U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-QSB
Mark one
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________to _________
Commission File No. 1-10623
Pamet Systems, Inc.
___________________________________________________________________________
(exact name of small business issuer as specified in its charter)
Massachusetts 04-2985838
___________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, Acton, Massachusetts 01720
___________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (978) 263-2060
Check whether the issurer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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_____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the close of the period covered by this report:
Title of each class Number of share outstanding
Common stock 2,891,188
($.01 par value)
Transitional Small Business Disclosure Format
YES________ NO__X___
<PAGE>
PAMET SYSTEMS, INC.
FORM 10-QSB TABLE OF CONTENTS
Part I Financial Information
Item 1 Financial Statements
Condensed Balance Sheets
June 30, 1999 and December 31, 1998
Condensed Statements of Operations
for the quarter ended June 30, 1999
and 1998 and six month period ended
June 30, 1999 and 1998
Condensed Statement of Cash Flows
for the six months ended June 30,
1999 and 1998
Item 2 Management's Discussion and Analysis of
Financial Condition or Plan of Operations
Part II Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signature(s)
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
Condensed Balance Sheets June 30, December 31,
1999 1998
--------- ------------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash $ 20,498 $ 54,817
Accounts receivable, net of allowance
for doubtful accounts of $60,000 and
factored receivables 465,405 418,229
Accounts receivable, factored 64,730 119,176
Inventory, net of reserve of $15,000 65,529 50,254
Prepaid expenses and other current
assets 70,757 81,421
TOTAL CURRENT ASSETS 686,919 723,897
PROPERTY AND EQUIPMENT, net 939,694 947,188
OTHER ASSETS 4,190 4,190
RESTRICTED CASH 28,818 28,534
CAPITALIZED SOFTWARE DEVELOPMENT COSTS 571,656 195,665
TOTAL ASSETS $ 2,231,277 $ 1,899,474
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Line of credit (vendor) $ 56,645 $ 169,934
Mortgage note payable 572,626 479,743
Due to factor ---- 65,980
Accounts payable, trade 968,567 787,764
Accounts payable, related party 20,680 20,513
Accrued expenses 470,617 265,267
Notes payable-related party 175,000 ----
Deferred software maintenance revenue 67,490 295,669
TOTAL CURRENT LIABILITIES 2,331,625 2,084,870
LONG TERM DEBT, less current portion 1,560,000 1,050,000
UNEARNED SUPPORT REVENUE 3,802 3,802
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
1,000,000 shares authorized,
none issued
Common Stock, $.01 par value,
7,500,000 shares authorized;
2,891,188 issued and outstanding 28,912 25,455
Additional paid-in Capital 5,953,561 5,306,924
Accumulated deficit (7,646,623) (6,571,577)
TOTAL STOCKHOLDERS EQUITY (1,664,150) (1,239,198)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 2,231,277 $ 1,899,474
========== ==========
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)"
<PAGE>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $576,594 $897,304 $972,384 $1,501,467
Cost of product 234,058 423,269 383,836 717,400
-------- -------- -------- ---------
342,536 474,035 588,548 784,067
Operating expenses:
Personnel costs 376,571 385,264 680,138 721,673
Rent, utilities, telephone 24,780 35,597 46,752 64,314
Travel and entertainment 36,814 48,134 62,086 101,628
Professional fees 41,427 77,669 109,707 140,239
Depreciation 20,723 19,191 41,058 37,233
Research and development 146,022 196,679 447,048 375,817
Other operating expenses 90,936 135,588 153,572 184,662
-------- ------- ------- -------
Total operating expenses 737,273 898,122 1,540,361 1,625,566
------- ------- --------- ---------
Income(loss) from operations (394,737) (424,087) (951,813) (841,499)
Interest income(expense), net (49,171) (36,213) (123,232) (59,862)
Net income(loss) $(443,908) $(460,300) $(1,075,045) $(901,361)
======== ======= ========= =======
Earnings(loss) per common
share $(.15) $(.18) $(.37) $(.36)
=== === === ===
Shares used in computing 2,891,188 2,536,250 2,891,188 2,536,250
earnings per share
</TABLE>
See accompanying "Notes to Financial Statements (unaudited)"
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income/(loss) $(1,075,045) $(901,361)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 41,058 37,233
Capitalized software development costs (375,991) ----
Change in assets and liabilities:
(Increase) Decrease in accounts
receivable (47,176) 87,413
(Increase) Decrease in accounts
receivable, factored 54,446 (87,485)
(Increase) Decrease in inventory (15,275) 33,358
(Increase) Decrease in prepaids and
other current assets 10,664 (96,369)
(Increase) in other assets
and restricted cash (284) (4,547)
(Decrease) in due to factor (65,980) ----
Increase in accounts payable 180,803 331,057
Increase in accounts payable,
related party 167 ----
(Decrease) in deferred software
maintenance revenue (228,179) (206,863)
Increase in accrued expenses and other
current liabilities 205,350 69,909
------- ------
Total adjustments (240,397) 163,706
Net cash provided by (used in)
operating activities (1,315,442) (737,655)
Cash flows from investing activities:
Expenditures for property & equipment (33,565) (29,378)
------ ------
Net cash used in investing activities (33,565) (29,378)
</TABLE>
Item 1 - Financial Statements
PAMET SYSTEMS, INC.
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from financing activities:
Payment of mortgage (7,117) (7,906)
Net change note payable related party 175,000 307,561
Net change line of credit-vendor (113,289) ----
Issuance of capital stock 650,094 531,270
Proceed from second mortgage 100,000 ----
Proceeds from long term convertible
promissory notes 510,000 ----
--------- ---------
Net cash provided by financing
activities 1,314,688 830,925
Net increase(decrease) in cash (34,319) 63,892
Cash and cash equivalents at
beginning of period 54,817 40,522
Cash and cash equivalents at
end of period $20,498 $104,414
====== =======
Supplemental disclosure of cash
flow information:
Cash paid for interest: $70,262 $31,965
</TABLE>
See accompanying "Notes to Financial Statements (Unaudited)
<PAGE>
PAMET SYSTEMS, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note (1) Statement Presentation
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of June
30, 1999 and the results of operations for the three and six month periods
and changes in cash flows for the period then ended. There were no material
unusual charges or credits to operations during the recently completed
fiscal quarter.
The results reported for the three and six month periods ended June
30, 1999 are not necessarily indicative of the results of operations which
may be expected for the entire year.
Note (2) Mortgage on Corporate Training, Development and Headquarters
Facility
On April 21, 1992 the Company consummated an agreement with the
Lexington Savings Bank of Lexington, MA to mortgage the Company's
development, training and headquarters facility, located at 1000 Main
Street, Acton, Massachusetts. The original principal amount of the mortgage
was $560,000. In October 1997 the note was extended for a one-year term
through October 21, 1998 with monthly payments $5,423.00 determined
according to a twenty-year amortization period including interest at 10.0%.
Lexington Savings Bank's parent company, Affiliated Community Bankcorp,
Inc. was purchased by UST Corp., the parent company of USTrust, in August
1998. The mortgage was not renewed in October 1998. The remaining balance
on the mortgage at June 30, 1999 was $472,626 that was classified as a
current liability since the mortgage was not renewed in October 1998.
The bank has required an interest bearing compensating balance account. On
June 30, 1999 this account equaled $28,818.
The Company entered into a second mortgage agreement on June 16,
1999 with Area Realty, LLC, the prospective buyer of the building, for
$100,000 at 11% per annum. The principal and accrued interest were to be
repaid in one payment on the earlier of December 31, 1999 or the date upon
which the building was sold by the Company to Area Realty, LLC.
On August 6, 1999, the Company sold the facility to Area Realty,
LLC for $1,150,000 and signed a leaseback agreement with the buyer for 7
years. Both the first and second mortgage and all accrued interest were
repaid at that time.
<PAGE>
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Overview
Pamet Systems, Inc. (the Company or Pamet Systems), founded in
1987, designs and implements broad-based information technology solutions
for public safety agencies enabling them to realize cost efficiencies and
provide better service. The company's suite of products is composed of four
major components: PoliceServer NT, FireServer NT, CADServer NT and
JailServer NT. The Company also offers several companion products including
Imaging, Mobile, Query, and Mapping. The Company's revenues consist
primarily of sales of these software applications, the associated hardware
and systems integration, and support and update service fees.
The Company's revenues for the 3 month period ended June 30, 1999
(the 1999 period) decreased 35.7% to $576,594 from $897,304 for the 3 month
period ending June 30, 1998 (the 1998 period). This decrease reflects the
continued trend of declining revenues from the Company's principal products
as a result of market expectations for a complete Microsoft operating
environment using Microsoft NT Server and a Windows 95/98 or NT Desktop
graphical user interface. In response to the market, the Company began
rebuilding its products on the NT platform late in 1997 at considerable
expense. The Company has invested over $1,740,000 to date developing what
management believes will be one of the only fully integrated native NT
suites of public safety applications available in the market. Market
response to the NT suite of products that will be released in the third
quarter of 1999 has been favorable although the Company is unable to
predict how successful its sales efforts will be. In addition to the
Company's PoliceServer NT beta site in Cambridge, MA, the Company has been
awarded three additional NT system orders from competitive bidding
processes, including a countywide multi-agency system in Tennessee.
PoliceServer NT and CADServer NT will move to the production environment in
the third quarter of 1999 with the installation of the systems mentioned
above. Management believes that sales of the Company's records management
(PoliceServer NT and FireServer NT) and computer-aided dispatch (CADServer
NT) products will become a significant portion of the Company's revenue
subsequent to the release of the NT-based versions of these products.
Sales for the 1999 period were sustained by Mobile systems and support
revenues.
The Company continues to believe that there are significant market
opportunities based on the federal Crime bill funding expected in 1999 and
beyond, the establishment of E911 centers, heightened emphasis on crime
prevention and control in most communities and the awareness by
municipalities that computer systems can improve the efficiency and
effectiveness of their public safety resources. The Company has also seen
increased emphasis on the coordination of public safety systems between
neighboring towns, county, and state police organizations. The Company's
products are designed and marketed with the option to be used in this type
of regional application.
The primary focus of management during the 1999 period has been in
four areas: current revenue and cost controls, development of a sales
pipeline for the NT product, completion of the development and integration
of the new applications for release during the third quarter of 1999 and
the acquisition of adequate funding to ensure the completion of the NT
development program and the establishment of the sales and operations
infrastructure required to support anticipated sales growth. Relative to
the acquisition of investment, during the first six months of 1999 $760,000
was received in the private placement program.
Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998
Net sales in the 1999 period decreased 35.7% to $576,594 from
$897,304 for the 1998 period. The revenues for the 1999 period reflected
the continued slowing of system sales while customers await the release of
the Company's NT-based product as discussed above. Prospective customers
who have received COPSMore grant awards are either delaying spending the
funds or purchasing companion products such as Mobile, Imaging, or Mapping.
Over 60% of the sales in the second quarter can be attributed to the
COPSMore grant programs. In addition, the revenues for the 1999 period
showed a continued trend toward the Mobile product. The revenues for the
1999 period consisted of eight new Mobile systems, one Imaging system, four
Query systems, and one Mapping system compared to two PoliceServer
systems, three hardware upgrades, eight Mobile systems, and two Imaging
systems in the 1998 period. The Mobile sales in the 1999 period represented
55.4% of net hardware and software sales as compared to 55.5% in the 1998
period. Support revenues increased 15.0% to $154,960 for the 1999 period
from $134,785 for the 1998 period reflecting the increase in the customer
base from the 1998 period. Cost of product decreased 44.7% or $189,211 to
$234,058 for the 1999 period from $423,269 for the 1998 period. The
resulting increase in gross margin from 52.8% in the 1998 period to 59.4%
in the 1999 period reflects improved margins on Mobile and Imaging sales
and continued favorable margins on support revenues. The improved margins
also reflect the increased use of state bid list contractors as a procurement
vehicle. These contractors partner with the Company and provide off-the-
shelf hardware that combined with Pamet Systems software offers a complete
solution for the customer. This arrangement reduces total revenues and
increases margins for the company.
Operating expenses reflect a decrease $160,849 or 17.9% to $737,273
for the 1999 period compared to $898,122 for the 1998 period primarily due
to the capitalization of $317,749 of NT product development costs during
the 1999 period. Gross expenses including capitalized development costs
were $1,055,022, an increase of 17.5% over 1998 spending levels. Gross
research and development expenditures in the 1999 period showed an increase
of $267,092 or 135.8% over the 1998 levels reflecting the addition of
in-house engineers, the continued use of outside resources for the
development of CADServer NT and the increased deployment of current staff
to the NT development program. During the development cycle of the NT
products, the Company has continued to use outside resources to accomplish
product development goals while minimizing the long-term financial
commitments of the Company. As the products near release, management has
focused internal resources on the project to ensure timely completion of
development and testing and product release on schedule in the third
quarter of 1999. NT product development will continue throughout 1999
until all functionality in PoliceServer and FireServer has been ported to
the NT platform consistent with market demands. To offset the expenses
associated with adding significant resources in the engineering and support
areas to ensure the timeliness of the NT product delivery, management has
focused on cost control in other areas including travel, rent, and
telephone.
As a result of increased deployment of in-house resources to
research and development, net personnel costs reflected a decrease of 2.3%
or $8,693. Gross personnel expenditures, including those allocated to
research and development, increased $105,215 or 25.6% from $410,221 for the
1998 period to $515,436 for the 1999 period. These additional resources
and the associated expenses are focused on the development, testing and
documentation of the NT product and the implementation of a cohesive sales
and marketing effort supporting the introduction and sale of the NT suite
of products.
Rent, utilities and telephone decreased 30.4% to $24,780 for the
1999 period from $35,597 for the 1998 period due primarily to the decreased
phone expense resulting from negotiating reduced long distance rates and
the reduction in office space and telephone expenses associated with the
Southeast regional sales office in Maitland, Florida. Management has
reduced the sales and support staffing of the Southeast regional office and
has managed many of the sales and support functions from the corporate
headquarters. As the new products are released during the third quarter of
1999, the Company plans to add resources to focus on the Southeast region.
Travel and entertainment expenses decreased 23.5% to $36,814 for the 1999
period from $48,134 for the 1998 period. The 1998 expenses included the
travel expenses associated with the COPSMore 1998 grant seminars held in 15
states. Similar expenses were not incurred in the 1999 period as no new
federal grant programs were announced. Professional fees decreased 46.7%
to $41,427 for the 1999 period from $77,669 for the 1998 period primarily
due a reduction in consulting expenses. During 1998 the Company utilized
outside resources to improve existing product documentation and to assist
with the private placement funding program. These projects have been
completed and the Company is using internal resources to document the NT
suite of products. Depreciation expense increased 8.0% to $20,723 for the
1999 period from $19,191 for the 1998 period. The additional depreciation
on upgraded in-house computer systems has been offset by reduced
depreciation on older equipment. Other operating expenses decreased 32.9%
to $90,936 for the 1999 period from $135,588 for the 1998 period. During
the 1998 period, the Company experienced significant nonrecurring
marketing, office supplies and postage expenses associated the adoption of
a new corporate logo and in support of the COPSMore 98 grant seminars.
Net interest expense for the 1999 period was $49,171 compared to
$36,213 for the 1997 period. This reflects the increased fees associated
the Company's receivables financing agreement with Silicon Valley Bank, the
interest associated with the issuance of convertible debt and vendor lines
of credit and the use of working capital loans from directors.
The net loss for the 1999 period was $(443,908) or $(.15) per share
compared to net loss of $(460,300) or $(.18) per share for the 1998 period.
The loss is due primarily to increased operating expenses resulting from
product development and the increased infrastructure costs which management
believes will position the Company for expected future revenue growth.
Six Months Ended June 30, 1999 vs. Six Months Ended June 30, 1998
Net sales for the six month period ended June 30, 1999 (the 1999
period) decreased $529,083 or 35.2% to $972,384 from $1,501,467 for the six
month period ended June 30, 1998 (the 1998 period). The decrease in sales
reflects customers delaying purchases awaiting the release of the NT
product suite. Most significantly affected were the system sales and
Imaging, although Mobile sales were also adversely affected. However,
support revenues increased 21.6% to $313,031 for the 1999 period from
$257,473 for the 1998 period reflecting the increase in the customer base
from the 1998 period. Cost of product decreased 46.5% to $383,836 for the
1999 period from the $717,400 for the 1998 period. Gross margin increased
to 60.5% for the 1999 period from 52.2% for the 1998 period. The
improvement in margin can be attributed a significant improvement in the
Mobile margins as a result of some customers purchasing their hardware
directly from the state bid list thereby increasing the higher margined
software component of these sales.
Net operating expenses decreased $85,205 or 5.2% to $1,540,361 for
the 1999 period compared to $1,625,566 for the 1998 period. However gross
operating expenses, including capitalized development costs of $375,991,
were $1,916,352, an increase of $290,786 or 17.9% over the 1998 level.
Gross expenditures on research and development increased $447,222 or
119.0%. The most significant portion of these expenditures was on the
redesign of the Company's suite of products to the NT platform. Net
personnel costs decreased 5.8% to $680,138 for the 1999 period from
$721,673 for the 1998 period. As the Company's internal resources have
been deployed to support the development, testing, documentation, and
training program development for the NT suite of products, these costs have
been allocated to research and development. However, gross personnel
expenditures of $911,230 in the 1999 period versus $771,594 in the 1998
period reflect an increase of 18.1%. In addition to a Customer Support
Manager and a sales representative in the Northeast added late in second
quarter of 1998, this increase reflects more recent additions in
engineering, technical writing, and sales. These new resources were added
to support the on time release of the NT products, their introduction to
the marketplace and the anticipated increased level of business in the
future. Rent, utilities and telephone expenses decreased $17,562 or 27.3%
to $46,752 for the 1999 period from $64,314 for the 1998 period. This
decrease is almost entirely associated with decreased long distance
telephone rates and an error in recording telephone expense in the fourth
quarter of 1998.
Travel and entertainment expenses decreased 38.9% to $62,086 for
the 1999 period from $101,628 for the 1998 period. During the 1998 period
the Company experienced significant travel expenses associated with the
opening of the Southeast regional office and the integration of the TAI
employees into the Company. As stated above, the Company has trimmed the
staffing in the Southeast region during the 1999 period which resulted in
lower travel expenses. Professional fees decreased 21.8% to $109,707 for
the 1999 period from $140,239 for the 1998 period due to the decrease in
consulting expenses for product documentation services, the cost of a
financial consultant, and installation of an upgraded financial package.
Depreciation expense increased 10.3% to $41,058 for the 1999 period from
$37,233 for the 1998 period reflecting the depreciation associated with the
upgrades of the Company's computer equipment. Other operating expenses
decreased 16.8% to $153,572 for the 1999 period from $184,662 for the 1998
period. These decreases reflect reduced spending in several areas including
the expenses associated with the COPSMore 98 grant seminars and the costs
resulting from the introduction of a new corporate logo in 1998.
Net interest expense was $123,232 for the 1999 period compared to
$59,862 for the 1998 period. This increase reflects the accrued interest
associated with the convertible promissory note funding acquired late in
1998 and in the first half of 1999, the interest associated with the
receivable financing agreement with Silicon Valley Bank and increased usage
of working capital loan commitments from directors.
The net loss for the 1999 period was $(1,075,045) or $(.37) per
share compared to a net loss of $(901,361) or $(.36) per share for the 1998
period. The loss for the period can be attributed to the significant
spending on research and development and the spending associated with the
commitment to build the Company's infrastructure to meet anticipated future
business.
Liquidity and Capital Resources
The Company's working capital deficit deteriorated to $(1,644,706)
at June 30, 1999 from a deficit of $(1,360,973) at December 31, 1998 due to
the reduced sales and the current level of research and development
spending. In addition, the deficit at December 31, 1998 and June 30, 1999
reflects the reclassification of the mortgage note on the Company's
headquarters building to current liabilities because the mortgage note was
not renewed on schedule in October 1998. However, on August 6, 1999, the
Company sold the building for $1,150,000 and entered into a 7-year
leaseback agreement with the buyer. The sale of the headquarters building
generated cash of $533,123 after repayment of the first and second
mortgages and all expenses. The triple net lease on the building is at
$13.46 per gross square foot of the building (12,984 square feet) or
$174,764.64 per year. The lease includes a provision for the second
through seventh years for rent increases based on the Consumer Price Index
for Urban Wage Earners and Clerical Workers (CPI-W) Boston, Mass not to
exceed a cap of three percent compounded per annum from the base rent.
During the first three years of the lease, the base rent will be reduced by
$1,567 per month or $18,804 per year.
During the first six months of 1999, the Company secured $760,000
of additional financing in the form of long-term convertible debt,
converted $600,000 of long-term convertible debt to equity, increased and
extended a short-term $250,000 vendor line of credit to a two-year $350,000
convertible promissory note, and received $300,000 in loan commitments from
directors. In general, the outstanding long-term convertible debt funding
accrues interest at 11%, has a two year term, carries the option of
conversion of the principal to common stock by the debt holder at
conversion prices ranging from $1.45 to $2.75 or repayment of principal and
accrued interest by the Company, and has 100% warrant coverage attached
that allows for the purchase of additional shares of common stock at an
exercise price of $2.50.
Cash decreased to $20,498 at June 30, 1999 from $54,817 at December
31, 1998. Accounts receivable increased to $465,405 at June 30, 1999 from
$418,229 at December 31, 1998.
Although the Company believes that it has the resources necessary
to fund the completion of the NT development program, working capital to
fund future growth remains a focus and concern of management. The funding
received in the first half of 1999 coupled with the proceeds from the sale
of the headquarters building subsequent to the end of the period ensures
that the Company will complete the major portions of the development in the
third quarter of 1999. The Company believes that sales of the current
products and the newly released NT product suite, unused lines of credit
from directors, the funds from the sale of the building, and the private
placement funding already received will support continued operations
through the end of the year. Backlog at August 12, 1999 was $604,000. The
Company is continuing to consider projects to increase its cash position
such as activities to raise capital, mergers, acquisitions or other
business combinations.
As of June 30, 1999, the Company had accumulated approximately
$7,400,000 of federal net operating loss carryforwards that expire
beginning in the year 2004. In addition, the Company has state net
operating losses to carryforward of approximately $4,400,000 which expire
between the years 1999 and 2003. Under the Internal Revenue Code of 1986,
as amended, the rate at which a corporation may utilize its net operating
losses to offsets income for federal tax purposes is subject to specified
limitations during periods after the corporation has undergone an
"ownership change". It has been determined that an ownership change did
take place at the time of the Registrant's initial public offering.
However, the limitations on the loss carryforward exceed the accumulated
loss at the time of the "ownership change". Thus there is no restriction
on its use.
Seasonality
The majority of the Company's installed base has a fiscal year that
commences on July 1 and, therefore, the Company bills its customers for
their annual software support and update service on July 1 of each year.
Consequently, cash flow representing software support revenues has tended
to be higher in the second half of the Registrant's fiscal year, although
software support revenues are recognized ratably throughout the fiscal
year.
Revenue Recognition
Revenues from software license fees are recognized when a contract
has been executed, the product has been delivered, all significant
contractual obligations have been satisfied and collection of the related
receivable is probable. Maintenance revenues, including those bundled with
the initial license fee, are deferred and recognized ratably over the
service period. Consulting and training service revenues are recognized as
the services are performed.
Year 2000
Company engineers have performed extensive testing to insure that
all of the Company's supported software products are compliant with the
year 2000 transition. The Company's software was developed to store and
calculate date related information using 4 digit values, so records dated
December 31, 1999 will be followed by records dated January 1, 2000.
Testing has shown that the Company's software successfully manages the year
2000 rollover while maintaining data and system integrity. For the turnkey
systems that the Company sells, the Company continues to monitor the
progress of other third party suppliers on whom it depends, such as
Microsoft and Compaq. Although the Company cannot certify these third party
products, the Company will continue to monitor the published status of
their compliance and notify its supported customers of any findings. The
Company's customers have been informed that year 2000 compliance may not
apply to older computer equipment or non-current versions of system
software.
Internally the Company utilizes some third-party vendor computer
hardware, networking equipment, telecommunication products and software
products that may or may not be year 2000 compliant. However, the Company
has been assured, by third party vendors that the software products that
the Company relies on to manage its internal finance, materials and support
activities are all year 2000 compliant. Internal testing to verify these
assurances will not be completed until July 1999. The Company also relies,
directly or indirectly, on the external systems of suppliers, creditors,
financial organizations and governmental entities for accurate exchange of
data. The impact of year 2000 non-compliance by any of these entities is
being monitored at this time.
Inflation
Inflation has not had a significant impact on the Company's
operations to date.
Forward Looking Statements
This Form 10-QSB contains statements, which are not historical facts.
These statements may constitute "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities and Exchange Act
of 1934 as amended. Certain, but not necessarily all, of such forward
looking statements can be identified by the use of such words as
"believes", "expects", "may", "will", "should", or "anticipates" or the
negative thereof or other variations thereon of similar terminology, and/or
which include, without limitation, statements regarding the following: the
timing of the development and release and uniqueness of the NT products,
adequacy of the funding for the completion of the NT development, and
market expectation for the NT operating environment; expected share of the
Company's sales to be NT products; building a sales and marketing
initiative; law enforcement trends regarding E911, mobile systems and
market opportunities; sufficiency of working capital and funding; adequacy
of the corporate infrastructure to support operations and anticipated
growth; economic and competitive factors affecting market growth; year 2000
compliance; and discussions of strategies involving risk and uncertainties
that reflect management's current views. These statements are based on many
assumptions and factors and may involve risks and uncertainties. The actual
results of the Company or industry results may be materially different from
any future results expressed or implied by such forward looking statements
because of factors such as problems in the development of the NT products;
insufficient capital resources to complete development and operate the
Company; inability to successfully market and sell the NT product; changes
in the marketplace including variations in the demand for public safety
software; and changes in the economic and competitive environment. These
factors and other information contained in this Form 10 Q could cause such
views, assumptions and factors and the Company's results of operations to
be materially different.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
c. Sales of Securities
On April 15, 1999, 315,988 shares of Pamet Systems Common
Stock were issued to two directors in exchange for the surrender
of $600,000 of convertible promissory notes.
On May 10, 1999 the Company issued a $35,000 convertible promissory
note with five year warrants attached to an accredited investor as
defined in Rule 501(a) under the Securities Act of 1933, as
amended. The note allows the noteholder to convert the principal
amount of the note and purchase up to 14,000 shares of Pamet
Systems Common Stock at $2.50 per share. The attached five-year
warrants allow the noteholder to purchase 14,000 shares of Pamet
Systems Common Stock at a price of $2.50 per share. The note
accrues interest at 11% per year and both principal and interest
are due on May 9, 2001. No principal has been converted to Common
Stock or warrants exercised at June 30, 1999.
On May 14, 1999 the Company issued a $375,000 convertible
promissory note with five year warrants attached to an
accredited investor as defined in Rule 501(a) under the Securities
Act of 1933, as amended. The note allows the noteholder to convert
the principal amount of the note and purchase up to 150,000 shares
of Pamet Systems Common Stock at $2.50 per share. The attached
five-year warrants allow the noteholder to purchase 150,000 shares
of Pamet Systems Common Stock at a price of $2.50 per share. The
note accrues interest at 11% per year and both principal and
interest are due on May 13, 2001. No principal has been converted
to Common Stock or warrants exercised at June 30, 1999.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a vote of Security Holders
The Company held its 1999 Annual Meeting of Stockholders on May 28,
1999.
At the Annual Meeting, Dr. Joel B. Searcy and Dr. Davinder Sethi
were elected as Directors. The voting results for the election of
the directors were as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Dr. Joel B. Searcy 2,324,035 1500
Dr. Davinder Sethi 2,323,785 1750
</TABLE>
In addition the following other directors continued as such after
the meeting: Richard C. Becker, Arthur V. Josephson, Bruce
J.Rogow, David T. McKay, and Dr. Stanley J. Robboy.
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
4.20 Convertible Note issued to West Country Partners dated
May 10, 1999
4.21 Warrant issued to West Country Partners dated May 10, 1999
4.22 Convertible Note issued to BSI SA dated May 14, 1999
4.23 Warrant issued to BSI SA dated May 14, 1999
27 Financial Date Schedule
b. Reports on form 8-K
None
<PAGE>
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 thereunto duly authorized
Pamet Systems, Inc.
-------------------
(Registrant)
August 16, 1999 Richard C. Becker
_______________________________ ______________________
Date Richard C. Becker
Vice President
Principal Financial Officer
<PAGE>
EXHIBIT 4.20
Convertible Note issued to West Country Partners dated May 10, 1999
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of May 10, 1999 by and between PAMET SYSTEMS, INC., a Massachusetts
corporation whose principal place of business is 1000 Main Street, Acton,
Massachusetts 01720 (the "Company"), and West Country Partners, a California
Limited Partnership of which James S. Schmitt is the General Partner (the
"Purchaser"), with its address at 1917 Brittany Park, Camarillo, CA 93012.
WHEREAS, the Company is desirous of selling, and the Purchaser is desirous
of acquiring, (i) a convertible promissory note in substantially the form
attached hereto as Exhibit A in the principal amount of Thirty Five Thousand
Dollars ($35,000) (the "Note") and (ii) a five-year warrant (the "Warrant") in
substantially the form attached hereto as Exhibit B to purchase up to Fourteen
Thousand (14,000) shares ("Warrant Shares") of the common stock, par value $.01
per share (the "Common Stock"), of the Company (the Note and the Warrant
together sometimes hereinafter are referred to as the "Securities"), on the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and of the mutual
obligations hereinafter set forth, and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE NOTES AND WARRANTS; CLOSINGS
Section 1.01 Purchase and Sale of the Notes and Warrants.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company agrees to issue and sell to the Purchaser at the
Closing, and the Purchaser agrees to purchase from the Company at the Closing,
the Note and the Warrant for an aggregate purchase price of Thirty Five
Thousand Dollars ($35,000) (the "Purchase Price").
(b) The exercise price per share of the Warrant and the conversion
price per share of the Note to be issued at the Closing shall initially be set
at Two Dollars and Fifty Cents ($2.50).
Section 1.02 Closing. The sale of the Securities by the Company to the
Purchaser shall take place on May 10, 1999 at the offices of the Company or at
such other place and time as may be agreed upon by the Purchaser and the
Company (the "Closing"). At the Closing, the Company shall deliver to the
Purchaser certificates evidencing the Securities against payment of the
Purchase Price for the Securities, by certified or official bank check or wire
transfer of immediately available funds to an account designated by the
Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees with, the
Purchaser, as of the date hereof and as of the date of each Closing, as
follows:
Section 2.01 Incorporation and Corporate Existence. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all necessary corporate power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by the Company and to carry on the business of the Company,
as it is now being conducted.
Section 2.02 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and, and assuming
due execution and delivery of the Agreement by the Purchaser, this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally, subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and subject to the effect of applicable securities laws as to rights to
indemnification.
Section 2.03 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Company from performing any of its material
obligations under this Agreement and would not have a material adverse effect
on the Company; (ii) conflict with or violate the charter or by-laws of the
Company; or (iii) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Company, except as would not prevent the Company from performing any of its
material obligations under this Agreement and would not have a material adverse
effect on the Company.
Section 2.04 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Company, threatened,
which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to adversely affect or
restrict the Company's ability to consummate the transactions contemplated
hereby.
Section 2.05 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to, and agrees with, the
Company, as of the date hereof and as of each Closing, as follows:
Section 3.01 Authority. The Purchaser has all necessary power and
authority to execute and deliver this Agreement, to purchase the Securities
from the Company and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and, and
assuming due authorization, execution and delivery of the Agreement by the
Company, this Agreement constitutes a legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
moratorium or similar laws affecting creditors' rights and remedies generally,
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and subject to the effect of applicable securities laws as to
rights to indemnification.
Section 3.02 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Purchaser from performing any of its
material obligations under this Agreement; or (ii) except as would not prevent
the Purchaser from performing any of its material obligations under this
Agreement, conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the
Purchaser.
Section 3.03 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Purchaser,
threatened, which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
Section 3.04 Investment Purpose; Legend; Private Placement.
(a) The Purchaser is acquiring the Securities solely for the
purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
(b) The Purchaser acknowledges that neither the Securities nor the
Warrant Shares are registered under the Securities Act and that none of the
Securities or the Warrant Shares may be transferred or sold except pursuant to
the registration provisions of the Securities Act or pursuant to an applicable
exemption therefrom and subject to state securities laws and regulations, as
applicable. The Purchaser acknowledges that the certificates evidencing the
Securities and the Warrant Shares shall contain a legend substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND SUCH SECURITIES MAY NOT BE SOLD,
ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE
DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE
SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Purchaser acknowledges that the Securities involve a great deal
of risk and that there is a limited or no market for the Securities and the
Warrant Shares. The Purchaser is able to (i) bear the economic risk of the
investment in the Company, (ii) afford a complete loss of such investment, and
(iii) hold indefinitely the Securities. In reaching an informed decision to
invest in the Company, the Purchaser has sufficient information to evaluate the
merits and risks of an investment in the Securities of the Company. In that
connection, (x) the Purchaser has received (A) the Company's proxy statement,
dated May 14, 1998, for the Company's 1998 annual meeting of stockholders, (B)
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997, as amended to date, and (C) the Company's Quarterly Reports on Form
10-QSB for the quarters ended March 31, 1998, June 30, 1998 and September 30,
1998 and (y) representatives of the Company have (A) fully and satisfactorily
answered any questions which duly authorized representatives of the Purchaser
desired to ask concerning the Company, and (B) furnished the Purchaser with any
additional information or documents requested to verify the accuracy of or
supplement any information previously delivered to or discussed with duly
authorized representatives of the Purchaser.
(d) The address of the Purchaser set forth on page 1 of this Agreement
is the true and correct address of the Purchaser and the Purchaser has no
present intention of becoming a resident or domiciliary of any other state or
jurisdiction.
Section 3.05 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act because (please check as appropriate):
[ ] (a) the Purchaser is an individual whose net worth, either
individually or with his spouse, exceeds $1,000,000 on the date hereof;
[ ] (b) the Purchaser is an individual whose individual income exceeded
$200,000 in each of the two previous years or whose joint income with his
spouse exceeded $300,000 in each of the three previous years, and has a
reasonable expectation of reaching the same income level in the current year;
[ x ] (c) the Purchaser is a corporation, partnership or Massachusetts or
similar business trust, not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000; or
[ ] (d) the investor hereby certifies that it is an accredited investor
because it is an entity in which each of the equity owners qualifies as an
accredited investor under items (a), (b) or (c) above.
Section 3.06 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
Section 3.07 No General Solicitation. The Securities were not offered
or sold by any form of general solicitation or general advertising.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Expenses. The Purchaser hereby agrees that all fees and
expenses incurred by the Purchaser in connection with this Agreement shall be
borne by the Purchaser, and the Company hereby agrees that all fees and
expenses incurred by the Company shall be borne by the Company, in each case
including without limitation all fees and expenses of such party's counsel and
accountants.
Section 4.02 Public Announcements. Except as required by law, neither
the Company nor the Purchaser shall make any public announcements in respect of
this Agreement or the transactions contemplated herein or otherwise communicate
with any news media without prior notification to the other party.
Section 4.03 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, the Closings and any investigation at any time made
by or on behalf of either party hereto.
Section 4.04 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior oral or written agreement between the parties.
Section 4.05 No Third-Party Beneficiaries; Assignment. This Agreement
is for the sole benefit of and binding upon the parties hereto and their
permitted successors and assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns, and shall inure to the benefit of and
be enforceable by the parties hereof and their respective successors and
assigns.
Section 4.06 Amendment. This Agreement may be amended or modified only
by an instrument in writing signed by the Company and the Purchaser.
Section 4.07 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
Section 4.08 Gender and Number; Headings. Whenever used in this
Agreement, the singular number shall include the plural, the plural the
singular, and the use of any gender shall be applicable to all genders. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement
Section 4.09 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of laws
thereof. The Company and the Purchaser hereby consent to the jurisdiction of
the state and federal courts of the Commonwealth of Massachusetts for all
disputes arising under this Agreement.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above.
PAMET SYSTEMS, INC.
Attest:__________________________ By:_____________________________
Name: Name: David T. McKay
Title: Title: President & CEO
Corporate Seal
____________________________________
By:_____________________________
Name: James S. Schmitt
Title: General Partner,
West Country Partners
<PAGE>
No. L-010
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE
NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL AMOUNT
OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO
MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR
AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE.
CONVERTIBLE PROMISSORY NOTE
$35,000 Acton, Massachusetts
May 10, 1999
FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the
"Company"), hereby promises to pay to West Country Partners, a California
Limited Partnership of which James S. Schmitt is the General Partner ("Payee"),
with its address at 1917 Brittany Park, Camarillo, CA 93012, the principal sum
of Thirty Five Thousand Dollars ($35,000), on the dates and in the amounts
hereinafter set forth. This Promissory Note is issued by the Company pursuant
to the Securities Purchase Agreement, dated as of the date hereof, among the
Company and Payee (the "Securities Purchase Agreement"). Capitalized terms
used but not defined shall have the respective meanings ascribed to them in the
Securities Purchase Agreement. This Promissory Note is hereinafter referred to
as this "Note."
1. Principal and Maturity Date. The principal amount of this Note
outstanding together with all accrued interest hereon shall be due and payable
on May 9, 2001 (the "Maturity Date").
2. Interest. The outstanding principal amount of this Note shall accrue
interest at the per annum rate of eleven percent (11.0%) through the earlier of
the date of repayment or conversion (in each case computed on the basis of a
365 day year and actual days elapsed). Interest shall be payable in full on
the Maturity Date with respect to the principal amount of the Note then
outstanding. No interest shall be deemed to have accrued or be payable on any
portion of this Note which is Converted on or prior to the Maturity Date.
3. Prepayment. This Note may be prepaid, in whole or in part, without
penalty or premium upon not less than thirty (30) days prior written notice
from the Company to the Payee, at any time or from time to time. All
prepayments made on this Note shall be applied first to the payment of all
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of the payment. Prepayment, in
whole or in part, shall be noted in the accounting records of the Company.
4. General Payment Provisions. All payments or prepayments of principal
and interest and other sums due pursuant to this Note shall be made by check
payable to the Payee at the address set forth above or at such other address as
Payee shall have previously designated to the Company in writing not later than
two Business Days (as defined below) prior to the date on which such payment
becomes due.
If the due date of any payment under this Note would otherwise fall on a
day which is not a Business Day, such date will be extended to the immediately
succeeding Business Day and interest shall be payable at the rate set forth
herein for the period of the extension. The term "Business Day" shall mean any
day on which commercial banks in the State of New York are not authorized or
required to close.
5. Conversion; Prepayment.
(a) Conversion/Prepayment and Conversion Price. The Payee may, subject to
the terms and conditions of this Section 5, at any time, or from time to time,
exercise its right to convert this Note to Common Stock by delivering a duly
executed notice, in the form substantially similar to Exhibit A hereto, of such
intention to the Company (the "Conversion Notice"); provided, however, that if,
and to the extent, this Note or any portion thereof is called for prepayment,
the holder may exercise its right to convert to Common Stock such portion of
this Note as was called for prepayment.
The Payee shall have the right, subject to the terms and conditions of this
Section 5, to, no more frequently than four times per annum in the aggregate,
convert all or any part of the principal amount then outstanding under this
Note (the "Note Amount"), in an amount not less than $25,000 (or such lesser
amount as may then be outstanding), into that number of fully-paid and
nonassessable shares of Common Stock (the "Conversion Shares"), obtained by
dividing the Note Amount or such portion thereof presented for conversion by
the Conversion Price. The "Conversion Price" shall initially be $2.50 per
share of Common Stock.
Upon a partial conversion or prepayment of this Note, the Company shall
execute and deliver to or on the order of the holder hereof, a new Note or
Notes of authorized denominations in principal amount equal to the unconverted
or unredeemed, as the case may be, portion of this Note.
(b) Issuance of Common Stock on Conversion. In order to effect the
conversion of this Note, the Payee shall deliver to the Company at its
principal office, this Note and a duly executed Conversion Notice; provided,
however, that if the Payee desires to convert the Note on the Maturity Date,
Payee shall notify the Company in writing of its intention to convert the Note
at least five (5) days prior to the Maturity Date. The date upon which the
Company receives the Conversion Notice, the Note and any other documentation
required under this Section 5 of this Note or the Conversion Notice shall be
referred to herein as the "Effective Date." Upon the Effective Date, this Note
(or portion thereof) shall be deemed converted into shares of Common Stock in
accordance with this Section 5, at which time the rights of the Payee with
respect to this Note and the amount so converted shall cease and, subject to
the following provisions of this paragraph, the person or persons entitled to
receive the shares of Common Stock upon conversion of this Note (or portion
thereof) shall be treated for all purposes as having become the record holder
or holders of such Common Stock. As promptly as practicable after the
Effective Date, the Company shall deliver or cause to be delivered to the
Payee, at the address set forth above or at such other address as the Payee
shall designate in writing, certificates representing the number of fully paid
and nonassessable shares of Common Stock into which this Note (or portion
thereof), shall be converted in accordance with the provisions of this Section
5. If this Note is called for prepayment it may be converted as provided
herein up to and including the close of business on the business day preceding
the date of prepayment.
No fractional shares of Common Stock shall be issued upon conversion of
this Note (or portion thereof). In lieu of any fractional share of Common
Stock which would otherwise be issuable upon conversion of this Note (or
portion thereof), the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to such fraction multiplied by the Conversion
Price.
(c) Reserves. The Company covenants that it will at all times reserve and
keep available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, solely for the purpose of issue upon conversion of this
Note as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of this Note. The Company covenants that all
shares of Common Stock which shall be so issuable shall, upon issuance, be duly
and validly issued and fully paid and nonassessable. The Company shall from
time to time, in accordance with applicable law, increase the authorized amount
of its Common Stock if at any time the authorized amount of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of this
Note at the time outstanding.
(d) Taxes Upon Conversion. The issuance of certificates for shares of
Common Stock upon the conversion of this Note shall be made without charge to
the converting noteholder for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the holder of this Note; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of this Note, and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid; and provided, further,
that in no event shall the Company be required to pay or reimburse the holder
for any income tax payable by such holder as a result of such issuance.
(e) Legends. All certificates representing Conversion Shares shall bear a
conspicuous legend stating in substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS THEY HAVE BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION
FROM REGISTRATION OR QUALIFICATION IS AVAILABLE."
The Company shall, upon the request of any holder of a stock certificate
representing Conversion Shares and the surrender of such certificate, issue a
new stock certificate without such legend if (i) the stock evidenced by such
certificate has been effectively registered under the Securities Act and
qualified under any applicable state securities law and sold by the holder
thereof in accordance with such registration and qualification or (ii) such
holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth
herein are no longer required or necessary under the Securities Act or any
applicable state law.
6. Subordination.
(a) The Company irrevocably covenants and agrees, and the Holder of this
Note, by its acceptance thereof, irrevocably covenants and agrees, that the
payment of the principal of and interest on this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, to the
prior payment and/or cancellation (as shall be appropriate) in full of all
Senior Indebtedness (as defined herein). The provisions of this Section 6 are
made for the benefit of the holders of Senior Indebtedness, and such holders
shall, at any time, be entitled to enforce such provisions against the Company
or Noteholder. No holder of any Senior Indebtedness shall be deemed to owe any
fiduciary duty or any other obligation to any Holder of this Note now or at any
time hereafter. Notwithstanding anything herein contained to the contrary, all
the provisions of this Note shall, except as otherwise provided herein, be
subject to the provisions of this Section 6, so far as the same may be
applicable thereto.
(b) For purposes of this Section 6 (and subject to Section 2.06 of the
Securities Purchase Agreement), "Senior Indebtedness" shall mean any
indebtedness, liability or obligation, contingent or otherwise, other than that
arising pursuant to this Note, of the Company (any such indebtedness, liability
or obligation being hereinafter in this definition referred to as an
"Obligation") (i) which is created, assumed or incurred by the Company after
the date of this Note and which, when created, assumed or incurred, is
specifically designated by the Company as Senior Indebtedness for the purposes
hereof in the instrument creating or evidencing the Company's liability with
respect to such Obligations or (ii) any increases, guarantees, refundings,
renewals, rearrangements or extensions of and amendments, modifications and
supplements to any indebtedness, liability or obligation described in clause
(i) above.
8. No Assignment. This Note may not be assigned by the Payee without the
prior written consent of the Company.
9. Governing Law. This Note shall be construed in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts as applied to
contracts made and to be performed entirely in the Commonwealth of
Massachusetts without regard to principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the Commonwealth of Massachusetts or any federal
court sitting in the Commonwealth of Massachusetts for purposes of any suit,
action or other proceeding arising out of this Note (and agrees not to commence
any action, suit or proceedings relating hereto except in such courts). Each
of the parties hereto agrees that service of any process, summons, notice or
document by U.S. registered mail at its address set forth herein shall be
effective service of process for any action, suit or proceeding brought against
it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Note, which is brought by or against it, in
the courts of the Commonwealth of Massachusetts or any federal court sitting in
the Commonwealth of Massachusetts and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
10. Adjustment of Interest Rate. No provision of this Note shall require
the payment of interest to the extent that receipt of any such payment by the
Company would be contrary to the provisions of law applicable to the Company
limiting the maximum amount of interest that may be charged to or collected
from the Company, and if any sum in excess of such maximum rate of interest is
paid or charged, the excess will be deemed to have been a prepayment of
principal of this Note when paid, without premium or penalty, and all payments
made thereafter will be appropriately applied to interest and principal to give
effect to such maximum rate, and after such application any excess shall be
immediately refunded to the Company.
PAMET SYSTEMS, INC.
By: ______________________________
Name: David T. McKay
Title: President & CEO
Attested:
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT A TO PROMISSORY NOTE
[Form of Conversion Notice]
To Pamet Systems, Inc.:
The undersigned registered holder (the "Payee") of the Note in the
principal amount indicated below and bearing the certificate number indicated
below (the "Note"), hereby irrevocably exercises its right to convert the
principal amount of the Note indicated herein into shares of common stock, par
value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance
with the terms of the Note, and directs that the shares issuable and
deliverable upon such conversion together with a check in payment for
fractional shares, be issued and delivered to the Payee unless a different name
has been indicated below. If shares are to be issued in the name of a person
other than the Payee (such person being referred to as the "Transferee"), the
Note must be duly endorsed by, or accompanied by instruments of transfer in
form satisfactory to the Company and duly executed by the undersigned, and the
undersigned will pay all transfer taxes payable with respect thereto. In
addition, the Transferee must sign this notice. All capitalized terms used in
this notice and not otherwise defined shall have the respective meanings
ascribed to them in the Note.
The Payee, or in the event a Transferee shall receive the Conversion Shares
issued upon conversion of this Note, the Transferee, hereby represents and
warrants to the Company that (i) he has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment in the Company, (ii) he is acquiring the Conversion Shares for
its own account for investment and not with a view to, or for distribution or
sale in connection with any public offering in violation of the Securities Act
of 1933, as amended (the "Securities Act"), (iii) he understands that (x) the
Conversion Shares will not have been registered for sale under the Securities
Act or qualified under applicable state securities laws and may not be resold
without registration under the Securities Act and qualification under any
applicable state securities law, (y) such Conversion Shares will be issued to
him pursuant to one or more exemptions from the registration or qualification
requirements of the Securities Act and that the representations and warranties
contained herein are given with the intention that the Company may rely thereon
for purposes of claiming such exemptions and (z) the Conversion Shares shall
contain a legend substantially as set forth in Section 5(e) of the Note, (iv)
he is an "accredited investor" as defined in Section 501 of Regulation D
promulgated under the Securities Act, (v) he understands he must bear the
economic risk of Conversion Shares issued upon conversion of the Note for an
indefinite period of time as the Conversion Shares cannot be sold unless
registered under the Securities Act and any other applicable state securities
laws or sold in a transaction exempt from such registration thereunder and (vi)
representatives of the Company have (x) fully and satisfactorily answered any
questions which he deemed to ask concerning the Company and (y) furnished him
with such additional information and documents regarding the Company as he has
reasonably requested.
Principal amount of Note to be converted: $________________
Certificate Number of Note: __
Print name, address (including zip code) and social security or other taxpayer
identification number of the person in whose name the Common Stock will be
issued:
_________________________________
_________________________________
_________________________________
(Zip Code)
_________________________________
Social Security or other
Taxpayer Identification
Number
Dated:___________________________ ____________________________
Signature of Noteholder
Dated:___________________________ ____________________________
Signature of Transferee
<PAGE>
EXHIBIT 4.21
Warrant issued to West Country Partners dated May 10, 1999
LW - 010
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH
REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on May 9, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts
corporation, hereby certifies that West Country Partners, a California Limited
Partnership of which James S. Schmitt is the General Partner, with its address
at 1917 Brittany Park, Camarillo, CA 93012, or his permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing May 10, 1999, and prior to 5:00 P.M., Eastern Standard Time, on May
9, 2004, a total of Fourteen Thousand (14,000) fully paid and nonassessable
shares of Common Stock, par value $.01 per share, of the Company for an
aggregate purchase price of Thirty Five Thousand Dollars ($35,000) (computed
on the basis of $2.50 per share). (Hereinafter, (i) said Common Stock,
together with any other equity securities which may be issued by the Company
with respect thereto or in substitution therefor, is referred to as the "Common
Stock," (ii) the shares of the Common Stock purchasable hereunder are referred
to as the "Warrant Shares," (iii) the aggregate purchase price payable
hereunder for the Warrant Shares is referred to as the "Aggregate Warrant
Price," (iv) the price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price," (v) this Warrant, and all
warrants hereafter issued in exchange or substitution for this Warrant are
referred to as the "Warrant" and (vi) the holder of this Warrant is referred to
as the "Holder.") The number of Warrant Shares for which this Warrant is
exercisable is subject to adjustment as hereinafter provided.
This Warrant is issued by the Company pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and West Country
Partners (the "Securities Purchase Agreement"). Capitalized terms used but not
defined shall have the respective meanings ascribed to them in the Securities
Purchase Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing May 10, 1999, and prior to 5:00 P.M., Eastern Standard
Time, on May 9, 2004, by the Holder of this Warrant by the surrender of this
Warrant (with the subscription form at the end hereof duly executed) at the
address set forth in Subsection 9(a) hereof, together with proper payment of
the Aggregate Warrant Price, or the proportionate part thereof if this Warrant
is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in
cash by certified or official bank check payable to the order of the Company.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above
(an "Exercise Date"). At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such exercise
as provided in subsection 1(d) below shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such certificates.
(d) If this Warrant is exercised in part, the Holder shall be entitled to
receive a new Warrant covering the number of Warrant Shares in respect of which
this Warrant has 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 will (a) issue a certificate or
certificates in the name of the Holder for the shares of the Common Stock to
which the Holder shall be entitled, and (b) deliver the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of the
Warrant.
(e) No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the fair value of a
share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
in reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the number of Warrant Shares for which this Warrant may
be exercised shall be adjusted so that if the Holder surrendered this Warrant
for exercise after such action the Holder would be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which he
would have been entitled to receive had such Warrant been exercised immediately
prior to such action. An adjustment made pursuant to this subsection (a) shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this subsection (a), the Holder of this Warrant
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of this Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares of such classes of capital stock or shares of Common Stock and
other capital stock.
(b) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale or conveyance had
such Warrant been exercised immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder to the end that the provisions set forth in
this Section 3 shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of this Warrant. The above
provisions of this subsection (b) shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances. Notice of
any such consolidation, merger, statutory exchange, sale or conveyance and of
said provisions so proposed to be made, shall be mailed to the Holder not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares issuable
upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price in effect immediately prior to such
adjustment by a fraction the numerator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately prior to
such adjustment and the denominator of which is the aggregate number of Warrant
Shares for which this Warrant may be exercised immediately after such
adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided in this
Warrant and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification, a
brief statement of the facts requiring such adjustment or modification and the
manner of computing the same and cause a copy of such certificate to be mailed
to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the proper exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights, and the Company will take all such actions as
may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 5(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor. The
Holder covenants and agrees that it shall pay, when due and payable, any and
all federal, state and local income or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable
upon the exercise hereof have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or under any state securities laws and
unless so registered may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only either (i) upon publication by the Securities
and Exchange Commission (the "Commission") of a ruling, interpretation, opinion
or "no action letter" based upon facts presented to said Commission, or (ii)
upon receipt by the Company of an opinion of counsel acceptable to the Company
to the effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations promulgated under either such act, or to
the effect that the Warrant or Warrant Shares to be sold or transferred have
been registered under the Securities Act of 1933, as amended, and that there is
in effect a current prospectus meeting the requirements of Subsection 11(a) of
the Securities Act, which is being or will be delivered to the purchaser or
transferee at or prior to the time of delivery of the certificates evidencing
the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer
(including, without limitation, a transfer by will or pursuant to the laws of
descent and distribution), and as a condition thereto, if such transfer is not
made pursuant to an effective registration statement under the Securities Act,
the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (iii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 5, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each
officer and director thereof from and against any and all loss, damage or
liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach by the Holder of, this Warrant, (b) any transfer of the Warrant or
(c) any untrue statement or omission to state any material fact in connection
with the investment representations or with respect to the facts and
representations supplied by the Holder to counsel to the Company upon which its
opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance with
the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution,
attachment or other process attempted upon the Warrant, shall be null and void
and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with Massachusetts
law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with an
available exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by first-class
mail, postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at the address contained in the first paragraph of this
Warrant, or such other address as the Holder has designated in writing to the
Company.
9. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be
signed by a duly authorized officer as of this 10th day of May, 1999.
ATTEST: PAMET SYSTEMS, INC.
_______________________ By:___________________________________
Name: David T. McKay
Title: President & CEO
<PAGE>
SUBSCRIPTION
The undersigned, __________________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of PAMET
SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _________________________ the right to purchase _________________________
shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant, and
a proportionate part of said Warrant and the rights evidenced hereby, and does
irrevocably constitute and appoint _________________________, attorney, to
transfer that part of said Warrant on the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address____________________________
____________________________
<PAGE>
EXHIBIT 4.22
Convertible Note issued to BSI SA dated May 14, 1999
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of May 14, 1999 by and between PAMET SYSTEMS, INC., a Massachusetts
corporation whose principal place of business is 1000 Main Street, Acton,
Massachusetts 01720 (the "Company"), and BSI SA (the "Purchaser"), a financial
institution representing Mr. Pierre Bottinelli with its address at Via Magatti
2, 6900 Lugano, Switzerland.
WHEREAS, the Company is desirous of selling, and the Purchaser is desirous
of acquiring, (i) a convertible promissory note in substantially the form
attached hereto as Exhibit A in the principal amount of Three Hundred and
Seventy Five Thousand Dollars ($375,000) (the "Note") and (ii) a five-year
warrant (the "Warrant") in substantially the form attached hereto as Exhibit B
to purchase up to One Hundred and Fifty Thousand (150,000) shares ("Warrant
Shares") of the common stock, par value $.01 per share (the "Common Stock"), of
the Company (the Note and the Warrant together sometimes hereinafter are
referred to as the "Securities"), on the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and of the mutual
obligations hereinafter set forth, and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE NOTES AND WARRANTS; CLOSINGS
Section 1.01 Purchase and Sale of the Notes and Warrants.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company agrees to issue and sell to the Purchaser at the
Closing, and the Purchaser agrees to purchase from the Company at the Closing,
the Note and the Warrant for an aggregate purchase price of Three Hundred and
Seventy Five Thousand Dollars ($375,000) (the "Purchase Price").
(b) The exercise price per share of the Warrant and the conversion
price per share of the Note to be issued at the Closing shall initially be set
at Two Dollars and Fifty Cents ($2.50).
Section 1.02 Closing. The sale of the Securities by the Company to the
Purchaser shall take place on May 14, 1999 at the offices of the Company or at
such other place and time as may be agreed upon by the Purchaser and the
Company (the "Closing"). At the Closing, the Company shall deliver to the
Purchaser certificates evidencing the Securities against payment of the
Purchase Price for the Securities, by certified or official bank check or wire
transfer of immediately available funds to an account designated by the
Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees with, the
Purchaser, as of the date hereof and as of the date of each Closing, as
follows:
Section 2.01 Incorporation and Corporate Existence. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all necessary corporate power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by the Company and to carry on the business of the Company,
as it is now being conducted.
Section 2.02 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and, and assuming
due execution and delivery of the Agreement by the Purchaser, this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally, subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and subject to the effect of applicable securities laws as to rights to
indemnification.
Section 2.03 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Company from performing any of its material
obligations under this Agreement and would not have a material adverse effect
on the Company; (ii) conflict with or violate the charter or by-laws of the
Company; or (iii) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Company, except as would not prevent the Company from performing any of its
material obligations under this Agreement and would not have a material adverse
effect on the Company.
Section 2.04 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Company, threatened,
which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to adversely affect or
restrict the Company's ability to consummate the transactions contemplated
hereby.
Section 2.05 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to, and agrees with, the
Company, as of the date hereof and as of each Closing, as follows:
Section 3.01 Authority. The Purchaser has all necessary power and
authority to execute and deliver this Agreement, to purchase the Securities
from the Company and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and, and
assuming due authorization, execution and delivery of the Agreement by the
Company, this Agreement constitutes a legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
moratorium or similar laws affecting creditors' rights and remedies generally,
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and subject to the effect of applicable securities laws as to
rights to indemnification.
Section 3.02 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Purchaser from performing any of its
material obligations under this Agreement; or (ii) except as would not prevent
the Purchaser from performing any of its material obligations under this
Agreement, conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the
Purchaser.
Section 3.03 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Purchaser,
threatened, which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
Section 3.04 Investment Purpose; Legend; Private Placement.
(a) The Purchaser is acquiring the Securities solely for the
purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
(b) The Purchaser acknowledges that neither the Securities nor the
Warrant Shares are registered under the Securities Act and that none of the
Securities or the Warrant Shares may be transferred or sold except pursuant to
the registration provisions of the Securities Act or pursuant to an applicable
exemption therefrom and subject to state securities laws and regulations, as
applicable. The Purchaser acknowledges that the certificates evidencing the
Securities and the Warrant Shares shall contain a legend substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND SUCH SECURITIES MAY NOT BE SOLD,
ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE
DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE
SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Purchaser acknowledges that the Securities involve a great deal
of risk and that there is a limited or no market for the Securities and the
Warrant Shares. The Purchaser is able to (i) bear the economic risk of the
investment in the Company, (ii) afford a complete loss of such investment, and
(iii) hold indefinitely the Securities. In reaching an informed decision to
invest in the Company, the Purchaser has sufficient information to evaluate the
merits and risks of an investment in the Securities of the Company. In that
connection, (x) the Purchaser has received (A) the Company's proxy statement,
dated May 14, 1998, for the Company's 1998 annual meeting of stockholders, (B)
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997, as amended to date, and (C) the Company's Quarterly Reports on Form
10-QSB for the quarters ended March 31, 1998, June 30, 1998 and September 30,
1998 and (y) representatives of the Company have (A) fully and satisfactorily
answered any questions which duly authorized representatives of the Purchaser
desired to ask concerning the Company, and (B) furnished the Purchaser with any
additional information or documents requested to verify the accuracy of or
supplement any information previously delivered to or discussed with duly
authorized representatives of the Purchaser.
(d) The address of the Purchaser set forth on page 1 of this Agreement
is the true and correct address of the Purchaser and the Purchaser has no
present intention of becoming a resident or domiciliary of any other state or
jurisdiction.
Section 3.05 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act because (please check as appropriate):
[ ] (a) the Purchaser is an individual whose net worth, either
individually or with his spouse, exceeds $1,000,000 on the date hereof;
[ ] (b) the Purchaser is an individual whose individual income exceeded
$200,000 in each of the two previous years or whose joint income with his
spouse exceeded $300,000 in each of the three previous years, and has a
reasonable expectation of reaching the same income level in the current year;
[ ] (c) the Purchaser is a corporation, partnership or Massachusetts or
similar business trust, not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000; or
[ ] (d) the investor hereby certifies that it is an accredited investor
because it is an entity in which each of the equity owners qualifies as an
accredited investor under items (a), (b) or (c) above.
Section 3.06 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finders or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
Section 3.07 No General Solicitation. The Securities were not offered
or sold by any form of general solicitation or general advertising.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Expenses. The Purchaser hereby agrees that all fees and
expenses incurred by the Purchaser in connection with this Agreement shall be
borne by the Purchaser, and the Company hereby agrees that all fees and
expenses incurred by the Company shall be borne by the Company, in each case
including without limitation all fees and expenses of such party's counsel and
accountants.
Section 4.02 Public Announcements. Except as required by law, neither
the Company nor the Purchaser shall make any public announcements in respect of
this Agreement or the transactions contemplated herein or otherwise communicate
with any news media without prior notification to the other party.
Section 4.03 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, the Closings and any investigation at any time made
by or on behalf of either party hereto.
Section 4.04 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior oral or written agreement between the parties.
Section 4.05 No Third-Party Beneficiaries; Assignment. This Agreement
is for the sole benefit of and binding upon the parties hereto and their
permitted successors and assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns, and shall inure to the benefit of and
be enforceable by the parties hereof and their respective successors and
assigns.
Section 4.06 Amendment. This Agreement may be amended or modified only
by an instrument in writing signed by the Company and the Purchaser.
Section 4.07 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
Section 4.08 Gender and Number; Headings. Whenever used in this
Agreement, the singular number shall include the plural, the plural the
singular, and the use of any gender shall be applicable to all genders. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement
Section 4.09 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of laws
thereof. The Company and the Purchaser hereby consent to the jurisdiction of
the state and federal courts of the Commonwealth of Massachusetts for all
disputes arising under this Agreement.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above.
PAMET SYSTEMS, INC.
Attest:__________________________ By:_____________________________
Name: Name: David T. McKay
Title: Title: President & CEO
Corporate Seal
____________________________________
By:_____________________________
Name: Mr. A. De Angelis
Title: First Vice President
BSI SA
Securities Administration
<PAGE>
No. L-008
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE NAME AND TELEPHONE
NUMBER OF THE REPRESENTATIVE OF THE ISSUER WHO CAN PROVIDE (i) THE TOTAL AMOUNT
OF ORIGINAL ISSUE DISCOUNT, (ii) THE ISSUE DATE, AND (iii) THE YIELD TO
MATURITY ON THE ISSUE DATE IS RICHARD C. BECKER, (978)-263-2060.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR
AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE.
CONVERTIBLE PROMISSORY NOTE
$375,000 Acton, Massachusetts
May 14, 1999
FOR VALUE RECEIVED, PAMET SYSTEMS, INC., a Massachusetts corporation (the
"Company"), hereby promises to pay to BSI SA ("Payee"), a financial institution
representing Mr. Pierre Bottinelli with its address at Via Magatti 2, 6900
Lugano, Switzerland, the principal sum of Three Hundred and Seventy Five
Thousand Dollars ($375,000), on the dates and in the amounts hereinafter set
forth. This Promissory Note is issued by the Company pursuant to the
Securities Purchase Agreement, dated as of the date hereof, among the Company
and Payee (the "Securities Purchase Agreement"). Capitalized terms used but
not defined shall have the respective meanings ascribed to them in the
Securities Purchase Agreement. This Promissory Note is hereinafter referred to
as this "Note."
1. Principal and Maturity Date. The principal amount of this Note
outstanding together with all accrued interest hereon shall be due and payable
on May 13, 2001 (the "Maturity Date").
2. Interest. The outstanding principal amount of this Note shall accrue
interest at the per annum rate of eleven percent (11.0%) through the earlier of
the date of repayment or conversion (in each case computed on the basis of a
365 day year and actual days elapsed). Interest shall be payable in full on
the Maturity Date with respect to the principal amount of the Note then
outstanding. No interest shall be deemed to have accrued or be payable on any
portion of this Note which is Converted on or prior to the Maturity Date.
3. Prepayment. This Note may be prepaid, in whole or in part, without
penalty or premium upon not less than thirty (30) days prior written notice
from the Company to the Payee, at any time or from time to time. All
prepayments made on this Note shall be applied first to the payment of all
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of the payment. Prepayment, in
whole or in part, shall be noted in the accounting records of the Company.
4. General Payment Provisions. All payments or prepayments of principal
and interest and other sums due pursuant to this Note shall be made by check
payable to the Payee at the address set forth above or at such other address as
Payee shall have previously designated to the Company in writing not later than
two Business Days (as defined below) prior to the date on which such payment
becomes due.
If the due date of any payment under this Note would otherwise fall on a
day which is not a Business Day, such date will be extended to the immediately
succeeding Business Day and interest shall be payable at the rate set forth
herein for the period of the extension. The term "Business Day" shall mean any
day on which commercial banks in the State of New York are not authorized or
required to close.
5. Conversion; Prepayment.
(a) Conversion/Prepayment and Conversion Price. The Payee may, subject to
the terms and conditions of this Section 5, at any time, or from time to time,
exercise its right to convert this Note to Common Stock by delivering a duly
executed notice, in the form substantially similar to Exhibit A hereto, of such
intention to the Company (the "Conversion Notice"); provided, however, that if,
and to the extent, this Note or any portion thereof is called for prepayment,
the holder may exercise its right to convert to Common Stock such portion of
this Note as was called for prepayment.
The Payee shall have the right, subject to the terms and conditions of this
Section 5, to, no more frequently than four times per annum in the aggregate,
convert all or any part of the principal amount then outstanding under this
Note (the "Note Amount"), in an amount not less than $25,000 (or such lesser
amount as may then be outstanding), into that number of fully-paid and
nonassessable shares of Common Stock (the "Conversion Shares"), obtained by
dividing the Note Amount or such portion thereof presented for conversion by
the Conversion Price. The "Conversion Price" shall initially be $2.50 per
share of Common Stock.
Upon a partial conversion or prepayment of this Note, the Company shall
execute and deliver to or on the order of the holder hereof, a new Note or
Notes of authorized denominations in principal amount equal to the unconverted
or unredeemed, as the case may be, portion of this Note.
(b) Issuance of Common Stock on Conversion. In order to effect the
conversion of this Note, the Payee shall deliver to the Company at its
principal office, this Note and a duly executed Conversion Notice; provided,
however, that if the Payee desires to convert the Note on the Maturity Date,
Payee shall notify the Company in writing of its intention to convert the Note
at least five (5) days prior to the Maturity Date. The date upon which the
Company receives the Conversion Notice, the Note and any other documentation
required under this Section 5 of this Note or the Conversion Notice shall be
referred to herein as the "Effective Date." Upon the Effective Date, this Note
(or portion thereof) shall be deemed converted into shares of Common Stock in
accordance with this Section 5, at which time the rights of the Payee with
respect to this Note and the amount so converted shall cease and, subject to
the following provisions of this paragraph, the person or persons entitled to
receive the shares of Common Stock upon conversion of this Note (or portion
thereof) shall be treated for all purposes as having become the record holder
or holders of such Common Stock. As promptly as practicable after the
Effective Date, the Company shall deliver or cause to be delivered to the
Payee, at the address set forth above or at such other address as the Payee
shall designate in writing, certificates representing the number of fully paid
and nonassessable shares of Common Stock into which this Note (or portion
thereof), shall be converted in accordance with the provisions of this Section
5. If this Note is called for prepayment it may be converted as provided
herein up to and including the close of business on the business day preceding
the date of prepayment.
No fractional shares of Common Stock shall be issued upon conversion of
this Note (or portion thereof). In lieu of any fractional share of Common
Stock which would otherwise be issuable upon conversion of this Note (or
portion thereof), the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to such fraction multiplied by the Conversion
Price.
(c) Reserves. The Company covenants that it will at all times reserve and
keep available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, solely for the purpose of issue upon conversion of this
Note as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of this Note. The Company covenants that all
shares of Common Stock which shall be so issuable shall, upon issuance, be duly
and validly issued and fully paid and nonassessable. The Company shall from
time to time, in accordance with applicable law, increase the authorized amount
of its Common Stock if at any time the authorized amount of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of this
Note at the time outstanding.
(d) Taxes Upon Conversion. The issuance of certificates for shares of
Common Stock upon the conversion of this Note shall be made without charge to
the converting noteholder for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the holder of this Note; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of this Note, and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid; and provided, further,
that in no event shall the Company be required to pay or reimburse the holder
for any income tax payable by such holder as a result of such issuance.
(e) Legends. All certificates representing Conversion Shares shall bear a
conspicuous legend stating in substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS THEY HAVE BEEN REGISTERED OR QUALIFIED THEREUNDER OR AN EXEMPTION
FROM REGISTRATION OR QUALIFICATION IS AVAILABLE."
The Company shall, upon the request of any holder of a stock certificate
representing Conversion Shares and the surrender of such certificate, issue a
new stock certificate without such legend if (i) the stock evidenced by such
certificate has been effectively registered under the Securities Act and
qualified under any applicable state securities law and sold by the holder
thereof in accordance with such registration and qualification or (ii) such
holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth
herein are no longer required or necessary under the Securities Act or any
applicable state law.
6. Subordination.
(a) The Company irrevocably covenants and agrees, and the Holder of this
Note, by its acceptance thereof, irrevocably covenants and agrees, that the
payment of the principal of and interest on this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, to the
prior payment and/or cancellation (as shall be appropriate) in full of all
Senior Indebtedness (as defined herein). The provisions of this Section 6 are
made for the benefit of the holders of Senior Indebtedness, and such holders
shall, at any time, be entitled to enforce such provisions against the Company
or Noteholder. No holder of any Senior Indebtedness shall be deemed to owe any
fiduciary duty or any other obligation to any Holder of this Note now or at any
time hereafter. Notwithstanding anything herein contained to the contrary, all
the provisions of this Note shall, except as otherwise provided herein, be
subject to the provisions of this Section 6, so far as the same may be
applicable thereto.
(b) For purposes of this Section 6 (and subject to Section 2.06 of the
Securities Purchase Agreement), "Senior Indebtedness" shall mean any
indebtedness, liability or obligation, contingent or otherwise, other than that
arising pursuant to this Note, of the Company (any such indebtedness, liability
or obligation being hereinafter in this definition referred to as an
"Obligation") (i) which is created, assumed or incurred by the Company after
the date of this Note and which, when created, assumed or incurred, is
specifically designated by the Company as Senior Indebtedness for the purposes
hereof in the instrument creating or evidencing the Company's liability with
respect to such Obligations or (ii) any increases, guarantees, refundings,
renewals, rearrangements or extensions of and amendments, modifications and
supplements to any indebtedness, liability or obligation described in clause
(i) above.
8. No Assignment. This Note may not be assigned by the Payee without the
prior written consent of the Company.
9. Governing Law. This Note shall be construed in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts as applied to
contracts made and to be performed entirely in the Commonwealth of
Massachusetts without regard to principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the Commonwealth of Massachusetts or any federal
court sitting in the Commonwealth of Massachusetts for purposes of any suit,
action or other proceeding arising out of this Note (and agrees not to commence
any action, suit or proceedings relating hereto except in such courts). Each
of the parties hereto agrees that service of any process, summons, notice or
document by U.S. registered mail at its address set forth herein shall be
effective service of process for any action, suit or proceeding brought against
it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Note, which is brought by or against it, in
the courts of the Commonwealth of Massachusetts or any federal court sitting in
the Commonwealth of Massachusetts and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
10. Adjustment of Interest Rate. No provision of this Note shall require
the payment of interest to the extent that receipt of any such payment by the
Company would be contrary to the provisions of law applicable to the Company
limiting the maximum amount of interest that may be charged to or collected
from the Company, and if any sum in excess of such maximum rate of interest is
paid or charged, the excess will be deemed to have been a prepayment of
principal of this Note when paid, without premium or penalty, and all payments
made thereafter will be appropriately applied to interest and principal to give
effect to such maximum rate, and after such application any excess shall be
immediately refunded to the Company.
PAMET SYSTEMS, INC.
By: ______________________________
Name: David T. McKay
Title: President & CEO
Attested:
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT A TO PROMISSORY NOTE
[Form of Conversion Notice]
To Pamet Systems, Inc.:
The undersigned registered holder (the "Payee") of the Note in the
principal amount indicated below and bearing the certificate number indicated
below (the "Note"), hereby irrevocably exercises its right to convert the
principal amount of the Note indicated herein into shares of common stock, par
value $.01 per share, of Pamet Systems, Inc. (the "Company"), in accordance
with the terms of the Note, and directs that the shares issuable and
deliverable upon such conversion together with a check in payment for
fractional shares, be issued and delivered to the Payee unless a different name
has been indicated below. If shares are to be issued in the name of a person
other than the Payee (such person being referred to as the "Transferee"), the
Note must be duly endorsed by, or accompanied by instruments of transfer in
form satisfactory to the Company and duly executed by the undersigned, and the
undersigned will pay all transfer taxes payable with respect thereto. In
addition, the Transferee must sign this notice. All capitalized terms used in
this notice and not otherwise defined shall have the respective meanings
ascribed to them in the Note.
The Payee, or in the event a Transferee shall receive the Conversion Shares
issued upon conversion of this Note, the Transferee, hereby represents and
warrants to the Company that (i) he has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment in the Company, (ii) he is acquiring the Conversion Shares for
its own account for investment and not with a view to, or for distribution or
sale in connection with any public offering in violation of the Securities Act
of 1933, as amended (the "Securities Act"), (iii) he understands that (x) the
Conversion Shares will not have been registered for sale under the Securities
Act or qualified under applicable state securities laws and may not be resold
without registration under the Securities Act and qualification under any
applicable state securities law, (y) such Conversion Shares will be issued to
him pursuant to one or more exemptions from the registration or qualification
requirements of the Securities Act and that the representations and warranties
contained herein are given with the intention that the Company may rely thereon
for purposes of claiming such exemptions and (z) the Conversion Shares shall
contain a legend substantially as set forth in Section 5(e) of the Note, (iv)
he is an "accredited investor" as defined in Section 501 of Regulation D
promulgated under the Securities Act, (v) he understands he must bear the
economic risk of Conversion Shares issued upon conversion of the Note for an
indefinite period of time as the Conversion Shares cannot be sold unless
registered under the Securities Act and any other applicable state securities
laws or sold in a transaction exempt from such registration thereunder and (vi)
representatives of the Company have (x) fully and satisfactorily answered any
questions which he deemed to ask concerning the Company and (y) furnished him
with such additional information and documents regarding the Company as he has
reasonably requested.
Principal amount of Note to be converted: $________________
Certificate Number of Note: __
Print name, address (including zip code) and social security or other taxpayer
identification number of the person in whose name the Common Stock will be
issued:
_________________________________
_________________________________
_________________________________
(Zip Code)
_________________________________
Social Security or other
Taxpayer Identification
Number
Dated:___________________________ ________________________________
Signature of Noteholder
Dated:___________________________ ________________________________
Signature of Transferee
<PAGE>
EXHIBIT 4.23
Warrant issued to BSI SA dated May 14, 1999
LW - 008
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD) THAT SUCH
REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on May 13, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
PAMET SYSTEMS, INC.
FOR VALUE RECEIVED, PAMET SYSTEMS, INC. (the "Company"), a Massachusetts
corporation, hereby certifies that BSI SA, a financial institution representing
Mr. Pierre Bottinelli with its address at Via Magatti 2, 6900 Lugano,
Switzerland, or its permitted assigns, is entitled to purchase from the
Company, at any time or from time to time commencing May 14, 1999, and prior to
5:00 P.M., Eastern Standard Time, on May 13, 2004, a total of One Hundred and
Fifty Thousand (150,000) fully paid and nonassessable shares of Common Stock,
par value $.01 per share, of the Company for an aggregate purchase price of
Three Hundred and Seventy Five Thousand Dollars ($375,000) (computed on the
basis of $2.50 per share). (Hereinafter, (i) said Common Stock, together with
any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock," (ii)
the shares of the Common Stock purchasable hereunder are referred to as the
"Warrant Shares," (iii) the aggregate purchase price payable hereunder for the
Warrant Shares is referred to as the "Aggregate Warrant Price," (iv) the price
payable hereunder for each of the Warrant Shares is referred to as the "Per
Share Warrant Price," (v) this Warrant, and all warrants hereafter issued in
exchange or substitution for this Warrant are referred to as the "Warrant" and
(vi) the holder of this Warrant is referred to as the "Holder.") The number of
Warrant Shares for which this Warrant is exercisable is subject to adjustment
as hereinafter provided.
This Warrant is issued by the Company pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and BSI SA (the
"Securities Purchase Agreement"). Capitalized terms used but not defined shall
have the respective meanings ascribed to them in the Securities Purchase
Agreement.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing May 14, 1999, and prior to 5:00 P.M., Eastern Standard
Time, on May 13, 2004, by the Holder of this Warrant by the surrender of this
Warrant (with the subscription form at the end hereof duly executed) at the
address set forth in Subsection 9(a) hereof, together with proper payment of
the Aggregate Warrant Price, or the proportionate part thereof if this Warrant
is exercised in part.
(b) The Aggregate Warrant Price or Per Share Warrant Price shall be paid in
cash by certified or official bank check payable to the order of the Company.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above
(an "Exercise Date"). At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such exercise
as provided in subsection 1(d) below shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such certificates.
(d) If this Warrant is exercised in part, the Holder shall be entitled to
receive a new Warrant covering the number of Warrant Shares in respect of which
this Warrant has 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 will (a) issue a certificate or
certificates in the name of the Holder for the shares of the Common Stock to
which the Holder shall be entitled, and (b) deliver the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of the
Warrant.
(e) No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the fair value of a
share.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
in reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Adjustments.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the number of Warrant Shares for which this Warrant may
be exercised shall be adjusted so that if the Holder surrendered this Warrant
for exercise after such action the Holder would be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which he
would have been entitled to receive had such Warrant been exercised immediately
prior to such action. An adjustment made pursuant to this subsection (a) shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this subsection (a), the Holder of this Warrant
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of this Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares of such classes of capital stock or shares of Common Stock and
other capital stock.
(b) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale or conveyance had
such Warrant been exercised immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder to the end that the provisions set forth in
this Section 3 shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of this Warrant. The above
provisions of this subsection (b) shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances. Notice of
any such consolidation, merger, statutory exchange, sale or conveyance and of
said provisions so proposed to be made, shall be mailed to the Holder not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(c) In the event of any adjustment to the number of Warrant Shares issuable
upon exercise of this Warrant, the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price in effect immediately prior to such
adjustment by a fraction the numerator of which is the aggregate number of
Warrant Shares for which this Warrant may be exercised immediately prior to
such adjustment and the denominator of which is the aggregate number of Warrant
Shares for which this Warrant may be exercised immediately after such
adjustment.
(d) Whenever the Per Share Warrant Price is adjusted as provided in this
Warrant and upon any modification of the rights of the Holder of this Warrant
in accordance with this Section 3, the Company shall promptly prepare a
certificate of an officer of the Company, setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or modification, a
brief statement of the facts requiring such adjustment or modification and the
manner of computing the same and cause a copy of such certificate to be mailed
to the Holder.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the proper exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights, and the Company will take all such actions as
may be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then Per
Share Warrant Price. Subject to Section 5(e) hereof, the Company further
covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor. The
Holder covenants and agrees that it shall pay, when due and payable, any and
all federal, state and local income or similar taxes that may be payable in
respect of the issuance of any Warrant Shares or certificates therefor.
5. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares issuable
upon the exercise hereof have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or under any state securities laws and
unless so registered may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only either (i) upon publication by the Securities
and Exchange Commission (the "Commission") of a ruling, interpretation, opinion
or "no action letter" based upon facts presented to said Commission, or (ii)
upon receipt by the Company of an opinion of counsel acceptable to the Company
to the effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations promulgated under either such act, or to
the effect that the Warrant or Warrant Shares to be sold or transferred have
been registered under the Securities Act of 1933, as amended, and that there is
in effect a current prospectus meeting the requirements of Subsection 11(a) of
the Securities Act, which is being or will be delivered to the purchaser or
transferee at or prior to the time of delivery of the certificates evidencing
the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed transfer
(including, without limitation, a transfer by will or pursuant to the laws of
descent and distribution), and as a condition thereto, if such transfer is not
made pursuant to an effective registration statement under the Securities Act,
the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant, in form and substance equivalent to that signed by the
original Holder of this Warrant, signed by the proposed transferee, (ii) an
agreement by such transferee to the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (iii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 5, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each
officer and director thereof from and against any and all loss, damage or
liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach by the Holder of, this Warrant, (b) any transfer of the Warrant or
(c) any untrue statement or omission to state any material fact in connection
with the investment representations or with respect to the facts and
representations supplied by the Holder to counsel to the Company upon which its
opinion as to a proposed transfer shall have been based.
(d) Transfer. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance with
the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution,
attachment or other process attempted upon the Warrant, shall be null and void
and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with Massachusetts
law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with an
available exemption from such registration."
6. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by first-class
mail, postage prepaid, addressed to:
(a) the Company at 1000 Main Street, Acton, Massachusetts 01720, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at the address contained in the first paragraph of this
Warrant, or such other address as the Holder has designated in writing to the
Company.
9. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, PAMET SYSTEMS, INC., has caused this Warrant to be
signed by a duly authorized officer as of this 14th day of May, 1999.
ATTEST: PAMET SYSTEMS, INC.
_______________________ By:___________________________________
Name: David T. McKay
Title: President & CEO
<PAGE>
SUBSCRIPTION
The undersigned, __________________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Common Stock of PAMET
SYSTEMS, INC. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated __________________ Signature__________________________
Address____________________________
____________________________
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
PAMET SYSTEMS, INC.
Dated __________________ Signature_________________________
Address___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and transfers
unto _________________________ the right to purchase _________________________
shares of the Common Stock of PAMET SYSTEMS, INC. by the foregoing Warrant, and
a proportionate part of said Warrant and the rights evidenced hereby, and does
irrevocably constitute and appoint _________________________, attorney, to
transfer that part of said Warrant on the books of PAMET SYSTEMS, INC.
Dated ___________________ Signature__________________________
Address____________________________
____________________________
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 20,498
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<RECEIVABLES> 530,135
<ALLOWANCES> 60,000
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<CURRENT-ASSETS> 686,919
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0
0
<OTHER-SE> (1,664,150)
<TOTAL-LIABILITY-AND-EQUITY> 2,231,277
<SALES> 576,594
<TOTAL-REVENUES> 576,594
<CGS> 234,058
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 737,273
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<INTEREST-EXPENSE> 49,171
<INCOME-PRETAX> (443,908)
<INCOME-TAX> 0
<INCOME-CONTINUING> (443,908)
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