U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB Annual Report under Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year Commission File No. 33-55254-39
ended December 31, 1996
PERIPHERAL CONNECTIONS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 87-0485315
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
2 Sheppard Avenue East, Suite 1800
North York, Ontario CANADA M2N 5Y7
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (416) 250-1212
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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 .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year: $ 0
Aggregate market value of voting stock held by non-affiliates of
registrant: As of March, 1997, there was no market for issuer's securities.
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 1,000,000 shares of $.001 par
value Class A common stock outstanding as of March 6, 1997.
Transitional Small Business Disclosure Format: Yes No X
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PART I
Item 1. Business
Peripheral Connections, Inc. (the "Company") was incorporated under the
laws of Nevada on March 14, 1990. The Company is in the developmental stage, and
has no operational history and has yet to engage in business of any kind. The
Company is in the process of investigating potential business ventures which, in
the opinion of management, may provide a source of eventual profit to the
Company. Such involvement may take many forms, including the acquisition of an
existing business, the acquisition of assets to establish subsidiary businesses,
or the creation of a new business such as the establishment of a search engine
for the Internet, as described below. It is not certain whether the Company's
current management would remain involved as management of an acquired business;
presently unidentified individuals may be retained for such purposes.
On July 2, 1996, the Company raised $200,000 through the issuance of a
12.5% debenture which was convertible into $0.001 par value Class A common
shares of the Company ("Common Stock") at the rate of 10 cents per share (the
"First Debenture"). On November 1, 1996, the Company raised $200,000 through the
issuance of a 10% debenture (the "Second Debenture") which is convertible into
Common Stock at the rate of 10 cents per share. The funds from the Second
Debenture were used to repay in full and retire the First Debenture. The Second
Debenture was sold to Chalmette Finance, Inc. pursuant to Regulation S.
Chalmette Finance Inc. is a Panamanian corporation with its principal offices in
Canada and is controlled by Melvyn Moscoe, an officer and director of the
Company. The price of the shares was determined arbitrarily by both parties. The
Second Debenture provides that it is an event of default if the Company's
securities are not listed for purchase and sale on a recognized securities
exchange on or before November 30, 1997.
The Company is investigating using the proceeds of this $200,000 financing
to construct a new search engine for financial products now being presented on
the World Wide Web of the Internet. The Company would assemble the personnel and
infrastructure to create the requisite Web software. The Company is of the
opinion that it ultimately could attract such potential advertisers in the
financial world as brokers, money managers, financial planners, publishers and
banking institutions who are now paying premium prices on a per-contract basis
and if successful in creating the software, it can possibly reach an
indeterminate portion of an Internet audience estimated to amount to as many as
25-50 million investors per day. The Company recognizes that such proposed
software would provide a service now available in different forms by other
Internet providers, and that the intensive competition which now exists on the
Internet for "advertising" dollars that might preclude it from ever establishing
a viable business.
No assurance can be given as to when the Company may construct a new search
engine or locate alternative suitable business opportunities and such
opportunities may be difficult to locate; however, the Company intends to
actively search for potential business ventures for the
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next five years. The Company intends to allocate any incoming funds, should
there be any in the future, to general use for the purpose of seeking,
investigating and acquiring or becoming engaged in a business opportunity.
Decisions concerning these matters may be made by management without the
participation or authorization of the shareholders.
Management anticipates that due to its limited funds, and the limited
amount of its resources, the Company may be restricted to participation in only
one potential business venture. This lack of diversification should be
considered a substantial risk because it will not permit the Company to offset
potential losses from one venture against gains from another.
Business opportunities, if any arise, are expected to become available to
the Company principally from the personal contacts of its officers and
directors. While it is not expected that the Company will engage professional
firms specializing in business acquisitions or reorganizations, such firms may
be retained in the future, if management deems it to be advisable. Opportunities
may thus become available from professional advisers, securities broker-dealers,
venture capitalists, members of the financial community, and other sources of
unsolicited proposals. In certain circumstances, the Company may agree to pay a
finder's fee or other form of compensation, including perhaps one-time cash
payments, payments based upon a percentage of revenues or sales volume, and/or
payments involving the issuance of securities, for services provided by persons
who submit a business opportunity in which the Company shall decide to
participate, although no contracts or arrangements of this nature presently
exist. The Company is unable to predict at this time the costs of constructing a
search engine or locating an alternative suitable business opportunity.
The Company reserves the right to evaluate and to enter into any type of
business opportunity, in any stage of their development (including the "start
up" stage), in any location. In seeking a business venture, Management will not
be influenced primarily by an attempt to take advantage of the anticipated or
perceived appeal of a specific industry, management group, or product or
industry, but rather will be motivated by the Company's business objective of
seeking long term capital appreciation in their real value. In addition, the
Securities Exchange Act of 1934 ("Exchange Act") requires the filing of the Form
8-K to disclose any businesses acquired and require certified financial
statements of such companies. These reporting requirements may substantially
limit the businesses which may be available for possible acquisition candidates.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's management, none of whom is a professional analyst.
Among the factors which management will consider in analyzing potential business
opportunities are the available technical, financial and managerial resources;
working capital and financial requirements; the history of operation, if any;
future prospects; the nature of present and anticipated competition; potential
for further research, development or exploration; growth and expansion
potential; profit potential; the perceived public recognition or acceptance of
products or services; name identification, and other relevant factors.
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It is not possible at present to predict the exact manner in which the
Company may participate in a business opportunity. Specific business
opportunities will be reviewed and, based upon such review, the appropriate
legal structure or method of participation will be decided upon by management.
Such structures and methods may include, without limitation, leases, purchase
and sale agreements, license, joint ventures; and may involve a merger,
consolidation, or reorganization. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
The Company may create its own product or services. It is possible that the
Company will acquire a business venture by conducting a reorganization involving
the issuance of the Company's restricted securities. Such a reorganization may
involve a merger (or combination pursuant to state corporate statutes, where one
of the entities dissolves or is absorbed by the other), or it may occur as a
consolidation, where a new entity is formed and the Company and such other
entity combine assets in the new entity. A reorganization may also occur,
directly or indirectly, through subsidiaries, and there is no assurance that the
Company would be the surviving entity. Any such reorganization could result in
additional dilution to the book value of the shares and loss of control of a
majority of the shares. The Company's present directors may be required to
resign in connection with a reorganization.
A reorganization may be structured in such a way as to take advantage of
certain beneficial tax consequences available in business reorganizations, in
accordance with provisions of the Internal Revenue Code of 1986 (as amended).
Pursuant to such a structure, the number of shares held prior to the
reorganization by all of the Company's shareholders might be less than 20% of
the total shares to be outstanding upon completion of the transaction.
Consequently, substantial dilution of percentage equity ownership of the present
shareholders may result.
Generally, the issuance of securities in a reorganization transaction would
be undertaken in reliance upon one or more exemptions from the registration
provisions of applicable federal securities laws, including the exemptions
provided for non-public or limited offerings, distributions to persons resident
in only one state and similar exemptions provided by state law. Shares issued in
a reorganization transaction based upon these exemptions would be considered
"restricted" securities under the Securities Act of 1933 ("1933 Act"), and would
not be available for resale for a period of two years, in accordance with Rule
144 promulgated under the 1933 Act. However, the Company might undertake, in
connection with such a reorganization transaction, certain registration
obligations in connection with such securities.
The Company may choose to enter into a venture involving the acquisition of
or merger with a company which does not need substantial additional capital but
desires to establish a public trading market for their securities. Such a
company may desire to consolidate its operations with the Company through a
merger, reorganization, asset acquisition, or other combination, in order to
avoid possible adverse consequences of undertaking its own public offering.
(Such consequences might include expense, time delays or loss of voting
control.) In the event of such a merger, the Company may be required to issue
significant additional shares, and it may be anticipated that control over the
Company's affairs may be transferred to others. It should also be noted that
this type of business venture might have the effect of depriving the Company's
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present shareholders of the protection of federal and state securities laws,
which normally affect the process of a company's becoming publicly held.
It is likely that the investigation and selection of business opportunities
will be complex, time-consuming and extremely risky. However, management
believes that based on current economic regulatory conditions it is possible, if
not probable, for a company like the Company with limited assets or liabilities,
to negotiate a merger or acquisition with a viable private company. The
opportunity arises principally because of the high level of accounting and other
fees and the considerable length of time associated with the registration
process of "going public." However, should any of the conditions change, it is
very possible that there would be little or no economic value for anyone taking
over control of the Company.
As part of their investigation of acquisition possibilities, the Company's
management may meet with executive officers of the business and its personnel;
inspect its facilities; obtain independent analyses or verification of the
information provided, and conduct other reasonable measures, to the extent
permitted by the Company's limited resources and management's limited expertise.
Generally, the Company intends to analyze and make a determination based upon
all available information without reliance upon any single controlling factor.
It is probable that the Company's management will be inexperienced in the
areas in which potential businesses will be investigated and in which the
Company may make an acquisition or investment. Thus, it may become necessary for
the Company to retain consultants or outside professional firms to assist
management in evaluating potential investments, and to hire managers to run or
oversee the operations of its acquisitions or investments. The Company can give
no assurance that it will be able to find suitable consultants or managers.
There are currently no contracts or agreements between any consultant and any
companies that are searching for "shell" companies with which to merge.
There have been preliminary discussions between the Company and market
makers regarding the participation of such market makers in a electronic
bulletin board aftermarket for the Company's securities. There is presently no
market for the Company's securities. The majority of the Company's shares are
held by affiliates and not freely transferable.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention, and substantial costs for accountants, attorneys and others. Should a
decision thereafter be made not to participate in a specific business
opportunity, it is likely that costs already expended would not be recoverable.
It is also likely, in the event a transaction should eventually fail to be
consummated, for any reason, that the costs incurred by the Company would not be
recoverable. The Company's officers and directors are entitled to reimbursement
for all expenses incurred in their investigation of possible business ventures
on behalf of the Company, and no assurance can be given that if the Company's
have available funds they will not be depleted in such expenses.
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In addition to the severe limitations placed upon the Company by virtue of
its limited funds, the Company will also be limited, in its investigation of
possible acquisitions, by the reporting requirements of the Exchange Act,
pursuant to which certain information must be furnished in connection with any
significant acquisitions. The Company would be required to furnish, with respect
to any significant acquisition, certified financial statements for the acquired
company, covering one, two or three years (depending upon the relative size of
the acquisition). Consequently, acquisition prospects which do not have the
requisite certified financial statements, or are unable to obtain them, may be
inappropriate for acquisition under the present reporting requirements of the
1934 Act.
The Company does not intend to take any action which would render it an
investment company under The Investment Companies Act of 1940 (the "1940 Act").
The 1940 Act defines an investment company as one which (1) invests, reinvests
or trades in securities as its primary business; (2) issues face-amount
certificates of the installment type or (3) invests, reinvests, owns, holds or
trades securities or owns or acquires investment securities having a value
exceeding 40 percent of the value of its total assets (exclusive of Government
securities and cash items) on an unconsolidated basis. The above 40 percent
limitation may be exceeded so long as a company is primarily engaged, directly
or through wholly-owned subsidiaries, in a business or businesses other than
that of investing, reinvesting, owning, holding or trading in securities. A
wholly- owned subsidiary is defined as one which is at least 95% owned by the
company.
Neither the Company nor any of its officers or directors are registered as
investment advisers under the Investment Advisers Act of 1940 (the "Advisers
Act"), and so there is no authority to pursue any course of business or
activities which would render the Company or its management "investment
advisers" as defined in the Advisers Act. Management believes that registration
under the Advisers Act is not required and that certain exemptions are
available, including the exemptions for person who may render advice to a
limited number of other persons and who may advise other persons located in one
state only.
The Company expects to encounter intense competition in its efforts to
locate suitable business opportunities in which to engage. The primary
competition for desirable investments may come from other small companies
organized and funded for similar purposes, from small business development
corporations and from public and private venture capital organizations. As the
Company will be completely unfunded, it is likely that all of the competing
entities will have significantly greater experience, resources, facilities,
contacts and managerial expertise than the Company and will, consequently, be in
a better position than the Company to obtain access to, and to engage in,
business opportunities. Due to its limited funds, the Company may not be in a
position to compete with larger and more experienced entities for business
opportunities which are low-risk. Business opportunities in which the Company
may ultimately participate are likely to be highly risky and extremely
speculative.
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Item 2. Properties
The Company owns no properties and utilizes space on a rent-free basis in
the office of Melvyn Moscoe, a director of the Company and the Company's
secretary and treasurer. This arrangement is expected to continue until such
time as the Company becomes involved in a business venture which necessitates
its relocation, as to which no assurances can be given. The Company has no
agreements with respect to the maintenance or future acquisition of office
facilities, however, if a successful merger/acquisition is negotiated, it is
anticipated that the office of the Company will be moved to that of the acquired
company.
Item 3. Legal Proceedings
On January 7, 1994, the Bureau of Securities of the State of New Jersey
filed a complaint in the matter of Capital General Corporation (the Company's
principal Shareholder prior to July 2, 1996), David R. Yeaman (the Company's
president and a director prior to July 2, 1996) and 74 other named defendants,
which were Nevada and Utah corporations including the Company. The complaint
proposed that civil monetary penalties totalling $30,000.00 be assessed against
Capital General Corporation for alleged violations of the Uniform Securities Law
(1967), N.J.S.A. 49:3-47 et. seq. by (1) selling to 24 New Jersey residents
between April 1986 and May 1991, securities in 25 of the 74 above referred to
respondent corporations named in the proceeding, not including the Company,
which were neither registered nor exempt from registration, and (2) making
untrue statements of material fact and omitting to state material facts in
connection with said New Jersey sales in 6 of the 74 above referred to resident
corporations named in the proceeding, not including the Company. Also on January
7, 1994, the Bureau of Securities of the State of New Jersey, based on
substantially similar allegations as in the above referred complaint, issued its
Order Denying Exemptions and to Cease and Desist. This order summarily denied
the exemptions contained in N.J.S.A. 49:3-50(b),(1),(2),(3),(9),(11) and (12) of
the securities of Capital General Corporation to 24 New Jersey residents
pursuant to the offer of rescission which began about April 28, 1993. This order
also ordered Capital General Corporation and David Yeaman to Cease and Desist
from offering or selling any securities in blind pool corporations into, or from
the State of New Jersey.
Capital General and David Yeaman filed answers denying the material
allegations of said complaint and resisting the imposition of said civil
monetary penalties, and the said Order denying Exemptions and to Cease and
Desist. Subsequently the issues raised in said complaint and order were settled
by agreement between the said Bureau of Securities and Mr. Yeaman and Capital
General Corporation in a consent order dated July 11, 1994 and approved by an
administrative law judge of the State of New Jersey Office of Administrative Law
September 2, 1994. Under the terms of said consent order, all claims in the
complaint against all named respondents were settled by the payment of $3,000
civil penalty, and the order was modified so that it does not apply to 27 of the
respondent companies; however said order does still apply to the Company.
Mr. Yeaman is no longer an officer or director of the Company.
8
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See also Item 9 regarding legal proceedings against former officers and
directors.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the Company's security holders for a vote during
the fiscal year ending December 31, 1996.
PART II
Item 5. Market of the Registrant's Common Equity and Related Stockholder
Matters.
There currently is not a trading market for the Company's $0.001 par value
common stock nor has there been a trading market for the Company's stock since
its inception.
As of March 10, 1997, there were approximately 348 record holders of the
Company's common stock. The Company has not previously declared or paid any
dividends on its common stock and does not anticipate declaring any dividends in
the foreseeable future.
Item 6. Management Discussion and Analysis or Plan of Operation.
The Company has had no operational history and has yet to engage in
business of any kind. All risks inherent in new and inexperienced enterprises
are inherent in the Company's business.
The Company has no operational history and has yet to engage in business of
any kind. All risks inherent in a new and inexperienced enterprise are inherent
in the Company's business. On July 2, 1996, the Company raised $200,000 through
the issuance of the First Debenture. On November 1, 1996, the Company raised
$200,000 through the issuance of the Second Debenture which is convertible into
Common Stock at the rate of 10 cents per share. The funds from the Second
Debenture were used to repay and retire the First Debenture. The Second
Debenture was sold to Chalmette Finance, Inc. pursuant to the exemption from
securities registration contained in Regulations S. Chalmette Finance Inc. is a
Panamanian corporation with principal offices in Canada and is controlled by
Melvyn Moscoe, an officer and director of the Company. The price of the shares
was determined arbitrarily by both parties. The Second Debenture provides that
it is an event of default if the Company's securities are not listed for
purchase and sale on a recognized securities exchange on or before November 30,
1997.
The Company is investigating using the $200,000 of net proceeds of this
financing activity to construct a new search engine for financial products now
being presented on the Internet. The Company would assemble the personnel and
infrastructure to create the requisite Web software. The Company is of the
opinion that it ultimately could attract such potential advertisers in the
financial world as brokers, money managers, financial planners, publishers and
banking
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institutions who are now paying premium prices on a per-contract basis and if
successful in creating the software, it can possibly reach an indeterminate
portion of an Internet audience estimated to amount to as many as 25-50 million
investors per day. The Company recognizes that such proposed software would
provide a service now available in different forms by other Internet providers,
and that the intensive competition which now exists on the Internet for
"advertising" dollars might preclude it from ever establishing a viable
business.
However, the Company has not committed to creating such search engine and
the Company has not made a formal study of the economic potential of any
business. At the present, the Company has not specifically identified any assets
or specific business opportunities for acquisition.
As of March, 1997, the Company has limited available capital resources,
such as credit lines, guarantees, etc. Should management decide not to further
pursue its business opportunity activities, management may abandon its
activities and the shares of the Company would become worthless. However, the
Company's officers, directors and major shareholder, have made an oral
undertaking to commence on a limited basis, the process of investigating
potential business opportunities or possible merger and acquisition candidates.
The Company's status as a publicly- held corporation may enhance its ability to
locate potential business ventures. The proceeds from the convertible debenture
are intended to provide for the payment of filing fees, professional fees,
printing and copying fees and other miscellaneous fees, in addition to funding
or partially funding a merger or acquisition or other business venture.
Based on current economic and regulatory conditions, Management believes
that it is possible, if not probable, for a company like the Company, with
limited assets, to negotiate a merger or acquisition with a viable private
company. The opportunity arises principally because of the high legal and
accounting fees and the length of time associated with the registration process
of "going public". However, should any of these conditions change, it is very
possible that there would be little or no economic value for anyone taking over
control of the Company.
Item 7. Financial Statements.
Independent Auditor's Report F-1
(Smith & Company)
Balance Sheets F-2
Statement of Operations F-3
Statement of Changes in Stockholder's Equity (Deficit) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
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SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
Members of: Crandall Building Suite 700
American Institute of 10 West 100 South
Certified Public Accountants Salt Lake City, Utah 84101
Utah Association of Telephone: (801) 575-8297
Certified Public Accountants Facsimile: (801) 575-8306
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Peripheral Connections, Inc. (A Development Stage Company)
We have audited the accompanying balance sheets of Peripheral Connections, Inc.
(a development stage company) as of December 31, 1996 and 1995, and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the years ended December 31, 1996, 1995 and 1994 and for the period of March 14,
1990 (date of inception) to December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peripheral Connections, Inc. (a
development stage company) as of December 31, 1996 and 1995 and the results of
its operations, changes in stockholders' deficit and its cash flows for the
years ended December 31, 1996, 1995 and 1994 and for the period of March 14,
1990 (date of inception) to December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
February 11, 1997
F-1
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
12/31/96 12/31/95
-------------- --------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 163,476 $ 0
Loan receivable - related party (Note 5) 27,860 0
Accrued interest (Note 5) 225 0
TOTAL CURRENT ASSETS 191,561 0
-------------- --------------
$ 191,561 $ 0
============== ==============
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Interest payable $ 3,333 $ 0
-------------- --------------
TOTAL CURRENT LIABILITIES 3,333 0
Convertible debenture - related party (Note 6) 200,000 0
-------------- --------------
TOTAL LIABILITIES 203,333 0
STOCKHOLDERS' EQUITY (DEFICIT) Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding
1,000,000 shares 1,000 1,000
Deficit accumulated during
the development stage (12,772) (1,000)
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (11,772) 0
-------------- -------------
$ 191,561 $ 0
============== =============
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
3/14/90
Year Year Year (Date of
ended ended ended inception) to
12/31/96 12/31/95 12/31/94 12/31/96
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0
----------- ------------ ------------ -------------
GROSS PROFIT 0 0 0 0
General & administrative
expenses 11,790 0 0 12,790
----------- ------------ ------------ -------------
11,790 0 0 12,790
OTHER INCOME (EXPENSE)
Interest income 3,770 0 0 3,770
Interest expense (3,752) 0 0 (3,752)
18 0 0 18
----------- ------------ ------------ -------------
NET LOSS $ (11,772) $ 0 $ 0 $ (12,772)
=========== ============ ============ =============
Net income (loss) per weighted
average share $ (.01) $ .00 $ .00
=========== ============ ============
Weighted average number of
common shares used to compute
net income (loss) per weighted
average share 1,000,000 1,000,000 1,000,000
=========== ============ ============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During
Par Value $0.001 Development
Shares Amount Stage
--------------- -------------- ----------------
Balances at 3/14/90
<S> <C> <C> <C>
(Date of inception) 0 $ 0 $ 0
Issuance of common
stock (restricted)
at $.001 per share
at 3/14/90 1,000,000 1,000 0
--------------- -------------- -----------------
Net loss for period (1,000)
Balances at 12/31/90 1,000,000 1,000 (1,000)
Net income for year 0
--------------- -------------- -----------------
Balances at 12/31/91 1,000,000 1,000 (1,000)
Net income for year 0
--------------- -------------- -----------------
Balances at 12/31/92 1,000,000 1,000 (1,000)
Net income for year 0
--------------- -------------- -----------------
Balances at 12/31/93 1,000,000 1,000 (1,000)
Net income for year 0
--------------- -------------- -----------------
Balances at 12/31/94 1,000,000 1,000 (1,000)
Net income for year 0
--------------- -------------- -----------------
Balances at 12/31/95 1,000,000 1,000 (1,000)
Net loss for year (11,772)
--------------- -------------- -----------------
Balances at 12/31/96 1,000,000 $ 1,000 $ (12,772)
=============== ============== =================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
3/14/90
Year Year Year (Date of
ended ended ended Inception) to
12/31/96 12/31/95 12/31/94 12/31/96
-------------- -------------- -------------- --------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ (11,772) $ 0 $ 0 $ (12,772)
Adjustments to reconcile
net income (loss) to cash
used by operating activities 0 0 0 0
Changes in assets and
liabilities:
Accrued interest
payable 3,333 0 0 3,333
-------------- -------------- -------------- --------------
NET CASH USED BY
OPERATING ACTIVITIES (8,439) 0 0 (9,439)
INVESTING ACTIVITIES
Loans to related party and
accrued interest (28,085) 0 0 (28,085)
-------------- -------------- -------------- --------------
NET CASH USED BY
INVESTING ACTIVITIES (28,085) 0 0 (28,085)
FINANCING ACTIVITIES
Proceeds from sale of
common stock 0 0 0 1,000
Proceeds from convertible
debentures 400,000 0 0 400,000
Debenture repayments (200,000) 0 0 (200,000)
-------------- -------------- -------------- --------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 200,000 0 0 201,000
-------------- -------------- -------------- --------------
INCREASE IN CASH
AND CASH EQUIVALENTS 163,476 0 0 163,476
Cash and cash equivalents
at beginning of year 0 0 0 0
-------------- -------------- -------------- --------------
CASH & CASH EQUIVALENTS
AT END OF YEAR $ 163,476 $ 0 $ 0 $ 163,476
============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all
highly-liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of risk, consist of cash and investments. The Company
places its investments in highly rated term deposit obligations which
limits the amount of credit exposure. Historically, the Company has
not experienced any losses related to investments.
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized. Since the Company has
not yet realized income as of the date of this report, no provision
for income taxes has been made.
In February, 1992, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which supersedes substantially all existing
authoritative literature for accounting for income taxes and requires
deferred tax balances to be adjusted to reflect the tax rates in
effect when those amounts are expected to become payable or
refundable. The Statement was applied in the Company's financial
statements for the fiscal year commencing January 1, 1993.
At December 31, 1996 a deferred tax asset has not been recorded due to
the Company's lack of operations to provide income to use the net
operating loss carryover of $11,772 which will expire December 31,
2011.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Nevada on
March 14, 1990 and has been in the development stage since
incorporation. The Company intends to develop a new search-engine for
financial products now presented on the Internet.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
common stock to Capital General Corporation for $1,000 cash for an
average consideration of $.001 per share. The Company's authorized
stock includes 25,000,000 shares of common stock at $.001 par value.
F-6
<PAGE>
PERIPHERAL CONNECTIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE 4: RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real property. Office services
were provided through June 1996, without charge, by Capital General
Corporation. Since July, office services have been provided without
charge by current management. Such costs are immaterial to the
financial statements, and, accordingly, have not been reflected
therein. The officers and directors of the Company are involved in
other business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
NOTE 5: LOAN RECEIVABLE - RELATED PARTY
At December 31, 1996, the Company is owed principal of $27,860 and
interest of $225 by an entity whose president is Secretary/Treasurer
and a Director of the Company. The loan is due on demand and has an
interest rate of 8%.
NOTE 6: CONVERTIBLE DEBENTURE - RELATED PARTY
On November 1, 1996, the Company issued a convertible debenture to an
entity controlled by the Company's Secretary/Treasurer for $200,000
cash. The debenture has an interest rate of 10% per annum, calculated
semi-annually. The first interest payment of $10,000 will be due May
31, 1997. The debenture is payable on November 1, 2001. The lender may
convert prior to November 1, 2001, in whole or in part, the
outstanding principal and accrued interest into $.001 par value Class
A common stock of the Company at a conversion price of $.10 per share.
Had the lender exercised the option at December 31, 1996, the lender
would have received 2,000,000 shares of common stock and would have
become the Company's majority shareholder. The debt is secured by all
assets of the Company.
Scheduled principal reductions of debentures are as follows:
1997 $ 0
1998 0
1999 0
2000 0
2001 200,000
-------------------
$ 200,000
===================
NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, loan and interest
receivable, and interest payable approximate fair value due to the
short maturity periods of these instruments. The fair value of the
Company's long-term debt, based on the present value of the debt,
assuming interest rates of 10.00% at December 31, 1996 was
approximately $125,000.
NOTE 8: CHANGE IN OWNERSHIP
During the year, the Company experienced a change in ownership as well
as a change in all officers and directors.
F-7
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
Item 9. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officers and
directors. The directors were appointed as of July 2, 1996 and will serve until
the next annual meeting of the Company's stockholders, and until their
successors have been elected and have qualified. The officers were appointed to
their positions as of July 2, 1996, and continue in such positions, at the
discretion of the directors. David R. Yeaman and Krista Castleton Neilson are no
longer officers or directors of the Company.
Name Age Position
Milton Klyman 71 President, Director
Melvyn Moscoe 53 Secretary/Treasurer, Director
CURRENT DIRECTORS AND OFFICERS
MILTON KLYMAN has been a Director and the President of the Company since
July 2, 1996. He has been a self-employed financial consultant since 1982.
Milton Klyman is presently a director and/or officer of the following other
companies and has been from the date indicated to the present (unless otherwise
indicated): Windy Mountain Explorations Ltd. (07/91), Academy Explorations
Limited (08/82), Agnico Eagle Mines Ltd. (06/72), Blue Power Energy Corp.
(10/95), Canlorm Resources Inc. (09/94), CD Rom Network Corp. (07/94), Covesco
Capital Corporation (01/96), Curran Bay Resource Ltd. (08/93), Concho Resources
& Energy Inc. (12/92 to 09/94), Destrobelle Mines Ltd. (06/82), Falcon Point
Resources Limited (05/84), Golden Penguin Resources Ltd. (12/87), Gracefield
Capital Corporation (01/95), Grand Empire Explorations Ltd. (11/87), Grand Oakes
Resources Corp. (12/88), HMD Capital Corp. (02/96), Harte Resources Corporation
(01/82), Humlin Red Lake Mines Limited (04/95), Inland National Capital Ltd.
(01/95), July Resources Corp. (06/90), MW Capital Resources Corp. (06/90),
Merbank Capital Corporation (01/95 to 08/95), Midswana Diamond Exploration Corp.
(11/79 to 11/94), Mountain Beaver Resources, Inc. (02/96), Oil Springs Energy
Corp. (08/93), Olympic Rom World Inc. (10/94), Planetsafe Enviro Corporation
(03/95), Raw Creek Resources Inc. (01/95), Red Fox Resources Inc. (12/87), Reed
Lake Exploration Ltd. (11/95), Resources Minieres Platinor Inc. (01/96), Rusty
Lake Resources Ltd. (03/95 to 05/95), Scotia Prime Minerals, Incorporated
(02/95), Silver Circle Compact Disc Books Inc. (03/94), Sudbury Contact Mines
Ltd. (09/71), Tejas Petroleum Resources Ltd. (11/90), Triangle Capital Energy
Corp. (01/93), Twin Star Energy Corp. (09/91), Unique Capital Corporation
(01/96), United Dixie Resources Inc. (05/93), Willow Resources Ltd. (01/93 to
11/93) and Xxpert Rental Tool Inc. (02/97). Agnico Eagle Mines Ltd. is listed on
the New York Stock Exchange.
11
<PAGE>
MELVYN MOSCOE has been a Director and the Secretary and Treasurer of the
Company since July 2, 1996. Since 1987, Mr. Moscoe's principal occupation has
been as President and principal of M. Moscoe Consultants, Inc., through which
company Mr. Moscoe has engaged in financial and general business consulting to
private ventures, leading corporations and governmental entities. Mr. Moscoe has
also been involved in private investment activities in the past five years. From
1972 to 1987, Mr. Moscoe was a partner in Wm. Eisenberg & Co, one of the top 15
accounting firms in Canada.
FORMER OFFICERS AND DIRECTORS
KRISTA CASTLETON NIELSON, was a Director of the Company from inception
until July 2, 1996. Since 1986 she has been an officer and director of Capital
General Corporation ("Capital General"), a Utah-based financial consulting firm,
and has been involved in the organization and promotion of various shell
companies. Ms. Nielson received a Business degree from Salt Lake Community
College in 1987. She serves as an officer and/or director in the following
private corporations: Yeaman Enterprises, Inc. and Universal Associates, Inc.,
family holding companies, Yeaman Auto Sales, Inc., an automobile dealership
company, Four Star Ranch, Inc., a farmland development company, Creative
Financial Corporation and Visual Impact Corporation, financial consulting
companies, and National Stock Transfer, Inc., a stock transfer agency company.
Ms. Nielson devotes her time primarily to her role as Vice President of Capital
General and to the financial consulting activities in which Capital General
engages.
DAVID R. YEAMAN, was a Director of the Company from inception until July 2,
1996. He has been President of Capital General since its inception in 1971 to
the present. Mr. Yeaman has been involved in numerous development stage
companies since he assisted in organizing Capital General Corporation. During
the last five years, in connection with Capital General Corporation, he has been
primarily involved in the organization and promotion of various shell companies.
Mr. Yeaman serves as an officer and/or director in the following private
companies: Yeaman Enterprises, Inc., a family holding company, Four Star Ranch,
Inc., a farmland development company, Yeaman Auto Sales, Inc., an automobile
dealership company, Financial Connections, Inc. and Peak Experience, Inc.,
financial consulting companies. Mr. Yeaman devotes his time primarily to his
role as President of Capital General Corporation and to the financial consulting
activities in which Capital General Corporation engages.
Krista Castleton Nielson and David R. Yeaman are directors of Arrow
Management, Inc., Saber Capital, Inc., Vicuna, Inc., Why Not?, Inc., Zeus
Enterprises, Inc., Xebec Galleon, Inc., Hightide, Inc., Grandeur, Inc., Kowtow,
Inc., Radar Resources, Inc., Alpaca, Inc., Bonito Industries, Inc., Cetacean
Industries, Inc., Star Dolphin, Inc., Egeret, Inc., Flamingo Capital, Inc.,
Gopher, Inc., Hyena Capital, Inc., Koala Capital Corporation, Jackal Industries,
Inc., Longhorn, Inc., Macaw Capital, Inc., Environmental Development
Corporation, Ultronics Corporation, Bioethics, Ltd., Quantitative Methods
Corporation, and Bio-Chem, Inc. which are companies subject to the requirements
of section 15(d) of the Exchange Act. Ms. Casteleton Nielson and Mr. Yeaman are
not directors or officers of any other company with a class of
12
<PAGE>
securities registered pursuant to Section 12 of the Exchange Act or the
requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940.
On February 8, 1996, David R. Yeaman was charged in the United States
District Court for the Eastern District of Pennsylvania with conspiracy, wire
fraud and fraud in the offer, purchase and sale of securities, in violation of
18 U.S.C. Sections 2, 371 and 1343; 15 U.S.C. Sections 771(a), 77x, 78j(b), and
78ff; and Rule 10b-5 promulgated by the Securities and Exchange Commission,
Title 17, Code of Federal Regulations, Section 240.10b-5 (1986).
On February 22, 1996, Mr. Yeaman entered his not guilty plea to all
charges. The allegations against Mr. Yeaman are based on the government's claims
that he and five of the other defendants named in the proceeding violated the
aforesaid laws by inflating the apparent worth of certain reinsurance companies
by leasing them alleged worthless securities. Specifically, it is alleged that
Mr. Yeaman, with other defendants, engaged in practices which falsely increased
the quoted prices of the securities and misrepresented restricted securities as
free trading securities. Based on these allegations, the charges against Mr.
Yeaman include one count of conspiracy, seven counts of wire fraud, six counts
of securities fraud, and aiding and abetting with respect to each count.
The U.S. Securities and Exchange Commission, Securities Act of 1933 Release
No. 7008 and Securities Exchange Act of 1934 Release No. 32669 announced that on
July 23, 1993, it ordered David R. Yeaman and Capital General to permanently
cease and desist from committing or causing further violations of Section 5(a)
and (c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(g) of
the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 and 13d-1(c)
thereunder.
Krista Castleton Nielson was ordered to permanently cease and desist from
committing or causing further violations of Section 17(a) of the Securities Act
and Section 10(b) of the Exchange Act and Rules 10b-5 and 12b-20 thereunder. In
addition, the Commission ordered the revocation of the registration of the
common stock of Altara International, Inc., Arrow Management, Inc., Atlas
Equity, Inc., Dynamic Associates, Inc., Energy Systems, Inc., Four Star Ranch,
Inc., Panorama Industries, Inc., Partisan Corporation, Quiescent Corporation,
Saber, Inc., Upsilon, Inc., Vicuna, Inc., Why Not?, Inc., Xebec Galleon, Inc.,
Zebu, Inc., and Zeus Enterprises, Inc. pursuant to Section 12(j) of the Exchange
Act. The Commission found that each of the issuers had filed a registration
statement on Form 10 that contained materially false and misleading statements
in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Each of the respondents had submitted an Offer of Settlement consenting to
the entry of the Order without admitting or denying the allegations in the
Order. Prior to the submission of the Offers of Settlement, Capital General, on
behalf of the above mentioned companies, except for Panorama Industries, Inc.,
filed a registration statement on Form S-1 during December of 1992 to register
the common stock of those companies under the Securities Act of 1933.
13
<PAGE>
Concurrently with the signing of the Offers of Settlement, the Registration
Statement was declared effective on June 30, 1993. A Post Effective Amendment
was filed and declared effective September 2, 1993. Although the registration of
the common stock under Section 12(g) of the 1934 Act was revoked on July 23,
1993, the companies are now registered and reporting under the Securities Act of
1933 by virtue of the filing of Form S-1 as indicated by Commission File No.
33-55254.
During 1986 and 1987, Capital General gifted very small percentages of
stock (usually 100 shares to each giftee) in the following companies, to
approximately 1,000 persons or entities: Amenity, Inc., Dogmatic, Inc., Mystic
Industries, Inc., Showstoppers, Inc., Hightide, Inc., Grandeur, Inc., Fantastic
Industries, Inc., Juglar, Inc., Xebec Galleon, Inc., Golden Home Health Care
Equipment Centers, Inc., Nighthawk Capital, Inc., Instrument Development
Corporation, H & B Carriers, Inc., Florida Growth Industries, Inc., Macaw, Inc.,
Longhorn Enterprise, Inc., Koala Corporation, Yahwe Corporation, Star Dolphin,
Inc., Jackal, Inc., Hyena Capital, Inc., Gopher, Inc., Flamingo Capital, Inc.,
Egret, Inc., Cetacean Industries, Inc., Bonito, Inc., Alpaca, Inc., Zeus
Enterprise, Inc., Tamarind, Inc., Saber, Inc., Radar, Inc., Quiescent
Corporation, Vanadium, Inc., Upsilon, Inc., Why Not?, Inc., Bestmark, Inc.,
Missouri Illinois Mining Co., Inc.
Capital General did not register the gifts of shares in these companies
with the Securities Division of the State of Utah or with the Securities
Exchange Commission because it believed these gifts to be outside the scope of
the Utah Uniform Securities Act and the Securities Act of 1933 inasmuch as such
acts require registration for sales and do not require registration of gifts.
Nevertheless, in connection with the distribution of shares of its subsidiaries,
Capital General was found by the Utah Securities Advisory Board, in two
decisions affirmed by the Utah State Courts, to have violated the registration
provisions of the Utah Uniform Securities Act. See In re Amenity Inc., No.
SD-86-11 (Utah Sec. Adv. Bd. February 18, 1987) aff'd C87-2625 (3d Dist. Ct.
September 18, 1987) aff'd sub nom Capital General Corp. v. Utah Dep't of
Business Reg., 777 P.2d 494, 498 (Utah Ct. App.) cert.denied, 781 P.2d 873 (Utah
S. Ct. 1989); In re H&B Carriers Inc., No. 87-09-28-01 (Utah Sec. Adv. Bd., Apr.
15, 1988) aff'd No. 88-5900053 (3d Dist. Ct. Sept 10, 1990) aff'd sub nom
Capital General Corp. v. Utah Dep't of Business Reg., Case No 91- 196 (Utah Ct.
App. February 10, 1992. All of the remaining companies listed above were parties
to the H&B Carriers order.
Both of these actions sought suspension of transactional exemptions
respecting the shares of these companies pursuant to Section 14(3) of the Utah
Uniform Securities Act. Capital General defended both actions on the grounds
that the Utah Uniform Securities Act did not apply to gifts of securities, that
the gifts were good faith gifts specifically exempted by the Act, and that in
any event even if it had "sold" shares in violation of the Act, suspension of
transactional exemptions was not an authorized remedy under the statute. These
defenses were rejected at the administrative agency level, and upon judicial
review at the District Court level and by the Utah Court of Appeals.
14
<PAGE>
Item 10. Executive Compensation
The Company has made no arrangements for the remuneration of its officers
and directors, except that they will be entitled to receive reimbursement for
actual, demonstrable out-of-pocket expenses, including travel expenses if any,
made on the Company's behalf in the investigation of business opportunities. No
remuneration has been paid to the Company's officers or directors prior to the
filing of this form. There are not agreements or understandings with respect to
the amount or remuneration that officers and directors are expected to receive
in the future. Management takes no salaries from the Company and does not
anticipate receiving any salaries in the foreseeable future. No present
prediction or representation can be made as to the compensation or other
remuneration which may ultimately be paid to the Company's management, since
upon the successful consummation of a business opportunity, substantial changes
may occur in the structure of the Company and its management. At such time,
contracts may be negotiated with new management requiring the payment of annual
salaries or other forms of compensation which cannot presently be anticipated.
Use of the term "new management" is not intended to preclude the possibility
that any of the present officers or directors of the Company might be elected to
serve in the same or similar capacities upon the Company's decision to
participate in one or more business opportunities.
The Company's management may benefit directly or indirectly by payments of
consulting fees, payment of finder's fees, or through the payment of salaries,
or any other methods of payments through which insiders or current investors
receive funds, stock, other assets or anything of value whether tangible or
intangible. There are no plans, proposals, arrangements or understandings with
respect to the sale of additional securities to affiliates, current shareholders
or others prior to the location of a business opportunity.
15
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership.
The following table sets forth, as of March 6, 1997 information regarding
the beneficial ownership of shares by each person known by the Company to own
five percent or more of the outstanding shares, by each of the Company's
directors and officers and by the officers and directors as a group.
No. of Shares % of Total
Name of of Common Stock Common Shares
Beneficial Owner Beneficially Owned Outstanding1
Milton Klyman 960,400 96.04%
Hollywood Suites
176 John Street
Toronto, Ontario
Canada M5T 1X5
Chalmette Finance, Inc. (2) 2,000,000 66.67% (3)
c/o Melvyn Moscoe
2 Sheppard Avenue East
Suite 1800
North York, Ontario
Canada M2N 5Y7
Melvyn Moscoe (2) 2,000,000 66.67% (3)
2 Sheppard Avenue East
Suite 1800
North York, Ontario
Canada M2N 5Y7
All Officers and (2)
Directors as a Group 2,960,400 98.68% (3)
--------
1 Based upon 1,000,000 shares of common stock outstanding as of March 6,
1997.
2 Chalmette Finance, Inc. owns a Convertible Debenture that may be
converted into 2,000,000 shares of common stock. Chalmette Finance,
Inc. is owned 50% by Melvyn Moscoe and voting and dispositive power is
held by Mr. Moscoe. Ownership of the Convertible Debenture is also
attributed to Mr. Moscoe.
3 Assuming the conversion of the Convertible Debenture held by Chalmette
Finance, Inc. into 2,000,000 common shares.
16
<PAGE>
(b) Changes in Control
In the event that Chalmette Finance, Inc. elects to convert its Convertible
Debenture into more than 1,000,000 shares of common stock, there will be a
change in control of the Company.
Item 12. Certain Relationships and Related Transactions
Since January 1, 1995, the following transactions have occurred in which
persons who, at the time of such transactions, were directors, officers or
owners of more than 5% of the Company's common stock, had a direct or indirect
material interest.
On November 1, 1996, Chalmette Finance Inc. ("Chalmette") loaned $200,000
to the Company through the issuance to Chalmette of the Company's Second
Debenture. The issuance of the Second Debenture was exempt from Securities Act
registration pursuant to the provisions of Regulation S. Chalmette is a
Panamanian corporation with its principal offices in Canada. The $200,000 of
proceeds was used to retire a substantially similar convertible debenture that
the Company had previously issued on July 2, 1996 to M.I. Manek Inc., a Swiss
corporation with offices in Canada. M.I. Manek Inc. is unaffiliated with the
Company.
The principal amount of the Second Debenture accrues interest at the rate
of 10% per annum and is payable on November 1, 2001. Interest is payable on the
31st day of May and the 30th day of November of each year commencing May 31,
1997. The Second Debenture provides that it is an event of default if the
Company fails to have its securities listed for purchase and sale on a
recognized stock exchange on or before November 30, 1997.
Prior to the due date, all or any part of the principal amount of the
Second Debenture and accrued and unpaid interest is convertible, at the option
of the holder, into common stock of the Company at the rate of $0.10 per share.
The holder of the Second Debenture would be entitled to at least 2,000,000
shares of common stock and become the controlling shareholder of the Company if
the entire Second Debenture were converted. Mr. Moscoe, the Secretary and
Treasurer of the Company and a director, owns 50% of the stock of Chalmette and
controls Chalmette.
On December 31, 1996, the Company lent $27,860 to National Media Funding
Corporation, an entity controlled by Mr. Moscoe and in which he has a 100%
ownership interest. Such loan accrues interest at 8% per annum. The principal
and interest are repayable to the Company on demand.
17
<PAGE>
Item 13. Exhibits, Lists and Reports on Form 8-K
(a) Exhibits
3 (i) Articles of Incorporation
3 (ii) By Laws
10.1 Form of Debenture of M.I. Manek Inc. (Incorporated by reference
from Company's Form 8-K/A dated July 8, 1996)
10.2 Form of Debenture of Chalmette Finance Inc.
10.3 Related Party Note
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed an Amendment No. 1 to Form 8-K November 4, 1996. The
Amendment set forth the change in control that occurred when Milton Klyman
acquired 960,400 of the issued and outstanding Class A common shares of the
Company. It also disclosed and described the 12.5% $200,000 convertible
debenture that the Company sold on July 2, 1996 to M. I. Manek Investments Inc.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PERIPHERAL CONNECTIONS, INC.
Date: March 11, 1997 By: s\ Milton Klyman
Milton Klyman, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 11, 1997 By: s\ Milton Klyman
Milton Klyman, President and Director
Date: March 11, 1997 By: s\ Melvyn Moscoe
Melvyn Moscoe, Secretary, Treasurer
and Director
19
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF
THE EXCHANGE ACT BY NON-REPORTING ISSUERS
The Company has not furnished to its security holders an annual report or
proxy materials since the filing of its immediately prior report on Form 10-KSB.
20
<PAGE>
EXHIBITS
21
<PAGE>
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
PERIPHERAL CONNECTIONS, INC.
I THE UNDERSIGNED natural person of the age of 21 years or more, acting as
incorporator of a corporation under the Private Corporations provisions of
78-010, et seq., NEVADA REVISED STATUTES, (hereinafter referred to as the
"N.R.S."), adopt the following Articles of Incorporation for such Corporation:
ARTICLE I
NAME
The name of the Corporation is PERIPHERAL CONNECTIONS, INC.
ARTICLE II
PRINCIPAL OFFICE
The initial principal office of the Corporation shall be located at 216
South Fourth Street, Las Vegas, Nevada, 89106, and/or such other place as the
directors shall designate.
ARTICLE III
DURATION
The period of duration of the Corporation is perpetual.
ARTICLE IV
PURPOSES AND POWERS
The purposes for which the corporation is organized are to engage in any
activity or business not in conflict with the laws of the State of Nevada or of
the United States of America, and without limiting the generality of the
foregoing, specifically, to have and to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations organized and any
and all acts amendatory thereof and supplemental thereto.
ARTICLE V
22
<PAGE>
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have authority
to issue is 25,000,000 shares, having a par value of 50.001 (1 mill) per share.
The stock shall be designated as Class "A" voting common stock and shall have
the same rights and preferences. The common stock shall not be divided into
classes and may not be issued in series. Fully paid stock of this Corporation
shall not be liable for any further call or assessment. The total capitalization
of the Corporation shall be $25,000.
ARTICLE VI
PRE-EMPTIVE RIGHTS
No stockholder of the Corporation shall, because of his ownership of stock,
have a pre- emptive or other right to purchase, subscribe for or take part of
any of the notes, debentures, bonds or other securities convertible into or
carrying options for warrants to purchase stock of the Corporation issued,
optioned or sold by it after its incorporation, except as may be otherwise
stated in these Article of Incorporation or by an amended certificate of said
Articles duly filed, may at any time be issued, optioned for sale and sold or
disposed of by the Corporation pursuant to the resolution of its Board of
Directors to such person, persons or organizations and upon such terms as may to
such Board of Directors seem proper, without first offering such stock or
securities or any part thereof to existing stockholders, except as required in
Article V of these Articles of Incorporation.
ARTICLE VII
VOTING OF SHARES
Each outstanding share of the class "A" common stock of the Corporation
shall be entitled to one vote on each matter submitted to a vote at a meeting of
the stockholders. Each shareholder shall be entitled to vote his or its shares
in person or by proxy, executed in writing by such shareholder or by its duly
authorized attorney in fact. At each election for directors, every shareholder
entitled to vote at such election shall have the right to vote in person or by
proxy, the number of shares owned by him or it for as many persons as there are
directors to be elected and for whose election he or it has the right to vote,
but the shareholder shall have no right, whatsoever, to accumulate his or its
votes with regard to such election.
ARTICLE VIII
DIRECTORS
The governing board of this Corporation shall be called directors, and the
number of directors may from time to time be specified by the By-laws of the
Corporation at not less than one, nor
23
<PAGE>
more than fifteen. When the By-laws do not specify the number of directors, the
number of directors shall be three (3), or equal to the number of shareholders
should there be less than three initial shareholders. The name of the initial
director, being also the incorporator and sole shareholder, is:
ADDRESS NAME
LESLIE H. SHAW 3760 So. Highland Dr. #300, Salt Lake City, UT 84106 which
director shall hold office until the first meeting of the shareholders of the
Corporation and until his or her successors have been duly elected and
qualified. Directors need not be residents of the State of Nevada or
shareholders of the Corporation.
ARTICLE IX
INCORPORATOR
The name and address of the sole incorporator shareholder of this
Corporation is:
NAME ADDRESS
LESLIE H. SHAW 3760 So. Highland Dr. #300, Salt Lake City, UT 84106
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Exhibit 3(ii)
BYLAWS
OF
PERIPHERAL CONNECTIONS, INC.
ARTICLE I
OFFICE
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation may also have offices in such other places
as the Board may from time to time designate.
The location of the principal office of the Corporation shall be: 216 South
Fourth Street, Las Vegas, Nevada, 89101.
ARTICLE II
SHAREHOLDERS MEETING
Section 1. Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the State of Nevada as
shall be set forth in compliance with these Bylaws. The meeting shall be held on
the 15th day of February of each year beginning at 10:00. If such day is a legal
holiday, the meeting shall be on the next business day. This meeting shall be
for the election of Directors and for the transaction of such other business as
may properly come before it.
Section 2. Special Meetings. Special meetings of shareholders, other than
those regulated by statute, may be called at any time by the President, or a
majority of the Directors, and must be called by the President upon written
request of the holders of 50% of the outstanding shares entitled to vote at such
special meeting. Written notice of such meeting stating the place, the date and
hour of the meeting, the purpose or purposes for which it is called, and the
name of the person by whom or at whose direction the meeting is called shall be
given. The notice shall be given to each shareholder of record in the same
manner as notice of the annual meeting. No business other than that specified in
the notice of the meeting shall be transacted at any such special meeting.
Section 3. Notice of Shareholder Meetings. The Secretary shall give written
notice stating the place, day, and hour of the meeting, and in the case of a
special meeting, the purpose or
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purposes for which the meeting is called, which shall be delivered not less than
ten nor more than fifty days before the date of the meeting, either personally
or by mail to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
books of the Corporation, with postage thereon prepaid.
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal office
of the Corporation.
Section 5. Record Date. The Board of Directors may fix a date not less than
ten nor more than fifty days prior to any meeting as the record date for the
purpose of determining shareholders entitled to notice of and to vote at such
meetings of the shareholders. The transfer books may be closed by the Board of
Directors for a stated period not to exceed fifty days for the purpose of
determining shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose.
Section 6. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of shareholders in such number that less than a quorum remain.
Section 7. Voting. A holder of an outstanding share, entitled to vote at a
meeting, may vote at such meeting in person or by proxy. Except as may otherwise
be provided in the Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing in his name on the record of
shareholders. Except as herein or in the Articles of Incorporation otherwise
provided, all corporate action shall be determined by 50% of the votes cast at a
meeting of shareholders by the holders of share entitled to vote thereon.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
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Section 9. Informal Action by Shareholders. Any action required to be taken
at a meeting of the shareholders, or any action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors may adopt
such rules and regulations for the conduct of their meetings and the management
of the Corporation as they deem proper.
Section 2. Number, Tenure and Qualifications. The number of Directors of
the Corporation shall be three. Each Director shall hold office until the next
annual meeting of shareholders and until his successor shall have been elected
and qualified. Directors need not be residents of the State of Nevada or
shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than by this Bylaw, immediately following
after and at the same place as the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than this resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by order of the Chairman of the Board, the President, or by one-third
of the Directors. The Secretary shall give notice of the time, place and purpose
or purposes of each special meeting by mailing the same at least two days before
the meeting or by telephoning or telegraphing the same at least one day before
the meeting to each Director.
Section 5. Quorum. A majority of the members of the Board of Directors
shall constitute a quorum for the transaction of business, but less than a
quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. At any meeting at which every Director shall be present, even though
without any notice, any business may be transacted.
Section 6. Manner of Acting. At all meetings of the Board of Directors,
each Director shall have one vote. The act of a majority present at a meeting
shall be the act of the Board of Directors, provided a quorum is present.
Section 7. Vacancies. A vacancy in the Board of Directors shall be deemed
to exist in case of death, resignation, or removal of any Director, or if the
authorized number of Directors be increased, or if the shareholders fail at any
meeting of shareholders at which any Director is to be elected, to elect the
full authorized number to be elected at that meeting.
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Section 8. Removals. Directors may be removed at any time by a vote of the
shareholders holding 50% of the shares outstanding and entitled to vote. Such
vacancy shall be filled by the Directors then in office, though less than a
quorum, to hold office until the next annual meeting or until his successor is
duly elected and qualified, except that any directorship to be filled by reason
of removal by the shareholders may be filled by election by the shareholders at
the meeting at which the Director is removed. No reduction of the authorized
number of Directors shall have the effect of removing any Director prior to the
expiration of his term of office.
Section 9. Resignation. A Director may resign at any time by delivering
written notification thereof to the President or Secretary of the Corporation.
Resignation shall become effective upon its acceptance by the Board of
Directors; provided, however, that if the Board of Directors has not acted
thereon within ten days from the date of its delivery, the resignation shall
upon the tenth day be deemed accepted.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 11. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefore.
Section 12. Emergency Power. When, due to a national disaster or death, a
majority of the Directors are incapacitated or otherwise unable to attend the
meetings and function as Directors, the remaining members of the Board of
Directors shall have all the powers necessary to function as a complete Board,
and for the purpose of doing business and filling vacancies shall constitute a
quorum, until such time as all Directors can attend or vacancies can be filled
pursuant to these Bylaws.
Section 13. Chairman. The Board of Directors may elect from its own number
a Chairman of the Board, who shall preside at all meetings of the Board of
Directors, and shall perform such other duties as may be prescribed from time to
time by the Board of Directors.
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ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a President,
one or more Vice-Presidents, a Secretary, a Treasurer, a General Manager, and a
General Counsel, each of whom shall be elected by a majority of the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. In its discretion, the
Board of Directors may leave unfilled for any such period as it may determine
any office except those of President and Secretary. Any two or more offices may
be held by the same person, except the offices of President and Secretary.
Officers may or may not be directors or shareholders of the Corporation.
Section 2. Election and Term of Office. The officers of the Corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held as
soon thereafter as convenient. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 3. Resignation. Any officer may resign at any time by delivering a
written resignation either to the President or to the Secretary. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall require 50% vote of the Board of Directors, exclusive of the
officer in question if he is also a Director.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office shall be
created, such vacancy may be filled by the Board of Directors for the unexpired
portion of the term.
Section 6. President. The President shall be the chief executive and
administrative officer of the company. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board, at meetings of
the Board of Directors. He shall exercise such duties as customarily pertain to
the office of President and shall have general and active supervision over the
property, business, and affairs of the company and over its several officers. He
may appoint officers, agents, or employees other than those appointed by the
Board of Directors. He may sign, execute and deliver in the name of the company
powers of attorney, contracts, bonds and other obligations, and shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
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Section 7. Vice-President. The Vice-President shall have such powers and
perform such duties as may be assigned to him by the Board of Directors or the
President. In the absence or disability of the President, the Vice-President
designated by the Board or the President shall perform the duties and exercise
the powers of the President. A Vice-President may sign and execute contracts and
other obligations pertaining to the regular course of his duties.
Section 8. Secretary. The Secretary shall, subject to the direction of a
designated Vice- President, keep the minutes of all meetings of the stockholders
and of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meetings of all committees. He shall
cause notice to be given of meetings of stockholders, of the Board of Directors,
and of any committee appointed by the Board. He shall have custody of the
corporate seal and general charge of the records, documents and papers of the
company not pertaining to the performance of the duties vested in other
officers, which shall at all reasonable times be open to the examination of any
Director. He may sign or execute contracts with the President or Vice-President
"hereunto authorized in the name of the company and affix the seal of the
company thereto. He shall perform such other duties as may be prescribed from
time to time by the Board of Directors or by the Bylaws. He shall be sworn to
the faithful discharge of his duties. Assistant Secretaries shall assist the
Secretary and shall keep and record such minutes of meetings as shall be
directed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall, subject to the direction of a
designated Vice-President, have general custody of the collection and
disbursement of funds of the company. He shall endorse on behalf of the company
for collection checks, notes and other obligations, and shall deposit the same
to the credit of the company in such bank or banks or depositories as the Board
of Directors may designate. He may sign, with the President or such other
persons as may be designated for the purpose by the Board of Directors, all
bills of exchange or promissory notes of the company. He shall enter or cause to
be entered regularly in the books of the company full and accurate account of
all monies received and paid by him on account of the company; shall at all
reasonable times exhibit his books and accounts to any Director of the company
upon application at the office of the company during business hours; and,
whenever required by the Board of Directors or the President, shall render a
statement of his accounts. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws. He
shall give bond for the faithful performance of his duties in such sum and with
or without such surety as shall be approved by the Board of Directors.
Section 10. General Counsel. The General Counsel shall advise and represent
the company generally in all legal matters and proceedings, and shall act as
counsel to the Board of Directors and the Executive Committee. The General
Counsel may sign and execute pleadings, powers of attorney pertaining to legal
matters, and any other contracts and documents in the regular course of his
duties.
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Section 11. General Manager. The Board of Directors may employ and appoint
a General Manager who may, or may not, be one of the officers or Directors of
the corporation. He shall be the chief operating officer of the corporation and,
subject to the directions of the Board of Directors, shall have general charge
of the business operations of the corporation and general supervision over its
employees and agents. He shall have the exclusive management of the business of
the corporation and of all of its dealings, but at all times subject to the
control of the Board of Directors. Subject to the approval of the Board of
Directors or the Executive Committee, he shall employ all employees of the
corporation, or delegate such employment to subordinate officers, or such
division chiefs, and shall have authority to discharge any person so employed.
He shall make a report to the President and Directors quarterly, or more often
if required to do so, setting forth the result of the operations under his
charge, together with suggestions looking to the improvement and betterment of
the condition of the corporation, and to perform such other duties as the Board
of Directors shall require.
Section 12. Other Officers. Other officers shall perform such duties and
have such powers as may be assigned to them by the Board of Directors.
Section 13. Salaries. The salaries or other compensation of the officers of
the corporation shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salaries or other compensation of any subordinate
officers or agents. No officer shall be prevented from receiving any such salary
or compensation by reason of the fact that he is also a Director of the
corporation.
Section 14. Surety Bonds. In case the Board of Directors shall so require,
any officer or agent of the corporation shall execute to the corporation a bond
in such sums and with such surety or sureties as the Board of Directors may
direct, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting for
all property, monies or securities of the corporation which may come into his
hands
ARTICLE V
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than two nor more than
seven members, one of whom shall be the President, and shall designate one of
such members as Chairman. The Board may also designate one or more of its
members as alternates to serve as members of the Executive Committee in the
absence of a regular member or members. The Board of Directors reserves to
itself alone the power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, change the membership of any
committee at any time, fill vacancies therein, and discharge any committee
either with or without cause at any time.
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Subject to the foregoing limitations, the Executive Committee shall possess and
exercise all other powers of the Board of Directors during the intervals between
meetings.
Section 2. Other Committees. The Board of Directors may also appoint from
among its own members such other committees as the Board of Directors may
determine, which shall in each case consist of not less than two Directors, and
which shall have such powers and duties as shall from time to time be prescribed
by the Board. The President shall be a member ex officio of each committee
appointed by the Board of Directors. A majority of the members of any committee
may fix its rules of procedure.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loan or advances shall be contracted on behalf of the
corporation, no negotiable paper or other evidence of its obligation under any
loan or advance shall be issued in its name, and no property of the corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness of liability of the corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
Section 3. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select, or as may be selected by any officer or agent authorized to do so by the
Board of Directors.
Section 4. Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the corporation shall be signed by
such officer or officers or such agent or agents of the corporation and in such
manner as the Board of Directors from time to time may determine. Endorsements
for deposit to the credit of the corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
Section 5. Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the President or a Vice-President and by the Treasurer or by the
Secretary, and sealed with the seal of the corporation. The seal may be
facsimile, engraved or printed. Where such bond or debenture is authenticated
with the manual signature of an authorized officer of the corporation or other
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trustee designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the corporation's officers named
thereon may be facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, shall cease to be an
officer of the corporation for any reason before the same has been delivered by
the corporation, such bond or debenture may nevertheless be adopted by the
corporation and issued and delivered as though the person who signed it or whose
facsimile signature has been used thereon had not ceased to be such officer.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificate of Share. The shares of the corporation shall be
represented by certificates prepared by the Board of Directors and signed by the
President or the Vice- President and by the Secretary, and sealed with the seal
of the corporation or a facsimile. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney "hereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
Section 3. Transfer Agent and Registrar. The Board of Directors shall have
power to appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
Section 4. Lost or Destroyed Certificates. The corporation may issue a new
certificate to replace any certificate theretofore issued by it alleged to have
been lost or destroyed. The Board of Directors may require the owner of such a
certificate or his legal representative to give the corporation a bond in such
sum and with such sureties as the Board of Directors may
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direct to indemnify the corporation as transfer agents and registrars, if any,
against claims that may be made on account of the issuance of such new
certificates. A new certificate may be issued without requiring any bond.
Section 5. Consideration for Shares. The capital stock of the corporation
shall be issued for such consideration, but not less than the par value thereof,
as shall be fixed from time to time by the Board of Directors. In the absence of
fraud, the determination of the Board of Directors as to the value of any
property or services received in full or partial payment of shares shall be
conclusive.
Section 6. Registered Shareholders. The company shall be entitled to treat
the holder of record of any share or shares of stock as the holder thereof, in
fact, and shall not be bound to recognize any equitable or other claim to or on
behalf of this company any and all of the rights and powers incident to the
ownership of such stock at any meeting, and shall have power and authority to
execute and deliver proxies and consents on behalf of this company in connection
with the exercise by this company of the rights and powers incident to the
ownership of such stock. The Board of Directors, from time to time, may confer
like powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification. No officer or Director shall be personally
liable for any obligations of the corporation or for any duties or obligations
of the corporation or for any duties or obligations arising out of any acts or
conduct of said officer or Director performed for or on behalf of the
corporation. The corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at any time
hereafter as a Director or officer of the corporation from and against any and
all claims, Judgments and liabilities to which such persons shall become subject
by reason of his having heretofore or hereafter been a Director or officer of
the corporation, or by reason of any action alleged to have heretofore or
hereafter taken or omitted to have been taken by him as such Director or
officer, and shall reimburse each such person for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability,
including power to defend such person from all suits or claims as provided for
under the provisions of the Nevada Business Corporation Act; provided, however,
that no such person shall be indemnified against, or be reimbursed for, any
expense incurred in connection with any claim or liability arising out of his
own negligence or willful misconduct. The rights accruing to any person under
the foregoing provisions of this section shall not exclude any other right to
which he may lawfully be entitled, nor shall anything herein contained restrict
the right of the corporation to indemnify or reimburse such person in any proper
case, even though not specifically herein provided for. The corporation, its
directors, officers, employees and agents shall be fully
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protected in taking any action or making any payment, or in refusing so to do in
reliance upon the advice of counsel.
Section 2. Other Indemnification. The indemnification herein provided shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee, and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 3. Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a Director, officer or employee of the
corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
liability under the provisions of this section or of the general Corporation Law
of Nevada.
Section 4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the corporation by its Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or Director
of the corporation under the provisions of these Bylaws, or under the provisions
of the Articles of Incorporation, or under the provisions of the Nevada Business
Corporation Act, a waiver thereof in writing signed by the person or person
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute a waiver of notice of such meetings, except where attendance is
for the express purpose of objecting to 17 the legality of that meeting.
ARTICLE X
AMENDMENTS
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These bylaws may be altered, amended repealed, or new bylaws adopted by 50%
of the entire Board of Directors at any regular or special meeting. Any bylaw
adopted by the Board may be repealed or changed by action of the, shareholders.
ARTICLE XI
FISCAL YEAR
The fiscal year of the corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XII
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the corporation.
ARTICLE XIII
CORPORATE SEAL
The seal of the corporation shall be in the form of a circle and shall bear
the name of the corporation and the year of incorporation per sample affixed
hereto.
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Exhibit 10.2
CONVERTIBLE DEBENTURE
THIS AGREEMENT made as of the 1st day of November, 1996.
B E T W E E N:
CHALMETTE FINANCE INC.
a Corporation incorporated pursuant
to the laws of Panama
(hereinafter called the "Lender")
OF THE FIRST PART
AND:
PERIPHERAL CONNECTIONS, INC.
a Corporation incorporated pursuant
to the laws of the State of Nevada
(hereinafter called the "Corporation")
OF THE SECOND PART
ARTICLE 1
PROMISE TO PAY
1.1 Peripheral Connections, Inc. (the "Corporation"), a corporation
incorporated under the laws of the State of Nevada and having its chief
executive office at 2 Sheppard Avenue East, Suite 1800, North York,
Ontario, M2N 5Y7, for value received, hereby promises to pay to the order
of Chalmette Finance Inc. (the "Lender") at 2 Sheppard Avenue East, Suite
1800, North York, Ontario, M2N 5Y7 or at such other place as the Lender may
direct at any time and from time to time, on November 1, 2001, the
principal amount of two hundred thousand ($200,000.00) dollars of law
currency of the United States of America, together with interest on the
principal amount at the rate of ten (10.00%) percent per annum, calculated
semi-annually, not in advance, without reinvestment factor, as well after
as before demand, default and judgment. Interest on the principal amount
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outstanding shall be payable twice yearly on the 31st day of May and the
30th day of November in each and every year until the principal is paid in
full; the first payment of interest to be computed form the date hereof
upon the whole of the principal amount secured, to become due and payable
on the 31st day of May, 1997 (the principal amount, such interest and all
other amounts now or hereafter payable hereunder being referred to herein
as the "Obligations Secured").
ARTICLE 2
CONVERSION RIGHTS
2.1 The Lender may, upon giving notice as hereinafter provided, at any time
prior to the 1st day of November, 2001, convert in whole or in part, the
outstanding principal balance of this Debenture, together with all accrued
and unpaid interest, in to $0.001 Par Value Class A Common Shares in the
capital of the Corporation at a conversion price equal to ten ($0.10) cents
per share (the "Conversion Price").
2.2 If the Lender elects to convert a part only of the outstanding principal
balance of this Debenture, the outstanding principal balance owing on this
Debenture shall be deemed to have been reduced by the amount of the
Debenture so converted and the Lender shall provide to the Corporation such
instruments and acknowledgments as shall be necessary to validly and
effectively amend this Debenture.
2.3 In order to effect the right of conversion herein provided for, the Lender
shall deliver to the Corporation, at the registered office of the
Corporation, a notice in writing setting out the Lender's election to
convert this Debenture, together with all accrued but unpaid interest
thereon, in to $0.001 Par Value Class A Common Shares in the capital of the
Corporation. If the Lender elects to convert a part only of the outstanding
principal balance of this Debenture, such notice shall set out the amount
of the outstanding principal balance of the Debenture which the Lender
desires to convert in to $0.001 Par Value Class A Common Shares in the
capital of the Corporation.
2.4 Within 30 days of the Corporation's receipt of such notice of the
conversion, the Corporation, at its' own cost and expense, shall cause the
certificate or certificates representing the $0.001 Par Value Class A
Common Shares in the capital of the Corporation so converted to be issued
in the name of the Lender or in such name or names as the Lender may direct
in writing, provided that the Lender shall pay any applicable security
transfer taxes. Subject to the provisions of paragraph 2.2 (partial
conversion) upon the issuance of such shares, this Debenture shall be
deemed to have been satisfied, discharged or redeemed and for such purpose,
the Lender shall cancel and discharge this Debenture and execute and
deliver to the Corporation such instruments as shall be necessary to
discharge this Debenture and to release or reconvey to the Corporation any
property and assets subject to the security created hereby.
2.5 From and after the date that the Corporation receives such notice of
conversion, interest shall cease to accrue on that portion of the
outstanding principal amount of this Debenture which is to be converted.
38
<PAGE>
ARTICLE 3
CREATION OF SECURITY INTEREST
3.1 As continuing security for the payment of the Obligations Secured and the
performance by the Corporation of all its covenants and obligations
hereunder, the Corporation hereby grants, assigns, transfers, mortgages,
pledges, charges and hypothecates, by way of a security interest to and in
favour of the Lender, all of the undertaking, property and assets of the
Corporation, both real and personal, immovable and moveable, tangible and
intangible, legal and equitable, of whatsoever nature and kind and
wheresoever situate, now owned or hereafter acquired by the Corporation
including the goodwill of the Corporation and all proceeds in any form now
or hereafter derived from the sale, lease or other disposition of any of
the property and assets of the Corporation subject to, or intended to be
subject to the security interest hereby created.
3.2 The attachment of the security interest created hereby has not been
postponed and such security interest shall attach to any particular
property intended to be subject to the security interest created hereby as
soon as the Corporation has rights in such property.
3.3 The Corporation covenants that it shall not, without the prior consent in
writing of the Lender create, assume or suffer to exist any Lien, upon all
or any part of the Mortgaged Property ranking or purporting to rank in
priority to or pari passu with this Debenture or the security created
hereby other than the security hereof and any other Lien which the Lender
has expressly consented to in writing.
3.4 No provision hereof shall be construed as a subordination or postponement
of this Debenture and/or the security created hereby to or in favour of any
other Lien, whether or not such Lien is permitted hereunder or otherwise.
3.5 The Corporation shall at its own expense do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, mortgages, pledges, charges, assignments, security
agreements, hypothecs, and assurances (including instruments supplemental
or ancillary hereto) and such financing statements as the Lender may from
time to time request to better assure and perfect its security on the
Mortgaged Property or any part thereof.
3.6 The Corporation shall have the right at any time and from time to time, to
prepay the whole or any part of the principal sum secured hereunder without
notice or bonus.
ARTICLE 4
EVENTS OF DEFAULT
4.1 The occurrence of any of the following events shall constitute an Event of
Default:
39
<PAGE>
(a) the Corporation defaults in payment of all or any part of the
Obligations Secured;
(b) the Corporation fails to have its' securities listed for purchase and
sale on a recognized stock exchange on or before November 30, 1997;
(c) the Corporation admits its inability to pay its debts generally as
they become due or otherwise acknowledges its insolvency;
(d) except to the extent permitted by the Lender in writing, the
Corporation institutes any proceeding or takes any corporate action or
executes any agreement to authorize its participation in or
commencement of any proceeding:
40
<PAGE>
(i) seeking to adjudicate it a bankrupt or insolvent, or
(ii) seeking liquidation, dissolution, winding up, reorganization,
arrangement, protection, relief or composition of it or any of
its property or debt, or making a proposal with respect to it
under any law relating to bankruptcy, insolvency, reorganization
or compromise of debts or other similar laws (including, without
limitation, any application under the Companies' Creditors
Arrangement Act (Canada) or any reorganization, arrangement or
compromise of debt under the laws of the jurisdiction of
incorporation of the Corporation);
(e) any proceeding is commenced against or affecting the Corporation:
(i) seeking to adjudicate it a bankrupt or insolvent,
(ii) seeking liquidation, dissolution, winding up, reorganization,
arrangement, protection, relief or composition of it or any of
its property or debt or making a proposal with respect to it
under any law relating to bankruptcy, insolvency, reorganization
or compromise of debts or other similar laws (including, without
limitation, any reorganization, arrangement or compromise of debt
under the laws of the jurisdiction of incorporation of the
Corporation);
(iii)seeking appointment of a receiver, trustee, agent, custodian or
other similar official for it or for any substantial part of its
properties and assets, including the Mortgaged Property or any
part thereof;
and such proceeding is not being contested in good faith by
appropriate proceedings or, if so contested remains outstanding,
undismissed and unstayed more than 60 days from the institution
of such first mentioned proceeding; or
(f) any creditor of the Corporation or any other Person shall privately
appoint a receiver, trustee or similar official for any substantial
part of the Corporation's properties and assets or for the Mortgaged
Property or any part thereof, and such appointment is not being
contested in good faith and by appropriate proceedings or, if so
contested, such appointment continues for more than 60 days.
ARTICLE 5
REMEDIES UPON DEFAULT
5.1 Upon the occurrence of an Event of Default, the Obligations Secured shall,
at the option of the Lender, immediately be due and payable by the
Corporation to the Lender and the security hereby created shall become
enforceable.
41
<PAGE>
5.2 If the security created hereby becomes enforceable, the Lender may in its
discretion, take any steps or proceedings of any kind permitted by law or
in equity or otherwise to enforce payment of the Obligations Secured or
performance of any other covenant or obligation of the Corporation
contained herein and exercise all rights and remedies of a secured party
under the PPSA or to realize all or any parts of the security created
hereby.:
5.3 All rights, powers and remedies of the Lender under this Debenture may be
exercised separately or in combination and shall be in addition to, and not
in substitution for, any other security now or hereafter held by the Lender
and any other rights, powers and remedies of the Lender however created or
arising. No single or partial exercise by the Lender of any of the rights,
powers and remedies under this Debenture or under any other security now or
hereafter held by the Lender shall preclude any other and further exercise
of any other right, power or remedy pursuant to this Debenture or any other
security or at law, in equity or otherwise. The Lender shall at all times
have the right to proceed against all or any portion of the Mortgaged
Property or any other security in such order and in such manner as it shall
determine without waiving any rights, powers or remedies which the Lender
may have with respect to this Debenture or any other security or at law, in
equity or otherwise. No delay or omission by the Lender in exercising any
right, power or remedy hereunder or otherwise shall operate as a waiver
thereof or of any other right, power or remedy.
5.4 In the case of any judicial or other steps or proceedings to enforce the
security hereby created, and without limiting any right of the Lender to
obtain judgment for any greater amount, the Corporation shall remain liable
to the Lender for any amount which may remain due in respect of the
Obligations Secured after application to the payment thereof of the
proceeds of any sale, lease or other disposition of the Mortgaged Property
or any part thereof.
5.5 The Lender shall not be liable for any failure to exercise its rights,
powers or remedies arising hereunder or otherwise, including without
limitation any failure to take possession of, collect, enforce, realize,
sell, lease or otherwise dispose of, preserve, maintain, complete, protect,
replace or improve all or any part of the Mortgaged Property, to carry on
all or any part of the business of the Corporation relating to the
Mortgaged Property or to take any steps or proceedings for any such
purposes, nor shall the Lender have any obligation to take any steps or
proceedings to preserve rights against prior parties to or in respect of
all or any part of the Mortgaged Property.
5.6 Unless required by law, the Lender shall not be required to give the
Corporation any notice of any sale, lease or other disposition of the
Mortgaged Property or any part thereof or the date after which any private
disposition of Mortgaged Property or any part thereof is to be made.
5.7 If the Lender is at any time or from time to time required to make a
payment to defeat or honour the priority of a mortgage, pledge, charge,
assignment, security interest, hypothec, lien or other encumbrance on or in
respect of all or any part of the Mortgaged Property, any such payment or
payments, and the costs, charges and expenses of the Lender in connection
therewith (including legal fees on a solicitor and his own client basis)
shall be payable by the Corporation on demand.
42
<PAGE>
ARTICLE 6
APPLICATION OF MONEYS
6.1 The moneys arising from the enforcement of the security created hereby
(except following foreclosure or other acceptance of the Mortgaged Property
or part thereof in satisfaction
43
<PAGE>
of the Obligations Secured) shall be applied by the Lender in the following
order, except to the extent otherwise required by law:
(a) first, in payment of the Lender's reasonable costs, charges and
expenses (including legal fees on a solicitor and his own client
basis) incurred in the exercise of all or any of the rights, powers or
remedies granted to it under this Debenture;
(b) second, in payment of amounts paid by the Lender in respect of any
charges ranking in priority or pari passu with the security created by
this Debenture;
(c) third, in payment of the remainder of the Obligations Secured in such
order of application as the Lender may determine;
(d) fourth, subject to sections 7.2 and 7.3, to any Person who has a
security interest in the Mortgaged Property or part thereof that is
subordinate to that of the Lender and whose interest,
(i) was perfected by possession, the continuance of which was
prevented by the Lender taking possession of the Mortgaged
Property; or
(ii) was, immediately before the sale, lease or other disposition by
the Lender perfected by registration;
(e) fifth, subject to sections 6.2 and 6.3, to any other Person with an
interest in such moneys who has delivered a written notice to the
Lender of the interest before the distribution of such moneys; and
(f) last, subject to sections 6.2 and 6.3, to the Corporation or any other
Person who is known by the Lender to be an owner of the Mortgaged
Property.
6.2 The Lender may require any Person mentioned in clauses 6.1(d), 6.1(e) or
6.1(f) to furnish proof of that Person's interest, and unless the proof is
furnished within ten days after demand by the Lender, the Lender need not
pay over any portion of the moneys referred to therein to such Person.
6.3 Where there is a question as to who is entitled to receive payment under
clauses 6.1(d), 6.1(e) or 6.1(f), the Lender or the Receiver may pay the
moneys referred to therein into court.
ARTICLE 7
GENERAL
7.1 The Lender may in its discretion from time to time release any part of the
Mortgaged Property or any other security either with or without any
sufficient consideration therefor, without
44
<PAGE>
responsibility therefor and without thereby releasing any other part of the
Mortgaged Property or any other security or any Person from the security
created by this Debenture or from any of the covenants herein contained.
7.2 The Corporation hereby appoints the Lender as the Corporation's attorney,
with full power of substitution, in the name and on behalf of the
Corporation, to execute, deliver and do all such acts, deeds, leases,
documents, transfers, demands, conveyances, assignments, contracts,
assurances, consents, financing statements and things as the Corporation
has herein agreed to execute, deliver and do or as may be required by the
Lender to give effect to this Debenture or in the exercise of any rights,
powers or remedies hereby conferred on the Lender and generally to use the
name of the Corporation in the exercise of all or any of the rights, powers
or remedies hereby conferred on the Lender. This appointment, coupled with
an interest, shall not be revoked by the insolvency, bankruptcy,
dissolution, liquidation or other termination of the existence of the
Corporation or for any other reason.
7.3 The Corporation shall pay to the Lender on demand all of the Lender's
reasonable costs, charges and expenses (including, without limitation,
legal fees on a solicitor and his own client basis) incurred in connection
with the perfection, preservation or enforcement of any security created
hereby.
7.4 The Lender may at any time and from time to time set-off, appropriate and
apply any indebtedness and liability of the Lender to the Corporation,
matured or unmatured, against and on account of the Obligations Secured
when due, in such order of application as the Lender may from time to time
determine.
7.5 After the Obligations Secured have been paid in full, the Lender shall, at
the written request and expense of the Corporation, cancel and discharge
this Debenture and execute and deliver to the Corporation such instruments
as shall be necessary to discharge this Debenture and to release or
reconvey to the Corporation any property and assets subject to the security
created hereby.
7.6 The Lender may grant extensions of time and other indulgences, take and
give up security, accept compositions, make settlements, grant releases and
discharges and otherwise deal with the Corporation, debtors of the
Corporation, sureties and other Persons and with all or any part of the
Mortgaged Property and other security as the Lender sees fit, without
prejudice to any debts and liabilities of the Corporation to the Lender or
the rights, powers and remedies of the Lender under this Debenture.
7.7 The Corporation authorizes the Lender to file such financing statements and
other documents and do such acts, matters and things (including completing
and adding schedules identifying all or any part of the Mortgaged Property)
as the Lender may consider appropriate to perfect and continue the security
created by this Debenture, to protect and preserve the interest of the
Lender in the Mortgaged Property and to realize upon this Debenture.
45
<PAGE>
7.8 Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be sufficiently given only if
delivered to the party for whom it is intended at the principal address of
such party herein set forth or as changed pursuant hereto. Either party may
notify the other pursuant hereto of any change in such party's principal
address to be used for the purposes hereof.
(1) If to the Lender at:
Chalmette Finance Inc.
Calle Aquilino De la Guardia No. 8
Edificio IGRA
Panama, Republica de Panama
Apartado 87-1371
Panama 7
Republica de Panama
(2) If to the Corporation at:
2 Sheppard Avenue East,
Suite 1800
North York, Ontario
M2N 5Y7
Attention: Mr. Melvyn Moscoe
With a Copy to its' solicitor at
Barnet J. Goldberg
Barrister and Solicitor
89 Scollard Street
Suite 300
Toronto, Ontario
M5R 1G4
Notwithstanding the foregoing, if the PPSA requires that a notice or other
communication be given in a specified manner, then any such notice or
communication shall be given in such manner.
7.9 In this Debenture:
"this Debenture", "these presents", "hereto", "herein", "hereof", "hereby",
"hereunder", and any similar expressions refer to this Debenture and not to any
particular Article, section or other portion hereof;
46
<PAGE>
"Event of Default" has the meaning attributed to such term in section 4.1;
"Lien" means any mortgage, pledge, charge, assignment, security interest,
hypothec, lien or other encumbrance, including, without limitation, any
agreement to give any of the foregoing, or any conditional sale or other title
retention agreement;
"Mortgaged Property" means all of the undertaking, property and assets of
the Corporation subject to, or intended to be subject to, the mortgages,
pledges, charges, assignments, security interests and hypothecs created hereby;
"Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with or without
share capital, unincorporated association, trust, trustee, executor,
administrator or other legal personal representative, regulatory body or agency,
government or governmental agency, authority or entity however designated or
constituted;
"PPSA" means the Personal Property Security Act, 1989 (Ontario) as amended
from time to time and any Act substituted therefor and amendments thereto and
the following terms, namely, "Chattel Paper", "Consumer Goods", "Document of
Title", "Goods", "Instrument", "Inventory" , "Security", shall have the
respective meaning set out in the PPSA;
"Receiver" means any of a receiver, manager, receiver-manager and receiver
and manager;
7.10 The inclusion of headings in this Debenture is for convenience of reference
only and shall not affect the construction or interpretation hereof.
7.11 Except where otherwise expressly provided, all amounts in this Debenture
are stated and shall be paid in U.S. dollars.
7.12 In this Debenture, unless the context otherwise requires, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
7.13 Each of the provisions contained in this Debenture is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision or part thereof by a court of competent jurisdiction shall not
affect the validity or enforceability of any other provision hereof.
7.14 No amendment or waiver of this Debenture shall be binding unless executed
in writing by the party to be bound thereby. No waiver of any provision of
this Debenture shall constitute a waiver of any other provision nor shall
any waiver of any provision of this Debenture constitute a continuing
waiver unless otherwise expressly provided.
47
<PAGE>
7.15 This Debenture shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein
and the Corporation hereby irrevocably attorns to the jurisdiction of the
courts of Ontario.
7.16 This Debenture shall be binding on the Corporation and its successors and
shall enure to the benefit of the Lender and its successors and assigns.
The Obligations Secured shall be paid, and this Debenture shall be
assignable by the Lender, free of any set-off, counter-claim or equities
between the Corporation and the Lender.
7.17 This Debenture may be executed in counterparts, each of which shall be
effected only upon delivery and thereafter shall be deemed an original and
all of which shall be taken to be one and the same instrument, with the
same effect as if all parties hereto had signed the same signature page.
48
<PAGE>
7.18 The Corporation acknowledges receipt of a copy of this Debenture and a copy
of the financing statement/verification statement registered under the PPSA
in respect of the security created hereby
IN WITNESS WHEREOF the Corporation has executed this Debenture as of the
1st day of November, 1996.
Peripheral Connections, Inc.
Per: s/
- -------------------------
Melvyn Moscoe
Secretary and Director
Authorized Signing Officer
I have the authority to bind the Corporation
IN WITNESS WHEREOF the Lender has executed this Debenture as of the 1st day
of November, 1996.
Chalmette Finance Inc.
Per: s/
- -------------------------
Emirita de Piad
Secretary
Authorized Signing Officer
I have the authority to bind the Corporation
49
<PAGE>
Exhibit 10.3
December 31, 1996
DEMAND PROMISSORY NOTE
For valuable consideration received we promise to pay on demand to Peripheral
Connections Inc. $27,860 together with interest at 8% per annum.
National Media Funding Corporation.
Per s/
President
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Peripheral Connections, Inc. December 31, 1996 financial statements
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000894557
<NAME> Peripheral Connections, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 163,476
<SECURITIES> 0
<RECEIVABLES> 28,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 191,561
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 191,561
<CURRENT-LIABILITIES> 3,333
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (12,772)
<TOTAL-LIABILITY-AND-EQUITY> 191,561
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 11,790
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,752
<INCOME-PRETAX> (11,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,772)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
