SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_____________
COMMISSION FILE NUMBER 0-24372
THE THORSDEN GROUP, LTD.
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0611746
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4505 South Wasatch Blvd., Suite 340
Salt Lake City, Utah 84124
(Address of principal executive offices and Zip Code)
(801) 424-0044
(Registrant's telephone number, including Area Code)
Check whether the registrant: (1) 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
--- ---
As of December 31, 1997, there were issued and outstanding 20,000,000 shares
of the Company's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page No.
-------
1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1997.............................3
Unaudited Condensed Consolidated Statements of Income for
the three and nine months ended December 31, 1997 and 1996.......4
Unaudited Condensed Consolidated Statements of Cash Flows for
the three and nine months ended December 31, 1997 and 1996.......5
Notes to Unaudited Condensed Consolidated Financial Statements.....6
2. Management's Discussion and Analysis or Plan of Operation..........7
PART II. OTHER INFORMATION............................................ 11
2
<PAGE>
PART I
ITEM 1 - FINANCIAL STATEMENTS
THE THORSDEN GROUP, LTD.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Condensed Balance Sheets (Unaudited)
December 31 March 31
1997 1997
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 900,087 $ 11,614
Marketable Securities - available for sale 716,918 -
Accounts Receivable 15,125 (30,000)
Prepaid Expenses 3,650 -
---------- --------
Total Current Assets 1,635,780 (18,386)
---------- --------
Equipment 114,271 1,004
Less Accumulated Depreciation 705 -
---------- --------
EQUIPMENT, NET 113,566 1,004
OTHER ASSETS 9,374 -
---------- --------
TOTAL ASSETS $1,758,720 $(17,382)
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 68,283 $ 8,771
Deferred Income on Maintenance Contracts 16,667 -
Equipment Lease Obligations 33,273 -
Accrued Liabilities 34,592 41,253
---------- --------
Total Current Liabilities 152,815 50,024
---------- --------
Equipment Lease Obligations 22,145 -
STOCKHOLDERS' EQUITY
Common Stock 20,000 425
Additional Paid in Capital 1,927,307 821
Accumulated unrealized loss on investments (123,692) -
Accumulated (Deficit) (239,855) (68,652)
---------- --------
Total Stockholders' Equity 1,583,760 (67,406)
---------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,758,720 $(17,382)
========== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
THE THORSDEN GROUP, LTD.
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Cumulative from
Inception (Sept.25, 1996)
Three Months Ended Nine Months Ended to December 31, 1997
- --------------------------------------------------------------------------------------------
December 31 December 31
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 10,959 $ 0 $ 135,958 $ 0 $ 135,958
------------- --------- ------------- ---------- -------------
COSTS AND EXPENSES:
Cost and Sales 852 0 852 0 852
Research and Development 55,062 5,716 73,164 5,716 79,239
Marketing, General and
Administrative 193,904 26,402 244,658 26,458 307,276
------------- --------- ------------ ---------- -------------
OPERATING COSTS AND EXPENSES 249,818 32,118 318,674 32,174 387,367
------------- --------- ------------ ---------- -------------
OPERATING (LOSS) (238,859) (32,118) (182,716) (32,174) (251,409)
Interest Income 11,344 71 11,513 71 11,554
------------- --------- ------------ ----------- -------------
NET (LOSS) $ (227,515) $ (32,047) $ (171,203) $ (32,103) $ (239,855)
============= ========= ============ ========== =============
NET LOSS PER SHARE $ (0.01) $ (0.08) $ (0.01) $ (0.08) $ (0.01)
============= ========= ============ ========== =============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 20,000,000 424,600 20,000,000 424,600 20,000,000
============= ========= ============ ========== =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE>
THE THORSDEN GROUP, LTD.
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Cumulative From
December 31 Inception (Sept. 25,
1997 1996 1996) to Dec. 31, 1997
------------------------------- ----------------------------
<S> <C> <C> <C>
CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net (Loss) $(171,203) $ (32,102) $(239,855)
Adjustments to reconcile net income to net cash used for ---------- ------------- ---------
operating activities:
Depreciation 705 0 705
Changes in Assets and Liabilities:
Accounts Receivable (45,125) 0 (15,125)
Prepaid Expenses (3,650) 0 (3,650)
Other Assets (9,374) 0 (9,374)
Accounts Payable 59,512 1,094 68,283
Deferred Income 16,667 0 16,667
Accrued Liabilities (6,661) 43,762 34,592
---------- ------------- ---------
12,074 44,855 92,098
---------- ------------- ---------
NET CASH (USED FOR)/PROVIDED BY OPERATING ACTIVITIES (159,129) 12,753 (147,757)
---------- ------------- ---------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Additions to Equipment (113,267) 0 (114,271)
---------- ------------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from Private Placement of Shares 1,105,451 0 1,106,697
Increase in Lease Obligations 55,418 0 55,418
---------- ------------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,160,869 0 1,162,115
- ----------------------------------------------- ---------- ------------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 888,473 12,753 900,087
---------- ------------- ---------
Beginning cash: $ 11,614 $ 0 $ 0
---------- ------------- ---------
Ending with: $ 900,087 $ 12,753 $ 900,087
---------- ------------- ---------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,559 $ 0 $ 1,559
---------- ------------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-5-
THE THORSDEN GROUP, LTD.
Notes to Consolidated Financial Statements
Preliminary Note
- ----------------
The accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
following disclosures are adequate to make the information presented not
misleading. These condensed financial statements reflect all adjustments
(consisting only of normal recurring adjustments) that, in the opinion of
management, are necessary to present fairly the financial position and results
of operations of the Company for the periods presented. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended March 31, 1997, as amended.
The Company was incorporated on June 11, 1992. Its activities since inception
until October 7, 1997 were limited to organizational matters. For the purpose
of merging with Arkona, Inc., a Utah corporation pursuant to an agreement
dated October 7, 1997, the Company formed a wholly owned subsidiary, Thorsden
Acquisition Corp. An Agreement and Plan of Merger was executed on October 7,
1997 resulting in a reverse triangular merger, accounted for as a purchase.
The merger resulted in Thorsden Acquisition Corp. ceasing to exist with the
surviving entity now operating as a wholly owned subsidiary of Thorsden under
the name of Arkona, Inc.
Arkona, Inc. was incorporated from a Limited Liability Company ("LLC") on or
about September 30, 1997. All the assets and liabilities of the LLC were
transferred into the corporation and the LLC ceased to exist.
The Agreement and Plan of Merger set forth that Thorsden would issue
14,000,000 shares to Arkona Inc.'s shareholders. At that time Thorsden had
424,500 shares outstanding and issued additional 1,575,500 shares to
Thorsden's shareholders. Immediately after this issuance Arkona Inc.'s
shareholders owned 14,000,000 of the total outstanding of 16,000,000 shares,
or 87.5%.
Comparative figures in this report have been restated, where necessary, for
the effects of this merger.
Also, on October 7, 1997, a private placement of securities was completed
wherein the Company received cash of approximately $1,159,390 and marketable
securities of approximately $840,610. These marketable securities have since
been written down to their market value of $716,918 at December 31, 1997. A
total of 4,000,000 additional shares were issued in conjunction with the
private placement. The total current outstanding shares are 20,000,000.
Thorsden incurred approximately $68,000 in transaction costs associated with
the private placement and has recorded these against equity.
The marketable securities described above are available for sale and comprise
3,000 shares of common stock of Eurogas Corp. ("EUGS") and 163,922 shares of
Interjet Net Corp. ("IJNT"). At December 31, 1997, the last sale prices of
these securities as reported by the over-the-counter ("OTC") electronic
bulletin board were $6.75 and $4.25 per share, respectively. Shares traded in
the OTC market are characterized by volatile changes in price and thin trading
volumes. The relatively low volume of securities traded and the dramatic
effect that sales of even a few shares can have on the market price of such
securities may have an adverse effect on the Company's ability to liquidate
its holdings or to realize the values shown above. This may in turn have an
adverse effect on the Company's operations.
Interest income is all bank interest.
<TABLE>
<CAPTION>
Cash and cash equivalents includes:
December 31, 1997 March 31, 1997
----------------- --------------
<S> <C> <C>
Cash and Bank $797,226 $0
Certificates of Deposit $102,861 0
-------- --
Total $900,087 $0
======== ==
</TABLE>
The certificates of deposit mature in December 1998 and November 1999. These
are held jointly with First Security Bank, Salt lake City, as guarantee for
payment of office rent and equipment leases.
-6-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO
BE COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "1995 ACT").
SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL
FACTORS GOVERN WHETHER ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN WILL BE
OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE FORWARD-LOOKING
STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE
ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE FOREGOING
INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC,
COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE TIME AND
MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE
DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS
UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY
OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO
ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND
BUSINESS DEVELOPMENTS, THE IMPACT OF WHICH MAY CAUSE THE COMPANY TO ALTER ITS
MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN
AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE
INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY
THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY
WILL BE ACHIEVED.
The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto appearing elsewhere in this
Quarterly Report on Form 10-QSB.
GENERAL
The Thorsden Group, Ltd. (the "Company") is a Delaware corporation organized
in 1992 for the purpose of seeking and acquiring business opportunities. In
October 1997, the Company merged with Arkona, Inc., a Utah corporation in a
reverse triangular merger, accounted for as a purchase. Arkona's predecessor,
Arkona LLC, a limited liability company was founded in September 1996. Since
the merger, the Company has continued the business of Arkona, which is as
follows:
DISTRIBUTED COMPUTING
- ---------------------
For more than a decade, the computer industry has been striving to extend the
value of stored information from large enterprise systems to networked desktop
computers. Networked computing allowed corporations to empower knowledge
workers by giving them direct control of information and applications -
productivity skyrocketed. In recent years, the Internet has allowed companies
to extend the scope and value of their networks even further. Members of the
Internet's "connected" community can obtain a wide variety of corporate data.
Finally, a third iteration of the theme is quietly but forcefully gaining
momentum.
Information access is once again being extended further than ever before -
this time to a wave of mobile, disconnected, and geographically distributed
employees, partners, and customers. Organizations that take advantage of this
third wave can finally apply corporate knowledge at its final and most
critical destination - the customer point of service.
INTELLIGENT SYNCHRONIZATION
- ---------------------------
Arkona's unique software solutions are helping to bring about this
"Distributed" information wave by extending a business's most critical
information and applications - large knowledge databases. These databases are
monolithic in size and complexity making them inherently poor applications for
mobile workers such as field sales and service representatives.
When field personnel visit customers for sales or service calls, it is
paramount that they arrive with all pertinent customer information, including
detailed information on products, pricing, contracts, and any other
information which might affect the customer. The great challenge is that this
kind of structured information is ideally suited for large corporate databases
and workhorse computers. To make matters worse, the information is rarely
stored in a single repository. The result is a complex computing environment
difficult to mobilize for field service professionals.
Surprisingly, this simple requirement of efficiently extracting information
from larger, disparate databases and seamlessly synchronizing it upon check in
from the field is a struggle that costs corporations millions in lost
knowledge capital, lost sales, and lost customers. This challenge represents
enormous waste and frustration both for corporations and their customers. The
need to resolve this dilemma was the genesis of Arkona's software solutions.
Instead of aiming to displace large corporate databases, which function very
well at the home office where there is ample computing power, Arkona extends
the value of these databases by cleanly extracting mission critical
information for point of service use. And Arkona's software maximizes existing
software investments by working equally well with any of the widely used
database systems including Oracle, Sybase, Informix, PeopleSoft, BAAN, SAP,
Microsoft, and others.
HOW THE CUSTOMER BENEFITS
- -------------------------
Arkona's products and services help customers to:
OPTIMIZE SYNCHRONIZATION OF DATA AND APPLICATIONS: Arkona's Universal Update
technology optimizes the process of synchronizing distributed and mobile data
sources. The Universal Update Server reduces bandwidth requirements by
distributing and reconciling only incremental differences between client and
server data sources. Administrators may also define profiles for individual
users, groups, or other servers. Information is customized and distributed
based on business logic stored in the user profile.
REDUCE THE HIGH COST OF INFORMATION AND APPLICATION UPDATES: Arkona's
synchronization solutions eliminate data "snapshots" mailed to the field,
costly downtime for application updates, and time consuming support of remote
installation procedures. Arkona's technology allows customers to simply,
inexpensively and securely update and synchronize critical information and
distributed applications.
SIMPLIFY THE DELIVERY OF INFORMATION: End-users can update information and
applications with the click of a button, avoiding data/application
reconciliation problems.
PROFIT FROM FLEXIBLE SYNCHRONIZATION SOLUTIONS: True object design and
reusable code libraries allow Arkona to quickly and efficiently create proven
synchronization solutions to a customer's exact specifications. Arkona's
custom solutions take advantage of multiple data sources, data types, OS
platforms, and various mobile devices.
LEVERAGE AND REVITALIZE LEGACY SYSTEMS: Arkona's custom solutions easily
integrate with existing corporate information and knowledge systems. Arkona
designs distributed applications that extend a company's information system
investments instead of replacing them.
ARKONA'S SOLUTIONS
- ------------------
Universal Update(TM)
The Universal Update client and server represent Arkona's core technology.
These modules work as embedded components within specific vertical solutions.
Arkona's customers and solution providers may choose to license the Universal
Update technology for use in their own products, or can work with Arkona to
build more specific vertical solutions.
Arkona OnSite(TM) Field Service
Arkona OnSite Field Service is Arkona's first vertical solution, designed
specifically for field service engineers. Arkona OnSite gives field service
engineers access to critical customer, product, and inventory information even
when disconnected at the customer's site.
Arkona OnSite(TM) Publisher
Arkona OnSite Publisher is currently being designed in collaboration with an
Arkona solution provider. Arkona OnSite Publisher will allow large reference
publishers to virtually eliminate production and distribution of CD ROM
publications in favor of on-line distribution. Electronic titles will be
synchronized automatically with publisher archives and placed directly into a
subscribers own electronic library solution. The first implementation will be
released to large legal publishers and law firms.
RESULTS OF OPERATIONS
- ---------------------
Quarter Ended December 31, 1997
Revenues for the quarter ended December 31, 1997 were $10,959, compared to $0
for the comparable quarter in 1996. Cost of revenues totaled $249,818 in the
quarter ended December 31, 1997, compared to $26,402 in the quarter ended
December 31, 1996. The 1997 expenses included $55,062 in research and
development expense compared to $5,716. The increased expenses in 1997
reflect the addition of personnel and costs associated with the merger of the
Company with Arkona. The Company had $11,344 in interest income during the
quarter ended December 31, 1997 compared to $71 in the same period of 1996.
The net loss for the quarter was $227,515 (or $.01 per share) compared to a
loss $32,047 (or $.08 per share) in 1996.
Following the successful completion of the merger management's focus for the
third quarter was to ensure the recruitment of the core team necessary for the
success of the Company. Management believes it has made progress in securing
key engineering talent in a very competitive and tight marketplace. This will
be an ongoing task in successive quarters.
Revenues for the quarter were primarily related to an ongoing service contract
with a single customer (OEC Medical Systems, Inc. - "OEC") and cost of sales
reflects the costs associated with delivery of these services. The Company is
currently bidding for a number of projects utilizing its core technologies and
expects to report successes in subsequent quarters.
Expenses for the quarter reflect the cost of people, engineering research and
marketing and selling efforts, which will form the foundation of future
increased revenue and profitability growth.
The Company's primary marketing focus for the quarter was to establish the
Company's identity in the marketplace and to build a secure platform for
future growth. During the nine and three months ended December 31, 1997, the
Company provided support services for OEC pursuant to a written agreement.
The Company has entered into a license agreement with this same customer
pursuant to which the Company has agreed to pay a royalty to OEC on revenues
generated from the licensing or use of a software product developed by Arkona
in 1997 under an agreement with OEC. The royalty will be an amount equal to 5
percent of net revenues until OEC has recovered the amount paid to Arkona to
develop the product ($125,000), 2 percent of net revenues thereafter until OEC
has recovered twice the amount of its payments to Arkona and 1 percent of
revenues thereafter. No royalties have been paid by the Company to date under
this arrangement.
During the three months ended December 31, 1997, the Company completed a
private placement of its Common Stock, generating gross proceeds of $2,000,000
in cash and marketable securities. The Company funded its operations during
the period with the proceeds of this offering. Capital spending of $113,267
was primarily for computer and related equipment used in the Company's
operations. During the nine months ended December 31, 1997, the Company's
operating activities used $141,778 of cash.
Research and development expenditures totaled $55,062 during the three months
ended December 31, 1997. The Company expects that research and development
expenditures will continue to increase during the next 12 months as
development of existing and new products continues. It is expected that new
personnel in the research and development area will increase these expenses by
approximately 5% in the fourth quarter.
Nine Months Ended December 31, 1997 Compared With Nine Months Ended December
31, 1996
The Company had no revenues or business activity prior to the merger with
Arkona. Since the completion of the merger in October 1997, the primary focus
of management was to recruit a core team of personnel for various aspects of
the Company's business. It is expected that additional employees will be
needed to complete planned product development during the balance of calendar
1998.
During the nine months ended December 31, 1997, the Company had revenues of
$135,958 compared to no revenues in the comparable nine-month period ended
December 31, 1996. All operating revenues for the period were generated from
the sole customer of the Company, OEC.
Research and development costs for the nine months ended December 31, 1997
totaled $73,263, compared to $5,716 during the same period in 1996.
Marketing, general and administrative expenses were $227,209 for the nine
months ended December 31, 1997, compared to $26,458 for the nine months ended
December 31, 1996. All of these amounts relate to Arkona's activity to
develop and market its software products.
Interest income was $11,513 for the nine months ended December 31, 1997 and
resulted from the investment of the Company's cash proceeds from the sale of
its Common Stock.
The net loss for the period totaled $153,852, compared to a net loss of
$32,103 for the nine months ended December 31, 1996. The net loss applicable
to common shares was $.01 per share for the nine months ended December 31,
1997 compared to $.08 per share in the same period one year ago.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1997, the Company had cash and cash equivalents of $1,740,697,
as compared to cash and cash equivalents of $11,614 as of March 31, 1997.
Cash and cash equivalents include certificates of deposit held with First
Security Bank, Salt Lake City, Utah, as a guarantee for payment of office rent
and equipment leases.
The Company also held marketable securities available for sale at December 31,
1997. The Company does not intend to engage in the business of investing in
or buying and selling securities of other companies. These securities were
received as consideration in the private placement of the Company's common
stock in October 1997. They are comprised of 3,000 shares of common stock of
Eurogas Corp. ("EUGS") and 163,922 shares of Interjet Net Corp. ("IJNT"). At
December 31, 1997, the last sale prices of these securities as reported by the
over-the-counter ("OTC") electronic bulletin board were $6.75 and $4.25 per
share, respectively. Shares traded in the OTC market are characterized by
volatile changes in price and thin trading volumes. The relatively low volume
of securities traded and the dramatic effect that sales of even a few shares
can have on the market price of such securities may have an adverse effect on
the Company's ability to liquidate its holdings or to realize the values shown
above. This may in turn have an adverse effect on the Company's operations.
Management believes that the cash available to the Company from the recently
completed private placement and cash provided by operations will be sufficient
to meet the business requirements of the Company for the next twelve months.
If the Company expands its efforts to develop new products, it may be required
to seek additional funding through the sale of its securities or through
borrowing. Presently the Company does not have an established bank line of
credit or similar facility.
<PAGE>
OUTLOOK
- -------
This section contains forward-looking statements, all of which are based on
current expectations. The purpose of this section is to inform shareholders
of anticipated developments in the Company. The reader is cautioned that
because of certain risks applicable to the Company's business and to the
industry in which the Company operates, actual results may vary from those
anticipated by the Company. Such risks and related factors may include, but
are not limited to, potential financial and other effects of future
acquisitions, one-time charges and related operational risks associated with
such transactions, moves into new market segments and the cost of managing
growth of the business, business and economic conditions and growth of the
Company's target market segments and of the economy generally, changes in
customer order patterns, including timing of project initiation and
completion, competitive factors, timing of the release of new products, and
possible litigation involving intellectual property matters.
The Company's corporate launch will be held at the upcoming Java-One
Conference in San Francisco in March 1998, at which time it will describe its
offerings and product portfolio. This will be the first time the Company's
potential customers and competitors will be aware of the Company's
capabilities and strategies. This is Sun Microsystems' premier event of the
year for its Java users and represents a significant opportunity to increase
the Company's visibility in the industry.
The Company expects earnings in the fourth quarter of the fiscal year to be
relatively flat, as the Company continues its marketing efforts. Orders
written during the fourth quarter will not produce revenues until the next
fiscal year. The Company intends to continue its focus on products related to
the mobile worker, but will also be exploring opportunities in related
fields.
Recent Sales of Unregistered Securities
- ---------------------------------------
During the quarter ended December 31, 1997, the Company conducted a private
offering of its common stock. The shares issued in the offering were
restricted shares and were offered and sold pursuant to exemptions from
registration under the Securities Act of 1933, as amended, including the
exemptions under Section 4(2) and Regulation D, promulgated under the Act.
The purchasers in the offering were accredited investors as that term is
defined under Rule 501 of Regulation D and a limited number of persons known
to the Company or who represented to the Company that they or their purchaser
representatives were otherwise suitable (under state and federal regulations)
and possessed adequate means of providing for their current needs and personal
contingencies and who had no need for liquidity in an investment in securities
such as the Company's common stock, which are subject to certain risks,
including the possible loss of a person's investment in whole or in part. The
offering was completed at the time of the merger of the Company with Arkona
and resulted in the receipt of gross cash proceeds to the Company of
approximately $1,159,390 and the securities held for sale described above. A
total of 4,000,000 shares were issued in the private placement.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Subsequent to the end of the period covered by this report, in January 1998,
the Board of Directors approved an amendment to the Certificate of
Incorporation of the Company, increasing the authorized shares of the Company
to 50,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock. This change has been approved by consent of 70% of the outstanding
shares of the Company's Common Stock and the Company will notify the remaining
shareholders of this change in due course.
In October 1997, the Company merged with Arkona. A new board of directors was
appointed as a consequence of the merger and with the issuance of shares in
the merger, the Company underwent a change of control. The Company filed a
Current Report on Form 8-K to report this change and to identify the new
directors and officers of the Company. Those new directors and officers are:
John Blumenthal, 36, President and Director. Mr. Blumenthal has worked
in the information technology industry for more than 12 years, much of that
time as a software engineer and architect for Deutsche Bank AG in New York. He
has also been a software engineer with RasterOps and has provided independent
consulting services in the field for US West and Micron. In 1994 he was
employed by Veritas Software to lead technical development in that company's
Far East and South American operations. He was instrumental in positioning
the Veritas product line in the Internet marketplace. He has also served as
an advisor to the US House of Representatives Subcommittee on Technology
concerning US encryption export laws. He has a BA degree from Columbia
University in New York.
Stephen Russell, 45, Vice President Finance, Chief Financial Officer and
Director. Mr. Russell has a BS in Physics and Mathematics from the University
of Glasgow in Scotland. He is a Chartered Accountant and a graduate of the
International Advanced Management Program from The International Institute for
Management Development in Lausanne, Switzerland. Mr. Russell worked as a
senior manager for Price Waterhouse in Glasgow, London and Seattle prior to
joining Digital Equipment Corporation where he served as the CEO of a Digital
UK, a subsidiary in London and European Product Finance Manager in Geneva,
Switzerland.
John Zollinger, 29, Vice President Engineering, Chief Technical Officer
and Director. Mr. Zollinger has been involved in the software engineering
industry for more than 10 years. He was previously employed by Moore Business
Communications Services, where he designed, implemented and deployed a calling
card order fulfillment system that allowed AT&T to launch a new successful
business unit. He was also a consultant to EOTT Energy Partners.
Tim Kapp, 28, Vice President Marketing and Director. Mr. Kapp holds a BA
in Economics and Econometric Modeling and an MBA from Brigham Young
University. He was Senior Market Research Analyst for Folio Corporation and
served as Product Marketing Manager most recently. He has also served as a
member of the Internet Engineering Task Force, the SGML Open Consortium, and
as a representative to the W3C Internet standards body.
Gary Wright, 36, Director of Product Marketing and Director. Mr. Wright
has a BS in Business Administration from the University of Utah. He was an
original founding member of CAAMS, Inc. in Salt Lake City, Utah. Mr. Wright
was Divisional Manager for RasterOps, Inc. and was employed by Serius
Corporation as Vice President. Most recently Mr. Wright was International
Product Marketing Manager for Folio Corporation.
Dave Valenti, 43, Director of Business Development, is a physician at a
Level 1 Trauma Center in Salt Lake City, Utah. He holds a BS in Engineering
Science from Arizona State University and an MD from the University of
Arizona. He is board certified in Internal Medicine and Emergency Medicine and
is a Fellow of the American College of Emergency Physicians.
Jeff Barlow, 34, Vice President Technical Operations and Director. Mr.
Barlow has a BS in Business Administration, Production Management from Utah
State University and has been involved in the software development industry
for more than a decade. Mr. Barlow was previously employed by Wescor, inc., a
Utah-based high technology medical device development and manufacturing
company.
Martin Alfred, 38, Director of Operations, Secretary and Director. Mr.
Alfred has a BS in Business Administration from Valparaiso University. Prior
to joining the Company, Mr. Alfred was a partner in a company located in
Denver, Colorado.
Bruce Baird, 42, Corporate Counsel and Director. Mr. Baird has a BS in
Economics and a JD from the University of Utah. For nearly 20 years he has
been engaged in private practice of law in Salt Lake City, Utah.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Agreement with OEC
10.2 Service Agreement with OEC
10.3 Form of Employee Confidentiality, Work Product and
Non-competition Agreement
27 Financial Data Schedule (previously filed)
(b) Reports on Form 8-K
-------------------
On October 29, 1997, the Company filed a Current Report on
Form 8-K (subsequently amended on December 22, 1997), to report
the merger with Arkona.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE THORSDEN GROUP, LTD.
------------------------
(Registrant)
Date: May 6, 1998 /s/ John Blumenthal
----------------------------------------
John Blumenthal, Chief Executive Officer
Date: May 6, 1998 /s/ Stephen Russell
-----------------------------------------
Stephen Russell, Chief Financial Officer
and Controller (Principal Financial and
Accounting Officer)
AGREEMENT
This Agreement is entered into this ____ day of June, 1997 by and between
Arkona, LLC, a Utah Limited Liability Corporation of 201 South Main Street
#900, Salt Lake City, UT 84111 ("ARKONA") and OEC Medical Systems, Inc., a
Delaware corporation of ("OEC").
RECITALS
Whereas, ARKONA and OEC entered into a Memorandum of Understanding
contemplating a "Detailed Agreement" for ARKONA to develop a certain product
for OEC relating to computer communications between OEC offices and OEC field
service OEC's Designated Representatives; and,
Whereas, ARKONA and OEC desire now to finalize that Detailed Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the
following mutual promises, the parties agree to the following:
TERMS
1. Product to be developed. ARKONA will design, write and implement the
Product as specified in Exhibit "A" which is attached and incorporated by
reference. OEC shall provide any further information concerning OEC's
internal systems and procedures on a timely basis as determined reasonably
necessary by ARKONA.
2. Ownership, confidentiality, licensing and royalties. As more fully
specified in the Licensing Agreement which is attached and incorporated by
reference as Exhibit "B", ARKONA will retain ownership of all logic and the
code related to the Product except that OEC shall own all of its internal code
and any other code uniquely necessary to allow the Product to communicate with
OEC's internal network. ARKONA shall license the Product to OEC as specified
in Exhibit "B". Exhibit "B" also obligates each party to keep specified
information about the Product confidential and otherwise governs disclosure of
information.
3. Royalties to OEC. ARKONA shall pay royalties to OEC from any royalties or
other license fees received by ARKONA from subsequent sales or licensing to
third-parties of the Product. The right of OEC to receive such royalties
shall not be construed to give OEC any interest in the Product nor any control
over ARKONA'S sale or use of such product which control shall be solely in the
discretion of ARKONA. The royalty shall be 5 percent of net revenues (selling
price less ARKONA'S direct selling expenses such as product cost, sales
commissions, marketing, etc.) until OEC has recovered its payments to ARKONA
for development of the Product under this Agreement. After such recovery,
OEC's royalty shall be 2 percent of net revenues until OEC has recovered a
total of twice its payments to ARKONA and 1 percent thereafter. This royalty
provision shall only apply to subsequent sales or licensing by ARKONA of
products or services which substantially incorporate both the logic and code
of the Product. This royalty provision shall not apply to products or
services created by ARKONA not under this Agreement nor paid for by OEC
including, but not limited to, generic, abstracted, web objects which may
interface with generic database products. Net revenues from such sales or
licensing to third-parties shall mean all monies actually received by ARKONA
(or for any in-kind or other payment, the market value of such payment at the
time received by ARKONA) for that the subsequent product or service less
ARKONA'S direct selling expenses, such as sales commissions and other sales
related expenses and all costs incurred in any modifications of the Product to
meet the needs of future customers (modification costs shall not exceed fifty
percent (50%) of revenues) and all costs incurred in any modifications of the
Product to meet the needs of future customers, incurred in connection with the
subsequent sale as determined under generally accepted accounting principles.
For any six month period ending either December 31 or June 30 of any year for
which ARKONA has made any sales or licensing of the Product requiring royalty
payments to OEC pursuant to this paragraph, ARKONA shall provide to OEC a
reasonably detailed accounting of such net revenues received and shall,
simultaneously, pay the appropriate royalty amount to OEC.
4. Schedule for development of the Product. ARKONA developed the Product to
date pursuant to a schedule agreed upon with OEC. The schedule provided that
work agreed to have begun on December 13, 1996 and was to have been completed
on or before April 6, 1997. A milestone was agreed to and met on February 24,
1997. Subsequently, items of additional work were discovered necessitating
the extension of the completion date. ARKONA and OEC hereby accept the
following future schedule as a complete satisfaction of any claims related to
such schedule change. On or before May 15, 1997, assuming OEC has timely
provided the necessary hardware, all appropriate dial-in connections at OEC
shall be established. On or before May 19, 1997 ARKONA shall deliver an
operable version of the Product to OEC for testing. Modifications and
corrections to the test version reasonably required by OEC shall be made by
ARKONA on or before May 26, 1997. Final production distribution of the
Product and user documentation shall be completed by June 9, 1997.
5. Training. Arkona shall provide such training for OEC as reasonably
required by OEC prior to June 9, 1997. Such training is presently
contemplated to involve two (2) training classes at remote locations. OEC
shall pay Arkona all necessary and reasonable travel expenses including
airfare, hotels, ground transportation and meals. OEC shall make such
payments to Arkona within ten (10) days of Arkona's submission of an invoice
for suchand costs together with expense receipts.
6. Compensation. OEC shall pay ARKONA a total of $100,000.00 for completion
of the Product. $30,000 was paid, the receipt of which is hereby
acknowledged, upon the execution of the Memorandum of Understanding.
$30,000.00 was paid upon meeting the February 24, 1997 milestone, the receipt
of which is hereby acknowledged. The final $40,000.00 shall be paid on
acceptance of the final deliveries on June 9, 1997 as specified above.
7. Service and support. ARKONA shall provide support for the Product after
acceptance for thirty (30) days at no cost to OEC. ARKONA shall use its best
efforts to provide such service as expeditiously as reasonably required by
OEC. OEC and ARKONA shall enter into a long-term service agreement for the
Product prior to June 9, 1997.
8. Additional Work. During ARKONA'S work on the Product additional elements
of necessary work were discovered by OEC and ARKONA. These additional
elements relate to a need to maintain database consistency between OEC's
existing Metrix field service database and new information created by the
Product. This additional work was not reasonably discoverable by OEC or
ARKONA under the timeframe of ARKONA'S work on the Product. ARKONA shall
create, in conjunction with Brian Major of OEC, the necessary logic and code
required to create and maintain this necessary database consistency. A
preliminary version of the additional work will be delivered to OEC on May 12,
1997. OEC and ARKONA shall work jointly to finalize the additional work by
May 19, 1997. Upon acceptance of the additional work by Brian Major, OEC
shall pay ARKONA $25,000.00.
9. Phase 2 Compatibility. ARKONA shall use its best efforts to design the
Product to accommodate at the lowest reasonable expense the development of
Phase 2 work as specified.
10. Phase 2 General Product Description. The Phase 2 product ("Phase 2
Product") will be a software toolset in an appropriate programming language as
mutually agreed upon between OEC and ARKONA. The Phase 2 Product will provide
access to and data mapping to and from remote office computers or field sales
representatives laptop computers in a connected network state to the OEC
network and databases.
11. Phase 2 Analysis. To more fully understand the exact requirements and
the times and costs involved in creating the Phase 2 Product OEC and ARKONA
shall perform an initial analysis. Prior to starting the actual detailed
analysis OEC's designated representative and ARKONA'S Phase 2 team leader
shall conduct a two (2) day pre-analysis on or before June 30, 1997. This
pre-analysis will more closely specify the time, methodology and individuals
necessary to complete the detailed analysis. Presently the detailed analysis
is contemplated to take approximately four (4) weeks and will involve an
ARKONA analyst working with various OEC employees involved in various aspects
of the order entry process; reviewing OEC's internal documentation regarding
such processes and reviewing such Oracle documentation as necessary. It is
anticipated that completion of the Phase 2 Product will require complete
access to information regarding the Oracle order entry system.
12. Phase 2 Analysis Payment. OEC shall pay ARKONA $1,000.00 per day per
person for Phase 2 analysis work billed on a weekly basis.
13. Phase 2 Analysis Deliverable. At the completion of the Phase 2 detailed
analysis, ARKONA shall deliver to OEC a report specifying a detailed scope of
work and/or specification for the Phase 2 Product, an statement of options
concerning the Phase 2 Product together with an analysis of the risks of such
options, a budget for completion of the Phase 2 Product and a schedule for
production.
14. Phase 2 Contract and Start of work. If OEC chooses to proceed with Phase
2 after receiving the analysis deliverable, OEC and ARKONA shall enter into a
detailed agreement for the work and start work within seven (7) days.
15. Miscellaneous. This Agreement shall be governed by the law of the State
of Utah and any action brought to enforce its terms shall be brought only in
Utah. In any such action, the prevailing party shall be entitled to its costs
of action including a reasonable attorneys fee.
This Agreement is executed and effective as of the date and year first
written above.
ARKONA, LLC OEC Medical Systems, Inc.
By: __________________ By: __________________
Its: __________________ Its: __________________
SOFTWARE SUPPORT AGREEMENT
This Software Support Agreement is entered into this 31st day of
October, 1997 by and between Arkona Software Inc. a Utah Corporation of 4505
South Wasatch Blvd #34O7 Salt Lake City, UT 84124 ("ARKONA") and OEC Medical
Systems, Inc., a Delaware corporation of 384 Wright Brothers Drive, Salt Lake
City, UT 84116 ("OEC").
RECITALS
Whereas, ARKONA and OEC entered into an Agreement dated June 12, 1997
("Development Agreement") under which ARKONA developed a certain software
product for OEC relating to computer communications between OEC offices and
OEC field service engineers; and,
Whereas, ARKONA and OEC desire now to enter into an agreement specifying
the terms of Arkona's supporting the software;
NOW, THEREFORE, in consideration of the foregoing Recitals and the
following mutual promises, the parties agree to the following:
TERMS
1. Term of Agreement. This Software Support Agreement shall be effective
from September 1, 1997 until August 31, 1998.
2. Renewal. This Software Support Agreement may be extended for three (3)
additional one year periods by OEC notifying Arkona in writing of its
intention to extend not later than August 1, of each succeeding year.
3. Definitions. The following terms shall have the following meanings in
this Software Support Agreement:
3.1. Incident means a request from OEC to Arkona for software support relating
to a specific problem that can be answered by isolating its origin to a single
cause or a specific question that can be answered by a single explanation or
instruction (each incident may include multiple contacts between Arkona and
OEC to reach resolution or closure of the problem or question);
3.2. Integration Error means a failure of the Product to perform as desired by
OEC caused by or related to integration of the Product with versions of
Third-party software different than those detailed in the Specifications or
other Third-party software not referenced in the Specifications;
<PAGE>
3.3. Product means that software developed by Arkona for OEC as specified in
the Development Agreement which was delivered on August 1, 1997 and accepted
by OEC;
3.4. Remote means services provided by Arkona to OEC requiring the physical
presence of an Arkona employee outside of Salt Lake City, Utah;
3.5. Software Assistance means providing advice to OEC regarding the
operation of the Product;
3.6. Software Fault means a failure of the Product to comply with the
Specifications due to an internal error, omission or defect of the Product,
including, but not limited to, a failure of the Product to integrate with the
versions of Third-party software detailed in the Specifications;
3.7. Specifications means those specifications attached as Exhibit "A" to the
Development Agreement;
3.8. Specification Error means a failure of the Product to perform as desired
by OEC caused by an error or omission in the Specifications;
3.9. Third-party Software means software provided by companies other than
Arkona running on OEC main-office systems or on the laptop computers of OEC's
Field Service Engineers. Third-party software does not include programs
running within the Product;
3.10. Upgrade means an increase or change in the functionality of the Product
from that detailed in the specifications requested by OEC.
4. Basic Service Charge. OEC shall pay Arkona $25,000.00 as a Basic Service
Charge for the services specified below. The payments shall be made quarterly
in the amount of $6,250 each with the first payment due on the execution of
this Software Support Agreement and with subsequent payments due on the 1st
day of December, March, and June thereafter. The Basic Service Charge shall be
increased five percent (5%) for each year of any extension.
5. Reporting of Incidents. Incidents shall be reported to Arkona from OEC
only by Charles Krolik or Richard Dunn (or successors designated by OEC in
writing) except in extreme emergencies where neither Krolik or Dunn are
available. Incidents may be reported by telephone, fax or email to the
following addresses (or such changed addresses as may be provided in writing to
OEC from time to time):
5.1. Telephone: (801) 424-0044
5.2. Fax: (801) 424-0033
5.3 Email: [email protected]
6. Response by Arkona. Incidents reported to Arkona during regular working
hours (9:00 a.m. to 5:00 p.m., prevailing time in Salt Lake City) on regular
working days (excluding Federal and State of Utah legal holidays) shall be
responded to within 24 hours. Incidents reported to Arkona at other times
shall be responded to within 24 hours of 8:00 a.m. of the next regular working
day.
7. Best Efforts to Resolve. Arkona shall use its best efforts to resolve the
Incident, either by correcting the Software Fault or providing the Software
Assistance as soon as possible.
8. Incidents Included within Basic Service Charge. The Basic Service Charge
includes assistance each calendar month with a total of fifteen ( 15) Software
Assistance and/or Software Faults via telephone, fax, email or at the OEC main
office in Salt Lake City. These fifteen (15) assistance per month shall not
be cumulative and any unused assistance at the end of each month shall expire.
9. Incidents not Included within Basic Service Charge. In addition to any
Software Assistance or Software Fault Incidents exceeding the fifteen (15)
total per month, the Basic Service Charge shall not include correction of or
assistance with any Third-party Software, Integration Errors, Specification
Errors or Upgrades.
10. Charges for Incidents in Excess of Basic Service Charge. For Incidents
involving Software Assistance or Software Faults in excess of fifteen (15) per
month Arkona shall charge OEC $100.00 per Incident.
11. Arkona Responsibility Regarding Integration Errors or Specification
Errors. Arkona shall initially respond to all Incidents. If Arkona identifies
an Incident as arising out of or related to an Integration Error,
Specification Error or Third-party Software Arkona shall immediately notify
OEC of such determination in writing or by fax or email. Unless promptly
instructed otherwise, Arkona shall, if such resolution can be effectuated by
less than four (4) working hours of Arkona time, provide the necessary
resolution as soon as possible. For such resolution, Arkona shall charge OEC
$750.00 plus any additional costs such as Third-party Software and/or charges,
hardware, etc. If such a resolution is estimated by Arkona to take more than
four (4) working hours Arkona shall give OEC a written estimate of the cost to
make such resolution and shall proceed with the resolution only upon
authorization from OEC for an agreed-upon amount or time and expenses rate.
OEC shall pay for any such resolutions on Arkona's monthly invoice.
12. Assistance Report Logs and Notification. Arkona shall log and track all
Incident reports and resolutions and provide the log to OEC not later than the
15th of the following month. Arkona shall promptly notify OEC whenever in a
month OEC has used ten (10) of the fifteen (15) assistance per month included
within the Basic Service Charge.
13. Resolution Production Costs and Distribution. Arkona shall provide one (1)
copy of the resolution of any Incident (i.e., software patch or assistance
documentation) to OEC without charge except for any charges for Third-party
Software and/or any hardware necessarily included within the resolution.
Installation of any software patch and/or hardware on the main office OEC
system shall be performed by Arkona either at no additional charge if included
within the Basic Service Charge or as part of the costs billed to OEC if not
included within the Basic Service Charge. Copying, distributing to and
installing the resolution on any computers not at the main office of OEC shall
be the sole responsibility and cost of OEC or, if requested by OEC to be
performed by Arkona, shall be considered as Remote Work and billed
accordingly.
14. Charges for Remote Work. For any Remote Work OEC shall pay Arkona as
follows:
14.1. Billable Time. Billable Time shall include flight times (calculated from
1/2 hour before scheduled flight departure until landing), travel to and from
airport or hotel to remote site and actual working time. A Working Day shall
be eight (8) hours per day of Billable Time. The minimum charge for remote
work shall be for one ( 1 ) Working Day. The charge for each Working Day shall
be $1,500 for regular days (i.e., excluding weekends and Federal and State of
Utah legal holidays) and $2,500 for non-regular days. Billable Time on any day
in excess of eight (8) hours shall be charged at the rate of $300 per person
per hour for regular days and $400 per person per hour on non regular days.
14.2. Travel Expenses. OEC shall reimburse Arkona for all trave] expenses
including, but not limited to, airfare, car rental, hotels, meals, tolls and
parking incurred in providing such remote support.
14.3. Other Expenses. OEC shall reimburse Arkona for all other expenses
reasonably related to Remote Work including, but not limited to, necessary
Third-party Software and/or hardware and/or expendable tools or other
materials.
15. Arkona Responsibility Regarding Upgrades.
15.1. OEC Upgrade Requests. If Arkona identifies an Incident as arising out of
or constituting a request for an Upgrade, Arkona shall immediately notify OEC
of such determination in writing or by fax or email. Arkona shall give OEC a
written estimate of the cost (including, but not limited to, Arkona's time and
expenses and any charges for Third-party Software and/or hardware) to make
such Upgrade and shall proceed with the Upgrade only upon authorization from
OEC for an agreed-upon amount or time and expenses rate as specified in section
14.1. OEC shall pay for any such Upgrade on Arkona's monthly invoice. For any
such Upgrades OEC shall enter into a licensing agreement with Arkona similar to
that incorporated as Exhibit "B" to the Development Agreement and a Software
Support Agreement similar to this.
15.2. Arkona Upgrades. If Arkona releases any Upgrade during the Term of this
Agreement, Arkona shall offer such Upgrade to OEC at no cost except for
Arkona's time and expenses involved in installing the Upgrade and any charges
for Third-party Software and/or hardware to install and/or distribute such
Upgrade.
16. Monthly Invoices and Payment. Arkona shall invoice OEC monthly for all
work performed under this Software Support Agreement and/or any separate
projects authorized pursuant to this Software Support Agreement together with
reasonable supporting documentation. OEC shall pay Arkona on its invoices
within fifteen 15) days of receipt of an invoice. All invoices unpaid for more
than thirty (30) days shall bear interest at the rate of one and one-half
percent (1.5 %) per month.
17. Limitation on Liability. Arkona's sole liability to OEC pursuant to this
Software Support Agreement and the Development Agreement shall be limited to
resolving any Software Faults and resolving all Incidents as provided above.
Specifically, Arkona shall not be liable to OEC for any incidental and/or
consequential damages.
18. Miscellaneous. This Agreement shall be governed by the }aw of the State of
Utah and any action brought to enforce its terms shall be brought only in
Utah. In any such action, the prevailing party shall be entitled to its costs
of action including a reasonable attorneys fee.
This Agreement is deemed executed and effective as of the date and year first
written above.
Arkona Software, Inc. OEC Medical Systems, Inc.
By: Jeffrey Barlow By: (Name not legible)
Its: VP Technical Operations Its: VP Finance
EMPLOYEE CONFIDENTIALITY, WORK PRODUCT
AND NON-COMPETITION AGREEMENT
This Employee Confidentiality, Work Product and NonCompetition Agreement
("Agreement") by and between Arkona, L.L.C. ("Arkona"), and the undersigned
employee ("Employee") is effective as of the date shown. The terms of this
Agreement are as follows:
1. Definition of Confidential Information. For purposes of this
Agreement, "Confidential Information" shall mean any and all information,
data, documents, items or materials, that are or shall be owned, developed,
used by, or that relate to or arise from, Arkona, its businesses, activities,
investigations, work of Arkona's employees, agents or contractors, utilization
of Arkona's equipment, supplies, facilities or information, in the past,
present or future, whether intangible, magnetic, digital or in any other form,
format or medium, and whether or not published, patented, copyrighted,
registered or suitable therefore, that relate to:
(a) research, technology, inventions, discoveries, devices, designs,
computer programs, software (whether owned by Arkona or any third party or
used under license), software integration techniques, source codes, object
codes, text, methods, processes, procedures, systems, trade secrets, know how,
ideas or forms;
(b) marketing, marketing data, market research, business plans,
strategies, sales techniques, customer lists, customers, the names, addresses,
telephone numbers, telecopier numbers, operations, buying habits, practices,
needs, backgrounds, records and other information regarding customers and
potential customers, training, purchasing, purchasing methods, vendors,
suppliers, costs, prices, discounts, services, potential services, employees,
independent contractors, terms and conditions of engagement and performance
evaluations for employees and independent contractors, financial statements,
forecasts and reports;
(c) information generally regarded as confidential in the industry or
business in which Arkona is engaged; or
(d) information designated as confidential by Arkona.
Notwithstanding the foregoing, the term "Confidential Information" does not
include information that is (a) generally known in the industry in which
Arkona competes; (b) readily ascertainable by proper means by competitors
of Arkona, through sources independent of Employee and Arkona, through no act
or fault of Employee; or (c) owned, created, conceived or first reduced to
practice by Employee, either alone or together with others, prior to the date
of this Agreement, which is removed from the operation of this Agreement by
listing it in Exhibit "A" attached herewith and by this reference made a part
hereof (if nothing is listed in Exhibit "A", it is understood that Employee
has no matters that Employee desires to remove from the operation of this
Agreement).
2. Ownership of Confidential Information. Employee acknowledges and
agrees that: (a) the Confidential Information is proprietary and confidential;
(b) the Confidential Information is owned exclusively by and constitutes trade
secrets of Arkona; (c) unauthorized disclosure or use of the Confidential
Information would cause substantial loss and irreparable harm to Arkona; (d)
Employee's obligations under this Agreement are reasonable and necessary to
protect the legitimate interests and Confidential Information of Arkona; and
(e) the compensation and benefits provided to Employee during Employee's
employment are in substantial part consideration for this Agreement. Employee
shall promptly disclose to Arkona, or to any persons Arkona designates in
writing, all Confidential Information of which Employee has knowledge, and all
information, documents, items and materials relating thereto.
3. No Use or Disclosure. During the term of Employee's employment and
thereafter, except as required in the performance of Employee's duties for
Arkona, or as specifically authorized in writing by the President of Arkona,
Employee shall not, directly or indirectly, in any way (i) use, modify,
disclose, copy, transfer, sell, distribute, delete, destroy, display, perform
or exploit any Confidential Information or Arkona property; (ii) use, modify,
disclose, copy, transfer, sell, distribute, delete, destroy, display, perform
or exploit any information, data, documents, items or materials received by
Employee or Arkona from a third party for the period required by any
confidentiality agreement, understanding or duty between Arkona and the third
party; or (iii) aid, encourage or allow any other person to do any of the
foregoing.
4. Other Agreements. Employee represents and warrants that Employee's
employment by Arkona and its performance hereunder do not and will not violate
any other agreement binding Employee, nor violate any obligation of
confidentiality between Employee and any third party. Further, Employee agrees
that Employee will not use for Arkona's benefit, or disclose to Arkona, any
trade secrets, confidential information or property of any third party if
Employee is prohibited by agreement (such as an agreement with a prior employer
or contractor) or otherwise from so using, disclosing or
exploiting the same. Employee represents and warrants that Employee has
disclosed to Arkona any such obligations of confidentiality and related
limitations, if any. Employee will not enter into any agreement, whether
written or oral, at any time, that is in conflict with the terms of this
Agreement. Employee agrees to indemnify and hold Arkona harmless from all damage
s, expenses, costs (including reasonable attorneys' fees) and liability
incurred by Arkona in connection with, or resulting from, any breach of this
Section 4.
5. Definition of Work Product. For purposes of this Agreement, "Work
Product" shall mean all works of authorship, inventions, devices, discoveries,
improvements, engineerings, reverse engineerings, promotional materials,
training materials, organizational materials, speeches, articles, books,
handbooks, written materials, printed materials, artwork, visuals, graphics,
templates, pictures, prints, products, creations, designs, computer software,
computer software integration techniques, source codes, object codes, sound
recordings, formulas, processes, techniques, ideas, suggestions, know-how and
moral rights, all derivative works, versions, variations and modifications to
the foregoing, and all documents, items and materials that relate to the
foregoing, whether finished, under development or otherwise, whether
intangible, magnetic, digital or in any other form, format or medium, and
whether or not published, copyrighted, patented, registered or suitable
therefore, that are created, conceived, developed or reduced to practice by
Employee, in whole or in part, whether alone, together with others or
otherwise, during the period of Employee's employment with Arkona, that are
(a) created, conceived, developed or reduced to practice within the scope of
Employee's duties for Arkona, on Arkona's time, or with the aid, assistance,
or use of any of Arkona's property, equipment, facilities, supplies,
resources, or intellectual property; (b) the result of any work, services, or
duties performed by Employee for Arkona; or (c) related to the industry,
trade, or current or demonstrably anticipated business, research, or
development, of Arkona.
6. Ownership of Work Product. All Work Product shall, to the extent
possible, be considered works made for hire by Employee for Arkona within the
meaning of Title 17 of the United States Code, or its successor provision, and
all copyrights, patents, patents rights, shop rights, trademarks, service
marks, trade names, goodwill pertaining to the foregoing, registration rights,
pending application rights, contract rights, claims and actions, and all other
rights, under the laws of the United States, foreign countries and
international conventions, that relate to or arise from the same, shall be
owned by and remain exclusively the property of Arkona. To
the extent any or all of the foregoing, under applicable law as noted above,
may not be considered works made for hire by Employee for Arkona, Employee
hereby unconditionally transfers, assigns, grants and conveys to Arkona,
forever (or for the longest period of time otherwise permitted by law), all
right, title, interest, tangible and intangible property, benefits, powers,
privileges, claims and demands of every kind and nature, whatsoever throughout
the world, in and to the same, individually and collectively, without the
necessity of any further consideration.
7. Cooperation. Employee shall promptly disclose to Arkona all Work
Product and shall execute all documents and perform all tasks reasonably
requested by Arkona to document, perfect and secure the foregoing rights for
Arkona, including, but not limited to, copyright, patent and other
registration rights.
8. Non-Competition Agreement. Employee acknowledges that Employee's
services are of a special and unusual character which have a unique value to
Arkona and that confidential information will be obtained by or disclosed to
Employee as a result of employment. As a material inducement to Arkona to
employ Employee and in consideration of compensation to be paid to Employee
for services, Employee covenants and agrees as follows:
(a) During Employee's employment by Arkona and for a period of one (1)
year after Employee ceases to be employed by Arkona, Employee shall not,
directly or indirectly, as principal or agent, or in any other capacity:
(i) solicit or divert business from any client, account or location
of Arkona.
(ii) own, manage, operate, participate in or be employed by or
otherwise be interested in, or connected in any manner with, any
person, firm, corporation or other enterprise which directly
competes with the business of Arkona in the geographic area in
which Arkona competes for business, conducts its business,
seeks its market, solicits customers, sells its products or
services or seeks to sell its products or services.
(b) Employee covenants and agrees that any violation of this Agreement
shall entitle Arkona to an accounting and repayment of all profits,
compensation, commissions, remunerations or benefits which Employee directly
or indirectly has or may realize, and such remedy shall be in addition to and
not in limitation of any injunctive relief or other rights or remedies to
which Arkona is or may be entitled at law or in equity under this Agreement.
(c) Employee acknowledges having carefully read and considered the
provisions of this Agreement and agrees that the restrictions set forth in
Paragraph 8(a) including, but not limited to, the time period of restriction
and the geographical area restriction are fair and reasonably required for the
protection of the interests of Arkona, its officers, directors and other
employees. In the event that any provision of Paragraph 8(a) hereof relating
to time period and/or area of restriction shall be declared by a court of
competent jurisdiction to exceed the maximum time period or area such court
deems reasonable and enforceable, said time period and/or area or restriction
shall be deemed to become and thereafter be the maximum time period and/or
area which such court deems reasonable and enforceable.
9. At Will Employment. Employee agrees that Employee's employment with
Arkona is employment at will and may be terminated at any time with or without
cause and for any or no reason. This Agreement shall not in any way modify
Employee's status as an employee at will. This Agreement controls those
aspects of the employment relationship between Arkona and Employee that are
specifically addressed herein. All other aspects of the employment
relationship are regulated under the general policies of Arkona.
10. Termination. In the event of termination or cessation of Employee's
employment with Arkona, whether with or without cause, (a) this Agreement
shall remain in full force and effect; (b) Employee shall promptly deliver to
Arkona all information, data, documents, computer disks and equipment, items
and materials of any nature and in any form, format or medium pertaining to
Employee's work for Arkona, the Confidential Information and/or Work Product;
and (c) Employee will not take, retain, use, disclose or disseminate any
originals, copies or other reproductions of any of the foregoing, in any form,
format or medium whatsoever.
11. Waiver. The failure of either party to take any action under this
Agreement, or the waiver of a breach of this Agreement, shall not affect that
party's rights to require performance hereunder or constitute a waiver of any
subsequent breach.
12. Enforcement. For any breach of this Agreement, Employee agrees that
Arkona is entitled to equitable and other injunctive relief which may include,
but shall not be limited to, restraining Employee from rendering any service
or performing or participating in any activity in breach of this Agreement.
However, no remedy available under this Agreement (including this Section 12)
is intended to be exclusive of any other remedy, and each and every remedy
shall be cumulative and shall be in addition to every other available remedy
now or hereafter existing at law or in equity by statute or otherwise.
13. Attorneys' Fees. Should Arkona or Employee incur attorneys' fees or
costs in order to enforce the provisions of this Agreement, whether or not a
legal action is instituted, the party not in default shall be entitled to
reimbursement of such attorneys' fees and costs, in addition to all other
rights and remedies either party may have at law or in equity.
14. Modification. This Agreement may not be altered, modified, amended or
changed, in whole or in part, except by a writing executed by the parties.
15. Assignment. This Agreement is fully assignable by Arkona. This
Agreement is personal to Employee and neither the Agreement, nor the rights or
duties hereunder, may be voluntarily or involuntarily, directly or indirectly,
assigned or otherwise transferred or encumbered by Employee without the prior
written approval of Arkona.
16. Moral Rights. Employee acknowledges the existence of Employee's
statutory moral rights in Work Product to the extent such Work Product may
qualify as a work of visual art to be used as such, pursuant to Title 17
Section 106A of the United States Code, or its successor statute, and does
hereby expressly and forever waive all such rights.
17. Interpretation. This Agreement shall be governed by the laws of the
State of Utah. The headings herein are for reference only and shall not define
or limit the provisions hereof.
18. Entire Agreement. Arkona and Employee acknowledge and agree that this
Agreement constitutes the entire agreement between them with respect to the
subject matter addressed herein, and all prior or contemporaneous agreements,
whether written or oral, as may relate to the same, except those referred to
in this Agreement, are hereby superseded by this Agreement.
19. Severability. If any provision of this Agreement is found to be
invalid or unenforceable by a court or tribunal, whether due to particular
time limits, unreasonableness or otherwise, it is agreed that the provision in
question shall be reduced or otherwise modified by such court or tribunal, but
only to the extent necessary to permit its enforcement and only in such
court's jurisdiction. If the particular provision cannot be reduced or
modified to make it enforceable, that provision shall then be severed from
this Agreement and the remaining provisions of this Agreement shall remain in
full force and effect giving maximum validity and enforceability to this
Agreement.
20. Successors. This Agreement shall be binding upon the parties and
their heirs, successors, assigns, transferees, grantees, executors and
administrators.
21. Review. Employee acknowledges that before signing this Agreement,
Employee read it, Employee was given an opportunity to discuss it with
Employee's attorneys and advisors, and Employee understands its meaning and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day of , 19_.
ARKONA
By:
Name :
Title:
EMPLOYEE
Name:
EXHIBIT "A"
PREEXISTING RIGHTS
I do not own or have any claim, interest or rights in any confidential
information or intellectual property.
I own or have a claim, interest or rights in the confidential
information and intellectual properties listed below (attach extra sheet if
necessary).
Employee's Signature
