SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended March 31, 1999
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
Commission file number 0-24372
Sundog Technologies, Inc.
(Name of small business issuer in its charter)
The Thorsden Group, Ltd.
(Former name of small business issuer)
DELAWARE 33-0611746
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4505 South Wasatch Blvd., Suite 340
Salt Lake City, Utah 84124
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 424-0044
Securities registered under to Section 12(b) of the Act: None
Securities registered under to Section 12(g) of the Act: Common Stock, par value
$.001
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
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]
Issuer's revenues for its most recent fiscal year were $75,167.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 29, 1999 was not determinable since the Common Stock was
not traded during the period.
The number of shares outstanding of the issuer's common stock, par value $.001
per share, as of June 10, 1999 was 22,248,001 shares.
No documents are incorporated by reference in this report.
Transitional Small Business Disclosure
Format (Check one):
Yes No X
----- -----
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PART I
Item 1. Description of Business
Special note regarding forward-looking statements. Certain statements in this
Item 1-Business, and in Item 6-Management's Discussion and Analysis or Plan of
Operation constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. You should regard
any statement in these sections that is not a statement of historical fact to be
a forward-looking statement of management's beliefs, expectations and plans, all
of which may be adversely affected by risks and other factors outside the
control of the Company. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause actual results to vary from the views expressed in forward-looking
statements include, but are not limited to, risk factors discussed below in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Introduction
Sundog Technologies, Inc. ("Sundog" or the "Company") is a Delaware corporation
organized in 1992 for the purpose of seeking and acquiring business
opportunities. The Company was formerly known as The Thorsden Group, Ltd. and
changed its name to Sundog Technologies, Inc. in April 1999. In October 1997,
the Company acquired Arkona, Inc., a Utah corporation, through a wholly owned
subsidiary corporation. Arkona Inc.'s predecessor, Arkona LLC, a Utah limited
liability company, was founded in September 1996 and had limited business
operations prior to its acquisition by the Company. As a wholly owned subsidiary
of Sundog, Arkona is continuing its business of developing, marketing and
selling software products for use in portable and distributed network computing.
On June 5, 1998, the Company formed a new subsidiary company, Qui Vive Inc.
("QV"), incorporated in Delaware. This company is engaged in the development of
Sundog's e-mail security software product and Internet application more fully
described below. QV is wholly owned by Sundog, however the Company has granted
options to key personnel of QV as an incentive to further the development work
on the QV products. If all options allocated are granted and subsequently
exercised in full, the options granted to the QV development team will result in
the team's ownership of approximately 45% of the issued and outstanding common
stock of QV and reduce the ownership of Sundog proportionately.
Development and launch of the e-mail security product has been delayed beyond
the Company's original expectations. This has been due in large part to
unforseen delays in raising the necessary funding for this project. Recent
internal restructuring has placed Sundog's former CEO, John Blumenthal, at the
head of this project and Sundog has revised its development and launch timeline.
The QV projects are discussed more particularly below under the heading, "QV
Operations."
Arkona Operations. In 1997, Sundog's founders anticipated the growth of an
emerging market niche, enterprise information exchange (EIX), an outgrowth of
the traditional data replication/synchronization marketplace. This innovative
technology allows rapid integration of business information systems throughout
the enterprise, and the ability to easily share critical information with
remote, occasionally connected workers and partners around the world.
During December 1998, the first shipping version of Arkona's core product,
Universal Update, was publicly introduced. As part of the Universal Update
rollout, Arkona announced a strategic partnership with Open Market, Inc., the
market share leader in Internet electronic commerce software and provider of
information commerce tools. Universal Update v1.5 shipped first in June 1999 and
includes special application "adapters" that integrate Universal Update and Open
Market products. Pre-release evaluation of the combined offering was conducted
at several Open Market customer and partner sites.
In February 1999, Arkona launched its professional services group and named a
new Vice President, Barney Leifeste. The group provides Arkona's customers with
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both training and consulting in business process improvement (BPI), a service
used to drive demand for Arkona's software products and a prerequisite to ensure
complete client satisfaction. The professional service group signed its first
contract in January 1999 with Cadmus Journal Services (NASDAQ: CDMS), one of the
nation's largest printing companies.
QV Operations. The digital revolution has evolved around a simple notion: that
information should be permanent. Unlike other media formats, digital information
(such as e-mail) can be stored forever, recovered at will, copied with ease, and
shared anywhere. Unfortunately, these attributes also give digital information a
more sinister side. E-mail, for example, can just as easily be saved, copied,
recovered, and redistributed by anyone at any time with or without consent and
frequently without knowledge of the author. Once an electronic e-mail message
has been sent, the author loses complete control of his or her words. According
to industry analyst Esther Dyson, "The challenge is not to keep everything
secret, but to limit misuse of such information."
QV was created to develop a solution to these problems. The purpose of the QV
solution is to facilitate communication and give content control back to the
author. The Company anticipates that this product will evolve from its initial
implementation, which will represent a level of functionality sufficient to
cover most e-mail users' primary privacy concerns. However, the Company intends
to implement other designs that eliminate intermediary services, further
simplify the functionality and usability of the product and simultaneously
increase the level of security in the product.
The ultimate design goal is to meet the most stringent secure messaging
requirements up to and including the standards of the United States Department
of Defense. Increasingly rigorous levels of security will be implemented en
route to achieving this final goal. Once the e-mail solution is successfully
launched, implementations beyond e-mail will be designed and marketed. Markets
to be targeted after the initial releases include, but will not necessarily be
limited to: voice mail, pagers, databases, Usenet newsgroups, and web publishing
tools.
The Company is currently seeking to raise additional capital in order to
complete and move from the design and architecture phase of development,
including the securing of all intellectual property protections available, to
completion and marketing of the first product version. There is no assurance
that such funding will be obtained.
The Company has engaged engineers, marketers and an administrative staff to
support the development of the QV product for delivery to the marketplace. There
can be no assurance that the Company will successfully complete the product, or
that the product will include all or substantially all of the elements described
above, or that any of the other risks described herein will not adversely affect
the outcome of the project.
Development on both Universal Update and the secure e-mail product is slower
than the Company originally anticipated. The implication for market penetration
with these products is that it will be behind plan and therefore the revenue
produced may also be behind plan. A key focus for successive quarters will be to
ensure continued product and market development plans are met.
Certain Risk Factors
Our short and long-term success is subject to certain risks, many of which are
substantial in nature and you should consider carefully the following risk
factors, in addition to other information contained in this report as you
evaluate the Company and its business. Any one of these factors could cause
actual results of our operations to differ materially from projected results.
We are in the development stage, meaning that we have had only limited revenues
from sales of products or services. The Company is in the development stage and
has a limited operating history. There can be no assurance that we will be able
to achieve a significant level of sales or attain profitability. Our operations
to this point have been limited to developing software, making initial sales
under contracts with two customers and obtaining financing for its operations.
As a result of the increase in operating expenses caused by recent expansion of
our business, operating results may be adversely affected if significant sales
do not materialize in the near term. There can be no assurance that we will be
able to grow in the future or attain profitability. As a result, we believe that
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our prior results of operations are not necessarily meaningful and should not be
relied upon as an indication of future performance. The profit potential of our
business is unproven and speculative. We believe that to be successful we must,
among other things, develop and market software that is widely accepted by
business customers at prices that will yield a profit.
Our software and technologies are unproven and we do not know whether the market
will accept them. Our software is in a development stage. The e-mail and
Internet products in particular contain innovative technologies for which there
may be no established market. Our remote computing and database management
products have produced only limited sales to date. There can be no assurance
that any of our products will achieve broad commercial acceptance. Our ability
to generate future revenues will be dependent on a number of factors, many of
which are beyond our control and include, among others, our ability to carry on
timely and effective marketing campaigns and the rate we can establish new
products and the type of competition we may encounter. Because of the foregoing
factors, among others, we are unable to forecast our revenues or the rate at
which we will add new customers with any degree of accuracy. There can be no
assurance that we will be able to increase sales in accordance with our internal
forecasts or to a level that meets the expectations of investors. There can also
be no assurance that we will ever achieve favorable operating results or
profitability.
Our accountants have included an explanatory paragraph on our financial
statements regarding our status as a "going concern." Our consolidated financial
statements included in this report have been prepared on the assumption that we
will continue as a going concern. The Company's independent public accountants
have issued their report dated June 10, 1999 that includes an explanatory
paragraph stating that our recurring losses and accumulated deficit, among other
things, raise substantial doubt about our ability to continue as a going
concern. Our product line is limited and it has been necessary to rely upon
financing from the sale of our equity securities and certain assets consisting
of marketable securities to sustain operations. Additional financing may be
required if we are to continue as a going concern.
We require additional capital to continue development of our products and to
fund day-to-day operations. Cash flow from the sale of products and services is
not sufficient to finance our day-to-day operations. Our business is capital
intensive and we expect we will continue to incur significant operating losses
over the next 12 months, primarily due to the market launch of new products,
increased marketing expenditures, and the expansion of research and development
programs. Additional funds will be required in the event we have not begun to
generate significant revenues by the end of 1999. As a result, we may find it
necessary to postpone or cancel some of our planned marketing and/or product
development programs, which could adversely affect future revenues and new
product introductions. Notwithstanding revenues that may be produced during the
next 12 months, we anticipate that additional funds will be required to continue
the necessary levels of product development and promotional expenses to meet our
long-term goals. We intend to seek such additional funding through additional
public or private financings. There can be no assurance that additional
financing will be available, or, if available, that it will be available on
acceptable terms or in required amounts.
Obtaining additional capital through the sale of common stock will result in
dilution of shareholder interests. If additional funds are raised by issuing
additional shares of common stock, or securities such as options or warrants or
preferred stock convertible into common stock, further dilution of the equity
ownership of existing holders of our common stock will result. If adequate funds
are not made available to us, we may be required to delay, scale back or even
eliminate one or more of our product candidates and/or product development
programs, and/or obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights that we would not otherwise
relinquish.
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Our quarterly operating results may fluctuate significantly. We experience and
expect to continue to experience significant fluctuations in our quarterly
operating results. These fluctuations result from a variety of factors, many of
which are outside our control. Such factors might include, but are not
necessarily limited to:
- The rate at which customers purchase our software and the prices
paid for such software,
- The amount and timing of capital expenditures and other costs
relating to the expansion of our business,
- The introduction of software products by us or our competitors,
- Price competition or changes in Internet and computer technology,
and
- Technical difficulties or economic conditions specific to our
business.
A significant portion of our expenses could be fixed in advance based in large
part on future revenue forecasts. If revenue is below expectations in any given
quarter, the adverse impact of the shortfall on the operating results may be
magnified by the inability to adjust spending to compensate for the shortfall.
Therefore, a shortfall in actual as compared to estimated revenue would have an
immediate adverse effect on our business, financial condition and operating
results that could be material.
In addition, we plan to increase operating expenses to fund additional sales and
marketing, general and administrative activities and infrastructure needs. To
the extent these expenses are not accompanied by an increase in revenues, our
business, financial condition, and results of operations could be materially
adversely affected.
Due to all of the foregoing factors, it is likely that our operating results in
one or more future quarters will fail to meet or exceed the expectations of
securities analysts or investors. In such event, the trading price of the common
stock of the Company, to the extent there is a market for such stock, would
likely be materially adversely affected. You should not expect past results to
be reliable indicators of future performance.
Our expansion into Internet, e-mail and other applications, as well as the
growth of our business, require the addition of qualified personnel and increase
our reliance on such personnel. The loss of technically experienced, qualified
personnel is a risk to our success. We may not be equipped to successfully
manage any future periods of rapid growth or expansion, which could be expected
to place a significant strain on managerial, operating, financial and other
resources. We are highly dependent upon the efforts of management and
technically skilled personnel, including programmers and engineers, and future
performance will depend, in part, upon the ability of management to manage
growth effectively and to retain the services of these experts. This will
require us to implement financial controls, systems and management information
systems capabilities, to develop our operating, administrative, financial and
accounting systems and controls, to maintain close coordination among
engineering, accounting, finance, marketing, sales and operations, and to hire
and train additional technical and marketing personnel. There is intense
competition for management, technical and marketing personnel. The loss of the
services of any of our management team or the failure to attract and retain
additional key employees could have a material adverse effect on our business,
financial condition, and results of operations.
Our dependence on intellectual property and proprietary information subjects us
to the risk that such property may be inadequately protected or that such
information may be misappropriated. We regard our intellectual property as
critical to our success, and we rely on copyright, patent and trade secret
protection to protect our proprietary rights in intellectual property. We are
currently pursuing and expect to pursue the registration of copyrights, patents
and trademarks in the United States. Effective trademark, copyright, trade
secret or patent protection may not be available in every country in which our
products are or become available. We intend to effect appropriate registrations
internationally and domestically as our operations expand. There can be no
assurance that the United States or foreign jurisdictions will afford any
protection for our intellectual property. There also can be no assurance that
any of our intellectual property rights will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide any competitive
advantage. We could also incur substantial costs in asserting our intellectual
property or proprietary rights against others, including any such rights
obtained from third parties, and/or defending any infringement suits brought
against us. Although we enter into confidentiality and invention agreements with
our employees and consultants, there can be no assurance that such agreements
will be honored or that we will be able to protect effectively our rights to
unpatented trade secrets and know-how. Moreover, there can be no assurance that
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others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets and
know-how. We may be required to obtain licenses to certain intellectual property
or other proprietary rights from third parties. There can be no assurance that
any such licenses or proprietary rights would be made available under acceptable
terms, if at all. If we do not obtain required licenses or proprietary rights,
we could encounter delays in product development or find that the development or
sale of products requiring such licenses could be foreclosed.
Budget and cost overruns and delays frequently characterize development projects
such as those conducted by us. We budget the cost of each project, review cost
reports and update our cost projections and development schedules regularly.
However, there can be no assurance that the actual production costs for projects
will remain within budget or that development will remain on schedule. We have
experienced delays in development objectives in the past and there can be no
assurance we will not incur similar delays in the future. Production delays,
higher talent costs, increased subcontractor costs, and other unanticipated
events (including, but not limited to delays in obtaining necessary financing)
may substantially increase production costs and delay or even prevent completion
of the production of any one or more of the programs we are now pursuing or that
we intend to pursue in the future. The failure to remain within budget and
deliver products on time may have a material adverse effect on our business,
financial condition and results of operations.
The software industry, and in particular, the Internet, are characterized by
rapid development and change. We must develop products and technology that keep
pace with technological change. The software and Internet markets are recognized
for rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging nature of these technologies, products
and services and their rapid evolution require that we continually improve the
performance, features and reliability of our software, particularly in response
to competitive offerings by other companies. There can be no assurance that we
will successfully respond quickly, cost effectively and sufficiently to these
developments. There may be a time-limited market opportunity for our products
and there can be no assurance that we will be successful in achieving widespread
acceptance of our products before competitors offer products and services with
features and performance similar to current offerings. In addition, the
widespread adoption of new technologies or standards could require substantial
expenditures to modify or adapt our products and services and which could have a
material adverse effect on our business, financial condition and results of
operations. Furthermore, our new software enhancements may contain design flaws
or other defects that limit their marketability. There can also be no assurance
that research and development and discoveries by others will not render some or
all of our products or potential product offerings uncompetitive or obsolete. We
compete with a number of entities that are currently developing and producing
software products that compete with our current and proposed products. Many of
these competitors have substantially greater capital resources, research and
development capabilities, and production and marketing resources, capabilities
and experience than we have available to us. These competitors may succeed in
developing products that are more effective or less costly than any products
that we may develop, or that gain market acceptance prior to any of our
products, making market penetration more difficult for us.
We depend on the technology of third parties in the development of our software.
Our use of such technology has been licensed to us. If our license to any such
technology were terminated or otherwise restricted beyond our current ability to
use it and incorporate it into our own products, our development efforts would
be adversely affected. If we were not capable of obtaining the license to other
technology to replace that which was lost because of the termination of a
license, our products that are dependent upon the technology would become
inoperable or their effectiveness and performance significantly reduced. In
addition, if the vendors of such technology were to materially alter or modify
or discontinue their products, we would be forced to incur additional expense to
acquire or develop products that would enable us to continue with our own
products. If the cost of licensing third-party technology materially increased,
our gross margins and earnings would decrease.
Like many software development companies, our business model is characterized by
a very high degree of operating leverage. Many of our operating costs and
expenses consist of employee and facility related costs, which are fixed over
the short term. Our operating expenses and hiring plans are based substantially
on our internal projections of future revenue, which are inherently subject to
risks and factors that are often outside our ability to control. If revenues do
not meet expectations, net income will be adversely affected.
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Changes in the marketplace may require the Company to make changes to our
current pricing models. We may choose later this year or in future periods to
make changes to current pricing practices, including offering discounts to
customers or a reduction of transactions that involve perpetual use licenses of
our products, changes in maintenance pricing or other changes in the manner in
which we charge customers for the use of our products. These changes may not be
well received by customers. Furthermore, the changes may depend on an increase
of volume and the failure to achieve sufficient increases in user volume would
adversely affect earnings.
Our current officers, directors and significant shareholders continue to have
control of the Company. Officers, directors and certain significant shareholders
of the Company own 11,480,000 shares (or approximately 51%) of the outstanding
common stock. As a result, these persons (as a group) are able to elect a
majority of our Board of Directors, to dissolve, merge, or sell all or
substantially all of our assets, and to direct and control our operations,
policies and business decisions.
There is no present public market for our common stock. If and when such a
market develops, our stock price may be volatile. There has been no market for
our common stock and there is no assurance that any market will develop. The
common stock is not listed on any exchange. If and when such a more established
market may develop, the market price of the common stock, like that of the
securities of other software and high technology companies, may be highly
volatile. Broad market fluctuations may adversely affect the market price of our
common stock. Our stock price may be affected by each of the factors described
above, as well as:
- Announcements by us or competitors concerning technological
innovations, new products or procedures developed by us or our
competitors,
- The adoption or amendment of governmental regulations and similar
developments in the United States and foreign countries that affect
our products or markets specifically or our markets generally,
- Disputes relating to patents or proprietary rights,
- Publicity regarding actual or potential results relating to product
candidates under development by us or a competitor,
- Delays in product development,
- Slow acceptance of our products in new or existing markets, and
- Economic and other external factors, as well as period-to-period
fluctuations in financial results.
Our common stock may be deemed to be a "low-priced stock" and subject to certain
regulatory action that limits or restricts the market for such stock. Until such
time, if any, as our common stock is included in The Nasdaq SmallCap Market or
listed on another exchange, the common stock will not be eligible for quotation
on Nasdaq and there can be no assurance that it will ever be so eligible. Until
such time as we are eligible to satisfy the listing criteria of Nasdaq or
another stock market, trading, if any, in our common stock would be conducted in
the over-the-counter market in the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board," under the symbol SUDG. Consequently, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of, the Company's securities. In the absence of a security being
quoted on Nasdaq, or if we do not have $2,000,000 in net tangible assets,
trading in the common stock could be covered by Rule 15c2-6 promulgated under
the Exchange Act for non-Nasdaq and non-exchange listed securities. Under such
rule, broker-dealers who recommend such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with a net worth in excess of
$1,000,000 or an annual income exceeding $200,000 or $300,000, jointly with
their spouse) must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale.
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Securities are also exempt from this rule if the market price is at least $5 per
share. Under the rules and regulations of the SEC, additional disclosure is
required for penny stocks and for trades in any stock defined as a penny stock.
The SEC has defined a penny stock to be any Nasdaq or non-Nasdaq equity security
that has a market price or exercise price of less than $5 per share and allows
for the enforcement against violators of the rules. Unless exempt, the rules
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining important concepts involving the penny stock
market, the nature of such market, terms used in such market, the
broker-dealer's duties to the customer, a toll-free telephone number for
inquiries about the broker-dealer's disciplinary history, and the customer's
rights and remedies in case of fraud or abuse in the sale.
Disclosure must also be made about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities, and,
if the broker-dealer is the sole market-maker for the securities, then such fact
must also be disclosed, as well as its control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the investor's account and information on the limited market in penny
stocks. These requirements significantly add to the burden of the broker-dealer
and limit the market for penny stocks.
While many Nasdaq stocks are covered by the definition of penny stock,
transactions in a Nasdaq stock are exempt from all but the sole market-maker for
(i) issuers who have $2,000,000 in tangible assets ($5,000,000 if the issuer has
not been in continuous operation for three years), (ii) transactions in which
the customer is an institutional accredited investor and (iii) transactions that
are not recommended by the broker-dealer. In addition, transactions in a Nasdaq
security directly with the Nasdaq market maker for such securities, are subject
only to the sole market-maker disclosure, and the disclosure with regard to
commissions to be paid to the broker-dealer and the registered representatives.
If our common stock is or becomes subject to the existing rules on penny stocks,
the market liquidity for the common stock could be severely affected by limiting
the ability of broker-dealers to sell the common stock and the ability of
purchasers in this Offering to sell their securities in the secondary market.
Anti-takeover provisions of Delaware Corporate Law, and our ability to issue
preferred stock may affect the price of our common stock and allows the Board of
Directors to issue securities that may significantly dilute your ownership and
voting power. Under our Certificate of Incorporation, as amended, we are
authorized to issue up to 10,000,000 shares of preferred stock, par value $.001
per share ("Preferred Stock"). We have not issued any Preferred Stock and there
are no present plans to issue any Preferred Stock. Our Board of Directors has
the authority to issue the Preferred Stock with such voting and other rights
superior to those of our common stock, which could effectively deter any
attempted takeover of the Company. In addition, the Delaware General Corporation
Law prohibits certain mergers, consolidations, sales of assets or similar
transactions between a corporation on the one hand and another company which is,
or is an affiliate of, a beneficial holder of 15% or more of such corporation's
voting power (defined as an "Interested Stockholder") for three years after the
acquisition of the voting power, unless the acquisition of the voting power was
approved beforehand by the corporation's board of directors or the transaction
is approved by a majority of such corporation's shareholders (excluding the
Interested Stockholder). These provisions prohibiting Interested Stockholder
transactions could also preserve management's control of Sundog.
The large number of shares of our common stock eligible for future sale without
restrictions can affect the market price of the common stock. As of April 9,
1999, 20,520,400 shares of our common stock outstanding are "restricted
securities" as that term is defined under Rule 144 of the Securities Act. Either
presently or in the future, these shares of common stock may be sold pursuant to
registration under the Securities Act, in compliance with Rule 144 or pursuant
to another exemption from registration. Under Rule 144 as currently in effect, a
person who has beneficially owned restricted securities of the Company for a
period of at least one year may, within any three month period, sell in
brokerage transactions an amount of such securities that does not exceed the
greater of 1% of our then-outstanding common stock or the average weekly trading
volume of our common stock during the four calendar weeks prior to such sale.
Rule 144, as currently in effect, also permits, under certain circumstances, the
sale of shares without regard to the limitations described above, by
non-affiliates of the Company, after holding such shares for at least two years.
Sales of substantial amounts of our common stock of the Company in the public
market, and any sales by affiliates of the Company, particularly officers and
directors, could adversely affect prevailing market prices for the common stock.
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The Company has not declared any dividends with respect to its common stock. We
have never paid cash dividends on our common stock. We intend to retain
earnings, if any, to finance the operation and expansion of our business and,
therefore, we do not expect to pay cash dividends on the Shares in the
foreseeable future.
Year 2000 compliance issues could adversely affect our business. During the next
year, many software programs may not recognize calendar dates beginning in the
Year 2000. This problem could force computers or machines that use date
dependent software or embedded technologies to either shut down or provide
incorrect information. To address this problem internally, we have examined our
computer and information systems, contacted our software and hardware providers,
and, where necessary, made upgrades to our systems. Our products are being
developed to address this problem without modification by the user. Although we
believe that our products are Year 2000 compliant, undetected errors or defects
may remain. Disruptions to our business or unexpected costs could arise because
of undetected errors or defects in the technology used in our products or
internal information systems, which are comprised predominantly of third party
software and hardware. If we, or any of our key suppliers or customers, fail to
recognize and mitigate internal and external Year 2000 risks, we may temporarily
be unable to process transactions, send invoices, or engage in normal business
activities or we may experience a decline in sales, which could have a material
adverse effect on our business, financial condition and results of operations.
Although our license terms limit our liability for product liability claims,
there can be no assurance that such a claim will not be brought in the future.
We have not experienced product liability claims to date. However, our products
include programs designed for mission critical applications, creating the risk
that the failure or malfunction of our products may result in serious damage or
loss and open the Company to a claim for damages. While contract terms limit our
exposure, there can also be no assurance that a court would not rule such
provisions to be invalid or unenforceable, or that changes in the law would
render such terms void or unenforceable. A successful claim could have a
material adverse effect on the Company. Furthermore, the cost of defending
against a claim, even successfully, could be material and could have an adverse
effect on our results of operations and an adverse effect on the marketing of
our products.
Item 2. Description of Property
The Company owns no real property. The Company leases a 4,850 square foot
facility in Salt Lake City, Utah from an unaffiliated third party at which it
conducts all of its corporate, administrative, research (for Universal Update)
and development activities. The lease of the Salt Lake facility expires December
31, 1999, with an option to renew for one year. The base monthly lease payment
for that facility totals $7,360.
The Company also leases a 3,550 square foot facility in Colorado Springs,
Colorado at which Qui Vive conducts all of its administrative, research and
development activities. The lease of the Colorado Springs facility expires in
March 2002 and has a base monthly payment of $4,018. These terms were negotiated
through arms-length transactions, and the Company believes that such terms are
consistent with prevailing market conditions.
The Company believes the Salt Lake City and Colorado Springs facilities are
adequate for its needs for at least the next year and does not anticipate any
expansion or the need to acquire, through lease or otherwise, any additional
facilities.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the security holders during the fourth
quarter of the fiscal year covered by this report.
In May 1999, the Company changed its name from The Thorsden Group, Ltd. to
Sundog Technologies, Inc. The change was accomplished by an amendment to the
Company's Certificate of Incorporation, which was adopted by the consent of
shareholders holding a majority of the issued and outstanding shares of the
Company. A notice of such change was mailed to all shareholders on or about May
21, 1999.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
There is no current public trading market for the Company's common stock and
there is no assurance that any market will ever develop for such shares. To the
extent a market does develop in the future, the market price of the common stock
will be subject to significant fluctuations as a result of several factors, over
many of which the Company has little or no control.
As of June 10, 1999 there were approximately 22,248,001 shares of Common Stock
issued and outstanding held by approximately 425 holders of record. The Company
has never issued any shares of preferred stock. The Company has never declared
or paid dividends on any class of its equity securities.
Recent sales of Unregistered Securities.
During the year ended March 31, 1999, the Company sold and issued 2,115,501
shares of common stock for cash proceeds of $3,367,749 at a range of prices
between $1.50 and $2.00. Subsequent to March 31, 1999 107,667 shares were issued
for cash proceeds of $161,500.
These securities were offered and sold pursuant to exemptions from registration
under the Securities Act of 1933, as amended, including exemptions under Section
4(2) and Regulation D, promulgated under the Act. The purchasers of these
securities were accredited investors as that term is defined under Rule 501 of
Regulation D, as well as a limited number of sophisticated purchasers who had
access to information concerning the Company necessary to make an informed
investment decision concerning their purchase of the Company's securities.
Item 6. Management's Discussion and Analysis or Plan of Operation
The core business of the Company is developing, marketing and selling software
products for use in data distribution and secure e-mail applications. Business
is conducted through its subsidiaries, Arkona and Qui Vive.
Data Distribution
During the fiscal year ended March 31, 1999, and since that date, management has
directed much of its efforts and resources in the continued development of
Universal Update(TM). This product was beta tested in the quarter ending
December 31, 1998, and shipped as V1.5, to a number of evaluation sites in June
1999.
Through Arkona, the Company provides robust yet simple solutions for the
information exchange requirements of medium to large distributed enterprise
customers. Arkona products and services help customers overcome the significant
challenge of seamlessly accessing, transforming, and distributing business
intelligence between disparate enterprise systems, and also making that
information easily available to distributed employees, partners and customers.
Arkona has defined a complete EIX solution including computer software and
requisite professional services. This product/service combination enables
customers to easily define, locate, distribute, and share strategic information
assets, making them available whenever and wherever they are needed. The result
is a dramatic increase in the value of that client's information assets.
Arkona's solutions include:
o Universal Update(TM): The Universal Update information exchange manager
is the heart of Arkona's software solutions. It provides a centralized
platform to collect, transform, and distribute corporate information to
various points throughout the organization. Using Universal Update and
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add-on solution packages, Arkona's customers can quickly and simply
integrate disparate information sources including distributed sites,
mobile workers, and partners. Projects that would normally take months
to years to custom develop can be accomplished in a matter of hours and
days.
o Business Modeling: Arkona's professional services group provides the
training and consulting necessary to ensure complete client
satisfaction. This industry-recognized team of business architects
helps clients to identify and capture their business rules and clearly
articulated those rules as the foundation for successfully utilizing
Arkona's products. Additionally, the architects will identify
improvements that should be made to the client's current business
processes and to recommend Arkona products that could facilitate
improvement.
Currently, the universal Update platform is being optimized and repackaged for
specific industry solutions. In particular, two packaged solutions have been
identified and are under development. These are (1) a sales and marketing
distributed communication package; and (2) a package designed to assist in the
development of corporate portals. Both solutions leverage the Universal Update
platform and allow for cross development of key components. Simplify Data
Distribution
Universal Update provides a centralized data distribution hub for all of a
company's information sources. It easily handles the complex logistics of moving
information throughout the enterprise----tracking the information, managing
updates and modifications, and selecting the best delivery methods. Universal
Update is the information clearinghouse for the mobile and distributed
enterprise.
Optimize Information Exchange
Universal Update routes both inbound and outbound information through unique
application "adapters". Adapter technology gives Universal Update the power to
communicate with almost any corporate data source including relational and
free-form data, as well as enterprise applications and legacy systems. This
vendor neutral distribution strategy gives a business a distinct advantage over
complex, proprietary replication systems.
How the Customer Benefits
Universal Update technology:
o Extends a company's system investments
o Eliminates the complexity of advanced data distribution
o Lowers the cost of providing timely information updates
o Improves communication between distributed partners, customers, and
employees
o Ensures flexibility for future integration with new data sources and
applications
Professional Services
In February 1999, the company launched its professional services group, which
provides training and consulting in business process improvement, product
support and knowledge management.
Business Process Improvement: Through a wide-variety of Business Process
Improvement (BPI) offerings, the Company brings corporate management the ability
to assess all activities within their organization for possible improvements,
including automation of tasks.
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Product Consulting and Training: Professional Services uses proven structured
methods to ensure the Company's enterprise products consistently bring value to
clients. They receive the ability to identify their information requirements and
business rules that will govern the operation of Universal Update and other
products.
Knowledge Management: Professional Services helps companies incorporate
appropriate knowledge management best practices into their daily operations.
Secure Email
The digital revolution has evolved around a simple notion: that information
should be permanent. Unlike other media formats, digital information (e-mail)
can be stored forever, recovered at will, copied with ease, and shared anywhere.
Unfortunately, these attributes can also give digital information a more
sinister side. E-mail can just as easily be saved, copied, recovered, and
redistributed by anyone at any time with or without consent and frequently
without knowledge. Once an electronic email message has been sent, an author
loses all control of his or her words. According to industry analyst Esther
Dyson, "The challenge is not to keep everything secret, but to limit misuse of
such information."
The Company is developing a solution to these problems; the purpose of which is
to facilitate communication and give content control back to the author. The
project is presently in the implementation phase. When the first version of the
product is launched, we expect it to give e-mail users the chance to direct:
o How their words will be released,
o Who can see them,
o How they can be redistributed, and
o If they can be printed, copied, or saved.
The Company cannot assure that the safeguards of enhanced e-mail will not be
abused or circumvented by someone with the requisite degree of computer
sophistication and a malicious motive. However, subsequent versions of the
product will continue to raise the bar against potential abuse and compromise of
security that is so easily breached, often accidentally, with current systems.
The Company believes that the level of security embedded in the first
implementation will be sufficient to address the needs of approximately 80
percent of the market. Enhancements to increase security and further simplify
the product's usability will be added over time.
Key Features
The first version is expected to include the following key features:
Content Restrictions: Authors can decide whether their email messages can be
printed, copied, or saved by the recipient.
Forwarding Restrictions: Authors can prohibit recipients from forwarding their
email in whole or in part.
Lifespan Limits: Authors can configure messages to self-destruct after a
predefined period.
Persistence Limits: Authors can define the number of times any message can be
viewed.
Phase 1 Functionality
The key features listed above will include the following functionality:
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o Email is created using a browser-based email interface. Once an email
message has been authored, the user selects appropriate protection from a
simple GUI
o The Email message is secured. The product's mail server encapsulates and
encrypts the e-mail message. The mail server can reside within a
corporation or with an Internet service provider.
o Email recipient receives the protected message. First time recipients of a
protected message may require a one-time download experience to obtain the
company viewer in which the message is rendered.
o Access may be granted using a personal password. Before the recipient can
open a secured e-mail message, the sender may require that the recipient
first be authenticated. This authentication process will employ industry
standard authentication mechanisms.
o Content is controlled through sender-defined options. Even after access has
been granted, secured e-mail continues to be restricted by the
sender-defined options. Recipients cannot manipulate the original e-mail
message in any way that is forbidden by the sender.
Future Functionality
Subsequent versions of the software will include significant enhancements that
will be announced as the products are released.
The Company expects this product to be a critical solution, which it believes
may well become the legally required standard of care for a wide variety of
industries, professions, and situations. In fact, the Company believes secured
e-mail should be used in any situation requiring discretion. The product is
intended as an ideal solution for:
- - Legal communications
- - Governmental agencies
- - Contract negotiations
- - Medical Information
- - Sensitive human resource information
- - Communication of non-public corporate information
- - Any information which should not be public
Status of Development
The Company anticipates the email product will evolve from its initial
implementation, which, as described above, will represent a level of
functionality sufficient to cover most e-mail users' privacy concerns. However,
the Company intends to implement other designs that eliminate intermediary
services, further simplify the functionality and usability of the product and
simultaneously increase the level of security in the product.
The ultimate design goal is to meet the most stringent secure messaging
requirements up to and including the standards of the US Department of Defense.
Increasingly rigorous levels of security will be implemented en route to
achieving this final goal. Once the e-mail solution is successfully launched,
implementations beyond e-mail will be designed and marketed. Markets to be
targeted after the initial releases will include, but not necessarily be limited
to: voice mail, pagers, databases, Usenet newsgroups, and web publishing tools.
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The Company is currently seeking to raise additional capital to complete product
development and marketing of the first product version.
The Company has engaged engineers, marketers and an administration staff to
support the development of the product for delivery to the marketplace. However,
there can be no assurance that the Company will successfully complete the
project, and that the product will include all or substantially all of the
elements described above, or that any of the other risks described herein will
not adversely affect the outcome of the project. The following discussion and
analysis should be read in conjunction with the consolidated financial
statements and notes to financial statements appearing elsewhere in this report.
See Item 7-Financial Statements.
Results of Operations
Fiscal Year Ended March 31, 1999 Compared With Year Ended March 31, 1998
Revenues for the year ended March 31, 1999 were $75,167, compared to $144,271
for the previous year. Cost of revenues totaled $49,756 in the year ended March
31, 1999, compared to $2,110 in the previous year. Expenses for the year
included $1,202,763 in research and development expense compared to $278,750 in
the previous year. The Company expects that research and development
expenditures (including expenses associated with recruiting and hiring new
personnel) will continue to increase during the next 12 months as development of
existing and new products continues. The increased expenses in the year ended
March 31, 1999 reflect the addition of personnel and costs associated with the
development of Universal Update and the secure email product. The Company had
$50,520 in interest income during the year ended March 31, 1999, compared to
$20,803 in the previous year. The net loss for the year was $2,356,758 (or $0.11
per share) compared to a loss of $636,180 (or $0.06 per share) in the year ended
March 31, 1998. The increased loss was due primarily to the increase in research
and development and other expenses described above.
Revenues for the year ended March 31, 1999 included fees for consulting
services. Revenues for the year ended March 31, 1998 were primarily related to
an ongoing service contract with a single customer (OEC) and cost of sales
reflects the costs associated with delivery of these services. These services
include customer support and technical services on the Company's OnSite Field
Service software product.
Expenses incurred during the year reflect the additional cost of personnel,
engineering research and marketing and selling efforts, which management
believes will form the foundation of future increased revenue and profitability
growth as product roll-outs commence during the second half of calendar 1999.
The Company's primary focus during the year ended March 31, 1999 was to engineer
products that were ready for market. Universal Update V1.5 was launched in June
1999 while the alpha version of the secure e-mail product was also released in
June 1999. Marketing efforts have focussed on creating awareness of Universal
Update with the target customer and partner base. During the year and quarter
ended March 31, 1998, the Company provided support services for OEC pursuant to
a written agreement. The Company has entered into a license agreement with this
same customer under which the Company has agreed to pay a royalty to OEC on
revenues generated from the licensing or use of the OnSite Field Service
software product first developed by Arkona in 1997. The royalty will be an
amount equal to 5% of net revenues until OEC has recovered the amount paid to
Arkona to develop the product ($125,000), 2% of net revenues thereafter until
OEC has recovered twice the amount of its payments to Arkona and 1% of revenues
thereafter. No royalties have been paid by the Company to date under this
agreement.
During the year ended March 31, 1999, the Company completed a private placement
of its Common Stock, generating gross proceeds of $3,367,749 in cash. The
Company funded its operations during the period with the proceeds of this
offering.
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Capital spending of $181,337 was primarily for the purchase of computer and
related equipment used in the Company's operations. During the year ended March
31, 1999, the Company's operating activities used $2,337,500 of cash, compared
to $543,350 during the previous fiscal year.
Liquidity and Capital Resources
The Company has been unable to finance its operations from cash flows from
operating activities. Substantial funds and additional time will be required to
continue developing and commercializing the Company's products. Because
operating activities have not produced significant revenues to date and because
the Company will require significant capital to accomplish the objectives set
forth above, additional equity and/or debt funding will be required, although
such funding may not be available or may not be available on favorable terms.
The Company has not established a credit facility with any lending institution
and has no formal funding or financing arrangement, agreement or understanding
with any related or unrelated party to provide such funding in the future.
The consolidated financial statements of the Company have been prepared on the
assumption that the Company will continue as a going concern. The Company's
independent public accountants have issued their report dated June 10, 1999,
that includes an explanatory paragraph stating that the Company's recurring
losses and accumulated deficit, among other things, raise substantial doubt
about the Company's ability to continue as a going concern. The Company's
product line is limited and it has been necessary to rely upon financing from
the sale of its equity securities to sustain operations. Additional financing
will be required if the Company is to continue as a going concern. If such
additional funding cannot be obtained, the Company may be required to scale back
or discontinue its operations. Even if such additional financing is available to
the Company, there can be no assurance that it will be on terms favorable to the
Company. In any event, such financing will result in immediate and possibly
substantial dilution to existing shareholders.
At March 31, 1999, the Company had cash and cash equivalents of $2,215,620 as
compared to cash and cash equivalents of $568,612 as of March 31, 1998.
Management believes that the cash available to the Company from the recently
completed private placements and cash provided by operations will be sufficient
to meet the business requirements of the Company for the next 6 months. The
Company intends to continue to seek additional funding to meet anticipated
operational needs with the aim of having this in place by the end of August
1999. The Company does not expect to make any purchases of new plants or
significant equipment in the next twelve months. However, the Company continues
to evaluate new product opportunities and may, if necessary, seek to add
equipment and personnel to pursue such opportunities in the future. 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. There can be no assurance that additional funding will be
available as required or on terms that are favorable to the Company. The
issuance of shares of the Company's Common Stock or other securities convertible
into such securities will result in dilution to the shareholders of the Company
and such dilution may be material and substantial.
Year 2000 Issues
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result there is a
risk that certain Company computer programs or equipment that have
date-sensitive software or embedded technology may recognize a date using "00"
as the year 1900, rather than the year 2000. With the approaching change in the
century, this could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, collect payment or engage in similar
normal business activities or complete ongoing development projects.
The Company relies on computer hardware, software and related technology,
together with data, in the operation of its business. Such technology and data
are used in the Company's internal operations, such as billing and accounting.
The Company has investigated the technology and data used in its operations.
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There is, however, no assurance that third parties will successfully remediate
their own Year 2000 Issues over which the Company has no control or that factors
in such third party technology caused by Year 2000 problems will not adversely
affect the Company.
The Company believes that, assuming that the Company's customers, suppliers and
distributors successfully remediate their own Year 2000 Issues over which the
Company has no control, the Company will have no material business risk from
such issues.
The Company develops its software and designs its products to be Year 2000
compliant. Customers may require the Company to certify that its products are
Year 2000 compliant. If its products were shown to have been the cause of a Year
2000 problem in a customer's system or business, the Company could incur
liabilities for breaching the warranty, if any, that it may give its customers
concerning the status of its products under applicable Year 2000 standards.
Recent Accounting Pronouncements
In September 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires entities
presenting a complete set of financial statements to include details of
comprehensive income that arise in the reporting period. Comprehensive income
consists of net earnings or loss for the current period and other comprehensive
income, which consists of revenue, expenses, gains and losses that bypass the
statement of earnings and are reported directly in a separate component of
equity. Other comprehensive income includes, for example, foreign currency
items, minimum pension liability adjustments and unrealized gains and losses on
certain investment securities.
SFAS 130 requires that components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS is effective for fiscal years beginning after
December 15, 1997 and requires restatement of prior period financial statements
presented for comparative purposes. Adoption of SFAS 130 is not required for
reporting on interim periods prior to the close of a fiscal year beginning after
December 15, 1997. The Company adopted SFAS 130 commencing with the year ended
March 31, 1999.
During January 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-5 "Reporting on the Costs of Start-up
Activities" ("SOP 98-5). SOP 98-5 becomes effective for all fiscal years
beginning after December 15, 1998. The Company will adopt SOP 98-5 in its fiscal
year beginning April 1, 1999. Because the current amortization periods of the
product development costs and start-up costs averaging 12 months, the Company
does not expect the adoption of SOP 98-5 to have a material impact on the
Company's financial statements.
During January 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 becomes effective for all fiscal years beginning after December
15, 1998. The Company does not expect the adoption of SOP 98-1 to have a
material adverse effect on the Company's financial statements.
Item 7. Financial Statements
The Company's consolidated financial statements and associated notes are set
forth elsewhere in this report.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
As of June 29, 1999, the directors and executive officers of the Company are as
follows:
Name Age Position
- ------------------- --- -------------------------------------
Jerral Pulley 64 Chairman of the Board of Directors
Stephen Russell (1) 46 Director and Chief Financial Officer
John Blumenthal (1) 38 Director
Carl Steffens (1) 35 President and Chief Executive Officer
Joseph Ward 52 Director
John Zollinger 30 Director, Vice President Engineering,
Chief Technical Officer
Tim Kapp 30 Director and Vice President Marketing
- ------------------
(1) John Blumenthal acted as CEO until December 31, 1998 at which time Stephen
Russell assumed that role. Carl Steffens was appointed President and Chief
Executive Officer of Sundog on June 1, 1999.
Jerral Pulley, 64, Chairman of the Board of Directors. Mr. Pulley has been a
director of the Company since July 1, 1998. With expertise in marketing and
sales innovation, Mr. Pulley has held chief executive officer positions and
served as a senior executive for several nationally recognized companies,
including Procter & Gamble, PepsiCo, Squibb, Ryder System, Hallmark and Borden.
Mr. Pulley's success in increasing revenues via customized channel distribution
strategies parallels Sundog's focused partner strategy and plan. Currently a
partner in the consulting firm Client Synergy Group in Bountiful, Utah, Mr.
Pulley serves as a member on several client boards and assists with their
strategic planning, new product development, and marketing needs and services.
Stephen Russell, 46, Chief Financial Officer and Director. Mr. Russell has been
an officer and director of the Company since October 1997. He specializes in
business and financial strategies and change management, having over 20 years of
executive experience in such positions as general manager, chief executive
officer, finance director, and management consultant in a wide variety of
industries, including computer software/hardware sales and services, banking,
construction, manufacturing, engineering, brewing/distilling, and electronics.
With Digital Equipment Corporation (DEC), Mr. Russell provided financial
leadership to a $2 billion product division, and as chief executive officer of a
DEC $100 million subsidiary, he led a team that doubled revenue and
profitability in one year. Prior to joining DEC, Mr. Russell was a senior
manager with Price Waterhouse in Glasgow, London, and Seattle. Mr. Russell holds
a bachelor's degree in Physics and Mathematics from the University of Glasgow,
and is a Chartered Accountant. He is also a graduate of the International
Advanced Management Program from the International Institute for Management
Development (IMD) in Lausanne, Switzerland.
John Blumenthal, 38, Director. Mr. Blumenthal has been a director of the Company
since October 1997 and he previously served as its CEO. He is the CEO of Qui
Vive. Mr. Blumenthal has worked in the information technology industry for more
than 12 years. His career began in New York City's financial industry where he
worked for Deutsche Bank AG's operations and research group. He later joined CLT
Research Associates to direct the NYC-based financial research firm's
information technology development efforts. In 1992, he relocated to Salt Lake
City, Utah continuing in a software and systems engineering capacity for
Rasterops, and on storage and security consulting projects for a regional
telecommunications company and a large chip manufacturer in the western United
States. Mr. Blumenthal's activity in this region attracted the attention of
Openvision Technologies (acquired by Veritas Software in 1996), which employed
him to lead the technical and partner development of their Pacific Rim and South
American operations. In these projects Mr. Blumenthal was instrumental in
architecting and implementing security and storage technology for global 500
companies. His clients included some of the world's largest telecommunications,
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manufacturing and financial corporations. In 1997, Veritas selected Mr.
Blumenthal as systems engineer of the year for all international operations. Mr.
Blumenthal's former experience also includes contributions to the Internet
marketing strategy of the Openvision (Veritas) product line and as an advisor to
the U.S. House of Representatives Subcommittee on Technology concerning U.S.
encryption export laws and network security during hearings held in 1996 and
1997. Mr. Blumenthal holds a bachelor's degree from Columbia University
(Columbia College) in NYC.
Carl Steffens, 35, CEO. Carl Steffens is the acting President and CEO of Sundog
Technologies, joining the Company in June 1999. Mr. Steffens was most recently
President and CEO of InterWorks Computer Products, a privately held supplier of
modular electronic subsystems to telecommunications and data communications
equipment manufacturers such as Cisco Systems, Nortel/Bay Networks, Alcatel, and
3Com/US Robotics. Prior to InterWorks, he served in a variety of business
development and operational roles with Pacific Telesis/SBC Communications (NYSE:
SBC). This included managing the launch of Pacific Bell Digital TV, a digital
wireless-cable system with market coverage of over 3.5 million homes in Southern
California. He has also served as Director of Product Marketing for Xiox
Corporation (NASDAQ: XIOX), and in engineering, sales, and marketing capacities
at Integrated Device Technology (NASDAQ: IDTI). Mr. Steffen's education includes
a bachelor's degree in Electrical and Computer Engineering from the University
of California at Santa Barbara and an MBA from the Wharton School of the
University of Pennsylvania.
Joseph Ward, 52, Director. Mr. Ward has been a director of the Company since
August 1, 1998. He has marked several achievements during his career, including
the launch of new media ventures, the development of value-added publishing
products, and the successful implementation of direct marketing campaigns. Mr.
Ward currently serves as executive vice president of the Professional
Communications sector at Cadmus Communications Corporation. He is also the group
president of Cadmus Journal Services (CJS), the world's largest provider of
production and information management solutions to publishers of scientific,
technical, and medical (STM) journals; trade/professional and alumni
associations, and special interest commercial magazines. Prior to joining
Cadmus, Mr. Ward served as board member at Cadmus, president of direct response
for the book group of Bertlesmann AG, president and chief executive officer of
J. Ward Consulting, and president of the Meredith Book Group of Meredith Corp.
He published various book programs for Better Homes & Gardens, Ladies Home
Journal and other Meredith magazines, and founded Meredith Corp.'s new media
division. In addition, he was publisher and senior vice president of Time-Life,
Inc., where he handled all book operations and launched the company into the
CD-ROM and CD new media business.
John Zollinger, 30, Director and Vice President Engineering. Mr. Zollinger has
been a director and officer of the Company since October 1997. He has been
involved in nearly all aspects of the software engineering industry spanning
enterprise development from warehousing/processing, telecommunications, banking,
oil and gas, insurance, and commodity trading systems. In addition to his skills
in analyzing, designing and implementing mission critical software systems, Mr.
Zollinger has a proven ability to manage and bring together diverse groups of
engineers to achieve complex software project goals. While working with Moore
Business Communications Services, Mr. Zollinger led the engineering team that
designed and implemented a large-scale order fulfillment and management system
for the telecommunications industry. This system enabled AT&T to launch a new
successful business unit and has since been used by other companies such as
Sprint, MCI and GTE. As an independent engineering consultant for Filoli, Mr.
Zollinger helped guide the development of a highly distributed claims handling
system for Industrial Indemnity. Mr. Zollinger also assisted EOTT Energy
Partners in establishing standard practices for object-oriented analysis,
design, and implementation of an enterprise-wide oil and gas trading system.
Tim Kapp, 30, Vice President Marketing and Director. Mr. Kapp has been an
officer and director of the Company since October 1997. He began his career as a
financial analyst where he specialized in quantitative market analysis. However,
he soon found greater application for his analytical and technical skills within
high-tech marketing, focusing on the software industry and Internet-driven
technology. As senior market research analyst at Folio and product marketing
manager at Open Market, leaders in Internet commerce and electronic publishing,
Mr. Kapp provided analysis of technology trends, product forecasts, and
competitive strategies, and championed business and product plans. In addition
to these responsibilities, he served on committees for the Internet Engineering
Task Force (IETF), the SGML Open Consortium, and as a representative to the W3C
Internet Standards body. Mr. Kapp holds a bachelor's degree in Economics and
Econometric Modeling and an MBA from Brigham Young University.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by regulation of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms which
they file.
Based solely on its review of the copies of such forms furnished to the Company
during the fiscal year ended March 31, 1999, and representations made by certain
persons subject to this obligation that no such filings were required to be
made, the Company believes that all reports required to be filed by these
individuals and persons have been made in a timely manner.
Item 10. Executive Compensation
During the fiscal year ended March 31, 1999, the total compensation paid to
Stephen Russell, the Company's Chief Executive Officer, from December 31, 1998
through the Year Ended March 31, 1999 was $95,000. No other executive officer of
the Company received annual compensation of $100,000 or more during the fiscal
year ended March 31, 1999.
Mr. Steffens has a three-month contract with the Company to act as its CEO,
commencing June 1, 1999, under which he is paid $10,000 per month. On the
successful conclusion of this contract he may be awarded 250,000 options to
purchase stock in the Company at a price of $2.00 per share.
Mr. Pulley, the Company's Chairman, has a consulting contract pursuant to which
he has agreed to consult with the Company for 48 days during calendar year 1999.
He is paid $50,000 per annum in quarterly installments for his services. He was
paid $25,000 during the year ended March 31, 1999. In addition, Mr. Pulley and
Mr. Ward are each paid $1,000 fees for each Board meeting attended.
Mr. Pulley was awarded stock options for the purchase of 60,000 shares on July
1, 1998 (vesting March 31, 1999) and 110,000 shares on March 1, 1999 (vesting on
March 1, 2000). Mr. Ward was awarded stock options of 60,000 shares on August 1,
1998 (vesting August 1, 1999). All options granted these two directors are
exercisable at a price of $0.50 per share.
The Company has established two stock option plans to provide incentives to its
directors, officers, employees and advisors. Through May 31, 1999 1,445,000
non-qualified stock options had been granted to 19 individuals. These options
vest over two to three years, and, when fully vested, allow the holders to
purchase common stock under these two plans at $0.50 and $1.50 per share.
Qui Vive has its own stock option plan and has granted options to purchase
344,500 shares of Qui Vive common stock to 14 individuals with exercise prices
ranging from $0.10 to $1.00 per share. These options vest over a three-year
period. Certain of the holders of these Qui Vive options are also officers or
directors of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management
To the Company's knowledge, the following table sets forth information regarding
ownership of the Company's outstanding Common Stock on June 10, 1999 by (i)
beneficial owners of more than 5% of the outstanding shares of Common Stock;
(ii) each director and each executive officer; and (iii) all directors and
executive officers as a group. Except as otherwise indicated below and subject
to applicable community property laws, each owner has sole voting and sole
investment powers with respect to the stock listed. Unless otherwise indicated,
the address of each person identified below is the Company's principal office.
As of June 10, 1999, there were 22,248,001 shares of Common Stock issued and
outstanding.
Page 19 of 22
<PAGE>
<TABLE>
<CAPTION>
Name and Address Shares of Common Stock
of Beneficial Owners Beneficially Owned Percentage of Class
- -------------------------------------------- ------------------ -------------------
<S> <C> <C>
Jeffrey Barlow, 5% Beneficial Owner 1,540,000 6.82%
John Blumenthal, Director 2,940,000 13.03%
Timothy Kapp, Director 980,000 4.34%
Stephen Russell, Executive Officer, Director 1,540,000 6.82%
David Valenti, 5% Beneficial Owner 1,540,000 6.82%
838 Edgehill Road
Salt Lake City, Utah 84103
John Zollinger, Director 2,940,000 13.03%
All executive officers and
directors as a group (6 persons) 8,400,000 37%
</TABLE>
There are no arrangements known to the Company, the operation of which may, at a
subsequent date, result in a change of ownership or control of the Company.
Item 12. Certain Relationships and Related Transactions
John Blumenthal, a director and the former CEO of the Company and the holder of
approximately 13% of its issued and outstanding common stock, is also the
President of Qui Vive, a wholly owned subsidiary of the Company. Qui Vive has
granted options to its development team, including Mr. Blumenthal. If all
options currently outstanding and held by the development team were fully vested
and exercised, the developers would own approximately 36% of the issued and
outstanding shares of Qui Vive and the Company's ownership would be reduced to
approximately 64%. Mr. Blumenthal would own 70,000 shares or approximately 8% of
the issued and outstanding shares of Qui Vive (assuming all currently granted
options were exercised). His ownership interest in both the Company and its
subsidiary could create an inherent conflict of interest to the extent the
objectives and interests of the Company were to differ from those of the
minority owners of Qui Vive (including Mr. Blumenthal).
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits of the Company are included herein:
Exhibit No. Document Description
- ----------- --------------------
2.1 Agreement and Plan of Merger dated October 11, 1997 (incorporated by
reference to Current Report on Form 8-K, filed October 28, 1997)
3.1 Certificate of Incorporation (Incorporated by reference to such
exhibit as filed with the Company's registration statement on Form
10-SB, File No. 0-24372)
3.2 Amendment to Certificate of Incorporation (incorporated by reference
to Definitive Information Statement on Form 14C, May 6, 1998)
3.3 Bylaws (Incorporated by reference to such exhibit as filed with the
Company's registration statement on Form 10-SB, File No. 0-24372)
4.1 Specimen common stock certificate (Incorporated by reference to such
exhibit as filed with the Company's registration statement on Form
10-SB, File No. 0-24372)
Page 20 of 22
<PAGE>
4.2 Form of Warrant A to Purchase Common Stock (incorporated by reference
to the Company's quarterly report on Form 10-QSB for the quarter ended
March 31, 1998)
4.3 Form of Warrant B to Purchase Common Stock (incorporated by reference
to the Company's quarterly report on Form 10-QSB for the quarter ended
March 31, 1998)
10.1 1992 Stock Option Plan (Incorporated by reference to such exhibit as
filed with the Company's registration statement on Form 10-SB, File
No. 0-24372)
10.2 Stock Option Agreement with Jehu Hand (Incorporated by reference to
such exhibit as filed with the Company's registration statement on
Form 10-SB, File No. 0-24372)
10.3 Stock Option Agreement with Eric Anderson (Incorporated by reference
to such exhibit as filed with the Company's registration statement on
Form 10-SB, File No. 0-24372)
10.4 Demand Convertible Promissory Note from Jehu Hand (Incorporated by
reference to such exhibit as filed with the Company's annual report
for the year ended March 31, 1996)
10.5 Agreement with OEC (incorporated by reference to quarterly report on
Form 10-QSB for the quarter ended December 31, 1997, as amended)
10.6 Service Agreement with OEC (incorporated by reference to quarterly
report on Form 10-QSB for the quarter ended December 31, 1997, as
amended)
10.7 Form of Employee Confidentiality, Work Product and Non-competition
Agreement (incorporated by reference to quarterly report on Form
10-QSB for the quarter ended December 31, 1997, as amended)
10.8 1999 Stock Option Plan
10.9 Qui Vive Stock Option Plan
Page 21 of 22
<PAGE>
SUNDOG TECHNOLOGIES, INC.
formerly known as THE THORSDEN GROUP, LTD.
Including the accounts of its wholly-owned subsidiaries
ARKONA, INC. and QUI VIVE, INC.
[A DEVELOPMENT STAGE COMPANY]
FINANCIAL STATEMENTS
March 31, 1999
[WITH INDEPENDENT AUDITORS' REPORT]
<PAGE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A DEVELOPMENT STAGE COMPANY]
TABLE OF CONTENTS
Page
----
Independent Auditors' Report. . . . . . . . . . . . . . . . . 1
Balance Sheet - March 31, 1999. . . . . . . . . . . . . . . . 2
Statements of Operations for the years ended March
31, 1999, and 1998, and for the Period June 11, 1992
(inception) through March 31, 1999. . . . . . . . . . . . . . 3
Statement of Stockholders' Equity for the Period
June 11, 1992(inception) through March 31, 1999 . . . . . . . 4
Statements of Cash Flows for the years ended March
31, 1999, and 1998, and for the Period June 11, 1992
(inception) through March 31, 1999 . . . . . . . . . . . . . .5
Notes to Financial Statements . . . . . . . . . . . . . . 6-11
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Sundog Technologies, Inc.[a development stage company]
We have audited the accompanying balance sheet of Sundog Technologies, Inc., [a
development stage company] formerly known as The Thorsden Group, Ltd., including
the accounts of its wholly-owned subsidiaries, Arkona, Inc. and Qui Vive, Inc.
as of March 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the years ended March 31, 1999 and 1998, and for the
period from June 11, 1992 [inception] through March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Arkona, LLC, a limited liability company
and predecessor of Arkona, Inc., for the period from inception through December
31, 1996, were audited by other auditors whose report dated September 30, 1997,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sundog Technologies, Inc., [a
development stage company] including the accounts of its wholly-owned
subsidiaries as of March 31, 1999, and the results of operations and cash flows
for the periods ended March 31, 1999 and 1998, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has experienced losses from operations since
its inception and has not yet begun generating significant revenue which raises
substantial doubt about the ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 10. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
-------------------------------
MANTYLA McREYNOLDS
Salt Lake City, Utah
June 10, 1999
1
<PAGE>
<TABLE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A Development Stage Company]
Balance Sheet
March 31, 1999
<CAPTION>
ASSETS
Current Assets
<S> <C>
Cash & cash equivalents - Note 1 $ 2,215,620
Marketable securities available for sale - Note 8 3,188
Accounts receivable - Note 2 51,200
Prepaid expenses 25,550
---------------------
Total Current Assets 2,295,558
Property and Equipment - Note 6
Property and equipment 380,406
Less: Accumulated depreciation (52,146)
---------------------
Net Property and Equipment 328,260
Other Assets
Deposits - Note 9 105,605
Intangible assets - Note 4 59,983
---------------------
Total Other Assets 165,588
TOTAL ASSETS $ 2,789,406
=====================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 140,748
Accrued liabilities 75,822
Current portion of capital leases - Note 5 37,741
---------------------
Total Current Liabilities 254,311
Long-Term Liabilities
Capital leases payable - Note 5 30,267
---------------------
Total Long-Term Liabilities 30,267
---------------------
Total Liabilities 284,578
Stockholders' Equity - Notes 7, 8, 11 & 13
Preferred stock -- 10,000,000 shares authorized, $.001 par
value; no shares issued and outstanding
Capital stock -- 50,000,000 shares authorized, $.001 par
value; 22,530,101 shares issued and outstanding 22,530
Additional paid-in capital 5,557,526
Accumulated unrealized losses on investments (13,754)
Deficit accumulated during the development stage (3,061,474)
---------------------
Total Stockholders' Equity 2,504,828
---------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,789,406
=====================
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
<TABLE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A Development Stage Company]
Statements of Operations and Comprehensive Income
For the Years Ended March 31, 1999 and 1998
and for the Period June 11, 1992(inception) through March 31, 1999
<CAPTION>
Period from
Year Year June 11,1992
ended ended Through
3/31/99 3/31/98 3/31/99
------------ ------------ ------------
<S> <C> <C> <C>
Revenues - Note 1 $ 75,167 $ 144,271 $ 219,438
Operating Expenses
Cost of sales 49,756 2,110 51,866
Research and development 1,202,763 278,750 1,488,123
Marketing, general and
administrative 1,219,266 517,084 1,798,317
------------ ------------ ------------
Total Operating Expenses 2,471,785 797,944 3,338,306
------------ ------------ ------------
Net Loss from Operations (2,396,618) (653,673) (3,118,868)
Other Income/(Expense)
Interest income $ 50,520 $ 20,803 $ 71,364
Interest expense (6,684) (3,200) (9,884)
Other income 270 -0- 270
Other expense (178) (110) (288)
Loss on sale of securities available
for sale (4,068) -0- (4,068)
------------ ------------ ------------
Total Other Income/(Expense) 39,860 17,493 57,394
------------ ------------ ------------
Net Loss Before Income Taxes (2,356,758) (636,180) (3,061,474)
Provision for income taxes -0- -0- -0-
Net Loss $ (2,356,758) $ (636,180) $ (3,061,474)
------------ ------------ ------------
Other comprehensive income:
Unrealized holding gains(loss) 145,256 (159,010) (13,754)
------------ ------------ ------------
Comprehensive Income (Loss) (2,211,502) (795,190) (3,075,228)
============ ============ ============
Loss per share - Note 1 $ (.11) $ (.06) $ (.62)
============ ============ ============
Weighted average number shares 20,922,574 10,212,250 4,863,279
============ ============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
<TABLE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A Development Stage Company]
Statements of Stockholders' Equity
For the Period June 11, 1992(inception) through March 31, 1999
<CAPTION>
Accum.
Additnl. Unrealized Accum. Total
Shares Common Paid-In Loss on Loss Devel Stockholders'
Issued Stock Capital Investments Stage Equity
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 11, 1992 -0- $ -0- $ -0- $ -0- -0- $ -0-
Issued common stock for cash
through March 31, 1993 400,000 400 100 500
Net loss for the year ended
March 31, 1993 (269) (269)
Balance, March 31, 1993 400,000 $ 400 $ 100 $ -0- (269) $ 231
Capital contribution 500 500
Issued shares in Private 24,500 25 221 246
Placement for cash
Net loss for the year ended
March 31, 1994 (221) (221)
Balance, March 31, 1994 424,500 $ 425 $ 821 $ -0- (490) $ 756
Net loss for the year ended
March 31, 1995 (2,262) (2,262)
Balance, March 31, 1995 424,500 $ 425 $ 821 $ -0- (2,752) $ (1,506)
Net loss for the year ended
March 31, 1996 (1,078) (1,078)
Balance, March 31, 1996 424,500 $ 425 $ 821 $ -0- (3,830) $ (2,584)
Net loss for the year ended
March 31, 1997 (64,706) (64,706)
Balance, March 31, 1997 424,500 $ 425 $ 821 $ -0- (68,536) $ (67,290)
Issued stock for assets as part
of Arkona merger 15,575,500 15,575 15,575
Issued shares in Private
Placement for cash and
securities 4,000,000 4,000 1,926,486 1,930,486
Issued shares in Private
Placement for cash 132,500 133 264,867 265,000
Adjustment for unrealized loss
on investments (159,010) (159,010)
Net loss for the year ended
March 31, 1998 (636,180) (636,180)
Balance, March 31, 1998 20,132,500 $ 20,133 $2,192,174 $(159,010) (704,716) $1,348,581
Issued shares in Private
Placement for cash 2,397,601 2,397 3,365,352 3,367,749
Adjustment to unrealized loss
on investments 145,256 145,256
Net loss for the year ended
March 31, 1999 (2,356,758) (2,356,758)
Balance, March 31, 1999 22,530,101 $ 22,530 $5,557,526 $ (13,754) (3,061,474) $2,504,828
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
<TABLE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A Development Stage Company]
Statements of Cash Flows
For the Years Ended March 31, 1999 and 1998
and for the Period From June 11, 1992(inception) through March 31, 1999
<CAPTION>
Period
from
Year Year 6/11/92
ended ended to
3/31/99 3/31/98 3/31/99
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows Provided by/(Used for) Operating
Activities
Net Loss $(2,356,758) $ (636,180) $(3,061,474)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 45,758 6,418 52,176
Increase in accounts receivable (42,887) (8,313) (51,200)
Increase in accounts payable 47,460 84,517 140,748
Increase in other current liabilities 4,894 29,791 75,822
(Decrease)/increase in deferred income (10,417) (19,583) -0-
Increase in prepaid expenses (25,550) -- (25,550)
----------- ----------- -----------
Net Cash Used for Operating Activities (2,337,500) (543,350) (2,869,478)
Cash Flows Provided by/(Used for) Investing
Activities
Decrease in Lease deposits 1,641 (107,246) (105,605)
Sale of Marketable Securities 823,668 -- 823,668
Patent costs (38,249) (21,734) (59,983)
Capital expenditures (181,337) (198,095) (380,436)
----------- ----------- -----------
Net Cash Used for Investing Activities 605,723 (327,075) 277,644
Cash Flows Provided by Financing Activities
Increase in capital lease obligations 11,036 56,972 68,008
Proceeds from Private Placement of shares 3,367,749 1,370,451 4,738,446
Cash contribution -- -- 1,000
----------- ----------- -----------
Net Cash Provided by Financing Activities 3,378,785 1,427,423 4,807,454
----------- ----------- -----------
Net Increase/(Decrease) in Cash 1,647,008 556,998 2,215,620
Beginning Cash Balance 568,612 11,614 -0-
----------- ----------- -----------
Ending Cash Balance $ 2,215,620 568,612 $ 2,215,620
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ 6,684 3,200 $ 9,884
Cash paid during the year for income taxes $ -0- -0- $ -0-
Noncash Financing Activities:
Issued stock for marketable securities $ -0- 840,610 $ 840,610
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SUNDOG TECHNOLOGIES, INC.
Including the accounts of its wholly-owned subsidiaries
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
Note 1 Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
(a) Organization
Sundog Technologies, Inc. [Company] originally incorporated
under the laws of the State of Delaware in 1992 as The
Thorsden Group, Ltd., for the purpose of seeking and acquiring
business opportunities. On March 25, 1999 the Company changed
its name to Sundog Technologies, Inc., effective June 10,
1999. In October 1997, the Company merged with Arkona, Inc., a
Utah corporation (formerly Arkona, LLC), in a reverse
triangular merger, accounted for as a purchase. Since the
merger, the Company has continued the business of Arkona,
Inc.; developing, marketing, and selling software products
which incrementally and automatically update database content,
reference documents, and enterprise applications required by
organizations with distributed business centers, field
professionals, telecommuters, partners, and customers. The
Company also has expanded to provide Business Process
Improvement (BPI) and related Knowledge Management services
through its Professional Services Group. BPI helps managers
identify how their organizations must change to meet the
challenges of tomorrow and provides a road map for
implementing that change. In June of 1998, the Company formed
a new subsidiary company, Qui Vive, Inc., to expand its
software products developing, marketing, and selling.
Principal operating activities have not yet commenced and the
Company is considered to be in the development stage. The
ultimate success of the Company will be dependent on its
ability to adequately fund, develop and market its products.
Results of operations have been combined for all periods
presented in the accompanying financial statements.
Intercompany transactions have been eliminated in
consolidation.
(b) Income Taxes
Effective April 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 [the
Statement], "Accounting for Income Taxes." The Statement
requires an asset and liability approach for financial
accounting and reporting for income taxes, and the recognition
of deferred tax assets and liabilities for the temporary
differences between the financial reporting bases and tax
bases of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized
or settled. For the years ending March 31, 1999 and 1998 the
Company had no significant income tax expense or liability as
a result of net operating losses incurred. Deferred tax
benefits, and the related deferred tax assets, arising from
the recognition of the tax consequences of net operating
losses have not been recorded or recognized by the Company.
Currently, there is no reasonable assurance that the Company
will be able to take advantage of accumulated loss carry
forwards in the future.
(c) Net Loss Per Common Share
In accordance with Financial Accounting Standards No. 128,
"Earnings Per Share," basic loss per common share is computed
using the weighted average number of common shares
outstanding. Diluted earnings per share is computed using
weighted average number of common shares plus dilutive common
share equivalents outstanding during the period using the
treasury stock method. Common stock equivalents were not
included in the computation of loss per share for the periods
presented because their inclusion is antidilutive.
(d) Cash & Cash Equivalents
For purposes of the statements of cash flows, the Company
considers cash on deposit in the bank and other unrestricted
investments with original maturities of three months or less
at the time of purchase to be cash equivalents.
6
<PAGE>
SUNDOG TECHNOLOGIES, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY, ARKONA, INC.
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
[continued]
Note 1
Organization and Summary of Significant Accounting
--------------------------------------------------------------
Policies[continued]
-------------------
(e) Use of Estimates in Preparation of Financial Statements
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; disclosure of contingent
assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
(f) Revenue recognition
The Company recognizes revenue upon delivery of the software
products to the customer and by providing Business Process
Improvement and related Knowledge Management services through
its Professional Services Group. Any additional obligations
related to the software, such as service agreements, are
negotiated under a separate contract; revenue on these items
is recognized over the period of service as is appropriate.
Note 2 Concentration
-------------
The Company has entered into contracts with two customers to
develop software applications using the Company's proprietary
systems.
As an additional provision of one contract, the Company agreed
to pay a customer royalties of two percent of net revenues up
to the contract amount ($125,000) and one percent of net
revenues thereafter, from subsequent sales or licensing to
third parties of the product developed for such customer.
Accounts receivable consists entirely of amounts due from one
customer. No reserve has been provided for uncollectible
amounts. The customer paid the balance due in April, 1999.
The Company maintains cash balances in a financial institution
located in the Salt Lake City, Utah. Accounts at this
institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. The Company had cash of $190,327
in excess of the FDIC insured limit at March 31, 1999.
Note 3 Income Taxes
------------
The Company has available net operating loss (NOL) carry
forwards of approximately $2,356,758, the benefits of which
will expire in various amounts through 2014. NOLs will only be
usable to the extent that the Company is successful in
obtaining future profitability, or incurring profitable
transactions.
Note 4 Intangible Assets
-----------------
The Company has applied for patent protection for its
proprietary software and has expended $59,983 for these
rights. The patents are still in the process of being granted.
The Company will begin to amortize these assets upon
completion of patent registration or at the point when the
products begin to generate revenue.
7
<PAGE>
SUNDOG TECHNOLOGIES, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY, ARKONA, INC.
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
[continued]
Note 5 Leases
------
The Company has various capital lease agreements
collateralized with property and equipment as of March 31,
1999. These leases bear interest at 12% and have remaining
terms of one to five years. Future minimum lease payments are
as follows:
Minimum
Year Ending Lease Principal Interest
Payments
---------------------- ------------------ -----------------
3/31/2000 $ 45,850 $ 37,741 $ 8,109
3/31/2001 18,344 16,312 2,032
3/31/2002 7,353 5,927 1,425
3/31/2003 6,351 5,686 665
3/31/2004 2,422 2,342 80
---------------------- ------------------ -----------------
Total $ 80,320 $ 68,008 $ 12,311
====================== ================== =================
The Company has operating leases for its office facilities
which expire at various times through March 2002. Future
minimum lease payments for the office facilities amount to
$115,481, $50,228, and $47,621 for fiscal years ending March
31, 2000, 2001, and 2002, respectively. Rent expense during
the current year was $44,980 for 1999 and $11,643 for 1998.
Note 6 Property and Equipment
----------------------
Property and equipment are summarized by major classifications
as follows:
Accumulated
Acquisition Amortization/ Net Book
Cost Depreciation Value
--------------- ------------------ -----------------
Office Furniture $ 24,259 $ 3,566 $ 20,693
Computer Software 58,533 11,273 47,260
Computer Equipment 297,614 37,307 260,307
--------------- ------------------ -----------------
Total $ 380,406 $ 52,146 $ 328,260
=============== ================== =================
The Company has acquired approximately $115,366 in computer
equipment financed through capital lease. Depreciation
expense, including the amortization of assets acquired by
capital lease, amounted to $45,758 and $6,418 during the years
ended March 31, 1999 and 1998, respectively. The Company
computes depreciation using the straight-line method over five
years.
8
<PAGE>
SUNDOG TECHNOLOGIES, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY, ARKONA, INC.
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
[continued]
Note 7 Merger with Arkona, Inc.
------------------------
Effective October 7, 1997, all of the Arkona, Inc. common
stock issued and outstanding was converted into and exchanged
for 2,972,200 shares of Sundog Technologies, Inc., common
stock. At that time all converted Arkona stock was canceled.
Additional shares were issued in the amount of 11,027,800 to
shareholders of Arkona and 1,575,500 shares were issued to
shareholders of Sundog. The financial statements in this
report have been restated, where necessary, for the effects of
this merger.
Note 8 Private Placement Memorandum/Marketable Securities
--------------------------------------------------
Closing of the merger referred to in Note 7 was subject to an
offering of 4,000,000 shares of common stock through a private
placement memorandum. The shares are exempt from registration
under the Securities Act of 1933, and applicable state
securities laws, pursuant to exemptions contained therein.
Accordingly, the shares were offered by the Company to a
limited number of persons. The 4,000,000 shares ($.001 par)
were issued for cash ($1,159,390 less $69,514 in costs) and
securities (valued at $840,610) to equal $2,000,000 or $.50
per share, prior to settlement fees. The securities delivered
in the placement consisted of 3,000 shares of Eurogas
Corporation (valued at $7.00 per share) and 204,200 shares of
InterjetNet Corporation (valued at $5.00 per share). A
provision for accepting the securities allowed for the Company
to receive, upon sale of said securities, at least $.50 per
share in cash proceeds for the Thorsden stock issued under the
offering. Any shortfall in the value of the securities when
sold would result in a reduction of the number of shares
issued through the offering. Rather than reducing the number
of shares issued, the subscriber made a verbal commitment to
contribute additional shares of InterjetNet to ensure that the
Company is able to realize cash equal to the original market
value. All of the InterjetNet shares were sold in June of 1998
for approximately $820,000. The net unrealized loss on
investments was reduced during the year by approximately
$145,000 due to the market value increase and subsequent sale
of the InterjetNet stock. The year end unrealized loss on
investments of $13,754 was related to the Eurogas securities.
The unrealized loss is based on the original cost of the
securities verses current market value. As of March 31, 1999,
the Company had 3,000 shares remaining. These securities are
available for sale and have been adjusted to fair market value
as of March, 31, 1999.
An additional Private Placement Memorandum (dated March 4,
1998) has been circulated. This offering originally involved
the issuance of up to 2,000,000 units, consisting of 2,000,000
shares of common stock of the Company and 2,000,000 common
stock purchase warrants. In July of 1998 the memorandum was
amended to change the common stock price from $2/share to
$1.50/share, which increased the total offering to 2,666,666
shares. The warrants enable the purchasers to buy an
additional 1,333,333 shares of common stock at prices ranging
from $2 to $3 per share over a two year period. Proceeds from
this offering, of approximately $3.83 million through June 10,
1999, have been used primarily to fund the development and
marketing of the Company's two divisions.
9
<PAGE>
SUNDOG TECHNOLOGIES, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY, ARKONA, INC.
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
[continued]
Note 9 Deposits
--------
In conjunction with its lease obligations, the Company has
placed security deposits with its landlord or with banks. A
deposit of $3,413 was paid at the inception of the office
lease to the landlord. The remaining amount is composed of two
certificates of deposit placed in financial institutions which
are collateral for the equipment and office leases.
Contract Requiring Deposit Rate Amount Maturity
- -------------------------- ---- ------ --------
Equipment Lease 6.160% 70,259 November 4, 1999
Office Lease 4.000% 35,346 June 23, 1999
Total 105,605
=========
Note 10 Going Concern
-------------
The Company has incurred losses from inception to March 31,
1999 amounting to $2,356,758. Financing the Company's
activities to date has primarily been the result of private
placement offerings. The Company's ability to achieve a level
of profitable operations and/or additional financing may
impact the Company's ability to continue as it is presently
organized. Management anticipates reaching a level of
profitable operations. To the extent that cash flow
requirements are not met by operations, management intends to
raise additional capital through private placement offerings.
Note 11 Stock Option Plans
------------------
The Company has established two Stock Option Plans (1992 and
1999) to provide incentives to its directors, officers,
employees and advisors, to do business with the Company, and
to enable the Company to obtain and retain the services of the
type of directors, officers, advisors and employees considered
essential for long-range success. Granting of options is at
the discretion of the Stock Option Committee of the Board. The
Committee may determine the terms and conditions of options,
consistent with the Plan. Each plan currently has authorized
2,000,000 shares.
Through May 31, 1999, the 1992 Plan has granted 1,095,000
options to 17 individuals with a stock purchase price of $.50
per share and the 1999 Plan has granted 350,000 stock options
to four individuals with a purchase price of $1.50 per share.
These options vest over two to three years, and, when fully
vested, allow the holders to purchase common shares at $.50
and $1.50 per share. In the 1992 plan, 150,000 options have
vested; through the date of this report, no options have been
exercised.
Qui Vive has its own stock option plan which makes 45% (or
450,000 options for 450,000 shares)of Qui Vive, Inc.,
available to key individuals over a three year vesting period.
Through May 1999, 344,500 options have been granted to 14
individuals with exercise prices ranging from $.10 to $1.00
per share. Of these options, approximately 109,800 vested.
10
<PAGE>
SUNDOG TECHNOLOGIES, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY, ARKONA, INC.
[A Development Stage Company]
Notes to Financial Statements
March 31, 1999
[continued]
Note 12 401K Profit Sharing Plan
------------------------
On January 15, 1998, the Directors adopted an employee benefit
program consisting of a 401K Profit Sharing Plan. The 401K
Plan provides for employees to contribute on a pretax basis,
employer matching, and a broad portfolio of investment options
within the plan to be selected by the employee. Employer
matching contributions are made at the sole discretion of
management. Profit sharing expense recognized under this plan
was $18,977 and $4,138 for the years ended March 31, 1999 and
1998, respectively.
Note 13 Subsequent Events
-----------------
Subsequent to March 31, 1999 and through June 10, 1999, the
Company has received approximately $161,500 for 107,667 shares
from additional private placement subscriptions and $33,334
through the exercise of stock warrants to purchase 16,500
shares.
11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SUNDOG TECHNOLOGIES INC.
By: /s/ Stephen Russell
---------------------------
Its: Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities on the dates
indicated.
By: /s/ John Blumenthal Date: June 29, 1999
---------------------------
John Blumenthal, Director
By: /s/ Stephen Russell Date: June 29, 1999
------------------------------------------
Stephen Russell, Chief Financial Officer
Vice President Finance and Director
(Principal Accounting Officer)
By: /s/ John Zollinger Date: June 29, 1999
--------------------------
John Zollinger, Director
By: /s/ Tim Kapp Date: June 29, 1999
--------------------
Tim Kapp, Director
By: /s/ Jerral Pulley Date: June 29, 1999
--------------------------------------
Jerral Pulley, Chairman and Director
By: /s/ Joseph Ward Date: June 29, 1999
-----------------------
Joseph Ward, Director
Page 22 of 22
The Thorsden Group, Ltd.
a Delaware corporation
Stock Option and Incentive Plan
SECTION 1
GENERAL
-------
1.1 Purpose. This Stock Option and Incentive Plan (the "Plan") has
been established by The Thorsden Group, Ltd. ("Company") to:
- attract and retain persons eligible to participate in the
Plan;
- motivate participants in the Plan by means of appropriate
incentives to achieve long-range goals;
- provide incentive compensation opportunities that are
competitive with those of other similar companies;
- closely associate the interests of the participants of the
Plan with those of the Company and its other shareholders by
reinforcing the relationship between participants' rewards and
shareholder gains through equity ownership in the Company and
increased shareholder value.
1.2 Eligibility for Participation. Participants in the Plan shall be
selected by the Committee, and awards under the Plan may be granted by the
Committee, to directors, officers and employees of the Company or any Subsidiary
of the Company, and to other individuals such as consultants and non-employee
agents of the Company or a Subsidiary, whom the Committee believes have made or
will make an essential contribution to the Company or a Subsidiary. Incentive
Stock Options may only be granted to executive officers and other employees of
the Company or a majority-owned Subsidiary who occupy responsible managerial or
professional positions, who have the capability of making a substantial
contribution to the success of the Company or Subsidiary, and who agree, in
writing, to remain in the employ of, and to render services to, the Company or
Subsidiary for a period of at least one (1) year from the date of the grant of
the Award. The Committee has the authority to select particular employees within
the eligible group to receive Awards under the Plan. In making this selection
and in determining the persons to whom Awards under the Plan shall be granted
and the form and amount of awards under the Plan, the Committee shall consider
any factors deemed relevant in connection with accomplishing the purposes of the
Plan, including the duties of the respective persons and the value of their
present and potential services and contributions to the success, profitability
and sound growth of the Company. A person to whom an Award has been granted is
sometimes referred to herein as an "Participant." In the discretion of the
Committee, a Participant may be granted any Award permitted by the Plan and more
than one Award may be granted to a Participant.
1
<PAGE>
1.3 Participating Companies. For purposes of the Plan, the term
"Subsidiary" means any subsidiary of the Company, and any business venture
designated by the Committee in which the Company has a significant interest, as
determined in the discretion of the Committee.
1.4 Administration of the Plan. The operation and administration of
the Plan, including the Awards made under the Plan, will be subject to the
provisions of Section 4 (relating to operation and administration). Capitalized
terms in the Plan are defined as set forth in the Plan, including the definition
provisions of Section 7 of the Plan.
SECTION 2
---------
OPTIONS AND SARS
----------------
2.1 Definitions. For purposes of this Plan:
2.1.1 The grant of an "Option" entitles the Participant to
purchase shares of the Company's common stock ("Stock") at an Exercise
Price established by the Committee. Options granted under this Section
2 may be either Incentive Stock Options ("ISOs"), the tax consequences
of which are intended to be governed by Section 422 of the Internal
Revenue Code, as amended, (the "Code") or Non-Qualified Stock Options
("NQOs"), as determined in the discretion of the Committee.
2.1.2 An SAR entitles the Participant to receive, in cash or
Stock (as determined in accordance with subsection 2.5), value equal to
(or otherwise based on) the excess of: (a) the Fair Market Value of a
specified number of shares of Stock at the time of exercise; over (b)
an Exercise Price established by the Committee.
2.2 Exercise Price. The Exercise Price of each Option and SAR granted
under this Plan will be established by the Committee or will be determined by a
method established by the Committee at the time the Option or SAR is granted;
except that the Exercise Price shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant, unless the Committee shall
determine, in its sole discretion, that there are circumstances which reasonably
justify the establishment of a lower Exercise Price.
2.3 Term and Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
2.4 Manner of Payment. The payment of the Exercise Price of an Option
granted under this Plan will be subject to the following:
2
<PAGE>
2.4.1 Subject to the following provisions of this subsection
2.4, the full Exercise Price for shares of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise
(except that, in the case of an exercise arrangement approved by the
Committee and described in paragraph 2.4.3, payment may be made as soon
as practicable after the exercise).
2.4.2 The Exercise Price shall be payable in cash or by
tendering, by either actual delivery of shares or by attestation,
shares of Stock acceptable to the Committee, and valued at Fair Market
Value as of the day of exercise, or in any combination thereof, as
determined by the Committee.
2.4.3 The Committee may permit a Participant to elect to pay
the Exercise Price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Stock (or a sufficient
portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such
exercise.
2.5 Authorization of Reload Options. Concurrently with the award of
Options to a Participant in the Plan, the Committee may, subject to the
provisions of the Plan, the Committee may prescribe and authorize reload options
to purchase for cash or for shares of Stock allotted by the Committee ("Reload
Options"). The number of Reload Options shall equal (i) the number of shares of
Stock used to exercise the underlying Options and (ii) to the extent authorized
by the Committee, the number of shares of Stock used to satisfy any tax
withholding requirement incident to the exercise of the underlying Options. The
grant of a Reload Option will become effective upon the exercise of underlying
Option or other Reload Options through the use of shares of Stock held by the
Participant for at least 12 months. Notwithstanding the fact that the underlying
Option may be an ISO, a Reload Option is not intended to qualify as an ISO under
Section 422 of the Code.
2.6 Reload Option Amendment. Each Award Agreement shall state whether
the Committee has authorized Reload Options with respect to the underlying
Option. Upon the exercise of an underlying Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the underlying Award
Agreement.
2.7 Reload Option Exercise Price. The Exercise Price per share of
Stock deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a share of Stock on the date the grant of the Reload Option becomes
effective, unless the Committee shall determine, in its sole discretion, that
there are circumstances which reasonably justify the establishment of a lower
Exercise Price.
2.8 Term and Exercise. The term of each Reload Option shall be equal
to the remaining term of the underlying Option.
3
<PAGE>
2.9 Termination of Employment. No additional Reload Options shall be
granted to a Participant when Options and/or Reload Options are exercised
pursuant to the terms of this Plan following termination of the Participant's
employment.
2.10 Settlement of Award. Shares of Stock delivered pursuant to the
exercise of an Option or SAR shall be subject to such conditions, restrictions
and contingencies as the Committee may establish in the applicable agreement.
Settlement of SARs may be made in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash, or in a combination thereof, as
determined in the discretion of the Committee. The Committee, in its discretion,
may impose such conditions, restrictions and contingencies with respect to
shares of Stock acquired pursuant to the exercise of an Option or an SAR as the
Committee determines to be desirable.
SECTION 3
---------
OTHER STOCK AWARDS
------------------
3.1 Definitions. For purposes of this Plan:
3.1.1 A "Stock Unit" Award is the grant of a right to receive
shares of Stock in the future;
3.1.2 A "Performance Share" Award is a grant of a right to
receive shares of Stock or Stock Units which is contingent on the
achievement of performance or other objectives during a specified
period;
3.1.3 A "Restricted Stock" Award is a grant of shares of Stock
and a "Restricted Stock Unit" Award is the grant of a right to receive
shares of Stock in the future, with such shares of Stock or right to
future delivery of such shares of Stock subject to a risk of forfeiture
or other restrictions that will lapse upon the achievement of one or
more goals relating to completion of service by the Participant, or
achievement of performance or other objectives, as determined by the
Committee.
3.2 Restrictions on Stock Awards. Each Stock Unit Award, Restricted
Stock Award, Restricted Stock Unit Award and Performance Share Award under this
Plan will be subject to the following:
3.2.1 Any such Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall determine.
3.2.2 The Committee may designate whether any such Award being
granted to any Participant is intended to be "performance-based
compensation" as that term is used in Section 162(m) of the Code. Any
4
<PAGE>
such Awards designated as intended to be "performance-based
compensation" shall be conditioned upon the achievement of one or more
Performance Measures. The Performance Measures that may be used by the
Committee for such Awards shall be based on any one or more of the
following, as selected by the Committee: (i) achievement of development
milestones or specific goals related to the Participant's role within
the Company; (ii) the experience, education and particular expertise of
the Participant in the context of his or her role within the Company;
and (iii) specific Measures identified by the Committee and made part
of the grant of the Award to such Participant. For Awards intended to
be "performance-based compensation," the grant of the Awards and the
establishment of the Performance Measures shall be made during the
period required under Code Section 162(m).
SECTION 4
---------
OPERATION AND ADMINISTRATION
----------------------------
4.1 Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1998 annual meeting of its shareholders, the Plan shall
be effective as of January 1, 1999 (the "Effective Date"); provided, however,
that to the extent that Awards are granted under the Plan prior to its approval
by the shareholders, the Awards shall be contingent on approval of the Plan by
the shareholders of the Company at such annual meeting or an intervening special
meeting at which a vote is taken as to approval of the Plan. The Plan shall be
unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Awards under it are outstanding; provided, however, that,
to the extent required by the Code, no ISO may be granted under the plan on a
date that is more than ten years from the date the Plan is adopted or, if
earlier, the date the Plan is approved by shareholders.
4.2 Shares Subject to Plan. The shares of Stock for which Awards may
be granted under the Plan shall be subject to the following:
4.2.1 Subject to the following provisions of this subsection
4.2, the maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be 2,000,000
shares of Stock; however, the Board may increase such number of shares,
but not in any event without shareholder approval of an increase that
would result in the number of shares available in the aggregate for
Awards under the Plan exceeding 10% of the total authorized common
shares of the Company.
4.2.2 To the extent any shares of Stock covered by an Award
are not delivered to a Participant or beneficiary because the Award is
forfeited or canceled, or the shares of Stock are not delivered because
the Award is settled in cash or used to satisfy the applicable tax
withholding obligation, such shares will not be deemed to have been
delivered for purposes of determining the maximum number of shares of
Stock available for delivery under the Plan.
5
<PAGE>
4.2.3 If the Exercise Price of any Option granted under the
Plan is satisfied by tendering shares of Stock to the Company (by
actual delivery or by attestation), only the number of shares of Stock
issued net of the shares of Stock tendered shall be deemed delivered
for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan.
4.2.4 Subject to paragraph 4.2.5, the following additional
maximums are imposed under the Plan:
(a) The maximum number of shares of Stock that may be
issued by Options intended to be ISOs shall be 500,000 shares.
(b) The maximum number of shares of Stock that may be
issued in conjunction with Awards granted to Section 3
(relating to Stock Awards) shall be 500,000 shares.
(c) The maximum number of shares that may be covered
by Awards granted to any one individual pursuant to Section 2
(relating to Options and SARs) shall be 100,000 shares during
any calendar year.
(d) No more than 100,000 shares of Stock may be
subject to Stock Unit Awards, Restricted Stock Awards,
Restricted Stock Unit Awards and Performance Share Awards that
are intended to be "performance-based compensation" (as that
term is used for purposes of Code Section 162(m)) granted to
any one individual during any one-calendar-year period
(regardless of when such shares are deliverable).
(e) In the event of a corporate transaction involving
the Company (including, without limitation, any stock
dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination or exchange of shares), the
Committee may adjust Awards to preserve the benefits or
potential benefits of the Awards. Action by the Committee may
include (i) adjustment of the number and kind of shares which
may be delivered under the Plan; (ii) adjustment of the number
and kind of shares subject to outstanding Awards; (iii)
adjustment of the Exercise Price of outstanding Options and
SARs; and (iv) any other adjustments that the Committee
determines to be equitable.
4.3 General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
4.3.1 Notwithstanding any other provision of the Plan, the
Company shall have no liability to deliver any shares of Stock under
6
<PAGE>
the Plan or make any other distribution of benefits under the Plan
unless such delivery or distribution would comply with all applicable
laws (including, without limitation, the requirements of the Securities
Act of 1933), and the applicable requirements of any securities
exchange or similar entity.
4.3.2 To the extent that the Plan provides for issuance of
stock certificates to reflect the issuance of shares of Stock, the
issuance may be effected on a non-certificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.
4.4 Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.
4.5 Use of Shares. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Subsidiary, including the plans and arrangements of the Company or
a Subsidiary assumed in business combinations.
4.6 Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.7 Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Any Award settlement, including
payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee may permit or
require the deferral of any Award payment, subject to such rules and procedures
as it may establish, which may include provisions for the payment or crediting
of interest, or dividend equivalents, including converting such credits into
deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash
due under the Plan with respect to any Participant to the extent that such
benefits are attributable to the services rendered for that Subsidiary by the
7
<PAGE>
Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.
4.8 Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.9 Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10 Agreement With Company. An Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided to the
Participant, and the Committee may, but need not require that the Participant
shall sign a copy of such document. Such document is referred to in the Plan as
an "Award Agreement" regardless of whether any Participant signature is
required.
4.11 Action by Company or Subsidiary. Any action required or permitted
to be taken by the Company or any Subsidiary shall be by resolution of its
Board, or by action of one or more members of the Board (including a committee
of the Board) who are duly authorized to act for the Board, or (except to the
extent prohibited by applicable law or applicable rules of any stock exchange)
by a duly authorized officer of such company.
4.12 Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.13 Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right or title to any assets,
funds or property of the Company or any Subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other
property which the Company or any Subsidiary, in their sole discretion,
may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the Stock or
amounts, if any, payable under the Plan, unsecured by any assets of the
Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary
shall be sufficient to pay any benefits to any person.
8
<PAGE>
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee the
right to be retained in the employ of the Company or any Subsidiary,
nor any right or claim to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of the Plan. Except
as otherwise provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any rights as a shareholder of the Company
prior to the date on which the individual fulfills all conditions for
receipt of such rights.
4.14 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
9
<PAGE>
SECTION 5
---------
CHANGE IN CONTROL
-----------------
5.1 Effect of Change in Control. Subject to the provisions of
paragraph 4.2.5 (relating to the adjustment of shares), and except as otherwise
provided in the Plan or the Award Agreement reflecting the applicable Award,
upon the occurrence of a Change in Control:
5.1.1 All outstanding Options (regardless of whether in tandem
with SARs) shall become fully exercisable.
5.1.2 All outstanding SARs (regardless of whether in tandem
with Options) shall become fully exercisable.
5.1.3 All Stock Units, Restricted Stock, Restricted Stock
Units, and Performance Shares shall become fully vested.
5.2 Definition. For purposes of the Plan, the term "Change in Control"
shall mean a change in the beneficial ownership of the Company's voting Stock or
a change in the composition of the Board of the Company which occurs as follows:
5.2.1 Any "Person" (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended ("Exchange
Act")) is or becomes a beneficial owner, directly or indirectly, of
Stock of the Company representing 25% or more of the total voting power
of the Company's then outstanding Stock.
5.2.2 A tender offer (for which a filing has been made with
the SEC which purports to comply with the requirements of Section 14(d)
of the Exchange Act and the corresponding SEC rules) is made for the
Stock of the Company. In case of such a tender offer, the Change in
Control will be deemed to have occurred upon the first to occur of (i)
any time during the tender offer when the Person making the offer owns
or has accepted for payment Stock of the Company with 25% or more of
the total voting power of the Company's outstanding Stock or (ii) three
business days before the offer is to terminate unless the offer is
withdrawn first, if the Person making the offer could own, by the terms
of the offer plus any shares owned by this Person, Stock with 50% or
more of the total voting power of the Company's outstanding Stock when
the offer terminates.
5.2.3 Individuals who were the Board's nominees for election
as directors of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the election of
directors shall not constitute a majority of the Board following the
election.
10
<PAGE>
SECTION 6
---------
COMMITTEE
---------
6.1 Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the "Committee")
in accordance with this Section 6. The Committee shall be selected by the Board
of the Company and shall consist solely of two or more members of the Board who
are not also employees of the Company. If the Committee does not exist, or for
any other reason determined by the Board, the Board may take any action under
the Plan that would otherwise be the responsibility of the Committee.
6.2 Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:
6.2.1 Subject to the Plan, the Committee will have the
authority and discretion to select from among the Eligible Employees
those persons who shall receive Awards, to determine the time or times
of receipt, to determine the types of Awards and the number of shares
covered by the Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards, and
(subject to the restrictions imposed by Section 7) to cancel or suspend
Awards.
6.2.2 To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the
material purposes of the Awards in jurisdictions outside the United
States, the Committee will have the authority and discretion to modify
those restrictions as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States.
6.2.3 The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, to determine the terms and provisions
of any Award Agreement made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the
administration of the Plan.
6.2.4 Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all persons.
6.2.5 In controlling and managing the operation and
administration of the Plan, the Committee shall take action in a manner
that conforms to the articles and bylaws of the Company, and applicable
state corporate law.
6.3 Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
11
<PAGE>
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
6.4 Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
SECTION 7
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may, at any time, amend or terminate the Plan, provided that
no amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments pursuant or subject
to subsection 4.2.5 shall not be subject to the foregoing limitations of this
Section 7.
SECTION 8
---------
DEFINED TERMS
-------------
In addition to the other definitions contained herein, the following
definitions shall apply:
8.1 "Award" shall mean any award or benefit granted under the Plan,
including, without limitation, the grant of Options, SARs, Stock Unit Awards,
Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share
Awards.
8.2 "Board" shall mean the Board of Directors of the Company.
8.3 "Code" shall mean the Internal Revenue Code of 1986, as amended. A
reference to any provision of the Code shall include reference to any successor
provision of the Code.
8.4 "Disability" is deemed to occur during the period in which a
Participant is unable, by reason of a medically determinable physical or mental
impairment, to engage in any substantial gainful activity, which condition, in
the opinion of a physician selected by the Committee, is expected to have a
duration of not less than 120 days.
12
<PAGE>
8.5 "Eligible Employee" shall mean any employee of the Company or a
Subsidiary. An Award may be granted to an employee, in connection with hiring,
retention or otherwise, prior to the date the employee first performs services
for the Company or the Subsidiaries, provided that such Award shall not become
vested prior to the date the employee first performs such services.
8.6 "Fair Market Value" of a share of Stock under the Plan, as of any
date, shall be determined as follows:
8.6.1 If the principal market for the Stock is a national
securities exchange or the Nasdaq stock market (including the Nasdaq
SmallCap Market), then "Fair Market Value" as of that date will be the
mean between the lowest and highest reported sale prices of the Stock
on that date on the principal exchange on which the Stock is then
listed or admitted to trading.
8.6.2 If sale prices are not available or if the principal
market for the Stock is not a national securities exchange and the
Stock is not quoted on the Nasdaq stock market, the average between the
highest bid and lowest asked prices for the Stock on such day as
reported on the Nasdaq OTC Electronic Bulletin Board Service or by the
National Quotation Bureau, Incorporated, or a comparable service.
8.6.3 If the day is not a business day, and as a result,
paragraphs 8.5.1 and 8.5.2 are not applicable, the Fair Market Value of
the Stock will be determined as of the last preceding business day. If
paragraphs 8.5.1 and 8.5.2 are otherwise inapplicable, then the Fair
Market Value of the Stock shall be determined in good faith by the
Committee.
8.7 "Retirement" of a Participant shall mean the occurrence of a
Participant's Date of Termination after completing at least five years of
service and attaining age 65.
8.8 "Subsidiary" means any company during any period in which it is a
subsidiary corporation as that term is defined in Code section 424(f) with
respect to the Company.
8.7 "Stock" means shares of the Company's common stock.
SECTION 9
---------
MISCELLANEOUS
-------------
9.1 General Restriction. Each Award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock subject or related
thereto upon any securities exchange or under any state or federal law, or (ii)
the consent or approval of any government regulatory body, or (iii) an agreement
13
<PAGE>
by the Participant with respect to the disposition of Stock, is necessary or
desirable as a condition of, or in connection with, the granting of such Award
or the issue or purchase of Stock thereunder, such Award may not be exercised or
consummated in whole or in part unless and until such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
9.2 Non-Uniform Determinations. The Committee's determinations under
the Plan (including without limitation determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Awards under the Plan, whether or not such persons are similarly situated.
9.3 Fractional Shares. Fractional shares shall not be granted under
any Award under this Plan, unless the provision of the Plan which authorizes
such Award also specifies the terms under which fractional shares or interests
may be granted.
9.4 Effects of Headings. The Section and Subsection headings contained
herein are for convenience only and shall not affect the construction hereof.
ADOPTED BY RESOLUTION OF THE BOARD OF DIRECTORS, EFFECTIVE THE 1ST DAY OF
JANUARY, 1999.
-----------------------------------------
, Secretary
-------------------------
14
Qui Vive, Inc.
(A Subsidiary of Sundog Technologies, Inc.)
Stock Option Grant and Agreement
Pursuant to the terms and conditions of the Qui Vive, Inc. 1998 Stock
Option and Incentive Plan (the "Plan"), Qui Vive, Inc., a Delaware corporation
(the "Company") and subsidiary of Sundog Technologies, Inc. ("Sundog"), hereby
grants to the Participant an Option to purchase shares of the Company's common
stock on the following terms and conditions:
1. Identifying Provisions. As used in this Option, the following
terms shall have the following respective meanings (see also Section 9):
a. "Participant" is xxxx
b. "Date of Grant" is (hire date)
c. Number of "Covered Shares" is (amount listed in offer letter)
d. "Exercise Price" Per Share is (amount listed in offer letter)
2. Award. This Agreement specifies the terms of the option ("Option")
granted to the Participant to purchase the number of Covered Shares at the
Exercise Price set forth above in Paragraph 1. The Option is not intended to
constitute an "incentive stock option" as that term is used in Code section 422.
3. Date of Exercise. Except as limited by this Agreement or by the
Plan, this Option shall become exercisable pursuant to the vesting schedule set
forth below until and including the Expiration Date of this Option as defined
below, whereupon the Option shall expire and may thereafter no longer be
exercised. Vesting of the Option shall be as follows:
Installment (No. of Covered Shares) Vesting Date Applicable to Installment
- ----------------------------------- --------------------------------------
xxx xxx
xxx xxx
xxx xxx
An installment shall not become exercisable on the otherwise applicable
vesting date if the Participant's Date of Termination (as defined in Paragraph
9, below) occurs on or before such vesting date. No exercise of this Option or
any part hereof will be exercisable until the date for vesting has occurred. The
Option may be exercised on or after the Date of Termination only as to that
portion of the Covered Shares that had vested immediately prior to the Date of
Termination. Notwithstanding the foregoing, if there is a change of control
resulting from the sale of all or substantially all of the assets of the Company
or the sale of more than 50% of the issued and outstanding common stock of the
Company, then the following shall apply:
1
<PAGE>
a. If Participant has been employed by the Company for more than six
months, and at least one-half of the vesting period of a
particular installment has passed as of the effective date of such
change of control transaction, then that installment will be
deemed fully vested at such effective date.
4. Expiration. The Option shall not be exercisable after the
Company's close of business on the last business day that occurs prior to the
Expiration Date. As used in this Agreement, the Participant's "Expiration Date"
shall be the earliest to occur of:
a. the five-year anniversary of the Date of Grant;
b. if the Participant's Date of Termination occurs by reason of
death, Disability or Retirement, the one-year anniversary of such Date of
Termination; or
c. if the Participant's Date of Termination occurs for reasons other
than death, Disability, or Retirement, the 90-day anniversary of such Date of
Termination.
5. Method of Exercise. The Plan is administered by the Compensation
Committee ("Committee") of the Board of Directors of the Company (as described
in the Plan). Subject to the terms of this Agreement and the Plan, the Option
may be exercised in whole or in part by filing a written notice with the
Committee at its corporate headquarters prior to the close of business of the
Company on the last business day that occurs prior to the Expiration Date. Such
notice shall specify the number of Covered Shares the Participant elects to
purchase, and shall be accompanied by payment of the Exercise Price for such
shares. Payment shall be by certified check or cashier's check payable to the
Company. The Option shall not be exercisable if and to the extent the Committee
determines that such exercise would violate applicable state or federal
securities laws or the rules and regulations of any securities exchange on which
the Company's common stock or the common stock of Sundog is then traded. If the
Committee makes such a determination, it shall use all reasonable efforts to
obtain compliance with such laws, rules or regulations. In making any
determination hereunder, the Committee may rely on the opinion of counsel for
the Company or Sundog.
6. Withholding. All deliveries and distributions under this Agreement
are subject to withholding of all applicable taxes. The Committee may require,
as a condition to the exercise of this Option in whole or in part and delivery
of the Covered Shares, the prior payment to the Company by the Participant of
applicable withholding amounts. Such payment shall accompany the Exercise Price
paid upon exercise of the Option unless otherwise agreed by the Committee.
7. Transferability. Except as otherwise provided in this Paragraph 7,
the Option is not transferable other than as designated by the Participant by
will or by the laws of descent and distribution, and during the Participant's
life, may be exercised only by the Participant. However, the Participant, with
the prior written approval of the Committee, may transfer the Option for no
consideration to or for the benefit of the Participant's Immediate Family
(including, without limitation, to a trust for the benefit of the Participant's
Immediate Family or to a partnership or limited liability company for one or
2
<PAGE>
more members of the Participant's Immediate Family), subject to such limits as
the Committee may establish, and the transferee shall remain subject to all
terms and conditions applicable to the Option prior to such transfer. The
foregoing right to transfer the Option shall apply to the right to consent to
amendments to this Agreement and, in the discretion of the Committee, shall also
apply to the right to transfer ancillary rights associated with the Option. The
term "Immediate Family" means the Participant's spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers and grandchildren.
8. Certain Restrictions. The Participant has entered into and agreed
to be bound by an employment agreement and a non-disclosure agreement (the
"Other Agreements") as a condition to receipt of this Option. The right of
Participant to exercise this Option, in whole or in part, will be conditioned
upon Participant's continued compliance with the Other Agreements. The parties
acknowledge that the Company is a subsidiary of Sundog. The minority interests
of the Company, upon exercise of the Option and other similar rights granted by
the Company, will be owned at least in part by the Participant and a few
individual shareholders. The parties agree that the Participant, following the
exercise of the Option in whole or in part and receipt of the Covered Shares in
connection with such exercise, will not sell, assign, transfer, hypothecate,
pledge, or otherwise dispose of the Covered Shares for any reason whatsoever,
unless and until the Participant has first offered the Covered Shares to the
Company, which may redeem or repurchase such Covered Shares directly from the
Participant. The certificates evidencing the Covered Shares will include a
restrictive legend referring to this right of first refusal granted to the
Company and the restriction on the transfer of the Covered Shares created
thereby. If the Company declines to exercise the right granted it hereunder
within 30 days of receipt of written notice of a proposed sale of the Covered
Shares by Participant, Participant may the pursue the original transaction on
the terms and conditions set forth in its notice to the Company. Any change in
such terms will be deemed a new offer and will reset the right of the Company to
receive notice of a sale and to exercise the right of first refusal in
connection therewith.
9. Definitions. Capitalized terms in this Agreement shall have the
meaning given them in the Plan, this Section 9, or elsewhere in this Agreement.
The following definitions shall apply:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act. The Company is a Subsidiary of Sundog and as
such is an Affiliate of Sundog for purposes of this Agreement.
"Date of Termination" is the first day occurring on or after the Grant
Date on which the Participant is not employed by the Company or Sundog or any
Subsidiary or Affiliate of the Company or of Sundog, regardless of the reason
for the termination of employment; provided that a termination of employment
shall not be deemed to occur by reason of a transfer of the Participant's
employment between the Company and Sundog or between either of them and a
Subsidiary or Affiliate of either of them, or between two Subsidiaries or
Affiliates, as the case may be; and further provided that the Participant's
3
<PAGE>
employment shall not be considered terminated while the Participant is on an
authorized leave of absence from the Company, Sundog or any Affiliate or
Subsidiary of either of them. If, as a result of a sale or other transaction,
the Participant's employer ceases to be an Affiliate of either the Company or
Sundog (and the Participant's employer is or becomes an entity that is separate
from the either the Company or Sundog), the occurrence of such transaction shall
be treated as the Participant's Date of Termination caused by the Participant
being discharged by the employer.
10. Heirs and Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant has designated a beneficiary but the Designated Beneficiary
dies before the Designated Beneficiary's exercise of all rights under this
Agreement or before the complete distribution of benefits to the Designated
Beneficiary under this Agreement, then any rights that would have been
exercisable by the Designated Beneficiary shall be exercised by the legal
representative of the estate of the Designated Beneficiary, and any benefits
distributable to the Designated Beneficiary shall be distributed to the legal
representative of the estate of the Designated Beneficiary.
11. Administration. The authority to manage and control the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.
12. Plan Governs. This Option is subject to and all of the terms and
conditions of the Plan bind the Participant, as the same may be amended from
time to time in accordance with its terms. A copy of the Plan is available from
the office of the Secretary of the Company. Except as the Plan may permit
variations when agreed upon in writing by the Participant and the Company, such
as this Agreement, in the event of a conflict between the terms of the Plan and
the terms of this Agreement, the terms and provisions of the Plan shall govern.
13. Not an Employment Contract. The Option does not confer any right
on the Participant with respect to continuation of employment or other service
4
<PAGE>
with the Company, Sundog or any Subsidiary or Affiliate of either of them, nor
will it interfere in any way with any right the Company, Sundog or any such
Subsidiary or Affiliate would otherwise have to terminate or modify the terms of
such Participant's employment or other service at any time.
14. Rights in Stock Before Issuance and Delivery. No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option unless and until such shares have been issued to
such person as fully-paid shares.
15. Notices. Any notice to be given to the Company shall be addressed
to the Company in care of the Committee at the principal offices of Sundog and
any notice to be given to the Participant shall be addressed to the Participant
at the address set forth beneath the Participant's signature hereto or at such
other address as the Participant may hereafter designate in writing to the
Committee. Any such notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as before said, registered or
certified and deposited postage and registry or certification fees prepaid in a
post office or branch post office regularly maintained by the United States
Postal Service.
16. Other Terms. This Agreement has been executed and delivered by the
Company in Salt Lake City, Utah and shall be construed and enforced in
accordance with the laws of said state, other than any choice of law rules
calling for the application of laws of another jurisdiction. This Agreement may
be amended by written agreement of the Participant and the Company (through the
Committee and with its approval), without the consent of any other person. If
the Company or Sundog enters into a transaction which is intended to be
accounted for using the pooling-of-interests method of accounting, but it is
determined by the Committee that the Option or any aspect thereof could
reasonably be expected to preclude such treatment, then the Committee may modify
(to the minimum extent required) or revoke (if necessary) the Option or any of
the provisions thereof to the extent that the Committee determines that such
modification or revocation is necessary to enable the transaction to be subject
to pooling-of-interests accounting.
[The remainder of this page is intentionally left blank. Signatures follow on
the next page.]
5
<PAGE>
IN WITNESS WHEREOF the Committee has caused the Company to grant this Option on
the Date of Grant specified above.
Qui Vive, Inc.
7150 Campus Drive Suite 290
Colorado Springs, CO 80920
By:
------------------------------------
Its:
------------------------------------
Participant:
- -----------------------------------------
Signature
Address:
- -----------------------------------------
- -----------------------------------------
City/State/Zip
6
<PAGE>
NOTICE OF EXERCISE
Qui Vive, Inc.
7150 Campus Drive Suite 290
Colorado Springs, CO 80920
Ladies and Gentlemen:
The undersigned hereby elects to purchase, pursuant to the provisions of the
Stock Option Agreement and Option held by the undersigned, dated November 9,
1998, shares of Stock of Qui Vive, Inc., a Delaware corporation,
issuable upon exercise of said Option.
The undersigned hereby represents and warrants that the undersigned is acquiring
such stock for his own account and not for resale or with a view to distribution
of any part thereof.
The undersigned hereby attaches the purchase price payable for such shares at
$ per share in the form of (specify
cash, check, money order, other securities, etc.).
Dated:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
- -------------------------
(Social Security Number)
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