SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 2004
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE EXCHANGE ACT OF 1934
From the transition period from to
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Commission File Number 000-31631
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TRANS MAX TECHNOLOGIES, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 42-1599830
------ ----------
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
2190 SMITHTOWN AVENUE, RONKONKOMA, NEW YORK 11779
------------------------------------------------
(Address of principal executive offices)
(631) 285-7101
--------------
(Issuer's telephone number)
200 Trade Zone Drive, Ronkonkoma, New York 11779
------------------------------------------------
(Address of former executive offices)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days:
Yes XX No:
As of May 24, 2004, 221,112,474 shares of Common Stock of the issuer were
outstanding.
Item 1. Financial Statements
TRANS MAX TECHNOLOGIES, INC.
BALANCE SHEET
MARCH 31, DECEMBER 31,
2004 2003
ASSETS (UNAUDITED) (NOTE)
- --------------- ------------ -----------
Current assets:
Cash and cash equivalents $ 39,358 $ 9,259
Accounts receivable, net 25,725 26,984
Inventories 54,804 40,940
Other current assets 32,830 23,881
------------ -----------
Total current assets 152,717 101,064
Receivable from affiliates 218,966 29,894
Property and equipment, net 819,687 434,713
Other assets 163,250 163,250
------------ -----------
Total assets $ 1,354,620 $ 728,921
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 56,442 $ 46,240
Accrued expenses 115,258 4,573
Notes payable to stockholders 777,900 113,400
------------ -----------
Total current liabilities 949,600 164,213
------------ -----------
Commitments and contingencies
Stockholders' equity:
Common stock; $0.001 par value; 500,000,000 shares
authorized; 221,112,474 and 212,631,192 shares
issued and outstanding as of March 31, 2004 and
December 31, 2003 respectively 221,112 212,631
Additional paid in capital 1,417,509 1,014,424
Accumulated deficit (1,233,601) (662,347)
------------ -----------
Total stockholders' equity 405,020 564,708
------------ -----------
Total liabilities and stockholders' equity $ 1,354,620 $ 728,921
============ ===========
Note: The balance sheet at December 31, 2003 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
The accompanying notes are an integral part
of these unaudited financial statements.
F-2
TRANS MAX TECHNOLOGIES, INC.
UNAUDITED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
----------------
2004 2003
------------- -------------
Sales, net $ 60,348 $ 68,536
Cost of goods sold 33,012 24,030
------------- -------------
Gross profit 27,336 44,506
General and administrative expenses 531,161 39,649
Research and development expenses 57,612 114
------------- -------------
Income (loss) from operations (561,437) 4,743
Interest expense (9,817) (1,151)
------------- -------------
Net income (loss) $ (571,254) $ 3,592
============= =============
Net income (loss) per share-basic and diluted $ (0.00) $ 0.00
============= =============
Weighted average shares outstanding 219,976,411 212,394,739
============= =============
The accompanying notes are an integral part
of these unaudited financial statements.
F-3
TRANS MAX TECHNOLOGIES, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2004
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ---------- ------------ ---------- ----------
Balance at December 31,
2003 212,631,192 $ 212,631 $ 1,014,424 $(662,347) $ 564,708
Cash contributed
by stockholders - - 369,171 - 369,171
Common stock issued in
connection with employ-
ment agreements 8,481,282 8,481 26,858 - 35,339
Interest imputed on
stockholder loan - - 7,056 - 7,056
Net income (loss) - - - (571,254) (571,254)
------------ ---------- ------------ ---------- ----------
Balance at March 31,
2004 221,112,474 $ 221,112 $1,417,509 $(1,233,601) $ 405,020
============ ============ ========== ============ ==========
The accompanying notes are an integral part
of these unaudited financial statements.
F-4
TRANS MAX TECHNOLOGIES, INC.
UUAUDITED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
----------------
2004 2003
----------- ---------
Cash flows from operating activities:
Net income (loss) $ (571,254) $ 3,592
Adjustment to reconcile net income (loss) to net cash
used in operating activities:
Common stock issued for services 35,339 -
Imputed interest expense 7,056 -
Depreciation expense 673 750
Changes in operating assets and liabilities:
Accounts receivable 1,260 8,478
Inventory (13,864) 836
Other assets (8,950) 160
Accounts payable and accrued expenses 120,887 (10,174)
----------- ---------
Net cash provided by (used in) operating activities (428,853) 3,642
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment (385,647) -
Increase in receivable from affiliates (189,072) -
----------- ---------
Net cash used in investing activities (574,719) -
----------- ---------
Cash flows from financing activities:
Proceeds from notes payable to stockholders 664,500 -
Cash contributed by stockholders 369,171 -
----------- ---------
Net cash provided by financing activities 1,033,671 -
----------- ---------
Net increase (decrease) in cash and cash equivalents 30,099 3,642
Cash and cash equivalents, beginning of period 9,259 -
----------- ---------
Cash and cash equivalents, end of period $ 39,358 $ 3,642
=========== =========
Supplemental cash flow information:
Cash paid for interest $ 2,761 $ 1,151
=========== =========
Cash paid for income taxes $ - $ -
=========== =========
The accompanying notes are an integral part
of these unaudited financial statements.
F-5
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
------------------------------
The accompanying unaudited interim financial statements have been prepared
without audit pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted, pursuant to such rules and regulations. These unaudited
financial statements should be read in conjunction with the audited financial
statements and notes thereto of the Company included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2003. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of financial position, results of
operations and cash flows for the interim periods presented have been included.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the respective full year.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
The Company faces many operating and industry challenges. The Company intends
to do business in a highly competitive industry. Future operating losses for
the Company are anticipated and the proposed plan of operations, even if
successful, may not result in cash flow sufficient to finance the
continued expansion of its business. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Realization of
assets is dependent upon continued operations of the Company, which in turn is
dependent upon management's plans to meet its financing requirements, as
discussed below, and the success of its future operations. The financial
statements do not include any adjustments that might result from this
uncertainty.
2. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
Perma-Tune Electronics, Inc. ("Perma-Tune") was incorporated in 1993 in the
state of Texas. The Company designs and manufactures high performance
electronic ignition systems for distribution throughout the United States,
Canada and Europe.
On July 21, 2003 Perma-Tune acquired 100% of the issued and outstanding stock of
Trans Max Technologies, Inc. ("Trans Max"), a Nevada corporation, in exchange
for 15,177,300 shares of Perma-Tune's common stock (pre 2 for 1 and 6 for 1
stock splits). As a result of this acquisition, the control of Perma-Tune
shifted to the former shareholders of Trans Max and this transaction was treated
as a recapitalization. As a part of this recapitalization, Perma-Tune
Electronics, Inc. changed its name to Trans Max Technologies, Inc. (the
"Company").
MANAGEMENT ESTIMATES
---------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
--------------------
The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable and
collectibility is probable. Generally, these criteria are met at the time
product is shipped. The Company provides for the estimated cost of product
warranties upon shipment. The Company has a no return policy and has had no
returns in the last two years. Shipping and handling costs are included in cost
of goods sold.
RESEARCH AND DEVELOPMENT
--------------------------
Research and development activities are expensed as incurred, including costs
relating to patents or rights which may result from such expenditures.
F-6
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
2. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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CONCENTRATIONS OF CREDIT RISK
--------------------------------
Financial instruments which subject the Company to concentrations of credit risk
include cash and cash equivalents and accounts receivable. The Company maintains
its cash and cash equivalents with major financial institutions selected based
upon management's assessment of the banks' financial stability. Balances
periodically exceed the $100,000 federal depository insurance limit. The Company
has not experienced any losses on deposits. Accounts receivable generally arise
from sales of services to customers operating in the United States. Collateral
is generally not required for credit granted. As of March 31, 2004,
approximately 35% of the Company's trade receivables were due from one customer.
The Company provides allowances for potential credit losses when necessary.
PROPERTY AND EQUIPMENT
------------------------
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of three to seven years for
office furniture and equipment. Leasehold improvements are depreciated over the
shorter of the useful life of the improvement or the life of the related lease.
Additions or improvements that increase the value or extend the life of an asset
are capitalized. Expenditures for normal maintenance and repairs are expensed as
incurred. Disposals are removed from the accounts at cost less accumulated
depreciation and any gain or loss from disposition is reflected in operations
currently.
INVENTORIES
-----------
Inventories are stated at the lower of cost or market, with cost determined on a
first-in, first-out basis.
INCOME TAXES
-------------
The Company uses the liability method in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax carrying amounts of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. A valuation allowance,
if necessary, is provided against deferred tax assets, based upon management's
assessment as to their realization.
The difference between the 34% federal statutory income tax rate and amounts
shown in the accompanying interim financial statements is primarily attributable
to an increase in the valuation allowance applied against the tax benefit from
utilization of net operating loss carryforwards.
STOCK-BASED COMPENSATION
-------------------------
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123") established financial accounting and reporting standards for
stock-based employee compensation plans. It defined a fair value based method
of accounting for an employee stock option or similar equity instrument and
encouraged all entities to adopt that method of accounting for all of their
employee stock compensation plans and include the cost in the income statement
as compensation expense. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees". The Company accounts for
compensation cost for stock option plans in accordance with APB Opinion No. 25.
F-7
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
2. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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IMPAIRMENT OF LONG-LIVED ASSETS
----------------------------------
In the event facts and circumstances indicate the carrying value of a long-lived
asset, including associated intangibles, may be impaired, an evaluation of
recoverability is performed by comparing the estimated future undiscounted cash
flows associated with the asset to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow is required. Based upon
management's evaluation, an impairment write-down of the Company's long-lived
assets was not deemed necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company includes fair value information in the notes to financial statements
when the fair value of its financial instruments is different from the book
value. When the book value approximates fair value, no additional disclosure is
made.
LOSS PER SHARE
----------------
Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period. Common
equivalent shares from common stock options and warrants are excluded from the
computation as their effect would dilute the loss per share for all periods
presented.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities and supersedes
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. In addition, SFAS No. 146 establishes that fair value is the objective for
initial measurement of the liability. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002, but early adoption is
permitted. The adoption of SFAS No. 146 did not have an impact on the Company's
financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation", which amends SFAS No. 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock based employee compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock based employee compensation. Finally, SFAS No. 148 amends APB Opinion No.
28, "Interim Financial Reporting", to require disclosure of those effects in
interim financial statements. SFAS No. 148 is effective for fiscal years ended
after December 15, 2002, but early adoption is permitted. The Company adopted
SFAS No. 148 on January 1, 2003. The adoption of SFAS No. 148 did not have a
significant impact on its financial reporting.
In January 2003, the FASB issued FASB Interpretation (FIN) No. 46 "Consolidation
of Variable Interest Entities." FIN No. 46 requires a company to consolidate a
variable interest entity ("VIE") if the company has variable interests that give
it a majority of the expected losses or a majority of the expected residual
returns of the entity. Prior to FIN No. 46, VIE's were commonly referred to as
SPE's. FIN No. 46 is effective immediately for VIE's created after January 31,
2003. This interpretation did not have a material effect on the Company's
financial condition or results of operations.
In April 2003, the FASB issued SFAS No. 149, Amendment to Statement No. 133 on
Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133. The changes in SFAS No. 149 improve financial reporting by requiring
that contracts with comparable characteristics be accounted for similarly. Those
changes will result in more consistent reporting of contracts as either
derivatives or hybrid instruments. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, except in certain instances
detailed in the statement, and hedging relationships designated after June 30,
2003. Except as otherwise stated in SFAS No. 149, all provisions should be
applied prospectively. The adoption of this statement did not have a material
effect on the Company's financial condition or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150,
which is effective at the beginning of the first interim period beginning after
June 15, 2003, must be implemented by reporting the cumulative effect of a
change in accounting principle for financial instruments created before the
issuance date of the statement and still existing at the beginning of the
interim period of adoption. The statement requires that a financial instrument
which falls within the scope of the statement to be classified and measured as a
liability. The following financial instruments are required to be classified as
liabilities: (1) shares that are mandatorily redeemable, (2) an obligation to
repurchase the issuer's equity shares or one indexed to such an obligation and
that requires or may require settlement by transferring assets and (3) the
embodiment of an unconditional obligation that the issuer may or may not settle
by issuing a variable number of equity shares if, at inception, the monetary
value of the obligation is based on certain measurements defined in the
statement. The adoption of this statement did not have a material effect on the
Company's financial condition or results of operations.
3. LIQUIDITY
---------
For the three months ended March 31, 2004, the Company had a net loss of
$(571,254) and net income of $3,592 for the same period in 2003. For the three
months ended March 31, 2004 the Company had negative cash flows from operations
of $(428,853) and positive cash flows from operations of $3,642 for the same
period in 2003. In addition to the revenues provided by the normal operations
of the electronic ignition product line, the Company has been dependent on
additional capital contributions from shareholders and debt financing to fund
its cash requirements.
As of March 31, 2004 the Company's cash reserves totaled $39,358. The Company
is continuing production and sales efforts as well as further research and
development. During the remainder of 2004 the Company expects to incur
additional costs for research and development and anticipates expanding its
sales and marketing effort. These efforts could significantly increase demand
for the Company's products beyond the Company's current production capacity.
While the Company believes it can increase its production capacity to meet sales
demands, additional capital will be required to meet expansion requirements.
F-8
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
3. LIQUIDITY, CONTINUED
---------------------
To assist with funding its operations, the Company's majority stockholders
contributed additional paid-in capital of $369,171 and additional loans of
$664,500 during the three months ended March 31, 2004. During 2004 and beyond
the Company will require additional capital. Although the current majority
stockholders of the Company have made a verbal commitment, with no guarantee, to
continue to fund the research and development and sales and marketing efforts of
the Company in 2004 if alternate financing cannot be obtained, there can be no
assurance that any new capital would be available to the Company or that
adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, or other arrangements will be available when needed
or on terms satisfactory to the Company. The failure of the Company to obtain
adequate additional financing may require the Company to delay, curtail or scale
back some or all of its research and development programs, sales and marketing
efforts, and manufacturing operations.
4. PROPERTY AND EQUIPMENT
----------------------
Property and equipment, at March 31, 2004, consists of the following:
Machinery and equipment $ 71,074
Leasehold improvements 809,708
----------
880,782
Less accumulated depreciation (61,095)
----------
Property and equipment, net $ 819,687
==========
Depreciation expense was $673 and $750 for the three months ended March 31, 2004
and 2003, respectively. Leasehold improvements of $809,708 represent additions
made in connection with the renovation and possible purchase of a 65,000 square
foot building in Ronkonkoma, New York.
5. NOTES PAYABLE TO STOCKHOLDERS
-----------------------------
Notes payable to stockholders at March 31, 2004 consisted of the following:
Note payable to a stockholder bearing interest at 10% per
year with interest payments due quarterly and the principal
due on demand. This note is collateralized by inventory. $ 40,000
Note payable to two stockholders and current employees of
the Company bearing interest at 10% per year with all
interest and principal due June 28, 2004 with the option
to renew the note for 30 day periods. The note is not
collateralized. 23,400
F-9
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE TO STOCKHOLDERS, CONTINUED
----------------------------------------
Note payable to a stockholder and officer/director of the
Company. There is no formal note agreement; however, the
note bears interest at the prime rate (4% at March 31,
2004) and is due on demand. The note is not collateralized. 150,000
Note payable to a stockholder and officer/director of the
Company. There is no formal note agreement. The note
bears no interest; however, interest is imputed at
the prime rate (4% at March 31, 2004) and the outstanding principal
balance is due on demand. The note is not collateralized. 564,500
-------
Total notes payable to stockholders $ 777,900
==========
6. STOCKHOLDERS' EQUITY
---------------------
In connection with the Company's recapitalization (See Note 2), the Company
adopted new articles of incorporation that authorized the Company to issue
500,000,000 shares of common stock with a par value of $0.001 per share. Since
the Company's common stock did not previously have a stated par value, common
stock for all periods presented has been restated to reflect the par value of
$0.001 per share.
The Company's articles of incorporation also authorize the issuance of up to
10,000,000 shares of preferred stock with characteristics determined by the
Company's board of directors. As of March 31, 2004 the Company has not issued
any preferred stock.
Effective March 12, 2004 the Company's board of directors approved a six for one
forward split of the Company's stock. As a result, 184,263,395 shares were
issued to the stockholders of the Company. Par value of the stock remained at
$0.001 per share and, accordingly, $184,263 was transferred from additional
paid-in capital to common stock. The effect of this stock split was recorded
retroactively in the December 31, 2003 audited financial statements and,
accordingly, all references to the number of common shares and per common share
amounts have been restated to give retroactive effect to the stock split for all
periods presented in these interim financial statements.
STOCK OPTIONS
--------------
The Company periodically issues incentive stock options to key employees,
officers and directors to provide additional incentives to promote the success
of the Company's business and to enhance the ability to attract and retain the
services of qualified persons. The issuance of such options are approved by the
Board of Directors. The exercise price of an option granted is determined by
the fair market value of the stock on the date of grant.
F-10
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
6. STOCKHOLDERS' EQUITY, CONTINUED
---------------------------------
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation", requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options is
greater than or equals the fair market value of the underlying stock on the date
of grant, no compensation expense has been recognized.
Proforma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option-pricing model. No options were granted or vested in 2002 and,
accordingly, no option-pricing assumptions or proforma disclosures are presented
for that year.
The Black-Scholes option valuation model was developed for use in estimating
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of proforma disclosures, the estimated fair value of the options is
included in expense over the option's vesting period or expected life.
As of March 31, 2004, options to purchase 9,000,000 shares of the Company's
common stock were granted to employees with an exercise price of $0.01667 per
share. These options vest ratably at different times beginning in May 2004 and
ending in 2007 and expire ten years from the date of grant. The Company's
proforma information follows:
Actual net income (loss) $(571,254)
=========
Proforma net income (loss) $ (571,254)
===========
Actual basic and dilutive net income (loss) $ (0.00)
==========
Proforma basic and dilutive net income (loss)
per share $ (0.00)
==========
Option Pricing Assumptions:
Dividend yield 0%
Expected volatility 100%
Risk free interest 3.0%
Expected lives 10 years
F-11
TRANS MAX TECHNOLOGIES, INC.
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS, CONTINUED
6. STOCKHOLDERS' EQUITY, CONTINUED
---------------------------------
A summary of the Company's stock option activity and related information for the
three months ended March 31, 2004 follows:
NUMBER OF
SHARES
UNDER WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ---------------
Outstanding - December 31, 2003 1,950,000 $ 0.01667
Granted 7,050,000 $ 0.01667
Exercised - -
Forfeited during 2004 - - __
--------- ---------------
Outstanding - March 31, 2004 9,000,000 $ 0.01667
========= ===============
Exercisable - March 31, 2004 - -
========= ===============
7. RELATED PARTY TRANSACTIONS
----------------------------
The Company has entered into four notes payable agreements with certain of its
stockholders (See Note 5). Included in accrued expenses at March 31, 2004 is
accrued interest payable to these stockholders of $5,925 related to these notes.
Included in interest expense for the years ended March 31, 2004 and 2003 was
$9,817 and $1,151, respectively, related to these notes.
The Company has a license agreement with its Chief Scientist for its ignition
system product line whereby it has acquired all of his rights to patents,
trademarks, technical information and trade secrets through November 30, 2021 by
payment of a yearly license fee of $1,000.
In November 2003, the Company agreed to provide a $1.5 million line of credit to
provide products and services to Aero Marine Engine, Inc., a company owned by
the majority stockholders of the Company. Pursuant to the agreement between the
Company and Aero Marine Engine, Inc., for every $2 paid to the Company by Aero
Marine Engine, Inc., the Company will extend $1 of credit, up to a maximum of
$1.5 million dollars. As of March 31, 2004, the Company has not advanced any
money under this agreement. Aero Marine does not have sufficient funds
to pay the Company in order to receive credit, under this agreement.
At March 31, 2004 the Company had a receivable from Aero Marine of $218,966.
There is a substantial doubt about the ability of Aero Marine to repay the
Company. These advances were made in connection with relocating this affiliated
company to Ronkonkoma, New York and funding this affiliated company's payroll.
F-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB (this "Form 10-QSB"),
including statements under "Item 1. Description of Business" and "Item 6.
Management's Discussion and Analysis", constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995 (collectively, the "Reform
Act"). Certain, but not necessarily all, of such forward-looking statements can
be identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates", or the negative thereof
or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Trans Max
Technologies, Inc. ("the Company", "we" or "us") to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. References in this form 10-QSB,
unless another date is stated, are to March 31, 2004.
OVERVIEW
The Company has focused on expanding its existing product lines, the development
of new product lines, the development of new technologies, and streamlining and
increasing the production of its existing product lines.
NEW PRODUCTS
Enhancements to the Plasma Drive Ignition System are ongoing. Modifications to
the system continue in order to meet demand for emerging markets such as the
marine and motorcycle industries. Other markets and applications for this system
include street vehicles, high performance automobiles, race cars, scientific and
industrial equipment, space and aviation applications, agricultural machinery
and vehicles, as well as clean burning fuel applications.
The Company is also working on reducing the size of the circuitry and the system
overall. This miniaturization will improve the marketability of the system and
lessen the time frame the company requires to penetrate these new emerging
markets.
In March 2004 the Company received two letters of intent for 1,000 units each
From new customers in the marine and motorcycle industries. The new
products may not be completed unless the Company receives additional financing
of which there is no guarantee.
MARKETING STRATEGY
The Company will continue its current marketing strategy of conducting sales
training missions to its wholesale distributors, continuing to improve and
expand its website, and making postcard mailings to alert distributors to new
product offerings. The Company has also intensified its in house sales efforts
and strengthened its position in new markets through its affiliation with
related companies. The Company now provides its warehouse distributors with
compact disks containing information on all of its product offerings in a format
that distributors can use to promote the Company's products in their advertising
and catalogs.
The Company has attended and been an exhibitor at trade shows in Indianapolis
and Miami and will attend other shows during year where appropriate. The
Company also has tested its plasma drive ignition system on the 2003 Crown
Victoria.
The Company's internet site, www.perma-tune.com, continues to be instrumental in
sales and providing information regarding its products, applications, ordering
and contact information, as well as technical support and product
specifications.
In February of 2004 the Company was an exhibitor at the Miami International Boat
Show. During this trade show the Company explored new marketing and sales
opportunities in the marine industry. All product lines of the Company were
well received by both boat and marine engine manufacturers. Special interest
was taken in the Company's plasma drive ignition system by the high performance
and racing boat manufacturers. A plasma drive ignition system was outfitted and
tested by an independent high performance engine manufacturer. The results
showed a substantial increase in horsepower and garnered a product endorsement.
The positive show feedback coupled with the product's performance resulted in
the Company being awarded second place by the boat show organizers for best new
technology at the show.
MANUFACTURING OVERVIEW
Management has prepared for rapid growth. The Company's manufacturing technique
is flexible because of its modular design and it can respond easily to customer
demand. Modules can be mass-produced and then assembled in house to meet
additional customer orders. Production can be increased and new products
introduced readily. Currently the Company is operating at a small percentage of
its manufacturing capacity.
The Company expects to begin outsourcing the production of the circuit boards
used throughout its product lines. The circuitry is being redesigned and
miniaturized to improve the overall marketability and manufacturability of the
product line. Outsourcing will reduce the direct labor hours of manufacturing
the product line and will reduce the overall cost of goods sold. Outsourcing
will also permit the Company to increase production without hiring more
employees and reduce overhead costs by reducing the number of production parts
that must be stocked.
COMPARISON OF OPERATING RESULTS
Three months ended March 31, 2004 compared to the three months ended March 31,
2003:
For the three months ended March 31, 2004 as compared to the three months ended
March 31, 2003 the Company experienced a decrease in gross sales to $60,348 from
$68,536, respectively.
Gross profit for the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003 decreased to $27,336 from $44,506 respectively. As a
percentage of sales, gross profit decreased for the three months ended March 31,
2004 to 45% from 65% for the three months ended March 31, 2003. This decrease
was primarily due to the hiring of additional technical personnel during 2004.
General and administrative expenses were $531,161 and $39,649 for the three
months ended March 31, 2004 and 2003, respectively. This increase was primarily
due to an increase in salaries as a result of the addition of a new management
team as well as increased compensation of relocated employees. In addition,
there was an overall increase in professional fees, rent expense and utilities.
Interest expense increased to $9,817 for the three months ended March 31, 2004
from $1,151 for the three months ended March 31, 2003. This increase was a
result of the increase in the note payable to stockholder balances in 2004.
Research and development expenses increased to $57,612 for the three months
ended March 31, 2004 from $114 for the three months ended March 31, 2003. This
increase was due to redesigning the circuit boards, new applications for the
Plasma Drive Ignition system, and material and labor costs for prototypes.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2004 and March 31, 2003, the Company
reported a net loss of $(571,254) and a net profit of $3,592, respectively. The
Company has been dependent on additional capital contributions from shareholders
and debt financing to fund its cash requirements, as well as revenues provided
by the normal operations of the electronic ignition product line.
As of March 31, 2004 the Company's cash reserves totaled $39,358 and total
current assets were $152,717. The Company is continuing production and sales
efforts as well as further research and development. Through the first quarter
of 2004, the Company has no long-term commitments but expects to incur
additional costs for research and development and sales and marketing through
the remainder of 2004. These efforts could significantly increase demand for the
Company's products beyond the Company's current production capacity.
While the Company believes it can increase its production capacity to meet sales
demand, additional capital will be required to meet expansion requirements.
Inventory at March 31, 2004 was $54,804. Other current assets of $32,830
represents $18,100 of security deposits, $10,500 other receivables and $4,230
advanced to an employee. The Company also has a receivable due from a related
party of $218,996. This is due primarily from a company owned by the majority
stockholders of the Company. These advances were made in connection with
relocating this affiliated company to Ronkonkoma, New York and funding this
affiliate's payroll. There currently is no repayment plan for this receivable.
The Company presently has an outstanding loan payable on demand to Terry Taylor,
a stockholder. Principal balance as of March 31, 2004 is $40,000. The loan bears
an interest rate of 10%. Interest is payable quarterly. The loan is secured by
inventory. The interest for the quarter ended March 31, 2004 of $1,000 was
accrued at March 31, 2004 and has not yet been paid..
The Company also presently has an outstanding loan payable on demand to Lonnie
Lenarduzzi and Linda Decker, stockholders and former directors. Principal
balance as of March 31, 2004 is $23,400. The loan bears an interest rate of 10%
per year, and is unsecured. The note is due June 28, 2004, with the option to
renew the term for additional 30-day periods. Interest in the amount of $1,585
has been accrued as of March 31, 2004.
The Company also presently has an outstanding loan payable to Peter
Mergenthaler, the Company's Chief Executive Officer as well as a stockholder of
the Company. The principal balance as of March 31, 2004 is $564,500. The loan
bears no interest and there currently is no repayment plan.
The Company also presently has an outstanding loan payable to Paul M. Cervino,
the Company's Chief Financial Officer as well as a stockholder of the Company.
The principal balance as of March 31, 2004 is $150,000. The loan bears interest
at the prime rate (4% at March 31, 2004) and there currently is no repayment
plan.
The Company's working capital ratio is .16 at March 31, 2004.
As of March 31, 2004, the Company had accounts payable of $56,442, accrued
expenses of $115,258 and notes payable to stockholders of $777,900, as stated
above.
The Company's inventory turnover ratio is .62 for the first quarter of 2004.
As of March 31, 2004 the Company had property and equipment, net of accumulated
depreciation of $819,687. The total in 2004 is primarily a result of additions
to leasehold improvements in connection with the renovation and possible
purchase of a 65,000 square foot building in Ronkonkoma, New York.
The former shareholders of Trans Max, who have become the Company's majority
stockholders, contributed additional paid-in capital of $369,171 during the
quarter ended March 31, 2004, and the Company may require additional capital.
There can be no assurance that any new capital would be available to the Company
or that adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, or other arrangements will be available when needed
or on terms satisfactory to the Company. Although the Company has a verbal
commitment, with no guarantee, from its current majority shareholders to
continue funding its operations, the failure of the Company to obtain adequate
additional financing may require the Company to delay, curtail or scale back
some or all of its research and development programs, sales and marketing
efforts, and manufacturing operations. Any additional financing may involve
dilution to the Company's then-existing shareholders.
Although the Company anticipates its majority stockholders to continue to fund
its short-term operations, without additional capital or debt financing, the
Company does not believe it can operate at its current level without additional
funding. The Company is currently dependent on receiving funding from its
majority shareholders. If funding were to stop or the Company could not raise
additional capital, the Company would not be able to continue operations beyond
its current pay cycle.
CRITICAL ACCOUNTING POLICIES
We believe that of the significant accounting policies used in the preparation
of our financial statements, the following are critical accounting policies,
which may involve a higher degree of judgment, complexity and estimates.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable and
collectibility is probable. Generally, these criteria are met at the time
product is shipped. The Company provides for the estimated cost of product
warranties upon shipment. The Company has a no return policy and has had no
returns in the last two years. Shipping and handling costs are included in cost
of goods sold.
RESEARCH AND DEVELOPMENT
Research and development activities are expensed as incurred, including costs
relating to patents or rights which may result from such expenditures.
STOCK-BASED COMPENSATION
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123") established financial accounting and reporting standards for
stock-based employee compensation plans. It defined a fair value based method
of accounting for an employee stock option or similar equity instrument and
encouraged all entities to adopt that method of accounting for all of their
employee stock compensation plans and include the cost in the income statement
as compensation expense. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees". The Company accounts for
compensation cost for stock option plans in accordance with APB Opinion No. 25.
LOSS PER SHARE
Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period. Common
equivalent shares from common stock options and warrants are excluded from the
computation as their effect would dilute the loss per share for all periods
presented.
RECAPITALIZATION
On July 21, 2003, the Registrant acquired 100% of the issued and outstanding
shares of Trans Max Technologies, Inc., a Florida corporation, ("Trans Max") in
exchange for 15,177,300 shares of the Registrant's common stock. This share
exchange is stated at pre two for one and six for one split's. As a result of
the acquisition of Trans Max, the control of the Registrant shifted to the
former shareholders of Trans Max.
Following the Share Exchange there were 17,500,000 shares of the Registrant's
common stock outstanding. The change in control was reported via a Form 8-K in
August,2003. The business of Perma-Tune Electronics, Inc. will remain the
business of the Registrant.
As a result of the acquisition of Trans Max, the Registrant changed its name
from Perma-Tune Electronics, Inc. to Trans Max Technologies, Inc. In addition,
Lonnie Lenarduzzi resigned as the Registrant's President, Chief Executive
Officer and Director, Linda Decker resigned as Secretary, Chief Financial
Officer, and Director and the following persons resigned as directors: Larrie
Lenarduzzi, Wayne Robertson, and Harold "Red" Smith. Peter Mergenthaler was
appointed as director and the Chief Executive Officer. Paul M. Cervino has been
appointed as the Chief Financial Officer of the Company.
FORWARD SPLIT
On March 12, 2004, in connection with a six for one forward split the company
issued 184,260,395 shares of common stock. The following individuals exercise
control of the Registrant with the forward spilt reflected in each individual's
number of shares.
Name No. of shares Percentage
---- --------------- ----------
Colonel Robert Fyn 63,744,660 28.8%
Murray H. Stark 63,744,660 28.8%
Peter Mergenthaler 27,319,140 12.4%
Garth S. Bailey 27,319,140 12.4%
ITEM 5. - Certain Relationships and Related Transactions
Robert E. Fyn, Murray H. Stark, Garth S. Bailey and Peter Mergenthaler own
majority control of Aero Marine Engine, Inc. as well as majority control of the
Registrant. Messrs. Fyn and Stark each own approximately 26% of Aero Marine
Engine, Inc. and Messrs. Bailey and Mergenthaler own approximately 13% of Aero
Marine Engine, Inc.
In November 2003, the Company agreed to provide a $1.5 million line of credit to
provide products and services to Aero Marine Engine, Inc. Pursuant to the
agreement between the Company and Aero Marine Engine, Inc., for every $2 paid to
the Company by Aero Marine Engine, Inc., the Company will extend $1 of credit,
up to a maximum of $1.5 million dollars. The Company's current financial
position makes it unlikely that it would be able to extend credit under the
agreement.
Lonnie Lenarduzzi has entered into a Licensing Agreement to license to the
Company all technology developed by him for $1,000 per year. The Licensing
Agreement was entered into on November 30, 1996 and has a term of 25 years,
extending to November 30, 2021.
The Company has relocated to a temporary location with a month to month lease
while renovating and possibly purchasing a 65,000 square foot building in
Ronkonkoma, New York. The Company is leasing the space from Advance Micro Power
Corporation who has signed a Letter of Intent to be acquired by the Company. It
is anticipated that the acquisition will be finalized within 90 days, subject to
the ability of the Company to receive financing.
Advance Micro Power (AMP) designs and produces miniature electronic circuit
boards. AMP's customer base includes companies in the medical, industrial,
defense, and telecommunication industries. AMP also functions as a technology
incubator for small high tech entrepreneurs.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
3.2 Bylaws
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant Section
302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Trans Max Technologies, Inc.
Date: May 24, 2004
By: /s/ Peter Mergenthaler
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Peter Mergenthaler
Chief Executive Officer
EXHIBIT 3.2
BYLAWS
OF
TRANS MAX TECHNOLOGIES, INC.
A NEVADA CORPORATION
ARTICLE 1.
DEFINITIONS
1.1 Definitions. Unless the context clearly requires otherwise, in these
-----------
Bylaws:
(a) "Board" means the board of directors of the Company.
(b) "Bylaws" means these bylaws as adopted by the Board and includes amendments
subsequently adopted by the Board or by the Stockholders.
(c) "Articles of Incorporation" means the Articles of Incorporation of Trans
Max Technologies, Inc., as filed with the Secretary of State of the State
of Nevada and includes all amendments thereto and restatements thereof
subsequently filed.
(d) "Company" means Trans Max Technologies, Inc., a Nevada corporation.
(e) "Section" refers to sections of these Bylaws.
(f) "Stockholder" means stockholders of record of the Company.
1.2 Offices. The title of an office refers to the person or persons who at
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any given time perform the duties of that particular office for the Company.
ARTICLE 2.
OFFICES
2.1 Principal Office. The Company may locate its principal office within or
----------------
without the state of incorporation as the Board may determine.
2.2 Registered Office. The registered office of the Company required by law
-----------------
to be maintained in the state of incorporation may be, but need not be, the same
as the principal place of business of the Company. The Board may change the
address of the registered office from time to time.
2.3 Other Offices. The Company may have offices at such other places,
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either within or without the state of incorporation, as the Board may designate
or as the business of the Company may require from time to time.
ARTICLE 3.
MEETINGS OF STOCKHOLDERS
3.1 Annual Meetings. The Stockholders of the Company shall hold their
---------------
annual meetings for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings at such time, date
and place as the Board shall determine by resolution.
3.2 Special Meetings. The Board, the Chairman of the Board, the President
----------------
or a committee of the Board duly designated and whose powers and authority
include the power to call meetings may call special meetings of the Stockholders
of the Company at any time for any purpose or purposes. Special meetings of the
Stockholders of the Company may also be called by the holders of at least 30% of
all shares entitled to vote at the proposed special meeting.
3.3 Place of Meetings. The Stockholders shall hold all meetings at such
-----------------
places, within or without the State of Nevada, as the Board or a committee of
the Board shall specify in the notice or waiver of notice for such meetings.
3.4 Notice of Meetings. Except as otherwise required by law, the Board or a
------------------
committee of the Board shall give notice of each meeting of Stockholders,
whether annual or special, not less than 10 nor more than 50 days before the
date of the meeting. The Board or a committee of the Board shall deliver a
notice to each Stockholder entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his address as it appears on the records of the Company, or by transmitting a
notice thereof to him at such address by telegraph, telecopy, cable or wireless.
If mailed, notice is given on the date deposited in the United States mail,
postage prepaid, directed to the Stockholder at his address as it appears on the
records of the Company. An affidavit of the Secretary or an Assistant Secretary
or of the Transfer Agent of the Company that he has given notice shall
constitute, in the absence of fraud, prima facie evidence of the facts stated
therein.
Every notice of a meeting of the Stockholders shall state the place, date
and hour of the meeting and, in the case of a special meeting, also shall state
the purpose or purposes of the meeting. Furthermore, if the Company will
maintain the list at a place other than where the meeting will take place, every
notice of a meeting of the Stockholders shall specify where the Company will
maintain the list of Stockholders entitled to vote at the meeting.
3.5 Stockholder Notice. Subject to the Articles of Incorporation, the
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Stockholders who intend to nominate persons to the Board of Directors or propose
any other action at an annual meeting of Stockholders must timely notify the
Secretary of the Company of such intent. To be timely, a Stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 50 days nor more than 90 days prior to the date of
such meeting; provided, however, that in the event that less than 75 days'
notice of the date of the meeting is given or made to Stockholders, notice by
the Stockholder to be timely must be received not later than the close of
business on the 15th day following the date on which such notice of the date of
the annual meeting was mailed. Such notice must be in writing and must include
a (i) a brief description of the business desired to the brought before the
annual meeting and the reasons for conducting such business at the meeting; (ii)
the name and record address of the Stockholder proposing such business; (iii)
the class, series and number of shares of capital stock of the Company which are
beneficially owned by the Stockholder; and (iv) any material interest of the
Stockholder in such business. The Board of Directors reserves the right to
refuse to submit any such proposal to stockholders at an annual meeting if, in
its judgment, the information provided in the notice is inaccurate or
incomplete.
3.6 Waiver of Notice. Whenever these Bylaws require written notice, a
----------------
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall constitute the equivalent of notice.
Attendance of a person at any meeting shall constitute a waiver of notice of
such meeting, except when the person attends the meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. No written
waiver of notice need specify either the business to be transacted at, or the
purpose or purposes of any regular or special meeting of the Stockholders,
directors or members of a committee of the Board.
3.7 Adjournment of Meeting. When the Stockholders adjourn a meeting to
----------------------
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Stockholders may transact any business
which they may have transacted at the original meeting. If the adjournment is
for more than 30 days or, if after the adjournment, the Board or a committee of
the Board fixes a new record date for the adjourned meeting, the Board or a
committee of the Board shall give notice of the adjourned meeting to each
Stockholder of record entitled to vote at the meeting.
3.8 Quorum. Except as otherwise required by law, the holders of a majority
------
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes at any meeting of
the Stockholders. In the absence of a quorum at any meeting or any adjournment
thereof, the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, or, in the absence therefrom of all the
Stockholders, any officer entitled to preside at, or to act as secretary of,
such meeting may adjourn such meeting to another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Stockholders to all Stockholders entitled to vote thereat, stating
that the minimum percentage of stockholders for a quorum as provided by Nevada
law shall constitute a quorum, then, except as otherwise required by law, that
percentage at such adjourned meeting shall constitute a quorum and a majority of
the votes cast at such meeting shall determine all matters.
3.9 Organization. Such person as the Board may have designated or, in the
------------
absence of such a person, the highest ranking officer of the Company who is
present shall call to order any meeting of the Stockholders, determine the
presence of a quorum, and act as chairman of the meeting. In the absence of the
Secretary or an Assistant Secretary of the Company, the chairman shall appoint
someone to act as the secretary of the meeting.
3.10 Conduct of Business. The chairman of any meeting of Stockholders shall
-------------------
determine the order of business and the procedure at the meeting, including such
regulations of the manner of voting and the conduct of discussion as he deems in
order.
3.11 List of Stockholders. At least 10 days before every meeting of
--------------------
Stockholders, the Secretary shall prepare a list of the Stockholders entitled to
vote at the meeting or any adjournment thereof, arranged in alphabetical order,
showing the address of each Stockholder and the number of shares registered in
the name of each Stockholder. The Company shall make the list available for
examination by any Stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting will take place or at the
place designated in the notice of the meeting.
The Secretary shall produce and keep the list at the time and place of
the meeting during the entire duration of the meeting, and any Stockholder who
is present may inspect the list at the meeting. The list shall constitute
presumptive proof of the identity of the Stockholders entitled to vote at the
meeting and the number of shares each Stockholder holds.
A determination of Stockholders entitled to vote at any meeting of
Stockholders pursuant to this Section shall apply to any adjournment thereof.
3.12 Fixing of Record Date. For the purpose of determining Stockholders
---------------------
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, or Stockholders entitled to receive payment of any
dividend, or in order to make a determination of Stockholders for any other
proper purpose, the Board or a committee of the Board may fix in advance a date
as the record date for any such determination of Stockholders. However, the
Board shall not fix such date, in any case, more than 60 days nor less than 10
days prior to the date of the particular action.
If the Board or a committee of the Board does not fix a record date
for the determination of Stockholders entitled to notice of or to vote at a
meeting of Stockholders, the record date shall be at the close of business on
the day next preceding the day on which notice is given or if notice is waived,
at the close of business on the day next preceding the day on which the meeting
is held or the date on which the Board adopts the resolution declaring a
dividend.
3.13 Voting of Shares. Each Stockholder shall have one vote for every share
----------------
of stock having voting rights registered in his name on the record date for the
meeting. The Company shall not have the right to vote treasury stock of the
Company, nor shall another corporation have the right to vote its stock of the
Company if the Company holds, directly or indirectly, a majority of the shares
entitled to vote in the election of directors of such other corporation.
Persons holding stock of the Company in a fiduciary capacity shall have the
right to vote such stock. Persons who have pledged their stock of the Company
shall have the right to vote such stock unless in the transfer on the books of
the Company the pledgor expressly empowered the pledgee to vote such stock. In
that event, only the pledgee, or his proxy, may represent such stock and vote
thereon.
A plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
elections and, except when the law or Articles of Incorporation requires
otherwise, the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
other matters.
Where a separate vote by a class or classes is required, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class.
The Stockholders may vote by voice vote on all matters. Upon demand
by a Stockholder entitled to vote, or his proxy, the Stockholders shall vote by
ballot. In that event, each ballot shall state the name of the Stockholder or
proxy voting, the number of shares voted and such other information as the
Company may require under the procedure established for the meeting.
3.14 Inspectors. At any meeting in which the Stockholders vote by ballot,
----------
the chairman may appoint one or more inspectors. Each inspector shall take and
sign an oath to execute the duties of inspector at such meeting faithfully, with
strict impartiality, and according to the best of his ability. The inspectors
shall ascertain the number of shares outstanding and the voting power of each;
determine the shares represented at a meeting and the validity of proxies and
ballots; count all votes and ballots; determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors; and certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
certification required herein shall take the form of a subscribed, written
report prepared by the inspectors and delivered to the Secretary of the Company.
An inspector need not be a Stockholder of the Company, and any officer of the
Company may be an inspector on any question other than a vote for or against a
proposal in which he has a material interest.
3.15 Proxies. A Stockholder may exercise any voting rights in person or by
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his proxy appointed by an instrument in writing, which he or his authorized
attorney-in-fact has subscribed and which the proxy has delivered to the
secretary of the meeting pursuant to the manner prescribed by law.
A proxy is not valid after the expiration of 13 months after the date
of its execution, unless the person executing it specifies thereon the length of
time for which it is to continue in force (which length may exceed 12 months) or
limits its use to a particular meeting. Each proxy is irrevocable if it
expressly states that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an irrevocable power.
The attendance at any meeting of a Stockholder who previously has
given a proxy shall not have the effect of revoking the same unless he notifies
the Secretary in writing prior to the voting of the proxy.
3.16 Action by Consent. Any action required to be taken at any annual or
-----------------
special meeting of stockholders of the Company or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Company by delivery to its registered office, its principal place of business,
or an officer or agent of the Company having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Company's registered office shall be by hand or by certified or registered mail,
return receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 50 days of the
earliest dated consent delivered in the manner required by this section to the
Company, written consents signed by a sufficient number of holders to take
action are delivered to the Company by delivery to its registered office, its
principal place of business or an officer or agent of the Company having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Company's registered office shall be by hand or by
certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE 4.
BOARD OF DIRECTORS
4.1 General Powers. The Board shall manage the property, business and
--------------
affairs of the Company.
4.2 Number. The number of directors who shall constitute the Board shall
------
equal not less than 1 nor more than 10, as the Board or majority stockholders
may determine by resolution from time to time.
4.3 Election of Directors and Term of Office. The Stockholders of the
----------------------------------------
Company shall elect the directors at the annual or adjourned annual meeting
(except as otherwise provided herein for the filling of vacancies). Each
director shall hold office until his death, resignation, retirement, removal, or
disqualification, or until his successor shall have been elected and qualified.
4.4 Resignations. Any director of the Company may resign at any time by
------------
giving written notice to the Board or to the Secretary of the Company. Any
resignation shall take effect upon receipt or at the time specified in the
notice. Unless the notice specifies otherwise, the effectiveness of the
resignation shall not depend upon its acceptance.
4.5 Removal. Stockholders holding 2/3 of the outstanding shares entitled to
-------
vote at an election of directors may remove any director or the entire Board of
Directors at any time, with or without cause.
4.6 Vacancies. Any vacancy on the Board, whether because of death,
---------
resignation, disqualification, an increase in the number of directors, or any
other cause may be filled by a majority of the remaining directors, a sole
remaining director, or the majority stockholders. Any director elected to fill
a vacancy shall hold office until his death, resignation, retirement, removal,
or disqualification, or until his successor shall have been elected and
qualified.
4.7 Chairman of the Board. At the initial and annual meeting of the Board,
---------------------
the directors may elect from their number a Chairman of the Board of Directors.
The Chairman shall preside at all meetings of the Board and shall perform such
other duties as the Board may direct. The Board also may elect a Vice Chairman
and other officers of the Board, with such powers and duties as the Board may
designate from time to time.
4.8 Compensation. The Board may compensate directors for their services and
------------
may provide for the payment of all expenses the directors incur by attending
meetings of the Board or otherwise.
ARTICLE 5.
MEETINGS OF DIRECTORS
5.1 Regular Meetings. The Board may hold regular meetings at such places,
----------------
dates and times as the Board shall establish by resolution. If any day fixed
for a meeting falls on a legal holiday, the Board shall hold the meeting at the
same place and time on the next succeeding business day. The Board need not
give notice of regular meetings.
5.2 Place of Meetings. The Board may hold any of its meetings in or out of
-----------------
the State of Nevada, at such places as the Board may designate, at such places
as the notice or waiver of notice of any such meeting may designate, or at such
places as the persons calling the meeting may designate.
5.3 Meetings by Telecommunications. The Board or any committee of the Board
------------------------------
may hold meetings by means of conference telephone or similar telecommunications
equipment that enable all persons participating in the meeting to hear each
other. Such participation shall constitute presence in person at such meeting.
5.4 Special Meetings. The Chairman of the Board, the President, or one-half
----------------
of the directors then in office may call a special meeting of the Board. The
person or persons authorized to call special meetings of the Board may fix any
place, either in or out of the State of Nevada as the place for the meeting.
5.5 Notice of Special Meetings. The person or persons calling a special
--------------------------
meeting of the Board shall give written notice to each director of the time,
place, date and purpose of the meeting of not less than three business days if
by mail and not less than 24 hours if by telegraph or in person before the date
of the meeting. If mailed, notice is given on the date deposited in the United
States mail, postage prepaid, to such director. A director may waive notice of
any special meeting, and any meeting shall constitute a legal meeting without
notice if all the directors are present or if those not present sign either
before or after the meeting a written waiver of notice, a consent to such
meeting, or an approval of the minutes of the meeting. A notice or waiver of
notice need not specify the purposes of the meeting or the business which the
Board will transact at the meeting.
5.6 Waiver by Presence. Except when expressly for the purpose of objecting
------------------
to the legality of a meeting, a director's presence at a meeting shall
constitute a waiver of notice of such meeting.
5.7 Quorum. A majority of the directors then in office shall constitute a
------
quorum for all purposes at any meeting of the Board. In the absence of a
quorum, a majority of directors present at any meeting may adjourn the meeting
to another place, date or time without further notice. No proxies shall be
given by directors to any person for purposes of voting or establishing a quorum
at a directors meetings.
5.8 Conduct of Business. The Board shall transact business in such order
-------------------
and manner as the Board may determine. Except as the law requires otherwise, the
Board shall determine all matters by the vote of a majority of the directors
present at a meeting at which a quorum is present. The directors shall act as a
Board, and the individual directors shall have no power as such.
5.9 Action by Consent. The Board or a committee of the Board may take any
-----------------
required or permitted action without a meeting if all members of the Board or
committee consent thereto in writing and file such consent with the minutes of
the proceedings of the Board or committee.
ARTICLE 6.
COMMITTEES
6.1 Committees of the Board. The Board may designate, by a vote of a
-----------------------
majority of the directors then in office, committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
6.2 Selection of Committee Members. The Board shall elect by a vote of a
------------------------------
majority of the directors then in office a director or directors to serve as the
member or members of a committee. By the same vote, the Board may designate
other directors as alternate members who may replace any absent or disqualified
member at any meeting of a committee. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may appoint by unanimous
vote another member of the Board to act at the meeting in the place of the
absent or disqualified member.
6.3 Conduct of Business. Each committee may determine the procedural rules
-------------------
for meeting and conducting its business and shall act in accordance therewith,
except as the law or these Bylaws require otherwise. Each committee shall make
adequate provision for notice of all meetings to members. A majority of the
members of the committee shall constitute a quorum, unless the committee
consists of one or two members. In that event, one member shall constitute a
quorum. A majority vote of the members present shall determine all matters. A
committee may take action without a meeting if all the members of the committee
consent in writing and file the consent or consents with the minutes of the
proceedings of the committee.
6.4 Authority. Any committee, to the extent the Board provides, shall have
---------
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Company, and may authorize the affixation of the
Company's seal to all instruments which may require or permit it. However, no
committee shall have any power or authority with regard to amending the Articles
of Incorporation, adopting an agreement of merger or consolidation, recommending
to the Stockholders the sale, lease or exchange of all or substantially all of
the Company's property and assets, recommending to the Stockholders a
dissolution of the Company or a revocation of a dissolution of the Company, or
amending these Bylaws of the Company. Unless a resolution of the Board
expressly provides, no committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger.
6.5 Minutes. Each committee shall keep regular minutes of its proceedings
-------
and report the same to the Board when required.
ARTICLE 7.
OFFICERS
7.1 Officers of the Company. The officers of the Company shall consist of a
-----------------------
President, a Secretary and such Vice Presidents, Assistant Secretaries,
Assistant Treasurers, and other officers as the Board may designate and elect
from time to time. The same person may hold at the same time any two or more
offices.
7.2 Election and Term. The Board shall elect the officers of the Company.
-----------------
Each officer shall hold office until his death, resignation, retirement, removal
or disqualification, or until his successor shall have been elected and
qualified.
7.3 Compensation of Officers. The Board shall fix the compensation of all
------------------------
officers of the Company. No officer shall serve the Company in any other
capacity and receive compensation, unless the Board authorizes the additional
compensation.
7.4 Removal of Officers and Agents. The Board may remove any officer or
------------------------------
agent it has elected or appointed at any time, with or without cause.
7.5 Resignation of Officers and Agents. Any officer or agent the Board has
----------------------------------
elected or appointed may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President, or the Secretary of the
Company. Any such resignation shall take effect at the date of the receipt of
such notice or at any later time specified. Unless otherwise specified in the
notice, the Board need not accept the resignation to make it effective.
7.6 Bond. The Board may require by resolution any officer, agent, or
----
employee of the Company to give bond to the Company, with sufficient sureties
conditioned on the faithful performance of the duties of his respective office
or agency. The Board also may require by resolution any officer, agent or
employee to comply with such other conditions as the Board may require from time
to time.
7.7 President. The President shall be the chief operating officer of the
---------
Company and, subject to the Board's control, shall supervise and direct all of
the business and affairs of the Company. When present, he shall sign (with or
without the Secretary, an Assistant Secretary, or any other officer or agent of
the Company which the Board has authorized) deeds, mortgages, bonds, contracts
or other instruments which the Board has authorized an officer or agent of the
Company to execute. However, the President shall not sign any instrument which
the law, these Bylaws, or the Board expressly require some other officer or
agent of the Company to sign and execute. In general, the President shall
perform all duties incident to the office of President and such other duties as
the Board may prescribe from time to time.
7.8 Vice Presidents. In the absence of the President or in the event of his
---------------
death, inability or refusal to act, the Vice Presidents in the order of their
length of service as Vice Presidents, unless the Board determines otherwise,
shall perform the duties of the President. When acting as the President, a Vice
President shall have all the powers and restrictions of the Presidency. A Vice
President shall perform such other duties as the President or the Board may
assign to him from time to time.
7.9 Secretary. The Secretary shall (a) keep the minutes of the meetings of
---------
the Stockholders and of the Board in one or more books for that purpose, (b)
give all notices which these Bylaws or the law requires, (c) serve as custodian
of the records and seal of the Company, (d) affix the seal of the corporation to
all documents which the Board has authorized execution on behalf of the Company
under seal, (e) maintain a register of the address of each Stockholder of the
Company, (f) sign, with the President, a Vice President, or any other officer or
agent of the Company which the Board has authorized, certificates for shares of
the Company, (g) have charge of the stock transfer books of the Company, and (h)
perform all duties which the President or the Board may assign to him from time
to time.
7.10 Assistant Secretaries. In the absence of the Secretary or in the event
---------------------
of his death, inability or refusal to act, the Assistant Secretaries in the
order of their length of service as Assistant Secretary, unless the Board
determines otherwise, shall perform the duties of the Secretary. When acting as
the Secretary, an Assistant Secretary shall have the powers and restrictions of
the Secretary. An Assistant Secretary shall perform such other duties as the
President, Secretary or Board may assign from time to time.
7.11 Treasurer. The Treasurer shall (a) have responsibility for all funds
---------
and securities of the Company, (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, (c) deposit all moneys in
the name of the Company in depositories which the Board selects, and (d) perform
all of the duties which the President or the Board may assign to him from time
to time.
7.12 Assistant Treasurers. In the absence of the Treasurer or in the event
--------------------
of his death, inability or refusal to act, the Assistant Treasurers in the order
of their length of service as Assistant Treasurer, unless the Board determines
otherwise, shall perform the duties of the Treasurer. When acting as the
Treasurer, an Assistant Treasurer shall have the powers and restrictions of the
Treasurer. An Assistant Treasurer shall perform such other duties as the
Treasurer, the President, or the Board may assign to him from time to time.
7.13 Delegation of Authority. Notwithstanding any provision of these Bylaws
-----------------------
to the contrary, the Board may delegate the powers or duties of any officer to
any other officer or agent.
7.14 Action with Respect to Securities of Other Corporations. Unless the
-------------------------------------------------------
Board directs otherwise, the President shall have the power to vote and
otherwise act on behalf of the Company, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which the Company holds securities. Furthermore, unless the
Board directs otherwise, the President shall exercise any and all rights and
powers which the Company possesses by reason of its ownership of securities in
another corporation.
7.15 Vacancies. The Board may fill any vacancy in any office because of
---------
death, resignation, removal, disqualification or any other cause in the manner
which these Bylaws prescribe for the regular appointment to such office.
ARTICLE 8.
CONTRACTS, LOANS, DRAFTS,
DEPOSITS AND ACCOUNTS
8.1 Contracts. The Board may authorize any officer or officers, agent or
---------
agents, to enter into any contract or execute and deliver any instrument in the
name and on behalf of the Company. The Board may make such authorization
general or special.
8.2 Loans. Unless the Board has authorized such action, no officer or agent
-----
of the Company shall contract for a loan on behalf of the Company or issue any
evidence of indebtedness in the Company's name.
8.3 Drafts. The President, any Vice President, the Treasurer, any Assistant
------
Treasurer, and such other persons as the Board shall determine shall issue all
checks, drafts and other orders for the payment of money, notes and other
evidences of indebtedness issued in the name of or payable by the Company.
8.4 Deposits. The Treasurer shall deposit all funds of the Company not
--------
otherwise employed in such banks, trust companies, or other depositories as the
Board may select or as any officer, assistant, agent or attorney of the Company
to whom the Board has delegated such power may select. For the purpose of
deposit and collection for the account of the Company, the President or the
Treasurer (or any other officer, assistant, agent or attorney of the Company
whom the Board has authorized) may endorse, assign and deliver checks, drafts
and other orders for the payment of money payable to the order of the Company.
8.5 General and Special Bank Accounts. The Board may authorize the opening
---------------------------------
and keeping of general and special bank accounts with such banks, trust
companies, or other depositories as the Board may select or as any officer,
assistant, agent or attorney of the Company to whom the Board has delegated such
power may select. The Board may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
ARTICLE 9.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
9.1 Certificates for Shares. Every owner of stock of the Company shall have
-----------------------
the right to receive a certificate or certificates, certifying to the number and
class of shares of the stock of the Company which he owns. The Board shall
determine the form of the certificates for the shares of stock of the Company.
The Secretary, transfer agent, or registrar of the Company shall number the
certificates representing shares of the stock of the Company in the order in
which the Company issues them. The President or any Vice President and the
Secretary or any Assistant Secretary shall sign the certificates in the name of
the Company. Any or all certificates may contain facsimile signatures. In case
any officer, transfer agent, or registrar who has signed a certificate, or whose
facsimile signature appears on a certificate, ceases to serve as such officer,
transfer agent, or registrar before the Company issues the certificate, the
Company may issue the certificate with the same effect as though the person who
signed such certificate, or whose facsimile signature appears on the
certificate, was such officer, transfer agent, or registrar at the date of
issue. The Secretary, transfer agent, or registrar of the Company shall keep a
record in the stock transfer books of the Company of the names of the persons,
firms or corporations owning the stock represented by the certificates, the
number and class of shares represented by the certificates and the dates thereof
and, in the case of cancellation, the dates of cancellation. The Secretary,
transfer agent, or registrar of the Company shall cancel every certificate
surrendered to the Company for exchange or transfer. Except in the case of a
lost, destroyed, stolen or mutilated certificate, the Secretary, transfer agent,
or registrar of the Company shall not issue a new certificate in exchange for an
existing certificate until he has canceled the existing certificate.
9.2 Transfer of Shares. A holder of record of shares of the Company's
------------------
stock, or his attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary, transfer agent or registrar of the Company, may
transfer his shares only on the stock transfer books of the Company. Such
person shall furnish to the Secretary, transfer agent, or registrar of the
Company proper evidence of his authority to make the transfer and shall properly
endorse and surrender for cancellation his existing certificate or certificates
for such shares. Whenever a holder of record of shares of the Company's stock
makes a transfer of shares for collateral security, the Secretary, transfer
agent, or registrar of the Company shall state such fact in the entry of
transfer if the transferor and the transferee request.
9.3 Lost Certificates. The Board may direct the Secretary, transfer agent,
-----------------
or registrar of the Company to issue a new certificate to any holder of record
of shares of the Company's stock claiming that he has lost such certificate, or
that someone has stolen, destroyed or mutilated such certificate, upon the
receipt of an affidavit from such holder to such fact. When authorizing the
issue of a new certificate, the Board, in its discretion may require as a
condition precedent to the issuance that the owner of such certificate give the
Company a bond of indemnity in such form and amount as the Board may direct.
9.4 Regulations. The Board may make such rules and regulations, not
-----------
inconsistent with these Bylaws, as it deems expedient concerning the issue,
transfer and registration of certificates for shares of the stock of the
corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer agents, or one or more registrars, and may require
all certificates for stock to bear the signature or signatures of any of them.
9.5 Holder of Record. The Company may treat as absolute owners of shares
----------------
the person in whose name the shares stand of record as if that person had full
competency, capacity and authority to exercise all rights of ownership, despite
any knowledge or notice to the contrary or any description indicating a
representative, pledge or other fiduciary relation, or any reference to any
other instrument or to the rights of any other person appearing upon its record
or upon the share certificate. However, the Company may treat any person
furnishing proof of his appointment as a fiduciary as if he were the holder of
record of the shares.
9.6 Treasury Shares. Treasury shares of the Company shall consist of shares
---------------
which the Company has issued and thereafter acquired but not canceled. Treasury
shares shall not carry voting or dividend rights.
ARTICLE 10.
INDEMNIFICATION
10.1 Definitions. In this Article:
-----------
(a) "Indemnitee" means (i) any present or former Director, advisory director or
officer of the Company, (ii) any person who while serving in any of the
capacities referred to in clause (i) hereof served at the Company's request
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, and (iii) any person nominated or designated by (or pursuant to
authority granted by) the Board of Directors or any committee thereof to
serve in any of the capacities referred to in clauses (i) or (ii) hereof.
(b) "Official Capacity" means (i) when used with respect to a Director, the
office of Director of the Company, and (ii) when used with respect to a
person other than a Director, the elective or appointive office of the
Company held by such person or the employment or agency relationship
undertaken by such person on behalf of the Company, but in each case does
not include service for any other foreign or domestic corporation or any
partnership, joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise.
(c) "Proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or
proceeding.
10.2 Indemnification. The Company shall indemnify every Indemnitee against
---------------
all judgments, penalties (including excise and similar taxes), fines, amounts
paid in settlement and reasonable expenses actually incurred by the Indemnitee
in connection with any Proceeding in which he was, is or is threatened to be
named defendant or respondent, or in which he was or is a witness without being
named a defendant or respondent, by reason, in whole or in part, of his serving
or having served, or having been nominated or designated to serve, in any of the
capacities referred to in Section 10.1, if it is determined in accordance with
Section 10.4 that the Indemnitee (a) conducted himself in good faith, (b)
reasonably believed, in the case of conduct in his Official Capacity, that his
conduct was in the Company's best interests and, in all other cases, that his
conduct was at least not opposed to the Company's best interests, and (c) in the
case of any criminal proceeding, had no reasonable cause to believe that his
conduct was unlawful; provided, however, that in the event that an Indemnitee is
found liable to the Company or is found liable on the basis that personal
benefit was improperly received by the Indemnitee the indemnification (i) is
limited to reasonable expenses actually incurred by the Indemnitee in connection
with the Proceeding and (ii) shall not be made in respect of any Proceeding in
which the Indemnitee shall have been found liable for willful or intentional
misconduct in the performance of his duty to the Company. Except as provided in
the immediately preceding proviso to the first sentence of this Section 10.2, no
indemnification shall be made under this Section 10.2 in respect of any
Proceeding in which such Indemnitee shall have been (x) found liable on the
basis that personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the Indemnitee's Official Capacity, or
(y) found liable to the Company. The termination of any Proceeding by judgment,
order, settlement or conviction, or on a plea of nolo contendere or its
equivalent, is not of itself determinative that the Indemnitee did not meet the
requirements set forth in clauses (a), (b) or (c) in the first sentence of this
Section 10.2. An Indemnitee shall be deemed to have been found liable in
respect of any claim, issue or matter only after the Indemnitee shall have been
so adjudged by a court of competent jurisdiction after exhaustion of all appeals
therefrom. Reasonable expenses shall, include, without limitation, all court
costs and all fees and disbursements of attorneys for the Indemnitee. The
indemnification provided herein shall be applicable whether or not negligence or
gross negligence of the Indemnitee is alleged or proven.
10.3 Successful Defense. Without limitation of Section 10.2 and in addition
------------------
to the indemnification provided for in Section 10.2, the Company shall indemnify
every Indemnitee against reasonable expenses incurred by such person in
connection with any Proceeding in which he is a witness or a named defendant or
respondent because he served in any of the capacities referred to in Section
10.1, if such person has been wholly successful, on the merits or otherwise, in
defense of the Proceeding.
10.4 Determinations. Any indemnification under Section 10.2 (unless ordered
--------------
by a court of competent jurisdiction) shall be made by the Company only upon a
determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of Directors who, at the time of such vote, are not named
defendants or respondents in the Proceeding; (b) if such a quorum cannot be
obtained, then by a majority vote of a committee of the Board of Directors, duly
designated to act in the matter by a majority vote of all Directors (in which
designated Directors who are named defendants or respondents in the Proceeding
may participate), such committee to consist solely of two (2) or more Directors
who, at the time of the committee vote, are not named defendants or respondents
in the Proceeding; (c) by special legal counsel selected by the Board of
Directors or a committee thereof by vote as set forth in clauses (a) or (b) of
this Section 10.4 or, if the requisite quorum of all of the Directors cannot be
obtained therefor and such committee cannot be established, by a majority vote
of all of the Directors (in which Directors who are named defendants or
respondents in the Proceeding may participate); or (d) by the shareholders in a
vote that excludes the shares held by Directors that are named defendants or
respondents in the Proceeding. Determination as to reasonableness of expenses
shall be made in the same manner as the determination that indemnification is
permissible, except that if the determination that indemnification is
permissible is made by special legal counsel, determination as to reasonableness
of expenses must be made in the manner specified in clause (c) of the preceding
sentence for the selection of special legal counsel. In the event a
determination is made under this Section 10.4 that the Indemnitee has met the
applicable standard of conduct as to some matters but not as to others, amounts
to be indemnified may be reasonably prorated.
10.5 Advancement of Expenses. Reasonable expenses (including court costs
-----------------------
and attorneys' fees) incurred by an Indemnitee who was or is a witness or was,
is or is threatened to be made a named defendant or respondent in a Proceeding
shall be paid by the Company at reasonable intervals in advance of the final
disposition of such Proceeding, and without making any of the determinations
specified in Section 10.4, after receipt by the Company of (a) a written
affirmation by such Indemnitee of his good faith belief that he has met the
standard of conduct necessary for indemnification by the Company under this
Article and (b) a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in this Article. Such written undertaking shall be an unlimited
obligation of the Indemnitee but need not be secured and it may be accepted
without reference to financial ability to make repayment. Notwithstanding any
other provision of this Article, the Company may pay or reimburse expenses
incurred by an Indemnitee in connection with his appearance as a witness or
other participation in a Proceeding at a time when he is not named a defendant
or respondent in the Proceeding.
10.6 Employee Benefit Plans. For purposes of this Article, the Company
----------------------
shall be deemed to have requested an Indemnitee to serve an employee benefit
plan whenever the performance by him of his duties to the Company also imposes
duties on or otherwise involves services by him to the plan or participants or
beneficiaries of the plan. Excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall be deemed fines.
Action taken or omitted by an Indemnitee with respect to an employee benefit
plan in the performance of his duties for a purpose reasonably believed by him
to be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Company.
10.7 Other Indemnification and Insurance. The indemnification provided by
-----------------------------------
this Article shall (a) not be deemed exclusive of, or to preclude, any other
rights to which those seeking indemnification may at any time be entitled under
the Company's Articles of Incorporation, any law, agreement or vote of
shareholders or disinterested Directors, or otherwise, or under any policy or
policies of insurance purchased and maintained by the Company on behalf of any
Indemnitee, both as to action in his Official Capacity and as to action in any
other capacity, (b) continue as to a person who has ceased to be in the capacity
by reason of which he was an Indemnitee with respect to matters arising during
the period he was in such capacity, (c) inure to the benefit of the heirs,
executors and administrators of such a person and (d) not be required if and to
the extent that the person otherwise entitled to payment of such amounts
hereunder has actually received payment therefor under any insurance policy,
contract or otherwise.
10.8 Notice. Any indemnification of or advance of expenses to an Indemnitee
------
in accordance with this Article shall be reported in writing to the shareholders
of the Company with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to shareholders of a
consent to action without a meeting and, in any case, within the 12-month period
immediately following the date of the indemnification or advance.
10.9 Construction. The indemnification provided by this Article shall be
------------
subject to all valid and applicable laws, including, without limitation, the
Nevada General Corporation Law, and, in the event this Article or any of the
provisions hereof or the indemnification contemplated hereby are found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Article shall be regarded as modified accordingly, and, as
so modified, to continue in full force and effect.
10.10 Continuing Offer, Reliance, etc. The provisions of this Article (a)
--------------------------------
are for the benefit of, and may be enforced by, each Indemnitee of the Company,
the same as if set forth in their entirety in a written instrument duly executed
and delivered by the Company and such Indemnitee and (b) constitute a continuing
offer to all present and future Indemnitees. The Company, by its adoption of
these Bylaws, (x) acknowledges and agrees that each Indemnitee of the Company
has relied upon and will continue to rely upon the provisions of this Article in
becoming, and serving in any of the capacities referred to in Section 10.1(a) of
this Article, (y) waives reliance upon, and all notices of acceptance of, such
provisions by such Indemnitees and (z) acknowledges and agrees that no present
or future Indemnitee shall be prejudiced in his right to enforce the provisions
of this Article in accordance with their terms by any act or failure to act on
the part of the Company.
10.11 Effect of Amendment. No amendment, modification or repeal of this
-------------------
Article or any provision hereof shall in any manner terminate, reduce or impair
the right of any past, present or future Indemnitees to be indemnified by the
Company, nor the obligation of the Company to indemnify any such Indemnitees,
under and in accordance with the provisions of the Article as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
ARTICLE 12.
TAKEOVER OFFERS
In the event the Company receives a takeover offer, the Board of Directors
shall consider all relevant factors in evaluating such offer, including, but not
limited to, the terms of the offer, and the potential economic and social impact
of such offer on the Company's stockholders, employees, customers, creditors and
community in which it operates.
ARTICLE 13.
NOTICES
13.1 General. Whenever these Bylaws require notice to any Stockholder,
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director, officer or agent, such notice does not mean personal notice. A person
may give effective notice under these Bylaws in every case by depositing a
writing in a post office or letter box in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram addressed to such Stockholder, director, officer
or agent at his address on the books of the Company. Unless these Bylaws
expressly provide to the contrary, the time when the person sends notice shall
constitute the time of the giving of notice.
13.2 Waiver of Notice. Whenever the law or these Bylaws require notice, the
----------------
person entitled to said notice may waive such notice in writing, either before
or after the time stated therein.
ARTICLE 14.
MISCELLANEOUS
14.1 Facsimile Signatures. In addition to the use of facsimile signatures
--------------------
which these Bylaws specifically authorize, the Company may use such facsimile
signatures of any officer or officers, agents or agent, of the Company as the
Board or a committee of the Board may authorize.
14.2 Corporate Seal. The Board may provide for a suitable seal containing
--------------
the name of the Company, of which the Secretary shall be in charge. The
Treasurer, any Assistant Secretary, or any Assistant Treasurer may keep and use
the seal or duplicates of the seal if and when the Board or a committee of the
Board so directs.
14.3 Fiscal Year. The Board shall have the authority to fix and change the
-----------
fiscal year of the Company.
ARTICLE 15.
AMENDMENTS
15.1 Subject to the provisions of the Articles of Incorporation, the
Stockholders or the Board may amend or repeal these Bylaws at any meeting.
The undersigned hereby certifies that the foregoing constitutes a true and
correct copy of the Bylaws of the Company as adopted by the Directors on the
23rd day of July, 2003.
Executed as of this 23rd day of July, 2003.
/s/ Peter Mergenthaler
-----------------------------
Peter Mergenthaler, Secretary
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Peter Mergenthaler, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Trans Max
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report
is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the small business issuer's
internal control over financial reporting; and
5. The small business issuer's other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 24, 2004
By: /s/ Peter Mergenthaler
-------------------------------
Peter Mergenthaler,
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Paul M. Cervino, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Trans Max
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report
is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the small business issuer's
internal control over financial reporting; and
5. The small business issuer's other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 24, 2004
By: /s/ Paul M. Cervino
-------------------------------
Paul M. Cervino,
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Mergenthaler, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Trans Max Technologies, Inc. on Form 10-QSB for the fiscal quarter
ended March 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-QSB fairly presents in all material respects the financial
condition and results of operations of Trans Max Technologies, Inc.
By:/s/ Peter Mergenthaler
--------------------------
Name: Peter Mergenthaler
Title: Chief Executive Officer
May 24, 2004
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul M. Cervino, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Trans Max Technologies, Inc. on Form 10-QSB for the fiscal quarter
ended March 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-QSB fairly presents in all material respects the financial
condition and results of operations of Trans Max Technologies, Inc.
By:/s/ Paul M. Cervino
--------------------------
Name: Paul M. Cervino
Title: Chief Financial Officer
May 24, 2004