SUBSCRIPTION AGREEMENT
Subscription for the Shares shall be made pursuant to a subscription
agreement (the "Subscription Agreement") in the form attached to this
Disclosure Statement. The Subscription Agreement contains, among other
things, customary representations and warranties by the Company, covenants
of the Company reflecting the information set forth herein,
representations by the investors and appropriate conditions to closing.
Underwriter
The Shares are being offered by the Company to the public without the
benefit of an underwriter.
Discounts and Commissions
The sales of the Shares being offered by the Company will be carried out
by the Company. The Company will not discount the price of the Shares or
pay a commission to any dealer in connection with the sale of the Shares.
USE OF PROCEEDS
Use of Proceeds: It is estimated that the Company will use the maximum
funds of $1,000,000 in the manner set forth below:
Production (Marine Electronics) $ 150,000
Production (Contract Manufacturing) 200,000
Marketing (Marine Electronics) 200,000
Business Development (Contract Manufacturing) 200,000
Operating Capital 250,000
=========
$1,000,000
The actual expenditures of the proceeds of the Offering may differ
substantially from the estimated use of proceeds. The actual expenditures
of the proceeds of the Offering will be according to the expenditures
deemed by the Company and its board of directors to be in the best
interests of advancing the business of the Company. The actual
expenditures will also vary from the estimated use of proceeds if
less than all of the Shares are sold.
The Company anticipates that the net proceeds from the Offering will be
sufficient to meet its financial requirements for only a short period of
time. The Company, therefore, will require substantial additional capital
to fund its contemplated business plan in the near future.
The Company anticipates expenses associated with the Offering, including
legal, accounting and stock transfer agent expenses, will be approximately
$10,000 US. The Company anticipates expenses associated with the
registration of the Shares issued pursuant to the Offering, including
legal and accounting expenses, will be approximately $30,000 US.
DILUTION
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of an entity from its total assets.
"Dilution" is the difference between the offering price of a security such
as the Shares, and its net tangible book value per Share immediately after
the Offering, giving effect to the receipt of net proceeds in the Offering.
As of the date of this Disclosure Statement, the net tangible book value of
the Company was $156,848 or approximately $0.021 per share. Giving effect to
the sale by the Company of all offered Shares at the Offering price, the pro
forma net tangible book value of the Company would be approximately $156,848,
or approximately $0.138 per Share, which would represent an immediate
increase in net tangible book value of approximately $0.117 per Share to
present shareholders and an immediate dilution of approximately $0.362
per Share, or approximately 86.2% to new investors.
The following table illustrates the pro forma per Share dilution assuming
the maximum Shares offered are sold.
ASSUMING MAXIMUM SHARES SOLD
Offering Price (before deduction of Offering expenses) $1.000 per share
Net tangible book value before Offering $0.021 per share
Net tangible book value after Offering $0.138 per share
Dilution to new investors $0.862 per share
Dilution as a percentage 86.2%2
DESCRIPTION OF BUSINESS
CORPORATE BACKGROUND
Corporate Organization
History: The Company is a corporation organized under the laws of the
State of Delaware on May 11, 1998.
History and Current Status: The Company was originally incorporated for
the purpose of high technology development and manufacturing of
underwater communications systems and contract manufacturing.
Corporate Facilities: The Company maintains its principal corporate
offices at #0000 - 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx X0X 0X0.
Introduction: The Company acquired all of the issued and outstanding
common shares in Northstar Technical Inc. ("Northstar") in January,
1999. Northstar is a high technology development and manufacturing
company with two main business activities. One is underwater
communications systems, the other is contract manufacturing.
Northstar's objectives are to become a leader in marine electronics
and a major regional contract manufacturer. As a result of the
acquisition, Northstar became a subsidiary of the Company.
Northstar - Corporate Information: Northstar is a corporation
incorporated under the laws of Newfoundland on July 5, 1989 and
extra-provincially registered in British Columbia on April 1, 1997.
The registered and records offices of Northstar are located at 00
Xxxx Xxxxxxx Xxxxx, X.X. Xxx 0000, Xx. Xxxx'x, Xxxxxxxxxxxx, X0X
0X0 (Telephone: (000) 000-0000, Facsimile: (000) 000-0000).
Northstar's head office is located at Xxxxx 0000, 000 Xxxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0 (Telephone:
(000) 000-0000, Facsimile: (000) 000-0000).
Northstar - General Development and History: Northstar was
founded in 1989 by Dr. Xxxxxx Xxxxxxx as a technology development
and manufacturing company. Northstar acquired the initial
technology for the NETMIND system from the receiver of National
Petroleum and Marine Consultants Limited and Altair Marine Systems
Limited for the sum of CDN$1.00, which two companies had spent an
aggregate CDN$1,740,000 on the partial development of the technology.
Northstar has since spent over CDN $3,500,000 to complete the
development and commercialization of the NETMIND system and establish
a production operation. The basic technology was commercialized in
August 1996 when the first industrial system was produced. The
plant has since manufactured over thirty complete systems.
The customers of the NETMIND system include the National Oceanics
and Atmospheric Administration (NOAA) in the United States, the United
States Department of the Interior and Fishery Products International
(FPI) in Canada.
In 1995, Northstar signed a Teaming Agreement with Loral Librascope
("Loral") (now Lockheed Xxxxxx) of Glendale, California pursuant to
which, if Loral were successful in a proposal to the Canadian Navy,
Northstar would assemble and test multi-function work stations
(submarine control consoles). In 1997, Lockheed Xxxxxx entered
into a contract with Northstar pursuant to which Northstar assisted
Lockheed Xxxxxx with the production of the first prototype console
on their premises. Northstar is attempting to secure a sole source
contract to manufacture control consoles for the Upholder submarines
which Canada recently purchased from the United Kingdom.
Background Technology: Northstar has developed a core technology
for underwater communications which has applications in the fishery,
offshore oil and gas, defence, marine transportation, oceanographic
and environmental industries. The basic engines are underwater sensors
which take measurements and transmit the information back to a receiver
on board a ship or oil rig.
Each sensor is equipped with one or more acoustic transducers depending
on its function. Analog and digital signal processing and power
management functions are performed by the sensor electronics.
The telemetered data are received by a hull mounted, hydrodynamically
shaped hydrophone. The received signals are amplified at the hydrophone
for transmission via cable to the deck unit processor/display, a small
cabinet mounted at a convenient location on the bridge. The processor
portion of the deck unit decodes the signals and converts them into
engineering units for display on a high resolution colour monitor.
The NETMIND System: The first application of Northstar's core
technology is the NETMIND system for the world's commercial fishing
industry.
NETMIND monitors the performance of a trawl and is both a conservation
tool and an efficiency tool. It consists of a group of electronic
sensors that transmit measurements from the net through the water to
a receiver on the ship. The information is displayed on a computer
screen and the captain can tell what activities are occurring in the
net. He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is full
and ready to be pulled in. Fishermen call NETMIND their 'eyes
beneath the sea'.
The Market: NETMIND was introduced to the marketplace in 1996 and sales
have been made in North America and Europe. The targeted customers have
been strategic in that they are industry leaders and government agencies.
Three different agencies of the US Government have purchased systems and
have given very positive feedback. International customers are interested
in NETMIND for its price and technical advantages.
To date, Northstar has barely penetrated the potential market which is
estimated to be about 25,000 vessels worldwide. Upon the successful
close of this offering, sales in the first year are estimated to be
about 100 NETMIND systems.
Competition: The NETMIND system has two known main competitors, Furuno
in Japan and Scanmar in Norway. It is believed that NETMIND has price
and technical advantages over each. Technically, NETMIND has longer
sensor battery life, longer operating distance, and better maintenance
and repair features. See "Risk Factors".
Technology Protection: Since commercializing NETMIND in 1996, Northstar
has made many enhancements to the system. These activities have
resulted in an optimum design for which a patent application is
intended. The technology is difficult to replicate because of its
sophistication and, regardless of patent protection, it is expected
it would take several years for a new player to catch up to the present
system. In the meantime, Northstar is developing new innovative NETMIND
products which should ensure a competitive edge.
Future Opportunities: Northstar's second technology application will
likely be for the multi-billion dollar offshore oil and gas industry.
One potential product is for the remote control of subsea wellheads.
This is especially important as the industry goes into deeper and
deeper water to find and produce petroleum.
Further business opportunities are envisaged for the defense, marine
transportation, oceanographic and environmental industries. The
possibilities include towed arrays for seismic exploration, towed
arrays for submarines, docking systems for large ocean going ships,
positioning systems for oil and gas drilling platforms, acoustic
measurements of ocean currents, and diver to diver communications for
the recreational diving industry. Northstar would look to strategic
alliances with other companies and government agencies to reduce
technological risks and open doors to new markets.
Contract Manufacturing: Northstar's second business division focuses
on manufacturing systems for the defense, transportation and
communications industries in strategic alliance with major
international contractors. Several years ago, Northstar signed a
Teaming Agreement with LORAL LIBRASCOPE, in Glendale, California
for the manufacture of control consoles for submarines. This was
followed by the first start-up contract with LOCKHEED XXXXXX which
was signed in April 1997. Northstar is attempting to secure a
contract to manufacture consoles for Canadian Navy submarines. It
is expected that other work for Canadian patrol frigates, destroyers
and maritime helicopters will follow on from the submarine contracts.
Northstar expects to establish good relationships with other major
defense and communications contractors in Canada and the United States
and significant contract opportunities are expected through them.
Historical Financial Information: Northstar has spent over
CDN$1,850,000to complete the development and commercialization
of the NETMIND system. Northstar has received CDN$458,309 in
Scientific Research and Experimental Development refunds from
Revenue Canada. Funding support from the major shareholder and
private investors total approximately CDN$1,565,500 in the form of
share purchases or loans. The federal government of Canada has
provided support totaling approximately CDN$600,000 in the form of
research grants and interest-free loans through the National
Research Council and the Atlantic Canada Opportunities Agency.
Northstar's wholesale revenues were CDN$272,631 for year ending
March 31, 1998 and CDN$252,565 for nine months ending December
31, 1998. The gross profit for the year ending March 31, 1998 was
48% and was 48% for the nine months ending December 31, 1998.
Expenses totaled CDN$388,000 for the year ended March 31, 1999 and
CDN$356,000 for the nine months ended December 31, 1998. Dividends
of CDN$42,282 were paid on Northstar's preference shares in 1998.
These shares have been fully redeemed or converted to common shares.
Northstar's assets as of December 31, 1998 totaled CDN$1,112,490 and
its current liabilities totaled CDN$374,425. Long-term debt of
CDN$711,774 consists of government interest-free loans and a loan
of CDN$240,000 payable to Pathfinder Enterprises Inc., a company
controlled by a shareholder of Scientific, with monthly interest
payments only to July 2002, secured by a floating charge debenture.
There are shareholder loans of CDN$258,709 with no fixed terms of
repayment. Northstar has an accumulated deficit of CDN$854,871 as
of December 31, 1998.
Projected Revenues: Northstar anticipates sales of approximately
CDN$5 million in the first year upon completion of the Offering.
Depending on the financial, production and management resources,
there is potential for CDN$20 million in revenues in the second
year, with greater potential in the third year.
Management: Northstar's management is comprised of a small team
of individuals experienced in the development, manufacture and
sale of ocean industry technologies.
Dr. Xxxxxx Xxxxxxx, Chairman and Chief Executive Officer, has
25 years experience in the field and has established himself as
an international consultant in ocean industry, oil and gas, and
high technology. Xx. Xxxxxxx is also a director of the Company.
See "Management" for detailed information regarding Xx. Xxxxxxx.
Xx. Xxxxx Xxxxxx is Northstar's Technical Director and one of
the world's leaders in developing and manufacturing ocean
instrumentation for the defense industry. In 1977, Xx. Xxxxxx
founded Marine Acoustics which designed and manufactured sonar
transducers for OEM use and subsea computers for the control of
subsea rock drills. In 1985, Marine Acoustics was reorganized as
Marine Acoustics Ltd. Marine Acoustics Ltd. produces numerous
sonar systems, including exercise mine acoustic telemetry systems,
which are used by the British, United States, Australian, Belgian,
Canadian and Egyptian Navies. Xx. Xxxxxx supervised the design of
the NETMIND system and advises Northstar on production and value
engineering.
Xx. Xxxxx Xxxxxxx, P.Eng., Senior Electronics Engineer, has over
20 years experience developing marine systems, computer and
communications systems and in project management. He has been
involved in the design, development and implementation of both
hardware and software elements of tracking radar systems,
geophysical sounding systems, distributed computing systems,
Geographical Information Systems and embedded instrumentation
systems. Xx. Xxxxxxx is responsible for the development of new
NETMIND technologies and other underwater communication products.
Mr. Xxxxx Xxxx is an Electronics Technologist and Northstar's
Production Manager. Xx. Xxxx is responsible for all production
activities including inventory control, electronic and mechanical
production, testing, quality control and shipping.
Xx. Xxxxxxxxx Xxxxxxxx has extensive experience in office management
and has worked for companies such as Coopers Xxxxxxx, X.X. Xxxxxx Ltd.
and Atlantic Specialties Ltd. Xx. Xxxxxxxx is responsible for all
of Northstar's financial and product shipment administration.
Plant, Equipment and Operations: The manufacturing plant is
located in St. John's, Newfoundland. The plant is approximately
3,000 square feet in area and is comprised of an electronics shop,
a mechanical engineering shop, a molding room, a component inventory
area, a finished goods area, research and development offices and
administrative offices. The plant possesses equipment typical of an
electronics manufacturing operation, i.e., oscilloscopes, soldering
stations, computers, flume hood, molding equipment, drill press and
specialty testing and assembly tools. The inventory system is
computerized, with a rigorous quality program in place which covers
incoming components, assembly testing and finished goods testing.
Northstar uses the program TANGO for its computer aided design (CAD)
activities. Lockheed Xxxxxx Federal Systems in Manassas, Virginia
has supplied to Northstar proprietary hardware and software for the
testing of submarine control consoles.
Northstar uses outsourcing as much as possible to keep overhead and
staffing levels low. For example, most of the mechanical assemblies
for the NETMIND system are supplied by a local mechanical shop, which
assemblies are then incorporated into the molding of the plastic
housings which are produced in-house.
Northstar currently has ten full-time employees and three part-time
engineering consultants.
EMPLOYEES
As of June 15, 1999, the Company had ten employees and three
part-time engineering consultants.
None of the Company's employees is represented by a labour union,
and the Company considers its employee relations to be good.
Competition for qualified personnel in the Company's industry
is intense, particularly for software development and other
technical staff. The Company believes that its future success
will depend in part on its continued ability to attract, hire
and retain qualified personnel.
DESCRIPTION OF PROPERTY
The primary business activities of the Company are carried on at
leased premises located at Xxxxx 0000, 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0. The premises are
comprised of 1,000 square feet and is leased for a term of two
years expiring on September 30, 1999. Northstar Technical Inc.
leases premises at 000 Xxxxx Xxxxxx, Xx. Xxxx'x, Xxxxxxxxxxxx,
Xxxxxx X0X 0X0. The premises are comprised of 3,000 square feet
and is leased for a term of two years expiring on June 30, 2000.
The Company does not lease or own any other property.
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers
and directors of the Company, their present positions with the
Company, and their biographical information.
Each director will serve until the next annual meeting of
shareholders, and thereafter if re-elected.
Name of Director Age
Dr. Xxxxxx Xxxxxxx 53
Xx. Xxxxx Power 56
Xx. Xxx Xxxxx 54
Name of Officer Office
Dr. Xxxxxx Xxxxxxx 53 President
Xx. Xxxxx Power 56 Vice-President
As a Delaware corporation, the final responsibility for the
management of the affairs of the Company rests with the Board
of Directors. That Board currently consists of three directors.
Those directors are elected at the annual meeting of the
shareholders and serve for an annual term or until they resign
or are replaced. Those directors meet or otherwise consult with
one another on a regular basis to review the affairs of the Company
and to adopt or confirm any resolutions which are necessary to
grant contractual and other authority to the administrative
officers. The directors may, and probably will, designate an
executive committee to which they will grant limited authority
to make certain ministerial decisions on behalf of the board
between meetings of the full board. The affairs of the Company
are administered by its executive officers. Those officers are
designated by the Board of Directors to whom those officers are
responsible. The executive officers are generally elected by the
directors on an annual basis and serve throughout that term or
until such earlier time as they resign or are replaced. The
directors may, and in the case of this Company will designate
themselves as senior executive officers of the Company. The
Company's day to day actions will occur through the actions of
those executive officers acting on behalf of the Company.
Throughout this Offering Memorandum the term "Management"
shall be interpreted as the current directors and officers
of the Company designated in the following section.
The following sets forth information as to the principal
occupation and business experience for at least the past
five years of each of those directors and officers.
Dr. Xxxxxx Xxxxxxx: Xx. Xxxxxxx received a Masters Degrees
in Engineering and in Physics from Memorial University of
Newfoundland and a Doctorate in Engineering Physics from the
University of Aix-Marseille in France. Xx. Xxxxxxx'x numerous
positions include: geophysicist with Pan American Petroleum
(AMOCO) in Calgary, Alberta (1968); professor and researcher at
Memorial University (1968 to 1977); Director of Engineering at
NORDCO Ltd. (1977 to 1980); and Associate Director of the
Newfoundland Petroleum Directorate. After starting his own
consulting and technology development firm in 1983, Xx. Xxxxxxx
has also managed the preparation of the developmentplan for the
$6 billion Hibernia development which was submitted to the
government for approval of the project; invented, developed and
commercialized the Hydroball current profiling system, a unique
phased array ocean current profiling system which won the silver
medal at the Canada Awards for Business Excellence in 1986; and
developed a fiber optic modem for TRW in the United States. Xx.
Xxxxxxx founded NewTech Instruments Ltd. in partnership with a
subsidiary of Xxxx Canada and was the first Chairman of the Board
of Directors of Seabright Corporation. Xx. Xxxxxxx has also
acted as a consultant for the Canadian federal government, the
provincial governments of Newfoundland and British Columbia, the
Canadian Consul in Boston, Massachusetts, Mobil Oil, the Defense
Research Establishment Pacific and the French Navy. Xx. Xxxxxxx
founded Northstar in 1989 and serves as Chairman and Chief
Executive Officer. He is also a director and President of Cabot
Management Ltd. and, until recently, was a director of the
University of Victoria's Innovation and Development Corporation.
Xx. Xxxxx Power: Mr. Power, a business management consultant,
has managed and administered several public companies for the past
15 years. Since 1984, Mr. Power has provided services including
strategic planning, management, administration, design, and
construction of major mining projects both nationally and
internationally. He has owned and operated several consulting
companies which have been providing comprehensive services in the
industrial and high-technology fields as well as the mining field.
His expertise also includes reactivating public companies, project
acquisitions, public and private funding, as well as developing and
taking existing private companies public. He is equally skilled to
function in the public markets both in Canada and the United States.
Mr. Power is President and Owner of Pow Con Management since 1981 and
Premier Enterprises Ltd. since 1994. These companies manage,
administrate and finance reporting companies. He served as President
and Director of several Vancouver reporting companies and publicly
listed companies since 1986 to present. Since 1992, Mr. Power has
served as President of World Organics Inc., listed on the Vancouver
Stock Exchange. From 1996 to 1997, Mr. Power served as President
and Director of Accuimage Diagnostics and he is also past President
of Security Industries, Inc. These companies are traded on the OTC
Bulletin Board.
Xx. Xxx Xxxxx: Xx. Xxxxx, since completing his Business
Administration degree from Arizona State University, has held
positions including Managing Director of Omni International;
Vice-President and Director of World Organics, Inc., a reporting
company; Secretary and Treasurer of Tec Industries Corp., a specialty
equipment rental agency; and owner and President of Stretchcoat, a
national manufacturer and marketer of specialty products. Xx. Xxxxx
has also represented major principals selling products nationally.
Management Compensation: The Company has agreed to pay Xx. Xxxxx
Power, Director and Vice President, a past consulting fee of $27,000
and current monthly fees of $2,000 and to pay Xxxxxx Xxxxxxx, Director
and President, a bonus of $100,000 payable when the Company is able
to pay.
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth certain information as to the Company's
three highest paid officers and directors for the period from the
commencement of Scientific's Business to June 15, 1999. No other
compensation was paid to any such officer or director other than the
cash compensation set forth below.
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Dr. Xxxxxx Xxxxxxx Director and President $16,300
Xx. Xxxxx Power Director and Vice President $ 2,000
Xx. Xxx Xxxxx Director NIL
_______
Officers and Directors Directors and Officers $18,300
of the Company as a Group
The compensation paid to directors and officers to June 15, 1999 is
believed by the Company to be below market compensation rates for the
services provided by the directors and officers, having regard to the
experience and qualifications of the directors and officers. The
Company anticipates compensation being increased to market rates upon
the Company achieving sufficient revenues and/or financings to pay such
increased compensation.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999, the beneficial
ownership of the Company's Common Stock by each officer and director of
the Company, by each person known by the Company to beneficially own more
than 10% of the Company's Common Stock outstanding and by the officers and
directors of the Company as a group. Except as otherwise indicated, all
shares are owned directly.
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock(1)
Common Stock Xxxxx Power 990,000 13.30%
Common Stock Xxxxxx Xxxxxxx 164,883 2.23%
Common Stock Xxx Xxxxx 100,000 1.35%
Common Stock Xxxxxx Enterprises 1,397,900(2) 18.88%
Common Stock Monaco Ventures 1,000,000(3) 13.51%
Common Stock All Officers and Directors 4,352,783 58.79%
as a Group (3 persons)
(1) Based on 7,404,481 shares of Common Stock of the Company issued
and outstanding
on June 15, 1999.
(2) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
XXXXXX ENTERPRISES]
(3) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
MONACO VENTURES]
The following directors and officers of the Company have been granted
options to purchase shares of the Company's common stock as follows:
Optionee Position Options Option Price Per Share
Xxxxxx Xxxxxxx Director 250,000 $0.50
Xxxxx Power Director 100,000 $0.50
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by the Company within the
two years preceding the date hereof which are still in effect, except
as follows:
Completion of previous offering: The Company completed an offering of
363,000 shares on January 26, 1999. The proceeds of the offering were
US$363,000. The purchasers of the shares were all non US residents.
Acquisition of Northstar: The Company acquired Northstar in January,
1999 pursuant to an agreement dated July 31, 1998. The Company purchased
all of the issued and outstanding shares of Northstar in exchange for
4,901,481 shares of the Company's Common
Stock which were issued from treasury.
Copies of the foregoing contracts and any reports referred to in this
Disclosure Statement may be inspected at the head office of the Company
at Xxxxx 0000, 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx
X0X 0X0, during normal business hours while the Offering contemplated
hereunder is in progress to and including the closing date.
Except for the acquisition of Northstar, none of the following persons
has any direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company in May, 1998
or in any proposed transaction to which the Company is proposed to be a
party:
(A) any director or officer of the Company;
(B) any proposed nominee for election as a director of the Company;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to the
Company's Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same house as such person or
who is a director or officer of any parent or subsidiary of the Company.
SECURITIES BEING OFFERED
The securities being offered are the shares of the Company's common
stock, par value $0.0001 per share. Under the Company's Articles of
Incorporation, the total number of shares of all classes of stock
that the Company shall have authority to issue is 100,000,000 shares
of common stock, par value $0.0001 per share (the " Common Stock")
and 20,000,000 shares of preferred stock, par value $0.001 per share
(the "Preferred Stock"). As of September 15, 1999, a total of
7,404,481 shares of Common Stock are issued and outstanding. No shares
of Preferred Stock are issued or outstanding. All issued and outstanding
shares of the Common Stock are fully paid and non-assessable.
Common Stock
Holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of holders of Common
Stock, including the election of directors. Holders of Common Stock do
not have cumulative voting rights in the election of directors.
Holders of a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy,
are necessary to constitute a quorum at any meeting of the Company's
stockholders, and the vote by the holders of a majority of such
outstanding shares is required to effect certain fundamental corporate
changes such as liquidation, merger or amendment of the Company's
Articles of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the
Board of Directors, from funds legally available therefor. In the
event of the liquidation, dissolution or winding up of the affairs
of the Company, all assets and funds of the Company remaining after
the payment of all debts and other liabilities shall be distributed,
pro rata, among the holders of the Common Stock. Holders of Common
Stock are not entitled to pre-emptive or subscription or conversion
rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and
non-assessable.
Transfer Agent
Signature Stock Transfer of Dallas, Texas is the transfer agent for
the Shares.
Share Purchase Warrants
None.
Options
The directors of the Company approved an incentive stock option plan
(the "Stock Option Plan"). The directors have approved the following
grants of options pursuant to the Stock Option Plan.
(a) an aggregate of 500,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's officers and
directors.
(a) an aggregate of 275,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's employees.
(a) an aggregate of 15,000 options to purchase shares of Common
Stock at a price of $0.75 per share to the Company's consultants.
All options are subject to a vesting schedule with one-third vesting
on grant, one-third on the first anniversary of the date of grant and
one-third on the second anniversary of the date of grant.
Convertible Securities
Pathfinder Enterprises Inc. has the option to convert a $240,000 CDN
loan to Northstar Technical Inc. to common shares at $0.90 US per
share in the first year and $1.25 US per share in the second year
commencing March 11, 1999.
LITIGATION
The Company is a defendant in a lawsuit commenced against the Company
by the Company's former master distributor. The former distributor has
alleged that the Company has interfered with the ability of the former
distributor to sell products. The Company has filed a counterclaim for
monies owing by the former distributor to the Company. An adverse
outcome to the lawsuit could have a material adverse impact on the
Company.
FINANCIAL STATEMENTS
The Company's unaudited Financial Statements, as described below,
are attached hereto.
A. Unaudited financial statements for the period ending
January 31, 1999, including:
(a) Consolidated Balance Sheet;
(a) Consolidated Statement of Operations and Deficit;
(a) Consolidated Statement of Shareholders' Equity;
(a) Consolidated Statement of Cash Flows;
(a) Notes to Consolidated Financial Statements.
(a) Financial Statements
The Company's audited financial statements for the eight month period
ended December 31, 1998, together with the auditor's report, are
appended to this Offering Memorandum. The financial statements are
non-consolidated statements for the Company. INVESTORS ARE URGED TO
CAREFULLY REVIEW SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES TO THOSE
FINANCIAL STATEMENTS.
Certain Financial Matters: This statement reflects the position of
the Company on December 31,1998, which is prior to the completion of
the $US 363,000 placement and prior to the purchase of Northstar and
prior to the funding under this Offering. Therefore, such statements
reflect substantially no assets other than cash but do demonstrate
that the Company likewise has few liabilities. Accordingly, the book
value of Common Shares outstanding at the date of their statement are
at this time, negligible. The statement further reflects no income,
other than deposits. Its earnings per share are negative.
Management's Discussion of Financial Statements: The Balance Sheet
and financial statements are audited and are prepared in accordance
with generally accepted accounting principles of the United States.
Specifically, those figures do not, and are not intended to, reflect the
current net fair market value of the Company's assets. That value can
only be estimated, based upon the potential sales and prospective net
income which will be generated from the Company's present and future
technology. Because of the various matters which inherently must occur
in the future, the outcome cannot be precisely determined and is
therefore necessarily a matter of opinion. Management believes that
technology, combined with management's ability to successfully
commercialize the applications through its developed products, to be
substantial. It is that opinion, and not the current financial statement,
upon which the price of the Common Stock is being offered under this
Offering.
ADDITIONAL ATTACHMENTS
The following additional attachments are attached to this Disclosure
Statement:
Attachment Description
No. 1 Subscription Agreement
