UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 15, 2009
Nevada 333-140236
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(State or other jurisdiction (Commission File Number) IRS Identification No.
of incorporation)
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Registrant's telephone number, including area code 1 (866) 824 8854.
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory note: On June 15, 2009 Consorteum Holdings, Inc. (the "Company" or "CHI") completed and closed an agreement and plan of exchange pursuant to which it exchanged 39,999,750 shares of its common stock for an equivalent number of shares of common stock of Consorteum, Inc., a corporation organized under the laws of the Province of Ontario ("Consorteum"). The Consorteum shares the Company received represent all of the issued and outstanding shares of Consorteum. As a result of the exchange, Consorteum became a wholly-owned subsidiary of the Company. The Report on Form 8-K describes the events at the closing under the relevant Items and the business of Consorteum under Item 2.01.
Note 1: All dollar amounts are in US Dollars.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
(A)-(F)
On June 15, 2009, Consorteum Holdings, Inc., a Nevada corporation (formerly known as Implex Corporation and hereinafter "CHI" or the "Company"), Consorteum, Inc., a corporation organized under the laws of the Province of Ontario ("Consorteum"), and the holders of all of the issued and outstanding shares of common stock of Consorteum (the "Consorteum Stockholders"), closed the transactions described in the agreement and plan of exchange dated May 5, 2009 (the "Exchange Agreement") by and among CHI, Consorteum and the Consorteum Stockholders. A copy of the Exchange Agreement was filed with the Company's Form 8-K filing on May 8, 2009. Under the Exchange Agreement, the Company exchanged 39,999,750 shares of its common stock for 39,999,750 shares of common stock of Consorteum (the "Consorteum Shares") owned by the Consorteum Stockholders. The Consorteum Shares represent 100% of all of the issued and outstanding shares of Consorteum common stock. The Company issued its shares of common stock pro rata to the number of shares of Consorteum owned by each Consorteum Stockholder. For purposes of U.S. federal income taxes, the transaction is intended to qualify as a "B" Reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986 (the "Code"). As a result, at the closing of the Exchange Agreement, Consorteum became a wholly-owned subsidiary of the Company.
At the closing under the Exchange Agreement, CHI's President and CEO (until the closing) returned twenty-three million (23,000,000) shares of the Company's Common Stock that he owned to the Company for cancellation. In return, the Company transferred to him the business plan and other concepts he contributed to the Company in August 2008, at the time he joined the Company.
Consorteum was organized on April 2, 2006 and is a development stage company. Consorteum is a systems integration company within the financial services, payment and transaction processing industries. Consorteum oversees and coordinates the creation and distribution of a variety of prepaid credit card plans and services in different sectors ranging from government welfare programs to golf course member loyalty reward programs. Consorteum's organization also enables it to act as a principal in certain ventures if it chooses. Consorteum's business is described below under "Business of Consorteum, Inc."
Other than the transactions described in the Exchange Agreement, there is no relationship between the Company or its affiliates and Consorteum or its affiliates. However, James D. Beatty, the Chairman of the Board of the Company, is also the Chairman of the Board of Consorteum. The Company was introduced to Consorteum in 2008 for the purposes of acquiring Consorteum as a portfolio company; however, such a transaction was precluded by the Company's failure to attract the seed capital to commence portfolio company acquisitions. This transaction is the sole acquisition by the Company and all discussions with other potential portfolio companies have been terminated.
As a result of the Exchange Agreement closing, the Consorteum Stockholders own approximately 85.3% of the issued and outstanding common stock of CHI. The share exchange resulted in a change of control in the ownership of the Company. For information about the change of control see Item 5.01 of this Report -- Changes in Control of Registrant. Simultaneously with the closing of the Exchange Agreement, Mr. Richard C. Fox resigned as a director and President and CEO of the Company, and Mr. Craig Fielding and Mr. Quentin Rickerby joined Mr. James D. Beatty as directors of the Company. In addition, Messrs. Fielding and Rickerby became CEO, and President and COO, respectively of the Company. For information concerning the new directors and officers of the Company see Item 5.02 of this Report -- Departures of Certain Directors; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As conditions to the closing of the transactions contemplated by the Exchange Agreement, (i) the Company changed its name from Implex Corporation to Consorteum Holdings, Inc., effective April 9, 2009, and (ii) the Company's trading symbol was changed from IMPL to CSRH on the Over the Counter Bulletin Board ("OTCBB") effective June 9, 2009.
RISK FACTORS
The following risk factors apply to the Company, its business, the industry in which it operates and the common stock and market in which it trades. They should be read carefully by anyone with an interest in our Company who should consider the information together with the other material in this Report. Some of the statements in "Risk Factors" are forward looking statements.
RISKS RELATED TO OUR BUSINESS OPERATIONS
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN UNLESS WE RAISE SUBSTANTIAL AMOUNTS OF CAPITAL.
In its report dated February 19, 2009, the independent registered public accounting firm for Consorteum stated that the financial statements for the years ended June 30, 2008 and 2007 and for the period of inception (April 3, 2006) to June 30, 2008, were prepared assuming that Consorteum would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of cash flow constraints, an accumulated deficit of $1,864,746 at June 30, 2008 and recurring losses from operations. We continue to experience losses. Our ability to continue as a going concern is subject to the ability to generate a profit from new activities and/or obtain necessary funding from outside sources, including additional funds from the sale of the Company's securities or loans from financial institutions/individuals where possible. The continued operating losses and stockholders' deficit increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful, or that these funds will be available at the times or in the amounts required on terms acceptable to us.
WE HAVE A LIMITED OPERATING HISTORY
Although we were incorporated in 2006, we are a development stage company. We have a limited operating history and will likely encounter the risks and difficulties frequently encountered by early stage companies. Such risks include, without limitation, the following:
o amount and timing of operating costs and capital expenditures
in relation to expansion of our business, operations, and
infrastructure;
o time line to develop, test, coordinate, market and sell our
card programs and processing procedures;
o negotiation and implementation of strategic alliances or
similar arrangements with companies with sufficient resources
to support our programs and processing transactions;
o need for acceptance of products;
o ability to anticipate and adapt to a competitive market and
rapid technological developments;
o dependence upon key personnel.
We cannot be certain our strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
WE HAVE LIMITED SALES, MARKETING, AND DISTRIBUTION CAPABILITIES. WE WILL BE REQUIRED TO EITHER DEVELOP SUCH CAPABILITIES OR TO OUTSOURCE THESE ACTIVITIES TO THIRD PARTIES.
We currently have limited sales, marketing and distribution capabilities. In order to succeed, we will be required to either develop such capabilities or to outsource these activities to third parties. We can provide no assurance that third parties will be interested in acting as our outsourced
sales, marketing, and distribution arms on a timely basis, on commercially reasonable terms, or at all. If we are unable to establish sales, marketing, or distribution capabilities either by developing our own organization or by entering into agreements with others, we may be unable to successfully sell any products that we are able to begin to commercialize, which would have a material adverse effect upon our business, prospects, financial condition, and results of operations. Further, in the event that we are required to outsource these functions on disadvantageous terms, we may be required to pay a relatively large portion of our net revenue to these organizations, which would have a material adverse effect upon our business, prospects, financial condition, and results of operations.
RISKS RELATING TO THE CREDIT CARD AND TRANSACTION PROCESSING INDUSTRY
THE LEVEL OF TRANSACTIONS GENERATED BY OUR DIFFERENT CARD PROGRAMS IS SUBJECT TO SUBSTANTIAL SEASONAL VARIATION WHICH MAY CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE MATERIALLY.
Our experience is that the level of transactions is subject to seasonal variation. Transaction levels have consistently been higher in the last quarter of the year due to increased use of our prepaid credit card programs during the holiday season. Transaction levels are greater for our loyalty and reward programs during the second and third quarter of the year. The level of transactions drops in the first quarter, during which transaction levels are generally the lowest we experience during the year. As a result of these seasonal variations, our quarterly operating results, which depend in part on the number and value of the transactions processed, may fluctuate materially.
THE STABILITY AND GROWTH OF MULTIPLE TYPES OF CARD PROGRAMS DEPENDS ON MAINTAINING AGREEMENTS WITH SPONSORSHIP BANKS, SOFTWARE PROVIDERS AND PROCESSORS.
All of our supplier agreements such as those with banks, processing companies and software companies, have expiration dates. Although our suppliers are generally obligated to renew our agreements, they may have the option not to do so. Therefore, one or more of our critical suppliers such as a bank or processing company may terminate its contract at expiration. Although we would have notice of any such decision, we may not be able to replace the relationship in a timely manner or on favorable economic terms or at all. The requirement to replace any critical supplier relationship would also generate additional costs in the replacement process. The inability to maintain or replace these agreements could have a material adverse effect on our business, and financial condition or results of operations.
WE DO NOT CONTROL THE TRANSACTION FEES FOR SOME OF OUR PROGRAMS IN THE MARKETS WHERE THEY OPERATE. THE INTERCHANGE FEES CHARGED AND SHARED ARE ESTABLISHED BY THE SPONSORING PROCESSORS OR FINANCIAL INSTITUTIONS.
The amount of fees we receive per transaction is set in the markets in which we do business. We have and will continue to have card acceptance agreements with some banks under which fees are set. Also, we derive a portion of our revenues from "interchange fees" that are set by processors, financial institutions and the major card associations. We are not in a position to influence these fees. A significant decrease in the interchange fee could adversely affect our revenues.
WE ARE DEPENDENT UPON ELECTRONIC FINANCIAL TRANSACTION PROCESSORS OR THE CARD ISSUING INSTITUTION TO PROVIDE ASSISTANCE IN OBTAINING SETTLEMENT OF FUNDS RELATING TO INTERCHANGE REVENUE AS WELL AS OTHER TRANSACTIONS FEES AGREED UPON.
We have agreements in place related to transaction based fee revenues on credit and debit cards issued by banks. We also have in place arrangements for the settlement of these types of transactions, but in some cases we do not have a direct relationship with the card-issuing bank and we rely for settlement on the regulation rules that are administered by card associations (such as Visa or MasterCard and others). These contracts are typically terminable by a bank or processing company on 90 days notice. We have arrangements in place with our processing partners or card sponsoring institution to collect our fees via revenue splits at point of origin. The termination of a contract with any one of these parties could result in the loss of revenues.
A LACK OF BUSINESS OPPORTUNITIES OR FINANCIAL RESOURCES MAY IMPEDE OUR ABILITY TO EXPAND AT DESIRED LEVELS, AND OUR FAILURE TO EXPAND OPERATIONS COULD HAVE AN ADVERSE IMPACT ON ITS FINANCIAL CONDITION.
Our plans and opportunities will be focused on card issuing, transaction process and financial services to our varied client base. The expansion and development of our business will depend on various factors including the following:
o The demand for our card products, transaction processing and financial services product by the current markets.
o The ability to form the appropriate relationships and obtain necessary approvals for the installation of our card programs.
o The ability to install a transaction processing solution in an efficient and timely manner.
o The ability to issue a sufficient numbers of cards which relate to loyalty, rebate, reward, prepaid and other card programs.
o The availability of financing for the expansion of our business through partnerships, acquisition and hiring of additional personnel.
o The increased acceptance of our card products in our target markets.
o The increase of transaction fees revenue we receive.
o The deployment of larger numbers of the different card types by us, and our different distribution channels
o The continued use of our card product by cardholders.
We expect that transaction levels on a newly created card program in a developing market will not increase significantly. We will work to improve the levels of usage of the card products by acquiring high-quality clients and eliminating less-developed potential markets and adding new transactions types that are compatible with our different products. However, we may not be successful in materially increasing transaction levels through these measures.
OUR LOSS OF CURRENT RELATIONSHIPS WITH PROCESSORS, CARD PLANS AND FINANCIAL INSTITUTIONS WILL HAVE A MATERIAL ADVERSE EFFECT ON FUTURE REVENUES AND PROSPECTS.
Our revenue will be derived primarily from fees paid by users of our card products, by fees shared between us and the processors and also by the interchange revenues shared with the major card plan providers. Therefore, our future success will be dependant on our ability to increase the transaction and fee revenues that are created which are greater than our expenses. There can be no assurances that our efforts to achieve this in the beginning will be successful.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH THE LEADING SERVICE PROVIDERS WHO ARE MORE ESTABLISHED AND BETTER CAPITALIZED THAN US.
We experience significant competition from banks, non-bank providers of card programs, major processors as well as multiple card program suppliers. Many of our competitors have materially greater financial resources than us and can therefore implement ever changing technological developments to meet the level of convenience that consumers demand. No assurance can be given that we will be able to compete successfully with our more established and better-capitalized competitors.
RISKS RELATED TO OUR SHARES
IN RECENT YEARS, THE STOCK MARKET IN GENERAL HAS EXPERIENCED PERIODIC PRICE AND VOLUME FLUCTUATIONS. THIS VOLATILITY HAS HAD A SIGNIFICANT EFFECT ON THE MARKET PRICE OF SECURITIES ISSUED BY MANY COMPANIES FOR REASONS OFTEN UNRELATED TO THEIR OPERATING PERFORMANCE. THESE BROAD MARKET FLUCTUATIONS MAY ADVERSELY AFFECT OUR STOCK PRICE, REGARDLESS OF OUR OPERATING RESULTS. THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY.
The price of our common stock is quoted on the OTCBB and constantly changes. We expect that the market price of the common stock will continue to
fluctuate. These fluctuations may result from a variety of factors, many of which are beyond our control. These factors include:
o quarterly variations in our financial results;
o operating results that vary from the expectations of management, securities analysts and investors;
o changes in expectations as to our business, prospects, financial condition, and results of operations;
o announcements by us or our competitors of material developments;
o the operating and securities price performance of other companies that investors believe are comparable to us;
o future sales of our equity or equity-related securities;
o changes in general conditions in our industry and in the economy, the financial markets and the domestic or international political situation;
o departures of key personnel; and
o regulatory and intellectual property considerations.
FUTURE SALES OF COMMON STOCK OR THE ISSUANCE OF SECURITIES SENIOR TO OUR COMMON STOCK OR CONVERTIBLE INTO, OR EXCHANGEABLE OR EXERCISABLE FOR, OUR COMMON STOCK COULD MATERIALLY ADVERSELY AFFECT THE TRADING PRICE OF THE COMMON STOCK, AND OUR ABILITY TO RAISE FUNDS IN NEW EQUITY OFFERINGS.
Future sales of substantial amounts of our common stock or other equity-related securities in the public market or privately, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or other equity-related securities. We can make no prediction as to the effect, if any, that future sales of shares of common stock or equity-related securities, or the availability of shares of common stock for future sale, will have on the trading price of our common stock. There are currently 6,860,000 shares of our common stock available for sale.
OUR COMMON STOCK IS SUBJECT TO THE PENNY STOCK REGULATIONS THAT IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK. AS A CONSEQUENCE, THE ABILITY OF OUR STOCKHOLDERS TO SELL SHARES OF OUR COMMON STOCK COULD BE IMPAIRED.
The Securities and Exchange Commission (the "Commission") has adopted regulations that generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share subject to certain exceptions that are not applicable to our company at present. Our common stock is subject to the penny stock rules that impose additional sales practice requirements on broker-dealers who sell these securities to persons other than established customers and accredited investors. The regulations require that prior to any transaction involving a penny stock, a risk disclosure schedule must be delivered to the buyer explaining the penny stock market and its risks. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase, and must have received the purchaser's written consent to the transaction prior to sale. As such the market liquidity for the common stock will be limited to the ability of broker-dealers to sell it in compliance with the above-mentioned disclosure requirements.
You should be aware that, according to the Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
o control of the market for the security by one or a few broker-dealers;
o "boiler room" practices involving high-pressure sales tactics;
o manipulation of prices through prearranged matching of purchases and sales;
o the release of misleading information;
o excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
o dumping of securities by broker-dealers after prices have been manipulated to a desired level, which hurts the price of the stock and causes investors to suffer loss.
We are aware of the abuses that have occurred in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, we will strive within the confines of practical limitations to prevent such abuses with respect to our common stock.
FAILURE TO REMAIN CURRENT IN REPORTING REQUIREMENTS COULD RESULT IN DELISTING FROM THE OVER THE COUNTER BULLETIN BOARD.
Companies trading on the Over the Counter Bulletin Board ("OTCBB"), such as the Company, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13, in order to maintain
price quotation privileges on the OTCBB. If the Company fails to remain current in its reporting requirements, the Company could be delisted from the Bulletin Board.
In addition, the Financial Industry Regulatory Authority ("FINRA"), which supervises the OTCBB, has adopted a change to its Eligibility Rule, in a filing with the SEC. The change makes those OTCBB issuers that are cited for filing delinquency in their Form 10-K/Form 10-Q three times in a 24-month period and those OTCBB issuers removed for failure to file such reports two times in a 24-month period ineligible for quotation on the OTCBB for a period of one year. Under this rule, a company filing with the extension time set forth in a Notice of Late Filing (Form 12b-25) is not considered late. This rule does not apply to a company's Current Reports on Form 8-K.
FAILURE TO MAINTAIN MARKET MAKERS MAY AFFECT VALUE OF OUR COMMON STOCK.
If the Company is unable to maintain FINRA member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Company will be able to maintain such market makers.
SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY AFFECT MARKET PRICE.
All the shares held by Consorteum Stockholders who received them in the Exchange Agreement transaction were issued in reliance on the section 4(2) exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person (or persons whose shares are aggregated) who has beneficially owned shares acquired in a non-public transaction for at least six months, including persons who may be deemed affiliates of the Company (as that term is defined under that rule) would be entitled to sell within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of common stock, provided that certain current public information is then available. If a substantial number of the shares owned by these stockholders were sold pursuant to Rule 144 or a registered offering, the market price of the common stock at that time could be adversely affected.
WE HAVE NEVER PAID ANY CASH DIVIDENDS BECAUSE WE HAVE NEVER HAD ANY EARNINGS, AND WE WILL NOT PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid any cash dividends on our common stock since we began our business operations because we have never had earnings from which any such dividends could be declared. Assuming we attain earnings in the future, we do not intend to pay cash dividends. We intend to retain future earnings, if
any, for reinvestment in the development and expansion of our business. Any credit agreements which we may enter into with institutional lenders or otherwise may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that the board of directors decides is relevant. See "Dividend Policy" and "Description of Securities - Common Stock".
BUSINESS OF CONSORTEUM, INC.
There follows a description of the business of Consorteum, the operating wholly-owned subsidiary of the Company.
WHAT IS CONSORTEUM, INC.?
Consorteum, Inc. is a corporation organized under the laws of the Province of Ontario on April 3, 2006, with its corporate headquarters located at Suite 202, 2900 John Street, Markham, Ontario, L3R 5G3. Our telephone number is 1-866-824-8854 and our web site is www.consorteum.com.
WHAT WE DO:
Consorteum, Inc. is a systems integrator within the Financial Services, Payment and Transaction Processing industries.
Consorteum provides systems integration of electronic transaction processing solutions to healthcare, government, public and private sector companies. Our services provide customized, innovative technology solutions that create, augment and enhance customers existing financial, payment and transactional processing systems.
PAYMENT AND TRANSACTION PROCESSING INDUSTRY OVERVIEW
Payment transaction processing (PTP) is the central component in a banking payment system that is responsible for executing, routing and monitoring payment transactions. Payment transactions in general involve payment orders in various forms and formats. Transaction processing involves updating the appropriate database records as soon as a transaction (order, payment, etc.) occurs.
Transaction processing systems update constantly. At any given moment, someone may need an inventory balance, an account balance or the total current value of a financial portfolio. Also called "online transaction processing" (OLTP), the OLTP market is a demanding one, often requiring 24 x 7 operation and the most reliable computers and networks. Together, payment transaction processing and transaction processing is referred to as "Processing".
The Processing industry in North America and across the globe is made up of a number of organizations and infrastructures that process credit card, debit card and healthcare transactions as well as authorize these transactions
for settlement of monies or information between two or more organizations. `Processors', as they are traditionally known, have the capability of moving transactions in a digitized format to multiple settlement destinations. They traditionally contract to the banking industry (examples include Chase Paymentech and its affiliation with Chase Bank in the US and Scotiabank in Canada; Moneris to BMO and RBC in Canada, HSBC and Barclays Internationally), Processors can either be small, privately owned companies or larger, publicly traded companies, yet they are all `association members' of MasterCard or Visa, which means they can supply merchant discount rates (MDR) to their clients.
In North America, there are three major Processors: Chase Paymentech, First Data and Global Payments. These three processors are quickly becoming worldwide processors as they move into the European and Asian marketplaces via acquisition and partnership. Processors in North America process in excess of 75 billion electronic payment transactions annually (6.25 billion per month, or 312,500,000 transactions every business day).
There are also regional Processors in the North American market that provide the same key services as the three major processors mentioned above. Regional Processors have found ways of offering additional services that the majors cannot market because of scale and time factors.
The Processing industry worldwide does not typically possess all the core competencies to provide and manage all the elements of an end-to-end, turnkey solution. With the development and introduction of the new EMV standards and the increased adoption of new card types such as prepaid credit cards, stored value cards and loyalty cards, the Processors simply don't have the infrastructure or software in place to process these types of transactions. As a result, they look to others to supply the technologies needed to process these types of transactions.
CARD INDUSTRY OVERVIEW
The concept of using a card as a form of payment dates back to the late 1880's. The first card used in the United States was a fuel card in the 1920's that evolved over the years from paper and metal, to plastic. Large merchants issued the cards to their frequent customers and eventually started accepting other merchants' cards. Currently, the payment card industry encompasses debit, credit, stored value and prepaid cards. Our emphasis is on prepaid cards as described below.
HOW IS OUR BUSINESS ORGANIZED?
The majority of Consorteum's initiatives use the `Prepaid Card' as the cornerstone. A Prepaid Card is similar to a traditional credit card except it is pre-loaded with the cardholder's personal funds, which he can then use wherever the payment card is accepted, including on the internet and abroad. There is usually no credit involved since the only money available to spend is the money the cardholder deposits to the card.
The Prepaid Card industry allows its customers to gain the desired convenience they may not otherwise be afforded where day to day banking needs are concerned. As a system integrator Consorteum has the ability to address the specific requirements of their day to day banking needs, through its relationships with multiple suppliers. Consorteum will initially target six key markets and will develop and implement financial services, stored value / prepaid cards, payment, and transaction processing solutions for these key areas:
1. The Unbanked/Underbanked
2. Check Cashing
3. Loyalty Programs
4. Payroll /Benefit
5. Health and Wellness Processing
6. Consumer Rebate Programs
1. THE UNBANKED/UNDERBANKED
The unbanked/underbanked population includes individuals who receive government benefits, benefits payments, payroll checks, and other types of payments, but currently have minimal or no banking relationship
Traditionally, banks have not focused on the unbanked/underbanked customer base due to increased costs and risks. It is very expensive to service customers via a branch teller, especially when that customer is carrying a zero balance. Banks charge an average of $8 - $15 per month for a zero balance checking account, an obvious deterrent for those who more often than not would carry a zero balance. In addition, the unbanked/underbanked usually do not qualify for credit cards and mortgages so banks have little opportunity to turn them into profitable customers.
Due to increased credit requirements and security measures at banks, often the only alternative for the unbanked/underbanked is to use expensive check cashing outlets whose fees average 2% - 5% to cash a single paycheck. Many immigrant workers transfer funds each pay period to support relatives in foreign countries via check cashing outlets or wire transfers. Fees can amount to $60 per transfer, another major obstacle for the unbanked.
Two-thirds of customers (the `underbanked') have bank accounts but seek more convenient financial services. The remaining customers (the `unbanked') have been ignored by mainstream financial institutions and seek alternatives to provide them with basic financial services.
One potential market for our services in this area is the growing Hispanic population in the U.S., approximately 42.7 million people, which represents 14% of the total population. According to the July 1, 2004 U.S. Census, Hispanics are the country's largest minority. Approximately 73.7% of full time, year round Hispanic workers earn less than $35,000 per year. This is usually an indicator for consumers with little or no banking relationship who may rely on alternatives for their financial service needs. 66.9% of Hispanics in the U.S.
are originally from Mexico, with the second largest group originating from Central and South America (14.3%). In 2008, over $67.5 billion was transferred from the U.S. to Latin America and the Caribbean, and that same year, $25.1 billion went to Mexico alone.
2. CHECK CASHING
There are an estimated 13,000 check-cashing outlets ("CCO"s) in the U.S. cashing more than $80 billion worth of checks annually. Some 80 to 90 percent of these are payroll checks with an average size of $500 to $600. The balance is largely government benefits (social assistance, social security etc.), income-tax refunds, expense checks, medical benefits checks, insurance checks, and personal checks. CCO's do not require that a customer have a bank account to cash a check.
According to a 2007 Federal Reserve Board's Survey of Consumer Finances, over 10% of families in the U.S. do not keep a checking account. The survey also indicated that the majority of these consumers are unbanked by choice. A disproportionate number of the unbanked are ethnic minorities. These unbanked millions often must rely on alternative ways to carry out basic financial transactions, such as cashing payroll checks and paying bills. Currently, the average unbanked individual spends 10 percent of their net income on alternative financial services.
These check cashing services are provided primarily to lower and middle-income working individuals who are typically blue and white-collar workers involved in retail and service industries such as restaurants, hotels, auto repair, landscaping, daycare and line manufacturing. Many of these customers are also younger than the general population, regularly in need of financial services after normal banking hours, or living from "paycheck to paycheck".
Over 30 million people cash checks annually at CCO's and 180 million checks are processed annually in the U.S. While fees vary by store outlet, the Financial Service Centers of America (FISCA) - an industry trade group representing CCO's and payday lenders - estimates U.S. annual check cashing revenues at over $1.6 billion. As of 2004, there were an estimated 1,200 check cashing/payday loan stores in Canada. A 2006 survey indicated that 7 per cent of Canadians have used a check cashing service in the past year.
3. LOYALTY PROGRAMS
Loyalty programs are marketing programs designed to enhance brand loyalty by cultivating an ongoing relationship between a marketer and his customer. Successful loyalty programs encourage the consumer to buy frequently, to increase the amount spent each time, and to concentrate all or most of their related purchases on that brand. In addition, they provide access to valuable demographic and purchasing information that can be leveraged to shape future campaigns. In 2006, loyalty programs were a $10 billion industry overall with
over 1.3 billion members - four times the total U.S. population - across 2250 separate loyalty programs.
Most loyalty programs offer perks for membership in a club or program and reward purchases. Rewards may be based on the dollar value of purchases made or on the frequency of purchases. The most well known consumer loyalty programs are airline frequent-flyer programs that offer discounts against future travel called reward miles. Most large supermarket chains now have frequent-buyer clubs that offer no coupon discounts as well as newsletters and affiliate discounts.
Loyalty program marketing tactics can include regular communication with customers such as reminder mailings, private credit cards, cross-sell and up-sell offers, satisfaction and opinion surveys, and collection of information for member databases. Loyalty programs may offer a discount on future purchases based on frequency of purchase, without regard to the dollar value of the purchase (these are also called frequent user programs). By offering frequency-based incentives, the marketer hopes to capture and maintain market share. Frequent user discount programs tend to increase spending because consumers will deliberately inconvenience themselves or buy more often than they need to earn the awards and status.
Loyalty Programs often target the individual consumer and can be customized to target specific industries or merchants. Programs can offer rewards directly to consumers or business to business incentives to drive sales.
4. PAYROLL /BENEFIT
Debit and Credit is overtaking cash in transaction volume, generating large volumes of transaction fees, allowing branded, prepaid Consumer Financial Services such as payroll and benefits cards to be successful. It is estimated that there were 7 million payroll cards in circulation in the U.S. in 2006. The number of U.S. payroll cards is expected to increase to 17.5 million in 2010. Research done by the Aite Group projects spending through use of payroll cards will soar to $27.1 billion by 2009. Payroll and benefits cards provide employees and benefits recipients (many of whom are `unbanked' or `underbanked') with immediate access to their payroll or benefits payments. Cardholders can use their card at an ATM (Automatic Teller Machine), pay for purchases at the point-of-sale or pay bills online. Payroll and benefits cards are welcome everywhere credit cards are accepted worldwide, including Internet and mail order/telephone order (MOTO) merchants. Cardholders receive monthly statements and can obtain account information online, at ATMs, or by calling a toll-free number for customer service.
Upon enrolment into the payroll or benefits program, the participant will receive a personalized, re-loadable prepaid payroll or benefits card. Each pay period, the participant's funds are automatically deposited into their individual card account by their program administrator. Cardholders use their cards to obtain cash and pay for purchases as they would with a traditional
credit card. Corporate employers can offer the payroll cards to any or all of their employees.
Unbanked consumers are the primary target audience, particularly part-time and temporary employees and employees without checking accounts, those who do not wish to use their checking accounts for direct deposit, and consumers who receive recurring benefits payments. Convenience-minded employees, with or without checking accounts, who elect to have a portion of their paycheck deposited onto a payroll card for budgeting purposes are also targets.
5. HEALTH AND WELLNESS PROCESSING
The growing Health and Wellness industry makes use of transaction processing in a number of fundamental ways. Transactions are generated by everything from documentation processing to information management, payment processing, and health and wellness payments. In 2007 there were almost a billion electronic media claims processed for Medicare alone in the U.S.
The use of cards as a payment receipt methodology in healthcare is rapidly gaining acceptance due to its convenience and time saving benefits. Health insurance claims, disability payments, and structured settlement claims that are traditionally distributed by check can be replaced with a convenient re-loadable card.
6. CONSUMER REBATE PROGRAMS
Many consumer-focused companies provide cash back incentive programs to entice consumers to purchase their brand of products. For example, Sony might provide a $100 mail-in rebate when a consumer purchases a certain model of television. When the consumer applies for the mail-in rebate, the request is sent to a rebate processing company and a check is mailed to the recipient who cashes the check and spends the funds at their discretion. Rebate programs can be employed at the product level and/or at the store level, either locally or nationally.
Across North America there are several rebate processing companies (Resolve, Continental Promotions Group, etc.). Together, these rebate processing companies issue millions of consumer rebate checks per year. For example, in 2006, 250 million rebate checks totaling $5 billion were issued to U.S. consumers.
Many of the major retailers offering consumer mail-in rebate programs are looking for alternatives to their current cumbersome processes to help streamline these programs, making them less complicated and more user-focused. The current costs, processes and administration requirements needed to manage a typical mail-in rebate program can be significantly reduced by replacing mailed out checks with a simple, `one time' use gift/rebate cards.
WHAT ARE OUR CURRENT PROJECTS?
Consorteum currently has five key initiatives. All five programs are expected to be partially deployed and underway by the fourth quarter of 2009, based on our current planning process. The following is a list of Consorteum's third party contract and internal initiatives.
MY GOLF REWARDS
My Golf Rewards Inc. is a newly formed joint venture company incorporated in the Province of Ontario, to focus on customer retention through loyalty initiatives built specifically to target the international golf industry. To date Consorteum, Inc. has provided $250,000 of initial financing and owns a 49% stake in the joint venture. Part of the initial financing was used to acquire a loyalty engine technology license from FideliSoft, a Montreal, Quebec based loyalty and software provider. Under our license, the software also can be used for additional loyalty programs. Consorteum pays an annual licensing fee of $100,000 to FideliSoft Inc for the loyalty platform, divided into four equal payments of $25,000 payable quarterly, commencing October 1, 2009.
My Golf Rewards membership cards are distributed to interested golfers via participating golf courses. Golfers who apply for membership receive a My Golf Rewards loyalty card. The reward funds on this card continue to re-populate with ongoing use and redemption. The distinctive appeal of the card is that its value is based on rewarding golfers for repeat spending. As such, members are encouraged to use the card continually (rather than discard it after initial use).
As part of this initiative, ILS, our joint venture partner, provided the design of the program and the technical support. ILS and Consorteum are jointly responsible for ongoing development of new functionality enhancement. ILS is responsible for all direct golf course sales, marketing, customer service and terminal installations.
As a participant in My Golf Rewards, Consorteum will oversee and have final say over all operational aspects of the program. This includes providing executive management of the company, project management, technology partner management, support, and provisioning of the initial launch terminals, and loyalty card purchasing.
Phase 1 of the rollout will consist of two areas of focus: the first will be concentrated on 20 (minimum) courses to build brand awareness. To help with the adoption of the program, Consorteum will provide terminals (approximately $450 per terminal, for 20 terminals, a cost of $9,000) and cards (already purchased) to participating golf courses at no cost. Once the My Golf Rewards program has established itself within the industry, Consorteum will charge any new golf course an administration and set up fee to become part of the program. To enable customers to receive points throughout the golf courses facilities (pro shop, bar area, food and beverage cart) Consorteum anticipates the average golf course will require two or three terminals per location.
Consorteum will be required to finance the following as part of its obligations to the joint venture: program manager, marketing collateral, software license, POS terminals, hosted database servers, ongoing course promotions team and technical support. We expect that program execution for stage 1, (focused on June - September 2009) will have a budgeted cost of $150,000. In addition we have a $100,000 annual licensing fee to Fidelisoft for the loyalty platform.
My Golf Rewards charges the golf course a transaction fee each time the card is used. In addition My Golf Rewards charges a percentage fee of the total dollar points issued each time and a percentage fee of the dollar redemption amount.
MOBILE CHEQUE-IT
Consorteum has signed a joint-venture agreement with 1510848 Ontario Inc., an Ontario Corporation, to provide check cashing services to the mobile coffee truck industry. It is anticipated that the joint venture will be called Mobile-Cheque It. 1510848 Ontario Inc. will be responsible for all sales and marketing, driver sign up, client application form collection and cashed check collection. Consorteum will be responsible for technical support, application development, administrative services, card management, day to day operation and the banking relationship.
Many mobile coffee drivers offer check-cashing services to enable customers to pay off their weekly incurred tab. The average driver typically processes approximately 40 checks a month (with the average check being $500). Accordingly, many drivers carry a large amount of cash in their trucks to facilitate this check-cashing service.
The Mobile Cheque-It joint venture will enable 1000 coffee truck vendors in Canada to provide real-time, remote check-cashing services directly from any coffee truck. Each driver will be outfitted with a wireless POS terminal (configured to load funds, in real time, on to a stored value prepaid card). Customers will be charged a 3% service fee of the check value ($500 average) for processing and loading funds onto their prepaid card. Drivers will also be able to use the wireless POS terminal to take debit or credit card payment directly.
The first phase on the deployment process will be to five trucks for the beta test and to ensure all software and bank clearing of checks is seamless. The first initial beta trucks drivers will use the web browser on their cellular phone to activate the remote load on the prepaid MasterCard. The deployment will not require any funding for this phase. This will be a short term solution as the drivers will require a more functionable and streamlined process to a wireless POS terminal (Phase 2).
Phase 2 will require the enabling of up to 1000 mobile trucks with POS terminals, The cost of these terminals will be approximately $500 per truck and will be either leased or rented to the drivers. Drivers not wishing to promote all services or rent a terminal will still be able to cash a check and load a card though the web browser on their cell phone at no cost to the driver. Expenses will be funded equally between Consorteum and 1510848 Ontario Inc., our joint venture partner.
Consorteum's portion of deployment costs for this program is expected to cost approximately $100,000 in the first year. We estimate we will require one to two full time employees for supervision, accounting and periodic technical developments internally. Due to the anticipated amount of checks cashed and banking interaction, this program could be administratively heavy. Consorteum is responsible for the development and integration of the prepaid card reload applications into the POS terminal and provides the prepaid MasterCard product and any additional value added services.
1510848 Ontario Inc. is responsible for all sales, marketing and check collection costs. Additionally they will be responsible to fund the inventory for the Leased or Rented POS terminals for the drivers
All net revenues from the Mobile Cheque-It venture will be divided equally between Consorteum and 1510848 Ontario Inc. It is anticipated this joint venture will expand beyond Canada, into U.S., European and international markets throughout 2010-11.
Under the joint venture agreement, Consorteum will receive revenues from several sources from this initiative. First, we will receive 50% of the 3% service fee charged to cash any check. Second, we will share equally in the revenues from monthly fees charged to any card holder for maintaining the prepaid card account. Third, we will receive an override commission on any prepaid cellular and long distance products sold.
AFFINITY MANAGEMENT LTD.
Affinity Management provides national coalition buying programs across a spectrum of industries including chemical and horticulture companies. Consorteum has a contract in place with Affinity Management that allows them to resell our services to their coalition members. Affinity has been approved to resell our Prepaid Payroll Card and MDR programs and splits all revenues on a 50/50 basis with Consorteum.
Consorteum has provided to Affinity Management a secured payroll/incentive card program and Merchant Discount Rate program for Affinity Management Ltd. to offer to their clients in the U.S. and Canada. Since this is a reseller agreement, Consorteum has no financial liability for this program and no cost outlay.
Consorteum will receive 50% of all ongoing net revenues from cardholder fees charged on any payroll cards and 50% of all net revenues generated from the MDR for credit and debit card processing.
FIRST NATIONS FINANCIAL SERVICES (FN FINANCIAL SERVICES)
Consorteum has entered into an exclusive contract with F.P. Financial Ltd. to provide for the deployment of a suite of financial services to First Nations (FN) people and merchants. First Nations are Canada's indigenous population. We will act as the systems integrator to deliver the necessary components that will allow FP Financial to provide products and services to First Nation Bands. These services may include but are not limited to, Point of Sale (POS), Merchant Discount Rates (MDR), Automated Teller Machines (ATM), Stored Value, Payroll or Benefit Cards and Insurance. Consorteum will contract to third parties the provision of the hardware and software necessary to fulfill its obligations under the terms of the FP Financial contract.
The deployment will occur in stages. Initially, Consorteum will provide MDR and POS hardware to an initial group of First Nation's bands across Canada commencing in the third quarter of 2009. In the second phase 15,000 FN Benefits cards will be rolled out to the same select bands. FP Financial estimates that by the end of 2011, 300,000 benefits cards may be required. The FN Benefits card will be used to load government social assistance payments for First Nations People across Canada. This process will replace the current cumbersome manual check process.
We estimate we will require two full time employees for the initial contractual obligation to manage the third party providers, deployment, sales and marketing support for the FN project. We estimate our first year costs associated with this project will be approximately $250,000. These costs do not include the purchase and installation of the hardware or the creation of the requisite software. Under our agreement with FP, all these expenses will be paid directly by FP to the third party providers.
Consorteum will receive an ongoing revenue share based on its contract with FP Financial from fees charged to the card holder for usage. Within the contract there is additional provision for revenue share from every future product and services provided to FP Financial. The term of the contract between FP Financial and Consorteum is for an initial period of four years and renewable for two year intervals thereafter.
OUR SALES AND MARKETING STRATEGY
Consorteum has a two stage approach to sales and marketing, Direct (Consorteum managed and run programs) and Indirect (third party client managed and run programs).
Our methodology for deployment and/or initiation of a program is based on there being a qualified business problem, an identified solution, and a real client need. Consorteum evaluates the revenue potential, cost effectiveness, and profitability before proceeding.
Direct:
Once a defined opportunity has been identified, Consorteum will create
our own sales and marketing strategy. Depending on the program being launched
and availability of funding, the following areas could be included in the
marketing plan: publication media, web media, direct person-to-person
promotions, printed collateral, sponsored sporting events, retail store
promotions, email, direct mail, radio or TV. The combination of plans utilized will depend upon our research concerning the most effective allocation strategies, supplemented by our experiences based on programs actually launched and developed.
Indirect:
Our contracted clients are third party companies looking to resell our
products or services to their customers, or who have contracted Consorteum to
integrate a payment or transaction processing solution for them. A majority of
our third party clients are either referred to us from existing industry
partners or from our own direct sales efforts.
We also have the ability to provide our third party clients with industry focused sales and marketing advice. Although Consorteum does not directly shape the marketing plans of our clients, we do provide marketing expertise to help maximize their promotional efforts to increase adoption of services.
OUR PRODUCTS
We expect to create and distribute cards with a variety of functions and features that will depend upon the program to which they are addressed. A general description of various kinds of cards is set forth below; however, we do not currently have initiatives supporting all these varieties in place. Our ability to create different card types will depend upon a combination of client interest and initiatives and available funding sources.
LOYALTY CARDS:
The Loyalty card enables the identification between the consumer and
the loyalty provider. The card identifies the consumer accumulating points, or
enables the recipient to redeem points for pre-selected award. The card also
enables the loyalty/marketing provider to track the activity of their consumers
spending habits and redemption activity.
RE-LOADABLE PREPAID CARD:
Re-loadable prepaid cards are designed for people looking for multiple
use functionality from their card. Many retailers offer re-loadable cards as a
convenient way for their repeat spend customers to pay for products and
services, while maintaining brand loyalty. Based on the specific program, these
types of cards can be re-loaded at selected retail locations, on-line or at the
bank.
PAYROLL CARDS:
Each employee is issued his/her own stored value payroll card. The
employer post funds electronically to the employee's personal card via standard
direct deposit processes or by flat file to a secured website interface. Once
funds are loaded, the employee has immediate access to his payroll funds no
matter where he may be.
Employees can purchase goods and services at those locations that accept any major credit cards (including online and phone purchases) or withdraw cash at most ATMs. Stored value cards are safer than cash, reduce risk for
purchases made online or over the phone and provide peace of mind for people on the go.
Payroll cards are ideal for temporary workers, students, or those who work remotely, as well as those who desire flexibility.
MERCHANT DISCOUNT RATES:
Merchant Discount Rates are fees charged to a merchant in order to
accept payment from any of the major credit card companies. Consorteum has
established relationships with several large processors to purchase transaction
processing at a competitive rate and offer these services to our clients.
BENEFIT CARDS:
Prepaid benefit cards have been developed in order that federal,
municipal, state and provincial governments can deposit social assistance
payments direct onto a prepaid card, instead of issuing millions of manual
checks to recipients.
Healthcare Benefit cards are designed to be loaded with a monetary value by Healthcare benefit suppliers which allow there client to have control of their own benefit expenses
REBATE CARDS:
Rebate cards are similar to a non re-loadable gift card. The card is
issued to the recipient of the mail-in rebate instead of the traditional check
process or restricted retailer gift card. The rebate card enables the mail-in
recipient to use their rebate monies at any retail location, thus increasing
customer satisfaction.
GIFT CARD, NON RE-LOADABLE:
Non re-loadable gift cards normally have a preset denomination value
and are designed as a one-time use, non-re-loadable card. These cards are
traditionally designed for use at specific retail chains, closed loop, or open
loop prepaid gift cards that can be used at any retail merchant that accepts
major credit cards.
Transaction levels have consistently been higher in the last quarter of the year due to increased use of our prepaid card programs during the holiday season. Transaction levels are greater for our loyalty and reward programs during the second and third quarter of the year.
HOW ARE WE PAID FOR OUR SERVICES?
Each of our programs has a different way for collecting fees for the service. The amount of fees we receive varies with each program and the specific solution being offered. In some cases the transaction fee charged is set in the markets in which we are doing business.
In general, we receive a portion of the transaction and monthly fees generated by the end users card activity In most cases we do not receive these revenues directly from the card holders, as we generally do not have the direct relationship with them. We receive a percentage of the sums charged to the card holder by the issuing bank for the retention, maintenance, user fees and other expenses associated with cardholder ownership. We receive our allocated percentages of these collected fees each month from the issuing bank together with a statement calculating our fees. Various kinds of fees associated by type of card are described below; however, our participation in one or more of the kinds of fees associated with each card as well as the percentage of sharing of revenues will differ from client to client based upon our actual contract.
Card Programs: Most of the card programs are consumer based billing. This means the user of the card pays service fees for different functionality of the card. These fees could include Monthly Service fees, ATM fees, Balance inquiry fees, POS fees and others.
Loyalty Program: Fees for the loyalty programs are traditionally paid for by the retailer promoting the service. These could include administration fees, per transaction fees, reward issuing fees and reward redemption fees.
Merchant Discount Fees: The payment Processor charges the retail merchant a percentage of the transaction value for processing a specific card payment (VISA, MC, Debit). The processor pays Consorteum a percentage of net revenues generated from the fee charged to the merchant. We have and will continue to have card acceptance agreements with some banks under which fees are set.
WHAT REGULATIONS WILL OUR BUSINESS BE SUBJECT TO?
Due to the financial services focus of our business, Consorteum may be required to directly or indirectly conform to banking and Processing industry regulations. Our issuing banking and transaction Processing partners must comply with all federal and state/provincial banking regulations (eg. FDIC's "Regulation E" of the Electronic Funds Transfer Act) in addition to card association (eg. Visa, MasterCard, American Express, Discover) rules and regulations (eg. PCI Security Standards Council for payment account data security). Consorteum, as part of doing business with these partners, may have to comply with certain rules and regulations and/or insure our other business partners and clients properly collect, store, disseminate, and comply with certain portions of these rules and regulations on our issuing banking and Processing partners' behalf (eg. KYC "Know Your Customer"). Consorteum currently has no financial or licensing obligation to meet these compliance regulations. These regulations do change over time and vary from country to country.
INTELLECTUAL PROPERTY
Currently, we do not own any intellectual property that is subject to protection under U.S. or Canadian patent, trademark or copyright law. We have a license to use certain programming in connection with the MyGolf Rewards project.
Presently we have not design our own software programs for processing transactions. We do not believe that we will devote our efforts to creating any form of programming or other intellectual property that can be the subject of a patent application or other form of "strong" intellectual property protection.
We seek to maintain certain intellectual property as trade secrets or proprietary information. The secrecy of this information could be compromised by third parties, or intentionally or accidentally disclosed to others by our employees, which may cause us to lose any competitive advantage we enjoy from maintaining these trade secrets. We will, however, require all employees to sign non disclosure and confidentiality agreements and take other steps to protect our corporate assets prudently.
WHO IS OUR COMPETITION?
Competition for the various products and services that Consorteum supplies to its clients are generally supplied by a number of different sources. The major financial institutions around the globe could supply a partial or complete array of products that will be in direct competition with Consorteum. The large Processors such as Chase Paymentech, First Data and Global Payments also supply parts of the Consorteum solutions but generally do not offer a complete end-to-end solution. The individual card associations such as MasterCard, Visa and Discover can offer card programs such as prepaid credit cards and gift cards direct to their card users. There are also companies that supply stored value card programs, such as Incomm and eFunds; and there are also a number of loyalty and rewards program suppliers.
EMPLOYEES
Consorteum currently operates with a total of 7 (seven) contract employees. These individuals are all full-time individuals and are all on Management Services Agreements. These are the only employees of the company.
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXECUTIVE LEVEL OVERVIEW
Consorteum, Inc. was incorporated under the laws of the Province of Ontario on April 3, 2006. On June 15, 2009, Consorteum became a wholly-owned subsidiary of the Company as a result of the closing under an agreement and plan of exchange pursuant to which all of the Consorteum. stockholders exchanged all of their issued and outstanding shares of Consorteum for an equivalent number of shares of common stock of the Company. As a result of the exchange agreement closing,
Consorteum, Inc. will function as the operating company and the Company will be a holding company.
Consorteum. will focus on providing leading edge solutions to financial institutions, healthcare, government, public, associations, and private sector companies for electronic transaction processing and systems integration. Consorteum's services provide customized, innovative technology solutions that create, augment and enhance customers' existing systems. These enhancements and programs are aimed to serve underserved markets and provide equal opportunity for financial services to a greater audience. Consorteum works with a multitude of global technology partners that enable the company to create customized solutions for each of its clients across a broad spectrum of industries.
Until this acquisition, Consorteum relied on financing from sales of its common stock to related parties and private lending arrangements with individual investors. Management believes this acquisition will provide working capital stability, allowing Consorteum to grow and meet its operational forecast. This being said, it is Management's opinion that Consorteum will be cash-flow positive in the first quarter of 2010.
Consorteum has several contracts in place that will begin in the early third quarter of 2009. Consorteum will earn the majority of its revenue in the near future from debit and credit card transaction fees.
The financial results of 2007 and 2008 are reflective of an early stage company that has been focused on growing the proper management team, putting infrastructures in place and seeking out an acquiring company.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2008, Consorteum's fiscal year-end, Consorteum had $23,395 in total current assets, compared to total current assets of $6,232 as of June 30, 2007. The June 30, 2008 current assets were comprised of $16,049 in cash and $7,346 in accounts receivable. As at June 30, 2008, Consorteum fixed assets consisted of computer equipment valued at $19,643 less accumulated depreciation of $8,605.
RESULTS OF OPERATIONS
Consorteum had revenues of $223,627 for the year ended June 30, 2008, compared with $8,830 for the year ended June 30, 2007. The majority of the revenue in 2008 was earned from a single customer.
For the year ended June 30, 2008, Consorteum had a net loss of $999,247 compared to a net loss of $734,651 for the year ended June 30, 2007. The majority of this increase can be attributed to the costs associated with expanding initiatives, as well as the fees related to seeking out an acquiring company. Operating expenses increased from $584,713 for the year ended June 30, 2007 to $1,043,198 for the year ended June 30, 2008. The majority of this increase can be attributed to an increase in professional and consulting fees to assist Consorteum, in becoming a subsidiary of a publicly traded company.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not currently have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and related notes. Actual results could differ from
those estimates.
RISK AND UNCERTAINTIES:
Factors that could affect the Company's future operating results and
cause future results to vary materially from expectations include, but are not
limited to, lower than anticipated retail transactions, and inability to control
expenses, technology changes in the industry, relationships with processing
agencies and networks, changes in its relationship with related parties
providing operating services to the Company and general uncertain economic
conditions. Negative developments in these or other risk factors could have
material adverse affect on the Company's future financial position, results of
operations and cash flow.
CASH AND CASH EQUIVALENTS:
Consorteum considers all highly-liquid investments with a maturity of
three months or less when purchased to be cash equivalents. There are no cash
equivalents at March 31, 2009, June 30, 2008 and June 30, 2007.
EQUIPMENT AND DEPRECIATION:
Equipment is stated at cost and is depreciated using the declining
balance method over the estimated useful lives of the respective assets. Routine
maintenance, repairs and replacement costs are expensed as incurred and
improvements that extend the useful life of the assets are capitalized. When
equipment is sold or otherwise disposed of, the cost and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is
recognized in operations.
REVENUE RECOGNITION:
Consorteum derived the majority of its revenue in 2008 from a
consulting contract with a single customer. Revenue was recognized on a
completion of project basis. In the near future, it will be deriving the
majority of its revenue from debit and credit card transaction fees, loyalty
fees and consulting services. It will record this revenue on a transaction by
transaction basis with long term recurring revenues.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Consorteum uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their fair value due to the short-term maturities of these assets and liabilities.
INCOME TAXES
Consorteum accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by valuation allowance, if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Income tax provisions require the use of management judgments, which are subject to challenge by various taxing authorities. Significant estimates used in accounting for income taxes relate to determination of taxable income and the determination of temporary differences between book and tax bases.
PROPERTIES.
Consorteum has a lease on office space at Suite 202, 2900 John Street, Markham, Ontario, L3R 5G3. This lease is for the period commencing May 15, 2009,
and ending May 14, 2010. The property is 2231 square feet, at a rate of $3923.85 per month, inclusive of all fees and taxes.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CONTROL PERSONS
Consorteum, Inc. has entered into management services agreements with each of three officers as follows:
(i) On April 3, 2006 Consorteum entered into a management services agreement with Craig Fielding, its CEO and a member of the board of directors of Consorteum and the Company under which Mr. Fielding is paid an annual salary of $150,000 and receives additional compensation aggregating $23,400. Mr. Fielding's salary has accrued from commencement of his management services agreement, is carried as a liability on the books of Consorteum and has not been paid. If Mr. Fielding leaves Consortuem he is entitled to a severance of $300,000.
(ii) On May 1, 2006 Consorteum entered into a management services agreement with Quentin Rickerby, its COO, President and a member of the board of directors of Consorteum and the Company under which Mr. Rickerby is paid an annual salary of $150,000 and receives additional compensation aggregating $23,400. Mr. Rickerby's salary has accrued from commencement of his management services agreement, is carried as a liability on the books of Consorteum and has not been paid. If Mr. Rickerby leaves Consorteum he is entitled to a severance of $300,000.
(iii) On May 1, 2006 Consorteum entered into a management services agreement with James D. Beatty Associates, Ltd., a corporation owned by Mr. James D. Beatty, a member and Chairman of the Board of Directors of Consortuem and the Company under which Mr. Beatty is paid an annual salary of $60,000 and receives additional compensation aggregating $16,800. Mr. Beatty's salary has accrued from commencement of his management services agreement, is carried as a liability on the books of Consorteum and has not been paid. If Mr. Beatty leaves Consorteum he is entitled to a severance of $60,000.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue the following classes of stock: 100,000,000 shares of Common Stock, par value $0.001 per share, and (ii) 10,000,000 shares of preferred stock, par value $.001 per share. As of June 15, 2009, we have 46,859,750 shares of Common Stock issued and outstanding, and no preferred shares issued and outstanding.
PREFERRED STOCK
Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which
could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of our authorized preferred stock, there can be no assurance that the Company will not do so in the future.
COMMON STOCK
The holders of shares of Common Stock are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the Board of Directors may from time to time determine. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the Common Stock at the time outstanding. No holder of shares of Common Stock has a preemptive right to subscribe to future issuances of securities by the Company. Holders of Common Stock are entitled to cast one vote for each share held of record on all matters presented to stockholders for a vote. There is no cumulative voting.
DIVIDENDS
We have not paid any cash dividends on our Common Stock heretofore because we have not had any earnings from which dividends could be paid. We have no present intention of paying any cash dividends for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the board of directors.
LITIGATION
We are not engaged in litigation, and we do not know of any threatened or pending litigation in which we will or may be made a party.
INDEMNIFICATION
The Company's Certificate of Incorporation, as amended, contains provisions to indemnify the directors, officers, employees or other agents to the fullest extent permitted by the Nevada Private Corporations Law. These provisions may have the practical effect in certain cases of eliminating the ability of stockholders to collect monetary damages from directors and officers of the Company.
The Nevada Private Corporations Law generally provides that a corporation is empowered to indemnify any person who is made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving, at the request of the corporation, in any of such capacities of another corporation or other enterprise, if such director, officer, employee or agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Under Nevada law, a director or officer may not be indemnified where his act or failure to act constitutes a breach of is fiduciary duty and such breach involved intentional misconduct, fraud, or a knowing violation of law. This statute describes in detail the right of corporations such as our Company to indemnify any such person.
Our Certificate of Incorporation and our By-laws provide generally for mandatory indemnification of our directors and officers to the fullest extent permitted under the Nevada Private Corporations Law if they have been successful in the defense of any claim asserted against them, and permissive indemnification for any claim asserted against them if it appears they acted in good faith and in a manner not opposed to the best interests of the Company. We are also permitted to indemnify all other persons whom we requested to act on behalf of the Company in the same manner. Our By-Laws permit us to advance expenses on behalf of any person, including officers and directors, with regard to any action or proceeding, provided that we receive an undertaking to repay all such advances if it is determined that such person was not entitled to be indemnified by us.
We have entered into indemnification agreements with our directors and officers. The agreements provide that we will indemnify the indemnitee to the fullest extent permitted by applicable law against expenses, including reasonable attorneys' fees, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any civil or criminal action or administrative proceeding arising out of his performance of his duties as a director or officer of our company other than an action initiated by a director or officer. Such indemnification is available if the indemnitee acted in good faith and in a manner he reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful.
Under each indemnification agreement, the entitlement of a director or officer to indemnification shall be determined by a majority vote of a quorum of disinterested directors, or if such quorum either is not obtainable or so directs, by independent counsel or by our stockholders, as determined by such quorum of disinterested directors. Under certain circumstances, a party to the indemnification agreement will be conclusively presumed to have met the applicable statutory standard of conduct unless our board of directors, stockholders or independent legal counsel determines that the relevant standard has not been met. If a change of control of our company has occurred, the entitlement of such director or officer to indemnification shall be determined by independent counsel selected by such director or officer, unless such director or officer requests that either the board of directors or the stockholders make such determination.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 3.02 UNREGISTERED SALES OF SECURITIES.
On June 15, 2009 the Company sold 39,999,750 shares of its common stock to the stockholders of Consorteum, in exchange for 39,999,750 shares of Consorteum, common stock which represented all of the issued and outstanding shares of common stock of Consorteum, The transaction was closed in accordance with the terms and conditions of the Exchange Agreement (see Item 2.01 to this Report) and was exempt by virtue of the operation of section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering.
ITEM 4.01 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(A) On June 19, 2009 the Company engaged SF Partnership, LLP as the principal accountant to audit its financial statements. In connection with the new engagement, there was no matter of disagreement between the Company and its former accountants.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
(a) On June 15th, 2009 the Company underwent a change of control as a result of the closing under the Exchange Agreement described in Item 2.01 of this Report. As a result of the closing, all of the following occurred:
(1)-(7) Mr. Richard C. Fox, the Company's President and CEO, and a member of the Board of Directors resigned. See Item 5.02 (b) and (c) below. At the closing Mr. Fox returned 23,000,000 shares of the Company's common stock he owned to the Company for cancellation in return for certain business plan and related intellectual property he had contributed to the Company.
The persons named below acquired the number of shares of the Company's common stock set forth opposite their respective names. The shares received represent the percentages of the Company's voting stock indicated. The shares were issued at the closing of the Exchange Agreement in exchange for an equal number of the shares of Consorteum common stock held by the named Consorteum Stockholders. The consideration used by each control person is the number of shares of Consorteum common stock set forth opposite his name below:
Number of Consorteum
Name Shares Exchanged
---- ----------------
Quentin Rickerby 9,786,035
Craig A. Fielding 8,815,090
James D. Beatty 1,500,000
Peter Rickerby 4,165,000
Henry Frank Fielding 3,500,000
|
Name and Address of Amount and Nature of Beneficial Percentage of Class Beneficial Owner (1) Ownership (2) ----------------------------------------------------------------------------------------------- Quentin Rickerby, 9,786,035 common shares 21.0% 42 Angus Meadow Drive, Markham, Ontario, Canada, L6C 1Z2 ----------------------------------------------------------------------------------------------- Craig A. Fielding, 8,825,090 common shares 18.83% 464 Worthington Avenue, Richmond Hill, Ontario, Canada, L4E 4R6. ------------------------------------------------------------------------------------------------ Peter Simpson 100,050 common shares 0.21% 1440 Alfred Crescent, Burlington, Ontario. Canada, L7S 1K7 ------------------------------------------------------------------------------------------------ James D. Beatty, 1,700,000 common shares 3.6% 46 Teddington Park Avenue, Toronto, Ontario, Canada, M4N 2C6. ------------------------------------------------------------------------------------------------ Peter Rickerby, 4,165,000 common shares 8.9% 21820- 46th Ave, Langley, BC. Canada, V4A 3J6. ------------------------------------------------------------------------------------------------ Henry Frank Fielding, 3,500,000 common shares 7.47% 27 George Avenue, Great Harwood, Blackburn, Lancashire, U.K. BB6 7NR. ------------------------------------------------------------------------------------------------ OFFICERS AND DIRECTORS 20,411,175 COMMON SHARES 43.56% ------------------------------------------------------------------------------------------------ |
There was no cash consideration or other funds used in connection with the
change of control. There are no arrangements or understandings among members of
both the former and new control groups and their associates with respect to
election of directors or other matters; provided, however, the Exchange
Agreement contained as a condition to closing that Mr. Richard C. Fox would
resign as a director, and as President and CEO of the Company at the time of the
Exchange Agreement closing, and that Messrs. Craig Fielding and Quentin Rickerby
would be appointed to the Company's Board of Directors. See Item 5.02 (b) and
(c) below.
ITEM 5.02. DEPARTURES OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
(B) AND (C) On June 15, 2009 Mr. Richard C. Fox resigned his positions as a director, and as President and CEO of the Company as one of the conditions to closing under the Exchange Agreement. See Item 2.01. The persons named below were appointed as directors of the Company and to the executive officer positions set forth opposite their respective names. Mr. James D. Beatty remains as a director of the Company.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
MR. CRAIG A. FIELDING., B.A. - CEO AND DIRECTOR, AGE 44
From April 2006 to the present Mr. Fielding has served as a director and CEO of Consorteum, a company he co-founded. From January 2002 to February 2006 Mr. Fielding was part of the management team (Vice President of Sales) at Mint Technology Corp, a technology based company in Toronto. Prior to that he was Vice-President of Sales at Softtracks Enterprises from September 1999- November 2001, a startup company based in Vancouver, British Columbia From August 1989 to August 1999 Mr. Fielding worked in a number of Sales Management and Senior Management roles in North America with Xerox Canada Ltd .
MR. QUENT RICKERBY - PRESIDENT/COO AND DIRECTOR, AGE 43
Mr. Rickerby co-founded Consorteum in April 2006 and has been serving as Director, President and COO since inception. Mr. Rickerby has been in the payments and transactions industry for over 10 years and brings extensive management and sales experience in the gift, payroll prepaid card, transaction processing and financial services industry. From January 2003 to December 2005 Mr. Rickerby was part of the management team (Director of Sales) at Mint Technology Corp, a technology company based in Toronto. Prior to that, from March 1999 to September 2002 Mr. Rickerby worked as Director of Sales at Softtracks Enterprises, a start up company based out of Vancouver B.C in the wireless payment processing industry. Prior to that, Mr. Rickerby spent eight years working for two national wireless telecom companies in various management
positions, including being part of the start up team for the launch of Clearnet Wireless in Western Canada.
MR. JAMES D. BEATTY, B.A., M.B.A. - CHAIRMAN AND DIRECTOR, AGE 64
From July 1982 to the present, Mr. Beatty has been the President and Chief Executive Officer of Trinity Capital Corporation, a private Canadian merchant bank. Mr. Beatty has served as the Executive Chairman of Consorteum since May 2006. From January 2005 to the present Mr. Beatty has also been the Chairman of Canary Resources Inc., a U.S. publicly traded coal bed methane company operating in Eastern Kansas and Western Missouri. From March 2006 until June 2008 Mr. Beatty served as Chairman of First Metals Inc. a Canadian base metals producer listed on the Toronto Stock Exchange.
MR. PETER SIMPSON, CMA - CHIEF FINANCIAL OFFICER, AGE 44
Mr. Simpson has been working with Consorteum as their CFO, since April 2006. Mr. Simpson received his professional accounting designation in 1990. Since that time, he has operated a successful consulting and accounting practice, working with small to medium sized businesses during rapid growth stages, creating and maintaining proper infrastructures and financial reporting. Another area of expertise for Mr. Simpson is in filing R&D tax credit claims with the Federal and Provincial government. Since 1989, Mr. Simpson has filed returns that total well over a million dollars in tax savings. Along with R&D tax credit claims, Mr. Simpson has acted as CFO for companies in the software, professional medical journal and manufacturing industries. During 2007/2008, Mr. Simpson assisted a client in successfully completing a buyout of their company.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid by the company for services rendered for the fiscal year ended, June 30, 2008 to each of the individuals who served as Executive Chairman, Chief Executive Officer, Chief Operating Officer and President, and Chief Financial Officer (executives collectively referred to as the "Named Executives").
--------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY STOCK OPTION ALL TOTAL
OTHER
AWARDS AWARDS COMPENSATION
($)(1) ($) ($) ($)(2) ($)
------------------------------ --------- ----------------- -------------- --------------- ----------------- --------------
James D. Beatty, Executive 2008 $60,000 0 0 $16,800 $76,800
Chairman.
------------------------------ --------- ----------------- -------------- --------------- ----------------- --------------
Craig A. Fielding, Chief 2008 $150,000 0 0 $23,400 $173,400
Executive Officer
------------------------------ --------- ----------------- -------------- --------------- ----------------- --------------
Quentin Rickerby, Chief 2008 $150,000 0 0 $23,400 $173,400
Operating Officer, and
President.
------------------------------ --------- ----------------- -------------- --------------- ----------------- --------------
Peter Simpson, Chief 2009 $60,000 0 0 $60,000
Financial Officer
------------------------------ --------- ----------------- -------------- --------------- ----------------- --------------
|
All outstanding unpaid executive salaries have been accrued in the audited financials.
(1) In order to retain the Named Executive Officers and retain continuity of management in the event of an actual or threatened change of control, the Company has entered into Management Service Agreements, and Consulting agreements with each of the Named Executive Officers. Each agreement sets for the severance benefits in the event of a change of control or termination without cause. The Service / Consulting agreements are attached for full disclosure.
(2) Represents monthly car allowance, and monthly home office expense allowance
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
NAME SEVERANCE BENEFIT RESTRICTED EXCISE TOTAL ($)
TAX GROSS
PAYMENT (1) PLANS ($)(2) STOCK (3) UP
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
James D. Beatty, $60,000 $60,000
Executive Chairman
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
Craig A. Fielding, $300,000 $300,000
Chief Executive
Officer
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
Quentin Rickerby, $300,000 $300,000
Chief Operating
Officer, President
-------------------- -- ------------------ -- ------------- -- --------------- -- ----------- -- ------------
|
The Company currently has the following forms of stock compensation, equity compensation, deferred compensation or other plan or pension in place for its directors, executive officers and employees of the Company: (i) 2008 Stock Option Plan of the Company and (ii) 2008 Employees Compensation and Stock Option Plan. The Company is authorized to issue up to a maximum of 2,500,000 shares of its common stock under each such Plan. No grants of any kind are issued and outstanding under either Plan.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Consorteum, Inc. Consolidated Financial Statements at June 30, 2008 and June 30, 2007
(b) Pro forma financial information.
Pro forma combining balance sheet as as March 31, 2009.
Pro forma combining statement of operations as at March 31, 2009.
Notes to consolidated pro forma financial statements.
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CONSORTEUM HOLDINGS, INC.
By: /s/ Craig Fielding
----------------------------
Craig Fielding,
Chief Executive Officer
Dated: June 19, 2009
|
Index to Exhibits
(3)(i) Articles of Incorporation of Consorteum, Inc. (filed herewith).
(3)(ii) By-laws of Consorteum, Inc. (filed herewith).
10.4 Shareholder Agreement dated January 5, 2009 among Consorteum, Inc.,
Innovative Solutions, Inc., William Bateman and Michael Frasse (filed
herewith).
10.5 Management Services Agreement dated April 5, 2006 between Consorteum,
Inc. and FP Financial Services, Ltd. (filed herewith).
10.6 Management Services Agreement dated as of May 1, 2006 between
Consorteum, Inc. and Craig Fielding (filed herewith).
10.7 Management Services Agreement dated as of May 1, 2006 between
Consorteum, Inc. and Quentin Rickerby (filed herewith).
10.8 Management Services Agreement dated as of May 1, 2006 between
Consorteum, Inc. and James D. Beatty and Associates, Inc. (filed
herewith).
10.9 Joint Venture Agreement dated December 13, 2006 between Consorteum,
Inc. and 1510848 Ontario, Inc. (filed herewith).
10.10 Amended and Restated Mangement Services Agreement dated January 16,
2007 between Consorteum, Inc. and FP Financial Services, Ltd. (filed
herewith).
23. Consent of SF Partnership, LLP, Chartered Accountants (filed herewith).
|
Index to Financial Statements F-1
Report of Independent Registered Public Accounting Firm F-2
Consorteum, Inc. Balance Sheets at June 30, 2008 and June 30, 2007 F-3
Statements of Operations and Comprehensive Loss for the years ended
June 30, 2008 and 2007, and Cumulative from Inception
(April 3, 3006) Through June 30, 2008 F-4
Statements of Stockholders' Deficit For the Periods from Inception
(April 3, 2006) Through June 30, 2008 F-5
Statements of Cash Flows For the Years Ended June 30, 2008
and 2007 and Cumulative from Inception (April 3, 2006)
Through June 30, 2008 F-6
Notes to Financial Statements F-7-23
Pro forma combining balance sheet as at March 31, 2009. PF-1
Pro forma combining statement of operations as at March 31, 2009. PF-2
Notes to consolidated pro forma financial statements. PF-3-4
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
CONSORTEUM INC.
We have audited the accompanying balance sheets of CONSORTEUM INC. (A Development Stage Company) as of June 30, 2008 and 2007, and the related statements of operations and comprehensive loss, stockholders' deficit and cash flows for the years ended June 30, 2008 and 2007, and the period from April 3, 2006 (date of inception) through June 30, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consorteum Inc. as of June 30, 2008 and 2007, and the results of its operations and its cash flows for the years ended June 30, 2008 and 2007, and the period from April 3, 2006 (date of inception) through June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in the development stage, has an accumulated deficit during the development stage, and has insufficient working capital to meet its planned business operations. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ SF Partnership, LLP CHARTERED ACCOUNTANTS TORONTO, CANADA February 19, 2009 |
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2008 2007
ASSETS
CURRENT ASSETS
Cash $ 16,049 $ --
Accounts receivable, net (Note 4) 7,346 6,232
----------------------------
TOTAL CURRENT ASSETS 23,395 6,232
INVESTMENTS IN AFFILIATED COMPANIES (Note 5) 118,557 15,159
EQUIPMENT, NET (Note 6) 11,038 12,095
----------------------------
TOTAL ASSETS $ 152,990 $ 33,486
----------------------------
LIABILITIES
CURRENT LIABILITIES
Bank overdraft $ -- $ 6,492
Bank indebtedness (Note 7) 122,588 117,325
Accounts payable 543,329 105,984
Accrued liabilities 772,140 393,837
Loans payable (Note 8) 557,128 281,580
Due to stockholders (Note 9) 68,685 10,742
----------------------------
TOTAL CURRENT LIABILITIES 2,063,870 915,960
----------------------------
TOTAL LIABILITIES 2,063,870 915,960
----------------------------
COMMITMENTS AND CONTINGENCIES (Note 14)
STOCKHOLDERS' DEFICIT
CAPITAL STOCK
Common stock, no par value per share; unlimited shares authorized;
39,999,750 shares (2007 - 38,398,950 shares)
issued and outstanding 35,665 34,102
ACCUMULATED OTHER COMPREHENSIVE LOSS (81,799) (51,077)
ACCUMULATED DEFICIT DURING THE DEVELOPMENT STAGE (1,864,746) (865,499)
----------------------------
TOTAL STOCKHOLDERS' DEFICIT (1,910,880) (882,474)
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 152,990 $ 33,486
============================
(The accompanying notes are an integral part of these financial statements.)
F-3
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations and Comprehensive Loss
For the Years Ended June 30, 2008 and 2007, and Cumulative
from Inception (April 3, 2006) Through June 30, 2008
(Expressed in U.S. Dollars)
Cumulative from
Inception
(April 3, 2006)
Year Ended Year Ended Through
June 30, June 30, June 30,
2008 2007 2008
REVENUES $ 223,627 $ 8,830 $ 245,836
------------------------------------------------------
OPERATING EXPENSES
Management and consulting fees 706,438 366,299 1,173,161
General and administration expenses 183,332 167,350 372,963
Provision for doubtful accounts 99,738 -- 99,738
Selling expenses 49,475 48,067 98,010
Depreciation expense 4,215 2,997 8,211
------------------------------------------------------
TOTAL OPERATING EXPENSES 1,043,198 584,713 1,752,083
------------------------------------------------------
LOSS FROM OPERATIONS (819,571) (575,883) (1,506,247)
------------------------------------------------------
OTHER EXPENSES
Equity in net loss of an affiliated company (111,835) (82,882) (214,772)
Write off of investment in an affiliated company (34,633) (44,150) (78,783)
Interest and financing costs (33,208) (31,736) (64,944)
------------------------------------------------------
TOTAL OTHER EXPENSES (179,676) (158,768) (358,499)
------------------------------------------------------
NET LOSS (999,247) (734,651) (1,864,746)
Foreign currency translation adjustment (30,722) (50,420) (81,799)
------------------------------------------------------
COMPREHENSIVE LOSS $ (1,029,969) $ (785,071) $ (1,946,545)
======================================================
LOSS PER SHARE (Note 12)
BASIC $ (0.03) $ (0.02)
==================================
DILUTED $ (0.03) $ (0.02)
==================================
(The accompanying notes are an integral part of these financial statements.)
F-4
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Stockholders' Deficit
For the Periods from Inception (April 3, 2006) Through June 30, 2008
(Expressed in U.S. Dollars)
ACCUMULATED
ACCUMULATED DEFICIT
OTHER DURING THE TOTAL
COMMON STOCK COMPREHENSIVE DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT LOSS STAGE DEFICIT
--------------------------------------------------------------------------------
Balance - Inception (April 3, 2006) -- $ -- $ -- $ -- $ --
Stocks issued for cash 100 86 -- -- 86
Stocks issued for services rendered 27,964,350 25,126 -- -- 25,126
Foreign currency translation adjustment -- -- (657) -- (657)
Net loss for the period -- -- -- (130,848) (130,848)
--------------------------------------------------------------------------------
Balance - June 30, 2006 27,964,450 25,212 (657) (130,848) (106,293)
Stocks issued for services rendered (Note 13) 10,434,500 8,890 -- -- 8,890
Foreign currency translation adjustment -- -- (50,420) -- (50,420)
Net loss for the period -- -- -- (734,651) (734,651)
--------------------------------------------------------------------------------
Balance - June 30, 2007 38,398,950 34,102 (51,077) (865,499) (882,474)
Stocks issued for services rendered (Note 13) 1,600,800 1,563 -- -- 1,563
Foreign currency translation adjustment -- -- (30,722) -- (30,722)
Net loss for the period -- -- -- (999,247) (999,247)
--------------------------------------------------------------------------------
BALANCE - JUNE 30, 2008 39,999,750 $ 35,665 $ (81,799) $ (1,864,746) $ (1,910,880)
================================================================================
(The accompanying notes are an integral part of these financial statements.)
F-5
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
For the Years Ended June 30, 2008 and 2007 and Cumulative from
Inception (April 3, 2006) Through June 30, 2008
(Expressed in U.S. Dollars)
Cumulative from
Inception
YEAR ENDED Year Ended (April 3, 2006)
JUNE 30, June 30, Through
2008 2007 June 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (999,247) $ (734,651) $(1,864,746)
---------------------------------------------------
Adjustments for non-cash items:
Equity in net loss of an affiliated company 111,835 82,882 214,772
Writeoff of investment in an affiliated company 34,633 44,150 78,213
Depreciation 4,215 2,997 8,211
Stocks issued for services rendered 1,563 8,890 35,579
Changes in non-cash working capital, net of effects
from acquisition:
Accounts receivable (1,114) (5,288) (7,346)
Accounts payable 297,399 76,121 403,383
Accrued liabilities 378,303 342,054 772,140
---------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (172,413) (182,845) (359,794)
---------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (3,158) (9,407) (19,249)
Acquisition of investment in affiliated companies (115,621) (171,295) (286,916)
---------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (118,779) (180,702) (306,165)
---------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 275,548 281,580 557,128
Proceeds from bank indebtedness 5,263 117,325 122,588
Proceeds from bank overdraft -- 6,492 6,492
Repayment of bank overdraft (6,492) -- (6,492)
Proceeds from issuance of capital stock -- -- 86
Due to stockholders 57,943 (405) 68,685
---------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 332,262 404,992 748,487
---------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGE ON CASH (25,021) (41,463) (66,479)
---------------------------------------------------
INCREASE (DECREASE) IN CASH 16,049 (18) 16,049
CASH - BEGINNING OF PERIOD -- 18 --
---------------------------------------------------
CASH - END OF PERIOD $ 16,049 $ -- $ 16,049
===================================================
(The accompanying notes are an integral part of these financial statements.)
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
1. ORGANIZATION, DEVELOPMENT STAGE ACTIVITIES, AND GOING CONCERN
Consorteum Inc. (the "Company") was incorporated under the laws of the Province of Ontario on April 3, 2006.
DEVELOPMENT STAGE ACTIVITIES
The Company provides pioneering technology solutions and management expertise to companies and organizations looking to develop, streamline or augment their methods of processing payment transactions. It operates as a technology and services aggregator to meet the diverse needs of its client base by leveraging its wide-ranging partner technologies to develop end-to-end, turn-key card and payment transaction processing solutions.
GOING CONCERN ASSUMPTION
The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business. The Company's negative working capital and accumulated deficit during the development stage raise substantial doubt as to its ability to continue as a going concern. As of June 30, 2008 the Company had a negative working capital of $2,040,475 (2007 - $909,728) and an accumulated deficit during the development stage of $1,864,746 (2007 - $865,499).
The Company's continuance as a going concern is dependent on the success of the efforts of its Directors and principal stockholders in providing financial support in the short term; raising additional long-term equity or debt financing either from its own resources or from third parties; and the attainment of key contracts. In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, and differences from the carrying amounts reported in these financial statements could be material.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States of America, and their basis of application is consistent with that of the previous year. Set forth below are the Company's significant accounting policies:
a) Equipment, Net
Equipment is recorded at cost. Depreciation, based on the estimated useful life of the equipment, is provided at an annual rate of 30% based on the declining-balance method.
b) Impairment of Long-lived Assets
In accordance with Statement of Financial Accounting Standard ("SFAS") No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS," long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. Management believes that no impairment existed as of June 30, 2008 other than those related to investments - see Note 5.
c) Revenue Recognition
Revenue is recognized when services are provided and collection is reasonably assured.
d) Equity Investments
Equity investments are entities over which the Company exercises significant influence but does not exercise control. These are accounted for using the equity method of accounting and are initially recognized at cost net of any accumulated impairment loss. The Company's share of these entities' profits or losses after acquisition of its interest is recognized in the statement of operations and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Company's share of losses of these investments equals or exceeds the carrying amount of the investment, the Company only recognizes further losses where it has incurred obligations or made payments on behalf of the affiliate.
Joint ventures are entities over which the Company exercises control jointly with another party or parties. Joint ventures are also accounted for under the equity method as described above.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
e) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109, "ACCOUNTING FOR INCOME TAXES." Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
f) Foreign Currency Translation
In accordance with the provision of SFAS No. 52, "FOREIGN CURRENCY TRANSLATION," the Company, whose functional currency is the Canadian dollar, translates its balance sheet into U.S. dollars at the prevailing rate at the balance sheet date and translates its revenues and expenses at the average rates prevailing during each reporting period. Net gains or losses resulting from the translation of financial statements are accumulated and charged directly to accumulated comprehensive income or loss, a component of stockholders' equity or deficit. Gains or losses resulting from foreign currency transactions are included in earnings.
g) Comprehensive Income or Loss
The Company applies the provisions of SFAS No. 130, "REPORTING COMPREHENSIVE INCOME." Unrealized gains and losses from foreign exchange translation are reported in the accompanying statements as comprehensive income (loss).
h) Earnings or Loss Per Share
The Company accounts for earnings or loss per share pursuant to SFAS No. 128, "EARNINGS PER SHARE," which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. There were no dilutive financial instruments issued or outstanding for the years ended June 30, 2008 and 2007.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
i) Use of 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 and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from those estimates. These estimates are reviewed on an ongoing basis and as adjustments become necessary, they are reported in earnings in the period in which they become known.
j) Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 158, "EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS - AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, 106, AND 132(R)" ("SFAS 158"). The Company is currently assessing the potential impact that the adoption of SFAS 158 could have on its financial statements.
In February 2007, FASB issued SFAS No. 159, "THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES" ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. SFAS No. 159 applies to reporting periods beginning after November 15, 2007. The Company is currently assessing the potential impact that the adoption of SFAS 159 could have on its financial statements.
In April 2007, the FASB issued a FASB Staff Positions ("FSP") on FASB Interpretation ("FIN") 39-1 ("FIN 39-1") which modifies FIN 39, "OFFSETTING OF AMOUNTS RELATING TO CERTAIN CONTRACTS" ("FIN 39"). FIN 39-1 addresses whether a reporting entity that is party to a master netting arrangement can offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with FIN 39. Upon adoption of this FSP, a reporting entity shall be permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The guidance in this FSP is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the potential impact of implementing this standard.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Recent Accounting Pronouncements (cont'd)
In December 2007, the FASB issued SFAS No. 160, "NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS--AN AMENDMENT OF ACCOUNTING RESEARCH BULLETIN NO. 51" ("SFAS 160"). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of SFAS 160 will have no impact on the Company's financial statements.
In December 2007, FASB issued SFAS No. 141 (revised 2007), "BUSINESS COMBINATIONS" ("SFAS 141(R)"). This statement replaces SFAS No. 141, "Business Combinations" and requires an acquirer to recognize the assets acquired, the liabilities assumed, including those arising from contractual contingencies, any contingent consideration, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure the noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer. SFAS 141(R) amends SFAS No. 109, "ACCOUNTING FOR INCOME TAXES," to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142, "GOODWILL AND OTHER INTANGIBLE ASSETS," to, among other things, provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently assessing the potential impact that the adoption of SFAS 141(R) could have on its financial statements.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Recent Accounting Pronouncements (cont'd)
In February 2008, FASB issued FSP on SFAS No. 140-3, "ACCOUNTING FOR TRANSFERS OF FINANCIAL ASSETS AND REPURCHASE FINANCING TRANSACTIONS" ("FSP SFAS 140-3"). The objective of this FSP is to provide guidance on accounting for a transfer of a financial asset and a repurchase financing. This FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS No. 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES" ("SFAS 140"). However, if certain criteria are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be evaluated separately under SFAS No. 140. FSP SFAS 140-3 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within these fiscal years. Earlier application is not permitted. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
In February 2008, FASB issued FSP SFAS No. 157-1, "APPLICATION OF FASB STATEMENT NO. 157 TO FASB STATEMENT NO. 13 AND OTHER ACCOUNTING PRONOUNCEMENTS THAT ADDRESS FAIR VALUE MEASUREMENTS FOR PURPOSES OF LEASE CLASSIFICATION OR MEASUREMENT UNDER STATEMENT 13" ("FSP SFAS 157-1"). FSP SFAS 157-1 amends SFAS 157 to exclude FASB Statement No. 13, "ACCOUNTING FOR LEASES," and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under FASB Statement 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement No. 141, "BUSINESS COMBINATIONS," or SFAS 141(R), regardless of whether those assets and liabilities are related to leases. This FSP shall be effective upon the initial adoption of SFAS 157.
In February 2008, FASB issued FSP SFAS No. 157-2, "EFFECTIVE DATE OF FASB STATEMENT NO. 157" ("FSP SFAS 157-2"). FSP SFAS 157-2 delays the effective date of SFAS No. 157, "FAIR VALUE MEASUREMENT," for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. It does not defer recognition and disclosure requirements for financial assets and financial liabilities, or for nonfinancial assets and nonfinancial liabilities that are remeasured at least annually.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Recent Accounting Pronouncements (cont'd)
In March 2008, FASB issued SFAS No. 161, "DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--AN AMENDMENT OF FASB STATEMENT NO. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Earlier application is encouraged. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
In April 2008, FASB issued FSP SFAS 142-3, "DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS" ("FSP SFAS 142-3"). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS," ("SFAS 142"). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. FSP SFAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. Early adoption is prohibited. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
In May 2008, FASB issued FSP Accounting Principles Board ("APB") 141-1, "ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT)" ("FSP APB 141-1"). FSP APB 141-1 clarifies convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, "ACCOUNTING FOR CONVERTIBLE DEBT AND DEBT ISSUED WITH STOCK PURCHASE WARRANTS." Additionally, FSP APB 141-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 141-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is not permitted. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Recent Accounting Pronouncements (cont'd)
In May 2008, FASB issued SFAS No. 162, "THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles ("GAAP") in the United States of America (the GAAP hierarchy). SFAS 162 is effective 60 days following the U.S. Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "THE MEANING OF PRESENT FAIRLY IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES." The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, "DISCLOSURES ABOUT CREDIT DERIVATIVES AND CERTAIN GUARANTEES: AN AMENDMENT OF FASB STATEMENT NO. 133 AND FASB INTERPRETATION NO. 45; AND CLARIFICATION OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 161" ("FSP SFAS 133-1 and FIN 45-4"). FSP 133-1 and FIN 45-4 is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. It amends FASB Statement No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. FSP SFAS 133-1 and FIN 45-4 also amends FASB Interpretation No. 45, "GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS TO OTHERS," to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of the FSP SFAS 133-1 and FIN 45-4 that amend Statement 133 and Interpretation 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements. The adoption of FSP 133-1 and FIN 45-4 will have no impact on the Company's financial statements.
In October 2008, FASB issued FSP SFAS 157-3, "DETERMINING THE FAIR VALUE OF A FINANCIAL ASSET WHEN THE MARKET FOR THAT ASSET IS NOT ACTIVE" ("FSP SFAS 157-3"). FSP SFAS 157-3 clarifies the application of FASB Statement No. 157, "FAIR VALUE MEASUREMENTS," in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP SFAS 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Recent Accounting Pronouncements (cont'd)
In December 2008, FASB issued FSP SFAS 140-4 and FIN 46 (R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities" ("FSP SFAS 140-4 and FIN 46 (R)"). FSP SFAS 140-4 and FIN 46 (R) amends FASB SFAS 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES," to require public entities to provide additional disclosures about transfers of financial assets. It also amends FASB SFAS 46 (revised December 2003), "CONSOLIDATION OF VARIABLE INTEREST ENTITIES," to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is (a) a sponsor of a qualifying special purpose entity ("SPE") that holds a variable interest in the qualifying SPE but was not the transferor (nontransferor) of financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor (nontransferor) of financial assets to the qualifying SPE. The disclosures required by FSP SFAS 140-4 and FIN 46 (R)" are intended to provide greater transparency to financial statement users about a transferor's continuing involvement with transferred financial assets and an enterprise's involvement with variable interest entities and qualifying SPEs. FSP SFAS 140-4 and FIN 46 (R) is effective for reporting periods (annual or interim) ending after December 15, 2008. The Company is currently reviewing the effect, if any; the proposed guidance will have on its financial statements.
In December 2008, FASB issued FSP SFAS 132 (R)-1, "EMPLOYERS'
DISCLOSURES ABOUT POSTRETIREMENT BENEFIT PLAN ASSETS", ("FSP SFAS
132 (R)-1"). FSP SFAS 132 (R)-1 provides guidance on an employer's
disclosures about plan assets of a defined benefit pension or other
postretirement plan. It also includes a technical amendment that
requires a nonpublic entity to disclose net periodic benefit cost
for each annual period for which a statement of income is presented.
FSP SFAS 132 (R)-1is effective for fiscal years ending after
December 15, 2009. The adoption of FSP SFAS 132 (R)-1 will have no
impact on the Company's financial statements.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
3. FAIR VALUE MEASUREMENTS
The Company adopted SFAS 157, except as it applies to the nonfinancial assets and nonfinancial liabilities subject to FSP SFAS 157-2. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, SFAS 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Cash, bank overdraft, bank indebtedness (Level 1), accounts receivable, due to stockholders, accounts payable, accrued liabilities, and loans payable (Level 2) are reflected in the balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.
4. ACCOUNTS RECEIVABLE, NET
2008 2007
Accounts receivable - trade $ 98,855 $ --
Accounts receivable - other 7,346 6,232
-------------------------
106,201 6,232
Less allowance for doubtful accounts (98,855) --
-------------------------
$ 7,346 $ 6,232
-------------------------
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
5. INVESTMENTS IN AFFILIATED COMPANIES
2008 2007
Acquisition costs
49% ownership interest in MyGolf Rewards Inc. $ 343,502 $ 124,365
40% units in FP Financial Ltd. 83,360 46,930
---------------------------
Total 426,862 171,295
---------------------------
Accumulated equity in net loss of MyGolf Rewards Inc.
Balance, beginning of period (109,206) (20,145)
Equity in net loss for the period (111,835) (82,882)
Translation adjustment (3,904) (6,179)
---------------------------
Balance, end of period (224,945) (109,206)
---------------------------
Writeoff of investment in FP Financial Ltd. (83,360) (46,930)
---------------------------
$ 118,557 $ 15,159
===========================
|
Total assets and liabilities associated with the Company's equity investment in MyGolf Rewards Inc. are as follows:
2008 2007
Total assets $ 32,343 $ 20,206
Total liabilities $500,447 $257,554
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
6. EQUIPMENT, NET
Equipment comprises the following:
2008 2007
Accumulated Accumulated
Cost Depreciation Cost Depreciation
--------------------------------------------------------------------------------
Computer equipment $19,643 $ 8,605 $16,331 $ 4,236
-------------------------------------------------
Net carrying amount $ 11,038 $ 12,095
======= ========
|
Depreciation expense charged to operations amounted to $4,215 for the year ended June 30, 2008 (2007 - $2,997).
7. BANK INDEBTEDNESS
Bank indebtedness comprises of a demand loan facility in the amount of $122,588 (2007- $117,325). Interest is at Royal Bank of Canada's prime rate plus 2% per annum. The loan is secured by a general security agreement signed by the Company constituting a first ranking security interest in all personal properties of the Company and personal guarantees from certain stockholders. As at June 30, 2008 and 2007 the full amount has been drawn down.
8. LOANS PAYABLE
A loan of $166,719 (2007 - $Nil) is unsecured, non-interest bearing, with no fixed terms of repayment.
The remaining loans bear interest at rates ranging from 12% to 18% per annum, are unsecured and mature between March and April 2009 (Note 16).
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
9. DUE TO STOCKHOLDERS
The amounts due to stockholders are interest-free, unsecured and have no fixed terms of repayment.
10. RELATED PARTY TRANSACTIONS AND BALANCES
The following were charged to the Company by certain stockholders for services provided:
2008 2007
a) Management fees $296,850 $264,900
========================
b) Allowances $ 62,932 $ 56,159
========================
|
These transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the related parties.
Included in accrued liabilities is $736,898 (2007 - $379,758) owed to certain stockholders for management fees, consulting fees and allowances.
Included in accounts payable is $139,946 (2007 - $Nil) owed to MyGolf Rewards Inc., an affiliated company, as part of the Company's equity investment obligation (see Note 5).
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
11. INCOME TAXES
The Company's income tax expense is as follows:
2008 2007
Expected income tax recovery at the
statutory rate of 17.57% (2007- 18.62%) $ 175,568 $ 136,792
Permanent differences -- (2,263)
Change in enacted tax rates (9,013) --
Effects of translation adjustments 1,029 1,730
Change in valuation allowance (167,584) (136,259)
--------------------------
Benefit from income taxes $ -- $ --
==========================
|
The components of deferred tax assets are as follows:
2008 2007
Net operating loss carryforwards $ 271,729 $ 129,965
Investment in affiliated companies 54,169 29,072
Equipment 1,512 789
Valuation allowance (327,410) (159,826)
----------------------------
Net $ -- $ --
===========================
|
The Company has net operating loss carryforwards available to be applied against future years' income. Due to the losses from operations and expected future operating results, it is more likely than not that the deferred tax asset resulting from the tax losses available for carry forward will not be realized through the reduction of future income tax payments. Accordingly, a 100% valuation allowance has been recorded for deferred tax assets and current income taxes.
As of June 30, 2008, the Company had $1,546,550 of Federal, Provincial and State net operating loss carryforwards available to offset future taxable income. Such carryforwards expire in:
2026 $105,521
2027 592,466
2028 848,563
----------
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
12. LOSS PER SHARE
The following table identifies the components of basic and diluted loss per share:
2008 2007
Net loss $ (999,247) $ (734,651)
----------------- -----------------
Weighted number of average shares outstanding
during the period - basic and diluted 39,126,985 31,133,594
----------------- -----------------
Basic and diluted loss per share $ (0.03) $ (0.02)
================= =================
13. CASH FLOW SUPPLEMENTAL INFORMATION
Non-cash financing and investing activities are as follows:
Cumulative from
Inception
(April 3, 2006)
Through
2008 2007 June 30, 2008
Issuance of shares for services rendered $ 1,563 $ 8,890 $ 35,579
=====================================
Acquisition of investment in an affiliated
company through incurrence of liability $139,946 $ -- $139,946
=====================================
|
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
13. CASH FLOW SUPPLEMENTAL INFORMATION (cont'd)
During the period, the Company had cash flows arising from interest and income taxes paid as follows:
Cumulative from
Inception
(April 3, 2006)
Through
2008 2007 June 30, 2008
Income tax $ -- $ -- $ --
========================================
Interest $10,359 $31,736 $42,095
========================================
|
14. COMMITMENTS AND CONTINGENCIES
The Company leases an office space under a non-cancellable operating lease expiring in the next fiscal year. The Company's commitment for minimum rental payment for the next year is $12,480.
15. FINANCIAL INSTRUMENTS
Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments. The fair value of the financial instruments approximates their carrying values, unless otherwise noted.
Financial risk is the risk that the Company's earnings are subject to fluctuations in interest risk or currency risk and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.
CONCENTRATION OF CREDIT RISK
SFAS No. 105, "DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK," requires disclosure of any significant off-balance-sheet risk and credit risk concentration. The Company does not have significant off-balance-sheet risk or credit concentration. The Company maintains cash with major financial institutions. From time to time, the Company has funds on deposit with commercial banks that exceed federally insured limits. Management does not consider this to be a significant credit risk as these banks and financial institutions are well-known.
CONSORTEUM INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2008 and 2007
(Expressed in U.S. Dollars)
16. SUBSEQUENT EVENTS
On various dates subsequent to June 30, 2008, the Company entered into amended agreements with lenders, who provided funds to the Company aggregating to $367,763 ($375,000 Canadian dollars) for the year ended June 30, 2008 to replace the terms of the original loans. Key features of the loan agreements include (a) a minimum repayment amounting to $433,960 ($442,500 Canadian dollars) and (b) repayment will commence in the second quarter of 2009. The Company has also committed to allocate 500,000 shares to one of the lenders in a planned reverse takeover when the deal is finalized. These shares will be subject to all regulatory requirements consistent with all other stockholders of the Company.
On January 7, 2009, the Company entered into a Letter of Intent that was amended on February 4, 2009 so that it is a binding Letter of Intent to be superseded by a formal reorganization agreement for the reverse acquisition of Continan Communications Inc. by the Company and/or its stockholders.
PRO FORMA COMBINING BALANCE SHEET
AS AT MARCH 31, 2009
Consorteum Consorteum
Inc. Holdings Inc.
March 31, March 31,
2009 2009 Pro Forma
(unaudited) (unaudited) Adjustments (unaudited)
----------- ----------- ----------- -----------
ASSETS
Current
Bank $ 4,309 $ -- $ 4,309
Accounts Receivable 6,356 -- 6,356
----------- ----------- -----------
10,665 -- 10,665
----------- ----------- -----------
Other Assets
Deferred Offering Costs -- 34,678 34,678
Investment in Affiliated Companies 95,927 -- 95,927
----------- ----------- -----------
95,927 34,678 130,605
----------- ----------- -----------
Net Fixed Assets 6,922 -- 6,922
----------- ----------- -----------
$ 113,514 $ 34,678 $ 148,192
=========== =========== ===========
LIABILITIES
Current
Bank Indebtedness $ 84,305 $ -- $ 84,305
Accounts Payable 609,600 50,643 660,244
Accrued Liabilities 788,714 -- 788,714
Loans Payable 838,725 -- 838,725
Due to stockholders 2,046 -- 2,046
----------- ----------- -----------
2,323,390 50,643 2,374,033
----------- ----------- -----------
Long Term
Loan -- 25,000 25,000
----------- ----------- -----------
Total Liabilities 2,323,390 75,643 2,399,033
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Capital Stock $ 28,857 $ 29,860 (29,860) $ 28,857
Additional Paid-in Capital -- 65,079 (65,079) --
Deficit (2,238,733) (135,904) 94,939 (2,279,698)
----------- ----------- -----------
(2,209,876) (40,965) (2,250,841)
----------- ----------- -----------
$ 113,514 $ 34,678 $ 148,192
=========== =========== ===========
PF-1
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PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2009
Consorteum Consorteum
Inc. Holdings Inc.
Nine months ended Three months ended
March 31, March 31,
2009 2009 Pro Forma
(unaudited) (unaudited) Adjustments (Unaudited)
---------- --------- --------- ---------
Revenue $ 198 $ -- $ 198
--------- --------- ---------
Expenses
Amortization 2,172 -- 2,172
Automobile and Travel 36,275 -- 36,275
Bank Charges 1,569 -- 1,569
Insurance 341 -- 341
Professional Fees 405,685 10,069 (10,069) 405,685
Management Fees 192,953 -- 192,953
Rent & Utilities 13,407 -- 13,407
Travel 16,980 -- 16,980
Interest on Loan 65,143 -- 65,143
--------- --------- ---------
734,526 10,069 734,526
--------- --------- ---------
Net Loss $(734,328) $ (10,069) $(734,328)
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PF-2
Consorteum Holdings Inc.
Notes to Pro-Forma Consolidated Financial Statements
March 31, 2009(Stated in United States Dollars)
Unaudited
1. Basis of Presentation
A) These unaudited pro forma consolidated financial statements present the pro forma financial position and results of operations of the Company based upon historical financial information after giving effect to the transaction and adjustments as follows:
1) On June 15, 2009 Consorteum Holdings Inc. (CHI) entered into an agreement and plan of exchange whereby CHI acquired 100% of the issued and outstanding shares of common stock of Consorteum, Inc. (Consorteum) from Consorteum's stockholders, by exchanging 39,999,750 shares of CHI common stock for an equivalent number of shares of common stock of Consorteum. The substance of CHI's share issuance and the proposed reorganization is a transaction which results in Consorteum's becoming a listed public entity through CHI's acquisition of Consorteum's net assets and Consorteum's recapitalization. While the balance sheet and the income statement are of CHI as a legal entity, the assets, liabilities, and dollar amounts attributed to share capital are those of Consorteum. Future CHI financial statements will present a continuation of Consorteum's business. CHI is accounting for this acquisition using the purchase method of accounting as if it had occurred at March 31, 2009 for these unaudited pro forma consolidated financial statements. CHI has recorded the investment in Consorteum and the issuance of shares as if it had occurred at March 31, 2009.
2) Consorteum maintains its books and records in Canadian dollars.
Balance sheet accounts are translated using closing exchange rates in effect at
the balance sheet date. No representation is made that the Canadian dollar could
have been, or could be, converted into United States dollars at the rates on the
respective dates and or at any other certain rates. Adjustments resulting from
the translation are included in the accumulated other comprehensive income
(loss) in stockholders' equity.
3) The financial statements of CHI and Consorteum are prepared in accordance with accounting principles generally accepted in the United States of America.
B) The pro-forma consolidated financial statements are based on the balance sheets of the following:
1) CHI as at March 31, 2009 (unaudited)
2) Consorteum as at March 31, 2009 (unaudited)
C) The pro-forma consolidated balance sheet as at March 31, 2009 gives effect to the transactions as at March 31, 2009.
PF-3
CONSORTEUM HOLDINGS INC.
Notes to Pro-Forma Consolidated Financial Statements
March 31, 2009
(Stated in United States Dollars)
Unaudited
1. Basis of Presentation (Cont'd)
D) The pro-forma consolidated balance sheet are not necessarily indicative of the actual results that would have occurred had the proposed transactions occurred on the dates indicated and not necessarily indicative of future operations or financial position.
2. Pro-Forma Adjustments
CHI's issuance of 39,999,750 shares to Consorteum's shareholders in exchange for all of Consorteum's outstanding shares results in this transaction being accounted for as an acquisition of CHI's net assets by Consorteum. Accordingly, the issuance of shares will be recorded by eliminating CHI's share capital and deficit, resulting in a net $94,939 increase to the pro forma share capital.
PF-4
EXHIBIT 3.i
Ministry of Consumer and Business Affairs Ontario
April 3, 2006
ARTICLES OF INCORPORATION
1. The Name of the corporation is: CONSORTEUM INC.
2. The address of the registered office is:
305 Davenport Road
Toronto, Ontario M5R1K5
3. Number (or minimum and maximum number) of directors is/are: 1/10
4. The first Director(s) is/are:
Lorne Albaum
Address for service, giving Street & No. or R.R. No.
305 Davenport Road
Toronto, Ontario M5R 1K5
Resident Canadian? Yes or No.
Yes.
5. Restrictions, if any, on business the corporation may carry on or on powers the corporation may exercise.
None.
6. The classes and any maximum number of shares that the corporation is authorized to issue:
An unlimited number of common shares.
7. Rights, privileges, restrictions and conditions (if any) attaching to each class of shares and directors authority with respect to any class of shares which may be issued in series:
None.
8. The issue, transfer or ownership of shares is/is not restricted and the restrictions (if any) are as follows:
No shares in the capital of the Corporation shall be transferred without either:
(a) the consent of the holders of at least fifty-one percent (51%) of the shares of the Corporation for the time being outstanding expressed by a resolution passed at a meeting of the shareholders or by an instrument or instruments in writing signed by the holders of at least fifty-one percent (51%) of such shares; or
(b) the consent of the directors of the Corporation by a resolution passed at a meeting of the board of directors or by an instrument or Instruments in writing signed by a majority of the directors.
9. Other provisions if any:
1. Without in any way restricting the powers conferred upon the Corporation or its board of directors by the Business Corporations Act, as now enacted or as the same may from time to time be amended, re-enacted or replaced, the board of directors may from time to time, without authorization of the shareholders, in such amounts and on such terms as it deems expedient:
(a) borrow money upon the credit of the Corporation;
(b) issue, re-issue, sell or pledge debt obligations of the Corporation;
{c) subject to the provisions of the Business Corporations Act, as now enacted, re-enacted or replaced, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person: and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation owned or subsequently acquired, to secure any obligation of the Corporation.
The board of directors may from time to time delegate to a director, a committee of directors or an officer of the Corporation any or all of the powers conferred on the board as set out above, to such extent and in such manner as the board shall determine at the time of such delegation.
2. The number of shareholders AT the Corporation, exclusive of persons who are in its employment and exclusive of persons who, having boon formerly in the employment of the Corporation, were, while in that employment, and have continued after termination of that employment to be, shareholders of the Corporation, is limited to not more than fifty, two or more persons who are the joint registered owners of one or more shares being counted as one shareholder.
3. Any invitation to the public to subscribe for securities is prohibited.
10. The names and addresses of the incorporators are:
First name, middle names:
Lorne Albaum
Full address for service or address of registered office or of principal place of business giving street and No. or R.R. No., municipality and postal code
305 Davenport Road
Toronto, Ontario M5R 1K5
These articles are signed in duplicate:
Signature of incorporator(s)
/s/ Lorne Albaum -------------------- Lorne Albaum |
EXHIBIT 3.ii
BY-LAW NO. 1
A by-law relating generally to the
transaction of the business and affairs of
CONSORTEUM INC.
(herein called the "CORPORATION")
CONTENTS
One Interpretation Two Directors Three Committees Four Officers Five Protection of Directors, Officers and Others Six Meetings of Shareholders Seven Securities Eight Dividends and Rights Nine Notices Ten Borrowing Powers of the Directors Eleven Business of the Corporation |
BE IT ENACTED as a by-law of the Corporation as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this by-law, unless the context otherwise requires:
(a) "ACT" means the BUSINESS CORPORATIONS ACT, and includes the regulations made pursuant thereto, and every other act or statute incorporated therewith or amending the same, or any act or statute substituted therefor, and in the case of such substitution the reference in the by-laws of the Corporation to non-existing acts or statutes shall be read as referring to the substituted provisions in the new act or statute;
(b) "BOARD" means the board of directors of the Corporation;
(c) words and expressions defined in the Act shall have the applicable definitions when used herein; and
(d) in all by-laws of the Corporation where the context so requires or permits, the singular shall include the plural and the plural shall include the singular. The word "person" shall include firms and corporations, and the masculine gender shall include the feminine and neuter genders.
ARTICLE 2
DIRECTORS
2.1 POWERS. Subject to any unanimous shareholder agreement, the board shall manage or supervise the management of the affairs and business of the Corporation. So long as a quorum of directors remains in office no vacancy or vacancies in the board shall affect the power of the continuing directors to act.
2.2 NUMBER AND QUORUM. The board of directors shall consist of such number of persons as are from time to time determined by special resolution or, if the special resolution empowers the board to determine the number, by resolution of the board. The board of directors shall determine the quorum, provided in no event shall a quorum be less than 2/5 of the number of directors or minimum number of directors, as the case may be, subject to the limitations contained in the Act including the limitation that, if the Corporation has fewer than three (3) directors, the quorum shall consist of all directors. However, for a meeting of directors to be validly constituted, a majority of directors present must be resident Canadians as defined by the Act (unless the Corporation has only one or two directors, in which case that director or only one of the two directors need be resident Canadians); provided if a resident Canadian director who is unable to be present at the meeting approves the business transacted thereat and such director together with those resident Canadian directors present at the meeting would have constituted the required number of resident Canadian directors to be present, such meeting shall be validly constituted.
2.3 QUALIFICATION. No person shall be qualified for election as a director if he: (I) is less than eighteen years of age; (ii) is of unsound mind and has been so found by a court in Canada or elsewhere; (iii) is not an individual; or (iv) has the status of a bankrupt. A director need not be a shareholder. A majority of the directors shall be resident Canadians provided that if the number of directors is only one or two, that director or only one of the two directors need be a resident Canadian.
2.4 ELECTION AND TERM OF OFFICE. Unless the Articles otherwise provide, the directors shall be elected yearly at the annual meeting of the shareholders and shall hold office until the annual meeting next following. The whole board shall be elected at each annual meeting and all the directors then in office shall retire, but, if qualified, shall be eligible for re-election. The election may be by a show of hands or by resolution of the shareholders unless a ballot be demanded by any shareholder. If after nomination there is no contest for election, the persons nominated may be elected by declaration of the chairman to that effect. If an election of directors is not held at the proper time, the directors then in office shall continue in office until their successors are elected or appointed.
2.5 VACANCIES. Subject to the Act, a quorum of the board may fill a vacancy in the board, except a vacancy resulting from an increase in the number of directors or in the maximum number of directors or from a failure of the shareholders to elect the number of directors required to be elected at any meeting of shareholders. In the absence of a quorum of the board, or if the vacancy has arisen from the failure of the shareholders to elect the number of directors required by the Articles, or if the vacancy has resulted from an increase in the number of directors or in the maximum number of directors, the board shall forthwith call a special meeting of
shareholders to fill the vacancy. If the board fails to call such a meeting or if there are no such directors, then in office, any shareholder may call such meeting. A director appointed or elected to fill a vacancy holds office for the unexpired term of his predecessor.
2.6 VACATION OF OFFICE. A director ceases to hold office when: (I) he dies; (ii) he is removed from office by the shareholders; (iii) he ceases to be qualified for election as a director; or (iv) his written resignation is received by the Corporation provided if a time subsequent to its date of receipt by the Corporation is specified in such written resignation the resignation shall become effective at the time so specified. No director named in the Articles shall be permitted to resign his office unless at the time the resignation is to become effective a successor is elected or appointed.
2.7 REMOVAL OF DIRECTORS. Subject to the provisions of the Act, the shareholders may by resolution passed at an annual or special meeting remove any director before the expiration of his term of office and the vacancy created by such removal may be filled at the same meeting failing which it may be filled by the directors pursuant to Section 2.5 of this By-law.
2.8 CANADIAN MAJORITY. The board shall not transact business at a meeting unless a majority of the directors are resident Canadians as defined by the Act, (unless the Corporation has only one or two directors, in which case that director or only one of the two directors need be resident Canadians), except where:
(a) a resident Canadian director who is unable to be present approves in writing or by telephone or other communications facilities the business to be transacted at the meeting; and
(b) a majority of resident Canadians would have been present had that director been present at the meeting.
2.9 PLACE OF MEETINGS. Meetings of the board may be held at any place within or outside Ontario. The board need not hold any meetings within Canada.
2.10 CALLING OF MEETINGS. Meetings of the board may be held at any time without formal notice being given if all the directors are present, or if a quorum is present and those directors who are absent signify their consent to the holding of the meeting in their absence. Any resolution passed, or proceeding had, or action taken at such meeting shall be as valid and effectual as if it had been passed at or had been taken at a meeting duly called and constituted.
Subject to the Act, no notice of a meeting of the board shall be necessary if the meeting is the first meeting of the board held immediately following a meeting of shareholders at which such board was elected or if the meeting of the board is a meeting which follows immediately upon a meeting of shareholders at which a director was appointed to fill a vacancy on the board, provided at any such meeting of the board a quorum of directors is present.
2.11 NOTICE OF MEETING. The Chairman, the President or a Vice-President who is a director or any two directors may at any time by notice call a meeting of the board. Such notice shall be given in the manner provided in Section 9.1 to each director not less than forty-eight (48) hours before the time when the meeting is to be held. A notice of a meeting of directors
need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified. A director may in any manner and at any time waive notice of or otherwise consent to a meeting of the board. Attendance of a director at such a meeting is a waiver of notice of meeting except where the attendance is for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called.
2.12 ADJOURNED MEETING. Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the original meeting or the adjourned meeting preceding the applicable adjourned meeting, if the original meeting is adjourned on more than one occasion.
2.13 REGULAR MEETINGS. The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted thereat to be specified.
2.14 ABSENT DIRECTORS. Any director of the Corporation may file with the Secretary of the Corporation a written waiver of notice of any meetings of the directors and may at any time withdraw such waiver, and until such waiver is withdrawn, no notice of meetings of directors need be sent to such director, and any and all meetings of the directors of the Corporation shall (provided a quorum is present) be validly constituted notwithstanding that notice shall not have been given to such director.
2.15 CHAIRMAN. Subject to Section 4.8 hereof, the chairman of any meeting of the board shall be the President and, in his absence, a director who is a Vice-President present at the meeting. If no such officer is present, the directors present shall choose one of their number to be chairman.
2.16 VOTING AT MEETINGS. Questions arising at any meeting of directors shall be decided by a majority of votes. In the case of an equality of votes, the chairman of the meeting, in addition to his original vote, shall not have a second or casting vote.
2.17 RESOLUTION IN WRITING. A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors or a committee of directors, is as valid as if it had been passed at a meeting of directors or a committee of directors.
2.18 MEETINGS BY TELEPHONE. If all the directors present at or participating in a meeting consent, a meeting of the board or of a committee of the board may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and a director participating in such a meeting by such means is deemed to be present at the meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board and of committees of the board held while a director holds office.
2.19 INTEREST OF DIRECTORS AND OFFICERS IN CONTRACTS. Provided the applicable director or officer shall have complied with the applicable requirements of the Act in respect of disclosure of interest and otherwise, no director or officer shall be disqualified by his office from contracting with the Corporation nor shall any contract or arrangement entered into by or on behalf of the Corporation with any director or officer or in which any director or officer is in any way interested be liable to be voided nor shall any director or officer so contracting or being so interested be liable to account to the Corporation for any profit realized by any such contract or arrangement by reason of such director's or officer's holding that office or of the fiduciary relationship thereby established.
ARTICLE 3
COMMITTEES
3.1 MANAGING DIRECTOR AND COMMITTEE OF DIRECTORS. The board may in its discretion appoint a managing director and such committees of the board as it deems appropriate, and delegate to such managing director and committees any of the powers of the board except those which the board is prohibited by the Act from delegating. A majority of the members of each such committee shall be resident Canadians. The managing director shall be a resident Canadian.
3.2 TRANSACTION OF BUSINESS. The powers of a committee of directors may be exercised by a meeting at which a quorum is present or by resolution in writing signed by all the members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings of such committee may be held at any place within or outside Ontario.
3.3 PROCEDURE. Unless otherwise determined by the board, each committee shall have the power to fix its quorum at not less than a majority of its members, to elect its chairman and to regulate its procedure.
ARTICLE 4
OFFICERS
4.1 APPOINTMENT. Subject to the Act, this by-law and any other applicable by-laws of the Corporation and any unanimous shareholder agreement:
(a) the directors may designate the offices of the Corporation, appoint officers, specify their duties and delegate to them powers to manage the business and affairs of the Corporation;
(b) a director may be appointed to any office of the Corporation; and
(c) two or more offices of the Corporation may be held by the same person.
4.2 THE PRESIDENT. The President shall be the chief executive officer of the Corporation and, subject to the authority of the board, shall be charged with the general supervision of the business and affairs of the Corporation. He shall be ex officio a member of all standing committees and, if no chairman of the board has been appointed, or if appointed is not
present, chairman of all meetings of shareholders and of all meetings of directors of the Corporation, if a director. Except when the board of directors has appointed a General Manager, the President shall also have the powers and be charged with the duties of that office. He shall perform all duties incident to his office and shall have such other powers and duties as may from time to time be assigned to him by the board of directors.
4.3 VICE-PRESIDENT. During the absence or disability of the President his duties may be performed and his powers may be exercised by the Vice-President, or if there are more than one, by the Vice-Presidents in order of seniority (as determined by the board), save that no Vice- President shall preside at a meeting of the board or at a meeting of shareholders who is not qualified to attend the meeting as a director or shareholder, as the case may be. If a Vice- President exercises any such duty or power, the absence or disability of the President shall be presumed with reference thereto. A Vice-President shall also perform such duties and exercise such powers as the President may from time to time delegate to him or the board may prescribe.
4.4 SECRETARY. The Secretary shall give, or cause to be given, all notices required to be given to shareholders, directors, auditors and members of committees provided that the validity of any notice shall not be affected by reason only of the fact that it is sent by some person other than the Secretary. He shall attend all meetings of the directors and of the shareholders and shall enter or cause to be entered in books kept for that purpose minutes of all proceedings at such meetings. He shall, subject to any specific appointment to the contrary, be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation, if any, and of all books, papers, records, documents and other instruments belonging to the Corporation, and he shall perform such other duties as may from time to time be prescribed by the board.
4.5 TREASURER. The Treasurer shall keep or cause to be kept proper books of account and accounting records with respect to all financial and other transactions of the Corporation and, under the direction of the board, shall control the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation. He shall render to the board at the meetings thereof, or whenever required of him, an account of all his transactions as Treasurer and of the financial position of the Corporation and he shall perform such other duties as may from time to time be prescribed by the board.
4.6 ASSISTANT-SECRETARY AND ASSISTANT-TREASURER. The Assistant-Secretary and the Assistant-Treasurer or, if more than one, the Assistant-Secretaries and the Assistant-Treasurers, shall respectively perform all the duties of the Secretary and Treasurer in the absence or disability of the Secretary or Treasurer, as the case may be. The Assistant-Secretary and the Assistant-Treasurer shall also have such powers and duties as may from time to time be assigned to them by the board.
4.7 GENERAL MANAGER. The General Manager, if one be appointed, shall have full authority, subject to the authority of the board of directors and the supervision of the President, to manage and direct the business and affairs of the Corporation and to appoint and remove all officers, employees and agents of the Corporation not elected or appointed directly by the board, and to settle the terms of their employment and remuneration. If and so long as the General Manager is a director, he may, but need not, be known as the Managing Director.
4.8 CHAIRMAN OF THE BOARD. The directors may from time to time appoint a Chairman of the Board who shall be a director. If appointed, the board may assign to him any of the powers and duties that are by any provisions of this by-law assigned to the President, and he shall, subject to the provisions of the Act, have such other powers and duties as the board may specify. The Chairman of the Board shall act as chairman of all directors and shareholders meetings at which he is present. During the absence or disability of the Chairman of the Board, his duties shall be performed and his powers exercised by the managing director, if any, or by the president.
4.9 POWER AND DUTIES OF OTHER OFFICERS. The powers and duties of all other officers shall be such as the terms of their engagement call for or as the board may specify. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the board otherwise directs.
4.10 DUTIES MAY BE DELEGATED. In case of the absence or inability to act of the President, a Vice-President or any other officer of the Corporation or for any other reason that the board may deem sufficient, the board may delegate all or any of the powers of such officer to any other officer or to any director for the time being.
4.11 REMUNERATION AND REMOVAL. The board may determine the remuneration to be paid to the directors, officers, agents and employees of the Corporation. Any officer, agent or employee of the Corporation may receive such remuneration as may be determined notwithstanding the fact that he is a director or shareholder of the Corporation. The board may by resolution award special remuneration to any officer of the Corporation undertaking any special work or service for, or undertaking any special mission on behalf of the Corporation other than routine work ordinarily required of such office. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a corporation which is employed by or performs services for the Corporation, the fact of his being a director or officer of the Corporation shall not disentitle such director or officer or such firm or corporation, as the case may be, from receiving proper remuneration for such services. All officers, in the absence of written agreement to the contrary, shall be subject to removal by resolution of the board at any time with or without cause. Until such removal each officer shall hold office until his successor is elected or appointed or until his earlier resignation.
4.12 AGENTS AND ATTORNEYS. The board shall have power from time to time to appoint agents or attorneys for the Corporation in or out of Canada with such powers of management or otherwise (including the power to sub-delegate) as may be thought fit.
4.13 FIDELITY BONDS. The board may require such officers, employees and agents of the Corporation as the board deems advisable to furnish bonds for the faithful discharge of their duties, in such form and with such surety as the board may from time to time prescribe, but no director shall be liable for failure to require any bond or for the insufficiency of any bond or for any loss by reason of the failure of the Corporation to receive any indemnity thereby provided.
ARTICLE 5
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
5.1 PROTECTION OF DIRECTORS AND OFFICERS. Except as otherwise specifically provided in the Act, no director or officer of the Corporation shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by order of the board of directors for or on behalf of the Corporation or for the insufficiency or deficiency of any security in or upon which any of the monies of the Corporation shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or corporation with whom any monies, securities or effects of the Corporation shall be deposited, or for any loss, conversion, misapplication or misappropriation of or damage resulting from any dealings with any monies, securities or other assets belonging to the Corporation or for any loss occasioned by any error of judgment or oversight on his part or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of his office or in relation thereto unless the same shall happen by failure to exercise the powers and to discharge the duties of his office honestly, and in good faith with a view to the best interests of the Corporation and in connection therewith to exercise that degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
Subject to the foregoing, the directors may rely upon the accuracy of any statement or report prepared by the Corporation's auditors or accountants and shall not be responsible or held liable for any loss or damage resulting from the payment of any dividends or otherwise acting upon such statement or report.
The directors of the Corporation are hereby authorized from time to time to cause the Corporation to give indemnities to any director or other person who has undertaken or is about to undertake any liability on behalf of the Corporation and to secure such director or other person against loss by mortgage and charge upon the whole or any part of the real and personal property of the Corporation by way of security. Any action from time to time taken by the directors under this paragraph shall not require approval or confirmation by the shareholders.
5.2 INDEMNITY. Subject to the limitations contained in the Act, the Corporation hereby indemnifies all past, present and future directors and officers of the Corporation, and all persons who are now or may hereafter be, acting or have heretofore acted, at the Corporation's request, as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or body corporate, if:
(a) he acted honestly and in good faith with a view to the best interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.
5.3 INSURANCE. Subject to the limitations contained in the Act, the Corporation may purchase and maintain such insurance for the benefit of its directors and officers against any liability incurred by them in their capacity as directors or officers of the Corporation, or in their capacity as directors or officers of another body corporate where they act or have acted in that capacity at the Corporation's request, as the board may from time to time determine.
ARTICLE 6
MEETINGS OF SHAREHOLDERS
6.1 ANNUAL MEETING. Subject to the Articles and any unanimous shareholder agreement, the annual meeting of the shareholders shall be held at any place within or outside Ontario on such day and at such time as the board, may from time to time determine, for the purpose of hearing and receiving the reports and statements required by the Act to be read to and laid before shareholders at an annual meeting, electing directors, appointing the auditor and fixing or authorizing the board to fix his remuneration, and for the transaction of such other business as may properly be brought before the meeting.
6.2 SPECIAL MEETINGS. Subject to the Articles and any unanimous shareholder agreement, the board shall have the power at any time to call a special meeting of shareholders to be held at such time on such day and at any place within or outside Ontario as may be determined by the board. The phrase "special meeting of the shareholders" wherever it occurs in this by-law shall include a meeting of any class or classes of shareholders, and the phrase "meeting of shareholders" wherever it occurs in this by-law shall mean and include an annual meeting of shareholders and a special meeting of shareholders.
6.3 NOTICE OF MEETINGS. Notice of the time and place of each meeting of shareholders shall be given in the manner provided in Section 9.1, and
(a) if the Corporation is at the time of such notice offering \any of its securities to the public, not less than twenty-one (21) days, and
(b) if the Corporation is at the time of such notice not offering any of its securities to the public, not less than ten (10) days,
and in any event, not more than fifty (50) days before the date on which the meeting is to be held, to the auditor of the Corporation, to the directors of the Corporation and to each shareholder of record at the close of business on the day on which the notice is given who is entered on the securities register of the Corporation as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditor's report, election of directors and reappointment of the incumbent auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall state the text of any special resolution to be submitted to the meeting.
6.4 LIST OF SHAREHOLDERS ENTITLED TO NOTICE. For every meeting of shareholders, the Corporation shall prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder. If a record date for the meeting is fixed pursuant to Section 6.5, the shareholders listed shall be those registered at the close of business on a day not later than ten (10) days after such record date. If no record date is fixed, the shareholders listed shall be those registered at the close of business on the day immediately preceding the day on which notice of the meeting is given, or where no such notice is given, the day on which the meeting is held. The list shall be available for examination by any shareholder during usual business hours at the registered office of the Corporation or at the place where the securities register is kept and at the place where the meeting is held.
6.5 RECORD DATE FOR NOTICE. The board may fix in advance a record date, preceding the date of any meeting of shareholders by not more than fifty (50) days and not less than twenty-one (21) days, for the determination of the shareholders entitled to notice of the meeting, provided that notice of any such record date is given not less than seven (7) days before such record date, by newspaper advertisement in the manner provided in the Act. If no record date is so fixed, the record date for the determination of the shareholders entitled to notice of the meeting shall be the close of business on the day immediately preceding the day on which the notice is given.
6.6 MEETINGS WITHOUT NOTICE. A meeting of shareholders may be held without notice at any time and place as permitted by the Act:
(a) if all the shareholders entitled to vote thereat are present in person or represented by proxy or if those not present or represented by proxy waive notice of or otherwise consent to such meeting being held; and
(b) if the auditors and the directors are present or waive notice of or otherwise consent to such meeting being held.
At such a meeting any business may be transacted which the Corporation at a meeting of shareholders may transact.
6.7 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of the shareholders shall be those entitled to vote thereat, the directors and auditors of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the Articles or by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting.
6.8 QUORUM. Two persons entitled to vote at a meeting of shareholders present in person constitute a quorum.
6.9 RIGHT TO VOTE. Subject to the Act, the articles and Section 6.5 hereof, each person registered as a shareholder of the Corporation at the date of any meeting of shareholders shall be entitled to one vote for each share held.
6.10 REPRESENTATIVES. An executor, administrator, committee of a mentally incompetent person, guardian or trustee and where a body corporate is such executor, administrator, committee, guardian or trustee, any person duly appointed by proxy for such body corporate, upon filing with the secretary of the meeting sufficient proof of his appointment, shall represent the shares of the testator, intestate, mentally incompetent person, ward or cestui que trust in his or its stead at all meetings of the shareholders of the Corporation and may vote accordingly as a shareholder in the same manner and to the same extent as the shareholder of record. If there be more than one executor, administrator, committee, guardian or trustee, the provisions of clause 6.12 shall apply.
6.11 PROXIES. Every shareholder, including a shareholder that is a body corporate, entitled to vote at a meeting of shareholders may by means of a proxy appoint a person, who need not be a shareholder, as his nominee to attend and act at the meeting in the manner, to the extent and with the power conferred by the proxy.
Subject to the Act, a proxy shall be executed by the shareholder or his attorney authorized in writing or, if the shareholder is a body corporate, under its corporate seal, if any, or by an officer or attorney thereof duly authorized.
A proxy may be in any form which may be prescribed from time to time by the board of directors or which the chairman of the meeting may accept as sufficient, provided that such form complies with the provisions of the Act.
Proxies shall be deposited with the secretary of the meeting before any vote is cast under the authority thereof or at such earlier time and in such manner as the board may prescribe in accordance with the provisions of the Act. A proxy in the form of a facsimile transmission may also be so deposited.
6.12 JOINT SHAREHOLDERS. Where two or more persons hold the same share or shares jointly, any one of such persons present at a meeting of shareholders has the right in the absence of the other or others to vote in respect of such share or shares, but, if more than one of such persons are present or represented by proxy and vote, they shall vote together as one on the share or shares jointly held by them.
6.13 SCRUTINEER. At each meeting of shareholders one or more scrutineers may be appointed by a resolution of the meeting or by the chairman with the consent of the meeting to serve at the meeting. Such scrutineers need not be shareholders of the Corporation.
6.14 VOTES TO GOVERN. Unless otherwise required by the provisions of the Act, the Articles or by-laws of the Corporation, at all meetings of shareholders every question shall be decided by the majority of the votes duly cast on the question.
6.15 SHOW OF HANDS. At all meetings of shareholders every question shall be decided by a show of hands unless a poll thereon is required by the chairman or be demanded by a shareholder present in person or represented by proxy and entitled to vote or unless a poll is required under the provisions of the Act. Upon a show of hands every shareholder present in person or represented by proxy and entitled to vote shall have one vote. After a show of hands has been taken upon any question the chairman may require or any shareholder present in person
or represented by proxy and entitled to vote may demand a poll thereon. Whenever a vote by show of hands has been taken upon a question, unless a poll thereon is demanded, a declaration by the chairman of the meeting that the vote upon the question has been carried or carried by a particular majority or not carried and an entry to that effect in the minutes of the proceedings at the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceedings in respect of the said question, and the result of the vote so taken shall be the decision of the Corporation in annual or general meeting, as the case may be, upon the question. A demand for a poll may be withdrawn at any time prior to the taking of the poll.
6.16 POLLS. If a poll is required by the chairman of the meeting or under the provisions of the Act or is demanded by any shareholder present in person or represented by proxy and entitled to vote and the demand be not withdrawn, a poll upon the question shall be taken in such manner as the chairman of the meeting directs. Upon a poll each shareholder who is present in person or represented by proxy shall, unless the Articles otherwise provide, be entitled to one vote for each share in respect of which he is entitled to vote at the meeting and the result of the poll shall be the decision of the Corporation in annual or general meeting, as the case may be, upon the question.
6.17 CASTING VOTE. In case of an equality of votes at any meeting of shareholders either upon a show of hands or upon a poll the chairman of the meeting shall not be entitled to a second or casting vote.
6.18 CHAIRMAN. Subject to Section 4.8 hereof, the President or, in his absence, a Vice- President who is a director shall preside as Chairman at a meeting of shareholders. If there is no President or such a Vice-President, or if at a meeting, none of them is present within fifteen minutes after the time appointed for holding of the meeting, the shareholders present shall choose a person from their number to be the Chairman.
6.19 ADJOURMNENT OF MEETINGS. The Chairman of any meeting of shareholders may, with the consent of the meeting and subject to such conditions as the meeting may decide, adjourn the same from time to time and from place to place, and no notice of such adjournment need be given to the shareholders except as required by the Act. Any business may be brought before or dealt with at an adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling such original meeting.
6.20 RESOLUTION IN WRITING. A resolution in writing signed by all of the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders unless a written statement with respect to the subject matter of the resolution is submitted by a director or the auditors in accordance with the Act.
6.21 ONLY ONE SHAREHOLDER. Where the Corporation has only one shareholder or only one holder of any class or series of shares, the shareholder present in person or by proxy constitutes a meeting.
6.22 PROCEDURE. At all meetings of shareholders questions of procedure shall be settled by reference to such publication relating to the conduct of company meetings as shall be acceptable to the chairman of the meeting.
ARTICLE 7
SECURITIES
7.1 REGISTERS. The Corporation shall keep or cause to be kept such registers of security holders and of transfers as required by the Act.
7.2 ALLOTMENT. Subject to the provisions, if any, of the Articles, the board may from time to time allot or grant options to purchase the whole or any part of the authorized and unissued shares in the capital of the Corporation to such person or persons or class of persons as the board determines by resolution provided that no share shall be issued until it is fully paid as prescribed by the Act.
7.3 COMMISSIONS. The board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation, whether from the corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares.
7.4 SHARE CERTIFICATES. Every holder of one or more shares of the Corporation shall be entitled, at his option, to a share certificate, or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the number and class or series of shares held by him as shown on the securities register. Share certificates and acknowledgements of a shareholder's right to a share certificate, respectively, shall be in such form as the board shall from time to time approve. Any share certificate shall be signed in accordance with Section 11.4 hereof, provided that, unless the board otherwise determines, certificates representing shares in respect of which a transfer agent or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent or registrar. A share certificate shall be signed manually by at least one director or officer of the Corporation or by or on behalf of the transfer agent or registrar if there is one. Any additional signatures required may be printed or otherwise mechanically reproduced. A share certificate executed as aforesaid shall be valid notwithstanding that one of the directors or officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.
7.5 REPLACEMENT OF SECURITY CERTIFICATES. The board or any person designated by the board shall direct the issue of a new security certificate in lieu of and upon cancellation of a security certificate that has been mutilated or in substitution for a security certificate claimed to have been lost, apparently destroyed or wrongfully taken on payment of such fee and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the board may from time to time prescribe, whether generally or in any particular case.
7.6 TRANSFER AGENT AND REGISTRAR. The directors may from time to time by resolution appoint or remove a transfer agent and a registrar (who may, but need not be the same individual or body corporate) and one or more branch transfer agents and registrars (who may, but need not be the same individual or body corporate) for the securities of the Corporation and may provide
for the transfer of securities in one or more places and may provide that securities will be interchangeably transferable or otherwise.
7.7 TRANSFER OF SECURITIES. Securities in the capital of the Corporation shall be transferable only on the register of transfers or on one of the branch registers of transfers (if any) kept by or for the Corporation in respect thereof by the registered holder of such securities in person or by attorney duly authorized in writing upon surrender for cancellation of the certificate representing such securities properly endorsed or accompanied by a properly executed transfer, subject to the provisions of the Act and subject to the restrictions on transfer (if any) set forth in the Articles.
7.8 CORPORATION'S LIEN ON SHARES. The Corporation shall have a first and paramount lien upon all the shares registered in the names of each shareholder whether solely or jointly with others for his debts, liabilities and engagements solely or jointly with any other person, to or with the Corporation, whether the periods for payment, fulfilment or discharge thereof have actually arrived or not. Any such lien shall extend to all dividends from time to time declared in respect of such shares. Unless otherwise agreed the registration of a transfer of shares shall operate as a waiver of the Corporation's lien, if any, on such shares. However, the Corporation shall not be entitled to enforce such lien against a transferee of the share who has no actual knowledge of it, unless such lien is noted conspicuously on such share certificate.
For the purpose of enforcing such lien, the board may sell the shares subject thereto in such manner as it thinks fit; but no sale shall be made until notice in writing of the intention to sell has been served on such shareholder, his executors or administrators, and default has been made by him or them, in payment, fulfilment or discharge of such debts, liabilities or engagements for ten days after the date of mailing of such notice.
The net proceeds of any such sale shall be applied in or towards satisfaction of the debts, liabilities or engagements, and the residue, if any, paid to such shareholder, his executors or administrators or assigns.
Upon any such sale in purported exercise of the powers hereinbefore given, the directors may cause the purchaser's name to be entered in the register in respect of the shares sold and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after his name has been entered in the register in respect of such shares, the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Corporation exclusively.
7.9 REFUSAL TO REGISTER TRANSFER. Except in the case of shares listed on a stock exchange recognized by the Ontario Securities Commission, the board may refuse to permit the registration of a transfer of shares in the capital of the Corporation against which the Corporation has a lien until all of the debt represented by that lien has been paid to the Corporation.
7.10 JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for the certificate issued in respect thereof, and for any dividend, bonus, return of capital or other money payable or warrant issuable
in respect of such share, but all the joint holders of a share shall be severally as well as jointly liable for the payment of all demands payable in respect thereof
ARTICLE 8
DIVIDENDS AND RIGHTS
8.1 DIVIDENDS. Subject to the provisions of the Act, the board may from time to time declare dividends payable to the shareholders according to their respective rights and interests in the Corporation. Dividends may be paid in money or property or by issuing fully paid shares of the Corporation.
8.2 DIVIDEND CHEQUES. A dividend payable in cash shall be paid by cheque drawn on the Corporation's bankers or one of them to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at his last recorded address, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address and if more than one address appears on the books of the Corporation in respect of such joint holding the cheque shall be mailed to such of those addresses as is selected by the person mailing such cheque. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge all liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold.
8.3 NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation on proof of such non-receipt and upon satisfactory indemnity being given to it, shall issue to such person a replacement cheque for a like amount.
8.4 RECORD DATE. The board may fix in advance a date preceding by not more than fifty days the date for the payment of any dividend or the date for the issue of any warrant or other evidence of right to subscribe for shares in the capital or securities of the Corporation as a record date for the determination of the persons entitled to receive payment of such dividend or to exercise the right to subscribe for such securities, as the case may be, and in every such case only such persons as shall be security holders of record at the close of business on the date so fixed shall be entitled to receive payment of such dividend or to exercise the right to subscribe for securities and to receive the warrant or other evidence in respect of such right, as the case may be, notwithstanding the transfer of any securities after any such record date fixed as aforesaid. Where no record date is fixed in advance as aforesaid, the record date for the determination of the persons entitled to receive payment of such dividend or to exercise the right to subscribe for such securities of the Corporation shall be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the board.
8.5 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six
(6) years from the date on which the same was declared to be payable shall be
forfeited and shall revert to the Corporation.
ARTICLE 9
NOTICES
9.1 METHOD OF GIVING. Any notice, communication or other document to be given by the Corporation to a shareholder, director, officer or auditor of the Corporation shall be sufficiently given if:
(a) delivered personally to the person to whom it is to be given to the latest address of such person as shown in the records of the Corporation or its transfer agent; or
(b) if sent by prepaid mail addressed to such address; or
(c) if sent to such address by any means of transmitted or recorded communication; or
(d) if sent by telecopier, to the latest telecopier number of the person to whom it is to be given, as shown in the records of the Corporation.
The Secretary or any person authorized by him may change the address or telecopier number on the books of the Corporation of any shareholder in accordance with any information believed by him to be reliable. A notice, communication or document so delivered shall be deemed to have been received by the addressee when it is delivered personally to the address aforesaid; and a notice, communication or document so mailed shall be deemed to have been received by the addressee on the fifth day after mailing; and a notice sent by any means of transmitted or recorded communication shall be deemed to have been received by the addressee when delivered to the appropriate communication company or agency or its representative for dispatch; and a notice sent by telecopier shall be deemed to have been received at the time of transmission; provided however that, notwithstanding the foregoing, in the case of any meeting of directors, verbal notice thereof shall be sufficient notice.
9.2 COMPUTATION OF TIME. In computing the date when notice must be given under any provision of the Articles or by-laws requiring a specified number of days' notice of any meeting or other event, the period of days shall be deemed to commence the day following the date the notice was given and shall be deemed to terminate at midnight of the last day of the period, except that if the last day of the period falls on a Sunday or holiday the period shall terminate at midnight of the day next following that is not a Sunday or holiday.
9.3 OMISSIONS AND ERRORS. The accidental omission to give any notice to any shareholder, director, officer or auditor or the non-receipt of any notice by any shareholder, director, officer or auditor or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon.
9.4 NOTICE TO JOINT SHAREHOLDERS. All notices with respect to any shares registered in more than one name may, if more than one address appears on the books of the Corporation in respect of such joint holding, be given to such joint shareholders at such address so appearing as is selected by the person giving such notice, and notice so given shall be sufficient notice to all the holders of such shares.
9.5 PERSONS BECOMING ENTITLED BY DEATH OR OPERATION OF LAW. Every person who by operation of law, transfer, death of a security holder or by any other means whatsoever, becomes entitled to any security, shall be bound by every notice in respect of such security which prior to his name and address being entered on the books of the Corporation was duly given to the person from whom he derives his title to such security.
On the death of any security holder (not being one of several joint holders of a security) the executors or administrators of such deceased security holder shall be the only persons recognized by the Corporation as having any title to such security.
Any person becoming entitled to a security in consequence of the death, bankruptcy or insolvency of any shareholder (herein referred to as a person entitled by transmission) shall produce to the Corporation such evidence as may be reasonably required by the board to prove his title and declare in writing his election either to be himself registered as a security holder in respect of the security, or instead of being registered himself, to make such transfer as the deceased or bankrupt person could have made.
Until any person becoming entitled to any security by transmission has complied with the terms aforesaid, the Corporation may retain any dividend or other payment declared or payable upon such security, and shall not be bound to recognize the title of the person claiming under such transmission.
9.6 PROOF OF SERVICE. A certificate of the Secretary or other duly authorized officer of the Corporation in office at the time of the making of the certificate, or of any agent of the Corporation as to facts in relation to the mailing or delivery or sending of any notice to any shareholder, director, officer or auditor shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation, as the case may be.
9.7 WAIVER OF NOTICE. Any shareholder (or his duly appointed proxy) director, officer or auditor may waive any notice required to be given under any provision of the articles or bylaws of the Corporation or of the Act, and such waiver, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default in giving such notice. Any shareholder (or his duly appointed proxy) may waive any irregularity in any meeting of shareholders.
ARTICLE 10
BORROWING POWERS OF THE DIRECTORS
10.1 BORROWING POWER. Without limiting the borrowing powers of the Corporation as set forth in the Act, but subject to the provisions of the Act, the board may from time to time, without authorization of the shareholders:
(a) borrow money on the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the Corporation;
(c) give guarantees on behalf of the Corporation to secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation owned or subsequently acquired, to secure any obligation of the Corporation.
10.2 The directors may from time to time authorize any director or directors, officer or officers, employee of the Corporation or other person or persons, whether connected with the Corporation or not, to make arrangements with reference to the monies borrowed or to be borrowed as aforesaid and as to the terms and conditions of the loan thereof and as to the securities to be given therefor, with power to vary or modify such arrangements, terms and conditions and to give such additional debt obligations for any monies borrowed or remaining due by the Corporation as the directors of the Corporation may authorize and generally to manage, transact and settle the borrowing of money by the Corporation.
10.3 The directors may from time to time authorize any director or directors, officer or officers, employee of the Corporation or other person or persons, whether connected with the Corporation or not, to sign, execute and give on behalf of the Corporation all documents, agreements and promises necessary or desirable for the purposes aforesaid and to draw, make, accept, endorse, execute and issue cheques, promissory notes, bills of exchange, bills of lading and other negotiable or transferable instruments and the same and all renewals thereof or substitutions therefor so signed shall be binding upon the Corporation.
10.4 The words "debt obligations" as used in this Section 10 mean bonds, debentures, notes or other similar obligations or guarantees of such an obligation, whether secured or unsecured.
ARTICLE 11
BUSINESS OF THE CORPORATION
11.1 REGISTERED OFFICE. The registered office of the Corporation shall be in the municipality or geographic township within Ontario specified in its Articles, and at such place therein as the directors of the Corporation may from time to time by resolution determine.
11.2 CORPORATE SEAL. The corporate seal of the Corporation, if any, shall be such seal as the directors of the Corporation may from time to time by resolution adopt.
11.3 BANKING ARRANGEMENTS. The banking business of the Corporation or any part thereof shall be transacted with such chartered banks, trust companies or other financial institutions as the board may by resolution from time to time determine.
Cheques on the bank accounts, drafts drawn or accepted by the Corporation, promissory notes given by it, acceptances, bills of exchange, orders for the payment of money and other instruments of a like nature may be made, signed, drawn, accepted or endorsed, as the case may be, by such officer or officers, person or persons as the board of directors may by resolution from time to time name for that purpose.
Cheques, promissory notes, bills of exchange, orders for the payment of money and other negotiable paper may be endorsed for deposit to the credit of the Corporation's bank account by such officer or officers, person or persons, as the board of directors may by resolution from time to time name for that purpose, or they may be endorsed for such deposit by means of a stamp bearing the Corporation's name.
11.4 EXECUTION OF INSTRUMENTS. Any instruments in writing may be signed in the name of and on behalf of the Corporation by two persons, one of whom holds the office of President or Vice-President and the other of whom holds the office of Secretary-Treasurer or by any two directors and any instrument in writing so signed shall be binding upon the Corporation without any further authorization or formality. In the event that the Corporation has only one officer and director, that person alone may sign any instruments in writing in the name of and on behalf of the Corporation. The board of directors shall have power from time to time by resolution to appoint any other officer or officers or any person or persons on behalf of the Corporation either to sign instruments in writing generally or to sign specific instruments in writing. The corporate seal, if any, may be affixed to any instruments in writing on the authority of any of the persons named in this section.
The term "INSTRUMENTS IN WRITING" as used herein shall, without limiting the generality thereof, include contracts, documents, deeds, mortgages, hypothecs, charges, security interests, conveyances, transfers and assignments of property (real or personal, immovable or movable), agreements, tenders, releases, proxies, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, stocks, bonds, debentures or other securities and all paper writings.
11.5 INVESTMENTS. In particular, without limiting the generality of the foregoing, execution as provided in Section 11.4 hereof shall be adequate to sell, assign, transfer, exchange, convert or convey any securities, rights and warrants.
11.6 VOTING SECURITIES IN OTHER COMPANIES. All securities carrying voting rights in any other body corporate held from time to time by the Corporation may be voted at all meetings of holders of such securities in such manner and by such person or persons as the board of the Corporation from time to time determines. In the absence of action by the board, the proper signing officers of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation instruments of proxy and arrange for the issuance of voting certificates and other evidence of right to vote in such names as they may determine.
11.7 SOLICITORS. Either the President or the Secretary shall have power from time to time to instruct solicitors to institute or defend actions or other legal proceedings for the Corporation without any specific resolution or retainer or instructions from the board provided, however, that the board may give instructions superseding or varying such instructions.
11.8 CUSTODY OF SECURITIES. The directors may from time to time by resolution provide for the deposit and custody of securities of the Corporation.
All share certificates, bonds, debentures, debenture stock certificates, notes or other obligations or securities belonging to the Corporation, may be issued or held in the name of
a nominee or nominees of the Corporation (and if issued or held in the name of more than one nominee shall be held in the names of the nominees jointly with right of survivorship) and may be endorsed in blank with endorsement guaranteed in order to enable transfers to be completed and registration to be effected.
11.9 CHARGING ASSETS. The board may from time to time charge, hypothecate, mortgage or pledge any or all of the assets of the Corporation not only by means of bonds and debentures by way of fixed charge or charges or by way of floating charge or charges, but also by any other instrument or instruments for the purposes of securing any past or existing or new or future liability direct or indirect of the Corporation or for the purpose of securing any bonds, debentures or other securities or liabilities of the Corporation or of any other body corporate.
11.10 INVALIDITY OF ANY PROVISIONS OF THIS BY-LAW. The invalidity or unenforceability of any provision of this by-law shall not affect the validity or enforceability of the remaining provisions of this by-law.
11.11 FINANCIAL YEAR. The financial year of the Corporation shall terminate on such day in each year as is from time to time established by the board of directors.
The undersigned, being all of the directors of the Corporation, by their signatures below resolve pursuant to Section 129(1) of the BUSINESS CORPORATIONS ACT (Ontario) that the foregoing by-law shall be and it is hereby made a by-law of the Corporation.
DATED the 3rd day of April, 2006.
/s/ Craig A. Fielding /s/ Quentin Rickerby ---------------------- --------------------- Craig A. Fielding Quentin Rickerby |
EXHIBIT 10.4
THIS AGREEMENT made the 5th day of January 2006.
BETWEEN:
INNOVATIVE LOYALTY SOLUTIONS INC. a corporation incorporated under the laws of the Province of Ontario
("ILS")
- And -
CONSORTEUM INC., a corporation incorporated under the laws of the Province of Ontario
("CONSORTIUM")
-And -
WILLIAM BATEMAN and MICHAEL PRASSE
(collectively the "SHAREHOLDERS")
BACKGROUND
Each of ILS and Consorteum wish to set out the desired terms and conditions governing the operation of a joint venture to supply a loyalty card program called My Golf Rewards (the "Program") to the golf industry.
The parties have caused a company to be incorporated in Ontario under the name My Golf Rewards Inc. ("MGR").
This agreement amongst shareholders will outline the management responsibilities and ownership percentage amongst the shareholders of MGR,
NOW THEREFORE, in consideration of the premises, the mutual covenants contained in this Agreement and other consideration (the receipt and sufficiency of which are acknowledged), the parties agree as follows:
ARTICLE I
AGREEMENT TERMS
1.1 AGREEMENT. Each party acknowledges and agrees that the terms, conditions, rights and obligations in respect of the operation of MGR shall be governed by this Agreement.
1.2 INITIAL INVESTMENT. The parties acknowledge that Consorteum has provided access to an initial investment to MGR of up to $250,000 commencing on or before February 1, 2007.
1.3 LICENCE. From such funds, MGR has acquired a Fidelisoft licence to use and exploit the software and other intellectual property necessary for MGR to carry on the Program and its business.
1.4 ADDITIONAL ONGOING FUNDS. It is agreed that additional investments may be required on an ongoing basis for operational and marketing costs of the Program. Consorteum at its discretion may source funding for MGR from additional investors or parties at any time. The parties acknowledge and agree that such may result in dilution of their respective share ownership positions.
1.5 SHAREHOLDER INTEREST. As the major investor in MGR, Consorteum holds a 49% ownership stake, ILS holds a 25% ownership stake and each of the Shareholders holds a 13% ownership stake in MGR.
1.6 REVENUE AND PROFIT SHARE POSITION. The Shareholders waive their right to receive dividends paid out of the MGR program until Consorteum has received repayment of funds advanced to MGR by it. Once Consorteum's debt has been repaid in full and ongoing MGR operational costs are covered out of gross revenues, all parties will share in net profits based on their respective share ownership percentages. At that time, ILS and the Shareholders will be responsible for all of the costs of the program in relation to respective percentage ownership.
1.7 EQUITY PURCHASE. Consorteum and the Shareholders will offer ILS the option to purchase up to an additional 24% equity stake in MGR. ILS may purchase this equity at anytime up until December 31, 2013 based on the following terms.
1. ILS will pay 50% of the market value of the additional equity acquired; provided that the minimum price will be the amount of Consorteum's initial investment into the program, plus 50% of such amount
2. Consorteum and the Shareholders will transfer equity to ILS pro rata to their respective shareholdings.
1.8 DISCLOSURE OF EXPENDITURE. It is agreed that all expenditures connected to the development of the Program be fully disclosed, recognised and agreed upon by Consorteum prior to payment or approval to funding. This includes all expenditures to date relating to the program, and all future expenditure.
1.9 BOARD REPRESENTATION. All parties will vote their shares in MGR to ensure that ILS will be entitled to have two nominees on the board, Consortium will be entitled to have two nominees on the board and the Shareholders will be entitled to have one nominee on the board. of directors of MGR.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 ILS WARRANTIES. ILS represents and warrants to Consorteum as follows (acknowledging that Consorteum is relying on the representations and warranties of ILS contained in this Agreement and any agreement, certificates or other document delivered by ILS pursuant hereto in connection with this Agreement):
(a) ILS has the capacity and authority and has taken all necessary action to enter into, execute and deliver this Agreement;
(b) This Agreement constitutes and the agreements and other instruments contemplated herein when executed will constitute valid and binding obligations of ILS enforceable in accordance with the terms hereof and thereof subject, however, to limitations with respect to enforcement imposed in connection with laws affecting the rights of creditors generally including, without limitation, applicable bankruptcy, insolvency, moratorium, reorganization or similar laws and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; and
(c) No consent, licence, approval, order or authorization of or registration, filing or declaration with any governmental authority that has not been obtained or made by ILS and no consent of any third party is required to be obtained by ILS in connection with the execution, delivery and performance by ILS of this Agreement or the consummation of the transactions contemplated by the Program.
2.2 CONSORTEUM WARRANTIES. Consorteum represents and warrants to ILS as follows (acknowledging that ILS is relying on the representations and warranties of Consorteum contained in this Agreement and any agreement, certificates or other document delivered by Consorteum pursuant hereto in connection with this Agreement):
(a) Consorteum has the capacity and authority and has taken all necessary action to enter into, execute and deliver this Agreement;
(b) This Agreement constitutes and the agreements and other instruments contemplated herein when executed will constitute valid and binding obligations
of Consorteum enforceable in accordance with the terms hereof and thereof subject, however, to limitations with respect to enforcement imposed in connection with laws affecting the rights of creditors generally including, without limitation, applicable bankruptcy, insolvency, moratorium reoganization or similar laws and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; and
(c) No consent, licence, approval, order or authorization of, or registration, filing or declaration with any governmental authority that has not been obtained or made by Consorteum and no consent of any third party is required to be obtained by Consorteum in connection with the execution, delivery and performance by Consorteum of this Agreement or the consummation of the transactions contemplated by the Program.
2.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of ILS and Consorteum contained in this Agreement and contained in any document or certificate given pursuant to this Agreement shall continue for an indefinite period.
ARTICLE 3
GENERAL
3.1 TIME. Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision.
3.2 NOTICES. All communications which may be or are required to be given by either party to the other herein, shall (in the absence of any specific provision to the contrary) be in writing and delivered or sent by prepaid registered mail or fax to the parties at their following respective addresses:
Consorteum Inc.
12-351 Steelcase Rd West,
Markham
Ontario
L3R 4H9
Attn: Mr. Quent Rickerby
Facsimile: 1-866-824-8854
Innovative Loyalty Solutions Inc.
147 Citation Drive, Unit 30
Concord, ON
Att: Mr. Bill Mathews
Facsimile:
C/O William Bateman
Suite 550, 141 Adelaide Street West, Toronto, Ontario
And if any such communication is sent by prepaid registered mail, it shall, subject to the following sentence, be conclusively deemed to have been received on the third business day following the mailing thereof and, if delivered or faxed, it shall be conclusively deemed to have been received at the time of delivery or transmission. Notwithstanding the foregoing provisions with respect to mailing, in the event that it may be reasonably anticipated that, due to any strike, lockout or similar event involving an in postal service, any payment or communication will not be received by the addressee by no later than the third (3rd) business day following the mailing thereof then the mailing of any such payment or communication as aforesaid shall not be an effective means of sending the same but rather any payment or communication must then be sent by an alternative means of transportation which it may reasonably be anticipated will cause the payment or communication to be received reasonably expeditiously by the addressee. Either party may from time to time change its address herein before set forth by notice to the other of them in accordance with this section.
3.3 GOVERNING LAW. This Agreement and the rights and obligations and relations of the parties hereto shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein (but without giving consideration to any conflict of laws rules). The parties hereto agree that the Courts of Ontario shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement Each party hereto does hereby astern to the jurisdiction of the Courts of the Province of Ontario.
3.4 HEADING. The headings in this Agreement and in the Schedules hereto are inserted solely for convenience of reference and do not affect the interpretation thereof or define, limit or commit the contents of any provision of this Agreement.
3.5 ASSIGNMENT AND ENSUREMENT. Neither this Agreement nor any rights or obligations hereunder shall be assignable by any party hereto without the prior written consent of each of the other parties, which consent may be unreasonably withheld. Subject thereto, this Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective successors (including any successor by reason of amalgamation of any party hereto), heirs and permitted assigns.
3.6 ENTIRE AGREEMENT. With respect to the subject matter of this Agreement, this Agreement (a) sets forth the entire agreement between the parties hereto and any persona who
have in the past or who are now representing either of the parties hereto, (b) supersedes all prior understandings and communications between the parties hereto or any of them, oral or written, and (c) constitutes the entire agreement between the parties hereto. Each party hereto acknowledges and represents that this Agreement is entered into after full investigation and that no party is relying upon any statement or representation made by any other which is not embodied in this Agreement Each party hereto acknowledges that he or it shall have no right to rely upon any amendment, praise, modification, statement or representation made or occurring subsequent to the execution of this Agreement unless the same is in writing and executed by each of the parties hereto. This Agreement is not intended to settle any obligations or disputes between the parties, and therefore all claims are preserved.
3.7 FURTHER ASSURANCES. The parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each party hereto shall provide such further documents or instruments required by the other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions.
3.8 WAIVER. The failure of any party to this Agreement to enforce at any time any of the provisions of this Agreement or any of its rights in respect thereto or to insist upon strict adherence to any term of this Agreement will not be considered to be a waiver of such provision, right or term or in any way to affect act the validity of this Agreement or deprive the applicable party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. The exercise by any party to this Agreement of any of its rights provided by this Agreement will not preclude or prejudice such party from exercising any other right it may have by reason of this Agreement or otherwise, irrespective of any previous action or proceeding taken by it hereunder. Any waiver by any party hereto of the performance of any of the provisions of this Agreement will be effective only if in writing and signed by a duly authorized representative of such party.
3.9 NUMBER. In this Agreement and unless the context otherwise requires, words importing the singular number only shall include the plural and vice versa, words importing the masculine and feminine genders and vice versa and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.
3.10 COUNTERPARTS. - This Agreement may be executed in any number of counterparts and all such counterparts shall for all purposes constitute one agreement, binding on the parties hereto, provided each party hereto has executed at least one counterpart, and each shall be deemed to be an original, notwithstanding that all parties are not signatory to the same counterpart.
This contract will supersede all previous agreement written or oral.
DATED the 5th day of January, 2006
INNOVATIVE LOYALTY SOLUTIONS
Per: /s/ William Mathews
------------------------------
William Mathews
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CONSORTEUM, INC.
Per: /s/ Quent Rickerby
------------------------------
Quent Rickerby
/s/ William Bateman
------------------------------
William Bateman
/s/ Michael Prasse
------------------------------
Michael Prasse
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EXHIBIT 10.5
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT made as of the 5th day of April, 2006 "Effective Date").
BETWEEN:
CONSORTEUM INC.
(hereinafter referred to as the "Consultant")
OF THE FIRST PART
- and -
FP FINANCIAL LTD.
(hereinafter referred to as the "Corporation")
OF THE SECOND PART
WHEREAS the Corporation desires to obtain and apply the expertise of the Consultant to the Corporation's business.
NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto) the parties make the agreements and acknowledgements hereinafter set forth:
1. CONSULTING SERVICES - The Corporation hereby retains the services of the Consultant and the Consultant hereby agrees to provide the consulting services which are described in Schedule "A" in accordance with the provisions set out in Schedule "A" (the "Services"). The Corporation hereby agrees the Consultant will be the Corporation's sole and exclusive financial products and services provider as set forth in Schedule "A". The Consultant shall not be required to provide any services to the Corporation except as set forth in Schedule "A". The Consultant will provide all Services to the Corporation at the Consultant's net cost for the term of the contract.
2. TERM - This Agreement shall commence on the Effective Date with an initial term of four years and will be automatically renewed for successive two year terms thereafter unless the parties elect not to renew his Agreement in accordance with Section 8.
3. NON-EXCLUSIVITY OF SERVICES -- The Corporation acknowledges that the Consultant may be retained as a consultant by other persons. The Consultant may continue to provide services to other persons and may accept new retainers for services. The Consultant may, in the performance of the Services, provide the services of one or more of its employees or representatives, and the identities of such employees or representatives shall be in the discretion of the Consultant. The manner and the times at which the Consultant performs the Services shall be within the discretion of the Consultant.
4. COMPENSATION -- The Corporation shall pay to the Consultant an initial management fee of $5,000.00 payable upon execution of this Agreement. Thereafter, the Corporation shall pay to the Consultant a monthly management fee of $5,000.00 on the 15th day of each month until the launch of the FP Financial benefits card (the "Benefits Card"). Following the launch of the Benefits Card, the Consultant will receive twenty percent (20%) of all gross profits from all current and future services provided by the Consultant for the term of the contract and any renewal terms. The Consultant shall be entitled to send an invoice to the Corporation for the Consultant's fees for each month which shall be payable within 10 days after the date on which such invoice is received by the Corporation. The Corporation shall pay all applicable taxes such as GST upon the Consultant's fees.
5. REIMBURSEMENT -- The Corporation agrees to reimburse the Consultant for all reasonable and necessary expenses incurred in the performance of its services under this Agreement provided that the Consultant shall substantiate its expenses by furnishing to the Corporation reasonable evidence relating to expenses for which the Consultant seeks reimbursement.
6. COMPLIANCE WITH LAWS - The Consultant shall in the performance of this Agreement comply with all laws, regulations and orders of the federal laws of Canada and of the Province of Ontario.
7. INDEPENDENT CONTRACTOR - The Consultant shall provide the Services to the Corporation as an independent contractor and not as an employee of the Corporation and acknowledges that an employer-employee relationship is not created by this Agreement.
8. TERMINATION --
(a) A party may terminate this Agreement effective immediately upon notice to the other party in the event that the other party is in breach of any of the terms or conditions of this Agreement which breach is material and has not been cured in all material respects within 30 days after receipt of written notice which provides details of the breach. The parties acknowledge and agree that a breach of this Agreement by the Consultant is material if it detrimentally and materially affects the business of the Corporation taken as a whole.
(b) A party may terminate this Agreement effective immediately upon notice to the other party in the event that the other party becomes insolvent or 3 voluntarily or involuntarily bankrupt, or makes an assignment for the benefit of its creditors.
(c) In the event of termination, by the Consultant under the provisions of paragraph (a) or (b) above, or in the event of wrongful termination of this Agreement by the Corporation, the Corporation shall pay to the Consultant, all amounts then owing under this Agreement.
9.LEGAL RISK MANAGEMENT -- The following legal risk management provisions will apply for all purposes under and relating to this Agreement:
(a) the obligations of the Consultant expressly stated in this Agreement are in lieu of all other representations, warranties or conditions expressed or implied including implied representations, warranties or conditions arising by statute or otherwise in law, or from a course of dealing or usage of trade;
(b) neither party shall have any liability whatsoever for any special or consequential damages, loss of profits or other economic loss of the other party; this limitation shall not apply to any obligation by a party to pay any fees or other amounts expressly required under this Agreement.
10. TIME OF ESSENCE -- Time of payment is of the essence.
11. REPRESENTATIONS AND WARRANTIES - Each party represents, warrants and covenants to the other party as follows:
(a) Each party is duly organized, validly existing and no action relating to insolvency, liquidation or suspension of payments has, to the knowledge of such party, been taken in respect of it.
(b) The execution, delivery and performance of this Agreement by each party has been duly authorized by all necessary action on the part of such party in accordance with such party's constating documents and does not and will not require the prior written consent of any trustee or holder of any indebtedness or other obligation of such party or any other party to any other agreement with such party.
12.ENTIRE AGREEMENT - With respect to the subject matter of this Agreement, this Agreement: (a) sets forth the entire agreement between the parties hereto and any persons who have in the past or who are now representing either of the parties hereto, (b) supersedes all prior understandings and communications between the parties hereto, oral or written, and (c) constitutes the entire agreement between the parties hereto. Each party hereto acknowledges and represents that this Agreement is entered into after full investigation and that no party is relying upon any statement or representation made by any other which is not embodied in this Agreement. Each party hereto acknowledges that no liability whatsoever shall arise based in contract or tort, with respect to misrepresentations of any kind, including but not limited to, statements or representations negligently made by any persons who have in the past or who are
now representing either of the parties hereto, in order to induce either party into entering into this agreement. Each party hereto acknowledges that he or it shall have no right to rely upon any amendment, promise, modification, statement or representation made or occurring subsequent to the execution of this agreement unless the same is in writing and executed by each of the parties hereto.
13. COUNTERPARTS - This Agreement may be executed in any number of counterparts and all such counterparts shall for all purposes constitute one agreement, binding on the parties hereto, provided each party hereto has executed at least one counterpart, and each shall be deemed to be an original, notwithstanding that all parties are not signatory to the same counterpart. This Agreement may be executed and delivered by either of the parties by transmitting to the other a copy of this Agreement (executed by such delivering Party) by telecopier or similar means of electronic communication, and delivery in that manner by a party shall be binding upon such party and deemed to be an original.
14. ASSIGNMENT AND ENUREMENT - This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.
15. SURVIVAL - Any terms or conditions of this Agreement by which obligations of either party are applicable or which extend or may extend beyond expiration or termination of this Agreement (whether expressly or by implication) shall survive and continue in full force and effect notwithstanding such termination. All obligations to pay fees under this Agreement shall survive expiration or termination of this Agreement.
16. GOVERNING LAW - This Agreement and the rights and obligations and relations of the parties hereto shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein (but without giving effect to any conflict of laws rules). The parties hereto agree that the Courts of Ontario shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement. Each party hereto does hereby attorn to the jurisdiction of the Courts of the Province of Ontario.
17. PARTIAL INVALIDITY, - In any provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law and be independent of every other provision of this Agreement.
18. FURTHER ASSURANCES - Each party hereto agrees from time to time, subsequent to the date hereof, to execute and deliver or cause to be executed and delivered to the other of them such instruments or further assurances as may, in the reasonable opinion of the other of them, be necessary or desirable to give effect to the provisions of this Agreement.
19. CONFIDENTIALITY --
(a) Each party hereby undertakes to keep confidential and shall cause all of employees, and agents to keep confidential, the confidential information of the other party disclosed hereunder, except as may be explicitly approved by the other party in writing, or
as may be necessary for the proper discharge by the first party of its duties, responsibilities and obligations under this Agreement. The obligations of confidentiality and restricted use herein will not apply to the confidential information of the disclosing party that is already known to the receiving party, in the public domain, or enters the public domain through no breach of this Agreement by the receiving party.
(b) Notwithstanding the provisions of Section 19(a), a party shall be entitled to the extent necessary for the performance of its duties hereunder to allow access to the information covered by Section 19(a) above exclusively to such of its employees, and consultants who are directly concerned with the carrying out of such party's duties under this Agreement; provided that such party shall inform each of such persons of the confidential nature of such information and of such party's obligation of confidentiality with respect to it, and such party shall be responsible for any breach of such obligations by any of its employees, or consultants.
(c) If required to provide any information subject to this Section 19 pursuant to any subpoena or any other equivalent legal process, a party shall promptly notify the other party so that such other party can seek a protective order from the court having jurisdiction in such matter or otherwise seek to prevent or limit the scope of, or impose conditions upon, such disclosure.
(d) All public announcements of a material business nature related to the business of either party shall, if they are to be made, be subject to prior written notice to THE other party.
20.EXECUTION AND DELIVERY - This Agreement has been duly executed and delivered by each party. This Agreement constitutes the legal, valid, binding and enforceable obligation of such party.
2 1 .LANGUAGE - At the request of the parties, this agreement has been drafted in the English language. A la demande des parties, la presente convention a ete redigee en anglais.
22. SECTION HEADINGS - Section headings appearing in this Agreement are inserted for convenience or reference only, and shall in no way be construed to be interpretations of text.
23. AMENDMENTS - This Agreement may be modified or amended only by the duly authorized representatives of both parties by an instrument in writing.
24. NOTICE TO BE GIVEN - All invoices, demands or other communications required or permitted to be given under this Agreement to a party shall be in writing and delivered, posted by registered prepaid mail or sent by facsimile or e-mail addressed to the party for whom it is intended as follows:
THE CORPORATION:
310-112 Market Ave
Winnipeg, Manitoba
R3B OP4
Fax No.: (2U4) 987-2659
THE CONSULTANT:
333 North Rivermede Road, Unit 1
Concorde, Ontario
LdK 3N7
E-mail: craig_frelding@rogers.com
Notices delivered shall be deemed given and received upon delivery, those sent by registered mail on the fifth (5th) day after posting, and those sent by facsimile or e-mail, on the day of transmission; provided that during any period of mail disruption, notice shall he delivered or sent by facsimile or e-mail. Either party may at any time and from time to time designate a substitute address for the purpose of this paragraph by GIVING written notice thereof to the other party at least ten (10) days in advance of the effective date of such designation.
26. OTHER RULES - Unless the context of this Agreement otherwise requires,
(a) the terms "hereof," "herein," "hereby" and derivative or similar words refer to THE ENTIRE Agreement, including schedules and exhibits;
(b) any reference to a law, a regulation, an agreement or a document shall refer to any amendment, supplement or replacement of the same;
(c) any reference to a person shall, where appropriate, include any successors and permitted transferees and assigns of such persons; and
(d) the terms "include" or "including" means "including without limitation"." Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless business days are specified.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date written above,
FP FINANCIAL LTD
Lee Price President and Secretary
CONSORTEUM INC.
SCHEDULE "A"
SERVICES TO BE PROVIDED BY THE CONSULTANT TO THE
CORPORATION
1. Consulting services for the purpose of providing management services, financial technology services, and alternative payment and provisioning initiatives (including benefits/payroll initiatives).
2. Initial services include:
(a) contract negotiation assistance with financial technology and service providers;
(b) project management assistance and ongoing support for deployment of services; and
(c) technical support for services provided by the Consultant to the Corporation.
3. Additional services to be provided shall include
(a) point-of-sale terminals;
(b) payment processing services;
(c) future micro-payment products: EMV and contract-less payments;
(d) pre-paid card service: credit card, debit card, gift, wireless, long distance;
(e) value-added services: loyalty, insurance services, AAA, medical, travel; and
(f) future programs as agreed upon by the parties.
EXHIBIT 10.6
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of May 2006 (the "Effective Date"),
BETWEEN:
Consorteum Inc
(hereinafter referred to as the "CORPORATION")
- and -
CRAIG FIELDING (hereinafter referred to as the "Associates"), incorporated in the Province of Ontario. The services of Associates shall be provided to the Corporation by CRAIG FIELDING, of the City of Richmond Hill in the Province of Ontario (hereinafter referred to as the "Executive"). Executive and Associates shall be understood to be interchangeable for the purposes of this Service Agreement.
1.1 The Executive agrees to act as Chief Executive Officer of the Corporation.
1.2 The Executive herby acknowledges he is subject always to the direction of the Corporation through the Board.
1.3 The Executive shall serve the Corporation in the capacity as Chief Executive Officer and provide such services as are commensurate with such position and responsibility. When present all meetings of the Board, and, inter alia, direct the financial and capital market strategies necessary for efficient performance, and accept responsibility for the implementation of financial controls necessary to assume appropriate compliance.
2.1 Subject to earlier termination pursuant to the terms hereof, the initial term of this service agreement shall be from and including the Effective Date up to and including June 30th, 2010 (the "INITIAL TERM"), unless otherwise decided by shareholders or the Board.
The service of the Executive shall, on the consent of both parties, continue thereafter for an additional two year period, but otherwise on the same terms and conditions contained herein, or on revised terms and conditions as may be established by the Board and agreed to by the Executive.
2.2 Notwithstanding the preceding Section 2.1, this Agreement shall be subject to early termination during either the Initial Term, or any subsequent periods, in accordance with the termination provisions of Article 4 hereof.
3.1 While in the service of the Corporation, the Executive will be paid an annual base fee in the amount of one hundred and fifty thousand dollars ($150,000), subject to applicable statutory deductions, and contributions to employee benefit plans (the "Base Fee").
3.2 The Executive's Base Fee will be payable monthly, in accordance with the Corporation's practices and procedures as they may exist from time to time.
3.3 The Base Fee will be reviewed by the Board on an annual basis, and may, in the sole discretion of the Board, be increased.
3.4 The Executive will be eligible to participate in a bonus plan to be established by the Corporation (the "Bonus Plan"). The Bonus Plan will be based upon the pre-tax cash flow of the Corporation.
3.5 The Executive will be eligible to participate in any stock option plan which the Corporation may establish in the future for its employees to the extent determined by the Board in its sole discretion.
3.6 The Executive will be eligible to participate in all existing and future benefit plans of the Corporation which it makes available to its executive employees, including without limitation, dental, vision and health care benefits, long-term care, disability and life insurance.
3.7 The Executive will be provided (This is subject to change) with a home office allowance of $700.00 per month, ("THE HOME OFFICE ALLOWANCE") to cover all home office expenses including the purchase, leasing or maintenance of any equipment, technology or supplies reasonably necessary or incidental to the Executive's responsibilities to the Corporation.
3.8 The Executive shall be solely responsible for any and all income tax liability including without limitation taxable benefits from the receipt of the Auto Allowance, the acquisition of common shares of the Corporation upon exercise of stock option grants, and any other taxable benefits received by the Executive under his service with the Corporation. All payments made by the Corporation to the Executive or for the benefit of the Executive shall be less applicable withholdings and deductions.
3.9 The Corporation shall pay to the Executive an automobile allowance of Cdn$1250.00 per month. All reasonable and related automobile expenses shall be reimbursed to the Executive or Associates by the Corporation upon the provision of itemized accounts and receipts.
4.1 In the event the Executive resigns, at any time, for any reason, he shall provide a minimum of three (3) months advance written notice to the Corporation. The Executive will not be entitled to receive any further compensation or benefits whatsoever, other than those which have accrued up to the Executive's last day of active service with the Corporation in the event of termination by the Executive. The Corporation may, at its discretion, waive in whole or in part such notice, however three (3) months compensation will still be honoured, including,
4.2 Notwithstanding the term of this Agreement as set forth in Section 2.1 hereof, the Executive hereby agrees that this Agreement and his service shall be immediately terminable by the Corporation, without payment of any severance or other compensation to him in lieu of prior notice of such termination, in the event of the existence of Just Cause for the termination or in the event of the Disability of the Employee. For the purposes hereof:
(a) "Just Cause" means any act or conduct which at common law constitutes just cause and shall be deemed to include, conduct materially inconsistent with the fulfilment of the expressed or implied terms and conditions of the Executive's service; materially negligent performance by the Executive of his service duties; or a consistent failure to exercise the amount of care and skill required to perform his duties herein in a competent manner, except where such failure results from the occurrence of a Disability; and
(b) "Disability" shall mean the failure of the Executive to perform his duties on a substantially uninterrupted basis for three (3) consecutive months or for a period of five (5) months out of any twelve (12) month period where such failure results from physical or mental illness.
4.3 In the event this Agreement and the Executive's service is terminated for Just Cause, the Corporation shall not be required to give the Executive any notice of such termination or payment or other compensation in lieu thereof. In such event, the Executive shall only be entitled to the payment of his remuneration and any other benefits, which have accrued to the date of termination. In such event, the Executive expressly confirms and agrees that he shall not be entitled to compensation for loss of contract, loss of benefits or other matters relating to his contract with the Corporation.
4.4 Notwithstanding any other provision of this Agreement, the Corporation shall remain liable to pay to the Executive his remuneration during the period of time that the Executive is unable to perform his service duties herein by reason of illness or mental or physical disability or incapacity. In the event that such illness or mental or physical disability or incapacity constitutes a Disability as defined in the preceding subsection 4.2(b), then the Corporation may, in its sole discretion, immediately terminate this Agreement and the Executive's service without any notice of termination or payment of any compensation for his loss of contract, loss of benefits, or other matters relating to his contract with the Corporation.
4.5 The service of the Executive will be terminated automatically in the event of the death of the Executive, and Associates will not be entitled to receive any further compensation or benefits pursuant to the terms of the service of the Executive, other than those which have accrued up to the date of death.
4.6 In addition to the circumstances as set out in this Article 4, hereof, the Corporation may terminate the Executive's service at any time, without prior notice, by paying to the Executive a separation package in a lump sum which will be equal to twenty four (24) months of the Base Fee (the "Separation Package").
4.7 The Executive acknowledges that the Separation Package provided pursuant to this Agreement supersedes and replaces any and all rights to reasonable notice of termination that the Executive might otherwise be entitled to at common law, and the Executive expressly waives any rights to such notice. The Executive agrees that the Separation Package is deemed conclusively to be reasonable notice of termination and specifically includes all amounts owing for termination and/or severance pay under any contract, statute, common law or otherwise.
4.8 Except as set out herein, the Executive will not be entitled to any other
Fee or benefits of service following his dismissal, including without
limitation, Auto Allowance, Discretionary Bonus, health benefits, or the
issuance or vesting of any stock options pursuant to the Stock Option
Plan.
4.9 In the event that the service of the Executive with the Corporation is
terminated in any manner, upon termination, the Executive agrees to
execute a comprehensive release to the effect that he acknowledges that
receipt of any monies pursuant to the terms of this Agreement is in full
satisfaction of any and all outstanding claims or entitlements which the
Executive may otherwise have against the Corporation and its Affiliates,
as well as the officers, directors, employees and agents of the
Corporation and its Affiliates.
4.10 The Executive understands and agrees that all benefits, including
long-term disability coverage will cease as of the date of termination of
the Executive's service, and the Corporation has no liability for any
damages caused by the cessation of such benefits coverage regardless of
the reason for termination or resignation. The Corporation has no
obligation to extend any benefit coverage past the termination date.
4.11 All items of any kind or nature created or used by the Executive in the
course of service, or otherwise furnished by the Corporation, and all
equipment, credit cards, computers, cellular phones, data, books, records,
reports, files, notes, manuals, literature, software, Confidential
Information (as hereinafter defined) or any other materials belonging to
the Corporation or its customers, suppliers, distributors, employees or
consultants and in the Executive's possession or control, shall be
surrendered to the Corporation, in good condition, promptly upon the
Executive's termination of service, irrespective of the time, manner or
cause of termination.
ARTICLE 5
CONFIDENTIAL INFORMATION
------------------------
5.1 The Executive recognizes and understands that in performing the service
duties and responsibilities as outlined in this agreement, the Corporation
will provide the Executive with access to and the Executive will become
knowledgeable with respect to a wide variety of nonpublic information
relating to the Corporation, its business and that of its affiliates, its
customers, suppliers, distributors, employees and consultants of an
extremely confidential nature (the "CONFIDENTIAL INFORMATION").
5.2 During Associates' service with the Corporation, or at any time
thereafter, it shall not divulge, communicate or use any Confidential
Information which it may have access to or otherwise receive or obtain in
relation to the affairs of the Corporation or any of its subsidiaries,
related companies or affiliated entities. Breach of confidentiality will
be considered cause for immediate dismissal. Associates' covenant of
confidentiality will survive termination.
|
6.1 Any notice required to be given hereunder shall be in writing and sufficiently made if sent by facsimile transmission, or delivered personally or mailed by prepaid registered mail to the parties at their respective addresses herein.
Associates:
Craig Fielding, CEO
464 Worthington Ave
Richmond Hill,
Ontario ME 4R6
(i) The Corporation:
Consorteum Inc,
351 Steelcase Rd,
Unit 12 Markham
Ontario,
Any such notice shall be deemed to have been given on the date it is delivered if personally delivered or sent by facsimile transmission, or, if mailed, on the fifth business day following the mailing thereof Either party may change its address for service by giving written notice hereunder.
7.1 All dollar amounts set forth in this Agreement refer to Canadian currency.
7.2 This Agreement shall be governed and construed in accordance with the laws of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have executed and delivered this Agreement as of the date first written above.
Consorteum, Inc.
Per: /s/ signature
-----------------------------------
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SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
)
--------------------------------- ) /s/ Craig Fielding
Witness ) -----------------------------------
) CRAIG FIELDING, CEO
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EXHIBIT 10.7
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of May 2006 (the "Effective Date"),
BETWEEN:
Consorteum Inc
(hereinafter referred to as the "CORPORATION")
- and-
QUENT RICKERBY (hereinafter referred to as the "Associates"), incorporated in the Province of Ontario. The services of Associates shall be provided to the Corporation by QUENT RICKERBY, of the City of Markham in the Province of Ontario (hereinafter referred to as the "Executive"). Executive and Associates shall be understood to be interchangeable for the purposes of this Service Agreement.
ARTICLE 1
APPOINTMENT AND DUTIES
1.1 The Executive agrees to act as Chief Operating Officer of the Corporation.
1.2 The Executive hereby acknowledges he is subject always to the direction of the Corporation through the Board.
1.3 The Executive shall serve the Corporation in the capacity as Chief Operating Officer and provide such services as are commensurate with such position and responsibility. When present all meetings of the Board, and, inter alia, direct the financial and capital market strategies necessary for efficient performance, and accept responsibility for the implementation of financial controls necessary to assume appropriate compliance.
ARTICLE 2
TERM OF SERVICE
2.1 Subject to earlier termination pursuant to the terms hereof, the initial term of this service agreement shall be from and including the Effective Date up to and including June 30th, 2010 (the "INITIAL TERM"), unless otherwise decided by shareholders or the Board.
The service of the Executive shall, on the consent of both parties, continue thereafter for an additional two year period, but otherwise on the same terms and conditions contained herein, or on revised terms and conditions as may be established by the Board and agreed to by the EXECUTIVE.
2.2 Notwithstanding the preceding Section 2.1, this Agreement shall be subject to early termination during either the Initial Tenn, or any subsequent periods, in accordance with the termination provisions of Article 4 hereof.
ARTICLE 3
REMUNERATION AND BENEFITS
3.1 While in the service of the Corporation, the Executive will be paid an annual base fee in the amount of one hundred and fifty thousand dollars ($150,000), subject to applicable statutory deductions, and contributions to employee benefit plans (the "BASE FEE").
3.2 The Executive's Base Fee will be payable monthly, in accordance with the Corporation's practices and procedures as they may exist from time to time.
3.3 The Base Fee will be reviewed by the Board on an annual basis, and may, in the sole discretion of the Board, be increased.
3.4 The Executive will be eligible to participate in a bonus plan to be established by the Corporation (the "Bonus Plan"). The Bonus Plan will be based upon the pre-tax cash flow of the Corporation.
3.5 The Executive will be eligible to participate in any stock option plan which the Corporation may establish in the future for its employees to the extent determined by the Board in its sole discretion.
3.6 The Executive will be eligible to participate in all existing and future benefit plans of the Corporation which it makes available to its executive employees, including without limitation, dental, vision and health care benefits, long-term care, disability and life insurance.
3.7 The Executive will be provided (This is subject to change) with a home office allowance of $700.00 per month, ("THE HOME OFFICE ALLOWANCE") to cover all home office expenses including the purchase, leasing or maintenance of any equipment, technology or supplies reasonably necessary or incidental to the Executive's responsibilities to the Corporation.
3.8 The Executive shall be solely responsible for any and all income tax liability including without limitation taxable benefits from the receipt of the Auto Allowance, the acquisition of common shares of the Corporation upon exercise of stock option grants, and any other taxable benefits received by the Executive under his service with the Corporation. All payments made by the Corporation to the Executive or for the benefit of the Executive shall be less applicable withholdings and deductions.
3.9 The Corporation shall pay to the Executive an automobile allowance of Cdn$1250.00 per month. All reasonable and related automobile expenses shall be reimbursed to the Executive or Associates by the Corporation upon the provision of itemized accounts and receipts.
ARTICLE 4
TERMINATION OF SERVICE
4.1 In the event the Executive resigns, at any time, for any reason, he shall provide a minimum of three (3) months advance written notice to the Corporation. The Executive will not be entitled to receive any further compensation or benefits whatsoever, other than those which have accrued up to the Executive's last day of active service with the Corporation in the event of termination by the Executive. The Corporation may, at its discretion, waive in whole or in part such notice, however three (3) months compensation will still be honoured, including,
4.2 Notwithstanding the term of this Agreement as set forth in Section 2.1 hereof, the Executive hereby agrees that this Agreement and his service shall be immediately terminable by the Corporation, without payment of any severance or other compensation to him in lieu of prior notice of such termination, in the event of the existence of Just Cause for the termination or in the event of the Disability of the Employee. For the purposes hereof:
(a) "Just Cause" means any act or conduct which at common law constitutes just cause and shall be deemed to include, conduct materially inconsistent with the fulfilment of the expressed or implied terms and conditions of the Executive's service; materially negligent performance by the Executive of his service duties; or a consistent failure to exercise the amount of care and skill required to perform his duties herein in a competent manner, except where such failure results from the occurrence of a Disability; and
(b) "Disability" shall mean the failure of the Executive to perform his duties on a substantially uninterrupted basis for three (3) consecutive months or for a period of five (5) months out of any twelve (12) month period where such failure results from physical or mental illness.
4.3 In the event this Agreement and the Executive's service is terminated for Just Cause, the Corporation shall not be required to give the Executive any notice of such termination or payment or other compensation in lieu thereof. In such event, the Executive shall only be entitled to the payment of his remuneration and any other benefits, which have accrued to the date of termination. In such event, the Executive expressly confirms and agrees that he shall not be entitled to compensation for loss of contract, loss of benefits or other matters relating to his contract with the Corporation.
4.4 Notwithstanding any other provision of this Agreement, the Corporation shall remain liable to pay to the Executive his remuneration during the period of time that the Executive is unable to perform his service duties herein by reason of illness or mental or physical disability or incapacity. In the event that such illness or mental or physical disability or incapacity constitutes a Disability as defined in the preceding subsection 4.2(b), then the Corporation may, in its sole discretion, immediately terminate this Agreement and the Executive's service without any notice of termination or payment of any compensation for his loss of contract, loss of benefits, or other matters relating to his contract with the Corporation.
4.5 The service of the Executive will be terminated automatically in the event of the death of the Executive, and Associates will not be entitled to receive any further compensation or benefits pursuant to the terms of the service of the Executive, other than those which have accrued up to the date of death.
4.6 In addition to the circumstances as set out in this Article 4, hereof, the Corporation may terminate the Executive's service at any time, without prior notice, by paying to the Executive a separation package in a lump sum which will be equal to twenty four (24) months of the Base Fee (the "SEPARATION PACKAGE").
4.7 The Executive acknowledges that the Separation Package provided pursuant to this Agreement supersedes and replaces any and all rights to reasonable notice of termination that the Executive might otherwise be entitled to at common law, and the Executive expressly waives any rights to such notice. The Executive agrees that the Separation Package is deemed conclusively to be reasonable notice of termination and specifically includes all amounts owing for termination and/or severance pay under any contract, statute, common law or otherwise.
4.8 Except as set out herein, the Executive will not be entitled to any other Fee or benefits of service following his dismissal, including without limitation, Auto Allowance, Discretionary
Bonus, health benefits, or the issuance or vesting of any stock options
pursuant to the Stock Option Plan.
4.9 In the event that the service of the Executive with the Corporation is
terminated in any manner, upon termination, the Executive agrees to
execute a comprehensive release to the effect that he acknowledges that
receipt of any monies pursuant to the terms of this Agreement is in
full satisfaction of any and all outstanding claims or entitlements
which the Executive may otherwise have against the Corporation and its
Affiliates, as well as the officers, directors, employees and agents of
the Corporation and its Affiliates.
4.10 The Executive understands and agrees that all benefits, including
long-term disability coverage will cease as of the date of termination
of the Executive's service, and the Corporation has no liability for
any damages caused by the cessation of such benefits coverage
regardless of the reason for termination or resignation. The
Corporation has no obligation to extend any benefit coverage past the
termination date.
4.11 All items of any kind or nature created or used by the Executive in the
course of service, or otherwise furnished by the Corporation, and all
equipment, credit cards, computers, cellular phones, data, books,
records, reports, files, notes, manuals, literature, software,
Confidential Information (as hereinafter defined) or any other
materials belonging to the Corporation or its customers, suppliers,
distributors, employees or consultants and in the Executive's
possession or control, shall be surrendered to the Corporation, in good
condition, promptly upon the Executive's termination of service,
irrespective of the time, manner or cause of termination.
ARTICLE 5
CONFIDENTIAL INFORMATION
5.1 The Executive recognizes and understands that in performing the service
duties and responsibilities as outlined in this agreement, the
Corporation will provide the Executive with access to and the Executive
will become knowledgeable with respect to a wide variety of nonpublic
information relating to the Corporation, its business and that of its
affiliates, its customers, suppliers, distributors, employees and
consultants of an extremely confidential nature (the "CONFIDENTIAL
INFORMATION").
5.2 During Associates' service with the Corporation, or at any time
thereafter, it shall not divulge, communicate or use any Confidential
Information which it may have access to or otherwise receive or obtain
in relation to the affairs of the Corporation or any of its
subsidiaries, related companies or affiliated entities. Breach of
confidentiality will be considered cause for immediate dismissal.
Associates' covenant of confidentiality will survive termination.
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ARTICLE 6
NOTICE
6.1 Any notice required to be given hereunder shall be in writing and sufficiently made if sent by facsimile transmission, or delivered personally or mailed by prepaid registered mail to the parties at their respective addresses herein.
Associates:
Quent Rickerby, COO
42 Angus Meadow Drive,
Markham,
Ontario, L6C 1Z2
(i) The Corporation:
Consorteum Inc,
351 Steelcase Rd, Unit 12
Markham
Ontario,
Any such notice shall be deemed to have been given on the date it is delivered if personally delivered or sent by facsimile transmission, or, if mailed, on the fifth business day following the mailing thereof. Either party may change its address for service by giving written notice hereunder.
ARTICLE 7
GENERAL PROVISIONS
7.1 ALL DOLLAR AMOUNTS SET FORTH IN THIS AGREEMENT REFER TO CANADIAN CURRENCY.
7.2 THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO.
IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED AND DELIVERED THIS
AGREEMENT AS OF THE DATE FIRST WRITTEN ABOVE.
CONSORTEUM INC.
PER:/s/ Craig A. Fielding
-------------------------------
Craig A. Fielding
|
Position: CEO
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
------------------------------- ) /s/ Quent Rickerby
WITNESS ) ----------------------------
) QUENT RICKERBY, COO
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EXHIBIT 10.8
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of May 2006 (the "Effective Date"),
BETWEEN:
Consorteum Inc
(hereinafter referred to as the "Corporation")
- and-
James D. Beatty & Associates Inc. (hereinafter referred to as the "Associates"), incorporated in the Province of Ontario. The services of Associates shall be provided to the Corporation by James D. Beatty, of the City of Toronto, in the Province of Ontario (hereinafter referred to as the "Executive"). Executive and Associates shall be understood to be interchangeable for the purposes of this Service Agreement.
ARTICLE 1
APPOINTMENT AND DUTIES
1.1 The Executive agrees to act as Chairman of the Corporation.
1.2 The Executive hereby acknowledges he is subject always to the direction of the Corporation through the Board.
1.3 The Executive shall serve the Corporation in the capacity as Executive Chairman and provide such services as are commensurate with such position and responsibility. He shall also chair, when present all meetings of the Board, and, inter alia, direct the financial and capital market strategies necessary for efficient performance, and accept responsibility for the implementation of financial controls necessary to assume appropriate compliance.
ARTICLE 2
TERM OF SERVICE
2.1 Subject to earlier termination pursuant to the terms hereof, the initial term of this service agreement shall be from and including the Effective Date up to and including June 30th, 2010 (the "Initial Term"), unless otherwise decided by shareholders or the Board.
The service of the Executive shall, on the consent of both parties, continue thereafter for an additional one year period, but otherwise on the same terms and conditions contained herein, or on revised terms and conditions as may be established by the Board and agreed to by the Executive.
2.2 Notwithstanding the preceding Section 2.1, this Agreement shall be subject to early termination during either the Initial Term, or any subsequent periods, in accordance with the termination provisions of Article 4 hereof.
ARTICLE 3
REMUNERATION AND BENEFITS
3.1 While in the service of the Corporation, the Executive will be paid an annual base fee in the amount of sixty thousand dollars ($60,000), subject to applicable statutory deductions, and contributions to employee benefit plans (the "Base Fee").
3.2 The Executive's Base Fee will be payable monthly, in accordance with the Corporation's practices and procedures as they may exist from time to time.
3.3 The Base Fee will be reviewed by the Board on an annual basis, and may, in the sole discretion of the Board, be increased.
3.4 The Executive will be eligible to participate in a bonus plan to be established by the Corporation (the "Bonus Plan"). The Bonus Plan will be based upon the pre-tax cash flow of the Corporation.
3.5 The Executive will be eligible to participate in any stock option plan which the Corporation may establish in the future for its employees to the extent determined by the Board in its sole discretion.
3.6 The Executive will be eligible to participate in all existing and future benefit plans of the Corporation which it makes available to its executive employees, including without limitation, dental, vision and health care benefits, long-term care, disability and life insurance.
3.7 The Executive will be provided (This is subject to change) with a home office allowance of $600.00 per month, ("the home office allowance") to cover all home office expenses including the purchase, leasing or maintenance of any equipment, technology or supplies reasonably necessary or incidental to the Executive's responsibilities to the Corporation.
3.8 The Executive shall be solely responsible for any and all income tax liability including without limitation taxable benefits from the receipt of the Auto Allowance, the acquisition of common shares of the Corporation upon exercise of stock option grants, and any other taxable benefits received by the Executive under his service with the Corporation. All payments made by the Corporation to the Executive or for the benefit of the Executive shall be less applicable withholdings and deductions.
3.9 The Corporation shall pay to the Executive an automobile allowance of Cdn$ 800.00 per month. All reasonable and related automobile expenses shall be reimbursed to the Executive or Associates by the Corporation upon the provision of itemized accounts and receipts.
ARTICLE 4
TERMINATION OF SERVICE
4.1 In the event the Executive resigns, at any time, for any reason, he shall provide a minimum of three (3) months advance written notice to the Corporation. The Executive will not be entitled
to receive any further compensation or benefits whatsoever, other than those which have accrued up to the Executive's last day of active service with the Corporation in the event of termination by the Executive. The Corporation may, at its discretion, waive in whole or in part such notice, without further payment to the Executive;
4.2 Notwithstanding the term of this Agreement as set forth in
Section 2.1 hereof, the Executive hereby agrees that this
Agreement and his service shall be immediately terminable by
the Corporation, without payment of any severance or other
compensation to him in lieu of prior notice of such
termination, in the event of the existence of Just Cause for
the termination or in the event of the Disability of the
Employee. For the purposes hereof:
(a) "Just Cause" means any act or conduct which at common law constitutes just cause and shall be deemed to include, conduct materially inconsistent with the fulfillment of the expressed or implied terms and conditions of the Executive's service; materially negligent performance by the Executive of his service duties; or a consistent failure to exercise the amount of care and skill required to perform his duties herein in a competent manner, except where such failure results from the occurrence of a Disability; and
(b) "Disability" shall mean the failure of the Executive
to perform his duties on a substantially
uninterrupted basis for three (3) consecutive months
or for a period of five (5) months out of any twelve
(12) month period where such failure results from
physical or mental illness.
4.3 In the event this Agreement and the Executive's service is terminated for Just Cause, the Corporation shall not be required to give the Executive any notice of such termination or payment or other compensation in lieu thereof. In such event, the Executive shall only be entitled to the payment of his remuneration and any other benefits, which have accrued to the date of termination. In such event, the Executive expressly confirms and agrees that he shall not be entitled to compensation for loss of contract, loss of benefits or other matters relating to his contract with the Corporation.
4.4 Notwithstanding any other provision of this Agreement, the Corporation shall remain liable to pay to the Executive his remuneration during the period of time that the Executive is unable to perform his service duties herein by reason of illness or mental or physical disability or incapacity. In the event that such illness or mental or physical disability or incapacity constitutes a Disability as defined in the preceding subsection 4.2(b), then the Corporation may, in its sole discretion, immediately terminate this Agreement and the Executive's service without any notice of termination or payment of any compensation for his loss of contract, loss of benefits, or other matters relating to his contract with the Corporation.
4.5 The service of the Executive will be terminated automatically in the event of the death of the Executive, and Associates will not be entitled to receive any further compensation or benefits pursuant to the terms of the service of the Executive, other than those which have accrued up to the date of death.
4.6 In addition to the circumstances as set out in this Article 4 and
Section 2.3 hereof, the Corporation may terminate the Executive's
service at any time, without prior notice, by paying to the Executive a
separation package in a lump sum which will be equal to twelve (12)
months of the Base Fee (the "Separation Package").
4.7 The Executive acknowledges that the Separation Package provided
pursuant to this Agreement supersedes and replaces any and all rights
to reasonable notice of termination that the Executive might otherwise
be entitled to at common law, and the Executive expressly waives any
rights to such notice. The Executive agrees that the Separation Package
is deemed conclusively to be reasonable notice of termination and
specifically includes all amounts owing for termination and/or
severance pay under any contract, statute, common law or otherwise.
4.8 Except as set out herein, the Executive will not be entitled to any
other Fee or benefits of service following his dismissal, including
without limitation, Auto Allowance, Discretionary Bonus, health
benefits, or the issuance or vesting of any stock options pursuant to
the Stock Option Plan.
4.9 In the event that the service of the Executive with the Corporation is
terminated in any manner, upon termination, the Executive agrees to
execute a comprehensive release to the effect that he acknowledges that
receipt of any monies pursuant to the terms of this Agreement is in
full satisfaction of any and all outstanding claims or entitlements
which the Executive may otherwise have against the Corporation and its
Affiliates, as well as the officers, directors, employees and agents of
the Corporation and its Affiliates.
4.10 The Executive understands and agrees that all benefits, including
long-term disability coverage will cease as of the date of termination
of the Executive's service, and the Corporation has no liability for
any damages caused by the cessation of such benefits coverage
regardless of the reason for termination or resignation. The
Corporation has no obligation to extend any benefit coverage past the
termination date.
4.11 All items of any kind or nature created or used by the Executive in the
course of service, or otherwise furnished by the Corporation, and all
equipment, credit cards, computers, cellular phones, data, books,
records, reports, files, notes, manuals, literature, software,
Confidential Information (as hereinafter defined) or any other
materials belonging to the Corporation or its customers, suppliers,
distributors, employees or consultants and in the Executive's
possession or control, shall be surrendered to the Corporation, in good
condition, promptly upon the Executive's termination of service,
irrespective of the time, manner or cause of termination.
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ARTICLE 5
CONFIDENTIAL INFORMATION
5.1 The Executive recognizes and understands that in performing the service duties and responsibilities as outlined in this agreement, the Corporation will provide the Executive with access to and the Executive will become knowledgeable with respect to a wide variety of nonpublic information relating to the Corporation, its business and that of its affiliates, its customers, suppliers, distributors, employees and consultants of an extremely confidential nature (the "Confidential Information").
5.2 During Associates' service with the Corporation, or at any time thereafter, it shall not divulge, communicate or use any Confidential Information which it may have access to or otherwise receive or obtain in relation to the affairs of the Corporation or any of its subsidiaries, related companies or affiliated entities. Breach of confidentiality will be considered cause for immediate dismissal. Associates' covenant of confidentiality will survive termination.
ARTICLE 6
NOTICE
6.1 Any notice required to be given hereunder shall be in writing and sufficiently made if sent by facsimile transmission, or delivered personally or mailed by prepaid registered mail to the parties at their respective addresses herein.
Associates:
James D. Beatty, Chairman
Trinity Capital Corporation
55 University Avenue, Suite 1010 Toronto, Ontario
M5J 2H7
(i) The Corporation:
Consorteum Inc,
351 Steelcase Rd, Unit 12 Markham
Ontario,
Any such notice shall be deemed to have been given on the date it is delivered if personally delivered or sent by facsimile transmission, or, if mailed, on the fifth business day following the mailing thereof. Either party may change its address for service by giving written notice hereunder.
ARTICLE 7
GENERAL PROVISIONS
7.1 All dollar amounts set forth in this Agreement refer to Canadian currency.
7.2 This Agreement shall be governed and construed in accordance with the laws of the Duchy of Luxembourg.
IN WITNESS WHEREOF the parties hereto have executed and delivered this Agreement as of the date first written above.
Per: /s/ Craig A. Fielding
----------------------------
Craig A. Fielding, CEO
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
)
)
) /s/ James D. Beatty
-------------------------
JAMES D. BEATTY, CHAIRMAN
JAMES D. BEATTY & ASSOCIATES INC.
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EXHIBIT 10.9
JOINT VENTURE AGREEMENT
THIS AGREEMENT made the 13th day of November,
2006.
BETWEEN:
1510848 ONTARIO INC., a corporation incorporated under the laws of the Province of Ontario
("1510848")
- and -
CONSORTEUM INC., a corporation incorporated under the laws of the Province of Ontario
("CONSORTIUM")
Background
Each of 1510848 and Consorteum have signed a Term Sheet dated August 21, 2006 (the "Term Sheet"), attached hereto as Schedule 'A", which sets out the terms and conditions governing the joint venture partnership to enable cheque cashing services for mobile coffee trucks in Canada
The Term Sheet contemplates that the parties will enter into a formal Joint Venture Agreement.
The parties would like to enter into this simplified Joint Venture Agreement as contemplated by the Term Sheet.
NOW THEREFORE, in consideration of the premises, the mutual covenants contained in this Joint Venture Agreement and other consideration (the receipt and sufficiency of which are acknowledged), the parties agree as follows:
ARTICLE 1
AGREEMENT TERMS
1.1 Agreement. Each party acknowledges and agrees that the terms, conditions, rights and obligations in respect of this Agreement (and any rights of renewal) shall be governed exclusively by this Agreement and the terms and conditions set out in the Term Sheet, which is attached as Schedule "A" hereto and the terms of which are incorporated into this Agreement.
1.2 Term. The initial term of this Agreement shall be four (4) years
and will be automatically renewed thereafter for two (2) year terms unless one
of the parties provides notice of termination of the partnership as provided in
Section 3.1 below.
1.3 Costs of the Program. The costs associated with the cheque-cashing program(the "Program") will be paid from total revenues.
1.4 Profits. All net profits on all programs will be split between 1510848 Inc and Consorteum on a 50/50 basis/
1.5 Responsibility.
Consorteum will be responsible for the following:
a) Software development;
b) Cheque cashing payment platform and settlement
process;
c) Payment processing and settlement with the drivers;
d) Manage partner company relationships;
e) POS payment processing discount rate;
f) Enable prepaid wireless and long distance to be sold
on the POS device;
g) Provide a prepaid MasterCard/Visa product;
h) Provide up to a $50,000 pilot float;
i) Future programs as determined; and
j) All client information will be jointly owned between
both parties and both parties must agree on any
release of information.
k) Consorteum will deliver a pilot ready solution by
January 15, 2007
1) Commercial solution by May 31, 2007
m) Full integrated handheld solution - TBD
1510848 Inc will be responsible for the following:
a) Point of Sale hardware;
b) Collection of cheques from drivers; and
c) Cashing of cheques and deposit into the float
account.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.11510848 Inc Warranties. 1510848 Inc represents and warrants to Consorteum as follows (acknowledging that Consorteum is relying on the representations and warranties of 1510848 Inc contained in this Agreement and any agreement, certificates or other document delivered by 1510848 Inc pursuant hereto in connection with this Agreement):
(a) 1510848 Inc has the capacity and authority and has taken all necessary action to enter into, execute and deliver this Agreement;
(b) this Agreement constitutes and the agreements and other instruments contemplated herein when executed will constitute valid and binding obligations of 1510848 Inc enforceable in accordance with the terms hereof and thereof subject, however, to limitations with respect to enforcement imposed in connection with laws affecting the rights of creditors generally including, without
limitation, applicable bankruptcy, insolvency, moratorium, reorganization or similar laws and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; and
(c) no consent, licence, approval, order or authorization of, or registration, filing or declaration with any governmental authority that has not been obtained or made by 1510848 Inc and no consent of any third party is required to be obtained by the 1510848 Inc in connection with the execution, delivery and performance by the 1510848 Inc of this Agreement or the consummation of the transactions contemplated by the Program.
2.2 Consorteum Warranties. Consorteum represents and warrants to 1510848 Inc as follows (acknowledging that 1510848 Inc is relying on the representations and warranties of Consorteum contained in this Agreement and any agreement, certificates or other document delivered by Consorteum pursuant hereto in connection with this Agreement):
(a) Consorteum has the capacity and authority and has taken all necessary action to enter into, execute and deliver this Agreement;
(b) this Agreement constitutes and the agreements and other instruments contemplated herein when executed will constitute valid and binding obligations of Consorteum enforceable in accordance with the terms hereof and thereof subject, however, to limitations with respect to enforcement imposed in connection with laws affecting the rights of creditors generally including, without limitation, applicable bankruptcy, insolvency, moratorium, reorganization or similar laws and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; and
(c) no consent, licence, approval, order or authorization of, or registration, filing or declaration with any governmental authority that has not been obtained or made by Consorteum and no consent of any third party is required to be obtained by the Consorteum in connection with the execution, delivery and performance by the Consorteum of this Agreement or the consummation of the transactions contemplated by the Program.
2.3 Survival of Representations and Warranties. The representations and warranties of 1510848 Inc and Consorteum contained in this Agreement and contained in any document or certificate given pursuant to this Agreement shall survive the Closing and shall continue for an indefinite period.
ARTICLE 3
GENERAL
3.1 Termination. Unless terminated earlier in accordance with the provisions hereof, the initial term (the "Initial Term") of the Joint Venture Agreement shall commence on the date
hereof and shall continue for a period of four (4) years. This Agreement shall automatically renew for successive two (2) year periods on the terms provided herein unless either party provides written notice to the other, at least 30 days prior to the expiry of the Initial Term or any successive term, that this Agreement will terminate at the end of the Initial or any such successive terms as the case may be.
Notwithstanding anything to the contrary herein contained, either party may terminate the Agreement:
(i) effective immediately upon notice to the other party in the event that the other party is in breach of any of the terms or conditions of this Agreement which breach is material and has not been cured in all material respects within 30 days after receipt of written notice which provides details of the breach; and
(ii) effective immediately upon notice to the other party in the event that the other party becomes insolvent or voluntarily or involuntarily bankrupt, or makes an assignment for the benefit of its creditors.
Following recovery of all of Consorteum's costs associated with the Program, 1510848 Inc. shall have the right to terminate this Agreement following a change in the management of Consorteum that negatively affects the business relationship between the parties. The Consorteum management team includes Quent Rickerby, Craig Fielding and Jim Henry. Also if Consorteum fails to reach deployment dates, as outline in responsibilities, 1510848 Inc shall have the right to terminate this agreement with 30 days notice.
3.2 Time. Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision.
3.3 Notices. All communications which may be or are required to be given by either party to the other herein, shall (in the absence of any specific provision to the contrary) be in writing and delivered or sent by prepaid registered mail or telecopier to the parties at their following respective addresses:
FOR: CONSORTEUM
Consorteum Inc.
42 Angus Meadow Drive
Markham, Ontario, L4K 3N7
Attn: Mr. Quent Rickerby
Facsmilie: 1-866-824-8854
FOR: 1510848 INC
101 Culham Street
Oakville, ON. L6H 1G3
Attn : Mr. AJ Jutronich
Facsimile: 905-337-2928
and if any such communication is sent by prepaid registered mail, it shall, subject to the following senence, be conclusively deemed to have been received on the third business day following the mailing thereof and, if delivered or telecopied, it shall be conclusively deemed to have been received at the time of delivery or transmission. Notwithstanding the foregoing provisions with respect to mailing, in the event that it may be reasonably anticipated that, due to any stike, lock-out or similar event involving an interruption in postal service, any payment or communication will not be received by the addressee by no later than the third (3rd) business day following the mailing thereof, then the mailing of any such payment or communication as aforesaid shall not be an effective means of sending the same but rather any payment or communication must then be sent by an alternative means of transportation which it may reasonably be anticipated will cause the payment or communication to be received reasonably expeditiously by the addressee. Either party may from time to time change its address herein before set forth by notice to the other of them in accordance with this section.
3.4 Governing Law. This Agreement and the rights and obligations and relations of the parties hereto shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein (but without giving consideration to any conflict of laws rules). The parties hereto agree that the Courts of Ontario shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement. Each party hereto does hereby attorn to the jurisdiction of the Courts of the Province of Ontario.
3.5 Headings. The headings in this Agreement and in the Schedules hereto are inserted solely for convenience of reference and do not affect the interpretation thereof or define, limit or construe the contents of any provision of this Agreement.
3.6 Assignment and Enurement. Neither this Agreement nor any rights or obligations hereunder shall be assignable by any party hereto without the prior written consent of each of the other parties, which consent may be unreasonably withheld. Subject thereto, this Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective successors (including any successor by reason of amalgamation of any party hereto) and permitted assigns.
3.7 Entire Agreement. With respect to the subject matter of this
Agreement, this Agreement (a) sets forth the entire agreement between the
parties hereto and any persons who have in the past or who are now representing
either of the parties hereto, (b) supersedes all prior understandings and
communications between the parties hereto or any of them, oral or written, and
(c) constitutes the entire agreement between the parties hereto Each party
hereto acknowledges and represents that this Agreement is entered into after
full investigation and that no party is relying upon any statement or
representation made by any other which is not embodied in this Agreement. Each
party hereto acknowledges that he or it shall have no right to rely upon any
amendment, promise, modification, statement or representation made or occurring
subsequent to the execution of this Agreement unless the same is in writing and
executed by each of the parties hereto_ This Agreement is not intended to settle
any obligations or disputes between the parties, and therefore all claims are
preserved.
3.8 Further Assurances. The parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each party hereto shall provide such further documents or instruments required by the other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions.
3.9 Waiver. The failure of any party to this Agreement to enforce at any time any of the provisions of this Agreement or any of its rights in respect thereto or to insist upon strict adherence to any term of this Agreement will not be considered to be a waiver of such provision, right or term or in any way to affect the validity of this Agreement or deprive the applicable party of the right thereafter to insist upon strict adherence to.that term or any other term of this Agreement. The exercise by any party to this Agreement of any of its rights provided by this Agreement will not preclude or prejudice such party from exercising any other right it may have by reason of this Agreement or otherwise, irrespective of any previous action or proceeding taken by it hereunder. Any waiver by any party hereto of the performance of any of the provisions of this Agreement will be effective only if in writing and signed by a duly authorized representative of such party.
3.10 Number. In this Agreement and unless the context otherwise requires, words importing the singular number only shall include the plural and vice versa, words importing the masculine and feminine genders and vice versa and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.
3.11 Counterparts. - This Agreement may be executed in any number of counterparts and all such counterparts shall for all purposes constitute one agreement, binding on the parties hereto, provided each party hereto has executed at least one counterpart, and each shall be deemed to be an original, notwithstanding that all parties are not signatory to the same counterpart.
DATED the 13th day of December, 2006.
1510848 ONTARIO INC.
Per: /s/ A. J. Jutronich
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A. J. Jutronich
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CONSORTEUM INC.
Per: /s/ Quent Rickerby
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Quent Rickerby
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EXHIBIT 10.10
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT made as of the 16 day of January, 2007 (the "EFFECTIVE DATE").
BETWEEN:
CONSORTEUM INC.
(Hereinafter referred to as the "PARTNER")
OF THE FIRST PART
- And -
FP FINANCIAL LTD.
(Hereinafter referred to as the "CORPORATION")
OF THE SECOND PART
WHEREAS the Corporation desires to obtain and apply the expertise of the Partner to the Corporation's business.
NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto) the parties make the agreements and acknowledgements hereinafter set forth:
1. CONSULTING SERVICES - The Corporation hereby retains the services of the Partner and the Partner hereby agrees to provide the consulting services which are described in Schedule "A" in accordance with the provisions set out in Schedule "A" (the "SERVICES"). The Corporation hereby agrees the Partner will be the Corporation's sole and exclusive financial products and services provider as set forth in Schedule "A". The Partner shall not be required to provide any services to the Corporation except as set forth in Schedule "A". The Partner will provide all Services to the Corporation at the Partner's net cost for the term of the contract.
2. TERM - This Agreement shall commence on the Effective Date with an initial term of four years and will be automatically renewed for successive two-year terms thereafter unless the parties elect not to renew his Agreement in accordance with Section 8.
3. NON-EXCLUSIVITY OF SERVICES - The Corporation acknowledges that the Partner may be retained as a consultant by other persons. The Partner may continue to provide services to other persons and may accept new retainers for services. The Partner may, in the performance of the Services, provide the services of one or more of its employees or representatives, and the identities of such employees or representatives shall be in the discretion of the Partner. The manner and the times at which the Partner performs the Services shall be within the discretion of the Partner.
4. COMPENSATION - The Corporation shall pay to the Partner an initial management fee of $5,000.00 payable upon execution of this Agreement. Thereafter, the Corporation shall pay to the Partner a monthly management fee of $5,000.00 on the 15th day of each month until the launch of the FP Financial benefits card (the "BENEFITS CARD"). Following the launch of the Benefits Card, the Partner will receive forty percent (40%) of all net profits (as that term is defined in Schedule "B" hereto) relating to the Services provided by the Partner, which are to be distributed on a monthly basis. The Partner shall be entitled to send an invoice to the Corporation for the Partner's fees for each month which shall be payable within 10 days after the date on which such invoice is received by the Corporation. The Corporation shall pay all applicable taxes such as GST upon the Consultant's fees.
5. SALES TARGETS - (see attached spreadsheet Appendix 'C') The parties have agreed upon sales targets for 2007, and as such have agreed that the attached spreadsheet will act as a minimum target for sales and usage goals.
6. REIMBURSEMENT - The Corporation is responsible for all expenses of the Corporation and the Services provided by the Partner, including, but not limited to, all sales, marketing, and training and distribution expenses. The Corporation agrees to reimburse the Partner for all reasonable and necessary expenses incurred in the performance of its services under this Agreement provided that the Partner shall substantiate its expenses by furnishing to the Corporation reasonable evidence relating to expenses for which the Partner seeks reimbursement.
7. COMPLIANCE WITH LAWS - The Partner shall in the performance of this Agreement comply with all laws, regulations and orders of the federal laws of Canada and of the Province of Ontario.
8. FULL DISCLOSURE OF ALL FINANCIAL INFORMATION - The Corporation agrees that the Partner, will have full access to all financial information, statements, audits, or any other documents relating to the financial affairs of the Corporation. The Corporation shall provide a copy of all audited and unaudited financial statements of the Corporation to the Partner within 10 business days of being provided to the officers or directors of the Corporation.
9. INDEPENDENT CONTRACTOR - The Partner shall provide the Services to the Corporation as an independent contractor and not as an employee of the Corporation and acknowledges that an employer-employee relationship is not created by this Agreement.
10. SUBCONTRACT - The Partner shall have the right, subject to the prior consent of the Corporation, to subcontract to a third party any element of any of the Services for which it is responsible under this Agreement.
11. TERMINATION -
(a) A party may terminate this Agreement effective immediately upon notice to the other party in the event that the other party is in breach of any of the terms or conditions of this Agreement which breach is material and has not been cured in all material respects within 30 days after receipt of written notice which provides details of the breach. The parties acknowledge and agree that a breach of this Agreement by the Partner is material if it detrimentally and materially affects the business of the Corporation taken as a whole.
(b) A party may terminate this Agreement effective immediately upon notice to the other party in the event that the other party becomes insolvent or voluntarily or involuntarily bankrupt, or makes an assignment for the benefit of its creditors.
(c) In the event of termination, by the Partner under the provisions of paragraph (a) or (b) above, or in the event of wrongful termination of this Agreement by the Corporation, the Corporation shall pay to the Partner, all amounts then owing under this Agreement.
12. LEGAL RISK MANAGEMENT - The following legal risk management provisions will apply for all purposes under and relating to this Agreement:
(a) the obligations of the Partner expressly stated in this Agreement are in lieu of all other representations, warranties or conditions expressed or implied including implied representations, warranties or conditions arising by statute or otherwise in law, or from a course of dealing or usage of trade;
(b) Neither party shall have any liability whatsoever for any special or consequential damages, loss of profits or other economic loss of the other party; this limitation shall not apply to any obligation by a party to pay any fees or other amounts expressly required under this Agreement.
13. TIME OF ESSENCE - Time of payment is of the essence.
14. REPRESENTATIONS AND WARRANTIES - Each party represents, warrants and covenants to the other party as follows:
(a) Each party is duly organized, validly existing and no action relating to insolvency, liquidation or suspension of payments has, to the knowledge of such party, been taken in respect of it.
(b) The execution, delivery and performance of this Agreement by each party has been duly authorized by all necessary action on the part of such party in accordance with such party's constating documents and does not and will not require the prior written consent of any trustee or holder of any indebtedness or other obligation of such party or any other party to any other agreement with such partY.
15. ENTIRE AGREEMENT - With respect to the subject matter of this Agreement, this Agreement: (a) sets forth the entire agreement between the parties hereto and any persons who have in the past or who are now representing either of the parties hereto, (b) supersedes all prior understandings and communications between the parties hereto, oral or written, and (c) constitutes the entire agreement between the parties hereto. Each party hereto acknowledges and represents that this Agreement is entered into after full investigation and that no party is relying upon any statement or representation made by any other which is not embodied in this Agreement. Each party hereto acknowledges that no liability whatsoever shall arise based in contract or tort, with respect to misrepresentations of any kind, including but not limited to, statements or representations negligently made by any persons who have in the past or who are now representing either of the parties hereto, in order to induce either party into entering into this agreement. Each party hereto acknowledges that he or it shall have no right to rely upon any amendment, promise, modification, statement or representation made or occurring subsequent to the execution of this agreement unless the same is in writing and executed by each of the parties hereto.
16. COUNTERPARTS - This Agreement may be executed in any number of counterparts and all such counterparts shall for all purposes constitute one agreement, binding on the parties hereto, provided each party hereto has executed at least one counterpart, and each shall be deemed to be an original, notwithstanding that all parties are not signatory to the same counterpart. This Agreement may be executed and delivered by either of the parties by transmitting to the other a copy of this Agreement (executed by such delivering Party) by telecopier or similar means of electronic communication, and delivery in that manner by a party shall be binding upon such party and deemed to be an original.
17. ASSIGNMENT AND ENUREMENT - This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.
18. SURVIVAL - Any terms or conditions of this Agreement by which obligations of either party are applicable or which extend or may extend beyond expiration or termination of this Agreement (whether expressly or by implication) shall survive and continue in full force and effect notwithstanding such termination. All obligations to pay fees under this Agreement shall survive expiration or termination of this Agreement.
19. GOVERNING LAW - This Agreement and the rights and obligations and relations of the parties hereto shall be governed by and construed in accordance with the laws of the Province
of Ontario and the federal laws of Canada applicable therein (but without giving effect to any conflict of laws rules). The parties hereto agree that the Courts of Ontario shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement. Each party hereto does hereby attorn to the jurisdiction of the Courts of the Province of Ontario.
20. PARTIAL INVALIDITY - In any provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law and be independent of every other provision of this Agreement.
21. FURTHER ASSURANCES - Each party hereto agrees from time to time, subsequent to the date hereof, to execute and deliver or cause to be executed and delivered to the other of them such instruments or further assurances as may, in the reasonable opinion of the other of them, be necessary or desirable to give effect to the provisions of this Agreement.
22. CONFIDENTIALITY -
(a) Each party hereby undertakes to keep confidential and shall cause all of employees, and agents to keep confidential, the confidential information of the other party disclosed hereunder, except as may be explicitly approved by the other party in writing, or as may be necessary for the proper discharge by the first party of its duties, responsibilities and obligations under this Agreement. The obligations of confidentiality and restricted use herein will not apply to the confidential information of the disclosing party that is already known to the receiving party, in the public domain, or enters the public domain through no breach of this Agreement by the receiving party.
(b) Notwithstanding the provisions of Section 21(a), a party shall be entitled to the extent necessary for the performance of its duties hereunder to allow access to the information covered by Section 21(a) above exclusively to such of its employees, and consultants who are directly concerned with the carrying out of such party's duties under this Agreement; provided that such party shall inform each of such persons of the confidential nature of such information and of such party's obligation of confidentiality with respect to it, and such party shall be responsible for any breach of such obligations by any of its employees, or consultants.
(c) If required to provide any information subject to this Section 21 pursuant to any subpoena or any other equivalent legal process, a party shall promptly notify the other party so that such other party can seek a protective order from the court having jurisdiction in such matter or otherwise seek to prevent or limit the scope of, or impose conditions upon, such disclosure.
(d) All public announcements of a material business nature related to the business of either party shall, if they are to be made, be subject to prior written notice to the other party.
23. EXECUTION AND DELIVERY - This Agreement has been duly executed and delivered by each party. This Agreement constitutes the legal, valid, binding and enforceable obligation of such party.
24. LANGUAGE - At the request of the parties, this agreement has been drafted in the English language. A la demande des parties, la presente convention a ete redigee en anglais.
25. SECTION HEADINGS - Section headings appearing in this Agreement are inserted for convenience or reference only, and shall in no way be construed to be interpretations of text.
26. AMENDMENTS - This Agreement may be modified or amended only by the duly authorized representatives of both parties by an instrument in writing.
27. NOTICE TO BE GIVEN - All invoices, demands or other communications required or permitted to be given under this Agreement to a party shall be in writing and delivered, posted by registered prepaid mail or sent by facsimile or e-mail addressed to the party for whom it is intended as follows:
THE CORPORATION:
310-112 Market Ave
Winnipeg, Manitoba
R3B OP4
Fax No.: (204) 987-2659
THE PARTNER:
42 Angus Meadow Drive
Markham
Ontario
L6C 1Z2
E-mail: qrickerby@rogers.com
Notices delivered shall be deemed given and received upon delivery, those sent by registered mail on the fifth (5th) day after posting, and those sent by facsimile or e-mail, on the day of transmission; provided that during any period of mail disruption, notice shall be delivered or sent by facsimile or e-mail. Either party may at any time and from time to time designate a substitute address for the purpose of this paragraph by giving written notice thereof to the other party at least ten (10) days in advance of the effective date of such designation.
26. OTHER RULES - Unless the context of this Agreement otherwise requires,
(a) the terms "hereof," "herein," "hereby" and derivative or similar words refer to the entire Agreement, including schedules and exhibits;
(b) any reference to a law, a regulation, an agreement or a document shall refer to any amendment, supplement or replacement of the same;
(c) any reference to a person shall, where appropriate, include any successors and permitted transferees and assigns of such persons; and
(d) The terms "include" or "including" means "including without limitation"." Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless business days are specified.
IN WITNESS WHEREOF the parties hereto have exec, ted this Agreement as of the date written above.
FP FINANCIAL LTD
By: /s/ signature
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I have authority to bind the Corporation
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CONSORTEUM INC.
By: /s/ signature
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I have authority to bind the Corporation
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SCHEDULE "A"
SERVICES TO BE PROVIDED BY THE PARTNER TO THE
CORPORATION
1. Consulting services for the purpose of providing management services, financial technology services, and alternative payment and provisioning initiatives (including benefits/payroll initiatives).
2. Initial services include:
(a) Contract negotiation assistance with financial technology and service providers;
(b) Project management assistance and ongoing support for deployment of services;
(c) Management of all technology partner relationships; and
(d) Technical support for services provided by the Partner to the Corporation.
3. Additional services to be provided will include
(a) Point-of-sale terminals;
(b) Payment processing services;
(c) Future micro-payment products: EMV and contract-less payments;
(d) Pre-paid card service: credit card, debit card, gift, wireless, long distance;
(e) Value-added services: loyalty, insurance services, AAA, medical, travel;
(f) New products and services added to the Corporation's product line; and
(g) Future programs as agreed upon by the parties.
The partner provides access to and the management of such resources, management of third party providers and management of deployment and implementation of all services described herein.
SCHEDULE "B"
Definition of 'NET PROFITS'
NET PROFITS -- Are defined as revenue less expenses, expenses being defined as "reasonable and mutually agreed upon by both parties in this agreement, including sales, marketing and administrative expenses, and given final approval by, and conforming to the agreed upon guidelines of the accountant assigned by the parties in this agreement"
SCHEDULE "B"
DEFINITION OF 'NET PROFITS'
NET PROFITS - Are defined as revenue less expenses, expenses being defined as "reasonable and mutually agreed upon by both parties in this agreement, including sales, marketing and administrative expenses, and given final approval by, and conforming to the agreed upon guidelines of the accountant assigned by the parties in this agreement"
In all cases, not less than 25% of all gross revenues will he associated to Consortcum Inc
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
CONSORTEUM HOLDINGS, INC.
We consent to the use of our report dated February 19, 2009, with respect to the balance sheets of Consorteum Inc. as of June 30, 2008 and 2007, and the related statements of operations and comprehensive loss, stockholders' deficit and cash flows for the years ended June 30, 2008 and 2007, and the period from April 3, 2006 (date of inception) through June 30, 2008, incorporated herein by reference.
/s/ SF Partnership, LLP CHARTERED ACCOUNTANTS TORONTO, CANADA June 19, 2009 |