-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IcyQe8yBQr1SgV6+JBK3qy8z/cAROzGZh/BtICe7t9koOF9ELLAoSuy5ISmiVK3R 8cIB0KcMIbE0EdTPCAnJLA== 0000897101-97-000588.txt : 19970520 0000897101-97-000588.hdr.sgml : 19970520 ACCESSION NUMBER: 0000897101-97-000588 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAC TECHNOLOGIES INC CENTRAL INDEX KEY: 0001019034 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 411761861 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21957 FILM NUMBER: 97608070 BUSINESS ADDRESS: STREET 1: 4444 WEST 76TH STREET STREET 2: SUITE 600 CITY: EDINA STATE: MN ZIP: 55435 BUSINESS PHONE: 6128357080 MAIL ADDRESS: STREET 1: 4444 WEST 76TH STREET STREET 2: SUITE 600 CITY: EDINA STATE: MN ZIP: 55435 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from_________to__________ Commission file number 333-16451 --------------------------------------- SAC TECHNOLOGIES, INC. (Exact name of small business Issuer as specified in its charter) MINNESOTA 41-1741861 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 4444 West 76th Street, Suite 600, Edina, MN 55435 (Address of principal executive offices) (612) 835-7080 (Issuer's telephone number) -------------------------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes___ No_X_ Shares of the Registrant's Common Stock, par value $.01 per share, outstanding as of May 9, 1997: 3,718,750. SAC TECHNOLOGIES, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1 - Financial Statements Balance sheets as of December 31, 1996 and March 31, 1997 3 Statements of operations for the three months ended March 31, 1996 and 1997, and January 7, 1993 (date of inception) through March 31, 1997 4 Statements of cash flows for the three months ended March 31, 1996 and 1997, and January 7, 1993 (date of inception) through March 31, 1997 5 Notes to interim financial statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 1 - Legal proceedings 13 Item 2 - Changes in securities 13 Item 3 - Defaults upon senior securities 13 Item 4 - Submission of matters to a vote of security holders 13 Item 5 - Other events 13 Item 6 - Exhibits and reports on Form 8-K 13 SAC Technologies, Inc. (a Corporation in the Development Stage) BALANCE SHEETS ASSETS
December 31, March 31, 1996 1997 ----------- ----------- (unaudited) CURRENT ASSETS Cash and cash equivalents $ 89,133 $ 5,652,288 Accounts receivable, net - 52,410 Inventories 106,229 133,030 Prepaid expenses 10,487 25,024 ----------- ----------- Total current assets 205,849 5,862,752 EQUIPMENT AND FURNITURE AND FIXTURES - AT COST, less accumulated depreciation 41,936 41,179 OTHER ASSETS 157,478 15,636 ----------- ----------- $ 405,263 $ 5,919,567 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Notes payable $ 330,000 $ - Accounts payable 219,254 89,675 Accrued liabilities 12,180 153,819 ----------- ----------- Total current liabilities 561,434 243,494 STOCKHOLDERS' EQUITY (DEFICIT) Common stock - authorized, 20,000,000 shares of $.01 par value; issued and outstanding, 2,508,750 and 3,718,750 shares 25,088 37,188 Additional contributed capital 900,005 7,293,596 Deficit accumulated during the development stage (969,264) (1,404,211) Unearned compensation (112,000) (250,500) ----------- ----------- (156,171) 5,676,073 ----------- ----------- $ 405,263 $ 5,919,567 =========== ===========
See accompanying notes to interim financial statements. SAC Technologies, Inc. (a Corporation in the Development Stage) STATEMENTS OF OPERATIONS (unaudited)
January 7, 1993 (date Three months of inception) ended March 31, through ------------------------------ March 31, 1996 1997 1997 ----------- ----------- ----------- Revenues Product sales $ - $ 23,715 $ 23,715 Reimbursed research and development - 12,000 250,306 Technical support and other services - 77,438 224,189 ----------- ----------- ----------- - 113,153 498,210 Costs and other expenses Cost of product sales - 72,005 72,005 Cost of technical support and other services - 31,373 108,201 Selling, general and administrative 33,502 362,486 858,973 Research and development 46,272 96,531 828,709 ----------- ----------- ----------- 79,774 562,395 1,867,888 ----------- ----------- ----------- Operating loss (79,774) (449,242) (1,369,678) Other income (expense) Interest and other income 18 18,192 22,480 Interest expense (758) (3,897) (39,504) ----------- ----------- ----------- (740) 14,295 (17,024) ----------- ----------- ----------- NET LOSS $ (80,514) $ (434,947) $(1,386,702) =========== =========== =========== Loss per common share $ .03 $ .15 $ .53 =========== =========== =========== Weighted average number of shares outstanding 2,462,917 2,982,975 2,629,323 =========== =========== =========== See accompanying notes to interim financial statements.
SAC Technologies, Inc. (a Corporation in the Development Stage) STATEMENTS OF CASH FLOWS (unaudited)
January 7, 1993 (date Three months of inception) ended March 31, through --------------------------- March 31, 1996 1997 1997 ----------- ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities Net loss $ (80,514) $ (434,947) $(1,386,702) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 375 4,200 7,935 Amortization Warrants - - 4,167 Unearned compensation - 8,400 21,400 Interest converted to common stock - - 1,841 Revenues realized due to offset of billings against a stock repurchase - - (170,174) Warrants issued for services - 27,500 27,500 Contribution of services - - 11,250 Change in assets and liabilities: Accounts receivable (6,700) (52,410) (52,410) Inventories 887 (26,801) (133,030) Prepaid expenses 3,987 (14,537) (25,024) Accounts payable (659) (129,579) 89,675 Accrued liabilities 2,528 152,599 164,779 ----------- ----------- ----------- 418 (30,628) (52,091) ----------- ----------- ----------- Net cash used in operating activities (80,096) (465,575) (1,438,793) Cash flows from investing activities Capital expenditures (2,588) (3,443) (49,114) Security deposits - (6,219) (11,102) Patents and trademarks - - (4,534) ----------- ----------- ----------- Net cash used for investing activities (2,588) (9,662) (64,750) Cash flows from financing activities Net borrowings (payments) under short-term borrowing agreements 95,000 (330,000) - Issuance of convertible bridge notes - - 175,000 Issuance of warrants - - 25,000 Sales of common stock - 6,368,392 7,241,892 Redemption of common stock - - (138,000) Offering costs (7,851) - (148,061) ----------- ----------- ----------- Net cash provided by financing activities 87,149 6,038,392 7,155,831 ----------- ----------- ----------- Net increase in cash and cash equivalents 4,465 5,563,155 5,652,288 Cash and cash equivalents at beginning of period 5,221 89,133 - ----------- ----------- ----------- Cash and cash equivalents at end of period $ 9,686 $ 5,652,288 $ 5,652,288 =========== =========== =========== See accompanying notes to interim financial statements.
SAC Technologies, Inc. (a Corporation in the Development Stage) NOTES TO INTERIM FINANCIAL STATEMENTS December 31, 1996 and March 31, 1996 and 1997 (Unaudited) 1. Unaudited Statements The accompanying unaudited interim financial statements have been prepared by SAC Technologies, Inc. (the "Company") in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. In the opinion of management, the accompanying unaudited interim financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the financial position and the results of its operations and cash flows for the periods presented. It is suggested that these interim financial statements be read in conjunction with the financial statements and the related notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996. 2. Loss Per Share Loss per common share is determined by dividing the net loss by the weighted average number of shares of common stock and common stock equivalents outstanding. Under Securities and Exchange Commission rules for initial public offerings, common stock equivalents for all periods presented include shares sold or options or warrants granted within twelve months prior to the effective date of the Company's initial public offering (February 14, 1997) at per share prices less than that of the initial public offering (assumed to be $6.00 per share) even if the impact is antidilutive. During February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share." This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB No. 15, "earnings per Share." SFAS 128 provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully dilutive earnings per share. SFAS is effective for financial statements for both interim and annual periods ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fourth quarter and year ending December 31, 1997. Assuming that SFAS 128 had been implemented, basic and dilutive loss per share would have been the same as that reported for the three months ended March 31, 1997 pursuant to the existing Securities and Exchange Commission rules discussed above. 3. Other Assets December 31, March 31, 1996 1997 -------- -------- Deferred offering costs $148,061 $ - Security deposits 4,883 11,102 Patents 4,534 4,534 -------- -------- $157,478 $ 15,636 ======== ======== Deferred offering costs consist of legal fees and related expenses in connection with the Company's initial public offering of common stock. Such amounts were reflected as an offset to the gross proceeds received from this offering (see note 5). 4. Accrued Liabilities December 31, March 31, 1996 1997 -------- -------- Compensation $ 1,000 $ 65,000 Employee moving allowance - 40,000 Professional fees - 40,000 Interest and other 11,180 8,819 -------- -------- $ 12,180 $153,819 ======== ======== 5. Stockholders' Equity During February 1997, the Company completed an initial public offering of 1,210,000 shares of its common stock at $6.00 per share resulting in net proceeds of $6,220,331 after deduction of offering expenses. The proceeds from the offering were used to repay all outstanding notes payable of $442,000, including $117,000 of notes payable to a shareholder/director. The following non-statutory options have been granted since December 31, 1996:
Date of Exercise Grant Number Price Vesting Expiration Issued to ----- ------ -------- ----------------------- ---------- --------- March 1997 130,000 $6.43 Ratably through March 2002 March 2004 New Chief Operating Officer April 1997 20,000 8.87 Ratably through April 2002 April 2004 New Vice President of Finance April 1997 30,000 8.87 Ratably through April 2002 April 2004 New Director of Product Marketing
The difference between the option exercise price and estimated fair value of common stock at the date of grant for the options to purchase 130,000 shares of common stock is $146,900 and has been reflected as unearned compensation in the Company's financial statements to be recognized as expense over the five year vesting term of the stock option agreement. An additional $78,500 will be reflected as unearned compensation in the Company's financial statements for the quarter ending June 30, 1997 for the options to purchase 50,000 shares of common stock. The $78,500 will also be recognized as expense over the five year vesting term of the related stock option agreements. 5. Stockholders' Equity (continued) In connection with the Company's initial public offering, the Agent for the offering received a five-year warrant to purchase 44,469 shares of common stock at an exercise price of $7.20 per share. The warrant is exercisable from February 1998 through February 2002. Effective March 1997, the Company issued warrants to a consultant to purchase 12,500 shares of common stock at $6.00 per share. The warrants are exercisable for seven years. 6. Related Party Transactions Included in accounts receivable are $20,340 of amounts due from Inter-Con/PC, Inc. During the three months ended March 30, 1997, $74,520 of revenues were recognized from transactions with Inter-Con/PC, Inc. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding the Company's relationship with Inter-Con/PC, Inc. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-QSB THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD- LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," ANTICIPATE," OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATION THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS INCLUDING, WITHOUT LIMITATION, THE RISK FACTORS SET FORTH IN THE "RISK FACTORS" SECTION OF THE COMPANY'S REGISTRATION STATEMENT ON FORM SB-2 (FILE NO. 333-16451) FILED PURSUANT TO RULE 424(b) DATED FEBRUARY 14, 1997 AND ANY FUTURE SUPPLEMENTS OR AMENDMENTS TO THIS FILING. OVERVIEW The Company was incorporated in 1993 to develop real-time, stand-alone systems capable of identifying individuals through automated fingerprint analysis for use in controlling access to resources, information and facilities. From inception through most of 1996 the Company's development efforts, which by agreement were to be funded by Jasper Consulting, Inc. ("Jasper"), were principally focused on the development of its fingerprint identification and analysis products. In the second half of 1996, the Company shifted its principal focus from development to marketing and sales of its products. During March 1997, the Company hired a Chief Operating Officer with a marketing background. During April 1997, the Company hired a Director of Product Marketing and a Vice President of Finance. The Company's focus in the near term is to market its products primarily in the following application areas: controlled access to appliances, information resources, computers, computer networks, as well as apartments, offices and other facilities. During the quarter ended March 31, 1997, the Company began shipping its SACMan products to customers (see below). The Company continues its development of SAC_Remote and SAC_ Encrypt and anticipates release of such products during mid 1997 and late 1997, respectively. The Company is considered a development stage enterprise for accounting purposes. Results achieved to date are not indicative of future results primarily because the Company has shifted its focus from the development of its products to the marketing and selling of its products. Broad commercial acceptance of the Company's products by customers and end users is critical to the Company's success and ability to generate revenues. The Company has limited sales to date and has a limited operating history upon which an evaluation of the Company and its prospects can be based. The Company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stage of development. The Company may continue to sustain operating losses for the foreseeable future. The Company had also completed development of a Set Top Box, which provides for basic personal computer functions and Internet access via a wireless keyboard and a conventional television set. However, the Company did not believe that the promotion and marketing of the Set Top Box was within its focus and, accordingly, conveyed the technology to Inter-Con/PC, Inc. ("Inter-Con") in exchange for an initial 50% ownership interest (48.6% as of March 31, 1997) in Inter-Con, a development stage Company. The Company has a technical support agreement with Inter-Con which provides for Inter-Con to pay technical support fees to the Company of up to $20,000 per month. The agreement expires in October 1999 and is subject to three successive one-year renewal options at the option of Inter-Con. By agreement, Jasper is obligated to pay a royalty to the Company for sales of certain products and the Company has the exclusive right to manufacture products sold by Jasper, subject to a predetermined pricing structure. However, the Company is not relying on these potential sources of revenue from Jasper or its interest in Inter-Con to significantly impact its results of operation. The Company anticipates adding approximately 14 employees through 1998. The Company anticipates ongoing research and development expenses during 1997 at a level greater than that experienced for the year ended December 31, 1996. The Company anticipates accounts receivable and inventory levels, and selling, general and administrative expenses will increase significantly in connection with its transition to marketing and selling its products. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 AS COMPARED TO MARCH 31, 1997: Revenues from SACMan product sales were $23,715 during the three months ended March 31, 1997. These revenues were primarily from single unit sales to original equipment manufacturers and others developing or intending to develop applications which may utilize the Company's products. Revenues from reimbursed research and development were $12,000 during the three months ended March 31, 1997 and relate to collection of previously unrecognized research and development billings to Jasper, as discussed below. Revenues from technical support and other services were $77,438 during the three months ended March 31, 1997, $48,000 of which relates to three months billings under the technical services agreement with Inter-Con (see "Overview"). Additionally, the Company realized $29,438 of revenues from development activities for Inter-Con and Jasper. As more fully discussed in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, the Company has recognized revenue from Jasper on the cash method, as collection of amounts billed is not assured. As of March 31, 1997 there were $394,481 of billings outstanding from Jasper which have not yet been recognized for financial reporting purposes. Jasper has agreed to allow the Company to offset future product royalties due to Jasper, if any, against these unrecognized receivables. In addition, the Company may also charge an additional $800 for each product manufactured by the Company for Jasper in order to accelerate payment of the outstanding balance. No assurance can be given that future sales subject to payment of royalty to Jasper or orders to manufacture products on behalf of Jasper will occur in amounts sufficient to offset the uncollected billings above, if at all. Cost of product sales exceeded revenues from product sales by $48,290 during the three months ended March 31, 1997, principally resulting from costs associated with establishing a production line, hiring production personnel and training production personnel on the operation of the production equipment. Selling, general and administrative expense increased $328,984 to $362,486 during the three months ended March 31, 1997, as compared to $33,502 for the same period in 1996. Of the increase, $97,309 was due to additional salaries and wages and incentive compensation for marketing and administrative personnel, $90,100 was due to recruiting and relocation costs for the new chief operating officer, $62,929 was due to increased professional fees and the remainder of the increase was principally due to certain marketing and travel activities. Research and development expense increased $50,259 to $96,531 during the three months ended March 31, 1997 as compared to $46,272 for 1996. The increase is attributable to increased development activity to commercialize certain of its products. LIQUIDITY AND CAPITAL RESOURCES Since January 7, 1993 (date of inception), the Company's capital needs have been principally met by a February 1997 initial public offering of 1,210,000 shares of common stock at $6.00 per share which resulted in net proceeds of $6,220,331 after deduction of offering expenses, a July 1996 $700,000 private placement of common stock and a May 1996 sale of $200,000 of convertible bridge notes. The bridge notes were converted to common stock during mid 1996. Net cash used in operating activities during the three months ended March 31, 1997 was $465,575 and was principally due to operating losses. Net cash used for investing activities during 1997 was $9,662. Net cash provided by financing activities during 1997 was $6,038,392 and was principally from the proceeds received from the initial public offering discussed above. The Company believes the funds raised from its recent initial public offering will be adequate to last through mid 1998. No assurance can be given that events and circumstances won't change and require additional capital at an earlier date. No assurance can be given that any additional financing, when needed, will be available on acceptable terms, if at all, and such financing may only be available on terms dilutive to existing stockholders. Working capital increased $5,974,843 during the three months ended March 31, 1997 to $5,619,258, as compared to a deficit of $355,585 as of December 31, 1996. This increase is principally due to the proceeds received from the initial public offering. Additionally, during the three months ended March 31, 1997, there was a $79,211 increase in inventories and accounts receivable, a $12,060 increase in accounts payable and accrued expenses, a $213,000 reduction in borrowings under a revolving note payable to a bank and the Company repaid a $117,000 note payable to an officer/director. The inventory and accounts receivable increases are attributable to sales of the Company's products and purchasing component parts for its SACMan and related products for future production. During March 1997, the Company entered into a five year employment agreement with its new Chief Operating Officer. The agreement provides for certain base salary and incentive payments. In the event of constructive termination, as defined, this individual is entitled to one year severance pay, as defined (two years in case of merger or acquisition). Additionally, the Company awarded this individual options to purchase 130,000 shares of common stock at $6.43 per share. The options vest five percent on June 30, 1997 and five percent each quarter thereafter, such that on March 31, 2002, one-hundred percent of such options are vested. The options expire during March 2004. During April 1997, the Company hired a vice president of finance and a director of sales and marketing. The Company issued these individuals options to purchase a total of 50,000 shares of common stock at $8.87 per share. The options vest five percent on July 17, 1997 and five percent each quarter thereafter, such that on April 17, 2002, one-hundred percent of such options are vested. The options expires April 2004. The difference between the option exercise price and estimated fair value of common stock at the date of grant for the options to purchase 130,000 shares of common stock is $146,900 and has been reflected as unearned compensation in the Company's financial statements, to be recognized as expense over the five year vesting term of the stock option agreement. An additional $78,500 will be reflected as unearned compensation in the Company's financial statements for the quarter ending June 30, 1997 for the options to purchase 50,000 shares of common stock. The $78,500 will also be recognized as expense over the five year vesting term of the related stock option agreements. (See note 5 of the notes to interim financial statements). RECENTLY ISSUED ACCOUNTING STANDARD See note 2 of notes to interim financial statements for information regarding SFAS 128 "Earnings per Share." PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Events None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (I) Those exhibits required to be furnished in response to this item, other than parts of Exhibit 10 and all of Exhibit 27, were furnished in connection with the Company's Registration Statement on Form SB-2, File No. 33-16451 as filed with the Securities Exchange Commission on November 20, 1996, and as amended by Amendment No. 1 thereto filed on January 10, 1997, Amendment No. 2 thereto filed February 7, 1997 and Amendment No. 3 thereto filed February 14, 1997 and as supplemented by supplement dated April 9, 1997, all of which are incorporated herein by reference. (ii) Exhibit 10 - Material Contracts Noncompetition and nondisclosure agreement (standard employee agreement) dated April 17, 1997 with Ronald Burgmeier, Vice President of Finance (iii) Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K None. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SAC Technologies, Inc. (the "Registrant") Date: May 15, 1997 /s/ Barry Wendt ---------------- Barry Wendt, Chief Executive Officer /s/ Gary Wendt ---------------- Gary Wendt, Chief Financial Officer EX-10 2 NONCOMPETITION AND NONDISCLOSURE AGREEMENT SAC TECHNOLOGIES, INC. NONCOMPETITION AND NONDISCLOSURE AGREEMENT (Standard Employee Agreement) AGREEMENT entered into as of the 17th day of April, 1997, by and between SAC TECHNOLOGIES, INC., a Minnesota corporation (the "Company"), and Ron Burgmeier (the "Employee"); WHEREAS, the Employee desires to be employed by the Company commencing on April 17, 1997; and WHEREAS, the Company will employ the Employee only under and pursuant to the terms of this Agreement and subsequent to the execution of this Agreement by the Employee; NOW, THEREFORE, in consideration of the premises, in consideration of the employment of the Employee by the Company, in consideration of the mutual promises of the parties hereto, and for other good, valuable and sufficient consideration, IT IS HEREBY AGREED: 1. EMPLOYMENT. The employment of the Employee pursuant to this Agreement shall commence on the date set forth above and shall be an employment at will. The Employee hereby accepts such employment and understands that, because the Employee's employment is at will, the Employee's employment may be terminated at any time without notice and without reason or cause. 2. RELATIONSHIP BETWEEN PARTIES. The relationship between the Company and the Employee shall be that of employer and employee, and the Employee shall be entitled to participate, to the extent deemed reasonable by the Board of Directors of the Company, in any plans, arrangements or distributions by the Company pertaining to, or in connection with, any pension, bonus, profit-sharing, medical reimbursement, group life insurance, medical and hospitalization insurance, disability insurance, vacation policy or other benefit made available to employees. All benefits will be made available in accordance with then existing Company policy and may be changed, altered or eliminated by the Company without the Employee's consent. Nothing contained herein shall be construed to give the Employee any interest in the assets of the Company. All of the records of any and all business ventures in which the Company from time to time may become involved, and all of the records and files pertaining to the Company's suppliers, strategic allies, licensers, licensees and customers are herein specifically acknowledged to be the property of the Company and not that of the Employee. 3. COMPENSATION; DUTIES. The Employee's duties and responsibilities, and initial compensation and benefits are described on Exhibit A attached hereto. 4. PROTECTION OF TRADE SECRETS AND RELATED MATTERS. a. Nondisclosure Agreement. The Employee shall not during the term of the Employee's employment or at any time thereafter divulge, furnish or make accessible to anyone or use in any way other than for the benefit of the Company in the ordinary course of business of the Company any trade secrets or confidential information of the Company or of any strategic ally, licensee, licenser, vendor, or any other person or entity with which or with whom the Company has or has had any business relationship which the Employee has acquired or has become acquainted with or will acquire or become acquainted with during the term of the Employee's employment, whether developed by the Employee or by others. Confidential information includes any information or compilation of information that derives independent economic value from not being generally known or readily ascertainable by proper means by other persons and which relates to any aspect of the Company's business, or the business of any other person or entity with whom the Company has or has had a business relationship as aforesaid, including, but not limited to, trade secret information relating to the Company's scientific technology, processes, systems and products; the Company's research and development; the Company's philosophies and strategies; the Company's vendor and customer lists; all information with respect to "Inventions" described in Subparagraph b. of this Paragraph 4; and any such similar confidential information of a strategic ally, vendor, licensor, licensee or other person or entity with whom or with which the Company has or has had a business relationship which has been divulged to the Company by such individuals or entities. All information disclosed to the Employee, or to which the Employee obtains access, whether originated by him or her or by others, during the period of this employment, which the Employee has reasonable basis to believe to be confidential information, or which is treated by the Company as being confidential information, shall be presumed to be confidential information. b. Patent and Related Matters. (1) Disclosure and Assignment. The Employee will promptly disclose in writing to the Company complete information concerning each and every invention, discovery, improvement, idea, device, design, apparatus, practice, process, method or product, whether patentable or not and including those which may be subject to copyright protection, made, developed, perfected, devised, conceived or first reduced to practice by the Employee, either solely or in collaboration with others, during the term of the Employee's employment, whether or not during regular working hours (hereinafter referred to as "Inventions"). The Employee, to the extent that the Employee has the legal right to do so, hereby acknowledges that any and all of said Inventions are the property of the Company and hereby assigns and agrees to assign to the Company any and all of the Employee's right, title and interest in and to any and all of said Inventions. (2) Limitation. It is further agreed and the Employee is hereby notified that the above agreement to assign Inventions to the Company does not apply to an Invention for which no equipment, supplies, facility or confidential information of the Company was used and which was developed entirely on the Employee's own time, and (i) which does not relate (aa) directly to the business of the Company or (bb) to the Company's actual or demonstrably anticipated research and development, or (ii) which does not result from any work performed by the Employee for the Company. (3) Assistance. Upon request and without further compensation therefor, but at no expense to the Employee, and whether during the term of this Agreement or thereafter, the Employee will do all lawful acts, including, but not limited to, the execution of documents and instruments and the giving of testimony, that in the opinion of the Company, its successors and assigns, may be necessary or desirable in obtaining, sustaining, reissuing, extending and enforcing United States and foreign copyrights and Letters Patent, including, but not limited to, design patents, on any and all of said Inventions, and for perfecting, affirming and recording the Company's complete ownership and title thereto, and to cooperate otherwise in all proceedings and matters relating thereto. (4) Records. The Employee will keep complete, accurate and authentic accounts, notes, data and records of all of said Inventions in the manner and form requested by the Company. Such accounts, notes, data and records shall be the property of the Company, and, upon its request, the Employee will promptly surrender the same to it. (5) Patents Filed After Termination of Employment. For purposes of this Agreement, any Invention relating to the business of the Company on which the Employee files a patent application within one (1) year after termination of employment with the Company shall be presumed to cover Inventions conceived by the Employee during the term of the Employee's employment, subject to proof to the contrary by good faith, written and duly corroborated records establishing that such Invention was conceived and made following termination of employment. c. Return of Confidential Information Upon Termination of Employment. Upon the termination of the Employee's employment, the Employee agrees to deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, accounts, calculations and copies thereof, which are the property of the Company or which relate in any way to the business, products, customers, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in the Employee's possession or under the Employee's control. d. Injunctive Relief. The parties to this Agreement agree that the confidential information of the Company is unique, the unauthorized use or disclosure of which would confer irreparable harm on the Company, which irreparable harm may not be compensable entirely with monetary damages. The parties agree that injunctive relief is an appropriate remedy for breach of the provisions of this Section. Such injunctive relief shall be in addition to and not in limitation of any monetary relief or other remedies or rights to which Company is or may be entitled to at law, in equity or under this Agreement. e. Continuing Obligations. It is intended that the obligation of the Employee to perform pursuant to the terms of this Paragraph 4 is unconditional and does not depend on the performance or nonperformance of any agreements, duties or obligations between the Company and the Employee not specifically contained in this Agreement. This Paragraph 4 shall survive the termination of this Agreement and this termination of the Employee's employment with the Company. 5. NON-COMPETE. In consideration of the Company's employment of the Employee as aforesaid, the Employee agrees that during the Employee's employment with the Company and for a period of two (2) years after the termination of the Employee's employment with the Company for any reason or for no reason, the Employee agrees that the Employee shall not, directly or indirectly, for himself or herself, or through, on behalf of, or in conjunction with any person, persons or entity: a. own any interest in, manage, operate, join, consult with, be employed by, or in any other manner participate in or be connected with, any person or entity which now is, or in the future intends to be, engaged in the research, development, marketing or selling of fingerprint identification systems; or b. attempt to induce any persons or entities to discontinue doing business with the Company; or solicit or induce any employee or consultant of the Company to discontinue his or her or its employment or consultancy with the Company, or compete with the Company for himself, herself, or itself, or for others. 6. REPRESENTATION. The Employee represents and warrants that the Employee has fully disclosed to the Company every contract, agreement or arrangement, written or oral, with respect to any other employment or consulting relationship, which would interfere or conflict with the performance of the Employee's duties or obligations under this Agreement, or which would involve the disclosure of the Company's confidential information. 7. MISCELLANEOUS. a. The rights and obligations of the Company hereunder may be transferred to its successors and assigns. The Employee may not, however, transfer or assign the Employee's rights or obligations contained in this Agreement. b. The Employee agrees that the provisions of this Agreement, particularly the provisions of Paragraphs 4 and 5, are reasonable. Notwithstanding the foregoing, however, to the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. Notwithstanding the foregoing, in the event that any provision of this Agreement is unenforceable because it is overbroad, then such provision shall be limited to the extent necessary to make it enforceable under applicable law and enforced as so limited. The Employee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. c. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota. d. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party. e. This Agreement supersedes any prior employment agreements between the parties and contains the entire Agreement of the parties with respect to employment and employment issues. There are no terms other than those contained herein and therein. No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto with the same formality attending execution of this Agreement. f. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by registered or certified mail to the Company at the Company's main headquarters, or to the Employee at the address indicated below. g. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors and assigns. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officers and the Employee has signed this Agreement as of the day and year first above written. /s/ Ronald Burgmeier SAC TECHNOLOGIES, INC. - -------------------------------- (Employee) 4620 Valley View Blvd., Suite A1 By /s/ Barry M. Wendt - -------------------------------- -------------------------------- Its Chief Executive Officer Las Vegas, NV 89103 ---------------------------- - -------------------------------- (Address) ###-##-#### - -------------------------------- (Social Security Number) EXHIBIT A TO SAC TECHNOLOGIES, INC. NONCOMPETITION AND NONDISCLOSURE AGREEMENT WITH Ron Burgmeier -------------- (Employee) 1. Duties; Responsibilities: Vice President of Finance ------------------------ ---------------------------------- ---------------------------------- ---------------------------------- 2. Starting Salary: $70,000 ------------------------ ---------------------------------- 3. Initial benefits: ------------------------ (a) Vacation: 3 weeks ----------------- ---------------------------------- $100,000 Term Life (b) Life Insurance: Insurance Policy ----------------- ---------------------------------- (c) Health Insurance: Standard Health Insurance ----------------- ---------------------------------- Option to Purchase 20,000 shares over 5 years. 4. Stock Options: Options vest quarterly ------------------------ ---------------------------------- EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,652,288 0 53,410 1,000 133,030 5,862,752 49,114 7,935 5,919,567 243,494 0 0 0 37,188 5,638,885 5,919,567 23,715 131,345 72,005 103,378 459,017 0 3,897 (434,947) 0 0 0 0 (434,947) 0 (.15) (.15)
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