-----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, GgZtGU7XtD11JBB7KAsr9tkyVuHUxsN5FbZuafj+71NciEB19bOfthFgOKX4z3fR jE+Eaoylf9F66Dw6+YJu/A== 0001005477-02-001373.txt : 20020415 0001005477-02-001373.hdr.sgml : 20020415 ACCESSION NUMBER: 0001005477-02-001373 CONFORMED SUBMISSION TYPE: 20-F/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EIGER TECHNOLOGY INC CENTRAL INDEX KEY: 0001040702 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 000000000 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 20-F/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29320 FILM NUMBER: 02587782 BUSINESS ADDRESS: STREET 1: 818 ERIE ST CITY: STRATFORD ONTARIO STATE: A6 ZIP: 00000 MAIL ADDRESS: STREET 1: 818 ERIE ST CITY: STRATFORD ONTARIO STATE: A6 FORMER COMPANY: FORMER CONFORMED NAME: ALEXA VENTURES INC DATE OF NAME CHANGE: 19970610 20-F/A 1 d02-36823.txt AMENDMENT TO FORM 20-F SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001 Commission File No. 0-29320 EIGER TECHNOLOGY, INC. (Exact name of Registrant as specified in its charter) Ontario, Canada (Jurisdiction of incorporation or organization) 330 Bay Street, Suite 602 Toronto, Ontario M5H 2S8 (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act: None Securities registered or to be registered pursuant to Section 12(g) of the Act: Common Shares, without par value (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock as of the close of the period covered by the annual report: 36,215,853 Commons Shares without par value. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 |_| Item 18 |X| The Index to Exhibits is found at Page 40 1 FORWARD LOOKING STATEMENTS Forward-Looking Information is Subject to Risk and Uncertainty. This report contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. When used in this report, the words "estimate," "project," "intend," "expect," "anticipate" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Such risks and uncertainties include, but are not limited to, those identified under the subheading "Risk Factors" in Item 3 hereof. GLOSSARY The following is a glossary of some terms that appear in the discussion of the business of the Company as contained in this Annual Report. "ADSL" ADSL is a variation of DSL that operates by way of two- way or duplex bandwidth and is devoted to the downstream transmission of data. "bandwidth" The maximum speed at which data can be transmitted between computers in a network. "bus" A device for transmitting data to and from the different components of a PC. "DSL" "Digital Subscriber Line" - a technology for bringing high- bandwidth information to homes and businesses over conventional copper telephone lines, permitting continuous transmission of motion video, audio and 3-D effects. "electronic ballasts" A component that starts a fluorescent lamp. "Ethernet" A LAN, the different nodes of which are connected by coaxial cable. This cable can be thin (which can connect two nodes up to a distance of about 1000 feet) or thick (which can connect two nodes up to a distance of about 3300 feet). The Ethernet standard has a provision to transmit data at a rate of 10 megabits per second. "kbps" "Kilobytes Per Second" - a measure of the rate at which a modem can transmit data. This is measured in bits per second (bps). "LAN" "Local Area Network" is a group of PC's, computers and peripheral devices that are linked together where each 2 device is located in close proximity to all the other devices. LANs typically consist of a number of PC's, shares printers, shared directories and files. "PCMCIA" "Personal Computer Memory Card International Association" - a PCMCIA card as an expansion bus designed for laptop computers, which allows modems and other devices to be connected to the PC. "PC" "Personal Computer". "peripherals" A peripheral is a device, which can be attached to a PC and is controlled by its processor. Examples include printers and modems. "VOIP" Voice Over Internet Protocol is a term used in the telecom world for a set of facilities for managing the delivery of voice information using the Internet. A major advantage of VOIP is that it avoids the tolls charged by ordinary telephone service. "Soft Switch Software based telecommunications equipment as apposed Technology" to dedicated analog circuit switched technology. "Analog Voice" The traditional telephone technology in which sound waves are converted into electrical impulses of varying strength or amplitude. "IP Packets" A form of data transmission in which data is broken into small binary packets that are transmitted independently and reassembled at the destination. This is in contrast with circuit-switching, traditionally used for voice telephony, in which the transmission occurs over a dedicated circuit. "Advertising Based Whereby a user listens to a 15 second advertisement Calling" prior to receiving a free long distance call. "Technology Platform" A chosen architecture for technology. "Toll Quality" The standard of quality on a traditional circuit switched network. "OEM" Original Equipment Manufacturer. 3 TABLE OF CONTENTS Page PART I Item 1. Identity of Directors, Senior Management and Advisors 5 Not Applicable Item 2. Offer Statistics and Expected Timetable -- Not Applicable 5 Item 3. Key Information 5 Item 4. Information on the Company 9 Item 5. Operating and Financial Review and Prospects 19 Item 6. Directors, Senior Management and Employees 22 Item 7. Major Shareholders and Related Party Transactions 25 Item 8. Financial Information 27 Item 9. The Offer and Listing 28 Item 10. Additional Information 29 Item 11. Quantitative and Qualitative Disclosure about Market Risk Not Applicable 37 Item 12. Description of Securities Other than Equity Securities Not Applicable 37 PART II Item 13. Defaults, Dividend Arrearages and Delinquencies Not Applicable 38 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds -- Not Applicable 38 Item 15. Reserved. 38 Item 16. Reserved. 38 PART III Item 17. Financial Statements -- Not Applicable 39 Item 18. Financial Statements 39 Item 19. Exhibits 39 SIGNATURES 4 PART I Item 1. Identity of Directors, Senior Management and Advisers Not Applicable. Item 2. Offer Statistics and Expected Timetable Not Applicable. Item 3. Key Information A. Selected financial data. The selected consolidated financial information set out below has been obtained from financial statements which reflect the Company's business operations. The financial statements have been prepared in accordance with accounting principles generally accepted in Canada. For reconciliation to US GAAP refer to Note 15 of the attached audited statements. The following table summarizes information pertaining to operations of the Company for the last five years ended September 30, 2001.
2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------- Working Capital 12,815,000 23,404,000 4,765,000 1,169,000 1,228,000 Revenue 30,070,000 57,068,000 8,433,000 4,796,000 3,734,000 Income (loss) from Operation: (20,327,000) (693,000) (742,000) 508,000 138,000 Income (loss) from Continuing operation: (20,327,000) (629,000) (1,287,000) 508,000 138,000 Net Income (loss): (20,327,000) (693,000) (742,000) 508,000 138,000 Earnings (loss) per Share: (0.61) (0.03) (0.05) .01 .01 Total Assets: 30,721,000 57,145,000 17,018,000 9,221,000 5,385,000 Net Assets: 21,127,000 38,348,000 8,337,000 3,064,000 2,556,000 Long Term debt: 1,014,000 1,488,000 1,111,000 1,477,000 1,326,000 Total Liabilities: 10,265,000 15,501,000 6,727,000 5,689,000 2,760,000 Share Capital: 42,001,000 38,895,000 8,191,000 2,176,000 2,176,000 Retained Earnings (Deficit): (21,091,000) (764,000) (71,000) 671,000 163,000 Number of Shares: 36,215,853 33,945,858 20,457,429 13,815,001 13,815,001
- 5 - Currency Exchange Information The Company's accounts are maintained in Canadian dollars. In this Registration Statement, all dollar amounts are expressed in Canadian dollars except where otherwise indicated. The following table sets forth, for the periods indicated, the high and low rates of exchange of Canadian dollars into United States dollars, the average of such exchange rates on the last day of each month during the periods, and the end of period rates. Such rates are shown as, or are derived from, the reciprocals of the noon buying rates in New York City for cable transfers payable in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York. - -------------------------------------------------------------------------------- Fiscal Year Ended September 30 - -------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 High 0.6669 0.6903 0.6913 0.7300 0.7513 Low 0.6330 0.6686 0.6362 0.6330 0.7145 Average 0.6513 0.6793 0.6637 0.6840 0.7300 Period 0.6330 0.6636 0.6813 0.6540 0.7234 On March 4, 2002 the exchange rate of Canadian dollars into United States dollars, based upon the noon buying rate in New York City for cable transfers payable in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York City, was Cdn. $1.00 equals U.S. $0.6289. The following table sets forth, for the most recent previous six months, the high and low rates of exchange of Canadian dollars into United States dollars. The latest practicable date for March was noon buying rate on March 20, 2002. MAR FEB JAN DEC NOV OCT 2002 2002 2002 2001 2001 2001 High 0.6332 0.6295 0.6290 0.6396 0.6363 0.6416 Low 0.6268 0.6206 0.6201 0.6254 0.6241 0.6287 B. Capitalization and indebtedness. Not Applicable. - 6 - C. Reasons for the offer and use of proceeds. Not Applicable. D. Risk factors. The Company's operations are subject to a variety of risks and uncertainties. The following factors are considered a list of known material risk factors associated with the Company's operations. Foreign Operations The Company derives 58% of its revenue from international sales outside of North America and 34% from the United States. International sales are subject to certain risks, including unexpected changes in legal and regulatory requirements and policy changes affecting the Company's markets; changes in tariffs, currency exchange rates and other barriers; political and economic instability; difficulties in accounts receivable collection; difficulties in managing distributors and representatives; difficulties in protecting the Company's intellectual property; and potentially adverse tax consequences. See also "Foreign Exchange Rate" below. Management of the Growth of the Company The implementation of the Company's business strategy could result in a period of rapid growth. This growth could place a strain on the Company's managerial, operational and financial resources and information systems. Future operating results will depend on the ability of senior management to manage rapidly changing business conditions, and to implement and improve the Company's technical, administrative, financial control and reporting systems. No assurance can be given that the Company will succeed in these efforts. The failure to effectively manage and improve these systems could increase the Company's costs and adversely affect its ability to sell and deliver its products and services. Competition The Company faces competition in each of its markets and has competitors, many of which are larger and have greater financial resources than the Company. There can be no assurance that the Company will be able to continue to compete successfully in its markets. Because the Company competes, in part, on the technical advantages and cost of its products, significant technical advances by competitors or the achievement by such competitors of improved operating effectiveness that enable them to reduce prices could reduce the Company's competitive advantage in these products and thereby adversely affect the Company's business and financial results. New Products and Technological Change The market for the Company's products is characterized by rapidly changing technology, evolving industry standards and frequent new product introductions which may be comparable or superior to the Company's products. The Company's success will depend upon market acceptance of its existing products and its ability to enhance its existing products and to introduce new products and features to meet changing customer requirements. There can be no assurance that the Company will be successful in - 7 - identifying, manufacturing and marketing new products or enhancing its existing products on a timely and cost-effective basis or that such new products will achieve market acceptance. In addition, there can be no assurance that products or technologies developed by others will not render the Company's products or technologies non-competitive or obsolete. New Market Development There can be no assurance that the Company will be able to identify, develop and export to countries or geographic areas in which it is not presently selling. Intellectual Property The Company has not obtained patent protection for its proprietary technology or products and has not registered any trademarks or copyrights. As the Company has not protected its intellectual property, its business may be adversely affected by competitors copying or otherwise exploiting the features of the Company's technology, products, information or services. Dependence on Key Personnel and Skilled Employees The success of the Company is dependent, in large part, on certain key personnel and on the ability to motivate, retain and attract highly skilled persons. The employment market for skilled technology employees is extremely tight. There can be no assurance that the Company will be able to attract and retain employees with the necessary technical and technological skills given the highly competitive state of the employment market for these individuals. The loss of such services or the failure by the Company to continue to attract and retain other key personnel may have a material adverse effect on the Company, including its ability to develop new products, grow earnings and accelerate revenue growth. Risks of International Business Currently two of the Company's production facilities are based in South Korea while the other facility is located in Canada. As well, the Company distributes, markets and sells its products in numerous foreign countries. Accordingly, the Company is subject to the risks associated with producing and selling in international markets. These risks include the imposition of tariff and non-tariff barriers to trade requirements for export licenses and local business regulation, including the imposition of taxes. Relationship with Production Employees Although the employees of the Company are not unionized, there can be no assurance that this will not occur. Management of the Company is of the opinion that the unionization of its operations would have a detrimental effect on the Company's ability to remain competitive. Uncertain Operating Results The Company's operating results have varied and may continue to vary significantly depending on such factors as the timing of new product announcements, increases in the cost of raw materials and changes in pricing policies of the Company and its competitors. The market price of the Shares may be highly volatile in response to such fluctuations. - 8 - Foreign Exchange Rate Material appreciation of the Canadian dollar against the US dollar would reduce the profitability of the Company's US sales. The Company is also exposed to exchange rate fluctuations in the US and Canadian dollar against the Korean Won. Political Climate in South Korea Political instability in South Korea may negatively affect the Company's ability to manufacture its products on a timely basis, resulting in product shortages. Management is unaware of any present evidence of political instability of this magnitude in South Korea. Item 4. Information on the Company A. History and development of the company. Eiger Technology, Inc. (the "Company") was incorporated under the name "Alexa Ventures Inc." under the Company Act (British Columbia) on September 8, 1986. The memorandum of the Company was amended on November 26, 1999 to change the name of the Company from Alexa Ventures Inc. to "Eiger Technology, Inc." In November 2000 the Company changed its jurisdiction of incorporation from British Columbia to Ontario. The Company's registered head office and executive office is located at 330 Bay Street, Suite 602, Toronto, Ontario M5H 2S8. The telephone number of the registered office is (416) 216-8659. The Company entered the energy efficient lighting business in 1991. The Company's two main operating subsidiaries in this business are K-Tronik and ADH. ADH operates from the Company's 55,000 square foot manufacturing and engineering facility located in Stratford, Ontario. ADH manufactures and distributes transformer housings, switch housings and electronic data racks, as well as fluorescent light fixtures and reflectors. On April 1, 1998, the Company purchased 53% of the common stock of K-Tronik for $275,000, plus options entitling the holders to acquire up to 250,000 common shares of the Company. In addition to its US distribution capabilities, K-Tronik also possesses a South Korean manufacturing facility through its subsidiary, K-Tronik Asia, Inc. The Company's management does not intend to divest the Company of its interest in K-Tronik until the public and capital markets improve. Also, on September 15, 2000, the Company sold its 60% interest in Lexatec VR Systems, Inc. During fiscal 1998, the Company consolidated two of its South Korean subsidiaries, Energy Products, Inc. (a manufacturer of electronic ballasts) and its South Korean energy saving products sales arm, which were eventually combined under the name "K-Tronik Asia, Inc." - 9 - The Company entered the computer peripheral business following a series of transactions in September 1999 which resulted in the Company owning a 64% interest in Eiger Labs Group, Inc. ("Eiger Labs") and its Eiger Labs' wholly owned manufacturing subsidiary, Eiger Net, Inc. ("Eiger Net"). Based in Newark, California (Silicon Valley), Eiger Labs distributes a wide variety of PC card and desktop peripherals including storage, multimedia, connectivity and communications products such as MP3 players and ADSL modems. Based in South Korea, Eiger Net is a manufacturer of fax modems, Ethernet and PCMCIA products and MP3 players for both the South Korean and United States markets. Eiger Net manufactures electronic communication products for a number of OEMs and PC companies as well as for Eiger Labs. The Company caused its subsidiary Alexa (USA) Inc. to incorporate Eiger Labs as a 100% owned California subsidiary on August 18, 1999. On August 18, 2000 Eiger Labs acquired all of the assets of Eiger Labs, Inc. for consideration of US $500,000. Also on August 18, 1999, each of Seung Bae Lim, Yong Kook Kim, Tae Jin Lee and Rae Myung Cha (collectively, the "Eiger Net Vendors") subscribed for shares which, when issued, left the Company (through Alexa (USA) Inc.) holding 64% of Eiger Labs. The Company and the Eiger Net Vendors also entered into a shareholders' agreement with the Eiger Net Vendors providing, among other things, for the appointment of directors and officers, the nature of the business to be carried out by Eiger Labs, allocation of profits, dividends and distributions, and restrictions on sales of the parties' shares in Eiger Labs. The acquisition of the Company's 64% interest in Eiger Net was effected through payment of a combination of cash and stock with a combined aggregate value of US $1,500,000. US $1,000,000 cash consideration was paid and 500,000 common shares of the Company were issued. The Company further agreed to issue common shares to the Eiger Net Vendors in equal amounts, with performance earn out consideration contingent upon achieving the criteria tabled below for the combined results of Eiger Labs and Eiger Net: COMMON SHARES COMBINED GROSS COMBINED NET OF THE COMPANY YEAR SALES INCOME TO BE ISSUED - -------------------------------------------------------------------------------- 1999 US $27 million US $1.0 million 600,000 2000 US $70 million US $2.5 million 750,000 2001 US $80 million US $3.5 million 750,000 2002 US $90 million US $4.0 million 900,000 2003 US $110 million US $4.5 million 1,000,000 Under the formula in the agreements, if any of the above targets is not met in any of the above noted years, any gross sales or net income earned or achieved in that year is added to the targets of subsequent years. The common shares of the Company to be issued in - 10 - respect of those targets are to be considered cumulative and can be achieved in any subsequent year in respect of the terms of the agreement. 600,000 common shares of the Company were issued on February 29, 2000 pursuant to this agreement. The Company's common shares were trading at $8.00 Cdn. on that date. No shares will be issued during 2002 for the fiscal 2001 year, and therefore may be issued during subsequent years provided combined gross sales and net income targets are achieved on a cumulative basis. The Company moved its Eiger Net manufacturing facility to a 35,000 sq. ft. facility in Seoul, South Korea. This facility includes equipment capable of manufacturing high quality, technologically complex printed circuit board assemblies and electronic technical products. Eiger Net also received QS 9000 certification during the 2000 fiscal year. Eiger Labs and Eiger Net have experienced a significant decrease in sales and earnings as a result of the global recession and a downturn in the computer peripheral sector. Eiger has acquired 100% of the shares of Onlinetel through a Share Exchange agreement under the provisions of Chapter 92a of the NGCL (Nevada General Corporate Law). Upon receipt of the share exchange documents, Eiger has issued 1,800,000 shares on a pro rata basis for 100% of the shares of Onlinetel. As consideration for the acquisition of Onlinetel, Eiger will issue a maximum of 9,000,000 common shares which shall be comprised of 1,800,000 shares to the former shareholders of Onlinetel and up to an additional 7,200,000 shares pursuant to an earn out provision totalling 1,800,000 shares per year, over a period of four years, with extension provisions for an additional period of four years, based on Onlinetel's ability to meet the following operating benchmarks: ----------------------------------------------------------- 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Revenue $19,083,488 $37,347,766 $50,849,180 $59,867,184 - -------------------------------------------------------------------------------- Net Income $ 2,442,015 $ 6,212,532 $ 9,352,747 $13,848,741 - -------------------------------------------------------------------------------- Under the formula in the agreements, if any of the above targets is not met in any of the above noted years, any gross sales or net income earned or achieved in that year is added the targets of subsequent years. The common shares of the company to be issued in respect of those targets are to be considered cumulative and can be achieved in any subsequent year in respect of the terms of the agreement. Recent Financings 2000 Special Warrant Financing - 11 - Pursuant to an underwriting agreement dated March 7, 2000 (the "Underwriting Agreement") between the Company and Dundee Securities Corporation, Canaccord Capital Corporation and BMO Nesbitt Burns Inc. (collectively, the "Underwriters"), the Company issued by way of private placement a total of 4,400,000 special warrants ("Special Warrants") at a purchase price of $5.00 per Special Warrant. Each Special Warrant entitles the holder to acquire 1.1 common shares in the capital of the Company without payment of additional consideration on or before 5:00pm (Toronto time) on the earlier of (a) the third business day after a final receipt for the Company's prospectus is issued by the last of the Securities Commissions of Ontario, British Columbia and Alberta, and (b) March 7, 2001 (the "Expiry Time"). The 1.1 common share conversion factor includes a 10% penalty regarding the Company not clearing a final prospectus within 120 days of March 7, 2000. The Company did not receive clearance of a final prospectus and as such the 10% penalty was included. In consideration for services performed in relation to this offering, the Underwriters received a commission equal to 7% of the aggregate purchase price for the Special Warrants. As well, the Underwriters also received that number of special compensation options (the "Special Compensation Options") equal to 7% of the number of Common Shares issuable on the exchange of the Special Warrants, or a total of 308,000 Special Compensation Options. Each Special Compensation Option is non-transferable and entitles the Underwriters to receive one compensation option (the "Compensation Option") without additional payment. Each Compensation Option is non-transferable and entitles the Underwriters to acquire one Common Share at any time prior to 5:00 p.m. (Toronto time) on March 7, 2002, at a price of $5.00 per Common Share. December 1999 Private Placement On December 13, 1999, the Company sold by way of private placement 700,000 units at a price of $1.128 per unit. Each unit consists of one common share of the Company and one warrant exercisable for one common share of the Company at a price of $1.41 per common share. The warrants have been exercised. Other Recent Developments Eiger takes K-Tronik Public Eiger Technology announced on December 6, 2001 it signed an agreement to take its subsidiary, K-Tronik International Corp. public in the first quarter of 2002 by way of a reverse acquisition with LMC Capital Corp., a US reporting issuer. Eiger Technology owns 53% of K-Tronik through its US subsidiary ETIFF Holdings, Inc. K-Tronik's strategy moving forward is to increase market share through acquiring ESCO's (General Contractors that specialize in conducting energy efficiency audits of multiple tenant commercial buildings and retrofitting them with high efficiency lighting ballasts) and various other component manufacturers that supply the Electronic Ballast Industry. Integrating both the manufacturing and distribution of ballasts will increase gross margin substantially and will create operating efficiencies overall. - 12 - Eiger is to receive 7,571,428 shares of LMC for its 53% stake in K-Tronik. Eiger will also receive 7,071,000 shares at an average price of US $0.58 per share in part because of its agreement to convert debt owed to it by K-Tronik totaling US $4,071,000. The total consideration that Eiger is to receive in the transaction is 14,642,428 shares, which represents 64% of the shares of LMC. Mr. Robert Kim, President and founder of K-Tronik will receive a total of 6,714,286 shares of K-Tronik for his 47% stake in the company. Eiger takes ADH Public Eiger Technology, Inc. announced on December 20, 2001 it signed an agreement to take its subsidiary ADH Custom Metal Fabricators Inc., public, by way of a reverse acquisition with Newlook Capital Corp., a CDNX listed company (Ticker Symbol - NLK). Eiger Technology currently owns 100% of ADH through its subsidiary Vision Unlimited Equipment Inc. The announcement is in keeping with Eiger's strategy to monetize its technology holdings by way of outright sale or public offering. This strategy will raise additional working capital for Eiger without further dilution to shareholders and provide management a more defined focus on its technology assets. The terms of the transaction are as follows: In exchange for the issuance to it of 4,800,000 common shares of Newlook at a deemed price of $0.50 per common share (for a total purchase price of $2,400,000), Eiger agrees to sell to Newlook all of the issued and outstanding shares of Vision Unlimited Equipment Inc. (the "Vision Shares") and through the sale of the Vision Shares, all of the issued and outstanding shares of Vision's subsidiary, ADH Custom Metal Fabricators Inc. The resignation of the previous board of directors and officers of Newlook and the subsequent appointment of Mr. Gerry Racicot, Mr. Keith Attoe and Mr. John Ramsbottom to the board of directors of Newlook took place in accordance with the Vision/ADH agreement These persons were also appointed as the officers of Newlook. ADH has recently hired Mr. John Ramsbottom as President. Mr. Ramsbottom brings 23 years of management, manufacturing and engineering strength from Westinghouse, Emerson Electric and most recently Taylor Pipe Supports. He has held the titles of Facilities and Development Manager, Engineering Manager, and Director of Manufacturing and Engineering. Closing of the Vision/ADH Agreement is conditional as follows: The purchase by Eiger Technology, Inc. of 880,000 of the now outstanding 1,000,000 escrow shares for $88,000; The consolidation of the existing 1,000,000 common shares and the 1,000,000 escrowed common shares of Newlook on a 1 for 2 basis; and - 13 - Newlook's regulatory bodies and minority shareholder approval of the transaction. A finder's fee of 240,000 post-consolidated common shares is payable by Newlook in connection with the transaction. B. Business overview. The Company has four principal subsidiaries, namely, Onlinetel Corp., K-Tronik International Corporation, Eiger Net Inc. and ADH Custom Metal Fabricators, Inc. ONLINETEL CORP. Onlinetel Corp. is a next generation telecommunications software and services company, which uses soft-switch technology to deliver Voice over Internet Protocol (VoIP) communication services to individuals, businesses and carriers. Utilizing soft switch technology, Onlinetel converts analog voice conversation to digital I.P. packets and routes voice calls, phone-to-phone, over the Internet from any wireless or landline connection. VoIP and the integration of voice and data networks is a competitive threat to providers of traditional telecom services because of the substantial increase in communication cost efficiencies of both running voice and data over a single integrated infrastructure and the ability to bypass per minute usage rates. Using its Intelliswitch application, Onlinetel pioneered and developed a new media for advertisers, enabling individuals and businesses to benefit from free long distance calling in exchange for listening to a 15 second paid advertisement, and enabling sponsors to benefit from one-to-one advertisements to callers. The first commercial application of this advertisement based calling network was launched in the Greater Toronto Area (GTA) 905 area code. In 2001, Onlinetel experienced dramatic growth in advertising revenue as its user base in the GTA 905 area code grew to over 200,000 households, or just under 20% of the market. Additionally, Onlinetel is currently processing over 15 million minutes of traffic per month in this market. In 2002, Onlinetel anticipates launching advertising based calling networks in additional area codes nationally in order to significantly expand its user base and advertising revenue. As well, by leveraging its technology platform and scalable network infrastructure, Onlinetel has identified several potentially lucrative product offerings targeted to its growing user base; lowest cost 10-10 based international calling, residential and corporate flat rate subscription plans for unlimited calling between major centers nationally, flat rate unlimited internet access services, and customized prepaid phone card plans. Onlinetel delivers toll-quality communications at the lowest long distance rates available. With reduced investment cost burdens, Onlinetel's soft-switch technology reliably scales to service millions of callers. Onlinetel's continued expansion of its own national network along with seamless and virtual connections worldwide with leading carriers will extend Onlinetel's reach to the global community in 2002 and beyond. - 14 - K-TRONIK INTERNATIONAL CORPORATION K-Tronik is a North American manufacturer of energy efficient electronic ballasts for fluorescent lighting. K-Tronik supplies ballasts worldwide to OEMs such as Lightolier, Fontana, Edison, Visioneering, Peerless and others. With a broad product line, low cost production and one of the lowest product defect rates in the industry (less than 0.04%), K-Tronik has developed a solid reputation in the rapidly growing energy technology industry. K-Tronik had sales of CDN$10,107,000 in 2001, and has experienced 119% annual revenue growth over the past two years. This rapid growth is due in part to the United States Department of Energy's mandate that all fluorescent lamp ballasts produced after April 1, 2005 be energy efficient electronic ballasts, as opposed to less efficient electromagnetic ballasts. Currently, electronic ballasts represent 40% of the annual US $1 Billion North American ballast market. The strong brand recognition and market share built by K-Tronik over the past three years has also contributed significantly to its growth and has positioned it for sales momentum in the future. Based on this growth, Eiger announced its plans to take K-Tronik public in the first quarter of 2002 by way of a reverse acquisition with LMC Capital Corp., a US reporting issuer. Eiger will own 51.25% of K-Tronik upon its public listing. The decision to take K- Tronik public was also based on maximizing Eiger's return on shareholder equity that is currently not reflected in Eiger's share price. For example, utilizing a conservative price to sales ratio of two times, based on historical numbers, K-Tronik as a stand-alone public company represents value of CDN $0.48 per Eiger share. The public listing of K-Tronik will potentially enable Eiger to realize this value and raise working capital without dilution to Shareholders through the sale of its K-Tronik shares to the public. EIGER NET INC. Eiger Net is involved in the R&D, engineering and manufacturing of multimedia and data communication cards such as 56K and DSL modem cards, Home PNA cards, LAN cards, MP3 modules and other Internet access devices for OEM consumer electronics companies worldwide. In 2000 Eiger Net invested in new manufacturing capacity and obtained a QS 9000 certification in order to able to compete for large volume OEM consumer electronics contracts. As a result of those initiatives, Eiger experienced dramatic revenue growth in 2000 and was cash flow positive. However, the global economic downturn that began last year resulted in a difficult year for Eiger Net in 2001. The cost of new investments coupled with much lower production volumes than anticipated substantially increased unit production costs thereby eliminating operating margins. - 15 - With continued growth of the Internet and the convergence of voice and data networks, demand for multimedia and data communication cards that enable consumer electronic devices to access those networks will grow. As such, Eiger Net is positioned in growth areas of the computer components industry. However, until there is evidence of an overall economic recovery, Eiger Net will experience weaker than average operating results. ADH Custom Metal Fabricators Inc. ADH Custom Metal Fabricators is a fully integrated custom sheet metal manufacturer that specializes in low volume custom enclosures and cabinets. Products are custom engineered using the latest CAD technology and CNC manufacturing equipment. Products are all built to NEMA specifications and can range in size from a mailbox to a small house. In addition to its focus on enclosures and cabinetry, ADH contract manufactures for nationwide distribution of data and relay racks, custom control enclosures, fluorescent light fixtures and store display fixtures. ADH fabricates using a wide variety of metals and finishes including mild steels, aluminum, and stainless steel. ADH is located in Stratford, Ontario, in a 55,000 square foot manufacturing facility on 35 acres of land that is wholly owned by Eiger. ADH went through significant restructuring in 2001 and, in November 2001 hired John Ramsbottom as President. ADH identified certain high growth segments in the electrical cabinetry and enclosure market that will fuel internal growth, and also developed an acquisition strategy to consolidate a highly fragmented North American manufacturing industry. As part of this consolidation strategy, Eiger announced in December 2001 that it is taking ADH public by way of reverse acquisition of CDNX listed Newlook Capital Corp. in order to utilize capital markets to facilitate its acquisition strategy. Description of Principal Products The Onlinetel subsidiary serves the retail and business market segments of the long distance industry in Ontario with the rest of Canada being expanded into within the next year. Currently, Onlinetel offers fee based long distance service, advertising based long distance service, and ISP services. The K-Tronik subsidiary serves the retro fit and new building electronic fluorescent light ballast market in the USA, Canada, South America and Korea. The K-Tronik energy efficient electronic ballast is manufactured in its factory in Seoul, Korea with research and development facilities in both Seoul and New Jersey. The Company serves the major peripheral market segments of the computing industry, being the communications, connectivity and storage segments, and has designed its product line around providing solutions to customers in each of these market segments. The Company manufactures computer peripherals such as PCMCIA card data/fax modems, desktop PC modems, data storage and networking devices and data storage cards for use in digital cameras (collectively, the "Peripheral Products"). - 16 - The ADH subsidiary serves the custom metal fabrication market in Southwestern Ontario. ADH's principal products include data and relay racks, custom control enclosures, fluorescent light fixtures and store display fixtures. Sales and Revenue Analysis Sales Fiscal 2001 Fiscal 2000 Fiscal 1999 - -------------------------------------------------------------------------------- Computer Peripherals $17,428,000 $47,513,000 $2,467,000 Electronic Ballasts $10,107,000 $ 6,718,000 $2,950,000 Fabricated Products $ 2,301,000 $ 2,839,000 $2,933,000 VoIP Communication Services $ 234,000 Nil Nil The computer peripheral products are distributed internationally, while the electronic ballasts are distributed in the United States and the fabricated products are distributed primarily in Canada (with a small amount, less than 3%, being distributed in the U.S). The component parts for various circuit boards used in the computer peripheral and lighting ballast products are sourced from various large electronic suppliers and are available from many sources. The Company's main business is not seasonal. Marketing and Distribution Channels The Company's Onlinetel subsidiary markets its fee based long distance service through offering the initial service free and allowing word of mouth to increase the subscription base. When a critical mass is accomplished, the service is turned over to a fee based service with a 15% retention rate. The advertising based long distance service is marketed by an internal sales staff that market Onlinetel services directly to advertising agencies and large advertisers. The K-Tronik subsidiary has an extensive distribution network that includes a head office sales force coupled with regional sales representatives. This has allowed K-Tronik to sell to a broad base of customers in the construction and retrofit sector of the U.S.A. Key to the Eiger Net's distribution network is its ability to market its product line effectively to major OEM's in Korea such as Samsung and LG. ADH's distribution is performed by an internal sales force directly to manufacturers in Southwestern Ontario. C. Organizational structure. The following is a list of each material subsidiary of the Company and the jurisdiction of incorporation and the direct or indirect percentage ownership by the Company of each subsidiary: - 17 - Percentage of Voting Jurisdiction of Securities Owned of Name of Subsidiary Organization Controlled - -------------------------------------------------------------------------------- Onlinetel Corp. Ontario 100% Eiger Net, Inc. ("Eiger Net")(1) South Korea 58% K-Tronik International Corp. Nevada 53% ("K-Tronik") ADH Custom Metal Fabricators Inc. Ontario 100% "ADH") Eiger Labs Group, Inc. ("Eiger Labs") California 64% - -------------------------------------------------------------------------------- (1) Formerly Point Multimedia Systems Inc. - name changed February 20, 2000. The following is an organizational chart showing the Company's material subsidiaries: ---------------------- Eiger Technology, Inc. ---------------------- | | | ----------------------------------------------------------------------------------- | | | | | | | | | 100% | 58% | | 100% - ------------------ ---------------------- ------------------- ----------------- Onlinetel Corp. Eiger Net, Inc. K-Tronik ADH Custom Metal (an Ontario corp.) (a South Korean corp.) International Corp. Fabricators, Inc. (a Nevada corp.) (an Ontario corp.) - ------------------ ---------------------- ------------------- -----------------
D. Property, plants and equipment. The Company's industrial facility is 55,000 square feet of mixed office, manufacturing and engineering space located in an industrial designated area in Stratford, Ontario. The factory capacity currently utilizes 40% with presently one work shift. This facility is situated on 31.8 acres of land of which 26 acres is available for development or resale, although there are no current plans for either. The land and property are subject to a first mortgage of $1,213,000, with a balance of $745,000 at September 30, 2001. - 18 - The factory is a light gauge fabrication facility that produces energy efficient fluorescent lighting fixtures and reflectors, electronic data racks and oversize custom enclosures for the electrical industry. The Company recently moved its Eiger Net manufacturing facility to a 35,000 sq. ft. facility in Seoul, South Korea. This facility includes equipment capable of manufacturing high quality, technologically complex printed circuit board assemblies and electronic technical products. A second facility of approximately the same size is also located in Seoul for the manufacturing of electronic ballasts. Both facilities are leased. Item 5. Operating and Financial Review and Prospects A. Operating results. The Company generated sales of $30.1 million in fiscal 2001 compared to 57.1 million in fiscal 2000, the decrease mainly due to a reduction in Eiger Net Inc.'s sales of $30.1 million reflecting a weakness in the global economy particularly in the computer peripheral sector. During the fiscal 2001 year, the Company wrote off goodwill, investments, development and other costs amounting to $16,366,000 and acquired a 100% interest in Onlinetel, Inc., a Kitchener/Waterloo based Voice over Internet Protocol (VoIP) long distance and ISP services company. Revenue from ongoing operations were as follows: ($'000's) 2001 2000 Increase (Decrease) Onlinetel 234 -- 234 Eiger 17,428 47,513 (30,085) K-Tronik 10,107 6,718 3,389 ADH 2,301 2,837 (536) ------ ------ ------- 30,070 57,068 (26,998) ====== ====== ======= Management of the Company have written off $ 16,366,000 of goodwill, investments, long term loans receivable, impairment in value of inventory and deferred product development costs during fiscal 2001 reflecting the downturn in the worldwide computer peripheral business and global economic recession. Management is of the opinion that the economic recession will continue for the remainder of 2002. Management also believes that cost savings businesses such as energy saving electronic ballasts (K-Tronik) and VoIP (Onlinetel) should benefit from a cost conscious marketplace. K-Tronik sales increased due to a broadening of product offerings and continued increase in brand recognition. ADH sales decreased due to the reduction in outsourcing needed by - 19 - its primary customers in Southwestern Ontario. The percent decrease in gross margin at K-Tronik from 33% to 22% reflects K-Tronik continuing to add lower margin volume business to previous niche markets of specialty electronic ballasts. The decrease in sales by Eiger Labs and Eiger Net subsidiaries reflect the downturn in the overall computer peripheral OEM manufacturing sector. Expenses increased approximately 30% during the year ended September 30, 2001 to $9,947,000 from $7,076,000 for the year ended September 30, 2000. Operations and administrative expenses increased by approximately 63% (2001: $ 7,769,000; 2000: $ 5,514,000). These operations and administrative expenses consisted principally of salaries and benefits and the operating costs of the Company's Eiger Labs and Eiger Net and K-Tronik Group sales, R&D Design Engineering and Manufacturing facility, as well as, strengthening infrastructure at head office to ensure compliance with regulatory and governance matters. While interest on long-term debt also remained steady (September 30, 2001: $98,000; September 30, 2000: $92,000), other interest and bank charges decreased (September 30, 2001: $480,000; September 30, 2000: $552,000). This was due to a reduction in long-term debt at Eiger Group of Companies. Amortization of goodwill and other assets increased from $871,000 in fiscal 2000 to $1,032,000 in fiscal 2001. In the Company's view, at no time during any of the last five fiscal years have inflation or changing prices had a material impact on the Company's sales, earnings or losses from operations or net income. The Company has not been materially impacted by foreign currency fluctuations and net investments are not hedged. The Company's operations have not been materially affected by any governmental policies or factors. B. Liquidity and capital resources. At September 30, 2001, the Company's cash position has decreased to $5,993,000 from $13,814,000 at the end of September 30, 2000 and its working capital decreased by $10,589,000 to $12,815,000 at September 30, 2001, $ 6,580,000 principally as a result of investment commitments funded during the year. The Company increased its share capital from $38,895,000 at September 30, 2000 to $42,001,000 at September 30, 2001, through the issuance of 2,269,995 shares at an average price of $ 1.37. The decrease in the Company's accounts receivable to $ 8,759,000 at September 30, 2001 from $12,039,000 at September 30, 2000 is due to the decrease in the volume of business at Eiger Net, off set partially by an increase in business at K-Tronik. - 20 - Inventory decreased to $6,545,000 September 30, 2001 from $10,878,000 as a result in the decrease in the volume of business at Eiger Net offset by K-Tronik. The Company does not foresee any demands, commitments, events or uncertainties that will result in a significant change in its liquidity in the near term. The Company does not have any material commitments for capital expenditures as of the end of the last fiscal period or at any subsequent interim period except for capital funding of Onlinetel, Corp amounting to $1,500,000 over the next eighteen months. The Company does not foresee any material change in the mix between equity, debt or off balance sheet financing arrangements. The Company expects to arrange financing prior to any future acquisitions. C. Research and development, patents and licenses, etc. Research and development expenses were $20,000 ($987,000: 2000; $725,000: 1999) for the year ended September 30, 2001 as a result of a cost cutting program in place until the economy improves. Research and development is important to the Company's success and the ability of the Company to maintain a competitive advantage over its competitors. The Company employs trained professionals to perform its research and development work, most of whom have work experience in the field of computer technology and product development for established corporations such as Samsung and Garnet Systems. Approximately 8% of the Company's 162 employees are engaged in research and development activities. Management believes that the Company has a competitive advantage over many of its competitors in terms of product development and market rollout as it currently conducts all of its own research and development, which management believes many of its competitors do not. This enables management to monitor both the timely development of products with a view to current technology and market demand as well as controlling the cost-effectiveness of research and development activities, thereby reducing overhead costs and the risk of timing delays that could lead to introduction of obsolete products into the rapidly changing marketplace in which the Company operates. D. Trend information. The Company is currently affected by several industry trends. One trend is that of the expansion of Voice over Internet Protocol (VoIP) usage in North America. VoIP is expected to be one of the highest growth markets over the next few years. For example, revenue from VoIP services is expected to be $32 Billion in 2005, up from $1.8 Billion in 2000 according to iLocus. Frost & Sullivan also commented that the compounded annual growth rate of VoIP services from 1999-2006 will be 182%. The impetus for this growth is the competitive threat that VoIP poses to providers of traditional telecom services. - 21 - Essentially, VoIP substantially increases communication cost efficiencies by running voice and data over a single integrated infrastructure and bypassing traditional per minute telco usage rates. Through its wholly owned subsidiary, Onlinetel Corp., Eiger is positioned to dominate the Canadian VoIP services market. Through its advertising based calling network, Onlinetel currently has a user base of over 250,000 households in the Greater Toronto Area (GTA) 905 area code and processes over 15 million minutes of traffic per month in this market. In 2002, Onlinetel anticipates launching additional advertising based calling networks nationally in order to significantly expand its user base and introducing several potentially lucrative VoIP products to its growing user base: lowest cost 10-10 based international calling, residential and corporate flat rate subscription plans for unlimited calling between major centers nationally, flat rate unlimited internet access services, and customized prepaid phone card plans. The second less significant trend is that of cyclical oversupply in the PC industry which affects Eiger's core operating revenue. Currently, the majority of Eiger's revenue is derived from the OEM manufacture of conventional modem and modem related computer products such as 56K modems and modem/LAN cards. The current cyclical trend of oversupply in the PC industry, coupled with reduced consumer spending and overall economic activity, has the effect of a reduction in orders for components. This trend began in the first fiscal quarter of 2000 and, although this oversupply of inventory has been worked down somewhat by major computer companies, it is likely to persist for at least the next two quarters, resulting in a reduction of orders for Eiger's manufacturing facility in Korea. Item 6. Directors, Senior Management and Employees A. Directors and senior management. The following is a list of the current directors and senior officers of the Company, their municipalities of residence, their current position with the Company and their principal occupations: Gerry A. Racicot Norwich ON President, C.E.O., and Director Director since August 21, 1992. Mr. Racicot has a long career in administration, management and self-employment. The majority of these years were spent as an Investment Account Executive at a major Canadian brokerage house (Burns Fry), import/export wholesale distribution and retail business (Red Mountain Holdings Inc. - Stedmans). Keith Attoe Toronto ON C.F.O. and Director Director since February 23, 1996. Mr. Attoe is a Chartered Accountant who practiced in the City of Toronto for 11 years prior to joining the Company. His experience includes corporate financing, project - 22 - financing, portfolio management, US/CDA tax planning, investment strategy and treasury management. Mr. Attoe's clients have included CN, Deloitte Touche and Mondev group of companies, a major real estate developer in Montreal. Sidney S. Harkema Orillia ON Director Director since August 22, 1992. Mr. Harkema founded and built one of Canada's largest privately owned transport and express companies (Harkema Trucking Group). He served as President and Chairman of the Board for 27 years. He has since sold the entire trucking operation, cartage equipment and all 18 terminals located throughout the country and has devoted his time to public service organizations (principally as Chairman of the Huntley St. Group of Ministries). Robert Hoegler Richmond BC Director Director since February 23, 1996. Mr. Hoegler is an independent businessman who operates a public relations firm in the junior industrial sector group of companies under his own name. He is also a director of MCA Equities Ltd, a private management company. There are no arrangements or understandings between any of the officers or directors of the Company as to their election or employment, nor are there any family relationships. B. Compensation. For the year ended September 30, 2001 Gerry Racicot was compensated $213,000 for his role as President of the Company. For the same period Keith Attoe received $153,000 for his role as C.F.O. of the Company. A total of 25 persons served as members of the administrative, supervisory or management bodies of the subsidiaries of the Company during fiscal 2001. The aggregate remuneration paid to such persons was approximately $2.4 million. The following it a list of stock options granted during the last full financial year to members of the Company's executive. Name Quantity Exercise price Expiry - -------------------------------------------------------------------------------- Gerry Racicot 375,000 $.75 April 20, 2006 Keith Attoe 375,000 $.75 April 20, 2006 Sidney Harkema 75,000 $.75 April 20, 2006 Rob Hoegler 75,000 $.75 April 20, 2006 None of the above options were exercised during the Company's most recently completed financial year. - 23 - There are no other arrangements under which directors or members of the Company's administrative, supervisory or management bodies were compensated by the Company during the most recently completed financial year for their services. No plan exists, and no amount has been set aside or accrued by the Company or any of its subsidiaries, to provide pension, retirement or similar benefits for directors or officers of the Company, or any of its subsidiaries. C. Board practices. The directors of the Company are elected annually and hold office until the next annual general meeting of the Company's shareholders or until their successors in office are duly elected or appointed. All of the Company's directors were elected at the Company's most recent annual general meeting, which took place on April 12, 2001. Under the Company Act (Ontario) the Company is required to hold an annual general meeting no more than 15 months after its most recent annual general meeting. There are no service contracts with the Company or any of it subsidiaries for the directors providing benefits upon termination of their service. The Company does not have an executive committee. The audit committee is comprised of Keith Attoe, Sidney Harkema and Robert Hoegler. The committee operates within the guidelines of the Toronto Stock Exchange. D. Employees. The Company and its subsidiaries employ approximately 162 employees worldwide. The following is a breakdown of persons employed by main category of activity and geographic location for the last full financial year: Administrative/ Sales/ Location Clerical Marketing Manufacturing R&D - -------------------------------------------------------------------------------- Canada 12 8 27 United States 3 4 2 Korea 10 14 69 13 The most significant change in the number of employees was the result of the addition of Onlinetel. The acquisition added 20 people mostly concentrated in the areas of sales, clerical and technical. The Company and its subsidiaries have no involvement with labour unions. The Company and its subsidiaries do not employ a significant number of temporary employees. - 24 - E. Share ownership.
Number of Voting Shares Beneficially Owned or Number of Controlled Directly or Options to Name and Address Occupation Director Since Indirectly Purchase Held - ------------------------------------------------------------------------------------------------------------------- Gerry A. Racicot President, Chief Executive August 21, 1,556,530 925,000 Norwich, ON Officer and Director 1992 Keith Attoe Chief Financial Officer and February 23, 3,200 625,000 Toronto, ON Director of the Company 1996 Sidney S. Harkema Director of the Company; August 21, 1,509,100 125,000 Orillia, ON retired 1992 Robert Hoegler Director of the Company; February 23, Nil 125,000 Richmond, BC director of MCA Equities Ltd., 1996 (a private management company) - -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------- Number of Shares Beneficially Owned or Percentage of Total Controlled Directly or Shares Name Indirectly Issued(1) - -------------------------------------------------------------------------------------- Directors and Officers as a Group 3,068,830 8.5% - --------------------------------------------------------------------------------------
(1) Based on a total of 36,215,853 Common shares issued and outstanding as at February 28, 2002. At the discretion of the Board, the stock option plan may be exercised in consideration of services rendered and to be rendered by key personnel and consultants to the Company, its subsidiaries and affiliates. Item 7. Major Shareholders and Related Party Transactions A. Major shareholders. To the Company's knowledge no person holds five percent or more of the Company's common shares. There has been no significant change in percentage ownership held by any major shareholder. All common shareholders have identical voting rights. - 25 - There is no trading market for the common shares in the United States. The following table indicates the approximate number of record holders of common shares with U.S. addresses and portion and percentage of common shares so held in the U.S. The calculation is based on the total issued and outstanding as stated in item 6.E. % of Common Number of U.S. Number of Common shares held in Holders shares held in the U.S. the U.S. ================================================================================ 44 2,671,296 7.37% The computation of the number and percentage of common shares held in the United States is based upon the number of common shares held by record holders with United States addresses and by trusts, estates or accounts with United States addresses as disclosed to the Company following inquiry to all record holders known to the trustees, executors, guardians, custodians or the fiduciaries holding common shares for one or more trusts, estates, or accounts. United States residents may beneficially own common shares held of record by non-United States residents. A substantial number of common shares are held in "Street Name" by trustees, executors, guardians, custodians or other fiduciaries, including depositories, brokerage firms and financial institutions. Management is unable to determine the total number of individual shareholders that this represents. To the Company's knowledge, the Company is not directly or indirectly owned or controlled by any other corporation(s) or by any foreign government. The Management does not anticipate any change in the control of the Company. B. Related party transactions. No director, executive officer nor any of their associates or affiliates has or has had an interest in material transactions of the Company. All transactions within the corporate group are in the normal course of business, are transacted at fair market value, are recorded at the carrying value at the time and are eliminated upon consolidation. C. Interests of experts and counsel. Not Applicable - 26 - Item 8. Financial Information A. Consolidated Statements and Other Financial Information. The document contains consolidated financial statements, audited by an independent auditor and accompanied by an audit report, comprised of: (a) balance sheet; (b) income statement; (c) statement showing changes in equity (d) cash flow statement; (e) related notes and schedules required by the comprehensive body of accounting standards pursuant to which the financial statements are prepared; and (f) a note analyzing the changes in each caption of shareholders' equity presented in the balance sheet. The document includes comparative financial statements that cover the latest three financial years, audited in accordance with a comprehensive body of auditing standards. Export Sales Total Sales Volume Export Sales Export Sales as % of Total Sales - -------------------------------------------------------------------------------- $30,070,000 $27,535,000 91.57% Legal Proceedings There are no material pending legal proceedings to which the Company is a party or of which any of its subsidiaries or properties are subject. Management is not aware of any material proceedings in which any director, any member of senior management, or any of the Company's affiliates are a party adverse to, or have a material interest adverse to the Company or its subsidiaries. Dividend Policy The Company has not paid dividends on the common shares in any of its last five fiscal years. The directors of the Company will determine if and when dividends should be declared and paid in the future based on the Company's financial position at the relevant time. All of the common shares of the Company are entitled to an equal share in any dividends declared and paid. - 27 - B. Significant Changes. There have been no significant changes since the date of the annual financial statements included in this document. Item 9. The Offer and Listing. A. Offer and listing details. Information regarding the price history of the stock. Calendar Period High (Cdn$) Low (Cdn$) Volume Month Ended February, 2002 0.46 0.38 845,700 January, 2002 0.56 0.42 1,776,900 December, 2001 0.63 0.43 3,260,400 November, 2001 0.60 0.40 1,752,500 October, 2001 0.49 0.38 1,274,400 Quarter Ended September 30, 2001 0.80 0.40 3,190,200 June 30, 2001 1.05 0.39 4,339,300 March 31, 2001 0.63 0.38 4,223,000 December 31, 2000 3.70 2.05 4,081,600 September 30, 2000 5.00 2.65 4,779,800 June 30, 2000 7.40 2.85 6,224,000 March 31, 2000 10.30 3.00 17,147,400 December 31, 1999 4.25 0.90 9,030,700 Year Ended September 30, 1999 1.73 0.22 10,682,000 September 30, 1998 0.95 0.25 1,506,157 September 30, 1997 0.90 0.40 1,318,300 Prior to October 11, 1996, all trades were cleared through the VSE and subsequent to that date all trades were cleared on the TSE. B. Plan of distribution. Not Applicable. C. Markets. The common shares of the Company were listed for trading on the Toronto Stock Exchange (the "TSE") on October 11, 1996 and previous to this, on the Vancouver Stock Exchange (the "VSE") on April 3, 1991 under the symbol "AXA". - 28 - The common shares were listed on the NASD OTC Electronic Bulletin Board on October 8, 1997 and trade under the symbol "ETIFF". D. Selling shareholders. Not Applicable. F. Dilution. Not Applicable. F. Expenses of the issue. Not Applicable. Item 10. Additional Information. A. Share capital. Not Applicable. B. Memorandum and articles of association. The Company is incorporated under the laws of the Province of Ontario, Canada and has been assigned company number 942684, with its registered office situated at 330 Bay St., Suite 602, Toronto, ON M5H 2S8, Canada. The telephone number at that location is (416) 216-8659. The purpose of the Company is to perform any and all corporate activities permissible under Ontario law. A director may vote in respect of any contract or arrangement in which such director has an interest notwithstanding such director's interest and an interested director will not be liable to the Company for any profit realized through any such contract or arrangement by reason of such director holding the office of director. The remuneration of the directors shall from time to time be determined by the Company by ordinary resolution. Directors of the Company are not required to own shares of the Company in order to serve as directors. The share capital of the Company is an unlimited number of authorized common shares and 36,215,853 common shares outstanding as at the fiscal year end September 30, 2001 and is unchanged as of March 28, 2002. All common shares rank equally with other common shares, entitling the common shareholder to one vote at the annual shareholder's meeting. - 29 - There are no provisions for a classified board of directors or for cumulative voting for directors. There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities. There are no provisions in the Articles of Incorporation that would have the effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries). There are no provisions in the Articles of Incorporation governing the ownership threshold above which shareholder ownership must be disclosed. United States federal law and Ontario provincial securities law, however, requires that all directors, executive officers and holders of 10% or more of the stock of a company that has a class of stock registered under the Securities Exchange Act of 1934, as amended, disclose such ownership. In addition, holders of more than 5% of a registered equity security must disclose such ownership. C. Material contracts. The Company has not entered into any material contracts, other than in the ordinary course of business, during the preceding two years. D. Exchange controls. Canada has no system of currency exchange controls. There are no exchange restrictions on borrowing from foreign countries nor on the remittance of dividends, interest, royalties and similar payments, management fees, loan repayments, settlements of trade debts or the repatriation of capital. The Investment Canada Act (the "ICA"), enacted on June 20, 1985, requires prior notification to the Government of Canada on the "acquisition of control" of Canadian businesses by a non-Canadian, as defined by the ICA. Certain acquisitions of control, discussed below, are reviewed by the Government of Canada. The term "acquisition of control" is defined as any one or more non-Canadian persons acquiring all or substantially all of the assets used in the Canadian business, or the acquisition of the voting shares of a Canadian corporation carrying on the Canadian business or the acquisition of the voting interests of an entity controlling or carrying on the Canadian business. The acquisition of the majority of the outstanding shares is deemed to be an "acquisition of control" of a corporation. The acquisition of less than a majority, but one-third or more, of the voting shares of a corporation is presumed to be an "acquisition of control" of a corporation unless it can be established that the purchaser will not control the corporation. - 30 - Investments requiring notification and review are all direct acquisitions of Canadian business with assets of Cdn. $5,000,000 or more (subject to the comments below on WTO investors) and all indirect acquisitions of Canadian businesses (subject to the comments below on WTO investors) with assets of more than Cdn. $50,000,000 or with assets of between $5,000,000 and Cdn. $50,000,000 which represent more than 50% of the value of the total international transactions. In addition, specific acquisitions or new business in designated types of business activities related to Canada's cultural heritage or national identity could be reviewed if the government of Canada considers that it is in the public interest to do so. The ICA was amended with the implementation of the agreement establishing the World Trade Organization ("WTO") to provide for special review of thresholds for "WTO investors", as defined in the ICA. "WTO investors" generally means: (a) an individual, other than a Canadian, who is a member of a WTO member (such as, for example, the United States), or who has the right of permanent residence in relation to that WTO member. (b) governments of WTO members; and (c) entities that are not Canadian controlled, but which are WTO investor controlled as determined by the rules specified in the ICA. The special review thresholds for WTO investors do not apply, and general rules described above do not apply, to the acquisition of control of certain types of businesses specified in the ICA, including business that is a "cultural business". If the WTO investor rules apply, an investment in the shares of the Company by whom or from a WTO investor will be reviewable only if it is an investment to acquire control of the Company and the value of the assets of the Company is equal to or greater than a specified amount (the "WTO Review Threshold"). The WTO Review Threshold is adjusted annually by using a formula relating to increases in the nominal gross domestic product of Canada. The 1996 WTO Review Threshold is Cdn. $168,000,000. If any non-Canadian, whether or not a WTO investor, acquires control of the Company by the acquisition of shares, but the transaction is not reviewable as described above, the non-Canadian is required to notify the Canadian government and to provide certain basic information relating to the investment. A non-Canadian, or a non-WTO investor, is required to provide a notice to the government on the establishment of a new Canadian business. If the business of the Company is then a prescribed type of business activity related to Canada's cultural heritage or national identity, and if the Canadian government considers it in the public interest to do so, then the Canadian government may give a notice in writing within 21 days requiring the investment to be reviewed. For non-Canadian (other than WTO investors), and indirect acquisition of control, by the acquisition of voting interests of an entity that directly or indirectly controls the Company, is reviewable if the value of the assets of the Company is then Cdn. - 31 - $50,000,000 or more. If the WTO investor rules apply, then this requirement does not apply to a WTO investor, or to a person acquiring the entity from a WTO investor. Special rules specified in the ICA apply if the assets of the Company is more than 50% of the value of the assets of the entity so acquired. By these special rules, if the non-Canadian (whether or not a WTO investor) is acquiring control of an entity that directly or indirectly controls the Company, and the value of the assets of the company and all other entities carrying on business in Canada, calculated in the manner provided by the ICA and the regulations under the ICA, of the assets of all entities, the control of which is acquired, directly or indirectly, in the transaction of which the acquisition of control of the Company forms a part, then the threshold for a direct acquisition of control as discussed above will apply, that is, a WTO Review Threshold of Cdn. $168,000,000 (1996) for a WTO investor or a threshold of CDN. $5,000,000 for non-Canadian other than a WTO investor. If the value exceeds that level the transaction must be reviewed in the same manner as a direct acquisition of control by the purchase of shares by the Company. If an investment is renewable, an application for review in the form prescribed by the regulations is normally required to be filed with the director appointed under the ICA (the "Director") and the investment may not be consummated until the review has been completed. There are, however, certain exceptions. Applications concerning indirect acquisitions may be filed up to 30 days after the investment is consummated and applications concerning reviewable investments in culture-sensitive sectors are required upon receipt of a notice for review. In addition, the Minister (a person designated as such under the ICA) may permit an investment to be consummated prior to completion of the review, if he is satisfied that the delay would cause undue hardship to the acquirer or jeopardize the operations of the Canadian business that is being acquired. The Director will submit the application to the Minister, together with many other information or written undertakings given by the acquirer and any representation submitted to the Director by a province that is likely to be of net benefit to Canada, taking into account the information provided and having regard to certain factors of assessment where they are relevant. Some of the factors to be considered are: (a) the effect of the investment on the level and nature of economic activity in Canada, including the effect on employment, on resource processing, and on the utilization of parts, components and services produced in Canada; (b) the effect of the investment on exports from Canada; (c) the degree and significance of participation by Canadians in the Canadian business and in any industry in Canada of which it forms a part; (d) the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada; (e) the effect of the investment on competition within any industry or industries in Canada; - 32 - (f) the compatibility of the investment with national, industrial, economic, and cultural policies; (g) the compatibility of the investment with national, industrial, economic, and cultural policies taking into consideration industrial, economic, and cultural objectives enunciated by the government of legislature of any province likely to be significantly affected by the investment; and (h) the contribution of the investment to Canada's ability to compete in world markets. To ensure prompt review, the ICA set certain time limits for the Director and the Minister. Within 45 days after a completed application has been received, the Minister must notify the acquirer that he is satisfied that the investment is likely to be of net benefit to Canada, or that he is unable to complete his review, in which case he shall have 30 additional days to complete his review (unless the acquirer agrees to longer period), or he is not satisfied that the investment is likely to be of net benefit to Canada. Where the Minister has advised the acquirer that he is not satisfied that the investment is likely to be of net benefit to Canada, the acquirer has the right to make representations and submit undertakings within 30 days of the date of notice (or any period that is agreed upon between the acquirer and the Minister). On the expiration of the 30 day period (or the agreed-upon extension), the Minister must quickly notify the acquirer that he is not satisfied that the investment is likely to be of net benefit to Canada. In the latter case, the acquirer my not proceed with the investment or, if the investment has already been consummated, must divest itself of control of the Canadian business. The ICA provides civil remedies for non-compliance with any provision. There are also criminal penalties for breach of confidentiality or providing false information. Except as provided in the ICA, there are no limitations under the laws of Canada, the Province of British Columbia, or in any constituent documents of the Company on the right of non-Canadians to hold or vote the common shares of the Company. E. Taxation. Canadian Federal Income Taxation The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person who owns one or more common shares of the Company (the "Shareholder"), and who at all material times for the purposes of the Income Tax Act (Canada) (the "Canadian Act") deals at arm's length with the Company, holds all common shares solely as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any Common share in or in the course of carrying on business in Canada. It is assumed that the common shares will at all material times be listed on a stock exchange that is prescribed for the purposes of the Canadian Act. - 33 - This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980) (the "Treaty") as amended. This summary takes into account all specific proposals to amend the Canadian Act and the regulations thereunder publicly announced by the government of Canada to the date hereof and the Company's understanding of the current published administrative and assessing practices of Canada Customs and Revenue Agency. It is assumed that all such amendments will be enacted substantially as currently proposed, and that there will be no other material change to any such law or practice, although no assurances can be given in these respects. Except to the extent otherwise expressly set out herein, this summary does not take into account any provincial, territorial or foreign income tax law or treaty. This summary is not, and is not to be construed as, tax advice to any particular Shareholder. Each prospective and current Shareholder is urged to obtain independent advice as to the Canadian income tax consequences of an investment in common shares applicable to the Shareholder's particular circumstances. A Shareholder generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Shareholder on a disposition of a Common share unless the Common share constitutes "taxable Canadian property" to the Shareholder for purposes of the Canadian Act and the Shareholder is not eligible for relief pursuant to an applicable bilateral tax treaty. A Common share that is disposed of by a Shareholder will not constitute taxable Canadian property of the Shareholder provided that the Common share is listed on a stock exchange that is prescribed for the purposes of the Canadian Act (the Toronto Stock Exchange is so prescribed), and that neither the Shareholder, nor one or more persons with whom the Shareholder did not deal at arm's length, alone or together at any time in the five years immediately preceding the disposition owned, or owned any right to acquire, 25% or more of the issued shares of any class of the capital stock of the Company. In addition, the Treaty generally will exempt a Shareholder who is a resident of the United States for the purposes of the Treaty, and who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the Shareholder on the disposition of a Common share, from such liability provided that the value of the Common share is not derived principally from real property (including resource property) situated in Canada or that the Shareholder does not have, and has not had within the 12-month period preceding the disposition, a "permanent establishment" or "fixed base," as those terms are defined for the purposes of the Treaty, available to the Shareholder in Canada. The Treaty may not be available to a non-resident Shareholder that is a U.S. LLC which is not subject to tax in the U.S. Any dividend on a Common share, including a stock dividend, paid or credited, or deemed to be paid or credited, by the Company to a Shareholder will be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, or such lesser rate as may be available under an applicable income tax treaty. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a Common share to a Shareholder who is a resident of the United States for the purposes of the Treaty will be - 34 - reduced to 5% if the beneficial owner of the dividend is a company that owns at least 10% of the voting stock of the Company, and in any other case will be reduced to 15%, of the gross amount of the dividend. It is Canada Customs and Revenue Agency`s position that the Treaty reductions are not available to a Shareholder that is a "limited liability company" resident in the United States. The Company will be required to withhold any such tax from the dividend, and remit the tax directly to Canada Customs and Revenue Agency for the account of the Shareholder. Certain United States Federal Income Tax Consequences The following is a general discussion of the material United States Federal income tax law for U.S. holders that hold such common shares as a capital asset, as defined under United States Federal income tax law and is limited to discussion of U.S. Holders that own less than 10% of the common stock. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any future legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Company should consult their own tax advisors about the Federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company. U.S. Holders As used herein, a "U.S. Holder" is a holder of common shares of the Company who or which is a citizen or individual resident (or is treated as a citizen or individual resident) of the United States for federal income tax purposes, a corporation or partnership created or organized (or treated as created or organized for federal income tax purposes) in the United States, including only the States and District of Columbia, or under the law of the United States or any State or Territory or any political subdivision thereof, or a trust or estate the income of which is includable in its gross income for federal income tax purposes without regard to its source, if, (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States trustees have the authority to control all substantial decisions of the trust. - 35 - For purposes of this discussion, a U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers and Holders who acquired their stock through the exercise of employee stock options or otherwise as compensation. Distributions on common shares of the Company U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder's United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's United States Federal taxable income by those who itemize deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation. Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion. Foreign Tax Credit A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate shares of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign source income bears to his or its world-wide taxable income. In the determination of the application of this limitation, the various items of income and - 36 - deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as "passive income," "high withholding tax interest," "financial services income," "shipping income" and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances. Disposition of common shares of the Company A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between the amount of cash plus the fair market value of any property received, and the Holder's tax basis in the common shares of the Company. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder. Any capital gain will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted. Dividends and paying agents. Not Applicable. G. Statement by experts. Not Applicable. H. Documents on display. The documents concerning the Company which are referred to in the document are located at its principal executive office in Toronto, at the address stated at the beginning of this document. I. Subsidiary Information. Not Applicable. Item 11. Quantitative and Qualitative Disclosures About Market Risk. Not Applicable. - 37 - Item 12. Description of Securities other than Equity Securities. Not Applicable. PART II Item 13. Defaults, Dividend Arrearages and Delinquencies. Not Applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. Not Applicable. Item 15. [Reserved] Item 16. [Reserved] - 38 - PART III Item 17. Financial Statements. Not Applicable. Item 18. Financial Statements. The following financial statements are attached to and form part of this Annual Report: Audit Report Audited Consolidated Financial Statements of the Company for the years ended September 30, 2001, September 30, 2000 and September 30, 1999. Item 19. Exhibits. Exhibit Number 1.1 Certificate of Incorporation dated September 8, 1986 * 1.2 Certificate of Name Change dated November 26, 1999 * 1.3 Articles (Bylaws) of the Corporation * 1.4 Company Stock Option Plan * 4.a.1 Plan of Exchange dated as of August 3, 2001 between Onlinetel and Eiger Technology, Inc. 4.a.2 Share Purchase Agreement dated as of November 8, 2001 among ETIFF Holdings Inc., K-Tronik International Corp., and LMC Capital Corp. 4.a.3 Share Purchase Agreement dated as of December 19, 2001 among Vision Unlimited Equipment Inc., ADH Custom Metal Fabricators Inc., and Newlook Capital Corp. * Adopted by reference, as previously filed with the Commission. - 39 - SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. Eiger Technology, Inc. /s/ GERRY RACICOT - -------------------------------- Gerry Racicot President and C.E.O. March 26, 2002 EXHIBIT INDEX Exhibit Number Description - ------- ----------- 4.a.1 Plan of Exchange dated as of August 3, 2001 between Onlinetel and Eiger Technology, Inc. 4.a.2 Share Purchase Agreement dated as of November 8, 2001 among ETIFF Holdings Inc., K-Tronik International Corp., and LMC Capital Corp. 4.a.3 Share Purchase Agreement dated as of December 19, 2001 among Vision Unlimited Equipment Inc., ADH Custom Metal Fabricators Inc., and Newlook Capital Corp. - 40 - EIGER TECHNOLOGY, INC. CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001, 2000 and 1999 [LETTERHEAD OF MONTEITH, MONTEITH & CO.] EIGER TECHNOLOGY, INC. INDEX September 30, 2001, 2000 and 1999 Auditor's Report Consolidated Financial Statements Balance Sheets Statements of Operations and Retained Earnings Statements of Cash Flows Notes to the Consolidated Financial Statements [LETTERHEAD OF MONTEITH, MONTEITH & CO.] AUDITOR'S REPORT To the Shareholders of Eiger Technology, Inc.: We have audited the consolidated balance sheets of Eiger Technology, Inc. as at September 30, 2001, 2000 and 1999 and the consolidated statements of operations and retained earnings and cash flows for the years then ended. 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 auditing standards generally accepted in Canada and the United States of America. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, the financial statements present fairly, in all material respects, the financial position of Eiger Technology, Inc. as at September 30, 2001, 2000 and 1999 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in Canada. Monteith, Monteith & Co. CHARTERED ACCOUNTANTS. Stratford, Ontario, January 26, 2002. EIGER TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS as at September 30
ASSETS 2001 2000 1999 ---- ---- ---- $ $ $ Current: Cash 1,847,000 2,031,000 1,173,000 Cash Held in Escrow -- 4,978,000 -- Short-term Investments (Note 4) 4,146,000 6,805,000 -- Accounts Receivable (Note 5) 8,759,000 12,039,000 5,227,000 Inventory 6,545,000 10,878,000 3,733,000 Prepaid Expenses 769,000 686,000 248,000 ----------- ---------- ---------- 22,066,000 37,417,000 10,381,000 Long-term Investments (Note 4) 404,000 4,337,000 360,000 Capital (Note 6) 4,541,000 4,998,000 2,056,000 Goodwill 2,488,000 7,640,000 2,180,000 Other (Note 7) 1,222,000 2,753,000 2,041,000 ----------- ---------- ---------- 30,721,000 57,145,000 17,018,000 =========== ========== ========== LIABILITIES and SHAREHOLDERS' EQUITY Current: Bank Indebtedness (Note 8) 3,515,000 2,670,000 1,760,000 Accounts Payable and Accrued Liabilities 5,616,000 11,184,000 3,519,000 Income Taxes Payable -- 39,000 237,000 Current Portion of Long-term Debt (Note 9) 120,000 120,000 100,000 ----------- ---------- ---------- 9,251,000 14,013,000 5,616,000 ----------- ---------- ---------- Long-term Debt (Note 9) 1,014,000 1,488,000 1,111,000 ----------- ---------- ---------- Future Income Taxes (Note 10) -- 43,000 175,000 ----------- ---------- ---------- Non-controlling Interest (671,000) 3,253,000 1,779,000 ----------- ---------- ---------- Shareholders' Equity: Share Capital (Note 11) 42,001,000 38,895,000 8,191,000 Contributed Surplus 217,000 217,000 217,000 Retained Earnings (21,091,000) (764,000) (71,000) ----------- ---------- ---------- 21,127,000 38,348,000 8,337,000 ----------- ---------- ---------- 30,721,000 57,145,000 17,018,000 =========== ========== ==========
On Behalf of the Board: "Gerry Racicot" Director - -------------------------------- Gerry Racicot "Keith Attoe" Director - -------------------------------- Keith Attoe (See Accompanying Notes) EIGER TECHNOLOGY, INC. CONSOLIDATED STATEMENTS of OPERATIONS and RETAINED EARNINGS for the years ended September 30
2001 2000 1999 ---- ---- ---- $ $ $ Sales 30,070,000 57,068,000 8,433,000 Cost of Sales 27,711,000 50,731,000 6,055,000 ----------- ---------- --------- Gross Margin 2,359,000 6,337,000 2,378,000 ----------- ---------- --------- Expenses: Selling, General and Administration 7,769,000 5,154,000 2,410,000 Amortization of Capital Assets 568,000 407,000 204,000 Amortization of Goodwill and Other 1,032,000 871,000 222,000 Interest on Long-term Debt 98,000 92,000 111,000 Other Interest and Bank Charges 480,000 552,000 233,000 ----------- ---------- --------- 9,947,000 7,076,000 3,180,000 ----------- ---------- --------- Income (Loss) before Provision for Income Taxes (7,588,000) (739,000) (802,000) ----------- ---------- --------- Provision for Income Taxes: (Note 12) Current (6,000) 289,000 30,000 Future (56,000) (132,000) -- ----------- ---------- --------- (62,000) 157,000 30,000 ----------- ---------- --------- Income (Loss) before Unusual Items (7,526,000) (896,000) (832,000) Discontinued Operations -- (162,000) (545,000) Gain on Disposal of Discontinued Operations -- 226,000 -- Negotiated Reduction of Long-term Debt -- -- 293,000 Non-recurring Items (Note 14) (16,366,000) -- -- ----------- ---------- --------- Income (Loss) before Non-controlling Interest (23,892,000) (832,000) (1,084,000) Non-controlling Interest (3,565,000) (139,000) (342,000) ----------- ---------- --------- Net Income (Loss) for the Year (20,327,000) (693,000) (742,000) Retained Earnings - Beginning of Year (764,000) (71,000) 671,000 ----------- ---------- --------- Retained Earnings - End of Year (21,091,000) (764,000) (71,000) =========== ========== ========= Earnings per Share: Before Non-recurring Items Basic (0.23) (0.04) (0.06) ----------- ---------- --------- Diluted (0.23) (0.04) (0.06) ----------- ---------- --------- Net Income (Loss) Basic (0.61) (0.03) (0.05) ----------- ---------- --------- Diluted (0.61) (0.03) (0.05) ----------- ---------- ---------
(See Accompanying Notes) EIGER TECHNOLOGY, INC. CONSOLIDATED STATEMENTS of CASH FLOWS for the years ended September 30
2001 2000 1999 ---- ---- ---- $ $ $ Cash Flows from Operating Activities: Net Income (Loss) for the Year (20,327,000) (693,000) (742,000) Items not Involving Cash: Non-recurring Items (Note 14) 16,366,000 Amortization 1,600,000 1,278,000 427,000 Future Income Taxes (56,000) (132,000) -- ----------- ---------- ---------- (2,417,000) 453,000 (315,000) ----------- ---------- ---------- Changes in Non-cash Working Capital Balances: Accounts Receivable 3,280,000 (6,812,000) (3,134,000) Inventory 3,203,000 (7,145,000) (1,037,000) Prepaid Expenses (83,000) (438,000) (226,000) Accounts Payable and Accrued Liabilities (5,568,000) 7,665,000 433,000 Income Taxes Payable (39,000) (198,000) 165,000 Future Income Taxes -- -- (1,000) Non-controlling Interest (3,094,000) (137,000) 1,468,000 ----------- ---------- ---------- (4,718,000) (6,612,000) (2,647,000) ----------- ---------- ---------- Cash Flows from Investing Activities: Purchase of Capital Assets (478,000) (3,349,000) (147,000) Long-term Investments (3,571,000) (3,977,000) -- Purchase of Goodwill and Other Assets (2,531,000) (2,243,000) (1,326,000) ----------- ---------- ---------- (6,580,000) (9,569,000) (1,473,000) ----------- ---------- ---------- Cash Flows from Financing Activities: Increase (Decrease) in Long-term Debt (474,000) 397,000 (559,000) Increase (Decrease) in Bank Indebtedness 845,000 910,000 312,000 Advances from (Repayments to) Related Parties -- -- 112,000 Subs. Share Capital Issued to Non-controlling Interest -- 2,020,000 -- Subs. Dividends Paid to Non-controlling Interest -- (409,000) -- Issuance of Share Capital (Net of Costs) 3,106,000 25,904,000 5,282,000 ----------- ---------- ---------- 3,477,000 28,822,000 5,147,000 ----------- ---------- ---------- Net Cash Flows for the Year (7,821,000) 12,641,000 1,027,000 Cash and Cash Equivalents - Beginning of the Year 13,814,000 1,173,000 146,000 ----------- ---------- ---------- Cash and Cash Equivalents - End of the Year 5,993,000 13,814,000 1,173,000 =========== ========== ========== Cash and Cash Equivalents Represented by: Cash 1,847,000 2,031,000 1,173,000 Cash Held in Escrow -- 4,978,000 -- Short-term Investments 4,146,000 6,805,000 -- ----------- ---------- ---------- 5,993,000 13,814,000 1,173,000 =========== ========== ==========
(See Accompanying Notes) EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Business: Eiger Technology, Inc. ("the Company") is incorporated under the laws of Ontario. Through its various subsidiaries, the Company manufactures and distributes electronic/computer peripherals and electronic ballasts to OEM and consumer markets worldwide, and offers Voice over Internet Protocol services to the Canadian long-distance market. 2. Significant Accounting Policies: (a) Basis of Preparation: These financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Cdn. GAAP"). A reconciliation to U.S. generally accepted accounting principles ("U.S. GAAP") is provided in Note 15. Because a precise determination of assets and liabilities depends on future events, the preparation of periodic financial statements necessitates the use of estimates and approximations. Actual amounts may differ from these estimates. (b) Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Eiger Technology, Inc. and all of its subsidiary companies as listed in Note 3. All significant intercompany transactions and balances have been eliminated upon consolidation. (c) Cash and Cash Equivalents: Cash and cash equivalents consist of cash on account and short-term investments with remaining maturities of three months or less at acquisition. (d) Inventory: Inventory is valued at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis and includes the costs of materials and direct labour plus the applicable share of manufacturing overhead. (e) Investments: All non-consolidated investments are accounted for at cost. Short-term investments are written down to market value when less than cost. Long-term investments are written down to market value when a decline in market value below the carrying value is considered to be other than temporary. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 2. Significant Accounting Policies - continued: (f) Capital Assets: Capital assets are recorded at cost. Amortization is calculated on the declining-balance basis at the following annual rates: Building - 4-5% Machinery and Equipment - 5-10% Automotive Equipment - 20-30% Computer Equipment - 20-30% Leasehold Improvements - 10% straight line basis (g) Goodwill: Goodwill represents the excess of the purchase price of the Company's interest in subsidiary companies over the fair value of the underlying net identifiable assets at the time of acquisition. Goodwill is amortized over 10 years on a straight-line basis (40 years for acquisitions prior to 1997). Goodwill arising on acquisitions after June 30, 2001 is not amortized. Management evaluates the expected future net cash flows of the companies at each reporting date and adjusts goodwill for any impairment. (h) Other Assets: Product development costs meeting generally accepted criteria for deferral are written down to expected realizable value, and are amortized once production commences over periods ranging from three to ten years, depending on the anticipated economic life of the particular product. Deferred organization, finance, and regulatory approval costs are amortized over 2 to 5 years. Long-term lease deposits are recorded at cost. (i) Income Taxes: Income taxes are provided using the liability method of tax allocation. Under this method, future tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities, and are measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. (j) Issuance of Share Capital: The costs of issuing share capital are netted against share capital. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 2. Significant Accounting Policies - continued: (k) Revenue Recognition: Sales are recorded upon shipment to customers. Fees are recognized as services are rendered. (l) Foreign Currency Translation: Due to the extensive degree of financing provided to its foreign subsidiaries by the Company, these subsidiaries are considered to be integrated operations. Accordingly, the temporal method of foreign currency translation is used. Under this method, monetary assets and liabilities of foreign subsidiaries are translated into Canadian dollars using the exchange rate in effect at the balance sheet date, non-monetary items are translated at historical exchange rates (except for items carried at market, which are translated at the balance sheet date exchange rate), and revenues and expenses are translated using average exchange rates to approximate the rates actually in effect at the time of the transactions. Resulting foreign exchange translation gains or losses are included in the determination of net income for the year, except for such gains or losses relating the translation or settlement of foreign currency denominated long-term monetary items which are deferred and amortized over the remaining life of the monetary item. There were no material exchange gains or losses on long-term foreign currency denominated monetary items during either of the reporting periods. (m) Stock-based Compensation: No compensation expense is recognized for stock options granted to employees. Options are granted at the fair market value of the shares on the day of the grant. Any consideration paid by employees on the exercise of stock options is credited to share capital. (n) Earnings per Share: Basic earnings per share is calculated based on the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated using the treasury stock method based on the weighted average number of shares that would have been outstanding during the year had all the dilutive options been exercised at the beginning of the year, or date of issuance if later, and assuming that option proceeds would be used to purchase common shares at the average market price during the year. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 3. Subsidiaries and Related Party Transactions: Eiger Technology, Inc. is related to the following corporations: Name of Corporation Nature of Relationship - ------------------- ---------------------- Vision Unlimited Equipment Inc.* 100% Subsidiary A.D.H. Custom Metal Fabricators Inc. 100% Subsidiary of Vision Unlimited Equipment Inc. Alexa Properties Inc. 100% Subsidiary K-Tronik Int'l Corp. 53% Subsidiary K-Tronik Asia Corp. 59.3% owned through K-Tronik Int'l Corp. and directly Alexa Korea Holdings, Inc.* 100% Subsidiary EigerNet, Inc. 58.5% Subsidiary of Alexa Korea Holdings, Inc. Alexa (U.S.A.), Inc.* 100% Subsidiary Eiger Labs Group, Inc. 64% Subsidiary of Alexa (U.S.A.), Inc. Onlinetel, Inc. 100% Subsidiary * Inactive - holding company only All transactions within the corporate group are in the normal course of business, are transacted at fair market value, are recorded at the carrying value at the time, and are eliminated upon consolidation. Intercompany balances at the financial statement date are also eliminated upon consolidation. Service fees paid to corporations owned by four management personnel during the period totalled $412,000 (2000: $320,000; 1999: $208,000). EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 4. Investments: (a) Short-term Investments: Short-term investments are comprised of Canadian money market funds and short-term commercial paper plus accrued interest, having a market value equivalent to their cost amount. (b) Long-term Investments: 2001 2000 1999 ---- ---- ---- $ $ Advances to Nixxo Technology, Inc. -- 2,221,000 -- Advances to Lexatec VR Systems Inc. 324,000 1,444,000 -- Subsidiary long-term investment in debt securities 80,000 437,000 -- Other -- 235,000 360,000 ------- --------- ------- 404,000 4.337,000 360,000 ======= ========= ======= The advances noted above are non-interest bearing, and have no specific terms of repayment. 5. Accounts Receivable: Accounts receivable are reported net of an allowance for doubtful accounts of $196,000 (2000: $116,000; 1999: 193,000). 6. Capital Assets:
2001 2000 1999 ------------------------------------- --------- --------- Accumulated Net Book Net Book Net Book Cost Amortization Value Value Value ------------------------------------- --------- --------- $ $ $ $ $ Land 159,000 -- 159,000 159,000 159,000 Buildings 1,103,000 183,000 920,000 951,000 463,000 Machinery and Equipment 5,017,000 2,702,000 2,315,000 3,124,000 1,152,000 Furniture and Fixtures 817,000 389,000 428,000 392,000 83,000 Automotive Equipment 201,000 83,000 118,000 108,000 20,000 Leasehold Improvements 268,000 152,000 116,000 123,000 135,000 Computer Hardware 363,000 80,000 283,000 71,000 32,000 Computer Software 240,000 38,000 202,000 70,000 12,000 ------------------------------------- --------- --------- 8,168,000 3,627,000 4,541,000 4,998,000 2,056,000 ===================================== ========= =========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 7. Other: 2001 2000 1999 ---- ---- ---- $ $ $ Product Development Costs 298,000 1,709,000 1,212,000 Deferred Organization and and Financing Costs -- 370,000 525,000 Non-interest Bearing Long-term Deposits 682,000 435,000 95,000 Regulatory Approval 174,000 174,000 141,000 Other 68,000 65,000 68,000 --------- --------- --------- 1,222,000 2,753,000 2,041,000 ========= ========= ========= 8. Bank Indebtedness: The Canadian line of credit balance of $96,000 bears interest at Royal Bank prime plus .75%, is due on demand, and is secured by a general security agreement covering inventory, equipment and accounts receivable. Foreign subsidiary lines of credit balances totalling $3,419,000 (Cdn.) bear interest at rates ranging from 5 - 7.25%, are secured by inventory and equipment, and are repayable upon demand. 9. Long-term Debt:
2001 2000 1999 ---- ---- ---- $ $ $ Royal Bank of Canada term loan repayable in monthly instalments of $10,000 plus interest calculated at Royal Bank prime plus 1/4% 745,000 865,000 878,000 Shin Han Bank (Korea) term loan repayable in bi-annual instalments of $60,500 commencing May 8, 2006 and ending November 8, 2008 plus interest calculated at 6.75% per annum 303,000 651,000 -- Other 86,000 92,000 333,000 --------- --------- --------- 1,134,000 1,608,000 1,211,000 Less: Current Portion (120,000) (120,000) (100,000) --------- --------- --------- 1,014,000 1,488,000 1,111,000 ========= ========= =========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 9 Long-term Debt - continued: Principal payments required on long-term debt for the next five years are as follows: Year Amount ---- ------ $ 2002 120,000 2003 206,000 2004 120,000 2005 120,000 2006 241,000 ------- 807,000 ======= 10. Future Income Taxes: Significant components of future income tax assets (liabilities) are as follows:
2001 2000 1999 ---- ---- ---- $ $ $ Excess of net book value of capital assets over tax value (236,000) (270,000) (257,000) Other future income tax liabilities -- (53,000) -- Operating losses carried forward 2,254,000 372,000 3,000 Less: Valuation Allowance (2,034,000) (102,000) -- "Canadian Exploration Expenses" carried forward -- -- 69,000 Other 16,000 10,000 10,000 ---------- -------- -------- Net future income tax assets (liabilities) -- (43,000) (175,000) ========== ======== ========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 11. Share Capital: Authorized: 100,000,000 Common Shares Issued:
2001 2000 1999 --------------------------- --------------------------- -------------------------- No. of $ No. of $ No. of $ Shares Shares Shares ------ ------ ------ Beginning of Year: 33,945,858 39,437,000 21,284,358 9,340,000 13,815,001 2,176,000 Issued - private placement* 70,000 1,839,000 11,444,500 27,861,000 6,065,500 6,152,000 - exercise of options 400,000 350,000 617,000 483,000 50,000 42,000 - acquisitions 1,799,995 936,000 -- -- 1,353,857 1,882,000 - earn out shares -- -- 600,000 4,800,000 -- -- - costs of issue -- (19,000) -- (3,047,000) -- (912,000) --------------------------- --------------------------- -------------------------- End of Year: 36,215,853 42,543,000 33,945,858 39,437,000 21,284,358 9,340,000 Reciprocal Shareholdings (526,929) (542,000) (526,929) (542,000) (826,929) (1,149,000) --------------------------- --------------------------- -------------------------- Net per Balance Sheets 35,688,924 42,001,000 33,418,929 38,895,000 20,457,429 8,191,000 =========================== =========================== ==========================
* Shares in escrow: None (2000: 4,840,000; 1999: None) The Company awards unconditional stock options to employees, officers, directors and others at the recommendation of the CEO as approved by the shareholders. Options are granted at the fair market value of the shares on the day granted, and vest immediately. The following is a continuity schedule of outstanding options for the reporting periods, where WAEP refers to "weighted average exercise price".
2001 2000 1999 ------------------- ------------------- ----------------- WAEP WAEP WAEP No. of ---- No. of ---- No. of. ---- Options $ Options $ Options $ ------- - ------- - ------- - Beginning of Year: 1,713,000 3.37 895,000 0.74 955,000 0.75 Granted 2,133,000 1.16 1,535,000 3.70 -- -- Exercised (400,000) 0.88 (617,000) 0.76 (50,000) 0.85 Expired -- -- (100,000) 0.90 (10,000) 0.75 --------- --------- ------- End of Year: 3,446,000 2.29 1,713,000 3.37 895,000 0.74 ========= ========= =======
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 11. Share Capital - continued: Stock options were exercised during the year at prices ranging from $0.60 to $1.40. The weighted average contractual life for options outstanding at year end was 1,400 days. During the year, proceeds from exercised stock options of $350,000 was credited to share capital (2000: $483,000; 1999: $42,000). No amounts were recognized as compensation expense with respect to stock options granted or exercised in either of the reporting periods. Stock options have been granted to the CEO of K-Tronik Int'l Corp. contingent upon meeting sales quotas for that company as tabled below: Number of Monthly Sales for Six Options Consecutive Months Exercisable Total Excercise Units of Ballasts Per Plateau Cumulative Price - ----------------------------------------- ----------- ---------- --------- 50,000 per month for 6 consecutive months 70,000 70,000 .60 60,000 per month for 6 consecutive months 70,000 140,000 .60 70,000 per month for 6 consecutive months 70,000 210,000 .60 80,000 per month for 6 consecutive months 70,000 280,000 .60 90,000 per month for 6 consecutive months 70,000 350,000 .60 No shares were issued in fiscal 2001, fiscal 2000 or fiscal 1999 as a result of this agreement. Management has agreed to issue shares of the Company to four members of the management team of EigerNet, Inc. and Eiger Labs Group Inc. as performance earn out consideration contingent upon achieving the criteria tabled below for the combined results of those two companies: Common Year Gross Sales Net Income Shares - ---- ----------- ---------- ------ 1999 $27 million U.S. $1.0 million U.S. 600,000 2000 $70 million U.S. $2.5 million U.S. 750,000 2001 $80 million U.S. $3.5 million U.S. 750,000 2002 $90 million U.S. $4.0 million U.S. 900,000 2003 $110 million U.S. $4.5 million U.S. 1,000,000 600,000 shares were issued in fiscal 2000 as a result of this agreement based on the operating results for 1999. No shares were issued in fiscal 2001 and none will be issued in fiscal 2002 pursuant to this agreement as the sales and income criteria have not been met. Additional shares may become issuable pursuant to the agreement described in Note 16. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 12. Provision for Income Taxes:
2001 2000 1999 ---- ---- ---- $ $ $ Current Provision: (6,000) 289,000 30,000 ---------- -------- -------- Future Provision: Losses carried forward (22,000) (267,000) (3,000) Net book value of capital assets (34,000) 13,000 3,000 Canadian Exploration Expenses -- 69,000 -- Other -- 53,000 -- ---------- -------- -------- (56,000) (132,000) -- ---------- -------- -------- Total Provision (62,000) 157,000 30,000 ========== ======== ======== Reconciliation of Tax Provision: Income (Loss) before Provision for Income Taxes (7,588,000) (739,000) (802,000) Taxable Intercompany Dividend Eliminated on Consolidation -- 409,000 -- Taxable Intercompany Gain Eliminated on Consolidation -- -- 467,000 Amortization of Goodwill Arising on Consolidation 624,000 549,000 66,000 Valuation Allowance on Losses Carried Forward 6,716,000 408,000 -- Utilization of Unrecognized Losses Carried Forward -- -- (50,000) Minor Permanent Differences -- -- (4,000) Discontinued Operations - Previous Year -- -- (547,000) Prior Period Adjustments before Non-controlling Interest -- -- 981,000 ---------- -------- -------- Income Subject to Current and Future Income Taxes (248,000) 627,000 111,000 ========== ======== ======== At Average Statutory Rate (2001: 25%; 2000: 25%; 1999: 27%) (62,000) 157,000 30,000 ========== ======== ========
The average statutory rate varies depending on the relative mix of incomes from the Company and its subsidiaries located in Canada, Korea and the United States. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 13. Cash Payments of Interest and Income Taxes: 2001 2000 1999 ---- ---- ---- $ $ $ Interest 555,000 620,000 332,000 ======= ======= ======= Income Taxes 15,000 304,000 72,000 ======= ======= ======= 14. Non-recurring Items: 2001 ---- $ Charge for impairment in value of consolidated goodwill 6,500,000 Charge for impairment in value of long-term loans receivable 7,003,000 Non-recurring charge for impairment in value of inventory 566,000 Charge for impairment in value of capital assets 184,000 Charge for decline in value of long-term investments in shares of other corporations 982,000 Charge for impairment in value of deferred product development costs 1,131,000 ---------- 16,366,000 ========== Due to unfavourable economic conditions, particularly in the Republic of South Korea, the Company has experienced significant and long-term decline in the value of the asset groups noted above. The charges of impairment in values reported above are shown net of a reduction in future tax liabilities of $127,000 and non-controlling interest of $1,170,000. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 15. Reconciliation to U.S. GAAP: These financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Cdn. GAAP"). Significant differences under U.S. GAAP are discussed below. For fiscal years beginning after December 15, 1998, U.S. GAAP requires that all organization costs (including those previously deferred) be expensed currently. Also, all product development costs are to be expensed as incurred. U.S. GAAP requires the measurement and reporting of "comprehensive income". Comprehensive income includes net income and all other changes to Shareholders' Equity other than amounts received from or paid to shareholders. The only reportable comprehensive income item for the Company relates to foreign currency translation adjustments as described below. U.S. GAAP requires the use of the current rate method of foreign currency translation, with any resulting foreign exchange translation adjustments forming part of comprehensive income for the year and accumulating as a separate component of shareholders' equity. APB Opinion 25 requires the intrinsic value based method be used to measure stock option compensation. As the Company grants stock options at fair market value, no compensation is recognized. SFAS No. 123 requires pro-forma disclosure of net income and earnings per share as if the fair value method had been applied. Reconciliations to U.S. GAAP are as follows:
2001 2000 1999 ---- ---- ---- $ $ $ Net Income (Loss): - per Cdn. GAAP (20,327,000) (693,000) (742,000) - expense deferred product development costs net of portion relating to non-controlling interest 856,000 (328,000) (374,000) - expense deferred organization costs net of portion relating to non-controlling interest 219,000 90,000 (309,000) - foreign currency translation adjustment 191,000 129,000 6,000 - future income tax savings related to above (347,000) 60,000 265,000 ----------- -------- ---------- - per U.S. GAAP (19,408,000) (742,000) (1,154,000) ----------- -------- ---------- Comprehensive item - foreign exchange adjustment (191,000) (129,000) (6,000) ----------- -------- ---------- Comprehensive Income (19,599,000) (871,000) (1,160,000) =========== ======== ==========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 15. Reconciliation to U.S. GAAP - continued:
2001 2000 1999 ---- ---- ---- $ $ $ Retained Earnings: - per Cdn. GAAP (21,091,000) (764,000) (71,000) - expense deferred product development costs net of portion relating to non-controlling interest (298,000) (1,154,000) (826,000) - expense deferred organization costs net of portion relating to non-controlling interest -- (219,000) (309,000) - foreign currency translation adjustments 326,000 135,000 6,000 - future income tax savings related to above 100,000 447,000 387,000 ----------- ---------- ---------- - per U.S. GAAP (20,963,000) (1,555,000) (813,000) =========== ========== ========== Accumulated Other Comprehensive Items: - per Cdn. GAAP -- -- -- - foreign currency translation adjustments (326,000) (135,000) (6,000) ----------- ---------- ---------- - per U.S. GAAP (326,000) (135,000) (6,000) =========== ========== ========== Total Assets: - per Cdn GAAP 30,721,000 57,145,000 17,018,000 - expense deferred product development costs (298,000) (1,709,000) (1,212,000) - expense deferred organization costs -- (370,000) -- - increase in future income tax assets 100,000 404,000 212,000 ----------- ---------- ---------- - per U.S. GAAP 30,523,000 55,470,000 16,018,000 =========== ========== ========== Earnings per Share: Basic (.59) (.03) (.08) ----------- ---------- ---------- Fully Diluted (.59) (.03) (.08) ----------- ---------- ----------
Pro-forma Disclosure (SFAS No. 123): Had SFAS No. 123 been followed, net income would have decreased by $1,766,000 in fiscal 2001 (2000: $4,342,000; 1999: no change), and basic and fully diluted earnings per share would have been (.64) and (.64) respectively (2000: (.20) and (.20)); (1999: .08 and (.08)). EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 16. Acquisitions of Subsidiary Companies: On July 31, 2001 the Company acquired 100% of the outstanding shares of Onlinetel Inc., a company incorporated under the laws of Nevada. Onlinetel Inc. provides Voice over Internet Protocol ("VoIP) long distance services to the Canadian market. The consolidated financial statements of Eiger Technology, Inc. include the results of operations of Onlinetel, Inc. for the two months ended September 30, 2001. The acquisition was accomplished through the issuance of 1,799,995 common shares of Eiger Technology, Inc. having a total fair market value at the time of issuance of $936,000. The purchase equation at the time of acquisition was as follows: $Cdn. --------- Current Assets 48,000 Capital Assets 594,000 Goodwill 1,314,000 Liabilities (995,000) --------- Net Assets Acquired 961,000 ========= T.S.E. Fee 25,000 Shares of Eiger Technology Inc. 936,000 --------- Total Consideration 961,000 ========= The share exchange agreement allows that additional shares of Eiger Technology, Inc. may be issued to the former shareholders of Onlinetel, Inc. if certain earn out provisions are met as follows: Fiscal Gross Net Common Year Revenue Income Shares - ------ ------- ------ ------ $ $ $ # 2002 19,083,000 2,442,000 1,800,000 2003 37,348,000 6,213,000 1,800,000 2004 50,849,000 9,353,000 1,800,000 2005 59,867,000 13,849,000 1,800,000 Unmet earn out targets can be carried forward and met on a cumulative basis until fiscal 2010. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 17. Subsequent Events: Subsequent to the year end, the Company announced its intention to sell its 53% interest in K-Tronik Intl'l Corporation ("K-Tronik") to LMC Capital Corp. ("LMC"), a U.S. reporting issuer. The Company will received 7,571,428 shares of LMC for its holdings, plus an 14,642,428 shares are expected to be worth approximately $8,500,000 and to represent a 51% interest in LMC. Subsequent to the year end, the Company has proposed to sell its 100% interest in Vision Unlimited Equipment Inc., and its 100% subsidiary, ADH Custom Metal Fabricators Inc., to Newlook Capital Corp. ("Newlook"), a capital pool company pursuant to Policy to 2.4 of the Canadian Venture Exchange Inc. ("CDNX"). The sale price of $2,400,000 will be satisfied by the issuance to the Company of 4,800,000 common shares of Newlook. These shares are expected to be received over a period of six years due to CDNX surplus and value security escrow restrictions. The transaction will result in the Company becoming a controlling shareholder of Newlook. The above-mentioned transactions are subject to approvals by the respective Boards of Directors, performance of due diligence procedures, and receipt of approvals from the applicable regulatory authorities. 18. Financial Instruments: (a) Fair Value: Cash and cash equivalents, short-term investments, accounts receivable and payable, and bank indebtedness are carried at cost which approximates fair value due to their short time to maturity. Management believes the carrying value of long-term investments to be equivalent to their fair market value. The fair values of the Company's long-term debt obligations, based on current rates for debt with similar terms and maturities, are approximately the same as their carrying values. (b) Interest Rate Risk: The Company is not exposed to significant interest rate risk due to the short-term maturity of its current monetary assets and liabilities. The Company's interest rate risk pertaining to its long-term debt obligations is not considered to be significant due to the relatively low amounts involved. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 18. Financial Instruments - continued: (c) Credit Risk: The Company's financial assets that are exposed to credit risk consist primarily of short-term investments, accounts receivable, and long-term investments. Short-term investments consist solely of money market funds and short-term commercial paper issued by investment-rated Canadian financial institutions, and are invested for terms not exceeding 90 days. The Company, in the normal course of business, is exposed to credit risk from its customers. Management believes that sufficient allowance has been made for bad debts in these financial statements based on a review of accounts on an individual basis. The concentration of credit risk in trade accounts receivable is not considered to be significant due to the Company's large client base. The Company is also exposed to credit risk with respect to its long-term advances to Lexatec VR Systems Inc. and certain subsidiary investments. Advances to Lexatec VR Systems Inc. are partially secured by a pledge of reciprocal shareholdings. 19. Commitments: As at September 30, 2001, the Company had commitments under the terms of various operating leases requiring annual rental payments as follows: $ 2002 503,000 2003 551,000 2004 347,000 2005 160,000 2006 160,000 EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS 20. Segmented Information: Management has identified four reportable segments: "ADH", "K-Tronik", "Onlinetel" and "Eiger". Segementation is determined on the basis of the types of goods and services provided and geographic location. "ADH" consists of A.D.H. Custom Metal Fabricators Inc. and Alexa Properties Inc. A.D.H. Custom Metal Fabricators Inc. is a manufacturer of fluorescent light fixtures, data racks and other metal cabinetry. Alexa Properties Inc. owns the land and manufacturing facility in Stratford, Ontario. "K-Tronik" includes K-Tronik Int'l Corp., a distributor of electronic ballasts based in Hackensack, New Jersey, and K-Tronik Asia Corp., a manufacturer of electronic ballasts operating in Korea. "Onlinetel" consists of Onlinetel, Inc. which provides Voice over Internet Protocol services to the Canadian long distance market. "Eiger" includes Eiger Labs Group, Inc. and EierNet, Inc. Both of these companies are involved in the production and distribution of electronic communications products. EigerNet, Inc. is located in South Korea, while Eiger Labs Group, Inc. operates out of California. Financial information, segmented according to the above, is presented in the form of schedules over the next three pages. EIGER TECHNOLOGY, INC. SEGMENTED INFORMATION September 30, 2001
ADH K-Tronik Onlinetel Eiger ========= ========== ========= ========== $ $ $ $ Sales: External: - Domestic 2,301,000 -- 234,000 -- - Foreign -- 10,107,000 -- 17,428,000 Intersegment -- -- -- -- --------- ---------- --------- ---------- 2,301,000 10,107,000 234,000 17,428,000 Cost of Sales 2,004,000 7,934,000 -- 17,958,000 --------- ---------- --------- ---------- Gross Margin 297,000 2,173,000 234,000 (530,000) --------- ---------- --------- ---------- Expenses: Operations and Administration 509,000 3,014,000 335,000 3,394,000 Amortization of Capital and Other Assets 210,000 655,000 28,000 676,000 Interest on Long-term Debt 65,000 -- -- 33,000 Other Interest and Bank Charges 56,000 360,000 -- 61,000 --------- ---------- --------- ---------- 840,000 4,029,000 363,000 4,164,000 --------- ---------- --------- ---------- Income (Loss) before Taxes (543,000) (1,856,000) (129,000) (4,694,000) Provision for Income Taxes (72,000) 15,000 -- (20,000) --------- ---------- --------- ---------- Income (Loss) before Non-recurring Items (471,000) (1,871,000) (129,000) (4,674,000) Non-recurring Items (136,000) (1,048,000) -- (8,691,000) Non-controlling Interest 2,000 1,245,000 -- 2,318,000 --------- ---------- --------- ---------- Net Income (Loss) for the Year (605,000) (1,674,000) (129,000) (11,047,000) ========= ========== ========= ========== Cash Flows: From Operating Activities (224,000) (1,892,000) (303,000) (1,399,000) From Investing Activities (32,000) (112,000) (158,000) (2,282,000) From Financing Activities 568,000 1,705,000 669,000 4,205,000 --------- ---------- --------- ---------- 312,000 (299,000) 208,000 524,000 Cash and Cash Equivalents: Beginning of the Year -- 446,000 -- 937,000 --------- ---------- --------- ---------- End of the Year 312,000 147,000 208,000 1,461,000 ========= ========== ========= ========== Expenditures on Capital Assets and Goodwill during the Year 32,000 207,000 1,472,000 43,000 ========= ========== ========= ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 1,803,000 -- 2,037,000 -- - Foreign -- 1,596,000 -- 1,477,000 --------- ---------- --------- ---------- 1,803,000 1,596,000 2,037,000 1,477,000 ========= ========== ========= ========== Amount of Investment in Investees Subject to Significant Influence -- -- -- -- ========= ========== ========= ========== Total Assets 4,428,000 8,440,000 2,423,000 14,351,000 ========= ========== ========= ========== Totals per All Reconciling Financial Others Items Statements =========== =========== =========== $ $ $ Sales: External: - Domestic -- -- 2,535,000 - Foreign -- -- 27,535,000 Intersegment -- -- -- ----------- ----------- ----------- -- -- 30,070,000 Cost of Sales -- (185,000) 27,711,000 ----------- ----------- ----------- Gross Margin -- -- 2,359,000 ----------- ----------- ----------- Expenses: Operations and Administration 777,000 (260,000) 7,769,000 Amortization of Capital and Other Assets 31,000 -- 1,600,000 Interest on Long-term Debt -- -- 98,000 Other Interest and Bank Charges 3,000 -- 480,000 ----------- ----------- ----------- 811,000 -- 9,947,000 ----------- ----------- ----------- Income (Loss) before Taxes (811,000) -- (7,588,000) Provision for Income Taxes -- 15,000 (62,000) ----------- ----------- ----------- Income (Loss) before Non-recurring Items (811,000) -- (7,526,000) Non-recurring Items (6,491,000) -- (16,366,000) Non-controlling Interest -- -- 3,565,000 ----------- ----------- ----------- Net Income (Loss) for the Year (7,302,000) -- (20,327,000) =========== =========== =========== Cash Flows: From Operating Activities (900,000) -- (4,718,000) From Investing Activities (10,801,000) 6,805,000 (6,580,000) From Financing Activities 3,135,000 (6,805,000) 3,477,000 ----------- ----------- ----------- (8,566,000) -- (7,821,000) Cash and Cash Equivalents: Beginning of the Year 12,431,000 -- 13,814,000 ----------- ----------- ----------- End of the Year 3,865,000 -- 5,993,000 =========== =========== =========== Expenditures on Capital Assets and Goodwill during the Year 38,000 -- 1,792,000 =========== =========== =========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 116,000 -- 3,956,000 - Foreign -- -- 3,073,000 ----------- ----------- ----------- 116,000 -- 7,029,000 =========== =========== =========== Amount of Investment in Investees Subject to Significant Influence -- -- -- =========== =========== =========== Total Assets 35,402,000 (34,323,000) 30,721,000 =========== =========== ===========
EIGER TECHNOLOGY, INC. SEGMENTED INFORMATION September 30, 2000
Lexatec ADH K-Tronik Discontinued) Eiger ========= ========== ============= ========== $ $ $ $ Sales: External: - Domestic 2,834,000 -- -- -- - Foreign 5,000 6,718,000 (123,000) 47,513,000 Intersegment 18,000 -- -- -- ---------- ---------- ----------- ----------- 2,857,000 6,718,000 (123,000) 47,513,000 Cost of Sales 2,523,000 4,465,000 (92,000) 43,763,000 ---------- ---------- ----------- ----------- Gross Margin 334,000 2,253,000 (31,000) 3,750,000 ---------- ---------- ----------- ----------- Expenses: Operations and Administration 612,000 2,337,000 235,000 2,374,000 Amortization of Capital and Other Assets 159,000 465,000 1,000 646,000 Interest on Long-term Debt 71,000 -- -- 21,000 Other Interest and Bank Charges 103,000 252,000 1,000 195,000 ---------- ---------- ----------- ----------- 945,000 3,054,000 237,000 3,236,000 ---------- ---------- ----------- ----------- Income (Loss) before Taxes (611,000) (801,000) (268,000) 514,000 Provision for Income Taxes (184,000) (55,000) 1,000 324,000 ---------- ---------- ----------- ----------- Income (Loss) before Non-recurring Items (427,000) (746,000) (269,000) 190,000 Non-recurring Items -- -- -- -- Non-controlling Interest 3,000 545,000 107,000 (409,000) ---------- ---------- ----------- ----------- Net Income (Loss) for the Year (424,000) (201,000) (162,000) (219,000) ========== ========== =========== =========== Cash Flows: From Operating Activities (197,000) (3,067,000) (267,000) (3,360,000) From Investing Activities (157,000) (734,000) -- (650,000) From Financing Activities 354,000 4,226,000 267,000 3,795,000 ---------- ---------- ----------- ----------- -- 425,000 -- (215,000) Cash and Cash Equivalents: Beginning of the Year -- 21,000 -- 1,152,000 ---------- ---------- ----------- ----------- End of the Year -- 446,000 -- 937,000 ========== ========== =========== =========== Expenditures on Capital Assets and Goodwill during the Year 158,000 1,434,000 -- 8,206,000 ========== ========== =========== =========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 2,050,000 -- -- -- - Foreign -- 1,708,000 -- 8,790,000 ---------- ---------- ----------- ----------- 2,050,000 1,708,000 -- 8,790,000 ========== ========== =========== =========== Amount of Investment in Investees Subject to Significant Influence -- -- -- -- ========== ========== =========== =========== Total Assets 3,881,000 8,632,000 -- 28,042,000 ========== ========== =========== =========== Totals per All Reconciling Financial Others Items Statements =========== =========== =========== $ $ $ Sales: External: - Domestic -- (2,000) 2,832,000 - Foreign -- 123,000 54,236,000 Intersegment -- (18,000) -- ----------- ----------- ---------- -- 103,000 57,068,000 Cost of Sales -- 72,000 50,731,000 ----------- ----------- ---------- Gross Margin -- 31,000 6,337,000 ----------- ----------- ---------- Expenses: Operations and Administration (169,000) (235,000) 5,154,000 Amortization of Capital and Other Assets 8,000 (1,000) 1,278,000 Interest on Long-term Debt -- -- 92,000 Other Interest and Bank Charges 2,000 (1,000) 552,000 ----------- ----------- ---------- (159,000) (237,000) 7,076,000 ----------- ----------- ---------- Income (Loss) before Taxes 159,000 268,000 (739,000) Provision for Income Taxes 72,000 (1,000) 157,000 ----------- ----------- ---------- Income (Loss) before Non-recurring Items 87,000 269,000 (896,000) Non-recurring Items -- 64,000 64,000 Non-controlling Interest -- (107,000) 139,000 ----------- ----------- ---------- Net Income (Loss) for the Year 87,000 226,000 (693,000) =========== =========== ========== Cash Flows: From Operating Activities 279,000 -- (6,612,000) From Investing Activities (16,770,000) 8,742,000 (9,569,000) From Financing Activities 28,922,000 (8,742,000) 28,822,000 ----------- ----------- ---------- 12,431,000 -- 12,641,000 Cash and Cash Equivalents: Beginning of the Year -- -- 1,173,000 ----------- ----------- ---------- End of the Year 12,431,000 -- 13,814,000 =========== =========== ========== Expenditures on Capital Assets and Goodwill during the Year 95,000 -- 9,893,000 =========== =========== ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 90,000 -- 2,140,000 - Foreign -- -- 10,498,000 ----------- ----------- ---------- 90,000 -- 12,638,000 =========== =========== ========== Amount of Investment in Investees Subject to Significant Influence 175,000 -- 175,000 =========== =========== ========== Total Assets 40,093,000 (23,503,000) 57,145,000 =========== =========== ==========
EIGER TECHNOLOGY, INC. SEGMENTED INFORMATION September 30, 1999
Lexatec Eiger ADH K-Tronik Discontinued) (one month) ========= ========== ============= =========== $ $ $ $ Sales: External: - Domestic 3,397,000 -- -- -- - Foreign 83,000 2,950,000 3,007,000 2,467,000 Intersegment 55,000 -- -- -- --------- ---------- --------- ---------- 3,535,000 2,950,000 3,007,000 2,467,000 Cost of Sales 2,852,000 1,585,000 2,964,000 2,282,000 --------- ---------- --------- ---------- Gross Margin 683,000 1,365,000 43,000 185,000 --------- ---------- --------- ---------- Expenses: Operations and Administration 251,000 2,001,000 589,000 76,000 Amortization of Capital and Other Assets 192,000 161,000 1,000 4,000 Interest on Long-term Debt 111,000 -- -- -- Other Interest and Bank Charges 108,000 123,000 -- 2,000 --------- ---------- --------- ---------- 662,000 2,285,000 590,000 82,000 --------- ---------- --------- ---------- Income (Loss) before Taxes 21,000 (920,000) (547,000) 103,000 Provision for Income Taxes (6,000) 12,000 3,000 28,000 --------- ---------- --------- ---------- Income (Loss) before Non-recurring Items 27,000 (932,000) (550,000) 75,000 Discontinued Operations -- -- -- -- Negotiated Loan Reduction -- -- -- -- Non-controlling Interest (12,000) 381,000 5,000 (27,000) --------- ---------- --------- ---------- Net Income (Loss) for the Year 15,000 (551,000) (545,000) 48,000 ========= ========== ========= ========== Cash Flows: From Operating Activities 395,000 (548,000) (378,000) (2,113,000) From Investing Activities (350,000) (1,146,000) (8,000) (415,000) From Financing Activities (45,000) 1,603,000 386,000 3,680,000 --------- ---------- --------- ---------- -- (91,000) -- 1,152,000 Cash and Cash Equivalents: Beginning of the Year -- 112,000 -- -- --------- ---------- --------- ---------- End of the Year -- 21,000 -- 1,152,000 ========= ========== ========= ========== Expenditures on Capital Assets and Goodwill during the Year 19,000 587,000 7,000 1,649,000 ========= ========== ========= ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 2,052,000 -- -- -- - Foreign -- 423,000 6,000 1,755,000 --------- ---------- --------- ---------- 2,052,000 423,000 -- 1,755,000 ========= ========== ========= ========== Amount of Investment in Investees Subject to Significant Influence -- -- -- -- ========= ========== ========= ========== Total Assets 5,015,000 4,949,000 808,000 8,552,000 ========= ========== ========= ========== Totals per All Reconciling Financial Others Items Statements =========== =========== =========== $ $ $ Sales: External: - Domestic -- (464,000) 2,933,000 - Foreign -- (3,007,000) 5,500,000 Intersegment -- (55,000) -- ---------- ----------- ---------- -- (3,526,000) 8,433,000 Cost of Sales -- (3,628,000) 6,055,000 ---------- ----------- ---------- Gross Margin -- 102,000 2,378,000 ---------- ----------- ---------- Expenses: Operations and Administration 3,000 (510,000) 2,410,000 Amortization of Capital and Other Assets 3,000 65,000 426,000 Interest on Long-term Debt -- -- 111,000 Other Interest and Bank Charges -- -- 233,000 ---------- ----------- ---------- 6,000 (445,000) 3,180,000 ---------- ----------- ---------- Income (Loss) before Taxes (6,000) 547,000 (802,000) Provision for Income Taxes (4,000) (3,000) 30,000 ---------- ----------- ---------- Income (Loss) before Non-recurring Items (2,000) 550,000 (832,000) Discontinued Operations -- (545,000) (545,000) Negotiated Loan Reduction 293,000 -- 293,000 Non-controlling Interest -- (5,000) 342,000 ---------- ----------- ---------- Net Income (Loss) for the Year 291,000 -- (742,000) ========== =========== ========== Cash Flows: From Operating Activities (3,000) -- (2,647,000) From Investing Activities (6,449,000) 6,895,000 (1,473,000) From Financing Activities 6,418,000 (6,895,000) 5,147,000 ---------- ----------- ---------- (34,000) -- 1,027,000 Cash and Cash Equivalents: Beginning of the Year 34,000 -- 146,000 ---------- ----------- ---------- End of the Year -- -- 1,173,000 ========== =========== ========== Expenditures on Capital Assets and Goodwill during the Year -- -- 2,262,000 ========== =========== ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic -- -- 2,052,000 - Foreign -- -- 2,184,000 ---------- ----------- ---------- -- -- 4,236,000 ========== =========== ========== Amount of Investment in Investees Subject to Significant Influence 175,000 -- 175,000 ========== =========== ========== Total Assets 11,547,000 (13,853,000) 17,018,000 ========== =========== ==========
EX-4.A1 3 ex-4a1.txt PLAN OF EXCHANGE SCHEDULE A PLAN OF EXCHANGE UNDER CHAPTER 92A OF THE NEVADA REVISED STATUTES SECTION 1 - INTERPRETATION 1.1 Definitions. In this Plan of Exchange: (a) "Common Shares" means common shares in the capital of Onlinetel (b) "Common Shareholders" means holders of Common Shares. (c) "Dissent Procedures" means the procedures to be strictly followed by a dissenting Common Shareholder set at in Appendix I hereto. (d) "Earnout Shares" means the Eiger Common Shares to be issued to the Common Shareholders on a pro rata basis if Onlinetel achieves the revenue and net income (before tax) milestones set out in Subsection 3.1(b) hereto. (e) "Effective Date" means the date of filing of articles of Exchange with the Secretary of State. (f) "Eiger" means Eiger Technology, Inc., a corporation incorporated under the laws of British Columbia, Canada and continued pursuant to the laws of Ontario, Canada, having its head office situated at 330 Bay Street, Suite 602, Toronto, Ontario, Canada M5H 2S. (g) "Eiger Common Shares" means the common shares of Eiger. (h) "Exchange" means an exchange under the provisions of Chapter 92A of the NRS, on the terms and conditions set forth in this Plan of Exchange and any amendment or variation thereto made in accordance with the terms of the Exchange Agreement. (i) "Exchange" Agreement" means the exchange agreement dated as of August 3, 2001 between Onlinetel, certain principal Common Shareholders, Eiger and 3927237 Canada Ltd. to which this Plan of Exchange is attached as Schedule A. (j) "Fiscal Years" means collectively, the fiscal years of Onlinetel ending December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005 and "Fiscal Year" means one of such Fiscal Years. (k) "Letter of Transmittal" means the letter of transmittal provided by Onlinetel to Common Shareholders. (l) "NRS" means the Nevada Revised Statutes, as amended. 2 (m) "Onlinetel" means Onlinetel Inc., a company incorporated under the laws of Nevada having its head office situated at 30 Duke Street, Suite 701, Kitchener, Ontario, Canada N2H 3W5. (n) "Plan of Exchange", "hereof", "herein", "hereunder" and similar expressions refer to this Plan or Exchange, and not any particular article, section or other portion hereof. (o) "Secretary of State" means the Secretary of State for the State of Nevada. (p) "Subco means 3927237 Canada Ltd., a wholly-owned subsidiary of Eiger incorporated under the federal laws of Canada for the purpose of carrying out the Exchange and having its head office situated at 330 Bay Street, Suite 602, Toronto, Ontario, Canada M5H 2S8. (q) "Transfer Agent" means Pacific Corporate Trust Company at its principal office in Vancouver, BC, Canada. 1.2 Headings and References. The division of this Plan of Exchange into Sections and the insertion of headings are for convenience or reference only and do not affect the construction or interpretation of this Plan of Exchange. Unless otherwise specified, references to Sections or Appendices are to Sections of, and Appendices to, this Plan of Exchange. 1.3 Currency. All references to currency in this Plan of Exchange are to Canadian dollars. 1.4 Time. Unless otherwise indicated, all times expressed herein are local time, Toronto, Ontario. 1.5 Appendices. The following appendices attached hereto form part of this Plan of Exchange. Appendix I - Dissent Procedures SECTION 2 - EXCHANGE AGREEMENT 2.1 Exchange Agreement. This Plan of Exchange is made pursuant to, is subject to the provisions of, and forms part of the Exchange Agreement. SECTION 3 - THE EXCHANGE 3.1 The Exchange. On the Effective Date, the following will occur and will be deemed to occur without any further act or formality: (a) each issued and outstanding Common Share will be acquired by Subco in exchange for 0.0953 of an Eiger Common Share; and (b) Common Shareholders will have the right to receive up to 0.3813 of an Earnout Share as consideration for each Common Share acquired by Subco on the following basis: 3 (1) If Eiger receives an audited financial statements of Onlinetel in respect of a Fiscal Year evidencing that both the revenue and net income (before tax) targets in respect of that Fiscal Year as set out below have been met or exceeded, Eiger shall, within twenty (20) business days of its receipt of such financial statements issue 1,800,000 Earnout Shares to the former Common Shareholders pro rata to the percentage of Common Shares held by each Shareholder at the time of exchange. ----------------------------------------------------------- Fiscal Year 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Revenue $19,083,488 $37,347,766 $50,849,180 $59,867,184 - -------------------------------------------------------------------------------- Net Income (before tax) $ 2,442,015 $ 6,212,532 $ 9,352,747 $13,848,741 - -------------------------------------------------------------------------------- (2) In the event that Onlinetel does not achieve both the revenue and net income targets for a given Fiscal Year (a "Deficient Fiscal Year"), the Earnout Shares for the Deficient Fiscal Year shall not be forfeited but instead, the entitlement to the Earnout Shares will be carried forward as provided below to a maximum time limit of 2010. (3) If in any subsequent fiscal year of Onlinetel (which need not be a Fiscal Year as defined), Onlinetel achieves cumulative revenue and net income when combined with that of all fiscal years ending after December 31, 2001 (all of which need not be Fiscal Years as defined) equal to or greater than the revenue and net income for the Deficient Fiscal Year (after deducting revenue and net income for all Fiscal Years in respect of which Earnout Shares have been issued), the Earnout Shares for the Deficient Fiscal Year shall be immediately issued, in addition to any entitlement to receive Earnout Shares in respect of the current Fiscal Year. (4) In the event that in respect of a current Fiscal Year Onlinetel achieves both the revenue and net income targets applicable to a future Fiscal Year, the Earnout Shares in respect of that future Fiscal Year and all prior Fiscal Years shall be immediately issued to the Shareholders. (5) In the event that any of Eiger, Subco or Onlinetel is sold or completes a transaction which, directly or indirectly, results in a change of control, all Earnout Shares, to the extent not previously issued, and if the revenue and income targets above stated have been accomplished at the date of takeover, shall be immediately issued to the Common Shareholders. 3.2 Fractional Shares. Notwithstanding anything herein contained, no fractional Eiger Common Shares or Earnout Shares will be issued in connection with this Plan of Exchange. Where the aggregate number of Eiger Common Shares or Earnout Shares to be issued to a Common Shareholder would result in a fraction of an Eiger Common Share or Earnout Share being issued, such fractional interest shall be rounded up or down to the next highest or lowest whole number of Eiger Common Shares. 3.3 Acquisition of Common Shares of Dissenting Holders. Each Common Share of a dissenting Common Shareholder shall be, and shall be deemed to be, transferred to 4 Onlinetel for cancellation and cancelled contemporaneously with the acquisition by Subco of Common Shares pursuant to Section 3.1 and such holders shall thereupon have no rights or entitlements with respect to those Common Shares except as provided in Section 4. SECTION 4 - RIGHTS OF DISSENT 4.1 Rights of Dissent. Notwithstanding section 3.1, holders of Common Shares may exercise rights of dissent in strict compliance with the Dissent Procedures set forth in Appendix I. SECTION 5 - CERTIFICATES 5.1 Right to Share Certificates (a) Subject to Section 5.2, as soon as practicable following the Effective Date or the date upon which any Earnout Shares are required to be issued, as the case may be, where a Common Shareholder has delivered to the Transfer Agent a duly completed Letter of Transmittal and the certificates representing such holder's Common Shares, Eiger will cause the Transfer Agent either: (1) to forward or cause to be forwarded by first class insured mail to the Common Shareholder at the address specified in the Letter of Transmittal, or (2) if the Letter of Transmittal does not specify an address, to forward or cause to be forwarded to the Common Shareholder at the address of the holder as shown on the share register maintained by Onlinetel, certificates representing the Eiger Common Shares or Earnout Shares, as the case may be, required to be delivered to such Common Shareholder pursuant to the provisions hereof. (b) As soon as practicable following the Effective Date or the date upon which any Earnout Shares are required to be issued, as the case may be, where a Common Shareholder has not delivered a Letter of Transmittal and certificates contemplated by Subsection 5.1(a) and has not exercised rights of dissent in accordance with Section 4.1, Eiger will cause the Transfer Agent to make available at the principal office of the Transfer Agent in Vancourer certificates representing the Eiger Common Shares and, if applicable, Earnout Shares, required to be delivered to such Common Shareholder pursuant to the provisions hereof upon presentation of the certificates evidencing such Common Shares. 5.2 Registration. Unless otherwise directed by the Letter of Transmittal, the certificates representing the Eiger Common Shares and Earnout Shares referred to in Section 5.1 will be issued in the name of the registered holder of the Common Shares acquired. 5.3 Idem. Subject to Section 5.1, at and after the Effective Date, any certificate formerly representing Common Shares will represent only the right to receive Eiger Common Shares and Earnout Shares in accordance with this Plan of Exchange. APPENDIX I DISSENT PROCEDURES NRS 92A.300 Definitions. As used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those sections. (Added to NRS by 1995, 2086) NRS 92A.305 "Beneficial stockholder" defined. "Beneficial stockholder" means a person who is a beneficial owner of shares held in a voting trust or by a nominee as the stockholder of record. (Added to NRS by 1995, 2087) NRS 92A.310 "Corporate action" defined. "Corporate action" means the action of a domestic corporation. (Added to NRS by 1995, 2087) NRS 92A.315 "Dissenter" defined. "Dissenter" means a stockholder who is entitled to dissent from a domestic corporation's action under NRS 92A.380 and who exercises that right when and in the manner required by NRS 92A.400 to 92A.480, inclusive. (Added to NRS by 1995, 2087; A 1999, 1631) NRS 92A.320 "Fair value" defined. "Fair value," with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which he objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. (Added to NRS by 1995, 2087) NRS 92A.325 "Stockholder" defined. "Stockholder" means a stockholder of record or a beneficial stockholder of a domestic corporation. (Added to NRS by 1995, 2087) NRS 92A.330 "Stockholder of record" defined. "Stockholder of record" means the person in whose name shares are registered in the records of a domestic corporation or the beneficial owner of shares to the extent of the rights granted by a nominee's certificate on file with the domestic corporation. (Added to NRS by 1995, 2087) NRS 92A.335 "Subject corporation" defined. "Subject corporation" means the domestic corporation which is the issuer of the shares held by a dissenter before the corporate action creating the dissenter's rights becomes effective or the surviving or acquiring entity of that issuer after the corporate action becomes effective. (Added to NRS by 1995, 2087) NRS 92A.340 Computation of interest. Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed from the effective date of the action until the date of payment, at the average rate currently paid by the entity on its principal bank loans or, if it has no bank loans, at a rate that is fair and equitable under all of the circumstances. (Added to NRS by 1995, 2087) NRS 92A.350 Rights of dissenting partner of domestic limited partnership. A partnership agreement of a domestic limited partnership or, unless otherwise provided in the partnership agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the partnership interest of a dissenting general or limited partner of a domestic limited partnership are available for any class or group of partnership interests in connection with any merger or exchange in which the domestic limited partnership is a constituent entity. (Added to NRS by 1995, 2088) NRS 92A.360 Rights of dissenting member of domestic limited-liability company. The articles of organization or operating agreement of a domestic limited-liability company or, unless otherwise provided in the articles of organization or operating agreement, an agreement of merger or exchange, may provide I - 2 that contractual rights with respect to the interest of a dissenting member are available in connection with any merger or exchange in which the domestic limited-liability company is a constituent entity. (Added to NRS by 1995, 2088) NRS 92A.370 Rights of dissenting member of domestic nonprofit corporation. 1. Except as otherwise provided in subsection 2, and unless otherwise provided in the articles or bylaws, any member of any constituent domestic nonprofit corporation who voted against the merger may, without prior notice, but within 30 days after the effective date of the merger, resign from membership and is thereby excused from all contractual obligations to the constituent or surviving corporations which did not occur before his resignation and is thereby entitled to those rights, if any, which would have existed if there had been no merger and the membership had been terminated or the member had been expelled. 2. Unless otherwise provided in its articles of incorporation or bylaws, no member of a domestic nonprofit corporation, including, but not limited to, a cooperative corporation, which supplies services described in chapter 704 of NRS to its members only, and no person who is a member of a domestic nonprofit corporation as a condition of or by reason of the ownership of an interest in real property, may resign and dissent pursuant to subsection 1. (Added to NRS by 1995, 2088) NRS 92A.380 Right of stockholder to dissent from certain corporate actions and to obtain payment for shares. 1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of any of the following corporate actions: (a) Consummation of a plan of merger to which the domestic corporation is a party: (1) If approval by the stockholders is required for the merger by NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation and he is entitled to vote on the merger; or (2) If the domestic corporation is a subsidiary and is merged with its parent under NRS 92A.180. (b) Consummation of a plan of exchange to which the domestic corporation is a party as the corporation whose subject owner's interests will be acquired, if he is entitled to vote on the plan. (c) Any corporate action taken pursuant to a vote of the stockholders to the event that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or nonvoting stockholders are entitled to dissent and obtain payment for their shares. 2. A stockholder who is entitled to dissent and obtain payment under NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to him or the domestic corporation. (Added to NRS by 1995, 2087) NRS 92A.390 Limitations on right of dissent: Stockholders of certain classes or series; action of stockholders not required for plan of merger. 1. There is no right of dissent with respect to a plan of merger or exchange in favor of stockholders of any class or series which, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting at which the plan of merger or exchange is to be acted on, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held by at least 2,000 stockholders of record, unless: (a) The articles of incorporation of the corporation issuing the shares provide otherwise; or (b) The holders of the class or series are required under the plan of merger or exchange to accept for the shares anything except: (1) Cash, owner's interests or owner's interests and cash in lieu of fractional owner's interests of: (I) The surviving or acquiring entity; or (II) Any other entity which, at the effective date of the plan of merger or exchange, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held of record by a least 2,000 holders of owner's interests of record; or (2) A combination of cash and owner's interests of the kind described in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b) I - 3 2. There is no right of dissent for any holders of stock of the surviving domestic corporation if the plan of merger does not require action of the stockholders of the surviving domestic corporation under NRS 92A.130. (Added to NRS by 1995, 2088) NRS 92A.400 Limitations on right of dissent: Assertion as to portions only to shares registered to stockholder; assertion by beneficial stockholder. 1. A stockholder of record may assert dissenter's rights as to fewer than all of the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the subject corporation in writing of the name and address of each person on whose behalf he asserts dissenter's rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which he dissents and his other shares were registered in the names of different stockholders. 2. A beneficial stockholder may assert dissenter's rights as to shares held on his behalf only if: (a) He submits to the subject corporation the written consent of the stockholder of record to the dissent not later than the time the beneficial stockholder asserts dissenter's rights; and (b) He does so with respect to all shares of which he is the beneficial stockholder or over which he has power to direct the vote. (Added to NRS by 1995, 2089) NRS 92A.410 Notification of stockholders regarding right of dissent. 1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, the notice of the meeting must state that stockholders are or may be entitled to assert dissenters' rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections. 2. If the corporate action creating dissenters' rights is taken by written consent of the stockholders or without a vote of the stockholders, the domestic corporation shall notify in writing all stockholders entitled to assert dissenters' rights that the action was taken and send them the dissenter's notice described in NRS 92A.430. (Added to NRS by 1995, 2089; A 1997, 730) NRS 92A.420 Prerequisites to demand for payment for shares. 1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, a stockholder who wishes to assert dissenter's rights: (a) Must deliver to the subject corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effectuated; and (b) Must not vote his shares in favor of the proposed action. 2. A stockholder who does not satisfy the requirements of subsection 1 and NRS 92A.400 is not entitled to payment for his shares under this chapter. (Added to NRS by 1995, 2089; 1999, 1631) NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to assert rights; contents. 1. If a proposed corporate action creating dissenters' rights is authorized at a stockholders' meeting, the subject corporation shall deliver a written dissenter's notice to all stockholders who satisfied the requirements to assert those rights. 2. The dissenter's notice must be sent no later than 10 days after the effectuation of the corporate action, and must: (a) State where the demand for payment must be sent and where and when certificates, if any, for shares must be deposited; (b) Inform the holders of shares not represented by certificates to what extent the transfer of the shares will be restricted after the demand for payment is received; (c) Supply a form for demanding payment that includes the date of the first announcement to the news media or to the stockholders of the terms of the proposed action and requires that the person asserting dissenter's rights certify whether or not he acquired beneficial ownership of the shares before that date; (d) Set a date by which the subject corporation must receive the demand for payment, which may not be less than 30 nor more than 60 days after the date the notice is delivered; and (e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive. (Added to NRS by 1995, 2089) I - 4 NRS 92A.440 Demand for payment and deposit of certificates; retention of rights of stockholder. 1. A stockholder to whom a dissenter's notice is sent must: (a) Demand payment; (b) Certify whether he acquired beneficial ownership of the shares before the date required to be set forth in the dissenter's notice for this certification; and (c) Deposit his certificates, if any, in accordance with the terms of the notice. 2. The stockholder who demands payment and deposits his certificates, if any, before the proposed corporate action is taken retains all other rights of a stockholder until those rights are canceled or modified by the taking of the proposed corporate action. 3. The stockholder who does not demand payment or deposit his certificates where required, each by the date set forth in the dissenter's notice, is not entitled to payment for his shares under this chapter. (Added to NRS by 1995, 2090; A 1997, 730) NRS 92A.450 Uncertificated shares: Authority to restrict transfer after demand for payment; retention of rights of stockholder. 1. The subject corporation may restrict the transfer of shares not represented by a certificate from the date the demand for their payment is received. 2. The person for whom dissenter's rights are asserted as to shares not represented by a certificate retains all other rights of a stockholder until those rights are canceled or modified by the taking of the proposed corporate action. (Added to NRS by 1995, 2090) NRS 92A.460 Payment for shares: General requirements. 1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for payment, the subject corporation shall pay each dissenter who complied with NRS 92A.440 the amount the subject corporation estimates to be the fair value of his shares, plus accrued interest. The obligation of the subject corporation under this subsection may be enforced by the district court: (a) Of the county where the corporation's registered office is located; or (b) At the election of any dissenter residing or having its registered office in this state, of the county where the dissenter resides or has its registered office. The court shall dispose of the complaint promptly. 2. The payment must be accompanied by: (a) The subject corporation's balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, a statement of income for that year, a statement of changes in the stockholders' equity for that year and the latest available interim financial statements, if any; (b) A statement of the subject corporation's estimate of the fair value of the shares; (c) An explanation of how the interest was calculated; (d) A statement of the dissenter's rights to demand payment under NRS 92A.480; and (e) A copy of NRS 92A.300 to 92A.500, inclusive. (Added to NRS by 1995, 2090) NRS 92A.470 Payment for shares: Shares acquired on or after date of dissenter's notice. 1. A subject corporation may elect to withhold payment from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenter's notice as the date of the first announcement to the news media or to the stockholders of the terms of the proposed action. 2. To the extent the subject corporation elects to withhold payment, after taking the proposed action, it shall estimate the fair value of the shares, plus accrued interest, and shall offer to pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The subject corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenters' right to demand payment pursuant to NRS 92A.480. (Added to NRS by 1995, 2091) NRS 92A.480 Dissenter's estimate of fair value: Notification of subject corporation; demand for payment of estimate. 1. A dissenter may notify the subject corporation in writing of his own estimate of the fair value of his shares and the amount of interest due, and demand payment of his estimate, less any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of his shares and interest due, if he believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his shares or that the interest due is incorrectly calculated. I - 5 2. A dissenter waives his right to demand payment pursuant to this section unless he notifies the subject corporation of his demand in writing within 30 days after the subject corporation made or offered payment for his shares. (Added to NRS by 1995, 2091) NRS 92A.490 Legal proceeding to determine fair value: Duties of subject corporation; powers of court; rights of dissenter. 1. If a demand for payment remains unsettled, the subject corporation shall commence a proceeding within 60 days after receiving the demand and petition the court to determine the fair value of the shares and accrued interest. If the subject corporation does not commence the proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded. 2. A subject corporation shall commence the proceeding in the district court of the county where its registered office is located. If the subject corporation is a foreign entity without a resident agent in the state, it shall commence the proceeding in the county where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign entity was located. 3. The subject corporation shall make all dissenters, whether or not residents of Nevada, whose demands remain unsettled, parties to the proceeding as in an action against their shares. All parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. 4. The jurisdiction of the court in which the proceeding is commenced under subsection 2 is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or any amendment thereto. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. 5. Each dissenter who is made a party to the proceeding is entitled to a judgment: (a) For the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the subject corporation; or (b) For the fair value, plus accrued interest, of his after-acquired shares for which the subject corporation elected to withhold payment pursuant to NRS 92A.470. (Added to NRS by 1995, 2091) NRS 92A.500 Legal proceeding to determine fair value: Assessment of costs and fees. 1. The court in a proceeding to determine fair value shall determine all of the costs of the proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court. The court shall assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. 2. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable: (a) Against the subject corporation and in favor of all dissenters if the court finds the subject corporation did not substantially comply with the requirements of NRS 92A.300 to 92A.500, inclusive; or (b) Against either the subject corporation or a dissenter in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by NRS 92A.300 to 92A.500, inclusive. 3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the subject corporation, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. 4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters who are parties to the proceeding, in amounts the court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding. 5. This section does not preclude any party in a proceeding commenced pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68 or NRS 17.115. (Added to NRS by 1995, 2092) EX-4.A2 4 ex-4a2.txt SHARE PURCHASE AGREEMENT ETIFF HOLDINGS, LLC 8025 Excelsior Drive Suite 200 Madison, Wisconsin 53717 Tel: (608) 827-5300 Fax: (608) 827-5501 November 8, 2001 LMC Capital Corp. Suite 2602 - 1111 Beach Ave Vancouver, BC V6E 1T9 Dear Sir or Madam: Re: Sale of all issued and outstanding shares of ("K-Tronik") to LMC Capital Corp. ("LMC") This agreement (the "Agreement") sets forth the terms and conditions of our agreement whereby LMC Capital Corp. ("LMC") will purchase a 100% beneficial right, title and interest in and to 53% of the issued and outstanding shares (the "K-Tronik Majority Shares") of K-Tronik Int'l Corporation ("K-Tronik") from ETIFF Holdings, Inc. ("ETIFF") and in and to 47 % of the issued and outstanding shares (the "K-Tronik Minority Shares") from Mr. Robert Kim ("Mr. Kim"). The K-Tronik Majority Shares and the K-Tronik Minority Shares shall be referred to, collectively, as the "K-Tronik Shares". In consideration of the sum of $10.00 paid to each of ETIFF, K-Tronik and to Mr. Kim by LMC, the receipt and sufficiency of which is hereby acknowledged, and for other good and valuable consideration, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES 1.1 LMC represents and warrants to ETIFF, K-Tronik and Mr. Kim that: (a) LMC is a valid and subsisting corporation duly incorporated and in good standing under the laws of the State of Nevada; (b) entering into this Agreement does not and will not conflict with, and does not and will not result in a breach of, any of the terms of its incorporating documents or any agreement or instrument to which LMC is a party; (c) this Agreement has been or will be authorized by all necessary corporate action on the part of LMC; and (d) LMC is in good standing with the Securities and Exchange Commission, the Nevada Secretary of State and all other regulatory and statutory bodies having jurisdiction over its business affairs. 2 1.2 K-Tronik and ETIFF represent and warrant to LMC that: (a) K-Tronik beneficially owns any and all rights to the business of K-Tronik (the "Business and Intellectual Property"); (b) there are no outstanding agreements or options to acquire or purchase any interest in any of the Business and Intellectual Property, and no person has any royalty or other interest whatsoever in the Business and Intellectual Property; (c) entering into this Agreement does not and will not conflict with, and does not and will not result in a breach of, any agreement or instrument to which K-Tronik and / or ETIFF are party; and (d) K-Tronik and ETIFF have due and sufficient right and authority to enter into this Agreement in accordance with this Agreement, and this Agreement has been or will be authorized by all necessary action on the part of K-Tronik. 1.3 ETIFF and Mr. Kim represent and warrant to LMC that: (a) they beneficially own, free and clear of all liens and encumbrances of any kind, all of the K-Tronik Shares and the K-Tronik Shares represent all of the issued and outstanding shares, of all types or classes, of K-Tronik; (b) there are no outstanding agreements or options to acquire or purchase any interest in any of the K-Tronik Shares, and no person has any royalty or other interest whatsoever in the K-Tronik Shares (save and except that which is created in this Agreement and that which vests in ETIFF itself); and (c) entering into this Agreement does not and will not conflict with, and does not and will not result in a breach of, any agreement or instrument to which ETIFF is party. 2. PURCHASE AND SALE 2.1 ETIFF hereby agrees to sell to LMC, and LMC hereby agrees to purchase from ETIFF, an undivided 100% beneficial right, title and interest in and to the K-Tronik Majority Shares for a deemed price of $5,300,000 (the "ETIFF Purchase Price"). The ETIFF Purchase Price shall be paid by way of the issuance to ETIFF of 7,571,428 common shares of LMC (the "New LMC Shares issued to ETIFF") at a deemed price of $0.70 per common share. 2.2 Mr. Kim hereby agrees to sell to LMC, and LMC hereby agrees to purchase from ETIFF, an undivided 100% beneficial right, title and interest in and to the K-Tronik Minority Shares for a deemed price of $4,700,000 (the "Kim Purchase Price"). The Kim Purchase Price shall be paid by way of the issuance to Mr. Kim of 6,714,286 common shares of LMC (the "New LMC Shares issued to Mr. Kim") at a deemed price of $0.70 per common share. 3 2.3 The New LMC Shares issued to Mr. Kim and the New LMC Shares issued to ETIFF shall be referred to, collectively, as the "New LMC Shares". 2.4 As a condition of its sale of the K-Tronik Majority Shares, ETIFF shall be granted the option (and shall exercise the option) to purchase a total of 3,000,000 LMC Shares from the existing shareholders of LMC for a purchase price of $30. 2.5 As a condition of the sale of the K-Tronik Shares, LMC shall agree to settle the outstanding debts of K-Tronik to its parent, ETIFF, in the amount of $4,071,000 by way of the issuance of 4,071,000 common shares of LMC at a deemed price of one common share per $1.00 of outstanding debt owed to ETIFF. 2.6 The New LMC Shares shall be placed in escrow for release as follows: (a) 10% of the escrowed shares shall be released upon closing of the transactions herein (the "First Release Date"); and (b) 15% of the escrowed shares shall be released every six months (on the six month anniversary of the First Release Date. 3. RIGHTS AND OBLIGATIONS OF THE PARTIES 3.1 Upon execution of this Agreement, ETIFF, LMC and K-Tronik shall take all reasonable steps to: (a) gain, prior to Closing, such approvals to the purchase and sale of the K-Tronik Shares as may be required from K-Tronik and from regulatory and statutory authorities having jurisdiction; (b) at any time prior to Closing, not do or permit to be done any act or thing which would or might in any way adversely affect the rights of LMC hereunder; (c) ensure that K-Tronik and LMC (through its ownership of the K-Tronik Shares) will have, upon Closing, exclusive and quiet possession of the Business and Intellectual Property, without the occupation of the same or any part thereof by any other person; and (d) Upon Closing, LMC shall take all reasonable steps and make all reasonably necessary efforts to ensure that its common shares are posted for trading through the facilities of the NASD's OTCBB and shall further take all reasonably necessary efforts to ensure the New LMC Shares issued to Mr. Kim and to ETIFF are registered for resale in the United States under the Securities Exchange Act of 1934. 4. CLOSING 4.1 The closing of the purchase of the K-Tronik Shares (the "Closing") shall occur no later than 10 business days following the later of the date of any required regulatory approval to this transaction being granted or the date of execution of this Agreement unless otherwise agreed by LMC, ETIFF, Mr. Kim and K-Tronik. 4.2 Upon Closing, the Directors of LMC shall concurrently resign and shall appoint to the 4 Board of Directors of LMC Keith Attoe, Gerry Racicot, Robert Kim and T.W. Chung provided each consents to so act. The present President, Secretary and Treasurer of LMC shall resign and the new Board of Directors shall appoint Robert Kim as President, Keith Attoe as Treasurer and J.K. Lee as Secretary provided each consents to so act. 4.3 Upon Closing, the sole shareholder of K-Tronik (which shall then be LMC) shall hold a shareholders' meeting for K-Tronik and shall confirm the appointment of the present President and Directors of K-Tronik. 5. MISCELLANEOUS 5.1 Any notice to be required or permitted hereunder will be in writing and sent by delivery, facsimile transmission, or prepaid registered mail addressed to the party entitled to receive the same, or delivered to such party at the address specified above, or to such other address as either party may give to the other for that purpose. The date of receipt of any notice, demand or other communication hereunder will be the date of delivery if delivered, the date of transmission if sent by facsimile, or, if given by registered mail as aforesaid, will be the date on which the notice, demand or other communication is actually received by the addressee. 5.2 This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors and permitted assigns. 5.3 Each of the parties hereto agrees that it shall be responsible for its own legal expenses and disbursements relating to this Agreement and the negotiation and preparation of any further agreements. 5.4 This Agreement shall be interpreted and construed in accordance with the laws of the State of New Jersey and the parties agree to attorn to the courts thereof. 5.5 All dollar figures in this Agreement are given in valid currency of the United States of America. 5.6 This Agreement may be executed by facsimile and in counterpart. 5.7 All amendments to this Agreement must be in writing and signed by all of the parties hereto. 5.8 The interests, rights and obligations of the parties herein may not be assigned, sold, transferred or otherwise conveyed without the express written consent of the parties hereto. 5.9 All parties have been advised to seek independent legal advice with respect to applicable securities, tax and other laws, statutes and regulations and with respect to their review of this Agreement. If the above terms and conditions accurately record your understanding of our agreement, please 5 so acknowledge by signing a copy of this Agreement in the space provided below turning the same to us at your earliest convenience. Upon your execution thereof, this Agreement will constitute a legal and binding agreement subject to its terms. Yours truly, ETIFF HOLDINGS, LLC ________________________________ Operating Manager The terms of the Agreement above are hereby read, understood, acknowledged, accepted and consented to (should such consent by required) by the undersigned effective the 8th day of November, 2001. MR. ROBERT KIM ________________________________ LMC CAPITAL CORP. ________________________________ Authorized Signatory K-TRONIK INT'L CORPORATION ________________________________ Authorized Signatory EX-4.A3 5 ex-4a3.txt SHARE PURCHASE AGREEMENT EIGER TECHNOLOGY, INC. 330 Bay Street Suite 602 Toronto, Ontario M5H 2S8 Tel: (416) 216-8659 Fax: (416) 216-1164 December 19, 2001 Newlook Capital Corp. Suite 1304 - 925 West Georgia Street Vancouver, BC V6C 3L2 Attention: Mr. Hari Varshney Dear Mr. Varshney: Re: Sale of all issued and outstanding shares of Vision Unlimited Equipment Inc. (and through it, its subsidiary, ADH Custom Metal Fabricators Inc.) ("Vision") to Newlook Capital Corp. ("Newlook") This agreement (the "Agreement") sets forth the terms and conditions of our agreement whereby Newlook Capital Corp. ("Newlook") will purchase a 100% beneficial right, title and interest in and to all of the issued and outstanding shares (the "Shares") of Vision Unlimited Equipment Inc. (and through it, its subsidiary, ADH Custom Metal Fabricators Inc.) ("Vision") from the sole shareholder of Vision (the "Shareholder"), Eiger Technology, Inc. In consideration of the sum of $10.00 paid to each of the Shareholder and to Vision, by Newlook, the receipt and sufficiency of which is hereby acknowledged, and for other good and valuable consideration, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES 1.1 Newlook represents and warrants to the Shareholder and to Vision that: (a) Newlook is a valid and subsisting corporation duly incorporated and in good standing under the laws of the Province of British Columbia and has 2,000,000 common shares issued and outstanding of which 1,000,000 common shares are subject to escrow under the terms of their issue; (b) entering into this Agreement does not and will not conflict with, and does not and will not result in a breach of, any of the terms of its incorporating documents or any agreement or instrument to which Newlook is a party; (c) this Agreement has been or will be authorized by all necessary corporate action on the part of Newlook; (d) Newlook is in good standing with the British Columbia Securities Commission, the Canadian Venture Exchange (the "CDNX") and all other regulatory and statutory bodies having jurisdiction over its business and affairs; (e) the number of persons holding a Board Lot (as that term is defined in the CDNX policies) of shares of Newlook, even assuming the consolidation in Section 5 had taken place, shall not be less than 200 on execution of this Agreement ; (f) there shall be no issuance of additional securities of any kind by Newlook after execution of this Agreement and prior to Closing unless otherwise agreed by the parties hereto; (g) payment of all outstanding fees owed to the CDNX has been made prior to the execution of this Agreement; and (h) Newlook will not make any request, either of the sponsor retained in connection with this Agreement or of the CDNX, to resume trading of its common shares prior to Closing. 1.2 Vision and the Shareholder represent and warrant to Newlook that: (a) entering into this Agreement does not and will not conflict with, and does not and will not result in a breach of, any agreement or instrument to which Vision and / or the Shareholder are party; (b) Vision and the Shareholder have due and sufficient right and authority to enter into this Agreement in accordance with this Agreement, and this Agreement has been or will be authorized by all necessary action on the part of Vision; (c) the Shareholder beneficially owns, free and clear of all liens and encumbrances of any kind, all of the Shares and the Shares represent all of the issued and outstanding shares, of all types or classes, of Vision; (d) Vision will manage its business in a reasonable and responsible manner until Closing; (e) Both Vision Unlimited Equipment Inc. and ADH Custom Metal Fabricators Inc. are in good standing under the laws of the Province of Ontario wherein they are incorporated; and (f) The Shareholder is in good standing British Columbia Securities Commission, the Ontario Securities Commission, the Toronto Stock Exchange and all other regulatory and statutory bodies having jurisdiction over its business affairs. 2. PURCHASE AND SALE 2.1 The Shareholder hereby agrees to sell to Newlook, and Newlook hereby agrees to purchase from the Shareholder, an undivided 100% beneficial right, title and interest in and to the Shares in consideration of the issuance to the Shareholder of 4,800,000 common shares of Newlook (the "Newlook Shares") at a deemed price of $0.50 per common share for a total purchase price of $2,400,000. The Newlook Shares will be issued to the Shareholder after the consolidation referred to in Section 5.4(b) is implemented. 2.2 Newlook will execute a Finder's Fee agreement with Hammer Holdings (St. Thomas) Inc. calling for the issuance of 240,000 common shares (issued after the consolidation referred to in Section 5.4(b)) being 5% of the Newlook Shares. 2.3 The Newlook Shares shall be, when issued, fully paid and non-assessable common shares in the capital of Newlook and will be free and clear of all liens, charges and encumbrances save and except for hold periods or resale restrictions imposed by applicable securities laws, regulations and statutes in the Province of British Columbia, in the Province of Ontario and in the policies of the CDNX. 3. RIGHTS AND OBLIGATIONS OF THE PARTIES 3.1 Upon execution of this Agreement, Newlook shall take all reasonable steps to: (a) gain, prior to Closing, such approvals to this Agreement as may be required from its shareholders and from regulatory and statutory authorities having jurisdiction (including, in particular, from the CDNX); (b) at any time prior to Closing, not do or permit to be done any act or thing which would or might in any way adversely affect the rights of Vision and the Shareholder hereunder; and (c) provide to the Shareholder, any party contracted as a Sponsor on the CDNX (as that term is defined in the policies of the CDNX) and their designated representatives (including legal counsel), any and all reasonably requested agreements, documents, records, data and files (in written or electronic form) relating to Newlook which are in the care, control and possession of Newlook. 3.2 Upon execution of this Agreement, the Shareholder and Vision shall take all reasonable steps to gain, prior to Closing, such approvals to the purchase and sale of the Shares as may be required from the Shareholder, from Vision and from regulatory and statutory authorities having jurisdiction. 4. FORMAL AGREEMENT 4.1 The parties agree that this Agreement incorporates all of the essential terms of their agreement and that it shall be binding upon them. However, the parties may negotiate, on or before Closing, a formal agreement, or agreements, (the "Formal Agreement") which may incorporate such further terms and conditions as are reasonably necessary to carry out, and give effect to, the general terms and conditions of this Agreement if they so choose. 4.2 If the parties choose to negotiate the Formal Agreement, they hereby agree that upon execution of the Formal Agreement all prior understandings and agreements, whether verbal or written, shall be superseded by the terms of the Formal Agreement and that such prior understandings and agreements, including this Agreement, shall be superseded and terminated by the terms of the Formal Agreement. 5. CLOSING 5.1 The closing of the purchase of the Shares (the "Closing") shall occur no later than 10 business days following the occurrence of both the final acceptance for filing of this Agreement with the CDNX and approval of this Agreement by the shareholders of Newlook, unless otherwise agreed by Newlook, the Shareholder, and Vision. 5.2 Upon Closing, the Directors of Newlook shall resign and shall appoint to the Board of Directors of Newlook John Ramsbottom, Gerry Racicot and Keith Attoe should they consent to so act. These three new directors shall also become the new officers of Newlook as President, Chairman of the Board / CEO and CFO respectively. 5.3 Upon Closing, the sole shareholder of Vision (which shall then be Newlook) shall hold a shareholder's meeting for Vision and shall confirm the appointment of the present President and Directors of Vision until such time as the next annual meeting of shareholders is convened. 5.4 The following are conditions precedent to Closing and conditions precedent to the performance of any of the Shareholder's or Visions' obligations under the terms of this Agreement: (a) the transfer, in escrow, of 880,000 of the present 1,000,000 escrowed common shares of Newlook to the Shareholder or a party it may designate in consideration of the payment of $88,000 to the present holders (pro rata according to their holdings) of these escrowed common shares; (b) the granting of any required regulatory and shareholder approval necessary to implement on Closing a consolidation, on a one for two basis, of the existing 2,000,000 common shares of Newlook issued and outstanding; (c) the cancellation of all 200,000 outstanding share purchase options of Newlook; (d) the agreement of the present directors of Newlook that they shall only make application to release from escrow the 120,000 escrowed common shares (60,000 escrowed common shares after implementing the consolidation in 5.4(b) above) in accordance with the present escrow terms (that is, they will not seek to accelerate the present three year release from escrow); (e) the working capital of Newlook shall, upon execution of this Agreement, be not less than $35,000; and (f) any and all management or other contracts by which Newlook rents space, secures management or office services or is otherwise required to make payments to a third party on an ongoing or periodic basis shall be cancelled prior to execution of this Agreement. 5.5 Newlook shall, concurrently with the execution of this Agreement, enter into an agreement (the "Sponsorship Agreement") by which a broker member of the CDNX agrees to act as Sponsor (as that term is defined in the policies of the CDNX) for the transactions contemplated by this Agreement). The Sponsorship Agreement shall contain the following terms: (i) the Sponsor shall charge Newlook not more than $30,000 as a sponsorship fee; and (ii) the expenses which the Sponsor charges Newlook under the Sponsorship Agreement shall be capped at $7,500 (excluding legal fees). 5.6 Upon execution of both this Agreement and the Sponsorship Agreement, Eiger shall pay to Mr. Hari Varshney a deposit of $25,000 on the escrow shares to be purchased in 5.4(a) above (the "Deposit"). The Deposit shall be non-refundable in the event that Eiger does not proceed with this Agreement for any reason other than non-performance by Newlook or a material breach of the representations and warranties of Newlook herein. 5.7 As a condition precedent to Closing, Newlook shall obtain shareholder and regulatory approval to change its name to whatever corporate name the Shareholder shall reasonably request. 5.8 As a condition precedent to Closing, Newlook shall make all necessary efforts to ensure that, if it is required under the policies of the Ontario Securities Commission or the CDNX, it is deemed to be a reporting issuer in the Province of Ontario upon Closing. 6. MISCELLANEOUS 6.1 Any notice to be required or permitted hereunder will be in writing and sent by delivery, facsimile transmission, or prepaid registered mail addressed to the party entitled to receive the same, or delivered to such party at the address specified above, or to such other address as either party may give to the other for that purpose. The date of receipt of any notice, demand or other communication hereunder will be the date of delivery if delivered, the date of transmission if sent by facsimile, or, if given by registered mail as aforesaid, will be the date on which the notice, demand or other communication is actually received by the addressee. 6.2 This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors and permitted assigns. 6.3 Each of the parties hereto agrees that it shall be responsible for its own legal expenses and disbursements relating to this Agreement and the negotiation and preparation of any further agreements. 6.4 This Agreement and the Final Agreement shall be interpreted and construed in accordance with the laws of British Columbia and the parties agree to attorn to the courts thereof. 6.5 All dollar figures in this Agreement are given in valid currency of Canada. 6.6 This Agreement may be executed by facsimile and in counterpart. 6.7 All amendments to this Agreement must be in writing and signed by all of the parties hereto. 6.8 The interests, rights and obligations of the parties herein may not be assigned, sold, transferred or otherwise conveyed without the express written consent of the parties hereto. 6.9 The performance of the covenants and obligations of the Shareholder and Newlook herein are hereby made expressly subject to the completion of due diligence investigations of Vision and the Shareholder by Newlook and the Sponsor on or before February 28, 2002 and are further subject to the receipt of any required regulatory approvals by Newlook or shareholder approvals required by Newlook. If the above terms and conditions accurately record your understanding of our agreement, please so acknowledge by signing a copy of this Agreement in the space provided below turning the same to us at your earliest convenience. Upon your execution thereof, this Agreement will constitute a legal and binding agreement subject to its terms. Yours truly, EIGER TECHNOLOGY INC. - ------------------------ The terms of the Agreement above are hereby read, understood, acknowledged, accepted and consented to (should such consent by required) by the undersigned effective the 19th day of December, 2002. NEWLOOK CAPITAL CORP. - ---------------------------- Authorized Signatory -----END PRIVACY-ENHANCED MESSAGE-----