UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended - March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28772
SLOAN ELECTRONICS, INC.
(Name of Small Business Issuer in its charter)
Delaware 35-1990559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1751 Stickney Pt,. Rd, Sarasota FL 34231
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(941)349-6583
(Former name, former address and former fiscal year if changed since
last report)
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 [ ]
As of March 31, 1999, the Registrant has outstanding
11,147,749 shares of Common Stock, $.001 par value.
Documents Incorporated by Reference
Certain exhibits listed in Item 6 of Part II have been incorporated by
reference. An index to exhibits appears with Item 6.
<PAGE>
THIS QUARTERLY REPORT CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS
QUARTERLY REPORT AND INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR
CURRENT EXPECTATIONS OF THE COMPANY, WITH RESPECT TO (I)THE COMPANY'S
PRODUCT DEVELOPMENT AND FINANCING PLANS, (II) TRENDS AFFECTING THE
COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS,(III)THE IMPACT OF
COMPETITION AND (IV)THE EXPANSION OF CERTAIN OPERATIONS. ANY SUCH FORWARD-
LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
Sloan Electronics, Inc.
Form 10-QSB
Quarterly Report, period ended March 31, 1999
INDEX page number
PART I Financial Information
Item 1. Financial Statements
Accountants' Compilation Report F1
Statements Of Financial Condition F2
Statements Of Operations F3
Statement Of Changes In Stockholders' Equity F4
Statements Of Cash Flows F5
Item 2. Management's discussion and analysis of
financial conditions and results of operations.
Part II. Other Information
<PAGE>
April 28, 1999
TO THE BOARD OF DIRECTORS
Sloan Electronics, Inc.
Sarasota, Florida
ACCOUNTANTS COMPILATION REPORT
We have compiled the accompanying statements of financial condition of
Sloan Electronics, Inc., as of March 31, 1999 and December 31, 1998, the
related statement of changes in stockholders' equity for the periods then
ended, and the statements of operations and cash flows for the three month
periods ended March 31, 1999 and 1998, in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted
disclosures were included in the financial statements, they might influence
the user's conclusions about the Company's financial position, results of
operations, and cash flows. Accordingly, these financial statements are
not designed for those who are not informed about such matters.
Bobbitt, Pittenger & Company, P.A.
Certified Public Accountants
F1
<PAGE>
Part I Financial Information
Item 1. Financial Statements
SLOAN ELECTRONICS, INC.
STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
1999 1998
ASSETS
Cash $ 2,949 $ 19,792
Accounts receivable - net 11,250 12,126
Inventory 22,870 27,171
Prepaid insurance 19,743 26,422
Prepaid legal fees 366,667
Deferred syndication costs 100,000 100,000
---------- ----------
TOTAL CURRENT ASSETS 523,479 185,511
---------- ----------
EQUIPMENT - NET 1,668 1,892
---------- ----------
$ 525,147 $ 187,403
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 79,615 $ 79,736
Accrued expenses 115,086 117,442
Accrued interest 9,213 8,650
Accrued interest - related party 50,248 41,189
Notes payable 33,406 41,718
Notes payable - related party 235,000 210,000
------- -------
TOTAL CURRENT LIABILITIES 522,568 498,735
STOCKHOLDERS' EQUITY
Common stock - authorized 80,000,000 shares;
par value $.001; issued and outstanding,
11,147,749 and 10,635,249 shares at March 31,
1999 and December 31, 1998, respectively 11,148 10,635
Additional paid-in capital 1,032,680 603,134
Due from officer (33,465) (33,565)
Accumulated deficit (1,007,784) (891,536)
----------- ---------
TOTAL STOCKHOLDERS' EQUITY 2,579 (311,332)
----------- ---------
$ 525,147 $ 187,403
=========== =========
See accountants' compilation report.
F2
<PAGE>
SLOAN ELECTRONICS, INC.
STATEMENTS OF OPERATIONS
Three months
ended Year ended
March 31, 1999 December 31, 1998
SALES $ 4,828 $ 84,659
COST OF SALES 3,948 67,959
--------- --------
GROSS PROFIT 880 16,700
EXPENSES
Selling 21,501 1,277
General and administrative 86,005 337,219
Interest 9,622 28,518
------- --------
117,128 367,014
------- --------
OPERATING LOSS BEFORE INCOME
TAXES AND EXTRAORDINARY GAIN (116,248) (350,314)
INCOME TAXES
-------- ---------
LOSS BEFORE EXTRAORDINARY GAIN (116,248) (350,314)
EXTRAORDINARY GAIN 50,185
--------- ---------
NET LOSS $(116,248) $(300,129)
========= ==========
NET LOSS PER SHARE $ (.011) $ (.030)
========= ==========
See accountants' compilation report.
F3
<PAGE>
SLOAN ELECTRONICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid-in Due from Accumulated Total
Stock Capital Officer Deficit
BALANCE,
January 1, 1998 $ 9,189 $376,497 $ (33,565) $ (591,407) $(239,286)
Sale of common stock 225 64,775 65,000
Stock issued for services 111 10,889 11,000
Stock issued in private
placement offering 1,000 99,000 100,000
Note payable converted to
common stock 110 51,973 52,083
Net loss (300,129) (300,129)
-------- -------- -------- ---------- ----------
BALANCE,
December 31, 1998 10,635 603,134 (33,565) (891,536) (311,332)
Sale of common stock 13 9,987 10,000
Stock issued for services 500 399,500 400,000
Stock issued as compensation 20,059 20,059
Net loss (116,248) (116,248)
Payment-due from officer 100 100
-------- -------- ------- ---------- --------
$11,148 $1,032,680 $(33,465) $(1,007,784) $ 2,579
======== ========= ======== ========= =======
See accountants' compilation report.
F4
<PAGE>
SLOAN ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
Three months
ended Year ended
March 31, 1999 December 31,1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(116,248) $(300,129)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 224 898
Forgiveness of accounts payable (50,185)
Stock issued for services 400,000 11,000
Stock options issued for compensation 20,059
Stock issued for accrued interest 2,083
Decrease in operating assets:
Accounts receivable - net 876 77,606
Inventory 4,301 (17,020)
Prepaid insurance 6,679 (26,422)
Prepaid legal fees (366,667)
Deferred syndication costs (100,000)
Due from officer 100
Increase (decrease) in operating liabilities:
Accounts payable (121) 5,335
Accrued expenses (2,356) 95,912
Accrued interest - related parties 9,622 25,963
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (43,531) (274,959)
-------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of equipment (903)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 25,000 126,718
Proceeds from sale of common stock 10,000 165,000
Repayments of loans (8,312)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 26,688 291,718
-------- --------
NET (DECREASE) INCREASE IN CASH (16,843) 15,856
CASH, at beginning of period 19,792 3,936
-------- --------
CASH, at end of period $ 2,949 $ 19,792
========= ========
See accountants' compilation report.
F5
<PAGE>
Three months
Ended Year ended
March 31, 1999 December 31, 1998
SUPPLEMENTAL DISCLOSURES:
Interest paid $ - $ 1,545
--------- -----------
Non cash financing activity - note payable
of $50,000 and accrued interest of $2,083
converted to 110,000 shares of common stock
in the year ended December 31, 1998
Non cash financing activity - stock issued for prepaid
legal fees 500,000 shares, valued at $400,000
Non cash financing activity - stock options
issued for compensation 30,000 shares,
compensation valued at $20,059
<PAGE>
Part I. Item 2. Description of business and management's discussion
Sloan Electronics, Inc. (the "Company") designs, manufacturers and markets
electronic monitoring equipment primarily for the criminal justice industry
and the long-term health care industry. The Company markets its house
arrest monitoring equipment through its in-house marketing department and
currently distributes its products through national service providers. The
Company's medical division has a distribution agreement with Response USA,
a distributor of personal emergency response systems. King Alarm, a
security product distributor, no longer is an exclusive distributor of
Company products to the security industry.
The Company's revenues are primarily from product sales. Based on a written
agreement, the Company will receive recurring payments from Response USA
based on a percentage of their service revenue. The Company received
recurring revenue from Response USA in the first quarter of 1999.
MAS Acquisition I Corp. (the "Company"), was incorporated on July 31, 1996
in the State of Delaware, to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. On
December 5, 1997, pursuant to the terms of an Agreement of Merger (the
"Agreement") between the Company and Sloan Electronics, Inc. ("Sloan"),
Sloan has merged into the Company and the Company has changed its name to
Sloan Electronics, Inc.
Products
Criminal Justice:
The Company offers a full range of electronic monitoring equipment for the
criminal justice system's house arrest corrections programs and for the
medical industry's long-term health care providers. The Company strikes a
balance between its ability to provide solid, state-of-the-art, high-
quality products and its ability to retail these products at the lower end
of the industry's pricing spectrum.
The concept behind the Company's product line is that each product is able
to stand alone, without after-market equipment such as door sensors or
additional custom wiring, yet each product is integratable with a number of
pre-existing computer software programs. This philosophy of integration
makes the Company's SEI Alert products and Wander Watch products more
attractive to institutional consumers.
The SEI Alert 24 Single Offender Based System. A tamper-proof transmitter
is custom-fitted and attached to an offender's ankle. This anklet is
waterproof and designed to be worn at all times. A home-based receiver is
placed in a central location within a residence, and a range setting is
selected. In the event that the anklet is removed, or that the person
wearing it strays outside the predetermined range, the event is recorded,
time and date stamped, and sent to an outside monitoring station within 4
minutes. The current industry average time window is over 8 minutes.
The SEI Alert 24 Half-Way House Multi-Residence System. Each person
paroled to a half-way house is fitted with an anklet transmitter. The
receiver then monitors the movements of each client within the
predetermined parameter of the half-way house and records any and all
violations. This system can work as a stand-alone measure with the current
data sent via a telephone line to monitoring station, or can also work as
an in-house employee monitoring station. The system is designed to monitor
from 1 to 50 offenders.
<PAGE>
The SEI Alert 24 Drive-By Transmitter Detector. This device is designed
for use by parole officers, probation officers or security officers. This
mobile surveillance system allows an officer to check on a house arrest
client simply by driving past the offender's residence, work place or
school. The system detects and displays the ID of a particular offender by
interfacing with that person's anklet transmitter. The receiver unit time
an date stamps the information collected, and it can also upload this
information to a central computer.
The SEI Alert 24 Chain Gang / Work Release Departure Alert System. Each
inmate is fitted with an anklet transmitter. A single guard monitors the
portable programmable receiver unit which alerts the officer in the event
that an offender, or group of offenders, leaves the general area.
The SEI Alert 24 Automated Check In System. A kiosk for the criminal
justice industry to facilitate the "day reporting" of offenders on
probation or parole. Client is verified using hand print technology,
listens to a specific message from the parole officer and replies using a
telephone handset and tone pad. The system can collect restitution money
and issues a receipt to the offender showing check-in details and payments.
The system interfaces with a computer that can generate various reports. As
a case management tool it improves a parole officer's efficiency in
managing the growing number of inmates released into supervision programs.
It is currently in field trial in Washington state for the Department of
Corrections. The Company is pursuing license agreements with prospective
customers.
Medical Monitoring:
The Wander Watch Single Patient System. An adjustable, tamper-proof anklet
is fitted to a patient's leg. It is completely waterproof and designed to
be worn at all times, including bathing and swimming. The micro-
transmitter in the anklet sends a coded silent radio signal to the home
receiver, which in turn determines the proximity of the patient to the base
unit. An alarm will sound when the patient travels beyond the selected
range or if the anklet is removed. This alarm can be transmitted by
telephone to a central station using industry standard alarm protocols.
Dispatchers at the central station can then take the appropriate responses,
such as calling the caregiver, notifying a neighbor, or calling emergency
services.
The Wander Watch Multi-Patient Wander Alert System. A computer-based
system specifically designed for placement within a medical facility, the
Multi-Patient Alert System is able to notify a caregiver in the event of a
patient departure from a long-term healthcare facility. It was originally
configured to monitor the movements of 1 to 25 patients. Unlike most
wander alert systems installed in a medical facility, the Wander Watch
system stands alone and does not require custom electrical wiring,
installation of door sensors or the use of door barrier detection
equipment.
<PAGE>
Nurse Call Alert 24. A wireless nurse call system with a 500 resident
capacity, which can be installed in less than 30 minutes. This system
utilizes fail-safe technology, provides coverage of any sized facility,
outputs usage reports and provides for a complete audit trail. The system's
advanced features include an automatic signal check, low battery reporting
and an optional range extender. The system can function as a nurses' call
network or it can complement an optional paging system to direct staff to
medical emergencies in a more timely and efficient manner. This system is
currently available for field trials.
Other products:
Fleet Watch Alert 24. This radio frequency reporting system allows a
company to passively keep tract of its fleet vehicle traffic. Every time a
fleet vehicle drives onto or off the company property, the event is date
and time stamped automatically. This enables a company to keep track of
employee hours, vehicle use and vehicle status instantly. The Fleet Watch
computerized base unit is fully integratable with other computer software,
allowing the unit to generate vehicle status reports on demand. No longer
is it necessary for a company to assign an employee the duty of physically
counting each vehicle on the lot. This system is available for field
trials.
INDUSTRY BACKGROUND
The Corrections Industry. The United States currently locks up a greater
share of its residents than any other nation. According to the US
Department of Justice there were 3.5 million people on probation or parole
at year end 1995, and the estimated 5.5 million total in the correctional
population equals 2.8% of US adults and is growing at 4.5% per year. As of
June 30, 1995, there were 1,004,608 state prison inmates, up 9.1%, and
99,466 federal inmates, up 6.1%. The annual average increase in the prison
population since 1980 has been 8.7% per year.
The Criminal Justice System regards house arrest as an acceptable
alternative to incarceration for the nonviolent segment of the prison
population, and as a better way to monitor criminals once they are paroled
to a half-way house facility. The public's insistence on increased law
enforcement along with their reluctance to fund additional prisons also
makes house arrest using electronic assisted monitoring systems an
increasingly attractive alternative to incarceration.
The Medical Industry. A patient's compulsive desire to wander about is a
symptom of dementia, which often accompanies Alzheimer's Disease.
Biologically, this is caused by physical changes in the brain. Oftentimes
the patient acts out of routine, such as the repetitive action of getting
ready to leave for work every day. Sometimes the patient just feels tense
or trapped and wants to escape his environment. Until recently, a common
medical practice was to heavily sedate these patients, or to restrain a
patient to a chair or bed to keep them from wandering. Today, hospitals
and institutions maintain separate facilities to enable them to better deal
with patients who demonstrate a compulsive desire to wander. However, the
huge costs associated with institutionalized care, along with its
impersonal nature, make at-home care an important option for many families.
<PAGE>
Of the 4 million currently diagnosed with Alzheimer's, 3 million live at
home, cared for by family, visiting aides, and nurses supplied by the
estimated 18,000 at-home care agencies which are projected to grow 30%
every two years. The Sloan electronic Wander Watch Alert 24 systems are
designed to help at-home caregivers and institutions safeguard patients
prone to wandering.
The US Administration on Aging projects as many as 14.3 million Alzheimer's
cases by 2040. The Company believes that the long-term healthcare segment
of the medical industry is growing at an increasing rate. The Sloan
Electronics Wander Watch Alert 24 Multi-Patient system is designed for long
term care facilities. The Company also believes that the home-care segment
of the healthcare market is growing at a steady rate. The Wander Watch
Alert 24 Single Patient System is specifically designed to meet the needs
of the more than 3 million Alzheimer's patients and patients with related
medical disorders, who are cared for at home. These systems not only help
protect the patient, but they also give the at-home caregiver peace of mind
that their loved one will not wander off at night or when the caregiver is
momentarily distracted.
BUSINESS STRATEGY
The Company's electronics business strategy is based on establishing a
market share within the criminal justice house arrest industry and within
the healthcare industry. By incorporating better, more cost-effective
technology into its SEI Alert 24 product line and its Wander Watch
products, the Company believes that its products are among the best
currently available in these two industries.
Until recently, Management has defined the Company's role as primarily a
research, development and manufacturing entity. Management plans to
continue to market products directly to the criminal justice industry,
while relying on distributors such as Response USA to market its Wander
Watch healthcare product line. However, Management recognizes that there
are many business opportunities for the Company in addition to its
electronic monitoring business. Consequently, the Board of Directors will
recommend to the shareholders a name change that will reflect their
decision to divide operations into multiple divisions with operations in
the technology, education and electronics industry sectors. Shareholders'
approval will be voted on at the Annual Meeting of Shareholders on May 22,
1999. One of the Company's proposed new technology divisions will provide
distance learning over the internet. The Company has signed a letter of
intent to acquire for stock an internet learning company. The "Cyber
Learning" curricula will be available worldwide and will allow students in
foreign countries to obtain accredited higher education degrees as well as
training certificates over the Internet. The Company is presently
evaluating a number of other strategic relationships with established
businesses in the internet, electronics and technology industries as well
as the criminal justice industry with a view towards acquiring existing
profitable businesses along with management teams as operating divisions.
<PAGE>
To further the Company's goals and improve shareholder value through
acquisitions, management has taken steps to promote the company to
investors in order to improve share price. A strong price with good daily
volume will allow the company to raise the capital needed to grow the core
business, and to fuel expansion into other businesses through acquisitions
for stock. To these ends, the Company has hired David Feingold, Esq. of
Feingold & Kam. As an SEC attorney specializing in issues that affect
emerging companies, Mr. Feingold is working with management to position the
Company as a holding company with interests in the Internet and technology
sectors. He will coordinate and pay any consultants for services. Several
officers of the Company and individual shareholders have paid Feingold &
Kam from their personal holdings. In accordance with a resolution of the
Board of Directors, these payments will be reimbursed by the Company. In
the first quarter of 1999, 500,000 shares were paid to Feingold & Kam under
this arrangement.
High-Quality Image. The Company believes that within the house arrest and
medical monitoring industries, the Company has built a reputation for
developing and manufacturing some of the best, cost-effective and user-
friendly systems on the market. The Wander Watch products and the SEI Alert
24 products reflect the Company's commitment to quality. The Company
pursues the highest standards in its design, component selection, assembly
and appearance of its products. The Company recognizes that product
dependability and reliability are highly significant to the Company's
continued success. Therefore, quality control and customer satisfaction
play an important role in the Company's business strategy.
Focus on Private Residence. The Wander Watch product line and the SEI Alert
24 product lines are both specifically designed to be used in a private
home, apartment or townhouse. Ease-of-use and stand-alone features inherent
to both products give the Company a competitive advantage in these areas.
The Wander Watch Single Patient System is both affordable and easy to
install. The receiver unit plugs into a standard outlet. Unlike most
competitive products, this is all that is required to install and operate
the products; doors do not need to be wired with sensors. There are no
wires or barriers associated with the products. This stand-alone concept
runs contrary to the current industry thinking. Management believes that
this concept is one of the reasons that makes the Company's product line
more attractive to the consumers.
Customer Service and Support. Sloan Electronics believes that its
relationship with its dealers and its consumers has contributed
significantly to its past success and should continue to enhance its
future prospects. The Company's ability to upgrade its equipment in the
field not only gives the Company a competitive advantage within the
industry, but also allows it to focus on up-selling and upgrading its
product line.
<PAGE>
PRODUCT DESIGN AND DEVELOPMENT
The Company is continuously engaging in electronic component research,
design, experimentation and development, all of which are essential to
maintaining a competitive advantage in the market place. The overall
product development is managed and directed by Paul Sloan, President of the
Company. In addition, on project-by-project basis, a product development
team is assembled from personnel within the Company and may include
personnel outside the Company as well.
The Company's product development team is responsible for developing
working designs of all approved product concepts using computer-aided
design systems, and for coordinating all modeling and initial prototyping.
The in-house testing department evaluates all prototypes. The Company then
creates the full documentation to build its products and designs all of its
circuitry artwork. Complete product specifications and blue-printed product
designs are then sent to Kimchuk Inc., which prints the circuit-boards,
assembles, tests, performs quality control inspections to rigid standards,
packages and finally drop-ships the Company's products to its distributors
or directly to its customers.
The Company believes that investment in product development, and its
relationship with Kimchuk, enables it to reduce prototype development time
substantially. The Management believes that this shortened lead time
enhances the Company's ability to place new products in distribution, which
strengthens its competitive position.
SALES AND MARKETING
The Company's marketing strategy varies based upon each product line. With
regard to the criminal justice house arrest market, the Company plans to
continue aggressively market its SEI Alert 24 products to independent
service providers and to municipalities which monitor and administer their
own house arrest programs. The Board of Directors has created the position
of Vice President of Sales and named Donald Grimes to the post. Mr. Grimes
has extensive experience in the criminal justice monitoring industry. In
addition, the company is seeking strategic associations with other
companies to develop and market enhanced products for the criminal justice
industry. The Company has licensed its Wander Watch Alert 24 single patient
departure alert system for exclusive distribution to the long-term health
care industry to Response USA, a major company in the PERS (Personal
Emergency Response System) industry. Response USA leases Wander Watch Alert
24 single patient systems on a monthly basis to individual users and to
home care agencies. The Company has terminated its exclusive arrangement
with KingAlarm for distribution of the Wander Watch Alert24 single patient
departure alert systems to the security industry. The Company will seek
independent security companies to act as distributors to the security
industry. Marketing strategies and distribution decisions concerning other
products are handled on a product-by-product basis.
<PAGE>
SEI Alert 24 Products. The criminal justice house arrest market is
dominated by several manufacturers who, along with retailing their
products, are also contract service providers who compete in the security
industry. These manufacturers have developed proprietary software which is
not currently integratable with standard, existing security company
protocol. Their software is not as effective or user-friendly as security
industry software. However, these manufacturers look upon this proprietary
software as a way to shut small security companies out of a lucrative
market.
Based on current trends, management believes that within 5 years, 80% of
the municipalities who currently monitor their own house arrest program
will get out of the business. Independent security contractors will be
competing directly against these other equipment manufacturers for service
contracts. The Company is in the position to market its fully integratable
home incarceration system to these security providers, thus leveling the
playing field within the house arrest industry.
The Wander Watch Products. The Company views its corporate role in the
medical monitoring industry as that of developer, designer and
manufacturer. To that end, the Company has negotiated and signed contracts
with Response USA to distribute its Wander Alert detection equipment.
Response USA leases the systems to individuals and home care agencies and
offers central station monitoring of the Wander Watch Alert 24 units for an
additional monthly fee. The company has a recurring revenue sharing
arrangement with Response USA. The Company began receiving income from
recurring monthly fees in the first quarter of 1999. Response USA has four
regional offices servicing all 50 states and markets to home care agencies,
hospitals, adult day care facilities, as well as individuals. Response USA
receives payment for the Wander Watch system both from end users and
various state and local agencies. Currently reimbursements include
Milwaukee, Pennsylvania, Department of Aging waiver program, Rhode Island
Department of Aging, partial reimbursement from local California programs
and partial reimbursement from New York local programs. Reimbursement is
pending in Massachusetts, and Response USA is seeking other state and local
agencies to approve the systems for reimbursement. There is no assurance
that other reimbursements will be obtained or those in place will continue.
Response USA also receives referrals from the National Alzheimer
Association and participates in their Safe Return program.
Advertising. The Company has advertised in trade publications specific to
the markets it manufacturers products for, and in journals which test its
products and publish company-by-company product comparisons. The Company is
constantly seeking out innovative ways to build name recognition within the
industries in which it competes, as well as to create public awareness for
its product line. The Company maintains a web site at www.seialert24.com .
<PAGE>
COMPETITION
The Company competes in a number of niche markets, which the Company
believes will continue to grow.
House Arrest Market. The Company's competitors within the criminal justice
market include BI Incorporated, Strategic Technologies, Inc., and Elmo-
Tech Ltd. Although all of the Companies manufacturing house arrest products
base their products on the same principals, management believes that the
Company has competitive advantages over its competitors within this
industry.
1. The SEI Alert 24 product line uses a 900 MHz spread spectrum radio
frequency rather than the standard 300 MHz frequency. This difference in
technology is similar to the technological differences that exist between
cordless phones. Phones using 900 MHz radio frequencies are far superior to
those less expensive models that experience interference problems due to
the fact that they operate at a lower frequency.
2. The SEI Alert 24 products have an exclusive low range setting on the
receiver unit, which ensures that house arrest means house arrest and not
neighborhood arrest. With other systems, an offender could wander the
neighborhood and still not trip the distance setting on the base unit. The
industry standard low range setting is a 150 foot perimeter. SEI's low
range setting is between 40 and 60 feet.
3. With competitors' equipment, the "window" from the time an offender
steps outside the range setting until he is detected as being outside the
range setting varies from 6 to 30 minutes. With some systems, an offender
is able to leave his residence for that period of time and return
undetected. The SEI Alert 24 system greatly improves performance and offers
an exclusive 4 minute radio frequency window.
4. The SEI Alert 24 anklet transmitter is tamper resistant. No tamper
system currently available is 100% tamper proof or false alarm proof;
however, the SEI Alert 24 system is the most reliable on the market when it
comes to false alarms. A false alarm necessitates a physical inspection of
the anklet transmitter by a monitoring officer; therefore, this fact is
viewed as a major selling point among security providers.
5. The SEI Alert 24 product line has been designed to allow security
companies access to one of the fastest growing segments of the industry:
electronic home incarceration. The competitors' use of abusive pricing
policies and proprietary software which is incompatible with standard
central station equipment have worked together to keep independent
contractors out of the market. Using the Company's products, these security
companies are now able to compete with BI Incorporated, Strategic
Technologies, and Elmo-Tech for municipal contracts on an even footing.
Unlike other manufacturers, the Company currently does not directly compete
against its customers in the contract monitoring business. However, the
company is seeking strategic associations with other companies in the
criminal justice monitoring industry to vertically integrate its business
and maximize market share.
<PAGE>
Long-Term Healthcare Market. The Company's competition in this market
includes WanderGuard, Code Alert, Watchmate and Secure Care Products. All
of these companies utilize proximity sensing technology, which requires
that a patient wear a low powered transmitter that sends a weak signal. A
receiver is mounted at each door. When a patient approaches the door, an
alarm sounds and the door magnetically locks. The Company's Wander Watch
Alert 24 technology has a competitive advantage over proximity-sensing
systems since it requires no additional wiring of door sensors and provides
a higher level of patient security.
1. With competitive products, the transmitter attached to a patient has no
removal alert (an inherent part of the Wander Watch systems). These
transmitters are attached with a hospital ID type band. Common behavior for
an Alzheimer's patient, or other patients suffering from dementia, is to
try to remove everything from their bodies. The Wander Watch anklet, if
removed, activates an alarm at the receiver unit. 2. Proximity-sensing
technology requires the installation of barriers, door sensors and magnetic
locks. Prices per door range from $2,500 to over $5,000, with the average
facility having anywhere between four and ten doors. Automatic door locks
also create problems with existing fire alarms and fire regulations, for in
the event of a fire, the proximity technology and magnetic door locks need
to be deactivated.
3. The Wander Watch system utilize 900 MHz spread spectrum radio frequency
technology, a tamper-resistant anklet transmitter with a tamper alarm, and
sells its products at a price below that charged by the competition.
The Fleet Watch Alert 24. The Fleet Watch system is another unique product
of the Company. The Company believes that no other company offers a fully
integratable passive monitoring system for fleet vehicles. This system is
able to generate full vehicle status reports on demand, confirm employee
hours of vehicle operation and continuously monitor the comings and goings
of fleet vehicles. This tamper resistant monitoring system installs in less
than 30 minutes, ends unapproved vehicle use, and provides a complete audit
trail and other necessary usage reports for each vehicle in a company's
fleet. This unit has been successfully tested on a fleet of concrete
trucks.
The Nurse Call Alert 24. A fully supervised 900 MHz spread spectrum
wireless nurse call system is yet another innovation by the Company. The
Company believes that this system is among the best wireless security
system available, with unique features such as automatic signal check and
low battery reporting. With the systems optional range extenders, any
sized facility may be monitored. Another unique integratable option is the
paging system which assists in quicker response times by staff.
MANUFACTURING AND ASSEMBLY
The Company manufactures all of its products in the USA. Kimchuk Inc., the
Company's primary contract manufacturer, has many years of experience as an
electronics manufacturer and designer. Kimchuk manufacturers over 500
different products at its four plants located through out the East Coast.
<PAGE>
The Company's relationship with Kimchuk allows it to reduce its production
costs, to reduce its final testing costs and to reduce its personnel costs.
The Company designs all of its products with automatic insertion, surface
mount technology, and automatic testing in mind. This attention to detail
enables Kimchuk to manufacture and assemble the Company's products in the
most cost-efficient manner, while maintaining accuracy in circuit board
production and error-free transfer and component connections.
Product Warranties. The Company supports its products with a limited 1-year
warranty, which covers all defects in materials or workmanship. the Company
will repair or replace defective units without charge to the consumers for
labor or materials. The Company's service department acts as liaison
between the customer and Kimchuk and works aggressively to resolve any and
all problems a customer may have with any of its products. The Company has
not experienced a material level of product warranty claims for breakage or
other defects.
FUTURE PRODUCTS
The Company continues to look for new ideas for development of new
products. The Company believes that new products could represent
substantial new business for the Company.
GOVERNMENT REGULATION
The Company's facilities are subject to numerous federal, state and local
laws and regulations designed to protect the environment from waste
emissions and hazardous substances. The Company is also subject to the
Federal Occupational Safety and Health Act and other laws and regulations
effecting the safety and health of employees in the administrative and
manufacturing areas of its facilities. The Company believes that is in
compliance in all material aspects with all applicable environmental and
occupational safety regulations. The Company's radio frequency anklet
transmitter is subject to FCC (Federal Communications Commission)
regulations, as are all radio frequency devices. The Company has obtained
type approval #HCQ3B6WWT for the anklet transmitter and its products are in
compliance with FCC rules Part 15.
YEAR 2000
The Company's products and operations are year 2000 compliant.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company, and the
Notes thereto appearing elsewhere herein, and in conjunction with the
Balance Sheet at December 31, 1998 and Income Statement for the year ended
December 31, 1998 contained in the Company's Annual Report 10-KSB and in
conjunction with the quarterly 10-QSB reports for the periods ended March
31, 1998 and June 30, 1998, and September 30, 1998 incorporated herein by
reference, and is qualified in its entirety by reference to such financial
statements.
RESULTS OF OPERATIONS
A majority of the Company's revenues are derived from sales of
electronic monitoring devices to the long term health care and criminal
justice industry. Sales revenues are recognized when the products are
shipped.
Operating revenues decreased by $9,026 (65%) for the quarter ended
March 31, 1999 as compared to the quarter ended March 31, 1998
Gross profit for the first quarter of 1999 decreased to $880 compared
to $9008 for the first quarter of 1998. The decrease is due in part to
lower margins on sales of spares and parts, which have a lower markup.
Selling, general and administrative expenses were $107,506 in the
first quarter of 1999, compared to $86,412 for the first quarter of 1998.
This represents an increase of 25% over selling, general and administrative
expenses for the first quarter of 1998. The increase is in part due to
increased insurance costs, professional fees, and contract services and
expenses. Sales and marketing expenses increased to $21,501 for the first
quarter 1999. Sales and marketing expenses increased due to the hiring of
Don Grimes as VP Sales in November of 1998. Management is concerned with
the sales performance and attributes poor results as partially due to lack
of funding for inventory. The commitment to hire a full time sales person
was made so that the Company can maintain industry contacts in anticipation
of obtaining funds to build inventory. General and administrative expenses
remained fairly consistent in the first quarter of 1999 compared to the
first quarter of 1998.
The net loss for the quarter ending March 31, 1999 was $116,248 or
$0.011 per share based on 11,147,749 shares outstanding, as compared to a
net loss for the first quarter of 1998 of $86,412, or $0.009 per share. The
net loss for the period is primarily attributed to insufficient level of
revenue generated by the Company.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
Net cash provided from financing activities was $26,688 for the three
months ended March 31, 1999, raised through private placement of common
stock and borrowing.
The Company has no material commitments for capital cash expenditures
during the next quarter and believes that its current cash and working
capital position and future income from operations will require sufficient
additional capital to meet its cash and working capital needs.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item 3. Defaults.
None
Item 4. Submission Of Matters To A Vote Of Security Holders.
None
Item 5. Other Information
The Company has entered into a letter of intent to acquire distance
learning business from IEG Holdings, Inc. Subsequent to the close of the
first quarter 1999, the Company has determined that it will be in its best
interest to concentrate first on the acquisition of the Spanish University
of America distance learning portion of IEG Holdings, and is conducting due
diligence prior to setting a closing date. The Company also has been in
acquisition negotiations with RTI Global,Inc., a provider of electronic
publishing solutions for commercial printers and publishers. The Company is
evaluating the possibility that it may be able to acquire a majority stake
in RTI, but has not yet entered into a letter of intent. The Company is
also discussing possible acquisition with several monitoring companies in
the criminal justice and security industries. These acquisitions, if
realized, would allow for vertical integration of the Company's equipment
manufacturing and management capabilities with municipal contract service
providers and client central monitoring facilities.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2.0) Plan and Agreement of Merger between MAS Acquisition Corp. and
Sloan Electronics Inc. as filed with the Form 8-K Amendment on
March 18, 1998.
(2.1) Article of Amendment changing company name from MAS Acquisition I
Corp. to Sloan Electronics, Inc. as filed with the Form 8-K
Amendment on March 18, 1998.
(3)(i) Articles of Incorporation as filed with the Form 10-SB
Registration Statement on September 4, 1996.
(3)(ii)Bylaws of the Company adopted by the Company from the
Bylaws of Sloan Electronics, Inc. as amended, filed with
the form 10-QSB on November 12, 1998
(4) Specimen Stock Certificate as filed with the Form 10-SB
Registration Statement on September 4, 1996.
(4.1) Specimen Stock Certificate replacing MAS Acquisition I Corp. Stock
Certificate, filed with form 10-KSB/A April 7, 1998.
(4.2) Stock Option Plan approved by shareholders May 16,1998 as filed with
form DEF-14A April 10, 1998.
(10) Material Contracts as filed with the form 10-KSB/A April 7, 1998
(13) Quarterly reports for 1998 filed as 10-QSB on May 14,
1998, 10-QSB/A on August 20, 1998 and 10-QSB on November
13, 1998. Annual Report 10K-SB for the period ended
December 31, 1998 as filed on March 30, 1999.
(22) Published report regarding matters submitted to vote as
Filed with DEF-14A on April 10, 1998 and DEF-14A as filed
On April 6, 1999.
(27) Financial data schedule for electronic filing.
(99.1) Consulting Agreement with Feingold & Kam
(99.2) Letter of Intent with IEG Holdings
(b) Reports on Form 8-K
None
<PAGE>
Signatures
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SLOAN ELECTRONICS, INC.
Dated May 12, 1999
By: /s/ Paul Sloan
Paul Sloan
President and CEO
Dated May 12, 1999 By: /s/ Larry Provost
Larry Provost
Chairman and CFO
AMENDED AND RESTATED
LEGAL AND CONSULTING ENGAGEMENT AGREEMENT
This Amended and Restated Legal and Consulting Engagement
Agreement ("Agreement") is made this 5th day of May, 1999 by and between
Feingold & Kam, an international business company and an entity which
provides legal services and investment banking consultation services
(hereinafter "Consultant")and Sloan Electronics, Inc., a Delaware
Corporation (hereinafter "Company").
RECITALS:
Whereas, Company and Consultant originally entered into an
agreement on or about January 22nd of 1999 for the provision of services by
the Consultant to the Company; and
Whereas, the Company and Consultant previously and mutually agreed to void
said prior agreement and have since been working together and desire to
recognize their relationship in writing.
NOW, THEREFORE, for and in consideration of valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree to the following:
1. SERVICES. Consultant shall provide the following services to the
Company and the Company agrees that the Consultant shall be the only entity
to provide said services unless the parties mutually agree to additional
firms, persons or entities to also be providing these services (hereinafter
the "Services"):
<PAGE>
a. Assist in raising all capital necessary for the operation of Company
b. Assist in all public relations matters regarding the operation of the
Company
c. Assist in creating strategic plans to help the Company's stock grow and
be stable
d. Assist in meeting National Association of Securities Dealer's
requirements
e. Assist in the creation of mergers and acquisitions
f. Provide all legal services necessary for the completion of a merger
and/or acquisition
g. Provide all legal services necessary for the creation of contracts and
the compliance with laws regarding the daily operation of the Company
h. Obtain market makers and broker dealers for involvement in the
securities transactions of the Company
i. Obtain retail brokerage and analyst involvement of the Company's stock
j. Hire public relations firms
2. DURATION OF THE AGREEMENT. This Agreement shall be in effect from the
date of execution of this Agreement until such time as either party desires
to terminate this Agreement. Notification of a desire to terminate this
Agreement shall be provided by one party to the other via Certified Mail,
Return Receipt. Thereafter, thirty days after the receipt of said letter
of termination, this Agreement shall be terminated. The purpose of this
clause is to permit each party to be continuously satisfied with the
conduct of the other and thereby maintain this Agreement so long as each
party satisfies the other.
<PAGE>
3. REPRESENTATIONS OF THE COMPANY. The Company Represents and Warrants
that all free trading stock that is in the possession of either the
Company, its officers, directors, agents, affiliates, employees, beneficial
holders of more than five percent of the Company's Stock or those persons
who have received stock via a private placement or securities act
exemption; have been disclosed to the Consultant and shall not trade in the
open market without prior notification to Consultant. Company understands
that this term has been placed in this Agreement because any attempt by
Consultant to perform its Services could be dramatically affected by an
increase in the public float of the Company and thereby Consultant must
have adequate assurances as to the amount of and location of the freely
trading float of stock at all times.
4. COMPENSATION. The Company agrees to pay Consultant the following
compensation (the "Compensation") for the Services:
a. The Company acknowledges that it does not have the working capital to
pay cash monies to the Consultant nor does the Company possess securities
that are freely trading and/or registered with which to pay the Consultant.
Therefore, the Company shall permit the Consultant to purchase restricted
shares and/or negotiate to purchase shares of stock from
officers/directors/shareholders of the Company. The Company may in its
discretion repay any officers/directors/shareholders who pay Consultant on
behalf of the Company and the Consultant may act as escrow and/or receive
valuable consideration for assisting the Company in completing any of the
Services. Compensation shall be based on a per task basis based on the
level and extent of the Services provided and the mutual agreement of the
parties hereto.
5. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida and venue shall only be appropriate in Palm Beach County,
Florida.
6. WAIVER OF CONFLICT. The Company acknowledges that many of the companies
and individuals with which the Company may conduct business with by virtue
of introduction by the Consultant are in fact companies and individuals
that the Consultant has represented in the past and/or may represent in the
future. The Company specifically waives any claim of conflict of interest
against Consultant and the Company understands that many of Consultant's
contacts who may perform services or do business with the Company are in
fact past and/or present and/or future clients of Consultant.
Each party has read this Agreement and agrees to abide by the terms hereof:
/s/David Feingold /s/Larry Provost
Authorized signature for and on Authorized signature for and on
behalf of Feingold & Kam, IBC, an behalf of Sloan Electronics, Inc.,
International Business Company a Del. Corporation
5/5/1999 Date 5/5/1999 Date
Letter of Intent
for the Purchase and Sale of Capital Stock
by and Between
IEG Holdings, Inc.
as Sellers
and
Sloan Electronics, Inc.
as Purchaser
This Letter of Intent Agreement for the Purchase and Sale of Capital
Stock (the "Agreement") made between IEG Holdings, Inc. and its
shareholders ("Seller") and Sloan Electronics, Inc. ("Purchaser") is made
this 3rd day of March, 1999.
PRELIMINARY STATEMENT
Purchaser intends to purchase from Seller, and Seller intends to sell to
Purchaser, all of their respective right, title and interest in, to and
under the capital stock of IEG Holdings, Inc., a Florida corporation
consisting of educational and internet businesses and programs representing
approximately two million dollars in gross annual revenues (hereinafter
collectively referred to as the "Business"), which comprises all of the
shares of the Business, strictly in accordance with the terms and
provisions of this Agreement.
Purchaser is a company which is publicly traded via the over the counter
bulletin board market and Seller is a private company which has no publicly
traded stock.
This Agreement shall set forth the terms and conditions of a sale of stock
as specified herein, and the actual sale shall occur at the closing date
specified herein. This document shall not be deemed to create a binding
transaction. Each party may withdraw from undertaking this transaction
until the date of closing and the execution of all closing documents. This
Agreement sets forth the intended terms of a transaction that may be
subject to adjustments at closing based on the results of a due diligence
period referred to herein.
NOW THEREFORE, in consideration of the foregoing Preliminary Statement,
which is incorporated by reference with the same force and effect as if
fully set forth herein, and in consideration of the mutual promises and
covenants contained in this Agreement, Purchaser and Seller collectively
agree as follows:
1. Sale of the Stock. In consideration of the Purchase Price, as
herein defined, and the covenants, conditions, restrictions and agreements
stipulated to be paid and performed by Purchaser and Seller and upon the
terms and provisions of this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, all of the outstanding and
issued stock of the Business owned by Seller, which collectively is equal
to one hundred percent of the stock in the Business.
2. Purchase Price. The purchase price (collectively herein called the
Purchase Price) for the purchase and sale of the Seller's share of the
stock of the Business shall be the consideration set forth in Exhibit "A"
attached hereto and incorporated herein by reference.
<PAGE>
The Purchase Price shall be paid in either stock or lawful money of the
United States of America by cash, cashier's check, treasurer's check, bank
check, certified check, wire transfer or other immediately available funds
of the United States or any combination thereof as specified in Exhibit "A"
attached hereto.
3. Creditors of Business; Indemnification. Seller agrees to and with
Purchaser that all existing creditors of Business who are owed $1,000.00 or
more by the Business as of this date, if any, are set forth on Exhibit "B"
of this Agreement, together with a description of the amounts due and owing
and the names of such creditors.
Seller expressly agrees to defend all actions against Purchaser
and/or the Business with respect to and shall pay, protect, indemnify and
save harmless Purchaser and/or the Business from and against any and all
liabilities, losses, damages, costs, expenses (including reasonable
attorney's fees and expenses), causes of action, suits, claims, demands or
judgments of any nature to which Purchaser and/or the Business, or any of
them is subject to because of actions by the Seller on behalf of the
Business prior to the closing.
The aforementioned indemnifications shall not be applied in favor of
an indemnitee as to actions of an indemnitor if such indemnitee had
specific knowledge of and did not object to, or concurred in, such actions
at or prior to the time the indemnitor took such actions.
4. Stock Power; Restrictive Covenant, Operation of the Business.
Stock Powers shall be delivered to Purchaser upon the payment of the
Purchase Price, together with all stock certificates representing the one
hundred percent of the stock in the Business.
A. Seller's Covenant Not to Compete. In order to induce the Purchaser
to purchase the shares of the Business, the Seller hereby agrees that until
the second anniversary of the closing under this Agreement, he will not,
individually or together with any one or more other persons or entities,
directly or indirectly, engage in or have any ownership interest in any
person, firm, corporation, partnership, association, agency or business
(whether as principal, agent, holder of any equity security or other
instrument convertible into an equity security, employee, consultant or
otherwise) that engages in a business similar to or competitive with the
business currently conducted by the Business and which is located or
operated within the same state as any current location of the Business or
any place where the Business has customers, or such other geographical area
as a court of competent jurisdiction would deem reasonable. The Sellers
agree that the period provided for and the area encompassed in this Section
are necessary and reasonable in order to protect the Purchaser and the
Business in the conduct of the Business' operation and are also as
consideration for the Purchaser's agreements in Section B. For the period
set forth in this Section, the Sellers, and each of them, hereby further
agree not to divulge, communicate, or use to the detriment of the Business
or the Purchaser, in any way, any confidential information or trade secrets
of the Business, including, without limitation, personnel information,
secret processes, know-how, customer lists, costs information and technical
data.
<PAGE>
The Sellers acknowledge that the restrictions contained herein are
reasonable and necessary to protect the business and interest which the
Purchaser is acquiring pursuant to this Agreement and are also as
consideration for the Purchaser's agreements in Section B, and that any
violation of these restrictions will cause substantial irreparable injury
to the Business and the Purchaser. The Sellers therefore hereby agree
that the Business, the Purchaser, or any one or more of them, are entitled,
in addition to any and all other remedies, to preliminary and permanent
injunctive relief to prevent a breach or contemplated breach of this
Section. The existence or any claim or cause of action against the
Business or the Purchaser, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Business or the Buyer of the restrictions contained in this Section.
Notwithstanding the foregoing, neither Steve Bettinger nor Robert Bettinger
shall be prohibited from pursuing business or obtaining interests in non-
educational entities that are not in competition with Purchaser or Seller,
however, Steve Bettinger and Robert Bettinger must devote the majority of
their time and efforts to the operation of the Business.
B. Purchaser's Covenant Not to Compete. In order to induce the
Sellers to sell the shares of the Business, and in consideration of the
Sellers' agreements in Section A, the Purchaser hereby agrees that until
the second anniversary of the closing under this Agreement, it will not,
individually or acting together or with one or more other persons or
entities, directly or indirectly, engage in or have any ownership interest
in any person, firm, corporation, partnership, association, agency or
business (whether as principal, agent, holder of any equity security or
other instrument convertible into an equity security, employee, consultant
or otherwise) that engages in a business similar to that currently engaged
in by the Business. The Buyer agrees that the period provided for, and the
areas encompassed, in this Section are necessary and reasonable in order to
induce the Sellers to sell the shares of and to protect the Sellers'
interest following the sale and are also as consideration for the Sellers'
agreements in Section A. For the period of the covenant set forth in this
Section, the Purchaser hereby further agrees not to divulge, communicate,
or use to the detriment of Steven Bettinger or the Sellers in any way, any
confidential information or trade secrets, including, without limitation,
personnel information, secret processes, know-how, customer lists, cost
information and technical data.
The Purchaser acknowledges that the restrictions contained herein are
reasonable and necessary to protect the business and interest of the
Sellers following the sale of the Business' shares to the Purchaser
pursuant to this Agreement and are also as consideration for the Sellers'
agreements in Section A, and that any violation of these restrictions will
cause substantial irreparable injury to Steven Bettinger and the Sellers.
The Purchaser therefore hereby agrees that the Sellers and Steven Bettinger
or any one or more of them, are entitled, in addition to any and all other
remedies, to preliminary and permanent injunctive relief to prevent a
breach or contemplated breach of this Section. The existence of any claim
or cause of action against Steven Bettinger or the Sellers, whether
predicated upon this Agreement or otherwise, shall not constitute a defense
to the enforcement by Steven Bettinger or the Sellers of the restrictions
contained in this Section.
<PAGE>
C. Operation of the Business. The Purchaser and Seller agree that after
the closing of the transaction referenced in this Agreement, Steve
Bettinger and Robert Bettinger shall maintain all daily operations of the
Business which shall include, but not be limited to, the following: (1)
hiring and firing decisions regarding the Business, (2) payment of all
bills regarding the Business, (3) determining acquisition candidates for
the Business, (4) determining salaries of employees of the Business. (5)
determining all employment contracts for the Business. In the event that
Seller determines that there is an acquisition candidate for the Business
to acquire, the Seller shall be authorized to negotiate on behalf of the
Business for stock acquisitions, however, no acquisition shall be permitted
for any business requiring shares of stock which are equal to more than
fifteen (15) times the revenue of the proposed acquisition. Seller shall
owe the purchaser a fiduciary duty to negotiate the most cost effective
acquisition price available and all approvals required by law shall be
obtained to effectuate an acquisition. It shall be presumed that any
acquisition based on the fifteen times revenues or less formula shall be
per se acceptable unless the stock of purchaser falls by one dollar per
share or more within thirty days after announcement of an acquisition based
on said formula, thereafter said formula will drop to thirteen times
revenues, then if there is another one dollar drop using said new formula
then the formula shall be eleven times revenues and if there is still a one
dollar drop using eleven times revenue formula, then a formula of ten times
revenues shall be employed. The formula for acquisitions shall not be
below ten times revenues until the Purchaser's or the Seller's individual
or combined revenues exceed twenty million dollars in annual sales. The
decision with regards to acquisition targets of the Business shall be in
the discretion of Steve Bettinger and Robert Bettinger. The Seller shall
be responsible for paying 5% of the gross revenues of the Business to the
Purchaser within five days of the last day of each month, with payments not
beginning until six months from the date of the closing of this
transaction.
5. Representations and Warranties. The Seller represents and Warrants that
they are the only owners of the Business and that the Business is duly
organized under the laws of the state of Florida. The Seller further
represents and warrants that the financial statements attached as Exhibit
"C" hereto are correct and accurately reflect the financial condition of
the Seller as of the date of this Agreement. Within ninety days of the
date of this Agreement the Seller shall provide the Purchaser with audited
financials for the companies encompassed in the Business. The Seller
further represents that it has full authority to enter into the transaction
contemplated in this Agreement and that there are no lawsuits, liens,
threatened or pending claims, either administrative, civil, criminal or
otherwise against the Business or the Seller except as disclosed in Exhibit
"D" attached hereto. The Seller further represents that it and the
Business have been in compliance with all laws and regulations applicable
to it. It is further represented that any contracts, agreements,
assessments or obligations which the Business is subject to have been
disclosed in Exhibit "E" attached hereto. In addition, Seller represents
that the condition of the Business will not materially change between the
date of this Agreement and the date of the closing.
<PAGE>
6. Spinoff. The Seller and Purchaser agree that so long as the price of
Purchaser's stock is traded in the open market at or above $3.00 per share,
then the Seller shall have no right to have the Business spun off as a
separately traded public entity. If, for a sixty day period during the
three years from the date of the closing of this transaction, the
Purchaser's stock is traded in the open market at below a price of $3.00
per share, then Seller shall have the right to have Seller and the Business
spun off as a separately traded public entity and upon the spin off, the
Purchaser shall have the choice of, five percent of the common stock of the
separately traded public entity or any shares of Purchaser that were used
to make acquisitions for the Seller/Business before the Seller and the
Business were spun off as a separately traded public entity.
7. The Closing. The closing (the Closing) for the matters
contemplated in connection with this Agreement shall occur on May 22, 1999
(the Closing Date), at the offices of Purchaser's Counsel or at such other
place and at such other time as shall be collectively agreed upon as the
Closing Date by Purchaser and Seller.
The parties agree that this closing may take place by documents being
executed in counterparts and facsimile copies having the same effect as
originals. Notwithstanding all other text in this paragraph number 7, no
closing shall take place until Purchaser has changed its name to a name
which reflects its involvement in the internet and the Purchaser must
revise its website to accurately and professionally reflect its
participation in the internet.
8. Notices. Any notice, demand or request shall be given in writing
and shall be deemed to have been duly given or made five (5) business days
after the date it is mailed by certified or registered mail addressed to
the parties to this Agreement. A copy of all notices, requests and demands
shall be sent on behalf of Seller to Mr. Jay Korn, Esq. at Korn & Spirn, 50
Clinton Street, Hempstead, New York 11550, telephone (516)538-5222 and fax
(516)292-3556 and a copy of all notices, requests and demands on behalf of
Purchase to David J. Feingold, Esq. at Feingold & Kam, 3300 PGA Blvd. Suite
410, Palm Beach Gardens, Fl 33410, telephone (561)630-6727 and fax (561)
630-8936.
9. Modification and Amendment and Restrictions. This Agreement may be
modified, amended or otherwise changed only by an agreement in writing
which is executed and delivered by the parties hereto. Purchaser hereby
agrees that it is restricted from selling, encumbering or pledging any
stock that it receives in Seller unless there is a spin off or the return
of the Business to Seller from Purchaser. Purchaser further agrees that it
shall not undertake any acquisitions other than of businesses in the same
industry as Seller or Purchaser for a period of six months from the date of
closing. Purchaser shall not issue any stock outside of that already
authorized, for acquisitions other than new schools. Additionally,
Purchaser further agrees that neither Larry Provost nor Paul Sloan or their
families shall sell their stock in the Purchaser for a period of one year
from the date of closing.
<PAGE>
10. Further Acts, Instruments and Assurances. Purchaser and Seller
hereby covenant and shall do, execute, acknowledge and deliver any and all
further acts, instruments and assurances necessary for carrying out the
intention and facilitating the performance of this Agreement and the
transactions contemplated hereunder. Notwithstanding any provision to the
contrary herein, no action may be taken pursuant to this Agreement unless
approved by the action of the appropriate officer or the board of directors
as may be required by Delaware law since Purchaser is a corporation
organized and existing under the laws of the state of Delaware. Each party
hereto further assures the other that it has obtained the appropriate board
and/or shareholder approval to undertake the transaction contemplated
herein.
11. Waiver of Remedies. No remedy herein conferred or conferred by law
is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to and not in exclusion
of any other remedy given hereunder or by law or now or hereafter existing
at law or in equity. No delay, act or omission by Purchaser or Seller to
exercise any right or power accruing in connection with this Agreement or
the transactions contemplated hereunder shall impair any such right or
power or shall be construed as a waiver thereof or an acquiescence therein;
and every power and remedy conferred herein or conferred by law may be
exercised from time to time and as often as may be deemed expedient.
12. Binding Effect/Due Diligence Period. Each provision of this
Agreement shall be a separate and independent covenant. The breach of any
provision shall not relieve Purchaser or Seller, as the case may be, from
their obligation to observe and perform each and every other provision of
this Agreement to be observed and performed. Notwithstanding the
foregoing, this Agreement shall not operate as a conveyance of stock, the
actual conveyance shall only occur upon the Closing taking place with the
execution of all necessary closing documents. The actual Purchase Price
paid may be adjusted based on any discrepancy found in the Exhibits
attached hereto during the due diligence period. The due diligence ("Due
Diligence") period shall be that period of time that elapses between the
date of this Agreement and the Closing Date. During the Due Diligence
period, the Purchaser and Seller shall be entitled to a copy of each and
every document requested from the other as well as having the opportunity
to have any professionals review their respective businesses, offices and
documents, upon reasonable notice. Failure to make any requested documents
available shall be grounds for voiding this entire Agreement at the
discretion of either party.
13. Separability. If any provision of this Agreement is held to be
invalid, illegal, non-binding and unenforceable, or any combination of the
foregoing, this Agreement shall be construed as if the offending provision
has not been herein contained.
14. Counterparts. This Agreement may be executed and delivered in
counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument.
<PAGE>
15. Entire Agreement. This Agreement contains the entire agreement
among Purchaser and Seller; there are no promises, agreements, covenants or
other conditions than those set forth herein.
16. Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Florida and venue
shall only be appropriate in Palm Beach County, Florida.
17. Successors and Assigns. This Agreement shall be binding upon
Seller and Purchaser and their respective successors and assigns.
18. Interpretation of this Agreement. Whenever used in this Agreement,
the singular shall include the plural; the plural shall include the
singular; the use of any gender shall include all genders; and person shall
mean any individual, partnership, corporation, trust, estate, joint
venture, syndicate or other entity or any combination of the foregoing.
19. Waiver of Conflict. The parties hereto acknowledge that David J.
Feingold, Esq. and Feingold & Kam have provided in the past and will
provide services in the future to the Purchaser and Seller and their
officers, directors, successors and assigns. It is specifically agreed
that each party has been fully advised of David J. Feingold's and Feingold
& Kam's involvement with each party. For purposes of this Agreement, David
J. Feingold and Feingold & Kam have been counsel for the Purchaser. The
Seller has been given the opportunity to have independent legal counsel
review this Agreement on their behalf and attorney Jay Korn, Esq. has acted
on behalf of the Seller. The parties hereto hereby waive any claims
regarding David J. Feingold, and Feingold & Kam's representation of each
party in the past and in the future and each party has been given the
opportunity to have alternative counsel review and draft this Agreement.
The undersigned have executed the signature page hereinbelow to signify
their agreement to the terms and conditions set forth herein.
PURCHASER SELLER
/s/ Larry Provost /s/ Robert Bettinger
Chairman Sec/Treas
3/15/1999 3/15/99
/s/ Paul Sloan
President
3/15/99 Robert Bettinger
/s/ Paul Sloan Steve Bettinger
/s/ Larry Provost
Exhibits to be attached:
A- Purchase Price B- Creditors C- Financial Statements
D- Lawsuits, liens, pending or threatened claims
E- Contracts, agreements, assessments, obligations
<PAGE>
Exhibit "A" - Purchase Price
The Purchaser shall pay to Seller a total of 5.35 million shares
of the Purchaser's stock assuming the receipt of two million dollars in
revenues from Seller. The payment shall be made by the Purchaser
permitting the Seller to convert all shares of IEG Holdings, Inc. or any of
its subsidiary stock into shares of Sloan Electronics, Inc. stock. All
stock so converted shall be restricted securities and not freely tradeable
unless subject to an exemption or a rule recognized under the Securities
Act of 1933 which would permit free trading. In the event any shares so
converted become free trading, the Seller represents and warrants that at
no time will the Seller sell any of its free trading shares at anytime that
the share price of Sloan Electronics, Inc. falls below a bid price of two
dollars per share. Notwithstanding the foregoing, the Seller shall be
entitled to five hundred thousand shares of registered free trading stock
with no selling restrictions. The Purchase Price paid at closing shall be
increased or decreased depending if the actual dollar amount of revenues
received from the Seller at closing is more or less than the dollar amount
of revenues referenced herein. As of the execution of this Agreement, the
Purchase Price is assumed to have a value of $16.05 million based on a
share price of $3.00 per share for Purchaser's stock, which was the price
of Purchaser's stock at the beginning of the acquisition discussions
between the parties. On the date of closing, the Seller shall be entitled
to the greater of 5.35 million shares of stock in Purchaser or $16.05
million worth of stock in Purchaser.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 1999 and Income Statement for the quarter ended
March 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 2,949
<SECURITIES> 0
<RECEIVABLES> 11,250
<ALLOWANCES> 0
<INVENTORY> 22,870
<CURRENT-ASSETS> 523,479
<PP&E> 1,668
<DEPRECIATION> 224
<TOTAL-ASSETS> 525,147
<CURRENT-LIABILITIES> 522,568
<BONDS> 0
0
0
<COMMON> 11,148
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 525,147
<SALES> 4,828
<TOTAL-REVENUES> 4,828
<CGS> 3,948
<TOTAL-COSTS> 107,506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,622
<INCOME-PRETAX> (116,248)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (116,248)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
