As filed with the Securities and Exchange Commission on August 8, 1997
Registration No. _________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRANTS OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SYNAPTX WORLDWIDE, INC.
(Name of Small Business Issuer in its charter)
Utah 87-0375342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
385 Airport Road, Suite A, Elgin, Illinois 60123
(Address of principal executive officers) (Zip Code)
Issuer's telephone number: (847) 622-0200
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
<PAGE>
SYNAPTX WORLDWIDE, INC.
FORM 10-SB
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business. . . . . . . . . . . . . . . . . 3
ITEM 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . 11
ITEM 3. Description of Property. . . . . . . . . . . . . . . . . 17
ITEM 4. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . 17
ITEM 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . . . . . . 19
ITEM 6. Executive Compensation . . . . . . . . . . . . . . . . . 21
ITEM 7. Certain Relationships and Related Transactions . . . . . 23
ITEM 8. Description of Securities. . . . . . . . . . . . . . . . 25
PART II
ITEM 1. Market Price of and Dividends on Registrant's
Common Equity and Other Shareholder Matters. . . . . . 26
ITEM 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 27
ITEM 3. Changes in and Disagreements with Accountants. . . . . . 27
ITEM 4. Recent Sales of Unregistered Securities. . . . . . . . . 28
ITEM 5. Indemnification of Directors and Officers. . . . . . . . 28
PART F/S
Financial Statements . . . . . . . . . . . . . . . . . . 29
PART III
ITEM 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . S-1
ITEM 2. Description of Exhibits. . . . . . . . . . . . . . . . . S-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . S-2
<PAGE>
PART I
Registration Summary
The following summary is qualified in its entirety by the more
detailed information and the financial statements including the
notes thereto, appearing elsewhere in this Registration. Except as
otherwise indicated, the information in this Registration reflects
the recapitalization of the Company (as more fully explained below)
whereby through a reverse merger, the Company's pre-merger
shareholders' common stock reflects a 1 for 1.75 stock split of the
Common Stock in February, 1997 and in connection with the merger
agreement with Worldwide Applied Telecom Technologies, Inc., a
Delaware Corporation, ("WWATT"), the WWATT pre-merger shareholders
of its Common Stock received 3,600,000 shares of the Company's
common stock for the 3,271,000 shares of WWATT Common Stock issued
and outstanding, representing a stock dividend of 10.058086% as of
the merger date, March 12, 1997.
ITEM 1. Description of Business
Synaptx Worldwide, Inc. ("Synaptx" or the "Company") provides
consulting service, marketing, sales and search assistance within
the telecommunications industry. The Company's stated goal is to
develop through acquisitions a national telecommunications sales
representative organization. Synaptx also intends to make
additional acquisitions of existing telecommunications companies
having potential for growth as equipment manufacturers and software
providers needing developed marketing channels.
The Company was incorporated on June 25, 1981 under the laws
of the State of Utah as Calico Gold Properties, Inc. and initially
engaged in the acquisition and development of mineral resource
prospects. The Company engaged in limited mining operations and
subsequently ceased its operations and became inactive for several
years. In 1995, the Company began to actively investigate and seek
mergers with or acquisitions of operating businesses. In 1996, the
Company changed its name to In-Touch Interactive Multimedia, Inc.
in connection with a previously planned merger that was never
consummated.
On February 10, 1997, the Company entered into a merger
agreement (the "Merger") with WWATT. Pursuant to the terms of the
Merger, the Company effected a reverse stock split of its
outstanding shares of common stock on a one (1) share for one and
three-fourths (1.75) shares, and exchanged 3,600,000 shares of
authorized but previously unissued shares of the Company's common
stock for all the previously issued and outstanding shares of
WWATT. An additional 790,000 shares of the Company's common stock
were issued for services related to the Merger. As a result of the
Merger, WWATT was merged with and into the Company with the Company
being the surviving corporation, and the Company changed its
corporate name to Synaptx Worldwide, Inc. The aforementioned
actions were approved by the Company's shareholders at the Special
Meeting of Shareholders held March 12, 1997. Prior to the Merger,
there was no affiliation between the Company and WWATT, nor between
the officers, directors or principal shareholders of the two
respective entities. For accounting purposes, the transaction has
been treated as a recapitalization of WWATT, or a reverse merger,
with WWATT being treated as the acquirer.
Business Development:
WWATT was initially conceived and organized on November 3,
1995, with the intent to provide a vehicle to acquire emerging high
technology companies in the telecommunications industry. As a
result of its Merger with WWATT, the Company is presently
committed to the acquisition and development of sales
representative organizations and telecommunications equipment
manufacturers and software providers. Acquisition candidates will
typically be undercapitalized, existing companies that already have
developed products or services that offer significant growth
potential. The Company may also acquire other consulting or sales
representative businesses. WWATT completed two acquisitions prior
to the Merger, specifically North American Telco/Cable
Representatives, Inc. ("NATCRI"), an independent network of senior
executives possessing professional relationships in the
telecommunications industry, and Maxwell Partners, Inc.
("Maxwell"), an integrated marketing consulting firm that works
exclusively with telecommunications and information industry
clients. Management believes that NATCRI and Maxwell provide the
Company with the marketing and sales support necessary to provide
potential future acquisitions with needed developed marketing
channels for their products and/or services. As a result of the
Merger, NATCRI and Maxwell became subsidiaries of the Company.
Synaptx Access, Inc. (F/K/A North American Telco/Cable
Representatives, Inc.)
North American Telco/Cable Representatives, Inc. which has
changed its name to Synaptx Access, Inc. (hereinafter referred to
as "Access") is an independent network of senior executives
("Executive Associates") whose existing professional relationships
in the telecommunications industry provide the Company with access
to key industry decision makers. Access was incorporated in Florida
on November 14, 1994 with the dual objectives of increasing sales
for smaller manufacturers and software providers to the
telecommunications industry and enabling larger network providers
and manufacturers to utilize the products and services of smaller
innovative firms in a time-efficient manner. WWATT issued 490,000
shares of its common stock for the acquisition of Access on June 3,
1996, which shares were converted into 539,285 shares of the
Company's common stock as a result of the Merger. The acquisition
was treated as a pooling of interests.
Access has developed a unique multi-level sales strategy named
the Executive/SME Squeeze to overcome the challenge of selling to
larger organizations that are being downsized and in which
decisions are made by only a very few senior executives. "SME"
represents a Subject Matter Expert, a commonly used term in the
telecommunications industry. Access Executive Associates can
generate meetings with key industry decision makers relying upon
their history of building personal relationships. Executive
Associates are able to arrange executive introductions, trigger
assignment of a SME to review proposed products, manage the
relationship to obtain a recommendation to deploy its clients'
products, and orchestrate executive approval of the purchase.
Companies with which Access Executive Associates have existing
relationships include major equipment manufacturers such as Lucent,
Nortel (formerly Northern Telecom), Siemens, and L.M. Ericcson;
major service providers such as the regional Bell operating com-
panies (RBOCs), AT&T, MCI, Sprint, GTE and other independent
telephone companies; competitive access providers and long distance
resellers; and major wireless service providers such as Air Touch,
Cellular One, and Skytel. Among the services the Executive
Associates provide to their clients is assistance in evaluating
investments in other telecommunications companies.
In order to complement the efforts of its Executive
Associates, Access will strive to develop an independent national
sales representative organization that will target public and
private network providers, utilities, and original equipment
manufacturers. This development will proceed through the possible
acquisition of regional sales representative firms that typically
employ five to ten employees ("Representatives"). Leads will be
generated, qualified, and tracked through a sophisticated central
database that will provide Representatives with easy access to key
decision makers. By taking advantage of senior Executive
Associates and Representatives' personal contacts, management
anticipates that Access will generate a base of new sales
opportunities for its principal companies, "Access Principals"
representing companies whose products and/or services Executive
Associates and Representatives will promote and sell. Access is
pursuing an aggressive growth strategy to build a nationwide sales
representative organization by the end of its 1998 fiscal year. By
using its existing network of Executive Associate contacts, Access
intends to approach other major equipment manufacturers with
proposals to represent their products to larger customers.
Access held its first annual sales meeting of its Executive
Associates in November, 1995, and the second was held in January,
1997. Clients and potential clients presented their companies'
product lines, marketing plans, and sales strategies to the Access
team. In its first year of operation, Access recruited more than
twenty firms as clients and has accepted several new Executive
Associates. In addition, some larger firms have contracted with
Access to facilitate their sales efforts. Other firms employ Access
Executive Associates as consultants and as members of their
management team.
In addition to its sales activities, Access Executive
Associates will investigate, through their professional network
contacts, a variety of executive recruiting opportunities. Access
accepts search assignments on a contingency basis, charging clients
a percentage of a new hire's first-year compensation. Candidates
submitted for client consideration are identified in one of two
ways. In the first scenario, a client may ask Access to fill a
specific position. In this case, the firm contacts members of its
Executive Associates' network and alerts them to the client's need.
Alternatively, Access keeps on file and continually updates a
database of resumes from individuals interested in exploring new
professional opportunities. Candidates for a specific position may
well be found from within this collection.
Synaptx Impulse, Inc. (F/K/A Maxwell Partners, Inc.)
Maxwell Partners, Inc. which has changed its name to Synaptx
Impulse, Inc. (hereinafter referred to as "Impulse"), the Company's
second acquisition, in October 1996, is an integrated marketing
consulting firm that works with telecommunications and information
industry clients. Founded in 1991, its core services include
strategic and market planning, new product launch planning,
distribution channel analysis and design, communications program
planning and implementation, and event and trade show management.
Past and present clients include AT&T, Lucent Technologies,
Ameritech, BellSouth, SBC Corporation, GTE, Sprint, Motorola,
Nortel, Rochester Telephone, SNET, SPSS, Reltec and Century
Telephone. WWATT issued 690,000 shares of its common stock for the
acquisition of Impulse on October 1, 1996, which shares were
converted into 759,400 shares of the Company's common stock as a
result of the Merger. The acquisition was treated as a purchase.
Access and Impulse will combine to provide the Company's
potential future acquisitions with marketing and sales support.
Management of Access has an extended network of personal
relationships it can leverage to facilitate sales of its sister
companies' products, and Impulse can assist these same companies in
developing marketing strategies, distribution channels, and lead-generating
communications programs.
ORAYCOM, Inc.
On June 1, 1997, the Company made its first acquisition of a
telecommunications sales representative company, ORAYCOM, Inc.
located in Carrollton, Texas ("ORAYCOM"). ORAYCOM was acquired
with 142,858 shares of Synaptx common stock. ORAYCOM will operate
as a subsidiary of Access. ORAYCOM is a sales representative to
the private network, public telephone network, cable operating
companies and alternate access provider communication markets.
ORAYCOM currently represents RELTEC and Thomas & Bettes in addition
to other clients.
Employing seven (7) people and operating out of leased office
space in Carrollton, Texas, ORAYCOM's employees based in strategic
territories to meet their customers' needs, serve North and
Southeast Texas, Oklahoma, Arkansas, Arizona, New Mexico, Nevada
and Southern California. Revenues represent the earning of
commissions on its customers' sales. These commissions range from
3.5% up to 8%, depending on the sophistication of the customers'
products and services represented.
The Company intends to make additional acquisitions as
financing and business conditions warrant, although there can be no
assurance that the Company will be able to finalize any future
acquisitions. The Company intends to make its acquisitions with
Synaptx securities, employing tax-free exchanges for the stock of
the to-be-acquired companies. Contingent earn-out payments of the
Company's common stock will be based on aggressive revenue and
profit hurdles.
Marketing and Business Strategy
The Company's primary objective is to acquire emerging high
technology companies in the telecommunications industry that have
limited market access. The Company will provide marketing
assistance, access to key industry decision makers, an experienced
sales team, management expertise, financial direction and executive
recruiting services in an effort to build revenues and profits.
Because such companies typically service a sharply defined niche
market, they will generally function more as OEM suppliers than
direct competitors to major equipment manufacturers. The Company's
objective is to strengthen each acquisition's income statement and
balance sheet to the point where it can operate as a self-sustaining subsidiary.
Toward this end, the Company has set the
following objectives:
(a) Acquire high technology companies and help them to
maximize their performance;
(b) Achieve industry status and recognition as a growth
facilitator for small and emerging high technology companies
within the telecommunications industry;
(c) Build the Company into a significant participant in the
telecommunications industry; and
(d) Optimize return on investment for shareholders.
The Company's strategy is designed to enable its future
subsidiaries to either sell directly to network providers or
through larger manufacturers on an original equipment manufacturer
(OEM) basis. In some cases, the Company will have the flexibility
to distribute its products through large suppliers that are
burdened with proprietary rather than open standards based
products. To maintain and improve its competitive position, the
Company seeks to acquire companies that develop and introduce, on
a timely and cost-effective basis, new products and product
features that keep pace with technological developments and
emerging industry standards and address the increasingly
sophisticated needs of its customers. In striving toward its
business objectives, the Company intends to implement the following
key strategies:
(a) Acquire firms that are cash flow positive or have the
potential to generate significant cash flows within the first
year following acquisition.
(b) Build, through acquisition, a national telecommunications
sales representative organization targeting public and private
network providers, utilities, and original equipment
manufacturers;
(c) Identify and acquire small telecommunications suppliers
with unique, proven product lines that have demonstrated
uneven sales success;
(d) Use the Company's expertise to sell products in wider
geographic areas and broader market areas to dramatically
increase revenue;
(e) Establish relationships leading to international import
and export opportunities;
(f) Establish and operate acquired companies as independent
profit centers, with all intracompany transactions handled on
an arm's length basis; and
(g) Raise performance of subsidiaries to predetermined levels
where they can become self-sustaining subsidiaries.
There can be no assurance that the Company will be able to
make future material acquisitions or that it will ever achieve its
expressed goals.
Management believes that the cost of building a distribution
network is equal to or greater than the cost of developing a
product. As a result, many small technology companies are unable
to develop distribution channels and thus fail to realize their
full potential. The Company intends to seek out suppliers that
possess excellent technology but have been unable to realize their
full potential because of limited sales and marketing skills and/or
their inability to raise capital. The Company's management group
and advisors have extensive experience in the management of
suppliers to the telecommunications industry. Moreover, the Company
plans to capitalize on the current trend in downsizing in larger
companies by offering products that replace labor or perform
functions that are likely to be outsourced.
Potential New Acquisitions and Product Lines
The dynamics of the telecommunications industry will dictate
the types of products Synaptx will seek to acquire in the future.
Primary targets will be products that facilitate management of
elements within decentralized, distributed telecommunications
networks and the environments in which they operate. Synaptx will
seek out technology leadership that brings value to its customers
in terms of quality improvements or cost reductions.
Synaptx intends to focus on acquiring companies that compete
in the following product-market segments:
(a) Advanced intelligent network software and hardware
platforms;
(b) Emerging broadband transmission technologies (e.g. xDSL);
(c) Wireless transmission and switching technologies,
especially PCS systems;
(d) Network management technologies (software and hardware);
(e) Convergent billing systems that accommodate wireline and
wireless, local and long distance in a single system;
(f) Customer care systems (especially expert software
systems);
(g) Products that maintain the environment in which network
elements are housed such as central office enclosures, outside
plant cabinets, cement vaults, and next generation termination
devices; and
(h) Products whose features include testing and early warning
of network component failures.
Increasing market competition demands that new products
address the issues of product creation, product delivery, and
product assurance in both public and private networks. Synaptx
will strive to address the needs of emerging companies and the
needs of existing companies that continue to use embedded legacy
maintenance systems. Synaptx will focus on products that have the
ability to respond to a demanding and changing customer base.
Application flexibility will be a critical product attribute.
In addition to product-oriented acquisitions, the Company will
also endeavor to build through acquisition a nationwide sales
representative organization by the end of 1998. It is anticipated
that acquired firms will be local or regional in scope, will
generally employ five to ten reps, and will bring with them
established product lines that support the Company's strategic
direction.
The Company intends to focus its acquisition efforts on
telecommunications suppliers that have (1) a unique, proven product
line that is not being sold evenly across North America, (2) a
demonstrated technical ability to envision, design, develop, and
service their products, (3) a demonstrated track record of market
acceptance in the markets they address, (4) positive cash flow or
the potential to achieve positive cash flow in the short term, and
(5) availability for purchase at attractive prices. The Company's
strategy is to consolidate certain sales, marketing, and
administrative functions at the corporate level both to enhance the
effectiveness of the function and to achieve cost savings by
eliminating redundant expenses.
Target companies will typically be strong technologically but
weak in product distribution skills and in their ability to raise
additional capital. Acquisition candidates will have been in
business for a minimum of three years. Synaptx will evaluate
companies that are cash flow positive but not overburdened with
debt. All acquired companies will have demonstrated the potential
to generate significant, positive cash flows with additional
capital, sales and marketing assistance, and managerial focus.
Past operating experience with Access and Impulse will be used to
evaluate acquisition candidates and to simplify and expedite the
due diligence process.
The Company anticipates making future acquisitions by
primarily using its capital stock. If necessary, the Company plans
to finance or seek outside financing for potential requirements of
cash. Although the Company is currently exploring additional
acquisition opportunities, the Company has no agreements regarding
such possible future acquisitions and has no agreement or
commitments to obtain any additional financing. There can be no
assurances that financing for any future acquisitions will be
available on terms acceptable to the Company or at all, or that any
future acquisitions will be consummated.
On May 16, 1997, the Company entered into a letter of
agreement ("letter agreement") to acquire a Chicago-based sales
representative organization. Under the proposed terms of the
letter agreement, the Company would purchase all of the outstanding
capital stock and pay $2,000,000 in stock and cash. Additionally,
the proposed terms call for an earn-out of additional stock over
the next two years based on the acquiree achieving certain defined
revenues and earnings before income taxes targets. Employment
agreements would also be entered into with the three key managers
of the business. At this time, no definitive agreements have been
entered into. Closing is expected in September 1997.
On May 13, 1997, the Company entered into a letter of intent
("letter of intent") to acquire a Minneapolis-based sales
representative organization. Under the proposed terms of this
letter of intent, the Company would purchase all of the outstanding
capital stock. The letter of intent also calls for the development
of mutually agreeable employment agreements with the principals of
the business. At this time, no definitive agreements have been
entered into. Closing is expected in September 1997.
Competition
The telecommunications industry is highly competitive and
characterized by rapidly changing technologies, evolving industry
standards, frequent new product introductions, and rapid changes in
customer requirements. Synaptx's competitors will vary from market
to market depending upon which companies are acquired and become
Synaptx subsidiaries. Principal competitive factors affecting the
market for subsidiary products include product reputation, quality,
performance, price, professional service, and customer support.
Features such as adaptability, scalability, ability to integrate
with other products, functionality, and ease of use are key product
differentiators. Synaptx intends to empower its subsidiary
companies to compete by using the Access sales team and Impulse's
integrated marketing expertise.
Facilities
The Company's principal place of business is located at 385
Airport Road, Suite A, Elgin, Illinois 60123, and consists of
approximately 8,800 square feet of office space. This facility is
subject to a lease which expires on January 31, 1998. Impulse also
leases office space in Atlanta, Georgia consisting of 2,733 square
feet of space, with a lease expiration date of June 30, 1998.
In February, 1997, Impulse signed a letter of intent to build
out and rent new office space at a new location, covering
approximately 19,760 square feet of space. The proposed lease
would extend for seven (7) years, commencing in December 1997.
Monthly rents start at $12,597 and escalate approximately 3% per
year on each anniversary date of the lease. This facility is
considered adequate to support the future needs of Impulse, Access
and the projected sales representative organization to be acquired
to serve the upper Midwest. However, as of the date hereof, no
definitive lease has been signed.
ORAYCOM's office facility covers 2,000 square feet of space
with the lease term extending to February 28, 2002.
Litigation
The Company is not a party to any material pending legal
proceedings and no such action by, or to the best of its knowledge,
against the Company has been threatened.
Employees
As of June 30, 1997 the Company employed 38 full-time
individuals, consisting of 3 executive officers, 29 professional
and sales representatives, and 6 office staff personnel. In
addition to its full-time employees, the Company may use the
services of certain consultants, writers and design professionals
on a contract basis. Management presently anticipates hiring
additional employees as business warrants and as funds become
available.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with
the consolidated financial statements and notes thereto appearing
elsewhere in the Form 10-SB.
Overview
The Company is a fully integrated service provider of
consulting, marketing, sales advice and implementation strategies
serving customers in the telecommunications industry. The Company
operates in one business segment. The Company's fiscal year is
August 31. Unless otherwise noted, references to fiscal 1995 or
1996 relate to the fiscal years ended August 31, 1995 and 1996,
respectively.
The Company's objective is to use its comprehensive knowledge
of the telecommunications industry to acquire and improve equipment
manufacturers and software developers. Targeted acquisition
candidates would include companies that have demonstrated an
ability to envision, design and commercialize unique products.
Once such an entity is acquired, the Company will direct its sales,
marketing and managerial resources toward achieving increased
revenues and earnings. To date, the Company has only acquired
companies that support its core services of consulting, marketing
and sales. These acquisitions are not intended for subsequent
spin-out. Instead, they will be the foundation to create the
revenues and earnings growth for target acquirees.
The Company currently provides consulting services, marketing
support services and the development of collateral marketing
materials, and sales channel advice. Additionally, the Company has
entered the employment search business charging fees for
individuals hired by client companies based on a negotiated
percentage of the new employee's total first year recurring
compensation. Revenues of the Company consist of fees for
professional services which are estimated in advance, quoted,
negotiated and then formalized via contract or purchase order.
These professional fees are therefore structured as fixed price
arrangements which in accordance with the Company's terms and
conditions can be and are regularly billed in advance. Because
these billings often precede the work being performed, revenues are
only recognized as work is performed. Accordingly, any excess of
professional fee billings over professional fees earned are
reflected as a current liability, that is, deferred revenue.
Additionally, the Company bills for collateral material production
and the placement of ads which are marked-up based on industry
standards. These revenues are recorded when the item is produced.
Cost of sales and revenues consist primarily of the cost of
labor in providing professional services representing salaries and
benefits for employees and direct costs for outside independent
professionals, copywriters and designers (sometimes referred to
herein as "freelancers"). Production and ad placement costs
represent amounts invoiced from suppliers. If the vendor has not
provided an invoice at the time of revenue recognition, such costs
are accrued at the estimated cost for which the production or ads
were billed.
Selling, general and administrative expenses consist primarily
of marketing and administration expenses which include salaries,
benefits and associated taxes, rent and other general office
expenses.
Results of Operations
The following table sets forth, for fiscal periods 1995 and
1996 and for the nine months ended May 31, 1996 and 1997, certain
items from the Company's Consolidated Statements of Operations
expressed as a percentage of net sales. Results for the fiscal
periods ended 1995 and 1996 and for the nine months ended May 31,
1996 include the consolidated operations of Synaptx and Access
(utilizing pooling of interests accounting) while the results for
the first nine months of 1997 include eight months of Impulse
operations subsequent to its October 1, 1996 acquisition date,
which is not reflected in prior periods since the acquisition is
presented under the purchase method of accounting.
Fiscal Periods Nine Months
Ended August 31 Ended May 31
1995 1996 1996 1997
Net sales and revenues 100.0% 100.0% 100.0% 100.0%
Cost of Sales 89.5% 86.9% 87.1% 69.1%
Gross profit 10.5% 13.1% 12.9% 30.9%
Selling, general and
administrative expenses 87.8% 61.2% 18.7% 48.3%
Operating loss (77.3%) (48.1%) (5.8%) (17.4%)
Interest expense, net - - - 1.4%
Net loss (77.3%) (48.1%) (5.8%) (18.8%)
Year Ended August 31, 1996 Compared to Year Ended August 31, 1995
The Company's net sales and revenues increased by $121,715 or
508%, from $23,938 for the fiscal year ended August 31, 1995
("1995") to $145,653 for the fiscal year ended August 31, 1996
("1996"). The total increase related to consulting revenues
generated through the Access subsidiary. Access was incorporated
in November, 1994 and began operations in early 1995. Thus, it had
only a few months of operations during its initial fiscal year,
1995. 1996 represented a full year of operations and 1996
consulting revenues resulted from primarily three customers.
Cost of sales and revenues increased by $105,134 in 1996, or
491%, from $21,427 in 1995 to $126,561 in 1996. Both amounts
related to the cost of Access Executive Associates who perform the
Access subsidiary consulting assignments. Of these total amounts,
the Company's President and C.E.O. represented $21,200 or 98.9% of
the 1995 total consulting costs and $111,500 or 88.1% of the 1996
total consulting costs, thus representing $90,300 or 71.0% of the
increase. As a percentage of net sales and revenues, cost of sales
and revenues decreased from 89.5% in 1995 to 86.9% in 1996.
The Company's gross profit margin, was 10.5% and 13.1% for 1995
and 1996, respectively. The increase in gross profit margin of 2.6
points in 1996 is attributable to a full year of operations of the
Access subsidiary in 1996 versus start-up operations in 1995 plus
a more profitable mix of business.
Selling, general and administrative expenses increased by
$70,609 in 1996 or 336%, from $21,024 in 1995 to $91,633 in 1996.
This increase reflects a full year of operations for Access in 1996
versus only partial year operations in 1995. Furthermore, the
parent company, Synaptx Worldwide, Inc., formerly known as
Worldwide Applied Telecom Technologies, Inc., was formed in
November of 1995 and the President and C.E.O.'s salary was accrued
starting June 1, 1996, which represents the beginning of his
activities implementing the Company's business plan. Of these total
amounts, the Company's President and C.E.O. was reimbursed for
selling, general and administrative costs representing $15,800 or
75.1% of the 1995 total and $17,200 or 18.8% of the 1996 total. As
a percentage of net sales and revenues, selling, general and
administrative expenses decreased from 87.8% in 1995 to 61.2% in
1996.
Nine Months ended May 31, 1997 Compared to Nine Months Ended May
31, 1996
Net sales and revenues increased by $2,371,728 or 2,445%, from
$97,000 in the nine month period ended May 31, 1996 ("first nine
months of 1996") to $2,468,728 in the nine month period ended May
31, 1997 ("first nine months of 1997"). The Company's consulting
revenues increased $19,663 or 20.3% from $97,000 to $116,663 due to
sales to two new consulting customers, partially offset by reduced
activity by an existing customer. The acquisition of the Impulse
subsidiary in October, 1996 resulted in the addition of marketing
services and production revenues of $2,281,958 for the first nine
months of 1997. Marketing services and production revenues were
primarily derived from telecommunications industry customers of
which two represented more than 10%, each, of such revenues.
Search revenues began in the third quarter of 1997, adding $70,107
from this new revenue source.
Cost of sales and revenues increased by $1,620,250 or 1,917%,
from $84,502 to $1,704,752. Of these total amounts, the Company's
President and C.E.O. represented $79,595 or 94.2% for the nine
months ended May 31,1996 and $86,436 or 5.1% for the nine months
ended May 31, 1997. The acquisition of the Impulse subsidiary in
October, 1996, results in the addition of cost of revenues for
marketing services and production revenues of $1,698,398 or 71.3%
of related revenues. As a percentage of net sales and revenues,
cost of sales and revenues decreased from 87.1% in 1996 to 69.1% in
1997.
The Company's gross profit margin, was 12.9% and 30.9% for the
first nine months of 1996 and 1997, respectively. Gross profit
margin increased for the first nine months of 1997 compared to the
first nine months of 1996 because of the Impulse acquisition.
Selling, general and administrative expenses increased by
$1,173,626 or 6,478%, from $18,118 for the first nine months of
1996 to $1,191,744 for the first nine months of 1997. Of these
total amounts, the Company's President and C.E.O. was reimbursed
for operating costs representing $13,242 or 73.1% for the first
nine months of 1996 and $27,900 or 2.3% for the first nine months
of 1997. Selling, general and administrative expenses also
increased due primarily to the creation of WWATT in November, 1995
including the addition of salary expense for the C.E.O. which began
in June, 1996. The increase in selling, general and administrative
expenses for the first nine months of 1997 versus the first nine
months of 1996 reflects the inclusion of Impulse subsequent to its
October 1, 1996 acquisition date. The acquisition of Impulse
results in the addition to selling, general and administrative
expenses of $826,035, or 33.5% of net sales and revenues. As a
percentage of net sales and revenues, selling, general and
administrative expenses increased from 18.7% for the first nine
months of 1996 to 48.3% for the first nine months of 1997. The
remainder of fiscal year ending August 31, 1997 will reflect an
additional increase in selling, general and administrative expenses
as a result of the acquisition of ORAYCOM. This higher run rate
will carry over to fiscal 1998 which will have a full year of both
Impulse and ORAYCOM selling, general and administrative expenses.
Additionally, the Company estimates that 1998 selling, general and
administrative expenses should increase as a result of increased
expenses related to the increase in net sales and revenues.
However, because the Company expects increased net sales and
revenues in 1998, the Company believes that such expenses should
remain relatively consistent as a percentage of net sales and
revenues with the fiscal 1997 level.
Net interest expense increased from none for the first nine
months of 1996 to $35,343 or 1.4% of net sales and revenues for the
first nine months of 1997. The increase in interest expense
results from the acquisition of the Impulse subsidiary whose
operations are included herein for the eight months since its
October 1, 1996 purchase date. The bank line of credit and note
supporting this interest expense bear interest at the bank's
internal rate which approximated 11% during the period.
Net Operating Loss
The Company has accumulated approximately $467,732 of net
operating loss carryforwards as of May 31, 1997, which may be
offset against taxable income and income taxes in future years.
The use of these losses to reduce future income taxes will depend
on the generation of sufficient taxable income prior to the
expiration of the net operating loss carryforwards. The
carry-forwards expire in the year 2011. In the event of certain
changes in control of the Company, there will be an annual
limitation on the amount of net operating loss carryforwards which
can be used. No tax benefit has been reported in the financial
statements for the year ended August 31, 1996 or for the nine
months ended May 31, 1997 because there is a 50% or greater chance
that the carryforward will not be utilized. Accordingly, the
potential tax benefit of the loss carryforward is offset by a
valuation allowance of the same amount.
Liquidity and Capital Resources
The Company's principal cash requirements are for selling,
general and administrative expenses, primarily outside consultants
such as independent contractors who provide design, copywriting and
professional marketing and sales consulting services, employee
costs, funding of accounts receivable, capital expenditures and
funding of acquisitions. The Company's primary sources of cash have
been from an initial private placement of the Company's common stock
which raised $747,588 of net proceeds plus cash derived from
operations. The Company is investigating various sources for
additional financing, including both equity infusion and debt
facility arrangements.
During fiscal 1995, the Company's sole operation was consulting
during this initial stage period of operations. The creation of
Access was funded by $30,000 invested by the two shareholders from
whom Access was acquired in June, 1996 for 539,285 shares of
Synaptx common stock. Access was accounted for as a pooling of
interests. This initial Access funding financed the first year
loss of $18,513.
During fiscal 1996, the Company experienced increased revenues
and selling, general and administrative costs through growth of its
consulting business. The Company financed this growth in revenues
and accounts receivable with increased accounts payable financing
from its vendors. Additionally, the Company advanced $50,000 as a
non-interest loan to Impulse before it was acquired on October 1,
1996. This loan was partially financed by increased accounts
payable from its vendors and by a non-interest bearing loan from
the Company's President and C.E.O. of $32,000.
For the nine months ended May 31, 1996, the Company's sole
source of revenue was its consulting business and it incurred a net
loss of $5,620 and increased accounts receivable of $7,228. These
uses of cash from operations were financed by increased accounts
payable financing from the Company's vendors and a non-interest
bearing short-term loan of $10,000 from its President and C.E.O.
Capital expenditures of $13,100 were financed by the issuance of
common stock to its President and C.E.O.
During the nine months ended May 31, 1997, the Company's
results included the acquired Impulse subsidiary, for eight months,
starting from October 1, 1996, the Impulse acquisition date.
Impulse was acquired for 759,401 shares of the Company's common
stock. Because the acquisition was accounted for using the
purchase method it provided $141,194 of cash and increased the
liabilities by $1,033,101. The Company has experienced an
operating loss of $463,111 for the nine months ended May 31, 1997.
The Impulse subsidiary represented $171,283 or 37.0% of this loss
including $127,698 of noncash transactions for depreciation and
amortization. Access represented $85,054 or 18.4% of this loss
which primarily related to cost of management payroll and related
costs associated with developing and beginning implementation of
the sales representative organization acquisition plan. Synaptx,
the parent company, represented $206,773 or 44.6% of this loss
representing the holding company costs including the salary and
related taxes and benefits for the President and C.E.O. plus
allocation of the estimated costs for the other corporate officers
who provide services to Synaptx overall plus the cost of insurance,
brochures promoting the Company's new image, public relations and
legal costs.
The Company's revenue growth for the nine months ended May 31,
1997 required financing for increased accounts receivable of
$385,767, resulting primarily from the Impulse acquisition's revenue
growth. Additionally, the Company repaid $315,308 of notes payable
to banks and other current liabilities resulting from the Impulse
acquisition and incurred $78,606 of capital expenditures, primarily
related to the opening of an Atlanta office to support Impulse
operations.
In March, 1997, the Company raised $747,588 of cash from the
net proceeds of its private placement offering of 1,430,800 shares
of the Company's common stock of which 898,074 shares were issued.
The Company's current expansion plans are primarily related to
the acquisition of sales representative organizations for the
creation of the first nationwide telecommunications sales
representative channel of distribution. Furthermore, acquisition
targets are being identified and discussions have ensued to begin
the acquisition of telecommunications hardware and service
providers. These acquisitions are expected to be consummated
primarily for Synaptx stock. However, part of these acquisitions
can be expected to require the use of cash for noncompete
agreements with key employees and possibly past performance
liabilities to the selling shareholders. Management anticipates
that cash needed to finance possible acquisitions in the near term
will be generated from operations which are expected to begin
generating cash from operations beginning in the fourth quarter of
fiscal 1997 and from additional private placement financing. There
can be no assurance that such financing can be obtained.
The Company's current expansion plans include relocating from
its corporate headquarters representing 8,800 square feet office
space in a business park in Elgin, Illinois around December, 1997
to office facilities currently being refurbished in downtown Elgin.
This new facility will provide, as currently configured, nearly
20,000 square feet of office space. A lease has not yet been
signed and therefore, an obligation to relocate does not yet exist.
If this space is leased and relocation takes place, the estimated
cost of relocation of $25,000 is expected to be financed from
current operations.
Recent Accounting Pronouncements
In December, 1995, FASB issued Statement of Financial
Accounting Standards Number 123, "Accounting for Stock-Based
Compensation." This standard encourages a new method of
recognizing stock-based compensation expense using an option
pricing model measurement of the estimated fair value of employee
stock options. Alternatively, companies may choose to retain the
current approach set forth in Accounting Principles Board Opinion
Number 25, "Accounting for Stock Issued to Employees," and provide
expanded footnote disclosure as to what the effects of utilizing
the option pricing model measurement would have been. Statement
123 is effective for fiscal years beginning in 1996. The Company
does not plan to use the option pricing model measurement of
Statement 123 and will provide the required footnote disclosure.
In February, 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share." The new standard
simplifies the methods for computing earnings per share and
requires the preparation of two new amounts, basic and diluted
earnings per share. When the Company adopts SFAS No. 128, it
expects to report the following restated amounts for the fiscal
periods:
1996 1995
Basic $ (0.04) $ (0.03)
Diluted $ (0.04) $ (0.03)
Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company wishes to advise readers that
actual results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company to
meet its cash and working capital needs, the ability of the Company
to complete material acquisitions of operating companies, and other
risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
ITEM 3. Description of Property
The information required by this Item 3, Description of
Property, is set forth in Item 1, Description of Business, of this
Form 10-SB.
ITEM 4. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information, to the best of the
Company's knowledge, as of June 30, 1997, with respect to each
person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, each director and all directors and
officers as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class(2)
Ronald L. Weindruch * 1,665,550(3) 32.05%
385 Airport Road
Suite A
Elgin, IL 60123
D. Mike Maxwell * 554,145(4) 10.49%
385 Airport Road
Suite A
Elgin, IL 60123
Richard E. Hanik * 73,748(5) 1.42%
385 Airport Road
Suite A
Elgin, IL 60123
William N. Kashul, Sr. * 60,533(6) 1.15%
385 Airport Road
Suite A
Elgin, IL 60123
Peter B. Atwal * 5,503(7) 0.11%
385 Airport Road
Suite A
Elgin, IL 60123
Jerome Rhattigan 269,643 5.19%
1612 Bridgewater Drive
Heathrow, FL 32746
Aegir International
Investments, Inc. 266,692 5.13%
P.O. Box HMI387
Hamilton, Bermuda HMFX
All directors and 2,359,479(8) 44.06%
executive officers as a
group(5 persons in group)
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the
Company has been advised that each person above has sole
voting power over the shares indicated above.
(1) Share amounts include, where indicated, Common Stock issuable
upon the exercise of certain stock options and stock warrants
held by the Company's directors and executive officers at
exercise prices ranging from $0.0909 to $0.9995 per share
which are exercisable within sixty days.
(2) Based upon 5,193,660 shares of common stock outstanding on
June 30, 1997. Percentage ownership is calculated separately
for each person on the basis of the actual number of
outstanding shares as of June 30, 1997 and assumes the
exercise of certain stock options held by such person (but not
by anyone else) exercisable within sixty days.
(3) Includes 44,024 shares of stock held in the names of Mr.
Weindruch's children. Includes 3,669 shares which may be
acquired by Mr. Weindruch pursuant to the exercise of stock
purchase options exercisable within sixty days at the average
exercise price of $0.9995 per share.
(4) Includes 400,062 shares held by Mr. Maxwell's wife and 66,036
shares held by Mr. Maxwell's children and their spouses, as to
which Mr. Maxwell disclaims any beneficial ownership. Also
includes 3,669 shares which may be acquired by Mr. Maxwell
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $0.9995 per
share, 1,834 shares which may be purchased by Mr. Maxwell's
wife pursuant to the exercise of stock purchase options
exercisable within 60 days at the average exercise price of
$0.90861 per share, and 82,544 shares which may be acquired by
Mr. Maxwell pursuant to the exercise of stock purchase
warrants exercisable within sixty days at the average exercise
price of $0.90861 per share.
(5) Includes 5,000 shares held in the names of Mr. Hanik's
children. Includes 3,669 shares which may be acquired by Mr.
Hanik pursuant to the exercise of stock purchase options
exercisable within sixty days at the average exercise price of
$0.90861 per share.
(6) Includes 60,533 shares which may be acquired by Mr. Kashul
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $0.166 per
share.
(7) Includes 5,503 shares which may be acquired by Mr. Atwal
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $0.90861
per share.
(8) Includes 162,359 shares which are issuable upon the exercise
of certain stock options and stock warrants held by the
Company's directors and executive officers at exercise prices
ranging from $0.0909 to $0.9995 per share which are
exercisable within sixty days.
ITEM 5. Directors, Executive Officers, Promoters and Control
Persons
Executive Officers and Directors
The executive officers and directors of the Company are as
follows:
Name Age Position
Ronald L. Weindruch. . . . . . . . 50 President, C.E.O. and
Director
William N. Kashul, Sr. . . . . . . 63 Director
D. Mike Maxwell. . . . . . . . . . 57 Executive Vice President
and Director
Peter B. Atwal . . . . . . . . . . 41 Director
Richard E. Hanik . . . . . . . . . 50 Secretary, Treasurer and C.F.O.
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. There are no agreements with respect to the election of
directors. The Company has not compensated its directors for
service on the Board of Directors or any committee thereof, but
directors are reimbursed for expenses incurred for attendance at
meetings of the Board of Directors and any committee of the Board
of Directors. Officers are appointed annually by the Board of
Directors and each executive officer serves at the discretion of
the Board of Directors. The Company does not have any standing
committees.
None of the officers and/or directors of the Company are
officers or directors of any other publicly traded corporation, nor
have any of the directors and/or officers, nor have any of the
affiliates or promoters of the Company filed any bankruptcy
petition, been convicted in or been the subject of any pending
criminal proceedings, or the subject or any order, judgment, or
decree involving the violation of any state or federal securities
laws within the past five years.
The business experience of each of the persons listed above
during the past five years is as follows:
Ronald L. Weindruch is the founder, Chairman and Chief
Executive Officer of Synaptx as well as the founder of Access. Mr.
Weindruch also serves as Chairman of the Sanford Airport Authority
in Sanford, Florida. Prior to founding Access in 1994, he held a
variety of senior management positions with Siemens, including
senior vice-president of operations at Siemens Stromberg-Carlson.
Prior to beginning with Siemens in 1984, Mr Weindruch served as
director of marketing for the Nortel (formerly Northern Telecom)
DMS 100 switching system and was also group director of business
development for Nortel's digital switching group. Mr. Weindruch
holds an M.B.A. degree from George Washington University.
D. Mike Maxwell is Executive Vice President of Synaptx. He
founded Impulse in 1991 which was acquired by WWATT on October 1,
1996. Additionally, he has founded Pet Care, Inc., Paw Island
Limited Partnership, and the National Cellular SAFETALK Center,
Inc. He has over twenty years of marketing and sales experience in
the telecommunications industry, with expertise in marketing
services, market plan development and execution, marketing and
sales training, sales planning and management. Mr. Maxwell has
been in the marketing services business since 1984 when he was
named vice president of sales for Warner-Little Text, a consumer
telecommunications and enhanced subscriber services subsidiary of
Warner Communications. Prior to joining Warner-Little Text, he was
the director of marketing for Consolidated Communications, a
diversified communications company. Mr. Maxwell has served as
chairman of the marketing committee of the U.S. Telephone
Association and is an active member of International Engineer
Consortium education planning council for the Business and
Marketing institute. Mr. Maxwell holds a B.A. degree from Eastern
Illinois University.
William N. Kashul, Sr. is President of Kashul Consulting,
Inc., a Chicago-based telecommunications consulting firm. Prior to
forming his firm in 1994, Mr. Kashul was a regional vice president
of Strategic Account Development, North America, for Northern
Telecom, Inc. Mr. Kashul began his telecommunications career in
the U.S. Army in 1953. He joined BTE Automated Electric as an
engineer in 1956 and went to ITT Kellogg as a project engineer in
1959. He joined Stromberg-Carlson as a senior sales engineer in
1967 before going to Northern Telecom in 1972. Mr. Kashul is a
member of the International Communications Forum Executive Advisory
Council and holds an M.B.A. from the University of Chicago.
Peter B. Atwal has over twenty-two years experience in the
telecommunications and data communications industry and has worked
in research and development, switching systems and operations
support systems. Mr. Atwal is the Chief Technology Officer for ISR
Global Telecom, a network management provider. In this capacity,
he is responsible for development of TMN Toolkit products, turnkey
projects for service platforms, interworking units and network and
element management solutions based on TMN principles and standards.
Mr. Atwal previously worked as a research and development manager
for Siemens, and as a consultant for Logica, Inc. Mr. Atwal holds
a BSC degree in computer science from London University.
Richard E. Hanik is Chief Financial Officer, Secretary and
Treasurer of Synaptx. In 1994 he joined Impulse which was acquired
on October 1, 1996, and was appointed C.F.O. following WWATT's
acquisition of Impulse. Prior to joining Impulse, Mr. Hanik had 11
years of telecommunications business development and financial
experience with Ameritech, in their cellular and paging operations.
While at Ameritech, Mr. Hanik was instrumental in their acquisition
of numerous paging businesses and developed the initial financial
system when cellular operations first began in October, 1983.
Prior to that he spent four years as an Audit Manager with Deloitte
& Touche. Mr. Hanik also held various financial positions at
Chemetron Corporation, then a Fortune 500 company, including
Division Controller and Internal Audit Director. Prior to
Chemetron, he served as Controller of the Illinois Housing
Development Authority and started his career as an auditor with
Arthur Andersen & Co. Mr. Hanik is a member of the American
Institute of Certified Public Accountants and the Illinois Society
of CPAs, and holds a B.A. degree from DePaul University.
ITEM 6. Executive Compensation
Employee Stock Option Plan
The Board of Directors and a majority of the shareholders of
the Company have approved and adopted the Company's 1996 Stock
Option Plan (the "Plan"). The purpose of the Plan is to encourage
stock ownership by management employees of the Company, to provide
an additional incentive for those employees to contribute to the
success of the Company and to provide the Company with the
opportunity to use stock options as a means of recruiting new
managerial personnel where appropriate.
The Plan authorizes the grant of options which qualify as
incentive stock options under Section 422A of the Internal Revenue
Code ("qualified options"), as well as stock options which do not
qualify under that section of the Code ("nonqualified options").
The Plan is administered by the Board of Directors of the Company.
The Board is authorized to select the individual employees to
receive options under the Plan, the number of shares subject to
each option, the option term and other matters specified in the
Plan.
The Plan provides that the exercise price of any option may
not be less than 100% of the fair market value of the Company's
stock at the date of grant. Options must be granted within ten
years from the date the Plan was approved by the Company's
shareholders.
A maximum of 550,290 shares of the Company's common stock are
authorized for issuance pursuant to options granted under the Plan,
subject to adjustments to prevent dilution or enlargement of rights
of participants in certain circumstances. As of June 30, 1997 there
were 240,144 stock options issued under the Plan of which 80,061
are exercisable at an option price per share ranging from $0.09086
to $2.18 per share and with expiration dates from October, 1998
through June, 2002.
In addition to the shares of the Company's common stock
available under the Plan, the Company has also issued nonqualified
stock options outside of the Plan. In July 1996, nonqualified
options to purchase 33,018 shares of the Company's common stock at
an option price of $0.9086 per share were issued to the outside
members of the Board of Directors for their services. In October
1996, one of the outside directors was granted nonqualified options
to purchase 55,030 shares of the Company's common stock at an
option price of $0.0909 per share for his services in identifying
the Impulse acquisition. As of June 30, 1997, all 88,048 of the
nonqualified options are outstanding and exercisable.
Profit Sharing Plan
The Company's subsidiary, Synaptx Impulse, Inc., sponsors a
qualified employee savings plan (commonly referred to as a "401K
plan") for all eligible employees, including all the officers of
the Company. Participants may make contributions from their gross
pay (limited to 15% of the employee's compensation, as defined),
with Synaptx Impulse, Inc. matching such contributions (subject to
certain limitations) at the rate of 25% of the first 6% of each
participant's contribution. No other deferred compensation plan is
currently in place.
The following table sets forth all compensation actually paid
or accrued by the Company for services rendered to the Company for
the years ended August 31, 1995 and 1996, and the ten month period
ended June 30, 1997 to the Company's Chief Executive Officer and
Executive Vice President. No executive officer of the Company has
earned a salary greater than $100,000 annually for any of the
periods depicted.
Summary Compensation Table
Other All
Annual Other
Name and Compen- Compen-
Principal Position Year Salary Bonus sation sation(1)
Ronald L. Weindruch, 1995 $ -0- $ -0- $ -0- $ 21,200
President, C.E.O. 1996 $18,000 $ -0- $ -0- $111,500
1997 $76,600 $ -0- $ -0- $ 90,900
D. Mike Maxwell, 1995 $ -0- $ -0- $ -0- $ -0-
Executive Vice 1996 $ -0- $ -0- $ -0- $ -0-
President 1997 $91,125 $ -0- $ -0- $ -0-
(1) Consulting and commission income.
Employment Agreement
The Company has entered into an employment agreement with its
President and CEO which currently provides for an annual salary of
$108,000 per year with an increase in compensation to $120,000 per
year effective September 1, 1997. This agreement also provides for
an increase in compensation to $144,000 per year when the
consolidated sales and revenues run rate defined as three
consecutive months reaches $12 million annually, a bonus based on
Company's performance as defined by the Board of Directors not to
exceed 33% of base compensation, and other incentives upon
achieving certain other performance hurdles. The term of this
employment agreement expires August 31, 1998 but automatically
renews on an annual basis, unless acted upon by the Board. If the
employee is terminated without cause, the Company is liable for
three years of regular compensation if this termination takes place
during the initial term and two years of regular compensation if
after the initial term.
The Executive Vice President of the Company has an employment
agreement with a subsidiary of the Company which expires on August
31, 1998 but has an automatic annual renewal provision. This
agreement provides for an annual salary of $135,000 and a bonus
based on the subsidiary's performance (as defined by the
subsidiary's Board of Directors) not to exceed 33% of base
compensation. If the employee is terminated without cause, the
Company is liable for three years of regular compensation if this
termination takes place during the initial term and two years of
regular compensation if after the initial term.
Following the acquisition of ORAYCOM, Inc. on June 1, 1997,
its founder and president, O. Ray Strickland, had an employment
agreement in place which among other things, provided for annual
compensation of $120,000 per year and a commission of 5% on all
commission revenues generated within the nine state territory
serving the Southwest U.S. This employment agreement extends
through June 1, 2000.
The Company, through its subsidiaries, has four other
employment agreements, including one with the remaining officer of
the Company. These agreements provide for annual salaries ranging
from $72,000 to $95,000 and expire on December 31, 1997 with the
exception of one agreement which expires on August 31, 1998. All
these employment agreements provide for automatic renewal. If the
employee is terminated without cause during the initial term of
their agreement, the Company is liable for nine months of regular
compensation.
ITEM 7. Certain Relationships and Related Transactions
During the Company's last two fiscal years, there have been no
transactions between the Company and any officer, director, nominee
for election as director, or any shareholder owning greater than
five percent (5%) of the Company's outstanding shares, nor any
member of the above referenced individuals' immediate family,
except as set forth below.
On February 10, 1997, the Company entered into the Merger.
Pursuant to the terms of the Merger, the Company effected a reverse
stock split of its outstanding shares of common stock on a one (1)
share for one and three-fourths (1.75) shares, and exchanged
3,600,000 shares of authorized but previously unissued shares of
the Company's common stock (post-split) for all the previously
issued and outstanding shares of WWATT. An additional 790,000
shares of the Company's common stock was issued for services
related to the Merger. As a result of the Merger, WWATT was merged
with and into the Company with the Company being the surviving
corporation, and the Company changed its corporate name to Synaptx
Worldwide, Inc. The aforementioned actions were approved by the
Company's shareholders at the Special Meeting of Shareholders held
February 10, 1997. For accounting purposes, the transaction has
been treated as a recapitalization of the Company, or reverse
merger. At the time of the transaction, the Company had only
nominal assets and there was no substantive trading market for its
securities. Therefore, the value of the transaction and the number
of shares issued thereby was determined by mutual negotiation among
the parties.
The Synaptx Chairman of the Board of Directors, who is also
its President & C.E.O., received 269,642 shares of the Company's
common stock which is equal to 50% of the common stock issued in
the exchange for NATCRI's stock, for his 50% ownership in Access.
Also, this individual provides a significant amount of the services
to Access. He was paid or an accrual was made for services
provided and expenses incurred, as follows:
Total incurred for: May 31, May 31, August 31, August 31,
1996 1997 1995 1996
Consulting and
commission expenses $84,300 $90,900 $ -0- $ 111,500
Selling, general and
administrative
expenses 13,200 27,900 15,800 17,200
Accrued expenses:
Consulting and
commission expenses 12,200 17,400 21,200 20,200
Additionally, this majority shareholder of WWATT had, as of August
31, 1996, advanced funds to a company in the form of a
noninterest-bearing loan in the amount of $32,000. The Company has
repaid the loan.
The Company has a revolving line-of-credit with a bank for
$250,000, due to expire May 1, 1998. It is expected to be renewed.
Furthermore, the Company also has a $25,000 term note with a
maturity date of September 30, 1997. Borrowings under the line-of-credit and
the outstanding principal and interest on the note are
collateralized by substantially all of the Company's assets and
bear interest at the bank's floating interest rate (currently
10.99%). The line-of-credit and the note are further secured by
commercial guaranties of two of the shareholders and Synaptx.
The Company through its acquisition of Impulse is also acting
as guarantor of personal notes to a bank of an officer of the
Company and his wife, a shareholder. These notes, as of June 30,
1997, total $443,800 which includes $257,500 under a mortgage note
secured by real estate. The Company believes that the current fair
market value of such real estate is sufficient to cover the
principal amounts associated with these mortgage notes. The
officer and the shareholder are current in their payments.
ITEM 8. Description of Securities
Common Stock
The Company is authorized to issue 25,000,000 shares of common
stock, par value $.001 per share, of which 5,193,660 shares are
issued and outstanding as of June 30, 1997. All shares of common
stock have equal rights and privileges with respect to voting,
liquidation and dividend rights. Each share of common stock
entitles the holder thereof to (i) one non-cumulative vote for each
share held of record on all matters submitted to a vote of the
stockholders; (ii) to participate equally and to receive any and
all such dividends as may be declared by the Board of Directors out
of funds legally available thereof; and (iii) to participate pro
rata in any distribution of assets available for distribution upon
liquidation of the Company. Stockholders of the Company have no
preemptive rights to acquire additional shares of common stock or
any other securities. All outstanding shares of common stock are
non-assessable.
Preferred Stock
The Company is also authorized to issue 10,000,000 shares of
preferred stock , par value One-Tenth of a Cent ($.001) per share,
which shares of preferred stock may be issued in various series
with terms, rights, voting privileges and preferences to be
determined at the discretion of the Board of Directors at the time
of issuance. All fully paid shares of preferred stock of the
Company shall not be liable to call or assessment. No shares of
Preferred Stock have been issued or are currently outstanding.
Warrants to Purchase Common Stock
The Company also authorized the issuance of 200,006 warrant
certificates to purchase shares of common stock of the Company.
The warrant certificates allow for the purchase of one (1) share of
common stock for every one warrant certificate. The warrants were
issued as follows:
Number of Exercise
Date Expiration Warrant Price
Issued Date Certificates Range
9/1/96 8/31/2001 88,048 $ 0.45431 to
$ 0.90861
2/7/97 2/6/2002 111,958 $ 0.90861 to
$ 1.36292
The Warrant Agreement provides for adjustments to the number of
warrant certificates to prevent dilution of warrant holders under
certain circumstances.
<PAGE>
PART II
ITEM 1. Market Price of And Dividends on the Registrant's Common
Equity and Other Shareholder Matters
No shares of the Company's Common Stock have been registered
with the Securities and Exchange Commission (the "Commission") or
any state securities agency of authority. The Company's Common
Stock is being traded on a limited basis in the over-the-counter
market and quotations are published on the OTC Bulletin Board under
the symbol "SYTX", and in the National Quotation Bureau, Inc. "pink
sheets" under Synaptx Worldwide, Inc. Inclusion on the OTC
Bulletin Board permits price quotations for the Company's shares to
be published by such service.
The ability of an individual shareholder to trade their shares
in a particular state may be subject to various rules and
regulations of that state. A number of states require that an
issuer's securities be registered in their state or appropriately
exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to
register its securities in any particular state. Further, most
likely the Company's shares will be subject to the provisions of
Section 15(g) and Rule 15g-9 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), commonly referred to as the
"penny stock" rule. Section 15(g) sets forth certain requirements
for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity
security is considered to be a penny stock unless that security is:
registered and traded on a national securities exchange meeting
specified criteria set by the Commission; authorized for quotation
on The NASDAQ Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at
least $5.00 per share) or the issuer's net tangible assets; or
exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will
be subject to additional sales practice requirements on broker-dealers
who sell penny stocks to persons other than established
customers and accredited investors, generally persons with assets
in excess of $1,000,000 or annual income exceeding $200,000, or
$300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must
make a special suitability determination for the purchase of such
securities and must have received the purchaser's written consent
to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the first transaction, of a risk
disclosure document relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current
quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks held
in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of
broker-dealers to trade and/or maintain a market in the Company's
common stock and may affect the ability of shareholders to sell
their shares.
As of June 30, 1997 there were 145 holders of record of the
Company's common stock, which figure does not take into account
those shareholders whose certificates are held in the name of
broker-dealers. Because of the sparse trading of the Company's
securities and the absence of a current bid and ask quotation, no
trading history is presented herein.
As of the date hereof, the Company has issued and outstanding
5,193,660 shares of common stock. Of this total, 657,211 shares
were issued in transactions more than two years ago. The remaining
4,536,449 shares were issued on or after March 12, 1997. Thus,
657,211 shares of the Company's outstanding common stock may be
sold or otherwise transferred without restriction pursuant to the
terms of Rule 144 ("Rule 144") of the Securities Act of 1933, as
amended (the "Act"), unless held by an affiliate or controlling
shareholder of the Company. Of these shares, the Company has
identified no shares as being held by affiliates of the Company.
The 4,536,449 shares issued on or after March 12, 1997 and/or
presently held by affiliates or controlling shareholders of the
Company may be sold pursuant to Rule 144, subject to the volume and
other limitations set forth under Rule 144. In general, under Rule
144 as currently in effect, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares of the
Company for at least one year, including any person who may be
deemed to be an "affiliate" of the Company (as the term "affiliate"
is defined under the Act), is entitled to sell, within any three-month
period, an amount of shares that does not exceed the greater
of (i) the average weekly trading volume in the Company's common
stock during the four calendar weeks preceding such sale or (ii) 1%
of the shares then outstanding. A person who is not deemed to be
an "affiliate" of the Company and who has held restricted shares
for at least three years would be entitled to sell such shares
without regard to the resale limitations of Rule 144.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.
ITEM 2. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which
any of its property is subject and, to the best of its knowledge,
no such actions against the Company are contemplated or threatened.
ITEM 3. Changes in and Disagreements With Accountants
There have been no changes in or disagreements with
accountants.
ITEM 4. Recent Sales of Unregistered Securities
The Company's predecessor, WWATT, issued restricted shares of
WWATT common stock starting March 1, 1996. Additionally, shares
were issued to consummate the purchases of Access, Impulse and
ORAYCOM, Inc. on June 3, 1996, October 1, 1996 and June 1, 1997,
respectively. Beginning June 10, 1996, WWATT began offering a
private placement which was consummated March 12, 1997. All the
above transactions were adjusted in a stock dividend upon the
recapitalization of WWATT into Synaptx for which 3,600,000 shares
of Synaptx common stock were issued. Additionally, 790,000 shares
of Synaptx common stock were issued to one person for providing
services related to the recapitalization of WWATT into Synaptx.
On January 23, 1997 pursuant to a written agreement, the
Company issued an aggregate of 85,716 shares of common stock to a
total of three individuals in exchange for various services
rendered to the Company, including assisting the Company in its
search for and investigation of potential acquisition and merger
candidates. These shares were issued in reliance on the exemption
from registration provided by Rule 701 promulgated under the
Securities Act of 1933, as amended (the "Act"), and certificates
representing the shares bear an appropriate restrictive legend.
On June 3, 1997 the Board of Directors of Synaptx authorized
a stock rights offering whereby every shareholder of record as of
May 28, 1997 of Synaptx common stock could purchase one (1) share
of common stock for every three (3) shares held at a price of $2.18
per share. As a result, an offering of 1,682,403 shares were so
offered of which 3,591 were exercised as of June 30, 1997 the
expiration date.
With respect to the issuance and/or sale of the aforementioned
shares except for those issued on January 23, 1997, the Company
relied on the exemption from registration provided by Sections 4(2)
and 4(6) of the Securities Act of 1933, as amended (the "Act"), and
Regulation D Rule 506 promulgated thereunder. The Company has also
made available to purchasers of its common stock its business plan
and/or Private Placement Memorandum. All of the shares issued to
the aforementioned persons bore restrictive legends preventing
their transfer except in accordance with the Act and the
regulations promulgated thereunder. In addition, stop transfer
instructions pertaining to these shares will be lodged with the
Company's transfer agent.
ITEM 5. Indemnification of Directors and Officers
As permitted by the provisions of the Utah Revised Business
Corporation Act (the "Utah Act"), the Company has the power to
indemnify an individual made a party to a proceeding because they
are or were a director, against liability incurred in the
proceeding, if such individual acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interest
of the Company and, in a criminal proceeding, they had no
reasonable cause to believe their conduct was lawful.
Indemnification under this provision is limited to reasonable
expenses incurred in connection with the proceeding. The Company
must indemnify a director or officer who is successful, on the
merits or otherwise, in the defense of any proceeding or in defense
of any claim, issue, or matter in the proceeding, to which they are
a party to because they are or were a director or officer of the
Company, against reasonable expenses incurred by them in connection
with the proceeding or claim with respect to which they have been
successful. The Company's Articles of Incorporation empower the
Board of Directors to indemnify its officers, directors, agents, or
employees against any loss or damage sustained when acting in good
faith in the performance of their corporate duties.
The Company may pay for or reimburse reasonable expenses
incurred by a director, officer employee, fiduciary or agent of the
Company who is a party to a proceeding in advance of final
disposition of the proceeding provided the individual furnishes
the Company with a written affirmation that their conduct was in
good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and undertake to
repay the advance if it is ultimately determined that they did not
meet such standard of conduct.
Also pursuant to the Utah Act, a corporation may set forth in
its articles of incorporation, by-laws or by resolution, a
provision eliminating or limiting in certain circumstances,
liability of a director to the corporation or its shareholders for
monetary damages for any action taken or any failure to take action
as a director. This provision does not eliminate or limit the
liability of a director (i) for the amount of a financial benefit
received by a director to which they are not entitled; (ii) an
intentional infliction of harm on the corporation or its
shareholders; (iii) for liability for a violation of
Section 16-10a-842 of the Utah Act (relating to the distributions
made in violation of the Utah Act); and (iv) an intentional
violation of criminal law. To date, the Company has not adopted
such a provision in its Articles of Incorporation, By-Laws, or by
resolution. A corporation may not eliminate or limit the liability
of a director for any act or omission occurring prior to the date
when such provision becomes effective. The Utah Act also permits
a corporation to purchase and maintain liability insurance on
behalf of its directors, officers, employees, fiduciaries or
agents.
Transfer Agent
The Company has designated Interstate Transfer Co., 56 West
400 South, Suite 260, Salt Lake City, Utah 84101, as its transfer
agent.
PART F/S
The financial statements for Synaptx Worldwide, Inc. for the
fiscal periods ended August 31, 1996 and 1995 have been audited to
the extent indicated in their report by BDO Seidman, LLP,
independent certified public accountants, and have been prepared in
accordance with generally accepted accounting principles and
pursuant to Regulation S-B as promulgated by the Securities and
Exchange Commission and are included herein in response to Item 15
of this Form 10-SB. Financial statements for the period ended May
31, 1997 and 1996 have been compiled by management of the Company
and are included herewith. These statements were not audited or
reviewed by BDO Seidman, LLP and, accordingly they did not express
an opinion or any other form of assurance on them.
The financial statements for Synaptx Impulse, Inc. for the
fiscal years ended August 31, 1996 and 1995 have been audited to
the extent indicated in their report by BDO Seidman, LLP,
independent certified public accountants, and have been prepared in
accordance with generally accepted accounting principals.
<PAGE>
Synaptx Worldwide, Inc. and Subsidiary (f/f/a/ Worldwide
Applied Telecom Technology, Inc.)
Independent Auditors' Report F-2
Consolidated Balance Sheets as of August 31, 1996
and 1995 F-3
Consolidated Statements of Operations for the Periods
Ended August 31, 1996 and 1995 F-4
Consolidated Statements of Stockholders' (Deficit)
Equity for the Years Ended August 31, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Periods
Ended August 31, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
Unaudited Financial Statements
Consolidated Balance Sheet as of May 31, 1997 F-16
Consolidated Statements of Operations for the Nine
Months Ended May 31, 1996 and 1997 F-17
Consolidated Statements of Cash Flows for the
Nine Months Ended May 31, 1996 and 1997 F-18
Notes to Consolidated Financial Statements F-19
Pro Forma Consolidated Financial Information
Introduction to the Unaudited Pro Forma Consolidated
Financial Information for the Nine Months Ended
May 31, 1997 F-22
Pro Forma Consolidated Statement of Operations for
the Nine Months Ended May 31, 1997 F-23
Note to Pro Forma Consolidated Financial Statement F-24
Introduction to Unaudited Pro Forma Consolidated
Financial Information for the Year Ended
August 31, 1996 F-25
Pro Forma Consolidated Statement of Operations for
the Year Ended August 31, 1996 F-26
Note to Pro Forma Consolidated Financial Statement F-27
Acquisition
Synaptx Impulse, Inc. (f/k/a Maxwell Partners, Inc.)
Independent Auditors' Report F-28
Balance Sheets as of August 31, 1996 and 1995 F-29 - F-30
Statements of Operations for the Years Ended
August 31, 1996 and 1995 F-31
Statements of Stockholders' Deficit for the Years Ended
August 31, 1996 and 1995 F-32
Statements of Cash Flows for the Years Ended
August 31, 1996 and 1995 F-33
Notes to Financial Statements F-34
<PAGE>
Independent Auditors' Report
Board of Directors
Synaptx Worldwide, Inc. (f/k/a Worldwide Applied Telecom
Technology, Inc.) and Subsidiary
Elgin, Illinois
We have audited the accompanying consolidated balance sheets of
Synaptx Worldwide, Inc. (f/k/a Worldwide Applied Telecom
Technology, Inc.) and Subsidiary as of August 31, 1996 and 1995,
and the related consolidated statements of operations,
stockholders' (deficit) equity and cash flows for the year ended
August 31, 1996 and the ten months ended August 31, 1995. 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 generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about 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. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Synaptx Worldwide, Inc. (f/k/a Worldwide Applied
Telecom Technology, Inc.) and Subsidiary at August 31, 1996 and
1995, and the consolidated results of their operations and cash
flows for the year and ten months then ended, respectively, in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Chicago, Illinois
April 23, 1997
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Consolidated Balance Sheets
August 31, 1996 1995
Assets
Current Assets
Cash $ - $ 11,342
Accounts receivable (Note 5) 36,792 27,001
Total Current Assets 36,792 38,343
Restricted Cash (Note 6) 10,000 -
Due From Maxwell Partners, Inc.(Note 9) 50,000 -
Property and Equipment, net of
accumulated depreciation (Note 3) 11,500 -
Deferred Placement Cost (Note 6) 5,000 -
$113,292 $ 38,343
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 56,746 $ 26,856
Accrued expenses (Note 8) 60,000 -
Due to officer (Note 2) 32,000 -
Total Current Liabilities 148,746 26,856
Liability to Private Placement
Subscribers (Note 6) 10,000 -
Commitments (Note 7)
Stockholders' (Deficit) Equity
Preferred stock; $.001 par value;
10,000,000 shares authorized - -
Common stock; $.001 par value;
25,000,000 shares authorized,
1,937,022 and 539,285 shares
issued and outstanding 1,936 539
Additional paid-in capital 43,664 29,461
Deficit (91,054) (18,513)
Total Stockholders' (Deficit) Equity (45,454) 11,487
$113,292 $ 38,343
See accompanying notes to consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Consolidated Statements of Operations
Ten months
Year ended ended
August 31, August 31,
1996 1995
Consulting Revenue (Note 5) $ 145,653 $ 23,938
Consulting and Commission Expenses 126,561 21,427
Gross profit 19,092 2,511
General and Administrative Expenses 91,633 21,024
Net Loss $ (72,541) $ (18,513)
Weighted Average Shares Outstanding 1,937,022 539,285
Net Loss Per Share $ (0.04) $ (0.03)
See accompanying notes to consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Consolidated Statements of Stockholders' (Deficit) Equity
Additional
Common Par Paid-in
Stock Value Capital Deficit Total
Balance, September 1, 1994 - $ - $ - - $ -
Shares issued in acquisition
(Note 1) 539,285 539 29,461 - 30,000
Net loss for the period - - - (18,513) (18,513)
Balance, August 31, 1995 539,285 539 29,461 (18,513) 11,487
Shares issued for assets 1,397,737 1,397 11,703 - 13,100
Expenses incurred for the
Company by the President - - 2,500 - 2,500
Net loss for the year - - - (72,541) (72,541)
Balance, August 31, 1996 1,937,022 $1,936 $43,664 $(91,054) $(45,454)
See accompanying notes to consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Consolidated Statements of Cash Flows
Ten
Year months
ended ended
August 31, August 31,
Cash Flows From Operating Activities
Net loss (72,541) $(18,513)
Adjustments to reconcile net loss to net cash
provided by (used in)operating activities
Depreciation 1,600 -
Noncash rent expense 2,500 -
Changes in assets and liabilities
Increase in accounts receivable (9,791) (27,001)
Increase in accounts payable 29,890 26,856
Increase in accrued expenses 60,000 -
Net cash provided by (used in) operating
activities 11,658 (18,658)
Cash Flows From Financing Activities
Increase in restricted cash (10,000) -
Increase in liability to private
placement subscribers 10,000 -
Increase in deferred placement coss (5,000) -
Increase in due from Maxwell Partners, Inc. (50,000) -
Increase in due to officer 32,000 -
Issuance of common stock - 30,000
Net cash used in financing activities (23,000) 30,000
Net (Decrease) Increase in Cash (11,342) 11,342
Cash, at beginning of period 11,342 -
Cash, at end of period $ - $ 11,342
Supplemental Cash Flow Information
During the year 1996, the Company issued
1,397,737 shares of common stock in
exchange for fixed assets with a value
of $13,100.
See accompanying notes to consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Summary of Accounting Policies
Operations Synaptx Worldwide, Inc., formerly known as
Worldwide Applied Telecom Technology, Inc. (the
"Company"), is a holding company incorporated in
the State of Utah. The Company has a wholly owned
subsidiary, North American Telco Cable
Representatives, Inc. (d/b/a Synaptx Access
("Access")), which was incorporated in the State of
Florida. Access was acquired by the Company on
June 3, 1996 in a transaction accounted for as a
pooling of interests. See Notes 1 and 9.
Access is a consulting and sales representative
firm based in Florida that provides
telecommunications and information industry
companies with consulting, field sales and business
development support. Clients are located throughout
the United States.
Access' revenues are primarily to
telecommunications companies. Accordingly, all
receivables at August 31, 1996 and 1995 are related
to these customers.
Basis of
Reporting The consolidated financial statements of the
Company (incorporated on November 3, 1995) are
reporting the Company's initial results for the ten
months ended August 31, 1996 and Access' results
for the fiscal year ended August 31, 1996 and the
ten months ended August 31, 1995. Access was
incorporated November 14, 1994. See Note 2.
Principles of
Consolidation The consolidated financial statements include the
accounts of the Company and its wholly owned
subsidiary, Access. Upon consolidation,
significant intercompany accounts, transactions and
profits are eliminated.
At August 31, 1996, approximately 32% of net assets
included in the consolidated balance sheet are
attributed to Access.
Recognition
of Income Professional fees and commission billings represent
the principal sources of revenue derived from its
customers. Professional fee revenue is generally
recognized when fees are earned based on work
performed. Commission revenues are recorded as
services are performed.
Property and
Equipment;
Depreciation Property and equipment are stated at cost and
depreciated over their estimated useful lives of
three to five years using the straight-line method.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Summary of Accounting Policies
Income Taxes Prior to the business combination on June 3, 1996,
the Company's wholly owned subsidiary, with the
consent of its shareholders, elected to be taxed as
an "S" corporation in compliance with elections
under the Internal Revenue Code. In lieu of
corporation income taxes, the shareholders of an
"S" corporation are taxed on their proportionate
share of the subsidiary's taxable income.
Accordingly, no liability or provision for federal
income taxes is included in the accompanying
financial statements for Access' taxable periods
ended December 31, 1994 and 1995, and for the stub
period prior to the merger for the five months
ended May 31, 1996, nor are any deferred taxes
provided for timing differences between income tax
and financial reporting prior to May 31, 1996.
Since the acquisition date, Access' results are
included with the Company's results as reflected in
a planned consolidated federal income tax return.
See Note 4.
Estimates The accompanying financial statements include
estimated amounts and disclosures based on
management's assumptions about future events.
Actual results may differ from those estimates.
Recent
Accounting
Pronouncements In December 1995, FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This
standard encourages a new method of recognizing
stock-based compensation expense using an option
pricing model measurement of the estimated fair
value of employee stock options. Alternatively,
companies may choose to retain the current approach
set forth in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees,"
and provide expanded footnote disclosure as to what
the effects of utilizing the option pricing model
measurement would have been. SFAS No. 123 is
effective for fiscal years beginning in 1996. The
Company does not plan to use the option pricing
model measurement of SFAS No. 123 and will provide
the required footnote disclosure.
In March 1997, the FASB issued SFAS No. 128,
"Earnings per Share." The new standard simplifies
the standards for computing earnings per share and
requires presentation of two new amounts: basic and
diluted earnings per share. The Company will adopt
this standard when it reports its operating results
for the second quarter ending February 28, 1998.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Summary of Accounting Policies
Financial
Instruments Financial instruments which potentially subject the
Company to concentrations of risk consist
principally of temporary cash investments and
accounts receivable. The Company invests its
temporary cash balances in financial instruments of
highly rated financial institutions with maturities
of less than three months.
The carrying values reflected in the balance sheets
reasonably approximate the fair values for cash,
accounts receivable, payables and debt.
Net Loss Per
Share Net loss per share is based on the weighted average
number of shares of common stock outstanding during
each period.
Stock Dividend In February 1997, the Company declared a 10.058%
stock dividend. All share and per share data have
been adjusted to reflect the stock dividend.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
1. Business
Combination On June 3, 1996, the Company entered into a
definitive agreement with the shareholders holding
all of the issued and outstanding common stock of
Access. These shareholders agreed to exchange all
of their outstanding common stock for 541,842
shares of common stock of the Company. The
acquisition was accounted for as a pooling of
interests and, accordingly, the accompanying
financial information has been restated to include
the accounts of Access for all periods presented.
Results of the separate entities for the periods
preceding the acquisition are as follows:
September 1,
1995 Year
through ended
May 31, August 31,
1996 1995
Revenues
The Company $ -
Access 105,773 27,001
$ 105,773 $ 27,001
Net loss
The Company $ 37,713 $ -
Access 18,899 18,513
$ 56,612 $ 18,513
2. Related
Party
Transactions The majority shareholder of the Company who is also
the Chairman of the Board of Directors and the
President of the Company received 269,642 shares
(50% of the Company's common stock issued in the
exchange of stock) for his 50% ownership in Access.
Also, this individual provides a significant amount
of the services to Access. For the periods ended
August 31, he was paid or an accrual was made for
services provided and expenses incurred, as
follows:
1996 1995
Total payments for the periods
Consulting and commissions
expenses $111,500 $ -
General and administrative
expenses 38,000 15,800
Accounts payable at August 31
Consulting and commissions
expenses 20,200 21,200
General and administrative
expenses 2,700 2,800
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
In 1996, this shareholder advanced funds of $32,000
to the Company in the form of a noninterest-bearing
loan. Subsequent to August 31, 1996, the Company
fully paid this loan.
In addition, the Company was provided office space
rent free by the President. The Company has
recorded an expense for the estimated market value
of the rental space with a corresponding credit to
paid-in capital.
One of the members of the board of directors is
also the founder/chief technology officer of the
most significant customer in 1996. This director
like all other outside directors also was granted
options to purchase 5,529 shares of the Company's
common stock subsequent to year end. See Note 7.
3. Property and
Equipment Major classes of property and equipment consist of
the following as of August 31:
1996 1995
Furniture and fixtures $ 9,400 $ -
Computer equipment 3,700 -
13,100 -
Less accumulated depreciation 1,600 -
Net property and equipment $11,500 $ -
4.Income Taxes With the consent of its stockholders, Access
elected to be taxed as an "S" corporation pursuant
to the Internal Revenue Code through June 3, 1996.
Under this arrangement, the stockholders will
include the taxable income (loss) of the Company in
their individual tax returns.
As of June 3, 1996, Access became a "C"
Corporation. A deferred tax asset was created as a
result of the estimated future tax consequences of
temporary differences between the financial
statement and tax basis of assets given the
provisions of the enacted tax laws. A valuation
allowance has been established to fully reserve for
this deferred tax asset.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
5.Significant
Customers A substantial portion of the Company's revenues are
generated from relatively few customers. Two
customers accounted for approximately 55% and 18%
of sales in the year ended August 31, 1996 and two
different customers accounted for approximately 57%
and 13% of sales in the ten months ended August 31,
1995. Receivables from these customers represented
approximately 14% and 37% of total receivables at
August 31, 1996, respectively, and approximately
57% and 13% of total receivables at August 31,
1995, respectively.
6. Private
Placement From July 1996 through March 1997, the Company sold
898,074 shares (post stock dividend, 816,000 pre
dividend) of the Company's common stock at $1 per
share in a private placement. The private
placement required that a minimum of $500,000 be
raised. At August 31, 1996, $10,000 was received
towards the purchase of 10,000 shares.
Accordingly, this cash was considered restricted
and a liability was established for the subscribed
shares.
Placement costs of $5,000 were incurred as of
August 31, 1996. These costs will be offset
against the proceeds when the private placement
becomes effective subsequent to year end.
7.Stock
Incentive Plan The Company has a stock incentive plan (the "Plan")
adopted by the board of directors on September 27,
1996 and approved by the stockholders on January
17, 1997. The Plan provides for the issuance of
both qualified and nonqualified incentive stock
options at an exercise price approximating the fair
market value of the Company's stock at the date of
grant (or 110% of such fair market value in the
case of substantial stockholders). A total of
550,290 shares of the Company's common stock have
been reserved pursuant to the Plan. As of August
31, 1996, there were no options outstanding under
the Plan. Subsequent to year end, the Company has
granted the following options:
Outstanding as of August 31, 1996 -
Granted 214,644
Exercised -
Cancelled -
Option range $.90 - $1.00
Options exercisable 71,565
Options available for grant 335,646
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
In July and October 1996, the Company issued
nonqualified options to purchase 33,018 and 55,030
shares of common stock, respectively. The option
prices were $.91 and $.09, respectively. All these
options remain outstanding and are exercisable.
The Company has issued 200,006 warrants to various
individuals. The exercise prices of the warrants
range from $.45 to $1.36. The warrants are
exercisable and expire in August 2001 and February
2002.
8.Employment
Agreement In July 1996, the Company entered into an
employment agreement with its president/chief
executive officer which extends through December
31, 1997. The agreement shall be automatically
renewed for successive one-year terms unless
canceled by either party at least 30 days prior to
the current term's expiration. The agreement
provides for an annual salary of $108,000 and a
discretionary bonus not to exceed 33% of the
employee's regular compensation for each quarter.
When the Company's sales for three consecutive
months exceed an annual amount of $15 million, then
compensation will be increased to $144,000 per
year. If the employee is terminated without cause,
the Company is liable for three years of regular
compensation if this termination takes place during
the initial term and two years of regular
compensation if after the initial term. At August
31, 1996, accrued expenses includes $18,000 for his
compensation.
9.Subsequent
Events (a) On July 13, 1996, the Company signed a
definitive agreement to exchange 759,400
shares of its common stock for all of the
existing outstanding common stock of Maxwell
Partners, Inc. ("Maxwell"), an Illinois
corporation. The exchange of common stock was
consummated on October 1, 1996. The
acquisition will be accounted for using the
purchase method of accounting. Maxwell is
primarily engaged in marketing to the
telecommunications and information industries.
The results of operations of Maxwell are not
included in the accompanying financial
statements as of August 31, 1996. The total
cost of the acquisition was approximately
$1,720,000, which exceeded the fair value of
the net assets of Maxwell by approximately
$1,300,000. The excess will be amortized on
the straight-line method over ten years.
If the acquisition had occurred on September
1, 1994, management estimates that, on an
unaudited proforma basis, the following would
have been reported on a consolidated basis:
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
1996 1995
(Unaudited)
Revenues $3,079,000 $3,131,000
Net loss (325,000) (321,000)
Loss per share (0.12) (0.25)
As of August 31, 1996, the Company had
advanced working capital of $50,000 to Maxwell
in the form of a noninterest-bearing advance.
(b) In September 1996, the Company received
$40,000 from a third party in the form of a
promissory note due December 3, 1996. The
interest rate was 10%. This loan was fully
paid in December 1996. In conjunction with
this note, 40,000 warrants representing 40,000
shares of the Company's common stock were
issued. These warrants are exercisable over a
five- year period at $1 per share.
(c) On March 12, 1997, the Company entered into a
Merger Agreement (the "Agreement") and Plan of
Reorganization with Synaptx Worldwide, Inc.
("Synaptx"), formerly In-Touch Interactive
Multimedia, Inc., an inactive Utah publicly
held shell corporation. Under the terms of
the Agreement, the Company merged with and
into Synaptx with Synaptx being the surviving
corporation. Synaptx issued to the
stockholders of the Company 3,600,000 (post
stock dividend) shares of Synaptx common
stock. After this merger, Synaptx had a total
of 5,047,211 shares of common stock issued and
outstanding. Had the merger taken place on
September 1, 1994, the proforma inclusion of
Synaptx's operating results would not have had
a significant effect on the consolidated
revenues and net loss of the Company.
(d) In April 1997, Maxwell refinanced its debt
with a financial institution. As part of the
restructuring, Synaptx has entered into a
corporate resolution to guarantee the debt of
Maxwell. At August 31, 1996, the balance of
this line-of-credit was $171,300. Borrowings
under the line-of-credit are payable on demand
or due May 1, 1998 and collateralized by
substantially all of Maxwell's assets.
10.Rights Offering
(Unaudited) In May 1997, the Company initiated a rights
offering of up to 1,682,403 shares of its common
stock at $2.18 per share. The offering terminated
on June 30, 1997 with 3,591 shares subscribed.
<PAGE>
Synaptx Worldwide, Inc.
(f/k/a Worldwide Applied Telecom Technology, Inc.)
and Subsidiary
Notes to Consolidated Financial Statements
11.Acquisitions
(Unaudited) (a) In June 1997, the Company acquired a
telecommunications sales representative
company. The purchase price was 142,858
shares of the Company's common stock plus the
contingent earnouts based on future levels of
earnings as defined in the agreement.
(b) In May 1997, the Company entered into letters
of intent to acquire two sales representative
organizations. No definitive agreements have
been entered into, however closing is expected
to take place in September 1997.
<PAGE>
Synaptx Worldwide, Inc. and Subsidiaries
Consolidated Balance Sheet
As of May 31, 1997
(Unaudited)
ASSETS
Current assets:
Cash $ 280
Accounts receivable 733,351
Prepaid expenses and deposits 43,127
Total current assets 776,758
Property, plant and equipment 214,105
Less accumulated depreciation (47,865)
Net property, plant and equipment 166,240
Other assets 17,000
Goodwill, net 1,217,209
Total assets $2,177,207
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 481,460
Accrued expenses and taxes 259,024
Unearned revenues 160,000
Capital lease obligation 11,950
Notes payable to bank 275,000
Total current liabilities 1,187,434
Shareholders' equity:
Preferred stock (par value $.001, 10,000,000
shares authorized, no shares outstanding) -
Common stock (par value $.001, 25,000,000 shares
authorized, 5,047,211 shares issued and
outstanding) 5,047
Additional paid-in capital 1,536,390
Retained earnings (551,664)
Total shareholders' equity 989,773
Total liabilities and shareholders' equity $2,177,207
See notes to condensed consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc and Subsidiaries
Consolidated Statements of Operation
For the Nine Months Ending May 31, 1996 and 1997
(Unaudited)
May 31, May 31,
1996 1997
Net sales and revenues:
Marketing services & production $ 2,281,958
Commissions & consulting fees $ 97,000 116,663
Executive placement fees 70,107
Total revenues 97,000 2,468,728
Cost of sales and revenues 84,502 1,704,752
Gross Profit 12,498 763,976
Expenses:
Selling, general, & admin. expenses 17,118 1,059,046
Depreciation 1,000 46,265
Amortization 86,433
Interest expense - net 35,343
Total expenses 18,118 1,227,087
Net loss $ (5,620) $ (463,111)
Weighted average shares outstanding 1,937,022 3,645,607
Net loss per share $ (0.00) $ (0.13)
See notes to condensed consolidated financial statements.
<PAGE>
Synaptx Worldwide, Inc and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ending May 31, 1996 and 1997
(Unaudited)
May 31, May 31,
1996 1997
Cash flows from (used in) operations
Net (loss) $ (5,620) $(463,111)
Depreciation expense 1,000 46,265
Amortization expense - 86,433
Changes in: (net of acquisition)
Accounts receivable (7,228) (385,367)
Other current assets - 33,748
Accounts payable 5,501 203,743
Accrued expenses and taxes - 12,902
Due to officers 10,000 (32,000)
Unearned revenues - 10,000
Other current liabilities - (209,951)
Net cash provided by (used in)
operations 3,653 (697,338)
Cash flows from (used in) investing
activities:
Additions to property plant &
equipment (13,100) (73,606)
Additions to long term deposits (17,000)
Cash realized on acquisitions 141,194
Net cash provided by (used in)
investing activities (13,100) 50,588
Cash from (used in) financing activities:
Issuance of common stock - net 1,270 747,588
Additions to capital in excess of par 10,734 -
Reductions in bank line of credit - (18,000)
Reductions in long term debt - (82,558)
Net cash provided by (used in) operations 12,004 647,030
Net increase (decrease) in cash 2,557 280
Cash at beginning of period 11,342 -
Cash at end of period $ 13,899 $ 280
_________________________________________________________________
Supplemental Disclosures of Cash Flow Information
Cash paid during the nine months for
Interest $ - $38,438
Income taxes - -
Supplemental Schedule of Noncash Investing Activities
Synaptx Worldwide, Inc. acquired Synaptx Impulse, Inc. in
October, 1996 for 759,400 shares of common stock with a value
of $690,000. In conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired $ 429,459
Cost in excess of fair value of assets acquired 1,293,642
Stock Issued (690,000)
Liabilities assumed $1,033,101
See notes to condensed consolidated financial statements.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 Basis of Presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of results for the
interim periods.
The results of operations for the nine month periods ended May
31, 1996 and 1997 are not necessarily indicative of the results to
be expected for the full year.
Synaptx Worldwide, Inc., formerly known as Worldwide Applied
Telecom Technology, Inc. (the "Company"), is a holding company
incorporated in the State of Utah. The Company has two wholly
owned subsidiaries, Synaptx Access, Inc. (F/K/A North American
Telco Cable Representatives, Inc.) ("Access"), which was
incorporated in Florida, and Synaptx Impulse, Inc. (F/K/A Maxwell
Partners, Inc.) ("Impulse"), which was incorporated in Illinois on
October 1, 1996. See Note 3.
NOTE 2 Business Reorganization - Reverse Merger
On February 10, 1997, the Company entered into a merger
agreement (the "Merger") with Worldwide Applied Telecom Technology,
Inc., a Delaware corporation, ("WWATT"). Pursuant to the terms of
the Merger, the Company effected a reverse stock split of its
outstanding shares of common stock on a one (1) share for one and
three-fourths (1.75) shares, and exchanged 3,600,000 shares of
authorized but previously unissued shares of the Company's common
stock for all the previously issued and outstanding shares of
WWATT. An additional 790,000 shares of the Company's common stock
was issued for services related to the Merger. As a result of the
Merger, WWATT was merged with and into the Company with the Company
being the surviving corporation, and the Company changed its
corporate name to Synaptx Worldwide, Inc. The aforementioned
actions were approved by the Company's shareholders at the Special
Meeting of Shareholders held March 12, 1997. Prior to the Merger,
there was no affiliation between the Company and WWATT, nor between
the officers, directors or principal shareholders of the two
respective entities. For accounting purposes, the transaction has
been treated as a recapitalization of the Company, or reverse
merger. Subsequent to the acquisition, all of the Company's
activities have been restated to the prior business endeavors of
WWATT. Had the merger taken place on September 1, 1994, the pro
forma inclusion of Synaptx's operating results would not have had
a significant effect on the consolidated revenues and net loss of
the Company.
NOTE 3 Business Combination
On July 13, 1996, the Company signed a definitive agreement to
exchange 759,400 shares of its common stock for all of the existing
outstanding common stock of Impulse. The exchange of common stock
was consummated on October 1, 1996. The acquisition was accounted
for using the purchase method of accounting. Impulse is primarily
engaged in marketing to the telecommunications and information
industries. The results of operations of Impulse are not included
in the accompanying financial statements as of May 31, 1996. The
total cost of the acquisition was approximately $1,300,000, which
included the fair value of the net liabilities assumed from
Impulse. The excess will be amortized on the straight-line method
over ten years.
If the acquisition had occurred on September 1, 1995, management
estimates that, on an unaudited pro forma basis, the following
would have been reported on a consolidated basis for the nine
months ended May 31:
(Unaudited) 1996 1997
Revenues $2,455,430 $ 2,632,921
Net loss (318,951) (634,958)
Loss per share $ (0.17) $ (0.17)
NOTE 4 Notes Payable to Bank
On April 29, 1997, the Company renewed a $250,000 revolving
line of credit with the bank which is collateralized by
substantially all of the Company's assets. This line-of-credit was
added with the acquisition of Synaptx Impulse, Inc., consummated
October 1, 1996. The total line balance is limited to 65% of
Impulse accounts receivable under 90 days old. At May 31, 1997,
the balance due under the line was $250,000 and bears interest at
the bank's floating internal rate of 10.99%.
The Company also added a term loan when it acquired Synaptx
Impulse, Inc. At May 31, 1997, the balance due under the loan was
$25,000. On June 26, 1997, this note was renewed with a maturity
date of September 30, 1997 and bears interest at the bank's floating
internal rate of 10.99%.
NOTE 5 Capital Stock
On March 12, 1997, the Company entered into a Merger Agreement
(the "Agreement") and Plan of Reorganization with Synaptx Worldwide,
Inc. ("Synaptx"), formerly In-Touch Interactive Multimedia, Inc.,
an inactive Utah publicly held shell corporation. Under the terms
of the Agreement, the Company merged with and into Synaptx with
Synaptx being the surviving corporation. Synaptx issued to the
stockholders of the Company, 3,600,000 shares of Synaptx common
stock. After this merger, Synaptx had a total of 5,047,211 shares
of common stock issued and outstanding.
NOTE 6 Subsequent Events
On June 1, 1997, the Company signed a definitive agreement and
consummated an exchange of 142,858 shares of its common stock for
all of the existing outstanding common stock of ORAYCOM, a Texas
corporation. The acquisition will be accounted for using the
purchase method of accounting. ORAYCOM is primarily engaged in
marketing to the telecommunications and information industries.
The results of operations of ORAYCOM are not included in the
accompanying financial statements as of May 31, 1997. The total
cost of the acquisition was approximately $500,000, which exceeded
the fair value of the net assets of ORAYCOM by approximately
$403,000. Additionally, pursuant to the terms of the acquisition,
the former shareholders of ORAYCOM may earn additional purchase
price consideration in the form of additional common stock of the
Company based on the attainment of both "commission revenues" and
"earnings" above specified levels by ORAYCOM beginning June 1, 1997
through August 31, 1999. The additional consideration is specified
as fixed amounts for monthly attainment of specified "commission
revenues" and "earnings" through August 31, 1997 and for the
attainment of specified annual "commission revenues" and "earnings"
for the subsequent fiscal years ending August 31, 1998 and 1999.
If ORAYCOM meets the specified "commission revenues" and "earnings"
amounts for all the periods involved, the additional consideration
could amount to $380,000. The excess will be amortized on the
straight-line method over ten years.
If the acquisition had occurred on September 1, 1995,
management estimates that, on an unaudited pro forma basis, the
following would have been reported on a consolidated basis:
(Unaudited) 1996 1997
Revenues $ 404,954 $ 2,951,017
Net loss (6,154) (461,197)
Loss per share $ (0.00) $ (0.12)
On June 3, 1997 the Board of Directors of Synaptx authorized
a stock rights offering whereby every shareholder of record as of
May 28, 1997 of Synaptx common stock could purchase one (1) share
for every three (3) shares held at a price of $2.18 per share. As
a result, an offering of 1,682,403 shares were so offered of which
3,591 were exercised as of June 30, 1997, the expiration date.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Pro Forma Consolidated Financial Statement
Nine Months Ended May 31, 1997
The following unaudited pro forma consolidated statement of
operations for the nine months ended May 31, 1997 gives effect to
the acquisition of Synaptx Impulse, Inc. (F/K/A Maxwell Partners,
Inc.)which was made as of October 1, 1996. The acquisition was
accounted for using the purchase method of accounting.
Accordingly, the results of operations of the acquired entity have
been reflected since the acquisition date. The pro forma
information has been prepared as if the acquisition occurred on
September 1, 1996 and is based on historic financial statements of
Synaptx Worldwide, Inc. and Synaptx Impulse, Inc. from September 1,
1996 to the acquisition date.
The unaudited pro forma statement of operations has been
prepared by management based upon the financial statements of
Synaptx Worldwide, Inc. and the acquired entity. These pro forma
results may not be indicative of the results that actually would
have occurred if the combination had been in effect since inception
or which may be obtained in the future.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Pro Forma Statements of Operations
Nine Months Ended May 31, 1997
(Unaudited)
Synaptx Synaptx Pro forma
Worldwide Impulse, Adjustments Pro forma
Inc. Inc. Increase Consolidation
(Decrease)
REVENUES $ 2,468,728 $ 164,193 $ - $ 2,632,921
COST OF REVENUES 1,704,752 201,902 1,906,654
GROSS PROFIT 763,976 (37,709) 726,267
EXPENSES
Selling, general &
administrative 1,059,046 103,269 1,162,315
Depreciation 46,265 18,335 64,600
Amortization 86,433 - 4,055 90,488
Interest Expense - Net 35,343 8,479 43,822
Total Expenses 1,227,087 130,083 4,055 1,361,225
NET LOSS $(463,111) $(167,792) $(4,055) $(634,958)
Weighted Average Shares
Outstanding 3,645,607 84,377 3,729,984
NET LOSS PER SHARE OF
COMMON STOCK $ (0.13) $ (0.17)
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Note to Pro Forma Financial Statement
Effective October 1, 1996, the Company acquired all of the
outstanding stock of Synaptx Impulse, Inc. (F/K/A Maxwell Partners,
Inc.,) whose principal operations consist of strategic and market
planning, new product launch planning, distribution channel
analysis and design, communications program planning and
implementation, and event and trade show management primarily for
clients in the telecommunications industry. The acquisition was
consummated for 759,400 shares of Synaptx common stock, with a fair
value at the acquisition date of $690,000.
The transaction was recorded under the purchase method of
accounting. The total cost of the acquisition was approximately
$1,723,000, which exceeded the fair value of assets acquired by
approximately $1,300,000.
Pro forma adjustment related to the acquisition of Impulse
include an adjustment for amortization of the cost in excess of
fair value of assets acquired of $4,055.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Pro Forma Consolidated Financial Statement
Year Ended August 31, 1996
The following unaudited pro forma consolidated statement of
operations for the year ended August 31, 1996 gives effect to the
acquisition of Synaptx Impulse, Inc. (F/K/A Maxwell Partners,
Inc.)which was made as of October 1, 1996. The acquisition was
accounted for using the purchase method of accounting.
Accordingly, the results of operations of the acquired entity are
not reflected in the Company's year ended August 31, 1996 results
of operations since the acquisition date occurred after the
Company's fiscal year end. The pro forma information has been
prepared as if the acquisition occurred on September 1, 1995 and is
based on historic financial statements of Synaptx Worldwide, Inc.
and Synaptx Impulse, Inc. from September 1, 1995 to August 31,
1996.
The unaudited pro forma statement of operations has been
prepared by management based upon the financial statements of
operations of Synaptx Worldwide, Inc. and the acquired entity.
These pro forma results may not be indicative of the results that
actually would have occurred if the combination had been in effect
since inception or which may be obtained in the future.
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Pro forma Statements of Operations
Year Ended August 31, 1996
(Unaudited)
Synaptx Synaptx Pro forma
Worldwide Impulse, Adjustments Pro forma
Inc. Inc. Increase Consolidation
(Decrease)
REVENUES $ 145,653 $2,900,084 $ - $ 3,045,737
COST OF REVENUES 126,561 1,953,011 2,079,572
GROSS PROFIT 19,092 947,073 - 966,165
EXPENSES:
Selling, general
& administrative 90,033 915,064 1,005,097
Depreciation 1,600 65,000 66,600
Amortization - - 129,650 129,650
Interest Expense - Net - 35,429 35,429
Total Expenses 91,633 1,015,493 129,650 1,236,776
LOSS FROM OPERATIONS (72,541) (68,420) (129,650) (270,611)
OTHER INCOME (EXPENSE) - (53,312) (53,312)
NET LOSS $ (72,541) $ (121,732) $(129,650) $ (323,923)
Weighted average shares
outstanding 1,937,022 759,400 2,696,422
NET (LOSS) PER SHARE OF
COMMON STOCK $ (0.04) $ (0.12)
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
Note to Pro Forma Financial Statement
Effective October 1, 1996, the Company acquired all of the
outstanding stock of Synaptx Impulse, Inc. (F/K/A Maxwell Partners,
Inc.,) whose principal operations consist of strategic and market
planning, new product launch planning, distribution channel
analysis and design, communications program planning and
implementation, and event and trade show management primarily for
clients in the telecommunications industry. The acquisition was
consummated for 759,400 shares of Synaptx common stock, with a fair
value at the acquisition date of $690,000.
The transaction was recorded under the purchase method of
accounting. The total cost of the acquisition was approximately
$1,723,000, which exceeded the fair value of assets acquired by
approximately $1,300,000.
Pro forma adjustment related to the acquisition of Impulse
include an adjustment for amortization of the cost in excess of
fair value of assets acquired of $129,650.<PAGE>
Independent Auditors' Report
Synaptx Impulse, Inc.
(f/k/a Maxwell Partners, Inc.)
Chicago, Illinois
We have audited the accompanying balance sheets of Synaptx Impulse,
Inc. (f/k/a Maxwell Partners, Inc.) as of August 31, 1996 and 1995,
and the related statements of operations, stockholders' deficit 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 generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about 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. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Synaptx
Impulse, Inc. (f/k/a Maxwell Partners, Inc.) at August 31, 1996 and
1995, and the results of its operations and cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Chicago, Illinois
April 23, 1997
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Balance Sheets
August 31, 1996 1995
Assets
Current Assets
Cash $ 38 $ 1,000
Investment in related party 15,000 -
Accounts receivable 469,481 425,871
Due from related parties (Note 2) - 112,250
Other receivables 1,058 5,805
Prepaid expenses and other 12,023 38,106
Total Current Assets 497,600 583,032
Property and Equipment, less accumulated
depreciation and amortization(Note 1) 122,516 183,963
$620,116 $766,995
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Balance Sheets
August 31, 1996 1995
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable $ 436,632 $ 432,716
Accrued expenses 25,213 9,203
Due to related parties (Note 2) 33,250 -
Due to Synaptx Worldwide (Note 10) 50,000 -
Notes payable to bank (Note 4) 294,000 120,000
Notes payable to shareholders (Note 2) 40,675 140,000
Capital lease obligation - current portion
(Note 5) 23,306 24,169
Deferred revenue 75,000 235,000
Total Current Liabilities 978,076 961,088
Capital Lease Obligation - Long-Term (Note 5) 2,173 24,243
Total Liabilities 980,249 985,331
Shareholders' Deficit
Common stock, no par - 100,000 shares
authorized - 15,150 shares issued
and outstanding (Note 8) 35,000 35,000
Deficit (395,133) (219,336)
Less subscriptions receivable (Note 2) - (34,000)
(360,133) (218,336)
$ 620,116 $ 766,995
See accompanying summary of accounting policies and notes to
financial statements.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Statements of Operations
Year ended August 31, 1996 1995
Revenues $2,900,084 $3,104,068
Expenses
Operating 1,173,011 1,606,193
Direct labor 779,606 665,409
Selling, general and administrative
(Notes 6 and 7) 982,270 978,631
Total expenses 2,934,887 3,250,233
Operating loss (34,803) (146,165)
Other Income (Expense)
Write-off of related party advances
(Note 2) (53,000) (144,000)
Interest income 4,707 18,476
Interest expense (40,136) (44,528)
Miscellaneous 1,500 (2,009)
Total other expense (86,929) (172,061)
Net Loss $(121,732) $(318,226)
See accompanying summary of accounting policies and notes to
financial statements.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Statements of Stockholders' Deficit
Retained Subscrip-
Common Earnings tion
Shares Stock (Deficit) Receivable Total
Balance, at September 1, 1994 100 $ 1,000 $ 107,890 $ - $108,890
Shares issued 15,050 34,000 - - 34,000
Net loss - - (318,226) - (318,226)
Distributions to shareholders - - (9,000) - (9,000)
Advances to stockholders for
purchase of common stock - - - (34,000) (34,000)
Balance, at August 31, 1995 15,150 35,000 (219,336) (34,000) (218,336)
Net loss - - (121,732) - (121,732)
Distributions to shareholders - - (54,065) - (54,065)
Payment on subscription receivable - - - 34,000 34,000
Balance, at August 31, 1996 15,150 $ 35,000 $(395,133) $ - $(360,133)
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Statements of Cash Flows
Year ended August 31, 1996 1995
Cash Flows From Operating Activities
Net loss $ (121,732) $ (318,226)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 65,000 58,865
Changes in assets and liabilities
Increase in accounts receivable (43,610) (50,977)
Decrease (increase) in due from related
parties 112,250 (75,538)
Decrease in other receivables 4,747 50,048
Decrease in prepaid expenses and other 26,083 15,958
Increase in accounts payable 3,916 145,796
Increase (decrease) in accrued expenses 16,010 (98,104)
Increase in due to related parties 33,250 -
Increase in due to Synaptx Worldwide 50,000 -
(Decrease) increase in deferred revenue (160,000) 235,000
Net cash used in operating activities (14,086) (37,178)
Cash Flows From Investing Activities
Capital expenditures (3,553) (37,468)
Investment in related party (15,000) -
Net cash used in investing activities (18,553) (37,468)
Cash Flows From Financing Activities
Contributions by shareholders 34,000 -
Distributions to shareholders (54,065) (9,000)
Payments on capital lease obligation (22,933) (15,585)
Payments on shareholder loans (99,325) (22,250)
Proceeds from shareholder loans - 162,250
Increase (decrease) in line-of-credit, net 174,000 (52,873)
Net cash provided by financing activities 31,677 62,542
Net Decrease in Cash $ (962) $ (12,104)
Cash, at beginning of year 1,000 13,104
Cash, at end of year $ 38 $ 1,000
Supplemental Disclosure of Cash Flow Information
Interest paid $ 39,297 $ 41,528
Capital lease obligation incurred to lease equipment
and furniture - 63,996
Stock subscription receivable - 34,000
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Summary of Accounting Policies
Nature of
Operations Synaptx Impulse, Inc. (f/k/a Maxwell Partners,
Inc.) (the "Company") is a Chicago, Illinois based
marketing and advertising agency serving the
telecommunications and information industries
throughout the continental United States. The firm
employs industry professionals with expertise in
market research, strategic and market planning,
marketing communications, sales training and
management, database marketing and graphic design.
Revenue
Recognition Professional fees and production billings represent
the principal sources of revenue derived from
customers. Professional fees revenue is generally
recognized when fees are earned based on work
performed. Production revenues are recorded as
billed with costs accrued for vendor invoices not
yet received. Salaries and other company costs are
expensed as incurred.
Deferred
Revenue The Company often receives prepayments for
professional services to be rendered. This revenue
is deferred and as the services are provided, a
proportionate share of the deferred revenue is
recognized into income.
Investments During the fiscal year 1996, the Company purchased
a 12.5% interest in Paw Island, a related party of
the Company. This investment is accounted for
using the cost method. Subsequent to year end,
this investment was distributed to the individual
shareholders of the Company.
Property and
Equipment Property and equipment are stated at cost.
Depreciation is computed over the estimated useful
lives of the assets using accelerated methods.
Income Taxes The Company elected "S" corporation status when it
was incorporated and, accordingly, it is not a
tax-paying entity for federal income tax purposes. Its
stockholders have consented to include the losses
of the Company in their individual federal tax
returns.
Estimates The accompanying financial statements include
estimated amounts and disclosures based on
management's assumptions about future events.
Actual results may differ from those estimates.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Summary of Accounting Policies
Financial
Instruments Financial instruments which potentially subject the
Company to concentrations of risk consist
principally of accounts receivable. The accounts
receivable are from major corporations located
throughout the United States and the associated
credit risks are limited. The carrying values
reflected in the balance sheet at August 31, 1996
reasonably approximate the fair values for accounts
receivable and payable.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Notes to Financial Statements
1.Property and
Equipment Major classes of property and equipment consist of
the following:
August 31, 1996 1995
Leasehold improvements $ 10,506 $ 10,089
Furniture and fixtures 228,365 227,001
Computer equipment 92,752 90,981
Vehicle 20,782 20,782
352,405 348,853
Less accumulated
depreciation 229,889 164,890
Net property and equipment $ 122,516 $ 183,963
2.Related Party
Transactions The Company has notes payable to shareholders
totaling $40,675 and $140,000 for the years ended
August 31, 1996 and 1995, respectively. These
notes are payable on demand or December 28, 1999
and bear interest at 7.48%.
For the last few years, the Company has performed
marketing work for, and subleased rental space to,
two related entities in which the majority
shareholder has an equity interest. Revenues of
$2,577 and $205,184 were derived from sales to
related entities in the years ended August 31, 1996
and 1995, respectively. In addition, the Company
advanced these two entities funds from time to
time. Cash advances of $44,700 and $236,580 were
made to these related entities in the years ended
August 31, 1996 and 1995, respectively.
It has been determined that the majority of these
amounts are deemed uncollectible. As such, write-offs
of $53,312 and $349,117 are reflected in the
years ended August 31, 1996 and 1995, respectively.
In the year ended August 31, 1995, $205,184 of
these write-offs were charged directly to revenues.
In the future, the Company will no longer undertake
such transactions.
$0 and $112,250 are due from these related entities
at August 31, 1996 and 1995, respectively. Amounts
due from affiliates have been stated at their net
realizable value.
The Company also has $33,250 due to a related party
at August 31, 1996 for amounts advanced.
Rent charged to these affiliates for sublet office
space was $5,835 and $23,340 for the years ended
August 31, 1996 and 1995, respectively.
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Notes to Financial Statements
During 1996, the Company paid commissions of
$37,500 to the Company of one of the members of the
board of directors of Synaptx Worldwide for the
sale of equipment to a major customer.
As of August 31, 1995, the Company advanced $34,000
to four stockholders for the purchase of the
Company's common stock. These notes earned
interest of 8% and were paid in full in 1996.
3.Significant
Customers A substantial portion of the Company's revenues is
generated from relatively few customers. Two
customers accounted for approximately 28% and 27%
of sales in the year ended August 31, 1996, and 31%
and 27% of sales in the year ended August 31, 1995.
Receivables from these customers represented
approximately 14% and 15% of total receivables at
August 31, 1996, respectively, and approximately
20% and 10% of total receivables at August 31,
1995, respectively.
4.Notes Payable
to Bank The notes payable consist of borrowings under a
revolving line-of-credit with the bank. Borrowings
under the line-of-credit, which is payable on
demand or due May 1, 1998, are collateralized by
substantially all of the Company's assets and bear
interest at the bank's internal rate (10.99% and
10.67% at August 31, 1996 and 1995, respectively).
The total line balance is limited to no more than
65% of accounts receivable less than 90 days old.
The line is secured by commercial guaranties of two
of the shareholders and Synaptx Worldwide. As of
August 31, 1996 and 1995, the balances due under
this line are $171,300 and $120,000, respectively.
The Company also has a term loan with a balance of
$122,700 and $0 at August 31, 1996 and 1995,
respectively. This loan is collateralized by
substantially all of the Company's assets and bears
interest at the bank's internal rate of 10.99% at
August 31, 1996. The loan is due May 31, 1997.
The Company has also guaranteed the personal debt
of shareholders of the Company totaling $447,921
and $482,940 at August 31, 1996 and 1995, respec-
tively.
In addition, the Company has guaranteed the debt of
a related entity totaling $74,006 and $83,129 at
August 31, 1996 and 1995, respectively.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Notes to Financial Statements
5.Capital
Leases In 1994, the Company entered into a capital lease
for various equipment and furniture. The total
principal amount of this capital lease was $63,996.
The lease requires monthly installments of $2,208,
which includes interest at 19.44%, until November
1997. The capital lease is secured by the related
furniture and equipment.
The following is a schedule by years of future
minimum payments required under the lease together
with its present value as of August 31, 1996:
Year ending August 31, Amount
1997 $ 26,508
1998 2,208
Total minimum lease payments 28,716
Less amount representing interest 3,237
Present value of minimum lease payments $ 25,479
6.Employee
Benefit Plans The Company sponsors a qualified employee savings
plan for all eligible employees. Participants may
make contributions from their gross pay (limited to
15% of the employee's compensation, as defined),
with the Company matching such contributions
(subject to certain limitations) at the rate of 25%
of the first 6% of each participant's contribution.
Employer matching contributions to the plan were
approximately $7,000 and $9,000 for the years ended
August 31, 1996 and 1995, respectively.
The Company sponsored an incentive plan for the
period December 1, 1995 through November 30, 1996.
The incentive plan is contingent upon the profits
generated by the Company that exceed $40,000 and
performance objectives. Likewise, losses generated
will result in no funds contributed to the
incentive pool. Allocations of the fund are based
upon employee eligibility and individual incen-
tives. No contributions were made to the incentive
plan as of August 31, 1996.
7.Lease
Commitments The Company occupies their premises under a lease
expiring January 31, 1998. An amendment to the
lease was entered on August 30, 1994 for additional
space. Rentals are subject to annual escalation
charges based upon increases in operating expenses
and real estate taxes.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Notes to Financial Statements
As of August 31, 1996, the Company's future minimum
lease payments under operating leases are as
follows:
Year ending August 31, Amount
1997 $ 131,220
1998 54,675
Total minimum rent commitments $ 185,895
Rental expense for the Company's facilities
amounted to approximately $121,035 and $94,808 for
the years ended August 31, 1996 and 1995,
respectively.
In September 1996, the Company entered into an
agreement to lease office space in Atlanta,
Georgia. The lease extends through June 1998. The
aggregate minimum rental commitment for this period
would be approximately $69,000.
In February 1997, the Company signed a letter of
intent to build out and rent new office space at a
different location. The proposed lease would
extend for seven years commencing in December 1997.
The aggregate minimum rental commitment for this
period would be approximately $1,146,000. A
payment of $2,000 of the total required deposit of
$25,000 has been made and serves as the second
month's rent and security deposit.
8.Common Stock In January 1995, the Company's authorized shares of
common stock were increased from 1,000 shares to
100,000 shares. An additional 15,050 shares of
common stock were issued to selected employees of
the Company.
9.Employment
Agreements In July 1996, the Company entered into employment
agreements with its chief financial officer and
president which extend through December 31, 1997.
The agreements shall be automatically renewed for
successive one-year terms unless cancelled by
either party at least 30 days prior to the current
term's expiration. The agreements provide for an
aggregate annual salary of $225,000 and a
discretionary bonus not to exceed 33% of the
employee's regular compensation for each quarter.
If the employee is terminated without cause, the
Company is liable for three years of regular
compensation if this termination takes place during
the initial term and two years of regular
compensation if after the initial term.
<PAGE>
Synaptx Impulse, Inc.
(f/k/a/ Maxwell Partners, Inc.)
Notes to Financial Statements
In July 1996, the Company also entered employment
agreements with three of the Company's shareholders
which extend through December 31, 1997. The terms
are the same as the aforementioned agreements with
an annual salary of $72,000 per shareholder. If
the employee is terminated without cause during the
initial term of their agreement, the Company is
liable for nine months of regular compensation.
10.Acquisition On July 13, 1996, the Company signed a definitive
agreement to exchange all the outstanding common
stock of the Company for 690,000 shares of common
stock of Synaptx Worldwide, Inc. The exchange of
common stock was consummated on October 1, 1996.
As of August 31, 1996, Synaptx Worldwide, Inc. had
advanced $50,000 to the Company in the form of a
noninterest-bearing advance.
<PAGE>
PART III
ITEM 1. Index to Exhibits
The following exhibits are filed with this Registration Statement:
Exhibit No. Exhibit Name
2.1 Merger Agreement and Plan of Reorganization.
3.1(i) Articles of Incorporation and all amendments
thereto ("P")
3.2(ii) By-Laws of Registrant ("P")
4.1 Specimen of Common Stock Certificate ("P")
10.1 Lease Agreement on Registrant's principal place of
business ("P")
10.2 Purchase Agreement of Synaptx Access, Inc. f.k.a.
North American Telco / Cable Representatives, Inc.
10.3 Purchase Agreement for Synaptx Impulse, Inc.,
f.k.a. Maxwell Partners, Inc.
10.4 Purchase Agreement for ORAYCOM, Inc.
10.5 Employment Agreement for Ronald L. Weindruch
10.6 Employment Agreement for D. Mike Maxwell
21.1 Subsidiaries
27. Financial Data Schedule
ITEM 2. Description of Exhibits
See Item I above.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange
Act of 1934, the registrant caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
organized.
SYNAPTX WORLDWIDE, INC.
(Registrant)
By: /S/ Ronald L. Weindruch
(Signature)
Date: August 8, 1997 RONALD L. WEINDRUCH
President
MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION, (hereinafter
the "Agreement") is made and entered into this 10th day of
February, 1997, by and between In-Touch Interactive Multimedia,
Inc., a Utah corporation (hereinafter the "Company"), and
Worldwide Applied Telecom Technology, Inc., a Delaware corporation
(hereinafter "WWATT").
RECITALS
WHEREAS, the Company desires to merge WWATT with and into the
Company whereby the Company shall be the surviving corporate entity
pursuant to the terms and conditions set forth herein;
WHEREAS, all current shareholders of WWATT desire to exchange
all of their shares of WWATT common stock for shares of the
Company's common stock; and
WHEREAS, the parties hereto desire to reorganize the
management and operations of the Company, to change the corporate
name to Synaptix Worldwide, Inc., and to engage in the current
business of WWATT.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
MERGER AND EXCHANGE OF SHARES
SECTION 1.1 Merger and Plan of Reorganization.
(a) The parties hereby agree that the Company shall merge
WWATT with and into the Company with the Company to be the
surviving corporation (hereinafter the "Merger"), and whereby
all the shares of WWATT common stock currently issued and
outstanding at the Effective Time of the Merger, as defined in
Section 1.2 below, shall, by action of the Merger and without
any action on the part of the holder thereof, automatically be
converted into an aggregate of three million six hundred
thousand (3,600,000) shares of authorized but previously
unissued common stock of the Company, par value $.001 per
share and post split as set forth in Section 1.5(d) below,
which shares shall be issued to the shareholders of WWATT or
their assigns on a pro rata basis representing each respective
shareholder's percentage ownership in WWATT.
(b) In connection with the consummation of the Merger, the
parties hereby agree that an additional seven hundred ninety
thousand (790,000) shares of the Company's authorized but
previously unissued common stock, par value $.001 per share
and post-split as per Section 1.5(d) below, shall be issued to
Solutions Partnership, Inc. as a fee for services related to
the Merger and as set forth in Section 6.4 below.
(c) The parties hereto hereby further agree that at or
prior to the Effective Time
of the Merger:
(i) management of the Company shall be reorganized so as
to seat the new Board of Directors of the Company to
consist of those persons elected at the Special Meeting
of Shareholders of the Company held February 10, 1997 and
as set forth in Section 1.5(f) below;
(ii) the Company's corporate name shall be changed to
Synaptix Worldwide, Inc.;
(iii) the corporate identity, existence, purposes,
powers, franchises, rights, and immunities of WWATT shall
be merged into the Company and the Company shall be fully
vested therewith;
(iv) the separate corporate existence of WWATT, except as
specifically otherwise provided by law, shall cease,
whereupon WWATT and the Company shall become a single
corporation; and
(v) the necessary steps shall be taken in order to
reflect that the Company will be principally engaged in
the current business of WWATT and in any other act or
activity for which a corporation may be organized under
the laws of the State of Utah.
SECTION 1.2 Effective Time of the Merger. Subject to satisfaction
of the terms and conditions of this Agreement, the parties hereto
shall cause the Articles of Merger in substantially the form set
forth in Exhibit 1.2 annexed hereto and by this reference made a
part hereof (the "Articles of Merger"), to be signed, verified and,
immediately upon its execution, delivered to the Secretary of State
of the State of Utah. The Effective Time of the Merger shall be
the date the Articles of Merger shall have been filed with the
State of Utah and at such time the Company shall have merged WWATT
with and into the Company and the separate existence of WWATT shall
cease.
SECTION 1.3 Issuance of Shares.
(a) Upon the Effective time of the Merger, all shares of
WWATT common stock issued and outstanding shall by action of
the Merger and without any action on the part of the holder
thereof, automatically be converted into an aggregate of
3,600,000 shares of the Company's common stock, post-split,
which shares shall be issued to the shareholders of WWATT or
their assigns on a pro rata basis representing each respective
shareholder's percentage ownership in WWATT.
(b) The shares of the Company's common stock to be
issued hereunder are authorized but previously unissued shares
of common stock of the Company and shall be, when issued,
properly authorized, validly issued, fully paid and
nonassessable.
(c) All shares of the Company's common stock to be
issued hereunder are deemed "restricted securities" as defined
by Rule 144 of the Securities Act of 1933 (the "1933 Act") and
the recipients thereof, or their designees or assigns, shall
represent that they are acquiring said shares for investment
purposes only and without the intent to make a further
distribution of the shares. All shares of the Company's
common stock to be issued under the terms of this Agreement
shall be issued pursuant to an exemption from the registration
requirements of the 1933 Act, under Section 4(2) of the 1933
Act and the rules and regulations promulgated thereunder. All
certificates representing the Company's common stock to be
issued hereunder shall bear the following legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933,
as amended, and may not be offered for sale, sold
or otherwise transferred except in compliance with
the registration provisions of such Act or pursuant
to an exemption from such registration provisions,
the availability of which is to be established to
the satisfaction of the Company.
SECTION 1.4 Closing. The closing of this Agreement and the
transactions contemplated hereby (the "Closing") shall take place
on or prior to the 3rd day of March, 1997 (the "Closing Date"),
unless extended by the mutual assent of the parties hereto, at a
time and place to be mutually agreed upon by the parties hereto,
and shall be subject to the provisions of Article X of this
Agreement. At the Closing or within thirty (30) days thereafter:
(a) Holders of WWATT common stock shall deliver to the
Company all stock certificates representing all of the issued
and outstanding shares of WWATT common stock, duly endorsed,
so as to make the Company the sole holder thereof, free and
clear of all claims and encumbrances, and which certificates
shall be, upon the issuance of the Company's common stock as
per Section 1.3 above, canceled and deemed void and of no
further effect;
(b) The Company shall deliver to the holders of WWATT
common stock, stock certificates representing an aggregate of
three million six hundred thousand (3,600,000) shares of the
Company's common stock, and to Solutions Partnership, Inc. an
aggregate of seven hundred ninety thousand (790,000) shares of
the Company's common stock, and each certificate representing
such shares shall bear a restrictive legend in a form
customarily used with restricted securities and substantially
as set forth in Section 1,3(c) above;
(c) WWATT shall deliver to the Company all deeds,
mortgages, agreements and other pertinent documents evidencing
WWATT's title, interest and ownership of all of its assets and
property;
(d) The Company shall deliver an Officer's Certificate
as described in Sections 9.1, 9.2 and 9.4 hereof, dated the
Closing Date, that all representations, warranties, covenants
and conditions set forth herein by the Company are true and
correct as of, or have been fully performed and complied with
by, the Closing Date; and
(e) WWATT shall deliver an Officer's Certificate as
described in Sections 8.1, 8.2 and 8.4 hereof, dated the
Closing Date, that all representations, warranties, covenants
and conditions set forth herein by WWATT are true and correct
as of, or have been fully performed and complied with by, the
Closing Date.
SECTION 1.5 Special Meeting of Shareholders of the Company.
In anticipation of this Agreement and the transactions contemplated
hereby, the Company has taken all necessary and requisite action to
call for and hold a Special Meeting of Shareholders on February 10,
1997, at which meeting the following business is to be transacted
and proposals ratified by the shareholders:
(a) To ratify this Agreement and all transactions
contemplated hereby;
(b) To ratify the rescission of the Company's proposed
acquisition of Healthcare 2000 International, Inc., a Florida
corporation, which transaction was previously approved by the
Company's shareholders but was never finalized and closed, and
to further rescind certain other proposals related to the
acquisition which were also approved by the shareholders;
(c) To ratify the proposed amendment to the Articles of
Incorporation to change the authorized capitalization to
25,000,000 shares of common stock, par value $.001 per share,
and 10,000,000 shares of preferred stock, par value $.001 per
share;
(d) To effect a reverse stock split of the Company's issued
and outstanding shares of common stock on a one (1) share for
one and three-fourths (1.75) shares basis;
(e) To ratify the amendment to the Articles of Incorporation
to change the corporate name to Synaptix Worldwide, Inc., or
any other name deemed suitable by the shareholders attending
the meeting; and
(f) To accept the resignation of the Company's current
directors and to nominate and elect a new Board of Directors
consisting of the following four nominees: Ronald L.
Weindruch, D. Mike Maxwell, William N. Kashul, Sr. and Peter
B. Atwal.
SECTION 1.6 Consummation of Transaction. If at the Closing, no
condition exists which would permit any of the parties to terminate
this Agreement, or a condition then exists and the party entitled
to terminate because of that condition elects not to do so, then
the transactions herein contemplated shall be consummated upon such
date, and then and thereupon, the Company will file the Articles of
Merger and all other requisite documents with the State of Utah.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and agrees that:
SECTION 2.1 Organization of the Company. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Utah, is duly qualified and in good
standing as a foreign corporation in every jurisdiction in which
such qualification is necessary, and has the corporate power and
authority to own its properties and assets and to transact the
business in which it is engaged. There are no corporations or
other entities with respect to which (i) the Company owns any of
the outstanding stock or other interest, or (ii) the Company may be
deemed to be in control because of factors or relationships other
that the quantity of stock or other interest owned. The Company
has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is the legal, valid and
binding obligation of the Company, enforceable against the Company
in accordance with its respective terms except to the extent that
such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights
generally.
SECTION 2.2 Capitalization of the Company. Prior to the action to
be taken at the Company's Special Meeting of Shareholders and the
transactions contemplated by this Agreement, the authorized capital
stock of the Company consisted of 25,000,000 shares of common
stock, par value $.00004 per share, of which 1,150,000 shares were
issued and outstanding. Taking into consideration the effect of
the proposed change of capitalization and proposed one share for
1.75 shares reverse stock split, the number of shares of common
stock issued and outstanding shall be approximately 657,143 shares,
par value $.001 per share, without giving effect of the rounding of
fractional shares. All shares of the Company's common stock
presently issued and outstanding have been duly authorized and
validly issued and are fully paid and non-assessable. There are no
other options, warrants, rights, calls, commitments or agreements
of any character obligating the Company to issue any shares of its
capital stock or any security representing the right to purchase or
otherwise receive any such stock. Shares of the Company's common
stock to be issued pursuant to this Agreement, when so issued, will
be duly authorized, validly issued, fully paid and non-assessable.
SECTION 2.3 Charter Documents. Complete and correct copies of the
Articles of Incorporation and By-Laws of the Company and all
amendments thereto, have been or will be delivered to WWATT prior
to the Closing.
SECTION 2.4 Corporate Documents. The Company's shareholders' list
and corporate minute books to be delivered at the Closing are
complete and accurate as of the date hereof and the corporate
minute books contain the recorded minutes of all corporate meetings
of shareholders and directors.
SECTION 2.5 Financial Statements. The Company's financial
statements for the period ended February 10, 1997 and the years
ended December 31, 1996 and 1995, a copy of which is to be annexed
hereto as Exhibit 2.5 and by this reference made a part hereof, are
true and complete in all material respects, having been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis for the periods covered by such statements, and
fairly present, in accordance with generally accepted accounting
principles, the financial condition of the Company, and results of
its operations for the periods covered thereby. Except as otherwise
disclosed to WWATT as set forth herein, there has been no material
adverse change in the business operations, assets, properties,
prospects or condition (financial or otherwise) of the Company
taken as a whole from that reflected in the financial statements
referred to in this Section 2.5, or which WWATT based its decision
to enter into this Agreement.
SECTION 2.6 Absence of Certain Changes or Events. Since the date
of the Company's financial report for the period ended February 10,
1997 (see Exhibit 2.5), and except as disclosed otherwise herein,
the Company has not (i) issued or sold any promissory note, stock,
bond, option or other corporate security of which it was an issuer
or other obligor, (ii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or
contingent, direct of indirect, (iii) incurred or suffered to be
incurred any liability or obligation whatsoever, (iv) caused or
permitted any lien, encumbrance or security interest to be created
or arise on or in any of its properties or assets, (v) declared or
made any dividend, payment or distribution to stock holders or
purchased or redeemed or agreed to purchase or redeem any shares of
its capital stock, (vi) reclassified its shares of capital stock,
or (vii) entered into any agreement or transaction except in
connection with the execution and performance of this Agreement.
SECTION 2.7 Assets and Liabilities. The Company does not have any
material assets as reflected in the financial statements included
as Exhibit 2.5. As of the date hereof, the Company does not have
any material debts, liabilities or obligations of any nature,
whether accrued, absolute, contingent, or otherwise, whether due or
to become due, that are not fully reflected in the Company's
financial statements.
SECTION 2.8 Tax Returns and Payments. The Company has filed with
the appropriate governmental authority tax returns, whether based
upon income, sales or franchise, as required by law to be filed on
or before the date of this Agreement. The Company represents that
immediately upon the Closing it will prepare and file those
required federal tax returns that may be due. The Company has paid
all taxes to be due on said returns, any assessments made against
the Company and all other taxes, fees and similar charges imposed
on the Company by any governmental authority. No tax liens have
been filed and no claims are being assessed and no returns are
under audit with respect to any such taxes, fees or other similar
charges.
SECTION 2.9 Contracts. The Company is not a party to or bound by
any contract or commitment, whether written or oral, except as
otherwise disclosed herein.
SECTION 2.10 Required Authorizations. There have been or will be
timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications waivers
or other actions of any kind required by virtue of execution and
delivery of this Agreement by the Company or the consummation by it
of the transactions contemplated hereby. Prior to the Closing, the
shareholders of the Company shall have approved this Agreement and
the transactions contemplated hereunder and the appropriate
corporate filings shall have been made with the State of Utah.
SECTION 2.11 Compliance with Law and Government Regulations. The
Company is in compliance with and is not in violation of,
applicable federal, state, local or foreign statutes, laws and
regulations (including without limitation, any applicable building,
zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business.
SECTION 2.12 Litigation. There is no litigation, arbitration,
proceeding or investigation pending or threatened to which the
Company is a party or which may result in any material change in
the business or condition, financial or otherwise, of the Company
or in any of its properties or assets, or which might result in any
liability on the part of the Company, or which questions the
validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement,
and to the best knowledge of the Company, there is no basis for any
such litigation, arbitration, proceeding or investigation.
SECTION 2.13 Trade Names and Rights. The Company does not use any
trademark, service mark, trade name, or copyright in its business,
nor does it own any trademark, trademark registration or
application, trade name, service mark, copyright, copyright
registration or application. No person owns any trademark,
trademark registration or application, service mark, trade name,
copyright, or copyright registration or application, the use of
which is necessary or contemplated in connection with the operation
of the Company's business.
SECTION 2.14 Governmental Consent. With the exception of the
filing specified in Section 1.2 hereof, no consent, approval,
authorization or order of, or registration, qualification,
designation, declaration or filing with, any governmental authority
on the part of the Company is required in connection with the
execution and delivery of this Agreement or the carrying out of any
transactions contemplated hereby.
SECTION 2.15 Previous Proposed Transactions. The Company has
previously entered into two separate transactions whereby it
intended to acquire MLK Industries Limited, a United Kingdom
corporation, and Healthcare 2000 International, Inc., a Florida
corporation. Although both proposed transactions were approved by
the Company's shareholders, neither transaction resulted in a
definitive agreement and neither transaction was finalized and
closed. The Company has no further commitments, obligations or
liabilities as a result of the two previous proposed transactions.
SECTION 2.16 Authority. The Company and its shareholders have, or
will prior to the Closing, approved the Merger, this Agreement and
the transactions contemplated hereby and duly authorized the
execution and delivery hereof. The Company has full power,
authority and legal right to enter into this Agreement and to
consummate the transactions contemplated hereby, and all corporate
action necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby has been duly and validly taken. The execution and delivery
of this Agreement, the consummation of the transactions
contemplated hereby and compliance by the Company with the
provisions hereof will not (i) conflict with or result in a breach
of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Company under, any of the terms, conditions or provisions of the
Articles of Incorporation or By-Laws of the Company, or any note,
bond, mortgage, indenture, license, lease, agreement or any
instrument or obligation to which the Company is party or by which
it is bound; or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its
properties or assets.
SECTION 2.17 Investigation of Financial Condition. In addition to
making available for review by WWATT all financial statements,
books and records of the Company, and without in any manner
reducing or otherwise mitigating the representations contained
herein, WWATT shall have the opportunity to meet with the Company's
accountants and attorneys to discuss the financial condition of the
Company and to make whatever further independent investigation
deemed necessary and prudent.
SECTION 2.18 Full Disclosure. None of the representations and
warranties made by the Company herein, or in any exhibit,
certificate or memorandum furnished or to be furnished by the
Company, on its behalf pursuant hereto, contains or will contain
any untrue statement of material fact, or omits any material fact,
the omission of which would be misleading.
ARTICLE III
COVENANTS OF THE COMPANY
SECTION 3.1 Conduct Prior to the Closing. Between the date
hereof and the Closing:
(a) The Company will not enter into any material
agreement, contract or commitment, whether written or oral, or
engage in any transaction without the prior written consent of
WWATT;
(b) The Company will not declare any dividends or
distributions with respect to its capital stock or amend its
Articles of Incorporation or By-Laws without the prior written
consent of WWATT;
(c) The Company will not authorize, issue, sell,
purchase or redeem any shares of its capital stock without the
prior written consent of WWATT;
(d) The Company will comply with all requirements which
federal or state law may impose on it with respect to this
Agreement and the transactions contemplated hereby, and will
promptly cooperate with and furnish information to WWATT in
connection with any such requirements imposed upon the parties
hereto in connection therewith;
(e) The Company will not incur any indebtedness for
money borrowed, or issue or sell any debt securities, incur or
suffer to be incurred any liability or obligation of any
nature whatsoever, or cause or permit any lien, encumbrance or
security interest to be created or arise on or in any of its
properties or assets, acquire or dispose of fixed assets,
change employment terms, enter into any material or long-term
contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its
stated amount or enter into any other transaction other than
in the regular course of business, except to comply with the
terms of this Agreement, without the prior written
consent of WWATT;
(f) The Company shall grant to WWATT and its counsel,
accountants and other representatives, full access during
normal business hours during the period prior to the Closing
to all its respective properties, books, contracts,
commitments and records and, during such period, furnish
promptly to WWATT and such representatives all information
relating to the Company as WWATT may reasonably request; and
(g) Except for the transactions contemplated by this
Agreement, the Company will conduct its business in the normal
course, and shall not sell, pledge or assign any of its assets
without the prior written consent of WWATT.
SECTION 3.2 Affirmative Covenants. Prior to Closing, the Company
will do the following:
(a) Use its best efforts to accomplish all actions
necessary to consummate this Agreement including satisfaction
of all the conditions contained in this Agreement;
(b) Promptly notify WWATT in writing of any material
adverse change in the financial condition, business,
operations or key personnel of the Company, any breach of its
representations or warranties contained herein, and any
material contract, agreement, license or other agreement
which, if in effect on the date of this Agreement, should have
been included in this Agreement or in an exhibit annexed
hereto and made a part hereof;
(c) Obtain approval of this Agreement from a majority of its
shareholders;
(d) Nominate at the its Special Meeting of Shareholders a new
Board of Directors, nominees to be Ronald L. Weindruch, D.
Mike Maxwell, William N. Kashul, Sr. and Peter B. Atwal;
(e) Reserve, and promptly after the Closing, issue and
deliver to the shareholders of WWATT or their designees and to
Solutions Partnership, Inc. the number of shares of the
Company's common stock required hereunder;
(f) Take the necessary corporate action to file with the
State of Utah, Articles of Amendment to its Articles of
Incorporation which will change its corporate name to Synaptix
Worldwide, Inc.; and
(e) Take all other necessary corporate actions to
accomplish all transactions contemplated herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WWATT
WWATT hereby represents, warrants and agrees that:
SECTION 4.1 Organization of WWATT. WWATT is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and is duly qualified and in good standing in
every jurisdiction in which such qualification is necessary.
Unless otherwise set forth herein or in any financial statements or
in Exhibit 4.1 annexed hereto and by this reference made a part
hereof, and with the exception of Maxwell Partners, Inc. and North
American Telco Cable Representatives, Inc., there are no
corporations or other entities with respect to which (i) WWATT
owns any of the outstanding stock or other interest, or (ii) WWATT
may be deemed to be in control because of factors or relationships
other than the percentage of outstanding stock or other interest
owned in such entity. WWATT has all requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2 Charter Documents. Complete and correct copies of the
Articles of Incorporation and By-Laws of WWATT and all amendments
thereto, have been or will be delivered to the Company prior to the
Closing.
SECTION 4.3 Financial Statements / Assets and Liabilities.
WWATT's financial statements for the period ended August 31, 1996,
a copy of which is annexed hereto as Exhibit 4.3 and by this
reference made a part hereof, are true and complete in all material
respects, having been prepared in accordance with generally
accepted accounting principles applied on a consistent basis for
the periods covered by such statements, and fairly present the
financial condition of WWATT and results of its operations for the
periods covered thereby. WWATT has good and marketable title to
all of its assets and property, free and clear of any and all
liens, claims and encumbrances except as may be otherwise set forth
herein or in its audited financial statements annexed hereto as
Exhibit 4.3.
SECTION 4.4 Tax Returns and Payments. All of WWATT's tax returns
(federal, state, city, county or foreign) which are required by law
to be filed on or before the date of this Agreement, have been duly
filed or extended with the appropriate governmental authority.
WWATT has paid or accrued all taxes to be due on said returns, any
assessments made against WWATT and all other taxes, fees and
similar charges imposed on WWATT by any governmental authority
(other than those, the amount or validity of which is being
contested in good faith by appropriate proceedings). No tax liens
have been filed and no claims are being assessed with respect to
any such taxes, fees or other similar charges.
SECTION 4.5 Required Authorizations. There have been or will be
timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications waivers
or other actions of any kind required by virtue of execution and
delivery of this Agreement by WWATT or the consummation by it of
the transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government Regulations. WWATT
is in compliance with all applicable statutes, regulations,
decrees, orders, restrictions, guidelines and standards, whether
mandatory or voluntary, affecting its properties and operations,
imposed by State of Delaware, and any state or foreign country or
government to which WWATT is subject.
SECTION 4.7 Litigation. There is no material litigation,
arbitration, proceeding or investigation pending or threatened to
which WWATT is a party or which may result in any material change
in the business or condition, financial or otherwise, of WWATT or
in any of its properties or assets, or which might result in any
liability on the part of WWATT, or which questions the validity of
this Agreement or of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement, and to the
best knowledge of WWATT, there is no basis for any such litigation,
arbitration, proceeding or investigation.
SECTION 4.8 Trade Names and Rights. If applicable, Exhibit 4.8
annexed hereto and by this reference made a part hereof, contains
a complete list of all trademarks, service marks, trademark and
service mark registrations, applications and licenses with respect
to the foregoing owned or held by WWATT. WWATT has no knowledge of
any facts and nothing has come to its attention that would lead it
to believe that it has infringed or misappropriated or is
infringing upon any trademark, copyright, patent or other similar
right of any person. No claim relating thereto is pending or to
the knowledge of WWATT is threatened.
SECTION 4.9 Governmental Consent. With the exception of any
filing specified herein, no consent, approval, authorization or
order of, or registration, qualification, designation, declaration
or filing with, any governmental authority on the part of WWATT is
required in connection with the execution and delivery of this
Agreement or the carrying out of any transactions contemplated
hereby.
SECTION 4.10 Authority. WWATT and its shareholders have approved
the Merger, this Agreement and duly authorized the execution and
delivery hereof. WWATT has full power, authority and legal right
to enter into this Agreement and to consummate the transactions
contemplated hereby, and all corporate action necessary to
authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly
and validly taken. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and
compliance by WWATT with the provisions hereof will not (i)
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of WWATT under, any of the terms,
conditions or provisions of the Articles of Incorporation or
By-Laws of WWATT, or any note, bond, mortgage, indenture, license,
agreement or any instrument or obligation to which WWATT is party
or by which it is bound; or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to WWATT
or any of its properties or assets.
SECTION 4.11 Investigation of Financial Condition. In addition to
making available for review by the Company certain corporate
documents, books and records of WWATT, and without in any manner
reducing or otherwise mitigating the representations contained
herein, the Company shall have the opportunity to meet with WWATT's
accountants and attorneys to discuss the financial condition of
WWATT and to make whatever further independent investigation
reasonably deemed necessary and prudent.
SECTION 4.12 Options and Warrants. WWATT has authorized pursuant
to its 1996 Stock Option Plan, up to 500,000 stock options that may
be issued for the purchase of WWATT common stock pursuant to
certain terms and conditions. As of the date hereof, WWATT has
issued 295,000 options pursuant to such Plan entitling the holders
thereof to purchase up to an aggregate of 295,000 shares of WWATT
common stock at prices ranging from $.10 to $1.10 per share prior
to the year 2001. WWATT also has issued and outstanding 181,725
stock purchase warrants entitling the holders thereof to purchase
up to an aggregate of 106,725 shares of WWATT common stock at
prices ranging from $.50 to $1.50 per share. The aforementioned
options and warrants will remain issued and outstanding and will be
exercisable for the purchase of the Company's common stock
following the Merger pursuant to terms and conditions to be
determined by the parties.
SECTION 4.13 Investment Purpose. Those persons receiving shares
of the Company's common stock hereunder shall execute appropriate
documents to represent and warrant that they, or their designees,
are acquiring the shares of the Company's common stock for
investment purposes only and not with a view for further
distribution or resale, and each such recipient shall individually
further represent and acknowledge that the securities issued
hereunder are "restricted securities" and may not be sold, traded
or otherwise transferred without registration under the 1933 Act or
exemption therefrom.
SECTION 4.14 Full Disclosure. None of the representations and
warranties made by WWATT herein, or in any exhibit, certificate or
memorandum furnished or to be furnished by the Company, on its
behalf pursuant hereto, contains or will contain any untrue
statement of material fact, or omits any material fact, the
omission of which would be misleading.
ARTICLE V
COVENANTS OF WWATT
SECTION 5.1 Conduct Prior to the Closing. Between the date
hereof and the Closing:
(a) Except within the regular course of business, WWATT
and its subsidiaries will not enter into any material
agreement, contract or commitment, whether written or oral, or
engage in any transaction without the prior written consent of
the Company;
(b) WWATT and its subsidiaries will not sell, assign,
transfer or otherwise divest any of the assets depicted in
Exhibit 4.3 hereto without the prior written consent of the
Company;
(c) WWATT and its subsidiaries will not declare any
dividends or distributions with respect to its capital stock
or amend its Articles of Incorporation or By-Laws without the
prior written consent of the Company;
(d) Except within the regular course of business, WWATT
and its subsidiaries will not incur any indebtedness for money
borrowed or issue to sell any debt securities, or incur or
suffer to be incurred any liability or obligation of any
nature whatsoever, or cause or permit any lien, encumbrance or
security interest to be created or arise on or in any of its
properties or assets without the prior written consent of the
Company;
(e) WWATT will comply with all requirements which
federal or state law may impose on it with respect to this
Agreement and the transactions contemplated hereby, and will
promptly cooperate with and furnish information to the Company
in connection with any such requirements imposed upon the
parties hereto in connection therewith; and
(f) WWATT shall grant to the Company and its counsel,
accountants and other representatives, full access during
normal business hours during the period prior to the Closing
to all its respective properties, books, contracts,
commitments and records and, during such period, furnish
promptly to the Company and such representatives all
information relating to WWATT as the Company may reasonably
request.
SECTION 5.2 Affirmative Covenants. Prior to Closing, WWATT will
do the following:
(a) Obtain the approval of its Board of Directors and a
majority of its shareholders to proceed with this Agreement;
(b) Use its best efforts to accomplish all actions
necessary to consummate this Agreement including satisfaction
of all the conditions contained in this Agreement;
(c) Cause to be prepared and delivered to the Company,
if applicable, all deeds, contracts, agreements, mortgages,
encumbrances and other documents relating to the ownership and
title and/or interest in WWATT's assets and property; and
(d) Promptly notify the Company in writing of any
materially adverse change in the financial condition,
business, operations or key personnel of WWATT, any breach of
its representations or warranties contained herein, and any
material contract, agreement, license or other agreement
which, if in effect on the date of this Agreement, should have
been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the transactions
contemplated in this Agreement are consummated, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expense or as otherwise agreed to herein.
SECTION 6.2 Brokers and Finders. Each of the parties hereto
represents, as to itself, that no agent, broker, investment banker
or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except
as may be otherwise set forth herein and in Section 6.4 below.
SECTION 6.3 Necessary Actions. Subject to the terms and
conditions herein provided, each of the parties hereto agree to use
all reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement. In
the event at any time after the Closing, any further action is
necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of the Company or WWATT, as
the case may be, shall take all such necessary action.
SECTION 6.4 Consulting Agreement. For services rendered in
connection with the negotiation and execution of this Agreement and
the consummation of the transactions contemplated herein, the
parties have entered into a separate agreement whereby at the
Closing, a fee of seven hundred ninety thousand (790,000) shares of
the Company's authorized but previously unissued common stock
(post-split) shall be issued to Solutions Partnership, Inc. Such
shares shall be deemed restricted securities as defined by Rule 144
of the 1933 Act.
SECTION 6.5 Indemnification.
(a) WWATT agrees to defend and hold the Company harmless
against and in respect of any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties, and
reasonable attorney fees, that the Company shall incur or
suffer, which arise out of, result from or relate to any
material breach of, or failure by WWATT to perform any of its
representations, warranties, covenants and agreements in this
Agreement or in any exhibit or other instrument furnished or
to be furnished by WWATT under this Agreement.
(b) The Company agrees to defend and hold WWATT harmless
against and in respect of any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties, and
reasonable attorney fees, that WWATT shall incur or suffer,
which arise out of, result from or relate to any material
breach of, or failure by the Company to perform any of its
representations, warranties, covenants and agreements in this
Agreement or in any exhibit or other instrument furnished or
to be furnished by the Company under this Agreement.
SECTION 6.6 Confidentiality. All parties hereto agree to keep
confidential this Agreement and all information and documents
relating to this Agreement until such time as the Agreement and the
transactions contemplated hereunder are made public by means of an
appropriate press release or by any other means reasonably assured
to make such information publicly available.
<PAGE>
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement are
subject to the fulfillment and satisfaction of each of the
following conditions:
SECTION 7.1 Legal Action. No preliminary or permanent injunction
or other order by any federal or state court which prevents the
consummation of this Agreement or any of the transactions
contemplated by this Agreement shall have been issued and remain in
effect.
SECTION 7.2 Absence of Termination. The obligations to consummate
the transactions contemplated hereby shall not have been canceled
pursuant to Article X hereof.
SECTION 7.3 Required Approvals. The Company and WWATT shall have
received all such approvals, consents, authorizations or
modifications as may be required to permit the performance by the
Company and WWATT of the respective obligations under this
Agreement and the consummation of the transactions herein
contemplated, whether from governmental authorities or other
persons, and the Company and WWATT shall each have received any and
all permits and approvals from any regulatory authority having
jurisdiction required for the lawful consummation of this
Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have been obtained
any and all permits, approvals and consents of the Securities or
"Blue-Sky" Commissions of any jurisdictions, and of any other
governmental body or agency, which counsel for the Company may
reasonably deem necessary or appropriate so that consummation of
the transactions contemplated by this Agreement may be in
compliance with all applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
All obligations of the Company under this Agreement are
subject to the fulfillment and satisfaction by WWATT prior to or at
the time of the Closing, of each of the following conditions, any
one or more of which may be waived by the Company.
SECTION 8.1 Representations and Warranties True at the Closing.
All representations and warranties of WWATT contained in this
Agreement will be true and correct at and as of the time of the
Closing and WWATT shall have delivered to the Company a
certificate, dated the date of the Closing, to such effect and in
the form and substance satisfactory to the Company and signed, in
the case of WWATT, by its president and secretary.
SECTION 8.2 Performance. The obligations of WWATT to be performed
on or before the Closing pursuant to the terms of this Agreement
shall have been duly performed at such time, and WWATT shall have
delivered to the Company a certificate, dated the date of the
Closing, to such effect and in form and substance satisfactory to
the Company.
SECTION 8.3 Authority. All action required to be taken by or on
the part of WWATT to authorize the execution, delivery and
performance of this Agreement by WWATT and consummation of the
transactions contemplated hereby, shall have been duly and validly
taken.
SECTION 8.4 Absence of Certain Changes or Events. There shall not
have occurred since the date hereof any adverse change in the
business, condition (financial or otherwise), assets or liabilities
of WWATT or any event or condition of any character adversely
affecting WWATT, and it shall have delivered to the Company
certificates dated the date of the Closing, to such effect and in
form and substance satisfactory to the Company and signed in the
case of WWATT, by its president and secretary.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF WWATT
All obligations of WWATT under this Agreement are subject to
the fulfillment and satisfaction by the Company prior to or at the
time of Closing, of each of the following conditions any one or
more of which may be waived by WWATT.
SECTION 9.1 Representations and Warranties True at the Closing.
All representations and warranties of the Company contained in this
Agreement will be true and correct at and as of the time of the
Closing, and the Company shall have delivered to WWATT a
certificate, dated the date of the Closing, to such effect and in
the form and substance satisfactory to WWATT and signed, in the
case of the Company, by its president and secretary.
SECTION 9.2 Performance. Each of the obligations of the Company
to be performed on or before the Closing pursuant to the terms of
this Agreement shall have been duly performed at the time of the
Closing, and the Company shall have delivered to WWATT a
certificate, dated the date of the Closing, to such effect and in
form and substance satisfactory to WWATT and signed, in the case of
the Company, by its president and secretary.
SECTION 9.3 Authority. All action required to be taken by or on
the part of the Company to authorize the execution, delivery and
performance of this Agreement by the Company and consummation of
the transactions contemplated hereby shall be duly and validly
taken.
SECTION 9.4 Absence of Certain Changes or Events. There shall not
have occurred since the date hereof any adverse change in the
business, condition (financial or otherwise), assets or liabilities
of the Company or any event or condition of any character adversely
affecting the Company and it shall have delivered to WWATT
certificates dated the date of the Closing, to such effect and in
form and substance satisfactory to WWATT and signed in the case of
the Company, by its president and secretary.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything herein or
elsewhere to the contrary, this Agreement may be terminated:
(a) By mutual agreement of the parties hereto at any
time.
(b) By the board of directors of the Company at any time
prior to the Closing if:
(i) a condition to performance by the Company under this
Agreement or a covenant of WWATT contained herein shall
not be fulfilled on or before the time of the Closing or
at such other time and date specified for the fulfillment
for such covenant or condition; or
(ii) a material default or breach of this Agreement is
made by WWATT; or
(iii) if the Closing shall not have taken place on or
prior to March 31, 1997.
(c) By the board of directors of WWATT at any time prior
to the Closing if:
(i) a condition to WWATT's performance under this
Agreement or a covenant of the Company contained in this
Agreement shall not be fulfilled on or before the Closing
or at such other time and date specified for the
fulfillment of such covenant or conditions; or
(ii) a material default or breach of this Agreement is
made by the Company; or
(iii) if the Closing shall not have taken place on or
prior to March 31, 1997.
SECTION 10.2 Effect of Termination. In the event this Agreement
is terminated, the Agreement, except as to Sections 11.1 and 11.2
hereof, shall no longer be of any force or effect and there shall
be no liability on the part of any party or its respective
directors, officers or shareholders; provided however, that in the
case of a Termination without cause by a party or a termination
pursuant to Sections 10.1(b)(i) or 10.1(c)(i) hereof because of a
prior material default under or a material breach of this Agreement
by another party, the damages which the aggrieved party or parties
may recover from the defaulting party or parties shall in no event
exceed the amount of out-of-pocket costs and expenses incurred by
such aggravated party or parties in connection with this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Costs and Expenses. All costs and expenses incurred
in connection with this Agreement will be paid by the party
incurring such expenses. In the event of any termination of this
Agreement pursuant to Section 10.1, subject to the provisions of
Section 11.2, the Company and WWATT will each bear their own
respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time prior to
the Closing date:
(a) The Company may (i) extend the time for the
performance of any of the obligations or other acts of WWATT,
(ii) waive any inaccuracies in the representations and
warranties of WWATT contained herein or in any document
delivered pursuant hereto by WWATT and (iii) waive compliance
with any of the agreements or conditions contained herein to
be performed by WWATT. Any agreement on the part of the
Company to any such extension or waiver shall be valid only if
set forth in an instrument, in writing and signed on behalf of
the Company.
(b) WWATT may (i) extend the time for the performance of
any of the obligations or other acts of the Company, (ii)
waive any inaccuracies in the representations and warranties
of the Company contained herein or in any document delivered
pursuant hereto by the Company and (iii) waive compliance with
any of the agreements or conditions contained herein to be
performed by the Company. Any agreement on the part of WWATT
to any such extension or waiver shall be valid only if set
forth in an instrument, in writing and signed on behalf of
WWATT.
SECTION 11.3 Notices. Any notice to any party hereto pursuant to
this Agreement shall be given by Certified or Registered Mail,
addressed as follows:
<PAGE>
In-Touch Interactive Multimedia, Inc. Copy to:
4700 South 900 East Leonard E. Neilson
Suite 48 B Attorney at Law
Salt Lake City, Utah 84117 1121 East 3900 South, Ste. 200
Salt Lake City, Utah 84124
Worldwide Applied Telecom Technology, Inc. Copy to:
3020 Alatka Court Bruce Rich
Longwood, Florida 32779 c/o Reid & Priest
40 West 57th Street
New York, New York 10019
Additional notices are to be given as to each party, at such
other address as should be designated in writing complying as to
delivery with the terms of this Section 11.3. All such notices
shall be effective when sent, addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and the
respective successors and assigns. Nothing in this Agreement is
intended to confer, expressly or by implication upon any other
person, any rights or remedies under or by reason of this
Agreement.
SECTION 11.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and
together shall constitute one document. The delivery by facsimile
of an executed counterpart of this Agreement shall be deemed to be
an original and shall have the full force and effect of an original
executed copy.
SECTION 11.6 Severability. The parties hereto agree and affirm
that none of the provisions herein is dependent upon the validity
of any other provision and, if any part of this Agreement is deemed
to be unenforceable, the remainder of the Agreement shall remain in
full force and effect.
SECTION 11.7 Headings. The Article and Section headings are
provided herein for convenience of reference only and do not
constitute a part of this Agreement.
SECTION 11.8 Governing Law. This Agreement shall be governed by
the laws of the State of Utah.
SECTION 11.9 Survival of Representations and Warranties. All
terms, conditions, representations and warranties set forth in this
Agreement or in any instrument, certificate, opinion, or other
writing provided for herein, shall survive the Closing and the
delivery of the shares of the Company's common stock issued
hereunder at the Closing, for a period of one year from the Closing
regardless of any investigation made by or on behalf of any of the
parties hereto.
SECTION 11.10 General Release. Each of the parties to this
Agreement hereby releases and discharges the other party together
with such other party's officers, directors, employees, agents,
assigns, attorneys, accountants and affiliates, whether or not
herein named or referred to, of and from any and all claims, causes
of action, debts, duties, liabilities and obligations of any and
every sort or nature, wherever and however arising, which against
the other party it now has or ever had or which it or its assigns
hereafter may or can have, from any time up to and including the
Closing of this Agreement and the Effective Time of the Merger
contemplated hereby.
SECTION 11.11 Assignability. This Agreement shall not be
assignable by any of the parties hereto without the prior written
consent of the other parties.
SECTION 11.12 Amendment. This Agreement may be amended with the
approval of the boards of directors of the Company and WWATT at any
time before or after approval thereof by shareholders of the
Company and, if required, of WWATT; but after such approval by the
Company's shareholders, no amendment shall be made which
substantially and adversely changes the terms hereof. This
Agreement may not be amended except by an instrument, in writing,
signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement in a manner legally binding upon them as
of the date first above written.
"Company"
IN-TOUCH INTERACTIVE MULTIMEDIA, INC. ATTEST:
By: __________________________ ___________________________
Its: President Its: Secretary
"WWATT"
WORLDWIDE APPLIED TELECOM
TECHNOLOGY, INC. ATTEST:
By: ________________________ __________________________
Its: President Its: Secretary
AGREEMENT
THIS AGREEMENT is made as of the 3rd day of June, 1996, by
and among WORLDWIDE APPLIED TELECOM TECHNOLOGY, INC., a Delaware
corporation ("WWATT") and Ronald L. Weindruch and Jerome
Rhattigan (collectively, the "NATCRI Shareholders").
BACKGROUND
The NATCRI Shareholders own all the outstanding capital
stock North American Telecom Cable Representatives, Inc., a
Florida corporation ("NATCRI"). WWATT wishes to acquire NATCRI,
and the NATCRI Shareholders wish to own common stock in WWATT and
to continue to conduct NATCRI's business as a subsidiary of
WWATT.
Accordingly, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
ARTICLE 1
STOCK FOR STOCK EXCHANGE
1.1 Exchange of NATCRI Shares for WWATT Shares. Subject to
the terms and conditions of this Agreement, WWATT agrees to issue
to the NATCRI Shareholders a total of 490,000 shares of WWATT's
common stock (the "WWATT Common Stock"), in exchange for all the
outstanding shares of capital stock of NATCRI (the "NATCRI
Stock"). Each NATCRI Shareholder shall transfer to WWATT at the
Closing (as hereinafter defined) the number of shares of NATCRI
Stock shown opposite such person's name on Exhibit 1.1 and shall
receive in exchange therefor the number of shares of WWATT Common
Stock shown opposite such person's name on Exhibit 1.1.
The parties hereto, including the NATCRI Shareholders,
NATCRI and WWATT, intend for this exchange of stock to be treated
as a tax free reorganization as defined within the U.S. Internal
Revenue Code Section 368.
1.2 Closing. The exchange of WWATT Common Stock for NATCRI
Stock shall take place at a closing (the "Closing") at such place
as shall be mutually agreed to by the parties at 10:00 a.m. on
June 3, 1996, or as soon as practicable thereafter upon the
satisfaction or waiver of the conditions to Closing set forth in
Article 5. The date on which the Closing takes place is referred
to as the "Closing Date." At the Closing, each NATCRI
Shareholder shall deliver to WWATT stock certificates
representing the NATCRI Stock owned by such NATCRI Shareholder,
duly endorsed for transfer or with duly executed stock powers
attached, together with such other documents as WWATT may
reasonably request prior to the Closing. At the Closing, WWATT
shall deliver to each NATCRI Shareholder a stock certificate
representing the WWATT Common Stock issued to such NATCRI
Shareholder in exchange for his or her NATCRI Stock, together
with such other documents as each NATCRI Shareholder may
reasonably request prior to the Closing. The parties agree to
execute such additional documents after the Closing as may be
necessary or desirable to carry out the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NATCRI SHAREHOLDERS
The NATCRI Shareholders, jointly (except where otherwise
expressly indicated to the contrary) and severally, represent and
warrant as follows:
2.1 Organization. To the best of their knowledge, NATCRI
is duly incorporated, validly existing and in good standing under
the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in
which the failure to be so qualified would have a material
adverse effect on the transactions contemplated by this Agreement
or on the business, financial condition or results of operation
of NATCRI, and has full corporate power and authority to conduct
its business as presently conducted and to enter into and perform
this Agreement.
2.2 Authorization. Each NATCRI Shareholder represents and
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement subject to the
security interest held, and rights of approval or consent which
may be asserted, by Resource Bank. This Agreement has been duly
executed and delivered by such NATCRI Shareholder and (assuming
the due execution and delivery by the other parties hereto)
constitutes the legal, valid and binding agreement of such NATCRI
Shareholder enforceable against such person in accordance with
its terms, except as may be limited by applicable bankruptcy,
insolvency or other laws affecting the enforcement of creditors'
rights and remedies generally and by general principles of
equity. The NATCRI Shareholders shall, at the Closing, provide a
fully executed resolution of the NATCRI Board of Directors
indicated that there are no existing conditions that preclude the
transaction as defined in Section 1.1 and authorizing such
exchange as documented by a Plan of Reorganization that
references those actions to accomplish the tax free result
intended by the parties in this transaction which will be
incorporated within this NATCRI Board of Directors resolution.
2.3 No Consents, Conflicts. Each NATCRI Shareholder
represents and warrants that (a) no consent, approval or other
action by any governmental authority or third party is required
in connection with the execution, delivery and performance of
this Agreement by such NATCRI Shareholder; and (b) neither the
execution, delivery or performance of this Agreement by such
NATCRI Shareholder will (i) violate, conflict with or result in a
breach of any provision of or constitute a default or an event
which with notice or lapse of time or both, would constitute a
default under NATCRI's articles of incorporation or bylaws or any
agreement or obligation to which NATCRI or such NATCRI
Shareholder is a party or by which either of such persons may be
bound or affected where such violation, conflict, breach or
default would have a material adverse effect on the transactions
contemplated by this Agreement, or (ii)violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
NATCRI or such NATCRI Shareholder where such violation would have
a material adverse effect on the transactions contemplated by
this Agreement.
2.4 Financial Statements. The NATCRI Shareholders have
previously delivered to WWATT the balance sheets and related
statements of income, shareholders' equity and cash flows as of
and for the calendar year period ended December 31, 1995 (the
"Financial Statements"). The Financial Statements have been
prepared in accordance with NATCRI's books and records, present
fairly in all material respects the financial position, results
of operations, shareholders' equity and cash flows for the year
then ended. There has been no material adverse change in the
business, financial condition, results of operations or prospects
of NATCRI since December 31, 1995. Except as disclosed in the
Financial Statements, NATCRI does not have any liabilities,
commitments or obligations (whether accrued, absolute, contingent
or otherwise), other than obligations incurred since the date of
the Financial Statements in the ordinary course of business and
consistent with past practice and none of which has or will have
a material adverse effect, on the business, financial condition,
results of operations or prospects of Maxwell.
2.5 Compliance, No Litigation. To the best of their
knowledge, NATCRI is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules
and regulations and with all agreements, commitments or
obligations to which it is a party or by which it or any of its
assets may be bound. To the best of their knowledge, there is no
proceeding, investigation or inquiry pending or threatened
against NATCRI, its business or any of its assets, nor is there
any basis for any such proceeding, investigation or inquiry.
Neither NATCRI nor, to the best of their knowledge, its business
or any of its assets is subject to any judgment, order, writ or
injunction of any court, arbitrator or governmental agents or
instrumentality.
2.6 Authorized Capital Stock. The authorized capital stock
of NATCRI consists of 7,500 shares of common stock, of which
1,000 shares are issued and outstanding, all of which are owned
by the NATCRI Shareholders. All the outstanding shares of NATCRI
Stock have been validly issued and are fully paid and non
assessable. There are no outstanding options, warrants, rights
or other commitments obligating NATCRI to issue any of its
capital stock.
2.7 Title to NATCRI Stock. Each NATCRI Shareholder owns
the NATCRI Stock to be transferred to WWATT at the Closing, free
and clear of all liens, claims and encumbrances, and at the
Closing, WWATT will acquire good and valid title to such NATCRI
Stock, free and clear of all liens, claims and encumbrances.
2.8 Investment Representations. Each NATCRI Shareholder
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the WWATT
Common Stock in exchange for the NATCRI Stock owned by such
NATCRI Shareholder, and has been given the opportunity to examine
all documents and ask questions of, and receive answers from
representatives of WWATT concerning the terms and conditions of
such exchange and the financial condition, business and prospects
of WWATT, and to obtain such additional information as he or she
deemed necessary in connection with the transaction contemplated
by this agreement. The WWATT common stock to be acquired by such
NATCRI Shareholder pursuant to this agreement is being acquired
by such NATCRI Shareholder pursuant to this agreement is being
acquired for such person's own account for investment and not
with a view to the public distribution thereof, and such NATCRI
Shareholder will not effect any transfer of such WWATT Common
Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or exemptions from registration
thereunder and in compliance with all applicable state securities
laws. Each NATCRI Shareholder understands that the WWATT Common
Stock to be received by such person at the Closing will bear
appropriate restrictive legends referred to the foregoing
transfer restrictions.
2.9 Reliance on Own Tax Advisors. The NATCRI Shareholders
are relying on their own tax advisors in connection with
determining the tax consequences to them of the transactions
contemplated by this Agreement and are not relying on WWATT or
WWATT's attorneys, accountants or advisors for any such advice.
2.10 Brokers and Finders. Neither WWATT nor any of its
shareholders, officers, directors or agents is liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by any NATCRI Shareholder in
connection with the transactions contemplated hereby contains or
will contain when executed any untrue statement of a material
fact or omits or will omit when executed to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WWATT
WWATT represents and warrants as follows:
3.1 Organization. WWATT is duly incorporated, validly
existing and in good standing under the laws of the State of its
incorporation, is qualified to do business as a foreign
corporation in each other jurisdiction in which the failure to be
so qualified would have a material adverse effect on the
transactions contemplated by this Agreement or on the business,
financial condition or results of operations of WWATT, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
3.2 Authorization. WWATT has full power, capacity and
authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by WWATT and
(assuming the due execution and delivery by the other parties
hereto) constitutes the legal, valid and binding agreement of
WWATT enforceable against WWATT in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights and
remedies generally and by general principles of equity. WWATT
shall, at the Closing, provide a fully executed resolution of the
WWATT Board of Directors indicating that there are no existing
conditions that preclude the transaction as defined in Section
1.1 and authorizing such exchange as documented by a Plan or
Reorganization that references those actions to accomplish the
tax free result intended by the parties in this transaction which
will be incorporated within this WWATT Board of Directors
resolution.
3.3 No Consents, Conflicts. No consent, approval or other
action by any governmental authority or third party is required
in connection with the execution, delivery and performance of
this Agreement by WWATT and neither the execution, delivery or
performance of this Agreement by WWATT will (i) violate, conflict
with or result in a breach of any provision of, or constitute a
default or an event which with notice or lapse of time or both,
would constitute a default under WWATT's articles of incorporated
or bylaws or any agreement or obligation to which WWATT is a
party or by which it may be bound or effected where such
violation, conflict, breach or default would have a material
adverse effect on the transactions contemplated by this
Agreement, or (ii) violate any order, writ, injunctions, decree,
statue, rule or regulation applicable to WWATT where such
violation would have a material adverse effect on the
transactions contemplated by this Agreement.
3.4 Business of WWATT. WWATT has had no business
operations to date except as set forth on Exhibit 3.4. WWATT will
deliver at the closing to each NATCRI Shareholder a statement of
financial condition as of May 31, 1996, which has been prepared
in accordance with the books and records of WWATT, and presents
fairly in all material respects the financial position of WWATT
as of the date thereof. There has been no material adverse
change in the business, financial condition, results of
operations or prospects of WWATT since the date of WWATT's
balance sheet referred to above. Except as disclosed in such
balance sheet and as otherwise herein specifically noted, WWATT
does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements
in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse
effect, on the business, financial conditions, results of
operations or prospects of WWATT.
3.5 Compliance, No Litigation. WWATT is in material
compliance with all applicable federal, state, local and foreign
laws, ordinances, orders, rules and regulations and with all
agreements, commitments or obligations to which it is a party or
by which it or any of its assets may be bound. There is no
proceeding, investigation or inquiry pending or threatened
against WWATT, its business or any of its assets, nor is there
any basis for any such proceeding, investigation or inquiry.
Neither WWATT nor its business or any of its assets is subject to
any judgment, order, writ or injunction of any court, arbitrator
or governmental agency or instrumentality.
3.6 Authorized Capital Stock. The authorized capital stock
of the Company is 20,000,000 shares, consisting of 5,000,000
shares of convertible preferred Stock, $.001 par value per share,
none of which are issued or outstanding and 15,000,000 shares of
Common Stock, $.001 par value per share, of which 1,320,000
shares have been validly issued and are outstanding, and
1,300,000 shares are planned on being offered for sale.
3.7 Title to WWATT Stock. The WWATT Common Stock to be
issued to each NATCRI Shareholder will be duly and validly
issued, fully paid and non assessable, and each NATCRI
Shareholder will acquire title to the WWATT Common Stock to be
issued to such person hereunder free and clear of all liens,
claims and encumbrances.
3.8 Investment Representations. WWATT represents and
warrants that it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits
and risks of an investment in the NATCRI Stock in exchange for
the WWATT Common Stock, and has been given the opportunity to
examine all documents and ask questions of and receive answers
from representatives of NATCRI concerning the terms and
conditions of such exchange and the financial condition, business
and prospects of NATCRI, and to obtain such additional
information as it deems necessary in connection with the
transactions contemplated by this Agreement the NATCRI Stock to
be acquired by WWATT pursuant to this Agreement is being acquired
for WWATT's own account for investment and not with a view to the
public distribution thereof, and WWATT will not effect any
transfer of such NATCRI Stock except pursuant to an effective
registration statement under the Securities Act of 1933 or
exemptions from registration thereunder and in compliance with
all applicable state securities laws. WWATT understands that the
NATCRI Common Stock to be received by WWATT at the Closing will
bear appropriate restrictive legends referred to the foregoing
transfer restrictions. WWATT agrees to comply with Blue Sky Laws
in the States of Florida and Wisconsin.
3.9 Reliance on Own Tax Advisers. WWATT is relying on
their own tax advisors in connection with determining the tax
consequences to them of the transactions contemplated by this
Agreement and are not relying on NATCRI or NATCRI's attorneys,
accountants or advisors for any such advice.
3.10 Brokers and Finders. Neither NATCRI nor any of its
shareholders, officers, director or agents is liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
3.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by WWATT in connection with
the transactions contemplated hereby contains or will contain
when executed any untrue statement of a material fact or omits or
will omit when executed to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading.
ARTICLE 4
ACTIONS PRIOR TO CLOSING
4.1 Ordinary Course. From the date hereof until the
Closing, each NATCRI Shareholder agrees to use reasonable best
efforts to cause NATCRI to conduct its business only in the
ordinary course, consistent with past practice.
4.2 Best Efforts. Each party agrees to use reasonable best
efforts to cause the fulfillment at the earliest practicable date
of all the conditions to the Closing.
4.3 Access. During the period prior to Closing, WWATT
shall give each NATCRI Shareholder, and the NATCRI Shareholder
shall cause NATCRI to give WWATT, and their respective
representatives reasonable access during normal business hours to
all of its books and records, and to cause to be furnished to
each other and their representatives all information with respect
to their respective businesses and affairs as the other may
reasonably request.
4.4 Plan of Reorganization. NATCRI and WWATT will effect a
plan of Reorganization that documents the actions it is taking to
accomplish transactions in accordance with tax free intent of the
parties, including the NATCRI Shareholders, NATCRI, NATCRI and
WWATT, as defined in Section 1.1 above.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 NATCRI Shareholders' Obligations to Close. Each and
every obligation of each NATCRI Shareholder to be performed on
the Closing Date shall be subject to the satisfaction or waiver
of each of the following conditions:
5.1.1 Representations, Warranties and Covenants.
The representations and warranties of WWATT set forth in this
Agreement shall be true and correct in all material respects when
made and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and WWATT
shall have performed all obligations required to be performed by
it under this Agreement on or before the Closing Date.
5.1.2 Tax Consequences. The NATCRI Shareholders
shall have determined, in consultation with their own tax
advisors, that the transactions to be consummated at the Closing
will not result in taxable income to them (the parties agree to
use reasonable best efforts to restructure the transactions
contemplated hereby in the event that the NATCRI Shareholders are
unable to make such a determination, so that the foregoing
condition can be satisfied).
5.2 WWATT's Obligations to Close. Each and every
obligation of WWATT to be performed on the Closing Date shall be
subject to the satisfaction or waiver of each of the following
conditions:
5.2.1 Representations, Warranties and Covenants.
The representations and warranties of each NATCRI Shareholder set
forth in this Agreement shall be true and correct in all material
respects when made and as of the Closing Date as though such
representations and warranties were made on and as of the Closing
Date, and each NATCRI Shareholder shall have performed all
obligations required to be performed by such person under this
Agreement on or before the Closing Date.
5.2.2 Tax Consequences. WWATT shall have
determined, in consultation with their own tax advisors, that the
transactions to be consummated at the Closing will not result in
taxable income to them (the parties agree to use reasonable best
efforts to restructure the transactions contemplated hereby in
the event that WWATT is unable to make such a determination, so
that the foregoing condition can be satisfied).
ARTICLE 6
TERMINATION
6.1 Termination by Either Party. This Agreement may be
terminated, without liability, By WWATT or by the NATCRI
Shareholders if the terminating party is not itself in default
hereunder by written notice of such election to the other if the
closing has not occurred by November 1, 1996. If for any reason,
other than a failure by WWATT to perform according to this
Agreement or a failure of any condition to closing set forth in
Section 5.1 hereof or the failure to close by November 1, 1996,
NATCRI chooses to withdraw from the merger, NATCRI and/or the
NATCRI Shareholders, jointly and severally, shall pay to WWATT,
as liquidated damages in lieu of any and all claims, damages,
costs and expenses incurred by WWATT, and not as a penalty, the
sum of $25,000 to be paid within thirty (30) days after written
notice of said election to withdraw. If for any reason, other
than a failure by NATCRI or the NATCRI Shareholders to perform
according to this Agreement or a failure of any condition to
closing set forth in Section 5.2 hereof or the failure to close
by November 1, 1996, WWATT chooses to withdraw from the merger,
WWATT shall pay to NATCRI, as liquidated damages, in lieu of any
and all claims, damages, costs and expenses incurred by NATCRI or
the NATCRI Shareholders, and not as a penalty, the sum of $25,000
to be paid within thirty (30) days after written notice of said
election to withdraw.
6.2 Breach. In the event of any breach by one or more
NATCRI Shareholders and NATCRI hereunder, including a breach of
representations and warranties, prior to the Closing, WWATT shall
have the option to (i) terminate this Agreement, (ii) close the
transactions contemplated hereby notwithstanding such breach, or
(iii) seek specific performance of this Agreement. In the event
of a breach by WWATT hereunder, including a breach of
representations and warranties, prior to the Closing, the NATCRI
Shareholders shall have the options to (I) terminate this
Agreement, (ii) close the transactions contemplated hereby
notwithstanding such breach, or (iii) seek specific performance
of this Agreement. Nothing contained in this section is intended
to preclude or limit the right of any party to seek a remedy in
damages in lieu of or in addition to any other remedy set forth
herein.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Post-Closing Covenants of WWATT. WWATT covenants from
and after the Closing as follows:
7.1.1 Registration of Shares. WWATT shall use
reasonable best efforts to cause the registration under the
Securities Act of 1933 of the WWATT Common Stock issued to the
NATCRI Shareholders at the Closing no later than twelve (12)
months after WWATT's Common Stock has been registered under
Section 12 of the Securities Exchange Act of 1934. WWATT agrees
to use reasonable best efforts to accomplish such 1934 Act
registration within twelve (12) months after the Closing.
7.2 Operation of NATCRI's Business Following the Closing.
The parties agree as follows with respect to the operation of
NATCRI's business following the Closing:
7.2.1 Location. NATCRI shall continue to conduct
its business at its present facility in Elgin, Illinois until
such time as NATCRI's Board and WWATT's Board of Directors
mutually agree that a change would be beneficial to the business
of WWATT and its subsidiaries taken as a whole.
7.3 Budgets and Business Plans. Senior management of
NATCRI shall prepare an annual operating budget and capital
budget for review by WWATT's Board of Directors at least ninety
(90) days prior to the beginning of each fiscal year which shall
exclude the first fiscal year or such period of shorter than one
year that includes the closing date. Such budgets shall be
reviewed and may be revised quarterly. Implementation of all
such budgets and revisions thereto must be approved both by
NATCRI's senior management and WWATT's Board of Directors.
Additionally, NATCRI's senior management shall prepare a
five-year business plan for review and approval by WWATT's Board of
Directors, in conjunction with the preparation and review and
approval of NATCRI's annual operating and capital budgets. The
five-year business plan shall be reviewed and may be revised
annually, with the approval of WWATT's Board of Directors.
ARTICLE 8
OTHER
8.1 Survival. The representations and warranties set forth
in Articles 2 and 3 shall survive the Closing for a period of six
(6) months. NATCRI and each NATCRI Shareholder agrees to defend,
indemnify and hold harmless WWATT and WWATT agrees to defend,
indemnify and hold harmless each NATCRI Shareholder for any
damages, losses, liabilities or claims incurred by the other as a
result of the breach by the other of such representations and
warranties made by it herein.
8.2 Miscellaneous. This Agreement may be amended only in
writing signed by the party against whom enforcement is sought.
This Agreement may not be assigned by any party hereto without
the prior written consent of the other parties. This Agreement
shall be governed and construed in accordance with the laws of
the State of Florida, without regard to principles of conflicts
of law. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. The
headings contained in this Agreement are only for convenience and
shall not affect the meaning or interpretation of this Agreement.
The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provisions of this
Agreement, which shall remain in full force and effect. Each
party agrees that the others would be irreparably harmed in the
even of any breach of this Agreement. Accordingly, the parties
agree that each shall be entitled to specific performance of this
Agreement to injunctive relief to prevent any breach of this
Agreement. In the event of any litigation arising out of or
relating to this Agreement, the prevailing party shall be
entitled to reasonable attorney's and expenses from the losing
party.
Worldwide Applied
Telecom Technology,
Inc.
North American Telecom
Cable Representatives,
Inc.
Ronald L. Weindruch,
President
Ronald L. Weindruch,
Shareholder
Jerome Rhattigan,
Shareholder
(Corporate Seal)
(Corporate Seal)
Exhibit 1.1
Exchange of NATCRI Shares for WWATT Shares
NATCRI Shareholder
NATCRI Shares
WWATT Shares
Ronald L. Weindruch
500
245,000
Jerome Rhattigan
500
245,000
Totals
1,000
490,000
AGREEMENT
THIS AGREEMENT is made as of the 19th day of July, 1996, by
and among WORLDWIDE APPLIED TELECOM TECHNOLOGY, INC., a Delaware
corporation ("WWATT"), RONALD L. WEINDRUCH ("Weindruch"), and
SHARON K. MAXWELL, RICHARD E. HANIK, PAUL D. KEISER, MICHAEL B.
ADAMSON, and ERIC N. FRIDMAN (collectively, the "Maxwell
Shareholders").
BACKGROUND
The Maxwell Shareholders own all the outstanding capital
stock of Maxwell Partners, Inc., an Illinois corporation
("Maxwell"). WWATT wishes to acquire Maxwell, and the Maxwell
Shareholders wish to own common stock in WWATT and to continue to
conduct Maxwell's business as a subsidiary of WWATT.
Accordingly, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
ARTICLE 1
STOCK FOR STOCK EXCHANGE
1.1 Exchange of Maxwell Shares for WWATT Shares. Subject
to the terms and conditions of this Agreement, WWATT agrees to
issue to the Maxwell Shareholders a total of 690,000 shares of
WWATT's common stock (the "WWATT Common Stock"), in exchange for
all the outstanding shares of capital stock of Maxwell (the
"Maxwell Stock"). Each Maxwell Shareholder shall transfer to
WWATT at the Closing (as hereinafter defined) the number of
shares of Maxwell Stock shown opposite such person's name on
Exhibit 1.1 and shall receive in exchange therefor the number of
shares of WWATT Common Stock shown opposite such person's name on
Exhibit 1.1.
The parties hereto, including the Maxwell Shareholders, D.
Mike Maxwell, Maxwell and WWATT, intend for this exchange of
stock to be treated as a tax free reorganization as defined
within the U.S. Internal Revenue Code Section 368.
1.2 Closing. The exchange of WWATT Common Stock for
Maxwell Stock shall take place at a closing (the "Closing") at
such place as shall be mutually agreed to by the parties at 10:00
a.m. on September 1, 1996, or as soon as practicable thereafter
upon the satisfaction or waiver of the conditions to Closing set
forth in Article 5 and in Section 7.1.1. The date on which the
Closing takes place is referred to as the "Closing Date." At the
Closing, each Maxwell Shareholder shall deliver to WWATT stock
certificates representing the Maxwell Stock owned by such Maxwell
Shareholder, duly endorsed for transfer or with duly executed
stock powers attached, together with such other documents as
WWATT may reasonably request prior to the Closing. At the
Closing, WWATT shall deliver to each Maxwell Shareholder a stock
certificate representing the WWATT Common Stock issued to such
Maxwell Shareholder in exchange for his or her Maxwell Stock,
together with such other documents as each Maxwell Shareholder
may reasonably request prior to the Closing. The parties agree
to execute such additional documents after the Closing as may be
necessary or desirable to carry out the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MAXWELL SHAREHOLDERS
The Maxwell Shareholders, jointly (except where otherwise
expressly indicated to the contrary) and severally, represent and
warrant as follows:
2.1 Organization. To the best of their knowledge, Maxwell
is duly incorporated, validly existing and in good standing under
the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in
which the failure to be so qualified would have a material
adverse effect on the transactions contemplated by this Agreement
or on the business, financial condition or results of operation
of Maxwell, and has full corporate power and authority to
conduct its business as presently conducted and to enter into and
perform this Agreement.
2.2 Authorization. Each Maxwell Shareholder represents and
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement subject to the
security interest held, and rights of approval or consent which
may be asserted, by Resource Bank. This Agreement has been duly
executed and delivered by such Maxwell Shareholder and (assuming
the due execution and delivery by the other parties hereto)
constitutes the legal, valid and binding agreement of such
Maxwell Shareholder enforceable against such person in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights and remedies generally and by general
principles of equity. The Maxwell Shareholders shall, at the
Closing, provide a fully executed resolution of the Maxwell Board
of Directors indicated that there are no existing conditions that
preclude the transaction as defined in Section 1.1 except the
security interest held by Resource Bank and any and all rights
thereunder related thereto and authorizing such exchange as
documented by a Plan of Reorganization that references those
actions to accomplish the tax free result intended by the parties
in this transaction which will be incorporated within this
Maxwell Board of Directors resolution.
2.3 No Consents, Conflicts. Other than the rights held by
Resource Bank arising in connection with its security interest
and any consent and approval rights arising therefrom each
Maxwell Shareholder represents and warrants that (a) no consent,
approval or other action by any governmental authority or third
party is required in connection with the execution, delivery and
performance of this Agreement by such Maxwell Shareholder; and
(b) neither the execution, delivery or performance of this
Agreement by such Maxwell Shareholder will (i) violate, conflict
with or result in a breach of any provision of or constitute a
default or an event which with notice or lapse of time or both,
would constitute a default under Maxwell's articles of
incorporation or bylaws or any agreement or obligation to which
Maxwell or such Maxwell Shareholder is a party or by which either
of such persons may be bound or affected where such violation,
conflict, breach or default would have a material adverse effect
on the transactions contemplated by this Agreement, or
(ii)violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Maxwell or such Maxwell Shareholder
where such violation would have a material adverse effect on the
transactions contemplated by this Agreement.
2.4 Financial Statements. The Maxwell Shareholders have
previously delivered to WWATT the balance sheets and related
statements of income, shareholders' equity and cash flows as of
and for the calendar year period ended December 31, 1995 and for
the nine months ended September 30, 1996 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with Maxwell's books and records, present fairly in
all material respects the financial position, results of
operations, shareholders' equity and cash flows for the year then
ended. There has been no material adverse change in the
business, financial condition, results of operations or prospects
of Maxwell since September 30, 1996. Except as disclosed in the
Financial Statements, Maxwell does not have any liabilities,
commitments or obligations (whether accrued, absolute, contingent
or otherwise), other than obligations incurred since the date of
the Financial Statements in the ordinary course of business and
consistent with past practice and none of which has or will have
a material adverse effect, on the business, financial condition,
results of operations or prospects of Maxwell.
2.5 Compliance, No Litigation. To the best of their
knowledge, Maxwell is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules
and regulations and with all agreements, commitments or
obligations to which it is a party or by which it or any of its
assets may be bound. To the best of their knowledge, there is no
proceeding, investigation or inquiry pending or threatened
against Maxwell, its business or any of its assets, nor is there
any basis for any such proceeding, investigation or inquiry.
Neither Maxwell nor, to the best of their knowledge, its business
or any of its assets is subject to any judgment, order, writ or
injunction of any court, arbitrator or governmental agents or
instrumentality.
2.6 Authorized Capital Stock. The authorized capital stock
of Maxwell consists of 100,000 shares of common stock, of which
15,150 shares are issued and outstanding, all of which are owned
by the Maxwell Shareholders. All the outstanding shares of
Maxwell Stock have been validly issued and are fully paid and non
assessable. There are no outstanding options, warrants, rights
or other commitments obligating Maxwell to issue any of its
capital stock. The capital stocks held by Sharon K. Maxwell are
pledged to the bank and to other lenders to support loans and
debt provided to Maxwell Partners, Inc. and personally to Sharon
K. Maxwell and to D. Mike Maxwell, held both individually,
jointly and severally.
2.7 Title to Maxwell Stock. Each Maxwell Shareholder owns
the Maxwell Stock to be transferred to WWATT at the Closing, free
and clear of all liens, claims and encumbrances, and at the
Closing, WWATT will acquire good and valid title to such Maxwell
Stock, free and clear of all liens, claims and encumbrances. The
only exception is that the Maxwell stock held by Sharon K.
Maxwell is subject to certain liens, claims, and encumbrances as
described in Section 2.6.
2.8 Investment Representations. Each Maxwell Shareholder
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the WWATT
Common Stock in exchange for the Maxwell Stock owned by such
Maxwell Shareholder, and has been given the opportunity to
examine all documents and ask questions of, and receive answers
from representatives of WWATT concerning the terms and conditions
of such exchange and the financial condition, business and
prospects of WWATT, and to obtain such additional information as
he or she deemed necessary in connection with the transaction
contemplated by this agreement. The WWATT common stock to be
acquired by such Maxwell Shareholder pursuant to this agreement
is being acquired by such Maxwell Shareholder pursuant to this
agreement is being acquired for such person's own account for
investment and not with a view to the public distribution
thereof, and such Maxwell Shareholder will not effect any
transfer of such WWATT Common Stock except pursuant to an
effective registration statement under the Securities Act of 1933
or exemptions from registration thereunder and in compliance with
all applicable state securities laws. Each Maxwell Shareholder
understands that the WWATT Common Stock to be received by such
person at the Closing will bear appropriate restrictive legends
referred to the foregoing transfer restrictions.
2.9 Reliance on Own Tax Advisors. The Maxwell Shareholders
are relying on their own tax advisors in connection with
determining the tax consequences to them of the transactions
contemplated by this Agreement and are not relying on WWATT or
WWATT's attorneys, accountants or advisors for any such advice.
2.10 Brokers and Finders. Neither WWATT nor any of its
shareholders, officers, directors or agents is liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by any Maxwell Shareholder in
connection with the transactions contemplated hereby contains or
will contain when executed any untrue statement of a material
fact or omits or will omit when executed to state a material fact
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WWATT
WWATT represents and warrants as follows:
3.1 Organization. WWATT is duly incorporated, validly
existing and in good standing under the laws of the State of its
incorporation, is qualified to do business as a foreign
corporation in each other jurisdiction in which the failure to be
so qualified would have a material adverse effect on the
transactions contemplated by this Agreement or on the business,
financial condition or results of operations of WWATT, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
3.2 Authorization. WWATT has full power, capacity and
authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by WWATT and
(assuming the due execution and delivery by the other parties
hereto) constitutes the legal, valid and binding agreement of
WWATT enforceable against WWATT in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights and
remedies generally and by general principles of equity. WWATT
shall, at the Closing, provide a fully executed resolution of the
WWATT Board of Directors indicating that there are no existing
conditions that preclude the transaction as defined in Section
1.1 and authorizing such exchange as documented by a Plan or
Reorganization that references those actions to accomplish the
tax free result intended by the parties in this transaction which
will be incorporated within this WWATT Board of Directors
resolution.
3.3 No Consents, Conflicts. No consent, approval or other
action by any governmental authority or third party is required
in connection with the execution, delivery and performance of
this Agreement by WWATT and neither the execution, delivery or
performance of this Agreement by WWATT will (i) violate, conflict
with or result in a breach of any provision of, or constitute a
default or an event which with notice or lapse of time or both,
would constitute a default under WWATT's articles of incorporated
or bylaws or any agreement or obligation to which WWATT is a
party or by which it may be bound or effected where such
violation, conflict, breach or default would have a material
adverse effect on the transactions contemplated by this
Agreement, or (ii) violate any order, writ, injunctions, decree,
statue, rule or regulation applicable to WWATT where such
violation would have a material adverse effect on the
transactions contemplated by this Agreement.
3.4 Business of WWATT. WWATT has had no business
operations to date except as set forth on Exhibit 3.4. WWATT will
deliver at the closing to each Maxwell Shareholder a statement of
financial condition as of September 30, 1996, which has been
prepared in accordance with the books and records of WWATT, and
presents fairly in all material respects the financial position
of WWATT as of the date thereof. There has been no material
adverse change in the business, financial condition, results of
operations or prospects of WWATT since the date of WWATT's
balance sheet referred to above. Except as disclosed in such
balance sheet and as otherwise herein specifically noted, WWATT
does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements
in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse
effect, on the business, financial conditions, results of
operations or prospects of WWATT.
3.5 Compliance, No Litigation. WWATT is in material
compliance with all applicable federal, state, local and foreign
laws, ordinances, orders, rules and regulations and with all
agreements, commitments or obligations to which it is a party or
by which it or any of its assets may be bound. There is no
proceeding, investigation or inquiry pending or threatened
against WWATT, its business or any of its assets, nor is there
any basis for any such proceeding, investigation or inquiry.
Neither WWATT nor its business or any of its assets is subject to
any judgment, order, writ or injunction of any court, arbitrator
or governmental agency or instrumentality.
3.6 Authorized Capital Stock. The authorized capital stock
of the Company is 20,000,000 shares, consisting of 5,000,000
shares of convertible preferred Stock, $.001 par value per share,
none of which are issued or outstanding and 15,000,000 shares of
Common Stock, $.001 par value per share, of which 1,810,000
shares have been validly issued and are outstanding, and
1,300,000 shares are presently being offered for sale.
3.7 Title to WWATT Stock. The WWATT Common Stock to be
issued to each Maxwell Shareholder will be duly and validly
issued, fully paid and non assessable, and each Maxwell
Shareholder will acquire title to the WWATT Common Stock to be
issued to such person hereunder free and clear of all liens,
claims and encumbrances.
3.8 Investment Representations. WWATT represents and
warrants that it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits
and risks of an investment in the Maxwell Stock in exchange for
the WWATT Common Stock, and has been given the opportunity to
examine all documents and ask questions of and receive answers
from representatives of Maxwell concerning the terms and
conditions of such exchange and the financial condition, business
and prospects of Maxwell, and to obtain such additional
information as it deems necessary in connection with the
transactions contemplated by this Agreement the Maxwell Stock to
be acquired by WWATT pursuant to this Agreement is being acquired
for WWATT's own account for investment and not with a view to the
public distribution thereof, and WWATT will not effect any
transfer of such Maxwell Stock except pursuant to an effective
registration statement under the Securities Act of 1933 or
exemptions from registration thereunder and in compliance with
all applicable state securities laws. WWATT understands that the
Maxwell Common Stock to be received by WWATT at the Closing will
bear appropriate restrictive legends referred to the foregoing
transfer restrictions. WWATT agrees to comply with Blue Sky Laws
in the States of Illinois and Wisconsin.
3.9 Reliance on Own Tax Advisers. WWATT is relying on
their own tax advisors in connection with determining the tax
consequences to them of the transactions contemplated by this
Agreement and are not relying on Maxwell or Maxwell's attorneys,
accountants or advisors for any such advice.
3.10 Brokers and Finders. Neither Maxwell nor any of its
shareholders, officers, director or agents is liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
3.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by WWATT in connection with
the transactions contemplated hereby contains or will contain
when executed any untrue statement of a material fact or omits or
will omit when executed to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading.
ARTICLE 4
ACTIONS PRIOR TO CLOSING
4.1 Ordinary Course. From the date hereof until the
Closing, each Maxwell Shareholder agrees to use reasonable best
efforts to cause Maxwell to conduct its business only in the
ordinary course, consistent with past practice.
4.2 Best Efforts. Each party agrees to use reasonable best
efforts to cause the fulfillment at the earliest practicable date
of all the conditions to the Closing.
4.3 Access. During the period prior to Closing, WWATT
shall give each Maxwell Shareholder, and the Maxwell Shareholder
shall cause Maxwell to give WWATT, and their respective
representatives reasonable access during normal business hours to
all of its books and records, and to cause to be furnished to
each other and their representatives all information with respect
to their respective businesses and affairs as the other may
reasonably request.
4.4 Plan of Reorganization. Maxwell and WWATT will effect
a plan of Reorganization that documents the actions it is taking
to accomplish transactions in accordance with tax free intent of
the parties, including the Maxwell Shareholders, D. Mike Maxwell,
Maxwell and WWATT, as defined in Section 1.1 above.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 Maxwell Shareholders' Obligations to Close. Each and
every obligation of each Maxwell Shareholder to be performed on
the Closing Date shall be subject to the satisfaction or waiver
of each of the following conditions:
5.1.1 Representations, Warranties and Covenants.
The representations and warranties of WWATT set forth in this
Agreement shall be true and correct in all material respects when
made and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and WWATT
shall have performed all obligations required to be performed by
it under this Agreement on or before the Closing Date.
5.1.2 Tax Consequences. The Maxwell Shareholders
shall have determined, in consultation with their own tax
advisors, that the transactions to be consummated at the Closing
will not result in taxable income to them (the parties agree to
use reasonable best efforts to restructure the transactions
contemplated hereby in the event that the Maxwell Shareholders
are unable to make such a determination, so that the foregoing
condition can be satisfied).
5.1.3 Employment Agreements. WWATT shall have
caused Maxwell to enter into an employment agreement with each
Maxwell key employee in substantially the form set forth for each
such Maxwell Shareholder in Exhibit 5.12.3.
5.1.4 WWATT Directorship. D. Mike Maxwell shall
have been elected as a director of WWATT, effective as of the
Closing and D. Mike Maxwell shall be elected for a term of four
(4) years, or if WWATT's By-Laws calls for a shorter term, then
such shorter term shall be used along with a guarantee renewal of
such term or terms to cover the intended four (4) year period.
5.1.5 Consent and Release by Bank. The Resource
Bank shall have consented to the sale, transfer and exchange of
the shares of Maxwell stock and to the transaction therein
contemplated and shall agree in writing to release its security
interest in said shares and in the personal assets of Sharon K.
Maxwell and D. Mike Maxwell and to waive and release Maxwell,
Sharon K. Maxwell and D. Mike Maxwell from any and all
outstanding obligations or guaranties directly involving Maxwell
Partners to the said bank.
5.2 WWATT's Obligations to Close. Each and every
obligation of WWATT to be performed on the Closing Date shall be
subject to the satisfaction or waiver of each of the following
conditions:
5.2.1 Representations, Warranties and Covenants.
The representations and warranties of each Maxwell Shareholder
set forth in this Agreement shall be true and correct in all
material respects when made and as of the Closing Date as though
such representations and warranties were made on and as of the
Closing Date, and each Maxwell Shareholder shall have performed
all obligations required to be performed by such person under
this Agreement on or before the Closing Date.
5.2.2 Tax Consequences. WWATT shall have
determined, in consultation with their own tax advisors, that the
transactions to be consummated at the Closing will not result in
taxable income to them (the parties agree to use reasonable best
efforts to restructure the transactions contemplated hereby in
the event that WWATT is unable to make such a determination, so
that the foregoing condition can be satisfied).
5.2.3 Employment Agreements. Each of the Maxwell
key employees shall have entered into the Employment Agreements
referred to in Section 5.1.3.
ARTICLE 6
TERMINATION
6.1 Termination by Either Party. This Agreement may be
terminated, without liability, By WWATT or by the Maxwell
Shareholders if the terminating party is not itself in default
hereunder by written notice of such election to the other if the
closing has not occurred by September 1, 1996. If for any
reason, other than a failure by WWATT to perform according to
this Agreement or a failure of any condition to closing set forth
in Section 5.1 hereof or the failure to close by September 1,
1996, Maxwell chooses to withdraw from the merger, Maxwell and/or
the Maxwell Shareholders, jointly and severally, shall pay to
WWATT, as liquidated damages in lieu of any and all claims,
damages, costs and expenses incurred by WWATT, and not as a
penalty, the sum of $25,000 to be paid within thirty (30) days
after written notice of said election to withdraw. If for any
reason, other than a failure by Maxwell or the Maxwell
Shareholders to perform according to this Agreement or a failure
of any condition to closing set forth in Section 5.2 hereof or
the failure to close by September 1, 1996, WWATT chooses to
withdraw from the merger, WWATT and/or Ronald Weindruch, jointly
and severally shall pay to Maxwell, as liquidated damages, in
lieu of any and all claims, damages, costs and expenses incurred
by Maxwell or the Maxwell Shareholders, and not as a penalty, the
sum of $25,000 to be paid within thirty (30) days after written
notice of said election to withdraw.
6.2 Breach. In the event of any breach by one or more
Maxwell Shareholders and D. Mike Maxwell hereunder, including a
breach of representations and warranties, prior to the Closing,
WWATT shall have the option to (i) terminate this Agreement, (ii)
close the transactions contemplated hereby notwithstanding such
breach, or (iii) seek specific performance of this Agreement. In
the event of a breach by WWATT hereunder, including a breach of
representations and warranties, prior to the Closing, the Maxwell
Shareholders shall have the options to (I) terminate this
Agreement, (ii) close the transactions contemplated hereby
notwithstanding such breach, or (iii) seek specific performance
of this Agreement. Nothing contained in this section is intended
to preclude or limit the right of any party to seek a remedy in
damages in lieu of or in addition to any other remedy set forth
herein.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Post-Closing Covenants of WWATT. WWATT covenants from
and after the Closing as follows:
7.1.1 Stock Plans. WWATT agrees to use reasonable
best efforts to implement within one hundred twenty (120) days
after the Closing Date a stock purchase program for the
executives of WWATT and its subsidiaries, including the
executives of Maxwell, Additionally, WWATT agrees that each
Maxwell Shareholder shall have a right of first refusal to
acquire shares of Common Stock of WWATT and that WWATT expects to
sell in a Regulation D private placement at $1.00 per share, with
each Maxwell Shareholder having the right to acquire that amount
of stock in such offering as shall equal such person's regular
compensation (as defined in such person's Employment Agreement).
Additionally, WWATT shall use reasonable best efforts to
implement within one hundred twenty (120) days after the Closing
Date a stock option plan for the Maxwell Shareholders and other
key employees of Maxwell giving them an opportunity to purchase
additional shares of Common Stock of WWATT, with vesting of
options to be tied to the achievement of predetermined
performance goals.
7.1.2 Registration of Shares. WWATT shall use
reasonable best efforts to cause the registration under the
Securities Act of 1933 of the WWATT Common Stock issued to the
Maxwell Shareholders at the Closing no later than twelve (12)
months after WWATT's Common Stock has been registered under
Section 12 of the Securities Exchange Act of 1934. WWATT agrees
to use reasonable best efforts to accomplish such 1934 Act
registration within twelve (12) months after the Closing.
7.2 Operation of Maxwell's Business Following the Closing.
The parties agree as follows with respect to the operation of
Maxwell's business following the Closing:
7.2.1 Location. Maxwell shall continue to conduct
its business at its present facility in Elgin, Illinois until
such time as Maxwell's Board and WWATT's Board of Directors
mutually agree that a change would be beneficial to the business
of WWATT and its subsidiaries taken as a whole.
7.3 Budgets and Business Plans. Senior management of
Maxwell shall prepare an annual operating budget and capital
budget for review by WWATT's Board of Directors at least ninety
(90) days prior to the beginning of each fiscal year which shall
exclude the first fiscal year or such period of shorter than one
year that includes the closing date. Such budgets shall be
reviewed and may be revised quarterly. Implementation of all
such budgets and revisions thereto must be approved both by
Maxwell's senior management and WWATT's Board of Directors.
Additionally, Maxwell's senior management shall prepare a
five-year business plan for review and approval by WWATT's Board of
Directors, in conjunction with the preparation and review and
approval of Maxwell's annual operating and capital budgets. The
five-year business plan shall be reviewed and may be revised
annually, with the approval of WWATT's Board of Directors.
Maxwell's Chairman and Chief Executive Officer shall have
authority to approve capital expenditures of up to $25,000.00
each made within the guidelines established by the annual
operating and capital budgets and five-year business plan
approved by WWATT';s Board of Directors. Any individual capital
expenditure in excess of $25,000.00 must be approved by WWATT's
Board of Directors. Additionally, all individual salaries in
excess of $40,000.00 per year and the total number of Maxwell
employees shall be subject to approval by WWATT's Board of
Directors each year.
7.4 Employee Benefits. Maxwell's existing 401(k) Plan and
employee benefits shall be continued in the same form as prior to
the Closing, except to the extent modified pursuant to the
Employment Agreements referred to in Section 5.1.3.
7.5 Accounts Receivable. No accounts receivable of Maxwell
shall be factored unless agrees to by the Chief Executive Officer
and Chief Financial Officer of Maxwell and WWATT's Board of
Directors.
ARTICLE 8
OTHER
8.1 Survival. The representations and warranties set forth
in Articles 2 and 3 shall survive the Closing for a period of six
(6) months. Maxwell and each Maxwell Shareholder agrees to
defend, indemnify and hold harmless WWATT and WWATT agrees to
defend, indemnify and hold harmless each Maxwell Shareholder for
any damages, losses, liabilities or claims incurred by the other
as a result of the breach by the other of such representations
and warranties made by it herein.
8.2 Miscellaneous. This Agreement may be amended only in
writing signed by the party against whom enforcement is sought.
This Agreement may not be assigned by any party hereto without
the prior written consent of the other parties. This Agreement
shall be governed and construed in accordance with the laws of
the State of Illinois, without regard to principles of conflicts
of law. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. The
headings contained in this Agreement are only for convenience and
shall not affect the meaning or interpretation of this Agreement.
The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provisions of this
Agreement, which shall remain in full force and effect. Each
party agrees that the others would be irreparably harmed in the
even of any breach of this Agreement. Accordingly, the parties
agree that each shall be entitled to specific performance of this
Agreement to injunctive relief to prevent any breach of this
Agreement. In the event of any litigation arising out of or
relating to this Agreement, the prevailing party shall be
entitled to reasonable attorney's and expenses from the losing
party.
<PAGE>
Company Signature Name and Title
Worldwide Applied
Telecom Technology, Inc. Ronald L.Weindruch,
President
(Corporate Seal)
Ronald L. Weindruch,
personnally
Maxwell Partners, Inc.
Sharon K. Maxwell,
Shareholder
Richard E. Hanik,
Shareholder
Paul D. Keiser,
Shareholder
Michael B. Adamson,
Shareholder
Eric N. Fridman,
Shareholder
(Corporate Seal)
<PAGE>
Exhibit 1.1
Exchange of Maxwell Shares for WWATT Shares
Maxwell Shareholder Maxwell Shares WWATT Shares
Sharon K.Maxwell 10,000 423,500
Richard E.Hanik 1,060 63,700
Paul D. Keiser 1,515 74,000
Michael B. Adamson 1,515 74,000
Eric N. Fridman 1,060 54,800
Totals 15,150 690,000
AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 1997
("Contract Date"), by and among SYNAPTX WORLDWIDE, INC., a Utah
corporation ("SYNAPTX ") and O. RAY STRICKLAND (the "ORAYCOM
Shareholder").
BACKGROUND
The ORAYCOM Shareholder owns all the outstanding capital stock
of ORAYCOM, Inc., a Texas corporation ("ORAYCOM"). SYNAPTX wishes
to acquire ORAYCOM, and the ORAYCOM Shareholder wishes to own
common stock in SYNAPTX and to continue to conduct ORAYCOM's
business as a subsidiary of SYNAPTX.
Accordingly, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
ARTICLE 1
STOCK FOR STOCK EXCHANGE
1.1 Exchange of ORAYCOM Shares for SYNAPTX Shares. Subject
to the terms and conditions of this Agreement, SYNAPTX agrees to
issue to the ORAYCOM Shareholder a total of ______________ shares
of SYNAPTX common stock representing the total number of shares of
SYNAPTX common stock resulting from the formula of dividing Five
Hundred Thousand Dollars ($500,000) by the average closing price of
the SYNAPTX common stock for the prior twenty [20] trading days
preceding the Contract Date, rounded up to next whole share of
SYNAPTX common stock (the "SYNAPTX Common Stock"), in exchange for
all the outstanding shares of capital stock of ORAYCOM (the
"ORAYCOM Stock"). The ORAYCOM Shareholder shall transfer to
SYNAPTX at the Closing (as hereinafter defined) the number of
shares of ORAYCOM Stock shown opposite such person's name on
Exhibit 1.1 and shall receive in exchange therefor the number of
shares of SYNAPTX Common Stock shown opposite such person's name on
Exhibit 1.1.
The parties hereto, including the ORAYCOM Shareholder,
ORAYCOM and SYNAPTX, intend for this exchange of stock to be
treated as a tax free reorganization as defined within the U.S.
Internal Revenue Code Section 368(a)(1)(B).
1.2 Contingent Issuance of SYNAPTX Shares. Subject to the
terms and conditions of this Agreement, SYNAPTX agrees to issue to
the ORAYCOM Shareholder a maximum value of $380,000 worth of
SYNAPTX Common Stock ("Earn-out Bonus") as an incentive to achieve
the Level One Results or Level Two Results (and as hereinafter
defined) as reflected on Exhibit 1.2, to be issued over the SYNAPTX
fiscal year ends, specifically August 31, 1997, 1998 and 1999 (the
"Earn-out Period" for each fiscal year end or collectively the
"Earn-out Periods"), to the existing ORAYCOM Shareholder who is
employed by ORAYCOM as of the date ninety (90) days after each of
the next three SYNAPTX fiscal year ends, specifically, August 31,
1997, 1998, and 1999 ("Payout Date" for each fiscal year end or
collectively the "Payout Dates"). The Level One Results and Level
Two Results represent threshold levels of amounts to be realized
after the Closing covering the total of Commission Revenues and the
total Earnings before Taxes, both of which must be achieved, as
recorded on the books and records of ORAYCOM for each Earn-out
Period in accordance with generally accepted accounting principles
("Level One Results" and "Level Two Results", respectively). The
Earn-out Bonus as reflected on Exhibit 1.2 represents the dollars
payable for the respective Level One Results and Level Two Results
specified on Exhibit 1.2 achieved ("Earn-out Bonus Realized").
Earn-out Bonus Realized is payable in shares of Synaptx Common
Stock based on the number of shares resulting from the formula of
Earn-out Bonus Realized divided by the average closing price of
SYNAPTX Common Stock for every trading day in the month of
September as published for the stock exchange on which the SYNAPTX
Common Stock is traded or as quoted on the electronic bulletin
board if the SYNAPTX Common Stock is not so traded, rounded up to
the next whole share of SYNAPTX Common Stock.
1.3 Closing. The exchange of SYNAPTX Common Stock for
ORAYCOM Stock shall take place at a closing (the "Closing") at such
place as shall be mutually agreed to by the parties at 10:00 a.m.
on June 2, 1997, or as soon as practicable thereafter upon the
satisfaction or waiver of the conditions to Closing set forth in
Article 5 and in Section 7.1.1. The date on which the Closing
takes place is referred to as the "Closing Date." At the Closing,
the ORAYCOM Shareholder shall deliver to SYNAPTX stock certificates
representing the ORAYCOM Stock owned by such ORAYCOM Shareholder,
duly endorsed for transfer or with duly executed stock powers
attached, together with such other documents as SYNAPTX may
reasonably request prior to the Closing. At the Closing, SYNAPTX
shall deliver to the ORAYCOM Shareholder a stock certificate
representing the SYNAPTX Common Stock issued to such ORAYCOM
Shareholder in exchange for his or her ORAYCOM Stock, together with
such other documents as the ORAYCOM Shareholder may reasonably
request prior to the Closing. The parties agree to execute such
additional documents after the Closing as may be necessary or
desirable to carry out the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ORAYCOM SHAREHOLDER
The ORAYCOM Shareholder represents and warrants as follows:
2.1 Organization. To the best of his knowledge, ORAYCOM is
duly incorporated, validly existing and in good standing under the
laws of the State of its incorporation, is qualified to do business
as a foreign corporation in each other jurisdiction in which the
failure to be so qualified would have a material adverse effect on
the transactions contemplated by this Agreement or on the business,
financial condition or results of operation of ORAYCOM, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
2.2 Authorization. The ORAYCOM Shareholder represents and
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by such ORAYCOM Shareholder and
(assuming the due execution and delivery by the other parties
hereto) constitutes the legal, valid and binding agreement of such
ORAYCOM Shareholder enforceable against such person in accordance
with its terms, except as may be limited by applicable bankruptcy,
insolvency or other laws affecting the enforcement of creditors'
rights and remedies generally and by general principles of equity.
The ORAYCOM Shareholder shall, at the Closing, provide a fully
executed resolution of the ORAYCOM Board of Directors indicating
that there are no existing conditions that preclude the transaction
as defined in Article 1 and authorizing such exchange as documented
by a Plan of Reorganization that references those actions to
accomplish the tax free result intended by the parties in this
transaction which will be incorporated within this ORAYCOM Board of
Directors resolution.
2.3 No Consents, Conflicts. The ORAYCOM Shareholder
represents and warrants that (a) no consent, approval or other
action by any governmental authority or third party is required in
connection with the execution, delivery and performance of this
Agreement by such ORAYCOM Shareholder; and (b) neither the
execution, delivery or performance of this Agreement by such
ORAYCOM Shareholder will (i) violate, conflict with or result in a
breach of any provision of or constitute a default or an event
which with notice or lapse of time or both, would constitute a
default under ORAYCOM's articles of incorporation or by-laws or any
agreement or obligation to which ORAYCOM or such ORAYCOM
Shareholder are a party or by which either of such persons may be
bound or affected where such violation, conflict, breach or default
would have a material adverse effect on the transactions
contemplated by this Agreement, or (ii)violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
ORAYCOM or such ORAYCOM Shareholder where such violation would have
a material adverse effect on the transactions contemplated by this
Agreement.
2.4 Financial Statements. The ORAYCOM Shareholder has
previously delivered to SYNAPTX the balance sheets and related
statements of income, shareholder's equity and cash flows as of and
for the calendar year period ended December 31, 1996 and for the
five month period ended May 31, 1997 (the "Financial Statements").
The Financial Statements have been prepared in accordance with
ORAYCOM's books and records, present fairly in all material
respects the financial position, results of operations,
shareholder's equity and cash flows for the periods then ended.
There has been no material adverse change in the business,
financial condition, results of operations or prospects of ORAYCOM
since December 31, 1996. Except as disclosed in the Financial
Statements, ORAYCOM does not have any liabilities, commitments or
obligations (whether accrued, absolute, contingent or otherwise),
other than obligations incurred since the date of the Financial
Statements in the ordinary course of business and consistent with
past practice and none of which has or will have a material adverse
effect, on the business, financial condition, results of operations
or prospects of ORAYCOM.
2.5 Compliance, No Litigation. To the best of his knowledge,
ORAYCOM is in material compliance with all applicable federal,
state, local and foreign laws, ordinances, orders, rules and
regulations and with all agreements, commitments or obligations to
which it is a party or by which it or any of its assets may be
bound. To the best of his knowledge, there is no proceeding,
investigation or inquiry pending or threatened against ORAYCOM, its
business or any of its assets, nor is there any basis for any such
proceeding, investigation or inquiry. Neither ORAYCOM nor, to the
best of his knowledge, its business or any of its assets is subject
to any judgment, order, writ or injunction of any court, arbitrator
or governmental agents or instrumentality.
2.6 Authorized Capital Stock. The authorized capital stock
of ORAYCOM consists of ________________ shares of common stock, of
which __________________ shares are issued and outstanding, all of
which are owned by the ORAYCOM Shareholder. All the outstanding
shares of ORAYCOM Stock have been validly issued and are fully paid
and non assessable. There are no outstanding options, warrants,
rights or other commitments obligating ORAYCOM to issue any of its
capital stock. The capital stock held by the ORAYCOM Shareholder is
not pledged to any bank or to other lenders to support loans and
debt provided to ORAYCOM, Inc. and personally to any individual or
multiple ORAYCOM Shareholder.
2.7 Title to ORAYCOM Stock. The ORAYCOM Shareholder owns the
ORAYCOM Stock to be transferred to SYNAPTX at the Closing, free and
clear of all liens, claims and encumbrances, and at the Closing,
SYNAPTX will acquire good and valid title to such ORAYCOM Stock,
free and clear of all liens, claims and encumbrances.
2.8 Investment Representations. The ORAYCOM Shareholder
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the SYNAPTX
Common Stock in exchange for the ORAYCOM Stock owned by such
ORAYCOM Shareholder, and has been given the opportunity to examine
all documents and ask questions of, and receive answers from
representatives of SYNAPTX concerning the terms and conditions of
such exchange and the financial condition, business and prospects
of SYNAPTX, and to obtain such additional information as he or she
deemed necessary in connection with the transaction contemplated by
this agreement. The SYNAPTX common stock to be acquired by such
ORAYCOM Shareholder pursuant to this agreement is being acquired by
such ORAYCOM Shareholder for such person's own account for
investment and not with a view to the public distribution thereof,
and such ORAYCOM Shareholder will not effect any transfer of such
SYNAPTX Common Stock except pursuant to an effective registration
statement under the Securities Act of 1933 or exemptions from
registration thereunder and in compliance with all applicable state
securities laws. The ORAYCOM Shareholder understands that the
SYNAPTX Common Stock to be received by such person at the Closing
will bear appropriate restrictive legends referred to the foregoing
transfer restrictions.
2.9 Reliance on Own Tax Advisors. The ORAYCOM Shareholder is
relying on his own tax advisors in connection with determining the
tax consequences to him of the transactions contemplated by this
Agreement and is not relying on SYNAPTX or SYNAPTX's attorneys,
accountants, officers or advisors for any such advice.
2.10 Brokers and Finders. Neither ORAYCOM, including its
officers, directors or agents, nor the ORAYCOM Shareholder, are
liable for any brokers' or finders' fees or expenses in connection
with this Agreement or the transactions contemplated hereby.
2.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by any ORAYCOM Shareholder in
connection with the transactions contemplated hereby contains or
will contain when executed any untrue statement of a material fact
or omits or will omit when executed to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAPTX
SYNAPTX represents and warrants as follows:
3.1 Organization. SYNAPTX is duly incorporated, validly
existing and in good standing under the laws of the State of its
incorporation, is qualified to do business as a foreign corporation
in each other jurisdiction in which the failure to be so qualified
would have a material adverse effect on the transactions
contemplated by this Agreement or on the business, financial
condition or results of operations of SYNAPTX, and has full
corporate power and authority to conduct its business as presently
conducted and to enter into and perform this Agreement.
3.2 Authorization. SYNAPTX has full power, capacity and
authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by SYNAPTX and
(assuming the due execution and delivery by the other parties
hereto) constitutes the legal, valid and binding agreement of
SYNAPTX enforceable against SYNAPTX in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights and
remedies generally and by general principles of equity. SYNAPTX
shall, at the Closing, provide a fully executed resolution of the
SYNAPTX Board of Directors indicating that there are no existing
conditions that preclude the transaction as defined in Section 1.1
and authorizing such exchange as documented by a Plan or
Reorganization that references those actions to accomplish the tax
free result intended by the parties in this transaction which will
be incorporated within this SYNAPTX Board of Directors resolution.
3.3 No Consents, Conflicts. No consent, approval or other
action by any governmental authority or third party is required in
connection with the execution, delivery and performance of this
Agreement by SYNAPTX and neither the execution, delivery or
performance of this Agreement by SYNAPTX will (i) violate, conflict
with or result in a breach of any provision of, or constitute a
default or an event which with notice or lapse of time or both,
would constitute a default under SYNAPTX's articles of
incorporation or bylaws or any agreement or obligation to which
SYNAPTX is a party or by which it may be bound or affected where
such violation, conflict, breach or default would have a material
adverse effect on the transactions contemplated by this Agreement,
or (ii) violate any order, writ, injunctions, decree, statute, rule
or regulation applicable to SYNAPTX where such violation would have
a material adverse effect on the transactions contemplated by this
Agreement.
3.4 Business of SYNAPTX. SYNAPTX has previously delivered
to the ORAYCOM Shareholder the balance sheets and related
statements of income, shareholders' equity and cash flows as of and
for the fiscal year period ended August 31, 1996 and the condensed
financial statement information included in the Second Quarter 1997
Investor Quarterly Update (the "Financial Statements"). The
Financial Statements have been prepared in accordance with the
SYNAPTX books and records, present fairly in all material respects
the financial position, results of operations, shareholders' equity
and cash flows for the periods then ended. There has been no
material adverse change in the business, financial condition,
results of operations or prospects of SYNAPTX since the date of
SYNAPTX Financial Statements referred to above. Except as
disclosed in such balance sheet and as otherwise herein
specifically noted, SYNAPTX does not have any liabilities,
commitments or obligations (whether accrued, absolute, contingent
or otherwise), other than obligations incurred since the date of
the Financial Statements in the ordinary course of business and
consistent with past practice and none of which has or will have a
material adverse effect, on the business, financial conditions,
results of operations or prospects of SYNAPTX.
3.5 Compliance, No Litigation. SYNAPTX is in material
compliance with all applicable federal, state, local and foreign
laws, ordinances, orders, rules and regulations and with all
agreements, commitments or obligations to which it is a party or by
which it or any of its assets may be bound. There is no
proceeding, investigation or inquiry pending or threatened against
SYNAPTX, its business or any of its assets, nor is there any basis
for any such proceeding, investigation or inquiry. Neither SYNAPTX
nor its business or any of its assets is subject to any judgment,
order, writ or injunction of any court, arbitrator or governmental
agency or instrumentality.
3.6 Authorized Capital Stock. The authorized capital stock
of the Company is 35,000,000 shares, consisting of 10,000,000
shares of preferred Stock, $.001 par value per share, none of which
none are issued or outstanding and 25,000,000 shares of Common
Stock, $.001 par value per share, of which 5,047,211 shares have
been validly issued and are outstanding.
3.7 Title to SYNAPTX Stock. The SYNAPTX Common Stock to be
issued to the ORAYCOM Shareholder will be duly and validly issued,
fully paid and non assessable, and the ORAYCOM Shareholder will
acquire title to the SYNAPTX Common Stock to be issued to such
person hereunder free and clear of all liens, claims and
encumbrances. Additionally, the SYNAPTX Board of Directors and a
majority of the then Synaptx shareholders have approved a stock
option plan providing for the issuance of 551,150 shares of SYNAPTX
common stock of which 316,900 shares are issued with exercise
prices ranging from $0.091 to $0.998 per share. Also, the SYNAPTX
Board of Directors has approved the issuance of stock warrants
representing 200,310 shares of SYNAPTX common stock with an
exercise price from $0.454 to $0.907 per share.
3.8 Investment Representations. SYNAPTX represents and
warrants that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the ORAYCOM Stock in exchange for the
SYNAPTX Common Stock, and has been given the opportunity to examine
all documents and ask questions of and receive answers from
representatives of ORAYCOM concerning the terms and conditions of
such exchange and the financial condition, business and prospects
of ORAYCOM, and to obtain such additional information as it deems
necessary in connection with the transactions contemplated by this
Agreement the ORAYCOM Stock to be acquired by SYNAPTX pursuant to
this Agreement is being acquired for SYNAPTX's own account for
investment and not with a view to the public distribution thereof,
and SYNAPTX will not effect any transfer of such ORAYCOM Stock
except pursuant to an effective registration statement under the
Securities Act of 1933 or exemptions from registration thereunder
and in compliance with all applicable state securities laws.
SYNAPTX understands that the ORAYCOM Common Stock to be received by
SYNAPTX at the Closing will bear appropriate restrictive legends
referred to the foregoing transfer restrictions. SYNAPTX agrees to
comply with Blue Sky Laws in the State of Texas.
3.9 Reliance on Own Tax Advisers. SYNAPTX is relying on its
own tax advisors in connection with determining the tax
consequences to it of the transactions contemplated by this
Agreement and are not relying on ORAYCOM or ORAYCOM's attorneys,
accountants, officers or advisors for any such advice.
3.10 Brokers and Finders. Neither SYNAPTX nor any of its
shareholders, officers, director or agents is liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
3.11 No Misrepresentations. Neither this Agreement nor any
document executed or to be executed by SYNAPTX in connection with
the transactions contemplated hereby contains or will contain when
executed any untrue statement of a material fact or omits or will
omit when executed to state a material fact necessary in order to
make the statements made, in light of the circumstances under which
they were made, not misleading.
ARTICLE 4
ACTIONS PRIOR TO CLOSING
4.1 Ordinary Course. From the date hereof until the Closing,
the ORAYCOM Shareholder agrees to use reasonable best efforts to
cause ORAYCOM to conduct its business only in the ordinary course,
consistent with past practice.
4.2 Best Efforts. Each party agrees to use reasonable best
efforts to cause the fulfillment at the earliest practicable date
of all the conditions to the Closing.
4.3 Access. During the period prior to Closing, SYNAPTX
shall give the ORAYCOM Shareholder, and the ORAYCOM Shareholder
shall cause ORAYCOM to give SYNAPTX, and their respective
representatives reasonable access during normal business hours to
all of its books and records, and to cause to be furnished to each
other and their representatives all information with respect to
their respective businesses and affairs as the other may reasonably
request.
4.4 Plan of Reorganization. ORAYCOM and SYNAPTX will effect
a plan of Reorganization that documents the actions it is taking to
accomplish transactions in accordance with tax free intent of the
parties, including the ORAYCOM Shareholder, ORAYCOM and SYNAPTX,
as defined in Section 1.1 above.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 ORAYCOM Shareholder's Obligations to Close. Each and
every obligation of the ORAYCOM Shareholder to be performed on the
Closing Date shall be subject to the satisfaction or waiver of each
of the following conditions:
5.1.1 Representations, Warranties and Covenants. The
representations and warranties of SYNAPTX set forth in this
Agreement shall be true and correct in all material respects when
made and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and SYNAPTX
shall have performed all obligations required to be performed by it
under this Agreement on or before the Closing Date.
5.1.2 Tax Consequences. The ORAYCOM Shareholder
shall have determined, in consultation with his own tax advisors,
that the transactions to be consummated at the Closing will not
result in taxable income to him (the parties agree to use
reasonable best efforts to restructure the transactions
contemplated hereby in the event that the ORAYCOM Shareholder is
unable to make such a determination, so that the foregoing
condition can be satisfied).
5.1.3 Employment Agreements. SYNAPTX shall have
caused ORAYCOM to enter into an employment agreement with each
ORAYCOM key employee in substantially the form set forth for the
ORAYCOM Shareholder in Exhibit 5.1.3.
5.2 SYNAPTX's Obligations to Close. Each and every
obligation of SYNAPTX to be performed on the Closing Date shall be
subject to the satisfaction or waiver of each of the following
conditions:
5.2.1 Representations, Warranties and Covenants. The
representations and warranties of the ORAYCOM Shareholder set forth
in this Agreement shall be true and correct in all material
respects when made and as of the Closing Date as though such
representations and warranties were made on and as of the Closing
Date, and the ORAYCOM Shareholder shall have performed all
obligations required to be performed by such person under this
Agreement on or before the Closing Date.
5.2.2 Tax Consequences. SYNAPTX shall have
determined, in consultation with its own tax advisors, that the
transactions to be consummated at the Closing will not result in
taxable income to it (the parties agree to use reasonable best
efforts to restructure the transactions contemplated hereby in the
event that SYNAPTX is unable to make such a determination, so that
the foregoing condition can be satisfied).
5.2.3 Employment Agreements. Each of the ORAYCOM key
employees shall have entered into the Employment Agreements
referred to in Section 5.1.3.
ARTICLE 6
TERMINATION
6.1 Termination by Either Party. This Agreement may be
terminated, without liability, by SYNAPTX or by the ORAYCOM
Shareholder if the terminating party is not itself in default
hereunder by written notice of such election to the other if the
closing has not occurred by September 1, 1997.
6.2 Breach. In the event of any breach by one or more
ORAYCOM Shareholder hereunder, including a breach of
representations and warranties, prior to the Closing, SYNAPTX shall
have the option to (i) terminate this Agreement, (ii) close the
transactions contemplated hereby notwithstanding such breach, or
(iii) seek specific performance of this Agreement. In the event of
a breach by SYNAPTX hereunder, including a breach of
representations and warranties, prior to the Closing, the ORAYCOM
Shareholder shall have the options to (I) terminate this Agreement,
(ii) close the transactions contemplated hereby notwithstanding
such breach, or (iii) seek specific performance of this Agreement.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Post-Closing Covenants of SYNAPTX. SYNAPTX covenants
from and after the Closing as follows:
7.1.1 Stock Plans. SYNAPTX agrees to use reasonable
best efforts to implement within one hundred twenty (120) days
after the Closing Date a stock purchase program for the executives
of ORAYCOM.
7.2 Operation of ORAYCOM's Business Following the Closing.
The parties agree as follows with respect to the operation of
ORAYCOM's business following the Closing:
7.2.1 Location. ORAYCOM shall continue to conduct
its business at its present facility in Carrollton, Texas until
such time as the ORAYCOM Board and the SYNAPTX Board of Directors
mutually agree that a change would be beneficial to the business of
SYNAPTX and its subsidiaries taken as a whole.
ARTICLE 8
OTHER
8.1 Survival. The representations and warranties set forth
in Articles 2 and 3 shall survive the Closing for a period of six
(6) months. ORAYCOM and the ORAYCOM Shareholder agrees to defend,
indemnify and hold harmless SYNAPTX and SYNAPTX agrees to defend,
indemnify and hold harmless the ORAYCOM Shareholder for any
damages, losses, liabilities or claims incurred by the other as a
result of the breach by the other of such representations and
warranties made by it herein.
8.2 Miscellaneous. This Agreement may be amended only in
writing signed by the party against whom enforcement is sought.
This Agreement may not be assigned by any party hereto without the
prior written consent of the other parties. This Agreement shall
be governed and construed in accordance with the laws of the State
of Texas, without regard to principles of conflicts of law. This
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original. The headings contained in this
Agreement are only for convenience and shall not affect the meaning
or interpretation of this Agreement. The invalidity or
unenforceability of any provision of this Agreement shall not
affect any other provisions of this Agreement, which shall remain
in full force and effect. Each party agrees that the others would
be irreparably harmed in the even of any breach of this Agreement.
Accordingly, the parties agree that each shall be entitled to
specific performance of this Agreement to injunctive relief to
prevent any breach of this Agreement. In the event of any
litigation arising out of or relating to this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees
and expenses from the losing party.
<PAGE>
Company Signature Name and Title
Synaptx Worldwide, Inc.
Ronald L. Weindruch,
President
(Corporate Seal)
ORAYCOM, Inc.
O. Ray Strickland,
ORAYCOM Shareholder
(Corporate Seal)
WORLDWIDE APPLIED TELECOM TECHNOLOGY, INC.
EMPLOYMENT AGREEMENT
BY THIS AGREEMENT, made this 1st day of July, 1996, Worldwide
Applied Telecom Technology, Inc., an Delaware corporation
("Company") and Ronald L. Weindruch ("Employee"), in
consideration of mutual benefits set forth herein, hereby agree
as follows:
1. Employment. The Company hereby employs the Employee
and the Employee hereby accepts employment upon the terms and
conditions hereinafter set forth.
2. Term. Subject to the provisions for the termination as
hereafter provided, the term of this Agreement shall begin on the
date hereof and shall terminate on December 31, 1997.
Thereafter, this Agreement shall be automatically renewed for
successive one-year terms unless either party notifies the other
of non-renewal at least 30 days prior to the expiration of the
then current term. The compensation and other benefits provided
for herein shall be subject to annual review and adjustment where
appropriate by the Company's Board of Directors.
3. Compensation. For all services rendered by the
Employee under this Agreement, the Company shall compensate the
Employee by paying the Employee the sum of the following:
(i) $108,000 per year payable in equal installments in
accordance with the Company's normal payroll policies (called
"Regular Compensation");
(ii) When Company's consolidated run rate sales for three
(3) consecutive months exceeds an annual amount of $15,000,000,
then such Regular Compensation will be increased to $144,000 per
year payable in equal installments in accordance with the
Company's normal payroll policies;
(iii) Such bonus, if any, for each calendar quarter as
is specified by the Board of Directors of Company for each
quarter during which Employee's employment continues (called
"Profit Bonus"), based on the Company's performance relative to
budget for the quarter, together with any other factors the Board
of Directors deems appropriate, such bonus normally not to exceed
thirty-three percent (33%) of the Employee's Regular Compensation
for the applicable quarter.
(iv) In addition to the above arrangements relative to
Employee's compensation, it is understood between the parties
that Employee also provides services to a subsidiary of the
Company, North American Telecom Cable Representatives, Inc.,
under a contractual arrangement as a third-party commission
representative and provider of consulting services. These
services are provided as an independent representative and not as
an employee of Company or any of its subsidiaries or affiliates.
In the event of certain early terminations of this Agreement
as provided hereafter, compensation payable to the Employee shall
(unless otherwise stated) be limited to amounts Fully Accrued.
The term "Fully Accrued" means (a) as to Regular Compensation,
the percentage of a year's Regular Compensation as shall equal
the percentage of the year which has expired on the termination
date, and (b) as to Profit Bonus, only that Profit Bonus which
has been awarded by the Company's Board of Directors.
4. Duties. The Employee is engaged as President and Chief
Executive Officer. The precise services of the Employee may be
extended or curtailed, from time to time, at the direction of the
Company. The Employee also shall perform such corporate
development services for the Company's parent corporation and
affiliates as the Company's Board of Directors may specify from
time to time, without additional compensation.
5. Extent of Services. The Employee shall devote the
Employee's entire time, attention and energy to the business of
the Company, and shall not, during the term of this Agreement,
engage in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing the
Employee from investing Employee's assets in such form or manner
as will not require services on the part of Employee in the
operation of the affairs of the Company to which investments are
made.
6. Expenses. The Employee is authorized to incur
reasonable expenses for promoting the business of the Company,
including expenses for travel and similar items. The Company
will reimburse the Employee for all such expenses upon
presentation by the Employee, from time to time, of an itemized
account of such expenditures in accordance with the Company's
expense reimbursement policies. Additionally, the Company's
existing practice of reimbursing the full cost of all cellular
phone bills associated with the main cellular phone used for
business will be continued for Employee. Also, when Company's
consolidated run rate of sales for three (3) consecutive months
exceeds an annualized amount of $8,000,000, Employee will be
provided with, the following:
(a.) membership in a country club to promote the
business of the Company and its subsidiaries,
(b.) a full size company car ("Company Car") for which
all costs in operating such Company Car, including
insurance, repairs, maintenance, gasoline, any taxes
thereon, and other necessary operating costs.
7. Fringe Benefits. The Employee shall enjoy the same
fringe benefits (other than stock options) as provided generally
to other senior executives of Company, including health, life and
disability insurance. The Company will maintain such health,
life and disability insurance with benefits at a minimum
consistent with the existing Company health, life and disability
insurance. Furthermore, the Company or one of it's subsidiaries
will offer the benefit of a deferred compensation arrangement,
commonly referred to as a "401(K) Plan" whose contributions and
benefits structure will at a minimum be consistent with the
existing Maxwell Partners, Inc. Retirement Savings Plan.
8. Vacation. The Employee shall be entitled each year to
10 holidays, 10 vacation days and 10 personal days, during which
time the Employee's compensation shall be paid in full.
9. Disability. If the Employee is unable to perform his
services by reason of illness or incapacity, the Company will
continue to pay Employee's compensation (until such time as
Employee begins to receive payments under the disability
insurance maintained by Company as to Employee), at which time
compensation from the Company shall cease; provided, however,
that compensation shall not be paid by the Company beyond the
existing term of this Agreement.
10. Termination.
(i) Without Cause. Without cause, the Company may
terminate this Agreement at any time upon 30 days' written notice
to the Employee. In such event, the Employee shall continue to
receive Regular Compensation throughout the original or any one
year renewal term as more fully explained in Section 2 of this
Agreement, which shall not be less than two (2) years of such
Regular Compensation, unless taking place during the original
term of this agreement in which case it shall be three (3) years
of such Regular Compensation, but shall be entitled to Profit
Bonus only to the extent Fully Accrued on the date of
termination.
(ii) With Cause. The Company may terminate the
employment of the Employee hereunder immediately upon written
notice thereof in the event of material fraud or dishonesty by
the Employee in connection with his employment or if the Employee
is convicted of a felony. In such event, the Company shall pay
the Employee only such compensation as shall have Fully Accrued
on the date of termination.
(iii) Termination by Employee. The Employee may
terminate this Agreement at any time upon 30 days' prior written
notice to the Company. In such event, the Employee shall be
entitled to receive his or her compensation only to the extent
Fully Accrued on the date of termination.
11. Death During Employment. If the Employee dies during
the term of this Employment Agreement, the Company shall pay to
the estate of the Employee the compensation which would be Fully
Accrued as of the end of the calendar month in which his death
occurs , and Employee's surviving spouse shall continue to
receive such Regular Compensation throughout the original term or
any one year renewal term as more fully explained in Section 2 of
this Agreement, which shall not be less than two (2) years of
such Regular Compensation ("Extended Compensation"), unless
taking place during the original term of this agreement in which
case it shall be three (3) years of such Regular Compensation,
but shall be entitled to Profit Bonus only to the extent Fully
Accrued on the date of death. Under no circumstances will
Extended Compensation be paid beyond December 31, 2000.
12. Non-Disclosure. Employee hereby agrees with Company
that Employee will keep confidential any and all confidential
information of the Company, including Company's know-how, trade
secrets, customer lists, and other information, data and
proprietary information relating to Company's business (herein
called "Proprietary Information") and will not at any time,
without prior written consent of Company, disclose or make known
or allow to be disclosed or made known such Proprietary
Information to any person, firm, corporation, or other business
entity other than Company and persons or entities designed by
Company. This provision shall survive the termination of this
Agreement.
13. Notices. Any notice required or permitted to be
given under this Agreement shall be sufficient if in writing, and
sent by certified mail or hand delivery to the Employee's
residence in the Employee, or to the principal office in case of
the Company.
14,. Waiver of Breach. The waiving by the Company of a
breach of any provision in this Agreement by the Employee shall
not operate or be construed as a waiver of any subsequent breach
by the Employee.
15. Assignment. The rights and obligation of the Company
under this Agreement shall inure to and be binding upon the
successors and assigns of the Company.
16. Entire Agreement. This instrument contains the entire
agreement of the parties. It may not be changed or altered
except by an Agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension
or discharge is sought.
17. Attorney's Fees. In the event of any litigation or
arbitration proceeding arising out of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees
and expenses from the losing party, whether incurred before suit
is brought, before or at trial or the arbitration proceeding, on
appeal or in insolvency proceedings.
18. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Florida, exclusive of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Worldwide Applied
Telecom Technology,
Inc. ("Company")
Employee
Richard E. Hanik,
Secretary
Ronald L. Weindruch
<PAGE>
SYNAPTX WORLDWIDE, INC.
(f/k/a WORLDWIDE APPLIED TELECOM TECHNOLOGY, INC. )
AMENDMENT TO EMPLOYMENT AGREEMENT
DATED: JUNE 26, 1997
BY THIS AGREEMENT, made this 26th day of June, 1997, SYNAPTX
WORLDWIDE, INC. (f/k/a WORLDWIDE APPLIED TELECOM TECHNOLOGY,
INC., a Delaware corporation) a Utah corporation ("Company") and
Ronald L. Weindruch ("Employee"), in consideration of mutual
benefits set forth herein, hereby agree to amend the Employment
Agreement, dated July 1, 1996 ("Employment Agreement"), as
follows:
Section 2 of the Employment Agreement is amended to read, as
follows:
2. Term. Subject to the provisions for the termination as
hereafter provided, the term of this Agreement shall begin on the
date hereof and shall terminate on August 31, 1998. Thereafter,
this Agreement shall be automatically renewed for successive one-year
terms unless either party notifies the other of non-renewal
at least 30 days prior to the expiration of the then current
term. The compensation and other benefits provided for herein
shall be subject to annual review and adjustment where
appropriate by the Company's Board of Directors.
Section 3 (i) of the Employment Agreement is amended to read as
follows:
(i) $108,000 per year payable in equal installments in
accordance with the Company's normal payroll policies through the
month ended August 31, 1997 and $120,000 per year payable in
equal installments in accordance with the Company's normal
payroll policies starting September 1, 1997 (called "Regular
Compensation");
Section 3 (ii) of the Employment Agreement is amended to read as
follows:
(ii) When Company's consolidated run rate sales for three
(3) consecutive months exceeds an annual amount of $15,000,000,
then such Regular Compensation will be increased to $144,000 per
year payable in equal installments in accordance with the
Company's normal payroll policies;
Section 3 (iv) of the Employment Agreement is amended to read as
follows:
(iv) In addition to the above arrangements relative to
Employee's compensation, it is understood between the parties
that Employee also provides services to a subsidiary of the
Company, Synaptx Access Inc. (f/k/a North American Telecom Cable
Representatives, Inc.), under a contractual arrangement as a
third-party commission representative and provider of consulting
services. These services are provided as an independent
representative and not as an employee of Company or any of its
subsidiaries or affiliates.
Add a new Section 3 (v) to the Employment Agreement, as follows:
(v) Incentive stock options to acquire thirty thousand
(30,000) shares of the Synaptx Worldwide, Inc. common stock will
be issued as of September 1, 1997 of which 1/3 are vested at the
date of issuance, 1/3 more vest on September 1, 1998 and the
final 1/3 vest September 1, 1999 with an option price based on
the closing price of the Synaptx Worldwide, Inc. common stock on
September 1, 1997 and a term of five (5) years to exercise the
stock options from the date of issuance.
Section 6 of the Employment Agreement is amended to read as
follows:
6. Expenses. The Employee is authorized to incur
reasonable expenses for promoting the business of the Company,
including expenses for travel and similar items. The Company
will reimburse the Employee for all such expenses upon
presentation by the Employee, from time to time, of an itemized
account of such expenditures in accordance with the Company's
expense reimbursement policies. Additionally, the Company's
existing practice of reimbursing the full cost of all cellular
phone bills associated with the main cellular phone used for
business will be continued for Employee. Also, when Company's
consolidated run rate of sales for three (3) consecutive months
exceeds an annualized amount, as defined below ("Annualized Run
Rate"), Employee will be provided with, the following:
(a.) membership in a country club to promote the
business of the Company and its subsidiaries when the
Annualized Run Rate exceeds $12,000,000, and
(b.) a full size company car ("Company Car") for which
all costs in operating such Company Car, including
insurance, repairs, maintenance, gasoline, any taxes
thereon, and other necessary operating costs when the
Annualized Run Rate exceeds $10,000,000.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment to the Employment Agreement as of the day and year
first above written.
Synaptx Worldwide, Inc.
(f/k/a Worldwide
Applied Telecom
Technology, Inc.)
("Company")
Employee
Richard E. Hanik,
Secretary
Ronald L. Weindruch
MAXWELL PARTNERS , INC.
EMPLOYMENT AGREEMENT
BY THIS AGREEMENT, made this 19th day of July, 1996, MAXWELL
PARTNERS, INC., an Illinois corporation ("Company") and D. Mike
Maxwell ("Employee"), in consideration of mutual benefits set
forth herein, hereby agree as follows:
1. Employment. The Company hereby employs the Employee
and the Employee hereby accepts employment upon the terms and
conditions hereinafter set forth.
2. Term. Subject to the provisions for the termination as
hereafter provided, the term of this Agreement shall begin on the
date hereof and shall terminate on December 31, 1997.
Thereafter, this Agreement shall be automatically renewed for
successive one-year terms unless either party notifies the other
of non-renewal at least 30 days prior to the expiration of the
then current term. The compensation and other benefits provided
for herein shall be subject to annual review and adjustment where
appropriate by the Company's Board of Directors.
3. Compensation. For all services rendered by the
Employee under this Agreement, the Company shall compensate the
Employee by paying the Employee the sum of the following:
(i) $135,000 per year payable in equal installments in
accordance with the Company's normal payroll policies (called
"Regular Compensation");
(ii) Such bonus, if any, for each calendar quarter as is
specified by the Board of Directors of Company for each quarter
during which Employee's employment continues (called "Profit
Bonus"), based on the Company's performance relative to budget
for the quarter, together with any other factors the Board of
Directors deems appropriate, such bonus normally not to exceed
thity-three percent (33%) of the Employee's Regular Compensation
for the applicable quarter.
In the event of certain early terminations of this Agreement
as provided hereafter, compensation payable to the Employee shall
(unless otherwise stated) be limited to amounts Fully Accrued.
The term "Fully Accrued" means (a) as to Regular Compensation,
the percentage of a year's Regular Compensation as shall equal
the percentage of the year which has expired on the termination
date, and (b) as to Profit Bonus, only that Profit Bonus which
has been awarded by the Company's Board of Directors.
4. Duties. The Employee is engaged as President and Chief
Operating Officer. The precise services of the Employee may be
extended or curtailed, from time to time, at the direction of the
Company. The Employee also shall perform such corporate
development services for the Company's parent corporation and
affiliates as the Company's Board of Directors may specify from
time to time, without additional compensation.
5. Extent of Services. The Employee shall devote the
Employee's entire time, attention and energy to the business of
the Company, and shall not, during the term of this Agreement,
engage in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing the
Employee from investing Employee's assets in such form or manner
as will not require services on the part of Employee in the
operation of the affairs of the Company to which investments are
made.
6. Expenses. The Employee is authorized to incur
reasonable expenses for promoting the business of the Company,
including expenses for travel and similar items. The Company
will reimburse the Employee for all such expenses upon
presentation by the Employee, from time to time, of an itemized
account of such expenditures in accordance with the Company's
expense reimbursement policies. Additionally, the Company's
existing practice of reimbursing the full cost of all cellular
phone bills associated with the main cellular phone used for
business will be continued for Employee. Also, Employee will be
provided with a full size company car ("Company Car") for which
all costs in operating such Company Car, including insurance,
repairs, maintenance, gasoline, any taxes thereon, and other
necessary operating costs, will continue to be borne by Maxwell
after closing.
7. Fringe Benefits. The Employee shall enjoy the same
fringe benefits (other than stock options) as provided generally
to other senior executives of Company, including health, life and
disability insurance. The Company will maintain such health,
life and disability insurance with benefits at a minimum
consistent with the existing Company health, life and disability
insurance. Furthermore, the Company will continue offering the
benefit of a deferred compensation arrangement, commonly referred
to as a "401(K) Plan" whose contributions and benefits structure
will at a minimum be consistent with the existing Maxwell
Partners, Inc. Retirement Savings Plan.
8. Vacation. The Employee shall be entitled each year to
10 holidays, 10 vacation days and 10 personal days, during which
time the Employee's compensation shall be paid in full.
9. Disability. If the Employee is unable to perform his
services by reason of illness or incapacity, the Company will
continue to pay Employee's compensation (until such time as
Employee begins to receive payments under the disability
insurance maintained by Company as to Employee), at which time
compensation from the Company shall cease; provided, however,
that compensation shall not be paid by the Company beyond the
existing term of this Agreement.
10. Termination.
(i) Without Cause. Without cause, the Company may
terminate this Agreement at any time upon 30 days' written notice
to the Employee. In such event, the Employee shall continue to
receive Regular Compensation throughout the original or any one
year renewal term as more fully explained in Section 2 of this
Agreement, which shall not be less than two (2) years of such
Regular Compensation, unless taking place during the original
term of this agreement in which case it shall be three (3) years
of such Regular Compensation, but shall be entitled to Profit
Bonus only to the extent Fully Accrued on the date of
termination.
(ii) With Cause. The Company may terminate the
employment of the Employee hereunder immediately upon written
notice thereof in the event of material fraud or dishonesty by
the Employee in connection with his employment or if the Employee
is convicted of a felony. In such event, the Company shall pay
the Employee only such compensation as shall have Fully Accrued
on the date of termination.
(iii) Termination by Employee. The Employee may
terminate this Agreement at any time upon 30 days' prior written
notice to the Company. In such event, the Employee shall be
entitled to receive his or her compensation only to the extent
Fully Accrued on the date of termination.
<PAGE>
11. Death During Employment. If the Employee dies during
the term of this Employment Agreement, the Company shall pay to
the estate of the Employee the compensation which would be Fully
Accrued as of the end of the calendar month in which his death
occurs , and Employee's surviving spouse shall continue to
receive such Regular Compensation throughout the original term or
any one year renewal term as more fully explained in Section 2 of
this Agreement, which shall not be less than two (2) years of
such Regular Compensation ("Extended Compensation"), unless
taking place during the original term of this agreement in which
case it shall be three (3) years of such Regular Compensation,
but shall be entitled to Profit Bonus only to the extent Fully
Accrued on the date of death. Under no circumstances will
Extended Compensation be paid beyond December 31, 2000.
12. Non-Disclosure.
Employee hereby agrees with Company that Employee will keep
confidential any and all confidential information of the Company,
including Company's know-how, trade secrets, customer lists, and
other information, data and proprietary information relating to
Company's business (herein called "Proprietary Information") and
will not at any time, without prior written consent of Company,
disclose or make known or allow to be disclosed or made known
such Proprietary Information to any person, firm, corporation, or
other business entity other than Company and persons or entities
designed by the Company. This provision shall survive the
termination of this Agreement.
13. Notices. Any notice required or permitted to be
given under this Agreement shall be sufficient if in writing, and
sent by certified mail or hand delivery to the Employee's
residence in the Employee, or to the principal office in case of
the Company.
14,. Waiver of Breach. The waiving by the Company of a
breach of any provision in this Agreement by the Employee shall
not operate or be construed as a waiver of any subsequent breach
by the Employee.
15. Assignment. The rights and obligation of the Company
under this Agreement shall inure to and be binding upon the
successors and assigns of the Company.
16. Entire Agreement. This instrument contains the entire
agreement of the parties. It may not be changed or altered
except by an Agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension
or discharge is sought.
17. Attorney's Fees. In the event of any litigation or
arbitration proceeding arising out of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees
and expenses from the losing party, whether incurred before suit
is brought, before or at trial or the arbitration proceeding, on
appeal or in insolvency proceedings.
18. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Illinois, exclusive of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Maxwell Partners, Inc.
("Company")
Employee
Sharon K. Maxwell,
Secretary and Vice
President
D. Mike Maxwell
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
The following are subsidiaries of Synaptx Worldwide, Inc.:
1. Synaptx Access, Inc., f.k.a. North American Telco/Cable
Representatives, Inc., a Florida corporation, 100% owned by
Synaptx Worldwide, Inc.
2. Synaptx Impulse, Inc., f.k.a. Maxwell Partners, Inc.,
an Illinois corporation, 100% owned by Synaptx Worldwide,
Inc.
3. ORAYCOM, Inc., a Texas corporation 100% owned by
Synaptx Worldwide, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE SYNAPTX WORLDWIDE,
INC. FINANCIAL STATEMENTS FOR THE PERIODS ENDED MAY
31, 1997 AND AUGUST 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> AUG-31-1996 AUG-31-1997
<PERIOD-END> AUG-31-1996 MAY-31-1997
<CASH> 0 280
<SECURITIES> 0 0
<RECEIVABLES> 36,792 733,251
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 36,792 776,758
<PP&E> 13,100 214,105
<DEPRECIATION> 1,600 47,865
<TOTAL-ASSETS> 113,292 2,177,207
<CURRENT-LIABILITIES> 148,746 1,187,434
<BONDS> 0 0
0 0
0 0
<COMMON> 1,936 5,047
<OTHER-SE> 43,664 1,536,390
<TOTAL-LIABILITY-AND-EQUITY> 113,292 2,177,207
<SALES> 145,653 2,468,728
<TOTAL-REVENUES> 145,653 2,468,728
<CGS> 126,561 1,704,752
<TOTAL-COSTS> 126,561 1,704,752
<OTHER-EXPENSES> 91,633 1,227,087
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 35,343
<INCOME-PRETAX> (72,541) (463,111)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (72,541) (463,111)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (72,541) (463,111)
<EPS-PRIMARY> (.04) (.13)
<EPS-DILUTED> (.04) (.13)
</TABLE>
