<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 31, 2000
COMMISSION FILE NO. 027619
iBIZ TECHNOLOGY CORP.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 86-0933890
- --------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1919 West Lone Cactus, Phoenix, Arizona 85021
- --------------------------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (623) 492-9200
---------------------
</TABLE>
<TABLE>
<CAPTION>
Class Outstanding at March 14, 2000
----- -----------------------------
<S> <C>
Common stock, $0.01 par value 28,933,861
</TABLE>
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. - FINANCIAL INFORMATION................................................................................ 1
ITEM 1. FINANCIAL STATEMENTS (REVIEWED)
CONSOLIDATED BALANCE SHEETS ............................................................... 2
CONSOLIDATED STATEMENT OF OPERATIONS....................................................... 4
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT................................. 5
CONSOLIDATED STATEMENT OF CASH FLOWS....................................................... 7
NOTES TO FINANCIAL STATEMENTS.............................................................. 9
COMPARISON CONSOLIDATED BALANCE SHEETS............................................................ 23
COMPARISON CONSOLIDATED STATEMENTS OF OPERATIONS.................................................. 25
COMPARISON CONSOLIDATED STATEMENTS OF CASH FLOWS.................................................. 26
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..28
PART II. - OTHER INFORMATION................................................................................... 31
ITEM 1. LEGAL PROCEEDINGS................................................................................... 31
ITEM 2. CHANGES IN SECURITIES .............................................................................. 31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................................................... 32
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................. 33
ITEM 5. OTHER INFORMATION................................................................................... 33
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................................... 33
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL INFORMATION
The financial statements for the three month period ended
January 31, 2000 have been reviewed, but not audited by iBIZ's independent
auditors, Moffitt & Company, P.C. As required by the SEC, this Form 10-QSB
contains comparisons to financial statements for the three month period ended
January 31, 1999. The financial statements for the three month period ended
January 31, 1999 were prepared internally by management of the Company, and are
unaudited and unreviewed.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To The Board of Directors and Stockholders
IBIZ Technology Corp. and Consolidated Subsidiary
Phoenix, Arizona
We have reviewed the accompanying balance sheet of IBIZ Technology Corp. and
Consolidated Subsidiary as of January 31, 2000, and the related statements of
operations, changes in stockholders' deficit, retained earnings and cash flows
for the three months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of IBIZ Technology Corp. and Consolidated
Subsidiary.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in Note 22, certain conditions indicate that the company may be
unable to continue as a going concern. The accompanying financial statements do
not include any adjustments to the financial statements that might be necessary
should the company be unable to continue as a going concern.
MOFFITT & COMPANY, P. C.
SCOTTSDALE, ARIZONA
March 6, 2000
1
<PAGE> 4
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JANUARY 31, 2000
(UNAUDITED)
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $450,757
Accounts receivable, trade 382,637
Inventories 238,059
Prepaid expenses 28,246
--------
TOTAL CURRENT ASSETS $1,099,699
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 185,182
OTHER ASSETS
Note receivable, related party 412,162
Deposits 16,412
Customer list, net of accumulated amortization 11,305
--------
TOTAL OTHER ASSETS 439,879
----------
TOTAL ASSETS $1,724,760
==========
</TABLE>
2
<PAGE> 5
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 521,941
Customer deposits 30,014
Notes payable, current 6,540
Accrued liabilities 131,890
Sales and payroll taxes payable 117,606
Corporation income taxes payable 19,078
Deferred income 86,298
Convertible debentures payable 200,000
-----------
TOTAL CURRENT LIABILITIES $ 1,113,367
LONG - TERM LIABILITIES
Convertible debentures payable 1,400,000
Notes payable 17,005
-----------
TOTAL LONG - TERM LIABILITIES 1,417,005
STOCKHOLDERS' DEFICIT
Common stock
Authorized - 100,000,000 shares, par
value $.001 per shares
Issued and outstanding - 27,021,380 shares 27,021
Paid in capital in excess of par value of stock 1,443,650
Advance on stock subscription 75,000
Retained earnings (deficit) (2,351,283)
-----------
TOTAL STOCKHOLDERS' DEFICIT (805,612)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 1,724,760
===========
</TABLE>
3
<PAGE> 6
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SALES $ 628,853
COST OF SALES 550,795
------------
GROSS PROFIT 78,058
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (773,095)
------------
(LOSS) BEFORE OTHER INCOME (695,037)
OTHER INCOME (EXPENSE)
Interest income $ 5,398
Interest expense (20,481)
--------
TOTAL OTHER INCOME, NET (15,083)
------------
(LOSS) BEFORE INCOME TAXES (710,120)
INCOME TAXES 0
------------
NET (LOSS) $ (710,120)
============
NET (LOSS) PER COMMON SHARE
Basic and Diluted $ (0.03)
============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic and diluted 26,721,059
============
</TABLE>
4
<PAGE> 7
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
SHARES AMOUNT
---------------------------
<S> <C> <C>
BALANCE, NOVEMBER 1, 1999 26,370,418 $26,370
CONVERSION OF DEBENTURES TO
COMMON STOCK 300,962 301
ISSUANCE OF COMMON STOCK
FOR CASH
AT .50(CENT)PER SHARE 100,000 100
AT $1.10 PER SHARE 250,000 250
FEES AND COSTS FOR ISSUANCE
OF STOCK 0 0
NET (LOSS) FOR THE THREE MONTHS
ENDED JANUARY 31, 2000 0 0
---------- -------
BALANCE, JANUARY 31, 2000 27,021,380 $27,021
========== =======
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PAID IN
CAPITAL IN
EXCESS OF ADVANCES RETAINED
PAR VALUE ON STOCK EARNINGS
OF STOCK SUBSCRIPTIONS (DEFICIT)
----------- ------------- ------------
<S> <C> <C> <C>
$ 1,106,266 $75,000 $(1,641,163)
200,734 0 0
49,900 0 0
274,750 0 0
(188,000) 0 0
0 0 (710,120)
----------- ------- -----------
$ 1,443,650 $75,000 $(2,351,283)
=========== ======= ===========
</TABLE>
6
<PAGE> 9
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(710,120)
Adjustments to reconcile net (loss) to
net cash (used) by operating activities
Depreciation 10,774
Interest on debentures converted to common stock 1,036
Changes in operating assets and liabilities
Accounts receivable, trade (170,337)
Inventories 30,028
Prepaid expenses 10,738
Deposits 347
Accounts payable (241,024)
Customer deposits (85,394)
Accrued liabilities and taxes 12,523
Deferred income 31,336
---------
NET CASH FLOWS (USED)
BY OPERATING ACTIVITIES $(1,110,093)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (70,615)
Loan to related party (55,352)
Purchase of customer list (11,900)
---------
NET CASH FLOWS (USED) BY
INVESTING ACTIVITIES (137,867)
</TABLE>
7
<PAGE> 10
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock $ 137,000
Proceeds from issuance of convertible debentures 1,600,000
Decrease in notes payable (63,626)
-----------
NET CASH FLOWS PROVIDED
BY FINANCING ACTIVITIES $1,673,374
----------
NET INCREASE IN CASH 425,414
CASH BALANCE, NOVEMBER 1, 1999 25,343
----------
CASH BALANCE, JANUARY 31, 2000 $ 450,757
==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during year for:
Interest $ 3,787
==========
Taxes $ 0
==========
NON CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of common stock for convertible debentures $ 200,000
==========
</TABLE>
8
<PAGE> 11
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IBIZ Technology Corp. was organized on April 6, 1994, under the
laws of the State of Florida. The company is a holding company
and owns 100% of Invnsys Technology Corporation.
Invnsys Technology Corporation is in the business of selling
retail and wholesale, financial, computing and communication
equipment and offering network integration services, digital
subscriber line high speed internet connection services and
business-to-business software sales. They also provide repair
services and sell maintenance contracts. The corporation
currently operates a service center in Phoenix, Arizona.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
IBIZ Technology Corp. and its wholly owned subsidiary, Invnsys
Technology Corporation.
All material inter-company accounts and transactions have been
eliminated.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Uncollectible accounts receivable are written off at the time
management specifically determines them to be uncollectible. In
addition, the allowance for doubtful accounts is provided at an
amount determined by management.
INVENTORIES
Inventories are stated at the lower of cost (determined
principally by first-in, first-out method) or cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are charged to the asset accounts while
replacement, maintenance and repairs, which do not improve or
extend the lives of the respective assets, are expensed. At the
time property and equipment are retired or otherwise disposed
of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts. Gains or losses from
retirements or sales are credited or charged to income.
The company depreciates its property and equipment for financial
reporting purposes using the straight-line method based upon the
following useful lives of the assets:
9
<PAGE> 12
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
<TABLE>
<S> <C>
Tooling 3 Years
Machinery and equipment 5-10 Years
Office furniture and equipment 5-10 Years
Vehicles 5 Years
Leasehold improvements 5 Years
Location equipment 5 years
</TABLE>
CUSTOMER LISTS
The customer list is recorded at cost and is being amortized on
a straight-line basis over five years.
ACCOUNTING ESTIMATES
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were used.
REVENUE RECOGNITION
The company recognizes revenue from product sales when the goods
are shipped and title passes to customers.
SALES OF MAINTENANCE AGREEMENTS
The revenue received for the maintenance agreements is being
reported evenly over the life of the contracts. Such unearned
portion is recorded as deferred income.
INCOME TAXES
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and
liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in
the financial statements at currently enacted income tax rates
applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed
in FASB Statement No., 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets
and liabilities are adjusted through the provision for income
taxes.
10
<PAGE> 13
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET EARNINGS PER SHARE
The company adopted Statement of Financial Accounting Standards
No. 128 that requires the reporting of both basic and diluted
earnings per share. Basic earnings per share is computed by
dividing net income available to common shareowners by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common
stock. In accordance with FASB 128, potentially dilutive
warrants and options that would have an anti-dilutive effect on
net loss per share are excluded.
RISKS AND UNCERTAINTIES
The company is in the computer and computer technology industry.
The company's products are subject to rapid obsolescence and
management must authorize funds for research and development
costs in order to stay competitive.
UNAUDITED FINANCIAL INFORMATION
The financial statements are unaudited. In management's opinion,
such information includes all normal recurring entries necessary
to make the financial information not misleading.
NOTE 2 DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The company has financial instruments, none of which are held
for trading purposes. The company estimates that the fair value
of all financial instruments at January 31, 2000, as defined in
FASB 107, does not differ materially from the aggregate carrying
values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been
determined by the company using available market information and
appropriate valuation methodologies. Considerable judgement is
required in interpreting market data to develop the estimates of
fair value, and accordingly, the estimates are not necessarily
indicative of the amounts that the company could realize in a
current market exchange.
NOTE 3 ACCOUNTS RECEIVABLE
A summary of accounts receivable and allowance for doubtful
accounts is as follows:
<TABLE>
<S> <C>
Accounts receivable $407,637
Allowance for doubtful accounts 25,000
-------
$382,637
========
</TABLE>
11
<PAGE> 14
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 4 INVENTORIES
Inventories are comprised of the following:
<TABLE>
<S> <C>
Computer and components:
Finished products $185,497
Demonstration and loaner units 6,003
Depot units 13,521
Office 31,467
Evaluation units 1,252
Parts 319
--------
Total inventories $238,059
========
</TABLE>
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment and accumulated depreciation consists of:
<TABLE>
<S> <C>
Tooling $ 68,100
Machinery and equipment 44,628
Software 22,305
Office furniture and equipment 108,986
Vehicles 39,141
Location equipment 41,919
Leasehold improvements 14,467
--------
339,546
Less accumulated depreciation 154,364
--------
Total property and equipment $185,182
========
</TABLE>
The depreciation expenses for the three months ended January
31, 2000 is $ 10,179.
NOTE 6 CUSTOMER LIST
The customer list and accumulated amortization consists of:
<TABLE>
<S> <C>
Cost $11,900
Less accumulated amortization 595
-------
Total customer list $11,305
=======
</TABLE>
The amortization for the three months ended January 31, 2000 is
$595.
12
<PAGE> 15
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 7 NOTE RECEIVABLE, RELATED PARTY
<TABLE>
<S> <C>
The related note is secured by 500,000 shares of common stock in
the company, payable on demand and accrues interest at 6%. At
January 31, 2000, management believed the notes would not be
collected within the current operating cycle and classified the
asset as a long-term asset. $412,162
========
</TABLE>
NOTE 8 CUSTOMER DEPOSITS
It is the company's policy to obtain a portion of the sales
price when orders are received. These funds are recorded as
customer deposits and are applied to the customer invoices when
the merchandise is shipped.
NOTE 9 INCOME TAXES
<TABLE>
<S> <C>
(Loss) from continuing operations
before income taxes $(710,120)
---------
The provision for income taxes is estimated as follows:
Currently payable $ 0
---------
Deferred $ 136,830
---------
A reconciliation of the provision for income taxes compared with
the amounts at the U.S. Federal Statutory rate was as follows:
Tax (refund) at U.S. Federal Statutory
income tax rates $(140,886)
Less change in valuation allowance 140,886
---------
Net tax $ 0
=========
Deferred income tax assets and liabilities reflect the impact of
temporary differences between amounts of assets and
liabilities for financial reporting purposes and the basis of
such assets and liabilities as measured by tax
laws. The net deferred tax assets is: $ 0
---------
Temporary differences and carry forwards that gave rise to
deferred tax assets and liabilities included the following:
</TABLE>
13
<PAGE> 16
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 9 INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DEFERRED TAX
------------
ASSETS LIABILITIES
------ -----------
<S> <C> <C>
Net operating loss $ 451,000 $ 0
Accrued expenses and miscellaneous 8,100 0
Tax credit carryforward 38,424 0
Depreciation 0 6,199
--------- -------
Subtotals 497,524 6,199
Valuation allowance (497,524) (6,199)
--------- -------
Total deferred taxes $ 0 $ 0
========= =======
</TABLE>
As discussed in Note 22, there is substantial doubt about the
company's ability to continue as a going concern. Consequently,
the company must maintain a 100% valuation allowance for the
deferred taxes as there is doubt that the company will generate
profits which will be absorbed by the tax differences.
A reconciliation of the valuation allowance is as follows:
<TABLE>
<S> <C>
Balance, November 1, 1999 $356,638
Addition to allowance for three months ended
January 31, 2000 140,886
--------
Balance, January 31, 2000 $497,524
========
</TABLE>
NOTE 10 TAX CARRYFORWARD
The company has the following tax carryforwards at January 31,
2000:
<TABLE>
<CAPTION>
EXPIRATION
YEAR AMOUNT DATE
---- ------ ----
<S> <C> <C>
Net operating loss
October 31, 1995 $ 2,500 October 31, 2010
October 31, 1996 24,028 October 31, 2011
October 31, 1997 192,370 October 31, 2012
October 31, 1998 71,681 October 31, 2013
October 31, 1999 991,162 October 31, 2019
Capital loss
October 31, 1997 25,600 October 31, 2002
Contribution
October 31, 1997 545 October 31, 2002
October 31, 1999 2,081 October 31, 2004
Research tax credits 38,424
</TABLE>
14
<PAGE> 17
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 11 NOTES PAYABLE
<TABLE>
<S> <C>
Note payable to Community First National Bank due in monthly
payments of interest of approximately $3,100. Interest is
computed at national prime as stated in the Wall Street Journal
plus 3 percent. The principal amount is due July 31, 2000. This
note is secured by accounts receivable, general intangibles and
all equipment and leasehold improvements. The shareholder has
personally guaranteed the loan and the bank is the beneficiary
of an insurance policy on the life of the shareholder. $ 0
Note payable to Community First National Bank due in monthly
payments of principal and interest of $545 with interest at 7
percent until March 7, 2004. The note is secured by
an automobile. 23,545
-------
23,545
Less: current portion 6,540
-------
Net long-term debt $17,005
=======
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ended January 31,
<S> <C>
2001 $ 6,540
2002 6,540
2003 3,925
--------
$17,005
=======
</TABLE>
NOTE 12 COMMON STOCK PURCHASE WARRANTS
The company has issued the following common stock purchase
warrants:
<TABLE>
<CAPTION>
NUMBER EXERCISE
DATE OF SHARES TERM PRICE
---- --------- ---- -----
<S> <C> <C> <C>
May 7, 1999 100,000 3 years $0.75
May 13, 1999 100,000 3 years $1.00
May 7, 1999 300,000 3 years $0.75
May 7, 1999 300,000 10 years $0.75
May 13, 1999 100,000 10 years $1.00
</TABLE>
15
<PAGE> 18
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 13 CONVERTIBLE DEBENTURES
<TABLE>
<CAPTION>
CURRENT
$200,000 DEBENTURE TOTAL PORTION
------------------ ----- -------
<S> <C> <C>
On June 30, 1999, the company issued $200,000 of $ 200,000 $ 200,000
convertible debentures. The debentures bear interest
at 8%, are unsecured and are due on June 21, 2000.
On February 24, 2000, the debentures were converted
into 300,00 shares of common stock
$1,000,000 DEBENTURE
In December 1999, the company issued an additional 1,000,000 0
$1,000,000 of 7% convertible debentures under the
following terms and conditions:
1. Due date - December 28, 2004.
2. Interest only on May 1 and December 1 of each
year commencing April 1, 2000, payable in cash
or stock.
3. Warrants to purchase 200,000 shares of common stock at
$0.94 per share.
4. Conversion terms - The debenture holder shall have the
right to convert all or a portion of the outstanding
principal amount of this debenture plus any accrued
interest into such number of shares of common stock as
shall equal the quotient obtained by dividing the
principal amount of this debenture by the applicable
conversion price.
5. Conversion price - Lesser of (i) $0.94 (fixed price) or
(ii) the product obtained by multiplying the average
closing price by .80.
6. Average closing price - The debenture holder shall have
the election to choose any three trading days out of
twenty trading days immediately preceding the date on
which the holder gives the company a written notice of the
holders' election to convert outstanding principal of this
debenture.
7. Redemption by company - If there is a change in control of
the company, the holder of the debenture can request that
the debenture be redeemed at a price equal to 125% of the
aggregate principal and accrued interest outstanding under
this debenture.
8. The debentures are unsecured.
</TABLE>
16
<PAGE> 19
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 13 CONVERTIBLE DEBENTURES (CONTINUED)
<TABLE>
<CAPTION>
CURRENT
$1,000,000 DEBENTURE (CONTINUED) TOTAL PORTION
-------------------------------- ----- -------
<S> <C> <C>
9. Any further issuance of common stock or debentures must be
approved by debenture holders.
10. Debenture holders have a eighteen month right of first
refusal on future disposition of stock by the company.
11. Restriction on payment of dividends, retirement of stock
or issuance of new securities.
12. The company paid a $100,000 brokerage fee for obtaining
the $1,000,000 debentures.
13. The debenture agreement provides monetary penalties in the
event the company delays the issuance of the conversion
stock.
On March 2, 2000, the company converted the $1,000,000
debentures into 1,292,481 shares of common stock.
$600,000 DEBENTURE
In November 1999, the company issued $600,000 of 7% $ 400,000 $ 0
convertible debentures under the following amended
terms and conditions:
1. Due date - November 9, 2004.
2. Interest only on April 1 and November 1 of each
year commencing January 1, 2000.
3. Warrants to purchase 100,000 shares of common
stock at $ 0.94 per share.
4. Conversion terms - The debenture holder shall have the
right to convert all or a portion of the outstanding
principal amount of this debenture plus any accrued
interest into such number of shares of common stock as
shall equal the quotient obtained by dividing the
principal amount of this debenture by the applicable
conversion price.
5. Conversion price - Lesser of (i) $ 0.675 (fixed price) or
(ii) the product obtained by multiplying the average
closing price by .80.
6. Average closing price - The debenture holder shall have
the election to choose any three trading days out of
twenty trading days immediately preceding the date on
which the holder gives the company a written notice of the
holders' election to convert outstanding principal of this
debenture.
</TABLE>
17
<PAGE> 20
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 13 CONVERTIBLE DEBENTURES (CONTINUED)
<TABLE>
<CAPTION>
CURRENT
$600,000 DEBENTURE (CONTINUED) TOTAL PORTION
------------------------------ ----- -------
<S> <C> <C>
7. Redemption by company - If there is a change in control of
the company, the holder of the debenture can request that
the debenture be redeemed at a price equal to 125% of the
aggregate principal and accrued interest outstanding under
this debenture.
8. The debentures are unsecured.
9. Any further issuance of common stock or debentures must be
approved by debenture holders.
10. Debenture holders have a eighteen month right of first
refusal on future disposition of stock by the company.
11. Restriction on payment of dividends, retirement of stock
or issuance of new securities.
On November 9, 1999, the company converted $200,000 of
debentures into 300,962 shares of common stock.
Total $1,600,000 $ 200,000
========== ===========
</TABLE>
NOTE 14 NET (LOSS) PER COMMON SHARE
Computation of net (loss) per common share
<TABLE>
<S> <C>
Net (loss) to common stockholders $ 710,120
--------------------------------------------------------------------- -----------
Weighted average number of common shares outstanding
26,721,059
Net (loss) per share ($0.03)
</TABLE>
The weighted average shares from converting stock options,
warrants and debentures are not presented as the amounts are
anti-dilutive.
NOTE 15 REAL ESTATE LEASE
On June 1, 1999, the company leased a new facility from a
related entity. The lease commenced on July 1, 1999, requires
initial annual rentals of $153,600 (with annual increases) plus
taxes and operating costs and expires on December 31, 2024. The
company has also guaranteed the mortgage on the premises.
Future minimum lease payments, (based upon fiscal years ending
October 31) excluding taxes and expenses, are as follows:
18
<PAGE> 21
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 15 REAL ESTATE LEASE (CONTINUED)
<TABLE>
<S> <C>
October 31, 2000 $ 156,160
October 31, 2001 163,968
October 31, 2002 172,168
October 31, 2003 180,780
October 31, 2004 189,820
November 1, 2004 - December 31, 2024 6,676,000
</TABLE>
Rent expense for the three months ended January 31, 2000 is
$38,400.
NOTE 16 ADVERTISING
The company expenses all advertising as incurred. For the three
months ended January 31, 2000, the company charged to operations
$9,110 in advertising costs.
NOTE 17 INTEREST
The company incurred interest expenses for the three months
ended January 31, 2000 of $20,481.
NOTE 18 WARRANTY RESERVE
The company established a warranty reserve of $35,568 to cover
any potential warranty costs on computer equipment that are not
covered by the computer manufacturer's warranty.
NOTE 19 ECONOMIC DEPENDENCY
The company purchases the majority of its computer equipment
from three suppliers.
NOTE 20 OFFICERS' COMPENSATION
The company has four employment agreements with the following
officers:
<TABLE>
<CAPTION>
PRESIDENT VICE
AND CHIEF VICE PRESIDENT CHIEF
EXECUTIVE PRESIDENT/ OF OPERATING
OFFICER COMPTROLLER OPERATIONS OFFICER
------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Annual compensation $200,000 $88,000 $88,000 $96,200
======== ======= ======= =======
</TABLE>
19
<PAGE> 22
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 21 STOCK OPTIONS
On January 31, 1999, the corporation adopted a stock option plan
for the purpose of providing an incentive based form of
compensation to the directors, key employees and service
providers of the corporation.
The stock subject to the plan and issuable upon exercise of
options granted under the plan are shares of the corporation's
common stock, $.001 par value, which may be either unissued or
treasury shares. The aggregate number of shares of common stock
covered by the plan and issuable upon exercise of all options
granted shall be 5,000,000 shares, which shares shall be
reserved for use upon the exercise of options to be granted from
time to time.
The company issued the following options:
<TABLE>
<CAPTION>
DATE OF NUMBER VESTING
ISSUANCE OF SHARES RECIPIENT PERIOD TERM
-------- --------- --------- ------ ----
<S> <C> <C> <C> <C>
April 22, 1999 800,000 Officers One year 10 years
50% immediately
50% in six months
April 22, 1999 240,000 Employees Five years 10 years
10% immediately
balance over five
years
April 22, 1999 200,000 Employee Five years 10 years
10% immediately
balance over four
years
April 22, 1999 150,000 Directors Two years 10 years
50% per year
May 7, 1999 500,000 Employee Immediately 10 years
May 7, 1999 85,000 Employees Five years 10 years
10,000 shares
immediately
balance over five
years
May 7, 1999 375,000 Employee Immediately 10 years
January 28, 2000 125,000 Officer Immediately 10 years
January 28, 2000 500,000 Officer One year - 10 years
------- performance
based
2,975,000
=========
</TABLE>
20
<PAGE> 23
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 21 STOCK OPTIONS (CONTINUED)
The exercise price is the fair market value of the shares
(average of bid and ask price) at the date of the grant which
was .75(cent) to $1.06 per share.
The company applied APB Opinion 25 and related interpretations
in accounting for this stock option plan. Had compensation costs
for the company's plan been determined based on the fair value
at the grant date consistent with the method of FASB Statement
123, the company's net income and earnings per share would not
have changed.
The fair value of the option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 30%, (3) risk-free interest rate of 6.40%, and (4)
expected life of 10 years.
A summary of the stock options is as follows:
<TABLE>
<CAPTION>
SHARES
<S> <C>
Outstanding at November 1, 1999 2,350,000
Granted during the three months ended January 31, 2000 625,000
---------
Outstanding at January 31, 2000 2,975,000
=========
</TABLE>
Information regarding stock options outstanding as of January
31, 2000 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING
PRICE EXERCISE CONTRACTUAL
RANGE SHARES PRICE LIFE
----- ------ ----- ----
<S> <C> <C> <C>
$ .75(cent)- $1.06 2,975,000 $ .75 9 years, 3 months
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
-------------------
WEIGHTED
AVERAGE
PRICE EXERCISE
RANGE SHARES PRICE
----- ------ -----
<S> <C> <C>
$ 0 0 N/A
</TABLE>
Since the exercise price and the fair market value of the stock
were the same, there is no compensation costs to report and
required pro-forma net income and earnings per share are the
same as the historical financial statement presentations.
21
<PAGE> 24
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
(UNAUDITED)
NOTE 22 GOING CONCERN
These financial statements are presented on the basis that the
company is a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. The
accompanying financial statement show that the company has
incurred net losses of $710,120, has a deficit working capital
of $13,668 and a stockholders' deficit of $805,612. In February
and March 2000, the company converted $1,200,000 of debentures
into common stock. These conversions increased working capital
and stockholders' equity. In addition, sales have increased from
the purchase of the customer lists.
NOTE 23 INVESTOR COMMUNICATION AGREEMENT
In December 1999, the company entered into an agreement with an
investment company for the purpose of providing investor
communications and enhancing shareholder values.
The agreement is for one year and requires the following
payments by the company:
1. Non-refundable retainer of $50,000.
2. $10,000 per month advisory fee commencing June
1, 2000.
3. Warrants to purchase 75,000 shares of the
company's common stock at 120% of the last trade
price as of the execution of the agreement and
the warrants must be exercised within three
years from date of issuance.
NOTE 24 FINANCIAL PROJECT MANAGEMENT AGREEMENT
In December 1999, the company entered into a six month agreement
with Equinet, Inc., the project manager, to promote the growth
of, or increase in the shareholder value of the company.
The project manager will be compensated as follows:
1. A monthly fee of $3,500 for the first 6 months
of the agreement payable in cash or stock.
2. A fee of 1% - 10% based upon the funding
received from the project manager's
recommendations.
3. In connection with the first $5,000,000 raised
by the project manager, the company will issue
to the project manager warrants to purchase
three shares of common stock for each $20
raised, up to a maximum of 750,000 shares. In
the event the first $1,875,000 is received by
January 10, 2000, the company will provide
Equinet, Inc. a discounted exercise price of
$0.99 per share in connection with the warrants
issued for these funds.
22
<PAGE> 25
IBIZ TECHNOLOGY CORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, 2000 JANUARY 31,1999
(REVIEWED) (UNREVIEWED)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 450,757 $ 296,310
Accounts Receivable, Trade 382,637 237,643
Inventories 238,059 274,264
Prepaid Expenses, Other Assets 28,246 20,876
---------- ----------
Total Current Assets 1,099,699 829,093
Property and Equipment, Net of Accumulated Depreciation 185,182 65,183
Other Assets
Note Receivable, Related Party 412,162 544,791
Deposits 16,412 0
Customer List, Net of Accumulated Amortization 11,305 0
---------- ----------
Total Other Assets 439,879 544,791
TOTAL ASSETS $1,724,760 $1,439,067
========== ==========
</TABLE>
23
<PAGE> 26
IBIZ TECHNOLOGY CORP
CONSOLIDATED BALANCE SHEETS
CONTINUED
<TABLE>
<CAPTION>
JANUARY 31, 2000 JANUARY 31,1999
(REVIEWED) (UNREVIEWED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable, Trade $ 521,941 $ 826,433
Customer Deposits 30,014 243,655
Notes Payable, Current 6,540 19,580
Accrued Liability 131,890 59,596
Sales and Payroll Taxes Payable 117,606 301,786
Corporation and Income Tax Payable 19,078 17,841
Deferred Income 86,298 80,831
Convertible Debentures Payable 200,000 0
---------- ----------
Total Current Liabilities 1,113,367 1,549,722
Long-Term Liabilities
Convertible Debentures Payable 1,400,000 0
Notes Payable 17,005 339,526
---------- ----------
Total Long-Term Liabilities 1,417,005 339,526
Stockholders' Deficit
Common Stock
Authorized - 100,000,000 shares
Par value $.001 per share
Issued and Outstanding 27,021 24,540
Paid in Capital in Excess of Par Value 1,443,650 179,742
Advances on Stock Subscriptions 75,000 105,000
Retained Earnings (Deficit) (2,351,283) (759,463)
---------- ----------
Total Stockholders' Deficit (805,612) (450,181)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,724,760 $1,439,067
========== ==========
</TABLE>
24
<PAGE> 27
IBIZ TECHNOLOGY CORP
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIODS
ENDED JANUARY 31, 2000 AND 1999
<TABLE>
<CAPTION>
JANUARY 31, 2000 JANUARY 31,1999
(REVIEWED) (UNREVIEWED)
<S> <C> <C>
Sales $ 628,853 $ 833,519
Cost of Sales 550,795 721,661
------------ ------------
Gross Profit 78,058 111,858
Selling, General & Administrative Expense (773,095) 131,007
------------ ------------
(Loss) Before Other Income (695,037) (19,149)
Other Income
Interest Income 5,398 0
Interest Expense (20,481) (15,884)
Total Other Income, Net (15,083) (15,884)
------------ ------------
(Loss) Before Income Taxes (710,120) (35,033)
Income Taxes 0 0
------------ ------------
Net (Loss) ($ 710,120) ($ 35,033)
============ ============
Net (Loss) per Common Share Outstanding
Basic and Diluted (0.03) (0.001)
Weighted Average Number of Common Shares Outstanding
Basic and Diluted 26,721,059 24,143,201
============ ============
</TABLE>
25
<PAGE> 28
IBIZ TECHNOLOGY CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JANUARY 31, 2000 AND 1999
<TABLE>
<CAPTION>
January 31, 1999 January 31, 1999
(reviewed) (unreviewed)
------------------------------------
<S> <C> <C>
CASH FLOW STATEMENTS
Cash Flows from Operating Activities:
Net (Loss) ($710,120) ($ 35,033)
Adjustments to Reconcile Net (loss) to
Net Cash (used) by Operating Activities
Depreciation 10,774 11,353
Deferred Tax 0 (73,085)
Interest on Convertible Debentures 1,036 0
Changes in Operating Assets and Liabilities
Accounts Receivable, Trade (170,337) (84,107)
Inventories 30,028 49,133
Prepaid Expenses and Other Assets 10,738 27,779
Deposits 347 0
Accounts Payable, Trade (241,024) 45,618
Customer Deposits (85,394) (151,609)
Accrued Liabilities and Taxes 12,523 42,729
Deferred Income 31,336 9,800
------------------------------------
Net Cash Flows (Used) by Operating Activities ($1,110,093) ($ 157,422)
Cash Flows from Investing Activities:
Purchases of Property and Equipment (70,615) 0
Loan to Related Party (55,352) 361,829
Purchase of Customer List (11,900) 0
------------------------------------
Net Cash Flows (Used) by Investing Activities ($ 137,867) $ 361,829
Cash Flows from Financing Activities:
Bank Overdraft 0 (13,700)
Net Proceeds from Issuance of Common Stock 137,000 35,000
Proceeds from Issuance of Convertible Debentures 1,600,000 0
Advances on Stock Subscriptions 0 105,000
Decrease in Notes Payable (63,626) (34,597)
------------------------------------
Net Cash Flows Provided by Financing Activities $ 1,673,374 $ 91,703
Net Increase in Cash 425,414 296,110
Cash Balance, November 1, Prior Year 25,343 200
------------------------------------
------------------------------------
Cash Balance, January 31, Current Year $ 450,757 $ 296,310
====================================
</TABLE>
26
<PAGE> 29
IBIZ TECHNOLOGY CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JANUARY 31, 2000 AND 1999
CONTINUED
<TABLE>
<CAPTION>
JANUARY 31, 1999 JANUARY 31, 1999
(REVIEWED) (UNREVIEWED)
------------------------------------
<S> <C> <C>
Supplemental Disclosure of Cash
Flow Information
Cash Paid During Year for:
Interest $3,787 $15,884
Taxes 0 0
======================================
Non-cash Investing and Financing Activities
Issuance of Common Stock for Investment in
INVNSYS Technology Corporation 0 16,000
Issuance of Common Stock for
Convertible Debentures 200,000 0
</TABLE>
27
<PAGE> 30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
Through its operating subsidiary, INVNSYS, iBIZ designs,
manufactures, and distributes small footprint desktop computers, transaction
printers, general purpose financial application keyboards, numeric keypads,
CRT's, LCD monitors and related products. INVNSYS also markets a line of OEM
notebook computers and distributes transactional and color printers. iBIZ
recently began offering network integration services, digital subscriber line
high-speed Internet connection services, and business-to-business software
sales.
SELECTED FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
Three Month Period Ended
---------------------------
12/31/2000 12/31/99
---------- --------
<S> <C> <C>
Statement of Operations Data
Net sales $ 628,853 $ 833,519
Gross profit $ 78,058 $ 111,858
Operating income (loss) $ (695,037) $ (19,149)
Net earnings (loss) after tax $ (710,120) $ (35,033)
Net earnings (loss) per share $ (0.03) $ (0.001)
12/31/2000 12/31/99
---------- --------
Balance Sheet Data
Total assets $ 1,724,760 $ 1,439,067
Total liabilities $ 2,530,372 $ 1,889,248
Stockholders' equity (deficit) $ (805,612) $ (450,181)
</TABLE>
RESULTS OF OPERATIONS.
Three month period ended January 31, 2000, compared to three month period ended
January 31, 1999.
Revenues. Sales decreased by approximately 25% from $833,519
for the three month period ended January 31, 1999 to $628,853 for the three
month period ended January 31, 2000. The decrease was mainly as a result of a
focus by management on the development of the infrastructure to support new
lines of business, acquisitions, Year 2000 hardware and software sales impacts,
and traditional markets consolidation.
Cost of Sales. The cost of sales decreased by approximately
24% from $721,661 in the three month period ended January 31, 1999 to $550,795
for the three month period ended January 31, 2000. The decrease in cost of sales
is attributable to a similar percentage decrease in sales and reflects hardware
costs which remained fairly stable over the three month period.
Gross Profit. Gross profit decreased from approximately
$111,858 for the three month period ended January 31, 1999 to $78,058 for the
three month period ended January 31, 2000. The decrease resulted primarily from
the decrease in revenues.
28
<PAGE> 31
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased approximately 690% from $131,007
to $773,095 for the three month period ended January 31, 2000. The increase was
primarily due to business expansion into the Internet, software, broadband and
business-to-business sectors, costs of fees paid for capital raising and
investor relations, and legal and accounting fees related to registration of the
Company's common stock.
Interest Expense. Interest expense of $15,083 for the three
month period ended January 31, 2000 and of $15,884 for the three month period
ended January 31, 1999 was accrued on notes payable to Community First National
Bank (primarily extended for working capital purposes).
Net Earnings. Net losses increased from $35,033 for the three
month period ended January 31, 1999 to $710,120 for the three month period ended
January 31, 2000. The increase in losses resulted primarily from a decline in
sales and a significant increase in selling, general, and administrative
expenses related to the strategic growth initiative.
Liquidity and Capital Resources.
Historically, iBIZ has had significant problems with
liquidity. The Company has been unable to generate sufficient internal cash flow
to fund all of its obligations. iBIZ must continue to raise additional funds to
support the strategic growth initiatives in progress. Specifically, iBIZ will
require additional funding to support its entry into broadband connectivity,
its planned development of web-server co-location facilities, and a planned
expansion into the application service provider segment of the
business-to-business sector. INVNSYS is in an industry subject to rapid
obsolescence and change. It must continue to raise additional substantial
funds for research and development and production of new products.
Effective November 15, 1999, iBIZ and Equinet, Inc.
("Equinet") entered into a Financial Project Management Agreement (the
"Agreement"), whereby iBIZ engaged Equinet to implement a program to increase
shareholder value through equity investment or a business combination (the
"Program").
For the earlier of six (6) months or until completion of the
Program, iBIZ is obligated to pay Equinet a monthly fee of $3,500. In addition,
iBIZ will pay Equinet a fee on a sliding scale ranging from 10% to 1% of the
amount of equity funding raised from investors introduced by Equinet. At its
option, iBIZ may elect to pay Equinet in common stock of the Company. As of
January 31, 2000, the Company had paid Equinet $188,000 for its introductions to
investors. The Company paid investor relation fees to several individuals of
approximately $97,000.
During the quarter ended January 31, 2000, the Company raised
an aggregate of $1,600,000 through issuance of convertible debentures to Globe
United Holdings, Inc. ("Globe"). On December 6, 1999, Globe converted $200,000
of the convertible debentures. Pursuant to the applicable conversion formula,
iBIZ issued 300,962 shares of common stock to Globe. iBIZ also issued $275,000
of common stock to an individual in January.
By letter agreement dated December 14, 1999, iBIZ engaged
Josephthal & Co. Inc. ("Josephthal"), to provide financial communication
services. iBIZ paid Josephthal a one-time retainer fee of $50,000, and is
obligated to pay Josephthal $10,000 per month for advisory fees commencing June
1, 2000. The agreement is effective for a period of one year and may be
terminated by either party upon 10 days written notice.
29
<PAGE> 32
Management believes that iBIZ now has sufficient reserves and
will generate sufficient cash flow from operations to operate through January
31, 2001. However, iBIZ will need to raise additional short term capital to
maintain its ongoing business and to fund the strategic growth initiatives
currently in progress beyond January 31, 2001. iBIZ is actively seeking to
obtain a significant capital infusion to avoid continuing reliance on short term
capital sources. Recent option and warrant exercises have also helped increase
the capital of the Company. There is no assurance that iBIZ will raise the
necessary capital to remain in business beyond January 31, 2001 or that
unforeseen events may result in the need for additional capital sooner than
January 31, 2001. If at any time iBIZ is unable to raise financing through
additional sales of common stock or alternate financing sources, it may
be required to delay or modify planned growth initiatives.
Management believes that its recent diversification into
broadband connectivity services and third-party software sales should improve
its liquidity and cash flow. These sectors of its business are currently
generating approximately $200,000 per month in sales revenues. There is no
assurance, however, that its favorable relationship with its third-party
suppliers will continue or that its customers will continue to purchase the
broadband connectivity services, hardware and the software packages and upgrades
necessary to generate the revenue experienced since January 2000.
30
<PAGE> 33
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2 . CHANGES IN SECURITIES
(c) Recent Sales of Unregistered Securities
In November 1999, iBIZ issued Six Hundred Thousand Dollars
($600,000.00) of 7% Debentures (the "$600k 7% Debentures") to Globe United
Holdings, Inc. ("Globe"). Thereafter, in December 1999, iBIZ issued to Globe an
additional One Million Dollars ($1,000,000.00) of 7% Debentures (the "$1000k 7%
Debentures). On December 6, 1999, Globe converted $200,000 of the $600k 7%
Debentures, plus accrued interest to date and on March 2, 2000, Globe converted
$1,000,000 of the $1000k 7% Debentures, plus accrued interest to date. Pursuant
to the applicable conversion formula, iBIZ issued 300,962 shares of common stock
and 1,292,481 shares of common stock, respectively.
In connection with the issuance of the $600k 7% Debentures,
iBIZ issued a warrant to purchase 100,000 shares of common stock at a purchase
price of $0.94 per share. The warrant is immediately exercisable and expires
November 9, 2004.
In connection with the issuance of the $1000k 7% Debentures,
iBIZ issued a warrant to purchase 200,000 shares of common stock at a purchase
price of $0.94 per share. The warrant is immediately exercisable and expires
December 28, 2004 (collectively the "Warrants").
iBIZ relied upon Regulation D, Rule 506 promulgated under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
issuance of the 7% Debentures and the Warrants.
On December 8, 1999, iBIZ issued 100,000 shares of common
stock, $0.001 par value, at a purchase price of $0.50 per share for a total
amount of $50,000. iBIZ relied upon Regulation D, Rule 506 promulgated under the
Securities Act with respect to this sale.
On December 14, 1999, iBIZ issued a warrant to purchase 75,000
shares of common stock, $0.001 par value, at a purchase price of $1.66 per
share. The warrant is immediately exercisable and expires three (3) years from
the date of grant. iBIZ relied upon either Section 4(2) or Regulation D, Rule
506 promulgated under the Securities Act with respect to this warrant.
On January 7, 2000, iBIZ issued 250,000 shares of common
stock, $.001 par value, at a sales price of $1.10 per share for a total amount
of $275,000. iBIZ relied upon Regulation D, Rule 506 promulgated under the
Securities Act with respect this sale.
On January 10, 2000, iBIZ issued warrants to purchase an
aggregate of 281,250 shares of common stock at a purchase price of $0.99 per
share. The warrant is immediately exercisable and expires December 29, 2004. The
warrants have terms of five years and are immediately exercisable. iBIZ relied
upon either Section 4(2) or Regulation D, Rule 506 promulgated under the
Securities Act with respect these warrants.
31
<PAGE> 34
(d) Use of Proceeds from Registration Statement
1. iBIZ has filed a Registration Statement on
Form SB-2, File No. 333- 94409 to register
7,144,252 shares of common stock, $0.001 par
value (the "SB-2"). The SB-2 was declared
effective by the SEC on February 1, 2000 and
has been effective through the date hereof.
The shares registered in the SB-2 are for
resale by iBIZ's securityholders upon
exercise of options or warrants. iBIZ will
not receive any of the proceeds from the
sale of the common stock by the
securityholders, but may receive up to
$1,007,000 upon the exercise of the options
or warrants.
In connection with the SB-2, iBIZ incurred
fees and expenses of approximately $50,000
related to professional services and filing
fees. As of March 15, 2000, the Company had
received $390,000 upon the exercise of
options or warrants to purchase 520,000
shares of common stock. These funds have
been allocated to general working capital.
Between December 6, 1999 and March 2, 2000,
Globe converted an aggregate of $1,400,000
of iBIZ's 7% Debentures into 1,593,443
shares of common stock. These shares were
registered for resale under the SB-2. As a
result of the conversion, iBIZ retired debt
in the amount of $1,400,000.
In addition, upon the effective date of the
SB-2, an aggregate of $300,000 of the
Company's 8% Convertible Debentures
automatically converted to 200,000 shares of
common stock. These shares were registered
for resale by the securityholders under the
SB-2 As a result, iBIZ recognized the
retirement of $300,000 of debt on February
24, 2000.
2. On January 27, 2000, iBIZ filed a
Registration Statement on Form S-8, File No.
027619, to register 3,025,000 shares of
common stock, $0.001 par value (the "S-8").
The S-8 became effective immediately upon
filing and has been effective through the
date hereof. The shares registered in the
S-8 are for resale by iBIZ's employees upon
exercise of options. iBIZ will not receive
any of the proceeds from the sale of the
common stock by the employees, but may
receive up to $2,500,000 upon exercise of
the options.
In connection with the S-8, iBIZ incurred
fees and expenses of approximately $12,300
related to professional services and filing
fees. As of March 15, 2000, iBIZ had
received $45,000 upon exercise of options to
purchase an aggregate of 60,000 shares of
common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
32
<PAGE> 35
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.24 Letter Agreement dated December 14, 1999,
between iBIZ and Josephthal & Co., Inc.
10.25 Financial Project Management Agreement
dated January 20, 1999 between iBIZ and Equinet,
Inc.
23.03 Consent of Moffitt and Company
27.03 Financial Data Schedule
B. Reports on Form 8-K
Not Applicable
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated this 16th day of March, 2000
IBIZ TECHNOLOGY CORP., A FLORIDA
CORPORATION
By: /s/ Kenneth W. Schilling
--------------------------------------------
Kenneth W. Schilling, President, Director
By: /s/ Terry S. Ratliff
--------------------------------------------
Terry S. Ratliff, Vice President,
Comptroller, Secretary, Director
By: /s/ Mark H. Perkins
--------------------------------------------
Mark H. Perkins, Vice President of
Operations, Director
33
<PAGE> 1
EXHIBIT 10.24
December 14, 1999
Mr. Ken Schilling
President
iBIZ Technology Corp.
1919 W. Lone Cactus Dr.
Phoenix, AZ. 85027
Dear Ken.
This will confirm the understanding and agreement (the
"Agreement") between iBIZ Technology Corp. and subsidiaries (the "Company") and
Josephthal & Co. Inc. ("Josephthal") as follows:
1. The Company hereby engages Josephthal as the Company's
financial communications advisor with respect to advice relating to strategic
investor communications, including shareholder profile, enhancing shareholder
value and other similar matters. Josephthal shall also assist the Company with
increasing Josephthal financial consultants' and the financial community's
awareness of the Company and its prospects through the development and
implementation of a comprehensive financial communications program (see Exhibit
A, for greater detail).
2. This Agreement shall be effective for a period of one year,
commencing upon the execution hereof unless earlier terminated on ten days
written notice by either party to the other party.
3. In consideration for the services to be rendered by
Josephthal to the Company pursuant to this Agreement, upon the execution hereof,
the Company shall pay to Josephthal a non-refundable retainer fee of $50,000
upon execution of this agreement; $10,000 per month in advisory fees commencing
on June 1, 2000; and issue to Josephthal and/or its affiliated designees,
warrants to purchase 75,000 shares of the Company's Common Stock as follows: (i)
exercise price shall be at 120% of the last trade price as of the date of
execution of this Agreement; and (ii) exercise period shall be at any time
within three years from the date of issuance. The terms and conditions of the
warrants shall be set forth more fully in a separate warrant agreement to be
executed by Josephthal and the Company, and shall give Josephthal and its
designees unlimited piggyback registration rights. The warrant shall contain
standard dilution provisions for stock combinations and stock splits and a
provision allowing for cashless exercise of such warrants.
<PAGE> 2
4. The Company shall reimburse Josephthal monthly for
reasonable out-of-pocket expenses incurred in connection with the engagement
hereunder, promptly as requested. Josephthal shall notify the Company when such
expenses exceed a mutually agreed upon budget. Any single expense greater than
$500 shall be pre-approved by the Company.
5. Any advice, either oral or written, provided to the Company
by Josephthal hereunder shall not be publicly disclosed or made available to
third parties without the prior written consent of Josephthal except as required
by law. In addition, Josephthal may not be otherwise publicly referred to
without its prior consent.
6. The Company recognizes and confirms that in fulfilling its
engagement hereunder, Josephthal will use and rely on data, material and other
information furnished to Josephthal by the Company. The Company acknowledges and
agrees that in performing its services under this engagement, Josephthal may
rely upon the data, material and other information supplied by the Company
without independently verifying its accuracy, completeness or veracity. The
Company represents and warrants to Josephthal that all such information
concerning the Company provided to Josephthal by the Company will be true and
accurate in all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which such
statements are made. The Company acknowledges and agrees that Josephthal will be
using and relying upon such information supplied by the Company and publicly
available information concerning the Company without any independent
investigation or verification thereof or independent appraisal by Josephthal of
the Company or its business or assets.
7. Since Josephthal will be acting on behalf of the Company in
connection with this engagement, the Company agrees to indemnify Josephthal as
set forth in a separate letter of agreement (Exhibit B), dated the date hereof,
between Josephthal and the Company.
8. This Agreement is delivered in the State of New York and
shall be construed and enforced in accordance with and governed by, the laws of
the State of New York without giving effect to its conflict of law principles.
The parties hereto hereby agree that any action, proceeding or claim against it
arising out of or in any way related to this Agreement shall be brought and
enforced in the courts of the State of New York or the United States of America
for the Southern District of New York and irrevocably submits to such exclusive
jurisdiction, and hereby irrevocable waives any objection to such exclusive
jurisdiction or inconvenient forum.
9. This Agreement may not be amended, modified or waived,
except in writing signed by all of the parties hereto. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original but all of which when taken together shall constitute one and the same
instrument.
<PAGE> 3
Josephthal is delighted to accept this engagement and looks
forward to working with you on this assignment. If the foregoing correctly sets
forth the understanding between Josephthal and the Company with respect to this
agreement, please so indicate by signing the enclosed duplicate in the place
provided below, whereupon this letter shall constitute a binding agreement as of
the date first above written.
JOSEPHTHAL & GO. INC.
By:
-----------------------------------------------
Edmund Belak, Jr.
Managing Director
Accepted and Agreed:
iBIZ Technology Corp.
By:
--------------------------------------
Ken Schilling
President
<PAGE> 4
December 21, 1999
Josephthal & Co. Inc.
200 Park Avenue, 25th Floor
New York, NY 10166
Attention: Edmund Belak, Jr.
Managing Director
Investment Banking
Gentlemen:
In connection with our engagement of Josephthal & Co. Inc.
("Josephthal") pursuant to that certain letter agreement dated December 21, 1999
between iBIZ Technology Corp. and Josephthal (the "Letter Agreement") we hereby
agree to indemnify and hold harmless Josephthal and its affiliates, and the
respective directors, officers, shareholders, agents and employees of Josephthal
(each an "Indemnified Person" and collectively the "Indemnified Persons"), from
and against any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses as incurred by any of them
(including the reasonable fees and expenses of counsel) which are related to or
arise out of (i) any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company in
connection with the Letter Agreement or (ii) any actions taken or omitted to be
taken by any Indemnified Person in connection with the Letter Agreement and we
shall reimburse any Indemnified Person for all expenses (including the
reasonable fees and expenses of counsel) as incurred by such Indemnified Person
in connection with Investigating, preparing or defending any such claim, action,
suit or proceeding (collectively a "Claim"). We will not, however, be
responsible for any Claim or indemnification therefor which is finally
determined to have resulted from the gross negligence or willful misconduct of
any Indemnified Person or from any breach of the Letter Agreement by Josephthal.
We further agree that no Indemnified Person shall have any liability to us for
or in connection with our engagement of Josephthal except for any Claim incurred
by us as a direct result of any Indemnified Person's gross negligence or willful
misconduct.
We further agree that we will not, without the prior written
consent of Josephthal, settle, compromise or consent to the entry of any
judgment in any pending or threatened Claim in respect of which indemnification
may be sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim), unless such settlement, compromise or consent
includes an unconditional, irrevocable release of each Indemnified Person
hereunder from any and all liability arising out of such Claim.
<PAGE> 5
Promptly upon receipt by an Indemnified Person of notice of
any complaint or the assertion or institution of any Claim with respect to which
indemnification is to be sought hereunder, such Indemnified Person shall
promptly notify us in writing of such complaint or of the assertion or
institution of such Claim but failure to notify us shall not relieve us from any
obligation we may have hereunder, unless and only to the extent such failure to
notify results in the forfeiture by us of substantial rights and defenses. If we
so elect or are requested by such Indemnified Person, we will assume the defense
of such Claim, including the employment of counsel reasonably satisfactory to
such Indemnified Person and the payment of the fees and expenses of such counsel
and upon such election or request we shall not be liable for any legal costs
subsequently incurred by such Indemnified Person. In the event, however, that
such Indemnified Person reasonably determines in its sole judgment that having
common counsel would present such counsel with a conflict of interest or if the
defendant in, or target of, any such Claim, includes an Indemnified Person and
us, and such Indemnified Person reasonably concludes that there may be legal
defenses available to it or other Indemnified Persons different from or in
addition to those available to us, then such Indemnified Person may employ its
own separate counsel to represent or defend it in any such Claim and we shall
pay the reasonable fees and expenses of such counsel. Notwithstanding anything
herein to the contrary, if we fail timely or diligently to defend, contest, or
otherwise protect against any Claim, the relevant Indemnified Person shall have
the right, but not the obligation, to defend, contest, compromise, settle,
assert crossclaims, or counterclaims or otherwise protect against the same, and
shall be fully indemnified by us therefor, including without limitation, for the
reasonable fees and expenses of its counsel and all amounts paid as a result of
such Claim or the compromise or settlement thereof, provided, however that
Josephthal shall not settle, compromise or release any claim without our consent
or without obtaining an irrevocable release from any and all liability with
respect to or arising out of such claim. In any Claim in which we assume the
defense, the indemnified Person shall have the right to participate in such
Claim and to retain its own counsel therefor at its own expense.
If we elect not to assume the defense or we are not so
requested by an Indemnified Person, as provided above, the Indemnified Person
may assume such defense at the expense of the Company. In any litigation or
proceeding, the Company shall not be responsible for the fees and expenses of
more than one counsel for all Indemnified Persons in any one jurisdiction,
unless such Indemnified Persons have a separate and conflicting defense with
regard to such litigation or proceeding as reasonably determined by Counsel for
the Indemnified Person. In no event shall we be liable for any settlement of any
Claim by an Indemnified Person that has been made without our consent.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not Josephthal is the Indemnified Person), we and Josephthal shall contribute to
the Claim for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to us, on the one hand, and
Josephthal on the other, in connection with Josephthal's
<PAGE> 6
engagement referred to above, subject to the limitation that in no event shall
the amount of Josephthal's contribution to such Claim exceed the amount of fees
actually received by Josephthal from us pursuant to Josephthal's engagement. We
hereby agree that the relative benefits to us, on the one hand, and Josephthal
on the other, with respect to Josephthal's engagement shall be deemed to be in
the same proportion as (a) the total value paid or proposed to be paid or
received by us or our stockholders as the case may be, pursuant to the
transaction (whether or not consummated) for which you are engaged to render
services bears to (b) the fee actually paid to Josephthal in connection with
such engagement.
Our indemnity, reimbursement and contribution obligations
under this Agreement shall be in addition to, and shall in no way limit or
otherwise adversely affect any rights that any Indemnified Party may have at law
or at equity.
Should Josephthal or its personnel be required or requested by
us to provide documentary evidence or testimony in connection with any
proceeding arising from or relating to the Letter Agreement, we agree to pay all
reasonable expenses incurred by Josephthal or its personnel in complying
therewith.
We and Josephthal, on behalf of itself and the Indemnified
Persons, hereby consent to personal jurisdiction and service of process and
venue in any court in the State of New York which any claim for indemnity may be
brought under this Agreement.
Very truly yours,
iBIZ Technology Corp.,
By:
---------------------------------------------
Name:
Title:
Confirmed and agreed to:
JOSEPHTHAL & CO. INC.
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.25
FINANCIAL PROJECT MANAGEMENT AGREEMENT
This Financial Project Management Agreement (the "Agreement"),
dated this 20th day of January, 2000, and effective as of November 15, 1999, is
entered into by and between EQUINET, INC., a New York corporation (the "Project
Manager"), and ibiz Technology Corp., a Florida corporation (the "Company"). The
Project Manager and the Company may each be referred to as a "Party" and
together the Project Manager and the Company may be referred to as the
"Parties."
WHEREAS, Company desires to increase its shareholder value and
growth through increased capitalization or a business combination; and
WHEREAS, after reviewing the Company's business plan with
management, Project Manager is sufficiently confident that management's
objectives can be achieved;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Parties hereto agree as follows:
1) Responsibilities of Project Manager. Project Manager agrees
to implement a program to promote the growth of, or increase the shareholder
value of the Company (the "Program"). It is understood that this Program may
involve the Company seeking third-party equity funding (the "Funding"), or
possible business combination or joint venture (the "Transaction") (collectively
the "Corporate Goal"). The Project Manager shall provide the Company with its
opinion and recommendations with respect to the most appropriate means of
meeting the Corporate Goal, however, the implementation of such recommendations
and the acceptance of the Funding and the consummation of any Transaction shall
be at the sole and exclusive option of the Board of Directors of the Company.
a) Analysis and Review. Project Manager agrees to
provide the following services, and such other related services as may
be appropriate and required to assist in the Company's efforts to meet
the Corporate Goal:
i) Conduct summary due diligence and
analysis of the Company's operation and financial status to
ascertain the legality and feasibility of the Program (the
"Recommendation"). Such analysis shall include a critical
evaluation of the Information, financial projections and
documents delivered to the Project Manager by the Company
prior to implementation of the Program, and;
ii) Provide the Company with a formal
recommendation for implementation of the Program.
b) Program Implementation. Upon receipt of formal
approval and written authorization from the Company to proceed with the
Program ("Program Authorization"), Project Manager shall:
<PAGE> 2
i) Advise the Company with respect to the
form and structure of the Program;
ii) Advise the Company with respect to
professional assistance that may be necessary and desirable
for the implementation of the Program;
iii) Advise the Company with respect to
methods of generating public awareness of its business and
products and to heighten investor awareness of the Company;
iv) Advise the Company with respect to
certain corporate partners who may be of strategic importance
in the further development of the Company's business;
v) Advise the Company with respect to
personnel who may be of strategic importance in the further
development of the Company's business;
vi) Identify and introduce the Company to
institutional and other investors who may contribute all or a
portion of the Funding or identify potential candidates for
the Transaction; and
vii) Assist the Company wherever possible
with the implementation of each of the above-enumerated steps.
2) Responsibilities of the Company. In connection with the
above activities, which will be undertaken by Project Manager on the Company's
behalf, the Company shall fully cooperate with the Project Manager in the
fulfillment of its duties hereunder, and agrees to the following until such time
as a Termination Date has been set:
a) Project Manager Introductions. Any investment in
the Company from the time of engagement until its expiration will be
considered as a result of the work done by the Project Manager if
Project Manager first introduced the investors to the Company.
b) Access to Information. Furnish all information and
data concerning the Company, the transaction, any prior transactions
and the Funding (collectively the "Information"), which the Project
Manager may request.
c) Access to Company Officers and Professionals.
Company will provide the Project Manager complete access to the
Company's officers, directors, employees, accountants, counsel and
other key persons.
d) Truthful Representations. The Company represents
and warrants that all information (i) made available to the Project
Manager and any prospective financing source, or (ii) contained in any
materials prepared by the Company will, at all times during this
engagement be true, accurate and complete in all material respects and
will not contain any untrue statement of a material fact or omit to
state therein any fact necessary to make the statements therein not
misleading in light of the circumstances under which they are made. The
Company further represents that any projections provided to the Project
Manager or contained in any materials prepared by or on behalf of the
Company with respect to the subject matter thereof will have been
prepared in good
<PAGE> 3
faith and will be based on assumptions which in light of the
circumstances under which they are made at that time were in Company's
determination reasonable.
e) Responsibility for Representations. The Company
acknowledges and agrees that in rendering its services as agreed
hereunder, the Project Manager will be using and relying on the
Information (and information available from public sources and other
sources deemed to be reliable) without independent verification thereof
and without independent appraisal of any of the Company's assets. The
Project Manager does not assume responsibility for the accuracy or
completeness of the Information or any other information regarding the
Company the financing the transaction or the Investment Funds. Any
advice rendered by the Project Manager pursuant to this agreement may
not be disclosed privately or publicly by the Project Manager without
the Company's prior written consent.
f) Indemnification of Project Manager. If, in
connection with the services or matters that are the subject of this
Agreement, the Project Manager becomes involved in any capacity in any
action or legal proceeding, due to the actions, information, position,
assertions, or affirmations put forth by the Company or by the Project
Manager at the direction of the Company or in reliance upon material or
the Information furnished by the Company, the Company agrees to
indemnify and hold harmless the Project Manager as the case may be for
the reasonable legal fees of counsel, court costs and other expenses
(including the costs of investigation and preparation) incurred. The
Company also agrees to hold harmless the Project Manager against any
losses, claims, damages or liabilities, joint services or matters which
are the subject of this Agreement; provided however that the Company
shall not be liable in respect of any loss, claim damages or liability
to the extent and only to the extent that such loss claim damage or
liability resulted from the gross negligence or willful misconduct of
the Project Manager. The provisions of this paragraph shall survive the
expiration of the period of this agreement including any extensions
their of set forth herein.
g) Implementation of Program. In the event that
Company provides Program Authorization to Project Manager, Company
agrees to:
i) Allocate the services of its Chief
Executive Officer and Chief Financial Officer, and engage such
other outside professionals as are required to the
successfully implement and complete each task associated with
the Program, pursuant to the Project Manager's recommendation,
unless modified in writing by the mutual consent of the
Parties; and
ii) Issue such compensation as is required
by Project Manager and such other outside professionals as
engaged pursuant to this Agreement, so as to cause timely
implementation of the Program pursuant to the Project
Manager's recommendation, unless modified in writing by the
mutual consent of the Parties.
3) Compensation. In consideration for the services that are to
be provided by Project Manager under this Agreement, the Company agrees to
compensate the Project Manager as follows:
<PAGE> 4
a) Analysis and Review Services. Customer will pay to
the Project Manager a non-refundable engagement fee of Zero Dollars
($0) payable upon the execution of this Agreement, and Zero Dollars
($0) payable upon presentation of the Recommendations to the Company by
Project Manager.
b) Program Implementation: Funding Scenario. In the
event that the Program entails Funding originating from investors first
introduced by Project Manager, and upon receipt and acceptance of the
Funding by Company, and concurrent to all other closing fees, the
Company shall pay the Project Manager a fee described in the tables
below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Amount of Funding Fee rate Maximum fee
-------------------------------------------------------------------------------
<S> <C> <C>
Up to $2,100,000 10% $210,000
$2,100,001 to $5,000,000 6% $300,000
$5,000,001 to $20,000,000 5% $1,000,000
$20,000,001 to $50,000,000 3% $1,500,000
Above $50,000,000 1% N/A
-------------------------------------------------------------------------------
</TABLE>
c) [Reserved].
d) Consultation. For a period of 6 months from the
date of this Agreement or until completion of the Program, whichever
occurs first, Project Manager shall be entitled to a cash fee of $3,500
per month. Such fees shall be payable upon execution of this Agreement,
and shall be payable on the first of each month thereafter. The Company
may accrue monthly payments until the closing of the financing
following the signing of this agreement, which for the purpose of
computing accrued payments shall be deemed to be December 1, 1999 (the
"Inaugural Date").
e) Stock in Lieu of Cash Compensation. In the sole
discretion of the Company, the Company may elect to compensate the
Project Manager in common stock of the Company, which the Project
Manager hereby agrees to accept. If the common stock of the Company at
the time of compensation is "restricted" (as that term is defined in
the Securities Act of 1933), then the Company shall issue that number
of shares having a value equal to twice the value of cash compensation
then due; and if the common stock of the Company at the time of
compensation is "registered" (as that term is defined in the Securities
Act of 1933), then the Company shall issue that number of shares having
a value equal to the value of cash compensation then due. The value of
the stock at the time of compensation shall be the average closing
price shown on the electronic bulletin board or other public trading
forum for the immediately preceding ten (10) business days (referred to
herein as "Calculated Valuation Price").
f) Expenses. The Company shall reimburse Project
Manager for all reasonable and customary out-of-pocket expenses
incurred in connection with the provision of services pursuant to the
terms of this Agreement; provided however, that no expense in excess of
One Hundred Fifty Dollars ($150) will be incurred without the Company's
prior approval, in which case and to the extent practicable, such
expenses shall be paid in advance. These expenses include but are not
limited to all printing,
<PAGE> 5
telephone, mailing, reproduction, word processing, travel (including
air travel), and lodging expenses. Such fees shall be calculated and
reimbursed on a monthly basis.
g) Warrant Grants. In connection with first
$5,000,000 of Funding raised by the Project Manager, the Company shall
grant to the Project Manager warrants to purchase three (3) shares of
the Company's common stock for each Twenty Dollars ($20) of Funding
raised, up to a maximum of 750,000 shares. The Company shall issue the
warrants to the Project Manager concurrently with the closing of each
Funding. By way of example, concurrent with the closing of Funding in
the amount of $500,000, the Company shall issue warrants to purchase
75,000 shares to the Project Manager. The exercise price of the
warrants shall be the Calculated Valuation Price as of the date of
closing of the Funding. The warrants shall have a term of five (5)
years and the common stock underlying the warrants shall have piggyback
registration rights on the first available registration statement
appropriate for the registration of the underlying common stock filed
after January 31, 2000. The Company shall not be required to issue
warrants to purchase fractional shares of common stock. As to any
warrant to purchase a fraction of a share to which the Project Manager
would otherwise be entitled, the Company shall pay a cash adjustment in
respect to such final fraction in an amount equal to the same fraction
of the Calculated Valuation Price per share of common stock on the date
of issuance of the warrant. The number of warrants issuable to the
Project Manager as of the date of this Agreement are listed on Schedule
A attached hereto. When appropriate, public statements issued by the
Company shall identify the Project Manager by name and state that: (i)
the Company is public; and (ii) the Company has been assisted by the
Project Manager in its transition from private to public ownership.
4) Confidentiality. Except to the extent necessary to perform
its obligations hereunder or to comply with any applicable law, regulation or
rule, neither Party shall disclose or divulge to any third party other than the
other Party's directors, officers, auditor, or legal project managers, either
before or after the termination of this letter agreement, any document or
information exchanged between the Parties during the term of this Agreement
without prior written consent of the other party, which consent shall not
unreasonably withheld.
5) Use of Advice and Recommendations. Neither the
Recommendations or any advice, whether oral or in writing, and no other material
prepared for Company in connection with the Project Manager' services hereunder
is to be used for any purpose other than the purpose for which such report,
advice or material was prepared, or is to be used or referred to by Company in
any public documents or otherwise publicly referred to without the Project
Manager' written consent. Notwithstanding the foregoing sentence, in the event
that Company receives a request to disclose all or any part of the Information
contained in any such report, advice or material under the terms of a valid and
effective subpoena or order issued by a court of competent jurisdiction, Company
may disclose such information provided that Company notifies the Project Manager
of the existence, terms and circumstances surrounding such request.
6) Non-Circumvention. The Company hereby irrevocably agree not
to circumvent, avoid or bypass the Project Manager, either directly or
indirectly, in order to avoid payments of fees or commissions, or otherwise
benefit, either financially or otherwise, from information supplied to it or
individuals and or business entities introduced to it by the Project
<PAGE> 6
Manager with regard to any financial transaction, sale of securities, business
combination or joint venture under discussion, in that the Company will not
contact persons or entities on the acknowledged Contact List. The "Contact List"
is a list of persons or entities that the Project Manager will present to the
Company on a monthly basis listing those persons with whom the Project Manager
has negotiated on behalf of the Company, which list will be effective to limit
the Company when acknowledged by the Company, which acknowledgement shall not be
unreasonably withheld. The spirit of mutual trust and confidence shall be the
underlying principle of this undertaking and the Parties agree to adhere
thereto.
7) Termination. Unless otherwise agreed in writing or
terminated earlier pursuant to this Section 7, this Agreement will terminate six
(6) months from the Inaugural Date (the "Expected Termination Date"). The
"Termination Date" shall be the earlier of: (i) the date set by the Parties
pursuant to this Section 7; or (ii) the Expected Termination Date.
a) Termination by Project Manager. It is hereby
agreed and understood that the Project Manager shall have the right to
interview the Company and accomplish a due diligence review with
respect to the Company's representations and that at the Project
Manager's sole discretion if such interviews and due diligence
demonstrate substantive and material discrepancies from that which was
put forth by the Company, then the Project Manager shall have the right
to terminate this agreement and be held harmless from any claims of the
Company for such termination as well as from any claims of third
parties which may result from any such discrepancy. In the event that
the Project Manager is unable to perform its responsibilities under
this agreement due to the failure of the Company to perform its
responsibilities hereunder the Project Manager shall be released from
its responsibilities under this agreement and shall accept the
compensation then due and owing in full satisfaction of Project
Manager's claims against the Company.
b) Termination by Company. The Company may terminate
this agreement at any time after (i) the submission of the
Recommendations to the Company by the Project Manager and submission to
Project Manager of written notice to terminate by Company; (ii) the
Recommendations have not been successfully achieved after the period of
one hundred and twenty (120) days has elapsed from the date that
Program Authorization was submitted to the Project Manager; or (iii)
for cause. In the event that at time of such termination the Company
shall be in discussions with underwriters or investors or parties to
the Transaction that are introduced by the Project Managers, the
Project Manager will maintain the exclusive right to conclude the
Funding or the Transaction with any or all of such parties, under the
terms of this Agreement. In the event that the Company acquires the
Funding after terminating this agreement from any party, which has been
introduced to the Company by the Project Manager, the Company will pay
to the Project Manager the applicable fee or fees referenced in Section
3 hereof. In case of termination, except termination for cause, the
Project Manager will receive full reimbursement for the entire amount
of expenses incurred by Project Manager in connection with its services
pursuant to this Agreement.
c) Termination for Cause. For the purposes of this
engagement, notwithstanding anything to the contrary hereto, "Cause"
shall mean (i) misrepresentation
<PAGE> 7
of a material fact in connection with the duties to be preformed by the
Project Manager; (ii) continuing inattention to or neglect of the
duties to be preformed by the Project Manager which remains unremedied
for fifteen business days following written notice by certified mail
from Company to the Project Manager; (iii) an adjudication in a civil
or criminal proceeding or an arbitral decision that the Project
Manager, or any of its officers or directors, has committed a fraud or
felony; (iv) a breach of this Agreement by the Project Manager; or (v)
gross negligence or willful misconduct by the Project Manager. If the
Company terminates this Agreement for Cause, the Project Manager will
not be entitled to any further fees of any character from the Company
under any circumstances.
8) Securities Laws. The Parties to this agreement mutually
agree to comply with any and all applicable securities laws in their efforts to
secure funds for the Company.
9) Miscellaneous Provisions.
a) Notices. All notices, requests, demands and other
communications to be given hereunder shall be in writing and shall be
deemed to have been duly given on the date of personal service or
transmission by fax if such transmission is received during the normal
business hours of the addressee, or on the first business day after
sending the same by overnight courier service or by telegram, or on the
third business day after mailing the same by first class mail, or on
the day of receipt if sent by certified or registered mail, addressed
as set forth below, or at such other address as any Party may hereafter
indicate by notice delivered as set forth in this Section 9(a):
If to the Project Manager: EQUINET, INC.
305 W. 50th Street, Suite 2
New York, New York 10019
Attention: Gregg Davis
If to the Company: IBIZ TECHNOLOGY CORP.
1919 West Lone Cactus
Phoenix, Arizona 85021
Attention: Kenneth Schilling
b) Binding Agreement; Assignment. This Agreement
shall constitute the binding agreement of the Parties hereto,
enforceable against each of them in accordance with its terms. This
Agreement may not be assigned except by the express written consent of
the Company.
c) Entire Agreement. This Agreement constitutes the
entire and final agreement and understanding between the Parties with
respect to the subject matter hereof and the transactions contemplated
hereby, and supersedes any and all prior oral or written agreements,
statements, representations, warranties or understandings between the
Parties, all of which are merged herein and superseded hereby.
Notwithstanding the foregoing, the Company and the Project Manager
agree and acknowledge that the transactions contemplated by this
Agreement shall be subject to the terms of those certain
<PAGE> 8
Securities Purchase Agreements dated November 9, 1999 and December 29,
1999, and their respective related agreements, between the Company and
Globe United Holdings, Inc.
d) Waiver. No waiver of any provision of this
Agreement shall be deemed to be or shall constitute a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the Party making the waiver.
e) Headings. The headings provided herein are for
convenience only and shall have no force or effect upon the
construction or interpretation of any provision hereof.
f) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
g) Further Documents and Acts. Each Party agrees to
execute such other and further documents and to perform such other and
further acts as may be reasonably necessary to carry out the purposes
and provisions of this Agreement.
h) Governing Law; Venue. THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION ENFORCEMENT thereof, SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES)
OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE. PROJECT MANAGER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF THE COMPANY,
IN ANY OTHER COURT IN WHICH THE COMPANY SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. PROJECT MANAGER WAIVES ANY OBJECTION OF
FORUM NON CONVENIENS AND VENUE. PROJECT MANAGER FURTHER WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED
MAIL DIRECTED TO PROJECT MANAGER AT THE ADDRESS SET FORTH BELOW ITS
SIGNATURE HERETO AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO PROJECT MANAGER'S ADDRESS. PROJECT MANAGER
FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK
ANY JUDGMENT ENTERED AGAINST IT.
i) Attorneys; Drafting. The Project Manager has not
retained any independent professionals to review or comment on this
Agreement or otherwise protect the interests of the Company. Each Party
further agrees and acknowledges that this Agreement represents the
respective understandings of such Parties as negotiated between
<PAGE> 9
them, and no ambiguity or other aspect of this Agreement shall be
construed against any Party solely by virtue of the drafting or
presentment of this Agreement. Each Party has been advised to speak
with legal and accounting professionals to understand the legal and tax
implications and impact of the transactions contemplated hereby, and
neither Party has relied upon the other, the Company, or their
respective counsel in connection therewith.
j) Severable Provisions. The provisions of this
Agreement are severable, and if any one or more provisions is
determined to be illegal, indefinite, invalid or otherwise
unenforceable, in whole or in part, by any court of competent
jurisdiction, then the remaining provisions of this Agreement and any
partially unenforceable provisions to the extent enforceable in the
pertinent jurisdiction, shall continue in full force and effect and
shall be binding and enforceable on the Parties.
k) Survival. Neither termination nor completion shall
affect the provisions of paragraphs 2(d), 2(f), 4, 5, 6, 8 AND 9 hereof
and the indemnification and non-circumvention provisions which are
incorporated therein, which shall remain operative and in full force
and effect for a period of two years subsequent to the Termination
Date.
l) Facsimile Copies. It is agreed that an executed
facsimile or copy of this document is a legal and biding contract with
the same force and effect as the original.
[Signatures on following page]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date and year first above written.
PROJECT MANAGER EQUINET, Inc., a New York corporation
By:
--------------------------------------------
Greg Davis, President
THE COMPANY iBIZ TECHNOLOGY CORP., a Florida corporation
By:
--------------------------------------------
Name:
------------------------------------------
Its:
-------------------------------------------
<PAGE> 10
SCHEDULE A
WARRANTS ISSUABLE AS OF JANUARY 20, 2000
<TABLE>
<CAPTION>
Funding Source Funding Amount Warrant Shares Exercise Price
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
Globe United Holdings, Inc. $600,000 90,000 $0.99
$1,000,000 150,000 $1.46
Blaine Ruzycki $275,000 41,250 $1.45
</TABLE>
<PAGE> 1
Moffitt & Company, P.C.
- --------------------------------------------------------------------------------
Certified Public Accountants 5040 East Shea Blvd. Suite 270
Scottsdale, Arizona 85254
(480) 951-1416
Fax (480) 948-3510
[email protected]
March 15, 2000
IBIZ Technology Corp. and Subsidiary
1919 W. Lone Cactus Drive
Phoenix, AZ 85027
We herewith consent to the incorporation of our January 31, 2000 reviewed
financial statements in the January 31, 2000 Form 10-QSB and all amendments
thereto filed with the Securities and Exchange Commission.
Sincerely,
/s/ Moffitt & Company, P.C.
MOFFITT & COMPANY, P.C.
Scottsdale, AZ
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> OCT-31-1999 OCT-31-1998
<PERIOD-END> JAN-31-2000 JAN-31-1999
<CASH> 450,757 296,310
<SECURITIES> 0 0
<RECEIVABLES> 407,637 240,143
<ALLOWANCES> 25,000 2,500
<INVENTORY> 238,059 274,264
<CURRENT-ASSETS> 1,099,699 829,093
<PP&E> 339,546 216,347
<DEPRECIATION> 154,364 151,164
<TOTAL-ASSETS> 1,724,760 1,439,067
<CURRENT-LIABILITIES> 1,113,367 1,549,722
<BONDS> 0 0
0 0
0 0
<COMMON> 27,021 24,540
<OTHER-SE> (832,633) (474,721)
<TOTAL-LIABILITY-AND-EQUITY> 1,724,760 1,439,067
<SALES> 628,853 833,519
<TOTAL-REVENUES> 634,251 833,519
<CGS> 550,795 721,661
<TOTAL-COSTS> 550,795 721,661
<OTHER-EXPENSES> 773,095 131,007
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20,481 15,884
<INCOME-PRETAX> (710,120) (35,033)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (710,120) (35,033)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (710,120) (35,033)
<EPS-BASIC> (0.03) (0.001)
<EPS-DILUTED> 0 0
</TABLE>
