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U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR FISCAL YEAR ENDED OCTOBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 027619
iBIZ TECHNOLOGY CORP.
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(Exact name of registrant as specified in its charter)
Florida 86-0933890
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(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or No.)
organization)
1919 West Lone Cactus, Phoenix, Arizona 85021
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (623) 492-9200
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Securities register under Section 12(b) of the Exchange Act
Title of each class Name of each exchange on which registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 12 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes NO X
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ended October 31,
1999 were $2,082,515.
On January 25, 2000, the aggregate market value of the voting stock of
iBIZ Technology Corp. ("iBIZ") (consisting of common stock, $0.001 par value)
held by non-affiliates of the Registrant (approximately 12,368,980 shares) was
approximately $14,719,086 based on the closing price for such common stock
($1.19) on said date as reported by the OTC Bulletin Board.
As of January 27, 2000, there were 27,046,380 outstanding shares of iBIZ
common stock.
Documents incorporated by reference: None.
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INDEX
TABLE OF CONTENTS
PART I
Item 1 Description of Business 1
Item 2 Description of Property 20
Item 3 Legal Proceedings 20
Item 4 Submission of Matters to a vote of Security Holders 21
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 22
Item 6 Management's Discussion and Analysis or Plan of Operation 24
Item 7 Financial Statements F-1
Item 8 Changes in and Disagreements with Accountants on 29
Accounting and Financial Disclosure
PART III
Item 9 Directors, Executive Officers, Promoters and Control 29
Persons; Compliance with Section 16 (a) of the Exchange Act
Item 10 Executive Compensation 30
Item 11 Security Ownership of Certain Beneficial Owners and 32
Management
Item 12 Certain Relationships and Related Transactions 34
Item 13 Exhibits and Reports on Form 8-K 34
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iBIZ Technology Corp. ("iBIZ" or the "Company") cautions readers
that certain important factors may affect the Company's actual results and could
cause such results to differ materially from any forward-looking statements that
may be deemed to have been made in this Form 10-KSB or that are otherwise made
by or on behalf of the Company. For this purpose, any statement contained in the
Form 10-KSB that is not a statement of historical fact may be deemed to be a
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "expect," "believe," "anticipate," "intend," "could,"
"estimate," or "continue" or the negative variations thereof or comparable
terminology are intended to identify forward-looking statements. Factors that
may affect the Company's results include, but are not limited to, the Company's
history of losses, its need for additional financing and its competitive
marketing environment. The Company is also subject to other risks detailed
herein or detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
iBIZ HISTORY
iBIZ was originally incorporated under the laws of the State of
Florida in 1994. From its incorporation through December 31, 1998, the Company
operated as a development stage company with no operations or revenues while it
sought to identify a strategic business combination with a private operating
company. To facilitate the acquisition of a private company doing business
outside of its initial purpose upon incorporation, the Company changed its name
to EVC Ventures, Inc. in May 1998 and to INVNSYS Holding Corporation in October
1998.
Effective January 1, 1999, the Company entered into a Plan of
Reorganization and Stock Exchange Agreement with INVNSYS Technology Corporation
("INVNSYS") and various shareholders of INVNSYS (the "Reorganization"). As a
result of the Reorganization, INVNSYS became a wholly-owned subsidiary of the
Company. On February 1, 1999, the Company changed its name to iBIZ Technology
Corp.
While operating as a development stage company, the Company's
officers and directors were not compensated for their services. From
incorporation through December 31, 1994, Mr. Julio A. Padilla served as
President and sole Director. Mr. Eric P. Littman served as President and sole
Director from January 1, 1995 through July 9, 1998. Thereafter, Mr. John Xinos
served as President, Secretary, and Treasurer from July 10, 1998 through
December 31, 1998. Messrs. Padilla, Littman and Xinos are no longer involved in
the management of iBIZ and are believed not to be shareholders.
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BUSINESS HISTORY OF INVNSYS
The Company conducts business solely through its operating
subsidiary INVNSYS. For your convenience, this prospectus will refer to the
parent company as the Company or iBIZ and the wholly-owned operating company as
INVNSYS.
INVNSYS (formerly known as SouthWest Financial Systems, Inc.) was
founded in 1979. Under the direction of INVNSYS' founder, Kenneth Schilling, the
company initially focused on distributing front-end bank branch automation
computer systems for networking applications. INVNSYS acted as a regional
distributor for SHARP Electronics ("SHARP"), a privately held Japanese
manufacturer of computers and electronic devices. In addition, INVNSYS also
distributed the products of Billcon Company, Ltd., and Glory, manufacturers of
bank automation and money processing systems.
In 1985, INVNSYS became a master distributor of SHARP products
and acquired the exclusive rights to distribute SHARP products to financial
institutions in the western United States. Between 1987 and 1990, INVNSYS won
various awards from SHARP for outstanding sales performance. Also during this
time, INVNSYS began to participate in the design of computer systems for
financial institutions. In cooperation with Wells Fargo Bank and SHARP, INVNSYS
produced the first plain paper facsimile machine in 1990.
In 1992, INVNSYS began to design and build its own computer
systems, focusing on integrated systems for the banking industry. In 1993,
INVNSYS terminated its relationship with SHARP and focused on developing its own
products. In approximately 1994, INVNSYS began working in conjunction with Epson
America ("Epson"), a leading manufacturer of point-of-sale computer products, in
the development of products for the banking industry. For example, INVNSYS
designed a software program which enabled Epson transactional printers to
produce cashier's checks, an industry innovation. In addition, in cooperation
with Epson, INVNSYS designed and marketed a stackable computer system for
financial institutions. In 1996, INVNSYS produced its first entry into the
market for complete computer systems with its Vision 2000 Multimedia
Notestation, an Intel Pentium-based computer/printer combination. In October
1998, INVNSYS began to market its current line of business transaction
computers, the iT series.
iBIZ's principal offices are located at 1919 West Lone Cactus,
Phoenix, Arizona 85021. iBIZ maintains a website at www.ibizcorp.com. The
information on the website is not part of this Form 10-KSB.
Statements regarding the various hardware products offered by the
Company, joint ventures and marketing agreements, are forward looking and you
should not rely on them or assume that the products discussed will ever be
shipped in quantities sufficient to generate material revenue or that marketing
agreements will generate any revenue. Many products discussed in this Form
10-KSB may ultimately not be sold or may only be sold in limited quantities.
Marketing agreements may not result in anticipated revenue for the Company.
Technology used in computer products is subject to rapid obsolescence, changing
consumer preferences, software advancements, and competitors' products time to
market. These factors,
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among others, may result in unforeseen changes in the types of products
ultimately sold by the Company.
PRODUCTS
INVNSYS engages in the business of designing, manufacturing and
distributing small-footprint desktop computers, transaction printers, general
purpose financial application keyboards, numeric keypads, cathode ray tube
("CRT") and liquid crystal display ("LCD") monitors and related products.
INVNSYS also markets a line of original equipment manufacturer ("OEM") notebook
computers and distributes transactional and color printers. In addition to
hardware, in December 1999, INVNSYS began reselling third party software.
INVNSYS' continued success is dependant upon the introduction of
new products and the enhancement of existing products. INVNSYS is actively
engaged in the design and development of additional computers and peripherals to
augment its present product line. Currently, INVNSYS designs many of its
products in-house. INVNSYS employs a four-person product design and development
staff which is managed directly by Kenneth Schilling. During 1998, INVNSYS did
not incur costs specifically allocated to research and development. During
fiscal 1999, INVNSYS spent Five Thousand Fourteen Dollars ($5,014.00) on
expenses directly allocated for research and development. For financial
accounting purposes INVNSYS has historically not allocated any significant
expenses to research and development because its equipment manufacturers
actually implement the innovations of senior level management of INVNSYS.
However, iBIZ considers salaries paid to senior level management involved in
product design and development as costs related to research and development.
Because of the rapid pace of technological advances in the
personal computer industry, INVNSYS must be prepared to design, develop,
manufacture and market new and more powerful hardware products in a relatively
short time span. While INVNSYS believes that it has been successful to date in
accomplishing that goal, there can be no assurance that it will continue to do
so in the future.
Business Application Small Footprint Computers
INVNSYS believes its iT-8000 has the smallest footprint of any
desktop personal computer in the industry. (A "footprint" is the amount of desk
space the computer terminal covers.) The iT-8000 provides the convenience of a
small footprint and the power of a traditional desktop unit. The iT-8000's
compact dimensions allow it to be installed in areas where the physical space
available to install a computer is limited. These applications include corporate
workstations, branch bank teller platforms, supermarkets and other retail
point-of-sale ("POS") machines. The iT-8000 is also suited to other
space-conscious settings such as a hospital patient bedside.
Standard features include extra serial ports for attaching
peripheral devices such as magnetic card readers or check readers and a built-in
local area network ("LAN") connection. Currently, the iT-8000 may be configured
with Intel Pentium processors with MMX Technology (75Mhz through 233Mhz), from 2
to 256 megabyte ("MB") random access memory ("RAM"), a
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standard 2.5" hard drive, providing current industry capacity of up to 13
gigabyte ("GB"), and 10.4", 12.0" or 13.3" color LCD panels.
INVNSYS recently introduced a line of "thin-client" computers.
Thin-client computers are scaled down devices with limited memory and no local
storage capability designed to be integrated with a centralized server. In a
thin-client environment, network software applications remain on the server,
while the terminal functions as the gateway to the system. INVNSYS believes
thin-client systems offer increased manageability and better security as all
applications run on the server and not the terminal.
INVNSYS' thin-client computer, the iTerm-8000 (a derivative of
the iT-8000), supports up to a 233 Mhz processor, 128 MB RAM, optional floppy
and hard drives, and offers an attached LCD monitor. The iTerm 8000 will support
Citrix Systems, Inc. ("Citrix") Independent Computing Architecture ("ICA") as
the server application which is compatible with Citrix MetaFrame and WinFrame
software.
Personal Computers
Capitalizing on its knowledge and success in designing computer
systems for the financial institution industry, INVNSYS has expanded its product
line to include personal home computers.
Sahara. The Sahara Databook is a small footprint desktop computer
which integrates optional Intel Pentium II/III processor power, simplified
networking and sophisticated manageability features into a compact form. INVNSYS
believes its flexible design allows original equipment manufacturers ("OEMS") to
deliver a range of uses, from a fully-featured corporate workstation to a
stripped-down network personal computer. The Sahara is sold in four basic
configurations, each allowing customers to pick the options most suitable for
their purposes.
Safari. The Safari is a small footprint computer with a full
array of LAN, P.O.S., entertainment and Internet applications. The Safari is
offered with a range of processors including Intel Pentium, Cyrix, IBM, and AMD,
may provide up to 256 MB RAM, and can be equipped with an optional LCD panel,
20X Slim Size CD-ROM drive and a 3D full duplex sound module.
Keyboards
Historically, INVNSYS has designed and marketed a range of
keyboards and numeric keypads for financial institutions. Such products
currently include the Geno 628 data pad, the Serial data numeric-only key pad,
the ACK-540GP keyboard, and the TV-3682, a space-efficient keyboard designed for
bank branch teller applications. The TV-3682 is encoded with a proprietary
software which allows the keyboard to be used with any computer without the need
to install a driver. To aid numeric input, the numeric pad is given prominence
over the alpha pad. The TV-3682 also incorporates a touchpad mouse with no
moving parts, which saves space and improves reliability.
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Capitalizing on the expanding market for powerful, handheld
organizers, in September 1999, INVNSYS introduced its KeySync Keyboard
("KeySync"). The KeySync directly connects to all Palm devices, including the
PalmVII, produced by 3COM, and allows users to more easily input data into their
organizers. The KeySync is integrated with the Palm products through KeyLink
software, exclusively designed for and licensed to INVNSYS.
The KeySync's dimensions are 10" x 4-1/2" x 1-1/4" (LxWxH), and
it offers a sixty-two (62) key keyboard, six (6) programmable function keys and
uses three (3) "AAA" batteries to minimize draining the Palm's battery. In
addition to Palm products, the KeySync is currently compatible with Microsoft CE
handheld organizers.
Palm Pilot Accessories
In December 1999, INVNSYS began selling a foldable cradle to hold
the various Palm Pilot products. Management believes this cradle is easier to
use than the products offered by competitors. INVNSYS also began selling a
12-volt power adapter to enable recharging of the batteries used in the Palm
Pilot in a vehicle's cigarette lighter.
Displays and Monitors
INVNSYS offers a line of space-saving, zero-emission LCD flat
panel displays. INVNSYS believes these LCD monitors provide superior viewing
angles, graphic display and brightness over conventional monitors while
consuming less energy. Moreover, LCD panels do not flicker like conventional CRT
monitors, thus reducing eye strain and user fatigue. INVNSYS' LCD panels take up
less than one-tenth of the space needed for an equivalent cathode ray tube
("CRT") monitor and are some of the thinnest available on the market. INVNSYS
believes that the flat LCD panel gives the monitor a competitive edge over
conventional CRT products by providing equivalent screen sizes in less space.
In January, 2000, INVNSYS and Harsper Co., Ltd. ("Harsper")
entered into an agreement whereby INVNSYS will act as the exclusive United
States distributor of certain current and all future models of Harsper LCD
panels. In addition, INVNSYS will handle service and support functions for
Harsper. The LCD panels will be marketed under both the iBIZ and Harsper names
and will include 12.1", 14.1", 15.1" and 18.1" computer displays. INVNSYS will
also offer Harsper's "high-style" LCD panels with metal cases and flat glass
fronts designed for the executive or deluxe home office. INVNSYS currently
anticipates offering Harsper LCD panels in the first quarter of 2000.
The computer industry is currently experiencing a shortage of
12.1" LCD panels. To date, INVNSYS has been able to obtain adequate supplies of
these LCD panels and has not experienced any significant production delays as a
result of the shortage. However, if the shortage continues and INVNSYS' demand
increases, INVNSYS may experience difficulties in meeting customer demand.
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INVNSYS also offers a range of conventional CRT monitors in sizes
14 to 21 inches with digital controls.
Planned Product Introductions
iT-9000. INVNSYS is currently developing a new small footprint
Pentium II/III computer with attachable LCD monitor, currently called the
iT-9000. The iT-9000 combines numerous technologies into less than one
square-foot of desktop space. As a highly flexible, open-architecture platform,
the iT-9000 can be configured for multiple computing roles. The iT-9000 will
provide functions for visual Internet access, in-home video monitoring, family
message center, home security, home control and high-resolution television
reception. INVNSYS believes that by eliminating the necessity of assembling
numerous electronic components, the iT-9000 will present an all-in-one solution
to office desktop overcrowding. With its optional under-cabinet mounting,
INVNSYS believes the iT-9000 will provide a solution to extremely limited home
and office work areas.
The iT-9000 will offer a flip-down LCD panel, and will utilize
the latest Pentium III processor technology. The iT-9000 is undergoing product
evaluation and management has not yet determined a customer delivery date.
Lapboard. INVNSYS is also developing a wireless keyboard to be
marketed under the name "Lapboard." This keyboard incorporates RF wireless
technology and is suitable for a variety of applications including general
computing, Web TV and Dish Technology. The Lapboard is ergonomically designed
and features an elevated palm rest allowing the hands to be in a more natural
position above the alpha keys, thus alleviating stress on the wrist. In
addition, the Lapboard will offer a "bottom case" contoured for the user's lap.
INVNSYS has incorporated several flexible design elements into the Lapboard,
such as an interchangeable pointing device for users who prefer a trackball
instead of the standard mouse touchpad. A joystick module and a sixteen (16) key
programmable keypad have also been designed as interchangeable elements.
INVNSYS has filed a patent application for the Lapboard with the
United States Patent and Trademark Office. INVNSYS is conducting product
evaluation and testing and management is currently evaluating the capital
resources necessary to begin production.
OEM Notebook Computers
In addition to designing its own products, INVNSYS also offers a
complete line of competitively priced, build-to-order notebook computers
manufactured by Twinhead Corporation ("Twinhead") and marketed under the name
"iBook." Currently, INVNSYS offers three notebook models, the Apache, Phoenix
and RoadRunner.
RoadRunner. INVNSYS believes the RoadRunner offers powerful
computing power in a lightweight design. At only 1.28" high and 4.4 pounds,
INVNSYS believes the RoadRunner is half the weight of most competing notebooks.
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The RoadRunner offers Intel Pentium II processors with up to
366Mhz, as well as Pentium III processors, a built in 56k fax/modem, external
FDD/24X CD-ROM module or 2X/4X DVD drive, a full size keyboard and a full 12.1"
TFT screen offering resolution as high as 800 x 600 pixels. The RoadRunner
offers 64 MB of memory, which can be upgraded to 192 MB. Utilizing Twinhead's
patented (pending) battery auto calibration system and the notebook's Advanced
Configuration and Power Interface ("ACPI") power management standard, which
automatically monitors and optimizes battery use, the RoadRunner provides up to
2.5 hours of full battery usage.
Apache. The Apache offers high performance in an ultra-slim
(1.54" high), compact unit. Models have a range of central processing units
("CPU's") from the Celeron MMC1 366Mhz to Intel Pentium II 400Mhz. The Apache
has a 16-bit stereo sound system with built-in stereo speakers and microphone
supporting full-duplex sound, a 3D graphics system with 2 MB of video RAM
operating over a 64-bit memory bus and a built-in 24X CD-ROM, which is
interchangeable with a 2X DVD-ROM drive. The Apache offers resolution as high as
1024 x 768 pixels with its 13.3" (XGA) or 12.1" (SVGA) built-in TFT screen.
The Apache can be installed with up to 256 MB of memory using
industry-standard Synchronous Dual in-line Memory Modules ("SO DIMM"). To
improve slow input/output, the Apache also features up to 6.4 MB hard disk
drive, an optional built-in 56 Kbps modem and a 32-bit CardBus PC card drive.
The Apache also offers an infrared port which allows wireless file transfer and
printing to other infrared-enabled systems.
INVNSYS believes power saving is a major concern for notebook
users. To address this issue, the Apache offers a processor which as of the date
of this Form 10-KSB consumes up to forty percent (40%) less energy than a
comparable desktop processor. In addition, the Apache has numerous
user-controlled power management routines including suspend to RAM and suspend
to disk. The Apache comes with Twinhead's patented (pending) battery auto
calibration system, which monitors and optimizes battery use automatically.
Using ACPI in tandem with battery auto calibration, battery life can be extended
to more than three (3) hours on one charge. The battery will automatically
recharge in approximately four (4) hours when the AC adapter is plugged in and
the notebook is in suspend mode.
INVNSYS believes the Apache is designed to be user friendly. It
offers OSD (On-Screen Display), which allows the user to see volume and
brightness changes as made. Screen brightness can be changed with special hot
keys. The modular 9.5 mm hard disk drive may be removed, thus allowing users to
switch hard disk drives quickly and keep data secure.
Phoenix. The Phoenix provides the user with accelerated graphics
in a portable package. This notebook is designed to provide all the functions of
a powerful desktop multimedia system in a compact, lightweight notebook format.
The Phoenix weighs 6.8 pounds and measures 12.2" x 9.8" x 1.6" (LxWxH). INVNSYS
believes it is slimmer and lighter than most other notebooks while providing
superior performance and convenience.
The Phoenix utilizes the Intel Pentium II 333 to 400 MHz
processors. The notebook features a 10 GB hard disk drive, an optional built-in
56 Kbps modem, two (2) PC
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Card slots with integrated CardBus and Zoomed Video, an infrared port and a
built-in 24X CD-ROM, which is interchangeable with a 2X DVD-ROM drive.
The Phoenix incorporates the 2X AGP-bus interface, which is four
(4) times faster than the fastest PCI-bus. In addition, the Phoenix offers 4 MB
of video RAM operating over a 64-bit memory bus, a VGA chip, and a hardware DVD
accelerator with MPEG II support which allows users to watch full-screen video
without dropping frames.
The Phoenix may be configured with a 1024 x 768 pixel built-in
13.3" or 14.1"(XGA) FTF screen and may be connected to an external monitor or
television via built-in ports.
For sound applications, the Phoenix offers the ESS Maestro-2M
PCI, which is the latest industry standard, is compatible with the 16-bit Sound
Blaster Pro, and supported by Microsoft DirectAudio and Direct 3D for use in
Windows NT 5.0 or Windows 98 systems. It features integrated 3D audio effects as
well as dual channel full duplex operation.
The Phoenix comes with an Intel MMC2 CPU module, which allows for
easy upgrades. In addition, the notebook's modular design allows for several
configurations. The notebook may be configured with anywhere from 32 to 256 MB
of RAM. The modular hard disk drive may be removed and replaced with an
alternate drive. Also available in the Phoenix is an LS-120 drive, which reads
and writes to 120MB Superdisks as well as standard 3.5" floppy disks. An
additional expandability option for the Phoenix is Twinhead's proprietary port
replicator, which duplicates all of the connectors that are available on the
rear side of the notebook and adds one extra PS/2 port, one stereo line-out
connector and a Game/MIDI port.
For communications, the Phoenix offers an optional 56 Kbps
fax/modem which facilitates dial-up networking, a full duplex sound system and
built-in microphone and stereo speakers which allow the Phoenix to be installed
with voicemail and speakerphone functions. Network connections are possible
through a 32-bit CardBus slot. In addition, the Phoenix offers an infrared port
which allows wireless file transfer and printing to other infrared-enabled
systems.
The Phoenix supports all the new functions provided with the
Windows 98 operating system. Power management is optimized with an advanced
power management system. Whenever the notebook's processor is not operational
for a short time, the processor becomes idle so that it consumes less power.
When the processor resumes working, it returns to full speed almost
instantaneously with no loss of performance. The Phoenix also supports
Twinhead's patented (pending) battery auto calibration system, which monitors
and optimizes battery use at the touch of a key, ensuring longer battery life.
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Printers and Peripherals
INVNSYS is an authorized distributor of Epson printers and
peripherals. INVNSYS distributes the Epson TM-U325, a low cost, high speed
transaction printer. In addition, INVNSYS distributes the Epson TM-U375, a high
speed transaction printer which has the ability to prepare and print cashier's
checks and money orders, including signatures. Management believes this feature
is not available in competing products and the inclusion of this product
increases INVNSYS' ability to offer proprietary products in the marketplace.
In December 1999, INVNSYS began offering color printers
manufactured by Tektronix, Inc. Printers include the Phaser 840 solid ink color
printer, which management believes is, as of the date of this Form 10-KSB, twice
as fast as most color printers.
Third-Party Software and Hardware Reselling
In December 1999, iBIZ acquired certain assets from PC Solutions,
Inc., a business-to-business and retail software provider. The Company also
hired three employees formerly associated with PC Solutions. Through this
acquisition, INVNSYS began selling third-party software. To date, INVNSYS is
recognizing approximately $100,000 per month in revenues from third-party
software sales.
In addition, INVNSYS recently began reselling various companies'
hardware and related supplies. Management believes the ability of INVNSYS to
offer the products of numerous companies will allow it to more effectively
provide complete network solutions.
SERVICES
Responding to market demand for complete network solutions,
INVNSYS began providing network integration services in the last quarter of
1999. Through previous contacts developed by its Chief Technology Officer prior
to joining the Company, INVNSYS acquired network integration service accounts
with American Express and Motorola.
Expanding its networking capabilities, in November 1999, INVNSYS
entered into an agreement with Northpoint Communications. Through this
agreement, INVNSYS began offering digital subscriber line ("DSL") services to
commercial customers. DSL service is an emerging technology providing high-speed
Internet connections over existing phone carriers' copper wiring at connection
speeds ranging from 144 kbps to 1.5 mbps. Management believes DSL service offers
a lower cost alternative to competing products such as T-1 and frame relay
services which provide similar connection speeds but require additional
infrastructure expenditures.
Management believes that the addition of network integration and
DSL services will allow INVNSYS to expand its customer base by enabling the
Company to offer complete networking solutions. To date, INVNSYS has not
recognized significant revenues from these new services. There can be no
assurance that INVNSYS will be successful in developing, integrating and
profiting from its network integration or DSL services.
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MARKETING, SALES AND DISTRIBUTION
INVNSYS markets and distributes products directly to end users
through a direct sales force, regional re-sellers, value-add providers in the
banking and POS market and Internet commerce sites. INVNSYS has a direct sales
force of six employees, directed by Mr. Schilling, who market INVNSYS' products
to financial institutions.
In addition to direct sales, INVNSYS also sells its full range of
products directly to retail customers through its website at www.ibizcorp.com.
The website is linked to an Online Consumer site on Yahoo! Recently, INVNSYS
entered into an agreement with Cyberian Outpost, Inc. to market INVNSYS'
products on its website www.outpost.com. To date, iBIZ has recognized only
nominal revenues from Internet retail sales. Management believes that direct
sales to end users should allow INVNSYS to more efficiently and effectively meet
customer needs by providing products which are tailored for the customer's
individual requirements at a more economical price.
INVNSYS distributes a line of Epson transactional printers.
INVNSYS participates in Epson's MasterVar program which provides INVNSYS a
non-exclusive right to sell, support and service Epson computer peripherals in
the United States and Canada.
In January, 2000, INVNSYS was named the exclusive United States
distributor of certain current and all new Harsper Co., Ltd. products and
services. The Master Distribution Agreement is effective until September 31,
2000, subject to annual renewal unless terminated by either party prior to the
then effective renewal date. After the initial period, the agreement may be
terminated subject to mutual acceptance of the parties and upon 30 days written
notice.
INVNSYS also distributes its products to regional resellers and,
to a lesser extent, national distributors. For example, INVNSYS has entered into
a vendor agreement for KeySync with MicroAge, Inc., one of the largest hardware
distributors in North America. To date however, INVNSYS has not recognized
significant revenues from its vendor agreement with MicroAge.
In February 1999, INVNSYS entered into a marketing agreement with
Global Telephone Communication, Inc. ("Global"), whereby Global will market
INVNSYS' products in the Pacific Rim. Management believes that Global, through a
joint venture with Pacific Assets International, will provide access to numerous
banks throughout Asia, including Mainland China, Hong Kong, Taiwan, South Korea,
Malaysia, Indonesia and Japan. To date however, INVNSYS has not recognized
revenues from its marketing agreement with Global.
MANUFACTURING
INVNSYS' products are engineered and manufactured by various
entities in Taiwan. Currently, INVNSYS has an agreement with DataComp, a private
Taiwanese company, to manufacture INVNSYS' keyboards and keypads. INVNSYS'
iT-8000 computers are currently manufactured by Puritron, a Taiwanese company.
INVNSYS' LCD's are
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manufactured by Sampo Technology, a Taiwanese manufacturer, and receive varying
customization ranging from cosmetic items to enhancing components such as stereo
speakers and touchpad screens from Acana Peripherals Corporation, a Taiwanese
company. The Harsper LCD panels are manufactured in South Korea. INVNSYS' Sahara
and Safari desktop computers are currently manufactured by First International
Computer in Taiwan.
These manufacturers build INVNSYS' products to INVNSYS'
specifications with non-proprietary components. Therefore, the vast majority of
parts used in INVNSYS' products are available to INVNSYS' competitors. Although
INVNSYS has not experienced difficulties in the past relating to engineering and
manufacturing, the failure of INVNSYS' manufacturers to produce products of
sufficient quantity and quality could adversely affect INVNSYS' ability to sell
the products its customers demand.
INVNSYS engages in final assembly, functional testing and quality
control of its products in its Phoenix, Arizona facility. Management believes
INVNSYS' completion of the final stages of manufacturing allows INVNSYS to
ensure quality control for its products manufactured overseas.
INVNSYS has entered into an agreement with Twinhead Corporation,
a Taiwanese manufacturer of notebook computers ("Twinhead") to produce
build-to-order notebook computers. The design, engineering and manufacturing of
INVNSYS' notebook computers is done entirely by Twinhead. Management believes
this relationship allows INVNSYS to offer a broader range of products to its
customers without the cost of research and development and manufacturing.
LICENSES
Citrix Systems, Inc. On December 30, 1998, INVNSYS entered a
licensing agreement with Citrix Systems, Inc. ("Citrix") for the use of Citrix
Independent Computing Architecture ("ICA"), an emerging industry standard for
server-based computing (the "ICA Agreement"). Under the ICA Agreement, INVNSYS
is granted a non-exclusive, non-transferable right to incorporate ICA into
Citrix-approved iBIZ computers. The license is for a term of two years and
automatically renews for successive one year periods unless either party gives
notice of an intent to allow the agreement to expire at the end of the then
current term.
In addition, INVNSYS and Citrix have entered into a Citrix
Business Alliance Membership Agreement dated February 22, 1999 (the "CBA
Agreement"). For a membership fee, CBA membership entitles INVNSYS to
engineering, sales, and marketing support by Citrix, as well as access to beta
releases of new Citrix products and discounted current software products.
Microsoft, Inc. In June 1999, INVNSYS entered into an agreement
with Microsoft, Inc. to become an OEM system builder. Participation in this
program will allow INVNSYS to install genuine Microsoft operating systems in
selected applications with full support from Microsoft. In addition, this
agreement entitles INVNSYS to pre-production
11
<PAGE> 14
versions of Microsoft products and enables INVNSYS to provide input into
development and design of new products.
KeyLink Software License. iBIZ has an exclusive, perpetual
license to use, distribute and offer for sale with associated hardware, the
software which facilitates the connection between the KeySync keyboard and the
3COM Palm devices.
PATENTS AND TRADEMARKS
INVNSYS holds no United States or foreign patents for its
products. However, iBIZ has filed a patent application for its Lapboard
keyboard. In general, INVNSYS believes that its continued success will depend
primarily upon the technical expertise, creative skills, and management
abilities of its officers, directors, and key employees rather than on patent
ownership.
iBIZ has filed an application with the United States Patent and
Trademark Office for the use of the names "iBIZ" and "KeySync" and is currently
investigating various other product trademarks.
YEAR 2000 ISSUES
Management believes that all of INVNSYS' current products are
Year 2000 compliant. In December 1999, INVNSYS completed a conversion of its
internal systems, such as accounting programs and management believes all
internal systems are Year 2000 compliant. Management estimates the Company
incurred costs of approximately $20,600 to address the Year 2000 computer issue.
To date, iBIZ has not experienced any material disruptions related to the Year
2000 computer issue. However, iBIZ can give no assurance that future failures of
third-party systems will not have a material effect on INVNSYS' operations.
SERVICE AND SUPPORT
INVNSYS provides its customers with a comprehensive service and
support program. Technical support is provided to customers via a toll-free
telephone number as well as through the iBIZ website. The number is available
Monday through Friday 8:00 a.m. to 5:00 p.m., Mountain Standard Time. INVNSYS
maintains a staff of approximately 10 technical and customer support
representatives who respond to telephone inquiries.
Also available on iBIZ's website are links to files for software
patches and drivers used for software updates.
INVNSYS' products have either a one year or three year limited
warranty covering parts and service. In addition, INVNSYS offers extended
service agreements, which may extend warranty coverage for up to two additional
years. Under the Virtual Spare program, INVNSYS provides replacement units by
next-day shipment in the event a customer's unit fails. Under this program,
customers have, at no additional expense, the option to have their existing
hard-drive configuration installed on the replacement unit. The customer's units
are then
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<PAGE> 15
returned to INVNSYS' Phoenix facility for service. Under INVNSYS' On-Site
program, customers have the ability to have a Company-owned spare on-site for
immediate availability in the event of a failure. Failed units are then returned
to INVNSYS' facility for service and returned to replace the spare for future
needs. INVNSYS believes its Virtual Spare and On-Site programs eliminate the
need for on-site technical support for the replacement units and reduce set-up
time at customer facilities.
COMPETITION
Personal Computers
The personal computer industry is highly competitive. INVNSYS
competes at the product level with various other personal computer manufacturers
and at the distribution level primarily with computer retailers, on-line
marketers and the direct sales forces of large personal computer manufacturers.
At the product level, the personal computer industry is
characterized by rapid technological advances in both hardware and software
development and by the frequent introduction of new and innovative products.
There are approximately 100 manufacturers of personal computers, the majority of
which have greater financial, marketing and technological resources than
INVNSYS. Competitors at this level include IBM, Compaq, Dell, NEC, and Gateway
2000. Gateway 2000 and NEC, among other competitors, have recently introduced
smaller desk top computers than have been manufactured in the past. However,
those computers are targeted for the consumer and not for the corporate customer
and are more expensive than the computers offered by INVNSYS. INVNSYS' main
competitors for its planned product line of thin-client computer systems include
specialty manufacturers such as WYSE Technology.
Competitive factors include product quality and reliability,
price to performance characteristics, marketing capability, and corporate
reputation. In addition, a segment of the industry competes primarily for
customers on the basis of price. Although the INVNSYS' products are price
competitive, INVNSYS does not attempt to compete solely on the basis of price.
The intense nature of competition in the computer industry
subjects INVNSYS to numerous competitive disadvantages and risks. For example,
many major companies will exclude consideration of INVNSYS' products due to
limited size of the company. Moreover, INVNSYS' current revenue levels cannot
support a high level of national or international marketing and advertising
efforts. This, in turn, makes it more difficult for INVNSYS to develop its brand
name and create customer awareness. Additionally, INVNSYS' products are
manufactured by third parties in Taiwan or Korea. As such, INVNSYS is subject to
numerous risks and uncertainties of reliance on offshore manufacturers,
including, taxes or tariffs, non-performance, quality control, and civil unrest.
Also, as INVNSYS holds no patents, the vast majority of parts used in its
products are available to its competitors.
Management believes that it can compete effectively by providing
computers and peripherals utilizing unique designs and space-saving qualities,
such as small footprints.
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<PAGE> 16
Although Management believes it has been successful to date, there can be no
assurance that INVNSYS will be able to compete successfully in the future.
Services
INVNSYS recently began offering network integration services and
DSL high-speed Internet connection services. Although management believes these
services will enable INVNSYS to expand its customer base through the offering of
complete network solutions, each service will experience intense competition.
For example, network integration services are offered by a wide range of
competitors, including large established companies such as IBM and AT&T, as well
as small private entities. Many of INVNSYS' competitors in network integration
services are be more established and have greater resources. INVNSYS has hired a
Chief Technology Officer with significant network integration experience and
industry contacts. However, as this is a new line of business, no assurance can
be given that INVNSYS will be able to expand its business through network
integration services.
Similarly, the market for Internet connection services is highly
competitive. INVNSYS' agreement with Northpoint Communications enables it to
offer DSL high-speed Internet connection services. DSL is an emerging technology
which allows for higher speed connections over existing copper phone lines.
Currently, large established companies such as U.S. West Communications, COX
Communications and Rhythms NetConnections, Inc. offer DSL services. Management
believes that these companies' greater resources may increase market awareness
and acceptance of DSL services. However, as INVNSYS has only recently entered
the market for Internet connection services, there can be no assurance that it
can successfully compete in the marketplace.
Reselling
As part of its efforts to provide complete networking solutions,
in December 1999, INVNSYS began reselling third-party hardware, software and
related supplies to business customers. The market for reselling these products
is highly competitive. INVNSYS competes against a wide range of competitors,
including the direct sales forces of companies such as COMP USA, and ASAP
Software Express, a division of Corporate Express, Inc., and mail order
companies such as Insight, and Computer Discount Warehouse. Many of INVNSYS'
competitors are more established and have greater resources. Management believes
that INVNSYS can compete effectively in this market segment in that INVNSYS can
provide complete network solutions in conjunction with competitively priced
third-party hardware, software and related supplies. To date, management
estimates that the reselling of third-party software has generated sales of
approximately $100,000 per month. However, there is no assurance that iBIZ's
relationship with its third-party suppliers will continue, that such revenue
levels will be sustained or that the Company will be able to effectively compete
in the third-party reselling market segment.
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<PAGE> 17
CUSTOMERS
Throughout its history, INVNSYS' ability to deliver innovative
product designs and quality customer service has enabled it to provide products
to major financial institutions including Wells Fargo, Bank of America, Security
Pacific, Northrim Bank, and First Interstate Banks. Currently, no single
customer accounts for more than 10% of INVNSYS' revenues.
EMPLOYEES; LABOR RELATIONS
As of January 27, 2000, INVNSYS had approximately 27 full-time
employees. No employee of INVNSYS is represented by a labor union or is subject
to a collective bargaining agreement. INVNSYS has never experienced a
work-stoppage due to labor difficulties and believes that its employee relations
are good.
FCC REGULATIONS
The Federal Communications Commission (the "FCC") has adopted
regulations setting radio frequency emission standards for computing equipment.
Management believes all of INVNSYS' current products meet applicable FCC and
foreign requirements.
INVNSYS is in the process of exploring foreign operations. Many
foreign jurisdictions require governmental approval prior to the sale or
shipment of personal computing equipment and in certain jurisdictions such
requirements are more stringent than in the United States. Any delays or
failures in obtaining necessary approvals from foreign jurisdictions may impede
or preclude INVNSYS' efforts to penetrate such markets.
USE OF TRADEMARKS AND TRADENAMES
All trademarks and tradenames used in this Form 10-KSB are the
property of their respective owners.
RISK FACTORS
We Have A History Of Losses And Anticipate Future Losses
For the fiscal year ended October 31, 1999, we sustained a net
loss of approximately $1,053,563. Future losses are anticipated to occur. Our
success in obtaining additional funding will determine our ability to continue
operations. We have insufficient cash flow to sustain or grow operations. We
cannot assure you that we will be successful in reaching or maintaining
profitable operations.
We Will Require Additional Capital In the Future
We have spent, and will continue to spend, substantial funds on
product research and development and expansion of our sales and marketing
efforts. As a result, we will need to raise short-term capital to maintain our
ongoing business. We are actively seeking to obtain a significant capital
infusion to avoid continuing reliance on short-term capital sources. On
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<PAGE> 18
December 29, 1999, we issued convertible debentures in the amount of $1,000,000.
We currently anticipate the proceeds will be sufficient to maintain our ongoing
business until March 2000. However, we cannot assure you that unforeseen events
will not result in the need for additional capital sooner than we currently
anticipate. If at any time we are unable to raise additional financing, we may
be forced into insolvency.
Debt financing may include restrictive covenants, such as
restrictions on incurring additional debt. If we are unable to raise additional
funds when necessary, we may have to reduce planned expenditures, scale back our
product developments, sales or other operations, enter into financing
arrangements on terms that we would not otherwise accept or be forced into
insolvency.
The Market is Highly Competitive
The market for our products is intensely competitive. We expect
to experience significant and increasing levels of competition. We compete
principally in the following areas:
- Product Quality and Reliability
- Product Performance
- Level of Customer Service
- Ability to Meet Customer Requirements
- Brand Awareness
- Price
In many of our markets, traditional computer hardware
manufacturing companies provide the most significant competition. Our
competitors include a substantial number of large public companies, including
IBM, Compaq Computer Corporation, Dell Computer Corporation, Toshiba, Gateway
2000 and NEC.
Most of our competitors are much larger, benefit from greater
name recognition and have significantly greater resources than we do. This
subjects us to numerous competitive disadvantages. For example, our current
revenue levels limit our ability to market and advertise on a national or
international level. This in turn makes it more difficult for us to increase
brand awareness. We could be forced to reduce prices and suffer reduced margins
or market share due to increased competition from manufacturers or distributors
of products similar to or competitive with our product.
We Need to Expand our Product Range
To effectively compete, we need to continue to expand our
business and generate greater revenues so that we have the resources to timely
develop new products. We must continue to market our products and services
through our direct sales force and expand our e-commerce distribution channels.
We cannot assure you that we will be able to grow sufficiently to provide the
range and quality of products required to compete.
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<PAGE> 19
We Must Keep Pace with Rapid Technological Change to Remain
Competitive
The computer industry is characterized by rapidly changing
technology, evolving industry standards, frequent new product introductions and
enhancements and changing customer demands. We must develop and introduce new
products that keep pace with technological developments. If we fail to introduce
progressive new products in a timely and cost-effective manner, our financial
performance may be negatively affected.
Some of Our Products Target Niche Markets
We sell a line of "small footprint" computers. (The footprint is
the amount of desk space a computer requires.) We are also currently developing
a "thin client" computer system designed to utilize thinly equipped terminals
with limited memory and no local storage capability connected to central
servers.
We believe that the small footprint and thin client computer
segments of the industry present business opportunities because they are
underdeveloped markets. However, we also believe that the number of competitors
offering these products will grow over the next several years. For example,
competitors such as Gateway 2000 and NEC have recently introduced computers
targeted to consumers requiring less desk space. We compete in the thin client
market segment with well established companies such as Wyse Technology. We
believe that Wyse may hold over 45% of the world-wide general purpose terminal
market. We cannot guarantee you that small footprint products will gain or even
sustain current market share or that our thin client products will achieve
market acceptance. In addition, our products could be rendered obsolete and
unmarketable if our competitors introduce new technology or new industry
standards emerge.
Recent Consolidations May Limit Our Markets
One of our primary markets is the banking and financial
institution industry. Recently, many banking and financial institutions have
begun to consolidate. Although the number of potential customers decrease during
consolidation, many banking and financial institutions upgrade their computer
networks. We cannot assure you that the demand for our products by banking and
financial institutions will not decrease as a result of the consolidation.
Our Products Must Be Compatible With Third-Party Software
Although we market computer hardware and peripherals, we
currently do not develop software. Consequently, we are dependent upon
third-parties to develop software applications that operate on our hardware
platforms. If software providers do not continue to provide software acceptable
to our customers, our sales may suffer.
We cannot guarantee that all available software will be
compatible with our products or that we will have the technical personnel
necessary to evaluate and fix software compatibility problems that may arise. If
we do not have technical personnel available, our sales may decline.
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<PAGE> 20
We Are Dependant On Our Manufacturers And Suppliers
Our business depends upon obtaining adequate quantities of
products from our manufacturers and suppliers. Consequently, our results of
operations are dependant, in part, upon our manufacturers' and suppliers'
ability to produce reasonably priced products in adequate amounts to meet our
demands.
Currently, our computers and peripherals are engineered and
manufactured by various entities in Taiwan or Korea. Although we have not
experienced significant problems with our manufacturers and suppliers in the
past, we may experience such problems in the future. We are also subject to
risks of fluctuations in our component prices. If prices charged by our vendors
increase, our costs of goods sold and net income would be adversely affected.
Currently, we believe there is a shortage of liquid crystal
display monitors. To date, we have not experienced difficulty in obtaining these
monitors. In addition, we recently entered into an agreement with Harsper Co.,
Ltd. to act as the exclusive United States distributor for their liquid crystal
display monitors. If our business expands and monitor supplies remain low, we
may experience difficulty in meeting customer demand.
We cannot assure you that our positive relationships will
continue or that in the event of a termination of a relationship with a
manufacturer or supplier, we would be able to obtain alternative sources of
manufacturing or components without a material disruption in our ability to
provide products to our customers. A material disruption of our ability to
supply computers and peripherals to our customers would have a material adverse
effect on our sales and results of operations.
We Must Continue to be Authorized to Incorporate Manufacturer
Authorized Products
We are dependant on our continued authorization to provide
manufacturer authorized products, including certain software products.
Currently, the Company is authorized by industry-leading software developers,
such as Citrix Systems, Inc. and Microsoft to incorporate their software in our
products. Without such authorization, we would be unable to provide the same
range of products currently offered. We cannot assure you that manufacturers
will continue to authorize use of their software in our computers and
peripherals.
We Have Recently Added New Lines of Business
We recently began offering network integration services and
digital subscriber line or DSL high-speed Internet communications services. To
aid in the development of these services, we have hired a Chief Technology
Officer with significant experience and industry contacts. However, we cannot
assure you that we will develop and implement successful marketing strategies
for these new services. In addition, as DSL services are an emerging technology,
we cannot assure you that this technology will gain market acceptance.
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<PAGE> 21
Our Network Integration and DSL Services Face Intense Competition
We recently began offering network integration services and DSL
high-speed Internet communications services. The market for these products is
highly competitive. Our network integration services will compete against a wide
range of competitors from large established companies such as IBM and AT&T to
smaller private entities. Our DSL services will compete with companies such as
U.S. West Communications, COX Communications and Rhythms NetConnections.
Although these companies are more established, we believe their greater
resources may increase market awareness and acceptance of DSL services. This, in
turn, may make it easier for us to sell DSL services. We cannot assure you,
however, that our new DSL services will enable us to expand our customer base
and generate greater revenues.
We Recently Began Offering Third-Party Hardware, Software and
Related Supplies
We recently began selling third-party hardware, software and
related supplies in the highly competitive, business-to-business market.
Management anticipates a significant portion of revenues will be generated by
sales of hardware, software and related supplies developed by third parties.
Should third-party suppliers decide to sell their products through their own
direct sales forces or should competitors develop hardware, software and related
supplies which replace that provided by the Company's suppliers, the revenues
generated by these sales could materially decline.
We Have Few Proprietary Rights
We attempt to protect our limited proprietary property through
copyright, trademark, trade secret, nondisclosure and confidentiality measures.
Such protections, however, may not preclude competitors from developing similar
technologies.
Currently, we hold no patents and most of the technology used in
the design and manufacturer of our computers and peripherals is known and
available to others. Although we are exploring patent protection for one of our
keyboard products, we believe that our competitive position is based on the
ability to successfully market innovative computers and peripherals rather than
on patented technologies.
Although we believe that our products do not infringe on any
third party's intellectual property rights, we cannot be certain that we will
not become involved in litigation involving proprietary rights. Intellectual
property rights litigation entails substantial legal and other costs. We do not
know if we will have the necessary financial resources to defend or prosecute
our rights in connection with any litigation.
There Is A Limited Market For Our Common Stock
Currently only a limited trading market exists for our common
stock. Our common stock trades on the OTC Bulletin Board under the symbol
"iBIZ." The Bulletin Board is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ system. Any
broker/dealer that makes a market in our stock or other person that buys or
sells our stock could have a significant influence over its price at any given
time. We cannot
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assure you that the market in our common stock will be sustained. As a result,
holders of our common stock may be unable to readily sell the stock they hold or
may not be able to sell it at all.
Our Stock Price has Been Volatile
The history relating to the prices of newly public companies
indicates that there may be significant volatility in the market price of our
common stock. More particularly, since trading began in July 1998, the market
price of our common stock has fluctuated between a low of $0.56 per share and a
high of $3.06 per share, a 545% variance. As a result, holders of our common
stock may be subject to wide fluctuations in the value of their investment.
We Are Dependent on Key Personnel
Our future success is dependent, in part, upon our five executive
officers and other key employees. A loss of one or more of our current officers
or key employees could negatively impact our operations. However, we have
entered into employment agreements with our executive officers and other key
employees. We currently do not carry key-man life insurance policies for our
executive officers. We cannot assure you that we will not suffer the loss of key
human resources.
Our Officers and Directors Can Exercise Control Over All Matters
Submitted to a Vote of Shareholders
As of January 27, 2000, our executive officers and directors
beneficially owned an aggregate of approximately 57% of our outstanding common
stock. These officers, acting together, will be able to effectively control
matters requiring approval by our shareholders, including election of members to
our board of directors. As a practical matter, current management will continue
to control iBIZ for the foreseeable future.
ITEM 2 DESCRIPTION OF PROPERTY
On July 1, 1999, iBIZ began leasing an approximately 15,000
square foot custom-built office building located at 1919 West Lone Cactus,
Phoenix, Arizona. The facility is used for administration, design, engineering
and assembly of products. iBIZ's lease ("Lease") is for a term of twenty-six and
one-half years (26.5), with monthly rental payments of $12,800, subject to
annual increases, plus taxes and operating costs.
The facility is leased from Lone Cactus Capital Group, L.L.C., a
limited liability company in which Kenneth Schilling is a member. The Lease is
personally guaranteed by Mr. Schilling and his wife, Diane. Management believes
this new facility will provide adequate space to accommodate the iBIZ's current
plan of growth and expansion.
ITEM 3 LEGAL PROCEEDINGS
iBIZ is not currently a party to any lawsuit or proceeding.
However, from time to time, iBIZ is subject to lawsuits occurring in the regular
course of business. Most such lawsuits
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involve claims for money damages. iBIZ carries insurance to protect itself
against such claims, subject to any applicable deductibles. iBIZ can give no
assurances that future lawsuits will not have a material adverse effect on its
financial condition or results of operations.
iBIZ has been assessed approximately $62,000 in penalties and
interest by the Internal Revenue Service. The Company is disputing the
assessment and is currently negotiating with the IRS. iBIZ can give no assurance
that any settlement can be reached for an amount less than $62,000.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
No matters were submitted to a vote by shareholders during the
fourth quarter of the fiscal year ended October 31, 1999.
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PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is currently traded on the OTC
Bulletin Board. The common stock was initially listed under the symbol "EVCV" on
June 3, 1998, and trading began on July 16, 1998. On October 26, 1998, the
Company changed its trading symbol to "IBIZ." The following charts indicate the
high and low sales price for the Company's common stock for each quarter between
September 30, 1998 and December 1999.
1998 COMMON STOCK PRICES
EVCV -- iBIZ
[1998 COMMON STOCK PRICES iBIZ GRAPH]
<TABLE>
<CAPTION>
QUARTER ENDED
Sept. 98 Dec. 98
-------- -------
<S> <C> <C>
High $3.06 $2.69
Low $2.25 $1.88
</TABLE>
1999 COMMON STOCK PRICES iBIZ
[1999 COMMON STOCK PRICES iBIZ GRAPH]
<TABLE>
<CAPTION>
QUARTER ENDED
Mar. 99 Jun. 99 Sep. 99 Dec. 99
------ ------ ------ -------
<S> <C> <C> <C> <C>
High $2.06 $2.44 $2.22 $1.81
Low $0.94 $0.56 $0.94 $0.84
</TABLE>
As of January 6, 2000, Management believes there to be 126
holders of record of iBIZ's common stock. To date, iBIZ has not paid any
dividends on its common stock. iBIZ does
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not currently intend to pay dividends in the future. iBIZ is prohibited from
declaring or paying dividends while certain debentures and warrants are
outstanding.
Sales of Unregistered Securities During Fiscal Year Ended
October 31, 1999
Between November 13, 1998 and January 13, 1999, iBIZ issued
540,318 shares of common stock, $.001 par value, at a sales price of $.35 per
share totaling $189,111.30. iBIZ relied upon Regulation D, Rule 506 promulgated
under the Securities Act with respect to these sales.
Effective January 1, 1999, iBIZ entered into a Plan of
Reorganization and Share Exchange Agreement with INVNSYS and the below
referenced individuals. Pursuant to the Reorganization, iBIZ issued 16,000,000
shares of common stock, $.001 par value, in exchange for one hundred percent
(100%) of the outstanding shares of INVNSYS. The shares were allocated as
follows:
<TABLE>
<CAPTION>
NO. OF SHARES
-------------
<S> <C>
Moorea Trust dated December 18, 1991 12,120,000
Terry Ratliff 1,771,200
Mark Perkins 1,771,200
Paul Russo 46,400
Frank Ligammari 33,600
Richard Bielfelt 28,800
Terry Neild 228,800
</TABLE>
The shares issued by iBIZ were issued pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").
From March 8, 1999 through November 18, 1999, iBIZ issued
1,730,100 shares of common stock, $.001 par value, at a sales price of $.50 per
share and 640,318 shares of common stock, $.001 par value, at a sales price of
$.35 totaling an aggregate of $1,089,161. iBIZ relied upon Regulation D, Rule
506 promulgated under the Securities Act with respect to these sales.
From April 22, 1999 through May 13, 1999, iBIZ issued options to
purchase 2,850,000 shares of common stock, $.001 par value to employees and
various consultants. The exercise price of the options is the fair market value
on the date of grant, which ranged from $0.75 to $1.00 per share. iBIZ relied
upon either Rule 701 or Section 4(2) with respect to the granting of the
options.
On June 30, 1999, iBIZ issued Two Hundred Thousand Dollars
($200,000.00) of 8% Debentures. The 8% Debentures are due on June 21, 2000, bear
interest at eight percent (8%) per annum, and are unsecured. Under the terms of
the 8% Debentures, iBIZ is obligated to include the shares issuable upon
conversion of the 8% Debentures in this registration statement. Upon the
effectiveness of this registration statement, the 8% Debentures shall
automatically convert to 300,000 fully paid and nonassessable shares of common
stock, $.001 par value.
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Effective May 1999, iBIZ issued a warrant entitling the holder to
acquire 400,000 shares of common stock, $.001 par value, at an exercise price of
$0.75 per share for the first 300,000 shares and $1.00 per share for the
remaining 100,000 shares.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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>
Year Ended
----------
10/31/97 10/31/98
-------- --------
<S> <C> <C>
Statement of Operations Data
Net sales $ 2,350,459 $ 3,402,681
Gross profit $ 771,019 $ 1,182,885
Operating income (loss) $ (403,889) $ 112,882
Net earnings (loss) after tax $ (321,109) $ 7,863
Net earnings (loss) per share $ (32.11) $ 0.79
</TABLE>
<TABLE>
<CAPTION>
10/31/97 10/31/98
-------- --------
<S> <C> <C>
Balance Sheet Data
Total assets $ 1,309,954 $ 1,653,998
Total liabilities $ 1,821,151 $ 1,999,231
Stockholders' equity (deficit) $ (511,197) $ (345,233)
</TABLE>
<TABLE>
<CAPTION>
Year Ended
----------
10/31/98 10/31/99
-------- --------
<S> <C> <C>
Statement of Operations Data
Net sales $ 3,402,681 $ 2,082,515
Gross profit $ 1,182,885 $ 399,610
Operating income (loss) $ 37,600 $(1,074,180)
Net earnings (loss) after tax $ 7,863 $(1,053,563)
Net earnings (loss) per share $ 0.79 $ (.04)
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
Balance Sheet Data
<S> <C> <C>
Total assets $ 1,653,998 $ 1,043,030
Total liabilities $ 1,999,231 $ 1,476,559
Stockholders' equity (deficit) $ (345,233) $ (433,527)
</TABLE>
RESULTS OF OPERATIONS.
Fiscal year ended October 31, 1998 compared to fiscal year ended October 31,
1997.
Revenues. Sales increased by approximately 45% from $2,350,459
for the fiscal year ended October 1997 to $3,402,681 for the fiscal year ended
October 1998. The increase was mainly as a result of greater demand for INVNSYS'
iT business application products and new product introductions and shipments for
its keyboards.
Cost of Sales. The cost of sales increased by approximately 41%
from $1,579,440 in the fiscal year ended October 1997 to $2,219,796 in the
fiscal year ended October 1998. The increase in cost of sales is attributable to
a similar percentage increase in sales and reflects hardware costs which
remained fairly stable over the two-year period.
Gross Profit. Gross profit increased from approximately $771,019
in October 1997 to $1,182,885 in October 1998. The increase resulted primarily
from the increase in revenues coupled with a slight decline in the costs of
products components.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses decreased approximately 9% in the fiscal year ended
October 1997 to the fiscal year ended October 1998. The decrease resulted
primarily from cost reductions in promotion, insurance, payroll, payroll taxes,
rent, telephone and entertainment.
Interest Expense. Interest expense of $75,282 for the fiscal year
ended October 1998 and of $74,147 for the fiscal year ended October 1997 was
accrued on notes payable to Community First National Bank (primarily extended
for working capital purposes).
Income Taxes. Because INVNSYS incurred a loss of approximately
$471,130 for the fiscal year ended October 1997, INVNSYS obtained a refund of
$150,021. For the fiscal year ended October 1998, INVNSYS incurred taxes of
$75,372 even though income before taxes was only $83,235. The significant tax on
nominal income resulted from certain non-deductible expenses.
Net Earnings. A loss in fiscal year October 1997 of $321,109
increased to a profit of $7,863 for fiscal year ended October 1998.
Profitability resulted primarily from a dramatic increase in sales and a
decrease in selling, general and administrative expenses.
25
<PAGE> 28
Fiscal year ended October 31, 1999 compared to fiscal year ended October 31,
1998.
Revenues. Sales decreased by approximately 63% from $3,402,681 in
the fiscal year ended October 1998 to $2,082,515 in the fiscal year ended
October 1999. The decrease was mainly as a result of the focus by management on
raising financing for iBIZ and a transition to a new line of products. INVNSYS
experiences short product life cycles and the declining revenues reflect
declining sales volumes for existing products which were not replaced by any
significant sales of new products, and which management estimates did not exceed
$10,000.
Cost of Sales. The cost of sales of $2,219,796 in the fiscal year
ended October 1998 declined to $1,682,905 in the fiscal year ended October 1999,
or an approximate 32% decrease. This decline reflects a coinciding decrease in
the sale of products resulting in the purchase of less hardware from INVNSYS'
overseas suppliers.
Gross Profit. Gross profit decreased by approximately 66% from
$1,182,885 in the fiscal year ended October 1998 to $399,610 in the fiscal year
ended October 1999. The significant decrease resulted primarily from the
decrease in revenues coupled with the cost of sales which did not decrease in
direct proportion to the decrease in revenues. Gross profits also decreased as a
result of selling more products to retailers at lower prices and a decline in
maintenance service income, both of which reflected greater competitiveness in
the product sector.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased approximately 38% from $1,070,003 in the
fiscal year ended October 1998 to $1,473,790 for the fiscal year ended October
1999. The increase was primarily due to costs of consulting paid in connection
with the acquisition, legal and accounting fees associated with the acquisition
and an increase in the salaries of INVNSYS' key employees.
Interest Expense. Interest expense of $28,260 for the fiscal year
ended October 1999 and of $75,282 for the fiscal year ended October 1998 was
accrued on notes payable to Community First National Bank primarily extended for
working capital purposes. The decline in interest expense resulted from
repayment of most of the principal of the notes in June, 1999.
Net Earnings. Net earnings decreased from $7,863 for the fiscal
year ended October 1998 to a loss of $1,053,563 for the fiscal year ended
October 1999. The loss resulted from an increase in the selling, general and
administrative expenses, a cost of sales decrease which was not in proportion to
the significant decrease in revenues, and a substantial decrease in revenues for
the fiscal year ended October 1999.
Liquidity and Capital Resources
For the year ended October 1997, INVNSYS supplemented cash flow
with proceeds from notes payable of approximately $138,000. At year end, INVNSYS
had an overdraft of $14,133. For the year ending October 1998, INVNSYS received
an advance from iBIZ Technology Corp. (prior to the acquisition) for
approximately $158,101. INVNSYS also
26
<PAGE> 29
repaid notes of approximately $211,631. For the fiscal year ended October 1999,
INVNSYS had an overdraft of $13,700.
Historically, INVNSYS has had and now iBIZ has significant
problems with liquidity. The Company has been unable to generate sufficient
internal cash flow to fund all of its obligations. Outside sources of financing
consisting of bank loans have been insufficient. While INVNSYS pays most of its
suppliers in full prior to delivery of product by its manufacturers of hardware
in Taiwan, its banking customers are not obligated to make payments until 30
days after delivery of products. 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. Entry into
additional lines of business have required ever increasing capital infusions.
During 1999, INVNSYS repaid $225,000 on an outstanding loan from
Community First National Bank in the amount of $350,000 and delinquent payroll
taxes, penalties and interest of approximately $260,000.
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. Pursuant to the applicable conversion
formula, iBIZ issued 300,962 shares of common stock.
In consideration for the purchase of the 1000k 7% Debentures,
iBIZ agreed to amend the Applicable Conversion Price of the remaining amount of
the 600k 7% Debentures. The Applicable Conversion Price, as amended, is defined
as the lesser of (i) $0.675 or (ii) the product obtained by multiplying (x) the
Average Closing Price (as defined in the 7% Debentures) by (y) .80.
The Applicable Conversion Price for the 1000k 7% Debentures, is
the lesser of (i) $0.94 or (ii) the product obtained by multiplying (x) the
Average Closing Price (as defined in the 7% Debentures) by (y) .80.
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
29, 2004.
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").
27
<PAGE> 30
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.
In connection with the first $5,000,000 raised under the Program,
iBIZ will grant to Equinet warrants to purchase three (3) shares of the
Company's common stock for each $20.00 raised, up to a maximum of 750,000
shares. The warrants will be issued concurrently with the closing of each equity
funding transaction. The exercise price of the warrants will be the average
closing price for the immediately preceding 10 business day prior to closing of
the funding. As of January 10, 2000, investors introduced by Equinet had
purchased $1.875 million of securities from the Company. iBIZ has issued
warrants to purchase 281,250 shares of common stock to Equinet. iBIZ agreed to
provide Equinet a discounted exercise price of $0.99 per share for these
warrants if the first $1.875 million were received by January 10, 2000.
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.
Beginning in November 1, 1998, and continuing through January 7,
2000, iBIZ raised approximately $3,120,411 though sales of iBIZ common stock and
convertible debentures which it used to finance the working capital needs of its
wholly-owned subsidiary, INVNSYS. Management believes that iBIZ has sufficient
reserves and will generate sufficient cash flow from operations to operate
through March 31, 2000. However, iBIZ will need to raise additional short term
capital to maintain its ongoing business beyond March 31, 2000. iBIZ is actively
seeking to obtain a significant capital infusion to avoid continuing reliance on
short term capital
28
<PAGE> 31
sources. There is no assurance that iBIZ will raise the necessary capital to
remain in business beyond March 31, 2000 or that unforeseen events may result in
the need for additional capital sooner than March 31, 2000. If at any time iBIZ
is unable to raise financing through additional sales of common stock it may be
forced into insolvency.
Management believes that its recent diversification into
third-party software sales should improve its liquidity and cash flow. This
sector of its business is already generating approximately $100,000 per month in
sales revenues and is not as capital intensive as its hardware assembly and
manufacturing sector. There is no assurance, however, that its favorable
relationship with its third party suppliers will continue or that its customers
will continue to purchase hardware and the software packages and upgrades
necessary to generate the revenue experienced since December 1999.
29
<PAGE> 32
ITEM 7 FINANCIAL STATEMENTS
IBIZ TECHNOLOGY CORP. AND
CONSOLIDATED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
TABLE OF CONTENTS
PAGE NO.
--------
INDEPENDENT AUDITORS' REPORT .......................................... F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet...................................... F-3
Consolidated Statement of Operations............................ F-5
Consolidated Statement of Changes in Stockholders' Deficit...... F-6
Consolidated Statement of Cash Flows............................ F-8-9
Notes to Consolidated Financial Statements...................... F-10-24
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
IBIZ Technology Corp. and Consolidated Subsidiary
Phoenix, Arizona
We have audited the accompanying balance sheet of IBIZ Technology Corp. and
Consolidated Subsidiary as of October 31, 1999, and the related statements of
operations, changes in stockholders' deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on the financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of IBIZ Technology Corp. and
Consolidated Subsidiary as of October 31, 1999, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As shown in the financial statements,
the company incurred a net loss of $1,053,563 during the year ended October 31,
1999, and, as of that date had a working capital deficit of $912,169 and a
shareholders' deficit of $433,527. In addition sales have declined significantly
from prior years. As discussed in note 22 to the financial statements, the
company's significant operating losses and capital needs raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
MOFFITT & COMPANY, P.C.
SCOTTSDALE, ARIZONA
January 10, 2000
F-2
<PAGE> 34
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 25,343
Accounts receivable, trade 212,300
Inventories 268,087
Prepaid expenses 38,984
--------
TOTAL CURRENT ASSETS $ 544,714
PROPERTY AND EQUIPMENT 124,747
OTHER ASSETS
Note receivable, related party 356,810
Deposits 16,759
--------
TOTAL OTHER ASSETS 373,569
----------
TOTAL ASSETS $1,043,030
==========
</TABLE>
F-3
<PAGE> 35
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 762,965
Customer deposits 115,408
Notes payable, current 67,497
Accrued liabilities 138,199
Sales and payroll taxes payable 98,774
Corporation income taxes payable 19,078
Deferred income 54,962
Convertible debentures payable 200,000
------------
TOTAL CURRENT LIABILITIES $ 1,456,883
LONG-TERM LIABILITIES
Notes payable 19,674
------------
TOTAL LONG-TERM LIABILITIES 19,674
STOCKHOLDERS' DEFICIT
Common stock
Authorized -- 100,000,000 shares, par
value $.001 per shares
Issued and outstanding -- 26,370,418 shares 26,370
Paid in capital in excess of par value of stock 1,106,266
Advance on stock subscription 75,000
Retained earnings (deficit) ( 1,641,163)
------------
TOTAL STOCKHOLDERS' DEFICIT ( 433,527)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 1,043,030
===========
</TABLE>
F-4
<PAGE> 36
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C> <C>
SALES $ 2,082,515
COST OF SALES 1,682,905
-----------
GROSS PROFIT 399,610
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,473,790
-----------
(LOSS) BEFORE OTHER INCOME (1,074,180)
OTHER INCOME (EXPENSE)
Cancellation of debt $ 154,933
Other income 32,339
Interest income 28,260
Interest expense (58,085)
---------
TOTAL OTHER INCOME, NET 157,447
-----------
(LOSS) BEFORE INCOME TAXES (916,733)
INCOME TAXES 136,830
-----------
NET (LOSS) $(1,053,563)
============
NET (LOSS) PER COMMON SHARE
Basic and Diluted $ (0.04)
============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic and diluted 25,116,013
============
</TABLE>
F-5
<PAGE> 37
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
SHARES AMOUNT
---------- -------
<S> <C> <C>
BALANCE, NOVEMBER 1, 1998 8,000,000 $ 8,000
ISSUANCE OF COMMON STOCK
FOR ACQUISITION OF INVNSYS
TECHNOLOGY CORPORATION
AND TRANSFER OF NET ASSETS
AT BOOK VALUE PER REVERSE
ACQUISITION 16,000,000 16,000
ISSUANCE OF COMMON STOCK
FOR CASH
AT .354 CENTS PER SHARE 640,318 640
AT .504 CENTS PER SHARE 1,730,100 1,730
FEES AND COSTS FOR ISSUANCE
OF STOCK 0 0
ADVANCES ON STOCK SUBSCRIPTION 0 0
NET (LOSS) FOR THE YEAR ENDED
OCTOBER 31, 1999 0 0
---------- -------
BALANCE, OCTOBER 31, 1999 26,370,418 $26,370
========== =======
</TABLE>
F-6
<PAGE> 38
<TABLE>
<CAPTION>
PAID IN
CAPITAL IN
EXCESS OF ADVANCES RETAINED
PAR VALUE ON STOCK EARNINGS
OF STOCK SUBSCRIPTIONS (DEFICIT)
---------- ------------- ------------
<S> <C> <C> <C>
$ 145,282 $ 154,111 $ (74,266)
0 0 (513,334)
223,471 0 0
863,320 (154,111) 0
(125,807) 0 0
0 75,000 0
0 0 (1,053,563)
---------- ---------- ------------
$1,106,266 $ 75,000 $(1,641,163)
========== ========== ============
</TABLE>
F-7
<PAGE> 39
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (1,053,563)
Adjustments to reconcile net (loss) to
net cash (used) by operating activities
Depreciation 42,104
Increase (decrease) in
Accounts receivable, trade (58,764)
Other receivables 1,500
Inventories 55,310
Prepaid expenses (11,984)
Deferred tax asset 145,054
Deposits 3,396
Accounts payable (26,898)
Customer deposits (279,856)
Accrued liabilities and taxes (80,443)
Deferred income (16,069)
------------
NET CASH FLOWS (USED)
BY OPERATING ACTIVITIES $ (1,280,213)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (90,315)
Repayment of related party loans 634,030
------------
NET CASH FLOWS PROVIDED BY
INVESTING ACTIVITIES 543,715
</TABLE>
F-8
<PAGE> 40
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft $ (13,700)
Net proceeds from issuance of common stock 806,873
Advances on stock subscription 75,000
Proceeds from issuance of convertible debentures 200,000
Decrease in notes payable (306,532)
---------
NET CASH FLOWS PROVIDED
BY FINANCING ACTIVITIES $761,641
--------
NET INCREASE IN CASH 25,143
CASH BALANCE, NOVEMBER 1, 1998 200
--------
CASH BALANCE, OCTOBER 31, 1999 $ 25,343
========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during year:
Interest $ 56,766
========
Taxes $ 0
========
NON CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of company stock for investment in
Invnsys Technology Corporation $ 16,000
========
</TABLE>
F-9
<PAGE> 41
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The company was organized on April 6, 1994, under the laws of the
State of Florida. In January, 1999, the company acquired Invnsys
Technology Corporation, an Arizona corporation. Per the acquisition
agreement, the company issued 16,000,000 shares of newly issued
restricted common stock for 100% of the issued and outstanding
stock 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.
CORPORATION NAME CHANGES
The corporation has changed its name as follows:
1. At date of incorporation - Exotic Video City, Inc.
2. May 28, 1998 - EVC Ventures, Inc.
3. October 10, 1998 - Invnsys Holding Corporation
4. January 21, 1999 - IBIZ Technology Corp.
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.
F-10
<PAGE> 42
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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:
Tooling 3 Years
Machinery and equipment 5-10 Years
Office furniture and equipment 5-10 Years
Vehicles 5 Years
Leasehold improvements 5 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
F-11
<PAGE> 43
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
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.
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.
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 October 31, 1999, 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 $ 214,800
Allowance for doubtful accounts 2,500
----------
$ 212,300
==========
</TABLE>
F-12
<PAGE> 44
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 4 INVENTORIES
Inventories are comprised of the following:
<TABLE>
<S> <C>
Computer and components:
Finished products $ 217,236
Demonstration and loaner units 5,731
Depot units 20,089
Office 24,712
Parts 319
-----------
Total inventories $ 268,087
===========
</TABLE>
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment and accumulated depreciation consisted of:
<TABLE>
<S> <C>
Tooling $ 68,100
Machinery and equipment 39,032
Office furniture and equipment 105,627
Vehicles 39,141
Leasehold improvements 17,031
-----------
268,931
Less accumulated depreciation 144,184
-----------
Total property and equipment $ 124,747
===========
</TABLE>
The depreciation expenses for the year ended October 31, 1999 is $
42,104.
NOTE 6 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
October 31, 1999, management believed the notes would not be
collected within the current operating cycle and classified the
asset as a long-term asset. $ 356,810
===========
</TABLE>
F-13
<PAGE> 45
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 7 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 8 INCOME TAXES
<TABLE>
<S> <C>
(Loss) from continuing operations
before income taxes $ ( 916,733)
---------------
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 at U.S. Federal Statutory
income tax rates $ 136,830
---------------
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
---------------
</TABLE>
Temporary differences and carry forwards that gave rise to deferred
tax assets and liabilities included the following:
<TABLE>
<CAPTION>
DEFERRED TAX
----------------------------------
ASSETS LIABILITIES
--------------- --------------
<S> <C> <C>
Net operating loss $ 294,800 $ 0
Accrued expenses and miscellaneous 23,414 0
Tax credit carryforward 38,424 0
Depreciation 0 6,199
--------------- --------------
</TABLE>
F-14
<PAGE> 46
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 8 INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DEFERRED TAX
----------------------------------
ASSETS LIABILITIES
---------------- ----------------
<S> <C> <C>
Subtotals $ 356,638 $ 6,199
Valuation allowance ( 356,638) ( 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> <C>
Balance, November 1, 1998 $ 291,068
Addition to allowance for year ended October 31, 1999 65,570
----------------
Balance, October 31, 1999 $ 356,638
================
</TABLE>
NOTE 9 TAX CARRYFORWARD
The company has the following tax carryforwards at October 31,
1999:
<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>
F-15
<PAGE> 47
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 10 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. $ 62,426
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. 24,745
---------------
87,171
Less: current portion 67,497
---------------
Net long-term debt $ 19,674
===============
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ended October 31,
<S> <C>
2000 $ 67,497
2001 5,336
2002 5,721
2003 6,135
2004 2,482
----------------
$ 87,171
================
</TABLE>
F-16
<PAGE> 48
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 11 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> <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>
NOTE 12 CONVERTIBLE DEBENTURES
On June 30, 1999, the company authorized $200,000 of convertible
debentures. The debentures bear interest at 8%, are unsecured and
are due on June 21, 2000.
Upon the effectiveness of the required registration statements, the
debentures will automatically convert into 300,000 fully paid and
nonassessable shares of common stock of the company.
NOTE 13 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, excluding taxes and expenses, are as
follows:
<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>
NOTE 14 ADVERTISING
The company expenses all advertising as incurred. For the year
ended October 31, 1999, the company charged to operations $15,492
in advertising costs.
F-17
<PAGE> 49
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 15 INTEREST
The company incurred interest expenses for the year ended October
31, 1999 of $49,537.
NOTE 16 RESEARCH AND DEVELOPMENT COSTS
The company incurred research and development costs for the year
ended October 31, 1999 of $5,014.
NOTE 17 WARRANTY RESERVE
The company established a warranty reserve of $50,000 to cover any
potential warranty costs on computer equipment that are not covered
by the computer manufacturer's warranty.
NOTE 18 ECONOMIC DEPENDENCY
The company purchases the majority of its computer equipment from
three suppliers.
NOTE 19 OFFICERS' COMPENSATION
On March 5, 1999, the company entered into three employment
agreements with the following officers:
<TABLE>
<CAPTION>
PRESIDENT VICE
AND CHIEF VICE PRESIDENT
EXECUTIVE PRESIDENT/ OF
OFFICER COMPTROLLER OPERATIONS
--------------- --------------- --------------
<S> <C> <C> <C>
Annual compensation $ 200,000 $ 88,000 $ 88,000
=============== =============== ==============
</TABLE>
NOTE 20 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:
F-18
<PAGE> 50
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 20 STOCK OPTIONS (CONTINUED)
<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
----------
2,350,000
==========
</TABLE>
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 .75cents
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.
F-19
<PAGE> 51
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 20 STOCK OPTIONS (CONTINUED)
A summary of the stock options is as follows:
<TABLE>
<CAPTION>
SHARES
-----------------
<S> <C>
Outstanding at November 1, 1998 0
Granted during the year 2,350,000
-----------------
Outstanding at October 31, 1999 2,350,000
=================
</TABLE>
Information regarding stock options outstanding as of October 31,
1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING
PRICE EXERCISE CONTRACTUAL
RANGE SHARES PRICE LIFE
----- --------- ----------- -----------------
<S> <C> <C> <C> <C>
$.754 2,350,000 $ .75 9 years, 6 months
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
---------------------------------
WEIGHTED
AVERAGE
PRICE EXERCISE
RANGE SHARES PRICE
---------------- ------------ ---------
<S> <C> <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.
NOTE 21 PLAN OF REORGANIZATION AND STOCK EXCHANGE AGREEMENT
On January 1, 1999, the company issued 16,000,000 shares of newly
issued restricted common stock for 100% of the issued and
outstanding stock of Invnsys Technology Corporation. Invnsys
Technology Corporation became a wholly-owned subsidiary of IBIZ
Technology Corp. and the acquisition was accounted for as a reverse
acquisition.
F-20
<PAGE> 52
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 21 PLAN OF REORGANIZATION AND STOCK EXCHANGE AGREEMENT (CONTINUED)
The details of the results of operation (unaudited) for each
separate company, prior to the date of combination, that are
included in the current net income are:
<TABLE>
<CAPTION>
INVNSYS IBIZ
TECHNOLOGY TECHNOLOGY
CORPORATION CORP.
------------------ --------------------
<S> <C> <C>
Sales $ 402,127 $ 0
Cost of sales 239,704 0
------------------ --------------------
Gross profit 162,423 0
Selling, general and administrative
expenses 243,094 27,742
------------------ --------------------
(Loss) before income taxes (refund) ( 80,671) ( 27,742)
Income taxes (refund) (20,150) 0
------------------ --------------------
Net (loss) $ (60,521) $ ( 27,742)
================== ====================
</TABLE>
There were no adjustments in the net assets of the combining
companies to adopt the same accounting policies.
Each of the companies had an October 31 fiscal year so no
accounting adjustments were necessary.
An (unaudited) reconciliation of revenues and earnings reconciled
with the amounts shown in the combined financial statements is as
follows:
<TABLE>
<S> <C>
Net (loss) on IBIZ Technology Corp. at December 31, 1998 $ ( 27,742)
Add Invnsys Technology Corporation (loss)
for November 1, 1998 to December 31, 1998 ( 60,521)
Additional net (loss) from January 1, 1999 to October 31, 1999 ( 965,300)
--------------------
Net (loss) for the year ended October 31, 1999 $ ( 1,053,563)
=====================
</TABLE>
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 current liabilities
exceed current assets by $912,169 and a shareholders' deficit of
$433,527. In addition, sales have declined significantly from prior
years. As described in note 23, the company obtained $1,600,000 of
additional financing in November 1999 and December 1999.
F-21
<PAGE> 53
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 23 SUBSEQUENT EVENT
$600,000 DEBENTURE
In November 1999, the company issued $600,000 of 7% 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.
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.
12. On December 6, 1999, $200,000 plus $3,149 of accrued interest
was converted to 300,962 shares of common stock.
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 a discounted exercise price of $0.99 per
share in connection with the warrants issued for these funds.
F-22
<PAGE> 54
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 23 SUBSEQUENT EVENT (CONTINUED)
$1,000,000 DEBENTURE
In December 1999, the company issued an additional $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 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.
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.
STOCK ISSUANCE
On November 29, 1999, the company received $50,000 and issued
100,000 shares of restricted stock.
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:
F-23
<PAGE> 55
IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
NOTE 23 SUBSEQUENT EVENT (CONTINUED)
INVESTOR COMMUNICATION AGREEMENT (CONTINUED)
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.
ASSET PURCHASE AGREEMENT
On December 23, 1999, the company purchased the customer and vendor
list from PC Solutions, Inc. for a purchase price of $11,250.
In addition, the company acquired two key-employees of PC
Solutions, Inc, and entered into two employment contracts with the
following terms and conditions:
<TABLE>
<CAPTION>
EMPLOYEE ONE EMPLOYEE TWO
------------ ------------
<S> <C> <C>
Effective date December 9, 1999 December 23, 1999
Salary annual $60,000 $0
Salary - per each half-day $ 0 $250
Commissions 2%
Options -December 9, 1999 25,000 shares 0
Options - January 3, 2000 0 25,000 shares
Options - January 2, 2001 25,000 shares 0
Options - January 2, 2002 50,000 shares 0
Options - January 2, 2003 50,000 shares 0
Each month after January 3, 2000
monthly 5,000 share options to
a maximum of 50,000 shares 0 50,000 shares
Option price $1.00 per share $1.00 per share
Option vesting period Immediate Immediate
Option expiration dates 10 years 10 years
Term of employment contract 3 years Mutually agreed date
Automatic renewal Annually 0
</TABLE>
F-24
<PAGE> 56
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
<TABLE>
NAME AGE POSITION
<S> <C> <C>
Kenneth W. Schilling 47 President, Chief Executive
Officer, Director
Terry S. Ratliff(1) 41 Vice President, Controller,
Director
Mark H. Perkins 36 Vice President of Operations,
Director
Richard A. Christopher 34 Chief Technology Officer
Jeffrey A. Slosky 41 Director of Marketing
James A. Ratliff(1) 42 Chief Operating Officer
</TABLE>
(1) James Ratliff and Terry Ratliff, were, but are not currently, husband and
wife.
Kenneth W. Schilling, founded INVNSYS' predecessor, SouthWest
Financial Systems, in 1979, and has been Chief Executive Officer, President and
a Director since INVNSYS' founding. Mr. Schilling studied for a B.S. in
electrical engineering at the University of Pittsburgh from 1970 to 1972 but
left for military service prior to receiving his degree.
Terry S. Ratliff, joined INVNSYS in 1989 as controller and
currently serves as Vice President, and Controller. Ms. Ratliff was appointed to
iBIZ's Board of Directors on March 5, 1999. Ms. Ratliff graduated from Nicholls
State University in Thibodaux, Louisiana where she received a B.A. in
accounting.
Mark H. Perkins, joined INVNSYS in 1994 and currently serves as
Vice President of Operations. Mr. Perkins was appointed to iBIZ's Board of
Directors on March 5, 1999. Prior to his joining INVNSYS, Mr. Perkins was
employed at American Express as a project manager for major systems
implementation, a position he held for eight years. Mr. Perkins earned a degree
in business management from California State University-Sonoma.
Richard A. Christopher, joined iBIZ September 1, 1999, and
currently serves as Chief Technology Officer. Prior to joining iBIZ, Mr.
Christopher was the President of A Better Computer Solution, Inc., a provider of
network integration and related services he founded in
29
<PAGE> 57
1991. He also served in the U.S. Navy from 1982 through 1994. Mr. Christopher
attended Arizona State University where he studied engineering.
Jeffrey A. Slosky, joined iBIZ as a marketing consultant in
January 1999 and became a full-time employee in July 1999. Mr. Slosky currently
serves as Director of Marketing where he is responsible for product and
corporate marketing, including the design of advertising and products sheets.
From October 1991 through November 1998, he was the founder and partner of
Scottsdale Cellular, LLC, a provider of cellular telecommunications technology.
Mr. Slosky earned a B.S. in Marketing/Advertising from Arizona State University
in 1980.
James A. Ratliff, joined iBIZ as Chief Operating Officer in
January, 2000. Prior to joining the Company, Mr. Ratliff held the position of
Director of Global Procurement at American Express from February 1998 to
December 1999. From August 1995 to January 1998, Mr. Ratliff served as
International Program Manager for AlliedSignal Aerospace, where he was
responsible for the development of international partnerships. Mr. Ratliff
earned an MBA and a BS in Purchasing Materials and Logistics from Arizona State
University, where he graduated summa cum laude in 1991.
As of the date of filing this Form 10-KSB, iBIZ is not aware of
any delinquencies of any persons in respect to required filings under Section
16(a) of the Exchange Act.
ITEM 10 EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid or
accrued by the Company to Mr. Schilling, iBIZ's current chief executive officer
during fiscal years ended 1998 and 1999.
<TABLE>
<CAPTION>
OTHER RESTRICTED
NAME AND ANNUAL STOCK LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS(1) PAYOUT COMPENSATION
($) ($) ($) ($) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth W. Schilling, 1998 $200,000 ----
President, Chief 1999 $200,000 250,000
Executive Officer
</TABLE>
(1) Includes 50,000 options granted for service as a director of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OF
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (1) IN FISCAL YEAR ($/SH) DATE
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth W. Schilling 250,000 10.6% $0.75 4/21/09
</TABLE>
(1) Includes 50,000 options granted for service as a director of the Company.
200,000 options vested upon granting on April 22, 1999, and 25,000 will
vest on April 22, 2000 and April 22, 2001 respectively.
30
<PAGE> 58
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE FISCAL YEAR END AT FISCAL YEAR END
ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth W. Schilling -0- -0- 250,000/200,000 $227,500/$182,000
</TABLE>
(1) Based on closing price of the Common Stock on October 29, 1999 of $0.91.
Compensation of Directors
Pursuant to the terms of their employment agreements, effective
April 22, 1999, Messrs. Schilling, Perkins and Ms. Ratliff each received fifty
thousand (50,000) options to purchase fifty thousand (50,000) shares of common
stock in consideration for their services as directors of iBIZ. Each director
holds office until the next annual meeting of shareholders or until their
successors are elected and qualified.
Employment Agreement for Kenneth W. Schilling
Effective March 5, 1999, Kenneth W. Schilling and iBIZ entered
into an Employment Agreement (the "Agreement"), as amended as of September 8,
1999.
Under the Agreement, Mr. Schilling has been retained to act as
President and Chief Executive Officer of iBIZ. The Agreement is for a term of
two years ending March 4, 2001. Under the Agreement, Mr. Schilling shall receive
an annual base salary of $200,000.00. In addition, effective April 22, 1999, Mr.
Schilling received two hundred fifty thousand (250,000) options to purchase two
hundred fifty thousand (250,000) shares of common stock of iBIZ at an exercise
price of $0.75 per share. Two hundred thousand (200,000) options were issued in
consideration of Mr. Schilling's services as an officer of iBIZ and fifty
thousand (50,000) options were issued in consideration for services as a
director. Two hundred thousand (200,000) options vested upon granting on April
22, 1999, and twenty-five thousand (25,000) options will vest on April 22, 2000
and April 22, 2001, respectively.
The Agreement provides that upon total and permanent disability,
as defined in the Agreement, iBIZ shall pay Mr. Schilling such benefits as may
be provided to officers of iBIZ under any Company provided disability insurance
or similar policy or under any iBIZ adopted disability plan. In the absence of
such policy or plan, iBIZ shall continue to pay Mr. Schilling for a period of
not less than six months the compensation then in effect as of the effective
date of his termination.
Mr. Schilling may terminate the Agreement upon written notice,
within thirty (30) days following the occurrence of an event constituting "Good
Reason," as defined below. Upon the termination by Mr. Schilling for Good
Reason, Mr. Shilling will be entitled to receive a payment equal to the lesser
of: (1) an amount equal to one-half of his annual base salary in effect at the
time of termination; or (2) the remaining compensation due to Mr. Schilling
under the terms of the Agreement. If Mr. Schilling fails to exercise his rights
to terminate the
31
<PAGE> 59
Agreement for Good Reason within thirty (30) days following an event
constituting Good Reason, such rights shall expire and be of no further force or
effect.
"Good Reason" is defined to mean the occurrence of any of the
following events without Mr. Schilling's consent: (1) assignment of Mr.
Schilling to any duty substantially inconsistent with his position or duties
contemplated by the Agreement or a substantial reduction of his duties
contemplated by the Agreement; (2) the removal of any titles bestowed under the
Agreement; (3) any material breach or failure of iBIZ to carry out the
provisions of the Agreement after notice and an opportunity to cure; and (4) the
relocation of Mr. Schilling, his corporate office facilities, or personnel
outside the Phoenix metropolitan area.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of January 27, 2000 by:
- all directors
- each person who is known by the Company to be the beneficial
owner of more than five percent (5%) of the outstanding
common stock
- each executive officer named in the Summary Compensation
Table below
- all directors and executive officers as a group
The number of shares beneficially owned by each director or
executive officer is determined under rules of the SEC, and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
the SEC rules, beneficial ownership includes any shares as to which the
individual has the sole or shared voting power or investment power. In addition,
beneficial ownership includes any shares which the individual has the right to
acquire within sixty (60) days of January 27, 2000, through the exercise of any
stock option or other right. Unless otherwise indicated, each person listed
below has sole investment and voting power (or shares such powers with his or
her spouse). In certain instances, the number of shares listed includes (in
addition to shares owned directly), shares held by the spouse or children of the
person, or by a trust or estate of which the person is a trustee or an executor
or in which the person may have a beneficial interest.
32
<PAGE> 60
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Beneficially Owned
- ------------------------------------------------------------------------------------------------------------
Name and Address of Vested
Beneficial Owner Shares Options (1) Total (1) Percent (1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth W. Schilling(2) ---------- 200,000 200,000 0.7 %
1919 W. Lone Cactus Drive,
Phoenix, AZ 85021
Moorea Trust(2) 11,120,000 --------- 11,120,000 40.8%
1919 W. Lone Cactus Drive,
Phoenix, AZ 85021
Terry S. Ratliff(3) 1,771,200 300,000 2,071,200 7.6%
1919 W. Lone Cactus Drive,
Phoenix, AZ 85021
Mark H. Perkins 1,771,200 300,000 2,071,200 7.6%
1919 W. Lone Cactus Drive,
Phoenix, AZ 85021
All directors and officers
as group (6 persons) 14,677,400 1,675,000 16,352,400 56.9%
</TABLE>
(1) Includes options vested on January 27, 2000 and options which will
become vested on or before March 27, 2000.
(2) Kenneth and Diane Schilling are husband and wife and hold the shares as
trustees under the Moorea Trust dated December 18, 1991.
iBIZ Technology Corp. Stock Option Plan
The iBIZ Technology Corp. Stock Option Plan (the "Stock Option
Plan") provides for the grant of stock options to purchase common stock to
eligible directors, officers, key employees, and service providers of iBIZ. The
Stock Option Plan covers an aggregate maximum of five million (5,000,000) shares
of common stock and provides for the granting of both incentive stock options
(as defined in Section 422 of the Internal Revenue Code of 1986, as amended) and
non-qualified stock options (options which do not meet the requirements of
Section 422). Under the Stock Option Plan, the exercise price may not be less
than the fair market value of the common stock on the date of the grant of the
option. As of January 27, 2000, three million four hundred thousand (3,400,000)
options ("the Options") had been granted under the plan at exercise prices of
$0.75 and $1.00. The Options are granted for a period of ten (10) years, subject
to earlier cancellation upon termination of employment, resignation, disability
and death. The Options vest pursuant to the terms of each individual option,
which to date have ranged from immediate to a five (5) year period.
The Board of Directors (the "Board") administers and
interprets the Stock Option Plan and is authorized to grant options thereunder
to all eligible persons. In the event the Board has at least two (2) members who
are not either employees or officers of iBIZ or of any parent or subsidiary of
iBIZ, the Stock Option Plan will be administered by a committee of not less than
two (2) persons who are such independent directors. The Board designates the
optionees, the number of shares subject to the options and the terms and
conditions of each option. Certain changes in control of iBIZ, as defined in the
Stock Option Plan, will cause the options to vest immediately. Each option
granted under the Stock Option Plan must be exercised, if at all, during a
period established in the grant which may not exceed ten (10) years from the
date of grant. An optionee may not transfer or assign any option granted and may
not exercise any options after a specified period subsequent to the termination
of the optionee's employment with iBIZ. The Board may make such amendments to
the Stock Option Plan from time to time it
33
<PAGE> 61
deems proper and in the best interests of iBIZ provided it may not take any
action which disqualifies any option granted under the Stock Option Plan as an
incentive stock option or which adversely effects or impairs the rights of the
holder of any option under the Stock Option Plan.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the Reorganization, INVNSYS operated as a
closely-held private corporation. While a private company, INVNSYS made loans
totaling $992,037 to Kenneth Schilling. These loans are payable on demand and
accrued interest at eight percent (8%) during 1997 and six percent (6%) during
1998 and 1999. As of October 31, 1999, the balance of the loans payable by Mr.
Schilling to INVNSYS totaled Three Hundred Fifty-six Thousand Eight Hundred Ten
Dollars ($356,810.00). Effective October 31, 1999, Mr. Schilling, as trustee of
the Moorea Trust, pledged 500,000 shares of iBIZ common stock to secure this
debt.
iBIZ leases its facility from Lone Cactus Capital Group,
L.L.C., a limited liability company in which Kenneth Schilling is a member. iBIZ
believes the terms of the lease are at an arms-length fair market rate.
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the last quarter of
the period covered by this Form 10-KSB.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.01(1) Plan of Reorganization and Stock Exchange Agreement dated January 1, 1999
3.01(1) Articles of Incorporation, as amended
3.02(1) Bylaws
5.01(3) Opinion of Gammage & Burnham, P.L.C.
10.01(1) Citrix Business Alliance Membership Agreement dated February 10, 1999, between INVNSYS and Citrix Systems, Inc.
10.02(1) Client Software License Agreement dated December 30, 1998, between INVNSYS and Citrix Systems, Inc.
10.03(1) IBIZ Technology Corporation Distributed Software License Agreement dated June 2, 1999, between iBIZ and
Jeremy Radlow
10.04(1) 3Com Designed for Palm Computing Platform Logo License Agreement, between iBIZ and
Palm Computing, Inc.
10.05(1) IBIZ Technology Corp. Stock Option Plan dated January 31, 1999
10.06(1) Form of Stock Option
10.07(1) Lease Agreement dated June 1, 1999, between iBIZ and Lone Cactus Capital Group, L.L.C.
</TABLE>
34
<PAGE> 62
<TABLE>
<S> <C>
10.08(1) Strategic Teaming and Marketing Agreement dated February 18, 1999, between iBIZ and
Global Telephone Communication, Inc.
10.09(1) Form of iBIZ Technology Corp. Common Stock Purchase Warrant
10.10(1) Form of iBIZ Technology Corp. Convertible Debenture
10.11(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and
Kenneth Schilling
10.12(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and Terry Ratliff
10.13(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and Mark Perkins
10.14(2) Securities Purchase Agreement dated November 9, 1999, between iBIZ and Globe United
Holdings, Inc.
10.15(2) 7% Convertible Debenture Due November 9, 2004, between iBIZ and Globe United Holdings,
Inc.
10.16(2) Warrant dated November 9, 1999
10.17(2) Registration Rights Agreement dated November 9, 1999, between iBIZ and Globe United
Holdings, Inc.
10.18(3) Securities Purchase Agreement dated December 29, 1999, between iBIZ and Globe United
Holdings, Inc.
10.19(3) 7% Convertible Debenture Due December 29, 2004, between iBIZ and Globe United
Holdings, Inc.
10.20(3) Warrant dated December 29, 1999
10.21(3) Registration Rights Agreement dated December 29, 1999, between iBIZ and Globe United
Holdings, Inc.
10.22(3) Subscription Agreement for Common Stock of iBIZ Technology Corp.
10.23(4) Master Distribution Agreement dated January 12, 2000, between iBIZ and Harsper Co. Ltd.
21.01(1) Subsidiaries of Registrant
23.01(3) Consent of Moffitt & Company
23.02(4) Consent of Moffitt & Company
27.02(4) Financial Data Schedule
</TABLE>
- ---------------
1. Incorporated by reference from iBIZ's Form 10-SB, File No. 027619,
filed with the SEC on October 13, 1999.
2. Incorporated by reference from iBIZ's Form 10-SB/A, File No. 027619,
filed with the SEC on December 1, 1999.
3. Incorporated by reference from iBIZ's Form SB-2, File No. 62347,
filed with the SEC on January 11, 2000.
4. Filed herewith.
35
<PAGE> 63
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant cause this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
iBIZ TECHNOLOGY CORP., INC.
By: /s/Kenneth W. Schilling
----------------------------------------
Kenneth W. Schilling
President, Chief Executive Officer,
and Director
Dated: January 27, 2000
In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/Terry S. Ratliff Vice President, Comptroller, Director January 27, 2000
- --------------------
Terry S. Ratliff
/s/Mark H. Perkins Vice President of Operations, Director January 27, 2000
- ------------------
Mark H. Perkins
</TABLE>
36
<PAGE> 64
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.01(1) Plan of Reorganization and Stock Exchange Agreement dated January 1, 1999
3.01(1) Articles of Incorporation, as amended
3.02(1) Bylaws
5.01(3) Opinion of Gammage & Burnham, P.L.C.
10.01(1) Citrix Business Alliance Membership Agreement dated February 10, 1999, between INVNSYS and Citrix Systems, Inc.
10.02(1) Client Software License Agreement dated December 30, 1998, between INVNSYS and Citrix Systems, Inc.
10.03(1) IBIZ Technology Corporation Distributed Software License Agreement dated June 2, 1999, between iBIZ and
Jeremy Radlow
10.04(1) 3Com Designed for Palm Computing Platform Logo License Agreement, between iBIZ and
Palm Computing, Inc.
10.05(1) IBIZ Technology Corp. Stock Option Plan dated January 31, 1999
10.06(1) Form of Stock Option
10.07(1) Lease Agreement dated June 1, 1999, between iBIZ and Lone Cactus Capital Group, L.L.C.
</TABLE>
34
<PAGE> 65
<TABLE>
<S> <C>
10.08(1) Strategic Teaming and Marketing Agreement dated February 18, 1999, between iBIZ and
Global Telephone Communication, Inc.
10.09(1) Form of iBIZ Technology Corp. Common Stock Purchase Warrant
10.10(1) Form of iBIZ Technology Corp. Convertible Debenture
10.11(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and
Kenneth Schilling
10.12(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and Terry Ratliff
10.13(1) Employment Agreement dated March 5, 1999, as amended, between iBIZ, INVNSYS and Mark Perkins
10.14(2) Securities Purchase Agreement dated November 9, 1999, between iBIZ and Globe United
Holdings, Inc.
10.15(2) 7% Convertible Debenture Due November 9, 2004, between iBIZ and Globe United Holdings,
Inc.
10.16(2) Warrant dated November 9, 1999
10.17(2) Registration Rights Agreement dated November 9, 1999, between iBIZ and Globe United
Holdings, Inc.
10.18(3) Securities Purchase Agreement dated December 29, 1999, between iBIZ and Globe United
Holdings, Inc.
10.19(3) 7% Convertible Debenture Due December 29, 2004, between iBIZ and Globe United
Holdings, Inc.
10.20(3) Warrant dated December 29, 1999
10.21(3) Registration Rights Agreement dated December 29, 1999, between iBIZ and Globe United
Holdings, Inc.
10.22(3) Subscription Agreement for Common Stock of iBIZ Technology Corp.
10.23(4) Master Distribution Agreement dated January 12, 2000, between iBIZ and Harsper Co. Ltd.
21.01(1) Subsidiaries of Registrant
23.01(3) Consent of Moffitt & Company
23.02(4) Consent of Moffitt & Company
27.02(4) Financial Data Schedule
</TABLE>
- ---------------
1. Incorporated by reference from iBIZ's Form 10-SB, File No. 027619,
filed with the SEC on October 13, 1999.
2. Incorporated by reference from iBIZ's Form 10-SB/A, File No. 027619,
filed with the SEC on December 1, 1999.
3. Incorporated by reference from iBIZ's Form SB-2, File No. 62347,
filed with the SEC on January 11, 2000.
4. Filed herewith.
<PAGE> 1
EXHIBIT 10.23
HARSPER CO. LTD.
1598-3, Seocho-dong,
Seocho-ku, Seoul Korea
TEL: : 82-2-525-7050
FAX: 82-2-521-6959
http://www.harsper.co.kr
[GRAPHIC OMITTED]
MASTER DISTRIBUTION AGREEMENT
WHEREAS iBiz Technology Corp (a Florida, US Corporation)
herein after referred to as "iBiz", whose principle place of business is 1919
Lone Cactus Drive, Phoenix, AZ 85027, and Harsper Co., LTD., herein after
referred to as "Harsper", whose principle place of business is 1598-3,
Renaissance #608, Seocho-Dong, Seocho-Ku, Seoul, Korea, have entered into an
exclusive United States distribution agreement for Harsper products and services
subject to the following terms, conditions, exclusions and grants.
NOW THEREFORE, for good and valuable consideration, receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF PRODUCTS. Harsper Co., Ltd hereby
grants EXCLUSIVE United States "distribution rights" for all Harsper products
and services (except as specifically identified in Attachment "A" hereto),
generally available upon execution of this agreement, and that may become
available during the term of this agreement or any extension thereof. For the
purposes of this agreement EXCLUSIVE United States distribution rights" shall
mean iBiz Technology Corp is the solely authorized channel for the distribution
of Harsper products and services within the United States. Harsper agrees to
refer all U.S. inquiries to iBiz for fulfillment and further agrees to promote,
communicate, and support through official company announcements the existence of
the relationship crafted herein.
iBiz Technology Corp hereby agrees to distribute, under the
terms of this agreement, Harsper Co., products and services, and shall become
their solely authorized agent for the sale, service, and marketing of said
products. iBiz Technology Corp. agrees to use all commercially feasible efforts
to market, promote, and support through official company announcements, direct
actions of it's sales/service staff and management, Harsper products and
services.
<PAGE> 2
iBiz Technology Corp. agrees to maintain the Harsper logo on
models HL-1330G/HL-1510G. iBiz Technology Corp may enter into branding
arrangements on other Harsper models upon the expressly granted authorization of
Harsper consistent with the terms of this agreement.
2. TERMS OF AGREEMENT. This Agreement shall become effective
as of the execution date first set forth ("Effective Date") and shall continue
in effect for a period of by September 31, 2000. This Agreement will renew
annually on the effective date of the agreement unless terminated by either
party prior to the effective renewal date. This agreement may be terminated
following the initial agreement period subject to mutual acceptance of the
parties and upon written request made in writing 30 days prior to the intended
date of termination.
3. HOLD HARMLESS AND INDEMNIFY, Harsper hereby agrees to
indemnify and save harmless iBiz from and against all claims, liability, loss,
damage or expense, including attorney's fees from a third party resulting from
claims based on the gross negligence of Harsper, it's employees, and/or agents.
iBiz Technology Corp hereby agrees to indemnify and save
harmless Harsper from and against all claims, liability, loss, damage or
expense, including attorney's fees from a third party resulting from claims
based on the gross negligence of iBiZ, it's employees, and/or agents.
Harsper shall defend or settle, at it's own expense, any cause
of action or proceeding brought against iBiz Technology Corp. which is based on
a claim that the Product infringes any United States patent, copyright or other
proprietary right, and shall indemnify and hold iBiz harmless against any final
judgment that may be awarded by a Court of competent jurisdiction against iBiz
as a result of the foregoing, including any award of attorneys' fees; provided
however, that iBiz shall give Harsper prompt notice of such cause of action or
proceeding and shall provide Harsper with all reasonable cooperation and
information in iBiz Technology Corp's possession.
In the event of a claim that the Products infringe any United
States patent, copyright, or other proprietary right or if Harsper reasonably
believes that a likelihood of such claim exists, Harsper may, in its sole
discretion, procure for iBiz Technology Corp. the right to continue using,
marketing, and or distributing the Products, modify the Products to make it
non-infringing, or replace the Products with non-infringing computer hardware of
similar capabilities.
Harsper shall have no liability to iBiz for infringement
pursuant to this, paragraph if such claim of infringement is based solely on:
(1) combination of the Products with other computer hardware or devices not
approved by Harsper; (2) modifications made to the Products by someone other
than Harsper; or (3) modifications made to the Products by iBIZ to meet
purchasers' requirements
<PAGE> 3
HARSPER CO., LTD.
1598-3, Renaissance, #608, Seocho-Dong,
Seocho-Ku, Seoul, Korea
Date: ____________________ By: ____________________
IBIZ TECHNOLOGY CORP.
1919 Lone Cactus Drive, Phoenix.,
AZ 85027, USA
Date: ____________________ By: ____________________
<PAGE> 4
HARSPER CO. LTD.
1598-3, Seocho-dong,
Seocho-ku, Seoul Korea
TEL: : 82-2-525-7050
FAX: 82-2-521-6959
http://www.harsper.co.kr
[GRAPHIC OMITTED]
ATTACHMENT "A"
EXCLUSIVE DISTRIBUTION PRODUCT DETAIL
1. EXCLUSIVE MODELS: All models (except TV function monitor)
HL-1210A, HL-1400A, HL-1410A, HL-1500A, HL-1510A, HL-1520R, HL-1530A,
HL-1810D(new 18.1"), HL-1330G(13.3" new model / using metal frame and glass),
HL-1510G(15.1" new model / using metal frame and glass), ALL NEW MODELS in the
future HL-1330G / HL-1510G (new model / using metal frame and glass).
This monitor comes in 3 different configurations.
A. PC monitor function with speaker B. PC monitor function with speaker +
Composite input function.
B. PC Monitor function with speaker + Composite function
C. PC monitor function with speaker + Composite input function + TV function
(Base/Foot is a little bit different design)
2. EXCLUDED PRODUCTS
The following products are excluded from this exclusive
distribution agreement based on a reseller agreement between Harsper and GATT or
other company. This agreement is for the current production model as of the
execution of this agreement. GATT or other company will continue to distribute
in the U.S. on a non-exclusive basis the current versions of the models listed
below.
HL-1510G/HL-1330G (PC monitor function with speaker +
Composite input function + TV function (current version)
<PAGE> 1
[Moffitt & Company, P.C. Letterhead]
January 25, 2000
iBIZ Technology Corp.
1919 W. Lone Cactus Drive
Phoenix, AZ 85027
As independent public accountants, we hereby consent to the use in this Form
10-KSB of our report dated January 10, 2000, and to all references to our firm
included in this Form 10-KSB.
Yours very truly,
/s/ Stanley M. Moffitt, CPA, for Moffitt & Company P.C.
- --------------------------------------------------------
Stanley M. Moffitt, CPA
Moffitt & Company, P.C.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 25,343
<SECURITIES> 0
<RECEIVABLES> 214,800
<ALLOWANCES> (2,500)
<INVENTORY> 268,087
<CURRENT-ASSETS> 544,714
<PP&E> 124,747
<DEPRECIATION> 42,104
<TOTAL-ASSETS> 1,043,030
<CURRENT-LIABILITIES> 1,456,883
<BONDS> 0
0
0
<COMMON> 26,370,418
<OTHER-SE> 1,181,266
<TOTAL-LIABILITY-AND-EQUITY> 1,043,030
<SALES> 2,082,515
<TOTAL-REVENUES> 2,082,515
<CGS> 1,682,905
<TOTAL-COSTS> 1,682,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,085
<INCOME-PRETAX> (916,733)
<INCOME-TAX> 136,830
<INCOME-CONTINUING> (1,053,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,053,563)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
