FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(x) Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number 000-26233
Techlabs, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0843965
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(IRS Employer Identification No.)
3435 Galt Ocean Drive, Fort Lauderdale, Florida 33308
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(Address of principal executive offices)
954-630-0027
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or
<PAGE>
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 (x) No ( ).
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of May 17, 2000, the
registrant had issued and outstanding 7,670,000 shares of common stock.
Transitional Small Business Disclosure Format (check one). Yes ( )
No (x)
<PAGE>
This discussion in this quarterly report regarding Techlabs and our
business and operations contains "forward-looking statements." These
forward-looking statements use words such as "believes," "intends," "expects,"
"may," "will," "should," "plan," "projected," "contemplates," "anticipates," or
similar statements. These statements are based on our beliefs, as well as
assumptions we have used based upon information currently available to us.
Because these statements reflect our current views concerning future events,
these statements involve risks, uncertainties and assumptions. Actual future
results may differ significantly from the results discussed in the
forward-looking statements. A reader, whether investing in our common stock or
not, should not place undue reliance on these forward-looking statements, which
apply only as of the date of this annual report.
When used in this Quarterly Report on Form 10-QSB, "Techlabs", "we,"
"our," and "us" refers to Techlabs Inc. and our subsidiaries Interplanner.com,
Inc. ("Interplanner"), StartingPoint.com, Inc. ("MyStartingPoint"), InternetChic
Marketing, Inc. ("InternetChic Marketing"), Tech Capital, Inc. ("Tech Capital")
and Tech Investments, Inc. ("Tech Investments").
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Consolidated Balance Sheets at March 31, 2000 (unaudited)
and December 31, 1999 2
Consolidated Statements of Operations for the three months
ended March 31, 2000 (unaudited) and 1999 (unaudited) 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 (unaudited) and 1999 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
</TABLE>
1
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(UNAUDITED)
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 2,538 $ --
Prepaid Expenses 56,250 75,000
Marketable equity securities 3,000,000 3,130,000
----------- -----------
Total Current Assets 3,058,788 3,205,000
Property and Equipment 1,119,251 1,112,218
Intangible and Other Assets
Deposits and other 5,503 5,503
Investment securities 50,000 50,000
Intangibles (Note 5) 950,000 1,000,000
----------- -----------
Total Assets $ 5,183,542 $ 5,372,721
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 324,376 $ 261,805
Due to stockholders 800,941 732,941
----------- -----------
Total Liabilities 1,125,317 994,746
STOCKHOLDERS' EQUITY
Preferred stock - special class A ($.001 par value, 12,500,000 shares
authorized, 9,000,000 shares issued and outstanding) 9,000 9,000
Common stock ($.001 par value, 50,000,000 shares
authorized, 7,370,000 shares issued and outstanding) 7,370 7,335
Additional paid-in capital 4,722,200 4,639,335
Accumulated deficit (597,002) (277,695)
----------- -----------
4,141,568 4,377,975
Less: Stockholder note receivable (83,343) -
----------- -----------
Total Stockholders' Equity 4,058,225 4,377,975
----------- -----------
$ 5,183,542 $ 5,372,721
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
2
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Ended
March 31,
2000 1999
------------ -----------
<S> <C> <C>
Revenue
Net revenues $ 12,625 $ --
Operating Expenses
Cost of revenues 31,763 --
Other general and administrative 170,647 150,416
----------- -----------
Total operating expenses 202,410 150,416
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Operating loss (189,785) (150,416)
Other Income (Expense)
Interest income 478
Unrealized loss on trading securities (130,000) --
----------- -----------
Total other income (expense) (129,522) 0
Loss before provision for income taxes and cumulative
effect of change in accounting principle (319,307) (150,416)
Provision for income taxes -- --
----------- -----------
Loss before cumulative effect of
change in accounting principle (319,307) (150,416)
Cumulative effect of change in accounting principle -- (11,849)
----------- -----------
Net income (loss) and comprehensive income (loss) $ (319,307) (162,265)
=========== ===========
Earnings per share:
Basic and diluted
Before cumulative effect of change in
accounting principle $ (0.04) $ (0.04)
=========== ===========
Net income (loss) and comprehensive income
(loss) per common share $ (0.04) $ (0.04)
=========== ===========
Basic and diluted weighted average shares outstanding 7,352,308 4,044,444
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
3
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Stockholder
--------------- ----------------- Paid-In Accumulated Note
Shares Amount Shares Amount Capital Deficit Receivable Total
------ ------ ------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999, audited - $ - 1,100,000 $ 1,100 $ 24,900 $ - - $ 26,000
February, 1999:
Issuance of restricted shares
to founders for $1,500 cash
and $118,500 in compensation. 1,500,000 1,500 118,500 120,000
Conversion of common
shares into preferred shares 9,000,000 9,000 (1,000,000) (1,000) (8,000) 0
Issuance of shares under private
placement offerings -
March 1999, at $.10 per
share net of offering
costs of $7,830 5,000,000 5,000 487,170 492,170
April 1999, at $1.00 per share 230,000 230 229,770 230,000
April, 1999 issuance of:
Restricted shares for services 5,000 5 37,495 37,500
Shares for investment securities 250,000 250 2,249,750 2,250,000
December, 1999:
Shares issued in asset
acquisition 250,000 250 1,499,750 1,500,000
Net loss and comprehensive loss (277,695) (277,695)
--------- ------- --------- ------- ----------- ---------- --------- -----------
Balance, December 31, 1999 9,000,000 9,000 7,335,000 7,335 4,639,335 (277,695) 4,377,975
Stock options exercised 35,000 35 82,865 82,900
Note receivable from stockholder (83,343) (83,343)
Net loss and comprehensive loss (319,307) (319,307)
--------- ------- --------- ------- ----------- ---------- ---------- -----------
Balance, March 31, 2000, unaudited 9,000,000 $ 9,000 7,370,000 $ 7,370 $ 4,722,200 $ (597,002) $ (83,343) $ 4,058,225
========= ======= ========= ======= =========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements
4
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Operating Activities
Net loss $(319,307) $(162,265)
Adjustments to reconcile net loss to
net cash used in operating activities
Unrealized loss (gain) on securities 130,000 --
Cumulative effect of change in accounting principle -- 11,849
Common stock issued for compensation -- 118,500
Amortization and depreciation 91,667 --
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses 18,750 --
Increase in other receivable (478) (10,000)
Increase in accounts payable 62,571 651
--------- ---------
Net Cash Used in Operating Activities (16,797) (41,265)
Investing Activities
Web site development costs (48,700) --
Purchase of marketable equity securities -- --
Deposits -- --
--------- ---------
Net Cash Used in Investing Activities (48,700) 0
Financing Activities
Advances from stockholders 68,000 --
Repayments to stockholders -- --
Advances from officer -- --
Proceeds from sale of stock 35 493,670
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Net Cash Provided by Financing Activities 68,035 493,670
--------- ---------
Change in Cash and Cash Equivalents 2,538 452,405
Cash and cash equivalents, beginning of period 0 15,000
--------- ---------
Cash and cash equivalents, end of period $ 2,538 $ 467,405
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
5
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1 - Significant Accounting Policies
Business. The accompanying unaudited condensed and consolidated financial
statements of Techlabs (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. For further information, refer to the audited
consolidated financial statements and footnotes thereto for the fiscal year
ended December 31, 1999 included in the Company's Annual Report on Form 10-KSB.
Basis of Presentation. The consolidated financial statements include the
accounts of the Company (formerly a development stage company) and its wholly
owned subsidiaries, Interplanner.com, Inc., Starting Point.com, Inc and
Internetchic.com, Inc. All material intercompany transactions have been
eliminated.
Property and Equipment. Property and equipment at March 31, 2000 consisted
principally of web-sites and related costs. Depreciation on assets placed in
service is determined using the straight-line method over the estimated useful
lives of the related assets. Significant improvements are capitalized while
maintenance and repairs are expensed as incurred. At March 31, 2000, the Company
had capitalized approximately $661,000 in development costs related to
Interplanner.com's calendar technology. The Company will begin depreciating the
related costs over a three-year period in second quarter of fiscal 2000 pursuant
to the Company's full-scale launch of the site. The Company is depreciating the
remaining $500,000 related to the purchased assets of Starting Point.com over a
three year period and recorded approximately $42,000 and $0 in expense for the
three months ended March 31, 2000 and 1999, respectively.
On an ongoing basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including costs in excess of net assets of
subsidiaries acquired. During this review, the Company reevaluates the
significant assumptions used in assessing the carrying cost of long-lived
assets. Although the assumptions may vary from transaction to transaction, they
generally include revenue growth, operating results, cash flows and other
indicators of value. Management then determines whether any adjustment is then
required for permanent impairment of the value of long-lived assets based upon
events or circumstances which have occurred since acquisition.
6
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1 - Significant Accounting Policies - (continued)
Intangibles. Intangible assets consist of domain names, trade names and
contracts related to a purchased Internet web portal site and meta-search
technology. Amortization for intangibles is determined using the straight-line
method over a five year period. Amortization expense totaled $50,000 and $0, for
the three months ended March 31, 2000 and 1999, respectively.
Investment Securities. Investment securities consist of both securities for
which there is no readily determinable market and marketable equity securities.
Investments for which there is no readily determinable market value are included
on the accompanying March 31, 2000 balance sheet among "Other Assets" at cost.
Dividends from those securities distributed to the Company are included in
income to the extent they represent earnings of the investee company. Dividends
in excess of earnings are treated as a reduction in the investment, and
indications of an other-than-temporary decline in value are treated as a
reduction in the carrying value of the investment.
Marketable equity securities are classified into one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are
acquired and held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities that the Company has the
ability and intent to hold to maturity. All other securities not included in the
trading or held-to-maturity categories are available- for-sale securities.
Management determines the appropriate classification of marketable investment
securities at the time they are acquired and evaluates the continuing
appropriateness of the classification at each balance sheet date. Trading
securities, consisting primarily of actively trading equity securities, are
stated at fair value. For valuing trading securities with temporary
restrictions, management considers the effects on quoted market prices of the
temporary restrictions in light of the volatility in prices of the specific
security. Realized and unrealized gains and losses are included in income.
Earnings Per Share. Basic earnings per share (EPS) is based on the weighted
average number of common shares outstanding during the year, whereas diluted EPS
also gives effect to all dilutive potential common shares, if any, that were
outstanding during the period. At the date of these financial statements, all of
the Company's contingent shares were anti-dilutive.
Recent Accounting Pronouncements. Statement of Financial Accounting Standards
No. 133 (SFAS 133) establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and
7
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1 - Significant Accounting Policies - (continued)
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value. This
statement, as amended by SFAS 137, is effective for financial statements for all
fiscal quarters of all fiscal years beginning after June 15, 2000. Because it
does not currently invest in derivative financial instruments or engage in
hedging activities, the Company does not expect the adoption of this standard to
have a material impact on its financial position, results of operations or cash
flows.
The Company has adopted the provisions of Statement of Position 98-1 "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use."
Accordingly, the Company has capitalized external costs incurred at March 31,
2000 of $661,918 to acquire and develop customized software and an Internet
web-site for internal use.
The Company has adopted Statement of Financial Accounting Standards No. 131
(SFAS 131) "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
stockholders. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers. The Company does not have any
reportable segments.
Note 2 - Cumulative Effect of Change in Accounting Principle
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities ("SOP
98-5"), was issued by the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants, was effective for the
Company in 1999. SOP 98-5 required the Company, in 1999, to expense costs
capitalized in 1998 associated with start-up activities. Adoption of SOP 98-5
also required the Company to report the effects of applying SOP 98-5 as a
cumulative effect of a change in accounting principles in its March 31, 1999
financial statements.
8
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 3 - Statement of Cash Flows Supplemental Disclosure
During the three months ended March 31, 2000 and 1999, the Company paid no
interest or income taxes, and the following transactions not affecting cash
occurred:
(a) The Company recorded $130,000 in unrealized losses on trading
securities during the three months ended March 31, 2000.
(b) The Company issued 1,500,000 shares of its restricted common stock
as founders' stock, valued at $120,000, of which $118,500 was
non-cash compensation for services during the three months ended
March 31, 1999.
(c) The Company issued 35,000 shares of its common stock pursuant to
the stock option plan to two employees of the Company in exchange
for promissory notes totaling $82,865 and cash proceeds of $35.
Note 4 - Investment Securities
In April 1999, the Company purchased 1,000,000 of preferred stock in
TheBigHub.com, Inc. for $627,000 in cash. In addition, the Company issued
250,000 shares of its common stock valued at $2,250,000 primarily in
consideration for the conversion of the preferred stock for an equal number of
shares of TheBigHub.com, Inc. common stock. Additionally the Company entered
into a marketing alliance with the BigHub.com.
These marketable equity securities contain legal restrictions which begin
lapsing in April 2000 and limit the number of shares that may be disposed of at
any one time by the Company. Management's intent is to liquidate its position in
these securities in the near term. Accordingly, these securities are classified
as trading securities and are comprised as follows:
Among Current Assets:
Trading securities:
Marketable equity securities, at cost $ 2,877,000
Gross unrealized gains 123,000
Marketable equity securities, at fair value $ 3,000,000
9
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 4 - Investment Securities - (continued)
In May 1999, the Company purchased for cash consideration of $50,000 a minority
interest consisting of 50,000 shares of convertible preferred stock in Focalex,
Inc., a privately held company. The investment was recorded at cost and is
included in the balance sheet at March 31, 2000 in other assets.
Note 5 - Acquisition of Assets of Starting Point, LLC
In December 1999, the Company completed its purchase of certain assets of
Starting Point, LLC, from its parent company, Yesmail.com, Inc. (Yesmail), in
exchange for 250,000 shares of the Company's restricted common stock. The
purchased assets consist principally of search engine technologies, domain
names, trade names and contracts related to Starting Point's web portal site and
meta-search technology. As part of the purchase agreement, the Company
guaranteed the value of its shares issued to Yesmail would have a minimum value
of $1.5 million one year after the date of the transaction (Note 7).
The purchase price of $1,500,000 was allocated $500,000 to the web-site and
$1,000,000 to intangibles consisting principally of domain names, trade names
and contracts. Depreciation and amortization expense totaling $91,667 was
recorded for the three months ended March 31, 2000 related to the purchased
assets. During the three months ended March 31, 2000, the Company created a
wholly owned subsidiary, Starting Point.com, Inc.
Note 6 - Commitments and Contingencies
As discussed at Note 5, the Company acquired certain assets ("assets") in
exchange for 250,000 shares of its restricted common stock. These shares carry
with them "piggyback" registration rights. Additionally, the Company has
guaranteed a minimum value of $1,500,000 for the 250,000 shares given in
exchange for the assets, such value to be determined as of the close of trading
one year from the date of the acquisition on December 7, 1999. Any deficiency in
the price of the Company's common stock is to be satisfied through the issuance
of additional shares. The per share closing price of the Company's stock at
March 31, 2000 was $3.5 indicating a deficiency of approximately $625,000
between the guaranteed value and the value of the stock given at the transaction
date.
10
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 7 - Stockholders' Equity
During the three months ended March 31, 2000 the Company issued to two employees
35,000 shares of common stock for $2.37 per share pursuant to the Company's
stock option plan. Cash proceeds from the issuance of these shares were $35 and
the Company accepted promissory notes totaling $82,865 for the balance.
During the three months ended March 31, 1999 the Company issued to its founders,
including 750,000 shares to an officer, 1,500,000 shares of common stock valued
at $.08 per share and subject to continuing legal restrictions. Cash proceeds
from the issuance of these shares were $1,500 and the Company recognized expense
of $118,500 for the balance.
During the three months ended March 31, 1999, the Company sold in a private
placement exempt from registration, 1,500,000 shares of common stock at $.10 per
share. Available with these shares were options to purchase an additional
3,500,000 shares also at a purchase price of $.10 per share. These options were
later exercised, resulting in aggregate proceeds to the Company from the two
blocks of $492,170.
Note 8 - Related Party Transactions
During the three months ended March 31, 1999, the Company converted 1,000,000
shares of the founders common stock into 9,000,000 shares of Class A special
preferred stock.
During the three months ended March 31, 2000, certain stockholders in the
Company made cash advances totaling $68,000 in order to meet the Company's
operational needs. These advances at March 31, 2000 totaled $765,941 and are
included in the balance sheet under the caption "Due to Stockholders".
Note 9 - Subsequent Event
On April 12, 2000, the Company acquired a 25% equity interest in HandRes, Inc.
in exchange for 300,000 shares of the Company's restricted common stock.
HandRes, Inc. is a developer and provider of Web-based software applications,
including reservation and business-related Internet content, targeted to
wireless handheld device users.
11
<PAGE>
Item 2.
Management's Discussion and Analysis or Plan of Operation
Results of Operations
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1999
Net revenues for the quarter ended March 31, 2000 increased $12,625, or 100%
from that of the same period of the prior year. Techlabs was still in the
development stage during the three months ended March 31, 1999 and reported no
revenues. The increase in revenues was solely attributable to advertising
revenues generated from MyStartingPoint.com, Inc. and InternetChic Marketing.
Additionally, Techlabs expects to complete its full-scale launch of
Interplanner.com during the second quarter of fiscal 2000. Techlabs believes
that its portfolio of companies will continue to develop and introduce their
products commercially, actively pursue increased revenues from new and existing
customers, and look to expand into new market opportunities during fiscal 2000.
Therefore, as a result of both increased revenues from existing companies and
incremental revenues from new acquisitions, we expect to report future revenue
growth.
Other general and administrative expenses increased $20,231, or 13% to $170,647
in the first quarter ended March 31, 2000 from $150,416 for the corresponding
period in fiscal 1999. Included in other general and administrative expenses at
March 31, 1999, is a $118,500 non-cash charge related to stock compensation paid
to an officer of Techlabs. Giving effect to this non-cash charge, other general
and administrative expenses increased $138,731 in the first quarter of fiscal
2000. A majority of the increase is attributable to amortization of intangibles
and depreciation expense related to the purchased assets of MyStartingPoint.com.
Unrealized loss on trading securities was $130,000 for the three months ended
March 31, 2000. The loss is a result of the change in the market value at March
31, 2000 compared to December 31, 1999 of Techlabs' investment in the common
stock of the BigHub.com. Techlabs did not own shares of the BigHub.com at March
31, 1999.
As a result of all the above, the Company's net loss increased by approximately
$157,042 from approximately $162,265 or $(.04) per share for the three months
ended March 31, 1999 to approximately $319,307 or $(.04) per share for the three
months ended March 31, 2000.
Liquidity and Capital Resources
12
<PAGE>
Working capital at March 31, 2000 decreased $276,783 to $1,933,471 compared to
$2,210,254 at December 31, 1999. Approximately $130,000 of the net decrease in
working capital is attributable to a decrease in the market value of Techlabs'
investment in marketable equity securities of the BigHub.com. Techlabs principal
sources of capital during the first three months of fiscal 2000 were from
stockholder advances totaling $68,000. Techlabs' principal uses of capital
during the first three months of fiscal 2000 were $16,797 for funding of
operations, and $48,700 for capitalized web site development costs related to
Interplanner.com.
Our operations to date have primarily been funded through the private placement
of securities and loans from three of our shareholders. During fiscal 1999 we
sold an aggregate of 5,230,000 shares of our common stock in two private
placements, and we received aggregate gross proceeds of approximately $722,170.
During the first quarter of fiscal 2000 three of our shareholders provided cash
advances totaling $68,000 to us to meet our operational needs. These advances,
net of repayments of $10,000, totaled approximately $800,941 at March 31, 2000.
During fiscal 2000 we will be required to make various capital expenditures to
continue the development of our subsidiaries' operations, and we will be
required to hire additional employees. As of the date of this quarterly report,
we estimate the total costs of these capital expenditures during fiscal 2000
will be approximately $3 million to $5 million. While we anticipate that we will
begin receiving revenues from our operations during the second quarter of fiscal
2000, we will also be required to raise additional capital during the next 12
months to satisfy our cash requirements. Other than capital, which is available
to us if we elect to begin liquidating our investment in TheBigHub.com, Inc., we
currently have no source for additional capital. We will in all likelihood seek
to raise additional capital through the sale of equity securities. At this time,
however, we have no agreements or understanding with any third parties regarding
additional capital, and we cannot guarantee that we will be successful in
obtaining capital upon terms acceptable to us, if at all. In that event, we may
be forced to begin to liquidate our investment in TheBigHub.com, Inc. at a time
when the capital markets are volatile and the stock price of The BigHub.com is
lower than in recent months.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
13
<PAGE>
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On April 11, 2000, Techlabs purchased 1,250,000 shares of common stock of
HandRes, Inc., representing approximately 25% of its outstanding common stock,
from a shareholder of that company. As consideration, we issued the seller
300,000 shares of our common stock, which represented approximately 4% of our
issued and outstanding stock. HandRes, Inc. granted us certain registration
rights covering the 1,250,000 shares of common stock we acquired, and we granted
the recipient of the 300,000 shares of our common stock certain registration
rights.
HandRes, Inc. is a privately-held company which is a developer and provider of
web- based software applications, including reservation and business-related
Internet content, targeted to wireless handheld device users.
In connection with Techlabs' acquisition of certain assets of StartingPoint
,L.L.C. from Yesmail.com, Inc. in December 1999, subsequent to the site's
acquisition, Techlabs also entered into a three year exclusive Network Partner
Agreement with Yesmail.com, Inc. that permits MyStartingPoint to remain a member
of the YesMail Network. This agreement provided that we will receive a portion
of the net revenue received by Yesmail.com, Inc. from promotional YesMail email
campaigns, less certain costs. In April 2000 StartingPoint.com received notice
that it had purportedly failed to correct a breach of a material term of the
Network Partner Agreement as specified in a prior letter to StartingPoint.com,
and that this agreement had been terminated. Management of Techlabs disputes the
receipt of any prior notice and is evaluating its course of action in response
to the April 2000 letter. While Techlabs' intends to aggressively defend
StartingPoint.com's rights under the Network Partner Agreement, management
cannot either make a prediction as to the outcome of this dispute or its
possible affect on the financial condition and results of operations of
Techlabs.
Item 6. Exhibits and Reports on Form 8_K.
(a) Exhibits
No. Description
-----------
14
<PAGE>
10(i) Stock Purchase Agreement dated as of April 11, 2000, by and between
Public Venture Capital, LLC, Techlabs, Inc. and HandRes, Inc.
27 Financial Data Schedule
(b) None.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Techlabs, Inc.,
a Florida corporation
Date: May 22, 2000 By: /s/ Thomas J. Taule
-- ---------------------
Thomas J. Taule,
President and Chief Executive Officer
16
<PAGE>
INDEX TO EXHIBITS
No. Description
- -- -----------
10(i) Stock Purchase Agreement dated as of April 11, 2000, by and between
Public Venture Capital, LLC, Techlabs, Inc. and HandRes, Inc.
27 Financial Data Schedule
17
Exhibit 10(i)
STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made this 11th day of April, 2000, by and between Public Venture
Capital, LLC, a New Jersey Limited Liability Company, hereinafter referred to as
"Seller" and Techlabs, Inc., a Florida corporation, hereinafter referred to as
"Purchaser" or "Techlabs". HandRes, Inc. a New Jersey corporation (the
"Company") and each of the stockholders of the Company named on the signature
page hereof (the "Stockholders") shall also execute this Agreement.
RECITAL
-------
The Company is in the business of developing technology and,
manufacturing, distributing and otherwise providing products and services
relating to wireless travel and reservations applications, including those
involving the Internet and hand held and portable computers.
1. SALE OF SHARES
--------------
Subject to the terms and conditions herein the Seller shall sell to the
Purchaser 1,250,000 shares of the Company's Common Stock ("Common Stock"), no
par value (the "Purchased Shares"). The Purchased Shares will be offered and
sold to the Purchaser without being registered under the Securities Act of 1933,
as amended (the "Act"), or in reliance on exemptions therefrom. Moreover, the
Purchaser shall be entitled to the benefits of a Company Registration Rights
Agreement dated the 28th day of January, 2000, a copy of which is attached as
Exhibit A hereto (the "Company Registration Rights Agreement"). The assignment
of the Company Registration Rights Agreement to the Purchaser shall be a
condition precedent to the Purchaser's obligations hereunder.
In consideration for the sale of the Purchased Shares by the Seller to
the Purchaser hereunder, the Purchaser shall issue to the Seller at the Closing
(as hereinafter defined) 300,000 shares of its common stock, $.01 par value per
share (the "Purchase Price"). The shares of common stock representing the
Purchase Price are being issued to the Seller hereunder pursuant to Rule 506 of
Regulation D of the Act. In connection with such issuance, the Purchaser has
granted registration rights to the Seller with respect to such common stock
pursuant to a Registration Rights Agreement dated the date hereof by and between
Purchase and Seller (the "Purchaser Registration Rights Agreement"), a copy of
which is attached as Appendix 1 hereto.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Seller represents and warrants to and agrees with the Purchaser
that:
(a) As of the Closing Date, the Company shall have the authorized,
issued
<PAGE>
and outstanding capitalization set forth on Schedule 2A. The Company has no
subsidiaries; all of the outstanding shares of Common Stock of the Company is
duly authorized and validly issued, are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights; there are no
classes of capital stock or securities of the Company, other than the Common
Stock and the preferred stock set forth on Schedule 2A; all of the Purchased
Shares will be validly issued and outstanding; the Purchaser will be vested with
good and marketable title to the Purchased Shares, free and clear of all liens,
encumbrances, equities and claims, security interests, agreements, rights of
third parties or restrictions on transferability ("Liens") (other than those
imposed by this Agreement and the Act and the securities or "Blue Sky" laws of
certain jurisdictions); there are no (i) options warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests (including preferred stock) in the Company. The
Company does not own, directly or indirectly, any shares of capital stock or any
other equity or long term debt securities or have any equity interest in any
firm, partnership, joint venture or other entity. Moreover, the Purchaser
acknowledges the restrictions and other provisions contained in that certain
Purchase Agreement by and between the Company and the Seller dated January 28,
2000, as amended pursuant to the Amendment No. 1 To Purchase Agreement dated
February 18, 2000 (the "Purchase Agreement"). Such restrictions and provisions
shall continue to apply to the shares of Common Stock held by the Seller and the
Stockholders immediately following the Closing. The Company, the Seller and the
Stockholders hereby agree that the Purchased Shares, upon transfer to the
Purchaser at the Closing, shall no longer be subject to any of the terms and
conditions set forth in the Purchase Agreement.
(b) The Company is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and conduct its
business as now conducted; copies of the current Certificate of Incorporation
and Bylaws of the Company are attached as Exhibits 2B and 2C hereto. The Company
is duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to
be so filed would not, individually or in the aggregate, have a material adverse
effect on the era affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company.
(c) The Seller has all requisite corporate power and authority to
execute and deliver this Agreement and perform its obligations hereunder and to
transfer the Company Registration Rights Agreement to the Purchaser. This
Agreement, the Company Registration Rights Agreement and the Purchaser
Registration Rights Agreement have each been executed and delivered, and
constitute the valid and legally binding agreements of the Company and the
Seller, enforceable against the Company and the Seller and in accordance with
its terms, except that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
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<PAGE>
principles of equity and the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and public policy
considerations. The Seller hereby assigns to the Purchaser, and the Purchaser
hereby assumes from the Seller, all of the Seller's rights and obligations in,
to and under the Company Registration Rights Agreement with respect to the
Purchased Shares, and the Company and the Stockholders hereby consent to such
assignment and assumption.
(d) No consent, approval, authorization, order of, license,
filing, recording or registration with or exemption by any court or governmental
agency or body or third party is required for (i) the issuance and sale by the
Seller of the Purchased Shares, or (ii) the consummation by the Company and each
of its Stockholders of the other transactions contemplated hereby, except such
as have been obtained. and such as may be required under state securities or
"Blue Sky" laws in connection with the purchase and resale of the Purchased
Shares by the Purchaser. The Seller is not (i) in violation of its certificate
of formation or operating agreement, (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them or any of
their respective properties or assets, or (iii) in breach of or default under
(nor has any event occurred which, with notice or passage of time or both, would
constitute a default under) or in violation of any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument (collectively, a "Contract").
(e) There is not pending or, to the knowledge of the Company and/or
Seller, threatened, any action, suit, proceeding, inquiry or investigation to
which the Company is a party, or to which the property or assets of the Company
is subject, before or brought by any court, arbitrator or governmental agency or
body.
(f) The Company has filed all necessary federal, state and foreign
income and franchise tax returns (the "Returns"), and has paid all taxes shown
as due thereon. The Returns accurately reflect in all material respects all
liability for taxes of the Company for the periods concerned thereby and there
is no tax deficiency that has been asserted against the Company that would have,
individually or in the aggregate, a Material Adverse Effect.
(g) The Company owns all right, title and interest in and to any and
all technology, patents, trademarks and intellectual property in any way related
to or associated with the Company's Business previously owned in whole or in
part at any time by any of the Stockholders, Syvax, Inc. or any affiliate of any
of the foregoing, including the intellectual property described in Exhibit 5A
(the "Technology"); provided, that no representation is made that there are not
any persons or entities with competing ownership claims to any of the
Technology, provided, further, that none of the Stockholders has any knowledge
of any such competing ownership claims. The Company has good and marketable
title to the Technology free and clear of all Liens.
(h) The Company does not have, nor has it ever had, any employees other
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<PAGE>
Rolan Yang, Greg Russo, Eric M Stroud, Edward P Chin, Matthew Nielsen and Peter
Reiter.
(i) No holder of securities of the Company is currently entitled to
have such securities registered under the registration statements required to be
filed by the Company pursuant to the Company Registration Rights Agreement other
than as expressly permitted thereby.
(j) Neither the Company, the Seller, nor any of its respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any "security" (as defined in the
Act) that is or could be integrated with the sale of the Purchased Shares in a
manner that would require the registration under the Act of the Purchased Shares
or (ii) engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) in connection with the
offering of the Purchased Shares or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
Assuming the accuracy of the representations and warranties of the
Parties hereto, it is not necessary in connection with the offer, sale and
delivery of the Purchased Shares to the Purchaser in the manner contemplated by
this Agreement to register any of the Purchased Shares under the Act.
3. THE CLOSING.
-----------
3.1 The "Closing" shall take place at the Purchaser's Office, 3435 Galt
Ocean Drive, Ft. Lauderdale, FL 33308, simultaneously with the execution and
delivery of this Agreement.
3.2. Simultaneously with the execution and delivery of this Agreement,
at the Closing (or such later date indicated below), the Seller, as applicable,
are delivering or causing to be delivered to the Purchaser the following:
(i) within ten business days hereof, certificates representing
the Purchased Shares;
(ii) a duly executed copy of each of this Agreement and the
Purchaser Registration Rights Agreement (the "Transaction Agreements");
(iii) a copy of the resolutions of the Members of the Seller
duly authorizing the execution and delivery of this Agreement and each of the
other agreements and documents referred to herein and the performance of the
transactions contemplated hereby and thereby, which resolutions shall be
certified as true, correct and effective as of the date hereof by the Secretary
of the Seller and which shall be satisfactory to the Purchaser; and
-4-
<PAGE>
(iv) such other instruments and documents as the Purchaser's
Attorney shall reasonably request.
(b) Simultaneously with the execution and delivery of this Agreement,
at the Closing (or such later date indicated below), the Purchaser is delivering
to the Company the following:
(i) Certificates representing the Purchaser's shares of its
Rule 144 Common Stock comprising the Purchase Price, pursuant to Paragraph 1
above; and
(ii) A duly executed copy of each of the Transaction
Agreements to which the Purchaser is a party.
4. Covenants of the Seller.
------------------------
The Seller covenants and agrees with the Purchaser that:
(a) Registration of Transfer by the Purchaser. No transfer of the
Purchased Shares by the Purchaser (other than transfers pursuant to a Registered
Offering) shall be effective (and the Company shall not transfer on its books
any such shares) unless (i) the certificates representing such Purchased Shares
issued to the transferee shall bear the legends provided herein, if required by
such Section. In addition, no transfer of Purchased Shares shall be made by any
Purchaser unless such transfer is effected in connection with a Registered
Offering or is exempt from registration under Act, and the Company, should it so
request, has received a written legal opinion reasonably satisfactory to its
counsel that the proposed transfer is exempt from such registration and
otherwise complies with all applicable securities laws. No transfer of Purchased
Shares shall be effective unless the transferee agrees in writing to be subject
to the restrictions of this Section and Section 5.
(b) Legend. In the event that any shares of Purchased Shares become
free of the rights and restrictions imposed by this Agreement, the Purchaser
shall be entitled to receive promptly upon presentment to the Company of the
certificate or certificates evidencing the same, a new certificate or
certificates not bearing the restrictive legend provided for herein. In the
event that any shares of Purchased Shares are (i) transferred in connection with
a Registered Offering, or (ii) transferred pursuant to an exemption from
registration under the Securities Act and the Company has received a written
legal opinion, reasonably satisfactory to its counsel, as to the availability of
and compliance with such exemption and that such shares need not bear the
restrictive legend set forth herein, the Company shall issue a new certificate
or certificates representing such securities not bearing such legend.
5. Legend. Each stock certificate representing shares of Purchased
Shares, including any shares upon subsequent transfer, shall bear the following
legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
-5-
<PAGE>
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY BE OFFERED, PLEDGED, SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IF REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT AND SUCH LAWS, OR IF AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
6. Purchaser's Representations. The Purchaser represents and warrants
that:
(a) The Purchaser understands that (i) the Common Stock have not been
registered under the Act or registered or qualified under applicable state
securities laws by reason of their issuance by the Company and the Stockholders,
as applicable, in a transaction exempt from the registration and qualification
requirements of the Securities Act and applicable state securities laws, and
(ii) the Common Stock may be transferred by the Purchaser only if a subsequent
disposition thereof is registered or qualified under the Securities Act and
applicable state securities laws or is exempt from such registration or
qualification.
(b) The Purchaser has not employed any broker or finder or similar
person in connection with the transactions contemplated by this Agreement.
(c) The Company has made available to the Purchaser or its
representatives all agreements, documents, records and books that the Purchaser
has requested relating to an investment in the Common Stock. The Purchaser has
had an opportunity to ask questions of, and receive answers from, Persons acting
on behalf of the Company and the Stockholders concerning the terms and
conditions of this investment. The Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the risks and
merits of its investments in the Common Stock.
(d) The Purchaser further understands that this Agreement is made with
the Purchaser in reliance in part upon the Purchaser's representations to the
Company contained in this Section.
(e) As of the Closing Date, the Purchaser shall have the authorized,
issued and outstanding capitalization set forth in its financial statements
dated September 30, 1999 (the "Purchaser Financial Statement Date"), a copy of
which are attached as Appendix 6A hereto (the "Purchaser Financial Statements"),
except that the Purchaser has issued additional shares of common stock since the
Purchaser Financial Statement Date such that the number of shares of common
stock outstanding is now approximately 7,300,000, but not more than 7,400,000;
all of the outstanding shares of Common Stock of the Purchaser is duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; there are no classes of
capital stock or securities of the Purchaser except those disclosed in the
Financial Statements; all of the shares of common stock of the Purchaser
representing Purchase Price will be validly issued and outstanding; the Seller
-6-
<PAGE>
will be vested with good and marketable title to the Purchased Shares, free and
clear of all liens, encumbrances, equities and claims, security interests,
agreements, rights of third parties or restrictions on transferability ("Liens")
(other than those imposed by this Agreement and the Act and the securities or
"Blue Sky" laws of certain jurisdictions); except as disclosed in the Purchaser
Financial Statements, there are no (i) options warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests (including preferred stock) in the Purchaser.
The Purchaser does not own, directly or indirectly, any shares of capital stock
or any other equity or long term debt securities or have any equity interest in
any firm, partnership, joint venture or other entity.
(f) The Purchaser is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and conduct its
business as now conducted; copies of the current Certificate of Incorporation
and Bylaws of the Purchaser are attached as Exhibits 6B and 6C hereto. The
Purchaser is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so filed would not, individually or in the aggregate,
have a material adverse effect on the era affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Purchaser.
(g) The Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement and the Purchaser Registration Rights
Agreement and perform its obligations hereunder and thereunder and to assume the
Company Registration Rights Agreement from the Purchaser. This Agreement has
been executed and delivered, and, this Agreement and the Company Registration
Rights Agreement as assumed hereunder each constitutes the valid and legally
binding agreement of the Purchaser and the Purchaser, enforceable against the
Purchaser and the Purchaser and in accordance with its terms, except that (A)
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(h) No consent, approval, authorization, order of, license, filing,
recording or registration with or exemption by any court or governmental agency
or body or third party is required for (i) the issuance and sale by the
Purchaser to the Seller of the shares of common stock representing the Purchase
Price, or (ii) the consummation by the Purchaser of the other transactions
contemplated hereby, except such as have been obtained and such as may be
required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Purchased Shares by the Purchaser. The Purchaser is
not (i) in violation of its Articles of Incorporation or bylaws, (ii) in breach
or violation of any statute, judgment, decree, order, rule or regulation
applicable
-7-
<PAGE>
to any of them or any of their respective properties or assets, or (iii) in
breach of or default under (nor has any event occurred which, with notice or
passage of time or both, would constitute a default under) or in violation of
any of the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument (collectively, a "Contract").
(i) There is not pending or, to the knowledge of the Purchaser and/or
Purchaser, threatened, any action, suit, proceeding, inquiry or investigation to
which the Purchaser is a party, or to which the property or assets of the
Purchaser is subject, before or brought by any court, arbitrator or governmental
agency or body.
(j) The Purchaser has filed all necessary federal, state and foreign
income and franchise tax returns (the "Returns"), and has paid all taxes shown
as due thereon. The Returns accurately reflect in all material respects all
liability for taxes of the Purchaser for the periods concerned thereby and there
is no tax deficiency that has been asserted against the Purchaser that would
have, individually or in the aggregate, a Material Adverse Effect.
(k) The Purchaser Financial Statements present fairly in all material
respects the financial position, results of operations and cash flows of the
Purchaser the dates and for the periods to which they relate and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except as otherwise stated therein. Reel and Swafford (the
"Independent Accountants") is an independent public accounting firm within the
meaning of the federal securities laws.
(l) Since the Purchaser Financial Statement Date, except as disclosed
in filings with the United States Securities and Exchange Commission, (i) the
Purchaser has not incurred any liabilities or obligations, direct or contingent,
or entered into or agreed to enter into any transactions or contracts (written
or oral) not in the ordinary course of business, which liabilities, obligations,
transactions or contracts would, individually or in the aggregate, be material
to the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Purchaser, (ii) the
Purchaser has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock (other than with respect to any of such Subsidiaries, the purchase of, or
dividend or distribution on, capital stock owned by the Company), (iii) there
shall not have been any material change in the capital stock or long-term
indebtedness of the Purchaser and (iv) no event or circumstance has occurred
that has had, or could reasonably be expected to have, a material adverse effect
on the business or property of the Purchaser.
(m) The Purchaser does not have any liability for any prohibited
transaction or funding deficiency or any complete or partial withdrawal
liability with respect to any pension, profit sharing or other plan which is
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which the Purchaser makes or
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<PAGE>
ever has made a contribution and in which any employee of the Purchaser is or
has ever been a participant. With respect to such plans, the Purchaser is in
compliance in all material respects with all applicable provisions of ERISA.
(n) The Purchaser (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable assurance
that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals.
(o) The Purchaser is not and will not be an "investment company" or
"promoter" or "principal underwriter" for an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(p) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair salable value of
the assets of the Purchaser will exceed the sum of its stated liabilities and
identified contingent liabilities; the Purchaser is not, and will not be, after
giving effect to the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent.
(q) It is not necessary in connection with the offer, sale and delivery
of the common stock of the Purchaser representing the Purchaser Price being
transferred to the Seller in the manner contemplated by this Agreement to
register any of such common stock under the Act.
(r) The Purchaser has not taken, nor will any of them take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the securities
of the Purchaser being transferred to the Seller hereunder as the Purchase
Price.
(s) No filing made by the Purchaser with the United States
Securities and Exchange Commission or state government or agency regulating
securities (including reports on Form 10-K or 10-Q) includes any statement that
is misleading in any material respect or omits any information that makes such
filing misleading in any material respect.
7. Indemnification and Contribution.
---------------------------------
(a) Indemnification by the Seller. The Seller agrees to indemnify and
hold harmless (i) the Purchaser; (ii) each Person, if any, who controls (within
the meaning of
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<PAGE>
Section 15 of the Act or Section 20 of the Act) any such Person referred to in
clause (i) (any such Person referred to in this clause (ii), a "Controlling
Person"); and (iii) the respective officers, directors, managing directors,
stockholders, partners, employees, representatives, trustees, fiduciaries and
agents of any Person referred to in clause (i) or any such Controlling Person
(any such Person referred to in clause (i), (ii) or (iii), a "Purchaser
Indemnified Person") against any losses, claims, damages or liabilities, joint
or several, to which such Purchaser Indemnified Person may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (A) any inaccuracy in any of the
representations and warranties of the Seller contained herein and (B) the
failure of the Seller to perform its obligations hereunder and will reimburse
each such Purchaser Indemnified Person for any reasonable legal and other
expenses incurred by such Purchaser Indemnified Person in connection with
investigating or defending any such action or claims as such expenses are
incurred. Notwithstanding anything to the contrary contained herein, any claim
against Seller under this Agreement for breach of a representation or warranty
contained herein shall be made within two years after the date hereof.
Notwithstanding anything to the contrary contained herein, the Seller's
obligations to indemnify the Purchaser shall be limited as follows: (i) the
Seller shall not be liable for any claims, damages or losses arising from any
breach of a representation or warranty as to the assets, financial condition or
securities of the Company unless the Seller has received indemnification under
the Purchase Agreement for such breach, and is able to recover the related
claim, damage or loss under such Purchase Agreement indemnification provisions,
it being understood that the Seller is under no obligation to seek such
indemnification if, in its sole discretion, it deems recovery unlikely or
unadvisable, (ii) the aggregate amount of the indemnification by Seller
hereunder shall be limited to an amount equal to the number of shares of the
Purchaser's common stock representing the Purchase Price multiplied by the
average trading price per share of such stock for the five business days
preceding and including the date of the Closing, and (iii) the Seller shall not
be obligation to indemnify the Purchaser until the aggregate amount of damages,
claims and losses exceeds $5,000.
(b) Indemnification by the Purchaser. The Purchaser agrees to indemnify
and hold harmless (i) the Seller; (ii) each Controlling Person of the Seller;
and (iii) the respective officers, directors, employees, representatives and
agents of the Seller and each of its Stockholders or any such Controlling Person
(any such Person referred to in clause (i), (ii) or (iii), a "Company
Indemnified Person") against any losses, claims, damages or liabilities, joint
or several, to which such Company Indemnified Person may become subject, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any inaccuracy of any of such Purchaser's
representations and warranties contained herein and will reimburse the Seller
Indemnified Persons for any legal and other expenses reasonably incurred by the
Seller Indemnified Persons in connection with investigating or defending any
such actions or claims as such expenses are incurred. Notwithstanding anything
to the contrary contained herein; any claim against the Purchaser under this
Agreement for breach of a representation or warranty contained herein shall be
made within two years after the date hereof, except for claims resulting from
the willful misconduct or fraud of the Purchaser.
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<PAGE>
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by a Purchaser Indemnified Person or a Company Indemnified Person (each
"Indemnified Person") of notice of the commencement of any action, such
Indemnified Person shall, if a claim in respect thereof is to be made against an
indemnifying party under Section 7(a) or Section 7(b), as applicable, notify
such indemnifying party in writing of the commencement thereof, but the omission
so to notify the Indemnifying party will not relieve it from any liability that
it may have to any Indemnified Person otherwise than under Section 7(a) or
Section 7(b), as applicable, or to the extent it is not materially prejudiced as
approximate result of such failure. In case any such action is brought against
any Indemnified Person and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect within 30 days after receiving
any such notification, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
Indemnified Person (who shall not, except with the consent of the Indemnified
Person, be counsel to the indemnifying party, which consent shall not be
unreasonably withheld), and, after notice from the indemnifying party to such
Indemnified Person of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such Indemnified Person under such
paragraph for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such Indemnified Person, in connection with the
defense thereof other than reasonable costs of investigation. Notwithstanding
the foregoing, any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Person
unless (i) the Indemnified Person shall have been advised by counsel that
representation of the Indemnified Person by counsel provided by the indemnifying
party would be inappropriate due to actual or potential conflicting interests
between the indemnifying party and the Indemnified Person, including situations
in which there are one or more legal defenses available to the Indemnified
Person that are different from or additional to those available to the
indemnifying party; (ii) the indemnifying party shall have authorized in writing
the employment of counsel for the Indemnified Person at the expense of the
indemnifying party; or (iii) the indemnifying party shall have failed to assume
the defense or retain counsel reasonably satisfactory to the Indemnified Person
within a reasonable period of time after receipt of the notice of commencement
of any action pursuant to Section 7(a) or 7(b); provided however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Persons,
except to the extent that local counsel, in addition to their regular counsel,
is required in order to effectively defend against such action or proceeding or
as otherwise provided pursuant to this Section. No indemnifying party shall,
without the written consent of the Indemnified Person, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or
-11-
<PAGE>
not the Indemnified Person is an actual or potential panty to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the Indemnified Person from all liability arising out
of such action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified Person.
(d) The rights of the Seller and the Purchaser under this Section 7
shall be the sole and exclusive remedy of the Seller and the Purchaser,
respectively, with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Seller or the Purchaser, respectively in this Agreement.
8. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements set forth in this
Agreement or made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the any party hereto, any of its officers or directors, or any
controlling person referred to herein, (ii) delivery of and payment for the
Purchased Shares or the Purchase Price, or (iii) any sale, transfer or other
disposition of any Purchased Shares or common stock representing the Purchase
Price by either the Seller or the Purchaser.
9. Notices. All communications hereunder shall be in writing and shall
be mailed or delivered to:
If to the Company: HandRes, Inc.
146 Notch Road
Oak Ridge, New Jersey 07438
Fax: (630) 566-3333
Attn: President
With copy to: Ansell Zero Grimm & Aaron, PC
1E00 Lawrence Avenue, CN 7807
Ocean Township, New Jersey 07712
Fax: (732) 922-6161
Attn: Michael V. Benedetto, Esquire
If to the Seller: Public Venture Capital, LLC
2444 Highway 34 North
Suite 2
Manasquan, NJ 08736
Fax: 732-292-2885
Attn: President
With a copy to: Dyer Ellis & Joseph PC
600 New Hampshire Avenue
Washington, DC 20037
-12-
<PAGE>
Fax: (202) 944-3066
Attn: Todd D. Snyder
If to the Purchaser: Techlabs, Inc.
3435 Galt Ocean Drive
Ft. Lauderdale, FL 33308
Fax: (954) 630-9133
Attn: Thomas J. Taule
With copy to: David M. Glassberg, Esquire
1570 Madruga Avenue
Suite 211
Coral Gables, FL 33146
Fax: (305) 669-0804
If to any of the Stockholders, to such Stockholder at the Company's
address listed above, as it may be changed as set forth below.
All such notices and communications shall be deemed to have been duly
given: on the date delivered if delivered personally or sent by facsimile (with
electronic confirmation by the sending party together with a copy sent by U.S,
mail as set forth below). one business day following deposit with a reputable
overnight courier, or three business days after deposit in the U.S. mail if
mailed by certified or registered mail, return receipt requested. The foregoing
addresses may be modified only by providing prior notice to all other parties of
such change.
10. Successors and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors and assigns.
Except as provided in this Agreement, no party may assign its rights,
obligations and duties under this Agreement, without the written consent of all
of the parties hereto.
11. Applicable Law. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW.
12. Entire Agreement. This Agreement (including the Appendices,
agreements, documents and instruments referred to herein) constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them with respect to the subject
matter hereof.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall
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<PAGE>
constitute one and the same instrument. If the foregoing correctly sets forth
our understanding, please indicate your acceptance thereof in the space provided
below for that purpose, where upon this letter shall constitute a binding
agreement between the Seller, the Purchaser, the Company and the Stockholders.
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
PUBLIC VENTURE CAPITAL COM, LLC
By: /s/ Stephen Porada
---------------------------
Name: Stephen Porada
Title: Member
HANDRES, INC.
By: /s/ Eric Stroud
---------------------------
Name: Eric Stroud
Title: President
TECHLABS, INC.
By: /s/ Thomas J. Taule
---------------------------
Thomas J. Taule
Title: Chairman of the Board
STOCKHOLDERS.
---------------------------
Rolan Yang
---------------------------
Eric Stroud
---------------------------
Greg Russo
-14-
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,538
<SECURITIES> 3,000,000
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<PP&E> 1,161,251
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0
9,000
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<TOTAL-LIABILITY-AND-EQUITY> 5,183,542
<SALES> 12,625
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