UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14A of the Securities Exchange Act of 1934
Utilitynet.com, Inc.
(Exact name of registrant as specified in its Charter)
Common Stock no par value
(Title of Class
of Securities)
(CUSIP Number of Class of Securities)
Texas 0-26737 75-2817764
(State (Commission file (IRS Employer Identification
of Incorporation) number) Number)
Charles Clayton
527 Marquette, Suite 1800,
Minneapolis, Minnesota 55402
(612) 338-3738
(Name, address and telephone number of person authorized
to receive notice and communications of behalf on person filing statement)
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ITEM 1. DATE, TIME AND PLACE INFORMATION
The special meeting of shareholders Utilitynet.com, Inc. will be
held at the offices of the Company, 508 Decker Drive, Suite 200, Irving, Texas,
on the 28th day of October, 1999, at 3:30 p.m.
This Proxy Statement and form of proxy will be mailed to the
shareholders of Utilitynet.com, Inc. on October 18, 1999.
ITEM 2. REVOCABILITY OF PROXY
The proxy is not revokable.
ITEM 3. DISSENTER'S RIGHT OF APPRAISAL
All holders of outstanding shares of common stock of the company
have the right under Article 5.11 of the Texas Statutes to dissent from the
Merger and to obtain the fair value of their shares. Any shareholder seeking to
exercise his rights must follow the procedure specified in Article 5.11 of the
Texas Statutes. Copies of Texas Statutes, 5.11 (Rights of dissenting
shareholders) and 5.12 (procedures for asserting dissenters' rights) are
attached to this Proxy Statement.
A shareholder may assert dissenters' rights only as to all of the
shares registered in his or her name unless the shareholder dissents with
respect to all of the shares which are beneficially owned by another person but
registered in the name of the shareholder and discloses the name and address of
each beneficial owner on whose behalf the shareholder dissents. In that event,
the rights of the dissenter shall be determined as if the shares as to which the
shareholder has dissented and the other shares were registered in the names of
different shareholders. Shareholders who have the right to exercise dissenters'
rights and obtain payment for their shares do not have a right at law or in
equity to have the proposed action at the special meting set aside or rescinded,
except when the action is fraudulent with regard to the shareholder or the
corporation.
A shareholder that desires to dissent must give written notice to
Utilitynet.com, Inc., 508 Decker Drive, Suite 200, Irving, Texas 75062.
ITEM 4. PERSONS MAKING THE SOLICITATION
The solicitation is made by the registrant. There is no director
that intends to oppose any action.
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ITEM 5. INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Lindsey Vinson is the sole shareholder of DATAcquisition
Technologies, Inc., the sole officer, director and largest shareholder of
Utilitynet,com, Inc.
ITEM 6. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
There are presently 20,017,450 shares of the company's common shares
outstanding. The following table sets forth the information as to the ownership
of each person who, as of the date of this Offering Circular, owns of record, or
is known by the company to own beneficially, more than five per cent of the
company's common stock, and the officers and directors of the company.
Shares of Percent of
Name Common Stock ownership
- -------------------------------------------------------------------------------
Lindsey Vinson 5,046,801 25%
Claude Parks, Trustee 4,000,000 20%
Troy Vinson 4,000,000 20%
AFX Technology Group 1,400,000 7%
Directors and Officers 5,046,801 25%
as a group
Troy Vinson is the wife of Lindsey Vinson. Claude Parks is the
Trustee for a trust for the benefit of the children of Lindsey Vinson and Troy
Vinson.
ITEM 7. DIRECTORS AND EXECUTIVE OFFICERS
The officers and directors of the company are:
Name Position
- ---- --------
Lindsey Vinson President, Secretary, Director
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Lindsey Vinson, Mr. Vinson is the President, Secretary and a
Director of the Company. Mr. Vinson has a Bachelor's degree in Business
Administration from Drake University, and a J.D. degree from Ohio State
University. He has been a practicing attorney in Dallas, Texas from 1983 to the
present time.
ITEM 8. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
NAME CAPACITY CASH COMPENSATION
- ---- -------- -----------------
None
ITEM 9. INDEPENDENT PUBLIC ACCOUNTANTS
The principal accountant is Judd, Thomas, Smith & Company
The principal accountant for the current year is not expected to be
present at the special meeting of shareholders, they are not expected to make a
statement and are not expected to be available to answer appropriate questions.
ITEM 10. COMPENSATION PLANS
The registrant has no compensation plans, and no action with respect
to any such plan will be taken at the shareholders meeting.
ITEM 11. AUTHORIZATION OR ISSUANCE OF SECURITIES OTHERWISE THAN FOR EXCHANGE
Not applicable
ITEM 12. MODIFICATION OR EXCHANGE OF SECURITIES
None
ITEM 13. FINANCIAL AND OTHER INFORMATION
None
ITEM 14. MERGERS, CONSOLIDATIONS, ACQUISITIONS, AND SIMILAR MATTERS
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Plan of Merger
- --------------
Approval of a Plan of Merger on a stock for stock basis, whereby the
Company will acquire 100% of the outstanding capital common stock of
DATAcquisition Technologies, Inc. a data collection company that collects meter
data for electric, gas and water utilities, in exchange for 1,250,000 shares of
authorized but unissued common stock. This acquisition will give the Company an
actual operating entity.
ITEM 15. ACQUISITION OR DISPOSITION OF PROPERTY
Not Applicable
ITEM 16. RESTATEMENT OF ACCOUNTS
Not Applicable
ITEM 17. ACTION WITH RESPECT TO REPORTS
Not Applicable
ITEM 18. MATTERS NOT REQUIRED TO BE SUBMITTED
Not Applicable
ITEM 19. AMENDMENT OF CHARTER, BYLAWS OR OTHER DOCUMENTS
The Company has proposed to change its name to uData Net Corp. by an
amendment to the Articles of Incorporation.
ITEM 20. OTHER PROPOSED ACTION
Not Applicable
ITEM 21. VOTING PROCEDURES
The Board of Directors has fixed the close of business on October 1,
1999 as the record date. Only holders of record of shares on the record date are
entitled to notice of and to vote at the meeting. There are 20,017,450 shares
outstanding and entitled to
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vote held by approximately 142 shareholders.
Each holder is entitled to cast one vote per share. The presence, in
person or by proxy of the holders of a majority of the outstanding shares is
necessary to constitute a quorum. The affirmative vote, in person or by proxy,
of the holders of a majority of the shares is required to ratify the merger.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed by the President on September
29, 1999.
Utilitynet.com, Inc.
_/S/ Lindsey Vinson
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UTILITYNET.COM, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
October 28, 1999
PROXY SOLICITED BY THE BOARD OF DIRECTORS
This proxy statement is furnished to holders of the common stock
Utilitynet.com, Inc., (the "Company") in connection with the solicitation by the
Board of Directors of proxies for use at the special meeting of shareholders to
be held on the 28th day of October, 1999, and at all adjournments thereof, for
the purpose of voting on a Merger Agreement with DATAcquisition Technologies,
Inc.
Holders of outstanding stock of record at the close of business on
October 1, 1999, are entitled to vote at the meeting and to cast one vote for
each share held. The outstanding voting securities of the company, as of October
1, 1999, consists of 20,017,450 shares.
This Proxy Statement and form of proxy are being mailed to the
shareholders of Utilitynet,com, Inc. on or about October 18, 1999.
THE COMPANY
The Company was formed in Texas on May 5, 1999. The Company has
raised funds through a limited sale of its stock and has filed a Registration
Statement with the Securities and Exchange Commission. The addition of
DATAcquisition Technologies, Inc. will give the Company an operating business.
PRINCIPAL SHAREHOLDERS OF UTILITYNET.COM, INC.
The company knows of no person who was the beneficial owner of more
than 5% of the company's voting securities, and all of these securities were
held for more than the past two years, except as follows:
Name of Beneficial Owner Number of Shares % of Ownership
- ------------------------ ---------------- --------------
Lindsey Vinson 5,046,801 25%
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Claude Parks, Trustee 4,000,000 20%
Troy Vinson 4,000,000 20%
AFX Technology Group 1,400,000 7%
Directors and Officers 5,046,801 25%
as a group
Troy Vinson is the wife of Lindsey Vinson. Claude Parks is the
Trustee for a trust for the benefit of the children of Lindsey Vinson and Troy
Vinson.
OFFICERS AND DIRECTORS OF UTILITYNET.COM, INC.
The officers and directors of Utilitynet.com, Inc. held since
inception. There was no audit, compensation, nominating or any other committee
of the Board of Directors. The officers and directors of the company are as
follows:
Name Position
- ---- --------
Lindsey Vinson President, Secretary, Director
Lindsey Vinson, Mr. Vinson is the President, Secretary and a
Director of the Company. Mr. Vinson has a Bachelor's degree in Business
Administration from Drake University, and a J.D. degree from Ohio State
University. He has been a practicing attorney in Dallas, Texas from 1983 to the
present time.
EXECUTIVE COMPENSATION OF UTILITYNET.COM, INC.
There were no officers or directors that received any compensation
during the last year
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board of Directors has fixed the close of business on October 1,
1999 as the record date. Only holders of record of shares on the record date are
entitled to notice of and to vote at the meeting. There are 20,017,450 shares
outstanding and entitled to vote.
Each holder is entitled to cast one vote per share. The presence, in
person or by
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proxy of the holders of a majority of the outstanding shares is necessary to
constitute a quorum. The affirmative vote, in person or by proxy, of the holders
of a majority of the shares is required to conduct the business of the special
meeting of shareholders.
RIGHTS OF DISSENTING SHAREHOLDERS
All holders of outstanding shares of common stock of the company
have the right under Article 5.11 of the Texas Statutes to dissent from the
Merger and to obtain the fair value of their shares. Any shareholder seeking to
exercise his rights must follow the procedure specified in Article 5.11 of the
Texas Statutes. Copies of Texas Statutes, 5.11 (Rights of dissenting
shareholders) and 5.12 (procedures for asserting dissenters' rights) are
attached to this Proxy Statement.
A shareholder may assert dissenters' rights only as to all of the
shares registered in his or her name unless the shareholder dissents with
respect to all of the shares which are beneficially owned by another person but
registered in the name of the shareholder and discloses the name and address of
each beneficial owner on whose behalf the shareholder dissents. In that event,
the rights of the dissenter shall be determined as if the shares as to which the
shareholder has dissented and the other shares were registered in the names of
different shareholders. Shareholders who have the right to exercise dissenters'
rights and obtain payment for their shares do not have a right at law or in
equity to have the proposed action at the special meting set aside or rescinded,
except when the action is fraudulent with regard to the shareholder or the
corporation.
A shareholder that desires to dissent must give written notice to
Utilitynet.com, Inc., 508 Decker Drive, Suite 200, Irving, Texas 75062.
MERGER AGREEMENT WITH DATACQUISITION TECHNOLOGIES, INC.
The Board of Directors has entered into an DATAcquisition
Technologies, Inc. for a Merger Agreement. A copy of the agreement is attached
to this Proxy Statement as Appendix A. Under the terms of the Agreement
DATAcquisition Technologies, Inc. will transfer all of its shares in exchange
for 1,250,000 shares of Utilitynet.com, Inc..
DATAcquisition Technologies, Inc.
DATAcquisition Technologies, Inc. formerly known as USM Acquisition
Corp. and its predecessors have been in operation since 1990. Its business is
currently Primarily focused on the design and manufacture of data collection
devices used to collect meter data for electricity, gas and water utilities.
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The Company has developed custom, proprietary monitoring devices in
addition to their own "universal" design which can measure data from virtually
any meter manufacturer. These devices include optical and inductive technologies
with radio frequency based transmission products under development. The Company
also has under development testing devices for its own collection devices as
well as meter testing equipment.
Historically, DATAcquisition Technologies, Inc. has been driven by
engineering with no focus on sales and marketing. Furthermore, no financial
controls of any kind have been in place, The combination of these factors has
put the Company in a weakened position. After completion of the acquisition the
Company intends to increase the emphasis on sales and marketing and design and
build only those products with a ready market. Furthermore, the imposition of
financial controls and discipline will steady the Company's cash flow and allow
for planning and growth.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
The following is the unaudited pro forma condensed balance sheet, as
of June 30, 1999 for both DATAcquisition Technologies, Inc. Utilitynet.com,
Inc., showing the condensed balance sheet items, and the total for both
combined, under generally accepted accounting principles.
Historical Pro forma
---------- ---------
DATA Utility
---- -------
Assets
Cash $ 331 $ 382 $ 713
Current assets $ -- $350,674-- $ -- $351,005
Fixed assets $ 99,592 $ 24,102 $123,694
Other Assets $ 93,785 $ 5,000 $ 98,785
-------- --------- --------
$544,382 $ 29,484 $573,866
-------- --------- --------
Liabilities and Stockholders Equity
Liabilities $530,931 $ 46,230 $577,161
Stockholders Equity $ 13,451 $ (16,746) $ (3,295)
-------- --------- --------
$544,382 $ 29,484 $573,866
-------- --------- --------
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
The following is the unaudited pro forma condensed income statement,
as of
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June 30, 1999 for both DATAcquisition Technologies, Inc. and Utilitynet.com,
Inc., showing the condensed income statement items, and the total for both
combined, under generally accepted accounting principles.
Historical Pro forma
---------- ---------
DATA Utility
---- -------
Total Revenues $1,042,405 $ -- $1,042,405
Expenses $1,249,539 $ 29,810 $1,279,349
---------- ------------ ----------
Income (Loss) $ (207,134) $ (29,810) $ (236,944)
Per Share $ (207.13) $ (.0018) $ (.013)
CHANGE OF NAME
The Board of Directors has decided that it is in the best interests
of the Company to change its name to more accurately reflect the business of the
Company. The new name chosen is uData Net Corp. Accordingly it is proposed to
amend the Articles of Incorporation to change the name of the Company.
The Board of Directors of Utilitynet.com, Inc. recommends a vote for
the proposals in this Proxy Statement.
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PLAN OF MERGER
SECTION 1. CORPORATIONS PLANNING TO MERGE.
DATAcquisition Technologies, Inc. (DATA), a Texas corporation shall
be merged with Utilitynet.com, Inc. (Utility), a Texas, corporation. At the
Effective Time DATA shall cease to exist. Utility shall continue to be governed
by the laws of the State of Texas.
SECTION 2. TERMS AND CONDITIONS.
2.1 The exchange shall be effective upon the issuance of a
Certificate of Merger by the Secretary of State of the State of Texas.
2.2 The Articles of Incorporation shall remain.
2.3 The By-Laws shall remain.
2.4 The Directors and Officers shall remain.
SECTION 3. MANNER AND BASIS OF CONVERTING THE SHARES.
At the Effective Time, each share of the common stock of DATA issued
and outstanding immediately before the Effective Time shall be conveyed to
Utility. 1,250,000 shares of Utility common stock, by virtue of the merger shall
be conveyed to DATA, and shall represent validly issued, fully paid shares of
Utility.
IN WITNESS WHEREOF, the parties have executed this Plan of Merger
this --- day of October, 1999.
DATAcquisition Technologies, Inc.
by /s/ Lindsey Vinson
-----------------------------------------
President
Utilitynet.com, Inc.
by/s/ Lindsey Vinson
-----------------------------------------
President
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UTILITYNET.COM, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 18, 1999
Dear Fellow Shareholder:
The special meeting of shareholders of Utilitynet.com, Inc. will be
held at the Company, located at 580 Decker, Irving, Texas, on the 28th day of
October, 1999, at 9:00 a.m. to consider and act upon the following matters:
Merger with DATAcquisition Technologies, Inc..
Change of name to uData Net Corp.
The foregoing matters are more fully described in the accompanying
proxy statement which is hereby made a part of this notice.
All shareholders of record at the close of business on October 1,
1999, will be entitled to vote at the meeting.
BY THE BOARD OF DIRECTORS,
The execution of the enclosed proxy and its return as promptly as possible will
be greatly appreciated. A reply envelope is enclosed for your convenience.
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UTILITYNET.COM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Special Meeting of Shareholders
October 28, 1999
The undersigned, having received the Notice of Special Meeting of
Shareholders and Proxy Statement of Utilitynet.com, Inc., dated October 18,
1999, hereby constitute and appoint Lindsey Vinson with full power of
substitution, as attorney and proxy of the undersigned, to attend the special
meeting of shareholders of Utilitynet.com, Inc, on the 28th day of October,
1999, at 9:00 a.m., or at any adjournment or adjournments thereof, and to vote,
as designated below, all of the common shares of the undersigned in
Utilitynet.com, Inc., which the undersigned would be entitled to vote if
personally present, as follows:
Approve the merger with DATAcquisition Technologies, Inc.
______YES ______NO
Change the name to uData Net Corp.
______YES ______NO
This proxy will be voted as directed, or if no such direction is
indicated and the signed proxy is returned to Utilitynet.com, Inc., it will be
voted in favor thereof.
Dated: ___________________, 1999.
-----------------------------------
(Printed Shareholders Name)
-----------------------------------
(Shareholders Signature)
-----------------------------------
(Print Joint Shareholders Name,
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if any)
-----------------------------------
(Joint Shareholders Signature)
IMPORTANT: PLEASE DATE AND SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THE
STOCK CERTIFICATE. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
GIVE FULL TITLE AS SUCH; IF SHARES ARE HELD BY JOINT TENANTS, EACH JOINT TENANT
IS ASKED TO SIGN.
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AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement")
dated this ______ day of October, 1999, between DATAcquisition Technologies,
Inc. (the "Company"), a Texas corporation, and Utilitynet.com, Inc. (the
"Purchaser") a Texas corporation,
WHEREAS, the Purchaser desires to acquire all of the outstanding
shares of the Company in exchange for shares of the Purchaser, all upon the
terms and subject to the conditions of this Agreement and the Plan of Merger
attached as Exhibit A (the "Plan of Merger"); and
WHEREAS, the company and the purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger of the company;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties agree as follows:
ARTICLE 1
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in section 1.4) all of the shares
of the company shall be exchanged for shares of the purchaser (the "Merger").
The purchaser shall continue to be governed by the laws of the State of Texas,
and the separate corporate existence of the purchaser shall cease.
1.2 TERMS OF MERGER. The shareholders of the company shall transfer
all of their stock in the company to the purchaser. The purchaser agrees to
issue 1,250,000 shares of its stock to the shareholders of the company.
1.3 CLOSING. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Utilitynet.com, Inc., Dallas, Texas on the first
business day on which the last to be fulfilled or waived of the conditions set
forth in Article VII shall be fulfilled or waived in accordance with this
Agreement, at such time as the company and purchaser may agree, or (ii) on such
other date and/or at such other place and time as the company and purchaser may
agree.
1.4 EFFECTIVE TIME. As soon as practicable following fulfillment or
waiver of the conditions specified in Article VII, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VIII, the
Company and
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the Purchaser will cause the Articles of Merger (the "Articles of Merger") to be
executed and filed with the Secretary of State of Texas (the "State
Commission"). The Merger shall become effective on the date on which the
Secretary of State issues a Certificate of Merger, and such time is referred to
as the "Effective Time".
ARTICLE II
ARTICLES OF INCORPORATION AND BY-LAWS OF THE
PURCHASER
2.1 THE ARTICLES OF INCORPORATION. The Articles of Incorporation of
the Company (the "Articles") in effect at the Effective Time shall cease in
accordance with the Texas Statutes.
2.2 THE BY-LAWS. The By-Laws of the Company in effect at the
Effective Time shall cease in accordance with its terms and the Texas Statutes.
ARTICLE III
OFFICERS AND DIRECTORS OF THE PURCHASING CORPORATION
3.1 OFFICERS AND DIRECTORS. The directors and officers of the
purchaser at the Effective Time shall, from and after the Effective Time, shall
be directors and officers until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Purchasing Corporation's Articles and By-Laws.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 At the Effective Time, all shares of common stock of the company
issued and outstanding immediately prior to the Effective Time shall be
exchanged for validly issued, fully paid and nonassessable shares of the
purchaser.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 CORPORATE ORGANIZATION AND QUALIFICATION. The company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The company has the corporate power and
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authority to carry on its respective businesses as they are now being conducted.
The company has made available to purchaser a complete and correct copy of the
company's Articles, and the company's By-Laws. The company's Articles and
By-Laws so delivered are in full force and effect.
5.2 CORPORATE AUTHORITY. Subject only to approval of this Agreement
and the Plan of Merger by the holders of a majority of the outstanding shares,
the company has the requisite corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this Agreement and to
consummate the transactions contemplated. This Agreement is a valid and binding
agreement of the company.
5.3 COMPLIANCE. The execution and delivery of this Agreement by the
company does not, and the consummation of the transactions contemplated by the
company will not, constitute or result in (i) a breach or violation of, or a
default under, the Articles or By-Laws of the company or (ii) a breach or
violation of, a default under, the acceleration of, or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to (with or
without the giving of notice or the lapse of time), any provision of any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") of the company, or any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which the company is subject, except, in the case of clause
(ii) above, for such breaches, violations, defaults, or accelerations which,
alone or in the aggregate, will not have a material adverse effect on the
financial condition, properties, business or results of operations of the
company.
5.4 BROKERS AND FINDERS. Neither the company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated, except as disclosed.
5.5 FINANCIAL STATEMENTS. The financial statements as of June 30,
1999, which have been delivered to Purchaser ("Company Financial Statements")
are complete, accurate, and fairly present the financial condition of the
company as of the date and the results of its operation for the periods covered.
To the best knowledge of the company, there are no liabilities, either fixed or
contingent, not reflected in the financial statements other than contracts or
obligations in the ordinary and usual course of business, constituting liens or
other liabilities which, if disclosed, would alter substantially the financial
condition of the company as reflected in the financial statements. These
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied.
5.6 LITIGATION AND PROCEEDINGS. To the best knowledge of the
company, it is not involved in any pending litigation or governmental
investigation or proceeding not reflected in the financial statements, or
otherwise disclosed in the
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Schedules and, to the best knowledge of the company, no litigation, claims,
assessments, or governmental investigation or proceeding is threatened against
the company.
5.7 TAX RETURNS. The company has filed all tax returns, forms, or
reports, which are due or required to be filed by it prior to this date and has
paid or made adequate provisions for the payment of all taxes, penalty fees, or
assessments which have or may become due pursuant to such returns or pursuant to
any assessments received.
5.8 TITLE AND RELATED MATTERS. The company has good and marketable
title to all of its licenses, copyrights, trademark, patents, patents pending,
properties, inventory, interests in properties, and other assets, real and
personal, free and clear of all mortgages, liens, pledges, charges, or
encumbrances except (i) statutory liens or claims not yet delinquent; (ii) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the assets or properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such assets; and
(iii) as described in the financial statements or in company Schedules. The
company owns, free and clear of any liens, claims, encumbrances, royalty
interests, or other restrictions or limitations of any nature whatsoever, any
and all procedures, techniques, business plans, methods of management, or other
information utilized in the conduct of the company's business or operations,
whether or not the value thereof is reflected in the most recent balance sheet
included in the company Schedules. The plants, structures, and equipment of the
company that are necessary or used in the operations of the business of the
company are in good operating condition and repair, normal wear and tear
excepted.
5.9 COMPANY SCHEDULES. The company has delivered to Purchaser the
following schedules which are collectively referred to as the "Schedules" and
which consist of separate schedules dated as of the date of execution of this
Agreement and instruments and data as of the same date, all certified by the
chief executive officer of the company, as complete, true, and correct:
(A) A schedule containing complete and correct copies of the
articles of Incorporation and Bylaws of Company in effect as of the
date of this Agreement;
(B) A schedule containing a description of all real property owned
or leased by the company, together with a description of every
mortgage, deed of trust, pledge, lien, agreement, encumbrance,
claim, or equity interest of any nature whatsoever in real property
with copies of the underlying documentation;
(C) A schedule describing all material contracts, employee
agreements, licenses, agreements, or other instruments to which the
company is a party or
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by which it or its properties or assets are bound;
(D) A schedule describing all loans and mortgages for which Company
is obligated and the terms;
(E) A schedule setting forth a description of any material adverse
change in business, operations, property, inventory, assets, or
condition of the company since June 30, 1999;
(F) A schedule of all litigation or governmental investigation or
proceeding which is pending or which, to the best knowledge of
management, is threatened or contemplated;
(G) A schedule of all outstanding options and warrants to acquire
shares of common stock;
(H) A schedule describing all joint ventures, partnerships or
corporations in which the company owns an interest or a right to
acquire an interest;
(I) A schedule of all documents, disclosures, or representations
required to be disclosed by this Agreement or required to be
disclosed in order to set forth all material facts regarding the
company.
5.10 CORPORATE ORGANIZATION AND QUALIFICATION. The purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The purchaser has the corporate power and authority to
carry on its respective businesses as they are now being conducted. The
purchaser has made available to the company a complete and correct copy of the
purchaser's Articles, and the purchaser's By-Laws. The purchaser's Articles and
By-Laws so delivered are in full force and effect.
5.11 CORPORATE AUTHORITY. Subject only to approval of this Agreement
and the Plan of Merger by the holders of a majority of the outstanding shares,
the purchaser has the requisite corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this Agreement and to
consummate the transactions contemplated. This Agreement is a valid and binding
agreement of the purchaser.
5.12 COMPLIANCE. The execution and delivery of this Agreement by the
purchaser does not, and the consummation of the transactions contemplated by the
purchaser will not, constitute or result in (i) a breach or violation of, or a
default under, the Articles or By-Laws of the purchaser or (ii) a breach or
violation of, a default under, the acceleration of or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to (with or
without the giving of notice or the lapse of time), any provision of any
agreement, lease, contract, note, mortgage,
5
<PAGE>
indenture, arrangement or other obligation ("Contracts") of the purchaser or any
law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which the purchaser is
subject, except, in the case of clause (ii) above, for such breaches,
violations, defaults, or accelerations which, alone or in the aggregate, will
not have a material adverse effect on the financial condition, properties,
business or results of operations of the purchaser.
ARTICLE VI
COVENANTS
6.1 ACQUISITION PROPOSALS. The company will, and shall direct (and
shall use its best efforts to cause) all of its officers and directors and
employees and any investment banker, attorney, accountant or other agent
retained by the company not to, initiate or solicit any inquiries or the making
of any proposal with respect to, or, except to the extent required by fiduciary
obligations under applicable laws, as advised in writing by counsel, engage in
negotiations concerning, or provide any confidential information or data or to
have any discussions with, any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, the company. The company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted with respect to any of the foregoing. The company will
notify purchaser immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with the company.
6.2 INTERIM OPERATIONS OF THE COMPANY. The company covenants and
agrees that after this date and prior to the Effective Time (unless purchaser
shall otherwise agree in writing and except as otherwise contemplated by this
Agreement):
(a) the business of the company shall be conducted only in
the ordinary and usual course and, to the extent
consistent therewith, the company shall use its
reasonable best efforts to preserve its business
organization intact and maintain its existing relations
with customers, suppliers, employees and business
associates;
(b) the company shall not materially modify or amend or
terminate any of its material contracts or waive,
release or assign any material rights or claims, except
in the ordinary and usual course of business;
6.3 MEETINGS OF THE SHAREHOLDERS. As soon as practicable after this
date, purchaser and the company shall prepare a joint proxy/registration
statement
6
<PAGE>
(the "Registration Statement"), which shall comply as to form with all
applicable law and its governing instruments to convene a meeting of its
shareholders as promptly as practicable to consider and vote upon the approval
of this Agreement and the Plan of Merger and the Merger. Subject to fiduciary
requirements of applicable law, the respective boards of directors of each of
purchaser and the company shall recommend such approval and take all lawful
action to solicit such approval; provided, however, and notwithstanding any
other provision in this Agreement to the contrary, if either purchaser or the
company should experience any development or combination of developments having
a material adverse effect on the financial condition, properties, business or
results of operations of purchaser, taken as a whole, or the company, taken as a
whole, as the case may be, other than as a result of factors affecting the
industry or the economy generally, then the board of directors of the other
company may withdraw its recommendation of the Merger and may postpone the
meeting of its shareholders to allow adequate time to disseminate relevant
disclosure material. The company agrees, as to information with respect to the
company, its officers, directors, and shareholders contained when the
Registration Statement becomes effective and at the date of the meeting of the
respective shareholders of purchaser and the company, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated or necessary to make the statement not misleading.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF PURCHASER AND COMPANY. The
respective obligations of purchaser and the company to consummate the Merger are
subject to the fulfillment of each of the following conditions, any or all of
which may be waived in whole or in part by purchaser or the company as the case
may be, to the extent permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the holders of (i) at least a majority
of the voting power of the outstanding shares of the
purchaser common stock, voting together as a single
class, in accordance with applicable law and the
Certificate of Incorporation and By-Laws of purchaser
and (ii) a majority of the outstanding shares, in
accordance with applicable law and the Articles and
By-Laws of the company.
(b) Continuing Warranties, Certificate. The representations
and warranties of the company contained in this
Agreement shall be correct on and as of the Effective
Time in all material respects with the same effect as
though made and as of such date, except for the changes
contemplated by this Agreement, and the company shall
have performed in all
7
<PAGE>
material respects all of its obligations to be
performed, and purchaser shall have received at the
Effective Time a certificate to that effect, dated the
Effective Time, and executed on behalf of the company
by an executive officer of the company. Notwithstanding
anything in the foregoing to the contrary, this Section
7.1(b) shall be deemed to have been fulfilled
regardless of whether the representations contained in
Section 5.1 shall not be so correct or the covenants in
Sections 6.1 and 6.2 to the extent it is applied to
these sections.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
company to consummate the Merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the company to the extent permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the holders of (i) at least a majority
of the voting power of the outstanding shares of the
purchaser common stock, voting together as a single
class, in accordance with applicable law and the
Certificate of Incorporation and By-Laws of purchaser
and (ii) a majority of the outstanding shares, in
accordance with applicable law and the Articles and
By-Laws of the purchaser.
(b) Continuing Warranties, Certificate. The representations
and warranties of the purchaser contained in this
Agreement shall be correct on and as of the Effective
Time in all material respects with the same effect as
though made and as of such date, except for the changes
contemplated by this Agreement, and the purchaser shall
have performed in all material respects all of its
obligations to be performed, and company shall have
received at the Effective Time a certificate to that
effect, dated the Effective Time, and executed on behalf
of the purchaser by an executive officer of the
purchaser.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by shareholders of the parties by the mutual consent of
purchaser and the company by action of their respective boards of directors.
8
<PAGE>
8.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article VIII, no party (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in Section 9.2 and except that nothing will relieve any party from
liability for any breach of this Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
Merger.
9.2 SURVIVAL. The agreements shall survive the consummation of the
Merger.
9.3 MODIFICATION OR AMENDMENT. Subject to the Texas Statutes, at any
time prior to the Effective Time, the parties may, by written agreement, make
any modification or amendment of this Agreement approved by their respective
boards of directors. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties. After the Effective Time, none of the agreements may be amended.
9.4 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 COUNTERPARTS. For the convenience of the parties this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all counterparts shall together
constitute the same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
9.7 NOTICES. Any notice, request, instruction, or other document to
be given by any party to the other, shall be in writing and delivered personally
or sent by a registered or certified mail, postage prepaid to the company to
Lindsey Vinson, 508 Decker Drive, Dallas, Texas 75062, and to the purchaser to
to Lindsey Vinson, 508 Decker Drive, Dallas, Texas 75062, or to such other
persons or addresses as may be designated in writing by the party to receive
such notice.
9
<PAGE>
9.8 ENTIRE AGREEMENT, ETC. This Agreement (a) constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties, with respect to the subject matter and (b)
shall not be assignable by operation of law or obligation to, or rights in
respect of, any persons other than the parties, it being expressly agreed that
all of the persons (and their successors and assigns) who are beneficiaries of
such sections or schedule (whether as individuals or as members of a class or
group) shall be entitled to enforce such sections and schedule against purchaser
or the surviving corporation or of the purchaser.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
DATACQUISITION TECHNOLOGIES, INC.
By: /s/ Lindsey Vinson
----------------------------------------
Name: Lindsey Vinson
--------------------------------------
Title: President
-------------------------------------
UTILITYNET.COM, INC.
By: /s/ Lindsey Vinson
----------------------------------------
Name: Lindsey Vinson
--------------------------------------
Title: President
-------------------------------------
10
<PAGE>
DATACQUISITION TECHNOLOGIES, INC.
FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 1999
<PAGE>
DATACQUISITION TECHNOLOGIES, INC.
JUNE 30, 1999
CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
BALANCE SHEET 2
STATEMENT OF OPERATIONS 3
STATEMENT OF STOCKHOLDER'S EQUITY 4
STATEMENT OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6 - 11
<PAGE>
Report of Independent Certified Public Accountants
- --------------------------------------------------
Board of Directors and Stockholders
DATAcquisition Technologies, Inc.
We have audited the accompanying balance sheet of DATAcquisition Technologies,
Inc. as of June 30, 1999, and the related statements of operations,
stockholder's equity and cash flows for the period from inception (September
4,1998) to June 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 DATAcquisition Technologies,
Inc. as of June 30, 1999, and the results of its operations and its cash flows
for the period from inception (September 4, 1998) to June 30, 1999, in
conformity with generally accepted accounting principles.
LANE GORMAN TRUBITT, L.L.P.
Dallas, Texas
July 21, 1999
<PAGE>
DATAcquisition Technologies, Inc.
BALANCE SHEET
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 331
Trade receivables, net of $20,213 allowance 192,252
Inventories 150,147
Deposits and prepaid expenses 8,275
---------
Total current assets 351,005
PROPERTY AND EQUIPMENT - NET 99,592
OTHER ASSETS
Due from affiliates, net of $48,956 allowance 51,735
Goodwill - less accumulated amortization of $16,173 42,050
---------
93,785
---------
$ 544,382
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable $ 221,500
Current portion of long-term note payable 5,178
Accounts payable 64,836
Accrued expenses 204,480
---------
Total current liabilities 495,994
NOTE PAYABLE - LONG TERM 34,937
CONTINGENCIES --
STOCKHOLDER'S EQUITY
Common stock - authorized 1,000,000 shares, no par
Value, 1,000 shares issued and outstanding 220,585
Retained earnings (deficit) (207,134)
---------
13,451
---------
$ 544,382
=========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
DATAcquisition Technologies, Inc.
STATEMENT OF OPERATIONS
For the period from inception (September 4, 1998) to June 30, 1999
Revenues
Merchandise sales $ 852,749
Fees earned and other income 187,673
-----------
Total revenues 1,040,422
Cost of merchandise sales 317,969
-----------
Gross profit 722,453
Operating costs and expenses 712,990
-----------
Operating profit 9,463
Other income 1,983
Other expenses
Research and development 169,540
Interest expense 15,563
Penalties and late fees 29,430
Other 4,047
-----------
Total other expense 218,580
-----------
NET LOSS $ (207,134)
===========
BASIC NET LOSS PER SHARE $ (207.13)
===========
Weighted Average Common Shares Outstanding 1,000
===========
The accompanying notes are an integral part of these statements.
3
<PAGE>
DATAcquisition Technologies, Inc.
STATEMENT OF STOCKHOLDER'S EQUITY
For the period from inception (September 4, 1998) to June 30, 1999
<TABLE>
<CAPTION>
Retained Total
Earnings Stockholder's
Shares Amount (Deficit) Equity
------ ------ --------- ------
<S> <C> <C> <C> <C>
Issuance of common stock (at inception) 1,000 $ 1,000 $ - $ 1,000
Capital contributions by stockholder - 219,585 - 219,585
Net loss - - (207,134) (207,134)
----- -------- --------- ---------
Balance at June 30, 1999 1,000 $220,585 $(207,134) $ 13,451
===== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
DATAcquisition Technologies, Inc.
STATEMENT OF CASH FLOWS
For the period from inception (September 4, 1998) to June 30, 1999
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss $(207,134)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 28,827
Provision for losses on receivables 69,169
Change in assets and liabilities:
Trade receivables (212,465)
Inventories (90,370)
Deposits and prepaid expenses (8,275)
Accounts payable 64,836
Accrued expenses 206,980
---------
Net cash used by operating activities (148,432)
---------
Cash flows from investing activities
Advances to affiliates $(100,691)
Expenditures for property and equipment (41,881)
Proceeds from sale of property and equipment 250
---------
Net cash provided by investing activities (142,322)
---------
Cash flows from financing activities
Net proceeds under note payable 70,500
Proceeds from subordinate debt 220,585
---------
Net cash provided by financing activities 291,085
---------
Net increase in cash 331
Cash at beginning of period --
---------
Cash at end of period $ 331
=========
Supplemental disclosures of cash flow information:
Cash paid during the period from inception (September
4, 1998) to June 30, 1999 $ 2,748
=========
Interest $ --
=========
Noncash investing and financing transactions:
Note payable issued to purchase the asset of U.S. Mictrotel (See Note 7) $ 150,000
Note payable issued to purchase vehicle 40,115
Contribution of subordinated debt to capital 220,585
Equipment given to employee in lieu of compensation 2,500
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
1. HISTORY AND NATURE OF THE BUSINESS
The Company originally incorporated as U S M Acquisition Corp in September,
1998. During May, 1999, the Company changed its name to DATAcquisition
Technologies, Inc. ("DATA" or "the Company"). On September 4, 1998, DATA
purchased certain operating assets of US Microtel, Inc. ("USM") in exchange
for a $150,000 note payable secured by all assets transferred in the sale.
The principal and accrued interest on the note at an interest rate of 10%
per annum is due on September 3, 1999. On the date of the asset purchase,
both DATA and USM were affiliated through common ownership.
Generally, all assets acquired by DATA were recorded at USM's historical
book values, which approximated market values. Property, plant, and
equipment were reported at their fair values.
DATAcquisition Technologies, Inc. designs and manufactures data collection
devices used to collect meter data for electricity, gas, and water
utilities. The Company's customers are principally utility companies
located throughout the United States. For the period from inception
(September 4, 1998) through June 30, 1999, sales to three customers made up
approximately 44% of total sales. Accounts receivable from these customers
were approximately 29% of trade accounts receivable at June 30, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
-------------------
Revenue is accrued and recognized when the units are shipped to the
customer.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash and short-term, highly liquid
investments which have original maturities of three months or less.
The Company maintains its cash balances in two financial institutions which
are located in Dallas, Texas and Oklahoma City, Oklahoma. Balances in the
financial institutions are insured by the Federal Deposit Insurance
Corporation up to $100,000. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk
on cash and cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost or market, with cost being
determined on a first-in, first-out basis. The Company periodically
evaluates its inventory to determine if any unsalable or obsolete inventory
exists and adjusts its reserves as necessary. These evaluations are
performed, at a minimum, on an annual basis.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives of three to seven
years for financial reporting purposes and by accelerated methods for
income tax reporting purposes. As assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is reflected in operations. The
cost of maintenance and repairs is charged to operations as incurred;
significant renewals and betterments are capitalized
Goodwill
--------
Goodwill is the excess of cost over the fair value of net assets acquired
and is being amortized by the straight line method over three years for
financial statement reporting and over a useful life of fifteen years for
tax purposes.
6
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
------------------------
Research and development costs are expensed as incurred.
Income Taxes
------------
Statement of Financial Accounting Standards No. 109 requires the use of an
asset and liability approach for financial accounting and reporting
purposes. The statement also requires deferred tax balances to be adjusted
to reflect the tax rates in effect when those amounts are expected to be
payable or refundable.
Deferred income taxes are provided for differences in timing of reporting
certain expenses for financial reporting and tax purposes. Deferred tax
liabilities result primarily from the use of accelerated depreciation for
tax purposes and straight-line depreciation for financial reporting.
Deferred tax assets relate to (I) expenses recorded for financial statement
purposes that are not currently deductible for tax purposes, (ii) the
difference in the useful life of goodwill for financial statement purposes
and for tax purposes and (iii) net operating loss carryforwards and tax
credits remaining. If it is likely that some portion or all of a deferred
tax asset will not be realized, a valuation allowance is recognized (See
Note 8).
Estimates
---------
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
Advertising
-----------
Advertising and promotion costs are charged to operations when incurred.
Total expense for 1999 was $3,608.
Recent Accounting Pronouncements
--------------------------------
The Financial Accounting Standards Board has released Statement of
Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", FAS 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise (an amendment of FASB
Statement No. 65)," FAS 135, "Rescission of FASB Statement No. 75 and
Technical Corrections," dealing with government pension plans, FAS 136,
"Transfers of Assets to a Not-for-Profit Organization or Charitable Trust
That Raises or Holds Contributions for Others" and FAS 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effect of
FASB Statement No. 133"
The Company believes that the impact of these new standards will not have a
material effect on the Company's financial position, results of operations
or disclosures.
Earnings per Share
------------------
Per share information is based on the weighted average number of common
stock shares outstanding. The Company has no common stock equivalents.
Disclosures About Fair Value Of Financial Instruments
-----------------------------------------------------
Fair value of financial instruments are estimated to approximate the
related book value, unless otherwise indicated, based on market information
available to the Company.
7
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
3. INVENTORIES
Inventories consist of the following at June 30:
Raw materials $ 95,280
Work in process 42,139
Finished goods 12,728
--------
$150,147
========
4. PROPERTY AND EQUIPMENT
Property and equipment consists of:
Leasehold improvements $ 3,506
Office equipment 46,637
Office furniture 6,059
Automobiles 44,737
Factory equipment 11,307
---------
112,246
Accumulated depreciation (12,654)
---------
$ 99,592
=========
Depreciation expense for the period from inception (September 4, 1998) to
June 30, 1999 was $12,654.
5. NOTES PAYABLE
Short terms notes consist of the following at June 30, 1999:
$71,500 term note with a bank dated June, 1999.
Principal and accrued interest at a rate of 10% is due
on July 31, 1999. The note is guaranteed by the
stockholder of the Company and is secured by all
accounts receivable, inventory and general intangibles.
The note agreement contains various provisions and
restrictions including limitation of indebtedness $ 71,500
Note payable to related party (see Note 7) 150,000
---------
$ 221,500
=========
Long term notes consist of the following at June 30, 1999:
Note payable to a bank, dated June 24, 1999 in the
amounts of $40,115. Payments are due monthly in the
amount of $712 including interest at a rate of 8.25%.
The note is secured by a vehicle and the personal
guaranty of the stockholder $ 40,115
Less current maturities (5,178)
---------
$ 34,937
=========
8
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
5. NOTES PAYABLE (Continued)
At June 30, 1999, future minimum principal payments on long term debt were
as follows:
2000 $ 5,178
2001 5,850
2002 6,359
2003 6,912
2004 7,510
Thereafter 8,306
--------
$ 40,115
========
6. ACCRUED EXPENSES
Customer deposits $ 14,576
Accrued payroll 54,432
Payroll taxes payable 94,418
Accrued payroll tax penalties 15,000
Other accrued expenses 26,054
--------
$204,480
========
7. ASSET PURCHASE AND RELATED TRANSACTIONS
On September 4, 1998, the Company entered into an Asset Purchase Agreement
with USM to purchase all assets of USM except for receivables. At the time
of the sale, USM and the Company were related through common ownership.
Subsequent to signing the agreement, USM filed for relief under Chapter 7
of the U.S. Bankruptcy Code.
The purchase price of USM's assets was $150,000. Payment was in the form of
a note payable due on September 4, 1999 with accrued interest at 10%. The
note is secured by all assets transferred by the agreement.
The purchase price exceeded the fair value of net assets at the date of
acquisition by $58,223, which was assigned to goodwill and is being
amortized on the straight-line method over 3 years. Amortization related to
goodwill for the period from inception (September 4, 1998) to June 30, 1999
was $16,173.
Subsequent to acquisition, DATA entered into transactions resulting in a
$69,775 net receivable due from USM. These transactions are summarized as
follows:
Cash advanced to USM $ 36,874
Warranty work performed on products sold by USM 26,838
Payment of pre-acquisition liabilities by DATA 29,436
Payment of post-acquisition by USM (23,373)
As of June 30, 1999, a reserve of approximately $50,000 has been taken
against these balances. Eventual settlement of this receivable will be
determined by the Bankruptcy Court. Issues to be settled include the amount
of allowable charges and determination of the right to offset the
receivable against the note payable disclosed above. As a result the
outcome is highly uncertain. Due to the uncertainties described above, it
is at least reasonably possible that the reserve for uncollectible accounts
will change materially in the near term from the amounts assumed in
determining the current year net loss.
9
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
8 INCOME TAXES
As of June 30, 1999, the company had a net operating loss carryforward of
approximately $52,500 available to offset income of future periods. The net
operating loss carryforward expires in the year 2020. A deferred tax asset
of approximately $68,000 has not been recognized at June 30, 1999. A
valuation allowance was established to fully reserve the potential tax
benefit for the period presented. The valuation allowance increased by
approximately $68,000 for the period from inception (September 4, 1998) to
June 30, 1999.
The income tax benefit reconciled to the tax computed at federal statutory
rates at June 30, 1999 as follows:
Tax benefit at statutory rates $(79,333)
Tax effects of nondeductible items 11,457
--------
Deferred tax benefit (67,876)
Valuation allowance 67,876
--------
$ -
========
9 COMMITMENTS
Lease
-----
The Company conducts its operations from leased facilities under a
long-term lease agreement, classified as an operating lease, which expires
on February 28, 2002. Total rent expense, all of which was minimum rentals
was $35,188 for the period from inception (September 4, 1998) to June 30,
1999. Approximately $16,981 of this amount was paid on behalf of an
affiliate. The following is a schedule of future minimum lease payments
required by non-cancelable operating lease:
2000 $ 56,097
2001 60,231
2002 41,729
--------
$158,057
========
Consultant Agreement
--------------------
The Company has entered into a consulting agreement. This agreement
specifies certain minimum monthly charges payable to the consultant. The
following is a schedule of minimum charges under this agreement:
2000 $ 30,000
2001 8,750
--------
$ 38,750
========
Other
-----
The Company has entered into an agreement to be purchased by
Utilitynet.com, Inc. under which it will exchange all of the issued and
outstanding stock of DATA for 1,250,000 shares of restricted common stock
of Utilitynet.com, Inc. Utilitynet.com is owned principally by the
shareholder and president of the Company
Utilitynet.com, Inc. is a development stage company formed to operate as a
holding company for acquired businesses.
10
<PAGE>
DATAcquisition Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
10. CONTINGENCIES
The Company, in the normal course of business, is a plaintiff in a lawsuit.
The Company's management does not expect that the result of the lawsuit
will have a material adverse effect on the financial position or results of
operations of the Company.
11. OPERATING LOSSES
For the period September 4, 1998 through June 30, 1999, the Company
recorded an operating loss of $207,134 before any tax benefit. For the
period September 4, 1998 through June 30, 1999, the Company recorded an
operating loss of $207,134 before any tax benefit. This resulted in an
operating cash flow deficit of $148,432. As a result, the Company was
unable to make certain required payroll tax and employee withholding
payments. At June 30, 1999, the Company had not yet remitted payroll taxes
for the quarter ended March 31, 1999. They also owed unpaid penalties in
the amount of $12,384 from the quarter ended December 31, 1999.
Included in the operational expenses were certain expenditures not
associated with the "core" product sales and marketing and support
functions; rather, they were primarily directed toward the development of
new products and/or services that management feels is in the best long term
interest of the Company. Had these "non core" expenses been excluded from
the activities of the company, the operating loss would have been
substantially, if not entirely, eliminated.
The sole shareholder of the Company financed these activities through
contributions of capital on a periodic basis as needed by the Company.
Accordingly, it is the intention of management to continue to raise
additional capital in the future from its owner or other sources to support
such activities, if such activities continue to be in the best interest of
the Company. To this end, the Company has entered into an agreement to be
purchased by Utilitynet.com, Inc., under which it will exchange all of the
issued and outstanding stock of the Company for 1,250,000 shares of
restricted common stock of Utilitynet.com, Inc. Utilitynet.com, Inc. is
owned principally by the shareholder and President of the Company.
Utilitynet.com, Inc. is a development stage company formed to operate as a
holding company for acquired businesses.
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