SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Nine Months Ended Commission File Number
MARCH 31, 2000 333-34646
eSAFETYWORLD, Inc.
100-31 South Jersey Avenue
Setauket, NY 11733
Tel: 631-244-1454
Nevada 11-3496415
(State of Incorporation) (I.R.S. Employer Identification No.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
[ ] Yes [X] No
At March 31, 2000, the latest practicable date, there were 3,000,000 shares of
Common Stock outstanding, $.001 par value.
<PAGE>
eSAFETYWORLD, Inc.
INDEX
PAGE
PART I.
FINANCIAL INFORMATION
Item 1.
Unaudited Financial Statements:
Condensed Balance Sheets
as of March 31, 2000 and June 30, 1999 3
Condensed Statements of Operations for the Nine Months
Ended March 31, 2000 and 1999 5
Condensed Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 6
Statements of Cash Flows for the Nine Months Ended March 31,
2000 and 1999 7
Condensed Statement of Stockholders' Equity for the Nine
Months Ended March 31, 2000 8
Notes to Condensed Financial Statements 9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II.
OTHER INFORMATION 17
EXHIBITS
Financial Data Schedule 18
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eSAFETYWORLD, Inc.
CONDENSED BALANCE SHEETS
ASSETS
March 31, 2000 June 30, 1999
(unaudited)
Current Assets:
Cash and cash equivalents $5,866,760
Accounts receivable 159,443
Other current receivables 127,583
Prepaid expenses and other 99,271
----------
Total Current Assets 6,253,057
Goodwill 389,988
Other Assets 663,180 $ 10,000
---------- ----------
Total Assets $7,306,225 $ 10,000
========== ==========
See Notes to Condensed Financial Statements.
3
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eSAFETYWORLD, Inc.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 2000 June 30,1999
(unaudited)
Current Liabilities:
Notes payable $ 485,000
Accounts payable 264,771
----------
Total Current Liabilities 749,771
----------
Stockholders' Equity:
Common stock, $.001 par value, 20,000,000
shares authorized; 3,000,000 and
1,900,000 shares 3,000 $ 1,900
issued
Additional paid-in capital 6,446,613 8,100
Retained earnings 106,841
---------- ----------
Stockholders' Equity 6,556,454 10,000
---------- ----------
Total Liabilities and Stockholders' Equity $7,306,225 $ 10,000
========== ==========
See Notes Condensed Financial Statements.
4
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eSAFETYWORLD, Inc.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
Sales $ 651,312 $ 0
Cost of Sales 385,494
-----------
Gross Profit 265,818
-----------
Expenses
Selling and administrative expenses 70,085
Amortization of intangibles 80,625
-----------
Total expenses 150,710
-----------
Operating Profit 115,108
Other-net (principally interest) 18,333
-----------
Pretax Income 133,441
Income Taxes (26,600)
-----------
Net Income $ 106,841 $ 0
=========== ===========
Basic Income per Share $ .05 $ 0
=========== ===========
Weighted average number of common and
Common equivalent shares
outstanding 2,115,273 1,900,000
=========== ===========
See Notes to Condensed Financial Statements.
5
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eSAFETYWORLD, Inc.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
Sales $ 219,343 $ 0
Cost of Sales 116,484
-----------
Gross Profit 102,859
-----------
Expenses
Selling and administrative expenses 38,085
Amortization of intangibles 40,000
-----------
Total expenses 78,085
-----------
Operating Profit 24,774
Other-net (principally interest) 18,333
-----------
Pretax Income 43,107
Income Taxes (7,009)
-----------
Net Income $ 36,098 $ 0
=========== ===========
Basic Income Per Share $ .02 $ 0
=========== ===========
Weighted average number of common and
Common equivalent shares
outstanding 2,406,593 1,900,000
=========== ===========
See Notes to Condensed Financial Statements.
6
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eSAFETYWORLD, Inc.
CONDENSED STATEMENTS OFCASH FLOWS
FOR THE NINE MONTHS ENDED March 31, 2000 and 1999
(UNAUDITED)
2000 1999
Cash flows from operating activities:
Net income $ 106,841 $ 0
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 80,625
Decrease in net operating assets 60,111
-----------
Net cash provided by operations 247,577
-----------
Cash flows investing activities:
Purchase of software and customer lists (696,293)
-----------
Cash flows from financing activities:
New borrowings 485,000
Repayment of debt (400,000)
Loans made (209,137)
Issuance of securities 6,439,613
-----------
Total 6,315,476
-----------
Net increase in cash 5,866,760
Cash and cash equivalents - beginning 0
-----------
Cash and cash equivalents - ending $ 5,866,760 $ 0
=========== ===========
See Notes to Condensed Financial Statements.
7
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eSAFETYWORLD, Inc.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ---------- -------- -----
<S> <C> <C> <C> <C>
Balance, July 1, 1999 $ 1,900 $ 8,100 $ 10,000
Issuance of equity securities as
part of asset purchase 100 699,900 700,000
Sale of equity securities 1,000 5,738,613 5,739,613
---------- ----------
Net income 106,841 106,841
---------- ----------
Balance, March 31, 2000 $ 3,000 $6,446,613 $ 106,841 $6,556,454
========== ========== ========== ==========
</TABLE>
See Notes to Condensed Financial Statements.
8
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NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE 1--BASIS OF PRESENTATION
The accompanying interim condensed financial statements for the three-and
nine month periods ended March 31, 2000 and 1999 are unaudited and include all
adjustments considered necessary by Management for a fair presentation. The
results of operations realized during an interim period are not necessarily
indicative of results to be expected for a full year. These consolidated
financial statements should be read in conjunction with the information filed as
part of the Company's Registration Statement on Form SB-2.
eSAFETYWORLD was established as a Nevada corporation in July 1997 as The SL
Group, Inc. and changed its name to eSAFETYWORLD, Inc. in August 1999 and
completed an initial public offering of its common stock in February 2000. Its
purpose is to develop and operate a business-to-business E-Commerce site on the
world wide web selling industrial safety products.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's principal accounting and financial reporting
policies is as follows:
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods, The principal assumptions
inherent in the accompanying financial statements relate to the realizability
and life of the acquired customer and vendor lists and goodwill included in the
financial statements.
Revenue Recognition -- Revenue for product sales is recognized in the
period in which the product is shipped.
Advertising -- eSAFETYWORLD will charge advertising costs to expense as
incurred. Costs related to CD-ROMs, promotional literature and catalogs will be
charged to operations when mailed or distributed.
Basic Income Per Share -- Basic income per common and common equivalent
share are calculated by dividing net income by the weighted average number of
common and common equivalent shares outstanding during each period. There were
no options or convertible instruments outstanding during either period, except
for warrants the assumed exercise of which would have been antidilutive.
Long-lived Assets -- Long lived assets, including intangibles, to be held
and used are reviewed for impairment whenever events or changes in circumstances
indicate that the related carrying amount may not be recoverable. If required,
impairment losses on assets to be held and used are recognized based on the
excess of the asset's carrying value over its fair value. Long-lived assets to
be sold are reported at the lower of carrying amount or fair value reduced by
estimated disposal costs.
Intangibles -- Goodwill, which represents the excess of the purchase price
for certain of the assets and the business of the Cleanroom Products Division
acquired from Laminaire Corporation over
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the fair value of the net assets acquired, is being amortized on the
straight-line basis over five years. The value ascribed to the customer and
vendor lists is being amortized on the straight-line basis over ten years. The
cost of website development is being amortized on a straight-line basis over
five years.
Statement of Cash Flows -- For the purposes of this statement, investments
and time deposits having an initial term of 90 days or less are considered to be
cash equivalents.
Fiscal Year -- eSAFETYWORLD's fiscal year ends on June 30.
NOTE 3 -- COMPLETION OF INITIAL PUBLIC OFFERING
The Company completed an initial public offering on February 23, 2000 in
which it sold 1,000,000 shares of its common stock for gross proceeds of
$7,000,000. As part of the Offering, it paid the Underwriter a fee equivalent to
13% of total proceeds as commission and an expense allowance and also paid
$92,000 as a consulting fee. The Company also sold a warrant covering an
aggregate of up to 100,000 shares of common stock exercisable at a price of
$10.50 per share to the underwriter, for its own accounts,. The underwriter paid
a price of $100 for the warrant. The underwriter will receive 100,000 shares if
it exercises the warrant, commencing on the first anniversary of the date of
this offering until the fifth anniversary of the date of this offering. The
terms of the warrant require the Company to register the common stock for which
the warrant is exercisable within one year from the date of the prospectus. This
underwriter's warrant is not transferable by the warrant holders other than to
officers and partners of the underwriter. The exercise price of the
underwriter's warrant and the number of shares of common stock for which the
warrant is exercisable are subject to adjustment to protect the warrant holders
against dilution in specific events.
NOTE 4 - ACQUISITION OF CERTAIN ASSETS FROM LAMINAIRE CORPORATION
On August 11, 1999, eSAFETYWORLD entered into an agreement under which it
acquired certain intangible assets and rights of the distribution business of
Laminaire Corporation in exchange for 100,000 shares of its common stock, notes
in the principal amount of $500,000 and the assumption of accounts payables in
an amount up to $125,000. The terms of the acquisition were modified and reduced
in March 2000 such that the principal amount of notes was reduced to $400,000
and the Company did not assume any of Laminaire's accounts payable. The
acquisition agreement provided that the Company obtained the customer and vendor
base and lists, a toll free number and certain pricing information but acquired
no tangible assets including inventory or accounts receivable as part of the
transaction. The acquired business distributes disposable products used in
Cleanrooms to a wide variety of commercial customers.
The Company had the right to offset the principal amount of a $102,000
demand note that it made to Laminaire, in whole or in part, against any payment
due by it to Laminaire under these note agreements. In September 1999,
eSAFETYWORLD also guaranteed the payment of Laminaire's trade obligations to
three of Laminaire's vendors. In addition, the Company could offset the amounts
paid under these guarantees or any amounts that it paid or pays to satisfy
amounts due by Laminaire to its vendors against any amount due by the Company to
Laminaire under the note agreements.
The notes payable bore interest at eight percent per annum and were payable
in 12 quarterly instalments. The first instalments under the note agreements
were payable at the earlier of our completion of the Company's public offering
or March 31, 2000. As of March 31, 2000, the Company
10
<PAGE>
had made sufficient payments to Laminaire and its vendors to satisfy fully the
notes payable to Laminaire.
The total purchase price of $1,100,000 was accounted for as a purchase in
conformity with Opinion No. 16 of the Accounting Principles Board.
The Company's President is also a Director of Laminaire Corporation. He did
not participate in Laminaire's deliberations on the transaction described above.
All of the Company's Directors voted affirmatively for the resolution
authorizing the acquisition.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Consulting Agreements
eSAFETYWORLD has an agreement with EH Associates, LLC, an entity controlled
by its president under which eSAFETYWORLD will pay annual consulting fees of
$125,000, $140,000 and $150,000 in each of the three years in the period ended
March 31, 2003. The president receives reimbursement for expenses including
healthcare, but receives no other cash compensation from eSAFETYWORLD.
JP Inc., an entity controlled by the Company's chief financial officer has
a contract with eSAFETYWORLD under which eSAFETYWORLD has agreed to pay minimum
annual fees of $120,000 in each of the three years in the period ended March 31,
2003 for legal, marketing and other business services. The chief financial
officer receives reimbursement for expenses, but receives no other cash
compensation from eSAFETYWORLD.
EDK Associates, LLC, an entity controlled by a director, Ms. Owens, has a
contract with eSAFETYWORLD under which eSAFETYWORLD has agreed to pay annual
fees of $58,000, $65,000 and $75,000 in each of the three years in the period
ended May 31, 2003 for administrative, marketing and investor relations
services. Ms. Owens, who will devote 30 to 35 hours per week to eSAFETYWORLD,
receives reimbursement for expenses including healthcare, but receives no other
cash compensation from eSAFETYWORLD.
Employment Agreement
The Company's chief operating officer has a three-year employment agreement
that calls for an annual salary of $85,000, $100,000 and $120,000 in each of the
three years in the period ended March 31, 2003, as well as reimbursement of
business expenses, including a car allowance. The chief operating officer is the
son-in-law of the Company's president.
Stock Option Plan
The Company has a stock option plan that expires in 2009 and enables it to
grant incentive stock options, non-qualified options and stock appreciation
rights for up to an aggregate of 450,000 shares of our common stock. Incentive
stock options granted under the plan must conform to applicable federal income
tax regulations and have an exercise price not less than the fair market value
of shares at the date of grant or 110% of fair market value for ten percent or
more stockholders. Other options and
11
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stock appreciation rights may be granted on terms determined by the compensation
committee of the board of directors.
No options or other awards were outstanding at March 31, 2000.
Agreements with Apex Interactive and Continental Capital & Equity Corporation
In March 2000, the Company entered into a three-year renewable agreement
with Apex Interactive ("Apex") under which Apex agreed to host the Company's
e-commerce website, provide Internet marketing services and support the
Company's databases used by its website for $10,000 per month, subject to
adjustment.
In March 2000, the Company entered into a one-year agreement with
Continental Capital & Equity Corporation ("CCEC") under which CCEC agreed to
perform public relations and investor relations services for a fee of $50,000
(included in "Prepaid and other in the accompanying Balance Sheet) and warrants
to purchase 200,000 shares of common stock as follows - 50,000 shares each at
$10, $12, $14 and $16 per share. In addition, 30,000 shares of restricted common
stock are issuable in the quarter ended June 30, 2000.
Rent
eSAFETYWORLD is obligated under the terms of two short-term operating
leases for office space which call for minimum monthly rentals of approximately
$1,700.
NOTE 6 - NOTES PAYABLE
The notes payable were due to various unrelated investment funds and were
repaid in full in April 2000.
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Information set forth herein contains "forward-looking statements" which
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy. No
assurance can be given that the future results covered by the forward-looking
statements will be achieved. The Company cautions readers that important factors
may affect the Company's actual results and could cause such results to differ
materially from forward-looking statements made by or on behalf of the Company.
Such factors include, but are not limited to, changing market conditions, the
impact of competitive products, pricing, acceptance of the Company's products in
development and other risks detailed herein and in other filings that the
Company makes with the Securities and Exchange Commission.
Operations
The Company had no revenue generating history prior to June 30, 1999. In
August 1999, it acquired the business of the Distribution Product Group of
Laminaire Corporation. Its business strategy for the year following the
completion of the offering is designed to have us identified as the Internet
independent sales representative of industrial safety, disposable cleanroom and
first aid products for our market niches. This strategy is to:
o update the Company's e-commerce website to incorporate all 17,000 products
that it offers and incorporate real time customer service components,
o attend and present at trade shows,
o host receptions for potential customers and vendors,
o work with Apex Interactive and others to implement a state-of-the-art
Internet marketing campaign,
o prepare and distribute a CD-Rom covering all of our products,
o prepare and distribute printed advertising and promotional material, and
o visit or otherwise contact directly targeted customers and vendors.
In December 1999, we entered into a supply agreement with a traditional
wholesaler of industrial safety products. The agreement provides us with the
ability to sell more than 15,000 different products. We anticipate that this
wholesaler will become our largest supplier.
13
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The Company will devote a substantial portion of its resources during the
three-month period ended June 30, 2000 on completing and increasing the
visibility of its updated e-commerce website. The costs associated with those
undertakings, combined with the amortization requirements for recorded
intangible costs, make it unlikely that the quarter ended June 30, 2000 will be
profitable.
Operations
eSAFETYWORLD included the results of the former Distribution Product Group
in its results commencing with the acquisition date of August 22, 1999.
Operating results for the nine months are as follows:
- --------------------------------------------------------------------------------
Sales $ 651, 312
Cost of sales 385,494
Gross profit 265,818
Other operating costs 70,085
Amortization 80,625
Other-net 18,333
Pretax income 133,441
- --------------------------------------------------------------------------------
The Company's results for the nine months ended March 31, 2000 were
adversely affected by:
o the need to overcome vendor issues involving past due payments from
Laminaire. The Company experienced difficulties obtaining shipments while
it established its own relationships with vendors whose payments were
delayed by Laminaire. Throughout the period, various vendors delayed or
refused shipments because they were dissatisfied with Laminaire's payment
history.
o the loss of certain Laminaire customers who were dissatisfied with
Laminaire's delivery delays and who, therefore, did not renew blanket
orders that were scheduled to expire in 1999 or who just stopped placing
orders with an entity perceived to be the successor to Laminaire.
o the lack of cooperation on the part of certain Laminaire employees during
the transition period.
At the same time, substantially all of the Company's human resources were
devoted to the offering and then to updating the e-commerce website, as well as
modifying the Laminaire acquisition agreement. The Company ceased using former
Laminaire sales personnel in March 2000. Approximately 70% of the third quarter
revenues and substantially all of the quarter's profits were realized in March.
The sales that were obtained came principally through the toll free number,
efforts by Company employees to overcome Laminaire's perceived problems and
limited attendance at tradeshows. These sales were largely cleanroom sales and
were received by fax, telephone and email. The Company expects that its sales of
industrial safety and first aid products will increase in the second half of
2000 as its website becomes more known and it has had the opportunity to attend
more tradeshows.
14
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The Company realized a higher gross margin on sales (approximately 40%)
than was anticipated (approximately 30%) because many of the sales were for
higher margin items or were orders that needed to be fulfilled quickly or
required some customization. Overall, despite the problems and the need to
concentrate on web development and completion of the offering, earnings before
interest and amortization amounted to $195,723 largely because the Company kept
overhead costs to a minimum.
During this period, our efforts principally were directed towards:
o Completing the supply agreements;
o Overcoming vendor and other issues inherited from the Laminaire purchase;
o Developing and refining our overall strategy; and
o Planning this offering.
A substantial portion of these issues will be completed by June 30, 2000
allowing us to devote full time to marketing and sales. The Company also
believes that the customer lists obtained from Laminaire provides a potentially
valuable source of future business if the former customers are contacted
effectively. The Company is planning to engage an employee who will be dedicated
to that purpose.
Other operating costs consist principally of personnel and consulting
costs, including $48,000 paid to Laminaire for services received. No such costs
are included in cost of sales.
Amortization consists entirely of expenses relating to the Laminaire
transactions.
Liquidity and Capital Resources
The Company believes that the net proceeds of its initial public offering
are sufficient to satisfy its working capital requirements for at least 12
months because most of its expenditures relate to marketing and it has
discretion over the timing and amount of these expenditures. In addition, its
emphasis on outsourcing means that our level of fixed costs is relatively low,
less than $100,000 per month, and it has no material obligations or requirements
for capital expenditures.
The Company has no commitments for debt financing. The Company would seek
sources of financing if it has the opportunity of completing an acquisition. No
specific acquisition has been identified at this time.
Seasonality
The demand for the Company's products is somewhat seasonal. Its customers
have a reduced demand for products in the summer because many of its customers'
employees take vacation, plants are often closed during a portion of the summer
months, and there is a general reduction of business activity in those months.
New Accounting Pronouncements
15
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No new pronouncement issued by the Financial Accounting Standards Board,
the American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on the Company's
financial position or reported results of operations.
16
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PART II OTHER INFORMATION
Item 1 Legal Proceedings
eSAFETYWORLD is not a party to any litigation.
Item 2 Changes in Securities
See Condensed Financial Statements
Item 3 Defaults on Senior Securities
None
Item 4 Submission of Matters to a Vote of Shareholders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
There were no Reports on Form 8-K. The following Exhibits are being filed:
10.19 Letter Agreement Modifying Asset Purchase Agreement
10.20 Amended Consulting Agreement with JP, Inc.
10.21 Amended Employment Agreement with James Brownfiel
23 Letter from Accountants
27 Financial Data Schedule
17
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
eSAFETYWORLD, Inc.
(Registrant)
/s/ Edward A. Heil
-----------------------------
Edward A. Heil
President
Date: May 12, 2000
[GRAPHIC OMITTED]
eSAFETYWORLD, INC.
100-31 South Jersey Avenue
Setauket, NY 11733
516-244-1454
Fax: 212-656-1978
March 21, 2000
Stephen B. Schneer, Chairman
Laminaire Corporation
960 East Hazelwood Avenue
Rahway, NJ 07065
Dear Mr. Schneer:
This letter summarizes various understandings between eSAFETYWORLD, Inc.
and Laminaire Corporation and assumes that all readers are familiar with the
following two points:
o Laminaire's relationships with vendors and customers of it CD Division
were much worse than had been disclosed. Blanket orders that were
expiring were nor being renewed, pricing and database files were badly
out-of-date or otherwise inaccurate, virtually no sales efforts had
taken place for an extended period of time and few vendors were
willing to ship product.
o Laminaire is unable to ship product for its CM Division because it is
unable to obtain materials from its vendors.
Laminaire and eSAFETYWORLD now agree that:
o The acquisition agreement dated August 23, 1999 will be amended
to adjust the purchase price of the intangible assets acquired
such that eSAFFTYWORLD will no longer assume any accounts payable
or accrued expenses from Laminaire and the two notes that
Laminaire received from eSAFFTYWORLD in the aggregate principal
amount of $500,000 will be reduced to $400,000. In addition, the
Agreement will be amended to (i) include a current toll free
(800) telephone number held by Laminaire as one of the assets
assigned to eSAFFTYWORLD and (ii) specify that filters purchased
from third parties and distributed without further value-added
procedures are included as CD sales items (as such, eSAFETYWORLD
is entitled to customer lists pertaining to filter sales to the
extent such lists exist). All other terms of the notes will
remain in force.
o eSAFETYWORLD will agree to function as a general contractor on
selected CM jobs. eSAFFTYWORLD will, at its sole discretion,
determine which jobs offered
<PAGE>
by Laminaire to accept. If a job or contract is accepted,
eSAFETYWORLD will be assigned the customer sales order and will
obtain all materials, subcontract services and project management
required to undertake and complete the job. Laminaire will
provide all direct labor and fabrication work and receive a fee
for its sales and customer service functions. In general,
Laminaire will bill out its labor at $28 per hour and receive a
sales and service fee equal to three percent of the total sales
price. However, Laminaire may propose different different terms
on a case-by-case basis. eSAFETYWORLD will bill the customer when
a job is shipped and Laminaire will concurrently bill
eSAFETYWORLD for its services. Both parties agree that the
underlying reason for this arrangement is that Laminaire is
unable to fulfill customer orders because it is on credit hold
with substantially all of its CM vendors. This portion of the
agreement will remain in effect until June 30, 2000 and will be
reviewed and reconsidered by both parties at that date.
o Laminaire will provide miscellaneous other administrative
services for eSAFETYWORLD through April 30, 2000 and eSAFETYWORLD
will provide sales and management services for Laminaire through
the same period. Each service will be considered to have
approximately equal values.
eSAFETYWORLD will agree to drop any other claims that it may have against
Laminaire upon Laminaire executing this agreement.
Any controversy or claim arising out of or relating to this agreement, or
the breach thereof, shall be settled by arbitration in accordance of the rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbitrator(s) shall be entered in any court having jurisdiction thereof. For
that purpose, the parties hereto consent to the jurisdiction and venue of an
appropriate court located in Suffolk County, State of New York. In the event
that litigation results from or arises out of this Agreement or the performance
thereof, the parties agree to reimburse the prevailing party's reasonable
attorney's fees, court costs, and all other expenses, whether or not taxable by
the court as costs, in addition to any other relief to which the prevailing
party may be entitled. In such event, no action shall be entertained by said
court or any court of competent jurisdiction if filed more than one year
subsequent to the date the cause(s) of action actually accrued regardless of
whether damages were otherwise as of said time calculable.
Please review and return no later than March 29, 2000,
Sincerely,
/s/ EDWARD A HEIL
Edward A Heil
President
2
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Agreed to by:
/S/ [ILLEGIBLE]
- ---------------
NAME
/S/ Director
- ---------------
Title
<PAGE>
[GRAPHIC OMITTED]
100-31 South Jersey Avenue
Setauket, NY 11733
631-244-1454
Fax: 212-656-1978
April 4, 2000
Stephen B. Schneer, Chairman
Laminaire Corporation
960 East Hazelwood Avenue
Rahway, NJ 07065
Dear Mr. Schneer:
The purpose of this letter is to set forth a list of payments made by
eSAFETYWORLD, Inc. on behalf of Laminaire Corporation. All such payments are
being offset against the promissory notes in the aggregate principal amount of
$400,000 due by eSAFETYWORLD to Laminaire.
The payments are as follows:
Guarantees:
Texwipe $ 62,400
Alma 77,805
Kimberly Clark 79,882
Eichler Bergsman & Co., LLP 7,500
Cash used by Laminaire (1) 130,859
Offset of Note due from Laminaire 82,000
--------
Total 440,446
Amount of Notes 400,000
--------
Amount due to eSAFETYWORLD $ 40,446
========
(1) This amount relates to cash collected by Laminaire on sales pertaining to
eSAFETYWORLD during the period August 1999 to February 2000 as follows:
<PAGE>
Period Sales Cost of sales Other Net
August 22, 1999
through October $355,969 $213,110
November - December 76,000 55,900
January - February 59,900 44,000
-------- --------
Total $491,869 $313,010 $ 48,000 $130,859
======== ======== ======== ========
All amounts were obtained from Mr. Daniele. The amount included in "Other"
represents $8,000 per month to cover Laminaire's costs of servicing the
invoices. No attempt was made to reduce the cost of sales amount for purchases
actually made by eSAFETYWORLD.
After reviewing the data above, please call me to arrange for payment of the
amount due.
Sincerely,
Edward A. Heil
President
cc. R. Bret Jenkins
K. Ivan F. Gothner
Asim Kohli
2
<PAGE>
[GRAPHIC OMITTED]
100-31 South Jersey Avenue
Setauket, NY 11733
631-244-1454
Fax: 212-656-1978
April 10, 2000
Stephen B. Schneer, Chairman
Laminaire Corporation
960 East Hazelwood Avenue
Rahway, NJ 07065
Dear Mr. Schneer:
The purpose of this letter is to follow-up on our letter of April 4, 2000 in
which we set forth a detailed listing showing that Laminaire owes eSAFETYWORLD
approximately $40,400. Based on our discussions, it appears unlikely that
Laminaire has (i) the capability of paying that obligation or (ii) the ability
to obtain deliveries from vendors to service its orders and generate cash flow.
As a means of resolving the matters described in the first paragraph above, we
propose that Laminaire provide eSAFETYWORLD with its cleanroom manufacturing
customer list, on a nonexclusive basis. Such assignment will fully satisfy the
amount owed to eSAFETYWORLD by Laminaire.
It is further understood that:
o eSAFETYWORLD will contract fabrication functions on purchase orders
obtained by eSAFETYWORLD from customers on the list to the extent that it
deems appropriate. In the case that Laminaire receives a purchase order
from eSAFETYWORLD for fabrication work, eSAFETYWORLD will function as a
general contractor and will provide all materials needed to complete the
job.
o eSAFETYWORLD will own all designs and drawings relating to each such job.
o The assignment of the customer list is being done on a nonexclusive basis.
Laminaire retains the right to assign the list to others except that
Laminaire agrees that it will not assign the list or any portions thereof
to any current or former Laminaire employee, officer or director without
the written consent of eSAFETYWORLD.
<PAGE>
This offer remains open through the close of business on April 12, 2000.
Sincerely,
Edward A. Heil
President
Agreed to by:
- --------------------------------
Name
- --------------------------------
Title
- --------------------------------
Date
2
<PAGE>
[GRAPHIC OMITTED]
100-31 South Jersey Avenue
Setauket, NY 11733
631-244-1454
Fax: 212-656-1978
May 2, 2000
Stephen B. Schneer
Laminaire Corporation
960 East Hazelwood Avenue
Rahway, NJ 07065
Dear Mr. Schneer:
The purpose of this letter is to update our letter of April 4, 2000 in
which we summarized our transactions with Laminaire. Since then, Laminaire
performed some fabrication services for us and we purchased some used Laminaire
equipment. The equipment that we purchased is as follows:
o Two printers (including the old HP printer that belonged to Thermo-Mizer
Environmental Corp.),
o One wooden bookcase,
o One three drawer filing cabinet (that belonged to Thermo-Mizer),
o One Pentium II Computer with 19" monitor,
o One Pentium II Computer with 17" monitor and inkjet printer,
o Display units,
o Two wooden tables, and
o Three adding machines.
We understand that the book value of the foregoing items is negligible but have
nevertheless
<PAGE>
agreed to pay $6,000 for the entire package.
A summary of the transactions and balances due our companies since April 4,
2000 is as follows:
Net amount due to eSAFETYWORLD at 4/2/00 $ 40,446
Billing for fabrication services performed by
Laminaire for eSAFETYWORLD (32,000)
Purchase of used office equipment (6,000)
--------
Balance due to eSAFETYWORLD at 5/2/00 $ 2,446
--------
As we have advised you in the past, we have had ongoing problems caused by
the actions of current and former Laminaire employees and will not perform any
services whatsoever for Laminaire in the future.
Sincerely,
Edward A. Heil
President
Cc: R. Bret Jenkins
CONSULTING AGREEMENT
AGREEMENT made this 31st day of March, 2000, by and between JP, Inc., a
consulting firm domiciled in the State of Utah hereinafter referred to as the
"Consultant", and eSafetyWorld, Inc. whose principal place of business is
located at in East Setauket, New York hereinafter referred to as "Company."
WHEREAS, the Company desires to engage the services of the Consultant to
perform consulting services for the Company regarding as an independent
contractor and not as an employee; and
WHEREAS, Consultant desires to consult with the Board of Directors, the
officers of the Company, and the administrative staff, and to undertake for the
Company consultation as to the direction of certain functions in said management
of;
NOW, THEREFORE, it is agreed as follows:
1. Term. The respective duties and obligations of the contracting parties
shall be for a period of three years commencing on April 1, 2000, and may
be terminated by either party after three years by giving ninety (90) days'
written notice to the other party at the addresses stated above or at an
address chosen subsequent to the execution of this agreement and duly
communicated to the party giving notice. This Agreement shall automatically
renew each year thereafter, unless either party gives sixty (60) days
written notice to the other party of his intent not to renew for an
additional period.
2. Consultations. Consultant shall be available to consult with the Board of
Directors, the officers of the Company, and the heads of the administrative
staff, at reasonable times, concerning matters pertaining to the
organization of the administrative staff, the fiscal policies of the
Company, the relationship of the Company with its employees or with any
organization representing its employees, and, in general, the important
problems of concern in the business affairs of the Company. Consultant
shall not represent the Company, its Board of Directors, its officers or
any other members of the Company in any transactions or communications nor
shall Consultant make claim to do so. It is understood that all substantive
work performed by Consultant will be performed by or supervised by R. Bret
Jenkins.
3. Liability. With regard to the services to be performed by the Consultant
pursuant to the terms of this agreement, the
<PAGE>
Consultant shall not be liable to the Company, or to anyone who may claim
any right due to any relationship with the Corporation, for any acts or
omissions in the performance of services on the part of the Consultant or
on the part of the agents or employees of the Consultant, except when said
acts or omissions of the Consultant are due to willful misconduct or gross
negligence. The Company shall hold the Consultant free and harmless from
any obligations, costs, claims, judgments, attorneys' fees, and attachments
arising from or growing out of the services rendered to the Company
pursuant to the terms of this agreement or in any way connected with the
rendering of services, except when the same shall arise due to the willful
misconduct or gross negligence of the Consultant and the Consultant is
adjudged to be guilty of willful misconduct or gross negligence by a court
of competent jurisdiction.
4. Compensation. The Consultant shall receive compensation from the Company
for the performance of the services to rendered to the Company pursuant to
the terms of the agreement of not less than $120,000 per annum payable in
biweekly installments. In addition, the Company shall reimburse the
Consultant for any reasonable out of pocket expenses incurred by the
Consultant pursuant to the terms of this agreement. Consultant shall be
paid a bonus or success fee, as determined by the Board of Directors or the
Compensation Committee thereof, for strategic acquisitions or mergers in
which Consultant participates.
5. Arbitration. Any controversy or claim arising out of or relating to this
contract, or the breach thereof, shall be settled by arbitration in
accordance of the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) shall be entered in
any court having jurisdiction thereof. For that purpose, the parties hereto
consent to the jurisdiction and venue of an appropriate court located in
Suffolk County, State of New York. In the event that litigation results
from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party's reasonable attorney's
fees, court costs, and all other expenses, whether or not taxable by the
court as costs, in addition to any other relief to which the prevailing
party may be entitled. In such event, no action shall be entertained by
said court or any court of competent jurisdiction if filed more than one
year subsequent to the date the cause(s) of action actually accrued
regardless of whether damages were otherwise as of said time calculable.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on
the 31st day of March, 2000.
2
<PAGE>
eSAFETYWORLD, Inc.
- ----------------------------
By: Edward Heil
Its: CEO & President
JP, Inc.
- ----------------------------
By: Bret Jenkins
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 31st day of March, 2000, by
and between eSAFETYWORLD, Inc., having its principal place of business in East
Setauket, NY, hereinafter referred to as the "Employer", and James Brownfiel,
hereinafter referred to as the "Employee."
1. Employment. The Employer hereby agrees to employ the Employee in the
capacity of chief operating officer of the Employer with responsibilities
as determined from time to time by the Chief Executive Officer or Board of
Directors upon the terms and conditions set out herein.
2. Term. The term of this Agreement shall begin on April 1, 2000, and shall
terminate three years from such date. This Agreement shall automatically
renew each year thereafter, unless either party gives sixty (60) days
written notice to the other party of his intent not to renew for an
additional period.
3. Compensation. The Employer shall pay the Employee, as compensation for the
services rendered by the Employee, a salary of $85,000 in 2000, $100,000 in
2001 and $120,000 in 2002, payable every two weeks. Salary payments shall
be subject to withholding and other applicable taxes. Employer shall
provide Employee with the present company medical plan.
4. Expenses. The Company will provide Employee with a suitable automobile or
shall, in lieu of being furnished with a Company automobile, receive a
monthly automobile allowance of not less than $500.00. The Company shall
also reimburse Employee for all reasonable and necessary expenses incurred
in carrying out his duties under this Agreement. Employee shall present to
the Company from time to time an itemized account of such expenses in any
form required by the Corporation. Such expenses shall be subject to review
by the Audit Committee of the Board of Directors.
5. Duties. The Employee shall perform, for the Employer, the duties as defined
by the Board of Directors.
6. Extent of Services. The Employee shall devote not less than 90 percent of
his time, attention, and energies to the Employer's business and shall not,
during the term of this Agreement, be engaged in any other business
activity, whether or not such business activity is pursued for gain,
profit, or other pecuniary advantage. The Employee further agrees that he
will perform all of the duties assigned to him to the best of his ability
and in a manner satisfactory to the Employer, that he will truthfully and
accurately maintain all records, preserve all such records, and make all
such reports as the Employer may require; that he will fully account for
all money and all of the property of the Employer of which he may have
custody and will pay over and deliver the same whenever and however he may
be directed to do so.
7. Notices. Any notice required or desired to be given under this Agreement
shall be given in writing, sent by certified mail, return receipt
requested, to his residence in the case of the Employee, or to its
principal place of business, in the case of the Employer.
<PAGE>
8. Waiver of Breach. The waiver by the employer of a breach of any provision
of this Agreement by the Employee shall not operate or be construed as a
waiver of any subsequent breach by the Employee. No waiver shall be valid
unless in writing and signed by the Employer.
9. Assignment. The Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, the Employee may not assign any
of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of the Employer under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Employer.
10. Death during Employment. If the Employee dies during the term of
employment, the Employer shall pay to the estate of the Employee one full
month of compensation which would otherwise be payable to the Employee if
the Employee were alive. In addition, the Employer shall allow the Estate
of the Employee to maintain the ownership of any interest the Employee had
in any and all distributorships.
11. Vacations. The Employee shall be entitled each year to vacation and
personal leave suitable and appropriate to his position. During this time
his compensation shall be paid in full.
12. Termination by Employee. The Employee may not terminate this Agreement
without cause. This Agreement and the employment of the Employee may be
terminated by either party with stated cause upon 30 days' written notice
given by either party to the other within 12 months from the date of
commencement of employment hereunder, or upon 90 days' written notice with
stated cause thereafter. Termination for cause shall include, but not
necessarily be limited to (i) Employee's failure, refusal or inability to
perform satisfactorily the services required of him by the Board of
Directors; (ii) Employee's commitment of an offense of moral turpitude or
offense under federal, state or local laws; and (iii) commission by
Employee of an act of disloyalty against the Corporation or the violation
by Employee of any provision of this Agreement.
13. Entire Agreement. This Agreement contains the entire understanding of the
parties. It may be changed only by an Agreement in writing, signed by the
parties hereto.
14. Governing Law. This agreement, and all transactions contemplated hereby,
shall be governed by, construed and enforced in accordance with the laws of
the State of New York. The parties herein waive trial by jury and agree to
submit to the personal jurisdiction and venue of a court of subject matter
jurisdiction located in Suffolk County, State of New York. In the event
that litigation results from or arises out of this Agreement or the
performance thereof, the parties agree to reimburse the prevailing party's
reasonable attorney's fees, court costs, and all other expenses, whether or
not taxable by the court as costs, in addition to any other relief to which
the prevailing party may be entitled. In such event, no action shall be
entertained by said court or any court of competent jurisdiction if filed
more than one year
<PAGE>
subsequent to the date the cause(s) of action actually accrued regardless
of whether damages were otherwise as of said time calculable.
15. Indemnity. The Employer shall indemnify the Employee and hold him harmless
for any acts or decisions made by him in good faith while performing
services for the Employer and will use its best efforts to obtain coverage
for the Employee under any insurance policy now in force or hereinafter
obtained during the term of this Agreement covering the other officers,
and/or employees of the Employer against lawsuits. Employer shall pay all
expenses, including attorney's fees, actually and necessarily incurred by
the Employee in connection with any appeal thereon, including the cost of
court settlements.
16. Working Facilities. The Employee shall be provided such facilities and
services as are suitable to his position and appropriate for the
performance of his duties.
17. Contractual Procedures. Unless specifically disallowed by law, should
litigation arise hereunder, service of process therefor may be obtained
through certified mail, return receipt requested; the parties hereto
waiving any and all rights they may have to object to the method by which
service was perfected.
eSafetyWorld, Inc.
- ------------------------------ ---------------------------------
By: Edward Heil James Brownfiel
Its: CEO & President
To the Stockholders of eSafetyWorld, Inc.
We have reviewed the accompanying balance sheet of eSafetyWorld, Inc. as of
March, 31, 2000, and the related statements of income and retained earnings and
cash flows for the nine months then ended in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of eSafetyWorld, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/s/ Eichler Bergsman & Co., LLP
- -------------------------------------
EICHLER BERGSMAN & CO., LLP
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 5,848,427
<SECURITIES> 0
<RECEIVABLES> 159,443
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,253,057
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,306,225
<CURRENT-LIABILITIES> 749,771
<BONDS> 0
0
0
<COMMON> 3,000
<OTHER-SE> 6,553,454
<TOTAL-LIABILITY-AND-EQUITY> 7,306,225
<SALES> 651,312
<TOTAL-REVENUES> 651,312
<CGS> 385,494
<TOTAL-COSTS> 70,085
<OTHER-EXPENSES> 80,625
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 133,441
<INCOME-TAX> 26,600
<INCOME-CONTINUING> 106,841
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<NET-INCOME> 106,841
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