Securities and Exchange Commission
Washington, D. C. 20549
_______________
Form 10-SB/A
Amendment No 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
Commission File No. 0-29019
INTERACTIVE MARKETING TECHNOLOGY, INC.
(Name of registrant in its charter)
NEVADA 22-3617931
(State of incorporation) (I.R.S. Employer Identification No.)
3575 Cahuenga Boulevard West, Suite 390
Hollywood, California 90680
(323) 874-4484
(Address and telephone number of principal executive offices
and principal place of business)
________________
Securities registered pursuant to Section 12(b) of the Act:
None
________________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Title of each class
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Table of Contents
PART I
Item 1: Description of Business ..........................................3
Item 2: Management's Discussion and Analysis or Plan of Operation ........11
Item 3: Description of Property ..........................................14
Item 4: Security Ownership of Certain Beneficial Owners and Management ...14
Item 5: Directors, Executive Officers, Promoters and Control Persons .....15
Item 6: Executive Compensation ...........................................16
Item 7: Certain Relationships and Related Transactions ...................17
Item 8: Description of Securities ........................................17
PART II
Item 1: Market Price and Common Equity of Interactive Marketing
and Other Shareholder Matters ..................................18
Item 2: Legal Proceedings.................................................18
Item 3: Changes in and Disagreements with Accountants ....................19
Item 4: Recent Sales of Unregistered Securities ..........................19
Item 5: Indemnification of Directors and Officer .........................20
PART F/S
Index to Financial Statements ............................................20
PART III
Item 1: Index to and Description of Exhibits .............................21
<PAGE>
FORWARD LOOKING STATEMENTS
In this registration statement references to "Interactive Marketing,"
"we," "us," and "our" refer to Interactive Marketing Technology, Inc.
This Form 10-SB contains certain forward-looking statements. For this
purpose any statements contained in this Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Interactive Marketing's control. These factors include but are not limited to
economic conditions generally and in the industries in which Interactive
Marketing may participate; competition within Interactive Marketing's chosen
industry, including competition from much larger competitors; technological
advances and failure by Interactive Marketing to successfully develop business
relationships.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
Business Development
Interactive Marketing was incorporated in the state of Nevada as Shur De
Cor, Inc. on August 14, 1987. Shur De Cor never commenced operations. In
April of 1999 Shur De Cor merged with Interactive Marketing Technology, Inc.,
a New Jersey corporation ("Interactive New Jersey"). Interactive New Jersey
was formed on April 21, 1998 and was engaged in the business of direct
marketing of consumer products.
Pursuant to the merger agreement, Shur De Cor issued 12,404,000 common
shares of restricted stock to the twenty-two shareholders of Interactive New
Jersey in exchange for all of the issued and outstanding stock of Interactive
New Jersey. Shur De Cor was the surviving corporation and changed its name to
Interactive Marketing Technology, Inc. The directors and officers of Shur De
Cor resigned and the management of Interactive New Jersey filled the
vacancies. Interactive Marketing increased its authorized capital stock from
20,000,000 to 60,000,000 common shares. Also, former shareholders of
Interactive New Jersey obtained 50% of Interactive Marketing's total voting
power at that time. (See, "Part 1, Item II: Managements' Discussion &
Analysis - Reverse Merger Treatment," below.)
We have a short operating history, recorded a net operating loss of
$1,056,964 for the year ended February 29, 2000, have an accumulated deficit
of $1,097,644 and used $753,650 net cash for operations for the fiscal year
ended February 29, 2000. These factors raise substantial doubt about our
ability to continue as a going concern. This fact is reported by our
independent auditor Moore Stephens, P.C.
Business
Interactive Marketing is engaged in the direct marketing of proprietary
consumer products in the United States and worldwide. We facilitate the
design and manufacture of products and develop market strategies for such
products. Our goal is to generate awareness of new and better products for
the home and family and initiate consumer brand recognition of our products in
the marketplace. When appropriate, we may contract with well-known
personalities to serve as spokespersons for a product to increase that
product's credibility and marketability. We manage all phases of our direct
marketing programs and retail marketing for the products we sell, including:
* Product selection, testing and development
* Securing all necessary or appropriate rights to the product
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* Supervision of the manufacturing process, quality control and
packaging
* Production and broadcast of infomercials and commercials
* In-bound telemarketing, order fulfillment and customer service
* Print advertisements
IMT's Plumber, Inc.
In June 1998 Interactive New Jersey acquired exclusive rights to a
product called The Plumbers Secret. (See, "Principle Products," below). In
November of 1998, Interactive New Jersey, as licensor, entered into an
agreement to assign the exclusive license to a yet to be formed New Jersey
limited liability company which would have Interactive New Jersey's wholly
owned subsidiary as a majority member. The other member of the limited
liability company would be a entity formed by Bob Vila, a popular
home-improvement expert.
On February 4, 1999, the wholly owned subsidiary, IMT's Plumber, Inc., a
New Jersey corporation and the limited liability company, The Plumber's
Secret, L.L.C., a New Jersey limited liability company, were formed. IMT's
Plumber is a 50.01 % member of The Plumber's Secret, L.L.C. with Vila
Enterprises, L.L.C. as the other member. The Plumber's Secret, L.L.C.
operating agreement provides that all day-to-day management decisions of The
Plumber's Secret L.L.C. are to be made by Interactive Marketing.
Product Development
Interactive Marketing searches out independent third parties who have
invented or patented a product that we believe can be marketed to the public
or we may invent or patent a product. We attempt to develop new product ideas
from a variety of sources including inventors, suppliers, trade shows,
industry conferences and strategic alliances with manufacturing and consumer
product companies. Initially, we evaluate the suitability of a product for
television demonstration and explanation, the perceived value of the product
to the consumer, we determine if an adequate supply of the product can be
obtained and estimate the profitability of the product.
Once we conclude that the product will be commercially viable we attempt
to obtain the rights to the product. We then negotiate licensing arrangements
with the third parties that own the patent or the rights to the product.
Generally these licensing arrangements involve a combination of up-front
advances and/or royalties payable based upon sales or profits of the product.
We ordinarily seek exclusive worldwide rights to sell and to use all means of
distribution. However, we may be unsuccessful in obtaining such broad rights
and may acquire only limited rights. We have negotiated an exclusive license
for The Plumbers Secret and Tom House Physical Fitness and nonexclusive
licenses and/or marketing agreements for five additional proprietary products.
(See, "Principal Products" and "Recent Developments," below).
Once we have obtained the rights to market a product we may decide to
enhance the product to increase its marketability by changing the product
itself or altering its trade name, packaging, etc. Depending on the product,
we may place an order with a third party vendor to manufacture between 15,000
and 35,000 units. That amount is typically allocated for direct response
television sales only. Prior to marketing a product for domestic retail we
place another order with the manufacturer to cover the anticipated sales to
the retail market. We use this procedure to ensure we and our retailers have
enough lead-time to fill the demands for our products.
During fiscal year 1998 we expended $18,000 for research and development
for proprietary formulation, but we did not record any research and
development costs during 1999 fiscal year. During the 2000 fiscal year we
have spent $5,700 for research and development. We expect to market products
for home and business related to fitness, nutrition, pet care, health
emergency, golf and fishing.
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Sales and Marketing
Once we obtain the rights to market a product, we develop what we believe
will be the most effective marketing strategy. Strategies may include one or
more of the following:
* Direct Response Television (transactional television programming
known as infomercials)
* Spot Buying (30 seconds to two minute commercial spots)
* Catalogs
* Direct mail
* Direct Response print ads
* Television home-shopping programs
* Credit card statement inserts
* Membership programs
* Internet marketing
* Retail
* International Marketing
* Print advertising
We attempt to structure a campaign for the product which most closely
suits the product, its potential consumer and the profit margins associated
with the product. We typically require two to eight weeks to develop the best
approach for marketing a product. During this phase, we: (1) Evaluate the
suitability of the product for direct marketing and retail; (2) Evaluate the
perceived value of the product to consumers; (3) Determine whether an adequate
and timely supply of the product can be obtained; and (4) Analyze whether the
estimated profitability of the product satisfies our criteria.
When we decide to bring a product to market, we may arrange for the
production of a direct response television program ("infomercial") that can
provide in-depth demonstration and/or explanations of our product. The
duration of these productions may vary from one to sixty minutes. We attempt
to present the product in an entertaining and informative manner, and may use
a variety of program formats including live talk shows and paid live studio
audience programs. Our infomercials are produced in-house or by independent
production companies with experience in the infomercial field. We expect the
production of an infomercial to take approximately ten (10) days up to three
weeks to complete, at a cost typically ranging from $75,000 to $200,000 per
infomercial. Additional costs may include fees paid to hosts and
spokespersons.
Following completion of the production of an infomercial, we may test the
program in the United States in specific time slots on both national cable
networks and targeted broadcast stations. If an infomercial achieves
acceptable results in the market tests, we generally air it on a rapidly
increasing schedule on cable networks and broadcast channels. Acceptable
results means that we believe we will be able to sell sufficient amounts of
the product to cover the expense of production and of the media time. During
this initial phase, we may modify the creative presentation of the infomercial
and/or the retail pricing, depending upon viewer response. In general, we
expect to air each infomercial domestically at least four to ten months and we
continue such infomercials for longer periods of time to support retail sales.
An important part of our ability to successfully market products is
access to media time. We do not have, and do not presently intend to have
inventories of media time or long-term contracts with suppliers of media time
for the broadcasting of infomercials. We believe that such inventories and
long-term contracts impose a financial burden and risk which we are unwilling
to accept. The lack of such inventories or long-term contracts causes us to
pay for media time at the prevailing rates at the time the infomercial is
aired. However, when a product tests successfully, media time can be
purchased in bulk, which provides a 40-60% cost savings. We have paid
approximately $244,100 for media time for the period from August 1999 through
February 29, 2000.
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Our infomercials periodically display on the television screen during the
broadcast an "800" telephone number and our Web site, www.shopimt.com, which
a customer can call or visit to order a product. We contract with third-party
vendors to provide in-bound telemarketing for a fee based principally on the
number of telephone calls answered. In-bound telemarketers electronically
transmit orders to our third-party vendors where the product is packaged and
shipped. In the future we expect the in-bound telemarketer to promote,
"up-sell," complementary and/or additional products related to the product
from which the inquiry is received. Such sales efforts will be orchestrated
by our marketing personnel who will script the sales approaches for the
telemarketing personnel.
We believe that an opportunity exists for the retailing of our consumer
products on the Internet. By directly offering products through our own Web
site, we interact with customers in real-time and are able to frequently
adjust the product mix, pricing and visual presentation. In addition, we can
more easily obtain extensive demographic and behavioral data about our
customers, provide them with greater direct marketing opportunities and offer
a more personalized shopping experience. Also, the Internet provides the
convenience of home shopping and 24-hour-a-day, seven-days-a-week operation,
available to any location, foreign and domestic, that has access to the
Internet. In December of 1999 we agreed to link our Web site with Bob Vila's
Web site, www.BobVila.com which is an interactive site specializing in home
improvements. We also intend to create links with hundreds of Web sites to
promote and sell our products.
Principal Products
The Plumbers Secret.
In June 1998, Interactive New Jersey entered into a licensing agreement
with A2000 USA, Inc., licensor, and Robert and John Miller, as inventors, for
the exclusive right to manufacture and or produce, advertise, promote, market
or sell worldwide The Plumbers Secret. Interactive Marketing agreed to pay
A2000 USA a royalty per unit for a period of one year. $20,000 was paid to
the A2000 USA upon execution of the agreement and an additional $30,000 was
paid after successful test marketing. We have paid $66,000 in such royalties
and have accrued an additional $75,000 in royalties as of February 29, 2000.
The Plumbers Secret is a simple plumbing device that is packaged in its
own plastic toolbox-like carry case and can be used up to twelve times for
clearing any clogged drain in a home. The product retails for $39.95 and has
a shelf life of ten years. The case holds a canister, pistol grip extension,
and three adapters which connect to tubs, sinks, toilets, showers, garbage
disposals and removable and non-removable grates. The pressurized canister
releases a patented non-toxic, non-corrosive enzymatic formula that expands
200 times its mass when introduced to water. The aerosol delivery system
propels the standing water through the clog.
We have produced one and two minute spots with Bob Vila, the former host
of the television series "This Old House", as the spokesperson for The
Plumbers Secret. The infomercial began airing in July of 1999 and was
released as part of Apple Computer's QuickTime 4 digital video and streaming
media at the Macworld Expo/NY '99 show. In August of 1999 The Shopping
Channel in Canada and tSc Direct, an Internet site, agreed to market The
Plumber's Secret on Canadian Home Shopping. The Canadian Home Shopping
Channel is similar to the QVC Network in the United States. The Plumber's
Secret infomercial is broadcast throughout English speaking Canada and on the
tSc Direct Internet site located at www.tsc.ca. In November of 1999 we
granted QVC Shopping Channel a license to use The Plumbers Secret promotional
video to promote and sell the product on its program through December 31,
2001. We anticipate that this programming will appear in early 2001.
We have also expanded into retail markets with The Plumbers Secret. In
December of 1999 we filled product orders with Bed Bath & Beyond, Inc., QVC
Shopping Channel and Kmart Corporation. Our January 23, 2000 appearance of
The Plumbers Secret on QVC Shopping Channel was a success when we sold out
2,500 units within 7.2 minutes. As of February, 2000 net sales for the
Plumbers Secret were approximately $900,000.
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Power-Ti-Pod.
This product is a golf club, a driver, designed to correct a slice (a hit
that fades to the right). We entered into a joint venture with Carizma Golf
Co. in July of 1999 to market and sell this product internationally. We did
not produce an infomercial for this product, but used an infomercial that
Carizma had produced. Profits from this product were split 50/50 with Carizma
and as of February 29, 2000 we had realized sales of approximately $22,000. In
April 2000, we terminated our agreement with Carizma.
Putterball.
In November 1999 we entered into an agreement with Carizma Golf Co. to
develop and market the Putterball. The Putterball is a putting practice
device fashioned with a steel golf ball-like attachment in place of the normal
putter blade. The device does not tolerate error and assists a player to
learn his or her most productive technique through repetitive use of the
Putterball. Profits from the sale of this product were split 50/50 and as of
February 29, 2000 we recorded $8,000 in sales. As noted above, we terminated
our agreement with Carizma in April 2000.
Principal Suppliers
Production needs for our products are provided by third party vendors or
in-house. We contact several vendors until we find the combination of quality
manufacturing for a reasonable price. We consistently search for new
suppliers to insure that we and our customers are always assured the best
product. We currently rely on four vendors to supply the parts for The
Plumbers Secret. Aerosol Services Company located in California supplies the
pressurized cans filled with the non-toxic formula. Blow Molded Products
located in California supplies the plastic case, cap, handles and adapters.
Hawthorne Rubber located in New Jersey supplies the large flange adaptor. GM
Packaging located in California provides the shipping boxes. Carizma provided
the Power-Ti-Pod and Putterball products. We have not entered into formal
long-term written agreements with these suppliers.
We monitor the availability of our products and promptly adjust our
direct marketing campaign if and when a product cannot be adequately supplied.
However, such adjustment may not always be possible in the short term.
Management believes the loss of one or more of these vendors should not result
in a material adverse affect on our operations because we use a secondary
vendor for smaller quantities which allows us to replace the primary vendor
within 30-45 days.
Distribution
We rely on third parties to distribute our products. Sales from direct
response television and Internet sales are handled by our North American order
fulfillment center, PDS, located in Pacoima, California. This facility
receives merchandise from manufacturers, inspects merchandise for damage or
defects, stores product for later delivery, assembles the product as required,
packages and ships the products and processes customer returns. We use bulk
shippers to deliver products to customers in the United States. In certain
instances, the manufacturer of the product ships orders directly to the
customer.
Each customer is charged a shipping and handling fee, which varies by
product. The majority of customer payments are made by credit card over the
telephone, with the remainder paid by check. No product is shipped C.O.D. and
we will not ship a product until payment has been received and cleared.
In addition to direct response television we rely on our President, Sandy
Lang, Johnny Bench, Leisure Marketing and 20 independent sales representatives
to market our products. We recently entered into an informal agreement with
Leisure Marketing to market our products. Leisure Marketing has had
twenty-five years experience with direct response television sales. We
currently have engaged fourteen domestic independent distributors who intend
to solicit ninety major retail organizations in the home center, hardware,
farm and fleet and maintenance
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supply centers. Sales to our independent distributors are at a fixed price
and all sales are final with no guaranteed sales provisions. In July of 1999
we began development of an international retail and independent distributor
network. We currently have established ten independent distributors who will
begin marketing our products within the year. We anticipate that we will
engage independent distributors in various foreign countries around the world
to market our products.
Competition
We have been in our market for a short period of time and compete
directly with many other companies, large and small, which generate revenue
from direct marketing, wholesale/retail and Internet commerce activities. We
also compete with consumer products companies and retailers which have
substantially greater financial, marketing and other resources. Some of these
companies presently conduct, or indicate their intent to conduct, direct
response marketing. Products similar to our products may be sold in
department stores, pharmacies, general merchandise stores and through
magazines, newspapers, direct mail advertising catalogs and the Internet.
The Plumbers Secret competes directly with two products available in the
marketplace today that purport to do what our product does. They are called
Power Plumber and Air Force and sell for 30% less than The Plumbers Secret.
We compete with these products by using direct response television advertising
blitzes which provide the customer with the convenience of ordering by phone
or mail and a 30 day, 100% money-back guarantee. Also, we use a
non-corrosive, non-toxic formula in our product where the others use corrosive
chemicals. Our packaging is constructed of sturdy plastic parts where the
other products use cardboard. Finally, the endorsement of nationally known
home improvement expert, Bob Vila, improves The Plumbers Secret credibility
and marketability.
Major Customers
In November 1999 Kmart Corporation placed an initial purchase order for
35,000 units of The Plumbers Secret. From this order Kmart Corporation
accounted for $465,000, or 51%, of our net sales of The Plumbers Secret as of
the year ended February 29, 2000. The loss of Kmart Corporation as a resale
customer would have a material adverse effect on our results of operations.
Recent Developments
The following discussions involve forward looking statements regarding
our business developments that involve substantial risks and uncertainties.
We cannot assure that we will be able to finalize the described agreements.
Share Exchange. Interactive Marketing and Sandy Lang, as an individual,
entered into an share exchange agreement on April 15, 2000 with E-Pawn.com,
Inc., an Internet services company. We have agreed to issue to E-Pawn a
sufficient number of our common shares to give E-Pawn a 51% ownership interest
in Interactive Marketing. However, the share exchange is contingent upon our
shareholders' approval and we cannot assure that such shareholder approval
will be achieved. According to the terms of the agreement, Sandy Lang will
personally exchange 3,000,000 of his Interactive Marketing shares for
3,000,000 E-Pawn shares. We will provide additional shares sufficient to
provide E-Pawn with a 51% interest in Interactive Marketing. The initial
estimate is Interactive Marketing will issue 20,000,000 common shares in
exchange for 5,000,000 E-Pawn common shares. After the closing, E-Pawn will
provide $5 million in capital funding to Interactive Marketing with $1,000,000
due immediately upon closing. Each Interactive Marketing Shareholder will
receive a stock dividend of two common shares of Ubuynetwork.com for each
share of Interactive Marketing held. Sandy Lang will remain as President of
Interactive Marketing and will enter into an employment agreement with
Interactive Marketing. He will also be named Chairman of Ubuynetwork, com.
The following discussions involve forward looking statements regarding
our product developments that involve substantial risks and uncertainties. We
cannot assure that we will be able to finalize licensing or marketing
<PAGE> 8
agreements for these products, or that the products will prove to be
marketable or successful.
Tom House Physical Fitness. In December of 1999 Interactive Marketing
and Tom House signed a letter of intent to market Dr. House's fitness
products. Tom House is a retired major-league pitcher who has a Ph.D. in
psychology and he is an consultant, performance analyst and sports
psychologist, and is a trainer of elite athletes. We anticipate that the Tom
House Physical Fitness products will include training equipment that weighs
less than one pound, training tapes and nutritional supplements which will
provide body development necessary for a person's needs whether at home, the
office or while traveling. We are in the process of shooting the Tom House
infomercial. The nutritional supplements have been formulated and we
anticipate they will be available in the last quarter of 2000. We hope to
create a continuity package with Tom House where the customer can call an
"800" number and receive answers for any questions regarding the fitness
products.
EFL Fishing Lure. The EFL Fishing Lure is a patented latex plastic in
the shape of a fish developed by actor, Chris Atkins (known for his
performance in Blue Lagoon) and five motion picture special effects people.
When the EFL Fishing Lure is put over a crank bait the bait feels like a fish
and moves like a fish. Chris Atkins will be the spokesman for the EFL Fishing
Lure and we anticipate using many of the recognized pro fishermen along with
celebrities that love to fish as spokespersons. We have incurred through
February 1999 approximately $35,500 in costs for the production of a 30 minute
infomercial and will begin production of the product in foreign countries. We
have created a logo and we plan to use a retail package consisting of a unique
type of tackle box with several types of baits and hooks. We expect the
retail price to be $39.95
Universal Wrench. In January of 2000 we entered into a sales and
distribution agreement with Lacrex SA of Switzerland which granted us the
exclusive North America rights to market the Lacrex Universal Wrench. This
wrench can loosen a range of nuts and bolts and can take the place of a full
set of wrenches at a fraction of the cost. The head of the wrench has a range
of 180 degrees giving it the ability to get into difficult locations. We have
agreed to test market this product within the next quarter to determine if we
will proceed with its marketing. In the event we decide to move forward with
the marketing we have agreed to purchase 300,000 units during the first year
and additional purchases are required in subsequent years to renew this
agreement.
Wonder Ladder. This ladder is extremely light and versatile and comes in
three lengths: 3', 5' and 6'. It is constructed of lightweight aluminum and
when closed it is only 5" wide for easy storage. It will safely hold up to
250 pounds. In December we entered into an agreement to market the Wonder
Ladder with a profit split determined by certain specifications. We have
agreed to manufacture and market this product worldwide through infomercials.
The owners of this product will oversee all domestic retail sales.
Life Mask. The LifeMask was designed to aid the administration of CPR
(cardio-pulmonary resuscitation). The LifeMask is a plastic mask which is
placed over the victim's mouth and the person administering the CPR breathes
into a nipple attached to the outside of the mask. This prevents potential
exposure to any contagions that the victim may have. We have agreed to
produce and market this product for an indefinite period of time with 12% of
the profits paid to the owner.
Rights to Master Audio Recordings. In November of 1999 we purchased
non-exclusive rights to 5,000 master audio recordings from Planet
Entertainment Corporation. A "master recording" is the original, final,
then-recorded version of a song recorded in the studio. These master
recordings represent a variety of music. We intend to electronically enhance
and re-digitize these recordings and market these recordings by offering
compilation CD's and cassettes to the public through television advertising
and retail. We anticipate the marketing of these recordings will begin in the
fourth quarter of 2000.
Trademarks, License and Intellectual Property
We rely upon a combination of licenses, confidentiality agreements and
other contractual covenants to establish and protect development and marketing
rights for our products. We have assigned our exclusive license to
<PAGE> 9
manufacture and or produce, advertise, promote, market or sell worldwide The
Plumber's Secret to the Plumber's Secret L.L.C. We are currently seeking
trademark protection for The Plumbers Secret. We consider trademark
protection to be very important to brand name recognition and independent
distributor and consumer loyalty to our business. We intend to register our
certain trademarks in the United States.
Our ability to compete effectively will depend in part on our ability to
maintain exclusive licensing and the aggressive continued development of our
products. We can not assure that our competitors will not independently
develop or obtain products that are substantially equivalent or superior to
our products.
Government Regulations
Various aspects of our business are subject to regulation and ongoing
review by a variety of federal, state, local and foreign government agencies.
The products we sell are subject to the evaluation by the Consumer Products
Safety Commission ("CPSC") which protects the public from unreasonable risk of
injuries and death associated with consumer products. The advertising and
marketing of our products is regulated by the Federal Trade Commission ("FTC")
and the Federal Communications Commission, ("FCC"), which enforce consumer
protection laws in regards to truth in advertising. When we rely on the U.S.
Mail for shipment of our products the United States Post Office regulates the
types of products and the manner in which they may be distributed to our
customers. Each state has various comparable agencies or laws that States'
Attorneys General enforce in the areas of consumer protection. These
statutes, rules and regulations which are applicable to our operations and to
our products are numerous, complex and subject to change. Our international
business, when developed, will be subject to the laws and regulations in those
countries in which we sell or market our products.
We have not had any action instituted by any of these regulatory agencies
or governments in regards to our products or marketing. However, if any
significant actions are brought against us or any of our subsidiaries in
connection with a breach of such laws or regulations, including the imposition
of fines or other penalties, or against one of the entities through which we
obtain a significant portion of our media exposure, we could be materially and
adversely affected. There can be no assurance that changes in the laws and
regulations of any state or country which forms a significant portion of our
market will not adversely affect our business or results of operations.
We collect and remit sales tax in the states where we have a physical
presence, however, certain states in which our only activity is direct
response television and Internet marketing have attempted to require direct
marketers, such as Interactive Marketing, to collect and remit sales tax on
sales to customers residing in such states. A 1995 United States Supreme
Court decision held that Congress could legislate such a change. Thus far,
Congress has taken no action to that effect. We are prepared to collect sales
taxes for other states if laws are passed requiring such collection. We do
not believe that a change in the laws requiring the collection of sales taxes
will have a material adverse effect on our financial condition or results of
operations.
Employees
Currently we employ six (6) individuals. We think we have good relations
with our employees and none are subject to a collective bargaining agreement.
Reports to Security Holders.
Interactive Marketing voluntarily elected to file this Form 10-SB
registration statement in order to become a reporting company under the
Securities Exchange Act of 1934, as amended ( the "Exchange Act"). As of
March 20, 2000 we are required to comply with the reporting requirements of
the Exchange Act. We will file annual, quarterly and other reports with the
Securities and Exchange Commission ("SEC"). We also will be subject to the
proxy solicitation requirements of the Exchange Act and, accordingly, will
furnish an annual report with audited financial statements to our
stockholders. Interested persons may visit our web site at www.shopimt.com.
<PAGE> 10
Available Information.
Copies of this Registration Statement may be inspected, without charge,
at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C.
20549 and at the Pacific Regional Office of the SEC located at 5670 Wilshire
Boulevard 11th Floor, Los Angeles, California 90036-3648. The public may
obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0300. Copies of this material also should be available
through the Internet by using the SEC's EDGAR Archive, which is located at
http://www.sec.gov.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Overview
Interactive Marketing provides comprehensive marketing services for
proprietary consumer products in both the United States and worldwide. We
began operations in August of 1999 and have primarily relied on one product,
The Plumbers Secret, for our revenues. We have had a short operating history
and a history of operating losses, however, management believes we are in the
later stages of developing additional product lines to enhance our current
revenue stream. Currently management plans to introduce in the near-term at
least five additional products over the next three years.
Our fiscal year ends February 28 (or February 29) and the following
discussions are based on the consolidated financial statements of Interactive
Marketing and its wholly-owned subsidiary IMT's Plumber, Inc. and include the
consolidation of IMT's Plumbers, Inc.'s 50.01% members' interest in the
Plumbers Secret, LLC.
Reverse Merger Treatment
In April of 1999 Shur De Cor, a blank check company, merged with
Interactive New Jersey. Shur De Cor, the Nevada corporation, was the
surviving entity following the merger. The reverse merger was completed
pursuant to a stock-for-stock exchange of 12,404,000 shares of the Shur De
Cor's common stock for 100% of the outstanding stock, 2,500 shares, of
Interactive New Jersey. The merger was structured as a tax free
stock-for-stock exchange pursuant to Section 368 (a)(1)(B) of the Internal
Revenue Code, as amended.
IMT's Plumber Subsidiary
On March 16, 1999, the members of The Plumber's Secret L.L.C. agreed to
amend their operating agreement. The members agreed that the initial capital
contribution by both members would be approximately $100,000 each rather than
$1000 as agreed to in the original operating agreement. IMT's Plumber
committed to lend The Plumber's Secret L.L.C. up to $150,000 rather than the
original $250,000. Vila Enterprises has the option to abandon the L.L.C. if
sales of the product do not exceed $2 million in the first year. Management
believes we can meet this threshold.
The members agreed to distribute net cash available 50/50 until $500,000
was generated. After $500,000 in net cash is generated IMT's Plumber will
receive a preferred return on its capital contribution when it will receive
net cash available until the principal and interest of its loan are paid in
full. The operating agreement provides that $100,000 will be paid to B.V.T.V.,
Inc., which employs Bob Vila, for advertising and promoting the product in an
infomercial, however, the $100,000 fee has been applied towards the required
initial contribution as such services were performed. As of February 29, 2000
The Plumber's Secret L.L.C. has incurred a net loss of approximately $475,000
and the first $100,000 in losses has been allocated for tax purposes to Vila
Enterprises. The remaining losses will be allocated 50/50.
<PAGE> 11
Liquidity and Capital Resources
We have funded our cash requirements primarily through loans and private
placements of equity securities. We did not post revenues for the 1999 fiscal
year and have experienced cumulative operating losses since our inception of
approximately $1,100,000 through the 2000 fiscal year. For the fiscal year
ended February 29, 2000 we recorded $252,266 in cash with $508,698 total
current assets and $584,424 total current liabilities. For the 2000 fiscal
year we used $753,650 net cash for operating activities and we posted a $0.09
net loss per share.
During the 2000 fiscal year we invested $238,384 of net cash for patents,
office furniture and equipment, infomercial costs and advances. In November
of 1999 we issued 2,000,000 common shares to purchase non-exclusive rights to
master audio recordings valued at $600,000. The value of the masters was
assigned using an independent valuation which included anticipated future
revenue cash flow calculations . We intend to amortize this asset over a
period of 5 years once we begin to realize revenue from this product.
Net cash provided by financing activities was $1,239,050 for the 2000
fiscal year. These financing activities were primarily private placements of
our common stock. In April of 1999 we sold 285,000 common shares for $949,050
and in November 1999 we sold 295,000 common shares for $245,000. We also
obtained from a stockholder a $50,000 loan with an interest rate of 10% per
annum which is due in April of 2001.
Starting in March of 2000 we conducted a private placement offering for
an aggregate offering price of $600,000. We offered 6 units to accredited
investors for $100,000 each. Each unit consisted of one $100,000 convertible
secured promissory note at 12% per annum and 50,000 warrants to purchase
50,000 shares of our common stock at $1.25 per share. The promissory notes
are secured by our assets and will mature on the earlier of six months or upon
certain contingent events. The entire principal amount and interest owed on
the note may be converted, at the purchaser's discretion, into common shares
at a conversion rate of $1.25 per share. As of April 12, 2000 we completed
this offering with net proceeds of approximately $517,000 to be used for
working capital.
We have no plans to purchase significant equipment or make other capital
expenditures within the next twelve months. We have monthly lease commitments
for our office space of approximately $5,400. We also have accrued $75,000 in
royalty obligations for the 2000 fiscal year. According to the terms of our
marketing agreements we will be obligated to share profits and/or pay
royalties on any products we sell. Further, if we decide to market the
Universal Wrench, the terms of that agreement require us to purchase 300,000
units at an anticipated cost of $1.5 million during the first year of
marketing. We also expect to employ two to three additional employees based
upon anticipated growth which will increase our payroll costs by approximately
$150,000.
Management believes the anticipated net proceeds from the private
placement should sustain our operations for the next six months. Management
anticipates we will supplement the private placement with future revenues from
our new product lines and equity and debt financing will provide funding for
the longer term. Our management is reviewing various product cost bids and is
discussing with major retailers the selling of our new products.
Management also expects that we will add to our revenue source through
banner stream income from Internet advertisers. Banner stream advertising
refers to the ads that appear on Internet Web sites. Management hopes to
create a Web site that will become a primary source of such banner stream
income by early 2001. To that end, management entered into an share exchange
agreement with E-Pawn. We have agreed to provide E-Pawn with a 51% ownership
interest of our company. The agreement provides for an influx of
approximately $5 million in capital funding and we plan to use Ubuynetwork.com
as an Internet site for sale of our products.
Management anticipates that additional capital will be provided by
private placements of our common stock. However, our common stock listing has
been removed from the OTC Bulletin Board and listed on the National Quotation
Bureau Pink Sheets. Our trading market and our ability to raise capital
through equity may be adversely affected by this change. We intend to
complete such private placements pursuant to exemptions provided
<PAGE> 12
by federal and state securities laws. The purchasers and manner of issuance
will be determined according to our financial needs and the available
exemptions. We do not currently intend to make a public offering of our
stock. We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value per share of their common
stock.
Management is investigating the availability, source and terms for
external debt financing, but has not entered into any agreement with any
persons regarding such financing. We can not assure that funds will be
available from any source, or, if available, that we will be able to obtain
the funds on terms agreeable to us. Also, the acquisition of funding through
the issuance of debt could result in a substantial portion of our cash flows
from operations being dedicated to the payment of principal and interest on
the indebtedness, and could render us more vulnerable to competitive and
economic downturns.
Results of Operations
The following table summarizes our operations for the year ended February
29, 2000 and the period from inception through February 28, 1999.
From inception
(April 21, 1998)
Year ended through
February 29, 2000 February 28, 1999
----------------- -----------------
Revenues $ 921,381 -----
Costs of Sales 448,699 -----
Gross profit 472,682 -----
Costs and Expenses
Payroll & related costs 413,070 -----
General & Administrative 212,932 -----
Advertising & Media Buys 303,397 -----
Royalties 141,000 -----
Selling Expenses 69,561 -----
Consulting Fees - Related Party 33,333 -----
Travel & Entertainment 147,519 -----
Professional fees 115,105 22,680
Depreciation and Amortization 83,829 -----
Research & Development 5,700 18,000
Interest Expense - Related Party 4,200 -----
Total Costs and Expenses 1,529,646 40,680
Operating (Loss) (1,056,964) (40,680)
We recognize revenues when our product is shipped from our fulfillment
center. We recorded net revenues of $921,381 for the 2000 fiscal year,
compared to no revenues for the 1999 fiscal year. The revenues were
primarily a result of the sales of The Plumbers Secret by Kmart Corporation.
Cost of the goods, which includes the cost of the product and shipping of the
product, were $448,649. As a result, we posted a gross profit of $472,682
for the 2000 fiscal year.
Costs and expenses were $1,529,646 for the 2000 fiscal year compared to
$40,680 for 1999 fiscal year. The 1999 fiscal year expenses included
professional fees of $115,105 for legal and accounting fees and $18,000 for
research and development costs. We commenced our operations during the 2000
fiscal year and $626,002, or 40.9%, of these costs were related to payroll and
general and administrative costs. Advertising and media buys,
<PAGE> 13
selling expenses and royalties accounted for $513,958, or 33.6%, of our costs
and expenses. $55,000 of the total depreciation and amortization expenses of
$83,829 were costs of filming, editing and producing infomercials for our
products which costs were amortized over a two year period, its estimated
useful life.
Our loss from operations was $1,056,964 for the 2000 fiscal year compared
to $40,680 for the period from April 21, 1998 (date of inception) through
February 28, 1999.
We are unaware of any known trends, events or uncertainties that are
reasonably likely to impact revenues from operations. However, we may
experience significant fluctuations in operating results in future periods due
to a variety of factors, including but not limited to, the following factors:
* We may need additional financing in order to carry out our business
plan and management cannot assure that we will be successful in
obtaining such financing. Failure to obtain necessary financing
could have a material adverse impact on our operations.
* Sales from our products are unproven and some of our products are yet
to be tested in the retail environment.
* We must obtain new products and customers at reasonable costs, retain
customers and encourage repeat purchases.
* We need to develop our customer base through multiple marketing
channels, which include the following: (i) Development of an
aggressive marketing campaign using a combination of online and
traditional marketing: (ii) by entering into linking arrangements
with other web sites; and (iii) using direct marketing techniques to
target new and existing customers with personalized communications.
Seasonal Trends
Our market is not seasonal because our products are marketed with a
direct response television media blitz, which is not related to the seasonal
variables.
ITEM 3: DESCRIPTION OF PROPERTIES
Our principal offices are located in Hollywood, California. The property
is a six story office building made of brick and glass which is in good
condition. We lease approximately 2,500 square feet which includes six
offices, a conference room, kitchen and stock room. This property should be
adequate for the immediate future. Our monthly rent begins at $5,398 and
increases 3% per annum plus escalation costs over a five year period. This
lease will expire in September of 2004.
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding common stock of; (i) each person or group known by us to own
beneficially more than 5% of our outstanding common stock, (ii) each of our
named executive officers, (iii) each of our director's and (iv) all executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Except as indicated by footnote,
the persons named in the table below have sole voting power and investment
power with respect to all shares of common stock shown as beneficial ownership
of those shares. The percentage of beneficial ownership is based on
13,832,000 shares of common stock outstanding as of May 8, 2000.
<PAGE> 14
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned
-------------------------------
Name and Address of Number of Shares of
Beneficial Owners common Stock Percentage of Class
- ------------------ ------------------- ------------------
Planet Entertainment Corp 2,000,000 14.4%
222 Highway 35
Middletown, New Jersey 07748
Navesink Venture Partners, LLC 3,000,000 (1) 21.6%
2 Bridge Avenue
Galleria Bldg. #6
Red Bank, New Jersey 07701
MANAGEMENT
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- ---------------------- ------------------- -------------------
Sandy Lang 7,500,000 (2) 42.0%
3575 Cahuenga Boulevard West,
Suite 390
Hollywood, California 90680
Martin Goldrod 300,000 (3) 2.1%
3575 Cahuenga Boulevard West,
Suite 390
Hollywood, California 90680
Gregory Haehn 25,000 (4) *
2890 Attleboro Rd.
Shaker Heights, Ohio 44120
Johnny Bench 200,000 (5) 1.4%
324 Bisops Bridge
Cincinnati, Ohio 45255
All executive officers and
directors as a group 8,025,000 43.9%
* Less than 1%
(1) Represent options to purchase 3,000,000 shares exercisable in 60 days.
(2) Includes options to purchase 4,000,000 shares exercisable in 60 days.
(3) Includes options to purchase 250,000 shares exercisable in 60 days.
(4) Represents warrants to purchase 25,000 shares exercisable in 60 days
held by Yukon International, Inc., a company owned by Mr. Haehn.
(5) Includes options to purchase 150,000 shares exercisable in 60 days.
ITEM 5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors and executive officers and their respective ages and
positions are listed below. Biographical information for each of those
persons is also presented below. Our executive officers are appointed by our
Board of
<PAGE> 15
Directors and serve at its discretion. There are no familial relationships
among or between any of our officers or directors.
Directors and Officers
Name Age Position Held
- ----------- ----- --------------
Sandy Lang 54 President, Chief Executive Officer,
Director
Martin Goldrod 58 Secretary, Director
Gregory Haehn 54 Treasurer
Johnny Bench 51 Director
Sandy Lang. Mr. Lang became President and C.O.O. of Interactive New Jersey in
1998. He continues as President of Interactive Marketing, but resigned as the
C.O.O. and was appointed C.E.O. in October of 1999. Mr. Lang has over 25
years of experience in creative media production. From June 1995 until April
1999 he was Chairman of The Board of The Secret, Inc., a company involved in
marketing a golf training program. He served as president of domestic sales
for Epic Films from August 1989 to June of 1995. He has been involved with
syndicated television shows and feature films, televised game shows and
computer graphics for television stations.
Martin Goldrod. Mr. Goldrod was appointed as a Director on January 28, 2000
and appointed as Secretary on April 7, 2000. He has been employed as a Vice
President of Interactive Marketing since April 1999. From 1992 through 1999
he was self-employed as a marketing consultant located in Los Angeles,
California. He has over 25 years experience in management and promotion on
the local, regional and national level related to record companies such as
Capital Records, Arista Records and Mercury Records.
Gregory Haehn. Mr. Haehn was appointed Treasurer on March 14, 2000. He has
over 25 years experience in the development of and operations for retail and
wholesale sales of auto parts. He currently is the president of Yukon
International, Inc., an on-line fitness retailer. He is also the President of
Twin Realty, Inc. which purchases and builds retail outlets for auto parts.
From 1976 to 1997 he served as Chief Executive Officer of Worldwide Auto
Parts, Inc., an auto parts retailer, and was President of Eagle Distributing,
Inc., a warehouse distributor company which provided products to wholesale
customers.
Johnny Bench. Mr. Bench was appointed as our Director in April of 1999.
During the past five years he has derived the majority of his income from his
notoriety as a Hall of Fame baseball player. He also has worked in radio and
television broadcasting related to baseball. During 1997 he was the owner and
C.E.O. of JB Enterprises, Inc. which manufactured and distributed golf
equipment.
ITEM 6: EXECUTIVE COMPENSATION
The following table shows compensation of our chief executive officer for
fiscal years 1999 and 2000. None of our other named executive officers or
directors received compensation in excess of $100,000 for 1999 or 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------
Name and Principal Position Year Salary ($) Bonus Other
- ---------------------------- ------- ---------- ------- -----
Sandy Lang 2000 $131,250 $0 $0
President, CEO 1999 50,000 0 0
<PAGE> 16
Compensation of Directors
We do not have any standard arrangement for compensation of our directors
for any services provided as director, including services for committee
participation or for special assignments.
Employment Contracts
We have not entered into formal written employment agreements with our
named officers and directors.
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions either we
engaged in during the past two years or we propose to engage in involving our
executive officers, directors, 5% stockholders or immediate family members of
such persons:
Frank Leo, our former director and Secretary, has provided an aggregate
of $194,240 in cash or in property for or on behalf of Interactive New Jersey.
He paid legal fees totaling $14,680 and research and development costs of
$18,000 incurred between October 1, 1997 and June 30, 1998 in connection with
the formation of Interactive New Jersey including the licensing agreements,
and applications for patents and trademarks for the product. In January 1999,
he advanced $5,000 to us for working capital purposes. He paid total
licensing fees of $20,000 for the product, The Plumbers Secret, in June and
July of 1998. These payments were treated as a capital contribution. He also
remitted his acquisition of the title and interest in the mailing list of
past, current, and future names whereby his basis of $136,560 was treated as a
capital contribution. During the 2000 fiscal year, we paid $33,333 for
consulting fees to Kall Group, Inc., which is controlled by Frank Leo.
On November 30, 1999, Sandy Lang and the Kall Group, Inc., which is owned
by Frank Leo, then officers and directors, agreed to return and cancel
2,177,000 and 3,177,000 common shares, respectively, to the corporate treasury
for no compensation. In January of 1999 The Kall Group returned and canceled
an additional 2,000,000 common shares to the treasury. The purpose of the
return was to decrease the number of outstanding shares and provide
Interactive Marketing with additional authorized shares to facilitate equity
financing.
In March of 2000, we sold a fractional unit of our private placement to
Yukon International, Inc., which is owned by our Treasurer, Gregory Haehn.
Yukon International purchased a convertible promissory note for $50,000 at 12%
per annum with 25,000 warrants to purchase 25,000 common shares at $1.25 per
share.
On April 15, 2000, we and our President, Sandy Lang, as an individual,
entered into a share exchange agreement with E-Pawn which is contingent upon
shareholder approval. Mr. Lang agreed to personally exchange 3,000,000, of
his shares in the share exchange. In consideration for his shares, Mr. Lang
will remain as President of Interactive Marketing upon closing of the share
exchange and he will enter into an employment agreement for this position. He
will also be named the Chairman of Ubuynetwork.com.
ITEM 8: DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 60,000,000 shares of common stock, par value
$.001, of which 13,832,000 were issued and outstanding as of May 8, 2000. All
shares of common stock have equal rights and privileges with respect to
voting,
<PAGE> 18
liquidation and dividend rights. Each share of common stock entitles the
holder thereof (i) to one non-cumulative vote for each share held of record of
all matters submitted to a vote of the stockholders, (ii) to participate
equally and to receive any and all such dividends as may be declared by the
Board of Directors out of funds legally available; and (iii) to participate
pro rata in any distribution of assets available for distribution upon our
liquidation. Our stockholders have no preemptive rights to acquire additional
shares of common stock or any other securities.
Preferred Stock
We have not authorized preferred stock.
PART II
ITEM 1: MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on The National
Quotation Bureau's Pink Sheets under the symbol "IAMK". Until April 17, 2000
our common stock was quoted on the OTC NASDAQ Electronic Bulletin Board under
the symbols "IAMK" and "IAMKE". The following table represents the range of
the high and low bid prices of our stock as reported by the Nasdaq Trading and
Market Services for each fiscal quarter for the last two fiscal years ending
February 29, 2000. There was no trading activity prior to April 1999. Such
quotations represent prices between dealers and may not include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions.
Quarter Ended High Low
------------------ ------ -------
May 31, 1999 $7.875 $0.0625
August 31, 1999 4.0625 2.00
November 30, 1999 2.6875 0.75
February 29, 2000 1.9375 0.75
We have approximately 43 stockholders of record as of May 8, 2000. On
March 17, 1999, Shur De Cor effected a 2-for-1 forward split of its
outstanding common shares. The discussions in this registration statement
regarding our common shares reflect the forward stock split.
Dividends
We have not declared dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future.
OTC Bulletin Board Eligibility Rule
In January of 1999, the SEC granted approval of amendments to the NASD
OTC Bulletin Board Eligibility Rule 6530 and 6540. These amendments require a
company listed on the OTC Bulletin Board to be a reporting company and current
in its reports filed with the SEC. As a result of this rule change we
voluntarily filed this registration statement in order to become a fully
reporting company and maintain the listing of our common stock on the OTC
Bulletin Board. The rule requires that the SEC come to a position of no
further comment regarding the registration statement before a company is
considered compliant. According to the rules, we were not in compliance at
our phase-in-date of April 17, 2000 and our listing was removed from the OTC
Bulletin Board. We have moved our listing to the National Quotation Bureau's
Pink Sheets. This move to the "pink sheets" may adversely affect the market,
if any, in our stock.
<PAGE> 18
ITEM 2: LEGAL PROCEEDINGS
We are not a party to any legal proceedings or threatened proceedings as
of the date of this filing.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Pursuant to the merger agreement, we continue to employ the accounting
survivor, Interactive New Jersey's principal independent accountant, Moore
Stephens, P.C. located in Cranford, New Jersey. On April 7, 1999 Crouch,
Bierwolf and Chisholm, located in Salt Lake City, Utah, was replaced by Moore
Stephens, P.C. Crouch, Bierwolf and Chisholm had audited Shur De Cor's
financials statements as of February 28, 1999, December 31, 1998 and 1997.
Crouch Bierwolf and Chisholm's report on such financials, dated March 29,
1999, did not contain an adverse opinion, disclaimer of opinion nor was it
modified as to uncertainty, audit scope or accounting principles. The
decision to change accountants was approved by the Board of Directors. There
were no disagreements with Crouch, Bierwolf and Chisholm on any matter
regarding accounting practices, financial statement disclosure, or auditing
scope or procedure.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities we have sold within the
past years without registration:
On December 22, 1998, Shur De Cor issued 60,000 pre-split shares of
common stock, valued at $600, to James Glavas, our then President, services
rendered on our behalf. The issuance of such shares was exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) as a
private transaction not involving a public distribution.
On January 26, 1999, Shur De Cor issued 50,000 pre-split shares of common
stock, valued at $500, to Principal Holdings, Inc. for investment banking
services rendered on our behalf. The issuance of such shares was exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) as a
private transaction not involving a public distribution.
On February 15, 1999, pursuant to Rule 504, Shur De Cor offered 2,000,000
shares of common stock for an aggregate offering price of $50,000. Sixteen
(16) investors purchased 2,000,000 common shares for the $50,000 aggregate
offering price No underwriting discounts or commissions were paid for this
offering.
On April 13, 1999 we sold 285,000 common shares for $949,050 to Stratus
Investco S.A. The issuance of such shares was exempt from registration under
the Securities Act of 1933 by reason of Section 4(2) as a private transaction
not involving a public distribution.
On November 1, 1999 we sold 295,000 common shares to Finks Consultancy
Limited for $245,000. The issuance of such shares was exempt from
registration under the Securities Act of 1933 by reason of Section 4(2) as a
private transaction not involving a public distribution.
On November 19, 1999 we issued 2,000,000 common shares to Planet
Entertainment Corporation to acquire the non-exclusive rights to 5,000 master
audio recordings valued at $600,000. The issuance of such shares was exempt
from registration under the Securities Act of 1933 by reason of Section 4(2)
as a private transaction not involving a public distribution.
In April 2000 we closed a private placement with an aggregate offering
price of $600,000. We offered six units to accredited investors and each unit
consisted of one $100,000 convertible secured promissory note at 12% per annum
and 50,000 warrants, which expire in March 2005, to purchase 50,000 shares of
our common stock at $1.25 per share. We sold a total of six units, an
aggregate of 300,000 warrants, to eleven accredited investors for $600,000.
The placement agent, M.S. Farrell & Co., Inc., will receive a 10% commission
for all units sold, a 2 1/2% nonaccountable expense allowance and warrants for
10,000 common shares exercisable at $1.25, which expire in March 2005. The
issuance of such
<PAGE> 19
warrants was exempt from registration under the Securities Act of 1933 by
reason of Section 3(b) and Regulation D as a limited offering.
In each of the private transactions above, we believe that each purchaser
(i) was aware that the securities had not been registered under federal
securities laws, (ii) acquired the securities for his/her/its own account for
investment purposes of the federal securities laws, (iii) understood that the
securities would need to be indefinitely held unless registered or an
exemption from registration applied to a proposed disposition and (iv) was
aware that the certificate representing the securities would bear a legend
restricting its transfer. We believe that, in light of the foregoing, the
sale of our securities to the respective acquirers did not constitute the sale
of an unregistered security in violation of the federal securities laws and
regulations by reason of the exemptions provided under Section 3(b) and 4(2)
of the Securities Act, and the rules and regulations promulgated thereunder.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither our Articles of Incorporation nor our bylaws provide for the
indemnification of a present or former director and officer. However,
pursuant to Nevada Revised Statutes Section 78.750 and 78.751 the corporation
must indemnify a director, officer employee or agent of the corporation who is
successful on the merits or otherwise in defense on any action or suit. Such
indemnification shall include, expenses, including attorney's fees actually or
reasonably incurred by him. Nevada law also provides for discretionary
indemnification for each person who serves as or at the request of the
corporation as an officer or director of the corporation. The corporation may
indemnify such individuals against all costs, expenses and liabilities
incurred in a threatened, pending or completed action, suit or proceeding
brought because such individual is an director or officer of the corporation.
Such individual must have conducted himself in good faith and reasonably
believed that his conduct was in, or not opposed to, the best interests of the
corporation. In a criminal action he must not have had a reasonable cause to
believe his conduct was unlawful.
PART F/S
INDEX TO FINANCIAL STATEMENTS
Interactive Marketing Consolidated Financial Statements February 29, 2000 and
April 21, 1998 [date of inception] through February 28, 1999.
<PAGE>
INTERACTIVE MARKETING TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
Interactive Marketing Technology, Inc.:
Report of Independent Auditors.............................................1
Consolidated Balance Sheet as of February 29, 2000.........................2
Consolidated Statements of Operations for the year
ended February 29, 2000 and for the period April 21, 1998 [date of
inception] through February 28, 1999.....................................3
Consolidated Statements of Stockholders' Equity for the
year ended February 29, 2000 and for the period
April 21, 1998 [date of inception] through February 28, 1999.............4
Consolidated Statements of Cash Flows for the year ended
February 29, 2000 and for the period April 21, 1998
[date of inception] through February 28, 1999..........................5-6
Notes to Consolidated Statements........................................7-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Interactive Marketing Technology, Inc.
We have audited the accompanying consolidated balance sheet of Interactive
Marketing Technology, Inc. and subsidiary ["Interactive"] as of February 29,
2000, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period from April 21, 1998 [date of inception]
through February 28, 1999 and the year ended February 29, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Interactive as of February 29, 2000, and the results of their operations and
their cash flows for the period from April 21, 1998 [date of inception]
through February 28, 1999 and the year ended February 29, 2000, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Interactive will continue as a going concern. As discussed in Note 9 to
the consolidated financial statements, Interactive suffered a net loss of
$1,056,964 and utilized $753,650 in cash for operations for the year ended
February 29, 2000. These factors raise substantial doubt about Interactive's
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 9. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Moore Stephens, P.C.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
April 1, 2000 [Except as to Note 11A
as to which the date is April 4, 2000]
<PAGE>
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 29, 2000.
Assets:
Current Assets:
Cash $ 252,266
Accounts Receivable - [Net of Allowance of $1,000] 6,246
Inventory 164,224
Prepaid Expenses 20,475
Other Current Assets 65,487
-------------
Total Current Assets 508,698
-------------
Fixed Assets - At Cost [Net of Accumulated
Depreciation of $8,779] 70,209
-------------
Other Assets:
Master Recording Rights - Music Catalogues 600,000
Customer List [Net of Accumulated Amortization of $16,000] 120,560
Infomercial Costs [Net of Accumulated Amortization of $55,000] 139,416
Licensing Fees [Net of Accumulated Amortization of $2,300] 17,700
Patents [Net of Accumulated Amortization of $1,750] 13,250
Deposits and Other Assets 104,687
Advance to Minority Shareholder 49,980
-------------
Total Other Assets 1,045,593
-------------
Total Assets $ 1,624,500
=============
Liabilities and Stockholders' Equity:
Current Liabilities:
Promotional Allowances $ 375,000
Accounts Payable 134,424
Accrued Royalties 75,000
-------------
Total Current Liabilities 584,424
-------------
Long-Term Liabilities:
Note Payable - Stockholder [6E] 54,200
Commitments & Contingencies [3] -
-------------
Stockholders' Equity:
Common Stock, Par $.001, 60,000,000 Shares Authorized,
13,832,000 Shares Issued and Outstanding 13,832
Paid-in Capital 2,069,688
Accumulated Deficit (1,097,644)
-------------
Total Stockholders' Equity 985,876
-------------
Total Liabilities and Stockholders' Equity $ 1,624,500
=============
See Notes to Consolidated Financial Statements.
<PAGE> F-2
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
April 21, 1998
[Date of Inception]
Year ended through
February 29, February 28,
2000 1999
------------- --------------
Net Revenues $ 921,381 $ -
Cost of Good Sold 448,699 -
------------- --------------
Gross Profit 472,682 -
------------- --------------
Costs and Expenses:
Payroll and Related Costs 413,070 -
General and Administrative Costs 212,932 -
Advertising and Media Buys 303,397 -
Royalties 141,000 -
Selling Expenses 69,561
Consulting Fees - Related Party 33,333 -
Travel and Entertainment 147,519 -
Professional Fees 115,105 22,680
Depreciation and Amortization 83,829 -
Research and Development Costs 5,700 18,000
Interest Expense - Related Party 4,200 -
------------- --------------
Total Costs and Expenses 1,529,646 40,680
------------- --------------
[Loss] from Operations $ (1,056,964) $ (40,680)
============= ==============
Net [Loss] Per Share $ (.09) $ (.01)
============= ==============
Weighted Average Number of
Shares Outstanding 12,063,250 7,050,000
============= ==============
See Notes to Consolidated Financial Statements.
<PAGE> F-3
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Shares Issued to Founders 2,500 $ 250 $ - $ - $ 250
Issuance of Common Stock
in Share Exchange [6B] 12,404,000 12,404 (12,404) - -
Additional Contributions -
April 21, 1998 through
February 28, 1999 [4A] - - 189,240 - 189,240
Recapitalization Adjustment[6B] (2,500) (250) 250 - -
Net [Loss] for the period
April 21, 1998 through
February 28, 1999 - - - (40,680) (40,680)
Shares Returned and Canceled
by Two Officers in November
1999 and January 2000 [6D] (7,354,000) (7,354) 7,354 - -
------------- ----------- ------------- ------------- --------------
Balance at February 28, 1999 5,050,000 5,050 184,440 (40,680) 148,810
Acquired Equity of Shur
De Cor[9B] 6,202,000 6,202 (6,202) - -
Issuance of Common Stock in
April 1999 [6C] 285,000 285 948,765 - 949,050
Issuance of Common Stock in
November 1999 [6C] 295,000 295 244,705 - 245,000
Issuance of Common Stock in
November 1999 for Acquisition
of Masters Recording Rights 2,000,000 2,000 598,000 - 600,000
Advertising and Promotion
Contributed by a Minority
Shareholder [3A] - - 99,980 - 99,980
Net [Loss] for the period
March 1, 1999 through
February 29, 2000 - - - (1,056,964) (1,056,964)
------------- ----------- ------------- ------------- --------------
Balance at February 29, 2000 13,832,000 $ 13,832 $ 2,069,688 $ (1,097,644) $ 985,876
============= =========== ============= ============= ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> F-4
<TABLE>
<CAPTION>
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period
April 21, 1998
[Date of Inception]
Year ended through
February 29, February 28,
2000 1999
--------------- ----------------
<S> <C> <C>
Operating Activities:
Net [Loss] $ (1,056,964) $ (40,680)
--------------- ----------------
Adjustments to Reconcile Net [Loss]
to Net Cash [Used for] Operating Activities:
Depreciation and Amortization 83,829 -
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable - Net (6,246) 14,680
Inventory (164,224) 18,000
Prepaid Expenses and Other Current Assets (85,982) -
Deposits and Other Assets (104,687) -
Increase [Decrease] in:
Accounts Payable 126,424 8,000
Promotional Allowances 375,000 -
Accrued Royalties 75,000 -
Accrued Interest - Stockholder 4,200 -
--------------- ----------------
Total Adjustments 303,314 40,680
--------------- ----------------
Net Cash Operating Activities (753,650) -
Investing Activities:
Patents (15,000) -
Fixed Assets (78,988) -
Infomercial Costs (94,416) -
Advance to Minority Shareholder (49,980) -
--------------- ----------------
Net Cash - Investing Activities (238,384) -
Financing Activities:
Proceeds from Common Stock 1,194,050 250
Advance from Stockholder (5,000) 5,000
Loan from Stockholder 50,000 -
--------------- ----------------
Net Cash - Financing Activities 1,239,050 5,250
--------------- ----------------
Net Increase in Cash 247,016 5,250
Cash Beginning of Periods 5,250 -
--------------- ----------------
Cash End of Periods $ 252,266 $ 5,250
=============== ================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> F-5
<TABLE>
<CAPTION>
INTERACTIVE MARKETING TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period
April 21, 1998
[Date of Inception]
Year ended through
February 29, February 28,
2000 1999
--------------- ----------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $ - $ -
Income Taxes $ - $ -
Supplementary information on Non-Cash Investing and Financing Activities:
During 1998, a stockholder paid a total of $189,240 on behalf of the Company for:
Legal Fees $ 14,680
Research and Development Costs 18,000
Licensing Fees 20,000
Customer Lists 136,560
----------------
$ 189,240
================
In November of 1999, the Company purchased rights for 5,000 master audio recordings for various types
of music from an unrelated entity valued at approximately $600,000 by the issuance of 2,000,000 shares
of the Company's common stock.
In fiscal 1999, the Company's minority shareholder's contribution of $99,980 was exchanged for the
application of a $100,000 promotional fee due to him under a service agreement [See Note 3A]. These
amounts were credited to paid-in capital and capitalized as infomercial costs.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> F-6
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[1] Nature of Operations
Interactive Marketing Technology, Inc. ["Interactive" and the "Company"] was
formed on April 21, 1998. On April 7, 1999, the Company restated and amended
its bylaws under the State of Nevada. The Company's wholly-owned subsidiary
is Interactive's Plumber, Inc., which was formed February 4, 1999. Since
inception, the Company's principal business activity has been primarily to
produce, market, and sell a licensed product called the Plumbers Secret [the
"product"]. The subsidiary commenced selling the product in August 1999.
The Company intends on introducing new products in fiscal 2000 in a direct
response and retail sales environment. The Company continues to be involved
in negotiations to obtain licensing agreements for new products [See Note 3].
The Company was considered a development stage company for the year ended
February 28, 1999, however, since total net revenues of approximately
$921,000 have been realized between August 1999 and February 2000, the
Company is no longer a development stage entity.
[2] Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiary, Interactive's Plumber, Inc. and include the consolidation of its
50.01% members' interest in the Plumbers Secret, LLC. Intercompany
transactions and balances have been eliminated in consolidation.
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 and 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 those
estimates.
Cash and Cash Equivalents - The Company considers all highly liquid
investments, with a maturity of three months or less when purchased, to be
cash equivalents. At February 29, 2000, the Company did not have any cash
equivalents.
Research and Development Costs - The Company expenses research and
development costs as incurred. For the years ended February 29, 2000 and
February 28, 1999, research and development costs totaled $5,700 and $18,000,
respectively, for new products.
Net [Loss] Per Share - Net [loss] per share is based on the weighted average
number of shares outstanding, reflecting the shares issued in the transaction
[See Note 6B] and the shares reacquired and canceled [See Note 6D]. FASB
issued SFAS No. 128, "Earnings Per Share," in February 1997. SFAS No. 128
simplifies the earnings per share ["EPS"] calculations required by Accounting
Principles Board ["APB"] Opinion No. 15, and related interpretations, by
replacing the presentation of primary EPS with a presentation of basic EPS.
SFAS No. 128 requires dual presentation of basic and diluted EPS by entities
with complex capital structures. Basic EPS includes no dilution and is
computed by dividing income available to common stockholders by the
weightedaverage number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in the
earnings of an entity, similar to the fully diluted EPS of APB Opinion No.
15. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier
application is not permitted. The Company adopted SFAS No. 128. Basic EPS
is based on average common shares outstanding and diluted EPS include the
effects of potential common stock, such as, options and warrants, if
dilutive. As of February 29, 2000, the Company had no potentially dilutive
securities that would be included in the computation of diluted earnings per
share. Such dilutive securities if issued could dilute EPS in future years.
<PAGE> F-7
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[2] Summary of Significant Accounting Policies [Continued]
Intangible Assets - Intangible assets include licensing fees, patents and
customer lists which are amortized over five years using the straight-line
method. Amortization commenced in August of 1999 when the Company commenced
selling the licensed product. Amortization expense for the period August
1999 through February 29, 2000 was $20,050.
Fixed Assets - Fixed assets include office furniture and equipment.
Depreciation began in August of 1999 under the straight-line method over an
estimated useful live of five years. Depreciation expense for the period
August 1999 through February 29, 2000 was $8,779.
Infomercial Costs - These costs include the filming, editing and other film
producing costs for various product infomercials which are used for cable
network viewing audiences. These costs are of a direct response nature and
are therefore capitalized and amortized over the period during which benefits
are expected to be received, which is estimated to be two years. The
amortization expense for the period August 1999 through February 29, 2000 was
$55,000.
Advertising Costs - Advertising costs, except for costs associated with
direct-response advertising, are charged to operations when the advertising
first takes place. Advertising costs inclusive of media buys, amounted to
approximately $304,000 and $-0- for the year ended February 29, 2000 and the
period April 21, 1998 through February 28, 1999, respectively.
Revenue Recognition - The Company recognizes revenue upon shipment of the
product from the fulfillment facility. The Company return policy on direct
response is a full refund money back guarantee in thirty days. The Company
has accrued a liability of $5,000 based upon March 2000 returns for sales
prior to March 1, 2000. The Company's return policy on retail sales is for
defective merchandise only.
Inventory - Inventory is stated at the lower of cost or market. Cost is
determined by the first-in first-out method. The breakdown of the inventory
is as follows:
Supplies $ 30,800
Furnished Goods 133,424
--------------
Total $ 164,224
==============
Impairment - Certain long-term assets of the Company are reviewed when
changes in circumstances require as to whether their carrying value has
become impaired, pursuant to guidance established in Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Management
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations [undiscounted and without
interest charges]. If impairment is deemed to exist, the assets will be
written down to fair value. Management also reevaluates the periods of
amortization to determine whether subsequent events and circumstances warrant
revised estimates of useful lives. As of February 28, 2000, management
expects these assets to be fully recoverable.
<PAGE> F-8
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[3] Commitments and Contingencies
[A] Operating Agreement for The Plumber's Secret, LLC - Interactive 's
subsidiary, Interactive's Plumber, Inc., entered into an operating agreement
in February of 1999 whereby it acquired a 50.01% interest in the Plumber's
Secret, LLC and all day-to-day management decisions of the operating entity
are made by Interactive. Interactive shall be entitled to 10% of "net cash
flow" as defined as a management fee. Interactive, as licensor, has assigned
to the limited liability company a licensing agreement with A2000 USA, Inc.
The other limited liability partner has the right to abandon its interest if
sales from the product are less than $2,000,000 subsequent to the first year
that the infomercial airs on the product, which was July 1999. Net sales
generated from this product since inception [August 1999] amounted to
approximately $900,000 after the accrued promotional allowance.
On March 16, 1999, Interactive entered into an amendment of the operating
agreement for the limited liability company. The initial capital
contribution by both members was approximately $100,000 each. Interactive
committed to lending the limited liability company up to $150,000. As of
February 29, 2000, $415,135 was owed by Plumber's Secret, LLC to Interactive.
Interactive is entitled to receive a preferred return on its capital
contribution. Under a service agreement, $100,000 was to be paid to the
other limited liability member [Vila Enterprises, LLC] for advertising and
promoting the product in an infomercial. The $100,000 fee has been applied
towards the limited liability member's required initial capital contribution
of $99,980. As of February 29, 2000, the Plumber's Secret, LLC incurred a
net loss from operations of approximately $475,000. Pursuant to the
agreement, the first $100,000 in losses from the limited liability company
has been allocated for tax purposes to Vila Enterprises and then the
remainder will be allocated to the members according to the terms of the
first agreement. The minority interest portion of the February 29, 2000 loss
is $287,000 after allocation of the first $100,000 loss, however this loss
has not been allocated to the minority partner for financial statement
purposes. Future profits will be distributed 50/50 after the accumulated
losses are offset.
[B] Licensing Agreement Plumber's Secret - In June 1998, the Company entered
into a licensing agreement for the exclusive right to manufacture and or
produce, advertise, promote, market or sell worldwide the product for a
royalty per unit for a period of one year. Upon execution of agreement,
$20,000 was paid to the licensor. The Company is to pay a royalty fee of
$3.00 per each unit sold to the licensor. The Company paid $66,000 as of
February 29, 2000 and has accrued an additional $75,000 in royalties on this
obligation as of February 29, 2000.
[C] Operating Lease - In September 1999, the Company commenced leasing office
space under an operating lease which expires September 2004 for a monthly
minimum lease payment of approximately $5,400. This lease contains a renewal
option. In addition, the lease contains an escalation clause as defined and
a three percent automatic increase to the minimum monthly rent at the end of
each year. Total rent expense for the space for the year ended February 29,
2000 was approximately $35,500 and is classified as general and
administrative costs. Approximate aggregate future minimum rental payments
under this noncancellable operating lease is as follows:
February 28,
- -----------
2001 $ 66,000
2002 68,000
2003 70,000
2004 72,000
2005 39,000
-------------
Total $ 315,000
=============
[D] Telemarketing and Fulfillment Services Agreement - The Company entered
into a one year agreement on June 24, 1999 to telemarket the Plumber's
Secret, LLC throughout the world with PDS. PDS processes all orders received
for bank authorization and payment before shipping the products. PDS has
acquired a security interest in the Plumber's Secret products. PDS stores
the inventory and related materials as necessary to fulfill orders, subject
to timely receipt of product and materials from manufacturing centers. Total
expense during the year ended February 29, 2000 were approximately $54,000
and is classified as cost of goods sold in the statement of operations.
<PAGE> F-9
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[3] Commitments and Contingencies [Continued]
[E] Nonexclusive and Nontransferable License - On November 30, 1999, the
Company granted QVC a license to use the Plumber's Secret promotional video
to promote and sell the product on the televised shopping program through
December 31, 2001. The first promotional program is slated for the first
quarter of fiscal year 2001.
[F] Letter of Intent - Power-Ti-Pod - On July 14, 1999 entered into an
agreement for Interactive to sell the Power-Ti-Pod internationally and split
the profits 50/50 with a joint venture partner. The Company realized sales
of approximately $22,000 as of February 29, 2000.
[G] Letter of Intent - Tour-One Putter - On July 14, 1999 entered into an
agreement for Interactive to sell the Tour-One-Putter internationally first,
and back into a supply and demand, domestically. If an international market
is established Interactive will pay for telemarketing, media, fulfillment
costs, and product costs to generate a net profit split of 50/50 with a joint
venture partner. There were no sales as of February 29, 2000.
[H] Marketing Agreement - Putter Ball - The Company agreed on November 11,
1999 to develop a marketing plan for the sale of the Putter Ball with a joint
venture partner and for the joint venture partner to pay for the production
infomercial to market the product both domestically and internationally and
the manufacturing costs used for the Putter Ball. The profit split would be
50/50. The Company sold approximately $8,000 of the Putter Ball as of
February 29, 2000 and has no liability for this venture as of February 29,
2000.
[I] Letter of Intent - EFL Product Line - On November 12, 1999, the Company
received a license to manufacture and market the fishing line product that is
called the EFL Product Line. Interactive will be responsible for developing
the product and the infomercial and for fulfilling orders. Interactive will
pay a 15% royalty of the net sales as defined under the agreement. There
were no sales of this product as of February 29, 2000, however, approximately
$35,300 has been incurred for a future infomercial to be produced and is
classified as part of other assets on the balance sheet.
[J] Wonder Wrench - On January 5, 2000, the Company entered into a Sales and
Distribution Agreement with Lacrex SA of Switzerland ["Lacrex"] to solely and
exclusively market in North America the Lacrex Universal Wrench. Interactive
is granted first right of refusal for worldwide direct response rights on a
country to country basis. Interactive has committed to purchase from Lacrex
a minimum of 300,000 units of the product at a purchase price of $5.00 per
unit FOB China within one year. There were no sales of this product as of
February 29, 2000. There is a $20,000 deposit on the future infomercial that
will be produced for this product and is classified as part of other assets
on the balance sheet.
[K] Personal Service Agreement - In 1998, Interactive received the exclusive
rights for product marketing whereby Interactive is to pay a 15% of royalty.
Commencing April 1999, the Company paid $3,000 a month as a draw against the
profit split on Tom House tapes, kits, and products. No sales have been
recorded, therefore, these payments of $30,000 as of February 29, 2000 have
been recorded as part of other assets on the balance sheet.
[L] Royalty Payment - "The Rake" - The Company has not finalized negotiations
related to a royalty arrangement for The Rake. There were no sales or costs
for The Rake as of February 29, 2000.
[M] Noncompete Agreement - "Specialized Collapsible Ladder" - In December of
1999, the Company entered into a noncompete agreement to market the ladder
with a profit split as defined under certain specifications. There were no
sales or cost for the ladder as of February 29, 2000.
<PAGE> F-10
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[3] Commitments and Contingencies [Continued]
[N] Sales Agreement - Life Mask - On November 17, 1999, the Company entered
into an agreement whereby Interactive will pay all costs of the products and
another individual will receive 12% of all income worldwide from the sales of
the product. There were no sales or costs for the Life Mask as of February
29, 2000.
[O] Employment Agreement - On June 30, 1999, the Company entered into a 2
year employment agreement for an officer of the Company for an annual salary
of $135,000 plus reimbursable business expenses.
[P] Sales Price Guarantee - The Company has included a price guarantee on
sales orders for certain retail customers during first quarter of fiscal
2000. The price guarantee provides that the Company will not sell its
product to a competitor at a lower price up until the shipment date.
[4] Related Party Transactions
[A] Stockholder/Former Officer - Legal fees totaling $14,680 and research and
development costs of $18,000 were incurred between October 1, 1997 and June
30, 1998 in connection with the formation of the business, the licensing
agreements, and applications for patents and trademarks for the product.
Total licensing fees for the product, "Plumbers Secret", of $20,000 were paid
in June and July of 1998. These costs were paid by a stockholder of the
Company and were therefore treated as a capital contribution. The stockholder
of the Company also remitted his acquisition of the title and interest in the
mailing list of past, current, and future names whereby his basis of $136,560
was treated as a capital contribution. Therefore, the Company expensed
$40,680 and credited paid-in capital $189,240 for the period ended February
28, 1999 on these related party transactions.
During the year ended February 29, 2000, the Company paid an entity, which is
controlled by this stockholder consulting fees of approximately $33,000 and
paid the stockholder payroll costs of approximately $18,000.
[5] Income Taxes
At February 29, 2000, the Company had a net operating loss carryforward of
approximately $538,000 resulting in a long-term deferred asset of
approximately $183,000. The operating loss carryforward of $538,000 will
expire February 2020. The Company has provided a valuation allowance of
approximately $183,000 due to the uncertainty that the Company will be able
to generate sufficient taxable income in the future necessary to utilize this
asset. There are no material temporary differences that would result in a
deferred tax asset or liability at February 29, 2000.
[6] Equity and Debt Transactions
[A] Formation - Interactive Marketing Technology, Inc. was authorized to
issue 2,500 shares of common stock at no par value. At February 28, 1999,
there were 2,500 shares of common stock issued and outstanding to the
founders and there were no options or warrants outstanding. The 2,500 shares
were exchanged for 12,404,000 shares of common stock of Shur De Cor pursuant
to the Share Exchange Agreement dated March 15, 1999 [See Note 6B].
<PAGE> F-11
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[6] Equity and Debt Transactions [Continued]
[B] Share Exchange Agreement - On March 15, 1999, Interactive entered into a
share exchange agreement with Shur De Cor, Inc. whereby 100% of the common
stock, or 2,500 shares of Interactive, were exchanged for 12,404,000 shares
of common stock of Shur De Cor, Inc. For accounting purposes, the
acquisition was treated as an issuance of shares for cash by Interactive,
with Interactive as the acquirer. The accounting is identical to that
resulting from a reverse acquisition, except that no goodwill or other
intangible is recorded. Historical information prior to March 24, 1999 is
that of Interactive. Shares of 12,404,000 issued in the acquisition are
shown as outstanding for all periods presented in these financial statements
in the same manner as for a stock split. The acquired equity of Shur De Cor,
Inc. is included in the financial statements at the date of acquisition. Pro
forma information on this transaction is not presented as, at the date of
this transaction, Shur De Cor, Inc. was considered a public shell and
accordingly, the transaction was not considered a business combination. On
March 24, 1999, Shur De Cor, Inc. changed its name to Interactive Marketing
Technology, Inc. and increased its authorized capital stock from 20,000,000
to 60,000,000 common shares.
[C] Equity Financing - In April 1999, the Company received total proceeds of
$949,050 from the sale of 285,000 shares of common stock from two foreign
investors. In November of 1999, the Company received proceeds of $245,000
for the issuance of 295,000 shares of the Company's common stock.
[D] Treasury Stock - In November 1999 and January 2000, two of the Company's
officers and directors returned and the Company canceled a total of 7,354,000
shares of the Company's common stock for no compensation in an attempt to
provide additional shares to the Company for future financing. The effect of
this transaction has been reflected retroactively in the financial statements
for all periods presented.
[E] Note Payable - Stockholder - In April 1999, the Company received note
proceeds of $50,000 from a stockholder. The note is due April 2001 with
interest at 10% per annum. Unpaid interest expense for the year ended
February 29, 2000 was $4,200. The total unpaid liability of $54,200 is
classified as a long-term liability.
[F] Acquisition of Rights for Master Recordings - During November 1999, the
Company purchased the non-exclusive rights to 5,000 master audio recordings
[the "Library"] for various types of music from an unrelated entity in
exchange for the issuance of 2,000,000 shares of the Company's common stock.
The value of $600,000 was assigned to these rights based upon an independent
valuation received, which included estimated revenue projections used by
management to assess the recoverability from its future revenue stream.
Under the agreement, the Company has the right to use the Library to record
music on its own label. However, the agreement does not permit the
relicense, sublicense or the assignment of rights in the Library to a third
party.
The Company will commence amortization of this asset over five years. The
Company has not commenced amortization for this asset in fiscal year 1999 as
management intends to market a compilation of these recording in fiscal year
2000.
[7] Significant Risks and Uncertainties
Concentrations of Credit Risk - Cash - Financial instruments which
potentially subject the Company to concentrations of credit risk consists of
cash.
The Company places its cash with high credit quality institutions and is
subject to credit risk to the extent it exceeds federally insured limits. At
February 29, 2000, the Company has approximately $200,000 of cash subject to
such risk. The Company does not require collateral or other security to
support financial instruments subject to credit risk.
[8] Major Customer - For the year ended February 29, 2000, the Company had
sales to one resale customer amounting to approximately $465,000 of net sales
after promotional allowances of $375,000, or 51% of net sales.
<PAGE> F-12
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[9] Going Concern
The accompany financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern and realization of assets and settlement of
liabilities and commitments in the normal course of business.
The Company has suffered a net loss of $1,056,964 and utilized $753,650 in
cash for operations for the year ended February 29, 2000. The inability of
the Company to generate cash from operations, considering currently available
funds, creates an uncertainty about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
The Company is completing a private placement memorandum and upon receipt of
the estimated net proceeds of $517,000 believes it will be able to complete
anticipated sales orders, including the introduction of new products, with
the infusion of additional working capital and sustain operations for twelve
months [See Note 11A]. The continuation of the Company as a going concern is
dependent upon the success of these plans.
There can be no assurances that management's plans to reduce operating losses
and to obtain additional financing to fund operations will be successful.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the
Company cannot continue in existence.
[10] Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, other current assets as
well as accounts payable and other current liabilities approximates fair
value as a result of their short maturities. The carrying amount of due to
stockholder included in non-current liabilities approximates its fair value
because it bears interest at a rate that approximates the Company's cost of
capital.
[11] Subsequent Events
[A] Private Placement Memorandum ["PPM"] - On March 23, 2000, the Company
engaged a placement agent for an offering to sell up to 6 units, each unit
consisting of one $100,000 convertible secured promissory 12% note and 50,000
warrants to purchase 50,000 shares of common stock at a price of $1.25 per
share. The offering price is $100,000 per unit and the anticipated estimated
net proceeds to the Company is $517,000. The promissory notes will mature on
the earlier of (a) 6 months from the closing, (b) certain change of control
events, (c) the closing of $2,000,000 of bridge financing or $5,000,000 of
equity financing, or (d) the receipt and collection by the Company of
$600,000 in accounts receivable. The promissory notes will be secured by the
assets of the Company. The placement agent is entitled to a 10% commission
for all units sold, a 22% non-accountable expense allowance and warrants for
10,000 shares of common stock exercisable at $1.25 for a period of five
years. The Company has received approximately $400,000 from this offering as
of April 4, 2000. The Company anticipates this offering will help sustain
the Company's growth for six months of operations. Total fair value of the
equity instruments issued will be charged to operations over the life of the
related debt.
[B] Stock Option Plan - On March 28, 2000, the Company's Board of Directors
adopted the 2000 Stock Option Plan whereby it reserved for incentive rewards
10,000,000 shares of common stock for directors, employees, and consultants.
The Company granted stock options under this plan for 8,365,000 shares of the
Company's common stock at an exercise price of $1.00, which approximated the
fair market value at the date of grant.
<PAGE> F-13
INTERACTIVE MARKETING TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[12] Subsequent Events [Unaudited]
Stock Acquisition and Exchange Agreement - On April 15, 2000, the Company
entered into a stock acquisition and exchange agreement with a diversified
internet service company whereby 51% of IMT's issued and outstanding shares
of stock would be acquired subject to shareholder approval.
[13] New Authoritative Accounting Pronouncements
The Financial Accounting Standard Board ["FASB"] has issued Statement of
Financial Accounting Standards No. 133 ["SFAS No. 133"], "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The accounting for changes in the
fair value of a derivative depends on the intended use of the derivative and
how it its designated, for example, gain or losses related to changes in the
fair value of a derivative not designated as a hedging instrument is
recognized in earnings in the period of the change, while certain types of
hedges may be initially reported as a component of other comprehensive income
[outside earnings] until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter; on that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,
but it is permitted only as of the beginning of any fiscal quarter. SFAS No.
133 is not to be applied retroactively to financial statements of prior
periods.
The Company does not currently have any derivative instruments and is not
currently engaged in any hedging activities.
In March 2000, the FASB issued Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation." Among other issues, this
Interpretations clarifies (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option or
award, and (d) the accounting for an exchange of stock compensation awards in
a business combination. The Company has adopted this pronouncement.
<PAGE> F-14
PART III
ITEM 1: INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit
Number Description Location
2.1 Articles of Incorporation of Shur De Cor, Inc.,
dated August 14, 1987 Filed January
19, 2000
2.2 Articles of Merger filed April 7, 1999. Filed January
19, 2000
2.3 Bylaws of Interactive Marketing Filed January
19, 2000
6.1 Lease Agreement between E.P. Investments
and Interactive Marketing, dated May 10, 1999 Filed January
19, 2000
6.2 Agreement between A2000 USA, Inc. and Interactive
Marketing, dated June 1998. See attached
6.3 Amended Operating Agreement of The Plumbers
Secret LLC, dated March 16, 1999 See attached
6.4 Service Agreement between Interactive Marketing
and B.V.T.V., Inc., dated March 11, 1999 See attached
8.1 Agreement and Plan of Merger between Filed January
19, 2000 Interactive Marketing and Shur De Cor, Inc.,
dated March 24, 1999.
8.2 Stock Acquisition Agreement between Interactive
Marketing And E-Pawn.com, Inc., dated April 15, 2000. See attached
16 Letter of agreement from Crouch, Bierwolf & Chisholm,
dated March 29, 2000 See attached
27 Financial Data Schedule See attached
________________________
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, who is duly authorized.
5/9/00
Date _________________. INTERACTIVE MARKETING TECHNOLOGY, INC.
/s/ Sandy Lang
By: __________________________________________
Sandy Lang, President and CEO
AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made and entered into this day of
June, 1998, by, between and among, A2000 USA, INC. , 371 East 22nd Street,
Paterson, New Jersey 07514, as a licensor ("LICENSOR"); ROBERT MILLER, 371
East 22nd Street, Paterson, New Jersey 07514 and JOHN MILLER, 371 East 22nd
Street, Paterson, New Jersey 07514, (hereinafter "INVESTORS")and INTERACTIVE
MARKETING TECHNOLOGY, INC., 44 Minebrook Road, Colts Neck, New Jersey 07722,
as licensee ("LICENSEE"), when referred to collectively all parties listed
herein should be referred to as "Party" or "Parties" with regard to the
following:
RECITALS
A. LICENSOR represents that it is the sole owner of U.S. Patent
Applications number 08/757/315, 08/757/317 and 08/784/398 for pending patents
entitled "Sure Shot" (the "APPLICATIONS") and the Trademarks and Copyrights as
also set forth in Schedule "A" attached hereto the APPLICATIONS, Trademarks
and Copyrights are sometimes hereinafter collectively referred to hereinafter
as the "PROPERTIES").
B. LICENSOR is sole manufacturer of the product or products produced
from the "Properties" and sold primarily for persona, family or household
purposes, hereinafter "CONSUMER PRODUCT" and sold or used for any other use,
hereinafter "INDUSTRIAL PRODUCT" collectively referred to as "PRODUCT".
C. LICENSEE is a newly formed corporation which was created to, among
other things, secure the assignment and license in, to and for the PROPERTIES
and to exploit the PROPERTIES world wide through the manufacture and/or
production, advertising, marketing, sale and/or distribution of the CONSUMER
PRODUCT.
D. LICENSOR desires to assign, sell and license the PROPERTIES to
LICENSEE and LICENSEE desires to obtain the PROPERTIES from LICENSOR.
E. LICENSOR and LICENSEE now mutually desire for LICENSOR to sell,
assign, grant, transfer and convey to LICENSEE the exclusive rights and to the
PROPERTIES, in perpetuity, on the terms and conditions set forth before.
NOW, THEREFORE, in consideration for the mutual promises, covenants and
conditions herein contained, and for such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Recitals. The Recitals stated above the incorporated herein
by this reference as if set forth in full at this point.
2. Assignment and Transfer. LICENSOR hereby assigns, transfers
and licenses to LICENSEE the PROPERTIES, together with any and all patents,
copyrights or trademarks issued or to be issued in foreign countries that
correspond, in whole or in part, to the PROPERTIES, as well as any other
patents belonging to LICENSOR and INVENTORS individually (collectively
referred to with LICENSOR as the "INVESTORS"), original inventor and owner of
the PROPERTIES issued, pending or to be issued to the INVENTORS that are
necessary to or beneficial with respect to the production of the inventions
described and claimed in the PROPERTIES. To facilitate recording of this
worldwide assignment and perpetual license, LICENSOR shall execute the
assignment herewith annexes as Schedule "B".
3. Grant of Rights. Subject to the terms and conditions of this
AGREEMENT, LICENSOR hereby grants to LICENSEE the following rights
(collectively, the "License Rights"):
3.1 The exclusive right to manufacture and/or produce,
advertise, promote, market, sell and otherwise distribute the CONSUMER PRODUCT
worldwide by such means and media as LICENSEE may determine, including,
without limitation, via (i) airings of an infomercial on broadcast, cable,
satellite and all other forms of television transmission now existing or
hereafter developed; (ii) television shopping programs such as those aired by
QVC and Home Shopping Network; (iii) radio; (IV) print media; (v) direct-mail
solicitation, (VI) package inserts, (VII) inbound and outbound telemarketing,
(VIII) credit card syndication, (IX) catalogs, (X) wholesale and retail
channels; and (IX) computer transmissions such as commercial on-line services
and the Internet.
3.2 In connection with the exercise of its rights hereunder,
the exclusive, worldwide right to practice any and all patents and use any and
all trademarks, trade names, copyrights, trade secrets, proprietary
information, technical knowhow and other intellectual property rights which
LICENSOR may own or control with respect to the CONSUMER PRODUCTS, including,
without limitation those specifically identified on Schedule "A".
3.3 Rights to apply for, register, maintain, deregister or
otherwise terminate and take all other action (or fail to act) with respect to
trademarks, service marks, copyrights, patents and other forms of protection
of the Property and License Rights. The rights granted herein shall be
exercised with the consent of LICENSOR which consent shall not be unreasonably
withheld.
3.4 Rights to protect from Property and License Rights from
past, present and future infringements by unauthorized parties, including,
without limitation, rights to institute, prosecute, settle and otherwise
conduct such actions and proceedings concerning such infringements as LICENSEE
may elect in its discretion, and to enjoin, recover damages and obtain all
other permitted relief for such infringements.
3.5 Upon LICENSEE'S sale of Two Hundred Fifty Thousand
(250,000) units of CONSUMER PRODUCT, all rights conferred upon LICENSEE for
CONSUMER PRODUCT by this AGREEMENT shall be granted to LICENSEE as to
INDUSTRIAL PRODUCT as well. Upon the conferring of such rights, this
AGREEMENT shall be amended to insert PRODUCT wherever CONSUMER PRODUCT or
INDUSTRIAL PRODUCT appears herein.
3.6 Upon the conferring of the additional rights to LICENSEE
pursuant to 3.5 above, LICENSOR shall be paid a royalty per unit of PRODUCT
sold as set forth in Schedule C and in accordance with paragraph 7 of this
AGREEMENT.
3.7 The worldwide rights (rights conferred upon LICENSEE by
this AGREEMENT outside of the United States) shall be for a one (1) year
period. The one (1) year period shall begin sixty days (60) from the first
airing of the informercial aired by LICENSEE as part of the test marketing to
be conducted pursuant to this AGREEMENT and terminate one (1) year from that
date. The continuation of the worldwide rights conferred by this AGREEMENT
shall be contingent upon the sale by LICENSEE of One Hundred Thousand
(100,000) units of CONSUMER PRODUCT during that period. After that first year
period, the grant of worldwide rights to LICENSEE by this AGREEMENT shall
continue for additional one (1) year terms contingent upon the sale of Fifty
Thousand (50,000) units of CONSUMER PRODUCT or PRODUCT if applicable beginning
with the date of termination of the first one (1) year period and continuing
for additional one (1) year periods for the duration of this AGREEMENT.
4. Term. Subject to provisions for prior termination set
forth hereinbelow, this AGREEMENT shall commence on the date first above
written and shall continue until terminated pursuant to its terms.
5. Warranties. As of the date of this AGREEMENT, LICENSOR and
INVENTORS represent and warrant as follows:
5.1 They are the sole and uncontroverted owner of all
interests in and rights to the PROPERTIES.
]
5.2 None of them has entered into any prior contract,
arrangement or AGREEMENT relating to the PROPERTIES, except that INVENTORS
entered into agreements necessary to transfer all rights and interest in and
to the PROPERTIES to LICENSOR, so that LICENSOR could enter into this
AGREEMENT.
5.3 The validity of the APPLICATIONS have not been called
into question by and third party or parties.
5.4 They are not aware of any reason, not made of record
in the United States Patent and Trademark Office with respect to the
applications for and prosecution of the PROPERTIES, or the basis of which the
validity of the APPLICATIONS could reasonably be questioned or that the patent
applied for will not be issued.
5.5 They are not aware of any patents, trademarks or
copyrights held by third parties that would prevent the practice of the
inventions described or claimed in the PROPERTIES nor are they aware of any
assertions by third parties that such third party or parties hold rights to
the PROPERTIES.
5.6 No claims, actions, or suits of any nature, including
accounts payable or liens, related to or effectuating the PROPERTIES or
PRODUCT exist or are pending or threatened.
5.7 The INDUSTRIAL PRODUCT produced by LICENSORS by and
under this AGREEMENT shall be of high standard, consistent with and conforming
to the specifications, designs and cost as approved by LICENSEE and set forth
on Schedule "B-D".
5.8 LICENSOR and CREATORS have ceased all promotion and
sales of CONSUMER PRODUCT of whatever kind and nature. LICENSOR and INVESTORS
further agree that they will not promote or sell the CONSUMER PRODUCT during
the term of this AGREEMENT.
6. Testmarketing. LICENSEE shall conduct testmarketing of
the PRODUCTS as a cost and as set forth in Schedule "E" attached hereto.
6.1 If LICENSEE, in its sole discretion, determine that
testmarketing has been successful, the LICENSEE shall, as promptly as
practical, notify LICENSOR of its decision to proceed pursuant to this
AGREEMENT. If LICENSEE, in its sole discretion determines that testmarketing
has been unsuccessful, the LICENSEE may at its sole option, within thirty (30)
days following the conclusion of testmarketing, terminate the AGREEMENT upon
written notice to the Licensor in accordance with this AGREEMENT.
7. Consideration and Costs.
7.1 In consideration of the rights conferred by this
AGREEMENT, LICENSEE shall pay LICENSOR the sum of Twenty Thousand and No/100
Dollars ($20,000.00) within fifteen (15) days of execution of this AGREEMENT
by all the parties hereto. LICENSEE shall pay LICENSOR the additional sum of
Thirty Thousand and No/100 Dollars ($30,000.00) simultaneously with its
notification to LICENSOR of its decision to proceed as set forth in paragraph
6.1 herein. LICENSEE will receive a credit from LICENSOR for the monies paid
pursuant to this sub-paragraph against license/royalty fees to be paid by
LICENSEE pursuant to paragraph 7.2 below.
7.2 LICENSEE shall pay to LICENSOR a license/royalty fee
as set forth in Schedule C per unit of CONSUMER PRODUCT sold by LICENSEE
pursuant to this AGREEMENT. Payment shall be made within thirty (30) days
after sale. LICENSEE shall not be responsible to pay any license/royalty fee
on any unit of CONSUMER PRODUCT returned to LICENSEE. LICENSEE shall receive
a credit from LICENSOR on all returned units against future royalty licensee
fees due under this AGREEMENT.
7.3 LICENSOR shall pay to LICENSEE a royalty fee as "set
forth" in Schedule C of this AGREEMENT for each and every unit of INDUSTRIAL
PRODUCT sold by LICENSOR until LICENSOR confers the rights to INDUSTRIAL
PRODUCT to LICENSEE pursuant to this AGREEMENT.
7.4 LICENSEE shall be responsible for all costs of
production and sale of CONSUMER PRODUCT. LICENSOR shall be responsible for
all costs for the manufacture and sale of INDUSTRIAL PRODUCT. LICENSOR'S
obligations herein shall cease upon the conferring of rights to INDUSTRIAL
PRODUCT to LICENSEE pursuant to this AGREEMENT>
8. Payments, Accountings and Audits.
8.1 LICENSEE shall provide LICENSOR quarterly statements
regarding LICENSEE's sale of "CONSUMER PRODUCT". LICENSOR shall provide
LICENSEE quarterly statements regarding LICENSOR'S sale of INDUSTRIAL PRODUCT.
Such calendar quarterly statements which are to be provided within thirty (30)
days of the end of each calendar quarter. The statements shall set forth an
explanation of the funds received and spent, together with appropriate back up
documentation and an accounting of any funds due LICENSOR and LICENSEE, and a
check for any funds due LICENSOR and/or LICENSEE.
8.2 There shall be no minimum guaranteed payments.
9. Document Turnover. Upon execution of this AGREEMENT,
LICENSOR shall turnover to LICENSEE all drawings, plans, specifications,
designs and any rights to use individual's names, initials, voice, signature,
photographs, likeness with regard to the PRODUCTS, all accounts, records,
leads, contacts, and the like, regarding LICENSOR'S exploitation or attempted
exploitation of the PROPERTIES or PRODUCT in order that LICENSEE may
manufacture, produce, exploit, or attempt to exploit the PROPERTIES and/or
CONSUMER PRODUCT.
10. LICENSOR'S Manufacture of PRODUCT. In their
manufacture of PRODUCT, LICENSOR and LICENSEE agree to be bound by the
specifications set forth in Schedule "D" attached hereto.
11. Breach, Cure and Termination.
11.1 LICENSOR'S Right to Terminate Upon Notice. This
AGREEMENT may be terminated upon thirty (30) days written notice by LICENSOR
to LICENSEE in the following events, provided that during the thirty (30) day
period, LICENSEE fails to cure the breach.
(i) LICENSEE manufactures and/or products,
advertises, promotes, markets, sells, or otherwise distributes any of
LICENSOR'S PRODUCTS not covered by this AGREEMENT;
(ii) LICENSEE becomes subject to any voluntary or
involuntary order of any governmental agency or court involving the recall of
any of the CONSUMER PRODUCTS and/or INDUSTRIAL PRODUCTS;
(iii) LICENSEE Takes any action in connection with
the manufacture and/or production, advertising, promotion, marketing, selling
or other distribution of CONSUMER PRODUCTS or INDUSTRIAL PRODUCTS which
damages or reflects adversely upon the LICENSOR or the PROPERTIES
(iv) LICENSEE breaches any of the provisions of this
AGREEMENT relating to the requirement that the CONSUMER PRODUCTS or PRODUCTS
if applicable conform to the specifications set forth in Schedule D;
(v) LICENSEE fails to make timely payment of
royalty/license fees when due;
(vi) As to worldwide rights of LICENSEE, fails to
satisfy contingencies or make minimum sales requirements set forth in
Paragraph 3.7;
(vii) LICENSEE arranges for the manufacture and/or
production of CONSUMER PRODUCTS and/or INDUSTRIAL PRODUCTS by third parties
not approved in writing by LICENSOR, or assigns, transfers, sublicenses or
otherwise encumbers this AGREEMENT or any of its rights hereunder without the
consent of LICENSOR which consent shall not be unreasonably withheld;
(viii) LICENSEE fails to maintain liability insurance
as required by the provisions of this AGREEMENT.
(ix) LICENSEE fails to make shipment of CONSUMER
PRODUCTS and/or INDUSTRIAL PRODUCTS in amounts necessary to fulfill all
orders;
(x) LICENSEE fails to commence sale, shipment, and
distribution of any CONSUMER PRODUCTS or INDUSTRIAL PRODUCTS in accordance
with the terms of this AGREEMENT;
(xi) LICENSEE fails to sell, ship, and distribute on
a timely basis CONSUMER PRODUCTS and/ or INDUSTRIAL PRODUCTS for any three
consecutive month period;
(xii) LICENSEE fails to make timely submission to the
account statements when due;
(xiii) A petition in bankruptcy, whether voluntary or
involuntary, is filed against LICENSEE or LICENSEE is adjudicated a bankrupt
or insolvent, or makes an assignment for the benefit of creditors, or an
arrangement pursuant to any bankruptcy law, or if the LICENSEE discontinues
its business or if a receiver is appointed for the LICENSEE or LICENSEE'S
business and such receiver is not discharged within thirty (30) days of such
appointment;
(xiv) LICENSEE commits a breach of any material
provision of this AGREEMENT not specified in Paragraph 11.1 above.
As to sub-paragraphs ii, iii, iv, viii, x, xiii and xiv "cure" shall
be defined as reasonable, timely and bona fide steps by the LICENSEE to begin
to cure the breach within the thirty (30) day cure period.
LICENSEE agrees that during the period necessary to cure a breach of
the provision of this AGREEMENT regarding insurance, it will cease to
manufacture CONSUMER PRODUCTS and/or PRODUCT until the breach is cured.
LICENSOR agrees that during that same period all provisions of this AGREEMENT
which mandate production and/or sale of CONSUMER PRODUCT and/or PRODUCT shall
be tolled.
11.2 LICENSEE'S Right to Terminate Upon Notice. This
AGREEMENT may be terminated upon thirty (30) days written notice by LICENSEE
to LICENSOR in the following events, provided that during the thirty (30) day
period, LICENSOR fails to cure the breach.
(i) LICENSOR becomes subject to any voluntary or
involuntary order of any governmental agency or court involving the recall of
any of the INDUSTRIAL PRODUCTS;
(ii) LICENSOR takes any action in connection with the
manufacture and/or production, advertising, promotion, marketing, selling or
other distribution of INDUSTRIAL PRODUCTS which damages or reflects adversely
upon the LICENSEE or the PROPERTIES;
(iii) LICENSOR breaches any of the provisions of this
AGREEMENT relating to the requirement that INDUSTRIAL PRODUCTS conform to the
specifications set forth in Schedule D;
(iv) LICENSOR fails to make timely payment of
royalty/license fees when due;
(v) LICENSOR arranges for the manufacture and/or
production of INDUSTRIAL PRODUCTS by third parties not approved in writing by
LICENSEE, or assigns, transfers sublicenses or otherwise encumbers this
AGREEMENT or any of its rights hereunder without the consent of LICENSEE which
consent shall not be unreasonably withheld;
(vi) LICENSOR fails to maintain liability insurance
as required by the provisions of this AGREEMENT.
(vii) LICENSOR fails to make shipment of INDUSTRIAL
PRODUCTS in amounts necessary to fulfill all orders;
(viii) LICENSOR fails to commence sale, shipment, and
distribution of INDUSTRIAL PRODUCTS in accordance with the terms of this
AGREEMENT;
(ix) LICENSOR fails to sell, ship, and distribute on
a timely basis INDUSTRIAL PRODUCTS for any three consecutive month period;
(x) LICENSOR fails to make timely submission of the
account statements when due;
(xi) A petition in bankruptcy, whether voluntary or
involuntary, is filed against LICENSOR or LICENSOR is adjudicated a bankrupt
or insolvent, or makes an assignment for the benefit of creditors, or an
arrangement pursuant to any bankruptcy law, or if the LICENSOR discontinues
its business or if a receiver is appointed for the LICENSOR or LICENSOR'S
business and such receiver is not discharged within thirty (30) days of such
appointment;
(xii) LICENSOR commits a breach of any material
provision of this AGREEMENT not specified in Paragraph 11.2 above.
As to sub-paragraphs i, ii, iii, vi, ix, xiii and xiii "cure" shall
be defined as reasonable, timely and bona fide steps by the LICENSEE to begin
to cure the breed within the thirty day cure period.
LICENSOR agrees that during the period necessary to cure a breach of
the provision of this AGREEMENT regarding insurance, it will cease to
manufacture INDUSTRIAL PRODUCT and/or PRODUCT until the breach is cured.
LICENSEE agrees that during that same period all provisions of this AGREEMENT
which mandate production and/or sale of INDUSTRIAL PRODUCT and/or PRODUCT
shall be tolled.
11.3 Additional LICENSEE Termination Rights. LICENSEE
shall have the right to immediately terminate this AGREEMENT by giving written
notice to the LICENSOR if the LICENSOR does any of the following:
(i) LICENSEE offers for sale, sells, advertises,
promotes, ships, distributes and/or uses in any way the PROPERTIES or CONSUMER
PRODUCT;
(ii) LICENSEE Breaches any of the representations or
warranties provided in this AGREEMENT; or,
(iii) LICENSOR or INVENTORS fails to provide LICENSEE
with all the information, records, accounts and other information regarding
their prior efforts to market, sell, distribute, manufacture or otherwise
exploit the PROPERTIES;
(iv) Three (3) or more times during a twelve (12)
month period, fails to make timely payment of the royalty fee when due;
(v) Fails to make timely submission of accounting
statements when due.
Upon termination by LICENSEE, as stated herein LICENSOR shall be
liable to LICENSEE for all actual, reasonable and consequential damages
suffered by LICENSEE from such breach and termination in addition to any other
remedies afforded in by-laws or pursuant to this AGREEMENT.
12. Force Majeure. In the event that there is default or
delay in performance of the terms of this AGREEMENT and if such default or
delay is caused by fire, flood, labor dispute, strike, war, governmental
restrictions or other event beyond the reasonable control of the respective
parties, then the time of such performance shall be extended for the period of
such force majeure.
13. Post Termination and Expiration Rights and Obligations.
13.1 Upon termination of this AGREEMENT, notwithstanding
anything to be contrary herein, all royalty/license fees shall become
immediately due and payable.
13.2 After termination the LICENSEE may sell CONSUMER
PRODUCTS and/or INDUSTRIAL PRODUCTS which are on hand or in the process of
manufacture at the time notice of termination is received upon the expiration
of the Term of this AGREEMENT for a period not to exceed sixty (60) days after
termination provided that:
(i) such PRODUCTS conform to the Specifications;
(ii) the royalty/license fees with respect to such
sixty (60) day period are paid on the fifth (5th) day of the month following
such sixty (60) day period; and
(iii) appropriate statements regarding details of the
sales are furnished to LICENSOR for the sixty (60) day period promptly
together with the royalty/license fees payment required by (ii) above; and
(iv) within twenty (20) days of such termination or
expiration, LICENSEE delivers to LICENSOR the details of the quantity of
CONSUMER PRODUCTS and/or INDUSTRIAL PRODUCTS in inventory or in the process of
manufacture.
13.3 At the end of the aforesaid sixty day period LICENSOR
will purchase at LICENSEE's sole option any or all of the following material
which LICENSEE has on hand at the time of termination at a price equal to the
cost thereof to LICENSEE:
(i) all inventory of PRODUCTS;
(ii) any amount of work in progress inventory, or
components used in the manufacture of the PRODUCTS, or promotional packaging
materials; and
(iii) any promotional and packaging materials.
13.4 After termination of this AGREEMENT, the PROPERTIES
and all LICENSE RIGHTS granted to the LICENSEE shall forthwith revert to the
LICENSOR and the LICENSEE shall refrain from further use of the PROPERTIES.
13.5 The LICENSEE acknowledges that its failure to cease
the manufacture, offering for sale, sale, advertising, promotion, shipment,
and distribution of the PRODUCTS or use in any way of the PROPERTIES at the
termination or expiration of this AGREEMENT will result in immediate and
irreparable damage to the LICENSOR and to the rights of any subsequent
licensee of the LICENSOR. The LICENSEE acknowledges and admits that there is
no adequate remedy at law for failure to cease such activities and the
LICENSEE agrees that in the event of such failure, the LICENSOR shall be
entitled to equitable relief by way of injunctive relief and such other relief
as a court of competent jurisdiction may deem just and proper.
14. Indemnification. LICENSOR shall indemnify, defend and
hold harmless LICENSEE, its affiliated companies and their respective
officers, directors, shareholders, employees, licensees, agents, successors
and assigns from and against any and all liabilities and expenses whatsoever,
including without limitation, claims, damages, judgements, awards,
settlements, investigations, costs and attorneys fees and disbursements which
any of them may incur or become obligated to pay arising out of or resulting
from (i) the manufacture of the PRODUCT, including, without limitation, any
product liability claims; (ii) The infringement of the proprietary rights of
any third party with respect to any of the PRODUCTS or any of LICENSOR'S
Properties in the course of the exercise by LICENSEE of the rights granted to
it under this AGREEMENT; or (iii) The breach by LICENSOR of any of its
representations, warranties, covenants, obligations, agreements or duties
under this AGREEMENT.
LICENSEE shall indemnify, defend and hold harmless LICENSOR, its
affiliated companies and their respective officers, directors, shareholders,
employees, licensees, agents, successors and assigns from and against any and
all liabilities and expenses whatsoever, including, without limitation,
claims, damages, judgements, awards, settlements, investigations, costs and
attorneys fees and disbursements which any of them may incur or become
obligated to pay arising out of or resulting from (i) the manufacture of the
PRODUCT, including, without limitation, any product liability claims.
15. INSURANCE. For as long as either PARTY continues to
manufacture the PRODUCT, that PARTY shall maintain, at its own expense, a
blanket liability insurance coverage, including, but not limited to, coverage
for advertising, manufacture, design and product liability for the PRODUCTS
manufactured in an amount not less than $2,000,000.00 per occurrence. The
only party to this AGREEMENT, shall be named as an additional insured on such
policy. All such insurance shall be placed with one or more carriers which
are rated "A" or better by A.M. Best rating service. Each PARTY shall deliver
to the other party evidence of (i) the procurement of such insurance in form
reasonably acceptable to the other party within fifteen (15) days of such
procurement and (ii) maintenance of such insurance in form reasonably
acceptable to the other party at such times as are requested by that party.
Each PARTY shall be provided no less than thirty (30) days prior written
notice from the other party or its insurer of cancellation of such policy.
16. Noncomeptition. The INVENTORS or LICENSOR, its
directors officers, principals and agents shall not be involved, directly or
indirectly, in the ownership, management or operation of any enterprise or
provide services to any enterprise that competes with LICENSEE'S exploitation
of the PROPERTIES of CONSUMER PRODUCT during the term of this AGREEMENT.
During the term of this AGREEMENT, LICENSEE will not be interested
in the manufacturing, sales or distribution of the PRODUCTS, except pursuant
to this AGREEMENT, or in the manufacturing, sale or distribution of any
product similar to the PRODUCTS. For a period of one year following
termination of this AGREEMENT, LICENSEE will not be interested in the
manufacturing, sale or distribution of any product similar to the PRODUCTS
covered herein.
17. Injunction. Each party acknowledges that (i) a breach
by either party of its obligations contained herein will result in irreparable
and continuing damage to other party for which there will be no adequate
remedy at law. Accordingly, in the event of any such breach, the LICENSEE
shall be entitled to injunctive relief and/or an order for specific
performance, with respect to such beach. The beaching party shall not oppose
such relief on the grounds that there is an adequate remedy at law, and such
right shall be cumulative and in addition to any other remedies at law or in
equity (including monetary damages) which the LICENSEE may have upon any such
breach.
18. Consents and Approvals. Whatever approval or consent
of either party is required pursuant to this AGREEMENT such approval shall not
be unreasonably withheld. In addition it specifically agreed that the
withholding of such consents and approvals shall be based solely on
commercially reasonable criteria. It is further agreed that should the party
whose consent or approval is required not respond within ten (10) business
days of the receipt of the request for approval or consent; such approval or
consent shall be deemed given.
19. Independent Contractor. No arty nor any of its
officers, employees, agents or representatives is an employee or agent of any
other party for any purpose whatsoever. Rather, each party is and shall at
all times remain an independent contractor with respect to the other party.
Except as expressly provided in this AGREEMENT, LICENSEE may not in any way
control the manner in which LICENSOR manufactures the PRODUCT. Except as
expressly provided in this AGREEMENT, LICENSOR may not in any way control the
manner in which LICENSEE exercises the rights granted under this AGREEMENT.
20. Further Actions. The parties agree to execute such
additional documents and to perform all such other and further acts as may be
necessary or desirable to carry out the purposes and intents of this
AGREEMENT.
21. Notices. Any communication to be given to any party to
this AGREEMENT shall be in writing and deemed delivered when it is mailed by
first class airmail, postage prepaid, certified, return receipt requested, and
addressed to the party at its address set forth below; or , two (2) days after
such is sent via an overnight delivery service (such as Federal Express or DHL
Delivery), deliver charges, prepaid, and addressed to the party at its address
set forth below:
If to LICENSOR or Inventors:
A2000 USA, Inc.
371 East 22nd Street
Patterson, New Jersey 07514
If to LICENSEE:
INTERACTIVE MARKETING TECHNOLOGY, INC.
c/o Frank Leo
44 Minebrook Road
Colts Neck, New Jersey 07722
With a copy to:
PIRO, ZINNA, CIFELLI & PARIS, P.C.
c/o Angelo Cifelli, Jr., Esq.
360 Passaic Avenue
Nutley, New Jersey 07110
22. Arbitration. Any dispute relating to this AGREEMENT
shall be resolved by arbitration to be administered by the American
Arbitration Association in
23. No Waiver. The failure of either party to enforce any
provision of this AGREEMENT or to terminate this AGREEMENT for breach of any
covenant or condition herein shall not operate thereafter as a waiver of that
provision or any other provision of this AGREEMENT.
24. Severability. Any provision of this AGREEMENT which in
any way contravenes or is unenforceable under any law of any nation or a state
in which this AGREEMENT is effective shall be deemed separable and not a party
of this AGREEMENT and to the extent void; however, all remaining provisions of
this AGREEMENT shall be valid and in full force and effect.
25. Sole Understanding. This AGREEMENT sets forth the
entire AGREEMENT and understanding between the parties as to the subject
matter described herein, and supersedes all prior discussions, correspondence,
negotiations and agreements between them relating hereto.
26. Construction. This AGREEMENT shall not be construed
against the party preparing it, and shall be construed without regard to the
identity of the person who drafted it or the party who caused it to be drafted
and shall be construed as if all parties had jointly prepared this AGREEMENT
and it shall be deemed their joint work product, and each and every provision
of this AGREEMENT shall be construed as though all of the parties hereto
participated equally in the drafting hereof; and any uncertainty or ambiguity
shall not be interpreted against any one party. As a result of the foregoing,
any rule of construction that a document is to be construed against the
drafting party shall not be applicable.
27. Governing Law. This AGREEMENT shall be governed in all
respects, including validity, interpretation, effect and enforcement, by the
laws of the State of New Jersey and applicable Federal Laws.
28. Counterparts. This AGREEMENT may be executed in
counterparts, each of which, when so executed and delivered, shall be an
original; however, such counterparts together shall constitute but one and the
same AGREEMENT.
29. Headings. The headings used herein are for convenience
of reference only and do not constitute a party of this AGREEMENT and shall
not be deemed to limit or effect any of the provisions hereof.
30. Survival. The provisions of Sections 5, 14, 15, 16, 17
and 20 shall survive the termination of this AGREEMENT.
31. Inurement. This AGREEMENT shall inure to the benefit
of, and be binding upon the parties hereto, their heirs, executors,
transferees, legal representatives and successors.
32. Consecutive Pages. This AGREEMENT contains fourteen
(14) consecutively number pages, including all the signature pages, each page
of which has been read and reviewed by all the parties hereto.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be
executed, effective as of the day and year first written above.
LICENSOR:
A2000 USA, INC.
/s/ John Miller /s/ Robert Miller
________________ By: ________________________________
Secretary President
LICENSEE:
INTERACTIVE MARKETING TECHNOLOGY, INC.
/s/ Frank Leo
_________________ By:___________________________________
Secretary President
Read, acknowledged, understood and agreed to individually by
/s/ Robert Miller
__________________________________
Robert Miller
/s/ John Miller
__________________________________
John Miller
FIRST AMENDED AND RESTATED OPERATING AGREEMENT
OF
THE PLUMBER'S SECRET, L.L.C.
(as Successor to the ABC Limited Liability Company)
This First Amended and Restated Operating Agreement ("Agreement") of The
Plumber's Secret, L.L.C. ("Company") is made as of the 16th day of March 1999,
by and between Vila Enterprises LLC, a Delaware limited liability company with
a mailing address of PO Box 749, Marstons Mills, MA 02648 ("Vila
Enterprises"), and IMT's Plumber, Inc., a New Jersey corporation with a
mailing address of 45 Mine Brook Road, Colts Neck, NJ 07222 ("IMT"). (Vila
Enterprises and IMT shall hereinafter collectively be referred to as the
"Members.")
RECITALS
WHEREAS as "to be formed" corporation, Vila Co., the predecessor to Vila
Enterprises, and DEF Corporation, a corporation "to be formed" by Interactive
Marketing Technology, Inc., the predecessor to IMT, executed the Operating
Agreement of the ABC Limited Liability Company (the "Original Agreement.")
which contemplated the formation of a limited liability company in the state
of New Jersey;
WHEREAS the Original Agreement contemplated the formation of entities to
be members of the Company;
WHEREAS the parties desire to memorialize the formation and the naming of
the various entities and to amend and restate the Original Agreement to
clarify various aspects of the business relationship between the Members and
the Company; and,
WHEREAS, the parties desire to (i) produce, market and sell throughout
the world to Surge Plunge 2000 (the "Product") as more fully described in
Exhibit A (collectively, the "Business"),
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
FORMATION; PURPOSE; POWERS
1.1 Formation. The Members have formed the Company as a limited
liability company under the laws of the State of New Jersey. The Certificate
of Formation for the Company was filed with the New Jersey Secretary of State
on February 4, 1999. The Members hereby agree that the Company shall be
governed by, and the rights, duties and labilities of the Members shall be as
provided in, the New Jersey Limited Liability Company Act (the "Act") and this
Agreement.
1.2 Purpose. The Company is formed for the purpose of (i)
engaging in the Business, (ii) engaging in any lawful business, act or
activity related thereto as the Members may determine from time to time and
for which a limited liability company may be organized under the Act, and
(iii) engaging in any and all active necessary, convenient, desirable or
incidental to the foregoing.
1.3 Powers. Except as otherwise limited in this Agreement, the
Company shall have the power and authority to do any and all acts necessary,
appropriate, proper, advisable, convenient or incidental to or for the
furtherance of the purpose set forth in Section 1.2 hereof.
ARTICLE II
MANAGEMENT OF THE COMPANY
2.1 Decisions.
(a) The Members agree as follows with respect to decisions
to be made by the Members on behalf of the Company;
(i) All day-to-day management decisions relating to
the Business shall be made by IMT. If IMT is unavailable at the time that any
day-to-day management decision is required to be made by the Members, the such
day-to-day management decision shall be made by Vila Enterprises.
(ii) Except as provided below, all other major
decisions shall be made by mutual agreement of the Members.
(iii) The Members intend to produce an infomercial.
IMT shall have sole approval over decisions regarding the buying of time on
television and the distribution and marketing of the Product. Vila
Enterprises shall have the right to approve in advance the creative content,
the budget and the look of the infomercial. Vila Enterprises shall also have
the right to approve the packaging of the Product. All of the foregoing
approvals shall be exercised reasonably.
(b) There shall not be a "manager" (within the meaning of
the Act) of the Company.
2.2 Contracts; Insurance.
(a) IMT has heretofore entered into an agreement with A2000
USA, Inc. as a "Licensor" and Robert and John Miller as "Inventors" dated ___
day of June, 1998 (the "License Agreement"). IMT hereby assigns to the
Company the License Agreement, a copy of which is attached hereto as Exhibit
B.
(b) IMT shall obtain from the Licensor and Investors the
necessary rights to permit the assignment, including, but not limited to the
representations and warranties and indemnities inuring to the benefit of the
Company and its Members.
(c) All other contracts in connection with the Business may
be signed by IMT on behalf of the Company.
(d) It shall be IMT's responsibility to obtain and
maintain, at the expense of the Company, for as long as the Company has its
Business, a blanket liability insurance coverage including, but not limited to
coverage for advertising, manufacturing, and design and product liability for
the Product in an amount not less than $1,000,000 per claim or cause of
action. Each of the Members hereto as well as Bob Vila and B.V.T.V Inc. shall
be named as additional insureds with the Company. All such insurance shall be
placed with one or more carriers which are rated A or better by A.M. Best
rating service. IMT shall deliver to Vila Enterprises evidence of (i) the
procurement of such insurance in form reasonably acceptable to Vila
Enterprises within fifteen (15) days of such procurement, and (ii) maintenance
of such insurance in form reasonable acceptable to Vila Enterprises at such
time as requested by Vila Enterprises.
2.3 Meetings. The Members shall not meet for any purpose,
except at such times as the Members from time to time shall determine in their
sole discretion.
ARTICLE III
INTERESTS; CONTRIBUTIONS; BANK ACCOUNTS; ACCOUNTING
3.1 Capitalization and Ownership.
(a) The initial capitalization of the Company will be Two
Hundred Thousand Dollars ($200,000) (the "Capitalization"). One Hundred
Thousand Twenty Dollars ($100,020) of the Capitalization shall be contributed
by IMT and Ninety-nine Thousand Nine Hundred Eighty Dollars ($99,980) of the
Capitalization shall be contributed by Vila Enterprises. Each Member's
contribution shall be referred to herein as its "Contribution" and each
Member's proportionate share shall be referred to as its "Percentage
Interest."
(b) Ownership in the Company shall be divided as follows:
IMT - 50.01% and Vila Enterprises - 49.99%. Notwithstanding the foregoing,
all decisions not otherwise reserved for a particular Member under this
Agreement shall be made upon mutual consent of the Members.
3.2 Loan. IMT shall loan to the Company up to $150,000 to start
and operate the Business before the Business generates sufficient cash flow of
its own to cover "Costs and Expenses of Operation", as listed in Exhibit C. A
separate funding agreement shall be entered into by the parties that will
provide in part that any monies advanced under the funding agreement shall be
treated as a loan to the Company to be paid back after the Company has
generated $500,000 in aggregate Net Cash Available (as defined in Section
5.2(a) hereof.)
3.3 Company Bank Account. The bank account for the Company
shall be opened by IMT in the name of the Company at First Union.
3.4 Company Accountants. The accountants for the Company shall
be Moore Stephens unless and until other accountants are selected by the
Members.
ARTICLE IV
CERTAIN COVENANTS OF THE MEMBERS
4.1 Other Business of the Members. Each of the Members shall
devote such time and effort as may be necessary or advisable for the
furtherance of the Business. Each of the Members or their affiliates shall
have the right to engage in other business activities during the continuation
of this Agreement; provided, however, that during the term of this Agreement,
the Members, their affiliates, and their respective directors, officers,
principals and agents, shall not be involved directly or indirectly in the
ownership, management or operation of any enterprise or provide services to
any enterprise that could reasonably be viewed as competing with the Product.
4.2 Right to Abandon. In the event that sales from the Product
during the one-year period commencing on the date the first informercial airs
on television (the "First Year") generate less than Two Million Dollars
($2,000,000) in gross sales of the Product, Vila Enterprises shall have the
option, in its sole and absolute discretion, to withdraw as a Member of the
Company and to disassociate Bob Vila's name, likeness and image from the
Product with no further obligation or interest in the Company whatsoever after
the date of such disassociation. In such event, however, Vile-Enterprises
shall execute the necessary documentation to return its ownership interest to
the Company.
ARTICLE V
CAPITAL ACCOUNTS; ALLOCATIONS; CERTAIN TAX MATTERS
5.1 Capital Accounts. A separate capital account (a "Capital
Account") shall be maintained for each Member in accordance with the
applicable regulations under Section 704 of the Internal Revenue Code of 1986,
as amended (the "Code") ("Regulations"), including, specifically Regulation
Section 1.704-1(b)(2)(iv).
5.2 Distributions.
(a) Distributions of Cash from Operations. Net Cash
Available for distribution to Members shall equal Net Cash Flow (ad defined in
Section 6.1 hereof) less amounts paid for the Management Fee, the Artists
Agency Fee and the Promotional Fee. Net Cash Available, excepting only
reasonable reserves, shall be distributed among the Members at least once in
each calendar year as follows:
(i) First, fifty percent (50%) to IMT and fifty
percent (50%) to Vila Enterprises until such time as the Company generates
$500,000 in aggregate Net Cash Available.
(ii) Second, after such time as the Company has
generated $500,000 in aggregate Net Cash Available, Net Cash Available shall
be distributed to IMT until such time as the principal and interest on the
loan by IMT to the Company (collectively, "Loan Payments"), referred to in
Section 3.2 of the Agreement, together with the amount of IMT's unreturned
Contribution plus a return thereon computed at the same rate as interest on
the IMT loan referred to in Section 3.2 hereof have been paid in full. The
Loan Payments and payments on and of IMT's Contribution shall be made pro rata
in accordance with the relative loan balance and contribution amounts.
(iii) Third, the balance of the Net Cash Available
for distribution shall be distributed fifty percent (50%) to IMT and fifty
percent (50%) to Vila Enterprises.
(b) Distributions Upon Dissolution or Termination. Upon
Dissolution or termination of the Company, and after payment or adequate
provision for the debts and obligations of the Company, the remaining assets,
if any, of the Company shall be sold and the proceeds of such sale shall be
distributed and applied in the following priority:
(i) First, to fund reserves for liabilities not then
due and owing and for contingent liabilities to the extend deemed appropriate,
provided that upon the expiration of such period of time as the Members shall
deem advisable, the balance of such reserves remaining after payment of such
contingencies shall be distributed in the manner hereinafter set forth in this
Section 5:2(b);
(ii) Second, to the members in accordance with and in
proportion to the positive balance in each Member's Capital Account, after
adjustment thereof for all distributions and allocations of net income and net
losses from all prior transactions and from all operations of the Company.
5.3 Allocation of Net Income. Net Income of the Company for any
year shall be allocated as follows and in the following order of priority;
(a) First, to the Members, equally up to an amount equal to
the excess, if any, of (i) net loss previously charged to the Members pursuant
to Section 5.4(c) hereof, over (ii) net income previously credited to the
Members pursuant to this Section 5.3(a);
(b) Second, any remaining balance of such net income, shall
be divided equally between the members.
5.4 Allocation of Net Loss. Net loss of the Company shall be
allocated as follows and in the following order of priority;
(a) First, the first $100,000 of net loss shall be
allocated to Vila Enterprises;
(b) Second, to each of the Members in equal shares of such
net loss to the extent of the excess, if any, of (A) net income previously
allocated to the Members pursuant to section 5.3 (b) over (B) net loss
previously allocated to the Members pursuant to this Section 5.4(b);
(c) Third, any remaining balance of such net loss shall be
divided equally between the Members.
5.5 Taxable Net Income and Losses.
Net income and net loss shall be as determined for reporting on the
Company's federal income tax return. All items of depreciation, gain, loss,
deduction or credit shall be determined in accordance with the Code and,
except to the extent otherwise required by the code, allocated to and among
the Members in the same percentages in which the Members share in net income
and net loss. Notwithstanding the foregoing, if the book value of property
(as such term is used in Regulation Section 1.704-1(b)(2)(iv)(g)). differs
from its tax basis, then for the purposes of this Agreement, all
determinations of income, gain, loss and deduction shall be determined with
respect to such book value in accordance with the rules of Regulation Section
1.704-1(b)(2).
5.6 Section 704(c)Allocations.
In accordance with Code Section 704(c) and the Regulations thereunder,
depreciation, amortization, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial book value, such allocation to be
made by the Tax Matters Partner in accordance with the so-called "traditional
method" as noted under Regulation Section 1.704-3(b)(1).
ARTICLE VI
FEES, SEPARATE PROFIT AND OWNERSHIP LISTS
6.1 Services Rendered/Management Fee. Other than as provided in
this Article VI, no Member shall be compensated for any services rendered to
the Company except that IMT shall be entitled to a management fee equal to ten
percent (10%) of "Net Cash Flow" (the "Management Fee") in consideration of
its management of the Company. Net Cash Flow of the Company with respect to
any fiscal year shall be the amount by which (a) gross cash receipts of the
Company from all sources whatsoever other than proceeds attributable to
Contributions of the Members or the proceeds of loans or other indebtedness of
the Company exceed (b) all cash expenditures for operating costs and expenses
of the Company, excluding from such expenditures repayments of the principal
of loans and other indebtedness of the Company and those fees, costs and
expenses otherwise set forth in this Article VI.
6.2 Agency Commission. In accordance with a letter agreement
entered into with the Artists Agency, the Company shall pay to the Artists
Agency as an agency commission fee equal to nine percent (9%) of Net Cash
Flows ("Artist agency Fee').
6.3 No Separate Profit. The Members specifically agree that no
separate profit shall be made by either Member or its directors, officers,
principals or companies directly or indirectly affiliated with the Member, its
director, officers or principals on exploitation of the Product, including but
not limited to coverage, fees or Product costs, or any other similar fees
charged in running the Business, all of which shall belong to Company.
6.4 Ownership of Lists. Notwithstanding the foregoing, any
lists developed from the Business shall become the property of IMT provided
that IMT shall account ans pay to Vila Enterprises 50% of any and all net
income derived therefrom, after payment of agents' commission s as more
particularly set forth in a separate agreement.
6.5 B.V.T.V. Inc. Services Agreement. The Company is hereby
authorized to enter into separate agreements for services, including an
agreement with B.V.T.V, Inc. ("B.V.T.V'") for advertising and promoting the
product in the Infomercial and in the packaging. Pursuant to the agreement
with B.V.T.V, B.V.T.V, shall be paid a one-time fee of One Hundred Thousand
Dollars (4100,000) plus expenses incurred in connection with the production of
the infomercial (collectively, the "Promotional Fee").
ARTICLE VII
TAX MATTERS PARTNER
The "Tax Matters Partner" (as such term is defined in Section 6231
(a)(7) of the Code) of the Company shall be IMT. The Tax Matters Partner
shall not take any action whatsoever as such Tax Matters Partner unless such
action shall have been mutually approved by the Members. The Company's
accountant shall prepare tax returns and other required financial information
for the Company. The Company's taxable year shall be the same as its Fiscal
Year.
ARTICLE VIII
LIABILITY; EXCULPATION; INDEMNIFICATION
8.1 Liability of Members. A Member shall not be personally
liable for any debt, obligation or other liability of the Company, whether
arising in contact, tort, or otherwise.
8.2 Exculpation.
(a) For purposes of this Agreement, "Covered Person" shall
mean any Member, and any officer, director, shareholder, partner, member,
employee or agent of a Member, any affiliate thereof, and any authorized agent
or representative of the Company or any person who was a Member or is or was
designated by the Members to serve in any capacity at the request of the
Company.
(b) No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Covered Person in good faith on
behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement, except
that a Covered Person shall be liable (i) for any sch loss, damage or claim
incurred by reason of such Covered Person's gross negligence or willful
misconduct, which, in either case, was material to such loss, damage or claim
or (ii) if such Covered Person personally gained in fact a financial or other
advantage to which such Covered Person was not legally entitled.
8.3 Indemnification.
(a) To the fullest extent permitted by applicable law, the
Company shall indemnify any Covered Person who was or is made a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding brought by or against the Company or otherwise, whether
civil, criminal, administrative or investigative, including, without
limitation, an action by or in the right of the Company to procure a judgement
in its favor, by reason of the fact that such Covered Person is or was in any
capacity at the request of the Company for any other partnership, corporation,
joint venture, trust, employee benefit plan or other enterprise, against all
expenses, including attorneys' fees and disbursements, judgements, fines and
amounts paid in settlement actually and reasonably incurred by such Covered
Person in connection with such action, suit or proceeding. Notwithstanding
the foregoing, no indemnification shall be provided to or on behalf of any
Covered Person if and to the extent that a judgement or other final
adjudication adverse to such Covered Person established that (i) the acts of
such Covered Person constituted a gross negligence or willful misconduct
which, in either case, was material to such judgement or other final
adjudication or (ii) such Covered Person personally gained in fact a financial
profit or other advantage to which such Covered Person was not legally
entitled.
(b) Any indemnification under subsection (a) of this
Section (unless ordered by a court) shall be made by the Company only as
authorized in the specific instance upon a determination that the
indemnification of the Covered Person is proper under the circumstances
because he or she has met the applicable standard of conduct set forth in
section 8.2 hereof. Such determination shall be made by the Members, or if
the Members so direct, by independent legal counsel in a written opinion. Any
indemnification payment shall be payable only out of and to the extent of the
Company's assets, and no Covered Person shall have any liability therefor.
(c) The Company shall, in the discretion of the Members,
pay expenses incurred in defending any action, suit or proceeding described in
subsection (a) above (including reasonable legal fees and expenses of counsel
and other experts) in advance of the final disposition of such action, suit or
proceeding upon receipt by the Company of an undertaking, in form satisfactory
to the Members or the Company's legal counsel, to repay such amount if it
shall be determined that the Covered Person is not entitled to be indemnified
as authorized by Section (a) above.
(d) The indemnification provided by this Section 8.3 shall
not be deemed exclusive of any other rights to indemnification to which those
sculling indemnification may be entitled under any agreement or otherwise.
The rights to indemnification and reimbursement or advancement of expenses
provided by, or granted, pursuant to, this Section 8.3 shall continue as to a
Covered person who has ceased to be a Member, officer, employee or agent (or
other person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
ARTICLE IX
TRANSFERS
9.1 General Restrictions. No Member shall have the, right to
assign its rights or obligations under this Agreement to any other Person
without the prior written consent of the other Member.
9.2 Permitted Assignments Without Consent of Other Members.
Notwithstanding the provisions of Section 9.1 hereof, without the
consent of the other Members, a Member may assign its rights and obligations
hereunder to any entity under common control with such assigning Member or
assign to any Person such assigning Member's right to receive revenues
hereunder.
ARTICLE X
LIQUIDATION, WINDING-UP AND TERMINATION
10.1 Liquidation and Winding-Up. Upon the dissolution and
termination of the Company, the following shall be accomplished;
(a) The Business of the Company shall be wound up, and the
assets and properties of the Company shall be liquidated by the members as
promptly as possible, but in an orderly and businesslike manner so as not to
involve undue sacrifice.
(b) The assets of the Company shall be distributed to the
Members in accordance with Section 5.2(b) of this Agreement.
(c) A Certificate of Cancellation shall be filed with the
Secretary of State of the state of New Jersey by the Members.
10.2 Termination. The Company shall terminate when all property
and assets owned by the Company shall have been disposed of, and the net sale
proceeds, after payment of or provision for the amounts specified in Section
5.2(b), and any assets to be distributed in-kind shall have been distributed
to the Members as provided herein.
ARTICLE XI
GENERAL PROVISIONS
11.1 Arbitration. Any dispute, controversy or claim arising
under, out of, in connection with, or in relation to this Agreement or the
Business of the Company hereunder, or the making or validity of this
Agreement, or its interpretation, or any breach thereof, shall be determined
and settled by arbitration in New York City before a single neutral
arbitrator, in accordance with the rules then obtaining of the American
Arbitration Association. Any award or judgement rendered by the arbitrators
shall be final and conclusive upon the parties and a judgement thereon may be
entered int the highest court of any forum, State or Federal, having
jurisdiction.
11.2 Notices. Wherever provision is made in this Agreement for
the giving of any notice, such notice shall be in writing and shall be
delivered personally or sent by registered or certified mail (postage prepaid)
or facsimile transmission, in each case to the addresses or facsimile
telephone numbers therefor set forth in the preamble to this Agreement, and if
to the Company to:
c/o Kaufmann, Feiner, Yamin, Gilding & Robbins
777 Third Avenue - 24th Floor
New York, NY 10017
Attn: Ronald E. Feiner, Esq.
Fax: (212) 755-0431
With a copies to:
c/o Piro, Zinna, Cifelli & Pads
360 Passaic Avenue
Nutley, NJ 07110-2787
Attn: James M. Pior, Esq.
Fax: (937) 661-5157
or to such other address in any such case, as any party hereto shall
have last designated by notice to the other party. Notice shall be deemed to
have been given on receipt (evidenced, in the case of facsimile transmission
by a confirmation notice). Any Member may change its address for notices by
giving written notice of such change to the other Members and the Company.
11.3 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties with respect tot he subject
matter hereof. This Agreement or the Articles of Organization may be amended
from time to time only on the mutual approval of the Members.
11.4 No Waivers. No delay on the part of any party in
exercising any right hereunder shall operate as a waiver thereof, nor shall
any waiver, express or implied, by any party of any right hereunder or of any
failure to perform or breach hereof by any other party constitute or be deemed
a waiver of any other right hereunder or of any other failure to perform or
breach hereof by the same or any other Member; whether of a similar or
dissimilar nature thereof.
11.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
agreements made and entirely performed therein.
11.6 Further Assurances. Each of the Members hereby agrees, at
the request of any other Member, to execute and deliver all such other and
additional instruments and documents and to do such other acts and things as
may be reasonably necessary or appropriate to carry out the intent and
purposes of this Agreement.
11.7 No Third-Party Rights. This Agreement is made solely and
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns (subject to the express provisions hereof
relating to successors and assigns), and is not intended to confer any
benefits upon, or create any rights in favor of, any Person other than the
parties hereto.
11.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement shall
be binding when one or more counterparts, individually or taken together, bear
the signatures of each of the parties reflected herein as signatories.
11.9 Headings. The headings in this Agreement are solely for
convenience of reference and shall not affect the interpretation or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed, by their respective duly authorized officers or partners, of the
date first above written.
Signatures on Next Page
VILA ENTERPRISES LLC
/s/ Robert J. Vila
______________________ ____________________________
Witness Robert J. Vila, Manager
IMT'S PLUMBER, INC.
/s/ Frank Leo
______________________ _______________________
Witness , President
THE PLUMBER'S SECRET LLC
45 Mine Brook Road
Colts Neck, New Jersey 07222
Telephone (732) 936-9660
Facsimile (732) 936-9665
March 11, 1999
B.V.T.V. Inc.
I.D. # 04-3062874
f/s/o Bob Vila
P.O. Box 749
Marstons Mills, MA 02648
Gentlemen:
This letter, when executed by B.V.T.V., Inc. ("Supplier") and by The
Plumber's Secret LLC ("PS"), shall constitute a valid and binding agreement
between Supplier and PS with respect to Supplier's providing to PS the
services of Bob Vila ("Artist") to advertise and promote The Plumber's Secret
("Products/Services") upon the terms and conditions hereinafter set forth.
1. TERM. The initial term of this agreement shall commence as
of the date hereof and continue for as long as Vila Enterprises is an owner of
PS (the "Term").
2. SERVICES
(a) Production of Advertising Materials. PS shall have the
right to utilize Artist's services, and Supplier shall cause Artist to render
said services in and in connection with the production of advertising
materials for PS.
(b) Professional Rendition of Services. Supplier agrees to
cause Artist to (i) attend and participate in the production sessions as
requested by PS, and (ii) render services in connection with the production of
the commercials in a first-class, competent and artistic manner as needed
and/or directed by PS subject to Artist's prior commitments. It is understood
that Artist shall not be required to narrate or deliver any copy that violates
Artist's professional status or that Artist believes is factually inaccurate.
3. OWNERSHIP, USE AND TERRITORY.
(a) Supplier acknowledges that neither Supplier nor Artist
will claim any right, title or interest in or to the Materials produced
hereunder, or any elements thereof, or in or to any of PS's trademarks,
service marks, trade names or copyrights. The name, likeness, etc. of Bob
Vila shall remain the property of Supplier.
(b) PS shall have the full and complete right, during the
Term, to broadcast, use, reproduce, publish, copyright and/or exhibit the
Materials, and any versions or revisions thereof, in any and all forms of
audio-visual media, now in existence or hereafter devised, including but not
limited to national and spot television broadcasting, cable, closed circuit
television, industrial usage, electronic media and Internet, anywhere in the
world (the "Territory"), with such frequency and at such times as PC shall
elect.
4. COMPENSATION. In fully consideration for Supplier's and
Artist's performance of the provisions of this Agreement and for all of the
rights and options granted by Supplier and Artist hereunder, PS agrees to pay
and Supplier agrees to accept for the length of the Term:
(a) The sum of $100,000 payable upon execution.
(b) If travel is necessary, PS agrees to provide (i)
first-class round-trip airfare to and from the location where a session is
held for two (2) people, (ii) first-class hotel accommodations for two people,
single room (to include room and room tax only), (iii) local ground
transportation and (iv) actual expenses for two (2) people, which sums shall
not be credited against the fee.
5. USE OF NAME, LIKENESS AND TESTIMONIAL.
(a) During the Term hereof, PS shall have the right to use
and permit the use of Artist's name, likeness, performance, photograph, voice,
biography and/or endorsement in the Products/Services and for purposes of
advertising, promotion and publicity.
(b) Artist warrants and represents that Artist is now and
shall remain a user of Client's Products/Services and that the statements
Artist has made or will make during the Term concerning the Products/Services
reflect Artist's true and honest opinion of and experience with the
Products/Services.
6. RIGHT TO ENTER AGREEMENT. Supplier and Artist have fully
power and authority to enter into this Agreement and to perform all of the
obligations hereunder without violating the legal or equitable rights of any
third party.
7. CITIZENSHIP AND IMMIGRATION. Artist is legally permitted to
perform the services provided hereunder and PS's use of such services shall
not violate any laws or regulations pertaining to the employment of
individuals. At PS's request, Supplier shall provide PS with all necessary
work permits or certification or proof of citizenship.
8. EXECUTION OF SUPPLEMENTAL AGREEMENT. Supplier shall cause
Artist to execute and deliver to PS the inducement letter attached hereto as
Exhibit A and this Agreement shall have no force and effect unless such
inducement letter is signed and delivered by Artist.
9. PAY OR PLAY. PS shall be under no obligation to cause the
Materials produced hereunder to be used or broadcast or to use Artist's
services, it being understood that the sole obligation of PS and Client is to
make the payments required by this Agreement.
10. INDEMNITY.
(a) PS shall defend, indemnify and hold Supplier and Artist
harmless from and against any liability, loss, damage or expense (including
reasonable legal fees and disbursements) arising out of the breach by PS of
this Agreement or as a result of any representation, warranty, information or
materials prepared or supplied by PS concerning advertising or use of PS's
products and/or services or out ofthe production or exhibition of the same, or
any product liability actions brought against Supplier and/or Artist or for any
other claim arising out of the Products/Services produced hereunder.
(b) Supplier and Artist shall defend, indemnify and hold PS
and Client and their respective directors, officers, employees, licensees,
agents and assigns harmless from and against any liability, loss, damage or
expense (including reasonable legal fees and disbursements) arising out of any
breach by Supplier or Artist of any of Supplier's or Artist's representations,
warranties or obligations hereunder.
(c) Each indemnification is conditioned upon prompt notice
to the indemnifying party of any claim, suit or proceeding made or brought
against the indemnified party which the indemnified party believes to be
within the coverage of this paragraph. The indemnifying party shall have the
right to defend such claim, suit or proceeding at its expense with counsel of
its own (or its insurer's) choosing. The parties shall cooperate with each
other in the defense of such claim, suit or proceeding. The provisions of
this paragraph shall survive the termination or expiration of the Term of this
Agreement.
11. INDEPENDENT CONTRACTOR. Supplier's and Artist's respective
status hereunder is that of independent contractors and not employees of PS.
Supplier and Artist shall not be entitled to any benefits from PS including,
without limitation, worker's compensation, disability benefits, health,
medical or life insurance programs, pension, profit sharing or other
employer-benefit plans or programs maintained by PS. Supplier shall discharge
all of Supplier's obligations imposed by any federal state or local law,
regulation or order now or hereafter in force, including but not limited to
the filing of all returns and reports required and the payment of assessments,
taxes, contributions and other sums required by Supplier, and the Supplier
agrees to and does hereby indemnify and hold PS harmless from and against all
claims and demands resulting from Supplier's failure to comply with the
provisions of this paragraph.
12. NO WAIVER. Failure by either party to exercise rights
granted to it herein upon the occurrence of any of the contingencies set forth
in this Agreement shall not in any event constitute a waiver of such rights
upon the recurrence of such contingencies.
13. NOTICES. Service of any notice under this Agreement shall
be deemed to have been sufficiently given if in writing and delivered
personally or mailed by certified mail or registered mail or transmitted by
facsimile to Supplier at the address stated above (facsimile number
508-428-3179) with a copy concurrently to Ronald E. Feiner P.C. (facsimile
number 212-755-0431); and if notice is to be given to PS, then by Supplier
forwarding same in the manner herein set forth to P.S. at the address and fax
number stated above. Any notice so delivered, mailed or transmitted shall be
deemed to have been given on the day it is delivered personally, mailed or
transmitted. Either party, by like notice, may designate a different address
to which notices shall thereafter be sent.
14. CAPTIONS. The captions in this Agreement are inserted
solely for purposes of facilitation easy reference and shall not be construed
in any way as a part of the text, or as altering the substantive provisions
of this Agreement.
15. CHOICE OF LAW. This Agreement shall be construed in
accordance with the substantive laws of the State of New York, excluding its
conflicts of laws rules. Suppliers agrees and consents that jurisdiction and
venue of all matters relating to this Agreement shall be vested exclusively in
the federal, state and local courts within the State of New York unless
otherwise superseded by the arbitration provisions contained in any applicable
collective bargaining agreement to which PS is a signatory.
16. SEVERABILITY. If any provision of this Agreement is
determined to be invalid by a court of competent jurisdiction, such
determination shall in no way affect the validity or enforceability of any
other provision herein.
17. USE OF COUNSEL. Supplier represents that Supplier and
Artist have consulted with legal counsel of their own choosing in connection
with the negotiation and execution of this Agreement or have knowingly chosen
not to do so.
18. ENTIRE UNDERSTANDING. This Agreement constitutes the entire
understanding between Supplier and PS with respect to the subject matter of
this Agreement and supersedes all prior agreements. No waiver, modification
or addition to this Agreement shall be valid unless in writing and signed by
the parties hereto.
Supplier's signature at the end hereof, together with PS's shall
constitute this a binding agreement between the parties hereto.
Very truly yours,
THE PLUMBER'S SECRET LLC
/s/ Frank Leo
By: ________________________
Frank Leo
Member
Title: _______________________
3/16/99
Date: _______________________
AGREED AND ACCEPTED;
B.V.T.V. INC.
ID#04-3062874
/s/ Robert Vila
By: ______________________
President
Title: ____________________
March 24, 1999
Date: ____________________
<PAGE>
As of ___________________
The Plumber's Secret LLP
45 Mine Brook Road
Colts Neck, NJ 07227
Gentlemen/Ladies:
Reference is made to an agreement dated as of March 11, between
B.V.T.V. Inc. and The Plumber's Secret LLC ("PS") for the services of Bob
Vila (the "Agreement").
In order to induce PS to enter into said Agreement with B.V.T.V.
Inc. and in order to induce the execution thereof, I hereby warrant and
represent that I have read said Agreement ant that I agree to perform all of
the obligations and undertakings required of me thereunder and to abide by all
the restrictions contained therein as they are applicable to me, regardless of
whether B.V.T.V. continues to be my employer in connection with such services.
I acknowledge that payments by PS to B.V.T.V. Inc. as set forth in
said Agreement shall fully discharge PS's obligations to me.
Very truly yours,
/s/ Robert Vila
______________________________
Bob Vila
STOCK ACQUISITION AND EXCHANGE
AGREEMENT
This Agreement is made as of April 15, 2000 by an among the following
Parties:
E-Pawn.com, Inc., a Nevada corporation, formerly called Wasatch
International Corp., with its principal office in Coral Springs, Florida and
referred to herein as "EPWN", and,
Interactive Marketing Technology, Inc., a Nevada corporation, with its
principal office in Hollywood, California and referred to herein as "IAMK",
and,
Sandy Lang, a resident of California, who is a shareholder of IAMK and
the President and CEO of IAMK.
RECITALS
WHEREAS, EPWN is a diversified internet services company with
multi-dimensional capabilities as a portal, e-commerce software and program
developer, and with online auction and marketing expertise which desires to
expand its business interests through strategic alliances and investment; and
WHEREAS, IAMK is a diversified marketing and product development company
with expertise in all forms of direct and retail marketing; and
WHEREAS, IAMK and EPWN desire to promote the strategic alliance between
EPWN and IAMK by EPWN acquiring 51% of the issued and outstanding shares of
IAMK as provided herein; and,
WHEREAS, Sandy Lang has agreed to exchange certain of his shares of IAMK
for shares of EPWN as part of the acquisition by EPWN of the 51% interest in
IAMK and to continue to serve as President of IAMK; and
WHEREAS, the Board of Directors of EPWN has approved this transaction and
has performed its due diligence to confirm the intent of EPWN to close the
transaction, and it will recommend acceptance of the transaction.
NOW, THEREFORE, in consideration for the promises and actions to be taken
as provided herein, EPWN, IAMK and Sandy Lang individually, agree as follows:
Page 1 of 5
<PAGE>
1. Basic Transaction. EPWN will acquire in the approximately 51% of the
issued and outstanding shares of common stock of IAMK as of the Closing Date,
on a fully diluted basis. The transaction will be structured in a way
acceptable to the Boards of each company which will allow for the most tax
efficient basis for the shareholders and the companies. The transaction will
include the following terms and conditions:
a. EPWN will exchange 3,000,000 shares of its common stock with
Sandy Lang for 3,000,000 shares of IAMK held by him. Sandy Lang will have the
benefits of ownership of the EPWN shares which attach and accrue as of the
date of this Agreement.
b. EPWN will acquire shares of common stock of IAMK from IAMK
sufficient to provide to EPWN a 51% interest in all of the IAMK common stock
on a fully diluted basis. The total shares which represent 51% of the issued
and outstanding shall include the shares acquire by EPWN in 1.a, above. The
difference between the 51% number and the 3,000,000 share block shall be the
"IAMK Block."
c. For purposes of determining the exact number of shares in
this transaction, the Parties agree that IAMK will issue 20,000,000 shares of
its common restricted shares to EPWN in exchange for 5,000,000 shares of EPWN
common restricted shares. Value shall be determined concerning the share
exchange by using the average closing bid price for the past ten trading days
immediately preceding the date of this agreement.
2. Corporate Governance. The post-closing board of IAMK shall be
reorganized to provide that directors nominated by EPWN shareholders shall
form the majority of the directors.
3. Representations and Warranties. EPWN and IAMK represent and warrant
the following;
a. Each Party is familiar with the business and affairs of the
other Party, and each Party has had the opportunity to ask any question of the
officers of the other that the Party deems necessary for the purpose of making
an informed investment recommendation.
b. Each Party understands and has conducted an independent
review evaluating the merits and risks of an investment in the shares of EPWN
and IAMK, including the tax consequences of the exchange and investment.
c. Each Party understands that no agency has rendered any finding
relating to the fairness of the transaction.
Page 2 of 5
<PAGE>
4. Registration Rights. The shares of EWPN and IAMK and the
transactions in the shares offered for the exchange provided in this Agreement
will be registered with the Securities & Exchange Commission and the
appropriate blue sky authority. EPWN and IAMK will use its best efforts to
effect the registration under the Securities Act. All costs will be paid by
the issuer, but any selling costs will be borne by the selling shareholder.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:
a. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement. IAMK agrees to
submit the acquisition to a vote of its shareholders at a Special Shareholder
Meeting set as soon as practicable.
b. EPWN will cause its shareholders to vote to approve the
transaction by consent and through a proxy statement filed for action as soon
as practicable.
c. EPWN and IAMK will not take any action or enter into any
transaction outside the ordinary course of business for the respective
company.
d. EPWN and IAMK shall grant to representatives of each
company full access at all reasonable times to their books, records, property
and personnel for the purpose of concluding a due diligence review.
e. None of the Parties will solicit, initiate, or encourage
the submission of any proposal or offer from any person not a party to this
Agreement relating to the acquisition and exchange contemplated by this
Agreement.
f. No Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the
written approval of the other Party.
6. Conditions to Obligation to Close. The obligation of any Party to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
a. The representations and warranties contained in a
definitive agreement entered into between the parties that shall be submitted
in the proxy statement shall be true and correct in all material respects as
of the Closing.
b. All actions have been taken by each Party in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect
the transactions are satisfactory in form and substance to the Parties.
Page 3 of 5
<PAGE>
c. The Board of Directors of IAMK and EPWN and their respective
counsel have approved the transaction.
d. Each company shall be current in its filings with the
Securities & Exchange Commission and other regulatory agencies.
7. Closing. The closing of the transactions contemplated by this
Agreement shall take place in the offices of in Coral Springs, Florida or such
other place as the Parties may agree. The closing shall occur as soon a
practicable after the approval of the transaction by the shareholders of both
companies.
8. Post Closing Covenants. At or immediately following the Closing,
EPWN will take the following action to support IAMK and its management and
shareholders;
a. Within 90 days of the Closing, EPWN and IAMK shall make
arrangements to have up to $5,000,000 of new capital funded to IAMK of which
$1,000,000 shall be funded upon closing. EPWN shall make available to IAMK
1,000,000 shares of it's common stock for funding purposes,
b. EPWN shall issue to each shareholder of IAMK a stock
dividend of two shares of Ubuynetwork.com, Inc. stock for each share of IAMK
that is held as of April 18, 2000. These Ubuynetwork.com, Inc. shares will
have the exact same registration rights as all other shares of
Ubuynetwork.com.
c. IAMK shall enter into a employment agreement with Sandy
Lang which will provide compensation and incentives if IAMK and
Ubuynetwork.com achieves the growth and profitability goals set in the
company's business plans. This agreement shall be mutually agreed to by Mr.
Lang and the Board of EPWN.
d. Sandy Lang will be named the Chairman of Ubuynetwork.com,
Inc. which will be responsible for the overall marketing support to the Ubuy
group of companies.
e. In the event that it is the decision of the board of IAMK
and/or EPWN, to reverse or forward split the shares of IAMK, all warrants and
option of IAMK will be split at the same ratio as the common stock and the
____ price of the IAMK options/warrants will be adjusted at the same ratio as
the common stock split.
9. Expenses and Brokers. Each Party shall bear his or its own costs and
fees incurred in connection with this Agreement. No Party has an obligation
to pay any broker or finder in connection with the transaction associated with
he exchange of shares.
Page 4 of 5
<PAGE>
10. ________________________. This agreement _________ the _______
agreement among the Parties and Supersedes ____ _____ _______ ____________ and
_________________ oral or written, to the extent that they may relate to the
________ of the Agreement. The Parties agree that each will provide _______
_______________ ________ ___________ agreements which may be necessary to
close the transaction contemplated and __________ ______ ________ at the
Closing and after the Closing.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date ____ written above,
E-PAWN.COM, INC. INTERACTIVE MARKETING TECHNOLOGY, INC.
/s/ E. Libowitz /s/ Sandy Lang
By: _________________________ By: ______________________________
Eb Libowitz, Chairman Sandy Lang, President
/s/ Sandy Lang
_________________________________
Sandy Lang, Individually
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615
March 29, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Re: Interactive Marketing Technology, Inc.
Dear Sirs:
We have reviewed Item 3 -Change in and disagreements with accountants, of the
Form 10-SB. We are in agreement with the statements presented therein so far
as statements pertain to Crouch, Bierwolf & Chisholm.
Sincerely,
/s/ Crouch, Bierwolf & Chisholm
Crouch, Bierwolf & Chisholm
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