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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
ENTERPRISES SOLUTIONS, INC.
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(Name of small business issuer in its Charter)
Nevada 88-0232148
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
15 Raven Road, Canton, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 617-510-3898
781-828-5183
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ___ No _X_
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer had no revenues for the fiscal year ended December 31, 1999.
As of March 30, 2000, the aggregate market value of the Common Stock held by
non-affiliates (based upon the last reported price on the bid-ask average on the
OTC Bulletin Board) on March 30, 2000) was approximately $167,031,887. As of
March 30, 2000, there were 7,783,925 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Enterprises Solutions, Inc., a Nevada corporation (the "Company"), was
incorporated on September 16, 1987 under the name of Sedgewicke Business
Alliance, Inc. On December 21, 1994, the Company changed its name to American
Casinos International, Inc. ("ACII") and from that time focused its operations
on the gaming industry. In particular, ACII operated a casino in Venezuela. In
mid-1997, the Venezuelan government effectively shut down all casinos pending
relicensing under a much changed and restrictive law. Although the new law had
not yet been interpreted or clearly defined as to how it would ultimately be
implemented, ACII's casino could not reopen as it had previously operated.
In August, 1998, the Company capitalized $779,897 in shareholder loans
and accrued payroll expenses. The shareholders to whom the loan and payroll were
owed sold their shares to new investors and were allowed to keep the gaming
equipment in Venezuela as compensation for any and all liabilities associated
with the discontinued gaming operations. The Company also terminated a certain
licensing agreement and the rights to offer Internet bingo and casino games,
which the Company no longer considered part of its corporate business focus.
On September 1, 1999, the Company changed its name to Enterprises
Solutions, Inc. and, after being introduced to the merits of an engineering plan
to provide security products and a bondable (insurable) architecture for the
Internet, began to focus its endeavors on developing a suite of products and
solutions for Internet security.
Recent Developments
Securities and Exchange Commission Proceedings
Suspension in Trading of Common Stock. On March 30, 2000, the
Securities and Exchange Commission ("Commission") announced the temporary
suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934
(the "Exchange Act"), of trading of the Common Stock of the Company at 9:30 a.m.
on March 30, 2000 and terminating at 11:59 p.m. on April 12, 2000. The
Commission announced that it temporarily suspended trading in the securities of
the Company because of questions concerning the accuracy and completeness of
assertions made by the Company in its filings with the Commission, in its recent
press releases, and on its Internet website, including questions about the
identity of persons in control of the operations and management of the Company.
The Commission cautioned broker-dealers, shareholders, and prospective
purchasers that they should carefully consider the foregoing information along
with all other currently available information and any information subsequently
issued by the Company. Further, the Commisssion advised that brokers and dealers
should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange
Act, at the termination of the trading suspension, no quotation may be entered
unless and until they have strictly complied with all of the provisions of the
rule. If any broker or dealer has any questions as to whether or not he has
complied with the rule, he should not enter any quotation but immediately
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contact the staff of the Commission in Washington, D.C. If any broker or dealer
is uncertain as to what is required by Rule 15c2-11, he should refrain from
entering quotations relating to Enterprises Solutions, Inc. securities until
such time as he has familiarized himself with the rule and is certain that all
of its provisions have been met. If any broker or dealer enters any quotation
that is in violation of the rule, the Commission stated that it would consider
the need for prompt enforcement action.
Court Filing for Temporary Restraining Order and Other Relief. On April
6, 2000, the Commission filed in the U.S. District Court for the Southern
District of New York (1) a motion for Temporary Restraining Order, Order to Show
Cause and Orders Granting Other Relief against the Company and Herbert S.
Cannon, Defendants; (2) a Verified Complaint against the Company, Herbert S.
Cannon and Dr. John A. Solomon, Defendants, and Rowen House Ltd. and Montville
Ltd., Relief Defendants; and (3) and an Ex Parte Application For Order Freezing
Assets, Order To Show Cause Re Preliminary Injunction and Other Relief against
the Company, Herbert S. Cannon, Rowen House, Ltd. and Montville, Ltd.
The Commission's application for Temporary Restraining Order requests a
Court order (i) freezing certain assets of relief defendants, Rowen House, Ltd
and Montville, Ltd., (ii) requiring these relief defendants to show cause why
preliminary injunctive relief should not be entered, and (iii) enjoining all
defendants and relief defendants from destroying evidence. As to the
Commission's application to freeze assets of the relief defendants, it requested
an immediate freeze, with specified provisos, on (i) all monies held in any
account name maintained at the brokerage firm of Wall Street Equities, in the
name of, for the benefit of, or over which account authority is held by relief
defendants Rowen House, Ltd. and Montville, Ltd., to the extent such funds
represent the proceeds from the sale of shares of stock of the Company, and (ii)
any shares of the Company's Stock contained in such account. The Commission also
applied for expedited discovery for an order that all defendants and relief
defendants, and specified persons associated with them, be restrained and
enjoined from destroying, mutilating, concealing, altering, or disposing of, in
any manner, an document (as defined in the Commission's application). The Court
granted the Commission's application for the above Temporary Restraining Order
on April 6, 2000.
The Commission's Verified Complaint alleged securities fraud in
violation of the Exchange Act Section 10(b) and Rule 10b-5 promulgated
thereunder and requested relief enjoining the Company, Herbert S. Cannon and Dr.
John A. Solomon from violating the Exchange Act, the aforementioned Section
10(b) and Rule 10b-5; ordering Herbert S. Cannon to account for and disgorge,
with interest, all profits he has realized from any sales of the Company's
Common Stock, including sales through brokerage firms over which he had any
direct or indirect control, including those of relief defendants, Rowen House,
Ltd. and Montville, Ltd.; imposing a constructive trust upon any and all
proceeds from the Company's Common Stock sales being held in the brokerage
accounts of relief defendants Rowen House, Ltd. and Montville, Ltd.; and
ordering Herbert S. Cannon and Dr. John A. Solomon to pay appropriate civil
penalties.
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The Commission's Ex Parte Aplication for Order Freezing Assets, Order
To Show Cause Re Preliminary Injunction and Other Relief supports its
application for an ex parte order (i) freezing certain assets of the relief
defendants Rowen House, Ltd. and Montville, Ltd., (ii) requiring these relief
defendants to show cause why preliminary injunctive relief should not be
entered, (iii) requiring these relief defendants to each provide certain asset
identifying information, and (iv) enjoining all defendants and relief defendants
from destroying evidence.
The Company is working actively to attempt to settle the above
proceedings with the Commission.
Termination of Teaming Agreement with Gemini Computers, Incorporated
On April 10, 2000, Gemini Computers, Incorporated ("Gemini") advised
the Company that, given the above-described actions by the Commission, it was
terminating the Teaming Agreement in effect between the parties effective
immediately and it had no intent to move forward with any transaction involving
the acquisition of Gemini by the Company.
Offshore Financing
On April 2, 2000, the Company executed a Deed Poll under the laws of
Switzerland in favor of the holders of notes issued pursuant thereto (the "Deed
Poll"). Upon application of Waltrag A.G., in exchange for a purchase price of
$5,000,000, the Company issued to Waltrag A.G., the initial holder, $5,000,000
principal amount of its Convertible Notes pursuant to the Deed Poll (the
"Notes", such term to include the additional note issued as described below). As
set forth in the Deed Poll, each Note is in registered form and in the minimum
denomination of $250,000 each, bearing a coupon interest rate of 10% nominal
interest per annum, payable monthly in arrears, and maturing April 2, 2001. The
Notes are convertible at the option of the holder into Common Stock of the
Company, on or before April 2, 2001, at a conversion price of 90% of the 22 day
moving average price of the Company's Common Stock, backdated from the time of
the conversion request. The Company received payment of the $5,000,000 purchase
price for the above Notes on April 4, 2000.
In connection with the issuance of the Notes, as a commission without
payment of additional consideration, Waltrag A.G. was also issued an additional
Note in the principal amount of $250,000, the terms of which Note are the same
as those of the $5,000,000 principal amount of Notes referred to above, and
warrants to purchase 50,000 shares of Common Stock of the Company on or before
April 2, 2003, exercisable at a price equal to 120% of the conversion price of
the Notes calculated as of April 2, 2000.
Under the Deed Poll, the holder(s) of the Notes and Warrants have
piggyback registration rights for the underlying shares of Common Stock with
respect to any registration statement under the Securities Act of 1933 filed by
the Company at any time. The Company has no right to redeem any of the Notes
prior to their maturity date of April 2, 2001. The holder of Notes may, within
28 days of first becoming entitled to voting shares of the Company such that any
further aquisition of voting shares by the holder, require the Company within a
21 day period to redeem the outstanding Notes. The holder of the Notes has the
express right to demand the redemption of its Notes.
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The Company is not restricted in future financings by the provisions of
the Deed Poll.
The Deed Poll provides for a minimum subscription price by an applicant
of $100,000. Each holder of notes issued pursuant to the Deed Poll has the
benefit of, and is entitled to enforce the Deed Poll, whether or not such holder
is or is not a party to the Deed Poll. The Company agreed to establish and
maintain in New York, N.Y., a Register of the holders of notes issued pursuant
to the Deed Poll, and to determine amounts, if any, of withholding tax
applicable to any payment in respect to a note.
Description of Business
The Company's business is in the developmental stage. The Company has
one product under development that it is currently offering, its ESIGuard, a
secure virtual private network ("VPN") guard, which would provide a node to node
domain separating, gateway router. The defining characteristics of this premier
guard would be its ability to provide strong domain separation of communication
channels based upon an independently evaluated, high assurance multi-level
secure ("MLS") security kernel.
The Company's objective is to address what it perceives to be a lack of security
in the Internet applications by developing and providing high assurance security
computer networks and related products and services. Based upon its research,
the Company believes that none of the computer systems and software currently
being used for Internet transactions is adequately secure to business levels of
assurance. Based on independent, trusted third party assessment of the security
properties of its technology, the Company anticipates that its products will
afford the high assurance security levels necessary to support liability bonding
by business insurance carriers, and therefore provide the basis for growth in
electronic commerce over the Internet, particularly in Business-to-Business
(B2B) transactions, and enable Internet E-Commerce to reach critical mass.
The Company's management believes that the demand for trusted network systems
and products has grown significantly in recent years due to the dramatic
increase in the use of the Internet for electronic business transactions, and
its demonstrated vulnerability to attacks, evident by increasing incidents of
break-ins. Further, the Company management believes that, while the current
arsenal of security products may provide adequate defenses against specific
known vulnerabilities, improving the basic integrity of the network platforms
(workstations and servers) provides a more comprehensive and effective approach
to network security against all forms of attacks. To this end, the Company's
product line will concentrate on establishing high assurance platforms, or
enhancing of existing platforms, specifically workstations, such that high
levels of assurance in the security of the networking foundations can be
established, and the integrity of the composed networks sustained. By
establishing secure network foundations with verifiable security properties, the
Company believes that it can enable liability management for eBusiness over the
Internet.
The Company sees three potential market segments which it expects will
be interested in purchasing its trusted network products and related services:
infrastructure providers, corporate consumers and governments. The three main
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product areas which the Company plans to offer to these segments are: (1)
bondable hardware/software products that provide enhancements that extend the
basic platform architecture for a secure network infrastructure; (2) layered
software applications and network services built upon secure server platforms;
and (3) support for consulting and integrator services which provide hosted
services offered to customers.
The Company has commenced initial planning and development of a network
security architecture, which it plans to market under the Bondable Network
Architecture (BNA) product designation. The Company intends that this planned
family of trusted network server appliances and secure client workstations based
on its technology, would transparently integrate into the existing Internet
environment without modification either to the basic user applications or the
prevailing workstation environment. The Company's planned product line would
support bondable networks satisfying a wide range of E-Commerce business needs,
while preserving current investments in Internet technologies. In addition, the
Company believes that the demand for its products would give rise to a demand
for security related consulting, support and training services.
The Bondable Network Architecture would integrate a scalable number of high
assurance network components connected through existing media (both private and
public networks, such as the Internet) by reliably authenticated, trusted
sessions to compose secure virtual networks isolating the business processes.
The principle components of the BNA include the secure E-Commerce Workstations
and trusted eBusiness Servers.
The planned family of high assurance network servers, of which the ESIGuard is
the first, would host trusted network services which are required to support the
trusted architecture, as well as enterprise-specific value-laden applications.
In addition to the trusted ESIGuard, the Company plans to produce an high
assurance Certificate Authority (CA) server, a secure Web environment in the
form of a Web Server, and trusted, pervasive Directory Services (DS).
The Company's planned family of trusted workstation products are based
on an additional hardware/software component that would enhance the existing
platform operating system to extend the architecture ensuring the integrity of
the critical security services supported across the Bondable Network
Architecture. Assuming the availability of adequate financing, the Company
estimates time to market of six months for the first of its planned client
components.
Systex Inc.
The Company is negotiating with certain creditors of Sistex, Inc. for the
exclusive rights to license the "Assure" technology, which was created in
conjunction with the Novell's Trusted Network Architecture (R). The Company
plans to use this technology as an initial basis for expediting their technology
to market as a plug-in card to retrofit existing workstations.
Because the Company is still negotiating for the rights to license and develop
these technologies, it is possible that it will be unable to do so. However, the
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realization of the Bondable Network Architecture is not dependent on this
technology.
Research and Development Expenditures
The Company has made no expenditures the past year on research and
development.
Government Regulation
The Company plans to acquire technologies for use in developing its
products which would enable them to leverage the prior evaluations and evidences
of the technology based on international security criteria. In order to maintain
these government ratings, the Company will have to continuously update its
products with evaluations and ratings. As an example, the Company will be
required to maintain am ITSEC evaluation level of E4 or above assurance level
for marketing in Germany. In addition, the Company will have to establish an
adequate technical basis for providing digital signatures per statues in several
US states.
In order to import/export any of its high assurance products or any
equipment containing encryption technology, the Company will have to comply with
the relevant regulations then in effect which are promulgated by the various
world governments and US Department of State and/or Commerce.
Industry and Market for the Company's Products and Services
The Need for Business Level Assurances of Protection
The Company's management believes that as more and more businesses come
to rely on the Internet as a means of communicating and conducting transactions
with suppliers, customers and business partners, the need for secure, trusted
network products will become critical. The market analysis in the 1998 Ernst and
Young Special Report on Technology in Banking and Financial Services presents
technology spending trends on a global basis. The report focuses on E-Commerce,
and the survey findings indicate that global commerce has, in general,
recognized the importance of the direct e-commerce channel and exposes the need
for critical infrastructure - the, as yet, unsolved problems posed by today's
technologies. Of the 100 institutions surveyed in 26 countries most plan to
allocate significant resources to develop the information infrastructure
required to exploit e-commerce. Management believes that this indicates that the
Internet has come of age as a viable
According to the Gartner Group, "...through the year 2008, enterprises
will continue to evolve into extended enterprises, where business processes
encompass their partners, alliances and suppliers as well as their customers."
In these so-called "value networks" (Ernst & Young), enterprises will use
Internet-derived technology to extend their business processes.
The Company believes that businesses will continue to extend their
internal business processes to their external business partners, essentially
redefining process boundaries to include the Internet, web server and browsers.
This extranet technology will encompass all major businesses. But as stated by
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Forrester, "...the explosive growth of the Internet raises new dimensions of
risk, in the form of [attacks]...that exploit a system's communication
capabilities." The Company believes that this is equally true of extranets.
The Company believes that an "open" Internet means an "exposed"
Internet, where the user is not protected. The Gartner Group has also stated
that "As businesses expose their internal process to customers and suppliers,
today's security is being rendered ineffective. Firewalls have reached their
limit - taxed by the growing onslaught of invasive applications and aggressively
outbound users." As one analyst has suggested, "What do you do when there are no
perimeters? If you succeed in making your Web site easier to use, then everybody
is an insider."
Gartner further states "A new model is needed to save companies from
security's crippling complexity and to enable increased openness." To do this,
Gartner suggests that enterprises "...must adopt tools that add identity and
policy to the extranet while delegating control across the business." The
Company believes this to mean that the business community must establish
liability, accountability and interoperability uniformly across the entire
E-Commerce networking environment which is just as reliable as in the
pen-and-paper based business world. Further, the Company believes that the BNA
will enable these capabilities.
Market Analysis
The market trends in the Ernst and Young 1998 Special Report on
Technology indicate significant changes from previous years, with the area of
greatest change being Information Technology (IT) project spending. Projections
contained in the report indicate that such spending will be more than twice its
historical levels over the coming two to three years. This increase has been
largely driven by mandatory initiatives, such as the Year 2000 computer problem
and European Union Mandates. In 2001, these mandatory requirements are
anticipated to decline dramatically. The Company believes, however, as
apparently do the analysts, that these budgets will not be cut but rather
reallocated to other areas even over budgetary constraints. Management further
believes that, due to competitive demands, there will be a surge of new
e-commerce budget monies after 2001 resulting from these reallocations.
The Ernst & Young survey also indicated that stated growth in
e-commerce spending is far out-stripping that of spending for new technologies
as a whole. Respondents indicated that in 1998 they allocated twice as much of
their technology budgets for e-commerce as they allocated in 1997. New
technology budgets are projected to double from 1992 to 2001. Respondents also
indicated that by 2001, they plan to expend 14% of their new technology budgets
on e-commerce, alone. From this survey, the Company believes, as do the
analysts, that during the next five years, there will be allocations of the new
technology budgets for developing the information infrastructure for supporting
e-commerce which will take precedence over technology upgrades.
Respondents expect to see discretionary funding return to historical
levels (around 31%) by the Year 2000. Additionally, revenue growth through
e-commerce activities, viz., more content provider services, network service
providers, and direct sales channels, continues to be the primary focus of IT
discretionary spending and is projected to remain so for the next three to five
years.
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In view of the survey findings, there are three aspects to the
Company's products and marketing potential to be considered.
First, according to the survey, sharp increases in IT funding,
primarily attributable to mandatory projects such as Y2K compliance, with no
corresponding reductions after the Year 2000, coupled with increases in
discretionary funding projected for the Year 2000 and after, suggest that key
project activities, such as security ("the number one concern" according to
Gartner Group) and building of the information infrastructure are projected to
receive a major share of the IT budget.
Secondly, based on the survey predictions of the IT budgets dedicated
for e-commerce and the expressed interests in public key cryptography and
digital certificate systems, the Company believes that a trusted PKI security
service would be positioned to compete for a significant share of this funding.
Finally, increases in discretionary funding and in discretionary
project budgets will likely address security apart from e-commerce, focusing
strictly on corporate security requirements.
The Company believes analysts reports such as this Ernst & Young report, clearly
identify network security as a top concern of corporate IT departments. As such,
it believes that a comprehensive high assurance network architecture such as its
BNA will create a greater potential to capture the niche security market share
more rapidly when competing with the less comprehensive add-on security products
currently available. For example, it would not be necessary for a customer to
purchase a firewall virus protection and a certificate management system
separately when using a comprehensive high assurance network product such as the
Bonded Network Architecture. The Company believes that high assurance network
products should compete aggressively in the area over the next three to five
years. The Company also believes that as a potential basis for a new financial
services industry, i.e., network bonding and insuring of transactions, its
products would have a significant competitive advantage because of their
enabling of liability management for B2B transactions.
Competition
The market in which the Company plans to compete is that of bondable,
business-to-business network platforms and services. The Company is not aware
that any of the major network operating system providers currently is basing its
product offerings on high assurance technology.
The Company believes, however, that the development of its products and
related markets could accelerate the industry for high assurance products. This
would increase competition with the Company's planned products and services and
encourage other companies to enter the market. Many of these other companies may
be far larger and have greater resources than the Company, and could thus
achieve a competitive advantage over the Company in product development and
marketing in the long term.
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Employees
The Company currently has six employees, consisting of four engineers,
one salesperson and one office administrator. The Company plans to hire
additional employees, particularly engineers, to assist in the development of
its products.
ITEM 2. PROPERTIES
The Company's executive headquarters is located Southeast of Boston at
15 Raven Road, Canton, Massachusetts 02021. The Company's Security Systems
Solutions (S3) engineering and product development division and is located at 50
Ragsdale Drive, Suite 150, Monterey, California 93940. The Company has entered
into a lease for this facility which has a three year term commencing on
September 15, 1999 and expiring on September 14, 2002. The lease provides for a
base rent of $5,919 per month. Pursuant to the lease, the Company is also
responsible for 21.37% of (1) the operating expenses (estimated at $2,320 per
month for the first year and including real property and any public authority
taxes), (2) the services and utilities and (3) the Landlord's performance of
Tenant Company's Covenants (if applicable). The building is a two-story office
building of approximately 4,735 square feet. The Company believes that the
premises are adequately insured.
The Company's SSS division also has leased a corporate condominium
located at 24525 Outlook Drive, #26, Carmel, California, 93923. The lease is for
a period of one year commencing on September 8, 1999 and expiring on August 31,
2000 at a monthly rent of $2,250.
The Company's main operations center is located at 5061 North Dixie
Highway Boca Raton, Florida 33431. The offices at this location are leased under
a month-to-month arrangement at a monthly rental of $150.
ITEM 3. LEGAL PROCEEDINGS
See "Item 1. Description of Business" for a description of pending
proceedings with the Securities and Exchange Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company's securities trade on the OTC Bulletin Board and in the
over-the-counter market "pink sheets". The Company's trading symbol is "EPSO".
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions. The
following sets forth the range of high and low bid information for the quarterly
periods indicated as reported by the National Quotation Bureau:
High Low High Low
---- --- ---- ---
1997: 1st Quarter .21875 .0625 1998: 1st Quarter .50 .25
2nd Quarter .21875 .03 2nd Quarter 2.25 .125
3rd Quarter .05 .03 3rd Quarter 5 2
4th Quarter .5625 .04 4th Quarter 6.50 4.50
1999: 1st Quarter 11.25 6 2000: 1st Quarter 21.50 1.50
2nd Quarter 15.125 11
3rd Quarter 14 13.50
4th Quarter 6 1
The foregoing bid information has been adjusted for the stock dividend
which occurred in June 1999.
Holders
As of March 31, 2000, the number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name was approximately 72.
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Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, declaration of dividends will
be determined by the Board of Directors in light of conditions then existing,
including without limitation the Company's financial condition, capital
requirements and business condition.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Comparison of the Year Ended December 31, 1999 and 1998
Revenues decreased $328 (100%) to $0 in fiscal 1999 as compared to $328
in fiscal 1998. The decrease resulted from the fact that the Company
discontinued its prior operations and has not yet generated any revenues from
its planned Internet security business.
Selling, general and administrative expenses increased $1,379,968 to
$1,503,535 in fiscal 1999 from $125,567 in fiscal 1998. The net loss for fiscal
1999 increased $1,378,296 to $1,503,535 from a net loss in 1998 of $125,239 due
to the foregoing.
Liquidity and Capital Resources
The Company's working capital at April 4, 2000 was $5,000,000. The
Company's primary sources of working capital have been from the offshore
financing from Waltrag, A.G. referenced in Item 1, Recent Developments.
Currently, the Company's primary cash requirements include the ongoing
cost of the development of its new business plan and the costs of maintaining
its administrative expenses.
ITEM 7. FINANCIAL STATEMENTS
Financial statements of the Company meeting the requirements of Regulation S-B
are filed on the succeeding pages as listed below:
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ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PAGE NO.
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT 16
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets 17
Statements of Operations 18
Statements of Shareholders' (Deficit) 19
Statements of Cash Flows 20
Notes to the Consolidated Financial Statements 21-24
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Shareholders of
Enterprise Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Enterprise
Solutions, Inc., (A Development Stage Company) as of December 31, 1999 and 1998,
and the related consolidated statements of operations, shareholders' (deficit)
and cash flows for each of the two years in the period ended December 31, 1999.
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 audits 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
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 consolidated financial position of
Enterprise Solutions, Inc. as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Enterprise Solutions, Inc. will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has suffered recurring losses
from operations and, at December 31, 1999, had a working capital deficiency of
$471,179 and a shareholders' deficit of $471,179 that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
April 9, 2000
16
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Assets
Current assets
Cash $ 31,581 $ 38,974
---------- ----------
Total current assets 31,581 38,974
Loans and advances -- 125,000
---------- ----------
Total assets $ 31,581 $ 163,974
========== ==========
Liabilities and Shareholders' (Deficit)
Current liabilities
Accounts payable and accrued expenses $ 246,510 $ --
Demand loans 256,250 --
---------- ----------
Total current liabilities 502,760 --
---------- ----------
Commitments and contingencies
Shareholders' (deficit)
Preferred stock; $0.001 par value; 5,000,000 shares authorized;
148,500 and 100,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively 148 100
Common stock; $0.001 par value; 25,000,000 shares authorized;
4,309,954 and 3,443,340 shares issued and outstanding at
December 31, 1999 and 1998, respectively 4,310 3,444
Additional paid-in capital 2,786,646 1,969,178
(Less) subscription receivable -- (50,000)
Retained (deficit) (1,633,509) (1,633,509)
(Deficit) accumulated during the development stage (1,628,774) (125,239)
---------- ----------
Total shareholders' (deficit) equity (471,179) 163,974
---------- ----------
Total liabilities and shareholders' (deficit) $ 31,581 $ 163,974
========== ==========
</TABLE>
See accompanying notes.
17
<PAGE>
AMERICAN CORPORATE INVESTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Years Ended
December 31,
----------------------------
1999 1998
----------- ----------
Revenues $ -- $ 328
----------- ----------
Costs and expenses
Bad debt expense, net 727,617 --
Salaries, wages and taxes 122,355 --
Professional/consultants fees 387,739 16,821
Rent 46,664 --
Insurance 31,144 --
Telephone 10,374 --
Office expenses 30,450 5,024
Relocation expenses 48,474
Stock transfer and related expenses 11,049 3,722
Abandonment of licensing agreement -- 100,000
Travel and promotion 87,669 --
----------- ----------
Total costs and expenses 1,503,535 125,567
----------- ----------
Net (loss) $(1,503,535) $(125,239)
=========== ==========
Net (loss) per common share $ (0.40) $ (0.10)
=========== ==========
Weighted average common shares 3,714,010 1,278,071
=========== ==========
See accompanying notes.
18
<PAGE>
April 9, 2000
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Total
----------------------------------------------- Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital (Deficit) (Deficit)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 317,340 $ 318 -- $ -- $ 859,772 $(1,633,509) $ (773,419)
1998 Activity:
Preferred shares issued -- -- 100,000 100 99,900 -- 100,000
Common shares issued 2,084,000 2,084 -- -- 243,916 -- 246,000
Common shares issued
in stock split 1,042,000 1,042 -- -- (1,042) -- --
Capitalize shareholder
loans and accrued
payables -- -- -- -- 786,397 -- 786,397
(Less) underwriting
expenses -- -- -- -- (19,765) -- (19,765)
(Less) subscription
receivable -- -- -- -- (50,000) -- (50,000)
Net (loss) -- -- -- -- -- (125,239) (125,239)
----------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,443,340 3,444 100,000 100 1,919,178 (1,758,748) 163,974
1999 Activity:
Preferred shares issued -- -- 48,500 48 48,452 -- 48,500
Common shares issued 326,000 326 -- -- 802,174 -- 802,500
Common shares issued
in stock split 90,603 90 -- -- (90) -- --
Common shares issued
in cashless warrant
exercise 450,011 450 -- -- (450) -- --
Subscription receivable-
paid -- -- -- -- 50,000 -- 50,000
(Less) underwriting
expenses -- -- -- -- (32,618) -- (32,618)
Net (loss) -- -- -- -- -- (1,503,535) (1,503,535)
----------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,309,954 $ 4,310 148,500 $ 148 $ 2,786,646 $ (3,262,283) $ (471,179)
==============================================================================================
</TABLE>
See accompanying notes.
19
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Years Ended
December 31,
---------------------------
1999 1998
---------- -----------
Cash flows from operating activities
Net (loss) $(1,503,535) $ (125,239)
Adjustments to reconcile net (loss)
to net cash (used) by operating
activities
Bad debts 739,422 --
Operating assets and liabilities
Accounts payable and accrued expenses 246,510
---------- -----------
Net cash (used) by operating activities (517,603) (125,239)
---------- -----------
Cash flows from investing activities
Loans and advances (614,242) (125,000)
---------- -----------
Net cash (used) by investing activities (614,242) (125,000)
---------- -----------
Cash flows from financing activities
Demand loan proceeds 349,250 11,500
Loan repayments (93,000) --
Proceeds from issuance of shares
of common stock 802,500 246,000
Proceeds from issuance of shares
of preferred stock 48,500 100,000
Subscription receivable 50,000 (50,000)
Underwriting expenses (32,618) (19,765)
---------- -----------
Net cash provided by financing
activities 1,124,632 287,735
---------- -----------
Net (decrease) increase in cash (7,213) 37,496
Cash at beginning of year 38,794 1,478
---------- -----------
Cash at end of year $ 31,581 $ 38,974
========== ===========
Schedule of Non-Cash Financing
Transactions:
Additional paid-in capital upon
conversion of debt $ -- $ 786,397
========== ===========
See accompanying notes.
20
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. GENERAL
Enterprise Solutions, Inc. (ESI) (Company), a Nevada Corporation, together
with its wholly-owned subsidiary, plans to provide both government and
commercial enterprises with high assurance security technology.
The Company is in the development stage and currently has no revenue of a
continuing nature. It is management's plans to develop and provide high
assurance security computer networks and related products and services.
The accompanying financial statements include the consolidated accounts of
ESI and its wholly-owned subsidiary (a non-operating company with no assets
or liabilities.) All material intercompany balances and transactions have
been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
Assets, liabilities, revenues and expenses are recognized on the accrual
method of accounting for financial statement presentation and for federal
income tax purposes.
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.
Income Taxes
At December 31, 1999, the Company has net operating loss carry forwards of
approximately $1,7 million available to offset future taxable income which if
unused, expire through 2019. Therefore, a provision for income taxes has not
been provided.
Net Loss Per Common Share
Net loss per common share has been computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
3. GOING CONCERN
Currently, the Company has neither substantial revenues of a continuing
nature nor sufficient working capital to sustain its limited operations.
Management is planning to raise equity to pursue its intended plan of
21
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
operations. No assurance can be had that the Company will be successful in
raising additional funds or that any funding will be sufficient. The Company
has limited resources and has depended on outside financings. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
4. LOANS AND ADVANCES
The Company advanced $105,000 at December 31, 1999 to a company to develop an
Internet credit and clearing operation. At December 31, 1999 the advance was
considered worthless and was written off.
5. DEMAND LOANS
In 1999, the Company borrowed $349,250 from shareholders and others at no
interest, payable on demand, repaying $93,000 during 1999.
6. SHAREHOLDERS' (DEFICIT)
In 1999 and 1998 the Company issued 866,614 and 3,126,000 common shares,
respectively, in private placements, raising $1,048,500 in total.
In connection with certain of these offerings, the Company also issued,
during 1998, warrants to purchase 1,200,000 shares common stock at $3.00 per
share. In connection with the stock split declared in June 1999 these
warrants were adjusted. The new warrants are to purchase 1,800,000 shares of
common stock at $2.00 per share. The warrants expire in June 2003 and as of
December 31, 1999 none of the warrants had been exercised. During 1999
warrants were issued, in connection with certain common stock issuances, to
purchase 1,225,000 shares of common stock at $2.50 per common share, the
warrants had an expiration date of September 6, 2000. These warrants provided
the investors with a cashless exercise option where a reduced number of
common shares could be purchased with no additional cash payment. All of
these warrants were exercised, during 1999. In accordance with the cashless
exercise option, 811,680 shares of common stock were issued with no
additional proceeds being received by the Company.
The Company also issued to certain common shareholders 48,500 and 100,000
shares of preferred stock at $1.00 per share in 1999 and 1998, respectively.
In June 1998, the Company capitalized $786,397 of shareholders loan and
accrued payrolls as part of a transaction in which the shareholders to whom
these amounts were owed sold their entire interest in the company to new
shareholders. The Company's involvement in the exchange was to capitalize the
shareholders loans and accrued payrolls.
22
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
In March 1999, the Company amended its certificate of incorporation to change
its name from American Casinos International, Inc. (ACII), to alter the
authorized number of common shares to 25,000,000 shares, par value $.001, and
to authorize 5,000,000 preferred shares, par value $.001, with the Board of
Directors authorized to determine, among others, the series, etc. These
changes were made retroactively in these consolidated financial statements.
In June 1999, the Company declared a 50% common stock split which totaled
1,238,383 shares. This adjustment was reported in these consolidated
financial statements as if it had occurred in December 1997.
The Company's preferred stock is 8% cumulative and redeemable at the
Company's option at 100%. In 1999 and 1998, the Company issued 48,500 shares
and 100,000 shares, respectively, at $1.00 per share.
7. STOCK OPTION PLAN
The Company grants stock options for a fixed number of shares to members of
the Board of Directors with an exercise price equal to the fair market value
of the shares at the date of grant. The options are to expire two years after
the resignation of a Director who has served in that capacity at least one
year, unless otherwise modified by an action of a majority of the Board of
Directors. These options are for a term of three years. As of December 31,
1999 and 1998 no options had been issued or exercised.
8. COMMITMENTS AND CONTINGENCIES
The Company leases facilities and equipment in both Florida and California.
The term of these agreements varies from a month-to-month basis to a
five-year term. The facilities in Florida are leased on a month-to-month
basis, with a monthly rental cost of $150. The facilities in California are
leased for a 36-month term, expiring in September 2002, with a monthly rental
cost of $5,919. The Company is responsible for annual operating expenses,
services and utilities.
The minimum lease payments for all of the above facilities and equipment are
as follows:
Calendar Year Amount
------------- ------
2000 $93,486
2001 87,286
2002 45,891
2003 4,468
2004 4,130
23
<PAGE>
ENTERPRISE SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
9. SUBSEQUENT EVENT
On April 4, 2000, the Company received $5,000,000 from a financing
arrangement in Switzerland whereby the Company issued convertible notes with
interest at 10% per annum, due April 2, 2001. The notes are convertible at
the option of the holder into common stock of the Company, on or before April
2, 2001, at a defined conversion price. In connection with the financing, the
agent received a note in the amount of $250,000, the terms of which are the
same as those of the $5,000,000 principal amount of convertible notes. The
agent was also issued warrants to purchase 50,000 common shares on or before
April 2, 2003, at a price equal to 120% of the conversion price of the
convertible notes calculated as of April 2, 2000. The holder of the notes and
warrants have piggyback registration rights for the underlying shares of
common stock.
24
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Officers and Directors of the Company are as follows:
Name Age Title
- ---- --- -----
Dr. John A. Solomon 50 President and C.E.O*
Wayne B. Kight 48 Executive Vice President/Operations*
Gary S. Baker 52 Vice President/ Engineering
Nina L. Cannon 41 Director
Kenneth A. Martin 44 Secretary
* Indicates Directors
Dr. John A. Solomon has been President, Chief Executive Officer and
Director of the Company from October, 1999 to present. Dr. Solomon was President
and Chief Executive Officer of CEA, Inc., a systems integration and security
technology company, from 1979 to 1995. He was Chief Executive Officer of ACG,
Inc., a telecommunications provider, from 1996 to 1997 and has been Managing
Principal of Madison Consulting LLC, a high tech consultancy firm since 1997.
Wayne B. Kight has been Executive Vice President and Director of the
Company from June 1998 to present. He was Vice President of Homeowners Financial
Corp., a mortgage banking company, from May 1994 to June 1998 (this corporation
filed for Chapter 11 Bankruptcy in 1997 and for Chapter 7 Bankruptcy in 1998).
Mr Kight had his own consultancy practice from 1998 to 1999. He is also on the
Board of Directors of American ATM, Corp.
Gary S. Baker has been Vice President and Director of Engineering of
the Company since August 1999. He was a Senior Engineer at Stratus Computer from
1993 to 1996, a Senior Engineer and Manager at Novell Computer from 1996 to 1998
and Director of Engineering at Sistex from 1998 to 1999. He also serves as a
director of the Company's Secure Systems Solutions Division.
25
<PAGE>
Nina L. Cannon has been a Director of the Company since September 1,
1999. She was Director of Account and Contract Management of Nortel Networks
Telecommunications from December 1988 until November 1997 and from December 1997
to September 1999 she was Vice President of Operations, Sales and Planning at
Lucent Technologies Telecommunications.
Kenneth A. Martin is the founding principal of Martin & Adams, PLLC., a
Washington, D.C. law firm, the successor firm to Martin & Rylander, P.C., which
Mr. Martin founded in 1997. Prior thereto, Mr. Martin was a shareholder in Riley
& Artabane, P.C., a Washington, D.C. law firm.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company believes that during the fiscal year ended December 31,
1999, Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners may not have been satisfied. The Company
intends to have any required filings completed in the near future.
ITEM 10. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, no salaries in excess
of $100,000 per year have been paid to any executive officer or director of the
Company.
LONG-TERM INCENTIVE PLAN AWARDS
The Company has no Long-term Incentive Plan Awards currently in effect.
STOCK AND OPTION COMPENSATION OF OFFICERS AND DIRECTORS
The Company has authorized the issuance to Dr. John A. Solomon of
75,000 shares of Common Stock (and a balance owing of 150,000 shares) at a
nominal price pursuant to Mr. Solomon's Employment Agreement with the Company.
At the Board of Directors meeting held on March 20, 2000, the Board authorized
the issuance to Mr. Solomon of options to purchase 100,000 shares of Common
Stock at a price of $6.25 per share.
Mr. Wayne B. Kight purchased 10,000 shares at $.05 per share (adjusted
to 15,000 shares by reason of the stock split in June 1999) in June, 1998. At
the Board of Directors meeting held on July 30, 1998, the Board authorized the
issuance to Mr. Kight of options to purchase 22,500 shares of Common Stock at a
price of $1.00 per share and options to purchase 15,000 shares of Common Stock
26
<PAGE>
at $2.50 per share. At the Board of Directors meeting held on September 1, 1999,
the Board authorized the issuance to Mr. Kight of options to purchase 10,000
shares of Common Stock at a nominal price. The Company has authorized the
issuance to Mr. Kight of 40,000 shares of Common Stock (and a balance owing of
80,000 shares) at a nominal price pursuant to Mr. Kight's Employment Agreement
with the Company. At the Board of Directors meeting held on March 20, 2000, the
Board authorized the issuance to Mr. Kight of options to purchase 25,000 shares
of Common Stock at a price of $6.25 per share.
At the Board of Directors meeting held on September 1, 1999, the Board
authorized the issuance to Nina L. Cannon of options to purchase 10,000 shares
of Common Stock at a nominal price. At the Board of Directors meeting held on
March 20, 2000, the Board authorized the issuance to Ms. Cannon of options to
purchase 25,000 shares of Common Stock at a price of $6.25 per share.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Dr. John A. Solomon,
Michael F. Thompson, Wayne B. Kight and Gary S. Baker. The agreements have a
term of three years commencing on August 1, 1999 for Mr. Baker, September 15,
1999 for Dr. John A. Solomon, September 20, 1999 for Mr. Thompson, and October
6, 1999 for Mr. Kight. The agreements provide for a base salary of $200,000 for
Dr. Solomon, $85,000 for Michael F. Thompson, $120,000 for Wayne B. Kight and
$120,000 for Gary S. Baker. The agreements also stipulate the provision of a
certain amount of corporate common stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, information
concerning the beneficial ownership of the Common Stock of the Company by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers of the Company as a group. See "Item 10.
Executive Compensation -- Stock and Option Compensation of Officers and
Directors" for information as to stock and options authorized to be issued to
directors and officers.
Approx.
Name and Address of Amount and Nature % of
Beneficial Owner Of Ownership Class
------------------- ----------------- -------
Dr. John A. Solomon(1) 75,000(2) *
Wayne B. Kight(3) 15,000 *
Nina L. Cannon(3) - *
All directors and officers as a group *
*Less than 1%
27
<PAGE>
(1) The address for Dr. Solomon is c/o the Company at 15 Raven Road, Canton,
Massachusetts 02021.
(2) To be issued.
(3) The address for Mr. Kight and Ms. Cannon is c/o the Company at 5061 North
Dixie Highway Boca Raton, Florida
(4) The address for Mr. Baker is c/o the Company at 50 Ragsdale Drive, Suite
150, Monterey, California 93940.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Roger Raymond Schell, a former officer of the Company, is a
shareholder in Gemini Computers, Inc. with which the Company had a teaming
agreement.
See "Security Ownership of Certain Beneficial Owners and Management"
and "Executive Compensation" above.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following Exhibits are filed by attachment to this Annual Report on
Form 10-KSB:
EXHIBIT
NUMBER
- ------
10.5 Employment Agreement by and between the Company and Michael F. Thompson
10.6 Employment Agreement by and between the Company and Wayne B. Kight
21 Subsidiaries of the registrant.
28
<PAGE>
In addition to those Exhibits shown above, the Company incorporates the
following Exhibits by reference to the filings set forth below:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION FILED AS EXHIBIT
- ----------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation. 3.1 to Form 10-SB dated November 17, 1999
3.2 By-Laws 3.2 to Form 10-SB dated November 17, 1999
3.3 Amended and Restated By-Laws 3.3 to Amendment No. 1 to Form
10-SB dated January 3, 2000
4.1 Specimen Common Stock Certificate 4.1 to Amendment No. 1 to Form
10-SB dated January 3, 2000
4.2 Deed Poll dated April 2, 2000 4.1 to Form 8-K dated April 7, 2000
10.1 Lease for SSS Division's Corporate Condominium 10.1 to Form 10-SB dated November 17, 1999
10.2 Lease for SSS Division's Office Space 10.2 to Form 10-SB dated November 17, 1999
10.3 Employment Agreement by and between 10.3 to Form 10-SB dated November 17, 1999
the Company and Dr. John A. Solomon
10.4 Employment Agreement by and between 10.6 to Form 10-SB dated November 17, 1999
the Company and Gary L. Baker
</TABLE>
(B) REPORTS ON FORM 8-K:
The Company filed a Form 8-K on April 10, 2000.
29
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf the undersigned, thereto duly
authorized.
Dated: April 12, 2000
Enterprises Solutions, Inc.
By: /s/ John A. Solomon
-------------------------------------
John A. Solomon,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on April 12, 2000.
SIGNATURE CAPACITY
--------- --------
/s/ Wayne B. Kight Executive
- ----------------------
Wayne B. Kight Vice President,
Director
/s/ Nina L. Cannon Director
- ----------------------
Nina L. Cannon
30
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.5 Employment Agreement by and between the Company and
Michael F. Thompson
10.6 Employment Agreement by and between the Company and
Wayne B. Kight
21 List of Subsidiaries
31
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated September 20, 1999, by and between Enterprises
Solutions Inc., a Nevada corporation ("Company"), doing business as Secure
Systems Solutions, and Michael F. Thompson ("Employee").
WHEREAS, Secure Systems Solutions is a start up technology company
engaged in developing products for internet security,
WHEREAS, Employee has unique skills and experience in Internet and
computer security solutions.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
1.01 Position, Duties. The Company hereby employs Employee as Senior Engineer
for new and existing security products development of the Company. The duties of
Employee are as part of the new division, subsidiary or affiliate and include
the design, implementation and installation of products as well as preparation
of related documentation and business proposals. From time to time the Company
may change employee's position and duties in a manner consistent with Employee's
abilities and the needs of the business. Employee hereby accepts this employment
upon the terms and conditions herein contained and agrees to devote his time,
attention and efforts to promote and further the business and services of the
Company. Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company. Any Prior Agreements are hereby superseded,
terminated and shall have no further force or effect nor shall they be legally
binding upon either Employee or the Company.
11
<PAGE>
1.02 Place of Employment. Company will employ Employee in Northern California.
1.03 Full Time Employment.
A. Employee shall devote his entire productive time, ability and attention
to the business of Employer during the term of this Contract.
B. During the term of this Contract, Employee shall not engage in any
other business duties or pursuits without the knowledge and approval of
the Company. Furthermore, during the term of this Contract, Employee shall
not, whether directly or indirectly, render any services of a commercial
or professional nature to any other person or organization, whether for
compensation or otherwise, without prior consent from the Company.
However, the expenditure of reasonable amounts of time for educational,
charitable or professional activities shall not be deemed a breach of this
Contract if these activities do not materially interfere with the services
required under this Contract, and shall not require the prior written
consent of Employer.
C. This Contract shall not be interpreted to prohibit Employee from making
personal investments in any publicly held shares in any company which are
traded on a securities exchange so long as such holding doe not exceed
five percent (5%) of that company's capital shares. Further, it shall not
prohibit Employee from conducting private business affairs if those
activities do not materially interfere with the services required under
this Contract.
1.04 Funds Held in Trust. All funds received by Employee on behalf of Company,
if any, shall be held in trust for Company and shall be delivered to Company as
soon as practicable.
ARTICLE II
Compensation
2.01 Salary and Draw. From and after the effective date of this Agreement, the
Employee shall receive a salary ("Salary") from the Company in an amount equal
to EIGHTY FIVE THOUSAND DOLLARS ($85,000) per year. Employee's Salary shall be
payable semi monthly payments of $3,541.67.
2.02 Expense Reimbursement. The Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of the Company. Employee shall provide a written accounting an
explanation of all expenses for which reimbursement is sought on a monthly basis
and the Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. The Employee shall be entitled to receive such bonuses as the
Company shall determine from time to time in accordance with Company policy and
at the sole discretion of the Company.
2.04 Plan Participation. The Employee shall be entitled to participate in any
and all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by the Company.
12
<PAGE>
2.05 Other. The Employee shall be entitled to such fringe benefits as the
Company shall establish for its employees generally which shall include with
respect to the Employee at least two weeks paid vacation annually, eight paid
holidays as designated by the Company, provisions for an industry competitive
health, dental and vision and life insurance coverage for Employee and his
dependents from the starting date of this agreement, and such other benefits as
the Company shall adopt, subject to the discretion of the Company to add or
delete such standard benefits as the Company deems appropriate, from time to
time.
2.06 Stock Compensation. Employee shall be entitled to purchase from the
Company 15,000 shares of the Company's Common Stock in blocks of 5,000 shares
each on or after the first, second and third anniversary of the commencement of
his employment, paying the aggregate price of FIVE DOLLARS ($5.00) for each
block of shares, provided that this Agreement is not sooner terminated for death
under Section 5.02A, disability under Sections 5.02B or 5.03A or Cause under
sections 5.02C below. On the execution of this Agreement, Company shall place
all of said shares in escrow, and hold them for the benefit of Employee.
ARTICLE III
Non-Competition Agreement
3.01 No Competition During Employment Term. Employee will not, during his
employment with the Company or during the term of this Agreement, whichever
period is longer, engage in Competition with Company.
3.02 Competition Defined. For purposes of this Agreement, Employee engages in
"Competition" when he directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, (i) calls upon any customer of Company (including,
but not limited to, any customer obtained for Company by Employee) for the
purpose of soliciting or selling any Commercial and Mass market security
products; and (ii) establishes, enters it, is employed by or advises, consults
with or becomes a part of, any company, partnership corporation or other
business entity or venture, or in any way engage in business for himself or for
others, in producing or selling Commercial and Mass Market Security products.
3.03 Injunctive Relief. Because of the difficulty of measuring economic losses
to the Company and its affiliates as a result of his breach of the foregoing
covenant and because of the immediate and irreparable damage that would be
caused to the Company and its affiliates for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
the Company and its affiliates in the event of breach by him by injunctions and
restraining orders.
3.04 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Paragraph 3 are necessary to protect the goodwill and business
interests of the Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of the Company and its
affiliates on the date of the execution of this Agreement and the future plans
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of the Company; but it is also the intent of the Company and Employee that such
covenants be construed and enforced in accordance with the activities and
business of the Company and its affiliates on the date of the termination of the
employment of the Employee.
ARTICLE IV
Proprietary Information and Non Solicitation
4.01 Proprietary Information. Employee herewith executes and delivers to
Employer the Proprietary Information Agreement attached hereto.
4.02 Non-Solicitation. During the term of this Agreement and for one year
thereafter, Employee will not call upon or cause to be called upon any employee
of Company or any of its affiliates for the purpose or with the intent of
enticing them away from or out of the employ of Company or any reason whatever.
4.03 Injunctive Relief. In the event of a breach or threatened breach by
Employee of the provisions of this Paragraph 4, Company shall be entitled to an
injunction:
A. Restraining the Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to
be disclosed; and/or
B. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as
described above upon Employee's leave of the employ of the Company.
Nothing herein shall be construed as prohibiting the Company from pursuing
other remedies available to the Company for such breach or threatened
breach, including the recovery of damages from the Employer.
ARTICLE V
Term: Terminations
5.01 Term. The term of this agreement shall begin on September 20, 1999 and
continue until September 19, 2002, unless further extended or sooner terminated
as herein provided. On September 19, 2002, and on the 18th day of July of each
year thereafter, the term of the Employee's employment shall be automatically
extended one (1) additional year unless, on or before sixty (60) days in advance
of such last day of December, the Company shall have delivered to the Employee
or the Employee shall have delivered to the Company written notice that the term
of the Employee's employment hereunder will not be extended.
5.02 Termination by Company. Company may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Death. Company may terminate this Agreement in the
event of the death of Employee.
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B. Termination for Disability. Company may terminate the Agreement after
thirty (30) days written notice ("Notice of Termination") to Employee if,
because of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months, Employee is
unable to perform his duties under this agreement. Until such Notice of
Termination becomes effective, Employee shall continue to receive his
compensation and benefits hereunder.
C. Termination for Cause. Company may terminate this Contract for Cause.
For purposes of this Agreement "Cause" exists if Employee commits any of
the following acts that have a direct, substantial and adverse effect on
Employer's business: material act of dishonesty or gross misconduct,
unjustifiable neglect of his employment duties, violation of company
policy, conviction of a felony, or such acts of dishonesty, theft, fraud,
misrepresentation, or other acts of moral turpitude.
5.03 Termination by Employee. Employee may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Disability. Employee may terminate his employment if
his health should become impaired to an extent that makes his continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished Company
with a written statement from a qualified doctor to such effect and
provided, further, that, at Company's request, Employee shall submit to an
examination by a doctor selected by Company and such doctor shall have
concurred in the conclusion of Employee's doctor.
B. Termination for Good Reason. Employee may terminate this agreement
hereunder by resigning for Good Reason.
C. Termination for Management Change. Employee may terminate his
employment and this Agreement in the event that Company changes its Senior
Engineer Executive.
D. Definitions. For purposes of this Agreement, the capitalized terms
shall have the meaning set forth below:
"Good Reason" shall mean (i) a failure by Company to comply with any
material provision of this Agreement, including without limitation any
demand that Employee relocate outside of the Northern California area,
which has not been cured within thirty (30) days after written notice of
such noncompliance has been given by Employee to Company, or (ii) any
purported termination of Employee's employment by Company which is not
effected pursuant to the provisions hereof (and for purposes of this
Agreement no such purported termination shall be effective).
5.04 Compensation Upon Termination for Death or Disability. If Employee's
employment is terminated on death pursuant to 5.02A or disability pursuant to
Section 5.02B or 5.03A, Company shall pay Employee's estate his full salary and
benefits through the date of termination plus all outstanding expenses payable
pursuant to section 2.02 and Company shall have no further obligations to
Employee under this Agreement.
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5.05 Compensation Upon Termination for Cause. If Company terminates Employee's
employment for Cause pursuant to Section 5.02C, Company shall pay Employee his
full salary through the date of termination, at the rate in effect at the time
Notice of Termination is given, and Company shall have no further obligations to
Employee under this Agreement.
5.06 Compensation on Resignation for Good Reason or Company Termination in
Breach of Agreement.
If Employee shall terminate his employment for Good Reason or if Company
shall commit a material breach hereof, including without limitation the wrongful
termination of this Agreement, the Company shall pay Employee the following but
shall have no further obligation to Employee for any other payments,
compensation, benefits, claims or damages.
A. Within 30 days after such resignation or termination, Company shall pay
Employee four (4) months compensation at Employee's then current monthly
salary.
B. Employee shall receive for three (3) months from the date of
termination, all employee benefits plans and programs in which Employee
participated immediately prior to the date of termination provided that
Employee's continued participation is possible under the general terms and
provisions of such plans and programs. All such benefit plans and programs
shall be maintained at the level and value provided immediately prior to
the date of termination. In the event that Employee's participation in any
such plan or program is barred, Company shall arrange to provide Employee
with benefits substantially similar to those which Employee would
otherwise have been entitled to receive under such plans and programs from
which his continued participation is barred.
C. Except as required above, Company shall not be required to maintain in
force for the benefit of Employee any employee benefit plans or programs
following the date of termination.
D. Employee shall not be required to mitigate the amount of any payment
provided for in this Section 5.05 by seeking other employment or
otherwise.
ARTICLE VI
Representations of Employee
6.01 Restrictions from Prior Employment. Employee hereby represents and
warrants to the Company that he is not subject to any restriction or
non-competition covenant in favor of a former employer or any other persons or
entity, other than those listed in Exhibit A attached hereto and incorporated
herein by this reference. Employee further represents that the execution of this
Agreement by Employee and his employment by Company or its affiliates and the
performance of his duties described herein will not violate or be a breach of
any of the agreements listed in Exhibit A or any other agreement with a former
employer or any other person or entity.
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6.02 Non Disclosure of Trade Secrets. Employee agrees not to disclose to
Company or use in the course of his employment by the Company, any information
to the extent that such information constitutes a trade secret of prior
employers. Employee further agrees not to sue in the course of his employment by
the Company, any documentation containing proprietary information, or equipment
that may have been obtained by Employee from former employers.
6.03 Remedies. Employee agrees to indemnify Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company or its affiliates based upon or arising
out of any non-competition agreement or invention and secrecy agreement between
Employee and such third party.
ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with the Company
or any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. Upon the effective date of this agreement, the Prior
Agreement shall be terminated and superseded in its entirety. This written
agreement may not be later modified except by a further writing signed by the
Company and Employee, and no term of this Agreement may be waived except by
writing signed by the party waiving the benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
7.03 Assignment: Binding Effect. Employee understands that he has been selected
for employment by the Company on the basis of his personal qualifications,
experience and skills per Article I, preceding. Employee agrees, therefore, that
this Agreement and the rights to his services may be assigned by the Company at
any time without notice to him. Subject to the preceding two sentences, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, and assigns. It is further understood
and agreed that the Company may be merged or consolidated with another entity
and that any such entity shall automatically success to the rights, powers and
duties of the Company hereunder.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
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To Employee: Michael F. Thompson
24633 Rimrock Cyn Rd
Salinas, CA 93908
To the Company: Secure Systems Solutions
50 Ragsdale Drive #150
Monterey, CA 93940
Attn: Dr. Roger R. Schell
with a copy to: James W. Sullivan
Lombardo & Gilles
P.O. Box 2119
Salinas, CA 93902
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 7.04.
7.05 Attorneys Fees. In the event of litigation or arbitration to enforce or
interpret this Agreement, the court or arbitrator shall award the prevailing
party his reasonable attorneys' fees and costs of suit, including the costs of
expert witnesses.
7.06 Severability: Headings. If any portion of this Agreement is held invalid
or inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
SECURE SYSTEMS SOLUTION
-----------------------
BY: Roger R. Schell
ITS: President
EMPLOYEE:
WITNESSED BY:
- ----------------------- -----------------------
Michael F. Thompson
Dated: _________________
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EXHIBIT A TO
EMPLOYMENT AGREEMENT
A. Non-Compete Agreements.
B. Other companies entrusting Employee with restricted intellectual property
that may not be used by others:
PROPRIETARY INFORMATION AGREEMENT
This Agreement is made between Enterprise Solutions, Inc., doing business as
Secure Systems Solutions, (the "Company") and _____________________ (the
"Employee") effective as of the date of employment of a new employee, or in the
case of a current employee, on the date signed by Employee. For purposes of this
Agreement, the "Company" shall include any division, subsidiary, affiliate or
successor of Enterprise Solutions.
In consideration of the employment or continued employment of Employee by the
Company and payment of a salary, wage or other remuneration, the parties agree
as follows:
1. COVENANTS AGAINST DISCLOSURE. Employee will have possession of or access to
apparatus, equipment, drawings, report, manuals, invention records, customer
lists, computer programs or other materials embodying trade secrets or
confidential technical or business information of Company (collectively referred
to as "Proprietary Information"). Employee agrees:
i. not to use any such information or material for himself or others, and:
ii. not to take any such material or reproductions thereof from company
facilities,
at any time during or after employment by Company, except as required in
discharging Employee's duties to Company. Employee agrees immediately to return
all such material and reproductions thereof in his possession to Company upon
request and in any event upon termination of employment.
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Except with prior written authorization by Company, Employee agrees not to
disclose or publish any Proprietary Information of Company or of another party
to whom Company owes an obligation of confidence, at any time during or after
employment by Company.
2. DISCLOSURE OBLIGATIONS. Employee will fully and promptly disclose and
furnish to Company a complete record of any and all inventions and improvements,
whether patentable or not, which he, solely or jointly, may conceive, make
discover or first disclose during the period of his employment by Company which
were developed using Company's time or resources or which relate to the
Company's business or to the Company reasonably anticipated business. Employee
agrees to make and maintain adequate and current written records of all such
inventions and improvements in the form of notes, sketches, drawings or reports
relating thereto, which records shall be and remain the property of and
available to the Company at all times.
3. ASSIGNMENT. Employee agrees to and does hereby grant and assign to Company
or its nominee his entire right, title and interest in an to invention and
improvements coming within the scope of Paragraph 2 that relate in any way to
the actual or anticipated business or activities of Company or that are
suggested by or result form any task or work for or on behalf of Company
improvements. However, no provision in this Agreement is intended to require
assignment of any Employee rights in an invention if no equipment, supplies
facilities or trade secret information of the Company was used, and the
information was developed entirely on Employee's own time, and the invention
does not relate to the business of the Company or to the Company's actual or
demonstrably anticipated research or development or does not result from any
work performed by Employee for the Company.
4. EXECUTION OF DOCUMENTS AND PRIOR INVENTIONS. Employee agrees to fully
cooperate with Company in securing full benefit and protection for the Company
in said inventions and improvements including patent or copyright protection,
wherever and whenever the Company should elect. Employee will execute all
papers, documents and do such other acts reasonably requested by Company at any
time during and after employment by Company, without additional compensation,
but at the Company's expense.
As a matter of record the following is a complete list of all the inventions
which Employee had made heretofore and which Employee desires to be excluded
from this Agreement. (If none, state "NONE". Also, it is not necessary to list
prior inventions previously assigned or agreed to be assigned to others.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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5. COMPLIANCE NOT CONTINGENT UPON ADDITIONAL CONSIDERATION. Employee has not be
promise, and shall not claim any additional or special payment for compliance
with the covenants and agreements herein contained.
6. PRIOR EMPLOYMENT. Employee agrees not to disclose to Company or use in the
course of his employment by the Company, any information to the extent that such
information constitutes a trade secret of prior employers. Employee further
agrees not to use in the course of his employment by the Company any
documentation containing proprietary information or equipment that may have been
obtained by Employee from former employers.
7. WAIVER. No waiver by either party of any breach by the other party of nay
provision of this Agreement shall be deemed or construed to be a waiver of any
succeeding breach of such provision or as a waiver of the provision itself.
8. APPLICABILITY TO SUCCESSOR. This Agreement shall be binding upon and pass to
the benefit of the successors and assigns of Company, and insofar as the same
may be applied thereto, the heirs, legal representatives and assigns of
Employee.
9. SUPERSEDES PRIOR AGREEMENTS. This Agreement shall supersede the terms of any
prior employment agreement or understanding between Employee and the Company.
This Agreement may be modified or amended only in writing signed by an Officer
of Company and by Employee.
10. JURISDICITONS AND SEVERABILITY. It is agreed that this Agreement will be
interpreted and construed in accordance with the laws California. Should any
portion of this Agreement be judicially held to be invalid, unenforceable or
void, such holding shall not have the effect of invalidating the remainder of
this Agreement or any other part thereof, the parties hereby agreeing that the
portion so held to be invalid, unenforceable or void shall, if possible, be
deemed amended or reduced in scope.
EMPLOYEE____________________________
Employee acknowledges reading and understanding this Agreement.
________________________________ Date ____________
Employee's signature
Enterprise Solutions, Inc. doing business as Secure Systems Solutions
By______________________________ Date_____________
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EMPLOYMENT AGREEMENT
AGREEMENT dated October 06, 1999, by and between Enterprises Solutions
Inc., a Florida corporation ("Company"), and Wayne B. Kight ("Employee").
WHEREAS, the Company is engaged in the business of developing and
operating internet and computer security solutions, government and corporate
systems integration and contract selling and development work;
WHEREAS, the Company and the Employee wish to enter into an Employment
Agreement in order to retain Employee's ongoing services as the Executive Vice
President of the Company or in such capacities as the Company's Board from time
to time determines;
WHEREAS, Employee is employed by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will become familiar with and aware of information as to the specific manner of
doing business and the customers of the Company and its affiliates and future
plans with respect thereto, all of which will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable goodwill of the Company.
WHEREAS, employee recognizes that the Company's business is dependent
upon a number of trade secrets, including locations, trade contacts, supplies,
techniques, methods and data. The protection of the trade secrets is of critical
importance to the successful operation of the Company;
WHEREAS, the Company will sustain great loss and damage if during the
terms of this Agreement or Employee's employment with the Company, or for a
period of one (1) year immediately following the termination of the Agreement or
Employee's employment, for whatever reason, Employee should violate the
provisions of Articles III or IV of this Agreement. Further, monetary damages
for such losses would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
A. The Company hereby employs Employee as its Executive Vice President,
Operations. Additional or different duties, titles or positions, however,
may be assigned to Employee or may be taken from Employee from time to time
by the President & CEO and/or the Board of Directors ("Board") of the
Company. The Employee reports directly to the President and CEO of the
Company. Employee hereby accepts this employment upon the terms and
conditions herein contained and agrees to devote his time, attention and
efforts to promote and further the business and services of the Company.
Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
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B. Employee shall perform such duties, assume such responsibilities and devote
such time, attention and energy to the business of the Company as the Board
shall from time to time require and shall not, during the term of his
employment hereunder, be engaged in any other business activity pursued for
gain, profit or other pecuniary advantage if such activity interferes with
Employee's duties and responsibilities hereunder. However, the foregoing
limitations shall not be construed as prohibiting Employee from making
personal investments in such form or manner as will neither require his
services in the operation or affairs of the companies or enterprises in
which such investments are made nor violate the terms of Paragraphs 3 or 4
hereof.
ARTICLE II
Compensation
2.01 Salary. From and after the effective date of this Agreement, the Employee
shall receive a salary ("Salary") from the Company in an amount equal to
$120,000.00 per year.
The Employee's Salary shall be payable pursuant to a monthly schedule
consisting of semi-monthly payments ("Salary"), each such payment being in an
amount equal to 1/72 of $360,000 or $5,000. The Employee's present salary shall
remain in effect until the company begins to receive its funding. Immediately
after receipt of the initial outside funding capital pursuant to the above the
Employee shall receive the salary as defined in this agreement on the next
scheduled pay period and for each and every pay period thereafter in accordance
with this agreement.
2.02 Expense Reimbursement. The Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of the Company. Employee shall provide a written accounting and
receipt of all expenses for which reimbursement is sought on a monthly basis and
the Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. The Employee shall be entitled to receive such bonuses as the
President & CEO and/or Board shall determine from time to time in accordance
with Company policy and at the sole discretion of the President and/or Board.
2.04 Plan Participation. The Employee shall be entitled to participate in any
and all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by the Company.
2.05 Other. The Employee shall be entitled to such fringe benefits as the
Company shall establish for its employees generally which shall include with
respect to the Employee at least four weeks paid vacation annually, (family)
medical, life and disability insurance, disability pay, automobile and such
other benefits as the Company shall adopt, subject to the discretion of the
Company to add or delete such standard benefits as the Board deems appropriate,
from time to time.
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2.06 Stock Compensation. The Employee shall be entitled to receive in the form
of Common Stock of the Company shares in the amount of 120,000 shares in the
performance of this agreement. Forty Thousand 40,000 shares will be tendered to
the Employee immediately upon execution of this agreement. The Company shall
hold the remaining shares pursuant to this agreement in escrow. The right to the
remaining 2/3rds of Common Stock shall vest upon execution of this contract and
the remaining 80,000 shares shall be issued to Employee at the end of each of
the next two calendar years of service.
In the event the Employee's employment by the Company is terminated on or before
October 6, 2002 or following a "change in control of the Company", as defined in
section 5.02E below, any stock bonus provided for above shall be deemed to be
earned in full and shall be paid by the Company simultaneously with such change
in control.
ARTICLE III
Non-Competition Agreement
A. Employee will not, during the period of this Agreement or of his employment
by or with the Company, and for a period of two (2) years immediately
following the termination of this Agreement or his employment, whichever is
longer, for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature (i) call upon any
customer of the Company (including, but not limited to, any customer
obtained for the Company by Employee) for the purpose of soliciting or
selling any products or services in competition with those of the Company or
its affiliates; (ii) call upon any employee of the Company or any of its
affiliates for the purpose or with the intent of enticing them away from or
out of the employ of the Company or any reason whatever; (iii) establish,
enter it, be employed by or, advise, consult with or become a part of, any
company, partnership, corporation or other business entity or venture, or in
any way engage in business for himself or for others, in competition with
the Company or its affiliates within one hundred (100) miles of the home
office of the Company and/or any affiliated company location, such location
having a permanent and known facility wherein the Employee has served in any
capacity and wherever Employee has performed duties or had management
responsibility on behalf of the Company or its affiliates; or (iv) during or
after the term of his employment with the Company, disclose the Company's
customers or any other trade secrets of the Company whether in existence or
proposed, to any person, firm partnership, corporation or business for any
reason or purpose whatsoever.
B. Because of the difficulty of measuring economic losses to the Company and
its affiliates as a result of his breach of the foregoing covenant and
because of the immediate and irreparable damage that would be caused to the
Company and its affiliates for which it would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by the Company
and its affiliates in the event of breach by him by injunctions and
restraining orders.
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C. It is agreed by the parties that the foregoing covenants in this Paragraph 3
are necessary to protect the goodwill and business interests of the Company
and its affiliates and impose a reasonable restraint on Employee in light of
the activities and business of the Company and its affiliates on the date of
the execution of this Agreement and the future plans of the Company; but it
is also the intent of the Company and Employee that such covenants be
construed and enforced in accordance with the activities and business of the
Company and its affiliates on the date of the termination of the employment
of the Employee.
D. The covenants in this Paragraph 3 are severable and separate and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restriction
set forth are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable and the Agreement shall thereby be reformed.
E. All of the covenants in this Paragraph 3 shall be construed as an agreement
independent of any other provision in this Agreement and the existence of
any claim or cause of action of Employee against the Company or its
affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants. It
is specifically agreed that the period of one (1) year stated at the
beginning of this Paragraph 3, during which the agreements and covenants of
Employee made in this Paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in
violation of any provision of this Paragraph 3 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action the Company or its
affiliates seeks to enforce the agreements and covenants of Employee or in
which any person contests the validity of such agreements and covenants or
their unenforceability or seeks to avoid their performance or enforcement
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
A. The Employee recognizes and acknowledges that the information, techniques,
processes, formulas, developments, experimental work, work in progress,
business, list of the Company's customers and any other trade secret or
other secret or confidential information relating to Company's business as
they may exist from time to time are valuable, special and unique assets of
Company's business. In addition, Employee recognizes that Company is
continually engaged in research and development of new inventions and
improvements to the information, techniques, processes, formulas,
developments, trade secrets, and other secrets and confidential matters
relating to Company's business. Therefore, Employee agrees as follows:
1. That Employee will hold in strictest confidence and not disclose, reproduce,
publish or use in any manner, whether during or subsequent to his
employment, without the express authorization of the Board of Directors of
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the Company, any information, manufacturing technique, process, business
customer lists, trade secrets or any other secrets or confidential matter
relating to any aspect of the Company's business as designated from time to
time by the Board of Directors of Company, except as such disclosure or use
may be required in connection with Employee's work for the Company.
2. That upon request or at the time of leaving the employ of the Company, the
Employee will deliver to the Company, and not keep or deliver to anyone
else, any and all notes, memoranda, documents and, in general, any and all
material relating to the Company's business.
3. That the Board of Directors of the Company may from time to time designate
other subject matters requiring confidentiality and secrecy which shall be
deemed to be covered by the terms of this Agreement.
B. In the event of a breach or threatened breach by the Employee of the
provisions of this Paragraph 4, the Company shall be entitled to an
injunction:
1. Restraining the Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any person,
firm, corporation association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed;
and/or
2. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Company. Nothing herein
shall be construed as prohibiting the Company from pursuing other remedies
available to the Company for such breach or threatened breach, including the
recovery of damages from the Employer.
ARTICLE V
Term: Terminations
5.01 Term. The term of this agreement shall begin on October 6, 1999 and
continue until October 6, 2002, unless further extended or sooner terminated as
herein provided. On October 6, 2002, and on the 6th day of October each year
thereafter, the term of the Employee's employment shall be automatically
extended one (1) additional year unless, on or before sixty (60) days in advance
of such 6th day of October 2002, the Company shall have delivered to the
Employee or the Employee shall have delivered to the Company written notice that
the term of the Employee's employment hereunder will not be extended.
5.02 Termination. This Agreement and Employee's employment may be terminated in
any one of the following ways:
B. The death of Employee.
C. The Company may terminate the Agreement after thirty (30) days written
notice ("Notice of Termination") to Employee if, because of illness or
physical or mental disability or other incapacity which continues for a
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period in excess of three (3) months, Employee is unable to perform his
duties under this agreement.
D. Employee shall not be discharged during the Employment Period except
for justifiable cause. For purposes of this Agreement, justifiable
cause is limited to the following: willful, material dishonesty,
including theft, misappropriation or material intentional falsehood;
invidious discrimination or significant harassment, battery or assault
of an officer, employee, customer, client or vendor of the Company,
whether associated with race, color, religion, national origin, age,
sex, non-job related disability or any other factor or status protected
by law; willful or wanton breach of fiduciary duties; material and
persistent refusal to carry out lawfully assigned duties; intentional
or grossly reckless defamation, conviction of a felony or other illegal
public action that materially damages the Company's reputation. The
termination of the Employee for reasons other than those specified in
the preceding paragraph shall be deemed to be without justifiable
cause. No action or inaction by the Employee shall be deemed to have
occurred under this Agreement unless written notice of such action or
inaction shall have been given to the Employee by the Company and the
Employee shall have failed to cure or remedy such defect to the
Company's reasonable satisfaction within sixty (60) days after the
Employee receives written notice of the offending action or inaction.
Any termination of the Employee without justifiable cause shall entitle
the Employee to a minimum severance package of two (2) years current
salary payable over six (6) monthly installments, or the balance of
$360,000 less any payments made to Employee pursuant to this agreement,
whichever is less. Employee will also be entitled to immediate issuance
of shares in the Company equal to 120,000 less shares already issued
Employee.
E. Thirty (30) days notice by Employee of his intent to resign his
position.
F. For purposes of this Agreement, a "change in control of the Company"
shall mean a change in control that would be required to be reported in
response to Item 1(a) of Form 8-K under the Securities Exchange Act of
1934 (the "Exchange Act"); provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person"
(as that term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than the Company, as constituted, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities,
(ii) during any period of three consecutive years during the term of
this Agreement, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
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F. In the event the Company terminates, or attempts to terminate, the
employment of the Employee other than as provided above, or the Company
otherwise is in breach of the terms of this Agreement, the Company
agrees to pay or reimburse the Employee for, all legal fees, costs and
other damages, including back-pay and benefits if applicable, incurred
as a result of such breach or wrongful termination.
5.3 Compensation Upon Termination or During Disability
A. During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), the Employee shall continue to receive his full
salary at the rate then in effect for such period until his employment
is terminated pursuant to section 5.02B hereof.
B. If the Employee's employment shall be terminated pursuant to Section
5.02B, the Company shall pay the Employee his full salary through the
date of termination, at the rate in effect at the time Notice of
Termination is given, plus all outstanding expenses payable pursuant to
section 2.02 hereof and the Company shall have no further obligations
to the Employee under this Agreement.
C. If the Employee shall terminate his employment under Section 5.02D
hereof, the Company shall pay the Employee his full salary through the
date of termination at the rate in effect at the date of termination,
plus all outstanding expenses payable pursuant to section 2.02 hereof.
D. If the Company shall terminate the Employee's employment in breach
hereof or within one year of a "change in control of the Company", for
any reason other than death or disability under section 5.02A or B,
then:
1. The Company shall pay the Employee for any termination without
justified cause a minimum severance package of (2) years current
salary payable over six (6) months installments, or the balance of
$360,000 less any payments made to Employee pursuant to this
agreement, whichever is less. Employee will also be entitled to
immediate issuance of shares in the Company equal to 120,000 less
shares already issued Employee.
2. The Company shall maintain in full force and effect, for the
continued benefit of the Employee for three (3) months from the
date of termination, all employee benefit plans and programs in
which the Employee was entitled to participate immediately prior to
the date of termination provided that the Employee's continued
participation is possible under the general terms and provisions of
such plans and programs. All such benefit plans and programs shall
be maintained at the level and value provided immediately prior to
the date of termination. In the event that the Employee's
participation in any such plan or program is barred, the Company
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shall arrange to provide the Employee with benefits substantially
similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which his
continued participation is barred.
Employer shall be permitted to take key man life insurance out on
employee, with the company as beneficiary in the amount up to
$1,000,000.
Except as required above, the Company shall not be required to maintain
in force for the benefit of the Employee any employee benefit plans or programs
following the date of termination.
E. The Employee shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or
otherwise.
ARTICLE VI
Representations of Employee
Employee has represented and hereby represents and warrants to the
Company that he is not subject to any restriction or non-competition covenant in
favor of a former employer or any other persons or entity and that the execution
of this Agreement by Employee and his employment by the Company or its
affiliates and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer or any other person or entity.
Further, Employee agrees to indemnify the Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company or its affiliates based upon or
arising out of any non-competition agreement or invention and secrecy agreement
between Employee and such third party.
ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with the Company
or any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written agreement may not be later modified except by a
further writing signed by the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
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7.03 Non Delegation of Duties. Employee understands that he has been selected
for employment by the Company on the basis of his personal qualifications,
experience and skills. Employee agrees, therefore, that he cannot delegate any
part of his duties under this Agreement.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Enterprises Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
To Employee: Wayne B. Kight
18701 Cassandra Point Lane
Boca Raton, FL 33496
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 7.04.
7.05 Severability: Headings. If any portion of this Agreement is held invalid
or inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.06 Arbitration. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in the City of
Boca Raton, Florida in accordance with the rules then existing of the American
Arbitration Association and judgement upon the award may be entered in any Court
having jurisdiction thereof.
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISES SOLUTIONS INC.
WITNESSED BY:
__________________________ __________________________
John A. Solomon
Dated: _________________ Corporate President & CEO
EMPLOYEE:
WITNESSED BY:
__________________________ __________________________
Wayne B. Kight
Dated:_________________
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Subsidiary Name and Trade Name Jurisdiction of Incorporation
- ------------------------------ ------------------------------
Mr. Lucky's Casinos, Inc. Delaware
