SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 25, 2000
Fingermatrix, Inc.
(Exact name of Registrant as Specified in its Charter)
New York 0-9940 13-2854686
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
249 North Saw Mill River Road, Elmsford, New York 10523
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (914) 592-5930
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Item 5. Other Events
On January 25, 2000, the Registrant entered into a term sheet (the
"Term Sheet") with Web Mall.Com, Inc. ("Web Mall") and Blake Schiller
("Schiller") setting forth the principal terms of a proposed transaction between
the Registrant, Web Mall and Schiller.
In accordance with the terms of the Term Sheet, the Registrant agreed
to enter into a Share Exchange Agreement with Schiller (the "Stock Purchase
Agreement") pursuant to which the Registrant will purchase from Schiller, eighty
percent (80%) of Web Mall's outstanding shares of common stock in exchange for
13,463 shares of the Registrant's Series A 2% Voting Convertible Redeemable
Preferred Stock (the "Series A Preferred Stock"). The Series A Preferred Stock
will be convertible into an aggregate of 10,000,316 shares of the Registrant's
common stock. Schiller will retain twenty percent (20%) of the outstanding
shares of common stock of Web Mall. On and subject to the closing of the share
exchange contemplated by the Term Sheet, the Registrant will transfer eleven
percent (11%) of the outstanding shares of Web Mall's common stock to The
Trinity Group, Inc. ("Trinity") in consideration of certain financing previously
provided to Web Mall by Trinity.
The Registrant has agreed to grant Schiller "piggy-back" registration
rights with respect to the shares of the Registrant's common stock underlying
the Series A Preferred Stock, as well as any other registration rights that may
be granted by the Registrant to Lewis S. Schiller, Chairman and Chief Executive
Officer of the Registrant, or to any officer, director, or principal shareholder
of the Registrant. The ability to convert the Series A Preferred Stock into
shares of the Registrant's common stock will be dependent upon a contemplated
recapitalization of the Registrant pursuant to which the Registrant intends to,
among other things, increase its authorized capital to allow for such
conversion.
The Term Sheet contemplates that Web Mall will issue to the Registrant
a series of Web Mall's Preferred Stock which will entitle the Registrant to
elect a majority of Web Mall's Board of Directors. It is contemplated that Web
Mall's Board of Directors will consist of three persons, two of whom will be
designees of the Registrant and one of whom will be Schiller or his designee.
The Term Sheet also contemplates the issuance to Schiller of a common
stock purchase warrant which will entitle Schiller to receive additional shares
of Web Mall's outstanding common stock in amounts which will increase Schiller's
ownership percentage of such shares to forty percent (40%) of Web Mall's total
issued and outstanding shares of common stock if and when Web Mall's gross
revenues reach $100,000 and sixty percent (60%) of Web Mall's total issued and
outstanding shares of common stock if and when Web Mall's gross revenues reach
$250,000.
The Registrant has agreed to loan to Web Mall $250,000 from and subject
to the Registrant's receipt of the proceeds of its current private placement of
its securities (the "Loan"). All principal and interest on the Loan will be due
and payable in one year, will bear interest at the rate of 9% per annum and will
be mandatorily prepayable from the proceeds from any initial
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public offering of Web Mall's equity securities, if any, or from a to-be-agreed
upon portion of Web Mall's cash flow from operations. As consideration for the
Loan, Web Mall will issue and deliver to the Registrant a common stock purchase
warrant on terms to be mutually agreed upon.
The Term Sheet provides that on the closing date under the contemplated
Stock Purchase Agreement, Schiller will become the President of Web Mall. It is
also contemplated under the Term Sheet that Web Mall will enter into an
employment agreement with Schiller for a term of ten years at an annual base
salary of $125,000. The contemplated employment agreement with Schiller will
also provide for annual cost of living increases in amounts to be mutually
agreed upon, an annual bonus of 20% of the net pre-tax income of Web Mall,
incentive compensation in an amount equal to 2% of the annual gross revenues of
Web Mall, reimbursement of all ordinary and necessary business expenses incurred
by Schiller in connection with the performance of his services as well as
certain other specified fringe benefits.
The Term Sheet also contemplates that the Registrant and Web Mall will
enter into an agreement for a ten year term pursuant to which the Registrant
will receive an annual management fee from Web Mall in an amount equal to 10% of
the net pre-tax income of Web Mall, up to a maximum of $1,250,000. Additionally,
during the term of such Agreement, it is also contemplated that Trinity will
receive annual incentive compensation in an amount equal to 10% of the net
pre-tax income of Web Mall, up to a maximum of $1,250,000.
The Term Sheet specifies a number of conditions to the closing of the
transactions contemplated thereby, including the approval of all definitive
agreements by the Board of Directors of the Registrant.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1. Term Sheet dated January 25, 2000 between the Registrant, Web
Mall.Com, Inc. and Blake Schiller.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINGERMATRIX, INC.
By:/S/____________________________________
Lewis S. Schiller
Chief Executive Officer
Date: February 8, 2000
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Exhibit 99.1
TERM SHEET
The following sets forth the principal terms of certain proposed
transactions between Fingermatrix, Inc. and WEBMALL.COM, INC.
Share Exchange
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The Company: WEBMALL.COM, INC., a Delaware corporation with
offices at 80 Business Park Drive, Suite 308, Armonk,
New York 10504 (the "Company").
Purchaser: Fingermatrix, Inc., a New York corporation with
offices at 249 N. Saw Mill River Road, Elmsford,
New York 10523, or a subsidiary entity formed by
Fingermatrix ("Purchaser").
Seller: Blake Schiller, an individual residing at 95 High
Street, Armonk, New York 10504 ("Seller").
The Trinity Group I, Inc. The Trinity Group I, Inc. ("Trinity").
Share Exchange Agreement: Purchaser and Seller will enter into a Share Exchange
Agreement (the "Agreement"), pursuant to which
Purchaser will purchase from Seller such number of
shares of the Company's capital stock as shall equal,
on a fully diluted basis (excluding the Seller's
Warrant, hereinafter defined), 80% of the Company's
total issued and outstanding shares of capital stock
(the "Seller's Shares") for an aggregate purchase
price consisting of 13,463 shares of the Series A 2%
Voting Convertible Redeemable Preferred Stock, par
value $.01 per share, of Purchaser, which are
convertible into 10,000,316 shares of Purchaser's
common stock, par value $.01 per share (the "FINX
Shares"). The transaction contemplated by the
Agreement shall be structured and consummated as a
tax-free exchange between the parties thereto. On the
Closing Date (hereinafter defined), Seller will own
20% of the Company's total issued and outstanding
shares of capital stock, on a fully diluted basis
(excluding the Seller's Warrant).
On the Closing Date, Seller will issue to Trinity out
of the Seller's Shares, such number of Seller's
Shares as shall equal 11% of the Company's total
issued and outstanding shares of capital stock, on a
fully diluted basis (the "Trinity Shares").
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The shares of common stock underlying the FINX Shares
will, upon the issuance thereof to Seller, be
"restricted" securities as defined under the Federal
securities laws and will be subject to the resale
limitations of Rule 144 thereunder. The holders of
all of such shares of common stock will have
customary "piggy-back" registration rights and will
be entitled to any other registration rights granted
to Lewis S. Schiller or to any officer, director or
principal shareholder of Purchaser.
Purchaser intends to file an Information Statement
with the Securities and Exchange Commission by
February 28, 2000 to effect a recapitalization of
Purchaser which will, among other things, permit the
conversion of the FINX Shares.
Preferred Stock: On the closing date under the Agreement (the "Closing
Date"), the Company will issue to Fingermatrix, Inc.
("Fingermatrix") a series of the Company's preferred
stock which will entitle the holder thereof to elect
the majority of the Company's Board of Directors.
Seller's Warrant: On or prior to the Closing Date, Seller will own a
common stock purchase warrant (the "Seller's
Warrant") issued to Seller in contemplation of the
Company's future sale of capital stock or other
restructuring or reorganization in connection with
any debt or equity financing of the Company
(including the transaction contemplated by this Term
Sheet). The Seller's Warrant will entitle Seller, at
such time on and after the Closing Date as the
Company receives gross revenues from its operations
in the amounts set forth below, to receive such
number of shares of the Company's common stock, on a
fully diluted basis, as set forth below opposite each
of the amounts of such gross revenues:
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Gross Revenues Additional Shares of Common Stock
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$100,000 Such additional shares of common
stock as shall equal, when taken
together with the shares of common
stock then owned by Seller, 40% of
the total issued and outstanding
shares of the Company's common
stock
$250,000 Such additional shares of common
stock as shall equal, when taken
together with the shares of common
stock then owned by Seller, 60% of
the total issued and outstanding
shares of the Company's common
stock
Funding: Fingermatrix will lend to the Company $250,000 (the
"Loan") from and subject to Fingermatrix's receipt of
a sufficient amount of net proceeds from its
currently contemplated private placement. The Loan
shall be repayable one year after the date thereof,
bear interest at the rate of 9% per annum (all
principal and accrued interest being payable on the
maturity date) and be mandatorily prepayable from the
proceeds of any initial public offering of the equity
securities of the Company or from the Company's net
cash flow on terms to be mutually agreed upon between
Fingermatrix and Seller.
As consideration for the Loan, the Company will issue
to Fingermatrix a warrant to purchase shares of
common stock of the Company on terms to be mutually
agreed upon.
Management: On the Closing Date, the Board of Directors of the
Company shall consist of 3 persons, 2 of whom shall
be designees of Fingermatrix and the remaining
director shall be Seller. On the Closing Date, the
officers of the Company shall consist of the
following:
Lewis S. Schiller will be the Chairman of the Board
and Chief Executive Officer and Blake Schiller will
be the President.
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Blake Schiller
Employment Agreement: On the Closing Date, the Company and Seller will
enter into an employment agreement (the "Schiller
Employment Agreement") providing for Seller's
services as the President of the Company, on terms to
include the following:
(i) A term of ten years,
(ii) an annual base salary of $125,000,
(iii) annual cost of living increases, commencing in
the second year of the term of the Schiller
Employment Agreement,
(iv) an annual bonus for Seller's services as an
officer of the Company in the amount of 20% of the
net pre-tax income of the Company,
(v) incentive compensation for Seller's services as
an officer of the Company in an amount equal to 2% of
the annual gross revenues of the Company,
(vi) reimbursement of all ordinary and necessary
business expenses incurred by Seller in connection
with the performance of his services under the
Schiller Employment Agreement, and
(vii) customary fringe benefits, including, without
limitation, medical and dental insurance, life
insurance and disability insurance.
The base salary and all expense reimbursements shall
be paid to Seller monthly, in arrears, on the 1st day
of each month during the term of the Schiller
Employment Agreement. The bonus and incentive
compensation payable to Seller by the Company will be
paid to Seller at such time as shall be mutually
agreed upon.
Seller will devote his full-time to the performance
of his services under the Schiller Employment
Agreement.
The Schiller Employment Agreement will contain a
restrictive covenant precluding Seller from rendering
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services to competitors of the Company during the
term of such agreement and for a period of one year
after the expiration or termination of such agreement
(except for any termination of such agreement as a
result of a breach thereof by the Company).
Management Fees: On the Closing Date, the Company and Fingermatrix
will enter into an agreement pursuant to which
Fingermatrix will receive an annual management fee in
an amount equal to 10% of the net pre-tax income of
the Company, up to a maximum of $1,250,000. Such
agreement will have a term of ten (10) years (subject
to specified renewals). For periods on and after the
Closing Date and during the term of the
aforementioned agreement between the Company and
Fingermatrix, Trinity will receive annual incentive
compensation in an amount equal to 10% of the net
pre-tax income of the Company, up to a maximum of
$1,250,000.
Conditions to Closing
of Agreements: 1. Completion of satisfactory due diligence by
Fingermatrix, Inc. and WEBMALL.COM, INC.
concerning their respective financial conditions
and results of operations, actual and proposed
business activities and all material agreements
and proposals to which either party is or may
become a party.
2. The absence of any material pending or
threatened litigation against Fingermatrix,
Inc., WEBMALL.COM, INC., or Blake Schiller and
the absence of any liens or encumbrances on the
capital stock of Fingermatrix, Inc. or
WEBMALL.COM, INC., as the case may be.
3. The approval of the Agreements by the respective
Boards of Directors of Fingermatrix, Inc. and
WEBMALL.COM, INC. and Blake Schiller.
4. Execution of the Employment Agreement between
WEBMALL.COM, INC. and Blake Schiller.
Public Announcements: There shall be no press release or other public
announcement or disclosure of the transactions
contemplated by this Term Sheet without the prior
written consent of the parties hereto, except to the
extent legally required of Fingermatrix, Inc. under
applicable law, or with
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respect to any press release issued by Fingermatrix,
Inc. announcing the transactions which are the
subject of this Term Sheet and/or the proposed
Agreements.
Brokers: There are no brokers or finders in connection with
the proposed Agreements.
The foregoing sets forth the principal terms of certain proposed
transactions between Fingermatrix, Inc., WEBMALL.COM, INC. and Blake Schiller
with respect to the aforementioned Agreement and is not binding upon any of the
parties hereto, except with respect to the Paragraph entitled "Public
Announcements" which shall be binding upon the parties hereto. Except with
respect to the Paragraph entitled "Public Announcements" which shall be binding
upon the parties hereto, the foregoing does not constitute an agreement to agree
and none of the parties hereto shall have any rights or obligations with respect
to the transactions contemplated by this Term Sheet unless and until definitive
Agreements and related documents are executed and delivered between
Fingermatrix, Inc., WEBMALL.COM, INC. and Blake Schiller.
Dated: January 25, 2000
FINGERMATRIX, INC.
By:/S/_____________________________________
Lewis S. Schiller, Chairman of the Board
and Chief Executive Officer
WEBMALL.COM, INC.
By:________________________________________
Print Name and Title
/S/-------------------------------------
Blake Schiller
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