FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Date of Report (Date of earliest event reported) April 30, 1998.
DCI Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 2-96976-D 84-1155-41
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
611 Access Road, Stratford, CT 06497
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(Address of principal executive offices)
Registrant's telephone number, including area code:(203) 380-0910
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(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2: Acquisition or Disposition of Assets
On April 30, 1998, DCI Telecommunications, Inc.(DCI) entered
into a stock purchase agreement with Edge Communications, Inc.
(Edge), a Maryland corporation, whereby DCI acquired 100% of the
outstanding common stock of Edge in a stock for stock exchange,
with DCI exchanging four million three hundred eighty five
thousand seven hundred fifteen(4,385,715) shares of common
stock for all of the shares of Edge capital stock. The DCI stock
was valued at two dollars ($2.00)per share.
The Stock Purchase Agreement is attached hereto and sets forth in
detail the final agreement between the parties.
The persons from whom the Edge stock was acquired are:
Donald Gross 45%
Steven Gross 45%
Lansing Freeman 10%
There was no material relationship between such persons and the
Registrant or its officers, directors, affiliates or associate of
any officer or director. The valuation was based on arms length
negotiation.
The physical property acquired consists primarily of
furniture, office equipment and inventory used in the company's
headquarters. Edge is a seller of prepaid phone cards. The
registrant's intention is to continue to use such assets for the
same purpose.
It is impracticable to provide the required audited financial
statements with this Form 8K but the company expects to file such
statements within 60 days of this report. The company is
voluntarily filing unaudited pro forma statements listed below.
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
Copy of Stock Purchase Agreement
Pro Forma Consolidated Balance Sheet - Unaudited
Pro Forma Consolidated Statements of Operations - Unaudited
- Nine Months Ended December 31, 1997 and March 31, 1998
- Twelve Months Ended March 31, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of this April 30, 1998
between DCI Telecommunications, Inc., a Colorado corporation with
an address of P.O. Box 320334, Fairfield, Connecticut, 06432-0334
("Buyer") and Donnie Gross, an individual with an address of c/o
Edge Communications, Inc., 19225 Orbit Drive, Gaithersburg,
Maryland 20879, Steven Gross, an individual with an address of
c/o Edge Communications, Inc., 19225 Orbit Drive, Gaithersburg,
Maryland 20879 and Lansing Freeman, an individual with an address
of c/o Edge Communications, Inc., 19225 Orbit Drive,
Gaithersburg, Maryland 20879 (collectively, the "Seller").
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Buyer and Buyer desires
to purchase from Seller, all of the issued and outstanding stock
of Edge Communications, Inc., a Maryland corporation with an
address of 19225 Orbit Drive, Gaithersburg, Maryland 20879 (the
"Company");
WHEREAS, the Parties desire to evidence the Stock Purchase
Agreement in a writing between them;
NOW, THEREFORE, in consideration of the mutual rights,
obligations and representations set forth herein, the parties
agree as follows:
1. Sale and Purchase of Stock. Subject to the terms and
conditions hereinafter set forth, Seller shall sell to
Buyer, and Buyer shall purchase from Seller, one hundred
percent (100%) all of the authorized, issued and outstanding
shares of Company (the "Edge Stock").
2. Purchase Price. Buyer shall pay to Seller as consideration
for its acquisition of the Edge Stock Four Million Three
Hundred Eighty-five Thousand Seven Hundred Fifteen
(4,385,715) shares of common stock of Buyer (as more fully
set forth in paragraph 3 hereof) (the "Purchase Shares"),
which shares shall be transferred to Seller at Closing.
The Purchase Shares shall be allocated among each of the
Sellers in the following proportions: Donald Gross: 45%,
Steven Gross: 45%, Lansing Freeman: 10%. The Purchase
Shares may be transferred only to the persons and in such
amounts as are set forth in Schedule A attached hereto.
<PAGE>
3. Purchase Shares Rights and Restrictions. The Purchase
Shares shall carry with them the right to "piggy back" on
any S-1 Registration Statement filed by Buyer. The Purchase
Shares shall bear a legend to such effect, and shall be
registered on Form S-3 or the appropriate form upon request
from Seller at anytime after Closing on a "best efforts"
basis. Further, the Purchase Shares will be subject to Rule
144 of the Securities Act of 1933. Each share of the
Purchase Shares held by Seller, and any successor in
interest to the Purchase Shares, will vote the Purchase
Shares in the same manner as recommended by the current
President of Buyer for a period of 2 years from the date of
closing. To effectuate said restriction, each Seller shall
execute and deliver to Buyer the Irrevocable Proxy attached
hereto as Schedule B.
Buyer shall make the pager portion of Company's business a
separate division. If there is a change in the effective
control of Buyer or Company, the separate division will be
offered for transfer to the following persons: 50% to the
shareholders of Seller listed above in the indicated
percentages, and 50% to Buyer.
4. Seller Materials. Within five (5) days after the date of
this Agreement, Seller shall deliver to Buyer the materials
listed on Schedule C attached hereto (collectively known as
the "Seller Materials"). Buyer may, at its sole option,
extend the Inspection Period (hereinafter defined) and, if
necessary, the date of Closing, for each day Seller
Materials are delivered or otherwise disclosed to Buyer
beyond the deadline set forth in this paragraph.
5. Due Diligence. Both Buyer and Seller, through their
respective authorized officers and agents, shall have the
right, at their sole cost and expense, from the date of this
Agreement through April 30, 1998 (the "Inspection Period")
to review and inspect the all relevant books, records,
facilities personnel and representatives and to make such
inspections or other inquires as each party reasonably
require of the other. The information to be reviewed and
inspected by Buyer shall include, but not be limited to, the
Seller Materials.
If, based upon the review and inspection conducted in
accordance with this paragraph, either party decides not to
proceed with transaction described herein, that party may
terminate this Agreement by written notice to the other
delivered in accordance with paragraph 17 no later than one
(1) day after the expiration of the Inspection Period.
<PAGE>
To facilitate such review and inspection, as well as any
other aspects of the Company's business deemed necessary by
Buyer, during the Inspection Period, the parties shall
cooperate with each other, shall promptly provide reasonable
access to their records, facilities and employees upon
request and shall promptly provide all information and
materials reasonably requested by the other. In the event
that this Agreement is terminated for any reason, the
parties shall promptly return to the other and materials and
documents in their possession (including, but not limited
to, the Seller Materials) which was delivered to it pursuant
to this Agreement.
6. Closing; Transfer of Title and Assignment. Seller shall
transfer and assign to Buyer all of Seller's right, title
and interest in and to the Edge Stock at the offices of
Alfano & Baroff, Professional Association, 814 Elm Street,
Manchester, New Hampshire, or at such other place as the
parties may mutually agree upon, at a closing which shall
take place simultaneously with the execution of this
Agreement (the "Closing").
At the Closing, Seller shall deliver to Buyer all documents
and instruments necessary to effect the transfers,
assignments, assumptions and other transactions provided for
in this Agreement, including, but not limited to, each and
all of the documents listed in Schedule D attached hereto
(the "Closing Documents"), which shall be duly executed and,
where appropriate, acknowledged, together with any and all
items or instruments necessary or appropriate thereto.
All of the Closing Documents shall be in form and substance
satisfactory to Buyer and its counsel. Buyer reserves the
right to accept title to and/or assignment of the Edge Stock
in the name or names of such other corporation(s),
partnership(s) or other entities as Buyer may hereafter
designate.
7. Transition of Customers. Following Closing, Seller shall
use its best efforts to ensure the smooth transition of
Company's customers to Buyer.
8. Operation of Business; Liability and Risk of Loss. Between
the date of this Agreement and Closing, Seller shall cause
the Company to operate and manage its business in
substantially the same manner as the Company has been
operated and managed, and shall cause the Company to
maintain the current physical condition of its assets.
Seller shall cause the Company to use its best efforts to
preserve the value of the Company, including the goodwill of
the Company and the Company's employees, independent
<PAGE>
contractors, suppliers and other business contacts. The
Company shall remain liable for all obligations and
liabilities, costs and expenses, fixed or contingent,
arising out of the operation of its business or any assets
owned in connection therewith. In the event that this
Agreement is terminated and/or the Closing is not completed,
for any reason, then the Company shall remain liable for all
obligations and liabilities, costs and expenses, fixed or
contingent, arising out of the operation or ownership of its
businesses or assets. All risk of loss of, and related to,
any of the Company's assets shall remain with the Company
through the date and time of the Closing. Should any of the
Company's assets become materially damaged between the date
of this Agreement and Closing, Buyer may, at its sole
option, terminate this Agreement, in which event neither
party will have any further obligations under this
Agreement.
9. Broker. The parties acknowledge that Robert Cefail brought
about this transaction as agents of Seller and shall be
entitled to a commission from Seller only. No other broker
brought about this transaction as agent for Seller or Buyer.
If any claim on behalf of any broker or agent is made or
upheld, then the party against or through whom such claim is
made shall defend, indemnify and hold the other party
harmless from and against any damages, costs or expenses in
any way attributable to such claim, including, but not
limited to, reasonable attorneys' fees.
10. The Company's Representations and Warranties. The Company
represents and warrants to Buyer as follows (collectively,
the "The Company's Representations and Warranties"):
A. Power and Authority: The Company is a validly formed
and legally existing corporation. The Company has full
power and authority to enter into this Agreement and to
carry out the transactions contemplated herein. The
Company has taken all actions required of the Company
by applicable law, its Charter, its Certificate of
Incorporation, its By-Laws or otherwise, to authorize
the execution and delivery of this Agreement and will
take all actions necessary to carry out the
transactions contemplated herein.
B. Taxes: The Company shall prepare and file all proper
and necessary Tax Returns for all applicable periods
prior to the date of Closing. Following the Closing
date, Buyer shall assume the responsibility for filing
those tax returns for all periods which end following
the Closing with an appropriate adjustment of liability
thereunder being made between Buyer and The Company.
The Company will furnish Buyer such information as is
necessary to file said returns which the Company has in
its possession.
<PAGE>
C. Material Transactions: Between the date of this
Agreement and the Closing, the Company will make no
material changes in its condition (financial or
otherwise) other than changes occurring in the ordinary
course of business, or as otherwise set forth in this
Agreement.
D. Conduct of Business Pending Closing: Between the date
hereof and the Closing date, the Company will not,
without the consent in writing of Buyer, (i) enter into
any transaction other than in the ordinary course of
business (except as provided elsewhere in this
Agreement); (ii) issue any shares of any class or any
options, rights or warrants entitling the holder
thereof to purchase shares of any class of stock in the
Company; (iii) enter into any contracts which extend
beyond the Closing date; (iv) operate the Company other
than in the normal course of business as it has been
operated in the past; (v) sell any merchandise or
services other than on normal sales terms or at
discounts not usually employed by the Company in its
day-to-day marketing or its usual periodic promotions.
E. Compliance with Laws: To the best of the Company's
knowledge, the Company's assets as presently used and
in effect do not violate any applicable federal, state,
local or other governmental law, ordinance or
regulation, or any applicable private restriction or
agreement, and all federal, state and local permits,
licenses or approvals necessary to operate the
Company's business have been obtained. The transfer of
the Edge Stock to Buyer shall not violate any
applicable federal, state, local or other governmental
law, ordinance or regulation, or any applicable private
restriction or agreement.
F. Litigation, Etc.: There is no action, litigation,
claim, investigation, condemnation or proceeding of any
kind pending or, to the best of the Company's knowledge
and belief, threatened against the Company, the Edge
Stock or any of the Company's assets.
G. Adverse Actions: No actions have been taken by the
Company or by any other person or entity to the
knowledge of the Company which could give rise to (i)
any adverse action regarding the Edge Stock, the
Company's assets, or the operations conducted with such
assets, or (ii) to the best of the Company's knowledge
and belief, any charge of non-compliance with any
applicable federal or state law, rule, ordinance or
regulations.
<PAGE>
H. Title: The Company has good, clear, record and
marketable rights and title to its assets, and such
title, rights and interests are freely transferable,
except where consent of Buyer is required and as
otherwise expressly disclosed to Buyer prior to the
date of this Agreement.
I. Insurance: The Company's assets are fully and
adequately insured by policies of insurance for fire
and extended coverage risks and liability.
J. Other Contracts: The Company has not entered into any
other contract(s) for the sale of any of its assets or
the Edge Stock, nor are there any rights of first
refusal or options to purchase any of its assets or the
Edge Stock or any other rights of others that might
prevent the consummation of the transactions provided
for in this Agreement.
K. Seller Materials: The Seller Materials to be provided
Buyer pursuant to this Agreement are complete and
accurate.
The Company shall provide to Buyer at Closing a Certificate
of the Company's Compliance (attached hereto as Schedule E)
as to the continuing effect and validity of the Company's
Representations and Warranties.
11. Buyer's Representations and Warranties. Buyer represents
and warrants to Seller as follows:
A. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Colorado. Buyer has the legal power and authority to
enter into and perform this Agreement.
B. The Board of Directors of Buyer has approved this
Agreement and the performance hereof and no further
corporate action by Buyer is required in connection
herewith.
C. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated
hereby will not, violate any provisions of Buyer's
Articles of Incorporation or Bylaws, or any agreement,
indenture or other instrument applicable to Buyer.
12. Seller's Covenants. Seller makes the following covenants to
Buyer (collectively, the "Seller's Covenants"):
<PAGE>
A. From and after the date of this Agreement until the
date of Closing, Seller shall operate and manage its
businesses in substantially the same manner as such
businesses have been operated and managed by Seller,
shall pay all of its debts and obligations when due and
shall maintain good relations with creditors, customers
and suppliers, the physical condition of all of its
tangible assets, reasonable wear and tear excepted, and
the status of any contracts, leases, agreements and
rights to which it is a party and/or by which it is
benefited.
B. Except for transactions made in the ordinary course of
business or as otherwise expressly permitted under this
Agreement, from and after the date of this Agreement
until the date of Closing, Seller shall not knowingly
sell, assign or create any right, title or interest
whatsoever in or to its assets or businesses or create,
or permit to exist, any lien, encumbrance or charge
thereon, without promptly discharging same, nor shall
Seller incur any further or additional debt in excess
of its current outstanding debt.
C. Seller shall advise Buyer promptly upon notification to
Seller of any pending or threatened litigation or other
legal or regulatory action affecting its existence,
businesses, operations or assets, and shall promptly
provide notice to Buyer of the occurrence of any event
of default, or any event which, with notice or the
passage of time or both, would represent an event of
default, under the terms and provisions of any
contract, lease or other agreement to which Seller is a
party and/or by which it is bound.
D. From and after the date of this Agreement and until the
date of Closing, Seller shall not knowingly take any
action or omit to take any action, which action or
omission would have the effect of violating any of the
covenants of this Agreement or warranties or
representations of Seller under this Agreement.
E. Seller shall not, prior to the date of Closing, execute
any new contracts, leases or agreements, renew, extend,
amend, modify, assign or pledge any existing contracts,
leases and agreements, or assign or pledge any amounts
payable thereunder, out of the ordinary course of
business, nor shall Seller issue any new shares of its
capital stock, without the prior written consent of
Buyer, which consent shall not be unreasonably
withheld.
<PAGE>
F. Seller shall cause all policies of insurance for fire
and extended coverage risks and liability in effect on
the date of this Agreement to be maintained in full
force and effect through and including the date of
Closing.
G. Seller shall use its reasonable best efforts to obtain
any and all required consents of third parties to the
change of control of the businesses, assets and
obligations of Seller with respect to any contracts,
leases and agreements to which Seller is also a party,
and shall cooperate and assist fully in any efforts by
Buyer to facilitate the procurement of such consents.
H. Seller shall use its reasonable best efforts to obtain,
and/or shall cooperate and assist fully in any efforts
by Buyer to obtain, any and all regulatory permits,
approvals and consents required with respect to the
businesses and assets of Seller, whether through
transfer, assignment, issuance or re-issuance.
Seller shall provide to Buyer at Closing a Certificate of
Seller's Compliance (attached hereto as Exhibit E) as to the
continuing effect and validity of Seller's Covenants.
13. Seller's Indemnity. In addition to any other
indemnification provisions contained in this Agreement,
Seller, its executors and administrators, shall indemnify
and hold harmless Buyer, its agents, successors and assigns,
from and against any and all claims, actions, proceedings,
complaints, losses, damages, liabilities, costs and expenses
based upon, related to or arising from any of the following:
A. Any obligation or liability of Seller not assumed by
Buyer pursuant to this Agreement;
B. Any event or circumstance involving the Edge Stock,
Seller's assets or Seller's business which occurred
prior to the date and time of the Closing, unless such
liability was assumed by Buyer pursuant to this
Agreement;
C. Any and all federal, state or local taxes and fees
incurred, accrued or assessed in connection with the
Edge Stock, Seller's assets and/or Seller's business
with respect to any period(s) prior to the date and
time of the Closing; or
D. The breach of any of Seller's Representations and
Warranties.
<PAGE>
14. Additional Covenants of Seller
A. Non-Competition. Seller agrees that, for a period of
three (3) years from the date of Closing, Seller not
engage, directly or indirectly, alone or as a member of
a partnership, or as an officer, director or holder of
more than five percent (5%) of the outstanding capital
stock of any corporation, or as an employee, contractor
or agent of any partnership, corporation or other
business entity, in or be concerned with any business
located, operating or selling its products or services
anywhere within the United States of America that is
competitive with the business of Buyer or Company or
any parent, subsidiary or affiliate thereof.
Seller expressly acknowledges and agrees that (i) the
scope and duration of the foregoing restrictions are
reasonable, (ii) any breach of his obligations not to
compete shall cause immediate and irreparable injury to
Buyer, for which no legal remedy would be wholly
adequate, and (iii) Buyer shall be entitled to obtain
an injunction, order of specific performance or other
equitable decree enforcing such restrictions in the
event of Seller's violation thereof, in addition to the
right to claim monetary damages and to seek any
remedies it may have at law.
B. Confidentiality and Non-Disclosure. Prior to and after
Closing, Seller agrees to treat as confidential and not
disclose to any person, firm or other entity, nor use
for himself, any proprietary or confidential
information or trade secret belonging to Seller,
Company or Buyer. In enforcing the terms of this
paragraph, Buyer shall be entitled to all legal and
equitable remedies available under Connecticut and
federal law, including, but not limited to, the right
to obtain an injunction or order of specific
performance and any other remedies available at law or
equity. Further, and without limiting the foregoing,
Seller and Company agree to continue to be bound by the
terms of that certain confidentiality agreement
executed by Buyer and Company dated April 3, 1998, the
terms of which shall survive the Closing.
In enforcing the terms of this paragraph, Buyer shall be
entitled to all legal and equitable remedies available under
all applicable state and federal law, including, but not
limited to, the right to obtain an injunction or order of
specific performance of Seller's obligations hereunder. For
purposes of this paragraph, the term "Seller" shall mean
<PAGE>
Edge Communications, Inc., its shareholders, officers,
directors and employees. The individual signing this
Agreement shall ensure that all such persons are made aware
of the restrictions set forth in this paragraph, but the
failure of that individual to notify shall not alter the
obligations.
The parties expressly acknowledge and agree that the
obligations of the Buyer under the this Agreement, including
but not limited to the Buyer's payment of the Purchase
Price, are conditioned upon, among other things, Seller's
compliance with the obligations contained in this paragraph.
15. Default and Termination. If any contingency or condition
precedent to Buyer's obligations set forth in this Agreement
is not satisfied prior to the Closing, or in the event of
the occurrence of any Termination Event (as such term is
hereinafter defined), then in either event Buyer, at its
sole option, may (i) rescind this Agreement, in which event
neither party shall have any further rights or duties
hereunder, (ii) extend or delay the Closing for a
reasonable period of time, not to exceed forty-five (45)
days, (iii) accept title to or assignment of the Edge Stock
without any diminution in the Purchase Price, or (iv)
exercise whatever rights it may have at law or equity,
including the right of specific performance.
The occurrence of any one or more of the following shall
constitute a "Termination Event" hereunder:
A. Default by Seller in the performance or observance of
any of the provisions, terms, conditions, warranties or
covenants of this Agreement;
B. If any statement, representation or warranty made by
Seller in this Agreement or in connection herewith or
any financial statement, report, schedule or
certificate furnished by Seller or any of its officers
or accountants to Buyer prior to or during the term of
this Agreement shall prove to have been false or
misleading when made, or subsequently becomes false or
misleading, in any material respect;
C. The occurrence of an event of default, not cured within
any applicable remedy period, of any obligations of
Seller to any third party in connection with any of
Seller's assets;
<PAGE>
D. Seller shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator for
any of its property, (ii) admit in writing its
inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv)
be adjudicated a bankrupt or insolvent, (v) file a
voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization to take advantage of any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law or
statute, or an answer admitting the material
allegations of a petition filed against it in any
proceeding under any such law, or (vi) offer or enter
into any composition, extension or arrangement seeking
relief or extension of its debts;
E. In the event that proceedings shall be commenced or an
order, judgment or decree shall be entered, without the
application, approval or consent of Seller, in or by
any court of competent jurisdiction, relating to the
bankruptcy, dissolution, liquidation, reorganization
of, or the appointment of a receiver, trustee or
liquidator for, Seller, or of all or a substantial part
of its assets;
F. The existence of any lien, attachment or security
interest on all or any portion of the Edge Stock or
Seller's assets which will not be released or
discharged in connection with the transactions
contemplated by this Agreement; or
G. The failure or refusal by any applicable authorities to
issue any approvals applicable to the purchase of the
Edge Stock by Buyer which are required by law or
regulation and which were disclosed to and approved by
Buyer prior to the date of this Agreement, if any.
<PAGE>
16. Additional Conditions Precedent.
A. Buyer's obligations under this Agreement shall be
conditioned on:
1. The receipt by DCI of all governmental and third
party consents and approvals deemed necessary by
DCI to consummate the transactions represented by
this Agreement; and
2. The approval of the representations and warranties
and other matters pertaining to the Company herein
by the board of directors of Company.
B. Seller's obligations under this Agreement shall be
conditioned on the approval of the transaction
represented by this Agreement by the board of directors
and shareholders (if necessary) of Buyer.
17. Notice. Whenever notice must be given under the provisions
of this Agreement, such notice must be in writing and either
hand delivered or sent by certified mail, return receipt
requested, postage prepaid and addressed as follows (until
either party notifies the other in writing of a different
address):
If to Seller: Donnie Gross
Steven Gross
Lansing Freeman
c/o Edge Communications, Inc.
19225 Orbit Drive
Gaithersburg, Maryland 20879
with a copy to: Marc R. Feinberg, Esquire
West & Feinberg, P.C.
Suite 775N
4550 Montgomery Avenue
Bethesda, MD 20814
If to Buyer: DCI Telecommunications, Inc.
P.O. Box 320334
Fairfield, Connecticut, 06432-0334
with a copy to: Paul J. Alfano, Esquire
Alfano & Baroff,
Professional Association
814 Elm Street
Manchester, NH 03101
<PAGE>
18. Miscellaneous Provisions. This Agreement may not be amended
unless done so in a writing signed by the parties. This
Agreement contains the entire agreement between the parties
relating to the transaction described herein and all prior
or contemporary agreements, understandings, oral or Seller,
are merged herein, except as otherwise provided for herein.
This Agreement shall be binding upon the parties hereto,
their heirs, successors and assigns. This Agreement shall
be interpreted under the laws of the State of Connecticut.
All warranties, representations, hold harmless, indemnity
and non-competition obligations and restrictions, and any
obligations which by their nature cannot take place or be
completed until after Closing, and which are made,
undertaken and agreed to by Seller, shall survive the
Closing and the execution and delivery of the documents and
instruments executed and delivered at the Closing, and shall
not merge with any of such Closing documents or instruments.
19. Acceptance of Agreement by Seller. If Seller does not sign
this Agreement by 6:00 p.m. on April 30, 1998, then Buyer's
offer, as represented by this Agreement, shall be void.
IN WITNESS WHEREOF, the parties have executed this Stock
Purchase Agreement as of the date first stated above.
DCI Telecommunications, Inc.
("Buyer")
/s/ Larry Shatsoff By: /s/ Joseph J. Murphy
- ------------------ ------------------------
Witness Name: Joseph J. Murphy
Title: President
/s/ Marc R. Feinberg /s/ Donnie Gross
- -------------------- ----------------------
Witness Donnie Gross ("Seller")
/s/ Marc R. Feinberg /s/ Stephen Gross
- -------------------- -----------------
Witness Steven Gross ("Seller")
/s/ Marc R. Feinberg /s/ Lansing Freeman
- -------------------- -------------------
Witness Lansing Freeman ("Seller")
Edge Communications, Inc.
("Company")
/s/ Marc R. Feinberg By: /s/ Donnie Gross
- -------------------- --------------------
Witness Name: Donnie Gross
Title: President
<PAGE>
Schedule A
PERMITTED TRANSFEREES
Name Number of Shares
Robert Cefail 263,143
DCP Holdings, LLC 150,000
Lori Gross 62,500
Tibor Vas 20,000
<PAGE>
Schedule B
IRREVOCABLE PROXY
I, Stephen Gross of Rockville, Maryland, do hereby
irrevocably and unconditionally appoint Joseph J. Murphy, of
Fairfield, Connecticut, my lawful Proxy to vote and act for me
and in my name at all meetings of the stockholders of DCI
Telecommunications, Inc., a Colorado corporation, in transacting
any business as may come before such meetings. The Proxy shall
vote at the Proxy's discretion on all matters that may come
before the meetings. All previous Proxies are hereby revoked.
This Proxy is coupled with an interest and shall remain in force
for two (2) years and one day from the below-written date. My
intention is that this document serve as an assignment of all
voting rights appurtenant to all stock I own in DCI
Telecommunications, Inc.
Dated: April 30, 1998 /s/ Stephen Gross
-----------------
STATE OF Maryland
COUNTY OF Montgomery
The foregoing instrument was acknowledged before me this
30th day of April, 1998 by Marc R. Feinberg.
/s/ Mark R. Feinberg
--------------------
Notary Public
My commission expires:
September 1, 2000
<PAGE>
Schedule B
IRREVOCABLE PROXY
I, Donnie Gross of Bethesda, Maryland, do hereby irrevocably
and unconditionally appoint Joseph J. Murphy, of Fairfield,
Connecticut, my lawful Proxy to vote and act for me and in my
name at all meetings of the stockholders of DCI
Telecommunications, Inc., a Colorado corporation, in transacting
any business as may come before such meetings. The Proxy shall
vote at the Proxy's discretion on all matters that may come
before the meetings. All previous Proxies are hereby revoked.
This Proxy is coupled with an interest and shall remain in force
for two (2) years and one day from the below-written date. My
intention is that this document serve as an assignment of all
voting rights appurtenant to all stock I own in DCI
Telecommunications, Inc.
Dated: April 30, 1998 /s/ Donnie Gross
-----------------
STATE OF Maryland
COUNTY OF Montgomery
The foregoing instrument was acknowledged before me this
30th day of April, 1998 by Marc R. Feinberg.
/s/ Mark R. Feinberg
--------------------
Notary Public
My commission expires:
September 1, 2000
<PAGE>
Schedule B
IRREVOCABLE PROXY
I, Lansing Freeman of Chevy Chase, Maryland, do hereby
irrevocably and unconditionally appoint Joseph J. Murphy, of
Fairfield, Connecticut, my lawful Proxy to vote and act for me
and in my name at all meetings of the stockholders of DCI
Telecommunications, Inc., a Colorado corporation, in transacting
any business as may come before such meetings. The Proxy shall
vote at the Proxy's discretion on all matters that may come
before the meetings. All previous Proxies are hereby revoked.
This Proxy is coupled with an interest and shall remain in force
for two (2) years and one day from the below-written date. My
intention is that this document serve as an assignment of all
voting rights appurtenant to all stock I own in DCI
Telecommunications, Inc.
Dated: April 30, 1998 /s/ Lansing Freeman
-----------------
STATE OF Maryland
COUNTY OF Montgomery
The foregoing instrument was acknowledged before me this
30th day of April, 1998 by Marc R. Feinberg.
/s/ Mark R. Feinberg
--------------------
Notary Public
My commission expires:
September 1, 2000
<PAGE>
Schedule C
SELLER MATERIALS
TAX RETURNS/FINANCIAL STATEMENTS
Certified financial statements as of March 31, 1998
Year to date monthly Profit and Loss Statement and Balance Sheets
State Corporate Income Tax Returns: 1993 - 1997
All State Sale Tax Returns: 1993 - 1997
PERSONNEL
List of Employees and salaries
Company organizational chart
Employment contracts, if any
All payroll tax returns: 1994 - 1997
Job descriptions
All personnel records
Company Retirement Plan
Company Medical Insurance Plan
Company Employee Manual
Company Operating Manual
CONTRACTS
Leases
Franchise agreements
Vendor contracts
Agency and long distance carrier agreements
ASSETS
Inventory Listing
Titles to all vehicles
Current accounts receivable
Bank Statements - 1995 - present
Signature authority on bank accounts
INSURANCE
Property insurance policy
Vehicle insurance policy
Product liability insurance policy
MANAGEMENT REPORTS
Aged accounts payable
Aged accounts receivable
Sales, by month and by customer: 1995 - 1997
Other management reports
<PAGE>
SALES
Company sales brochures
Sales contracts
Credit procedures
Pricing policies
FINANCING
All loan or financing agreements
All promissory notes
OTHER LIABILITIES
Current accounts payable
CORPORATE RECORDS
Corporate Minute Book
All state registrations to do business
Annual State Report
HARDWARE/SOFTWARE
All switches
Description of all computers (size, speed, memory)
Network
Accounting software
Telephone system
Other software
<PAGE>
Schedule D
CLOSING DOCUMENTS
1. Certified statement of current inventory
2. Certified statement of accounts payable and all other
liabilities and contingent liabilities of Seller
3. Certified statement of accounts receivable
4. Certificates of title of all assets owned by Company, where
applicable
5. Certificate of Seller's Compliance (attached hereto as
Schedule E)
6. Final accounting of Company's assets as of the date of
Closing
7. Opinion of Counsel of Company regarding the due organization
and existence of Company, the authority of Company to
conclude the transactions provided for herein and the
binding effect, validity and enforceability of the terms and
provisions of this Agreement and the transactions provided
for herein against Company and Seller in such form as Buyer
shall reasonably determine
8. A list of all current customers of the Company
9. A list of all agents of the Company
10. Employment Agreement between DCI Telecommunications, Inc.
and Donnie Gross, Steven Gross and Lansing Freeman
11. Such other documents, instruments, certificates, materials
and opinions as Buyer and its counsel may reasonably
request.
<PAGE>
Schedule E
CERTIFICATE OF COMPLIANCE
Seller and Company hereby represents and warrants that
Seller's Representations and Warranties and Company's
Representations and Warranties (as those terms are defined in the
Agreement), and the continuing effect and validity of Seller's
Representations and Warranties and Company's Representations and
Warranties, are true and accurate through the date hereof.
Seller and Company further represent and warrant that Seller
and Company have fully complied with all Seller's Covenants and
Company's Covenants (as those terms are defined in the Agreement)
through the date hereof.
Date: April 30, 1998
/s/ Marc R. Feinberg /s/ Donnie Gross
- -------------------- -----------------------
Witness Donnie Gross ("Seller")
/s/ Marc R. Feinberg /s/ Stephen Gross
- -------------------- ------------------
Witness Steven Gross ("Seller")
/s/ Marc R. Feinberg /s/ Lansing Freeman
- -------------------- -------------------
Witness Lansing Freeman ("Seller")
Edge Communications, Inc.
("Company")
/s/ Marc R. Feinberg By: Donnie Gross
- -------------------- ------------------
Witness Name: Donnie Gross
Title: President
<PAGE>
DCI Telecommunications
Pro Forma Balance Sheet for
Edge Communications, Inc. Acquisition
As of 12/31/97
(000's omitted)
Unaudited
DCI Edge Pro Forma
Assets --- ---- ---------
Current Assets
Cash $1,295 $ 324 $ 1,619
Accounts Receivable 3,885 435 4,320
Investment 8,000 - 8,000
Other 433 - 433
------ ------ --------
Total Current Assets 13,613 759 14,372
Property and Equipment 619 320 939
Accum. Depreciation 132 30 162
------ ------ --------
Net Property & Equipment 487 290 777
Long term Receivables 516 - 516
Other Assets - 60 60
Goodwill 5,352 - 5,352
Less Accum. Amortization 96 8 104
------ ------ --------
Net 5,256 (8) 5,248
Total Assets $19,872 $1,101 $20,973
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $4,493 $573 $ 5,066
Other 390 111 501
------ ------ --------
Total Current Liabilities 4,883 684 5,567
Long Term Liabilities 649 100 749
Deferred Taxes 362 - 362
Convertible Preferred Stock 1,743 96 1,839
------ ------ --------
Total Long Term
Liabilities 2,754 196 2,950
Total Liabilities 7,637 880 8,517
Preferred Stock 305 - 305
Common Stock 1 1 2
Paid in Capital 10,766 250 11,016
Other (6) - (6)
Retained Earnings 1,169 (30) 1,139
------ ------ --------
Total Equity 12,235 221 12,456
TOTAL LIABILITIES
AND EQUITY $19,872 $1,101 $ 20,973
<PAGE>
DCI Telecommunications
Pro Forma Income Statement for
Edge Communications, Inc. Acquisition
(000's omitted)
Unaudited
Nine Months Ended
12/31/97 3/31/98
DCI Telecom. Edge Pro Forma
------------ ------ ---------
Net Sales $6,189 $6,842 $13,031
Cost of Sales 4,936 6,144 11,080
Gross Margin 1,253 698 1,951
Operating Expenses 2,192 676 2,868
Depreciation & Amortization 107 - 107
----- ------ -------
2,299 676 2,975
----- ------ -------
Income (Loss)
from Operations $(1,046) $22 $(1,024)
Interest Expense (8) - (8)
Interest Income 203 - 203
Net Income $(851) $22 $(829)
Shares 14,500 4,385 18,885
Net Income (Loss) per Share $(0.06) $(0.04)
Notes:
- ------
1) DCI Results exclude a gain from sale of contract of $3,078,421
and losses from discontinued operations of $882,614, assumes zero
sales from DCI Europe and CyberFax
2) The Edge acquisition would increase the number of common
shares by 4,385,000 (pooling)
3) Loss carry forward eliminates tax consequences
<PAGE>
DCI Telecommunications
Pro Forma Income Statement for
Edge Communications, Inc. Acquisition
(000's omitted)
Unaudited
Twelve Months Ended
March 31, 1998
DCI Telecom. Edge Pro Forma
Net Sales $8,253 $8,671 $16,924
Cost of Sales 6,582 7,781 14,363
Gross Margin 1,671 890 2,561
Operating Expenses 2,922 820 3,742
Depreciation & Amortization 143 - 143
------ ------ -------
3,065 820 3,885
------ ------ -------
Income (Loss)
from Operations $(1,394) $70 $(1,324)
Interest Expense (11) - (11)
Interest Income 270 - 270
------- ------ -------
Net Income $(1,135) $70 $(1,065)
Shares 14,500 4,385 18,885
Net Income (Loss) per Share $(0.08) $(0.06)
Notes:
1) DCI Results exclude a gain from sale of contract of $3,078,421
and losses from discontinued operations of $882,614, assumes zero
sales from DCI Europe and CyberFax
2) The Edge acquisition would increase the number of common
shares by 4,385,000 (pooling)
3) Loss carry forward eliminates tax consequences
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
DCI Telecommunications, Inc.
/s/ Joseph J. Murphy
-----------------
Joseph J. Murphy
President
Date: May 14, 1998
