SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
AMENDED CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 1, 2000
iSHOPPER.COM, INC.
(Exact name of registrant as specified in this Charter)
Nevada 033-03275-D 87-0431533
--------------------------- ----------------------- ------------------
State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
8722 South 300 West, Suite 106
Sandy, Utah 84070
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 984-9300
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
On June 1, 2000, iShopper.com, Inc. acquired K T Solutions. The
financial statements of K T Solutions, Inc., are filed herewith as
Exhibit 99.1.
(a) Financial Statements.
See Exhibit Index, Exhibit 99.1
(b) Pro forma financial information
See Exhibit Index, Exhibit 99.1
(c) Exhibits. The following exhibits are
incorporated herein by this reference:
Exhibit No. Description of Exhibit
----------- ---------------------------------------------------
2.5 Stock Exchange Agreements dated as of June 1, 2000
among the Registrant and K T Solutions, Inc.
99.1 Pro forma financial information.
99.1 Financial statements of K T Solutions, Inc.
____________________________
<PAGE>
SIGNATURES
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.
iSHOPPER.COM, INC.
Date: August 30, 2000 By: /S/ Douglas S. Hackett
-------------------------------------
Douglas S. Hackett, President,
Chief Executive Officer and Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- -------------------------------------------------------
2.5 Stock Exchange Agreement dated as of June 1, 2000 among
the Registrant and K T Solutions, Inc.
99.1 Pro forma financial information
99.1 Financial statements of K T Solutions, Inc.
____________________________
<PAGE>
iSHOPPER.COM, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Unaudited Pro Forma Condensed Consolidated Financial Statements F-2
Unaudited Pro Forma Condensed Consolidated Statements
of Operations for the Six Months Ended June 30, 2000
and for the Year Ended December 31, 1999 F-3
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements F-5
K T Solutions, Financial Statements
Independent Accountants' Review Report F-6
Balance Sheets - March 31, 2000 (Unaudited) and December
31, 1999 F-7
Statements of Operations for the Nine Months Ended March 31,
2000 and 1999 (Unaudited) and for the Years Ended December
31, 1999 and 1998 F-8
Statements of Stockholders' Deficit for the Years Ended
December 31, 1998 and 1999 and for the Nine Months Ended
March 31, 2000 (Unaudited) F-9
Statements of Cash Flows for the Nine Months Ended March
31, 2000 and 1999 (Unaudited) and for the Years Ended
December 31, 1999 and 1998 F-10
Notes to Financial Statements F-11
Independent Auditors' Report F-17
Balance Sheet - June 30, 1999 and Decemberr 31, 1999 F-18
Statement of Operations for the Three Months Ended June
30, 1999 and for the Year Ended December 31, 1999 F-19
Statement of Stockholders' Deficit for the Three Months Ended
June 30, 1999 and for the Year Ended December 31, 1999 F-20
Statement of Cash Flows for the Three Months Ended June 30,
1999 and for the Year Ended December 31, 1999 F-21
Notes to Financial Statements F-22
<PAGE>
iSHOPPER.COM, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On June 1, 2000, iShopper.com, Inc. (the Company) completed an
agreement (the Agreement) acquiring K T Solutions, Inc. (K T
Solutions). K T Solutions is a developer of technology-based training
solutions focused on the information technology education market.
Under the terms of the Agreements, K T Solutions was acquired by the
Company issuing 500,000 restricted shares of common stock and options
to purchase 250,000 common shares at 80% of market value of the common
stock which exercise price was determined by the Company to be $4.00
per share. In addition, the Company issued warrants to purchase 50,000
shares of common stock at $0.10 per share as a finders' fee, which are
also included in the purchase.
The acquisitions were accounted for by the purchase method of
accounting based upon the fair value of the common stock issued. The
common stock and options issued was valued at $2,240000, or $4.48 per
share, and $1,120,000 respectively. The additional cost of the
acquisition will increase goodwill. The purchase price was allocated
to the net assets of K T Solutions and based upon their fair value
with the $4,342,278 excess of the purchase price allocated to
goodwill. Goodwill is being amortized over a period of five years by
the straight-line method.
The following unaudited condensed consolidated pro forma statements of
operations have been prepared to present the results of operations of
the Company assuming the acquisitions occurred on January 1, 1999. The
amounts presented for the Company have been derived from the Company's
historical consolidated financial statements for the six months ended
June 30, 2000 and for the year ended December 31, 1999. The amounts
presented for the acquired companies were derived from their
historical financial statements through the dates of their
acquisitions.
Had the acquisition occurred on January 1, 1999, actual results of
operations would likely have differed from the amounts presented in
these pro forma statements. In addition, the pro forma results of
operations presented in the accompanying financial statements are not
necessarily indicative of the results that may be expected for the
remainder of the year ending December 31, 2000.
F-1
<PAGE>
iSHOPPER.COM, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Atlantic
Tech- KT Pro Forma Pro Forma
iShopper Uniq nologies Solutions Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,781,309 $ 108,500 $ 1,065,840 $ 62,954 $ - $ 4,018,603
Cost of Sales 1,568,858 - 910,292 7,211 - 2,486,361
----------- ----------- ----------- ----------- ----------- -----------
Gross Profit 1,212,451 108,500 155,548 55,743 - 1,532,242
----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses
General and administrative 2,432,736 111,609 166,307 114,469 C 33,878 2,858,999
Bad debt 82,666 - 21,662 - 104,328
Depreciation 25,463 - 15,473 - D 1,748 42,684
Amortization of software
costs 150,000 - - - B 155,738 305,738
Amortization of goodwill 404,621 2,180 - 325 A 283,457
C 114,366
E 360,670 1,165,619
----------- ----------- ----------- ----------- ---------- -----------
Total Operating Expenses 3,095,486 113,789 203,442 114,794 949,857 4,477,368
----------- ----------- ----------- ----------- ---------- -----------
Loss from Operations (1,883,035) (5,289) (47,894) (59,051) (949,857) (2,945,126)
Other expense (267) - - (9,550) - (9,817)
Interest income 14,674 - 1,161 2,627 - 18,462
Interest expense (33,953) (9,532) (23,215) (4,197) - (70,897)
----------- ----------- ----------- ----------- ---------- -----------
Loss Before Income Taxes (1,902,581) (14,821) (69,948) (70,171) (949,857) (3,007,378)
Income Tax Benefit (Expense) (236,060) - 5,080 - - (230,980)
----------- ----------- ----------- ----------- ----------- -----------
Net Loss $(2,138,641) $ (14,821) $ (64,868) $ (70,171) $ (949,857) $(3,238,358)
=========== =========== =========== =========== =========== ===========
Basic and Diluted Loss Per
Common Share $ (0.18) $ (0.24)
=========== ===========
Weighted Average Number of
Common Shares Used in Per
Share Calculation 11,574,232 13,408,135
=========== ===========
</TABLE>
See the accompanying notes to the unaudited condensed consolidated pro
forma financial statements.
F-3
<PAGE>
iSHOPPER.COM, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Atlantic
Tech- KT Pro Forma Pro Forma
iShopper Uniq nologies Solutions Adjustments Results
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 3,924,869 $ 295,974 $ 4,702,838 $ 872,445 $ - $ 9,796,126
Cost of Sales 276,600 23,385 4,316,526 113,221 - 4,729,732
----------- ----------- ----------- ----------- ----------- -----------
Gross Profit 3,648,269 272,589 386,312 759,224 - 5,066,394
----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses
General and administrative 3,912,542 513,410 316,040 1,027,586 - 5,769,578
Research and development - - 39,639 - - 39,639
Bad debt 653,702 - 191,742 - - 845,444
Loss from write-off of
goodwill 229,713 - - - - 229,713
Depreciation 23,543 - 28,425 8,803 D 4,209 64,980
Amortization of software costs - - - - B 600,000 600,000
Amortization of goodwill - - - - A 1,092,055
C 275,381
E 868,456 2,235,892
----------- ----------- ----------- ----------- ----------- -----------
Total Operating Expenses 4,819,500 513,410 575,846 1,036,389 2,840,101 9,785,246
----------- ----------- ----------- ----------- ----------- -----------
Loss from Operations (1,171,231) (240,821) (189,534) (277,165) (2,840,101) (4,718,852)
Interest income 28,567 - 2,234 - - 30,801
Interest expense (5,197) (38,744) (47,077) (56,193) - (147,211)
----------- ----------- ----------- ----------- ----------- -----------
Loss Before Income Taxes (1,147,861) (279,565) (234,377) (333,358) (2,840,101) (4,835,262)
Income Tax Benefit 233,810 - 40,012 - - 273,822
----------- ----------- ----------- ----------- ------------- -----------
Loss Before Extraordinary Item $ (914,051) $ (279,565) $ (194,365) $ (333,358) $ (2,840,101) $(4,561,440)
=========== =========== =========== =========== ============= ===========
Basic and Diluted Loss Before
Extraordinary Item Per
Common Share $ (0.68) $ (1.45)
=========== ===========
Weighted Average Number of
Common Shares Used In
Per Share Calculation 1,349,234 3,147,434
=========== ===========
</TABLE>
See the accompanying notes to the unaudited condensed consolidated pro
forma financial statements.
F-4
<PAGE>
iSHOPPER.COM, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
A- To recognize amortization of Uniq goodwill ($5,460,273),
acquired on April 4, 2000, over a period of five years by the
straight-line method.
B- To recognize amortization of Uniq capitalized software costs
($3,000,000) acquired on April 4, 2000, over a period of five
years by the straight-line method.
C- To recognize amortization of the K T Solutions goodwill
($1,074,225) acquired on June 1, 2000, over a period of five
years, to recognize the amortization of the ISSI goodwill
($302,678) over a period of five years, and to recognize $33,878
of expenses recognized by ISSI prior to the acquisition not shown
elsewhere.
D- To recognize depreciation of increased carrying value of
Atlantic's property and equipment ($21,046) acquired on June 1,
2000, over five years by the straight-line method.
E- To recognize amortization of KT Solutions goodwill
($4,342,278) acquired on June 1, 2000, over a period of five
years.
F-5
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
KT Solutions, Inc.
Oakland, California
We have reviewed the accompanying balance sheet of KT Solutions, Inc.,
as of March 31, 2000, and the related statements of operations and
shareholders' deficit for the nine month periods ended March 31, 2000
and 1999, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial
statements is the representation of the management of KT Solutions,
Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, with the exception of the matters described in
the following paragraph, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles.
A statement of cash flows for the nine month periods ended March 31,
2000 and 1999 has not been presented. Generally accepted accounting
principles require that such a statement be presented when financial
statements purport to present financial position and results of
operations.
ARMANINO MCKENNA LLP
August 15, 2000
F-6
<PAGE>
K T SOLUTIONS, INC.
Balance Sheet
March 31, 2000
(See Independent Accountants' Review Report)
ASSETS
Current assets
Cash $ 33,911
Accounts receivable - trade, net of
allowance for doubtful accounts of $9,961 145,433
-----------
Total current assets 179,344
Property and equipment, net 37,109
Other assets 21,233
-----------
$ 237,686
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 227,147
Royalties payable 380,296
Accrued interest 88,006
Advances from shareholder 38,025
Other accrued liabilities 9,024
Current portion of capital lease obligation 8,708
Notes payable 193,650
-----------
Total current liabilities 944,856
-----------
Capital lease obligation 17,016
Total liabilities 961,872
-----------
Shareholders' deficit
Preferred stock, no par value, 10,000,000 shares
authorized; 435,002 shares issued and outstanding 330,577
Common stock, no par value, 5,000,000 shares
authorized; 816,753 shares issued and outstanding 99,713
Accumulated deficit (1,154,476)
-----------
Total shareholders' deficit (724,186)
-----------
$ 237,686
===========
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
K T SOLUTIONS, INC.
Statements of Operations
For the Nine Month Periods Ended March 31, 2000 and 1999
(See Independent Accountants' Review Report)
2000 1999
---------- ----------
Sales $ 609,344 $ 985,253
Cost of sales 164,321 150,204
---------- ----------
Gross profit 445,023 835,049
---------- ----------
Operating expenses
General and administrative expenses 430,705 410,856
Research and development costs 209,002 378,253
Selling expenses 3,637 1,051
---------- ----------
Total operating expenses 643,344 790,160
---------- ----------
Income (loss) from operations (198,321) 44,889
---------- ----------
Other income (expense)
Miscellaneous income 17,352 14,984
Interest expense (33,724) (26,925)
Other income 2,645 5,769
---------- ----------
Total other expenses (13,727) (6,172)
---------- ----------
Income (loss) before provision for
income taxes (212,048) 38,717
Provision for income taxes 800 1,010
---------- ----------
Net income (loss) $ (212,848) $ 37,707
========== ==========
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
K T SOLUTIONS, INC.
Statements of Shareholders' Deficit
For the Nine Month Periods Ended March 31, 2000 and 1999
(See Independent Accountants' Review Report)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
---------------------- ---------------------- Accumulated Shareholders'
For the Nine Months Ended March 31, 2000 Shares Amount Shares Amount Deficit Deficit
---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1999 511,634 $ 388,051 821,753 $ 103,463 $ (941,628) $ (450,114)
Purchase of outstanding shares (76,632) (57,474) 5,000 (3,750) (61,224)
Net income - - - - (212,848) (212,848)
---------- ---------- ---------- ---------- ----------- ----------
Balance, March 31, 2000 435,002 $ 330,577 816,753 $ 99,713 $(1,154,476) $ (724,186)
---------- ---------- ---------- ---------- ----------- ----------
For the Nine Months Ended March 31, 1999
----------------------------------------
Balance, July 1, 1998 511,634 $ 388,051 780,000 $ 72,148 $ (959,157) $ (498,958)
Conversion of debt to shares 41,753 31,315 31,315
Net income - - - - 37,707 37,707
---------- ---------- ---------- ---------- ----------- ----------
Balance, March 31, 1999 511,634 $ 388,051 821,753 $ 103,463 $ (921,450) $ (429,936)
========== ========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
K T SOLUTIONS, INC.
Statements of Cash Flows
For the Nine Month Periods Ended March 31, 2000 and 1999
(See Independent Accountants' Review Report)
2000 1999
---------- ----------
Cash flows from operating activities
Net income (loss) $ (212,848) $ 37,707
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation 5,832 4,982
Deferred revenue - (444,341)
Changes in assets and liabilities accounts
Accounts receivable - trade 52,658 350,882
Deposits 2,440 439
Accounts payable 110,050 87,877
Royalties payable 87,300 22,831
Accrued interest 29,006 18,102
Accrued liabilities (37,995) (35,531)
---------- ----------
Net cash provided by operating activities 36,443 42,948
---------- ----------
Cash flows from investing activities
Capital expenditures (7,653) -
---------- ----------
Net cash used in investing activities (7,653) -
---------- ----------
Cash flows used in financing activities
Principal payments on indebtedness (12,574) -
Principal payments on capital lease obligation (2,076) -
Payments on advances from shareholders - (31,950)
---------- ---------
Net cash flows used in financing activities (14,650) (31,950)
---------- ----------
Net increase in cash 14,140 10,998
Cash at beginning of period 19,771 6,798
---------- ----------
Cash at end of period $ 33,911 $ 17,796
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the year for
Income taxes $ 800 $ 800
========== ==========
Debt conversion to shares of stock $ - $ 31,315
========== ==========
Debt issued to purchase shares of stock $ 61,224 $ -
========== ==========
Equipment financed by capital lease $ 27,800 $ -
========== ==========
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
1. General and Summary of Significant Accounting Policies
General
The company was incorporated under the laws of California and
commenced operations in 1982, as Missaticum, Inc. In 1982, the
company changed its name to Qtrain Corporation and, in 1995, it
again changed its name to KT Solutions, Inc., ("the Company").
The final name change occurred when current management assumed
control of the Company. The Company is a developer of technology-
based training solutions focused on the information technology
education market. The Company has recently signed numerous
distribution agreements with companies that market their products
on the Internet.
The Company's offices are located in Oakland, California. The
Company grants credit to its customers, the largest percentage of
whom are franchise operations of a national franchise that
operates throughout the world.
Basis of presentation
The Company uses the accrual basis of accounting for financial
statement purposes and the cash basis of accounting for tax
reporting purposes.
Cash
Cash includes cash and cash equivalents. The Company considers
cash in banks and short-term investments with original maturities
of three months or less to be cash equivalents.
Income taxes
The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" in fiscal year ended June
30, 1999 and has applied the provisions of the statement on a
retroactive basis to all the previous years.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial
reporting purposes.
Revenue recognition
The Company is engaged as a seller and licensor of software.
Sales revenue is recognized upon delivery of the software.
F-11
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
1. General and Summary of Significant Accounting Policies
(continued)
Property and Equipment
Property and equipment is stated at cost. Expenditures for major
improvements are capitalized at cost, while maintenance and
repairs are expensed as incurred.
Depreciation of property and equipment is computed primarily by
the straight-line method over the estimated useful lives of the
related assets which range from 3 to 7 years.
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.
2. Going Concern
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
However, the Company has sustained substantial operating losses in
recent years, with the exception of the year ended June 30, 1999.
As of March 31, 2000, total liabilities exceed total assets by
$724,186. Subsequent to March 31, 2000, management agreed to
transfer 100% of the outstanding shares, both preferred and common
of the Company to another company in exchange for stock of the
second company. (See Note 14)
Realization of a major portion of the assets in the accompanying
balance sheet is dependent upon continued operations of the
Company, its ability to meet its financing requirements, and the
success of its future operations. Management believes that
actions presently being taken, including the sale of the Company,
as well as the signing of various distribution agreements, will
improve the Company's operating performance to allow the Company
to continue as a going concern.
F-12
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
3. Royalty Agreements
The Company, in 1995, entered into settlement agreements with four
former shareholders as part of the current management's
acquisition agreement. The former shareholders were to drop all
claims against the Company and were not to compete with the
Company. The Company is in arrears in its payments to these
individuals; thereby, effectively waiving its non-competition
rights. In addition, these individuals are allowed to convert up
to 25% of the balance due them into shares of common stock of the
Company, should it issue shares in a private placement or public
offering. As of March 31, 2000, none of the individuals have
expressed an interest in acquiring any Company stock or competing
with Company operations. Royalties' payable under these
agreements totaled $380,296 as of March 31, 2000.
4. Property and Equipment
Property and equipment consisted of the following at March 31,
2000:
Computers and equipment $ 41,472
Office equipment and furniture 38,129
Equipment under capital lease 27,800
---------
107,401
Less accumulated depreciation (70,292)
---------
$ 37,109
=========
Depreciation expense for the nine months ended March 31, 2000 and
1999 was $5,832 and $4,982, respectively.
5. Notes Payable
Notes payable as of March 31, 2000, consisted of the following:
Note payable to related party - unsecured;
interest at 15%. Final payment due on
demand. Interest payments due monthly. $ 20,000
Note payable to shareholder - unsecured;
no monthly payments due. Note is convertible
into preferred stock at the option of the note
holder, provided certain conditions are met.
Interest accrues at 20% annually. 120,000
F-13
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
5. Notes Payable (continued)
Note payable to former shareholder,
secured by stock certificates. Monthly
principal payments of $2,000, bearing
interest at 10%, with the balance due in
full on October 1, 2000. $ 53,650
---------
193,650
LESS CURRENT PORTION (193,650)
---------
Long-term portion $ -
=========
6. Leases
The Company leases its facilities in Oakland from an unrelated
third party. Annual rent under this five-year lease, which
expires on February 28, 2005, escalates each year as described in
the agreement. Facility rent expense for the nine months ended
March 31, 2000 and 1999 was $21,380 and $______, respectively.
In January 2000, the Company entered into a capital lease
agreement to purchase computer equipment. The cost of the
equipment was $27,800, with related accumulated depreciation of
$2,317 as of March 31, 2000. The capital lease provides that the
Company pay the taxes, insurance and maintenance expenses relating
to the leased property. The terms of the lease provide for
payments of $871 per month over 36 months, including interest at
8%.
The following sets forth total future minimum lease payment
obligations for the fiscal years ended:
Capital Operating
Year Ended June 30, Lease Lease
------------------- --------- -----------
2000 $ 2,613 $ -
2001 10,452 54,672
2002 10,452 59,304
2003 5,226 63,936
2004 - 63,936
2005 - 42,624
--------- -----------
Total minimum lease payments 28,743 $ 284,472
Less amount representing interest 3,019 ===========
---------
Present value of minimum lease payments $ 25,724
=========
Less: current portion 8,708
--------
$ 17,016
========
F-14
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
7. Preferred Stock
The Company's preferred stock is eligible to receive a $6 dividend
on an annual basis should the Board of Directors elect to declare
dividends. No dividends were declared during the year ended June
30, 1999 or the nine months ended March 31, 2000.
8. Advances from Shareholder
The Company's majority shareholder, along with another company
controlled by the Company's majority shareholder, have combined to
advance funds to the Company. Neither of these related parties is
currently charging the Company interest and amounts advanced are
due on demand. As of March 31, 2000, the outstanding balance was
$38,025.
9. Income Taxes
The provision for income taxes reflected in the statements of
operations contains only the minimum state income tax amounts, as
the Company has sustained losses during its history and has net
operating loss carryforwards sufficient to offset taxable income.
As of March 31, 2000, the Company had $508,441 in net operating
loss carryforwards set to expire beginning in 2011. However, a
valuation reserve has been set up to reserve 100% of this
potential asset, as the realization of this asset does not meet
the more likely than not threshold required by FAS #109.
10. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade
accounts receivables. Concentrations of credit risk with respect
to trade receivables arise because the largest percentage of
customers granted credit are franchise operations of a national
franchisee who has a license agreement with the Company that can
be terminated in 90 days at the convenience of the licensee.
Sales under one licensing agreement comprised ___% and ____% of
the Company's revenues during the periods ended March 31, 2000 and
1999, respectively. Accounts receivable-trade from this licensing
agreement aggregated $128,609 as of March 31, 2000.
F-15
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
MARCH 31, 2000 AND 1999
_________________________
11.Related Party Transactions
Notes payable
All of the Company's debt has been issued to either shareholders
or former shareholders. See Note 5 for description of terms and
amounts.
Advances payable
The Company has received advances from its majority shareholder as
described in Note 8.
12.Stock Options
As of June 1997, the Company had granted to two employees the
option to purchase shares of the Company's common stock. A total
of 15,000 shares were reserved for their purchase at $0.075 per
share and 5,000 shares at $1.00, although the shares were not part
of a formal stock option plan. In January 1998, an additional
15,000 shares were reserved for one of these employees with a
purchase price of $2.00 per share. The option to purchase shares
vests ratably over a four-year period.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." Since the exercise price of the
options exceeded the fair market value of the common stock when
the options were granted, no compensation cost has been recognized
for options granted. Had compensation cost for stock options
granted been determined based on the fair value of the options
consistent with the provisions of SFAS No. 123, the Company's net
income for the periods ended March 31, 2000 and 1999 would have
been reduced negligibly. At March 31, 2000, 35,000 options had
been issued with a weighted-average price per share of $1.03.
Approximately, 15,000 options were exercisable at March 31,2000.
13. Subsequent Events
Subsequent to March 31, 2000, the Company repriced the options to
purchase shares of Company common stock for one of its employees
to $0.75 per share. The compensation related to this change is
considered negligible.
Also, subsequent to March 31, 2000, iShopper.com, Inc. issued
500,000 shares of common stock to the common and preferred
shareholders of the Company in return for 100% of the outstanding
shares of the Company's stock
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
KT Solutions, Inc.
Oakland, California
We have audited the accompanying balance sheets of KT Solutions, Inc.,
(a California corporation) as of June 30, 1999 and December 31, 1999,
and the related statements of operations, shareholders' deficit, and
cash flows for the periods then ended. These financial statements are
the responsibility of the management of KT Solutions, Inc. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of KT
Solutions, Inc. as of June 30, 1999 and December 31, 1999, and the
results of its operations and its cash flows for the periods then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2,
the Company's recurring operating losses and lack of working capital
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to those matters also are
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ARMANINO MCKENNA LLP
May 12, 2000
F-17
<PAGE>
KT SOLUTIONS, INC.
Balance Sheets
December 31, 1999 and June 30, 1999
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1999 1999
----------- -----------
<S> <C> <C>
Current assets
Cash $ 18,352 $ 19,771
Accounts receivable - trade, net of allowance
of $9,961 ($9,284 in June) 147,126 198,091
----------- ----------
Total current assets 165,478 217,862
Property and equipment, net 5,328 7,488
Other assets 26,405 23,673
----------- ----------
$ 197,211 $ 249,023
=========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 147,179 $ 117,097
Royalties payable 350,758 292,996
Accrued interest 78,027 59,000
Accrued liabilities 51,370 47,436
Deferred revenue 20,000 -
Advances from shareholder 36,525 37,608
Current portion of long term debt 198,232 145,000
----------- ----------
Total current liabilities 882,091 699,137
----------- ----------
Long term debt - -
----------- ----------
Shareholders' deficit
Preferred stock no par value, 10,000,000 shares
authorized; 435,002 shares issued and outstanding
(511,634 in June) 330,577 388,051
Common stock no par value, 5,000,000 shares
authorized; 816,753 shares issued and
outstanding (821,753 in June) 99,713 103,463
Accumulated deficit (1,115,170) (941,628)
----------- ----------
Total shareholders' deficit (684,880) (450,114)
----------- ----------
$ 197,211 $ 249,023
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
Six Months Ended Year Ended
December 31, June 30,
1999 1999
----------- -----------
Sales $ 372,755 $ 1,282,792
Cost of sales 107,817 229,350
----------- -----------
Gross profit 264,938 1,053,442
Operating expenses
General and administrative expenses 297,634 575,284
Research and development costs 130,335 449,945
Selling expenses 2,637 1,563
----------- -----------
Total operating expenses (165,668) 26,650
----------- -----------
Income (loss) from operations
Other income (expense)
Miscellaneous income 10,638 21,414
Interest expense (21,285) (36,784)
Other income 3,573 7,049
----------- -----------
Total other expenses (7,074) (8,321)
----------- -----------
Income (loss) before provision for
income taxes (172,742) 18,329
Provision for income taxes 800 800
----------- -----------
Net income (loss) $ (173,542) $ 17,529
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
KT SOLUTIONS, INC.
Statements of Shareholders' Deficit
For the Periods Ended December 31, 1999 and June 30, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
---------------------- ---------------------- Accumulated Shareholders'
Shares Amount Shares Amount Deficit Deficit
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended December 31, 1999
------------------------------------------
Balance, July 1, 1999 511,634 $ 388,051 82,753 $ 103,463 $ (941,628) $ (450,114)
Purchase of outstanding shares (76,632) (57,474) (5,000) (3,750) (61,224)
Net income - - - - (173,542) (173,542)
---------- ---------- ---------- ---------- ----------- ----------
Balance, December 31, 1999 435,002 $ 330,577 816,753 $ 99,713 $(1,115,170 $ (684,880)
---------- ---------- ---------- ---------- ----------- ----------
For the Year Ended June 30, 1999
--------------------------------
Balance, July 1, 1998 511,634 $ 388,051 78,000 $ 72,148 $ (959,157) $ (498,958)
Conversion of debt to shares 1,753 31,315 31,315
Net income - - - - 17,529 17,529
---------- ---------- ---------- ---------- ----------- ----------
Balance, June 30, 1999 511,634 $ 388,051 82,753 $ 103,463 $ (941,628) $ (450,114)
========== ========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
KT SOLUTIONS, INC.
Statements of Cash Flows
For the Periods Ended December 31, 1999 and June 30, 1999
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, June 30,
1999 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (173,542) $ 17,529
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation 2,160 6,642
Deferred revenue 20,000 (444,341)
Changes in assets and liabilities accounts
Accounts receivable - trade 50,965 275,378
Deposits (2,732) (15,392)
Accounts payable 30,082 31,896
Royalties payable 57,762 130,441
Accrued interest 19,027 32,463
Accrued liabilities 3,934 3,204
---------- ----------
Net cash provided by operating activities 7,656 37,820
---------- ----------
Cash flows used in financing activities
Principal payments on indebtedness (7,992) -
Payments on advances from shareholders (1,083) (24,847)
---------- ----------
Net cash flows used in financing activities (9,075) (24,847)
---------- ----------
Net increase (decrease) in cash (1,419) 12,973
Cash at beginning of period 19,771 6,798
---------- ----------
Cash at end of period $ 18,352 $ 19,771
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the year for
Income taxes $ 800 $ 800
========== ==========
Debt conversion to shares of stock $ - $ 31,315
========== ==========
Debt issued to purchase shares of stock $ 61,224 $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
1. General and Summary of Significant Accounting Policies
General
The Company was incorporated under the laws of California and
commenced operations in 1982, as Missaticum, Inc. In 1982 the
Company changed its name to Qtrain Corporation and in 1995 it
again changed its name to KT Solutions, Inc. The final name
change was due to a change in ownership when current management
assumed control of the Company. The Company is a developer of
technology-based training solutions focused on the information
technology education market. The Company has recently signed
numerous distribution agreements with companies that market their
products on the Internet.
The Company's offices are located in Oakland, California. The
Company grants credit to customers, the largest percentage of whom
are under a single franchise that operates throughout the world.
Basis of presentation
The Company uses the accrual basis of accounting for financial
statement purposes and the cash basis of accounting for tax
reporting purposes.
Cash
Cash includes cash and cash equivalents. The Company considers
cash in banks and short-term investments with original maturities
of three months or less to be cash.
Income taxes
The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" in fiscal year ended June
30, 1999 and has applied the provisions of the statement on a
retroactive basis to all the previous years.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial
reporting purposes.
Software revenue recognition policies
The Company is engaged as a seller and licensor of software.
Revenue is recognized upon delivery of the software.
F-22
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
1. General and Summary of Significant Accounting Policies
(continued)
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.
2. Going Concern
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
However, the Company has sustained substantial operating losses in
recent years, with the exception of the year ended June 30, 1999.
As of December 31, 1999, total liabilities exceed total assets by
$684,880. Management is currently in negotiations with outside
investors regarding potential equity financing. Realization of a
major portion of the assets in the accompanying balance sheet is
dependent upon continued operations of the Company, which in turn
is dependent upon the Company's ability to meet its financing
requirements, and the success of its future operations.
Management believes that actions presently being taken including
the potential sale of the Company as well as signing the various
distribution agreements, will revise the Company's operating and
financial requirements to provide opportunity for the Company to
continue as a going concern.
3. Royalty Agreements
The Company, at its inception, entered into settlement agreements
with four former shareholders as part of the current management's
acquisition agreement. The individuals were to drop all claims
against the Company and were not to compete with the Company. The
Company is in arrears in its payments to these individuals, by not
paying these individuals, the Company has effectively waived its
non-competition right. In addition, these individuals are allowed
to convert up to 25% of the balance due them into shares of stock
of the Company, should it issue shares in a private placement or
public offering. None of the individuals have expressed an
interest in acquiring any stock or competing with the Company.
F-23
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
4. Property and Equipment
Property and equipment is stated at cost. Expenditures for major
improvements are capitalized at cost, while maintenance and
repairs are expensed as incurred.
Depreciation of property and equipment is computed primarily by
the straight-line method over the estimated useful lives of the
related assets.
December 31, June 30,
1999 1999
---------- ----------
Computers and equipment $ 33,819 $ 33,819
Office equipment and furniture 38,129 38,129
71,948 71,948
Less accumulated depreciation (66,620) (64,460)
---------- ----------
$ 5,328 $ 7,488
========== ==========
Depreciation expense for the periods ended December 31, 1999 and
June 30, 1999 was $2,160 and $6,642, respectively.
5. Notes Payable
Notes payable as of December 31, 1999 and June 30, 1999,
consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
---------- ----------
<S> <C> <C>
Note payable to related party - unsecured;
interest at 15%. Final payment due on
demand. $ 20,000 $ 25,000
Note payable to shareholder - unsecured;
no monthly payments due. Note is convertible
to preferred stock at the option of the note
holder, provided certain conditions are met.
Interest accrues at 20% annually. 120,000 120,000
F-24
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
5. Notes Payable (continued)
December 31, June 30,
1999 1999
---------- ----------
Note payable to former shareholder,
secured by stock certificates. Monthly
principal payments of $2,000, bearing
interest at 10%, with the balance due in
full on October 1, 2000. $ 58,232 $ -
198,232 145,000
LESS CURRENT PORTION (198,232) (145,000)
$ - $ -
</TABLE>
6. Operating Leases
The Company leases its facilities in Oakland from an unrelated
third party. Annual rent under this five-year lease, which
expires on February 28, 2005, escalates each year as described in
the agreement. Future minimum lease payments for the years ended
June 30 under this lease are as follows: 2000 - $12,700; 2001 -
$54,672; 2002 - $59,304; 2003 - $63,936; 2004 - $63,936 and 2005 -
$42,624.
7. Preferred Stock
The Company's preferred stock is eligible to receive a $6 dividend
on an annual basis should the board of directors elect to declare
dividends. No dividends were declared during the year ended June
30, 1999 or the six months ended December 31, 1999.
8. Advances from Shareholder
The Company's majority shareholder, along with another company
controlled by the Company's majority shareholder, have combined to
advance funds to the Company. Neither of these related parties is
currently charging the Company interest and the amounts are due on
demand. As of December 31 and June 30, 1999, the outstanding
balances were $36,525 and $37,608, respectively.
F-25
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
9. Income Taxes
The provision for income taxes reflected in the statements of
operations contains only the minimum state income tax amounts, as
the Company has sustained losses during its history and has net
operating loss carryforwards sufficient to offset taxable income.
As of December 31, 1999, the Company had $508,441 in net operating
loss carryforwards set to expire beginning in 2011. However, a
valuation reserve has been set up to reserve 100% of the potential
asset, as the benefits are not likely to be recognized given the
Company's historical losses.
10. Major Customers
Sales under one licensing agreement comprised 84.3% and 86.8% of
the Company's revenues during the periods ended December 31, 1999
and June 30, 1999, respectively. Related receivables from this
license agreement aggregated $100,598 and $195,279 as of December
31, 1999 and June 30, 1999, respectively.
11. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade
accounts receivables. Concentrations of credit risk with respect
to trade receivables arise because the largest percentage of
customers granted credit are franchise operations of a national
franchisee who has a license agreement with the Company that can
be terminated in 90 days at the convenience of the licensee.
12. Related Party Transactions
Notes payable
All of the Company's debt has been issued to either shareholders
or former shareholders. See Note 5 for description of terms and
amounts.
Advances payable
The Company has received advances from its majority shareholder as
described in Note 8.
F-26
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
_________________________
13.Stock Options
As of June 1997, the Company had granted to two employees the
option to purchase shares of the Company's stock. A total of
15,000 shares were reserved for their purchase at $0.075 and 5,000
shares at $1.00, although they were not part of a formal stock
option plan. In January 1998, an additional 15,000 shares were
reserved for one of these employees with a purchase price of $2
per share. The option to purchase shares amortizes ratably over a
four-year period.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for options granted. Had compensation cost
for stock options granted been determined based on the fair value
of the options consistent with the provisions of SFAS No. 123, the
Company's net income for the periods ended December 31, and June
30, 1999 would have been reduced negligibly. A summary of the
status of the plan as of December 31, 1999, and the changes during
the year then ended is presented below:
Weighted
Average
Stock Price Per
Options Share
-------- ----------
Outstanding at June 30, 1998 35,000 $0.46
Granted - -
Exercised - -
Expired / Forfeited - -
Outstanding at June 30, 1999 35,000 $0.46
Vested shares at June 30, 1999 15,000 $0.46
Exercisable shares at June 30, 1999 35,000 $0.46
Granted - -
Exercised - -
Expired / Forfeited - -
Outstanding at December 31, 1999 35,000 $0.46
Vested shares at December 31, 1999 18,750 $0.46
Exercisable shares at December 31, 1999 35,000 $0.46
F-27
<PAGE>
KT SOLUTIONS, INC.
Notes to Financial Statements
JUNE 30 AND DECEMBER 31, 1999
___________________________
14.Subsequent Events
Subsequent to December 31, 1999, the Board of Directors signed a
letter of intent to acquire 100% of the outstanding shares of
stock in one of its vendors in exchange for newly issued shares of
the Company.
The Company entered into a capital lease agreement with a third
party to finance the purchase of computer equipment. The lease
commenced in January, 2000 and has a 36-month term with monthly
payments of $871.
Finally, subsequent to December 31, 1999, the Company signed a
letter of intent to sell 100% of its outstanding shares of stock
to another company.
F-28
<PAGE>
EXHIBIT 2.5
STOCK EXCHANGE AGREEMENT
This Agreement is entered into to be effective as of June 1, 2000
by and among KT Solutions, Inc., a privately-held California
corporation, f/k/a QTrain Corporation (hereinafter the "Company"),
Steve K. Burke, John C. Graham, James Mohr, Greg Stangler, Doug Baker,
Jim Duffy, Mark & Margaret Seymour, John M. Dunn, John D. Reeves,
Burke Family Trust, John B. Collins and MediaSoft (an Oklahoma
corporation), the owners of all outstanding shares of the Company (the
"Shareholders"), and iShopper.com, Inc., a Nevada corporation, dba
IHPR, Inc. (hereinafter "Purchaser").
RECITALS:
1. The Company is a California corporation engaged in the business
of developing and marketing computer-based and on-line training
courses;
2. Shareholders own all outstanding shares of the Company;
3. Purchaser desires to acquire from the Shareholders, and
Shareholders desire to convey to Purchaser, all of the issued and
outstanding capital shares of the Company, in exchange solely for
certain shares of Purchaser, all upon the terms and subject to the
conditions of this Agreement and in accordance with the laws of the
States of California and Nevada.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms and covenants
set forth herein, the Purchaser, the Company, and the Shareholders
approve and adopt this Stock Exchange Agreement and mutually covenant
and agree with each other as follows:
1. Shares to be Transferred and Shares to be Issued.
1.1 On the closing date the Shareholders shall transfer to
the Purchaser certificates for the number of shares of the common
stock of the Company described in Schedule A, attached hereto and
incorporated herein, which in the aggregate shall represent all of the
issued and outstanding shares of the common stock of the Company.
Such certificates shall be duly endorsed in blank by the Shareholders
or accompanied by duly executed stock powers in blank with signatures
guaranteed.
1.2 In exchange for the transfer of the common stock of the
Company pursuant to subsection 1.1. hereof, the Purchaser shall on the
closing date and contemporaneously with such transfer of the common
stock of the Company to it by the Shareholders issue and deliver to
the Shareholders, in the respective amounts specified on Schedule A, a
total of 500,000 common shares of Purchaser, issued and restricted
under S.E.C. Rule 144 ("Purchaser Shares'). Certificates for
Shareholders' shares of Purchaser shall be delivered to Shareholders
as soon after closing as Purchaser's transfer agent is able to prepare
such certificates. The certificates delivered to Shareholders pursuant
to this Agreement shall bear a legend in substantially the following
form:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933,
as amended, or under the securities laws of any state. The
shares of stock have been acquired for investment and may
not be sold, offered for sale or transferred in the absence
of an effective registration under the Securities Act of
1933, as amended, and any applicable state securities laws,
or an opinion of counsel satisfactory in form and substance
to counsel for iShopper.com, Inc. that the transaction shall
not result in a violation of federal or state securities
laws.
2. Representations and Warranties of the Company. The Company
represent and warrant as follows:
2.1 Organization and Authority.
a. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California, with full power and authority to enter into and perform
the transactions contemplated by this Agreement.
b. The minute books of the Company made available to
Purchaser contains the complete and accurate records of all meetings
and other corporate actions of the shareholders and the board of
directors (and any committee thereof) of the Company, including
without limitation the Articles of Incorporation of the Company and
its Bylaws.
2.2 Leases. The Company has made available to Purchaser
for its review all material leases pursuant to which the Company
leases real or personal property, including without limitation the
leases set forth in Schedule B hereto. All such leases are in good
standing, valid and in full force and effect; there are no existing
material defaults by the Company thereunder; no event of default has
occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder; and all lessors under such leases have consented (where
such consent is necessary) to the consummation of the transactions
contemplated by this Agreement without requiring material modification
in the rights or obligations of the lessee under such leases.
Executed counterparts of all consents referred to the preceding
sentence will be delivered to Purchaser at the Closing.
2.3 Bank Accounts. The Company has disclosed to Purchaser
the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which the
Company maintains safe deposit boxes or accounts of any nature and the
names of all persons authorized to sign, withdraw or otherwise act
with respect thereto as of the date hereof.
2.4 Contracts. The Company has made available to Purchaser for its
review all material written contracts to which it is a party,
including without limitation those contracts identified on Schedule B.
2.5 Employment Agreements. The Company has no employment
agreements in force or effect as of the closing date, except as and to
the extent specifically disclosed on Schedule D.
2.6 Litigation. To the knowledge of the Company, there are
no legal, administrative or other proceedings, investigations or
inquiries, product liability or other claims, judgments, injunctions
or restrictions, either pending or threatened against or involving the
Company or its assets, properties, or business, or against or relating
to the transactions contemplated by this Agreement, nor does the
Company have reasonable grounds to know of any basis for the same. In
addition, to the knowledge of the Company, there are no material
proceedings existing, pending or threatened to which any officer,
director, Shareholder or affiliate of the Company is a party adverse
to the Company or has a material interest adverse to the Company.
2.7. Taxes. The Company has filed all federal, state,
foreign, county and local income, profits, franchise, occupation,
property, sales, use, gross receipts and other tax returns required to
be filed by it, and the Company has paid and discharged all taxes and
assessments due in connection therewith and to its knowledge has paid
all other taxes and assessments as are due (including any interest or
penalties relating thereto). Except as may be disclosed in the
Financial Statements, to the knowledge of the Company there is no
taxing authority or agency asserting against the Company any
deficiency or other claim for the payment of additional taxes or
assessments.
2.8 Rights in Product and Intellectual Property. The
Company has made available to Purchaser for its review, all material
written contracts granting or otherwise relating to the Company's
rights, title and interest in and to the intellectual property
currently used in its business, including without limitation those
contracts set forth on Schedule C hereto. A list of the material
products and product lines currently marketed by the Company and in
which the Company has certain proprietary rights, is set forth on
Schedule C-1 hereto. The Company knows of no claims or challenges to
such rights by any third party.
2.9 Financials; Absence of Changes. On or before the
closing date, the Company shall have made available to Purchaser true
copies of the audited financial statements of the Company, statements
of operations, statements of cash flow and statements of stockholders'
equity as of the fiscal year ended December 31, 1999, (Schedule H),
unaudited financials for the three-month period ending March 31, 2000
(Schedule H-1), and unaudited financial statements for the one-month
period ending April 30, 2000 (Schedule H-2) (the "Balance Sheet
Date"); collectively, the foregoing statements are referred to herein
as the "Financial Statements"). The Financial Statements are complete
and correct in all material respects and fairly present the financial
condition of the Company and its predecessors as of their respective
dates and the results of operations for the periods covered thereby.
The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis. Since the Balance Sheet Date, and except as set forth on
Schedule H-2, there has been no material change in the financial
condition of Company. Since the Balance Sheet Date, the Company has
conducted its business only in the ordinary course, none of which, if
disclosed, would alter substantially the financial condition of
Company as reflected in the Financial Statements.
2.10 Ownership of Stock. Schedule A sets forth a
complete list of the holders of all outstanding shares of the Company
immediately prior to the closing date. All of said shares have been
validly issued and are fully paid and nonassessable. The Company has
issued and outstanding a total of 1,368,387 shares of common stock
and, to the knowledge of the Company, the Shareholders listed on
Schedule A hereto own that number of shares of common stock of the
Company reflected in said Schedule.
2.11 Accuracy of All Statements Made by Company. No
representation or warranty by the Company and the Shareholders in this
Agreement, nor any statement, certificate, schedule or exhibit hereto
furnished or to be furnished by or on behalf of the Company or the
Shareholders pursuant to this Agreement, nor any document or
certificate delivered to the Purchaser pursuant to this Agreement or
in connection with actions contemplated hereby, contains or shall
contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statement contained therein not
misleading.
2.12 Access to Documents; Opportunity to Ask Questions.
The Company shall make available for inspection by Purchaser and its
directors, officers, employees, counsel, representatives, accountants
and auditors (collectively, "Representatives"), during normal business
hours, corporate records, books of accounts, contracts and all other
documents requested by Purchaser, and shall permit Purchaser and such
Representatives to make reasonable inspection and examination of the
business, operations and affairs of the Company and to facilitate the
transactions contemplated by this Agreement. The Company and its
directors, officers and employees shall be available upon reasonable
notice and during normal business hours to answer questions of the
Purchaser and it Representatives concerning the business, operations
and affairs of the Company.
2.13 Brokers, Finders. Company has identified and disclosed
to Purchaser Doug Cole and John Adamson as the sole brokers or finders
or have or may have any claim against Purchaser for any brokerage or
finder's commission, fee or similar compensation related to this
transaction.
All representations and warranties under the above Section 2
shall survive closing of the transactions hereunder.
3. Shareholder Reperesentations, Warranties and Security Act
Provisions.
3.1 Agreement and Purchaser Shares.
a. Each Shareholder acknowledges on his, her or its own
behalf that he, she or it has been supplied with this Agreement and
that each is familiar with and understands its contents.
b. Each Shareholder represents and warrants on his, her
or its own behalf that, in determining to acquire the shares of
Purchaser, exchanging therefor Shareholders' respective shares in
Company, he, she or it has relied solely on his or her own analysis of
information obtained from Purchaser and on the advice of such
Shareholders' legal counsel and accountants or other financial
advisors with respect to the tax and other consequences involved in
acquiring Purchaser Shares.
c. Each Shareholder represents on his, her or its own
behalf that he/she/it owns the shares set forth opposite his/her/its
name on Schedule A free from any claims, liens or other encumbrances
and that such Shareholder has the full right, power and authority to
transfer said shares.
3.2 Restrictions on Disposition of Shares. Each of the
Shareholders on his, her or its own behalf represents and warrants
that the shares of Purchaser received hereunder are acquired for their
own respective accounts and not with the present view towards the
distribution thereof and that they will not dispose of such shares
except (i) pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or (ii) in any other transaction
which, in the opinion of counsel, reasonably acceptable to the
Purchaser, is exempt from registration under the Securities Act of
1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
3.3 Evidence of Compliance With Private Offering Exemption.
a. Each Individual Shareholder represents and warrants on
his or her own behalf that (i) Shareholder is at least 21 years of
age; (ii) Shareholder is a United States citizen; (iii) Shareholder
has adequate means of providing for Shareholder's current needs and
personal contingencies; (iv) Shareholder has no need for liquidity in
Shareholder's investments; (v) Shareholder maintains his or her
principal residence at the address shown in Schedule A; and (vi) all
investments in and commitments to non-liquid investments are, and
after the purchase of Purchaser Shares will be, reasonable in relation
to Shareholder's net worth and current needs. Each of the Shareholders
represents on his, her or its own behalf that he, she or it has
received adequate information about the business and history of the
Purchaser and the financial condition of the Purchaser, and also has
received such other documents and disclosures required or requested by
such Shareholder. Each of the Shareholders represents that he, she or
it has such knowledge of finance, securities, and investments,
generally, to evaluate the risks of the transaction set forth in this
Agreement.
b. Each corporate Shareholder represents and warrants on
its own behalf that (i) said corporation is a corporation duly formed
and in good standing in the state of its formation; (ii) was not
formed for the purpose of acquiring the securities of Purchaser; and
(ii) the individual executing this Agreement on its behalf has been
duly authorized to do so by said corporations' board of directors.
c. Each trust Shareholder represents and warrants on its
own behalf that (i) the trustee of said trust has knowledge and
experience in financial and business matters and is capable of
evaluating the merits and risks of investment in securities; (ii) that
said trust was not formed for the purpose of acquiring the securities
of Purchaser; and (iii) that the individual executing this Agreement
on behalf of the trust is the duly-appointed trustee or is otherwise
authorized by the trustee to execute this Agreement.
d. Each Shareholder understand that he/she/it must bear
the economic risk of the investment for an indefinite period of time
because the shares to be issued by the Purchaser hereunder have not
been registered under applicable securities laws and therefore cannot
be sold unless they are subsequently registered under such securities
laws or an exemption from such registration is available; that each
certificate will bear a restrictive legend to the effect that the
shares have not been registered under securities laws and are
therefore restricted on transferability and sale of such shares; and
that stop transfer instructions will be placed upon such shares with
the transfer agent of the Purchaser concerning such restrictions.
e. Each Shareholder shall cooperate with Purchaser and
shall provide such additional information as Purchaser may reasonably
require to establish Shareholder's experience in investment and in
financial and business matters, and (if applicable) qualification as
and accredited investor for purposes of Regulation D exemptions.
3.4 Notice of Limitations on Disposition. The Shareholders
and each of them represent that they are aware that the shares
distributed to them will not have been registered pursuant to the
Securities Act of 1933, as amended or under the securities laws of any
state and are subject to substantial restrictions on transfer as
described in the Agreement. Each Shareholder further understands that
(i) Purchaser has no obligation or intention to register any Purchaser
Shares for resale or transfer under the 1933 Act or any state
securities laws. Shareholders therefore understand and acknowledge,
specifically, that under current interpretations and applicable rules,
they may have to retain such shares for a period of as long as two
years and at the expiration of such period such sales may be confined
to brokerage transactions of limited amounts requiring certain
notification filings with the Securities and Exchange Commission and
such disposition may be available only if the Purchaser is current in
its filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or other public
disclosure requirements, and the other limitations imposed thereby on
the disposition of shares of the Purchaser.
3.5 Shareholder Reliance on Professional Counsel.
Each Shareholder acknowledges that he/she has been encouraged to rely
upon the advice of his or her legal counsel and accountants or other
financial advisors with respect to the tax and other considerations
relating to the purchase of Purchaser Shares and has been offered,
during the course of discussions concerning the acquisition of
Purchaser Shares, the opportunity to ask such questions and inspect
such documents (including the books and records and financial
statements) concerning Purchaser and its business and affairs as
Shareholder has requested so as to understand more fully the nature of
the investment and to verify the accuracy of the information supplied.
3.6 No Government Review or Opinion. Each Shareholder
acknowledges and understands that no federal or state agency,
including the Securities and Exchange Commission or the securities
commission or authorities of any state, has approved or disapproved
the Purchaser Shares, passed upon or endorsed the merits of any
offering, or made any finding or determination as to the fairness of
the Purchaser Shares for public investment.
3.7 Truth of Representations. Each Shareholder
acknowledges and understands that the Purchaser Shares are being
offered and sold under the terms of this Agreement in reliance on
specific exemptions from the registration requirements of federal and
state laws and that Purchaser is relying upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments, and
understandings set forth herein in order to determine the
Shareholders' suitability to acquire the Purchaser Shares. Each
Shareholder thus represents and warrants that the information set
forth herein concerning or relating to such Shareholder is true and
correct.
All representations and warranties under the above Section 4 shall
survive the closing of the transactions hereunder.
4. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants as follows:
4.1 Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada with full power and authority to
enter into and perform the transactions contemplated by this
Agreement.
4.2 Performance of this Agreement. The execution and
performance of this Agreement and the issuance of stock and other
transactions contemplated herein have been authorized by all necessary
corporate action by Purchaser. This Agreement, when executed and
delivered, will constitute the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms.
4.3 Financials; Absence of Changes. True copies of the
audited financial statements of the Purchaser as of the fiscal year
ended December 31, 1999 (the "Purchaser Balance Sheet Date") and the
quarter ended March 31, 2000 (the "Balance Sheet Date"), and
statements of operations, statements of cash flows, and statements of
stockholder's equity for said fiscal year and quarter have been
delivered by the Purchaser to the Company (collectively, the foregoing
statements are referred to herein as the "Purchaser Financial
Statements"). The Financial Statements are complete and correct in all
material respects and present an accurate and complete disclosure of
the financial condition of the Purchaser as of their respective dates,
and the results of operations for the periods covered thereby. The
Purchaser Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis. Since the Balance Sheet Date, there has been no material
change in the financial condition of the Company. Since the Balance
Sheet Date, Purchaser has conducted its business only in the ordinary
course, none of which, if disclosed, would alter substantially the
financial condition of Purchaser as reflected in the Purchaser
Financial Statements.
4.4 Liabilities. There are no material liabilities of the
Purchaser, whether accrued, absolute, contingent or otherwise, which
arose or relate to any transaction of the Purchaser, its agents or
servants which are not disclosed by or reflected in the Purchaser
Financial Statements. As of the date hereof, there are no known
circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, which may hereafter give rise to
liabilities, except in the normal course of business of the Purchaser,
none of which, if disclosed, would alter substantially the financial
condition of Purchaser as reflected in the Purchaser Financial
Statements.
4.5 Litigation. There are no legal, administrative or
other proceedings, investigations or inquiries, product liability or
other claims, judgments, injunctions or restrictions, either
threatened, pending or outstanding against or involving the Purchaser
or its subsidiaries, if any, or their assets, properties, or business,
nor does the Purchaser or its subsidiaries know, or have reasonable
grounds to know of any basis for any such proceedings, investigations
or inquiries, product liability or other claims judgments, injunctions
or restrictions. In addition, there are no material proceedings
existing, pending or threatened to which any officer, director
shareholder, subsidiary or other affiliate of Purchaser is a party
adverse to Purchaser or has a material interest adverse to Purchaser.
4.6 Taxes. All federal, state, foreign, county and local
income, profits, franchise, occupation, property, sales, use, gross
receipts and other taxes (including any interest or penalties relating
thereto) and assessments which are due and payable have been duly
reported, fully paid and discharged as reported by the Purchaser, and
there are no unpaid taxes which are, or could become a lien on the
properties and assets of the Purchaser. All tax returns of any kind
required to be filed have been filed and the taxes paid or accrued.
Except as may be disclosed in the Financial Statements, there is no
taxing authority or agency asserting against Purchaser any deficiency
or other claim for the payment of additional taxes or assessments.
4.7 Legality of Shares to be Issued. The shares of common
stock of the Purchaser to be delivered to the Shareholders pursuant to
this Agreement, when so delivered, will have been duly and validly
authorized and issued by the Purchaser, will be fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable
state and federal securities laws.
4.8 Governmental Consents. No consent, approval,
qualification, order or authorization of, or any filing with, any
federal, state or local governmental authority is required on the part
of Purchaser in connection with Purchaser's valid execution, delivery
or performance of this Agreement, or the offer, sale or issuance of
the Purchaser Shares by Purchaser, except for such filings as have
been made prior to the date hereof, and except for any notices of sale
required to be filed with the Securities and Exchange Commission under
Regulation D of the Securities Act of 1933, as amended, or any post-
closing filings as may be required under applicable state securities
laws, which Purchaser shall timely file within the applicable periods
therefore.
4.9 Capitalization. The authorized capital of
Purchaser consists, or will consist immediately prior to the closing
date, of 50,000,000 shares of common stock, $0.001 par value, of
which immediately after the issuance of the Purchaser Shares
hereunder, 10,784,935 shares will be issued and outstanding.
Immediately prior to the closing date, there were outstanding options
to purchase 930,000 shares of the common stock of the Purchaser, at
exercise prices in a range of $1.75 to $7.60. Except for the
foregoing shares and options, there are no outstanding options,
warrants, rights (including conversion or pre-emptive rights and
rights of first refusal), or agreements for the purchase from
Purchaser of any shares of its capital stock.
4.10 No Covenant as to Tax Consequences. It is the desire
of the parties hereto that this transaction be undertaken as a
reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code, qualifying for a tax-free exchange of securities. Purchaser
will use its best efforts to meet the requirements of Section
368(a)(1)(B). Notwithstanding, it is expressly understood and agreed
that neither the Purchaser nor its officers or agents has made any
warranty or agreement, expressed or implied, as to the tax
consequences of the transactions contemplated by this Agreement or the
tax consequences of any action pursuant to or growing out of this
Agreement.
4.11 Brokers, Finders. iShopper will hold Shareholders and
Company harmless from the claims by Doug Cole and John Adamson as
those broker(s) or finder(s) disclosed by Company and engaged by
iShopper or otherwise acting or claiming to be acting on iShopper's
behalf in identifying Company or otherwise facilitating the
transactions pursuant to this Agreement.
4.12 Information. Purchaser acknowledges that it has been
provided with financial and other written information about the
Company and has been given the opportunity by the Company to obtain
any additional information and ask such questions and receive answers
concerning the Company as it felt necessary. To the extent it availed
itself of such opportunity, the Company provided satisfactory
responses to all of Purchaser's requests for information.
4.13 Accuracy of All Statements Made by the Purchaser.
No representation or warranty by the Purchaser in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to
be furnished by the Purchaser pursuant to this Agreement, nor any
document or certificate delivered to the Company or the Shareholders
pursuant to this Agreement or in connection with actions contemplated
hereby, contains or shall contain any untrue statement of material
fact or omits to state or shall omit to state a material fact
necessary to make the statement contained therein not misleading.
All representations and warranties under the above Section 4 shall
survive the closing of the transactions hereunder.
5. Conditions Precedent to the Purchaser's Obligations.
Unless waived in writing by Purchaser, each and every obligation of
the Purchaser to be performed on the closing date shall be subject to
the satisfaction prior thereto of the following conditions:
5.1 Truth of Representations and Warranties. The
representations and warranties made by the Company and the
Shareholders in this Agreement or given on their behalf hereunder
shall be substantially accurate in all material respects on and as of
the closing date with the same effect as though such representations
and warranties had been made or given on and as of the closing date.
5.2 No Material Adverse Change. As of the closing date
there shall not have occurred any material adverse change, financially
or otherwise, which materially impairs the ability of the Company to
conduct its business as currently conducted.
5.3 Time Limit on Closing. Closing shall have taken place
by June 15, 2000, unless otherwise agreed between the Company and
Purchaser in writing.
5.4 Employment Agreements. The Company, Purchaser and
Steve K. Burke shall have shall have entered into an employment
agreement substantially in the form attached hereto as Schedule D.
5.5 Confidentiality Agreements. The Company shall have
entered into agreements of confidentiality and nondisclosure with all
current employees substantially in the form attached hereto as
Schedule E.
5.6 Conversion of Preferred Stock. All outstanding shares
of Series A Preferred Stock of the Company shall have been converted
into shares of Common Stock of the Company.
5.7. Exercise of Options. All outstanding options for
shares of Common Stock of the Company shall have been exercised.
6. Conditions Precedent to Obligations of the Company and the
Shareholders. Unless waived in writing by the Company and each
Shareholder, each and every obligation of the Company and the
Shareholders to be performed on the closing date shall be subject to
the satisfaction prior thereto of the following conditions:
6.1 Truth of Representations and Warranties. The
representations and warranties made by the Purchaser in this Agreement
or given on its behalf hereunder shall be substantially accurate in
all material respects on and as of the closing date with the same
effect as though such representations and warranties had been made or
given on and as of the closing date.
6.2 No Material Adverse Change. As of the closing date
there shall not have occurred any material adverse change, financially
or otherwise, which materially impairs the ability of the Purchaser to
conduct its business as currently conducted or as proposed to be
conducted.
6.3 Employment Agreements. The Company, Purchaser and
Steve K. Burke shall have shall have entered into an employment
agreement substantially in the form attached hereto as Schedule D.
6.4 Confidentiality Agreements. The Company shall have
entered into agreements of confidentiality and nondisclosure from key
executive employees substantially in the form attached hereto as
Schedule E.
6.5 Time Limit on Closing. Closing shall have taken place
by June 15, 2000, unless otherwise agreed between the Company and
Purchaser in writing.
6.8 Operating Capital to be Advanced to Company: Purchaser
is fully informed of and acknowledges the Company's cash flow needs.
In that connection, Purchaser shall advance to Company $250,000 as
follows: $60,000 prior to closing and upon execution of Promissory
Note and Pledge Agreement, $90,000 at closing as provided in section
9.3(d) below; an additional $50,000 on or before June 30, 2000; and
an additional $50,000 on or before July 15, 2000. Such funds are to
be dedicated to operating capital and to satisfy or service note
obligations owing Company, as disclosed hereunder. All funds thus
advanced shall be posted on the books of the Company as loans from
Purchaser to the Company and shall be repaid from the Company's
available operating revenue, with interest at the periodic prime rate
published by BankOne, Utah, N.A, as of the date of advance, each
pursuant to an unsecured demand note and with full privilege of
prepayment of all or any part of the principal and interest at any
time without penalty or bonus.
6.9 Minimum Private Placement of Purchaser Common Stock.
Purchaser shall have provided written evidence satisfactory to the
Company that it has received subscriptions to purchase shares of the
Common Stock of Purchaser pursuant to its Private Placement Memorandum
dated April 28, 2000, for a minimum of $3,000,0000 in subscription
payments or debt conversions in accordance with such Memorandum.
6.10 Company Officers and Directors. The officers and
directors of the Company as of the date of Closing shall be comprised
of those individuals set forth in Schedule G hereto.
7. Post-Closing Covenants
7.1 Additional Operating Capital to be Advanced. On or
before June 30, 2001, and in addition to funds advanced on or before
the closing pursuant to Section 6.8 above, Purchaser shall advance
additional funds totaling not less than $750,000. The exact amount of
such additional funds and the rate at which said funds are to be
advanced is to be determined based on a budget mutually agreed upon in
good faith between Purchaser and the Company's management promptly
following the closing date, but no later than 30 days following such
date. Such funds shall be advanced no less frequently than quarterly
and shall be applied to operating capital and the satisfaction or
servicing of debt of the Company existing as of the closing date and
disclosed in Schedules H to H-2 hereto. Such funds shall be delivered
in exchange for the unsecured, negotiable promissory note of the
Company, with interest at the periodic prime rate published by
BankOne, Utah, N.A. on the date of the advance, with principal and
interest payable in up to sixty consecutive fully amortized payments,
the number of which shall be solely determined by the management of
the Company, with full privilege of prepayment of all or any part of
the principal and interest at any time without penalty or bonus.
7.2 Establishment of Bonus Schedule. The Company and
Purchaser shall cooperate in establishing a bonus schedule for
Company's key employees, consistent and comparable with the bonus
schedule for key employees of Purchaser's other subsidiaries. Company
employees shall be subject to the policies and conditions governing
all employees of Purchaser and its subsidiaries.
7.3 Participation in Purchaser Stock Options. On or before
the fifth anniversary following the closing date, Purchaser shall make
available to the Company, pursuant to a stock option plan of
Purchaser, stock options covering a minimum of 500,000 shares of the
Common Stock of Purchaser to be issued as the Company may elect over
the five years following closing; provided, however, that, upon
approval of such stock option plan by the Board of Directors of
Purchaser, and in any event no later than September 1, 2000, Purchaser
shall make available for option grants to employees of the Company a
minimum of 400,000 common shares covered by such plan. Such options
shall be granted and allocated among employees of the Company by the
Compensation Committee of the Board of Directors of the Company.
Options granted as incentive stock options under the Plan shall be
exercisable at the greater of (a) fair market value as of the date of
issuance, based on the best efforts of the Parent's Board of Directors
to determine said value, or (b) 80% of the lowest bid value of
Parent's Common Stock over the thirty days immediately prior to option
issuance. Options granted as nonstatutory options under the Plan
shall be exercisable at no more than 80% of the lowest bid value of
Parent's Common Stock over the thirty days immediately prior to option
issuance.
8. Publicity. The parties agree that no publicity, release or other
public announcement concerning the transactions contemplated by this
Agreement shall be issued by any party hereto without the advance
approval of both the form and substance of the same by the other
parties and their counsel, which approval, in the case of any
publicity, release or other public announcement required by applicable
law, shall not be unreasonably withheld or delayed.
9. Closing.
9.1 Time and Place. The closing of this transaction
("closing") shall take place at the offices of iShopper.com, Inc.,
8722 South 300 West, Sandy, Utah 84070 on or before 5:00 p.m., June
15, 2000, or at such other time and place as the parties hereto shall
agree upon. Such date is referred to in this agreement as the "closing
date."
9.2 Documents To Be Delivered by the Company and the
Shareholders. At the closing the Company and the Shareholders shall
deliver to the Purchaser the following documents:
a. Certificates for the number of shares of common stock
of the Company in the manner and form required by subsection 1.1.
hereof.
b. All documents required to be delivered pursuant to
Purchaser's conditions to closing set forth in Section 5 hereof.
c. Such other documents of transfer, certificates of
authority and other documents as the Purchaser may reasonably request.
9.3 Documents To Be Delivered by the Purchaser. At the
closing the Purchaser shall deliver to the Company and the
Shareholders the following documents:
a. Certificates for the number of shares of common stock
of the Purchaser as determined in subsection 1.2. hereof.
b. All documents required to be delivered pursuant to the
Company's and the Shareholders' conditions to closing set forth in
Section 6 hereof.
c. Such other documents of transfer, certificates of
authority and other documents as the Company and/or the Shareholders
may reasonably request.
d. $90,000 in immediately available funds. Unless
otherwise agreed, said funds shall be conveyed by cashiers check
payable to the Company or wire transfer to an account designated by
the Company
10. Attorneys' Fees. Should any party to this Agreement default
in any of the covenants, conditions, or promises contained herein, the
defaulting party shall pay all costs and expenses, including a
reasonable attorney's fee, which may arise or accrue from enforcing
this Agreement, or in pursuing any remedy provided hereunder or by the
statutes of the State of Utah.
11. Assignment. This Agreement may not be assigned in whole or
in part by the parties hereto without the prior written consent of the
other party or parties, which consent shall not be unreasonably
withheld.
12. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, their
heirs, executors, administrators, successors and assigns.
13. Partial Invalidity. If any term, covenant, condition or
provision of this Agreement or the application thereof to any person
or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Agreement or application of such term or provision
to persons or circumstances other than those as to which it is held to
be invalid or unenforceable shall not be affected thereby and each
term, covenant, condition or provision of this Agreement shall be
valid and shall be enforceable to the fullest extent permitted by law.
14. No Other Agreements. This Agreement, together with the
agreements referred to herein, constitutes the entire Agreement
between the parties and there are and will be no oral representations
which will be binding upon any of the parties hereto.
15. Survival of Covenants, Representations and Warranties. All
covenants, representations, and warranties made herein to any parties
or in any statement or document delivered to any party hereto, shall
survive the making of this Agreement and the Closing.
16. Further Action. The parties hereto agree to execute and
deliver such additional documents and to take such other and further
action as may be required to carry out fully the transaction(s)
contemplated herein.
17. Amendment. This Agreement or any provision hereof may not
be changed, waived, terminated or discharged except by means of a
written supplemental instrument signed by the party or parties against
whom enforcement of the change, waiver, termination, or discharge is
sought.
18. Headings. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
19. Notices. Any notice, consent, approval, request, demand or
other communication required or permitted hereunder must be in writing
to be effective and shall be deemed delivered and received (i) if
personally delivered, including by a nationally recognized overnight
delivery service, or if delivered by facsimile, telex or telecopy with
electronic confirmation, when actually received by the party to whom
sent, or (ii) if delivered by mail (whether actually received or not),
at the close of business on the third business day next following the
day when placed in the federal mail, postage prepaid, certified or
registered mail, return receipt requested, addressed to Purchaser or
the Company at the address/facsimile number set forth below their
respective signatures to this Agreement, or to any Shareholder at the
address specified in Schedule A hereto.
20. Counterparts. This agreement may be executed in two or more
partially or fully executed counterparts, each of which shall be
deemed an original and shall bind the signatory, but all of which
together shall constitute but one and the same instrument.
21. Full Knowledge. By their signatures, the parties
acknowledge that they have carefully read and fully understand the
terms and conditions of this Agreement, that each party has had the
benefit of counsel, or has been advised to obtain counsel, and that
each party has freely agreed to be bound by the teens and conditions
of this Agreement.
IN WITNESS WHEREOF, the parties hereto executed the
foregoing Stock Exchange Agreement to be effective as of the day and
year first above written.
PURCHASER: iSHOPPER.com, INC.
8722 South 300 West, Suite 106
Sandy, Utah 84070
Facsimile Number: (801) 984-9301
By /s/ William E. Chipman
---------------------------------
William E. Chipman, CFO
COMPANY: KT SOLUTIONS, INC.
110 Broadway
Oakland, CA 94607
Facsimile Number: (510) 251-6235
By /s/ Steve K. Burke
---------------------------------
Steve K. Burke, President & CEO
SHAREHOLDERS:
/s/ Steve K. Burke /s/ John C. Graham
------------------------------- ---------------------------------
Steve K. Burke John C. Graham
/s/ Greg Stangler /s/ James E. Duffy
------------------------------- ---------------------------------
Greg Stangler James E. Duffy
/s/ John M. Dunn /s/ John B. Collins
------------------------------- ---------------------------------
John M. Dunn John B. Collins
/s/ Mark Seymour /s/ Margaret Seymour
------------------------------- ---------------------------------
Mark Seymour Margaret Seymour
/s/ Charles Burke, Trustee /s/ James O. Mohr
------------------------------- ---------------------------------
Charles Burke, Trustee, James Mohr
Burke Family Trust
/s/ Douglas Baker /s/ John D. Reeves
------------------------------ ---------------------------------
Douglas Baker John D. Reeves
MEDIASOFT
By /s/ James O. Mohr
-----------------------------
Its James O. Mohr, Vice President
<PAGE>
Schedule A
to
Stock Exchange Agreement
List of Shareholders
of KT Solutions, Inc.
No. of Shares
of
Common Stock No. of Shares of
of the Common Stock
Company of the Purchaser
held by to be Issued to
Name of Shareholder Shareholder each Shareholder
----------------------- ----------- ----------------
Steve K. Burke 638,385 233,261
62 Crestmont Drive
Oakland, CA 94619
(510) 851-6233
John C. Graham 251,667 91,958
7321 Flagstaff Road
Boulder, CO 80302
(303) 447-1155
Greg Stangler 150,000 54,809
35 N. Bedrock Avenue
Castlerock, CO 80134
(303) 660-5226
James E. Duffy 25,000 9,135
421 Juanita Way
Los Altos, CA 94022
(650) 941-8111
James Mohr 15,000 5,481
12104 Ballentine
Overland Park, KS 46213
(913) 879-1434
Douglas Baker 20,000 7,308
512 Frederick #1
San Francisco, CA 94117
(415) 661-5801
<PAGE>
Schedule A
(continued)
No. of Shares
of
Common Stock No. of Shares of
of the Common Stock
Company of the Purchaser
held by to be Issued to
Name of Shareholder Shareholder each Shareholder
----------------------- ----------- ----------------
John M. Dunn 20,000 7,308
4369 Altamirano Way
San Diego, CA 32103
(850) 898-3147
John Collins 133,333 48,719
3080 E. Lakeshore Drive
Whitefish, MT 59937
(406) 862-7486
Mark & Margaret Seymour 33,334 12,180
7828 S.E. 22nd Avenue
Mercer Island, WA 98040
(206) 232-5535
Charles Burke TTEE 33,334 12,180
Burke Family Trust
9818 Bloomfield Drive
Omaha, NE 68114
(402) 391-5056
Jim Mohr 33,334 12,180
Bob Alfson
MediaSoft
7200 N. Broadway Ext.
Oklahoma City, OK 73116
(405) 842-7512
John D. Reeves 15,000 5,481
7738 Prairie Lake Trail ---------- ---------
Parker, CO 80134
(308) 369-8765
TOTAL: 1,368,387 500,000
========== =========
<PAGE>
Schedule B
to
Stock Exchange Agreement
Exceptions and Disclosures
1. Loans
Original
Loan Initial Term
Lendor Amount Rate Start (Mos) Description
1.1 Charles K. Burke 25,000 15% 5/1/98 12
1.2 Jack Graham 120,000 20% 6/15/97 60 Preferred Stock
2. Settlement Agreements
Name Royalty Payments
2.1 Theodore F. Belden 1.65% mo gross revenue, max $252,450
2.2 James W. Corcoran 3.13% mo gross revenue, max $478,890
2.3 Greg Stangler 1.00% mo gross revenue, max $120,000
2.4 Al Waller 0.22% mo gross revenue, max $33,660
3. Distribution Channels - Training Companies
Company Date Description
------- ---- -----------
3.1 Nova Vista & KT Solutions 3/1/99 Private label license agreement
3.2 Nova Vista & KT Solutions 12/6/99 Commercial outsourcing agreement
3.3 New Horizons & KT Solutions 6/29/99 First Amendment to agreement
<PAGE>
Schedule B
(continued)
4. Distribution Channels - Online
Company Date Description
------- ---- -----------
4.1 Click2Learn 12/15/99 Content license and resale agreement
4.2 Headlight 10/30/98 Content agreement
4.3 Learn2.com 4/13/99 Software license and content agreement
4.4 Trainingnet 12/3/99 Provider partner program
4.5 Euniversity 11/18/99 Authorized reseller agreement
4.6 Dynamic Minds Business agreement
4.7 InMarkets.com 1/5/00 Content license and resale agreement
4.8 Acadio 11/3/99 Authorized reseller agreement
5. Distribution Channels - Retail
Company Date Description
------- ---- -----------
5.1 Fatbrain.com 11/16/99 Authorized reseller agreement
5.2 Digital River, 1/19/99 Software distribution agreement
Inc.
5.3 NetSales 10/21/98 Distribution agreement
5.4 amazon.com 10/99 Distribution agreement
6. Distribution Channels - Publishing
Company Date Description
6.1 ComputerPREP, Inc. Development contract
6.2 Prosoft Development Contract
6.3 KT Solutions & Sybex Electronic license agreement
6.4 Nova Vista & Sybex 1/3/00 Label license agreement
6.5 Nova Vista & KT 5/31/99 CDROM production agreement
Solutions
6.6 Lucent Technologies Software distribution agreement
6.7 MicroAge Federal 6/16/97 GSA solicitation
6.8 Earthweb 12/21/99 Authorized reseller agreement
6.9 Westwood Computer 11/15/99 Authorized reseller agreement
6.1 Pinnacle Multimedia 9/3/99 Authorized reseller agreement
<PAGE>
Schedule B
(continued)
7. Distribution Channels - Other
Company Date Description
7.1 Learnshare 7/7/98 Preferred vendor agreement
8. Test Construction Set License Extension, rights conveyed to
Rightclick, below:
8.1 Rightclick 6/1/99 Right to use test construction software
9. Prime Mover - proposal to replicate CDs
10. Leases
Lease # Date Term Monthly Rent
10.5 04-10929-1 9/16/97 36 $234.82
10.6 04-10999-1 11/12/97 36 $132.91
10.7 004-11950-01 10/28/99 36 $871.30
10.8 Oakland Office 5/27/99 60 $4,556.00
Building
11. Series A Preferred Stock Purchase Agreements; and related
Registration Rights Agreements (all converted to common prior to
closing)
Purchaser Date Price/Sh # of Shares
11.1 Mark & Margaret 2/22/96 0.75 33,334
Seymour
11.2 Mediasoft, Inc. 2/22/96 0.75 33,334
11.3 John M. Dunn 4/22/96 0.75 20,000
11.4 John C. Graham 5/1/96 0.75 166,667
11.5 John D. Reeves 2/1/97 0.75 15,000
III
11.6 The Burke Family 2/1/96 0.75 33,334
Trust
11.7 John Collins 8/1/97 0.75 133,333
<PAGE>
Schedule C
to
Stock Exchange Agreement
Intellectual Property And Product Rights
1. KT Solutions has the following intellectual property:
Patents: The Company has no patents or patents pending.
Registered Trademarks: The Company has used its trade name "KT
Solutions " since October 3, 1996, but has no registered trademarks or
trade mark registrations pending.
Copyrights: The Company has no registered copyrights or
copyrights pending.
2. Pursuant to certain agreements listed in Items 2 through 9,
inclusive, in Schedule B hereof, the Company utilizes third-party
content to develop technology-based training products and, in
accordance with the provisions of such royalty-bearing contracts, the
Company has certain rights in connection with those products listed at
Schedule C-1.
<PAGE>
Schedule D
to
Stock Exchange Agreement
Employment Agreement
<PAGE>
Schedule G
to
Stock Exchange Agreement
Directors and Officers of the Company, Post-Closing
A. Directors
Steve K. Burke Director
John C. Graham Director
(vacancy)
B. Officers
Title Name
President and Chief Executive Steve K. Burke
Officer
Vice President Steve K. Burke
Chief Financial Officer Steve K. Burke
Secretary Steve K. Burke
