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U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended SEPTEMBER 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from_________ to ___________
Commission file number 0-17569
DECISIONLINK, INC.
(Name of small business issuer in its charter)
FiberChem, Inc.
(former name if changed from last report)
Delaware 84-1063897
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1181 Grier Drive, Suite B, Las Vegas, Nevada 89119
(address of principal executive offices) (Zip Code)
Issuer's telephone number: (702) 361-9873
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
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(Title of class)
Indicate by check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
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Indicate by check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X ]
Issuer's revenues for its most recent fiscal year: $215,274
The aggregate market value of the voting and non-voting common stock held
by non-affiliates computed by reference to the last sale price of such stock on
December 21, 2000 of $0.125 was $7,538,931.
As of December 21, 2000, the Issuer had 68,251,557 shares of Common Stock,
par value $.0001 per share, outstanding.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
DecisionLink, Inc., a Delaware corporation formerly known as FiberChem,
Inc. ("FCI"), was incorporated on December 21, 1988 as the successor to
Tipton Industries, Inc., incorporated on April 6, 1987. On July 27, 2000, FCI
combined its business with Intrex Data Communications Corp. ("Intrex"), a
British Columbia corporation. Pursuant to the combination, FCI acquired all
the voting securities of Intrex and Pandel Instruments, Inc., a company
affiliated with Intrex, in exchange for securities exchangeable for, or
convertible into approximately a minimum of 50% and up to 80% of FCI's common
stock if certain milestones related to the Intrex business are met during a
two year period following the closing. On December 1, 2000, FCI changed its
corporate name from FiberChem, Inc. to DecisionLink, Inc. to better reflect
the expanded scope of the combined businesses. The business combination has
been accounted for as a purchase of DecisionLink, Inc. by Intrex. Unless the
context otherwise requires, references to DecisionLink or the Company include
FCI, its subsidiaries and predecessors.
We believe that the combined company, DecisionLink, can establish itself
as a leading provider of remote asset monitoring and control systems,
combining Intrex's satellite and wireless communication technology with FCI's
sensor technology, to greatly reduce the cost of transmitting and monitoring
data acquired from remote, mobile or difficult to service multiple locations.
We believe that these large potential cost savings will open opportunities
for the combined company in markets such as residential and commercial
propane gas tanks, oil wells, oil and gas pipelines and vehicle fleets.
In connection with the business combination, we obtained gross cash
financing proceeds of $3,635,000 and certain securities of nominal value from
the sale of $2,350,000 principal amount of 12% convertible debentures and
notes due July 26, 2002 and 257,000 shares of our Series B Convertible
Preferred Stock, with a stated value of $10 per share. The debentures and
notes are convertible into shares of common stock at a conversion price per
share equal to the lesser of $0.30 or 92% of the average of the market price
for the common stock for the 20 consecutive trading days ending two trading
days prior to the conversion. Each share of Series B Convertible Preferred
Stock is convertible into common stock at a stated conversion price of $0.59
per share, subject to a reduction of $0.07 per share on August 25 of each
year commencing 2001, and certain other adjustments in the conversion price.
From inception through the period ended September 30, 2000, DecisionLink
and its wholly-owned subsidiaries, Intrex, Firebird Data Communications,
Inc., FCI Environmental, Inc., and Pandel Mergerco, Inc. have operated in the
same industry segment.
SAFE HARBOR ACT STATEMENT
This report contains forward-looking statements, which are made pursuant
to the safe-harbor provisions of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical fact contained in
this report are forward-looking statements. We generally use words such as
"will," "plans," "expects," "believes," "anticipates" or "intends" and
similar expressions that reflect future expectations in order to identify
forward-looking statements. Forward-looking statements reflect management's
expectations as to future events and are inherently uncertain.
Forward-looking statements involve risks and uncertainties which could cause
actual results to differ materially from results anticipated by the
forward-looking statements. These risks and uncertainties include, but are
not limited to, DecisionLink's ability to market its products, services and
technologies worldwide, its ability to integrate the management, operations
and technologies of formerly independent companies, its ability to retain key
members of its senior management and Board of Directors, the timely
development and acceptance of new products, the ability to manufacture new
products in commercial quantities at reasonable cost, the impact of
competitive products and pricing, final promulgation and enforcement of
regulations, the timely funding of customer's projects, the ability to
generate sufficient working capital from operations and/or attract investment
or place debt in sufficient amounts to fund the financial obligations of
DecisionLink's business model and other risks detailed from time to time in
our SEC reports. We do not undertake any obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time.
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(b) BUSINESS OF ISSUER
DecisionLink develops, produces, markets and licenses end-to-end
solutions for wireless monitoring of remote and mobile assets. We believe
that our ability to collect data on a real-time basis through our
SensorFusion-SM- technology combined with the ability to transmit and monitor
the data from remote or difficult to reach assets and locations through our
communications technology offers us a unique opportunity for rapid growth in
the expanding wireless data communications market. Our products and services
are especially suitable for monitoring individual residential and commercial
propane gas tanks, oil and gas wells, pipelines and compressors, vehicle
fleets and other similar markets. We will also continue to pursue existing
above ground storage tank, offshore and sensor markets; and we will
incorporate our communications technology where appropriate. We believe that
these markets will provide significant revenue potential from the sale of
hardware and monitoring software, and significant recurring revenue potential
derived from ongoing monitoring and data management fees.
Our Intrex division provides low-cost, proprietary Internet and
communications technology for transmitting data to or from remote or mobile
assets on a real-time basis using third-party satellite services and other
wireless data systems. Data is routed through Intrex's global network that
acts as a data gateway and applications service provider. This allows
customers to monitor and control remote or mobile assets such as gas wells,
propane tanks, pipelines, compressors, storage tanks, offshore oil production
platforms, or service vehicles directly from a desktop PC.
Our FCI Environmental division develops optical chemical sensors that
produce continuous, real-time information on environmental pollutants in the
air, water and soil. These sensors and the Intrex communications technologies
are incorporated into products which we believe offer the environmental
monitoring community state-of-the-art sensing technology with all the
benefits of satellite and other wireless communications systems, including
dramatically reduced installation and start-up costs, lower communications
charges, ubiquitous coverage and the ability to receive data on a
customer-specific website.
PRODUCTS AND APPLICATIONS
SMARTTRANS-TM- is a sophisticated hardware and software package which
remotely monitors mobile or fixed industrial assets via satellite or cellular
telephone utilizing the Company's LeoLink-TM- and reports operations to the
customer on demand through the IntrexNet-TM- Universal Data Network (UDN).
LEOLINK-TM- is an extremely flexible microcomputer that stores data and
is an active control system and data link manager. It collects data
originating from remotely located equipment; stores and transmits that data;
and accepts commands for control of the remote equipment. It can be directly
interfaced to a wide variety of the customer's existing remote terminal units
(RTUs). LeoLink-TM- is supplied as a complete field installable package. It
is designed for use with Low Earth Orbit satellites or LEOs.
GEOLINK-TM- provides the same functionality as LeoLink-TM- but for use
with geosynchronous satellites or GEOs.
INTREXNET-TM- is a UDN that allows customers to send data using multiple
input devices or systems such as satellite, cellular, public Internet, or
private networks and receive decision-making information through the Internet
or private networks, pager networks, or public telephone systems.
FUELMATE-TM-/DATAMATE-TM- monitors output from intelligent flow meters
and electronic engine components which measure multiple functions such as
fuel use, rpm, temperature, injector timing, etc. and transmits the data on
demand via satellite. DataMate-TM- is a generic version of FuelMate-TM- and
has the ability to be programmed externally to monitor and process any type
of digital input signal.
INTREX ANYWHERE-TM- is a system that allows the IntrexNet-TM- UDN
customer to build a complete data acquisition system using the latest IP and
data base tools in conjunction with the latest in wireless and satellite
technology without having to invest in people and equipment infrastructure
required to build these systems from scratch.
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INTREXNET DATA PORTAL-TM- is a service of the IntrexNet-TM- UDN, which
allows customers access to communications networks using either a virtual
private network or a frame relay connection to the UDN. This is a very
flexible method for adding value added services to an OEM's portfolio. The
IntrexNet Data Portal-TM- allows us to provide OEM customers with private
labeled wireless communications services to provide very high quality
Internet based data collection and distribution systems.
PETROSENSE-Registered Trademark- CMS-4000 AND CMS-5000 SERIES are
fiber-optic based petroleum hydrocarbon sensors, which can detect
hydrocarbons in vapor and in water. We believe that this product line is the
best available technology for monitoring soil vapor and ground water on a
real-time basis. These products are now satellite and Internet enabled using
our SensorFusion-SM- technology.
OILSENSE-Registered Trademark--4000 AND PHA-100WL replace the now banned
Freon-based instruments used to determine the hydrocarbon content of produced
water from offshore oil production platforms. We believe that this niche
market represents a worldwide opportunity. The OilSense-Registered Trademark-
is now satellite and Internet enabled using our SensorFusion-SM- technology.
SENSOR-ON-A-CHIP-Registered Trademark- is an optical analytical
spectrometer on a plug-in chip in a standard 20-pin integrated circuit
package. Utilizing standard Texas Instruments components for ease of design
compatibility, these devices incorporate waveguides onto which a chemical
matrix may be coated. The presence of a chemical causes a reversible change
in the waveguide material that is detected and measured. The device is an
integral component of our SensorFusion-SM- technology, which integrates the
sensing and communications or messaging functions.
GASLINK-SM- is an ultrasound detection and communication device for the
measurement of fluid levels in tanks. This product uses our own patented
technology and proprietary communication systems. We believe that there is a
worldwide demand for this product.
COMPRESSIONLINK-SM- is a sensor and communication technology
specifically designed for compressor preventive maintenance control and
operational parameters. We believe that this is a large market with an urgent
need in remote oil flow compressor locations.
PROPRIETARY TECHNOLOGY
Our cutting edge sensor technology, state of the art satellite
communication technology, supervisory control and data acquisition systems
("SCADA"), and UDN system are protected by registered patents, copyrights and
trademarks, non-disclosure agreements, and proprietary design and software.
We own 23 U.S. patents and 15 International patents covering the
fundamental elements of both fiber and waveguide based chemical sensors. We
also own the key trademarks which identify our products, including
Sensor-on-a-Chip-Registered Trademark-, FOCS-Registered Trademark-,
PetroSense-Registered Trademark-, OilSense-Registered Trademark-,
LeoLink-TM-, SmartTrans-TM-, FuelMate-TM-, DataMate-TM-, IntrexNet Data
Portal-TM-, the IntrexNet Universal Data Network-TM- and Intrex Anywhere-TM-.
Through a five-year cross licensing agreement signed in 1999 with Bosch
Telecom GmbH, we license Bosch's proprietary chemistry and platforms with an
exclusive right for the medical market and non-exclusive rights as to other
markets in North America.
THE DECISIONLINK MARKETING STRATEGY
Building on our strengths we intend to establish ourselves as a leading
provider of remote asset monitoring and control systems. Our SensorFusion-SM-
technology integrates sensing and communications and/or messaging functions
seamlessly through our UDN and, with TCP/IP as its base protocol, it allows
an easy interface with most customer-supplied data management systems.
SensorFusion-SM- provides an end-to-end solution for clients with remote
assets that require cost efficient and time effective monitoring and control.
Our marketing strategy is to target large-scale applications where the
customer requires the functionality of high technology sensors and integrated
communication systems at a low delivery cost. These include applications such
as residential and commercial propane tanks, oil and gas wells, pipelines and
storage tanks.
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The Company believes that markets with these characteristics will provide:
- Significant revenue potential from the development and sale of
hardware;
- Significant recurring revenue potential derived from ongoing
monitoring and data management fees; and
- A strong, defensive position derived from the proprietary
communications and sensor technology, as well as the proprietary
communications protocol.
As part of our strategy, we have begun to establish joint-venture
partnerships with industry leaders to market our products and services.
MARKETING PARTNERS
On December 12, 2000, we signed a three-year agreement with Enraf BV of
Delft, Holland to jointly pursue the global aboveground storage tank (AST)
marketplace. This agreement calls for an initial purchase of
PetroSense-Registered Trademark- probes, a commitment to minimum purchases
over the life of the agreement, and to achieve a minimum level of business to
maintain exclusivity. The two companies will also explore opportunities to
incorporate DecisionLink's communication technology into Enraf's product
offerings.
Also on December 12, 2000, we announced that we had entered into a
memorandum of understanding (MOU) with Ridlington Enterprises Limited of
Tortola, British Virgin Islands, to form a joint venture company to identify
a mass market for DecisionLink's products in the Middle East and Central Asia
and to provide suitable distribution channels for those products. The
formation of this joint venture is subject to the parties reaching agreement
on the terms of a definitive joint venture agreement that is expected to be
in place by the end of January 2001.
Ridlington Enterprises Limited is part of the TRADCO Group of Companies
which is the holding entity for a group of Saudi Arabian companies owned by
Sheikh Khalid A. Alturki and Sons. TRADCO's main interests include: oil and
gas installations (both on and offshore); petrochemical and industrial
installations; power plants, substations, transmission lines and distribution
systems; construction management and materials; electrical and mechanical
contracting; electronics, including process controls, computer maintenance,
batteries, telecommunications, mobile radios, instrumentation and paging
systems; and general trading. The TRADCO group has completed numerous and
extensive programs for Saudi Arabian Oil Co. (SAUDI ARAMCO) and other major
international corporations.
On August 8, 2000, we announced that we had signed an MOU with Inepar
Telecom LTDA., a Brazilian communications company. The MOU will form the
basis of an agreement for a business venture between the two companies.
The joint business venture will give us access to Inepar's marketing
expertise, telecommunications systems, and licensees in Brazil and other
Latin American countries. The venture will give Inepar access to our
SensorFusion-SM- products and wireless solutions. DecisionLink and Inepar plan
to develop the propane monitoring, aboveground and underground storage tank,
and pipeline markets. Of particular interest to both companies is the
automatic meter reading market utilizing AMRPowerLink, an application we are
developing with Mainsborne Communications, Inc. for an automated meter
reading device manufactured by Mainsborne.
Inepar is a 30-year-old company with business interests and products in
the telecommunications, satellite, power, petroleum, and transportation
industries. Inepar is a shareholder in DAMOS SudAmerica, the ORBCOMM licensee
for Brazil and seven other Latin America countries. Inepar also is a licensee
for cellular phone services and two-way paging services within Brazil and
other Latin American markets.
ENVIRONMENTAL MONITORING MARKETS
The primary targets of DecisionLink's products have historically been in
the environmental monitoring marketplace, and more particularly in the
monitoring of ASTs, and monitoring of produced water on offshore oil
production platforms. During the twelve months ended September 30, 2000, we
sold approximately $1 million of products for these applications.
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On July 13, 1998, after a four-year process, the State of Florida passed
into law its new storage tank regulations with a compliance date of December
31, 1999. We believe that a significant population of the regulated community
has not taken action to achieve compliance. As of December 2000, Florida DEP
has designated about 800 sites as SNCs, or sites in Serious Non-Compliance.
Florida's inspection and notice-of-violation program is expected to be the
motivating factor for compliance, and therefore, we believe, installations of
our systems, although it is difficult to determine how soon. We believe that
this should result in ongoing revenues to us from this market. Other states
are expected to follow Florida in promulgating AST regulations, giving us an
opportunity for further growth, although there can be no assurance such
regulations will be promulgated or enforced.
Recently, DecisionLink and a pipe lining company received verbal
approval from the Florida DEP for use of the PetroSense-Registered Trademark-
product line as a leak detection strategy for pipelines, when used in
conjunction with an approved three dimensional exterior coating system. This
is expected to open up a new market with a presently undetermined size
potential.
The offshore produced water market exists because Freon-Registered
Trademark- is no longer manufactured under the Montreal Protocol. The
acceptance of a replacement technology is dependent on the increasing cost
and lack of availability of Freon-Registered Trademark-, together with
economic conditions such as the price of oil.
We are continuing our marketing of the PetroSense-Registered Trademark-
product line in the major offshore production areas of the Gulf of Mexico,
the North Sea and the Persian Gulf. We have sold over 100
PetroSense-Registered Trademark- units in the Gulf of Mexico region. New
customers during fiscal 2000 include Anadarko Petroleum, Apache Petroleum and
New Field Energy. A test program with BP/Amoco in the North Sea is currently
underway. Early results indicate a good correlation with the standard
Freon-based method. We believe that a successful conclusion would mean that
our product would receive approval from the regulatory body and would be the
only unit so approved that operates without the need for a potentially
harmful solvent. Our North Sea activities are handled through the ETI Group,
a leading supplier of environmental equipment to the UK market.
The European Union has proposed to develop a monitoring network for
bodies of water such as rivers, lakes and harbors. In order to qualify for
inclusion in this network, equipment has to have a certain "European
content". To meet this requirement, we have entered into an agreement with
Monitor Europe, a company affiliated with the ETI Group, our European
representative. Monitor Europe already operates the largest network of
"Europeanized" air pollution monitoring stations in Europe. They will
assemble PetroSense-Registered Trademark- -based water monitors that meet the
European requirements in their factory in Scotland and sell the end product
through their pan-European sales network. In addition, we will cooperate with
them to utilize where possible our communications technologies in their
networks.
In the underground storage tank (UST) marketplace, we have identified
that certain large, high throughput tanks located at truck stops and
convenience stores may present an opportunity for leak detection equipment.
The size and throughput of these tanks is problematic for conventional
compliance technologies. We are working with a regional chain of truck stops
to offer a solution for this problem. We have also identified a potential
opportunity in the Japanese retail gasoline marketplace for leak detection
equipment for a large number of urban installations. The depressed Japanese
economy has delayed this project.
In general, we believe the demand for our environmental products is
highly dependent on the adoption and enforcement of environmental regulations.
PROSPECTIVE MARKETS FOR SENSORFUSION-SM- AND COMMUNICATION PRODUCTS
Our marketing strategy targets large-scale applications where
SensorFusion-SM- will provide an end-to-end solution for customers with
remote assets that require the functionality of high technology sensors and
integrated communication systems, and cost-efficient, time-effective
monitoring and control. The low cost of the SensorFusion-SM- concept allows
us to address applications previously considered outside the pricing envelope.
We believe that markets with these characteristics will provide
significant revenue potential from the sale of hardware and monitoring
software, and significant recurring revenue potential derived from ongoing
monitoring and data management fees.
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We intend to pursue prospective markets by establishing joint ventures
and other partnerships with industry leaders in each market segment.
PROPANE TANKS
There are approximately 15 million commercial and residential propane
tanks in the United States alone. Current tank level measurement technology
provides rough estimates of tank fuel levels of limited management value. Our
patented GasLink level monitoring system is accurate within 1%. We believe
GasLink will enable a fundamental change in the way propane distribution
systems are managed. Distributors will be able to accurately monitor
individual tank fuel levels from a central location. This will allow them to
use more efficient fuel delivery schedules and better control inventories.
This should result in increased customer satisfaction, and we believe, up to
25% reduction in delivery costs. In addition, this new level of accuracy may
permit distributors to change the billing system from "pay per fill" to a
monthly usage based billing system (similar to a billing system for
electricity). The resulting information will also allow propane distributors
to more cost-effectively purchase and store propane. The GasLink system has
been designed for quick installation on existing tanks without modification
to the tanks and without the need to enter an end user's premises.
In May, 2000 we signed an MOU with Cornerstone Propane Partners, LP
(NYSE :CNO), the fourth largest propane distributor in the United States.
Cornerstone owns or controls approximately 460,000 tanks. The MOU sets out
the basic terms for a joint venture between DecisionLink and Cornerstone for
marketing the propane monitoring system to other major propane delivery
companies worldwide. The joint venture will be known as TankSat LLC with
DecisionLink owning 50% of the venture. In addition, the MOU reflects
Cornerstone's intent to install the GasLink system on most of its own
customers' tanks. As of December 2000, we are continuing our discussions
toward finalizing a formal agreement and implementation of the various
aspects.
Revenue in this market segment is intended to be derived from monthly
monitoring and data management fees, and the sale of individual tank
monitoring and communication equipment. We anticipate that monitoring
contracts will be for a minimum of five-year periods. In addition, we believe
that given the proprietary nature of our technology and systems, once
installed it will be difficult for customers to cost justify switching
monitoring services.
TankSat has begun initial marketing of the product to potential
customers both domestically and internationally.
OIL PUMPS AND GAS COMPRESSORS
The oil and gas industry has a critical operational need for accurate
measurement and monitoring of operating parameters for oil pumps and pipeline
compressors. We have developed CompressionLink, which is a monitoring and
communication device for accurately measuring compressor operational status.
The sensing equipment monitors various operating parameters resulting in the
provision of greater operating efficiencies and preventive maintenance
information. The communication systems allow suppliers of pumps and
compressors the ability to ensure they can maintain throughput and operating
"up time" availability. This avoids excessive shutdowns and mechanical damage
thereby helping to limit "out of conformity operations".
During 2000, we began delivering systems to end-users and began
generating recurring revenues from monthly communication charges for these
systems.
GASOLINE VAPOR DETECTION MARKET
Sensor-on-a-Chip-Registered Trademark-, jointly developed by
DecisionLink and Texas Instruments, is an optical analytical spectrometer on
a plug-in chip with a standard 20-pin integrated circuit package.
Applications include environmental, medical and industrial sensing of gases
such as carbon monoxide, ethanol, ammonia, hydrocarbons and food contaminants.
DecisionLink has been working with Gilbarco Inc., the largest supplier
of gas pumps in the United States, to deploy a low cost sensor for the
detection of gasoline vapor in Phase II vapor recovery systems for gasoline
dispenser systems. This device is designed to satisfy the requirements of
regulations promulgated during 1999 and 2000 by the California Air Resources
Board (CARB). It is possible that CARB may mandate at a later date
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additional requirements that may be beyond the capabilities of our chip. If
that were the case, the market for the chip we are developing would be
limited, and we would be required to consider whether to begin development of
a more sophisticated solution at substantially higher cost. Notwithstanding
this possibility, we continue to work with Gilbarco on this application, and
on a second application in the global market for Gilbarco's dispensers.
AUTOMATED REMOTE METER READING
In July 2000, we signed an MOU with Mainsborne Communications Inc.,
Vancouver, Canada to develop an interface to the modem in their automated
meter-reading device or AMR. We intend to market this product to utilities
with a large rural based clientele and to developing countries as a low cost
method of data recovery and communication for electricity, water and gas
usage. We believe there is an enormous opportunity in the rapidly growing AMR
marketplace and are positioning our technology to become a leader in the
communication pathway for remote meter data.
OTHER MARKETS
In addition, we anticipate pursuing the following market opportunities:
- Heavy machinery and transportation asset monitoring;
- Sensors for chemical detection and measurement.
COMPETITION
It is difficult to identify competition in a new and rapidly growing
industry. Few, if any, businesses operating in the market are providing
overall solutions for industry other than on a one time consulting basis.
Others are selling only partial solutions, where one may provide
instrumentation, another interpretation software, and yet another some form
of communication. We bring all areas together through LeoLink-TM-,
GeoLink-TM-, SmartTrans-TM-, IntrexNet-TM-, PetroSense-Registered Trademark-
and Sensor-on-a-Chip-Registered Trademark-.
We believe that we are a leader in developing and providing complete
end-to-end wireless solutions from sensors to desktop information and
control. We have not encountered competition from any company that offers, as
we do, a complete end-to-end wireless solution, although we compete
indirectly with companies that offer partial solutions and we expect
additional competition to develop as demand for our products grows.
Traditional satellite communication systems utilize geosynchronous
satellites. These systems require substantially higher initial capital costs
for equipment and are often cost prohibitive. They do have the advantage of
having broader bandwidth and the ability to transmit large amounts of data at
a relatively low cost per byte at high volume. Broad-bandwidth applications
are not our primary target market, although we offer this service as well,
through our service agreements with Norcom and others. We are a licensed
reseller of Low-Earth Orbit satellite communications services provided by
ORBCOMM USA, LP. There are approximately 25 active resellers in the United
States and about the same number in Canada. Ours is one of the broadest
reseller licenses with applications permitted for any industrial or
commercial application. Most others are restricted to certain industries. We
have been informed by ORBCOMM that we are one of its leading applications
developers. We are free to form marketing alliances with other resellers for
specific market areas, which we are currently doing. ORBCOMM has experienced
financial difficulties and filed a petition in the U.S. Bankruptcy Court for
reorganization under Chapter 11 of the U.S. Bankruptcy Act on September 15,
2000. ORBCOMM's management has advised us that it intends to continue to
provide satellite communications to us and that it believes its
reorganization will be successful.
We expect that competition may develop from companies that utilize one
of the following:
- Alternatives to LEO satellites
- New LEO satellite service providers
- General service providers
We also expect other ORBCOMM resellers may develop competitive solutions.
Alternatives to LEO satellite systems include geosynchronous satellite
systems, and cellular and other non-satellite systems. Because of their higher
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capital costs, geosynchronous systems have substantially higher communication
costs. ORBCOMM's "little" LEO system uses small, low-cost satellites for the
transmission of data only. Larger more expensive satellites are designed for
use for voice, video and data. Therefore the communication charges are
expected to be lower for specialized low-cost satellite systems such as
ORBCOMM.
Trade-offs between communications systems include: coverage area, bandwidth
and costs.
ORBCOMM's little LEO and our LeoLink-TM-, IntrexNet-TM-, and
SmartTrans-TM- systems have clear advantages including coverage of remote
areas not accessible by cellular and land based systems and lower cost of
hardware, a simpler antenna and lower communications costs than
geosynchronous satellites. The disadvantage to the ORBCOMM system is the
limitation on the amount of data that can be sent at a reasonable cost. Our
target markets will primarily have low data requirements and will suit the
ORBCOMM system well.
We are approaching markets that have few competitors at this early
stage. Currently there are companies developing similar services internally
to support or enhance their own business capabilities. While their internal
remote monitoring capability may compare directly with our business, it does
not at present compete with us for third party business. In addition, we
believe that a significant part of our new business will come from supplying
complete, integrated out-sourced services to these companies.
We believe that the distinctive capabilities of DecisionLink's fiber
optic chemical sensor ("FOCS-Registered Trademark-") technology provide
competitive advantages in its markets. We are unaware of any other product in
the marketplace, that can monitor petroleum hydrocarbons at all three desired
monitoring points, i.e., the vapor area above the water body, the floating
hydrocarbons at the water/air interface and the hydrocarbons dissolved in the
water. We believe that this capability, coupled with the FOCS-Registered
Trademark-'s rapid response time and reversibility (the ability to measure
both increasing and decreasing levels of pollutants), together with its
response to a wide variety of petroleum hydrocarbons including gasoline,
diesel and jet fuel, provide us with a competitive advantage. In particular,
the wide dynamic range of the measuring technology allows the detection of
new leaks on top of old contamination. We believe that our Florida
certification is a direct result of this capability.
Competitors such as Tracer Research, Inc. (Tucson, AZ) and NESCO, Inc.
(Tulsa, OK) offer products which provide competition in certain situations.
Tracer Research, Inc. has received approval by Florida DEP for its periodic
leak detection system for ASTs. The approval is conditional in that it
specifies certain operating conditions which must be met. There is a
specified inoculation period during which the tank is essentially out of
service. This is followed by sampling vapor wells and the site for presence
of the tracer. These samples are analyzed off site. Use of this technique is
conditional upon maintaining the specified inoculation time and testing only
when ground water levels allow. The test has to be performed every thirty
days. We believe these conditions of use provide a competitive advantage to
continuous PetroSense-Registered Trademark- products, since groundwater
levels often reach the tank bottom during rainy periods in low lying coastal
areas such as Florida. This is also true of Sensorcomm, of Bartlett, TN,
which recently received conditional approval for relatively clean sites.
Their approval is based on specific site conditions, including tank
foundation materials, groundwater level, and prior contamination limits.
MANUFACTURING
We manufacture the FOCS-Registered Trademark- sensors and probes at our
facility located in Las Vegas, Nevada. Electronic circuit boards and other
assemblies are fabricated and assembled by other companies using high quality
commercially available components. We currently perform final assembly, test
and calibration of our products at our facilities in Las Vegas and
Carrollton, Texas. We expect to continue manufacturing sensors and probes
ourselves; however, we expect to contract with others for the assembly of
high volume communications systems.
RESEARCH AND DEVELOPMENT
We entered into an agreement in February 2000, whereby the Dutch
government research agency TNO, Coca-Cola Enterprises - Netherlands and
DecisionLink began cooperation in the development of certain sensors of
interest to the food and beverage industry. The first phase of the program
has come to a satisfactory conclusion with TNO reporting that DecisionLink's
proprietary FOCS-Registered Trademark- technology exhibited better
sensitivity than anything currently available. Meetings to initiate phase two
of the project were held in early summer 2000. TNO committed additional
resources to ensure the satisfactory completion of their part of the
development and the three parties committed to continue funding the project.
9
<PAGE>
In conjunction with our cross-licensing agreement with Bosch, we
completed a feasibility study with a medical instrument manufacturing company
to supply certain gas sensor technology for a neonatal application. This
company requires a low-cost, disposable sensor package to replace its
existing sensing technology. The manufacturer estimates the market to be
2,000,000 units per year in the U.S. alone. Development is ongoing.
We have completed development stages of a project with the Dutch
engineering firm IWACO to develop a more sensitive hydrocarbon sensor for the
detection of hydrocarbons in water. During the Spring of 2001, we expect to
produce prototype units for beta-site testing at locations in Holland. A
continuing project with IWACO, which would use our sensors to monitor a
"Biological Fence," awaits evaluation of the effectiveness of the various
tests.
SENSORS
We believe that sensors represent a large potential market. Developed in
cooperation with Texas Instruments with the technology patented by
DecisionLink, our Sensor-on-a-Chip-Registered Trademark- has the potential to
exploit a wide range of consumer, industrial, commercial, automotive,
military and medical products.
Examples of ongoing developments include:
- a gasoline vapor sensor for a gasoline retailing application
- a carbon monoxide sensor for residential, medical and automotive use
- sensors for the detection of toxic gasses and chemical warfare agents
- a fuel/air ratio sensor for automotive use o a fail-safe flammable gas
sensor for a household appliance control system
- a breath alcohol sensor for an ignition interlock device for
automotive use
TEXAS INSTRUMENTS, INC. ("TI")
On June 15, 1995, we entered into an intellectual property license
agreement and a cooperative development agreement with TI. Under the License
Agreement, TI licensed our patented FOCS-Registered Trademark- for use with
TI's optoelectronics technology. We granted TI an exclusive worldwide
royalty-bearing license to develop, produce and market chip-based chemical
sensors for specific applications. In exchange, TI granted us a non-exclusive
worldwide royalty-bearing license to certain TI technology. The license
agreement terminates when the last DecisionLink or TI patent concerning the
technology under the license agreement expires. The License Agreement and
Cooperative Development Agreement replaced similar agreements between the
Company and TI, entered into in January 1992, with a goal of miniaturizing
our FOCS-Registered Trademark- technologies into microchip sensors.
DecisionLink has been granted a United States patent on chip-based sensors in
general and we have applied for a patent on a chip-based toxic gas sensor. TI
has licensed certain of its optoelectronics technology to Texas Advanced
Optoelectronic Solutions (TAOS), a group consisting primarily of former TI
employees. Our cross license agreement with TI continues and we have a
marketing agreement with TAOS.
DecisionLink's spending on research and development activities during
Fiscal 1999 and 2000 was approximately $1,034,000 and $1,300,000,
respectively, including expenses incurred by both FCI and Intrex prior to the
business combination on July 27, 2000.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company has determined the costs and effects of compliance with
federal, state and local environmental laws to be minimal in amount and
exposure. We spend less than 2% of our total expenditures to comply with the
various environmental laws.
EMPLOYEES
As of September 30, 2000, the Company and its subsidiaries employed 32
persons on a full-time basis, and 3 on a part-time basis. We believe that
relations with our employees are good.
10
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTIES
DecisionLink leases approximately 15,000 square feet of manufacturing,
warehouse and office space in Las Vegas, Nevada under a month-to-month lease
with monthly lease payments of $12,786. We also lease approximately 11,000
square feet of manufacturing, warehouse and office space in Carrollton, Texas
under a two-year lease expiring March 31, 2002 with monthly lease payments of
$8,618.
ITEM 3. LEGAL PROCEEDINGS
A former distributor has filed an action in French national courts
claiming improper termination by FCI Environmental, Inc. The Company has
responded that the distribution agreement provides for arbitration of any
disputes in Nevada, and that therefore, the French courts do not have
jurisdiction, and further that the claims are without merit. The French Court
has ruled that the former distributor may be entitled to approximately
$80,000 (approximately one-half of the original claim); however, either party
may appeal the decision. The Company has appealed the decision, has
negotiated a preliminary settlement of all claims, and has accrued a
provision for settlement of the claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
last quarter of the year ended September 30, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock trades under the symbol "DLNK" on the
Over-the-Counter Bulletin Board (OTCBB). The following table sets forth the
high and low trade prices of the Common Stock for the periods shown.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
COMMON STOCK
----------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30, 1999
First Quarter $0.23 $0.15
Second Quarter 0.28 0.13
Third Quarter 0.23 0.13
Fourth Quarter 0.21 0.12
FISCAL YEAR ENDED SEPTEMBER 30, 2000
First Quarter $0.30 $0.11
Second Quarter 2.03 0.16
Third Quarter 1.02 0.48
Fourth Quarter 0.59 0.23
FISCAL YEAR ENDING SEPTEMBER 30, 2001
October 1 - December 21, 2000 0.31 0.09
</TABLE>
On December 21, 2000, the closing sales price of the common stock on the
OTCBB was $0.125.
At December 21, 2000, there were approximately 534 holders of record of
common stock. We estimate that we have approximately 9,000 beneficial holders of
our common stock.
DIVIDEND POLICY
11
<PAGE>
The payment of dividends by DecisionLink is within the discretion of its
Board of Directors and depends in part upon our earnings, capital requirements
and financial condition. Since our inception, we have not paid any dividends on
our common stock and do not anticipate paying such dividends in the foreseeable
future. DecisionLink intends to retain earnings, if any, to finance our
operations.
Pursuant to the terms of the DecisionLink's Series A convertible
preferred stock, dividends are payable annually on November 1st. The holders
of the convertible preferred stock may elect to receive their dividend
payments in cash at a rate of 11% of the liquidation value, or in additional
shares of convertible preferred stock at the rate of 8% of the number of
shares of convertible preferred stock held by such holder on the date of
declaration. In October, 2000, DecisionLink's Board of Directors determined
that, in view of the recent trading price of FiberChem's common stock and in
view of DecisionLink's current cash position, it would not be appropriate to
declare the annual dividend payable on the convertible preferred stock on
November 1, 2000. As a result, that dividend will accumulate in accordance
with the terms of the convertible preferred stock. The undeclared dividends
in arrears as of September 30, 2000 are $1,028,848 ($1,371,797 as of November
1, 2000) if elected entirely in cash or 53,981 (74,927 as of November 1,
2000) additional shares of convertible preferred stock if elected solely in
shares. No assurance can be given that DecisionLink will be able to make
dividend distributions in the future if the holders of the convertible
preferred stock request cash. The Board of Directors have approved an
exchange offer to holders of the convertible preferred stock which would
change the conversion ratio from 10 common shares for each preferred share to
75 shares in satisfaction of accumulated dividends and of anti-dilution
provisions, and which would make future preferred dividends payable only in
common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and notes thereto. Due to the
combination of Intrex and FCI (the "Combination") on July 27, 2000, and the
resulting reverse merger accounting, the historical results of operations and
of financial condition as presented in the Item 7 consolidated financial
statements, and the following discussion and analysis, are not believed to be
indicative of expected future results of operations or of financial condition.
The consolidated financial statements at and for the period ended September
30, 2000, include the results of operations, capital transactions and cash
flows for the nine month period and the two month period ended September 30,
2000, for Intrex and FCI, respectively. Where possible, management has
attempted to provide known trends, demands, events, commitments and
uncertainties that are reasonably likely to have a material effect on future
liquidity, capital resources and results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's liquid assets, consisting of cash
and cash equivalents, totaled $2,811,000 compared to $64,000 at December 31,
1999. At September 30, 2000, working capital was $1,215,000 compared to a
deficiency of $692,000 at December 31, 1999. Working capital increased
primarily due to: (a) the Combination which included the assumption of
working capital totaling $871,000 including cash totaling $735,000, and (b)
net proceeds totaling $3,148,000 from the issuance of Series B Convertible
Preferred Stock and 12% notes and debentures, partially offset by increased
use of cash in operations.
Operating activities in 2000 used cash of $1,783,000, compared to
$331,000 used in operating activities in 1999. This increase in cash used is
primarily due to increased operating losses resulting from the Combination
and decreased trade accounts payable partially offset by increased accrued
expenses. The primary use of cash by operating activities in 2000 was for the
development, enhancement and marketing of the Company's products and services
as well as for broadening the Company's management team in conjunction with
its new business strategy. As a result of these activities, in 2000 the
Company incurred a net loss of $7,683,000 before non-cash adjustments
totaling $5,882,000. Non-cash adjustments were comprised of acquired research
and development totaling $5,500,000 expensed in conjunction with the
Combination; goodwill amortization totaling $246,000; and amortization of
equipment and other assets totaling $136,000. Management had deferred the
payment of a substantial portion of their salaries since June 1997, and
continues to do so. The primary use of cash by operating activities in 1999
was for research and development of Intrex's products and services. As a
result of these activities, in 1999 Intrex incurred a net loss of $658,000
before non-cash adjustments totaling $59,000. Non-cash adjustments were
comprised of research and development equipment expense totaling $51,000; and
equipment depreciation totaling $8,000.
12
<PAGE>
Investing activities in 2000 provided cash of $395,000, compared to
$133,000 used in investing activities in 1999. This increase is primarily due
to cash of $735,000 acquired from FCI partially offset by increased payments
for costs related to the Combination. The primary use of cash by investing
activities in 2000 was for payment of acquisition costs and the purchase of
equipment, offset by the cash acquired from FCI. The primary use of cash by
investing activities in 1999 was for payment of acquisition costs related to
the Combination, and the purchase of equipment.
Financing activities in 2000 provided cash of $4,029,000, compared to
$524,000 provided by financing activities in 1999. The primary source of cash
provided by financing activities in 2000 was: (a) net proceeds totaling
$3,148,000 from the private placement of convertible notes, debentures and
preferred stock as described in Notes 9 and 11 to the Company's consolidated
financial statements, and (b) pre-combination loans from FCI to Intrex
totaling $931,000. The primary use of cash by financing activities in 2000
was a $50,000 principal payment on the Privatbank promissory note.
Approximately $326,500 of the Company's total debt becomes due and payable
within the next twelve months. The primary source of cash provided in
financing activities in 1999 was net proceeds totaling $382,000 from the
placement of common stock as described in Note 12 to the Company's
consolidated financial statements and cash provided from related parties.
During 2000, cash flow from operations was not adequate to cover all
working capital and liquidity requirements. The Company was dependent on its
cash reserves existing at December 31, 1999 and upon its ability to place
promissory notes, debentures and preferred stock. Management anticipates the
possibility that cash requirements could exceed cash on hand and cash to be
generated from operating activities, if any, during the following
twelve-month period. These possible periods of liquidity deficiency are
attributed to the Company's working capital requirements pending
implementation of its business plan. The business plan calls for execution of
third party agreements to develop and market the Company's products and
services. Management is in various stages of negotiating these agreements.
Upon execution, management believes that additional capital will be required
in order to fulfill obligations under these agreements, and intends to seek
this capital from the capital markets. There can be no assurance that
management will execute agreements with third parties on terms and conditions
anticipated in its strategy, nor can there be any assurance that if such
agreement are executed that the Company will be able raise sufficient capital
in order to implement its strategy.
If the Company is unable to service its financial obligations as they
become due, it will be required to adopt alternative strategies, which may
include but are not limited to, actions such as reducing management and
employee headcount and compensation, seeking additional debt or equity
capital, attempting to restructure existing financial obligations and/or
seeking a strategic merger or acquisition. There can be no assurance that any
of these strategies could be effected on satisfactory terms.
RESULTS OF OPERATIONS
2000 COMPARED TO 1999
REVENUES during 2000 were $215,000 compared to no revenue during 1999.
This increase was due to the Combination and the commencement of commercial
sales by Intrex in 2000. Approximately 76% of 2000 revenues were generated
from sales of PetroSense-Registered Trademark- products and related services
to the AST market. Approximately 24% of 2000 revenues were generated from
sales of FuelMate-TM- /DataMate-TM- and CompressionLinksm products and related
services to the oil and gas market. During 1999, Intrex was a development
stage enterprise primarily engaged in furthering the research and development
of its proprietary Internet and communications technology, and therefore,
generated no revenues or cost of revenues.
COST OF REVENUES during 2000 was $151,000 generating a gross margin of
30% of revenues, compared to no cost of revenues or gross margin during 1999.
This increase was due to the Combination.
RESEARCH, DEVELOPMENT AND ENGINEERING expense ("RD&E") during 2000 was
$987,000, an increase of $500,000, or 102%, compared to 1999. This increase
was primarily due to the Combination, increased costs attributable to the
Cornerstone MOU, and increased headcount and other RD&E expenses incremental
to the Combination. Of this increase, approximately $246,000, or 49%, relates
to the Combination and approximately $254,000, or 51%, relates to Cornerstone
activities, increased headcount and other RD&E expenses incremental to the
Combination. RD&E expense
13
<PAGE>
during 2000 was comprised of approximately: 57% salary; 37% materials; and 6%
other. RD&E expense during 1999 was comprised of approximately: 28% salary; 64%
materials; and 8% other.
GENERAL AND ADMINISTRATIVE expense ("G&A") during 2000 was $727,000, an
increase of $584,000, or 410%, compared to 1999. This increase was primarily
due to the Combination, increased headcount and increased other G&A expenses
incremental to the Combination. Of this increase, approximately $327,000, or
56%, relates to the Combination and approximately $257,000, or 44%, relates
to Cornerstone activities and increased headcount and other G&A expenses
incremental to the Combination. G&A expense during 2000 was comprised of
approximately: 46% salary and related expenses; 17% facilities, insurance and
equipment rent; 8% professional fees; 8% non-cash reserves; and 21% other.
G&A expense during 1999 was comprised of approximately: 20% salary and
related expenses; 3% non-cash reserves; 16% facilities and equipment rent; 3%
professional fees; 10% travel; and 48% other.
SALES AND MARKETING expense during 2000 was $195,000, an increase of
$148,000, or 318%, compared to 1999. This increase was primarily due to the
Combination and increased travel incremental to the Combination. Of this
increase, approximately $111,000, or 75%, relates to the Combination and
approximately $37,000, or 25%, relates to increased travel incremental to the
Combination. Sales and marketing expense during 2000 was comprised of
approximately: 53% travel; 32% salary and related expenses; and 15% other.
Sales and marketing expense during 1999 was comprised primarily of travel.
ACQUIRED RESEARCH AND DEVELOPMENT expense during 2000 was $5,500,000
compared to no such acquired research and development expense during 1999.
This increase is one-time in nature and was due to the Combination. Purchased
in-process research and development expense includes the value of products in
the development stage and not considered to have reached technological
feasibility. In accordance with applicable accounting rules, purchased
in-process research and development expense is required to be expensed.
Accordingly, $5,500,000 was expensed in the quarter ended September 30, 2000.
GOODWILL AMORTIZATION expense during 2000 was $246,000, compared to no
goodwill amortization during 1999. This increase was due to the Combination.
The Combination created goodwill totaling $22,096,000 which is being
amortized over a 15 year period. Non-cash goodwill amortization during the 12
months following fiscal 2000 is expected to total $1,473,000 assuming that
there are no events or changes in circumstances indicating that the carrying
value of goodwill may not be recoverable during this period as explained
below. As required by Statement of Financial Accounting Standards No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS AND FOR LONG-LIVED ASSETS
TO BE DISPOSED OF, whenever events or changes in circumstances indicate that
the carrying value of goodwill may not be recoverable during the estimated
future periods to be benefited, the Company will review the recoverability of
goodwill based primarily upon analysis of undiscounted net cash flows. In the
event that goodwill is found to be carried at an amortized amount in excess
of estimated future net cash flows, undiscounted and without interest, then
goodwill will be adjusted for impairment, through a non-cash charge to
earnings in the period that such determination is made, to a level
commensurate with net cash flows discounted at a rate commensurate with the
risk involved. Assuming that there are no significant events or changes in
circumstances prior to December 31, 2001, management expects to review the
recoverability of goodwill at December 31, 2001, at which time goodwill may
be substantially adjusted for impairment, through a non-cash charge to
earnings.
INTEREST EXPENSE during 2000 was $133,000 compared to no interest
expense during 1999. This increase was due to the Combination. Interest
expense during 2000 was comprised of approximately: 53% non-cash amortization
of financing costs; 29% cash payment; and 18% change in accruals.
INTEREST INCOME during 2000 was $39,000 compared to no interest income
during 1999. This increase was due to the Combination and the temporary
investment of proceeds from the private placement of convertible notes,
debentures and preferred stock.
FOREIGN EXCHANGE GAIN during 2000 was $0, a decrease of $19,000 compared
to 1999. This decrease was due to the Combination.
14
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
Management does not believe that any recently issued but not yet
effective accounting standards if currently adopted would have a material
effect on the accompanying financial statements.
During Fiscal 1999 the Company adopted Statement of Financial Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"), which establishes new
standards for reporting and displaying comprehensive income and its
components. The adoption of SFAS 130 had no impact on the Company's
consolidated financial position, results of operations or cash flows.
Also during Fiscal 1999, the Company adopted Statement of Financial
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"), which requires disclosure of certain information
regarding operating segments, products and services, geographic areas of
operation and major customers. The adoption of SFAS 131 had no impact on the
Company's consolidated financial position, results of operations or cash
flows.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are contained in a separate
section of this Form 10-KSB which follows Part III.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages and respective positions of the Executive Officers and
Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Geoffrey F. Hewitt 57 Chairman of the Board, Chief Executive Officer and
Class A Director
David S. Peachey 56 President, and Class A Director
Peter J. Lagergren 53 Executive Vice President and Group President Communications
Technology Division and Chief Technology Officer, Class B
Director
Brian A. O'Neil 55 Executive Vice President - Corporate Development,
Class B Director
Melvin W. Pelley 56 Chief Financial Officer and Secretary
Irwin J. Gruverman 67 Class A Director
Walter Haemmerli 71 Class B Director
Trevor S. Nelson 37 Class C Director
Byron A. Denenberg 66 Class C Director
</TABLE>
GEOFFREY F. HEWITT has served as Chairman of the Board since November
14, 1997, and as Chief Executive Officer of the Company since April 1998. Mr.
Hewitt was appointed as a Director of the Company on September 11, 1996. He
has also served as a Director of FCI Environmental since April 1994 and as
its President from April 1994 to November 1996 and as its Chairman and Chief
Executive Officer since August 1995. Prior thereto, from 1977 until March
1994, Mr. Hewitt served as Vice President of worldwide sales and marketing
for H.N.U. Systems, Inc., a manufacturer of environmental and material
analysis instrumentation.
DAVID S. PEACHEY has served as President and Director of the Company
since July 27, 2000. He has served as a director of Intrex since October 1994
and as President and Chief Executive Officer of Intrex since July 1997. Since
1992, he has also served as President of Estero Capital Corp., a private
investment company, which participates in investment and administration of
industrial and high-tech based companies.
PETER J. LAGERGREN has served as Director, President of the
Communication Technology Division and Chief Technology Officer of the Company
since July 27, 2000. He has served as an Officer and Director of Intrex since
December 1994, and as President of Firebird Data Communications, Inc., now a
subsidiary of Intrex, since 1992. Until 1997 and for more than five years
prior thereto, Mr. Lagergren was also President of Pandel Instruments, Inc. a
company engaged in the development, production and marketing of intelligent
flow meters, satellite interface programs, mapping programs for tracking
ships, fuel management systems, tank measuring devices, and communications
software. Pandel Instruments, Inc. is now a subsidiary of FiberChem.
BRIAN A. O'NEIL has served as Executive Vice President and a Director of
the Company since July 27, 2000. Mr. O'Neil has served as a director of
Intrex since July 1997 and as its Vice President since July 1999. From 1996
to 1999 Mr. O'Neil was a Director of, and from 1996 to 1997 was Chief
Executive Officer of Foreword
16
<PAGE>
Demonstrations Inc., Vancouver, BC, an Internet software development company
specializing in the delivery of travel products to the on-line consumer. Mr.
O'Neil also served as a consultant to Intravelnet.com Inc., an Internet and
timeshare travel club sales organization from 1997 to 1999. From 1976 to 1995
Mr. O'Neil was founder and Chief Executive Officer of Fiorucci Fashions Ltd.,
a leading New Zealand garment distributor. Mr. O'Neil is a director of
Paravision Technologies, Inc., Mainsbourne Communications, Inc., and Atex
Garments, Ltd.
MELVIN W. PELLEY has been the Chief Financial Officer and Secretary of
the Company since April 1994. Prior thereto, from 1988 he was Vice President
of Finance and Administration of Acoustic Imaging Technologies Corporation,
Phoenix, Arizona, a manufacturer of diagnostic ultrasound medical equipment.
From 1983 to 1988 he was Director of Costs, Financial Planning and Analysis
of Advanced Technology Laboratories, Inc., Bothell, Washington, which
manufactures and markets real-time ultrasound medical diagnostic equipment.
From 1977 to 1983, Mr. Pelley was Chief Financial and Administrative Officer
for Advanced Diagnostic Research Corporation, Tempe, Arizona, a designer,
manufacturer and marketer of diagnostic ultrasound scanners.
IRWIN J. GRUVERMAN has served as Director of the Company since May 1994.
Since 1990, Mr. Gruverman has served as the General Partner for G&G
Diagnostics Funds, a venture capital business, and in 1982 founded and
currently serves as Chairman of the Board of Directors and Chief Executive
Officer of Microfluidics Corporation, an equipment manufacturer and process
research and development company.
WALTER HAEMMERLI has served as a Director of the Company since February
1990. Mr. Haemmerli has been the Chief Executive Officer since 1978 of
Manport AG, Zurich, Switzerland, an investment management company owned by
him. Mr. Haemmerli was employed by Union Bank of Switzerland, Geneva, Basel
and Zurich from 1960 to 1978, holding the position of Vice President from
1970. Mr. Haemmerli serves on the Board of Directors and is Vice-Chairman of
Privatbank Vermag AG, Chur, Switzerland, and is a Member of the Board of
Directors of American Cold Storage, Inc., Louisville, Kentucky.
TREVOR S. NELSON has served as a Director of the Company since July 27,
2000. He has served as a Director of Intrex since January 1996 and as Corporate
Secretary of Intrex since July, 1997. Mr. Nelson is a Chartered Accountant and
since 1994 he has served as the managing partner of The Stewart Thomas Group of
Penticton, British Columbia, an independent financial planning company of which
he was a founder. Mr. Nelson has also served as a member on the Board of
Directors of Schmitt Industries, Inc. of Portland, Oregon since 1991.
BYRON A. DENENBERG has served as a Director of the Company since August
1995. Mr. Denenberg is a Managing Partner of K B Partners, LLC, a venture
capital firm specializing in early-stage technology investments. Mr. Denenberg
was co-founder in 1969 of MDA Scientific, Inc. (MDA), a manufacturer and
marketer of toxic gas monitoring systems, where he was CEO from inception until
1991. MDA was purchased by Zellweger Uster AG in 1988. Mr. Denenberg received a
B.S. degree in Mechanical Engineering from Bucknell University, Lewisburg,
Pennsylvania. He currently serves as a Director of RCT Systems, Inc., and Orbit
Commerce, Inc. Mr. Denenberg was Chairman of MST Analytics, Inc. until its
merger with ATMI, Inc. in November 1999.
Officers serve at the discretion of the Board of Directors. All Directors
hold office until the expiration of their terms and the election and
qualification of their successors. The Company's Board of Directors is divided
into three classes of approximately equal size with the members of each class
elected to three-year terms expiring in consecutive years, subject to a phase-in
period for directors elected to fill a vacancy in a class. The terms of the
Class A Directors expire in 2003, the Class B Directors in 2002 and the Class C
Directors in 2001
The Board of Directors has a Compensation Review Committee, whose members
are Mr. Nelson, Mr. Hewitt and Mr. Peachey, which is responsible for reviewing
the compensation of our executives and employees. The Board of Directors has a
Stock Option Committee, whose members are Mr. Nelson, Mr. Gruverman, Mr. Hewitt
and Mr. Peachey, which is responsible for granting stock options under our stock
option plans. The Board of Directors also has a standing Audit Committee which
is responsible for reviewing with independent auditors the scope and results of
the audit engagement, reviewing our system of internal procedures and controls,
reviewing the actions of management in matters related to the audit function and
recommending the engagement of independent auditors. Mr. Gruverman and Mr.
Nelson serve as the members of the Audit Committee. The Board of Directors did
not have a standing nomination committee or committee performing similar
functions during the fiscal year ended September 30, 2000.
17
<PAGE>
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, Directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
Directors and ten percent shareholders are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on the
Company's copies of such forms received or written representations from certain
reporting persons that no forms were required for those persons, the Company
believes that, during the time period from October 1, 1999 to September 30,
2000, all filing requirements applicable to its officers, Directors and greater
than ten percent beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
The compensation paid and/or accrued to each of the executive officers of
the Company and its subsidiaries and of all executive officers as a group, whose
annual compensation exceeds $100,000, for services rendered to the Company
during the three fiscal years ended September 30, 2000, was as follows:
(a) SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------
Long-Term
Other Restricted Securities Incentive All
Name of Individual Fiscal Annual Stock Underlying Plan Other
and Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensation($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Geoffrey F. Hewitt 2000 $212,200(1) -- -- -- -- -- --
Chairman and CEO 1999 $217,134(1) -- -- -- 300,000 -- --
1998 $211,932(1) -- -- -- 240,000 -- --
David S. Peachey (2) 2000 $ 34,533(3) -- -- -- -- -- --
President
Peter J. Lagergren (4) 2000 $ 32,033(5) -- -- -- -- -- --
EVP and Chief Technology
Officer
Brian A. O'Neil (6) 2000 $ 22,033(7) -- -- -- -- -- --
EVP Corporate
Development
Melvin W. Pelley 2000 $139,200(8) -- -- -- -- -- --
Chief Financial Officer 1999 $139,479(8) -- -- -- 275,000 -- --
1998 $139,200(8) -- -- -- 180,000 -- --
Thomas A. Collins 2000 $132,200(9) -- -- -- -- -- --
President of 1999 $132,479(9) -- -- -- 200,000 -- --
FCI Environmental, Inc. 1998 $132,200(9) -- -- -- 120,000 -- --
</TABLE>
(1) Includes accrued but unpaid salary of $55,000 earned during each
fiscal year.
(2) Mr. Peachey was named President of DecisionLink on July 27, 2000.
Amount shown includes amounts paid and/or accrued since that date.
(3) Includes accrued but unpaid salary of $9,533 earned from July 27
through September 30, 2000.
(4) Mr. Lagergren was named Executive Vice President & Chief Technology
Officer of DecisionLink on July 27, 2000. Amount shown includes
amounts paid and/or accrued since that date.
(5) Includes accrued but unpaid salary of $7,867 earned from July 27
through September 30, 2000.
(6) Mr. O'Neil was named Executive Vice President - Corporate Development
of DecisionLink on July 27, 2000. Amount shown includes amounts paid
and/or accrued since that date.
(7) Includes accrued but unpaid salary of $9,500 earned from July 27
through September 30, 2000.
(8) Includes accrued but unpaid salary of $32,000 earned during each
fiscal year.
(9) Includes accrued but unpaid salary of $25,000 earned during each
fiscal year.
18
<PAGE>
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants to executive officers of DecisionLink during the year.
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired on Value at Fiscal Year End (#) at Fiscal Year End ($)
Name of Individual Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
----------------------- ------------ ------------- ------------------------- -------------------------------
<S> <C> <C> <C> <C>
Geoffrey F. Hewitt -- -- 765,000 / 0 $ 68,575 / $0
David S. Peachey -- -- 0 / 0 $ 0 / $0
Peter J. Lagergren -- -- 0 / 0 $ 0 / $0
Brian A. O'Neil -- -- 0 / 0 $ 0 / $0
Melvin W. Pelley -- -- 530,000 / 0 $ 55,900 / $0
Thomas A. Collins -- -- 395,000 / 0 $ 38,975 / $0
</TABLE>
(d) LONG-TERM INCENTIVE PLANS
Effective January 1, 1994, the Company implemented an Internal Revenue Code
Section 401(k) Profit Sharing Plan (the "Plan"). The Plan provides for voluntary
contributions by employees into the Plan subject to the limitations imposed by
Internal Revenue Code Section 401(k). The Company will match employee
contributions at a rate of 50% of the employee's contribution up to a maximum of
2% of the employee's compensation. The Company matching funds are determined at
the discretion of management and are subject to a five-year vesting schedule
from the date of original employment.
(e) DIRECTORS COMPENSATION
Non-management directors receive options to purchase shares of Common Stock
of the Company for serving on the Board of Directors and for service on official
committees of the Board. However, no such options have been granted since July
19, 1999 when the Company granted options to purchase 50,000 shares of Common
Stock at $0.125 per share, which was the market value of the Common Stock on
that date, to each of its four non-management Directors. In addition the Company
granted options to purchase an aggregate of 50,000 shares of Common Stock to
three of its non-management directors for service as members of the Audit
Committee (15,000 shares to each of its two members) and Compensation and Stock
Options Committee (10,000 shares to each of its two members).
(f) EMPLOYMENT CONTRACTS
Geoffrey F. Hewitt serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Hewitt is currently compensated
at a rate of $205,000 per annum and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
by the Company for cause and by either party upon notice prior to the expiration
of each annual period. Since June 15, 1997, payment of approximately 27% (or
$55,000 per annum) of Mr. Hewitt's salary has been deferred. In December 1998,
Mr. Hewitt applied his total unpaid salary from June 1997 through December 1998
of $84,615 to the purchase of unsubscribed Units in the Company's Rights
Offering ($16,640 after taxes). In July 1999, Mr. Hewitt applied his total
unpaid salary from January 1999 through June 1999 of $27,500 ($16,640 after
taxes) to the purchase of restricted shares of the Company's Common Stock. In
June 2000 Mr. Hewitt applied the total unpaid salary from July 1999 through June
2000 to the exercise of Class E Common Stock Purchase Warrants. The same
proportion of Mr. Hewitt's salary continues to be deferred.
David S. Peachey serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Peachey is currently compensated
at a rate of $200,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
by the Company
19
<PAGE>
for cause and by either party upon notice prior to the expiration of each annual
period. Since July 27, 2000, payment of approximately 25% (or $50,000 per annum)
of Mr. Peachey's salary has been deferred.
In connection with our business combination with Intrex Data Communications
Corp., we entered into an incentive compensation agreement with Mr. Peachey and
Intrex under which securities exchangeable for 9,450,000 shares of DecisionLink
common stock were issued to Mr. Peachey and deposited in escrow, subject to
release upon achievement of certain business milestones within a two-year period
following the business combination.
Peter J. Lagergren serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Lagergren is currently
compensated at a rate of $185,000 per annum, and is entitled to receive bonuses,
if any, at the discretion of the Board of Directors. The employment contract is
terminable by the Company for cause and by either party upon notice prior to the
expiration of each annual period. Since July 27, 2000, payment of approximately
22% (or $40,000 per annum) of Mr. Lagergren's salary has been deferred.
In connection with our business combination with Intrex Data Communications
Corp., we entered into an incentive compensation agreement with Mr. Lagergren
under which securities convertible into 9,450,000 shares of DecisionLink common
stock were issued to Mr. Lagergren and deposited in escrow, subject to release
upon achievement of certain business milestones within a two year period
following the business combination.
Melvin W. Pelley serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Pelley is currently compensated
at a rate of $132,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
by the Company for cause and by either party upon notice prior to the expiration
of each annual period. Since June 15, 1997, payment of approximately 24% (or
$32,000 per annum) of Mr. Pelley's salary has been deferred. In December 1998,
Mr. Pelley applied his total unpaid salary from June 1997 through December 1998
of $49,230 to the purchase of unsubscribed Units in the Company's Rights
Offering ($29,395 after taxes). In July 1999, Mr. Pelley applied his total
unpaid salary from January 1999 through June 1999 of $16,000 ($8,970 after
taxes) to the purchase of restricted shares of the Company's Common Stock. In
June 2000 Mr. Pelley applied his total unpaid salary from July 1999 through June
2000 to the exercise of Class E Common Stock Purchase Warrants. The same
proportion of Mr. Pelley's salary continues to be deferred.
Thomas A. Collins serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Collins is currently compensated
at a rate of $125,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
by the Company for cause and by either party upon notice prior to the expiration
of each annual period. Since June 15, 1997, payment of approximately 20% (or
$25,000 per annum) of Mr. Collins' salary has been deferred. In December 1998,
Mr. Collins applied $12,000 (approximately one-third) of his total unpaid salary
from June 1997 through December 1998 to the purchase of unsubscribed Units in
the Company's Rights Offering ($6,146 after taxes). In July 1999, Mr. Collins
applied $10,000 of his unpaid salary ($6,500 after taxes) to the purchase of
restricted shares of the Company's Common Stock. In June 2000 Mr. Collins
applied $20,000 of his deferred salary to the exercise of Class E Common Stock
Purchase Warrants. The same proportion of Mr. Collins' salary continues to be
deferred.
Brian A. O'Neil serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. O'Neil is currently compensated
at a rate of $125,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
by the Company for cause and by either party upon notice prior to the expiration
of each annual period. Since July 27, 2000 payment of approximately 20% (or
$25,000 per annum of Mr. O'Neil's salary has been deferred.
(g) CONSULTING AGREEMENTS
None.
20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 21, 2000,
concerning those persons known to the Company, based on information obtained
from such persons, with respect to the beneficial ownership (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of shares of
Common Stock, $.0001 par value, of the Company by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each Director and executive officer of the Company and its
subsidiaries, (iii) each executive officer named in the Summary Compensation
Table and (iv) all Officers and Directors as a group:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address Amount and Nature of Percentage of
Of Beneficial Owner Beneficial Ownership(1) Class(2)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Geoffrey F. Hewitt (3) 1,946,311(4) 2.8%
-------------------------------------------------------------------------------------------------------------------
David S. Peachey 56,018,224(5) 45.1%
1500 West Georgia St.
Vancouver, British Columbia
V6G 2Z6
-------------------------------------------------------------------------------------------------------------------
Melvin W. Pelley (3) 2,316,489(6) 3.3%
-------------------------------------------------------------------------------------------------------------------
Peter J. Lagergren 59,493,464(7) 46.6%
3033 Kellway Drive, Suite 118
Carrollton, TX 75006
-------------------------------------------------------------------------------------------------------------------
Thomas A. Collins (3) 509,962(8) *
-------------------------------------------------------------------------------------------------------------------
Brian O'Neil 18,419,023(9) 21.3%
3033 Kellway Drive, Suite 118
Carrollton, TX 75006
-------------------------------------------------------------------------------------------------------------------
Walter Haemmerli 6,608,159(10) 9.2%
Manport AG
Basteiplatz 3, CH 8001
Zurich, Switzerland
-------------------------------------------------------------------------------------------------------------------
Irwin J. Gruverman 1,580.432(11) 2.3%
30 Ossipee Road
Newton, MA 02164
-------------------------------------------------------------------------------------------------------------------
Trevor S. Nelson 10,856,652(12) 13.7%
575 Main Street, Suite 201
Penticton B.C., Canada V2A 5C6
-------------------------------------------------------------------------------------------------------------------
Byron A. Denenberg 1,730,476(3) 2.5%
KB Partners LLC
1101 Skokie Blvd., Suite 260
Northbrook, IL 60062
-------------------------------------------------------------------------------------------------------------------
All Directors and Officers of 159,479,192(14) 72.6%
DecisionLink as a Group (10 persons)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Represents less than one percent.
21
<PAGE>
(1) Unless otherwise noted, FiberChem believes that all persons named in the
table have sole investment power with respect to all shares of voting
securities beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date hereof upon the exercise of warrants, options or
other rights or upon the conversion of convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or other rights or convertible securities that are held
by such person (but not those held by any other person) and which are
exercisable or convertible within 60 days from the date hereof have been
exercised or converted.
(2) Based on 68,251,557 shares issued and outstanding as of December 21, 2000.
(3) The address of this person is c/o FCI Environmental, Inc., 1181 Grier
Drive, Suite B, Las Vegas, Nevada 89119.
(4) Includes an aggregate of 765,000 shares of Common Stock issuable upon
exercise of a like number of options. Also includes 159 shares of Common
Stock held by Mr. Hewitt's minor child.
(5) Includes 10,209,006 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares and 36,912,602 common shares issuable in
exchange for a like number of Intrex Class B Shares upon the occurrence of
certain events. Also includes 2,410,983 shares of Common Stock issuable in
exchange for a like number of Intrex Class B Shares owned by Estero Capital
Corp. and 6,485,633 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares owned by Estero Capital Corp. upon the
occurrence of certain events. Mr. Peachey is the sole stockholder of Estero
Capital Corp.
(6) Includes an aggregate of 530,000 shares of Common Stock issuable upon
exercise of a like number of options and 555,958 shares of Common Stock
issuable upon conversion of $65,000 in Convertible 9% Notes.
(7) Includes 13,561,700 shares of Common Stock issuable upon conversion of
135,617 shares of Pandel Series Preferred Stock and 45,931,764 common
shares issuable upon conversion of 459,317.64 shares of Pandel Series
Preferred Stock upon the occurrence of certain events.
(8) Includes an aggregate of 395,000 shares of Common Stock issuable upon
exercise of a like number of options.
(9) Includes 9,418 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares and 25,334 common shares issuable in
exchange for a like number of Intrex Class B Shares upon the occurrence of
certain events. Also includes 4,972,652 shares of Common Stock issuable in
exchange for a like number of Intrex Class B Shares owned by Pentland
Resources Ltd., a Barbados corporation, and 13,376,619 shares of Common
Stock issuable in exchange for a like number of Intrex Class B Shares owned
by Pentland Resources Ltd. upon the occurrence of certain events. Mr.
O'Neil is the beneficiary of a trust that owns 99% of the voting stock of
Pentland Resources Ltd., however, such trust has no power to vote or
dispose of the securities. A second trust has the power to appoint the sole
director of Pentland Resources Ltd. Mr. O'Neil does not have the power to
control said second trust. The securities are deemed beneficially owned by
the reporting person by reason of Rule 16a-8(a)(3). Mr. O'Neil disclaims
beneficial ownership for any other purpose.
(10) Includes 32,000 Class D Common Stock Purchase Warrants, 3,586 shares of
Series A Convertible Preferred Stock convertible into 35,860 shares of
Common Stock, an aggregate of 125,000 shares of Common Stock issuable
upon exercise of a like number of options, and a $50,000 9% note
convertible into 384,615 shares of Common Stock. Also includes 1,601,000
shares of Common Stock, 863,800 Class D Common Stock Purchase Warrants,
and 165,286 shares of Series A Convertible Preferred Stock convertible
into 1,652,860 shares of Common Stock, all held by Privatbank Vermag
A.G., Chur Switzerland, as custodian for certain customers, of which
company Mr. Haemmerli is Vice-Chairman.
(11) Includes an aggregate of 164,000 shares of Common Stock issuable upon
exercise of a like number of options. Also includes 857,967 shares of
Common Stock and, 8,161 shares of Series A Convertible Preferred Stock,
convertible into 81,610 shares of Common Stock, held by G&G Diagnostics,
L.P. II, of which Mr. Gruverman is a principal.
22
<PAGE>
(12) Includes 2,942,153 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares and 7,914,499 common shares issuable in
exchange for a like number of Intrex Class B Shares upon the occurrence of
certain events.
(13) Includes an aggregate of 138,142 shares of Common Stock issuable upon
exercise of a like number of options.
(14) Includes all shares of Common Stock issued and issuable as described in
Notes 4 -13 above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation - Directors Compensation; Employment Contracts;
and Consulting Agreements" for information concerning stock options granted and
employment and consulting agreements entered into during Fiscal 1998-2000 with
officers and Directors of the Company.
In December 1997 and January and February 1998, four directors (Geoffrey
Hewitt, Byron Denenberg, Irwin Gruverman and Walter Haemmerli) and an officer
(Melvin Pelley) of FiberChem each advanced the Company a total of $50,000 and
Mr. Haemmerli advanced an additional $75,000. These advances, aggregating
$325,000, were evidenced by convertible promissory notes bearing interest at the
rate of 8% per annum due five years from issuance. Each note and unpaid accrued
interest aggregating $20,275 was cancelled on December 22, 1998 in payment for
unsubscribed Units of the Rights Offering resulting in the issuance to the
directors and officer of 1,569,431 shares of Common Stock and a like number of
Class E Common Stock Purchase Warrants.
Mr. Pelley advanced the Company $25,000 on February 27, 1998, and an
additional $25,000 on July 1, 1998. Each of these advances is evidenced by a
separate promissory note bearing interest at the rate of 8% per annum and were
originally due on or before August 31, 1998. Mr. Pelley agreed to extend the due
dates of the promissory notes. Mr. Pelley advanced FiberChem $25,000 on June 2,
1999 and $25,000 on June 3, 1999 evidenced by promissory notes bearing interest
at the rate of 9% per annum and due three years from issuance. On June 19, 2000
these four notes and accrued interest thereon were applied to the exercise of
323,626 Class E Common Stock Purchase Warrants held by Mr. Pelley. Mr. Pelley
advanced $25,000 on July 27, 1999 and $40,000 on September 29, 1999, Mr.
Haemmerli advanced $50,000 on August 30, 1999 and Mr. Gruverman advanced $50,000
on July 26, 1999. Each of these advances is evidenced by a convertible
promissory note bearing interest at the rate of 9% per annum and due three years
from the date of issuance. Mr. Pelley advanced $200,000 on January 12, 2000,
evidenced by a promissory note bearing interest at the rate of 12% per annum and
due 3 years from the date of issuance. The note becomes convertible into Common
Stock at the option of the holder only if the Company deems it has sufficient
authorized shares available.
In March and August 1998, the Company obtained loans aggregating $433,000
from Privatbank Vermag AG, a private investment bank with which Mr. Haemmerli is
associated. These loans (the "Bridge Loans") were provided as interim financing
until the Company completed its Rights Offering. The Bridge Loans bear interest
at approximately 8.5% per annum. In addition, the Company agreed to issue to
Privatbank, as additional consideration, 130,000 Units (consisting of 130,000
shares of Common Stock and Class E Warrants to purchase 130,000 shares of Common
Stock). The Units were issued in October 1998 as part of the Rights Offering.
Also, $50,000 of the Bridge Loans and $1,920 in accrued interest were converted
to Common Stock and Warrants as part of the Rights Offering. The remaining
$383,000 of Bridge Loans were due on July 15, 1999, when principal of $133,000
and accrued interest of $14,680 were converted to 1,136,000 shares of Common
Stock. On September 20, 2000, an additional $50,000 in principal and $750 in
interest was paid. The due date of the remaining $200,000 principal amount was
extended to January 3, 2001.
23
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit No. Name
----------- -----
2.1 Amended Arrangement Agreement, dated as of May 26, 2000, entered into on
June 2, 2000, between FiberChem, Inc., a Delaware corporation and Intrex
Data Communications Corp., a British Columbia company. (1)
2.2 Agreement and Plan of Merger by and Among FiberChem, Inc., Pandel
Instruments, Inc., Pandel Mergerco, Inc. and Peter J. Lagergren. (1)
3.1 Articles of Incorporation of Registrant, as amended. (2)
3.2 By-Laws of Registrant. (3)
3.3 Certificate of Merger of Pandel Instruments, Inc. and Pandel Mergerco,
Inc. dated July 27, 2000. (4)
3.4 Certificate of Designation of Special Series Preferred Stock of
FiberChem, Inc. dated July 27, 2000. (4)
3.5 Certificate of Designation of Pandel Series Convertible Preferred Stock
of FiberChem, Inc. dated July 27, 2000. (4)
4.1 Trust Indenture Agreement dated as of July 28, 2000, between FiberChem
and The Bank of New York, as Trustee. (4)
4.2 U.S. $1,350,000 Global Bearer Debenture without interest coupons issued
by FiberChem on July 28, 2000. (4)
4.3 Form of 12% Senior Convertible Promissory Note due 2002. (4)
4.4 Class D Warrant Agreement of the Registrant with form of Warrant
Certificate. (5)
4.5 Form of 8% Senior Convertible Note Due 1999 issued in the Company's
February 1996 private placement. (6)
4.6 Form of Warrant to purchase Common Stock on or before May 31, 2001. (7)
10.1 Lease Agreement and Reimbursement Agreement dated July 27, 1989 by and
between the Company and Howard Hughes Properties for Hughes Airport
Center, 1181 Grier Drive, Suite B, Las Vegas, Nevada. (8)
10.2 Amendment dated May 6, 1991 and September 26, 1991 to the Industrial
Real Estate Lease (Exhibit 10.10) for the Company's facilities. (9)
10.3 Employee Stock Bonus Plan. (5)
10.4 Amendments dated October 23, 1990 and February 21, 1991 to the
Industrial Real Estate Lease (Exhibit 10.10) for the Company's
facilities. (10)
10.5 Non-qualified stock option plan. (11)
10.6 Qualified Stock Option Plan. (12)
10.7 Consulting agreement by and between the Company and with Irwin J.
Gruverman, dated November 4, 1993. (13)
10.8 Qualified Stock Option Plan. (14)
10.9 FCI FiberChem, Inc. and FCI Environmental, Inc. 401(k) Profit Sharing
Plan. (15)
10.10 Qualified Stock Option Plan (16)
10.11 License Agreement with Texas Instruments, Incorporated, dated June 15,
1995. (17)
10.12 Cooperative Development Agreement with Texas Instruments, Incorporated,
dated June 15, 1995. (17)
10.13 Form of Distribution Agreement. (18)
10.14 Form of agreement for services with Gordon Werner and others dated as of
September 15, 1995. (18)
10.15 Agreement dated November 8, 1996 by and between FCI Environmental, Inc.
and Alcohol Sensors International, Ltd. CERTAIN INFORMATION IN THIS
EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. (19)
10.16 Agreement dated October 1, 1996 by and between FCI Environmental, Inc.
and Autronica AS. (19)
10.17 OEM Strategic Alliance Agreement dated June 30, 1996 by and between
Whessoe Varec, Inc. and FCI Environmental, Inc. (19)
10.18 1997 Employee Stock Plan (20)
10.19 Employment and Non-Competition Agreement with Geoffrey F. Hewitt dated
July 27, 2000 (24)
10.20 Employment and Non-Competition Agreement with Melvin W. Pelley dated
July 27, 2000 (24)
10.21 Employment and Non-Competition Agreement with Thomas A. Collins dated
July 27, 2000 (24)
24
<PAGE>
10.22 Employment and Non-Competition Agreement with David S. Peachey dated
July 27, 2000 (24)
10.23 Employment and Non-Competition Agreement with Peter J. Lagergren dated
July 27, 2000 (24)
10.24 Employment and Non-Competition Agreement with Brian O'Neil dated July
27, 2000 (24)
10.25 Amendment to Whessoe Varec, Inc. OEM Strategic Alliance Agreement dated
August 13, 1997. (21)
10.26 Release and Settlement Agreement dated as of April 12, 2000 between the
Company and entrenet Group, L.L.C. (24)
10.27 Agreement dated October 4, 2000 between the Company and Continental
Capital & Equity Corporation (24)
10.28 1999 Employee Stock Option Plan (23)
10.29* Agreement dated December 12, 2000 by and between Enraf BV of Delft,
Holland and the Company
10.30* Reseller Agreement dated June 26, 1996 by and between ORBCOMM U.S.A.
L.P. and Intrex Data Communications Group.
13.1 Annual Report on Form 10-KSB for the fiscal year ended September 30,
1999 (24)
13.2 Quarterly Report on Form 10-QSB for the fiscal quarter ended June 30,
2000 (24)
13.3 Current Report on Form 8-K (Date of Earliest Event Reported July 27,
2000) (24)
13.4 Amendment No. 1 to Current Report on Form 8-K (Date of Earliest Event
Reported July 27, 2000) (24)
21.1* Subsidiaries of the Registrant (24)
23.1* Consent of Goldstein Golub Kessler LLP.
----------------------
(1) Incorporated by reference from the Company's Current Report on Form 8K
(Date of Earliest Event Reported June 2, 2000).
(2) Incorporated by reference from the Company's January 13, 1988
Post-Effective Amendment to the Registration Statement on Form S-18
(File No. 33-12097-C) as declared effective on March 3, 1988.
(3) Incorporated by reference from the Company's April 15, 1987 Amendment to
the Registration Statement on Form S-18 (File No. 33-12097-C) as
declared effective on March 3, 1988.
(4) Incorporated by reference from the Company's Current Report on Form 8K
(Date of Earliest Event Reported July 27, 2000).
(5) Incorporated by reference from the Company's Registration Statement No.
33-35985
(6) Incorporated by reference from the Company's Current Report on Form 8-K
for February 15, 1996.
(7) Incorporated by reference from the Company's Current Report on Form 8-K
on July 15, 1996.
(8) Incorporated by reference from the Company's Registration Statement No.
33-29338.
(9) Incorporated by reference from the Company's Annual Report on Form 10-K
for September 30, 1991.
(10) Incorporated by reference from the Company's April 24, 1991
Post-Effective Amendment to the Registration Statement on Form S-18
(File No. 33-35985) as declared effective on April 30, 1991.
(11) Incorporated by reference from the Company's Registration Statement on
Form S-8 for April 28, 1992. (File No. 33-47518).
(12) Incorporated by reference from the Company's Proxy Statement dated May
3, 1993.
(13) Incorporated by reference from the Company's Report on Form 10-K for
September 30, 1993.
(14) Incorporated by reference from the Company's Proxy Statement dated May
23, 1994.
(15) Incorporated by reference from the Company's Report on Form 10-KSB for
September 30, 1994.
(16) Incorporated by reference from the Company's Report on Form S-8 for
August 1, 1995.
(17) Incorporated by reference from the Company's Report on Form 8-K/A for
August 30, 1995.
(18) Incorporated by reference from the Company's Report on Form 10-KSB for
September 30, 1995.
(19) Incorporated by reference from the Company's Report on Form 10-KSB for
September 30, 1996.
(20) Incorporated by reference from the Company's Proxy Statement dated May
20, 1997.
(21) Incorporated by reference from the Company's Report on Form 10-KSB for
September 30, 1997.
(23) Incorporated by reference from the Company's registration statement on
form S-8 filed March 1, 2000 (File No. 333-31412).
(24) Incorporated by reference from the Company's registration statement on
Form S-2 filed November 13, 2000 (File No. 333-49706)
* Filed herewith.
25
<PAGE>
(b) REPORTS ON FORM 8-K
A current report on Form 8-K was filed on August 11, 2000 reporting, under
Item 2, Acquisition or Disposition of Assets, the July 27, 2000 completion of
the combination of our business with that of Intrex Data Communications Corp.
A current report on From 8-K/A, Amendment No. 1, was filed on October 10,
2000 amending the above, solely to add the financial statements of the
businesses acquired as required by Item 7(a) and the proforma financial
information required by Item 7(b).
26
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: December 28, 2000
FIBERCHEM, INC.
By: /s/ Geoffrey F. Hewitt
--------------------------
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
---- -------- ----
<S> <C> <C>
/s/ Geoffrey F. Hewitt Chairman of the Board, Chief Executive Officer and December 28 , 2000
Class A Director
/s/ David S. Peachey President, and Class A Director December 28 , 2000
/s/ Irwin J. Gruverman Class A Director December 28 , 2000
/s/ Peter J. Lagergren Executive Vice President and Group President December 28 , 2000
Communications Technology Division and Chief
Technology Officer, Class B Director
/s/ Brian A. O'Neil Executive Vice President - Corporate Development, December 28 , 2000
Class B Director
/s/ Trevor S. Nelson Class C Director December 28 , 2000
/s/ Byron A. Denenberg Class C Director December 28 , 2000
/s/ Melvin W. Pelley Chief Financial Officer and Secretary December 28 , 2000
(Principal Accounting Officer)
</TABLE>
27
<PAGE>
EXHIBIT INDEX
Exhibit No. Name
----------- ----
10.29 Agreement dated December 12, 2000 by and between Enraf BV of Delft,
Holland and the Company
10.30 Reseller Agreement dated June 26, 1996 by and between ORBCOMM U.S.A.
L.P. and Intrex Data Communications Group.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Goldstein Golub Kessler LLP
27.1 Financial Data Schedule
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
DecisionLink, Inc.
We have audited the accompanying consolidated balance sheet of DecisionLink,
Inc. and Subsidiaries as of September 30, 2000 and the related consolidated
statement of operations, stockholders' equity and cash flows for the period
from January 1, 2000 through September 30, 2000. These financial statements
are the responsibility of the Company's management. 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 generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
DecisionLink, Inc. and Subsidiaries as of September 30, 2000, and the results
of their operations and their cash flows for the period from January 1, 2000
through September 30, 2000 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 3 to the consolidated financial statements, the Company has suffered
recurring losses from operations and has a net accumulated deficit that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ GOLDSTEIN GOLUB KESSLER LLP
New York, New York
November 17, 2000, except for Note 18,
as to which the date is November 29, 2000
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Intrex Data Communications Corp.
We have audited the consolidated balance sheet of Intrex Data Communications
Corp. (a Development Stage Enterprise) as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficiency) and
comprehensive income and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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, these consolidated financial statements present fairly, in all
material respects, the financial position of Intrex Data Communications Corp. as
of December 31, 1999, and the results of its operations and its cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 3 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and negative cash flows from operations that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
We have reported separately on the consolidated financial statements of Intrex
Data Communications Corp. as of December 31, 1999 and for the year then ended in
accordance with accounting principles generally accepted in Canada.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
June 2, 2000
F-2
<PAGE>
DECISIONLINK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,811,336 $ 64,172
Accounts receivable, net of allowance for doubtful
accounts of $42,345 257,269 --
Inventories (Note 5) 234,504 --
Prepaid expenses and other 32,720 1,318
------------ ------------
Total current assets 3,335,829 65,490
Equipment, net of accumulated depreciation of $23,921 and $28,113,
respectively 149,543 9,158
Deferred note financing costs (Note 6) 768,292 --
Other assets, net (Note 7) 50,045 156,406
Goodwill, net of accumulated amortization of $245,506 21,850,054 --
------------ ------------
Total assets 26,153,763 231,054
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable 532,532 463,490
Accrued expenses (Note 8) 1,238,975 146,337
Due to related parties (Note 17) 23,000 102,121
Debentures and notes payable - current portion (Note 9) 326,500 37,855
Lease obligations -- 7,554
------------ ------------
Total current liabilities 2,121,007 757,357
Debentures and notes payable, excluding current portion (Note 9) 2,886,000 41,297
------------ ------------
Total liabilities 5,007,007 798,654
------------ ------------
Commitments and contingencies (Note 15) -- --
Stockholders' equity (deficiency)
Preferred stock (Note 11) 29,598,213 --
Common stock (Note 12) 6,645 1,047,247
Additional paid-in capital 671,901 --
Foreign currency translation adjustments 171,726 3,592
Accumulated deficit (9,301,729) (1,618,439)
------------ ------------
Total stockholders' equity (deficiency) 21,146,756 (567,600)
------------ ------------
Total liabilities and stockholders' equity (deficiency) $ 26,153,763 $ 231,054
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
DECISIONLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period Ended Year Ended
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Revenues $ 215,274 $ --
Cost of revenues 150,564 --
----------- -----------
Gross profit 64,710 --
----------- -----------
Operating expenses:
Research, development and engineering 987,233 487,696
General and administrative 726,659 142,571
Sales and marketing 194,740 46,615
----------- -----------
Total operating expenses 1,908,632 676,882
----------- -----------
Loss from operations (1,843,922) (676,882)
----------- -----------
Other income (expense):
Acquired research and development (Note 2) (5,500,000) --
Goodwill amortization (245,506) --
Interest expense (132,884) --
Interest income 39,022 --
Foreign exchange gain -- 18,591
----------- -----------
Total other income (expense) (5,839,368) 18,591
----------- -----------
Net loss $(7,683,290) $ (658,291)
=========== ===========
Basic earnings per common share $ (0.36) $ (0.09)
Diluted earnings per common share $ (0.36) $ (0.09)
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
DECISIONLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------------------------------------------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 - Intrex -- -- 6,909,444 $ 659,162
Intrex common stock issued:
For cash -- -- 1,196,000 404,053
For subscribed shares -- -- 40,000 12,863
For settlement of debt -- -- 81,250 27,449
Intrex share issuance costs -- -- -- (56,280)
Intrex foreign currency translation
adjustment -- -- -- --
Intrex net loss -- -- -- --
---------------------------------------------------------------------
Balance at December 31, 1999 - Intrex -- -- 8,226,694 1,047,247
Intrex common stock issued:
For settlement of debt -- -- 165,500 110,296
Cumulative effect of reverse merger
adjustments - Intrex -- -- (8,392,194) (1,157,543)
Cumulative effect of reverse merger
adjustments - FiberChem 207,848 $ 3,117,720 58,730,263 5,873
Issuance of Special Series Preferred
Stock for merger of Intrex
and FiberChem 1,751,008 19,409,412 -- --
Issuance of Pandel Series Preferred Stock
for merger of Intrex and FiberChem 580,782 6,431,904 -- --
Issuance of B Series Preferred Stock 257,000 2,570,000 -- --
Common stock issued:
Conversion of Special Series shares (47,204) (1,930,823) 4,720,435 472
For payment of merger costs and
settlement of related debt -- -- 3,000,000 300
Warrants issued for merger costs -- -- -- --
Warrants issued for B Series preferred
stock financing costs -- -- -- --
Foreign currency translation adjustment -- -- -- --
Net loss -- -- -- --
---------------------------------------------------------------------
Balance at September 30, 2000 2,749,434 $ 29,598,213 66,450,698 $ 6,645
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Shares Paid-In Translation Accumulated
Subscribed Capital Adjustment Deficit
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 - Intrex $ 12,863 -- $ 26,626 ($ 960,148)
Intrex common stock issued:
For cash -- -- -- --
For subscribed shares ($ 12,863) -- -- --
For settlement of debt -- -- -- --
Intrex share issuance costs -- -- -- --
Intrex foreign currency translation
adjustment -- -- (23,034) --
Intrex net loss -- -- -- (658,291)
----------------------------------------------------------------------
Balance at December 31, 1999 - Intrex -- -- 3,592 (1,618,439)
Intrex common stock issued:
For settlement of debt -- -- -- --
Cumulative effect of reverse merger
adjustments - Intrex -- -- -- --
Cumulative effect of reverse merger
adjustments - FiberChem -- ($ 2,076,346) -- --
Issuance of Special Series Preferred
Stock for merger of Intrex
and FiberChem -- -- -- --
Issuance of Pandel Series Preferred Stock
for merger of Intrex and FiberChem -- -- -- --
Issuance of B Series Preferred Stock -- (1,479,624) -- --
Common stock issued:
Conversion of Special Series shares -- 1,930,351 -- --
For payment of merger costs and
settlement of related debt -- 1,319,700 -- --
Warrants issued for merger costs -- 595,200 -- --
Warrants issued for B Series preferred
stock financing costs -- 382,620 -- --
Foreign currency translation adjustment -- -- 168,134 --
Net loss -- -- -- (7,683,290)
----------------------------------------------------------------------
Balance at September 30, 2000 -- $ 671,901 $ 171,726 ($ 9,301,729)
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Comprehensive
Total Income
--------------------------------
<S> <C> <C>
Balance at December 31, 1998 - Intrex ($ 261,497) ($ 175,643)
==============
Intrex common stock issued:
For cash 404,053 --
For subscribed shares -- --
For settlement of debt 27,449 --
Intrex share issuance costs (56,280) --
Intrex foreign currency translation
adjustment (23,034) (23,034)
Intrex net loss (658,291) (658,291)
--------------------------------
Balance at December 31, 1999 - Intrex (567,600) (681,325)
==============
Intrex common stock issued:
For settlement of debt 110,296 --
Cumulative effect of reverse merger
adjustments - Intrex (1,157,543) --
Cumulative effect of reverse merger
adjustments - FiberChem 1,047,247 --
Issuance of Special Series Preferred
Stock for merger of Intrex
and FiberChem 19,409,412 --
Issuance of Pandel Series Preferred Stock
for merger of Intrex and FiberChem 6,431,904 --
Issuance of B Series Preferred Stock 1,090,376 --
Common stock issued:
Conversion of Special Series shares -- --
For payment of merger costs and
settlement of related debt 1,320,000 --
Warrants issued for merger costs 595,200 --
Warrants issued for B Series preferred
stock financing costs 382,620 --
Foreign currency translation adjustment 168,134 168,134
Net loss (7,683,290) (7,683,290)
--------------------------------
Balance at September 30, 2000 $ 21,146,756 ($ 7,515,156)
================================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
DECISIONLINK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Ended Year Ended
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,683,290) $ (658,291)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired R&D write off 5,500,000 --
Amortization of goodwill 245,506 --
Amortization of financing costs 70,078 --
Provision for Amnex bonds 64,250 --
Amortization of intellectual property and patents 5,978 --
Depreciation of equipment (4,192) 7,631
Research and development - property and equipment expense -- 50,845
Changes in operating assets and liabilities net of effects from the purchase
of FiberChem, Inc.
(Increase) decrease in accounts receivable (30,801) 1,137
(Increase) decrease in inventories 26,121 24,253
(Increase) decrease in prepaid expenses and other current assets (994) (16,556)
Increase (decrease) in accounts payable (253,918) 260,224
Increase (decrease) in accrued expenses 254,346 --
Increase (decrease) in interest payable 23,641 --
------------ ------------
Net cash used in operating activities (1,783,275) (330,757)
------------ ------------
Cash flows from investing activities:
Payments for deferred acquisition costs (263,940) (75,539)
Purchase of equipment (72,661) (57,597)
Payments for patents (4,120) --
Cash acquired from FiberChem, Inc., net of cash paid in acquisition 735,465 --
------------ ------------
Net cash provided (used) in investing activities 394,744 (133,136)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of 12% convertible debentures 1,350,000 --
Proceeds from issuance of Preferred B Series 1,285,000 --
Proceeds from issuance of 12% convertible notes 1,000,000 --
Proceeds from issuance of capital stock -- 404,053
Common share issuance costs -- (22,531)
Increase in due to related parties 930,990 142,286
(Increase) decrease in cash in escrow 680,103 --
Principal payment of bridge loan (600,000) --
Financing costs (567,220) --
Principal payment of Privatbank loan (50,000) --
------------ ------------
Net cash provided (used) in financing activities 4,028,873 523,808
------------ ------------
Effect of exchange rate changes on cash 106,822 1,633
------------ ------------
Net increase (decrease) in cash and cash equivalents 2,747,164 61,548
Cash and cash equivalents at beginning of period 64,172 2,624
------------ ------------
Cash and cash equivalents at end of period 2,811,336 64,172
============ ============
Supplemental disclosure:
Cash paid for interest 39,165 --
Non-cash investing and financing activities:
Special series preferred stock exchanged for common stock 1,930,823 --
Common stock issued for payment of merger services capitalized 1,320,000 --
Warrants issued for merger costs 595,200 --
Warrants issued for B Series preferred stock financing costs 382,620 --
B Series preferred stock issued for non-cash financing 902,380 --
Debt converted to common stock 110,296 27,449
Note payable issued for deferred acquisition costs -- 80,866
Share issuance costs, previously deferred, netted against share capital -- 33,749
Issuance of common stock for previously paid subscriptions -- 12,863
Reconciliation of Acquisitions, net of cash acquired:
Preferred stock issued for acquisition of FiberChem 25,841,316 --
Deferred merger costs 2,608,566 --
FiberChem net assets acquired, net of cash (5,618,857) --
Purchase accounting goodwill (22,095,560) --
------------ ------------
Cash acquired $ 735,465 $ --
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - THE COMPANY
DecisionLink, Inc., a Delaware corporation formerly known as FiberChem, Inc.
("FCI"), was incorporated on December 21, 1988 as the successor to Tipton
Industries, Inc., incorporated on April 6, 1987. On July 27, 2000, FCI combined
its business with Intrex Data Communications Corp. ("Intrex Data"), a British
Columbia corporation, as more fully explained below. All references herein to
the "Company" or "DecisionLink" include DecisionLink's wholly owned
subsidiaries, Intrex Data, formerly a development stage enterprise which was
incorporated on October 26, 1994 under the Company Act (British Columbia),
Firebird Data Communications, Inc. ("Firebird"), FCI Environmental, Inc., and
Pandel Mergerco, Inc. ("Pandel") unless the context indicates otherwise.
Intrex Data and Firebird (collectively "Intrex") are engaged in the business of
providing low-cost, proprietary Internet and communications technology for
transmitting data to or from remote or mobile assets on a real-time basis using
third-party satellite services and other wireless data systems. Data is routed
through Intrex's global network that acts as a data gateway and applications
service provider. This allows customers to monitor and control remote or mobile
assets such as gas wells, propane tanks, pipelines, compressors, storage tanks,
offshore oil production platforms, or service vehicles directly from a desktop
PC.
NOTE 2 - ACQUISITION
On July 27, 2000 (the "Reverse Acquisition Date"), FCI acquired 100% of the
voting Common Stock of Intrex thereby completing the combination of their
businesses pursuant to an Amended Arrangement Agreement dated as of May 26, 2000
(the "Arrangement Agreement"). The Arrangement Agreement provides that each
Intrex voting common share, except for those shares held by Pandel Instruments,
Inc. ("Pandel"), be exchanged for 27.801925 non-voting Intrex Class B shares and
0.27801925 FCI Special Series preferred shares with each Special Series
preferred share entitled to one hundred votes. In conjunction with the
Arrangement Agreement, Pandel, which owned 24.89% of Intrex's common shares, was
merged into Pandel Mergerco, Inc., ("Mergerco") a wholly-owned FCI Delaware
subsidiary, in exchange for FCI mandatorily convertible Pandel Series preferred
shares with each Pandel Series preferred share entitled to one hundred votes and
is mandatorily convertible into one hundred FCI common shares.
That number of Intrex Class B shares and Pandel Series preferred shares
representing a percentage in excess of an approximate 51.8% ownership interest
in FCI (collectively the "Pooled Shares"), as indicated in the following table,
were deposited by the Intrex shareholders into escrow pursuant to the terms of
an escrow agreement. This agreement provides that Pooled Shares be issued to the
Intrex shareholders if certain milestones related to the Intrex business are met
during a two-year period following the closing. Accordingly, the consideration
issuable in the combination provides former Intrex shareholders with an initial
approximate 51.8% ownership interest and the potential to acquire up to an
approximate 81.1% ownership interest of the combined entity upon distribution,
if any, of the Pooled Shares.
The reverse acquisition of FCI by Intrex and the merger of Pandel into Mergerco
have both been accounted for using purchase accounting as a simultaneous
transaction. The carrying values of assets and liabilities have been estimated
to approximate fair market value. Accordingly, no adjustments to these amounts
were made to reflect the allocation and amount of the ultimate purchase price
with the exception of the allocation made to FCI's in-process research and
development ("R&D"). Purchased in-process R&D includes the value of products in
the development stage and not considered to have reached technological
feasibility. In accordance with applicable accounting rules, purchased
in-process R&D is required to be expensed. Accordingly, $5.5 million of the
acquisition cost was expensed in the quarter ended September 30, 2000.
The combination of intrex and FCI is treated as a reverse acquisition of FCI by
intrex for accounting purposes. the value of the consideration given by intrex,
including those shares held by pandel, to FCI was determined as FCI common
shares of 58,730,263 at $0.44 per share (100% of FCI issued and outstanding
common shares and the closing price of such shares, respectively, the day prior
to the Reverse Acquisition Date), or $25,841,316. Per the terms of the reverse
acquisition, consideration of 75.11% and 24.89% is from exchange of stock with
Intrex and Pandel, respectively. The excess of the value of the consideration
given over FCI's net assets acquired created goodwill of $22,095,560. Goodwill
will be amortized on a straight-line basis over 15 years.
F-7
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The following table sets forth the allocation of the value of the total
consideration:
<TABLE>
<CAPTION>
Shares
---------------------------------------------- Consideration
Non Pooled Pooled Total Value ($)
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Intrex Class B Shares 47,490,300 137,200,647 184,690,947 19,409,412
FCI Pandel Series 15,738,900 51,789,322 67,528,222 6,431,904
------------ ------------- ----------- -------------
Total issued 63,229,200 188,989,969 252,219,169 25,841,316
============ ============= =========== =============
</TABLE>
None of the consideration has been separately allocated to the Special Shares.
The effect of the various percentages of Intrex's interest in the acquired net
assets of FCI depending on the ultimate distribution of Pooled Shares, assuming:
(a) each Intrex Class B Share is exchanged for one share of FCI Common Stock,
and (b) each share of Pandel Series preferred stock is converted into 100 shares
of FCI Common Stock, is as follows:
<TABLE>
<CAPTION>
FCI Common Shares
Issued and Outstanding
Ultimate -----------------------------------------------------------------
Percent Intrex Other
Acquired Interest Interest Total
-------- -------- -------- -----
<S> <C> <C> <C>
51.8 63,229,200 58,730,263 121,959,463
68.3 126,225,856 58,730,263 184,956,119
76.3 189,222,513 58,730,263 247,952,776
81.1 252,219,169 58,730,263 310,949,432
</TABLE>
The accompanying financial statements at and for the period ended September 30,
2000, include the results of operations, capital transactions and cash flows for
the nine month period and the two month period ended September 30, 2000, for
Intrex and FCI, respectively, and is referred hereafter as "Period Ended
September 30, 2000".
Assuming the merger had occurred as of January 1, 1999 and 2000, respectively,
pro forma unaudited condensed consolidated results of operations are as follows:
<TABLE>
<CAPTION>
Period Year
Ended Ended
September 30, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Revenues $ 744,516 $ 2,372,215
Net loss (4,768,624) (10,644,108)
Basic loss per share $ (0.10) $ (0.23)
</TABLE>
The aforementioned pro forma unaudited condensed consolidated results of
operations are presented using audited condensed consolidated results of
operations of Intrex and Pandel for the nine months ended September 30, 2000 and
for the twelve months ended December 31, 1999, combined with the unaudited
condensed consolidated results of operations of FCI for the nine months ended
September 30, 2000 and with the unaudited condensed consolidated results of
operations of FCI for the twelve months ended December 31, 1999. Pro forma
adjustments related to the condensed combined results of operations have been
computed assuming the reverse acquisition of FCI by Intrex and the merger of
Pandel into Mergerco were consummated on January 1, 1999 and on January 1, 2000.
The pro forma condensed combined results of operations should be read in
conjunction with the audited financial statements and notes thereto of Intrex
and Pandel for the year ended December 31, 1999 and with the audited financial
statements and notes thereto of FCI for the year ended September 30, 1999
included in FCI's Form 8-K/A, Amendment No. 1, filed on October 10, 2000, as
well as the accompanying audited financial statements of the combined entities.
The pro forma unaudited financial information is not necessarily indicative of
the results of operations or the financial position which would have been
attained had the reverse acquisition of FCI by Intrex and the merger of
F-8
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Pandel into Mergerco been consummated at either of the foregoing dates or which
may be attained in the future. The pro forma unaudited results are not intended
to be a projection of future results.
All historical financial statements included in the aforementioned pro forma
financial information were prepared in accordance with U.S. generally accepted
accounting principles. The historical financial statements of Intrex, which were
prepared in accordance with Canadian generally accepted accounting principles
using the Canadian dollar as the functional currency, were translated into U.S.
dollars using the exchange rate at December 31, 1999 and September 30, 2000 for
the balance sheet and using an average rate for the periods presented in the
statements of operations. Translation adjustments are reflected as foreign
currency translation adjustments in Stockholder's equity and accordingly have no
effect on net loss.
DecisionLink develops, produces, markets and licenses chemical optical sensors
that produce continuous measurement data and communications technologies for
transmitting and managing that data. The FCI Environmental division develops
optical chemical sensors that produce continuous, real-time information on
environmental pollutants in the air, water and soil. These sensors and the
Intrex communications technologies are incorporated into products which offer
the environmental monitoring community state-of-the-art sensing technology with
all the benefits of satellite communications, including dramatically reduced
installation and start-up costs, lower communications charges, ubiquitous
coverage and the ability to receive data on a customer-specific website.
NOTE 3 - CONTINUATION AS A GOING CONCERN AND LIQUIDITY
The Company's consolidated financial statements for the period ended September
30, 2000 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a net loss of $7,683,290 for the
year ended September 30, 2000, and as of September 30, 2000 had an accumulated
deficit of $9,301,729.
Management recognizes that the Company must generate additional revenues or
reductions in operating costs and that it will need additional financing to
enable it to continue its operations. The Company is pursuing potential sources
of capital to fund the business model associated with the aforementioned
business combination. However, no assurance can be given that the Company can
achieve profitable revenues or secure additional financing on satisfactory
terms. If the Company is unable to service its financial obligations as they
become due, it will be required to adopt alternative strategies, which may
include actions such as debt restructuring, delaying capital expenditures and
reducing headcount. Any failure with respect to the foregoing strategies will
more likely than not have a material adverse effect on the Company's liquidity
and financial position.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PRINCIPLES - The financial statements are prepared in conformity with
U.S. generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of
DecisionLink include the financial statements of all majority-owned companies.
Significant intercompany transactions and balances have been eliminated.
USE OF ESTIMATES - The preparation of consolidated 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 in the Consolidated Balance Sheets and revenues and expenses in the
Consolidated Statements of Operations. Significant estimates made by management
in the accompanying financial statements include: carrying values and
amortization periods of goodwill and other assets, provisions for doubtful
accounts and inventory valuations and reserves. Actual results could differ
materially from those estimates based on unforeseen changes in circumstances.
CASH EQUIVALENTS - DecisionLink considers all highly liquid investments with
maturities of three months or less at the time of purchase to be cash
equivalents.
INVENTORIES - Inventories, consisting primarily of merchandisable fiber optic
chemical sensors, are stated at the lower of cost (first-in, first-out) or
market.
F-9
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
EQUIPMENT - Equipment is stated at cost. DecisionLink uses the straight-line
method over the estimated useful lives of the assets, generally five years, in
computing depreciation for financial reporting purposes and generally uses
accelerated methods for income tax purposes.
OTHER ASSETS - Other assets consists primarily of: (a) patent costs incurred in
acquiring and filing patents which are capitalized and amortized using the
straight-line method over four years, (b) deferred acquisition costs
representing costs relating to planned acquisitions, and (c) purchased
intellectual property relating to the core development of data, communications
and monitoring technologies.
GOODWILL - Goodwill, representing the excess of the cost over the net tangible
assets and identifiable intangible assets of acquired businesses, is stated at
cost and is amortized on a straight-line basis over 15 years, the estimated
future periods to be benefited. As required by Statement of Financial Accounting
Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS No. 121"), whenever events or changes
in circumstances indicate that the carrying value of assets acquired in a
business combination may not be recoverable during the estimated future periods
to be benefited, the Company will review the recoverability of goodwill based
upon the provisions of SFAS No. 121. In the event that assets acquired in a
business combination, including the value of goodwill associated with such
assets, are determined to be carried at an amortized amount in excess of
estimated future net cash flows, undiscounted and without interest, then such
assets, including goodwill, will be adjusted for impairment through a non-cash
charge to earnings in the period that such determination is made, to a level
commensurate with net cash flows discounted at a rate commensurate with the risk
involved. In the event that goodwill is not associated with impaired assets, the
Company will account for such goodwill under APB 17, INTANGIBLE ASSETS. At each
balance sheet date, the Company evaluates the period of amortization of
goodwill. The factors used in evaluating the amortization period include: (i)
current operating results, (ii) projected future operating results, and (iii)
any other material factors that affect the continuity of the business. No
impairment charges have been recognized in any of the periods presented.
SHARE ISSUANCE COSTS - Costs of issuing common shares are applied to reduce the
value of consideration assigned to such common shares.
FOREIGN CURRENCIES - Assets and liabilities recorded in foreign currencies on
the books of foreign subsidiaries are translated at the exchange rate on the
balance sheet date. Certain assets such as equipment and the related
depreciation expense are translated at the historical exchange rate on the
purchase date. Revenues, costs and expenses are translated at the average rate
of exchange prevailing during the periods presented. Translation adjustments
resulting form this process are charged or credited to equity as "Foreign
Currency Translation Adjustments." Gains and losses on foreign currency
transactions, if any, are included in non operating expenses.
FINANCIAL INSTRUMENTS - The carrying amounts reported in the balance sheets for
cash, accounts receivable, accounts payable, accrued liabilities and debt
approximate fair values due to the short-term maturity of these financial
instruments.
REVENUE RECOGNITION - Revenue from product sales to customers, distributors and
resellers is recognized when title passes, which is upon shipment of product to
the customer. There is generally no right of return except for normal
warranties. Revenue from monitoring and communication services is recognized in
the period provided. Revenue from research and testing services performed for
third parties under short-term contracts is recognized in the period provided.
RESEARCH AND DEVELOPMENT - Research and development costs are expensed as
incurred. Equipment used in research and development is capitalized only if it
has an alternative use.
WARRANTY - The Company warrants its products for a period of one year from the
date of delivery, provided the products are used under normal operating
conditions. The Company accrues a reserve based on estimated future costs for
product warranty, which is charged to cost of sales in the period in which the
related revenue is recognized.
INCOME TAXES - The Company complies with Statement of Financial Standards No.
109, ACCOUNTING FOR INCOME TAXES ("SFAS No. 109"). Under this asset and
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry forwards. Deferred
tax
F-10
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
assets and liabilities are measured using the enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS No. 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
PER SHARE DATA - The Company complies with Statement of Financial Accounting
Standards No. 128, EARNINGS PER Share ("SFAS No. 128"). SFAS No. 128 requires
companies to present basic earnings per share (EPS) and diluted EPS, instead of
the primary and fully diluted EPS as previously required. Companies with complex
capital structures are required to reconcile the numerator and denominator used
in the basic EPS computation to the numerator and denominator used in the
diluted EPS computation.
STOCK-BASED EMPLOYEE COMPENSATION AWARDS - The Company complies with Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS No. 123") which requires Companies to include the fair value
of stock options and other stock-based compensation issued to employees and
non-employees as compensation expense in the income statement or to disclose the
pro-forma effect on net income and earnings per share of such compensation
expense in the footnotes to the company's financial statements. The Company has
elected to account for its stock options issued under its stock option plans
pursuant to Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. This decision results in recognition of no compensation
expense for stock options issued under a Company stock option plan which are
granted with an exercise price at or greater than the market price on the grant
date. However, in accordance with the disclosure provisions of SFAS No. 123, the
Company has provided proforma basis information to reflect results of operations
and EPS had compensation expense been recognized for these grants. All other
equity instruments issued by the Company to employees and non-employees will be
recognized pursuant to SFAS No. 123 which will impact the Company's consolidated
balance sheet and statement of operations.
SEGMENT REPORTING - The Company complies with Statement of Financial Standards
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
("SFAS No. 131"). The management approach required by SFAS No. 131 designates
the internal organization that is used by management for making operating
decisions and assessing performance as the source of the Company's reportable
segments.
Management organizes and executes the Company's business plan around various
products, technologies and services intended to be assessed as homogeneous.
Currently, the Company participates predominantly within the oil, gas and
related industries. As such, DecisionLink and its subsidiaries are aggregated
into one reportable segment.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to fiscal 2000 presentation. These changes had no impact on previously reported
results of operations or shareholders' equity.
NEW ACCOUNTING PRONOUNCEMENTS - Management does not believe that any recently
issued but not yet effective accounting standards if currently adopted would
have a material effect on the accompanying financial statements.
During fiscal 1999 the Company adopted Statement of Financial Standards No. 130,
REPORTING COMPREHENSIVE INCOME ("SFAS 130"), which establishes new standards for
reporting and displaying comprehensive income and its components. The adoption
of SFAS 130 had no impact on the Company's consolidated financial position,
results of operations or cash flows.
NOTE 5 - INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Finished goods $ 752,840 $ --
Raw materials 377,609 --
Work in process 2,689 --
------------- -------------
Gross inventories 1,133,138 --
Valuation and obsolescence reserve - finished goods (548,760) --
Valuation and obsolescence reserve - raw materials (349,874) --
------------- -------------
Net inventories $ 234,504 $ --
============= =============
</TABLE>
F-11
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 6 - DEFERRED NOTE FINANCING COSTS
Deferred note financing costs consists of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
(A) Senior convertible debentures and notes $ 760,598 $ --
(B) Senior convertible notes - 8% 7,694 --
------------- -------------
$ 768,292 $ --
============= =============
</TABLE>
---------------------
(A) The Company incurred expenses associated with this offering totaling
$829,743, of which $382,620 was paid by the issuance of 987,000 common
stock purchase warrants to the placement agent. These costs are being
amortized to interest expense over the term of the note or until
conversion at which time a pro rata portion will be charged to
additional paid in capital. During the period ended September 30,
2000, $69,146 was amortized to interest expense. See Note 9.
(B) These costs are being amortized to interest expense over the term of
the note or until conversion at which time a pro rata portion will be
charged to additional paid in capital. During the period ended
September 30, 2000, $932 was amortized to interest expense. See Note
9.
NOTE 7 - OTHER ASSETS
Other assets consist of the following at September 30, 2000:
<TABLE>
<CAPTION>
Accumulated Net
Cost Amortization Book Value
--------- ------------ ----------
<S> <C> <C> <C>
Patents $ 42,206 $ (5,978) $ 36,228
Other 78,067 (64,250) 13,817
--------- ------------ ----------
$ 120,273 $ (70,228) $ 50,045
========= ============ ==========
</TABLE>
Other assets consist of the following at December 31, 1999:
<TABLE>
<CAPTION>
Accumulated Net
Cost Amortization Book Value
--------- ------------ ----------
<S> <C> <C> <C>
Deferred acquisition costs $ 156,405 $ -- $ 156,405
Intellectual property 1 -- 1
--------- ------------ ----------
$ 156,406 $ -- $ 156,406
========= ============ ==========
</TABLE>
Patent costs include costs incurred in acquiring, filing and prosecuting patents
and patent applications. The Company's policy in general is to apply for patents
in major European and Asian countries as well as in the United States.
Deferred acquisition costs were incurred in conjunction with the July 27, 2000
combination of Intrex and FCI.
F-12
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 8 - ACCRUED EXPENSES
Accrued expenses consist of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Accrued and deferred salary and benefits $ 511,062 $ 146,337
Other 358,993 --
Accrued professional fees 205,298 --
Accrued interest 90,879 --
Accrued warranty 72,743 --
------------ ------------
$ 1,238,975 $ 146,337
============ ============
</TABLE>
NOTE 9 - DEBENTURES AND NOTES PAYABLE
Debentures and notes payable consists of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
(A) Senior convertible debentures $ 1,350,000 $ --
(A) Senior convertible notes 1,000,000 --
(B) Director, officer and affiliated company notes 365,000 --
(C) Bridge note 200,000 --
(D) Senior convertible notes - 8% 171,000 --
(E) Subordinated convertible note 126,500 79,152
------------ ------------
3,212,500 79,152
Less: Current portion
Bridge note 200,000 --
Subordinated convertible note 126,500 37,855
------------ ------------
326,500 37,855
------------ ------------
Debentures and notes payable, excluding current portion $ 2,886,000 $ 41,297
============ ============
</TABLE>
The maturities of debentures and notes payable are as follows:
<TABLE>
<S> <C>
Fiscal 2001 $ 326,500
Fiscal 2002 2,686,000
Fiscal 2003 200,000
------------
$ 3,212,500
============
</TABLE>
--------------------------------
(A) Issued July 26, 2000; bears interest at 12.00% per annum; interest
payable semi-annually in June and December; no monthly installment
principle payments; unsecured; matures on July 26, 2002; convertible
into the Company's Common Stock at a conversion price per share equal
to the lesser of $0.30 or 92% of the average of the market price for
the common stock for the 20 consecutive trading days ending two
trading days prior to the conversion date, subject to adjustment under
certain circumstances. At September 30, 2000, this note and debenture
was convertible into approximately 9.87 million shares of Common
Stock. See Note 6.
(B) Bears interest at a weighted average rate of 10.65% per annum;
interest payable at maturity; no monthly installment principle
payments; unsecured; matures at various dates between July 25, 2002
and January 11, 2003; convertible into the Company's Common Stock at a
weighted average per share conversion price of $0.1243 of which
$200,000 is convertible into the Company's Common Stock at a per share
conversion price of $0.1200 only if sufficient authorized shares are
available. At September 30, 2000, these notes were convertible into
approximately 2.99 million shares of Common Stock.
(C) Bears interest at 8.00% per annum; interest payable at maturity; no
monthly installment principle payments; unsecured; matured on July 15,
1999, extended through January 3, 2001; obtained from Privatbank
Vermag AG, a private investment bank with which a Director of the
Company is associated.
F-13
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(D) Bears interest at 8.00% per annum if paid in cash or 12.00% per annum
if paid in Common Stock at the Company's option; interest payable
semi-annually in February and August; no monthly installment principle
payments; unsecured; matures on February 15, 2002; convertible into
the Company's Common Stock at a per share conversion price of $0.23,
subject to adjustment under certain conditions. The Company may
require conversion if the closing bid price of its Common Stock
exceeds 200% of the conversion price for 20 consecutive trading days;
placed under Regulation S, promulgated under the Securities Act of
1933, as amended; associated costs are being amortized to interest
expense over the term of the note or until conversion. At September
30, 2000, this note was convertible into approximately 744,000 shares
of Common Stock. See Note 6.
(E) Effective July 27, 2000, the Company entered into a Release and
Settlement Agreement (the "Entrenet Release and Settlement Agreement")
with respect to amounts due under a prior corporate services agreement
with Entrenet. In conjunction with the Entrenet Release and Settlement
Agreement, a promissory note for $126,500 was executed under the
following general terms: bears interest at 10.00% per annum; interest
payable at maturity; no monthly installment principle payments;
unsecured; matures on April 11, 2001; convertible into the Company's
Common Stock at a per share conversion price of $0.185, subject to
adjustment under certain conditions. At September 30, 2000, this note
was convertible into approximately 684,000 shares of Common Stock.
Related party interest expense incurred during the period ended September 30,
2000 and during the year ended December 31, 1999 totaled $9,827 and $0,
respectively.
NOTE 10 - INCOME TAXES
Income tax benefit attributable to losses differed from the amount computed by
applying the federal income tax rate of 34% to pretax loss as a result of the
following:
<TABLE>
<CAPTION>
Period Year
Ended Ended
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Computed "expected" tax benefit $ 2,612,319 $ 223,819
Reduction in benefit resulting from:
Non-deductible expenses (1,870,883) (30,381)
Change in valuation reserve (10,843,452) (193,438)
Reverse acquisition adjustment 10,102,016 --
------------ ------------
Net tax benefit $ -- $ --
============ ============
</TABLE>
Components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 Change 1999
------------ ------------ ------------
<S> <C> <C> <C>
Deferred tax assets $ 11,478,722 $ 10,865,452 $ 613,270
Less: Valuation allowance (11,456,722) (10,843,452) (613,270)
------------ ------------ ------------
22,000 22,000 --
Deferred tax liability (22,000) (22,000) --
------------ ------------ ------------
Net deferred tax asset $ -- $ -- $ --
============ ============ ============
</TABLE>
The deferred tax asset is comprised primarily of the tax effects of the net
operating loss carryforwards and reserve for inventory obsolescence recorded for
financial reporting purposes. The deferred tax liability primarily represents
the tax effect of the difference between depreciation recorded for financial
statement and income tax reporting purposes.
The Company has recorded a valuation allowance in accordance with the provisions
of SFAS No. 109 to reflect the estimated amount of deferred tax assets which may
not be realized. In assessing the realizability of deferred tax assets,
Management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be
F-14
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible.
At September 30, 1999, the Company has net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $33,103,226
available to offset future taxable income, if any, through 2020. The
following table summarizes the dates of generation and expiration of the
Company's federal net operating loss carryforward:
<TABLE>
<CAPTION>
Intrex
-------------------------------------------------------------------------------
Year Ended NOL NOL
December 31, Generated Utilized Carryover Expires
------------------------ ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
1995 $ 62,581 $ 62,581 2002-2010
1996 362,214 362,214 2003-2011
1997 215,859 215,859 2004-2012
1998 168,168 168,168 2005-2013
1999 528,633 528,633 2006-2019
------------- -------------
$ 1,337,440 $ 1,337,440
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DecisionLink
-------------------------------------------------------------------------------
Year Ended
September 30,
------------------------
<S> <C> <C> <C> <C>
1987 $ 128,307 $ (128,307) $
1988 445,230 (180,406) 264,824 2003
1989 (308,713) 308,713
1990 1,769,184 1,769,184 2005
1991 2,678,702 2,678,702 2006
1992 2,396,528 2,396,528 2007
1993 4,140,886 4,140,886 2008
1994 5,784,715 5,784,715 2009
1995 2,368,650 2,368,650 2010
1996 2,559,055 2,559,055 2011
1997 3,253,739 3,253,739 2012
1998 2,484,229 2,484,229 2013
1999 2,120,000 2,120,000 2019
2000 1,945,274 1,945,274 2020
------------- -------------
31,765,786 31,765,786
------------- -------------
$ 33,103,226 $ 33,103,226
============= =============
</TABLE>
The use of carryforwards to offset future taxable income is dependent upon
having taxable income in the legal entity originally incurring the loss and will
be further limited in each year to an amount equal to the Federal long-term tax
exempt interest rate times the entity's market value at the time a significant
change in ownership occurred. The Company cannot determine the effect of these
limitations.
F-15
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 11 - PREFERRED STOCK
Preferred stock consists of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------- ----------------
<S> <C> <C>
(A) Preferred stock Series A; $0.001 par value. Authorized 10,000,000
shares; 207,848 convertible shares issued and outstanding,
$15 per share liquidation value $ 3,117,720 $ --
(B) Preferred stock Series B; $0.01par value. Authorized 10,000,000
shares; 257,000 convertible shares issued and outstanding,
$10 per share liquidation value 2,570,000 --
(C) Preferred stock Special Series; $0.001 par value. Authorized 2,250,000
shares; 1,703,804 convertible shares issued and outstanding 17,478,589 --
(C) Preferred stock Pandel Series; $0.01par value. Authorized 750,000
shares; 580,782 convertible shares issued and outstanding. 6,431,904 --
----------------- ----------------
$ 29,598,213 $ --
================= ================
</TABLE>
--------------------------------
(A) Each share of Series A Preferred is convertible into ten shares of
DecisionLink Common Stock, initially at $1.50 per share. The
conversion ratio is subject to customary anti-dilution provisions. At
September 30, 2000, the Series A Preferred shares were convertible
into approximately 2.08 million shares of Common Stock. Dividends are
cumulative and are payable annually on November 1st, at the sole
discretion of the holders, in cash (11%) or additional shares of
Series A Preferred (8% of the number of shares owned at date of
declaration). The Series A Preferred entitles the holder to a
liquidation preference of $15 per share upon liquidation, dissolution
or winding up of the Company. The Series A Preferred is redeemable by
the Company when and if the closing bid price of DecisionLink Common
Stock is at least 200% of the conversion price for twenty consecutive
trading days. Upon redemption, the Company would issue ten shares of
its Common Stock for each share of Series A Preferred. Dividends have
accumulated undeclared since November 1, 1997. At September 30, 2000,
undeclared dividends aggregating $1,028,848 ($1,371,797 as of November
1, 2000) if elected entirely in cash, or 53,981 (74,927 as of November
1, 2000) additional shares of Series A Preferred if elected wholly in
additional shares, are in arrears in accordance with the terms of the
Series A Preferred. The Board of Directors have approved an exchange
offer to holders of the Series A Preferred which would change the
conversion ratio from 10 common shares for each preferred share to 75
common shares in satisfaction of accumulated dividends and of
anti-dilution provisions, and which would make future preferred
dividends payable only in common stock.
(B) Effective July 26, 2000, the Company conducted a private placement of
convertible preferred stock ("Series B Preferred"). The Series B
Preferred shares are not entitled to dividends or the benefit of a
redemption sinking fund. Upon any liquidation or dissolution of the
Company the holders of Series B Preferred shares are senior in right
to all shares of the Company's Common Stock and Pandel Series
preferred stock and PARI PASSU with the Series A Preferred. Each share
of Series B Preferred is redeemable at the option of the Company: (i)
at any time for cash equal to $10 per share (the "Redemption Value")
or (ii) at any time on or after June 1, 2004 for freely tradable
shares of the Company's Common Stock equal to: (1) 110% of the
Redemption Value of the shares being redeemed so long as the market
capitalization of the Company's outstanding Common Stock is less than
$300 million, and (2) 105% of the Redemption Value of the shares being
redeemed so long as the market capitalization of the Company's
outstanding Common Stock is greater than or equal to $300 million.
Shares of the Company's Common Stock delivered in payment of the
redemption price are to be valued at the average closing bid price for
the shares during the prior 20 consecutive trading days. Redemption in
exchange for Common Stock is restricted to up to 50% of the number of
Series B Preferred shares during any 180-day period. Each Series B
Preferred share is convertible into common stock at a stated
conversion price of $0.59 per share, subject to a reduction of $0.07
per share on August 25 of each year commencing 2001, and certain other
adjustments in the conversion price. At September 30, 2000, the Series
B Preferred shares were convertible into approximately 4.36 million
shares of Common Stock. The Series B Preferred entitles the holder to
a liquidation preference of $10 per share upon liquidation,
dissolution or winding up of the Company.
(C) On July 27, 2000, FCI acquired 100% of the voting Common Stock of
Intrex thereby completing the combination of their businesses pursuant
to an Amended Arrangement Agreement dated as of May 26, 2000
F-16
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(the "Arrangement Agreement"). The Arrangement Agreement provides
that each Intrex voting common share, except for those shares held by
Pandel Instruments, Inc. ("Pandel"), be exchanged into 27.801925
non-voting Intrex Class B shares and 0.27801925 FCI Special Series
preferred shares. In conjunction with the Arrangement Agreement,
Pandel, which owned 24.89% of Intrex's common shares, was merged into
Pandel Mergerco, Inc., ("Mergerco") a wholly owned FCI Delaware
subsidiary, in exchange for FCI mandatorily convertible Pandel Series
preferred shares.
Special and Pandel Series preferred shares totaling 1,372,006 and
517,893 shares, respectively, were deposited by the Intrex
shareholders into escrow pursuant to the terms of an escrow agreement
(collectively the "Pooled Shares"). This agreement provides that
Pooled Shares be issued to the Intrex shareholders if certain
milestones related to the Intrex business are met during a two-year
period following the closing. See Note 2.
Each Special Series share is entitled to 100 votes per share voting as
a single class with the Common Stock, and is convertible into 100
shares of the Company's Common Stock upon exchange of each Intrex
Class B share. At September 30, 2000, the Special Series shares were
convertible into approximately 42.73 million shares of Common Stock.
The Special Series shares are not entitled to dividends and are not
transferable. Upon any liquidation or dissolution of the Company the
holders of Special Series shares are entitled to receive out of the
net proceeds of the liquidation or dissolution in preference and
priority to holders of the Company's Common Stock, but junior to the
holders of the Company's shares of preferred stock of any class
outstanding at the time of first issuance of any of the Special Series
shares, a payment equal to $0.10 per share. Each Special Series share
is subject to mandatory redemption by the Company at a redemption
price equal to $0.001 per share upon the exercise by the holder of the
holder's right to exchange each Intrex Class B share owned by the
holder for one share of the Company's Common Stock in accordance with
the provisions of the Arrangement Agreement. Each Special Series share
is subject to optional redemption by the Company at a redemption price
of $0.001 per share at any time when the Intrex Class B shares are
subject to optional redemption by Intrex pursuant to Article 27 of the
Articles of Intrex.
Each Pandel Series share is entitled to one hundred votes per share
voting as a single class with the Common Stock, and is convertible
into 100 shares of the Company's Common Stock. At September 30, 2000,
the Pandel Series shares were convertible into approximately 15.74
million shares of Common Stock. The Pandel Series shares are entitled
to dividends in an amount equal to the dividend paid or declared on
the number of shares of Common Stock into which the Pandel Series
shares are convertible. Upon any liquidation or dissolution of the
Company the holders of Pandel Series shares are entitled to receive
out of the net proceeds of the liquidation or dissolution in
preference and priority to holders of the Company's Common Stock, but
junior to the holders of the Company's shares of preferred stock of
any class outstanding at the time of first issuance of any of the
Pandel Series shares, including the Special Series shares, a payment
equal to $0.10 per share plus all accrued and unpaid dividends, if
any, on the Pandel Series shares through the date of such liquidation
or dissolution. Each Pandel Series share is subject to automatic
conversion on December 31, 2000 or upon notice.
F-17
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 12 - COMMON STOCK
At September 30, 2000, Common Stock consisted of 150,000,000 authorized, $0.001
par value FCI shares of which 66,450,698 shares were issued and outstanding.
During the period ended September 30, 2000, the FCI and Intrex issued the
following shares of its Common Stock:
(A) 3,000,000 shares of unregistered FCI Common Stock in conjunction with
the Entrenet Agreement. The Common Stock was not registered under the
Securities Act of 1933, as amended, as the issuance of these
securities did not involve a public offering.
(B) 4,720,435 shares of unregistered FCI Common Stock from conversion of
the Company's Special Series preferred stock. The Common Stock was not
registered under the Securities Act of 1933, as amended, as the
issuance of these securities was pursuant to the Foreign Corporation
Act.
(C) 165,500 shares of Intrex Common Stock for settlement of debt.
Shares of Common Stock were reserved as follows (000's):
<TABLE>
<CAPTION>
September 30,
2000
-------------
<S> <C>
Preferred stock - Pooled Shares (see Note 2) 188.99
Preferred stock - other 64.91
Note and debentures 14.29
Warrants 13.84
Employee stock options 3.54
-------------
285.57
=============
</TABLE>
Of the shares of Common Stock reserved above, approximately 154 million shares
are subject to a lock-up agreement restricting resale of shares pursuant to
terms similar to the requirements of Rule 144. See Note 18.
At December 31, 1999, Common Stock consisted of 100,000,000 authorized, no par
value Intrex shares of which 8,226,694 shares were issued and outstanding.
During the year ended December 31, 1999, Intrex issued the following shares of
its Common Stock:
(C) 40,000 subscribed shares of Common Stock issued in 1999, paid in 1998
for $12,863. The Common Stock subscribed was priced at $0.3216 per
share.
(D) 81,250 shares of Common Stock valued at $27,449 or $0.3378 per share
as a settlement of debt due to a related party for services rendered.
(E) 1,196,000 shares of Common Stock valued at $404,053 or $0.3378 per
share for cash.
F-18
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 13 - WARRANTS, STOCK OPTIONS AND SFAS NO. 123 PRO FORMA
At September 30, 2000, warrants to purchase shares of the Company's Common Stock
were as follows:
<TABLE>
<CAPTION>
Shares Exercise
Description Reserved Price Matures
------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
(A) Conversion of senior convertible debt 7,047,826 $ 0.230 2/03
(B) D 1,895,175 1.250 9/00
(C) Unit 1,637,000 1.000 5/00
(D) RP&C 1,422,593 0.300 7/05
(E) Entrenet 960,000 0.185 4/04
Other 882,500 $ .350 - 1.000 2001-2005
-----------------
13,845,094
=================
</TABLE>
--------------------------------
(A) Issued in conjunction with inducement to convert 8% FCI senior
convertible debt.
(B) Issued in conjunction with financing activities of FCI in 1991 and
1993.
(C) Issued in conjunction with the FCI 1996 offering under Regulation S,
of 3,333,333 Units with ach Unit consisted of one share of Common
Stock and one warrant to purchase one share of Common Stock (the "Unit
Warrants") the shares and Unit Warrants being immediately separable.
(D) In conjunction with the 2000 placement of 12% note and debentures and
the B Series Preferred, the Company issued to the placement agent,
warrants to purchase 987,000 and 435,593, respectively, shares of the
Company's commons stock.
(E) Issued in conjunction with the Entrenet Release and Settlement
Agreement.
All of the Company's warrants were fully vested at issuance. All of the
aforementioned warrants or the shares of Common Stock represented by the
warrants have been or are being registered under the Securities Act of 1933.
FCI has granted options under qualified stock option plans as well as other
option plans to employees, directors, officers, consultants and other persons
associated with FCI who are not employees of, but are involved in the continuing
development of FCI. The following table summarizes stock option activity for the
period ended September 30, 2000:
<TABLE>
<CAPTION>
2000
---------------------------------
Weighted
Average
Exercise
Shares Price
--------------- ---------------
<S> <C> <C>
Effect of reverse merger 3,541,442 $ 0.272
Granted -- --
Exercised -- --
Forfeited -- --
--------------- ---------------
Options outstanding at September 30, 3,541,442 $ 0.272
=============== ===============
</TABLE>
F-19
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding and
exercisable at September 30, 2000:
<TABLE>
<CAPTION>
Weighted
Number Average Weighted
Range of Outstanding Remaining Average
Exercise and Contractual Exercise
Prices Exercisable Life Price
----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
September 30, 2000 $0.125 - $1.00 3,541,442 7.33 years $0.272
</TABLE>
There is no pro forma table presented as required by SFAS No. 123 because the
Company has not issued options in either of the periods reported.
In May 1999, FCI's Board of Directors adopted a 1999 Employee Stock Option Plan
("1999 Plan") covering an aggregate of 5,000,000 shares of Common Stock. At
September 30, 2000, options for 1,610,000 shares of Common Stock were
outstanding under the 1999 Plan.
In January 1997, FCI's Board of Directors adopted a 1997 Employee Stock Option
Plan ("1997 Plan"), approved by the stockholders at the June 23, 1997 Annual
Stockholders Meeting, covering an aggregate of 1,500,000 shares of Common Stock
and restricting the granting of options to purchase approximately 675,000 shares
of Common Stock authorized under previous stock option plans. At September 30,
2000, options for 1,281,000 shares of Common Stock were outstanding under the
1997 Plan.
In April 1995, FCI's Board of Directors adopted a 1995 Employee Stock Option
Plan ("1995 Plan"), approved by the stockholders at the May 8, 1995 Annual
Stockholders Meeting, covering an aggregate of 1,000,000 shares of Common Stock.
At September 30, 2000, options for 599,942 shares of Common Stock were
outstanding under the 1995 Plan.
In March 1994, FCI's Board of Directors adopted a 1994 Employee Stock Option
Plan ("1994 Plan"), approved by stockholders at the May 23, 1994 Annual
Stockholders Meeting, covering an aggregate of 1,000,000 shares of Common Stock.
At September 30, 2000, options for 50,500 shares of Common Stock were
outstanding under the 1994 Plan.
All of the aforementioned option plans or the shares of Common Stock represented
by the option plans have been registered under the Securities Act of 1933.
NOTE 14 - EARNINGS PER SHARE
The following table shows the weighted average common shares outstanding used in
computing basic EPS:
<TABLE>
<CAPTION>
Period Year
Ended Ended
September 30, December 31,
2000 1999
----------------- ----------------
<S> <C> <C>
Weighted average number of common shares in basic EPS 21,320,177 7,568,069
</TABLE>
For the year ended December 31, 1999, basic EPS is calculated based on the
weighted average number of Intrex common shares outstanding. For the period
ended September 30, 2000, basic EPS is calculated based on the weighted average
number of Intrex common shares outstanding prior to the acquisition date
weighted with the average number of FCI common shares outstanding from the
acquisition date through September 30, 2000. Shares issuable upon the exercise
of stock options, warrants, convertible notes, convertible preferred stock and
related earnings adjustments for the periods presented have not been taken into
account to calculate diluted EPS because of the anti-dilutive effect on loss per
share.
NOTE 15 - COMMITTMENTS AND CONTINGENCIES
F-20
<PAGE>
DECISIONLINK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
The Company leases its Las Vegas, NV facility under a month-to-month lease
terminable by either party upon 30 days notice. Monthly payments escalate
approximately $1,300 every twelve months. The current base monthly payment under
the month-to-month lease is $12,786. The Company is pursuing alternatives,
including a renewal of the month-to-month lease at approximately the current
base monthly rental charge. The Company leases its Carrollton, TX facility under
a lease that expires on March 31, 2002. Monthly base rental payments are $5,800
for the duration of the lease.
The Company has an Internal Revenue Code Section 401(k) Profit Sharing Plan (the
"Plan"). The Plan provides for voluntary contributions by employees into the
Plan subject to the limitations imposed by Internal Revenue Code Section 401(k).
The Company will match employee contributions at a rate of 50% of the employee's
contribution up to a maximum of 2% of the employee's compensation. The Company
matching funds are determined at the discretion of management and are subject to
a five-year vesting schedule from the date of original employment.
The Company is involved in litigation incidental to its business. In the opinion
of the Company's management, the expected outcome of such litigation will not
have a material effect on the financial position of the Company.
NOTE 16 - FINANCIAL INSTRUMENTS & CONCENTRATIONS OF MARKET AND CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash equivalents and trade accounts receivables. It is
the Company's practice to place its cash equivalents and investments in high
quality money market accounts. Generally, the Company does not require
collateral or other security to support customer receivables. The Company does
not expect its customers to fail to meet their obligations and, as such,
considers the credit risk associated with its trade accounts receivable to be
minimal.
NOTE 17 - RELATED PARTY TRANSACTIONS
Related party liabilities consists of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
(A) Pandel Instruments, Inc. $ -- $ 60,480
(B) Harwood Ventures -- 39,576
(C) Legal fees 23,000 --
(D) Other -- 2,065
------------ ------------
$ 23,000 $ 102,121
============ ============
</TABLE>
--------------------------------
(A) Controlled by an officer and director of the Company. Eliminated in
consolidation at September 30, 2000. See Note 2.
(B) Controlled by an officer and director of the Company. Converted to
Intrex Common Stock during the period ended September 30, 2000.
(C) For services rendered to a wholly-owed subsidiary by a director of the
subsidiary.
(D) Converted to Intrex Common Stock during the period ended September 30,
2000.
NOTE 18 - SUBSEQUENT EVENTS
At the annual meeting of stockholders of the Company commenced on November 29,
2000, stockholders of the Company approved the amendment to the Company's
Certificate of Incorporation to increase the Company's authorized shares of
Common Stock from 150,000,000 to 500,000,000 shares.
F-21
