SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- -------
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number: 33-15097-D
SYNAPTIX SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-10457105
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2450 South Shore Boulevard
Suite 210, Houston Texas 77573
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281) 334-0405
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
Common Stock, $.003 Par Value 15,593,700
(Shares outstanding as of December 31, 1997)
Transitional Small Business Disclosure Format (Check One) Yes No X
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
QUARTERLY REPORT ON FORM 10-QSB FOR THE INTERIM
PERIOD ENDED December 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Part I. Financial Information
Item I. Financial Statements
Balance Sheets at December 31, 1997 and June 30, 1997.......................................... 4
Statements of Operations for the Six Months Ended December 31,
1997 and 1996...................................................................................5
Statements of Changes in Stockholders' Deficit for the Year Ended
June 30, 1997 and Six Months Ended December 31, 1997............................................6
Statements of Cash Flows for the Six Months Ended December 31,
1997 and 1996...................................................................................7
Notes to Financial Statements..................................................................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................................................8
Part II. Other Information
Item 1. Legal Proceedings..............................................................................12
Item 5. Other Information..............................................................................13
Item 6. Exhibits and Reports on Form 8-K...............................................................14
Signatures.....................................................................................14
</TABLE>
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SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
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INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Synaptix Systems Corporation
Houston, Texas
The accompanying balance sheet of Synaptix Systems Corporation as of December
31, 1997 and the related statements of operations, shareholders' deficit, and
cash flows for the six months ended December 31, 1997 and 1996 were not audited
by us and, accordingly, we do not express an opinion on them.
The balance sheet as of June 30, 1997 and the statement of stockholders' deficit
for the year ended June 30, 1997 were audited by us and we expressed an
unqualified opinion on it in our report dated October 7, 1997 which also
contained a going concern paragraph, but we have not performed any auditing
procedures since that date.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
February 17, 1998
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
(Unaudited) (Audited)
----------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 2,583 $ 989
Prepaid expenses 11,045 72,770
----------------- -----------------
Total Current Assets 13,628 73,759
PROPERTY, PLANT, & EQUIPMENT 94,260 100,873
----------------- -----------------
Total Assets $ 107,888 $ 174,632
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities $ 378,692 $ 163,373
Loans payable - related parties 431,439 0
Current portion of lease 1,221 1,099
----------------- -----------------
Total Current Liabilities 811,352 164,472
Long-term lease 943 1,239
----------------- -----------------
Total Liabilities 812,295 165,711
Stockholders' Equity (Deficit):
Preferred Stock - $1 par value 10,000,000 shares authorized;
0 shares of Series A Voting Preferred Stock
outstanding at December 31, 1997 and June 30, 1997 0 0
Common Stock - $.003 par value, 25,000,000 shares authorized;
15,593,700 shares issued and outstanding at December 31, 1997
and 15,473,700 shares issued and outstanding at June 30, 1997 46,781 46,421
Additional paid-in capital 5,370,336 5,337,647
Retained earnings (deficit) (5,921,524) (5,175,147)
Stock subscription receivable (200,000) (200,000)
----------------- -----------------
Total Stockholders' Equity (Deficit) (704,407) 8,921
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 107,888 $ 174,632
================= =================
</TABLE>
See Accompanying Notes to the Financial Statements.
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
(Unaudited) (Unaudited)
----------------- -----------------
<S> <C> <C>
REVENUES $ 0 $ 0
Cost and Expenses: 746,377 46,050
----------------- -----------------
Total Costs and Expenses 746,377 46,050
----------------- -----------------
Income (loss) from Continuing Operations: (746,377) (46,050)
Income tax expense (benefit) 0 0
----------------- -----------------
Net Income (Loss) $ (746,377) $ (46,050)
================= =================
Income (Loss) Per Share $ (.05) $ (.58)
================= =================
</TABLE>
See Accompanying Notes to the Financial Statements.
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For Year Ended June 30,1997 (audited) and
For the Six Months Ended December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Total
Additional Retained Stockholders'
Common Preferred Paid-In Earnings Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
---------- ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1996 39,668 $ 119 174,865 $ 174,865 $ 4,610,729 $(4,826,922) $ (41,209)
Sale of restricted common stock
for cash 1,217,500 3,652 3,652
Issuance of restricted common stock
for expenses 58,334 175 20,825 21,000
Issuance of common stock for
preferred shares 174,865 525 (174,865) (174,865) 174,340
Sale of common stock (Regulation
S) for stock subscription 2,000,000 6,000 194,000
Sale of common stock (S-8) for
cash and services 6,750,000 20,250 251,500 271,750
Sale of restricted common stock for
cash, assets, and expenses 2,250,000 6,750 27,000 33,750
Issuance of restricted common stock
for assets and expenses 3,000,000 9,000 69,203 78,203
Cancellation of restricted stock (16,667) (50) (9,950) (10,000)
Net loss (348,225) (348,225)
---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1997 15,473,700 46,421 0 0 5,337,647 (5,175,147) 8,921
Sale of restricted common stock for
cash 20,000 60 15,940 16,000
Issuance of restricted common stock
to pay accounts payable 100,000 300 16,749 17,049
Net loss (746,377) (746,377)
---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCES AT December 31,
1997 15,593,700 $ 46,781 0 $ 0 $ 5,370,336 $(5,921,524) $ (704,407)
========== =========== ========== =========== =========== =========== ==========
</TABLE>
See Accompanying Notes to the Financial Statements.
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
------------------ ------------------
CASH FLOWS OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (746,377) $ (46,050)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Depreciation 14,588 0
Stock issued for expenses 0 21,000
Changes in Assets and Liabilities:
Prepaid expenses 61,725 0
Accounts payable and accrued expenses 232,368 16,650
------------------ ------------------
Net Cash Used by Operating Activities (437,696) (8,400)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (7,975) 0
------------------ ------------------
Net Cash Used by Investing Activities (7,975) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 16,000 3,652
Loans 431,439 8,400
Loan repayments (174) 0
------------------ ------------------
Net Cash Provided by Financing Activities 447,265 12,052
------------------ ------------------
Net Increase in Cash 1,594 3,652
CASH AT BEGINNING OF YEAR 989 0
------------------ ------------------
CASH AT END OF PERIOD $ 2,583 $ 3,652
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 46 $ 0
Income taxes paid 0 0
------------------ ------------------
$ 46 $ 0
================== ==================
</TABLE>
See Accompanying Notes to the Financial Statements.
7
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Basis of Presentation
The financial statements of Synaptix Systems Corporation (the
"Company"), included herein, are unaudited for all periods ended December 31,
1997 and 1996. They reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary to fairly depict
the results for the periods presented. Certain information and note disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to rules
and regulations of the Securities and Exchange Commission. It is suggested that
these financial statements be read in conjunction with the audited financial
statements for the years ended June 30, 1997 and 1996, which are included in the
Company's annual report. The Company believes that the disclosures made herein
are adequate to make the information presented not misleading.
2. Earnings per Common and Common Equivalent Share
Earnings per common and common equivalent share is based on the average number
of common shares and dilutive common share equivalents outstanding for the six
months ended December 31, 1997 and 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe harbors created by those sections. These forward- looking statements are
subject to significant risks and uncertainties, including those identified in
the section of this Form 10-QSB and in the Company's Annual Report on Form
10-KSB, filed with the SEC on November 4, 1997, which may cause actual results
to differ materially from those discussed in such forward-looking statement. The
forward-looking statements within this Form 10-QSB are identified by words such
as "believes," "anticipates," "expects," "intends," "may" and other similar
expressions. However, these words are not the exclusive means of identifying
such statements. In addition, any statements which refer to expectations,
projections or other characterizations of future events or circumstances are
forward looking statements. The Company undertakes no obligation to publicly
release the results of any revisions, to these forward-looking statements which
may be made to reflect events or circumstances occurring subsequent to the
filing of this Form 10-QSB with the Securities and Exchange Commission. Readers
are urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission, including its Form 10-KSB, that attempt to
advise interested parties of the risks and factors that may affect the Company's
business.
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The Company had a working capital deficiency at December 31, 1997, and
subsequent thereto, and is uncertain of its ability to raise sufficient working
capital. The Company plans to seek additional financing to obtain necessary
working capital to complete development of its Software and to commence
production and marketing, but there can be no assurance that such funding will
occur.
Introduction
Synaptix is a development stage company. Certain of the Company's
software products are directed to the retail consumer market, and certain of the
Company's software products are directed to the corporate market. With respect
to the Company's corporate software products, the Company anticipates that it
will be able to provide related systems integration and networking services in
connection with the license of its corporate software products. These system
integration services will include consulting and training to systems integrators
and large corporate end users and the installation of hardware on which to
implement the Company's software's products. The following discussion is
included to describe the Company's financial position and results of operations
for each of the two years for the six months ended December 31, 1997. The
financial statements and notes thereto contain detailed information that should
be referred to in conjunction with this discussion.
Results of Operations
Analysis of Six Months ended December 31, 1997 Compared to Six Months
ended December 31, 1996
Costs and expenses for the six months ended December 31, 1997 increased
significantly compared to the same period in 1996. The Company recorded a net
loss of $746,377, or a ($.05) loss per share for the six months ended December
31, 1997, compared with a net loss of $46,050, or a ($.58) loss per share for
the same period in 1996. The Company incurred expenses in the amount of $746,377
related to general and administrative costs associated with the development of
its software. The Company was non-operational for the six months ended December
31, 1996.
Revenues
The Company did not record any revenues for the six months ended
December 31, 1997 or 1996, respectively. During these periods, the Company
borrowed funds to pay for working capital expenditures. The Company plans to
seek additional financing to obtain necessary working capital to complete
development of its software and to commence production and marketing. Management
anticipates that the Company's funding requirements will be in the range of $3
to $5 million over the next 12 months. The Company may seek such financing from
venture capital sources or from a subsequent public issuance of stock.
Financial Condition
The Company is currently in a development stage, and the information,
financial statements and notes to the financial statements have been prepared on
the premise that it will be successful in raising additional capital and
continue as a going concern. The Company intends to rely on further equity
offerings and loans to generate sufficient working capital over the next 12
months to complete the Eagle project and introduce it to the market. The Company
anticipates that working capital expenditures, including costs of the
development of its new computer program code-named Eagle, will be approximately
$1.2 million during fiscal 1998. There can be no assurance that the Company will
be able to raise sufficient additional capital to achieve these objectives.
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General and Administrative Expenses
General and administrative expenses were $746,377 and $46,050 for the
six months ended December 31, 1997 and 1996, respectively, an increase of
$700,327. This increase was attributable to expenses incurred for
administrative, legal, accounting expenses and expenses associated with the
development of its software.
Loss from Operations
The Company had an operating loss of $746,377 for the six months ended
December 31, 1997 and $46,050 for the same period in 1996. The loss for the
period ended December 31, 1997, was the result of operating expenses incurred in
the development and production of the Eagle software product, in addition to
general and administrative costs.
The Company expects that operating results will fluctuate as a result
of a number of factors, including: whether the Company will continue as a going
concern, the timing of new product and service introductions by the Company, as
well as by its competitors, changes in the Company's level of operating
expenses, including the Company's expenditures for software product development
and promotional programs, the size and timing of customer orders for its
products and services, development, production or quality problems on the part
of the Company, competition in the computer software market and the general
state of the global and national economies. The market demand for commercial
software products and services can be significantly affected by uncertain
economic cycles. Many of the factors that may affect the Company's operating
results and demand for products and services based on its technologies cannot be
predicted, may not exhibit a consistent trend, or are substantially beyond the
Company's control. Fluctuations in operating results can also be expected to
result in volatility in the price of the Company's common stock.
Income Taxes
The Company had no income tax expense. As of December 31, 1997, the
Company had net operating loss carryfowards of approximately $4,151,000. The
utilization of net operating carryforwards will be limited as determined
pursuant to applicable provisions of the Internal Revenue Code and U. S.
Treasury regulations thereunder.
Net Loss
The Company had a net loss of $746,377 for the six months ended
December 31, 1997, compared with a net loss of $46,050 for the same period in
1996. The net loss for the six months ended December 31, 1997 was attributable
to an increase in administrative operating expenses. The increase in
expenditures in administrative expenses was anticipated under the Company's
operating plan following the acquisition of the software products.
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Liquidity and Capital Resources
There were no recorded revenues for the six months ended December 31,
1997. At December 31, 1997, the Company maintained a negative liquidity position
which is evidenced by a current ratio of .02 to 1. The Company has no major
capital commitments at the present time. Management continues to restructure the
Company in order to increase the Company's current ratio and liquidity, and
generate capital which would provide cash flow for future expansion.
At December 31, 1997, the Company had a working capital deficiency of
$797,724, compared to a working capital deficiency of $62,607 at December 31,
1996. Subsequent to December 31, 1997, the Company's working capital deficiency
has continued to increase. The cash balance at December 31, 1997 was
approximately $2,583, and at December 31, 1996, was approximately $3,652.
Cash used by operations totaled $437,696 for the six months ended
December 31, 1997, compared to $8,400 for the same period in 1996. Cash used in
investing activities for the six months ended December 31, 1997 was
approximately $7,975. Cash provided by financing activities during the six
months ended December 31, 1997 totaled $447,265, which included the proceeds
from the sale of stock and the borrowing of funds.
The Company holds promissory notes from investors in the amount of
$200,000 which were due and payable on November 15, 1997. These funds will be
used for working capital purposes in connection with existing obligations of the
Company, and future expenses to be incurred in the research and development of
the Eagle software product, and for general corporate purposes. There is no
assurance that the Company will obtain adequate financing or access to capital
to continue as a going concern.
Analysis of Six Months ended December 31, 1996 Compared to Six Months
ended December 31, 1995
During the six months ended December 31, 1996, the Company had no
active operations, $3,652 in cash, a working capital deficit of $62,607, and
accumulated losses of $4,872,972. The Company was considering entering into the
computer technology industry, and a management change. The Company continued to
seek acquisition and merger candidates with an emphasis in the area of computer
related technologies. Management believed that an acquisition of this nature
would provide an opportunity to enhance shareholder value.
Liquidity and Capital Resources
At December 31, 1996, and 1995, respectively, the Company maintained a
negative liquidity position. The Company had ceased all operations and was
looking for an acquisition candidate.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Synaptix has been named as a defendant in an action by Charles Schwab &
Co. entitled Charles Schwab & Co., Inc. v. Alan W. Harvey, Synaptix Systems
Corporation, and Signature Stock Transfer Incorporated, case no. 98-01336 filed
in the District Court of Harris County, Texas. The suit alleges causes of action
(i) against Synaptix for fraud and wrongful refusal to transfer shares, (ii)
against Alan Harvey, the former president of Synaptix, for fraud and breach of
contract, and (iii) against Signature, the registrant's stock transfer agent,
for wrongful refusal to transfer shares and negligence.
This action arises out of the attempted sale by Alan Harvey of 100,000
shares of Synaptix stock represented by a canceled stock certificate. Harvey had
previously represented to Synaptix and its transfer agent that the stock
certificate had been lost, and arranged for a replacement certificate to be
issued to him. Shortly before Harvey's resignation as president, and unknown to
Synaptix, Harvey deposited the canceled certificate in his personal account at
Charles Schwab & Co. A portion of the shares were sold before Schwab
representatives contacted the transfer agent for re- registration and
verification of the certificate. After the transfer agent advised Schwab that
the certificate had been canceled, Schwab acquired other shares in the market to
cover the shares sold which were represented by the canceled certificate .
Schwab alleges that Harvey intentionally misrepresented the canceled certificate
as a valid certificate. Because Harvey was then president of Synaptix, Schwab
claims that Synaptix is liable for Harvey's actions. Synaptix has denied all of
Schwab's allegations, and maintains that Harvey acted in his own capacity and
not as an agent of the Company, and that Schwab's loss was a result of its own
negligence. Synaptix has also assumed the defense of Signature Stock Transfer,
Inc., who Schwab has alleged wrongfully refused to transfer Harvey's canceled
certificate. Synaptix intends to file a cross-action against Alan Harvey for
indemnification. At this time, management does not believe that this action will
have a material adverse effect on the Company.
A former legal firm employed by the Company is in the process of
obtaining a default judgment against the Company for unpaid fees of about
$12,000. The $12,000 is reflected in accounts payable, and management is in the
process of settling this matter.
Certain shareholders of the Company are also shareholders of Synaptix
Systems Corporation ("Synaptix Florida"), a Florida corporation not affiliated
with the Company. Synaptix Florida was formed in 1996 by Alan W. Harvey, the
former president of the Company, with the intention of acquiring the Old
Synaptix assets and developing the software. Funds were raised by Synaptix
Florida from third-party investors for this purpose, although to the Company's
best knowledge Synaptix Florida never entered into any actual agreement to
acquire the Old Synaptix assets from the owner.
In December 1996, Mr. Harvey acquired control of the Company and
contracted with Swallen Investment Corp. to acquire the Old Synaptix assets. Mr.
Harvey, in his personal capacity, represented to certain Synaptix Florida
shareholders that they would receive stock in the Company in place of their
Synaptix Florida shares; these representations and the existence of Synaptix
Florida were not disclosed to the Board of Directors by Mr. Harvey until June,
1997. At that time, the Company wrote to the shareholders of Synaptix Florida to
inquire as to their interest in exchanging their shares for Company stock, in
anticipation of a projected merger of the two companies. No offer to exchange
shares was made at that time. Since that date, the Company learned that Synaptix
Florida had substantial undisclosed liabilities and has abandoned
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plans to merge the companies. In November 1997, the holders of record of
Synaptix Florida shares were issued shares of common stock of the Company in
exchange for Synaptix Florida stock. The stock was issued from Variable
Resources, Inc., a company held by Alan W. Harvey, and the Synaptix Florida
shares returned in exchange were canceled . There was no dilution of the
Company's stock as a result of this transaction.
Synaptix Florida is not currently conducting any operations. Alan W.
Harvey remains the president of that company. The funds raised by Synaptix
Florida apparently were expended in anticipation of acquisition of the assets.
Mr. Harvey has alleged, on behalf of Synaptix Florida, that some portion of
these funds were loaned or otherwise contributed to the Company. The Company
cannot confirm any such loans or contributions of funds from Synaptix Florida.
The Company has determined that potential claims by Synaptix Florida or
its shareholders could be asserted against Alan Harvey, and potentially against
the Company as well, in connection with the Company's acquisition of the Old
Synaptix assets and the alleged loans or contribution of Synaptix Florida funds
to the Company, although the Company does not believe that any such claim would
be upheld as against it. In order to settle any such claims, Mr. Arley L.
Harvey, Alan Harvey's father, has agreed to have Variable Resources, Inc., a
company controlled by Arley L. Harvey, acquire all rights to any derivative
claims from the shareholders of Synaptix Florida in exchange for shares of the
Company's stock held by Variable Resources, and to provide the Company with a
complete release. In addition, in September, 1997, the Company entered into a
separate Release Agreement with Synaptix Florida, settling all claims for
alleged loans or contributions of funds to the Company and providing for a
general release of claims between the two companies. As a result of these
actions, Management does not believe that these potential claims will have any
material adverse effect upon the Company.
Item 5. Other Information
Synaptix is terminating its employment agreements with all but one of
its employees and is entering into independent contractor relationships in their
stead for completion of the Eagle software project, pursuant to the terms of a
Team Development Agreement. Due to the Company's lack of cash flow, the Company
has been unable to meet its payroll obligations on a current basis, and was
approximately six (6) weeks behind in wage payments. The employees and the
Company have agreed to compromise these obligations by issuing cash and shares
of common stock to Synaptix' employees in settlement of wage claims. The total
number of shares to be issued is 52,125.
Going forward, the Company will compensate its former employees as
independent contractors. Each Team Member will be compensated at the rate of
five hundred (500) shares of registered common stock of Synaptix for each week
of services performed as verified and approved by the Team leader, Bob Tucker.
The registered shares of common stock will be issued to the Team members who
have satisfactorily performed twenty (20) hours of work for each weekly issuance
of shares. The share certificates shall be issued within seven days of each
month, or as soon thereafter as possible, following the period in which services
were performed, for completion of the Eagle project. In the event that the
Company's financial condition improves, it anticipates re-employing the
independent contractors as full-time employees.
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Item 6. Director Resignation
Mark F. Walz, a director of the Company, resigned effective as of February
3, 1998. Mr. Walz was elected in December 1996 and has served as a director
since that time, until his resignation. There was no dispute or disagreement
between the management of the Company or Mr. Walz. A copy of Mr. Walz'
resignation letter is attached hereto as Exhibit 17.
Item 7. Exhibits and Reports on Form 8-K
A. Exhibits
10(a) Synaptix Systems Corporation PROJECT EAGLE
Development Team Agreement
10(b) Settlement Agreement and Release by and
between Synaptix Systems Corporation and
certain employees.
17 Letter of resignation of Mark F. Walz.
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SYNAPTIX SYSTEMS CORPORATION
Dated: February 26, 1998 By: /s/ Edward S. Fleming
----------------------
Edward S. Fleming, President
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Exhibit 10(a)
Synaptix Systems Corporation
PROJECT EAGLE
Development Team Agreement
THIS AGREEMENT (the "Agreement") is made effective as of
_______________, 1998, by and among SYNAPTIX SYSTEMS CORPORATION, a Colorado
corporation ("Synaptix"), and the following employees of Synaptix working on the
Eagle Development Team (collectively, the "Team Members" and individually a
"Team Member"): BOB TUCKER ("Tucker"); LESLIE VARGAS ("Vargas"); DARYL ALLISON
("Allison"); DIANE CAMPBELL ("Campbell"); MIKE BURDEOS ("Burdeos"); CRAIG
HAMILTON ("Hamilton"); GREG GLOVER ("Glover"); and FELIX BALDERAS ("Balderas").
The parties to this Agreement agree as follows:
1. Termination of Employment Agreements and Retention as
Independent Contractors.
1.1 In consideration of the covenants, terms, and conditions set forth
herein, the parties agree that the employment agreements between Synaptix and
the Team Members are hereby terminated effective as of _____________, 1998.
1.2 During the term of this Agreement, the Team Member will furnish
consulting services and advice as specifically requested by Edward S. Fleming,
Synaptix' President. The services and advice will relate to work being done or
planned by Synaptix in connection with the development of that certain computer
program known as the Eagle Project, and will be within the area of the Team
Member's technical competence.
1.3 Each Team Member's services will be performed at Synaptix'
facilities at the address set forth below, and such other places that are
appropriate and are mutually agreed to by the Team Member and Synaptix.
2. Payment of Compensation.
2.1 The compensation owed to the Team Members from December 15, 1997
through their last day of employment on ____________, 1998, is to be paid in
full for salary earned by a combination of cash and shares of registered common
stock of Synaptix, as set forth on Exhibit A attached hereto. For the purposes
of this compensation, the common stock will be valued at one dollar ($1) per
share.
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3. Release by Team Members.
3.1 Each Team Member shall release Synaptix from any and all liability
arising from or relating to compensation and employment matters upon receipt of
the cash and common stock described above. The release shall be in the form of
Exhibit B attached hereto.
4. Restriction on Sale of Shares of Stock.
4.1 Each of the Team Members agrees to refrain from selling the shares
of registered common stock described on Exhibit A until after April 1, 1998;
provided, however, that up to and including April 1, 1998, the company reserves
the right to pay all back salary due the Team Member in cash. In such event,
Synaptix agrees that it shall issue a stock certificate in the equivalent amount
of shares and bearing a restrictive legend thereon, in exchange for the stock
certificate evidencing registered and unrestricted shares of Synaptix common
stock that the Team Member has received, and the Team Member agrees to submit
the registered share certificate to Synaptix for cancellation and to accept the
reissued share certificate bearing a restrictive legend.
5. Vargas and Tucker Employment.
5.1 Team Members Vargas and Tucker shall have the option to continue as
employees of the company under their current terms of employment. At the
election of Vargas and Tucker, Synaptix and Vargas and Tucker shall enter into
good faith negotiations to renegotiate their employment agreements.
6. Remaining Team Members as Independent Contractors.
6.1 Synaptix understands and acknowledges that the Team Members other
than Vargas and Tucker will pursue full time employment with other entities.
Each of such Team Members agrees to work for Synaptix as an independent
contractors and not as an employee of Synaptix. Each such Team Member
understands and agrees that he or she has no power or authority to act for,
represent, or bind Synaptix in any manner. Each such Team Member further
acknowledges and agrees that he or she is not entitled to any medical coverage,
life insurance, participation in company savings plan, or other benefits
afforded to Synaptix' regular employees. If Synaptix is required to pay or
withhold any taxes or make any other payment with respect to compensation
payable to a Team Member, such Team Member will reimburse Synaptix in full for
taxes paid, and permit Synaptix to make deductions for taxes required to be
withheld from any sum due such Team Member.
6.2 Each Team Member will dedicate a minimum of twenty hours (20) per
week to the Eagle project. Each Team Member will be compensated at the rate of
five hundred (500) shares of registered common stock of Synaptix for each week
of services performed as verified and approved by the Team leader, Bob Tucker.
The registered shares of common stock will be issued to the Team members who
have satisfactorily performed twenty (20) hours of work for each weekly issuance
of shares. The share certificates shall be issued within seven (7) days of each
four (4) week period of services performed.
7. Reemployment of Independent Contractors.
16
<PAGE>
7.1 At such time as Synaptix and the Team Members determine that
Synaptix is in a sufficiently sound financial position, Synaptix may offer to
re-employ the Team Members as full-time employees of the company on terms to be
mutually agreed to between Synaptix and the individual Team Member. In the event
of such reemployment, in addition to their salary each such reemployed Team
Member will receive a signing bonus of fifty thousand (50,000) shares of
unregistered Synaptix stock, bearing a restrictive legend and subject to Rule
144 under the Securities Act of 1933. This stock will be issued to the
reemployed Team Member no later than two (2) weeks after date of hire. In
addition, the reemployed Team Member shall be eligible to participate in
Synaptix employee stock purchase plan. The effective date of hire for this
document will be retroactive to the date that the employee accepted the first
employment offer ever received and the Company will bridge the employee's
service commencing with the original date of employment.
8. No Employment Offer.
8.1 Paragraph 7.1 notwithstanding, in the event that Synaptix elects
not to offer re-employment to a Team Member after completion of the Eagle
project, Synaptix Systems Corporation will issue to such Team Member a total of
twenty five thousand (25,000) unregistered shares of Synaptix common stock
bearing a restrictive legend and subject to Rule 144. The stock will be issued
to said Team Member not later than two weeks after the completion date of the
Eagle project. The purpose of these twenty five thousand shares of Rule 144
stock is incentive compensation for completing the software package with or
without the possibility of future employment. This is the only option available
for such Team Member, and is only applicable if Synaptix elects not to offer
employment to such Team Member who has signed and agreed to the provisions of
this Agreement.
9. Trade Secrets and Inventions; Inside Information.
9.1 Each Team Member will treat as proprietary and confidential any
information belonging to Synaptix or any third parties disclosed to such Team
Member in the course of such Team Member's services. Such Team Member assigns
and agrees to assign to Synaptix or Synaptix's nominee all rights in inventions
or other proprietary information conceived by such Team Member during the term
of this Agreement with respect to any work that such Team Member performs under
this Agreement, including, but not limited to, any computer programs or
programming.
9.2 In the course of the performance of each Team Member's duties, it
is expected that each Team Member will receive information that is considered
material inside information within the meaning and intent of the federal
securities laws, rules, and regulations. Each Team Member expressly agrees that
he or she will not disclose this information directly or indirectly to any other
person, nor use this information as a basis for advice to any other person
concerning any decision to buy, sell, or otherwise deal in Synaptix' securities.
10. Miscellaneous.
10.1 Attorneys' Fees. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or
17
<PAGE>
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.
10.2 Authority. Each person signing this document on behalf of
a party hereto warrants that he has been duly authorized by such party to do so.
10.3 Legal Counsel. Each party hereto hereby acknowledges
the receipt of advice of legal counsel prior to the execution hereof.
10.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall together constitute a single agreement, and this agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto.
10.5 Notices. All notices of communication required or
permitted hereunder must be in writing and will be deemed to have been duly
given if delivered personally, mailed by United States certified or registered
mail, postage prepaid, return receipt requested, mailed by overnight courier, or
sent by facsimile transmission (provided that any such facsimile transmission is
promptly confirmed by delivering or mailing the original executed notice by one
of the other methods provided for in this Subsection), to the parties at the
following addresses:
(a) If to Synaptix, addressed to:
Synaptix Systems Corporation
2450 South Shore Blvd., Suite 210
League City, Texas 77573
Attn: Edward S. Fleming, President
Facsimile No.: (281) 334-0307
(b) If to Team member, addressed to:
-------------------------------------
-------------------------------------
-------------------------------------
Facsimile No.:_______________________
Any such notice or communication that is addressed as provided in this
Subsection will be deemed given (a) upon delivery, if delivered personally, (b)
on the third business day after deposit in a regular depository of the United
States mail, if delivered by United States mail, (c) the day of transmission, if
delivered by facsimile transmission, provided that confirmation is promptly
sent, unless such transmission is sent after 3:00 p.m., local time of the
receiving party, or on a day which is not a business day of the receiving party,
in which case such transmission will be deemed given on the first business day
after the transmission, and (d) on the first business day of the receiving party
18
<PAGE>
after the delivery to the courier, if delivered by overnight courier. Any party
from time to time may change its address for the purpose of this provision by
furnishing a notice in accordance with this Subsection, but no such notice will
be deemed to have been given until it is actually received by the party sought
to be charged with the contents thereof.
10.6 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law embodied therein that might refer construction of such
provisions to the laws of another jurisdiction.
10.7 Captions. The captions in this Agreement are for
convenience of reference only, and shall not be considered a part hereof or be
given any effect in the construction or interpretation of this Agreement.
10.8 Severability. If any provision of this Agreement is
invalid, illegal or unenforceable, the balance of this Agreement shall remain in
full force and effect and this Agreement shall be construed in all respects as
if such invalid, illegal or unenforceable provision were omitted.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.
Synaptix:
SYNAPTIX SYSTEMS CORPORATION
By:___________________________
Edward S. Fleming, President
Team Members:
- ------------------------------ ----------------------------
BOB TUCKER LESLIE VARGAS
- ------------------------------ ----------------------------
FELIX BALDERAS DARYL ALLISON
- ------------------------------ ----------------------------
DIANE CAMPBELL MIKE BURDEOS
- ------------------------------ ----------------------------
CRAIG HAMILTON GREG GLOVER
Attachments:
Exhibit A -- Compensation Schedule
Exhibit B -- Release Agreement
20
<PAGE>
DEVELOPMENT TEAM AGREEMENT
EXHIBIT A
<TABLE>
<CAPTION>
$1 for $1
Employee Payroll Owed Stock Certificate
- ------------------------ --------------------------------------------------- -------------------
<S> <C> <C>
Felix Balderas Last day Dec. 19th. Due last week worked 1076
less vacation hours that were taken in advance
of accruing them.
Diane Campbell Last day Jan. 16th. Due contractual agreement 5884
of one month.
Greg Glover Last day Jan. 2nd. Due contractual agreement 2900
of three weeks pay. Received $850 cash towards
that amount.
Mark Orr Last day Jan 16th. Due contractual agreement of 4716
five weeks pay. Received $1,000 cash towards
that amount.
Daryl Allison Last day Jan. 26th. Due contractual agreement 6990
of six weeks. Received $1,000 cash towards
that amount.
Craig Hamilton Last day worked Feb. 6th. Due contractual 8721
agreement of eight weeks. Received $1,000
towards that amount.
Mike Burdeos Last day worked Jan. 26th. Due contractual 8438
agreement of six weeks. Received $1,000
towards that amount.
Bob Tucker Last day worked Jan. 26th. Due contractual 9731
agreement of six weeks.
Leslie Vargas Still employed by Synaptix Systems Corporation. 3669
Due contractual agreement of one month in back
pay. Received $1,000 towards that amount.
Total Owed 52,125
</TABLE>
21
<PAGE>
Exhibit 10(b)
SETTLEMENT AGREEMENT AND RELEASE
EXHIBIT B
This Release Agreement (this "Agreement") is made and entered into as
of the ____ day of ________________, 1998, by and between SYNAPTIX SYSTEMS
CORPORATION, a Colorado corporation ("Synaptix") and
_____________________________, an individual ("Employee").
RECITALS
A. Synaptix is a company engaged in the business of developing
and marketing computer programs. Employee is an employee of Synaptix.
B. The parties to this Agreement intend and desire to effect and
accomplish a full and final settlement of the claims and issues existing between
them arising out of the termination of Employee's employment by Synaptix.
C. The parties to this Agreement now desire to enter into a full and
complete settlement of all disputes by providing certain payments, taking
certain actions and entering into certain covenants as set forth below to
completely discharge any and all claims and potential claims between them.
AGREEMENT
NOW THEREFORE, it is agreed by and between the parties as follows:
1. Resignation of Employee. Employee hereby resigns as an
employee of Synaptix, effective as of _________________, 1998.
2. Development Team Agreement. Synaptix and Employee shall enter into a
development team agreement (the "Development Team Agreement") in the form
attached hereto as Exhibit A and incorporated herein by this reference.
3. Representations and Warranties of Parties. Each party hereby
represents and warrants to each other party as follows:
3.1 He, she, or it has not transferred, assigned or otherwise
subrogated or conveyed any of his, her or its interest in any of the claims
which are the subject matter of this Agreement to any person or entity not a
party to this Agreement;
3.2 He, she or it has obtained all such approvals and
authorizations as are necessary or appropriate to the execution, delivery and
performance of this Agreement by it, including the consents of shareholders,
directors, partners or joint venturers, where applicable, and this Agreement has
been validly executed and delivered by him, her or it and is binding upon and
enforceable against him, her or it in accordance with its terms; and
3.3 Except for the parties to this Agreement, he, she or it
has no knowledge that any other person or entity has any right or interest in or
to the subject matter of this Agreement.
22
<PAGE>
3.4 Each party to this Agreement hereby indemnifies and holds
the other party harmless from and against any liability, loss, claims, demands,
damages, costs or expenses incurred, or attorneys' fees paid, by the other party
as a result of the incorrectness of any of their respective representations and
warranties contained in paragraphs 6.1 through 6.3, inclusive, of this Section.
4. Covenants and Releases. For valuable consideration as recited above
and the receipt of which is hereby acknowledged, the parties to this Agreement
covenant and promise as follows:
4.1 Definitions.
(a) For purposes of this section, the term "party" or
"parties" shall mean:
(i) on the one hand, Employee, together with his
respective agents, heirs,
successors, personal representatives and assigns; and
(ii) on the other hand, Synaptix, together with its
respective past and present officers (other than
Employee), directors, agents, employees, servants,
successors and assigns.
(b) The use of the term "party" or "parties"
herein shall be inclusive, and usage of the singular shall in every case
also incorporate the collective meaning set forth above.
4.2 Mutual Releases. Except for the performance of the
undertakings set forth herein and in the Development Team Agreement attached
hereto as Exhibit A, each party to this Agreement does hereby release and
forever discharge each other party from any and all claims, demands, damages,
actions, causes of action, defenses and liabilities, of any kind whatsoever,
whether in law or in equity, whether contractual, common law, statutory,
federal, state or otherwise, whether known or unknown, whether suspected to
exist or not, which the parties now have, had or hereafter may have or claim to
have, by reason of any acts, omissions, transactions, or occurrences prior to
the date hereof arising out of Employee's employment by Synaptix and his actions
as an officer and director of the company.
4.3 General Release. Each of the parties to this release may
have claims by reason of acts, omissions, transactions or occurrences prior to
the date hereof against the other party, of which, at the time this agreement is
executed, the releasing party has no knowledge or suspicion. Except for the
performance of the undertakings expressly set forth herein and in the
Development Team Agreement, each party hereby agrees and represents that this
Agreement is specifically intended to, and does, extend to any and all such
claims that are based upon or arise out of the employment of Employee by
Synaptix and his actions as an officer and director of the company, whether or
not known, claimed, or suspected by such party and, therefore, each party hereby
expressly waives any statutory protection with respect to the limited claims
described in this sentence against unknown claim, regardless of whether or not
knowledge of such unknown claims may have materially affected such party's
decision.
4.4 No Admission of Liability. The parties to this Agreement,
and each of them, agree and acknowledge that nothing contained in this
Agreement, nor the settlement which led to it, is intended to be, nor shall it
be deemed, construed or treated in any respect as, an admission of liability.
23
<PAGE>
4.5 Scope of Release. This Agreement shall apply to and be
binding upon the respective officers, directors, agents, employees, servants,
successors, attorneys, heirs and assigns, if any, of each party to this
Agreement.
5. Miscellaneous.
5.1 Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
5.2 Authority. Each person signing this document on behalf of
a party hereto warrants that he has been duly authorized by such party to do so.
5.3 Legal Counsel. Each party hereto hereby acknowledges
the receipt of advice of legal counsel prior to the execution hereof.
5.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall together constitute a single agreement, and this agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.
5.5 Continuing Obligations. None of the releases contained
herein shall be construed to release any party from any obligation arising
hereunder or under the Development Team Agreement.
5.6 Confidentiality. The parties agree that they shall each
keep the terms of this Settlement Agreement confidential, and shall not disclose
the same to any third party except as may be required by law or judicial
process.
5.7 Fees and Expenses. Each party will pay their respective
fees, expenses and disbursements incurred in connection with the subject matter
of this Agreement and any amendments thereto.
5.8 Notices. All notices of communication required or
permitted hereunder must be in writing and will be deemed to have been duly
given if delivered personally, mailed by United States certified or registered
mail, postage prepaid, return receipt requested, mailed by overnight courier, or
sent by facsimile transmission (provided that any such facsimile transmission is
promptly confirmed by delivering or mailing the original executed notice by one
of the other methods provided for in this Subsection), to the parties at the
following addresses:
24
<PAGE>
(a) If to Synaptix, addressed to:
Synaptix Systems Corporation
2450 South Shore Blvd., Suite 210
League City, Texas 77573
Attn: Edward S. Fleming, President
Facsimile No.: (281) 334-0307
(b) If to Employee, addressed to:
-------------------------------------
-------------------------------------
-------------------------------------
Facsimile No.:_______________________
Any such notice or communication that is addressed as provided in this
Subsection will be deemed given (a) upon delivery, if delivered personally, (b)
on the third business day after deposit in a regular depository of the United
States mail, if delivered by United States mail, (c) on the day of transmission,
if delivered by facsimile transmission, provided that confirmation is promptly
sent, unless such transmission is sent after 3:00 p.m., local time of the
receiving party, or on a day which is not a business day of the receiving party,
in which case such transmission will be deemed given on the first business day
after the transmission, and (d) on the first business day of the receiving party
after the delivery to the courier, if delivered by overnight courier. Any party
from time to time may change its address for the purpose of this provision by
furnishing a notice in accordance with this Subsection, but no such notice will
be deemed to have been given until it is actually received by the party sought
to be charged with the contents thereof.
5.9 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law embodied therein that might refer construction of such
provisions to the laws of another jurisdiction.
5.10 Captions. The captions in this Agreement are for
convenience of reference only, and shall not be considered a part hereof or be
given any effect in the construction or interpretation of this Agreement.
5.11 Severability. If any provision of this Agreement is
invalid, illegal or unenforceable, the balance of this Agreement shall remain in
full force and effect and this Agreement shall be construed in all respects as
if such invalid, illegal or unenforceable provision were omitted.
5.12 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes any prior written or oral agreements
or understandings between them concerning the subject matter set forth above.
There are no representations, warranties, covenants, promises, agreements,
arrangements, or understandings, oral or written, express or implied between the
parties hereto relating to the subject matter set forth above which have not
been fully expressed herein. The terms and provisions of this Agreement may be
altered, amended or modified only by a written instrument executed by the party
sought to be bound by such alteration, amendment or modification.
25
<PAGE>
5.13 Binding Effect. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective heirs,
legal representatives, successors, and assigns. No party shall transfer or
assign any rights or obligations hereunder without the prior written consent of
the other party thereto.
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
and Release on the date first set forth above.
"Synaptix:" "Employee:"
SYNAPTIX SYSTEMS CORPORATION
_____________________________
By:___________________________
Edward S. Fleming, President (Print Name)
26
<PAGE>
Exhibit 17
MARK F. WALZ
1127 GLOURIE DRIVE
HOUSTON, TEXAS 77055
February 3, 1998
Mr. Matthew Hutchins
Chairman of the Board
Synaptix Systems Corporation
1900 Preston Road, Suite 267
Plano, Texas 75093
Mr. Daniel A. Gillett
Director and Chief Executive Officer
Synaptix Systems Corporation
1900 Preston Road, Suite 267
Plano, Texas 75093
Colonel Edward S. Fleming
Director and Acting President
Synaptix Systems Corporation
2450 South Shore Boulevard, Suite 210
League City, Texas 77573
VIA CERTIFIED MAIL
Dear Gentlemen:
As you may know, I have assumed a new position and consequently, effective
immediately, I am no longer able to devote the time necessary to function as a
board member of Synaptix. I trust that each of you will fulfill your fiduciary
duties to the shareholders of Synaptix, including filing of Form 8-K, if
necessary, reflecting my resignation from the Board. I wish each you continued
success.
Sincerely,
/s/ Mark F. Walz
Mark F. Walz
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Synaptix Systems Corporation December 31, 1997 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000817125
<NAME> Synaptix Systems Corporation
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 2,583
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,628
<PP&E> 108,848
<DEPRECIATION> (14,588)
<TOTAL-ASSETS> 107,888
<CURRENT-LIABILITIES> 811,352
<BONDS> 0
0
0
<COMMON> 46,781
<OTHER-SE> (751,188)
<TOTAL-LIABILITY-AND-EQUITY> 107,888
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 746,331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (746,377)
<INCOME-TAX> 0
<INCOME-CONTINUING> (746,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (746,377)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
