PRELIMINARY PROXY MATERIALS
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SAFE AID PRODUCTS INCORPORATED
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NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD DECEMBER __ ,1997
TO THE STOCKHOLDERS OF SAFE AID PRODUCTS INCORPORATED:
We invite you to attend a Special Meeting of Stockholders of Safe Aid
Products Incorporated ("Safe Aid") to be held at the offices of Lazer, Aptheker,
Feldman, Rosella & Yedid, LLP, 250 Old Country Road, Melville, New York 11747 on
December __, 1997, beginning at 10:00 a.m., local time. The limited purpose of
the Special Meeting is to consider and vote upon the following proposals, all of
which are more completely set forth in the accompanying Proxy Statement:
1. To consider and vote upon a proposal to amend Safe Aid's
Certificate of Incorporation to effectuate a ten-for-one reverse
stock split of Safe Aid's Common Stock.
2. To consider and vote upon a proposal to amend Safe Aid's
Certificate of Incorporation to increase the authorized common
stock to 999,999,000 shares of common stock.
3. To consider and vote upon a proposal to amend Safe Aid's
Certificate of Incorporation to change Safe Aid's name to Safe
Technologies International, Inc.
4. To consider and vote upon a proposal to approve and adopt a merger
agreement dated August 29, 1997, as amended, between Safe Aid and
Intelligence Network International, Inc.(INI) and the transactions
contemplated thereby.
5. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on December 1,
1997, are entitled to notice of and to vote at the Special Meeting or any
adjournments thereof.
Whether or not you plan to attend the Special Meeting in person, you
are requested to complete, date, sign and return the enclosed proxy card in the
enclosed envelope which requires no postage if mailed in the United States. If
you attend the Special Meeting, you may vote in person if you wish, even if you
have previously returned your proxy card.
By order of the Board of Directors,
SAFE AID PRODUCTS INCORPORATED
Stanley Snyder, President
Melville, New York
Date: December __, 1997
SAFE AID PRODUCTS INCORPORATED
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Safe Aid Products Incorporated, a Delaware
corporation ("Safe Aid") of proxies from the holders of Safe Aid's common stock,
par value $.00001 per share (the "Safe Aid Common Stock"), for use at the
Special Meeting of Stockholders to be held at the offices of Lazer, Aptheker,
Feldman, Rosella & Yedid, LLP on December __, 1997, beginning at 10:00 p.m.
local time and at all adjournments and postponements thereof (the "Special
Meeting").
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is December, 1997. Safe Aid's
principal executive offices are located at c/o Lazer, Aptheker, Feldman, Rosella
& Yedid, LLP, 225 Old Country Road, Melville, New York 11747 and its telephone
number is (516) 364-3887.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, Safe Aid's stockholders will consider and vote
upon the following matters:
1. An amendment to Safe Aid's Certificate of Incorporation to
effectuate a ten-for-one reverse stock split of Safe Aid's Common
Stock (the "Reverse Stock Split");
2. An amendment to Safe Aid's Certificate of Incorporation to increase
the authorized common stock to 999,999,000 shares of common stock
(the "Common Stock Amendment");
3. An amendment to Safe Aid's Certificate of Incorporation to change
Safe Aid's name to Safe Technologies International, Inc. (the "Name
Change Amendment");
4. The proposed merger of Intelligence Network International, Inc., a
Florida corporation ("INI") with and into Safe Aid pursuant to the
terms and condition of the merger agreement between INI and SafeAid
dated August 29, 1997, as amended, (the "Merger Proposal"); and
5. Such other business as may properly come before the SpecialMeeting,
including any adjournments or postponements thereof.
In order to consummate the Merger with Intelligence Network
International, Inc., (INI) Safe Aid stockholders need to adopt and approve each
of the proposals presented at the Special Meeting: (I) the Reverse Stock Split,
(ii) the Common Stock Amendment, (iii) the Name Change Amendment, and (iv) the
Merger Proposal. The Merger Agreement provides that approval of each of these
proposals is a condition precedent to closing the Merger.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted FOR the Reverse Stock Split, FOR the Common Stock Amendment, FOR
the Name Change Amendment, and FOR the Merger Proposal. In the event a
stockholder specifies a different choice by means of the enclosed proxy, his or
her shares will be voted in accordance with the specifications so made. The
Board does not know of any other matters that may be brought before the Special
Meeting. In the event that any other matter should come before the Special
Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies not marked to the contrary with respect to such
matters in accordance with their best judgment.
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. Reference is made to, and this Summary is qualified in
its entirety by, the more detailed information contained elsewhere in this Proxy
Statement.
General
This Proxy Statement, Notice of Safe Aid Special Meeting to be held
December __, 1997, and form of proxy solicited in connection therewith are being
mailed to holders of Safe Aid Common Stock on or about December__, 1997.
Special Meeting
At the Special Meeting, holders of shares of Safe Aid Common Stock will
consider and vote upon (i) a proposal to amend Safe Aid's Certificate of
Incorporation to effectuate a ten-for-one reverse stock split (the "Reverse
Stock Split"), (ii) a proposal to amend Safe Aid's Certificate of Incorporation
to increase the authorized common stock to 999,999,000 shares of common stock
(the "Common Stock Amendment"), (iii) a proposal to amend Safe Aid's Certificate
of Incorporation to change Safe Aid's name to Safe Technologies International,
Inc. (the "Name Change Amendment"), (iv) a proposal to approve and adopt the
Merger Agreement and the transactions contemplated thereby (the "Merger
Proposal") and (v) on such other matters as may properly be submitted to a vote
at the Special Meeting.
In order to consummate the Merger with Intelligence Network
International, Inc., (INI) Safe Aid stockholders need to adopt and approve each
of the proposals presented at the Special Meeting: (i) the Reverse Stock Split,
(ii) the Common Stock Amendment, (iii) the Name Change Amendment, and (iv) the
Merger Proposal. The Merger Agreement provides that approval of each of these
proposals is a condition precedent to the closing of the Merger.
Intelligence Network International Shareholder Approval
By written consent, the shareholders of INI have approved and adopted
the Merger Agreement and the transactions contemplated thereby.
Safe Aid
Safe Aid was incorporated under Delaware law on May 21, 1987 to engage
in manufacturing and marketing of a disinfectant product for sale in dental and
medical offices and hotel and motel markets, as well as in the retail
over-the-counter market, and to engage in research and development regarding
nasal and transdermal delivery of aspirin and other drugs.
During the past several years, Safe Aid has been relatively inactive
with nominal sales and operations and has remained in its development stage.
During the past year, Safe Aid's principal business objective has been to find
and merge with an operating company that management believes could increase
shareholder value.
Safe Aid's executive offices are located at c/o Lazer, Aptheker,
Feldman, Rosella & Yedid, LLP, 225 Old Country Road, Melville, New York 11747
and its telephone number is (516) 364-3887.
Intelligence Network International (INI)
INI offers a broad range of Internet services and products through
having made acquisitions of important Internet copyrights, trademarks,
contracts, Internet software copyrights, web sites, key employment contracts,
and trade names from three marketing and consulting companies. These acquisition
assets have been integrated into INI and now operate as divisions of INI: (i)
the Internet Software and Commerce Division specializes in developing Internet
bundled software packages and Internet Electronic Commerce (ii) the Internet
Information/Data/Directory Division specializes in providing information, data,
and directories for select subjects on the Internet.
INI also intends to expand its products and services by making select
acquisitions of vertical and horizontal related businesses, and has made two
recent acquisitions. On August 2, 1997, INI acquired Total Micro Computers, Inc.
("TMC"), a wholesaler and retailer of custom designed and assembled computer
systems and related products. On August 28, 1997, INI acquired GMG Computer
Consultants, Inc. d.b.a. Precision Imaging ("GMG"), a digital pre-press company
which specializes in preparing film, color, sizing, etc., of high quality full
color collateral pieces for printing, i.e. magazine publications and catalogs.
Collectively, GMG and TMC sometimes may be referred to herein as the
"Acquisition Companies." See "Information about INI" and "Acquisition
Companies."
INI's executive offices are located at 249 Peruvian Avenue, Palm Beach,
Florida 33480 and its telephone number is (561) 659-6227.
The Merger
This transaction is a "reverse merger acquisition" wherein the former
shareholders of INI are acquiring a majority interest (83%) of Safe Aid. After
the Merger, Safe Aid will be led by new management, which will focus exclusively
on Internet, New Media, and other new technology based products and services.
Prior to the closing date of the Merger (the "Closing Date"), Safe Aid
shall effect a ten-for-one reverse stock split pursuant to which its outstanding
common stock will be reduced to 70,547,720 shares. At the Effective Time, INI
shall be merged with and into Safe Aid pursuant to the terms and conditions of
the Merger Agreement. As of the Effective Time, the separate corporate existence
of INI will terminate, and each issued and outstanding share of INI Common Stock
will be converted into the right to receive one share of Safe Aid Common Stock.
In the aggregate, INI shareholders will receive 585,819,936 shares of Safe Aid
Common Stock in the Merger. The shares of Safe Aid Common Stock which will be
received by the INI shareholders pursuant to the Merger Agreement will be
restricted securities as defined in Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act").
At the Closing, Safe Aid will also issue 49,109,544 shares of 144
Restricted Safe Aid Common Stock to certain brokers, finders and consultants for
services rendered in the Merger transaction. The consultants ( of which there
are two) are presently affiliated with Safe Aid. For more information about the
brokers and finders, please see "The Merger - Brokerage and Finder's Fees." For
more information about the consultants and their affiliation with Safe Aid,
please see "The Merger - Consultant's Fees." After the consummation of the
Merger, the former INI shareholders will own approximately 83% of Safe Aid's
Common Stock, and the former Safe Aid Shareholders will own approximately 10% of
Safe Aid. Certain, brokers, finders and consultants will own the remaining 7% of
Safe Aid's Common Stock. See "The Proposed Merger-Brokerage and Finder's Fees"
and "The Proposed Merger- Consultant's Fees."
Conditions to the Merger
The obligations of Safe Aid and INI to effect the Merger are subject to
certain conditions, including, among other things, (i) approval and adoption of
the Reverse Stock Split, the Common Stock Amendment, the Name Change Amendment
and the Merger Agreement by Safe Aid's stockholders, (ii) the accuracy of
representations and warranties included in the Merger Agreement and other
customary conditions. Other than the required approval of the Merger by the Safe
Aid stockholders, substantially all of the obligations of Safe Aid and INI to
consummate the Merger may be waived or modified by the party that is, or whose
stockholders are, entitled to the benefits thereof.
Termination of the Merger Agreement
Either party may terminate the Merger Agreement without liability to
either party if the Merger is not closed by October 31, 1997 (the "Merger
Cancellation Date"). The Parties may further extend the Merger Cancellation
Date, to 30 days after resolution of any comments which the SEC might have on
the Proxy Statement, upon written notice to Safe Aid, provided that INI has
similarly extended its acquisition agreements with TMC and GMG. The Cancellation
Date may not be extended beyond March 1, 1998, however, without the written
consent of both INI and Safe Aid.
Management and Operations after the Merger
At the Effective Time, all of the existing officers and directors of
Safe Aid will resign, and the new officers and directors of Safe Aid after the
Merger will be as follows: Barbara L. Tolley, Chairman of the Board and CEO,
Michael Bhathena, Vice President and Chief Information Officer, Bradford L.
Tolley, Secretary and Treasurer, Charles N. Martus, Director, Jack W.
Tolley, Director, Franklin L. Frank, Director and Robert L. Alexander, Director.
After the Merger, new management will focus on developing Safe Aid's
Internet, New Media and new technology products and services. New management
intends to (i) expand the operations of Acquisition Companies by providing those
companies with marketing expertise, financial expertise, and administration
assistance (ii) integrate Internet services into the day to day operations of
the Acquisition Companies and (iii) make additional vertical or horizontal
acquisitions in strategic global locations of companies which would be
compatible to Safe Aid's niche profile of products' and services' companies.
RISK FACTORS
Stockholders of Safe Aid, in considering whether to approve the Merger
Proposal should consider the following matters. These matters should be
considered in conjunction with the other information included and incorporated
by reference in this Proxy Statement.
Reverse Acquisition; Change of Control; Change of Management and Business
This transaction is a "reverse merger acquisition" in which the former
shareholders of INI will acquire a majority interest (83%) in Safe Aid. After
the Merger, Safe Aid's former shareholders will own approximately 10% of Safe
Aid's Common Stock. Upon consummation of the Merger, all of the existing
officers and directors of Safe Aid will resign and new officers and directors
will take their place. The new management of Safe Aid will focus Safe Aid's
business toward certain new management expertise's of Internet, New Media, and
new technology based products and services which are currently being offered by
INI. There can be no assurance that Safe Aid's new business will be successful,
in view of all the risks, expenses and delays inherent in the establishment of a
new business, including but not limited to, unforeseen expenses, complications
and delays, the initiation of marketing activities, the uncertainty of market
acceptance of new services, intense competition from larger more established
competitors and other factors.
Merger Consideration and Dilution
The consideration to be given to INI and Safe Aid stockholders in the
Merger has been determined by arms-length negotiations between INI and Safe Aid,
and does not have any direct relation to Safe Aid or INI's earnings, results of
operations, book value, asset value or other criteria of value. There can be no
assurances that the merger consideration represents an accurate valuation of
Safe Aid's or INI's business.
Limited Operating History of INI
INI commenced operations on October 2, 1996 and was formed for the
purpose of making business acquisitions to merge into the Company select assets
which had been purchased from three marketing and consulting companies. INI had
no operations or revenues from its inception through December 31, 1996 (and
accordingly, only losses and a retained earnings deficit). With management's
plan for aggressive growth, attention was directed toward making select business
acquisitions in 1997. All of INI's operations are a result of its acquisitions
in 1997. As a result, the likelihood of success of INI's operations must be
considered in view of all the risks, expenses and delays inherent in the
establishment of a new business. See "Reverse Acquisition; Change of Control;
Change of Management and Business."
Developing Market; Unproved Market for INI's Services
The market for Internet and New Media services is characterized by
rapidly changing technology, evolving industry standards, changing customer
needs and demands, and frequent new products and services introductions. INI's
future success will depend, in part, on its ability to develop, maintain and
improve new and existing technologies for use in connection with its Internet
Divisions and Acquisition Companies, and its ability to provide new and
desirable services that capitalize on the increased use of the Internet. In
addition, INI's ability to provide extensive support and services to its
customers will be critical. There can be no assurance that INI will be
successful in effectively developing or providing new technologies or services
on a timely basis that will be readily accepted on a world wide or other
significant basis.
Acquisition Strategy
INI has experienced significant growth through acquisitions of
important Internet related assets from three marketing and consulting companies
and two companies doing business in the technology related fields. After the
consummation of the Merger, Safe Aid's success is dependent, in part, upon its
ability to integrate the operations of, and manage over time, the acquired
companies. There can be no assurance that Safe Aid will successfully integrate
the acquired operations of GMG or TMC into its operations or that the
anticipated benefits of the acquisitions will be achieved. The failure to
successfully integrate GMG or TMC or future acquisitions into Safe Aid's
operations would adversely affect Safe Aid's financial condition and results of
operations.
Capital Requirements
If the Merger is consummated, Safe Aid's capital requirements will be
significant, and it will be an important ongoing function and responsibility of
management to secure such necessary capital. Following the Merger, management
will seek to raise capital (if necessary) through public or private offerings of
equity or debt securities. A vital part of Safe Aid's growth will depend upon
the successful attainment of capital. Safe Aid will need capital to grow the
existing Acquisition Companies and to make additional appropriate vertical and
horizontal market industry acquisitions. There can be no assurance that any such
additional financing will be available to Safe Aid on commercially reasonable
terms, or at all. In light of Safe Aid's limited resources, its anticipated
expenses and the competitive environment in which it operates, any inability to
obtain additional financing, if required, would have a material adverse effect
on Safe Aid.
Dependence on Key Personnel
After the Merger, the success of Safe Aid will be highly dependent on
its management. Safe Aid's success will depend to a significant extent upon the
efforts and ability of its Chief Executive Officer and Chairman, Barbara Tolley,
and certain other key executives, including executives of its acquired
subsidiaries. Upon Closing, Ms. Tolley will enter into a two year employment
agreement with Safe Aid, with an option exercisable by Ms. Tolley to extend the
employment agreement for an additional year. See "Business after the Merger -
Employment Agreements." INI and Safe Aid do not presently have key person life
insurance on Ms. Tolley or Mr. Snyder, Safe Aid's President, however, it is
management's plan to obtain key man insurance for Ms. Tolley and other key
employees of Safe Aid after the Merger. The loss of the services of Ms. Tolley
or other key executives could have a material adverse effect on Safe Aid's
business.
Competition
The market for Internet services is new, intensely competitive, rapidly
evolving and subject to rapid technological change. INI expects to counter
significant competition from numerous companies, many of which may possess
substantially greater technical, financial, sales and marketing resources than
INI. INI understands that competition from new entrants is expected to increase
as commercial acceptance and use of the Internet expands. Such increased
competition may have a material adverse effect on INI's ability to successfully
market its services.
Also, the market competition for companies providing computer product
sales, being highly competitive, requires that companies in this industry
operate with relatively small profit margins.
Possible Depressing Effect of Future Sales of Safe Aid Common Stock
Future sales of the shares of Safe Aid Common Stock to be issued in the
Merger, or the perception that such sales could occur, could adversely affect
the market price of Safe Aid Common Stock. There can be no assurance as to when,
and how many of, the shares of Safe Aid Common Stock to be issued in the Merger
will be sold and the effect such sales may have on the market price of Safe Aid
Common Stock. Such securities are subject to resale restrictions in accordance
with the Securities Act and the regulations promulgated thereunder. As such
restrictions lapse or if such securities are registered for sale to the public,
such securities may be sold to the public.
Forward-Looking Statements
The management of INI and Safe Aid believe that this Proxy Statement
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, including
statements regarding, among other items, (I) the business plan for Safe Aid
after the Merger and (ii) anticipated trends in the Internet and technology
related fields. These forward-looking statements are based largely on
management's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond INI and Safe Aid's control. Actual
results could differ materially from these forward-looking statements as a
result of the factors described in "Risk Factors," including, among others,
general economic conditions, the limited operating history of INI, the unproved
market for INI's products and services, governmental regulation and competitive
factors. In light of these risks and uncertainties, there can be no assurance
that the forward-looking information contained in this Proxy Statement will in
fact transpire.
Special Meeting
Matters to be Considered at the Special Meeting
At the Special Meeting, holders of Safe Aid Common Stock will be asked
to consider and vote upon (i) the Reverse Stock Split, (ii) the Common Stock
Amendment, (iii) the Name Change Amendment, (iv) the Merger Proposal, and (v)
such other proposals as may be properly brought before the Special Meeting.
In order to consummate the Merger with INI, Safe Aid stockholders need
to adopt and approve each of the proposals presented at the Special Meeting: (i)
the Reverse Stock Split, (ii) the Common Stock Amendment, (iii) the Name Change
Amendment, and (iv) the Merger Proposal. The Merger Agreement provides that
approval of each of these proposals is a condition precedent to the Closing of
the Merger.
Record Date; Stock Entitled to Vote; Quorum
Only stockholders of record of Safe Aid Common Stock at the close of
business on December 1, 1997 (the "Safe Aid Record Date") are entitled to
receive notice of, and to vote at, the Special Meeting. At the close of business
on the Safe Aid Record Date, Safe Aid had issued and outstanding 705,477,200
shares of Safe Aid Common Stock. A majority of the outstanding shares of Safe
Aid Common Stock on the Safe Aid Record Date must be represented in person or by
proxy at the Special Meeting in order for a quorum to be present. Each share of
Safe Aid Common Stock issued and outstanding on the Safe Aid Record Date will
entitle the holder thereof to one vote on each proposal presented at the Special
Meeting.
Shares of Safe Aid Common Stock represented at the Special Meeting by a
properly executed, dated and returned proxy will be treated as present at the
Special Meeting for purposes of determining a quorum, without regard to whether
the proxy is marked as casting a vote or abstaining. Proxies relating to "street
name" shares that are properly executed and returned by brokers will be counted
as shares present for purposes of determining the presence of a quorum, but will
not be treated as shares having voted at the Special Meeting with respect to (i)
the Reverse Stock Split, (ii) the Common Stock Amendment, (iii) the Name Change
Amendment, or (iv) the Merger Proposal if authority to vote is withheld from the
broker (a "broker non-vote").
Votes Required
The affirmative vote of the holders of a majority of the outstanding
shares of Safe Aid Common Stock is required to approve and adopt (I) the Reverse
Stock Split, (ii) the Common Stock Amendment, (iii) the Name Change Amendment,
and (iv) the Merger Proposal.
Voting of Proxies
Proxies properly executed and returned in a timely manner will be voted
at the Special Meeting in accordance with the directions noted thereon. Proxies
which are properly executed, but for which no voting direction is indicated,
will be voted FOR the Reverse Stock Split, FOR the Common Stock Amendment, FOR
the Name Change Amendment, and FOR the Merger Proposal. Abstentions will be
recorded as such by the Inspector of Elections for the Special Meeting.
Abstentions and broker non-votes (as well as any other failure to vote) will not
be considered as votes cast with respect to any of the proposals.
Revocability of Proxies
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted, either by voting in person at the meeting, by written notice
to the Secretary of Safe Aid or by delivery of a later-dated proxy.
Ownership by Executive Officers and Directors
As of November 17, 1997, directors and executive officers of Safe Aid
may be deemed to be beneficial owners of 247,595,140 shares (including shares
underlying certain options and warrants) of Safe Aid Common Stock, or
approximately 35.1% of the then outstanding shares of Safe Aid Common Stock.
Recommendation of the Safe Aid Board
The Safe Aid Board has unanimously approved the (I) the Reverse Stock
Split, (ii) the Common Stock Amendment, (iii) the Name Change Amendment, and
(iv) the Merger Proposal (collectively, all such proposals shall be referred to
as the "Safe Aid Proposals"). The Safe Aid Board believes that the Safe Aid
Proposals are in the best interests of Safe Aid and its stockholders and
recommends that the Safe Aid Stockholders vote FOR the Reverse Stock Split, FOR
the Common Stock Amendment, FOR the Name Change Amendment, and FOR the Merger
Proposal.
THE PROPOSED MERGER
The following summary of the material terms of the Merger Agreement is
qualified in its entirety by reference to the provisions of the Merger
Agreement, as amended, which is attached as Exhibit A to this Proxy Statement
and is incorporated by reference herein.
General
The respective Board of Directors of Safe Aid and INI, meeting
separately, each approved and adopted the Merger Agreement and the Merger and
authorized the execution and performance of the Merger Agreement. The
shareholders of INI have approved and adopted the Merger Agreement and the
Merger and authorized the execution and performance of the Merger Agreement.
Background of the Merger
Barbara Tolley incorporated Property Intelligence International, Inc.
in 1992, In CyberMall, Inc. in 1995 and CyberPlan, Inc. in February,1996, and
was the Chief Executive Officer and principal shareholder of each of these
companies. Ms. Tolley formed these companies to update and replace her 20 year
marketing company in order to meet the challenges of the 21st century. Those
companies offered international marketing and consultancy services for global
clients. The marketing and advertising industry during these years was
experiencing profound change due to new technologies which greatly impacted
marketing services. Traditional advertising methods such as print, radio, and
television were increasing being supplemented by `new media' such as Kiosks,
CD-ROM, Infomercials, etc. One of the most significant new technologies which
revolutionized the advertising industry was the advent of online business and
information services and the Internet. During these years, Ms. Tolley created a
number of new copyrights and computer programs relating to the new technology.
In late 1996, Ms. Tolley decided to combine those Internet copyrights,
trademarks, contracts and other intangible assets from each of those companies
in order to form one operating entity which would specialize in Internet, New
Media and new technology products and services. Ms. Tolley formed INI in October
1996 to serve as an operating entity for Internet services. INI's Board of
Directors recognized that for INI to accomplish rapid expansion, they would need
to seek and consider various options for INI to raise capital: such as a private
offering, a public offering or a reverse merger into a public shell. For a six
month period, Ms. Tolley consulted with several investment bankers regarding
possible public or private offerings and reverse shell mergers. Ms. Tolley also
entered into discussions with a regional public telecommunications company which
had interest in acquiring INI for its Internet copyrights.
In June 1996, at the suggestion of Robert Weinberg, a business broker,
Ms. Tolley contacted Stanley Snyder, the President of Safe Aid. See "Brokers and
Finder's Fees." Ms. Tolley advised Mr. Snyder that she was an international
marketing and advertising executive and was in process of forming an Internet
Company which had important copyrights, trademarks, and contracts relating to
the Internet. Stanley Snyder arranged a meeting with Ms. Tolley.
In July 1996, Barbara Tolley, Stanley Snyder and Robert Weinberg met in
Boca Raton, Florida. At this meeting, they discussed a possible merger between
Ms. Tolley's Internet company and Safe Aid. Mr. Snyder thought that Ms. Tolley's
marketing and international business expertise might be helpful in developing
the Safe Aid patents and products. Furthermore, the management team that she had
assembled to head her new Internet company i.e. new technology products and
services was impressive.
Nothing definitive occurred from that July 1996 meeting.
In November 1996, Barbara Tolley and Stanley Snyder resumed their
discussions about a possible merger. By December 1996, they had reached an
understanding on the terms and conditions of a possible merger. Mr. Snyder
informed Ms. Tolley that in order to effectuate a merger with Safe Aid it would
be necessary to satisfy three conditions prior to the Merger. One, the Internet
assets should be merged into a new company. Ms. Tolley had previously taken this
step, and was preparing to merge copyrights, trademarks, and contracts into a
company named Intelligence Network International, Inc. ("INI"). Two, for INI to
acquire one or two companies in vertical industries prior to the Merger (these
acquisition companies needed to have good operating histories, sales revenues
and no losses). Three, for INI to have a substantial cash balance of at least
$290,000 prior to the closing of the Merger. After reaching this understanding
with Mr. Snyder, Ms. Tolley began to focus on attaining the criteria for a
possible Merger with Safe Aid, and did not actively pursue or negotiate with any
other company regarding a possible business combination with INI.
On January 10, 1997, INI's Board approved the Asset Purchase of select
assets which were Internet related from Property Intelligence International,
Inc., IN CyberMall, Inc., and Cyberplan, Inc. Subsequently, on behalf of INI,
Ms. Tolley began searching for possible acquisition/merger parties. During the
first six months of 1997, Barbara Tolley contacted more than 50 companies to
discuss a possible merger or business combination with INI. Ms. Tolley entered
into serious discussions with several of these companies, pursuant to which she
conducted due diligence investigations.
Ms. Tolley and Mr. Snyder jointly reviewed and discussed several of the
serious merger or acquisition candidates. By July 30, 1997, Stanley Snyder and
Barbara Tolley agreed that INI would acquire TMC, a wholesaler and retailer of
custom designed and assembled computer systems and related products, and GMG, a
pre press company. The closings of each of these acquisitions are conditions
precedent to the merger of Safe Aid and INI.
Ms. Tolley discussed the possible Merger of INI and Safe Aid with INI's
Board on numerous occasions, as a result, the INI Board was very familiar with
the terms and conditions of the Merger and the Merger Agreement.
Commencing in November 1996, Mr. Snyder and Lawrence Feldman, a
consultant of Safe Aid, had numerous discussions regarding a possible business
combination between Safe Aid and INI. Thereafter, Messrs. Snyder and Feldman
periodically gave informal status reports to the two outside Directors of Safe
Aid.
In August, 1997, a letter of intent was prepared by INI outlining the
proposed transaction and listing a number of contingencies that were to be
mutually addressed by the management of INI and Safe Aid. The letter of intent
was negotiated by Ms. Tolley on behalf of INI and by Mr. Feldman on behalf of
Safe Aid. Both the INI and Safe Aid Boards reviewed the letter of intent and
authorized its execution.
On August 29, 1997, the parties entered into the definitive Merger
Agreement. Effective as of October 31, 1997, the parties entered into an
extension agreement to extend the Closing Date of the Merger until March 1,
1998.
The INI Board approved the Merger and the Merger Agreement at a Board
meeting held on August 20, 1997. The Board of Safe Aid approved the Merger
Agreement by unanimous written consent on August 29, 1997.
Reasons for the Merger; Recommendation of the Safe Aid Board
Safe Aid has been unsuccessful in effecting its original business
purpose and had virtually no active operations for the past several years. In
addition, Safe Aid has no capital available to renew active operations. As a
result, during the past several years, management adopted a strategy of either
finding a business partner to exploit Safe Aid's technology or locating an
operating company to engage in a business combination with Safe Aid. Numerous
opportunities with third parties were reviewed and evaluated by Safe Aid (most
related to operating businesses looking to acquire a public company through a
reverse merger), but prior to 1997 none was found to be acceptable.
In February 1997, Safe Aid entered into a joint venture agreement with
CC Plus, a Spanish corporation, to establish the worldwide development,
production and marketing of a nasally administered aspirin. However, the joint
venture terminated in June 1997 over a contractual dispute regarding CC Plus's
obligation to expend $500,000 toward the development and marketing of the
nasally administered aspirin.
Thereafter, Safe Aid focused its search on non-public operating
companies that would be interested in acquiring Safe Aid's status as a public
company. Management did not limit its search to any particular industry. Rather,
it sought out a company in a high growth industry that could increase
shareholder value. Management determined that due to Safe Aid's (I) exhaustion
of all funds and inability to pay amounts necessary for its continuation, (ii)
inability to raise capital and (iii) inability to find a viable business partner
to exploit Safe Aid's patents, Safe Aid would completely cease all operations
and dissolve if it did not locate an acquisition candidate by the end of the
1997.
After taking into consideration all of the factors set forth above,
particularly given Safe Aid's lack of viable alternatives, the Board of
Directors of Safe Aid unanimously determined that the Merger was in the best
interests of Safe Aid and its stockholders, and that Safe Aid should proceed
with the Merger at this time. In view of the wide variety of factors considered,
both positive and negative, Safe Aid's Board did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the specific factors
considered. However, all material factors considered by Safe Aid's Board of
Directors in reaching its decision to approve and adopt the Merger Agreement and
the Merger are described above.
Reasons for the Merger; Recommendation of the INI Board
Ms. Tolley, representing INI, met with several financial advisors and
investment bankers to consider a possible private offering, public offering
and/or reverse shell merger. Ms. Tolley also met with the principals of several
public shell companies who were interested in a reverse merger with INI upon
agreement of certain conditions, and/or prices. Ms. Tolley also had meetings
with a regional telecommunications company which was interested in acquiring
INI's assets. However, for various reasons, these possible merger candidates
were rejected. The INI Board decided to proceed with Safe Aid.
The INI Board determined that the merger of INI with and into Safe Aid would
have the following benefits:
As part of a public company, the value of INI's stock would probably
increase. Oftentimes, the shares of a public company are more valuable than the
shares of a private company.
As part of a public company entity, INI's shareholders would have
greater liquidity, and will be able to sell their stock in the over-the-counter
market.
As part of a public company entity, INI would have increased
opportunities for financing. INI will be able to use its publicly traded stock
to finance its future acquisitions. Many shareholders of target acquisition
companies would prefer to receive shares of a publicly traded company as opposed
to shares of a privately held company.
INI will have increased visibility as part of a public company entity.
This increased visibility may lead to additional business opportunities for INI.
Additionally, if Safe Aid's story is marketed well and investors are receptive,
INI may be able to raise additional capital with greater ease at a later date.
The INI Board also considered several potential negatives issues raised
by the Merger. The disadvantages of INI's being part of a public company entity
are as follows:
INI will have an obligation to share certain information with the
public. All material details, including important trade relationships, must be
disclosed. INI will also have to reveal its financial information in quarterly
and annual reports.
INI will have certain expenses that a private company does not have.
Some of these additional expenses will include legal, accounting and transfer
agent fees.
The shareholders may put pressure on INI for short term results.
Investor sensitivity to earnings momentum can result in stock price volatility
and intensify pressure to show short-term profitability, possibly at the expense
of long-term goals.
After taking into consideration all of the factors set forth above, the
Board of Directors of INI unanimously determined that the Merger was in the best
interests of INI and its stockholders, and that INI should proceed with the
Merger at this time. In view of the wide variety of factors considered, both
positive and negative, INI's Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered. However, all material factors considered by INI's Board of Directors
in reaching its decision to approve and adopt the Merger Agreement and the
Merger are described above.
Effective Time
The Merger will become effective upon the filing of (i) a Certificate
of Merger with the Secretary of State of Delaware and (ii) Articles of Merger
with the Secretary of State of Florida (the "Effective Time.") The Effective
Time is expected to occur as promptly as practicable after the required approval
of Safe Aid stockholders at their Special Meeting, subject to the terms and
conditions contained in the Merger Agreement.
Structure of the Merger; Conversion of Shares
Prior to the Closing Date, Safe Aid shall effect a ten-for-one reverse
stock split pursuant to which its outstanding common stock will be reduced to
70,547,720 shares. At the Effective Time, INI shall be merged with and into Safe
Aid pursuant to the terms and conditions of the Merger Agreement. As of the
Effective Time, the separate corporate existence of INI will terminate, and each
issued and outstanding share of INI Common Stock will be converted into the
right to receive one share of Safe Aid Common Stock. In the aggregate, INI
shareholders will receive 585,819,936 restricted shares of Safe Aid Common Stock
in the Merger. At the Closing, Safe Aid will also issue 49,109,544 restricted
shares of Safe Aid Common Stock to certain brokers, finders and consultants for
services rendered in the Merger transaction. After the consummation of the
Merger, the former INI shareholders will own approximately 83% of Safe Aid's
Common Stock.
Procedure to Exchange of Certificates
As soon as is practicable after the Effective Time, Safe Aid's transfer
agent, United States Transfer of Englewood, Colorado (the "Transfer Agent") will
mail a form of transmittal letter to holders of INI Common Stock. The form of
transmittal letter will contain instruction with respect to the surrender of
certificates representing INI Common Stock.
INI STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND SHOULD
NOT BE FORWARDED TO THE TRANSFER AGENT UNLESS AND UNTIL THE INI SHAREHOLDER
RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME.
Governmental Approvals
Safe Aid and INI do not need to obtain any federal or state
governmental approvals in order to effectuate the Merger.
Conditions to the Merger
The obligations of INI to effect the Merger are subject to certain
conditions; including (I) approval and adoption of the Reverse Stock Split by
Safe Aid's stockholders, (ii) approval and adoption of the Common Stock
Amendment by Safe Aid's stockholders, (iii) approval and adoption of the Name
Change Amendment by Safe Aid's stockholders, (iv) approval and adoption of the
Merger Agreement by Safe Aid's stockholders, and (v) the accuracy of
representations and warranties of Safe Aid made in the Merger Agreement and
other customary conditions.
The obligation of Safe Aid to effect the Merger are subject to certain
conditions, including (I) simultaneously with or prior to closing, INI shall
have closed acquisitions of at least two companies active in industries relating
to that of INI and reasonably acceptable to Safe Aid, and as of the Closing Date
shall have not less than $290,000 in cash or cash equivalent assets, (ii) Safe
Aid and Barbara Tolley shall have entered into an employment agreement pursuant
to which Ms. Tolley will be employed as the Chief Executive Officer and Chairman
of the Board of Safe Aid, and (iii) the accuracy of representations and
warranties of INI made in the Merger Agreement and other customary conditions.
Termination of the Merger Agreement
Either party may terminate the Merger Agreement without liability to
either party if the Merger is not closed by October 31, 1997 (the "Merger
Cancellation Date"). The Parties may further extend the Merger Cancellation
Date, to 30 days after resolution of any comments which the SEC might have on
the Proxy Statement, upon written notice to Safe Aid, provided that INI has
similarly extended its acquisition agreements with TMC and GMG. The Cancellation
Date may not be extended beyond March 1, 1998, however, without the written
consent of both INI and Safe Aid.
Federal Income Tax Consequences
For federal income tax purposes the merger of INI with and into Safe
Aid, in accordance with the terms of the Merger Agreement, will qualify as a
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"). Provided that the Merger
qualities as a "reorganization" within the meaning of Section 368(a)(1)(A) of
the Code, (I) no gain or loss will be recognized by either Safe Aid or INI as a
result of the consummation of the Merger, (ii) no gain or loss will be
recognized by a shareholder of INI upon the receipt by such shareholder of
shares of Safe Aid's Common Stock in exchange for such shareholder's shares of
INI's Common Stock in accordance with the terms of the Merger Agreement, (iii)
the aggregate tax basis of the shares of Safe Aid Common Stock received by a
shareholder of INI will be the same as the aggregate tax basis of the shares of
INI Common Stock surrendered in exchange therefor reduced by the amount of any
cash received and increased by the amount of any gain recognized, and (iv) the
holding period of the shares of Safe Aid Common Stock received by an INI
shareholder in exchange for shares of INI Common Stock will include the period
during which the shares of INI Common Stock surrendered in exchange therefor
were held, provided the shares of INI Common Stock were held as capital assets
at the Effective Time.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. INI SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
FOR MORE SPECIFIC AND DEFINITIVE ADVICE AS TO THE FEDERAL INCOME TAX
CONSEQUENCES TO THEM OF THE CONVERSION OF THEIR SHARES OF INI COMMON STOCK
PURSUANT TO THE MERGER, AS WELL AS ADVICE AS TO THEIR APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS AND POSSIBLE AMENDMENTS TO
SUCH LAWS.
Accounting Treatment of the Merger
It is anticipated that the Merger will be accounted for as a reverse
acquisition using the "purchase" method of accounting, in accordance with
generally accepted accounting principals. Therefore, the aggregate consideration
paid by Safe Aid in connection with the Merger will be allocated to Safe Aid's
assets and liabilities based on their fair values, with any excess being treated
as goodwill. The assets, liabilities and results of operation of INI will be
consolidated into the assets, liabilities and results of operation of Safe Aid
subsequent to the Effective Time.
Resale of Safe Aid Common Stock
The shares of Safe Aid Common Stock which will be received by INI
shareholders pursuant to the Merger Agreement will be restricted securities as
defined in Rule 144 of the Securities Act. Restricted securities can be sold
into the public market pursuant to Rule 144 or pursuant to an effective
registration statement. Additionally, such sales are subject to any applicable
state securities laws.
Brokerage and Finder's Fees
Barbara Tolley, in looking for ways to expand the business of INI,
contacted various business brokers to assist her in finding companies that might
be interested in being acquired by INI. Two business brokers helped Ms. Tolley
find suitable acquisition companies. These business brokers are Lockwood Realty
and First Venture.
Lockwood Realty introduced INI to GMG, and First Venture introduced INI
to TMC. At the Closing, INI will issue 1,100,000 shares of its common stock to
Lockwood Realty, which compensation is based on the transaction value of the GMG
Acquisition. At the Closing, INI will issue 106,200 shares of its common stock
to First Venture, which compensation is based on the transaction value of the
TMC Acquisition. Pursuant to the Closing of the Merger, Lockwood Realty and
First Venture will exchange their shares of INI Common Stock for shares of Safe
Aid Common Stock.
Finder's Fees were incurred by Safe Aid through its attempts to locate
an operating company to merge into Safe Aid and will be paid by Safe Aid.
Finders Fees will be received by Bob Weinberg, Norman Moskowitz, and Private
Trust Corp. Ltd., as Trustee for the New Amsterdam Investment Trust for their
respective efforts in locating and introducing INI to Safe Aid.
Safe Aid will pay a finder's fee to Private Trust Corp. Ltd., as
Trustee for the New Amsterdam Investment Trust (the "Trustee"). At the Closing,
Safe Aid will issue 7,054,772 shares of its common stock to the Trustee. The
Trustee, who assisted Safe Aid's President, in searching for operating
companies, was responsible for advising Neil Moskowitz of Safe Aid's needs and
requirements for an operating company. New Amsterdam's compensation is based
upon the transaction value of the merger. Neil Moskowitz informed Bob Weinberg
of First Boca of the Safe Aid situation. Bob Weinberg contacted Ms. Tolley on
Safe Aid's behalf. At the Closing, Safe Aid will issue 3,527,386 shares of its
common stock to each of Mr. Weinberg and Mr. And Mrs. Moskowitz. The
compensation for Mr. Weinberg and the Moskowitzs is based upon an equal split of
the transaction value of the merger.
Except for the above broker and finder's fees, neither INI nor Safe Aid
has incurred any liability for brokerage, finder's fees or similar charges in
connection with the Merger.
Consultant's Fees
Stanley Snyder, the President and a director of Safe Aid, and Lawrence
Feldman, have served as consultants to Safe Aid since 1991. In 1994, Messrs.
Snyder and Feldman were each issued 35,000,000 shares of Safe Aid Common Stock
as compensation for their services from 1991 through 1993. They were not issued
any compensation for services rendered after 1993.
During the past four years, Mr. Snyder's services related principally
to finding potential candidates to acquire the Company through a business
combination. Mr. Feldman's services related principally to managing Safe Aid's
day to day operations, and searching for business partners to exploit the
Company's technology and potential candidates for a business combination. In
1996, Mr. Feldman successfully negotiated a joint venture agreement on behalf of
Safe Aid with a third party to develop and market Safe Aid's patent on nasal
delivery of aspirin. However, the joint venture agreement was terminated over a
contract dispute.
Messrs. Snyder and Feldman both reviewed numerous opportunities for
business combinations. Since July 1996, those efforts related principally to INI
and included meeting with INI representatives, negotiating the terms of the
merger, and assisting in the preparation and negotiation of the documentation
related to the merger.
As compensation for the services of Messrs. Snyder and Feldman from
1994, Safe Aid will issue 17,500,000 shares of its common stock ( on a
post-split basis) to each of Mr. Snyder and Mr. Feldman at the Closing of the
Merger. Such shares will constitute an aggregate of approximately 4.96% of the
issued and outstanding shares of Safe Aid following the Merger.
After the merger, Mr. Snyder will own 4.3% of Safe Aid's Common Stock
and Mr. Feldman will own 2.3% of Safe Aid's Common Stock including shares owned
by the estate of Martin Feldman, Larry Feldman's father.
BUSINESS AFTER THE MERGER
Following the Merger, the new management of Safe Aid intends to (i)
expand the operations of the Acquisition Companies by providing these companies
with marketing expertise, financial expertise and administration assistance (ii)
integrate Internet services into the daily operations of the Acquisition
Companies, and (iii) make additional selective vertical or horizontal
acquisitions in strategic locations of companies which are compatible to Safe
Aid's niche profile of products and services.
New management will help develop marketing plans for each acquired
company, and will provide the companies with continual reviews to monitor
progress and growth. Each Acquisition Company will, pursuant to the marketing
plan, implement and be responsible for its own sales goals and projections,
sales force, sales contacts and all sales processing.
New management also intends to integrate Safe Aid's Internet services
and products into the day to day business operations of each of the Acquisition
Companies, as well as into all future business acquisition companies. INI has
already begun creating web sites for GMG and TMC and also has made available to
GMG and TMC the AT&T WorldNet Internet Marketing Contract for their usage. INI
has also made these Internet services available to the acquisitions companies'
own customers. All sophisticated or complex Internet tasks such as Intranets,
computer systems integration, specialized Internet software development etc.,
which customers of the Acquisition Companies might require, for which the
Acquisition Companies do not have expertise, will be business referred directly
to new management of Safe Aid.
Safe Aid will be responsible for the Internet Electronic Commerce of
the Acquisition Companies, set up and maintenance of their respective web sites,
up to the point of processing the `order'. As the Acquisition Companies become
more familiar with the Internet and doing business electronically, Safe Aid will
gradually transfer more and more of the Acquisition Companies Internet processes
(i.e. inventory, ordering, field sales management, pricing, etc.),back to the
Acquisition companies and onto their own Intranet.
PRO FORMA FINANCIAL STATEMENTS - SAFE AID AFTER THE MERGER
The accompanying pro forma condensed consolidated financial statements
give effect to the Merger whereby Safe Aid will acquire all of the outstanding
common stock of INI in exchange for an aggregate of 585,819,536 shares of Safe
Aid Common Stock. At the Effective Time, INI will be merged with and into Safe
Aid, and its separate corporate existence will cease.
The accompanying pro forma condensed balance sheet as of August 31,1997
has been prepared as if (i) the Merger of INI with and into Safe Aid and (ii)
INI's acquisitions of GMG and TMC had been completed as of the balance sheet
date. The accompanying pro forma condensed statement of operations for the
fiscal year ended November 30, 1996 and the nine months ended August 31, 1997
have been prepared as if (i) the Merger of INI with and into Safe Aid had been
competed as of December 1, 1995 and (ii) INI's acquisitions of GMG and TMC
acquisitions had been completed as of December 1, 1995.
The unaudited pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of the consolidated
financial position or operation results that would have occurred had the Merger
been consummated on the dates specified, nor is it indicative of future
operating results or financial position. In the opinion of the management of
Safe Aid and INI, all adjustments necessary to present fairly the unaudited pro
forma financial information have been made.
The pro forma financial information should be read in conjunction with
the historical financial statements of Safe Aid as set forth in Exhibit A, INI's
historical financial set forth in Exhibit B, GMG's historical financial
statements as set forth in Exhibit C and TMC's historical financial statements
as set forth in Exhibit D.
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
INTELLIGENCE NETWORK INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
<CAPTION>
at August 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Historical P ro Forma
- ---------------------------------------------------------------------------------------------------- -------------------------
Safe Aid INI TMC + GMG Adjustments INI (1) Adjustments As Adjusted
-------- --- --------- ----------- ------- ----------- -----------
ASSETS
Currents assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash............................ $ 2,119 $ 12,308 $ 15,610 $ 0 $ 27,918 $ 0 $ 30,037
Notes receivable................ 0 0 105,841 0 105,841 0 105,841
Accounts receivable, net........ 0 0 270,070 0 270,070 0 270,070
Inventories..................... 0 0 99,721 0 99,721 0 99,721
Prepaid expenses & other
current assets 0 0 2,494 0 2,494 0 2,494
Total current assets............... 2,119 12,308 493,736 0 506,044 0 508,163
Property, plant and equipment net .
of accumulated depreciation 0 0 61,748 0 61,748 0 61,748
Management agreements.............. 0 0 0 50,000 (3) 1,050,000 0 1,050,000
................................... 1,000,000 (4)
Goodwill........................... 0 0 0 146,088 (3) 471,017 0 471,017
................................... 324,929 (4)
Other assets....................... 0 0 5,073 0 5,073 5,073
$ 2,119 $ 12,308 $ 560,557 $1,521,017 $2,093,882 $ 0 $ 2,096,001
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................ $ 0 $ 8,150 $ 86,195 $ 0 $ 94,345 $ 0 $ 94,345
Shareholders loans.............. 19,000 0 0 0 0 0 19,000
Accrued expenses................ 2,874 2,105 64,239 0 66,344 0 69,218
Notes payable................... 0 0 14,750 0 14,750 0 14,750
Other current liabilities....... 0 0 91,390 0 91,390 0 91,390
Total current liabilities.......... 21,874 10,255 256,574 0 266,829 0 288,703
Long-term debt and capital
lease obligations 0 0 0 0 0 0 0
Common stock issued with right of
of reversion 1,400,000 (7) 1,400,000 1,400,000
Stockholders' equity (deficiency):
Par value of common stock....... 7,055 0 700 12 (2) 698 (700)(2) 7,053
................................... (14) (7)
Additional paid in capital 1,572,194 102,550 69,233 9,276 (2) 536,140 378,843 (2) 888,173
................................... 196,088 (3) (1,599,004)(6)
................................... 1,324,929 (4)
................................... 234,050 (5)
................................... (1,399,986)(7)
Deficit accumulated during
development stage (1,599,004) 0 0 0 0 1,599,004 (6) 0
Retained Earnings............... 0 (100,497) 234,050 (234,050)(5) (109,785) (378,143)(2) (487,928)
(9,288)(2)
................................... $ 2,119 $ 12,308 $ 560,557 $1,521,017 $ 2,093,882 $ 0 $ 2,096,001
FOOTNOTES TO UNAUDITED PRO FORMA BALANCE SHEET AS OF AUGUST 31, 1997
(1) Pro forma Financials are recast and provided by INI at the request of the
Registrant on September 24, 1997. Represents the combined Balance Sheets of
INI, Total Micro Computers and GMG Computer Consultants.
(2) Pro forma adjustment to give effect to brokerage, finder and consultant
fees to be paid through the issuance of 50,315,700 shares at the closing of
the Merger and the acquisitions of GMG and TMC. For pro forma purposes, the
shares have been valued at $.0077 per share based on the fair market value
of Safe Aid's common stock as of the dates of the acquisition agreements.
The valuation of the INI shares being issued to the former shareholders of
GMG and TMC are based on the fair market value of Safe Aid common stock
because these shares will be exchanged on a one for one share basis for
Safe Aid common stock upon the consummation of the reverse merger.
Therefore, this adjustment reflects a total cost of $387,431 in brokerage,
finder and consultant fees. Included in the 50,315,700 shares are 1,100,000
shares that will be issued to Lockwood Realway for the GMG acquisition and
106,200 shares that will be issued to First Venture Realty for the TMC
acquisition. The remaining shares will be issued in connection with the INI
and Safe Aid reverse merger. Also, par value common stock has been adjusted
to reflect the amount of outstanding shares post-merger.
(3) Pro forma adjustment to give effect to the acquisition of TMC which has
been accounted for using the purchase method in accordance with APB Opinion
No. 16 with INI being the acquiring company. The management of INI and TMC
valued TMC at $425,000. Therefore, INI issued 1,062,500 shares of INI stock
to the former shareholders of TMC with a guaranteed price of $0.40 per
share. Upon the consummation of the INI and Safe Aid reverse merger the
shares would be exchanged for Safe Aid common stock on a one-for-one basis.
Therefore, the Company has guaranteed that the shares issued to the former
shareholders of TMC will be trading at a price of not lower than $0.40 per
share at the time of one year forward the date of closing of the
acquisition. If the shares are trading at a price of lower than $0.40 per
share, upon that date, the Company will upon evidence of stock sales by the
former shareholders of TMC either, at the discretion of those former
shareholders, make up any difference so as to equal the acquisition price
of $425,000 in cash or by issuing additional shares. As of August 31, 1997,
the fair value of the consideration given exceeded the net book value of
TMC by $196,088. Therefore, $50,000 of the excess was allocated to the
management agreements (one year contracts with option to renew for an
additional year) acquired and the remaining $146,088 was allocated to
goodwill.
(4) Pro forma adjustment to give effect to the acquisition of GMG which has
been accounted for using the purchase method in accordance with APB Opinion
No. 16 with INI being the acquiring company. The management of INI and GMG
valued GMG at $1,400,000. Therefore, INI issued 14,000,000 shares of INI
stock to the former shareholders of GMG with a guaranteed price of $0.10
per share. Upon the consummation of the INI and Safe Aid reverse merger the
shares would be exchanged for Safe Aid common stock on a one-for-one basis.
Therefore, the Company has guaranteed that the shares issued to the former
shareholders of GMG will be trading at a price of not lower than $0.10 per
share at the time of one year forward the date of closing of the
acquisition. If the shares are trading at a price of not lower than $0.10
per share, upon that date, the Company will permit GMG to invoke it's right
of reversion (See Note 7 regarding GMG's right of reversion). As of August
31, 1997, the fair value of the consideration given exceeded the net book
value of GMG by $1,324,929. Therefore, $1,000,000 was allocated to the
management agreements (one year contracts with option to renew for an
additional year) acquired and the remaining $324,929 was allocated to
goodwill.
(5) To eliminate the prior retained earnings of GMG and TMC as the acquired
companies in accordance with APB Opinion No. 16.
(6) To eliminate the deficit accumulated during development stage of Safe Aid
as the acquired company in accordance with APB Opinion No. 16.
(7) To reclassify the paid in capital and the par value of the stock issued to
the former stockholders of GMG from the stockholders' equity section in
order to give effect to its potentially temporary status as a result of
GMG's former stockholders right of reversion. Pursuant to the Acquisition
Agreement between INI and GMG, the former stockholders of GMG have the
right of reversion after a one year period and under a condition in which
the INI public stock is not trading, at a minimum of $.10 per share, at
that time. If the GMG's former stockholders elect to invoke this right of
reversion, at that time, one year forward from the closing date, the
Company must return to the former GMG shareholders all of their GMG stock,
contingent on the following terms: (1) GMG's former shareholders must
return all Safe Aid Common Stock held by them, a minimum of 10,000,000
shares, (2) any monies which Safe Aid might have advanced to GMG as working
capital must be repaid under the terms established (3) Safe Aid must be
released from any lease facility equipment guarantees which it made on
behalf of GMG.
</TABLE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
INTELLIGENCE NETWORK INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
<CAPTION>
Nine Months Ended
August 31, 1997
- --------------------------------------------------------------------------------------------- (table continued below)
Historical
-----------------------------------------------------------
Safe Aid INI TMC + GMG Adjustments INI (1)
-------- --- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue...................... $ 9,801 $ 0 $ 2,914,867 $ 0 $ 2,914,867
Costs and expenses
Cost of sales............. 7,569 0 2,234,213 0 2,234,213
Operating expenses........ 30,478 88,399 564,515 216,000(2) 897,034
............................. 28,120(4)
Net Income (Loss) Before Pro
Forma Tax Provision........ (28,246) (88,399) 116,139 (244,120) (216,380)
Pro Forma Tax Provision...... 0 0 0 19,682(5) 19,682
Net Income (Loss)............ $ (28,246) $(88,399) $ 116,139 $(263,802) $ (236,062)
Net Loss per common share.... NIL NIL
Weighted Average common
shares outstanding..... 705,477,200
(continued)
<CAPTION>
From Inception
(May 21, 1987)
to August 31, 1997
- ----------------------------------------------------------------------------
Pro Forma
Adjustments As Adjusted As Adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Revenue...................... $ 0 $ 2,924,668 $ 5,323,892
Costs and expenses
Cost of sales............. 0 2,241,782 4,172,585
Operating expenses........ 90,000(3) 1,017,512 3,017,538
.............................
Net Income (Loss) Before Pro
Forma Tax Provision........ (90,000) (334,626) (1,866,231)
Pro Forma Tax Provision...... 0 19,682 19,682
Net Income (Loss)............ $ (90,000) $ (354,308) $ (1,885,913)
Net Loss per common share.... NIL NIL
Weighted Average common
shares outstanding 705,477,200 609,989,049
FOOTNOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED AUGUST 31, 1997
(1) Pro forma Financials are recast and provided by INI at the request of the
Registrant on September 24, 1997. Represents the combined Balance Sheets of
INI, Total Micro Computers and GMG Computer Consultants.
(2) Pro forma adjustment to give effect to management agreements with Gary Bart
and Dean Constantine of GMG efffective November 1, 1997 and Anthony Diaz
and Gerardo Toquica of TMC effective October 2, 1997 as if the agreements
were effective at the beginning of the period.
(3) Pro forma adjustment to give effect to Barbara Tolley's employment
agreement with Safe Aid that will be effective upon the closing of the
reverse merger.
(4) Pro forma adjustment to give effect to the amortization of goodwil in GMG
and TMC over a ten year period.
(5) To reflect the pro forma tax provision of GMG which was an S corporation
during this period as if it were a C corporation.
</TABLE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
INTELLIGENCE NETWORK INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
<CAPTION>
Year Ended
November 30, 1996
- ---------------------------------------------------------------------------------------------- (continued below)
Historical
----------------------------------------------------------
Safe Aid INI TMC + GMG Adjustments INI (1)
-------- --- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue...................... $ 19,647 $ 0 $ 4,956,186 $ 0 $ 4,956,186
Costs and expenses
Cost of sales............. 15,187 0 3,969,122 0 3,969,122
Operating expenses........ 9,469 20,023 719,369 288,000(2) 2,114,885
............................. 37,493(4)
............................. 1,050,000(5)
Net Income (Loss) Before Pro
Forma Tax Provision........ (5,009) (20,023) 267,695 (1,375,493) (1,127,821)
Pro Forma Tax Provision...... 14,297(6) 14,297
Net Income (Loss)............ $ (5,009) $(20,023) $ 267,695 $(1,389,790) $ (1,142,118)
Net (Loss) per common share.. NIL NIL
Weighted Average common
shares outstanding ... 702,977,200
(table continued)
From Inception
(May 21, 1987)
to Nov 30, 1996
----------------------------------------
Pro Forma
----------------------------------------
Adjustments As Adjusted As Adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Revenue...................... $ 0 $4,975,833 $ 5,323,892
Costs and expenses
Cost of sales............. 0 3,984,309 4,172,585
Operating expenses........ 120,000(3) 2,244,354 3,969,886
.............................
.............................
Net Income (Loss) Before Pro
Forma Tax Provision........ (120,000) (1,252,830) $ (2,818,579)
Pro Forma Tax Provision...... 0 14,297 14,297
Net Income (Loss)............ $ (120,000) $(1,267,127) $ (2,832,876)
Net (Loss) per common share.. NIL NIL
Weighted Average common
shares outstanding . 702,977,200 654,257,057
FOOTNOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1996
(1) Pro forma Financials are recast and provided by INI at the request of the
Registrant on September 24, 1997. Represents the combined Balance Sheets of
INI, Total Micro Computers and GMG Computer Consultants.
(2) Pro forma adjustment to give effect to management agreements with Gary Bart
and Dean Constantine of GMG effective November 1, 1997 and Anthony Diaz and
Gerardo Toquica of TMC effective October 2, 1997 as if the agreements were
effective as of the beginning of the period.
(3) Pro forma adjustment to give effect to Barbara Tolley's employment
agreement with Safe Aid that will be effective upon the closing of the
reverse merger.
(4) Pro forma adjustment to give effect to the amortization of goodwill in GMG
and TMC over a ten year period.
(5) Pro forma adjustment to give effect to the amortization of the management
agreements over a one year period. The management agreements are all one
year contracts with an option to renew for an additional year.
(6) To reflect the pro forma tax provision of GMG which was an S corporation
during this period as if it were a C corporation.
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited pro forma information includes the historical financial statements
of Safe Aid for its fiscal year ended November 30, 1996 and for the nine month
period ended August 31, 1997, the historical financial statements of INI for its
fiscal year ended December 31, 1996 and the nine month period ended September
30, 1997, the historical financial statements of GMG for its fiscal year ended
December 31, 1996 and the nine month period ended September 30, 1997 and the
historical financial statements of TMC for its fiscal year ended December 31,
1996 and the nine month period ended September 30, 1997. See the financial
statements attached as Annexes B-E of this Proxy Statement.
NOTE 2 - CAPITAL TRANSACTIONS
In anticipation of the Reverse Merger, the following capital transaction
occurred: On August 27 1997, INI amended its Articles of Incorporation to
increase its authorized common stock from 30,000,000 Shares to 600,000,000 in
anticipation of the reverse merger so that INI shareholders could exchange one
share of INI Common Stock for one share of Safe Aid Common Stock. As of November
20, 1997, INI had 327,617,550 shares of its common stock issued and outstanding.
Immediately prior to the Merger, INI will issue and additional 258,202,386
shares of its common stock for capital contributions and services rendered to
INI in connection with the Merger. In aggregate, immediately prior to the
Merger, INI will have 585,819,936 shares of its common stock issued and
outstanding. In order to effectuate the Merger, each INI shareholder will
exchange one share of INI Common Stock for one share of Safe Aid Common Stock.
MANAGEMENT AFTER THE MERGER
As of the Effective Time, all of the existing officers and directors of
Safe Aid will resign, and the new executive officers and directors of Safe Aid
after the Merger will be as follows:
Name Age Position Held with Registrant
---- --- -----------------------------
Barbara L. Tolley 60 CEO and Chairman of the Board
Charles N. Martus 74 Director
Jack W. Tolley 74 Director
Franklin L. Frank 61 Director
Robert L. Alexander 54 Director
Bradford L. Tolley 33 Secretary and Treasurer
Michael Bhathena 29 Vice President and Chief Information Officer
Barbara L. Tolley received her BA from Ohio State University in 1959.
She founded Westchester Ltd., Inc., in 1975, a privately held company
specializing in international marketing and advertising in which she held the
office of President until 1989. In 1990, Ms. Tolley founded Property
Intelligence, Inc., a consulting firm. In 1992, Ms. Tolley founded Property
Intelligence International, Inc., an international marketing and consulting firm
and an online business service in collaboration with AT&T. Since 1996, Ms.
Tolley has been one of the majority stockholders in Villas International Realty,
Inc., an international holiday rental agency. Ms. Tolley has been a President
and Director of INI since its inception in October 1996.
Ms. Tolley is the wife of Jack W. Tolley and the mother of Bradford L. Tolley.
Charles N. Martus is a graduate of Dartmouth College, Hanover, New
Hampshire in 1944, and attended Amos Tuck School. Mr. Martus was a principal in
a gourmet food operation in Manhattan from 1946 until 1990. During the past five
years, Mr. Martus has been retired.
Jack W. Tolley is a graduate of Dartmouth College, Hanover, New
Hampshire in 1947, and attended Cornell University in Ithaca, New York. Mr.
Tolley founded J.W. Tolley & Associates in 1953, a national marketing and
advertising agency and served as President until 1975. Mr. Tolley was a Director
and consultant to Westchester Ltd., Inc. until 1982. Mr. Tolley has been
pursuing a career as an artist and painter of Southwestern American art and as
an author of several books on Florida and immigration for foreign nationals. Mr.
Tolley has been a Director of INI since October 1996. Mr. Tolley is the husband
of Barbara L. Tolley and the father of Bradford L. Tolley.
Franklin L. Frank has been Director and President of a privately held
real estate development company, based in Hicksville, New York, as well as a
stockholder in other real estate asset companies. Mr. Frank is currently
involved with mining operations in the State of Nevada. Mr. Frank has been a
Director of INI since October 1996.
Robert L. Alexander has been in management with Fortune 500 companies,
and has had start up responsibility with privately held corporations during his
career. Mr. Alexander was President of International Communications Systems
(ICS) from 1991 to 1993. He was President of United Communications Systems (USC)
from 1993-1994, a telephone reseller company in select markets. Mr. Alexander
founded his own company, Comstar International, Inc., with master distributor
contracts with GE Capital Communications Services in 1994. He was recruited by
Systems Communications, Inc. as CEO, responsible for operations of
communications companies acquired and merged into the public company. Since
April 1997, Mr. Alexander has been President of International Teledata
Corporation, responsible for its transition from a privately held company to a
public company.
Bradford L. Tolley is a graduate of Phillips Academy in Andover,
Massachusetts in 1982, and attended Rollins College in Winter Park, Florida. He
was employed by Westchester Ltd., Inc., as an account executive from 1985 to
1989. From 1990-1992, Mr. Tolley was employed by Bilfinger & Berger's American
subsidiary, Fru-Con Corporation, both subsidiaries of Dresdner Bank in Germany.
From 1992-1995, Mr. Tolley was Vice President of Property Intelligence
International, Inc. From 1995 -1996, Mr. Tolley was Vice President of IN
CyberMall, Inc. Mr. Tolley is currently President of Tolley Investments, Inc., a
privately held company. Mr. Tolley has been the Treasurer, Secretary and a
Director of INI since October 1996. Mr. Tolley is the son of Jack W. Tolley and
Barbara L. Tolley.
Michael Bhathena holds a B.A. in Computing & Statistics and a masters
degree in computing science, from the University of Kent in Great Britain. Mr.
Bhathena served as an assistant trader and then in the finance department at the
Hong Kong & Shanghai Banking Corporation's (HSBC) City of London Offices from
1986-1988. Mr. Bhathena served as a voice and data communications executive for
the Infocheck Group, Ltd. from 1992-93, a pioneer in providing on-line credit
information to British companies. Mr. Bhathena was employed and served as
President of PII (UK) Ltd., United Kingdom, which is an affiliate of Property
Intelligence International, Inc., from 1993-1995.
Employment Agreements - Safe Aid
Upon Closing, Barbara Tolley will enter into a two year employment
agreement with Safe Aid, with an option exercisable by Ms. Tolley to extend the
employment agreement for an additional year. Ms. Tolley's compensation will be
$120,000 per year for the initial two year term. At Ms. Tolley's option, this
sum can be paid with half cash and half stock, all cash or on an accrual basis.
Ms. Tolley will be entitled to bonus compensation based on a percentage of the
annual net pre-tax profits of Safe Aid. As an officer of Safe Aid, she will be
entitled to participate in an overall group insurance plan providing health,
life and disability insurance benefits for employees of Safe Aid. The employment
agreement will also provide for the use of an automobile and/or a monthly
automobile allowance, payment of club dues and other fringe benefits
commensurate with her duties and responsibilities.
Employment Agreements - Acquisition Companies - GMG and TMC
Four significant employees of GMG and TMC, the Acquisition Companies,
have entered into employment agreements with their respective companies for a
one year period after the Closing of the Merger.
On August 21, 1997, Gary Bart and Dean Constantine, the President and
Vice President of GMG each entered into an employment agreement with GMG
relating to the employment of such individuals with GMG effective as of November
1, 1997. The employment agreements contain non-competition and confidentiality
provisions and provide that Gary Bart will be the President of GMG and that Dean
Constantine will be the Vice President of GMG. Mr. Bart and Mr. Constantine will
respectively receive salaries of $84,000 and $60,000 per annum and will be
entitled to receive an annual bonus equal to the net profits of GMG after tax
for the 1997 fiscal year.
Anthony Diaz and Gerardo Toquica each entered into employment
agreements with TMC dated August 2, 1997, relating to the employment of such
individuals with TMC effective as of October 2,1997. The employment agreements
contain non-competition and confidentiality provisions. Mr. Diaz and Mr. Toquica
will each receive a salary of $72,000 per annum.
The foregoing summary of the terms of the employment agreements for the
significant employees is qualified in its entirety by reference to the
provisions of these employment agreements, a copy of which can be obtained from
Safe Aid's management pursuant to the instructions contained on page 36 hereof.
PRINCIPAL STOCKHOLDERS AFTER THE MERGER
The following table sets forth certain information regarding the
identity of the persons who will be the principal stockholders of Safe Aid if
the Merger is consummated. The following table sets forth the number of shares
of Safe Aid's Common Stock that will be beneficially owned by (I) each person
who will be named a director and/or executive officer of Safe Aid after the
Merger, (ii) all directors and executive officers of Safe Aid after the Merger
as a group, and (iii) each shareholder who will be a beneficial owner of more
than 5% of Safe Aid's Common Stock after the Merger. In addition to the shares
issued in the Merger, this table also reflects stock to be issued immediately
prior to the Merger for capital contributions and services rendered to INI in
connection with the Merger. After the Merger, Safe Aid will have issued and
outstanding 705,477,200 shares of its common stock. An asterisk indicates
beneficial ownership of less than 1% of the outstanding Safe Aid Common Stock
after the Merger.
Name and Future Position Amount and Nature Percentage of Shares
of Beneficial Ownership
Barbara L. Tolley (1) 267,755,650 38.0%
Chairman and CEO
Ruth Deutsch (2) 209,595,535 29.7%
Shareholder
Franklin L. Frank (3) 243,595,536 34.5%
Director
Bradford L. Tolley (4) 25,000,000 3.5%
Treasurer and Secretary
Jack W. Tolley (5) 267,755,650 38.0%
Director
Michael Bhathena 11,740,000 1.7%
Vice President and Chief
Information Officer
Charles N. Martus 200,000 *
Director
Robert L. Alexander 200,000 *
Director
All officers and directors 548,491,186 77.7%
as a group
1. Includes 8,060,114 shares held by Jack W. Tolley, Barbara L. Tolley's
husband, and of which Ms. Tolley disclaims beneficial interest. Under the
federal securities laws, Ms. Tolley is deemed to be the beneficial owner of
all Safe Aid Common Stock owned by her husband; however, pursuant to Rule .
16a-1141, Ms. Tolley disclaims any beneficial interest in the SafeAid Common
Stock owned by her husband.
2. Includes 68,000,000 shares beneficially held by Franklin L. Frank, Ms.
Deutsch's husband, and of which Ms. Deutsch disclaims beneficial interest.
3. Includes 34,000,000 shares held by LVDB, Inc., a corporation controlled by
Mr. Frank. Also includes 141,595,535 shares held by Ms. Deutsch, Mr. Franks
wife, and of which Mr. Frank disclaims beneficial interest.
4. Bradford L. Tolley is the son of Barbara L. Tolley and Jack W. Tolley.
5. Includes 259,595,536 shares held by Barbara L. Tolley, Jack W. Tolley's
wife, and of which Mr. Tolley disclaims beneficial interest. Under the
federal securities laws, Mr. Tolley is deemed to be the beneficial owner of
all Safe Aid Common Stock owned by his wife; however, pursuant to Rule
16a-1141, Mr. Tolley disclaims any beneficial interest in the Safe Aid
Common Stock owned by his wife.
6. The 267,655,500 shares of common stock owned by Barbara L. Tolley and Jack.
Tolley referred to in footnotes 1 and 4 and the 209,595,535 shares of common
stock owned by Ruth Deutsch and Franklin Frank referred to in footnotes 2
and 3 are counted only once in calculating the total in order to avoid a
misleading total.
INFORMATION ABOUT SAFE AID
Business
Safe Aid was incorporated under Delaware law on May 21, 1987 to engage
in manufacturing and marketing of a disinfectant product for sale in dental and
medical offices and hotel and motel markets, as well as in the retail
over-the-counter market, and to engage in research and development regarding
nasal and transdermal delivery of aspirin and other drugs.
During the past several years, Safe Aid has been virtually inactive
with nominal sales and operations and has remained in its development stage.
During the past year, Safe Aid's principal business objective has been to find
and merge with an operating company that management believes could increase
shareholder value.
Employees
At present, Safe Aid has one part-time clerical employee and one
officer working part-time with respect to Safe Aid's business activities.
Inasmuch as Safe Aid is not currently and does not plan to market any products
in the near future, Safe Aid does not have any sales force.
Properties
Inasmuch as there was limited activity, Safe Aid made arrangements to
have access to office and conference facilities on an as needed basis at 300
Rabro Drive, Hauppauge, New York 11788. The cost of maintaining these office
facilities was $150 per month. This arrangement was terminated during the fiscal
year ending November 30, 1995.
Legal Proceedings
There are no legal proceedings pending to which Safe Aid is subject,
nor to the knowledge of Safe Aid are any such legal proceedings threatened.
Changes in and Disagreements with Accountants
There have been no changes in or disagreements with Safe Aid's
accountants, Scott & Guilfoyle.
Price Range of Common Stock
Safe Aid's Common Stock is traded in the over-the-counter market under
the symbol "SFAD". The following table sets forth the high and low bid and ask
prices, as reported by the National Quotation Bureau, Inc., for Safe Aid's
Common Stock for the calendar periods indicated. These quotations reflect
intermediate prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
Common Stock
------------
Bid Asked
Period High/Low High/Low
- ------ -------- --------
1997
- - - - - - -
1st Quarter. 0136/.0070 .0137/.0073
2nd Quarter .016/.0045 .0163/.005
3rd Quarter .0121/.0053 .013/.006
1996
- - - - - - -
1st Quarter .002/.0015 .003/.003
2nd Quarter .06/.002 .07/.003
3rd Quarter .025/.0075 .026/.0081
4th Quarter .021/.008 .024/.0085
1995
- - - - - - -
1st Quarter .003/.001 .007/.004
2nd Quarter .0025/.001 .007/.004
3rd Quarter .0025/.001 .05/.003
4th Quarter .0015/.001 .05/.003
On August 28, 1997, the last trading day preceding the date on which
Safe Aid approved Merger Agreement, the high and low sales prices of Safe Aid's
Common Stock were $.0078 and $.0076 respectively.
The approximate number of common stockholders of record of Safe Aid as
of November 17, 1997 was 1,207.
Dividend Policy
Safe Aid has never paid cash dividends on its Common Stock. Payment of
dividends will be within the sole discretion of Safe Aid's Board of Directors
and will depend, among other factors, upon earnings, capital requirements and
the operating and financial condition of Safe Aid. At the present time, Safe
Aid's anticipated financial capital requirements are such that it intends to
follow a policy of retaining earnings in order to finance the development of its
business.
PRINCIPAL STOCKHOLDERS
Following table contains information as of November 17, 1997, as to the
beneficial ownership of shares of Common Stock of Safe Aid of all officers and
directors of Safe Aid, each person who to the knowledge of Safe Aid at that
date, was the beneficial owner of 10% or more of the outstanding shares, and all
officers and directors of Safe Aid as a group. As of November 17, 1997 there
were issued and outstanding 705,477,200 shares of common stock.
Name and Address of Amount and Nature Percent of Class
Beneficial Owner of Beneficial Ownership
Estate of Martin J. Feldman (1) 63,048,000 8.9%
Former Officer, Director
David J. Magid (1) 0 0%
40 Woodview Drive Shareholder
Doylestown, P.A.
Robert Reiner (1) 54,749,140 7.8%
3 Doyle Court Shareholder
Port Jefferson, NY
Melvin M. Fritz, D.O., M.D. 0 0%
15 Dewey Street Director
Huntington, NY
Stanley Snyder 129,798,000 18.4%
One Penn Plaza Officer, Director
Suite 1503
New York, NY
Barney Melsky 0 0%
16 Tuxedo Drive Officer, Director
Melville, NY
All Officers and Directors as a 247,595,140 35.1%
group (including Estate of
Martin J. Feldman)
(1) These individuals may be deemed "parents" and "promoters" of Safe Aid under
the rules and regulations of the Securities Act by virtue of their common stock
ownership and their effort in the organization of Safe Aid.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
Nine months ended August 31, 1997 compared with Nine Months ended
August 31, 1996
During the nine months ended August 31, 1997 revenues were $9,801
compared with $9,828 for the nine months ended August 31, 1996. Cost of sales
during the nine months ended August 31, 1997 were $7,569 compared with $7,599 in
the comparable prior year period.
Selling, general and administrative expenses were $30,478 for the nine
months ended August 31, 1997 compared with $7,765 in the comparable prior year
period, an increase of $22,713. This increase in selling, general and
administrative expenses is a result of the issuance of 2.5 million shares of
Safe Aid stock (having a value of $23,250) to a consultant.
As a result of the foregoing, Safe Aid's operating loss was $28,246 for
the nine months ended August 31, 1997 compared with $5,536 for the comparable
prior year period.
Fiscal year ended November 30, 1996 ("fiscal 1996") compared with
fiscal year ended November 30, 1995("fiscal 1995")
Total revenues were $19,647 in fiscal 1996 compared with $9,819 in
fiscal 1995. The $9,828 increase in sales resulted from a larger order from Safe
Aid's principal customer. Total revenues in fiscal 1996 consisted primarily
Endiviral-C, a disinfectant. Costs of sales were $15,187 in fiscal 1996 compared
to $7,589 in fiscal 1995. The $7,598 increase in cost of sales was attributable
to Safe Aid's increased sales. Selling, general and administrative expenses were
$9,469 and $21,304 in fiscal 1996 and fiscal 1995, respectively. This decrease
in selling, general and administrative expenses is a result of management's
curtailing expenses as much as possible.
As a result of the foregoing, Safe Aid's operating loss was $5,009 in
fiscal 1996, compared to a net loss of $19,049 in fiscal 1995.
Year ended November 30, 1995 ("fiscal 1995") compared with Year ended
November 30, 1994("fiscal 1994")
Total revenues were $9,819 in fiscal 1995 compared with $28,762 in
fiscal 1994. The $18,943 decrease in sales resulted from a smaller order from
Safe Aid's principal customer. Total revenues in fiscal 1995 consisted primarily
of sales of Endiviral-C, a disinfectant.
Costs of sales were $7,589 in fiscal 1995 compared with $14,633 in
fiscal 1994. The $7,044 decrease in cost of sales was attributable to Safe Aid's
decreased sales. Selling, general and administrative expenses remained
relatively consistent being $21,304 and $21,550 in fiscal 1995 and fiscal 1994,
respectively.
As a result of the foregoing, Safe Aid's operating loss was $19,049 in
fiscal 1995 compared with an operating net loss of $7,491 in fiscal 1994.
Liquidity and Capital Resources
Safe Aid has financed its working capital requirements by obtaining
loans from its shareholders. (Mr. Snyder, Mr. Feldman and the estate of Martin
Feldman) Safe Aid's cash at hand at August 31, 1997 was $2,119 compared to cash
at hand of $4,034 at November 30, 1996, $2,191 at November 30, 1995 and $9,221
at November 30, 1994. This decrease in cash at hand is a direct result of Safe
Aid's inability to generate cash from its operating activities during this time
period. Safe Aid had negative working capital of $19,755 at August 31, 1997
compared to negative working capital of $14,759 at November 30 1996, $9,750 at
November 30, 1995 and $9,299 at November 30, 1994.
Net cash used in operating activities was $7,415 for the first nine
months of 1997, $6,657 for fiscal 1996, $19,049 in fiscal 1995 and $$7,441 in
fiscal 1994. Net cash provided by financing activities was $5,500 in the nine
months ended 1997, $8,500 in fiscal 1996, $5,000 in fiscal 1995 and $0 in fiscal
1994. Cash provided by financing activities was from loans from stockholders.
Proposed Merger
Safe Aid has entered into a merger agreement with INI, and said merger
is subject to the fulfillment of certain conditions, including the approval of
Safe Aid's stockholders. There can be no assurances that Safe Aid will be able
to complete the merger, or even if the merger is completed, that it will be on
terms acceptable to Safe Aid. If the proposed merger takes place, the former INI
shareholders will own approximately 83% of Safe Aid's common stock.
If the proposed merger of INI and Safe Aid does not take place, Safe
Aid will consider various other options. It is highly likely, however, that
management will elect to liquidate and dissolve the company.
Going Concern Qualification
Safe Aid's financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. Safe Aid reported
net losses of $5,089 and $19,049 for the fiscal years ended November 30, 1996
and 1995, respectively. The continuation of Safe Aid is dependent upon the
closing of the Merger.
INFORMATION ABOUT INI
Overview
INI was incorporated under Florida law on October 2, 1996. Since its
inception, INI has grown primarily through acquisition. On January 10, 1997, INI
acquired select assets of three marketing and consulting companies in exchange
for INI stock. The principal shareholder of each of the three companies was
Barbara Tolley. With the January 1997 acquisitions, INI acquired the following:
Internet copyrights, trademarks, employment contracts, an AT&T WorldNet
contract, Internet Software copyrights, web sites, and trade names. These assets
have been merged into INI and operate as divisions of INI: (i) the Internet
Software Division specializing in developing Internet bundled software packages
and Internet Electronic Commerce and (ii) the Internet Information/
Data/Directory Division specializing in providing information, data, and
directories for select subjects on the Internet.
INI intends to expand its products and services through two recent
acquisitions. On August 2, 1997, INI acquired TMC, a wholesaler and retailer of
custom designed and assembled computer systems and related products. On August
28, 1997, INI acquired GMG, a pre press company which prepares film (plates) for
printing high quality magazines and catalogs. See "Acquisition Companies" for
more detail regarding the terms and conditions of these acquisition agreements.
Internet Related Businesses
INI through its purchase of select Internet assets has prepared for the
development of a full service Internet company which will be able to offer
Internet services, products and electronic commerce to targeted industries,
whose dependence upon sustaining their growth and market share will be in direct
proportion to those companies' successful adaptation and integration of the
Internet, new marketing methods (New Media) and new technologies into their
companies. INI plans to minimize competition by offering niche Internet products
and services that will be exclusive to INI authorship and copyright protection,
and by having employment contracts from Internet, New Media, and new technology
specialists who are currently assembled as INI's management team.
The Internet Software Division of INI, is resultant from INI's purchase
of assets from CyberPlan, Inc., and the Internet Software Division specializes
in developing Internet bundled software packages and Internet Electronic
Commerce. Assets that were acquired are as follows:
A. A Marketing contract with AT&T's WorldNet Internet Division. The
contract calls for creation and development of bundled software
packages, designed around the AT&T's WorldNet Internet Service, for
specialized industry communications and Internet applications.
B. The copyrights and source code programming for Real Estate 2001, the
first CyberPlan/AT&T WorldNet bundled software package, which passed
AT&T testing standards, and is now ready for market launch. Real
Estate 2001 features Internet access, Internet telephone, Internet
video conferencing, and important information and hyperlinks/content
to the real estate industry.
C. The Rights for copyright and source code programming filings (upon
completion) for the in process Internet software packages for the
legal industry, Spanish speaking community, and Internet desktop
software for children.
D. The employment contracts for Barbara Tolley and Michael Bhathena
which enable the creation and marketing of the products, and the
technical development skills.
E. The trade name of CyberPlan
The Internet Information /Data/Directory Division of INI, is resultant
from INI's purchase of assets from Property Intelligence International,
Inc.("PII") and In CyberMall, Inc. ("In CyberMall'), and functions as INI's
Internet Information/Data Services and Directories Division. Assets that were
acquired from PII are as follows:
A. The copyrights for PII, a Global Real Estate Information and
Database Service delivering online specialized global real estate
news and information, global financial information, global
properties for sale, global property industry employment, global
property events, builder products and services, global golf course
information, as well as global hotels and resort information. PII
saves significant time in locating, searching, and sorting specific
industry data for the user. PII is currently located on AT&T's
InterNic Web Site, as one of eighteen public access web sites.
B The PII Domain name: URL:http://www.pii.net
C The PII web site
D. The copyrights for the PII Journal, the Internet Electronic Edition,
bi-monthly tabloid newspaper, specializing in global real estate
news and information.
E. The trademark of PII
F. The copyrights for the PII Internet radio programming: PII RADIO
which features various real estate personalities discussing various
topics of interest to the public or to professionals serving the
real estate industry.
G. The employment contracts for Barbara Tolley and Michael Bhathena for
the continuing operations as Editor and Head of Technology to carry
forward the technical aspects of the service.
H. The Trade Name of PII
Also in the Internet Directory/Data/Information Division of INI,
resulting from INI's Asset Purchase from In CyberMall Inc., are the following:
A. The copyrights for IN CyberMall, a niche Internet Directory Locator
generated from Hyperlinked Web Sites which are currently marketing
on the Internet. In CyberMall was designed as a 'niche Directory
Locator' and a time saver for people wanting information and access
to the upmarket products and services only. In CyberMall provides
this information conveniently and easily to them. In CyberMall is
known on the Internet as 'the Mall for The Rich and Famous.'
B. The IN CyberMall Domain name: URL:http://www.incybermall.com
C. The IN CyberMall web site
D. The copyrights for the In CyberMall Internet radio programming: IN
RADIO which features various personalities and companies promoting
their products and services.
E. The employment contracts for Barbara Tolley, Brad Tolley, and
Michael Bhathena for the continuing operations as designer,
promotions and Head of Technology to carry forward the technical
services for future growth.
F. The Trade Name of In CyberMall
Relationships between the Internet Divisions
INI's Internet Software and Electronic Commerce Division and the
Internet Directory/Data/Information Division offer a full service capability and
expertise's, wherein INI will provide these services to the existing
Acquisitions Companies and their clients, as well as to all future acquisition
companies and their clients. By having a full service entity, clients and
customers have a one stop source for all their new technology and new marketing
media needs. Clients will have immediate access for specially designed Internet
software for their business development, and/or special assembled specifications
for their systems and networks for their Internet desktops with high speed
electronic information transfer systems and comprehensive electronic commerce
systems creating an environment of cost savings and speed of production.
Directors and Officers of INI
The officers of INI are Barbara Tolley - President and Bradford L.
Tolley - Treasurer and Secretary. The directors of INI are Barbara Tolley,
Bradford Tolley and Franklin L. Frank. The backgrounds of these individuals are
described in more detail in "Management after the Merger" on page 23. Jack
Tolley and Barbara Tolley are husband and wife. Brad Tolley is the son of
Barbara Tolley and Jack Tolley.
CURRENT PRINCIPAL SHAREHOLDERS OF INI
The following table sets forth certain information regarding the
beneficial ownership of INI's Common Stock as of November 20, 1997, with respect
to (i) each of INI's directors and executive officers, (ii) all directors and
executive officers of INI as a group and (iii) each person known by INI to own
beneficially more than 5% of INI's Common Stock. An asterisk indicates
beneficial ownership of less than 1% of the outstanding INI Common Stock. Except
as otherwise indicated, each of the shareholders listed below has sole voting
and investment power over the shares beneficially owned and the address of each
beneficial owner is c/o INI, 249 Peruvian Avenue, Palm Beach, Florida 33480. As
of November 20, 1997, there were issued and outstanding 327,617,550 shares of
INI common stock.
Name and address of Amount and Nature of Percentage of Shares
Beneficial Owner Beneficial Ownership
Barbara L. Tolley (1) 267,755,650 81.7%
Bradford L. Tolley (2) 25,000,000 7.6%
Franklin L. Frank 2,899,400 *
Jack W. Tolley (3) 267,755,650 81.7%
All officers and directors (4) 295,555,050 90.2%
as a group
1. Includes 8,060,114 shares held by Jack W. Tolley, Barbara L. Tolley's
husband, and of which Ms. Tolley disclaims beneficial interest. Under the
federal securities laws, Ms. Tolley is deemed to be the beneficial owner of
any INI Common Stock owned by her husband; however, pursuant to Rule
16a-1141, Ms. Tolley disclaims any beneficial interest in the INI Common
Stock owned by her husband.
2. Bradford L. Tolley is the son of Barbara L. Tolley and Jack W. Tolley
3. Includes 259,595,536 shares held by Barbara L. Tolley, Jack W. Tolley's
wife, and of which Mr. Tolley disclaims beneficial interest. Under the
federal securities laws, Mr. Tolley is deemed to be the beneficial owner of
all INI Common Stock owned by his wife; however, pursuant to Rule 16a-1141,
Mr. Tolley disclaims any beneficial interest in the INI Common Stock owned
by his wife.
4. The 267,655,500 shares of common stock owned by Barbara L .Tolley and Jack
W. Tolley referred to in footnotes 1 and 2 are only counted once in
calculating the total in order to avoid a misleading total.
ACQUISITION COMPANIES
TMC
Description of Business. TMC operates as a wholesaler and retailer of
custom designed and assembled computer systems ( branded Total Micro) and
related computer products to dealers, corporations and schools in the Southeast
United States. TMC has focused its efforts on the education market and has built
a significant presence in Florida schools. As a result of its school presence,
TMC is now realizing additional private sales as parents interested in PC's for
the home are turning to the same company that supplies the PC's at their
children's schools. In addition to their own retail outlet, Total Micro
distributes to additional retail stores in Central Florida.
Terms of the TMC Acquisition Agreement. Pursuant to an acquisition
agreement dated June 16, 1997, a closing agreement dated August 2, 1997, and an
extension agreement dated October 8, 1997, (collectively, the "TMC Acquisition
Agreement"), INI acquired all the issued and outstanding shares of TMC in
exchange for the issuance of 1,062,500 shares of INI's common stock to the TMC
shareholders.
The TMC acquisition is subject to reversal if the merger of INI with
and into Safe Aid is not closed on or before November 30, 1997. However,
pursuant to the Extension Agreement, INI can extend the Closing date until 30
days after the resolution of any comments that the SEC might have on the Proxy
Statement, upon presentation to TMC of reasonable evidence that Safe Aid is
actively pursuing the resolution of any such comments. The TMC Acquisition
Agreement provides the shareholders of TMC with a guarantee of their share
price. If Safe Aid's Common Stock is trading at a price of less than $.40 per
share upon the date one year after the Effective Time, Safe Aid will either
issue additional Safe Aid Common Stock so that the total value of Safe Aid
Common Stock issued to the TMC shareholders is $425,000, or pay to the TMC
shareholders in cash the difference between the value of the 1,062,500 shares
issued to the TMC shareholders and $425,000, as determined by Safe Aid.
Pursuant to the TMC Extension Agreement, INI has made a loan in the
amount of $25,000 to TMC to fund TMC's working capital requirements. The loan
bears interest at 10% per annum and is secured by a blanket pledge of the assets
of TMC and the personal guarantees of Anthony Diaz and Gerardo Toquica. The loan
is considered to be part of the $100,000 capital commitment made to TMC by INI
in their Acquisition Agreement.
The foregoing summary of the terms of the TMC Acquisition Agreement is
qualified in its entirety by reference to the provisions of the TMC Acquisition
Agreement, a copy of which can be obtained from Safe Aid's management pursuant
to the instructions provided on page 36 hereof.
GMG
Description of Business. GMG is a digital pre-press company which
specializes in producing high quality full color magazine publications and
catalogs.
GMG assists in the publication of magazines by working with publishers,
advertising agencies and companies which are placing advertisements in the
publication. GMG receives the editorial content of the magazine from the
publisher and combines it on a computer with the advertising material which it
receives directly from the advertisers. Once the magazine content has been put
together, the computer is used to enhance the image quality of the magazine and
ensure there are no mistakes. The entire magazine is then produced on color
separated film that is sent to the printer.
GMG's high quality work in this field was recognized when The Boca
Raton Magazine recently won "1996 Best Produced Magazine" award. The award has
been a springboard to prestigious new accounts that have been won by GMG in
1997.
GMG also works on jewelry catalogs, which require the highest quality
work and are priced accordingly. GMG ensures that the product pictures are
scanned into a computer flawlessly and the full capabilities of GMG's computer
systems and its software are used to produce the highest quality output. Color
separations are then produced on film to be sent to the printer.
Terms of the Acquisition Agreement. Pursuant to an acquisition
agreement dated July 22, 1997, a closing agreement dated August 28, 1997, and an
Extension Agreement dated October 13, 1997, (collectively, the "GMG Acquisition
Agreement"), INI acquired all the issued and outstanding shares of GMG in
exchange for 14,000,000 shares of INI's common stock to the GMG shareholders.
The GMG acquisition is subject to reversal if the merger of INI with
and into Safe Aid is not closed on or before November 30, 1997. However,
pursuant to the GMG Extension Agreement, INI can extend the Closing date until
30 days after the resolution of any comments that the SEC might have on the
Proxy Statement, upon presentation to GMG of reasonable evidence that Safe Aid
is actively pursuing the resolution of any such comments.
The GMG Acquisition Agreement provides the shareholders of GMG with a
right of reversion if Safe Aid's Common Stock is trading at a price lower than
$.10 per share upon the date one year from the Effective Time. If GMG's
shareholders elect the right of reversion, Safe Aid will be required to return
to the GMG shareholders all of their GMG stock, contingent upon the following
terms: (I) GMG's former shareholders must return all Safe Aid Common Stock held
by them, a minimum of 10,000,000 shares, (ii) any monies which Safe Aid might
have advanced to GMG as working capital will be repaid per the terms which were
established at the time of funding by Safe Aid, and (iii) Safe Aid shall be
released from any lease facility equipment guarantees which it made on behalf of
GMG.
The foregoing summary of the terms of the GMG Acquisition Agreement is
qualified in its entirety by reference to the provisions of the GMG Acquisition
Agreement, a copy of which can be obtained from Safe Aid's management pursuant
to the instructions contained on page 36 hereof.
Employees
As of September 1, 1997, INI employed 18 persons, including employees
of GMG and TMC, which are operating as wholly-owned subsidiaries.
Property
INI leases executive offices located at 249 Peruvian Avenue, Palm
Beach, Florida. TMC and GMG each lease office space in Tampa, Florida and North
Miami, Florida, respectively.
Legal Proceedings
INI is not a party to any material litigation presently pending nor, to
the best knowledge of INI, have any such proceedings been threatened. Similarly,
TMC and GMG are not parties to any material litigation presently pending nor, to
the best of their knowledge, have any such proceedings been threatened.
Market Price and Dividends on Common Stock
INI is a privately-owned corporation; therefore there is no public
market price available with respect to INI's Common Stock. Since its inception,
INI has not paid any dividends with respect to INI's Common Stock.
On November 20, 1997, INI had 15 stockholders.
MANAGEMENT'S PLAN OF OPERATIONS
The following discussion should be read in conjunction with INI's
audited financial statements for its fiscal year ended December 31, 1996 and
unaudited statements for the nine months ended September 30, 1997, which are
attached hereto as Exhibit C.
Organization and Development Stage Activities
INI was incorporated under Florida law on October 2, 1996. INI intends
to become known as a company that provides a wide range of New Media and new
technology products and services. Since its inception, INI's activities has been
primarily related to (I) acquiring Internet Assets (ii) negotiating and
executing the Merger Agreement with Safe Aid, (iii) acquiring the Acquisition
Companies, and (iv) searching for additional acquisition companies.
On January 10, 1997, INI acquired select assets from three companies in
exchange for INI stock. The principal shareholder of the three companies was
Barbara Tolley, the CEO and Chairman of INI. On August 29, 1997, INI entered
into the Merger Agreement with Safe Aid. Consummation of the Merger is subject
to the approval of Safe Aid stockholders at the Special Meeting and other
customary conditions. Pursuant to the Merger Agreement, an aggregate of
585,819,936 restricted shares of Safe Aid Common Stock will be issued in
exchange for all of the issued and outstanding shares of INI. Safe Aid will also
issue 49,109,544 restricted shares of Safe Aid Common Stock to certain brokers,
finders and consultants for services rendered in the Merger transaction.
On August 2, 1997, INI acquired TMC, a wholesaler and retailer of
custom designed and assembled computer systems and related products, in a stock
for stock exchange, subject to the closing of the Merger by November 1, 1997. On
August 28, 1997, INI acquired GMG, a digital pre- press company, in a stock for
stock exchange, subject to the closing of the Merger by November 1, 1997.
During the next 12 months, INI intends to continue its growth through
acquisitions, provided that INI can identify, locate and acquire suitable
acquisition candidates. If INI makes any acquisitions, it intends to only
acquire profitable companies. Accordingly, if INI makes any acquisition it
expects that its total revenues for its 1998 fiscal year end will be higher that
its total revenues for the fiscal year 1997. Additionally, depending upon the
exact terms of the acquisition agreements, INI may also increase its inventory,
equipment, property, and total number of employees. INI does not plan on
undertaking any significant product research and development, other than the
development of INI's Internet Software packages, resulting from INI's
acquisition of an AT&T WorldNet Internet Marketing Contract.
Results of Operations
Since its inception, INI has been engaged in organizational activities
and has had no sales. It operating expenses from January 1, 1997 through
September 30, 1997 have been approximately $88,399. These operating expenses
have consisted primarily of the following: office expenses, salaries, travel,
legal, accounting, consulting fees, licensing and supplies.
Liquidity and Capital Resources
INI has financed its operations and acquisitions primarily with sales
of its common stock and capital contributions from its shareholders. Since its
inception, INI has raised approximately $520,000 through sales of its common
stock in private transactions. These transactions have included sales to third
parties for cash, as well as issuance's of common stock to third parties in lieu
of compensation and fees. Net cash used in operating expenses since INI's
inception was approximately $108,422.
INI has completed two acquisitions since its formation, and intends to
continue to achieve growth through acquisitions. To pursue its acquisition
strategy, INI may incur short-term or long-term borrowings and/or issue
additional shares of its common stock or other securities. Except for the
Merger, INI has no current plans or commitments for any other acquisitions.
INI believes that its current cash reserves will allow INI to continue
to meets its expected operating expenses for at least six months following the
date of this Proxy Statement. INI believes that its future working capital
requirements will be satisfied from net income, future borrowings and/or sales
by INI of additional securities. Additionally, to achieve INI's acquisition
strategy, INI may be required to seek additional financing and/or issue
additional shares of common stock or other securities. If INI is unable to
obtain adequate financing, it may be required to curtail its acquisition plans.
No additional funding for any of these purposes has been committed to date.
PROPOSALS TO THE SAFE AID STOCKHOLDERS
The Safe Aid Board of Directors unanimously approved each of the
following proposals effective as of August 29, 1997, for presentation to Safe
Aid's stockholders. In order for Safe Aid to consummate the Merger, its
stockholders need to approve and adopt each of the proposals presented at the
Special Meeting.
PROPOSAL 1. REVERSE STOCK SPLIT
The Board of Directors of Safe Aid has adopted, subject to stockholder
approval, an amendment to its Certificate of Incorporation to effect a reverse
stock split pursuant to which each ten shares of Safe Aid Common Stock ("Old
Common Stock") will become one share of Safe Aid's then outstanding common stock
("New Common Stock").
Purpose and Effects of the Reverse Stock Split
In the Merger Agreement, Safe Aid covenants that it will effect a
ten-for-one reverse stock split prior to the Closing of the Merger Agreement. As
of the Safe Aid Record Date, 705,477,200 shares of Safe Aid Common Stock were
issued and outstanding. The ten-for-one Reverse Stock Split would reduce the
number of issued and outstanding shares of Safe Aid Common Stock to 70,547,720
shares, with no change in the par value of Safe Aid Common Stock.
If the Reverse Stock Split is approved by the stockholders, the Reverse
Stock Split will become effective at such time as Safe Aid files a Certificate
of Amendment with the Secretary of State of Delaware (the "Delaware Secretary of
State"). Safe Aid will not file a Certificate of Amendment with the Delaware
Secretary of State unless the Safe Aid stockholders approve each of the Safe Aid
Proposals described in this Proxy Statement. Exhibit F contains the full text of
the amendment that will be filed with the Delaware Secretary of State if INI's
stockholders approve the Reverse Stock Split, the Common Stock Amendment and the
Name Change Amendment.
Upon the filing of the Certificate of Amendment, all of the Old Common
Stock will be converted into New Common Stock as set forth in the Certificate of
Amendment. From and after the Effective Time, certificates representing shares
of Old Common Stock shall be deemed to represent only the right to receive
shares of New Common Stock to which an individual stockholder is entitled.
As soon as practicable after the Effective Date, Safe Aid will request
all stockholders to return their stock certificates representing issued shares
of Old Common Stock outstanding at the Effective Time ("Old Certificates") in
exchange for certificates representing the number of whole shares of New Common
Stock into which the shares of Common Stock have been converted ("New
Certificates") as a result of the Reverse Stock Split. No certificates
representing fractional share interests in the New Common Stock will be issued,
and no such fractional share interest will entitle the holder thereof to vote,
or to any rights of a stockholder of Safe Aid. Any fractional share interest
will result in the adjustment of the number of shares upward or downward to the
nearest whole share. Each stockholder will receive a letter of transmittal from
the Transfer Agent containing instructions on how to exchange certificates. In
order to receive New Certificates, stockholders must surrender their Old
Certificates pursuant to the Transfer Agent's instructions, together with the
properly executed and completed letter of transmittal and such evidence of
ownership of such shares as Safe Aid may require.
STOCKHOLDERS SHOULD NOT SUBMIT THEIR OLD CERTIFICATES TO THE TRANSFER AGENT
UNTIL THEY RECEIVE THESE INSTRUCTIONS.
Beginning at the Effective Time, each Old Certificate will, until
surrendered and exchanged as described above, will be deemed for all corporate
purposes to evidence ownership of the whole number of shares of common stock
into which the shares evidenced by such Old Certificate have been converted.
The affirmative vote of the holders of a majority of Safe Aid's Common
Stock is required to approve and adopt the Reverse Stock Split.
The Safe Aid Board Recommends a Vote in Favor of the Reverse Stock Split.
PROPOSAL 2. INCREASING AUTHORIZED COMMON STOCK
The Board of Directors of Safe Aid has adopted, subject to stockholder
approval, an amendment to its Certificate of Incorporation to increase the
number of authorized shares of common stock, par value $.00001 per share, from
950,000,000 to 999,999,000 shares. The Common Stock Amendment will not be filed
with the Delaware Secretary of State unless the Safe Aid stockholders approve
each of the Safe Aid Proposals described in this Proxy Statement.
The Common Stock Amendment provides for authorization of 49,999,000
additional shares of Safe Aid Common Stock. After the Reverse Stock Split and
the Merger are effectuated, 705,477,200 shares of Safe Aid Common Stock will be
issued and outstanding. In addition, at the time Safe Aid will have reserved
14,727,280 shares for issuance upon the exercise of certain outstanding
warrants.
If the Common Stock Amendment is adopted and the Certificate of
Amendment is filed with the Delaware Secretary of State, the first paragraph of
Article 4 of Safe Aid's Certificate of Incorporation shall be as follows:
"The total number of shares of stock which the Corporation shall have
the authority to issue is Nine Hundred Ninety Nine Million Nine Hundred Ninety
Nine Thousand (999,999,000) shares, par value $.00001 per share. All such shares
are of one class and are shares of Common Stock."
The Board of Directors of Safe Aid believes that it is desirable to
have additional authorized shares of common stock available for possible future
financing, acquisition transactions and other general corporate purposes. Having
such additional authorized shares of common stock available for issuance in the
future would give Safe Aid greater flexibility and may allow such shares to be
issued without the expense and delay of a special stockholders meeting. Although
such issuance of additional shares in respect of future acquisitions and
financing would dilute existing stockholders, management believes that such
transactions would increase the value of Safe Aid to its stockholders.
The affirmative vote of the holders of a majority of Safe Aid's Common
Stock is required to approve and adopt the Common Stock Amendment.
The Safe Aid Board recommends a vote in favor of the Common Stock
Amendment.
PROPOSAL 3. NAME CHANGE
The Board of Directors of Safe Aid has adopted, subject to stockholder
approval, an amendment to its Certificate of Incorporation to change its name to
"Safe Technologies International, Inc." The Name Change Amendment will not be
filed with the Delaware Secretary of State unless the stockholders approve each
of the Safe Aid Proposals.
One of the conditions of the Merger Agreement is that Safe Aid change
its name to "Safe Technologies International, Inc.," which management believes
is more descriptive of Safe Aid's new combined business activities.
The following is the text of the proposed amendment to Article 1 of
Safe Aid's Certificate of Incorporation:
"The name of this corporation shall be Safe Technologies International,
Inc." The affirmative vote of the holders of a majority of Safe Aid's Common
Stock is required to approve and adopt the Name Change Amendment.
The Safe Aid Board recommends a vote in favor of the Name Change
Amendment.
PROPOSAL 4. Merger Proposal
The Board of Directors of Safe Aid has unanimously approved and adopted
the Merger Agreement and the Merger and has determined that the Merger is in the
best interests of, and is on terms that are fair to, Safe Aid and its
stockholders and unanimously recommends that Safe Aid stockholders vote in favor
of the approval and adoption of the Merger Agreement and the Merger. The
determination of the Safe Aid Board was based upon consideration of a number of
factors described in "The Proposed Merger - Reasons for the Merger;
Recommendation of the Safe Aid Board."
The affirmative vote of the holders of a majority of Safe Aid's Common
Stock is required to approve and adopt the Merger Proposal.
The Safe Aid Board recommends a vote in favor of the Merger Proposal.
DESCRIPTION OF SAFE AID'S CAPITAL STOCK
The following description of Safe Aid's securities does not purport to
be complete and is subject in all respects to applicable Delaware law and to the
provisions of Safe Aid's Certificate of Incorporation.
General
The Certificate of Incorporation of Safe Aid authorizes 950,000,000
shares of Common Stock, $.00001 par value per share.
Common Stock
Safe Aid currently has outstanding 705,477,200 shares of common stock.
Holders of Safe Aid's Common Stock are entitled to cast one vote for each share
held of record on all matters submitted to a vote of holders of Safe Aid's
Common Stock, including the election of directors. There is no right to cumulate
votes for the election of directors. Stockholders holding a majority of the
voting power of the capital stock issued and outstanding and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any
meeting of Safe Aid's stockholders, and the vote by the holders of a majority of
such outstanding shares is required to effect certain fundamental corporate
changes such as liquidation, merger or amendment of Safe Aid's Certificate of
Incorporation.
Holders of Safe Aid's Common Stock are entitled to receive dividends
pro rata based on the number of shares held, when, as and if declared by Safe
Aid's Board of Directors, from funds legally available therefore. In the event
of liquidation, dissolution or winding up of the affairs of Safe Aid, all assets
and funds of Safe Aid remaining after the payment of all debts and other
liabilities shall be distributed, pro rata, among the holders of Safe Aid Common
Stock. Holders of Safe Aid Common Stock are not entitled to preemptive or
subscription or conversion rights and there are no redemption or sinking fund
provisions applicable to Safe Aid Common Stock. All outstanding shares of Safe
Aid Common Stock are, and the shares of Safe Aid Common Stock offered hereby
will be when issued, fully paid and non-assessable.
Redeemable Common Stock Purchase Warrants.
In June of 1988, Safe Aid completed a sale of 150,000 units to the
public at a price of $10 per unit. Each unit consisted of 1,000 shares of common
stock, $.00001 par value, and 500 redeemable common stock warrants designated
Redeemable Warrant A. Each Redeemable Warrant A would upon exercise, entitled
the holder to purchase one share of common stock for $.02 per share and to
receive one Redeemable Class B Common Stock Purchase Warrant. Each Redeemable
Class B Common Stock Purchase Warrant would, upon exercise, entitled the holder
to purchase one share of common stock for $.05 per share. The exercise periods
of both Class A and Class B Warrants have been extended by the Board of
Directors through January 9, 1998. At May 31, 1997, 147,272,800 shares of common
stock were reserved in connection with such warrants, which number of shares
will be reduced to 14,727,280 as a result of the proposed reverse stock split.
Business Combination Provision
Safe Aid is subject to a Delaware statute regulating "business
combinations," defined to include a broad range of transactions between Delaware
corporations and "interested stockholders," defined as persons who have acquired
at least 15% of a corporation's stock. Under the law, a corporation may not
engage in any business combination with any interested stockholder for a period
of three years from the date such person became an interested stockholder unless
certain conditions are satisfied. Safe Aid has not sought to "elect out" of the
statute and, therefore the restrictions imposed by such statute apply to Safe
Aid.
APPRAISAL RIGHTS
Safe Aid
Holders of record of Safe Aid Common Stock who do not vote in favor of
the Merger Proposal and who otherwise comply with the applicable statutory
procedures summarized herein will be entitled to appraisal rights under Section
262 ("Section 262") of the Delaware General Corporation Law ("DGCL"). A person
having a beneficial interest in shares of Safe Aid Common Stock held of record
in the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner to perfect appraisal rights.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL and is qualified in its entirety
by the full text of Section 262 which is reprinted in its entirety as Exhibit G.
All references in Section 262 and in this summary to a "stockholder" or "holder"
are to the record holder of the shares of Safe Aid Common Stock as to which
appraisal rights are asserted.
Under the DGCL, holders of shares of Safe Aid Common Stock ("Appraisal
Shares") who follow the procedures set forth in Section 262 will be entitled to
have their Appraisal Shares appraised by the Delaware Chancery Court and to
receive payment in cash of the "fair value" of such Appraisal Shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by such
court.
Under Section 262, where a proposed merger is to be submitted for
approval at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, must notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal rights
are available, that appraisal rights are so available, and must include in such
notice a copy of Section 262.
This Proxy Statement constitutes such notice to the holders of
Appraisal Shares and the applicable statutory provisions of the DGCL are
attached to this Proxy Statement as Exhibit G. Any stockholder who wishes to
exercise such appraisal rights or who wishes to preserve his right to do so
should review the following discussion and Exhibit C carefully, because failure
to timely and properly comply with the procedures specified will result in the
loss of appraisal rights under the DGCL.
A holder of Appraisal Shares wishing to exercise such holders'
appraisal rights (a) must not vote in favor of the Merger Proposal and (b) must
deliver to Safe Aid prior to the vote on the Merger at the Safe Aid meeting to
be held on October __, 1997, a written demand for appraisal of such holder's
Appraisal Shares.
All written demands for appraisal should be sent or delivered to
English, McCaughan & O'Bryan, P.A., 100 N.E. Third Avenue, Suite 1100, Fort
Lauderdale, Florida 33301, Attention: Gerald W. Gritter, Esq.
Within 10 days after the consummation of the Merger, Safe Aid will
notify each stockholder who has properly asserted appraisal rights under Section
262 and has not voted in favor of the Merger Proposal of the date the Merger
became effective.
Within 120 days after the consummation of the Merger, but not
thereafter, Safe Aid or any stockholder who has complied with the statutory
requirements summarized above may file a petition in the Delaware Chancery Court
demanding a determination of the fair value of the Safe Aid Common Stock. Safe
Aid is under no obligation to and has no present intention to file a petition
with respect to the appraisal of the fair value of the Appraisal Shares.
Accordingly, it is the obligation of the stockholders to initiate all necessary
action to perfect their appraisal rights within the time prescribed in Section
262.
Within 120 days after the consummation of the Merger, any stockholder
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from Safe Aid a statement setting
forth the aggregate number of Appraisal Shares not voted in favor of adoption of
the Merger Proposal and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Appraisal Shares. Such
statements must be mailed with ten days after a written request therefor has
been received by Safe Aid.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders considering
seeking appraisal should be aware that the fair value of their Appraisal Shares
as determined under Section 262 could be more than, the same as or less than the
value of the consideration they would receive pursuant to the Merger Agreement
if they did not seek appraisal of their Appraisal Shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262. The Delaware Supreme
Court has stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose Appraisal
Shares have been appraised. The costs of the action may be determined by the
Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
Court deems equitable. The Delaware Chancery Court may also order that all or a
portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys fees and the fees
and expenses of experts utilized in the appraisal proceeding, be charged pro
rata against the value of all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Merger, be
entitled to vote the Appraisal Shares subject to such demand for any purpose or
be entitled to the payment of dividends or other distributions on those
Appraisal Shares (except dividends or other distributions payable to holders of
record of Appraisal Shares as of a record date prior to the consummation of the
Merger).
If any stockholder who properly demands appraisal of his Appraisal
Shares under Section 262 fails to perfect, or effectively withdraws or loses,
his right to appraisal, as provided in the DGCL, the Appraisal Shares of such
stockholder will be converted into the right to receive the consideration
receivable with respect to such Appraisal Shares in accordance with the Merger
Agreement. A stockholder will fail to perfect, or effectively lose or withdraw,
his right to appraisal if, among other things, no petition for appraisal is
filed within 120 days after the consummation of the Merger, or if the
stockholder delivers to Safe Aid a written withdrawal of his demand for
appraisal. Any such attempt to withdraw an appraisal demand more than 60 days
after the consummation of the Merger will require the written approval of Safe
Aid.
The foregoing discussion only summarizes Section 262. Safe Aid
stockholders are urged to review such section in its entirety which is included
as Exhibit G to this Proxy Statement. Any holder of Safe Aid Common Stock who
intends to dissent from the Merger should review the text of Section 262
carefully and should also consult with his or her attorney. Any Safe Aid
stockholder who fails to strictly follow the procedures set forth in Section 262
will forfeit such dissenters' rights.
OTHER MATTERS
As of the date of this Proxy Statement, the Safe Aid Board knows of no
matters that will be presented for consideration at the Special Meeting other
than as described in this Proxy Statement. If any other matters shall properly
come before the Special Meeting or any adjournments or postponements thereof and
be voted upon, the enclosed proxy will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxy as to any such matters. The persons named as proxies
intend to vote or not to vote in accordance with the recommendation of the
management of Safe Aid.
LEGAL MATTERS
The validity of the Safe Aid Common Stock to be issued in the Merger
will be passed upon by Lazer, Aptheker, Feldman, Rosella & Yedid, LLP, Melville,
New York.
EXPERTS
The audited financial statements of Safe Aid at November 31, 1996 and
1995, and for the years then ended appearing in this Proxy Statement as Exhibit
A and incorporated by reference in this Proxy Statement have been audited by
Scott & Guilfoyle, independent auditor, to the extent and for the periods as
indicated in their reports with respect thereto. The audited financial
statements of INI at December 31, 1996 and for the years then ended appearing in
this Proxy Statement as Exhibit C and incorporated by reference in this Proxy
Statement have been audited by Jay S. Shapiro, P.A., certified public
accountant, for the periods as indicated in its report with respect thereto. The
audited financial statements of GMG at December 31, 1996 and 1995, and for the
years then ended appearing in this Proxy Statement as Exhibit D and incorporated
by reference in this Proxy Statement have been audited by Jay S. Shaprio, P.A.,
certified public accountant, for the periods as indicated in its report with
respect thereto. The audited financial statements of TMC at December 31, 1996
and 1995, and for the years then ended appearing in this Proxy Statement as
Exhibit E and incorporated by reference in this Proxy Statement have been
audited by Simmons LaPlant & Associates, P.A., certified public accountant, to
the extent and for the periods as indicated in its reports with respect thereto.
INDEPENDENT ACCOUNTANTS
Representatives of Scott & Guilfoyle are expected to be present at the
Special Meeting. These representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
INCORPORATION BY REFERENCE
Safe Aid incorporates by reference herein the following documents filed
pursuant to the Exchange Act under Safe Aid's Exchange Act File No. 0-17746:
1. Safe Aid's Annual Report on Form 10-KSB for the year ended
November 31, 1996;
2. Safe Aid's Quarterly Reports on Form 10-QSB for the quarters ended
February 28, and May 31, 1997;
3. Safe Aid's Current Reports on Form 8-K filed on February 25, 1997,
March 4, 1997 and June 17, 1997, respectively;
4. The description of Safe Aid's capital stock which is contained in
Safe Aid's registration statement on Form 8-A dated May 9, 1989.
All documents and reports filed by Safe Aid pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Proxy Statement
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference in this Proxy Statement and to be a part hereof from the dates of
filing of such documents or reports. Any statement contained in a document
incorporated or deemed to incorporated by reference herein shall be deemed to be
modified or superseded for the purpose of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. Such documents (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference)
are available, without charge, to any person, including any beneficial owner, to
whom this Proxy Statement is delivered, on written or oral request to Safe Aid
Products Incorporated, c/o Lazer, Aptheker, Feldman, Rosella & Yedid, LLP,
225 Old Country Road, Melville, New York 11747-2712 (telephone number (516)
364-3887) Attention: Barney Melsky, Secretary. In order to ensure timely
delivery of the documents prior to the Special Meeting, request should be made
by ______________, 1997.
SAFE AID PRODUCTS INCORPORATED
THIS STOCKHOLDER PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS DECEMBER __, 1997
The undersigned hereby appoints Stanley Snyder, Barney Melsky, or either of
them, as proxies, each with the power to appoint his substitute, to represent,
and vote all share of Common Stock of and on behalf of the undersigned as
designated on the reverse side at the Special Meeting of Stockholders of Safe
Aid Products Incorporated, to be held December __, 1997, and any adjournments
thereof, with all powers the undersigned would possess if personally present and
voting at such meeting. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Special Meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4
1. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT A TEN-FOR-ONE
REVERSE STOCK SPLIT
FOR _____ AGAINST ____ ABSTAIN ____
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK
FOR _____ AGAINST ____ ABSTAIN ____
3. PROPOSAL TO CHANGE SAFE AID'S NAME TO SAFE TECHNOLOGIES INTERNATIONAL, INC.
FOR _____ AGAINST ____ ABSTAIN ____
4. PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT WITH INI AND THE
TRANSACTIONS CONTEMPLATED THEREBY
FOR _____ AGAINST ____ ABSTAIN ____
This Proxy, when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is indicated, the Proxy will be
voted FOR Proposals 1, 2, 3 & 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Date:____________________________ , 1997.
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Signature
--------------------------------------------------------------
Signature if held jointly
PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S) HEREON. If shares are held in the name
of two or more persons, all must sign. When signing as Attorney, Executor,
Administrator, Personal Representative, Trustee, or Guardian, give full title as
such. If signer is a corporation, sign full corporate name by duly authorized
officer.
ANNEX "A"
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into on August 29,
1997, by and among INTELLIGENCE NETWORK INTERNATIONAL, INC., a Florida
corporation ("INI") and SAFE AID PRODUCTS INCORPORATED, a Delaware corporation
("Safe Aid").
RECITALS
The Boards of Directors of Safe Aid and INI believe that the merger of
INI with and into Safe Aid would be advantageous and beneficial and in the best
interests of INI and Safe Aid and their respective shareholders.
It is the intention of the parties hereto that: (i) INI shall be merged
with and into Safe Aid (the "Merger") (ii) effective as of Closing, each
outstanding share of the common stock of INI will be converted into one share of
the common stock of Safe Aid; (ii) the Merger shall qualify as a transaction in
securities exempt from registration or qualification under the Securities Act of
1933, as amended (the "Securities Act"), and under applicable state securities
laws; and (iii) the Merger shall qualify as a tax-free reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and intending to be legally bound, the parties hereto agree as
follows:
1. Recitals and Definitions.
-------------------------
(a) The foregoing RECITALS are true and correct, and are
incorporated herein and made a part hereof.
(b) For purposes of this Agreement, the terms set forth below
shall have the following meanings:
INI Statements - audited consolidated financial statements of INI
for the fiscal year ended December 31, 1996
Safe Aid
Statements - unaudited financial statements of Safe Aid for the
fiscal years ended November 30, 1995 and 1996
Closing - the consummation of the transaction of events set
forth in Section 11 hereof
Closing Date - the day on which the Closing is held as set forth
in Section 7 hereof and the time that Articles of
Merger are filed in accordance with the General
Corporation Law of the State of Delaware.
Common Stock - common stock, $.00001 par value per share, of Safe
Aid
Merger - the merger of INI with and into Safe Aid which
will result in the conversion of each outstanding
share of the common stock of INI into one share of
the Merger Stock
Merger Stock - 585,819,936 shares of Safe Aid Common Stock
2. The Merger.
-----------
(a) Safe Aid and INI agree that on the Closing Date INI shall be
merged with and into Safe Aid, which shall be the surviving corporation, and
Safe Aid shall change its name to "Safe Technologies International, Inc." or
such other name as may be designated by INI. Safe Aid shall retain its current
stock trading symbol. Pursuant to the Merger, each share of common stock of INI
issued and outstanding immediately prior to the Closing shall, without any
action on the part of the holder thereof, be converted into one share of the
Merger Stock. No other consideration shall be payable to the INI stockholders in
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connection with the Merger. The issuance of the Merger Stock will not be
registered pursuant to the Securities Act.
(b) From and after the Closing, the Articles of Incorporation and
Bylaws of Safe Aid as in effect immediately prior to the Closing shall be the
Articles of Incorporation and Bylaws of Safe Aid, as the surviving corporation,
until further amended, except that Article FIRST of the Safe Aid Articles of
Incorporation shall be amended to read as follows, effective upon consummation
of the Merger:
"The name of the Corporation is SAFE TECHNOLOGIES INTERNATIONAL, INC.
3. Representations and Warranties of INI. As a material inducement to
Safe Aid to enter into this Agreement and consummate the transactions
contemplated hereby, INI makes the following representations and warranties to
Safe Aid. The representations and warranties are true and correct in all
material respects at this date, and will be true and correct in all material
respects on the Closing Date as though made on and as of such date.
(a) INI Statements. Schedule 3(a) contains the INI Statements. The
INI Statements and financial information contained therein present fairly the
financial condition of INI for the periods covered (subject, in the case of
unaudited statements, to normal year- end audit adjustments which will not be
material to INI, taken as a whole, in amount or effect). The INI Statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied. The books and records of INI, financial and other, are in
all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(b) Undisclosed Liabilities. INI does not have any liabilities or
obligations of any nature, fixed or contingent, matured or unmatured, that are
not shown or otherwise provided for in INI Statements, except for liabilities
and obligations arising subsequent to the date of INI Statements in the ordinary
course of business, none of which individually or in the aggregate will be
materially adverse to the business or financial condition of INI. There are no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 of the Financial Accounting Standards Board) of INI
that will not be adequately provided for.
(c) Materially Adverse Change. Since the date of the most recent
INI Statements, the business of INI has been operated in the ordinary course and
there has not been:
(i) Any materially adverse change in the business,
condition (financial or otherwise), results of operations, prospects,
properties, assets, liabilities, earnings or net worth of INI for such period or
at any time during such period.
(ii) Any material damage, destruction or loss (whether
or not covered by insurance) affecting INI or its assets, properties or
businesses.
(iii) Any declaration, setting aside or payment of any
dividend or other distribution in respect of any shares of the capital stock of
INI, or any direct or indirect redemption, purchase or other acquisition of any
such stock or any agreement to do so.
(iv) Any issuance or sale by INI, or agreement by INI
to sell or pledge any of its securities, other than the issuance of common stock
as contemplated in Section 9(d) of this Agreement and issuances of common stock
to existing shareholders of INI for cash and/or services rendered. No
irrevocable proxies been given with respect to any securities of INI.
(v) Any statute, rule, regulation or order adopted by
any governmental body, agency or authority (including orders of regulatory
authorities with jurisdiction over INI) that materially and adversely affects
INI or their respective businesses or financial conditions.
(vi) Any material increase in the rate of compensation
or in bonus or commission payments payable or to become payable to any of the
salaried employees of INI; provided, however, that this subsection shall not
restrict or limit INI in any way from hiring additional personnel who are
required for their operations.
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(vii) Any other events or conditions of any character
that may reasonably be expected to have a materially adverse effect on INI or
their business or financial condition.
(d) Litigation. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the knowledge of INI, threatened against INI, whether at law or in equity, or
before or by any federal, state, municipal, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor does INI
know of any basis for any such action, suit, claim, investigation or proceeding.
(e) Compliance: Governmental Authorizations. INI has complied
in all material respects with all federal, state, local or foreign laws,
ordinances, regulations and orders applicable to its business, including without
limitation, federal and state securities, banking collection and consumer
protection laws and regulations that, if not complied with, would materially and
adversely affect its businesses. INI has all federal, state, local and foreign
governmental licenses and permits necessary for the conduct of its business.
Such licenses and permits are in full force and effect. INI knows of no
violations of any such licenses or permits. No proceedings are pending or
threatened to revoke or limit the use of such licenses or permits.
(f) Due Organization. INI is a corporation duly organized and
validly existing; its status is active; it is qualified to do business and in
good standing in each state where the properties owned, leased or operated, or
the business conducted, by them require such qualification and where failure to
so qualify would have a material adverse effect on their financial condition,
properties, business or results of operations. INI has the power to own its
properties and assets and to carry on its business as now presently conducted. A
true and complete copy of the Articles of Incorporation, By-Laws and Minutes of
Board of Directors and Stockholders Meetings of INI are attached hereto as
Schedule 3(f) and are made a part hereof.
(g) Tax Matters. INI has, or at the time of the Closing
hereunder will have, filed all federal, state and local tax or related returns
and reports due or required to be filed, which reports will accurately reflect
in all material respects the amount of taxes due. INI has paid all amounts or
taxes or assessments that would be delinquent if not paid as of the date of this
Agreement, and will have paid such required amounts as of the Closing Date.
There are no tax liens with respect to any properties owned by INI.
(h) Agreements. Schedule 3(h) contains a true and complete
list and brief description of all material written or oral contracts,
agreements, mortgages, obligations, understandings, arrangements, restrictions
and other instruments to which INI is a party or by which INI or its assets may
be bound. True and correct copies of all items set forth on Schedule 3(h) have
been or will have been made available to Safe Aid prior to the Closing. No event
has occurred that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a material default
by INI under any of the contracts or agreements set forth in Schedule 3(h). INI
has no knowledge of any material default by the other parties to such contracts
or agreements. In addition, no material violations have occurred pursuant to any
loan agreements to which any of INI is a party.
(i) Title to Property and Related Matters. INI has, and at the
time of the Closing will have, good and marketable title to all of its
properties, interests in properties and assets, real, personal and mixed, owned
by it at the date of this Agreement or acquired by it after the date of this
Agreement, of any kind or character, free and clear of any liens or
encumbrances. Except for matters that may arise in the ordinary course of
business, the assets of INI are in good operating condition and repair,
reasonable wear and tear excepted. To the best of the knowledge of INI, there
does not exist any condition that materially interferes with the use thereof in
the ordinary course of the business of INI.
(j) Licenses; Trademarks; Trade Names. Schedule 3(j) sets
forth all licenses, trademarks, trade names, service marks, copyrights, patents
or any applications for any of the foregoing that relate to the business of INI,
all of which are solely owned by INI, free and clear of any claims, liens or
encumbrances except as set forth on Schedule 3(j).
(k) Due Authorization. This Agreement has been duly
authorized, executed and delivered by INI and constitutes a valid and binding
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agreement of INI, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors rights generally or by the application of equitable principles.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate any order, writ, injunction or decree of any court or
governmental authority, or violate or conflict with in any material respect or
constitute a default under (or give rise to any right of termination,
cancellation or acceleration under) any provisions of INI's Articles of
Incorporation or Bylaws, the terms or conditions or provisions of any note,
bond, lease, mortgage, obligation, agreement, understanding, arrangement or
restriction of any kind to which INI is a party or by which INI or its
properties may be bound, or violates any statute, law, rule or regulation
applicable to INI. No consent or approval by any governmental authority is
required in connection with the execution and delivery by INI of this Agreement
or the consummation of the transactions contemplated hereby.
(l) Capitalization. The authorized capitalization of INI as of
the Closing Date will consist of 600,000,000 shares of no par value common stock
of which 585,819,936 shares will be issued and outstanding. Included within such
issued and outstanding shares are shares of INI common stock to be issued as
necessary and appropriate to fulfill the conditions precedent to Closing as set
forth in Section 9(d) of this Agreement. All issued and outstanding shares, when
issued, will be duly authorized, validly issued, fully paid and non-assessable,
and will be issued in compliance with applicable federal and state securities
laws and regulations. Except for the foregoing, there are no outstanding or
presently authorized securities, warrants, preemptive rights, subscription
rights or options to issue any of INI's securities.
(m) Full Disclosure. INI has, and at the Closing Date will
have, disclosed to Safe Aid in the Schedules to this Agreement or independently,
in writing, or made available to Safe Aid, documents, books and records
pertaining to, all events, conditions and facts materially affecting the
properties, business and prospects of INI. INI has not and will not have, at the
Closing Date, withheld disclosure or availability of any events, conditions and
facts of which it may have knowledge and that may materially and adversely
affect the properties, businesses or prospects of INI.
(n) Brokerage Fees. INI has not incurred, and will not incur,
any liability for brokerage or finder's fees or similar charges in connection
with this Agreement, except for finders' fees due to Robert Weinberg and Norman
and Bernice Moskowitz, which fees will be paid by Safe Aid on the Closing Date
by issuance of 3,527,386 shares of Common Stock to Robert Weinberg or his
designees and 3,527,386 shares of Common stock to Norman and Bernice Moskowitz
or their designees.
(o) Employee Benefit Plans. True and complete copies of all
employee benefit plans of INI, in any, have been heretofore delivered to Safe
Aid.
(p) Not Investment Company. INI is not an "investment company"
as defined in Section 368(a)(2)(F)(iii) of the Code.
4. Representations and Warranties of Safe Aid. Safe Aid, as a material
inducement to INI to enter into this Agreement and consummate the transactions
contemplated hereby, makes the following representations and warranties to INI,
which representations and warranties are true and correct in all material
respects at this date, and will be true and correct in all material respects on
the Closing Date as though made on and as of such date.
(a) Due Organization. Safe Aid is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Safe Aid has the corporate power to own its property and to carry on
its business as now presently conducted. The Articles of Incorporation and
By-Laws of Safe Aid are attached hereto as Schedule 4(a) and are made a part
hereof.
(b) Capitalization. The authorized capital stock of Safe Aid
consists of 950,000,000 shares of $.00001 par value Common Stock, of which
705,477,200 shares are outstanding as of the date of this Agreement. Prior to
Closing, Safe Aid shall complete a 10 to 1 reverse stock split pursuant to which
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the number of outstanding shares will be reduced to 70,547,720 as of Closing
with no change to the par value of the Common Stock, and shall increase its
authorized Common Stock to 999,999,000 shares. All of the outstanding shares of
Common Stock have been validly issued and are fully paid and non-assessable.
Except (i) for outstanding warrants for the purchase of 147,272,800 shares of
Common Stock as described in the Form 10-QSB filed by Safe Aid with the
Securities and Exchange Commission for the quarter ended May 31, 1997 and (ii)
as described in this Agreement, Safe Aid has no shares of Common Stock reserved
for issuance and there are no outstanding subscriptions, options, warrants,
rights, convertible securities or other agreements or commitments of any
character relating to the issued or unissued Common Stock or other securities of
Safe Aid obligating Safe Aid to issue any securities.
(c) Subsidiaries. Safe Aid has no subsidiaries, nor does it
own any interest in any other corporation, partnership or other entity, nor does
it have any right or obligation, whether under any agreement (oral or written)
or instrument of any kind, to acquire any such interest.
(d) Due Authorization. Subject only to approval of this
Agreement by Safe Aid's shareholders, this Agreement has been duly authorized,
executed, and delivered by Safe Aid, and constitutes a legal, valid, and binding
obligation of Safe Aid, enforceable in accordance with its terms except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors rights generally or by the application of equitable principles. The
execution, delivery and performance of this Agreement by Safe Aid will not
violate or conflict with in any material respect or constitute a default under
any provisions of applicable law, Safe Aid's Articles of Incorporation or
Bylaws, or any agreement or instrument to which Safe Aid is a party or by which
it or its assets are bound. No consent of any federal, state, municipal or other
governmental authority is required by Safe Aid for the execution, delivery or
performance of this Agreement by Safe Aid. No consent of any party to any
contract or agreement to which Safe Aid is a party or by which any of its
property or assets are subject is required for the execution, delivery or
performance of this Agreement by Safe Aid that has not been obtained at the date
of this Agreement.
(e) Shares of Merger Stock; Nature of Transactions. The Merger
Stock will be validly and legally issued, free and clear of all liens,
encumbrances, transfer fees and preemptive rights, and will be fully paid and
non-assessable. When consummated, the transactions provided in this Agreement,
including the issuance and delivery of the Merger Stock, will constitute (I) a
transaction of securities "not involving a public offering" under the Securities
Act, and (ii) a tax-free reorganization under Section 368(a)(1)(A) of the Code.
(f) SEC Reports. From the first date that such reports were
required of Safe Aid, Safe Aid has accurately and completely filed with the SEC
all of its required Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q. As of their respective dates, neither Safe Aid's Annual Report on Form
10-KSB for the fiscal year ended November 31, 1996, nor Safe Aid's Quarterly
Report on Form 10-QSB for the period ended May 31, 1997, each in the form
(including exhibits) filed with the SEC (collectively, the "Company Reports"),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
True and complete copies of the Company Reports have been heretofore delivered
to INI.
(g) Safe Aid Statements. Schedule 4(f) contains the Safe Aid
Statements. The Safe Aid Statements fairly present the financial position of
Safe Aid as of the date thereof. The books and records, financial and other, of
Safe Aid are in all material respects complete and correct.
(h) Undisclosed Liabilities. Safe Aid has no liabilities or
obligations of any nature, fixed or contingently matured or unmatured, that are
not shown or otherwise provided for in Safe Aid Statements or have not been
disclosed to INI.
(i) Litigation. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending
against Safe Aid, its assets or business, whether at law or in equity, or before
or by any federal, state, municipal, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor does Safe
Aid know of a threat of, or any basis for, any such action, suit, claim,
investigation or proceeding.
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(j) Tax Matters. Safe Aid has filed all federal, state and
local, tax or related returns and reports due or required to be filed, which
reports accurately reflect in all material respects the amount of taxes due.
Safe Aid has paid all taxes or assessments that have become due, other than
taxes or charges being contested in good faith or not yet finally determined.
Safe Aid is not aware of any tax liens with respect to any properties owned by
Safe Aid.
(k) Full Disclosure. Safe Aid has not, and will not have at
the Closing Date, withheld disclosure of any events, conditions, and facts of
which it may have knowledge and that may materially and adversely affect the
business or prospects of Safe Aid.
(l) Brokerage Fees. Safe Aid has not incurred, and will not
incur, any liability for brokerage or finder's fees or similar charges in
connection with this Agreement, except for a finders' fee due to Private Trust
Corp., Ltd., as Trustee for New Amsterdam Investment Trust, which fee will be
paid by Safe Aid on the Closing Date by issuance of 7,054,772 shares of Common
Stock to Private Trust Corp., Ltd., as Trustee.
(m) No Approvals Required. No approval, authorization,
consent, order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental authority
is required in connection with the execution and delivery by Safe Aid of this
Agreement or the consummation of the transactions described herein, except to
the extent that Safe Aid may be required to file reports in accordance with
relevant regulations under federal and state securities laws.
5. Covenants and Agreements.
The parties covenant and agree as follows:
(a) Conduct of Business. From the date hereof through the date
of the Closing, Safe Aid and INI shall conduct their respective businesses in
the ordinary course and in material compliance with all requirements of law to
which they are subject, keep their respective business and properties
substantially intact, and except in the ordinary course of business without the
prior written consent of Safe Aid, INI will not undertake any of the actions
specified in Section 3(c).
(b) Litigation. Safe Aid and INI shall promptly notify each
other of any lawsuit, claims, proceedings or investigations which after the date
hereof are threatened or commenced against it or against any officer, director,
employee, affiliate or consultant of it, with respect to the transactions
contemplated hereby or which reasonably could be expected to have a material
adverse effect.
(c) Distribution of Proxy Statement; Stockholder Meetings. At
the earliest practicable date following the date hereof, each of INI and Safe
Aid shall distribute a Joint Proxy Statement to its stockholders which gives
notice of the Stockholder Meetings for the purposes of adopting this Agreement
and approving the Merger (including the change of Safe Aid's name to Safe
Technologies International, Inc.), and (in the case of Safe Aid) approving the
reverse stock split and increase in authorized capital provided in Section 4(b)
of this Agreement, and considering such other matters as may properly come
before such meetings. The stockholder meetings shall be held as soon as
practicable (but in no event less than 20 or more than 30 days following
completion of the Joint Proxy Statement).
(d) Issuance of Capital Stock. Neither INI nor Safe Aid shall
issue, commit to issue, redeem or purchase, or amend the terms of, any of its
capital stock after the date hereof and prior to the Closing Date except as
otherwise contemplated by this Agreement.
(e) Notification of Certain Events. Each of INI and Safe Aid
shall promptly be given notice by the other of any event, condition or
circumstance occurring from the date hereof through the Closing Date which would
constitute or which would, with the passage of time or giving notice or both,
constitute a violation or breach of any representation or warranty contained
herein occurring with respect to the party required to give notice pursuant to
this Section.
(f) Tax Treatment. INI and Safe Aid undertake and agree to
take no action which would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code. Safe Aid
A-6
<PAGE>
agrees that it will file no tax returns or otherwise take a position
inconsistent with such tax treatment.
(g) Compensation. Neither party shall authorize any salary or
compensation increase, dividend or loans to officers or directors without the
prior written consent of the other party.
(h) Reports. Safe Aid shall file all required reports to
comply, and to remain in compliance with, all applicable federal and state
securities laws, rules and regulations.
6. Due Diligence and Termination. Safe Aid and INI each shall be
entitled to conduct, and all of the parties agree to cooperate in the conduct
of, such due diligence as Safe Aid or INI may wish to conduct prior to and on
the Closing Date to verify the truth, accuracy and completeness of
representations and warranties of the other parties to this Agreement. Safe Aid
shall have the right to terminate this Agreement upon written notice to INI at
any time prior to the Closing if INI fails to fulfill the conditions set forth
in Sections 5 and 9 that are applicable to INI. INI shall have the right to
cancel this Agreement upon written notice to Safe Aid at any time prior to the
Closing if Safe Aid fails to fulfill the conditions set forth in Sections 4(b),
5 and 8 that are applicable to Safe Aid. If either Safe Aid or INI so terminates
this Agreement, this Agreement shall be of no further force and effect and all
rights and obligations of the parties shall terminate without liability to
either party.
7. Closing Date. Both parties will diligently and continuously pursue
the actions required to close the Merger as soon as possible, using best efforts
to close by September 30, 1997. Either party may extend the Closing Date for up
to 30 days upon demonstration to the reasonable satisfaction of the other party
that they are diligently pursuing the performance of, and compliance with, all
conditions precedent to their obligations hereunder. Either party may terminate
this Agreement upon written notice to the other if the Closing has not occurred
by October 31, 1997, without liability to either party.
8. Conditions Precedent to Obligations of INI. All obligations of INI
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date (unless otherwise stated herein), of each of the following conditions, any
one or all of which may be waived by INI:
(a) The Shareholders of Safe Aid and INI shall have approved
the execution of this Agreement and the Merger thereby.
(b) The representations and warranties made by or on behalf of
Safe Aid contained in this Agreement or in any certificate or document delivered
to INI pursuant to the provisions hereof at the Closing shall be true in all
material respects at and as of the time of the Closing as though such
representations and warranties were made at and as of such time.
(c) Safe Aid shall have performed and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
(d) Safe Aid shall have delivered all of the Schedules
required herein, and copies of the documents referred to therein, to INI and
such Schedules and documents shall have been reasonably acceptable to INI.
(e) Any Due Diligence Examination by INI prior to the Closing
Date shall not have resulted in the discovery of any materially adverse
information concerning the business, condition (financial or otherwise), results
of operations, prospects, properties, assets, liabilities, earnings or net worth
of Safe Aid that was not previously disclosed and which constitutes a breach of
a representation or warranty of Safe Aid under this Agreement.
9. Conditions Precedent to Obligations of Safe Aid. All obligations of
Safe Aid under this Agreement are subject to the fulfillment, prior to or on the
Closing Date, of each of the following conditions, any one or all of which may
be waived in writing by Safe Aid:
(a) The stockholders of INI and Safe Aid shall have approved
the execution of this Agreement and the Merger thereby.
(b) The representations and warranties by INI contained in
this Agreement or in any certificate or document delivered to Safe Aid pursuant
A-7
<PAGE>
to the provisions hereof shall be true in all material respects at and as of the
time of the Closing as though such representations and warranties were made at
and as of such time.
(c) INI shall have performed and complied in all material
respects with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
(d) Simultaneously with or prior to Closing, INI shall close
its acquisition of at least two companies active in industries related to that
of INI and reasonably acceptable to Safe Aid, and as of the Closing Date shall
have not less than $280,000 in cash or cash equivalent assets. Any securities of
INI issued in connection with transactions entered into by INI in order to
satisfy the foregoing conditions shall be issued in compliance with all
applicable federal and state securities laws.
(e) INI shall have delivered all of the Schedules required
herein, and copies of the documents referred to therein, to Safe Aid and such
Schedules and documents shall have been reasonably acceptable to Safe Aid.
(f) INI shall have (i) no liens or encumbrances of any nature
on its assets, other than capital lease obligations that exist at the date of
this Agreement or as described in INI Statements or the Schedules to this
Agreement or otherwise disclosed to Safe Aid; (ii) no violations in any material
respect pursuant to any loan agreements; and (iii) no debt or other obligations
except as described in INI Statements or the Schedules to this Agreement or
otherwise disclosed to Safe Aid.
(g) Any Due Diligence Examination by Safe Aid prior to the
Closing Date shall not have resulted in the discovery of any materially adverse
information concerning the business, condition (financial or otherwise), results
of operations, prospects, properties, assets, liabilities, earnings or net worth
of INI.
(h) Safe Aid and Barbara Tolley shall have entered into an
Employment Agreement pursuant to which Tolley will be employed as Chief
Executive Officer and Chairman of the Board of Safe Aid. The Employment
Agreement will be for a term of two years, subject to termination for cause,
will provide for a compensation package as agreed to by Safe Aid and Tolley, and
will include an option to Tolley to extend the Employment Agreement for one
additional year.
10. Nature of Representations and Warranties. All of the parties hereto
are executing and carrying out the provisions of this Agreement in reliance on
the representations, warranties, covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for, and any
investigation that they might have made or any other representations,
warranties, covenants, agreements, promises or information, written or oral,
made by the other party or parties or any other person shall not be deemed a
waiver of any breach of any such representation, warranty, covenant or
agreement.
11. Closing. At the Closing, the following transactions shall occur,
all of such transactions being deemed to occur simultaneously:
(a) INI will deliver, or cause to be delivered, to Safe Aid
the following:
(i) All corporate records of INI, including without
limitation corporate minute books (which shall contain copies of the Articles of
Incorporation and Bylaws, as amended to the Closing Date), stock books, stock
transfer books, corporate seals, shares of stock of the Subsidiaries; and such
other corporate books and records as may reasonably be requested by Safe Aid and
its counsel.
(ii) A Certificate of Status for INI from the Secretary
of State of Florida, dated at or about the Closing Date, to the effect that such
corporation is in good standing under the laws of Florida.
(iii) Articles of Incorporation and Bylaws of INI
certified by the Secretary of INI as to their accuracy and completeness.
(iv) Copies of resolutions of the Board of Directors
and Shareholders of INI authorizing the transactions contemplated under this
Agreement.
A-8
<PAGE>
(v) Such documents as may be needed to accomplish the
Merger under the corporate laws of the State of Delaware.
(vi) A certificate of INI's President to the effect
that all representations and warranties of INI made under this Agreement are
reaffirmed on the Closing Date, as though originally given on such date.
(vii) Such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement or that may be reasonably requested in furtherance of the
provisions of this Agreement.
(b) Safe Aid will deliver or cause to be delivered to INI:
(i) Stock issuance instructions to Safe Aid's transfer
agent for the conversion of INI common stock to Safe Aid common stock, within
five business days after the Closing Date.
(ii) A Certificate of Status from the Secretary of
State of Delaware, dated at or about the Closing Date, to the effect that such
corporation is in good standing under the laws of Delaware.
(iii) Copies of resolutions of the Board of Directors
and Shareholders of Safe Aid authorizing the transactions contemplated under
this Agreement.
(iv) Such documents as may be needed to accomplish the
Merger under the corporate laws of the State of Delaware.
(v) A certificate of Safe Aid's President to the effect
that all representations and warranties of Safe Aid made under this Agreement
are reaffirmed on the Closing Date, as though originally given on such date.
(vi) Such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement, or that may be reasonably requested in furtherance of the
provisions of this Agreement.
(c) As of the Closing Date, all existing directors and
officers of Safe Aid shall resign, Barbara Tolley and two other persons
designated by Tolley will be elected as the directors of Safe Aid.
(d) Safe Aid shall issue, for services rendered in connection
with the Merger and for other good and valuable consideration, 17,500,000 shares
of Common Stock (on a post-split basis) to each of Stanley Snyder and Lawrence
Feldman.
12. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or sent by overnight courier delivery, confirmed facsimile
transmission or prepaid first class registered or certified mail, return receipt
requested, to the following addresses, or such other addresses as are given to
the other parties to this Agreement in the manner set forth herein:
If to Safe Aid, to: Stanley Snyder, President
Safe Aid Products Incorporated
c/o Lazer, Aptheker, Feldman, Rosella & Yedid, LLP
35 Pinelawn Road, Suite 203W
Melville, NY 11747
with a copy to: Eric W. Nodiff, Esq.
Dornbush Mensch Mandelstam & Schaeffer, LLP
747 Third Avenue
New York, NY 10017
If to INI, to: Barbara Tolley, President
Intelligence Network International, Inc.
249 Peruvian Avenue
Palm Beach, FL 33480
with a copy to: Gerald W. Gritter, Esq.
English, McCaughan & O'Bryan, P.A.
100 NE Third Avenue, Suite 1100
Fort Lauderdale, FL 33301
Any such notices shall be effective when delivered in person or sent by
A-9
<PAGE>
facsimile transmission, one business day after being sent by overnight courier
delivery or three business days after being sent by registered or certified
mail. Any of the foregoing addresses may be changed by giving notice of such
change in the foregoing manner, except that notices for changes of address shall
be effective only upon receipt.
13. Miscellaneous.
(a) Further Assurances. At any time, and from time to time,
after the Closing, each party will execute such additional instruments and take
such further action as may be reasonably requested by the other party to confirm
or perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
(b) Time. Time is of the essence.
(c) Survival of Representations. All covenants and agreements
made herein shall survive the Closing through all applicable statutes of
limitation. All covenants and agreements by or on behalf of the parties hereto
that are contained or incorporated in this Agreement shall bind and inure to the
benefit of the successors and assigns of all parties hereto.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(e) Amendment. This Agreement may not be amended, supplemented
or modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(f) Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties.
(g) Choice of Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of Florida
(except insofar as Delaware law shall govern the Merger and the corporate
actions of the parties contemplated hereby).
(h) Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this agreement.
(i) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
(j) Number and Gender. Words used in this Agreement,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context indicates is appropriate.
(k) Construction. The parties hereto and their respective
legal counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(l) Effect of Waiver. The failure of any party at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right to enforce the same. The waiver by any party of any
breach of any provision of this Agreement will not be construed to be a waiver
by any such party of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
(m) Severability. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement will not
affect any other provision of this Agreement, which will remain in full force
and effect, nor will the invalidity, illegality or unenforceability of a portion
of any provision of this Agreement affect the balance of such provision. In the
event that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
A-10
<PAGE>
(n) Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
The parties hereto acknowledge and agree that any party's
remedy at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach or threatened breach shall be per
se deemed as causing irreparable harm to such party. Therefore, in the event of
such breach or threatened breach, the parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to obtain, and the
offending party agrees not to oppose the aggrieved party's request for,
equitable relief in the form of specific enforcement, temporary restraining
order, temporary or permanent injunction, or any other equitable remedy that may
then be available to the aggrieved party.
(o) Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties hereto.
(p) No Third-Party Beneficiaries. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is the
intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
(q) Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
(r) Facsimile Signature. This Agreement may be executed and
accepted by facsimile signature and any such signature shall be of the same
force and effect as an original signature.
(s) Press Releases and Announcements: Prohibition on Trading
in Safe Aid Stock. Upon execution of this Agreement, INI and Safe Aid shall
jointly prepare and issue a press release or announcement relating to the
subject matter of this Agreement. INI and Safe Aid acknowledge that the United
States Securities Laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of Safe Aid, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of Safe Aid. Accordingly, INI and Safe Aid agree that they will instruct their
respective directors and officers not to purchase or sell any securities of Safe
Aid, or communicate such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell securities of Safe Aid, until no earlier than 72 hours following the
dissemination of a Current Report on Form 8-K to the SEC announcing the proposed
Merger pursuant to this Agreement.
(t) Expenses. All expenses incident to the preparation of
documents for, and closing of, the Merger will be borne by INI. Safe Aid
acknowledges that INI has forwarded its check in the amount of $10,000 to
counsel for Safe Aid as payment in full for their legal services in connection
with this transaction.
(u) Additional Agreement. For a period of two (2) years
following the Closing Date, Safe Aid shall be prohibited, directly and
indirectly, from effectuating a reverse stock split and for a period of three
(3) years following the Closing Date, the issuance of any capital stock or
securities convertible into or exercisable for capital stock shall be subject to
the approval of Barbara Tolley so long as she is the President or Chief
Executive Officer of Safe Aid.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SAFE AID PRODUCTS INCORPORATED
By: /s/ Lawrence Feldman
----------------------------------
Lawrence Feldman, Corporate Agent
INTELLIGENCE NETWORK INTERNATIONAL, INC.
By: /s/ Barbara Tolley
----------------------------------
Barbara Tolley, President
A-11
<PAGE>
List of Schedules:
Schedule 3(a) - INI Financial Statements
Schedule 3(f) - INI Articles of Incorporation, Bylaws and Minutes
Schedule 3(h) - INI Contracts
Schedule 3(j) - INI Licenses, Trademarks & Tradenames
Schedule 4(a) - Safe Aid Articles of Incorporation and Bylaws
Schedule 4(f) - Safe Aid Financial Statements
<PAGE>
ANNEX B
INDEX TO SAFE AID PRODUCTS INCORPORATED
FINANCIAL STATEMENTS
I. Audited Financial Statements for the Fiscal Year ended November
30, 1996
Reports of Independent Certified Public Accountants B-1
Balance Sheet as of November 30, 1996 and 1995 B-2
Statement of Stockholders' Equity for the period from inception B-3
(May 21, 1987) to November 30, 1996
Statement of Operations for each of the two years in the period B-5
ended November 30, 1996 and cumulative from inception (May 21,
1987) to November 30, 1996
Statement of Cash Flows for each of the two years in the period B-6
ended November 30, 1996 and cumulative from inception (May 21,
1987) to November 30, 1996
Notes to Financial Statements B-7
II. Unaudited Financial Statements for the Quarter ended February
28, 1997
Balance Sheets - February 28, 1997 (unaudited) and November 30, B-11
1996
Statement of Stockholders' Equity B-12
date of inception (May 21, 1987) through August 31, 1997
Statement of Operations - nine months ended August 31, 1997 and B-14
August 31, 1996 (unaudited) and from inception (May 21, 1987)
through August 31, 1997 (unaudited)
Statement of Cash Flows - nine months ended August 31, 1997 and B-16
August 31, 1996 (unaudited) and from inception (May 21, 1987)
through August 31, 1997 (unaudited)
Notes to Financial Statements B-17
August 31, 1997 (unaudited)
<PAGE>
Scott & Guilfoyle
Certified Public Accountants
5 Dakota Drive - Suite 206
Lake Success, New York 11042
Paul J. Scott. C.P.A. (516) 775-9600
Richard T. Guilfoyle. C.P.A. Fax (516) 328-6638
INDEPENDENT AUDITOR'S REPORT
The Board of Directors of
Safe Aid Products Incorporated
We have audited the accompanying balance sheets of Safe Aid Products
Incorporated (a development stage company) as of November 30, 1996 and 1995 and
the related statements of operations, stockholders' equity and cash flows for
the years then ended and for the period May 21, 1987 (inception) through
November 30, 1996. 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 audits. The financial statements for the
period May 21, 1987 (inception) through November 30, 1994, were audited by other
auditors whose report dated February 14, 1995 expressed an unqualified opinion
on those statements. The financial statements for the period May 21, 1987
(inception) through November 30, 1994 include total revenue and net loss of
$338,215 and ($1,546,700) respectively. Our opinion on the statements of
operations, shareholders' equity, and cash flows for the period May 21, 1987
(inception) through November 30, 1996 insofar as it relates to amounts for prior
periods through November 30, 1994, is based solely on the report of other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 balance sheet presentation. We
believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position Safe Aid Products Incorporated (a development stage
company) as of November 30, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, and the period from May 21, 1987
(inception) to November 30, 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to this matter are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Scott & Guilfoyle
Lake Success, New York
February 5, 1997
B-1
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
NOVEMBER 30
ASSETS
<CAPTION>
1996 1995
CURRENT ASSETS
<S> <C> <C>
Cash $ 4,034 $ 2,191
------------ -----------
TOTAL CURRENT ASSETS 4,034 2,191
MACHINERY AND EQUIPMENT
Net of accumulated depreciation of $4,258 0 0
------------ -----------
TOTAL ASSETS $ 4,034 $ 2,191
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Shareholder loans $ 13,500 $ 5,000
Accrued expenses 5,293 6,941
----------- -----------
TOTAL CURRENT LIABILITIES 18,793 11,941
----------- -----------
STOCKHOLDERS' EQUITY
Common stock $.00001 par value
950,000,000 shares authorized;
702,977,200 issued and outstanding 7,030 7,030
Additional paid in capital 1,548,969 1,548,969
Deficit accumulated during development
stage (1,570,758) (1,565,749)
---------- -----------
TOTAL ( 14,759) ( 9,750)
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,034 $ 2,191
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
B-2
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Date of inception - May 21, 1987 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock for
cash to founders ($.0001 per share) 100,000,000 1,000 9,000 0 10,000
----------- ------ --------- ---------- ---------
Balance, November 30, 1987 100,000,000 1,000 9,000 0 10,000
Issuance of common stock for cash
to outside investors from
December 1, 1987 through
February 11, 1988 ($.00044 per share) 350,000,000 3,500 152,014 0 155,514
Public issuance of shares for
cash, net of expenses, during
the period April 11, 1988 through
June 30, 1988 ($.0081 per share) 150,000,000 1,500 1,212,341 0 1,213,841
Issuance of common stock for consulting
services based on Board of Directors
assessment of value of services rendered
during August 1988 ($.02 per share) 4,050,000 40 80,960 0 81,000
Issuance of common stock for cash in
connection with exercise of warrants
during November 1988 ($.02 per share) 675,000 7 13,493 0 13,500
Net loss for the year ended
November 30, 1988 0 0 0 ( 414,054) ( 414,054)
----------- ---------- --------- -------- ---------
Balance, November 30, 1988 604,725,000 6,047 1,467,808 ( 414,054) 1,059,801
Issuance of common stock for license
agreement based on Board of Directors
assessment of value of agreement
during December 1988 ($.02 per share) 750,000 8 14,992 0 15,000
Issuance of common stock for public
relations services based on Board of
Directors assessment of value of services
during March 1989 ($.02 per share) 200,000 2 3,998 0 4,000
Issuance of common stock for consulting,
research & development based on Board of
Directors assessment of value of services
during October 1989 ($.01 per share) 750,000 8 7,492 0 7,500
Issuance of common stock for cash in
connection with exercise of warrants
during the year ended November 30, 1989
($.02 per share) 2,027,200 20 40,524 0 40,544
Net loss for the year ended
November 30, 1989 0 0 0 ( 561,463) ( 561,463)
----------- --------- --------- --------- ---------
Balance, November 30, 1989 608,452,200 6,085 1,534,814 ( 975,517) 565,382
(continued)
The accompanying notes are an integral part of the financial statements.
</TABLE>
B-3
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Issuance of common stock for cash
in connection with exercise of
warrants during the year ended
November 30, 1990 ($.02 per share) 25,000 0 500 0 500
Net loss for the year ended
November 30, 1990 0 0 0 ( 353,012) ( 353,012)
----------- --------- --------------- ----------- ----------
Balance, November 30, 1990 608,477,200 6,085 1,535,314 (1,328,529) 212,870
Net loss for the year ended
November 30, 1991 0 0 0 ( 108,242) ( 108,242)
------------ --------- --------------- ----------- ----------
Balance, November 30, 1991 608,477,200 6,085 1,535,314 (1,436,771) 104,628
Net loss for the year ended
November 30, 1992 0 0 0 ( 58,009) ( 58,009)
----------- --------- -------------- ----------- ---------
Balance, November 30, 1992 608,477,200 6,085 1,535,314 (1,494,780) 46,619
Issuance of common stock for consulting
services based on Board of Directors
assessment of value of services rendered
for the year ended November 30, 1993
($.01 per share) 500,000 5 495 0 500
Net loss for the year ended
November 30, 1993 0 0 0 ( 44,479) ( 44,479)
----------- --------- --------------- ----------- ---------
Balance, November 30, 1993 608,977,200 6,090 1,535,809 (1,539,259) 2,640
Issuance of common stock for legal &
consulting services based on Board of
Directors assessment of value of services
rendered for the year ended
November 30, 1994 ($.00015 per share) 94,000,000 940 13,160 0 14,100
Net loss for the year ended
November 30, 1994 0 0 0 ( 7,441) ( 7,441)
----------- -------- ------------ ------------ ---------
Balance, November 30, 1994 702,977,200 7,030 1,548,969 (1,546,700) 9,299
Net loss for the year ended
November 30, 1995 0 0 0 ( 19,049) ( 19,049)
----------- -------- --------------- ----------- ---------
Balance, November 30, 1995 702,977,200 7,030 1,548,969 (1,565,749) ( 9,750)
Net loss for the year ended
November 30, 1996 0 0 0 ( 5,009) ( 5,009)
----------- --------- --------------- ------------ ----------
Balance, November 30, 1996 702,977,200 $ 7,030 $1,548,969 $(1,570,758) $( 14,759)
=========== ====== ========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
B-4
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<CAPTION>
For The Years From Inception
Ended (May 21, 1987)
November 30 to November 30
1996 1995 1996
REVENUE
<S> <C> <C> <C>
Net sales $ 19,647 $ 9,819 $ 237,030
License fees 0 0 10,000
Interest income 0 25 120,676
-------- -------- ---------
TOTAL REVENUES 19,647 9,844 367,706
-------- -------- ---------
EXPENSES
Cost of sales 15,187 7,589 203,463
Selling, general and
administrative 9,469 21,304 920,379
Research and development 0 0 594,618
Selling expenses 0 0 65,642
Depreciation and amortization 0 0 29,443
Loss- inventory obsolescence 0 0 124,919
------- -------- ---------
TOTAL 24,656 28,893 1,938,464
------- -------- ---------
NET LOSS $( 5,009) $(19,049) $(1,570,758)
====== ====== =========
LOSS PER SHARE:
Net loss per share NIL NIL NIL
====== ====== ======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 702,977,200 702,977,200 654,257,057
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
B-5
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<CAPTION>
For The Years From Inception
Ended (May 21, 1987)
November 30 to November 30
1996 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $( 5,009) $(19,049) $(1,570,758)
-------- -------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 0 0 29,443
Issuance of common stock for services 0 0 122,100
Loss on abandonment of assets 0 0 11,018
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 0 0 0
Organization costs 0 0 ( 1,350)
Other current assets 0 78 0
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ( 1,648) 6,941 5,293
------ ------ ------------
NET CASH USED BY OPERATING
ACTIVITIES ( 6,657) (12,030) (1,404,254)
------ ------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment 0 0 ( 39,111)
------ ------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 0 1,433,899
Loans from stockholders 8,500 5,000 23,500
Repayment of stockholders' loans 0 0 ( 10,000)
------ ------ ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 8,500 5,000 1,447,399
------ ------ ---------
INCREASE (DECREASE) IN CASH 1,843 ( 7,030) 4,034
BEGINNING CASH BALANCE 2,191 9,221 0
------ ------ ----------
ENDING CASH BALANCE $ 4,034 $ 2,191 $ 4,034
======= ====== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
B-6
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Safe Aid Products Incorporated ("the Company") was incorporated on May 21, 1987
in the State of Delaware to engage in manufacturing and marketing of a
disinfectant product for sale in dental and medical offices and hotel and motel
markets, as well as in the retail over-the-counter market, and to engage in
research and development regarding nasal and transdermal delivery of aspirin and
other drugs. At present, the Company remains in its development stage. Its
activities to date consist of limited sales of disinfectant products and the
investigation of the nasal and transdermal delivery of aspirin and other drugs.
The Company's financial statements have been prepared on a going concern basis
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company reported net
losses of $5,089 and $19,049 for the fiscal years ended November 30, 1996 and
1995, respectively. The continuation of the Company is dependent upon obtaining
additional capital or financing or a sucessful merger. The Company is no longer
pursuing efforts to license the patent relating to nasal and transdermal
delivery of asprin and other drugs. The company has been unsuccessful in
exploiting these assets, due to its severly limited capital and lack of
significant operations. The Company believes that the best course of action to
increase shareholder value is to merge with or affect its acquisition by a
company with active business operations in a growth industry. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates and assumptions. Depreciation of machinery and equipment is
computed under an accelerated method over five year estimated useful lives of
the related assets.
Net Loss Per Share
Net loss per average common and common equivalent share has been computed on the
basis of the weighted average number of common shares and equivalents
outstanding during the respective periods. The effects on loss per share
resulting from the assumed issuance of reserved shares and the assumed exercise
of warrants in all periods presented are antidilutive and, therefore, not
included in the calculations.
NOTE 2 - INCOME TAXES
No provision has been made in the accompanying financial statements for income
taxes payable because of the Company's operating loss from operations. At
November 30, 1996, the Company has approximately $1,553,000 of operating loss
carryforwards for financial reporting and income tax purposes that expire
through the year 2011. Additionally, the Company has approximately $44,000 of
research and development credits available to offset future income taxes through
the year 2005.
B-7
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 3: STOCKHOLDERS' EQUITY
The Articles of Incorporation provide for the authorization of 950,000,000
shares of common stock at $.00001 par value. Original capital contributed was
$10,000 in payment for the issuance of 100,000,000 shares of common stock.
During the period from December 1, 1987 through February 11, 1988, an additional
350,000,000 shares were issued for an aggregate consideration of $155,514.
In June of 1988, the Company completed a sale of 150,000 units to the public at
a price of $10 per unit. The Company received proceeds in the amount of
$1,213,841, net of commissions and expenses to the underwriter, legal,
accounting and other expenses related to the public offering in the amount of
$286,159. Each unit consisted of 1,000 shares of common stock, $.00001 par
value, and 500 redeemable common stock warrants designated redeemable Warrant
"A". Each redeemable Warrant "A" would upon exercise, entitle the holder to
purchase one share of common stock for $.02 per share and to receive one
redeemable Class "B" Common Stock purchase warrant. Each redeemable Class "B"
Common Stock purchase warrant would, upon exercise, entitle the holder to
purchase one share of common stock for $.05 per share. These exercise periods of
both Class "A" and Class "B" warrants have been extended by the Board of
Directors through January 9, 1998. At November 30, 1996, 147,272,800 shares of
common stock are reserved in connection with such warrants.
The shares of common stock and common stock purchase warrants were immediately
detachable from the units upon closing of the public offering and are, to the
extent a market exists, therefore, traded separately from the common stock.
In August 1988, 4,050,000 shares of common stock were issued to certain
consultants of the Company as compensation for their services rendered. These
shares have been valued by the Company at $.02 per share. The Company recorded
these shares as research and development expense.
During November 1988, 675,000 redeemable Class "A" Common Stock purchase
warrants were exercised at a price of $.02 per share. The Company received
proceeds of $13,500 upon the exercise of these warrants.
In December 1988, 750,000 shares of common stock were issued to an unrelated
company as an inducement to enter into a license agreement at $.02 per share.
The Company recorded these shares as research and development expense.
In March 1989, 200,000 shares of common stock were issued to an unrelated party
as compensation for services rendered to the Company. These shares have been
valued by the Company at $.02 per share. The Company recorded these shares as
public relations expense.
In October 1989, 750,000 shares of common stock were issued to unrelated parties
as compensation for services rendered to the Company. These shares have been
valued by the Company at $.01 per share. The Company recorded these shares as
consulting and research and development expense.
B-8
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 3: STOCKHOLDERS' EQUITY - continued
During the years ended November 30, 1989 and 1990, 2,027,200 and 25,000
redeemable Class "A" Common Stock purchase warrants were exercised at a price of
$.02 per share, respectively. The Company received proceeds of $40,544 and $500
upon the exercise of these warrants, respectively.
On January 8, 1993, the Company issued 500,000 shares of the Company's common
stock in consideration of consulting services. The shares were valued at $.001
per share.
In January and February of 1994, 94,000,000 shares of common stock were issued
to certain officers and consultants of the Company and to one of the Company's
law firms as compensation for their services rendered and to induce them to
continue to provide their services to the Company. These shares have been valued
by the Company at $.00015 per share and the Company recorded these shares as
general and administrative expenses during the year ended November 30, 1994.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
On July 25, 1994, the Company entered into a license agreement with CMR Group,
Inc. ("CMR") in which the Company granted to CMR an exclusive license to develop
and market the Company's patent rights relating to TCGU or bleaching products.
In consideration for granting CMR this license, the Company received a license
fee of $10,000 in 1994 and will receive royalties of 10% of the net revenue from
all sales of products containing TCGU until the Company receives $1,000,000, and
7% of the net revenue from such sales thereafter.
There were no royalties earned pursuant to this agreement during the years ended
November 30, 1996 and 1995.
On January 25, 1988, the Company entered into a research agreement with the
University of Kentucky Research Foundation (UKRF). Pursuant to the terms of the
agreement, the Company offered a grant in the amount of $100,000 per year, in
exchange for specific research to be performed by UKRF. The Company paid
$100,000 for the year ended November 30, 1988 and $75,000 for the year ended
November 30, 1989. No grants were offered subsequent to 1989. All inventions or
discoveries pursuant to the research agreement shall be owned by UKRF. UKRF has
granted an option to the Company for the exclusive license of any such invention
or discoveries. Upon exercising its option, the Company shall pay a license fee
up to $10,000. Certain members of the Company's Advisory Board are professors at
the University of Kentucky. On August 30, 1988 the Company exercised its option
with respect to certain patent rights. Additionally, the Company shall pay
annual royalties during the term of the agreement based upon annual direct and
indirect net sales as follows:
i. 2.0% royalty on all direct sales.
ii. For all indirect sales for which the Company receives a royalty,
1/3 of such royalty is to be paid to UKRF. This royalty payment cannot
be less than 1% or more than 2% of such indirect sales.
iii. For all indirect sales for which the Company receives a license fee,
20% of such license fee is to be paid to UKRF.
There has been no activity with respect to this agreement during the years ended
November 30, 1996 and 1995.
B-9
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 4 - COMMITMENTS AND CONTINGENCIES (continued)
On January 25, 1988, the Company entered into a license agreement with UKRF in
connection with the right to use certain information and patents concerning the
derivation of aspirin. The agreement also required a non-refundable license
issue fee of $5,000 upon execution. Additionally, the Company shall pay a
royalty in an amount equal to 2% of the net sales of the licensed product as
defined in the agreement. There has been no activity with respect to this
agreement during the years ended November 30, 1996 and 1995.
The Company leased operating facilities located in Hauppauge, New York on a
month-to-month basis at an approximate monthly rental of $150. The Company also
leased storage space in a warehouse on a month-to-month basis at an aggregate
current monthly rental of $436. All leases were terminated during the year ended
November 30, 1995. Rent expense under all leases for the year ended November 30,
1995 was $2,958.
NOTE 5 - SALES TO MAJOR CUSTOMER AND PURCHASES FROM MAJOR SUPPLIERS
Sales to one major customer and purchases from one supplier aggregated 100% of
the Company's net sales and cost of goods for the years ended November 30, 1996
and 1995.
NOTE 6 - SUBSEQUENT EVENT
Effective January 11, 1997, the Board of Directors consented to extend the
exercise periods of both the Class "A" and Class "B" warrants through January 9,
1998.
B-10
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<CAPTION>
August 31,1997 November 30,
Unaudited 1996
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 2,119 $ 4,034
--------- -----------
TOTAL CURRENT ASSETS 2,119 4,034
MACHINERY AND EQUIPMENT
Net of accumulated depreciation of $4,258 0 0
------------ -----------
TOTAL ASSETS $ 2,119 $ 4,034
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Shareholder loans $ 19,000 $ 13,500
Accrued expenses 2,874 5,293
----------- -----------
TOTAL CURRENT LIABILITIES 21,874 18,793
---------- ----------
STOCKHOLDERS' EQUITY
Common stock $.00001 par value
950,000,000 shares authorized; 705,477,200
and 702,977,200 issued and outstanding respectively 7,055 7,030
Additional paid in capital 1,572,194 1,548,969
Deficit accumulated during development
stage (1,599,004) (1,570,758)
--------- ---------
TOTAL ( 19,755) ( 14,759)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,119 $ 4,034
============== =============
</TABLE>
B-11
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Accumulated
Common Stock Additional During Total
Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Date of inception - May 21, 1987 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock for
cash to founders ($.0001 per share) 100,000,000 1,000 9,000 0 10,000
----------- ------ --------- ---------- ---------
Balance, November 30, 1987 100,000,000 1,000 9,000 0 10,000
Issuance of common stock for cash
to outside investors from
December 1, 1987 through
February 11, 1988 ($.00044 per share) 350,000,000 3,500 152,014 0 155,514
Public issuance of shares for
cash, net of expenses, during
the period April 11, 1988 through
June 30, 1988 ($.0081 per share) 150,000,000 1,500 1,212,341 0 1,213,841
Issuance of common stock for consulting
services based on Board of Directors
assessment of value of services rendered
during August 1988 ($.02 per share) 4,050,000 40 80,960 0 81,000
Issuance of common stock for cash in
connection with exercise of warrants
during November 1988 ($.02 per share) 675,000 7 13,493 0 13,500
Net loss for the year ended
November 30, 1988 0 0 0 ( 414,054) ( 414,054)
----------- ---------- --------- -------- ---------
Balance, November 30, 1988 604,725,000 6,047 1,467,808 ( 414,054) 1,059,801
Issuance of common stock for license
agreement based on Board of Directors
assessment of value of agreement
during December 1988 ($.02 per share) 750,000 8 14,992 0 15,000
Issuance of common stock for public
relations services based on Board of
Directors assessment of value of services
during March 1989 ($.02 per share) 200,000 2 3,998 0 4,000
Issuance of common stock for consulting,
research & development based on Board of
Directors assessment of value of services
during October 1989 ($.01 per share) 750,000 8 7,492 0 7,500
Issuance of common stock for cash in
connection with exercise of warrants
during the year ended November 30, 1989
($.02 per share) 2,027,200 20 40,524 0 40,544
Net loss for the year ended
November 30, 1989 0 0 0 ( 561,463) ( 561,463)
----------- --------- --------- --------- ---------
Balance, November 30, 1989 608,452,200 6,085 1,534,814 ( 975,517) 565,382
</TABLE>
(continued)
B-12
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Accumulated
Common Stock Additional During Total
Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Issuance of common stock for cash
in connection with exercise of
warrants during the year ended
November 30, 1990 ($.02 per share) 25,000 0 500 0 500
Net loss for the year ended
November 30, 1990 0 0 0 ( 353,012) ( 353,012)
----------- --------- --------------- ----------- ----------
Balance, November 30, 1990 608,477,200 6,085 1,535,314 (1,328,529) 212,870
Net loss for the year ended
November 30, 1991 0 0 0 ( 108,242) ( 108,242)
------------ --------- --------------- ----------- ----------
Balance, November 30, 1991 608,477,200 6,085 1,535,314 (1,436,771) 104,628
Net loss for the year ended
November 30, 1992 0 0 0 ( 58,009) ( 58,009)
----------- --------- -------------- ----------- ---------
Balance, November 30, 1992 608,477,200 6,085 1,535,314 (1,494,780) 46,619
Issuance of common stock for consulting
services based on Board of Directors
assessment of value of services rendered
for the year ended November 30, 1993
($.01 per share) 500,000 5 495 0 500
Net loss for the year ended
November 30, 1993 0 0 0 ( 44,479) ( 44,479)
----------- --------- --------------- ----------- ---------
Balance, November 30, 1993 608,977,200 6,090 1,535,809 (1,539,259) 2,640
Issuance of common stock for legal &
consulting services based on Board of
Directors assessment of value of services
rendered for the year ended
November 30, 1994 ($.00015 per share) 94,000,000 940 13,160 0 14,100
Net loss for the year ended
November 30, 1994 0 0 0 ( 7,441) ( 7,441)
----------- -------- ------------ ------------ ---------
Balance, November 30, 1994 702,977,200 7,030 1,548,969 (1,546,700) 9,299
Net loss for the year ended
November 30, 1995 0 0 0 ( 19,049) ( 19,049)
----------- -------- --------------- ----------- ---------
Balance, November 30, 1995 702,977,200 7,030 1,548,969 (1,565,749) ( 9,750)
Net loss for the year ended
November 30, 1996 0 0 0 ( 5,009) ( 5,009)
----------- --------- --------------- ------------ ----------
Balance, November 30, 1996 702,977,200 $ 7,030 $1,548,969 $(1,570,758) $( 14,759)
Issuance of common stock for
services for the period ended
April 15, 1997 2,500,000 25 23,225 0 23,250
Net loss for the nine months ended
August 31, 1997, unaudited 0 0 0 ( 28,246) ( 28,246)
----------- --------- --------------- ------------ ----------
Balance, August 31, 1997 unaudited 705,477,200 $ 7,055 $1,572,194 $(1,599,004) $( 19,755)
=========== ====== ========= ========= =========
</TABLE>
B-13
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
For The Nine From Inception
Months Ended (May 21, 1987) to
August 31, August 31,
1997 1996 1997
<S> <C> <C> <C>
REVENUE
Net sales $ 9,801 $ 9,828 $ 246,831
License fees 0 0 10,000
Interest income 0 0 120,676
--------- --------- --------
TOTAL REVENUES 9,801 9,828 377,507
------- ------- --------
EXPENSES
Cost of sales 7,569 7,599 211,032
Selling, general and administrative 30,478 7,765 950,857
Research and development 0 0 594,618
Selling expenses 0 0 65,642
Depreciation and amortization 0 0 29,443
Loss- inventory obsolescence 0 0 124,919
---------- ---------- ----------
TOTAL 38,047 15,364 1,976,511
-------- ------ ---------
NET LOSS $( 28,246) $( 5,536) $(1,599,004)
======== ======= =========
LOSS PER SHARE:
Net loss per share NIL NIL NIL
======== ======= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 704,245,448 702,977,200 609,989,049
=========== =========== ===========
</TABLE>
B-14
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
For The Three
Months Ended
August 31,
1997 1996
REVENUE
<S> <C> <C>
Net sales $ 9,801 $ 0
-------- ---------
TOTAL REVENUES 9,801 0
-------- ---------
EXPENSES
Cost of sales 7,569 0
Selling, general and administrative 25,278 2,290
------- ------
TOTAL 32,847 2,290
------- ------
NET LOSS $ ( 23,046) $( 2,290)
======= =======
LOSS PER SHARE:
Net loss per share NIL NIL
======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 705,477,200 702,977,200
=========== ===========
</TABLE>
B-15
<PAGE>
<TABLE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
UNAUDITED
<CAPTION>
For The Nine From Inception
Months Ended (May 21, 1987) to
August 31, August 31,
1997 1996 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 28,246) $( 5,536) $(1,599,004)
------- ------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 0 0 29,443
Issuance of common stock for services 23,250 0 145,350
Loss on abandonment of assets 0 0 11,018
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Organization costs 0 0 ( 1,350)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ( 2,419) 98 2,874
-------- ------- -----------
NET CASH USED BY OPERATING ACTIVITIES ( 7,415) ( 5,438) (1,411,669)
-------- ------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment 0 0 ( 39,111)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 1,439,399
Loans from stockholders 5,500 6,000 23,500
Repayment of stockholders' loans 0 0 ( 10,000)
----------- --------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,500 6,000 1,452,899
-------- ------ ---------
INCREASE (DECREASE) IN CASH ( 1,915) 562 2,119
BEGINNING CASH BALANCE 4,034 2,191 0
-------- ------ ------------
ENDING CASH BALANCE $ 2,119 $ 2,753 $ 2,119
======== ====== ============
</TABLE>
B-16
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
UNAUDITED
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Safe Aid Products Incorporated ("the Company") was incorporated on May 21, 1987
in the State of Delaware to engage in manufacturing and marketing of a
disinfectant product for sale in dental and medical offices and hotel and motel
markets, as well as in the retail over-the counter market, and to engage in
research and development regarding nasal and transdermal delivery of aspirin and
other drugs. At present, the Company remains in its development stage. Its
activities to date consist of limited sales of disinfectant products and the
investigation of the nasal and transdermal delivery of aspirin and other drugs.
The Company's financial statements have been prepared on a going concern basis
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company reported net
losses of $5,089 and $19,049 for the fiscal years ended November 30, 1996 and
1995, respectively. The continuation of the Company is dependent upon obtaining
additional capital or financing or a sucessful merger. The Company is no longer
pursuing efforts to license the patent relating to nasal and transdermal
delivery of asprin and other drugs. The company has been unsuccessful in
exploiting these assets, due to its severly limited capital and lack of
significant operations. The Company believes that the best course of action to
increase shareholder value is to merge with or affect its acquisition by a
company with active business operations in a growth industry. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The financial data for the nine and three months ended August 31, 1997 and 1996,
and the period May 21, 1987 (commencement of development stage) through August
31, 1997 is unaudited, but includes all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of the management, necessary
for a fair presentation of the results of operations for such periods.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates and assumptions.
Depreciation of machinery and equipment is computed under an accelerated method
over five year estimated useful lives of the related assets.
Net Loss Per Share
Net loss per average common and common equivalent share has been computed on the
basis of the weighted average number of common shares and equivalents
outstanding during the respective periods. The effects on loss per share
resulting from the assumed issuance of reserved shares and the assumed exercise
of warrants in all periods presented are antidilutive and, therefore, not
included in the calculations.
B-17
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
UNAUDITED
NOTE 2 - INCOME TAXES
No provision has been made in the accompanying financial statements for income
taxes payable because of the Company's operating loss from operations. At
November 30, 1996, the Company has approximately $1,553,000 of operating loss
carryforwards for financial reporting and income tax purposes that expire
through the year 2011. Additionally, the Company has approximately $44,000 of
research and development credits available to offset future income taxes through
the year 2005.
NOTE 3: STOCKHOLDERS' EQUITY
The Articles of Incorporation provide for the authorization of 950,000,000
shares of common stock at $.00001 par value. Original capital contributed was
$10,000 in payment for the issuance of 100,000,000 shares of common stock.
During the period from December 1, 1987 through February 11, 1988, an additional
350,000,000 shares were issued for an aggregate consideration of $155,514.
In June of 1988, the Company completed a sale of 150,000 units to the public at
a price of $10 per unit. The Company received proceeds in the amount of
$1,213,841, net of commissions and expenses to the underwriter, legal,
accounting and other expenses related to the public offering in the amount of
$286,159. Each unit consisted of 1,000 shares of common stock, $.00001 par
value, and 500 redeemable common stock warrants designated redeemable Warrant
"A". Each redeemable Warrant "A" would upon exercise, entitle the holder to
purchase one share of common stock for $.02 per share and to receive one
redeemable Class "B" Common Stock purchase warrant. Each redeemable Class "B"
Common Stock purchase warrant would, upon exercise, entitle the holder to
purchase one share of common stock for $.05 per share. These exercise periods of
both Class "A: and Class "B" warrants have been extended by the Board of
Directors through January 9, 1998. At August 31, 1997, 147,272,800 shares of
common stock are reserved in connection with such warrants.
The shares of common stock and common stock purchase warrants were immediately
detachable from the units upon closing of the public offering and are, to the
extent a market exists, therefore, traded separately from the common stock.
In August 1988, 4,050,000 shares of common stock were issued to certain
consultants of the Company as compensation for their services rendered. These
shares have been valued by the Company at $.02 per share. The Company recorded
these shares as research and development expense.
During November 1988, 675,000 redeemable Class "A" Common Stock purchase
warrants were exercised at a price of $.02 per share. The Company received
proceeds of $13,500 upon the exercise of these warrants.
B-18
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
UNAUDITED
NOTE 3: STOCKHOLDERS' EQUITY (continued)
In December 1988, 750,000 shares of common stock were issued to an unrelated
company as an inducement to enter into a license agreement at $.02 per share.
The Company recorded these shares as research and development expense.
In March 1989, 200,000 shares of common stock were issued to an unrelated party
as compensation for services rendered to the Company. These shares have been
valued by the Company at $.02 per share. The Company recorded these shares as
public relations expense.
In October 1989, 750,000 shares of common stock were issued to unrelated parties
as compensation for services rendered to the Company. These shares have been
valued by the Company at $.01 per share. The Company recorded these shares as
consulting and research and development expense.
During the years ended November 30, 1989 and 1990, 2,027,200 and 25,000
redeemable Class "A" Common Stock purchase warrants were exercised at a price of
$.02 per share, respectively. The Company received proceeds of $40,544 and $500
upon the exercise of these warrants, respectively.
On January 8, 1993, the Company issued 500,000 shares of the Company's common
stock in consideration of consulting services. The shares were valued at $.001
per share.
In January and February of 1994, 94,000,000 shares of common stock were issued
to certain officers and consultants of the Company and to one of the Company's
law firms as compensation for their services rendered and to induce them to
continue to provide their services to the Company. These shares have been valued
by the Company at $.00015 per share and the Company recorded these shares as
general and administrative expenses during the year ended November 30, 1994.
On April 15, 1997, the Company authorized the issuance of 2,500,000 shares of
the Company's common stock in consideration of consulting services. The services
were valued at $23,250 or .0093 per share.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
On July 25, 1994, the Company entered into a license agreement with CMR Group,
Inc. ("CMR") in which the Company granted to CMR an exclusive license to develop
and market the Company's patent rights relating to TCGU or bleaching products.
In consideration for granting CMR this license, the Company received a license
fee of $10,000 in 1994 and will receive royalties of 10% of the net revenue from
all sales of products containing TCGU until the Company receives $1,000,000, and
7% of the net revenue from such sales thereafter.
There were no royalties earned pursuant to this agreement during the year ended
November 30, 1996 or the nine months ended August 31, 1997.
B-19
<PAGE>
SAFE AID PRODUCTS INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
UNAUDITED
NOTE 4 - COMMITMENTS AND CONTINGENCIES (continued)
On January 25, 1988, the Company entered into a research agreement with the
University of Kentucky Research Foundation (UKRF). Pursuant to the terms of the
agreement, the Company offered a grant in the amount of $100,000 per year, in
exchange for specific research to be performed by UKRF. The Company paid
$100,000 for the year ended November 30, 1988 and $75,000 for the year ended
November 30, 1989. No grants were offered subsequent to 1989. All inventions or
discoveries pursuant to the research agreement shall be owned by UKRF. UKRF has
granted an option to the Company for the exclusive license of any such invention
or discoveries. Upon exercising its option, the Company shall pay a license fee
up to $10,000. Certain members of the Company's Advisory Board are professors at
the University of Kentucky. On August 30, 1988 the Company exercised its option
with respect to certain patent rights. Additionally, the Company shall pay
annual royalties during the term of the agreement based upon annual direct and
indirect net sales as follows:
i. 2.0% royalty on all direct sales.
ii. For all indirect sales for which the Company receives a royalty, 1/3 of
such royalty is to be paid to UKRF. This royalty payment cannot be
less than 1% or more than 2% of such indirect sales.
iii. For all indirect sales for which the Company receives a license fee,
20% of such license fee is to be paid to UKRF.
There has been no activity with respect to this agreement during the year ended
November 30, 1996 or the nine months ended August 31, 1997.
On January 25, 1988, the Company entered into a license agreement with UKRF in
connection with the right to use certain information and patents concerning the
derivation of aspirin. The agreement also required a non-refundable license
issue fee of $5,000 upon execution. Additionally, the Company shall pay a
royalty in an amount equal to 2% of the net sales of the licensed product as
defined in the agreement. There has been no activity with respect to this
agreement during the year ended November 30, 1996 or the nine months ended
August 31, 1997.
NOTE 5: MERGER DISCUSSIONS
The Company is in the midst of merger discussions with Intelligence Network
International, Inc. ("INI") a Florida corporation engaged in various internet
services and products. The merger is subject to certain conditions including
increasing the authorized common stock to 999,999,000, changing the name to
"Safe Technologies International, Inc." and effectuating a one-for-ten reverse
stock split. If the proposed merger takes place the former INI shareholders will
own approximately eighty-three percent of Safe Aid's common stock. There is no
guarantee that the merger will take place.
B-20
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 5. Other Events
------------
On August 29, 1997, Safe Aid Products Incorporated ("Safe Aid")
entered into a merger agreement with Intelligence Network Inc. ("INI") (the
"Merger Agreement") pursuant to which INI will merge with and into Safe Aid (the
"Merger"). Safe Aid will be the corporation surviving the Merger.
INI offers various internet services and products through its two (2)
divisions:
1. Internet Software and Electronic Commerce Division
2. Internet Information, Data, and Directory Division.
INI also intends to expand its products and services into two new
industries with two recent acquisitions. In June, 1996 INI acquired Total Micro
Computers, Inc. ("TMC"), a wholesaler and retailer of custom designed and
assembled computer systems and related products. In July 1997, INI acquired GMC
Computer Consultants, INc. d/b/a Precision Imaging ("GMC"), a printer and
publisher of catalogs and magazines (collectively, GMC and TMC are sometimes
referred to as the "Acquisition Companies"). The acquisition of the Acquisition
Companies may be cancelled and rescinded if the Merger is not consummated by
November 1, 1997.
At the effective date of the Merger, INI will merge with and into Safe Aid.
Safe Aid will be the surviving corporation in the Merger and will continue its
corporate existence under Delaware law under the name "Safe Technologies
International, Inc.". At the effective time of the merger, the separate
corporate existence of INI will terminate, and pursuant to the Merger Agreement
each issued and outstanding share of INI common stock will be converterd into
the right to receive one share of Safe Aid common stock. Immediately prior to
the Merger (subject to stockholder approval), the outstanding common stock will
be reduced to 70,547,720 shares. After the consummation of the Merger, the
former INI shareholders will own approximately eighty-three (83%) percent of
Safe Aid's common stock.
B-21
<PAGE>
The obligations of Safe Aid and INI to effect the Merger are subject to
certain conditions including:
(i) Approval and adoption by Safe Aid stockholders of proposals
to amend Safe Aid's Certificate of Incorporation to (a) increase
Safe Aid's authorized common stock to 999,999,000 shares of
common stock; (b) change the name of Safe Aid to "Safe
Technologies International, Inc."; and (c) effectuate a
one-for-ten reverse stock split of Safe Aid's common stock;
(ii) Approval and adoption of the Merger Agreement by Safe Aid
stockholders;
(iii) As of the closing daet of the Merger, INI shall have not less
than $280,000 in cash or cash equivalent assets; and
(iv) The accuracy on the closing date of representations and
warranties of Safe Aid and INI made in the Merger Agreement.
Safe Aid has been unsuccessful in effecting its original business purpose
and has had virtually no active operations for the past several years. In
addition, Safe Aid has no capital available to renew active operations. As a
result, management adopted a strategy of locating an operating company to engage
in a business in combination with Safe Aid that could increase shareholder
value.
In considering the merits of the Merger with INI, Safe Aid's Board of
Directors gave substantial weight to its belief that marketing through the
Internet, and related fields of INI, represent a significant growth opportunity.
Safe Aid's Board of Directors also considered the risks factors attributable to
INI's business discussed in "Risk Fators" in the Proxy Materials submitted as
part of the Merger document, particularly INI's limited operating history and
need for additional capital, and disadvantages of the Merger, such as the
substantial dilution of the existing stockholder's ownership of Safe Aid. Safe
Aid's Board of Directors determined that the benefits outweighed the
disadvantages and unanimously approved the terms of the Merger.
In connection with the proposed Merger, Safe Aid will deliver a proxy
statement to its stockholders that will further describe INI and the propsed
Merger. The proxy statement will include audited financial statements of INI and
its recently acquired subsidiaries for their most recent fiscal years, as well
as unaudited interim financial statements of the nine month periods ended Sept
30, 1996 and 1997, and pro forma financial information of the combined entity
giving effect to the Merger.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27 - Financial Data Schedule
(b) Reports
A Form 8-K dated June 17, 1997 was filed in order
to report on the status of the joint venture between Safe Aid Products
Incorporated and CC Plus.
<PAGE>
ANNEX "C"
INDEX TO INI FINANCIAL STATEMENTS
I. Audited Financial Statements for the Fiscal Year ended December
31, 1996
Independent Auditor's Report C-1
Balance Sheet as of December 31, 1996 C-2
Statement of Revenues, Expenses and Retained Earnings for the period C-3
beginning October 2, 1996 (inception) ending December 31, 1996
Statement of Changes in Stockholders' Equity - December 31, 1996 C-4
Statement of Cash Flows for the period beginning October 2, 1996 C-5
(inception) ending December 31, 1996
Notes to Financial Statements C-6
II. Unaudited Financial Statements for the Quarter ended September 30, 1997
Cover Sheet C-7
Balance Sheet as of September 30, 1997 C-8
Statements of Income for the nine months ended September 30, 1997 C-9
Statement of Cash Flows for the nine months ended September 30, 1997 C-10
<PAGE>
JAY S. SHAPIRO, P.A.
Certified Public Accountant
1031 Ives Dairy Road Member: American Institute of
Suite 127 Certified Public Accountants
North Miami Beach, Florida 33179 and
Dade (305) 654-9989 Florida Institute of
Broward (954) 522-2915 Certified Public Accountants
Fax (305) 654-0055
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders'
of Intelligence Network International, Inc.
We have audited the accompanying Balance Sheet of Intelligence Network
International, Inc. as of December 31, 1996, and the related statements of
(loss), changes in stockholders' equity and cash flows for the period beginning
October 2, 1996 (date of inception) and ending December 31, 1996. 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.
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 financial statements referred to above present fairly, in
all material respects, the financial position of Intelligence Network
International, Inc. as of December 31, 1996, and the results of its operations
and cash flows for the period beginning October 2, 1996 (date of inception) and
ending December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ J.S. Shapiro, CPA, P.A.
North Miami Beach, Florida
November 12, 1997
C-1
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
DECEMBER 31, 1996
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
CASH $57,977
-------
57,977
$57,977
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES: --
STOCKHOLDER'S EQUITY:
Common stock, $.00 par value,
19,980,000 shares authorized,
1,449,700 shares issued and outstanding $ 0
Additional Paid-in Capital 78,000
Retained earnings (deficit) (20,023)
--------
57,977
--------
$ 57,977
========
The accompanying notes are an integral part of these Financial Statements
</TABLE>
C-2
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
STATEMENT OF REVENUES, EXPENSES AND RETAINED EARNINGS
FOR THE PERIOD OCTOBER 2, 1996 (INCEPTION) ENDING DECEMBER 31, 1996
<CAPTION>
<S> <C>
REVENUES: $ --
DIRECT COST OF REVENUES: --
--------
GROSS PROFIT --
GENERAL AND ADMINISTRATIVE COSTS:
Management fees 20,023
--------
NET LOSS (20,023)
RETAINED EARNINGS (DEFICIT):
Beginning of period --
--------
(20,023)
--------
End of period $(20,023)
========
The accompanying notes are an integral part of these Financial Statements
</TABLE>
C-3
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
DECEMBER 31, 1996
<CAPTION>
COMMON SHARES ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN CAPITAL EARNINGS TOTAL
BALANCE
<S> <C> <C> <C> <C> <C>
OCTOBER 2, 1996 1,449,700 0 $78,000 $78,000
NET INCOME FOR THE YEAR (20,023) (20,023)
LESS SHAREHOLDERS'
DIVIDEND DISTRIBUTIONS 0 0
BALANCE,
DECEMBER 31, 1996 1,449,700 0 $78,000 (20,023) $57,977
</TABLE>
C-4
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD BEGINNING OCTOBER 2, 1996 (INCEPTION) ENDING DECEMBER 31, 1996
<CAPTION>
<S> <C>
OPERATING ACTIVITIES:
Net income(loss) $(20,023)
Adjustments to reconcile net income to net
cash provided by operating activities: --
--------
NET CASH USED FOR INVESTING ACTIVITIES --
--------
FINANCING ACTIVITIES
Issuance of common stock 78,000
--------
Net cash (used) by financing activities 78,000
--------
INCREASE (DECREASE) IN CASH 57,977
CASH:
Beginning of year --
--------
End of year $ 57,977
========
The accompanying notes are an integral part of these Financial Statements
</TABLE>
C-5
<PAGE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - BACKGROUND INFORMATION
Description of Business:
Intelligence Network International, Inc. (INI) was incorporated in the state of
Florida on October 2, 1996. The Company plans to offer a broad selection of
internet based products and services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue from sales of internet services are recognized upon delivery to
the customer.
Income Taxes
The income tax effects on transactions are recognized for financial reporting
purposes in the year in which they enter into the determination of recorded
income, regardless of when they are recognized for income tax purposes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying value of cash, receivables and accounts payable approximates fair
value due to the short maturity of these instruments. The carrying values of
short term debt approximate fair value based on discounting the projected cash
flows using market rates available for similar maturities. None of the financial
instruments are held for trading purposes.
Vulnerability of a New Business in Internet Technology
The likelihood of success of the Company must be considered in view of all the
risks, expenses and delays inherent in the establishment of a new business,
including, but not limited to, unforeseen expenses, complications and delays,
the initiation of marketing activities, the uncertainty of market acceptance of
new services, intense competition from larger more established competitors and
other factors.
NOTE 3 - SUBSEQUENT EVENTS
On January 10, 1997 INI acquired assets from three internet related companies.
On August 2, 1997 INI acquired a company that wholesales and retails custom
designed and assembled computer systems and related products. On August 28, 1997
INI acquired a company that is a pre- press designer of magazines and
catalogues.
C-6
<PAGE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
FINANCIAL STATEMENT
AS OF SEPTEMBER 30, 1997
C-7
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC
BALANCE SHEET
AS OF SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 12,308
Accounts Receivable 0
Total Current Assets $ 12,308
PROPERTY AND EQUIPMENT, NET 0
---------
TOTAL ASSETS $ 12,308
---------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 8,150
Accrued expenses 2,105
Total Current Liabilities 10,255
STOCKHOLDERS' EQUITY
Common Stock 0
Additional Paid In Capital 104,000
Retained Earnings (101,947)
---------
Total Stockholders' Equity (2,053)
---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 12,308
---------
</TABLE>
C-8
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC
STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
REVENUES:
<S> <C>
Sales $ 0
COST OF SALES 0
--------
GROSS PROFIT 0
--------
OPERATING EXPENSES 88,399
INCOME FROM OPERATIONS (88,399)
--------
NET (LOSS) $(88,399)
--------
</TABLE>
C-9
<PAGE>
<TABLE>
INTELLIGENCE NETWORK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997
OPERATING ACTIVITIES
<S> <C>
Net (loss) $(88,399)
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase (decrease) in accounts payable 8,150
Increase (decrease) in accrued expenses 2,105
Total adjustments 10,255
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES $(78,144)
INVESTING ACTIVITIES --
--------
NET CASH USED FOR INVESTING ACTIVITIES --
--------
FINANCING ACTIVITIES 32,475
Issuance of common stock
Net cash (used) by financing activities 32,475
INCREASE (DECREASE) IN CASH (45,669)
CASH:
Beginning of nine month period 57,977
End of nine month period 12,308
</TABLE>
C-10
<PAGE>
ANNEX "D"
INDEX TO GMG FINANCIAL STATEMENTS
I. Audited Financial Statements for the Fiscal Year ended
December 31, 1995
Independent Auditor's Report D-1
Statement of Assets, Liabilities and Stockholder's Equity D-2
Statement of Revenues, Expenses and Retained Earnings D-3
Statement of Changes in Stockholders' Equity D-4
Statement of Cash Flows D-5
Notes to Financial Statements D-6
Supplementary Information- D-8
General and Administrative Costs
II. Audited Financial Statements for the Fiscal Year ended
December 31, 1996
Independent Auditor's Report D-9
Statement of Assets, Liabilities and Stockholder's Equity D-10
Statement of Revenues, Expenses and Retained Earnings D-11
Statement of Changes in Stockholders' Equity D-12
Statement of Cash Flows D-13
Notes to Financial Statements D-14
Supplementary Information- D-16
General and Administrative Costs
III. Unaudited Financial Statements for the nine months ended
September 30, 1997
Balance Sheet - September 30, 1997 D-17
Statements of Income - nine months ended September 30, 1997 D-18
and 1996
Statement of Cash Flows - nine months ended September 30, 1997 D-19
and 1996
<PAGE>
JAY S. SHAPIRO, P.A.
Certified Public Accountant
1031 Ives Dairy Road Member: American Institute of
Suite 127 Certified Public Accountant
North Miami Beach, Florida 33179 and
Dade (305) 654-9989 Florida Institute of
Broward (954) 522-2915 Certified Public Accountants
Fax (305) 654-0055
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and
Stockholders of GMG Computer Consultants, Inc.
We have audited the accompanying Balance Sheet of GMG Computer Consultants, Inc.
as of December 31, 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended. 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.
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 financial statements referred to above present fairly, in
all material respects, the financial position of GMG Computer Consultants, Inc.
as of December 31, 1995, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as whole. The supplemental information is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ J.S. Shapiro, CPA, P.A.
North Miami Beach, Florida
November 12, 1997
D-1
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 392
Accounts receivable - trade, net of
allowance for doubtful accounts of $778 51,010
Shareholder loan receivable 7,026
-------
58,428
PROPERTY AND EQUIPMENT, NET 16,654
OTHER ASSETS:
Deposits 3,630
-------
3,630
-------
$78,712
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $18,305
Line of credit payable - bank 16,123
Payroll taxes payable 2,440
Sales tax payable 2,759
-------
39,627
-------
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value 200
shares authorized, issued and
outstanding 200
Additional Paid-in Capital 4,200
Retained earnings 34,685
-------
39,085
-------
$78,712
=======
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-2
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF REVENUES, EXPENSES AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C>
SALES $406,227
COST OF SALES 79,351
--------
GROSS PROFIT 326,876
OPERATING EXPENSES 230,666
--------
INCOME FROM OPERATIONS 96,210
OTHER INCOME (EXPENSES)
Bad debt expense (778)
Interest expense (1,663)
---------
(2,441)
---------
NET INCOME $ 93,769
========
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-3
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
DECEMBER 31, 1995
<CAPTION>
COMMON SHARES ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS TOTAL
------ ------ --------------- -------- -----
BALANCE,
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1995 200 $200 $ 4,200 $ 4,400
NET INCOME FOR THE YEAR $93,769 93,769
LESS SHAREHOLDERS'
DIVIDEND DISTRIBUTIONS $59,084 59,084
BALANCE,
DECEMBER 31, l995 200 $200 $ 4,200 $34,685 39,085
The Accompanying notes are an integral part of these Financial Statements
</TABLE>
D-4
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
OPERATING ACTIVITIES:
<S> <C>
Net income $ 93,769
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,186
Provision for doubtful accounts 778
Changes in account balances
Accounts receivable (51,788)
Deposits 1,905
Accounts payable 18,305
Payroll taxes payable 3,789
Sales taxes payable (744)
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 78,200
INVESTING ACTIVITIES:
Purchase of property and equipment (691)
--------
NET CASH USED FOR INVESTING ACTIVITIES (691)
--------
FINANCING ACTIVITIES
Proceeds from line of credit payable - bank 763
Repayments on shareholders' note (8,084)
Repayments on short term debt (15,536)
Payments on shareholder's dividend distributions (59,084)
--------
Net cash (used) by financing activities (81,941)
--------
INCREASE (DECREASE) IN CASH (4,432)
CASH:
Beginning of year 4,824
--------
End of year $ 392
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest expense $ 1,663
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-5
<PAGE>
GMG COMPUTER CONSULTANTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,1995
NOTE 1 - BACKGROUND INFORMATION
GMG Computer Consultants, Inc. was incorporated in the state of Florida on May
14, 1990. The Company is a professional digital pre-press and color services
firm servicing the magazine and advertising industry. Its customer base is
nationwide with a concentrated emphasis in South Florida.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue from sales of digital pre-press and color services are
recognized upon delivery to the customer.
Trade Receivables
The Company provides an allowance for losses on trade receivables based on a
review of the current status of existing receivables and management's evaluation
of periodic aging of accounts.
Property and Equipment
Property and equipment are stated at cost. Depreciation for both financial
accounting and income tax purposes is computed using combinations of the
straight line and accelerated methods over the estimated lives of the respective
assets. Maintenance and repairs are charged to expense when incurred.
Income Taxes
The Company is an S Corporation for federal income tax purposes. Consequently,
all income tax attributes are reported by the stockholders' individually.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
The carrying value of cash, receivables and accounts payable approximates fair
value due to the short maturity of these instruments. The carrying values of
short term debt approximate fair value based on discounting the projected cash
flows using market rates available for similar maturities. None of the financial
instruments are held for trading purposes.
NOTE 3 - NOTES RECEIVABLE
The Company holds note receivables from its stockholders' totaling $7,026. These
notes earn interest at 8% and are due upon demand.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Machinery and equipment $91,112
Less - accumulated depreciation 74,458
-------
Net property & equipment $16,654
Depreciation expense amounted to $12,186 in 1995.
D-6
<PAGE>
NOTE 5 - LINE OF CREDIT PAYABLE - BANK
Equitable Bank
Line of credit payable on demand
Interest rate at 10.00%
Secured by corporate assets $16,123
NOTE 6 - LEASE COMMITMENTS
The Company leases office space which expires in December, 1998.
The lease requires the Company to pay monthly installments of $2,188.
Future minimum lease payments as of December 31, 1995 are as follows:
1996 $26,260
1997 42,235
1998 46,389
--------
$114,884
Rent expense for 1995 was $17,030.
The Company leases production and computer equipment under operating leases
which expire in 1997 and 1998. The leases require the Company to pay monthly
installments of $3,815.
Future minimum lease payments as of December 31, 1995 are as follows:
1996 $45,766
1997 45,766
1998 32,521
--------
$124,053
Equipment lease expense for 1995 was $30,889.
D-7
<PAGE>
SUPPLEMENTARY INFORMATION
GMG COMPUTER CONSULTANTS, INC.
GENERAL AND ADMINISTRATIVE COSTS
FOR THE YEAR ENDED DECEMBER 31, 1995
Advertising $ 3,750
Auto expense 13,306
Bank charges 639
Beeper charges 189
Delivery services 7,357
Depreciation and amortization 12,186
Dues & subscriptions 841
Equipment leases 30,889
Insurance 12,796
Legal fees 1,097
Licenses & taxes 2,653
Meals & entertainment 1,501
Office expenses 7,415
Office salaries 29,683
Officer's salaries 46,610
Outside services 9,701
Payroll taxes 14,415
Postage 916
Professional fees 3,075
Rent 17,030
Repairs & maintenance 144
Security 850
Seminars 325
Software 674
Supplies 865
Telephone 11,759
---------
$ 230,666
=========
The accompanying notes are an integral part of these Financial Statements
D-8
<PAGE>
JAY S. SHAPIRO, P.A.
Certified Public Accountant
1031 Ives Dairy Road Member: American Institute of
Suite 127 Certified Public Accountant
North Miami Beach, Florida 33179 and
Dade (305) 654-9989 Florida Institute of
Broward (954) 522-2915 Certified Public Accountants
Fax (305) 654-0055
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and
Stockholders of GMG Computer Consultants, Inc.
We have audited the accompanying Balance Sheet of GMG Computer Consultants, Inc.
as of December 31, 1996, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended. 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.
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 financial statements referred to above present fairly, in
all material respects, the financial position of GMG Computer Consultants, Inc.
as of December 31, 1996, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as whole. The supplemental information is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ J.S. Shapiro, CPA, P.A.
North Miami Beach, Florida
November 12, 1997
D-9
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
DECEMBER 31, l996
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 2,309
Accounts receivable - trade, net of
allowance for doubtful accounts of $778 19,835
Notes receivable, shareholders' 46,665
-------
68,809
PROPERTY AND EQUIPMENT, NET 16,893
OTHER ASSETS:
Deposits 4,567
-------
4,567
-------
$90,269
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 6,905
Line of credit payable - bank 15,924
Payroll taxes payable 16,958
-------
39,787
-------
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value 200
shares authorized, issued and
outstanding 200
Additional Paid-in Capital 4,200
Retained earnings 46,082
-------
50,482
-------
$90,269
=======
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-10
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF REVENUES, EXPENSES AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
REVENUES:
<S> <C>
Sales $389,694
DIRECT COST OF REVENUES:
Purchases 51,931
--------
GROSS PROFIT 337,763
OPERATING EXPENSES 256,399
--------
INCOME FROM OPERATIONS 81,364
OTHER INCOME (EXPENSES)
Bad debt expense (302)
Interest expense (2,600)
---------
(2,902)
---------
NET INCOME $ 78,462
========
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-11
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
DECEMBER 31, 1996
<CAPTION>
COMMON SHARES ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS TOTAL
------ ------ --------------- -------- -----
BALANCE,
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1996 200 $200 $ 4,200 $34,685 $39,085
NET INCOME FOR THE YEAR $78,462 $78,462
LESS SHAREHOLDERS'
DIVIDEND DISTRIBUTIONS $67,065 $67,065
BALANCE,
DECEMBER 31, l995 200 $200 $ 4,200 $46,082 $50,482
The Accompanying notes are an integral part of these Financial Statements
</TABLE>
D-12
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
OPERATING ACTIVITIES:
<S> <C>
Net income $ 78,462
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,601
Provision for doubtful accounts 302
Changes in account balances
Accounts receivable 30,872
Deposits (937)
Accounts payable (11,400)
Payroll taxes payable 14,518
Sales taxes payable (2,759)
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 121,659
INVESTING ACTIVITIES:
Issuance of stockholders' note receivable (39,639)
Purchase of property and equipment (12,839)
--------
NET CASH USED FOR INVESTING ACTIVITIES (52,478)
--------
FINANCING ACTIVITIES
Repayments on line of credit payable - bank (199)
Payments on shareholder's dividend distributions (67,065)
--------
Net cash (used) by financing activities (67,264)
--------
INCREASE (DECREASE) IN CASH 1,917
CASH:
Beginning of year 392
--------
End of year $ 2,309
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest expense $ 2,600
The accompanying notes are an integral part of these Financial Statements
</TABLE>
D-13
<PAGE>
GMG COMPUTER CONSULTANTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - BACKGROUND INFORMATION
GMG Computer Consultants, Inc. was incorporated in the state of Florida on May
14, 1990. The Company is a professional digital pre-press and color services
firm servicing the magazine and advertising industry. Its customer base is
nationwide with a concentrated emphasis in South Florida.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue from sales of digital pre-press and color services are
recognized upon delivery to the customer.
Trade Receivables
The Company provides an allowance for losses on trade receivables based on a
review of the current status of existing receivables and management's evaluation
of periodic aging of accounts.
Property and Equipment
Property and equipment are stated at cost. Depreciation for both financial
accounting and income tax purposes is computed using combinations of the
straight line and accelerated methods over the estimated lives of the respective
assets. Maintenance and repairs are charged to expense when incurred.
Income Taxes
The Company is an S Corporation for federal income tax purposes. Consequently,
all income tax attributes are reported by the stockholders' individually.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
The carrying value of cash, receivables and accounts payable approximates fair
value due to the short maturity of these instruments. The carrying values of
short term debt approximate fair value based on discounting the projected cash
flows using market rates available for similar maturities. None of the financial
instruments are held for trading purposes.
D-14
<PAGE>
NOTE 3 - NOTES RECEIVABLE
The Company holds note receivables from its stockholders' totaling $46,665.
These notes earn interest at 8% and are due upon demand.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Machinery and equipment $102,768
Less - accumulated depreciation 85,875
-------
Net property & equipment $16,893
Depreciation expense amounted to $12,601 in 1996.
NOTE 5 - LINE OF CREDIT PAYABLE- BANK
Equitable Bank
Line of credit payable on demand
Interest rate at 10.00%
Secured by corporate assets $15,924
NOTE 6 - LEASE COMMITMENTS
The Company leases office space which expires in December, 1998.
The lease requires the Company to pay monthly installments of
$3,519.
Future minimum lease payments as of December 31, 1996 are as follows:
1997 $42,235
1998 46,389
-------
$88,624
Rent expense for 1996 was $26,708.
The Company leases production and computer equipment under operating leases
which expire in 1997 and 1998. The leases require the company to pay monthly
installments of $3,815.
Future minimum lease payments as of December 31, 1996 are as follows:
1997 $45,766
1998 32,521
-------
$78,287
Equipment lease expense for 1996 was $41,528.
D-15
<PAGE>
SUPPLEMENTARY INFORMATION
GMG COMPUTER CONSULTANTS, INC.
GENERAL AND ADMINISTRATIVE COSTS
FOR THE YEAR ENDED DECEMBER 31, 1996
Advertising $ 5,851
Auto expenses 9,412
Bonuses 4,900
Delivery services 16,997
Depreciation and amortization 12,601
Equipment leases 41,528
Insurance 10,622
Miscellaneous 1,889
Office expenses 6,047
Office salaries 45,605
Officer's salaries 49,170
Outside services 1,905
Payroll taxes 7,708
Professional fees 2,136
Rent 26,708
Telephone 7,305
Utilities 6,015
--------
$256,399
========
The accompanying notes are an integral
part of these Financial Statements
D-16
<PAGE>
<TABLE>
UNAUDITED GMG FINANCIAL STATEMENTS
GMG COMPUTER CONSULTANTS, INC.
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 4,424
Accounts receivable - trade, net of
allowance for doubtful accounts of $569 16,768
Notes receivable, shareholders' 70,653
-------
91,845
PROPERTY AND EQUIPMENT, NET 8,492
OTHER ASSETS:
Deposits 5,073
-------
5,073
-------
$105,410
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $11,195
Line of credit payable - bank 16,099
Payroll taxes payable 3,045
-------
30,339
-------
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value 200
shares authorized, issued and
outstanding 200
Additional Paid-in Capital 4,200
Retained earnings 70,671
-------
75,071
-------
$105,410
=======
</TABLE>
D-17
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
------------------ ------------------
REVENUES:
<S> <C> <C>
Sales $225,569 $223,199
DIRECT COSTS 29,359 39,096
-------- --------
GROSS PROFIT 226,210 184,103
-------- --------
OPERATING EXPENSES
Advertising 2,200 3,869
Auto expenses 3,244 8,674
Bad debt 255 314
Bank charges 544 376
Depreciations 8,401 8,124
Delivery services 13,157 6,963
Equipment leases 26,431 24,370
Insurance 9,395 8,508
Interest expense 1,079 1,081
Licenses & taxes 2,183 353
Office expenses 2,797 8,227
Office salaries 22,440 82,173
Payroll taxes 2,728 568
Professional fees 3,575 700
Rent 24,864 19,477
Repairs & maintenance 472 595
Telephone 5,365 5,751
Travel 1,015 4,366
Utilities 3,619 3,067
-------- --------
133,764 187,566
-------- --------
NET INCOME $ 92,446 $ (3,453)
======== ========
</TABLE>
D-18
<PAGE>
<TABLE>
GMG COMPUTER CONSULTANTS, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
------------------ ------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 92,446 (3,453)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,401 8,124
Provision for doubtful accounts 255 314
Changes in account balances
Accounts receivable 3,067 30,382
Deposits (506) 1,756
Accounts payable 4,290 (13,559)
Payroll taxes payable (13,913) 9,698
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,040 33,262
INVESTING ACTIVITIES:
Issuance of stockholders' note receivable (23,988) (1,670)
Purchase of property and equipment (255) (3,073)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (24,243) (4,743)
-------- --------
FINANCING ACTIVITIES
Repayments on line of credit payable - bank (175) (197)
Payments on shareholder's dividend distributions (67,857) (27,773)
------- --------
Net cash (used) by financing activities (67,682) (27,970)
-------- --------
INCREASE (DECREASE) IN CASH 2,115 549
CASH:
Beginning of period 2,309 392
-------- --------
End of period $ 4,424 $ 941
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest expense $ 1,079 $ 1,081
</TABLE>
D-19
<PAGE>
ANNEX "E"
---------
INDEX TO TMC FINANCIAL STATEMENTS
I. Audited Financial Statements for the Fiscal Year ended
December 31, 1995
Independent Auditor's Report E-1
Balance Sheet as of December 31, 1996 E-2
Statement of Income for the fiscal year ended E-3
December 31, 1996
Statement of Changes in Stockholders' Equity E-4
Statement of Cash Flows E-5
Notes E-6
II. Unaudited Financial Statements for the six months ended
September 30, 1997
Balance Sheet September 30, 1997 E-7
Statements of Income - nine months ended September 30, 1997 E-8
and 1996
Statement of Cash Flows - nine months ended September 30, 1997 E-9
and 1996
<PAGE>
Simmons LaPlant & Associates
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Total Micro Computers, Inc.
We were engaged to audit the accompanying balance sheet of Total MicroComputers,
Inc. (a Florida corporation) as of December 31, 1996, and the related statements
of income, retained earnings, and cash flows for the year then ended. 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.
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 financial statements referred to above fairly, in all
material respects, the financial position of Total Micro Computers, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Simmons, LaPlant & Associates, CPA, PA
July 8, 1997
Certified Public Accountants / a Professional Association
First of America Plaza - 201 East Kennedy Boulevard, Suite 715
Tampa, Florida 33602-5828 - 813-229-2090 - 223-7104 FAX
E-1
<PAGE>
<TABLE>
TOTAL MICRO COMPUTERS, INC.
BALANCE SHEET
<CAPTION>
As of December 31, 1996
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 25,533
Accounts receivable-trade
net of allowance for doubtful accounts of $5,000 202,180
Inventory 141,503
Notes receivable, stockholders 35,188
Prepaid expenses 2,494
--------
Total Current Assets 406,898
PROPERTY AND EQUIPMENT, NET 42,386
--------
TOTAL ASSETS $449,294
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $101,973
Accrued expenses 54,846
Accrued income taxes 67,446
Note payable, stockholder 8,000
Note payable, related party 7,000
Deferred income taxes 4,800
--------
Total Current Liabilities 244,065
--------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value; 10,000 shares
authorized, 500 shares issued and outstanding 500
Additional paid-in capital 65,033
Retained earnings 139,686
--------
Total Stockholders' Equity 205,219
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $449,284
========
Read accompanying notes to financial statements
</TABLE>
E-2
<PAGE>
<TABLE>
TOTAL MICRO COMPUTERS, INC.
STATEMENT OF INCOME
<CAPTION>
Year Ended December 31, 1996
<S> <C>
SALES $ 4,566,492
COSTS OF SALES 3,917,191
-----------
GROSS PROFIT 649,301
OPERATING EXPENSES 462,970
-----------
INCOME FROM OPERATIONS 186,331
-----------
OTHER INCOME (EXPENSES)
Other income 27,767
Interest expense (2,166)
-----------
25,601
-----------
INCOME BEFORE INCOME TAXES 211,932
Provision for income taxes 72,246
-----------
NET INCOME $ 139,686
===========
</TABLE>
E-3
<PAGE>
<TABLE>
TOTAL MICRO COMPUTERS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Year Ended December 31, 1996
Common Shares Additional Retained
Shares Amount Paid-In Capital Earnings Total
------ ------- --------------- -------- -----
ISSUANCE OF COMMON STOCK,
<S> <C> <C> <C> <C> <C>
JANUARY 2, 1996 500 $500 $65,033 $65,533
NET INCOME FOR THE YEAR
$139,686 139,686
--- ---- ------- -------- --------
BALANCE,
DECEMBER 31, 1996 500 $500 $65,033 $139,686 $205,219
=== ==== ======= ======== ========
Read accompanying notes to financial statements.
</TABLE>
E-4
<PAGE>
<TABLE>
TOTAL MICRO COMPUTERS, INC.
STATEMENT OF CASH FLOWS
<CAPTION>
Year Ended December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net income $ 139,686
---------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 4,116
Provision for doubtful accounts 5,000
Changes in account balances:
Accounts receivable (207,180)
Inventory (92,238)
Prepaid expenses (275)
Accounts payable 101,973
Accrued income taxes 67,446
Deferred income taxes 4,800
Accrued expenses 54,846
---------
Total Adjustments (61,512)
---------
Net Cash Provided by Operating Activities 78,174
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of stockholders notes receivable (35,188)
Purchase of fixed assets (31,272)
---------
Net Cash Used by Investing Activities (66,460)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of stockholder note (3,674)
Repayment of related party note (1,000)
Proceeds from related party note 8,000
Issuance of common stock 10,493
---------
Net Cash Provided by Financing Activities 13,819
---------
NET INCREASE IN CASH 25,533
CASH, BEGINNING OF YEAR 0
---------
CASH, END OF YEAR $ 25,533
=========
SUPPLEMENTAL DISCLOSURES
- ------------------------
Cash paid during the year for interest $ 2,166
=========
Read accompanying notes to financial statements.
</TABLE>
E-5
<PAGE>
TOTAL MICRO COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-BACKGROUND INFORMATION
Total Micro Computers, Inc. (the Company), was organized and incorporated under
the laws of Florida on October 23, 1995. The Company began business on January
2, 1996 and is in the sale and service of computer hardware and software.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
The company used the accrual method of accounting which means that revenues
are recorded when earned. Revenue is considered earned at the point of sale
of the inventory.
Trade Receivables
- ----------------
The company provides an allowance for losses on trade receivables based on a
review of the current status of existing receivables and management's evaluation
of periodic aging of accounts.
Inventory
- ---------
Inventory consisting primarily of computer hardware components is stated at the
lower of cost or market. Cost is based on standard costs generated principally
by most recent purchase prices.
Property and Equipment
- ---------------------
Property and equipment are stated at cost. Depreciation for both financial
accounting and income tax purposes is computed using combinations of the
straight line and accelerated methods over the estimated lives of the respective
assets. Maintenance and repairs are charged to expense when incurred.
Income Taxes
- ------------
The Company uses Statement of Financial Accounting Standards No.109, "Accounting
for Income Taxes". Under Statement 109, deferred tax assets and liabilities are
recognized based on the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. 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.
Use of Estimates
- ---------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
- --------------------------------
The carrying value of cash, receivables and accounts payable approximates fair
value due to the short maturity of these instruments. The carrying values of
short term debt approximate fair value based on discounting the projected cash
flows using market rates available for similar maturities. None of the financial
instruments are held for trading purposes.
NOTE 3 - NOTES RECEIVABLE
The Company holds a note receivable from each stockholder totaling $35,188.
These notes earn interest at 8.5% and are due upon demand.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Store equipment $ 2,860
Furniture and equipment 18,767
Office equipment 24,875
-------
46,502
Less accumulated depreciation 4,116
-------
Property and equipment, net $42,386
=======
Depreciation expense amounted to $4,116 in 1996.
NOTE 5 - NOTES PAYABLE
Notes payable consists of the following:
Note payable to related party with monthly
payments of $150, including interest
at 1.00%. Balloon payment due March 1997.
The note is unsecured $ 7,000
Note payable to a stockholder includes interest
at 18%. Note is due on demand. The note
is unsecured 8,000
-------
$15,000
=======
NOTE 6 - LEASE COMMITMENTS
The Company leases office space and a truck under operating leases which expire
in April 1997 and August 1998, respectively. The leases require the Company to
pay monthly installments of $1,073.
Future minimum lease payments as of December 31, 1996 are as follows:
1997 $5,862
1998 1,566
------
$7,428
======
Rent expense for all operating leases for 1996 was $15,652.
NOTE 7 - INCOME TAXES
The provision for income taxes for the year ended December 31, 1996 consist of:
Current Deferred Total
------- -------- -----
Federal $56,766 $ 4,000 $60,766
State 10,680 800 11,480
------- ------- -------
$67,446 $ 4,800 $72,246
======= ======= =======
Provision for income taxes is reconciled to the amount computed by applying the
federal corporate tax rate to earnings before income taxes as follows:
Income tax at statutory rate $63,579
State income taxes 8,667
-------
$72,246
=======
The significant portion of the deferred tax liability is due to the tax effects
of temporary differences on depreciation of fixed assets.
NOTE 8 - RELATED PARTY TRANSACTIONS
During the year, the Company sold inventory to companies affiliated through
common ownership. Revenues from these sales totaled $1,199,655 for the year
ended December 31, 1996.
NOTE 9 - NON-CASH FINANCING ACTIVITY
On January 2, 1996 , the stockholders contributed non-cash assets totaling
$66,714 in exchange for shares of common stock. The Company also assumed a note
payable to a stockholder totaling $11,674 at January 2, 1996.
E-6
<PAGE>
<TABLE>
UNAUDITED TOTAL MICRO COMPUTERS, INC
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 6,748
Accounts Receivable - trade,
net of allowance for doubtful accounts of $4,000 246,572
Inventory 82,419
Notes receivable, stockholders 35,188
Prepaid expenses 2,494
--------
Total Current Assets 373,421
PROPERTY AND EQUIPMENT, NET 53,256
--------
TOTAL ASSETS $426,677
--------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade 75,192
Accrued expenses 66,740
Accrued income taxes 67,446
Notes payable, stockholder 14,750
Deferred income taxes 4,800
--------
Total Current Liabilities 228,928
--------
STOCKHOLDERS' EQUITY
Common Stock 500
Additional Paid In Capital 65,033
Retained Earnings 132,216
--------
Total Stockholders'Equity 197,749
--------
$426,677
--------
</TABLE>
E-7
<PAGE>
<TABLE>
UNAUDITED TOTAL MICRO COMPUTERS, INC
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
------------------- ------------------
<S> <C> <C>
SALES $ 2,750,896 $ 1,976,432
COST OF SALES 2,282,713 1,613,543
----------- -----------
GROSS PROFIT 468,183 362,889
----------- -----------
OPERATING EXPENSES 475,653 379,034
NET INCOME $ (7,470) $ (16,145)
----------- -----------
</TABLE>
E-8
<PAGE>
<TABLE>
UNAUDITED TOTAL MICRO COMPUTERS, INC
STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ (7,470) $ (16,145)
Adjustments to reconcile net income to net
cash provided by operating activities (195) 19,678
-------- --------
Net Cash Provided by Operating Activities (7,665) 3,533
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (10,870) (15,642)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of related party note (250) 0
Proceeds from related party note 0 8,000
Issuance of common stock 0 10,493
Net Cash Provided by Financing Activities (250) 18,493
NET INCREASE (DECREASE IN CASH) (18,785) 6,384
CASH, BEGINNING OF PERIOD 25,533 0
CASH, END OF PERIOD $ 6,748 $ 6,384
======== ========
</TABLE>
E-9
