U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-18270
DAWCIN INTERNATIONAL CORP.
--------------------------
(Exact name of the registrant as specified in its charter)
NEW YORK 11-2857523
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Garden City Plaza
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Garden City, New York 11530
(Address of principal executive offices)
(516) 739-8800
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(Registrant's telephone number)
Command Credit Corporation
--------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 7, 1996, 378,867. This amount reflects a Two Hundred
(200) to One (1) reverse stock split effective at the open of business on
October 17, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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PART I: Financial Information
ITEM 1: Financial Statements
DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
(UNAUDITED) (AUDITED)
September 30 June 30
1996 1996
------------ -------
Current Assets:
Cash and Cash Equivalents (Note 2) $ 18,953 $ 45,295
Accounts Receivable, net (Note 3) 226,697 248,465
Note Receivable (Note 4) 2,485,000 2,485,000
Prepaid Expenses 7,614 9,913
Interest Receivable (Note 5) 600,000 600,000
---------- ----------
Total Current Assets 3,338,264 3,388,673
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Fixed Assets:
Equipment 681,721 729,117
Furniture & Fixtures 166,480 166,400
Leasehold Improvements 225,003 225,003
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1,073,204 1,120,520
Less: Accumulated Depreciation
and Amortization 722,177 743,723
---------- ----------
Total Net Fixed Assets 351,027 376,797
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Other Assets:
Marketable Equity Securities -0- 14,500
Organization Expenses 5,049 677
Computer Software 128,297 119,992
Goodwill 262,586 75,967
Security Deposits 38,701 38,701
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Total Other Assets 434,633 249,837
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Total Assets $4,123,924 $4,015,307
========== ==========
The accompanying notes are an integral part of this report.
F-1
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DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
LIABILITIES & SHAREHOLDERS' EQUITY
(UNAUDITED) (AUDITED)
September 30 June 30
1996 1996
------------ -------
Current Liabilities:
Accounts Payable & Accrued Expenses (Note 6) $ 935,801 $ 784,517
Leases Payable 20,141 20,141
Payroll Taxes Payable 308,308 239,462
Notes Payable (Note 7) 214,966 203,065
Salaries Payable (Note 8) 196,120 158,944
Loans Payable (Note 7) 568,330 484,622
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Total Current Liabilities 2,243,666 1,890,751
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Long Term Liabilities:
Leases Payable 26,830 31,868
Notes Payable (Note 7) 893,759 911,259
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Total Long Term Liabilities 920,589 943,127
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Total Liabilities 3,164,255 2,833,878
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Shareholders' Equity:
Common Stock - Authorized 150 Mill. Shares,
$.0001 Par Value, 50,166,719 Issued and
49,095,306 Outstanding at 9/96 5,016 2,540
Paid-In-Capital in Excess of Par Value 45,963,520 43,929,791
Paid-In-Capital from Treasury Stock 946,434 946,434
Paid-In-Capital from Warrants Exercised 902,389 902,389
Translation Adjustment 4,852 5,528
Retained (Deficit) (45,828,123) (43,575,706)
---------- ----------
Total Shareholders' Equity 1,994,088 2,210,976
Less: Treasury Shares at Cost (1,034,419) (1,029,547)
---------- ----------
Net Shareholders' Equity 959,669 1,181,429
---------- ----------
Total Liabilities and Shareholders' Equity $4,123,924 $4,015,307
========== ==========
The accompanying notes are an integral part of this report.
F-2
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DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
(UNAUDITED)
1996 1995
---------- ----------
Revenues:
Operating Revenue $ 296,291 $ 142,060
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Total Revenue $ 296,291 $ 142,060
Costs Related to Revenue 155,711 106,853
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Gross Income $ 140,580 $ 35,207
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Operating Expenses:
Selling and Administrative
Expenses (Schedule I) 1,142,069 601,975
Cost of Shares for Services
Rendered (Schedule II) 1,278,993 1,513,727
(Gain) Loss on Investment -0- 1,907,793
(Gain) Loss on Sale of Assets (25,000) -0-
Bad Debt Expense -0- 618,313
Taxes 29,050 23,970
---------- ----------
Total Operating Expenses $2,425,112 $4,665,778
---------- ----------
Net (Loss) from Operations (2,284,532) (4,630,571)
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Non-Operating & Non-Recurring:
Gain (Loss) on Sale of Marketable
Equity Securities (1,000) -0-
---------- ----------
Net (Loss) ($2,285,532) ($4,630,571)
========== ==========
Net (Loss) per Outstanding
Common Share (Note 10) ($ 0.06) ($ 6.00)*
========== ==========
* NOTE: This amount has been restated to reflect a One Hundred Fifty (150) to
One (1) reverse stock split effective October 27, 1995.
The accompanying notes are an integral part of this report.
F-3
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DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
(UNAUDITED)
1996 1995
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Cash Flow from Operations:
Net (Loss) ($2,285,532) ($4,630,571)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operations
Depreciation & Amortization (21,546) (296,064)
(Gain)/Loss on Sale of Marketable
Equity Securities 1,000 -0-
Foreign Currency Translation Adjustment (676) (14,035)
(Increase) Decrease in:
Prepaid Expenses 2,299 (469,592)
Accounts Receivable 21,768 224,685
Organization Expenses (4,372) 29,148
Computer Software (8,305) 2,963
Increase (Decrease) in:
Accounts Payable 151,284 (720,808)
Leases Payable (5,038) (53,726)
Payroll Taxes Payable 68,846 (173,325)
Notes Payable (5,599) (145,929)
Salaries Payable 37,176 61,250
Loans Payable 83,708 (7,866)
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Net Cash Used (Provided) by Operations (1,964,987) (6,193,870)
---------- ----------
Cash Flow from Financing Activities:
Proceeds from Issuance of Common Stock 2,036,205 1,654,345
Purchase of Treasury Stock (4,872) (5,000)
Retained Earnings Liquidated Subsidiaries 33,115 1,876,281
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Net Cash Flow from Financing Activities 2,064,448 3,525,626
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Cash Flow from Investing Activities:
Capital Expenditures Paid in Cash 47,316 420,090
Bank/Data Center Acquisition -0- 260,993
Goodwill (186,619) 1,937,192
Proceeds from Sale of Marketable
Equity Securities 13,500 6,301
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Net Cash (Used) by Investing Activities (125,803) 2,624,576
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Net Increase in Cash and Cash Equivalents (26,342) (43,668)
Cash and Cash Equivalents Beginning of Period 45,295 228,098
---------- ----------
Cash and Cash Equivalents End of Period $ 18,953 $ 184,430
========== ==========
The accompanying notes are an integral part of this report.
F-4
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DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
SUPPORTING SCHEDULES
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
(UNAUDITED)
SCHEDULE I 1996 1995
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Selling Expenses:
Salaries & Outside Services $ 98,689 $ 13,446
Travel & Entertainment 136,840 51,099
Telephone 36,633 18,204
Commissions 19,925 59,299
Processing Charges 686 6,143
Trade Shows 2,600 100
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Total Selling Expenses $ 295,373 $ 148,291
========== ==========
Administrative Expenses:
Salaries & Outside Services $ 256,399 $ 193,650
Professional Fees 198,548 110,294
Office Expenses 6,288 1,099
Stock Transfer Fees 1,689 2,776
Rent 72,673 39,275
Stationery, Messenger, Printing & Postage 16,652 13,924
Insurance 26,362 26,023
Repair & Maintenance 15,065 5,924
Building & Equipment Leasing 7,096 14,349
Depreciation & Amortization 44,161 33,211
Utilities & Sundry Expenses 22,768 1,060
Interest Expense 178,995 12,099
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Total Administrative Expenses $ 846,696 $ 453,684
========== ==========
TOTAL SELLING AND ADMINISTRATIVE EXPENSES $1,142,069 $ 601,975
========== ==========
SCHEDULE II
Cost of Shares for Services Rendered:
Consulting $ 517,559 $ 712,280
Marketing 275,916 19,119
Public Relations 296,020 782,328
Research & Development 189,498 -0-
---------- ----------
TOTAL COST OF SHARES FOR SERVICES RENDERED $1,278,993 $1,513,727
========== ==========
The accompanying notes are an integral part of this report.
F-5
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DAWCIN INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 & 1995
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Method of Accounting: Dawcin International Corp. utilizes the accrual method
of accounting in recording all transactions.
B) Consolidation: Command Credit Acceptance Corporation ("Acceptance") was
incorporated in Florida on September 9, 1985. On October 12, 1988,
Acceptance was acquired by Video Plan International Corp. ("VPI"), a New York
corporation with virtually no business activity since 1980. Simultaneously,
VPI changed its name to Command Credit Corporation ("Command"). In October
1996, Command changed its name to Dawcin International Corp. ("Dawcin").
Results of operations of Dawcin and its subsidiaries are reported on a
consolidated basis.
C) Foreign Currency: Currency fluctuations resulting from the consolidation
of Foreign Offices are accumulated as prescribed by translation of foreign
operations under FASB 52. The resulting translation gains and losses are
shown as a component of Stockholders' Equity.
D) Depreciation & Amortization: Depreciation of fixed assets is being computed
on a straight line basis over a period of five years. Organization expense and
Goodwill are being amortized over five and thirty year periods, respectively.
Leasehold improvements are amortized over the shorter of the life of the lease
or the estimated useful life.
E) Revenue Recognition: All revenue is recognized when earned.
F) Income taxes: The Company recognizes taxes on income as the liability is
incurred. To date, the Company has accumulated net operating losses which
can be used to offset future earnings.
NOTE 2: CASH AND CASH EQUIVALENTS
Cash and cash equivalents represents amounts available for current operations
held in cash, checking accounts and interest bearing accounts.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consists primarily of trade receivables in connection with
the Company's credit card division. There is no allowance for doubtful accounts
because all receivables are deemed collectible.
NOTE 4: NOTES RECEIVABLE
In October 1995, the Company signed a definitive agreement with Jetlease Finance
Corp., a Florida corporation ("Jetlease"), under which the Company acquired 100%
of the common stock of Fidelity Holding Corp., ("Fidelity") a wholly-owned
subsidiary of Jetlease (the "Jetlease Transaction"). Jetlease is primarily
engaged in the leasing of small, medium and large aircraft to
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corporations and high net worth individuals. The Jetlease Transaction provided
for Jetlease to issue two promissory notes totaling ten million dollars
($10,000,000) in the aggregate, at a 12% per annum interest rate. These notes
are interest only for twenty-four (24) months with the entire principal due at
the end of twenty-four (24) months. One note is collateralized by a 1974 Boeing
727-200F and the other note is collateralized by a 1971 Boeing 727-100.
These notes are currently in default. The Company has not received any interest
payments on the two promissory notes. The Company notified Jetlease and the
Federal Aviation Administration ("FAA") of the default and commenced an action
to foreclose on its collateral, the aircraft. The Company also commenced an
action against Jetlease, its principals and others, for damages. The Company has
accrued interest income on these notes in the amount of $600,000 which
represents accrued interest for the period January 1, 1996 through June 30,
1996. Management believes the probability of collecting this accrued interest is
favorable.
On April 21, 1996, an involuntary petition under Chapter 7 (liquidation) of the
United States Bankruptcy Code was filed against Jetlease in the United States
Bankruptcy Court for the Southern District of Florida. Jetlease consented to the
entry of an order for relief, to convert the case to a case under Chapter 11
(reorganization) and the appointment of a trustee. Subsequent to June 30, 1996,
the Company was informed by its legal counsel that the collateral securing these
promissory notes had been misrepresented to the Company. The Company had been
supplied with fraudulent appraisals. Based upon this information, the Company
has written down the value of the two promissory notes to $1,875,000, the
current market value of the two aircraft. This amount was determined by a
subsequent appraisal of the aircraft which was ordered by the Judge of the
United States Bankruptcy Court, for the Southern District of Florida. However,
this transaction is still subject to litigation in the Bankruptcy court.
In addition, the Company has a note receivable as a result of a guaranteed
investment.
NOTE 5: INTEREST RECEIVABLE
Interest receivable consists primarily of amounts due from Jetlease as payment
on the two promissory notes (see Note 4).
NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable consists of miscellaneous trade payables and amounts due to
vendors. Accrued expenses consist primarily of expenses incurred during the
period but invoiced after September 30, 1996.
NOTE 7: NOTES AND LOANS PAYABLE
Current notes payable consist of an amount due to a third party lender, payable
with interest at prime plus 2% with a maturity date of May 1997 as well as
amounts due to the principals of Berwyn Holdings, Inc., a wholly owned
subsidiary of the Company. Current loans payable consists of amounts lent to the
Company by William G. Lucas, Chairman of Dawcin as well as amounts due to third
party short-term lenders. Long-term notes payable consist of amounts due to a
third party lender. This lender provides funds on an as needed basis at a rate
of 10% per
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annum. The Company will repay these loans at such time when there is sufficient
revenue generated from the implementation of the Company's programs.
NOTE 8: SALARIES PAYABLE
Salaries payable consists of amounts owed to Mr. Lucas, Chairman of Dawcin.
Mr. Lucas has not drawn a salary for the past several months and will
continue not to draw a salary until such time when significant revenues are
generated from the implementation of the Company's programs. Mr. Lucas has
also forgiven a significant portion of his salary in prior years.
NOTE 9: SHAREHOLDERS' EQUITY
At September 30, 1996 the Company had outstanding 50,166,719 shares of common
stock. Management believes that the Company's common stock is greatly
undervalued, and therefore, has from time to time purchased its securities on
the open market. To date, the Company has reacquired 1,071,413 shares of common
stock. These shares were accounted for at cost to the issuer and at September
30, 1996. All such shares are held in the treasury.
On October 4, 1995, The Company's Board of Directors approved a reverse stock
split of its common shares, pursuant to which every One Hundred Fifty (150)
shares of the Company's issued and outstanding common stock was converted to One
(1) share. This reverse split became effective on October 27, 1995. In addition,
the Company has issued to shareholders of record as of the close of business on
Thursday, October 26, 1995, a warrant equivalent to a 300% common stock dividend
(post split), at no cost to the shareholder. Eighteen months from October 27,
1995, the warrants may be exercised and converted into common stock. These
warrants will be callable by the Company on October 28, 1998 at par value.
NOTE 10: LOSS PER SHARE
Loss per share was computed by dividing the net loss by the weighted average
number of shares of common stock outstanding during the period. The weighted
average number of common shares outstanding during the three months ended
September 30, 1996 and 1995 was 36,800,444 and 825,935, respectively. The amount
for the 1995 period has been restated to reflect a One Hundred Fifty (150) to
One (1) reverse stock split effective October 27, 1995.
NOTE 11: SUBSEQUENT EVENTS
On October 8, 1996, the Company's Board of Directors approved a name change to
Dawcin International Corp.
On October 4, 1996, the Company's Board of Directors approved a reverse stock
split of its common shares, pursuant to which every Two Hundred (200) shares of
the Company's issued and outstanding common stock was converted to One (1)
share. This reverse split became effective the open of business on October 17,
1996. In addition, shareholders of record as of the close of business on October
16, 1996 will be granted a stock option on a one for one basis equal to the post
reversed split shares. A registration filing for these shares will be submitted
to the SEC within 120 days from the date the option is granted. In order to
qualify, shareholders must hold their existing shares for thirty (30) days from
October 16, 1996 at which time shareholders
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of record will receive an option to purchase shares in Dawcin on a one for one
basis at a discounted price of $0.50 per share.
The Company's outstanding warrants did not reverse split with the common stock,
however, the terms of the warrants have been amended. The new terms of the
warrants are as follows: for every two hundred warrants a shareholder may
purchase one common share for three dollars and fifty cents ($3.50) per share.
With respect to uneven amounts, a shareholder can pay the fractional amount
equal to one full share.
On October 4, 1996, Dawcin's Board of Directors granted permission to proceed
with the acquisition of First Equities Corp., a mortgage banking company located
in Melville, New York. Furthermore, the Board of Directors approved the
appointment of two new Board members; Mr. Edward Capuano, Chairman of First
Equities Corp. and Ms. Lisa Vota, Vice President of Finance of Dawcin.
On October 7, 1996, the Company's Board of Directors accepted the resignation
of William G. Lucas as President of Dawcin and approved the appointment of
Mr. Edward Capuano as President and Chief Operating Officer of Dawcin. Mr.
Lucas still holds the title of Chairman and Chief Executive Officer of the
Company.
On October 17, 1996 Dawcin International Corp. concluded the acquisition of 97%
of First Equities Corp., a full service mortgage banking company located in
Melville, New York. First Equities has mortgage banking licenses in eight states
and has pending or planned applications in an additional twelve states.
Currently, First Equities is operating out of eighteen branches in eight states
and has experienced consistent growth in both size and volume of mortgages
originated since its inception less than a year ago.
ITEM 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion and analysis should be read in conjunction with the
Company's financial statements and related notes thereto.
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995
Revenues. Revenues for the three months ended September 30, 1996 and 1995
were $140,580 and $35,270, respectively. The increase in revenues is due
primarily due to the improved operations of the Company's subsidiaries,
specifically, the addition of Berwyn's contracts with European American Bank
(EAB) and Fleet Bank and the Company's acquisition in May 1996 of Integrated
Systems International, Inc. (ISI). ISI is a high-tech MIS company with expertise
in implementing specific network solutions and integrating diverse network
systems and applications.
5
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Selling and Administrative Expenses. Selling and Administrative expenses for
the three months ended September 30, 1996 and 1995 were $1,142,069 and $601,975,
respectively. This increase is due to an increase of professional fees,
specifically, legal fees incurred in connection with the Company's arbitration
proceeding against Prime and litigation with regard to the Jetlease transaction.
In addition, salary expense increased due to the acquisition of ISI.
Cost of Shares Issued for Services Rendered. The Cost of Shares Issued for
Services Rendered for the three months ended September 30, 1996 and 1995, were
$1,278,993 and $1,513,727, respectively. This decrease is a result of the
Company's efforts to reduce the amount of shares of its Common Stock issued to
various consultants and professional servicers for consulting, marketing, public
relations and research and development.
Loss on Investment and Bad-Debt Expense. Loss on Investment for the three
months ended September 30, 1996 and 1995 was $-0- and $1,907,793, respectively.
Bad-debt expense for the three months ended September 30, 1996 and 1995 was $-0-
and $618,313, respectively. These decreases are due to the write-off in
September 1995 of Prime Source Managed Total Care, Inc. a medical billing
service that also provided managed health care, located in Salt Lake City, Utah.
In addition, the Company had two inactive subsidiaries, BanServ, Inc. (BanServ)
and Command Credit Limited (Limited) which were written-off during 1995.
Net Losses. For the three months ended September 30, 1996 and 1995, the
Company had net losses of $2,285,532 and $4,630,571, respectively. The
decrease in losses is due primarily to the decrease in loss on investment and
bad-debt expense, described above, as well as a decrease in the cost of
shares issued for services offset by an increase in selling and
administrative expenses.
Liquidity and Capital Resources
As of September 30, 1996, the Company held cash and cash equivalents of
approximately $19,000. The Company had total assets of $4,123,924 and total
liabilities of $3,164,255, compared with $4,015,307 and $2,833,878, respectively
at September 30, 1995. The increase in assets is due primarily to an increase in
goodwill attributable to the acquisition of ISI in May 1996. The increase in
liabilities is due primarily to an increase in loans payable to the Chairman of
Dawcin as well as an increase in trade payables and payroll taxes payable,
offset in part by a decrease in long-term notes payable to third party lenders.
In the past, the Company has experienced cash flow difficulties as a result
of the substantial effort and expense incurred to implement its credit card
programs. The Company generates its cash flow almost exclusively from its
operating activities. When the Company experiences its cash flow difficulties,
William G. Lucas, Chairman of Dawcin, from time to time lends the Company funds
at virtually no interest. Mr. Lucas has also not drawn a salary for the past
several months and is currently not drawing a salary. In addition, in past years
Mr. Lucas has forgiven a significant portion of his salary. The Company may
increase its liquidity and capital resources through its currently growing bank
credit card service program and through its MIS division which has recently
signed a major information technology contract with a large regional HMO
facility. Berwyn expects to sign a number of new bank contracts which are
currently in final stages of negotiations. It should be noted that cash flows
have been increasing every day as a result of the addition of new credit card
applications. However, the Company is disappointed that the amount of new credit
card applications is not at the rate it expected. Management believes
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that these new credit card applications will begin to increase as EAB becomes
more experienced in the secured credit card program.
The Company currently has no material commitments for capital expenditures.
The Company continues to explore new means to increase its capital base to
finance current operations and to implement its business plan.
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
(2) Stock Purchase Agreement incorporated herein.
(27) Financial Data Schedule incorporated herein.
(99) Pro Forma Financial Information incorporated herein.
(b) REPORTS ON FORM 8-K
NONE.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: November 13, 1996 DAWCIN INTERNATIONAL CORP.
(Registrant)
By: /s/ William G. Lucas
------------------------
William G. Lucas, Chairman
9
EXHIBIT 2
STOCK PURCHASE AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered into
in Garden City, New York as of this 17th day of October, 1996 by and between
DAWCIN INTERNATIONAL CORP., a New York corporation having its principal place of
business at 100 Garden City Plaza, Garden City, New York 11530 ("Purchaser") and
FIRST EQUITIES CORP., a Delaware corporation having its principal place of
business at 520 Broad Hollow Road, Melville, New York 11747 ("Seller").
W I T N E S S E T H:
WHEREAS, the shareholders of the Seller own and desire to sell, assign and
convey to Purchaser, Dawcin International Corp. 8,488,030 shares of common
stock, $.0001 par value (the "First Equities Shares"), constituting ninety seven
percent (97%) of the issued and outstanding shares of Common Stock of the
Company, and Purchaser desires to purchase and acquire such Shares from Seller
on and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the respective representations and
warranties hereinafter set forth and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF STOCK
1.1 Sale and Purchase. Subject to the terms and conditions contained
herein, Seller hereby agrees to sell, transfer, assign, convey and deliver to
Purchaser, and Purchaser hereby agrees to purchase and accept from Seller, on
the Closing Date, all of Seller's right, title and interest in and to the
Shares, free and clear of any liens, pledges, security interests, claims or
encumbrances of any kind.
1.2 Consideration. The consideration payable by Purchaser for the Shares
to be sold to Purchaser as provided herein shall be 8,750,546 shares of the
common stock, $.0001 par value (the "Dawcin Shares") of Purchaser, which shall
be exchanged for the Shares in the ratio of 1.03 Dawcin Shares for each First
Equities share.
ARTICLE II
CLOSING; CONDITIONS TO CLOSING; DELIVERIES
2.1 Closing. The closing of this transaction (the "Closing") shall be held
on the Closing Date at or about 10:00 A.M., at Purchaser's offices at 100 Garden
City Plaza, Garden City, New York 11530 or at such other time and place upon
which the parties shall agree.
<PAGE>
2.2 Conditions to Purchaser's Obligation. Purchaser's obligation hereunder
to purchase and pay for the Shares is subject to the satisfaction, on or before
the Closing Date, of the following conditions, any of which may be waived, in
whole or in part, by Purchaser in its sole discretion, and Seller shall use its
best efforts to cause such conditions to be fulfilled:
(a) Representations and Warranties Correct; Performance. The
representations and warranties of Seller contained in this Agreement (including
the Exhibits and Schedules hereto) and those otherwise made in writing by or on
behalf of Seller in connection with the transactions contemplated by this
Agreement shall be true, complete and accurate in all material respects when
made and on and as of the Closing Date as though such representations and
warranties were made at and as of such date, and Seller shall have delivered to
Purchaser a certificate, dated the Closing Date, to such effect signed by its
Presi dent. Seller shall have duly and properly performed, complied with and
observed in all material respects each of its covenants, agreements and
obligations contained in this Agreement to be performed, complied with and
observed on or before the Closing Date, and Seller shall have delivered to
Purchaser a certificate, dated the Closing Date, to such effect signed by its
President.
(b) Purchase Permitted by Applicable Laws. The purchase of and payment for
the Shares to be transferred to Purchaser and the Dawcin Shares to be issued to
Seller shall not be prohibited by any applicable law or governmental regulation.
(c) Proceedings; Receipt of Documents. All corporate and other proceedings
taken or required to be taken by Seller in connection with the transactions
contemplated hereby and all documents incident thereto shall have been taken and
shall be reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received all such information and such counterpart
originals or certified or other copies of such documents as Purchaser may
reasonably request.
(d) Delivery of Documents. Seller shall have delivered, or caused to be
delivered, to Purchaser the following:
(i) certificates representing no less than 90% of the First Equities
Shares, with duly executed stock powers and all other documents and
signatures necessary or appropriate for their transfer to Purchaser free
and clear by delivery;
(ii) a certified copy of the Certificate of Incorporation of the
Company;
(iii) a copy of the notice to its shareholders of the exchange
herein contemplated advising the shareholders of their right to exchange
said shares or to receive cash equal to the book value of said shares,
less a minority discount equal to 30% of the book value of said shares of
the Seller as of October 7, 1996; and
(iv) all documents necessary or appropriate to take possession and
full operational control of the Company; and
(v) all other consents, agreements, schedules, documents and
exhibits required by this Agreement to be delivered by the Seller, or
reasonably requested by Purchaser, at or before the Closing.
2
<PAGE>
(e) No Adverse Decision. There shall be no action, suit, investigation or
proceeding pending or threatened by or before any court, arbitrator or
administrative or governmental body which seeks to restrain, enjoin, prevent the
consummation of or otherwise affect the transactions contemplated by this
Agreement or questions the validity or legality of any such transactions or
seeks to recover damages or to obtain other relief in connection with any such
transactions.
(f) Approvals and Consents. Seller shall have duly obtained all
authorizations, consents, rulings, approvals, licenses, franchises, permits and
certificates, or exemptions therefrom, by or of all governmental authorities and
non-governmental administrative or regulatory agencies having jurisdiction over
the parties hereto, this Agreement, the Shares or the transactions contemplated
hereby, including, without limitation, all third parties pursuant to existing
agreements or instruments by which Seller may be bound, which are required for
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, at no cost or other adverse consequence
to Purchaser, and all thereof shall be in full force and effect at the time of
Closing.
2.3 Conditions to the Obligation of Seller. The obligation of Seller to
consummate the transac tions contemplated hereby is subject to the fulfillment
of the following conditions on or prior to the Closing Date, any of which may be
waived, in whole or in part, by Seller in its sole discretion, and Purchaser
shall use its best efforts to cause such conditions to be fulfilled:
(a) Representations and Warranties Correct; Performance. The
representations and warranties of Purchaser in this Agreement (including the
Exhibits and Schedules hereto) and those otherwise made in writing by or on
behalf of Purchaser in connection with the transactions contemplated by this
Agreement shall be true, complete and accurate in all material respects when
made and on and as of the Closing Date, as though such representations and
warranties were made at and as of such date, and Purchaser shall have delivered
to Seller a certificate, dated the Closing Date, to such effect signed by its
President. Purchaser shall have duly and properly performed, complied with and
observed in all material respects each of its covenants, agreements and
obligations contained in this Agreement to be performed, complied with and
observed on or before the Closing Date, and Purchaser shall have delivered to
Seller a certificate, dated the Closing Date, to such effect signed by its
President.
(b) Purchase Permitted by Applicable Laws. The purchase of and payment for
the Shares to be transferred to Purchaser and the First Equities Shares to be
issued to Seller shall not be prohibited by any applicable law or governmental
regulation.
(c) Proceedings; Receipt of Documents. All corporate and other proceedings
taken or required to be taken by Purchaser in connection with the transactions
contemplated hereby and all documents incident thereto shall have been taken and
shall be reasonably satisfactory in form and substance to Seller, and Seller
shall have received all such information and such counterpart originals or
certified or other copies of such documents as Seller may reasonably request.
(d) Delivery of Documents. Purchaser shall have delivered, or caused to be
delivered, to Seller the following:
3
<PAGE>
(i) a corporate good standing certificate of Purchaser from the
jurisdiction in which Purchaser is incorporated;
(ii) a copy of the letter instructing the transfer agent to issue
Dawcin Shares;
(iii) a copy of the letter to the transfer agent authorizing the
transfer of the First Equities Shares.
(iv) all other consents, agreements, schedules, documents and
exhibits required by this Agreement to be delivered by Purchaser at or
before the Closing.
(e) No Adverse Decision. There shall be no action, suit, investigation or
proceeding pending or threatened by or before any court, arbitrator or
administrative or governmental body which seeks to restrain, enjoin, prevent the
consummation of or otherwise affect the transactions contemplated by this
Agreement or questions the validity or legality of any such transactions or
seeks to recover damages or to obtain other relief in connection with any such
transactions.
(f) Approvals and Consents. Purchaser shall have duly obtained all
authorizations, consents, rulings, approvals, licenses, franchises, permits and
certificates, or exemptions therefrom, by or of all governmental authorities and
non-governmental administrative or regulatory agencies having jurisdiction over
Purchaser, including, without limitation, all third parties pursuant to existing
agreements or instru ments by which Purchaser may be bound, which are required
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, at no cost or other
adverse consequence to Seller, and all thereof shall be in full force and effect
at the time of Closing.
(g) Reverse Stock Split. Purchaser shall have effected a two
hundred-to-one reverse stock split of its issued and outstanding shares of
common stock.
ARTICLE III
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to, and agrees with, Purchaser as follows:
3.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is in good standing as a foreign corporation in each other
jurisdiction where the properties owned, leased or operated or the business
conducted by it requires such qualification.
3.2 Corporate Authority. Seller has full authority to execute and to
perform this Agreement in accordance with its terms; the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
does not and will not result in a breach, violation or default or give rise to
an event which, with the giving of notice or after the passage of time, or both,
would result in a breach, violation or default of any of the terms or provisions
of Seller's Articles of Incor-
4
<PAGE>
poration, By-Laws or of any indenture, agreement, judgment, decree or other
instrument or restriction to which Seller is a party or by which Seller or the
Shares may be bound or affected; the execution and delivery of this Agreement
has been and, as of the Closing Date, the consummation of the transactions
contemplated hereby will have been, duly authorized by all requisite corporate
action on the part of Seller and, as of the Closing Date, no further
authorization or approval, whether of the stockholders or directors of Seller or
governmental bodies or otherwise, will be necessary in order to enable Seller to
enter into and perform the same; and this Agreement constitutes a valid and
binding obligation enforceable against Seller in accordance with its terms.
3.3 Capitalization. The authorized capital stock of the Seller consists of
49,900,000 shares of common stock and 100,000 shares of preferred stock, $.01
par value, of which 8,750,546 shares and one share of preferred are issued and
outstanding. All of the aforesaid issued and outstanding shares are directly
owned of record and beneficially by the Seller, have been duly authorized and
validly issued and are fully paid and non-assessable. There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon the Company or the Seller for the purchase or
acquisition of any shares of the Company's capital stock, including, without
limitation, the Shares. The copies of the Certificate of Incorporation and
By-Laws of the Company heretofore provided to Purchaser are true and complete in
all respects.
3.4 Compliance With Law. The Seller is not in violation of any material
laws, governmental orders, rules or regulations to which the Company or any of
its properties are subject.
3.5 Financial Statements. Attached hereto as Schedule 3.5 is a balance
sheet of Seller as at December 31, 1995 and an income statement of Seller
prepared on an accrual basis for the year ended December 31, 1995 (the "Seller
Financial Statements"), as certified by the Chairman of the Board and Chief
Financial Officer of Seller. The Seller Financial Statements have been prepared
on a consistent basis and, subject to the cash basis of reporting, fairly
present the financial position and results of operation of Seller for the
periods covered thereby. The books and records maintained by Seller and upon
which the Financial Statements are based are true and correct in all material
respects and accurately reflect the business of Seller on an accrual basis.
Except to the extent reflected or reserved against in the balance sheet as at
December 31, 1995, included in the Seller Financial Statements, or as described
in Exhibits and Schedules hereto, Seller has no liability of any nature, whether
absolute, accrued, contin gent or otherwise and whether due or to become due,
including, without limitation, any liability for taxes for any period prior to
such date.
3.6 Litigation. There are no actions, suits, proceedings or investigations
(including any purportedly on behalf of Seller) relating to the Shares pending
or, to the best knowledge of Seller, threat ened against or affecting the
business or properties of the Company whether at law or in equity or admiralty
or before or by any governmental department, commission, board, agency, court or
instru mentality, domestic or foreign; nor is the Company operating under,
subject to, in violation of or in default with respect to, any judgment, order,
writ, injunction or degree of any court or other govern mental department,
commission, board, agency or instrumentality, domestic or foreign.
3.7 Taxes. The Company has filed, or caused to be filed, with all
appropriate governmental agencies all required tax and information returns and
have paid, caused to be paid or accrued all taxes (including, without
limitation, all income, franchise, sales, excise and use taxes), assessments,
charges, penalties and interest shown to be due and payable. To the best of its
knowledge, the Company has no liability, contingent or otherwise, for any taxes,
assessments, charges, penalties or
5
<PAGE>
interest, other than amounts adequately reserved for. The Company has not
received directly or indirectly notice of, nor is it otherwise aware of an audit
or examination. The Company is not a party directly or indirectly to any action
or proceeding by any governmental authority for assessment or collection of
taxes, charges, penal ties or interest; nor has any claim for assessment and
collection been asserted against the Company directly or indirectly; nor has the
Company executed a waiver of any statute of limitations with respect thereto. To
the best of its knowledge, the Company has paid, or caused to be paid, or
adequately reserved for, all applicable corporate franchise taxes, unemployment
taxes, payroll taxes, social security taxes, occupation taxes, ad valorem taxes,
property taxes, excise taxes and imposts, sales and use taxes, and all other
taxes of every kind, character or description required to be paid to the date
hereof, and has received no notices and are not otherwise aware, of any
deficiencies, adjustments or changes in assess ments with respect to any such
taxes. To the best of its knowledge, the Company has duly filed, or caused to be
filed, all reports or returns relating to or covering any such taxes or other
charges which are due or required to be filed at the date hereof and no
extensions of time are in effect for the assessment of deficiencies for such
taxes in respect of any fiscal period.
3.8 Agreements. Schedule 3.8 is a true and complete list of all contracts,
instruments, commitments and agreements, whether oral or written, presently in
effect to which the Company is a party or to which the Company is subject. Each
such agreement is a valid and subsisting agreement and in full force and effect,
all payments due from the Company thereunder have been made, there are no
disputes or suits or actions at law or otherwise pending or threatened
thereunder, except as specifically described on Schedule 3.8, and such
agreements are the only agreements or arrangements of this nature. True,
complete and correct copies of each such agreement have been supplied to
Purchaser prior to the date hereof.
3.9 Brokers. There has been no broker or finder involved in any manner in
the negotiations leading up to the execution of this Agreement or the
consummation of any transactions contemplated hereby and Seller agrees to
indemnify Purchaser against and hold Purchaser harmless from any claim made by
any party for a broker's or finder's fee or other similar payment based upon any
agreements, arrangements or understanding made by Seller.
3.10 No Untrue Representation or Warranty. No representation or warranty
contained in this Agreement or any attachment, statement, schedule, exhibit,
certificate or instrument furnished or to be furnished to Purchaser by Seller
pursuant hereto, or in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact, or omits to state any material
fact necessary to make the statements contained herein or therein not
misleading.
6
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
4.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and is in good standing as a foreign corporation in each other
jurisdiction where the properties owned, leased or operated or the business
conducted by it requires such qualification.
4.2 Corporate Authority. Purchaser has full authority to execute and to
perform this Agreement in accordance with its terms; the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
does not and will not result in a breach, violation or default or give rise to
an event which, with the giving of notice or after the passage of time, or both,
would result in a breach, violation or default of any of the terms or provisions
of Purchaser's Certificate of Incorporation, By-Laws or of any indenture,
agreement, judgment, decree or other instrument or restriction to which
Purchaser is a party or by which Purchaser may be bound or affected; the
execution and delivery of this Agreement has been and, as of the Closing Date,
the consummation of the transactions contemplated hereby will have been, duly
authorized by all requisite corporate action on the part of Purchaser and, as of
the Closing Date, no further authorization or approval, whether of the
stockholders or directors of Purchaser or governmental bodies or otherwise, will
be necessary in order to enable Purchaser to enter into and perform the same;
and this Agreement constitutes a valid and binding obligation enforceable
against Purchaser in accordance with its terms.
4.3 Capitalization. The authorized capital stock of Purchaser consists of
150,000,000 shares of common stock, $.0001 par value, of which approximately
50,000,000, shares are issued and outstanding. All of the aforesaid issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and non-assessable. The copies of the Certificate of Incorporation and
By-Laws of Purchaser heretofore provided to Seller are true and complete in all
respects. The Common Shares have been duly authorized and, when issued to the
shareholders of the Seller in consideration for the transfer of the Shares to
Purchaser, will be validly issued, fully paid and non-assessable.
4.4 Compliance With Law. Purchaser is not in violation of any material
laws, governmental orders, rules or regulations to which Purchaser or any of its
properties are subject.
4.5 Litigation. There are no actions, suits, proceedings or investigations
(including any purportedly on behalf of Purchaser) relating to the Shares
pending or, to the best knowledge of Purchaser, threatened against or affecting
the business or properties of Purchaser whether at law or in equity or admiralty
or before or by any governmental department, commission, board, agency, court or
instru mentality, domestic or foreign; nor is Purchaser operating under, subject
to, in violation of or in default with respect to, any judgment, order, writ,
injunction or degree of any court or other governmental department, commission,
board, agency or instrumentality, domestic or foreign.
7
<PAGE>
4.6 Taxes. Purchaser has filed, or caused to be filed, with all
appropriate governmental agencies all required tax and information returns and
have paid, caused to be paid or accrued all taxes (including, without
limitation, all income, franchise, sales, excise and use taxes), assessments,
charges, penalties and interest shown to be due and payable. To the best of its
knowledge, Purchaser has no liability, contingent or otherwise, for any taxes,
assessments, charges, penalties or interest, other than amounts adequately
reserved for. To the best of its knowledge, Purchaser has not received directly
or indirectly notice of, nor is it otherwise aware of an audit or examination.
Purchaser is not a party directly or indirectly to any action or proceeding by
any governmental authority for assessment or collection of taxes, charges,
penalties or interest; nor has any claim for assessment and collection been
asserted against Purchaser directly or indirectly; nor has Purchaser executed a
waiver of any statute of limitations with respect thereto. To the best of its
knowledge, Purchaser has paid, or caused to be paid, or adequately reserved for,
all applicable corporate franchise taxes, unemployment taxes, payroll taxes,
social security taxes, occupation taxes, ad valorem taxes, property taxes,
excise taxes and imposts, sales and use taxes, and all other taxes of every
kind, character or description required to be paid to the date hereof, and has
received no notices and are not otherwise aware, of any deficiencies,
adjustments or changes in assess ments with respect to any such taxes. To the
best of its knowledge, Purchaser has duly filed, or caused to be filed, all
reports or returns relating to or covering any such taxes or other charges which
are due or required to be filed at the date hereof and no extensions of time are
in effect for the assessment of deficiencies for such taxes in respect of any
fiscal period.
4.7 Agreements. Schedule 4.7 is a true and complete list of all contracts,
instruments, commitments and agreements, whether oral or written, presently in
effect to which Purchaser is a party or to which Purchaser is subject. Each such
agreement is a valid and subsisting agreement and in full force and effect, all
payments due from Purchaser thereunder have been made, there are no disputes or
suits or actions at law or otherwise pending or threatened thereunder, except as
specifically described on Schedule 4.7, and such agreements are the only
agreements or arrangements of this nature. True, complete and correct copies of
each such agreement have been supplied to Purchaser prior to the date hereof.
4.8 Brokers. There has been no broker or finder involved in any manner in
the negotiations leading up to the execution of this Agreement or the
consummation of any transactions contemplated hereby and Purchaser agrees to
indemnify Seller against and hold Seller harmless from any claim made by any
party for a broker's or finder's fee or other similar payment based upon any
agreements, arrange ments or understanding made by Purchaser.
8
<PAGE>
ARTICLE V
COVENANTS
5.1 Further Assurances. Each of the parties hereto agrees that, at any
time after the execution of this Agreement and after the Closing Date, upon the
reasonable request of the other, it will do, execute, acknowledge and deliver,
or will cause to be done, executed, acknowledged and delivered, all such further
amendments to this Agreement, acknowledgments, deeds, assignments, transfers,
convey ances, instruments, consents and assurances as may reasonably be required
to effect the transactions contemplated herein.
5.2 Publicity. The parties hereto agree that no publicity release or
announcement concerning the transactions contemplated hereby shall be issued
without the advance approval (which shall not be unreasonably withheld or
delayed) of the form and substance thereof by each of the parties hereto.
ARTICLE VI
CONDUCT OF BUSINESS OF PENDING THE CLOSING
Between the date hereof and the Closing, and except as otherwise expressly
consented to in writing in advance or approved in writing in advance by
Purchaser:
6.1 Regular Course of Business. The Seller will carry on its business
diligently and substantially in the same manner as heretofore conducted, and
shall not institute any new methods of management, accounting or operation or
engage in any transaction or activity, enter into any agreement or make any
commitment, except in the usual and ordinary course of business and consistent
with past practice as limited by the more restrictive provisions of this
Agreement, where applicable, or as otherwise specifi cally contemplated by this
Agreement and not in violation thereof.
6.2 Organization. Seller shall keep its corporate existence and business
organization intact, use its best efforts to keep available to Purchaser its key
employees, if any, and use its best efforts to preserve for Purchaser its
relationships, if any, with suppliers, customers, agents and others having
business relations with it.
6.3 Certain Changes. The Seller shall not, without the prior written
consent of Purchaser:
(a) Except in the ordinary course of business, borrow or agree to borrow
any funds or incur, or assume or become subject to, whether directly or by way
of guarantee or otherwise, any obligation or liability (absolute or contingent);
(b) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of liabilities or obligations reflected or reserved against in the
Balance Sheet or thereafter incurred in accordance with this Agreement;
9
<PAGE>
(c) Prepay any obligation having a fixed maturity of more than 90 days
from the date such obligation was issued or incurred;
(d) Permit or allow any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any lien;
(e) Cancel any debts or waive any claims or rights or sell, transfer, or
otherwise dispose of any of its properties or assets;
(f) Grant any increase in the compensation of officers or employees,
institute or amend any sales compensation plan, severance plan or other
arrangement for its officers or employees, or enter into any plan or agreement
with respect thereto;
(g) Make any capital expenditures or commitments for additions to or
replacement of property, plant, equipment or intangible capital assets;
(h) Pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into agreement or arrange with, any of its
employees, officers or directors or any affiliate thereof, except for directors
fees and compensation to employees, officers or directors at rates not exceeding
the rates of compensation currently in effect;
(i) Issue, or grant any options with respect to the issuance of, any
shares of its capital stock, or purchase shares of capital stock or make any
equity investment in, or agree to purchase or make any equity investment in, any
other entity, corporate or otherwise;
(j) Declare, set aside or pay any dividend on, or other distribution of
any assets of any kind whatsoever with respect to, any shares of the capital
stock of the Company, or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of the capital stock of the Company;
(k) Amend the Seller's Certificate of Incorporation or By-Laws; or
(l) Agree, whether in writing or otherwise, to do any of the foregoing.
6.4 Contracts. The Seller shall not enter into any contract or commitment,
or purchase any supplies or services or sell any assets, except normal contracts
or commitments, for the purchase of, and normal purchases of, supplies or
services involving amounts not in excess of $5,000 made in the usual and
ordinary course of business, consistent with the past practice of the Seller and
its Subsidiary, and not in violation of any other more restrictive provision of
this Article VII.
6.5 Insurance; Property. The Seller shall maintain adequate insurance
against all ordinary and insurable risks with respect to all property, real,
personal and mixed, owned or leased by it; and all such property shall be used,
operated, maintained and repaired in a reasonable manner.
6.6 No Default. The Seller shall not knowingly do any act or omit to do
any act which will cause a breach of any contract or commitment of the Seller or
which would cause the breach of any representation, warranty or covenant made
hereunder.
10
<PAGE>
6.7 Compliance With Laws. The Seller shall comply with all laws applicable
to it and its properties, operations, business and employees.
6.8 Tax Returns. The Seller shall prepare and file all federal, state,
local and foreign tax returns and amendments thereto required to be filed by it,
and pay all taxes shown to be due thereon. The Seller will ensure that Purchaser
shall have a reasonable opportunity to review each such return and amendment
prior to the filing thereof.
6.9 Maintain Books. The Seller shall maintain its books, accounts and
records in accordance with generally accepted accounting principles applied on a
basis consistent with prior years.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 Methods of Termination. The transactions contemplated herein may be
terminated and/or abandoned at any time, but not later than the Closing:
(a) By mutual written agreement of Purchaser and Seller; or
(b) By Purchaser or Seller if the Closing shall not have occurred on or
prior to October 31, 1996.
7.2 Procedure upon Termination. In the event of termination and
abandonment pursuant to Section 7.1 hereof, written notice thereof shall
forthwith be given to the other parties hereto and the transactions contemplated
by this Agreement shall be terminated and/or abandoned, without further action
by Purchaser or Seller. If the transactions contemplated by this Agreement are
terminated and/or abandoned as provided herein, each party will redeliver all
documents, work papers and other material of the other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same. A party hereto who shall
have satisfied in full all of the obligations of such party under this Agreement
which were to have been satisfied by such party prior to the Closing and who
shall have not breached any representation, warranty, covenant or agreement of
such party contained in this Agreement shall not have any liability or further
obligation to the other party to this Agreement.
11
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The representations and
warranties set forth herein shall survive for a period of two years following
the Closing Date.
8.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally, sent by telex
or facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or when sent by facsimile transmission or, if mailed by certified or
registered mail, five (5) days after the date of deposit in the United States
mail, postage prepaid, if addressed:
(a) in the case of Purchaser to:
Dawcin International Corp.
100 Garden City Plaza
Garden City, New York 11530
Attn: William G. Lucas, Chairman
(b) in the case of Seller to:
First Equities Corp.
520 Broad Hollow Road
Melville, New York 11747
Attn: Edward Capuano, President
or to such other address or to such other person as Purchaser or Seller
shall have last designated by written notice given as herein provided.
8.3 Modification. This Agreement and the Exhibits and Schedules annexed
hereto contain the entire agreement between the parties hereto and there are no
agreements, warranties or representations with respect to the subject matter
hereof which are not set forth herein. All prior negotiations, agreements and
understandings are superseded hereby. This Agreement may not be modified or
amended except by an instrument in writing duly signed by or on behalf of the
parties hereto.
8.4 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within the State.
8.5 Binding Effect; Assignment. This Agreement shall be binding upon the
parties and inure to the benefit of the successors and assigns of the respective
parties hereto; provided, however, that this Agreement and all rights hereunder
may not be assigned by Purchaser or Seller except with the prior written consent
of the other.
8.6 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
12
<PAGE>
8.7 Paragraph Headings. The paragraph headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
8.8 Transaction Expenses. Notwithstanding anything else in this Agreement
to the contrary, the parties hereto shall each be responsible for the payment of
(and shall indemnify and hold the other party or parties hereto harmless
against) any and all of its own expenses, including without limitation the fees
and expenses of counsel, accountants and other advisers, arising out of or
relating directly or indirectly to the transactions contemplated by this
Agreement, whether or not such transactions are consummated in whole or in part.
8.9 Waiver. The waiver of one breach or default hereunder shall not
constitute the waiver of any other or subsequent breach or default.
8.10 No Agency. This Agreement shall not constitute either party the legal
representative or agent of the other, nor shall either party have the right or
authority to assume, create, or incur any liability or any obligation of any
kind, express or implied, against or in the name of or on behalf of the other
party.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
DAWCIN INTERNATIONAL CORP. FIRST EQUITIES CORP.
By: /s/ William G. Lucas By: /s/ Edward Capuano
------------------------ ----------------------
William G. Lucas, Chairman & CEO Edward Capuano, President
13
<PAGE>
SCHEDULE 3.8
AGREEMENTS
NONE.
14
<PAGE>
SCHEDULE 4.8
AGREEMENTS
NONE.
15
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<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
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<RECEIVABLES> 3,311,697
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0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,285,532)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
<PAGE>
EXHIBIT 99
PRO-FORMA
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
DAWCIN FIRST
INT'L EQUITIES TOTAL
------------ ------------ -----------
September 30 September 30 June 30
1996 1996 1996
------------ ------------ -----------
Current Assets:
Cash and Cash Equivalents $ 18,953 $ 130,049 $ 149,002
Accounts Receivable, net 226,697 1,907,584 2,134,281
Mortgage Inventory -0- 6,826,652 6,826,652
Note Receivable 2,485,000 -0- 2,485,000
Prepaid Expenses 7,614 682,711 690,325
Interest Receivable 600,000 -0- 600,000
Other Current Assets -0- 10,594 10,594
---------- ----------- -----------
Total Current Assets 3,338,264 9,557,590 12,895,854
---------- ----------- -----------
Fixed Assets:
Equipment 681,721 102,404 784,125
Furniture & Fixtures 166,480 141,525 308,005
Leasehold Improvements 225,003 53,403 278,406
---------- ----------- -----------
1,073,204 297,332 1,370,536
Less: Accumulated Depreciation
and Amortization 722,177 47,852 770,029
---------- ----------- -----------
Total Net Fixed Assets 351,027 249,480 600,507
---------- ----------- -----------
Other Assets:
Land -0- 1,471,300 1,471,300
Marketable Equity Securities -0- 215,293 215,293
Organization Expenses 5,049 -0- 5,049
Computer Software 128,297 -0- 128,297
Goodwill 262,586 127,500 390,086
Security Deposits 38,701 23,983 62,684
---------- ----------- -----------
Total Other Assets 434,633 1,838,076 2,272,709
---------- ----------- -----------
Total Assets $4,123,924 $11,645,146 $15,769,070
========== =========== ===========
<PAGE>
PRO-FORMA
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
LIABILITIES & SHAREHOLDERS' EQUITY
DAWCIN FIRST
INT'L EQUITIES TOTAL
------------ ------------ -----------
September 30 September 30 June 30
1996 1996 1996
------------ ------------ -----------
Current Liabilities:
Accounts Payable & Accrued Expenses $ 935,801 $ 3,086,373 $ 4,022,174
Warehouse Line of Credit -0- 6,719,136 6,719,136
Leases Payable 20,141 -0- 20,141
Payroll Taxes Payable 308,308 2,903 311,211
Notes Payable 214,966 -0- 214,966
Salaries Payable 196,120 72,154 268,274
Loans Payable 568,330 -0- 568,330
---------- ----------- -----------
Total Current Liabilities 2,243,666 9,880,566 12,124,232
---------- ----------- -----------
Long Term Liabilities:
Leases Payable 26,830 23,812 50,642
Notes Payable 893,759 -0- 893,759
---------- ----------- -----------
Total Long Term Liabilities 920,589 23,812 944,401
---------- ----------- -----------
Total Liabilities 3,164,255 9,904,378 13,068,633
---------- ----------- -----------
Shareholders' Equity:
Common Stock - Authorized 150 Mill.
Shares, $.0001 Par Value, 9,001,380
Issued and 8,996,023 Outstanding
at 9/96 900 -0- 900
Paid-In-Capital in Excess of
Par Value 45,967,636 1,768,726 47,736,362
Paid-In-Capital from Treasury Stock 946,434 -0- 946,434
Paid-In-Capital from Warrants Exercised 902,389 -0- 902,389
Translation Adjustment 4,852 -0- 4,852
Retained (Deficit) (45,828,123) (27,958) (45,856,081)
---------- ----------- -----------
Total Shareholders' Equity 1,994,088 1,740,768 3,734,856
Less: Treasury Shares at Cost (1,034,419) -0- (1,034,419)
---------- ----------- -----------
Net Shareholders' Equity 959,669 1,740,768 2,700,437
---------- ----------- -----------
Total Liabilities and
Shareholders' Equity $4,123,924 $11,645,146 $15,769,070
========== =========== ===========
<PAGE>
PRO-FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
DAWCIN FIRST
INT'L EQUITIES TOTAL
------------ ------------ -----------
1996 1996 1996
------------ ------------ -----------
Revenues:
Operating Revenue $ 296,291 $ 2,191,065 $ 2,487,356
Costs Related to Revenue 155,711 -0- 155,771
---------- ----------- -----------
Gross Income $ 140,580 $ 2,191,065 $ 2,331,645
---------- ----------- -----------
Operating Expenses:
Selling and Administrative Expenses
(Schedule I) 1,142,069 1,343,445 2,485,514
Cost of Shares for Services Rendered
(Schedule II) 1,278,993) -0- 1,278,993
Direct Loan Origination Expenses -0- 811,732 811,732
(Gain) on Sale of Assets (25,000) -0- (25,000)
Taxes 29,050 990 30,040
---------- ----------- -----------
Total Operating Expenses $2,425,112 $ 2,156,167 $ 4,606,279
---------- ----------- -----------
Net Profit(Loss) from Operations (2,284,532) 34,898 (2,249,634)
---------- ----------- -----------
Non-Operating & Non-Recurring:
Gain (Loss) on Sale of Marketable
Equity (1,000) -0- (1,000)
---------- ----------- -----------
Total Non-Operating & Non-Recurring (1,000) -0- (1,000)
---------- ----------- -----------
Net Profit(Loss) ($2,285,532) $ 34,898 ($2,250,634)
========== =========== ===========
Net Profit(Loss) per Outstanding
Common Share ($0.09)* -0- ($ 0.09)
========== =========== ===========
* NOTE: This amount reflects a Two Hundred (200) to One (1) reverse stock split
effective October 17, 1996.
<PAGE>
PRO-FORMA
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
DAWCIN FIRST
INT'L EQUITIES TOTAL
------------ ------------ -----------
1996 1996 1996
------------ ------------ -----------
Cash Flow from Operations:
Net Income(Loss) ($2,285,532) $ 34,898 ($2,250,634)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operations
Depreciation & Amortization (21,546) 15,000 (6,546)
(Gain)/Loss on Sale of Marketable
Equity Securities 1,000 -0- 1,000
Foreign Currency Translation
Adjustment (676) -0- (676)
(Increase) Decrease in:
Prepaid Expenses 2,299 (219,691) (217,392)
Interest Receivable -0- -0-
Accounts Receivable 21,768 (791,282) (769,514)
Mortgage Inventory -0- 2,667,950 2,667,950
Organization Expenses (4,372) -0- (4,372)
Computer Software (8,305) -0- (8,305)
Other Current Assets -0- (19,424) (19,424)
Increase (Decrease) in:
Accounts Payable 151,284 971,428 1,122,712
Leases Payable (5,038) (2,335) (7,373)
Payroll Taxes Payable 68,846 (42,926) 25,920
Notes Payable (5,599) -0- (5,599)
Salaries Payable 37,176 44,997 82,173
Loans Payable 83,708 -0- 83,708
Warehouse Line of Credit -0- (2,562,992) (2,562,992)
---------- ----------- -----------
Net Cash (Used)Provided by Operations (1,964,987) 95,623 (1,869,364)
---------- ----------- -----------
Cash Flow from Financing Activities:
Proceeds from Issuance of
Common Stock 2,036,205 -0- 2,036,205
Purchase of Treasury Stock (4,872) -0- (4,872)
Retained Earnings Liquidated
Subsidiary 33,115 -0-
---------- ----------- -----------
Net Cash Flow from Financing Activities 2,064,448 -0- 2,064,448
---------- ----------- -----------
Cash Flow from Investing Activities:
Capital Expenditures Paid in Cash 47,316 (54,129) (6,813)
Bank/Data Center Acquisition -0- -0-
Goodwill (186,619) -0- (186,619)
Proceeds from Sale of Marketable
Equity Securities 13,500 -0- 13,500
Purchase of Marketable Equity
Securities -0- (55,000) (55,000)
---------- ----------- -----------
Net Cash (Used) by Investing Activities (125,803) (109,129) (234,932)
---------- ----------- -----------
Net Increase in Cash and Cash Equivalents (26,342) (13,506) (39,848)
Cash and Cash Equivalents Beginning
of Period 45,295 143,555 188,850
---------- ----------- -----------
Cash and Cash Equivalents End of Period $ 18,953 $ 130,049 $ 149,002
========== =========== ===========
<PAGE>
PRO-FORMA
SUPPORTING SCHEDULES
FOR THE THREE MONTHS ENDED SEPTEMBER 30TH
DAWCIN FIRST
INT'L EQUITIES TOTAL
------------ ------------ -----------
1996 1996 1996
------------ ------------ -----------
SCHEDULE I
Selling Expenses:
Salaries & Outside Services $ 98,689 -0- $ 98,689
Travel & Entertainment 136,840 -0- 136,840
Telephone 36,633 -0- 36,633
Advertising -0- -0-
Commissions 19,925 -0- 19,925
Processing Charges 686 -0- 686
Trade Shows 2,600 -0- 2,600
---------- ----------- -----------
Total Selling Expenses $ 295,373 -0- 295,373
========== =========== ===========
Administrative Expenses:
Salaries & Outside Services $ 256,399 $ 608,717 $ 865,116
Professional Fees 198,548 60,704 259,252
Office Expenses 6,288 116,186 122,474
Stock Transfer Fees 1,689 -0- 1,689
Rent 72,673 100,359 173,032
Stationery, Messenger,
Printing & Postage 16,652 35,101 51,753
Insurance 26,362 48,748 75,110
Repair & Maintenance 15,065 24,314 39,379
Building & Equipment Leasing 7,096 16,766 23,862
Depreciation & Amortization 44,161 15,000 59,161
Utilities & Sundry Expenses 22,768 23,842 46,610
Interest Expense 178,995 208,888 387,883
Licenses & Permits -0- 11,001 11,001
Advertising & Promotion -0- 8,271 8,271
Travel -0- 42,710 42,710
Meeting Expense -0- 22,838 22,838
---------- ----------- -----------
Total Administrative Expenses $ 846,696 $ 1,343,445 2,190,141
========== =========== ===========
TOTAL SELLING AND
ADMINISTRATIVE EXPENSES $1,142,069 $ 1,343,445 2,485,514
========== =========== ===========
SCHEDULE II
Cost of Shares for Services Rendered:
Consulting $ 517,559 -0- $ 517,559
Marketing 275,916 -0- 275,916
Public Relations 296,020 -0- 296,020
Research & Development 189,498 -0- 189,498
---------- ----------- -----------
TOTAL COST OF SHARES FOR
SERVICES RENDERED $1,278,993 -0- $ 1,278,993
========== =========== ===========
