<PAGE>
UNITED STATES
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 quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 0-26790
eSynch Corporation
--------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0461856
------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
15502 Mosher
Tustin, CA 92780
----------------------------------------
(Address of principal executive offices)
(714) 258-1900
------------------------------------------------
(Issuer's telephone number, including area code)
-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of common shares outstanding at May 12, 2000: 11,309,993
Transitional Small Business Format: Yes ( ) No (x)
<PAGE>
TABLE OF CONTENTS
PART I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as December 31, 1999 and
March 31, 2000 (Unaudited)
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I FINANCIAL INFORMATION
Item I - Financial Statements
2
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ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash ........................................................................ $ 496,757 $ 1,319,971
Accounts receivable ......................................................... 87,099 19,153
Inventory ................................................................... 10,000 15,943
Other receivable ............................................................ 24,296 24,296
Prepaid expenses ............................................................ 14,350 21,814
------------ ------------
Total Current Assets ..................................................... 632,502 1,401,177
------------ ------------
Property and equipment, net .................................................... 637,138 621,638
Goodwill ....................................................................... 3,723,933 4,142,901
Other assets ................................................................... 148,652 156,948
------------ ------------
Total Assets ............................................................. $ 5,142,225 $ 6,322,664
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................................................ $ 362,848 $ 443,164
Accrued liabilities ......................................................... 582,253 831,167
Accrued preacquisition liabilities .......................................... 1,293,594 1,293,594
Notes payable - current portion ............................................. 33,292 31,250
Preferred dividends payable ................................................. 144,132 62,324
------------ ------------
Total Current Liabilities ................................................ 2,416,119 2,661,499
Notes Payable - Long-term ...................................................... 77,150 77,150
Stockholders' Equity
Preferred stock - $0.001 par value; 400,000 shares
authorized .................................................................
Redeemable Preferred Stock - Series J, $0.001 par value
275 shares authorized: 275 shares issued and outstanding;
liquidation preference - $2,750,000 ........................................ 2,625,000 2,418,612
Redeemable Preferred Stock - Series K, $0.001 par value; 250 shares
authorized; 212.5 and 157.5 shares issued and outstanding; liquidation
preference - $2,125,000
and $1,575,000 ............................................................. 1,474,579 --
Common stock - $0.001 par value; 50,000,000 shares authorized; 11,309,993 and
10,505,464 shares issued
and outstanding ............................................................ 11,310 10,506
Additional paid-in capital ................................................. 17,651,566 17,044,450
Unearned compensation ....................................................... (354,507) (382,741)
Accumulated deficit ......................................................... (18,758,992) (15,506,812)
------------ ------------
Total Stockholders' Equity ............................................... 2,648,956 3,584,015
------------ ------------
Total Liabilities and Stockholders' Equity ..................................... $ 5,142,225 $ 6,322,664
============ ============
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
3
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ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues .............................. $ 196,548 $ 408,850
Costs of products sold ................ $ 11,243 $ 279,697
------------ ------------
Gross Profit ...................... $ 185,305 $ 129,153
Operating and Other Expenses
General and administrative .......... 1,167,650 718,998
Stock based compensation ............ 83,654
Amortization of goodwill ............ 418,768
Interest ............................ 4,638 30,617
------------ ------------
Total Operating and Other Expenses 1,674,710 749,615
------------ ------------
Net Loss .............................. (1,489,405) (620,462)
Preferred Dividend .................... 1,762,775 --
------------ ------------
Loss Applicable to Common Shares ...... $ (3,252,180) $ (620,462)
============ ============
Basic and Diluted Operating Loss Per
Common Share ......................... $ (0.14) $ (0.09)
Basic and Diluted Loss Applicable
Per Common Share ..................... $ (0.30) $ (0.09)
============ ============
Weighted average number of
common shares used in per
share calculation .................... 10,727,096 7,234,295
============ ============
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
4
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ESYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
2000 1999
------------- ------------
Cash Flows from Operating Activities
<S> <C> <C>
Net loss .................................................................. $(1,489,405) $ (620,462)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .......................................... 67,803 9,225
Amortization of goodwill ............................................... 418,768
Stock issued for services .............................................. 33,000 649,425
Stock issued for settlement of lawsuit ................................. 97,000
Stock Based Compensation ............................................... 83,654
Changes in operating assets and liabilities net of
the effects of the acquisitions
Accounts receivable .................................................... (67,946)
Inventory .............................................................. 5,943
Prepaid expenses ....................................................... 7,464 (290,497)
Other assets ........................................................... (37) (60,030)
Accounts payable ....................................................... (80,316) 16,220
Accrued liabilities .................................................... (248,914) 76,320
Other liabilities ...................................................... 2,042 5,218
----------- -----------
Net Cash Used in Operating Activities ................................... (1,170,944) (214,581)
----------- -----------
Cash Flows From Investing Activities
Acquisition of property and equipment ..................................... (74,770) (6,225)
Other receivable .......................................................... -- (50,000)
----------- -----------
Net Cash Used in Investing Activities ................................... (74,770) (56,225)
----------- -----------
Cash Flows From Financing Activities
Stock issued for cash ..................................................... 22,500
Proceeds from issuance of Preferred Shares ................................ 400,000
Cash received on notes receivable issued for
common stock ............................................................. -- 71,433
Proceeds from borrowing ................................................... -- 359,500
Payments on notes payable ................................................. -- (150,000)
----------- -----------
Net Cash Provided by Financing Activities .............................. 422,500 280,933
----------- -----------
Net Increase (Decrease) in Cash .............................................. (823,214) 10,127
Cash at Beginning of Period .................................................. 1,319,971 1,413
----------- -----------
Cash at End of Period ........................................................ $ 496,757 $ 11,540
=========== ===========
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
5
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eSYNCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS -
eSynch Corporation ("eSynch") resulted from a shareholder action that renamed
Innovus Corporation to eSynch on November 9, 1998. A predecessor company,
Intermark Corporation ("Intermark") was incorporated under the laws of the State
of California in October 1995. On August 5, 1998, Intermark was reorganized into
Innovus Corporation, a publicly-held shell corporation, incorporated in 1994. In
November 1998, eSynch acquired SoftKat Inc. ("SoftKat"). In May 1999, SoftKat
was sold to a third-party. On April 1, 1999, eSynch acquired Kiss Software
Corporation ("Kissco") and on September 20, 1999, eSynch acquired Oxford Media
Corporation ("Oxford").
The primary activities of eSynch, the consolidated company, have consisted of
raising capital, acquiring Innovus Corporation, SoftKat Inc., Kissco and Oxford,
developing and marketing video-on-demand services and video streaming through
the internet, and software sales through the internet.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of eSynch for all periods presented, the accounts of Kissco
and Oxford from the dates of their acquisitions on April 1, 1999 and September
30, 1999, respectively. These entities are collectively referred to as "eSynch"
or the "Company". All inter-company transactions and balances have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION - The accompanying condensed financial
statements have been prepared by the Company and are not audited. In the opinion
of management, all adjustments necessary for a fair presentation have been
included and consist only of normal recurring adjustments except as disclosed
herein. The financial position and results of operations presented in the
accompanying financial statements are not necessarily indicative of the results
to be generated for the remainder of 2000.
These financial statements have been condensed pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
disclosures normally included in financial statements have been condensed or
omitted. These financial statements should be read in connection with annual
financial statements included in the Company's Form 10-KSB dated December 31,
1999.
BUSINESS CONDITION - The financial statements have been prepared on the basis of
the Company continuing as a going concern. The Company has incurred losses from
operations and negative cash flows from operating activities and has accumulated
a deficit at December 31, 1999 in the amount of $15,506,812 and at the March 31,
2000 in the amount of $18,758,922. Management's plan to mitigate the impact of
these conditions is to obtain additional equity
6
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financing through the issuance of the Company's common stock, convertible
preferred stock or warrants. However, realization of the proceeds from these
potential transactions is not assured. These financial statements do not include
any adjustments relating to the recoverability and classification of recorded
assets or amounts and classifications of liabilities that might be necessary
should the Company be unable to continue as a going concern.
CONCENTRATION OF RISK AND MAJOR CUSTOMERS - The Company operates exclusively in
the software industry, accordingly, segment information relating to operations
in different industries is not presented in these financial statements. The
concentration of business in the highly competitive software industry subjects
the Company to concentrated market risk. Sales to any major customer in 2000 and
1999 were not significant.
FAIR VALUES OF FINANCIAL INSTRUMENTS - The amounts reported as cash, accounts
payable, notes payable, and liabilities relating to assets to be sold are
considered to be reasonable approximations of their fair values. The fair value
estimates were based on market information available to management at the time
of the preparation of the financial statements.
LOSS PER SHARE - The Company computes basic and diluted loss per share in
accordance with Statement of Financial Accounting Standards No. 128, ("SFAS
128"), Earnings Per Share. Basic loss per common share is computed by dividing
net loss available to common stockholders by the weighted-average number of
common shares outstanding during the period. Diluted loss per share is
calculated to give effect to stock warrants, options and convertible notes
payable except during loss periods when those potentially issuable common shares
would decrease the loss per share. 3,280,868 and 1,351,800 potentially issuable
common shares outstanding at March 31, 2000 and 1999 were excluded from the
calculation of diluted loss per share for the quarters ended March 31, 2000 and
1999, as they would have decreased the loss per share, respectively.
REVENUE RECOGNITION - The Company recognizes service revenue upon performance of
the service. For software products sold by the Company, revenue is recognized
when shipped except for hard goods sales sold through distributors which is
recognized upon receipt of payment.
NOTE 2--ACCRUED LIABILITIES
Included in accrued preacquisition liabilities are $612,170 in obligations to
state and the federal governments for payroll taxes from previous years and
estimated interest and penalties owing on such tax obligations. The account also
includes liabilities assumed in the acquisition of Innovus.
NOTE 3--COMMITMENTS AND CONTINGENCIES
CONSULTING AGREEMENTS - On August 27, 1999, the Company signed a consulting
agreement with a shareholder. Under the agreement, the consultant is to receive
20,000 shares of the common stock of the Company per quarter and $2,500 per
month. The term of the agreement is for one year.
LITIGATION -
eSynch and Subsidiaries
7
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We are involved in several lawsuits in the normal course of business and all
amounts for exposure to these lawsuits have been recorded in our financial
statements except as noted below.
SoftKat
We acquired SoftKat, Inc. ("SoftKat") in November 1998 and sold SoftKat in May
1999.
Although we sold SoftKat, various claims were asserted against us for alleged
liabilities or obligations of SoftKat based upon the theory of successor
liability or alter ego. The Company prevailed in eight suits which have been
settled or dismissed. Other claims may be asserted against us by creditors of
SoftKat, Inc., but we are unaware of any pending claims at this time. The
following represents the only remaining lawsuit regarding SoftKat to which the
Company is a party:
On May 18, 1999, Frank Grange filed a complaint against us in the Sonoma County
Superior Court, State of California. The complaint alleges that we owe
$84,801.40 for damages resulting from a lease between that plaintiff and
SoftKat, Inc., and a judgment obtained against SoftKat for unpaid rent, based on
a theory of successor liability. We have filed an answer denying that we are
obligated to pay any of these claims, and we intend to vigorously oppose any
attempt to impose successor liability.
Intermark
Intermark Corporation became our subsidiary on August 5, 1998.
In September, 1999, U.S. Print Corporation filed a complaint in Orange County
Superior Court, State of California. The complaint seeks to recover from the
Company $92,414.69 for services allegedly purchased but not paid for by
Intermark. A reserve to cover the Company's potential liability has been accrued
in the financial statements.
In September, 1999, a lawsuit was filed by C-Group in United States District
Court, District of Maryland, against Intermark seeking $99,110 for goods that
were claimed to be purchased by Intermark. In October, 1999, the plaintiff
amended the complaint and reduced the amount it is seeking to $81,326. The
Company has filed a motion to dismiss for lack of personal jurisdiction. The
Federal District Court has remanded the case to a state court in Maryland to
rule on the motion to dismiss. The Maryland court has not yet ruled on the
motion.
eSynch Corporation
The Company is a defendant in a lawsuit filed by a third-party claiming damages
for a breach of an oral agreement and for unpaid principal on a promissory note.
Due to the uncertainty of the claim at December 31, 1999, no provision for
possible loss from this proceeding has been accrued in the accompanying
financial statements. During March 2000, a settlement was reached whereby the
Company agreed to pay the third party $38,000 in cash and in turn, the third
party will return approximately 70,000 shares of common stock to the Company
which will be accounted for upon the execution of the settlement.
8
<PAGE>
NOTE 4--STOCKHOLDERS' EQUITY
During the fourth quarter 1999, the Company authorized the issuance of 250
shares of Series K convertible preferred stock at $10,000 per share. As of
December 31, 1999, the Company had received $1,400,000, net of $100,000 of
offering costs, under the offering. On January 31, 2000, the Company received an
additional $500,000 as a result of the Series K offering resulting in a total of
212.5 shares of Series K preferred shares and 150,000 warrants to purchase
shares of the Company's common stock. In addition, after the $500,000 were
received, the total proceeds from offering were allocated $828,897 to the
warrants and $970,103 to the beneficial conversion feature. The resulting
discount on the preferred stock over its liquidation value of $2,000,000 will be
recognized as preferred dividends over the period from the date the shares are
issued through the date they are first convertible.
On March 27, 2000, certain executive Officers and Directors exercised stock
options and warrants for 805,700 shares of the Company's common stock in a
"cashless exercise" transaction resulting in the issuance of a total of 757,530
shares of stock.
The Company also issued Common Stock as follows: 20,000 shares for services
in the amount of $33,000; 15,000 shares upon conversion of warrants for which
the Company received $22,500; and 12,000 shares in the amount of $97,000 upon
the settlement of a lawsuit.
NOTE 5--STOCK OPTIONS AND WARRANTS
The Company has issued stock options to employees and consultants under a
stock-based compensation plan and under individual contracts. Under the 1999
Stock Incentive Plan, which was approved by the shareholders in November 1999,
the Company may grant options to its employees and consultants for up to
3,000,000 shares of common stock. The exercise price of each option under the
plan and the individual contracts have generally been below the market price of
the Company's stock on the date of grant. Options generally vest from
immediately to over three years and are exercisable for up to five to ten years.
No options were granted in the three months ended March 31, 2000.
OPTIONS AND WARRANTS GRANTED TO NON-EMPLOYEES - During the three months ended
March 31, 2000, the Company issued 37,500 of the total 150,000 warrants as part
of the Series K convertible preferred offering described in Note 4 above. The
Company granted no options to non-employees during the three month period.
NOTE 6--SUBSEQUENT EVENTS
On April 19, 2000, the Company entered into a licensing agreement with a related
party to license two patents for certain royalties and contingently issuable
warrants. The patents relate to the broadcast, playback and limited use
capability of Internet streaming media and video. The licensing agreement gives
the Company the exclusive rights to the use of the patents until January 1,
2002, after which time, the licensing agreement becomes non-exclusive. As
consideration for the licensing agreement, the Company issued 950,000 fully paid
warrants to purchase shares of common stock. The warrants will be held in escrow
until January 1, 2001 at which time the warrants will be released from escrow
and will be exercisable. The Company may at any time before January 1, 2001
cancel the licensing agreement. In the case the licensing agreement is
cancelled, the warrants will be returned to the Company.
9
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion should be read in conjunction with the financial
statements and notes thereto found elsewhere herein. The discussion assumes that
the reader is familiar with or has access to the Company's financial statements
for the year ended December 31, 1999 found in the Company's Form 10-KSB dated
March 24, 2000.
The financial statements have been prepared on the basis of the Company
continuing as a going concern. The Company has incurred losses from operations
and negative cash flows from operating activities and has accumulated a negative
tangible net worth at March 31, 2000 in the amount of $1,158,310.
Results of Operations
During the quarter ended March 31, 2000, net sales were $196,548, compared to
$408,850 for the comparable period of the prior year. The sales amount for 1999
included sales for SoftKat in the amount of $373,011.
These sales did not continue as SoftKat was sold May 25, 1999.
The costs of products sold in the quarters March 31, 2000 and 1999 were $11,243
and $279,697, respectively. The decrease is attributable to the discontinuance
of SoftKat sales and the refocusing of the Kissco business from hard goods to
electronic distribution.
Operating loss for the quarter ended March 31, 2000 was $1,489,405 compared to
an operating loss of $620,462 for the quarter ended March 31, 1999. The
increased operating loss was related to the continuing expansion of eSynch into
the video-on-demand business and reflects the operations of Kissco and Oxford
acquired during 1999.
The Company incurred $4,638 and $30,617 in net interest expense during the
quarters ended March 31, 2000 and 1999, respectively.
Liquidity and Capital Resources
At March 31, 2000 the Company had $496,757 of cash and a deficit in working
capital (current liabilities in excess of current assets) of $1,783,617.
The Company has been relying upon the issuance of preferred stock to fund
continuing operations. During the last 12 months, the Company issued 487.5
shares of Convertible Preferred Stock plus warrants to purchase shares of Common
Stock in exchange for an investment of $4,625,000.
The Company estimates that during the quarter it was using approximately
$275,000 more cash each month than was generated by operations.
Risk Factors
Statements regarding the Company's plans, expectations, beliefs, intentions as
to future sales of software, future capital resources and other forward-looking
statements presented in this Form 10-QSB constitute forward looking information
within the meaning of the Private Securities Litigation Reform
10
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Act of 1995. There can be no assurance that actual results will not differ
materially from expectations. Investors are cautioned not to ascribe undue
weight to such statements. In addition to matters affecting the Company's
industry generally, factors which could cause actual results to differ from
expectations include, but are not limited to (i) sales of the Company's software
which may not rise to the level of profitability; (ii) due to the rapidly
changing and intensely competitive nature of the industry, competitors may
introduce new products with significant competitive advantages over the
Company's products; (iii) the Company may not have sufficient resources,
including any future financing it is able to obtain, to sustain marketing and
other operations; (iv) the Company may be unable to attract and retain
sufficient management and technical expertise, or may lose key employees; (v)
the Company's contractual or legal efforts to protect its confidential
information or intellectual property may be inadequate or ineffective to provide
protection, and the Company may be unable financially to pursue legal remedies
that may be available; (vi) the Company's selection, due diligence, execution,
and integration of acquisitions may not prove effective or reasonable; (vii) the
Company may suffer in material respects from the direct or indirect effects of
the "Year 2000" problem on public utilities, telecommunications networks,
customers, vendors, service providers, and the economy or financial markets
generally; (viii) the Company may suffer from other technical or communications
problems, such as power outages, system failures, system crashes, or hacking;
and (ix) the Company may be subjected to unknown risks and uncertainties, or be
unable to assess risks and uncertainties as may exist.
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
Although Softkat has been sold there may be asserted and unasserted claims
against Softkat or the Company. The Company is aware of several other creditors
of Softkat, Inc., which have claims against Softkat for amounts owed based on
good and/or services provided to Softkat. In most cases, we do not know the
identity of these creditors, the amounts that they claim are due and owing or
the circumstances of their claims. Some of the claims against Softkat have been
asserted either in pending litigation or threatened litigation.
The Company is a defendant in a lawsuit filed by a third-party claiming damages
for a breach of an oral agreement and for unpaid principal on a promissory note.
Due to the uncertainty of the claim at December 31, 1999, no provision for
possible loss from this proceeding has been accrued in the accompanying
financial statements. During March 2000, a settlement was reached whereby the
Company agreed to pay the third party $38,000 in cash and in turn, the third
party will return approximately 70,000 shares of common stock to the Company.
The Company is a defendant in a lawsuit filed by a third party claiming damages
for a breach of an investment banking agreement. As damages, the third party is
seeking 250,000 warrants to purchase shares of common stock of the Company. The
Company intends to vigorously defend the claim and believes that the third party
has never performed according to the terms of the agreement.
11
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Item 2 - Changes in Securities:
(a) The following securities were issued by the Company during the quarter ended
March 31, 2000 without registration under the Securities Act of 1933:
(i) The Company issued 55 shares of Series K Preferred Stock for
$500,000.
(ii) The Company issued warrants to purchase 37,500 shares of the
Company's common stock at a price equal to approximately $12.63.
(iii) The Company issued 20,000 shares of Common Stock for services.
(iv) The Company issued 15,000 shares of Common Stock upon the conversion
of warrants.
(v) The Company issued 12,000 shares of Common Stock in settlement of a
legal proceeding.
The Company believes the transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.
(b) The following registration statements were filed by the Company during the
quarter ended March 31, 2000.
(i) On January 18, 2000 and February 15, 2000, the Company filed
Amendments 1 and 2, respectively, to the Form SB-2 Registration
Statement originally filed on November 29, 1999, related to the
registration of common stock of the Company as required by terms of
the Series J Convertible Preferred Stock Purchase Agreement dated
July 22, 1999. As of March 31, 2000, the registration was not
effective.
(ii) On February 29, 2000, the Company filed a Form SB-2 Registration
Statement related to the registration of common stock of the Company
as required by terms of the Series K Convertible Preferred Stock
Purchase Agreement dated December 30, 1999. As of March 31, 2000,
the registration was not effective.
(iii) On March 27, 2000, the Company filed a Registration Statement on
Form S-8 for the purpose of registering a Reoffer Prospectus
associated with certain Stock Option Agreements, Warrants, and
Consulting Agreements. Certain executive Officers and Directors plus
two unrelated parties are named as Selling Stockholders. The Company
registered 505,700 shares, 300,000 shares and 18,000 shares related
to Stock Options, Warrants, and Consulting Agreements, respectively.
The Company issued 757,530 shares of Common Stock upon the exercise
of stock options and warrants registered there under. See NOTE
4--STOCKHOLDERS' EQUITY.
Item 6 - Exhibits and Reports on Form 8-K
None.
(a) Exhibits.
Those exhibits previously filed with the Securities and Exchange Commission as
required by Item 601 of Regulation S-K, are incorporated herein by reference in
accordance with the provisions of Rule 12b-32.
12
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
2.9(1) Agreement of Purchase and Sale of Stock dated as of May
25, 1999 between the Registrant and Kilburn Consultants,
Inc., an Isle of Man corporation.
4.20(2) Certificate of Designation of Relative Rights and
Preferences of Series K Preferred Stock
10.14(2) Series K Convertible Preferred Stock Purchase Agreement
dated as of December 30, 1999 among the Registrant and the
Purchasers named therein
10.15(2) Registration Rights Agreement dated as of December 30,
1999 among the Registrant and the Purchasers named therein
10.16(2) Form of Warrant to Purchase Shares of Common Stock of the
Registrant dated as of December 30, 1999 issued by the
Registrant in the following respective amounts:
Approximate
Exp. Exercise
Date Amount Holder Price
-------- -------- -------------------------- ---------
01/31/03 37,500 Aqua Wellington Small Cap
Value Fund Limited $12.36
12/31/02 45,000 Dandee, Ltd. $ 6.47
12/31/02 22,500 Lightline Limited $ 6.47
12/31/02 22,500 Roseworth Group Limited $ 6.47
12/31/02 22,500 Tonga Partners, L.P. $ 6.47
12/31/02 5,625 Intercoastal Financial
Services Corp. $ 6.47
01/31/03 3,750 Intercoastal Financial
Services Corp. $12.36
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the same number Exhibit to the Form 8-K filed
February 8, 2000 by the Company with the Securities and Exchange Commission
(2) Incorporated by reference to the same number Exhibit to the Form 8-K filed
February 15, 2000 by the Company with the Securities and Exchange Commission
Reports on Form 8-K
During the period covered by this report the Company filed the following reports
on Form 8-K:
On January 27, 2000, reporting the acquisition of SoftKat, Inc., including
financial statements, as of November 17, 1998.
On February 8, 2000, reporting the sale of SoftKat, Inc. as of May 25, 1999.
13
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On February 15, 2000, reporting that on December 30, 1999 the Company agreed to
sell 200 shares of Series K Convertible Preferred Stock and Warrants to purchase
150,000 shares of Common Stock in exchange for cash in the amount of $2,000,000.
Pursuant to that agreement, the Registrant sold 200 shares of Series K Preferred
Stock and Warrants to purchase 150,000 shares of Common Stock for cash in the
amount of $2,000,000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: May 12, 2000
eSynch Corporation
By: /s/ Thomas Hemingway
--------------------------------------
Thomas Hemingway, Chief Executive Officer
(Authorized Officer)
By: /s/ David P. Noyes
-------------------------------------
David P. Noyes, Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 2000, AND STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 496,757
<SECURITIES> 0
<RECEIVABLES> 87,099
<ALLOWANCES> 0
<INVENTORY> 10,000
<CURRENT-ASSETS> 632,502
<PP&E> 754,208
<DEPRECIATION> 117,070
<TOTAL-ASSETS> 5,142,225
<CURRENT-LIABILITIES> 2,416,119
<BONDS> 0
0
4,099,579
<COMMON> 11,310
<OTHER-SE> (1,461,933)
<TOTAL-LIABILITY-AND-EQUITY> 5,142,225
<SALES> 196,548
<TOTAL-REVENUES> 196,548
<CGS> 11,243
<TOTAL-COSTS> 1,674,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,489,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,489,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1489,405)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
