SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------------------
For the fiscal year ended November 30, 1996.
Commission File Number 33-36198
NET/TECH INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 22-3038309
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization). Identification No.)
1 WEST FRONT STREET, SUITE 30, RED BANK, NEW JERSEY 07701
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (908)345-1100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check whether Issuer: (1) has filed all reports required to be filed by section
13 or 15 (d) of the Securities and Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
As of January 31, 1997, the aggregate market value of the voting stock held by
non-affiliates of the Issuer was $12,635,530. The market value of Common Stock
of the Issuer, par value $.01 per share, was computed by reference to the
average of the closing bid and asked prices of one share on such date which was
2 1/2.
Issuer's Revenues for its most recent fiscal year: $0.
The number of shares outstanding of the Issuer's Common Stock, par value $.01
per share, as of January 31, 1997: 5,697,212.
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form or any amendment to this Form
10-KSB [ ]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Net/Tech International, Inc. (the "Company"), a Delaware corporation
was incorporated on January 10, 1990. Net/Tech currently is a development stage
company whose primary objective is to develop it's own proprietary products,
namely the Hygiene Guard Hand Washing Monitoring System. The company also owns
patented technology for water dispersible products and has made a determination
to limit it's activity in seeking licensing arrangements with outside
manufacturers and distributors for that patented technology. In addition,
Net/Tech is actively seeking to acquire a network of technologically innovative
products and companies.
BACKGROUND
Despite current Federal, State, and local regulations which mandate
that employees wash their hands after using restroom facilities, a significant
number fail to adhere to these laws. The Hygiene Guard /Registered Trademark/
individually identifies employees who neglect to comply with these vital health
codes.
The need for the Hygiene Guard /Registered Trademark/ Hand Washing
Monitoring System is based on a significant national health problem. A major
cause of infections in patient care and food handling businesses is employees
who fail to wash their hands after using the restroom facilities.
/bullet/ In the past twelve years, the infection rates have increased
fifty-eight percent (58%), rising from the fifth (5th) to the
third (3rd) leading killer of Americans.
/bullet/ Every year, two million (2,000,000) hospital patients get sick
and eighty thousand (80,000) deaths result either directly or
indirectly from infection they did not have when they entered the
hospital.
/bullet/ In restaurants across the country, there have been increasing
outbreaks of food-borne illnesses like Hepatitis A, E. Coli, and
silicosis. All of these can be carried on the hands of food
preparers.
HYGIENE GUARD/Registered Trademark/ HAND WASHING MONITORING SYSTEM
The Hygiene Guard /Registered Trademark/ individually identifies
employees who fail to wash their hands after using the restroom facilities,
prior to returning to the work place.
The Hygiene Guard /Registered Trademark/ is an Infrared based
interactive monitoring system. The system is comprised of three main components:
1) The Employee Badge
2) The Restroom Entry/Exit Module (EEMU)
3) The Sink/Soap Dispenser Monitoring Unit (SMU)
2
<PAGE>
The Employee badge is a self contained, battery powered device,
designed to attach to an employee's lapel or collar. It is approximately the
size of a typical employee name tag, and is water and shock resistant. It
utilizes emitting diodes or LED's to indicate the status of the badge, and an
active Infrared (IR) transceiver to communicate with the Entry/Exit Module, and
the Sink/Soap Dispenser Module. Each badge also has a unique ID or code imbedded
into the badge electronics.
The Entry/Exit Monitoring Unit ("EEMU") is the heart of the system. It
contains the central processing unit, a small keypad for entering supervisory
requests, a single line LCD display for enunciating system status, a small
printer for reports, and the support electronics needed for the communications
and power supply. The EEMU is actually two separate units, one unit is the main
enclosure, which can be conveniently wall or floor mounted. It is a NEMA 4 rated
enclosure that can be exposed to water and normal cleaning agents. The unit is
approximately 16" x 10" x 6". The second component of the EEMU is the I/R
transceiver assembly. This component houses the Infrared transceiver circuitry
and I/R lens. This unit is mounted to the ceiling in the bathroom, near the
entrance. It is approximately 4" x 4" x 2", with a 4" high dome lens. This
device floods the bathroom with encoded I/R signals that are interpreted by the
Hygiene Guard Badge. It also communicates with the SMU (Sink Monitoring Unit),
to record bathroom activities of badged employees.
The Sink/Soap Dispenser Monitoring Unit monitors the presence of a
badged employee at the sink. It communicates with the employee badge by means of
active Infrared sensors. It determines if the employee uses the sink or soap by
monitoring the soap dispenser actuator (using a micro switch), and by ensuring
the employee remained at the sink for a specific length of time. The sink module
is connected to the Entry/Exit Module by means of a small local area network.
The badge ID is also transmitted to the entry module via the local area network.
Two versions of this module are envisioned. One is integrated directly into the
soap dispenser, and the other is an external unit that can be attached to any
soap dispenser.
MARKETS AND MARKETING
The markets for the Hygiene Guard /Registered Trademark/ are all sites
where there is patient care and/or food processing and handling. Specific
markets include restaurants, hospitals, doctor's offices, nursing homes, hotels
and casinos, child day care facilities and food processors.
Net/Tech is committed to a marketing strategy that will result in a
significant level of sales within a short period of time without unnecessary
expenditures. Management intends to take advantage of existing distribution
channels rather than relying exclusively on in-house marketing. The following
activities will be initiated immediately upon completion of a production
prototype:
1. Initiate a nationwide program to alert Federal, State and County
health officials of the availability of a new, innovative product
which can help them monitor hand washing in establishments under
their supervision,
2. Continue negotiations and finalize a distribution agreement with
at least one of the International Industry leading distributors
who has already expressed interest in the Hygiene Guard System,
3. Utilize existing management and shareholder connections with
major hospitals, supermarkets, restaurants and hotels/casinos to
create end user sales,
4. Establish a strategic partnership and alliance with a well known
product end user,
3
<PAGE>
5. Establish in-house marketing team along with utilizing
conventional direct mail and industry specific advertising.
6. Establish licensing agreement with a child care corporation who
has expressed interest in using the Hygiene Guard /Registered
Trademark/ at child care centers to teach proper personal hygiene
at an early age.
7. Establish in-house marketing team along with utilizing
conventional direct mail and industry specific advertising.
PATENTS
On January 18, 1991, the Company filed for US patent protection on the
Hygiene Guard /Registered Trademark/ invention. A patent was granted on April
13, 1993 (5,202,666). All patent rights have been assigned to the Company by the
inventors, Daniel D. Richard and Hermann Knippscheer. Foreign patent rights for
the Hygiene Guard/Registered Trademark/ will be filed by the Company.
On April 30, 1990, the Company filed for US patent protection on the
water-dispersible technology (Patent #5,110,525, granted May 5, 1992), useful in
manufacturing rigid containers for use in the medical and food industries. The
inventors, William H. Hale and Roger E. Kolsky, have assigned the patent rights
to the Company. Agricultural and process patent applications have been filed.
The Company was issued a patent (Patent #5,135,721, granted Aug. 4,
1992) for a sterilization apparatus named Steril-Eze. All patent rights have
been assigned by the inventor to the Company.
The Company was issued a usage patent on the water-dispersible
technology (Patent #5,335,449, granted August 9, 1994) for the agricultural
market. All patent rights have been assigned by the inventor to the Company.
The Company was issued a process patent on the water-dispersible
technology (Patent #5,346,541, granted September 13, 1994). This patent covers
the process required to produce the material and the ability to vary dispersal
times. All patent rights have been assigned by the inventors to the Company.
COMPETITION
The Company will be reliant on patent protection and trade secrets for
the Hygiene Guard /Registered Trademark/ and technology to serve as a barrier to
direct competition from outside sources. There can be no assurance, however,
that the Company's patents issued will afford the Company commercially
significant protection against potential competitors.
RESEARCH AND DEVELOPMENT
The Company has expended $8,000 during 1996 and $4,303 during 1995 on
research and development. The Company does not anticipate any of these costs
being borne by customers.
4
<PAGE>
EMPLOYEES
In addition to a part-time financial officer and marketing consultants,
the Company has two full time employees. Also, the Company has hired independent
contractors for trade shows, research and engineering and designing consulting
work.
ITEM 2. DESCRIPTION OF PROPERTY
The Company corporate office, occupying 1250 square feet, is located in
Red Bank, New Jersey, with an annual rent of $21,600. The lease expires June 30,
1998. The Company currently has no leased Research and Development space.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Not Applicable.
5
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's Common Stock has been trading on the Over-the-Counter
market since January 10, 1992, the date of the Company's initial public
offering. The following table shows for the calendar periods indicated the high
and low closing bid quotation for the Company's Common Stock. The quotations,
from Dow Jones Retrieval Service, represent inter-dealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions.
HIGH BID LOW BID
1996
First Quarter 1 1/4
Second Quarter 3-3/4 1/4
Third Quarter 3-3/4 1-3/4
Fourth Quarter 2-1/2 1-3/4
1995
First Quarter 1-3/8 1/2
Second Quarter 1-3/8 5/8
Third Quarter 1-1/4 5/8
Fourth Quarter 1-1/8 1/4
(b) As of January 31, 1997, there were approximately 178 record holders
of the Company's Common Stock. In addition, there are 250 shareholders in street
name whose shares are held in the name of other nominees.
(c) There have been no dividends declared or paid by the Company on its
Common Stock during the past two years.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Since its inception on January 10, 1990, Net/Tech International, Inc.
has invested a substantial amount of its resources into the development of its
hygiene monitoring unit and water-dispersible technology and. This investment
has been financed through both private and public equity markets.
In March 1996, Net/Tech International, Inc. appointed Glenn E. Cohen to
serve as the company's new President and Chief Operating Officer. At that time,
the Company made a determination to focus on the development and marketing of
it's patented Hygiene Guard /Registered Trademark/ Hand Washing Monitoring
System.
In addition to the development of the Hygiene Guard /Registered
Trademark/ Hand Washing Monitoring System, the Company is actively seeking to
acquire a network of technologically innovative products and companies.
6
<PAGE>
PLAN OF OPERATION
CASH REQUIREMENTS
On November 30, 1996, the Company had a cash reserve of $77,500. On
October 10, 1996, the Company paid off the entire indebtedness to CRYO-CELL in
the amount of $169,357. It intends to pursue additional funding through private
placement. Subsequent to the end of the Company's most recent fiscal year, the
Company received $200,000 from the sale of options.
PRODUCT DEVELOPMENT AND STRATEGIC PLANS
On April 19, 1996, the Company entered into a contract with Stainless
Design Corporation (SDC) for Phase I of the miniaturization and development of
the production prototype for the Hygiene Guard /Registered Trademark/ Hand
Washing Monitoring System.
On October 31, 1996, Net/Tech entered into a Phase II contract with SDC
for the development of the Hygiene Guard /Registered Trademark/ Hand Washing
Monitoring System. Phase II shall complete the development through the
production prototype stage. According to SDC management estimates the production
prototype should be complete for Beta Product Test Site in the 2nd quarter of
1997.
On October 24, 1996, the Company acquired Pressure Point Technologies,
Inc. (PPT). The core technology of PPT is a batteryless remote control unit that
can operate televisions and garage doors utilizing finger pressure.
On November 25, 1996, Net/Tech obtained an option to purchase Stainless
Design Corporation (SDC). SDC is a manufacturing and installer of gas and
chemical delivery systems for the semi-conductor industry. SDC also is the
manufacturer for the Hygiene Guard /Registered Trademark/ Hand Washing
Monitoring System.
No assurances can be made that the Company can identify any partners or
consultants to continue development or successfully complete the development of
its products or market them even if they are substantially completed. No
assurance can be made that the Company will successfully complete any
acquisition of other products or companies.
7
<PAGE>
ITEM 7 FINANCIAL STATEMENTS
The financial statement and supplementary data listed in the
accompanying Index to Financial Statements are attached as part of this report.
NET/TECH INTERNATIONAL, INC.
LIST OF FINANCIAL STATEMENTS
The following financial statements of Net/Tech International, Inc. are included
in Item 7:
Report of Independent Public Accountant 9
Balance Sheets F-1
Statements of Loss F-3
Statements of Cash Flows F-4
Statements of Shareholders' Equity - Inception
Through November 30, 1996 F-6
Notes to Financial Statements F-9
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
8
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Net/Tech International, Inc.
We have audited the accompanying consolidated balance sheets of Net/Tech
International, Inc. (a development stage company) as of November 30, 1996 and
1995, and the related consolidated statements of loss and cash flows for the
years ended November 30, 1996 and 1995 and for the period from September 11,
1989 (inception) through November 30, 1996 and consolidated statements of
stockholders' equity and deficit accumulated during the development stage from
inception through November 30, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Net/Tech International, Inc. as of November 30, 1996 and 1995 and the
consolidated results of operations, cash flows and statements of stockholders'
equity and deficit accumulated during the development stage from inception
through November 30, 1996 in conformity with generally accepted accounting
principles.
MIRSKY, FURST & ASSOCIATES, P.A.
Fort Lee, New Jersey
February 3, 1997, except as to
Note 2, as to which the date
is March 14, 1997
9
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30 NOVEMBER 30
1996 1995
----------- -----------
CURRENT ASSETS
Cash $ 77,560 $ 0
Accounts Receivable 0 4,500
Prepaid Expenses 0 500
-------- -------
Total Current Assets 77,560 5,000
-------- -------
FIXED ASSETS
Furniture and Equipment 19,999 15,734
Less: Accumulated Depreciation 6,460 14,130
-------- -------
Net Fixed Assets 13,539 1,604
-------- -------
INTANGIBLE ASSETS
Patent Application Costs (net of accumulated
amortization of $9,424 and $5,501 respectively) 64,352 76,951
Unamoritized Organizational Costs 84 284
-------- -------
64,436 77,235
-------- -------
OTHER ASSETS
Security Deposits 21,950 150
-------- -------
TOTAL ASSETS $177,485 $83,989
======== =======
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-1
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30 NOVEMBER 30
1996 1995
----------- -----------
CURRENT LIABILITIES
Accounts Payable $ 22,939 $ 10,827
Accrued Expenses and Interest 4,625 50,330
Obligations Under Capital Lease 1,287 0
Convertible Notes Payable 0 466,275
---------- -----------
Total Current Liabilities 28,851 507,432
---------- -----------
LONG-TERM LIABILITIES
Obligations Under Capital Lease 3,264 0
---------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value; 20,000,000 and
7,500,000 shares authorized; 5,697,212 and
4,855,127 shares issued and outstanding,
respectively 56,972 48,551
Additional Paid-In Capital 2,661,759 1,903,126
Deficit Accumulated During the Development
Stage (2,573,361) (2,375,120)
---------- -----------
Total Stockholders' Equity 145,370 (423,443)
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 177,485 $ 83,989
========== ===========
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-2
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
JAN. 10
1990
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
NOVEMBER 30 NOVEMBER 30 NOVEMBER 30
1996 1995 1996
----------- ----------- -----------
INCOME $ 0 $ 0 $ 0
COSTS AND EXPENSES
General & Administrative Expenses 90,862 141,819 1,439,099
Research and Development Expenses 8,000 4,303 570,842
Legal, Professional and
Consulting Fee 50,773 51,260 412,460
Depreciation 2,098 819 38,847
Amoritzation of Intangibles 4,124 670 12,594
---------- --------- ----------
Operating (Loss) (155,857) (198,871) (2,473,842)
---------- --------- ----------
OTHER (INCOME) AND EXPENSES
Interest (Income) 0 (1) (24,162)
Interest Expense 7,106 36,638 59,435
Loss on Abandoment of Assets 1,603 0 571
Loss on Abandonment of Patents 33,675 0 33,675
Write-off of Investment 0 0 30,000
---------- --------- ----------
42,384 36,637 99,519
---------- --------- ----------
Net (Loss) $ (198,241) $(235,508) $2,573,361
========== ========= ==========
Net (Loss) Per Share $ (0.04) $ (0.05)
========== =========
Number of Shares used in Computation 5,486,393 4,855,127
========== =========
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-3
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
JAN. 10
1990
(INCEPTION)
THROUGH
NOVEMBER 30 NOVEMBER 30 NOVEMBER 30
FISCAL YEAR ENDED 1996 1995 1996
- ----------------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(198,241) $(235,508) $(2,573,361)
ADJUSTMENTS TO RECONCILE NET LOSS
TO CASH USED FOR OPERATING
ACTIVITIES:
Depreciation 2,098 819 38,847
Amortization of intangible
assets 4,124 670 10,341
Write-offs of patents and
trademarks 33,675 0 35,927
Loss on disposal of assets 1,603 0 1,603
Decrease in accrued expenses
from Initial public offering 0 0 30,500
Promotional services paid in
Common Stock 0 0 250
Decrease in Investment 0 0 30,000
Interest to affiliate paid in
Common Stock 6,856 0 6,856
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable 4,500 0 0
Prepaid expenses 500 1,901 0
Security deposits (21,800) 5,387 (21,950)
Accounts Payable 12,112 226 30,939
Accrued expenses (175) 32,020 50,155
--------- --------- -----------
NET CASH PROVIDED BY (USED) FOR
OPERATING ACTIVITIES: (154,748) (194,485) (2,359,893)
--------- --------- -----------
CASH FLOWS USED FOR INVESTING
ACTIVITIES:
Purchases of property and
equipment-net (15,636) 0 (53,989)
Patent and trademark
acquisition costs 0 (560) (82,704)
--------- --------- -----------
NET CASH USED FOR INVESTING
ACTIVITIES $ (15,636) $ (560) $ (136,693)
--------- --------- -----------
F-4
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
JAN. 10
1990
(INCEPTION)
THROUGH
NOVEMBER 30 NOVEMBER 30 NOVEMBER 30
FISCAL YEAR ENDED 1996 1995 1996
- ----------------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock $ 37,500 $ 0 $ 456,236
Loan proceeds from affiliate 187,907 194,789 634,182
Repayment of debt to affiliate (169,357) 0 (169,357)
Financing via capital leases 4,551 0 4,551
Other 0 0 (16)
Proceeds from debt 0 0 130,000
Deferred public offering costs 0 0 (84,496)
Issuance of common stock net of
offering costs 0 0 1,054,078
Proceeds of warrants exercised 187,343 0 548,968
--------- -------- ----------
NET CASH PROVIDED BY FINANCINT
ACTIVITIES 247,944 194,789 2,574,146
--------- -------- ----------
Increase (decrease) in cash and
cash equivalents 77,560 (256) 77,560
CASH AND CASH EQUIVALENTS:
Beginning of year 0 256 0
--------- -------- ----------
End of year $ 77,560 $ 0 $ 77,560
========= ======== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 0 $ 0 $ 0
Income Taxes $ 0 $ 0 $ 0
Supplemental schedule of noncash investing and financing activities:
Additional common stock was issued upon the conversion of $130,000 of
convertible loans payable.
A company was issued 2,000 shares at $4 per share for promotional services.
The company purchased Pressure Point Technologies in exchange for 25,000
shares of common stock.
Additional common stock was issued upon the conversion of the affiliate note
payable $(464,825) and accrued interest $(52,836).
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
INCEPTION THROUGH NOVEMBER 30, 1996
DEFICIT TOTAL
ACCUMULATED SHARE-
DURING THE HOLDERS'
COMMON STOCK ADDITIONAL PAID DEVELOPMENT EQUITY
SHARES AMOUNT IN CAPITAL STAGE (DEFICIT)
--------- ------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
JANUARY 10, 1990 (INCEPTION)
Shares issued at $.01 per unit
For cash-private placement 3,162,500 $31,625 31,625
For promotional service provide 25,000 250 250
For subsrciption receivable 750,000 7,500 7,500
For orginizational costs provided 100,000 1,000 1,000
For patent assignment 200,000 2,000 2,000
Shares issued at $1.00 per unit
For cash-private placement 130,000 1,300 $ 128,700 130,000
For purchase of option 30,000 300 29,700 30,000
Net (Loss) $(154,151) (154,151)
--------- ------- ---------- -------- --------
BALANCE NOVEMBER 30, 1990 4,397,500 43,975 158,400 (154,151) 48,224
DECEMBER 1, 1990 TO NOVEMBER 30, 1991
Net (Loss) (144,403) (144,403)
--------- ------- ---------- -------- ---------
BALANCE NOVEMBER 30, 1991 4,397,500 43,975 158,400 (298,554) (96,179)
DECEMBER 1, 1991 TO NOVEMBER 30, 1992
Shares issued at $7.00 per share
For cash - IPO 149,110 1,491 1,042,279 1,043,770
Shares issued at $2.33 per share
For Convertible Note 55,787 558 129,426 129,984
Shares issued at $2.00 per share
For Inside A Warrants 10,000 100 19,900 20,000
Shares issued at $2.67* per share
For Inside B Warrants 10,000 100 26,600 26,700
Reduction of deferred offering costs (212,813) (212,813)
Net (Loss) (662,629) (662,629)
--------- ------- ---------- --------- ---------
BALANCE NOVEMBER 30, 1992 4,622,397 $46,224 $1,163,792 $(961,183) $ 248,833
========= ======= ========== ========= =========
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
INCEPTION THROUGH NOVEMBER 30, 1996
DEFICIT TOTAL
ACCUMULATED SHARE-
ADDITIONAL DURING THE HOLDERS'
COMMON STOCK PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL STAGE (DEFICIT)
--------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
DECEMBER 1, 1992 TO NOVEMBER 30, 1993
Shares issued at $7.50 per share
For - IPO A Warrants 33,230 $ 332 $ 248,893 249,225
Shares issued at $4.66 per share
For Convertible Note A Warrants 500 5 2,325 2,330
Shares issued at $2.00 per share
For Inside A Warrants 25,000 250 49,750 50,000
Shares issued at $2.67* per share
For Inside B Warrants 5,000 50 13,320 13,370
Shares issued at $2.50 per share 60,000 600 148,386 148,986
Shares issued at $6.00 per share 3,000 30 17,870 17,900
Shares issued at $2.42 per share 92,000 920 222,080 223,000
Shares issued at $2.33 per share 10,000 100 23,250 23,350
Shares issued at $4.00 per share
For Professional Services 2,000 20 7,980 8,000
Net (Loss) (656,814) (656,814)
--------- ------- ---------- ---------- --------
BALANCE NOVEMBER 30, 1993 4,853,127 48,531 1,897,646 (1,617,997) 328,180
December 1, 1993 to November 30, 1994
Shares issued at $2.75 per share 2,000 20 5,480 5,500
Net (Loss) (521,615) (521,615)
--------- ------- ---------- ---------- --------
BALANCE NOVEMBER 30, 1994 4,855,127 $48,551 $1,903,126 ($2,139,612) ($187,935)
========= ======= ========== ========== ========
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNAITONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
INCEPTION THROUGH NOVEMBER 30, 1996
DEFICIT TOTAL
ACCUMULATED SHARE-
ADDITIONAL DURING THE HOLDERS'
COMMON STOCK PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL STAGE (DEFICIT)
---------- ------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
DECEMBER 1, 1994 TO NOVEMBER 30, 1995
Net (Loss) (235,508) (235,508)
----------- --------
BALANCE NOVEMBER 30, 1995 4,855,127 48,551 1,903,126 (2,375,120) (423,443)
---------- ------- ---------- ----------- --------
DECEMBER 1, 1995 TO NOVEMBER 30, 1996
Shares issued at $1.25 per share 149,874 1,499 185,844 187,343
Shares issued at $0.25 per share 150,000 1,500 36,000 37,500
Shares issued at $1.00 per share
to acquire Pressure Point Tech 25,000 250 24,750 25,000
Shares issued at $1.00 per share
for Convertible Loan 517,211 5,172 512,039 517,211
Net (Loss) (198,241) (198,241)
---------- ------- ---------- ----------- --------
BALANCE NOVEMBER 30, 1996 5,697,212 $56,972 $2,661,759 ($2,573,361) $145,370
========== ======= ========== =========== ========
</TABLE>
* Shares computed at $2.69 in error.
Share prices are rounded to the nearest penny.
The accompanying notes to financial statements
are an integral part of these statements.
F-8
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The Company was incorporated in Delaware on January 10, 1990. The
Company is to be considered a development stage company, which proposes to
commercialize products involving sanitary monitoring devices and water
dispersible technology. The Company's activities to date have principally been
the development of the Hygiene Guard /REGISTERED TRADEMARK/ production
prototype and the purchase of a water dispersible technology including the
rights to all future developments by the inventor, acquisition of a hand-made
prototype and an application for patent protection for the technology. It has
had no revenues to date. Consequently, the viability of the Company to remain a
going concern is dependent on its ability to obtain the necessary financing to
fund its research and development and other costs through sales of securities or
other sources of funding. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern.
In 1993, the Company formed Multi-Monitoring Systems, Inc., a Delaware
Corporation. As of November 30, 1995, no shares have been issued and the company
has no financial activity, therefore, it is not consolidated with Net/Tech. In
October, 1995, the Company acquired Pressure Point Technologies (see Note 3).
The financial statements include the accounts for this subsidiary from the date
of acquisition.
CASH EQUIVALENTS:
It is Company policy to include all investments with a maturity of less
than 90 days as Cash Equivalents.
FIXED ASSETS:
Fixed assets are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful life of the asset.
Upon the sale or retirement of depreciable assets, the cost and related
accumulated depreciation will be removed from the accounts and resulting profit
or loss will be reflected in income. Expenditures for maintenance and repairs
are charged to income as incurred.
PATENT COSTS:
Costs in connection with filing patent applications are being
capitalized. When the patent approvals are obtained, the Company amortizes such
costs over a life of 10 years. Upon the abandonment of a patent application all
prior costs are expensed.
F-9
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY SIGNIFICANT
ACCOUNTING POLICIES - CONTINUED
TRADEMARK COSTS:
Costs in connection with filing and developing trademarks are being
capitalized. Once the trademark approval is obtained, the Company amortizes such
costs over a life of 3 years. Upon the abandonment of a trademark application,
all prior costs are expensed.
ORGANIZATION COSTS:
Organization costs were capitalized and are being amortized over a five
year period.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are expensed in the year incurred.
LOSS PER COMMON AND COMMON EQUIVALENT SHARE
The loss per common share for the years 1996 and 1995 were computed by
dividing net loss by the weighted average number of common shares outstanding
during such periods. Common stock equivalents were not included in the
computation of weighted average shares outstanding because their inclusion would
be anti-dilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Actual results
could differ from those estimates.
NOTE 2 - LIQUIDITY AND BUSINESS RISKS
The company currently has no sources of revenues and has incurred
operating loss since inception. At November 30, 1996, the Company has an
accumulated deficit of $2,573,361. Such losses have resulted principally from
costs incurred in research and development and from general and administrative
expenses associated with the Company's operations. The company expects to
commence marketing of the Hygiene Guard /trademark/ product in the second
quarter of 1997. Any delay in the implementation of this plan would adversely
affect the Company's business, financial position and result of operations. In
March, 1997, the Company received $200,000 from the sale of 800,000 options to
purchase its common stock at $2.50 per share. These options are valid for a
period of two years. Exercise of these options would result in a cash infusion
of $2,000,000 to the Company. Stock issued will be subject to Rule 144
restrictions.
F-10
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 3 - ACQUISITIONS
In October 1996, the Company acquired 100% of the common stock of
Pressure Point Technologies, Inc., in a transaction accounted for under the
purchase method. The company issued 25,000 shares of common stock in
consideration for the stock acquired. Pressure Point Technologies was
incorporated in Michigan in 1996 and the assets of the company consisted
primarily of the technology for a battery less remote control for which a patent
has been applied for. The Net/Tech International stock issued was valued at $1
which was less than the prevailing quoted market price at the time of the
agreement due to limitations on the subsequent sale of the stock issued. The
acquisition cost of $25,000 was allocated to patents and will be amortized if
the patents are approved.
NOTE 4 - CONVERSION OF DEBT TO AFFILIATE
Beginning in April 1994, the Company borrowed capital for operations
from its affiliate CRYO-CELL International, Inc. The amounts borrowed were in
the form of convertible notes due on demand at an interest rate of 10% per
annum. The notes were convertible into the common stock of Net/Tech
International, Inc. at CRYO-CELL's discretion. All of the Company's patent
rights were assigned to CRYO-CELL as collateral for the notes.
On November 1, 1995, both boards of directors of the respective
companies resolved to convert the notes into shares of restricted common stock
valued by the Company at $1. The Company issued 517,211 shares which satisfied
$52,386 in accrued interest and the remaining $464,825 principal amount due.
NOTE 5 - ACCRUED EXPENSES
At November 30, accrued expenses consisted of:
1996 1995
---- ----
Legal and accounting $ 0 $ 0
Consultants and patent costs $ 0 $ 2,500
Accrued Interest $ 0 $ 45,530
General Expenses $ 4,625 $ 2,300
------- --------
$ 4,625 $ 50,330
======= ========
NOTE 6 - PATENTS
Patents have been granted on the Hygiene Guard /REGISTERED TRADEMARK/
and water dispersible technology. Additional patents have been applied for
relating to the water dispersibility technology.
F-11
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 6 - PATENTS - CONTINUED
The patent applications and rights were assigned by the co-inventors to
the Company. The assignments included rights to all related developments,
modifications and improvements. In consideration of the assignments each of the
co-inventors received 100,000 shares of common stock of the Company, valued at
$1,000, which approximates costs incurred by the co-inventors. The patent rights
were capitalized and recorded as an asset.
NOTE 7 - WARRANTS
The Company issued 160,000 shares with detachable Class A warrants at
$1.00 per share prior to the public offering. The IPO consisted of 149,110
shares with detachable Class A warrants exercisable at $7.50 per share. In
addition, the Company issued 55,790 shares with detachable Class A warrants
exercisable at $2.33 per share (conversion price) for the $130,000 convertible
note. All of the Class A warrants are exercisable to purchase one share of
common and one Class B warrant. The Class B warrant is exercisable to purchase
one share of common stock.
Both warrants are redeemable by the Company at any time upon thirty
days notice at $.05 per warrant not to exceed a period of two years on Class A
warrant from the date of issuance and three years on Class B warrants from the
date of issuance. The Company may redeem all of each class of warrants if the
average closing bid for the stock for twenty consecutive trading days is greater
than or equal to $10 for Class A warrants and greater than or equal to $14 for
Class B warrants. The redemption by the Company must be within thirty days.
Class A warrants issued prior to the public offering originally could
be exercised at $2 per share and Class B warrants at $2.69 per share. Class A
warrants issued in the public offering can be exercised at $7.50 per share and
Class B warrants at $10 per share. Class A warrants issued from the conversion
of the note could have been exercised at $4.66 per share and Class B warrants at
$6.20 per share. All of the common stock issued prior to the public offering
from the convertible loan are subject to Rule 144 under the Securities Act of
1933, restricting the sale of stock.
The expiration dates on the Class A and Class B warrants issued prior
to the public offering and issued with the convertible note were extended to
November 30, 1996 and the price of said warrants was reduced to $1.25 per share.
149,874 of these shares were exercised and the remaining warrants expired. The
expiration dated of the Class A and Class B warrants issued in the public
offering, exercisable at a price of $7.50 and $10 respectively have been
extended to August 27, 1997.
All other warrants issued by the Company have expired.
F-12
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 7 - WARRANTS - CONTINUED
The following table summarizes the Company's outstanding warrants at
November 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
WARRANTS
--------
A B A B
------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Warrants outstanding and exercisable at
the beginning of year (number of shares) 296,167 53,730 296,167 53,370
Exercised 149,874 0 0 0
Terminated 30,413 20,500 0 0
Warrants outstanding and
exercisable at the end of year 115,880 33,230 296,167 53,370
Price range of outstanding warrants
(n/m-no market) $ 7.50 $10.00 $2 - $7.50 $2.69 - $10
</TABLE>
NOTE 8 - OPTIONS
The following table summarizes the Company's outstanding options at
November 30:
1996 1995
---- ----
Options outstanding and exercisable at the
beginning of the year (number of shares) 243,000 290,500
Options Granted - Employee 110,000
Options Granted - Non-employee 26,000
Terminated - Non-employee (Exercise price $2.50) 30,000
Terminated - Non-employee (Exercise price $9.00) 10,000
Terminated - Non-employee (Exercise price $2.50) 7,500
Terminated - Non-employee (Exercise price $2.50) 200,000
Terminated - Non-employee (Exercise price $5.00) 3,000
Terminated - Employee (Exercise price $2.75) 25,000
Options outstanding and exercisable at the
end of year (# of shares) 151,000 243,000
Price range of outstanding options (n/m - no market) n/m n/m
F-13
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 8 - OPTIONS - CONTINUED
For outstanding shares under option at November 30, 1996, option prices
range from $0.25 to $2.00 per share. A total of 1,000 options are currently
exercisable at a price of $0.25. The expiration dates for these options range
from 5/98 to 3/99.
NOTE 9 - STOCKHOLDERS' EQUITY
Other stock reserved for future issuance is as follows:
DESCRIPTION NUMBER OF SHARES EXPIRATION
- ----------- ---------------- ----------
Reserve for maximum potential exercise of
public warrants 149,110 8/97
Reserve for options granted for non-employee 15,000 11/98
Reserve for granted employee options 200,000 11/98
- ----------
*250,000 shares of the Company's stock has been put into reserve for an
Employee Stock Option Plan (the Plan). Employee Options granted under the Plan
are exercisable at 100% of the current market price and have a term of five
years from the date of grant. The option immediately terminate on the employee's
termination or in the case of permanent and total disability, the options are
exercisable for a period of 30 days after termination.
NOTE 10 - RELATED PARTY TRANSACTIONS
CRYO-CELL International, Inc. owns 35.8% of the Company's issued and outstanding
stock.
For the fiscal year 1996, common expenses between Net/Tech and CRYO--CELL have
ceased. In prior years, the companies shared expenses were allocated based on
management's discretion of usage.
NOTE 11 - SERVICES CONTRIBUTED
a) In 1990, promotional services were provided by an independent contractor in
consideration for 25,000 shares of the Company's common stock. The Company had
negotiated the fair value of the promotional services rendered under the terms
of the agreement to be $250. The Company has recorded the shares issued at the
fair market value of the service and expensed the promotion fees.
b) In 1990, organization costs were provided by an independent contractor in
consideration for 100,000 shares of the Company's common stock. The Company had
been billed $1,000 and determined the fair value of the costs incurred to be
$1,000. The Company had recorded the shares issued at the fair market value of
the costs and capitalized the organization costs (see Note 1).
F-14
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 11 - SERVICES CONTRIBUTED - CONTINUED
c) In 1993, a company was issued 2,000 shares of common stock at $4.00 per share
for promotional services.
NOTE 12 - CONVERTIBLE LOANS
In May and June, 1991, the Company entered into convertible loan
agreements totaling $130,000 with nine individuals unaffiliated with the
Company. Each agreement stipulated that the individuals have the choice of being
repaid with interest at two percent over prime or converting the loan into
restricted common stock at one-third the per share price established in the
Company's Initial Public Offering of $7.00.
As of April 1992, all participants had converted their loan values at
$2.33 per unit into 55,790 shares of restricted common stock and warrants.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Company entered into a lease for office space in Red Bank, New Jersey. The
lease term is from September 5, 1996 to August 31, 1998. The base rent is
$21,000 per annum plus a provision for an increase based upon the landlord's
increase in real estate taxes. The lease also contains three one year renewal
options. Total rent expense for the year amounted to $2,833 and $23,000 for the
years ended November 30, 1996 and 1995 respectively.
The Company has entered into a contract with a manufacturer for the engineering,
development, implementation and documentation of its principal product. The
contract which is expected to be completed in fiscal year 1997 is in the amount
of $65,000. As of November 30, 1996, the Company has advanced $20,000 to the
manufacturer.
In March 1996, the Company appointed a new president and, accordingly, an
employment contract was signed.
NOTE 14 - INCOME TAXES
No provisions for income taxes was recorded for the two years ended November 30,
1996 and 1995 due to net operating losses incurred. Net operating loss carry
forwards for U.S. tax purposes of approximately $2,500,000 expire from 2005
through 2011.
The company's gross deferred tax assets of $1,007,000 and $928,000 at November
30, 1996 and 1995, respectively, represent primarily the tax effect of net
operating loss carry forwards. A full valuation allowance has been established
with regard to the gross deferred tax assets.
F-15
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 15 - CAPITAL LEASES
The Company leases certain equipment under a capital lease. Leased property
under capital leases include:
1996 1995
---- ----
Equipment $4,551 ----
At November 30, 1996 the future minimum lease payments required under capital
leases are as follows:
November 30, 1997 $1,913
November 30, 1998 1,913
November 30, 1999 1,754
------
5,580
Less: imputed interest 1,029
------
Present value of minimum
lease payments $4,551
======
NOTE 16 - INITIAL PUBLIC OFFERING
In January 1992, the Company successfully completed its initial public
offering in which the Company raised $1,043,770 from the sale of 149,110 units
at $7.00 per unit. After expenses, this resulted in a cash flow to the Company
of approximately $885,000.
NOTE 17 - "HYGIENE GUARD /REGISTERED TRADEMARK/" SALE
The purchase, production, testing and distribution agreement (described
below) will only be relevant once a production ready unit has been completed
VALGENE ASSOCIATES
On August 6, 1992, Net/Tech signed a letter of intent for the purchase
of the Company's first production prototype "Hygiene Guard" sanitary monitoring
unit with Valgene Associates, an Oklahoma City based restaurant group. The group
operates 10 full-service restaurants.
The agreement provides for Valgene to purchase and test a "Hygiene
Guard" unit under actual working conditions in one of their restaurants. Once it
is confirmed that the unit is functioning as intended, Valgene intensto order 9
additional units for installation in each of its operating restaurants and any
new restaurant opened in the future.
Thereafter, once Valgene has met these conditions, Net/Tech has agreed
to grant their request for exlucsive distributorship rights for Oklahoma, Texas
and Arkansas under the following terms:
F-16
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 17 - "HYGIENE GUARD/REGISTERED TRADEMARK/" SALE
(a) Minimum purchase and sales levels must be achieved in each of the
above states in order to retain exclusivity.
(b) Even if the purchase and sales levels are achieved, Net/Tech has
the right to withdraw the exclusive distributorship at any time in
exchange for an option for Valgene to purchase 10,000 shares of
Net/Tech stock. The exercise price of the option would be 1/2 the
average between the "bid" and "ask" price on the day distributorship
rights were reclaimed. Shares subject to the option would have to be
held pursuant to the Rule 144 holding period after exercise.
The Company maintains communications with Valgene by providing them
with status reports on progress towards the completion of the unit. At this
time, the terms of the agreement will be implemented.
HUMAN SERVICES RISK MANAGEMENT, INC. (HSRM), A DIVISION OF CHILD, INC.
On May 28, 1993 the Company signed an exclusive licensing agreement
with HSRM to test and market the Hygiene Guard unit to child care centers,
children's day car facilities, Head Start Programs and schools.
HSRM agrees to purchase one unit for testing. They will use their best
efforts to encourage the operators in their field to purchase the Hygiene Guard
as well as eliciting the insurance companies to provide a discounted premium to
centers which install the Hygiene Guard.
The Company will pay a 15% commission to HSRM on all Hygiene Guard
sales. The agreement will continue in force for 10 years and HSRM will continue
to have exclusivity if they sell over 300 units during the first two years.
There was no activity during 1996 for either of the above agreements.
F-17
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 18 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1ST 2ND 3RD 4TH
1996 QUARTER QUARTER QUARTER QUARTER
- ---- ---------- ---------- ---------- ----------
Net Loss $ 16,212 $ 16,417 $ 53,413 $ 112,199
========== ========== ========== ==========
Loss per Share $ 0 $ 0 $ .01 $ .02
========== ========== ========== ==========
Shares used in
Computation 4,860,806 5,521,925 5,565,753 5,697,212
========== ========== ========== ==========
1ST 2ND 3RD 4TH
1995 QUARTER QUARTER QUARTER QUARTER
- ---- ---------- ---------- ---------- ----------
Net Loss $ 62,486 $ 50,542 $ 39,688 $ 82,792
========== ========== ========== ==========
Loss per Share $ .01 $ .01 $ .01 $ .02
========== ========== ========== ==========
Shares used in
Computation 4,853,127 4,853,605 4,855,127 4,855,127
========== ========== ========== ==========
F-18
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Frederick Wilhelm* 66 Chairman of the Board
Glenn E. Cohen* 35 Director, President and Chief
Operating Officer
Daniel D. Richard* 66 Director
Brian K. Burke 50 Secretary, Treasurer and
Chief Financial Officer
- ----------------
* Members of executive Committee
All directors hold office until the next annual meeting of stockholders or
until their successors are elected. No compensation to members of the Board of
Directors is paid for their services. Officer serve at the discretion of the
Board.
The issuer does not have a class of equity securities registered to
Section 12 of the Exchange Act and thus does not have to comply with Section
16(a) of the Exchange Act.
FREDERICK WILHELM
Mr. Frederick Wilhelm was the Chairman of the Board of Directors of
Buffalo Scale and Supply, Inc. a distributor of scales until his retirement. He
was President of the company from 1976 to 1989. Mr. Wilhelm is also a Director
of CRYO-CELL International, Inc.
GLENN E. COHEN
Mr. Glenn E. Cohen serves as President and Chief Operating Officer. Mr.
Cohen is a graduate of Boston University, with a Bachelor of Business
Administration and Marketing. He is also a graduate of California Western School
of Law. Mr. Cohen is licensed to practice law in New Jersey since 1986. Mr.
Cohen's expertise is in the area of sales and marketing. From 1986-1996, Mr.
Cohen was vice-president of Cohen/Schatz Associates, Inc., a land brokerage
company in New Jersey, where he was responsible for over $200 million in sales.
DANIEL D. RICHARD
Mr. Daniel D. Richard, a co-founder of the Company, has served as Chairman
and CEO of CRYO-CELL International, Inc. since its inception in September 1989.
Currently and for the past eleven years, he has been the co-owner with his wife,
Marie E. Richard, of the Chain Lane Food Emporium located in a New Jersey resort
area and during the six year period from 1980-1986, Mr. Richard served
voluntarily as co-coordinator and director of the S.M.A.R.T. program,
responsible for culinary training of former substance abusers under contract
with the New Jersey Department of Health. In 1986, he was co-founder
10
<PAGE>
of Marrow-Tech, Inc. a publicly traded company engaged in the field of cellular
replication. Prior to that for over 25 years, Mr. Richard was President of
Daniel Richard Consultants, Inc. During that time frame, his organization was
responsible for setting up restaurant marketing programs in over 40 cities.
BRIAN K. BURKE
Mr. Brian Burke serves as Chief Financial Officer. Mr. Burke is a graduate
of the Harvard Business School with a Masters of Business Administration in
Finance and a Bachelor of Science from Florida State University. Prior to
joining the Company, Mr. Burke was a financial/management consultant with
Bio-Informatics in Clearwater, Florida, with a specialization in healthcare.
Prior to that he was Manager of Internal Reporting with Rohm and Haas Company
headquartered in Philadelphia.
ITEM 10. EXECUTIVE COMPENSATION
Set forth below is a Summary Compensation Table relating to the Chief
Executive Officer. No executive officer of the Registrant received a total
annual salary exceeding $100,000.
NAME AND PRINCIPLE POSITION YEAR(1)COMPENSATION SALARY BONUS OTHER
- --------------------------- ------------------- -------- ----- -----
Joseph Knauer (CEO) 1994 $ 8.077 - -
Robert Fenno (President) 1994 $ 77,885 - -
1995 $ 11,250 - -
Glenn Cohen (President & COO) 1996 $ 25,000 - -
Mr. Joseph Knauer entered into an employment agreement with the Company
for a term ending December 31, 1993 at which point he retired. Pursuant to this
agreement, Mr. Knauer received an annual salary of $60,000 in the first year,
increasing to $70,000 in the second year. In addition, Mr. Knauer was granted an
option to purchase 200,000 shares of the Company's Common Stock at an exercise
price of $2.50 per share. The options, which expired December 31, 1996, could
have been exercised any time within that five year period and were subject to
the Rule 144 holding period after exercise.
Mr. Robert Fenno joined the Company as of January 11, 1994, pursuant to an
employment contract with a term of one year. Mr. Fenno received a salary of
$90,000 and was granted 50,000 options with an exercise price of $2.50. Mr.
Fenno's contract was not renewed and his employment was terminated as of January
11, 1995.
Mr. Glenn E. Cohen had entered into an employment agreement for a term of
five years beginning on January 31, 1996. Pursuant to this agreement, Mr.
Cohen's salary for 1996 was $25,000 per annum. Beginning January 1997, Mr.
Cohen's base salary increased to $100,000 per annum. Mr. Cohen shall also have a
potential bonus income dependent on Net/Tech's profitability.
In addition, Mr. Cohen was granted 100,000 options to purchase company
stock at $0.50 per share. The options, which expire January 3, 1999, may be
exercised any time within the 3 year period and are subject to the Rule 144
holding period.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 31, 1997 certain information
with regard to the record and beneficial ownership of the Company's Common Stock
by (i) each stockholder owning of record or beneficially 5% or more of the
Company's Common Stock, (ii) each director individually, and (iii) all officers
and directors of the Company as a group:
11
<PAGE>
AMOUNT AND NATURE OF STOCK
NAME BENEFICIALLY OWNED AS OF PERCENT OF CLASS
- ---- -------------------------- ----------------
CRYO-CELL International, Inc.*(1) 2,037,929 35.77%
Daniel D. Richard*(2) 2,285,429 40.11%
Marie E. Richard * 246,000 4.31%
Frederick S. Wilhelm*(2) 2,087,929 5.26%
Glenn E. Cohen(3) 300,000 5.26%
Brian K. Burke(2)(4) 2,047,929 35.94%
All officers and directors
as a group (4 persons) 2,545,429 44.67%
- ------------------
* All addresses for the persons listed are 604 Packard Court, Safety
Harbor, FL 34695
(1) Includes 2.,037,929 shares owned by CRYO-CELL.
(2) Includes 2,037,929 shares held directly by CRYO-CELL. Shares held by
CRYO-CELL may be deemed beneficially owned by this individual in his
capacity as an officer and/or director of CRYO-CELL.
(3) Includes 200,000 options to purchase the Common Stock of Net/Tech.
(4) Includes 10,000 options to purchase the Common Stock of Net/Tech.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH PROMOTERS
The Company was founded by Messrs. Hermann Knippscheer, Roger Kolsky and
Joseph Meckel, who each purchase 100,000 shares at $0.01 each. In addition,
Frederick Wilhelm received 100,000 shares for organizational costs relating to
the Company. Daniel Richard received 100,000 shares for assigning his rights to
the Steril-Eze concept. The inventor, William Hale, received his 100,000 shares
for assignment of the technology and all future developments.
Shortly after formulation of the Company, CRYO-CELL was issued 2,198,750
shares for a consideration of $.01 per share, which amount was to represent 50%
of the outstanding shares. Inasmuch as management of this company and several of
the founders were affiliated with CRYO-CELL International, Inc., each CRYO-CELL
shareholder received an entitlement to purchase shares of this Company at the
same $.01 per share as the founders. All CRYO-CELL shareholders, which include
officers and directors of this Company, exercised this right and purchased one
share of the Company for each two CRYO-CELL shares they owned and as a result,
1,438,750 shares were purchased.
During 1994 and 1995, the Company borrowed $446,275 from CRYO-CELL to fund
its ongoing but limited operations. These loans were made on convertible notes
due on demand and convertible to common stock at the discretion of CRYO-CELL.
The loan was converted to common stock in 1996.
CRYO-CELL International, Inc. owns 35.8% of the Company's issued and
outstanding common stock.
12
<PAGE>
LIST OF PARENTS
CRYO-CELL International, Inc., Daniel D. Richard, and Frederick C.S.
Wilhelm, may be deemed a parent of Net/Tech through their combined ownership of
Net/Tech Common Stock directly or their indirect ownership by CRYO-CELL of
Net/Tech and their relationship as officers and/or directors of CRYO-CELL.
The individual ownership of the persons named above may be found in item
11 of this report.
13
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation
3.2 By-Laws (1)
4.1 Underwriter's Option (1)
10.2 Agreement with CRYO-CELL (1)
10.3 Long term Scientific Consultation Contract dated
February 11, 1992 between the Company and Dr. Charles
L. Beatty and Polymer Products and Services Co.,
including assignment of all patent rights by
Consultant (2)
10.4 Agreement with Valgene Associates, Dated August 6,
1992 (3)
10.41 Agreement with Human Services Risk Management, Inc.
dated May 28, 1993 (3)
10.5 Employment Agreement dated June 17, 1991 between the
Company and Joseph Knauer (2)
10.51 Employment Agreement dated December 28, 1993 between
the Company and Robert Anthony Fenno (3)
10.6 Convertible Note to CRYO-CELL International, Inc. dated
November 30, 1994 (3)
10.7 Convertible note to CRYO-CELL International, Inc. dated
November 30, 1995 (4)
10.8 Agreement with Pressure Point Technologies, dated
Oct. 29, 1996
10.9 Agreement with Stainless Design Corporation, dated
April 4, 1996 for Phase I development of Hygiene Guard
10.10 Agreement with Stainless Design Corporation, dated
Oct. 31, 1996 for Phase II development of Hygiene Guard
10.11 Employment Agreement between the Company and
Glenn E. Cohen
21 List of Subsidiaries
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8 - K
No reports on Form 8 - K were filed during the last quarter
on the fiscal year ended November 30, 1996
- ------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No.33-36198).
(2) Incorporated by reference to the Company's Annual Report on Form 10 K for
the year ended November 30, 1991.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended November 30, 1994.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended November 30, 1995.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 14th day of
March, 1997.
NET/TECH INTERNATIONAL, INC.
By: /s/ FREDERICK WILHELM
---------------------
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 14, 1997 by the following persons in the
capacities indicated:
/s/FREDERICK WILHELM Chairman of the Board
--------------------
Frederick Wilhelm
/s/BRIAN BURKE Secretary and Chief Financial Officer
--------------
Brian Burke
/s/GLENN E. COHEN Director, President and
----------------- Chief Operating Officer
Glenn E. Cohen
/s/DANIEL D. RICHARD Director
--------------------
Daniel D. Richard
15
EXHIBIT 10.8
AGREEMENT TO PURCHASE CORPORATION
By and between Net/Tech International, Inc., (hereafter NTTI) and James Neill.
WHEREAS James Neill owns 100% of the outstanding stock in Pressure Point
Technologies, Inc., (hereafter PPT).
WHEREAS NTTI is a duly formed Delaware Corporation,
WHEREAS PPT is a duly formed Michigan Corporation,
WHEREAS NTTI is desirous of purchasing 100% of PPT Corp. and it's Batteryless
Remote Control Technology, (hereafter BRCT),
WHEREAS PPT has developed the technology for a Batteryless Remote Control Device
which uses include, but are not limited to: televisions, VCRs, garage door
openers and car door openers,
WHEREAS PPT has applied to the US Patent Office and has a pending patent for the
Batteryless Remote Control Technology,
For mutual consideration between the parties which is hereby acknowledged, it is
agreed:
1) NTTI agrees to purchase and James Neill agrees to sell 100% (One
Hundred) of PPT outstanding stock, and all rights and interest in PPT,
including, but not limited to, all rights and interest to PPT's pending patent
for batteryless remote control technology (BRCT);
2) In consideration thereof, NTTI agrees to promptly pay James Neill
the following in a stock for stock exchange:
a. 25,000 (twenty-five thousand) shares of NTTI authorized, but
unissued common stock.
3) In addition, James Neill agrees to serve on the NTTI technical
advisory board for the following consideration to assist in analyzing and
evaluating potential technological acquisitions.
In consideration of his service on NTTI's Technical Advisory Board, NTTI agrees
to pay Mr. Neill an amount equal to 3% (three) of NTTI's cost to manufacture the
BRCT products. Said royalty shall be paid to Mr. Neill as product revenue is
received by NTTI for the sale of BRCT products. Royalties to Mr. Neill will
decrease with volume sales of BRCT products under the following schedule:
3% (Three) of cost of first 100,000 (One Hundred thousand) Units
2% (Two) of cost of units 100,000 (One Hundred Thousand) through
unit 1,000,000 (One Million)
1% (One) of cost of 1,000,000 (One Million) Units and above.
<PAGE>
a) The royalties contemplated under this agreement will be
deemed earned upon appointment of Mr. Neill to the Technical
Advisory Board and will not be changed by any later action
affecting Mr. Neill's position of the Board. As additional
consideration for his service on NTTI's advisory board, NTTI
agrees to grant Mr. Neill 2,500 (Twenty-five Hundred) stock
options at an exercise price of $2.00 (Two Dollars). Once
exercised, said stock shall be held pursuant to Securities
and Exchange Commission's (SEC) Rule 144 holding period.
4) NTTI hereby agrees that for a period of 10 (ten) years from date of
this agreement, if NTTI sells the BRCT, which purchase is detailed
in this agreement, NTTI shall pay James Neill 10% (ten) of any
profit NTTI shall realize as a result of that sale. Profit shall be
determined as follows:
a. The difference between sale price (sale price to include any
consideration received by NTTI for BRCT including royalties and
other fees) of the technology from NTTI to an unrelated 3rd
(third) party and the value of NTTI stock at the date of
transfer to James Neill.
It is further agreed and understood that any improvements, enhancements, or
modifications made by NTTI will become part of the existing BRCT Technology and
have no effect on payment due PPT or Mr. Neill under this agreement.
5) This constitutes the entire agreement between the parties and
cannot be changed unless it is done in writing and is mutually
acceptable.
6) This agreement is subject to approval by NTTI Board of Directors.
Agreed to: Oct.29, 1996
/s/ JAMES NEILL /s/ GLENN E. COHEN
- -------------------------- -----------------------------
James Neill, President Glenn E. Cohen, President
Pressure Point Technologies Net/Tech International, Inc.
EXHIBIT 10.9
PHASE I CONTRACT BETWEEN NET/TECH INTERNATIONAL, INC. AND
STAINLESS DESIGN CORPORATION (SDC)
The scope of this document serves as a contract for the Phase I development of
the second generation Hygiene Guard.
Phase I is a technical study to identify the technical scope and match the
available technology with the intended application. Phase I also investigates
the technical hurdles that would be associated with integrating the Hygiene
Guard with other equipment commonly found in health care and food service
facilities. Net/Tech has targeted installed price is approximately $1,000.00 and
includes up to 50 badges, and as such, we will attempt to design the system
based on that cost estimate.
For the purposes of identifying the basic scope for Phase I, I would like to
state our understanding of the product and its features:
The Hygiene Guard is a system of specifically designed components, intended to
function together to monitor the proper sanitary operations of designated
employees in work conditions including but not limited to health care and food
service. The primary functional components of the Hygiene Guard system are as
follows:
1. An employee "badge" that contains electronics to transmit and receive
identifying information to the CPU. This badge will be designed in such a way
that an employee name can be inserted into the badge and may have artwork such
as restaurant logo or company name. The basic design of the electronics will be
generic for all badges and will allow customization of the face for specialized
artwork. This will reduce the inventory for Net/Tech, as a stock of badges could
be maintained and printed as needed. Each badge will be programmable for a
numeric ID.
2. A bathroom entry sensor will detect the presence of a "badged" employee
entering the bathroom. The entry sensor will decode the badge ID and send that
information to the CPU for storage and reporting. The entry sensor will transmit
a signal to the badge to change the badges' state from "green" to "red". The
entry sensor will also reset the badge when the employee leaves the bathroom,
provided that employee activated the soap dispenser. The entry sensor will also
contain a small thermal printer that will print employee activity by badge
number. A possible method to generate the printout might be a multi position key
switch, with one position available for resetting the data.
3. Soap dispenser sensor will detect the presence of a "badged" employee within
a relatively close proximity and transmit that information to the entry sensor,
probably utilizing the entry sensors' transmitter and receiver to eliminate
redundant equipment. The soap dispenser sensor needs to have a restricted sensor
area to eliminate the possibility of the employee false triggering the sensor.
Additionally, a timer will be used to insure a reasonable amount of time was
spent at the soap dispenser. A switch actuated by the use of the soap dispenser
would transmit the badge ID to the entry sensor as long as the badged employee
is within close proximity.
Deliverables for Phase I:
<PAGE>
A technical specification, complete and suitable for submission to a
fabricator of electronic components.
Costing for volume production of the components and delivery schedule.
Drawings of the components suitable for both marketing and fabrication.
Pricing and delivery
The Phase I project will take approximately eight weeks to complete, however, we
are fully aware of the compressed time frame required and will make every
attempt to better that.
Phase I cost: $10,000.00
Terms and conditions: SDC is prepared to accept payment for the services of this
phase in both direct payment and Net/Tech stock and the option of first right of
refusal for Phase II and the subsequent manufacturing of the Hygiene Guard. Due
to the fact that this phase will require SDC to subcontract a portion of the
work, we will require 80% in direct payment and 20% in Net/Tech, 144 stock at
$1.25 per share. We will begin working on Phase I within 3 to 5 business days
after acceptance of the terms of this contract.
Authorized signature Glenn E. Cohen, President Date
Net/Tech International, Inc.
/s/ GLENN E. COHEN April 11, 1996
------------------ --------------
Kevin Brady, VP Product Development Date
/s/ KEVIN BRADY April 11, 1996
------------------ --------------
EXHIBIT 10.10
NET/TECH HYGIENE GUARD
PHASE II DEVELOPMENT CONTRACT PROPOSAL
Hygiene Guard Phase II Deliverables
The following is a list of deliverables remain the same as detailed in the
original proposal submitted for your review, and accepted. Phase II overall
scope would be full, detailed engineering development and implementation of the
electronics and packaging.
1. Engineering and Development: A complete engineering package ready for
submission to P.C. board manufacturers. This would include system schematics,
P.C. board layouts and artwork.
2. Prototype and Development: A fully functional prototype system and modified
soap dispenser, equipped with the proposed sensing device, based on the design
architecture selected for production. Some compromises in actual packaging of
the badge for prototyping may be necessary due to very long lead times
associated with tooling and molding.
3. Implementation and Debug: two weeks of engineering time to install, set up
and demonstrate the prototype system.
4. Documentation: This includes all system drawings, installation manual and
operators manual.
SDC would be prepared to offer our facility as a demonstration site if so
desired.
Non-Recurring Costs:
Engineering and Development $18,000
Prototyping fabrication $27,000
Implementation and Debug $ 5,000
Documentation $15,000
Total Phase II Development Costs: $65,000
Delivery:
Delivery of the complete working prototype is in three months, ARO. Please refer
to the original proposal outlining Phase I and Phase II which states Phase II to
take approximately 4 months. The critical path item will be the badge itself. We
may be able to fabricate a functional mock up of the badge so as to allow
demonstration of the complete system on a more aggressive schedule. The primary
reason for the long delivery is the complicated artwork and tooling necessary
for miniaturizing the badge. Delivery of the other major components of the
system will be by year end.
<PAGE>
Obviously the other elements of the project such as the system schematics will
be completed much sooner, as the first piece fabrication activity is consuming
most of Phase II time. We will begin an active campaign of pressure, both
verbally and with pay premiums to assist in compressing the fabrication time.
Terms:
SDC terms are net 30 days. Billing to be submitted monthly. SDC is prepared to
accept Net/Tech stock for half our fee, and the balance in cash. All direct
costs to SDC such as subcontractor expenses and vendor supplied items will be
billed through to Net/Tech, under the terms stated above, with all mark-ups
applied to the fee portion
Authorized Signatures:
/s/ KEVIN BRADY /s/ GLENN E. COHEN
- ------------------ Date: 10/29/96 ------------------------- Date: 10/29/96
Kevin Brady, VP Glenn E. Cohen, President
Product Development
EXHIBIT 10.11
REVISED EMPLOYMENT AGREEMENT
BETWEEN
NET/TECH INTERNATIONAL, INC. AND GLENN E. COHEN
WHEREAS Net/Tech International, Inc. (hereafter NTTI) is desirous of employing
Glenn E. Cohen (hereafter Cohen) as President and Chief Operating Officer.
WHEREAS Glenn E. Cohen is desirous of being employed by NTTI as President and
Chief Operating Officer.
ACKNOWLEDGEMENTS
It is hereby acknowledge that Cohen is currently serving as President and Chief
Operating Officer of NTTI and has been since the beginning of calendar year
1996. 1996 salary for Cohen is $25,000 (twenty-five thousand dollars). In
addition, it is acknowledged that on January 3, 1996, Cohen received a NTTI
stock option for 100,000 (one hundred thousand) shares of NTTI authorized but
unissued shares at $.50 (fifty cents) per share. It is also hereby acknowledged
that Cohen has been elected to the NTTI Board of Directors. This agreement shall
cover the time period beginning January 1997.
It is hereby agreed for good and valuable consideration:
1. TERM
This employment agreement shall be for a term of 4 (four) years beginning
January 1997 and continuing to January 2001.
2. SALARY
Cohen's base salary for the 4 (four) year period shall be $100,000 (one hundred
thousand dollars) per year, payable bi-weekly.
a. BONUS Cohen shall have the potential to receive bonus income as
follows:
Cohen shall receive 5% (five percent) of pretax profits generated from
the Hygiene Guard, sterilization unit (Sterm-Eze) and Battery-less Remote
Control Technology, currently owned by NTTI. Also, if NTTI acquires a company or
technology with no marketing capabilities or insignificant revenues, any
increase as a result of Cohen's activities in marketing will be credited toward
the 5% (five percent) determining factor in computing Cohen's bonus income.
Maximum compensation under this agreement (salary & bonus) shall not exceed
$250,000 (two hundred and fifty thousand dollars) annually.
<PAGE>
3. STOCK OPTIONS
In addition to options already received, on January 1, 1997, Cohen shall receive
a stock option to purchase an additional 100,000 (one hundred thousand) shares
of NTTI's authorized but unissued, common stock. Exercise price shall be
one-half the average between the Bid and Ask price of NTTI stock on January 15,
1997, or $1.00 (one dollar) per share, whichever is greater. Exercise subject to
SEC Rule 14 holding period.
4. REGISTRATION
If Cohen exercises and pays NTTI for existing stock options or options
contemplated in this agreement, NTTI agrees to register Cohen's shares from
these options if and when NTTI completes a stock registration.
5. TIME
It is understood and agreed that Cohen shall devote such time as deemed
necessary for performance of his duties as President and Chief Operating
Officer. It is further understood that Cohen is involved in other business
activities that would not interfere with his ability to perform his duties as
President and Chief Operating Officer.
6. HEALTH INSURANCE
NTTI shall provide Cohen with a mutually acceptable health insurance plan.
Dated Nov. 6, 1996
Agreed To:
NET/TECH INTERNATIONAL, INC.
/s/ GLENN E. COHEN 11/7/96 /s/ FREDERICK S. WILHELM, JR. 11/17/96
- -------------------------------- -----------------------------------------
Date Frederick S. Wilhem, Jr. Date
/s/ DANIEL D. RICHARD
---------------------
Daniel D. Richard
/s/ JOSEPH PRIVETERA
--------------------
Joseph Privetera
EXHIBIT 21
List of Subsidiaries
Multi-Monitoring System, Inc.
Pressure Point Technologies, Inc.
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