SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Net Tech International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
----------------------------------------------------------------------
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4. Date Filed:
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<PAGE>
Net/
[LOGO] Tech
INTERNATIONAL, INC.
A Network of Innovative Technology
----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Net/Tech International, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of Net/Tech
International, Inc. (the "Company") will be held at the Company's corporate
office located at One West Front Street, Suite 30, Red Bank, New Jersey 07701,
on February 28, 2000, at 11:00 A. M. local time. The meeting is called for the
following purposes:
1. To vote upon the acquisition by the Company of Results Oriented Integration
Corporation d/b/a ROI Corporation, a privately-held Georgia corporation
(ROI), through the issuance of 6,118,918 post-split shares of Common Stock
to be exchanged for all of the issued and outstanding shares of common
stock of ROI as follows:
(1) 2,352,988 shares will be delivered at closing; and
(2) 3,765,930 shares will be placed in escrow with a portion released each
fiscal year based on profitability of the Company for the fiscal years
ending in 2000, 2001, 2002, 2003, 2004, and 2005.
2. To vote upon an amendment to the Company's certificate of incorporation
changing the name of the Company to Return On Investment Corporation d/b/a
ROI Corporation (or some similar name based on availability).
3. To ratify the appointment of BDO Seidman as independent public accountants.
4. To elect the Board of Directors.
5. To vote upon an amendment to the Company's certificate of incorporation
increasing the number of authorized shares of Common Stock to 100,000,000
shares (before the reverse split).
6. To vote upon a 1-for-6 reverse split of the Company's Common Stock on
February 29, 2000.
7. To vote upon issuance of up to 150,000 post-split shares of the Company's
Common Stock in lieu of payment of debt.
8. To vote upon a private offering of from 2,000,000 to 3,000,000 post-split
shares of the Company's Common Stock.
9. To vote upon institution of an incentive stock option plan for up to
1,000,000 post-split shares of the Company's Common Stock.
10. To consider and take action upon such other matters as may properly come
before the meeting or any other adjournment of adjournments thereof.
The close of business on February 2, 2000, has been fixed as the record date for
the determination of Shareholders entitled to notice of, and to vote at, the
meeting. The stock transfer books of the Company will not be closed.
All Shareholders are cordially invited to attend the meeting. PLEASE NOTE THAT
IF YOU ARE NOT ABLE TO ATTEND THE MEETING PLEASE RETURN THE ENCLOSED PROXY VIA
MAIL OR FAX.
By Order of the Board of Directors
Anna Capozzi, Assistant Secretary
Dated February 3, 2000
1 West Front Street, Suite 30 o Red Bank, New Jersey 07701
Telephone (732) 345-1100 o Fax (732) 345-0113
<PAGE>
NET/TECH INTERNATIONAL, INC.
------------
PROXY STATEMENT
------------
This Proxy Statement is furnished to shareholders of Net/Tech
International, Inc. (the "Company") in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders (the "Annual Meeting") and
at any postponement or adjournment thereof. The Annual Meeting will be held at
the Net/Tech corporate office located at One West Front Street, Suite 30, Red
Bank, New Jersey 07701, on February 28, 2000, at 11:00 A. M. local time.
The Annual Meeting is being held for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement and
the Notice of Annual Meeting are being provided to shareholders beginning on or
about February 7, 2000. The Company, a Delaware Corporation, has its principal
executive offices at One West Front Street, Suite 30, Red Bank, New Jersey
07701.
SOLICITATION OF PROXIES AND REVOCABILITY
The Company is soliciting proxies. The cost of distributing the Proxy
Statement and Notice of Annual Meeting will be borne by the Company. Brokerage
houses and nominees will be requested to supply lists of or forward the
information materials to the beneficial owners. The Company, upon request, will
reimburse such brokerage houses and nominees for their reasonable expenses in
forwarding information materials to their beneficial owners. Proxies will be
voted as indicated and, if no designation is made, in the discretion of the
proxy. Stockholders may revoke the authority granted by their execution of
proxies at any time before the effective exercise of proxies by filing written
notice of such revocation with the Secretary of the Annual Meeting. Presence at
the Annual Meeting does not of itself revoke the proxy. All shares represented
by executed and unrevoked proxies will be voted in accordance with the
specifications therein. Proxies submitted without specification will be voted
FOR each of the Items listed below.
VOTING SECURITIES
The Company presently has one class of capital stock outstanding: Common
Stock, par value $.01 per share ("Common Stock").
As of February 2, 2000 (the "Record Date"), there were issued and
outstanding 9,733,960 shares of Common Stock.
Each share of Common Stock outstanding on the Record Date will be entitled
to one vote on all matters.
PARTS I, II, AND III
This Proxy Statement has three parts as follows:
PART I - ROI CORPORATION ACQUISITION
PART II - GENERAL AND SPECIFIC DISCLOSURES
PART III - ITEMS FOR THE APPROVAL OF SHAREHOLDERS AT THE ANNUAL
MEETING
<PAGE>
PART I
ROI CORPORATION ACQUISITION
---------------------------
Items 1, 2, 5, 6, 7, 8, and 9 of Part III of this Proxy Statement all
concern the acquisition by the Company of Results Oriented Integration
Corporation d/b/a ROI Corporation, a privately-held Georgia corporation (ROI).
Additional disclosures for these items can be found below in Part II of this
Proxy Statement.
ABOUT ROI CORPORATION
ROI markets software that processes electronic payment transactions for
companies selling through Internet e-commerce, retail outlets, and mail order
call centers. ROI's primary software is "e-transaction middleware" that is
certified to provide access to credit card and check authorization networks for
application software from companies like Binary Tree, Computer Associates, J.D.
Edwards, Friedman Corporation, HarrisData, Intentia, LANSA, VAI, and dozens
more. ROI customers range from small to large Internet marketers and retailers,
including companies such as Alltel, Brunswick, 800.com, IBM, and Skytel.
ROI currently provides credit card processing software only for IBM AS/400
computer systems in the United States. ROI management intends to use some of the
capital provided as part of the terms of the acquisition to pay off existing
debt and to develop versions of its software for other computer systems, such as
Unix, Linux, and Windows systems. ROI management also intends to expand
internationally and to pursue acquisitions of other software companies whose
products are complementary to ROI's. However, the success of ROI is dependent
upon many factors outside the control of ROI or of the Company. The software
business is highly competitive and there is no assurance of ROI's ability to
continue its growth and profitability.
THE ACQUISITION
In March 1999, the Company sold the rights to its patented "Hygiene Guard
Hand Wash Monitoring System" to GOJO Industries. GOJO is in the process of
commercializing this technology, for which the Company is entitled to receive
payments based on sales for up to 15 years. Currently, the Company has no
operations and only one paid employee. With the acquisition of ROI, the Company
will be in a new business, providing payment processing software to the
e-commerce marketplace, as well as retail and mail order businesses. After the
closing of the ROI acquisition, the officers and management of ROI will become
the officers and management of the Company. At the closing, Glenn Cohen will
resign as President and Chief Executive Officer of the Company, but will
continue as a Director and will enter into a Services Agreement with the Company
to manage the Company's relationship with GOJO Industries. ROI President and
Chief Executive Officer, Charles Pecchio, Jr., will enter into a five year
Employment Agreement with the Company at the closing.
In order to complete the acquisition, the following actions must be taken:
the issuance of shares of the Company's Common Stock to be exchanged for the
common stock of ROI (see Part II - Item 1); the Company's name will be changed
(see Part II - Item 2); an increase in the number of authorized shares of the
Company's Common Stock (see Part II - Item 5); a reverse split of the Company's
Common Stock (see Part II - Item 6); issuance of shares of Common Stock in lieu
of payment of debt (see Part II - Item 7); a private offering of the Company's
Common Stock (see Part II - Item 8); and institution of an incentive stock
option plan for the Company's Common Stock (see Part II - Item 9).
ISSUANCE OF SHARES, RESTRICTIONS AND ESCROWED SHARES
The Company must issue (after the reverse split) a total of 6,118,918
shares of Common Stock, par value $.01 per share, to be exchanged for all of the
issued and outstanding shares of common stock of ROI. These shares will not be
registered under the Securities Act of 1933, as amended, and must be held for a
minimum of two years. 2,352,988 of these shares will be delivered at closing and
3,765,930 of these shares will be held in escrow, with a portion released each
year at the rate of one share for each $2.40 of the Company's Net Income Before
Income Taxes ("NIBIT") for the fiscal years ending in 2000, 2001, 2002, 2003,
2004, and 2005. If the cumulative total NIBIT reaches $9,038,232.00, then all of
the escrowed shares will have been released. Each year's released shares must
2
<PAGE>
be held for a minimum of one year. Except for the minimum holding period, all of
these shares are subject to piggyback registration rights which will enable the
holder of such shares to have such shares registered along with any possible
future registration of shares of the Company.
AMENDMENT TO CERTIFICATE OF INCORPORATION FOR NAME CHANGE AND INCREASE IN
AUTHORIZED SHARES
The Board of Directors has approved an amendment to the Certificate of
Incorporation to change the name of the Company to Return On Investment
Corporation d/b/a ROI Corporation (or some similar name based on availability)
after the acquisition is effective, and to increase the total number of Common
Shares that the Company is authorized to issue to 100,000,000 shares, par value
$.01. A portion of these shares will be used for the ROI acquisition, other
potential acquisitions, a private offering, a potential additional public
offering, an employee stock option plan, and in lieu of payment of debt. Any
shares issued in addition to those approved by the Shareholders at the Annual
Meeting will be at the discretion of the Board of Directors and will not require
further authorization by the Shareholders for issuance. However, unless and
until all of the shares issued for the ROI acquisition have been released from
escrow as described herein, any shares to be issued specifically for further
acquisitions will require the approval of Shareholders holding a minimum of 65%
of the Common Stock of the Company then outstanding.
REVERSE SPLIT
The Board of Directors also has recommended a 1-for-6 reverse split of the
shares of Common Stock, par value $.01 per share, of the Company, whereby each
Shareholder of record on February 29, 2000, at 4:00 P.M. Eastern Standard Time,
shall receive 1 share for each 6 shares owned. The purpose of the reverse split
is to increase the valuation per share. The Board of Directors has recommended
setting aside (after the reverse split) a total of 1,000,000 shares of the
Company's Common Stock to be used by management, in its discretion, as part of
an incentive stock option plan. The Board of Directors has recommended setting
aside (after the reverse split) a total of 150,000 shares of the Company's
Common Stock to be used by management, in its discretion, in lieu of payment of
debt.
PRIVATE OFFERING
The Board of Directors has recommended a private offering (after the
reverse split) of a minimum of 2,000,000 shares and a maximum of 3,000,000
shares of the Company's Common Stock, par value $.01 per share, at a price per
share based on the current share value and the advice to the Board of Directors
from outside investment advisors (expected to be $2.50 per share), pursuant to a
private offering of Common Stock by the Company made pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the "Private
Offering"), which will result in aggregate gross proceeds to the Company,
ranging from approximately $5,000,000 to $7,500,000.
The shares issued as a result of the Private Offering will have a minimum
holding period of one year. The Company intends to use the proceeds as follows:
approximately $1,500,000 to pay the Company's and ROI's debts, approximately
$500,000 for marketing activities, approximately $2,000,000 for development of
software for the international market and for Unix, Linux and Windows systems,
and approximately $1,000,000 for working capital. If additional funds are
available, the Company intends to use them for further marketing and
international expansion, and potential acquisitions of companies whose products
are complementary to ROI's.
CONSULTING AGREEMENTS
The Company has entered into Consulting Agreements with Bridge Ventures,
Inc. ("Bridge") and Saggi Capital, Inc. ("Saggi") for their services in
assisting the Company with the ROI acquisition and the Private Offering, as well
as future assistance in mergers, acquisitions, raising capital and other
business matters. Under the terms of the Consulting Agreements, Bridge will
receive $5,000 per month for two years and has received warrants for the
purchase (after the reverse split) of up to 300,000 shares of Common Stock at
$.30 per share, and Saggi will receive $5,000 per month for four years and has
received warrants for the purchase (after the reverse split) of up to 300,000
shares of Common Stock at $1.98 per share.
3
<PAGE>
CLOSING AND CONTROL OF THE COMPANY
After approval by the Shareholders, the closing of the acquisition and the
Private Offering is planned on or about March 1, 2000. After the issuance of the
shares in exchange for ROI's shares and the issuance of the shares for the
Private Offering, a majority of the shares of Common Stock and, therefore,
voting control of the Company will rest with the shareholders who previously
owned ROI Corporation.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors believes it to be in the best interest of the
Company to approve the ROI acquisition and all of the actions required to be
taken. A majority of the outstanding shares of the Company must approve the
acquisition and all of the actions required to be taken in order for it to be
effective.
4
<PAGE>
PART II
GENERAL AND SPECIFIC DISCLOSURES
--------------------------------
A. GENERAL DISCLOSURE
The following information is provided to supply as full and complete
disclosure as is possible about the principal figures of the Company and ROI.
COMPENSATION OF EXECUTIVE OFFICERS
Set forth below is a Summary Compensation table relating to the executive
officers of the Company and ROI.
OTHER
NAME YEAR SALARY BONUS COMPENSATION (1)
- --------------------------------------------------------------------------------
Glenn E. Cohen (2) 1999 (3) $38,462 -
Chief Executive Officer
of the Company 1998 (3) $84,615 -
Charles A. McRoberts (4) 1999 (5) $24,000 $7,000
Chairman of the Board
of ROI Corporation 1998 (5) $18,000 - $1,174
Charles Pecchio, Jr. (6) 1999 (5) $68,678 $32,710 $15,802
Chief Executive Officer
of ROI Corporation 1998 (5) $65,908 $14,500 $21,881
(1) These are sums paid by ROI Corporation in the form of sales commissions.
(2) The Company's Chairman and Chief Executive Officer, Glenn E. Cohen, signed
a five year employment agreement with the Company on October 15, 1998,
which included the option to purchase 1,000,000 shares of the Company's
Common Stock for $.15 per share. The employment agreement will be
terminated at the closing of the ROI acquisition. Mr. Cohen's option for
the 1,000,000 shares will be converted into 750,000 shares of Common Stock
at the closing. Mr. Cohen has voluntarily foregone payment of his $125,000
annual salary, $25,000 annual raises, and severance pay of over $500,000.
At the closing, Mr. Cohen will resign as an officer of the Company, but
will continue as a Director and will enter into a Services Agreement with
the Company to manage the Company's relationship with GOJO Industries. Mr.
Cohen will receive $5,000 per month for three years plus 5% of the payments
to the Company made by GOJO based on sales for eight years after the
closing.
(3) The amounts shown were paid by the Company for the fiscal year ending
November 30 of the year shown.
(4) Charles A. McRoberts (brother of John W. McRoberts), Chairman of the Board
of ROI Corporation, received no compensation as a Director of ROI. All
compensation shown was paid by ROI to Mr. McRoberts for his employment as a
member of ROI's sales force. Mr. McRoberts has no options, warrants or
rights to purchase any additional securities of ROI or the Company.
(5) The amounts shown were paid by ROI Corporation for the fiscal year ending
June 30 of the year shown.
(6) Charles Pecchio, Jr., President and Chief Executive Officer of ROI
Corporation. received no compensation as a director of ROI. All
compensation shown was paid by ROI to Mr. Pecchio under his employment
agreement with ROI. At the closing of the acquisition of ROI by the
Company, Mr. Pecchio and the Company will enter into a five year employment
agreement on substantially the same terms as Mr. Pecchio's current
agreement with ROI. His current annual salary is $85,000 and he receives
incentives based on sales of the Company and growth in sales of the
Company, and quarterly and annual bonuses as determined by the Board of
Directors. Mr. Pecchio has no options, warrants or rights to purchase any
additional securities of ROI or the Company.
5
<PAGE>
SUMMARY COMPENSATION TABLE FOR OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------ SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/
SALARY BONUS COMPENSATION SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
(A) (B) (C) (D) (E) (G)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Glenn E. Cohen, Chief Executive
Officer, Net/Tech ("NT") 1999 38,462 -0- -0-
Charles Pecchio, Jr., Chief Executive
Officer, ROI Corporation ("ROI") 1999 68,678 32,710 15,802
Charles A. McRoberts, Chairman of
the Board, ROI 1999 24,000 7,000 -0-
Knud B. Gotterup, Director, NT 1999 -0- -0- -0- 48,000
Joseph A. Lauro, Director, NT 1999 -0- -0- -0- 12,000
Glenn E. Cohen, Chief Executive
Officer, NT 1998 84,615 -0- -0-
Charles Pecchio, Jr., Chief
Executive Officer, ROI 1998 65,908 14,500 21,881
Charles A. McRoberts, Chairman
of the Board, ROI 1998 18,000 -0- 1,174
Knud B. Gotterup, Director, NT 1998 -0- -0- -0- 25,000
Joseph A. Lauro, Director, NT 1998 -0- -0- -0- 15,000
Glenn E. Cohen, Chief Executive
Officer, NT 1997 94,231 -0- -0- 200,000
Charles Pecchio, Jr, Chief
Executive Officer, ROI 1997 60,000 -0- 7,709
Charles A. McRoberts, Chairman of
the Board, ROI 1997 -0- -0- -0-
</TABLE>
For NT, the amounts shown were paid by the Company for the fiscal year ending
November 30 of the year shown. For ROI, the amounts shown were paid by ROI
Corporation for the fiscal year ending June 30 of the year shown.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
- ----------------------------------------------------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OF FOR OPTION TERM
OPTION/SARS EMPLOYEES IN BASE PRICE EXPIRATION 5% ($) 10% ($)
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE $ $
(A) (B) (C) (D) (E) (F) (G)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Knud B. Gotterup, Director, Net/Tech 48,000 1.5% 00.25 12/2004 27,568 34,788
Joseph A. Lauro, Director, Net/Tech 12,000 .04% 00.25 12/2004 6,893 8,697
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The Company had no option/SAR exercises in the last fiscal year.
LONG-TERM INCENTIVE PLAN (LTIP) AWARDS IN LAST FISCAL YEAR
The Company had no Long-Term Incentive Plans (LTIP) in the last fiscal
year.
TEN-YEAR OPTION/SAR REPRICINGS
The Company had no Ten-Year Option/SAR repricings in the last fiscal year.
6
<PAGE>
COMPENSATION OF DIRECTORS
NUMBER OF SECURITIES
NAME YEAR CONSULTING FEES UNDERLYING OPTIONS
- --------------------------------------------------------------------------------
Knud B. Gotterup 1999 - 48,000 (1)
Director, Net/Tech
1998 - 25,000 (2)
Joseph A. Lauro 1999 - 12,000 (1)
Director, Net/Tech
1998 - 15,000 (2)
John W. McRoberts (3) - -
Director, ROI
(1) These options are exercisable to purchase Common Stock at $.25 per share
for a period of five years.
(2) These options are exercisable to purchase Common Stock at $.50 per share
for a period of five years.
(3) John W. McRoberts (brother of Charles A. McRoberts) has received no
compensation as a Director of ROI, and has no options, warrants or rights
to purchase any additional securities of ROI or the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
The Company's Chairman and Chief Executive Officer, Glenn E. Cohen, signed
a five year employment agreement with the Company on October 15, 1998, which
included the option to purchase 1,000,000 shares of the Company's Common Stock
for $.15 per share. The employment agreement will be terminated at the closing
of the ROI acquisition. Mr. Cohen's option for the 1,000,000 shares will be
converted into 750,000 shares of Common Stock at the closing. Mr. Cohen has
voluntarily foregone payment of his $125,000 annual salary, $25,000 annual
raises, and severance pay of over $500,000. At the closing, Mr. Cohen will
resign as an officer of the Company, but will continue as a Director and will
enter into a Services Agreement with the Company to manage the Company's
relationship with GOJO Industries. Mr. Cohen will receive $5,000 per month for
three years plus 5% of the payments to the Company made by GOJO based on sales
for eight years after the closing. No other employment contracts or
change-in-control arrangements exist with the Company and none were terminated
during the most recent fiscal year. ROI President and Chief Executive Officer,
Charles Pecchio, Jr., will enter into a five year Employment Agreement with the
Company at the closing.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS
The voting securities entitled to vote at the Annual Meeting consist of
shares of Common Stock, with each share of Common Stock entitling its owner to
one vote on an equal basis. The number of outstanding shares of Common Stock on
February 2, 2000 (the "Record Date") was 9,733,960. Only stockholders of record
on the books of the Company at the close of business on that date will be
entitled to vote at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Special Meeting.
Each of the Items must be approved by a majority of the votes cast at the
Annual Meeting on such Items by the holders of Common Stock.
7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the Record Date, with
respect to the ownership of the Company's Common Stock by each person who is
known by the Company to be a beneficial owner, as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, of more than five percent (5%) of
the Company's Common Stock, by each Director, by each Executive Officer and by
all Executive Officers and Directors of the Company as a group as of the Record
Date:
NAME OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
- --------------------------------------------------------------------------------
Glenn E. Cohen (2) 1,763,333 16.0%
Cryo-Cell International, Inc. 1,557,711 16.0%
Paul W. Enoch, Jr. (3) 1,400,000 13.0%
Knud Gotterup (4) 93,000 *
Joseph A. Louro (5) 27,000 *
All Executive Officers and Directors
As a Group (3 Persons) (2)(4)(5) 1,883,333 16.7%
(*) Signifies ownership of less than one percent (1%) of class.
(1) Pursuant to the rules of the Securities and Exchange Commission, the
percentage of voting stock for each stockholder is calculated by dividing
(i) the number of shares deemed to be beneficially owned by such
stockholder as of the Record Date by (ii) the sum of (a) the number of
shares of Common Stock outstanding as of the Record Date plus (b) the
number of shares issuable upon exercise of options held by such stockholder
which are exercisable as of the Record Date or will become exercisable
within 60 days after the Record Date.
(2) Includes 1,300,000 shares subject to options exercisable as of the Record
Date.
(3) Includes 1,000,000 shares subject to options exercisable as of the Record
Date.
(4) Includes 93,000 shares subject to options exercisable as of the Record
Date.
(5) Includes 27,000 shares subject to options exercisable as of the Record
Date.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS AFTER THE ROI
ACQUISITION
After the issuance of the shares in exchange for ROI's shares and the
issuance of the shares for the Private Offering, a majority of the shares of
Common Stock and, therefore, voting control of the Company will rest with the
shareholders who previously owned ROI Corporation. The following table sets
forth information as of the closing date of the completed ROI acquisition, with
respect to the ownership of the Company's Common Stock (after the 1-for-6
reverse split) by each person who is expected by the Company to be a beneficial
owner, as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, of more than five percent (5%) of the Company's Common Stock, by each
Director, by each Executive Officer and by all Executive Officers and Directors
of the Company as a group as of the closing date:
8
<PAGE>
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
PRIVATE OFFERING PRIVATE OFFERING
NAME OF NUMBER OF SHARES PERCENT OF PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1) CLASS(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Glenn E. Cohen (2) 252,222 2.5% 2.3%
Cryo-Cell International, Inc. 259,619 2.6% 2.4%
Paul W. Enoch, Jr. (3) 233,334 2.3% 2.1%
Knud Gotterup (4) 15,500 * *
Joseph A. Louro (5) 4,500 * *
Charles A. McRoberts (6) 2,456,667 24.9% 22.6%
John W. McRoberts (7) 1,488,740 15.1% 13.7%
Charles Pecchio, Jr. (8) 2,010,000 20.4% 18.5%
All Executive Officers and Directors
As a Group (4 Persons) (2)(6)(7)(8) 6,207,629 63.1% 57.3%
</TABLE>
(*) Signifies ownership of less than one percent (1%) of class.
(1) The Minimum Private Offering is based on 2,000,000 shares being sold. The
Maximum Private Offering is based on 3,000,000 shares being sold. Pursuant
to the rules of the Securities and Exchange Commission, the percentage of
voting stock for each stockholder is calculated by dividing (i) the number
of shares deemed to be beneficially owned by such stockholder as of the
closing of the ROI acquisition by (ii) the sum of (a) the number of shares
of Common Stock outstanding as of the closing of the ROI acquisition plus
(b) the number of shares issuable upon exercise of options held by such
stockholder which are exercisable as of the closing of the ROI acquisition
or will become exercisable within 60 days after the closing of the ROI
acquisition.
(2) Includes 125,000 post reverse split shares (resulting from the 750,000
pre-reverse split shares exchanged for the 1,000,000 share option upon
closing of the ROI acquisition) and 50,000 shares subject to options
exercisable as of the closing of the ROI acquisition.
(3) Includes 166,667 shares subject to options exercisable as of the closing of
the ROI acquisition.
(4) Includes 15,500 shares subject to options exercisable as of the closing of
the ROI acquisition.
(5) Includes 4,500 shares subject to options exercisable as of the closing of
the ROI acquisition.
(6) Includes 903,182 shares issued at the closing of the ROI acquisition and
1,553,485 shares in escrow.
(7) Includes 547,328 shares issued at the closing of the ROI acquisition and
941,412 shares in escrow.
(8) Includes 738,967 shares issued at the closing of the ROI acquisition and
1,271,033 shares in escrow.
9
<PAGE>
B. SPECIFIC DISCLOSURE
The following additional information is provided in compliance with the
Securities and Exchange Act of 1934, Schedule 14A, Item 14:
1. Each company's name, address, and phone number:
----------------------------------------------
Results Oriented Integration Corporation
d/b/a ROI Corporation
Westside Center
101 Emma Lane
Woodstock, GA 30189-3682
Phone (770) 517-4750
Fax (770) 517-4760
www.roicorporation.com
Net/Tech International, Inc.
1 West Front Street, Suite 30
Red Bank, New Jersey 07701
Phone (732) 345-1100
Fax (732) 345-0113
www.nettechintl.com
2. A brief description of the general nature of the business of ROI:
----------------------------------------------------------------
ROI markets software that processes electronic payment transactions for
companies selling through Internet e-commerce, retail outlets, and mail
order call centers. ROI's primary software is "e-transaction middleware"
that is certified to provide access to credit card and check authorization
networks for application software from companies like Binary Tree, Computer
Associates, J.D. Edwards, Friedman Corporation, HarrisData, Intentia,
LANSA, VAI, and dozens more. ROI customers range from small Internet
marketers and retailers to companies like Alltel, Brunswick, 800.com, IBM,
and Skytel.
3. The reason for engaging in the transaction:
------------------------------------------
Currently, the Company has no operations and will benefit from the
transaction. With the acquisition of ROI, the Company will be in a new
business, providing payment processing software to the e-commerce
marketplace, as well as retail and mail order businesses. The acquisition
of ROI will strengthen the financial position of the Company and add equity
and capital. As a result of this acquisition, the existing shareholders
will experience a dilution in their ownership and the associated voting
power of their stock. These results have been reflected in the tables
above.
4. Accounting treatment and tax consequences:
-----------------------------------------
This transaction between the Company and ROI will be treated as a purchase
transaction and is a tax-free exchange of shares.
5. Trading of Company's and ROI's stock:
------------------------------------
The Company's stock is trading on the Over-The-Counter market as symbol
NTTI. ROI is privately held and is not publicly traded.
6. Financial data:
--------------
All financial data required by Item 310 of Regulation S-B is included in
Appendix A.
10
<PAGE>
7. Pro forma data:
--------------
Pro forma data is contained in Appendix B.
8. Regulatory requirements:
-----------------------
To the Company's knowledge, no federal regulatory requirements must be
complied with and no approvals must be obtained for the ROI acquisition.
The acquisition of ROI by Net/Tech Acquisition Corporation, the Company's
wholly-owned subsidiary that was set up for this purpose, must comply with
Section 14-2-1101, et. seq. of the Georgia Business Corporation Code.
9. Stock prices:
------------
The Company's stock prices the date preceding the announcement of the
acquisition ranged from a low of $0.4375 to a high of $0.625.
10. Financial documents and accountants:
-----------------------------------
Copies of financial documents are included in Appendix A. At the Annual
Meeting, the appointment of principal accountants for the current fiscal
year will be ratified. The proposed accounting firm and the previous
accounting firm will not be represented at the meeting.
11. Documents incorporated by reference:
-----------------------------------
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, prior to the record date, shall be deemed to be
incorporated by reference into this proxy statement.
12. Item 310 of Regulation S-B:
--------------------------
All information required by Item 310 of Regulation S-B is included in
Appendix A.
11
<PAGE>
PART III
ITEMS FOR THE APPROVAL OF SHAREHOLDERS AT THE ANNUAL MEETING
------------------------------------------------------------
ITEM 1. ISSUANCE OF 6,118,918 POST REVERSE SPLIT SHARES FOR ROI STOCK SWAP
a. The Company seeks the issuance of 6,118,918 post reverse split shares of
the Company's Common Stock, par value $.01 per share.
b. All of the shares of Common Stock of the Company have the same dividend and
voting rights. Each share of Common Stock is entitled to one vote and a
majority of shares voted shall determine the outcome of any vote.
c. In order to complete the acquisition of ROI, the Company must take all of
the required actions and issue (after the reverse split) a total of
6,118,918 shares of Common Stock to be exchanged for all of the issued and
outstanding shares of common stock of ROI. These shares will not be
registered under the Securities Act of 1933, as amended, and must be held
for a minimum of two years. 2,352,988 of these shares will be delivered at
closing and 3,765,930 of these shares will be held in escrow for up to five
years, with a portion released each year at the rate of one share for each
$2.40 of the Company's Net Income Before Income Taxes ("NIBIT") for the
fiscal years ending in 2000, 2001, 2002, 2003, 2004, and 2005. If the
cumulative total NIBIT reaches $9,038,232.00, then all of the escrowed
shares will have been released. Each year's released shares must be held
for a minimum of one year.
d. Except for the minimum holding period, all of these shares are subject to
piggyback registration rights which will enable the holder of such shares
to have such shares registered along with any possible future registration
of shares of the Company. After approval by the Shareholders, the closing
of the acquisition and the Private Offering is planned on or about March 1,
2000. After the issuance of the shares in exchange for ROI's shares and the
issuance of the shares for the Private Offering, a majority of the shares
of Common Stock and, therefore, voting control of the Company will rest
with the shareholders who previously owned ROI Corporation.
e. Financial information required in Item 310 of Regulation S-B is included in
Appendix A.
ITEM 2. CERTIFICATE OF INCORPORATION - NAME CHANGE
The Board of Directors has approved an amendment to the Certificate of
Incorporation to change the name of the Company to Return On Investment
Corporation d/b/a ROI Corporation (or some similar name based on availability)
after the acquisition is effective. The Company will change its name to leverage
the name recognition in the marketplace gained as a result of ROI's marketing,
advertising, and public relations.
ROI markets software that processes electronic payment transactions for
companies selling through Internet e-commerce, retail outlets, and mail order
call centers. ROI's primary software is "e-transaction middleware" that is
certified to provide access to credit card and check authorization networks for
application software from companies like Binary Tree, Computer Associates, J.D.
Edwards, Friedman Corporation, HarrisData, Intentia, LANSA, VAI, and dozens
more. ROI customers range from small Internet marketers and retailers to
companies like Alltel, Brunswick, 800.com, IBM, and Skytel.
ROI currently provides credit card processing software only for IBM AS/400
computer systems in the United States. ROI management intends to use some of the
capital provided as part of the terms of the acquisition to pay off existing
debt and to develop versions of its software for other computer systems, such as
Unix, Linux, and Windows systems. ROI management also intends to expand
internationally and to pursue acquisitions of other software companies whose
products are complementary to ROI's. However, the success of ROI is dependent
upon many factors outside the control of ROI or of the Company. The software
business is highly competitive and there is no assurance of ROI's ability to
continue its growth and profitability.
12
<PAGE>
ITEM 3. APPOINTMENT OF AUDITORS
BDO Seidman has been selected by the Board of Directors as the independent
accountants and auditors of the Company for the fiscal year ending November 30,
1999, and (after the planned change in fiscal year end to June 30) for the
fiscal year ending June 30, 2000. BDO Seidman replaces Mirsky, Furst &
Associates who performed the audit for the fiscal year ending November 30, 1998.
Representatives from each of the accounting firms are not expected to be present
at the Annual Meeting. Shareholders are being asked to ratify the appointment of
\the auditors.
ITEM 4. ELECTION OF DIRECTORS
NOMINEES FOR ELECTION OF DIRECTORS
At the meeting, four Directors will be elected by the Shareholders to serve
as Directors of the Company until the next annual meeting or until the
successors are elected and shall qualify. Management has no reason to believe
that any of the nominees will not be a candidate or will be unable to serve. It
is intended that persons set forth under "Ownership of Common Stock" will vote
for all the nominees set forth below. One of these nominees has served as a
director of the Company since 1996. The other three nominees currently serve as
Directors of ROI. The proxy will be voted in accordance with its instructions.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Glenn E. Cohen 38 Chairman of the Board, President 1996
and Chief Executive Officer of the Company
Charles A. McRoberts 50 Chairman of the Board of ROI Corporation -
John W. McRoberts 47 President and Chief Executive Officer -
of Foresite, L.L.C., and Director of ROI Corporation
Charles Pecchio, Jr. 52 President, Chief Executive Officer, and Director -
of ROI Corporation
</TABLE>
Glenn E. Cohen serves as Chairman of the Board, President, and Chief
Executive Officer of the Company. 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 and has been licensed to practice law in New
Jersey since 1986. Mr. Cohen is founder and currently serves as President of
YourHomeDirect.com, an Internet based real estate brokerage firm. From 1986 to
1996, Mr. Cohen was Vice President and General Counsel of Cohen/Schatz
Associates, Inc., a land brokerage company in New Jersey, where he was
responsible for real estate sales in excess of $500 million. After the ROI
acquisition, Mr. Cohen will resign as President and Chief Executive Officer of
the Company but will continue as a Director and will enter into a Services
Agreement with the Company to manage the Company's relationship with GOJO
Industries.
Charles A. McRoberts (brother of John W. McRoberts) has served as Chairman
of the Board of ROI Corporation since 1996. He previously was President and CEO
of Mastiff Systems, a company that marketed and serviced security systems. Mr.
McRoberts joined Mastiff in 1982 and served as President and CEO from 1987 until
the sale of the company in 1996. Prior to joining Mastiff, Mr. McRoberts was
Branch Manager of Wells Fargo Alarm Services. Mr. McRoberts was a Second
Lieutenant in the U. S. Army at Fort Benning, Georgia. He managed a military
police platoon and was Officer in Charge of the Narcotic and Drug Detection
Squad.
John W. McRoberts (brother of Charles A. McRoberts) serves as President and
Chief Executive Officer of Foresite, L.L.C., a company that constructs radio
transmission towers and then leases them to communications companies. He has
served as a Director of ROI Corporation since 1996. He was a co-founder, and
served as
13
<PAGE>
President and Chief Executive Officer of Capstone Capital Corporation, a NYSE
listed real estate investment trust, from 1993 to 1998, when Capstone was
acquired by Healthcare Realty Trust for $900 million. Prior to that, Mr.
McRoberts was a senior officer of AmSouth Bank of Alabama (formerly AmSouth Bank
N.A.), where he was employed from 1977 to 1993.
Charles Pecchio, Jr., is President, Chief Executive Officer, and a Director
of ROI Corporation. Since 1993, he has provided consulting services related to
mergers and acquisitions to Atlanta area companies and has served as a Director
of Hoffman & Co, Inc., an engineering firm. From 1988 to 1992, he served as a
Director of Spiro International SA, a Swiss public company, and as an officer
and director of several affiliated companies in the U.S., the U.K, Germany,
France, and Switzerland. Mr. Pecchio was a co-founder, and served as President
and CEO of International Management Group, Ltd. (IMG), a venture management
company, from 1985 until its sale to Spiro in 1988. He negotiated the
acquisition by IMG of Honest Face Systems, Inc., a check guaranty and financial
transaction processing company, from Telecredit (now Equifax). He served as
President and CEO of Honest Face from 1986 to 1988 and negotiated its sale to
Comdata Holdings Corporation. Mr. Pecchio's previous experience includes
financial, sales, and management positions with IBM Corporation, General
Computer Corp., TeleVideo Systems, and NEC Information Systems.
The Company does not have any standing audit, nominating, or compensation
committees of the Board of Directors, or committees performing similar
functions. During the fiscal year ending November 30, 1999, there was one
meeting of the Board of Directors and all of the Directors attended the meeting.
ITEM 5. COMMON STOCK -AUTHORIZATION INCREASE TO 100,000,000 SHARES
a. The Company seeks the authorization of an amount of stock that would
increase the total number of shares of the Company's Common Stock, par
value $.01 per share, authorized for issuance to 100,000,000 as of the
record date.
b. The Company does not contemplate a public offering of these securities in
the proximate future. Except for the shares to be issued pursuant to Items
1, 7, and 8 of this Proxy Statement, no authorization for the issuance of
these securities is being sought from the security holders. All of the
shares of Common Stock of the Company have the same dividend and voting
rights. Each share of Common Stock is entitled to one vote and a majority
of shares voted shall determine the outcome of any vote.
c. The Company has entered into an agreement to acquire Results Oriented
Integration Corporation d/b/a ROI Corporation ("ROI"), a privately held
company incorporated in Georgia on March 16, 1996, whose principal
executive offices are located at Westside Center, 101 Emma Lane, Woodstock,
Georgia 30189, phone 800-396-7641, www. roiconnect.com. ROI will merge with
Net/Tech Acquisition Corporation, a Georgia corporation and a wholly-owned
subsidiary of the Company that was set up for the purpose of acquiring ROI.
A portion of these shares will be used for the ROI acquisition, other
potential acquisitions, a private offering, a potential additional public
offering, an employee stock option plan, and in lieu of payment of debt.
d. Any shares issued in addition to those approved by the Shareholders at the
Annual Meeting will be at the discretion of the Board of Directors and will
not require further authorization by the Shareholders for issuance.
However, unless and until all of the shares issued for the ROI acquisition
have been released from escrow as described herein, any shares to be issued
specifically for further acquisitions will require the approval of
Shareholders holding a minimum of 65% of the Common Stock of the Company
then outstanding.
e. The Company's financial information can be found in its 10-KSB and 10-QSB
filings. Additional financial information can be found in the addendums to
this Proxy Statement.
14
<PAGE>
ITEM 6. MODIFICATION/EXCHANGE OF SECURITIES -- 1-FOR-6 REVERSE SPLIT
a. The Board of Directors has recommended a 1-for-6 reverse split of the
shares of Common Stock, par value $.01 per share, of the Company, whereby
each Shareholder of record on February 29, 2000, at 4:00 P.M. Eastern
15
<PAGE>
Standard Time, shall receive 1 share of Common Stock in exchange for each 6
shares owned. The purpose of the reverse split is to increase the valuation
per share.
b. The Company's Common Stock is traded Over-The-Counter as symbol NTTI. The
fact that the Company's Common Stock is currently publicly traded is not
meant to convey the impression that the Company will be successful in
listing the securities for exchange or that, in the case that the Company
embarks on an underwritten offering, the underwriters may request the
Company to apply for such listing, unless there is reasonable assurance
that the securities to be offered will be acceptable to a securities
exchange for listing.
1. The Company's Common Stock has a value of $0.625 per share, as of the
close of business on January 31, 2000. The value of the Company's
Common Stock may vary from this estimate by the record date.
Shareholders' rights will be proportionally the same following the
reverse split.
2. Acquisition of ROI is contingent upon the approval of Items 1, 2, 5,
6, 7, 8 and 9 of this Proxy Statement. The failure of the Shareholders
to approve any one of the items listed will result in a delay of the
reverse split and the ROI acquisition. See the "Acquisition of ROI
Corporation" section above for a description of events that would
delay, defer or prevent a change in control of the Company.
c. On February 29, 2000, a 1-for-6 reverse split of the shares of Common Stock
of the Company will occur, whereby each Shareholder of record on February
29, 2000, at 4:00 P.M. Eastern Standard Time, shall receive 1 share of
Common Stock in exchange for each 6 shares owned. The purpose of the
reverse split is to increase the valuation per share. Proportional
ownership of the stock will remain the same as of the reverse split on
February 29, 2000. The reverse split will not affect shareholder rights.
d. The Company's shares are not in arrears in dividends or as to defaults with
respect to the outstanding securities which are to be modified or
exchanged. The effect of the proposed action is to increase the value per
share of the Company's Common Stock.
e. All information required by Item 310 of Regulation S-B is included in
Appendix A.
ITEM 7. ISSUANCE OF 150,000 POST REVERSE SPLIT SHARES FOR DEBT PAYMENT
a. The Company seeks the issuance of 150,000 post reverse split shares of the
Company's Common Stock, par value $.01 per share.
b. All of the shares of Common Stock of the Company have the same dividend and
voting rights. Each share of Common Stock is entitled to one vote and a
majority of shares voted shall determine the outcome of any vote.
c. The 150,000 post reverse split shares will be used to service existing
debts of the Company and ROI, debts incurred with the acquisition, and
other subsequent debts, all at the discretion of the Board of Directors.
d. The Company anticipates its Common Stock value will reflect the reduced
debt and enhanced equity position of the Company after the ROI acquisition.
Therefore, the Company believes that using shares to reduce debt is better
for the Company than using cash resources in some instances.
e. Financial information required in Item 310 of Regulation S-B is included in
Appendix A.
ITEM 8. PRIVATE OFFERING OF 2,000,000 TO 3,000,000 SHARES
a. The Company seeks the issuance after the reverse split of a minimum of
2,000,000 and a maximum of 3,000,000 shares of the Company's Common Stock,
par value $.01 per share, at a price per share based on the then current
share value and the advice to the Board of Directors from outside
investment advisors (expected to be $2.50 per share), for a private
offering of Common Stock by the Company made pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the "Private
Offering"), which will result in
16
<PAGE>
aggregate gross proceeds to the Company, ranging from approximately
$5,000,000 to $7,500,000. The shares issued as a result of the Private
Offering will have a minimum holding period of one year.
b. All of the shares of Common Stock of the Company have the same dividend and
voting rights. Each share of Common Stock is entitled to one vote and a
majority of shares voted shall determine the outcome of any vote.
c. These shares are to be used for a private offering to raise capital for the
Company. Further authorization for the issuance of these securities by a
vote of security holders will not be solicited prior to such issuance. The
Company intends to use the proceeds as follows: approximately $1,500,000 to
pay the Company's and ROI's debts, approximately $500,000 for marketing
activities, approximately $2,000,000 for development of software for the
international market and for Unix, Linux and Windows systems, and
approximately $1,000,000 for working capital. If additional funds are
available, the Company intends to use them for further marketing and
international expansion, and potential acquisitions of companies whose
products are complementary to ROI's.
d. The Company intends to expand its capitalization through the issuance of
these shares in the private offering. No impact, other than the resulting
dilution of share percentage from the issuance of additional shares, is
intended or anticipated on extant security holders' rights.
e. Financial information required in Item 310 of Regulation S-B is included in
Appendix A.
ITEM 9. INSTITUTION OF INCENTIVE STOCK OPTION PLAN
The Company is seeking the approval by the Shareholders of an Incentive
Stock Option Plan (the "Plan). The Plan will set aside 1,000,000 shares of
Common Stock as a long-term incentive for employees. The vesting requirements,
number of shares, and the exercise price of the options made available to
employees will be determined by the Board of Directors or their duly appointed
Stock Option Committee established to administer the plan. In no case will an
option be valid for longer than 10 years. The current employees of ROI
(excluding the Directors, all of whom have no options) have options to purchase
shares of ROI common stock that will be converted into options under the Plan to
purchase up to approximately 20,000 post reverse split shares of the Company's
Common Stock, with a total value of approximately $75,000 based on the per share
value on January 31, 2000. The Company anticipates a number of new employees
will be hired in the future, and, as such, the total number of options to be
issued under the Plan is indeterminable. The Company believes that it will
receive good and valuable consideration for the options granted to the employees
in that it will be able to attract and retain valuable, skilled employees. The
employee receives value because the exercise price of the option is expected to
be the price per share as of the grant date of the option. If the price per
share increases, the employee may be able to realize a profit. The Plan is a
qualified plan and is designed to not have tax consequences (i) for the Company
and (ii) for the employee until the exercise of the option and the sale at a
profit of the shares purchased. A final determination of the amount of options
to be received by various employees is indeterminable at this time. The Board of
Directors or the Stock Option Committee will make such determinations in
accordance with the Plan.
OTHER BUSINESS
Management does not know of any other business to be acted upon at the
meeting, and, as far as is known to management, no matters are to be brought
before the meeting except as specified in the notice of the meeting. However, if
any other business properly should come before the meeting, it is intended that
Shareholders will vote in their discretion on any such matters with the judgment
of the persons voting such proxies.
NEXT ANNUAL MEETING SHAREHOLDER PROPOSALS
Proposals intended to be presented at the Company's Next Annual Meeting of
Shareholders must be received at the Company's Executive Office no later than
July 31, 2000 for inclusion in the statement relating to that meeting.
17
<PAGE>
ADDITIONAL INFORMATION
The Company will provide without charge to each person, on written request
of such person, a copy of the Annual Report of the Company on Form 10-KSB for
the year ended November 30, 1999 (as filed with the Securities and Exchange
Commission) including the financial statements and the schedules thereto. All
such requests should be directed to the attention of the Secretary, Net/Tech
International, Inc., One West Front Street, Suite 30, Red Bank, New Jersey
07701.
Included with this Proxy are the audited financial statements of ROI for
the fiscal years ended June 30, 1998, and 1999, the unaudited financial
statements of ROI for the six months ended December 31, 1999, the audited
financial statements of the Company for the fiscal year ended November 30, 1998,
and the unaudited financial statements of the Company for the fiscal year ended
November 30, 1999. Also included are the pro forma financial statements for the
combination of the Company and ROI for the fiscal year ended November 30, 1999.
Upon completion of the acquisition of ROI, the Company's fiscal year end will be
changed from November 30 to June 30.
NET/TECH INTERNATIONAL, INC.
Red Bank, New Jersey
February 3, 2000
FORWARD LOOKING STATEMENTS
Statements wherein the terms "believes," "intends," or "expects" appear are
intended to reflect "forward looking statements" of the Company. The information
contained herein is subject to various risks, uncertainties and other factors
that could cause actual results to differ materially from the results
anticipated in such forward looking statements or paragraphs. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission, including the
most recent Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB and
any Current Reports on Form 8-KSB.
18
<PAGE>
PROXY
NET/TECH INTERNATIONAL, INC.
One West Front Street, Suite 30, Red Bank, New Jersey 07701
Telephone (732) 345-1100 - Fax (732) 345-0113
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Glenn E. Cohen, the true and
lawful attorney, agent and proxy of the undersigned, with full power of
substitution, to vote with respect to the shares of Common Stock of NET/TECH
INTERNATIONAL, INC. (the "Company") standing in the name of the undersigned at
the close of business on February 2, 2000, at the Annual Meeting of Shareholders
to be held at the offices of the Company at One West Front Street, Suite 30, Red
Bank, New Jersey, on February 28, 2000 at 11:00 A.M. local time, and at any and
all adjournment or adjournments thereof, with all powers that the undersigned
would possess if personally present and especially (but without limiting the
general authorization and power hereby given) to vote as indicated below.
VOTING INSTRUCTIONS - MARK YOUR VOTE (FOR, AGAINST, ABSTAIN) PLACE "X" ONLY IN
ONE BOX. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
FOLLOWING:
- --------------------------------------------------------------------------------
Item 1. To approve the acquisition by the Company of Results Oriented
Integration Corporation d/b/a ROI Corporation (ROI) through the
issuance of 6,118,918 post reverse split shares of Common Stock to be
exchanged for all of the issued and outstanding shares of common stock
of ROI as follows: (1) 2,352,988 will be delivered at closing; and (2)
3,765,930 shares will be placed in escrow with a portion released each
fiscal year based on profitability of the Company for the fiscal years
ending in 2000, 2001, 2002, 2003, 2004, and 2005.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 2. To approve an amendment to the Company's certificate of incorporation
changing the name of the Company to Return On Investment Corporation
d/b/a ROI Corporation (or some similar name based on availability).
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 3. To ratify the appointment of BDO Seidman as independent public
accountants.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 4. Election of four Directors.
Nominees: Glenn E. Cohen, Charles A. McRoberts, John W. McRoberts,
Charles Pecchio, Jr.
FOR ALL WITHHOLD ALL FOR ALL EXCEPT AS
LISTED
__________________
- --------------------------------------------------------------------------------
Item 5. To approve increasing the number of authorized shares of Common Stock
to 100,000,000 shares (before the reverse split).
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 6. To approve a 1-for-6 reverse split of the Company's Common Stock on
February 29, 2000.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 7. To approve the issuance of up to 150,000 post reverse split shares of
the Company's Common Stock in lieu of payment of debt.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 8. To approve a private offering of from 2,000,000 to 3,000,000 post
reverse split shares of Common Stock.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
Item 9. To approve institution of an incentive stock option plan for up to
1,000,000 post reverse split shares.
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE AND SIGN THIS PROXY.
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE OR FAX TO (732) 345-0113.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated February 3, 2000. The undersigned hereby
expressly revokes any and all proxies heretofore given or executed by the
undersigned with respect to the shares represented by this Proxy and, filing
this Proxy with the Secretary of the Company gives notice of such revocation.
WHERE NO CONTRARY CHOICE IS INDICATED BY THE STOCKHOLDER, THIS PROXY, WHEN
RETURNED, WILL BE VOTED FOR SUCH PROPOSALS AND WITH DISCRETIONARY AUTHORITY UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
- -----------------------------
DATE
- ----------------------------- -----------------------------
SIGNATURE SIGNATURE IF JOINTLY HELD
- ----------------------------- -----------------------------
PRINT NAME PRINT NAME IF JOINTLY HELD
<PAGE>
APPENDIX A
- ----------
GUY R. WILCOX
CERTIFIED PUBLIC ACCOUNTANT
2270 CASTLE LAKE DRIVE
TYRONE, GEORGIA 30290
(770) 632-9933 o FAX (770) 632-0194
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Results Oriented Integration Corporation
I have audited the accompanying balance sheets of Results Oriented Integration
Corporation as of June 30, 1999 and 1998, and the related statements of income,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Results Oriented Integration
Corporation as of June 30, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
By: /s/Guy R. Wilcox, CPA
October 28, 1999
A-1
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D\B\A ROI CORPORATION
BALANCE SHEETS
JUNE 30, 1998 AND 1999
1998 1999
---------- ----------
Assets
Current Assets:
Cash $ 0 $ 0
Accounts Receivable 110,128 400,322
---------- ----------
110,128 400,322
Property and Equipment net of
Accumulated Depreciation of
$55,787 and $162,670 (Note 2) 81,600 874,717
---------- ----------
$ 191,728 $1,275,039
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 4,553 $ 63,020
Other Payables 50,000
Notes Payable - Current (Note 3) 129,665 220,944
Deferred Taxes (Note 4) 0 84,900
---------- ----------
Total Current Liablities 134,218 418,864
Notes Payable - Long Term (Note 3) 0 700,605
---------- ----------
Total Liabilities 134,218 1,119,469
---------- ----------
Stockholders' Equity
Common Stock, no par value, (10,000,000 shares 500 1,333
authorized, 2,200,000 issued and outstanding
in 1998 and 5,333,200 issued and outstanding
in 1999)
Retained Earnings 57,010 154,237
---------- ----------
Total Stockholders' Equity 57,510 155,570
---------- ----------
$ 191,728 $1,275,039
========== ==========
See accountant's report and accompanying notes to financial statements.
A-2
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D\B\A ROI CORPORATION
STATEMENT OF INCOME
FOR THE YEARS ENDING JUNE 30, 1998 AND 1999
1998 1999
----------- -----------
Revenue
Sales - License Fees $ 476,441 $ 1,034,348
Sales - Support and Update Service 149,632 394,291
Sales - Other 27,674 56,011
----------- -----------
653,747 1,484,650
----------- -----------
Expenses
Wages & Salaries 402,356 498,224
Commissions and Contract Services 20,191 179,403
Royalties 48,000 138,277
Supplies 50,637 109,044
Advertising and Promotion 20,288 14,921
Employee Benefits 29,164 74,812
Rent and Occupancy 16,823 23,840
Depreciation 21,545 106,883
Telecommunications 24,256 36,150
Travel 5,350 40,218
Interest (net) 10,964 57,837
Other General & Administrative 13,513 22,914
----------- -----------
Total Operating Expenses 663,087 1,302,523
----------- -----------
Net Income (Loss) Before Income Taxes (9,340) 182,127
Income Tax Expense 0 84,900
----------- -----------
Net Income ($ 9,340) $ 97,227
=========== ===========
See accountant's report and accompanying notes to financial statements.
A-3
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D\B\A ROI CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDING JUNE 30, 1998 AND 1999
Common Stock Retained
Shares Amount Earnings Total
---------- ---------- ---------- ----------
Balance July 1, 1997 2,200,000 $ 500 $ 66,350 $ 66,850
Net Loss (9,340) (9,340)
---------- ---------- ---------- ----------
Balance June 30, 1998 2,200,000 500 57,010 57,510
Issue of Common Stock 3,133,200 833 833
Net Income 97,227 97,227
---------- ---------- ---------- ----------
Balance June 30, 1999 5,333,200 $ 1,333 $ 154,237 $ 155,570
========== ========== ========== ==========
See accountant's report and accompanying notes to financial statements.
A-4
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D\B\A ROI CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDING JUNE 30, 1998 AND 1999
1998 1999
--------- ---------
Cash Flows from Operating Activities
Net (Loss) Income ($ 9,340) $ 97,227
Adjustments to reconcile net income to
net cash provided by operating
activiities
Depreciation 21,545 106,883
(Increase) decrease in:
Accounts Receivable 11,984 (290,194)
(Decrease) Increase in:
Accounts payable 3,236 58,467
Other Payables 0 50,000
Deferred Taxes 0 84,900
--------- ---------
Net Cash Provided by Operating Activities 27,425 107,283
--------- ---------
Cash Flows for Investing Activities
Purchase of Equipment and Software (28,382) (900,000)
--------- ---------
Cash Flows from Financing Activities
Issuance of Common Stock 0 833
Proceeds of Debt (net) 957 791,884
--------- ---------
Repayment of Debt
Net Cash Provided from Financing Activities 957 792,717
--------- ---------
Net Change in Cash 0 0
Cash at beginning of year 0 0
--------- ---------
Cash at end of year 0 0
========= =========
Supplemental Disclosures
Operating activities reflect interest paid of $11,207 in 1998 and $57,943 in
1999.
See accountant's report and accompanying notes to financial statements.
A-5
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
- --------------------
ROI Corporation (the Company) develops software for the IBM AS/400 computer
system and provides related services. The software is categorized as
"e-transaction middleware" meaning that it processes electronic transactions
primarily related to credit card and check processing as part of retail, mail
order, and Internet e-commerce applications.
Cash Equivalents
- ----------------
For the purposes of the statement of cash flows, the company considers all short
term debt securities with a maturity of three months or less to be cash
equivalents.
Concentration of Credit Risk Arising from Cash Deposits in Excess of Insured
- --------------------------------------------------------------------------------
Limits
- ------
The Company maintains its cash balances in one financial institution in Atlanta,
Georgia. The balances are insured by the Federal Deposit Insurance Corporation
up to $100,000. At June 30, 1998 and 1999, the Company had no uninsured
balances.
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. Accordingly, actual results
could differ from those estimates.
Property and Equipment
- ----------------------
All property and equipment is recorded at cost and depreciated over its
respective estimated useful life using the straight line method. Upon sale or
retirement, the cost and related accumulated depreciation are eliminated from
the respective accounts and the resulting gain or loss is included in the
results of operations.
A-7
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT
Property and Equipment are summarized by major classifications as follows
1998 1999
---------- ----------
Computer Equipment $ 38,955 $ 38,955
Furniture 54,150 54,150
Software 44,282 944,282
---------- ----------
137,387 1,037,387
less accumulated depreciation 55,787 162,670
---------- ----------
$ 81,600 $ 874,717
========== ==========
Depreciation expense was $21,545 for 1998 and $106,883 for 1999.
NOTE 3 - DEBT
1998 1999
---------- ----------
Note payable to minority shareholder due
January 2004 with interest fixed at
10.25%. Payable in monthly installments
Note is secured by all assets of the Company -- $ 823,919
Note payable to NationsBank due March 2002
with interest fixed at 8.75% payable in monthly
installments $ 68,261 56,226
Credit Line with NationsBank, renewed annually,
interest at Prime + 1%, limited to $200,000
in 1998 and $50,000 in 1997 20,000 --
Credit Card advances requiring monthly payments
at rates varying from 9% to 9.7% 41,404 41,404
---------- ----------
Total Notes Payable 129,665 921,549
less current portion of long term debt 129,665 220,944
---------- ----------
Net Long Term Debt $ 0 $ 700,605
========== ==========
A-8
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
NOTES TO FINANCIAL STATEMENTS
Maturities of long term debt are as follows:
Year ending June 30,
2000 $ 220,994
2001 193,340
2002 202,368
2003 199,659
2004 105,188
----------
Total $ 921,549
==========
NOTE 4 - DEFERRED TAXES
Deferred income taxes are provided for certain income and expenses which are
recognized in different periods for tax and financial reporting purposes.
Sources of temporary differences and resulting tax liabilities are as follows:
Cash Basis Adjustment for Accounts Receivable $ 385,000
Net Operating Loss for Income Tax Purposes (250,000)
Depreciation 77,000
----------
Total Temporary Differences $ 212,000
==========
The Company's effective tax rate is approximately 40%. The current year expense
charged is $84,900. The net operating loss carryover is scheduled to expire June
2014.
NOTE 5 - COMMITMENTS
The Company has entered into a leasing arrangement for its operating facility
with required payments as follows:
Year Ending
June 30, 2000 $30,147
June 30, 2001 $8,601
The company has additional options for extensions in one year increments for up
to seven additional years with rent increases of 3% for each option period.
A-9
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
NOTES TO FINANCIAL STATEMENTS
The Company is under a royalty agreement with an unrelated party whereby a
minimum payment is made on a monthly basis of $6,000 per month or 12.5% of the
gross monthly sales collections from Sessions Plus revenue sources. The royalty
payments will be made until such time that the sum of $580,000 has been paid.
The amounts paid under the royalty agreement include $48,000 in 1998 and 138,277
in 1999. The agreement provides that default of the minimum payment provision
results in the reversion of all rights to the Sessions Plus software to the
royalty seller.
In January 1999, the Company acquired all of the assets of a competitor. In
addition to the acquisition price, the Company agreed to a contractual
commitment for a consulting and a non-compete arrangement with the owner of the
competitor whereby the Company will pay an annual consulting retainer of
$100,000 per year for two years. The total of $200,000 is to be paid six months
after the end of the second year. Provision for this liability is included in
other payables on a monthly basis.
NOTE 6 - PENSION PLAN
The Company adopted a 401(k) retirement plan on March 9, 1998. The plan covers
all employees who are at least 21 years of age with one or more years of
service. The Company currently makes a discretionary matching contribution of
25% of the employee's contributions elected as a salary deferral by eligible
employees. The Company's matching contributions for the years ended June 30,
1999 and 1998 were $15,030 and $14,613, respectively.
The Company also sponsors a defined contribution profit sharing plan covering
substantially all eligible participants. Contributions are decided by the board
of directors each year, however, contributions cannot exceed 15% of each
eligible employee's salary. Contributions were made in the amount of $23,000 for
the year ended June 30, 1999.
NOTE 7 - SUBSEQUENT EVENT
On September 9, 1999, the Company entered into a non-binding letter of intent
for the acquisition of the Company by an unrelated corporation. The final terms
and conditions of the proposed acquisition have not been determined as of the
date of this report and significant conditions must be met prior to the
ratification of the proposed acquisition. The letter of intent discusses a plan
whereby all of the stock of the Company would be acquired by the third party and
the current shareholders of the Company would gain a controlling interest in the
acquirer.
A-10
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - YEAR 2000 (UNAUDITED)
The Company, like other organizations and individuals around the world, could be
adversely affected if the computer systems it uses and those used by the
Company's service providers (the providers) can not properly process and
calculate date-related information and data. Management has assessed its
computer systems and the systems compliance issues of the providers. Based on
the information available to management, the providers are taking steps that
they believe are reasonably designed to address the Year 2000 issue; however,
the Company has no means of ensuring the providers will be ready.
The inability of the aforementioned third parties to complete the Year 2000
resolution process in a timely manner could have an adverse affect on the
Company's operations. Management will continue to monitor the status of and its
exposure to this issue. For the year ended June 30, 1999, the Company has not
incurred any Year 2000 related expenses nor does it expect to incur any Year
2000 expenses in the future.
A-11
<PAGE>
RESULTS ORIENTED INTEGRATION CORPORATION
D/B/A ROI CORPORATION
BALANCE SHEET
(UNAUDITED)
9/30/99 12/31/99
----------- -----------
ASSETS
Cash $ 124,832 $ 102,998
Accounts Receivable 277,068 462,136
----------- -----------
401,900 565,133
----------- -----------
Property & Equipment 1,037,387 1,037,387
less Accumulated Depreciation 213,766 264,862
----------- -----------
823,621 772,525
----------- -----------
Deposits and Prepaids -- 12,320
----------- -----------
TOTAL ASSETS $ 1,225,521 $ 1,349,978
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ 45,107 $ 76,786
Current Portion, Long Term Liabilities 208,044 228,864
Deferred Taxes 84,900 84,900
Long Term Portion, Long Term Liabilities 741,885 697,473
----------- -----------
1,079,935 1,088,024
----------- -----------
Stockholders Equity
Common Stock 1,333 1,824
Retained Earnings 154,237 154,237
Current Earnings (9,985) 105,894
----------- -----------
145,585 261,954
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 1,225,521 $ 1,349,978
=========== ===========
A-12
<PAGE>
NET/TECH INTERNATIONAL, INC.
and ROI Corporation
Income Statement
For the quarters ending September 30 and December 31,1999
(unaudited)
QE 9/30/99 QE 12/31/1999 6 MONTHS
---------- ------------- --------
REVENUE
Sales - License Fees $ 307,023 $ 537,762 $ 844,785
Sales - Support & Updates Service 129,234 182,171 311,405
Sales - Other 15,980 10,039 26,019
---------- ---------- ----------
Total Revenue 452,237 729,972 1,182,209
---------- ---------- ----------
EXPENSES
Compensation and Related Costs 246,597 318,669 565,266
Product Costs 34,810 37,766 72,575
General and Administrative 58,370 61,656 120,026
Professional Services 1,000 5,875 6,875
Selling Expenses 36,694 109,488 146,181
Occupancy Costs 11,597 7,889 19,486
Interest Expense 22,059 21,655 43,714
Depreciation and Amortization 51,096 51,096 102,192
---------- ---------- ----------
Total Operating Expenses 462,222 614,093 1,076,315
---------- ---------- ----------
NET INCOME (LOSS) BEFORE INCOME TAXES $ (9,985) $ 115,879 $ 105,894
========== ========== ==========
A-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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, 1998 and
1997, and the related consolidated statements of loss and cash flows for the
years ended November 30, 1998 and 1997 and for the period from September 11,
1989 (inception) through November 30, 1998 and consolidated statements of
stockholders' equity from inception through November 30, 1998. 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, 1998 and 1997 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, 1998 in conformity with generally accepted accounting
principles.
MIRSKY, FURST & ASSOCIATES, P.A.
Fort Lee, New Jersey
March 5, 1999
Except for Note 3 which is
March 15, 1999
A-14
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
------
NOVEMBER 30, NOVEMBER 30,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 160,334 $ 832,502
Accounts receivable 9,437 --
Inventory -- 41,479
Prepaid expenses 12,419 --
---------- ----------
Total Current Assets 182,190 873,981
---------- ----------
FIXED ASSETS
Leasehold improvements 10,126 10,126
Furniture and fixtures 44,024 35,494
Machinery and equipment 18,898 73,146
---------- ----------
73,048 118,766
Less: Accumulated Depreciation 26,474 20,096
---------- ----------
46,574 98,670
---------- ----------
INTANGIBLE ASSETS
Patent application costs (net of accumulated 52,633 59,942
amortization of $21,144 and $13,834 respectively)
OTHER ASSETS
Security deposits 10,850 4,044
---------- ----------
TOTAL ASSETS $ 292,247 $1,036,637
------------ ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
A-15
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1998 1997
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses and interest $ 146,883 $ 102,397
Obligations under capital lease-current portion 1,759 1,505
----------- -----------
Total Current Liabilities 148,642 103,902
OTHER LIABILITIES
Accrued compensation -- 125,000
Obligations under capital lease -- 1,759
Deposits 1,600 --
----------- -----------
Total Other Liabilities 1,600 126,759
----------- -----------
Total Liabilities 150,242 230,661
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value; 20,000,000
authorized; 9,324,637 and
6,689,210 shares issued and outstanding,
respectively 93,246 66,892
Additional paid-in capital 5,920,140 4,538,589
Deficit accumulated during the development stage (5,871,382) (3,799,505)
----------- -----------
Total Stockholders' Equity 142,004 805,976
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 292,247 $ 1,036,637
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
A-16
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSSES
<TABLE>
<CAPTION>
JANUARY 10,
1990
FOR THE YEAR FOR THE YEAR (INCEPTION)
ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1997 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Revenue $ 36,022 $ - $ 36,022
COSTS AND EXPENSES:
Cost of sales 14,674 - 14,674
Marketing, general & administrative expenses 1,298,821 814,604 3,964,984
Research, development and related expenses 419,013 391,939 1,381,794
Depreciation and amortization 20,266 18,974 90,681
--------------- --------------- ----------------
OPERATING LOSS $(1,716,752) ($1,225,517) $(5,416,111)
OTHER (INCOME) AND EXPENSE:
Interest income (16,366) - (40,528)
Interest expense 409 627 60,471
Loss on abandonment of assets 371,082 - 371,653
Loss on abandonment of patents - - 33,675
Write-off of investment - - 30,000
--------------- --------------- ----------------
355,125 627 455,271
NET INCOME (LOSS) $(2,071,877) ($1,226,144) ($5,871,382)
NET INCOME (LOSS) PER SHARE $ (0.29) ($0.20)
=============== ===============
Number of Shares Used In Computation 7,085,086 6,024,262
=============== ===============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
A-17
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 10,
1990
(INCEPTION)
THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
FISCAL YEAR ENDED 1998 1997 1998
- - ----------------- ------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Profit (Loss) ($2,071,877) ($1,226,144) ($5,871,382)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES
Depreciation 12,873 14,564 66,284
Amortization of intangible assets 7,394 4,410 22,145
Write-off of patents and trademarks -- -- 35,927
Loss on disposal of assets 119,795 -- 121,398
Decrease in accrued expenses from Initial
public offering -- -- 30,500
Compensation and services paid in Common Stock 202,905 219,000 422,155
Investment -- -- 30,000
Interest to affiliate paid in Common Stock -- -- 6,856
Accounts receivable (9,437) -- (9,437)
Inventory 41,479 (41,479) --
Prepaid expenses (12,419) -- (12,419)
Security deposits (6,806) 17,990 (10,766)
Accounts payable, accrued expenses and interest 44,486 74,833 200,414
Accrued compensation (125,000) -- (125,000)
Deposits 1600 -- 1,600
Other (84) -- (84)
----------- ----------- -----------
Total Adjustments 276,786 289,318 779,573
----------- ----------- -----------
NET CASH (USED IN)
OPERATING ACTIVITIES (1,795,091) (936,826) (5,091,809)
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment-net (80,572) (99,695) (234,256)
Patent and trademark acquisitions -- -- (82,704)
----------- ----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES ($ 80,572) ($ 99,695) ($ 316,960)
----------- ----------- -----------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
A-18
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
JANUARY 10,
1990
(INCEPTION)
THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
FISCAL YEAR ENDED 1998 1997 1998
- - ----------------- ----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 1,205,000 1,312,750 2,973,985
Loan proceeds from affiliate -- -- 634,182
Repayment of debt to affiliate -- -- (169,357)
Financing via capital leases -- -- 4,551
Other -- -- (16)
Proceeds from debt -- -- 130,000
Deferred public offering costs -- -- (84,496)
Issuance of common stock net of offering costs -- -- 1,054,078
Proceeds from options sold -- 480,000 480,000
Principal payments under capital lease (1,505) (1,287) (2,792)
Proceeds of warrants exercised -- -- 548,968
----------- ----------- -----------
1,203,495 1,791,463 5,569,103
NET CASH PROVIDED BY ----------- ----------- -----------
FINANCING ACTIVITIES
Net Increase (Decrease) in Cash and Cash Equivalents (672,168) 754,942 160,334
----------- ----------- -----------
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 832,502 77,560 --
----------- -----------
CASH AND CASH EQUIVALENTS END OF YEAR $ 160,334 $ 832,502 $ 160,334
=========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
A-19
<PAGE>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 10,
1990
(INCEPTION)
THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
FISCAL YEAR ENDED 1998 1997 1998
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<S> <C> <C> <C>
Cash Paid During the Period For:
Interest $ 409 $ 627 $1,036
Income Taxes $ -- $ -- $ --
</TABLE>
Supplemental schedule of noncash activities:
The Company recognized consulting expense of $12,605 for common stock in
connection with contracts to vendors. The Company recognized $170,300 in
compensation expense on options granted an employee. The expense was
calculated on the difference between the fair market value of the stock less
the exercise price on the date of grant. The Company abandoned its original
prototype and sustained a loss of $119,795 which was net of accumulated
depreciation of $6,495.
The Company abandoned all of its inventory in relation to the original
prototypes and sustained a loss in the amount of $251,288.
The accompanying notes to consolidated financial statements are an integral part
of these statements.
A-20
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
INCEPTION THROUGH NOVEMBER 30, 1998
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 provided 25,000 250 -- -- 250
For subscription receivable 750,000 7,500 -- -- 7,500
For organizational 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
Exercise of options 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>
A-21
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
INCEPTION THROUGH NOVEMBER 30, 1998
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
Proceeds from private placement:
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
Proceeds from private placement:
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>
A-22
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
INCEPTION THROUGH NOVEMBER 30, 1998
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 for 149,874 1,499 185,844 -- 187,343
Inside A & B Warrants
Proceeds from private placement:
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
----------- ----------- ----------- ----------- -----------
DECEMBER 1, 1996 TO NOVEMBER 30, 1997
Proceeds from private placement:
Shares issued at $1.25 per share 626,000 6,260 776,240 -- 782,500
Sale of options for $1.00 per option -- -- 200,000 -- 200,000
with an exercise price of $2.50
Sale of options for $.25 per option -- -- 270,000 -- 270,000
with an exercise price of $2.50
Shares issued at $1.50 per share upon 349,998 3,500 521,500 -- 525,000
exercise of stock options
</TABLE>
A-23
<PAGE>
<TABLE>
<CAPTION>
NET/TECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
INCEPTION THROUGH NOVEMBER 30, 1998
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>
Shares issued upon exercise of
stock options 16,000 160 15,090 -- 15,250
Compensation expense for issuance -- -- 94,000 -- 94,000
of stock options
Net (Loss) (1,226,144) (1,226,144)
----------- ----------- ----------- ----------- -----------
BALANCE NOVEMBER 30, 1997 6,689,210 $ 66,892 $ 4,538,589 $(3,799,505) $ 805,976
----------- ----------- ----------- ----------- -----------
DECEMBER 1, 1997 TO NOVEMBER 30, 1998
Shares issued at $2.00 per share 245,000 2,450 487,550 -- 490,000
Shares issued upon exercise of 20,000 200 24,800 -- 25,000
stock options
Shares issued at $1.25 per share 100,000 1,000 124,000 -- 125,000
Shares issued for consulting services 11,858 119 27,486 -- 27,605
Shares issued as compensation expense 1,429 14 4,986 -- 5,000
Shares issued at $1.75 per share 57,143 571 99,429 -- 100,000
Shares issued at $1.50 per share 100,000 1,000 149,000 -- 150,000
Proceeds from private placement
Shares issued at $.15 per share 2,099,997 21,000 294,000 -- 315,000
Compensation expense for issuance -- -- 170,300 -- 170,300
of stock options
Net (Loss) (2,071,877) (2,071,877)
----------- ----------- ----------- ----------- -----------
BALANCE NOVEMBER 30, 1998 9,324,637 $ 93,246 $ 5,920,140 $(5,871,382) $ 142,004
=========== =========== =========== =========== ===========
</TABLE>
Share prices are rounded to the nearest penny.
The accompanying notes to financial statements are an integral part of these
statements.
A-24
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The Company was incorporated in Delaware on January 10, 1990. The Company is the
developer of the patented Hygiene Guard Hand Wash Reminder and Monitoring
technology which prompts and verifies employee hand washing in any environment
where hygiene is a priority. See Note 2 and Note 2a.
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
Cash and cash equivalents consist of highly liquid interest bearing investments
with a maturity date at acquisition of three months or less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration of
credit risk are principally cash and cash equivalents. The Company's cash, which
at times during fiscal year ended November 30, 1998 exceeded the Federal
Depository Insurance limit, are deposited at high quality financial
institutions. The Company believes that deposits with such financial
institutions minimizes such risk.
In addition, all of the Company's purchases are from two vendors. The Company
believes that there are alternative sources for these purchases should the need
arise.
As of March 1999, the Company's sole source of future revenue is dependent upon
one companies ability to market the Hygiene Guard product line. See Note 2a.
ACCOUNTS RECEIVABLE
The Company examines its accounts receivable for collectibility. As of November
30, 1998, the Company believes that all accounts receivable are fully
collectible.
INVENTORY
The inventory is stated at the lower of cost or market in the year 1997. For the
fiscal year ended November 30, 1998 the inventory was written down to zero and
abandoned.
PROPERTY AND EQUIPMENT
Property and Equipment are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful life of the asset. Leasehold
Improvements are amortized over the shorter of the respective life of the lease
or the useful life of the improvements.
The capitalized prototype costs and related accumulated depreciation were
written off in 1998.
A-25
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Upon the sale or retirement of depreciable assets, the cost and related
accumulated depreciation will be removed and the resulting profit or loss will
be reflected in income. Expenditures for maintenance and repairs are charged
against income as incurred.
Estimated useful lives are as follows:
Machinery and Equipment 5 - 10 years
Furniture and Fixtures 5 - 7 years
INTANGIBLE ASSETS
Costs incurred in connection with filing patent and trademark applications are
capitalized. Patents and trademarks granted are amortized on a straight line
basis over a lifetime of 10 and 3 years, respectively. Abandoned patents are
expensed in the year of abandonment.
LONG-LIVED ASSETS
In fiscal 1997, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121"). Long lived assets and identifiable
intangibles to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Impairment is measured by comparing the carrying value of the
long-lived asset to the estimated undiscounted future cash flows expected to
result from uses of the assets and their eventual disposition. The adoption of
SFAS No. 121 did have a material impact on the results of operations or
financial position of the Company. During the year ended November 30, 1998, the
Company continued its policy of accounting for impairment of long lived assets
resulting in the write off of the prototype in the amount of $119,795. In
addition, the Company also wrote off it's inventory in the amount of $251,287.
ORGANIZATION COSTS
Organization costs were capitalized and are being amortized over a five year
period.
RESEARCH AND DEVELOPMENT COSTS
Research, development and related engineering costs are expensed as incurred.
LOSS PER COMMON AND COMMON EQUIVALENT SHARE
The loss per common share for the fiscal years 1998 and 1997 was computed by
dividing the 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.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share", which replaces current Earnings Per Share (EPS) reporting
for interim and annual periods ending after December 15, 1997 and requires a
dual presentation of basic and diluted EPS. During the fiscal year ended
November 30, 1998, the Company adopted SFAS No. 128. This did not have a
material impact on the Company's per share data.
A-26
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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.
EMPLOYEES STOCK PLANS
The Company accounts for its stock options in accordance with the provisions of
the Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees." In accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company continues to apply the provisions of APB
No. 25 for purposes of determining net income and has adopted the pro forma
disclosure requirement of SFAS No. 123 effective December 1, 1996. (See Note 8).
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a complete set of general
purpose financial statements; and SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a Company's business segments and related disclosures
about it's products, services, geographic areas and major customers. Both SFAS
No. 130 and SFAS No. 131 are effective for fiscal years beginning after December
15, 1997. The Company believes that the adoption of the new standards will not
have a material effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. The statement requires companies to recognize all
derivatives as either assets or liabilities, with the instruments measured at
fair value. The accounting for changes in fair value, gains or losses, depends
on the intended use of the derivative and its resulting designation. The
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Adoption of this standard will not impact the financial results
of the Company.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132
Employers Disclosures About Pensions and Other Post Retirement Benefits, which
revises employers' disclosures about pension and other post retirement benefit
plans, requires additional information on changes in the benefit obligations and
fair values of plan assets that will facilitate financial analysis, and
eliminates certain disclosures that are no longer deemed useful. The statement
is effective for fiscal years beginning after December 15, 1997. The Company
believes that the adoptions of this standard will not have a material effect on
the financial results of the Company.
NOTE 2 - LIQUIDITY AND BUSINESS RISKS
The Company had sales of $36,000 in the current year ended November 30, 1998.
The Company had an accumulated deficit of $5,871,382 as of November 30, 1998.
The accumulated deficit was $3,799,505 on November 30, 1997. Such losses have
resulted principally from research and development expenditures and engineering
costs, as well as the expansion of the company's staff including sales,
marketing and technical support. After the introduction of the product in 1998
the company decided to abandon the original model and engineer a smaller less
complex model. As a result the company wrote off its inventory and prototype.
The Company also decided to cut its sales, marketing and technical support
payroll at the end of fiscal 1998.
A-27
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
During the year the company raised capital by the issuance of 2,635,427 shares
of common stock for $1,237,605. Substantially all the shares were subject to
Rule 144 of the Securities Exchange Commission.
NOTE 2a) - MATERIAL SUBSEQUENT EVENTS
In March 1999, the Company sold its patent estate and product development. Under
the terms of the agreement, the Company will receive 10% percent of net U.S.
sales of the patented hand wash reminder and monitoring technology for a period
of 10 years. The Company will also receive 5% of net U.S. sales for the next two
years, 2 1/2% of net U.S. sales for the following three years and 7% of all
foreign net sales for a period of ten years. In addition, the Company will
receive a down payment of $50,000 and minimum guaranteed payments of $12,000 per
month for a period of twenty months. The purchaser will also fund product
development, patent prosecution protection and worldwide marketing.
Prior to the signing of this contract, the Company could not meet its present
working capital obligations. The Company has been extremely slow in paying its
accounts payable. Certain vendors have contacted the Company and made demand for
payment. The Company believes that the signing of this contract will put it in a
position to meet its present and future working capital obligations. However,
even though there are minimum guaranteed payments to the Company, there is still
a risk factor to be assumed by investors. While the contract provides for
initial payments totaling $290,000 additional revenue is contingent upon sales
of the patented equipment.
NOTE 3 - ACQUISITIONS
In November 1997, the Company acquired Hospitality Marketing and Purchasing
Corp., (HMP) for 100,000 authorized but unissued shares of common stock in
exchange for 100% of the stock of HMP. HMP is a Florida Corporation formed by
Ron Heagle. HMP assets consisted principally of a planned Health and Food safety
reference guide and catalog and the industry acumen of Mr. Heagle. Accordingly,
the shares issued to HMP were accounted for as an incentive signing bonus for
the personnel services of Mr. Heagle and were charged to the statement of
operations in the amount of $125,000. The shares were not issued until December
1997, the resulting expense and liability have been accrued as of November 30,
1997. The shares were valued at the value ascribed to other Rule 144 stock
issued in the period of the acquisitions. On October 15, 1998, Mr. Heagle's
employment was terminated by the Board of Directors.
In October 1996, the Company acquired 100% of the common stock in Pressure Point
Technologies, Inc., in a transaction accounted for under the purchase method.
The Company issued 25,000 shares of authorized but unissued stock in
consideration for the stock acquired. Pressure Point Technologies was
incorporated in Michigan in 1996, and the assets of the company consist
primarily of the technology for a battery less remote control for which a patent
was granted on March 31, 1998.
NOTE 4 - CONVERSION OF DEBT
Beginning in April 1994, the Company borrowed capital for operations from
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.
A-28
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 5 - PATENTS
Patents have been granted on the Hygiene Guard, TM, and on the water dispensable
technology. 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.
A patent has also been granted on a battery less remote technology and was
valued at $25,000 which is the value of the shares given. (See Note 3 )
NOTE 6 - 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 were exercisable to purchase one share of common and one Class
B warrant. The Class B warrants were exercisable to purchase one share of common
stock.
NOTE 7 - OPTIONS
In 1992 the Company adopted an Employee Incentive Stock Option Plan providing
for 250,000 shares to be available and the Company has set aside a reserve of
shares of that amount for this purpose. In addition, the Company has issued
Non-Employee Stock Options to individuals whose contribution and assistance is
of benefit to the Company.
Stock option activity was as follows for the two years ended November 30, 1998:
WEIGHTED AVERAGE
NO. OF SHARES EXERCISE PRICE
------------- ----------------
Outstanding at November 30, 1996 185,000 $ 1.19
Granted 2,317,500 $ 2.02
Exercised 365,000 $ 1.48
Terminated -0- $ -0-
Outstanding at November 30, 1997 2,137,500 $ 2.02
Granted and Purchased 490,000 $ 1.66
Exercised 20,000 $ 1.25
Terminated 130,000 $ 2.35
Outstanding at November 30, 1998 2,477,500 $ 1.95
A-29
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
Significant option groups outstanding at November 30, 1998 and related price and
life information follows:
WEIGHTED AVERAGE
RANGE OF EXERCISE WEIGHTED AVERAGE REMAINING
PRICE OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE
- ------------------ ----------- ----------------- ----------------
$0.15 to $1.00 405,000 .30 3.5
$1.01 to $2.00 877,500 1.63 1.7
$2.01 to $4.99 1,080,000 2.50 3.5
$5.00 115,000 5.00 2.5
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock, Issued to Employees" (APB 25) and related Interpretations in accounting
for its stock options. Accordingly, in 1997, $94,000 in compensation expense was
recognized for its stock-based compensation. During the year ended November 30,
1998, $170,300 in compensation expense was recognized for the Company's stock
based compensation. Had compensation cost for the options been determined based
upon the fair value at the grant date consistent with the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," the Company's net loss and net loss per share would
have been $2,253,040 and $.32 for the year ended November 30, 1998, and
$1,708,719 and $.28 for the year ended November 30, 1997. The weighted average
fair value of each option granted during fiscal 1998 is estimated at $.72 at the
date of grant using the Black-Scholes option pricing model with the following
assumptions: risk-free interest rate of 5%, expected life of 3.2 years, expected
volatility of 1.27% and no dividend yield. The weighted average fair value of
each option granted during fiscal 1997 is estimated at $1.36 at the date of
grant using the Black-Scholes option pricing model with the following
assumptions: risk-free interest rate of 6.3%, expected life of 1.2 years,
expected volatility of 133%, and no dividend yield.
Weighted average grant date fair values are shown below for groups where the
stock price equals, exceeds and is less than the exercise price.
WEIGHTED AVERAGE WEIGHTED AVERAGE
FAIR VALUE PER SHARE EXERCISE PRICE PER SHARE
--------------------- ------------------------
1998
Stock Price-Exercise Price $ .62 $ .25
Stock Price-Exercise Price $ .84 $ 3.47
1997
Stock Price-Exercise Price $ 2.02 $ 1.22
Stock price-Exercise Price $ 1.02 $ 1.25
The pro forma effect on net income is not representative of the pro forma effect
on net income in future periods because it does not take into consideration pro
forma compensation expense related to grants made in prior periods.
A-30
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 8 - STOCKHOLDERS' EQUITY
Other stock reserved for future issuance is as follows:
DESCRIPTION NUMBER OF SHARES EXPIRATION
----------- ---------------- ----------
Reserve for options purchased by
non-employees 1,530,000 1/99 to 01/00
Reserve for options granted for
non-employees 272,500 5/99 to 11/03
Reserve for granted employee
options 650,000 1/99 to 10/03
$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 options immediately terminate on the employee's
termination or in the case of permanent and total disability, the option are
exercisable for a period of 30 days after termination.
NOTE 9 - RELATED PARTY TRANSACTIONS
Cryo-Cell International Inc. owns 16.7% of the company's issued and outstanding
stock at November 30, 1998. It owned 28.2% as at November 30, 1997. There was no
intercompany charges.
NOTE 10 - SERVICES CONTRIBUTED
1) 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.
2) 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).
3) In 1993, a company was issued 2,000 shares of common stock at $4.00 per
share for promotional services.
4) During the year ended November 30, 1997, a key employee was issued
107,058 shares of common stock as a signing bonus and for services
rendered.
5) During the year ended November 30, 1997, another employee was issued
1,429 shares of common stock shares for services rendered.
6) During the year ended November 30, 1998, two companies were issued a
total of 4,800 shares of common stock for consulting services.
A-31
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company entered into a lease for office space in Red Bank, New Jersey. The
following schedule summarizes future minimum lease payments required under a
non-cancelable operating lease as of November 30, 1998: The lease expires in
2001.
1999 $ 48,488
2000 $ 49,582
2001 $ 12,530
Rent expense for the periods ending November 30, 1998 and November 30, 1997 was
$56,175 and $25,015, respectively.
On October 15, 1998, the Company entered into a 5 year employment agreement with
the Company President. During a portion of fiscal 1998, the President
voluntarily waived his salary in an effort to conserve company resources.
NOTE 12 - INCOME TAXES
No provision for income taxes was recorded for the two fiscal years ended
November 30, 1998 and 1997 due to net operating losses incurred. Net operating
loss carry forwards for federal tax purposes of approximately $5,472,000 expire
from 2005 through 2013.
The company's gross deferred tax assets of $1,800,000 and $1,290,000 at November
30, 1998 and 1997 respectively, represent the tax effect of net operating loss
carry forwards. Based upon the Company's earnings history, a valuation allowance
equal to the amount of the deferred tax assets is required to reduce the
Company's deferred tax assets to the amount realizable at present.
NOTE 13. - CAPITAL LEASES
The Company leases certain equipment under a capital lease. Leased property
under capital leases include:
1998 1997
---- ----
Equipment $4,551 $4,551
At November 30, 1998 the future minimum lease payments required under capital
leases are as follows:
FISCAL YEAR ENDING
------------------
November 30, 1999 $1,913
Less: Imputed interest 154
------
Present value of minimum
lease payments $1,759
======
A-32
<PAGE>
NET TECH INTERNATIONAL, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 14. - 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 15. - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Fourth quarter of 1997 was adversely affected by accounting for the purchase of
HMP as employee compensation in the amount of $125,000 and significant research
and development cost incurred.
Fourth quarter of 1998 was adversely affected by the write off and abandonment
of the prototype and the product line inventory in the amounts of $119,795 and
$251,288 respectively. The fourth quarter was also affected by the value of the
option issued to an employee as compensation in the amount of $170,300.
1ST 2ND 3RD 4TH
1997 QUARTER QUARTER QUARTER QUARTER
- ---- ------- ------- ------- -------
Net Loss $ 56.338 $ 158,678 $ 197,868 $ 813,260
========= ========= ========== ===========
Loss per share $ .01 $ .03 $ .03 $ .12
========= ========= ========== ===========
Shares used in
Computation 4,860,806 5,855,417 5,924,009 6,677,034
========== ========= ========= ===========
1998
- ----
Net Loss $ 399,205 $ 427,608 $ 355,574 $ 889,490
========== ========== ========== ===========
Loss per Share $ .06 $ .06 $ .05 $ .13
========== ========== ========== ===========
Shares used in
Computation 6,820,419 6,872,495 6,872,495 7,085,086
========== ========== ========== ===========
A-33
<PAGE>
NET/TECH INTERNATIONAL, INC.
BALANCE SHEET
NOVEMBER 30, 1999
(UNAUDITED)
NET/TECH
ASSETS
Cash $ 18,589
Accounts Receivable 156,000
-----------
174,589
-----------
Property & Equipment 73,048
less Accumulated Depreciation 42,566
-----------
30,482
-----------
Intangibles 26,000
less Accumulated Amortization 1,000
-----------
25,000
-----------
Deposits and Prepaids 14,018
-----------
TOTAL ASSETS $ 244,089
===========
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ 92,841
Current Portion, Long Term Liabilities
Deferred Taxes
Long Term Portion, Long Term Liabilities
-----------
92,841
-----------
Stockholders Equity
Common Stock 97,587
Additional Paid in Capital 5,980,799
Retained Earnings (5,927,138)
-----------
151,248
-----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 244,089
===========
A-34
<PAGE>
NET/TECH INTERNATIONAL, INC.
INCOME STATEMENT
FOR THE YEAR ENDING NOVEMBER 30,1999
(UNAUDITED)
NET/TECH
REVENUE
Sales - Products & License Fees $ 26,186
Sales - Services --
Sales - Assets, Patent 264,195
---------
Total Revenue 290,381
---------
EXPENSES
Research and Development 25,298
Compensation and Related Costs 93,450
Product Costs 12,535
General and Administrative 75,006
Professional Services 86,337
Selling Expenses 20,790
Occupancy Costs 14,526
Interest Expense 276
Depreciation and Amortization 17,919
---------
Total Operating Expenses 346,137
---------
NET INCOME (LOSS) BEFORE INCOME TAXES $ (55,756)
=========
A-35
<PAGE>
APPENDIX B
- ----------
NET/TECH INTERNATIONAL, INC.
AND ROI CORPORATION
PRO FORMA BALANCE SHEET
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
NET/TECH ROI COMBINED
ASSETS
<S> <C> <C> <C>
Cash $ 18,589 $ 44,030 $ 62,619
Accounts Receivable 156,000 591,204 747,204
----------- ----------- -----------
174,589 635,234 809,823
----------- ----------- -----------
Property & Equipment 73,048 1,037,387 1,110,435
less Accumulated Depreciation 42,566 247,830 290,396
----------- ----------- -----------
30,482 789,557 820,039
----------- ----------- -----------
Intangibles 26,000 -- 26,000
less Accumulated Amortization 1,000 -- 1,000
----------- ----------- -----------
25,000 -- 25,000
----------- ----------- -----------
Deposits and Prepaids 14,018 12,320 26,338
----------- ----------- -----------
TOTAL ASSETS $ 244,089 $ 1,437,111 $ 1,681,200
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Accounts Payable and Accrued Expenses $ 92,841 $ 100,245 193,086
Current Portion, Long Term Liabilities 222,003 222,003
Deferred Taxes 84,900 84,900
Long Term Portion, Long Term Liabilities 712,365 712,365
----------- ----------- -----------
92,841 1,119,513 1,212,354
----------- ----------- -----------
Stockholders Equity
Common Stock 97,587 1,333 98,920
Additional Paid in Capital 5,980,799 -- 5,980,799
Retained Earnings (5,927,138) 316,265 (5,610,873)
----------- ----------- -----------
151,248 317,598 468,846
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 244,089 $ 1,437,111 $ 1,681,200
=========== =========== ===========
</TABLE>
B-1
<PAGE>
NET/TECH INTERNATIONAL, INC.
AND ROI CORPORATION
PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDING NOVEMBER 30,1999
<TABLE>
<CAPTION>
NET/TECH ROI COMBINED
REVENUE
<S> <C> <C> <C>
Sales - Products & License Fees $ 26,186 $ 713,378 $ 739,564
Sales - Services -- 284,214 284,214
Sales - Assets, Patent 264,195 -- 264,195
---------- ---------- ----------
Total Revenue 290,381 997,592 1,287,973
---------- ---------- ----------
EXPENSES
Research and Development 25,298 -- 25,298
Compensation and Related Costs 93,450 408,335 501,785
Product Costs 12,535 49,637 62,172
General and Administrative 75,006 87,975 162,981
Professional Services 86,337 5,375 91,712
Selling Expenses 20,790 130,071 150,861
Occupancy Costs 14,526 14,699 29,225
Interest Expense 276 37,164 37,440
Depreciation and Amortization 17,919 83,596 101,515
---------- ---------- ----------
Total Operating Expenses 346,137 816,852 1,162,989
---------- ---------- ----------
NET INCOME (LOSS) BEFORE INCOME TAXES $ (55,756) $ 180,740 $ 124,984
========== ========== ==========
</TABLE>
B-2