CONFORMED COPY
FORM 10-K SB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) 15, ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1997
OR
( ) 15, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-37513-D
FI-TEK VI, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 84-1148204
______________________________ __________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3127 Ramshorn Drive, Castle Rock, Colorado 80104
_________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(303) 660-1710
_________________________________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for at least the past 90
days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K SB or any amendment to this form 10-K SB.
Yes X No
--- ---
As of August 31, 1997, the aggregate value of the 12,142,500 shares
of voting stock held by non-affiliates of the registrant was $121,425.
The number of shares outstanding of the registrant's only class of
common stock, as of August 31, 1997, was 29,042,500.
Registration Statement 33-37513-D, as amended, is incorporated into
Part I of this Report.
Exhibit Index is located at Page 11.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Fi-Tek VI, Inc. (the "Registrant" or the "Company") was incorporated
under the laws of the State of Delaware on July 12, 1990, for the primary
purpose of seeking out acquisitions of properties, businesses, or merger
candidates, without limitation as to the nature of the business
operations or geographic area of the acquisition candidate. From
inception through October 1992, the Company's activities were directed
primarily toward the obtaining of capital with which to pursue the
business plan summarized in the preceding sentence.
In October 1992, the Company completed its public offering of securities,
Receiving gross proceeds of $160,850 from the sales of 8,042,500 units of
designed to raise gross proceeds of up to $400,000 upon the sale of
the Company's securities, such units (the "Units") consisting of common
and common stock purchase warrants (the "Offering"). The underwriter of the
Company's Offering, pursuant to the Underwriting Agreement, purchased a warrant
to purchase 804,250 Units of the Company's securities, such units consisting of
commons stock and common stock purchase warrants. The Underwriter's warrants
expired in April 1997 without having been exercised.
Pursuant to the Colorado Securities Act, $93,714 of the proceeds of the
Offering was deposited into an escrow account. The funds were to be released
to the Company only upon satisfaction of the condition (the "Escrow Condition")
that at least fifty per cent of the gross proceeds of the Offering be committed
to one or more specific lines of business by no later than the fourth
anniversary of the date of the Company's prospectus. The Escrow Condition had
not been satisfied as of the fourth anniversary, or by April 14, 1996, and
accordingly, the Company distributed those funds pro rata to those persons who
were owners of the shares of commons tock purchased in the Offering. See
Liquidity and Capital Resources" under Item 6, Management's Discussion and
Analysis of Financial Condition and Results of Operations, in Part II, below.
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After completion of the offering, the Company began the process of
identification and evaluation of prospective acquisition candidates,
which process has included the solicitation of information from a
variety of sources within the general financial community as well as
from contacts established by management. This process is more fully
described in the Company's Prospectus, dated April 14, 1992, which
Prospectus is incorporated herein by this reference.
On September 12, 1997, the Company entered into a Plan and Agreement of
Reorganization ("Agreement") with Psychrometric Systems, Inc. ("PSI"), whereby
the Company proposes to acquire all of the outstanding stock of PSI in exchange
for 261,382,500 shares of common stock and 1,000,000 shares of preferred stock
of the Company, pursuant to which, if closed, the shareholders of PSI will own
approximately 89% of the outstanding common stock of the Company and give PSI
shareholders voting and management control. PSI, whose principal offices
are located in Lakewood, Colorado, is in the business of designing, selling,
manufacturing and building industrial cooling towers, repair and maintenance
in the retrofit of existing industrial cooling towers and cooling tower
components for these and similar facilities. Typical PSI customers include
companies such as Archer Daniels Midland, Amoco, Mitsubishi, Mobil, Texaco,
Bechtel, Fluor Daniel, and other large corporations around the world. For the
calendar year 1996, PSI reported gross revenues of approximately $16 million.
The closing of the Agreement with PSI is currently scheduled for the last week
of September 1997. However, there is no assurance the transaction will ever be
closed. Should the Agreement not be closed, the Company will continue its
process of identifying, evaluating and processing potential acquisition
candidates, as described in the prospectus.
Employees
The Company has no full time employees. Its executive officers
devote as much time as is necessary to conduct the Company's business.
See "Item 10. Executive Compensation."
ITEM 2. PROPERTIES
The Company has been provided office space in the home of its
President. The Company pays no rent for such space.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any threatened or pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1997.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock began trading on the NASD's Bulletin Board
during the third quarter of fiscal 1994. According to the only firm currently
making a market in the Company's securities, both the high and low bid during
each fiscal quarter since commencement of trading has remained at $.01
per share of common stock.
At August 31, 1997, the Company had approximately 50 shareholders of
record. The Company has not paid any dividends on its common stock and
does not expect to pay a cash dividend in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company completed the initial public offering of its securities
in October of 1992, receiving gross proceeds of $160,890 (including
proceeds from the sale of warrants to the underwriter of the offering).
Total costs of the offering amounted to $46,657. The net proceeds of
the offering, therefore, amounted to $114,233. Pursuant to the Colorado
Securities Act and based upon actual and estimated offering costs,
$93,714 of that amount was deposited into escrow. This escrowed amount
was refunded, by law, effective as of the date of the fourth anniversary
for the prospectus (April 14, 1996), since the Company failed to identify a
suitable business acquisition during the four year period after its public
offering. At June 30, 1997, the Company had total liquid capital resources
(cash) of $14,044.
Absent the closing of an acquisition, management anticipates that the
Company's current liquid capital resources will be applied in the coming twelve
months to three purposes. The first purpose will be to meet the Company's
reporting obligations under the Securities Exchange Act of 1934, as amended.
The second purpose will be to cover general and administrative expenses. The
third purpose will be to cover the expenses associated with searching for and
investigating business opportunities. The Company anticipates that its
current resources will be adequate for those purposes for at least the
coming year.
The Company had not, as of the fourth anniversary of the effective
date of the prospectus (April 14, 1996), entered into any arrangement
that would satisfy the conditions to the release of the escrowed funds.
Accordingly, management has distributed the escrowed funds to the holder
of shares on a pro rata basis.
Except as described in the preceding paragraph, the Company
anticipates that its capital needs will be minimal until it shall have
identified a business opportunity with which to combine. In pursuing a
combination transaction, the Company is likely to incur significant
additional expenses. The Company expects to meet such expenses with its
current liquid capital resources, but if the funds available for use by
the Company prove inadequate, the Company will seek to meet such expenses
by seeking to have payment of them deferred until after the combination
shall have been consummated or, in the alternative, by obtaining loans or
other capital contributions from the Company's founding stockholders.
The Company remains in the development stage and, since inception,
has experienced no significant change in liquidity or capital resources
or stockholder's equity other than the receipt of net proceeds from its
public offering and a minimal amount of inside capitalization funds and
distribution of escrowed funds in April 1996. The Company's balance
sheet for the fiscal year ended June 30, 1997, reflects a current asset
value of $14,044 and a total asset value of $14,044. The figures compare
to $18,216 in current assets and $18,216 in total assets at June 30,
1996. The total assets in the 1997 and 1996 fiscal year ends consisted
of unrestricted cash. The decreases in current and
total assets from the 1996 fiscal year end to the 1997 fiscal year end
are attributable to the Company's operating expenses exceeding its
receipt of interest earned on cash balances during the fiscal year ended
June 30, 1997.
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The Company continues to carry out its plan of business as discussed
above in Item 1. The Company's liquidity and capital resources will
continue to be diminished at least until the consummation of a business
combination and will thereafter continue to diminish unless and until the
business entity which the Company acquires has sufficient capital
resources and/or revenues to cover its operating costs.
Results of Operations
Since completing its public offering in October 1992, the Company
has engaged in no significant operations other than the search for, and
identification and evaluation of, possible acquisition candidates. Other
than interest income of $314 and $3,458, no revenues were received by
the Company during the fiscal years ended June 30, 1997 and 1996,
respectively. Since inception, the Company has earned interest income of
$12,190. No other revenues have been received by the Company since
inception. The Company experienced a net loss of $4,005 and $4,955,
respectively, during the fiscal years ended June 30, 1997 and 1996. This
decrease in net loss is attributable to the timing of payment of bills varied
slightly from fiscal 1997 a compared to fiscal 1996.
For the current fiscal year, the Company anticipates the acquisition of
PSI as a wholly owned subsidiary of the Company,
as is more fully discussed in Item 1., the result of which will end the
Company's status as a development stage company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is being submitted as a separate section
of this report beginning on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On August 27, 1993, the Company engaged Comiskey & Company,
Professional Corporation ("Comiskey") as its principal accountant to
audit its financial statements, thereby resulting in the dismissal of
Janet Loss, C.P.A., P.C. ("Loss"), its previous auditor.
Loss acted as the Company's auditor for the fiscal years ended June
30, 1991 and June 30, 1992.
In connection with the audits for the Company's fiscal years ended
June 30, 1991 and 1992, and for the subsequent interim periods preceding
the engagement of Comiskey as the Company's auditor, there has been no
disagreement between the Company and Loss concerning accounting
principles or practices, financial statement disclosures, or auditing
scope or procedures which would have caused Loss to make a reference to
the subject matter of the disagreement in connection with its reports.
In connection with the audits for the Company's fiscal years ended
June 30, 1991 and 1992, the reports by Loss relating to the financial
statements of the Company did not contain an adverse opinion or a
disclaimer of opinion, nor were the reports qualified or modified as to
audit scope, accounting principles, or uncertainty.
The decision to engage Comiskey was recommended and approved by the
Company's directors.
No event of the types listed in paragraphs (a)(1)(v)(A) through (D)
of Section 229.304 of the Securities Exchange Act of 1934 occurred for
the fiscal years ended June 30, 1991 and 1992, or for the subsequent
interim periods prior to the dismissal of Loss as auditors for the
Company. Loss has confirmed the foregoing in a letter to the Securities
and Exchange Commission.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Identification of Directors and Executive Officers of the Company
The directors and executive officers currently serving the Company
are as follows:
Name Age Position Held and Tenure
------ ----- --------------------------
Frank L. Kramer 55 President, Director
since July 13, 1990
Ronald J. Miller 54 Secretary, Treasurer, Director
since July 13, 1990
The directors named above will serve until the first annual meeting
of the Company's stockholders. Thereafter, directors will be elected for
one-year terms at the annual stockholders' meeting. Officers will hold
their positions at the pleasure of the board of directors, absent any
employment agreement, of which none currently exist or are contemplated.
There are no family relationships among the officers and directors.
There is no arrangement or understanding between any of the directors or
officers of the Company and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
The directors and officers will devote their time to the Company's
affairs on an "as needed" basis, which, depending on the circumstances,
could amount to as little as two hours per month, or as much as forty
hours per week, but more than likely will fall within the range of five
to ten hours per month.
Certain Significant Employees
No persons other than the executive officers listed above are
considered to be significant employees.
Business Experience
The following is a brief account of the education and business
experience during at least the past five years of the Company's executive
officers and directors, indicating their principal occupations and
employment during that period, and the names and principal businesses of
the organizations in which such occupations and employment were carried
out.
Biographical Information
Frank L. Kramer.
Mr. Kramer has served as President and as a
director of the Company since July 1990. Since January 1991, Mr. Kramer
has been self-employed as a financial consultant in the Denver, Colorado
area. From 1987 to December 1990, Mr. Kramer was affiliated with New
York Life Insurance Company ("New York Life") as an agent and recruiter.
From 1986 until March of 1987, he was an employee and a director of
Optimum Manufacturing, Inc., a public company engaged in manufacturing in
Denver, Colorado. From 1981 to late 1987, Mr. Kramer was self-employed
as a private financial consultant in the Denver, Colorado area, assisting
businesses in arranging interim financing for their business operations,
through private and commercial borrowings. He has also been engaged in
the structuring and implementing of private financing for the oil and gas
and commercial real estate industries. Mr. Kramer was affiliated with
New York Life from 1968 through 1981 and was engaged in sales, sales
management and estate planning. He became a Chartered Life Underwriter
in 1972. From 1973 through 1981, he was General Manager of two of New
York Life's general offices. Mr. Kramer has been and is involved in a
number of "blind pool" companies as outlined in the following paragraph.
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Mr. Kramer served as president and a director from 1984 to 1987 of
Fi-Tek Corp., a "blind pool" company headquartered in Aurora, Colorado,
which completed an offering of securities in 1986. In 1987, Fi-Tek Corp.
acquired Boston Technology, Inc. and moved its operations to Cambridge,
Massachusetts. From May 1987 to November 1988, Mr. Kramer served as
president, treasurer and the chairman of the board of Fi-Tek II, Inc., a
"blind pool" company headquartered in Aurora, Colorado, which completed
an offering of securities in July 1988. In October 1988, Fi-Tek II,
Inc., acquired On Line Communications, Inc. and moved its operations to
San Jose, California. The company subsequently changed its name to On
Line Network, Inc. and has since ceased operations. Mr. Kramer also
served, commencing in November 1988, as the president, treasurer and a
director of Fi-Tek III, Inc., a Delaware-chartered "blind pool"
corporation which completed an offering of securities in September 1989,
and which in August 1990 acquired Videoconferencing Systems, Inc., a
Norcross, Georgia-based company. Effective as of the date of
acquisition, Mr. Kramer resigned as president and treasurer, but retained
his position on the board of directors. The Company has since changed
its name to VSI Enterprises, Inc. and Mr. Kramer resigned his position as
director on July 15, 1991. From February 1987 until December 1989, he
was also the treasurer and a director of Bluestone Capital Corp., a
Colorado "blind pool" corporation which completed an offering of
securities in November 1988 and which moved its operations to Braintree,
Massachusetts after acquiring Dialogue, Inc. in December 1989. The
company has since ceased operations. Mr. Kramer also served as an
officer and director of Catalina Capital Corp. ("Catalina"), a Delaware-
chartered "blind pool" corporation which completed a public offering of
its securities in April 1991 and which moved its operations to
Scottsdale, Arizona after acquiring Explore Technology, Inc. ("Explore")
in August 1992. Mr. Kramer resigned all positions with Catalina upon the
closing of the acquisition of Explore. Explore has since changed its
name to Instant Video Technology, Inc. Mr. Kramer also served as
president, treasurer and a director of Fi-Tek IV, Inc., a Delaware-
chartered "blind pool" corporation which completed an offering of
securities in September 1990. During December 1992, Fi-Tek IV
completed a reverse acquisition (stock-for-stock exchange) of DBS
Network, Inc., a Mill Valley, California-based company, which
through its equity ownership of another entity, holds an interest in a
permit granted by the Federal Communications Commission for launch and
operation of direct broadcast satellites and is otherwise engaged in the
automated meter reading business for public utilities from satellites.
Fi-Tek IV has since changed its name to DBS Industries, Inc. For
approximately a one-month period in October 1990, Mr. Kramer served as a
director of Power Capital, Inc. (now known as 1st National Film Corp.),
a "blind pool" company which completed a public offering of its
securities in November 1989. Mr. Kramer is also an officer and director
of three other "blind pool" companies, Fi-Tek V, Inc., Fi-Tek VII, Inc. and
Harbour Capital Corp. Fi-Tek V, Inc. completed a "blind pool" public offering
of its securities in January 1992, and Fi-Tek VII, Inc. completed a
"blind pool" public offering of its securities in October 1992. Harbour
Capital Corp. completed a "blind pool" public offering of its securities in
October 1993.
Mr. Kramer obtained a B.S. Degree in Business Administration from
Louisiana State University in 1964.
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Ronald J. Miller.
Mr. Miller is the Secretary, Treasurer and a
director of the Company. He currently devotes the majority of his time
and attention to his personal investments and to other "blind pool"
companies in which he holds one or more position as officer, director, or
principal shareholder as described below. Mr. Miller served as secretary
and director of Fi-Tek III, Inc., from inception until August 1990, when
Fi-Tek III, Inc. acquired Videoconferencing Systems, Inc. Mr. Miller
served from inception until December 1993 as a director of Fi-Tek IV,
Inc., and has served since inception as secretary, treasurer, and
director of Fi-Tek V, Inc. and Fi-Tek VII, Inc. See biography of Mr.
Kramer for more information with respect to each of these development
stage companies. From March 11, 1988 through the present time, Mr.
Miller has served as president, treasurer and sole director of The
Phoenix Companies , Inc., which is based in Denver, Colorado and
incorporated under the laws of the State of Delaware. The Phoenix
Companies, Inc. was formed to "spin-off" publicly held subsidiaries as
acquisition candidates of private companies and business opportunities.
The Phoenix Companies, Inc. completed a public offering of its securities
in June 1990. The Company currently has no business operations. Since
February 1989, Mr. Miller has served as chief executive officer, secretary,
and a director of DataMerge, Inc., a Delaware-chartered company which has
developed and is currently marketing a financing sources database software
product. From June 1985 until October 26, 1990, Mr. Miller served as a
director of Power Capital, Inc. ("Power Capital"), a "blind pool"
company which completed a public offering of its securities on November 9, 1989.
In October 1990, Power Capital acquired 1st National Film Corp., a
California corporation engaged in the business of acquiring and then
distributing completed feature films for family viewing, and changed its name
to 1st National Film Corp. Effective as of the acquisition, Mr. Miller
resigned as a director, and as secretary and treasurer, having held the
latter two positions since October 1, 1990. Mr. Miller also served from
April 1987 to May 1990 as a director of Boston Technology, Inc. (formerly
Fi-Tek Corp.), a Delaware corporation, based in Cambridge, Massachusetts,
which is involved in the design, manufacture and marketing of voice
processing systems. See biography of Mr. Kramer for more information on the
history of Fi-Tek Corp. From 1978 to July 31, 1991, Mr. Miller was a partner
in the Denver, Colorado law firm of Pred and Miller. Pred and Miller acted as
counsel to the Company in connection with its offering of securities, but
that firm dissolved as of July 31, 1991 when Mr. Miller decided to
withdraw from the practice of law. From 1968 to 1978, Mr. Miller was
engaged in the private practice of law in Denver, Colorado, as an
associate and a partner in two different law firms. Since 1975, Mr.
Miller has specialized his practice in the areas of securities, corporate
and real estate law, and more recently until he withdrew from practice,
limited his practice to corporate and securities laws, and mergers and
acquisitions. Pred and Miller acted as general corporate and securities
counsel for a number of small public companies, and acted as securities
counsel for numerous "blind pool" companies, both during their formation
and initial public offering, and in the negotiations and acquisition of
business opportunities.
Mr. Miller received a B.A. Degree from Simpson College in 1965, and
Juris Doctor degree (magna cum laude) from the University of Denver
College of Law in 1968.
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ITEM 10. EXECUTIVE COMPENSATION
(a) Cash Compensation
After completion of the offering, the Company began the process of
identification and evaluation of prospective acquisition candidates, which
process has included the solicitation of information from a variety of sources
within the general financial community as well as from contracts established by
management. This process is more fully described in the Company's Prospectus,
dated April 14, 1992, which Prospectus is incorporated herein by this
reference.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Since inception, and through the end of its fiscal year ended
June 30, 1997, the Company paid no other compensation to its officers
and directors. However, in connection with the closing of the transaction
with Psychrometric Systems, Inc. (See Item 1 above), the Company has agreed
to issue 1,500,000 shares of its common stock to each of Frank L. Kramer and
Ronald J. Miller, the Company's only officers and directors since inception,
as full compensation for all services rendered to the Company since its
inception. Those shares will not be registered and will be considered
restricted shares under the federal securities laws.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control
Arrangements
None.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) & (b) Security Ownership of Certain Beneficial Owners
and Management
As of August 31, 1997, the persons listed in the table set forth
below were known by the Company to own or control beneficially more than
five percent of its outstanding common stock, par value $.00001 per
share, its only class of outstanding securities.
Name and Address of Number of Shares Percentage
Beneficial Owner Owner Beneficially of Class
- ------------------- -------------------- ------------
*Frank L. Kramer 6,150,000 21%
3127 Ramshorn Drive
Castle Rock, CO 80104
*Ronald J. Miller 6,500,000(1) 22%
300 High Street
Denver, CO 80218
Maurice LaFlamme 4,250,000 15%
49 Bay View Drive North
Jamestown, RI 02835
*All directors and 12,650,000 43%
executive officers
(2 people)
(1) Includes 100,000 shares held in an individual retirement account
for the benefit of Mr. Miller's spouse, in which shares Mr. Miller
disclaims all beneficial interest.
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(c) Changes in Control
The Company is currently attempting to effect an arrangement and/or
understanding which will, at a subsequent date result in a change of control
of the Company, as is more fully described in Item 1.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since inception, the Company has sold to its officers, directors and
others in a private placement a total of 21,000,000 shares of Common
Stock for a total of $18,000 or an average of $.0009 per share.
Certificates evidencing the Common Stock issued by the Company to these
persons have all been stamped with a restrictive legend, and are subject
to stop transfer orders by the Company. No officer, director, promoter,
or affiliate of the Company has or proposes to have any direct or
indirect material interest in any asset proposed to be acquired by the
Company through security holdings, contracts, options, or otherwise.
The Company has paid Pred and Miller, of which Ronald J. Miller, the
Company's Secretary, Treasurer and a director, was a partner until the
firm dissolved in July 1991, a total of $10,100 in fees for legal work
performed in connection with the Company's public offering. The Company
has paid to Frank L. Kramer a total salary of $3,000 for services
rendered in his capacity as President of the Company.
The Company does not have any pension, profit-sharing, stock option,
stock bonus, or other benefit plans. Such plans may be adopted in the
future at the discretion of the Board of Directors.
The Company presently maintains its offices at the home of its
President, for which it pays no rent, and for which it does not
anticipate paying rent in the future. The Company anticipates that
following the consummation of a business combination with an acquisition
candidate, the Company's office will be moved, but cannot predict future
office or facility arrangements with officers, directors or affiliates of
the Company.
There have been since inception no transactions, or series of
transactions, nor are there any currently proposed transactions, or
series of the same to which the Company is a party, in which the amount
involved exceeds $60,000 and in which to the knowledge of the Company any
director, executive officer, nominee, five percent shareholder or any
member of the immediate family of the foregoing persons have or will have
a direct or indirect material interest.
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PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT AND SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements and Schedules
The following Financial Statements are filed as part of this report:
Independent Auditor's Report of Comiskey & Company F-1
Balance Sheet F-2
Statements of Operations and Accumulated Deficit F-3
Statement of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6-7
(b) Reports on Form 8-K
None.
(c) Exhibits
The following Exhibits are filed with this report:
Name of Exhibit
(3.1) Certificate of Incorporation, incorporated by reference
to Registration Statement No. 33-37513-D, effective
April 14, 1992
(3.2) Bylaws, incorporated by reference to Registration
Statement No. 33-37513-D, effective April 14, 1992
(4.1) Rights of Stockholders (included in 3.1 and 3.2 above)
(10.1) Plan and Agreement of Reorganization
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report on Form 10-K SB to be signed on its behalf by the undersigned,
duly authorized.
Date: September 23, 1997 FI-TEK VI, INC.
By: /s/ Frank L. Kramer
-------------------
Frank L. Kramer, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, which include
the Principal Executive Officer, the Principal Financial Officer and a
majority of the Board of Directors on behalf of the Registrant and in the
capacities and on the dates indicated.
Name Title Date
---------------------- ------------------- --------------
/s/ Frank L. Kramer
Frank L. Kramer President, Director, and
Principal Executive Officer September 23, 1997
/s/ Ronald J. Miller
Ronald J. Miller Treasurer, Secretary,
Director and Principal
Financial Officer September 23, 1997
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
No annual report or proxy materials have been sent to security holders.
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors and Stockholders of
Fi-Tek VI, Inc.
We have audited the accompanying balance sheet of Fi-Tek VI, Inc. (a
development stage company) as of June 30, 1997, and the related
statements of loss and accumulated deficit, stockholders' equity, and
cash flows for the two years ended June 30, 1997, and for the period from
inception (July 12, 1990) to June 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
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 financial statements referred to above present
fairly, in all material respects, the financial position of Fi-Tek VI,
Inc. as of June 30, 1997, and the results of its operations and its cash
flows for each of the two years ended June 30, 1997 and for the period
from inception (July 12, 1990) to June 30, 1997 in conformity with
generally accepted accounting principles.
Denver, Colorado
September 19, 1997
COMISKEY & COMPANY
PROFESSIONAL CORPORATION
F-1
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
BALANCE SHEET
June 30, 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,044
----------
Total current assets 14,044
OTHER ASSETS
Organizational costs (net) -
----------
Total other assets -
----------
TOTAL ASSETS $ 14,044
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 50
Accounts payable - related party 258
----------
Total current liabilities 308
STOCKHOLDERS' EQUITY
Common stock, $0.00001 par value;
500,000,000 shares authorized;
29,042,500 shares issued and
outstanding at June 30, 1996. 290
Preferred stock, $0.00001 par value;
20,000 shares authorized; no shares
issued and outstanding -
Additional paid-in capital 38,229
Deficit accumulated during the
development stage (24,783)
----------
Total stockholders' equity 13,736
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,044
==========
The accompanying notes are an integral part
of the financial statements
F-2
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
Period
July 12, 1990
(Inception) For the year
to June 30, ended June 30,
1997 1997 1996
------------- ---------- ----------
REVENUES
Investment income $ 12,190 $ 314 $ 3,458
---------- -------- --------
EXPENSES
Legal and accounting 22,675 3,118 4,331
Office expense 4,236 453 859
Transfer agent 2,390 578 576
Taxes and licenses 2,149 170 620
Officer compensation 3,000 - -
Travel 2,023 - 2,023
Amortization 500 - 4
---------- -------- --------
Total expenses 36,973 4,319 8,413
---------- -------- --------
NET LOSS (24,783) (4,005) (4,955)
Accumulated deficit
Balance, beginning of period - (20,778) (15,823)
---------- -------- --------
Balance, end of period $ (24,783) $ (24,783) $ (20,778)
========== ======== ========
NET LOSS PER SHARE $ (NIL) $ (NIL) $ (NIL)
========== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 26,390,119 29,042,500 29,042,500
========== ========== ==========
The accompanying notes are an integral part
of the financial statements
F-3
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (July 12, 1990) to June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Common stock accumulated Total
------------------ Additional during the stock-
Number of paid-in developments holders
shares Amount capital stage equity
---------- -------- ----------- ------------ ---------
Common stock issued
for cash, July and
August, 1990 at
between $0.0003 and
$0.003 per share 21,000,000 $ 210 $ 17,790 $ - $ 18,000
Net loss for the
period July 12,
1990 (inception)
through June 30, 1991 - - - (1,815) (1,815)
---------- ------- ---------- ----------- --------
Balances,
June 30, 1991 21,000,000 210 17,790 (1,815) 16,185
---------- ------- ---------- ----------- --------
Net loss for the year
ended June 30, 1992 - - - (537) (537)
---------- ------- ---------- ----------- --------
Balances,
June 30, 1992 21,000,000 210 17,790 (2,352) 15,648
Common stock issued
upon closing of
public offering
October 29, 1992
at $0.02 per share 8,042,500 80 160,810 - 160,890
Deferred
offering cost - - (46,657) - (46,657)
Net loss for the year
ended June 30, 1993 - - - (7,581) (7,581)
---------- ------- ---------- ----------- --------
Balances,
June 30, 1993 29,042,500 290 131,943 (9,933) 122,300
Net loss for the year
ended June 30, 1994 - - - (3,692) (3,692)
---------- ------- ---------- ----------- --------
Balances,
June 30, 1994 29,042,500 290 131,943 (13,625) 118,608
Net loss for the year
ended June 30, 1995 - - - (2,198) (2,198)
---------- ------- ---------- ----------- --------
Balances,
June 30, 1995 29,042,500 290 131,943 (15,823) 116,410
Refund of
escrowed monies - - (93,714) - (93,714)
Net loss for the year
ended June 30, 1996 - - - (4,955) (4,955)
---------- ------- ---------- ----------- --------
Balance,
June 30, 1996 29,042,500 290 38,229 (20,778) 17,741
Net loss for the year
ended June 30, 1997 - - - (4,005) (4,005)
---------- ------- ---------- ----------- --------
Balance,
June 30, 1997 29,042,500 290 38,229 (24,783) 13,736
========== ======= ========== =========== ========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-4
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period
July 12, 1990
(Inception) For the year
to June 30, ended June 30,
1997 1997 1996
------------- ---------- ----------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (24,783) $ (4,005) $ (4,955)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Amortization 500 - 4
Increase (decrease) in
accounts payable 50 - 16
Increase (decrease) in
accounts payable -
related party 258 (167) 276
---------- -------- --------
Net cash used by
operating activities (23,975) (4,172) (4,659)
CASH FLOWS FROM
INVESTING ACTIVITIES
Increase in organization costs (500) - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock 178,890 - -
Deferred offering costs paid (46,657) - -
Statutory escrow contribution (93,714) - -
Loans from shareholders (4,000) - -
Repayment of loans from
shareholders 4,000 - -
---------- -------- --------
Net cash provided by
financing activities 38,519 - -
---------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 14,044 (4,172) (4,659)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 18,216 22,875
---------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 14,044 $ 14,044 $ 18,216
========== ======== ========
The accompanying notes are an integral part
of the financial statements
F-5
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Summary of Significant Accounting Policies
------------------------------------------
Development Stage Company
Fi-Tek VI, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on July 12, 1990. Its office is located at the office
of its President at 3127 Ramshorn Drive, Castle Rock, Colorado 80104.
The Company is a new enterprise in the development stage as defined by
Statement No. 7 of the Financial Accounting Standards Board and has not
engaged in any business other than organizational efforts, raising
capital, and investigating business opportunities. It has no full-time
employees and owns no real property. The Company intends to seek out and
take advantage of business opportunities that may have potential for
profit and, to that end, intends to acquire properties or businesses, or
a controlling interest therein. Management of the Company will have
virtually unlimited discretion in determining the business activities in
which the Company might engage.
The Company currently does not own any properties or an interest in any
business. However, it has identified a business opportunities that it shall
seek to acquire as is more fully described in Note 6.
Accounting Method
The Company records income and expense on the accrual method.
Fiscal Year
The Company has selected a June 30 fiscal year end.
Organization Costs
Organization costs are amortized over a 60-month period using the
straight-line method.
Deferred Offering Costs
Costs associated with the public offering have been charged to the
proceeds of the offering.
Loss Per Share
Loss per share was computed using the weighted average number of shares
outstanding during the period. Shares issued to insiders in anticipation
of a public offering have been accounted for as outstanding since
inception.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity date
of three months or less to be cash equivalents.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's
management to make estimates and assumptions that effect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
F-6
<PAGE>
Fi-Tek VI, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
2. Public Offering
---------------
On October 29, 1992, the Company completed its initial public offering
after selling 8,042,500 units. Each unit consists of one share of common
stock, one Class A warrant, and one Class B warrant. Each Class A
warrant and each Class B warrant will be exercisable for one share of
common stock at a price of $0.12 per share and $0.20 per share,
respectively, any time through April 14, 1998 and may be transferred
separately from the common stock. The Company may redeem the warrants at
a price of $0.0001 per warrant upon 30 days' written notice, reduce the
exercise price, or indefinitely extend the exercise period of the
warrants. At June 30, 1997, no warrants have been exercised.
The Company received net proceeds from the offering of $114,233 after
deducting offering costs of $46,657.
In a transaction, more fully described in Note 5, the Company intends to
issue 1,000,000 shares of preferred stock, $0.00001 par value. . In addition,
in the same transaction, the Company intends to issue 261,382,500 shares of the
Company's common stock. The common and preferred shares to be issued are
considered "restricted stock" within the meaning of Rule 144 of the Securities
Act of 1933
3. Related Party Transactions
--------------------------
The president is providing office space at no charge to the Company. The
president of the Company is reimbursed for all out-of-pocket expenses.
Since inception, the Company has paid $3,000 to the president as salary for his
services.
Since inception, the Company has paid approximately $10,100 to a related party
For legal services.
4. Income Taxes
------------
The Company has Federal net operating loss carryforwards of approximately
$22,600 expiring between 2008 and 2012. The tax benefit of these net
operating losses, which totals approximately $4,350, has been offset by a
full allowance for realization. This carryforward may be limited upon
the consummation of a business combination under IRC Section 381. For
the years ended June 30, 1997 and 1996, the valuation allowance increased
by $770 and $954, respectively.
5. Plan and Agreement of Reorganization
------------------------------------
On September 12, 1997 the Company entered into a Plan and Agreement of
Reorganization with Psychrometric Systems, Inc. ("PSI"), a Nevada corporation,
Frank L. Kramer, Ronald J. Miller, and George A. Kast. This transaction is
intended to be a reorganization under Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
If the transaction is closed, the Company will acquire from the existing PSI
shareholders, all of PSI's issued and outstanding common stock (20,376 shares),
no par value, in exchange for 261,382,500 shares (89.08%) of the Company's
common stock, par value $0.00001 and 1,000,000 shares of the Company's Series A
preferred stock, $0.00001 par value. The shares to be issued are considered
"restricted stock" within the meaning of Rule 144 of the Securities Act of
1933.
The preferred stock, issued for this transaction shall have the following
characteristics (i) each share of preferred stock shall be convertible into 290
shares of common stock upon attainment of Fi-Tek/PSI gross annual sales of
$60,000,000 for any fiscal year ended prior to fiscal year ended in 2002, or a
change in more than 50% control (in a single transaction), prior to the end of
fiscal 2002; and (ii) it shall be subject to redemption by the Company at a
price of $0.0001 per preferred share should the required sales level and/or
change of control, not be attained by 2002.
Upon the closing of the agreement, PSI agrees to use its best efforts to amend
the Company's Certificate of Incorporation to change the name of the Company to
Global Water Technology, Inc., or to a name substantially similar. Also upon
closing all (or, at the Company's option, all but one) of the members of the
Company's current board of directors and each and every person serving as an
officer shall resign their positions.
Prior to closing, Frank L. Kramer and Ronald J. Miller shall be issued
1,500,000 shares each, of the Company's common stock, valued at $15,000 each,
as full compensation for prior services rendered. The shares issued are
considered "restricted stock" within the meaning of Rule 144 of the Securities
Act of 1933. At PSI's request, Kramer & Miller shall act as advisors to
Fi-Tek/PSI for a period of up to 12 months following the consummation of the
exchange transaction, at no compensation, except reimbursement of out-of-pocket
expenses.
Furthermore, all holders of Fi-Tek restricted common stock in excess of
1,000,000 shares shall execute a one year lockup agreement whereby 75% of
their restricted shares shall not be sold during the one year period following
closing.
F-7
<PAGE>
PLAN AND AGREEMENT OF REORGANIZATION
This Plan and Agreement of Reorganization (this "Agreement") is
entered into on this 12th day of September, 1997, by and among
PSYCHROMETRIC SYSTEMS, INC., a Nevada corporation ("PSI"), FI-TEK VI,
INC., a Delaware corporation subject to the reporting requirements
imposed pursuant to Section 15(d) of the Securities Exchange Act of 1934,
as amended ("Fitek"), Frank L. Kramer ("Kramer"), Ronald J. Miller
("Miller") and George A. Kast ("Kast").
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is to be a
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended. Fitek will acquire all of PSI's issued and outstanding
common and preferred stock, without par value (the "PSI Stock" or the
"PSI Shares"), in exchange for 261,382,500 shares of the common stock,
par value $.00001 per share, of Fitek (the "Common Stock"), and 1,000,000
shares of Fitek Class A preferred stock (the "Preferred Stock").
AGREEMENT
1. Status of PSI Shares: Transfer Of PSI Shares: Lack of Encumbrances.
-------------------------------------------------------------------
(a) PSI and Kast represent that, as of the date of this
Agreement, all of the shareholders of PSI and their shareholdings,
both common and preferred stock, are listed on Exhibit A-1
attached to this Agreement. It is contemplated that Kast may
transfer a portion of his holdings of PSI Stock to other persons
or entities prior to the Closing (as defined in Section 3).
(b) The Shareholders of PSI (the "PSI Shareholders") shall
transfer, assign, convey and deliver to Fitek at the Closing
certificates representing, as of the Closing Date (as defined in
Section 3), all of the PSI Shares.
(c) The transfer of the PSI Shares shall be made free
and clear of all liens, mortgages, pledges, encumbrances, or
charges, whether disclosed or undisclosed, except as the PSI
Shareholders and Fitek shall have otherwise agreed in writing.
2. Issuance of Exchange Stock to PSI Shareholders.
-----------------------------------------------
(a) As consideration for the transfer, assignment,
conveyance and delivery of the PSI Stock, Fitek shall, at the
Closing, issue to the PSI Shareholders, pro rata in accordance
with each Shareholder's percentage ownership of PSI immediately
prior to the Closing, certificates representing 261,382,500 shares
of Common Stock (the "Fitek Exchange Stock") which shall represent
approximately 89.08% of the outstanding Common Stock of Fitek
immediately following the Closing.
<PAGE>
(b) As additional consideration for the transfer, assignment,
conveyance and delivery of the PSI Stock, the PSI Shareholders shall be
issued an aggregate of 1,000,000 shares of Fitek Class A preferred stock
(the "Preferred Stock") pro rata in accordance with each Shareholder's
percentage ownership of PSI Common Stock immediately prior to Closing.
The Preferred Stock shall be created by Fitek board of directors prior to
the Closing and it shall have the following characteristics: (i) each
share of Preferred Stock shall be convertible to 290 shares of Common
Stock upon attainment of Fitek/PSI gross annual sales of $60,000,000 for
any fiscal year ended prior to the fiscal year ending in 2002; and (ii)
it shall be subject to redemption by Fitek at a price of $.0001 per
preferred share should the required sales level not be attained by 2002.
Notwithstanding the provisions of (i) above, the Preferred Stock shall
become convertible upon a change in ownership of the combined Fitek/PSI,
which is defined as a single transaction which results in a change in
more than 50% control of the combined entity.
(c) The issuance of the Fitek Exchange Stock and the Preferred
Stock shall be made free and clear of all liens, mortgages, pledges,
encumbrances, or charges, whether disclosed or undisclosed, except as the
PSI Shareholders and Fitek shall have otherwise agreed in writing.
(d) As provided herein, and immediately prior to the Closing,
Fitek shall have issued and outstanding not more than 32,042,500 shares
of Common Stock, including the shares to be issued pursuant to Section I0
(c) hereof, not more than 8,042,500 Class A Warrants, and not more than
8,042,500 Class B Warrants, and shall not have any shares of preferred
stock issued and outstanding. Fitek will also have issued and outstanding
804,250 warrants issued to Westminster Securities in connection with
Fitek's public offering ("Underwriter Warrants").
(e) None of the Exchange Stock and Preferred Stock issued or
transferred to the PSI Shareholders and none of the PSI Stock transferred
to Fitek hereunder shall, at the time of Closing, be registered under
federal securities laws but, rather, shall be issued pursuant to an
exemption therefrom and be considered "restricted stock" within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Act"). All of such shares shall bear a legend worded
substantially as follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" within the meaning of Rule 144 under the
Act. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the
satisfaction of the Company.
The respective transfer agents of Fitek and PSI shall annotate their
records to reflect the restrictions on transfer embodied in the legend
set forth above. There shall be no requirement that Fitek register the
Exchange Stock or Preferred Stock under the Act, nor shall PSI or the
Shareholders be required to register any PSI Shares under the Act.
- -2-
<PAGE>
3. Closing.
--------
The consummation of the exchange described in
Sections 1 and 2 (the "Closing") shall take place on a date (the "Closing
K)ate") chosen by mutual agreement of PSI and Fitek within sixty (60)
days from the date of this Agreement, unless a later time shall be
mutually agreed upon by the parties.
4. Deliveries at Closing.
----------------------
(a) PSI and the PSI Shareholders shall deliver to Fitek, at Closing:
(1) certificates representing all shares of the PSI Stock (both
common and preferred) as described in Section 1 (b), each endorsed in
blank by the registered owner;
(2) an agreement from each Shareholder, substantially in the
form of Exhibit B, agreeing to a restriction on the transfer of the
Exchange Stock as described in Section 1 l(c) hereof;
(3) a copy of a consent of PSI's board of directors authorizing
PSI to take the necessary steps toward consummation of the transactions
described by this Agreement; and
(4) a copy of a Certificate of Good Standing for PSI issued not
more than thirty days prior to Closing by the Nevada Secretary of State.
(b) Fitek shall deliver to the PSI Shareholders, at Closing,
certificates representing the Exchange Stock and Preferred Stock, in the
names of the appropriate Shareholders, each in the appropriate
denomination, as described in Section 2.
(c) Fitek shall deliver to the new Fitek Board, appointed
pursuant to Section 11 (k) below, at Closing, the original of all of
Fitek's corporate records.
(d) Fitek shall deliver to PSI at Closing:
(1) a copy of a consent of Fitek's board of directors
authorizing Fitek to take the necessary steps toward consummation of the
transactions described by this Agreement and electing the new directors
designated by PSI effective as of the Closing; and
(2) a copy of a Certificate of Good Standing for Fitek issued
not more than thirty days prior to Closing by the Secretary of State of
Delaware.
5. Covenants. Representations and Warranties of PSI and the Shareholders.
----------------------------------------------------------------------
Subject to the schedule of exceptions, attached hereto as
Exhibit C and incorporated herein by this reference, which schedule shall
be acceptable to Fitek, PSI and Kast represent and warrant to Fitek as
follows:
- -3-
<PAGE>
(a) Corporate Existence and Power of PSI. PSI is (i) a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Nevada, (ii) has all necessary corporate
power and authority and all material licenses, authorizations, consents
and approvals required to own, lease, license or use its properties now
owned, leased, licensed or used and to carry on its business as now
conducted, (iii) is duly qualified as a foreign corporation under the
laws of each jurisdiction in which both (A) qualification is required
either (i) to own, lease license or use its properties now owned, leased,
licensed and used or (ii) to carry on its business as now conducted and
(B) the failure to be so qualified could materially and adversely affect
either or both of (i) the business, properties, operations, prospects or
condition (financial or otherwise) of PSI and (ii) PSI's ability to
perform its obligations under this Agreement and (iv) has all necessary
corporate power and authority to execute and deliver this Agreement.
PSI's books and records are complete and correct and have been maintained
with good business practice and accurately reflect in all material
respects the transactions to which they relate. Copies of PSI's
Certificate of Incorporation, and all amendments thereof to date,
certified by the proper Nevada officials, and of Fitek's bylaws as
amended to date, together with all minutes of shareholders' and
directors' meetings, certified by PSI's Secretary, will be delivered to
Fitek prior to C19sing and shall be complete and correct as of the date
of delivery of said documents. The same shall be subject to the review
and approval of counsel for Fitek.
(b) Subsidiaries and Ownership of Securities. PSI has, as of
the date of this Agreement, no subsidiaries.
(c) Capitalization. The aggregate number of shares of Common
Stock, without par value, which PSI is authorized to issue is 25,000, of
which 20,376 shares are currently issued and outstanding. All of such
outstanding shares are validly issued, fully paid and nonassessable. PSI
also has 50 shares of preferred stock issued and outstanding, which
shares of preferred stock shall have been redeemed by PSI prior to
Closing. PSI has no outstanding warrants or options to purchase Common
Stock and no such warrants or options will be issued prior to the
Closing.
According to PSI's books and records, each of the persons or
entities that is to be a Shareholder at Closing is domiciled in one of
the following jurisdictions: Nevada, Colorado or Idaho. All securities
issued by PSI as of the date of this Agreement have been issued in
compliance with all applicable state and federal laws.
(d) Financial Statements. PSI will deliver to Fitek, prior to
Closing, a copy of PSI's audited and unaudited financial statements
through June 30, 1997 ("Financial Statements"), which will be true and
complete and will have been prepared on a tax basis in accordance with
generally accepted accounting principles. The Financial Statements have
not been prepared in accordance with Regulation S-X appearing in Title 17
of the Code of Federal Regulations ("Regulation S-X").
(e) Absence of Undisclosed Liabilities. Except as disclosed in
Exhibit C, as reflected in this Agreement or in PSI's unaudited balance
sheet at June 30, 1997, PSI has no
- -4-
<PAGE>
actual knowledge of any material liabilities of any nature, whether
accrued, absolute, contingent, or otherwise, including, without
limitation, annual franchise taxes or other corporate charges in the
normal course of business.
(f) Absence of Certain Changes. Except as disclosed in
Exhibit C, since June 30, 1997, there has not been, and as of the
Closing, there will not be (i) any change in PSI's financial
condition, assets, liabilities, or business other than changes in
the ordinary course of business, none of which, taken individually
or considered together with other changes, has been materially
adverse, or (ii) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting PSI's
properties or business.
(g) Title to Properties. PSI has good-and marketable
title to all of its properties and assets, real and personal,
tangible and intangible, none of which is subject to any security
interest, mortgage, pledge, lien, encumbrance, or charge, except
for liens, if any, shown on PSI's financial statements as of June
30, 1997, or on Exhibit D prepared in compliance with subsection
(j) below as securing specified liabilities set forth therein
(with respect to which no default exists) and, except for minor
imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of
the properties subject thereto, or materially impair PSI's
operations and have arisen in the ordinary course of business.
(h) Accounts Receivable. PSI represents that, except to
the extent disclosed in Exhibit C or reserved against on its
balance sheet at June 30, 1997, it is not aware of any material
accounts and contracts receivable existing that in its judgment
would be uncollectible. An account or contract receivable shall be
deemed to be material if it is in excess of $50,000.
(i) Litigation. Except as disclosed in Exhibit G, there
is no litigation or proceeding pending, or to PSI's knowledge
threatened, against or relating to PSI, its properties, or
business, nor does PSI know or have reasonable grounds to know, of
any basis for any such action, or of any governmental investigation
relative to PSI, its properties, or business. PSI is not, and on
the Closing Date will not be, in default under or with respect to
any judgment, order, writ, injunction or decree of any court or of
any federal, state, municipal or other governmental authority,
department, commission, board, agency or other instrumentality;
and PSI has, and on the Closing Date will have, complied in all
material respects with all laws, rules, regulations and orders
applicable to it and to its business, if any.
(j) Exhibits Relating 19 Certain Matters. Exhibit D
contains a complete and accurate recitation of the following
documents: a description of all liens, mortgages, charges, and
encumbrances that are outstanding with respect to any of the
properties and assets of PSI; a list of all leases wherein PSI is
either lessor or lessee; a list of all other written or oral
contracts, commitments, agreements, and other contractual
obligations to which PSI is a party; a list of all insurance
policies carried by PSI; a description of all bonus, pension,
profit sharing, retirement, stock purchase, stock option,
hospitalization, insurance, and other executive or employee
compensation or benefit plans to which PSI is a party; a list of
all notes payable of PSI; and, a list of all notes and contracts
receivable of PSI.
- -5-
<PAGE>
(k) Contracts. PSI is not a party to any contract, except
contracts described in Exhibits ~ Or D. To the best of its knowledge, PSI
has in all material respects performed all obligations required to be
performed by it to date and is not in default in any material respect
under any agreements, leases, or other documents to which it is a party,
except as disclosed in Exhibit D to this Agreement.
(1) Taxes. Except as disclosed in Exhibit IU, PSI has filed in
correct form, or has received proper extensions to file, all federal and
state income tax returns due with respect to all periods through the end
of its last fiscal year, and all real and personal property tax
schedules, franchise, sales or use tax returns, and all federal and state
employment and withholding tax returns that are required to be filed, and
has paid or properly recorded in its books of record all taxes as shown
on the said returns and all assessments received by it to the extent that
such taxes and assessments have become due. The Internal Revenue Service
has not examined any income tax return of PSI.
(m) Authority to Execute Agreement. The Board of Directors of
PSI, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by PSI of this Agreement, and has
duly authorized each of the transactions hereby contemplated. A copy of
the Consent of Board of Directors of PSI authorizing such action is
attached hereto as Exhibit E and incorporated herein by this reference.
PSI has the power and authority to execute and deliver this Agreement, to
consummate the transactions hereby contemplated and to take all other
actions required to be taken by it pursuant to the provisions hereof. PSI
has taken all actions required by law, its Articles of Incorporation, as
amended, its bylaws, as amended, or otherwise to authorize the execution
and delivery of this Agreement. This Agreement is valid and binding upon
PSI and Kast in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the Articles
of Incorporation, as amended, or the bylaws, as amended, of PSI, or any
agreement, stipulation, order, writ, injunction, decree, law, rule or
regulation applicable to PSI.
(n) Finder's Fees. PSI and Kast are not, and on the Closing
Date will not be, liable or obligated to pay any finder's, agent's or
broker's fee arising out of or in connection with this Agreement or the
transactions contemplated by this Agreement.
(o) Disclosure. No representation or warranty by PSI in this
Agreement, nor any statement or certificate hereto, or in connection with
the transactions contemplated hereby, knowingly contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(p) Compliance. To the best of its knowledge, PSI has complied
in all material respects with all applicable laws, orders and regulations
of federal, state, municipal and/or other governments and/or any
instrumentality thereof, domestic or foreign, currently applicable to its
assets and to the business conducted by it.
- -6-
<PAGE>
(q) Change of Fitek Name. PSI agrees to use its best
efforts to amend Fitek's Certificate of Incorporation immediately
following the Closing to change Fitek's name to Global Water
Technology, Inc., or to a name that is substantially similar.
(r) Fitek Representative Or Board Member. PSI agrees
that the current Fitek board shall have the right, in lieu of
naming a board member pursuant to Section 1 l(k), to designate a
non-board advisor who shall be entitled to notice of and to attend
all board meetings. In any of the circumstances stated above or in
Section 11 (k), PSI agrees that the Fitek representative (or board
member) shall have the right to be reimbursed for all travel
expenses to attend meetings and shall receive such compensation as
may be approved by the new Fitek board of directors but no less
than the compensation that any other "outside" director of Fitek,
if any, may receive.
6. Access and Information.
-----------------------
Subject to the protections provided
by Section 14, PSI shall give to Fitek and to Fitek's counsel,
accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of
PSI's properties, books, contracts, commitments, and records, including
information concerning products and customer base, and patents held by,
or assigned to, PSI, and furnish Fitek during such period with all such
information concerning PSI's affairs as Fitek reasonably may request.
7. Covenants. Representation and Warranties of Fitek, Kramer and Miller.
---------------------------------------------------------------------
Fitek, Kramer and Miller, and each of them, represents and
warrants as follows:
(a) Corporate Existence and Power of Fitek. Fitek is (i)
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, (ii) has all
necessary corporate power and authority and all material licenses,
authorizations, consents and approvals required to own, lease,
license or use its properties now owned, leased, licensed or used
and to carry on its business as now conducted, (iii) is duly
qualified as a foreign corporation under the laws of each
jurisdiction in which both (A) qualification is required either
(i) to own, lease license or use its properties now owned, leased,
licensed and used or (ii) to carry on its business as now
conducted and (B) the failure to be so qualified could materially
and adversely affect either or both of (i) the business,
properties, operations, prospects or condition (financial or
otherwise) of Fitek and (ii) Fitek's ability to perform its
obligations under this Agreement and (iv) has all necessary
corporate power and authority to execute and deliver this
Agreement. Fitek's books and records are complete and correct and
have been maintained with good business practice and accurately
reflect in all material respects the transactions to which they
relate. Copies of Fitek's Certificate of Incorporation, and all
amendments thereof to date, certified by the proper Delaware
officials, and of Fitek's bylaws as amended to date, together with
all minutes of shareholders' and directors' meetings, certified by
Fitek's Secretary, will be delivered to PSI prior to Closing and
shall be complete and correct as of the date of delivery of said
documents. The same shall be subject to the review and approval of
counsel for PSI.
(b) Subsidiaries. Fitek has, as of the date of this
Agreement, no subsidiaries.
- -7-
<PAGE>
(c) Capitalization. As of the date of this Agreement, the
aggregate number of shares of common stock, par value $.00001 per share,
which Fitek is authorized to issue is 500,000,000 of which 32,042,500
shares are currently issued and outstanding. In addition, there are
8,042,500 Class A Common Stock Purchase Warrants and 8,042,500 Class B
Common Stock Purchase Warrants issued and outstanding, each of which
warrants is exercisable for one share of common stock at a price of $.12
per share for Class A Warrants and $.20 per share for Class B Warrants.
Fitek also has issued 804,250 Underwriter Warrants. Except for the Class
A Common Stock Purchase Warrants and Class B Common Stock Purchase
Warrants and the Underwriter Warrants, no options or rights to purchase
common stock or preferred stock are currently outstanding, or will be
outstanding as of the Closing. The aggregate number of shares of
preferred stock, par value $.00001 per share, which Fitek is authorized
to issue is 20,000,000, of which no shares are issued and outstanding.
(d) Financial Statements. Fitek will deliver to PSI, prior to
Closing, copies of all of Fitek's audited and unaudited financial
statements through June 30, 1997, all of which are true and complete and
have been prepared in accordance with generally accepted accounting
principles and Regulation S-X.
(e) Absence of Undisclosed Liabilities. Except to the extent
reflected in this Agreement or in Fitek's balance sheet at June 30, 1997,
none of Fitek, Kramer or Miller has any knowledge of any liabilities, as
of such date, of any nature, whether accrued, absolute, contingent, or
otherwise, including, without limitation, annual franchise taxes or other
corporate charges in the normal course of business. There are no
liabilities, contingent or otherwise, which have been incurred as a
result of any prior letters of intent between Fitek and any other company
relating to an unconsummated business combination between Fitek.
(f) Absence of Certain Changes. Fitek is engaged in no business
and conducts no operations. Since June 30, 1997, there has not been any
material change in Fitek's financial condition, assets or liabilities,
except the incurring of expenses in connection with the acquisition of
PSI or as reflected in this Agreement.
(g) Litigation. There is no litigation or proceeding pending,
or to Fitek's, Kramer's or Miller's knowledge, threatened, against or
relating to Fitek, nor does Fitek know or have reasonable grounds to
know, of any basis for any such action, or of any governmental
investigation relative to Fitek. Fitek is not, and on the Closing Date
will not be, in default under or with respect to any judgment, order,
writ, injunction or decree of any court or of any federal, state,
municipal or other governmental authority, department, commission, board,
agency or other instrumentality; and Fitek has, and on the Closing Date
will have, complied in all material respects with all laws, rules,
regulations and orders applicable to it, if any.
(h) Contracts. Fitek is not a party to any contract, nor is
Fitek a party to any written or oral commitment, for capital
expenditures. Fitek has in all material respects performed all
obligations required to be performed by it to date and is not in default
in any material respect under any agreements or other documents to which
it was a party.
- -8-
<PAGE>
(i) SEC Filings. As of the date of this Agreement, Fitek has
filed with the Securities and Exchange Commission ("SEC") all
registration statements, financial statements, applications, reports,
schedules, forms, proxy statements and all other instruments, documents
and written information (collectively, the "SEC Filings") required to be
filed by Fitek under the Securities Act of 1933, as amended (the "1933
Act") and the Securities Exchange Act of 1934, as amended (the "1934
Act"). All documents filed with the SEC complied in all material respects
with the requirements of the 1933 Act and the 1934 Act, as the case may
be, and none of the SEC Filings (including any and all financial
statements included therein) contains or, on the Closing Date, will
contain any untrue statement of a material fact or omits or, on the
Closing Date, will omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances in
which they were made or shall have been made, not misleading. The
financial statements of Fitek included in the SEC Filings comply as to
form in all material respects with applicable accounting requirements
and published rules and regulations of the SEC with respect thereto.
(j) Authority. to Execute Agreement. The Board of Directors of
Fitek, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Fitek of this Agreement and the
Fitek Exchange Stock, and has duly authorized each of the transactions
hereby contemplated. A copy of the Consent of Board of Directors of Fitek
authorizing such action is attached hereto as Exhibit F and incorporated
herein by this reference. Fitek has the power and authority to execute
and deliver this Agreement, to consummate the transactions hereby
contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Fitek has taken all the actions
required by law, its Certificate of Incorporation, as amended, its
bylaws, as amended, or otherwise to authorize the execution and delivery
of the Fitek Exchange Stock pursuant to the provisions hereof. This
Agreement is valid and binding upon Fitek in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a violation or
breach of the Certificate of Incorporation, as amended, or the bylaws, as
amended, of Fitek, or any agreement, stipulation, order, writ,
injunction, decree, law, rule or regulation applicable to Fitek. Upon
issuance, the Fitek Exchange Stock shall be validly issued, fully paid
and non-assessable.
(k) Finder's Fees. Fitek is not, and on the Closing Date will
not be, liable or obligated to pay any finder's, agent's or broker's fee
arising out of or in connection with this Agreement or the transactions
contemplated by this Agreement.
(1) Disclosure. No representation or warranty by Fitek in this
Agreement, nor any statement or certificate furnished or to be furnished to
PSI or the Shareholders pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(m) Taxes. Fitek has filed all federal income tax returns due with
respect to all periods through the end of its last fiscal year, and has
paid all taxes as shown on the said returns
- -9-
<PAGE>
and all assessments received by it to the extent that such taxes
and assessments have become due. The Internal Revenue Service has
riot examined any income tax return of Fitek.
(n) Registration Rights. Except to the extent set forth
in Fitek's Prospectus, dated April 14, 1992, which pertains to
Fitek's obligations in favor of its warrantholders, Fitek has not
granted any registration rights to holders of warrants or to
holders of restricted Common Stock.
8. Access and Information.
-----------------------
Subject to the protections provided
by Section 14, each party shall give the other party and their counsel,
accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of the
party's properties, books, contracts, commitments, and records, if any,
and shall furnish the other party during such period with all such
information concerning its affairs as the other party reasonably may
request.
9. Conduct of PSI Business Pending Closing.
----------------------------------------
PSI and Kast covenant that pending the Closing:
(a) Except as described in, or as may be necessary to
effect the transactions contemplated by, the next sentence, no
change will be made in PSI's Articles of Incorporation or bylaws
and no change will be made in PSI's issued shares of stock, other
than such changes as may be first approved in writing by Fitek.
Fitek and Kast acknowledge that Kast intends to transfer
outstanding PSI shares, prior to the Closing, to one or more of
the persons or entities listed on Exhibit A-2.
(b) No dividends shall be declared and no stock options
shall be granted.
(c) Except as otherwise requested by Fitek, PSI will use
its best efforts (without making any commitment on Fitek's behalf)
to preserve PSI's business organization intact; to keep available
to PSI the services of its present officers and employees; and to
preserve the goodwill of those having business relations with PSI.
10. Conduct of Fitek Pending Closing.
---------------------------------
Fitek covenants that, pending the Closing:
(a) Except as provided in Section 10 (c), no change will
be made in Fitek's Certificate of Incorporation or bylaws or in
Fitek's authorized or issued shares of stock, except as may be
first approved in writing by PSI.
(b) No dividends shall be declared, no stock options
granted and no employment agreements shall be entered into with
officers or directors of Fitek, except as contemplated by this
Agreement or as may be first approved in writing by PSI.
(c) PSI and Kast agree that Fitek shall, prior to the
Closing, issue to each of Kramer and Miller 1,500,000 shares of
the Common Stock of Fitek as full compensation for prior services
of Kramer and Miller as officers and directors of Fitek to the
date of the Closing. Such shares shall not be registered under the
federal securities laws, but rather shall be considered
- -10-
<PAGE>
"restricted stock" with the same characteristics as are set forth
in Section 2 (e) hereof with respect to the Exchange Stock.
~
11. Conditions Precedent to Closing.
--------------------------------
All obligations of Fitek,
PSI and the PSI Shareholders under this Agreement are subject to the
fulfillment, prior to or at the Closing, of all conditions elsewhere
herein set forth, including, but not limited to, receipt by the
appropriate party of all deliveries required by Section 4 herein, and
fulfillment, prior to the Closing, of each of the following conditions,
unless any such conditions are waived by such party at or before the
Closing:
(a) The respective representations, warranties and
covenants of PSI and Kast, and of Fitek, Kramer and Miller
contained in this Agreement shall be true at the time of Closing
as though such representations, warranties and covenants were made
at such time.
(b) PSI, Kast, Fitek, Kramer and Miller shall have
performed and complied with all agreements and conditions required
by this Agreement to be performed or complied with by each prior
to or at the Closing.
(c) Each PSI Shareholder acquiring Exchange Stock will
be required, at Closing, to submit an agreement, substantially in
the form of Exhibit B, confirming that all the Exchange Stock
received will be acquired for investment and not with a view to,
or for sale in connection with, any distribution thereof, and
agreeing not to transfer any of the Exchange Stock for a period of
one year from the Closing Date, except to those persons approved
by legal counsel to Fitek as falling within an exemption from
registration under the Act and any applicable state securities
laws, which transfers do not constitute a public distribution of
securities, and in which the transferees execute an investment
letter in form and substance satisfactory to counsel for Fitek.
The foregoing provision shall not prohibit the registration of
those shares at any time following the Closing. Each PSI
Shareholder acquiring Exchange Stock will be required to transfer
to Fitek at the Closing his or her respective PSI Shares, free and
clear of all liens, mortgages, pledges, encumbrances or changes,
whether disclosed or undisclosed.
(d) Fitek shall have been presented with, and shall have
approved, an updated version of Exhibits C and D, prepared by PSI,
current as of the Closing.
(e) Each party shall have received favorable opinions
from the other party's counsel on such matters in connection with
the transactions contemplated by this Agreement as are reasonable,
including an opinion from counsel for PSI that the Exchange, if
consummated, will not in any manner violate corporate or
securities laws of any states where any PSI Shareholder resides.
(f) Each party shall have satisfied itself that since
the date of this Agreement the business of the other party has
been conducted in the ordinary course except to the extent
otherwise contemplated by this Agreement. In addition, each party
shall have satisfied itself that no withdrawals of cash or other
assets have been made and no indebtedness has been incurred since
the date of this Agreement, except the possible execution by PSI
of a lease with an option
- -11-
<PAGE>
to purchase an office building and with respect to services rendered or
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement, unless said withdrawals or indebtedness
were either contemplated by the terms of this Agreement or subsequently
consented to in writing by the parties.
(g) Each party covenants that, to the best of its knowledge, it
has complied in all material respects with all applicable laws, orders
and regulations of federal, state, municipal and/or other governments
and/or any instrumentality thereof, domestic or foreign, applicable to
their assets, to the business conducted by them and to the transactions
contemplated by this Agreement.
(h) Fitek shall have provided to PSI through June 30, 1997, all
audited and unaudited financial statements prepared in accordance with
generally accepted accounting principles and with Regulation S-X, and the
audited statements certified as such by independent accountants of Fitek.
(i) PSI shall have provided to Fitek audited financial
statements of PSI for the three most recently completed fiscal years (or
for such shorter period as PSI or its subsidiaries, if any, shall have
been in existence), prepared on a tax basis in accordance with generally
accepted accounting principles, together with unaudited financial
statements in the same form for the period from the end of the most
recently ended fiscal year to a date within thirty days of the Closing.
Such unaudited financial statements of PSI shall have included the
following schedules: Schedule of Assets; Schedule of Notes Payable;
Schedule of Accounts Payable; and Schedule of Notes Receivable or, in
their absence, an affirmation that such items do not exist. PSI shall
also provide, as of a date within ten days of Closing, an update of any
material change in the aforementioned schedules. In addition, PSI will
deliver to Fitek, prior to Closing, in a form satisfactory to Fitek, a
letter from PSI's independent auditors confirming that PSI's financial
statements, covering the three most recently completed fiscal years, are
auditable and can be prepared in accordance with generally accepted
accounting principles and Regulation S-X within seventy-five (75) days of
the Closing Date.
(j) Each party shall have granted to the other party (acting
through its management personnel, counsel, accountants or other
representatives designated by it) full opportunity to examine its books
and records, properties, plants and equipment, proprietary rights and
other instruments, rights and papers of all kinds in accordance with
Sections 6 and 8 hereof and each party shall be satisfied to proceed with
the transactions contemplated by this Agreement upon completion of such
examination and investigation.
(k) Effective as of the Closing Date, all (or, at Fitek's
option, all but one) of the members of Fitek's current board of directors
and each and every person serving as an officer of Fitek shall resign
their respective positions and/or offices by tendering written
resignations. Immediately prior to said resignations, Fitek's board of
directors shall appoint as members of Fitek's new board those persons
designated by PSI to fill said director positions, with such appointments
to be effective as of the Closing. If all members of Fitek's current
board of
- -12-
<PAGE>
directors (the "Current Board") resign as of the Closing, the parties
hereto agree that the Current Board may designate, at any time within
Twelve months following the Closing, one person to serve as a member of
the Board. If that person is not a current board member of Fitek, the
nominee shall be subject to the approval of PSI.
(1) All press releases, shareholder communications, SEC Filings
and other publicity generated by Fitek or PSI regarding the transactions
contemplated by this Agreement shall have been reviewed and approved by
the other party before their release to the public or any governmental
agency.
(m) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the
exhibits attached hereto, shall be legal and binding under applicable
statutory and case law of the States of Delaware and Nevada,
respectively, including, but not limited to Nevada's securities laws and
all other applicable state securities laws.
(n) Each of the PSI Stockholders shall have tendered his or her
stock certificate or certificates to Fitek, endorsed in blank, to permit
the transfer of the PSI's Exchange Stock at Closing as contemplated by
Section 2(b).
(o) At PSI's request, Kramer and Miller shall act as advisors
to Fitek/PSI for a period of up to twelve months following the Closing,
performing such duties as shall be assigned by the Fitek board of
directors. Kramer and Miller agree to perform the functions as advisor
without compensation. However, Kramer and Miller shall be entitled to
reimbursement of all out of pocket expenses incurred in the performance
of duties assigned to them as advisors.
(p) All holders of Fitek restricted common stock in excess of
one million shares shall execute agreements in form and substance
satisfactory to PSI and Fitek whereby they agree that 75% of their
restricted shares shall not be sold for a period of twelve months
following Closing, except that private sales may be made to purchasers
who agree to be bound by the provisions of the "lock-up" agreement. No
such private sales may be made, however, unless PSI and its counsel have
received an opinion from counsel for the seller that the proposed private
sale is exempt from the registration provisions of the 1933 Act and
applicable state securities laws.
(q) Each party shall have received from the other party the
following, each dated as of the Closing Date, in form and substance
reasonably satisfactory to the receiving party:
(i) a certificate of the President of PSI or Fitek, as
the case may be, to the effect that (i) the representations and
warranties of such other party contained in this Agreement are true and
correct in all material respects as of the Closing Date and (ii) such
other party has performed, in all material respects, all covenants and
other obligations required by this Agreement to be performed by it at or
before the Closing Date; and
- -13-
<PAGE>
(ii) a certificate of the Secretary of State of each
jurisdiction in which such other party is incorporated, dated as of a
recent date, as to the good standing of and payment of taxes by such
other party and as to the charter documents of such other party on file
in the office of the Secretary of State.
12. Standstill Agreement.
---------------------
Prior to the closing, none of Fitek,
PSI, Kast, Kramer or Miller may discuss or negotiate with any other
corporation, firm or person, or entertain or consider any inquiries, or
proposals relating to the possible disposition of their shares of capital
stock of their companies, or their assets, and each of them will cause
their respective companies to conduct business only in the ordinary
course, except that PSI may undertake investigation, discussion and/or
negotiations with potential acquisition candidate companies, provided
that such negotiations, discussions and investigations are in furtherance
of PSI's business plan, and further, Kast shall be authorized to sell his
stock to employees and/or others prior to Closing. Notwithstanding the
foregoing, each party shall be free to engage in activities mentioned in
the preceding sentence which are designed to further the mutual interests
of the parties for the contemplated consolidation of the companies and
advancement of PSI' s business plan.
13. Termination.
------------
This Agreement may be terminated prior to
Closing, and the contemplated transactions abandoned, without liability
to either party, except with respect to the obligations of Fitek, PSI and
Kast under Section 14 hereof:
(a) by mutual consent of the parties;
(b) by Fitek, if in its reasonable belief there has been a
material misrepresentation or breach of warranty on the part of PSI or
Kast in the representations and warranties set forth in the Agreement;
(c) by PSI or Kast if, in the reasonable belief of PSI or Kast,
there has been a material misrepresentation or breach of warranty on the
part of Fitek, Kramer or Miller in the representations and warranties set
forth in the Agreement;
(d) by either Fitek or by Kast if the Closing shall not have occurred by the
Closing Date;
(e) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement do not qualify for exemption
from registration under applicable federal and state securities laws, or
qualification, if obtainable, cannot be accomplished, in Fitek's opinion
or that of its counsel, without unreasonable expense or effort;
(f) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement cannot be consummated under
Nevada or other relevant state corporate law or, if consummation is
possible, that it cannot be accomplished, in Fitek's opinion or that of
its counsel, without unreasonable expense or effort;
- -14-
<PAGE>
(g) by Fitek or by Kast if Fitek in its sole discretion
or Kast in his discretion shall determine that any of the
transactions contemplated by this Agreement have become inad-
visable or impracticable by reason of the institution or threat by
state, local, or federal governmental authorities or by any other
person of material litigation or proceedings against any party;
(h) by Fitek if the business or assets or financial
condition of PSI, taken as a whole, have been materially and
adversely affected, whether by the institution of litigation or by
reason of changes or developments or in operations in the ordinary
course of business or otherwise; or, by a Kast if the business or
assets or financial condition of Fitek, taken as a whole, have
been materially and adversely affected, whether by the institution
of litigation or by reason of changes or developments or in
operations in the ordinary course of business or otherwise;
(i) by Fitek if it shall appear to Fitek that PSI shall
not be able to obtain within a reasonable amount of time after
Closing all consents and approvals of all governmental authorities
having any jurisdiction over the business of PSI, or if such
authorities shall withdraw any approvals, licenses, or permits
given to PSI or to any other entity with which PSI is affiliated
or in which PSI has an interest;
(j) by Fitek if more than 5% (by percentage ownership)
of the PSI Shareholders dissent from the exchange described in
Sections 1 and 2, or are unable or for any reason refuse to
transfer any or all of their PSI Shares to Fitek in accordance
with Section 1, or fail to tender at the Closing the certificate
or certificates, endorsed in blank, representing all of their PSI
Stock;
(k) by PSI if Fitek fails to perform material conditions
set forth in Section 11;
(1) by PSI if examination of Fitek's books and records
pursuant to Section 8 uncovers a material deficiency; and
(m) by Fitek if PSI fails to perform material conditions
set forth in Section 11.
In the event of a bad-faith termination of this Agreement, the
non-terminating party shall be limited solely and exclusively to recovery
of its attorney's fees expended in the preparation and reporting of the
transaction. Fitek, Kramer and Miller expressly waive all other damages,
fees, costs, and lost opportunity costs (consequential damages) against
each other as a result of termination of this Agreement.
14. Confidentiality.
----------------
While each party is obligated to provide
access to and furnish information in accordance with Sections 6 and 8
herein, it is understood and agreed that such disclosures and information
subsequently obtained as a result of such disclosures are proprietary and
confidential in nature. Each party agrees to hold such information in
confidence and not to reveal any such information to any person who is
not a party to this Agreement, or an officer, director, key employee, or
shareholder thereof, and not to use the information obtained for any
purpose other than assisting in
- -15-
<PAGE>
its due diligence inquiry precedent to the Closing. Upon request of any
party, a confidentiality agreement, acceptable to the disclosing party,
will be executed by any person selected to receive such proprietary
information, prior to receipt of such information.
15. Nature and Survival of Representations.
---------------------------------------
All statements
contained in any certificate or other instrument delivered by or on
behalf of PSI, Kast, Fitek, Kramer or Miller pursuant hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by PSI, Kast, Fitek Kramer or Miller,
respectively, and shall survive the closing for a period of twelve (12)
months.
16. Binding Agreement.
------------------
(a) This Agreement shall become binding upon the parties
when, but only when, it shall have been signed by or on behalf of
all parties.
(b) Subject to the condition stated in subsection (a),
above, this Agreement shall be binding upon, and inure to the
benefit of, the respective parties and their legal
representatives, successors and assigns. This Agreement, in all of
its particulars, shall be enforceable by legal action for the
recovery of damages or by way of specific performance and the
terms and conditions of this Agreement shall remain in full force
and effect subsequent to Closing and shall not be deemed to be
merged into any documents conveyed and delivered at the time of
Closing. In the event that any person is required to initiate any
action at law or in equity for the enforcement of this Agreement,
the prevailing party in such litigation shall be entitled to
recover, from the party determined to be in default, all of its
reasonable costs incurred in said litigation, including attorneys'
fees.
17. Construction.
-------------
This Agreement is intended to be performed in
the State of Colorado, and shall be construed and enforced in accordance
with the laws of that State.
18. Notices.
--------
All notices, requests, demands, and other
communications hereunder shall be in writing, and shall be deemed to have
been duly given if delivered or mailed, first class postage, prepaid, to
PSI or Kast, at 12600 West Colfax Ave, Suite C-500, Lakewood, CO 80215,
Attention: George Kast, or if to Fitek, Kramer or Miller at 300 High
Street, Denver, CO 80218, Attention: Ronald J. Miller.
19. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Arbitration.
------------
Any dispute arising pursuant to or in any way
related to this Agreement or the transactions contemplated hereby shall
be settled by arbitration in the City and County of Denver, State of
Colorado, provided, however, that nothing in this Section shall restrict
the right of either party to apply to a court of competent jurisdiction
for emergency relief pending final determination of a claim by
arbitration in accordance with this Section. All arbitration shall be
conducted in accordance with the
- -16-
<PAGE>
rules and regulations of the American Arbitration Association by a panel
of three arbitrators, one selected by each party and the third selected
by the other two arbitrators. Each party shall pay their own expenses
associated with such arbitration, including the expenses of any
arbitrator selected by such party and 50% of the expenses of the third
arbitrator. The decision of the arbitrator shall be binding upon the
parties and judgment in accordance with that decision may be entered in
any court having jurisdiction thereof.
21. Enforceability.
---------------
Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties
hereto hereby waive any provision of law which renders any provision
'hereof prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
PSYCHROMETRIC SYSTEMS, INC. FI-TEK VI, INC.
By:\S\ George A. Kast By:\s\Frank L. Kramer
----------------------------- -------------------------
George A. Kast, President Frank L. Kramer, President
\s\ George A. Kast \s\Frank L. Kramer
----------------------------- ------------------------
George A. Kast Frank L. Kramer
\s\Ronald J. Miller
------------------------
Ronald J. Miller
- -17-
<PAGE>
EXHIBIT LIST
Exhibit A-1 -- Names and Respective Shareholdings in PSI of the
Individuals and Entities that are currently PSI
Shareholders.
Exhibit A-2 -- Names and Anticipated Respective Shareholdings in PSI of
the Individuals and Entities that are to be PSI
Shareholders immediately prior to Closing.
Exhibit B -- Form of Investment Letter of PSI Shareholders.
Exhibit C --Schedule of Exceptions to Covenants, Representations and Warranties
of Psychrometric Systems, Inc.
Exhibit D --Description of Liens, Mortgages, Charges and Encumbrances of
Psychrometric Systems, Inc.
Exhibit E -- Consent of Board of Directors of Psychrometric Systems, Inc.
Exhibit F -- Consent of Directors of Fi-Tek VI, Inc.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENTS OF LOSS AND ACCUMULATED DEFICIT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10KSB FOR THE YEAR
ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 14044
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14044
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14044
<CURRENT-LIABILITIES> 308
<BONDS> 0
0
0
<COMMON> 290
<OTHER-SE> 13446
<TOTAL-LIABILITY-AND-EQUITY> 14044
<SALES> 0
<TOTAL-REVENUES> 314
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4319
<LOSS-PROVISION> (4005)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4005)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4005)
<EPS-PRIMARY> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
