UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934 FOR THE FISCAL YEAR ENDED
May 31, 1997
COMMISSION FILE NUMBER: 0-19796
INTERACTIVE TECHNOLOGIES CORPORATION, INC.
(Exact name of registrant as specified in charter)
Wyoming 98-0120805
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
102 SOUTH HARBOR CITY BOULEVARD
MELBOURNE, FLORIDA 32901
(Address of Principal Executive Offices)
Registrant's telephone number including area code: 407-953-4811
Securities Registered Under Section 12(b) of the Exchange Act: NONE
Securities Registered Under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE.
Check whether the Registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes_X_ No___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. _X_
The Registrant's operating revenues for its most recent fiscal year were:
$197,781.27
The aggregate market value of voting stock held by non-affiliates of
the Registrant, based on the average of the closing bid and asked prices of the
Registrant's Common Stock in the NASDAQ market as reported by NASDAQ on May
31,1997, was approximately $8,224,515. Shares of voting stock held by each
officer and director and by each person who owns 5% or more of the outstanding
voting stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily
conclusive.
As of May 31, 1997, 12,279,612 shares of Common Stock, $0.01 par value,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
LOCATION OF EXHIBIT INDEX
The index of exhibits is contained in PART IV, Item 13 herein on page 11.
<PAGE>
TABLE OF CONTENTS
PART I:
Page
Item 1. Description of Business 1
Item 2. Description of Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote
of Security Holders 4
PART II:
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Management's Plan of Operation 5
Item 7 Financial Statements 7
Item 8 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 7
PART III:
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the
Exchange Act 8
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial
Owners and Management 9
Item 12. Certain Relationships and Related Transactions 10
PART IV:
Item 13. Exhibits, and Reports on Form 8-K 10
SIGNATURES 12
<PAGE>
PART I
Item 1. Description of Business.
- --------------------------------
Background.
Interactive Technologies Corporation, Inc. (ITC) was incorporated in the
state of Wyoming on August 8, 1991. At that time, ITC was engaged in the
business of exploiting its rights under a license granted by CST Entertainment
Imaging, Inc. ("CST"). Such license gave ITC the exclusive right to use CST's
coloring process to convert to color black-and-white film and videotape,
including black-and-white theatrical films and television programs produced for
distribution in Europe. ITC also had exclusive right to use CST's technology to
provide digital special visual effects for new film and video productions
produced for distribution primarily in the European territory. ITC ceased this
effort on October 18, 1995, when it exchanged the license in satisfaction of
certain of its debt.
On October 20, 1995, ITC entered into an agreement to acquire assets of
Syneractive, Inc. ("SI"), a Florida corporation. SI's assets included
intellectual property consisting of a television production and the trade name
Rebate TV. The assets also included license rights from the FCC to provide
Interactive Video and Data Service ("IVDS") in the Charleston-North Charleston,
South Carolina, and Melbourne-Titusville-Palm Bay, Florida metropolitan areas.
In exchange for such assets, ITC issued 5,700,000 shares of common stock to
Perry Douglas West, its current sole director and officer.
Principal Products or Services and Their Markets.
General. ITC develops and produces interactive television and interactive
digital media programming for distribution on cable, by broadcast and direct
satellite television, and over the Internet. ITC's principal interactive
programming product is Rebate TV(TM) The product allows a consumer to receive a
cash rebate from ITC for purchases of products advertised on the Rebate TV(TM)
television program by incorporating interactive media and computer data
management. Rebate TV(TM) is designed to utilize existing communication
technologies for consumer responses. It now uses the telephone and the Internet
as return links. However, it is also designed to easily accommodate the emerging
interactive television systems as they come into use, such as IVDS and
Interactive Television (via fiber optic cable/telephone cable etc.)
Initial Market. ITC conducted a beta test of Rebate TV(TM) from April 15,
1996, through January, 1997 (the "Test Period"). During the Test Period, Rebate
TV(TM) aired one half hour daily, seven days a week, on WIRB/Channel 56 in the
central Florida market. That market serves a population of approximately
2,175,000.
During the Test Period, the television program was divided into 14 one
minute retail information segments which were utilized by advertisers to provide
information about their company and a brief description of the cash rebate
offered to the consumer. The balance of the program consisted of information
segments, rebate reviews and instructional segments. Retailers represented a
broad spectrum of business including grocery chains, furniture stores, tire
service stores, retail banks, restaurants, car dealers and various specialty
businesses. ITC collected point-of-sale information from the vendors who
participated during the Test Period, and processed that data along with Rebate
TV(TM) customer call-in data. Rebates were credited to customer accounts as they
were verified. ITC manages escrow accounts for retail vendors so that rebates
are transferred to a general customer escrow fund as they are credited.
Consumers making a purchase of items of product or in dollar amounts which
carried the rebate offered by a participating retailer (i.e. a $5 rebate on a
purchase of $50 or more, or $10 rebate on the purchase of a brake package,
etc.). By calling ITC's toll free telephone number, 1-888-2REBATE, the consumer
would be connected to ITC's computer data base, and could then register the
Rebate TV(TM) number on the bottom of the receipt. At the end of the month, ITC
sends a check to the Rebate TV(TM) customer for a total of all rebates processed
during that month. These rebates are in addition to coupons or other promotional
offers by the vendor. Rebate TV(TM) had approximately 4,000 subscribers by the
end of the Test Period.
Revenue Sources. ITC receives revenues of two types from Rebate TV(TM).
First, retail vendors will pay an initial production fee to ITC for the
production of the information segment that becomes part of the television show.
Then, the retail vendors will pay ITC a transaction fee based upon verified
sales. The amount of the transaction fee will vary with the type of retailer and
the frequency of purchase of its products. For instance, the transaction fee for
a automobile sale is much higher than a grocery store because of the size and
frequency of purchase. 1
<PAGE>
Program Development.
ITC's research and development efforts consumed the technical efforts of
ITC from October 1995 through the airing of Rebate TV(TM) on April 15, 1996, and
involved two basic areas: the television programming for the shows, and the data
management and computer interface development efforts for the interaction with
the retailers and the consumers. None of this expense will be borne directly by
the retailers or the consumers, but will be recouped through profits as ITC
expands its markets.
Development of Rebate TV(TM) basic programming by ITC has been done during
the fiscal year with Century III at Universal Studios, Florida. Established in
1976, Century III has serviced a widely diverse client base with high production
values utilizing the latest and finest in production and post-production
hardware. This includes local, regional, national and international projects for
all four broadcast television networks, national cable networks such as
Nickelodeon and HBO, major independent producers, advertising agencies and major
corporate and governmental organizations such as Digital Equipment Corporation,
Harris Corporation, General Electric, NCR, AT&T, Kodak, Polaroid, Walt Disney
World, Harcourt Brace Jovanovich, FPL Group, Westinghouse, McDonnell Douglas,
Martin Marietta, Reebok, International and NASA. The creative director for
Rebate TV(TM) is Michael Hamilton who has designed, directed and produced such
television series as "Magnum P.I.", "Simon & Simon", "Wings" and "The Twilight
Zone". His commercial experience includes such clients as CadillacTM, Texaco,
Coca ColaTM, Heineken, American Airlines, Donna Karan, Elizabeth Arden, QVC,
Business Technology Management and the Family Channel.
The computer development efforts related to Rebate TV(TM) were done at
ITC's engineering offices in Melbourne, Florida, where the hardware and software
designs and specifications were developed, tested and implemented during the
past two fiscal years to: (i) manage the large amounts of data and transactions
involved in collecting and verifying sales information from the Rebate TV(TM)
retailers; (ii) calculate the rebates, record the credits, and issue the checks
to the consumer; (iii) accommodate and record the telephone rebate requests, and
(iv) provide automated participation information to the public.
ITC looks to Rebate TV(TM) to attract its share of the communications
industry end-user market which is estimated to be $189.3 billion by 1998.
Interactive digital media is projected to remain the fastest growing category in
the industry.
Internet Access. ITC's Internet home pages for use with Rebate TV(TM) allow
viewers to access the program's data base through the Internet. It allows them
to view the status of their accounts, enter vendor rebate claims, and later will
allow viewers to access a variety of products and services associated with
Rebate TV(TM) which ITC expects to include. ITC's home page is located at
http://www.REBATETV.COM
Network Operations. ITC intends to develop and produce its own television
channel and to distribute its Rebate TV(TM) video programming in this format to
customers. ITC's distribution plan currently provides for distribution of this
programming started in the central Florida markets to expand from there.
Interactive Video and Data Services. As part of ITC's commitment to the
evolution of interactive television, its Federal Communications Commission
Interactive Video and Data Services ("IVDS") radio station licenses in the
Charleston-North Charleston, South Carolina, and Melbourne-Titusville-Palm Bay,
Florida service areas represent an additional enhancement to ITC's programming
distribution. These licenses have a duration of an initial five years, and are
renewable if all conditions of the license are met.
IVDS, a two way communications system, will allow viewers to take an active
role in systems delivered through broadcast television, cable television,
wireless cable, direct broadcast satellite or other future television delivery
methods. IVDS is regulated as a personal radio service under the rules of the
FCC which has allocated spectrum in the 218-219 MHZ range for its use. IVDS
systems are designed to operate with a hand-held remote control device that
controls the interactive set top device on the subscriber's television set. A
viewer would interact with the TV station through a radio signal using an IVDS
frequency.
ITC has sold under contract, 90% of this ownership of this license and
equipment and has reserved rights to provide programming to this license area
when it is in operation.
2
<PAGE>
ITC is reviewing alternative uses and equipment proposals for its
Melbourne-Titusville-Palm Bay, Florida license and expects to proceed to install
a system for this license within the next 24-36 months. Although ITC will run
its Rebate TV(TM) and other programs on its own service area systems, the
programs it develops are intended for use on various interactive delivery
systems and are not specific to Interactive Video and Data Services systems.
They are marketed to all of these various delivery systems. For broadcast of
Rebate TV(TM) programming ITC currently uses and plans to use standard video
media distribution methods such as cable, broadcast stations, wireless cable and
direct broadcast satellite. Although ITC has designed its programs to utilize an
IVDS return link (a "return link" is the method by which data is sent from the
consumer or viewer back to the originator of the program), they are also
designed to accommodate other return links such as the telephone. ITC has
purchased equipment and software to provide a telephone return link as an
interim return link for its own license areas as well as other areas where it is
providing programming, to be utilized where IVDS is not available; until the
installation an operation of the IVDS equipment as a return link is completed as
well as for use with non subscribers to IVDS.
Intellectual Content. ITC has developed a plan for the accumulation and
sale of intellectual content. This content takes several forms, including
completed television and video programming, both developed and produced by ITC
and by third parties; property rights to written scripts and publications for
the purpose of producing or having produced television or motion picture
products; and program ideas, concepts and designs. In addition to the Rebate
TV(TM) programs, ITC has filed and had accepted trademark applications with the
United States Patent and Trademark Office for "Rebate TV", for "DEAL! DEALS!
DEALS!" (a direct shopping program which ITC has produced), and "Television that
pays you to shop".
ITC has in addition under this plan a number of projects under
consideration and review. To date, revenue from these activities has been
limited to the Rebate TV(TM) television program, and to a limited showing of its
DEAL! DEALS! DEALS! program. There is associated with each of these shows and
projects a lead time or advance period necessary for development and scheduling.
In addition, ITC may elect to sell outright or resell any of these properties.
ITC continually accumulates data in the operation of its Rebate TV(TM), and
examines this data with regard to indicated changes in its programming. ITC
expects to continue research and development of its products based upon the
collection of this data.
Competitive Conditions.
ITC is unaware of any direct competition with Rebate TV(TM). However, there
are other companies in the interactive television industry that have announced
that they will provide programming to the interactive television marketplace.
Many of these companies will be better capitalized than ITC and will be better
positioned to take to take advantage of this emerging market. There is no
assurance that ITC will secure a competitive position in such market or that its
activities will result in profit to ITC.
FCC Licensing.
The ability of ITC to provide IVDS services in the United States is subject
to the rules and regulations, if any, promulgated by the FCC. At present there
are no such rules or regulations. However, there is no assurance that there will
not be rules and regulations forth coming which are adverse to the interests of
ITC.
Acquisition of Airtech International Corporation.
The Company has entered into an agreement for the acquisiton of Airtech
International Corporation of Dallas, Texas and has filed a registration
statement under the Securities Act of 1933 on form S-4. The discussion below
includes a discussion of both the Company's information and that of Airtech
International Corporation which is incorporated by reference. This agreement
calls for the Company to purchase all, but not less than 81%, of the issued and
outstanding $0.0001 par value common stock of AIRTECH pursuant to a Stock
Purchase Agreement, dated as of May 8, 1997. (Such Stock Purchase Agreement, as
amended and restated as of August 1, 1997, the Stock Purchase Agreement)
Pursuant to the Stock Purchase Agreement, each holder of the AIRTECH common
stock (the AIRTECH Common Stock) which accepts ITC's purchase offer shall
receive in exchange for such AIRTECH Common Stock: (i) his pro-rata percent of
3
<PAGE>
8,000,000 shares of ITC's $.01 par value common shares; (ii) his pro-rata share
of 8,850,000 shares of ITC's Convertible Preferred Shares (the ITC Preferred
Shares), and his pro-rata share of $9,000,000 aggregate principal amount of
ITC's Convertible 10% Debentures (the ITC Debentures). The remaining 21,707,142
shares of Common Stock being registered hereunder is being reserved by ITC
against the conversion, if any, of the Convertible Preferred Shares and the ITC
Debentures.
Number of Persons Employed.
As of August 1, 1997, ITC had five employees, three of which are full-time.
The Company's fiscal year runs from June 1 to May 31 of each year.
Item 2. Description of Properties.
- ------------------------------------
The Company currently has executive and engineering offices at 102 South
Harbor City Boulevard, Melbourne, Florida and programming and media offices at
Century III at Universal Studios, 2000 Universal Studios Plaza, Suite 100,
Orlando, Florida.
The Melbourne facility consists of 1,250 square feet of office and
engineering space, and is leased from The Network Group, for a term of one year,
with automatic renewal for an additional 12 months unless either Landlord or
Tenant is notified in writing by the other party at least 60 days prior to
termination date. Monthly lease payments are $1,250.00 plus applicable Florida
sales tax.
The Company's Century III office at Universal Studios consists of
approximately 250 square feet of office space and use of common areas. The cost
of this space is included in invoicing for production work Century III is
performing for the Company.
Item 3 Legal Proceedings
- -------------------------
The Company is a defendant in a proceeding filed in the United States
District Court for the Southern District of New York. It accepted service April
5, 1997 in an action brought by Studiolink Corporation and Steven Campus for
damages arising out of an equipment lease agreement. The Company expects to
assert counterclaims against the Plaintiffs for losses suffered as a result of
their failure to perform. Settlement discussions have been ongoing and the
Company expects this matter to be settled in a manner not unfavorable to the
Company. In addition, in related matters, the Company is in litigation with LLB
Realty, L.L.C. which has filed a claim alleging claims under an office lease
agreement in Superior Court of New Jersey, Mercer County. The Company has
asseted claims against L.L.B. Realty, L.L.C. for failure to perform under the
conditions of the agreement. Settlement negotiations have been ongoing and the
Company expects this matter to be settled in a manner no unfavorable to the
Company.
The Company is not as party to any other pending legal proceedings except
for claims and lawsuits arising in the normal course of business. ITC does not
believe that these claims or lawsuits will have a material effect on ITC's
financial condition or results of operations
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
A Special Meeting of Shareholders was had on May 2, 1997 at the Company's
offices are 102 South Harbor City Boulevard, Melbourne, Florida 32901. Of the
12,209,612 shares eligible to vote, 7,581,808 were present to vote at the
meeting. By an affirmative vote of 7,581,808 shares the Shareholders voted to
amend the Articles of Incorporation of the Company to increase the authorized
common shares of stock in the Company to 50,000,000 and to increase the
authorized preferred shares of stock in the Company to 20,000,000. The Board of
Directors did not solicit proxies for this meeting and no proxy statement was
filed or distributed.
4
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------------------
a. Market Information
Interactive Technologies, Inc. common shares are traded on the National
Association of Securities Dealers Automated Quotation Systems (NASDAQ) SmallCap
Market under the symbol "ITNL". The Company's shares were traded on the NASDAQ
exchange beginning April 30, 1996. High and low quotes for the last quarter of
the Company's fiscal year when the shares began trading on NASDAQ were:
High Low
Fiscal Year 1997 4th Quarter 1 15/16 3/8
3rd Quarter 1 1/2 1 1/8
2nd Quarter 4 1 1/4
1st Quarter 5 1/4 4 1/4
Fiscal Year 1996 4th Quarter 5 4 7/8
Prior to being traded on the NASDAQ exchange, the Company's common shares
were traded in the "over-the-counter" or "Bulletin Board" market. The following
quotes represent the quarterly high and low quotes available through the quarter
ending 12/29/95. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions:
Fiscal Year 1996
High Low
Quarter Ending 3/29/96 4 3/4 3 7/8
Quarter Ending 12/29/95 4 2 1/2
Prior to the quarter ending 12/29/95 of the Company's FY 96, and during the
previous FY 95, to the best of the Company's knowledge, no trading occurred in
the Company's common stock.
b. Holders
As of August 1, 1997, there were approximately 950 record holders of the
Company's Common Stock.
c. Dividends
The Company has never paid any cash dividends on its Common Stock and has
no present intent to pay any cash dividends in the foreseeable future. The
declaration of cash dividends will depend on future earnings, if any, the
financial needs of the Company, and other pertinent factors. Further, the
declaration of dividends will be at the discretion of the Company's Board of
Directors.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------
Results of Operations
Revenues for the combined operations of ITC and AIRTECH were $1,648,878 for
the nine months ending February 28, 1997, with a Gross Profit of $1,048,391
after Cost of Goods Sold.
ITC's operations for the same nine month period consisted of primarily of
completion of its initial market testing of its Rebate TV(TM) television program
in the Central Florida Market. Net revenues for this period were $194,804. ITC
has developed and operates a computer system and communications system to
support its Rebate TV(TM) program on a national basis. The operation of these
systems and the development of a national marketing program during this period
resulted in General and Administrative Expenses of $1,356,397 and a net loss
from operations of $1,158,593. During this period ITC realized a gain of
$311,500 from the sale of a 90% interest in its Charleston, South Carolina IVDS
license. Development of ITC's computer system and communications link are
substantially complete and now available for access on a national basis.
5
<PAGE>
AIRTECH for such nine month period had Gross Revenues in the amount of
$1,648,878 resulting in Gross Income after Cost of Goods sold of $1,048,391.
During such period, AIRTECH was completing development of a new line of air
filtration equipment after cancellation of its agreement with Honeywell
Environmental Air Control, Inc. Cancellation of such Agreement, resulted in
General and Administrative Expenses of $2,102,894 and a Net Loss of $1,054,503
before depreciation and amortization. Development of AIRTECH's basic line of
products is substantially complete and AIRTECH has begun marketing its products
directly and through its new franchise program.
Material Changes in Operations and Financial Condition
With the end of its initial market testing, ITC has changed its focus from
program development and testing to market expansion. Operation of Rebate TV(TM)
although currently distributable and supportable on a national basis, requires
that it be rolled out on a market by market basis. ITC faces a number of
decisions as to whether to concentrate its resources on local markets supported
by smaller vendors (such as Bedroom Land and Kobe Steak Houses) or to
concentrate on multiple markets driven by regional and national advertisers
(such as Airtran Airways and Cakes Across America). ITC is currently developing
promotional programs to drive subscribers to either market but is concentrating
on a single market approach to support each market with such programs as its
School Organization Promotion (Rebate TV(TM) goes to School).
ITC has been subject to several delays in its expansion with the departure
of Mr. Poe who was in charge of the market expansion effort including some
additional delays in recovering company files and information from Mr. Poe. ITC
is currently in pre-production of its new program and expects it to air within
the fall of 1997. Also during this period, ITC withdrew from a production studio
project in New Jersey due to substantial delays caused by both the real estate
lessor and the studio equipment lessor. This decision by management was
encouraged by substantial changes in post production equipment and software
technology in the very short term which would have required additional capital
expenditures by ITC.
The Company continues to produce Rebate TV(TM) in central Florida and has
entered into a strategic relationship with Bottomline, Inc. of Atlanta, Georgia
which will make available to ITC production and post production resources to
meet requirements by the ITC as it expands into additional markets.
AIRTECH until May of 1996 was a full service distributor for Honeywell
Environmental Air Control, Inc. Upon termination of that contract, AIRTECH began
development of a complete line of air purification products to replace the
Honeywell line. AIRTECH sales for the 9 month period referenced above are a
result of this product development (See Principal Products and Services). In May
1997, AIRTECH incorporated Airsopure, Inc. as a wholly owned subsidiary for the
implementation and operation of a franchise sales program for the distribution
and sales of air purification products. (See Franchise Program). AIRTECH
continues to distribute products directly and through its subsidiary McClusky
Sales and Service, Inc. In addition, AIRTECH has developed certain products
which has presented for distribution to the multilevel marketing industry.
Liquidity and Capital Resources
During the nine month period ending February 28, 1997, ITC and AIRTECH
continued to fund operations and expansion through revenues and private sales of
equity securities and debt. In fiscal year 1996, ITC received net cash from
financing activities in the amount of $1,172,150 with AIRTECH receiving
$2,698,530 during that period. For the nine month period referenced above, the
combined companies received $1,837,023 in cash and subscription receivables from
financing activities. Although neither ITC nor AIRTECH have commitments for
future funding, management believes that it can continue to raise additional
capital for expansion of its markets though revenue and private sources.
In addition, ITC has agreed to issue $5,000,000 in Series M Preferred Stock
(the Series M Stock) on a private basis to accredited investors in the form of
200 units consisting of 25,000 shares of convertible preferred stock convertible
into common at the rate of one share for one share of preferred and 25,000
warrants convertible into common stock at a price of $2.00 per share. The
preference for this series is to a pro rata portion of 20% of the Gross Profits
from the sales of the AIRTECH Model 950 Air Purification and Filtration System
being developed as a Class II Medical Device for Medicare Recipients with
Respiratory Conditions. This preference is for a period of three years from the
6
<PAGE>
date production begins. AIRTECH has agreed to assign a 25% interest in this
revenue stream to ITC out of which this 20% will be set aside for this
preference. The Series M Stock will be offered pursuant to Rule 506 of
Regulation D of the Securities Act of 1933. Twenty-five percent (25%) of the net
proceeds of the sale of the Series M Stock will be used for market expansion and
distribution of the Rebate TV(TM) programming, and seventy-five percent (75%) of
such net proceeds will be allocated for the development and distribution of the
AIRTECH Model 950. ITC does not have an underwriter for this placement.
Management expects that the sales of the Series M Stock will be completed,
although there is no assurance that either it will be completed or that the
funds will otherwise be available to fund the operations and expansion of the
combined companies.
Convertible Debentures.
Effective as of May 31, 1997, Exergon Capital S.A.,Laughlin Securities
Limited, Crestridge Investments, Ltd. and Jayhead Investments Ltd.
(collectively, the "Converting Debenture Holders" exercised their $1,050,000
principal amount of ITC's Convertible Debentures (the May 1997 Debentures) in
exchange for 1,144,444, aggregate number, of ITC's Common Stock. In connection
with such conversion, the Converting Debenture Holders received the May 31
Warrants (defined below).
May 31 Warrants. In connection with the conversion of the May 31
Debentures, the Converting Debenture Holders received warrants (the "May 31
Warrants") which are exercisable within five years from May 31, 1997, upon 30
days written notice and upon payment of the exercise price. The May 31 Warrants
may be converted, in the aggregate, into 1,144,444 shares of ITC common stock as
follows:
Debenture Holder No. Of Shares Exercise Price
Per Share
Exergon Capital, S.A. 333,333 $0.90
Laughlin Securities Limited 250,000 $0.90
Crestridge Investments Ltd. 250,000 $0.75
Jayhead Investments Ltd. 250,000 $1.00
Item 7. Financial Statement.
- -----------------------------
The Registrant is unable to file financial statements at the time of this
report in that its auditor has not completed the audit report with its financial
statements. Time required for preparation of proforma financial statements
including the Registrant and Airtech International Corporation for filing with
Registered S-4 registration statements delay the Registrant's accountants in
completion of audit report for fiscal year. The report will be filed in full
with an amended 10-KSB Report within 15 days.
Item 8. Changes In and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
By unanimous consent of the Board of Directors of the Company on November
10, 1995, the Registrant engaged the accounting firm of Turner, Stone & Company
of Dallas, Texas as independent accountants for the Registrant for the fiscal
year beginning June 1, 1995, and voted to excuse the accounting firm of Lumsden
& McCormick from further service to the Company after the completion of its work
on the audit for the Registrant for the fiscal year ending May 31, 1996. During
the previous two fiscal years ending May 31, 1995, there were no disagreements
with Lumsden & Company on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure or any reportable
events.
7
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ----------------------------------------------------------------------
Compliance With Section 16(a) of the Exchange Act.
---------------------------------------------------
a. Directors and Executive Officers.
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company as of May 31, 1996. A summary of
the background and experience of each of these individuals is set forth after
the table.
The directors and executive officers are:
NAME AGE POSITION
Perry Douglas West 50 Chairman, Chief Executive Officer
The Board of Directors currently consists of two Directors, each holding
office for a term of one year. Mr. John Potter 53, was added after the end of
the fiscal year.
Perry Douglas West joined the Company in October 1995, and is Chairman and
Chief Executive Officer of the Company. Mr. West co-founded American Financial
Network in July of l985. Headquartered in Dallas, Texas, American Financial
Network operated a national computerized mortgage loan origination network. Mr.
West served as Executive Vice President/Director and General Counsel of this
public company from 1985 to 1991. Mr. West has practiced law in Florida since
1974, representing various business institutions in the financial, computer,
natural resources and general business industries and international
transactions. He was graduated with a Bachelor of Arts degree from The Florida
State University in l968 and with a Juris Doctorate degree from The Florida
State University, College of Law in l974.
George C. Clark, Ph.D, joined the Company in November 1995 as Director of
Systems Development. He was previously a Senior Scientist in the Advanced
Technology Department in the Electronics Systems Sector of Harris Corporation,
headquartered in Melbourne, Florida from 1964 through 1994. During his tenure at
Harris, Dr. Clark conducted advanced research and development in antennas,
electronic communications systems, statistical communication theory, error
correction coding, computer-aided design of electronic circuits and systems,
object oriented programming methodologies, and modeling of transportation
systems. He also served as Director of the Advanced Technology Department at
Harris, co-authored a graduate level text book on error correction coding, spent
two years as a Visiting Scientist at the MIT Laboratory for Computer Science,
and taught many undergraduate courses in Electronic Engineering, Artificial
Intelligence and in Signal and Systems Theory. Dr. Clark holds a Bachelor of
Science degree in Electrical Engineering from the Massachusetts Institute of
Technology in 1959, a Masters Degree in Physics from the University of Miami in
1961 and a Ph.D. degree in Electrical Engineering from Purdue University in
1965.
Dr. Clark managed the development of the computer software and hardware
systems that form the infrastructure to the operations of Rebate TV(TM), and his
absence from the Company would have an initial adverse effect on operations.
Michael Hamilton joined the Company in April 1996 as Executive Vice
President, Production, in charge of all creative operations and new program
development for the Company. Mr. Hamilton is an entertainment industry veteran,
whose recent credits include developing a Movie of the Week for the ABC network,
a feature in conjunction with Jason Alexander's Daeson Productions, and
transactional programming for QVC. He also designed and directed such television
series as Wings, Murder She Wrote, The Twilight Zone and Magnum P.I., with
experience extending to commercial clients such as Donna Karan, Cadillac and
Coca-Cola. His absence from the Company would have an initial adverse effect on
programming operations.
c. Family Relationships.
None.
8
<PAGE>
Item 10. Executive Compensation.
- --------------------------------
Perry Douglas West, Chairman and Chief Executive Officer of the Company has
no employment agreement in force as of May 31, 1996, Mr. West received $8,000 in
miscellaneous compemsation during the fiscal year. Mr. West has agreed to defer
contract compensation and contract compensation issues until a future date.
Robert J. Poe, Chief Operating Officer was employed with an employment
agreement with the Company until November 1, 1997. He was paid through that
date. Mr. Poe's agreement called for him to receive a base salary of $12,500 per
month for the first twelve calendar months of his contract. In addition he is to
receive 5% of the gross profits from the operation of the Company's Rebate
TV(TM) television programming, as well as other programming brought into the
Company by Mr. Poe.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
a. Security Ownership of Certain Beneficial Owners.
The Company knows of no persons or groups being the beneficial owner of
more than 5% of the Company's Common Shares other than Mr. West.
b. Security Ownership of Management.
The following table sets forth information with respect to the share
ownership of Common Stock, par value $0.01, of the Company by its officers and
directors, both individually and as a group, who are the beneficial owner of
more than 5% of the Company's Common Shares.
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Title of Class Name Amount and Percent of
Address of Nature of Class3
Beneficial Beneficial
Owner1 Ownership2
- --------------------------------------------------------------------------------
Common Perry Douglas West 5,700,000 46.4
1270 Orange Avenue
Suite A
Winter Park, FL 32789
All Directors and Officers 5,700,000 46.4
as a group
NOTES
1 Each person has sole voting and investment power with respect to the
as shares indicated as owned beneficially by each person.
2 Except as other wise noted, all shares listed are owned both of record
and beneficially.
3 Based upon 12,279,612 shares of Common Stock outstanding as of
May 04, 1997.
c. Changes in Control.
During the previous fiscal year, pursuant to an Asset Purchase Agreement
("Asset Purchase Agreement") signed on October 20, 1995, among Interactive
Technologies Corporation, Inc., a Wyoming corporation ("Registrant"),
Syneractive, Inc., a Florida corporation, and Perry Douglas West, the Registrant
purchased certain assets in exchange for 5,214,464 shares of the Registrant's
common stock and agreed to purchase additional assets for an additional 485,536
shares of the Registrant's common stock.
Control of the registrant after this transaction was in the hands of Perry
Douglas West who previously owned approximately 47.82% of the outstanding common
stock and owned 50.04% of the outstanding common stock after the completion of
the acquisition of additional assets pursuant to the Asset Purchase Agreement.
Prior to the transaction, no single shareholder held more than 10% of the
common stock. The directors and officers of the Registrant as a whole owned
l8.69% of the outstanding common stock of the Registrant prior to the
transaction.
9
<PAGE>
Resolutions were delivered at closing electing Perry Douglas West as
Chairman of the Board of Directors and Chief Executive Officer of the
Registrant. At that time Morton J. Glickman resigned as Chairman and Director of
the Board of Directors.
Item 12. Certain Relationships and Related Transactions.
- --------------------------------------------------------
On October l8, l995 the Registrant entered into a Purchase Agreement
("Purchase Agreement") with Jayhead Investments, Ltd. for the sale of a certain
joint venture interest with CST Entertainment Imaging, Inc. in which the
Registrant had contributed its license to colorize black and white film and
videotape and other related features in certain European countries, the terms of
which are set forth in that certain license agreement, as amended, granted by
CST Entertainment Imaging, Inc. to Exergon, S.A., and subsequently assigned to
the Registrant and all proceeds due therefrom. This asset has been written off
of the Registrant's books and carries no value in the Registrant's financial
statements.
This Purchase Agreement provided for the exchange of this asset for the
satisfaction of $701,865 in debt owed by the Registrant to Jayhead Investment,
Ltd., a company which is controlled by a former Director and Officer of the
Company. This interest has been assigned subject to necessary third party
approval and the indebtedness forgiven.
On October 20, 1995, the Registrant executed the purchase of certain asset
pursuant to a Asset Purchase Agreement ("Asset Purchase Agreement") signed on
October 20, 1995 among Interactive Technologies Corporation, Inc., a Wyoming
corporation ("Registrant"), Syneractive, Inc., a Florida corporation and Perry
Douglas West, the Registrant purchased certain assets in exchange for 5,214,464
shares of the Registrant's common stock and has agreed to purchase additional
assets for an additional 485,536 shares of the Registrant's common stock.
The assets purchased consist primarily of all right title and interest in
and to a video program concept and design created for interactive television
known as "Rebate TV(TM)", certain engineering reports and data, contract
receivables and cash in the approximate amount of $50,000 plus equipment
deposits in the amount of $43,875.
The additional assets which the Registrant agreed to purchase upon the
approval of the transfer by the Federal Communications Commission include
Federal Communications Commission Radio Station Licenses for Interactive Video
and Data Services radio service in service areas 137 and 90. These licenses are
subject to amounts due over the period of the licenses (five years) to the
Federal Communications Commission of $540,000 for service area 137 and $232,000
for service area 90. In addition, the license for service area 90 is subject to
a contract agreement which gives a third party the right to purchase, subject to
the retention of an interest in the nature of a 10% royalty, up to 90% of this
license for $500,000. These assets also include the rights to a contract for the
purchase of certain radio station equipment for the license area 90. These are
assets and do not include any current operations. The Registrant has placed the
net value of the total of these assets at $5,700,000.
Perry Douglas West is now Chief Executive Officer, and Director of the
Company.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
- ------------------------------------------
10
<PAGE>
EXHIBIT INDEX
(a.) Exhibit Page
3.0 Charter and By-Laws (1)
4.0 Instruments Defining Rights of Securities Holders
4.1 Form S-4 Registration Statement filed 8-22-97 defining
rights of securities to be acquired by Airtech
International Corporation shareholders (2)
10.0 Material Contracts
10.1 ITC lease with The Network Group, Inc. for Melbourne, Florida (3)
office and engineering space, dated October 25, 1996
10.2 ITC Equipment Lease Agreement with Studiolink Corporation, (3)
dated March 27, 1996
10.3 ITC Employment Agreement with Chief Operating Officer/Director (3)
Bob Poe, dated November 1, 1995
10.4 Satellite Network Television lease with LLB Realty, L.L.C./Keller, (3)
Dodds & Wentworth for Princeton, New Jersey television
studio and production facility, dated March 1996
10.5 Stock Purchase Agreement dated May 5, 1997 with
Airtech International Corporation Attached hereto
99.0 Additional Exhibits
99.1 Proforma Balance Sheet and Statement of
Operations for Registrant and Airtech
International Corporation dated 2-28-97 Attached hereto
(1) This exhibit was previously filed as an exhibit to the Registrant's Form 10
filed January 14, 1992 and is herein incorporated by reference.
(2) Filed form S-3 August 22, 1997
(3) Set out in Form KSB for year ended May 31, 1996.
(b.) Reports on Form 8-K.
Form 8-K dated March 17, 1997 setting out Company's filing of Form S-8 with
Securities and Exchang Commission
Form 8-K dated May 5, 1997 setting out changes in the Company's Articles of
Incorporation increasing authorized capital to 50,000,000 common shares and
20,000,000 preferred shares
Form 8-K dated May 22, 1997 setting out agreement for the acquisition of
all of the outstanding stock in Airtech International Corporation of Dallas
Texas.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Interactive Technologies Corporation, Inc.
by:_________________________________________
Perry Douglas West, Chief Executive Officer
Dated: August 28, 1997
12
<PAGE>
FIRST AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
INTERACTIVE TECHNOLOGIES CORPORATION
a Wyoming corporation
and
AIRTECH INTERNATIONAL CORPORATION SHAREHOLDERS
and
AIRTECH INTERNATIONAL CORPORATION,
a Texas corporation
* * * * *
2.1 1
<PAGE>
TABLE OF CONTENTS
Page
Article I Exchange of Shares 1
Article II Purchaser's Representations and Warranties 3
Article III Representations and Warranties of Airtech
and the Selling Shareholders 5
Article IV Airtech's covenants 8
Article V Purchaser's Covenants 9
Article VI Purchaser's Conditions Precedent 11
Article VII Conditions Precedent of Airtech Selling Shareholders 11
Article VIII Miscellaneous 12
Exhibit 1.03 17
2.1 2
<PAGE>
FIRST AMENDED
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDED STOCK PURCHASE AGREEMENT is entered into effective as of
August 31, 1997, by and among Interactive Technologies Corporation, Inc. a
Wyoming corporation ("Purchaser"), Airtech International Corporation, a Texas
corporation ("Airtech") and the shareholders of the outstanding common stock of
Airtech (the "Selling Shareholders").
W I T N E S S E T H :
WHEREAS, Purchaser is a publicly held corporation that desires to acquire a
business which has growth potential; and
WHEREAS, Airtech is a business engaged in the business of manufacturing and
marketing of portable and commercial air purification equipment that appears to
have growth potential; and
WHEREAS, Purchaser desires to acquire at least eight-one percent (81%) of
the issued and outstanding shares of common stock, $0.0001 par value, of Airtech
(the "Airtech Common Stock") owned by the Selling Shareholders in exchange for
Purchaser's common stock, par value $0.01 ("ITC Common Stock"), Purchaser's
preferred stock, par value $1.00 ("ITC Preferred Stock") and Purchaser's
debentures (the "ITC Debentures") in a tax-free transaction pursuant to the
provisions of Section 368(a)(1)(B) of the Internal Revenue Code as amended;
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE OF SHARES
1.01 Purchase of Stock. Subject to and upon the terms and conditions
contained herein, at the Closing (as hereinafter defined), the Selling
Shareholders shall assign, transfer, convey and deliver to Interwest Transfer
Company, P.O. Box 17136, Salt Lake City, Utah, 84117 the Escrow Agent hereon,
together with any substitute escrow agent designated by Purchaser and Airtech,
the Airtech Common Stock, pursuant to the terms of the Escrow Agreement, the
form of which is attached hereto as Exhibit "A" (the "Escrow Agreement") and
incorporated by reference, free and clear of any liens, encumbrances and charges
whatsoever, and Purchaser shall accept and acquire from the Selling Shareholders
the Airtech Common Stock owned by them. Purchaser shall accept and acquire from
the Selling Shareholders, as provided herein, in the aggregate a minimum of
eighty-one percent (81%) and up to a maximum of one hundred percent (100%) of
Airtech Common Stock.
1.02 Delivery of Consideration and Registration of ITC Common Stock. In
consideration of the shares of Airtech Common Stock of the Selling Shareholders,
Purchaser at the Closing shall deliver to the Escrow Agent for the Selling
Shareholders one or more certificates representing shares of ITC Common Stock,
one or more certificates representing shares of ITC Preferred Stock and one or
more ITC Debentures, to which they are entitled to receive in exchange for
certificates representing their shares of Airtech Common Stock, as set forth
opposite such shareholders' name on Exhibit 1.03. When issued such security will
legally and valididly issued and is paid and nonassessable free and clear of any
leins, encumbraces or chages whatsoever.
1.02.1 ITC Common Stock. ITC shall issue in exchange for the Airtech Common
Stock, 8,000,000 shares of registered ITC Common Stock. Each Airtech shareholder
will receive their pro-rata percent of the of the ITC Common Stock (number of
Shareholder's shares of Common Stock in Airtech / total issued and outstanding
shares of Airtech Common Stock). Prior to the Closing, as defined herein and in
the Escrow Agreement, ITC shall file a registration statement with the
Securities and Exchange Commission to register the ITC Common Stock, Preferred
Stock and Debentures under the Securities Act of 1933 and after the registration
statement is declared effective file such post-effective amendments and such
other documents as may be required to enable the Selling Shareholders to sell
any such ITC Common Stock acquired by them pursuant to the provisions of this
Stock Purchase Agreement. It is mutually agreed that ITC and Airtech shall work
together in the preparation of the information required in the Registration Form
and that Airtech shall be responsible for the cost associated with registering
the shares for the Airtech Shareholders.
2.1 3
<PAGE>
1.02.2 ITC Preferred Stock. ITC shall, in addition, issue in exchange for
the Airtech Common Stock 8,850,000 shares of Convertible Preferred Stock, par
value $1.00. ITC at its option may elect to convert these shares of Preferred
Stock at any time during the 24 month period. At closing each selling
shareholder will receive his pro-rata percent of the ITC Preferred Stock (number
of each selling Shareholder's shares of Common Stock in Airtech / total issued
and outstanding shares of Airtech Common Stock).
1.02.3 ITC Debentures. ITC shall issue in exchange for the Airtech Common
Stock $6,000,000 principal amount Convertible 10% Debentures. These Debentures
will be secured by the shares of Airtech Common Stock purchased by ITC pursuant
to this Article I, and shall be convertible after 24 months into registered
shares of ITC Common Stock at a rate of $0.70 per share. ITC at its option, may
elect to convert the ITC Debentures at any time during the 24 month period. At
closing, each Shareholder will receive his pro-rata percent of the ITC
Debentures (number of each selling Shareholder's shares of Common Stock in
Airtech total issued and outstanding shares of Airtech Common Stock). The
interest accruing on these Debentures, at ITC's option, can be paid in cash or
in additional registered shares of Common Stock in ITC. If the interest is paid
in shares of Common Stock the convertible rate shall be $0.70.
1.03 Closing. The closing of the transaction contemplated hereby (the
"Closing") shall occur on June 30, 1997 or such date after required compliance
with state and federal laws, notification of shareholders, required votes by
shareholders and the registration statement has been filed by ITC with the
Securities and Exchange Commission.
As soon as practical following the effective date of the registration
statement filed with respect to the closing of the transaction contemplated
hereby shall occur on the twentieth (20) day following the date of delivery of
this Prospectus to Airtech shareholders, or on such later date required
compliance with state and federal laws and receipt of the acceptance from
Selling Shareholders owning at least eighty-one percent (81%) of the issued and
outstanding Airtech Common Stock.
1.04 Instruments of Transfer; Further Assurances. In order to consummate
the transaction contemplated hereby, the following documents and instruments
shall be delivered:
(a) Documents from Selling Shareholders. Selling Shareholders shall deliver
to Purchaser's Escrow Agent at the Closing one or more stock certificates
representing in the aggregate the number of shares of Airtech Common Stock owned
by them plus duly executed stock powers or other instrument of transfer for each
such stock certificate.
(b) Documents from Purchaser. Purchaser's Escrow Agent shall deliver to
Selling Shareholders at the closing one or more stock certificates representing
in the aggregate the number of shares of ITC Preferred Stock, the Dollar amount
of Debentures to which such Selling Shareholders are entitled, to be registered
in such names and in such denominations as shall be requested by Selling
Shareholders not less than thre (3) business days prior to the Closing Date. The
Purchaser's Escrow Agent, after the effective date of the registration is
received from the Securities and Exchange Commission shall deliver to the
Selling Shareholders the aggregate number of shares of ITC Common Stock to which
such Selling Shareholders are entitled, registered in such names and in such
denominations as shall be requested by Selling Shareholders.
(c) Further Documents. At the Closing, and at all times thereafter as may
be necessary (i)Selling Shareholders shall execute and deliver to Purchaser
such other instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser good and indefeasible title to the shares of
Airtech Common Stock owned by them and to comply with the purposes and intent of
this Agreement, and (ii)Purchaser shall execute and deliver to Selling
Shareholders such other instruments as shall be reasonably necessary or
appropriate to comply with the purposes and intent of this Agreement.
2.1 4
<PAGE>
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants that the following are true and correct
as of this date and will be true and correct through the Closing Date as if made
on that date:
2.01 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite power and authority to carry on the
business in which it is engaged, to own the properties it owns and to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
2.02 Authorization and Validity. The execution, delivery and performance of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been or will be prior to Closing duly authorized by
Purchaser. This Agreement constitutes or will constitute legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with its terms, and neither the execution or delivery of this Agreement nor the
consummation by the Purchaser of the transactions contemplated hereby
(i)violates any statute or law or any rule, regulation or order of any court or
any governmental authority, or (ii) violates or conflicts with, or constitutes a
default under or will constitute a default under, any contract, commitment,
agreement, understanding, arrangement, or restriction of any kind to which the
Purchaser is a party or by which the Purchaser is bound.
2.03 No Violation. Neither the execution and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (a)conflict
with, or result in a violation or breach of the terms, conditions and provisions
of, or constitute a default under, the Articles of Incorporation or Bylaws of
Purchaser or any agreement, indenture or other instrument under which Purchaser
is bound or to which the assets of Purchaser are subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b)violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Purchaser or the properties or assets of
Purchaser. Purchaser has complied in all material respects with all applicable
laws, regulations and licensing requirements, and has filed with the proper
authorities all necessary statements and reports. Purchaser possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
2.04 Capitalization. As of the date hereof, Purchaser had an authorized
capitalization of 70,000,000 shares, consisting of 50,000,000 shares of Common
Stock, par value $0.01, of which 12,209,612 shares are issued and outstanding
and 20,000,000 shares of Preferred Stock, par value $1.00, no shares are issued
and outstanding. Each outstanding share of capital stock has been legally and
validly issued and is fully paid and nonassessable.
2.05 Corporate Records. The copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of Purchaser that have been delivered or made
available to Airtech are true, correct and complete copies thereof. The minute
book of Purchaser, copies of which have been delivered or made available to
Airtech, contain minutes of all meetings of and consents to all actions taken
without meetings by the Board of Directors and the shareholders of Purchaser
since the formation of Purchaser, all of which are accurate in all material
respects.
2.06 Financial Statements. Purchaser has furnished Airtech and the Selling
Shareholders a copy of Purchaser's audited financial statements as of May 31,
1996 and unaudited February 28, 1997 financial statements, including the notes
thereto. Since the date of such balance sheets, statements of operations and
cash flows, except as set forth on Schedule 2.06, Purchaser has incurred no
unpaid obligations, liabilities or commitments or acquired assets other than in
the ordinary course of business.
2.07 Absence of Certain Changes. Except as set forth in Exhibit 2.07
hereto, since February 28, 1997, Purchaser has not: (a)suffered any material
adverse change in its financial condition, assets, liabilities or business;
(b)contracted for or paid any capital expenditures in excess of $10,000.00;
(c)incurred any indebtedness for borrowed money, issued or sold any debt
securities or discharged any liabilities or obligations; (d)mortgaged, pledged
or subjected to any lien, lease, security interest or other charge or
encumbrance any of their properties or assets; (e)paid any material amount on
2.1 5
<PAGE>
any indebtedness prior to the due date, forgiven or canceled any material debts
or claims or released or waived any material rights of claims; (f)suffered any
damage or destruction to or loss of any assets (whether or not covered by
insurance) that materially and adversely affects its business; (g acquired or
disposed of any material assets or incurred any material liabilities or
obligations; (h) made any payments to or loaned any money to its affiliates or
associates; (I)formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity; (j)entered into any
material employment, compensation, consulting or collective bargaining agreement
with any person or group, or modified or amended in any material respect the
terms of any such existing agreement; or (k)entered into any other commitment or
transaction or experienced any other event that is material to this Agreement or
to the transactions contemplated hereby, or that has affected, or may adversely
affect Airtech's business, operations, assets, liabilities or financial
condition.
2.08 Title; Leased Assets. Except as described in Exhibit 2.08 hereto,
Purchaser owns its assets, and its real and personal property leaseholds, free
and clear of all liens, claims and encumbrances, except for (I) liens for
non-delinquent ad valorem taxes or non-delinquent statutory liens arising other
than by reason of its default, and (ii) such liens, minor imperfections of title
or easements on real property, leasehold estates or personalty as do not in any
material respect detract from the value thereof and do not interfere with the
present use of the properties subject thereof. Such assets and leaseholds are
the only ones necessary for the conduct of Purchaser's business as now being
conducted.
2.09 Insurance. All of the insurable properties of Purchaser are insured
for its benefit under valid and enforceable policies, issued by insurers of
recognized responsibility in amounts and against such risks and losses as is
customary in Purchaser's industry.
2.10 Disclosure. No representation or warranty by Purchaser in this
Agreement nor any statement or certificate furnished or to be furnished by it
pursuant hereto or in connection with the transactions contemplated hereby
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 or necessary in order to provide Airtech and the Selling
Shareholders with complete and accurate information.
2.11 Consents. Except as set forth in Exhibit 2.11, there is no
authorization, consent, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Purchaser.
2.12 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Purchaser and there are no known,
noticed or threatened violations of any zoning, building, fire, safety or wage
and hour laws or regulations.
2.13 Litigation. Except as described in Exhibit 2.13, Purchaser has not had
any legal action or administrative proceeding or investigation instituted or, to
the best of the knowledge of Purchaser, threatened against or affecting any of
the assets or business of Purchaser. Purchaser is not (a) subject to any
continuing court or administrative order, writ, injunction or decree applicable
specifically to Purchaser or to its business, assets, operations or employees,
or (b) in default with respect to any such order, writ, injunction or decree.
Purchaser knows of no basis for any such action, proceeding or investigation.
2.14 Disclosure. No representation or warranty by Purchaser in this
Agreement nor any statement or certificate furnished or to be furnished by it or
them pursuant hereto or in connection with the transactions contemplated hereby
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 or necessary in order to provide Purchaser with complete
and accurate information.
2.15 Tax Returns. Purchaser has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of the operations of
Purchaser and has paid or caused to be paid all assessments shown to be due and
claimed to be due on such tax returns.
2.1 6
<PAGE>
2.16 Contracts. All contracts and agreements to which Purchaser is a party
are described in Exhibit 2.16. Such contracts and agreements have not been
amended and remain in full force and effect in accordance with their respective
terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIRTECH
AND THE SELLING SHAREHOLDERS
Airtech and the Selling Shareholders, jointly and severally, represent and
warrant that the following are true and correct as of this date and will be true
and correct through the Closing Date as if made on that date:
3.01 Organization and Good Standing. Airtech is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation with all requisite power and authority to carry on the business in
which it is engaged and to own the properties it owns. Airtech is duly qualified
and licensed to do business and is in good standing in all jurisdictions where
the nature of its business makes such qualification necessary. Airtech does not
have any assets, employees or offices in any state other than the state of
Texas.
3.02 Authorization and Validity. The execution, delivery and performance of
this Agreement by Airtech and the consummation of the transactions contemplated
hereby have been or will be prior to Closing duly authorized by Airtech. This
Agreement constitutes or will constitute legal, valid and binding obligations of
Airtech, enforceable against Airtech in accordance with its terms and neither
the execution or delivery of this Agreement nor the consummation of the
transactions contemplated hereby (i) violates any statute or law or any rule,
regulation or order of any court or any governmental authority, or (ii) violates
or conflicts with, or constitutes a default under or will constitute a default
under, any contract, commitment, agreement, understanding, arrangement, or
restriction of any kind to which a party or by which Airtech is are bound.
3.03 Capitalization. As of the date hereof, Airtech has an authorized
capitalization of 100,000,000 shares, consisting of Ninety Million (90,000,000)
shares of common stock, $0.0001 par value, of which 15,743,569 shares are issued
and outstanding, One Million Seven Hundred Fifty Thousand (1,750,000) shares of
Series A Preferred Stock, $1.00 par value, no shares outstanding; Five Million
(5,000,000) shares of Series AA Preferred Stock, of which no shares are issued
and outstanding and 1,000 shares of Series C Preferred Stock, $1.00 par value,
1,000 shares outstanding. The record and beneficial shareholders of all issued
and outstanding Airtech Common Stock held by the Selling Shareholders will be
transeferred to ITC, free and clear by each Selling Shareholder of all liens,
claims, encumbrances, equities and proxies. Each outstanding share of common
capital stock has been legally and validly issued and is fully paid and
nonassessable. There are no outstanding securities, obligations, rights,
subscriptions, warrants, options or other rights to purchase shares of common
stock or preferred stock of Airtech.
3.04 Corporate Records. The copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of Airtech that have been delivered or made
available to Purchaser are true, correct and complete copies thereof. The minute
book of Airtech, copies of which have been delivered or made available to
Purchaser, contain minutes of all meetings of and consents to all actions taken
without meetings by the Board of Directors and the shareholders of Airtech since
the formation of Airtech, all of which are accurate in all material respects.
3.05 Financial Statements. Airtech has furnished to Purchaser Airtech's
audited balance sheet and related statements of operations and cash flows for
the period ended February 29, 1996 and interim financial statements for the
periods through February 28, 1997 (the "Airtech Financial Statements"). The
Airtech Financial Statements fairly present the financial condition and results
of operations of Airtech as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles.
3.06 Absence of Certain Changes. Except as set forth in Exhibit 3.06
hereto, since February 28, 1997, Airtech has not: (a) suffered any material
adverse change in its financial condition, assets, liabilities or business; (b)
contracted for or paid any capital expenditures in excess of $50,000.00;
(c)incurred any indebtedness for borrowed money, issued or sold any debt
securities or discharged any liabilities or obligations; (d) mortgaged, pledged
or subjected to any lien, lease, security interest or other charge or
encumbrance any of their properties or assets; (e) paid any material amount on
2.1 7
<PAGE>
any indebtedness prior to the due date, forgiven or canceled any material debts
or claims or released or waived any material rights of claims; (f) suffered any
damage or destruction to or loss of any assets (whether or not covered by
insurance) that materially and adversely affects its business; (g) acquired or
disposed of any material assets or incurred any material liabilities or
obligations; (h) made any payments to or loaned any money to its affiliates or
associates; (I) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity; (j) entered into any
material employment, compensation, consulting or collective bargaining agreement
with any person or group, or modified or amended in any material respect the
terms of any such existing agreement; or (k) entered into any other commitment
or transaction or experienced any other event that is material to this Agreement
or to the transactions contemplated hereby, or that has affected, or may
adversely affect Airtech's business, operations, assets, liabilities or
financial condition.
3.07 Title; Leased Assets. Except as described in Exhibit 3.07 hereto,
Airtech owns its assets, and its real and personal property leaseholds, free and
clear of all liens, claims and encumbrances, except for (I) liens for
non-delinquent ad valorem taxes or non-delinquent statutory liens arising other
than by reason of its default, and (ii) such liens, minor imperfections of title
or easements on real property, leasehold estates or personality as do not in any
material respect detract from the value thereof and do not interfere with the
present use of the properties subject thereof. Such assets and leaseholds are
the only ones necessary for the conduct of Airtech business as now being
conducted.
3.08 Insurance. All of the insurable properties of Airtech are insured for
its benefit under valid and enforceable policies, issued by insurers of
recognized responsibility in amounts and against such risks and losses as is
customary in Airtech's industry.
3.09 No Violation. Neither the execution and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (a) conflict
with, or result in a violation or breach of the terms, conditions and provisions
of, or constitute a default under, the Articles of Incorporation or Bylaws of
Airtech or any agreement, indenture or other instrument under which Airtech is
bound or to which any of the assets of Airtech are subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b) violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Airtech or the properties or assets of Airtech.
Airtech has complied in all material respects with all applicable laws,
regulations and licensing requirements, and has filed with the proper
authorities all necessary statements and reports. Airtech possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
3.10 Consents. Except as set forth in Exhibit 3.10, no authorization,
consent, approval, permit or license of, or filing with, any governmental or
public body or authority, any lender or lessor or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of Airtech.
3.11 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Airtech and there are no known,
noticed or threatened violations of any zoning, building, fire, safety or wage
and hour laws or regulations.
3.12 Litigation. Except as described in Exhibit 3.12, Airtech has not had
any legal action or administrative proceeding or investigation instituted or, to
the best of the knowledge of Airtech, threatened against or affecting any of the
assets or business of Airtech. Airtech is not (a) subject to any continuing
court or administrative order, writ, injunction or decree applicable
specifically to Airtech or to its business, assets, operations or employees, or
(b) in default with respect to any such order, writ, injunction or decree.
Airtech knows of no basis for any such action, proceeding or investigation.
2.1 8
<PAGE>
3.13 Disclosure. No representation or warranty by Airtech or the Selling
Shareholders in this Agreement nor any statement or certificate furnished or to
be furnished by it or them pursuant hereto or in connection with the
transactions contemplated hereby 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 or necessary in order to
provide Purchaser with complete and accurate information.
3.14 Tax Returns. Airtech has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of, the operations of
Airtech and has paid or caused to be paid all assessments shown to be due and
claimed to be due on such tax returns. 3.15 Contracts. All contracts and
agreements to which Airtech is a party are described on Exhibit 3.15 and are in
full force and effect in accordance with their respective terms.
ARTICLE IV
AIRTECH'S COVENANTS
Airtech agrees that on or prior to the Closing:
4.01 Business Operations. Airtech shall operate its business only in the
ordinary course and Airtech shall use its best efforts to preserve the business
of Airtech intact, to retain its present customers and suppliers so that they
will be available to Purchaser after the Closing and to cause the consummation
of the transactions contemplated by this Agreement in accordance with its terms
and conditions. Airtech shall not take any action that might impair the business
or assets of Airtech without the prior consent of Purchaser or take or fail to
take any action that would cause or permit the representations made in
Article III hereof to be inaccurate at the time of Closing or preclude Airtech
from making such representations and warranties at the Closing.
4.02 Access. Airtech shall permit Purchaser and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Airtech, including Airtech's employees, customers and
suppliers, and Airtech shall furnish Purchaser all documents, records and
information with respect to the affairs of Airtech as Purchaser and its
representatives may reasonably request.
4.03 Material Change. Prior to the Closing, Airtech shall promptly inform
Purchaser in writing of any material adverse change in the condition of the
business of Airtech. Notwithstanding the disclosure to Purchaser of any such
material adverse change, Airtech shall not be relieved of any liability for, nor
shall the providing of such information by Airtech to Purchaser be deemed a
waiver by Purchaser of, the breach of any representations or warranty of Airtech
contained in this Agreement.
4.04 Approvals of Third Parties. As soon as practicable after the execution
of this Agreement, but in any event prior to the Closing Date, Airtech will use
its best efforts to secure all necessary approvals and consents of third parties
to the consummation of the transactions contemplated by this Agreement.
4.05 Contracts. Except with Purchaser's prior written consent, Airtech
shall not waive any material right or cancel any material contract, debt or
claim nor with it assume or enter into any contract, lease, license obligation,
indebtedness, commitment purchase or sale involving more than $10,000.00, each.
4.06 Capital Assets; Payments of Liabilities. Except with Purchaser's prior
written consent, Airtech will not acquire or dispose of any capital asset having
an initial cost of $10,000.00 or more, nor will Airtech discharge or satisfy any
lien or encumbrance or pay or perform any obligation or liability other than
(I) liabilities and obligation reflected in the Airtech Financial Statements,
and (ii) current liabilities and obligations incurred in the usual and ordinary
course of business since February 28, 1997, and, in either such case only as
required by the express terms of the agreement or other instrument pursuant to
which the obligation or liability was incurred.
4.07 Mortgages, Liens. Except with Purchaser's prior written consent,
Airtech will not enter into or assume any mortgage, pledge, conditional sale or
other title retention agreement, permit any lien, encumbrance or claim of any
kind to attach to any of its assets, whether nor owned or hereafter acquired, or
guarantee or otherwise become contingently liable for any obligations of another
or make any capital contributions or investments in any corporation, business or
other person.
2.1 9
<PAGE>
4.08 Sales of Stock. Except as set forth on Schedule 4.08, Airtech will
not, without Purchaser's prior written consent, after the date hereof, issue any
shares of its common stock or preferred stock nor will it issue or enter into an
agreement to issue any securities, rights, subscriptions, warranties or options
to purchase shares of its common stock or preferred stock or which are
convertible into shares of its common stock or preferred stock in whole or in
part.
ARTICLE V
PURCHASER'S COVENANTS
Purchaser agrees that on or prior to the Closing:
5.01 Business Operations. Purchaser shall operate its business only in the
ordinary course and Purchaser shall use its best efforts to preserve the
business of Purchaser intact, to retain its present customers and suppliers so
that they will be available to Purchaser after the Closing and to cause the
consummation of the transactions contemplated by this Agreement in accordance
with its terms and conditions. Purchaser shall not take any action that might
impair the business or assets of Purchaser without the prior consent of Airtech
or take or fail to take any action that would cause or permit the
representations made in Article II hereof to be inaccurate at the time of
Closing or preclude Purchaser from making such representations and warranties at
the Closing.
5.02 Access. Purchaser shall permit Airtech and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Purchaser, and Purchaser shall furnish Airtech all
documents, records and information with respect to the affairs of Purchaser as
Airtech and its representatives may reasonably request.
5.03 Sales of Stock. Except with Airtech's prior written consent Purchaser
will not, after the date hereof, issue any shares of its common stock nor will
it issue or enter into an agreement to issue any securities, rights,
subscriptions, warranty or options to purchase shares of its common stock or
preferred stock or which are convertible into shares of its common stock or
preferred stock in whole or in part.
5.04 Material Change. Prior to the Closing, Purchaser shall promptly inform
Airtech in writing of any material adverse change in the condition of the
business of Purchaser. Notwithstanding the disclosure to Airtech of any such
material adverse change, Purchaser shall not be relieved of any liability for,
nor shall the providing of such information by Purchaser to Airtech be deemed a
waiver by Airtech of, the breach of any representation or warranty of Purchaser
contained in this Agreement.
5.05 Contracts. Except with Airtech's prior written consent, Purchaser
shall not waive any material right or cancel any material contract, debt or
claim nor with it assume or enter into any contract, lease, license obligation,
indebtedness, commitment purchase or sale involving more than $10,000.00, each.
5.06 Capital Assets; Payments of Liabilities. Except with Airtech's prior
written consent, Purchaser will not acquire or dispose of any capital asset
having an initial cost of $10,000.00 or more, nor will Purchaser discharge or
satisfy any lien or encumbrance or pay or perform any obligation or liability
other than (i) liabilities and obligation reflected in the Purchaser Financial
Statements, and (ii) current liabilities and obligations incurred in the usual
and ordinary course of business since February 28, 1997, and, in either such
case only as required by the express terms of the agreement or other instrument
pursuant to which the obligation or liability was incurred other than payments
of liabilities disclosed on Exhibit 5.06 and does warrant and represent that the
total outstanding liabilities of Purchaser shall not exceed $60,000 at Closing.
5.07 Mortgages, Liens. Except with Airtech's prior written consent,
Purchaser will not enter into or assume any mortgage, pledge, conditional sale
or other title retention agreement, permit any lien, encumbrance or claim of any
kind to attach to any of its assets, whether nor owned or hereafter acquired, or
guarantee or otherwise become contingently liable for any obligations of another
or make any capital contributions or investments in any corporation, business or
other person.
5.08 Approvals of Third Parties. As soon as practicable after the execution
of this Agreement, but in any event prior to the Closing Date, Purchaser will
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated by this Agreement.
2.1 10
<PAGE>
ARTICLE VI
PURCHASER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment at or prior to the Closing of
each of the following conditions:
6.01 Representations and Warranties. The representations and warranties of
Airtech contained herein shall be true and correct in all material respects as
of the Closing, and Purchaser shall not have discovered any material error,
misstatement or omission therein. At the Closing, Purchaser shall have received
a certificate, dated the date of the Closing, and executed by the President of
Airtech, certifying in such detail as Purchaser may reasonably request as to the
accuracy of such representations and warranties referred to in Article III and
the fulfillment of the obligations and compliance with the covenants referred to
in Article IV as of the Closing.
6.02 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
6.03 Consents and Approvals. Airtech shall have obtained, and delivered to
Purchaser evidence thereof, all consents and approvals required to be obtained
in connection with the consummation of the transactions contemplated hereby.
6.04 No Material Adverse Change. No material, adverse change in the assets,
business operations or financial conditions of Airtech shall have occurred after
the date hereof and prior to the Closing. Purchaser shall have received a letter
from the chief financial officer of Airtech, dated the date of the Closing,
stating that on the basis of a limited review (not an audit) of the latest
available accounting records of Airtech, consultations with responsible officers
of Airtech, and other pertinent inquiries that they may deem necessary, they
have no reason to believe that during the period from February 29, 1996 to a
specific date not more than five business days before the Closing, there is any
change in the financial condition or results of operations of Airtech, except
for changes incurred in the ordinary and usual course of business of Airtech
during that period that in the aggregate are not materially adverse, and except
for other changes or transactions, if any, contemplated by this Agreement.
6.05 Approval of Airtech's Board of Directors and Selling Shareholders.
This Agreement shall have been approved by the Board of Directors of Airtech and
at least two-thirds of the Selling Shareholders entitled to vote thereon.
ARTICLE VII
CONDITIONS PRECEDENT OF AIRTECH SELLING SHAREHOLDERS
Except as may be waived in writing by Airtech and the Selling Shareholders,
the obligations of the Selling Shareholders hereunder are subject to fulfillment
at or prior to the Closing of each of the following conditions:
7.01 Representations and Warranties. The representations and warranties of
Purchaser contained herein shall be true and correct in all material respects as
of the Closing, and Airtech and the Selling Shareholders shall not have
discovered any material error, misstatement or omission therein. At the Closing,
Airtech and the Selling Shareholders shall have received a certificate, dated
the date of the Closing, and executed by the President of Purchaser, certifying
in such detail as Airtech and the Selling Shareholders may reasonably request as
to the accuracy of such representations and warranties referred to in Article II
and the fulfillment of the obligations and compliance with covenants referred to
in Article V as of the Closing.
7.02 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
7.03 Consents and Approvals. Purchaser shall have obtained, and delivered
to Airtech evidence thereof, all consents and approvals required to be obtained
in connection with the consummation of the transactions contemplated hereby.
2.1 11
<PAGE>
7.04 No Material Adverse Change. No material, adverse change in the assets,
business operations or financial condition of Purchaser shall have occurred
after the date hereof and prior to the Closing. The Selling Shareholders shall
have received a letter from the chief financial officer of Purchaser, dated the
date of the Closing, stating that on the basis of a limited review (not an
audit) of the latest available accounting records of Purchaser, consultations
with responsible officers of Purchaser, and other pertinent inquiries that he
may deem necessary, there is no reason to believe that during the period from
March 31, 1996 to a specific date not more than five business days before the
Closing, there is any change in the financial condition or results of operations
of Purchaser, except for changes incurred in the ordinary and usual course of
business of Purchaser, during that period that in the aggregate are not
materially adverse, and except for other changes or transactions, if any,
contemplated by this Agreement.
7.05 Approval of Purchaser's Board of Directors. This Agreement shall have
been approved by the Board of Directors of Purchaser.
ARTICLE VIII
MISCELLANEOUS
8.01 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by the party against which enforcement
of the amendment, modification or supplement is sought.
8.02 Parties in Interest. This Agreement shall be binding on and inure to
the benefit of and be enforceable by Selling Shareholders, Airtech, and the
Purchaser, their respective heirs, executors, administrators, legal
representatives, successors and assigns, except as otherwise expressly provided
herein.
8.03 Assignment. Neither this Agreement nor any right created hereby shall
be assignable by either party hereto except by Purchaser to a wholly-owned
subsidiary of Purchaser.
8.04 Notice. Any notice or communication must be in writing and given by
depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested or by delivering the same in person. Such notice shall be deemed
received on the date on which it is hand-delivered or on the third business day
following the date on which it is so mailed. For purposes of notice, the
addresses of the parties shall be:
If to Airtech:
John Potter, President
15400 Knoll Trail, Suite 106
Dallas, Texas 75248
If to the Selling Shareholders:
At the address set forth above.
If to Purchaser:
Perry Douglas West, Chairman and Chief Executive Officer
104 South Harbor City Boulevard, Suite A
Melbourne, Florida 32901
Any party may change its address for notice by written notice given to the
other parties.
8.05 Entire Agreement. This Agreement and the exhibits hereto supersede all
prior agreements and understandings relating to the subject matter hereof,
except that the obligations of any party under any agreement executed pursuant
to this Agreement shall not be affected by this Section.
8.06 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own costs
and expenses (including attorneys' fees) except that each party hereto agrees to
pay the costs and expenses, including reasonable attorneys' fees, incurred by
the other parties in successfully (I) enforcing any of the terms of this
Agreement, or (ii) proving that the other parties breached any of the terms of
this Agreement in any material respect.
2.1 12
<PAGE>
8.07 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance here from. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement, a provision as similar in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
8.08 Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Colorado. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and determined
by a court of competent jurisdiction with the State of Colorado.
8.09 Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
8.10 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective as
of the date first written above.
PURCHASER:
INTERACTIVE TECHNOLOGIES CORPORATION
________________________________________
Perry Douglas West,
Chairman and Chief Executive Officer
AIRTECH:
AIRTECH INTERNATIONAL CORPORATION:
________________________________________
John Potter, President and Chairman
SELLING SHAREHOLDERS:
___________________________________
John Potter, Power of Attorney
2.1 13
<PAGE>
UNANIMOUS CONSENT IN LIEU OF A SPECIAL MEETING
OF THE
BOARD OF DIRECTORS
OF
AIRTECH INTERNATIONAL CORPORATION
May __, 1997
The undersigned, being all of the members of the Board of Directors of
AIRTECH INTERNATIONAL CORPORATION (the "Corporation"), have, by signing this
consent, taken the following action without a meeting, pursuant to the
provisions of Article 9.10B of the Texas Business Corporation Act:
RESOLVED, that the Corporation enter into a Stock Purchase Agreement
between the Corporation, the Corporation's shareholders and Interactive
Technologies Corporation, a Wyoming corporation, a copy of which is attached to
this Consent marked Exhibit "A".
RESOLVED FURTHER, that the Corporation's President is hereby authorized, on
behalf of the Corporation, to execute the Stock Purchase Agreement attached
hereto as Exhibit "A", pursuant to the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code, as amended.
EXECUTED effective as the day and year written above.
C. J. Comu
John Potter
2.1 14
<PAGE>
PRO-FORMA COMBINED BALANCE SHEETS
FEBRUARY 28, 1997
(Unaudited)
Historical Acquired
Acquisition
ITC AIRTECH Adjustments Combined
--- ------- ----------- --------
ASSETS
Current Assets $206,627 $1,122,819 $1,329,446
Stock subscription receivable 507,577(2) 507,577
Property and equipment
net of depreciation 96,289 214,485 310,774
Intellectual properties
Net of amortization 5,142,712(3) 336,977(4) 12,250,000(5) 17,729,689
Goodwill 1,408,474(5) 1,408,474
Other Assets 1,866 1,896,489 1,898,355
----- --------- ---------
Total Assets 5,447,494 4,078,347 $ 23,184,315
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 536,432 $ 248,205 (250,000)(6) $ 534,637
Long-term Liabilities 1,299,573 26,116 (800,000)(6) 9,525,689
9,000,000 (5)
Total Liabilities 1,836,005 274,321 10,060,326
--------- --------- ------------- ----------
Commitments and Contingencies (7)
Stockholders' Equity
Paid in Capital 9,614,244 4,360,281(1) 4,658,474(5) 19,682,999
Retained Earning (Deficit) (6,002,755) (556,255) (6,559,010)
----------- ------------ ------------ -----------
3,611,489 3,804,026 13,123,989
----------- ------------ ------------ -----------
Total Liabilities and
Stockholders' Equity $ 5,447,494 $4,078,347 $23,184,315
========== ========= ==========
<PAGE>
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
For The Nine Months Ended February 28, 1997
(Unaudited)
Historical Acquired
Acquisition
ITC AIRTECH Adjustments Combined
--- ------- ----------- --------
ASSETS
Net Revenues $ 197,804 $ 1,451,074 $ 1,648,878
Cost of Sales 600,487 600,487
--------- ----------- -----------
Gross Income 197,804 850,587 1,048,391
General and Administrative 1,356,397 746,497 2,102,894
--------- ----------- -----------
Net Income from Operations
Before depreciation,
Amortization and taxes (1,158,593) 104,090 (1,054,503)
Depreciation
and amortization 721,088 721,088
--------- ------------ -----------
Net Income from Operations (1,879,681) 104,090 (1,775,591)
Gain on Sale of
Charleston License 311,500 311,500
--------- ------------ -----------
Net Income before Income Taxes(1,568,181) 104,090 (1,464,091)
Income Taxes -0- -0- -0-
Net Income $(1,568,181) $ 104,090 $(1,464,091)
============ ========== ============
Primary earnings per share $(0.13) $0.01 $(0.08)
Diluted earnings per share $(0.01)
The notes to the pro forma financial statements and the basis for presentation
of the financial statements are included in the exhibits and are an integral
part of these financial statements.
