<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended April 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-25362
INFOSAFE SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3645702
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
342 Madison Avenue
Suite 622
New York, NY 10173
(Address of Principal Executive Offices)
(212) 867-7200
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes __X__ No _____
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at June 13, 1997:
----- ------------------- ---------
Class A Common Stock, $.01 par value 4,557,435 shares
Class B Common Stock, $.01 par value 1,372,566 shares
Traditional Small Business Disclosure Format
Yes __X__ No _____
<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of July 31, 1996, April 30, 1997 (unaudited) ........................................3
Condensed Statements of Operations for the Three and Nine Months ended April 30, 1996 and April 30, 1997
(unaudited) and for the period November 18, 1991 (inception) to April 30, 1997(unaudited)...................4
Condensed Statements of Cash Flows for the Nine Months ended April 30, 1996 and April 30, 1997 (unaudited)
and for the period November 18, 1991 (inception) to April 30, 1997 (unaudited)..............................5
Notes to Condensed Financial Statements...........................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................8
PART II. OTHER INFORMATION
Item 2. Changes in Securities...................................................................................13
Item 5. Other Information.......................................................................................14
Item 6. Exhibits and Reports on Form 8-K........................................................................14
SIGNATURES.......................................................................................................17
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, April 30,
A S S E T S 1996 1997
----------- ---------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 50,466 $ 3,531,675
Marketable securities - available for sale.............................. 908,178
Other current assets.................................................... 132,609 118,560
------------ ------------
Total current assets........................................... 1,091,253 3,650,235
Fixed assets (net of accumulated depreciation
of $201,923 and 264,224 respectively)................................... 299,082 249,646
Equipment held for lease (Note C)............................................ 420,613 67,447
Non-current assets........................................................... 214,384 324,712
------------ ------------
T O T A L...................................................... $ 2,025,332 $4,292,040
=========== ==========
L I A B I L I T I E S
Current liabilities:
Accounts payable and accrued liabilities................................ $ 375,481 $ 316,670
Due to stockholder...................................................... 116,163 60,000
-------- -----------
Total current liabilities...................................... 491,644 376,670
Non current liabilities...................................................... 10,364 2,694
---------- ------------
Total liabilities.............................................. 502,008 379,364
--------- ----------
Contingencies and other matters (Note E)
STOCKHOLDERS' EQUITY
(Note D)
Common Stock:
Class A - par value $.01 per share, 20,000,000 shares authorized,
one vote per share; 2,908,549 and 4,557,435
shares issued and outstanding, respectively.................. 29,085 45,574
Class B - par value $.001 per share, 2,000,000 shares
authorized, six votes per share; 1,326,309 and 1,372,566
shares issued and outstanding, respectively
including 781,244 shares held in escrow...................... 1,387 1,435
Class E-1 - par value $.01 per share, 2,000,000 shares authorized,
one vote per share; 1,347,637 and 1,478,637
shares issued and to be issued, redemption value
$.0001 per share............................................. 13,436 14,786
Class E-2 par value $.01 per share, 2,000,000 shares authorized,
one vote per share; 1,347,637 and 1,478,637
shares issued and to be issued, redemption value
$.0001 per share............................................. 13,436 14,786
Additional paid-in capital................................................... 9,694,582 14,132,785
(Deficit) accumulated during the development stage........................... (8,234,154) (10,296,690)
Unrealized gain on marketable securities..................................... 5,552
----------- -----------
Total stockholders' equity................................................... 1,523,324 3,912,676
----------- -----------
T O T A L...................................................... $ 2,025,332 $ 4,292,040
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period From
April 30, April 30, November 18, 1991
------------------------ -------------------- (Inception) to
1996 1997 1996 1997 April 30, 1997
---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Revenues ..................................... $ 15,625 $ 600 $ 51,496 $ 17,323 $ 609,163
------------ ------------ ------------ ------------ ------------
Expenses:
Cost of revenue ........................... 20,799 10,642 71,924 36,814 228,579
Write down of assets (Note C) ............ 470,000 281,836 470,000 341,836 811,836
Operating expenses ....................... 851,116 698,065 2,402,928 1,750,795 9,513,425
------------ ------------ ------------ ------------ ------------
T o t a l ............................. 1,341,915 990,543 2,944,852 2,129,445 10,553,840
------------ ------------ ------------ ------------ ------------
Operating loss ............................... (1,326,290) (989,943) (2,893,356) (2,112,122) (9,944,677)
Investment income ............................ 32,629 29,368 179,004 50,914 446,089
Settlement expense ........................... (394,828)
Interest expense (including debt
discount and deferred financing fees .... (3,887) (382) (18,762) (1,328) (394,874)
------------ ------------ ------------ ------------ ------------
Net (loss) ................................... $ (1,297,548) $ (960,957) $ (2,733,114) $ (2,062,536) $(10,288,290)
============ ============ ============ ============ ============
Net (loss) per common share .................. $ (.38) $ (.21) $ (.80) $ (.53)
============ ============ ============ ============
Weighted average number of common
shares outstanding ...................... 3,422,781 4,517,559 3,422,781 3,877,881
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the
Nine Months Ended Period from
April November 18, 1991
----------------------------------- (Inception) to
1996 1997 April 30,1997
------------- ------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) ............................................. $ (2,733,114) $ (2,062,536) $(10,288,290)
Write off equipment held for lease ..................... 470,000 341,836 811,836
Other adjustments to reconcile net (loss)
to net cash (used in) operating activities ........... (1,693) 78,396 1,298,189
------------ ------------ ------------
Net cash (used in) operating activities: ............. (2,264,807) (1,642,304) (8,178,265)
------------ ------------ ------------
Cash flows from investing activities
Purchase of marketable securities ...................... (746,150) (339,238) (13,003,771)
Sale of marketable securities .......................... 2,917,156 1,241,864 13,003,771
Other investing activities ............................. (39,019) (2,215) (1,555,439)
------------ ------------ ------------
Net cash provided by (used in)
investing activities ................................. 2,131,987 900,411 (1,555,439)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock ................. 5,050,000 16,075,260
Cost in connection with sale of common
securities ........................................... (864,999) (2,892,904)
Payment of deferred financing costs .................... (224,919)
Proceeds from bridge loan .............................. 1,500,000
Payment of bridge loan ................................. (1,500,000)
Exercise of warrants ................................... 185,313 60,000 396,395
Other financing activities ............................. (139,472) (21,899) (88,453)
------------ ------------ ------------
Net cash provided by financing activities .............. 45,841 4,223,102 13,265,379
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .................................... (86,979) 3,481,209 3,531,675
Cash and cash equivalents beginning
of period ............................................... 154,726 50,466 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
END OF PERIOD ........................................... $ 67,747 $ 3,531,675 $ 3,531,675
============ ============ ============
</TABLE>
Supplemental disclosure of non-cash investing and financing activity.
During the nine months ending April 30, 1997 employee shareholders of the
Company agreed to contribute accrued salaries owed to them of approximately
$146,000 to additional paid in capital.
The accompanying notes are an integral part of these
condensed financial statements.
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<PAGE>
INFOSAFE SYSTEMS, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(NOTE A) Basis of Presentation and the Company:
(1) Basis of presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 3 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Operating results for the three-month and nine-month periods
ended April 30, 1997 and for the period from November 18, 1991 (inception) to
April 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1997.
The balance sheet at July 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the audited financial
statements and footnotes thereto included in the Form 10-KSB, for the Company's
fiscal year ended July 31, 1996.
(2) Organization and business:
Infosafe Systems, Inc. (the "Company") is a development stage company
engaged in the design, development and marketing of systems for securing,
controlling, delivering, metering and auditing electronic products, documents
and programs. The Company has developed the "Infosafe(R) System" which meters
the usage of information and can release information on a "pay per use" basis.
The Company initially developed a hardware-based distribution system and is
currently developing software-based distribution systems utilizing this
technology.
(NOTE B) - Summary of Significant Accounting Policies:
Net loss per share of common shares is based on the weighted average
number of shares outstanding during the period excluding Class B shares in
escrow, all Class E-1 and Class E-2 shares.
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<PAGE>
(NOTE C) - Equipment Held for Lease:
Equipment held for lease was composed of an encryption and metering
control unit called the Mark III. During the fiscal year ended July 31, 1996,
the Company stopped production of these control units until such time as the
demand for these units increases and reduced the value of the control units to
reflect their remaining realizable value. The Company is in the process of
developing "software only" applications for its technology and has written down
its equipment held for lease to an estimated salvage value of approximately
$67,000. This resulted in a write down of long-lived assets aggregating $281,836
for the three month period ended April 30, 1997.
(Note D) - Private Placement:
In February and March, 1997, the Company realized net proceeds of
approximately $4,185,000 from gross proceeds of $5,050,000 raised in a private
placement (the "1997 Private Placement") of 1,603,175 IPO Units. Each IPO Unit
contains of one share of Class A Common Stock, 1.11721 redeemable Class A
Warrants and 1.11721 redeemable Class B Warrants. As a result of the sale of the
securities in the 1997 Private Placement, pursuant to the anti-dilution
provisions contained in the Class A Warrants and the Class B Warrants, the
purchase price to be paid upon exercise of each Class A Warrant and Class B
Warrant of the Company by the holder of such warrants has been adjusted from
$6.50 to $5.82 for the Class A Warrants and from $8.75 to $7.83 for the Class B
Warrants. Further, as a result of the 1997 Private Placement, an additional
.11721 Class A Warrants are issuable for each outstanding Class A Warrant and an
additional .11721 Class B Warrants are issuable for each outstanding Class B
Warrant. Accordingly, an aggregate of an additional 494,623 Class A Warrants and
396,830 Class B Warrants are required to be issued by the Company to holders of
outstanding Class A Warrants and Class B Warrants respectively, resulting in an
aggregate of 4,714,772 Class A Warrants and 3,782,604 Class B Warrants
outstanding. Additionally, the Company has extended the expiration date of the
Class A Warrants and the Class B Warrants to February 18, 2002.
In conjunction with the 1997 Private Placement, certain employees and
directors of the Company agreed to contribute unpaid salaries and fees
aggregating approximately $146,000 to additional paid in capital during the nine
month period ended April 30, 1997.
(NOTE E) - Contingencies and Other Matters:
1) Effective November 26, 1996, the Company appointed Arthur R. Medici
as President and Chief Executive Officer pursuant to a three-year employment
agreement ("Agreement"). The Agreement provides for the Company to issue Mr.
Medici 70,000 shares of Class B Common Stock, 135,000 Shares of Class E-1 Common
Stock and 135,000 shares of Class E-2 Common Stock, which can not be transferred
by Mr. Medici until August 1999 and will be canceled by the Company if his
employment is terminated prior to August 1999
-7-
<PAGE>
("Vesting Period"). The Company will reflect compensation expense and an
increase to additional paid in capital aggregating $298,593 in connection with
the issuance of such shares over the Vesting Period, compensation expense and an
increase in additional paid in capital was $46,655 for the nine month period
ended April 30, 1997.
2) In March, 1997, the Company entered into an exclusive licensing
agreement with Visus Technologies, Inc. The Company has paid an advance royalty
fee of $150,000 to VTI. The exclusivity of this license is terminable if the
Company fails to generate certain revenues from the sale of VTI technology. VTI
retains the exclusive right to use this technology in certain circumstances. In
addition, the Company has an outstanding letter of intent with VTI which
provides the Company with an option to acquire 100% of VTI for an amount of
Class A Common Stock of the Company to be determined based on VTI's performance;
the Company is continuing to negotiate the terms of this acquisition.
3) During May 1997 the Company purchased a majority interest in
Internet Commerce Corporation (ICC), a new company which is developing
Internet-based business to business communication and electronic commerce
products and services. The Company will fund ICC up to a maximum $500,000 plus
provide administrative and overhead support for ICC of up to $24,000 a month for
six months in exchange for 84% of ICC's outstanding stock.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for the description of historical facts contained herein, this
Form 10-QSB contains certain forward-looking statements within the meaning of
the "safe harbor"provisions of the Private Securities Litigation Reform Act of
1995 concerning applications of the Company's technologies and the Company's
proposed products and future prospects, that involve risks and uncertainties,
including the possibility that the Company will (i) be unable to commercialize
products based on its technology, or (ii) that it will ever achieve profitable
operations, as detailed herein under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and from time to time
in the Company's filings with Securities and Exchange Commission and elsewhere.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements. The
Company's actual results could differ materially from those discussed herein.
Overview
The Company is a development stage company engaged in the design,
development and marketing of systems for securing, controlling, delivering,
metering and auditing electronic products, documents and programs, for use in
stand-alone applications, corporate networks and open networks such as the
Internet. The Company commenced operations in January 1992.
-8-
<PAGE>
From November 18, 1991 (inception) to April 30, 1997, the Company recognized
revenues of approximately $609,000, of which $455,000 was from one customer
(including a non-recurring license fee of $350,000 from such customer), and had
an accumulated deficit of approximately $10 million. The Company has continued
to operate at a deficit since inception and expects to continue to operate at a
deficit until such time as operations generate sufficient revenues to cover
costs. The Company believes its technology (the "Infosafe System"), as well as
the technology recently licensed from Visus Technologies, Inc. (VTI), and
technology and methods being developed by a new subsidiary of the Company
organized during May 1997, Internet Commerce Corporation (ICC), address critical
areas of electronic commerce such as security, delivery, verification and
metering of information. The Company is also seeking to position itself as an
independent third party to authenticate, certify, validate, authorize and
facilitate secure transactions for electronic information.
The Company's first commercial product, the Design Palette(R), has not
achieved commercial acceptance and the Company does not presently intend to
support and market the Design Palette in its current hardware configuration and
is evaluating the market potential of the Product in a software based
configuration.
The Company and Copyright Clearance Center(R) ("CCC"), the largest
licensor of photocopy reproduction rights in the United States, entered into a
contract on December 12, 1996. The agreement between the Company and CCC is for
a two-year term and will automatically renew unless notice of termination is
given by either party six months prior to the expiration of the term. This
system allows customers at commercial copy locations to easily obtain permission
to photocopy CCC registered materials and to conveniently pay royalties. The
system will provide information concerning transaction and rights costs,
material to be copied, number of copies, the customer and usage or licensing
information. The Company is currently in the process of marketing this system to
quick print chains and other venues. The Company had initially intended to use
its Mark III encryption and control units in the Infosafe copyright system;
however, due to commercial and other difficulties, the Company is currently
developing a software only version of this product.
The Company has written down assets held for lease, consisting of its
Mark III encryption and metering control units, to an estimated salvage value of
approximately $67,000, resulting in a write off of approximately $341,000 for
the nine month period ended April 30, 1997.
The Company is also investigating other potential applications for is
technologies which may include, but are not limited to, acquisitions of
complementary technologies. In March, 1997, the Company entered into an
exclusive licensing agreement with VTI for the resale of its Scan2Web software.
-9-
<PAGE>
Scan2Web enables users to browse an on-line document archive and view content on
a computer while preventing the printing of a "business quality" document. To
receive an original document or a "business" quality copy, the user must pay the
system provider (i.e. the Company, or the archive manager). The Company intends
to use VTI's technology in combination with its own proprietary metering and
encryption technologies to create secure sales delivery channels for documents
and images over private and public networks. The Company has paid an advance
royalty fee to VTI. The exclusivity of this license is terminable if the Company
fails to generate certain revenues from the sale of the Scan2Web technology and
VTI retains the exclusive right to use this technology in certain circumstances.
In addition, the Company has an outstanding letter of intent with VTI which
provides the Company with an option to acquire 100% of VTI for Class A Common
Stock of the Company. The Company and VTI are currently conducting discussions
to change the terms of the acquisition.
The Company has purchased a majority interest in ICC, a new company
which is developing Internet-based products and services for the electronic
commerce marketplace. ICC currently intends to develop a system which, the
Company believes, will provide a competitively priced system for facilitating
and validating purchase orders and other business documents transmitted via
electronic media, such as the Internet. The co-founders of ICC have been
developing a technical and commercial plan for such a system and have
contributed all their rights pursuant thereto to ICC. The Company believes that
the synergy between the Company's proprietary security and encryption technology
and ICC's electronic commerce services may enable both companies to broaden the
appeal and usability of their products. The Company's viability depends on its
ability to successfully develop and market these and other products and there
can be no assurance that the Company will ever generate sufficient sales from
its technologies and services to yield significant revenues.
In March 1997, the Company completed a private placement of an
aggregate of 1,603,274 IPO Units. As a result of the 1997 Private Placement, the
Company received net proceeds of approximately $4.2 million after placement
agent fees and expenses and other offering expenses.
Results of Operations
Three Months Ended April 30, 1997 Compared with Three Months Ended April 30,
1996.
Revenues were approximately $600 and $16,000 for the three months ended
April 30, 1997 (the "1997 Three Months"), and for the three months ended April
30, 1996 (the "1996 Three Months"). The revenues were generated from sales
through the Design Palette and the decline in such revenues resulted from a
decline in the demand for Design Palette images. The Company does not presently
intend to support and market the Design Palette in its current
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<PAGE>
hardware configuration and is evaluating the market potential of the product in
a software configuration.
For the 1997 Three Months, the Mark III encryption and metering control
units held for lease were written down by approximately $282,000 to their
estimated salvage value of approximately $67,000. The Company is currently
developing software based distribution systems utilizing its technology which
does not utilize the assets held for lease, resulting in the write down. For the
1996 Three Months, the Company's management determined that the quantity of the
Mark III control units exceeded the anticipated demand, in addition the largest
supplier of images for the Design Palette system gave notice to the Company to
remove its products from the Design Palette. As a result of these developments,
the Company wrote down its assets held for lease in the amount of $470,000.
Operating expenses were approximately $698,000 in the 1997 Three Months
and approximately $851,000 in the 1996 Three Months. Approximately 60% of this
decrease is attributable to a reduction in development and marketing costs
incurred in the 1996 Three Months relating to the Design Palette System. The
remainder of the decrease is due to the Company's efforts to reduce overhead
costs and a reduction in legal fees in the 1997 Three Months.
The Company had income from investments of approximately $29,000 for
the 1997 Three Months and approximately $33,000 in the 1996 Three Months. The
investment income for the 1996 Three Months relates to interest earned on funds
received during January and February 1995 from an initial public offering prior
to their expenditure. The investment income for the 1997 Three Months relates to
interest earned on the remaining funds received during January and February 1995
from an initial public offering prior to their expenditure and from funds
received during February and March 1997 from the 1997 Private Placement. The
decrease in interest income is due to the decrease in the remaining funds
received during January and February 1995 from an initial public offering as
these funds were expended for operations.
Interest expense was approximately $400 in the 1997 Three Months and
approximately $4,000 in the 1996 Three Months. Interest expense is attributed to
the financing of capital assets.
Due to the above, the Company had a net (loss) of approximately
$(961,000) in the 1997 Three Months compared to a net (loss) of approximately
$(1,298,000) in the 1996 Three Months.
-11-
<PAGE>
Nine Months Ended April 30, 1997 Compared with Nine Months Ended April 30, 1996.
Revenues were approximately $17,000 for the nine months ended April 30,
1997 (the "1997 Nine Months") and approximately $51,000 for the nine months
ended April 30, 1996 (the "1996 Nine Months"). The revenues were generated from
sales through the Design Palette and the decrease in such revenues resulted from
a decrease in demand for the Design Palette.
For the 1997 Nine Months, assets held for lease were written down by
$341,836. For the 1996 Nine Months, assets held for lease were written down by
$470,000. The value of the assets held for lease was reduced to reflect the
assets' estimated salvage value of $67,000. The Company is currently
developing software based distribution systems utilizing its technology which
does not utilize the assets held for lease, resulting in the write down.
Operating expenses were approximately $1,751,000 in the 1997 Nine
Months and approximately $2,403,000 in the 1996 Nine Months. Approximately 70%
of this decrease is attributed to development and marketing costs incurred in
the 1996 Nine Months relating to the launch of the Design Palette System. The
remainder of the decrease is due to the Company's efforts to reduce overhead
costs and a reduction in legal fees in the 1997 Nine Months.
The Company had income from investments of approximately $51,000 for
the 1997 Nine Months and approximately $179,000 in the 1996 Nine Months. The
investment income for the 1996 Nine Months relates to investment income earned
on funds received during January and February 1995 from an initial public
offering prior to their expenditure. The investment income for the 1997 Nine
Months relates to interest earned on the remaining funds received during January
and February 1995 from an initial public offering prior to their expenditure and
from funds received during February and March 1997 from the 1997 Private
Placement. The decrease in interest income is due to the decrease in the
remaining funds received during January and February 1995 from the initial
public offering as these funds are expended for operations prior to receipt of
the 1997 Private Placement funds.
Interest expense was approximately $1,000 in the 1997 Nine Months and
approximately $19,000 in the 1996 Nine Months. Interest expense is attributed to
the financing of capital assets.
Due to the above, the Company had a net (loss) of approximately
$(2,063,000) in the 1997 Nine Months compared to a net (loss) of approximately
$(2,733,000) in the 1996 Nine Months.
Liquidity and Capital Resources
The Company has incurred substantial losses and negative cash flow from
operations since its inception. At April 30, 1997 the Company had working
capital of approximately $3.2 million as a result of the receipt of the net
proceeds from the 1997 Private Placement of approximately $4.2 million. The
Company has financed its operations through private placements during fiscal
1994 and fiscal 1997 and an initial public offering during fiscal 1995, which
aggregated net proceeds of approximately $12.7 million. The Company has
significant cash requirements in connection with its business, including
expenditures for research and
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<PAGE>
development of new applications of its technology, marketing, working capital
and acquisitions. In March, 1997, the Company paid $150,000 in advance license
fees to VTI and in May 1997, the Company agreed to pay $500,000 in cash plus
$24,000 a month for six months for the acquisition of ICC. The Company
anticipates losses to continue through the next fiscal year as the Company
attempts to market its products and develop new applications for its
technologies. The Company believes that the net proceeds received from the
1997 Private Placement, together with funds expected to be generated from
operations, will be sufficient to finance the Company's working capital
requirements until the end of fiscal 1998. There can be no assurance that the
Company will generate sufficient revenues to fund its operations after such
period or that the Company will realize sufficient revenue from commercializing
its technology by that time.
The report of the Company's independent auditors on the Company's
financial statements as of July 31, 1996 and for the year then ended and for the
period from November 18, 1991 (inception) to July 31, 1996 contains a paragraph
regarding the uncertainty with respect to the ability of the Company to continue
as a going concern.
The Company has a net operating loss carryforward for tax purposes of
approximately $8.9 million to offset future taxable income for federal tax
purposes. The utilization of the loss carryforward to reduce future income taxes
will depend on the Company's ability to generate sufficient taxable income prior
to the expiration of the net operating loss carryforwards. The carryforward
expires from 2007 to 2011. The Internal Revenue Code and Regulations contain
provisions which limit the use of available net operating loss carryforwards in
any given year should significant changes (greater than 50%) in ownership
interests occur. Due to the initial public offering, the net operating loss
carryover of approximately $1,900,000 incurred prior to the initial public
offering will be subject to an annual limitation of approximately $400,000 until
the net operating loss is utilized or expires.
PART II. OTHER INFORMATION
Item 2: Changes in Securities
In February and March 1997, the Company realized net proceeds of
approximately $4,185,000 from gross proceeds of $5,050,000 from the 1997 Private
Placement of 1,603,175 IPO Units. Each IPO Unit consists of one share of Class A
common stock, 1.11721 redeemable Class A Warrants and 1.11721 redeemable Class B
Warrants. The securities in the 1997 Private Placement were sold to accredited
investors pursuant to Regulation D of the Securities Act of 1933 through D.H.
Blair Investment Banking Corp. as placement agent. Each IPO Unit is identical to
the Units issued in the Company's initial public offering, and was sold at a
price of $3.15 per IPO Unit. As a result of the sale of the securities in the
1997 Private Placement, pursuant to the anti-dilution provisions contained in
the Class A Warrants and the Class B Warrants, the purchase price to be paid
upon exercise of each Class A Warrant and Class B Warrant of the Company by the
holder of such warrants has been adjusted from $6.50 to $5.82 for the Class A
Warrants and from $8.75 to $7.83 for the Class B Warrants.
-13-
<PAGE>
Further, as a result of the 1997 Private Placement, an additional .11721 Class A
Warrants are issuable for each outstanding Class A Warrant and an additional
.11721 Class B Warrants are issuable for each outstanding Class B Warrant.
Accordingly, an aggregate of an additional 494,623 Class A Warrants and 396,830
Class B Warrants are required to be issued by the Company to holders of
outstanding Class A Warrants and Class B Warrants respectively, resulting in an
aggregate of 4,714,772 Class A Warrants and 3,782,604 Class B Warrants
outstanding. Additionally, the Company has extended the expiration date of the
Class A Warrants and the Class B Warrants to February 18, 2002. In addition, the
Company issued warrants to the placement agent to purchase 561,146 shares of
Class A Common Stock, 626,915 Class A Warrants and 626,915 Class B Warrants
(including 65,769 Class A Warrants and 65,769 Class B Warrants due to the
anti-dilution provisions contained in such Warrants). The Company also executed
an agreement with the placement agent extending for three years an agreement
regarding compensation payable to the placement agent in the event the placement
agent originates a financing or a merger, acquisition or other prescribed
transaction to which the Company is a party.
Item 5: Other Information
Alan N Alpern, Frank Schwab and William Walker resigned from the Board
of Directors.
On March 4, 1997 Mr. Robert S. Christie was appointed to the Company's
Board of Directors.
On June 11, 1997 Mr. Neal B. Freeman was appointed to the Company's
Board of Directors.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1(1) Form of Underwriter's Option
4.2(1) Form of Warrant Agreement
4.3(1) Escrow agreement, as amended
4.4(1) Form of Warrant expiring September 10, 2002
10.1(1) 1992 Stock Option Plan
10.2(1) 1994 Stock Option Plan
10.3(1) Employment Agreement with Thomas H. Lipscomb, as amended
10.4(1) Consulting Agreement with Alan N. Alpern, as amended
10.5(1) Lease for Executive Offices, as supplemented
10.6(1) License and Option Agreement dated February 9, 1994 between
the Registrant and International Typeface Corporation**
-14-
<PAGE>
10.7(1) Employment agreement with Charlton Calhoun III, as amended
10.8(2) Agreement between International Typeface Corporation and the
Company dated April 21, 1995
10.9(3) Employment Agreement with Arthur R. Medici
10.10(4) Warrant Agreement, dated February 10, 1997
10.11(4) Amendment, dated February 10, 1997, to Warrant Agreement dated
January 25, 1995
10.12(4) Form of Agent's Option
10.13(4) M/A Agreement Extension
10.14(4) Agreement with Copyright Clearance Center, dated December 12,
1996*
10.15 Formation and Stock Purchase Agreement, dated as of April 16,
1997 among the Company, Michele Golden and Michael Cassidy
11.1 Computation of Net Loss Per Share
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-83940)
(2) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1995
(3) Incorporated by reference to the Company's report on Form 8-K dated
November 26,1996
(4) Incorporated by reference to the Company's report on Form 10-QSB dated
January 31, 1997.
* This Document has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment. An excised
version of the Document is being filed as an exhibit hereto.
** Confidential treatment has been granted for portions of this Exhibit.
-15-
<PAGE>
(b) Reports on Form 8-K
For the three months ended April 30 1997 the Company filed the following Current
Reports on Form 8-K:
On February 26, 1997, the Company filed a Current Report on Form 8-K.
On March 5, 1997, the Company filed a Current Report on Form 8-K.
On June 11, 1997 the Company filed a Current Report on Form 8-K.
-16-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INFOSAFE SYSTEMS, INC.
Dated: June 16, 1997 By: /s/ Arthur R. Medici
--------------------------------------
Arthur R. Medici, President and Chief
Executive Officer
By: /s/ Alan N. Alpern
--------------------------------------
Alan N. Alpern, Chief Financial and
Legal Officer
-17-
<PAGE>
EXHIBIT INDEX
Exhibits.
4.1(1) Form of Underwriter's Option
4.2(1) Form of Warrant Agreement
4.3(1) Escrow agreement, as amended
4.4(1) Form of Warrant expiring September 10, 2002
10.1(1) 1992 Stock Option Plan
10.2(1) 1994 Stock Option Plan
10.3(1) Employment Agreement with Thomas H. Lipscomb, as amended
10.4(1) Consulting Agreement with Alan N. Alpern, as amended
10.5(1) Lease for Executive Offices, as supplemented
10.6(1) License and Option Agreement dated February 9, 1994 between the
Registrant and International Typeface Corporation**
10.7(1) Employment agreement with Charlton Calhoun III, as amended
10.8(2) Agreement between International Typeface Corporation and the
Company
dated April 21, 1995
10.9(3) Employment Agreement with Arthur R. Medici
10.10(4) Warrant Agreement, dated February 10, 1997
10.11(4) Amendment, dated February 10, 1997, to Warrant Agreement dated
January 25, 1995
10.12(4) Form of Agent's Option
10.13(4) M/A Agreement Extension
10.14(4) Agreement with Copyright Clearance Center, dated December 12, 1996*
10.15 Formation and Stock Purchase Agreement, dated as of April 16, 1997
among the Company, Michele Golden and Michael Cassidy
11.1 Computation of Net Loss Per Share
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-83940)
(2) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1995
(3) Incorporated by reference to the Company's report on Form 8-K dated
November 26, 1996
(4) Incorporated by reference to the Company's report on Form 10-QSB dated
January 31, 1997
* This Document has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment. An excised
version of the Document is being filed as an exhibit hereto.
** Confidential treatment has been granted for portions of this Exhibit.
<PAGE>
Exhibit 10.15
INFOSAFE SYSTEMS, INC.
Formation and Stock Purchase Agreement
AGREEMENT dated as of April 16, 1997, among Michael Cassidy ("MC"), Michele
Golden ("MG"), (collectively sometimes "M&M"), and Infosafe Systems, Inc.
("IS"), a Delaware Corporation with offices at 342 Madison Avenue, New York, NY
10173 (each of the above sometimes a "Party" and collectively the "Parties").
M&M have developed a program for providing business-to-business electronic
commerce services, and ancillary consulting and implementation services,
primarily using the Internet, all as set out in the Strategic Plan dated January
1997 (Exhibit 1 a), "Quick Start Initiatives 1997" (Exhibit l(b)), and the
memorandum of "Engineering Tasks and Sales" (Exhibit 1c) (all constituting the
"Intended Activity") . IS wishes to participate in the Intended Activity and the
Parties are therefore entering into this Formation and Stock Purchase Agreement.
1. Formation of Internet Commerce Corporation.
The parties will promptly cause a Delaware Corporation to be formed
under the name Internet Commerce Corporation ("ICC"), with authorized
capital of 10 million shares of Common Stock, par value $ .01 per share
("Shares") and 5 million shares of preferred stock, the terms and
preferences to be fixed by the Directors at the time of issue
("Preferred"). The Articles of Incorporation and the Bylaws of ICC
shall be in the forms attached as Exhibits 11(a) and 11(b) and are
approved by all Parties. Promptly after its formation, ICC shall become
a signatory and thus a Party to this Agreement.
2. Purchase and Issuance of Shares.
a) M&M will contribute and assign to ICC all their assets and
business relating to the Intended Activity, including their
rights under the Agreement of March 31, 1997, with the
"Fieldman Group" (Exhibit III), and their rights to utilize
the Business Plan of January 1997, particularly their rights
to deal with certain customers named therein on a preferential
basis and their rights to use of the name "Internet Commerce
Corporation", and all their rights to ICC New York. In
addition, M&M will contribute the sum of $1,000 to the capital
of ICC. In consideration for their contributions, ICC will
issue to MG 60,000 Shares, and to MC 40,000, all of which
shall be fully paid and nonassessable.
b) IS will subscribe to purchase 500,000 Shares for an aggregate
consideration of $500,000, of which $ 100,000 will be paid
simultaneously with the execution of Assignments and
contribution of $1,000 by M&M under a) above. The balance will
<PAGE>
be represented by a non-interest bearing demand Note of IS
which is expected to be paid from time to time by IS against
the cash requirements of ICC, substantially in accordance with
the EDI Fastart Operating Cash Budget attached
as Exhibit IV, including payment of up to $6,000 for legal
expenses of M&M in connection with the preparation for, and
participation in the transactions contemplated by this
Agreement and payment of an aggregate of $30,000 to Michael
Fromer for introducing the Parties.
3. Investment Intent and Share Certificates.
The Parties each represent that it is purchasing the Shares for its own
account and for investment purposes only. Each Party acknowledges that
it may not sell or otherwise dispose of the Shares or any interest
therein without registration under the Securities Act of 1933 or
pursuant to an exemption therefrom and agrees that the certificates
representing its Shares will bear an appropriate legend to the
foregoing effect and that the Shares are subject to other voting and
transfer restrictions under this Agreement.
4. Other Financial Relationships between ICC and IS.
a) Under a Cost-Sharing Convention to be entered into by ICC and
IS, IS will provide logistic and administrative support,
available "in house", to ICC at the rate of $24,000 per month,
which will be accrued for six months as shown on Exhibit III
and reviewed as to amount and method of payment at the end of
that period. The initial $ 144,000 will not be paid until a
Qualified Public Offering has been effected for ICC.
b) ICC and IS will enter into a Tax Convention governing the
allocation of tax responsibilities in light of the filing of
consolidated tax returns while IS continues to own at least
80% of ICC. ICC will adopt the calendar year for tax purposes.
c) The fiscal year of ICC will commence on August 1 of each year.
ICC shall keep adequate records and books of account in
accordance with GAAP consistently applied, reflecting all
financial transactions of ICC and in which, for each fiscal
year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
5. ICC Stock Option Plan.
a) The Parties will vote as shareholders for the adoption of an
ICC Stock Option Plan, under which ICC will reserve a total of
350,000 Shares for issuance of options to officers, employees,
directors and consultants as incentives to promote the
interests and business of ICC. 75,000 of such Options will be
reserved for IS personnel affiliated with ICC, and the M&M
Directors will vote for the award of such Options as
designated by IS. Option agreements will be in the same form
-2-
<PAGE>
as those issued under the IS Stock Option Plan, modified as
appropriate by the vesting provisions of Sections 5 d and e
below.
b) Qualified Stock Options will he granted to MG for an aggregate
amount of 120,000 Shares, exercisable while employed by ICC
for six years at an option price of $1.10 per Share. Of these
Options, 60,000 will be classified as A Options and 60,000
will be classified as B Options. For the purposes of this
paragraph 5 b, "while employed" shall mean while MG is
employed under the employment agreement referred to in Section
7b below, or any extension thereof, or, if not extended by
ICC, so long as MG is ready, willing and able to perform the
duties described in the employment agreement, on the same
terms and conditions, month-to-month or for any given term,
through April 15, 2003, as may be desired by ICC (except if
employment is terminated prior to that date "for cause" as
defined in the employment agreement, or if MG is in violation
of Section 4 or 5 of that agreement). This provision does not
create an obligation on the part of ICC to employ MG beyond
the term of the employment agreement, and MG acknowledges
that, if employment does not continue for any reason, the
options may not be "qualified" for tax purposes at the time of
exercise.
c) Qualified Stock Options will be granted to MC for an aggregate
amount of 80,000 Shares exercisable while employed by ICC for
six years at an option price of $1.00 per Share. Of these
Options, 40,000 will be classified as A Options and 40,000
will be classified as B Options. For the purposes of this
paragraph 5 c, "while employed" shall mean while MC is
employed under the employment agreement referred to in Section
7b below, or any extension thereof, or, if not extended by
ICC, so long as MC is ready, willing and able to perform the
duties described in the employment agreement, on the same
terms and conditions, month-to-month or for any given term,
through April 15, 2003, as may be desired by ICC (except if
employment is terminated prior to that date "for cause" as
defined in the employment agreement, or if MC is in violation
of Section 4 or 5 of that agreement). This provision does not
create an obligation on the part of ICC to employ MC beyond
the term of the employment agreement, and MC acknowledges
that, if employment does not continue for any reason, the
options may not be "qualified" for tax purposes at the time of
exercise.
d) The 100,000 A Options will vest in two equal tranches; the
first will vest provided that revenues of ICC are at least $
10,000,000 in any of the first three fiscal years of ICC,
commencing August 1,1997, and the second will vest, together
with any shares of the first tranche not already vested,
provided that revenues of LCC are at least $ 30,000,000 in any
of the first five fiscal years of ICC.
(i) In order to establish reasonable control over costs
associated with generating revenue for purposes of this
provision, without the express written agreement of IS,
-3-
<PAGE>
monthly operating costs of ICC, excluding contract work for
third parties will not exceed $100,000 per month, including
the support referred to in 4 a) above, until third party
funding of at least $1,000,000 has been obtained
for ICC. All operating contracts and arrangements, other than
contract work for third parties or as expressly approved by IS
in writing, shall be reasonably calculated to provide gross
profit margins of at least 50% and to achieve break-even cash
flow within 150 days of their respective inception dates.
(ii) In addition to salaries to be provided under employment
agreements described in Section 7b below, in the event of
exercise of any of the A Options by the holders, ICC will pay
such holder a bonus calculated to cover the "after-tax" cost
of exercising any A options actually exercised.
e) The B Options will also vest in two equal tranches; the first
will vest provided that ICC has net income (determined in
accordance with GAAP by the independent accountants of IS) of
at least $4,000,000 in any of the first three fiscal years of
ICC, and the second will vest together with any shares of the
first tranche not already vested, provided that ICC has net
income of at least $12,000,000 in any of the first five fiscal
years of ICC.
6. Anti-Dilution Assurance.
The Parties will cooperate in an effort to arrange a minimum of
$1,000,000 of third-party financing for ICC. IS agrees that, until a
minimum of $1,000,000 has been contributed as additional capital to
ICC, after the initial contribution by IS of $500,000 and the accrual
of IS logistic support for six months, the aggregate of 100,000 Shares
received by M&M at the time of ICC formation as provided for in this
Agreement will not represent less than 10% of total capitalization of
ICC, including any convertible securities to be considered for this
purpose as if converted, but excluding Shares resulting from any
exercise of Options granted under the ICC Stock Option Plan other than
the A Options. Similarly, IS agrees that the aggregate of 100,000 A
Options to be granted to M&M as provided in 5b and c above will not
represent less than 10% of such capitalization. IS will take any and
all necessary steps, including contribution of Shares owned by it, as
may be necessary to carry out the provisions of this Section 6.
7. Directors and Management.
a) Until a public offering of securities of ICC having a gross
offering price to the public of at least $5,000,000 has been
consummated ("Qualified Public Offering"), so long as they
retain ownership of at least 80% of their initially subscribed
shares, namely 80,000 shares in the case of M&M and 400,000
shares in the case of IS, the Parties shall vote their shares
to elect and maintain a Board of five directors, two of whom
shall be nominated by M&M and three of whom shall be nominated
by IS. A quorum of the Board shall consist of a majority of
the directors in office and the Board shall act by majority
-4-
<PAGE>
vote of the whole Board, except that any majority must include
a director nominated by M&M where the action to be taken
involves: amendment of the Articles of Incorporation;
amendment of the Bylaws; amendment of the 1997 Stock Option
Plan or adoption any other stock option plan or other equity
incentive plan; merger or sale of ICC or substantially all its
assets. Notwithstanding the above, the Parties shall continue
to vote their Shares for Directors in the same manner so long
as they retain ownership of 80% of their originally subscribed
shares and M&M continue to be employed by ICC. The initial
officers shall include: Arthur Medici - CEO and President,
Alan Alpern - CFO and Chief Legal Officer and Patrick Brosnan
Controller.
b) ICC will enter into employment agreements with Michele Golden,
Michael Cassidy and David Hubbard in substantially the forms
attached as Exhibits V a, b and c.
8. Sale or Transfer of Shares-by Parties.
Except for the transfer of an aggregate of 6,000 shares by M&M to
Michael Fromer, or transfers to others already shareholders or to
members of the immediate family of a Party, prior to a Qualified Public
Offering a Party shall not sell or transfer, by gift or otherwise, all
or any of their Shares except in compliance with the terms of this
Agreement or by the laws of inheritance or descent.
a) Notice of Proposed Transfer or Sale. If M&M or IS desires to
sell or transfer any of their shares or any interest therein,
voluntarily or by operation of law, that Party ("Offeror")
shall deliver notice to ICC. The Notice must specify the
proposed bona fide Transferee, the amount of shares, the
consideration to be paid and any other material terms and
conditions.
b) Approval of Transferee. The Offer or must first obtain a
written approval of the proposed Transferee from the Board of
Directors of ICC, which approval must include the votes of a
Director nominated by M&M. Approval shall not be unreasonably
withheld or delayed and any denial of approval (within 30
days) shall be based on a good-faith determination by the
Board that the proposed transferee is a competitor or is
otherwise not a suitable investor in ICC.
c) Right of First Refusal. From the date that approval has been
obtained under b) above, the Offeror shall offer ICC and the
other Parties a 30 day option to agree to acquire all the
Shares offered, at the same price and on the same terms and
conditions offered by the approved Transferee. Any agreement
to acquire all the Shares offered must be consummated within
thirty days of the agreement to acquire, or any longer period
if one is specified for the approved Transferee. If the option
is not exercised in whole by the offerees, pro rata or in some
-5-
<PAGE>
other proportions, then, for thirty days thereafter, the
Offeror may consummate the sale to the approved Transferee on
the original terms and conditions. If the sale is not
so consummated, then the proposed sale may not be consummated
without renewed compliance with all provisions of this Section
8c.
d) Market Strand-off. If required by the manager of underwriters
effecting a first Qualified Public Offering for ICC, M&M will
agree not to sell any Shares owned by them for the same period
after the effective date of such an Offering as is agreed to
by IS.
e) Transferees are Parties. If a sale or transfer is consummated
to any transferee under this section 8, the Transferee is
deemed to have acquired the Shares subject to all terms and
conditions of this Agreement and the Transferee shall execute
an instrument satisfactory to ICC by which he assumes and
agrees to be bound by all those terms and conditions.
f) Change of Control. In the event that a third party
unaffiliated with any of the Parties acquires the power to
elect a majority of the directors of ICC within five years,
then the A Options held by M&M shall immediately vest.
g) Exchange of ICC for IS Shares. In the event that any of the A
or B Options held by M&M vest within five years, and ICC does
not effect a Qualified Public Offering within twelve months
after such vesting, then M&M shall have the right to exchange
their ICC Shares for shares of the Common Stock of IS. The
exchange ratio shall be negotiated in good faith by the
parties; if they are unable to reach agreement after 60 days,
either IS or M&M may require that the issue of the exchange
ratio to be determined on the basis of a fair market value be
submitted in New York City to arbitration in accordance with
the then obtaining rules of the American Arbitration
Association.
9. Representations and Warranties of M&M.
M&M jointly and severally represent and warrant to IS that:
a) They have full power to enter into this Agreement and the
Employment Agreements attached as Exhibits V a and b, without
violation of any prior agreement or commitments;
b) The Agreement of March 31, 1997 (Exhibit III) among ICC
(former), the Fieldman Group and M&M is valid, binding and in
full force and effect;
c) They have good title and the right to transfer to ICC the
assets listed in Section 2a hereunder, free and clear of any
encumbrances;
-6-
<PAGE>
d) The Documents constituting Exhibits I a, b and c represent the
good faith ,best efforts description of the Intended Activity
as M&M contemplate it to be conducted and of the business area
in general. To their best knowledge, the Exhibits are
factually accurate in all material respects. All projections
contained in the Exhibits are reasonable and are based on all
necessary material assumptions, each of which is reasonable
and justifiable, and neither MG nor MC knows of any reason
that any of them cannot be reasonably fulfilled; provided,
however, that the foregoing does not constitute, and they
disclaim, any promise or guaranty, as to the accuracy of any
such projections or expectations.
e) There are no claims, actions, suits, or other proceedings
pending or to the best knowledge of M&M, threatened against or
affecting, any of them which might reasonably be expected to
adversely affect the conduct or results of the Intended
Activity.
10. Representations and Warranties of IS.
IS represents and warrants to M&M that:
a) IS is a corporation duly organized, validly existing and in
good stranding under the laws of the State of Delaware and has
all requisite corporate power to carry on its business and to
own and operate its properties;
b) When approved by its Board of Directors, IS will have full
power to enter into, execute, deliver and perform this
Agreement.
11. Miscellaneous.
a) Further Actions. Each Party shall from time to time take such
actions (including, without limitation, voting their Shares,
adoption of Articles of Incorporation and Bylaws and electing
directors) and deliver such additional documents as may be
reasonably necessary to effectuate the purposes of this
Agreement.
b) Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject
matter hereof, supersedes any existing agreements among them
concerning the subject matter, and may be modified only by a
written document duly executed by each Party.
Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, sent by telecopy or facsimile transmission (with receipt
confirmed), or delivered against receipt to the Party to whom it is to be given
at the address of such Party set forth below (or to such other address as the
Party shall have furnished in writing to all other Parties):
-7-
<PAGE>
M&M;
C/O Michele Golden
945 Fifth Avenue
Apt. 12D
New York, NY 10021
C/O Michael Cassidy
71 Hillside Road
Cumberland, RI 02864
Infosafe Systems, Inc.
342 Madison Avenue, Suite 622
New York, NY 10173
Fax no: (212) 867-7200.
d) Binding Effect and Benefit. The provisions of this Agreement
shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
e) Severability and Governing Law. If any provision hereof is
held invalid such invalidity shall not affect the other
provisions that may be given effect without the invalid
provision and, to this end, the provisions hereof shall be
deemed severable. The Agreement shall be governed by and
construed in accordance with the laws of the State of New York
without giving effect to the rules governing conflicts of law.
f) Brokers and Finders. Each Party further represents and
warrants to the others that, as a consequence of any action by
the Party or any person affiliated with such Party, and except
for a fee of $30,000 to be paid by ICC to Michael Fromer, and
6,000 Shares to be transferred to him by M&M, no broker,
finder or other person is entitled to any finder's or
brokerage fee or commission in connection with the
transactions contemplated by this Agreement. Each Party agrees
to indemnify and hold harmless each of the others from and
against any claim arising by any breach of the aforesaid
representation and warranty.
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first written above.
INFOSAFE SYSTEMS, INC.
By: /s/ Arthur Medici /s/ Michele Golden /s/ Michael Cassidy
-------------------- ------------------- --------------------
Arthur Medici, Michele Golden Michael Cassidy
CEO & President
-8-
<PAGE>
CONFIRMED:
INTERNET COMMERCE CORPORATION
By: /s/ Arthur Medici /s/ Michele Golden /s/ Michael Cassidy
-------------------- ------------------- --------------------
Arthur Medici, Michele Golden Michael Cassidy
CEO & President
Address:
Internet Commerce Corporation
342 Madison Ave.
Suite 622
New York, NY 10172
-9-
<PAGE>
EXHIBIT 11.1
COMPUTATION OF NET (LOSS) PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30 April 30
--------------------------------- ----------------
1996 1997 1996 1997
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET (LOSS) ATTRIBUTABLE TO COMMON
SHAREHOLDERS................................ $(1,297,548) $ (960,957) $(2,733,114) $(2,062,536)
============ ========== =========== ===========
Weighted average number of Class A common
share outstanding........................... 2,734,975 3,926,237 2,734,975 3,286,559
Weighted average number of Class B common
share outstanding........................... 1,469,050 1,372,566 1,469,050 1,372,566
Less escrow shares............................. (781,244) (781,244) (781,244) (781,244)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING................................. 3,422,781 4,517,559 3,422,781 3,877,881
========= ========= ========= =========
NET (LOSS) PER SHARE OF COMMON SHARE........... $(.38) $(.21) $(.80) $(.53)
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AND THE OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 1997
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> APR-30-1997
<CASH> 3,531,675
<SECURITIES> 0
<RECEIVABLES> 11,639
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,650,235
<PP&E> 513,870
<DEPRECIATION> 264,224
<TOTAL-ASSETS> 4,292,040
<CURRENT-LIABILITIES> 376,670
<BONDS> 0
0
0
<COMMON> 76,581
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<CGS> 36,814
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<INCOME-PRETAX> (2,062,536)
<INCOME-TAX> 0
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<NET-INCOME> (2,062,536)
<EPS-PRIMARY> (.53)
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</TABLE>
