SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 20, 1997
IMATEL HOLDINGS, INC.
( Exact name of registrant as specified in its charter)
DEVELOPMENT BANCORP, LTD.
(FORMER NAME)
WASHINGTON
(State or other jurisdiction of incorporation)
0-22934 91-1268870
(Commission File Number) (IRS Employer Identification No.)
45110 Club Drive, Suite B, Indian Wells, California 92210
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
<PAGE>
Registrant's telephone number, including area code: (760) 360-5793
Item 2. Acquisition or Disposition of Assets.
On October 20, 1997, pursuant to a Stock Purchase Agreement (the
"Agreement") the Company agreed to purchase 3,266 shares (equal to 51% of the
capital stock) of International Marketing and Advertising, Inc. a Florida
corporation engaged in the telecommunications business, ("IMATEL") for cash of
$500,000. Initially, the Company acquired 2,881 shares or 45% of IMATEL, for
$350,000. The purchase of the remaining 385 shares (or 6%) for $150,000 is to
take place within 5 days of receipt by IMATEL of the requisite approval of the
Federal Communications Commission for the change in control.
In addition, the Company agreed to issue 19,818 shares of its common
stock to certain shareholders of IMATEL in cancellation of shareholder loans
extended to IMATEL by such individuals, as follows:
Name of
Shareholder Loan Amount Shares
Roberto Galoppi 20,459 6,819
Fabio Galoppi 19,000 6,333
Andea Ciba 20,000 6,666
The holders of the pre-acquisition shares of IMATEL shall have
the right to exchange such shares for shares of Company Common Stock as soon as
IMATEL achieves net profit before taxes of no less than $100,000 in two
consecutive fiscal quarters. IMATEL has granted to the Company a right of first
refusal to purchase additional shares of IMATEL and to provide additional
financing.
Pursuant to the Agreement, the Company is obligated to establish
a stock option plan under which IMATEL management shall be granted options to
purchse 600,000 shares of Company Common Stock, to vest according to the
following schedule: 100,000 options exercisable at $4.00 upon the first
$1,000,000 in IMATEL earnings, 200,000 options at $5.00 per share upon the
second $1,000,000 in earnings, and 300,000 options at $6.00 per share upon the
thrid $3,000,000 in earnings. The earnings targets are cumulative and all
options expire three years from closing.
Pursuant to the Agreement, Robert Galoppi was elected as
chairman and chief executive officer, of the Company to serve with
Messrs. Riccardo Mortara, and Dempsey K. Mork, and IMATEL elected
Messrs. Dempsey K. Mork, Riccardo Mortara, Mark Neuman and Randall
A. Baker to the IMATEL Board, to serve with Messrs. Roberto
Galoppi, Fabio Galoppi and Andrea Ciba.
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The Company has changed its name to Imatel Holdings, Inc. as
required by the Agreement and IMATEL has agreed to changes its name to Imatel,
Inc.
Imatel has engaged the Company's Independent Certified Public
Accountants, Pritchett, Siler & Hardy, to audit its financial statements as
required by the Exchange Act.
Item 5. Other Events
The following information is presented with respect to IMATEL.
Overview of IMATEL
IMATEL was incorporated in 1987 as I.M.A.. As the name
International Marketing and Advertising implies, IMATEL began as a small
consulting firm assisting companies in the US to expand their market share in
Latin America as well as companies in Latin America to expand their market share
in the US.
IMATEL was introduced to the telecommunication industry through a
marketing promotion that it performed for AT&T in 1994. Upon being introduced to
the opportunities of telecommunications, IMATEL shifted its focus to this
industry and renamed itself IMATEL.
IMATEL's initial marketing efforts in the telecommunications
industry was successful. By the end of 1995 IMATEL had distributed well over
1,000,000 calling cards to Latin American air travelers bound for the US. At the
same time IMATEL started entering the call back market upon a specific request
of these same passengers who wished to use IMATEL for their telecommunication
needs from their Home Country.
However IMATEL soon found out that a successful marketing
strategy was not enough to succeed in this industry. Without the technical
expertise, as well to keep the customers satisfied, insure proper billing,
control costs, and assess profitability on a product by product, country by
country basis, the company could not survive.
For over a year IMATEL management researched the technical
industry and raised $ 1.5 million dollars in capital to fund the development of
IMATEL's technology. IMATEL engineered its own proprietary software and built
its own switches. This technology not only gave IMATEL control over customer
satisfaction billing and cost control but also allowed IMATEL to immediately
respond to opportunities that became available in the market. The technology
developed by IMATEL created an added opportunity for future profits through the
franchising of such new technology to similar telephone
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companies in the future.
With the addition of technology infrastructure developments, and
IMATEL's marketing experience, IMATEL has grown from a debit card/call back
company to a true carrier with PTT (Post Telegraph Telephone) relationships.
IMATEL is capable of providing international telephone service in many countries
and re-filing services, comparable to any major player in the market (AT&T, MCI,
Sprint, etc.).
Re-filing: The Hub and Spoke Concept
Re-filing in telecommunications is the same principle implemented
by the airline industry referred to as the 'hub and spoke'. In most countries
around the world, each country has their own national telephone company, called
the PTT (Post, Telegraph & Telephone) of that country. Many of these PTT's are
either partially or fully owned by the government of that country. Almost all
PTT's have a monopoly on telephone traffic coming out of that country to
anywhere in the world.
Until the last few decades AT&T and the Bell companies were for
all practical purposes, the PTT of the United States. After the break-up of the
Bells and AT&T, several other carriers emerged to carry traffic from the United
States to anywhere in the world, MCI, Sprint, LDDS/WorldCom as well as many
smaller carriers and re-sellers of carriers. This, of course, created
competition and drove US based telecommunications prices down substantially.
Each of these new carriers, in order to carry traffic
internationally, had two choices. The first was to run their traffic over AT&T's
lines, and therefore pay to AT&T, both AT&T's cost as well as AT&T's profit
margin. The second was to develop relationships and negotiate rates with each
individual country and therefore only pay the cost for traffic to that country.
Each PTT, of each country, negotiated a different price for US
traffic into their country based on many factors. This results in international
rates that are far from uniform and usually have nothing to do with the number
of miles a call is going to travel. For example, a call from the U.S. to
Venezuela might cost $.45 per minute while a call to Columbia might cost $.70
per minute, a difference of $.25, although the distance from the U.S. is about
the same.
Also, rates that Venezuela might extend to the U.S. may be very
different from the rate that Venezuela might extend to Canada or to Mexico. In
addition, countries very often give their neighboring countries extreme
discounts in exchange for favorable
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rates from that neighboring country. The theory is that countries that are close
in geographical location will naturally do higher levels of telecommunications
traffic between the countries due to their proximity alone.
For example, Venezuela might offer a very inexpensive rate to
Columbia, hypothetically $.10 per minute. Given this hypothetical situation, it
may indeed be cheaper for a U.S. based carrier to send all of its traffic bound
for Columbia through Venezuela. The cost to send the call to Venezuela is $.45.
In addition, the cost to send the call from Venezuela to Columbia is $.10. The
total cost of $.55 is less than the cost to send the call from the U.S.
directly to Columbia, $.70.
This savings of $.15 per minute for the carrier sending the U.S.
traffic, allows for a greater profit margin for that carrier as well as for that
carrier to pass some of the savings onto his customers. This results in that
carrier being able to capture a much larger market share of calls going to
Columbia.
However, in order for the carrier to send traffic directly to
Venezuela, and then out of Venezuela to Columbia, the carrier must first have a
"settlement agreement" with the PTT of Venezuela.
Each PTT, or each individual carrier, has agreements to carry
traffic to every other country. Some PTTs might have a direct settlement
agreement with other PTTs. With other countries, the PTT or carrier, might ride
on another carrier or through yet another PTT (Re-filing).
The more PTT relationships that a carrier is able to develop, the
greater number of choices the carrier has when terminating traffic. Each new PTT
relationship offers a new, and hopefully less expensive, way to route traffic to
every country in the world. With each PTT relationship that is negotiated, the
choices to route traffic grows exponentially. Thus, the hub and spoke concept.
The Market
The global telecommunications market totals $602 billion. Two
thirds of this market is focused in 6 countries, the U.S., Japan, Germany, U.K.,
France and Italy. These countries account for $383 billion of the global market,
with Italy accounting for $20 billion of this figure.
IMATEL provides services to large businesses, governments, medium
and small business, other carriers (long distance,
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rebillers, resellers, and local exchanges).
Our international strategy is to provide integrated full service
communications with facilities based, end-to-end managed services. Currently 38%
of the global market is now open to competition and 22% of the market will open
up 1/1/98, with the remaining 44% of the global telecommunications market open
for competition in the next 3-5 years. With local access networks in key
centers, long distance facilities where demand is strong and a cross border
infrastructure, IMATEL is uniquely positioned with the right assets in the right
place at the right time with a forward international marketing and service
strategy.
The IMATEL Technology
IMATEL has created a PC based switching system that represents
the following advantages over other types of switches.
Price
The P.C. based switch costs 10 to 15% to build, once the
necessary software is developed, of the cost of a mainframe switch.
Flexibility
All the code is written in a PC based language that is easily
adjusted by in house engineers. In contrast, Mainframe switching systems are
written in proprietary code that can only be accessed by the manufacturer.
Billing and Reporting.
Currently the PC is the most popular computer platform on the
market today. There are numerous quality software packages being written for the
PC by dozens of companies. This PC software is very inexpensive compared to the
price of proprietary mainframe software. Mainframe switch billing programs
usually run on AS 400 platforms and pricing starts at $250,000 for the base
module without enhancements. The IMATEL PC based switch can interface with any
of these inexpensive, off-the-shelf software packages, including any currently
popular accounting packages. This is due to the fact that IMATEL's switch is PC
based and therefore shares a common operating system, platform and format with
other PC based products . IMATEL currently uses the Windows NT operating system
as well as Microsoft 's SQL server and Microsoft Office. This has allowed IMATEL
to build a flexible billing program. IMATEL can bill in any currency, in
increments of seconds, minutes, by pulse, or any other desired feature. This
allows management to link all databases and determine on a real time basis, not
only every call that is made, but by how much it
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bills, how much it costs and therefore determines profitability
by country, product, and by time.
Profitability is subject to change in accordance with the connect
ratio or based on the choice of available underline carriers. By providing such
information on a real time basis, management can adjust to those changes
immediately, and capitalize on the opportunity to increase the company's overall
profitability. In the telecommunications business where profits depend on
seconds and pennies, the obsession with minimum details and "on time"
performance are the key for an appropriate return on investment.
PC and Mainframe: The Ultimate Advantage.
IMATEL believes that the best solution for high volume of traffic
is to have both the mainframe and the PC working together, each doing what it
does best. For higher volumes of traffic, (IMATEL) is now gearing to these
volumes, the PC based switch would sit in front of the mainframe switch and act
as what is known as the IVR (integrated Voice Response unit) The call would come
into the PC based switch. The PC switch would take down all the vital
information, such is where the call is coming from where it is going, date and
time it started etc. etc. This would take a fraction of a second. The PC switch
then passes the information to the PC data network so that the system could do
its data capture and calculation. The PC switch would then pass the call to the
mainframe switch for processing the actual call. When the call is completed,
information is sent to the PC switch that records the end of the call and
prepares billing and cost analysis. With this specialized system, IMATEL does
not incur loss of immediate and proper real time reporting, even when a major
volume is handled. The PC collects the data, and the mainframe does the actual
switching. IMATEL has a fully functional debit card platform, Call Back
application, and proprietary ICON system. IMATEL has created over 1000 lines of
code controlling the connecting of calls, timing, and Least Cost Routing, (the
selection of the right carrier based upon the right price and right quality for
each individual country), and very sophisticated call progress analysis than can
insure quality control.
IMATEL has invested heavily in its technology, especially in its
billing system and cost reconciliation. Management believes that most
telecommunications companies fail, not due to a wrong marketing strategy, or the
biggest and most expensive switch in the market, but because the billing to
their clients is faulty and/or the cost control is nonexistent.
THE IMATEL MARKETING STRATEGY
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While the technology was being developed, IMATEL created its own
marketing strategy, with an eye to events occurring around the world that will
modify the telecommunications industry around the world within the next three
years. The deregulation that is taking shape around the world will create
enormous opportunities for our industry. Rates will fall, corporate users that
now represent 30% of the total users will control over 70% of the total traffic
and international traffic will grow in excess of 10% per annum. The areas that
will show the major growth will be Europe, Latin America and part of the orient.
To this end IMATEL created connecting points in Venezuela for Latin America,
Italy for Europe and soon a new location in the Orient will open.
In Venezuela IMATEL opened an office in the fall of 1996, in
accordance with the local regulations the country is open for partial
competition now and total competition in the next 3 years. We are already a
small but credible competitor now and will expand even further in the next few
months, not only in Venezuela but in the rest of Latin America. In Italy the
company opened in November 1996, and by January 1 1998, when complete
competition will be allowed we are going to be one of the major international
carriers in the country.
Production
Italy.
In Italy we are present with an international calling card
system, international refiling and ICON services to over 120 local companies.
Italy at the moment represents 29.8% of the volume produced and 22.4% of the
revenue.
Venezuela
In Venezuela the ICON system is being used by 85 of the major
companies and is showing strong growth patterns. Venezuela represents 14.2% of
the minutes and 8 % of the revenue. Debit Cards Domestic credit cards 30.7% of
the minutes and 46.9 % of the revenue Call Back. This is an activity that is
slowly being converted to ICON technology but still represents 25.4% of total
minute and 22.7% of the revenue.
8
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"Unaudited"
DEVELOPMENT BANCORP, LTD
AND
INTERNATIONAL MARKETING AND ADVERTISING, INC.
Content Page Consolidated Pro Forma Financial Statements
For the Periods Ending
Six Months, June 30, 1997
Consolidated Pro Forma Balance Sheet, as of June 30, 1997.
Consolidated Pro Forma Income Statement for the six (6) month period ending June
30, 1997.
Consolidated Pro Forma Statement of Adjustments to Shareholders' Equity as of
June 30, 1997.
Summary of International Marketing and Advertising, Inc. "Significant Accounting
Policies and Notes
to Pro Forma Financial Statements" for the period ending June 30, 1997.
Summary of Development Bancorp, Ltd. "Significant Accounting Policies and Notes
to Audited Financial Statements" for the fiscal year ending December 31, 1996,
as contained in the December 31, 1996 10KSB Report, the "Unaudited" 10Q Report
for the 6 months ended June 30, 1997 and this Current Report on Form 8-K.
9
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<TABLE>
<CAPTION>
"Unaudited"
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1997
(11) (1) International DB/(CR)
ASSETS Development Marketing and Pro Forma Consolidated
Current Assets Bancorp, Ltd. Advertising, Inc. Adjustments Pro Forma
<S> <C> <C> <C> <C>
Cash $ 2,521 $ 21,579 $ 24,100
Receivables 17,694 25,597 43,291
Receivable (Related Party) 104,115 104,115
Marketable Securities 643,939 643,939
Other Current Assets & Prepaids 17,808 189,548 207,356
------------- ------------ ----------- -----------
Total Current Assets 786,077 236,724 0 1,022,801
------------ ------------ ------------ -----------
Other Assets
Investments 5,172,381 (500,000)(7) 4,672,381
Note Receivable 250,000 250,000
Investment in Affiliate 500,000 (7) 500,000
Property & Equipment-Net 35,229 888,971(3) 924,200
Other Assets/Systems Development 1,086,574(2) 1,086,574
----------- ---------- ---------- ----------
Total Other Assets 5,457,610 1,975,545 0 7,433,155
---------- ---------- ------- ----------
TOTAL ASSETS $ 6,243 687 $ 2,212,269 $ 0 $ 8,455,956
LIiABILITIES & EQUITY ======== ======= ======= =======
Current Liabilities
Checks drawn excess bank funds $ 218,878 218,878
Accounts Payable 60,651 262,820(5a) 323,471
Accounts Payable Affiliate ( 500,000)(7) 500,000
Accrued Payroll 234,223 234,223
Other Accrued Liabilities 1,774 65,872 67,646
------------ ----------- -------------- -----------
Total Current Liabilities 515,526 328,692 ( 500,000) 1,344,218
------------ ---------- --------- ----------
Long Term Liabilities
Equipment Leases Capitalized 316,531(15b) 316,531
Notes Payable-Stockholders 409,268 409,268
Total Long Term Liabilities _________ 725,799 ________ 725,799
--------- -----------
TOTAL LIABILITIES 515,526 1,054,491 ( 500,000) 2,070,017
SHAREHOLDERS' EQUITY
CAPITAL STOCK:
-Development Bancorp, Ltd.
Common stock, no par value,
50,000,000 shares authorized;
3,394,668 issued/outstanding 12,134,685 12,134,685
-International Mktg & Advert.
Common stock, no par value,
3,137 shares issued /outstanding 21 (7) 21 0
PAID IN CAPITAL: 1,650,000 (7) (9) 992,222 657,778
RETAIN EARNING(DEFICIT) ( 6,471,085)(9) ( 492,243) (9)( 492,243) (6,471,085)
TRANSLATION ADJUSTMENT 64,561 64,561
------------- --------------- -------------- -------------
TOTAL SHAREHOLDERS'
EQUITY (DEFICIT) 5,728,161 1,157,778 500,000 6,385,939
----------- --------- --------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,243,687 $ 2,212,269 $ 0$ 8,455,956
</TABLE>
======== ======= ======= ========
The accompanying notes are an integral
part of the financial statements
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<TABLE>
<CAPTION>
"Unaudited"
DEVELOPMENT BANCORP, LTD.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR SIX MONTHS PERIOD ENDING JUNE 30, 1997
PRO FORMA COMPILATION
6/30/97 6/30/97 6/30/97
DVBC(10-Q) IMA (F/S) Combined
-------------- ----------------- --------------
Revenues:
<S> <C> <C> <C>
Commissions, Consulting Fees, Dividends $ 543 0 343
Sales 0 325,130 325,130
----------- ------------ -----------
Total Revenues 543 325,130 325,673
G & A Expenses 483,803 359,415 843,218
- --------------
---------- --------- -----------
Income (Loss) from Operations (483,260) (34,285) (517,545)
Other Income (Expense):
Unrealized Gain (Loss) on
Marketable Securities (2,116) 0 (2,116)
Interest Income 24,084 0 24,084
(Writedown/Loss) Pemp Investments (2,884,818) 0 (2,884,818)
(Writeoff/Expense) of Systems
Development Capitalized Costs
1996 Expenditures 0 * (169,652) (507,699)
1997 Expenditures 0 * (338,047) (338,047)
Foreign Currency Transactions
Gain or (Loss) (619) 0 (619)
---------- ------------ ----------
Total other Income (Expense) (2,863,469) (338,047) (3,201,516)
Income (Loss) from Continuing
Operations (3,346,729) (372,332) (3,719,061)
Discontinued Operations Income/(Loss) (14,098) 0 (14,098)
-------- ----------- -----------
Net Income (Loss) $(3,360,827) $ (372,332) $(3,733,159)
=======
Per share (Loss) $(0.9900) $(0.1097) $(1.0997)
3,394,668 3,394,668 3,394,668
========= ========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements
11
<PAGE>
<TABLE>
<CAPTION>
"Unaudited"
DEVELOPMENT BANCORP, LTD.
PRO FORMA ADJUSTMENTS TO SHAREHOLDERS' EQUITY
JUNE 30, 1997
. Debit/(Credit)
.
Total Retained Total
Number Capital Capital (Earnings) Cash (Equity)
Of Shares Stock Surplus Loss Purchase Deficit
--------------- --------- ------------ ------------ ----------- -------------
Before Acquisition of
International Marketing
and Advertising
Development Bancorp, Ltd.
<S> <C> <C> <C> <C>
Common Stock & Equity 3,394,668(8) $(12,134,685) $ 6,471,085 $(5,663,600)
Translation Adjustment ( 64,561)
-----------
Total Equity-DVBC (5,728,561)
Acquisition of International
Marketing and Advertising, Inc.
Payment of $500,000 (US $) in*
exchange for all Common
Stock shares of International
Marketing and Advertising, Inc. 3,137(7) ( 21)(7) (1,650,000) 492,243 (1,157,778)
Transfer International Marketing
Retained Earnings (Deficit)
Prior to Acqusition Transfer to 492,243 (492,243)(9) -0-
Capital Surplus Accoun
Investment Cash Purchase/exchange
International Marketing Stock (3,137)(7) 21(7) 499,979* (500,000)* -0-
------------- ------------- ------------- ------------ ====== -------------
Development Bancorp, Ltd.
SHAREHOLDERS' EQUITY
JUNE 30, 1997 after acquisition
of International Marketing and
Advertising, Inc. 3,394,668(8) $(12,134,685)( 657,778) 6,471,085 ( 6,385,939)
======= ========= ======= ======= =======
</TABLE>
*Balancing entry for recording $500,000 Cash Purchase transaction for
acquisition of IMA Capital Stock.
The accompanying notes are an integral
part of the financial statements
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<PAGE>
"Unaudited"
DEVELOPMENT BANCORP, LTD.
NOTES TO FINANCIAL STATEMENTS FOR PRO FORMA ADJUSTMENTS
APPLICABLE TO INTERNATIONAL MARKETING and ADVERTISING, INC.
For The Period Ending June 30, 1997
Note 1: Organization and Significant Accounting Policies
Nature of Organization:
International Marketing and Advertising, Inc. ("IMA") is a service corporation
organized in the State of Florida for the purpose of providing a telephone
marketing system readily accessible to any person in the United States and also
on a world-wide basis. IMA is a privately-owned Corporation which is being
acquired by Development Bancorp, Ltd. in a cash purchase transaction and will be
operated as a wholly-owned entity of Development Bancorp, Ltd.
Basis of Presentation:
All references in these Notes refer solely to the "Unaudited" Financial
Statements for IMA which were prepared by IMA's in-house Accountant in
accordance with Generally Accepted Accounting Principles. All significant
intercompany accounts and transactions have been eliminated.
Other Assets:
Other Assets consists of the Intellectual Properties and Computer Database
Systems which have been developed by IMA and have been valued at their actual
acquisition costs for financial statement presentation.
Property and Equipment:
Property and Equipment is stated at cost. Depreciation is computed using
straight line and MACRS Tax Basis methods over the estimated useful lives of the
assets, 5, 7, and 15 years.
Expenditures for additions and improvements are capitalized. Repairs and
maintenance are expensed as incurred.
Industry and Geographical Segment Reporting ;
Not applicable for this reporting period.
Use of Estimates:
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make certain estimates and
assumptions about the future outcome of current transactions which may affect
reporting and disclosure of these transactions. Accordingly, actual results
could differ from those estimates used in preparing these financial statements.
Newly-Issued Accounting Standards:
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for the
Long-Lived Assets to be disposed of" (SFAS No. 121) was issued. IMA will adopt
SFAS No. 121 for the issuance of its Financial
Statements.
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"Unaudited"
DEVELOPMENT BANCORP, LTD.
NOTES TO FINANCIAL STATEMENTS FOR PRO FORMA ADJUSTMENTS
APPLICABLE TO INTERNATIONAL MARKETING AND ADVERTISING, INC.
For The Period Ending June 30, 1997
Note 1: Organization and Significant Accounting Policies (Continued)
Newly-Issued Accounting Standards (Continued):
This standard requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. In adopting this
standard, IMA will be required to estimate the future cash flows expected from
the use of the asset and its eventual disposition. If the sum of the future cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, an "Impairment Loss" would be recognized and reflected in
IMA's Financial Statements for the fiscal period involved. IMA's Management
believes that the impact of SFAS No. 121 on IMA's financial position and results
of operations is not expected to be material.
Note 2: Other Assets
Other Assets represents the actual costs incurred by IMA in the development of a
Telephone Marketing and Advertising Computer Database System. In conjunction
with this activity, IMA purchased/leased Hardware and Software. Summarized below
are the major components of these assets:
<TABLE>
<CAPTION>
Description Original Costs
<S> <C>
Hardware and software $ 295,888
Telephone Systems 500,649
Miscellaneous Equipment 27,780
Sub Total $ 824,317
Systems Development Capitalized Costs 262.257
----------
Total Other Assets $1,086,574
=======
</TABLE>
Note 3: Property and Equipment - Fixed Assets
These assets consisted of the following catagories at June 30, 1997:
Office Furniture and Equipment $ 29,200
Communications Equipment 366,837
Computer Equipement 557,980
--------
Total Actual Costs Capitalized $ 954,017
Less Accumulated Depreciation ( 65,046)
Net Property and Equipment $ 888,971
======
Depreciation expense totalled $26,250 for the period 1/1/97 to 6/30/97. Prior
years' Depreciation expense was $22,554 in 1996 and $16,242 in 1995.
Note 4: Accrued Liabilities - Current
As of June 30, 1997, IMA had Accrued Liabilities of $65,872 which consisted of
Corporate Income Tax Liability of $12,975 and Payroll Tax Liabilities of
$52,897.
"Unaudited"
DEVELOPMENT BANCORP, LTD.
NOTES TO FINANCIAL STATEMENTS FOR PRO FORMA ADJUSTMENTS
APPLICABLE TO INTERNATIONAL MARKETING AND ADVERTISING, INC.
For The Period Ending June 30, 1997
Note 5: Accounts Payable/Commitments and Contingencies
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<PAGE>
a) Accounts Payable ($262,820):
As of June 30, 1997, IMA reflects a total of $164,137 due to trade vendors and
$98,683 for the fiscal current year's lease obligations (to 12/31/97).
b) Commitments/Operating Leases:
IMA currently has ten (10) operating leases amounting to $316,531 (net of the
$98,683 included in Accounts Payables). Following is a summary of the lease
obligations by fiscal year (ending 12/31/97):
Fiscal Year 1998 $220,371
Fiscal Year 1999 89,055
Fiscal Year 2000 7,105
---------
Total $316,531
======
c) Contingencies:
There are no known contingencies to provide for as of the date of these
financial statements.
Note 6: Income Taxes
IMA has an accrual of $12,975 for Corporate Income Taxes.
Note 7: Consideration given by Development Bancorp, Ltd. for the acquisition
of International Marketing and Advertising, Inc.
In accordance with terms and conditions stated in the AGREEMENT AND PLAN OF
REORGANIZATION (the "Agreement") dated December x, 1997, between Development
Bancorp, Ltd. (the "Company") and International Marketing and Advertising, Inc.
(IMA), the "Company" will acquire all of the outstanding Capital (Common) Stock
Shares of IMA (3,137 SHARES) for a total cash purchase price of $500,000 (U.S.
Dollars).
Note 8: Development Bancorp, Ltd. Capital Stock as of June 30, 1997
The Capital Stock structure of Development Bancorp, Ltd. consists of the
following Capital Stock Issues:
a) Common Stock, no par value
50,000,000 shares authorized; 3,394,668 shares issued and
outstanding as of June 30, 1997 with a current total capitalized
value of $12,134,685.
"Unaudited"
DEVELOPMENT BANCORP, LTD.
NOTES TO TO FINANCIAL STATEMENTS FOR PRO FORMA ADJUSTMENTS
APPLICABLE TO INTERNATIONAL MARKETING AND ADVERTISING, INC.
For The Period Ending June 30, 1997
Note 9: Development Bancorp, Ltd. Shareholders' Equity
The Accumulated Retained Earnings (Deficit) of Development Bancorp, Ltd. as of
June 30, 1997 was a
$(6,471,085 Deficit).
Note 10: Consolidated Pro Forma Income Statement Reporting Period
The Income Statement period covers the 6 Month (interim) period ending June 30,
1997 for Development Bancorp, Ltd. and International
Marketing and Advertising, Inc.
Note 11: Organization, Significant Accounting Policies, and Footnotes to
Financial Statements
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Refer to the Development Bancorp, Ltd. 10KSB for the 12 months ended December
31, 1996 and the 10QSB for the 6 months ended June
30, 1997.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a)(b)The required financial statements of IMATEL are unavailable as of the date
hereof and will be filed by the Registrant pursuant to the requirements of the
Securities Exchange Act and the rules and regulations promulgated thereunder
within 60 days of the date of the event reported herein. Unaudited financial
information is presented in Item 5.
(c)Exhibits
2.Plan of acquisition, reorganization, arrangement, liquidation or succession.
2.1. Share Purchase Agreement between IMATEL and the
Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 11, 1997 IMATEL HOLDINGS, INC.
By: /s/ Dempsey K. Mork
Dempsey K. Mork
Secretary
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT, (the "Agreement") is dated as of the ____
day of October, 1997, and is between DEVELOPMENT
BANCORP LTD., ("DVBC") a Washington corporation, and INTERNATION-
AL MARKETING & ADVERTISING, INC. ("IMA).
R E C I T A L S
WHEREAS, DVBC desires to acquire 51% of the issued and authorized shares of IMA,
which would make IMA a partially owned subsidiary of DVBC; and
WHEREAS, IMA would like to sell 51% of all of its issued and outstanding shares
in consideration for an investment of $500,000
AGREEMENT
In consideration of the mutual covenants and agreements contained in
this agreement and in reliance upon the representations and warranties set forth
below, the parties agree as follows:
PURCHASE OF SHARES AND CONSIDERATION
Share purchase. IMA has 10,000 shares authorized, of which 3,137.60 are
outstanding. Under this agreement, IMA is selling DVBC 3,266 shares of IMA
stock, which represents 51% of the issued and outstanding shares of IMA.
Consideration. In consideration for the purchase of 3,266 shares of IMA stock,
DVBC agrees to pay to IMA $500,000.00 in two separate payments. The initial
payment of $350,000.00 and the final payment of $150,000.00. Stock option. IMA
hereby grants DVBC a right of first refusal to purchase additional shares of
IMA, and a right of first refusal to provide additional financing. IMA is not
obligated to sell additional shares or borrow additional capital.
Share Conversion. After two consecutive quarters that IMA has produced a profit
before taxes of $100,000.00 or more, the holders of shares of IMA will be able
to exchange their shares with DVBC shares on the basis of mutually agreed terms.
Change of Status. IMA agrees not to merge, reorganize, or
otherwise alter the current status of IMA without a shareholders
meeting.
Exchange of Shares of Debt. The following shareholders agree to cancel their
shareholder loans as listed below in exchange for the following number of DVBC
two year restricted shares.
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Name of shareholder Loan amount
Number of DVBC shares
Roberto Galoppi $20,459
6,819
Fabio Galoppi $19,000
6,333
Andrea Ciba $20,000
6,666
Board of Directors. The Company will appoint Roberto Galoppi
chairman of the board of DVBC. IMA will appoint Dempsey Mork,
Riccardo Mortara, Mark Neuman and Randall A. Baker.
Company Name. DVBC will change its name to IMATEL Holdings. IMA
will change its name to IMATEL Inc.
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Closing
The closing of this transaction will be in two parts. In part one, which will be
closed on October 20, 1997, DVBC will pay $350,000 and receive 2,881 shares,
which represent 45% of the issued and outstanding shares of IMA, plus two seats
on the IMA board of directors which represent a majority. Immediately following
the closing IMA will take all necessary steps to enable the FCC to approve DVBC
as a control party of IMA. Part two of the closing, is to take place within 5
days of the FCC approval of DVBC, DVBC will fund the remaining $150,000 and have
one directors resign for the IMA board, leaving DVBC with a single seat on the
IMA board. DVBC will receive 385 shares, which will result in DVBC owning 51% of
the issued and outstanding shares of IMA.
Stock Option Plan. DVBC shall immediately establish a stock option program under
which IMA management shall be entitled to options to purchase a total of 600,000
shares, which options shall vest at the following rates:
<TABLE>
<CAPTION>
Options Price Event
<S> <C> <C> <C> <C>
100,000 4.00 First $1,000,000 of IMA earnings
200,000 5.00 Second $1,000,000 of IMA earnings
300,000 6.00 Third $1,000,000 of IMA earnings
</TABLE>
The above earnings targets shall be cumulative; and all options
will expire on three years from closing.
REPRESENTATIONS AND WARRANTIES OF IMA
Organization.: IMA is a corporation duly organized and in good standing under
the laws of Florida, and is in good standing. The officers and directors of IMA
are: Roberto Galoppi, Fabio Galoppi, and Andrea Ciba all of whom make the
following representations.
Capitalization. IMA has 10,000 authorized shares of common stock
of which 3,137.60 are issued and outstanding. There is no other
class of stock. There are on options, rights or agreement
relative to any of the IMA shares.
Financial Statements. The financial statements provided DVBC by IMA contained in
the business plan dated September, 1997 are true and correct and properly
present the financial condition of IMA.
No Undisclosed Liabilities. IMA is not subject to any undis-
closed material liability or obligation.
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Litigation. There is no litigation, proceeding or investigation
pending or threatened against IMA or any of its officers or
directors.
Title of Assets. IMA has good and marketable title to all of its assets and
properties carried on its balance sheet, free and clear of all liens or
encumbrances, except those reflected on its financial statements.
Defaults. IMA is not in material default, or alleged to be in
material default, under any contract or obligation.
Transactions with Affiliates, Directors and Shareholders. There are no contracts
or agreements between the officers and directors of IMA that have an adverse
material effect on IMA.
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IMA Audit. IMA, out of the proceeds of the DVBC investment, agrees to engage
Pritchett, Silver & Hardy to conduct a certified audit of IMA and to complete
said audit within 60 days of the first closing.
Authority. IMA has the full power and authority to enter into
this Agreement.
Closing. The closing will have two parts.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants of the officers and directors of
IMA shall survive the closing of this transaction and remain in full force and
effect.
CERTAIN AGREEMENTS AND UNDERSTANDINGS
MISCELLANEOUS
Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties. There are no representations,
agreements, or undertaking other than those set forth herein or
therein.
Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
parties hereto as the date first above written.
International Marketing & Advertising, Inc.
By:
Roberto Galoppi Title
By:
Fabio Galoppi Title
By:
Andrea Ciba Title
Development Bancorp, Ltd.
, Director
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