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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
PRO TECH COMMUNICATIONS, INC.
(Name of Small Business Issuer in its charter)
FLORIDA 59-3281593
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3311 INDUSTRIAL 25TH STREET, FT. PIERCE, FLORIDA 34946
(Address of principal executive offices, including zip code)
Issuer's telephone number: (407) 464-5100
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
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(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Pro Tech Communications, Inc. (the "Company") was incorporated in
the State of Florida on October 5, 1994. From August 30, 1991 to October 31,
1994, the Company's business was conducted by Pro Tech Systems, a limited
partnership organized under the laws of the State of California. Keith Larkin,
the President, Treasurer and Chairman of the Board of the Company, was the
general partner of Pro Tech Systems and there were 12 limited partners in the
limited partnership. From the formation of Pro Tech Systems in August 1991
until June 1993, the limited partnership was involved in engineering and
designing lightweight telecommunications headsets as well as preliminary
marketing efforts for the product. From June 1993 until October 1994, Pro Tech
Systems was engaged in limited manufacturing and marketing activities for its
product. On November 1, 1994, all of the assets of Pro Tech Systems were
transferred to the Company as consideration for the issuance of 2,000,000
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), which were subsequently distributed on a pro rata basis to each of the
partners of the partnership. As of December 13, 1994, Pro Tech Systems was
formally dissolved.
The Company presently designs, develops, manufactures and markets
lightweight telecommunications headsets employing what the Company believes are
new concepts in advanced lightweight design and marketing strategies involving
the sale of the Company's product directly to the commercial headset market as
a replacement for its competitors' products. The Company presently
manufacturers and markets its first design for the commercial headset market
comprised of fast food companies and other large quantity users of headset
systems, and is in the process of completing development of a second design for
the telephone user market, which includes telephone operating companies,
government agencies, business offices, and professional telephone centers. The
Company will commence testing this product in the fourth quarter of 1996.
The Company's business strategy is to offer lightweight headsets with design
emphasis on performance and durability at a cost below that of its competitors.
The Company intends to concentrate its efforts on the production
of that portion of the telephone headset that the user wears. There are two
components to a complete telephone headset. The first is the headset component
that the user wears, consisting of a receiver capsule and a voice tube. The
second is the electronic amplifier component which plugs into the telephone
system to be operated. Of the two components, the electronic amplifier is
relatively more complex, time consuming and costly to produce as it requires
many variations to interface with the wide variety of telephone systems in the
market and generates higher labor and material costs. The electronic amplifier
also generally offers lower profit margins than the headset component. As a
result, the Company presently does not intend to produce electronic amplifiers,
but will concentrate its efforts on the production and distribution of the
headsets having the capability of connecting to and interfacing with the
various electronic
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amplifiers and telephone systems currently in use. The Company is conducting
its own market study to determine whether it would be financially viable for
the Company to produce its own electronic amplifier. The Company believes the
study will be completed in the fall of 1996. If it is determined to proceed
with the production, marketing and sale of an amplifier, the Company
anticipates spending approximately $200,000 to research and develop the
product.
INDUSTRY BACKGROUND
The lightweight telephone headset industry commenced in 1961
when Plantronics, Inc. ("Plantronics"), a company founded by Keith Larkin, the
Company's President, Treasurer and Chairman of the Board, began marketing and
selling the first lightweight telephone headset under a patent issued to Mr.
Larkin. Mr. Larkin remained with Plantronics until May 1967, at which time
Plantronics was the principal manufacturer of lightweight telephone headsets in
the world, and its products were standard on the National Aeronautics and Space
Administration's Mercury, Gemini, and Apollo moon flights. See "DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS." Today, Plantronics is the
world's largest lightweight telephone headset manufacturer, with approximately
$170 million of net sales for the 1995 fiscal year.
The Company estimates that sales of lightweight telephone headsets
exceeded $200 million in 1995 with the market dominated by two companies -
Plantronics and ACS Wireless, Inc. ("ACS Wireless") - which were both founded
by Keith Larkin and which both produced headsets under his patents. Product
lines of the Company's competitors generally share similar configurations, and
are marketed at higher prices than the headset offered by the Company.
Designed specifically for air traffic controllers and other
aerospace applications, the first headsets were intended as a replacement for
the heavy, bulky headsets then in use. While lightweight telephone headset
continue to be used for such purposes, today telephone headsets are
predominantly used as a substitute to telephone handsets by a wide variety of
users, including telephone operating companies and telephone call centers (such
as airline reservations, catalog sales and credit collection operations) and to
a lesser extent, by business persons and other professionals whose occupations
require extensive, though not constant, use of the telephone. In comparison to
handsets standard on most telephones, telephone headsets provide users with the
ability to perform other tasks while communicating via telephone and as a
result are designed to allow users to work more effectively and efficiently.
In comparison to speaker phones, telephone headsets provide greater
communications clarity and security. The Company believes that these advantages
will lead to increased demand for telephone headsets.
Telephone headsets also have commercial applications, primarily
two-way radio communication systems, such as those used by fast food attendants
to communicate with patrons and other personnel. Personal computer
applications for telephone headsets include audio input and output via voice
command, voice dictation and integrated voice telephone functions.
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PRODUCTS
The ProCom. The Company's initial entry into the lightweight
telephone headset market is the "ProCom." Weighing less than 2 ounces, the
ProCom is worn by users over the head by means of a springsteel wire headband
and a cushioned earphone. Attached to the earphone, which may be worn over
either ear, is an adjustable boom which connects to the ProCom's microphone.
The ProCom headset connects to the electronic amplifier or telephone system by
means of a tensile cable at the end of which is attached an adaptor capable of
interfacing with the particular electronic amplifier or telephone system
employed by the user. Through the use of different adapters, the Company is
currently able to equip the ProCom to be compatible with all of the electronic
amplifiers and telephone systems currently in use. The ProCom will be offered
in direct competition with all models offered by Plantronics, ACS
Communications, GN Netcom, Inc. and UNEX Corporation. See "DESCRIPTION OF
BUSINESS - Competition." The Company is presently selling the ProCom to
distributors at prices ranging from $28.00 to $49.00 per headset, and the
product is sold by the Company to retailers for $54.00 per headset.
The Trinity. The Trinity has been designed for users in noisy
office environments. The Company is currently in the process of developing the
Trinity for manufacture and sale. The Company anticipates completing the
development of the product by the fourth quarter of the 1996 calendar year.
Unlike other headsets currently available, the Trinity will employ a light (1/2
ounce) "acoustical ear cup" which completely surrounds the users' ear. The
perimeter of this cup rests lightly in a broad area of contact around the ear,
rather than against or in the ear itself, which the Company believes will allow
the user to wear the Trinity in comfort for extended time periods. Moreover,
by enclosing the ear, the acoustical ear cup reduces background noise, thereby
significantly improving the clarity and strength of reception from the
earphone. The Trinity has been designed as a comfortable and lightweight
alternative to the bulky commercial sound suppressant headsets which are
presently the only headsets available to users operating in noisy office
environments. The Trinity can be worn in one of two mounting methods: (i) over
the ear (without a headband) by means of a contoured ear piece inserted within
the acoustical ear cup for positioning on either the left or right ear; or (ii)
over the head, by means of a detachable headband which can support either one
or two earcups. Like the ProCom, the Trinity will be produced with a choice of
adapters capable of interfacing with the electronic amplifiers and telephone
systems of most major manufacturers. The Company presently intends to sell the
Trinity to distributors at prices ranging from $46.00 to $54.00 per headset,
and the product is expected to be sold by the Company to retailers for $68.00
per headset.
The Freedom. The Company intends to introduce the Freedom headset
for sale in the fourth quarter of 1996. After conducting its own market
research, the Company determined that there is a demand for a headset which
combines both the over-the-head and over-the-ear features. As a result, the
Company designed the Freedom to incorporate both of these features, which
should enhance the Company's ability to market the product to cellular,
personal computer and small office telephone users. The Freedom is a
commercial adaptation of the headset that the Company has designed for use by
the National Aeronautics and Space
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Administration ("NASA"). Boeing Defense and Space Group ("Boeing") is a prime
contractor for NASA, and as such has the responsibility to choose certain
components and products used in NASA's space program. The Company was chosen
by Boeing as a supplier of telephone headsets for NASA projects after the
Company provided Boeing with product specifications which met NASA's
requirements for the product. Boeing also subjected the Company's product to
various tests in order to ensure that the product would function under
conditions for space travel. See "DESCRIPTION OF BUSINESS - Marketing and
Sales."
The Freedom is a smaller design of the Trinity, with some
components reduced by 20% in order to create a lightweight headset. The ear
speaker and microphone positioning can be adjusted by the user of the headset,
thereby allowing the product to fit numerous head and ear sizes. In addition,
the Freedom has a detachable headband allowing users the choice of wearing the
headset over the head or over the ear. The Company presently intends to sell
the Freedom to distributors at prices ranging from $28.00 to $49.00 per
headset, and the product is expected to be sold by the Company to retailers for
$54.00 per headset.
The disparity in price between the cost to distributors and
retailers for each product described in this section is primarily a result of a
shifting of direct selling expenses from the Company to distributors. These
expenses, which average approximately $10.26 of the individual unit retail
price, have been accepted by distributors in return for a lower average
purchase price. The Company offers lower prices for its products to
distributors which purchase certain quantities of products to increase sales
and gain market share for the Company's products.
MARKETING AND SALES
The Company presently intends to market its products primarily
through its officers and staff, utilizing industry contacts and calling upon
potential purchasers. The Company plans on supplementing the marketing efforts
of its employees by using independent sales representatives after all of the
Company's products have been introduced into the market.
The Company markets and will continue to market its headsets
directly to the commercial headset market as a replacement for its competitors'
headsets. Examples of such purchasers include fast food companies and
franchisees and other large quantity users of commercial headset systems. The
Company has entered into a non-binding business relationship agreement with
McDonald Corporation ("McDonald") which allows the Company to sell its products
on a non-exclusive basis to McDonald franchisees and company-owned restaurants.
Initial test sales to McDonald and its franchisees by the Company and Pro
Tech Systems totaled $424,300 in 1994, which included sales of over 8,000
headsets to more than 3,500 McDonald restaurants. These numbers have
increased by over 18,600 headset sales to more than 7,000 restaurants during
the fiscal year ended October 31, 1995. Sales of 9,375 headsets were made to a
total of approximately 1,000 new customers during the first six months of the
current fiscal year. The sale of the Company's products to McDonald-owned
restaurants and franchisee restaurants represented approximately 60% and 35% of
the Company's net sales for fiscal year 1995 and the first six months of fiscal
1996, respectively.
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As the Company expands, it will direct its marketing and sales
efforts at: (i) telephone operating companies; (ii) telephone system
manufacturers; (iii) personal computer manufacturers; and (iv) government
agencies. Manufacturers of new telephone systems and other telecommunication
equipment that utilize headsets have been targeted by the Company as a
developing market for telephone headsets. Although the Company presently
intends to attempt to sell its products to Rockwell, Northern Telecom
Teknetron, and other large telephone headset users, there can be no assurance
that the Company will be successful in such efforts. Another potential large
volume purchaser of headset are manufacturers of personal computers, especially
if and when headsets become a standard personal computer accessory. In
addition, the Company plans to market its products to government agencies. The
Company's headset has been approved for sale to Boeing, a prime contractor of
NASA, for use by astronauts in outerspace. To date, the Company has had
$3,825 of sales to Boeing for two prototype headsets. While profits from
government contracts are anticipated to be minimal, such sales enhance the
credibility and reputation of the selected headset and manufacturer, especially
within the telephone industry.
The Company's directed marketing and sales efforts will be
supplemented by the distribution of the Company's products through established
channels of distribution. These include: (i) specialized headset distributors
that derive a majority of their revenues from the sale of headsets to both end
users and, to a lesser extent, resellers; and (ii) larger electronic
wholesalers that offer hundreds of products, including headsets. It is
anticipated that a majority of sales of the Company's headsets to commercial
users such as credit card companies and airlines will be through such
distributors.
As of June 26, 1996, the Company, in order to supplement its
marketing efforts, entered into two-year marketing agreements with each of
Martin Goldberg, Costas Takkas and Don Fraser, pursuant to which Mr. Goldberg
was granted the non-exclusive right to market the Company's products throughout
the United States, Mr. Takkas was granted the non-exclusive right to market
such products in Central and South America and the Caribbean, and Mr. Fraser
was granted the non-exclusive right to market such products in all other parts
of the world. As consideration for the services to be rendered by each of such
persons, the Company granted each of such persons a warrant to purchase up to
200,000 shares of Common Stock at an exercise price of $1.50 per share. The
warrants are exercisable commencing on September 26, 1996, and expire two years
thereafter. Under each of the agreements, the Company has also agreed to pay
each of such persons two percent of the sales of the Company's products
resulting from the efforts of Messrs. Goldberg, Takkas and Fraser. To date,
the Company has not sold any of its products through the efforts of Messrs.
Goldberg, Takkas or Fraser.
MANUFACTURING
The Company purchases the components for its headsets from four
suppliers in the Far East and 12 in the United States, who produce the
components to the Company's specification based upon molds designed by the
Company. The firms that supply 90% of the component parts of the Company's
products are Whitney Blake Company of Vermont, Inc., Bellows Falls, Vermont;
Primo Microphones Inc., McKenny, Texas; Globe Electronic Plug Connector, Inc.,
Taiwan; Chen Shing Spring Co., Ltd., Taiwan; and Fine Acoustics Company,
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Ltd., Korea. An interruption in the supply of a component for which the
Company is unable to readily procure a substitute source of supply could
temporarily result in the Company's inability to deliver products on a timely
basis, which in turn could adversely affect its operations. To date, the
Company has not experienced any shortages of supplies. In order to meet the
requirements of its customers for timely delivery of products, the Company
manufactures headsets to meet forecasted customer requirements. Since such
manufacturing occurs prior to the receipt of purchase orders, the Company
maintains an inventory of finished headsets as well as components. At October
31, 1995, the amount of the Company's inventory was $90,061. For the six-month
period ended April 30, 1996, the amount of the Company's inventory was
$98,024.
Production of the Company's headsets consists of assembly
operations conducted at the Company's principal offices in Fort Pierce,
Florida. The Company believes that the Fort Pierce office presently possesses
sufficient production capacity, or could easily be expanded to accommodate up
to $4 million of sales of the Company's products. See "DESCRIPTION OF
PROPERTY." In the event that purchase orders were to exceed the production
capabilities of the Fort Pierce location, the Company would be required to
enter into subcontracting arrangements for the manufacturer of the Company's
products by third parties. A delay in establishing such arrangements, if
necessary, could adversely affect the Company's ability to deliver products on
a timely basis to its customers, which in turn could adversely affect the
Company's operations. The Company, however, believes that subcontracting the
manufacture of the Company's products could be accomplished on short notice
given the simple design of the Company's products.
COMPETITION
The lightweight telephone headset industry is highly competitive
and characterized by a few dominant manufacturers. The Company is aware of
several companies which manufacture telephone headsets, each of which possesses
greater financial, manufacturing, marketing and other resources than the
Company. Primary among the Company's competitors is Plantronics, the world's
largest manufacture of lightweight telephone headset, which estimates its share
of the market to be 65% in North America and 60% worldwide and reported net
sales from all of its products (including electronic amplifiers and other
headset accessories and services) of approximately $170 million for the fiscal
year 1995. Other competitors include ACS Wireless, GN Netcom, Inc. and UNEX
Corporation. ACS Wireless was founded by Mr. Larkin, and the Company believes
ACS Wireless has a market share of approximately 15%. See "DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS."
The Company believes that in selecting telephone headsets, users
primarily consider price, product quality, reliability, product design and
features, and warranty terms. The Company believes that its headsets are
superior in design and construction and substantially lower in price than the
models currently available from the Company's competitors. No assurances can
be given, however, that the Company's products will be perceived by users and
distributors as providing a competitive advantage over competing headsets. In
addition, no assurance can be given that competing technologies will not become
available which are
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superior, less costly or marketed by better known companies. Also, certain
customers may prefer to do business with companies with substantially greater
resources than the Company.
In addition to direct competition from other companies offering
lightweight telephone headsets, the Company may additionally face indirect
competition in its industry from technological advances such as interactive
voice response systems which require no human operators for certain
applications such as account balance inquiries or airplane flight information.
The Company believes that this competition will be more than offset by
increased demand for headsets as voice telecommunication applications expand.
PROPRIETARY PROTECTION
The Company does not presently own any patents for any of its
products or technologies. Under the employment agreement of Keith Larkin, the
Company's President, Treasurer, and Chairman of the Board, Mr. Larkin has,
however, transferred to the Company any and all patentable rights he may have
in the ProCom, Trinity, and the Freedom, and any feature thereof, as well
as all other patent rights Mr. Larkin may conceive in the course of his
employment with the Company. See "EXECUTIVE COMPENSATION-Employment
Agreement." The Company intends to seek patent protection on its inventions at
the appropriate time in the future. The process of seeking patent protection
can be lengthy and expensive, and there can be no assurance that patents will
issue from any applications filed by the Company or that any patent issued will
be of sufficient scope or strength or provide meaningful protection or any
commercial advantage to the Company. The Company may be subjected to, or may
initiate, litigation or patent office interference proceedings, which may
require significant financial and management resources. The failure to obtain
necessary rights or the advent of litigation arising out of any such claims
could have a material adverse effect on the Company's operations.
Certain of the Company's employees involved in engineering and
technical programs will be required to enter into confidentiality agreements as
a condition of employment. The Company does not currently own any registered
trademarks, although the Company intends to file trademark applications in the
future with respect to its distinguishing marks.
EMPLOYEES
The Company currently has 13 full-time employees and 2 part-time
employees, including 3 persons in management, 3 persons in administration, 2
persons in marketing and 5 persons in assembly and production. The Company
intends to hire up to 8 additional employees within the next three months, 4 of
whom will work in production, 2 in marketing and 1 each in shipping and
customer service. None of the Company's employees are represented by a
collective bargaining unit, and the Company believes that its relationship with
its employees is good.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
SIX-MONTH PERIOD ENDED APRIL 30, 1996 AS COMPARED TO SIX-MONTH PERIOD ENDED
APRIL 30, 1995.
Net sales for the six-month period ended April 30, 1996 totalled
$403,805, representing a decrease of $4,502 in net sales for the comparable
prior six-month period. The Company commenced the sale of its product through
distributors during the first six months of fiscal 1996. During such period,
the Company sold a total of 9,375 headsets, as compared to 8,099 headsets for
the comparable prior six-month period.
The Company only sold its products directly to the end user
until the beginning of fiscal 1996. Thereafter, the Company also sold its
products to distributors at discounted prices in order to gain market share.
See "DESCRIPTION OF BUSINESS - Products." As a result, the cost of goods sold
for the six months ended April 30, 1996 was $162,907, as compared to $138,435
for the comparable prior six-month period. The increase of $24,472 resulted
from material to build the products ($8,455), direct labor expense ($11,073)
and overhead attributable to the products ($4,904). The increase in cost of
goods sold was caused by the Company's decision to sell products to
distributors as well as directly to end users. Distributors made large volume
purchases requiring the Company to carry larger inventories of finished goods
as compared to the prior comparable six-month period. Accordingly, the
Company's gross profit for the six-month period ended April 30, 1996 decreased
by $28,973 from the comparable prior six-month period.
Selling, general and administrative expenses for the first six
months of fiscal 1996 increased by $7,977 over the comparable six-month
period. The increase in such expenses resulted from investments of $22,631 in
marketing research offset by the permanent closing in July 1995 of the
Company's sales office in California, which resulted in a savings of $14,654.
Consequently, net income from operations decreased approximately 49% for the
first six months of fiscal 1996 over the comparable prior six-month period.
The Company generated interest income of $12,908 for the first six
months of fiscal 1996 as compared to interest income of $1,003 for the
comparable prior six-month period. The interest income resulted from the
Company's investment of the net proceeds from the private placement of
securities during the six-month period ended April 30, 1996. Offsetting the
interest income during the first six months of fiscal 1996 was an interest
expense of $13,868 resulting from a loan of $250,000 from a stockholder of the
Company. No comparable interest expense was incurred during the first six
months of fiscal 1995. The loan was originally planned to support the
Company's research and development efforts and as a reserve for unanticipated
cash requirements. Because the Company decided that the proceeds of the loan
would not be needed, the principal amount of the loan and accrued interest of
$13,868 were repaid in April 1996. The principal amount of the loan accrued
interest at the rate of 14.3% per annum. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
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The Company generated net income of $35,575 for the first six
months of fiscal 1996 as compared to net income of $82,063 for the first six
months of fiscal 1995. The principal reasons for the decrease in net income
between the periods were the Company's investment in market research and
research and development of $32,105 during the first six months of fiscal 1996
versus $2,670 for the comparable prior six-month period, the implementation of
a new computer system during the first six months of fiscal 1996, which
resulted in an expense of $8,815, as compared to no comparable expense during
the first six months of fiscal 1995, and the decrease in profit margin
resulting from the sale of the Company's product primarily through
distributors, rather than directly to end users, during the first six months of
fiscal 1996. Sales through distributors were made at lower prices than sales
to end users.
FISCAL YEAR ENDED OCTOBER 31, 1995
For the fiscal year ended October 31, 1995, the Company realized
net sales of $830,667 on the sale of 17,599 headsets. Cost of goods sold for
this period was $358,595, which resulted in gross profits of $472,072. Net
income for the 12-month period totalled $43,959, after non-recurring expenses
and auditing expenses in excess of $50,000 related to the Company's sale in
1995 of 864,000 shares of Common Stock and corporate start-up expenses.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio (current assets to current liabilities) of the
Company was 2.50 to 1.00 at October 31, 1995 and working capital was
$412,373. For the six-month period ended April 30, 1996 the current ratio was
77.3 to 1.00 and current assets exceeded current liabilities by 920,942,
primarily as a result of the Company's private placement of securities during
the period and the repayment of a loan of $250,000 from a stockholder of the
Company. The Company's working capital was $920,942 for the six-month period
ended April 30, 1996, as compared to $472,533 for the comparable prior
six-month period.
During the fiscal year ended October 31, 1995 and thereafter, the
Company has funded its working capital requirements with cash flow from
operations and the net proceeds of $852,226 from the private sale of 1,964,000
shares of Common Stock. The Company intends to use the cash it generates from
operations and the net proceeds from the private sale of Common Stock to
increase its market share in the fast-food headset market and to enter the
telephone user market. Management believes that the Company has sufficient
funds to meet the Company's anticipated working capital requirements for at
least 12 months.
Effective December 9, 1994, the Company entered into an amended
and restated employment agreement with Keith Larkin, the President, Chairman of
the Board and Treasurer of the Company. Under the agreement, Mr. Larkin will
be entitled to receive an annual salary of up to $90,000 (as adjusted each
year by at least the percentage increase in the Consumer Price Index). The
Company, however, is only required to pay Mr. Larkin such maximum annual salary
if the Company generates annual sales for a fiscal year of at least $2 million
and has pre-tax income equal to at least 20% of the Company's annual sales. In
all other cases, the Board of Directors sets Mr. Larkin's salary, taking into
account the Company's projected
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financial performance and cash required to satisfy the Company's anticipated
operating expenditures. See "EXECUTIVE COMPENSATION-Employment Agreement."
In order for the Company to maximize the potential of the
telephone user market and to enable the Company to expand into additional
markets, including government agencies and personal computers, the Company will
require additional capital. It is anticipated that the Company will seek to
raise such additional financing through a private or public offering of equity,
although there are presently no agreements, understandings or arrangements with
respect to any additional financing and no assurances can be given that the
Company will be able to obtain such additional financing. The Company
presently does not intend to finance, to any significant extent, its growth
through debt financing.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's executive, sales and manufacturing offices occupy
approximately 3,200 square feet of space located at 3309 and 3311 Industrial
25th Street, Fort Pierce, Florida 34946, pursuant to two leases expiring on
November 30, 1997. The Company also has the option of renewing the leases
expiring in November 1997 for an additional two-year period on the same terms
and conditions, except the monthly rental rate will increase by approximately
$20.00 per month. The Company's aggregate monthly rent under both leases is
$1,425.67. The Company considers its rental space adequate for its present
operations, and believes additional space is available near its present
location, if needed.
(The balance of this page is intentionally left blank.)
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Common Stock as of August 30, 1996 by: (i) each of the Company's officers and
directors; (ii) each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock; and (iii) all of the
Company's officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address of Shares Owned
Beneficial Owner Beneficially Percentage of Class
------------------- ------------ -------------------
<S> <C> <C>
Keith Larkin 1,580,000(1) 35.1%
c/o Pro Tech Communications, Inc.
3311 Industrial 25th Street
Fort Pierce, Florida 34946
Kenneth Campbell 25,000(2) 0.6%
c/o Pro Tech Communications, Inc.
3311 Industrial 25th Street
Fort Pierce, Florida 34946
Richard Hennessey 25,000(2) 0.6%
c/o Pro Tech Communications, Inc.
3311 Industrial 25th Street
Fort Pierce, Florida 34946
Harris McLean Financial Group, Ltd. 220,000(3) 5.3%
P.O. Box 30758
Cayman Islands, B.W.I.
All officers and directors as a group 1,630,000(1)(2) 35.8%
(3 persons)
</TABLE>
_________________________
(1) Includes 540,000 shares of Common Stock underlying a stock option, which
is presently exercisable at $.50 per share and expires on April 15, 1999.
(2) Represents 25,000 shares of Common Stock underlying a stock option, which
is presently exercisable at $.50 per share and expires on April 15, 1999.
(3) Includes 200,000 shares of Common Stock underlying an option which is
presently exercisable at $.60 per share and expires on May 2, 1997.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to
the executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Keith Larkin 72 Chairman of the Board, President and Treasurer
Kenneth Campbell 53 Director, Secretary and Vice President-Operations
Richard Hennessey 37 Vice President - Marketing
</TABLE>
Keith Larkin is the founder, Chairman of the Board, President and
Treasurer of the Company. Mr. Larkin's 30 year professional career has been
devoted to designing, manufacturing and marketing his new designs in
lightweight telephone headsets. In 1961, Mr. Larkin founded Plantronics, the
current industry leader in lightweight telephone headsets with annual sales of
all its products (including the electronic amplifier) in 1995 of approximately
$170 million. From 1961 until he sold his interest in 1967, Mr. Larkin served
as the President and Chairman of Plantronics, during which period Plantronics
established itself as the main source of lightweight telephone headsets to the
telephone industry and provided the headsets for NASA's Mercury, Gemini and
Apollo moon flights. In the late 1970s, Mr. Larkin conceived, developed and
patented a new design in headsets, and in 1980, he founded ACS Wireless to
manufacture a new line of headsets to compete against the Plantronics'
headsets. With Mr. Larkin as its President, ACS Wireless attained $1 million
monthly sales figures to the telephone market within 3 years of operations and
replaced Plantronics' headsets on the NASA Space Shuttle. In 1986, he left ACS
Wireless to become involved in Christian children's relief programs in Haiti
and Honduras for a period of three years. From January 1989 to August 1991,
Mr. Larkin served as the President of Advanced Recreational Technology, Inc.,
an engineering research and development company owned by Mr. Larkin. In August
1991, Mr. Larkin founded Pro Tech Systems, a California limited partnership
which he managed as general partner. Pro Tech Systems was formed to design,
manufacture and market lightweight telephone headsets. Upon the transfer of
all of the assets of Pro Tech Systems to the Company in November 1994, Mr.
Larkin became the Chairman of the Board, President and Treasurer of the
Company, positions which he has held since such time.
Kenneth Campbell has held the positions of Vice
President-Operations, Secretary, and a director of the Company since November
9, 1994. As Vice President-Operations, Mr. Campbell is responsible for all
aspects of manufacturing including materials management, production, quality
control, and all related accounting. From 1967 through 1979, he served as the
President of the Boathouse of Lexington, Inc., a corporation dealing in a line
of pleasure boats manufactured by the SeaRay Corporation. From 1980 through
1989, Mr. Campbell owned several retail businesses specializing in consumer
product sales, including Campbell
12
<PAGE> 14
Distributors, Inc. and Campbell & Associates of Fort Pierce, Florida, Mr.
Campbell has been employed as a real estate broker for Prudential Real Estate
in 1990/1991 and as a sales manager for Pace Homes, Inc. and Versa Development,
Inc. from 1992 to 1993.
Richard Hennessey joined the Company as Director of Marketing in
August 1995 and was appointed Vice President - Marketing on June 10, 1996.
From 1982 through 1984, Mr. Hennessey was a salesman with the computer sales
division of Lanier Business Products located in Boston, Massachusetts. From
1984 through April 1994, Mr. Hennessey held various new venture sales and sales
management positions with Digital Equipment Corporation ("Digital"). From
January 1995 until Mr. Hennessey joined the Company, he was engaged in
voluntary missionary work.
ITEM 6. EXECUTIVE COMPENSATION
Set forth below is certain information concerning the compensation
paid to the Company's chief executive officer for the fiscal year ended October
31, 1995. No other executive officer of the Company received compensation in
excess of $100,000 for such fiscal year.
SUMMARY COMPENSATION TABLE
The following table provides the cash and other compensation paid
or accrued by the Company to its chief executive officer for the fiscal year
ended October 31, 1995:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Securities
Restricted Underlying
Other Annual Stock Stock LTIP All Other
Name/Position Year Salary Bonus Compensation Awards Options Payouts Compensation
- ------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Keith Larkin 1995 $22,500 0 $0 0 0 0 0
</TABLE>
EMPLOYMENT AGREEMENT
Effective December 9, 1994, Keith Larkin entered into a five-year
amended and restated employment agreement with the Company, pursuant to which
he has the duties of President and Treasurer of the Company and has a right to
receive an annual salary of up to $90,000, which may increase each year by an
amount not less than the percentage increase in the United States Consumer
Price Index. Under the agreement, Mr. Larkin will only be entitled to receive
an annual salary of $90,000 if the Company generates annual sales for a fiscal
year of $2 million and has pre-tax income equal to at least 20% of the
Company's annual sales. In all other cases, the Board of directors sets Mr.
Larkin's salary, taking into account the Company's projected financial
performance and cash required to satisfy the Company's anticipated operating
expenditures. As part of the consideration Mr. Larkin provided to the Company
in exchange for the Company's obligations under the employment agreement, Mr.
13
<PAGE> 15
Larkin assigned all of his rights, title and interest in and to any and all
inventions, discoveries, developments, improvements, processes, trade secrets,
trademark, copyright and patent rights of which he conceived during the five
years prior to the date of the agreement. This provision covers the patent
rights, if any, associated with the ProCom, Trinity and Freedom lightweight
telephone headsets. For the fiscal year ended October 31, 1995, the Company
paid Mr. Larkin a salary of $22,500, and Mr. Larkin will receive a salary
of $40,000 for the fiscal year ending October 31, 1996.
The Company does not have written employment agreements with Kenneth
Campbell or Richard Hennessey. During the fiscal year ended October 31, 1995,
the Company paid Messrs. Campbell and Hennessey salaries of $40,000 and $7,500,
respectively. For the fiscal year ending October 31, 1996, the Company will pay
Messrs. Campbell and Hennessey salaries of $48,000 and $40,000, respectively.
STOCK OPTION PLAN
In April 1996, the Board of Directors of the Company adopted the
Company's 1996 Stock Option Plan (the "Plan"). The Plan provides for the grant
by the Company of options to purchase up to an aggregate of 590,000 of the
Company's authorized but unissued shares of Common Stock (subject to adjustment
in certain cases including stock splits, recapitalizations and reorganizations)
to officers, directors, consultants, and other persons rendering services to
the Company.
The purposes of the Plan are to provide incentive to employees,
including officers, directors and consultants of the Company, to encourage such
persons to remain in the employ of the Company and to attract to the Company
persons of experience and ability. The Plan terminates on April 15, 2006.
Options granted under the Plan may be either incentive stock options
within the meaning of the Internal Revenue Code of 1986, as amended ("incentive
options"), or options that do not qualify as incentive options ("nonqualified
options"). The exercise price of incentive options must be at least equal to
the fair market value of the shares of Common Stock on the date of grant;
provided, however, that the exercise price of any incentive option granted to
any person who, at the time of the grant of the option, owns stock aggregating
10% or more of the total combined voting power of the Company or of any parent
or subsidiary of the Company ("Ten Percent Shareholder"), must not be less than
110% of the fair market value of such shares on the date of grant of the
incentive option. No incentive option may be granted under the Plan to any
individual if the aggregate fair market value of the shares (determined as of
the time the option is granted) which vest (i.e. first become exercisable)
during any calendar year, under all incentive options held by such optionee
exceeds $100,000. There is no limitation on the amount of nonqualified stock
options which may be granted to any participant in the Plan. Options may be
granted under the Plan for terms of up to ten years; provided, however, that
the term of any incentive option granted to any Ten Percent Shareholder, may
not exceed five years. Options granted under the Plan to officers, directors or
employees of the Company may be exercised only while the optionee is employed
or
14
<PAGE> 16
retained by the Company. However, options which are exercisable at the time of
termination may be exercised within three months of the date of termination,
and twelve months after termination of the employment relationship or
directorship if such termination was by reason of death or permanent disability
of the optionee.
On April 15, 1996, options to purchase 25,000 shares were granted to
each of Kenneth Campbell and Richard Hennessey and options to purchase 540,000
shares were granted to Keith Larkin. All of such options are immediately
exercisable at the option price of $0.50 per share and expire on April 15,
1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 1, 1994, all of the assets of Pro Tech Systems, a
California limited partnership, were transferred to the Company. In exchange,
the Company issued 1,000,000 shares of Common Stock to Mr. Larkin (the general
partner of the partnership) and 1,000,000 shares to the 12 limited partners of
the partnership.
On September 12, 1995, Euro Investment Corporation, a corporation
organized under the laws of the Cayman Islands, loaned the Company $250,000.
Interest on the principal amount of the loan accrued at the rate of 14.3% and
all principal and accrued interest was payable on demand. The loan was secured
by the Company's accounts receivable. In April 1996, the Company repaid the
principal amount of the loan and all accrued interest thereon ($13,868). At
the time such loan was made to the Company, Eurovest Securities Ltd.
("Eurovest"), a corporation organized under the laws of the Cayman Islands,
beneficially owned approximately 5.2% of the Company's then-issued and
outstanding Common Stock. Don Fraser, an individual who has entered into a
two-year marketing agreement with the Company, controls Euro Investment
Corporation which owns 50% of the stock of Eurovest. See "DESCRIPTION OF
BUSINESS-Marketing and Sales."
In connection with the Company's sale of 1,964,000 shares of Common
Stock during 1995 and 1996, Harris McLean Financial Group, Ltd. ("Harris
McLean") acted as sales agent for the Company with respect to the sale of
shares outside of the United States. As consideration for the services of
Harris McLean, the Company paid such firm a commission of $40,950 and granted
the firm an option (without the payment of any cash consideration) to purchase
200,000 shares of Common Stock at an exercise price of $.60 per share. The
option is presently exercisable and expires on May 2, 1997.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 10,000,000 shares of Common
Stock, par value $.001 per share. As of August 30, 1996, there were
3,964,000 shares of Common Stock issued and outstanding to 24 stockholders of
record.
Holders of Common Stock are entitled to cast one vote for each share
owned of record at all stockholder meetings for all purposes. Since holders of
Common Stock do not have cumulative voting rights, holders, individually or as
a group, of more than 50% of the outstanding shares of Common Stock present and
voting at an annual meeting of stockholders
15
<PAGE> 17
at which a quorum is present can elect all of the directors of the Company.
Holders of Common Stock have no preemptive rights and have no right to convert
their Common Stock into any other securities. All of the outstanding shares of
Common Stock are fully paid and nonassessable.
Holders of Common Stock are entitled to receive ratably on a
pro-rata basis dividends, if any, as may be declared from time to time by the
Board of Directors in its sole discretion from funds legally available
therefor. No dividends have been declared since the Company was formed in
October 1994. In the event of liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to receive ratably on a
pro-rata basis the Company's assets, if any, remaining after payment of the
Company's liabilities.
American Stock Transfer & Trust Company, New York, New York, serves
as transfer agent for the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Common Stock began trading on the National Association of
Securities Dealers, Inc. Electronic Bulletin Board on March 22, 1996. On
August 30, 1996, the closing bid price of the Common Stock as reported on the
Electronic Bulletin Board was $2 7/8. The market quotation reflects
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not represent an actual transaction. As of August 30, 1996, there were 42
record holders of the Common Stock.
As of August 30, 1996, there were 3,964,000 shares of Common Stock
issued and outstanding, of which 1,964,000 shares were offered and sold in
reliance on the exemption from registration provided by Rule 504 of Regulation
D promulgated under the Securities Act of 1933 (the "Securities Act"). The
shares of Common Stock acquired pursuant to Rule 504 may be resold without
registration under the Securities Act, unless the holders of such shares would
be deemed underwriters or dealers. The balance of the outstanding shares of
Common Stock, representing 2,000,000 shares, are restricted securities and
unless registered under the Securities Act may not be sold publicly until
November 1996, at which time such shares may be sold pursuant to Rule 144
promulgated under the Securities Act. Generally, Rule 144 permits the sale by
a stockholder, within any three-month period, of such amount of shares which
does not exceed the greater of 1% of the then-outstanding shares of Common
Stock or the average weekly trading volume during the four calendar weeks
prior to such sale.
The Company granted an option to Harris McLean to purchase 200,000
shares of Common Stock at exercise price of $.60 per share. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." The option is presently exercisable
and expires on May 2, 1997. The option was issued, and the shares underlying
the option will be issued, pursuant to Regulation S promulgated under the
Securities Act. Accordingly, if Harris McLean exercises the option after the
effective date of this Report, the shares acquired pursuant to the exercise
16
<PAGE> 18
of the option may be publicly resold in the United States only in compliance
with the registration requirements of the Securities Act or an exemption
therefrom.
The Company granted options to purchase 590,000 shares to the
executive officers of the Company pursuant to Rule 701 promulgated under the
Securities Act. Accordingly, the shares underlying the options may be publicly
resold by such executive officers 90 days after the effective date of this
Report.
As of June 26, 1996, the Company issued warrants to purchase
200,000 shares of Common Stock to each of Messrs. Martin Goldberg, Costas
Takkas and Don Fraser pursuant to Section 4(2) of the Securities Act and Rule
506 of Regulation D promulgated under the Securities Act. The warrants
issued to Messrs. Takkas and Fraser were also exempt from the registration
requirements of the Securities Act pursuant to Regulation S promulgated
thereunder. The shares of Common Stock underlying the warrants may be
registered for sale by Messrs. Goldberg, Takkas and Fraser pursuant to certain
demand and piggy-back registration rights.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued the following securities since its formation
in October 1994:
On November 1, 1994, all of the assets of Pro Tech Systems, a
California limited partnership, were transfered to the Company as consideration
for the issuance of 2,000,000 shares of Common Stock to 13 persons, including
Mr. Larkin and the 12 limited partners of the limited partnership. This
transaction was considered exempt from the registration requirements of the
Securities Act under Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated under the Securities Act.
On November 3, 1994, the Company granted Westek Electronics, Inc.
("Westek"), a company controlled by Mr. Larkin's son, a two-year option to
purchase 40,000 shares of Common Stock at an exercise price $.50 per share.
The option is presently exercisable and expires on March 2, 1997. The option
was issued to Westek in consideration of a loan of $20,000 from Westek to the
Company. The loan was repaid in full on May 1, 1995. This transaction was
considered exempt from the registration requirements from the Securities Act
under Section 4(2) of the Securities Act and Rule 506 of Regulation D.
From January 5, 1995 to November 15, 1995, the Company offered and
sold 864,000 shares of Common Stock at $.50 per share to 13 persons pursuant to
Rule 504 of Regulation D promulgated under the Securities Act. In connection
with such transaction, the
17
<PAGE> 19
Company granted an option to Harris McLean to purchase up to 200,000 shares of
Common Stock. The option was granted to Harris McLean pursuant to Regulation S
promulgated under the Securities Act.
From April 8, 1996 to May 15, 1996, the Company sold 1,100,000
shares at $.50 per share to 56 persons pursuant to Rule 504 of Regulation D
promulgated of the Securities Act.
On April 15, 1996, options to purchase 25,000 shares under the 1996
Stock Option Plan were granted to each of Kenneth Campbell and Richard
Hennessey and options to purchase 540,000 shares under such plan were granted
to Keith Larkin. The grant of such options was exempt under Section 4(2) of the
Securities Act.
As of June 26, 1996, the Company granted to each of Martin Goldberg,
Costas Takkas and Don Fraser a warrant to purchase 200,000 shares of Common
Stock at an exercise price of $1.50 per share. These transactions were
considered exempt from the registration requirements of the Securities Act
under Section 4(2) of the Securities Act and Rule 506 of Regulation D
promulgated under the Securities Act. In addition, the transactions with
Messrs. Takkas and Fraser were exempt from such registration requirements under
Regulations S promulgated under the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the Company's Articles of Incorporation, the Company has
agreed to indemnify any officer or director, or any former officer or director,
to the full extent permitted by law. As a result, the Company will indemnify
any officer or director who is a party to a lawsuit by reason of such person's
service as a director or officer against expenses and amounts incurred in
connection with such lawsuit if he or she acted in good faith, and, with
respect to a criminal action or proceedings, had no reasonable cause to believe
his or her conduct was unlawful. The Company will also indemnify such persons
against expenses reasonably incurred by him or her in connection with the
defense or settlement of suit brought by or in the right of the Company to
procure a judgment in its favor, if such person acted in good faith and is not
adjudged to be liable for negligence, unless a court determines that such
person is entitled to indemnity, notwithstanding the adjudication of liability
for negligence.
On April 15, 1996, the Company granted three executive officers of
the Company options to purchase an aggregate of 590,000 shares of Common Stock.
The grants of the options were considered exempt from the registration
requirements of the Securities Act under Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act.
18
<PAGE> 20
PART F/S
The Company's financial statements begin on page F-1 to this Report.
19
<PAGE> 21
(LOGO) PEAT MARWICK LLP
700 20th Street
P.O. Box 249
Vero Beach, Fl 32961
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pro Tech Communications, Inc.
We have audited the accompanying balance sheet of Pro Tech Communications, Inc.
as of October 31, 1995 and the related statements of income, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pro Tech Communications, Inc.
as of October 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
November 28, 1995
<PAGE> 22
- 2 -
PRO TECH COMMUNICATIONS, INC.
BALANCE SHEET
October 31, 1995
<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 571,270
Accounts receivable less allowance for doubtful accounts of $22,080 123,073
Inventory (note 2) 90,061
Other current assets 1,122
-------------
Total current assets 785,526
Net property and equipment (note 3) 90,166
-------------
$ 875,692
=============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable (note 4) 250,226
Accounts payable 28,581
Accrued expenses (note 8) 34,186
-------------
Total current liabilities 312,993
Stockholders' equity: (note 5)
Common stock, $.001 par value, authorized 10,000,000 shares, issued
and outstanding 2,864,000 shares 2,864
Additional paid-in capital 515,876
Retained earnings 43,959
-------------
Total stockholders' equity 562,699
Commitments (note 7)
-------------
$ 875,692
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
- 3 -
PRO TECH COMMUNICATIONS, INC.
STATEMENT OF INCOME
Year ended October 31, 1995
<TABLE>
<S> <C>
Net sales (note 9) $ 830,667
Cost of goods sold 358,595
-------
Gross profit 472,072
Selling, general and administrative expenses 415,407
-------
Income from operations 56,665
Other income (expense):
Interest income 2,160
Interest expense (1,967)
Miscellaneous income 1,033
--------
Income before income taxes 57,891
Income taxes (note 8) 13,932
-------
Net income $ 43,959
=======
Net income per common share $ .02
=======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
- 4 -
PRO TECH COMMUNICATIONS, INC.
STATEMENT OF STOCKHOLDERS EQUITY
Year ended October 31, 1995
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, November 1, 1994 $ 2,000 119,485 - 121,485
Issuance of 864,000 shares of common stock
(note 5) (net of costs of $32,000)
864 396,391 - 397,255
Net earnings - - 43,959 43,959
------- ----------- --------- --------
Balance, October 31, 1995 $ 2,864 515,876 43,959 562,699
======= =========== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
- 5 -
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Cash received from sale of merchandise $ 723,566
Cash paid to vendors and employees (738,295)
Interest paid (1,967)
Interest received 2,160
---------
Net cash used by operating activities (14,536)
---------
Cash flows from investing activities:
Purchase of property and equipment (70,976)
Proceeds from sale of property and equipment 3,275
---------
Net cash used in investing activities (67,701)
---------
Cash flows from financing activities:
Principal payments on notes payable (2,420)
Repayment of loan payable (5,721)
Proceeds from note payable 250,000
Proceeds from issuance of common stock 397,255
---------
Net cash provided by financing activities 639,114
---------
Net increase in cash and cash equivalents 556,877
---------
Cash and cash equivalents at beginning of year 14,393
---------
Cash and cash equivalents at end of year $ 571,270
=========
Reconciliation of net income to net cash used by operating activities:
Net income 43,959
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation and amortization 20,619
Allowance for doubtful accounts 8,779
Gain on disposal of fixed assets (829)
Increase in accounts receivable (42,220)
Increase in inventory (65,914)
Increase in other assets (500)
Decrease in accounts payable (2,607)
Increase in accrued expenses 27,007
Decrease in other liabilities (2,830)
---------
Total adjustments (58,495)
---------
Net cash used by operating activities $ (14,536)
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 26
- 6 -
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Pro Tech Communications, Inc. (the "Company") was organized and
incorporated under the laws of the State of Florida for the
purpose of designing, developing, producing and marketing
lightweight telephone headsets. The current year market
consists of fast-food franchises who use the headsets in
drive-thru services, but the product has potential in other
industries.
On November 1, 1994 all assets and liabilities of Pro Tech
Systems (a limited partnership) were transferred to Pro Tech
Communications, Inc. The former partners of Pro Tech Systems
received 2,000,000 shares of common stock in the Company in
exchange for their respective interests in the limited
partnership.
(B) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
(C) INVENTORY
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(D) REVENUE AND COST RECOGNITION
The Company recognizes revenues as products are shipped. A
portion of sales is made to distributors, who purchase the
product with no right of return. New customers are extended a
30-day trial period during which the product may be returned.
Additionally, each headset carries a two year warranty. The
Company provides, by a current charge to income, an amount it
estimates will be needed to cover future warranty obligations
for products sold during the year. The accrued liability for
warranty costs is included in the caption "Accrued expenses" in
the balance sheet.
(E) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets which are generally 5-10 years.
Repair and maintenance costs are charged to expense when
incurred.
(Continued)
<PAGE> 27
- 7 -
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(F) INCOME TAXES
Income taxes are calculated in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Statement
for Income Taxes". Under the asset and liability method of
Statement 109, deferred income taxes are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(2) INVENTORY
Inventory at October 31, 1995 consists of the following:
<TABLE>
<S> <C>
Raw materials $ 68,521
Work in process 1,000
Finished goods 20,540
-------
$ 90,061
=======
</TABLE>
(3) NET PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at October 31, 1995:
<TABLE>
<S> <C> <C>
Production molds $ 52,999
Office equipment 40,091
Production equipment 8,217
Leasehold improvements 6,663
Vehicles 1,984
--------
Total cost 109,954
Less: accumulated depreciation 19,788
--------
Total $ 90,166
========
</TABLE>
Total depreciation expense was $20,464 for the period ended October 31,
1995.
(Continued)
<PAGE> 28
- 8 -
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(4) NOTES PAYABLE
Notes payable consisted of the following at October 31, 1995:
<TABLE>
<S> <C>
Note payable to GMAC bearing fixed interest at 18.5%; interest and
principal payable in sixty equal monthly installments of $143, final
payment due November 1995; secured by vehicle. $ 226
Note payable to Euro Investment Corporation bearing annual interest at
14.3%, payable on demand 250,000
-------
Total notes payable $ 250,226
=======
</TABLE>
(5) CAPITAL STOCK
During fiscal year 1995, the Company underwent a stock offering under
Rule 504 of Regulation D promulgated under the Securities Act of 1933.
The offering sold 864,000 shares of common stock at $.50 per share,
yielding net cash proceeds of $399,255. At October 31, 1995, $2,000 was
held in escrow for the benefit of the Company pending completion of the
subscription agreement by an investor for 4,000 shares. This receivable
is netted against additional paid-in capital.
The Company, in conjunction with the stock offering of March 3, 1995,
issued warrants for 200,000 shares of common stock to the sales agent
responsible for sales outside the United States. As of October 31, 1995,
a summary of the warrants to purchase common stock, currently
exercisable, are as follows:
<TABLE>
<CAPTION>
Expiration Date Shares Exercise Price Per Warrant
--------------- ------ --------------------------
<S> <C> <C>
May 2, 1997 200,000 $.60
</TABLE>
(6) RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred and are
included in selling, general and administrative expenses. The amount
charged to expense during fiscal year 1995 was $31,300.
(7) OPERATING LEASES
The Company leases office and production facilities under operating
leases. Future minimum lease payments for such noncancelable leases as
of October 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 13,927
1997 8,232
1998 1,372
-------
Total $ 23,531
======
</TABLE>
Rent expense under lease agreements totaled $15,319 for fiscal year 1995.
(Continued)
<PAGE> 29
- 9 -
(8) INCOME TAXES
Income taxes consist of the following:
<TABLE>
<S> <C>
1995
----
Current:
Federal
$ 12,179
State 1,753
-------
$ 13,932
======
</TABLE>
The actual expense differs from the "expected" amount computed by
applying the U.S. Federal corporate income tax rate of 34% to income
before income taxes as follows:
<TABLE>
<S> <C>
Computed "expected" tax expense $ 19,683
Increase (reduction) in income taxes resulting from:
State income tax, net of federal tax benefits 1,200
Effect of graduated tax rates (11,200)
Other, net 4,249
------
$ 13,932
======
</TABLE>
(9) MAJOR CUSTOMERS
For fiscal year 1995, approximately 60% of all sales were to McDonald's
Restaurant franchises.
(10) EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with its' President
expiring December 9, 1999. The agreement provides for a maximum annual
salary of $90,000 with additional amounts added using the consumer price
index as a minimum. The President is eligible for the maximum annual
salary during a given year only if the Company generates annual sales of
at least $2,000,000 and pre-tax income equal to at least 20% of the
Company's annual sales. If at any time during the Company's fiscal year
the Board of Directors determines the Company will not meet minimum
requirements noted above, the Board shall determine the President's
compensation for that year, taking into account the Company's projected
financial performance and needs for that year.
<PAGE> 30
ProTech Communications, Inc.
Balance Sheet and Statement of Equity
as of April 30, 1996 and April 30, 1995
(unaudited)
<TABLE>
<CAPTION> Fiscal Year Fiscal Year
1996 1995
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 693,720 $ 256,092
Accounts Receivable less bad debt allowance
(19,382 in Fiscal Year 1996 vs. 22,040
in Fiscal Year 1995) 140,725 145,484
Deposits being Held 500 500
Inventory (note 2) 98,024 47,794
----------- ---------
Total current assets 932,969 449,870
Net property and equipment (note 3) 133,730 72,592
----------- ---------
Total Assets $ 1,066,699 $ 522,262
Liabilities and Stockholders' Equity
Current Liabilities: (note 4)
Accounts Payable 6,664 24,831
Accrued expenses (note 8) 5,363 12,666
----------- ---------
Total Current Liabilities 12,027 37,497
Stockholder's Equity: (note 5)
Common Stock, $.001 par value, authorized 10,000,000
shares issued and outstanding 3,964,000 3,964 2,864
Additional Paid in Capital 971,711 360,495
Retained Earnings 43,422 39,329
Current Period Profit (Loss) 35,575 82,063
----------- ---------
Total Stockholders' Equity 1,054,672 484,749
Commitments (note 7)
----------- ---------
Total Liabilities and Equity $ 1,066,699 $ 522,246
</TABLE>
See accompanying notes to financial statements
<PAGE> 31
ProTech Communications, Inc.
Statement of Income
For the six months ended April 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION> Fiscal Year Fiscal Year
1996 1995
----------- -----------
<S> <C> <C>
Net Sales (note 9) $ 403,805 $ 408,307
Cost of Goods Sold 162,907 138,435
Gross Profit 240,898 269,871
Selling, general and administrative expenses 196,731 188,754
Income from operations 44,167 81,117
Other income (expense):
Interest income 12,908 1,003
Interest expense (13,868) (57)
Miscellaneous income (250) 0
Income before income taxes 42,957 82,063
Income taxes (note 8) 7,382 0
Net Income $ 35,575 $ 82,063
Net income per share $ 0.01 $ 0.02
</TABLE>
See accompanying notes to financial statements.
<PAGE> 32
PRO TECH COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
For the six months ended April 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION> Fiscal Year Fiscal Year
1996 1995
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from sale of merchandise $ 399,994 $ 354,634
Cash paid to vendors and employees (407,182) (384,568)
Interest paid (13,868) (57)
Interest received 12,908 1,003
---------- ----------
Net cash used by operating activities (8,148) (28,988)
Cash flows from investing activities:
Purchase of property and equipment (42,092) (29,515)
Proceeds from the sale of property and equipment -0- -0-
---------- ----------
Net cash used in investing activities (42,092) (29,515)
Cash flows from financing activities:
Proceeds from notes payable 20,000
Payable to employee (370)
Note payable: GMAC (644)
Principal payments on notes payable (252,113) 0
Proceeds from issuance of common stock 424,803 256,282
---------- ----------
Net cash provided by financing activities 172,690 275,268
Cash and cash equivalents at beginning of period 571,270 39,327
Cash and cash equivalents at end of period $ 693,720 $ 256,092
Reconciliation of net income to net cash used by operating
activities:
Net income $ 35,575 $ 82,063
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation and amortization 24,062
Allowance for doubtful accounts 6,081
Increase in accounts receivable (14,332) (50,408)
Increase in Inventory (7,963) (23,647)
Decrease in accounts payable (21,875) (31,188)
Increase in accrued expenses (26,470) (2,836)
Increase in other liabilities (3,226) (2,972)
---------- ----------
Total adjustments (43,723) (111,051)
Net cash used by operating activities $ (8,148) $ (28,988)
</TABLE>
See accompanying notes to financial statements
<PAGE> 33
PRO TECH COMMUNICATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended April 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, November 1, 1994 $ 2,000 119,485 - 121,485
Issuance of 864,000 shares of 864 396,391 43,422 440,677
common stock (note 5) (net costs
of $32,000) March 3, 1995.
Issuance of 1,100,000 shares of 1,100 455,835 - 456,935
common stock (note 5) (net costs
of $90,050) April 8, 1996.
Net earnings - - 35,575 35,575
------ ---------
Balance, April 30, 1996 $ 3,964 971,711 78,997 1,054,672
</TABLE>
See accompanying notes to financial statements
<PAGE> 34
PROTECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
for April 30, 1996
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Pro Tech Communications, Inc. (the "Company") was organized and
incorporated under the laws of the State of Florida for the
purpose of designing, developing, producing and marketing
lightweight telephone headsets. The current year market consists
of fast-food franchises who use the headset in drive-thru
services, but the product has potential in other industries.
On November 1, 1994 all assets and liabilities of Pro Tech Systems
(a limited partnership) were transferred to Pro Tech
Communications, Inc. The former partners of Pro Tech Systems
received 2,000,000 shares of common stock in the Company in
exchange for their respective interests in the limited
partnership.
(B) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
(C) INVENTORY
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(D) REVENUE AND COST RECOGNITION
The Company recognizes revenues as products are shipped. A
portion of sales is made to distributors, who purchase the product
with no right of return. New customers are extended a 30-day
trial period during which the product may be returned.
Additionally, each headset carries a two year warranty. The
Company provides, by a current charge to income, an amount it
estimates will be needed to cover future warranty obligations for
products sold during the year. The accrued liability for warranty
costs is included in the caption "accrued expenses" in the balance
sheet.
<PAGE> 35
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(E) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets which are generally 5-10 years. Repair and
maintenance costs are charged to expense when incurred.
(F) INCOME TAXES
Income Tax calculations have not changed from the previously
audited statements dated October 31, 1995 and the comparable
period. Payments in 1996 have been based on the estimated
audited amounts.
Income taxes are calculated in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Statement
for Income Taxes". Under the asset and liability method of
Statement 109, deferred income taxes are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred taxes of a change in tax rates is recognized
in income in the period that includes the enactment date.
(2) INVENTORY
Inventory at April 30, 1996 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw Materials $ 78,829
Work in Progress 1,000
Finished Goods 18,195
--------
$ 98,024
</TABLE>
<PAGE> 36
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(3) NET PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at April 30, 1996
<TABLE>
<S> <C>
Production molds $ 80,474
Office equipment 41,266
Production equipment 22,981
Leasehold improvements 6,972
Vehicles 5,268
Research and development -0-
Incorporation fees -0-
---------
Total Cost 156,961
Less: accumulated depreciation 23,231
---------
Total $ 133,730
</TABLE>
(4) LIABILITIES - NOTES PAYABLE
The Company has $ 0 in notes payable as of April 30, 1996.
Note payable to GMAC bearing fixed interest at 18.5%; interest and
principal payable in sixty equal monthly installments of $ 143, final
payment was due November 1995; secured by vehicle. Paid in full.
Note payable to Euro Investment Corporation, $250,000., bearing annual
interest at 14.3%, payable on demand, $13,868. Paid in full.
<PAGE> 37
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(5) CAPITAL STOCK
April 8, 1996, the Company underwent a stock offering under Rule 504 of
Regulation D promulgated under the Securities Act of 1933. The offering
sold 1,100,000 shares of common stock at $0.50 per share yielding net cash
proceeds of $424,803.
March 3, 1995, the Company underwent a stock offering under Rule 504 of
Regulation D promulgated under the Securities Act of 1933. The offering
sold 864,000 shares of common stock at $0.50 per share, yielding net cash
proceeds of $396,391.
The Company, in conjunction with the stock offering of March 3, 1995,
issued warrants for 200,000 shares of common stock to the sales agent
responsible for sales outside the United States. As of April 30, 1996, a
summary of the warrants to purchase common stock, currently exercisable,
is as follows:
<TABLE>
<CAPTION>
Expiration Date Shares Exercise Price Per Warrant
--------------- ------ --------------------------
<S> <C> <C>
September 3, 1997 200,000 $0.60
</TABLE>
(6) RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred and are included
in selling, general and administrative expenses. The amount charged to
expense during the first six months of fiscal year 1996 was $9,474.
(7) OPERATING LEASES
The Company leases office and production facilities under operating leases.
Future minimum lease payments for such noncancelable leases as of April 30,
1996 are as follows:
<TABLE>
<S> <C>
1996 $ 13,928
1997 8,232
1998 1,372
--------
Total $ 23,532
</TABLE>
Rent expensed under lease agreements totaled $8,376 for the first six months
for fiscal year 1996.
<PAGE> 38
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(8) INCOME TAXES
Estimated 1996 income taxes consist of the following:
<TABLE>
<S> <C>
Current:
Federal $ 12,180
State 2,005
--------
$ 14,185
Actual income taxes paid through April 30, 1996:
Federal $ 6,090
</TABLE>
(9) MAJOR CUSTOMERS
For the first six months of fiscal year 1996, approximately 35% of sales
were to McDonald's Restaurant franchises. With sales now expanded to new
customers sold through distributors to reach a total of 65% of sales.
(10) EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with its President
expiring December 9, 1999. The agreement provides for a maximum annual
salary of $90,000 with additional amounts added using the consumer price
index as a minimum. The President is eligible for the maximum annual
salary during a given year only if the Company generates at least
$2,000,000 and pre-tax income equal to at least 20% of the Company's annual
sales. If at any time during the Company's fiscal year the Board of
Directors determines the Company will not meet minimum requirements noted
above, the Board shall determine the President's compensation for that
year, taking into account the Company's projected financial performance
and needs for that year.
<PAGE> 39
PART III
EXHIBITS
3.1 Articles of Incorporation of the Company, dated October 5,
1994, and the Amendments thereto, dated January 31, 1995.*
3.2 By-laws of the Company.*
10.1 Amended and Restated Employment Agreement, dated as of
December 9, 1994, between the Company and Keith Larkin.
10.2 Stock Option, dated March 3, 1995, issued by the Company
to Harris McLean Financial Group, Ltd.*
10.3 Stock Option, dated November 3, 1994, issued by the
Company to Westek Electronics, Inc.*
10.4 The Company's 1996 Stock Option Plan.*
10.5 Stock Option, dated April 15, 1996, issued by the Company
to Keith Larkin.*
10.6 Stock Option, dated April 15, 1996, issued by the Company
to Kenneth Campbell.*
10.7 Stock Option, dated April 15, 1996, issued by the Company
to Richard Hennessey.*
10.8 Lease, dated July 20, 1994, between the Company and Sid
Motel.
10.9 Lease, dated November 22, 1995, between the Company and
Sidney Motel.*
10.10 Marketing Agreement, dated as of June 26, 1996, between
the Company and Martin Goldberg.*
10.11 Amended and Restated Stock Purchase Warrant, dated as of
June 26, 1996, issued by the Company to Martin Goldberg.
10.12 Marketing Agreement, dated as of June 26, 1996, between
the Company and Costas Takkas.*
10.13 Amended and Restated Stock Purchase Warrant, dated as of
June 26, 1996, issued by the Company to Costas Takkas.
10.14 Marketing Agreement, dated as of June 26, 1996, between
the Company and Don Fraser.*
10.15 Amended and Restated Stock Purchase Warrant, dated as of
June 26, 1996, issued by the Company to Don Fraser.
27 Financial Data Schedule (for SEC use only).
___________________________
* Previously filed with initial filing of this Form 10-SB with the Commission
on July 5, 1996.
20
<PAGE> 40
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant caused this Amendment No. 1 to Registration Statement on
Form 10-SB to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRO TECH COMMUNICATIONS, INC.
Dated: October 4, 1996 By: /s/ Keith Larkin
-----------------------------------
Keith Larkin
President and Chairman of the Board
21
<PAGE> 41
INDEX TO EXHIBITS
Exhibit Description
10.1 Amended and Restated Employment Agreement,
dated as of December 9, 1994, between the
Company and Keith Larkin.
10.8 Lease, dated July 20, 1994, between the
Company and Sid Motel.
10.11 Amended and Restated Stock Purchase Warrant,
dated as of June 26, 1996, between the Company
and Martin Goldberg.
10.13 Amended and Restated Stock Purchase Warrant,
dated as of June 26, 1996, between the Company
and Costas Takkas.
10.15 Amended and Restated Stock Purchase Warrant,
dated as of June 26, 1996, between the Company
and Don Fraser.
27. Financial Data Schedule (for SEC use only).
<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDMENT AND RESTATED AGREEMENT is entered into as of the 9th
day of December 1994 between PRO TECH COMMUNICATIONS, INC., a Florida
corporation ("Corporation"), and KEITH LARKIN ("Employee").
NOW, THEREFORE, the parties hereto agree as follows:
1. Term. The term of this Agreement shall commence as
of the date first above written, and unless sooner terminated hereunder, shall
terminate five (5) years after the date first above written.
2. Title. Employee shall serve as the President and
Treasurer, or in any other position consistent with Employee's status to which
he may hereafter be elected or appointed during the term of this Agreement.
3. Compensation. For all services rendered by Employee
to Corporation hereunder during each twelve (12) months of this Agreement,
Employee shall receive an annual salary in the maximum amount of $90,000.
Employee shall be entitled to receive an annual salary of $90,000 during a
given fiscal year only if Corporation generates annual sales for such fiscal
year of at least $2 million and pre-tax income equal to at least 20% of
Corporation's annual sales. If, however, the Board of Directors (the "Board")
of Corporation determines, at any time during a fiscal year of Corporation,
that Corporation will not achieve the financial results referred to in the
preceding sentence, the Board shall set the dollar amount of periodic payments
and the annual salary to be paid to Employee for a such fiscal year, taking
into account Corporation's projected financial performance and the cash
required to satisfy Corporation's anticipated operating expenditures.
Accordingly, Employee acknowledges and understands that he is not guaranteed
any minimum amount of annual salary, unless Corporation achieves the financial
results referred to in this Section 3. The $90,000 maximum annual salary
figure shall be increased each year after the initial twelve-month period of
this Agreement by an amount, determined in the sole discretion of the Board of
Directors of the Corporation, of not less than the percentage increase in the
United States Consumer Price Index published by the Bureau of Labor Statistics,
United States Department of Labor. The salary shall be paid in equal bi-weekly
installments or any other payment mode in which Corporation pays its executive
officers.
4. Duties. During the term of this Agreement, Employee
shall serve under the direction and control of Corporation's Board of
Directors. Employee's duties shall include, without limitation, the
supervision, management and control of all of the daily operations of
Corporation. Employee shall devote all of his time, energy and skills to the
faithful and diligent performance of his duties.
<PAGE> 2
5. Expenses. During the term of this Agreement,
Corporation shall allow Employee reasonable travel, entertainment and other
expenses incurred by Employee in furtherance of the business of Corporation.
Corporation shall reimburse Employee for any such expenses paid by him subject
to the rules adopted by Corporation for handling such reimbursements.
6. Employee Benefits. Employee shall be entitled to
participate in any and all fringe benefit plans or programs, including, but not
limited to, insurance, and deferred compensation plans, maintained by
Corporation for the benefit of all executives of Corporation.
7. Confidential Data. Employee agrees while employed by
Corporation and thereafter for a period of three years not, directly or
indirectly, to disclose or use to the detriment of the Corporation or for the
benefit of any other person or firm any confidential information or trade
secrets which are not readily available in the public domain (including, but
not limited to, the identity and particular needs of any customer of the
Corporation, the methods and techniques of any of the businesses of the
Corporation, the marketing plans and objectives of the Corporation, the
intellectual property rights of any product of the Corporation) belonging to
the Corporation, unless Employee has first obtained the express written consent
of Corporation. Employee shall deliver promptly to Corporation upon
termination of employment, or at any time Corporation may so request, all
memoranda, notes, records, reports, manuals, drawings, blueprints, formulas,
and other documents (and all copies thereof) relating to the business of
Corporation and all property associated therewith, then possessed or under the
control of the Employee. In the event of a breach or threatened breach by
Employee of the provisions of this paragraph 7, Corporation shall be entitled
to an injunction restraining Employee from disclosing, in whole or in part,
such information, or from rendering any services to any person, firm,
corporation, association or other entity to whom such information, in whole or
in part, has been disclosed or is threatened to be disclosed. Nothing
contained herein shall be construed as prohibiting Corporation from pursuing
any other remedies available to Corporation for such breach or threatened
breach, including recovery of damages from Employee. This paragraph 7 shall
survive the termination of this Agreement.
8. Discoveries and Inventions. Employee hereby assigns,
without further consideration, to Corporation, all of his rights, title and
interest in and to any and all inventions, discoveries, developments,
improvements, processes, trade secrets, trademark, copyright and patent rights
in the United States and elsewhere, techniques, designs, data and all other
work product, whether tangible or intangible, which: (i) Employee has
conceived, reduced to practice or otherwise created, either alone or jointly
with others, at any time during the five (5) years prior to the commencement of
the term of this Agreement, including, without limitation, all such inventions
with respect to lightweight telephone headsets, including, without limitation,
all such inventions with respect to Corporation's "Pro Com"
2
<PAGE> 3
and "Trinity" models; and (ii) Employee conceives, reduces to practice, or
otherwise creates, either alone or jointly with others, during the term of
Employee's employment with Corporation. Employee shall perform all acts
reasonably required by Corporation to enable Corporation to learn of, develop
and protect the rights it receives hereunder, including, but not limited to,
making full and immediate disclosure to Corporation and assisting in the
preparation and execution of all documents required to acquire and convey to
Corporation those items listed in this paragraph 8 hereof and patent, copyright
and trademark protection in the United States and elsewhere, all at no cost to
Employee.
9. Non-Competition.
a. Employee covenants and agrees that, while in
the employment of Corporation and for three (3) years after the termination of
this Agreement, Employee shall not, for his own account or either as agent,
consultant, servant or employee, or as a shareholder of any corporation or
member of any firm, own, manage, operate, join, control, or participate in the
ownership, management, operation or control of any individual, or that division
or part of any entity or business that is a competitor of Corporation.
b. In the event of an actual or threatened
breach by Employee of any of the provisions in paragraph 9a. hereof,
Corporation shall be entitled to an injunction restraining Employee from the
prohibited conduct without the necessity of establishing irreparable injury to
Corporation unless required under Florida law. If a court of competent
jurisdiction should hold that the duration and/or scope (geographic or
otherwise) of the covenants contained in paragraph 9a. hereof are in violation
of Florida law, then, to the extent permitted by Florida law, the court shall
enforce all such covenants (geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto agree to be bound by same,
subject to their rights of appeal. Nothing herein stated shall be construed as
prohibiting Corporation from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of damages from
Employee. In any action or proceeding to enforce the provisions of this
paragraph 9, or seeking damages for breach or threatened breach of this
paragraph 9, the prevailing party shall be reimbursed by the other party for
all costs incurred in such action or proceeding including, without limitation,
all court costs and filing fees, and all reasonable attorneys' fees, incurred
either at the trial level or at all appellate levels. Such reimbursement, if
any, shall be paid within thirty (30) calendar days after the rendition of a
final non- appealable order in such action or proceeding.
c. The existence of any claim or cause of action
by Employee against Corporation, which does not relate to this Agreement, shall
not constitute a defense to the enforcement by Corporation of the foregoing
restrictive covenant.
d. In the event Corporation obtains an
injunction against Employee arising from Employee's violation of any of the
covenants set forth in this paragraph 9, then
3
<PAGE> 4
all of the terms of and covenants in this paragraph 9 shall automatically be
extended for a period of one (1) year, with such extension period commencing,
without Order of Court or any writing or other action by the parties hereto, on
the date that a final, non-appealable injunction Order is entered against
Employee in any such action or proceeding to enforce the provisions of this
paragraph.
10. Termination. This Agreement may be terminated prior
to the term provided for by paragraph 1 hereof upon the occurrence of any of
the following events:
a. Immediately, upon written notice by
Corporation that Employee has committed an event for "cause" under paragraphs
11(a), (b), (c), (e) or (h) hereof;
b. Thirty (30) days after Corporation's notice
to Employee that he has committed an event for "cause" under paragraphs 11(d),
(f) or (g), and Employee has failed to cure any such specified violation to the
reasonable satisfaction of Corporation;
c. Upon Employee's death;
d. Upon Corporation's dissolution; or
e. At any time by written agreement of the
parties.
11. Definition of "Cause". As used in this Agreement,
the term "cause" shall mean any of the following events:
a. Employee's commission of any act constituting
embezzlement, theft or misappropriation of Corporation's funds;
b. Employee's acceptance of kickbacks, bribery
or any other "off-the-books" payment which relate directly or indirectly to
Corporation's business;
c. Employee's violation of paragraph 7 above;
d. Employee's violation of paragraph 8 above;
e. Employee's violation of paragraph 9 above;
f. Employee's gross negligence or gross
malfeasance in the performance of his duties hereunder;
4
<PAGE> 5
g. Any material breach by Employee of the terms
of this Agreement;
h. Employee's termination of his employment with
Corporation without the prior written consent of Corporation, except that this
subparagraph (h) shall not include a termination by employee of his employment
with Corporation, after thirty (30) days written notice thereof, in the event
of the nonpayment by Corporation to Employee of amounts due Employee hereunder
pursuant to the terms hereof or during said additional thirty (30) day period
or other material breach of this Agreement by Corporation.
12. Notices. All notices required to be given hereunder
shall be in writing, sent certified mail, return receipt requested, postage
prepaid to the following addresses:
If to Employee, then to:
Keith Larkin
c/o Pro Tech Communications, Inc.
3311 Industrial 25th Street
Fort Pierce, Florida 34946
If to Corporation, then to:
Chairman of the Board of Directors
Pro Tech Communications, Inc.
3311 Industrial 25th Street
Fort Pierce, Florida 34946
13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
14. Remedies and Waivers. If a party is in breach of any
provision of this Agreement, the non-breaching party shall be entitled to
pursue all remedies available to the non-breaching party for such breach,
including, but not limited to, the recovery of damages and injunctive relief.
The waiver by either party hereto of any breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach by either party hereto.
15. Binding Effect and Assignment. This Agreement shall
be binding upon the parties, their heirs, personal representatives, successors
and assigns. This Agreement is personal as to Employee and may not be assigned
by Employee. This Agreement may be assigned by Corporation without the prior
consent of Employee, provided, however, that: (a) the assignee shall agree in
writing to fulfill Corporation's obligations to Employee hereunder,
5
<PAGE> 6
and (b) such an assignment shall not release Corporation from its obligations
hereunder, unless agreed to in writing by Employee.
16. Severability. None of the provisions of this
Agreement depend on the validity of any other provision and the invalidity,
illegality or unenforceability, in whole or in part, of any provision shall not
affect any other provision herein contained.
17. Entire Understanding. This Agreement contains the
entire understanding of the parties relating to the employment of the Employee
by Corporation. It may not be changed orally but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
18. Headings. The headings contained herein are for
reference purposes only and shall be without substantive meaning.
19. Counterparts. This Agreement may be executed in
identical counterparts, each of which shall be deemed an original, and such
counterparts, taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
In the presence of:
PRO TECH COMMUNICATIONS, INC.
/s/ Roberta McFarlane By: /s/ Kenneth Campell
- ------------------------ -----------------------------
/s/ Rosemary Sunderman /s/ Keith Larkin
- ------------------------ --------------------------------
Keith Larkin
6
<PAGE> 1
EXHIBIT 10.8
LEASE
THIS LEASE made and entered into this 20th day of JULY, 1994 by and
between SID MOTEL herein termed the Lessor and PRO-TECH SYSTEMS herein termed
the Lessee, each in consideration of the agreements to be performed by the
other, hereby agree:
1. Property and Term: The Lessor hereby leases to the Lessee the
following described premises: 3309 Industrial 25th Street
Fort Pierce, FL
for the term beginning at 12:01 A.M. on SEPTEMBER 1, 1996 and ending at 11:59
P.M. on NOVEMBER 30, 1997.
2. Rent: The Lessee will pay to the Lessor as rent for the property
leased during the term, the total amount of SIXTEEN THOUSAND DOLLARS
($16,000.00) paying $666.67 plus sales tax on the first day of each month.
Due upon lease execution: $ 736.67 - First month's rent & sales tax
$ 706.67 - Last month's rent & sales tax
---------
$1,413.33
Lessee agrees to pay all applicable sales tax in regards to said monthly
rental payments at the same time said monthly rental payments become due.
In the event that any rent payment shall become overdue for a period in
excess of five (5) days, then, at Landlord's option, a "late charge" of five
percent (5%) of such payment for such period of thirty (30) days or any part
thereof, shall become immediately due and owing to Landlord, as additional
rent.
(1)
<PAGE> 2
3. Use: The Lessee will use the property only for light electronic
research and development, and shall not make or suffer any unlawful, improper
or offensive use of the premises, or any use or occupancy thereof contrary to
any law of the State of Florida, or any ordinance of the City or County wherein
said demised premises are situated.
4. Assignment or Subleasing: No assignment of this lease or
subleasing any part of the leased property, by the Lessee or any assignee or
sublessee, shall be valid without the written consent of the Lessor. No
assignment or subleasing shall relieve the assignor or sublessor of any
obligation under this Lease. Each assignee or sublessee shall, by assuming that
status, become obligated to perform every agreement of this lease to be
performed by the Lessee; except that a sublessee shall be obligated to perform
them only insofar as they relate to the part of the property subleased and the
rent required by the sublessee, and shall be obligated to pay rent directly to
the Lessor only after default in payment by the sublessor with written demand
from the Lessor to pay rent directly to the Lessor.
5. Access by Lessor: The Lessor may enter, inspect and make such
repairs to the leased property as the Lessor may reasonably desire, at all
reasonable times.
6. Repairs: The Lessor will maintain the exterior of the leased
building, including the roof and exterior walls, in good and substantial
repair. The Lessee will maintain the interior of the leased property,
including interior ceilings, walls, floors, fixtures, pipes, doors and windows,
(including plate glass windows), in good and substantial repair. Interior
fixtures and pipes are those that project from the ceilings, walls and floors
into the room; exterior fixtures and pipes include those concealed behind, over
or under the interior ceilings, walls and floors. The Lessee will maintain all
plate glass
(2)
<PAGE> 3
windows and other windows in the leased property in good and substantial repair
and will replace all broken windows regardless of the cause of breaking. The
agreements to repair in this paragraph, except for damage or breaking of plate
glass or other windows not caused by fire, do not apply to any damage caused by
fire or other casualty.
7. Damage by Fire or Other Casualty: If the leased property is
damaged by fire or other casualty to the extent of twenty per centum or more,
the Lessor shall have the option to rebuild and repair the leased property or
to terminate this lease; if damaged to a lesser extent, the Lessor will rebuild
and repair. In the event of damage by fire or other casualty, the rent payable
under this lease shall abate, in proportion to the impairment of the use that
can reasonably be made of the property for the purpose permitted by this lease,
until the property is rebuilt and repaired (or until the lease is terminated,
if terminated in accordance with this paragraph).
8. Waiver and Exemption: Any constitutional or statutory exemption
of the Lessee or any assignee or sublessee, of any property usually kept on the
leased premises, from distress or forced sale is waived.
9. Addresses: All rent payable and notice given under this lease to
the Lessor shall be paid at place as the Lessor shall specify in writing. All
notices given under this lease to the Lessor or any assignee or sublessee of
the Lessee shall be given at the leased premises. Any notice properly mailed by
registered mail, postage and fee prepaid, shall be deemed delivered when mailed,
whether received or not.
(3)
<PAGE> 4
10. Remedies for Failure to Pay Rent: If any rent required by this
lease shall not be paid when due, the Lessor shall have the option to:
(a) Terminate this lease, resume possession of the property for his
own account, and recover immediately from the Lessee the difference between the
rent specified in the lease and the fair rental value of the property for the
remainder of the term, reduce to present worth.
(b) Resume possession and re-lease or rent the property for the
remainder of the term for the account of the Lessee, and recover from the
Lessee, at the end of the term or at the time each payment of rent comes due
under this lease as the Lessor may choose, the difference between the rent
specified in the lease and the rent received on the re-leasing or renting.
In either event, the Lessor shall also recover all expenses incurred by
reason of the breach, including reasonable attorneys' fees.
11. Remedies for Breach of Agreement: If either the Lessor or the
Lessee shall fail to perform, or shall breach any agreement of this lease other
than the agreement of the Lessee to pay rent, for ten (10) days after a written
notice specifying the performance required shall have been given to the party
failing to perform; the party so giving notice may institute action in a Court
of competent jurisdiction to terminate this lease or to compel performance of
the agreement, and the prevailing party to that litigation shall be paid by the
losing party all expenses of such litigation including a reasonable attorneys'
fees.
(4)
<PAGE> 5
12. Option to Extend Term: The Lessee shall have the option to
extend the term of this lease for an additional period of 12 months beginning
at 12:01 AM on SEPTEMBER 1, 1996 and ending at 11:59 PM on AUGUST 31, 1997,
provided that written notice of the intention of the Lessee to exercise said
option shall be delivered to the Lessor, at his address specified in Paragraph
9, at least three (3) months prior to the end of the primary term. The terms
of the extended term, including rent, shall be determined by negotiation at the
time the Lessee desires to re-lease the premises.
13. Signs: All exterior signs must have prior approval of the
Lessor and no unsightly signs shall be erected or permitted to remain on the
exterior of the leased property or on either side of the windows or door at the
front of the leased property.
14. Public Utilities and Janitorial Serviced: The Lessee shall
provide all utilities and inside janitorial services to the premises during the
term of this lease.
15. Maintenance: The Lessee will keep and maintain the leased
premises and the spaces immediately adjoining the front and the rear thereof in
a good and clean condition and will promptly remove or cause to be removed any
rubbish or trash accumulating therein.
16. Ad Valorem Real Estate Taxes: The Lessor will pay municipal
and county ad valorem real estate taxes for the first full calendar year.
Thereafter the Lessee will pay their proportionate share of any increase in such
taxes and their proportionate share shall bear the same ratio to 100 percent of
the total increase that the square footage of floor space of the entire
building.
(5)
<PAGE> 6
17. Warranty of Right to Lease: The Lessor covenants that he owns
fee simple title to all the property described in the first paragraph of this
lease and that he has full and complete right to lease the same.
18. Insurance: The Lessee agrees to obtain at his expense a policy
or policies of liability insurance in company or companies approved by the
Lessor, providing for liability insurance for bodily injury and property damage
with a combined single limit of not less than $300,000. Said policy or
policies shall be commercial general liability policies and will include the
Lessor as additional named insured. Either the original or a duplicate
original will be delivered to the Lessor and all premiums will be paid by the
Lessee.
19. Maintenance of Air-Conditioner: The LESSOR will maintain
building air-conditioning unit or units and all parts thereof in good and
substantial repair and working order.
20. Janitorial Service: Lessee will provide its own interior
janitorial service for the areas of the building.
21. Condition of Property at Lease Temination: The Lessee will
quietly surrender possession of the property and vacate same at the end of the
original term, or at the end of the extended term, as the case may be, and
return the property to the Lessor in as good conditon as when first occupied,
reasonable wear and tear expected.
22. Radon Gas Disclosure: Radon Gas is a naturally occurring
radioactive gas that, when accumulated in a building in sufficient quantities,
may present health risks to persons who are exposed to it over time. Levels
of radon that exceed Federal and State guidelines have been found in buildings
in Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
(6)
<PAGE> 7
23. Disability Act: Tenant shall be responsible for compliance with the
Demised Premises with all requirements of the Americans with Disabilities Act
(the "Act"), and shall indemnify, defend and save Landlord harmless from any
claim, damages or loss resulting from Tenant's failure to comply with the Act,
which indemnification shall survive the termination of this Lease.
24. Indemnity: The Lessee will, during the term of this Lease, or any
renewals, indemnify the Lessor and hold him harmless against all claims,
demands, and judgments for loss, damage, or injury to property or person
resulting or occurring as a result of act or acts or omission or omissions of
Lessee, its employees, agents or representatives, or the breach of any
obligation of Lessee as set out in this Lease, but not by reason of the
negligence of the Lessor.
IN WITNESS WHEREOF, the Lessor has caused these presents to be executed in
its name and the Lessee has hereto set his hand and seal on the day and year
first above written, in two counterparts, either of which may be considered an
original.
Signed, sealed and delivered in
the presence of:
/s/ KDL CORP.
- ------------------------------- ----------------------------------
WITNESS LESSOR
/s/ SIDNEY MOTEL OWNER
- ------------------------------- ----------------------------------
WITNESS LESSOR
/s/ KEITH LARKIN
- ------------------------------- ----------------------------------
WITNESS LESSEE
- ------------------------------- ----------------------------------
WITNESS LESSEE
(7)
<PAGE> 1
Exhibit 10.11
THIS STOCK PURCHASE WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
FT. PIERCE, FLORIDA
GRANTED: AS OF JUNE 26, 1996
THIS AMENDED AND RESTATED STOCK PURCHASE WARRANT EXPIRES
IF NOT EXERCISED ON OR BEFORE
5:00 P.M., MIAMI TIME, SEPTEMBER 26, 1998
Stock Purchase Warrant
To Purchase 200,000 Shares of Common Stock
par value $.001 per share
of
PRO TECH COMMUNICATIONS, INC.
THIS IS TO CERTIFY that Martin Goldberg ("Goldberg") is entitled upon
the due exercise hereof at any time during the Exercise Period (as hereinafter
defined) to purchase from PRO TECH COMMUNICATIONS, INC. (the "Company"), up to
two hundred thousand (200,000) duly authorized, validly issued, fully paid and
non-assessable shares of common stock, par value $.001 per share, at a price of
One Dollar and Fifty Cents ($1.50) (the "Exercise Price") (subject to
adjustment as provided herein) for each share of such common stock so purchased
and to exercise the other rights, powers and privileges hereinafter provided,
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
ARTICLE I
DEFINITIONS
The terms defined in this Article I, whenever used in this Stock
Purchase Warrant, shall have the respective meanings hereinafter specified.
Whenever used in this Stock Purchase Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders.
"Common Stock" means the Company's authorized common stock, par value
$.001 per share.
"Company" means Pro Tech Communications, Inc., and any successor
corporation.
<PAGE> 2
"Exercise Period" means the period commencing on September 26, 1996
(three months after the date of grant), and terminating at 5:00 p.m., Miami
time, on September 26, 1998, or such time as otherwise provided herein.
"Exercise Price" means One Dollar and Fifty Cents ($1.50) per share,
as such price may be adjusted from time to time pursuant to Article V.
"Goldberg" means Goldberg Financial Group Ltd., and any successor
corporation.
"Person" means an individual, a corporation, a joint venture, a
general or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Stock Purchase Warrant(s)" means this Amended and Restated Stock
Purchase Warrant.
"Warrant Shares" means shares of Common Stock issued upon the exercise
of this Stock Purchase Warrant.
ARTICLE II
NUMBER OF SHARES; EXERCISE OF STOCK PURCHASE WARRANT
2.1. Number of Shares. This Stock Purchase Warrant shall entitle
Goldberg to subscribe to and purchase up to two hundred thousand (200,000)
shares of Common Stock.
2.2. Right to Exercise. Subject to the provisions contained in
this Stock Purchase Warrant and upon compliance with the conditions of this
Article II, Goldberg shall have the right at any time and from time to time
during the Exercise Period to exercise this Stock Purchase Warrant in whole or
in portions.
2.3. Notice of Exercise; Issuance of Common Stock. To exercise
this Stock Purchase Warrant, Goldberg shall deliver to the Company (a) a Notice
of Exercise substantially in the form attached hereto, duly executed by
Goldberg, (b) an amount equal to the aggregate Exercise Price for the shares of
Common Stock purchased upon due exercise of this Stock Purchase Warrant, (c)
this Stock Purchase Warrant and (d) a certificate executed by Goldberg
certifying that attached thereto is a true and correct copy of the resolutions
or authorizations of the appropriate directors, owners or otherwise, approving
and authorizing the exercise of this Stock Purchase Warrant and the purchase of
the Warrant Shares.
Payment of the Exercise Price shall be made, at the option of
Goldberg, (i) by wire transfer of immediately available funds to an account in
a bank located in the United
2
<PAGE> 3
States designated in writing for such purpose by the Company or (ii) by
certified or official bank check payable to the order of the Company and drawn
on a member of the Chicago or New York Clearing House. Upon receipt thereof,
the Company shall, as promptly as practicable, and in any event within seven
(7) business days thereafter, cause to be issued and delivered to Goldberg, a
certificate representing the aggregate number of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock purchased pursuant
to the exercise of this Stock Purchase Warrant registered in the name of
Goldberg. The certificates representing such Warrant Shares shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
WITHOUT REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
Notwithstanding anything contained herein to the contrary,
this Stock Purchase Warrant may not be exercised if the issuance of the shares
of Common Stock upon such exercise would constitute a violation of any
applicable federal or state securities or other applicable laws or regulations.
As a condition to the exercise of this Stock Purchase Warrant, the Company may
require Goldberg to make such representations and agree to such covenants as
may be required by any applicable law or regulation.
This Stock Purchase Warrant shall be deemed to have been
exercised and such certificate shall be deemed to have been issued, and
Goldberg shall be deemed to have become the holder of record of such Warrant
Shares for all purposes as of the close of business on the date the Notice of
Exercise, together with payment and a certificate as herein provided and this
Stock Purchase Warrant, are received by the Company.
2.4. Balance of Stock Purchase Warrant Certificate. Upon exercise
of this Stock Purchase Warrant in part rather than in whole, the Company shall
execute and deliver to Goldberg a new Stock Purchase Warrant certificate of
like tenor evidencing the unexercised portion of the Stock Purchase Warrant and
otherwise in all respects identical with this Stock Purchase Warrant.
ARTICLE III
REGISTRATION
3.1. Registration; Ownership. The Company will keep a register in
which, subject to such reasonable regulations as it may prescribe, the Company
will provide for the registration of ownership of this Stock Purchase Warrant.
The Company will not at any time, except upon the dissolution, liquidation or
winding up of the Company, close such register so as to result in preventing or
delaying the exercise of this Stock Purchase Warrant.
3
<PAGE> 4
3.2. Replacement of Stock Purchase Warrant. Upon receipt by the
Company of evidence satisfactory to it, in the exercise of reasonable
discretion, of the ownership of and the loss, theft, destruction or mutilation
of any Stock Purchase Warrant and, in case of loss, theft or destruction, the
written agreement of Goldberg to indemnify the Company against any resulting
loss or expense or in case of mutilation upon surrender and cancellation of
such Stock Purchase Warrant, the Company will execute and deliver in lieu
thereof, a new Stock Purchase Warrant of like tenor.
ARTICLE IV
NO ASSIGNMENT OR TRANSFER
Goldberg shall not assign or transfer any of its rights under this
Stock Purchase Warrant. Any purported assignment or transfer of this Stock
Purchase Warrant in violation of this Article IV shall be void.
ARTICLE V
ADJUSTMENT OF SHARES
In the event of any increase or decrease in the number of shares of
Common Stock outstanding by reason of a stock split or reverse stock split, the
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant and the Exercise Price shall be appropriately adjusted. The
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant after such stock split or reverse stock split shall be equal
to an amount that Goldberg would have been entitled to, had the Stock Purchase
Warrant been exercised immediately prior to the stock split or reverse stock
split.
In the event that the Company shall at any time increase its
outstanding shares of Common Stock into a greater number of shares of Common
Stock by reason of a stock split, the Exercise Price in effect immediately
prior to such increase shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be reduced into a smaller
number of shares of Common Stock by reason of a reverse stock split, the
Exercise Price in effect immediately prior to such reduction shall be
proportionately increased, calculated by dividing (i) the product of the total
number of shares of Common Stock outstanding prior to the stock split or
reverse stock split, multiplied by the Exercise Price, by (ii) the total number
of shares of Common Stock outstanding after the stock split or reverse stock
split.
4
<PAGE> 5
ARTICLE VI
REGISTRATION RIGHTS
The Company grants Goldberg the following rights to have the Warrant
Shares registered under the Securities Act:
6.1 Piggy-back Registration Rights. If, at any time during the
Exercise Period, the Company proposes to register any class of equity security
on any form for the general registration of securities under the Securities Act
(other than a registration form relating to a registration of a stock option,
stock purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan, a registration of
stock proposed to be issued in exchange for securities or assets of, or in
connection with the merger or consolidation with, another corporation or a
registration of stock proposed to be issued in exchange for other securities of
the Company), then the Company shall give prompt written notice thereof to
Goldberg and, upon the written request of Goldberg made within ten (10) days
after the receipt of such notice, the Company shall use its best efforts to
effect as part of such registration the registration under the Securities Act
of that number of the Warrant Shares which Goldberg requests the Company to
register, provided that the managing underwriter of the Company's public
offering, if any, shall be of the opinion that the inclusion in such
registration of such number of Warrant Shares will not interfere with the
successful marketing of all of the Company's securities being registered. If a
managing underwriting requests Goldberg to reduce in whole or in part the
number of Warrant Shares, if any, sought to be registered by Goldberg, Goldberg
shall comply with the request of the managing underwriter. In connection with
any registration pursuant to this Section 6.1, Goldberg shall provide the
Company with such information regarding himself and the distribution of the
Warrant Shares as the Company and the managing underwriter, if any, shall
reasonably request. The Company shall pay all costs and expenses incident to
the Company's registration of Goldbergs' Warrant Shares pursuant to this
Section 6.1, except the attorneys' fees and expenses of Goldberg. The Company
shall not be obligated to effect registration under the Securities Act pursuant
to this Section 6.1 on more than one occasion. Within five (5) business days
after the Securities and Exchange Commission (the "Commission") declares the
Company's registration statement to be effective, Goldberg shall exercise this
Stock Purchase Warrant in full and shall pay to the Company the full Exercise
Price therefor.
6.2 Demand Registration Rights. During the Exercise Period,
Goldberg shall have the following demand registration rights, subject to the
conditions contained in this Section 6.2:
(a) Registration Request. At any time during the
Exercise Period and as soon as reasonably practicable upon the written request
of Goldberg, the Company shall proceed to file with the Commission a
registration statement under the Securities Act on any appropriate form as the
Company shall select covering the Warrant Shares. The Company shall use its
best efforts to cause such registration statement to become effective as soon
as reasonably practicable following such request; provided, however, that the
Company shall not
5
<PAGE> 6
be required (i) to file a registration statement on more than one occasion or
(ii) to file any registration statement during any period of time (not to
exceed 180 days) when the Company is contemplating an underwritten offering of
its shares of equity securities and, in the judgment of the managing
underwriter thereof, such filing would have a material adverse effect on the
contemplated offering.
(b) Information and Costs. Goldberg shall provide the
Company with such information with respect to the Warrant Shares to be sold,
the plans for the proposed distribution thereof, and such other information as
shall in the opinion of counsel for the Company be necessary to enable the
Company to include in such registration statement (or any amendment or
supplement thereto) all material facts required to be disclosed with respect to
Goldberg. The Company shall bear the costs of such registration, including,
but not limited to, all registration and filing fees, and printing expenses.
Notwithstanding the foregoing, Goldberg shall pay the fees and disbursements of
his own counsel and any underwriting fees and selling commissions applicable to
the Warrant Shares sold by Goldberg.
(c) Financial Statements. The Company shall not be
required to furnish any audited financial statements at the request of Goldberg
other than those statements customarily prepared at the end of its fiscal year,
unless (i) Goldberg shall agree to reimburse the Company for the out-of-pocket
expenses incurred by the Company in the preparation of such other audited
financial statements or (ii) such other audited financial statements are to be
required by the Commission as a condition to ordering a registration statement
effective under the Securities Act.
(d) Joint Exercise of Demand Registration Rights. The
Company shall only be obligated to register the Warrant Shares of Goldberg
pursuant to this Section 6.2 if and only if Donald Fraser and Costas Takkas
also provide the Company with a written request to register the shares of
Common Stock underlying the Stock Purchase Warrants granted to each of such
persons as of June 26, 1996.
(e) The Company's Obligation to Maintain the Registration
Statement Current. The Company shall be required to maintain the registration
statement covering the Warrant Shares current until the earlier to occur of (i)
the sale of all of the Warrant Shares or (ii) twelve (12) months from the date
that the registration statement covering the Warrant Shares was declared
effective by the Commission.
(f) Exercise of Warrant Shares. Within five (5) business
days after the registration statement covering the Warrant Shares is declared
effective by the Commission, Goldberg shall exercise this Stock Purchase
Warrant in full and shall pay the full Exercise Price to the Company therefor.
6
<PAGE> 7
ARTICLE VII
MISCELLANEOUS
7.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Goldberg or the Company shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of Goldberg or the Company.
7.2. Notice Generally. Any notice, demand or delivery to be made
pursuant to or in connection with this Stock Purchase Warrant shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to (a) Goldberg at its last known address appearing on the books or
register of the Company maintained for such purpose or (b) the Company at 3311
Industrial 25th Street, Ft. Pierce, Florida 34946. Goldberg and the Company
may each designate a different address by written notice to the other pursuant
to this Section 7.2.
7.3. Payment of Certain Expenses. Except as otherwise provided in
this Stock Purchase Warrant, the Company and Goldberg shall each pay their
respective expenses in connection with, and all taxes and other governmental
charges that may be imposed in respect of, the issue, sale and delivery of the
shares of Common Stock issuable upon the exercise of this Stock Purchase
Warrant.
7.4. Amendment. This Stock Purchase Warrant may not be modified or
amended except by written agreement duly executed by the Company and Goldberg.
7.5. Headings. The headings of the Articles and Sections of this
Stock Purchase Warrant are for the convenience of reference only and shall not,
for any purpose, be deemed a part of this Stock Purchase Warrant.
7.6 Governing Law. This Stock Purchase Warrant shall be governed
by the laws of the State of Florida without reference to the conflict of laws
principles thereof.
7.7 Replacement Warrant. This Amended and Restated Stock Purchase
Warrant supersedes the Stock Purchase Warrant to purchase 200,000 shares of
Common Stock which was previously issued to Goldberg.
Date of Grant: As of June 26, 1996
Pro Tech Communications, Inc.
By: /s/ Keith Larkin
-------------------------------
Name: Keith Larkin
Title: Chief Executive Officer
The undersigned agrees to comply with the terms and conditions contained herein.
/s/ Martin Goldberg
----------------------------------
Martin Goldberg
7
<PAGE> 8
Date
Pro Tech Communications, Inc.
3311 Industrial 25th Street
Ft. Pierce, Florida 34946
Re: Exercise of Stock Purchase Warrant
Dear Sir:
Please be advised that pursuant to an Amended and Restated Stock
Purchase Warrant Agreement ("Agreement"), granted as of June 26, 1996, by Pro
Tech Communications, Inc. (the "Company") to the undersigned, the undersigned
hereby exercises the Stock Purchase Warrant in the amount of ______________
shares of common stock of the Company and herewith tenders its cashier's check
or certified check to the Company in the amount of
__________________________________ ($_____ ____) in payment for such shares of
common stock. Capitalized terms not otherwise defined herein are defined as
set forth in the Agreement.
The undersigned requests _______ stock certificates for such shares
issued in the name of ______________________ _________ whose address is
______________________________________ and whose social security number is
___________________ __________________.
The undersigned hereby acknowledges, warrants and represents the
following:
(1) The undersigned's acknowledgements, representations,
warranties and agreements contained in the Agreement are true, complete and
accurate as of the date of this letter.
(2) The Stock Purchase Warrant is presently exercisable and as
such, has vested and has not expired.
(3) The undersigned is presently and has been in full compliance
with all the terms, conditions and provisions of the Agreement.
Sincerely,
______________________________
8
<PAGE> 1
Exhibit 10.13
THIS STOCK PURCHASE WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
FT. PIERCE, FLORIDA
GRANTED: AS OF JUNE 26, 1996
THIS AMENDED AND RESTATED STOCK PURCHASE WARRANT EXPIRES
IF NOT EXERCISED ON OR BEFORE
5:00 P.M., MIAMI TIME, SEPTEMBER 26, 1998
Stock Purchase Warrant
To Purchase 200,000 Shares of Common Stock
par value $.001 per share
of
PRO TECH COMMUNICATIONS, INC.
THIS IS TO CERTIFY that Costas Takkas ("Takkas") is entitled upon the
due exercise hereof at any time during the Exercise Period (as hereinafter
defined) to purchase from PRO TECH COMMUNICATIONS, INC. (the "Company"), up to
two hundred thousand (200,000) duly authorized, validly issued, fully paid and
non-assessable shares of common stock, par value $.001 per share, at a price of
One Dollar and Fifty Cents ($1.50) (the "Exercise Price") (subject to
adjustment as provided herein) for each share of such common stock so purchased
and to exercise the other rights, powers and privileges hereinafter provided,
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
ARTICLE I
DEFINITIONS
The terms defined in this Article I, whenever used in this Stock
Purchase Warrant, shall have the respective meanings hereinafter specified.
Whenever used in this Stock Purchase Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders.
"Common Stock" means the Company's authorized common stock, par value
$.001 per share.
"Company" means Pro Tech Communications, Inc., and any successor
corporation.
<PAGE> 2
"Exercise Period" means the period commencing on September 26, 1996
(three months after the date of grant), and terminating at 5:00 p.m., Miami
time, on September 26, 1998, or such time as otherwise provided herein.
"Exercise Price" means One Dollar and Fifty Cents ($1.50) per share,
as such price may be adjusted from time to time pursuant to Article V.
"Person" means an individual, a corporation, a joint venture, a
general or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Stock Purchase Warrant(s)" means this Amended and Restated Stock
Purchase Warrant.
"Takkas" means Costas Takkas.
"Warrant Shares" means shares of Common Stock issued upon the exercise
of this Stock Purchase Warrant.
ARTICLE II
NUMBER OF SHARES; EXERCISE OF STOCK PURCHASE WARRANT
2.1. Number of Shares. This Stock Purchase Warrant shall entitle
Takkas to subscribe to and purchase up to two hundred thousand (200,000) shares
of Common Stock.
2.2. Right to Exercise. Subject to the provisions contained in
this Stock Purchase Warrant and upon compliance with the conditions of this
Article II, Takkas shall have the right at any time and from time to time
during the Exercise Period to exercise this Stock Purchase Warrant in whole or
in portions.
2.3. Notice of Exercise; Issuance of Common Stock. To exercise
this Stock Purchase Warrant, Takkas shall deliver to the Company (a) a Notice
of Exercise substantially in the form attached hereto, duly executed by Takkas,
(b) an amount equal to the aggregate Exercise Price for the shares of Common
Stock purchased upon due exercise of this Stock Purchase Warrant, (c) this
Stock Purchase Warrant and (d) a certificate executed by Takkas certifying that
attached thereto is a true and correct copy of the resolutions or
authorizations of the appropriate directors, owners or otherwise, approving and
authorizing the exercise of this Stock Purchase Warrant and the purchase of the
Warrant Shares.
Payment of the Exercise Price shall be made, at the option of
Takkas, (i) by wire transfer of immediately available funds to an account in a
bank located in the United
2
<PAGE> 3
States designated in writing for such purpose by the Company or (ii) by
certified or official bank check payable to the order of the Company and drawn
on a member of the Chicago or New York Clearing House. Upon receipt thereof,
the Company shall, as promptly as practicable, and in any event within seven
(7) business days thereafter, cause to be issued and delivered to Takkas, a
certificate representing the aggregate number of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock purchased pursuant
to the exercise of this Stock Purchase Warrant registered in the name of
Takkas. The certificates representing such Warrant Shares shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
WITHOUT REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
Notwithstanding anything contained herein to the contrary,
this Stock Purchase Warrant may not be exercised if the issuance of the shares
of Common Stock upon such exercise would constitute a violation of any
applicable federal or state securities or other applicable laws or regulations.
As a condition to the exercise of this Stock Purchase Warrant, the Company may
require Takkas to make such representations and agree to such covenants as may
be required by any applicable law or regulation.
This Stock Purchase Warrant shall be deemed to have been
exercised and such certificate shall be deemed to have been issued, and Takkas
shall be deemed to have become the holder of record of such Warrant Shares for
all purposes as of the close of business on the date the Notice of Exercise,
together with payment and a certificate as herein provided and this Stock
Purchase Warrant, are received by the Company.
2.4. Balance of Stock Purchase Warrant Certificate. Upon exercise
of this Stock Purchase Warrant in part rather than in whole, the Company shall
execute and deliver to Takkas a new Stock Purchase Warrant certificate of like
tenor evidencing the unexercised portion of the Stock Purchase Warrant and
otherwise in all respects identical with this Stock Purchase Warrant.
ARTICLE III
REGISTRATION
3.1. Registration; Ownership. The Company will keep a register in
which, subject to such reasonable regulations as it may prescribe, the Company
will provide for the registration of ownership of this Stock Purchase Warrant.
The Company will not at any time, except upon the dissolution, liquidation or
winding up of the Company, close such register so as to result in preventing or
delaying the exercise of this Stock Purchase Warrant.
3
<PAGE> 4
3.2. Replacement of Stock Purchase Warrant. Upon receipt by the
Company of evidence satisfactory to it, in the exercise of reasonable
discretion, of the ownership of and the loss, theft, destruction or mutilation
of any Stock Purchase Warrant and, in case of loss, theft or destruction, the
written agreement of Takkas to indemnify the Company against any resulting loss
or expense or in case of mutilation upon surrender and cancellation of such
Stock Purchase Warrant, the Company will execute and deliver in lieu thereof, a
new Stock Purchase Warrant of like tenor.
ARTICLE IV
NO ASSIGNMENT OR TRANSFER
Takkas shall not assign or transfer any of its rights under this Stock
Purchase Warrant. Any purported assignment or transfer of this Stock Purchase
Warrant in violation of this Article IV shall be void.
ARTICLE V
ADJUSTMENT OF SHARES
In the event of any increase or decrease in the number of shares of
Common Stock outstanding by reason of a stock split or reverse stock split, the
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant and the Exercise Price shall be appropriately adjusted. The
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant after such stock split or reverse stock split shall be equal
to an amount that Takkas would have been entitled to, had the Stock Purchase
Warrant been exercised immediately prior to the stock split or reverse stock
split.
In the event that the Company shall at any time increase its
outstanding shares of Common Stock into a greater number of shares of Common
Stock by reason of a stock split, the Exercise Price in effect immediately
prior to such increase shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be reduced into a smaller
number of shares of Common Stock by reason of a reverse stock split, the
Exercise Price in effect immediately prior to such reduction shall be
proportionately increased, calculated by dividing (i) the product of the total
number of shares of Common Stock outstanding prior to the stock split or
reverse stock split, multiplied by the Exercise Price, by (ii) the total number
of shares of Common Stock outstanding after the stock split or reverse stock
split.
4
<PAGE> 5
ARTICLE VI
REGISTRATION RIGHTS
The Company grants Takkas the following rights to have the Warrant
Shares registered under the Securities Act:
6.1 Piggy-back Registration Rights. If, at any time during the
Exercise Period, the Company proposes to register any class of equity security
on any form for the general registration of securities under the Securities Act
(other than a registration form relating to a registration of a stock option,
stock purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan, a registration of
stock proposed to be issued in exchange for securities or assets of, or in
connection with the merger or consolidation with, another corporation or a
registration of stock proposed to be issued in exchange for other securities of
the Company), then the Company shall give prompt written notice thereof to
Takkas and, upon the written request of Takkas made within ten (10) days after
the receipt of such notice, the Company shall use its best efforts to effect as
part of such registration the registration under the Securities Act of that
number of the Warrant Shares which Takkas requests the Company to register,
provided that the managing underwriter of the Company's public offering, if
any, shall be of the opinion that the inclusion in such registration of such
number of Warrant Shares will not interfere with the successful marketing of
all of the Company's securities being registered. If a managing underwriting
requests Takkas to reduce in whole or in part the number of Warrant Shares, if
any, sought to be registered by Takkas, Takkas shall comply with the request of
the managing underwriter. In connection with any registration pursuant to this
Section 6.1, Takkas shall provide the Company with such information regarding
himself and the distribution of the Warrant Shares as the Company and the
managing underwriter, if any, shall reasonably request. The Company shall pay
all costs and expenses incident to the Company's registration of Takkas'
Warrant Shares pursuant to this Section 6.1, except the attorneys' fees and
expenses of Takkas. The Company shall not be obligated to effect registration
under the Securities Act pursuant to this Section 6.1 on more than one
occasion. Within five (5) business days after the Securities and Exchange
Commission (the "Commission") declares the Company's registration statement to
be effective, Takkas shall exercise this Stock Purchase Warrant in full and
shall pay to the Company the full Exercise Price therefor.
6.2 Demand Registration Rights. During the Exercise Period,
Takkas shall have the following demand registration rights, subject to the
conditions contained in this Section 6.2:
(a) Registration Request. At any time during the
Exercise Period and as soon as reasonably practicable upon the written request
of Takkas, the Company shall proceed to file with the Commission a registration
statement under the Securities Act on any appropriate form as the Company shall
select covering the Warrant Shares. The Company shall use its best efforts to
cause such registration statement to become effective as soon as reasonably
practicable following such request; provided, however, that the Company shall
not
5
<PAGE> 6
be required (i) to file a registration statement on more than one occasion or
(ii) to file any registration statement during any period of time (not to
exceed 180 days) when the Company is contemplating an underwritten offering of
its shares of equity securities and, in the judgment of the managing
underwriter thereof, such filing would have a material adverse effect on the
contemplated offering.
(b) Information and Costs. Takkas shall provide the
Company with such information with respect to the Warrant Shares to be sold,
the plans for the proposed distribution thereof, and such other information as
shall in the opinion of counsel for the Company be necessary to enable the
Company to include in such registration statement (or any amendment or
supplement thereto) all material facts required to be disclosed with respect to
Takkas. The Company shall bear the costs of such registration, including, but
not limited to, all registration and filing fees, and printing expenses.
Notwithstanding the foregoing, Takkas shall pay the fees and disbursements of
his own counsel and any underwriting fees and selling commissions applicable to
the Warrant Shares sold by Takkas.
(c) Financial Statements. The Company shall not be
required to furnish any audited financial statements at the request of Takkas
other than those statements customarily prepared at the end of its fiscal year,
unless (i) Takkas shall agree to reimburse the Company for the out-of-pocket
expenses incurred by the Company in the preparation of such other audited
financial statements or (ii) such other audited financial statements are to be
required by the Commission as a condition to ordering a registration statement
effective under the Securities Act.
(d) Joint Exercise of Demand Registration Rights. The
Company shall only be obligated to register the Warrant Shares of Takkas
pursuant to this Section 6.2 if and only if Donald Fraser and Martin Goldberg
also provide the Company with a written request to register the shares of
Common Stock underlying the Stock Purchase Warrants granted to each of such
persons as of June 26, 1996.
(e) The Company's Obligation to Maintain the Registration
Statement Current. The Company shall be required to maintain the registration
statement covering the Warrant Shares current until the earlier to occur of (i)
the sale of all of the Warrant Shares or (ii) twelve (12) months from the date
that the registration statement covering the Warrant Shares was declared
effective by the Commission.
(f) Exercise of Warrant Shares. Within five (5) business
days after the registration statement covering the Warrant Shares is declared
effective by the Commission, Takkas shall exercise this Stock Purchase Warrant
in full and shall pay the full Exercise Price to the Company therefor.
6
<PAGE> 7
ARTICLE VII
MISCELLANEOUS
7.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Takkas or the Company shall operate
as a waiver of such right or otherwise prejudice the rights, powers or remedies
of Takkas or the Company.
7.2. Notice Generally. Any notice, demand or delivery to be made
pursuant to or in connection with this Stock Purchase Warrant shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to (a) Takkas at its last known address appearing on the books or
register of the Company maintained for such purpose or (b) the Company at 3311
Industrial 25th Street, Ft. Pierce, Florida 34946. Takkas and the Company may
each designate a different address by written notice to the other pursuant to
this Section 7.2.
7.3. Payment of Certain Expenses. Except as otherwise provided in
this Stock Purchase Warrant, the Company and Takkas shall each pay their
respective expenses in connection with, and all taxes and other governmental
charges that may be imposed in respect of, the issue, sale and delivery of the
shares of Common Stock issuable upon the exercise of this Stock Purchase
Warrant.
7.4. Amendment. This Stock Purchase Warrant may not be modified or
amended except by written agreement duly executed by the Company and Takkas.
7.5. Headings. The headings of the Articles and Sections of this
Stock Purchase Warrant are for the convenience of reference only and shall not,
for any purpose, be deemed a part of this Stock Purchase Warrant.
7.6 Governing Law. This Stock Purchase Warrant shall be governed
by the laws of the State of Florida without reference to the conflict of laws
principles thereof.
7.7 Replacement Warrant. This Amended and Restated Stock Purchase
Warrant supersedes the Stock Purchase Warrant to purchase 200,000 shares of
Common Stock which was previously issued to Takkas.
Date of Grant: As of June 26, 1996
Pro Tech Communications, Inc.
By: /s/ Keith Larkin
---------------------------------------
Name: Keith Larkin
Title: Chief Executive Officer
The undersigned agrees to comply with the terms and conditions contained herein.
/s/ Costas Takkas
---------------------------------------------
Costas Takkas
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<PAGE> 8
---------------
Date
Pro Tech Communications, Inc.
3311 Industrial 25th Street
Ft. Pierce, Florida 34946
Re: Exercise of Stock Purchase Warrant
Dear Sir:
Please be advised that pursuant to an Amended and Restated Stock
Purchase Warrant Agreement ("Agreement"), granted as of June 26, 1996, by Pro
Tech Communications, Inc. (the "Company") to the undersigned, the undersigned
hereby exercises the Stock Purchase Warrant in the amount of ______________
shares of common stock of the Company and herewith tenders its cashier's check
or certified check to the Company in the amount of
__________________________________ ($_____ ____) in payment for such shares of
common stock. Capitalized terms not otherwise defined herein are defined as
set forth in the Agreement.
The undersigned requests _______ stock certificates for such shares
issued in the name of ______________________ _________ whose address is
______________________________________ and whose social security number is
___________________ __________________.
The undersigned hereby acknowledges, warrants and represents the
following:
(1) The undersigned's acknowledgements, representations,
warranties and agreements contained in the Agreement are true, complete and
accurate as of the date of this letter.
(2) The Stock Purchase Warrant is presently exercisable and as
such, has vested and has not expired.
(3) The undersigned is presently and has been in full compliance
with all the terms, conditions and provisions of the Agreement.
Sincerely,
______________________________
8
<PAGE> 1
Exhibit 10.15
THIS STOCK PURCHASE WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
FT. PIERCE, FLORIDA
GRANTED: AS OF JUNE 26, 1996
THIS AMENDED AND RESTATED STOCK PURCHASE WARRANT EXPIRES
IF NOT EXERCISED ON OR BEFORE
5:00 P.M., MIAMI TIME, SEPTEMBER 26, 1998
Stock Purchase Warrant
To Purchase 200,000 Shares of Common Stock
par value $.001 per share
of
PRO TECH COMMUNICATIONS, INC.
THIS IS TO CERTIFY that Donald Fraser ("Fraser") is entitled upon the
due exercise hereof at any time during the Exercise Period (as hereinafter
defined) to purchase from PRO TECH COMMUNICATIONS, INC. (the "Company"), up to
two hundred thousand (200,000) duly authorized, validly issued, fully paid and
non-assessable shares of common stock, par value $.001 per share, at a price of
One Dollar and Fifty Cents ($1.50) (the "Exercise Price") (subject to
adjustment as provided herein) for each share of such common stock so purchased
and to exercise the other rights, powers and privileges hereinafter provided,
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
ARTICLE I
DEFINITIONS
The terms defined in this Article I, whenever used in this Stock
Purchase Warrant, shall have the respective meanings hereinafter specified.
Whenever used in this Stock Purchase Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders.
"Common Stock" means the Company's authorized common stock, par value
$.001 per share.
"Company" means Pro Tech Communications, Inc., and any successor
corporation.
<PAGE> 2
"Exercise Period" means the period commencing on September 26, 1996
(three months after the date of grant), and terminating at 5:00 p.m., Miami
time, on September 26, 1998, or such time as otherwise provided herein.
"Exercise Price" means One Dollar and Fifty Cents ($1.50) per share,
as such price may be adjusted from time to time pursuant to Article V.
"Fraser" means Fraser Financial Group Ltd., and any successor
corporation.
"Person" means an individual, a corporation, a joint venture, a
general or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Stock Purchase Warrant(s)" means this Amended and Restated Stock
Purchase Warrant.
"Warrant Shares" means shares of Common Stock issued upon the exercise
of this Stock Purchase Warrant.
ARTICLE II
NUMBER OF SHARES; EXERCISE OF STOCK PURCHASE WARRANT
2.1. Number of Shares. This Stock Purchase Warrant shall entitle
Fraser to subscribe to and purchase up to two hundred thousand (200,000) shares
of Common Stock.
2.2. Right to Exercise. Subject to the provisions contained in
this Stock Purchase Warrant and upon compliance with the conditions of this
Article II, Fraser shall have the right at any time and from time to time
during the Exercise Period to exercise this Stock Purchase Warrant in whole or
in portions.
2.3. Notice of Exercise; Issuance of Common Stock. To exercise
this Stock Purchase Warrant, Fraser shall deliver to the Company (a) a Notice
of Exercise substantially in the form attached hereto, duly executed by Fraser,
(b) an amount equal to the aggregate Exercise Price for the shares of Common
Stock purchased upon due exercise of this Stock Purchase Warrant, (c) this
Stock Purchase Warrant and (d) a certificate executed by Fraser certifying that
attached thereto is a true and correct copy of the resolutions or
authorizations of the appropriate directors, owners or otherwise, approving and
authorizing the exercise of this Stock Purchase Warrant and the purchase of the
Warrant Shares.
Payment of the Exercise Price shall be made, at the option of
Fraser, (i) by wire transfer of immediately available funds to an account in a
bank located in the United
2
<PAGE> 3
States designated in writing for such purpose by the Company or (ii) by
certified or official bank check payable to the order of the Company and drawn
on a member of the Chicago or New York Clearing House. Upon receipt thereof,
the Company shall, as promptly as practicable, and in any event within seven
(7) business days thereafter, cause to be issued and delivered to Fraser, a
certificate representing the aggregate number of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock purchased pursuant
to the exercise of this Stock Purchase Warrant registered in the name of
Fraser. The certificates representing such Warrant Shares shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
WITHOUT REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
Notwithstanding anything contained herein to the contrary,
this Stock Purchase Warrant may not be exercised if the issuance of the shares
of Common Stock upon such exercise would constitute a violation of any
applicable federal or state securities or other applicable laws or regulations.
As a condition to the exercise of this Stock Purchase Warrant, the Company may
require Fraser to make such representations and agree to such covenants as may
be required by any applicable law or regulation.
This Stock Purchase Warrant shall be deemed to have been
exercised and such certificate shall be deemed to have been issued, and Fraser
shall be deemed to have become the holder of record of such Warrant Shares for
all purposes as of the close of business on the date the Notice of Exercise,
together with payment and a certificate as herein provided and this Stock
Purchase Warrant, are received by the Company.
2.4. Balance of Stock Purchase Warrant Certificate. Upon exercise
of this Stock Purchase Warrant in part rather than in whole, the Company shall
execute and deliver to Fraser a new Stock Purchase Warrant certificate of like
tenor evidencing the unexercised portion of the Stock Purchase Warrant and
otherwise in all respects identical with this Stock Purchase Warrant.
ARTICLE III
REGISTRATION
3.1. Registration; Ownership. The Company will keep a register in
which, subject to such reasonable regulations as it may prescribe, the Company
will provide for the registration of ownership of this Stock Purchase Warrant.
The Company will not at any time, except upon the dissolution, liquidation or
winding up of the Company, close such register so as to result in preventing or
delaying the exercise of this Stock Purchase Warrant.
3
<PAGE> 4
3.2. Replacement of Stock Purchase Warrant. Upon receipt by the
Company of evidence satisfactory to it, in the exercise of reasonable
discretion, of the ownership of and the loss, theft, destruction or mutilation
of any Stock Purchase Warrant and, in case of loss, theft or destruction, the
written agreement of Fraser to indemnify the Company against any resulting loss
or expense or in case of mutilation upon surrender and cancellation of such
Stock Purchase Warrant, the Company will execute and deliver in lieu thereof, a
new Stock Purchase Warrant of like tenor.
ARTICLE IV
NO ASSIGNMENT OR TRANSFER
Fraser shall not assign or transfer any of its rights under this Stock
Purchase Warrant. Any purported assignment or transfer of this Stock Purchase
Warrant in violation of this Article IV shall be void.
ARTICLE V
ADJUSTMENT OF SHARES
In the event of any increase or decrease in the number of shares of
Common Stock outstanding by reason of a stock split or reverse stock split, the
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant and the Exercise Price shall be appropriately adjusted. The
number of shares of Common Stock issuable upon the exercise of this Stock
Purchase Warrant after such stock split or reverse stock split shall be equal
to an amount that Fraser would have been entitled to, had the Stock Purchase
Warrant been exercised immediately prior to the stock split or reverse stock
split.
In the event that the Company shall at any time increase its
outstanding shares of Common Stock into a greater number of shares of Common
Stock by reason of a stock split, the Exercise Price in effect immediately
prior to such increase shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be reduced into a smaller
number of shares of Common Stock by reason of a reverse stock split, the
Exercise Price in effect immediately prior to such reduction shall be
proportionately increased, calculated by dividing (i) the product of the total
number of shares of Common Stock outstanding prior to the stock split or
reverse stock split, multiplied by the Exercise Price, by (ii) the total number
of shares of Common Stock outstanding after the stock split or reverse stock
split.
4
<PAGE> 5
ARTICLE VI
REGISTRATION RIGHTS
The Company grants Fraser the following rights to have the Warrant
Shares registered under the Securities Act:
6.1 Piggy-back Registration Rights. If, at any time during the
Exercise Period, the Company proposes to register any class of equity security
on any form for the general registration of securities under the Securities Act
(other than a registration form relating to a registration of a stock option,
stock purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan, a registration of
stock proposed to be issued in exchange for securities or assets of, or in
connection with the merger or consolidation with, another corporation or a
registration of stock proposed to be issued in exchange for other securities of
the Company), then the Company shall give prompt written notice thereof to
Fraser and, upon the written request of Fraser made within ten (10) days after
the receipt of such notice, the Company shall use its best efforts to effect as
part of such registration the registration under the Securities Act of that
number of the Warrant Shares which Fraser requests the Company to register,
provided that the managing underwriter of the Company's public offering, if
any, shall be of the opinion that the inclusion in such registration of such
number of Warrant Shares will not interfere with the successful marketing of
all of the Company's securities being registered. If a managing underwriting
requests Fraser to reduce in whole or in part the number of Warrant Shares, if
any, sought to be registered by Fraser, Fraser shall comply with the request of
the managing underwriter. In connection with any registration pursuant to this
Section 6.1, Fraser shall provide the Company with such information regarding
himself and the distribution of the Warrant Shares as the Company and the
managing underwriter, if any, shall reasonably request. The Company shall pay
all costs and expenses incident to the Company's registration of Fraser's
Warrant Shares pursuant to this Section 6.1, except the attorneys' fees and
expenses of Fraser. The Company shall not be obligated to effect registration
under the Securities Act pursuant to this Section 6.1 on more than one
occasion. Within five (5) business days after the Securities and Exchange
Commission (the "Commission") declares the Company's registration statement to
be effective, Fraser shall exercise this Stock Purchase Warrant in full and
shall pay to the Company the full Exercise Price therefor.
6.2 Demand Registration Rights. During the Exercise Period,
Fraser shall have the following demand registration rights, subject to the
conditions contained in this Section 6.2:
(a) Registration Request. At any time during the
Exercise Period and as soon as reasonably practicable upon the written request
of Fraser, the Company shall proceed to file with the Commission a registration
statement under the Securities Act on any appropriate form as the Company shall
select covering the Warrant Shares. The Company shall use its best efforts to
cause such registration statement to become effective as soon as reasonably
practicable following such request; provided, however, that the Company shall
not be required (i) to file a registration statement on more than one occasion
or (ii) to file any
5
<PAGE> 6
registration statement during any period of time (not to exceed 180 days) when
the Company is contemplating an underwritten offering of its shares of equity
securities and, in the judgment of the managing underwriter thereof, such
filing would have a material adverse effect on the contemplated offering.
(b) Information and Costs. Fraser shall provide the
Company with such information with respect to the Warrant Shares to be sold,
the plans for the proposed distribution thereof, and such other information as
shall in the opinion of counsel for the Company be necessary to enable the
Company to include in such registration statement (or any amendment or
supplement thereto) all material facts required to be disclosed with respect to
Fraser. The Company shall bear the costs of such registration, including, but
not limited to, all registration and filing fees, and printing expenses.
Notwithstanding the foregoing, Fraser shall pay the fees and disbursements of
his own counsel and any underwriting fees and selling commissions applicable to
the Warrant Shares sold by Fraser.
(c) Financial Statements. The Company shall not be
required to furnish any audited financial statements at the request of Fraser
other than those statements customarily prepared at the end of its fiscal year,
unless (i) Fraser shall agree to reimburse the Company for the out-of-pocket
expenses incurred by the Company in the preparation of such other audited
financial statements or (ii) such other audited financial statements are to be
required by the Commission as a condition to ordering a registration statement
effective under the Securities Act.
(d) Joint Exercise of Demand Registration Rights. The
Company shall only be obligated to register the Warrant Shares of Fraser
pursuant to this Section 6.2 if and only if Martin Goldberg and Costas Takkas
also provide the Company with a written request to register the shares of
Common Stock underlying the Stock Purchase Warrants granted to each of such
persons as of June 26, 1996.
(e) The Company's Obligation to Maintain the Registration
Statement Current. The Company shall be required to maintain the registration
statement covering the Warrant Shares current until the earlier to occur of (i)
the sale of all of the Warrant Shares or (ii) twelve (12) months from the date
that the registration statement covering the Warrant Shares was declared
effective by the Commission.
(f) Exercise of Warrant Shares. Within five (5) business
days after the registration statement covering the Warrant Shares is declared
effective by the Commission, Fraser shall exercise this Stock Purchase Warrant
in full and shall pay the full Exercise Price to the Company therefor.
6
<PAGE> 7
ARTICLE VII
MISCELLANEOUS
7.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Fraser or the Company shall operate
as a waiver of such right or otherwise prejudice the rights, powers or remedies
of Fraser or the Company.
7.2. Notice Generally. Any notice, demand or delivery to be made
pursuant to or in connection with this Stock Purchase Warrant shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to (a) Fraser at its last known address appearing on the books or
register of the Company maintained for such purpose or (b) the Company at 3311
Industrial 25th Street, Ft. Pierce, Florida 34946. Fraser and the Company may
each designate a different address by written notice to the other pursuant to
this Section 7.2.
7.3. Payment of Certain Expenses. Except as otherwise provided in
this Stock Purchase Warrant, the Company and Fraser shall each pay their
respective expenses in connection with, and all taxes and other governmental
charges that may be imposed in respect of, the issue, sale and delivery of the
shares of Common Stock issuable upon the exercise of this Stock Purchase
Warrant.
7.4. Amendment. This Stock Purchase Warrant may not be modified or
amended except by written agreement duly executed by the Company and Fraser.
7.5. Headings. The headings of the Articles and Sections of this
Stock Purchase Warrant are for the convenience of reference only and shall not,
for any purpose, be deemed a part of this Stock Purchase Warrant.
7.6 Governing Law. This Stock Purchase Warrant shall be governed
by the laws of the State of Florida without reference to the conflict of laws
principles thereof.
7.7 Replacement Warrant. This Amended and Restated Stock Purchase
Warrant supersedes the Stock Purchase Warrant to purchase 200,000 shares of
Common Stock which was previously issued to Fraser.
Date of Grant: As of June 26, 1996
Pro Tech Communications, Inc.
By: /s/ Keith Larkin
--------------------------------------
Name: Keith Larkin
Title: Chief Executive Officer
The undersigned agrees to comply with the terms and conditions contained herein.
/s/ Donald Fraser
-------------------------------------
Donald Fraser
7
<PAGE> 8
--------------
Date
Pro Tech Communications, Inc.
3311 Industrial 25th Street
Ft. Pierce, Florida 34946
Re: Exercise of Stock Purchase Warrant
Dear Sir:
Please be advised that pursuant to an Amended and Restated Stock
Purchase Warrant Agreement ("Agreement"), granted as of June 26, 1996, by Pro
Tech Communications, Inc. (the "Company") to the undersigned, the undersigned
hereby exercises the Stock Purchase Warrant in the amount of ______________
shares of common stock of the Company and herewith tenders its cashier's check
or certified check to the Company in the amount of
__________________________________ ($_____ ____) in payment for such shares of
common stock. Capitalized terms not otherwise defined herein are defined as
set forth in the Agreement.
The undersigned requests _______ stock certificates for such shares
issued in the name of ______________________ _________ whose address is
______________________________________ and whose social security number is
___________________ __________________.
The undersigned hereby acknowledges, warrants and represents the
following:
(1) The undersigned's acknowledgements, representations,
warranties and agreements contained in the Agreement are true, complete and
accurate as of the date of this letter.
(2) The Stock Purchase Warrant is presently exercisable and as
such, has vested and has not expired.
(3) The undersigned is presently and has been in full compliance
with all the terms, conditions and provisions of the Agreement.
Sincerely,
______________________________
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1995
<PERIOD-START> NOV-01-1995 NOV-01-1995
<PERIOD-END> OCT-31-1996 APR-30-1996
<CASH> 571,270 693,720
<SECURITIES> 0 0
<RECEIVABLES> 123,073 140,725
<ALLOWANCES> 22,080 19,382
<INVENTORY> 90,000 98,000
<CURRENT-ASSETS> 785,526 932,969
<PP&E> 90,166 133,730
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 875,692 1,066,699
<CURRENT-LIABILITIES> 312,993 12,027
<BONDS> 250,226 0
0 0
0 0
<COMMON> 2,864 3,964
<OTHER-SE> 559,835 1,050,708
<TOTAL-LIABILITY-AND-EQUITY> 875,692 1,066,699
<SALES> 830,667 403,805
<TOTAL-REVENUES> 830,667 403,805
<CGS> 358,595 162,907
<TOTAL-COSTS> 358,595 162,907
<OTHER-EXPENSES> 415,407 196,731
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,160 12,908
<INCOME-PRETAX> 57,891 42,957
<INCOME-TAX> 13,932 7,382
<INCOME-CONTINUING> 43,959 35,575
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 43,959 35,575
<EPS-PRIMARY> .02 .01
<EPS-DILUTED> .02 .01
</TABLE>
