-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hj5y3IJglQRN4w6oIzfQ2XzqpXRfz7cjKIWq6z+2XqxYbW+OZ5Uw2QLBNMm+b6wU Jln3jQx7WI0OCdx1T0sZ8A== 0000912057-99-005759.txt : 19991117 0000912057-99-005759.hdr.sgml : 19991117 ACCESSION NUMBER: 0000912057-99-005759 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESYNCH CORP/CA CENTRAL INDEX KEY: 0000859915 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870461856 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26790 FILM NUMBER: 99752794 BUSINESS ADDRESS: STREET 1: 15502 MOSHER CITY: TUSTIN STATE: CA ZIP: 92780 BUSINESS PHONE: 9498331220 MAIL ADDRESS: STREET 1: 15502 MOSHER CITY: TUSTIN STATE: CA ZIP: 92780 FORMER COMPANY: FORMER CONFORMED NAME: INNOVUS CORP DATE OF NAME CHANGE: 19941004 FORMER COMPANY: FORMER CONFORMED NAME: TRI NEM INC DATE OF NAME CHANGE: 19930328 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from _________ to ________ Commission file number 0-26790 eSynch Corporation -------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 87-0461856 ------------------------------ ------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 15502 Mosher Tustin, CA 92780 ---------------------------------------- (Address of principal executive offices) (714) 258-1900 ------------------------------------------------ (Issuer's telephone number, including area code) ------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of common shares outstanding at November 12, 1999, 1999: 9,797,143 Transitional Small Business Format: Yes ( ) No (x) TABLE OF CONTENTS PART I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheet - September 30, 1999 (Unaudited) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1999 and 1998 (Unaudited) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998 (Unaudited) Notes to Condensed Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 6. Exhibits and Reports on Form Signatures PART I FINANCIAL INFORMATION Item I - Financial Statements ESYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET September 30, 1999 (UNAUDITED) ASSETS Current Assets Cash. . . . . . . . . . . . . . . . . . . . . . . . . . $ 734,490 Inventory . . . . . . . . . . . . . . . . . . . . . . . 87,593 Other receivable. . . . . . . . . . . . . . . . . . . . 14,608 Prepaid expenses. . . . . . . . . . . . . . . . . . . . 92,203 ----------- Total Current Assets. . . . . . . . . . . . . . . . . 928,894 ----------- Property and Equipment, net . . . . . . . . . . . . . . . . 668,724 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 67,788 Software licenses 144,902 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . 4,247,815 ----------- Total Assets. . . . . . . . . . . . . . . . . . . . . $ 6,058,123 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable . . . . . . . . . . . . . . . . . . . . $ 1,589,134 Accrued liabilities. . . . . . . . . . . . . . . . . . . 879,306 Value of Common Stock to be Issued . . . . . . . . . . . 440,625 Notes payable. . . . . . . . . . . . . . . . . . . . . . 380,491 ----------- Total Current Liabilities . . . . . . . . . . . . . . 3,289,556 Notes Payable . . . . . . . . . . . . . . . . . . . . . . . 422,153 Redeemable Preferred Stock - Series I, $0.001 par value; 600,000 shares authorized; 600,000 shares issued and outstanding; liquidation preference - $600,000. . . . . 600 Redeemable Preferred Stock - Series J, $0.001 par value 275 shares authorized: 262.5 shares and outstanding; liquidation preference - $2,625,000 263 ----------- Stockholders' Equity Preferred stock - $0.001 par value; 400,000 shares authorized; none issued or outstanding. . . . . . . . . - Common stock - $0.001 par value; 20,000,000 shares authorized; 9,797,143 shares issued and outstanding . . 9,797 Additional paid-in capital . . . . . . . . . . . . . . . 14,683,713 Note receivable from shareholder . . . . . . . . . . . . (163,047) Accumulated deficit. . . . . . . . . . . . . . . . . . . (12,184,912) ----------- Total Stockholders' Equity. . . . . . . . . . . . . . 2,345,551 ----------- Total Liabilities and Stockholders' Equity. . . . . . . . . $ 6,058,123 =========== See the accompanying notes to the condensed consolidated financial statements. -1- ESYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months For the Nine Months Ended September 30, Ended September 30, ------------------------- ------------------------ 1999 1998 1999 1998 ----------- ------------ ----------- ----------- Net Product Sales. . . . . . . $ 255,668 $ - $ 917,400 $ 15,293 ----------- ------------ ----------- ----------- Costs and Operating Expenses Costs of products sold. . 91,521 459,944 9,940 General and administrative. 1,255,677 355,052 2,555,008 738,068 Stock Issued for Services . 308,238 112,108 1,622,164 112,108 Stock Based Compensation. . 204,000 - 2,021,347 - Amortization of Debt Discount. . . . . . . . . 355,567 355,567 Amortization of Goodwill. . 406,878 - 818,756 - ----------- ------------ ----------- ----------- Total Costs and Operating Expenses . . . . . . . . 2,266,314 822,727 7,477,219 1,215,683 ----------- ------------ ----------- ----------- Operating Loss . . . . . . . . (2,010,646) (822,727) (6,559,819) (1,200,390) Other Income . . . . . . . . . 6,805 87,000 13,458 Interest expense . . . . . . . (15,210) ( 3,627) (60,839) (5,571) ----------- ------------ ----------- ----------- Net Loss . . . . . . . . $(2,025,856) $ (819,549) $(6,533,658) $(1,192,503) =========== ============ =========== =========== Basic and Diluted Loss Per Common Share . . . . . . . . . $ ( 0.22) $ (.16) $ (.78) $ (.26) =========== ============ =========== =========== Weighted average number of common shares used in per share calculation. . . . . . 9,266,893 5,075,328 8,389,358 4,548,202 =========== ============ =========== ===========
See the accompanying notes to the condensed consolidated financial statements. -2- ESYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, ------------------------- 1999 1998 ----------- ----------- Cash Flows from Operating Activities Net loss. . . . . . . . . . . . . . . . . . . . $(6,533,658) $(1,192,503) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization. . . . . . . . 27,765 29,834 Amortization of goodwill . . . . . . . . . . 818,756 Stock issued for services. . . . . . . . . . 1,429,944 112,108 Amortization of Debt Discount. . . . . . . . 355,567 Liability for stock to be issued for services . . . . . . . . . . . . . . . . 440,625 - Stock issued for settlement of lawsuit . . . 26,456 - Stock Based Compensation . . . . . . . . . . 2,021,347 - Changes in operating assets and liabilities net of the effects of the acquisitions Accounts receivable . . . . . . . . . . . . ( 2,353) 54,767 Inventory . . . . . . . . . . . . . . . . . (12,211) - Prepaid expenses . . . . . . . . . . . . . . (53,881) - Other assets . . . . . . . . . . . . . . . . (56,611) - Accounts payable . . . . . . . . . . . . . . ( 9,723) 223,221 Accrued liabilities. . . . . . . . . . . . . (168,766) ----------- ----------- Net Cash Used in Operating Activities . . . . (2,072,310) (417,006) ----------- ----------- Cash Flows From Investing Activities Proceeds from sale of SoftKat, net. . . . . . . 50,000 - Acquisition of property and equipment . . . . . ( 69,185) - Kiss cash acquired. . . . . . . . . . . . . . . 49,233 - ----------- ----------- Net Cash Used in Investing Activities . . . . 30,048 (771) ----------- ----------- Cash Flows From Financing Activities Stock issued for cash 2,650,000 - Cash received on notes receivable issued for common stock . . . . . . . . . . . . . . . . . 322,509 - Proceeds from borrowing . . . . . . . . . . . . 371,070 428,071 Payments on notes payable . . . . . . . . . . . (568,240) - ----------- ----------- Net Cash Provided by Financing Activities. . 2,775,339 428,071 ----------- ----------- Net Increase in Cash . . . . . . . . . . . . . . . 733,077 11,065 Cash at Beginning of Period. . . . . . . . . . . . 1,413 - ----------- ----------- Cash at End of Period. . . . . . . . . . . . . . . $ 734,490 $ 11,065 =========== ===========
See the accompanying notes to the condensed consolidated financial statements. -3- eSYNCH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND NATURE OF OPERATIONS -- Intermark Corporation("Intermark") was incorporated under the laws of the State of California in October 1995. On August 5, 1998, Intermark was reorganized into Innovus Corporation, a publicly-held shell corporation. By shareholder action, Innovus Corporation, the parent company, changed its name to eSynch Corporation ("eSynch") on November 9, 1998. On November 17, 1998, eSynch acquired SoftKat Inc. ("SoftKat"). On May 25, 1999, SoftKat was sold to a third-party. See Note 2. On April 1, 1999, eSynch consummated an acquisition of Kiss Software Corporation ("Kiss")whereby under the terms of an Agreement and Plan of Merger Kiss became a wholly owned subsidiary of eSynch. Kiss was incorporated under the laws of California on February 14, 1997. The primary activities of Kiss have consisted of distributing computer utility software principally through wholesale distribution channels. On September 30, 1999, eSynch consummated an acquisition of Oxford Media Corp. ("Oxford") whereby under the terms of an Agreement and Plan of Merger, Oxford became a wholly owned subsid1ary of eSynch. Oxford was incorporated in January, 1999 and is a developer of digital technologies for video-on-demand and DVD Conversion. The primary activities of eSynch, the consolidated company, have consisted of raising capital, and acquiring Companies in the Internet, Software and related areas. PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial statements include the accounts of Intermark and eSynch for all periods presented, and the accounts of SoftKat, Inc. to May 25, 1999, the accounts of Kiss since April 1, 1999 and Oxford Media Corp. since September 30, 1999. These entities are collectively referred to as "eSynch" or the "Company". All inter-company transactions and balances have been eliminated in consolidation. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumption that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. INTERIM UNAUDITED FINANCIAL INFORMATION -- The accompanying condensed financial statements have been prepared by the Company and are not audited. In the opinion of management, all adjustments necessary for a fair presentation have been included and consist only of normal recurring adjustments except as disclosed herein. The financial position and results of operations presented in the accompanying financial statements are not necessarily indicative of the results to be generated for the remainder of 1999. These financial statements have been condensed pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements have been condensed or omitted. These financial statements should be read in connection with annual financial statements included in the Company's Form 10-KSB dated December 31, 1998. BUSINESS CONDITION -- The financial statements have been prepared on the basis of the Company continuing as a going concern. The Company has incurred losses from operations and negative tangible net worth of $1,902,264. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. Management's plan to mitigate the impact of these conditions is to obtain additional equity financing through the issuance of the Company's common stock, convertible preferred stock or warrants. The Company is also currently in negotiations for additional financing arrangements. However, realization of the proceeds from these potential transactions is not assured. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. CONCENTRATION OF RISK AND MAJOR CUSTOMERS -- The Company operates exclusively in the software industry, accordingly, segment information relating to operations in different industries is not presented in these financial statements. The concentration of business in the highly competitive software industry subjects the Company to concentrated market risk. Sales to any major customer during the quarters and nine months September 30, 1999 and 1998 were not significant. FAIR VALUES OF FINANCIAL INSTRUMENTS -- The amounts reported as cash, accounts payable, notes payable, and liabilities relating to assets to be sold are considered to reasonable approximations of their fair values. The fair value estimates were based on market information available to management at the time of the preparation of the financial statements. LOSS PER SHARE -- The Company computes basic and diluted loss per share in accordance with Statement of Financial Accounting Standards No. 128, ("SFAS 128"), Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to stock warrants, options and convertible notes payable except during loss periods when those potentially issuable common shares would decrease the loss per share. 3,560,026 and 151,133 potentially issuable common shares outstanding at September 30, 1999 and 1998 were excluded from the calculation of diluted loss per share for the quarters ended September 30, 1999 and 1998, as they would have decreased the loss per share, respectively. REVENUE RECOGNITION -- The Company sells software products at fixed prices for which the right to return is granted to the buyer. Accordingly, revenue is recognized when the buyer has paid for the products and the amount of future returns can be reasonably estimated. Cost of products sold is recognized at the date the sale is recognized less an estimate for sales returns. Until the sale is recognized, products purchased from publishers are accounted for as consigned product from publishers and the related cost is not reflected in the financial statements with the exception of a limited amount of software inventory owned by the Company at period-end. NOTE 2--ACQUISITIONS SOFTKAT -- On November 17, 1998, the Company acquired SoftKat, Inc,. a California corporation primarily engaged in the wholesale distribution of computer software games. In exchange for the SoftKat common shares, the Company issued 720,000 common shares and 600,000 shares of Series I redeemable, convertible preferred shares. Up to an additional 720,000 common shares are contingently issuable based upon the difference between the market price of the common stock one year from the date of acquisition and a target market price. In November, 1999 the target market price was achieved and the share were no longer issuable. The acquisition was accounted for using the purchase method of accounting. The acquisition purchase price, based upon the fair value of the common and preferred stock issued and the additional contingently issuable common shares, was $2,670,000. The excess of the purchase price over the estimated fair value of the identifiable acquired assets less liabilities assumed was $6,882,300, which was recognized as goodwill. The results of operations of SoftKat have been included in the June 30, 1999 (through May 25, 1999 date of sale) condensed consolidated financial statements. In February 1999, Management of the Company decided to dispose of SoftKat because it did not meet the core business objectives of the Company. On May 25, 1999, SoftKat was sold to a third party for $50,000 cash and a note receivable for $100,000 which resulted in the recognition of an impairment loss of $2,323,841. The subsequent sale and resulting loss provided evidence of conditions that existed at December 31, 1998; therefore, an impairment loss was recognized in 1998 in accordance with SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The impairment loss was determined by the excess of the carrying amount of the assets in excess of the $50,000 subsequently collected and the amount of the related liabilities. The $100,000 note receivable was not considered in the computation of the impairment loss or the resulting carrying value of the assets to be sold, but will be recognized when collected. The resulting amount of the assets to be sold and the related liabilities assumed by the buyer have been presented separately in the accompanying balance sheet. Effective April 1, 1999, the Company completed the acquisition of Kiss Software Corporation, California corporation engaged in the wholesale and retail distribution of computer and Internet utility software products. Under the agreement, shareholders of Kiss agreed to exchange each of their common shares for.181557136 common shares of eSynch and each of their preferred shares for .4183964 common shares of eSynch. The exchange resulted in the Company issuing 1,428,134 common shares to Kiss shareholders. The Company also issued 163,187 options in conjunction with the purchase. These options are exercisable at $2.05 per share. During the second quarter 1999, the acquisition was accounted for using the purchase method of accounting. The acquisition purchase price, based upon the fair value of the common stock and options issued, has been estimated at $3,965,570. The excess of the purchase price over the estimated fair value of the identifiable acquired assets less liabilities assumed was $5,061,571 (unaudited), which was recognized as goodwill. Goodwill is being amortized over approximately 3 years on a straight-line basis. Effective September 30, 1999, the Company completed the acquisition of Oxford Media Corp., ("Oxford") engaged in DVD video encoding, compression and authoring. Under the Agreement the shareholders of Oxford exchanged all the outstanding shares of Oxford Common Stock for 450,000 shares of the Company's Common Stock. During the third quarter, the acquisition was accounted for using the purchase method of accounting and the purchase price of the acquired assets was computed to be $720,000 which was attributed to the assets acquired including software licenses in the amount of $144,902. Oxford received a non-exclusive license from Oxford Management Corporation, a Nevada corporation, which is a license of proprietary software and source code -on-demand hotel pay-for-view system. The value of the licenses is being amortized over three years. In addition, the Company entered into another license agreement with Oxford Management. In this license agreement, the Company granted Oxford Management a license to sell advertising and promotional offers that will be displayed by means of operation of certain software products of the Company or its subsidiaries. NOTE 3--PREPAID EXPENSES In June 1999, the Company prepaid consulting services by issuing 54,000 common shares of stock to third-party consultants. The prepaid services recognized from the issuance of these shares was $111,380. As of September 30, 1999, $57,751 of the prepaid services had been performed by the consultants and therefore, were expensed by the Company. NOTE 4--NOTES PAYABLE In August 1999, the Company repaid $250,000 borrowed from a third-party. Notes Payable long-term include a note to an Officer-Shareholder in the amount of $195,270. NOTE 5--STOCK BASED COMPENSATION The Company issued stock options for 885,000 shares of Common stock to Officers and Employees in connection with Employment Agreements signed on April 1, 1999.The options allowed for the exercise of options over various periods at a price of $1.00 per share. In addition, on April 1, 1999, an officer of the Company was granted warrants to purchase 400,000 shares of common stock at $0.05 per share. In September, 1999 the Company modified the previously granted warrants to 450,000 shares at $0.50 per share and granted new stock options under Employment Agreements of 390,000 shares at a price of $1.00 per share and granted an officer warrants to purchase 250,000 shares at $1.00 per share. The charge under stock based compensation was $204,000 and $2,021,347 for the three months and nine months ended September 30, 1999. NOTE 6--STOCKHOLDERS' EQUITY On July 16, 1999 the Company issued 2,000 shares of common stock for interest of $6,000. During the three months ended September 30, 1999, the Company issued 105,000 and shares of common stock for services. The value of the services was determined based upon the trading price of the Company's common stock on the date of issuance. The services were valued at $308,238 and were expensed in the three month period ended September 30, 1999. The Series I redeemable preferred stock has a liquidation preference of $1.00. The Company is required to redeem 200,000 shares of the preferred stock at $1.00 per share upon obtaining financing of $1,500,000 or more from any source and must redeem an additional 200,000 shares of preferred stock upon obtaining an additional $3,000,000 in funding. Dividends on the preferred stock are payable prior and in preference to any declaration or payment of any dividends on the common stock, when, as, and if declared by the Board of Directors. However, there is no stated dividend rate. The preferred stock is convertible, at the option of the holder, into common stock at the lesser of $3.00 per share. The preferred stock has voting rights equivalent to the number of common shares into which it can be converted and has additional voting rights with respect to approval of any issuance of a senior series of preferred shares. Effective August 13, 1999, the Company entered into an Agreement from an investing source for equity financing in an aggregate amount of $2,625,000, subject to certain terms and conditions. The financing is in the form of preferred stock and warrants issued by the Company. The Company will have issued 275 shares of Series J Preferred Stock aggregately, with each share convertible into common stock under certain conditions as described. In addition the Company issued warrants to purchase 187,500 shares of the Company common stock at a price equal to 115% of the closing stock price on the date before the closing date. The Series J Preferred Stock is convertible into the Company's common stock at a price equal to the lower of 80% of the average closing stock price the lowest six trading days in the consecutive 20 days prior to conversion subject to a floor in the conversion price. The Company had received $2,500,000 of the total amount as of September 30, 1999. The shares are redeemable by the Company for cash upon 30 days prior written notice for a price of 120% of the original issue price plus accrued dividends. Dividends accrue at the rate of 7% of from the original issue date, but are payable only upon conversion or redemption. The Company is obligated, at its expense, to file for the registration of the common stock issuable upon conversion within 60 days of September 30, 1999, with an effective date within 150 days after September 30, 1999 or the investors will be entitled to a registration payment equal to 2% of the purchase price for the first 30 days the Company is tardy and 3% for every 30 day period thereafter. NOTE 7--COMMITMENTS AND CONTINGENCIES Litigation: The Company has been name as an additional defendant in claims against SoftKat under the theory of successor liability. Whereas the Company has been successful in obtaining dismissals of several such suits, there is no certainty that the Company will successfully defend the suits in the future. No provisions have been made for possible loss from these claims. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion should be read in conjunction with the financial statements and notes thereto found elsewhere herein. The discussion assumes that the reader is familiar with or has access to the Company's financial statements for the year ended December 31, 1998 found in the Company's Form 10-KSB dated June 21, 1999 and 10 QSBs dated July 7, and August 13 1999. The financial statements have been prepared on the basis of the Company continuing as a going concern. The Company has incurred losses from operations and negative cash flows from operating activities and has accumulated a negative tangible net worth at September 30, 1999 in the amount of $1,902,264. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Results of Operations During the quarter and the nine months ended September 30, 1999 net sales were $255,668 and $917,400 compared to $ -0- and $15,293 for the comparable periods of the prior year. The sales amount for the nine months September 30, 1999 included sales for SoftKat in the amount of $477,011. The costs of products sold in the quarter and nine months ended September, 1999 were $91,521 and $459,944 compared with $ -0- and $ 9,940 for the comparable periods in the prior year. Operating losses for the quarter and nine months ended September 30, 1999 were $2,025,856 and $6,533,658 compared to an operating loss of $819,549 and $1,192,503 for the comparable periods in the prior year The increased operating loss was due to the difficulties associated with Softkat operations and increased public relations due to the Company being a public traded company. Stock issued for services was $308,238 and $1,622,164 for the quarter and nine months ended September 30, 1999 and stock based compensation associated with stock options and warrants amounted $204,000 and $2,021,347 for the same periods.. Liquidity and Capital Resources At September 30 1999 the Company had $734,490 of cash and a deficit in working capital (current liabilities in excess of current assets) of $2,555,066. The Company had been relying upon short-term borrowings from affiliates and others, as well as issuance of common stock and Preferred Stock The Company estimates that during the quarter it was using approximately $300,000 more cash each month than was generated by operations. Risk Factors Statements regarding the Company's plans, expectations, beliefs, intentions as to future sales of software, future capital resources and other forward-looking statements presented in this Form 10-QSB constitute forward looking information within the meaning of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to ascribe undue weight to such statements. In addition to matters affecting the Company's industry generally, factors which could cause actual results to differ from expectations include, but are not limited to (i) sales of the Company's software which may not rise to the level of profitability; (ii) due to the rapidly changing and intensely competitive nature of the industry, competitors may introduce new products with significant competitive advantages over the Company's products; (iii) the Company may not have sufficient resources, including any future financing it is able to obtain, to sustain marketing and other operations; (iv) the Company may be unable to attract and retain sufficient management and technical expertise, or may lose key employees; (v) the Company's contractual or legal efforts to protect its confidential information or intellectual property may be inadequate or ineffective to provide protection, and the Company may be unable financially to pursue legal remedies that may be available; (vi) the Company's selection, due diligence, execution, and integration of acquisitions may not prove effective or reasonable; (vii) the Company may suffer in material respects from the direct or indirect effects of the "Year 2000" problem on public utilities, telecommunications networks, customers, vendors, service providers, and the economy or financial markets generally; (viii) the Company may suffer from other technical or communications problems, such as power outages, system failures, system crashes, or hacking; and (ix) the Company may be subjected to unknown risks and uncertainties, or be unable to assess risks and uncertainties as may exist. PART II OTHER INFORMATION Item 1 - Legal Proceedings In Softkat related matter, three lawsuits against the Company, based upon a theory of successor liability, were dismissed. Although Softkat has been sold there may be asserted and unasserted claims against Softkat or the Company: The Company is aware of several other creditors of Softkat, Inc., which have claims against Softkat for amounts owed based on good and/or services provided to Softkat. In most cases, we do not know the identity of these creditors, the amounts that they claim are due and owing or the circumstances of their claims. Some of the claims against Softkat have been asserted either in pending litigation or threatened litigation. Regarding these unasserted claims against Softkat, there is a reasonable likelihood that some of the plaintiffs/creditors will seek to satisfy their claims against the Company on theories of either successor liability or alter ego. In September, 1999, a lawsuit was filed against Intermark seeking $99,110 for goods that were claimed to be purchased by Intermark. In October, 1999 another lawsuit was filed against Intermark seeking $81,326 for goods that were claimed to be purchased by Intermark. In July, 1999, a third party claim of $53,539 against Kiss was settled for $25,000 Item 2 - Changes in Securities: (a) The following securities were issued by the Company during the quarter ended September 30, 1999 without registration under the Securities Act of 1933: (i) The Company issued 105,000 shares for services valued at $168,000. The Company issued 2,000 shares for interest totaling $6,000. The Company issued 450,000 shares in connection with the Oxford Media Corp. acquisition. The Company issued 262.5 shares of Series J Preferred Stock for $2,500,000. The Company issued warrants to purchase 112,500 shares of the Company's common stock at a price equal to approximately $3.00 and 75,000 shares at a price equal to approximately $5.18. In September, 1999, the Company modified previously granted warrants to an officer to purchase 450,000 share at $0.50 per share and granted new stock options under Employment Agreements of 390,000 shares at a price of $1.00 per share and granted an officer warrants to purchase 250,000 shares at $1.00 per share. The Company believes the transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. Item 6 - Exhibits and Reports on Form 8-K None. (a) Exhibits. Those exhibits previously filed with the Securities and Exchange Commission as required by Item 601 of Regulation S-K, are incorporated herein by reference in accordance with the provisions of Rule 12b-32.
Exhibit No. Description of Exhibit -------------------------------------- 2.1 (1) Agreement and Plan of Reorganization dated September 30, 1999 among the Company, Oxford Media Corp. and the exchanging Security Holders of Oxford Media Corp. 10.7 Employment Agreements of Officers Don Watters - amended T. Richard Hutt - amended James Budd - amended Robert Way - amended David P. Noyes 27 Financial Data Schedule
(1) Incorporated by reference to the same number Exhibit to the Form 8-K filed October 15, 1999 by the Company with the Securities and Exchange Commission (b) Reports on Form 8K During the period covered by this report the Company filed a Form 8-K/A On August 13, 1999 reporting on the acquisition of Kiss Software including financial statements, under item 7. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 12, 1999 eSynch Corporation By: /S/ Thomas Hemingway -------------------------------------- Tom Hemingway, Chief Executive Officer (Authorized Officer) By: /S/ David P. Noyes ------------------------------------- David P. Noyes, Chief Financial Officer EX-10.7 2 EXHIBIT 10.7 THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 1, 1999 is entered into by and between eSYNCH CORPORATION, a Delaware corporation having its principal office at 4600 Campus Drive, Newport Beach, CA 92660 (the "Company"), and Donald C. Watters, an individual (the "Executive"). WITNESSETH WHEREAS, the Executive and the Company desire to enter this Agreement to confirm the terms and conditions on which the Company will employ the Executive; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive agree as follows: 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the term set forth in Section 2 below, in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. Term. The term of employment shall commence as of the date hereof and shall end when terminated pursuant to Section 6 below. The period described above shall be hereinafter referred to as the "Term of Employment." 3. Position, Duties, Responsibilities and Authority. (a) During the Term of Employment, the Executive shall serve as President and Chief Operating Officer of the Company, and shall report and be responsible to the Chief Executive Officer and the Board of Directors of the Company. During the Term of Employment, the Executive shall have the duties, responsibilities and authority as shall be determined from time to time by the Chief Executive Officer and the Board of Directors of the Company. (b) Throughout the Term of Employment, the Executive shall devote his full business time and attention to the business of the Company. 4. Base Compensation. During the Term of Employment, the Executive shall receive base compensation at an annual rate of not less than One Hundred Fifty Thousand Dollars ($150,000), to be paid in accordance with the Company's normal procedure for compensation of its senior executives, but not less frequently than monthly. At the end of each calendar year during the Term of Employment, the Executive's base compensation shall be reviewed by the Board of Directors of the Company, on the basis of the performance of the Executive and the profitability of the Company. 5. Employee Benefits, Perquisites and Expenses. During the Term of Employment, the Executive shall be entitled to participate in all benefit plans, programs or practices maintained by the Company for senior executives or other employees of the Company on the date hereof and any other such benefit plans, programs or practices from time to time in effect, subject to the terms thereof. Without limiting the generality of the foregoing, the Executive shall be entitled to the following: (a) The company hereby grants the executive (450,000) four-hundred and fifty thousand shares of eSYNCH stock at a purchase price of ($0.50) fifty cents per share and (250,000) shares of eSYNCH company options that are immediately vested at a exercise price of $1.00 per share as of 1/10/99. (b) Three (3) weeks of paid vacation in each calendar year during the Term of Employment subject to the accrual policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; plus such holidays, sick leave and other time off as are established by the policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; (c) Reimbursement for all reasonable and documented expenses incurred by the Executive in connection with the performance of his duties hereunder, all in accordance with the Company's policy with respect to such reimbursement; (d) Medical, dental and other supplemental health benefits, life insurance benefits for the Executive and his dependents, accidental death and dismemberment benefits for the Executive, and long-term disability benefits, at least as favorable to the Executive as those currently in effect; (e) Participation in the Company's 401(k) plan, and related matching program as currently in effect; (f) Payment of personal tax planning and preparation expenses up to a maximum of Fifteen Hundred Dollars ($1,500) per year; (g) A reasonable car allowance or a company car of the make and type approved by the Board of Directors of the Company but not less than $500 a month. 6. Termination of Employment. The Term of Employment shall terminate upon the occurrence of any of the following events: (a) The Executive may terminate his employment upon giving the Company written notice thirty (30) days in advance of the proposed date of termination. (b) The Executive's employment shall terminate automatically upon the death of Executive. (c) The Company may terminate the Executive's employment at any time for cause by delivering to the Executive a certified copy of a resolution of the Board of Directors of the Company finding that the Executive committed an act or omission constituting cause hereunder. As used herein, the term "cause" shall mean: (i) Misappropriation of any material funds or property of the Company, or any act or acts of intentional dishonesty relating to the Executive's employment resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) Acting in a manner which is substantially detrimental or substantially damaging to the Company's reputation, business operations, prospects or relations with its employees, suppliers or customers, after receipt of written notice thereof from the Board of Directors of the Company and a reasonable opportunity to so remedy such acts; or (iii) Refusing to perform in material respects his duties hereunder (other than as a result of any temporary or permanent mental or physical impairment as certified by a physician reasonably acceptable to the Company), after receipt of written notice thereof from the Board of Directors of the Company and a reasonable opportunity to so perform such duties. (d) However, notwithstanding any of the above, the Company may terminate the Executive's employment without cause at any time and for any reason by giving the Executive written notice (in accordance with the notice provisions contained in Section 9) from the Board of Directors of the Company at least thirty (30) days in advance of the date on which the termination is to become effective. 7. Obligations and Payments Upon Termination. (a) Upon any termination of employment pursuant to Section 6, the Executive and the Company shall have no further obligation to the other under this Agreement except with respect to the provisions of this Section 7. (b) Upon any termination of employment under Sections 6(a), 6(b) or 6(c), the Company shall pay the Executive in a lump sum within ten (10) days following such termination (or such earlier date required by law) an amount equal to the pro-rata amount of the base compensation owed to the Executive as of the effective date of the termination (as well as any accrued but unpaid vacation) as he may be entitled to receive up to the date of termination. (c) Upon any termination of employment under Section 6(d), the Company shall make payment to the Executive in the amounts and at the times set forth in Section 7(b); and, in addition: (i) the Company shall pay the Executive in a lump sum within ten (10) days following such termination an additional amount equal to twelve (12) months of his base compensation; (ii) the Company shall continue to provide to the Executive the employee benefits, perquisites and expenses identified in Section 5(c) through 5(f) hereof for the twelve (12) month period following the date of termination; (iii) the Company shall repay all loans and other obligations payable to the Executive in cash within ten (10) days following such termination; and (iv) the Company shall repurchase from the Executive all shares of capital stock, options and warrants of the Company held by him or his affiliates at the current 30 day average market trading price prior to the date of delivery notice of the Executives termination in a lump sum in cash within ten (10) days following the effective date of termination. (d) Provided that the Company repurchases all shares of capital stock, options and warrants of the Company held by the Executive or his affiliates pursuant to the this agreement (whether such repurchase occurs as a result of termination without cause or termination for any other reason) and, to the extent applicable, in accordance with Section 7(c)(iv) of this Agreement, the Executive hereby agrees that, from and after the date on which the closing of such repurchase occurs and continuing for a period of two (2) years thereafter, he will not, directly or indirectly, engage in any business, or have any interest in, any corporation, partnership, proprietorship, firm, Association or business, which engages in any activities competitive with the products being licensed or sold by the Company or solicit and/or recruit the company's customers, suppliers, or personnel at the time of such repurchase. This covenant shall apply in each jurisdiction in which the Company licenses or sells any products at the time of such repurchase. Notwithstanding the foregoing, this covenant shall not restrict the ability of the Executive to own up to 5% of the shares of capital stock of any public company. 8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company (other than the Executive) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any party hereto of any breach by any other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time; nor shall the receipt or acceptance of compensation or other benefits following any termination of the Executive's employment be deemed a waiver of any condition or provision hereof. 9. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable, the remainder of this agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 10. CHOICE OF LAW. The formation, construction and performance of this agreement shall be construed in accordance with the laws of California. 11. INTEGRATION. This Agreement contains the entire agreement between the parties and supercedes all prior oral and written agreements, understandings, commitments and practices between them, including all prior employment agreements, whether or not fully performed by Executive before the date of this Agreement. No oral modifications, express or implied, may alter or vary the terms of this Agreement. 12. VENUE. Any action brought to enforce the terms of this agreement shall be commenced, prosecuted and defended exclusively in the State or Federal court of the State of California located in Orange County, California. 13. ATTORNEY'S FEES. In the event of any legal action (including any appeal of a judgement) in connection with the Agreement, the prevailing party shall be entitled to reimbursement of reasonable attorneys' fees and costs and expenses (including court costs) incurred in connection there with. IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized officer of the Company, have executed this Employment Agreement as of the first day of March, 1999 COMPANY eSYNCH CORPORATION (Board of Directors) By --------------------------------------- By --------------------------------------- By --------------------------------------- EXECUTIVE --------------------------------------- Donald C Watters, an individual THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999 is entered into by and between eSYNCH CORPORATION, a Delaware corporation having its principal office at 4600 Campus Drive, Newport Beach, CA 92660 (the "Company"), and Dick Hutt, an individual (the "Executive"). WITNESSETH WHEREAS, the Executive and the and the Company desire to enter this Agreement to confirm the terms and conditions on which the Company will employ the Executive; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive agree as follows: 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the term set forth in Section 2 below, in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. Term. The term of employment shall commence as of the date hereof and shall end when terminated pursuant to Section 6 below. The period described above shall be hereinafter referred to as the "Term of Employment." 3. Position, Duties, Responsibilities and Authority. (a) During the Term of Employment, the Executive shall serve as Vice-President and Corporate Secretary of the Company, and shall report and be responsible to the Chief Executive Officer of the Company. During the Term of Employment, the Executive shall have the duties, responsibilities and authority as shall be determined from time to time by the Chief Executive Officer of the Company. (b) Throughout the Term of Employment, the Executive shall devote his full business time and attention to the business of the Company. 4. Base Compensation. During the Term of Employment, the Executive shall receive base compensation at an annual rate of not less than One Hundred thirty Thousand Dollars ($130,000), to be paid in accordance with the Company's normal procedure for compensation of its senior executives, but not less frequently than monthly. At the end of each calendar year during the Term of Employment, the Executive's base compensation shall be reviewed by the Board of Directors of the Company, on the basis of the performance of the Executive and the profitability of the Company. 5. Employee Benefits, Perquisites and Expenses. During the Term of Employment, the Executive shall be entitled to participate in all benefit plans, programs or practices maintained by the Company for senior executives or other employees of the Company on the date hereof and any other such benefit plans, programs or practices from time to time in effect, subject to the terms thereof. Without limiting the generality of the foregoing, the Executive shall be entitled to the following: (a) Options in conjunction with former option agreement. (b) Two (2) weeks of paid vacation in each calendar year during the Term of Employment subject to the accrual policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; plus such holidays, sick leave and other time off as are established by the policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; (c) Reimbursement for all reasonable and documented expenses incurred by the Executive in connection with the performance of his duties hereunder, all in accordance with the Company's policy with respect to such reimbursement; (d) Medical, dental and other supplemental health benefits, life insurance benefits for the Executive and his dependents, accidental death and dismemberment benefits for the Executive, and long-term disability benefits, at least as favorable to the Executive as those currently in effect; (e) Participation in the Company's 401(k) plan, and related matching program as currently in effect; 6. Termination of Employment. The Term of Employment shall terminate upon the occurrence of any of the following events: (a) The Executive may terminate his employment upon giving the Company written notice thirty (30) days in advance of the proposed date of termination. (b) The Executive's employment shall terminate automatically upon the death of Executive. (c) The Company may terminate the Executive's employment at any time for cause by delivering to the Executive a letter finding that the Executive committed an act or omission constituting cause hereunder. As used herein, the term "cause" shall mean: (i) Misappropriation of any material funds or property of the Company, or any act or acts of intentional dishonesty relating to the Executive's employment resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) Acting in a manner which is substantially detrimental or substantially damaging to the Company's reputation, business operations, prospects or relations with its employees, suppliers or customers, after receipt of written notice thereof from the President/COO and a reasonable opportunity to so remedy such acts; or (iii) Willfully refusing to perform in material respects his duties hereunder (other than as a result of any temporary or permanent mental or physical impairment as certified by a physician reasonably acceptable to the Company), after receipt of written notice thereof from the President/COO of the Company and a reasonable opportunity to so perform such duties. (d) The Company may terminate the Executive's employment without cause at any time and for any reason by giving the Executive written notice from the President/COO of the Company at least thirty (30) days in advance of the date on which the termination is to become effective. 7. Obligations and Payments Upon Termination. (a) Upon any termination of employment pursuant to Section 6, the Executive and the Company shall have no further obligation to the other under this Agreement except with respect to the provisions of this Section 7. (b) Upon any termination of employment under Sections 6(a), 6(b) or 6(c), the Company shall pay the Executive in a lump sum within ten (10) days following such termination (or such earlier date required by law) an amount equal to the base compensation provided under section 4 hereof (as well as any accrued but unpaid vacation) as he may be entitled to receive up to the date of termination. (c) Upon any termination of employment under Section 6(d), the Company shall make payment to the Executive in the amounts and at the times set forth in Section 7(b); and, in addition: (i) The Company shall pay the Executive in a lump sum within ten (10) days following such termination an additional amount equal to three (3) months of his base compensation; (ii) The Company shall continue to provide to the Executive the employee benefits, perquisites and expenses identified in Section 5(c) through 5(f) hereof for the three (3) month period following the date of termination; (iii) The Company shall repay all loans and other obligations payable to the Executive in cash within ten (10) days following such termination; and (iv) The Company shall immediately vest all shares of stock options and warrants of the Company held by the executive and the company has the right at the companies option to buy back from the executive any shares of stock, options and warrants held by the executive at the current 30 day average market trading price prior to the date of delivery of the Executive's termination. (v) The executive has three (3) months from the termination date in which to exercise these options and/or warrants or they expire. (d) Provided that the Company repurchases all shares of capital stock, options and warrants of the Company held by the Executive or his affiliates pursuant to the this agreement (whether such repurchase occurs as a result of termination without cause or termination for any other reason) and, to the extent applicable, in accordance with Section 7(c)(iv) of this Agreement, the Executive hereby agrees that, from and after the date on which the closing of such repurchase occurs and continuing for a period of two (2) years thereafter, he will not, directly or indirectly, engage in any business, or have any interest in, any corporation, partnership, proprietorship, firm, Association or business, which engages in any activities competitive with the products being licensed or sold by the Company or solicit and/or recruit the company's customers, suppliers, or personnel at the time of such repurchase. This covenant shall apply in each jurisdiction in which the Company licenses or sells any products at the time of such repurchase. Notwithstanding the foregoing, this covenant shall not restrict the ability of the Executive to own up to 5% of the shares of capital stock of any public company. 8. AMENDMENT OR MODIFICATION; Waiver. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company (other than the Executive) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any party hereto of any breach by any other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time; nor shall the receipt or acceptance of compensation or other benefits following any termination of the Executive's employment be deemed a waiver of any condition or provision hereof. 9. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable, the remainder of this agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 10. CHOICE OF LAW. The formation, construction and performance of this agreement shall be construed in accordance with the laws of California. 11. INTEGRATION. This Agreement contains the entire agreement between the parties and supercedes all prior oral and written agreements, understandings, commitments and practices between them, including all prior employment agreements, whether or not fully performed by Executive before the date of this Agreement. No oral modifications, express or implied, may alter or vary the terms of this Agreement. 12. VENUE. Any action brought to enforce the terms of this agreement shall be commenced, prosecuted and defended exclusively in the State or Federal court of the State of California located in Orange County, California. 13. ATTORNEY'S FEES. In the event of any legal action (including any appeal of a judgement) in connection with the Agreement, the prevailing party shall be entitled to reimbursement of reasonable attorneys' fees and costs and expenses (including court costs) incurred in connection there with. IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized officer of the Company, have executed this Employment Agreement as of the first day of April 1999 COMPANY eSYNCH CORPORATION (Board of Directors) By --------------------------------------- By --------------------------------------- By --------------------------------------- EXECUTIVE --------------------------------------- Dick Hutt, an individual THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999 is entered into by and between eSYNCH CORPORATION, a Delaware corporation having its principal office at 4600 Campus Drive, Newport Beach, CA 92660 (the "Company"), and Jim Budd, an individual (the "Executive"). WlTNESSETH WHEREAS, the Executive and the and the Company desire to enter this Agreement to confirm the terms and conditions on which the Company will employ the Executive; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the term set forth in Section 2 below, in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. TERM. The term of employment shall commence as of the date hereof and shall end when terminated pursuant to Section 6 below. The period described above shall be hereinafter referred to as the "Term of Employment." 3. POSITION, DUTIES, RESPONSIBILITIES AND AUTHORITY. (a) During the Term of Employment, the Executive shall serve as Vice-President and shall report and be responsible to the President and COO of the Company. During the Term of Employment, the Executive shall have the duties, responsibilities and authority as shall be determined from time to time by the President and COO of the Company. (b) Throughout the Term of Employment, the Executive shall devote his full business time and attention to the business of the Company. 4. BASE COMPENSATION. During the Term of Employment, the Executive shall receive base compensation at an annual rate of not less than One Hundred Thirty Thousand Dollars ($130,000), to be paid in accordance with the Company's normal procedure for compensation of its senior executives, but not less frequently than monthly. At the end of each calendar year during the Term of Employment, the Executive's base compensation shall be reviewed by the Board of Directors of the Company, on the basis of the performance of the Executive and the profitability of the Company. 5. EMPLOYEE BENEFITS, PERQUISITES AND EQPENSES. During the Term of Employment, the Executive shall be entitled to participate in all benefit plans, programs or practices maintained by the Company for senior executives or other employees of the Company on the date hereof and any other such benefit plans, programs or practices from time to time in effect, subject to the terms thereof. Without limiting the generality of the foregoing, the Executive shall be entitled to the following: (a) Options in conjunction with former option agreement. (b) Two (2) weeks of paid vacation in each calendar year during the Term of Employment subject to the accrual policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; plus such holidays, sick leave and other time off as are established by the policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; (c) Reimbursement for all reasonable and documented expenses incurred by the Executive in connection with the performance of his duties hereunder, all in accordance with the Company's policy with respect to such reimbursement; (d) Medical, dental and other supplemental health benefits, life insurance benefits for the Executive and his dependents, accidental death and dismemberment benefits for the Executive, and long-term disability benefits, at least as favorable to the Executive as those currently in effect; (e) Participation in the Company's 401(k) plan, and related matching program as currently in effect; 6. TERMINATION OF EMPLOYMNET. The Term of Employment shall terminate upon the occurrence of any of the following events: (a) The Executive may terminate his employment upon giving the Company written notice thirty (30) days in advance of the proposed date of termination. (b) The Executive's employment shall terminate automatically upon the death of Executive. (c) The Company may terminate the Executive's employment at any time for cause by delivering to the Executive a letter finding that the Executive committed an act or omission constituting cause hereunder. As used herein, the term "cause" shall mean: (i) Misappropriation of any material funds or property of the Company, or any act or acts of intentional dishonesty relating to the Executive's employment resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) Acting in a manner which is substantially detrimental or substantially damaging to the Company's reputation, business operations, prospects or relations with its employees, suppliers or customers, after receipt of written notice thereof from the President/COO and a reasonable opportunity to so remedy such acts; or (iii) Willfully refusing to perform in material respects his duties hereunder (other than as a result of any temporary or permanent mental or physical impairment as certified by a physician reasonably acceptable to the Company), after receipt of written notice thereof from the President/COO of the Company and a reasonable opportunity to so perform such duties. (d) The Company may terminate the Executive's employment without cause at any time and for any reason by giving the Executive written notice from the President/COO of the Company at least thirty (30) days in advance of the date on which the termination is to become effective. 7. OBLIGATIONS AND PAYMENTS UPON TERMINATION (a) Upon any termination of employment pursuant to Section 6, the Executive and the Company shall have no further obligation to the other under this Agreement except with respect to the provisions of this Section 7. (b) Upon any termination of employment under Sections 6(a), 6(b) or 6(c), the Company shall pay the Executive in a lump sum within ten (10) days following such termination (or such earlier date required by law) an amount equal to the base compensation provided under section 4 hereof(as well as any accrued but unpaid vacation) as he may be entitled to receive up to the date of termination. (c) Upon any termination of employment under Section 6(d), the Company shall make payment to the Executive in the amounts and at the times set forth in Section 7(b); and, in addition: (i) The Company shall pay the Executive in a lump sum within ten (10) days following such termination an additional amount equal to three (3) months of his base compensation; (ii) The Company shall continue to provide to the Executive the employee benefits, perquisites and expenses identified in Section 5(c) through 5(f) hereof for the three (3) month period following the date of termination; (iii) The Company shall repay all loans and other obligations payable to the Executive in cash within ten (10) days following such termination; and (iv) The Company shall immediately vest all shares of stock options and warrants of the Company held by the executive and the company has the right at the companies option to buy back from the executive any shares of stock, options and warrants held by the executive at the current 30 day average market trading price prior to the date of delivery of the Executive's termination. (v) The executive has three (3) months from the termination date in which to exercise these options and/or warrants or they expire. (d) Provided that the Company repurchases all shares of capital stock, options and warrants of the Company held by the Executive or his affiliates pursuant to the this agreement (whether such repurchase occurs as a result of termination without cause or termination for any other reason) and, to the extent applicable, in accordance with Section 7(c)(iv) of this Agreement, the Executive hereby agrees that, from and after the date on which the closing of such repurchase occurs and continuing for a period of two (2) years thereafter, he will not, directly or indirectly, engage in any business, or have any interest in, any corporation, partnership, proprietorship, firm, Association or business, which engages in any activities competitive with the products being licensed or sold by the Company or solicit and/or recruit the company's customers, suppliers, or personnel at the time of such repurchase. This covenant shall apply in each jurisdiction in which the Company licenses or sells any products at the time of such repurchase. Notwithstanding the foregoing, this covenant shall not restrict the ability of the Executive to own up to 5% of the shares of capital stock of any public company. 8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company (other than the Executive) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any party hereto of any breach by any other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time; nor shall the receipt or acceptance of compensation or other benefits following any termination of the Executive's employment be deemed a waiver of any condition or provision hereof. 9. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable, the remainder of this agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 10. CHOICE OF LAW. The formation, construction and performance of this agreement shall be construed in accordance with the laws of California. 11. INTEGRATION. This Agreement contains the entire agreement between the parties and supercedes all prior oral and written agreements, understandings, commitments and practices between them, including all prior employment agreements, whether or not fully performed by Executive before the date of this Agreement. No oral modifications, express or implied, may alter or vary the terms of this Agreement. 12. VENUE. Any action brought to enforce the terms of this agreement shall be commenced, prosecuted and defended exclusively in the State or Federal court of the State of California located in Orange County, California. 13. ATTORNEY'S FEES. In the event of any legal action (including any appeal of a judgement) in connection with the Agreement, the prevailing party shall be entitled to Reimbursement of reasonable attorneys' fees and costs and expenses (including court costs) incurred in connection there with. IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized officer of the Company, have executed this Employment Agreement as of the first day of April 1999 COMPANY eSYNCH CORPORATION (Board of Directors) By --------------------------------------- By --------------------------------------- By ----------------------------------------- EXECUTIVE ----------------------------------------- Jim Budd, an individual THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 1, 1999 is entered into by and between eSYNCH CORPORATION, a Delaware corporation having its principal office at 4600 Campus Drive, Newport Beach, CA 92660 (the "Company"), and Robert Way, an individual (the "Executive"). WITNESSETH WHEREAS, the Executive and the and the Company desire to enter this Agreement to confirm the terms and conditions on which the Company will employ the Executive; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the term set forth in Section 2 below, in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. TERM. The term of employment shall commence as of the date hereof and shall end when terminated pursuant to Section 6 below. The period described above shall be hereinafter referred to as the "Term of Employment." 3. POSITION, DUTIES, RESPONSIBILITIES AND AUTHORITY (a) During the Term of Employment, the Executive shall serve as Vice-President and General Manager of the Company, and shall report and be responsible to the President and Chief Operating Officer of the Company. During the Term of Employment, the Executive shall have the duties, responsibilities and authority as shall be determined from time to time by the President and Chief Operating Officer of the Company. (b) Throughout the Term of Employment, the Executive shall devote his full business time and attention to the business of the Company. 4. BASE COMPENSATION. During the Term of Employment, the Executive shall receive base compensation at an annual rate of not less than One Hundred Ten Thousand Dollars ($110,000), to be paid in accordance with the Company's normal procedure for compensation of its senior executives, but not less frequently than monthly. At the end of each calendar year during the Term of Employment, the Executive's base compensation shall be reviewed by the Board of Directors of the Company, on the basis of the performance of the Executive and the profitability of the Company. 5. EMPLOYEE BENEFITS, PEREQUSITIES AND EXPENSES During the Term of Employment, the Executive shall be entitled to participate in all benefit plans, programs or practices maintained by the Company for senior executives or other employees of the Company on the date hereof and any other such benefit plans, programs or practices from time to time in effect, subject to the terms thereof. Without limiting the generality of the foregoing, the Executive shall be entitled to the following: (a) The company hereby grants the executive(250,000) Two Hundred and Fifty thousand shares of eSYNCH options that are immediately vested at a exercise price of $1.00 per share as of 1/10/99 (b) Three (3) weeks of paid vacation in each calendar year during the Term of Employment subject to the accrual policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; plus such holidays, sick leave and other time off as are established by the policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; (c) Reimbursement for all reasonable and documented expenses incurred by the Executive in connection with the performance of his duties hereunder, all in accordance with the Company's policy with respect to such reimbursement; (d) Medical, dental and other supplemental health benefits, life insurance benefits for the Executive and his dependents, accidental death and dismemberment benefits for the Executive, and long-term disability Benefits, at least as favorable to the Executive as those currently in effect; (e) Participation in the Company's 401(k) plan, and related matching program as currently in effect; 6. Termination of Employment. The Term of Employment shall terminate upon the occurrence of any of the following events: (a) The Executive may terminate his employment upon giving the Company written notice thirty (30) days in advance of the proposed date of termination. (b) The Executive's employment shall terminate automatically upon the death of Executive. (c) The Company may terminate the Executive's employment at any time for cause by delivering to the Executive a letter finding that the executive committed an act or omission constituting cause hereunder. As used herein, the term "cause" shall mean: (i) Misappropriation of any material funds or property of the Company, or any act or acts of intentional dishonesty relating to the Executive's employment resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) Acting in a manner which is substantially detrimental or substantially damaging to the Company's reputation, business operations, prospects or relations with its employees, suppliers or customers, after receipt of written notice thereof from the President/COO and a reasonable opportunity to so remedy such acts; or (iii) Willfully refusing to perform in material respects his duties hereunder (other than as a result of any temporary or permanent mental or physical impairment as certified by a physician reasonably acceptable to the Company), after receipt of written notice thereof from the President/COO of the Company and a reasonable opportunity to so perform such duties. (d) The Company may terminate the Executive's employment without cause at any time and for any reason by giving the Executive written notice from the President/COO of the Company at least thirty (30) days in advance of the date on which the termination is to become effective. 7. OBLIGATIONS AND PAYMENTS UPON TERMINATION. (a) Upon any termination of employment pursuant to Section 6, the Executive and the Company shall have no further obligation to the other under this Agreement except with respect to the provisions of this Section 7. (b) Upon any termination of employment under Sections 6(a), 6(b) or 6(c), the Company shall pay the Executive in a lump sum within ten (10) days following such termination (or such earlier date required by law) an amount equal to the base compensation provided under section 4 hereof(as well as any accrued but unpaid vacation) as he may be Entitled to receive up to the date of termination. (c) Upon any termination of employment under Section 6(d), the Company shall make payment to the Executive in the amounts and at the times set forth in Section 7(b); and, in addition: (i) The Company shall pay the Executive in a lump sum within ten (10) days following such termination an additional amount equal to three (3) months of his base compensation; (ii) The Company shall continue to provide to the Executive the employee benefits, perquisites and expenses identified in Section 5(c) through 5(f) hereof for the three (3) month period following the date of termination; (iii) The Company shall repay all loans and other obligations payable to the Executive in cash within ten (10) days following such termination; and (iv) The Company shall immediately vest all shares of stock options and warrants of the Company held by the executive and the company has the right at the companies option to buy back from the executive any shares of stock, options and warrants held by the executive at the current 30 day average market trading price prior to the date of delivery of the Executive's termination. (v) The executive has three (3) months from the termination date in which to exercise these options and/or warrants or they expire. (d) Provided that the Company repurchases all shares of capital stock, options and warrants of the Company held by the Executive pursuant to the this agreement (whether such repurchase occurs as a result of termination without cause or termination for any other reason) and, to the extent applicable, in accordance with Section 7(c)(iv) of this Agreement, the Executive hereby agrees that, from and after the date on which the closing of such repurchase occurs and continuing for a period of two years thereafter, he will not, directly or indirectly, engage in any business, or have any interest in, any corporation, partnership, proprietorship, firm, Association or business, which engages in any activities competitive with the products being licensed or sold by the Company at the time of such repurchase. This covenant shall apply in each jurisdiction in which the Company licenses or sells any products at the time of such repurchase. Notwithstanding the foregoing, this covenant shall not restrict the ability of the Executive to own up to 5% of the shares of capital stock of any public company. 8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company (other than the Executive) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any party hereto of any breach by any other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time; nor shall the receipt or acceptance of compensation or other benefits following any termination of the Executive's employment be deemed a waiver of any condition or provision hereof. 9. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable, the remainder of this agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 10. CHOICE OF LAW. The formation, construction and performance of this agreement shall be construed in accordance with the laws of California. 11. INTEGRATION. This Agreement contains the entire agreement between the parties and supercedes all prior oral and written agreements, understandings, commitments and practices between them, including all prior employment agreements, whether or not fully performed by Executive before the date of this Agreement. No oral modifications, express or implied, may alter or vary the terms of this Agreement. 12. VENUE. Any action brought to enforce the terms of this agreement shall be commenced, prosecuted and defended exclusively in the State or Federal court of the State of California located in Orange County, California. 13. ATTORNEY'S FEES. In the event of any legal action (including any appeal of a judgement) in connection with the Agreement, the prevailing party shall be entitled to reimbursement of reasonable attorneys' fees and costs and expenses (including court costs) incurred in connection there with. IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized officer of the Company, have executed this Employment Agreement as of the first day of April 1999 COMPANY eSYNCH CORPORATION (Board of Directors) By --------------------------------------- By --------------------------------------- By --------------------------------------- EXECUTIVE --------------------------------------- Robert Way, an individual THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of September 8, 1999 is entered into by and between eSYNCH CORPORATION, a Delaware corporation having its principal office at 15502 Mosher, Tustin, CA (the "Company"), and David P. Noyes an individual (the "Executive"). WITNESSETH WHEREAS, the Executive and the Company desire to enter this Agreement to confirm the terms and conditions on which the Company will employ the Executive; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive agree as follows: 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, for the term set forth in Section 2 below, in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. Term. The term of employment shall commence as of the date hereof and shall end when terminated pursuant to Section 6 below. The period described above shall be hereinafter referred to as the "Term of Employment." 3. Position, Duties, Responsibilities and Authority. (a) During the Term of Employment, the Executive shall serve as Chief Financial Officer of the Company, and shall report and be responsible to the Chief Executive Officer and the Board of Directors of the Company. During the Term of Employment, the Executive shall have the duties, responsibilities and authority as shall be determined from time to time by the Chief Executive Officer and the Board of Directors of the Company. (b) Throughout the Term of Employment, the Executive shall devote his full business time and attention to the business of the Company. 4. Base Compensation. During the Term of Employment, the Executive shall receive base compensation at an annual rate of not less than One Hundred Fifty Thousand Dollars ($150,000), to be paid in accordance with the Company's normal procedure for compensation of its senior executives, but not less frequently than monthly. At the end of each calendar year during the Term of Employment, the Executive's base compensation shall be reviewed by the Board of Directors of the Company, on the basis of the performance of the Executive and the profitability of the Company. 5. Employee Benefits, Perquisites and Expenses. During the Term of Employment, the Executive shall be entitled to participate in all benefit plans, programs or practices maintained by the Company for senior executives or other employees of the Company on the date hereof and any other such benefit plans, programs or practices from time to time in effect, subject to the terms thereof. Without limiting the generality of the foregoing, the Executive shall be entitled to the following: (a) The company hereby grants the executive (250,000) two hundred and fifty thousand shares of eSYNCH stock at a purchase price of ($1.00) one dollar per share and (250,000) shares of eSYNCH company options that are vested quarterly in the amount of 31,250 per quarter at a exercise price of $1.00 per share as of 9/08/99. (b) Three (3) weeks of paid vacation in each calendar year during the Term of Employment subject to the accrual policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; plus such holidays, sick leave and other time off as are established by the policies of the Company currently in effect or hereafter approved by the Company's Board of Directors; (c) Reimbursement for all reasonable and documented expenses incurred by the Executive in connection with the performance of his duties hereunder, all in accordance with the Company's policy with respect to such reimbursement; (d) Medical, dental and other supplemental health benefits, life insurance benefits for the Executive and his dependents, accidental death and dismemberment benefits for the Executive, and long-term disability benefits, at least as favorable to the Executive as those currently in effect; (e) Participation in the Company's 401(k) plan, and related matching program as currently in effect; (f) Payment of personal tax planning and preparation expenses up to a maximum of Fifteen Hundred Dollars ($1,000) per year; (g) A reasonable car allowance or a company car of the make and type approved by the Board of Directors of the Company but not less than $500 a month. 6. Termination of Employment. The Term of Employment shall terminate upon the occurrence of any of the following events: (a) The Executive may terminate his employment upon giving the Company written notice thirty (30) days in advance of the proposed date of termination. (b) The Executive's employment shall terminate automatically upon the death of Executive. (c) The Company may terminate the Executive's employment at any time for cause by delivering to the Executive a certified copy of a resolution of the Board of Directors of the Company finding that the Executive committed an act or omission constituting cause hereunder. As used herein, the term "cause" shall mean: (i) Misappropriation of any material funds or property of the Company, or any act or acts of intentional dishonesty relating to the Executive's employment resulting or intended to result in direct or indirect personal gain or enrichment at the expense of the Company; (ii) Acting in a manner which is substantially detrimental or substantially damaging to the Company's reputation, business operations, prospects or relations with its employees, suppliers or customers, after receipt of written notice thereof from the Board of Directors of the Company and a reasonable opportunity to so remedy such acts; or (iii) Refusing to perform in material respects his duties hereunder (other than as a result of any temporary or permanent mental or physical impairment as certified by a physician reasonably acceptable to the Company), after receipt of written notice thereof from the Board of Directors of the Company and a reasonable opportunity to so perform such duties. (d) However, notwithstanding any of the above, the Company may terminate the Executive's employment without cause at any time and for any reason by giving the Executive written notice (in accordance with the notice provisions contained in Section 9) from the Board of Directors of the Company at least thirty (30) days in advance of the date on which the termination is to become effective. 7. Obligations and Payments Upon Termination. (a) Upon any termination of employment pursuant to Section 6, the Executive and the Company shall have no further obligation to the other under this Agreement except with respect to the provisions of this Section 7. (b) Upon any termination of employment under Sections 6(a), 6(b) 6(c) or 6 (d), the Company shall pay the Executive in a lump sum within ten (10) days following such termination (or such earlier date required by law) an amount equal to the pro-rata amount of the base compensation owed to the Executive as of the effective date of the termination (as well as any accrued but unpaid vacation) as he may be entitled to receive up to the date of termination. (c) Upon any termination of employment under Section 6(d), the Company shall make payment to the Executive in the amounts and at the times set forth in Section 7(b); and, in addition: (i) the Company shall pay the Executive in a lump sum within ten (10) days following such termination an additional amount equal to six (6) months of his base compensation; (ii) the Company shall continue to provide to the Executive the employee benefits, perquisites and expenses identified in Section 5(c) through 5(f) hereof for the six (6) month period following the date of termination; (iii) the Company shall repay all loans and other obligations payable to the Executive in cash within ten (10) days following such termination. 8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by the Board of Directors of the Company and is agreed to in writing, signed by the Executive and by an officer of the Company (other than the Executive) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any party hereto of any breach by any other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time; nor shall the receipt or acceptance of compensation or other benefits following any termination of the Executive's employment be deemed a waiver of any condition or provision hereof. 9. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable, the remainder of this agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 10. CHOICE OF LAW. The formation, construction and performance of this agreement shall be construed in accordance with the laws of California. 11. INTEGRATION. This Agreement contains the entire agreement between the parties and supercedes all prior oral and written agreements, understandings, commitments and practices between them, including all prior employment agreements, whether or not fully performed by Executive before the date of this Agreement. No oral modifications, express or implied, may alter or vary the terms of this Agreement. 12. VENUE. Any action brought to enforce the terms of this agreement shall be commenced, prosecuted and defended exclusively in the State or Federal court of the State of California located in Orange County, California. 13. ATTORNEY'S FEES. In the event of any legal action (including any appeal of a judgement) in connection with the Agreement, the prevailing party shall be entitled to reimbursement of reasonable attorneys' fees and costs and expenses (including court costs) incurred in connection there with. IN WITNESS WHEREOF, the Executive and the Company, by a duly authorized officer of the Company, have executed this Employment Agreement as of the first day of March, 1999 COMPANY eSYNCH CORPORATION (Board of Directors) By --------------------------------------- By --------------------------------------- By --------------------------------------- EXECUTIVE --------------------------------------- David P. Noyes, an individual EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS ON JUNE 30, 1999, AND STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 34,547 0 0 0 87,593 928,894 668,724 0 6,058,123 3,289,556 0 600 263 9,797 2,335,754 6,058,123 917,400 917,400 459,944 6,559,819 0 (6,559,819) 60,839 (6,553,358) 0 (6,553,538) 0 0 0 (6,553,538) (0.78) (0.78)
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