-----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, I2wh5SYVyREfUmyfXmcUoF16mfvo2XYLwcaSlvQVMTBksHedw6GW67C/8M8h11Ae DSVtHeQ1QO+DxEtF+c7eKA== 0000950153-00-000358.txt : 20000317 0000950153-00-000358.hdr.sgml : 20000317 ACCESSION NUMBER: 0000950153-00-000358 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBIZ TECHNOLOGY CORP CENTRAL INDEX KEY: 0001079893 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 860933890 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27619 FILM NUMBER: 571575 BUSINESS ADDRESS: STREET 1: 1919 WEST LONE CACTUS CITY: PHOENIX STATE: AZ ZIP: 85201 BUSINESS PHONE: 6239200 MAIL ADDRESS: STREET 1: 1919 WEST LONE CACTUS CITY: PHOENIX STATE: AZ ZIP: 85201 10QSB 1 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JANUARY 31, 2000 COMMISSION FILE NO. 027619 iBIZ TECHNOLOGY CORP. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 86-0933890 - --------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1919 West Lone Cactus, Phoenix, Arizona 85021 - --------------------------------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (623) 492-9200 ---------------------
Class Outstanding at March 14, 2000 ----- ----------------------------- Common stock, $0.01 par value 28,933,861
2 TABLE OF CONTENTS PART I. - FINANCIAL INFORMATION................................................................................ 1 ITEM 1. FINANCIAL STATEMENTS (REVIEWED) CONSOLIDATED BALANCE SHEETS ............................................................... 2 CONSOLIDATED STATEMENT OF OPERATIONS....................................................... 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT................................. 5 CONSOLIDATED STATEMENT OF CASH FLOWS....................................................... 7 NOTES TO FINANCIAL STATEMENTS.............................................................. 9 COMPARISON CONSOLIDATED BALANCE SHEETS............................................................ 23 COMPARISON CONSOLIDATED STATEMENTS OF OPERATIONS.................................................. 25 COMPARISON CONSOLIDATED STATEMENTS OF CASH FLOWS.................................................. 26 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..28 PART II. - OTHER INFORMATION................................................................................... 31 ITEM 1. LEGAL PROCEEDINGS................................................................................... 31 ITEM 2. CHANGES IN SECURITIES .............................................................................. 31 ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................................................... 32 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................. 33 ITEM 5. OTHER INFORMATION................................................................................... 33 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................................... 33
3 PART I ITEM 1. FINANCIAL INFORMATION The financial statements for the three month period ended January 31, 2000 have been reviewed, but not audited by iBIZ's independent auditors, Moffitt & Company, P.C. As required by the SEC, this Form 10-QSB contains comparisons to financial statements for the three month period ended January 31, 1999. The financial statements for the three month period ended January 31, 1999 were prepared internally by management of the Company, and are unaudited and unreviewed. INDEPENDENT ACCOUNTANTS' REVIEW REPORT To The Board of Directors and Stockholders IBIZ Technology Corp. and Consolidated Subsidiary Phoenix, Arizona We have reviewed the accompanying balance sheet of IBIZ Technology Corp. and Consolidated Subsidiary as of January 31, 2000, and the related statements of operations, changes in stockholders' deficit, retained earnings and cash flows for the three months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of IBIZ Technology Corp. and Consolidated Subsidiary. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. As discussed in Note 22, certain conditions indicate that the company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments to the financial statements that might be necessary should the company be unable to continue as a going concern. MOFFITT & COMPANY, P. C. SCOTTSDALE, ARIZONA March 6, 2000 1 4 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY CONSOLIDATED BALANCE SHEET JANUARY 31, 2000 (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $450,757 Accounts receivable, trade 382,637 Inventories 238,059 Prepaid expenses 28,246 -------- TOTAL CURRENT ASSETS $1,099,699 PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 185,182 OTHER ASSETS Note receivable, related party 412,162 Deposits 16,412 Customer list, net of accumulated amortization 11,305 -------- TOTAL OTHER ASSETS 439,879 ---------- TOTAL ASSETS $1,724,760 ==========
2 5 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable, trade $ 521,941 Customer deposits 30,014 Notes payable, current 6,540 Accrued liabilities 131,890 Sales and payroll taxes payable 117,606 Corporation income taxes payable 19,078 Deferred income 86,298 Convertible debentures payable 200,000 ----------- TOTAL CURRENT LIABILITIES $ 1,113,367 LONG - TERM LIABILITIES Convertible debentures payable 1,400,000 Notes payable 17,005 ----------- TOTAL LONG - TERM LIABILITIES 1,417,005 STOCKHOLDERS' DEFICIT Common stock Authorized - 100,000,000 shares, par value $.001 per shares Issued and outstanding - 27,021,380 shares 27,021 Paid in capital in excess of par value of stock 1,443,650 Advance on stock subscription 75,000 Retained earnings (deficit) (2,351,283) ----------- TOTAL STOCKHOLDERS' DEFICIT (805,612) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,724,760 ===========
3 6 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
SALES $ 628,853 COST OF SALES 550,795 ------------ GROSS PROFIT 78,058 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (773,095) ------------ (LOSS) BEFORE OTHER INCOME (695,037) OTHER INCOME (EXPENSE) Interest income $ 5,398 Interest expense (20,481) -------- TOTAL OTHER INCOME, NET (15,083) ------------ (LOSS) BEFORE INCOME TAXES (710,120) INCOME TAXES 0 ------------ NET (LOSS) $ (710,120) ============ NET (LOSS) PER COMMON SHARE Basic and Diluted $ (0.03) ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic and diluted 26,721,059 ============
4 7 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
COMMON STOCK --------------------------- SHARES AMOUNT --------------------------- BALANCE, NOVEMBER 1, 1999 26,370,418 $26,370 CONVERSION OF DEBENTURES TO COMMON STOCK 300,962 301 ISSUANCE OF COMMON STOCK FOR CASH AT .50(CENT)PER SHARE 100,000 100 AT $1.10 PER SHARE 250,000 250 FEES AND COSTS FOR ISSUANCE OF STOCK 0 0 NET (LOSS) FOR THE THREE MONTHS ENDED JANUARY 31, 2000 0 0 ---------- ------- BALANCE, JANUARY 31, 2000 27,021,380 $27,021 ========== =======
5 8
PAID IN CAPITAL IN EXCESS OF ADVANCES RETAINED PAR VALUE ON STOCK EARNINGS OF STOCK SUBSCRIPTIONS (DEFICIT) ----------- ------------- ------------ $ 1,106,266 $75,000 $(1,641,163) 200,734 0 0 49,900 0 0 274,750 0 0 (188,000) 0 0 0 0 (710,120) ----------- ------- ----------- $ 1,443,650 $75,000 $(2,351,283) =========== ======= ===========
6 9 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED JANUARY 31, 2000 (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $(710,120) Adjustments to reconcile net (loss) to net cash (used) by operating activities Depreciation 10,774 Interest on debentures converted to common stock 1,036 Changes in operating assets and liabilities Accounts receivable, trade (170,337) Inventories 30,028 Prepaid expenses 10,738 Deposits 347 Accounts payable (241,024) Customer deposits (85,394) Accrued liabilities and taxes 12,523 Deferred income 31,336 --------- NET CASH FLOWS (USED) BY OPERATING ACTIVITIES $(1,110,093) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (70,615) Loan to related party (55,352) Purchase of customer list (11,900) --------- NET CASH FLOWS (USED) BY INVESTING ACTIVITIES (137,867)
7 10 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE THREE MONTHS ENDED JANUARY 31, 2000 (UNAUDITED) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock $ 137,000 Proceeds from issuance of convertible debentures 1,600,000 Decrease in notes payable (63,626) ----------- NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES $1,673,374 ---------- NET INCREASE IN CASH 425,414 CASH BALANCE, NOVEMBER 1, 1999 25,343 ---------- CASH BALANCE, JANUARY 31, 2000 $ 450,757 ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during year for: Interest $ 3,787 ========== Taxes $ 0 ========== NON CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock for convertible debentures $ 200,000 ==========
8 11 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2000 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS IBIZ Technology Corp. was organized on April 6, 1994, under the laws of the State of Florida. The company is a holding company and owns 100% of Invnsys Technology Corporation. Invnsys Technology Corporation is in the business of selling retail and wholesale, financial, computing and communication equipment and offering network integration services, digital subscriber line high speed internet connection services and business-to-business software sales. They also provide repair services and sell maintenance contracts. The corporation currently operates a service center in Phoenix, Arizona. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of IBIZ Technology Corp. and its wholly owned subsidiary, Invnsys Technology Corporation. All material inter-company accounts and transactions have been eliminated. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Uncollectible accounts receivable are written off at the time management specifically determines them to be uncollectible. In addition, the allowance for doubtful accounts is provided at an amount determined by management. INVENTORIES Inventories are stated at the lower of cost (determined principally by first-in, first-out method) or cost. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacement, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. The company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets: 9 12 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT (CONTINUED) Tooling 3 Years Machinery and equipment 5-10 Years Office furniture and equipment 5-10 Years Vehicles 5 Years Leasehold improvements 5 Years Location equipment 5 years
CUSTOMER LISTS The customer list is recorded at cost and is being amortized on a straight-line basis over five years. ACCOUNTING ESTIMATES Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. REVENUE RECOGNITION The company recognizes revenue from product sales when the goods are shipped and title passes to customers. SALES OF MAINTENANCE AGREEMENTS The revenue received for the maintenance agreements is being reported evenly over the life of the contracts. Such unearned portion is recorded as deferred income. INCOME TAXES Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No., 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. 10 13 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET EARNINGS PER SHARE The company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common shareowners by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, potentially dilutive warrants and options that would have an anti-dilutive effect on net loss per share are excluded. RISKS AND UNCERTAINTIES The company is in the computer and computer technology industry. The company's products are subject to rapid obsolescence and management must authorize funds for research and development costs in order to stay competitive. UNAUDITED FINANCIAL INFORMATION The financial statements are unaudited. In management's opinion, such information includes all normal recurring entries necessary to make the financial information not misleading. NOTE 2 DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The company has financial instruments, none of which are held for trading purposes. The company estimates that the fair value of all financial instruments at January 31, 2000, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the company using available market information and appropriate valuation methodologies. Considerable judgement is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the company could realize in a current market exchange. NOTE 3 ACCOUNTS RECEIVABLE A summary of accounts receivable and allowance for doubtful accounts is as follows: Accounts receivable $407,637 Allowance for doubtful accounts 25,000 ------- $382,637 ========
11 14 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 4 INVENTORIES Inventories are comprised of the following: Computer and components: Finished products $185,497 Demonstration and loaner units 6,003 Depot units 13,521 Office 31,467 Evaluation units 1,252 Parts 319 -------- Total inventories $238,059 ========
NOTE 5 PROPERTY AND EQUIPMENT Property and equipment and accumulated depreciation consists of: Tooling $ 68,100 Machinery and equipment 44,628 Software 22,305 Office furniture and equipment 108,986 Vehicles 39,141 Location equipment 41,919 Leasehold improvements 14,467 -------- 339,546 Less accumulated depreciation 154,364 -------- Total property and equipment $185,182 ========
The depreciation expenses for the three months ended January 31, 2000 is $ 10,179. NOTE 6 CUSTOMER LIST The customer list and accumulated amortization consists of: Cost $11,900 Less accumulated amortization 595 ------- Total customer list $11,305 =======
The amortization for the three months ended January 31, 2000 is $595. 12 15 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 7 NOTE RECEIVABLE, RELATED PARTY The related note is secured by 500,000 shares of common stock in the company, payable on demand and accrues interest at 6%. At January 31, 2000, management believed the notes would not be collected within the current operating cycle and classified the asset as a long-term asset. $412,162 ========
NOTE 8 CUSTOMER DEPOSITS It is the company's policy to obtain a portion of the sales price when orders are received. These funds are recorded as customer deposits and are applied to the customer invoices when the merchandise is shipped. NOTE 9 INCOME TAXES (Loss) from continuing operations before income taxes $(710,120) --------- The provision for income taxes is estimated as follows: Currently payable $ 0 --------- Deferred $ 136,830 --------- A reconciliation of the provision for income taxes compared with the amounts at the U.S. Federal Statutory rate was as follows: Tax (refund) at U.S. Federal Statutory income tax rates $(140,886) Less change in valuation allowance 140,886 --------- Net tax $ 0 ========= Deferred income tax assets and liabilities reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. The net deferred tax assets is: $ 0 --------- Temporary differences and carry forwards that gave rise to deferred tax assets and liabilities included the following:
13 16 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 9 INCOME TAXES (CONTINUED)
DEFERRED TAX ------------ ASSETS LIABILITIES ------ ----------- Net operating loss $ 451,000 $ 0 Accrued expenses and miscellaneous 8,100 0 Tax credit carryforward 38,424 0 Depreciation 0 6,199 --------- ------- Subtotals 497,524 6,199 Valuation allowance (497,524) (6,199) --------- ------- Total deferred taxes $ 0 $ 0 ========= =======
As discussed in Note 22, there is substantial doubt about the company's ability to continue as a going concern. Consequently, the company must maintain a 100% valuation allowance for the deferred taxes as there is doubt that the company will generate profits which will be absorbed by the tax differences. A reconciliation of the valuation allowance is as follows: Balance, November 1, 1999 $356,638 Addition to allowance for three months ended January 31, 2000 140,886 -------- Balance, January 31, 2000 $497,524 ========
NOTE 10 TAX CARRYFORWARD The company has the following tax carryforwards at January 31, 2000:
EXPIRATION YEAR AMOUNT DATE ---- ------ ---- Net operating loss October 31, 1995 $ 2,500 October 31, 2010 October 31, 1996 24,028 October 31, 2011 October 31, 1997 192,370 October 31, 2012 October 31, 1998 71,681 October 31, 2013 October 31, 1999 991,162 October 31, 2019 Capital loss October 31, 1997 25,600 October 31, 2002 Contribution October 31, 1997 545 October 31, 2002 October 31, 1999 2,081 October 31, 2004 Research tax credits 38,424
14 17 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 11 NOTES PAYABLE Note payable to Community First National Bank due in monthly payments of interest of approximately $3,100. Interest is computed at national prime as stated in the Wall Street Journal plus 3 percent. The principal amount is due July 31, 2000. This note is secured by accounts receivable, general intangibles and all equipment and leasehold improvements. The shareholder has personally guaranteed the loan and the bank is the beneficiary of an insurance policy on the life of the shareholder. $ 0 Note payable to Community First National Bank due in monthly payments of principal and interest of $545 with interest at 7 percent until March 7, 2004. The note is secured by an automobile. 23,545 ------- 23,545 Less: current portion 6,540 ------- Net long-term debt $17,005 =======
Maturities of long-term debt are as follows:
Year ended January 31, 2001 $ 6,540 2002 6,540 2003 3,925 -------- $17,005 =======
NOTE 12 COMMON STOCK PURCHASE WARRANTS The company has issued the following common stock purchase warrants:
NUMBER EXERCISE DATE OF SHARES TERM PRICE ---- --------- ---- ----- May 7, 1999 100,000 3 years $0.75 May 13, 1999 100,000 3 years $1.00 May 7, 1999 300,000 3 years $0.75 May 7, 1999 300,000 10 years $0.75 May 13, 1999 100,000 10 years $1.00
15 18 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 13 CONVERTIBLE DEBENTURES
CURRENT $200,000 DEBENTURE TOTAL PORTION ------------------ ----- ------- On June 30, 1999, the company issued $200,000 of $ 200,000 $ 200,000 convertible debentures. The debentures bear interest at 8%, are unsecured and are due on June 21, 2000. On February 24, 2000, the debentures were converted into 300,00 shares of common stock $1,000,000 DEBENTURE In December 1999, the company issued an additional 1,000,000 0 $1,000,000 of 7% convertible debentures under the following terms and conditions: 1. Due date - December 28, 2004. 2. Interest only on May 1 and December 1 of each year commencing April 1, 2000, payable in cash or stock. 3. Warrants to purchase 200,000 shares of common stock at $0.94 per share. 4. Conversion terms - The debenture holder shall have the right to convert all or a portion of the outstanding principal amount of this debenture plus any accrued interest into such number of shares of common stock as shall equal the quotient obtained by dividing the principal amount of this debenture by the applicable conversion price. 5. Conversion price - Lesser of (i) $0.94 (fixed price) or (ii) the product obtained by multiplying the average closing price by .80. 6. Average closing price - The debenture holder shall have the election to choose any three trading days out of twenty trading days immediately preceding the date on which the holder gives the company a written notice of the holders' election to convert outstanding principal of this debenture. 7. Redemption by company - If there is a change in control of the company, the holder of the debenture can request that the debenture be redeemed at a price equal to 125% of the aggregate principal and accrued interest outstanding under this debenture. 8. The debentures are unsecured.
16 19 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 13 CONVERTIBLE DEBENTURES (CONTINUED)
CURRENT $1,000,000 DEBENTURE (CONTINUED) TOTAL PORTION -------------------------------- ----- ------- 9. Any further issuance of common stock or debentures must be approved by debenture holders. 10. Debenture holders have a eighteen month right of first refusal on future disposition of stock by the company. 11. Restriction on payment of dividends, retirement of stock or issuance of new securities. 12. The company paid a $100,000 brokerage fee for obtaining the $1,000,000 debentures. 13. The debenture agreement provides monetary penalties in the event the company delays the issuance of the conversion stock. On March 2, 2000, the company converted the $1,000,000 debentures into 1,292,481 shares of common stock. $600,000 DEBENTURE In November 1999, the company issued $600,000 of 7% $ 400,000 $ 0 convertible debentures under the following amended terms and conditions: 1. Due date - November 9, 2004. 2. Interest only on April 1 and November 1 of each year commencing January 1, 2000. 3. Warrants to purchase 100,000 shares of common stock at $ 0.94 per share. 4. Conversion terms - The debenture holder shall have the right to convert all or a portion of the outstanding principal amount of this debenture plus any accrued interest into such number of shares of common stock as shall equal the quotient obtained by dividing the principal amount of this debenture by the applicable conversion price. 5. Conversion price - Lesser of (i) $ 0.675 (fixed price) or (ii) the product obtained by multiplying the average closing price by .80. 6. Average closing price - The debenture holder shall have the election to choose any three trading days out of twenty trading days immediately preceding the date on which the holder gives the company a written notice of the holders' election to convert outstanding principal of this debenture.
17 20 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 13 CONVERTIBLE DEBENTURES (CONTINUED)
CURRENT $600,000 DEBENTURE (CONTINUED) TOTAL PORTION ------------------------------ ----- ------- 7. Redemption by company - If there is a change in control of the company, the holder of the debenture can request that the debenture be redeemed at a price equal to 125% of the aggregate principal and accrued interest outstanding under this debenture. 8. The debentures are unsecured. 9. Any further issuance of common stock or debentures must be approved by debenture holders. 10. Debenture holders have a eighteen month right of first refusal on future disposition of stock by the company. 11. Restriction on payment of dividends, retirement of stock or issuance of new securities. On November 9, 1999, the company converted $200,000 of debentures into 300,962 shares of common stock. Total $1,600,000 $ 200,000 ========== ===========
NOTE 14 NET (LOSS) PER COMMON SHARE Computation of net (loss) per common share Net (loss) to common stockholders $ 710,120 --------------------------------------------------------------------- ----------- Weighted average number of common shares outstanding 26,721,059 Net (loss) per share ($0.03)
The weighted average shares from converting stock options, warrants and debentures are not presented as the amounts are anti-dilutive. NOTE 15 REAL ESTATE LEASE On June 1, 1999, the company leased a new facility from a related entity. The lease commenced on July 1, 1999, requires initial annual rentals of $153,600 (with annual increases) plus taxes and operating costs and expires on December 31, 2024. The company has also guaranteed the mortgage on the premises. Future minimum lease payments, (based upon fiscal years ending October 31) excluding taxes and expenses, are as follows: 18 21 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 15 REAL ESTATE LEASE (CONTINUED) October 31, 2000 $ 156,160 October 31, 2001 163,968 October 31, 2002 172,168 October 31, 2003 180,780 October 31, 2004 189,820 November 1, 2004 - December 31, 2024 6,676,000
Rent expense for the three months ended January 31, 2000 is $38,400. NOTE 16 ADVERTISING The company expenses all advertising as incurred. For the three months ended January 31, 2000, the company charged to operations $9,110 in advertising costs. NOTE 17 INTEREST The company incurred interest expenses for the three months ended January 31, 2000 of $20,481. NOTE 18 WARRANTY RESERVE The company established a warranty reserve of $35,568 to cover any potential warranty costs on computer equipment that are not covered by the computer manufacturer's warranty. NOTE 19 ECONOMIC DEPENDENCY The company purchases the majority of its computer equipment from three suppliers. NOTE 20 OFFICERS' COMPENSATION The company has four employment agreements with the following officers:
PRESIDENT VICE AND CHIEF VICE PRESIDENT CHIEF EXECUTIVE PRESIDENT/ OF OPERATING OFFICER COMPTROLLER OPERATIONS OFFICER ------- ----------- ---------- ------- Annual compensation $200,000 $88,000 $88,000 $96,200 ======== ======= ======= =======
19 22 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 21 STOCK OPTIONS On January 31, 1999, the corporation adopted a stock option plan for the purpose of providing an incentive based form of compensation to the directors, key employees and service providers of the corporation. The stock subject to the plan and issuable upon exercise of options granted under the plan are shares of the corporation's common stock, $.001 par value, which may be either unissued or treasury shares. The aggregate number of shares of common stock covered by the plan and issuable upon exercise of all options granted shall be 5,000,000 shares, which shares shall be reserved for use upon the exercise of options to be granted from time to time. The company issued the following options:
DATE OF NUMBER VESTING ISSUANCE OF SHARES RECIPIENT PERIOD TERM -------- --------- --------- ------ ---- April 22, 1999 800,000 Officers One year 10 years 50% immediately 50% in six months April 22, 1999 240,000 Employees Five years 10 years 10% immediately balance over five years April 22, 1999 200,000 Employee Five years 10 years 10% immediately balance over four years April 22, 1999 150,000 Directors Two years 10 years 50% per year May 7, 1999 500,000 Employee Immediately 10 years May 7, 1999 85,000 Employees Five years 10 years 10,000 shares immediately balance over five years May 7, 1999 375,000 Employee Immediately 10 years January 28, 2000 125,000 Officer Immediately 10 years January 28, 2000 500,000 Officer One year - 10 years ------- performance based 2,975,000 =========
20 23 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 21 STOCK OPTIONS (CONTINUED) The exercise price is the fair market value of the shares (average of bid and ask price) at the date of the grant which was .75(cent) to $1.06 per share. The company applied APB Opinion 25 and related interpretations in accounting for this stock option plan. Had compensation costs for the company's plan been determined based on the fair value at the grant date consistent with the method of FASB Statement 123, the company's net income and earnings per share would not have changed. The fair value of the option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 30%, (3) risk-free interest rate of 6.40%, and (4) expected life of 10 years. A summary of the stock options is as follows:
SHARES Outstanding at November 1, 1999 2,350,000 Granted during the three months ended January 31, 2000 625,000 --------- Outstanding at January 31, 2000 2,975,000 =========
Information regarding stock options outstanding as of January 31, 2000 is as follows:
OPTIONS OUTSTANDING ------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE REMAINING PRICE EXERCISE CONTRACTUAL RANGE SHARES PRICE LIFE ----- ------ ----- ---- $ .75(cent)- $1.06 2,975,000 $ .75 9 years, 3 months
OPTIONS EXERCISABLE ------------------- WEIGHTED AVERAGE PRICE EXERCISE RANGE SHARES PRICE ----- ------ ----- $ 0 0 N/A
Since the exercise price and the fair market value of the stock were the same, there is no compensation costs to report and required pro-forma net income and earnings per share are the same as the historical financial statement presentations. 21 24 IBIZ TECHNOLOGY CORP. AND CONSOLIDATED SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JANUARY 31, 2000 (UNAUDITED) NOTE 22 GOING CONCERN These financial statements are presented on the basis that the company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The accompanying financial statement show that the company has incurred net losses of $710,120, has a deficit working capital of $13,668 and a stockholders' deficit of $805,612. In February and March 2000, the company converted $1,200,000 of debentures into common stock. These conversions increased working capital and stockholders' equity. In addition, sales have increased from the purchase of the customer lists. NOTE 23 INVESTOR COMMUNICATION AGREEMENT In December 1999, the company entered into an agreement with an investment company for the purpose of providing investor communications and enhancing shareholder values. The agreement is for one year and requires the following payments by the company: 1. Non-refundable retainer of $50,000. 2. $10,000 per month advisory fee commencing June 1, 2000. 3. Warrants to purchase 75,000 shares of the company's common stock at 120% of the last trade price as of the execution of the agreement and the warrants must be exercised within three years from date of issuance. NOTE 24 FINANCIAL PROJECT MANAGEMENT AGREEMENT In December 1999, the company entered into a six month agreement with Equinet, Inc., the project manager, to promote the growth of, or increase in the shareholder value of the company. The project manager will be compensated as follows: 1. A monthly fee of $3,500 for the first 6 months of the agreement payable in cash or stock. 2. A fee of 1% - 10% based upon the funding received from the project manager's recommendations. 3. In connection with the first $5,000,000 raised by the project manager, the company will issue to the project manager warrants to purchase three shares of common stock for each $20 raised, up to a maximum of 750,000 shares. In the event the first $1,875,000 is received by January 10, 2000, the company will provide Equinet, Inc. a discounted exercise price of $0.99 per share in connection with the warrants issued for these funds. 22 25 IBIZ TECHNOLOGY CORP CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2000 JANUARY 31,1999 (REVIEWED) (UNREVIEWED) ASSETS Current Assets Cash and Cash Equivalents $ 450,757 $ 296,310 Accounts Receivable, Trade 382,637 237,643 Inventories 238,059 274,264 Prepaid Expenses, Other Assets 28,246 20,876 ---------- ---------- Total Current Assets 1,099,699 829,093 Property and Equipment, Net of Accumulated Depreciation 185,182 65,183 Other Assets Note Receivable, Related Party 412,162 544,791 Deposits 16,412 0 Customer List, Net of Accumulated Amortization 11,305 0 ---------- ---------- Total Other Assets 439,879 544,791 TOTAL ASSETS $1,724,760 $1,439,067 ========== ==========
23 26 IBIZ TECHNOLOGY CORP CONSOLIDATED BALANCE SHEETS CONTINUED
JANUARY 31, 2000 JANUARY 31,1999 (REVIEWED) (UNREVIEWED) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable, Trade $ 521,941 $ 826,433 Customer Deposits 30,014 243,655 Notes Payable, Current 6,540 19,580 Accrued Liability 131,890 59,596 Sales and Payroll Taxes Payable 117,606 301,786 Corporation and Income Tax Payable 19,078 17,841 Deferred Income 86,298 80,831 Convertible Debentures Payable 200,000 0 ---------- ---------- Total Current Liabilities 1,113,367 1,549,722 Long-Term Liabilities Convertible Debentures Payable 1,400,000 0 Notes Payable 17,005 339,526 ---------- ---------- Total Long-Term Liabilities 1,417,005 339,526 Stockholders' Deficit Common Stock Authorized - 100,000,000 shares Par value $.001 per share Issued and Outstanding 27,021 24,540 Paid in Capital in Excess of Par Value 1,443,650 179,742 Advances on Stock Subscriptions 75,000 105,000 Retained Earnings (Deficit) (2,351,283) (759,463) ---------- ---------- Total Stockholders' Deficit (805,612) (450,181) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,724,760 $1,439,067 ========== ==========
24 27 IBIZ TECHNOLOGY CORP CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 2000 AND 1999
JANUARY 31, 2000 JANUARY 31,1999 (REVIEWED) (UNREVIEWED) Sales $ 628,853 $ 833,519 Cost of Sales 550,795 721,661 ------------ ------------ Gross Profit 78,058 111,858 Selling, General & Administrative Expense (773,095) 131,007 ------------ ------------ (Loss) Before Other Income (695,037) (19,149) Other Income Interest Income 5,398 0 Interest Expense (20,481) (15,884) Total Other Income, Net (15,083) (15,884) ------------ ------------ (Loss) Before Income Taxes (710,120) (35,033) Income Taxes 0 0 ------------ ------------ Net (Loss) ($ 710,120) ($ 35,033) ============ ============ Net (Loss) per Common Share Outstanding Basic and Diluted (0.03) (0.001) Weighted Average Number of Common Shares Outstanding Basic and Diluted 26,721,059 24,143,201 ============ ============
25 28 IBIZ TECHNOLOGY CORP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 2000 AND 1999
January 31, 1999 January 31, 1999 (reviewed) (unreviewed) ------------------------------------ CASH FLOW STATEMENTS Cash Flows from Operating Activities: Net (Loss) ($710,120) ($ 35,033) Adjustments to Reconcile Net (loss) to Net Cash (used) by Operating Activities Depreciation 10,774 11,353 Deferred Tax 0 (73,085) Interest on Convertible Debentures 1,036 0 Changes in Operating Assets and Liabilities Accounts Receivable, Trade (170,337) (84,107) Inventories 30,028 49,133 Prepaid Expenses and Other Assets 10,738 27,779 Deposits 347 0 Accounts Payable, Trade (241,024) 45,618 Customer Deposits (85,394) (151,609) Accrued Liabilities and Taxes 12,523 42,729 Deferred Income 31,336 9,800 ------------------------------------ Net Cash Flows (Used) by Operating Activities ($1,110,093) ($ 157,422) Cash Flows from Investing Activities: Purchases of Property and Equipment (70,615) 0 Loan to Related Party (55,352) 361,829 Purchase of Customer List (11,900) 0 ------------------------------------ Net Cash Flows (Used) by Investing Activities ($ 137,867) $ 361,829 Cash Flows from Financing Activities: Bank Overdraft 0 (13,700) Net Proceeds from Issuance of Common Stock 137,000 35,000 Proceeds from Issuance of Convertible Debentures 1,600,000 0 Advances on Stock Subscriptions 0 105,000 Decrease in Notes Payable (63,626) (34,597) ------------------------------------ Net Cash Flows Provided by Financing Activities $ 1,673,374 $ 91,703 Net Increase in Cash 425,414 296,110 Cash Balance, November 1, Prior Year 25,343 200 ------------------------------------ ------------------------------------ Cash Balance, January 31, Current Year $ 450,757 $ 296,310 ====================================
26 29 IBIZ TECHNOLOGY CORP CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 2000 AND 1999 CONTINUED
JANUARY 31, 1999 JANUARY 31, 1999 (REVIEWED) (UNREVIEWED) ------------------------------------ Supplemental Disclosure of Cash Flow Information Cash Paid During Year for: Interest $3,787 $15,884 Taxes 0 0 ====================================== Non-cash Investing and Financing Activities Issuance of Common Stock for Investment in INVNSYS Technology Corporation 0 16,000 Issuance of Common Stock for Convertible Debentures 200,000 0
27 30 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Through its operating subsidiary, INVNSYS, iBIZ designs, manufactures, and distributes small footprint desktop computers, transaction printers, general purpose financial application keyboards, numeric keypads, CRT's, LCD monitors and related products. INVNSYS also markets a line of OEM notebook computers and distributes transactional and color printers. iBIZ recently began offering network integration services, digital subscriber line high-speed Internet connection services, and business-to-business software sales. SELECTED FINANCIAL INFORMATION.
Three Month Period Ended --------------------------- 12/31/2000 12/31/99 ---------- -------- Statement of Operations Data Net sales $ 628,853 $ 833,519 Gross profit $ 78,058 $ 111,858 Operating income (loss) $ (695,037) $ (19,149) Net earnings (loss) after tax $ (710,120) $ (35,033) Net earnings (loss) per share $ (0.03) $ (0.001) 12/31/2000 12/31/99 ---------- -------- Balance Sheet Data Total assets $ 1,724,760 $ 1,439,067 Total liabilities $ 2,530,372 $ 1,889,248 Stockholders' equity (deficit) $ (805,612) $ (450,181)
RESULTS OF OPERATIONS. Three month period ended January 31, 2000, compared to three month period ended January 31, 1999. Revenues. Sales decreased by approximately 25% from $833,519 for the three month period ended January 31, 1999 to $628,853 for the three month period ended January 31, 2000. The decrease was mainly as a result of a focus by management on the development of the infrastructure to support new lines of business, acquisitions, Year 2000 hardware and software sales impacts, and traditional markets consolidation. Cost of Sales. The cost of sales decreased by approximately 24% from $721,661 in the three month period ended January 31, 1999 to $550,795 for the three month period ended January 31, 2000. The decrease in cost of sales is attributable to a similar percentage decrease in sales and reflects hardware costs which remained fairly stable over the three month period. Gross Profit. Gross profit decreased from approximately $111,858 for the three month period ended January 31, 1999 to $78,058 for the three month period ended January 31, 2000. The decrease resulted primarily from the decrease in revenues. 28 31 Selling, General and Administrative Expenses. Selling, general and administrative expenses increased approximately 690% from $131,007 to $773,095 for the three month period ended January 31, 2000. The increase was primarily due to business expansion into the Internet, software, broadband and business-to-business sectors, costs of fees paid for capital raising and investor relations, and legal and accounting fees related to registration of the Company's common stock. Interest Expense. Interest expense of $15,083 for the three month period ended January 31, 2000 and of $15,884 for the three month period ended January 31, 1999 was accrued on notes payable to Community First National Bank (primarily extended for working capital purposes). Net Earnings. Net losses increased from $35,033 for the three month period ended January 31, 1999 to $710,120 for the three month period ended January 31, 2000. The increase in losses resulted primarily from a decline in sales and a significant increase in selling, general, and administrative expenses related to the strategic growth initiative. Liquidity and Capital Resources. Historically, iBIZ has had significant problems with liquidity. The Company has been unable to generate sufficient internal cash flow to fund all of its obligations. iBIZ must continue to raise additional funds to support the strategic growth initiatives in progress. Specifically, iBIZ will require additional funding to support its entry into broadband connectivity, its planned development of web-server co-location facilities, and a planned expansion into the application service provider segment of the business-to-business sector. INVNSYS is in an industry subject to rapid obsolescence and change. It must continue to raise additional substantial funds for research and development and production of new products. Effective November 15, 1999, iBIZ and Equinet, Inc. ("Equinet") entered into a Financial Project Management Agreement (the "Agreement"), whereby iBIZ engaged Equinet to implement a program to increase shareholder value through equity investment or a business combination (the "Program"). For the earlier of six (6) months or until completion of the Program, iBIZ is obligated to pay Equinet a monthly fee of $3,500. In addition, iBIZ will pay Equinet a fee on a sliding scale ranging from 10% to 1% of the amount of equity funding raised from investors introduced by Equinet. At its option, iBIZ may elect to pay Equinet in common stock of the Company. As of January 31, 2000, the Company had paid Equinet $188,000 for its introductions to investors. The Company paid investor relation fees to several individuals of approximately $97,000. During the quarter ended January 31, 2000, the Company raised an aggregate of $1,600,000 through issuance of convertible debentures to Globe United Holdings, Inc. ("Globe"). On December 6, 1999, Globe converted $200,000 of the convertible debentures. Pursuant to the applicable conversion formula, iBIZ issued 300,962 shares of common stock to Globe. iBIZ also issued $275,000 of common stock to an individual in January. By letter agreement dated December 14, 1999, iBIZ engaged Josephthal & Co. Inc. ("Josephthal"), to provide financial communication services. iBIZ paid Josephthal a one-time retainer fee of $50,000, and is obligated to pay Josephthal $10,000 per month for advisory fees commencing June 1, 2000. The agreement is effective for a period of one year and may be terminated by either party upon 10 days written notice. 29 32 Management believes that iBIZ now has sufficient reserves and will generate sufficient cash flow from operations to operate through January 31, 2001. However, iBIZ will need to raise additional short term capital to maintain its ongoing business and to fund the strategic growth initiatives currently in progress beyond January 31, 2001. iBIZ is actively seeking to obtain a significant capital infusion to avoid continuing reliance on short term capital sources. Recent option and warrant exercises have also helped increase the capital of the Company. There is no assurance that iBIZ will raise the necessary capital to remain in business beyond January 31, 2001 or that unforeseen events may result in the need for additional capital sooner than January 31, 2001. If at any time iBIZ is unable to raise financing through additional sales of common stock or alternate financing sources, it may be required to delay or modify planned growth initiatives. Management believes that its recent diversification into broadband connectivity services and third-party software sales should improve its liquidity and cash flow. These sectors of its business are currently generating approximately $200,000 per month in sales revenues. There is no assurance, however, that its favorable relationship with its third-party suppliers will continue or that its customers will continue to purchase the broadband connectivity services, hardware and the software packages and upgrades necessary to generate the revenue experienced since January 2000. 30 33 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable ITEM 2 . CHANGES IN SECURITIES (c) Recent Sales of Unregistered Securities In November 1999, iBIZ issued Six Hundred Thousand Dollars ($600,000.00) of 7% Debentures (the "$600k 7% Debentures") to Globe United Holdings, Inc. ("Globe"). Thereafter, in December 1999, iBIZ issued to Globe an additional One Million Dollars ($1,000,000.00) of 7% Debentures (the "$1000k 7% Debentures). On December 6, 1999, Globe converted $200,000 of the $600k 7% Debentures, plus accrued interest to date and on March 2, 2000, Globe converted $1,000,000 of the $1000k 7% Debentures, plus accrued interest to date. Pursuant to the applicable conversion formula, iBIZ issued 300,962 shares of common stock and 1,292,481 shares of common stock, respectively. In connection with the issuance of the $600k 7% Debentures, iBIZ issued a warrant to purchase 100,000 shares of common stock at a purchase price of $0.94 per share. The warrant is immediately exercisable and expires November 9, 2004. In connection with the issuance of the $1000k 7% Debentures, iBIZ issued a warrant to purchase 200,000 shares of common stock at a purchase price of $0.94 per share. The warrant is immediately exercisable and expires December 28, 2004 (collectively the "Warrants"). iBIZ relied upon Regulation D, Rule 506 promulgated under the Securities Act of 1933, as amended (the "Securities Act") with respect to the issuance of the 7% Debentures and the Warrants. On December 8, 1999, iBIZ issued 100,000 shares of common stock, $0.001 par value, at a purchase price of $0.50 per share for a total amount of $50,000. iBIZ relied upon Regulation D, Rule 506 promulgated under the Securities Act with respect to this sale. On December 14, 1999, iBIZ issued a warrant to purchase 75,000 shares of common stock, $0.001 par value, at a purchase price of $1.66 per share. The warrant is immediately exercisable and expires three (3) years from the date of grant. iBIZ relied upon either Section 4(2) or Regulation D, Rule 506 promulgated under the Securities Act with respect to this warrant. On January 7, 2000, iBIZ issued 250,000 shares of common stock, $.001 par value, at a sales price of $1.10 per share for a total amount of $275,000. iBIZ relied upon Regulation D, Rule 506 promulgated under the Securities Act with respect this sale. On January 10, 2000, iBIZ issued warrants to purchase an aggregate of 281,250 shares of common stock at a purchase price of $0.99 per share. The warrant is immediately exercisable and expires December 29, 2004. The warrants have terms of five years and are immediately exercisable. iBIZ relied upon either Section 4(2) or Regulation D, Rule 506 promulgated under the Securities Act with respect these warrants. 31 34 (d) Use of Proceeds from Registration Statement 1. iBIZ has filed a Registration Statement on Form SB-2, File No. 333- 94409 to register 7,144,252 shares of common stock, $0.001 par value (the "SB-2"). The SB-2 was declared effective by the SEC on February 1, 2000 and has been effective through the date hereof. The shares registered in the SB-2 are for resale by iBIZ's securityholders upon exercise of options or warrants. iBIZ will not receive any of the proceeds from the sale of the common stock by the securityholders, but may receive up to $1,007,000 upon the exercise of the options or warrants. In connection with the SB-2, iBIZ incurred fees and expenses of approximately $50,000 related to professional services and filing fees. As of March 15, 2000, the Company had received $390,000 upon the exercise of options or warrants to purchase 520,000 shares of common stock. These funds have been allocated to general working capital. Between December 6, 1999 and March 2, 2000, Globe converted an aggregate of $1,400,000 of iBIZ's 7% Debentures into 1,593,443 shares of common stock. These shares were registered for resale under the SB-2. As a result of the conversion, iBIZ retired debt in the amount of $1,400,000. In addition, upon the effective date of the SB-2, an aggregate of $300,000 of the Company's 8% Convertible Debentures automatically converted to 200,000 shares of common stock. These shares were registered for resale by the securityholders under the SB-2 As a result, iBIZ recognized the retirement of $300,000 of debt on February 24, 2000. 2. On January 27, 2000, iBIZ filed a Registration Statement on Form S-8, File No. 027619, to register 3,025,000 shares of common stock, $0.001 par value (the "S-8"). The S-8 became effective immediately upon filing and has been effective through the date hereof. The shares registered in the S-8 are for resale by iBIZ's employees upon exercise of options. iBIZ will not receive any of the proceeds from the sale of the common stock by the employees, but may receive up to $2,500,000 upon exercise of the options. In connection with the S-8, iBIZ incurred fees and expenses of approximately $12,300 related to professional services and filing fees. As of March 15, 2000, iBIZ had received $45,000 upon exercise of options to purchase an aggregate of 60,000 shares of common stock. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable 32 35 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits 10.24 Letter Agreement dated December 14, 1999, between iBIZ and Josephthal & Co., Inc. 10.25 Financial Project Management Agreement dated January 20, 1999 between iBIZ and Equinet, Inc. 23.03 Consent of Moffitt and Company 27.03 Financial Data Schedule B. Reports on Form 8-K Not Applicable Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated this 16th day of March, 2000 IBIZ TECHNOLOGY CORP., A FLORIDA CORPORATION By: /s/ Kenneth W. Schilling -------------------------------------------- Kenneth W. Schilling, President, Director By: /s/ Terry S. Ratliff -------------------------------------------- Terry S. Ratliff, Vice President, Comptroller, Secretary, Director By: /s/ Mark H. Perkins -------------------------------------------- Mark H. Perkins, Vice President of Operations, Director 33 EX-10.24 2 EX-10.24 1 EXHIBIT 10.24 December 14, 1999 Mr. Ken Schilling President iBIZ Technology Corp. 1919 W. Lone Cactus Dr. Phoenix, AZ. 85027 Dear Ken. This will confirm the understanding and agreement (the "Agreement") between iBIZ Technology Corp. and subsidiaries (the "Company") and Josephthal & Co. Inc. ("Josephthal") as follows: 1. The Company hereby engages Josephthal as the Company's financial communications advisor with respect to advice relating to strategic investor communications, including shareholder profile, enhancing shareholder value and other similar matters. Josephthal shall also assist the Company with increasing Josephthal financial consultants' and the financial community's awareness of the Company and its prospects through the development and implementation of a comprehensive financial communications program (see Exhibit A, for greater detail). 2. This Agreement shall be effective for a period of one year, commencing upon the execution hereof unless earlier terminated on ten days written notice by either party to the other party. 3. In consideration for the services to be rendered by Josephthal to the Company pursuant to this Agreement, upon the execution hereof, the Company shall pay to Josephthal a non-refundable retainer fee of $50,000 upon execution of this agreement; $10,000 per month in advisory fees commencing on June 1, 2000; and issue to Josephthal and/or its affiliated designees, warrants to purchase 75,000 shares of the Company's Common Stock as follows: (i) exercise price shall be at 120% of the last trade price as of the date of execution of this Agreement; and (ii) exercise period shall be at any time within three years from the date of issuance. The terms and conditions of the warrants shall be set forth more fully in a separate warrant agreement to be executed by Josephthal and the Company, and shall give Josephthal and its designees unlimited piggyback registration rights. The warrant shall contain standard dilution provisions for stock combinations and stock splits and a provision allowing for cashless exercise of such warrants. 2 4. The Company shall reimburse Josephthal monthly for reasonable out-of-pocket expenses incurred in connection with the engagement hereunder, promptly as requested. Josephthal shall notify the Company when such expenses exceed a mutually agreed upon budget. Any single expense greater than $500 shall be pre-approved by the Company. 5. Any advice, either oral or written, provided to the Company by Josephthal hereunder shall not be publicly disclosed or made available to third parties without the prior written consent of Josephthal except as required by law. In addition, Josephthal may not be otherwise publicly referred to without its prior consent. 6. The Company recognizes and confirms that in fulfilling its engagement hereunder, Josephthal will use and rely on data, material and other information furnished to Josephthal by the Company. The Company acknowledges and agrees that in performing its services under this engagement, Josephthal may rely upon the data, material and other information supplied by the Company without independently verifying its accuracy, completeness or veracity. The Company represents and warrants to Josephthal that all such information concerning the Company provided to Josephthal by the Company will be true and accurate in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are made. The Company acknowledges and agrees that Josephthal will be using and relying upon such information supplied by the Company and publicly available information concerning the Company without any independent investigation or verification thereof or independent appraisal by Josephthal of the Company or its business or assets. 7. Since Josephthal will be acting on behalf of the Company in connection with this engagement, the Company agrees to indemnify Josephthal as set forth in a separate letter of agreement (Exhibit B), dated the date hereof, between Josephthal and the Company. 8. This Agreement is delivered in the State of New York and shall be construed and enforced in accordance with and governed by, the laws of the State of New York without giving effect to its conflict of law principles. The parties hereto hereby agree that any action, proceeding or claim against it arising out of or in any way related to this Agreement shall be brought and enforced in the courts of the State of New York or the United States of America for the Southern District of New York and irrevocably submits to such exclusive jurisdiction, and hereby irrevocable waives any objection to such exclusive jurisdiction or inconvenient forum. 9. This Agreement may not be amended, modified or waived, except in writing signed by all of the parties hereto. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which when taken together shall constitute one and the same instrument. 3 Josephthal is delighted to accept this engagement and looks forward to working with you on this assignment. If the foregoing correctly sets forth the understanding between Josephthal and the Company with respect to this agreement, please so indicate by signing the enclosed duplicate in the place provided below, whereupon this letter shall constitute a binding agreement as of the date first above written. JOSEPHTHAL & GO. INC. By: ----------------------------------------------- Edmund Belak, Jr. Managing Director Accepted and Agreed: iBIZ Technology Corp. By: -------------------------------------- Ken Schilling President 4 December 21, 1999 Josephthal & Co. Inc. 200 Park Avenue, 25th Floor New York, NY 10166 Attention: Edmund Belak, Jr. Managing Director Investment Banking Gentlemen: In connection with our engagement of Josephthal & Co. Inc. ("Josephthal") pursuant to that certain letter agreement dated December 21, 1999 between iBIZ Technology Corp. and Josephthal (the "Letter Agreement") we hereby agree to indemnify and hold harmless Josephthal and its affiliates, and the respective directors, officers, shareholders, agents and employees of Josephthal (each an "Indemnified Person" and collectively the "Indemnified Persons"), from and against any and all claims, actions, suits, proceedings (including those of shareholders), damages, liabilities and expenses as incurred by any of them (including the reasonable fees and expenses of counsel) which are related to or arise out of (i) any actions taken or omitted to be taken (including any untrue statements made or any statements omitted to be made) by the Company in connection with the Letter Agreement or (ii) any actions taken or omitted to be taken by any Indemnified Person in connection with the Letter Agreement and we shall reimburse any Indemnified Person for all expenses (including the reasonable fees and expenses of counsel) as incurred by such Indemnified Person in connection with Investigating, preparing or defending any such claim, action, suit or proceeding (collectively a "Claim"). We will not, however, be responsible for any Claim or indemnification therefor which is finally determined to have resulted from the gross negligence or willful misconduct of any Indemnified Person or from any breach of the Letter Agreement by Josephthal. We further agree that no Indemnified Person shall have any liability to us for or in connection with our engagement of Josephthal except for any Claim incurred by us as a direct result of any Indemnified Person's gross negligence or willful misconduct. We further agree that we will not, without the prior written consent of Josephthal, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional, irrevocable release of each Indemnified Person hereunder from any and all liability arising out of such Claim. 5 Promptly upon receipt by an Indemnified Person of notice of any complaint or the assertion or institution of any Claim with respect to which indemnification is to be sought hereunder, such Indemnified Person shall promptly notify us in writing of such complaint or of the assertion or institution of such Claim but failure to notify us shall not relieve us from any obligation we may have hereunder, unless and only to the extent such failure to notify results in the forfeiture by us of substantial rights and defenses. If we so elect or are requested by such Indemnified Person, we will assume the defense of such Claim, including the employment of counsel reasonably satisfactory to such Indemnified Person and the payment of the fees and expenses of such counsel and upon such election or request we shall not be liable for any legal costs subsequently incurred by such Indemnified Person. In the event, however, that such Indemnified Person reasonably determines in its sole judgment that having common counsel would present such counsel with a conflict of interest or if the defendant in, or target of, any such Claim, includes an Indemnified Person and us, and such Indemnified Person reasonably concludes that there may be legal defenses available to it or other Indemnified Persons different from or in addition to those available to us, then such Indemnified Person may employ its own separate counsel to represent or defend it in any such Claim and we shall pay the reasonable fees and expenses of such counsel. Notwithstanding anything herein to the contrary, if we fail timely or diligently to defend, contest, or otherwise protect against any Claim, the relevant Indemnified Person shall have the right, but not the obligation, to defend, contest, compromise, settle, assert crossclaims, or counterclaims or otherwise protect against the same, and shall be fully indemnified by us therefor, including without limitation, for the reasonable fees and expenses of its counsel and all amounts paid as a result of such Claim or the compromise or settlement thereof, provided, however that Josephthal shall not settle, compromise or release any claim without our consent or without obtaining an irrevocable release from any and all liability with respect to or arising out of such claim. In any Claim in which we assume the defense, the indemnified Person shall have the right to participate in such Claim and to retain its own counsel therefor at its own expense. If we elect not to assume the defense or we are not so requested by an Indemnified Person, as provided above, the Indemnified Person may assume such defense at the expense of the Company. In any litigation or proceeding, the Company shall not be responsible for the fees and expenses of more than one counsel for all Indemnified Persons in any one jurisdiction, unless such Indemnified Persons have a separate and conflicting defense with regard to such litigation or proceeding as reasonably determined by Counsel for the Indemnified Person. In no event shall we be liable for any settlement of any Claim by an Indemnified Person that has been made without our consent. We agree that if any indemnity sought by an Indemnified Person hereunder is held by a court to be unavailable for any reason, then (whether or not Josephthal is the Indemnified Person), we and Josephthal shall contribute to the Claim for which such indemnity is held unavailable in such proportion as is appropriate to reflect the relative benefits to us, on the one hand, and Josephthal on the other, in connection with Josephthal's 6 engagement referred to above, subject to the limitation that in no event shall the amount of Josephthal's contribution to such Claim exceed the amount of fees actually received by Josephthal from us pursuant to Josephthal's engagement. We hereby agree that the relative benefits to us, on the one hand, and Josephthal on the other, with respect to Josephthal's engagement shall be deemed to be in the same proportion as (a) the total value paid or proposed to be paid or received by us or our stockholders as the case may be, pursuant to the transaction (whether or not consummated) for which you are engaged to render services bears to (b) the fee actually paid to Josephthal in connection with such engagement. Our indemnity, reimbursement and contribution obligations under this Agreement shall be in addition to, and shall in no way limit or otherwise adversely affect any rights that any Indemnified Party may have at law or at equity. Should Josephthal or its personnel be required or requested by us to provide documentary evidence or testimony in connection with any proceeding arising from or relating to the Letter Agreement, we agree to pay all reasonable expenses incurred by Josephthal or its personnel in complying therewith. We and Josephthal, on behalf of itself and the Indemnified Persons, hereby consent to personal jurisdiction and service of process and venue in any court in the State of New York which any claim for indemnity may be brought under this Agreement. Very truly yours, iBIZ Technology Corp., By: --------------------------------------------- Name: Title: Confirmed and agreed to: JOSEPHTHAL & CO. INC. By: ---------------------------------- Name: Title: EX-10.25 3 EX-10.25 1 EXHIBIT 10.25 FINANCIAL PROJECT MANAGEMENT AGREEMENT This Financial Project Management Agreement (the "Agreement"), dated this 20th day of January, 2000, and effective as of November 15, 1999, is entered into by and between EQUINET, INC., a New York corporation (the "Project Manager"), and ibiz Technology Corp., a Florida corporation (the "Company"). The Project Manager and the Company may each be referred to as a "Party" and together the Project Manager and the Company may be referred to as the "Parties." WHEREAS, Company desires to increase its shareholder value and growth through increased capitalization or a business combination; and WHEREAS, after reviewing the Company's business plan with management, Project Manager is sufficiently confident that management's objectives can be achieved; NOW THEREFORE, in consideration of the premises and covenants contained herein, the Parties hereto agree as follows: 1) Responsibilities of Project Manager. Project Manager agrees to implement a program to promote the growth of, or increase the shareholder value of the Company (the "Program"). It is understood that this Program may involve the Company seeking third-party equity funding (the "Funding"), or possible business combination or joint venture (the "Transaction") (collectively the "Corporate Goal"). The Project Manager shall provide the Company with its opinion and recommendations with respect to the most appropriate means of meeting the Corporate Goal, however, the implementation of such recommendations and the acceptance of the Funding and the consummation of any Transaction shall be at the sole and exclusive option of the Board of Directors of the Company. a) Analysis and Review. Project Manager agrees to provide the following services, and such other related services as may be appropriate and required to assist in the Company's efforts to meet the Corporate Goal: i) Conduct summary due diligence and analysis of the Company's operation and financial status to ascertain the legality and feasibility of the Program (the "Recommendation"). Such analysis shall include a critical evaluation of the Information, financial projections and documents delivered to the Project Manager by the Company prior to implementation of the Program, and; ii) Provide the Company with a formal recommendation for implementation of the Program. b) Program Implementation. Upon receipt of formal approval and written authorization from the Company to proceed with the Program ("Program Authorization"), Project Manager shall: 2 i) Advise the Company with respect to the form and structure of the Program; ii) Advise the Company with respect to professional assistance that may be necessary and desirable for the implementation of the Program; iii) Advise the Company with respect to methods of generating public awareness of its business and products and to heighten investor awareness of the Company; iv) Advise the Company with respect to certain corporate partners who may be of strategic importance in the further development of the Company's business; v) Advise the Company with respect to personnel who may be of strategic importance in the further development of the Company's business; vi) Identify and introduce the Company to institutional and other investors who may contribute all or a portion of the Funding or identify potential candidates for the Transaction; and vii) Assist the Company wherever possible with the implementation of each of the above-enumerated steps. 2) Responsibilities of the Company. In connection with the above activities, which will be undertaken by Project Manager on the Company's behalf, the Company shall fully cooperate with the Project Manager in the fulfillment of its duties hereunder, and agrees to the following until such time as a Termination Date has been set: a) Project Manager Introductions. Any investment in the Company from the time of engagement until its expiration will be considered as a result of the work done by the Project Manager if Project Manager first introduced the investors to the Company. b) Access to Information. Furnish all information and data concerning the Company, the transaction, any prior transactions and the Funding (collectively the "Information"), which the Project Manager may request. c) Access to Company Officers and Professionals. Company will provide the Project Manager complete access to the Company's officers, directors, employees, accountants, counsel and other key persons. d) Truthful Representations. The Company represents and warrants that all information (i) made available to the Project Manager and any prospective financing source, or (ii) contained in any materials prepared by the Company will, at all times during this engagement be true, accurate and complete in all material respects and will not contain any untrue statement of a material fact or omit to state therein any fact necessary to make the statements therein not misleading in light of the circumstances under which they are made. The Company further represents that any projections provided to the Project Manager or contained in any materials prepared by or on behalf of the Company with respect to the subject matter thereof will have been prepared in good 3 faith and will be based on assumptions which in light of the circumstances under which they are made at that time were in Company's determination reasonable. e) Responsibility for Representations. The Company acknowledges and agrees that in rendering its services as agreed hereunder, the Project Manager will be using and relying on the Information (and information available from public sources and other sources deemed to be reliable) without independent verification thereof and without independent appraisal of any of the Company's assets. The Project Manager does not assume responsibility for the accuracy or completeness of the Information or any other information regarding the Company the financing the transaction or the Investment Funds. Any advice rendered by the Project Manager pursuant to this agreement may not be disclosed privately or publicly by the Project Manager without the Company's prior written consent. f) Indemnification of Project Manager. If, in connection with the services or matters that are the subject of this Agreement, the Project Manager becomes involved in any capacity in any action or legal proceeding, due to the actions, information, position, assertions, or affirmations put forth by the Company or by the Project Manager at the direction of the Company or in reliance upon material or the Information furnished by the Company, the Company agrees to indemnify and hold harmless the Project Manager as the case may be for the reasonable legal fees of counsel, court costs and other expenses (including the costs of investigation and preparation) incurred. The Company also agrees to hold harmless the Project Manager against any losses, claims, damages or liabilities, joint services or matters which are the subject of this Agreement; provided however that the Company shall not be liable in respect of any loss, claim damages or liability to the extent and only to the extent that such loss claim damage or liability resulted from the gross negligence or willful misconduct of the Project Manager. The provisions of this paragraph shall survive the expiration of the period of this agreement including any extensions their of set forth herein. g) Implementation of Program. In the event that Company provides Program Authorization to Project Manager, Company agrees to: i) Allocate the services of its Chief Executive Officer and Chief Financial Officer, and engage such other outside professionals as are required to the successfully implement and complete each task associated with the Program, pursuant to the Project Manager's recommendation, unless modified in writing by the mutual consent of the Parties; and ii) Issue such compensation as is required by Project Manager and such other outside professionals as engaged pursuant to this Agreement, so as to cause timely implementation of the Program pursuant to the Project Manager's recommendation, unless modified in writing by the mutual consent of the Parties. 3) Compensation. In consideration for the services that are to be provided by Project Manager under this Agreement, the Company agrees to compensate the Project Manager as follows: 4 a) Analysis and Review Services. Customer will pay to the Project Manager a non-refundable engagement fee of Zero Dollars ($0) payable upon the execution of this Agreement, and Zero Dollars ($0) payable upon presentation of the Recommendations to the Company by Project Manager. b) Program Implementation: Funding Scenario. In the event that the Program entails Funding originating from investors first introduced by Project Manager, and upon receipt and acceptance of the Funding by Company, and concurrent to all other closing fees, the Company shall pay the Project Manager a fee described in the tables below:
------------------------------------------------------------------------------- Amount of Funding Fee rate Maximum fee ------------------------------------------------------------------------------- Up to $2,100,000 10% $210,000 $2,100,001 to $5,000,000 6% $300,000 $5,000,001 to $20,000,000 5% $1,000,000 $20,000,001 to $50,000,000 3% $1,500,000 Above $50,000,000 1% N/A -------------------------------------------------------------------------------
c) [Reserved]. d) Consultation. For a period of 6 months from the date of this Agreement or until completion of the Program, whichever occurs first, Project Manager shall be entitled to a cash fee of $3,500 per month. Such fees shall be payable upon execution of this Agreement, and shall be payable on the first of each month thereafter. The Company may accrue monthly payments until the closing of the financing following the signing of this agreement, which for the purpose of computing accrued payments shall be deemed to be December 1, 1999 (the "Inaugural Date"). e) Stock in Lieu of Cash Compensation. In the sole discretion of the Company, the Company may elect to compensate the Project Manager in common stock of the Company, which the Project Manager hereby agrees to accept. If the common stock of the Company at the time of compensation is "restricted" (as that term is defined in the Securities Act of 1933), then the Company shall issue that number of shares having a value equal to twice the value of cash compensation then due; and if the common stock of the Company at the time of compensation is "registered" (as that term is defined in the Securities Act of 1933), then the Company shall issue that number of shares having a value equal to the value of cash compensation then due. The value of the stock at the time of compensation shall be the average closing price shown on the electronic bulletin board or other public trading forum for the immediately preceding ten (10) business days (referred to herein as "Calculated Valuation Price"). f) Expenses. The Company shall reimburse Project Manager for all reasonable and customary out-of-pocket expenses incurred in connection with the provision of services pursuant to the terms of this Agreement; provided however, that no expense in excess of One Hundred Fifty Dollars ($150) will be incurred without the Company's prior approval, in which case and to the extent practicable, such expenses shall be paid in advance. These expenses include but are not limited to all printing, 5 telephone, mailing, reproduction, word processing, travel (including air travel), and lodging expenses. Such fees shall be calculated and reimbursed on a monthly basis. g) Warrant Grants. In connection with first $5,000,000 of Funding raised by the Project Manager, the Company shall grant to the Project Manager warrants to purchase three (3) shares of the Company's common stock for each Twenty Dollars ($20) of Funding raised, up to a maximum of 750,000 shares. The Company shall issue the warrants to the Project Manager concurrently with the closing of each Funding. By way of example, concurrent with the closing of Funding in the amount of $500,000, the Company shall issue warrants to purchase 75,000 shares to the Project Manager. The exercise price of the warrants shall be the Calculated Valuation Price as of the date of closing of the Funding. The warrants shall have a term of five (5) years and the common stock underlying the warrants shall have piggyback registration rights on the first available registration statement appropriate for the registration of the underlying common stock filed after January 31, 2000. The Company shall not be required to issue warrants to purchase fractional shares of common stock. As to any warrant to purchase a fraction of a share to which the Project Manager would otherwise be entitled, the Company shall pay a cash adjustment in respect to such final fraction in an amount equal to the same fraction of the Calculated Valuation Price per share of common stock on the date of issuance of the warrant. The number of warrants issuable to the Project Manager as of the date of this Agreement are listed on Schedule A attached hereto. When appropriate, public statements issued by the Company shall identify the Project Manager by name and state that: (i) the Company is public; and (ii) the Company has been assisted by the Project Manager in its transition from private to public ownership. 4) Confidentiality. Except to the extent necessary to perform its obligations hereunder or to comply with any applicable law, regulation or rule, neither Party shall disclose or divulge to any third party other than the other Party's directors, officers, auditor, or legal project managers, either before or after the termination of this letter agreement, any document or information exchanged between the Parties during the term of this Agreement without prior written consent of the other party, which consent shall not unreasonably withheld. 5) Use of Advice and Recommendations. Neither the Recommendations or any advice, whether oral or in writing, and no other material prepared for Company in connection with the Project Manager' services hereunder is to be used for any purpose other than the purpose for which such report, advice or material was prepared, or is to be used or referred to by Company in any public documents or otherwise publicly referred to without the Project Manager' written consent. Notwithstanding the foregoing sentence, in the event that Company receives a request to disclose all or any part of the Information contained in any such report, advice or material under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction, Company may disclose such information provided that Company notifies the Project Manager of the existence, terms and circumstances surrounding such request. 6) Non-Circumvention. The Company hereby irrevocably agree not to circumvent, avoid or bypass the Project Manager, either directly or indirectly, in order to avoid payments of fees or commissions, or otherwise benefit, either financially or otherwise, from information supplied to it or individuals and or business entities introduced to it by the Project 6 Manager with regard to any financial transaction, sale of securities, business combination or joint venture under discussion, in that the Company will not contact persons or entities on the acknowledged Contact List. The "Contact List" is a list of persons or entities that the Project Manager will present to the Company on a monthly basis listing those persons with whom the Project Manager has negotiated on behalf of the Company, which list will be effective to limit the Company when acknowledged by the Company, which acknowledgement shall not be unreasonably withheld. The spirit of mutual trust and confidence shall be the underlying principle of this undertaking and the Parties agree to adhere thereto. 7) Termination. Unless otherwise agreed in writing or terminated earlier pursuant to this Section 7, this Agreement will terminate six (6) months from the Inaugural Date (the "Expected Termination Date"). The "Termination Date" shall be the earlier of: (i) the date set by the Parties pursuant to this Section 7; or (ii) the Expected Termination Date. a) Termination by Project Manager. It is hereby agreed and understood that the Project Manager shall have the right to interview the Company and accomplish a due diligence review with respect to the Company's representations and that at the Project Manager's sole discretion if such interviews and due diligence demonstrate substantive and material discrepancies from that which was put forth by the Company, then the Project Manager shall have the right to terminate this agreement and be held harmless from any claims of the Company for such termination as well as from any claims of third parties which may result from any such discrepancy. In the event that the Project Manager is unable to perform its responsibilities under this agreement due to the failure of the Company to perform its responsibilities hereunder the Project Manager shall be released from its responsibilities under this agreement and shall accept the compensation then due and owing in full satisfaction of Project Manager's claims against the Company. b) Termination by Company. The Company may terminate this agreement at any time after (i) the submission of the Recommendations to the Company by the Project Manager and submission to Project Manager of written notice to terminate by Company; (ii) the Recommendations have not been successfully achieved after the period of one hundred and twenty (120) days has elapsed from the date that Program Authorization was submitted to the Project Manager; or (iii) for cause. In the event that at time of such termination the Company shall be in discussions with underwriters or investors or parties to the Transaction that are introduced by the Project Managers, the Project Manager will maintain the exclusive right to conclude the Funding or the Transaction with any or all of such parties, under the terms of this Agreement. In the event that the Company acquires the Funding after terminating this agreement from any party, which has been introduced to the Company by the Project Manager, the Company will pay to the Project Manager the applicable fee or fees referenced in Section 3 hereof. In case of termination, except termination for cause, the Project Manager will receive full reimbursement for the entire amount of expenses incurred by Project Manager in connection with its services pursuant to this Agreement. c) Termination for Cause. For the purposes of this engagement, notwithstanding anything to the contrary hereto, "Cause" shall mean (i) misrepresentation 7 of a material fact in connection with the duties to be preformed by the Project Manager; (ii) continuing inattention to or neglect of the duties to be preformed by the Project Manager which remains unremedied for fifteen business days following written notice by certified mail from Company to the Project Manager; (iii) an adjudication in a civil or criminal proceeding or an arbitral decision that the Project Manager, or any of its officers or directors, has committed a fraud or felony; (iv) a breach of this Agreement by the Project Manager; or (v) gross negligence or willful misconduct by the Project Manager. If the Company terminates this Agreement for Cause, the Project Manager will not be entitled to any further fees of any character from the Company under any circumstances. 8) Securities Laws. The Parties to this agreement mutually agree to comply with any and all applicable securities laws in their efforts to secure funds for the Company. 9) Miscellaneous Provisions. a) Notices. All notices, requests, demands and other communications to be given hereunder shall be in writing and shall be deemed to have been duly given on the date of personal service or transmission by fax if such transmission is received during the normal business hours of the addressee, or on the first business day after sending the same by overnight courier service or by telegram, or on the third business day after mailing the same by first class mail, or on the day of receipt if sent by certified or registered mail, addressed as set forth below, or at such other address as any Party may hereafter indicate by notice delivered as set forth in this Section 9(a): If to the Project Manager: EQUINET, INC. 305 W. 50th Street, Suite 2 New York, New York 10019 Attention: Gregg Davis If to the Company: IBIZ TECHNOLOGY CORP. 1919 West Lone Cactus Phoenix, Arizona 85021 Attention: Kenneth Schilling b) Binding Agreement; Assignment. This Agreement shall constitute the binding agreement of the Parties hereto, enforceable against each of them in accordance with its terms. This Agreement may not be assigned except by the express written consent of the Company. c) Entire Agreement. This Agreement constitutes the entire and final agreement and understanding between the Parties with respect to the subject matter hereof and the transactions contemplated hereby, and supersedes any and all prior oral or written agreements, statements, representations, warranties or understandings between the Parties, all of which are merged herein and superseded hereby. Notwithstanding the foregoing, the Company and the Project Manager agree and acknowledge that the transactions contemplated by this Agreement shall be subject to the terms of those certain 8 Securities Purchase Agreements dated November 9, 1999 and December 29, 1999, and their respective related agreements, between the Company and Globe United Holdings, Inc. d) Waiver. No waiver of any provision of this Agreement shall be deemed to be or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the Party making the waiver. e) Headings. The headings provided herein are for convenience only and shall have no force or effect upon the construction or interpretation of any provision hereof. f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. g) Further Documents and Acts. Each Party agrees to execute such other and further documents and to perform such other and further acts as may be reasonably necessary to carry out the purposes and provisions of this Agreement. h) Governing Law; Venue. THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ENFORCEMENT thereof, SHALL BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. PROJECT MANAGER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF THE COMPANY, IN ANY OTHER COURT IN WHICH THE COMPANY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. PROJECT MANAGER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE. PROJECT MANAGER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO PROJECT MANAGER AT THE ADDRESS SET FORTH BELOW ITS SIGNATURE HERETO AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO PROJECT MANAGER'S ADDRESS. PROJECT MANAGER FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT. i) Attorneys; Drafting. The Project Manager has not retained any independent professionals to review or comment on this Agreement or otherwise protect the interests of the Company. Each Party further agrees and acknowledges that this Agreement represents the respective understandings of such Parties as negotiated between 9 them, and no ambiguity or other aspect of this Agreement shall be construed against any Party solely by virtue of the drafting or presentment of this Agreement. Each Party has been advised to speak with legal and accounting professionals to understand the legal and tax implications and impact of the transactions contemplated hereby, and neither Party has relied upon the other, the Company, or their respective counsel in connection therewith. j) Severable Provisions. The provisions of this Agreement are severable, and if any one or more provisions is determined to be illegal, indefinite, invalid or otherwise unenforceable, in whole or in part, by any court of competent jurisdiction, then the remaining provisions of this Agreement and any partially unenforceable provisions to the extent enforceable in the pertinent jurisdiction, shall continue in full force and effect and shall be binding and enforceable on the Parties. k) Survival. Neither termination nor completion shall affect the provisions of paragraphs 2(d), 2(f), 4, 5, 6, 8 AND 9 hereof and the indemnification and non-circumvention provisions which are incorporated therein, which shall remain operative and in full force and effect for a period of two years subsequent to the Termination Date. l) Facsimile Copies. It is agreed that an executed facsimile or copy of this document is a legal and biding contract with the same force and effect as the original. [Signatures on following page] IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written. PROJECT MANAGER EQUINET, Inc., a New York corporation By: -------------------------------------------- Greg Davis, President THE COMPANY iBIZ TECHNOLOGY CORP., a Florida corporation By: -------------------------------------------- Name: ------------------------------------------ Its: ------------------------------------------- 10 SCHEDULE A WARRANTS ISSUABLE AS OF JANUARY 20, 2000
Funding Source Funding Amount Warrant Shares Exercise Price - -------------- -------------- -------------- -------------- Globe United Holdings, Inc. $600,000 90,000 $0.99 $1,000,000 150,000 $1.46 Blaine Ruzycki $275,000 41,250 $1.45
EX-23.03 4 EX-23.03 1 Moffitt & Company, P.C. - -------------------------------------------------------------------------------- Certified Public Accountants 5040 East Shea Blvd. Suite 270 Scottsdale, Arizona 85254 (480) 951-1416 Fax (480) 948-3510 moffittcpas@uswest.net March 15, 2000 IBIZ Technology Corp. and Subsidiary 1919 W. Lone Cactus Drive Phoenix, AZ 85027 We herewith consent to the incorporation of our January 31, 2000 reviewed financial statements in the January 31, 2000 Form 10-QSB and all amendments thereto filed with the Securities and Exchange Commission. Sincerely, /s/ Moffitt & Company, P.C. MOFFITT & COMPANY, P.C. Scottsdale, AZ EX-27.03 5 EX-27.03
5 3-MOS 3-MOS OCT-31-1999 OCT-31-1998 JAN-31-2000 JAN-31-1999 450,757 296,310 0 0 407,637 240,143 25,000 2,500 238,059 274,264 1,099,699 829,093 339,546 216,347 154,364 151,164 1,724,760 1,439,067 1,113,367 1,549,722 0 0 0 0 0 0 27,021 24,540 (832,633) (474,721) 1,724,760 1,439,067 628,853 833,519 634,251 833,519 550,795 721,661 550,795 721,661 773,095 131,007 0 0 20,481 15,884 (710,120) (35,033) 0 0 (710,120) (35,033) 0 0 0 0 0 0 (710,120) (35,033) (0.03) (0.001) 0 0
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