-----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, E0Y3Vxug8y1YcHEAWEoFUymZCkwysSo+aUgOJIcBblj+2b44ZBPHcd3IFnq9p9Uc TM5pMmRJ3rLBKmC/Gv9EQA== 0001144204-04-020880.txt : 20041202 0001144204-04-020880.hdr.sgml : 20041202 20041202134327 ACCESSION NUMBER: 0001144204-04-020880 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040131 FILED AS OF DATE: 20041202 DATE AS OF CHANGE: 20041202 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27619 FILM NUMBER: 041179932 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/A 1 v09498_10qsba3.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A3 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED JANUARY 31, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 -------------------- IBIZ TECHNOLOGY CORP. (Exact name of small business registrant as specified in its charter) COMMISSION FILE NUMBER 000-027619 FLORIDA 86-0933890 ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2238 West Lone Cactus Drive, #200, Phoenix, Arizona 85021 (Address of principal executive offices) (623) 492-9200 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: YES X NO --- --- As of March 15, 2004, the registrant had 2,565,805,769 shares of its $.001 par value common stock outstanding. Transitional Small Business Disclosure Format: YES NO X --- --- IBIZ TECHNOLOGY CORP. INDEX TO QUARTERLY REPORT ON FORM 10-QSB FOR THE FISCAL QUARTER ENDED JANUARY 31, 2004
PART I. FINANCIAL INFORMATION Page ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of January 31, 2004 (Unaudited) and October 31, 2003 (Audited).......................................................................1 Condensed Consolidated Statements of Loss for the Three Months Ended January 31, 2004 and 2003 (Unaudited)................................................................2 Condensed Consolidated Statement of Changes in Stockholders' Deficit for the Three Months Ended January 31, 2004 (Unaudited)......................................................3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2004 and 2003 (Unaudited)...............................................................4 Notes to Interim Condensed Consolidated Financial Statements (Unaudited).................................6 ITEM 2. OUR MANAGEMENT'S DISCUSSION AND ANALYSIS...........................................................12 ITEM 3. OUR CONTROLS AND PROCEDURES........................................................................19 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS..................................................................................19 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................................................19 ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................................................20 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................20 ITEM 5. OTHER INFORMATION..................................................................................20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................................20 SIGNATURES..................................................................................................21
i IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 31, OCTOBER 31, 2004 2003 (UNAUDITED AND (AUDITED) RESTATED) ------------ ------------ ASSETS Current assets: Cash ................................................................... $ 262,649 $ 2,140 Restricted cash equivalent ............................................. 10,000 10,000 Accounts receivable, net ............................................... 48,995 111,322 Inventories, net (Note 4) .............................................. 62,228 43,842 Prepaid expenses ....................................................... 129,128 24,057 ------------ ------------ Total current assets ...................................................... 513,000 191,361 Property and equipment, net ............................................... 59,851 63,329 Patents, net .............................................................. 53,130 -- Intellectual property rights, net ......................................... 55,455 61,000 Deposits .................................................................. 2,500 2,500 Note receivable from officer, net ......................................... -- -- ------------ ------------ Total assets .............................................................. $ 683,936 $ 318,190 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable ....................................................... $ 679,784 $ 581,637 Accrued liabilities (Note 7) ........................................... 1,376,830 2,306,911 Deferred income ........................................................ -- 5,570 Notes payable .......................................................... 99,990 124,920 Current maturities of debentures (Note 9) .............................. 2,152,297 3,265,837 ------------ ------------ Total current liabilities ................................................. 4,308,901 6,284,875 Convertible debentures .................................................... 467,000 750,000 ------------ ------------ Total liabilities ......................................................... 4,775,901 7,034,875 ------------ ------------ Commitments and contingencies (Notes 14and 15) Stockholders' deficit (Note 10): Preferred stock, $.001 par value; 50,000,000 shares authorized; none issued or outstanding ................................................ -- -- Common stock, $.001 par value; 5,000,000,000 shares authorized; 2,273,572,909 and 649,893,721 issued and outstanding, respectively ... 2,273,573 649,894 Common stock to be issued (Note 5) .................................... 1,200,000 -- Additional paid-in capital ............................................. 23,580,291 17,431,753 Accumulated deficit .................................................... (31,145,829) (24,798,332) ------------ ------------ Total stockholders' deficit ............................................... (4,091,965) (6,716,685) ------------ ------------ Total liabilities and stockholders' deficit ............................... $ 683,936 $ 318,190 ============ ============ The accompanying notes are an integral part of these condensed consolidated financial statements.
1 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)
THREE MONTHS ENDED ---------------------------------- JANUARY 31, JANUARY 31, 2004 2003 (RESTATED) --------------- --------------- Revenues: Net product sales ......................................................... $ 152,216 $ 65,879 Maintenance services ...................................................... 9,733 9,431 --------------- --------------- Total revenues .................................................................. 161,949 75,310 --------------- --------------- Cost of revenues: Cost of product sales ..................................................... 113,038 86,174 Cost of maintenance services .............................................. 8,707 5,561 --------------- --------------- Total cost of revenues .......................................................... 121,745 91,735 --------------- --------------- Gross income (loss) ............................................................. 40,204 (16,425) Operating expenses: Selling, general and administrative ....................................... 380,149 441,229 Officer bonuses ........................................................... -- -- Research and development .................................................. -- -- Acquired in-process research and development (Notes 4 and 5) ......................................................... 1,200,000 -- Consulting fees paid in stock options (Note 7) ............................ 4,770,000 -- --------------- --------------- Total operating expenses ........................................................ 6,350,149 441,229 --------------- --------------- Loss from operations ............................................................ (6,309,945) (457,654) Non-operating income (expenses): Miscellaneous income (Note 8) ............................................. 64,728 -- Interest and financing expenses (Note 9) .................................. (102,280) (920,350) --------------- --------------- Total non-operating (expenses) income, net ...................................... (37,552) (920,350) --------------- --------------- --------------- --------------- Net loss ........................................................................ $ (6,347,497) $ (1,378,004) =============== =============== --------------- --------------- Net loss per common share - Basic and diluted (Note 3) .......................... $ (0.00) $ (0.02) =============== =============== Weighted average number of common shares outstanding - Basic and diluted (Note 3) 1,405,453,312 59,250,249 =============== ===============
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE MONTHS ENDED JANUARY 31, 2004 (UNAUDITED)
Common Stock Common Stock To Be Issued Additional -------------------------- ------------------------- Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total ------------- ---------- ---------- ------------ ----------- -------------- ----------- BALANCE, October 31, 2003 649,893,721 $ 649,894 $17,431,753 $ (24,798,332) $(6,716,685) Common stock issued upon exercise of options 86,950,000 86,950 647,473 734,423 Common stock issued for services received and in settlement of liabilities 102,108,108 102,108 102,352 204,460 Common stock issued to officers and other employees as bonuses 398,620,692 398,621 179,379 578,000 Common stock issued upon conversion of debentures and accrued interest, net of related issuance costs 1,036,000,388 1,036,000 449,334 1,485,334 Acquisition of Synosphere, LLC 30,000,000 $ 1,200,000 1,200,000 Value assigned to Services received in exchange for options 4,770,000 4,770,000 Net loss (6,347,497) (6,347,497) ------------- ---------- ---------- ------------ ----------- -------------- ----------- BALANCE, January 31, 2004 2,273,572,909 $2,273,573 30,000,000 $ 1,200,000 $23,580,291 $ (31,145,829) $(4,091,965) ============= ========== ========== ============ =========== ============== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED ---------------------------- JANUARY 31, JANUARY 31, 2004 2003 ----------- ----------- (RESTATED) Cash flows from operating activities: Net loss ........................................................... $(6,347,497) $(1,378,004) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ................................... 24,527 5,468 Provisions for sales returns, rebates and doubtful accounts ..... 3,100 3,099 Acquired in-process research and development (Notes 4 and 5) .... 1,200,000 -- Services received in exchange for common stock (Note 10) ........ 45,698 123,768 Services received in exchange for common stock options (Note 10) 4,770,000 -- Beneficial conversion feature of convertible debentures ......... -- 837,998 Gains on settlements of debenture obligations (Note 12) ......... (62,728) -- Gain on disposal of fixed asset ................................. (2,000) Net changes in assets and liabilities: Accounts receivable ............................................. 59,227 (21,077) Inventories ..................................................... (18,386) (37,070) Prepaid expenses ................................................ 5,785 (18,000) Accounts payable and accrued liabilities ........................ (158,710) 258,479 ----------- ----------- Net cash used in operating activities ................................. (480,984) (225,339) ----------- ----------- Cash flows from investing activities-Proceeds form sale of fixed asset 2,000 -- ----------- ----------- Cash flows from financing activities: Net proceeds from issuances of convertible debentures .............. -- 360,000 Net proceeds from exercises of common stock options ................ 734,423 -- Proceeds from note payable ........................................ 9,990 -- Principal payments on notes payable ................................ (4,920) (419) ----------- ----------- Net cash provided by financing activities ............................. 739,493 359,581 ----------- ----------- Net increase (decrease) in cash and cash equivalents .................. 260,509 134,242 Cash at beginning of period ........................................... 2,140 948 ----------- ----------- Cash at end of period ................................................. $ 262,649 $ 135,190 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
THREE MONTHS ENDED ------------------------- JANUARY 31, JANUARY 31, 2004 2003 ---------- ---------- (RESTATED) Supplemental schedule of cash activities: Interest paid in cash ........................................... $ 9,987 $ 2,334 Supplemental schedule of non-cash investing and financing activities: Debenture principal and accrued interest thereon converted to common stock .............................................................. $1,482,308 $ 58,681 Issuance of common stock in settlement of: Fees, services and expenses (including prepaid consulting ....... $ 172,058 $ 123,768 contract) Accounts payable and accrued expenses ........................... $ 121,193 $ 1,870 Accrued employee bonuses ........................................ $ 578,000 $ -- Consulting fees paid with common stock options ..................... $4,770,000 $ --
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS, ORGANIZATIONAL STRUCTURE AND PRINCIPLES OF CONSOLIDATION iBIZ Technology Corp., together with its wholly-owned subsidiaries (hereinafter "the Company"), a Florida corporation, headquartered in Phoenix, Arizona, is primarily a marketer and distributor of various accessories primarily intended for use with Personal Digital Assistants ("PDAs"). The Company conducts substantially all of its operations through its wholly-owned subsidiary, iBIZ, Inc. The Company's other wholly-owned subsidiaries, Invnsys Technology Corporation and Qhost, Inc. have been inactive since their respective operations were discontinued in prior fiscal years. 2. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Fiscal Periods The Company's fiscal year-end is October 31. References to a fiscal year refer to the calendar year in which such fiscal year ends. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company's historical results as well as management's future expectations. The Company's actual results could vary materially from management's estimates and assumptions. Reclassifications Certain amounts in the condensed consolidated financial statements for the comparative prior fiscal periods have been reclassified to be consistent with the current fiscal period's presentation. Preparation of Interim Condensed Consolidated Financial Statements These interim condensed consolidated financial statements for the periods ended January 31, 2004 have been prepared by the Company's management, without audit, in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). In the opinion of management, these interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, unless otherwise noted) necessary to present fairly the Company's consolidated financial position, results of operations and cash flows for the fiscal periods presented. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in these interim consolidated financial statements pursuant to the SEC's rules and regulations, although the Company's management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial position, results of operations and cash flows for the interim periods disclosed herein are not necessarily indicative of future financial results. These interim condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company's most recent Annual Report on Form 10-KSB, as amended, for the fiscal year ended October 31, 2003. 6 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Net Loss Per Share Basic and diluted net loss per share has been computed by dividing net loss by the weighted average number of common shares outstanding during the applicable fiscal period. At January 31, 2004 and 2003, the Company had outstanding commitments to issue preferred shares (See Note 10), outstanding debentures for which the holders have unilateral rights to convert the unpaid principal, and any accrued interest thereon, into common shares, and outstanding stock purchase warrants and options for which the holders have unilateral rights to exercise into common shares. However, as the effect of their inclusion would be anti-dilutive given the net losses reported herein, these potential additional common shares have been excluded from the computation of net loss per common share - diluted. Should the Company report net income in a future fiscal period, net income per common share -diluted will be separately computed and disclosed giving effect to the potential dilution that would result if the then committed and outstanding preferred shares and debentures were converted, and the then outstanding stock purchase warrants and options were exercised, into common shares. At January 31, 2004, an aggregate of 40.1 million additional common shares were potentially issuable pursuant to outstanding financial instruments that have fixed conversion and exercise prices. However, as the conversion and exercise prices of certain outstanding financial instruments will not be established until their respective conversion and exercise dates, if ever, the maximum aggregate amount of potentially issuable common shares as of January 31, 2004 is not currently determinable. Segment Reporting The Company's chief operating decision makers consist of members of senior management that work together to allocate resources to, and assess the performance of, the Company's business. Senior management currently manages the Company's business, assesses its performance, and allocates its resources as a single operating segment. To date, the Company's products and services have been principally marketed to customers residing within the United States of America. Net revenues realized from customers residing in other geographic markets were less than ten percent of consolidated net revenues for the interim fiscal periods reported herein. Recently Issued Accounting Standards Not Yet Adopted There are no accounting standards with pending adoptions that have any applicability to the Company. 3. RESTATEMENT OF PREVIOUSLY REPORTED FISCAL 2004 INTERIM FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements have been restated to correct an error in the condensed consolidated financial statements that were included in the Company's Form 10-QSB for the fiscal 2004 first quarter ended January 31, 2004 as filed with the U.S. Securities and Exchange Commission ("SEC"). The detail of this restatement follows: The restatement pertains to the accounting previously applied by the Company to its January 20, 2004 acquisition of Synosphere, LLC (See Note 5 for further details). As previously reported, certain acquired technology-related assets with an aggregate assigned fair value of $1,200,000 were initially capitalized and reflected as Patents and Technology on the Company's post-acquisition interim condensed consolidated balance sheet at January 31, 2004. Subsequently, it was determined by the Company's management that the technological feasibility of these acquired assets had, in fact, not been sufficiently established prior to the acquisition date in order to justify their capitalization. As restated herein, these previously reported acquired assets have been eliminated from the Company's interim condensed consolidated balance sheet at January 31, 2004 and instead immediately expensed as acquired in-process research and development as now reflected in the Company's interim condensed consolidated statement of loss for the three months ended January 31, 2004. 7 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. ACQUISITION OF SYNOSPHERE, LLC On January 20, 2004, the Company acquired all of the outstanding membership interests in Synosphere, LLC ("Synosphere"), a Texas limited liability company pursuing the development of certain handheld computer technologies, in exchange for 30.0 million shares of its common stock with an aggregate value of $1,200,000 based on the immediately preceding closing bid price of its common stock (See Note 4 for details regarding the related purchase accounting applied). A subsequent addendum to the acquisition agreement permitted certain of Synosphere's shareholders to elect to receive cash in lieu of common shares. 5. ACCRUED LIABILITIES Accrued liabilities consist of the following:
JANUARY 31, OCTOBER 31, 2004 2003 ---------- ---------- Accrued wages, benefits and payroll taxes ................. $ 632,490 $ 915,040 Accrued interest .......................................... 685,195 741,398 Accrued officer bonuses ................................... -- 578,000 Accrued sales commissions and vendor royalties ............ 36,732 53,445 Taxes ..................................................... 19,300 19,028 Accrued customer deposits ................................. 3,113 -- ---------- ---------- Total accrued liabilities ................................. $1,376,830 $2,306,911 ========== ==========
The Company remains liable to the U.S. Internal Revenue Service ("IRS") for approximately $65,000 in unpaid payroll taxes, and subsequently assessed interest, for certain periods through its first quarter of 1999. The Company has continued to accrue for this liability in its consolidated financial statements. It is management's intention to seek a reduced settlement of this liability with the IRS, if and when, the Company has surplus working capital allowing it to timely honor any such settlement. As of January 31, 2004, the IRS had not yet assessed, nor has the Company accrued for, any related penalties. 6. CONVERTIBLE DEBENTURES The Company's outstanding convertible debentures consist of the following at January 31, 2004: - ---------------------------------------------------- DEBENTURE HOLDER AMOUNT - ---------------------------------------------------- Keshet L.P. $ 988,843 Lites Trading Co. 467,000 Laurus Master Fund 307,701 Keshet Fund L.P. 201,941 AJW Offshore, Ltd. 177,160 Alpha capital Alktiengesellschaft 155,000 Talbiya B. Investments Ltd. 94,562 Celest Trust Reg 80,075 AJW Partners LLC 72,160 AJW Qualified Partners, Ltd. 63,830 Esquire Trade & Finance 11,025 - ---------------------------------------------------- Total 2,619,297 Current Maturities (2,152,297) - ---------------------------------------------------- Long Term $ 467,000 - ---------------------------------------------------- 8 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. CONVERTIBLE DEBENTURES (CONTINUED) During the three-month period ended January 31, 2004, the Company issued 1,036,000,388 shares of its common stock in conversion of $1,422,793 in principal and $88,791 of accrued interest, net of $26,250 in costs and $67,728 in gains on settlement of the conversion. The remaining convertible debentures were due on October 31, 2003. The holders have made no demand for payment. 7. STOCKHOLDERS' DEFICIT Preferred Stock Committed for Issuance On December 20, 2001, the Company's Board of Directors authorized the issuance of 3,500,000 shares of preferred stock to one former director in satisfaction of a retention incentive and three officers (including one former officer) in satisfaction of annual bonuses and retention incentives. These preferred shares have been reserved although not yet issued. If and when issued, each of these preferred shares will immediately entitle the holder to cast votes equivalent to one-hundred common shares, or, at their election, to subsequently convert each preferred share into ten common shares. The Board of Directors has not yet designated any other rights to these preferred shares, including, but not limited to, dividend and liquidation rights. Common Stock Issued for Services Received and in Settlement of Liabilities During the three months ended January 31, 2004, the Company issued shares of its common stock for services received and in settlement of liabilities as follows: November 2003 o 10 million shares valued at $37,000 for legal services provided by Greg Sichenzia. o 9.6 million shares valued at $35,425 to various creditors in satisfaction of their outstanding amounts due. o 0.5 million shares valued at $1,975 to a company that provided edgarizing and related services during the quarter ended January 31, 2004. o 1.0 million shares valued at $3,700 to a company for marketing services during the quarter ended January 31, 2004. December 2003 o 81.0 million shares valued at $126,360 in accordance with a one year consulting contract with D. Scott Elliott for merger and acquisition services. Common Stock Issued to Officers and Other Employees as Bonuses December 2003 o 204,482,763 shares valued at $296,500 in partial settlement of accrued bonuses at October 31, 2003 to officers and employees. January 2004 o 194,137,931 shares of our common stock in final settlement of $281,500 in accrued bonus at October 31, 2003. 9 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. STOCKHOLDERS' DEFICIT (CONTINUED) Stock Options and Warrants During the three months ending January 31, 2004, the Company granted stock options to individuals in exchange for the following consulting services: November 2003 o Options valued at $260,000 to purchase 200 million shares of common stock (at a 40% discount from market, as defined) were issued to D. Scott Elliott for general business and financial consulting services to assist the Company with its expansion plans and entry into other markets. December 2003 o Options valued at $60,000 to purchase 50 million shares of common stock (at a 15% discount from market, as defined) were issued to Jeffrey Firestone for providing legal counsel on international issues in mergers and acquisitions. January 2004 o Options valued at $4,450,000 to purchase 100 million shares of common stock (at a 50% discount from market, as defined) were issued to Pangea Investments GmbH for consulting and acquisition services in Europe and Israel. Sam Elimalech, an officer of Enterprise Capital AG, is also a member of Pangea Investments Gmbh. The Company has valued the options granted using the Black-Scholes stock option pricing model. The total fair value of the options granted during the three months ending January 31, 2004 was $4,770,000. Based on the uncertainty of any future value of these agreements, the Company expensed the value of the options in the quarter ended January 31, 2004. 8. MISCELLANEOUS INCOME Miscellaneous income consists of the following during the three months ended January 31, 2004: 2004 ------- Gains on settlements of debenture obligations .... 62,728 Gain on disposal of fixed asset................... 2,000 ------- Total interest and miscellaneous income........... $64,728 ======= During the period, the Company renegotiated their debenture balances with the AJW Entities. As a result of the negotiation, the AJW entities converted in full the debenture balances which resulted in the cancellation of approximately $62,728 in principal and interest. The cancellation has been recorded as income in the Statement of Operations for the three-month period ended January 31, 2004. 10 IBIZ TECHNOLOGY CORP. AND SUBSIDIARIES NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. INTEREST AND FINANCING EXPENSES Interest and financing expenses consist of the following:
THREE MONTHS ENDED JANUARY 2004 2003 -------- -------- Interest expense ..................................$102,280 $ 82,352 Beneficial conversion features of debentures issued ................................ -- 837,998 -------- -------- Total interest and financing expenses..............$102,280 $920,350 ======== ========
10. COMMITMENTS AND CONTINGENCIES Legal and Administrative Proceedings The Company, including its subsidiaries, is periodically involved in litigation and administrative proceedings primarily arising in the normal course of its business. In the opinion of management, the Company's gross liability, if any, and without any consideration given to the availability of indemnification or insurance coverage, under any pending or existing litigation or administrative proceedings would not materially affect its financial position, results of operations or cash flows. 11 ITEM 2. OUR MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as "believe," "expect," "should," intend," "may," "anticipate," "likely," "contingent," "could," "may," or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our current products, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Factors, within and beyond our control, that could cause or contribute to such differences include, among others, the following: those associated with our marketing of relatively new PDA accessories for consumers in an evolving marketplace, consumer preferences, perceptions and receptiveness with respect to our PDA accessories, our critical capital raising efforts in an uncertain and volatile economical environment, our ability to maintain an existing relationships with critical customers and vendors, including related licensing and marketing arrangements, our cash-preservation and cost-containment efforts, our ability to retain key management personnel, our relative inexperience with advertising, our competition and the potential impact of technological advancements thereon, the impact of changing economic, political, and geo-political environments on our business, as well as those factors discussed elsewhere in this Form 10-QSB/A and in "Item 1 - Our Business," "Item 6 - Our Management's Discussion and Analysis," particularly the discussion under "Risk Factors - Substantial Doubt as to our Ability to Continue as a Going Concern" and elsewhere in our most recent Form 10-KSB for our fiscal year ended October 31, 2003, as amended, filed with the United States Securities and Exchange Commission. Readers are urged to carefully review and consider the various disclosures made by us in this report, in the aforementioned Form 10-KSB, as amended, and those detailed from time to time in our reports and filings with the United States Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that are likely to affect our business. Our fiscal year ends on October 31. References to a fiscal year refer to the calendar year in which such fiscal year ends. INTRODUCTION We are a marketer and distributor of various accessories primarily intended for use with PDAs. Our current line of products principally consists of over eighty individual accessories for a wide array of PDAs. These accessories range in complexity and price from simple connector cables with suggested retail prices starting at $9.99 at the low end to our multi-faceted XELA Keyboard with a suggested retail price of $69.99 at the high end. However, during the three months ended January 31, 2004 and 2003, and as reported herein, our product sales revenues were substantially attributable to the following principal products (See Item 1. Our Business - Our Principal Products in our most recently filed Form 10-KSB for the fiscal year ended October 31, 2003, as amended, for further details): DATA INPUT DEVICES: o Our Keysync Keyboard - We introduced our Keysync Keyboard to the consumer marketplace in November 1998 as a more practicable and user-friendly alternative to the traditional PDA stylus for inputting significant amounts of data. Our Keysync Keyboard has a suggested retail price of $69.00. o Our XELA Keyboard - We introduced our XELA Keyboard to the consumer marketplace in March 2003 as another more practicable and user-friendly alternative to the traditional PDA stylus for inputting significant amounts of data. Our XELA Keyboard has a suggested retail price of $69.00. 12 POWER DEVICES: o Our Travel Kits - We introduced our first Travel Kit to the consumer marketplace in March 2002. We currently offer fifteen such Travel Kits to accommodate a wide array of PDAs. Each of our Travel Kits includes an AC charger, a 12-volt automobile adapter/charger, a USB charging cable, and a synchronization cable. Our Travel Kits have a suggested retail price of $39.99. ENTERTAINMENT DEVICES: o Our pocketRADIO - We introduced our pocketRADIO to the consumer marketplace in October 2003. Our pocketRADIO is an FM Stereo card that allows a PDA user to listen to FM Stereo while simultaneously running other programs. Our pocketRADIO have a suggested retail price of $49.99. With the exception of the free technical support services we provide as part of the one year parts and labor warranty that accompanies each of our products, the only other services we performed during the fiscal periods reported herein were pursuant to maintenance agreements associated with our technical servicing and support of computer terminals and printers for financial institutions, which business we no longer actively market or pursue. Our maintenance service revenues, which constituted 6.5% of our total consolidated revenues for the fiscal year ended October 31, 2003, will continue to decrease in future fiscal years. OUR RECENT SIGNIFICANT DEVELOPMENTS There are no recent significant developments. OUR CRITICAL ACCOUNTING POLICIES The following discussions of our consolidated results of operations and financial condition, including our liquidity and capital resources, are based upon our consolidated financial statements as included elsewhere in this filing. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. Our actual results have differed, and will likely continue to differ, to some extent from our initial estimates and assumptions. We currently believe that the following significant accounting policies entail making particularly difficult, subjective or complex judgments of inherently uncertain matters that, given any reasonably possible variance therein, would make such policies particularly critical to a materially accurate portrayal of our historical or reasonably foreseeable financial condition or results of operations: o Revenue Recognition for Product Sales and Related Allowances for Sales Returns and Rebates. In accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," we recognize a product sale, including related shipping and handling income, and the cost of the sale, upon product shipment provided that all material risks and rewards of ownership are concurrently transferred from us to our customer, the price is fixed or readily determinable, collection of the related receivable by us is reasonably assured, and we are able to reliably estimate appropriate allowances for probable sales returns and rebates based on our relevant historical experience and future expectations. We unconditionally accept product returns during the initial thirty days following the date of sale. We periodically offer promotional rebates of a limited duration, typically one week, on certain product sales, for which we outsource the processing and tracking of related customer submissions. The periodic provisions made by us to establish and maintain appropriate allowances for sales returns and rebates are charged to our results of operations via offsets to our gross product sales. Actual sales returns and rebates realized by us are charged against the related allowances with any favorable or unfavorable experience, as compared to our preceding estimates, having a correspondingly impact on our results of operations. 13 o Accounts Receivable and Related Allowance for Doubtful Accounts. In addition to corresponding reductions made for the allowances for sales returns and rebates, as discussed above, we further reduce our consolidated accounts receivable by an appropriate allowance for accounts where doubt exists in our opinion, based on known specifics or the passage of time, as to their ultimate collectability. We routinely offer our customers payment terms that range from 30 to 60 days. We do not assess interest on, nor do we require any securing collateral of, past due customer balances. The periodic provisions made by us to establish and maintain an appropriate allowance for doubtful accounts are charged to our results of operations via increases to our selling, general and administrative expenses. Actual collection experience realized by us on previously designated doubtful accounts, including final determinations of uncollectability, is charged against the allowance for doubtful accounts with any favorable or unfavorable experience, as compared to our preceding estimates, having a corresponding impact on our results of operations. o Inventories. Our consolidated inventories, which consist solely of finished products available for sale, are stated at the lower of average cost or market, reduced by an appropriate allowance estimated by us for probable obsolescence. We record an allowance for obsolescence based on our historical experience and future expectations. The periodic provisions made by us to establish and maintain an appropriate allowance for obsolescence are charged to our results of operations via increases to our cost of goods sold. Actual disposition experience realized by us on previously designated obsolete inventory is charged against the allowance for obsolescence with any favorable or unfavorable experience, as compared to our preceding estimates, having a corresponding impact on our results of operations. o Impairment of Long-Lived Assets. We evaluate, on at least a quarterly basis, each of our long-lived assets for impairment by comparing our then estimate of its related future cash flows, on an undiscounted basis, to its net book value. If impairment is indicated, we reduce the net book value of the asset to an amount equal to our estimate of related future cash flows, on an appropriately discounted basis, with a corresponding impairment charge to our results of operations. o Convertible Debt Securities. We have periodically issued debentures that have non-detachable conversion features. In those instances where the stated conversion price reflects a discount from the then prevailing market price for our common stock, we make, at the date of the debenture issuance, an estimate as to the fair value of this beneficial conversion feature. The value assigned to the beneficial conversion feature is then immediately recognized in our results of operations via an interest/financing charge with a corresponding incremental credit to additional paid-in capital. 14 OUR CONSOLIDATED RESULTS OF OPERATIONS Our consolidated total revenues for the three months ended January 31, 2004 ("fiscal 2004 first quarter") were $161,949, an increase of $86,639, or 115%, as compared to $75,310 for the three months ended January 31, 2003 ("fiscal 2003 first quarter"). Our product sales constituted 93% of our consolidated total revenues for the fiscal 2004 first quarter as compared to 87% of our consolidated total revenues for the fiscal 2003 first quarter. Our maintenance revenues, which constituted the balance of our consolidated total revenues for each respective fiscal period, will continue to decrease in future fiscal periods as we no longer actively market or pursue maintenance services. Our product sales were $152,216 for the fiscal 2004 first quarter, an increase of $86,337, or 131%, as compared to $65,879 in product sales for the fiscal 2003 first quarter. We substantially attribute the preceding increase to sales of our pocketRADIOs (shipments began in late October 2002) which increased from approximately $33,000 in 2003 to over $100,000 in 2004. Partially offsetting the preceding product sales increases principally were sales decreases of varying degrees realized in our accessories for non-PDA hand-held computing devices, the marketing of which we continue to de-emphasize as we focus our currently limited operating and financial resources on the PDA accessories marketplace. We also realized a significant decrease in sales of our Keysync Keyboard which we primarily attribute to the introduction of competing products into the marketplace. Sales of our Travel Kits also decreased slightly, which we believe generally corresponded to the overall softening of sales realized by the underlying PDA manufacturers. Variances in the average prices realized by us on products in existence during both fiscal periods did not have a significant impact, favorably or unfavorably, on the overall net increase in our product sales for fiscal 2004. Approximately 63% of our product sales in the first quarter of fiscal 2004 were to one large retailer. It must be noted that, absent significant contributions from the introduction of new products, our future revenues will be materially dependent upon sales of our pocketRADIOs and, to a significantly lesser extent, our Travel Kits. We incurred consolidated gross income of $40,204 for the fiscal 2004 first quarter, and consolidated gross losses of $16,425 for the fiscal 2003 first quarter. In turn, we experienced a gross margin of 25% for the fiscal 2004 first quarter and a negative gross margin of 22% for the fiscal 2003 first quarter. Our fiscal 2004 consolidated gross income and gross margin were attributable to gross income of $39,178, and a resulting gross margin of 26%, on our product sales during the fiscal 2004 first quarter. Conversely, our fiscal 2003 consolidated gross loss and negative gross margin was attributable to a gross loss of $20,295, and a resulting negative gross margin of 31%, on our product sales during the fiscal 2003 first quarter. Product Sales in 2004 consists of $104,182 (68% of sales) of direct material, packaging and freight, a reduction in our provision for obsolete inventories totaling $23,100 (15% of sales) and $31,956 (21% of sales) of salaries and employee related costs. Cost of Revenues- Product Sales in 2003 consists of $46,410 (70% of sales) of direct material, packaging and freight and $39,764 (60% of sales) of salaries and employee related costs. Our products are often purchased from different vendors and can fluctuate significantly based on our sales mix. We do not expect our material costs to fluctuate significantly in coming quarters. Our current labor force is also expected to be adequate to meet demand of our products sales through the remainder of 2004. Cost of Revenues-Maintenance Agreements in 2004 consists of $3,935 of parts and accessories (40% of revenues) and $4,772 of wages and benefits (49% of revenues). Cost of Revenues-Maintenance Agreements in 2003 consists of $648 of parts and accessories (7% of revenues) and $4,913 of wages and benefits (52% of revenues). Based on the nature of the equipment being serviced and the applicable age thereof, parts and accessories can fluctuate significantly each period. Our products experience a high degree of technological obsolescence based on the rapidly changing market for PDA-related products and the introduction of new PDAs. We evaluate our inventories based on sales over a rolling six-month period and industry publications of PDA-related product changes in order to determine the write-off of slow-moving and obsolete inventories. During the first quarter of 2004, we made a bulk sale of items which were fully reserved for in our reserve and, accordingly, the reserve was adjusted. Our consolidated total operating expenses were $6,350,149 for the fiscal 2004 first quarter, an increase of $5,908,920, or 1339%, from the $441,229 incurred during the fiscal 2003 first quarter. 15 Our consolidated selling, general and administrative ("SG&A") expenses were $380,149 for the fiscal 2004 first quarter, a decrease of $61,080, or 14%, from the $441,229 incurred during the fiscal 2003 first quarter. The main components in these expenses are salaries and wages for its key employees and officers (2004 - $72,531; 2003 - $145,300), professional fees (2004 - $128,713; 2003 - $74,155) and travel (2004 - $33,585; 2003 - $1,100). The reduction in salaries and wages is attributable to the decrease in operations and cash flows which resulted in a reduction in staff compared to the prior quarter. Professional fees increased significantly due to the costs associated with our attempt to spin-off the iBIZ, Inc. subsidiary and the acquisition of Synosphere LLC. Travel expenses increased during this period due to our extensive travel and related costs for the transaction with Enterprise (Israel), the acquisition of Synosphere LLC and search for new opportunities. We incurred an expense totaling $1.2 million for acquired research and development in the first quarter of fiscal 2004. As noted in Note 3 to the attached financial statements, this cost represents the fair value of the common stock issued in connection with our acquisition of Synosphere LLC. We incurred consulting expenses paid in stock options totaling $4.77 million in the first quarter of fiscal 2004. This cost represents the fair value of stock options issued for services to the following entities: November 2003 o Options valued at $260,000 to purchase 200 million shares of common stock (at a 40% discount from market, as defined) were issued to D. Scott Elliott for general business and financial consulting services to assist the Company with its expansion plans and entry into other markets. December 2003 o Options valued at $60,000 to purchase 50 million shares of common stock (at a 15% discount from market, as defined) were issued to Jeffrey Firestone for providing legal counsel on international issues in mergers and acquisitions. January 2004 o Options valued at $4,450,000 to purchase 100 million shares of common stock (at a 50% discount from market, as defined) were issued to Pangea Investments GmbH for consulting and acquisition services in Europe and Israel. Sam Elimalech, an officer of Enterprise Capital AG, is also a member of Pangea Investments Gmbh. The Company has valued the options granted using the Black-Scholes stock option pricing model. The total fair value of the options granted during the three months ending January 31, 2004 was $4,770,000. Based on the uncertainty of any future value of these agreements, the Company expensed the value of the options in the quarter ended January 31, 2004. We expect to continue utilizing our common stock and options to procure necessary consulting services during this fiscal year since our financial condition makes the probability of securing additional capital difficult and costly. Please refer to Note 7 to the Condensed Consolidated Financial Statements included in this filing for further details of our stock activity. Our resulting losses from operations for the fiscal 2004 first quarter and 2003 were $6,309,945 and $457,654, respectively. Our non-operating other income and expenses primarily consist of interest expense, including non-cash charges attributable to the non-detachable beneficial conversion feature of newly issued debentures. Our interest expense was $102,280 for the fiscal 2004 first quarter, a decrease of $818,070, or 89%, from the $920,350 incurred during the fiscal 2003 first quarter. This decrease is due to $837,998 of beneficial conversion features of debentures issued during the three months of fiscal 2003. These charges were not repeated during fiscal 2004. During the fiscal 2004 three month period we realized non-cash aggregate gains of $62,728 on settlements of debenture obligations. The balance of our non-operating income and expenses items, including interest income, were inconsequential to our consolidated results of operations. 16 Primarily as a result of the foregoing, we incurred a loss of $6,347,497 ($0.00) (per basic and diluted share) for the fiscal 2004 first quarter. The preceding compares to a loss of $1,378,004 ($0.02) (per basic and diluted share) for the fiscal 2003 first quarter. Our future ability to achieve profitability in any given future fiscal period remains highly contingent upon our realizing significantly increased product sales sufficient to leverage our non-variable, likely to be recurring expenses. For instance, our ability to achieve gross profits and positive gross margins in any given future fiscal period remains highly contingent upon us being able to leverage through significant incremental product sales the significant non-variable direct labor and overhead components of our costs of goods sold. Similarly, our ability to realize income from operations is further dependent upon our ability to additionally leverage through significant incremental sales our SG&A expenses, the majority of which currently are non-variable and recurring in nature. To the extent that we incur other less frequent or non-recurring operating expenses, as in fiscal 2004, we will require additional incremental product sales in order to leverage them. Lastly, our ability to realize net income and net income per common share remains highly contingent upon us being able to leverage through incremental product sales any significant net non-operating expenses, such as charges for the beneficial conversion features of any issued debentures and our interest expense on any outstanding debt. Correspondingly, our ability to realize significant incremental product sales in any given future fiscal period remains highly contingent upon us obtaining significant equity infusions and/or long-term debt financing sufficient to fund the increased and sustained campaign of marketing and advertising activities we believe necessary to build broad consumer awareness of, and demand for, our PDA accessories. Even if we were to be successful in procuring such funding, there can be no assurance that we will be successful in our marketing and advertising efforts, and that we will subsequently realize the significant incremental product sales we require. OUR CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES Overview We have historically sustained our operations through an ongoing combination of trade credit arrangements, short-term financings, and debt and equity issuances. As our working capital requirements generally precede the realization of product sales and related accounts receivable, we routinely draw upon our existing cash and cash equivalent balances and seek short and long-term financing to fund our procurement of inventory. We currently have no established credit facilities in place for future borrowings. During the course of transitioning our Company over the last several years from our discontinued computer service businesses to our current business of marketing and distributing various accessories primarily intended for use with PDAs, we have incurred substantial operating and net losses, as well as negative operating cash flows. As of our fiscal quarter ended January 31, 2004, our working capital deficit was $3,795,901 and our stockholders' deficit was $4,091,965. Such reflects a decrease from our preceding fiscal year ended October 31, 2003 when our working capital deficit was $6,093,514 and our stockholders' deficit was $6,716,685. We had an unrestricted cash balance of $262,649 at January 31, 2004, as compared to $2,140 at October 31, 2003. We had outstanding convertible debentures with an aggregate principal face amount of $2,619,297 at January 31, 2004, of which $2,152,297 was due within one year and and $694,090 was to become due and payable by our fiscal year ending October 31, 2005. Subsequent to January 31, 2004 and through March 15, 2004, debentures totaling $1,039,968 were converted into 228,074,146 shares of common stock. We had outstanding convertible debentures with an aggregate principal face amount of $4,015,837 at October 31, 2003, of which $3,265,837 and $750,000 was to become due and payable during our fiscal years ending October 31, 2004 and 2005, respectively. 17 Our Consolidated Cash Flows Our operating activities utilized $480,984 in cash during the fiscal 2004 three month period, an increase of $255,645, or 113%, from the $225,339 in cash utilized during the fiscal 2003 three month period. Our increased utilization substantially reflects a $5,008,264, or 516%, net increase in our non-cash charges, being substantially offset by the $4,969,493 increase in our net loss. The most significant reductions in our non-cash charges were a $837,998 reduction in the charges associated with the beneficial conversion features of issued convertible debentures. This reduction is offset by increases of $1,200,000 and $4,770,000 in our non-cash acquisition of in-process research and development and services rendered in exchange for common stock options, respectively. Partially offsetting these non-cash charge items were a $59,227 increase in accounts receivable, an $18,386 increase in inventories and a $158,710 decrease in accounts payable and accrued liabilities. Based on the exercise of stock options in the quarter, we were able to pay certain accounts payable and accrued liabilities to continue our operations. Cash flows from operations in 2003 reflect the increase in our accounts payable and accrued liabilities due to our decreased cash flows experience continuing from late 2002 into early 2003. Our investing activities provided $2,000 during the fiscal 2004 three month period from the sale of the company automobile. There was no cash used in investing activities during the fiscal 2003 three month period. Our financing activities provided $739,493 in cash during the fiscal 2004 first quarter, an increase of $379,912, or 106%, from the $359,581 in cash provided by financing activities during the fiscal 2003 three month period. Our fiscal 2004 three month period reflects cash inflows primarily from our issuances of common stock options, and, to a significantly lesser extent, the cash we received from a note payable. The preceding cash inflows were slightly offset by the cash outflows related to principal repayments made on outstanding notes payable. In contrast, our fiscal 2003 three month period 2003 primarily reflects lower cash inflows from our issuances of convertible debentures. Such were slightly offset by the cash outflows related to principal repayments made on outstanding notes payable. Our Planned Capital Expenditures We had no significant planned capital expenditures, budgeted or otherwise, as of January 31, 2004. OUR OTHER MATTERS Quantitative and Qualitative Disclosures About Market Risk We currently are not materially exposed to financial market risks from changes in short or long-term interest rates as substantially all of our financial instruments, and most notably our remaining outstanding debentures, have fixed rates of interest. However, should we be successful in procuring the significant additional funding we currently seek and if such funding were to be substantially in the form of debt with variable rates of interest, then our exposure to these market risks would increase, possibly significantly. We currently are not materially exposed to currency market risks as substantially all of our business dealings, and most notably our purchases of inventory from overseas vendors, are denominated in U.S. dollars. However, should we in the future enter into significant contracts denominated in non-U.S. dollar currencies, then our exposure to these currency market risks would increase, possibly significantly. We have not used, and currently do not contemplate using, any derivative financial instruments. Our Legal Contingencies We as a company, including our subsidiary, are periodically involved in litigation and administrative proceedings primarily arising in the normal course of our business. In our opinion, our gross liability, if any, and without any consideration given to the availability of indemnification or insurance coverage, under any pending or existing incidental litigation or administrative proceedings would not materially affect our financial position, results of operations or cash flows over and beyond any acknowledged liability. 18 We remain liable to the U.S. Internal Revenue Service ("IRS") for approximately $65,000 in unpaid payroll taxes, and subsequently assessed interest, for certain periods through the first quarter of 1999. We have continued to accrue for this liability in our consolidated financial statements. It is our intention to seek a reduced settlement of this liability with the IRS if and when we have surplus working capital allowing us to timely honor any such settlement. SEC Order of Formal Investigation The SEC has commenced a formal investigation into certain specific matters that may constitute potential violations by the Company, and/or its officers, directors, employees, and others, of the federal securities laws. The Company and its officials are fully cooperating with the SEC during its formal investigation. The Company will publicly disclose the specific nature of any resulting SEC allegation(s) if and when they become known, subject to any SEC mandated confidentiality and as permitted by applicable federal securities laws. Recently Issued Accounting Standards With Pending Adoptions There currently are no recently issued accounting standards with pending adoptions that have any applicability to us. ITEM 3. CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer, or CEO, and chief financial officer, or CFO, of the effectiveness of the design and operation of our disclosure procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of January 31, 2004. There have been no significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None for the period ending January 31, 2004. ITEM 2. CHANGES IN SECURITIES (c) Recent Sales of Unregistered Securities The securities described below represent securities of iBIZ sold by iBIZ during the three month period ended January 31, 2004, that were not registered under the Securities Act of 1933, as amended (the "Securities Act"), all of which were issued by the Company pursuant to exemptions under the Securities Act. Underwriters were not involved in these transactions. PRIVATE PLACEMENTS OF COMMON STOCK AND WARRANTS FOR CASH None. SALES OF DEBT AND WARRANTS FOR CASH None OPTION GRANTS On November 1, 2003, the Company granted an individual the option to purchase 200,000,000 shares of common stock at the exercise price of the average closing price for the three days prior to exercise less a 40% discount. The option is exercisable commencing November 1, 2003 and expires after January 15, 2004. The option holder exercised 60,000,000 shares of common stock on December 10, 2003 and the Company received $93,600 cash. 19 On December 15, 2003, the Company granted an individual the option to purchase 50,000,000 shares of common stock at the exercise price of market value at the date of exercise less a 15% discount. The options expire five years from date of grant. The option holder exercised 26,956,000 shares of common stock during December 2003 and January 2004 and the Company received $640,823 cash. On January 28, 2004, the Company granted Pangea Investments GmbH the option to purchase 100,000,000 shares of common stock at the exercise price of market value at the date of exercise less a 50% discount. The option is exercisable commencing January 28, 2004 and expires after January 29, 2014. No options have been exercised under this agreement. ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS None The above offerings and sales were deemed to be exempt under Regulation D and Section 4(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were business associates of iBiz or executive officers and/or directors of iBiz, and transfer was restricted by iBiz in accordance with the requirements of the Securities Act. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. 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: 10.1 Employment Agreement with Kenneth Schilling 10.2 Employment Agreement with Bryan A. Scott 10.3 Employment Agreement with Ramon Perales 31.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 302, provided herewith. 32.1 Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S. C. Section 1350, provided herewith. (b) Reports on Form 8-K. None. 20 Pursuant to the requirements of Section 12 of the Securities Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized. DATED THIS 1ST DAY OF DECEMBER 2004 IBIZ TECHNOLOGY CORP. By: /s/ KENNETH W. SCHILLING --------------------------------------- Kenneth W. Schilling, President, and acting principal accounting officer 21 EX-10.1 2 v09498_ex10-1.txt EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 20th day of January, 2004, between iBIZ Technology Corp., a Florida corporation ("Corporation" or "Company" or "Employer"), and Ramon Perales ("Employee"). In consideration of the mutual covenants, agreements and provisions contained in this Agreement, the parties agree as follows: EMPLOYMENT 1.0 EMPLOYMENT. Employer employs Employee as Chief Marketing Officer of Synosphere, and Employee accepts employment, upon the terms and conditions set forth herein. 2.0 TERM. This Agreement shall commence effective as of January 21, 2004, and shall continue in effect for a period of two (2) years ("Employment Period"); unless terminated earlier, by Company or Employee, upon prior written notice. Further, if a change of control (as defined herein) of the Company shall have occurred during the Employment Period, this Agreement shall continue in effect until January 21, 2005. 3.0 CHANGE OF CONTROL. The term "Change of Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("1934 Act) as in effect on the date of this Agreement or, if Item 5(f) is no longer in effect, any regulations issued by the Securities and Exchange Commission ("SEC") pursuant to the 1934 Act which serve similar purposes; provided that, without limitation, such change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act) is or becomes a beneficial owner, directly or indirectly, of securities of the company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board of Directors following such election. 4.0 COMPENSATION. For all services to be rendered by the Employee pursuant to his duties set forth in this Agreement, the Employee shall be paid as compensation; 4.1. BASE SALARY AND CONSIDERATIONS. A fixed salary in the amount of One Hundred and Twelve Thousand Dollars ($102,000) per year, payable in equal installments according to the Company's regular payroll schedule. This salary shall be reviewed from time to time during the term of this Agreement by the Corporation's Board of Directors or Compensation and Benefits Committee of the Board. 22 If the Employee's base salary is not paid according to the Employer's normal payroll cycle, then the Employer shall issue shares of its common stock, valued at the moving average of the closing share price over the last 20 trading days with a 25% discount, as an alternative payment to the base salary. Such shares of common stock shall be issued under a Stock Retainer Plan, registered under a Form S-8 filed and made effective by the Employer. Such shares shall be issued and paid at the end of each month during which the payment(s) was not made, until such time that sufficient funds are available to make such payments. In addition, during the duration of the Employee's Term, the Employer shall issue an Earn Out bonus of common stock in Eight (8) payments, each payment made quarterly, in the amount of $62,500, the ("Earn Out"). Common stock shall be issued based on the moving average of the closing share price over the last 20 trading days and registered under Form S-8 and made effective by the Employer within 90 days of the payment date. In the event the Employer terminates the Employee for Cause as detailed in section 10.0 Termination, the Employee is not entitled to receive the Earn Out bonus portion that has not been paid as of the termination date. Furthermore, the Employer shall issue a Sign On bonus to the Employee in the amount of Two Million and Five Hundred Thousand (2,500,000) shares. The Sign On bonus shall be registered under Form S-8 and made effective by the Employer within 90 days of January 20, 2004. Lastly, during the Term, the Employer shall evaluate the Employee's performance semi-annually and may further award a Bonus based on performance. A performance review shall be conducted by the Employer during the month of June and December. 4.2 EMPLOYEE BENEFIT PLANS. The Employee, his dependents and beneficiaries, shall be entitled to participate in any pension, profit sharing, medical reimbursement, insurance or other employee payment or benefit plan of the Employer as may be in effect from time to time, subject to the participation standards and other terms thereof, to the same extent as other officers under the benefit practices of the Company. 4.3 CUMULATIVE COMPENSATION. The compensation provided for in paragraphs 4.1, and 4.2 above, together with the perquisites set forth in section 6.0 below, are in addition to the benefits provided for upon termination pursuant to Section 10.0 below. 23 4.4 INDEMNIFICATION. The Corporation hereby agrees to indemnify, and keep indemnified in accordance with, and to the fullest extent authorized by, the Laws of the State of Florida as it may be in effect from time to time, the Employee, from and against any expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Employee in connection with any threatened, pending or completed action, suit or proceeding, whether or not such action is by or in the right of the Corporation or such other enterprise with respect to which the Employee serves or has served as a director, officer or employee, by reason of the fact that the Employee is or was a director, officer or employee, of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise. The indemnification rights granted to the Employee under this Agreement shall not be deemed exclusive of, or in limitation of, any rights to which Employee may be entitled under the law of its state of incorporation, the Corporation's Certification of Incorporation of By-Laws, any other agreement, vote of stockholders or directors or otherwise. 5.0 EXPENSES. During the term hereof, the Corporation will reimburse the Employee for any reasonable out-of-pocket expenses incurred by the Employee in performance of service for the Corporation under this Agreement (e.g., transportation, lodging and food expenses incurred while traveling on Corporation business) and any other expenses incurred by the Employee in furtherance of the Corporation's business; provided, however, that the Employee renders to the Corporation a complete and accurate accounting of all such expenses. 6.0 PERQUISITES. During the period of employment, Employee shall be entitled to perquisites, including, without limitation, an appropriate office, and fringe benefits accorded executives of equal rank. 7.0 VACATIONS. The Employee shall be entitled to a vacation with full compensation equal to three (3) weeks each year; provided, however, that the Employee's vacation will be scheduled at such time as will least interfere with the business of the Employer. Attendance at a business seminar is not to be deemed a vacation; provided, whoever, that attendance at such meetings or seminars shall be planned so as to least interfere with the business of the Employer. 8.0 EMPLOYMENT. The Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company, for the Employment Period as specified in Section 2.0, to exercise such authority and perform such duties as are commensurate with the authority being exercised and duties being performed by the Employee immediately prior to the effective date of this Agreement, which services shall be performed at the location where the Employee was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company may reasonably require; provided that the Employee shall not be required to accept a location which is unreasonable in the light of the Employee's personal circumstances. The Employee agrees that during the Employment Period he shall devote his business time to his executive duties as described herein and perform such duties faithfully and efficiently. 9.0 PERFORMANCE. It is contemplated that during the period of employment the Employee shall serve as an executive of the Company with the office and title of President and Chief Executive Officer reporting directly to the Board of Directors during the period of employment, the Employee shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal to in responsibility and importance and in scope to and commensurate with his position described in general terms in this Section 9.0. 10.0 TERMINATION. 10.1 During the period of employment, Employee may terminate this Agreement without cause or for cause. For the purposes of this Section 10.1, the term "cause" shall include the occurrence of any of the following: 10.1.1 The breach or violation by the Company of any of the terms of this Agreement or of the Acquisition Agreement; 10.1.2. Any significant change in position, duties and responsibilities of the Employee to which the Employee does not consent; 24 10.1.3. In the event of a change in control as defined in Section 2.0 hereof, any change in the circumstances of employment which the Employee determines, in good faith, results in his being unable to carry out the duties and responsibilities attached to the position and contemplated by the definition of that position set forth in this Agreement. 10.2. In the event of an occurrence described in subsection 10.1.1, 10.1.2, or 10.1.3 above, the Employee shall serve written notice of such event upon the Company, setting forth in detail the circumstances that the Employee has determined constitutes "cause" within any of those definitions. In the event the Company should remedy or otherwise cure the facts constituting the cause relied upon by the Employee within thirty (30) days after such written notice, such fact or circumstance shall not be deemed to constitute "cause" for which employment can be terminated within the meaning of Section 10.1 above. 10.3. During the period of employment, the Corporation may terminate this Agreement for cause and upon thirty (30) days written notice and opportunity to cure being given to Employee. For the purpose of this Section 10.3, the term "cause" shall include the occurrence of any of the following: 10.3.1. Employee breaches or violates any of the terms of this Agreement; 10.3.2. Employee is convicted of any felony or is shown to have engaged in any act of dishonesty or fraud upon the Corporation, any of its affiliated companies, or any of its customers or clients; 10.3.3. Employee has been grossly negligent in the performance of his employment duties or responsibilities. 10.4. During the period of employment, the Corporation may not terminate this Agreement without cause. 10.5. This Agreement shall also terminate upon the insolvency, dissolution, or liquidation of the Corporation or cessation of business by the Corporation for at least thirty (30) consecutive days. 11.0 TERMINATION PAYMENTS. In the event of a Termination and subject to the provisions of Sections 10.1.1., 10.1.2., 10.1.3. 10.4, or 10.5 of this Agreement, the Company shall pay to the Employee and provide him with the following: 11.1. the Company shall pay the Employee thirty (30) days following Termination, one lump sum payment of the Employee's base salary rate for the remaining period of the Term. Any shares not yet vested or shares not registered with the SEC shall vest and/or be registered as soon as is practicable. 11.2. During the remainder of the Employment or payment Period, the Employee shall continue to be treated as an employee under the provisions of any incentive compensation described in Section 4.2. In addition, the Employee shall continue to be entitled to all benefits and service credit for benefits under medical, insurance, split-dollar life insurance and other employee benefit plans, programs and arrangements of the Company described or referred to in Section 4.3 as if he were still employed during such period under this Agreement. 11.3. If, despite the provisions of paragraph 11.2 above, benefits or the right to accrue further benefits under any stock option or other incentive compensation arrangement described in Section 4.2 shall not be provided under any such arrangement to the Employee or his dependents, beneficiaries or estate because he is no longer an employee of the Company, the Company shall, to the extent necessary, pay or provide for payment of such benefits to the Employee or his dependents, beneficiaries or estate. 12.0 DISABILITY. 12.1. If the Employee is unable to perform the Employee's services by reason of illness or incapacity, the Employee's regular compensation shall be continued for a period of twelve (12) weeks following the week in which such illness or incapacity commences, at the end of which time no further compensation shall be due and payable to the Employee until the Employee shall return and resume the Employee's duties. In the event the Employee is eligible to receive payments on account of the fringe benefit program covering disability provided by the Corporation, then the Employee's base salary, as defined as above, will be reduced to the extent of such entitlement and receipt. 25 12.2. If, because of illness, physical or mental disability or other incapacity, Employee shall fail, for a period of one hundred twenty (120) work days during the term hereof, to render the services provided for by this Agreement, or if Employee contracts an illness or injury which will permanently prevent performance by him of the services and duties provided for by this Agreement by notice to the Employee effective thirty (30) days after the giving of such notice, after which no additional compensation shall be due. 13.0 DEATH. In the event of the death of Employee during the term of this Agreement, his employment hereunder shall terminate on the date of his death. In the accounting between the Employer and the Employee's personal representative, Employee's estate shall be due compensation under this Agreement equal to one year of Employee's salary. In addition, one hundred percent (100%) of the total amount of shares to be granted to the Employee and or the total amount of shares to be registered with the SEC to the Employee, shall vest and or be registered as soon as is practicable. 13.1 In the event of death, the Employee sets forth that the Employee's personal representative is the listed below and shall be due compensation in accordance with the provisions set forth in 13.0. Employee's Personal Representative: Esmeralda Perales Relationship: Spouse Address: 507 Cottonwood, Kennedy, Texas 78119 Phone: (830) 583-9708 14.0 COMPETITION. 14.1. Employee covenants to and with the Employer, its successors and assigns, that during the term of this Agreement and for a period of twelve (12) months from the date of the termination of this Agreement for any reason, he will not directly or indirectly, enter into any agreement or arrangement with any other person, firm, corporation or entity to conduct any research or development, nor shall Employee directly or indirectly conduct such research or development on his own behalf, related to the discovery of processes, inventions, improvement, development or commercialization of any new device, apparatus or product competitive with a product developed, produced or reduced to practice solely by the Corporation, unless Employee shall have first obtained the Corporation's expressed written consent thereto. 14.2. In the event of a breach or threatened breach by Employee of any provisions of this Section 14.0 the Corporation shall be entitled to an injunction restraining it from the commission of such breach. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of money damages. The covenants contained in this Section 15.0 shall be construed as independent of any other provisions in this Agreement; and the existence of any claim or cause of action of Employee against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of said covenants. 14.3. The covenants contained in this Section 14.0 shall terminate and, upon termination, shall be unenforceable and of no further legal force and effect, in the event the Corporation, or any successor to the Corporation, becomes insolvent, is liquidated or ceases for any reason to conduct business operations for a continuous period of at least thirty (30) days. 14.4. The Corporation shall have the right to assign the aforesaid covenants; and Employee agrees to remain bound by the terms of the covenants to any and all subsequent purchaser and assignees of the assets and business of the Corporation. 15.0 NON-INTERFERENCE WITH EMPLOYEES. 15.1. Employee covenants with the Corporation that employees of or consultants to the Corporation and employees of and consultants to firms, corporations or entities affiliated with the Corporation have, of necessity, been exposed to and have acquired certain knowledge, understandings, and know-how concerning the Corporation's business operations which is confidential information and proprietary to the Corporation. 26 15.2. In order to protect the Corporation's confidential information and to promote and insure the continuity of the Corporation's contractual relations with its employees and consultants, Employee covenants and agrees that for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage other to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual or other relations with any or all of its employees or consultants, or (ii) induce or attempt to induce any employee or consultant to the Corporation to cease performing services for or on behalf of the Corporation, or (iii) solicit, offer to retain, or retain, or in any other manner engage or employ the services of, any person or entity who or which is retained or engaged by the Corporation, or any firm, corporation or entity affiliated with the Corporation, as an employee, consultant or agent. 15.3. In the Event any court of competent jurisdiction determines or holds that all or any portion of the covenants contained in this Section 15.0 are unlawful, invalid, or unenforceable for any reasons, then the parties hereto agree to modify the provisions of this Section 15.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 16.0 CLIENTS AND CUSTOMERS. 16.1. Employee covenants with the Corporation that the clients and customers of the Corporation, both actual and contemplated, constitute actual and prospective business relationships, which are proprietary to the Corporation and comprise, in part, the Corporation's confidential information and trade secrets. 16.2. In order to protect the Corporation's proprietary rights and to promote and ensure the continuity of the Corporation's contractual relations with its customers and clients, Employee covenants and agrees that, notwithstanding the provisions of Section 16.1 hereof, and for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage others to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual relations with any clients or customers, or (ii) induce or attempt to induce any client or customer of the Corporation to cease doing business with the Corporation. 16.3. In the event any court of competent jurisdiction determines or holds that all or any portions of the covenants contained in this Section 16.0 are unlawful, invalid or unenforceable for any reason, then the parties hereto agree to modify the provisions of this Section 16.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 17.0 COVENANT TO RETAIN CONFIDENCES. 17.1. Employee understands that all information learned, known, made, devised or developed concerning any of the Company's products and activities, including, without limitation, any inventions, discoveries, improvements, processes, formulas, computer programs (including their structure, sequence, organization, coherence, look and feel), apparatus, equipment, customer and client lists, marketing plans, mailing lists, art, graphics, display, research, and the like used by the Corporation in connection with its business constitutes the confidential information, proprietary information and trade secrets of the Corporation. Employee covenants and agrees that he will not (except as required in the course of his position with the Corporation), during the term hereof or thereafter for a period of twelve (12) months, communicate or divulge to, or use for the benefit of himself or any other person, firm, association, or corporation, without the consent of the Corporation, any confidential information or trade secrets possessed, owned, or used by the Corporation or its affiliates that may be communicated to, acquired by, or learned of by the Employee in the course of or as a result of his services with the Corporation. For the purposes of this Section 17.1, confidential information of the Corporation shall not include (i) any information developed by the Employee independently of services performed by the Employee for the Corporation pursuant to this Agreement; (ii) any information rightfully obtained by the Employee from a third party without restriction; (iii) any information publicly available other than through the fault or negligence of the Employee; (iv) any information disclosed by the corporation to third parties without restriction; or (v) information already known by the Employee prior to its disclosure by the Corporation. 27 17.2. Employee will not use in the course of Employee's employment with the Corporation, or disclose or otherwise make available to the Corporation, any information, documents or other items which Employee may have received from any other person or entity (including any prior employer), and which Employee is prohibited from so using, disclosing or making available. 17.3. All records, files, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents, prototypes, testing data, equipment, electronically stored information on disk, tape or any other medium or existing in computer memory transmitted by any means, including, but not limited to, telephone or electronic data transmission and the like, relating to the business of the Corporation or its affiliates, which Employee shall use or prepare or come into contact with, shall remain the sole property of the Corporation. 18.0 WORK PRODUCT. 18.1. All trade secrets, know-how, confidential information, copyrightable material, inventions, discoveries, and improvements, including computer programs (their structure, sequence, organization, coherence, look and feel), whether patentable or unpatentable, copyrightable or uncopyrightable, made, devised, discovered or reduced to practice by the Employee, whether by himself or jointly with others, from the time of becoming an employee of the Corporation until the termination of that status, shall be deemed work for hire and shall be promptly disclosed in writing to the Corporation and are to redound to the benefit of the Corporation and become and remain its sole and exclusive property. Should the Corporation choose to not purse registered protection for any disclosure provided by the employee within sixty (60) calendar days from the date of the disclosure, the decision to not pursue protection (on the sixty-first (61st) day) shall be deemed a decision that the information in the disclosure is unrelated to the business of the Corporation, and is a quitclaim to any rights related thereto. 18.2. By executing this Agreement, Employee hereby transfers and assigns to the Corporation, or person, firms or corporations designated by the Corporation, any or all of Employee's rights, title and interest in and to any and all developments, inventions, computer programs, discoveries, improvements, processes, devices, copyrights, patents and patent applications therefore, and to execute at any and all times any and all instruments and do any and all acts necessary or which the Corporation may deem desirable in connection with conveying, transferring and assigning Employee's entire right, title and interest in and to any inventions, discoveries, improvements, computer programs, processes devices, copyrights, patent applications therefore or patents thereon in any way related to the technology or trade secrets developed, discovered or reduced to practice by Employee during the term of this Agreement, it being the express understanding and agreement of the parties that any and all future developments, inventions, and discoveries of Employee during the term hereof shall be the property of the Corporation, or its assigns. 19.0 PATENTS AND COPYRIGHTS. 19.1. Employer shall cause to be filed United States and foreign patent and/or copyright applications on each invention deemed to be patentable or copyrightable and embodied in any technology developed and reduced to practice during the term hereof which inure to the Corporation by virtue of the provisions of Section 18.0 hereof. 19.2. The Corporation shall forfeit patent rights or copyrights to any patentable or copyrightable technology developed by Employee during the term hereof in any jurisdiction in which it fails to file patent or copyright applications six (6) months following a request by the Employee. Employer shall provide to Employee a copy of each application filed, and within six (6) months thereafter Employee shall designated what, if any, foreign countries he desires applications to be filed. Patent or copyright prosecution and maintenance shall be done by an attorney to be selected by the Corporation and approved by Employee, which approval shall not be unreasonably withheld. All reasonable expense of filing, prosecution and maintenance of domestic and foreign patents or copyrights and patent or copyright applications shall be borne by Employer. 28 19.3. Employer and Employee agree to forebear from, and not permit others to make or permit any public disclosure of any of the patentable matter prior to the application for a United States patent. All foreign patent applications shall be made no later than one (1) year following the date of the U.S. patent application. 19.4. All patents shall be applied for in the name of Employee, as inventor, and shall be assigned to the Corporation or assignee. All copyrights shall be registered in the name of the Corporation. The Employee shall, upon demand, execute and deliver to the Corporation or its assigns such documents or assignments as may be deemed necessary or advisable by counsel for the Corporation or its assigns for filing in the appropriate patent offices to evidence the assignment of the patent rights hereby granted. 20.0 REPRESENTATIONS OF EMPLOYEE. The Employee represents that, to the best of his knowledge and belief, neither his affiliation with the Corporation, nor his holding any position as officer, director, Employee, or consultant with the Corporation, nor his ownership of common stock in the Corporation, nor his performing any other services for the Corporation violates any presently existing, valid and enforceable contract, agreement, commitment or other legal relationship between Employee and any other person or entity. 21.0 ATTORNEYS' FEES. In the event there is any litigation or arbitration between the parties concerning this Agreement, the successful party shall be awarded reasonable attorneys' fees and litigation or arbitration costs, including the attorneys' fees and costs incurred in the collection of any judgment. 22.0 NOTICES. All notices required or permitted hereunder shall be sufficient if delivered personally or mailed to the parties at the address set forth below or at such other address as either party may designate in writing from time to time. Any notice by mailing shall be effective forty-eight (48) hours after it has been deposited in the United States certified mail, return receipt requested, duly addressed and with postage prepaid. 23.0 PARTIAL INVALIDITY. If any provisions of this Agreement are in violation of any statute or rule of law of any state or district in which it may be sought to be enforced, then such provisions shall be deemed null and void only to the extent that they may be in violation thereof, but without invalidating the remaining provisions. 24.0 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, personal representatives, successors and assigns; provided, however, that Employee may not assign his employment hereunder, and any assignment by Employee in violation of this Agreement shall vest no rights in the purported assignee. 25.0 WAIVER. No waiver of any breach of any one of the agreements, terms, conditions or covenants of this Agreement by the Employer or the Employee shall be deemed to imply or constitute a waiver of any other agreement, term, condition or covenant of this Agreement. The failure of either party to insist on strict performance of any agreement, term, condition or covenant, herein set forth, shall not constitute or be construed as a waiver of the rights of either or the other thereafter to enforce any other default of such agreement, term, condition or covenant; neither shall such failure to insist upon strict performance be deemed sufficient grounds to enable either party hereto to forego or subvert or otherwise disregard any other agreement, term, condition or covenants of this Agreement. 26.0 GOVERNING LAW. This Agreement and the rights and duties of the parties shall be construed and enforced in accordance with the laws of the State of Florida. 27.0 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter thereof. There are no representations, warranties, conditions or obligations except as herein specifically provided. Any amendment or modification hereof must be in writing. 29 IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written. EMPLOYER: IBIZ TECHNOLOGY CORP. By: Name: Title: EMPLOYEE: /s/ Ramon Perales ---------------------------------- RAMON PERALES 30 EX-10.2 3 v09498_ex10-2.txt EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 20th day of January, 2004, between iBIZ Technology Corp., a Florida corporation ("Corporation" or "Company" or "Employer"), and Bryan A. Scott ("Employee"). In consideration of the mutual covenants, agreements and provisions contained in this Agreement, the parties agree as follows: EMPLOYMENT 1.0 EMPLOYMENT. Employer employs Employee as President and Chief Executive Officer of Synosphere, and Employee accepts employment, upon the terms and conditions set forth herein. 2.0 TERM. This Agreement shall commence effective as of January 21, 2004, and shall continue in effect for a period of two (2) years ("Employment Period"); unless terminated earlier, by Company or Employee, upon prior written notice. Further, if a change of control (as defined herein) of the Company shall have occurred during the Employment Period, this Agreement shall continue in effect until January 21, 2005. 3.0 CHANGE OF CONTROL. The term "Change of Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("1934 Act) as in effect on the date of this Agreement or, if Item 5(f) is no longer in effect, any regulations issued by the Securities and Exchange Commission ("SEC") pursuant to the 1934 Act which serve similar purposes; provided that, without limitation, such change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act) is or becomes a beneficial owner, directly or indirectly, of securities of the company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board of Directors following such election. 4.0 COMPENSATION. For all services to be rendered by the Employee pursuant to his duties set forth in this Agreement, the Employee shall be paid as compensation; 4.1. BASE SALARY AND CONSIDERATIONS. A fixed salary in the amount of One Hundred and Twelve Thousand Dollars ($112,000) per year, payable in equal installments according to the Company's regular payroll schedule. This salary shall be reviewed from time to time during the term of this Agreement by the Corporation's Board of Directors or Compensation and Benefits Committee of the Board. If the Employee's base salary is not paid according to the Employer's normal payroll cycle, then the Employer shall issue shares of its common stock, valued at the moving average of the closing share price over the last 20 trading days with a 25% discount, as an alternative payment to the base salary. Such shares of common stock shall be issued under a Stock Retainer Plan, registered under a Form S-8 filed and made effective by the Employer. Such shares shall be issued and paid at the end of each month during which the payment(s) was not made, until such time that sufficient funds are available to make such payments. In addition, during the duration of the Employee's Term, the Employer shall issue an Earn Out bonus of common stock in Eight (8) payments, each payment made quarterly, in the amount of $62,500, the ("Earn Out"). Common stock shall be issued based on the moving average of the closing share price over the last 20 trading days and registered under Form S-8 and made effective by the Employer within 90 days of the payment date. In the event the Employer terminates the Employee for Cause as detailed in section 10.0 Termination, the Employee is not entitled to receive the Earn Out bonus portion that has not been paid as of the termination date. Furthermore, the Employer shall issue a Sign On bonus to the Employee in the amount of Two Million and Five Hundred Thousand (2,500,000) shares. The Sign On bonus shall be registered under Form S-8 and made effective by the Employer within 90 days of January 20, 2004. Lastly, during the Term, the Employer shall evaluate the Employee's performance semi-annually and may further award a Bonus based on performance. A performance review shall be conducted by the Employer during the month of June and December. 4.2 EMPLOYEE BENEFIT PLANS. The Employee, his dependents and beneficiaries, shall be entitled to participate in any pension, profit sharing, medical reimbursement, insurance or other employee payment or benefit plan of the Employer as may be in effect from time to time, subject to the participation standards and other terms thereof, to the same extent as other officers under the benefit practices of the Company. 4.3 CUMULATIVE COMPENSATION. The compensation provided for in paragraphs 4.1, and 4.2 above, together with the perquisites set forth in section 6.0 below, are in addition to the benefits provided for upon termination pursuant to Section 10.0 below. 31 4.4 INDEMNIFICATION. The Corporation hereby agrees to indemnify, and keep indemnified in accordance with, and to the fullest extent authorized by, the Laws of the State of Florida as it may be in effect from time to time, the Employee, from and against any expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Employee in connection with any threatened, pending or completed action, suit or proceeding, whether or not such action is by or in the right of the Corporation or such other enterprise with respect to which the Employee serves or has served as a director, officer or employee, by reason of the fact that the Employee is or was a director, officer or employee, of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise. The indemnification rights granted to the Employee under this Agreement shall not be deemed exclusive of, or in limitation of, any rights to which Employee may be entitled under the law of its state of incorporation, the Corporation's Certification of Incorporation of By-Laws, any other agreement, vote of stockholders or directors or otherwise. 5.0 EXPENSES. During the term hereof, the Corporation will reimburse the Employee for any reasonable out-of-pocket expenses incurred by the Employee in performance of service for the Corporation under this Agreement (e.g., transportation, lodging and food expenses incurred while traveling on Corporation business) and any other expenses incurred by the Employee in furtherance of the Corporation's business; provided, however, that the Employee renders to the Corporation a complete and accurate accounting of all such expenses. 6.0 PERQUISITES. During the period of employment, Employee shall be entitled to perquisites, including, without limitation, an appropriate office, and fringe benefits accorded executives of equal rank. 7.0 VACATIONS. The Employee shall be entitled to a vacation with full compensation equal to three (3) weeks each year; provided, however, that the Employee's vacation will be scheduled at such time as will least interfere with the business of the Employer. Attendance at a business seminar is not to be deemed a vacation; provided, whoever, that attendance at such meetings or seminars shall be planned so as to least interfere with the business of the Employer. 8.0 EMPLOYMENT. The Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company, for the Employment Period as specified in Section 2.0, to exercise such authority and perform such duties as are commensurate with the authority being exercised and duties being performed by the Employee immediately prior to the effective date of this Agreement, which services shall be performed at the location where the Employee was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company may reasonably require; provided that the Employee shall not be required to accept a location which is unreasonable in the light of the Employee's personal circumstances. The Employee agrees that during the Employment Period he shall devote his business time to his executive duties as described herein and perform such duties faithfully and efficiently. 9.0 PERFORMANCE. It is contemplated that during the period of employment the Employee shall serve as an executive of the Company with the office and title of President and Chief Executive Officer reporting directly to the Board of Directors during the period of employment, the Employee shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal to in responsibility and importance and in scope to and commensurate with his position described in general terms in this Section 9.0. 10.0 TERMINATION. 10.1 During the period of employment, Employee may terminate this Agreement without cause or for cause. For the purposes of this Section 10.1, the term "cause" shall include the occurrence of any of the following: 10.1.1 The breach or violation by the Company of any of the terms of this Agreement or of the Acquisition Agreement; 10.1.2. Any significant change in position, duties and responsibilities of the Employee to which the Employee does not consent; 32 10.1.3. In the event of a change in control as defined in Section 2.0 hereof, any change in the circumstances of employment which the Employee determines, in good faith, results in his being unable to carry out the duties and responsibilities attached to the position and contemplated by the definition of that position set forth in this Agreement. 10.2. In the event of an occurrence described in subsection 10.1.1, 10.1.2, or 10.1.3 above, the Employee shall serve written notice of such event upon the Company, setting forth in detail the circumstances that the Employee has determined constitutes "cause" within any of those definitions. In the event the Company should remedy or otherwise cure the facts constituting the cause relied upon by the Employee within thirty (30) days after such written notice, such fact or circumstance shall not be deemed to constitute "cause" for which employment can be terminated within the meaning of Section 10.1 above. 10.3. During the period of employment, the Corporation may terminate this Agreement for cause and upon thirty (30) days written notice and opportunity to cure being given to Employee. For the purpose of this Section 10.3, the term "cause" shall include the occurrence of any of the following: 10.3.1. Employee breaches or violates any of the terms of this Agreement; 10.3.2. Employee is convicted of any felony or is shown to have engaged in any act of dishonesty or fraud upon the Corporation, any of its affiliated companies, or any of its customers or clients; 10.3.3. Employee has been grossly negligent in the performance of his employment duties or responsibilities. 10.4. During the period of employment, the Corporation may not terminate this Agreement without cause. 10.5. This Agreement shall also terminate upon the insolvency, dissolution, or liquidation of the Corporation or cessation of business by the Corporation for at least thirty (30) consecutive days. 11.0 TERMINATION PAYMENTS. In the event of a Termination and subject to the provisions --------------------- of Sections 10.1.1., 10.1.2., 10.1.3. 10.4, or 10.5 of this Agreement, the Company shall pay to the Employee and provide him with the following: 11.1. the Company shall pay the Employee thirty (30) days following Termination, one lump sum payment of the Employee's base salary rate for the remaining period of the Term. Any shares not yet vested or shares not registered with the SEC shall vest and/or be registered as soon as is practicable. 11.2. During the remainder of the Employment or payment Period, the Employee shall continue to be treated as an employee under the provisions of any incentive compensation described in Section 4.2. In addition, the Employee shall continue to be entitled to all benefits and service credit for benefits under medical, insurance, split-dollar life insurance and other employee benefit plans, programs and arrangements of the Company described or referred to in Section 4.3 as if he were still employed during such period under this Agreement. 11.3. If, despite the provisions of paragraph 11.2 above, benefits or the right to accrue further benefits under any stock option or other incentive compensation arrangement described in Section 4.2 shall not be provided under any such arrangement to the Employee or his dependents, beneficiaries or estate because he is no longer an employee of the Company, the Company shall, to the extent necessary, pay or provide for payment of such benefits to the Employee or his dependents, beneficiaries or estate. 12.0 DISABILITY. 12.1. If the Employee is unable to perform the Employee's services by reason of illness or incapacity, the Employee's regular compensation shall be continued for a period of twelve (12) weeks following the week in which such illness or incapacity commences, at the end of which time no further compensation shall be due and payable to the Employee until the Employee shall return and resume the Employee's duties. In the event the Employee is eligible to receive payments on account of the fringe benefit program covering disability provided by the Corporation, then the Employee's base salary, as defined as above, will be reduced to the extent of such entitlement and receipt. 33 12.2. If, because of illness, physical or mental disability or other incapacity, Employee shall fail, for a period of one hundred twenty (120) work days during the term hereof, to render the services provided for by this Agreement, or if Employee contracts an illness or injury which will permanently prevent performance by him of the services and duties provided for by this Agreement by notice to the Employee effective thirty (30) days after the giving of such notice, after which no additional compensation shall be due. 13.0 DEATH. In the event of the death of Employee during the term of this Agreement, his employment hereunder shall terminate on the date of his death. In the accounting between the Employer and the Employee's personal representative, Employee's estate shall be due compensation under this Agreement equal to one year of Employee's salary. In addition, one hundred percent (100%) of the total amount of shares to be granted to the Employee and or the total amount of shares to be registered with the SEC to the Employee, shall vest and or be registered as soon as is practicable. 13.1 In the event of death, the Employee sets forth that the Employee's personal representative is the listed below and shall be due compensation in accordance with the provisions set forth in 13.0. Employee's Personal Representative: Bonnie and Garland Scott Relationship: Parents Address: 2802 Woodcutter Court, San Antonio, Texas 78231 Phone: (210) 493-1593 14.0 COMPETITION. 14.1. Employee covenants to and with the Employer, its successors and assigns, that during the term of this Agreement and for a period of twelve (12) months from the date of the termination of this Agreement for any reason, he will not directly or indirectly, enter into any agreement or arrangement with any other person, firm, corporation or entity to conduct any research or development, nor shall Employee directly or indirectly conduct such research or development on his own behalf, related to the discovery of processes, inventions, improvement, development or commercialization of any new device, apparatus or product competitive with a product developed, produced or reduced to practice solely by the Corporation, unless Employee shall have first obtained the Corporation's expressed written consent thereto. 14.2. In the event of a breach or threatened breach by Employee of any provisions of this Section 14.0 the Corporation shall be entitled to an injunction restraining it from the commission of such breach. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of money damages. The covenants contained in this Section 15.0 shall be construed as independent of any other provisions in this Agreement; and the existence of any claim or cause of action of Employee against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of said covenants. 14.3. The covenants contained in this Section 14.0 shall terminate and, upon termination, shall be unenforceable and of no further legal force and effect, in the event the Corporation, or any successor to the Corporation, becomes insolvent, is liquidated or ceases for any reason to conduct business operations for a continuous period of at least thirty (30) days. 14.4. The Corporation shall have the right to assign the aforesaid covenants; and Employee agrees to remain bound by the terms of the covenants to any and all subsequent purchaser and assignees of the assets and business of the Corporation. 15.0 NON-INTERFERENCE WITH EMPLOYEES. 15.1. Employee covenants with the Corporation that employees of or consultants to the Corporation and employees of and consultants to firms, corporations or entities affiliated with the Corporation have, of necessity, been exposed to and have acquired certain knowledge, understandings, and know-how concerning the Corporation's business operations which is confidential information and proprietary to the Corporation. 34 15.2. In order to protect the Corporation's confidential information and to promote and insure the continuity of the Corporation's contractual relations with its employees and consultants, Employee covenants and agrees that for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage other to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual or other relations with any or all of its employees or consultants, or (ii) induce or attempt to induce any employee or consultant to the Corporation to cease performing services for or on behalf of the Corporation, or (iii) solicit, offer to retain, or retain, or in any other manner engage or employ the services of, any person or entity who or which is retained or engaged by the Corporation, or any firm, corporation or entity affiliated with the Corporation, as an employee, consultant or agent. 15.3. In the Event any court of competent jurisdiction determines or holds that all or any portion of the covenants contained in this Section 15.0 are unlawful, invalid, or unenforceable for any reasons, then the parties hereto agree to modify the provisions of this Section 15.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 16.0 CLIENTS AND CUSTOMERS. 16.1. Employee covenants with the Corporation that the clients and customers of the Corporation, both actual and contemplated, constitute actual and prospective business relationships, which are proprietary to the Corporation and comprise, in part, the Corporation's confidential information and trade secrets. 16.2. In order to protect the Corporation's proprietary rights and to promote and ensure the continuity of the Corporation's contractual relations with its customers and clients, Employee covenants and agrees that, notwithstanding the provisions of Section 16.1 hereof, and for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage others to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual relations with any clients or customers, or (ii) induce or attempt to induce any client or customer of the Corporation to cease doing business with the Corporation. 16.3. In the event any court of competent jurisdiction determines or holds that all or any portions of the covenants contained in this Section 16.0 are unlawful, invalid or unenforceable for any reason, then the parties hereto agree to modify the provisions of this Section 16.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 17.0 COVENANT TO RETAIN CONFIDENCES. 17.1. Employee understands that all information learned, known, made, devised or developed concerning any of the Company's products and activities, including, without limitation, any inventions, discoveries, improvements, processes, formulas, computer programs (including their structure, sequence, organization, coherence, look and feel), apparatus, equipment, customer and client lists, marketing plans, mailing lists, art, graphics, display, research, and the like used by the Corporation in connection with its business constitutes the confidential information, proprietary information and trade secrets of the Corporation. Employee covenants and agrees that he will not (except as required in the course of his position with the Corporation), during the term hereof or thereafter for a period of twelve (12) months, communicate or divulge to, or use for the benefit of himself or any other person, firm, association, or corporation, without the consent of the Corporation, any confidential information or trade secrets possessed, owned, or used by the Corporation or its affiliates that may be communicated to, acquired by, or learned of by the Employee in the course of or as a result of his services with the Corporation. For the purposes of this Section 17.1, confidential information of the Corporation shall not include (i) any information developed by the Employee independently of services performed by the Employee for the Corporation pursuant to this Agreement; (ii) any information rightfully obtained by the Employee from a third party without restriction; (iii) any information publicly available other than through the fault or negligence of the Employee; (iv) any information disclosed by the corporation to third parties without restriction; or (v) information already known by the Employee prior to its disclosure by the Corporation. 35 17.2. Employee will not use in the course of Employee's employment with the Corporation, or disclose or otherwise make available to the Corporation, any information, documents or other items which Employee may have received from any other person or entity (including any prior employer), and which Employee is prohibited from so using, disclosing or making available. 17.3. All records, files, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents, prototypes, testing data, equipment, electronically stored information on disk, tape or any other medium or existing in computer memory transmitted by any means, including, but not limited to, telephone or electronic data transmission and the like, relating to the business of the Corporation or its affiliates, which Employee shall use or prepare or come into contact with, shall remain the sole property of the Corporation. 18.0 WORK PRODUCT. 18.1. All trade secrets, know-how, confidential information, copyrightable material, inventions, discoveries, and improvements, including computer programs (their structure, sequence, organization, coherence, look and feel), whether patentable or unpatentable, copyrightable or uncopyrightable, made, devised, discovered or reduced to practice by the Employee, whether by himself or jointly with others, from the time of becoming an employee of the Corporation until the termination of that status, shall be deemed work for hire and shall be promptly disclosed in writing to the Corporation and are to redound to the benefit of the Corporation and become and remain its sole and exclusive property. Should the Corporation choose to not purse registered protection for any disclosure provided by the employee within sixty (60) calendar days from the date of the disclosure, the decision to not pursue protection (on the sixty-first (61st) day) shall be deemed a decision that the information in the disclosure is unrelated to the business of the Corporation, and is a quitclaim to any rights related thereto. 18.2. By executing this Agreement, Employee hereby transfers and assigns to the Corporation, or person, firms or corporations designated by the Corporation, any or all of Employee's rights, title and interest in and to any and all developments, inventions, computer programs, discoveries, improvements, processes, devices, copyrights, patents and patent applications therefore, and to execute at any and all times any and all instruments and do any and all acts necessary or which the Corporation may deem desirable in connection with conveying, transferring and assigning Employee's entire right, title and interest in and to any inventions, discoveries, improvements, computer programs, processes devices, copyrights, patent applications therefore or patents thereon in any way related to the technology or trade secrets developed, discovered or reduced to practice by Employee during the term of this Agreement, it being the express understanding and agreement of the parties that any and all future developments, inventions, and discoveries of Employee during the term hereof shall be the property of the Corporation, or its assigns. 19.0 PATENTS AND COPYRIGHTS. 19.1. Employer shall cause to be filed United States and foreign patent and/or copyright applications on each invention deemed to be patentable or copyrightable and embodied in any technology developed and reduced to practice during the term hereof which inure to the Corporation by virtue of the provisions of Section 18.0 hereof. 19.2. The Corporation shall forfeit patent rights or copyrights to any patentable or copyrightable technology developed by Employee during the term hereof in any jurisdiction in which it fails to file patent or copyright applications six (6) months following a request by the Employee. Employer shall provide to Employee a copy of each application filed, and within six (6) months thereafter Employee shall designated what, if any, foreign countries he desires applications to be filed. Patent or copyright prosecution and maintenance shall be done by an attorney to be selected by the Corporation and approved by Employee, which approval shall not be unreasonably withheld. All reasonable expense of filing, prosecution and maintenance of domestic and foreign patents or copyrights and patent or copyright applications shall be borne by Employer. 36 19.3. Employer and Employee agree to forebear from, and not permit others to make or permit any public disclosure of any of the patentable matter prior to the application for a United States patent. All foreign patent applications shall be made no later than one (1) year following the date of the U.S. patent application. 19.4. All patents shall be applied for in the name of Employee, as inventor, and shall be assigned to the Corporation or assignee. All copyrights shall be registered in the name of the Corporation. The Employee shall, upon demand, execute and deliver to the Corporation or its assigns such documents or assignments as may be deemed necessary or advisable by counsel for the Corporation or its assigns for filing in the appropriate patent offices to evidence the assignment of the patent rights hereby granted. 20.0 REPRESENTATIONS OF EMPLOYEE. The Employee represents that, to the best of his knowledge and belief, neither his affiliation with the Corporation, nor his holding any position as officer, director, Employee, or consultant with the Corporation, nor his ownership of common stock in the Corporation, nor his performing any other services for the Corporation violates any presently existing, valid and enforceable contract, agreement, commitment or other legal relationship between Employee and any other person or entity. 21.0 ATTORNEYS' FEES. In the event there is any litigation or arbitration between the parties concerning this Agreement, the successful party shall be awarded reasonable attorneys' fees and litigation or arbitration costs, including the attorneys' fees and costs incurred in the collection of any judgment. 22.0 NOTICES. All notices required or permitted hereunder shall be sufficient if delivered personally or mailed to the parties at the address set forth below or at such other address as either party may designate in writing from time to time. Any notice by mailing shall be effective forty-eight (48) hours after it has been deposited in the United States certified mail, return receipt requested, duly addressed and with postage prepaid. 23.0 PARTIAL INVALIDITY. If any provisions of this Agreement are in violation of any statute or rule of law of any state or district in which it may be sought to be enforced, then such provisions shall be deemed null and void only to the extent that they may be in violation thereof, but without invalidating the remaining provisions. 24.0 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, personal representatives, successors and assigns; provided, however, that Employee may not assign his employment hereunder, and any assignment by Employee in violation of this Agreement shall vest no rights in the purported assignee. 25.0 WAIVER. No waiver of any breach of any one of the agreements, terms, conditions or covenants of this Agreement by the Employer or the Employee shall be deemed to imply or constitute a waiver of any other agreement, term, condition or covenant of this Agreement. The failure of either party to insist on strict performance of any agreement, term, condition or covenant, herein set forth, shall not constitute or be construed as a waiver of the rights of either or the other thereafter to enforce any other default of such agreement, term, condition or covenant; neither shall such failure to insist upon strict performance be deemed sufficient grounds to enable either party hereto to forego or subvert or otherwise disregard any other agreement, term, condition or covenants of this Agreement. 26.0 GOVERNING LAW. This Agreement and the rights and duties of the parties shall be construed and enforced in accordance with the laws of the State of Florida. 27.0 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter thereof. There are no representations, warranties, conditions or obligations except as herein specifically provided. Any amendment or modification hereof must be in writing. 37 IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written. EMPLOYER: IBIZ TECHNOLOGY CORP. By: Name: Title: EMPLOYEE: /s/ Bryan A. Scott -------------------------------- BRYAN A. SCOTT 38 EX-10.3 4 v09498_ex10-3.txt EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 20th day of January, 2004, between iBIZ Technology Corp., a Florida corporation ("Corporation" or "Company" or "Employer"), and Ramon Perales ("Employee"). In consideration of the mutual covenants, agreements and provisions contained in this Agreement, the parties agree as follows: EMPLOYMENT 1.0 EMPLOYMENT. Employer employs Employee as Chief Marketing Officer of Synosphere, and Employee accepts employment, upon the terms and conditions set forth herein. 2.0 TERM. This Agreement shall commence effective as of January 21, 2004, and shall continue in effect for a period of two (2) years ("Employment Period"); unless terminated earlier, by Company or Employee, upon prior written notice. Further, if a change of control (as defined herein) of the Company shall have occurred during the Employment Period, this Agreement shall continue in effect until January 21, 2005. 3.0 CHANGE OF CONTROL. The term "Change of Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("1934 Act) as in effect on the date of this Agreement or, if Item 5(f) is no longer in effect, any regulations issued by the Securities and Exchange Commission ("SEC") pursuant to the 1934 Act which serve similar purposes; provided that, without limitation, such change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act) is or becomes a beneficial owner, directly or indirectly, of securities of the company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities or (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board of Directors following such election. 4.0 COMPENSATION. For all services to be rendered by the Employee pursuant to his duties set forth in this Agreement, the Employee shall be paid as compensation; 4.1. BASE SALARY AND CONSIDERATIONS. A fixed salary in the amount of One Hundred and Twelve Thousand Dollars ($102,000) per year, payable in equal installments according to the Company's regular payroll schedule. This salary shall be reviewed from time to time during the term of this Agreement by the Corporation's Board of Directors or Compensation and Benefits Committee of the Board. If the Employee's base salary is not paid according to the Employer's normal payroll cycle, then the Employer shall issue shares of its common stock, valued at the moving average of the closing share price over the last 20 trading days with a 25% discount, as an alternative payment to the base salary. Such shares of common stock shall be issued under a Stock Retainer Plan, registered under a Form S-8 filed and made effective by the Employer. Such shares shall be issued and paid at the end of each month during which the payment(s) was not made, until such time that sufficient funds are available to make such payments. 39 In addition, during the duration of the Employee's Term, the Employer shall issue an Earn Out bonus of common stock in Eight (8) payments, each payment made quarterly, in the amount of $62,500, the ("Earn Out"). Common stock shall be issued based on the moving average of the closing share price over the last 20 trading days and registered under Form S-8 and made effective by the Employer within 90 days of the payment date. In the event the Employer terminates the Employee for Cause as detailed in section 10.0 Termination, the Employee is not entitled to receive the Earn Out bonus portion that has not been paid as of the termination date. Furthermore, the Employer shall issue a Sign On bonus to the Employee in the amount of Two Million and Five Hundred Thousand (2,500,000) shares. The Sign On bonus shall be registered under Form S-8 and made effective by the Employer within 90 days of January 20, 2004. Lastly, during the Term, the Employer shall evaluate the Employee's performance semi-annually and may further award a Bonus based on performance. A performance review shall be conducted by the Employer during the month of June and December. 4.2 EMPLOYEE BENEFIT PLANS. The Employee, his dependents and beneficiaries, shall be entitled to participate in any pension, profit sharing, medical reimbursement, insurance or other employee payment or benefit plan of the Employer as may be in effect from time to time, subject to the participation standards and other terms thereof, to the same extent as other officers under the benefit practices of the Company. 4.3 CUMULATIVE COMPENSATION. The compensation provided for in paragraphs 4.1, and 4.2 above, together with the perquisites set forth in section 6.0 below, are in addition to the benefits provided for upon termination pursuant to Section 10.0 below. 4.4 INDEMNIFICATION. The Corporation hereby agrees to indemnify, and keep indemnified in accordance with, and to the fullest extent authorized by, the Laws of the State of Florida as it may be in effect from time to time, the Employee, from and against any expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Employee in connection with any threatened, pending or completed action, suit or proceeding, whether or not such action is by or in the right of the Corporation or such other enterprise with respect to which the Employee serves or has served as a director, officer or employee, by reason of the fact that the Employee is or was a director, officer or employee, of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise. The indemnification rights granted to the Employee under this Agreement shall not be deemed exclusive of, or in limitation of, any rights to which Employee may be entitled under the law of its state of incorporation, the Corporation's Certification of Incorporation of By-Laws, any other agreement, vote of stockholders or directors or otherwise. 5.0 EXPENSES. During the term hereof, the Corporation will reimburse the Employee for any reasonable out-of-pocket expenses incurred by the Employee in performance of service for the Corporation under this Agreement (e.g., transportation, lodging and food expenses incurred while traveling on Corporation business) and any other expenses incurred by the Employee in furtherance of the Corporation's business; provided, however, that the Employee renders to the Corporation a complete and accurate accounting of all such expenses. 6.0 PERQUISITES. During the period of employment, Employee shall be entitled to perquisites, including, without limitation, an appropriate office, and fringe benefits accorded executives of equal rank. 7.0 VACATIONS. The Employee shall be entitled to a vacation with full compensation equal to three (3) weeks each year; provided, however, that the Employee's vacation will be scheduled at such time as will least interfere with the business of the Employer. Attendance at a business seminar is not to be deemed a vacation; provided, whoever, that attendance at such meetings or seminars shall be planned so as to least interfere with the business of the Employer. 40 8.0 EMPLOYMENT. The Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company, for the Employment Period as specified in Section 2.0, to exercise such authority and perform such duties as are commensurate with the authority being exercised and duties being performed by the Employee immediately prior to the effective date of this Agreement, which services shall be performed at the location where the Employee was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company may reasonably require; provided that the Employee shall not be required to accept a location which is unreasonable in the light of the Employee's personal circumstances. The Employee agrees that during the Employment Period he shall devote his business time to his executive duties as described herein and perform such duties faithfully and efficiently. 9.0 PERFORMANCE. It is contemplated that during the period of employment the Employee shall serve as an executive of the Company with the office and title of President and Chief Executive Officer reporting directly to the Board of Directors during the period of employment, the Employee shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal to in responsibility and importance and in scope to and commensurate with his position described in general terms in this Section 9.0. 10.0 TERMINATION. 10.1 During the period of employment, Employee may terminate this Agreement without cause or for cause. For the purposes of this Section 10.1, the term "cause" shall include the occurrence of any of the following: 10.1.1 The breach or violation by the Company of any of the terms of this Agreement or of the Acquisition Agreement; 10.1.2. Any significant change in position, duties and responsibilities of the Employee to which the Employee does not consent; 10.1.3. In the event of a change in control as defined in Section 2.0 hereof, any change in the circumstances of employment which the Employee determines, in good faith, results in his being unable to carry out the duties and responsibilities attached to the position and contemplated by the definition of that position set forth in this Agreement. 10.2. In the event of an occurrence described in subsection 10.1.1, 10.1.2, or 10.1.3 above, the Employee shall serve written notice of such event upon the Company, setting forth in detail the circumstances that the Employee has determined constitutes "cause" within any of those definitions. In the event the Company should remedy or otherwise cure the facts constituting the cause relied upon by the Employee within thirty (30) days after such written notice, such fact or circumstance shall not be deemed to constitute "cause" for which employment can be terminated within the meaning of Section 10.1 above. 10.3. During the period of employment, the Corporation may terminate this Agreement for cause and upon thirty (30) days written notice and opportunity to cure being given to Employee. For the purpose of this Section 10.3, the term "cause" shall include the occurrence of any of the following: 10.3.1. Employee breaches or violates any of the terms of this Agreement; 10.3.2. Employee is convicted of any felony or is shown to have engaged in any act of dishonesty or fraud upon the Corporation, any of its affiliated companies, or any of its customers or clients; 10.3.3. Employee has been grossly negligent in the performance of his employment duties or responsibilities. 10.4. During the period of employment, the Corporation may not terminate this Agreement without cause. 10.5. This Agreement shall also terminate upon the insolvency, dissolution, or liquidation of the Corporation or cessation of business by the Corporation for at least thirty (30) consecutive days. 41 11.0 TERMINATION PAYMENTS. In the event of a Termination and subject to the provisions of Sections 10.1.1., 10.1.2., 10.1.3. 10.4, or 10.5 of this Agreement, the Company shall pay to the Employee and provide him with the following: 11.1. the Company shall pay the Employee thirty (30) days following Termination, one lump sum payment of the Employee's base salary rate for the remaining period of the Term. Any shares not yet vested or shares not registered with the SEC shall vest and/or be registered as soon as is practicable. 11.2. During the remainder of the Employment or payment Period, the Employee shall continue to be treated as an employee under the provisions of any incentive compensation described in Section 4.2. In addition, the Employee shall continue to be entitled to all benefits and service credit for benefits under medical, insurance, split-dollar life insurance and other employee benefit plans, programs and arrangements of the Company described or referred to in Section 4.3 as if he were still employed during such period under this Agreement. 11.3. If, despite the provisions of paragraph 11.2 above, benefits or the right to accrue further benefits under any stock option or other incentive compensation arrangement described in Section 4.2 shall not be provided under any such arrangement to the Employee or his dependents, beneficiaries or estate because he is no longer an employee of the Company, the Company shall, to the extent necessary, pay or provide for payment of such benefits to the Employee or his dependents, beneficiaries or estate. 12.0 DISABILITY. 12.1. If the Employee is unable to perform the Employee's services by reason of illness or incapacity, the Employee's regular compensation shall be continued for a period of twelve (12) weeks following the week in which such illness or incapacity commences, at the end of which time no further compensation shall be due and payable to the Employee until the Employee shall return and resume the Employee's duties. In the event the Employee is eligible to receive payments on account of the fringe benefit program covering disability provided by the Corporation, then the Employee's base salary, as defined as above, will be reduced to the extent of such entitlement and receipt. 12.2. If, because of illness, physical or mental disability or other incapacity, Employee shall fail, for a period of one hundred twenty (120) work days during the term hereof, to render the services provided for by this Agreement, or if Employee contracts an illness or injury which will permanently prevent performance by him of the services and duties provided for by this Agreement by notice to the Employee effective thirty (30) days after the giving of such notice, after which no additional compensation shall be due. 13.0 DEATH. In the event of the death of Employee during the term of this Agreement, his employment hereunder shall terminate on the date of his death. In the accounting between the Employer and the Employee's personal representative, Employee's estate shall be due compensation under this Agreement equal to one year of Employee's salary. In addition, one hundred percent (100%) of the total amount of shares to be granted to the Employee and or the total amount of shares to be registered with the SEC to the Employee, shall vest and or be registered as soon as is practicable. 13.1 In the event of death, the Employee sets forth that the Employee's personal representative is the listed below and shall be due compensation in accordance with the provisions set forth in 13.0. Employee's Personal Representative: Esmeralda Perales Relationship: Spouse Address: 507 Cottonwood, Kennedy, Texas 78119 Phone: (830) 583-9708 42 14.0 COMPETITION. 14.1. Employee covenants to and with the Employer, its successors and assigns, that during the term of this Agreement and for a period of twelve (12) months from the date of the termination of this Agreement for any reason, he will not directly or indirectly, enter into any agreement or arrangement with any other person, firm, corporation or entity to conduct any research or development, nor shall Employee directly or indirectly conduct such research or development on his own behalf, related to the discovery of processes, inventions, improvement, development or commercialization of any new device, apparatus or product competitive with a product developed, produced or reduced to practice solely by the Corporation, unless Employee shall have first obtained the Corporation's expressed written consent thereto. 14.2. In the event of a breach or threatened breach by Employee of any provisions of this Section 14.0 the Corporation shall be entitled to an injunction restraining it from the commission of such breach. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of money damages. The covenants contained in this Section 15.0 shall be construed as independent of any other provisions in this Agreement; and the existence of any claim or cause of action of Employee against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of said covenants. 14.3. The covenants contained in this Section 14.0 shall terminate and, upon termination, shall be unenforceable and of no further legal force and effect, in the event the Corporation, or any successor to the Corporation, becomes insolvent, is liquidated or ceases for any reason to conduct business operations for a continuous period of at least thirty (30) days. 14.4. The Corporation shall have the right to assign the aforesaid covenants; and Employee agrees to remain bound by the terms of the covenants to any and all subsequent purchaser and assignees of the assets and business of the Corporation. 15.0 NON-INTERFERENCE WITH EMPLOYEES. 15.1. Employee covenants with the Corporation that employees of or consultants to the Corporation and employees of and consultants to firms, corporations or entities affiliated with the Corporation have, of necessity, been exposed to and have acquired certain knowledge, understandings, and know-how concerning the Corporation's business operations which is confidential information and proprietary to the Corporation. 15.2. In order to protect the Corporation's confidential information and to promote and insure the continuity of the Corporation's contractual relations with its employees and consultants, Employee covenants and agrees that for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage other to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual or other relations with any or all of its employees or consultants, or (ii) induce or attempt to induce any employee or consultant to the Corporation to cease performing services for or on behalf of the Corporation, or (iii) solicit, offer to retain, or retain, or in any other manner engage or employ the services of, any person or entity who or which is retained or engaged by the Corporation, or any firm, corporation or entity affiliated with the Corporation, as an employee, consultant or agent. 15.3. In the Event any court of competent jurisdiction determines or holds that all or any portion of the covenants contained in this Section 15.0 are unlawful, invalid, or unenforceable for any reasons, then the parties hereto agree to modify the provisions of this Section 15.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 16.0 CLIENTS AND CUSTOMERS. 16.1. Employee covenants with the Corporation that the clients and customers of the Corporation, both actual and contemplated, constitute actual and prospective business relationships, which are proprietary to the Corporation and comprise, in part, the Corporation's confidential information and trade secrets. 16.2. In order to protect the Corporation's proprietary rights and to promote and ensure the continuity of the Corporation's contractual relations with its customers and clients, Employee covenants and agrees that, notwithstanding the provisions of Section 16.1 hereof, and for so long as Employee holds any position or affiliation with the Corporation, including service to the Corporation as an officer, director, employee, consultant, agent or contractor, and for a period of twelve (12) months from the date Employee ceases to hold any such position or status with the Corporation or otherwise becomes disaffiliated with the Corporation, he will not directly or indirectly, or permit or encourage others to directly or indirectly (i) interfere in any manner whatsoever with the Corporation's contractual relations with any clients or customers, or (ii) induce or attempt to induce any client or customer of the Corporation to cease doing business with the Corporation. 43 16.3. In the event any court of competent jurisdiction determines or holds that all or any portions of the covenants contained in this Section 16.0 are unlawful, invalid or unenforceable for any reason, then the parties hereto agree to modify the provisions of this Section 16.0 if and only to the extent necessary to render the covenants herein contained enforceable and otherwise in conformance with all legal requirements. 17.0 COVENANT TO RETAIN CONFIDENCES. 17.1. Employee understands that all information learned, known, made, devised or developed concerning any of the Company's products and activities, including, without limitation, any inventions, discoveries, improvements, processes, formulas, computer programs (including their structure, sequence, organization, coherence, look and feel), apparatus, equipment, customer and client lists, marketing plans, mailing lists, art, graphics, display, research, and the like used by the Corporation in connection with its business constitutes the confidential information, proprietary information and trade secrets of the Corporation. Employee covenants and agrees that he will not (except as required in the course of his position with the Corporation), during the term hereof or thereafter for a period of twelve (12) months, communicate or divulge to, or use for the benefit of himself or any other person, firm, association, or corporation, without the consent of the Corporation, any confidential information or trade secrets possessed, owned, or used by the Corporation or its affiliates that may be communicated to, acquired by, or learned of by the Employee in the course of or as a result of his services with the Corporation. For the purposes of this Section 17.1, confidential information of the Corporation shall not include (i) any information developed by the Employee independently of services performed by the Employee for the Corporation pursuant to this Agreement; (ii) any information rightfully obtained by the Employee from a third party without restriction; (iii) any information publicly available other than through the fault or negligence of the Employee; (iv) any information disclosed by the corporation to third parties without restriction; or (v) information already known by the Employee prior to its disclosure by the Corporation. 17.2. Employee will not use in the course of Employee's employment with the Corporation, or disclose or otherwise make available to the Corporation, any information, documents or other items which Employee may have received from any other person or entity (including any prior employer), and which Employee is prohibited from so using, disclosing or making available. 17.3. All records, files, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents, prototypes, testing data, equipment, electronically stored information on disk, tape or any other medium or existing in computer memory transmitted by any means, including, but not limited to, telephone or electronic data transmission and the like, relating to the business of the Corporation or its affiliates, which Employee shall use or prepare or come into contact with, shall remain the sole property of the Corporation. 18.0 WORK PRODUCT. 18.1. All trade secrets, know-how, confidential information, copyrightable material, inventions, discoveries, and improvements, including computer programs (their structure, sequence, organization, coherence, look and feel), whether patentable or unpatentable, copyrightable or uncopyrightable, made, devised, discovered or reduced to practice by the Employee, whether by himself or jointly with others, from the time of becoming an employee of the Corporation until the termination of that status, shall be deemed work for hire and shall be promptly disclosed in writing to the Corporation and are to redound to the benefit of the Corporation and become and remain its sole and exclusive property. Should the Corporation choose to not purse registered protection for any disclosure provided by the employee within sixty (60) calendar days from the date of the disclosure, the decision to not pursue protection (on the sixty-first (61st) day) shall be deemed a decision that the information in the disclosure is unrelated to the business of the Corporation, and is a quitclaim to any rights related thereto. 44 18.2. By executing this Agreement, Employee hereby transfers and assigns to the Corporation, or person, firms or corporations designated by the Corporation, any or all of Employee's rights, title and interest in and to any and all developments, inventions, computer programs, discoveries, improvements, processes, devices, copyrights, patents and patent applications therefore, and to execute at any and all times any and all instruments and do any and all acts necessary or which the Corporation may deem desirable in connection with conveying, transferring and assigning Employee's entire right, title and interest in and to any inventions, discoveries, improvements, computer programs, processes devices, copyrights, patent applications therefore or patents thereon in any way related to the technology or trade secrets developed, discovered or reduced to practice by Employee during the term of this Agreement, it being the express understanding and agreement of the parties that any and all future developments, inventions, and discoveries of Employee during the term hereof shall be the property of the Corporation, or its assigns. 19.0 PATENTS AND COPYRIGHTS. 19.1. Employer shall cause to be filed United States and foreign patent and/or copyright applications on each invention deemed to be patentable or copyrightable and embodied in any technology developed and reduced to practice during the term hereof which inure to the Corporation by virtue of the provisions of Section 18.0 hereof. 19.2. The Corporation shall forfeit patent rights or copyrights to any patentable or copyrightable technology developed by Employee during the term hereof in any jurisdiction in which it fails to file patent or copyright applications six (6) months following a request by the Employee. Employer shall provide to Employee a copy of each application filed, and within six (6) months thereafter Employee shall designated what, if any, foreign countries he desires applications to be filed. Patent or copyright prosecution and maintenance shall be done by an attorney to be selected by the Corporation and approved by Employee, which approval shall not be unreasonably withheld. All reasonable expense of filing, prosecution and maintenance of domestic and foreign patents or copyrights and patent or copyright applications shall be borne by Employer. 19.3. Employer and Employee agree to forebear from, and not permit others to make or permit any public disclosure of any of the patentable matter prior to the application for a United States patent. All foreign patent applications shall be made no later than one (1) year following the date of the U.S. patent application. 19.4. All patents shall be applied for in the name of Employee, as inventor, and shall be assigned to the Corporation or assignee. All copyrights shall be registered in the name of the Corporation. The Employee shall, upon demand, execute and deliver to the Corporation or its assigns such documents or assignments as may be deemed necessary or advisable by counsel for the Corporation or its assigns for filing in the appropriate patent offices to evidence the assignment of the patent rights hereby granted. 20.0 REPRESENTATIONS OF EMPLOYEE. The Employee represents that, to the best of his knowledge and belief, neither his affiliation with the Corporation, nor his holding any position as officer, director, Employee, or consultant with the Corporation, nor his ownership of common stock in the Corporation, nor his performing any other services for the Corporation violates any presently existing, valid and enforceable contract, agreement, commitment or other legal relationship between Employee and any other person or entity. 21.0 ATTORNEYS' FEES. In the event there is any litigation or arbitration between the parties concerning this Agreement, the successful party shall be awarded reasonable attorneys' fees and litigation or arbitration costs, including the attorneys' fees and costs incurred in the collection of any judgment. 22.0 NOTICES. All notices required or permitted hereunder shall be sufficient if delivered personally or mailed to the parties at the address set forth below or at such other address as either party may designate in writing from time to time. Any notice by mailing shall be effective forty-eight (48) hours after it has been deposited in the United States certified mail, return receipt requested, duly addressed and with postage prepaid. 23.0 PARTIAL INVALIDITY. If any provisions of this Agreement are in violation of any statute or rule of law of any state or district in which it may be sought to be enforced, then such provisions shall be deemed null and void only to the extent that they may be in violation thereof, but without invalidating the remaining provisions. 45 24.0 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, personal representatives, successors and assigns; provided, however, that Employee may not assign his employment hereunder, and any assignment by Employee in violation of this Agreement shall vest no rights in the purported assignee. 25.0 WAIVER. No waiver of any breach of any one of the agreements, terms, conditions or covenants of this Agreement by the Employer or the Employee shall be deemed to imply or constitute a waiver of any other agreement, term, condition or covenant of this Agreement. The failure of either party to insist on strict performance of any agreement, term, condition or covenant, herein set forth, shall not constitute or be construed as a waiver of the rights of either or the other thereafter to enforce any other default of such agreement, term, condition or covenant; neither shall such failure to insist upon strict performance be deemed sufficient grounds to enable either party hereto to forego or subvert or otherwise disregard any other agreement, term, condition or covenants of this Agreement. 26.0 GOVERNING LAW. This Agreement and the rights and duties of the parties shall be construed and enforced in accordance with the laws of the State of Florida. 27.0 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter thereof. There are no representations, warranties, conditions or obligations except as herein specifically provided. Any amendment or modification hereof must be in writing. IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written. EMPLOYER: IBIZ TECHNOLOGY CORP. By: Name: Title: EMPLOYEE: /s/ Ramon Perales ---------------------------------- RAMON PERALES 46 EX-31.1 5 v09498_ex31-1.txt EXHIBIT 31.1 IBIZ TECHNOLOGY CORP. OFFICER'S CERTIFICATE PURSUANT TO SECTION 302 I, Kenneth W. Schilling, the Chief Executive Officer and Chief Financial Officer of IBiz Technology Corp., certify that: 1. I have reviewed this Form 10-QSB of IBiz Technology Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: December 1, 2004 By: /s/ Kenneth W. Schilling ------------------------ Kenneth W. Schilling Chief Executive Officer and Chief Financial Officer 47 EX-32.1 6 v09498_ex32-1.txt EXHIBIT 32.1 IBIZ TECHNOLOGY CORP. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of IBiz Technology Corp. (the Company) on Form 10-QSB for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Kenneth W. Schilling, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to IBiz Technology Corp. and will be retained by IBiz Technology Corp. and furnished to the Securities and Exchange Commission or its staff upon request. Date: December 1, 2004 By: /s/ Kenneth W. Schilling ------------------------ Kenneth W. Schilling Chief Executive Officer and Chief Financial Officer 48 -----END PRIVACY-ENHANCED MESSAGE-----