-----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, H/VddlqNYTSEZKULYpfMFxiCNdLz2Aiap5PvqIC81vjSYmpCnYsSzlnbtvK1ipSs N9jwDgW+U0U9goO7ZYYFAg== 0000883041-97-000030.txt : 19970912 0000883041-97-000030.hdr.sgml : 19970911 ACCESSION NUMBER: 0000883041-97-000030 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970828 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE TECHNOLOGIES CORP INC CENTRAL INDEX KEY: 0000883041 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 980120805 STATE OF INCORPORATION: WY FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-19796 FILM NUMBER: 97672016 BUSINESS ADDRESS: STREET 1: 104 SOUTH HARBOR CITY BLVD STREET 2: STE A CITY: MELBOURNE STATE: FL ZIP: 32901 BUSINESS PHONE: 4079534811 10KSB 1 10KSB FOR FYE UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 FOR THE FISCAL YEAR ENDED May 31, 1997 COMMISSION FILE NUMBER: 0-19796 INTERACTIVE TECHNOLOGIES CORPORATION, INC. (Exact name of registrant as specified in charter) Wyoming 98-0120805 (State or other (IRS Employer jurisdiction of Identification No.) incorporation) 102 SOUTH HARBOR CITY BOULEVARD MELBOURNE, FLORIDA 32901 (Address of Principal Executive Offices) Registrant's telephone number including area code: 407-953-4811 Securities Registered Under Section 12(b) of the Exchange Act: NONE Securities Registered Under Section 12(g) of the Exchange Act: COMMON STOCK, $0.01 PAR VALUE. Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes_X_ No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. _X_ The Registrant's operating revenues for its most recent fiscal year were: $197,781.27 The aggregate market value of voting stock held by non-affiliates of the Registrant, based on the average of the closing bid and asked prices of the Registrant's Common Stock in the NASDAQ market as reported by NASDAQ on May 31,1997, was approximately $8,224,515. Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive. As of May 31, 1997, 12,279,612 shares of Common Stock, $0.01 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. LOCATION OF EXHIBIT INDEX The index of exhibits is contained in PART IV, Item 13 herein on page 11. TABLE OF CONTENTS PART I: Page Item 1. Description of Business 1 Item 2. Description of Properties 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 4 PART II: Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 5 Item 6. Management's Plan of Operation 5 Item 7 Financial Statements 7 Item 8 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 7 PART III: Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act 8 Item 10. Executive Compensation Item 11. Security Ownership of Certain Beneficial Owners and Management 9 Item 12. Certain Relationships and Related Transactions 10 PART IV: Item 13. Exhibits, and Reports on Form 8-K 10 SIGNATURES 12 PART I Item 1. Description of Business. - -------------------------------- Background. Interactive Technologies Corporation, Inc. (ITC) was incorporated in the state of Wyoming on August 8, 1991. At that time, ITC was engaged in the business of exploiting its rights under a license granted by CST Entertainment Imaging, Inc. ("CST"). Such license gave ITC the exclusive right to use CST's coloring process to convert to color black-and-white film and videotape, including black-and-white theatrical films and television programs produced for distribution in Europe. ITC also had exclusive right to use CST's technology to provide digital special visual effects for new film and video productions produced for distribution primarily in the European territory. ITC ceased this effort on October 18, 1995, when it exchanged the license in satisfaction of certain of its debt. On October 20, 1995, ITC entered into an agreement to acquire assets of Syneractive, Inc. ("SI"), a Florida corporation. SI's assets included intellectual property consisting of a television production and the trade name Rebate TV. The assets also included license rights from the FCC to provide Interactive Video and Data Service ("IVDS") in the Charleston-North Charleston, South Carolina, and Melbourne-Titusville-Palm Bay, Florida metropolitan areas. In exchange for such assets, ITC issued 5,700,000 shares of common stock to Perry Douglas West, its current sole director and officer. Principal Products or Services and Their Markets. General. ITC develops and produces interactive television and interactive digital media programming for distribution on cable, by broadcast and direct satellite television, and over the Internet. ITC's principal interactive programming product is Rebate TV(TM) The product allows a consumer to receive a cash rebate from ITC for purchases of products advertised on the Rebate TV(TM) television program by incorporating interactive media and computer data management. Rebate TV(TM) is designed to utilize existing communication technologies for consumer responses. It now uses the telephone and the Internet as return links. However, it is also designed to easily accommodate the emerging interactive television systems as they come into use, such as IVDS and Interactive Television (via fiber optic cable/telephone cable etc.) Initial Market. ITC conducted a beta test of Rebate TV(TM) from April 15, 1996, through January, 1997 (the "Test Period"). During the Test Period, Rebate TV(TM) aired one half hour daily, seven days a week, on WIRB/Channel 56 in the central Florida market. That market serves a population of approximately 2,175,000. During the Test Period, the television program was divided into 14 one minute retail information segments which were utilized by advertisers to provide information about their company and a brief description of the cash rebate offered to the consumer. The balance of the program consisted of information segments, rebate reviews and instructional segments. Retailers represented a broad spectrum of business including grocery chains, furniture stores, tire service stores, retail banks, restaurants, car dealers and various specialty businesses. ITC collected point-of-sale information from the vendors who participated during the Test Period, and processed that data along with Rebate TV(TM) customer call-in data. Rebates were credited to customer accounts as they were verified. ITC manages escrow accounts for retail vendors so that rebates are transferred to a general customer escrow fund as they are credited. Consumers making a purchase of items of product or in dollar amounts which carried the rebate offered by a participating retailer (i.e. a $5 rebate on a purchase of $50 or more, or $10 rebate on the purchase of a brake package, etc.). By calling ITC's toll free telephone number, 1-888-2REBATE, the consumer would be connected to ITC's computer data base, and could then register the Rebate TV(TM) number on the bottom of the receipt. At the end of the month, ITC sends a check to the Rebate TV(TM) customer for a total of all rebates processed during that month. These rebates are in addition to coupons or other promotional offers by the vendor. Rebate TV(TM) had approximately 4,000 subscribers by the end of the Test Period. Revenue Sources. ITC receives revenues of two types from Rebate TV(TM). First, retail vendors will pay an initial production fee to ITC for the production of the information segment that becomes part of the television show. Then, the retail vendors will pay ITC a transaction fee based upon verified sales. The amount of the transaction fee will vary with the type of retailer and the frequency of purchase of its products. For instance, the transaction fee for a automobile sale is much higher than a grocery store because of the size and frequency of purchase. 1 Program Development. ITC's research and development efforts consumed the technical efforts of ITC from October 1995 through the airing of Rebate TV(TM) on April 15, 1996, and involved two basic areas: the television programming for the shows, and the data management and computer interface development efforts for the interaction with the retailers and the consumers. None of this expense will be borne directly by the retailers or the consumers, but will be recouped through profits as ITC expands its markets. Development of Rebate TV(TM) basic programming by ITC has been done during the fiscal year with Century III at Universal Studios, Florida. Established in 1976, Century III has serviced a widely diverse client base with high production values utilizing the latest and finest in production and post-production hardware. This includes local, regional, national and international projects for all four broadcast television networks, national cable networks such as Nickelodeon and HBO, major independent producers, advertising agencies and major corporate and governmental organizations such as Digital Equipment Corporation, Harris Corporation, General Electric, NCR, AT&T, Kodak, Polaroid, Walt Disney World, Harcourt Brace Jovanovich, FPL Group, Westinghouse, McDonnell Douglas, Martin Marietta, Reebok, International and NASA. The creative director for Rebate TV(TM) is Michael Hamilton who has designed, directed and produced such television series as "Magnum P.I.", "Simon & Simon", "Wings" and "The Twilight Zone". His commercial experience includes such clients as CadillacTM, Texaco, Coca ColaTM, Heineken, American Airlines, Donna Karan, Elizabeth Arden, QVC, Business Technology Management and the Family Channel. The computer development efforts related to Rebate TV(TM) were done at ITC's engineering offices in Melbourne, Florida, where the hardware and software designs and specifications were developed, tested and implemented during the past two fiscal years to: (i) manage the large amounts of data and transactions involved in collecting and verifying sales information from the Rebate TV(TM) retailers; (ii) calculate the rebates, record the credits, and issue the checks to the consumer; (iii) accommodate and record the telephone rebate requests, and (iv) provide automated participation information to the public. ITC looks to Rebate TV(TM) to attract its share of the communications industry end-user market which is estimated to be $189.3 billion by 1998. Interactive digital media is projected to remain the fastest growing category in the industry. Internet Access. ITC's Internet home pages for use with Rebate TV(TM) allow viewers to access the program's data base through the Internet. It allows them to view the status of their accounts, enter vendor rebate claims, and later will allow viewers to access a variety of products and services associated with Rebate TV(TM) which ITC expects to include. ITC's home page is located at http://www.REBATETV.COM Network Operations. ITC intends to develop and produce its own television channel and to distribute its Rebate TV(TM) video programming in this format to customers. ITC's distribution plan currently provides for distribution of this programming started in the central Florida markets to expand from there. Interactive Video and Data Services. As part of ITC's commitment to the evolution of interactive television, its Federal Communications Commission Interactive Video and Data Services ("IVDS") radio station licenses in the Charleston-North Charleston, South Carolina, and Melbourne-Titusville-Palm Bay, Florida service areas represent an additional enhancement to ITC's programming distribution. These licenses have a duration of an initial five years, and are renewable if all conditions of the license are met. IVDS, a two way communications system, will allow viewers to take an active role in systems delivered through broadcast television, cable television, wireless cable, direct broadcast satellite or other future television delivery methods. IVDS is regulated as a personal radio service under the rules of the FCC which has allocated spectrum in the 218-219 MHZ range for its use. IVDS systems are designed to operate with a hand-held remote control device that controls the interactive set top device on the subscriber's television set. A viewer would interact with the TV station through a radio signal using an IVDS frequency. ITC has sold under contract, 90% of this ownership of this license and equipment and has reserved rights to provide programming to this license area when it is in operation. 2 ITC is reviewing alternative uses and equipment proposals for its Melbourne-Titusville-Palm Bay, Florida license and expects to proceed to install a system for this license within the next 24-36 months. Although ITC will run its Rebate TV(TM) and other programs on its own service area systems, the programs it develops are intended for use on various interactive delivery systems and are not specific to Interactive Video and Data Services systems. They are marketed to all of these various delivery systems. For broadcast of Rebate TV(TM) programming ITC currently uses and plans to use standard video media distribution methods such as cable, broadcast stations, wireless cable and direct broadcast satellite. Although ITC has designed its programs to utilize an IVDS return link (a "return link" is the method by which data is sent from the consumer or viewer back to the originator of the program), they are also designed to accommodate other return links such as the telephone. ITC has purchased equipment and software to provide a telephone return link as an interim return link for its own license areas as well as other areas where it is providing programming, to be utilized where IVDS is not available; until the installation an operation of the IVDS equipment as a return link is completed as well as for use with non subscribers to IVDS. Intellectual Content. ITC has developed a plan for the accumulation and sale of intellectual content. This content takes several forms, including completed television and video programming, both developed and produced by ITC and by third parties; property rights to written scripts and publications for the purpose of producing or having produced television or motion picture products; and program ideas, concepts and designs. In addition to the Rebate TV(TM) programs, ITC has filed and had accepted trademark applications with the United States Patent and Trademark Office for "Rebate TV", for "DEAL! DEALS! DEALS!" (a direct shopping program which ITC has produced), and "Television that pays you to shop". ITC has in addition under this plan a number of projects under consideration and review. To date, revenue from these activities has been limited to the Rebate TV(TM) television program, and to a limited showing of its DEAL! DEALS! DEALS! program. There is associated with each of these shows and projects a lead time or advance period necessary for development and scheduling. In addition, ITC may elect to sell outright or resell any of these properties. ITC continually accumulates data in the operation of its Rebate TV(TM), and examines this data with regard to indicated changes in its programming. ITC expects to continue research and development of its products based upon the collection of this data. Competitive Conditions. ITC is unaware of any direct competition with Rebate TV(TM). However, there are other companies in the interactive television industry that have announced that they will provide programming to the interactive television marketplace. Many of these companies will be better capitalized than ITC and will be better positioned to take to take advantage of this emerging market. There is no assurance that ITC will secure a competitive position in such market or that its activities will result in profit to ITC. FCC Licensing. The ability of ITC to provide IVDS services in the United States is subject to the rules and regulations, if any, promulgated by the FCC. At present there are no such rules or regulations. However, there is no assurance that there will not be rules and regulations forth coming which are adverse to the interests of ITC. Acquisition of Airtech International Corporation. The Company has entered into an agreement for the acquisiton of Airtech International Corporation of Dallas, Texas and has filed a registration statement under the Securities Act of 1933 on form S-4. The discussion below includes a discussion of both the Company's information and that of Airtech International Corporation which is incorporated by reference. This agreement calls for the Company to purchase all, but not less than 81%, of the issued and outstanding $0.0001 par value common stock of AIRTECH pursuant to a Stock Purchase Agreement, dated as of May 8, 1997. (Such Stock Purchase Agreement, as amended and restated as of August 1, 1997, the Stock Purchase Agreement) Pursuant to the Stock Purchase Agreement, each holder of the AIRTECH common stock (the AIRTECH Common Stock) which accepts ITC's purchase offer shall receive in exchange for such AIRTECH Common Stock: (i) his pro-rata percent of 3 8,000,000 shares of ITC's $.01 par value common shares; (ii) his pro-rata share of 8,850,000 shares of ITC's Convertible Preferred Shares (the ITC Preferred Shares), and his pro-rata share of $9,000,000 aggregate principal amount of ITC's Convertible 10% Debentures (the ITC Debentures). The remaining 21,707,142 shares of Common Stock being registered hereunder is being reserved by ITC against the conversion, if any, of the Convertible Preferred Shares and the ITC Debentures. Number of Persons Employed. As of August 1, 1997, ITC had five employees, three of which are full-time. The Company's fiscal year runs from June 1 to May 31 of each year. Item 2. Description of Properties. - ------------------------------------ The Company currently has executive and engineering offices at 102 South Harbor City Boulevard, Melbourne, Florida and programming and media offices at Century III at Universal Studios, 2000 Universal Studios Plaza, Suite 100, Orlando, Florida. The Melbourne facility consists of 1,250 square feet of office and engineering space, and is leased from The Network Group, for a term of one year, with automatic renewal for an additional 12 months unless either Landlord or Tenant is notified in writing by the other party at least 60 days prior to termination date. Monthly lease payments are $1,250.00 plus applicable Florida sales tax. The Company's Century III office at Universal Studios consists of approximately 250 square feet of office space and use of common areas. The cost of this space is included in invoicing for production work Century III is performing for the Company. Item 3 Legal Proceedings - ------------------------- The Company is a defendant in a proceeding filed in the United States District Court for the Southern District of New York. It accepted service April 5, 1997 in an action brought by Studiolink Corporation and Steven Campus for damages arising out of an equipment lease agreement. The Company expects to assert counterclaims against the Plaintiffs for losses suffered as a result of their failure to perform. Settlement discussions have been ongoing and the Company expects this matter to be settled in a manner not unfavorable to the Company. In addition, in related matters, the Company is in litigation with LLB Realty, L.L.C. which has filed a claim alleging claims under an office lease agreement in Superior Court of New Jersey, Mercer County. The Company has asseted claims against L.L.B. Realty, L.L.C. for failure to perform under the conditions of the agreement. Settlement negotiations have been ongoing and the Company expects this matter to be settled in a manner no unfavorable to the Company. The Company is not as party to any other pending legal proceedings except for claims and lawsuits arising in the normal course of business. ITC does not believe that these claims or lawsuits will have a material effect on ITC's financial condition or results of operations Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------ A Special Meeting of Shareholders was had on May 2, 1997 at the Company's offices are 102 South Harbor City Boulevard, Melbourne, Florida 32901. Of the 12,209,612 shares eligible to vote, 7,581,808 were present to vote at the meeting. By an affirmative vote of 7,581,808 shares the Shareholders voted to amend the Articles of Incorporation of the Company to increase the authorized common shares of stock in the Company to 50,000,000 and to increase the authorized preferred shares of stock in the Company to 20,000,000. The Board of Directors did not solicit proxies for this meeting and no proxy statement was filed or distributed. 4 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. - ------------------------------------------------------------------------------ a. Market Information Interactive Technologies, Inc. common shares are traded on the National Association of Securities Dealers Automated Quotation Systems (NASDAQ) SmallCap Market under the symbol "ITNL". The Company's shares were traded on the NASDAQ exchange beginning April 30, 1996. High and low quotes for the last quarter of the Company's fiscal year when the shares began trading on NASDAQ were: High Low Fiscal Year 1997 4th Quarter 1 15/16 3/8 3rd Quarter 1 1/2 1 1/8 2nd Quarter 4 1 1/4 1st Quarter 5 1/4 4 1/4 Fiscal Year 1996 4th Quarter 5 4 7/8 Prior to being traded on the NASDAQ exchange, the Company's common shares were traded in the "over-the-counter" or "Bulletin Board" market. The following quotes represent the quarterly high and low quotes available through the quarter ending 12/29/95. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions: Fiscal Year 1996 High Low Quarter Ending 3/29/96 4 3/4 3 7/8 Quarter Ending 12/29/95 4 2 1/2 Prior to the quarter ending 12/29/95 of the Company's FY 96, and during the previous FY 95, to the best of the Company's knowledge, no trading occurred in the Company's common stock. b. Holders As of August 1, 1997, there were approximately 950 record holders of the Company's Common Stock. c. Dividends The Company has never paid any cash dividends on its Common Stock and has no present intent to pay any cash dividends in the foreseeable future. The declaration of cash dividends will depend on future earnings, if any, the financial needs of the Company, and other pertinent factors. Further, the declaration of dividends will be at the discretion of the Company's Board of Directors. Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS - --------------------------------------------- Results of Operations Revenues for the combined operations of ITC and AIRTECH were $1,648,878 for the nine months ending February 28, 1997, with a Gross Profit of $1,048,391 after Cost of Goods Sold. ITC's operations for the same nine month period consisted of primarily of completion of its initial market testing of its Rebate TV(TM) television program in the Central Florida Market. Net revenues for this period were $194,804. ITC has developed and operates a computer system and communications system to support its Rebate TV(TM) program on a national basis. The operation of these systems and the development of a national marketing program during this period resulted in General and Administrative Expenses of $1,356,397 and a net loss from operations of $1,158,593. During this period ITC realized a gain of $311,500 from the sale of a 90% interest in its Charleston, South Carolina IVDS license. Development of ITC's computer system and communications link are substantially complete and now available for access on a national basis. 5 AIRTECH for such nine month period had Gross Revenues in the amount of $1,648,878 resulting in Gross Income after Cost of Goods sold of $1,048,391. During such period, AIRTECH was completing development of a new line of air filtration equipment after cancellation of its agreement with Honeywell Environmental Air Control, Inc. Cancellation of such Agreement, resulted in General and Administrative Expenses of $2,102,894 and a Net Loss of $1,054,503 before depreciation and amortization. Development of AIRTECH's basic line of products is substantially complete and AIRTECH has begun marketing its products directly and through its new franchise program. Material Changes in Operations and Financial Condition With the end of its initial market testing, ITC has changed its focus from program development and testing to market expansion. Operation of Rebate TV(TM) although currently distributable and supportable on a national basis, requires that it be rolled out on a market by market basis. ITC faces a number of decisions as to whether to concentrate its resources on local markets supported by smaller vendors (such as Bedroom Land and Kobe Steak Houses) or to concentrate on multiple markets driven by regional and national advertisers (such as Airtran Airways and Cakes Across America). ITC is currently developing promotional programs to drive subscribers to either market but is concentrating on a single market approach to support each market with such programs as its School Organization Promotion (Rebate TV(TM) goes to School). ITC has been subject to several delays in its expansion with the departure of Mr. Poe who was in charge of the market expansion effort including some additional delays in recovering company files and information from Mr. Poe. ITC is currently in pre-production of its new program and expects it to air within the fall of 1997. Also during this period, ITC withdrew from a production studio project in New Jersey due to substantial delays caused by both the real estate lessor and the studio equipment lessor. This decision by management was encouraged by substantial changes in post production equipment and software technology in the very short term which would have required additional capital expenditures by ITC. The Company continues to produce Rebate TV(TM) in central Florida and has entered into a strategic relationship with Bottomline, Inc. of Atlanta, Georgia which will make available to ITC production and post production resources to meet requirements by the ITC as it expands into additional markets. AIRTECH until May of 1996 was a full service distributor for Honeywell Environmental Air Control, Inc. Upon termination of that contract, AIRTECH began development of a complete line of air purification products to replace the Honeywell line. AIRTECH sales for the 9 month period referenced above are a result of this product development (See Principal Products and Services). In May 1997, AIRTECH incorporated Airsopure, Inc. as a wholly owned subsidiary for the implementation and operation of a franchise sales program for the distribution and sales of air purification products. (See Franchise Program). AIRTECH continues to distribute products directly and through its subsidiary McClusky Sales and Service, Inc. In addition, AIRTECH has developed certain products which has presented for distribution to the multilevel marketing industry. Liquidity and Capital Resources During the nine month period ending February 28, 1997, ITC and AIRTECH continued to fund operations and expansion through revenues and private sales of equity securities and debt. In fiscal year 1996, ITC received net cash from financing activities in the amount of $1,172,150 with AIRTECH receiving $2,698,530 during that period. For the nine month period referenced above, the combined companies received $1,837,023 in cash and subscription receivables from financing activities. Although neither ITC nor AIRTECH have commitments for future funding, management believes that it can continue to raise additional capital for expansion of its markets though revenue and private sources. In addition, ITC has agreed to issue $5,000,000 in Series M Preferred Stock (the Series M Stock) on a private basis to accredited investors in the form of 200 units consisting of 25,000 shares of convertible preferred stock convertible into common at the rate of one share for one share of preferred and 25,000 warrants convertible into common stock at a price of $2.00 per share. The preference for this series is to a pro rata portion of 20% of the Gross Profits from the sales of the AIRTECH Model 950 Air Purification and Filtration System being developed as a Class II Medical Device for Medicare Recipients with Respiratory Conditions. This preference is for a period of three years from the 6 date production begins. AIRTECH has agreed to assign a 25% interest in this revenue stream to ITC out of which this 20% will be set aside for this preference. The Series M Stock will be offered pursuant to Rule 506 of Regulation D of the Securities Act of 1933. Twenty-five percent (25%) of the net proceeds of the sale of the Series M Stock will be used for market expansion and distribution of the Rebate TV(TM) programming, and seventy-five percent (75%) of such net proceeds will be allocated for the development and distribution of the AIRTECH Model 950. ITC does not have an underwriter for this placement. Management expects that the sales of the Series M Stock will be completed, although there is no assurance that either it will be completed or that the funds will otherwise be available to fund the operations and expansion of the combined companies. Convertible Debentures. Effective as of May 31, 1997, Exergon Capital S.A.,Laughlin Securities Limited, Crestridge Investments, Ltd. and Jayhead Investments Ltd. (collectively, the "Converting Debenture Holders" exercised their $1,050,000 principal amount of ITC's Convertible Debentures (the May 1997 Debentures) in exchange for 1,144,444, aggregate number, of ITC's Common Stock. In connection with such conversion, the Converting Debenture Holders received the May 31 Warrants (defined below). May 31 Warrants. In connection with the conversion of the May 31 Debentures, the Converting Debenture Holders received warrants (the "May 31 Warrants") which are exercisable within five years from May 31, 1997, upon 30 days written notice and upon payment of the exercise price. The May 31 Warrants may be converted, in the aggregate, into 1,144,444 shares of ITC common stock as follows: Debenture Holder No. Of Shares Exercise Price Per Share Exergon Capital, S.A. 333,333 $0.90 Laughlin Securities Limited 250,000 $0.90 Crestridge Investments Ltd. 250,000 $0.75 Jayhead Investments Ltd. 250,000 $1.00 Item 7. Financial Statement. - ----------------------------- The Registrant is unable to file financial statements at the time of this report in that its auditor has not completed the audit report with its financial statements. Time required for preparation of proforma financial statements including the Registrant and Airtech International Corporation for filing with Registered S-4 registration statements delay the Registrant's accountants in completion of audit report for fiscal year. The report will be filed in full with an amended 10-KSB Report within 15 days. Item 8. Changes In and Disagreements With Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure - -------------------- By unanimous consent of the Board of Directors of the Company on November 10, 1995, the Registrant engaged the accounting firm of Turner, Stone & Company of Dallas, Texas as independent accountants for the Registrant for the fiscal year beginning June 1, 1995, and voted to excuse the accounting firm of Lumsden & McCormick from further service to the Company after the completion of its work on the audit for the Registrant for the fiscal year ending May 31, 1996. During the previous two fiscal years ending May 31, 1995, there were no disagreements with Lumsden & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure or any reportable events. 7 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; - ---------------------------------------------------------------------- Compliance With Section 16(a) of the Exchange Act. --------------------------------------------------- a. Directors and Executive Officers. The following table sets forth the names, ages and positions of the directors and executive officers of the Company as of May 31, 1996. A summary of the background and experience of each of these individuals is set forth after the table. The directors and executive officers are: NAME AGE POSITION Perry Douglas West 50 Chairman, Chief Executive Officer The Board of Directors currently consists of two Directors, each holding office for a term of one year. Mr. John Potter 53, was added after the end of the fiscal year. Perry Douglas West joined the Company in October 1995, and is Chairman and Chief Executive Officer of the Company. Mr. West co-founded American Financial Network in July of l985. Headquartered in Dallas, Texas, American Financial Network operated a national computerized mortgage loan origination network. Mr. West served as Executive Vice President/Director and General Counsel of this public company from 1985 to 1991. Mr. West has practiced law in Florida since 1974, representing various business institutions in the financial, computer, natural resources and general business industries and international transactions. He was graduated with a Bachelor of Arts degree from The Florida State University in l968 and with a Juris Doctorate degree from The Florida State University, College of Law in l974. George C. Clark, Ph.D, joined the Company in November 1995 as Director of Systems Development. He was previously a Senior Scientist in the Advanced Technology Department in the Electronics Systems Sector of Harris Corporation, headquartered in Melbourne, Florida from 1964 through 1994. During his tenure at Harris, Dr. Clark conducted advanced research and development in antennas, electronic communications systems, statistical communication theory, error correction coding, computer-aided design of electronic circuits and systems, object oriented programming methodologies, and modeling of transportation systems. He also served as Director of the Advanced Technology Department at Harris, co-authored a graduate level text book on error correction coding, spent two years as a Visiting Scientist at the MIT Laboratory for Computer Science, and taught many undergraduate courses in Electronic Engineering, Artificial Intelligence and in Signal and Systems Theory. Dr. Clark holds a Bachelor of Science degree in Electrical Engineering from the Massachusetts Institute of Technology in 1959, a Masters Degree in Physics from the University of Miami in 1961 and a Ph.D. degree in Electrical Engineering from Purdue University in 1965. Dr. Clark managed the development of the computer software and hardware systems that form the infrastructure to the operations of Rebate TV(TM), and his absence from the Company would have an initial adverse effect on operations. Michael Hamilton joined the Company in April 1996 as Executive Vice President, Production, in charge of all creative operations and new program development for the Company. Mr. Hamilton is an entertainment industry veteran, whose recent credits include developing a Movie of the Week for the ABC network, a feature in conjunction with Jason Alexander's Daeson Productions, and transactional programming for QVC. He also designed and directed such television series as Wings, Murder She Wrote, The Twilight Zone and Magnum P.I., with experience extending to commercial clients such as Donna Karan, Cadillac and Coca-Cola. His absence from the Company would have an initial adverse effect on programming operations. c. Family Relationships. None. 8 Item 10. Executive Compensation. - -------------------------------- Perry Douglas West, Chairman and Chief Executive Officer of the Company has no employment agreement in force as of May 31, 1996, Mr. West received $8,000 in miscellaneous compemsation during the fiscal year. Mr. West has agreed to defer contract compensation and contract compensation issues until a future date. Robert J. Poe, Chief Operating Officer was employed with an employment agreement with the Company until November 1, 1997. He was paid through that date. Mr. Poe's agreement called for him to receive a base salary of $12,500 per month for the first twelve calendar months of his contract. In addition he is to receive 5% of the gross profits from the operation of the Company's Rebate TV(TM) television programming, as well as other programming brought into the Company by Mr. Poe. Item 11. Security Ownership of Certain Beneficial Owners and Management. - ------------------------------------------------------------------------- a. Security Ownership of Certain Beneficial Owners. The Company knows of no persons or groups being the beneficial owner of more than 5% of the Company's Common Shares other than Mr. West. b. Security Ownership of Management. The following table sets forth information with respect to the share ownership of Common Stock, par value $0.01, of the Company by its officers and directors, both individually and as a group, who are the beneficial owner of more than 5% of the Company's Common Shares. - -------------------------------------------------------------------------------- (1) (2) (3) (4) Title of Class Name Amount and Percent of Address of Nature of Class3 Beneficial Beneficial Owner1 Ownership2 - -------------------------------------------------------------------------------- Common Perry Douglas West 5,700,000 46.4 1270 Orange Avenue Suite A Winter Park, FL 32789 All Directors and Officers 5,700,000 46.4 as a group NOTES 1 Each person has sole voting and investment power with respect to the as shares indicated as owned beneficially by each person. 2 Except as other wise noted, all shares listed are owned both of record and beneficially. 3 Based upon 12,279,612 shares of Common Stock outstanding as of May 04, 1997. c. Changes in Control. During the previous fiscal year, pursuant to an Asset Purchase Agreement ("Asset Purchase Agreement") signed on October 20, 1995, among Interactive Technologies Corporation, Inc., a Wyoming corporation ("Registrant"), Syneractive, Inc., a Florida corporation, and Perry Douglas West, the Registrant purchased certain assets in exchange for 5,214,464 shares of the Registrant's common stock and agreed to purchase additional assets for an additional 485,536 shares of the Registrant's common stock. Control of the registrant after this transaction was in the hands of Perry Douglas West who previously owned approximately 47.82% of the outstanding common stock and owned 50.04% of the outstanding common stock after the completion of the acquisition of additional assets pursuant to the Asset Purchase Agreement. Prior to the transaction, no single shareholder held more than 10% of the common stock. The directors and officers of the Registrant as a whole owned l8.69% of the outstanding common stock of the Registrant prior to the transaction. 9 Resolutions were delivered at closing electing Perry Douglas West as Chairman of the Board of Directors and Chief Executive Officer of the Registrant. At that time Morton J. Glickman resigned as Chairman and Director of the Board of Directors. Item 12. Certain Relationships and Related Transactions. - -------------------------------------------------------- On October l8, l995 the Registrant entered into a Purchase Agreement ("Purchase Agreement") with Jayhead Investments, Ltd. for the sale of a certain joint venture interest with CST Entertainment Imaging, Inc. in which the Registrant had contributed its license to colorize black and white film and videotape and other related features in certain European countries, the terms of which are set forth in that certain license agreement, as amended, granted by CST Entertainment Imaging, Inc. to Exergon, S.A., and subsequently assigned to the Registrant and all proceeds due therefrom. This asset has been written off of the Registrant's books and carries no value in the Registrant's financial statements. This Purchase Agreement provided for the exchange of this asset for the satisfaction of $701,865 in debt owed by the Registrant to Jayhead Investment, Ltd., a company which is controlled by a former Director and Officer of the Company. This interest has been assigned subject to necessary third party approval and the indebtedness forgiven. On October 20, 1995, the Registrant executed the purchase of certain asset pursuant to a Asset Purchase Agreement ("Asset Purchase Agreement") signed on October 20, 1995 among Interactive Technologies Corporation, Inc., a Wyoming corporation ("Registrant"), Syneractive, Inc., a Florida corporation and Perry Douglas West, the Registrant purchased certain assets in exchange for 5,214,464 shares of the Registrant's common stock and has agreed to purchase additional assets for an additional 485,536 shares of the Registrant's common stock. The assets purchased consist primarily of all right title and interest in and to a video program concept and design created for interactive television known as "Rebate TV(TM)", certain engineering reports and data, contract receivables and cash in the approximate amount of $50,000 plus equipment deposits in the amount of $43,875. The additional assets which the Registrant agreed to purchase upon the approval of the transfer by the Federal Communications Commission include Federal Communications Commission Radio Station Licenses for Interactive Video and Data Services radio service in service areas 137 and 90. These licenses are subject to amounts due over the period of the licenses (five years) to the Federal Communications Commission of $540,000 for service area 137 and $232,000 for service area 90. In addition, the license for service area 90 is subject to a contract agreement which gives a third party the right to purchase, subject to the retention of an interest in the nature of a 10% royalty, up to 90% of this license for $500,000. These assets also include the rights to a contract for the purchase of certain radio station equipment for the license area 90. These are assets and do not include any current operations. The Registrant has placed the net value of the total of these assets at $5,700,000. Perry Douglas West is now Chief Executive Officer, and Director of the Company. PART IV Item 13. Exhibits and Reports on Form 8-K. - ------------------------------------------ 10 EXHIBIT INDEX (a.) Exhibit Page 3.0 Charter and By-Laws (1) 4.0 Instruments Defining Rights of Securities Holders 4.1 Form S-4 Registration Statement filed 8-22-97 defining rights of securities to be acquired by Airtech International Corporation shareholders (2) 10.0 Material Contracts 10.1 ITC lease with The Network Group, Inc. for Melbourne, Florida (3) office and engineering space, dated October 25, 1996 10.2 ITC Equipment Lease Agreement with Studiolink Corporation, (3) dated March 27, 1996 10.3 ITC Employment Agreement with Chief Operating Officer/Director (3) Bob Poe, dated November 1, 1995 10.4 Satellite Network Television lease with LLB Realty, L.L.C./Keller, (3) Dodds & Wentworth for Princeton, New Jersey television studio and production facility, dated March 1996 10.5 Stock Purchase Agreement dated May 5, 1997 with Airtech International Corporation Attached hereto 99.0 Additional Exhibits 99.1 Proforma Balance Sheet and Statement of Operations for Registrant and Airtech International Corporation dated 2-28-97 Attached hereto (1) This exhibit was previously filed as an exhibit to the Registrant's Form 10 filed January 14, 1992 and is herein incorporated by reference. (2) Filed form S-3 August 22, 1997 (3) Set out in Form KSB for year ended May 31, 1996. (b.) Reports on Form 8-K. Form 8-K dated March 17, 1997 setting out Company's filing of Form S-8 with Securities and Exchang Commission Form 8-K dated May 5, 1997 setting out changes in the Company's Articles of Incorporation increasing authorized capital to 50,000,000 common shares and 20,000,000 preferred shares Form 8-K dated May 22, 1997 setting out agreement for the acquisition of all of the outstanding stock in Airtech International Corporation of Dallas Texas. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Interactive Technologies Corporation, Inc. by:_________________________________________ Perry Douglas West, Chief Executive Officer Dated: August 28, 1997 12 EX-2 2 STOCK PURCHASE AGREEMENT FIRST AMENDED AND RESTATED STOCK PURCHASE AGREEMENT by and between INTERACTIVE TECHNOLOGIES CORPORATION a Wyoming corporation and AIRTECH INTERNATIONAL CORPORATION SHAREHOLDERS and AIRTECH INTERNATIONAL CORPORATION, a Texas corporation * * * * * 2.1 1 TABLE OF CONTENTS Page Article I Exchange of Shares 1 Article II Purchaser's Representations and Warranties 3 Article III Representations and Warranties of Airtech and the Selling Shareholders 5 Article IV Airtech's covenants 8 Article V Purchaser's Covenants 9 Article VI Purchaser's Conditions Precedent 11 Article VII Conditions Precedent of Airtech Selling Shareholders 11 Article VIII Miscellaneous 12 Exhibit 1.03 17 2.1 2 FIRST AMENDED STOCK PURCHASE AGREEMENT THIS FIRST AMENDED STOCK PURCHASE AGREEMENT is entered into effective as of August 31, 1997, by and among Interactive Technologies Corporation, Inc. a Wyoming corporation ("Purchaser"), Airtech International Corporation, a Texas corporation ("Airtech") and the shareholders of the outstanding common stock of Airtech (the "Selling Shareholders"). W I T N E S S E T H : WHEREAS, Purchaser is a publicly held corporation that desires to acquire a business which has growth potential; and WHEREAS, Airtech is a business engaged in the business of manufacturing and marketing of portable and commercial air purification equipment that appears to have growth potential; and WHEREAS, Purchaser desires to acquire at least eight-one percent (81%) of the issued and outstanding shares of common stock, $0.0001 par value, of Airtech (the "Airtech Common Stock") owned by the Selling Shareholders in exchange for Purchaser's common stock, par value $0.01 ("ITC Common Stock"), Purchaser's preferred stock, par value $1.00 ("ITC Preferred Stock") and Purchaser's debentures (the "ITC Debentures") in a tax-free transaction pursuant to the provisions of Section 368(a)(1)(B) of the Internal Revenue Code as amended; NOW, THEREFORE, for and in consideration of the mutual representations, warranties and covenants herein contained, and on the terms and subject to the conditions set forth herein, the parties hereto agree as follows: ARTICLE I PURCHASE OF SHARES 1.01 Purchase of Stock. Subject to and upon the terms and conditions contained herein, at the Closing (as hereinafter defined), the Selling Shareholders shall assign, transfer, convey and deliver to Interwest Transfer Company, P.O. Box 17136, Salt Lake City, Utah, 84117 the Escrow Agent hereon, together with any substitute escrow agent designated by Purchaser and Airtech, the Airtech Common Stock, pursuant to the terms of the Escrow Agreement, the form of which is attached hereto as Exhibit "A" (the "Escrow Agreement") and incorporated by reference, free and clear of any liens, encumbrances and charges whatsoever, and Purchaser shall accept and acquire from the Selling Shareholders the Airtech Common Stock owned by them. Purchaser shall accept and acquire from the Selling Shareholders, as provided herein, in the aggregate a minimum of eighty-one percent (81%) and up to a maximum of one hundred percent (100%) of Airtech Common Stock. 1.02 Delivery of Consideration and Registration of ITC Common Stock. In consideration of the shares of Airtech Common Stock of the Selling Shareholders, Purchaser at the Closing shall deliver to the Escrow Agent for the Selling Shareholders one or more certificates representing shares of ITC Common Stock, one or more certificates representing shares of ITC Preferred Stock and one or more ITC Debentures, to which they are entitled to receive in exchange for certificates representing their shares of Airtech Common Stock, as set forth opposite such shareholders' name on Exhibit 1.03. When issued such security will legally and valididly issued and is paid and nonassessable free and clear of any leins, encumbraces or chages whatsoever. 1.02.1 ITC Common Stock. ITC shall issue in exchange for the Airtech Common Stock, 8,000,000 shares of registered ITC Common Stock. Each Airtech shareholder will receive their pro-rata percent of the of the ITC Common Stock (number of Shareholder's shares of Common Stock in Airtech / total issued and outstanding shares of Airtech Common Stock). Prior to the Closing, as defined herein and in the Escrow Agreement, ITC shall file a registration statement with the Securities and Exchange Commission to register the ITC Common Stock, Preferred Stock and Debentures under the Securities Act of 1933 and after the registration statement is declared effective file such post-effective amendments and such other documents as may be required to enable the Selling Shareholders to sell any such ITC Common Stock acquired by them pursuant to the provisions of this Stock Purchase Agreement. It is mutually agreed that ITC and Airtech shall work together in the preparation of the information required in the Registration Form and that Airtech shall be responsible for the cost associated with registering the shares for the Airtech Shareholders. 2.1 3 1.02.2 ITC Preferred Stock. ITC shall, in addition, issue in exchange for the Airtech Common Stock 8,850,000 shares of Convertible Preferred Stock, par value $1.00. ITC at its option may elect to convert these shares of Preferred Stock at any time during the 24 month period. At closing each selling shareholder will receive his pro-rata percent of the ITC Preferred Stock (number of each selling Shareholder's shares of Common Stock in Airtech / total issued and outstanding shares of Airtech Common Stock). 1.02.3 ITC Debentures. ITC shall issue in exchange for the Airtech Common Stock $6,000,000 principal amount Convertible 10% Debentures. These Debentures will be secured by the shares of Airtech Common Stock purchased by ITC pursuant to this Article I, and shall be convertible after 24 months into registered shares of ITC Common Stock at a rate of $0.70 per share. ITC at its option, may elect to convert the ITC Debentures at any time during the 24 month period. At closing, each Shareholder will receive his pro-rata percent of the ITC Debentures (number of each selling Shareholder's shares of Common Stock in Airtech total issued and outstanding shares of Airtech Common Stock). The interest accruing on these Debentures, at ITC's option, can be paid in cash or in additional registered shares of Common Stock in ITC. If the interest is paid in shares of Common Stock the convertible rate shall be $0.70. 1.03 Closing. The closing of the transaction contemplated hereby (the "Closing") shall occur on June 30, 1997 or such date after required compliance with state and federal laws, notification of shareholders, required votes by shareholders and the registration statement has been filed by ITC with the Securities and Exchange Commission. As soon as practical following the effective date of the registration statement filed with respect to the closing of the transaction contemplated hereby shall occur on the twentieth (20) day following the date of delivery of this Prospectus to Airtech shareholders, or on such later date required compliance with state and federal laws and receipt of the acceptance from Selling Shareholders owning at least eighty-one percent (81%) of the issued and outstanding Airtech Common Stock. 1.04 Instruments of Transfer; Further Assurances. In order to consummate the transaction contemplated hereby, the following documents and instruments shall be delivered: (a) Documents from Selling Shareholders. Selling Shareholders shall deliver to Purchaser's Escrow Agent at the Closing one or more stock certificates representing in the aggregate the number of shares of Airtech Common Stock owned by them plus duly executed stock powers or other instrument of transfer for each such stock certificate. (b) Documents from Purchaser. Purchaser's Escrow Agent shall deliver to Selling Shareholders at the closing one or more stock certificates representing in the aggregate the number of shares of ITC Preferred Stock, the Dollar amount of Debentures to which such Selling Shareholders are entitled, to be registered in such names and in such denominations as shall be requested by Selling Shareholders not less than thre (3) business days prior to the Closing Date. The Purchaser's Escrow Agent, after the effective date of the registration is received from the Securities and Exchange Commission shall deliver to the Selling Shareholders the aggregate number of shares of ITC Common Stock to which such Selling Shareholders are entitled, registered in such names and in such denominations as shall be requested by Selling Shareholders. (c) Further Documents. At the Closing, and at all times thereafter as may be necessary (i)Selling Shareholders shall execute and deliver to Purchaser such other instruments of transfer as shall be reasonably necessary or appropriate to vest in Purchaser good and indefeasible title to the shares of Airtech Common Stock owned by them and to comply with the purposes and intent of this Agreement, and (ii)Purchaser shall execute and deliver to Selling Shareholders such other instruments as shall be reasonably necessary or appropriate to comply with the purposes and intent of this Agreement. 2.1 4 ARTICLE II PURCHASER'S REPRESENTATIONS AND WARRANTIES Purchaser represents and warrants that the following are true and correct as of this date and will be true and correct through the Closing Date as if made on that date: 2.01 Organization and Good Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, with all requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver this Agreement and to consummate the transactions contemplated hereby. 2.02 Authorization and Validity. The execution, delivery and performance of this Agreement by Purchaser and the consummation of the transactions contemplated hereby have been or will be prior to Closing duly authorized by Purchaser. This Agreement constitutes or will constitute legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with its terms, and neither the execution or delivery of this Agreement nor the consummation by the Purchaser of the transactions contemplated hereby (i)violates any statute or law or any rule, regulation or order of any court or any governmental authority, or (ii) violates or conflicts with, or constitutes a default under or will constitute a default under, any contract, commitment, agreement, understanding, arrangement, or restriction of any kind to which the Purchaser is a party or by which the Purchaser is bound. 2.03 No Violation. Neither the execution and performance of this Agreement nor the consummation of the transactions contemplated hereby will (a)conflict with, or result in a violation or breach of the terms, conditions and provisions of, or constitute a default under, the Articles of Incorporation or Bylaws of Purchaser or any agreement, indenture or other instrument under which Purchaser is bound or to which the assets of Purchaser are subject, or result in the creation or imposition of any lien, charge or encumbrance upon any of such assets, or (b)violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over Purchaser or the properties or assets of Purchaser. Purchaser has complied in all material respects with all applicable laws, regulations and licensing requirements, and has filed with the proper authorities all necessary statements and reports. Purchaser possesses all necessary licenses, franchises, permits and governmental authorizations to conduct its business as now conducted. 2.04 Capitalization. As of the date hereof, Purchaser had an authorized capitalization of 70,000,000 shares, consisting of 50,000,000 shares of Common Stock, par value $0.01, of which 12,209,612 shares are issued and outstanding and 20,000,000 shares of Preferred Stock, par value $1.00, no shares are issued and outstanding. Each outstanding share of capital stock has been legally and validly issued and is fully paid and nonassessable. 2.05 Corporate Records. The copies of the Articles of Incorporation and all amendments thereto and the Bylaws of Purchaser that have been delivered or made available to Airtech are true, correct and complete copies thereof. The minute book of Purchaser, copies of which have been delivered or made available to Airtech, contain minutes of all meetings of and consents to all actions taken without meetings by the Board of Directors and the shareholders of Purchaser since the formation of Purchaser, all of which are accurate in all material respects. 2.06 Financial Statements. Purchaser has furnished Airtech and the Selling Shareholders a copy of Purchaser's audited financial statements as of May 31, 1996 and unaudited February 28, 1997 financial statements, including the notes thereto. Since the date of such balance sheets, statements of operations and cash flows, except as set forth on Schedule 2.06, Purchaser has incurred no unpaid obligations, liabilities or commitments or acquired assets other than in the ordinary course of business. 2.07 Absence of Certain Changes. Except as set forth in Exhibit 2.07 hereto, since February 28, 1997, Purchaser has not: (a)suffered any material adverse change in its financial condition, assets, liabilities or business; (b)contracted for or paid any capital expenditures in excess of $10,000.00; (c)incurred any indebtedness for borrowed money, issued or sold any debt securities or discharged any liabilities or obligations; (d)mortgaged, pledged or subjected to any lien, lease, security interest or other charge or encumbrance any of their properties or assets; (e)paid any material amount on 2.1 5 any indebtedness prior to the due date, forgiven or canceled any material debts or claims or released or waived any material rights of claims; (f)suffered any damage or destruction to or loss of any assets (whether or not covered by insurance) that materially and adversely affects its business; (g acquired or disposed of any material assets or incurred any material liabilities or obligations; (h) made any payments to or loaned any money to its affiliates or associates; (I)formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (j)entered into any material employment, compensation, consulting or collective bargaining agreement with any person or group, or modified or amended in any material respect the terms of any such existing agreement; or (k)entered into any other commitment or transaction or experienced any other event that is material to this Agreement or to the transactions contemplated hereby, or that has affected, or may adversely affect Airtech's business, operations, assets, liabilities or financial condition. 2.08 Title; Leased Assets. Except as described in Exhibit 2.08 hereto, Purchaser owns its assets, and its real and personal property leaseholds, free and clear of all liens, claims and encumbrances, except for (I) liens for non-delinquent ad valorem taxes or non-delinquent statutory liens arising other than by reason of its default, and (ii) such liens, minor imperfections of title or easements on real property, leasehold estates or personalty as do not in any material respect detract from the value thereof and do not interfere with the present use of the properties subject thereof. Such assets and leaseholds are the only ones necessary for the conduct of Purchaser's business as now being conducted. 2.09 Insurance. All of the insurable properties of Purchaser are insured for its benefit under valid and enforceable policies, issued by insurers of recognized responsibility in amounts and against such risks and losses as is customary in Purchaser's industry. 2.10 Disclosure. No representation or warranty by Purchaser in this Agreement nor any statement or certificate furnished or to be furnished by it pursuant hereto or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained therein not misleading or necessary in order to provide Airtech and the Selling Shareholders with complete and accurate information. 2.11 Consents. Except as set forth in Exhibit 2.11, there is no authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of Purchaser. 2.12 Compliance with Laws. There are no existing violations of any applicable federal, state or local law or regulation that could materially adversely affect the property or business of Purchaser and there are no known, noticed or threatened violations of any zoning, building, fire, safety or wage and hour laws or regulations. 2.13 Litigation. Except as described in Exhibit 2.13, Purchaser has not had any legal action or administrative proceeding or investigation instituted or, to the best of the knowledge of Purchaser, threatened against or affecting any of the assets or business of Purchaser. Purchaser is not (a) subject to any continuing court or administrative order, writ, injunction or decree applicable specifically to Purchaser or to its business, assets, operations or employees, or (b) in default with respect to any such order, writ, injunction or decree. Purchaser knows of no basis for any such action, proceeding or investigation. 2.14 Disclosure. No representation or warranty by Purchaser in this Agreement nor any statement or certificate furnished or to be furnished by it or them pursuant hereto or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained therein not misleading or necessary in order to provide Purchaser with complete and accurate information. 2.15 Tax Returns. Purchaser has prepared and filed, or has caused to be prepared and filed, with the appropriate United States, state and local government agencies, and all political subdivisions thereof, all tax returns required to be filed by, on behalf of or on account of the operations of Purchaser and has paid or caused to be paid all assessments shown to be due and claimed to be due on such tax returns. 2.1 6 2.16 Contracts. All contracts and agreements to which Purchaser is a party are described in Exhibit 2.16. Such contracts and agreements have not been amended and remain in full force and effect in accordance with their respective terms. ARTICLE III REPRESENTATIONS AND WARRANTIES OF AIRTECH AND THE SELLING SHAREHOLDERS Airtech and the Selling Shareholders, jointly and severally, represent and warrant that the following are true and correct as of this date and will be true and correct through the Closing Date as if made on that date: 3.01 Organization and Good Standing. Airtech is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation with all requisite power and authority to carry on the business in which it is engaged and to own the properties it owns. Airtech is duly qualified and licensed to do business and is in good standing in all jurisdictions where the nature of its business makes such qualification necessary. Airtech does not have any assets, employees or offices in any state other than the state of Texas. 3.02 Authorization and Validity. The execution, delivery and performance of this Agreement by Airtech and the consummation of the transactions contemplated hereby have been or will be prior to Closing duly authorized by Airtech. This Agreement constitutes or will constitute legal, valid and binding obligations of Airtech, enforceable against Airtech in accordance with its terms and neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby (i) violates any statute or law or any rule, regulation or order of any court or any governmental authority, or (ii) violates or conflicts with, or constitutes a default under or will constitute a default under, any contract, commitment, agreement, understanding, arrangement, or restriction of any kind to which a party or by which Airtech is are bound. 3.03 Capitalization. As of the date hereof, Airtech has an authorized capitalization of 100,000,000 shares, consisting of Ninety Million (90,000,000) shares of common stock, $0.0001 par value, of which 15,743,569 shares are issued and outstanding, One Million Seven Hundred Fifty Thousand (1,750,000) shares of Series A Preferred Stock, $1.00 par value, no shares outstanding; Five Million (5,000,000) shares of Series AA Preferred Stock, of which no shares are issued and outstanding and 1,000 shares of Series C Preferred Stock, $1.00 par value, 1,000 shares outstanding. The record and beneficial shareholders of all issued and outstanding Airtech Common Stock held by the Selling Shareholders will be transeferred to ITC, free and clear by each Selling Shareholder of all liens, claims, encumbrances, equities and proxies. Each outstanding share of common capital stock has been legally and validly issued and is fully paid and nonassessable. There are no outstanding securities, obligations, rights, subscriptions, warrants, options or other rights to purchase shares of common stock or preferred stock of Airtech. 3.04 Corporate Records. The copies of the Articles of Incorporation and all amendments thereto and the Bylaws of Airtech that have been delivered or made available to Purchaser are true, correct and complete copies thereof. The minute book of Airtech, copies of which have been delivered or made available to Purchaser, contain minutes of all meetings of and consents to all actions taken without meetings by the Board of Directors and the shareholders of Airtech since the formation of Airtech, all of which are accurate in all material respects. 3.05 Financial Statements. Airtech has furnished to Purchaser Airtech's audited balance sheet and related statements of operations and cash flows for the period ended February 29, 1996 and interim financial statements for the periods through February 28, 1997 (the "Airtech Financial Statements"). The Airtech Financial Statements fairly present the financial condition and results of operations of Airtech as of the dates and for the periods indicated and have been prepared in conformity with generally accepted accounting principles. 3.06 Absence of Certain Changes. Except as set forth in Exhibit 3.06 hereto, since February 28, 1997, Airtech has not: (a) suffered any material adverse change in its financial condition, assets, liabilities or business; (b) contracted for or paid any capital expenditures in excess of $50,000.00; (c)incurred any indebtedness for borrowed money, issued or sold any debt securities or discharged any liabilities or obligations; (d) mortgaged, pledged or subjected to any lien, lease, security interest or other charge or encumbrance any of their properties or assets; (e) paid any material amount on 2.1 7 any indebtedness prior to the due date, forgiven or canceled any material debts or claims or released or waived any material rights of claims; (f) suffered any damage or destruction to or loss of any assets (whether or not covered by insurance) that materially and adversely affects its business; (g) acquired or disposed of any material assets or incurred any material liabilities or obligations; (h) made any payments to or loaned any money to its affiliates or associates; (I) formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (j) entered into any material employment, compensation, consulting or collective bargaining agreement with any person or group, or modified or amended in any material respect the terms of any such existing agreement; or (k) entered into any other commitment or transaction or experienced any other event that is material to this Agreement or to the transactions contemplated hereby, or that has affected, or may adversely affect Airtech's business, operations, assets, liabilities or financial condition. 3.07 Title; Leased Assets. Except as described in Exhibit 3.07 hereto, Airtech owns its assets, and its real and personal property leaseholds, free and clear of all liens, claims and encumbrances, except for (I) liens for non-delinquent ad valorem taxes or non-delinquent statutory liens arising other than by reason of its default, and (ii) such liens, minor imperfections of title or easements on real property, leasehold estates or personality as do not in any material respect detract from the value thereof and do not interfere with the present use of the properties subject thereof. Such assets and leaseholds are the only ones necessary for the conduct of Airtech business as now being conducted. 3.08 Insurance. All of the insurable properties of Airtech are insured for its benefit under valid and enforceable policies, issued by insurers of recognized responsibility in amounts and against such risks and losses as is customary in Airtech's industry. 3.09 No Violation. Neither the execution and performance of this Agreement nor the consummation of the transactions contemplated hereby will (a) conflict with, or result in a violation or breach of the terms, conditions and provisions of, or constitute a default under, the Articles of Incorporation or Bylaws of Airtech or any agreement, indenture or other instrument under which Airtech is bound or to which any of the assets of Airtech are subject, or result in the creation or imposition of any lien, charge or encumbrance upon any of such assets, or (b) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over Airtech or the properties or assets of Airtech. Airtech has complied in all material respects with all applicable laws, regulations and licensing requirements, and has filed with the proper authorities all necessary statements and reports. Airtech possesses all necessary licenses, franchises, permits and governmental authorizations to conduct its business as now conducted. 3.10 Consents. Except as set forth in Exhibit 3.10, no authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of Airtech. 3.11 Compliance with Laws. There are no existing violations of any applicable federal, state or local law or regulation that could materially adversely affect the property or business of Airtech and there are no known, noticed or threatened violations of any zoning, building, fire, safety or wage and hour laws or regulations. 3.12 Litigation. Except as described in Exhibit 3.12, Airtech has not had any legal action or administrative proceeding or investigation instituted or, to the best of the knowledge of Airtech, threatened against or affecting any of the assets or business of Airtech. Airtech is not (a) subject to any continuing court or administrative order, writ, injunction or decree applicable specifically to Airtech or to its business, assets, operations or employees, or (b) in default with respect to any such order, writ, injunction or decree. Airtech knows of no basis for any such action, proceeding or investigation. 2.1 8 3.13 Disclosure. No representation or warranty by Airtech or the Selling Shareholders in this Agreement nor any statement or certificate furnished or to be furnished by it or them pursuant hereto or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained therein not misleading or necessary in order to provide Purchaser with complete and accurate information. 3.14 Tax Returns. Airtech has prepared and filed, or has caused to be prepared and filed, with the appropriate United States, state and local government agencies, and all political subdivisions thereof, all tax returns required to be filed by, on behalf of or on account of, the operations of Airtech and has paid or caused to be paid all assessments shown to be due and claimed to be due on such tax returns. 3.15 Contracts. All contracts and agreements to which Airtech is a party are described on Exhibit 3.15 and are in full force and effect in accordance with their respective terms. ARTICLE IV AIRTECH'S COVENANTS Airtech agrees that on or prior to the Closing: 4.01 Business Operations. Airtech shall operate its business only in the ordinary course and Airtech shall use its best efforts to preserve the business of Airtech intact, to retain its present customers and suppliers so that they will be available to Purchaser after the Closing and to cause the consummation of the transactions contemplated by this Agreement in accordance with its terms and conditions. Airtech shall not take any action that might impair the business or assets of Airtech without the prior consent of Purchaser or take or fail to take any action that would cause or permit the representations made in Article III hereof to be inaccurate at the time of Closing or preclude Airtech from making such representations and warranties at the Closing. 4.02 Access. Airtech shall permit Purchaser and its authorized representatives full access to, and make available for inspection, all of the assets and business of Airtech, including Airtech's employees, customers and suppliers, and Airtech shall furnish Purchaser all documents, records and information with respect to the affairs of Airtech as Purchaser and its representatives may reasonably request. 4.03 Material Change. Prior to the Closing, Airtech shall promptly inform Purchaser in writing of any material adverse change in the condition of the business of Airtech. Notwithstanding the disclosure to Purchaser of any such material adverse change, Airtech shall not be relieved of any liability for, nor shall the providing of such information by Airtech to Purchaser be deemed a waiver by Purchaser of, the breach of any representations or warranty of Airtech contained in this Agreement. 4.04 Approvals of Third Parties. As soon as practicable after the execution of this Agreement, but in any event prior to the Closing Date, Airtech will use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated by this Agreement. 4.05 Contracts. Except with Purchaser's prior written consent, Airtech shall not waive any material right or cancel any material contract, debt or claim nor with it assume or enter into any contract, lease, license obligation, indebtedness, commitment purchase or sale involving more than $10,000.00, each. 4.06 Capital Assets; Payments of Liabilities. Except with Purchaser's prior written consent, Airtech will not acquire or dispose of any capital asset having an initial cost of $10,000.00 or more, nor will Airtech discharge or satisfy any lien or encumbrance or pay or perform any obligation or liability other than (I) liabilities and obligation reflected in the Airtech Financial Statements, and (ii) current liabilities and obligations incurred in the usual and ordinary course of business since February 28, 1997, and, in either such case only as required by the express terms of the agreement or other instrument pursuant to which the obligation or liability was incurred. 4.07 Mortgages, Liens. Except with Purchaser's prior written consent, Airtech will not enter into or assume any mortgage, pledge, conditional sale or other title retention agreement, permit any lien, encumbrance or claim of any kind to attach to any of its assets, whether nor owned or hereafter acquired, or guarantee or otherwise become contingently liable for any obligations of another or make any capital contributions or investments in any corporation, business or other person. 2.1 9 4.08 Sales of Stock. Except as set forth on Schedule 4.08, Airtech will not, without Purchaser's prior written consent, after the date hereof, issue any shares of its common stock or preferred stock nor will it issue or enter into an agreement to issue any securities, rights, subscriptions, warranties or options to purchase shares of its common stock or preferred stock or which are convertible into shares of its common stock or preferred stock in whole or in part. ARTICLE V PURCHASER'S COVENANTS Purchaser agrees that on or prior to the Closing: 5.01 Business Operations. Purchaser shall operate its business only in the ordinary course and Purchaser shall use its best efforts to preserve the business of Purchaser intact, to retain its present customers and suppliers so that they will be available to Purchaser after the Closing and to cause the consummation of the transactions contemplated by this Agreement in accordance with its terms and conditions. Purchaser shall not take any action that might impair the business or assets of Purchaser without the prior consent of Airtech or take or fail to take any action that would cause or permit the representations made in Article II hereof to be inaccurate at the time of Closing or preclude Purchaser from making such representations and warranties at the Closing. 5.02 Access. Purchaser shall permit Airtech and its authorized representatives full access to, and make available for inspection, all of the assets and business of Purchaser, and Purchaser shall furnish Airtech all documents, records and information with respect to the affairs of Purchaser as Airtech and its representatives may reasonably request. 5.03 Sales of Stock. Except with Airtech's prior written consent Purchaser will not, after the date hereof, issue any shares of its common stock nor will it issue or enter into an agreement to issue any securities, rights, subscriptions, warranty or options to purchase shares of its common stock or preferred stock or which are convertible into shares of its common stock or preferred stock in whole or in part. 5.04 Material Change. Prior to the Closing, Purchaser shall promptly inform Airtech in writing of any material adverse change in the condition of the business of Purchaser. Notwithstanding the disclosure to Airtech of any such material adverse change, Purchaser shall not be relieved of any liability for, nor shall the providing of such information by Purchaser to Airtech be deemed a waiver by Airtech of, the breach of any representation or warranty of Purchaser contained in this Agreement. 5.05 Contracts. Except with Airtech's prior written consent, Purchaser shall not waive any material right or cancel any material contract, debt or claim nor with it assume or enter into any contract, lease, license obligation, indebtedness, commitment purchase or sale involving more than $10,000.00, each. 5.06 Capital Assets; Payments of Liabilities. Except with Airtech's prior written consent, Purchaser will not acquire or dispose of any capital asset having an initial cost of $10,000.00 or more, nor will Purchaser discharge or satisfy any lien or encumbrance or pay or perform any obligation or liability other than (i) liabilities and obligation reflected in the Purchaser Financial Statements, and (ii) current liabilities and obligations incurred in the usual and ordinary course of business since February 28, 1997, and, in either such case only as required by the express terms of the agreement or other instrument pursuant to which the obligation or liability was incurred other than payments of liabilities disclosed on Exhibit 5.06 and does warrant and represent that the total outstanding liabilities of Purchaser shall not exceed $60,000 at Closing. 5.07 Mortgages, Liens. Except with Airtech's prior written consent, Purchaser will not enter into or assume any mortgage, pledge, conditional sale or other title retention agreement, permit any lien, encumbrance or claim of any kind to attach to any of its assets, whether nor owned or hereafter acquired, or guarantee or otherwise become contingently liable for any obligations of another or make any capital contributions or investments in any corporation, business or other person. 5.08 Approvals of Third Parties. As soon as practicable after the execution of this Agreement, but in any event prior to the Closing Date, Purchaser will use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated by this Agreement. 2.1 10 ARTICLE VI PURCHASER'S CONDITIONS PRECEDENT Except as may be waived in writing by Purchaser, the obligations of Purchaser hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 6.01 Representations and Warranties. The representations and warranties of Airtech contained herein shall be true and correct in all material respects as of the Closing, and Purchaser shall not have discovered any material error, misstatement or omission therein. At the Closing, Purchaser shall have received a certificate, dated the date of the Closing, and executed by the President of Airtech, certifying in such detail as Purchaser may reasonably request as to the accuracy of such representations and warranties referred to in Article III and the fulfillment of the obligations and compliance with the covenants referred to in Article IV as of the Closing. 6.02 Proceedings. No action, proceeding or order by any court or governmental body or agency shall have been threatened in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated by this Agreement. 6.03 Consents and Approvals. Airtech shall have obtained, and delivered to Purchaser evidence thereof, all consents and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby. 6.04 No Material Adverse Change. No material, adverse change in the assets, business operations or financial conditions of Airtech shall have occurred after the date hereof and prior to the Closing. Purchaser shall have received a letter from the chief financial officer of Airtech, dated the date of the Closing, stating that on the basis of a limited review (not an audit) of the latest available accounting records of Airtech, consultations with responsible officers of Airtech, and other pertinent inquiries that they may deem necessary, they have no reason to believe that during the period from February 29, 1996 to a specific date not more than five business days before the Closing, there is any change in the financial condition or results of operations of Airtech, except for changes incurred in the ordinary and usual course of business of Airtech during that period that in the aggregate are not materially adverse, and except for other changes or transactions, if any, contemplated by this Agreement. 6.05 Approval of Airtech's Board of Directors and Selling Shareholders. This Agreement shall have been approved by the Board of Directors of Airtech and at least two-thirds of the Selling Shareholders entitled to vote thereon. ARTICLE VII CONDITIONS PRECEDENT OF AIRTECH SELLING SHAREHOLDERS Except as may be waived in writing by Airtech and the Selling Shareholders, the obligations of the Selling Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 7.01 Representations and Warranties. The representations and warranties of Purchaser contained herein shall be true and correct in all material respects as of the Closing, and Airtech and the Selling Shareholders shall not have discovered any material error, misstatement or omission therein. At the Closing, Airtech and the Selling Shareholders shall have received a certificate, dated the date of the Closing, and executed by the President of Purchaser, certifying in such detail as Airtech and the Selling Shareholders may reasonably request as to the accuracy of such representations and warranties referred to in Article II and the fulfillment of the obligations and compliance with covenants referred to in Article V as of the Closing. 7.02 Proceedings. No action, proceeding or order by any court or governmental body or agency shall have been threatened in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated by this Agreement. 7.03 Consents and Approvals. Purchaser shall have obtained, and delivered to Airtech evidence thereof, all consents and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby. 2.1 11 7.04 No Material Adverse Change. No material, adverse change in the assets, business operations or financial condition of Purchaser shall have occurred after the date hereof and prior to the Closing. The Selling Shareholders shall have received a letter from the chief financial officer of Purchaser, dated the date of the Closing, stating that on the basis of a limited review (not an audit) of the latest available accounting records of Purchaser, consultations with responsible officers of Purchaser, and other pertinent inquiries that he may deem necessary, there is no reason to believe that during the period from March 31, 1996 to a specific date not more than five business days before the Closing, there is any change in the financial condition or results of operations of Purchaser, except for changes incurred in the ordinary and usual course of business of Purchaser, during that period that in the aggregate are not materially adverse, and except for other changes or transactions, if any, contemplated by this Agreement. 7.05 Approval of Purchaser's Board of Directors. This Agreement shall have been approved by the Board of Directors of Purchaser. ARTICLE VIII MISCELLANEOUS 8.01 Amendment. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by the party against which enforcement of the amendment, modification or supplement is sought. 8.02 Parties in Interest. This Agreement shall be binding on and inure to the benefit of and be enforceable by Selling Shareholders, Airtech, and the Purchaser, their respective heirs, executors, administrators, legal representatives, successors and assigns, except as otherwise expressly provided herein. 8.03 Assignment. Neither this Agreement nor any right created hereby shall be assignable by either party hereto except by Purchaser to a wholly-owned subsidiary of Purchaser. 8.04 Notice. Any notice or communication must be in writing and given by depositing the same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested or by delivering the same in person. Such notice shall be deemed received on the date on which it is hand-delivered or on the third business day following the date on which it is so mailed. For purposes of notice, the addresses of the parties shall be: If to Airtech: John Potter, President 15400 Knoll Trail, Suite 106 Dallas, Texas 75248 If to the Selling Shareholders: At the address set forth above. If to Purchaser: Perry Douglas West, Chairman and Chief Executive Officer 104 South Harbor City Boulevard, Suite A Melbourne, Florida 32901 Any party may change its address for notice by written notice given to the other parties. 8.05 Entire Agreement. This Agreement and the exhibits hereto supersede all prior agreements and understandings relating to the subject matter hereof, except that the obligations of any party under any agreement executed pursuant to this Agreement shall not be affected by this Section. 8.06 Costs, Expenses and Legal Fees. Whether or not the transactions contemplated hereby are consummated, each party hereto shall bear its own costs and expenses (including attorneys' fees) except that each party hereto agrees to pay the costs and expenses, including reasonable attorneys' fees, incurred by the other parties in successfully (I) enforcing any of the terms of this Agreement, or (ii) proving that the other parties breached any of the terms of this Agreement in any material respect. 2.1 12 8.07 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance here from. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 8.08 Governing Law. This Agreement and the rights and obligations of the parties hereto shall be governed, construed and enforced in accordance with the laws of the State of Colorado. The parties agree that any litigation relating directly or indirectly to this Agreement must be brought before and determined by a court of competent jurisdiction with the State of Colorado. 8.09 Captions. The captions in this Agreement are for convenience of reference only and shall not limit or otherwise affect any of the terms or provisions hereof. 8.10 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this agreement effective as of the date first written above. PURCHASER: INTERACTIVE TECHNOLOGIES CORPORATION ________________________________________ Perry Douglas West, Chairman and Chief Executive Officer AIRTECH: AIRTECH INTERNATIONAL CORPORATION: ________________________________________ John Potter, President and Chairman SELLING SHAREHOLDERS: ___________________________________ John Potter, Power of Attorney 2.1 13 UNANIMOUS CONSENT IN LIEU OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS OF AIRTECH INTERNATIONAL CORPORATION May __, 1997 The undersigned, being all of the members of the Board of Directors of AIRTECH INTERNATIONAL CORPORATION (the "Corporation"), have, by signing this consent, taken the following action without a meeting, pursuant to the provisions of Article 9.10B of the Texas Business Corporation Act: RESOLVED, that the Corporation enter into a Stock Purchase Agreement between the Corporation, the Corporation's shareholders and Interactive Technologies Corporation, a Wyoming corporation, a copy of which is attached to this Consent marked Exhibit "A". RESOLVED FURTHER, that the Corporation's President is hereby authorized, on behalf of the Corporation, to execute the Stock Purchase Agreement attached hereto as Exhibit "A", pursuant to the provisions of Section 368(a)(1)(B) of the Internal Revenue Code, as amended. EXECUTED effective as the day and year written above. C. J. Comu John Potter 2.1 14 EX-99.B12 3 PROFORMA FINANICAL STATEMENTS PRO-FORMA COMBINED BALANCE SHEETS FEBRUARY 28, 1997 (Unaudited) Historical Acquired Acquisition ITC AIRTECH Adjustments Combined --- ------- ----------- -------- ASSETS Current Assets $206,627 $1,122,819 $1,329,446 Stock subscription receivable 507,577(2) 507,577 Property and equipment net of depreciation 96,289 214,485 310,774 Intellectual properties Net of amortization 5,142,712(3) 336,977(4) 12,250,000(5) 17,729,689 Goodwill 1,408,474(5) 1,408,474 Other Assets 1,866 1,896,489 1,898,355 ----- --------- --------- Total Assets 5,447,494 4,078,347 $ 23,184,315 ========= =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities $ 536,432 $ 248,205 (250,000)(6) $ 534,637 Long-term Liabilities 1,299,573 26,116 (800,000)(6) 9,525,689 9,000,000 (5) Total Liabilities 1,836,005 274,321 10,060,326 --------- --------- ------------- ---------- Commitments and Contingencies (7) Stockholders' Equity Paid in Capital 9,614,244 4,360,281(1) 4,658,474(5) 19,682,999 Retained Earning (Deficit) (6,002,755) (556,255) (6,559,010) ----------- ------------ ------------ ----------- 3,611,489 3,804,026 13,123,989 ----------- ------------ ------------ ----------- Total Liabilities and Stockholders' Equity $ 5,447,494 $4,078,347 $23,184,315 ========== ========= ========== PRO-FORMA COMBINED STATEMENT OF OPERATIONS For The Nine Months Ended February 28, 1997 (Unaudited) Historical Acquired Acquisition ITC AIRTECH Adjustments Combined --- ------- ----------- -------- ASSETS Net Revenues $ 197,804 $ 1,451,074 $ 1,648,878 Cost of Sales 600,487 600,487 --------- ----------- ----------- Gross Income 197,804 850,587 1,048,391 General and Administrative 1,356,397 746,497 2,102,894 --------- ----------- ----------- Net Income from Operations Before depreciation, Amortization and taxes (1,158,593) 104,090 (1,054,503) Depreciation and amortization 721,088 721,088 --------- ------------ ----------- Net Income from Operations (1,879,681) 104,090 (1,775,591) Gain on Sale of Charleston License 311,500 311,500 --------- ------------ ----------- Net Income before Income Taxes(1,568,181) 104,090 (1,464,091) Income Taxes -0- -0- -0- Net Income $(1,568,181) $ 104,090 $(1,464,091) ============ ========== ============ Primary earnings per share $(0.13) $0.01 $(0.08) Diluted earnings per share $(0.01) The notes to the pro forma financial statements and the basis for presentation of the financial statements are included in the exhibits and are an integral part of these financial statements. -----END PRIVACY-ENHANCED MESSAGE-----