EXHIBIT 10.1
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION made as of the 21st day
of August, 1995, by and between SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.,
a Delaware corporation having its principal place of business at 27 Governor
Street, Ridgefield, CT 06877 ("Seller"), and PORTSMOUTH CORPORATION, a Florida
corporation having its principal place of business at 10 Brickett's Mill Road,
Hampstead, New Hampshire 03841 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller desires to sell and assign to Purchaser substantially all
of the assets of Seller as described herein, upon the terms and conditions
hereinafter set forth, and Purchaser desires to purchase and acquire such assets
from Seller, upon the terms and conditions hereinafter set forth;
WHEREAS, upon the consummation of the sale of substantially all of the
assets of Seller to Purchaser as contemplated herein, Seller desires to dissolve
and liquidate pursuant to the General Corporation Law of the State of Delaware;
and
WHEREAS, Seller and Purchaser intend for the transactions contemplated
hereby to constitute a tax free reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the respective representations and
warranties hereinafter set forth and of the mutual covenants and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I: SALE AND PURCHASE OF ASSETS
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1.1 Sale and Purchase. Subject to the terms and conditions contained in
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this Agreement, Seller hereby agrees to sell, transfer, assign, convey and
deliver to Purchaser, and Purchaser hereby agrees to purchase and accept from
Seller, all of Seller's rights, title and interest in and to all of the assets
and properties of Seller of every kind and description wherever located, at the
Closing Date (as hereinafter defined) except those disposed of in the ordinary
course of business prior to the Closing Date (the assets of Seller to be sold
herein referred to as the "Assets").
Without limiting the foregoing, the Assets which are to be sold hereunder
shall include the following assets:
a. Machinery and Equipment -- all of the machinery, equipment, vehicles,
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furniture, tools and other similar personal properties and fixtures owned by
Seller located at Seller's offices at 27 Governor Street, Ridgefield, CT 06877,
including, but not limited to, the machinery, equipment, vehicles, furniture and
other personal properties and fixtures listed in Exhibit 1.1(a) attached hereto.
b. Inventories -- all inventories of raw materials, work in process,
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spare parts, supplies, and finished products.
c. Cash -- all cash on hand and in banks, cash equivalents, short term
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investments, and prepaid expenses of Seller at the Closing Date.
d. Scrap, Surplus and Left-Over Materials -- all scrap, surplus and left-
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over materials of Seller at the Closing Date.
e. Accounts Receivable -- the accounts receivable of Seller including the
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accounts receivable listed on Exhibit 1.1(e) attached hereto which are
outstanding at the Closing Date.
f. Miscellaneous Current Assets -- miscellaneous assets including
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contracts and arrangements for work to be performed, rights under agreements and
leases, which are listed on Exhibit 1.1(f) attached hereto.
g. Records -- all files, data, software and records of Seller including
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machinery and equipment records, production records, contract records, purchase
and sale records, supplier lists, customer lists, price lists, customer files,
account histories, assembly drawings, schematics and other drawings and
documentation relating to current and past products and services of Seller.
h. Patents, Trademarks and Proprietary Information -- all Seller's right
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to and interest in, any and all patents, patent applications, the name of the
Seller and all variants thereof, trade names, trademarks, trademark applications
and all confidential and proprietary information held and used by Seller,
including without limitation, specifications, designs, drawings, models, molds,
know-how, strategic and technical data, product research and development data,
manufacturing techniques and trade secrets, which are listed on Exhibit 1.1(h)
attached hereto.
1.2 Assumption of Liabilities. Subject to the Closing (as hereinafter
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defined), Purchaser shall assume, pay or discharge or in every respect be liable
for any and all liability, obligation, commitment or expense of Seller (whether
absolute, contingent, disclosed or undisclosed), including without limitation
tax liabilities of any nature whatsoever.
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1.3 Purchase Price. At the Closing, Purchaser shall issue and deliver to
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Seller as payment of the purchase price for the sale of the Assets hereunder
("Purchase Price"), (i) good and marketable title to eight million (8,000,000)
fully paid, validly issued and non-assessable shares of common stock of
Purchaser, par value $.0001 which shares immediately after the issuance thereof
represent ninety-four (94%) of the issued and outstanding shares of capital
stock of Purchaser, on a fully diluted basis, free and clear of any and all
liens, claims, charges or encumbrances of any nature whatsoever, and Seller
shall deliver to Purchaser the Assets.
ARTICLE II: CLOSING
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2.1 Closing. The closing of the transactions contemplated hereby (the
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"Closing") shall be held on September 28, 1995 (the "Closing Date") at the
offices of Seller or at such other time and place upon which the parties shall
mutually agree. At Closing, all steps shall be taken and documents and
instruments shall be delivered, in form reasonably acceptable to counsel for the
party to whom delivered, which are necessary or appropriate to consummate the
transactions provided for herein.
2.2 Conditions to Purchaser's Obligations. Purchaser's obligation
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hereunder to purchase and pay for the Assets is subject to the satisfaction, on
or before the Closing Date, of the following conditions, any of which may be
waived, in whole or in part, by Purchaser in its sole discretion, and Seller
shall use its best efforts to cause such conditions to be fulfilled:
(a) No action or proceeding before any court or other governmental body
shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might
affect the right of Purchaser to own, operate or control the Assets after
the Closing Date.
(b) All corporate and other proceedings taken or required to be taken by
Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall have been taken and shall be satisfactory
in form and substance to Purchaser.
(c) Seller shall have duly obtained all authorizations, consents, rulings,
approvals, licenses, franchises, permits and certificates, or exemptions
therefrom, by or of all governmental authorities and non-governmental
administrative or regulatory agencies having jurisdiction over the parties
hereto, this Agreement, the Assets, or the transactions contemplated
hereby.
(d) Seller shall have delivered to Purchaser such consents, agreements,
schedules, documents and exhibits required by this Agreement to be
delivered or reasonably requested by the Purchaser at or before Closing.
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(e) All representations and warranties of Seller contained in this
Agreement shall be true and correct as of the Closing Date as though such
representations and warranties were made as of such date.
(f) Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(g) There shall not be any material adverse change in the Assets from the
date hereof to the Closing Date and, during that period, there shall have
been no material loss by fire or casualty.
2.3 Conditions to Seller's Obligations. Seller's obligation hereunder
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to sell the Assets is subject to the satisfaction, on or before the Closing
Date, of the following conditions, any of which may be waived, in whole or in
part, by Seller in its sole discretion, and Purchaser shall use its best efforts
to cause such conditions to be fulfilled:
(a) No action or proceeding before any court or other governmental body
shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
(b) All corporate and other proceedings taken or required to be taken by
Purchaser in connection with the transactions contemplated hereby and all
documents incident thereto shall have been taken and shall be satisfactory
in form and substance to Seller.
(c) Purchaser shall have duly obtained all authorizations, consents,
rulings, approvals, licenses, franchises, permits and certificates, or
exemptions therefrom, by or of all governmental authorities and non-
governmental administrative or regulatory agencies having jurisdiction over
the parties hereto, this Agreement, the Assets, or the transactions
contemplated hereby.
(d) Purchaser shall have delivered to Seller such consents, agreements,
schedules, documents and exhibits required by this Agreement to be
delivered or reasonably requested by the Seller at or before Closing.
(e) All representations and warranties of Purchaser and Paul Grillo
contained in this Agreement shall be true and correct as of the Closing
Date as though such representations and warranties were made as of such
date.
(f) Purchaser shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(g) The Purchase Price due hereunder shall have been fully paid by
Purchaser pursuant to Section 1.3 hereof.
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(h) The Purchaser shall pay a six percent revenue-based royalty of (the
"Royalty"), in a pro rata amount in accordance with stockholders equity
percentage interest in the Seller, of the amount of all gross revenues,
less returns and discounts, generated by the Purchaser from the commercial
exploitation of all assets (including, but not limited to, intellectual
property, licenses, patents, patent applications, copyrights or the like)
acquired by the Purchaser from the Seller, during the sixty (60) month
period immediately following the Closing Date. Computation and payment of
the Royalty shall be made quarterly and the cumulative total of all Royalty
payments made pursuant to the Royalty shall not exceed the maximum total of
$8,500,000.
ARTICLE III: SELLER'S REPRESENTATIONS AND WARRANTIES
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Seller hereby represents and warrants to Purchaser as follows:
3.1 Corporate Organization. Seller is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on all the business conducted by it, and is
qualified to do business in all jurisdictions where the failure to so qualify
would have a material adverse effect on its business.
3.2 Corporate Authority. As of the Closing Date, Seller will have taken
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all corporate action and other proceedings necessary to enable Seller to enter
into and carry out its obligations under this Agreement and this Agreement when
executed and delivered by Seller will constitute a valid and binding obligation
of Seller.
3.3 Litigation. (i) Seller is not engaged in, or to the best of Seller's
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knowledge threatened with, any litigation, governmental investigation or other
proceeding or controversy which may materially adversely affect Seller's
obligation to consummate this Agreement, title to the Assets and (ii) Seller is
not subject to any outstanding judgment, order, decree or injunction of any
court or governmental body.
3.4 Books and Records. Seller has maintained its books and records in a
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manner that accurately and fairly reflect in reasonable detail transactions
relating to the Assets.
3.5 No Employee Benefit Plans. There are no employee benefit plans, as
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defined in Section 3.3 of Employee Retirement Income Security Act of 1974, as
amended, in effect with respect to the Seller's business.
3.6 Taxes. The Seller has timely filed all federal, state and local tax
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returns and other tax returns which are required to be filed, and all taxes due
from Seller have been timely paid and adequate reserves have been maintained for
the timely payment of taxes not yet due. The income tax returns of Seller have
never been audited by any authority empowered to do so.
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3.7 No Violation. The execution and delivery by Seller of this Agreement
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and the consummation of the transactions contemplated hereby do not and will not
conflict with or violate any contract or agreement to which Seller is a party or
by which it is bound and are not contrary to the Certificate of Incorporation or
By-laws of Seller and are not contrary to any order of any court to which Seller
is subject.
3.8 No Subsidiaries. Seller has, and on the Closing Date will have, no
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subsidiaries.
3.9 Financial Information. The unaudited financial statements dated as of
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December 31, 1994 (the "Unaudited Financial Statements") of Seller has been
prepared by the certified public accounting firm of Lyons & Lyons and to the
best of Seller's knowledge fairly presents the financial position and other
information purported to be shown therein of Seller at the date referenced
therein. The Unaudited Financial Statements have been prepared in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
3.10 No Material Advance Charge. Since the date of the Unaudited
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Financial Statements, the business of Seller has only been operated in the
ordinary course. There has not been since the date of the Unaudited Financial
Statements, and on the Closing Date there will not have been, in the aggregate
any material adverse change in the condition, financial or otherwise, of Seller
from that set forth in the Unaudited Financial Statements.
3.11 No Liabilities. There are, and on the Closing Date will be, no
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liabilities (including, but not limited to tax liabilities) or claims against
Seller (whether such liabilities or claims are contingent or absolute, direct or
indirect, matured or unmatured) not appearing on the Unaudited Financial
Statements other than liabilities incurred in the ordinary course of business
and disclosed in accordance with Section 3.13 or taxes incurred on earnings
since the date of the Unaudited Financial Statements.
3.12 Assets. Except as set forth in the Unaudited Financial Statements,
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Seller has, and on the Closing Date will have, good and marketable title to all
of Assets, free and clear of all security interests, pledges, liens,
restrictions and encumbrances of every kind and nature. The Assets to be
conveyed pursuant to this Agreement are all the assets of Seller necessary to
enable Purchaser to continue operating the business in the manner conducted by
Seller as of the date hereof.
3.13 Accounts Receivable and Accounts Payable. The accounts receivable
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and accounts payable as set forth in Exhibit 1.1(e) represent amounts due and
owed, as the case may be, for goods sold or services rendered or received by
Seller in the ordinary course of business and are collectable in the ordinary
course of business.
3.14 Contracts. All agreements, contracts and arrangements, whether
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written or oral (collectively, "Contracts"), to which Seller is, or on the
Closing Date will be, a party, or from
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which Seller will receive substantial benefits, and which are material to Seller
are not, and on the Closing Date will not, be in material default under any such
Contract.
3.15 No Affiliated Transactions. Except as otherwise disclosed in the
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Unaudited Financial Statements, there have been, and through the Closing Date
will have been (i) no bonuses or extraordinary compensation to any of the
officers or directors of Seller, (ii) no loans made to or any other transactions
with any of the officers or directors or shareholders of Seller or their
families, (iii) no dividends or other distributions declared or paid by Seller,
and (iv) no purchase by Seller of any of its capital shares.
3.16 Insurance. Seller has, and on the Effective Date will have,
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maintained casualty and liability policies and other insurance policies with
respect to its business which are appropriate and customary for businesses
similar to Seller in size, industry and risk profile. Copies of all of the
policies of insurance and bonds presently in force with respect to Seller,
including without limitation those covering properties, buildings, machinery,
equipment, worker's compensation, officers and directors and public liability,
have been delivered to Purchaser. All such insurance policies are in full force
and effect, with all premiums thereon duly paid and Seller has not received any
notice of cancellation with respect to any such policies.
3.17 Patents and Trademarks. Seller has, and on the Closing Date will
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have, no patents, patent applications, trademarks, trademark registrations or
applications therefor, trade names, copyrights, copyright registrations or
applications therefor, or other intellectual property, except as described in
Exhibit 1.1(h) attached hereto.
3.18 Compliance with Law. Since its inception, Seller has, and on the
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Closing Date, will have in all material respects operated its business and
conducted its affairs in compliance with all applicable laws, rules and
regulations, except where the failure to so comply did not have and would not be
expected to have a material adverse effect on Seller's business or property.
ARTICLE IV: PURCHASER'S REPRESENTATIONS AND WARRANTIES
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Purchaser and Paul Grillo hereby represent and warrant to Seller as
follows:
4.1 Corporate Organization. Purchaser is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Florida and
has the corporate power to carry on all business conducted by it. There are no
states or jurisdictions in which the character and location of any of the
properties owned or leased by the Purchaser, or the conduct of its business,
makes it necessary for it to qualify to do business as a foreign corporation
except where the failure to so qualify would not have a material adverse effect
on purchaser. Copies of the Certificate of Incorporation and of the By-laws of
Purchaser, and all amendments thereto, and stock records of Purchaser have been
furnished to Seller and are complete and correct. Purchaser's minute books
heretofore furnished to Seller contain complete and accurate records
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of all meetings and other corporate actions of Purchaser's stockholders and
Board of Directors and committees thereof.
4.2 Capitalization. The authorized capital stock of Purchaser consists of
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200,000,000 shares of Common Stock, par value $.0001 per share, of which five
hundred thousand (500,000) shares are issued and outstanding, no shares of which
are issued but not outstanding, and 199,500 shares of which are authorized and
unissued. All shares of the Company's Common Stock issuable to Seller in
payment of the Purchase Price, will upon issuance, be duly and validly issued,
fully paid and nonassessable and will be free and clear of any liens, claims,
charges or encumbrances of any nature whatsoever, and represent ninety-four
percent (94%) of the issued and outstanding shares of capital stock of
Purchaser, on a fully diluted basis. Except as set forth in Schedule 4.2
attached hereto, there are no outstanding options, warrants, rights, puts,
calls, commitments, conversion rights, plans or other agreements of any
character to which the Purchaser is a party or otherwise bound which provide for
the acquisition, disposition or issuance of any issued but not outstanding,
outstanding, or authorized and unissued shares of capital stock of Purchaser.
There are no preemptive or similar rights attached to Purchaser's capital stock.
No holders of any of the Purchaser's securities has any rights, "demand,"
"piggy-back' or otherwise, to have such securities registered under the
Securities Act of 1933, as amended.
4.3 Corporate Authority. As of the Closing Date, Purchaser will have
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taken all corporate action and other proceedings necessary to enable it to carry
out its obligations under this Agreement and this Agreement when executed and
delivered by Seller will constitute a valid and binding obligation of Seller.
4.4 Litigation. (i) Purchaser is not engaged in, or threatened with, any
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litigation, governmental investigation, including but not limited to, the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc., or other proceeding or controversy which may materially adversely
affect Purchaser's obligation to consummate this Agreement, (ii) no consent,
approval or authorization of or designation, declaration or filing with any
governmental authority is required in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
and (iii) Purchaser is not operating its business in violation of any federal,
state or local law or ordinance so as to have any material adverse effect on
Purchaser's purchase of the Assets.
4.5 No Violation. The execution and delivery by Purchaser of this
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Agreement and the consummation of the transactions contemplated hereby do not
and will not conflict with or violate any contract or agreement to which
Purchaser is a party or by which it is bound and are not contrary to the
Certificate of Incorporation or By-laws of Purchaser and are not contrary to any
order of any court to which Purchaser subject.
4.6 Not Investment Company or Investment Advisor. The business of
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Purchaser does not require it to be registered as an investment company or
investment adviser as such terms are defined under the Investment Company Act
and the Investment Advisers Act of 1940, each as amended.
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4.7 No Liabilities. There are, and on the Closing Date will be, no
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liabilities (including, but not limited to tax liabilities) or claims against
Purchaser (whether such liabilities or claims are contingent or absolute, direct
or indirect, matured or unmatured) not appearing on the audited financial
statements of the Purchaser as of September 30, 1994 (the "Audited Financial
Statements") other than liabilities incurred in the ordinary course of business
and disclosed in accordance with Section 4.7 or taxes incurred on earnings since
the date of the Audited Financial Statements.
4.8 No Material Advance Charge. Since the date of the Audited Financial
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Statements, the business of Purchaser has only been operated in the ordinary
course. There has not been since the date of the Audited Financial Statements,
and on the Closing Date there will not have been, in the aggregate any material
adverse change in the condition, financial or otherwise, of Purchaser from that
set forth in the Audited Financial Statements.
4.9 Contracts. The Purchaser has no existing agreements, contracts and
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arrangements, whether written or oral (collectively, "Contracts") other than
this agreement.
ARTICLE V: DISSOLUTION AND LIQUIDATION OF SELLER
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Subject to the approval of Seller's stockholders and the consummation of
the sale of Assets to Purchaser, Seller and Purchaser, as the case may be, shall
within 90 days of the Closing Date (i) file a Certificate of Dissolution
pursuant to Section 275 of the Delaware General Corporation Law with the
Secretary of State of the State of Delaware; (ii) file within 90 days
thereafter [Form 966] with the Internal Revenue Service, together with certified
copies of board and stockholders' resolutions of Seller, if required; and (iii)
distribute to the stockholders of Seller shares of Common Stock of Purchaser
whereupon the stockholders of Seller shall surrender all of their shares of
capital stock of Seller for cancellation.
ARTICLE VI: AFFIRMATIVE COVENANTS
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6.1 Affirmative Covenants of Seller. Seller shall, as soon as
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practicable but in no event later than the Closing Date, (i) cause a special
meeting of its stockholders to be called to consider and vote upon the sale of
the Assets by Seller to Purchaser and the dissolution and liquidation of Seller,
on the terms and conditions hereinafter set forth, or (ii) obtain such written
consent of its stockholders as is necessary under applicable state corporate law
to approve the sale of the Assets by Seller to Purchaser and the dissolution and
liquidation of Seller, on the terms and conditions hereinafter.
6.2 Affirmative Covenants of Purchaser. Purchaser shall, as soon as
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practicable but in no event later than the Closing Date, (i) (a) cause a special
meeting of its stockholders to be called to consider and vote upon the amendment
of the Certificate of Incorporation of Purchaser to change its name to Safe
Alternatives Corporation of America, Inc., effective upon the
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consummation of the sale of the Assets by Seller to Purchaser, or (b) obtain
such written consent of its stockholders as is necessary as is necessary under
applicable state corporate law to approve the amendment of the Certificate of
Incorporation of Purchaser to change its name to Safe Alternatives Corporation
of America, Inc., effective upon the consummation of the sale of the assets by
Seller to Purchaser, and (ii) (a) cause all of the existing members of the board
of directors to resign effective immediately upon the consummation of the
transactions contemplated hereunder and (b) (1) cause a special meeting of its
board of directors to nominate each of Stephen J. Thompson and Richard J. Fricke
to be nominated to the slate of the proposed board of directors of the Purchaser
and (2) cause a special meeting of the stockholders of the Purchaser to be
called to consider and approve the election of Messrs. Thompson and Fricke as
the sole members of the board of directors of the Purchaser, subject only to the
consummation of the transactions contemplated hereby.
ARTICLE VII: SURVIVAL; BULK SALES; SALES TAX
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7.1 Survival. The representations and warranties set forth herein shall
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survive and remain in effect following the Closing Date.
7.2 Bulk Sale Compliance Waiver. Purchaser hereby waives compliance with
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the provisions of any law relating to bulk transfers insofar as it may be
applicable to the purchase and sale of the Assets. If by reason hereof, any
claims are asserted by creditors of Seller, they shall be the responsibility of
Purchaser.
7.3 Sales Tax. Purchaser shall at the Closing, or thereafter, upon
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request of Seller, execute and deliver to Seller all requisite sales, use and
transfer tax returns and related certificates and affidavits, which must be
filed by reason of the transactions contemplated by this Agreement. Seller also
shall execute all such returns and related certificates and affidavits and shall
timely file the same and pay all sales, use and transfer taxes payable by reason
of the sale of the Assets when due and payable. Purchaser shall pay to Seller
at the Closing an amount in cash equal to all sales, use and transfer taxes
payable by reason of the sale of the Assets.
ARTICLE VIII: MISCELLANEOUS
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8.1 Expenses. Except as otherwise agreed in writing by the parties, each
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party shall pay its own expenses incident to the preparation and consummation of
this Agreement.
8.2 Benefit and Assignments. This Agreement shall be binding upon and
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inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party shall assign or transfer all or any portion of
this Agreement without the prior written consent of the other party, and any
such attempted assignment shall be null and void and of no force or effect.
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8.3 Broker. The parties represent and warrant to each other that all
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negotiations relating to this Agreement and the transactions contemplated hereby
have been carried on between them directly and without the intervention of any
other party in such manner as to give rise to any valid claim against any of the
parties for a brokerage commission, finder's fee or other like payment except
for the one hundred thousand dollar ($100,000) obligation to Mr. Paul Grillo,
payable at Closing, for his introduction and facilitation of the transactions
herein. In addition, assuming that the transactions are consummated, the
Purchaser shall enter into a consulting agreement with Mr. Grillo for a period
of Two (2) years (the "Consulting Agreement"). The Consulting Agreement shall
provide for a payment of $12,500 a month commencing July 1, 1996.
8.4 Further Assurances. Purchaser and Seller each agrees to take such
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action and to execute and deliver such documents and instruments as any party
may reasonably request in order to effectuate the terms of this Agreement and
the transactions contemplated hereby, and the parties agree to fully cooperate
with each other and with their respective counsel and accountants in connection
with any steps required to be taken as part of their respective obligations
under this Agreement.
8.5 Waiver. Any party hereto shall have the right to waive compliance by
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the other of any term, condition or covenant contained herein. Such waiver
shall not constitute a waiver of any subsequent failure to comply with the same
or any different term, condition or covenant.
8.6 Applicable Law. Connecticut law, other than choice of law, shall
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govern the validity, construction, interpretation and effect of this Agreement.
8.7 Headings. The paragraph headings of this Agreement are for
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convenience of reference only and do not form a part of the terms and conditions
of this Agreement or give full notice thereof.
8.8 Severability. Any provision hereof that is prohibited or
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unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.9 Entire Agreement. This Agreement and the Exhibits and Schedules
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hereto contain the entire understanding between the parties, no other
representations, warranties or covenants having induced either party to execute
this Agreement, and supersedes all prior or contemporaneous agreements with
respect to the subject matter hereof. This Agreement may not be amended or
modified in any manner except by a written agreement duly executed by the party
to be charged, and any attempted amendment or modification to the contrary shall
be null and void and of no force or effect.
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8.10 Notices. All notices or other communications to be sent by any party
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to this Agreement to any other party to this Agreement shall be sent by
certified mail, nationwide overnight delivery service or by personal delivery to
the addresses hereinbefore designated, or such other addresses as may hereafter
be designated in writing by a party. Courtesy copies of any such notices shall
be sent to: counsel for Seller, Feldman & Ellenoff, 200 Madison Avenue, Suite
1900, New York, N.Y. 10016 attn. Douglas S. Ellenoff, Esq. and counsel for
Purchaser, Frank Freeman, Esq., c/o Purchaser.
8.11 Counterparts. This Agreement may be executed by the parties hereto
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in one or more counterparts, each of which shall be deemed an original and which
together shall constitute one and the same instrument.
8.12 Abandonment. This Agreement and the transactions contemplated herein
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may be abandoned (a) by either party, acting by its Board of Directors, at any
time prior to its adoption by the shareholders as provided by law, or (b) by the
mutual consent of the parties, acting each by its Board of Directors, at any
time after such adoption by such shareholders and prior to the Closing Date. In
the event of abandonment of this Agreement, the same shall become wholly void
and of no effect and there shall be no further liability or obligation hereunder
on the part of either party, its Board of Directors or any other party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
By:_________________________________________
PORTSMOUTH CORPORATION
By:_________________________________________
I hereby acknowledge and accept personal
responsibility with respect to the accuracy of the representations in
ARTICLE IV: PURCHASER'S REPRESENTATIONS
AND WARRANTIES.
By: _____________________________________
Paul Grillo
12
SAC OF AMERICA, INC.
ACCOUNTS RECEIVABLE 9/1/95
--------------------------
INVOICE INVOICE
NUMBER DATE CUSTOMER AMOUNT
- ------ ----
B10166 06/21/95 H&S Environmental Co. $3,850.00
B10168 06/28/95 H&S Environmental Co. $2,894.50
B10171 07/12/95 W.A. Crandall & Sons, Inc. 2,894.50
B10172 07/18/95 H&S Environmental Co. 1,925.00
B10173 07/19/95 H&S Environmental Co. 770.00
B10174 07/24/95 USCG Support Center New 1,035.00
York
B10175 08/30/95 Bayway Lumber 256.00
Distributors, Inc.
B10176 08/30/95 The Potomac Edison 185.00
Company
B10177 08/30/95 Master Craft Paper 1,000.00
Company
B10178 08/30/95 I&OA Slutsky, Inc. 50.22
SAC OF AMERICA, INC.
ACCOUNTS PAYABLE 9/1/95
------------------------
INVOICE
DATE VENDOR AMOUNT
---- ------
06/28/95 Total Comfort Co., Inc. $ 68.90
07/26/95 Quill Corp. 93.98
08/01/95 State of Connecticut 2,697.03
08/07/95 Building Blocks 50.00
08//95 Fisher Scientific Co. 524.77
08/09/95 SNET 1,543.49
08/11/95 Pinchbeck Co. 81.95
08/13/95 AT&T 444.28
08/15/95 ARC, Inc. 67.00
08/16/95 Selectform, Inc. 90.35
08/17/95 Brown Chemical co. 644.00
08/17/95 Angus Chemical co. 1,322.24
08/19/95 UPS 77.18
08/22/95 Sprint Tele. 95.17
08/23/95 Security Solutions, Inc. 31.80
08/23/95 DEX Business Credit 104.94
08/23/95 Quill Corp. 562.74
08/23/95 Corporate Staffing Solutions 844.29
08/24/95 CL&P 722.77
08/24/95 Airborne Express 163.71
08/24/95 ITT Hartford Co. 247.84
08/25/95 SNET 603.31
08/25/95 AWD, Inc. 306.08
08/26/95 CompuServe, Inc. 256.84
08/26/95 American Express Co. 5,527.29
SAC OF AMERICA, INC.
ACCOUNTS PAYABLE 9/1/95
--------------------------
INVOICE
DATE VENDOR AMOUNT
---- ------
08/28/95 Quill Corp. 14.61
08/28/95 Pitney Bowes 66.30
08/30/95 Corporate Staffing Solutions 508.81
08/31/95 Sherwin Williams Co. 19.46
08/31/95 Crystal Rock Co. 131.06
Assets of Safe Alternatives Corporation
of America, Inc.
Richard Kennedy Exclusive License to SAC 2/26/92
------------------------------------------------
- Foaming and disposal of organic sludge
Richard Kennedy Exclusive License to SAC 7/17/91
------------------------------------------------
- Foaming and disposal of organic sludge
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal and reuse of expanded polystyrene through the use of liquid
mixture
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal and reuse of plastic bags polyurethane plastic polystyrene
diapers and the like
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal of oil through the use of foam
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded hollow core doors
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded urethane coating which provided a vapor barrier
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded water blown urethane foam
Richard Kennedy Exclusive License to SAC 8/23/93
------------------------------------------------
- Packaging foam
- Foaming and disposal of organic sludge
- Fire retarded water blown urethane foam with reduced smoke toxicity
Stevens/SAC 11/15/93
--------------------
- Chemical paint stripping technology
S.A.C. INVENTORY AS OF FEBRUARY 22, 1995
RIDGEFIELD
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ----- ----------------------
Lobby
- -----
Furniture Matched Set
2-Wingback chairs 1994 598 400
1-Loveseat 1994 399 300
1-Endtable 1994 200 150
1-Brass lamp 1994 100 50
1-Glass top display table 1994 450 400
1-Coffee Table 1994 250 175
2-Paintings - on loan
1-Plant stand 1994 50 25
Sams' Conference Room
- ---------------------
1-Conference table, rectangular, 1993 1000 800
1-Steel chair 1993 150 150
1-Small file cabinet (white) 1993 50 40
1-MLS-12 Phone 1993 200 200
1-Tenex 410 garbage container 1993 12 6
SUB-TOTAL 3459 2696
SUB-TOTAL FORWARD 3459 2696
1
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
Supply Room
- -----------
1-Sanyo Refrigerator model # SR-1282-4X 1994 299 250
Serial # 870500833
1-Sanyo Microwave Serial# 38705370 1994 225 200
1-Quil Paper cutter model # 754318 1993 115 100
1-Heavy duty stapler "Stanley" 1993 35 30
Model # B310 HDS
1-Ring binder GBC Image Maker 2000 1993 499 450
Serial # DL01769
1-Velobinder punch 1994 299 250
Stair Case
- ----------
1-Table with lamp 1994 150 125
Womens Room Mens Room
- -----------
1-Table 1-Tenex 410 garbage 1993 12 6
container
Frank's Office
- --------------
1-Desk, black top with
ext., 6 drawers 1993 700 500
1-Desk small with 2 drawers 1993 400 300
1-Three drawer file cabinet 1994 399 300
1-Wooden executive style 1993 299 250
1-MLS-12 Phone 1993 200 200
SUB-TOTAL THIS PAGE 3632 2961
SUB-TOTAL FORWARD 7091 5657
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
2
Frank's Office cont'd
- ---------------------
1-Bostich B660 stapler 1993 15 7
1-Steel chair 1993 250 225
Cannon NP 20155 8 copier, model # F12080 1993 3500 2500
Serial # CGR04310
Closet
- ------
2-Ruddermaid Toughbeck 32 gallon garbage cans 1993 30 20
Receptionist Office
- -------------------
1-Desk (litton business line) 1993 550 500
1-MLS-34D phone 1993 1100 1100
1-AT&T answering machine, model # 1323, serial # 1994 95 50
1-Computer - upgrade 2M RAM, Modem w/Fax Card
*1-486 Microgeneration 486 computer Serial #301149 1994 3799 4300
1-Fujitsu Keyboard Serial#H7158346 -
1-Gateway crystal scan monitor, wo24MI,
serial# TB1814035732
1-Fellows Mesh glare screen 1994 70 60
*1-HP IIP plus laser printer Serial# 3136J32LIZ 1399 1699
1-HOM black filing cabinet, 4 drawer 1993 299 250
1-Panasonic electric pencil sharpener 1993 75 60
1-C40 Scotch tape dispenser\ 1-Bates 520 Stapler 1993 25 20
1-3 drawer file cabinet with Formica top 1993 499 450
SUB-TOTAL THIS PAGE 11,686 11,241
SUB-TOTAL FORWARD 18,777 16,898
*Denotes Upgrades or Improvements
3
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
1-Royal 2325 copier, CopyStar w/document 1993 11,000 9,000
Feeder & Sorter, Serial# 009736H
1-Tenex 415 garbage pail 1993 12 6
1-EtherNet Connector 1993 200 200
Large Conference Room
- ---------------------
1-Round conference table 3,000 2,500
1-Small rolling stand 100 80
2-MLS-12 phones 400 400
9-Fabric armchairs, swivel 2,025 1,800
3-Standing floor lamps 300 200
2-Dry ease boards 150 100
1-Rubbermaid tool box 30 20
SUB-TOTAL THIS PAGE 17,217 14,306
SUB-TOTAL FORWARD 35,994 31,204
*Improvements and/or Upgrades Made
4
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
Sheryls' Office
- ---------------
1-Desk (litton business line) with keyboard attachment 1994 750 650
1-C40 scotch tape dispenser 1993 12 6
1-Black Desk Lamp 1994 60 50
2-AT&t MLS-12 phones 1993 400 400
1-Sony M2000 transcriber micro cassette serial # 47142 1994 399 350
1-brown file cabinet 2 drawers with wood veneer top 1994 299 250
1-Wood veneer table with 2 shelves 1993 150 100
1-Mini tower computer micro generation 486
2-Meg Ram & Local B., Card, serial# 301148* 1994 2995 3400
1-Z nix mouse
1-MAG Computer monitor model# PMV1448
serial # TB9D63195
1-Keyboard 2001 serial# 920909044
1-HP IIP plus laser printer serial # 3136J32L21, 2MG Ram* 1994 1399 1699
1-3drawer file cabinet with wood veneer top
1-Fujitsu Fax machine model # Dex Express 2500 1993 550 450
serial # 332893940
1-Linder quartz clock 1994 30 20
1-Speed-O-Print cabinet with sliding doors 1994 250 150
1-Acco-30 stapler 1993 20 15
2-Steelmaster index card drawers 1993 60 50
1-Punchodex P-49 3 hole punch 1993 20 15
1-Tenex 410 garbage pail 1993 12 6
SUB-TOTAL THIS PAGE 7,406 7,611
SUB-TOTAL FORWARD 43,400 38,815
*Denotes Upgrade or Improvements
5
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
Steves' Office
- --------------
1-Cherry veneer desk, 2 sections with 5 drawers 1993 2700 2500
1-File cabinet black with wood veneer top 1994 650 600
1-Sony dictator transcriber model# M2020, 1994 299 250
serial # 0503119
1-C-41 scotch tape dispenser 1993 12 6
1-Toshiba surveillance camera CCD, Model K537A 1994 450 400
1-Halogen torch lamp, black 1994 150 100
1-Halogen desk lamp, brass and black
2-Pelco video switcher model # VS5104, serial # 7177 4A 1994 125 125
1-Panasonic monitor b/w model # TR930B, 1994 399 350
serial # K3A46I075
1-Eleletrek power strip 1994 129 100
1-APC Power Backup 1995 499 499
1-stapler 1993 12 6
1-MLS-12 D phone serial # 921292707 1993 275 275
1-C38 scotch tape dispenser 1993 12 6
1-Cherry finish cabinet/desk 1993 1500 1300
4-Fabric covered chairs 1993 1200 1000
1-Executive style chair, high back 1994 899 800
1-Round table (36") 1994 299 250
1994 150 150
1994 499 400
serial number# 31230521
1-Cherry wood pendulum clock 1994 150 125
1-Spectra Viewframe LCD Computer projection Panel 1994 4500 4500
model Viewframe spectra c, serial # 119453
SUB-TOTAL THIS PAGE 14,909 13,742
SUB-TOTAL FORWARD 58,309 52,557
6
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
Steve's Office Cont'd
- ---------------------
1-NEC Versa Ultralite laptop* 1994 3800 4600
486SX 33MHz
12MB RAM
14.4 PCMCIA Fax modem
2x 170 Mb Hard drives 1994 2995 3600
1MCW 486/66 W/ CD Rom
NEC Multi-System XP17 Monitor*
Ricks office
- ------------
1- phone MLS-12 1993 400 400
1-wood Desk (Fancy) #84436 on Side 1993 1100 900
1-end table with drawer and cabinet 1994 150
1 Packard Bell PK Mate 486 computer 1994 1299
model pb-400
serial # 17A2C11327T
1-IBM keyboard model 139401
1-Packard Bell monitor model PB8538SVGA
serial # 73591171
1-Hitachi CD-Rom drive 1993 1700 1500
model CDR-1700s
serial# K1L053970
SUB-TOTAL THIS PAGE 11,444 12,200
SUB-TOTAL FORWARD 69,753 64,757
*Denotes Upgrades or Improvements
7
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
Rick's Office Cont'd
- --------------------
1-FyreFyter safe model FF 250 1993 699 699
1-Tenex 410 garbage pail 1993 12 6
1-Panasonic surveillance camera 1994 250 250
Gerard's office
- ---------------
1-AT&T MLS-12 phone 1993 200 200
1-Bostich 660 stapler 1993 12 6
1-C38 Scotch Tape Dispenser 1993 12 6
1-desk w/2 drawers (litton business line) 1993 650 550
1-desk, particle board with simulated wood veneer 1994 200 200
1-Tenex 410 garbage pail 1993 12 6
Sam's office
- ------------
1-AT&T phone MLS-12 1993 200 200
1-desk w/4 drawers (litton business line) 1993 600 500
1-Steelcase black filing cabinet w/2 drawers 1994 125 100
SUB-TOTAL THIS PAGE 2,972 2,723
SUB-TOTAL FORWARD 72,725 67,480
8
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
PAULA'S OLD OFFICE
- ------------------
1 desk, with 4 drawers (litton business line) 1993 750 650
1 filing cabinet w/3 drawers 399 300
2 AT&T MLS-12 phones 1993 400 400
1 Sony foot control unit - dictating machine
model FS-25 1994 399 350
1 Black steel chair 1993 225 150
1 Black T-legged table 1994 300 200
1 Fujitsu DEX 760 Fax/copier serial #34620259 1994 1750 1600
COMPUTER ROOM UPSTAIRS
- ----------------------
2 AT&T MLS-12 phones 1993 400 400
1 desk w/4 drawers (litton business line) 1993 750 650
1 desk w/2 drawers (litton business line) 1994 650 550
1 Black steel file cabinet w/4 drawers 1994 700 600
1 Fellows mesh anti-glare screen 1994 60 50
2 Tenex 410 garbage pails 1993 24 12
1 Gateway 2000 computer 486 SX 2 Meg Ram
and Video Accelerator * 1994 2100 2700
1 UMAX scanner model UC840 serial # A2205047 1994 2600 3000
1 Sony Trinitron monitor model CPD-1604S
serial # 2501586 1994 1600 1600
2 power strips (expensive) 1994 100 75
SUB-TOTAL THIS PAGE 13,307 13,362
* Denotes Upgrades or Improvements
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
COMPUTER ROOM CONT'D
- --------------------
Many misc. computer & video cables
1 Sony Camcorder, charge and battery model 1994 900 800
CCD-TR101 serial 230567
1 Panasonic SVHS deck model AG1960 1994 2400 2400
serial # E2TA00665
1 Symphonic TV/VCR model TVCR13B1C Serial # V38326714 1993 299 250
1Matox PC card model ILM16/AT/2MA/S serial # 1565 1994 700 700
1 Editlink controler card model 6766, SN LA010559 1994 1100 1100
1 Clip-on lamp 1994 29 15
MARIE'S OFFICE
- --------------
2 leather armchairs (plain) 1993 798 550
1 leather armchair (fancy) 1994 300 300
SET - 1 Desk 1993 1700 1500
1 computer table
both particle board with simulated wood veneer
1 AT&T MLS-12 phone 1993 200 200
1 C38 scotch tape dispenser 1993 12 6
1 Bostich 660 Stapler, serial # 82375710 1993 12 6
1 Casio adding machine model FR-1255Bk 1994 69 50
1 Linden Wall Clock 1993 15 7
1 Filex File Cabinet w/4 drawers 1994 700 700
1 Tenex 410 and 415 garbage pails 1993 24 12
SUB-TOTAL THIS PAGE 9,258 8,596
SUB-TOTAL FORWARD 95,290 89,438
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------- ----------------------
MARIE'S OFFICE CONT'D
- ---------------------
1 wood in/out stacking trays 1994 29 15
1 HP laserjet 4P printer * - 4 Meg Ram 1993 1299 1600
LEE'S OFFICE
- ------------
1 desk (litton business line) 1993 800 700
1 folding table 1994 150 100
1 halogen floor lamp 1994 79 60
1 halogen swing arm desk lamp 1994 59 40
1 black desk lamp 1994 59 40
3 expensive power strips 1994 117 117
1 AT&T MLS-12 phone 1993 200 200
1 calculator 1994 30 30
1 large tabel against the wall 1993 250 200
2 rolodex files 1993 30 20
1 swingline 646 stapler 1993 15 7
1 MAG monitor PVM1448 model serial TB9D63204 1995 2190 2190
1 Envision handheld scanner serial # M03114618 1995 499 499
and interface (paralell) serial # MR9303820
1 NEC Mutisync Monitor 21" 1995 2600 2600
model JC-2143UMA, serial # 4Y00469CB
Many misc. cables 1995 400 400
1 Teac 5 1/4" disk drive 1994 300 300
1 unnamed 250 MB tape backup drive 1994 400 400
SUB-TOTAL THIS PAGE 9,606 9,518
SUB-TOTAL FORWARD 104,896 98,956
* Denotes upgrades or improvement
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------- ----------------------
LEE'S OFFICE CONT'D
- -------------------
1 HP Scanjet Scanner model 9190A Serial # 2709J03930 1994 1,500 1,500
1 Microgeneration 486 computer * serial # 35228 1993 11,000 16,000
1 HP Laserjet 4 model C2007A * serial #JPBH040907 1994 1,399 1,599
1 Gateway Handbook model HB486SX-25 Serial #08U1M030 1994 25 25
1 NEC multi-spin cd rom model 3xp * serial # 3Z041534B 1994 799 799
1 data switch 4:1
1 Textronix Phaser III color printer * 1994 8,000 11,200
model 4698Pxi, seril # B102782 (on small table)
UPSTAIRS HALLWAY
- ----------------
1 Royal Copystar 2325 copier, serial 009739H 1993 11,000 9,000
w/rolling stand and cabinet
1 AT&T MLS-12 phone 1992 200 200
1 TI 5032 calculator serial c-0693 1994 69 50
1 Acosta 3 holr punch 1993 12 6
1 bostich 660 stapler 1993 12 6
1 Tenex 410 garbage pail 1993 12 6
1 metal desk and attached typewriter table 1994 399 350
1 speedoprint metal table with shelf 1994 100 80
SUB-TOTAL THIS PAGE 34,527 40,821
SUB TOTAL FORWARD 139,423 139,777
* Denotes upgrade or improvement
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ----- ----------------------
UPSTAIRS HALLWAY CONT'D
- -----------------------
1 cork board 1993 39 25
1 Boston electric pencil sharpener model 18 serial #6533078 1993 69 50
BOB'S OFFICE
- ------------
1 bookcase in closet 1994 79 70
1 executive chair with fabric in closet 1994 600 500
1 AT&T MLS-12 phone 1993 200 200
SET
1 desk and credenza 1994 1200 1500
5 matching leather arm chairs 1994 750 1000
1 round wood table 1994 200 300
1 file cabinet w/2 drawers 1994 399 350
1 Tenex 410 garbage pail 1994 12 6
STEVE'S CONFERENCE ROOM
- -----------------------
1 Linden wall clock 1993 29 20
1 Tenex 410 garbage pail 1993 12 6
1 large oval conference table 1994 600 600
FIRST FLOOR HALLWAY
- -------------------
1 small plant table 1994 25 20
3 Tenex 410 garbage pails 1993 36 18
1 small wood table with glass top 1994 100 80
1 dish rack and drainer 1993 10 5
SUB-TOTAL THIS PAGE 4,360 4,750
SUB-TOTAL FORWARD 143,783 144,527
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
FIRST FLOOR HALLWAY CONT'D
- --------------------------
11 unsigned prints 1993 220 200
1 Toshiba CCD camera Model K537A 1994 450 400
BASEMENT
- --------
Telephone System 1993 26,000 26,000
1 AT&T Partner II Phone switcing system
4 AT&T 206 Partner modules, model 103E
Serial #'s 92237.0671
92237.0673
92237.0210
92237.1325
1 Partner II processor module
ALL ARUOND OFFICE
- -----------------
29 All steel #231 office chairs, tilt and swivel 1993/1994 5,075 7,500
SUB-TOTAL THIS PAGE 31,745 34,100
GRAND TOTAL 175,528 178,627
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
Financial Statements and
Accountant's Compilation Report
December 31, 1994
SAFE ALTERNATIVES OF AMERICA, INC.
(Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1994
Accountant's Compilation Report................................1
Financial Statements
Balance Sheet..............................................2
Statement of Income and Deficit Accumulated
During the Development Stage..........................3
Statement of Cash Flows....................................4
Notes to Financial Statements..............................5
Schedule I-Analysis of Selling, General and
Administrative Expenses...............................8
Schedule II-Analysis of Research and Development...........9
Accountant's Compilation Report
Board of Directors
Safe Alternatives of America, Inc.
We have compiled the accompanying balance sheet of Safe of December 31, 1994,
and the related statements of income and deficit accumulated during development
stage and cash flows for the year then ended and for the period from January 1,
1992 (inception) to December 31, 1994, and the accompanying supplementary
information contained in schedules I and II, which are presented only for
supplementary analysis purposes, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
We are not independent with respect to Safe Alternatives of America, Inc.
/Lyons & Lyons
Ridgefield, Connecticut
July 31, 1995
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
BALANCE SHEET
December 31, 1994
ASSETS
CURRENT ASSETS
Cash $ 21,622
Accounts Receivable 15,888
Inventories 14,128
Prepaid Expenses 1,244
----------
TOTAL CURRENT ASSETS 52,882
FIXED ASSETS
Equipment 74,387
Leasehold improvements 61,315
Furniture and fixtures 101,344
----------
237,046
Less accumulated depreciation 58,696
----------
178,350
OTHER ASSETS
Organization costs, less amortization of $28,384 32,439
License agreement, less amortization of $3,333 46,667
Deposits and advances 21,258
----------
100,364
----------
$ 331,596
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 39,877
Shareholders' loans 112,500
Accrued State income tax 453
----------
TOTAL CURRENT LIABILITIES 152,830
SHAREHOLDERS' EQUITY
Common stock, $.00025 par value, 30,000,000
shares authorized, 26,204,500 shares issued
and outstanding 6,551
Additional paid-in capital 3,314,326
Deficit accumulated during developmental stage (3,142,111
----------
178,766
----------
$ 331,596
============
See accompanying notes and accountant's compilation report.
2
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
STATEMENT OF INCOME AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
-------------- ---------------
REVENUES
Sales $ 16,425 $ 16,425
Marketing rights 385,000
------------ ------------
16,425 401,425
COSTS AND EXPENSES
Cost of goods sold 9,170 9,170
Selling, general and
administrative 959,335 2,220,167
Research and development 617,191 1,230,035
Depreciation and amortization 47,459 90,414
------------ ------------
1,633,155 3,549,786
------------ ------------
OPERATING LOSS ( 1,616,730) ( 3,148,361)
OTHER INCOME (EXPENSE)
Interest 8,718
------------
LOSS BEFORE INCOME TAXES ( 1,616,730) ( 3,139,643)
INCOME TAX
State 250 2,468
------------ ------------
NET LOSS ( 1,616,980) $( 3,142,111)
=============
Deficit accumulated during the
development stage at beginning
of year ( 1,525,131)
------------
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STATE AT DEC. 31,1994 ( 3,142,111)
============
See accompanying notes and accountant's compilation report.
3
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
STATEMENT OF CASH FLOWS
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 1,616,980) $( 3,142,111)
Add (deduct) adjustments to cash basis:
Depreciation and amortization 47,459 90,413
Increase in accounts receivable ( 15,888) ( 15,888)
Increase in inventories ( 14,128) ( 14,128)
Increase in prepaid expense ( 1,244)
Increase in other assets ( 71,258)
Increase in accounts payable 30,920 39,877
Decrease in income taxes payable ( 250) 453
------------ ------------
NET CASH USED BY
OPERATING ACTIVITIES ( 1,568,867) ( 3,113,886)
CASH FROM INVESTING ACTIVITIES
Additions to fixed assets ( 39,018) ( 237,046)
Additions to intangible assets ( 60,823)
------------ ------------
NET CASH USED BY
INVESTING ACTIVITIES ( 39,018) ( 297,869)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholders' loans 112,500 112,500
Proceeds from issuance of stock 1,309,059 3,320,877
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,421,559 3,433,377
------------ ------------
NET DECREASE IN CASH ( 186,326) 21,622
Cash at beginning of year 207,948
------------
Cash at end of year $ 21,622 $ 21,622
============ ============
Supplemental disclosure of cash paid:
Taxes paid $ 703 $ 1,720
See accompanying notes and accountant's compilation report.
4
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations: Safe Alternatives Corporation of America, Inc. (SAC) (a development
- -----------
stage company) is a Connecticut-based Delaware corporation that has developed
patented new products and high-technology solutions for problems related to
environmental contamination. SAC has secured exclusive manufacturing,
marketing, and distribution rights to nineteen patented, patent pending and
application-in-process technologies in the Chemical and Biosteralization fields.
Basis of Presentation and Financing Activities: In the course of development
- -----------------------------------------------
activates, SAC has incurred significant losses since inception and expects
additional losses in 1995. SAC plans to continue to finance its operations with
a combination of stock sales and, in the longer term, revenues from product
sales. SAC's ability to continue as a going concern, in the near term, is
dependent upon obtaining additional financing. The accompanying financial
statements have been prepared assuming SAC will continue as a going concern, and
do not include any adjustments that might result from the outcome of this
uncertainty.
Property, Plant and Equipment: Property, plant and equipment are carried at
- ------------------------------
cost. Depreciation is computed for financial purposes on a straight-line basis
over the estimated useful lives of the related assets.
Organization Costs: Organization costs are amortized over 60 months using the
- -------------------
straight-line method.
Inventories: Inventories are stated at the lower of cost (first-in, first out)
- ------------
or market value.
Research and Development Expenses: Research and development expenses are
- ----------------------------------
charged to operations as incurred.
Shareholders' Loans: Shareholders' loans are unsecured, not-interest bearing,
- --------------------
demand notes.
Income Taxes: At December 31, 1994 the Company had net operating loss
- -------------
carryforwards for financial reporting purposes and tax purposes of approximate
$3,120,000 which will expire in 2007--$380,000, 2008--$1,140,000, 2009--
$1,600,000. These carryforwards are available for the reduction of future
federal and state taxable income and income taxes, if any.
5
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS--continued
Licenses: Certain costs incurred to acquire exclusive lenses of patentable
- ---------
technology are capitalized and amortized over a five year period.
Marketing Rights Revenue: In January 1993, SAC entered into a joint
- -------------------------
marketing, operating and research and development agreement with Integrated
Labs, Inc. Integrated agreed to fund operating costs of SAC in development,
marketing and sales of its products based upon per-agreed operating budgets. In
return, SAC agreed to grant Integrated and exclusive right and license to
exploit the SAC technologies including the sale, marketing and distribution of
products. The initial funding, $55,000 per month, continue for a period of
seven months (total $385,000) at which time the agreement was mutually
terminated.
NOTE B--LEASES
SAC maintains its headquarters at offices that are leased under a noncancelable
operating lease expiring on September 30, 1995.
In addition, SAC is leasing a QC laboratory and testing facility under a
noncancelable operating lease expiring on February 28, 1998.
The following is a schedule of future minimum rental payments under the above
operating leases as of December 31, 1994:
Year ending
December 31 Amount
----------- --------
1995 105,201
1996 79,312
1997 82,484
1998 13,836
NOTE C--STOCKHOLDERS' EQUITY
On April 8, 1993 the number of authorized shares of common stock was increased
from 7,500,000 to 30,000,000 shares and par value was changed from $.01 to
$.00025 per share.
During 1992 and 1993, 3,409,333 and 21,494,789 shares of common stock were
issued, respectively. In 1994, 1,300,378 shares of common stock were issued.
6
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS--continued
In addition, on December 31, 1993 Region II was merged into SAC. The
shareholders of Region II were issued one and one half shares of SAC common
stock in exchange for one share of Region II common stock.
NOTE D--OTHER
SAC many not be in compliance with certain provisions of the federal and certain
state securities laws with respect to issuance of its securities, from time to
time in the past, not conducted in accordance with applicable private offering
exemptions. There can be no assurances that the Commission of the applicable
state securities authorities would not take enforcement action against SAC with
respect to these provisions. Consequently, SAC may incur liabilities with
respect to such past activities which could have a material adverse effect on
SAC.
7
(Developmental Stage Company)
SCHEDULE I-ANALYSIS OF SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
------------------------------
Advertising $ 11,958 $ 15,142
Bank charges 186 618
Commissions 57,250
Consulting fees 144,342 215,848
Contributions 8,905 13,580
Dues and fees 6,342 15,772
Insurance 29,068 48,663
Meals and entertainment 11,413 31,472
Miscellaneous 2,596 3,303
Payroll taxes 31,135 76,702
Postage and shipping 17,330 27,594
Professional fees 115,592 241,678
Publications 9,249 21,810
Rent 37,209 81,397
Repairs and maintenance 6,149 27,077
Salaries 375,128 1,017,316
Supplies 62,846 130,164
Taxes-other 2,807 4,052
Telephone 33,318 84,667
Travel and entertainment 43,875 90,374
Utilities 9,887 15,688
-------- ----------
$959,335 $2,220,167
======== ==========
See accompanying notes and accountant's compilation report.
8
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
SCHEDULE II-ANALYSIS OF RESEARCH AND DEVELOPMENT EXPENSES
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
------------- --------------
Consulting Fees $ 67,313 $ 384,366
Dues and fees 1,300 9,900
Insurance 1,913 3,738
Laboratory fees 50,120 82,841
Licenses and patents 22,351
Supplies 6,976 11,500
Professional fees 9,902 53,874
Rent 73,800 116,850
Repairs and maintenance 5,391 11,130
Royalties 247,400 247,400
Salaries 126,128 243,391
Payroll taxes 10,469 18,391
Telephone 8,628 10,639
Utilities $ 7,851 $ 13,664
-------- ----------
$617,191 $1,230,035
======== ==========
See accompanying notes and accountant's compilation report.
9
PORTSMOUTH CORPORATION
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
10
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
Auditors' Report 1
Balance Sheet 2
Statement of Income
and Retained Earnings 3
Statement of Cash Flows 4
Notes to the Financial Statements 5-6
11
To the Board of Directors and Stockholders
of Portsmouth Corporation
We have audited the accompanying balance sheet of Portsmouth Corporation (a
Florida corporation) as of September 30, 1994, and the related statements of
income and retained earnings and cash flows for the nine months then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Portsmouth Corporation as of
September 30, 1994, and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles.
Alan H. Leff, C.P.A.
November 10, 1994
12
PORTSMOUTH CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1994
ASSETS
------
Current Assets
Deposits (Note 2) $115,000
Prepaid legal fees 5,000
--------
Total Current Assets $120,000
--------
Total Assets $120,000
========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ ---
----------
Total Liabilities $ ---
Stockholders' Equity
Common stock, $.0001 par value;
200,000,000 shares authorized,
14,085,000 shares issued and
outstanding (Note 3) 1,409
Paid in capital in excess of par value 727,091
Retained earnings (deficit) ( 608,500 )
---------
Total Stockholders' Equity 120,000
-------
Total Liabilities and
Stockholders' Equity $120,000
========
The accompanying notes are an integral part of these financial statements.
13
PORTSMOUTH CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Sales $ ---
Expenses ---
----------
Net Income ---
Retained Earnings (Deficit)
Beginning of Year ( 608,500)
----------
End of Year ($ 608,500)
==========
The accompany notes are an integral part of these financial statements
14
PORTSMOUTH CORPORATION
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Net Income $ ---
Cash Flows from Investing Activities
Deposit on purchase of common stock ( 115,000)
----------
Net Cash used by
Investing Activities ( 115,000)
----------
Cash Flows from Financing Activities
Proceeds from sale of common stock 120,000
Payments of prepaid legal fees ( 5,000)
----------
Net Cash Provided by
Financing Activities 115,000
-----------
Net Increase in Cash ---
Cash
Beginning of Year ---
-----------
End of Year $ ---
============
The accompanying notes are an integral part of these financial statements
15
PORTSMOUTH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
1. ORGANIZATION
------------
The Company was originally formed in 1976 to engage in a commuter
aircraft operation. The ordinal company was known as Knight Airlines,
Inc..
In April, 1983, the company went out of business and all assets of the
company were used to payoff any outstanding indebtedness. From April, 1983
to May, 1994, the company remained dormant. On May 3, 1994, the Board of
Directors authorized that the name of the corporation be changed to
Portsmouth Corporation. The Company, as a result, was reorganized to
engage in the petroleum recycling, reclamation, and water separation
industries.
2. DEPOSITS
--------
The company has made a deposit to Sandton Associates, L.L.C. of
$115,000 for the purchase of Devon Oil and Energy Corporation. The closing
is expected to occur in the near future.
3. COMMON STOCK
------------
Prior to May, 1994, the company had total authorized common shares of
2,000,000 with issued and outstanding shares of 1,945,000. The par value
of the stock was $.005.
On May 3, 1994 the board of directors authorized the issuance of
common stock to be increased to 200,000,000 shares at a par value of
$.0001. It was further resolved that the outstanding shares of common
stock be split two for one, thereby, increasing the outstanding shares of
stock to 3,890,000.
On August 31, 1994, the board of directors authorized the issuance of
10,195,000 restricted common shares in exchange for $120,000. The
restricted shares cannot be sold prior to August 31, 1996.
16
PORTSMOUTH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
4. SUBSEQUENT EVENT
----------------
On October 5, 1994, the Company entered into an agreement to purchase
all 100 shares of the outstanding common stock of Devon Oil and Energy
Corporation from Sandton Associates, L.L.C., in exchange for $600,000 in
cash and 500,000 shares of Portsmouth Corporation's restricted stock.
As a condition of the purchase, the Portsmouth Corporation has agreed
to assume the cost of an environmental cleanup at Devon Oil and Energy
Corporation's plant facility. The Sandton Associates, L.L.C. has warranted
that the cost will not exceed $500,000.
17
Schedule of approximately 285 shareholders of Safe Alternatives of America
Corporation, Inc., a Delaware corporation ("SAC Delaware") holding in the
aggregate 14,085,000 shares of the common stock of SAC Delaware.
21