** Past Successful Reverse Mergers: HCOM
HCOM (now GBRME - Global Matrechs)
1. Apr.9/2002 – added to profile on www.shellstockreview.com
2. Mar.27/2003 – HCOM trading at 0.001. o/s is 15 mil, a/s is 15 mil.
2. Mar.28/2003 – HCOM (HomeCom Communications Inc) announced reverse merger with Tulix Systems and reaches a high of 0.10 within 2 days, on March.31/2003.
3. Jun.15/2004 – HomeCom Communications changes name and symbol to GMTH (Global Matrechs Inc.)
Total run: 0.001 to 0.10 = 9900% in 3 days!!!
===============================================================================
On March 27, 2003, HomeCom Communications, Inc. ("HomeCom," "we" or "us")
entered into an Asset Purchase Agreement (the "Agreement") with Tulix Systems,
Inc. ("Tulix"), a company in which Gia Bokuchava, Nino Doijashvili and Timothy
R. Robinson, who are officers and directors of HomeCom, are officers, directors
and founding shareholders.
Under the Agreement, Tulix will purchase the assets used in the operation
of our hosting and web site maintenance business, including intellectual
property, equipment, contracts, certain accounts receivable in an aggregate
amount of approximately $70,000, and cash of $50,000 (the "Asset Sale"). As
consideration for these assets, Tulix will:
o issue to us shares of Tulix common stock that will represent 15% of
the outstanding shares of Tulix;
o issue to us a secured promissory note (the "Note") for a principal
amount of $70,000 (subject to adjustment as described herein) that
will bear interest at an annual rate of 7%, will be secured by certain
assets of Tulix that are transferred to Tulix as part of the Asset
Sale, and will become due one year after the closing of the Asset Sale
(the principal amount of the note may be increased at closing pursuant
to the terms of the Agreement); and,
o assume certain obligations of ours, including certain accounts payable
related to ongoing operations.
The note to be issued by Tulix to HomeCom will be for a principal amount of
$70,000, subject to adjustment as described below. If the sum of the cash and
accounts receivable of HomeCom (as determined in accordance with GAAP in a
manner consistent with HomeCom's past practices) on the day that we complete the
Asset Sale is less than $325,053, the principal amount of the Note will be
increased by an amount equal to the difference between $325,053 and the sum of
HomeCom's cash and accounts receivable on the closing date (to the extent that
the sum of cash and accounts receivable on the day that we complete the Asset
Sale is more than $325,053, we will divide the excess evenly between HomeCom and
1
10-K 5th Page of 61 TOC 1st Previous Next Bottom Just 5th
Tulix). The Note will bear interest at a rate of 7.0% per year and will mature
on the one year anniversary of the Closing of the Asset Sale. Interest will be
due and payable at maturity. The Note will be secured by certain assets
transferred to Tulix in the Asset Sale.
In connection with the Asset Sale, the Agreement provides that we will
enter into a Shareholders' Agreement with Tulix, Mr. Robinson, Mr. Bokuchava and
Ms. Doijashvili. The Shareholders' Agreement would give HomeCom certain rights
as a holder of Tulix stock for a period of five years. These rights include
rights of co-sale, rights of first refusal, anti-dilution rights and rights to
inspect the books and records of Tulix. The co-sale rights will give us (and the
other Tulix shareholders) the right to participate in any sales, subject to
certain exclusions, of Tulix stock by other Tulix shareholders. The rights of
first refusal granted to us in the Shareholders' Agreement will require that
Tulix give us (and the other Tulix shareholders) the right to purchase any
securities, subject to certain exclusions, that it intends to offer to third
parties before it offers those securities to third parties. The anti-dilution
rights contained in the Shareholders' Agreement require Tulix to grant us
additional shares of common stock any time, subject to certain exclusions, it
issues shares of common stock to other persons so that our aggregate ownership
interest in Tulix is generally not diluted. Finally, the Shareholders' Agreement
gives us the right to inspect the books and records of Tulix, subject to the
specific terms of the Shareholders' Agreement.
The parties intend to complete the Asset Sale if (i) it is approved by
HomeCom's stockholders as required under Delaware law and (ii) the other
conditions to closing set forth in the Agreement are satisfied or waived. These
conditions include, among others, the requirement that all third parties who
have a contractual right to approve the assignment of their contracts to Tulix
must consent to such assignment and a condition in favor of Tulix that the
largest customer of the business to which the assets relate not have given
notice that it intends to terminate its relationship with the business. As such,
we can offer no assurance that the Asset Sale will be completed. Neither we nor
Tulix is under any obligation to pay any type of termination fee if we do not
complete the Asset Sale, and there are no other deal protection measures. The
Agreement also contains a release from Tulix pertaining to certain matters and
mutual releases with Mr. Robinson, Mr. Bokuchava and Ms. Doijashvili regarding
certain employment matters. (See "Part III. Item 11: Executive Compensation,
Employment Contracts.").
License Agreement with Eurotech, Ltd.
Also on March 27, 2003, HomeCom entered into a License and Exchange
Agreement with Eurotech, Ltd. ("Eurotech") and, with respect to Articles V and
VI thereof, Polymate, Ltd. and Greenfield Capital Partners LLC (the "Exchange
Agreement"). The Exchange Agreement contemplates that Eurotech and HomeCom will
enter into a License Agreement (the "License Agreement"). Pursuant to the
Exchange Agreement and the License Agreement, Eurotech will license to HomeCom
its rights to the EKOR, HNIPU and Electro Magnetic Radiography (EMR)
technologies. In exchange for the license of these technologies, HomeCom will
(i) issue to Eurotech 11,250 shares of Series F preferred stock and 1,069 shares
of Series G preferred stock, both of which are new series of HomeCom's preferred
stock, and (ii) pay Eurotech a royalty of seven percent (7.0%) on net sales
generated by the licensed technologies and a royalty of four percent (4.0%) on
net sales generated by products and services that are improvements on the
licensed technologies. Closing of this transaction is subject to a number of
conditions, including HomeCom's delivery of evidence that: (i) its accounts
payable have been reduced to roughly $600,000, and (ii) the holders of HomeCom's
Series B, C, D and E preferred stock have waived the mandatory conversion rights
granted to them in connection with their respective shares of preferred stock.
As such, we can offer no assurance that this transaction will be completed. The
Exchange Agreement provides that, during the period prior to closing of the sale
of HomeCom's hosting and web site maintenance business, the financial needs of
the hosting and web site maintenance business will be funded by the operations
of that business, while the finances relating to the new licensed technologies
will be kept separate.
EMR is a technology intended for the imaging of subterranean nuclear and
hazardous wastes in ground and marine settings, and for oil exploration. HNIPU
is a technology intended to improve upon conventional monolithic polyurethanes
through a non-toxic process. EKOR is a family of non-toxic advanced composite
polymer materials used in the containment of nuclear and hazardous materials.
Shares of Series F Convertible Preferred Stock are convertible into shares
of common stock at a conversion rate of 10,000 shares of common stock per Series
F Share, subject to adjustment as set forth in the Certificate of Designations
2
10-K 6th Page of 61 TOC 1st Previous Next Bottom Just 6th
governing the Series F Preferred Stock. As such, the 11,250 shares of Series F
Preferred Stock to be issued to Eurotech will be convertible into 112,500,000
shares of common stock. In connection with the consummation of the transactions
contemplated by the Exchange Agreement, we have agreed to issue 1,500 shares of
Series F Preferred Stock to Polymate and 750 shares of Series F Preferred Stock
to Greenfield. As such, we have agreed to issue a total of 13,500 shares of
Series F Preferred Stock that will be convertible into 135,000,000 shares of
common stock. The Certificate of Designations, however, provides that the shares
of Series F preferred stock will only be convertible if HomeCom has a sufficient
number of authorized but unissued shares of common stock available to support
the conversion of the outstanding shares of all series of preferred stock
(although the Certificate of Designations states that the shares of Series F
Preferred Stock will become convertible on December 31, 2003 regardless of
whether a sufficient number of shares of common stock have been authorized by
such date). Currently, however, HomeCom has only 15,000,000 shares of authorized
common stock, of which 14,999,156 shares have been issued and are outstanding.
As such, our Board of Directors has approved, and has directed us to submit to
our stockholders, a proposal to amend our Certificate of Incorporation to, among
other things, increase the number of shares of common stock that we are
authorized to issue to 300,000,000 shares. If this amendment is approved, and if
Eurotech converts its shares of Series F Preferred Stock into shares of common
stock, a change in control of HomeCom could occur. For example, if Eurotech were
to convert all of its shares of Series F Preferred Stock, and if Polymate and
Greenfield were to convert their shares of Series F Preferred Stock into shares
of common stock, and if none of our other preferred shareholders were to convert
their shares of preferred stock into shares of common stock, Eurotech would hold
approximately 112,500,000 of the approximately 150,000,000 shares of common
stock then-outstanding, or roughly 75% of the then-outstanding shares of common
stock, and Polymate and Greenfield would hold, in the aggregate, approximately
22,500,000 shares of common stock, representing roughly 15% of the
then-outstanding shares. Shares of Series F Preferred Stock have the right to
vote on all matters with the common stock to the extent that such shares of
Series F Preferred Stock are then convertible into shares of common stock.
Pursuant to the License Agreement, HomeCom has agreed to issue 1,069 shares
of Series G Convertible Preferred Stock to Eurotech. Each share of Series G
Convertible Preferred Stock is convertible into a number of shares of common
stock determined by dividing $1,000 by a number equal to 82.5% of the average
closing price of the common stock over the preceding five business days. Shares
of Series G preferred stock have no voting rights.
HomeCom has agreed to enter into a commercially reasonable registration
rights agreement with Eurotech, Polymate and Greenfield pursuant to which
HomeCom would grant both demand and piggyback registration rights to those
entities.
In anticipation of the transaction, Lawrence Shatsoff and David Danovitch
have resigned from the HomeCom Board of Directors, and Don Hahnfeldt, the
President and Chief Executive Officer of Eurotech, and Dr. Randolph Graves, a
director and the Chief Financial Officer and Vice President of Eurotech, have
been elected to fill these vacancies on the HomeCom Board of Directors.
If we complete the Tulix transaction, we expect Mr. Robinson, Mr. Bokuchava
and Ms. Doijashvili to resign from the Board of Directors. This would leave
Michael Sheppard, Mr. Hahnfeldt and Dr. Graves as the three members of the
HomeCom Board of Directors, meaning that the two designees of Eurotech will
constitute a majority of our Board of Directors. It is expected that new HomeCom
officers, who will be identified by Eurotech, will be appointed by the Board of
Directors at such time.
