UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number: 0-30463
R-Tec Holding, Inc.
[Exact name of business issuer in its charter]
Idaho 82-0515707
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1471 E. Commercial Ave., Meridian, Idaho 83642
(Address of principal executive offices) (Zip Code)
Issuers Telephone Number: (208) 887-0953 Fax: (208) 888-1757
The number of shares of common stock outstanding as of June 30, 2001, is
18,283,917.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
Forward Looking Statements and Risk Factors
This form 10-QSB contains certain forward-looking statements which are
based on management's current expectations. The Company has identified risk
factors which could cause actual results to differ substantially from the
forward looking statements. These risk factors include, but are not limited to:
general economic conditions, current industry specific trends, variability in
time line of new product developments, new product acceptance, difficulties in
manufacturing new products in large volume, economic viability of our customers
and vendors, changes in legislation, the ability to obtain adequate capital
funding for product development and expansion, and the availability of qualified
employees.
Item 1. Financial Statements:
The following financial statements are filed as part of this report:
The Consolidated Financial Statements of the Company for the three months
and six months ended June 30, 2001 and 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation:
Financial Results of Operations:
Revenues continued to increase through the second quarter of 2001,
supported by stronger than expected sales in the engineered automation sector.
Sales growth in the IC (Integrated Circuit) testing sector remained positive,
but growth was moderate, as research and development continued in design
modifications and specific applications testing. Revenues were also supported by
revenue recognition of work in process contracts from the company's software
solutions division in Utah. Net income of $137,158 represents a fully diluted
net income to shareholders of $.01 per common share.
Sales for the three months ended June 30, 2001 were $1,147,216, compared to
$392,330 for the period ending June 30, 2000, resulting in an increase of
$754,886 or 192%. Operating expenses are comprised mostly of direct costs for
materials and labor for design and production. Operating expenses were 58% of
sales for the period ending June 30, 2001 compared to 101% of sales for the
period ending June 30, 2000.
Selling, general and administrative expenses were $332,382, or 29% of sales
for the three months ending June 30, 2001, compared to $62,460 or 16% of sales
for the same period ended June 31, 2000. The increase in selling, general and
administrative expenses was due primarily to the addition of management and
marketing personnel and additional expenses related to legal, accounting, and
other professional fees.
Net income for the three months ended June 30, 2001 was $137,158, compared
to a net loss of ($90,340) for the same period ended June 30, 2000. Management
feels the increase in net
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income is due to the increase in sales revenues and also to an increase in
profit margins per job costing analyses.
Management is aware of the current, substantial economic downturn in the
technology sectors as evidenced by numerous lowered sales projections and
earnings reports. Many of these technology companies represent existing and
potential clients for R-Tec Holding's operating subsidiaries. Management feels
that as budgetary restraints within these companies are mandated, especially for
capital expenditures, sales within R-Tec's engineered automation and software
solutions divisions will be negatively impacted. It is anticipated that IC
testing product sales will continue to grow but only at a moderate rate. This
sector accounts for only 14% of total sales revenues and is not expected to
offset the slowing of sales growth in the other product sectors. It is
anticipated therefore, that third and fourth quarter sales and corresponding
earnings will be reduced from current levels due to the general economic trends
in the technology sectors.
Acquisitions
R-Tec Machine Tool, Inc.
On July 3, 2001, the Company acquired R-Tec Machine Tool, Inc., an Idaho
corporation, pursuant to a Share Exchange and Reorganization Agreement by and
between the Company and the four individual shareholders of R-Tec Machine Tool.
Under the terms of the Agreement, the parties agreed to be bound by and
accept the fair market value placed on R-Tec Machine Tool obtained from an
independent business appraisal. Consideration for the acquisition was 291,248
shares of the common stock of the Company valued at $1.00 per share which the
parties agree and acknowledge was the fair market value of the Company's shares
as of the date of the Agreement. The Agreement provides for each of the four
R-Tec Machine Tool shareholders to receive equal shares of the Company's common
stock in the transaction. Two of R-Tec Machine Tool shareholders, Douglas G.
Hastings and Gary A. Clayton, are also officers, directors and major
shareholders of the Company. The other two shareholders of R-Tec Machine Tool
are Walter T. Hinkle and Joseph E. Hawkins. R-Tec Machine Tool leases space in
the same building used by the Company as its primary business location.
Pursuant to the Agreement, the Company acquired all of the issued and
outstanding stock of R-Tec Machine Tool. The Company now owns all of the assets
of R-Tec Machine Tool and is subject to all of its liabilities. The principle
assets include machine tool equipment. The assets acquired were valued at
approximately $195,500 as of the June 30, 2001, unaudited balance sheet date.
The R-Tec Machine Tool assets include various pieces of machine tool
equipment such as mills and lathes. This equipment is used in the machining of
component parts for various high tech products including the sockets and
automation equipment produced by the Company's subsidiary, R-Tec Corporation.
R-Tec Corporation has been the major customer of R-Tec Machine Tool. Significant
other customers include Micron Technology, Hewlett Packard and SCP Global
Technologies.
The Company has entered into 5-year employment contracts with Walter Hinkle
and Joseph Hawkins for $69,050 each in annual compensation.
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This information was filed with the Securities and Exchange Commission on
Form 8-K on July 18, 2001. This respective Form 8-K will be attached to the
10QSB filing for the quarter ending September 30, 2001.
Browland, LaMeire & Associates, Inc.
On July 17, 2001, the Company acquired certain assets from Browand, LaMeire
& Associates, Inc., an Oregon corporation, pursuant to an Asset Purchase
Agreement by and between the Company and Browand, LaMeire & Associates and its
two shareholders, Bill Browand and Jeanette LaMeire. The Agreement culminated a
lengthy period of discussion and negotiation between the parties.
Under the terms of the Agreement, the Company acquired certain assets which
include the client list and industry contacts, and certain items of office
equipment and inventory. Consideration for the acquisition was 380,000 shares of
the common stock of the Company valued at $1.00 per share which the parties
agree and acknowledge was the fair market value of the Company's shares as of
the date of the Agreement. The Agreement provides for the shares to be issued in
the name of Browand, LaMeire & Associates, Inc. Both shareholders of Browand,
LaMeire and Associates have previously signed employment contracts with R-Tec
Corporation, a wholly owned subsidiary of the Company. Bill Browand is employed
as Vice President of Sales for R-Tec Corporation. Jeanette LaMeire is employed
as Vice President of Marketing and is also on the board of directors of R-Tec
Corporation. Bill Browand has also been appointed to the board of directors of
the Company to fill the vacancy left by the resignation of John R. Hansen, Jr.
The Company now owns the purchased assets free and clear of liabilities or
liens of any nature. The office equipment and inventory were valued at
approximately $14,000 as of December 31, 2000. The value of the client list and
industry contacts was reached through negotiations between the parties.
Browand, LaMeire & Associates has been the marketing firm for the Company
for several years prior to this Agreement. The Company's management entered into
lengthy discussions and negotiations with Browand, LaMeire & Associates
believing that an in-house sales and marketing unit would be more effective.
Management sought to acquire more direct control of its marketing activities and
believed the acquisition would strengthen the relationship between the Company
and its customers and tie the customers more closely to the Company. Management
also believes the hiring of the two shareholders of Browand, LaMeire &
Associates will make the marketing efforts more streamlined and efficient. A few
of the significant companies included in the customer list are Motorola,
Anadigics, Micron Technology, Hewlett Packard, Lucent Technologies, Intel, 3com,
Transmeta and SCP Global Technologies.
This information was filed with the Securities and Exchange Commission on
Form 8-K on August 1, 2001.
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Changes in Financial Condition:
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein for June
30, 2001 and June 30, 2000.
Current assets were $1,580,081 for the period ending June 30, 2001,
compared to $815,664 for the period ending December 31, 2000, an increase of
$764,417, or 95%, respectively. The resulting current ratio was 2.34 at June 30,
2001, compared to 1.27 at December 31, 2000. The increase in current assets at
June 30, 2001, over December 31, 2000, was due primarily to an increase in cash
accounts of $296,204 and accounts receivable of $322,904.
Liquidity:
Management believes that adequate funding exists for current operations,
but is aware of the negative impact on cash flow that will occur if sales
decrease during the next several quarters of operations. Therefore, management
cannot guarantee that adequate cash flow from operations will exist to fund
operations in subsequent quarters. Currently, the Company does not have a line
of credit, but could use this financial vehicle as a means of strengthening
liquidity.
Funding and Capital Resources:
Capital resources have been increased by the sale of common stock through a
Private Placement Memorandum. Sales of common stock for the period ending June
30, 2001, yielded capital funding of $174,900. It is anticipated that additional
capital funding will be needed to increase cash accounts to offset the decrease
in sales revenues in the short term.
On June 30, 2001, the Company's Private Placement Memorandum for capital
funding expired. It is anticipated that private placements with accredited
investors as a capital funding vehicle will replace the Private Placement
Memorandum.
Plan of Operation:
In anticipation of slower technology sales and to maximize existing
resources, management has made the following operating decisions. Effective
Sept. 1, 2001, R-Tec Corporation and R-Tec Interconnect, Inc. will be merged
into one operating entity which will be R-Tec Corporation. All operational
activities will therefore be consolidated within the one operating unit and
overseen by the existing management group. No additional management personnel
will be needed under the consolidation. In addition, effective July 1, 2001,
R-Tec Holding, Inc. acquired R-Tec Machine Tool, Inc., which will be merged into
the operating unit, R-Tec Corporation. With the addition of the machining
capabilities acquired, R-Tec Corporation will continue to move closer to its
longer term goal of production and quality control capabilities, both in the
engineered automation and IC testing products sectors.
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Along with the addition of the machining capabilities, R-Tec Corp has
acquired a Micro Machining Center (MMC) for use in the research and development
of and production of IC testing products. It is anticipated that as with the
acquired machining capabilities, the MMC will help maximize job profitability
through lower than outsourced costs. Full production capability from the MMC
should begin within the fourth quarter of 2001. Management will also continue to
seek additional funding for plant expansion and production line construction of
plating capabilities for the IC testing products. The initial plant expansion is
estimated to be approximately $400,000 and the production line expansion is
estimated to be approximately $300,000.
In order to expand product lines and to stabilize revenue flows, management
is currently directing engineering development to create and produce standard
products. These standard products will incorporate products within both the
engineered automation and IC testing products sectors. It is expected that
standard product sales will help minimize the cyclical sales cycles prevalent in
standard automation. It is also expected that standard products within the IC
testing products sector will allow for economies of scale in production to
maintain corporate financial profit margin goals.
Management anticipates that additional capital funding will be required to
move forward with existing operations and to further the research and
development of several new products, i.e., GCI Flex and GCI II, both product
advancements of GCI(TM), and the Intorcorp motor. Capital funding may be sought
through a combination of but not limited to: private placements to accredited
investors, warrants, secondary stock offerings, and strategic financial
alliances.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities:
Private Placement Memorandum Stock Issuances:
During the second quarter of 2001, the Company received cash from common
stock through its Private Placement Memorandum, as follows:
Date Shares Cash Consideration Shareholder
- ---- ------ ------------------ -----------
04/20/01 10,000 $ 10,000 Red, LLC
06/15/01 25,000 $ 25,000 James J. Cron
06/15/01 25,000 $ 25,000 Robert L. White
06/30/01 15,000 $ 15,000 Brian White
06/30/01 24,900 $ 24,900 Chris White
06/30/01 50,000 $ 50,000 Ronald L. Spencer
06/30/01 25,000 $ 25,000 Alan D. Spencer
Totals 174,900 $174,900
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Other Stock Issuances:
During the second quarter of 2001, the Company issued stock for other
considerations as follows:
Date Shares Consideration Shareholder
- ---- ------ ------------- -----------
06/29/01 3,334 Professional Services Dave Stewart
06/30/01 15,000 Employment Michael T. Montgomery
Totals 18,334
Stock Option Plan:
The Company has a stock option plan, which allows employees, directors and
consultants of the Company to receive stock options. The Board of Directors set
aside 2,000,000 shares of common stock for issuance upon exercise of the
options. The Company has awarded 382,000 stock options to employees and
directors during 2001. The stock options vest 100% on the first anniversary of
the grant notice at a strike price of $1 per share.
The stock options are exercisable by the optionee as to all or any part of
the stock then vested by delivery to the Company of written notice of exercise
and payment of the purchase price as provided by the plan.
The Board of Directors maintains the right to change, suspend or terminate
the plan at any time, without notice, and in its sole discretion as provided by
the plan.
Item 3: Defaults Upon Senior Securities: None
Item 4: Submission of Matters to a Vote of Security Holders: None
Item 5: Other Information.
Item 6: Exhibits and Reports on form 8-K.
(a) No exhibits
(b) No Form 8K filings
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SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
R-Tec Holding, Inc.
(Registrant)
Date: Aug. 10, 2001 By /s/ Douglas G. Hastings
---------------------------------------
Douglas G. Hastings, President and CEO
By /s/ Michael T. Montgomery
---------------------------------------
Michael T. Montgomery, CFO
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R-TEC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of June 30, 2001 (Unaudited) and December 31, 2000
June December
30, 2001 31, 2000
----------- ---------
Current assets
Cash $ 372,838 $ 76,634
Accounts receivable (net of $-- allowance
for doubtful accounts) 834,428 511,524
Costs and estimated earnings in excess
of billings on uncompleted contracts 333,904 202,530
Income taxes receivable 15,295 15,295
Inventory 19,678 --
Prepaid expenses 1,630 3,094
Notes receivable, current portion 2,308 6,587
----------- ---------
Total current assets 1,580,081 815,664
Equipment and leasehold improvements, at cost,
net of accumulated depreciation 308,738 106,834
Other assets 48,575 17,397
Notes receivable, less current portion 18,066 14,663
----------- ---------
Total assets $ 1,955,460 $ 954,558
=========== =========
Current liabilities
Accounts payable $ 196,762 $ 334,142
Accrued expenses 225,563 102,161
Accrued preferred dividends payable 65,576 36,517
Billings in excess of costs and estimated
earnings on uncompleted contracts 529 94,663
Leases payable, current portion 13,458 12,020
Notes payable, current portion 109,320 --
Notes payable to related parties, current portion 65,000 65,000
----------- ---------
Total current liabilities 676,208 644,503
Lease payable, less current portion 17,994 28,036
Notes payable to related parties, less current portion 100,000 100,000
----------- ---------
Total liabilities 794,202 772,539
Shareholders' equity
Series A cumulative convertible preferred stock, par value
$0.234 per share, 5,000,000 authorized, 2,781,564
shares issued and outstanding 651,100 651,100
Common stock, no par value per share,
30,000,000 authorized, 18,267,362 and 17,373,128
shares issued and outstanding at June 30, 2001
and December 31, 2000, respectively 1,174,965 280,731
Additional paid-in capital 107,439 107,439
Accumulated deficit (772,246) (857,251)
----------- ---------
Total shareholders' equity 1,161,258 182,019
----------- ---------
Total liabilities and shareholders' equity $ 1,955,460 $ 954,558
=========== =========
See accompanying notes
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R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
------------ ----------- ------------ -----------
Revenues $ 1,147,216 $ 392,330 $ 1,846,387 $ 751,667
Operating costs 661,688 396,629 1,109,353 682,065
------------ ----------- ------------ -----------
Gross profit 485,528 (4,299) 737,034 69,602
Selling, general and administrative expenses 332,382 62,460 617,535 240,163
Research and development 195 7,698 195 7,698
------------ ----------- ------------ -----------
Operating income (loss) 152,951 (74,457) 119,304 (178,259)
Interest expense (3,708) (6,217) (8,550) (7,840)
Interest income 2,527 -- 3,962 --
Other -- 471 -- 1,001
------------ ----------- ------------ -----------
(1,181) (5,746) (4,588) (6,839)
------------ ----------- ------------ -----------
Income (loss) before income taxes 151,770 (80,203) 114,716 (185,098)
Income taxes 2 -- 652 --
------------ ----------- ------------ -----------
Net income (loss) 151,768 (80,203) 114,064 (185,098)
Preferred stock dividends 14,610 10,137 29,059 10,137
------------ ----------- ------------ -----------
Net income (loss) available
to common shareholders $ 137,158 $ (90,340) $ 85,005 $ (195,235)
============ =========== ============ ===========
Net income (loss) per common share $ 0.01 $ (0.01) $ 0.00 $ (0.02)
Weighted average shares outstanding 18,116,471 8,533,594 17,881,100 8,533,594
See accompanying notes
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R-TEC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended June 30, 2001 and June 30, 2000 (Unaudited)
Six Months Ended June,
2001 2000
--------- ---------
Cash flows from operating activities
Net income (loss) $ 114,064 $(185,098)
Adjustments to reconcile net loss to net
cash provided used by operating activities
Depreciation and amortization 35,048 11,437
Sale refund through issuance of note payable -- 58,706
Common stock issued for services 3,334
Common stock bonuses 15,000
Changes in assets and liabilities
Accounts receivable (322,904) 9,098
Costs and estimated earnings in excess
of billings on uncompleted contracts (131,374) 30,428
Inventory (19,678) --
Prepaid expenses 1,464 (468)
Accounts payable (137,380) (86,260)
Accrued expenses 123,402 (27,611)
Billings in excess of costs and estimated
earnings on uncompleted contracts (94,134) (17,584)
Income taxes payable -- (7,640)
--------- ---------
Net cash used by operating activities (413,158) (214,992)
Cash flows from investing activities
Purchase of equipment and other assets (144,491) (48,629)
--------- ---------
Net cash used by investing activities (144,491) (48,629)
--------- ---------
Cash flows from financing activities
Collections on loans 876 1,023
Proceeds from preferred stock -- 393,650
Proceeds from common stock 875,900 --
Net borrowings on line of credit -- 36,000
Payments on debt (22,923) (119,569)
--------- ---------
Net cash provided by financing activities 853,853 311,104
--------- ---------
Net increase in cash 296,204 47,483
Beginning cash 76,634 3,609
--------- ---------
Ending cash $ 372,838 $ 51,092
========= =========
Supplemental disclosures of cash flow information
Interest paid $ 8,550 $ 2,633
Noncash investing and financing activities
Sale refund through issuance of note payable $ -- $ 58,706
Equipment acquired through note payable $ 123,639 $ --
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R-TEC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
NOTE A - UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of R-Tec Holdings, Inc. (the
Company) and the results of operations and cash flows. Certain reclassifications
of prior quarter amounts were made to conform with current quarter presentation,
none of which effects previously recorded net loss.
NOTE B - EQUIPMENT
Equipment consists of:
Equipment $ 309,932
Vehicles 31,171
Office equipment and furnishings 17,731
Leasehold improvements 45,720
---------
404,554
Accumulated depreciation and amortization (95,816)
---------
$ 308,738
=========
NOTE C - ACQUISITIONS
On July 3, 2001, the Company acquired R-Tec Machine Tool, Inc., an Idaho
corporation, pursuant to a Share Exchange and Reorganization Agreement by and
between the Company and the four individual shareholders of R-Tec Machine Tool,
Inc.
Under the terms of the Agreement, the parties agreed to be bound by and accept
the fair market value placed on R-Tec Machine Tool, Inc. obtained from an
independent business appraisal. Consideration for the acquisition was 291,248
shares of the common stock of the Company valued at $1.00 per share which the
parties agree and acknowledge was the fair market value of the Company's shares
as of the date of the Agreement. The Agreement provides for each of the four
R-Tec Machine Tool, Inc. shareholders to receive equal shares of the Company's
common stock in the transaction. Two of R-Tec Machine Tool shareholders, Douglas
G. Hastings and Gary A. Clayton, are also officers, directors and major
shareholders of the Company. The other two shareholders of R-Tec Machine Tool
are Walter T. Hinkle and Joseph E. Hawkins. R-Tec Machine Tool, Inc. currently
leases space in the same building used by the Company as its primary business
location.
Pursuant to the Agreement, the Company acquired all of the issued and
outstanding stock of R-Tec Machine Tool. The Company now owns all of the assets
of R-Tec Machine Tool and is subject to all of
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R-TEC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
its liabilities. The principle assets include machine tool equipment. The assets
acquired were valued at approximately $195,500 as of the June 30, 2001,
unaudited balance sheet date.
The R-Tec Machine Tool, Inc. assets include various pieces of machine tool
equipment such as mills and lathes. This equipment is used in the machining of
component parts for various high tech products including the sockets and
automation equipment produced by the Company's subsidiary, R-Tec Corporation.
R-Tec Corporation has been the major customer of R-Tec Machine Tool. Significant
other customers include Micron Technology, Hewlett Packard and SCP Global
Technologies.
The Company, through its subsidiaries, currently provides custom automation
services and IC interconnect devices for the high-tech industry. It provides
custom solutions through prototype development, tooling, manufacturing and
consulting services. R-Tec Interconnect, Inc., also a subsidiary of the Company,
designs and manufactures burn-in sockets, high performance test sockets and
interconnect devices for the IC chip industry. Management believes the
acquisition of R-Tec Machine Tool will enable the Company, through its
subsidiaries, to more effectively manufacturer and produce its products. This
information was filed with the Securities and Exchange Commission on Form 8-K on
July 18, 2001.
The Company has entered into 5-year employment contracts with Walter Hinkle and
Joseph Hawkins who are each currently paid $69,050 in annual compensation.
On July 17, 2001, the Company acquired certain assets from Browand, LaMeire &
Associates, Inc., an Oregon corporation, pursuant to an Asset Purchase Agreement
by and between the Company and Browand, LaMeire & Associates and its two
shareholders, Bill Browand and Jeanette LaMeire.
Under the terms of the Agreement, the Company acquired certain assets which
include the client list and industry contacts, certain items of office equipment
and inventory. Substantially, all of the purchase price related to the client
list and industry contacts. Consideration for the acquisition was 380,000 shares
of the common stock of the Company valued at $1.00 per share which the parties
agree and acknowledge was the fair market value of the Company's shares as of
the date of the Agreement. The Agreement provides for the shares to be issued in
the name of Browand, LaMeire & Associates, Inc. Both shareholders of Browand,
LaMeire and Associates have previously signed employment contracts with R-Tec
Corporation, a wholly owned subsidiary of the Company. Bill Browand is employed
as Vice President of Sales for R-Tec Corporation. Jeanette LaMeire is employed
as Vice President of Marketing and is also on the board of directors of R-Tec
Corporation. Bill Browand has also been appointed to the board of directors of
the Company.
Browand, LaMeire & Associates has been the marketing firm for the Company for
several years prior to this Agreement. A few of the significant companies
included in the customer list are Motorola, Anadigics, Micron Technology,
Hewlett Packard, Lucent Technologies, Intel, 3com,
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R-TEC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and 2000
Transmeta and SCP Global Technologies. This information was filed with the
Securities and Exchange Commission on Form 8-K on August 1, 2001.
NOTE D - STOCK OPTION PLAN
The Company has a stock option plan, which allows employees, directors and
consultants of the Company to receive stock options. The Board of Directors set
aside 2,000,000 shares of common stock for issuance upon exercise of the
options. The Company has awarded 382,000 stock options to employees and
directors during 2001. The stock options vest 100% on the first anniversary of
the grant notice at a strike price of $1 per share.
The stock options are exercisable by the optionee as to all or any part of the
stock then vested by delivery to the Company of written notice of exercise and
payment of the purchase price as provided by the plan.
The Board of Directors maintains the right to change, suspend or terminate the
plan at any time, without notice, and in its sole discretion as provided by the
plan. The Company accounts for these plans under APB Opinion No. 25, "Accounting
for Stock Issued to Employees."
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