SECOND PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(3)
(to Prospectus dated May 19, 2000) Registration No. 333-32816
2,827,273 Shares
AUTHORISZOR INC.
Common Stock
$.01 par value
_____________________________
This second prospectus supplement supplements and amends the prospectus
dated May 19, 2000 and the first prospectus supplement dated August 24, 2000,
relating to 2,827,273 shares of the common stock, par value $.01, of Authoriszor
Inc., that may be offered and sold from time to time by certain of our
stockholders. Unless the context otherwise requires, "Authoriszor," the
"Company," "we," "our," "us" and similar expressions refers to Authoriszor Inc.
and its predecessors, but not to the selling stockholders. "Selling
stockholders" refers to the stockholders identified under the caption "Plan of
Distribution; Selling Stockholder", contained in the first prospectus supplement
dated August 24, 2000.
Our common stock is traded on the Nasdaq National Market under the symbol
"AUTH." On November 13, 2000, the closing price for our common stock on the
Nasdaq National Market was $7.94.
We will receive none of the proceeds from the sale of the common stock
offered by the selling stockholders. We will pay for expenses of preparing and
filing the registration statement, the prospectus, the first prospectus
supplement, the second prospectus supplement and all other prospectus
supplements. The selling stockholders will pay all selling and other expenses
that they incur.
The prospectus, together with the first prospectus supplement and this
prospectus supplement, constitutes the prospectus required to be delivered by
Section 5(b) of the Securities Act with respect to offers and sales of the
shares of common stock. All references in the prospectus to "this prospectus"
are hereby amended to read "this prospectus (as supplemented and amended)".
YOU SHOULD READ THE PROSPECTUS, THE FIRST PROSPECTUS SUPPLEMENT AND THIS
PROSPECTUS SUPPLEMENT CAREFULLY BEFORE YOU INVEST, INCLUDING THE RISK FACTORS
WHICH BEGIN ON PAGE 4 OF THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_____________________________
The date of this Prospectus Supplement is November 14, 2000.
This prospectus is hereby amended to modify certain sections of the
prospectus under the heading "Business" to delete such sections in their
entirety and, in lieu thereof, substitute the following information set forth
below:
BUSINESS
Our Strategy
We intend to become one of the leading providers of electronic security
solutions worldwide. The principal elements of our strategy to achieve this are
as follows:
Technological leadership. We believe that we offer innovative and high quality
Web security solutions. We intend to maintain this technological lead by
devoting substantial resources to product research and development, and, if
appropriate, by acquiring new products and technologies. In addition, we intend
to increase the current functionality of our solutions, which we anticipate will
create further sales opportunities and additional technological barriers for
others. We will continue to focus on open, flexible and scalable solutions while
broadening the scope of our electronic security solutions.
Global presence. We intend to be a leading provider of Web security solutions
to large enterprises in Europe and North America and other high growth markets
by expanding our sales and marketing and support organizations. To this end, we
have increased our staff to 61 employees as of September 30, 2000, including
Richard A. Langevin, our Chief Executive Officer, President and Interim Chief
Financial Officer
Target new industry sectors and commercial certificate authorities. We plan to
continue to focus our sales and marketing efforts on industries where Web
security is essential. These markets are currently:
. financial services;
. healthcare services;
. high-technology;
. government branches; and
. large enterprises.
We intend to target leading institutions in these markets and will also target
digital certificate service providers, known as commercial certificate
authorities or trusted third parties.
Develop strategic partnerships and customer relationships. We are working to
establish strategic relationships with leading partners to broaden and
accelerate the market acceptance of our Web security solutions. We will
strategically target relationships with companies and other organizations that
we expect to play a critical role in the future of electronic business. We
anticipate that these relationships should help to facilitate broad market
acceptance of our Web security solutions and we believe that they will help
achieve our goal of becoming a leading global provider of Web security products
and services.
Pursue selective growth opportunities. We intend to grow through both organic
expansion as well as through selected strategic acquisitions which we believe
will accelerate product, customer and geographic penetration.
Sales and Marketing
Since January 2000, we have been expanding our sales and marketing
organization. Sales staffing has increased from only 2 representatives in the
UK in January 2000 to 16 sales representatives, comprised of 6 sales
representatives in the UK and 10 sales representatives in the U.S. as of
September 30, 2000. We have also increased our marketing staff from 1
representative in the UK in January 2000 to 5 marketing representatives that is
comprised of 3 UK representatives and 2 U.S. representatives. We have also
expanded our global sales presence through the expansion of our sales offices.
From January 2000, we have increased our sales offices from the single UK sales
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office to a total of 8, including 7 new U.S. field offices in Burlington,
Massachusetts, Providence, Rhode Island, Chicago, Illinois, St. Louis, Missouri,
Phoenix, Arizona, Los Angeles, California and Washington, D.C.
Our overall sales objective is to maximize organic sales growth, develop a
global brand and achieve a global capability by continuing to develop the
necessary support infrastructure and establishing sales channels worldwide.
In addition to direct sales, we intend to develop relationships with other
entities to market and sell our product suite and services. These sales channels
can be categorized as follows:
. Application Service Provider ("ASP") Vendors and Services.
Conventional Internet Service Provider ("ISPs") services provide Web
servers and email services connected to the Internet. ASPs extend
these services to include offering software programs, from payroll or
human resources applications to a full enterprise resource planning
application. Our product suite is designed to provide an essential
fail-safe security environment for ASP Web services and applications;
. Product Re-sellers, Distributors and Sales Agents. The companies and
individuals in this category that we seek to work with are, typically,
geographically focused and offering local market knowledge and
contacts and sales skills;
. Original Equipment Manufacturers, including Application Development
Companies. These companies tend to operate worldwide and embed
security solutions into their own product offerings. They tend to
offer developed sales channels, established customer bases and brand
recognition; and
. Consultants, Value Added Resellers, Systems Integrators and Worldwide
Information Technology Vendors. These are companies and individuals
that may sell or recommend some or all of the elements of our product
suite to enhance their own solution.
All of these types of sales channels will assist us by providing access to
new geographic areas and markets and the capacity to further penetrate our
existing markets.
Our Website is also a major marketing tool and is an important way in which
some potential customers will judge us and our product suite. We anticipate that
in the future it may become a significant sales channel and our primary support
channel.
We are also seeking to discuss partnership agreements with system
integrators and value added resellers. We are considering several such
opportunities in the UK and the U.S. and expect to hold discussions to set up
agreements covering these countries during fiscal year 2001.
We are also seeking to further develop our distribution channel by
acquiring relevant companies or by making strategic equity investments. We have
acquired 27.2% of the share capital of WRDC Limited (25.1% on a fully diluted
basis), with an option to acquire the balance of its issued share capital after
October 31, 2001. WRDC Limited offers professional services in information
technology focused on core technologies of messaging, directories, network
security and data communications. Technology underpins all WRDC projects,
ranging from strategic and operational consultancy, through the design and
implementation of systems integration projects, to the provision of fully
managed information technology services.
From bases in Leeds and London, WRDC works with both UK and international
corporate clients from the following sectors:
. Financial Services
. UK Government
. Police
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. Distribution
. Telecommunications
. Travel and Tourism
. UK Ministry of Defense
. Manufacturing
. Information Technology
. Health
Intellectual Property Rights
We rely on a combination of copyright, trademark, service mark and trade
secret laws, confidentiality procedures and contractual restrictions to
establish and protect the proprietary rights in our software and services.
However, we will not be able to protect our intellectual property if we are
unable to enforce our rights or if we do not detect unauthorized use of our
intellectual property. In addition, these legal protections only provide us with
limited protection in certain geographic areas. If we litigate to enforce our
rights, it would be expensive, divert management resources and may not be
adequate to protect our business. Our inability to protect our proprietary
technology could have a material adverse effect on our business, prospects,
financial condition and results of operations.
We have five patent applications pending in the U.S. for our Authoriszor
product suite. However, because patent applications in the U.S. are
confidential, we cannot rule out the existence of earlier-filed patent
applications for technology similar or identical to our product suite, or the
possibility that another party may first secure patent protection in
substantially similar technology. Therefore, we cannot guarantee that our patent
applications will be successful. We have attempted to extend any successful U.S.
applications into the UK and other countries pursuant to the processes and
procedures provided by the Paris Convention and are currently evaluating the
necessity of extending any such successful U.S. patents pursuant to the Patent
Cooperation treaties; however, patent applications for software are more
difficult to obtain in some countries outside the U.S. Even where patent
protection is obtained, we cannot guarantee that third parties will not oppose
or otherwise challenge the patents granted. If we do not succeed in securing
patents in the U.S., UK and other territories, or if any granted patent is
successfully challenged, we may not be able to prevent the marketing of similar
products based on the underlying technology by other persons in that territory.
We have copyrights on all aspects of the Authoriszor product suite and are
in the process of applying for UK trademarks in respect of the key Authoriszor
logos used for branding. We are also in the process of implementing
confidentiality procedures and contractual provisions to further protect our
proprietary rights. Additional protection for the software, documentation and
other written materials is afforded by trade secret and, in the U.S. only,
unfair competition laws. "AUTHORISZOR", SZ Logo, "A Logo" and "SECURES THE WEB"
are trademarks or registered trademarks of Authoriszor or its subsidiaries in
the United States and other countries.
Research and Development
We aim to maintain our security software technology leadership position by
continuing to enhance and broaden our product offerings. Through constant
monitoring of the industry, we plan to identify new security features and trends
in the marketplace that are required to maintain our competitive edge. The
research and development team has currently identified several competitive
enhancements that are being considered for development, such as:
. native code conversion to further improve system performance;
. implementation of secure file transfer;
. expanded user selectable encryption;
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. active lightweight directory access protocol support; and
. the development of extended application programming interfaces.
Our future success will depend, in part, on our ability to attract, retain
and motivate highly qualified technical personnel. On March 15, 2000, we hired
Edward Vasko as Director of Technology for U.S. operations. Prior to his
employment with the Company, Mr. Vasko served as Product Manager, Security for
the North American software division of Bull S.A. In addition, on October 16,
2000, Alec P. Karys commenced employment with the Company as the Vice President
of Engineering. See "Management - Directors and Executive Officers" and
"Management - Employment Contracts, Termination of Employment and Change in
Control Agreements."
We believe our future success will also depend in large part on our ability
to enhance and leverage our technologies. We intend to continue to develop new
and innovative solutions to respond to the needs of our customers. We intend to
offer products that are compatible with existing operations platforms such as
UNIX and to seamlessly integrate our product without the need for re-
registration in the case clients require major upgrades.
For the one year period ending June 30, 2000, we incurred approximately
$792,000, including professional services, in expenses related to research and
development. We expect to continue to commit significant resources to our
research and development team in the future, including over the course of the
next 12 months.
Authoriszor 2000(TM)
Authoriszor 2000(TM) was designed to enhance ease-of-use for customers and
offer increased internet security and access management functionality for its
users. Specifically, some of the major enhancements available in this new
software version included:
. Security Profile Management. New user and group profile management
functionality designed to lower customers' deployment costs and
administrative workload;
. Single Process Web Site Configuration. The Web Site Import Wizard
allows managers and administrators to secure an entire website using
one process;
. Multiple Site Management. Authoriszor 2000(TM) is designed to provide
a unified view of multiple web sites, thereby reducing the time
involved in website administration.
Authoriszor 2000(TM) was designed to address certain B2B requirements
including:
. Protection from denial of service attacks that disable a corporate web
server by taking over available disk and memory space;
. Targeted security that is designed to ensure that only authorized
users see confidential web content;
. Multiple encryption methods that are designed to protect the
customer's existing investment in their other security products.
Employees
As of September 30, 2000 there were 61 people employed by us on a full-time
basis. Of these, 14 employees were primarily involved in research and
development, and 19 employees were involved in sales and marketing, 7 in general
administration and support and 20 engaged in professional services, in addition
to our Chief Executive Officer, President and Interim Chief Financial Officer,
Richard Langevin. We also employ consultants from time to time, including Fred
Sawin and Edward F. Rogers. See "Executive Compensation--Employment Contracts,
Termination of Employment and Changes in Contract Agreements."
Our employees are not represented by any collective bargaining unit, and we
have never experienced a work stoppage. We believe our relations with our
employees to be good. From time to time we also employ independent contractors
to support our professional services, product development, sales, marketing and
business development organizations.
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Our future success will depend, in part, on our ability to attract, retain
and motivate highly qualified technical and management personnel for whom
competition is intense. As part of our retention efforts, we seek to minimize
turnover of key employees by emphasizing the nature of our work, our work
environment, our encouragement of technical enhancements and our competitive
compensation packages.
Facilities
Our executive offices are currently located in Burlington, Massachusetts.
In May 2000, we signed a commercial real estate lease in order to move our U.S.
headquarters from the home office of our Chief Executive Officer in Natick,
Massachusetts to a permanent location in Burlington, Massachusetts. The lease
commenced on May 1, 2000 and includes 11,950 square feet of office space. We
commenced occupation of this space during the week of May 22, 2000. As a
result, we will incur a rental obligation of approximately $376,000 per annum
over the term of the five year lease. The Company's operations headquarters are
currently located on the first floor of a leased facility in Harrogate, England
consisting of approximately 3,132 square feet of office space. The rent and
service charge for this facility is approximately $72,000 per year. The Company
maintains additional UK offices in a 400 square foot leased facility in
Birmingham, England and a 3,174 square foot leased facility in Bradford,
England. The rent for these office spaces is approximately $48,000 in the
aggregate per year. In the opinion of the management of the Company, the U.S.
property in Burlington, Massachusetts and the UK properties in North Yorkshire,
Birmingham and Bradford are adequately covered by insurance.
In addition, during the previous three months, we have recruited field
staff in six major cities of the U.S. to provide local sales and technical
support to the marketplace and our customer base. As the operations are
initially small, we have either established home office locations, as in, for
example, Providence, Washington, St. Louis and Phoenix, or we have attempted to
locate and rent such other shared office space as was deemed appropriate for the
other field offices in Los Angeles, Burlington and Chicago.
This prospectus is hereby amended to modify the section of the prospectus
entitled "Management" to delete the section in its entirety and, in lieu
thereof, substitute the following information set forth below:
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning the Company's
current directors and executive officers. The term of office for each director
is one year or until the next meeting of stockholders, at which time elections
are held for each seat on the Company Board of Directors.
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Position with Authoriszor Inc. Director and/or
Name Or Authoriszor Ltd. Age Executive Officer Since
- ---- ------------------- --- -----------------------
Raymond G. H. Seitz..................... Chairman of the Board of Authoriszor Inc. 59 1999
Paul Ayres.............................. Managing Director of Authoriszor Ltd. 34 2000
Don Box................................. Director of Authoriszor Inc. 49 1996
David J. Blanchfield.................... Research and Development Director of 50 1998(1)
Authoriszor Ltd.
James L. Jackson........................ Vice President, Secretary and Director of 59 1997(1)
Authoriszor Inc. and Chairman of Authoriszor
Ltd.
Barry Jones............................. Director of Alliance and European Business 56 1999
Development for Authoriszor Ltd.
Alec P. Karys Vice President, Engineering of Authoriszor Inc. 56 2000
Richard A. Langevin..................... President, Chief Executive Officer, Interim 48 2000
Chief Financial Officer and Director of
Authoriszor Inc.
Ian McNeill............................. Chairman of the Board of Authoriszor Holdings, 52 1999
Ltd.
Sir Malcolm L. Rifkind.................. Director of Authoriszor Inc. 53 2000
Godfrey Shingles........................ Director of Authoriszor Inc. 61 2000
David R. Wray........................... Director of Authoriszor Inc. and Chief 53 1998(1)
Technical Officer of Authoriszor Ltd.
___________
(1) James L. Jackson, David J. Blanchfield and David R. Wray became directors
and executive officers of ITIS Technologies Limited, currently named
Authoriszor Ltd., in 1997 and 1998 respectively.
Raymond G. H. Seitz became our Chairman of the Board of Directors in December
1999 for a three year term. He has served as Vice Chairman of Lehman Brothers
Europe, an investment bank, since 1995 and is currently a Director of Chubb
Corporation, British Airways plc, Marconi plc, Cable & Wireless plc and Rio
Tinto plc. From 1991 through 1994, Mr. Seitz had served as U.S. Ambassador to
the United Kingdom.
Richard A. Langevin became our President, Chief Executive Officer and Interim
Chief Financial Officer in January 2000 for a term ending on December 31, 2003.
Mr. Langevin has served on our Board since January 2000. Mr. Langevin has had 29
years of software and technology industry experience. From 1993 through 1997,
Mr. Langevin provided management consulting and venture capital investment
advice to emerging technology companies. From 1997 until December 1999, he
worked for Bullsoft, the software division of Groupe Bull, where he served as
General Manager-North America and Senior Director-Worldwide Sales Operations.
James L. Jackson is a joint founder of Authoriszor Ltd. and serves as its
Chairman of the Board of Authoriszor Ltd. since October 2000. Since the
inception of Authoriszor Ltd. in 1997 until October 2000, Mr. Jackson served as
its Managing Director. Mr. Jackson joined the Board of Authoriszor Inc. in July
1999 and became our Vice President and Secretary in January 2000. He served as
Managing Director of Holdene Group plc, a UK computer information systems and
services company, from 1974 through 1996, the year that Holdene Group plc
entered administrative receivership in the UK.
David R. Wray is a joint founder of Authoriszor Ltd. and since 1998 has been
its Chief Technical Officer. He joined our Board in July 1999. He was the chief
architect of our product suite, which was developed with David J. Blanchfield
and James L. Jackson. Mr. Wray served as Managing Director of Synergetics GB, a
UK software development company, from 1997 through 1999 and of Servo Computers
Ltd., a computer systems integrator in the UK, from 1996 through 1997. From 1984
through 1996, Mr. Wray held the position of Business Development Manager at
Holdene Group plc, a UK computer information systems and services company, until
such company entered administrative receivership in the UK.
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Sir Malcolm L. Rifkind has served on our Board since January 2000 and has been
a consultant to us since October 1999. In his capacity as a consultant, Sir
Malcolm advises us on governmental organizations in the United Kingdom and
United States that require highly secure transfers of critical and confidential
information. In public service since 1974, he has served in the administrations
of English prime ministers Margaret Thatcher and John Major and held posts in
the UK including Secretary of State for Scotland, Secretary of State for
Transportation, Secretary of State for Defense and Foreign Secretary. Since his
retirement from public service in 1996, he has served as a consultant to several
businesses including PriceWaterhouseCoopers, and he currently is a director of
Ramco Energy plc.
Donald D. Box has served as one of our Directors since May 1996 and served as
our Assistant Secretary from May 1996 through January 2000. Mr. Box has served
as an Executive Vice President at Remington Oil and Gas Corporation, a publicly
held oil and gas exploration and production company, since November 1997. He
served as Chairman of the Board of Box Energy Corporation, which is listed on
NASDAQ, a public company owning oil and gas interests in the Gulf of Mexico and
mainland U.S., from 1993 through November 1997, and served as Chief Executive
Officer and President of Box Energy Corporation from January 1996 through
November 1997. Since 1992, Mr. Box has been President and a Director of Box
Brothers Holding Company, which is engaged in the oil and gas business. Box
Brothers underwent a plan of reorganization pursuant to Chapter 11 of the U.S.
Bankruptcy Code in Federal Bankruptcy Court in Delaware, which plan was
confirmed in 1997. From 1990 until 1996, Mr. Box was President of Race Circuits
Management of Texas, which was engaged in motor sports promotion. Don Box holds
a Bachelor of Science degree in Economics from the Wharton School of Business
and a Masters degree in Business Administration from Southern Methodist
University.
Godfrey Shingles was appointed to our Board on October 18, 2000. Mr. Shingles
has over 35 years of multinational general management experience. Most of this
experience was gained while Mr. Shingles was employed at Digital Equipment Co.
Limited. During his career at Digital, Mr. Shingles held positions including
Director of North Europe, Vice President of European Marketing and Corporate
Vice President responsible for Digital's operations in thirteen European
countries. In addition, Mr. Shingles served as Chairman and Chief Executive of
Digital. Mr. Shingles currently holds positions with: Imagination Technologies
Group PLC, a provider of video and audio systems, as Chairman since 1994 and
Director of Interregnum Venture Marketing Ltd., a high technology venture fund,
since 1994. In addition, Mr. Shingles has served as Chairman of Eurotel Telecom
Limited, a privately held telecommunications company, since 1998 and Chairman of
Nanomagnetics Ltd., a provider of solutions for magnetic storage, since 1999.
Ian H. McNeill has served as Chairman of Authoriszor Holdings Ltd. since
October 1999. In addition, between July 1999 and October 2000, Mr. McNeill
served as Chairman of the Board of Authoriszor Ltd. Prior to July 1999, he
served as Managing Director of Commercial Technology Limited, which assists
information companies in the areas of re-financing and mergers and acquisitions,
from 1991 through 1999. Mr. McNeill is on the Boards of WRDC Limited and
Zilex.com plc, both UK software suppliers.
David J. Blanchfield is a joint founder of Authoriszor Ltd. and has served as
Director of Research and Development of Authoriszor Ltd. since 1998. Mr.
Blanchfield was a software developer for Synergetics Ltd., a UK software
development company, from 1997 through 1999. He held the position of Personal
Computer Support Manager at Freemans plc, a UK mail order company, from 1995
through 1997. David Blanchfield has had a varied career in the information
technology industry since 1969.
Barry Jones is the Director of Alliance and European Business Development for
Authoriszor Ltd. From July 1999 until August 2000, Mr. Jones was the Sales and
Marketing Director of Authoriszor Ltd. From 1996 through 1999, Mr. Jones served
as Managing Director of Ubik.net Ltd., a UK company that specializes in business
to consumer electronic commerce software. Since 1995, Mr. Jones has provided
consulting services through CMM Ventures Limited to Internet and e-commerce
start-ups. Prior to that time Mr. Jones, commencing in 1991, provided consulting
services, specializing in channel management and marketing, to a number of large
information technology companies, including IBM, Digital Equipment Corporation
and Sun MicroSystems, as well as many smaller software companies. He also served
as Director of European Business Development for WebMate International Ltd., a
subsidiary of WebMate Technology Inc., which develops Web development software.
Paul Ayres became the Managing Director of Authoriszor Ltd. in October 2000.
Prior to joining Authoriszor Ltd., Mr. Ayres was the General Manager for
European Operations for Real Networks, Inc. from 1997 until joining
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Authoriszor. During 1995-1997, Mr. Ayres was General Manager for Netscape
Communications' Northern European operations. Mr. Ayres attended the University
of Essex/Cambridge University, majoring in Political Science and Law.
Alec P. Karys became Vice President of Engineering for Authoriszor Inc. in
October 2000. From 1995 until June, 1998, Mr. Karys worked for InterQual, a
company specializing in the development of medical software, as VP-Software
Development and Technical Services. After the sale of the company in June,
1998, he joined Universal Software Corporation as VP - Business Development from
April 1999 until October, 1999. In addition, during that time, Mr. Karys was
co-founder and CEO of Cognate Technologies, Inc., e-learning company, which was
subsequently acquired in October 2000. Mr. Karys is a graduate of Northeastern
University with a degree in Electrical Engineering. In 1978, he obtained his
MBA. He also attended the Stanford University Engineering Executive Program.
Board of Directors and Committees
The Board of Directors held two regularly scheduled meetings and four
special meeting during the fiscal year ended June 30, 2000. In addition, the
Board of Directors acted by unanimous consent on several occasions during the
fiscal year ended June 30, 2000.
Committees of the Board of Directors include the Executive Committee, the
Audit Committee and the Compensation Committee.
The Company established the Executive Committee in August 2000. The
Executive Committee may meet or take written action when the Board is not
otherwise meeting and has the same level of authority as the Board, with the
exception that the Executive Committee does not have the power to transact any
business or otherwise take any action that is contrary to the Bylaws of the
Company or any other action not permitted to be delegated to a such a committee
under the laws of the state of Delaware. The Executive Committee consists of
Raymond Seitz, Richard Langevin and James Jackson. A meeting of the Executive
Committee was held on August 28, 2000.
Effective November 10, 2000, the Audit Committee consisted of Don Box,
Raymond Seitz and Godfrey Shingles. The Board of Directors has adopted an Audit
Committee Charter. Pursuant to this Charter, the Audit Committee serves as an
independent party to monitor the Company's financial reporting process and
internal control system, reviews and appraises the audit efforts of the
Company's independent accountants and provides an open avenue of communication
among the independent accountants and the Company's senior management and the
Board of Directors. The Audit Committee held no meetings in fiscal 2000 with the
independent auditors and management but held one meeting with the auditors and
management following the end of fiscal year 2000 to discuss the audit thereof.
Effective November 10, 2000, the Compensation Committee consisted of Don
Box, Sir Malcolm Rifkind and Godfrey Shingles. The Compensation Committee makes
recommendations to the Board of Directors concerning salaries and incentive
compensation for the Company's senior management. The Compensation Committee
may administer the 2000 Omnibus Stock and Incentive Plan, when and if adopted.
The Compensation Committee is also responsible for setting and reviewing Mr.
Langevin's achievement of certain business objectives on a quarterly basis
pursuant to his Employment Agreement. See "Executive Compensation--Employment
Contracts, Termination of Employment and Changes in Contract Agreements." Prior
to January 12, 2000, we did not have a Compensation Committee or other committee
of the Board of Directors performing similar functions. Decisions concerning
compensation of executive officers generally have been made by the entire Board
of Directors. None of the executive officers or directors currently serves on
the Compensation Committee of another entity or on any other committee of the
Board of Directors of another entity performing similar functions. The
Compensation Committee held no meetings and acted on several occasions by
unanimous consent during the fiscal year ended June 30, 2000.
During the fiscal year ended June 30, 2000, all of the directors attended
75% or more of the meetings of the Board and the committees on which such
directors served.
Director Compensation
As of June 30, 2000, our members of the Board did not receive any cash
compensation from us for their services as members of the Board or Board
committees, except as discussed below.
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Directors are reimbursed for actual and reasonable out of pocket expenses in
connection with attendance at Board and committee meetings.
For his services provided to the Board of Directors of the Company, Donald
D. Box was granted an option to acquire 200,000 shares of Company common stock
on November 10, 2000 pursuant to a stock option agreement to be entered into by
and between the Company and Mr. Box in accordance with the Authoriszor Inc. 2000
Omnibus Stock and Incentive Plan (the "Plan"). The options granted to Mr. Box
are immediately exercisable for a three year term, whereupon the options granted
to Mr. Box shall terminate.
On October 18, 2000, Godfrey Shingles was appointed to the Company's Board
of Directors to serve as a Director. For his service to the Board of Directors,
Mr. Shingles is entitled to a retainer fee of $48,000 per year, payable monthly
in arrears. In addition and subject to stockholder approval, Mr. Shingles is to
be appointed to the Board of Directors for a three (3) year term, provided,
however, that Mr. Shingles appointment to the Board of Directors is terminable
by the Company or Mr. Shingles upon three months written notice by either party,
as the case may be. In addition, the Company may terminate Mr. Shingles'
directorship immediately under certain circumstances.
Pursuant to the agreement between the Company and Mr. Shingles relating to
his appointment to the Board of Directors, the Company has granted Mr. Shingles
a stock option pursuant to the Authoriszor Inc. 2000 Omnibus Stock and Incentive
Plan (the "Plan") to acquire 100,000 shares of Company common stock at an
exercise price equal to $9.875. The stock option shall become immediately
exercisable for a three (3) year term.
Effective from December 1, 1999, we appointed Raymond Seitz to the
Company's Board to serve as Chairman. The Company granted Mr. Seitz a stock
option to acquire 200,000 shares of the Company's common stock at an exercise
price of $3.00 per share, which is currently exercisable until October 30, 2002,
and he is entitled to a retainer of $4,000 per month. He is required to devote
an average of two days per month to his duties to us. In addition, at the
November Meeting the Board of Directors of the Company increased the retainer
payable to Mr. Seitz to $16,000 per month, commencing as of July 1, 2000.
Effective October 1, 1999, we appointed Sir Malcolm Rifkind as a consultant
to the Company's Board of Directors. Under his Consulting Agreement, we granted
Sir Malcolm Rifkind a stock option to acquire 200,000 shares of common stock at
an exercise price of $1.00 per share, which is currently exercisable until
September 30, 2002, and he is entitled to a retainer of (Pounds)2,500 per month
plus Value Added Tax. On January 12, 2000, we elected Sir Malcolm Rifkind to the
Company's Board of Directors.
On July 22, 1999, we entered into a consultancy agreement with Robert
Jeffcock under which he agreed to perform the roles of the Company's Chairman,
President and Chief Executive Officer. The consultancy was for an initial period
of 6 months, after which it was terminable on one month's notice by either
party. The fee payable under this consultancy was initially $5,000 per month.
However, effective December 1, 2000, the fee payable to Mr. Jeffcock pursuant to
his consultancy agreement increased to $10,000 per month. Mr. Jeffcock resigned
his Chairmanship as of December 1, 1999, resigned as Chief Executive Officer and
President effective January 1, 2000 and resigned as a director effective June
30, 2000. Mr. Jeffcock received $10,000 per month from January 1, 2000 until
May 31, 2000 for his services as a consultant to the Company.
In April 1999, Don Box was awarded a stock grant of 20,000 shares of the
Company's common stock for compensation for his services on the Company's Board
of Directors. The shares, which are restricted securities as defined in Rule 144
of the Securities Act of 1933, as amended (the "Securities Act"), were valued
for such purpose at $.20 per share, which was the current price of the Company's
common stock on the OTC Bulletin Board as of April 27, 1999, the date of grant.
See "Recent Developments. Part II. Item 5. Other Information."
Executive Compensation
The following table provides summary information concerning compensation
paid by the Company to its Chief Executive Officers and the four most highly
compensated executive officers whose salary and bonus in fiscal year 2000
exceeded $100,000 (the "Named Executive Officers") for the three most recent
fiscal years. In November 1999, the Company changed its fiscal year end from
December 31 to June 30. The summary information includes provided is for the 12
months ended June 30, 2000, the 12 months ended December 31, 1999 and the 12
months ended December 31, 1998.
Summary Compensation Table
Long Term
Compensation No. of All Other
Fiscal Annual Securities Annual
Name and Principal Position Year Salary Bonus Underlying Options Compensation
- --------------------------- ----- ------ ----- ------------------- ------------
Richard A. Langevin(1) 2000 $112,500 $62,500 500,000 $-0-
President, CEO, Interim 1999 N/A N/A N/A N/A
CFO 1998 N/A N/A N/A N/A
Robert P. Jeffcock (2) 2000 $ 85,000 $-0- $-0- $-0-
President and CEO 1999 -0- -0- -0- 250,000 shares of common stock (3)
1998 $ 90,000 -0- 200,000 -0-
James L. Jackson 2000 $ 87,500 $37,500 -0- $2,813 (3)
Vice President and Secretary 1999 N/A N/A N/A N/A
and Managing Director of 1998 N/A N/A N/A N/A
Authoriszor Ltd.
David R. Wray 2000 $ 87,500 $37,500 -0- $2,813 (4)
Director of the Company and 1999 N/A N/A N/A N/A
Chief Technical Officer
of Authoriszor Ltd. 1998 N/A N/A N/A N/A
David Blanchfield 2000 $ 87,500 $37,500 -0- $2,813 (4)
Research and Development 1999 N/A N/A N/A N/A
Director of Authoriszor Ltd. 1998 N/A N/A N/A N/A
Barry Jones 2000 $ 65,625 $37,500 131,214 20,363 (5)
Sales and Marketing 1999 N/A N/A N/A N/A
Director of Authoriszor Ltd. 1998 N/A N/A N/A N/A
(1) Mr. Langevin became President and Chief Executive Officer of the Company
effective January 1, 2000. Therefore, the compensation information
reflected herein is for the period January 1, 2000 to June 30, 2000.
(2) Mr. Jeffcock resigned as the Company's President and CEO effective
January 1, 2000 and resigned as a director of the Company effective
June 30, 2000. The compensation paid to Mr. Jeffcock from July 22, 1999
though November 31, 2000 consisted of $5,000 per month for his services as
President and CEO of the Company. Effective December 1, 2000, the
compensation paid to Mr. Jeffcock for the performance of his executive
roles with the Company increased to $10,000 per month. Additionally, from
January 1, 2000 to May 31, 2000, Mr. Jeffcock received compensation of
$10,000 per month for his services as a consultant to the Company.
(3) In April 1999, Mr. Jeffcock was granted 250,000 shares of the Company's
common stock in lieu of compensation. These shares, which are restricted
securities as defined in Rule 144 of the Securities Act, were valued for
such purpose at $.20 per share, which was the current market price of the
Company's common stock on the OTC Bulletin Board as of April 27, 1999, the
date of grant.
(4) Company pension contribution.
(5) Consists of a pension contribution by the Company in the amount of $2,813
and a consultant fee paid in Mr. Jones' Director capacity in the amount of
$17,550.
Stock Options
The following table summarizes information concerning grants of stock
options to the Chief Executive Officers and the Named Executive Officers during
the fiscal year ended June 30, 2000.
11
Stock Option Grants During Fiscal Year Ending June 30, 2000
Individual Grants Potential Realizable value
at assumed annual rates of
Number of % of stock price appreciation
Total for option term (3)
Securities Options Granted
Underlying to Employees Exercise Expiration
Name Options Granted During 2000 Price Date 5% 10%
- ---- ---------------- --------------- -------- ---------- ---------- ----------
Richard A. Langevin 500,000(1) 43.1 $6.75 12/31/09 $2,122,518 $5,378,880
Robert P. Jeffcock N/A N/A N/A N/A N/A N/A
James L. Jackson N/A N/A N/A N/A N/A N/A
David R. Wray N/A N/A N/A N/A N/A N/A
David Blanchfield N/A N/A N/A N/A N/A N/A
Barry Jones 131,214(2) 19.9 $2.00 9/30/08 125,299 299,168
___________
(1) These options vest as follows: 200,000 shares exercisable on or after
January 1,2001; 200,000 shares exercisable on or after January 1, 2001;
100,000 shares exercisable on or after January 1, 2002; 100,000 shares
exercisable on or after January 1, 2003; and 100,000 shares exercisable on
or after January 1, 2004, assuming that Mr. Langevin is employed by the
Company on each respective vesting date.
(2) These options vest up to 25% per year annually beginning October 1, 2000,
assuming that Mr. Jones is employed by Authoriszor Ltd. on each respective
vesting date.
(3) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
Company's common stock appreciates in value from the date of grant at the
5% and 10% annual rates prescribed by SEC rules for the term of the option
until such option's expiration and, therefore, are not intended to forecast
possible future appreciation, if any, of the price of the Company's common
stock.
The following table provides certain information concerning the exercise of
stock options during the fiscal year ended June 30, 2000 by the Chief Executive
Officers and the Named Executive Officers and unexercised stock options held by
such officers at June 30, 2000.
Aggregated Stock Option Exercises In Last Fiscal
And Option Values for Fiscal Year Ended June 30, 2000
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at June 30, 2000 (#) June 30, 2000 ($) (1)
---------------------------- -----------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------- -------- -------- ---------------- ----------------- ------------- -----------------
Richard A. Langevin N/A N/A N/A 500,000 N/A $1,875,000
Robert P. Jeffcock 200,000 $2,111,667 N/A N/A N/A N/A
James L. Jackson N/A N/A N/A N/A N/A N/A
David R. Wray N/A N/A N/A N/A N/A N/A
David Blanchfield N/A N/A N/A N/A N/A N/A
Barry Jones N/A N/A N/A 131,214 N/A $1,115,319
___________
(1) Market value of underlying securities at exercise date or fiscal year end,
as the case may be, minus the exercise price.
12
Effective as of March 1, 2000, Authoriszor Ltd. made certain contributions
to directors, executive officers and other employees of Authoriszor Ltd. with
respect to the personal pension plan of each such person in the UK. Pursuant to
the terms of such plan, Authoriszor Ltd. made a contribution to the personal
pension plans of directors and officer of Authoriszor Ltd. in an amount that did
not exceed 7.5% of the annual salary of such directors and executive officers.
Certain Named Executive Officers of the Company have received contributions
pursuant to such plan. See: "Executive Compensation."
2000 Omnibus Stock and Incentive Plan
General. The Company's 2000 Omnibus Stock and Incentive Plan (the "Plan") was
adopted by the Company's Board of Directors effective as of July 26, 2000 and
approved by the stockholders of the Company at the Company's 2000 Annual Meeting
of Stockholders ("Annual Meeting"), held on November 10, 2000 in London,
England. The Plan authorizes the issuance of options to purchase up to
1,700,000 shares of common stock. The purpose of the Plan is to enable
directors, certain consultants, and eligible employees of the Company and its
subsidiaries to acquire a stock ownership interest in the Company and encourage
them to remain in the employ of the Company or its subsidiaries. The Plan
authorizes the granting of Non-Qualified Stock Options (including reload
options) and Incentive Stock Options. The options granted under the Plan permit
the optionees to purchase shares of common stock at a price determined by the
Committee but in the case of Incentive Stock Options, at a price that is not
less than the fair market value of the common stock on the date of grant of the
option, provided that if the recipient of an incentive stock option owns more
than 10% of the total combined voting power of all classes of the Company's
stock, the exercise price shall not be less than 110% of the fair market value
on the date of grant. A maximum duration of 10 years has been established for
the Plan. The Board of Directors of the Company, however, has the power to
suspend or terminate the Plan at any time, provided such suspension or
termination does not affect outstanding options granted under the Plan.
Stockholder approval of the Plan was sought to comply with the Internal
Revenue Code of 1986, as amended (the "Code"), and the rules and regulations of
the NASDAQ Stock Exchange, Inc. (the "NASDAQ").
Shares Authorized and Award Limits. Pursuant to the terms of the Plan, the
Company is authorized to issue up to 1,700,000 shares of the Company's common
stock, of which up to 1,700,000 may be granted as Incentive Stock Options,
within the meaning of Section 422 of the Code. The Plan limits the annual
awards to individual participants to options covering no more than 200,000
shares.
The Plan provides that the following shares of common stock covered by Plan
awards may be utilized for subsequent awards under the Plan: shares are that
forfeited, shares exchanged or delivered to the Company in exercising options,
and any shares that are used to settle the minimum tax withholding obligations
of the Company as a result of the exercise of an option. No person shall have
any rights as a stockholder with respect to any shares of common stock covered
by an option prior to the date of issuance of a stock certificate for such
shares.
Administration. The Plan shall be administered by a committee (the "Committee")
of at least two members of the Board and is intended to satisfy the requirements
of Rule 16b-3 under the Exchange Act and Section 162(m) of the Code. All awards
granted under the Plan shall be on the terms, and subject to, the conditions
determined by the Committee consistent with the Plan. The Committee shall have
authority to interpret conclusively the provisions of the Plan, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable, to
decide conclusively all questions of fact arising in the application of the
Plan, to establish performance criteria in respect of awards under the Plan, to
certify that Plan requirements have been met for any participant in the Plan, to
submit such matters as it may deem advisable to the Company's stockholders for
their approval, and to make all other determinations and take all other actions
necessary or desirable for the administration of the Plan. The Committee is
expressly authorized to adopt rules and regulations limiting, or eliminating its
discretion in respect of certain matters as it may deem advisable to comply with
or obtain preferential treatment under, any applicable tax or other law, rule,
or regulation. All decisions and acts of the Committee shall be final and
binding upon all affected plan participants.
If no Committee has been designated to administer the Plan, references to
the Committee shall be deemed to be references to the Board, whose members shall
not be required to meet the above Rule 16b-3 and 162(m) requirements.
13
Eligibility and Participation. Directors, key employees, including officers,
and consultants of the Company and its subsidiaries shall be eligible for awards
under the Plan. Selection of certain eligible participants and the
determination of extent and timing of their participation shall be designated by
the Committee.
Terms of Options -- Method of Payment. The term of an option granted under the
Plan shall be determined by the Committee, except that, in the case of an
Incentive Stock Option, the term of the option shall not exceed ten (10) years
from the date of grant unless the grant is to a person who on the date of grant
owns (within the meaning of Section 422(b)(6) of the Code), directly or
indirectly, stock possessing more that ten percent (10%) of the total combined
voting power of all classes of the Company's stock, in which case the term of
the option shall not exceed five (5) years from the date of grant, and,
notwithstanding any other provision of this Plan, no option shall be exercised
after the expiration of its term.
The Committee may authorize payment for shares as to which an option is
exercised to be made in cash, shares of common stock owned by the participant
for at least six (6) months, or a combination thereof, by "cashless exercise" or
in such other manner as the Committee in its sole discretion may provide. The
Committee, in its sole discretion and on such terms as it may determine, may
loan money to the participant, guarantee a loan to the participant, or otherwise
assist the participant in obtaining the necessary cash to exercise all, or a
portion of, an award granted hereunder, or to pay any tax liability of the
Participant attributable to such exercise.
The Committee shall have the authority to specify that the participant to
whom an option is or was granted under this Plan shall be granted a reload
option in the event such person exercises all or a part of an option by
surrendering already-owned unrestricted shares of common stock in full or
partial payment of the exercise price (a "Reload Option"). Each Reload Option
shall cover a number of shares of stock equal to the number of shares of stock
surrendered in payment of the exercise price, shall have an exercise price per
share of stock equal to the Fair Market Value of the stock on the date of grant
of such Reload Option and shall expire on the stated expiration date of the
original option. Any Reload Option may provide for the grant, when exercised,
of subsequent Reload Options. A Reload Option shall contain such other terms
and conditions as the Committee in its sole discretion shall deem desirable and
which may be set forth in rules or guidelines adopted by the Committee or in the
option agreement evidencing the Reload Option.
Exercise Price. The exercise price per share shall be determined by the
Committee, except that in the case of an option granted as an Incentive Stock
Option, the exercise price per share shall not be less than one hundred percent
(100%) of the Fair Market Value, as determined by the Committee, of a share of
common stock on the date the option is granted (one hundred ten percent (110%)
in the case of an Incentive Stock Option granted to a person who on the date of
grant owns (within the meaning of Section 422(b)(6) of the Code) directly or
indirectly, stock possessing more than ten percent (10%) of the total combined
voting power of all classes of the Company's stock). The Fair Market Value of a
share of common stock on any date of reference means the closing price on the
date of grant, unless the Committee in its sole discretion shall determine
otherwise in a fair and uniform manner. For purposes of the Plan, the "Closing
Price" of the common stock on any business day shall be: (a) if the common stock
is listed or admitted for trading on any United States national securities
exchange or included on NASDAQ, the last reported sale price of common stock on
such exchange or system, as reported in any newspaper of general circulation;
(b) if the common stock is quoted on the OTC Bulletin Board or any similar
system of automated dissemination of quotations of securities prices in common
use, the mean between the closing high bid and low asked quotations for such day
of the common stock on such system; (c) if neither clause (a) nor (b) is
applicable, the mean between the high bid and low asked quotations for the
common stock as reported by the National Quotation Bureau, Incorporated if at
least two (2) securities dealers have inserted both bid and asked quotations for
the common stock on at least five (5) of the ten (10) preceding days; (d) in
lieu of the above, if actual transactions in the common stock are reported on a
consolidated transaction reporting system, the last sale price of the common
stock for such day and on such system; or (e) if no transactions in the common
stock are reported in accordance with (a), (b), (c) or (d), the fair market
value of a share of common stock as determined by the Board.
Withdrawal -- Termination of Employment - Death. The Committee shall have
discretion to specify in each participant's option agreement, or, with the
consent of the participant, an amendment thereof, provisions with respect to the
period, not extending beyond the term of the option, during which the option may
be exercised following the participant's termination of employment; provided,
however, that Incentive Stock Options that have not been previously exercised,
must be exercised within three (3) months following the participant's date of
termination unless employment is terminated because of death or disability, in
which event the exercise period is extended to one (1) year following the date
of termination.
14
Adjustments. The Plan provides for adjustment of options authorized for
issuance under the Plan in the event of stock dividends, stock splits,
recapitalizations, combinations, mergers, consolidations, liquidations, split-
ups, split-offs, spin-offs and other similar changes in the Company's stock, or
any distributions to the stockholders, other than regular cash dividends. In
that event, the Committee will make such substitution or adjustments in the
aggregate number or class of shares that may be distributed under the Plan
(including the substitution of similar awards denominated in the shares of
another company) and in the number, class and option price or other price of
shares subject to outstanding awards as it believes equitable or appropriate to
maintain the purpose of the original grant.
Transferability - Delivery. Except as may be permitted by the Committee,
options granted pursuant to the Plan shall not be assignable or transferable by
the holder thereof except by will or by the laws of descent and distribution.
Except as expressly provided in the Plan or as may be permitted by the
Committee, during the life of the holder, awards under the Plan shall be
exercisable only by such holder or by the guardian or legal representative of
such holder and are exercisable only during the participant's lifetime.
Termination or Amendment. The Board may at any time, with respect to any
shares not at the time subject to outstanding options, suspend or terminate the
Plan. The Board may also amend the Plan from time to time as it deems
advisable, but no amendment shall, without prior stockholder approval, (i)
increase the maximum number of shares subject to the Plan or the maximum number
of shares for which options may be granted to any one employee (other than
adjustments to prevent dilution or enlargement of participant rights in the
event of fundamental changes to the Company); change the class of personnel
eligible for the grant of options, (iii) permit the grant of awards in the form
of Incentive Stock Options that expire beyond the maximum ten-year period of the
Plan; or (iv) extend the termination date of the Plan. In addition, no
amendment or suspension of the Plan or any award thereunder shall, except as
specifically permitted in any award, substantially impair any award previously
granted to a holder without the written consent of such holder.
Certain Federal Tax Income Consequences. The following discussion of the
federal income tax consequences of participation in the Plan for typical
participant is only a summary, does not purport to be complete and does not
cover, among other things, foreign, state and local tax treatment of
participation in the Plan. Furthermore, differences in individual participant's
financial situations may cause federal income tax consequences of participation
in the Plan to vary.
No taxable income is realized by a participant upon the grant or exercise
of an Incentive Stock Option. However, the exercise of an Incentive Stock
Option may result in alternative minimum tax liability for the participant. If
no disposition of the shares of common stock issued to a participant pursuant to
the exercise of an Incentive Stock Option is made by the participant within two
years from the date of grant or one year after the issuance of such shares to
the participant, then upon the sale of such shares, any amount realized in
excess of the exercise price will be taxed to the participant as long-term
capital gain and any loss sustained will be long-term capital loss, and no
deduction will be allowed to the participant's employer for Federal income tax
purposes.
If shares of common stock acquired on the exercise of an Incentive Stock
Option are disposed of prior to the expiration of the two year/one year holding
periods described above, such disposition will be a "disqualifying disposition"
and the participant will recognize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of the shares of
the date of exercise (or, if less, the amount realized on the disposition of
such shares) over the option price of the shares. The employer of the
participant will be entitled to deduct an amount equal to the ordinary income
recognized by the participant. Any gain realized because the sale price was
greater than the fair market value of the shares on the date of exercise, will
be taxed as short-term or long-term capital gain and will not result in any
deduction by the employer of the participant. Special rules will apply if all
or a portion of the exercise price of an Incentive Stock Option is paid by
tendering shares of common stock.
With respect to Non-Qualified Stock Options, no income is realized by the
participant at the time the option is granted. Generally, at exercise, ordinary
income is recognized by the participant in an amount equal to the difference
between the exercise price and the fair market value of the shares of common
stock on the date of exercise, and the employer of the participant receives a
tax deduction for the same amount. Upon the ultimate disposition of such
shares, any appreciation or depreciation after the date of exercise is treated
as either short-term or long-term capital gain or loss depending on how long the
shares have been held following the date of exercise.
15
Awards to Named Officers and OtherPersons. The following table provides
information concerning options, which are Non-Qualified Stock Options, to
acquire shares of our common stock that have been granted to two directors,
employees and a consultant of the Company pursuant to the Plan as of the date
hereof. No options have been granted to Named Executive Officers.
2000 Omnibus Stock and Incentive Plan
Name and Position Exercise Price Underlying Options
- ----------------- --------------- ------------------
Edward F. Rogers $ 7.75 100,002
Consultant
Alec P. Karys $10.75 100,000
Vice President - Engineering
Godfrey Shingles(1) $9.875 100,000
Director
Edward Vasko $10.00 100,000
Director of Technology - U.S. Operations
Paul Ayres $ 9.75 200,000
Managing Director - Authoriszor Ltd.
Donald D. Box(1) 7.75 100,000
Director
Non-Executive Director Group(1) N.A. 200,000
Non-Executive Officer Employee Group $10.00 100,000
(1) Pursuant to an agreement between the Company and Mr. Shingles relating to
his appointment to the Board of Directors, the Company has granted Mr.
Shingles an option pursuant to the Plan to acquire 100,000 shares of
Company common stock at an exercise price equal to $9.875. The option to
acquire shares of Company common stock is immediately exercisable and
terminates three years after the date of grant. In addition, pursuant to an
agreement between the Company and Mr. Box relating to the performance of
certain services to the Board of Directors, the Company has granted Mr. Box
an option pursuant to the Plan to acquire 100,000 shares of Company common
stock at an exercise price equal to $7.75. The option to acquire shares of
Company common stock is immediately exercisable and terminates after three
years after the date of grant.
1999 Stock Option Plan
Benefits; Purpose; Shares. Our 1999 Stock Option Plan (the "1999 Stock Plan"),
ratified by our Board on October 4, 1999, currently provides for the issuance to
qualified participants of up to 1,000,000 shares of our common stock pursuant to
the grant of stock options. The 1999 Stock Plan is subject to approval by
stockholders in the event required by law or any stock exchange or quotation
system on which our common stock is listed or quoted. The purpose of our 1999
Stock Plan is to promote our interests and the interests of our stockholders by
using investment interests in Authoriszor Inc. to attract, retain and motivate
eligible persons, to encourage and reward their contributions to our performance
and to align their interests with those of our stockholders. As of November 1,
2000, options to purchase 951,714 shares of common stock had been awarded, of
which 35,000 of such options are subject to certain performance conditions,
having exercise prices ranging from $2.00 to $20.00 per share, under our 1999
Stock Plan. Of the options granted, all have been Non-qualified Stock Options,
or NQSOs. We may also grant options which are intended to qualify as Incentive
Stock Options, or ISOs, under Section 422 of the Internal Revenue Code.
Eligibility. Under our 1999 Stock Plan, we may grant ISOs to our employees and
officers and to any employee or officer of any parent company or subsidiary
company of ours. We may grant NQSOs to any person eligible to
16
receive ISOs, and also to Directors and to persons engaged by us, or any parent
company or subsidiary company of ours, to render bona fide consulting and
advisory services.
Administration. Our Board of Directors, or a committee appointed by the Board,
is authorized to administer the 1999 Stock Plan and has the authority in its
discretion to determine which eligible persons will be granted stock options,
the number of shares subject to options, the period of exercise of each option
and the terms and conditions of such options. As a condition to the exercise of
an option, the Board may require the person exercising the option to represent
and warrant that the underlying shares are being purchased for investment only
and without any present intention to distribute such shares.
Stock Options. Under our 1999 Stock Plan, we may grant ISOs or NQSOs. When
granted, each option must be designated as either an ISO or an NQSO. However,
regardless of such designation, in the event that the fair market value,
calculated in good faith by the Board based on the trading prices of the shares
of our common stock on the market on which our common stock trades, of shares
underlying ISOs held by an option holder in any calendar year exceeds $100,000,
such options shall be treated as NQSOs. When we grant options under the 1999
Stock Plan, prospective option holders are required to enter into a Stock Option
Agreement with us that sets out the key terms on which the options are to be
granted. The Stock Option Agreements also detail the term of a market stand off
period during which we can require the holder to refrain from selling shares
during the 180-day period following the effective date of our filing a
registration statement under the Securities Act.
Options are generally non-transferable and are exercisable during the
lifetime of the holder. However, notwithstanding the foregoing, the option may
be transferred or assigned by the holder of the option:
. to family members, trusts or other entities for the benefit of the
holder of the option;
. for the benefit of the family members of the holder of the option by
will or by the laws of descent and distribution;
. or by the laws regulating testate or intestate succession applicable
to the holder of the option.
Exercise Price. The exercise price of shares to be issued upon exercise of an
option is determined by the Board as administrator of the 1999 Stock Plan,
subject to the following:
. In the case of an ISO granted to an employee who, at the time of the
grant of such option, owns stock representing more than 10% of the
voting power of all of our classes of stock or that of any of our
parents or subsidiaries, then the exercise price shall be no less than
110% of the fair market value of our common stock on the date of
grant;
. In the case of an ISO granted to any other employee, the per share
exercise price will be no less than 100% of the fair market value per
share on the date of grant; or
. In the case of an NQSO, the per share exercise price will be
determined by the Board as administrator.
Exercise of Options. Option holders under the 1999 Stock Plan may exercise
their options at any time after their grant in accordance with the terms of
exercise set forth by the administrator of the 1999 Stock Plan and in their
Stock Option Agreements. The administrator has the sole discretion to accelerate
the date on which options may be exercised. In order to exercise options, option
holders must deliver to us a completed notice of exercise together with full
payment for the shares underlying such options. If a holder of options ceases to
be a person eligible to be granted options, his options will be exercisable for
three months after such person ceases to be eligible, except where such change
in status is as a result of the holders' death or disability, where such period
is extended to one year, unless specified in the grant of the option to be some
other period. Options must be exercised within ten years of their grant, or, if
determined by the Board, an earlier date.
Amendment and Termination. Our Board may at any time amend, alter, suspend or
terminate the 1999 Stock Plan. The Board shall be required to obtain stockholder
approval of any 1999 Stock Plan amendments to the extent necessary to comply
with applicable laws and may seek stockholder approval of any 1999 Stock Plan
amendments it deems desirable. No such amendment shall have a retroactive effect
on any options previously granted, unless the
17
relevant option holders consent to such amendment. The 1999 Stock Plan shall
terminate automatically on the tenth anniversary of the date of its adoption.
Changes in Capital Structure, Mergers, Asset Sales. In the event that we cause
a stock split, reverse stock split, stock dividend or any other decrease or
increase in the number of issued shares of our common stock without providing
consideration to option holders, the number of options to which such holders
have rights will be proportionally adjusted for any increase or decrease in the
number of issued shares resulting from any such change in capital structure. In
the event of our proposed dissolution or liquidation, the Board, as
administrator of the 1999 Stock Plan, is obliged to notify option holders of
such fact and may, at its discretion, allow such holders to exercise their
options up to 15 days prior to such event. Unless exercised, all options will
lapse immediately prior to a dissolution or liquidation. In the event of a
merger of by us with another corporation, each option may be assumed or an
equivalent option may be substituted by such successor corporation, or a parent
or subsidiary of such successor, without the consent of the option holder.
Employment Contracts, Termination of Employment and Change-in-Control Agreements
Effective October 16, 2000, the Company entered into an Employment
Agreement with Alec P. Karys pursuant to which Mr. Karys became the Vice
President of Engineering for Authoriszor Inc. The term of this agreement is one
year, expiring October 15, 2001. The Employment Agreement is terminable
immediately for cause by the Company, terminable voluntarily by Mr. Karys upon
45 days written notice, and after the one year term of employment has lapsed,
both the Company and Mr. Karys must give six months notice of termination. Mr.
Karys is entitled to compensation in the following amount:
. a base salary of $150,000;
. a maximum annual bonus of $37,500, payable quarterly upon certain
quarterly objectives, as defined by management, being reached;
. subject to stockholder approval, stock options to purchase a
cumulative total of 100,000 shares of the Company's common stock at an
exercise price of $10.75 per share, subject to certain adjustments as
provided in the Stock Option Agreements to be executed, that vest 25%
per year for a period of four years.
The options terminate on October 11, 2008. In the event of a sale of the
Company during the term of the agreement, all salary payments and bonus payments
under the agreement would become immediately due and payable and all options
would become immediately exercisable.
On October 7, 2000, the Company entered into an Employment Agreement with
Paul Ayres pursuant to which Mr. Ayres became the Managing Director of
Authoriszor Ltd. The term of this agreement is one year, expiring October 6,
2001. The Employment Agreement is terminable immediately for cause by the
Company, terminable voluntarily by Mr. Ayres upon 45 days written notice, and
after the one year term of employment has lapsed, both the Company and Mr. Ayres
must give six months notice of termination. Mr. Ayers is entitled to
compensation in the following amount (assuming a currency conversion ration of
(Pounds)1.50 British Pounds per $1.00 United States:
. a base salary of $277,500;
. a maximum annual bonus of $210,000, payable monthly, provided that
certain revenue targets are achieved; provided, however, that $26,250
shall be payable as a minimum guaranteed bonus for the first three
months of employment;
. In addition, up to an additional $45,000 shall be payable in the event
that other agreed upon targets are achieved;
. stock options to purchase a cumulative total of 200,000 shares of the
Company's common stock at an exercise price of $9.75 per share,
subject to certain adjustments as provided in the Stock Option
Agreements to be executed, that vest 25% per year for a period of four
years.
The options terminate on October 8, 2008. In the event of a sale of the
Company during the term of the agreement, all salary payments and bonus payments
under the agreement would become immediately due and payable and all options
would become immediately exercisable.
18
On July 21, 2000, the Company entered into a Consulting Agreement with
Edward F. Rogers pursuant to which Mr. Rogers would provide a broad array of
financial and other business-related consulting services for the Company. In
accordance with the terms of the consulting agreement, Mr. Rogers has agreed to
provide a minimum of 10 days per month performing such consulting services for
the Company at the rate of $3,000 per day. The daily compensation to the paid
to Mr. Rogers is comprised of $2,000 in cash and such number of restricted
shares of the Company's common stock equal to $1,000 per consulting day, which
shall be calculated weekly for the days worked in such week and will be the last
reported sales price of the Company's common stock at the close of business on
the last business day of the week in which Mr. Rogers performs consulting
services. The shares of restricted stock granted to Mr. Rogers are to be issued
upon the expiration of the consulting agreement after a six month term;
provided, however, that such shares cannot be sold or exchanged for a period of
12 months following the expiration of the consulting agreement. In addition,
Mr. Rogers is entitled to an option to purchase 100,002 shares of Company common
stock. The options vest on a monthly pro-rata basis and are exercisable over a
three-year period, which begins on the six-month anniversary of the expiration
date of the consulting agreement. The options granted to Mr. Rogers have an
exercise price of $7.75 per share, which was the closing price of the Company's
common stock on Nasdaq on July 20, 2000. The consulting agreement is terminable
by either party upon two weeks written notice by either party. In the event of
a sale of the Company during the term of the agreement, all restricted stock
payments under the agreement would become immediately due and payable and all
options would become immediately exercisable. The agreement also contains
nondisclosure, non-competition and non-interference provisions. As a result of
the stock compensation component of this consulting agreement, there will be an
accounting charge to earnings in the quarter ended September 30, 2000 of
approximately $258,000.
On April 1, 2000, the Company entered into a Consulting Agreement with
Frederick Sawin pursuant to which Mr. Sawin serves as Vice President of Sales
for North America. Pursuant to the terms of the consulting agreement, Mr. Sawin
is entitled to receive $1,500 per day in addition to 3% of all North American
sales that are revenued during the term of the consulting agreement or that are
booked during the term of the consulting agreement and are revenued within 30
days after the expiration of the consulting agreement. The term of the
consulting agreement is 26 weeks; however either the Company or Mr. Sawin may
terminate this consulting agreement upon 45 days written notice. The Company and
Mr. Sawin have agreed to extend the term of the Consulting Agreement for a
period of one month. In the event that the Company and Mr. Sawin agree to
change the consulting agreement to an employment agreement during the term of
the consulting agreement, the exercise price for any stock option that may be
granted to Mr. Sawin will be the market price of the Company common stock at the
close of business on the business day prior to the commencement date of the
consulting agreement.
On March 15, 2000, the Company entered into an Employment Agreement with Ed
Vasko, pursuant to which Mr. Vasko will serve as Director of Technology for the
Company's U.S. operations. Mr. Vasko is entitled to a salary of $115,000 and up
to an additional $15,000 by way of bonus, based on agreed targets. Additionally
Mr. Vasko was granted stock options to purchase 20,000 shares of common stock,
which vest over four years at 25% per year. The options granted to Mr. Vasko
have an exercise price of $10.00. In the event of a sale of the Company during
the term of the agreement, all salary payments and bonus payments under the
agreement would become immediately due and payable and all options would become
immediately exercisable.
We entered into an Executive Employment Agreement with Richard A. Langevin,
dated as of January 1, 2000, under which he has been appointed the Company's
Chief Executive Officer. The term of this agreement is four years, expiring
December 31, 2003, and terminable immediately for cause by either Mr. Langevin
or the Company. Mr. Langevin is entitled to compensation of:
. a base salary of $225,000;
. a minimum annual bonus of $125,000, payable in pro rata quarterly
increments, provided that certain quarterly Management-by-Objectives
targets are achieved; and
. stock options to purchase a cumulative total of 500,000 shares of the
Company's common stock at an exercise price of $6.75 per share,
subject to certain adjustments as provided in the Stock Option
Agreements, in increments of: 200,000 shares exercisable on or after
January 1, 2001; 100,000 shares exercisable on or after January 1,
2002; 100,000 shares exercisable on or after January 1, 2003; and
100,000 shares exercisable on or after January 1, 2004.
The options terminate on December 31, 2009. At Mr. Langevin's request, the
Company will file a registration statement on Form S-8 registering the issuance
of the shares underlying his options, provided that the Company meets the
requirements of Form S-8. In the event of a sale of the Company during the term
of the
19
agreement, all salary payments and bonus payments under the agreement would
become immediately due and payable and all options would become immediately
exercisable. The agreement contains a nondisclosure provision with an unlimited
duration and non-competition and non-interference provisions effective for
twelve months subsequent to termination of the agreement.
On July 22, 1999, Mr. Jeffcock entered into an agreement with the Company
to provide his services as a member of the Board and as President and Chief
Executive Officer. Pursuant to the terms of the agreement, Mr. Jeffcock was
paid $5,000 per month for his service as the President and Chief Executive
Officer of the Company. Effective December 1, 1999, the monthly amount paid to
Mr. Jeffcock increased from $5,000 to $10,000 per month. Mr. Jeffcock resigned
his Chairmanship as of December 1, 1999 and resigned as Chief Executive Officer
and President effective January 1, 2000. From January 1, 2000 to May 31, 2000,
Mr. Jeffcock was paid compensation in the amount of $10,000 per month for his
services as a consultant to the Company. Mr. Jeffcock resigned as a Director of
the Company effective June 30, 2000. See: "Board of Directors and Committees -
Director Compensation."
On July 22, 1999, the date the Company acquired Authoriszor Ltd., each of
James Jackson, David Wray and David Blanchfield entered into service agreements
with Authoriszor Ltd., under which they were appointed as follows:
James L. Jackson............................ Managing Director
David R. Wray............................... Technical Director
David Blanchfield........................... Research Development Director
The agreements are all for an initial fixed three year term and terminable on 12
months' notice after the expiration of the term by either party. They are each
entitled to a salary of approximately $123,750 together with an entitlement to
earn up to a further approximately $41,250 by way of bonus, based on agreed
targets, during the first year after February 18, 2000, the date the Company
completed its $30,000,000 placement in the United Kingdom and Europe of
2,727,273 shares of the Company's common stock at $11.00 per share pursuant to
Regulation S promulgated under the Securities Act. In addition, each individual
is entitled to receive a contribution of 7 1/2% of basic salary to his personal
pension scheme. The agreements also contain provisions dealing with the
ownership of intellectual property and a restrictive covenant for a 12 month
period after termination of employment.
Commercial Technology Ltd. ("CTL"), which is controlled by Ian McNeill the
Chairman of Authoriszor Ltd. prior to October 2000 and the current Chairman of
Authoriszor Holdings Ltd., entered into a consultancy agreement with Authoriszor
Ltd. on July 22, 1999, under which:
. CTL would provide the services of Ian McNeill to manage the financial
affairs of Authoriszor Ltd.; and
. The fee payable under such agreement was approximately $4,950 plus
Value Added Tax per month.
The consultancy agreement was set up for an initial period of 6 months, and
after that period was terminable by either party on one month's notice.
The consultancy fee payable to CTL was increased with effect from
December 1, 1999 to approximately $10,310 plus Value Added Tax per month. The
CTL consultancy agreement was terminated with effect from June 30, 2000, at
which time CTL entered into a consulting agreement with Authoriszor Ltd. with
effect from July 1, 2000, on terms similar to those set forth in the preceding
paragraphs, with the exception that the fee payable to CTL was increased to
$150,000 per annum. The consulting agreement was for an initial fixed term to
expire on June 30, 2001, subject to standard termination provisions. Either the
Company or CTL may terminate the consulting agreement upon four (4) months
written notice of such termination.
Stock Ownership Of Certain Beneficial Owners And Management
Our only outstanding class of equity securities is its common stock.
20
The following table sets forth certain information with respect to
beneficial ownership of the Company's common stock as of September 27, 2000, by
(i) each of the Company's directors and nominees and Named Executive Officers
(as defined in "Executive Compensation" below), (ii) all directors and executive
officers as a group, and (iii) each person who is known by the Company to
beneficially own more than 5% of the Company's common stock.
Shares of Percentage of Shares
Common Stock Of Common Stock
Person or Group Beneficially Owned (1) Beneficially Owned (1)
- --------------- ---------------------- ----------------------
Named Executive Officers and Directors:
James L. Jackson (2)++ 1,321,798 7.6%
David R. Wray (2) ++ 1,307,733 7.5%
Raymond G. H. Seitz (3) ++ 200,000 1.1%
Sir Malcolm L. Rifkind (4) ++ 200,000 1.1%
Richard A. Langevin(5) + 0 *
David J. Blanchfield (2) ++ 1,307,733 7.5%
Barry Jones (6)++ 101,589 *
Godfrey Shingles(7)++ 100,000 *
Don Box(11)+++ 166,500 *
Directors and Executive Officers as a Group (12 5,393,743 31.0%
persons) (8)
Beneficial Owners of 5% or More of The Company's
Outstanding Common Stock
Roy Williams(9) 1,959,842 11.3%
Birkett House
27 Albermarle Street
London W1X 4LQ
England
Robert P. Jeffcock(10) 1,125,812 6.5%
Apt B42 Roc Fleuri
1 Rue du Tenao
MC 98000
Monaco
___________
+ The address for this executive officer and directors is One Van de Graaff
Drive, Suite 502, Burlington, Massachusetts 01803-5188.
++ The address for these executive officers and directors is Windsor Hall,
Cornwall Road, Harrogate, North Yorkshire HG12PW England.
+++ The address for this director is 8201 Preston Road, Suite 600, Dallas,
Texas 75225-6211.
* Less than one percent (1%)
(1) Based upon 17,414,081 shares of common stock outstanding as of
September 27, 2000 and calculated in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Unless otherwise indicated, includes shares owned by
a spouse, minor children or by relatives sharing the same home,
entities owned or controlled by the named person. Also includes shares
if the named person has the right to acquire such shares within 60
days of September 27, 2000 by the exercise of any right or option.
Unless otherwise noted, shares are owned of record and beneficially by
the named person.
(2) Includes shares of the Company's common stock issued to these
individuals pursuant to the acquisition of ITIS Technologies Ltd., now
named Authoriszor Ltd.
21
(3) Represents a stock option to acquire 200,000 shares of the Company's
common stock at an exercise price of $3.00 per share which is
currently exercisable until October 30, 2002.
(4) Represents a stock option to acquire 200,000 shares of the Company's
common stock at an exercise price of $1.00 per share which is
currently exercisable until September 30, 2002.
(5) Mr. Langevin has been granted options to acquire 500,000 shares of the
Company's common stock at an exercise price of $6.75 per share, which
options expire December 31, 2009. However, such options vest at
January 1, 2001, January 1, 2002, January 1, 2003 and January 1, 2004
and thus Mr. Langevin will not have the right to acquire such shares
within 60 days of this filing unless a change of control event occurs.
In the event there is a change of control of Authoriszor Inc., all of
Mr. Langevin's options become immediately exercisable.
(6) Mr. Jones has been granted an option to purchase 131,214 shares of
common stock at an exercise price of $2.00 per share which vests up to
25% per year annually beginning October 1, 2000. In the event there is
a change in control of Authoriszor Inc., all options granted to Mr.
Jones become immediately exercisable.
(7) Pursuant to the agreement between the Company and Mr. Shingles
relating to his appointment to the Board of Directors, the Company has
granted Mr. Shingles a stock option pursuant to the Plan to acquire
100,000 shares of Company common stock at an exercise price equal to
the closing price of the Company's common stock on Nasdaq on the
effective date of such appointment, October 18, 2000. The stock option
shall become immediately exercisable for a three (3) year term at the
time Mr. Shingles is elected to the Board of Directors at the
Company's Annual Meeting, and the Plan is approved by the stockholders
of the Company. See "Director Compensation."
(8) Includes the shares of common stock acquirable upon exercise of the
stock options discussed in notes 3, 4 and 7 and 32,803 shares of
common stock acquirable upon exercise of stock options granted to Mr.
Jones that are exercisable beginning in October 2000. Does not include
options granted to Mr. Langevin that are discussed in note 5 or
options to acquire 300,000 share at an exercise price of $10.00 per
share that has been granted to other executive officers of the Company
that are not exercisable within sixty (60) days of the Record Date.
(9) Includes 655,334 shares of the Company's common stock held by Zalcany
Limited, a company organized under the laws of the UK of which Roy
Williams owns 50% of the issued share capital and is one of two
directors; 290,000 shares of the Company's common stock held by
Mustardseed Estates Ltd., a company organized under the laws of the UK
of which Roy Williams retains 99.9% voting control; and 67,500 shares
of the Company's common stock held by the Cardinal Williams Pension
Fund, a UK pension fund of which Roy Williams is one of two trustees
and the sole beneficiary. Includes 484,008 shares held by an Isle of
Man trust in which Roy Williams is included in a class of potential
beneficiaries. Mr. Williams disclaims beneficial ownership of the
shares owned by this trust.
(10) Includes 675,812 shares held by Caithness Limited, a company organized
under the laws of the Isle of Man. Mr. Jeffcock is included in a class
of potential beneficiaries in an Isle of Man trust that owns Caithness
Limited. Mr. Jeffcock disclaims beneficial ownership of the shares
owned by Caithness Limited
(11) Includes (i) 66,500 shares of common stock of the Company beneficially
owned by Mr. Box and (ii) a stock option to acquire 100,000 shares of
the Company's common stock at an exercise price of $7.75 per share
which is currently exercisable until November 9, 2003.
22
This prospectus is hereby amended to add the following section entitled "Recent
Developments".
Recent Developments
The information that follows is contained in the Company's Quarterly Report on
Form 10-QSB for the period ended September 30, 2000, filed with the SEC on
November 14, 2000.
23
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
__________________
For Quarter Ended September 30, 2000
Commission File No. 33-28562
AUTHORISZOR INC.
(Exact name of registrant as specified in charter)
Delaware 75-2661571
- -----------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
One Van de Graaff Drive, Suite 502
Burlington, Massachusetts 01803-5188
- -----------------------------------------------------------------------------
(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (781) 359-9650
--------------
- -----------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------
As of September 30, 2000, there were 17,414,081 shares of the common stock,
$0.01 par value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES __________ NO X
------------
AUTHORISZOR INC.
September 30, 2000
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and June 30, 2000....................................................... F-1
Consolidated Statements of Operations for the three months
ended September 30, 2000 and 1999 (unaudited) and for the period
January 15, 1997 (date of inception) to September 30, 2000 (unaudited).. F-2
Consolidated Statements of Cash Flows for the three months ended
September 30, 2000 and 1999 (unaudited) and for the period January 15,
1997 (date of inception) to September 30, 2000 (unaudited).............. F-3
Notes to Consolidated Financial Statements (unaudited).................. F-4
Item 2. Management's Discussion and Analysis or Plan of Operation............... 1
PART II. OTHER INFORMATION....................................................... 3
Item 1. Legal Proceedings....................................................... 4
Item 2. Changes in Securities................................................... 4
Item 3. Defaults Upon Senior Securities......................................... 4
Item 4. Submission of Matters to a Vote of Security Holders..................... 4
Item 5. Other Information....................................................... 4
Item 6. Exhibits and Reports on Form 8-K........................................ 7
SIGNATURES................................................................................... 9
i
CONSOLIDATED BALANCE SHEETS
September 30, 2000 June 30, 2000
(unaudited)
$ $
ASSETS
Cash 22,566,815 27,095,762
Receivables
VAT recoverable and trade 1,238 70,847
Accrued Interest 9,817 246,832
Other - 159,457
Prepaid expenses 126,421 76,568
--------------------------------------
Total current assets 22,704,291 27,649,466
Investment in securities, available-for-sale 2,505,216 1,992,769
Computer and office equipment, net of accumulated depreciation 1,036,316 681,094
Restricted bank deposits 408,000 408,000
Note receivable from WRDC 328,079 336,086
Investment in WRDC at net cost, adjusted for equity in
earnings or losses 485,812 506,880
Intangible and other assets 206,404 70,643
--------------------------------------
4,969,827 3,995,472
--------------------------------------
27,674,118 31,644,938
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other liabilities 520,845 1,194,021
Current maturities of capital lease obligations 103,990 58,990
--------------------------------------
Total current liabilities 624,835 1,253,011
Long term capital leases obligations, less current maturities 302,092 133,442
Stockholders' equity
Preferred stock, par value $.01 per share; authorized: 2,000,000
shares; issued: none
Common stock, $.01 par value per share; authorized: 30,000,000
shares; issued and outstanding: 17,414,081 shares at
September 30 and June 30, 2000 174,141 174,141
Additional paid-in capital 34,205,156 33,948,976
Accumulated other comprehensive income 1,949,578 1,620,583
Accumulated deficit during the development stage (9,581,684) (5,485,215)
--------------------------------------
26,747,191 30,258,485
--------------------------------------
27,674,118 31,644,938
======================================
The accompanying notes are an integral part of these statements.
1
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended January 15, 1997
of inception) to
September 30, September 30, September 30,
2000 1999 2000
Net sales $ 8,239 $ - 166,426
Cost of sales 1,678 - 18,353
-------------------------------------------------------------------------
Gross profit 6,561 - 148,073
Operating expenses
Professional fees 1,065,830 35,994 2,881,234
Marketing and advertising 300,534 28,509 1,180,899
Administrative 2,110,032 356,067 5,339,212
Stock-based compensation - - 1,773,500
-------------------------------------------------------------------------
Total operating expenses 3,476,396 420,570 11,174,845
-------------------------------------------------------------------------
Operating loss (3,469,835) (420,570) (11,026,772)
Other income (expense)
Interest income 383,885 230 995,184
Loss on sale of subsidiary - - (291,448)
Gain on sale of investments - 199,279 1,892,003
Currency transaction losses (1,022,229) - (1,117,186)
Equity in earnings (loss) of WRDC 11,710 - (33,465)
-------------------------------------------------------------------------
Total other income, net (626,634) 199,509 1,445,088
-------------------------------------------------------------------------
Net loss (4,096,469) (221,061) (9,581,684)
=========================================================================
Weighted average shares outstanding
Basic and Diluted 17,414,081 13,765,808
=================================================
Loss per common share
Basic and Diluted $ (0.24) $ (0.02)
=================================================
The accompanying notes are an integral part of these statements.
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the 3 months January 15, 1997
ended September 30, (date of inception)
to September 30,
2000 1999 2000
$ $ $
Cash flows used in operating activities
Net loss during the period (4,096,469) (221,061) (9,581,684)
Adjustments to reconcile net loss to net cash used in operating
activities:
Issuance of stock and stock options in exchange for services 258,338 - 1,040,287
Non-cash compensation expense - - 1,773,500
Equity in (earnings) loss in WRDC (11,710) - 33,465
Loss on foreign exchange transactions - - 94,957
Loss on sale of subsidiary - - 291,448
Gain on sale of investments (199,279) (1,892,003)
Depreciation and amortization 86,963 - 198,550
Changes in operating assets and liabilities
Receivables and other assets 263,323 (69,848) (284,755)
Accounts payable and accrued liabilities (611,770) 86,817 612,130
-----------------------------------------------
Net cash used in operating activities (4,111,325) (403,371) (7,714,105)
Cash flows (used in) provided by investing activities
Proceeds from sale of subsidiary - - 809,750
Acquisition of equipment (219,389) (108,850) (805,018)
Sale of investments - 1,360,579 4,415,909
Exercise of warrants - - (977,608)
Investment in WRDC - - (604,800)
Advances to WRDC - - (356,000)
Purchase of intangible assets (31,312) (30,000) (110,147)
Purchase of restricted bank deposits - (408,000)
-----------------------------------------------
Net cash flows (used in) provided by investing activities (250,701) 1,221,729 1,964,086
Cash flows provided by financing activities
Payments on capital leases (14,130) - (14,130)
Proceeds from the issuance of stock - 2,828 (28,332,847)
Recapitalization - 711 711
-----------------------------------------------
Net cash flows provided by (used in) financing activities (14,130) 3,539 28,319,428
Effect of exchange rate changes on cash (152,791) 1,845 (2,594)
-----------------------------------------------
Net (decrease) increase in cash and cash equivalents (4,528,947) 823,742 22,566,815
Cash and cash equivalents at beginning of period 27,095,762 698 -
Cash and cash equivalents at end of period 22,566,815 824,440 22,566,815
===============================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - - -
Income taxes - - -
The accompanying notes are an integral part of these statements.
3
NOTE A - BASIS OF PREPARATION
The consolidated financial statements of Authoriszor Inc. and subsidiaries (the
"Company") contained herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary for a fair presentation of the
consolidated financial position as of September 30, 2000 and the consolidated
results of operations and cash flows for the three months then ended have been
made. All such adjustments, in the opinion of management, are of a normal
recurring nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes as of June 30, 2000, included in the Company's Form
10-KSB.
NOTE B - CURRENCY TRANSACTION LOSSES
The Company incurred currency transaction losses of approximately $1,022,000
during the three months ended September 30, 2000. The losses are a result of
the Company entering into foreign currency option transactions and related bank
deposits denominated in pound sterling.
NOTE C - 2000 OMNIBUS STOCK AND INCENTIVE PLAN
In July 2000, the Authoriszor Inc. 2000 Omnibus Stock and Incentive Plan (the
"2000 Plan") was adopted by the Company's Board of Directors and approved by the
stockholders of the Company at the Company's 2000 Annual Meeting of
Stockholder's on November 10, 2000. Pursuant to the Plan, the Company may grant
Incentive Stock Options to any employee or officer of the Company or of any
subsidiary of the Company, and may grant Non-qualified Stock Options to any
person eligible to receive Incentive Stock Options, and also to directors,
consultants or advisors of the Company or its subsidiaries. The maximum number
of shares that may be subject to options and issued under the Plan is 1,700,000
shares of common stock.
NOTE D - COMPREHENSIVE INCOME (LOSS)
Accumulated Unrealized gain Foreign currency Comprehensive
deficit on translation loss
available-for-sale adjustment
securities
Balance at June 30, 2000 $(5,485,215) $1,425,069 $ 195,514
Foreign currency translation adjustment - - (183,452) $ (183,452)
Unrealized gain on available-for-sale securities - 512,447 - 512,447
Net loss during the period (4,096,469) - - $(4,096,469)
---------------------------------------------------------------------
Balance at September 30, 2000 (unaudited) (9,581,684) 1,937,516 12,062 $(3,767,474)
===========
Accumulated Foreign currency Comprehensive
deficit translation loss
adjustment
Balance at June 30, 1999 $ (78,735) $ (2,846) -
Foreign currency translation adjustment - (101) (101)
Net loss during the period (221,061) - (221,061)
---------------------------------------------------
Balance at September 30, 1999 (unaudited) (299,796) - (221,162)
============
4
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Discussion and Analysis or Plan
of Operation" constitutes forward-looking statements for purposes of the
Securities Act of 1933, as amended (the "Securities Act" ), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such involves
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. The words "expect," "estimate,"
anticipate," "predict," "believes," "plan," "seek," "objective" and similar
expressions are intended to identify forward-looking statements. Important
factors that could cause the actual results, performance or achievement of the
Company to differ materially from the Company's expectations include the
following:
. one or more of the assumptions or other cautionary factors discussed in
connection with particular forward-looking statements or elsewhere in this
Form 10-QSB prove not to be accurate;
. the Company is unsuccessful in securing sales through its anticipated sales
and marketing efforts;
. errors in cost estimates and cost overruns;
. the Company's inability to obtain financing for general operations
including the marketing of the Company's products;
. non-acceptance of one or more products of the Company in the market-place
for whatever reason;
. the Company's inability to supply any product to meet market demand;
. generally unfavorable economic conditions that would adversely effect
purchasing decisions by distributors, resellers or end-users;
. development of a similar competing product at a similar price point;
. the inability to successfully integrate one or more acquisitions, joint
ventures or new subsidiaries with the Company's operations (including the
inability to successfully integrate businesses that may be diverse as to
type, geographic area, or customer base and the diversion of management's
attention among several acquired businesses) without substantial costs,
delays, or other problems;
. if the Company experiences labor and/or employment problems such as the
loss of key personnel, inability to hire and/or retain competent personnel,
etc.;
. if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God etc.),
or is adversely affected by problems of its suppliers, shippers, customers
or others;
. a slowing of the growth of the acceptance and use of the Internet as a
source of information and a vehicle for commerce and business;
. if the Company encounters difficulties in expanding and conducting business
in foreign markets;
. if the Company experiences additional currency translation losses due to
the continued decline of the pound sterling versus the U.S. dollar;
. if larger and more established competitors successfully employ their
greater financial, marketing and sales resources, name recognition,
customer contacts and/or relationships with business and technology
partners to gain significant advantages over the Company; and/or
. those factors identified in the Company's Annual Report on Form 10-KSB,
dated September 28, 2000, including without limitation, those factors
identified as risk factors in the Company's Prospectus, dated May 19, 2000,
as supplemented, and other factors that affect the business generally.
5
All written or oral forward-looking statements attributable to the Company
are expressly qualified in their entirety by such factors. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations
The following is a discussion of the results of operations for the three
months ended September 30, 2000 compared with the three months ended September
30, 1999.
The operating loss increased to $3,469,835 for the three months ended
September 30, 2000 compared to $420,570 for the respective period in 1999. This
increase was attributable primarily to the costs incurred in setting up and
expanding the Company's development centers, opening additional sales offices,
expanding the management team, recruiting and hiring employees, expenses
associated with research and development, acquiring capital equipment and
infrastructure costs and legal and professional fees and costs in connection
with being a public company. In addition, the Company recognized an accounting
charge to earnings in the amount of $258,000, as a result of certain stock
compensation payable to Edward F. Rogers, a consultant to the Company.
The Company had sales of $8,239 in the three months ended September 30,
2000 compared to zero for the three months ended September 30, 1999.
In the three months ended September 30, 2000, the Company recognized
currency transaction losses of approximately $1,022,000. The losses are a
result of the Company entering into foreign currency option transactions and
related bank deposits denominated in pound sterling.
For the period prior to September 1999, the activities of the Company were
very limited. Aggregate revenues and expenses from inception through September
30, 1999, were $37,001 and $536,306, respectively.
Financing Management's Plan of Operation
The Company's executive offices are currently located in Burlington,
Massachusetts. In May 2000, the Company entered into a commercial real estate
lease in order to move the Company's U.S. headquarters from the home office of
the Chief Executive Officer in Natick, Massachusetts to a permanent location in
Burlington, Massachusetts. The lease commenced on May 1, 2000 and includes
11,950 square feet of office space. The Company commenced occupation of this
space during the week of May 22, 2000. As a result, the Company will incur a
rental obligation of approximately $376,000 per annum over the term of the five
year lease. The Company's operations headquarters are currently located on the
first floor of a leased facility in Harrogate, England consisting of
approximately 3,132 square feet of office space. The rent and service charge for
this facility is approximately $72,000 per year. The Company maintains
additional UK offices in a 400 square foot leased facility in Birmingham,
England and a 3,174 square foot leased facility in Bradford, England. The rent
for these office spaces is approximately $48,000 in the aggregate per year. In
the opinion of the management of the Company, the U.S. property in Burlington,
Massachusetts and the UK properties in North Yorkshire, Birmingham and Bradford
are adequately covered by insurance.
During the three months ended September 30, 2000, the Company has recruited
field staff in six major cities of the U.S. to provide local sales and technical
support to the marketplace and customer base. As the operations are initially
small, the Company has either established home office locations, as in, for
example, Providence, Washington, St. Louis and Phoenix, or has attempted to
locate and rent such other shared office space as was deemed appropriate for the
other field offices in Los Angeles, Burlington and Chicago.
The Company's commitments for salaries will be significantly higher
subsequent to September 30, 2000. The Company has increased its U.S. staff
significantly. As of September 30, 2000 there were 61 people employed by the
Company on a full-time basis. Of these, 14 employees were primarily involved in
research and development, and 19 employees were involved in sales and marketing,
7 in general administration and support and 20 engaged in professional services,
in addition to the Company's Chief Executive Officer, President and Interim
Chief Financial Officer, Richard A. Langevin. In October 2000, the Company
hired Paul Ayres as Managing Director of Authoriszor Ltd. and Alec Karys as Vice
President - Engineering for the Company. See Part II. Item 5. Other
6
Information. The Company also employs consultants from time to time, including
Fred Sawin and Edward F. Rogers. See Part II. Item 5. Other Information.
The Company's future success will depend, in part, on its ability to
attract, retain and motivate highly qualified technical and management
personnel. The Company intends to increase its sales and distribution, technical
services and administrative staff in the UK and to increase the sales and
distribution and administrative infrastructures in the U.S. In addition the
Company is actively seeking a Chief Financial Officer. As a result, the Company
expects to incur significant expenses related to recruiting such personnel. In
addition, the Company is focusing its recruiting on securing planned sales and
marketing personnel to sustain its business plan. Staffing of these highly
competitive, functional areas is becoming increasingly more difficult due to a
limited labor pool.
The Company believes its future success will depend in large part on its
ability to enhance and leverage its technologies. The Company intends to
continue to develop new and innovative solutions to respond to the needs of its
customers. The Company intends to offer products that are compatible with new
and emerging operations platforms such as UNIX and to seamlessly integrate its
product without the need for re-registration in the case clients require major
upgrades.
The Company aims to maintain its security software technology leadership
position by continuing to enhance and broaden the Company's product offerings.
Through constant monitoring of the industry, the Company plans to identify new
security features and trends in the marketplace that are required to maintain
its competitive edge. The research and development team has currently
identified several competitive enhancements that are being considered for
development, such as:
. native code conversion to further improve system performance;
. implementation of secure file transfer;
. expanded user selectable encryption;
. active lightweight directory access protocol support; and
. the development of extended application programming interfaces.
For the three months ended September 30, 2000, the Company incurred
approximately $350,000 in research and development. The Company expects that it
will continue to commit significant resources to its research and development
team in the future, including over the course of the next 12 months.
As of the quarter ended September 30, 2000, 14 full-time employees were
engaged in research and development for the Company. In addition, most of the
Company's technical staff and management team contribute to design and
development activities.
Management considers that the cash resources of the Company are adequate
for its working capital requirements for approximately the next twelve months.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company has market risk exposure with respect to the fluctuation in the
value of its investment in the common stock of Minmet Plc. These securities have
been classified as available-for-sale which requires that they be carried at the
market price. At September 30, 2000, these securities have a value of
approximately $2,500,000. Fluctuations in value could result both from the
price of the equity securities in general as well as changes in the market's
perception of the value of the shares of Minmet Plc. The Company has not deemed
it prudent to enter into transactions such as various types of hedges to
minimize risk. A 10% change in the market price of Minmet shares would cause a
$250,000 change in stockholder's equity.
The Company also has risk related to currency exchange rate fluctuations. A
portion of its cash flows are expected to be received in non-U.S. currencies.
In addition, as of September 30, 2000, the Company had deposited cash in pound
sterling denominated accounts in the amount of $16,200,000. A ten (10%)
percent fluctuation in currency rates would have a $1,620,000 effect on annual
net income or loss and the stockholders' equity of the Company. Also, as of
September 30, 2000, there are loans outstanding from the Company to its UK
subsidiaries of approximately $788,000. Based on this loan amount, a 10%
fluctuation in currency rates would have a $78,800 effect on annual net income
or loss. Although the Company may choose to do so in the future, to date, the
Company has not engaged in foreign exchange hedging.
7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(a) None
(b) None
(c) None
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
The following significant events have occurred during the quarter ended
September 30, 2000 or subsequent thereto:
1. On October 18, 2000, Godfrey S. Shingles was appointed to the
Company's Board of Directors to serve as a Director. For his service
to the Board of Directors, Mr. Shingles is entitled to a retainer fee
of $48,000 per year, payable monthly in arrears. In addition,
pursuant to a letter agreement, Mr. Shingles is to be appointed to the
Board of Directors for a three (3) year term, provided, however, that
Mr. Shingles appointment to the Board of Directors is terminable by
the Company or Mr. Shingles upon three months written notice by either
party, as the case may be. In addition, the Company may terminate Mr.
Shingles' directorship immediately under certain circumstances.
Pursuant to the letter agreement between the Company and Mr. Shingles
relating to his appointment to the Board of Directors, the Company
granted Mr. Shingles a stock option pursuant to the Authoriszor Inc.
2000 Omnibus Stock and Incentive Plan (the "2000 Stock Plan") to
acquire 100,000 shares of Company common stock at an exercise price
equal to $9.875. The stock option is immediately exercisable for a
three (3) year term.
2. Effective October 16, 2000, the Company entered into an Employment
Agreement with Alec P. Karys pursuant to which Mr. Karys became the
Vice President of Engineering for Authoriszor Inc. The term of this
agreement is one year, expiring October 15, 2001. The Employment
Agreement is terminable immediately for cause by the Company,
terminable voluntarily by Mr. Karys upon 45 days written notice, and
after the one year term of employment has lapsed, both the Company and
Mr. Karys must give six months notice of termination. Mr. Karys is
entitled to compensation in the following amount:
$ a base salary of $150,000;
$ a maximum annual bonus of $37,500, payable quarterly upon certain
quarterly objectives, as defined by management, being reached;
$ stock options to purchase a cumulative total of 100,000 shares of
the Company's common stock at an exercise price of $10.75 per
share, subject to certain adjustments as provided in the Stock
Option Agreements to be executed, that vest 25% per year for a
period of four years.
8
The options terminate on October 11, 2008. In the event of a sale of
the Company during the term of the agreement, all salary payments and
bonus payments under the agreement would become immediately due and
payable and all options would become immediately exercisable.
3. On October 7, 2000, the Company entered into an Employment Agreement
with Paul Ayres pursuant to which Mr. Ayres became the Managing
Director of Authoriszor Ltd. The term of this agreement is one year,
expiring October 6, 2001. The Employment Agreement is terminable
immediately for cause by the Company, terminable voluntarily by Mr.
Ayres upon 45 days written notice, and after the one year term of
employment has lapsed, both the Company and Mr. Ayres must give six
months notice of termination. Mr. Ayers is entitled to compensation
in the following amount (assuming a currency conversion ration of
(Pounds)1.50 British Pounds per $1.00 United States):
$ a base salary of $277,500;
$ a maximum annual bonus of $210,000, payable monthly, provided that
certain revenue targets are achieved; provided, however, that
$26,250 shall be payable as a minimum guaranteed bonus for the
first three months of employment;
$ In addition, up to an additional $45,000 shall be payable in the
event that other agreed upon targets are achieved;
$ stock options to purchase a cumulative total of 200,000 shares of
the Company's common stock at an exercise price of $9.75 per share,
subject to certain adjustments as provided in the Stock Option
Agreements to be executed, that vest 25% per year for a period of
four years.
The options terminate on October 8, 2008. In the event of a sale of
the Company during the term of the agreement, all salary payments and
bonus payments under the agreement would become immediately due and
payable and all options would become immediately exercisable.
4. On July 21, 2000, the Company entered into a Consulting Agreement with
Edward F. Rogers pursuant to which Mr. Rogers would provide a broad
array of financial and other business-related consulting services for
the Company. In accordance with the terms of the consulting
agreement, Mr. Rogers has agreed to provide a minimum of 10 days per
month performing such consulting services for the Company at the rate
of $3,000 per day. The daily compensation to the paid to Mr. Rogers
is comprised of $2,000 in cash and such number of restricted shares of
the Company's common stock equal to $1,000 per consulting day, which
shall be calculated weekly for the days worked in such week and will
be the last reported sales price of the Company's common stock at the
close of business on the last business day of the week in which Mr.
Rogers performs consulting services. The shares of restricted stock
granted to Mr. Rogers are to be issued upon the expiration of the
consulting agreement after a six month term; provided, however, that
such shares cannot be sold or exchanged for a period of 12 months
following the expiration of the consulting agreement. In addition,
Mr. Rogers is entitled to an option to purchase 100,002 shares of
Company common stock. The options vest on a monthly pro-rata basis
and are exercisable over a three-year period, which begins on the six-
month anniversary of the expiration date of the consulting agreement.
The options granted to Mr. Rogers have an exercise price of $7.75 per
share, which was the closing price of the Company's common stock on
Nasdaq on July 20, 2000. The consulting agreement is terminable by
either party upon two weeks written notice by either party. In the
event of a sale of the Company during the term of the agreement, all
restricted stock payments under the agreement would become immediately
due and payable and all options would become immediately exercisable.
The agreement also contains nondisclosure, non-competition and non-
interference provisions. As a result of the stock compensation
component of this consulting agreement, there will be an accounting
charge to earnings in the quarter ended September 30, 2000 of
approximately $258,000.
9
5. On April 1, 2000, the Company entered into a Consulting Agreement with
Frederick Sawin pursuant to which Mr. Sawin serves as Vice President
of Sales for North America. Pursuant to the terms of the consulting
agreement, Mr. Sawin is entitled to receive $1,500 per day in addition
to 3% of all North American sales that are revenued during the term of
the consulting agreement or that are booked during the term of the
consulting agreement and are revenued within 30 days after the
expiration of the consulting agreement. The term of the consulting
agreement is 26 weeks; however either the Company or Mr. Sawin may
terminate this consulting agreement upon 45 days written notice. The
Company and Mr. Sawin have agreed to extend the term of the Consulting
Agreement for a period of one month until November 20, 2000. In the
event that the Company and Mr. Sawin agree to change the consulting
agreement to an employment agreement during the term of the consulting
agreement, the exercise price for any stock option that may be granted
to Mr. Sawin will be the market price of the Company common stock at
the close of business on the business day prior to the commencement
date of the consulting agreement.
6. Commercial Technology Ltd. ("CTL"), which is controlled by Ian McNeill
the Chairman of Authoriszor Ltd. prior to October 2000 and the current
Chairman of Authoriszor Holdings Ltd., entered into a consultancy
agreement with Authoriszor Ltd. on July 22, 1999, under which:
$ CTL would provide the services of Ian McNeill to manage the
financial affairs of Authoriszor Ltd.; and
. The fee payable under such agreement was approximately $4,950 plus
Value Added Tax per month.
The consultancy agreement was set up for an initial period of 6
months, and after that period was terminable by either party on one
month's notice.
The CTL consultancy agreement was terminated with effect from June 30,
2000, at which time CTL entered into a consulting agreement with
Authoriszor Ltd. with effect from July 1, 2000, on terms similar to
those set forth in the preceding paragraphs, with the exception that
the fee payable to CTL was increased to $150,000 per annum. The
consulting agreement was for an initial fixed term to expire on June
30, 2001, subject to standard termination provisions. Either the
Company or CTL may terminate the consulting agreement upon four (4)
months written notice of such termination.
7. In October 2000, Ian McNeill resigned his position as Chairman of
Authoriszor Ltd. Mr. McNeill serves as Chairman of Authoriszor
Holdings Ltd. In addition, James L. Jackson resigned his position as
Managing Director of Authoriszor Ltd. and replaced Mr. McNeill as
Chairman of Authoriszor Ltd. and Paul Ayres became the Managing
Director of Authoriszor Ltd.
8. The 2000 Stock Plan, effective as of July 26, 2000, was ratified by
the Board of Directors of the Company on September 18, 2000 and
approved by the stockholders of the Company at the Company's 2000
Annual Meeting of Stockholders on November 10, 2000. The 2000 Plan
authorizes the issuance of options to purchase up to 1,700,000 shares
of common stock of the Company to directors, certain consultants and
eligible employees of the Company and its subsidiaries. It is
contemplated that the 2000 Plan will be registered under the
Securities Act on Form S-8. The following table describes options to
purchase shares of Common Stock that the Company has granted or agreed
to grant under the 2000 Plan in the fiscal quarter ending September
30, 2000 and thereafter:
10
2000 Omnibus Stock and Incentive Plan
Number of Shares
Name and Position Exercise Price Underlying Options
- ----------------- -------------- -----------------
Edward F. Rogers $ 7.75 100,002
Consultant
Alec P. Karys $10.75 100,000
Vice President - Engineering
Godfrey S. Shingles $9.875 100,000
Director
Edward Vasko $10.00 100,000
Director of Technology - U.S. Operations
Paul Ayres $ 9.75 200,000
Managing Director - Authoriszor Ltd.
Donald D. Box $ 7.75 100,000
Director
9. On October 19, 2000, the Company filed a Registration Statement on
Form S-8 covering the issuance of 1,000,000 shares of Common Stock
underlying options held by certain employees, officers and directors
of the Company issued pursuant to the 1999 Stock Option Plan.
10. For his services provided to the Board of Directors of the Company,
Donald D. Box was granted an option to acquire 100,000 shares of
Company common stock at a meeting of the Board of Directors on
November 10, 2000 (the "November Meeting") pursuant to a stock option
agreement to be entered into by and between the Company and Mr. Box in
accordance with 2000 Plan. The options granted to Mr. Box are
immediately exercisable for a three year term, whereupon the options
granted to Mr. Box shall terminate. At the November Meeting, the
Board of Directors of the Company approved the payment of a director
fee to Mr. Box in the amount of $4,000 per month, commencing as of
July 1, 2000.
In addition, at the November Meeting the Board of Directors of the
Company increased the retainer payable to Mr. Seitz to $6,000 per
month, commencing July 1, 2000.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
+10.1* Letter Agreement, dated as of September 30, 2000, and executed as of
October 31, 2000, by and between the Company and Godfrey S. Shingles.
+10.2* Letter of Employment, dated October 16, 2000, by and between the
Company and Alec P. Karys.
+10.3* Letter of Employment, dated October 4, 2000, by and between the
Company and Paul Ayres.
10.4* Consulting Agreement, dated July 21, 2000, by and between the Company
and Edward F. Rogers.
+10.5++ Authoriszor Inc. 2000 Omnibus Stock and Incentive Plan.
+10.6+++ Letter of Employment, dated May 1, 2000, by and between the Company
and Fred Sawin
27* Financial Data Schedule (Exhibit 27)
_________________
11
* Filed herewith
+ Compensation plan, benefit plan or employment contract or arrangement
++ Incorporated by reference to Appendix A contained in the Company's
definitive Proxy Statement pertaining to the 2000 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission on October
10, 2000 pursuant to Regulation 14A.
+++ Incorporated by reference to Exhibit 10.39 contained in the Company's
Registration Statement on Form S-1, as supplemented, filed with the
Commission on May 18, 2000.
Reports on Form 8-K
1. The Company filed no Current Reports on Form 8-K with the Securities and
Exchange Commission for the period ended September 30, 2000.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Amended Quarterly Report to be
signed on its behalf by the undersigned thereunto duly authorized.
AUTHORISZOR INC.
(Registrant)
Date: November 14, 2000 By: /s/Richard A. Langevin
-----------------------
Richard A. Langevin, President,
Chief Executive Officer and
Interim Chief Financial Officer
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
13
INDEX TO EXHIBITS
Exhibit Description of Exhibit
- ------- ----------------------
+10.1* Letter Agreement, dated as of September 30, 2000, and executed as of
October 31, 2000, by and between the Company and Godfrey S. Shingles.
+10.2* Letter of Employment, dated October 16, 2000, by and between the
Company and Alec P. Karys.
+10.3* Letter of Employment, dated October 4, 2000, by and between the
Company and Paul Ayres.
10.4* Consulting Agreement, dated July 21, 2000, by and between the Company
and Edward F. Rogers.
+10.5++ Authoriszor Inc. 2000 Omnibus Stock and Incentive Plan.
+10.6+++ Letter of Employment, dated May 1, 2000, by and between the Company
and Fred Sawin.
27* Financial Data Schedule (Exhibit 27)
_________________
* Filed herewith
+ Compensation plan, benefit plan or employment contract or arrangement
++ Incorporated by reference to Appendix A contained in the Company's
definitive Proxy Statement pertaining to the 2000 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission on October
10, 2000 pursuant to Regulation 14A.
+++ Incorporated by reference to Exhibit 10.39 contained in the Company's
Registration Statement on Form S-1, as supplemented, filed with the
Commission on May 18, 2000.
14