UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended November 30, 1998
Commission File Number: 17598
CONSYGEN, INC.
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(Exact name of Registrant as specified in its charter)
Texas 76-0260145
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 South 52nd Street, Tempe, Arizona 85281
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(602) 394-9100
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(Registrant's telephone number, including area code)
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) Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
15,342,064 shares of Common Stock, $.003 par value, as of January 12, 1999.
CONSYGEN, INC.
INDEX
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements.
Consolidated Balance Sheets,
November 30, 1998 and May 31, 1998 2
Consolidated Statements of Operations - Six and Three
Months Ended November 30, 1998 and November 30, 1997 3
Consolidated Statements of Cash Flows - Six
Months Ended November 30, 1998 and November 30, 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 12
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS REPORT AND IN DOCUMENTS
INCORPORATED BY REFERENCE HEREIN CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURIRIES EXCHANGE ACT OF 1934. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED
HEREIN OR INCORPORATED BY REFERENCE HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
FOREGOING, THE WORDS "BELIEVES," "PLANS," "ANTICIPATES," "EXPECTS," "ESTIMATES,"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS ON WHICH SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ARE REASONABLE, THERE CAN BE NO ASSURANCE THAT SUCH
ASSUMPTIONS WILL PROVE TO BE ACCURATE, AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
MAY CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE SET FORTH UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT.
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSYGEN, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
November 30, May 31,
1998 1998
---- ----
Current Assets:
Cash and Cash Equivalents $ 2,510,834 $ 4,991,434
Accounts Receivable 438,304 338,192
Debt Issuance Expense Net 62,601 62,601
Prepaid Expenses 33,647 40,000
Other Current Assets 27,135 7,135
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Total Current Assets 3,072,521 5,439,362
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Property and Equipment Net 1,252,743 1,207,842
------------ ------------
Other Assets:
Debt Issuance Expense Net of Current Portion 219,102 250,402
Other Assets 8,836 6,496
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Total Other Assets 227,938 256,898
------------ ------------
Total Assets $ 4,553,202 $ 6,904,102
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ 83,569 $ 134,157
Notes Payable 60,000 60,000
Accrued Liabilities 290,727 205,840
------------ ------------
Total Current Liabilities 434,296 399,997
LongTerm Debt 3,500,000 3,500,000
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Total Liabilities 3,934,296 3,899,997
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Commitments & Contingencies
Stockholders' Equity :
Common Stock, $.003 par Value, Authorized
40,000,000 Shares, Issued 15,412,064
Shares at November 30, 1998 and 15,407,653
Shares at May 31, 1998 46,236 46,223
Additional Paidin Capital 25,311,681 25,306,532
Accumulated Deficit (24,339,011) (21,948,650)
Treasury Stock, at cost (70,000 shares) (400,000) (400,000)
------------ ------------
Total Stockholders' Equity 618,906 3,004,105
------------ ------------
Total Liabilities and Stockholders' Equity $ 4,553,202 $ 6,904,102
============ ============
The accompanying notes are an integral part of the financial statements.
2
CONSYGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three For The Six
Months Ended Months Ended
November 30, November 30,
------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues $ 324,375 $ 121,000 $ 472,339 $ 121,000
Cost and Expenses:
Cost of Conversion Services 211,197 36,914 437,287 36,914
Software Development 157,759 293,787 351,560 577,832
Selling, General and
Administrative Expenses 1,160,382 706,375 1,970,309 1,040,188
Interest Expense 52,500 94,290 106,500 204,954
Depreciation and Amortization 49,078 33,561 92,728 54,964
----------- ----------- ----------- -----------
Total Costs and Expenses 1,630,916 1,164,927 2,958,384 1,914,852
----------- ----------- ----------- -----------
Loss from Operations (1,306,541) (1,043,927) (2,486,045) (1,793,852)
Interest Income 42,330 33,673 95,684 39,588
Net Loss $(1,264,211) $(1,010,254) $(2,390,361) $(1,754,264)
=========== =========== =========== ===========
Weighted Average Common
Shares Outstanding 15,341,093 14,857,121 15,341,093 14,388,977
=========== =========== =========== ===========
Net Loss Per Common Share $ (0.08) $ (0.07) $ (0.16) $ (0.12)
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
3
CONSYGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
Novmber 30,
------------------------
1998 1997
---- ----
Cash Flows from Operating Activities:
Net Loss $(2,390,361) $(1,754,264)
Adjustments to Reconcile Net Loss to
Net Cash (Used) by Operating Activities:
Depreciation 61,428 38,298
Stock issued for Services -- 106,400
Amortization of Debt Issuance Expense 31,300 16,666
Loan Interest - Additional Paidin Capital -- 12,090
Changes in Operating Assets and Liabilities:
Accounts Receivable (100,112) --
Prepaid Expenses and Other Assets (15,987) (43,975)
Accounts Payable (50,588) 38,161
Accrued Liabilities 84,887 (37,426)
----------- -----------
Net Cash (Used) by Operating Activities (2,379,433) (1,624,050)
----------- -----------
Cash Flows from Investing Activities:
Purchases of Furniture and Equipment (106,328) (276,690)
----------- -----------
Net Cash (Used) by Investing Activities (106,328) (276,690)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from Sale of Common Stock 5,161 7,238,750
Commissions on Sale of Common Stock -- (326,267)
Expenses of Offering -- (125,000)
Payments of Loans and Notes Payable -- (247,890)
Proceeds of Loans payable - Related Parties -- 23,190
Payments of Loans payable - Related Parties -- (92)
----------- -----------
Net Cash Provided by Financing Activities 5,161 6,562,691
----------- -----------
Net Increase in Cash and Cash Equivalents (2,480,600) 4,661,951
Cash and Cash Equivalents - Beginning of Period 4,991,434 21,483
----------- -----------
Cash and Cash Equivalents - End of Period $ 2,510,834 $ 4,683,434
=========== ===========
Supplemental Cash Flow Information:
Cash Paid for Interest -- $ 104,371
=========== ===========
Non-Cash Financing and Investing Activities:
Issuance of Common Stock as Payment of Debt -
Related Parties -- $ 162,275
=========== ===========
Issuance of Common Stock as Payment of Debt -- $ 88,300
=========== ===========
Issuance of Common Stock as Commissions
on Sale of Common Stock -- $ 206,269
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
CONSYGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of ConSyGen,
Inc., a Texas corporation ("ConSyGen-Texas") and its wholly-owned subsidiary,
ConSyGen, Inc., an Arizona corporation ("ConSyGen-Arizona"). Significant
intercompany accounts and transactions have been eliminated.
ConSyGen-Texas and its wholly-owned subsidiary ConSyGen-Arizona are
hereafter collectively referred to as the "Company."
In the opinion of the Company, the accompanying unaudited consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the results of operations and
cash flows for the periods presented.
Results of operations for interim periods are not necessarily indicative of
the results of operations for a full year due to external factors that are
beyond the control of the Company.
NOTE 2 - STOCKHOLDERS' EQUITY (DEFICIT)
STOCK OPTIONS
During June 1998, the Company granted to certain officers options to
purchase an aggregate of 210,000 shares of Common Stock pursuant to the
Company's 1997 Amended and Restated Non-Qualified Stock Option Plan. The options
had a term of 10 years, exercise prices of 2.875 per share, and were exercisable
as follows: 25% were immediately exercisable and the remaining 75% became
exercisable in 24 equal monthly installments commencing one month from the date
of grant.
During June 1998, the Company granted to certain directors options to
purchase an aggregate of 20,000 shares of Common Stock pursuant to the Company's
1997 Amended and Restated Non-Qualified Stock Option Plan. The options had a
term of 10 years, exercise prices of 2.875 per share, and were exercisable as
follows: 50% were immediately exercisable and the remaining 50% became
exercisable in 12 equal monthly installments commencing one month from the date
of grant.
Mr. Ronald I. Bishop resigned as president, chief executive officer and a
member of the board of directors of ConSyGen-Texas and ConSyGen-Arizona on June
30, 1998. He received $75,000 in severance compensation, and the exercise period
of his vested options to purchase 669,205 shares was extended from three months
to three years.
5
NOTE 2 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
Mr. Thomas S. Dreaper joined the Company as president and chief executive
officer effective July 17, 1998. In connection with his employment, the Company
agreed to grant to Mr. Dreaper an option to purchase 1,000,000 shares of the
Company's common stock at $2.8125 per share and on terms which provide for
vesting to the extent of 500,000 shares if and when the Company's stock price
closes at $5.00, and to the extent of the remaining 500,000 shares if and when
the Company's stock price closes at $10.00. Subject to the foregoing provisions,
Mr. Dreaper's options are to be exercisable at any time prior to July 18, 2008.
Mr. Jeffery Richards resigned as vice president and director of sales and
marketing-international effective July 20, 1998. He received $19,750 in
severance compensation, and the exercise period of his vested options to
purchase 125,000 shares was extended from three months to one year.
Mr. J. Stephen Kelly resigned as executive vice president, chief
administrative officer, secretary of the Corporation and member of the board of
directors of ConSyGen-Texas and ConSyGen-Arizona on October 5, 1998. He received
one-month salary in severance compensation, and the exercise period of his
vested options to purchase 60,935 shares was extended from three months to one
year.
Mr. James F. Vittera resigned as vice president marketing effective
November 13, 1998. He received one-month salary in severance compensation, and
the exercise period of his vested options to purchase 60,935 shares was extended
from three months to one year.
WARRANTS
On September 28, 1998, the Company issued notices of redemption to holders
of outstanding warrants to purchase an aggregate of 400,000 shares having an
exercise price of $5.00 per share. On November 28, 1998, these warrants were
expired.
NOTE 3 - NET LOSS PER SHARE
The computation of diluted net loss per share is not presented because
conversion, exercise or contingent issuance of securities that would have an
antidilutive effect on loss per share.
NOTE 4 - SUBSEQUENT EVENTS
STOCK OPTIONS
On December 17, 1998, the board of Directors restructured and repriced
stock options exercise price based on that day's closing price. The stock
options for all the current employees with exercise price above $1.50 were
adjusted to $1.50 per share.
6
During December 1998, the Company granted to certain officers options to
purchase an aggregate of 130,000 shares of Common Stock pursuant to the
Company's 1997 Amended and Restated Non-Qualified Stock Option Plan. The options
had a term of 10 years, exercise prices of $1.50 per share, and were exercisable
as follows: 25% were immediately exercisable and the remaining 75% became
exercisable in 24 equal monthly installments commencing one month from the date
of grant
During December 1998, the Company granted to a certain officer options to
purchase an aggregate of 100,000 shares of Common Stock pursuant to the
Company's 1997 Amended and Restated Non-Qualified Stock Option Plan. The options
had a term of 10 years, exercise prices of $.875 per share, and were exercisable
as follows: 50,000 shares if and when the Company's stock price closes at $5.00,
and to the extent of the remaining 50,000 shares if and when the Company's stock
price closes at $10.00.
LEGAL PROCEEDINGS
On December 3, 1998, the three holders of the Company's outstanding
Convertible Debentures, Sovereign Partners Limited Partnership, a Delaware
limited partnership, Dominion Capital Fund, Ltd., a Bahamian Corporation, and
Canadian Advantage Limited Partnership, an Ontario, Canada, Limited Partnership,
commenced an action (Case No. 98CIV.8457 in the United States District Court for
the Southern District of New York) against the Company for specific performance
of the provisions of the Debentures which permit the holders to convert the debt
evidenced by the Debentures into shares of the Company's common stock. The
Debentures are described on page 10 of the Company's Registration Statement on
Form S-3, filed with the Securities and Exchange Commission, effective September
29, 1998.
On December 28, 1998, the Company filed an answer in that action denying
that, under the pertinent circumstances, the Company is obligated to effect any
such conversion. The Company also filed a counterclaim against the holders, and
new claims against certain agents of the holders, in the same action, alleging
that the holders and the agents made material misrepresentations in connection
with the purchase and sale of the Debentures and made unlawful short sales of
the Company's common stock.
(This space intentionally left blank)
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in the Report. The Company and its wholly-owned subsidiary,
ConSyGen-Arizona, are herein collectively referred to as the "Company."
MATERIAL CHANGES IN RESULTS OF OPERATIONS
NET LOSSES. For the quarter ended November 30, 1998, the Company incurred
net losses of $1,264,000, compared with net losses of $1,010,000 for the
comparable prior quarter, an increase of $254,000. For the six months ended
November 30, 1998, the Company incurred net losses of $2,390,000, compared with
net losses of $1,754,000 for the comparable prior period, an increase of
$636,000.An explanation of these losses is set forth below.
REVENUES. For the quarter ended and six months ended November 30, 1998, the
Company had operating revenue of $324,000 and $472,339, respectively, compared
with $121,000 operating revenue for the comparable prior periods. The increase
in revenue was related to several completed and in process conversion service
contracts.
COST OF CONVERSION SERVICES. Cost of conversion services consists primarily
of personnel costs directly related to the performance of conversion services by
the Company. Before the commencement of revenue generating operations, the
personnel currently dedicated to the provision of conversion services were
dedicated to software development, and, accordingly, the costs directly related
to such personnel were previously included in software development expense. For
the three and six months ended November 30, 1998, cost of conversion services
were $211,000 and $437,000, respectively, compared with $37,000 for the
comparable prior periods. The increase in cost of conversion services is
primarily attributable to the redeployment of personnel, from software
development to the provision of conversion services, as noted above, and the
hiring of additional personnel. The cost of conversion as a percentage of sales
is high due to unabsorbed costs attributable to low sales volume
SOFTWARE DEVELOPMENT EXPENSES. For the three and six months ended November
30, 1998, software development expenses were $158,000 and $352,000,
respectively, compared with $294,000 and $578,000, respectively for the
comparable prior periods. The decrease in software development expenses is
primarily attributable to the transfer of certain personnel, from software
development to the production department.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the quarter ended
November 30, 1998, selling, general and administrative expenses were $1,160,000,
compared with $706,000 for the quarter ended November 30, 1997, an increase of
approximately $454,000. The increase in selling, general and administrative
expenses is primarily attributable to the increase in selling payroll expenses
of $390,000, an increase in advertising expenses of $23,000 and all other
8
expenses of $41,000 which include expenses associated with the Company's status
as a public company. For the six months ended November 30, 1998, selling,
general and administrative expenses were $1,970,000, compared with $1,040,000
for the quarter ended November 30, 1997, an increase of approximately $930,000.
The increase in selling, general and administrative expenses is primarily
attributable to the increase in payroll expenses of $700,000, an increase in
advertising expenses of $59,000 and all other expenses of $171,000 which include
expenses associated with the Company's status as a public company.
INTEREST EXPENSE. For the quarter ended November 30, 1998, interest expense
was $52,000, compared with $94,000 for the comparable prior period. For the six
months ended November 30, 1998, interest expense was $106,000, compared with
$204,000 for the comparable prior period The current year interest expense is
primarily composed of interest accrual on $3,5000,000 principal amount of the
Company's 6% Convertible Debentures.
DEPRECIATION EXPENSE. For the quarter ended November 30, 1998, depreciation
expense was approximately $33,000, compared with $25,000 for the comparable
prior period. For the six months ended November 30, 1998, depreciation expense
was approximately $61,000, compared with $38,000 for the comparable prior
period. The increase is primarily due to purchases of computers, furniture and
building.
AMORTIZATION EXPENSE. For the quarter ended November 30, 1998, amortization
expense was $16,000, compared with $8,000 for the quarter ended November 30,
1997, an increase of $8,000. For the six months ended November 30, 1998,
amortization expense was $31,000, compared with $17,000 for the six months ended
November 30, 1997, an increase of $14,000. The increase in debt issuance
expenses is primarily attributable to the amortization of debt issuance expense
associated with the Company's 6% Convertible Debentures.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1998, the Company had $2,500,000 in cash and cash
equivalents, compared with approximately $4,991,000 at May 31, 1998. The Company
had working capital of approximately $2,600,000 at November 30, 1998, compared
with a working capital of approximately $5,000,000 at May 31, 1998, a decrease
in working capital of approximately $2,400,000. The decrease in working capital
is primarily attributable to the net loss for six months of $2,400,000. The
Company had long-term debt of $3,500,000 at November 30, 1998 and at May 31,
1998.
The Company continues to incur significant losses. During the quarter ended
November 30, 1998, the Company's operations used approximately $1.2 million in
cash, an average of approximately $400,000 per month. The Company's cash
expenditures are increasing, primarily due to increases in sales and marketing
personnel. If the Company continues to incur significant losses, the Company's
liquidity could be materially and adversely affected. The Company does not
currently have any established bank credit facility, and there can be no
assurance that the Company will be able to obtain the additional capital in the
form of debt or equity financing necessary to continue its operations beyond
approximately March 31 of 1999 if no significant sales are realized.
9
Due to the Company's dispute with its debenture holders, scheduled interest
payments have been accrued but not paid. The non-payments of interest represent
a technical default under the terms of the debenture. If the Company's common
stock is delisted from Nasdaq SmallCap, it would constitute another event of
default. A remedy of default includes the holders considering the debt
immediately payable. The Company believes that it has substantial claims against
the debenture holders but can not be certain that these claims will be awarded
by court. The Company believes that due to the dispute, the remedies for default
are also uncertain and the debt remains classified as long-term.
The Company continues to hire additional sales and marketing personnel. In
the second fiscal quarter, the Company hired an additional 24 people for sales
and marketing in various regions of the U.S. In the short term, the personnel
costs associated with the increased sales efforts may adversely affect
operations and liquidity. There is no certainty that the increased sales efforts
will result in increased revenue in the longer term.
The Company will be introducing a new product in the fourth quarter of the
current fiscal year. Relative to the new product, the Company secured a letter
of credit of $259,000 from a bank and has provided, as collateral, a certificate
of deposit of the same amount. This credit facility was arranged in December
1998.
The Company expects to spend approximately $75,000 out of its available
cash for computer equipment during third fiscal quarter.
IMPACT OF INFLATION
Increases in the inflation rate are not expected to effect the Company's
operating expenses. Although the Company has no current plans to borrow
additional funds, if it were to do so at variable interest rates, any increase
in interest rates would increase the Company's borrowed funds.
SEASONALITY
The Company's operations are not affected by seasonal fluctuations,
although the Company's cash flows may at times be affected by fluctuations in
the timing for large contracts.
YEAR 2000 COMPLIANCE
The Company's review of its own operating systems does not indicate any
Year 2000 problems. There can be no assurance that the Year 2000 issue can be
resolved by third parties such as banks, electric, water and phone utility
companies prior to the upcoming change in century. Although the Company may
incur costs resulting from increased charges by such third party service
providers resulting from the impact of Year 2000 issues and related corrective
efforts, the liklihood or amount of such costs is too speculative to estimate at
this time.
10
PART II --- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On December 21, 1998, the Company received a written notice from the
National Association of Securities Dealers ("NASD") informing the Company that
the Company's securities will be delisted from The Nasdaq SmallCap Stock Market,
effective with the close of business on Tuesday, December 29, 1998. The
delisting is due to not meeting any one of the three requirements which are net
tangible assets value over $2 million, market capitalization over $35 million
and net income for one of the past three years. The Company has requested an
oral hearing which is expected to occur in February 1999. The company's stock
continues to trade during the appeal process.
The outcome of the NASD hearing may be the delisting of the Company's
common stock from the Nasdaq SmallCap Market, which could have a material
adverse effect upon the Company and the price of, and trading market for, the
Company's common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The list of Exhibits which are filed with this report or incorporated by
reference herein is set forth in the Exhibit Index that appears following the
signature page, which Exhibit Index is incorporated herein by this reference.
(b) Reports on Form 8-K.
The Company filed form 8-K on 12/30/98, which reported a legal action
against the Company, on December 3, 1998, for specific performance of the
provisions of the Debentures which permit the holders to convert the debt
evidenced by the debentures into shares of the Company's common stock. On
December 28, 1998, the Company filed an answer in that action denying that,
under the pertinent circumstances, the Company is obligated to effect any such
conversion. The Company also filed a counterclaim against the holders, and new
claims against certain agents of the holders, in the same action, alleging that
the holders and the agents made material misrepresentations in connection with
the purchase and sale of the Debentures and made unlawful short sales of the
Company's common stock.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSYGEN, INC.
Date: January 14, 1999 By: /s/ Thomas S. Dreaper
---------------- -------------------------------
Thomas S. Dreaper, President
and Chief Executive Officer
(Principal Executive Officer)
Date: January 14, 1999 By: /s/ Rajesh K. Kapur
--------------- --------------------------------
Rajesh K. Kapur, Vice President
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
12
EXHIBIT INDEX
4.3 Subscription Agreement used in connection with the Rule 506 sale of
Convertible Debentures in the aggregate principal amount of $3,500,000
(including form of Convertible Debenture, form of Warrant, and form of
Registration Rights Agreement, attached as Exhibits A, B and D,
respectively, to the Subscription Agreement). (4)
4.4 Form of Common Stock Purchase Warrant to purchase an aggregate of 10,000
shares issued in partial payment of finders' fees in connection with sale
of Convertible Debentures in aggregate principal amount of $3,500,000.
(4)
4.7 Form of Common Stock Purchase Warrant to purchase 200,000 shares issued
to consultant, Howard R, Baer, on August 1, 1997. (1)
4.8 Form of Common Stock Purchase Warrant to purchase 100,000 shares issued
to Howard R, Baer's designee, Kevin C. Baer, on August 1, 1997. (1)
4.11 Common Stock Purchase Warrant to purchase 100,000 shares issued to a
consultant's designee, Irvington International Limited, as of November
10, 1997. (3)
4.12 Agreement dated as of July 17, 1998 between the Registrant and Tom S.
Dreaper relating to employment and grant of options to purchase 1,000,000
shares of common stock of the Registrant. (6)
10.7 Registrant's 1996 Non-Qualified Stock Option Plan. (2)
10.8 Registrant's Second Amended and Restated 1997 Non-Qualified Stock Option
Plan. (5)
27 Financial Data Schedule. *
- ----------
(1) Filed as an Exhibit, with the same Exhibit number, to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1997 and
incorporated herein by reference.
(2) Filed as an Exhibit, with the same Exhibit number, to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended August 31, 1996 and
incorporated herein by reference.
(3) Filed as an Exhibit, with the same Exhibit number, to the Registrant's
Registration Statement on Form S-1, File No. 333-40649, and incorporated
herein by reference.
(4) Filed as an Exhibit, with the same Exhibit number, to the Registrant's
Annual Report on Form 10-K for the year ended May 29, 1998, and incorporated
herein by reference.
(5) Filed as an Exhibit No. 10.8 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended August 31, 1998, and incorporated herein by
reference.
(6) Filed as an Exhibit No. 4.12 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended August 31, 1998, and incorporated herein by
reference.
* Filed herewith