QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS
SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
Commission File Number: 001-14005
FRISBY TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 62-1411534
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3195 Centre Park Blvd.
Winston-Salem, NC 27107
(Address of Principal Executive Offices and Zip Code)
336-784-7754
(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), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ________
Number of shares outstanding of the issuer's Common Stock, par value $.001 per
share, as of September 30, 2000, 6,577,588 shares.
<PAGE>
FRISBY TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
Part I Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 2000 (unaudited) and
<S> <C>
December 31, 1999 3
Statements of Operations - Three Month and Nine Month Periods
Ended September 30, 2000 (unaudited) and September 30, 1999
(unaudited) 4
Statement of Stockholders' Equity - Nine Month Period
Ended September 30, 2000 (unaudited) 5
Statements of Cash Flows - Nine Month Period Ended September
30, 2000 (unaudited) and September 30, 1999 (unaudited) 6
Notes to Financial Statements - September 30, 2000 (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information 12
Signatures 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRISBY TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 707,173 $ 1,171,579
Accounts receivable, less allowance for doubtful accounts 1,161,684 1,849,436
Inventory 2,941,889 1,097,049
Prepaid and other current assets 348,892 559,820
------- -------
Total current assets 5,159,638 4,677,884
Property and equipment, net 811,287 604,921
Investment in joint venture 152,768 --
Intangible assets, less accumulated amortization 1,560,534 2,838,603
Other assets 76,094 298,439
------ -------
Total assets $ 7,760,321 $ 8,419,847
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 684,249 $ 1,622,280
Note payable - short term 1,571,469 549,981
Accrued expenses and other current liabilities 376,287 239,999
License fees payable 190,955 282,565
Deferred license revenues 30,002 26,254
------ ------
Total current liabilities 2,852,962 2,721,079
Accrued license agreement costs 98,500 120,250
Other liability -- 1,300,000
------ ---------
Total liabilities 2,951,462 4,141,329
Minority interest 139,228 --
Commitments and contingencies
Stockholders' equity:
Common Stock, $.001 par value; 30,000,000 shares authorized at
September 30, 2000; 10,000,000 shares authorized at December
31, 1999; 6,577,588 and 5,748,113 shares issued and outstanding,
respectively 6,577 5,748
Additional paid-in capital 18,707,654 14,888,201
Accumulated deficit (14,044,600) (10,615,431)
----------- ------------
Total stockholders' equity 4,669,631 4,278,518
--------- ---------
Total liabilities and stockholders' equity $ 7,760,321 $ 8,419,847
============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
FRISBY TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Product sales $ 1,682,611 $ 1,341,497 $ 6,807,799 $ 3,840,443
Research and development projects -- 52,725 63,967 198,975
Licenses and royalties 27,124 45,249 164,219 302,529
------ ------ ------- -------
Total revenues 1,709,735 1,439,471 7,035,985 4,341,947
Cost of sales:
Product sales 1,089,838 1,126,655 4,868,886 3,055,896
Research and development projects -- 30,300 18,000 199,142
Licenses and royalties (3,444) 58,800 435,156 296,057
------ ------ ------- -------
Total cost of sales 1,086,394 1,215,755 5,322,042 3,551,095
--------- --------- --------- ---------
Gross profit 623,341 223,716 1,713,943 790,852
Selling and marketing expense 555,520 506,877 1,826,164 2,003,060
General and administrative expense 1,030,224 1,158,922 3,253,179 3,051,063
--------- --------- --------- ---------
Loss from operations (962,403) (1,442,083) (3,365,400) (4,263,271)
Interest expense/ (income) 15,593 (33,894) 74,872 (166,459)
Minority Interest 798 -- (11,103) --
Provision for income taxes -- -- -- --
Net loss $ (978,794) $(1,408,189) $(3,429,169) $(4,096,812)
=========== =========== =========== ===========
Net loss per common share - basic and diluted $ (0.15) $ (0.25) $ (0.56) $ (0.74)
=========== =========== =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
FRISBY TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Balance at
<S> <C> <C> <C> <C> <C>
December 31, 1999 5,748,113 $ 5,748 $ 14,888,201 $(10,615,431) $ 4,278,518
Net loss -- -- -- (3,429,169) (3,429,169)
Exercise of employee
stock options 29,475 29 123,034 -- 123,063
Sale of common stock and
warrants, net of $302,781 of
related costs and expenses 800,000 800 3,696,419 -- 3,697,219
------- --- --------- ------------ ---------
Balance at
September 30, 2000 6,577,588 $ 6,577 $ 18,707,654 $(14,044,600) $ 4,669,631
========= ======== ============ ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
FRISBY TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine month period ended
September 30,
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(3,429,169) $(4,096,812)
Adjustments to reconcile net loss to net cash used in operating
activites:
Depreciation and amortization 169,630 129,635
Non cash consulting expense -- 70,000
Amortization of intangibles 186,974 153,900
Changes in assets and liabilities, prior to effect of acquisition:
Accounts receivable 687,752 (643,614)
Inventory (1,844,840) 15,794
Other current assets 210,928 378,496
Other non-current assets 222,345 99,522
Accounts payable (938,031) (77,343)
Accrued expenses and other current liabilities 136,288 (241,891)
Licenses fees payable (113,360) 4,748
Other liabilities 142,976 (38,747)
------- -------
Net cash used in operating activities (4,568,507) (4,246,312)
---------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment (375,996) (381,147)
Proceeds from sale of short-term investments -- 1,534,684
Purchase of intangible assets (208,905) (400,000)
Investment in joint venture (152,768) --
Purchase of business, net of cash acquired -- (100,830)
-------- --------
Net cash (used in)/provided by investing activities (737,669) 652,707
-------- -------
FINANCING ACTIVITIES
Repayment of line of credit (549,981) --
Proceeds from exercise of stock options 123,063 --
Net proceeds from private placement, net 3,697,219 --
Net proceeds from advances on line of credit 1,571,469 --
--------- ----
Net cash provided by financing activities 4,841,770 --
--------- ----
Net increase(decrease) in cash and cash equivalents (464,406) (3,593,605)
Cash and cash equivalents - beginning of period 1,171,579 6,516,138
--------- ---------
Cash and cash equivalents - end of period $ 707,173 $ 2,922,533
=========== ===========
Supplemental Information:
Interest Paid $ 74,872 $ --
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
FRISBY TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles and reflect all
adjustments consisting of normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the periods
shown. The results of operations for such periods are not necessarily indicative
of the results expected for the full fiscal year or for any future period. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
The accompanying financial statements should be read in conjunction with
the audited financial statements of Frisby Technologies, Inc. (the "Company")
for the year ended December 31, 1999 and the notes thereto contained in the
Company's Annual Report on Form 10-KSB, filed with the Securities and Exchange
Commission on April 14, 2000, as amended.
2. Summary of Significant Accounting Policies
NET LOSS PER SHARE
Net loss per share for the three and nine month periods ended September 30,
2000 and 1999 are based on the weighted average number of common shares
outstanding during the period in accordance with the Statement of Financial
Accounting Standard ("SFAS") No. 128 "Earnings Per Share."
Shares used in the computation of net loss per share for the three and nine
month periods ended September 30, 2000 were 6,575,860 and 6,127,123
respectively. Shares used in the computation of net loss per share for the three
and nine month periods ended September 30, 1999 were 5,708,113 and 5,512,345
respectively. The number of shares used in the calculation of net loss per share
on a basic and diluted basis is the same. The calculation of diluted net loss
per share excludes shares of common stock issuable upon the exercise of stock
options and warrants, as the effect of such exercises would be antidilutive.
RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform with the
current period presentation.
3. Shareholders' Equity
On May 31, 2000 the Company completed a private placement equity
transaction with an investor group for $4 million of a potential aggregate
equity transaction in the Company of up to $7.5 million. This transaction was a
unit (the "Unit") consisting of one share of Frisby common stock on the Nasdaq
SmallCap Market and one five-year warrant to buy a share of common stock at an
exercise price of $7.00 per share. The purchase price of this offering was $5.00
per Unit.
4. Joint Venture
During the first quarter of 2000, the Company established Schoeller Frisby
Technologies, GmbH, a joint venture with Schoeller Textil AG to expand the
European distribution of the Company's products. The Company owns 51% of the
outstanding shares of the common stock of the joint venture and, accordingly,
consolidates the joint venture. The joint venture began operations in January
2000.
The Company recorded minority interest expense, which reflects the portion
of the earnings of Schoeller Frisby Technologies GmbH that are applicable to
Schoeller Textil AG's minority interest. The minority interest amount on the
Balance Sheet represents the share of the net assets of Schoeller Frisby
Technologies GmbH associated with the minority partner's interest in those
operations.
5. Other Commitments
During the third quarter of 2000, the Company filed a registration
statement that included warrants outstanding issued in connection with a
September 1998 agreement with the inventor. As a result of the filing of the
registration statement, a put agreement associated with the warrants was
eliminated. Accordingly, the $1.3 million value of the put agreement previously
recorded in Other Liabilities was eliminated against the intangible asset, with
a resulting decrease in Cost of Sales for Licenses of $188,000 for previously
recognized amortization.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
2000 COMPARED WITH THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999
REVENUES. The Company generates revenue from four primary sources: (i)
sales of its Thermasorb(R), ComforTemp(R)DCC(TM) insulating and cooling foams,
fabrics, leathers and gels, and Schoeller(R)-ComforTemp(R) foam/fabric products
for use in its strategic partners' products; (ii) sales of SteeleVest and
Extreme Comfort end-user products (iii) license fees and royalties from the use
of Thermasorb(R) and ComforTemp(R) trademarks by strategic partners in end-user
products, as well as other fees earned in connection with its agreements with
strategic partners; and (iv) revenue from research and development contracts
related to the United States Government and from private companies. Total
revenues for the three months ended September 30, 2000 increased by $270,264 to
$1,709,735 from $1,439,471 for the three months ended September 30, 1999. Total
revenues for the nine month period ended September 30, 2000 increased by
$2,694,038 to $7,035,985 from $4,341,947 for the nine month period ended
September 30, 1999.
The majority of this third quarter increase was generated by increased
product sales of $341,114 to $1,682,611 from $1,341,497 for the three months
ended September 30, 1999. For the nine month period ended September 30, 2000
product sales increased by $2,967,356 to $6,807,799 from $3,840,443 for the
nine-month period ended September 30, 1999. These product sales increases
reflect the inclusion of Schoeller Frisby Technologies GmbH sales, primarily in
Europe, of approximately $429,000 and $2,638,000 for the three and nine month
periods, respectively, as well as increased sales to existing and new customers
in the United States and Asia.
COST OF SALES. The Company's cost of sales consists of: (i) direct and
indirect costs incurred in connection with product sales; (ii) royalty payments
required to be made in accordance with the technology licensing agreements;
(iii) the amortization expense associated with the transaction with the inventor
to lower the royalty rates and (iv) direct and indirect costs incurred in
connection with revenue from research and development contracts. Total cost of
sales for the three months ended September 30, 2000 decreased by $129,361 to
$1,086,394 from $1,215,755 for the three months ended September 30, 1999. This
third quarter reduction in cost of sales is attributed to lower foam
manufacturing costs coupled with a one time benefit of $188,000 resulting from
the elimination of a put agreement (see Note 5). Total costs for the nine month
period ended September 30, 2000 increased by $1,770,947 to $5,322,042 from
$3,551,095 for the nine month period ended September 30, 1999. This increase
corresponds to the increase in product sales mentioned above
SELLING AND MARKETING EXPENSE. Selling and marketing expenses for the three
months ended September 30, 2000 increased by $48,643 to $555,520 from $506,877
for the three months ended September 30, 1999. For the nine-month period ended
September 30, 2000 selling and marketing expenses decreased by $176,896 to
$1,826,164 from $2,003,060 for the nine-month period ended September 30, 1999.
This decrease results from the implementation of more cost-effective methods of
advertising and promotion, including a de-emphasis on print advertising in the
quarter in lieu of point-of-sale displays that are often co-funded by the
Company's customers.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses for
the three months ended September 30, 2000 decreased by $128,698 to $1,030,224
from $1,158,922 for the three months ended September 30, 1999. Additionally, for
the nine-month period ended September 30, 2000 these expenses increased by
$202,116 to $3,253,179 compared to $3,051,063 for the nine-month period ended
September 30, 1999. The decrease in the current quarter reflects savings
attributed to the elimination of certain executive and non-essential staff
positions due to a recently concluded Company streamlining initiated in the
second quarter. The increase for the nine-month period is due to the payment of
certain termination benefits associated with the aforementioned streamlining.
MINORITY INTEREST. Minority interest represents Schoeller Textil AG's 49%
interest in the net loss of Schoeller Frisby Technologies GmbH.
INTEREST EXPENSE/INCOME. Interest expense for the three and nine months
ended September 30, 2000 arises from the advances made against the line of
credit in the first three quarters of 2000. The interest income in the prior
year reflects the higher cash and investment balances due to receipts of
proceeds from the Initial Public Offering ("IPO") in April 1998.
NET LOSS. As a result of the foregoing, the net loss for the three months
ended September 30, 2000 decreased 30% to $978,794 from $1,408,189 for the three
months ended September 30, 1999. Additionally, the net loss for the nine month
period ended September 30, 2000 decreased by $667,643, or 16%, to $3,429,169
from $4,096,812 for the nine month period ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through September 30, 2000, the Company has incurred
cumulative losses of approximately $14,045,000. The Company has financed its
operations to date through bank borrowings and the issuance of common stock and
convertible preferred stock and research and development contracts relating to
United States Government programs.
At September 30, 2000, the Company had working capital of $2,307,000
including cash of $707,000 accounts receivable of $1,162,000, other current
assets of $349,000 and inventory of $2,942,000, offset by accounts payable of
$684,000, note payable short-term of $1,571,000 and accrued expenses and other
current liabilities of $597,000.
Cash used by operating activities was $4,569,000 and $4,246,000 for the
nine months ended September 30, 2000 and 1999, respectively. The principal
factor contributing to the cash used in operating activities for the nine months
ended September 30, 2000 and 1999 was the net loss for each of the respective
periods. Cash used by investing activities was $738,000 for the nine months
ended September 30, 2000. The principal investing activity for 2000 was the
purchase of office and testing equipment for the new headquarters. Cash provided
by investing activities for the nine months ended September 30, 1999 was
$653,000. The principal investing activities for 1999 were the proceeds from the
sale of short-term investments totaling $1,535,000, partially offset by the
purchase of fixed assets and an installment payment on the purchase of
intellectual property of $400,000. Cash provided by financing activities was
$4,842,000 for the nine months ended September 30, 2000. The principal financing
activities for the nine months ended September 30, 2000 were the net advance on
the line of credit of $1,571,000 and the private placement (net) of $3,697,000.
The Company has incurred cumulative losses since its inception and, therefore,
has not been subject to federal income taxes. Through September 30, 2000, the
Company has generated net operating loss carryforwards in excess of $14,000,000
that may be available to reduce future taxable income and future tax
liabilities. These carryforwards expire in years through 2019. The Tax Reform
Act of 1986 provides for an annual limitation on the use of net operating loss
carryforwards (following certain ownership changes) that could significantly
limit the Company's ability to utilize these carryforwards. As a result of the
IPO, the Company's ability to utilize the aforementioned carryforwards as of the
IPO date will be limited on an annual basis. Additionally, because the United
States tax laws limit the time during which these carryforwards may be applied
against future taxes, the Company may not be able to take full advantage of
these attributes for federal tax purposes.
On May 31, 2000 the Company completed a private placement equity
transaction with an investor group for $4 million of a potential aggregate
equity transaction in the Company of up to $7.5 million. The Company is still
seeking an additional equity investment of $3.5 million.
The Company has a $2,000,000 Line of Credit with a bank that expires
December 31, 2000. This line is principally maintained for working capital
purposes. The Line is a committed facility, which is secured by substantially
all of the Company's assets, and bears interest at the bank's prime rate plus
200 basis points. At September 30, 2000, the entire credit facility was either
borrowed against or used as collateral for the existing Letters of Credit with
suppliers. The Company is presently in discussion with its lender and several
other financial institutions regarding the renewal or replacement of this credit
facility. Management believes it will be able to maintain its required level of
financing.
The Company established Schoeller Frisby Technologies GmbH, a joint venture
with Schoeller Textil AG to expand the European distribution of the Company's
products. The Company believes that the initial equity and debt contribution to
this joint venture will not exceed $1 million.
Based on the Company's current operating plan, the Company believes that
the cash available as a result of the committed portion of the Line of Credit
and other equity financing activity mentioned above will be sufficient to
satisfy its operational and capital requirements through December 2000. Such
belief is based upon certain assumptions, and there can be no assurance that
such assumptions are correct. In the event that the Company's plans change, or
its available cash, cash flow from operations and available line of credit are
insufficient to fund operations due to unanticipated delays, problems, expenses
or otherwise, the Company would be required to seek additional financing sooner
than anticipated. Further, depending on the Company's progress in marketing its
product line, gaining acceptance of its thermal management technology and its
other products and services among the business community or the identification
of strategic acquisition or licensing opportunities, the Company may determine
that it is advisable to raise additional capital sooner than was anticipated.
INFLATION
The impact of general inflation on the Company's business has been
insignificant to date and the Company believes that it will continue to be
insignificant for the foreseeable future.
FOREIGN CURRENCY
The functional currency of the Schoeller Frisby Technologies GmbH is the
Swiss Franc.
FORWARD-LOOKING STATEMENTS
Certain information contained in this Quarterly Report on Form 10-QSB,
including, without limitation, information appearing under Part I, Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). Factors set forth in the Company's Prospectus filed April 1, 1998, or in
the Company's other Securities and Exchange Commission filings, could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Quarterly Report on Form 10-QSB.
Those statements are subject to numerous risks and uncertainties that could
cause actual results, performance and achievements to differ materially from
those described or implied in the forward-looking statements, and reported
results should not be considered an indication of future performance. Those
potential risks and uncertainties include without limitation the uncertainty of
the economic environment for the remainder of this year, the need for further
development of certain of Frisby Technologies' products and markets, the
development of alternative technologies or legal challenges to the Company's
existing technologies by third parties and the uncertainty of market acceptance
and demand for the company's products in the future.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
The Company is presently involved in a legal dispute pertaining to its
exclusive worldwide license rights for attaching its foam to fabric under
agreements with one of its licensors, Outlast Technologies. Frisby filed an
arbitration claim on April 25, 2000, in accordance with the terms of the
Frisby-Outlast license agreement. The Company remains fully confident its
position will prevail and expects no adverse effect from the arbitration.
Attendant to this arbitration is a subsequent patent infringement complaint
filed in U.S. Federal Court by Outlast that likewise the company believes has no
merit in fact and will not materially affect the Company's near or mid term
performance.
Item 2. Changes in Securities and Use of Proceeds
On May 31, 2000 the Company completed a private placement equity
transaction with an investor group for $4 million of a potential aggregate
equity transaction in the Company of up to $7.5 million. This transaction was a
unit (the "Unit") consisting of one share of Frisby common stock on the Nasdaq
SmallCap Market and one five-year warrant to buy a share of common stock at an
exercise price of $7.00 per share. The purchase price of this offering was $5.00
per Unit.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
See the Form 8-K, dated April 25, 2000, regarding the establishment of
Schoeller Frisby Technologies GmbH.
See the Form 8-K, dated June 15, 2000, regarding the $4 million private
placement equity transaction.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on April 25, 2000
regarding the establishment of Schoeller Frisby Technologies
GmbH.
The Company filed a report on Form 8-K on September 15, 2000
regarding the $4 million private placement equity transaction.
<PAGE>
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.
Dated: November 14, 2000
FRISBY TECHNOLOGIES, INC.
By:/s/ Gregory S. Frisby
---------------------
Gregory S. Frisby
Chief Executive Officer
By:/s/ Duncan R. Russell
---------------------
Duncan R. Russell
President & Chief Operating Officer
