U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
Form 10K-SB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal year ended December 31, 1999 Commission File Number 1-15261
IR Operating Corporation
(Name of Small Business Issuer in its charter)
DELAWARE 11-2165149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 Main Street, Webster, MA 01570
(Address of principal executive offices) (Zip Code)
(888) 444-4762
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 _____
Indicate the number of shares outstanding of each of the registrants
classes of stock of the latest practibcable date.
Class Outstanding at March 20, 2000
Common Stock, $.001 par value 5,033,128
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $7,379,4600 as of March 20, 2000
Documents Incorporated by Reference:
See Index to Exhibits
<PAGE>
Part I.
Item 1. Business.
(a) Business Development
The Company was originally named Atlantic Medical Corporation which was the
surviving corporation of a Delaware statutory merger with Rusco Development
Corporation, a New York corporation, in January 1972 and the surviving
corporation of an acquisition of Fox Group Enterprises, Inc. a Delaware
corporation which took place on March 29, 1999. Although in the form of a
merger, the Fox transaction was, in substance, an acquisition of Atlantic by Fox
Group Enterprises. After the merger with Fox Group Enterprises, Inc. the
corporation was named I-ROCK Industries, Inc. In April 1999 the Company changed
its name to IR Operating Corporation.
Since its acquisition of Fox Group Enterprises, the Company has conducted
no business operations except for organizational activities. Prior to the
acquisition of Fox Group the Issuer has been an inactive company. It had no
material assets, no business, no sales or revenue. The Issuer was seeking a
merger partner that could bring in substantial assets to the corporation. The
Issuer acquired Fox Group Enterprises, Inc. on March 29, 1999. The Fox Group
Enterprises, Inc. at the time of the merger had signed letters of intent to
acquire the technology, the patents and certain assets that were for producing
plastic pallets and other plastic profile shapes, from recycled material, using
a process known as the I-ROCK Process. On April 30, 1999, the issuer allowed the
letters of intent for the I-ROCK Process to expire because the technology would
require additional development before it could be commercialized. The patents
were subsequently acquired in September 1999. To exploit the patents the Issuer
may need to raise additional capital that will be used to operate the Issuer
during the start up phase.
A copy of the Company's most recent annual report, which includes audited
financial statements, will be provided to any shareholder requesting such
material, in writing, to the Secretary of the Company.
(b) Business of Issuer.
General
The Company generally has been inactive. The Company is seeking to acquire
suitable business opportunities or technologies within the recycling field.
During the quarter ended September 30, 1999, the Company acquired ownership of
two patents through the acquisition of a debt owed by the former owner of the
patents, and then foreclosing on the debt, for a process known as the I-ROCK
Process. This process is a cold extrusion process for converting waste plastic
into profile shapes that can be used for a variety of applications. The Company
has signed a lease for an existing plant site which is located in Bradley, IL.
The Company was able to negotiate favorable terms for leasing the plant site.
The Company is currently negotiating with the State of Illinois and the County
of Kankakee, IL, to lease the equipment, that is installed in the leased plant
site and designed for the I-ROCK Process, which is owned by the state and the
county. The Company believes that it will be able to negotiate a favorable lease
for the equipment with both the state and the county.
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Since acquiring the patent rights for the I-ROCK Process, the Company has
agreed to license the technology to a company in New Jersey. The New Jersey
company will have the right to manufacture products using the I-ROCK Process
technology. The Company will receive future compensation in the form of license
payments, commencing when the licensee reaches certain performance levels, and
royalty payments based on sales volume. The Company will provide technical
support for which it will be compensated for its direct costs.
The Company also plans to continue searching for suitable technologies
and/or companies to acquire.
It is anticipated that the Company's CEO and directors will receive
reasonable salaries for services as executive officers at such time as the
Company commences business operations. (See Part III, Item 11, "Executive
Compensation.") These individuals will devote such time and effort as may be
necessary to participate in the day-to-day management of the Company. (See Part
III, Item 9. "Directors, Executive Officers, Promoters and Control Persons).
No Operating History, Revenues or Earnings.
As of the date hereof, the Company has no operations and, accordingly, has
no operating revenues or earnings. Since its inception, most of the time and
resources of IR's management have been spent in organizing the Company,
obtaining interim financing and developing a business plan. The Company's
success is dependent upon its locating additional suitable business
opportunities and/or technologies, obtaining additional financing for intended
operations from placement of its equity or debt or from third party funding
sources. There is no assurance that IR will be able to locate a other business
opportunities or obtain additional debt or equity financing from any source. The
Company, during the development stage of its operations, can be expected to
sustain substantial operating expenses without generating any operating revenues
or the operating revenues generated can be expected to be insufficient to cover
expenses. Thus, for the foreseeable future, unless the Company attains
profitable operations, which is not anticipated, the Company's financial
statements will show an increasing net operating loss. (See Part I, Item 1. "
Business.")
Minimal Assets, Working Capital and Net Worth.
As of December 31, 1999, the Company's had total assets in the amount of
$102,249 consisting, principally of purchased patents and trademarks. As a
result of its minimal assets and reported losses, as of December 31, 1999, the
Company has negative net worth. Further, IR had a working capital deficit of
approximately $383,000 at December 31, 1999. There can be no assurance that the
Company's financial condition will improve. The Company is expected to continue
to have minimal working capital or a working capital deficit as a result of
current liabilities. Since the acquisition of the Fox Group, the Company has
been financed through loans from Murray Fox, President & CEO, for which the
Company has issued promissory notes in the amount of $328,000.
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Need for Additional Capital-Going Concern Qualification Expressed by Auditor.
While the Company is looking for business other opportunities and/or
technologies the ongoing expenses will be minimal. However, to grow, the Company
will need to raise additional equity and/or debt financing. IR's independent
certified public accountant has expressed this as a "going concern"
qualification. The Company does not anticipate the receipt of operating revenues
until management successfully implements its business plan, which is not
assured. Further, IR may incur significant unanticipated expenditures which
deplete its capital at a more rapid rate because of among other things, the
current state of its business, its limited personnel and other resources.
Because of these and other factors, management is presently unable to predict
what additional costs might be incurred by the Company. IR has no identified
sources of funds, and there can be no assurance that resources will be available
to the Company when needed.
Dependence on Management
The possible success of the Company is expected to be largely dependent on
the continued services of Murray Fox. Murray Fox, Anthony Conte and David Katz
are expected to devote only such time and effort to the business and affairs of
the Company as may be necessary to perform their responsibilities as executive
officers of IR. The loss of the services of Murray Fox would adversely affect
the conduct of the Company's business and its prospects for the future. The
Company presently holds no key-man life insurance on the life of Murray Fox, and
has an employment agreement with Murray Fox.
Ability to Grow Dependent upon Acquisitions
The Company expects to grow through acquiring other business opportunities
and/or technologies. There is no assurance that the Company will be able to
locate suitable business opportunities or technologies or that the Company will
be able to acquire any business or technology that has been identified.
Absence of Public Market for Shares
The Company's shares of Common Stock are registered with the U.S.
Securities and Exchange Commission under the Act. There is no active public
market for the shares of Common Stock and no assurance that one will develop.
Potential Sale of Restricted Shares
Of its outstanding shares, the Company has issued 7,441,700 shares of
common stock to persons affiliated with Fox Group pursuant to an exemption from
registration provided by Rule 4(2) and Regulation D promulgated under Section
3(b) of the Act. These shares are "restricted securities". Rule 144 of the Act
provides, in essence, that holders of restricted securities, for a period of one
year after the acquisition thereof from the Company or an affiliate of the
Company, may, every three months, sell to a market maker or in ordinary
brokerage transactions an amount equal to one percent of the Company's then
outstanding securities. Non-affiliates of the Company who hold restricted
securities for a period of two years may sell their securities without regard to
volume limitations or other restrictions. Resales of the free trading shares of
Common Stock by "affiliates, control persons and/or underwriters" of IR, as
those terms are defined in the Act, will be subject to the volume limitations,
described in paragraph (e) of Rule 144. Any transfer or resale of the shares of
IR's Common Stock will be subject, in addition to the Federal securities laws,
to the "blue sky" laws of each state in which such transfer or resale occurs.
The shareholders of the Fox Group who received shares, returned to the Company's
treasury a total of 3,827,204 shares effective September 29, 1999, in accordance
with the escrow agreement. Therefore now a total of 3,574,496 shares of the
Company's Common Stock will be available for resale under Rule 144 commencing on
March 30, 2000. Sales of shares of Common Stock under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock, should a
public market develop for such stock. Such sales also might impede future
financing by the Company.
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No Dividends
While payments of dividends on the Common Stock rests with the discretion
of the Board of Directors, there can be no assurance that dividends can or will
ever be paid. Payment of dividends is contingent upon, among other things,
future earnings, if any, and the financial condition of the Company, capital
requirements, general business conditions and other factors which cannot now be
predicted. It is highly unlikely that cash dividends on the Common Stock will be
paid by the Company in the foreseeable future.
No Cumulative Voting
The election of directors and other questions will be decided by a majority
vote. Since cumulative voting is not permitted, investors who purchase shares of
the Company's Common Stock may not have the power to elect even a single
director and, as a practical matter, the current management will continue to
effectively control the Company.
Control by Present Shareholders
The present shareholders of the Company's Common Stock will, by virtue of
their percentage share ownership and the lack of cumulative voting, be able to
elect the entire Board of Directors, establish the Company's policies and
generally direct its affairs. Accordingly, persons investing in the Company's
Common Stock will have no significant voice in Company management, and cannot be
assured of ever having representation on the Board of Directors. (See Part III,
Item 12. "Security Ownership of Certain Beneficial Owners and Management.")
Possible Adverse Effect of Penny Stock Regulations on Liquidity of Common
Stock in any Secondary Market
In the event a market develops in the Company's shares, of which there can
be no assurance, then if a secondary trading market develops in the shares of
Common Stock of the Company, of which there can be no assurance, the Common
Stock is expected to come within the meaning of the term "penny stock" under 17
CFR 240.3a51-1 because such shares are issued by a small company; are low-priced
(under five dollars); and are not traded on NASDAQ or on a national stock
exchange. The Securities and Exchange Commission has established risk disclosure
requirements for broker-dealers participating in penny stock transactions as
part of a system of disclosure and regulatory oversight for the operation of the
penny stock market. Rule 15g-9 under the Securities Exchange Act of 1934, as
amended, obligates a broker-dealer to satisfy special sales practice
requirements, including a requirement that it make an individualized written
suitability determination of the purchaser and receive the purchaser's written
consent prior to the transaction. Further, the Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 require a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure
instrument that provides information about penny stocks and the risks in the
penny stock market. Additionally, the customer must be provided by the
broker-dealer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and the salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. For so long as the Company's Common Stock is considered
penny stock, the penny stock regulations can be expected to have an adverse
effect on the liquidity of the Common Stock in the secondary market, if any,
which develops.
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Forward-Looking Statements
This Form 10-KSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-KSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Form 10-KSB are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequence to or effects on the Company or its
business or operations. The Company assumes no obligations to update any such
forward-looking statements.
Item 2. Properties
The Company's executive offices are located at 112 Main Street, Webster, MA
01570. It telephone number is (888)444-4762. The Company pays no rent for this
space.
The Company has signed a lease for 51,132 square feet of production and
warehouse space located at 180 East Ninth Street in Bradley, IL. The lease with
an initial term of 12 months calls for an annual rent approximating $72,000
including real estate taxes and insurance. The Company has the option to renew
the lease at the end of the first year for a period of five years at higher
lease rates.
Item 3. Legal Proceedings.
The Company and its President, Murray Fox, are party to a replevin legal
proceeding brought by the County of Kankakee, Illinois, in the Circuit Court of
the Twenty First Judicial Circuit Kankakee County, case number 99L166, to take
possession of certain assets that were bought by a third party using monies
loaned to the third party by Kankakee County. The defendants in addition to the
Company and Murray Fox are MTAE, Inc., Stacey D. Smith, Kenneth Kirby, Robert
Fischer, Gary Estepp, Innovative Recycling Corporation, I.R.C.C. of Bradley,
L.L.C., Area Job Development Corp., and the State of Illinois Department of
Commerce and Community Affairs The Company does not have possession of any of
the assets that are the subject of this action.
There are no other legal proceedings to which the Company is a party or to
which any of its property is subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders during fiscal
year ending December 31, 1999.
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Item 5. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
(a) Market Information.
The Company's common stock is traded on the National Quotation Bureau (NQB)
Electronic Quotation Systems under the trading symbol IROC.
The following table shows the high and low sales price for each quarter
within the last two complete fiscal years as well as the subsequent interim
quarters:
Quarter Ended High Low
-------------------- -------- -------
March 31, 1997 * *
June 30, 1997 2-3/4 1/2
September 30, 1997 1-1/8 1-1/8
December 31, 1997 1-1/8 1-1/8
March 31, 1998 18 2-1/4
June 30, 1998 2-1/4 2-1/4
September 30, 1998 9 2-1/4
December 31, 1998 7-7/8 6-3/4
March 31, 1999 7-1/32 29/128
June 30, 1999 5 1/4
September 30, 1999 0.90 0.875
December 31, 1999 .090 1.10
(b) Holders.
As of December 31, 1999, the Company had approximately 330 shareholders of
record of its outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
On March 29, 1999, 7,441,700 shares of common stock were issued to the
shareholders of Fox Group Enterprises, Inc. in connection with the acquisition
of Fox Group by the Company.
On March 29, 1999, the Company issued 1,062,230 shares of stock to fourteen
(14) individuals in consideration for work done on the merger. The Company
claimed the exemption from registration in connection with each of the offerings
provided under Section 3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder.
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Item 6. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since 1981, the Company has conducted no business operations except for
organizational activities and looking for a merger partner. For the period from
acquisition of Fox Group (March 29, 1999) through December 31, 1999, the Company
had no income from operations and operating expenses aggregating $633,218. The
Company is actively working to find suitable business opportunities and/or
technologies. The Company is concentrating its efforts in the recycling and
environmental business segments.
The Company may have to raise additional funds from outside investors to
fund the various business opportunities. Management intends to explore all
available alternatives for debt and/or equity financing, including but not
limited to private and public securities offerings. Even before an acquisition
the Company expects that the cash on hand will not be sufficient to meet its
operating needs for the next 12 months and will have to obtain further loans
from stockholders. Accordingly, management expects that it will be necessary for
IR to raise additional funds when IR is ready to make an acquisition or begin
operations related to the I-ROCK Process patents.
In addition, at least initially, the Company intends to operate out of an
office provided by Murray Fox. Thus, it is not anticipated that IR will lease or
purchase office space or computer equipment in the foreseeable future. IR may in
the future establish its own facilities and/or acquire computer equipment if the
necessary capital becomes available; however, the Company's financial condition
does not permit management to consider the acquisition of office space or
equipment at this time.
Financial Condition, Capital Resources and Liquidity
At December 31, 1999, the Company had assets totaling $102,249 and accrued
expenses of $89,467 attributable to accrued officer's salaries, accrued legal
expenses, organization expenses and professional fees. Since the Company's
inception, it has received $328,000 in cash in the form of loans from Murray Fox
which are secured by promissory notes issued by the Company. Murray Fox is not
obligated to advance further funds to the Company.
IR's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result its lack of revenue. The ability of the Company to continue as a going
concern is dependent upon its ability to acquire a viable business or
technology.
Net Operating Losses
The Company has net operating loss of $633,218 during the period January
10, 1999 through December 31, 1999 and had a stockholders' deficiency of
$315,218 at December 31, 1999.
Item 7. Financial Statements and Supplementary Data
Financial statements and supplementary data are included herein beginning
with page F-1.
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Item 8. Changes in and Disagreements with Accountants and Accounting and
Financial Disclosure
The Board of Directors of the Company have appointed Holtz Rubenstein & Co,
LLP ("HR") as auditors for the Company. Ralph S. Inocencio CPA, had been the
outside accountant for the Company through March 29, 1999. During the year ended
December 31, 1998 and the year ended December 31, 1999, there were no
disagreements between IR and Ralph S. Inocencio or Holtz Rubenstein on any
matter of accounting principles and practices, financial statement disclosure,
or audit scope and procedure, which disagreement, if not resolved to the
satisfaction of HR, would have caused it to make reference to the subject matter
of the disagreement in connection with its report.
Part III
Item 9. Directors and Executive Officers, Promoters and Control Persons
Name and Age Position
- -------------------------------------------------------------------------------
Murray Fox (76)............................. President, Chief Executive Officer,
Chief Financial Officer, Director
Anthony Conte (46)...........................Vice President, Director
David C. Katz (59)...........................Secretary, Director
Murray J. Fox - Director, President and Chief Executive Officer
Mr. Fox has been in the recycling business in excess of twenty years. He
founded Recycling Enterprises, Inc., a glass recycler in the 1970's. Mr. Fox was
also a co-founder of REI Distributors, Inc. in 1981 and became the largest glass
recycler in the state of New Jersey. REI merged with Pure Tech International,
Inc., a plastics recycler, in 1991. The newly combined business continued under
the Pure Tech name and became one of the largest plastic recycler in the United
States. In 1995 Pure Tech merged with Ozite Corporation and thus became a
diversified manufacturer of plastic materials and products as well as continuing
in the recycling field. Mr. Fox remained a director and officer of the newly
named PureTec Corporation until it was sold and privatized in 1998.
Anthony Conte - Director and Vice President
Mr. Conte was President of Pure Tech Plastics from 1992-1998 and in that
capacity was responsible for all facets of the business. This included 5 PET
recycling facilities in the Northeast as well as the building of several plants
in the Far East that were licensed from Pure Tech. From 1989 to 1991, Mr. Conte
worked as an independent consultant to Pure Tech International. From 1977 to
1988, Mr. Conte founded and was COO of Alcon Enterprises, an independent
supplier of services and part to the food and beverage industries. Mr. Conte is
currently Chairman of Ecoboard Holdings, Inc.
David Katz, Director and Secretary
Mr. Katz served the President and COO of PureTec Corporation from 1988-1998
when the company was sold to a private buyer. Prior to joining PureTec he was a
consultant to the food and beverage packing industry. From 1982-1987 he was Vice
President and Director of Operations for Taylor Wine Company, a subsidiary of
The Coca-Cola Company. Prior to that he was US Director of Packaging for the
Coca-Cola Company in Atlanta, Georgia and was responsible for coordinating the
introduction of PET bottles to the U.S. soft drink industry.
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All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. Murray Fox, Anthony Conte and
David Katz will devote such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers and/or directors of the Company.
Aside from the above officers and directors, there are no other persons
whose activities will be material to the operations of the Company at this time.
Family Relationships
There are no family relationships between or among the executive officers
and directors of the Company.
Item 10. Compliance with Section 16(a) of the Exchange Act
Murray Fox , Anthony Conte, and David Katz did not file Forms 3 at the time
the Company's Form 10-SB was declared effective.
Item 11. Executive Compensation:
The Company, in consideration for various services performed for the
Company, has signed an employment agreement with Murray Fox. Murray Fox is to
receive annual compensation in the amount of $100,000 per year. However, at
present no cash payments are being made to Murray Fox and the salary due is
being accrued on the books of the Company. Except for the above described
compensation, it is not anticipated that any executive officer of the Company
will receive any cash or non-cash compensation for his or her services in all
capacities to the Company until such time as the Company commences business
operations. At such time as IR commences operations, it is expected that the
Board of Directors will approve the payment of salaries in a reasonable amount
to each of its officers for their services in the positions. At such time, the
Board of Directors may, in its discretion, approve the payment of additional
cash or non-cash compensation to the foregoing for their services to the
Company. No compensation has been paid to executives for the last 3 years.
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
There were no stock appreciation rights granted, nor were any stock options
granted, to any of the above named officers in the fiscal year ended December
31, 1999. Murray Fox has the right to receive 50,000 options under the terms of
his employment contract.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of December 31, 1999,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five per cent of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
(a) Security ownership of certain beneficial owners;
<TABLE>
<CAPTION>
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Owner Percent of Class
---------------------------- --------------------------- ------------------------- -----------------
<S> <C> <C> <C>
Common Stock, par value Murray Fox (1)(2)(3)
$0.001 112 Main Street 1,625,360 32.29%
Webster, MA 01570
Anthony Conte (1)(2)(3)
9 Suncrest Drive 645,009 12.82%
Dix Hills, NY 11746
David Katz (1)(2)(3)
54 Tarn Drive 302,940 6.02%
Morris Plains, NJ 07950
</TABLE>
(b) Security ownership of management
<TABLE>
<CAPTION>
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Owner Percent of Class
---------------------------- --------------------------- ------------------------- -----------------
<S> <C> <C> <C>
Common Stock, par value Murray Fox
$0.001 112 Main Street 1,625,360 32.29%
Webster, MA 01570
Anthony Conte
9 Suncrest Drive 645,009 12.82%
Dix Hills, NY 11746
David Katz
54 Tarn Drive 302,940 6.02%
Morris Plains, NJ 07950
Total 2,573,309 51.13%
---------------------------- --------------------------- ------------------------- -----------------
</TABLE>
(1) Based upon 5,033,128 shares of the Company's Common Stock issued and
outstanding as of December 31, 1999.
(2) Executive officer of the Company.
(3) Member of the Board of Directors of the Company.
(4) Based upon 5,033,128 shares of the Company's Common Stock issued and
outstanding as of December 31, 1999.
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Item 7. Certain Relationships and Related Transactions:
Escrow Agreement-As part of the merger with Fox Group the shareholders of
Fox Group signed an Escrow Agreement with Reva Enterprises, Inc. and John B.
Lowy, P. C.who are shareholders of the Company which called for the former Fox
Group shareholders to return on pro-rata basis 750,000 shares of common stock
that was issued to them at the time of the merger if certain tangible net worth
levels were not met. The Company did not achieve the required tangible net worth
and in accordance with the escrow agreement the 750,000 escrow shares were
released to Reva Enterprises effective September 29, 1999.
Fox Group Enterprises Shareholder Agreement-The shareholders of Fox Group
at the time of the acquisition signed an agreement that called for the return of
3,867,204 shares to the Company to be used for the acquisition of I-ROCK
technology and/or company. Effective September 29, 1999, the shares covered by
the escrow agreements (3,867,204 shares) were returned to the Company's
treasury.
Since the Company's acquisition of Fox Group in March 1999, it has received
$328,000 in cash in the form of loans from Murray Fox which are represented by
promissory notes issued by the Company. The promissory notes bear interest a
5.5% per annum, with a default interest rate of 18% per annum.
Item 15. Exhibits, Financial statement Schedules and Reports on Form 8-K
No Forms 8-K were filed during the fiscal year ending December 31, 1999.
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Item 16. Index to Exhibits
3(i) Articles of Incorporation as of IR as amended and filed April 30, 1999
(incorporated by reference) from Registration Statement on Form 10-SB.
3(ii) Bylaws of IR (incorporated by reference) from Registration Statement
on Form 10-SB.
10(i) Escrow Agreement with Reva and Downey (incorporated by reference) from
Registration Statement on Form 10-SB.
10(ii) Fox Group Enterprises Stockholder Agreements (incorporated by
reference) from Registration Statement on Form 10-SB.
10(iii) 1999 Stock Option Plan
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SIGNATURES
Pursuant to the requirements off Section 13 or 15(d) of the Securities
exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IR OPERATING CORPORATION
By: /s/ Murray Fox
-------------------------
Murray Fox, President/CEO
Date: March 22, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
- --------------------------------------------------------------------------------
March 22, 2000 By:/s/ Murray Fox President and Director
-----------------
Murray Fox
March 22, 2000 By:/s/ Anthony Conte Vice President and Director
--------------------
Anthony Conte
March 22, 2000 By:/s/ David C. Katz Secretary and Director
--------------------
David C. Katz
13
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
REPORT ON AUDIT OF FINANCIAL STATEMENTS
PERIOD JANUARY 10, 1999 (INCEPTION)THROUGH DECEMBER 31, 1999
INDEX TO FINANCIAL STATEMENTS
Page
F-2 Independent auditors' report
F-3 Balance sheet
F-4 Statement of operations
F-5 Statement of stockholders' deficiency
F-6 Statement of cash flows
F-7 - 11 Notes to financial statements
F-1
<PAGE>
Independent Auditors'
Report
Board of Directors and Stockholders
IR Operating Corporation
We have audited the accompanying balance sheet of IR Operating Corporation
(a development stage company) as of December 31, 1999, and the related
statements of operations, stockholders' deficiency and cash flows for the period
January 10, 1999 (inception) through December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IR Operating Corporation as
of December 31, 1999, and the results of its operations and its cash flows for
the period January 10, 1999 (inception) through December 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that IR
Operating Corporation will continue as a going concern. As discussed in Note 1
to the financial statements, IR Operating Corporation has suffered a loss in the
current period and has negative working capital. These factors raise substantial
doubt regarding its ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
March 2, 2000
F-2
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS:
Cash $ 4,551
Prepaid expenses 30,057
-----------
Total current assets 34,608
-----------
PATENTS (Note 3) 67,641
-----------
$ 102,249
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 89,467
Loan payable - stockholder(Note 4) 328,000
-----------
Total current liabilities 417,467
COMMITMENT (Note 8)
STOCKHOLDERS' DEFICIENCY: (Note 6)
Common stock, par value $.001 per share;
authorized 50,000,000 shares, issued and
outstanding 5,033,128 shares 5,033
Preferred stock, par value $.001;authorized
5,000,000 shares; 0 issued and outstanding -
Additional paid-in capital 312,967
Deficit accumulated during the development stage (633,218)
-----------
(315,218)
-----------
$ 102,249
===========
See notes to financial statements
F-3
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
PERIOD JANUARY 10, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
EXPENSES: (Notes 4, 5, 7 and 8)
Organization and merger costs $ 347,905
Loss on aborted acquisition 122,114
General and administrative 154,349
Interest expense 8,850
-----------
NET LOSS $ (633,218)
===========
NET LOSS PER SHARE (Note 6) $ (.13)
===========
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 4,758,341
===========
See notes to financial statements
F-4
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
(Notes 5 and 6)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
50,000,000 Shares 5,000,000 Shares Deficit
Common Stock $.001 Par Value $.001 Par Value Accumulated
------------------------------------------------------- Additional During the
Par Par Par Paid-in Development
Shares Value Shares Value Shares Value Capital Stage Total
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 10, 1999 - $ - - $ - - $ - $ - $ - $ -
Common stock issued for cash 1,000 300,000 - - - - - - 300,000
Common stock shares issued
for acquisition of Fox Group
Enterprises, Inc. (1,000) (300,000) 7,838,102 7,838 - - 292,162 - -
Common stock issued to
consultants - - 1,062,230 1,062 - - 16,938 - 18,000
Stock reversion - - (3,867,204)(3,867) - - 3,867 - -
Net loss - - - - - - - (633,218) (633,218)
---------------------------------------------------------------------------------------------------
BALANCE, December 31, 1999 - $ - 5,033,128 $ 5,033 - $ - $312,967 $(633,218) $(315,218)
===================================================================================================
</TABLE>
See notes to financial statements
F-5
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
JANUARY 10, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(633,218)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss incurred in merger transaction 200,000
Non-cash compensation 18,000
Changes in operating assets and liabilities:
(Increase) in assets:
Prepaid expenses (30,057)
Increase in liabilities:
Accounts payable and accrued
expenses 89,467
----------
Net cash used in operating activities (355,808)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in business acquisition (200,000)
Acquisition of intangible assets (67,641)
----------
Net cash used in investing activities (267,641)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable - stockholder 328,000
Proceeds from issuance of common stock 300,000
----------
Net cash provided by financing activities 628,000
----------
Net increase in cash and cash equivalents 4,551
Cash and cash equivalents at beginning of period -
----------
Cash and cash equivalents at end of period $ 4,551
==========
See notes to financial statements
F-6
<PAGE>
IR OPERATING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
PERIOD JANUARY 10, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
1. Nature of Operations:
The Company has been in the development stage since inception. IR Operating
Corporation's (the "Company") financial statements for the period ended December
31, 1999 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a net loss of approximately
$633,000 for the period January 10, 1999 (inception) through December 31, 1999.
Management's plans regarding improving the results of future operations and
liquidity include acquisitions and mergers. The Company has acquired certain
patents for plastics technology and is currently developing plans to engage in
plastics processing.
2. Summary of Significant Accounting Policies:
a. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
b. Estimates
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Organization costs
The Company expenses organization costs as incurred. Organization costs
incurred in the period January 10, 1999 (inception) through December 31, 1999
approximated $130,000.
d. Income taxes
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. At December 31, 1999, the deferred tax
assets relating to the Company's net operating loss carry forwards ($114,000)
and organization costs ($139,000), were fully reserved.
F-7
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
e. Comprehensive income (loss)
Other comprehensive income refers to revenues, expenses, gains and losses
that under generally accepted accounting principles are included in
comprehensive income but are excluded from net income as these amounts are
recorded directly as an adjustment to stockholders' equity. Comprehensive loss
was equivalent to net loss for the period.
3. Patents:
During 1999, the Company acquired the rights to certain patents for
plastics technology for aggregate consideration approximating $68,000. The cost
of these patents will be charged to operations over their estimated useful lives
(15 years) commencing with the Company's start of operations.
4. Loan Payable - Stockholder:
As of December 31, 1999, the Company has borrowed an aggregate of $328,000
from an officer/stockholder. The loans are evidenced by promissory notes with
interest accruing at the rate of 5.5% per annum. The entire amount must be
repaid when the Company receives funding of $1,500,000.
In the event of default, as defined, the unpaid principal balance shall, at
the option of the holder, become immediately due, with the amount then due
accruing interest at a rate of 18% per annum or the highest rate permitted by
law, which ever is less.
5. Merger Agreement:
On March 29, 1999, Atlantic Medical Corporation ("Atlantic") acquired 100%
of the issued and outstanding common stock of Fox Group Enterprises, Inc.
("Fox") making the Fox a wholly-owned subsidiary of Atlantic. Under the terms of
the merger agreement, the holders of Fox were issued 7,441,700 shares of the
Company's common stock. An additional 1,062,230 shares of common stock (valued
at $18,000) were issued to consultants in connection with the transaction. The
pre-merger shareholders of Atlantic were paid $200,000 by Fox.
In connection with the non-attainment of certain conditions, effective
September 29, 1999, the Fox holders returned 3,867,204 shares of common stock to
the Company's treasury and an additional 750,000 shares reverted to the Atlantic
shareholders.
Although in the form of a merger, the transaction is, in substance, an
acquisition of Atlantic by Fox. Atlantic and stockholders agree that all issued
and outstanding shares of common stock of Fox, equal to one hundred percent
(100%), shall be exchanged with Atlantic for approximately 84% of the common
stock of Atlantic. Stockholders represent and warrant that they will hold such
shares of Atlantic for investment purposes and not for further public
distribution. These shares will be appropriately restricted.
F-8
<PAGE>
5. Merger Agreement: (Cont'd)
The excess of the consideration paid over the fair value of the net assets
received was charged to operations in the period ended December 31, 1999.
Prior to the closing of the merger agreement unanimous written consent was
received of Atlantic's directors and a majority of Atlantic's shareholders
approved Atlantic changing its name to "IR Operating Corporation".
6. Stockholders' Equity:
a. Capitalization
Pursuant to an amendment of the Company's certificate of incorporation, the
Company has authorized 50,000,000 shares, par value $0.001, of common stock. The
common stock has one vote per share, with no cumulative voting. There are no
pre-emptive rights, no conversion rights, no preferences, no redemption
provision, no sinking fund provisions or any liability for further calls or
assessments. There are no stated liquidation rights other than those that may
exist under Delaware law.
The Company has authorized 5,000,000 shares, par value $0.001 of preferred
stock. Shares of preferred stock may be issued in such classes or series, and
may have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and qualifications, or restrictions thereof, shall be stated and
expressed in the Articles of Incorporation or of any amendment thereto, or in
the resolution or resolutions providing for the issue of such stock adopted by
the Board of Directors pursuant to the authority which is expressly vested in it
by the provisions thereof.
b. Net loss per share
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS No. 128) requires dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if stock
options or convertible securities were exercised or converted into common stock.
Contingently issuable and issued shares are excluded from the weighted
average number of shares outstanding until all necessary conditions have been
satisfied at the end of the reporting period. The 3,867,204 shares subject to
reversion to the Company (Note 5) were excluded from the EPS computation for the
period January 10, 1999 (inception) through December 31, 1999.
Basic and diluted loss per share amounts were equivalent for the period.
F-9
<PAGE>
6. Stockholders' Equity: (Cont'd)
c. Stock option plan
The Company has adopted a non-qualified option plan ("the 1999 Plan"
covering 3,000,000 shares of common stock of the company. Options under the Plan
are granted at terms set by the Board of Directors at the time of issuance. As
of December 31, 1999, no options have been granted under the 1999 Plan.
7. Loss on Aborted Acquisition:
During the period January 10, 1999 (inception) through December 31, 1999,
the Company incurred charges to operations of approximately $122,000 relating to
an aborted acquisition of assets.
8. Commitments:
a. Employment agreement
In April 1999 the Company entered into a five year employment agreement
with an officer which provides for a minimum annual salary of $100,000. The
officer is also entitled to options to acquire 50,000 shares of the Company's
stock at an exercise price to be determined by the Board.
b. Consulting agreement
The Company is party to a five year agreement with an outside consultant
which becomes effective upon the Company's commencement of operations. The
agreement provides for minimum annual compensation of $100,000 in the first
year, with annual 10% increases thereafter. Additional increases will be earned
in the event the Company meets certain operating thresholds. In the event the
Company generates annual revenues from the its plastic processing technology, in
excess of $1 million, the consultant shall be granted options to acquire 10,000
shares of common stock at an exercise price equal to the current market value.
In consideration for a covenant not to compete with the Company, the
consultant will be entitled to receive 25,000 shares of common stock upon the
Company's commencement of operations.
c. Litigation
The Company is involved in various lawsuits and other matters incidental to
its business. In the opinion of management, the ultimate liabilities, if any,
resulting from such lawsuits and claims will not materially affect the financial
position of the Company.
F-10
<PAGE>
8. Commitments:
d. Lease agreement
On March 1, 2000, the Company entered into a lease agreement for an
operating facility. The agreement, with an initial term of twelve months,
provides for an annual rent, including real estate taxes and insurance,
approximating $72,000, payable in monthly installments.
9. License Agreement:
The Company entered into an agreement to license its patented technology to
a third party. The Company is entitled to future compensation in the form of
license payments, commencing when the licensee reaches certain performance
levels, and royalty payments based on sales volume. The Company will provide
technical support for which it will be compensated for its direct costs.
10. Supplemental Information - Statement of Cash Flows:
No cash payments for interest or income taxes were made during the period
January 10, 1999 (inception) through December 31, 1999.
F-11
<PAGE>
EXHIBIT INDEX
Exhibit No Description Page
10(iii) 1999 Stock Option Plan 2
1
Exhibit 10(iii)
ESO Plan 4/5/99
I-ROCK INDUSTRIES, INC.
1999 STOCK OPTION PLAN
There is hereby established a 1999 Stock Option Plan (the "Plan"). The Plan
provides for the grant to certain employees and others who render services to
I-ROCK Industries, Inc. or its subsidiaries (the "Company") of options
("Options") to purchase shares of common stock of the Company ("Common Stock").
1. Purpose: The purpose of the Plan is to provide additional incentive to
the officers, employees, and others who render services to the Company, who are
responsible for the management and growth of the Company, or otherwise
contribute to the conduct and direction of its business, operations and affairs.
It is intended that Options granted under the Plan strengthen the desire of such
persons to join and remain in the employ of the Company and stimulate their
efforts on behalf of the Company.
2. The Stock: The aggregate number of shares of Common Stock which may be
subject to Options shall not exceed 3,000,000. Such shares may be either
authorized and unissued shares, or treasury shares. If any Option granted under
the Plan shall expire, terminate or be canceled for any reason without having
been exercised in full, the corresponding number of unpurchased shares shall
again be available for the purposes of the Plan.
3. Types of Options. Options granted under the Plan shall be in the form of
(i) incentive stock options ("ISO's"), as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or (ii) non-statutory options
which do not qualify under such Section ("NSO's"), or both, in the discretion of
the Board of Directors or any committee appointed by the Board (each, the
"Committee"). The status of each Option shall be identified in the Option
Agreement.
4. Eligibility:
(a) ISO's may be granted to such employees (including officers and
directors who are employees) of the Company as the Committee shall
select from time to time.
(b) NSO's may be granted to such employees (including officers and
directors) of the Company, and to other persons who render services
to the Company, as the Committee shall select from time to time.
(c) In no event shall the number of shares which are subject to options
awarded under the Plan to any one employee (including any options
which have been exercised, canceled or expired) exceed 3,000,000.
5. Option Price.
(a) The price or prices per share of Common Stock to be sold pursuant to
an Option (the "exercise price") shall be such as shall be fixed by
the Committee but shall in any case not be less than:
(i) the fair market value per share for such Common Stock on the
date of grant in the case of ISOs other than to a 10%
Shareholder,
(ii) 110% of the fair market value per share for such Common Stock on
the date of grant in the case of ISOs to a 10% Shareholder, and
(iii)the fair market value on the date of grant in the case of
NSO's.
(b) A "10% Shareholder" means an individual who within the meaning of
Section 422(b)(6) of the Code owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of
the Company or of its parent or any subsidiary corporation.
2
<PAGE>
6. Period of Option Vesting.
(a) The Committee shall determine for each Option the period during which
such Option shall be exercisable in whole or in part, provided that
no ISO to a 10% Shareholder shall be exercisable more than five years
after the date of grant.
(b) Special Rule for ISO's. The aggregate fair market value (determined
at the time the ISO is granted) of the stock with respect to which
ISOs are exercisable for the first time by an Optionee during any
calendar year (under all such plans of the Company, its parent or
subsidiary) shall not exceed $100,000, and any excess shall be
considered an NSO.
7. Effect of Termination of Employment.
(a) The Committee shall determine for each Option the extent, if any, to
which such Option shall be exercisable in the event of the
termination of the Optionee's employment with or rendering of other
services to the Company.
(b) However, any such Option which is an ISO shall in all events lapse
unless exercised by the Optionee:
(i) prior to the 89th day after the date on which employment
terminated, if termination was other than by reason of death;
and
(ii) within the twelve-month period next succeeding the death of the
Optionee, if termination is by reason of death.
(c) The Committee shall have the right, at any time, and from time to
time, with the consent of the Optionee, to modify the lapse date of
an Option and to convert an ISO into an NSO to the extent that such
modification in lapse date increases the life of the ISO beyond the
dates set forth above or beyond dates otherwise permissible for an
ISO.
8. Payment for Shares of Common Stock.
Upon exercise of an Option, the Optionee shall make full payment of the
Option Price in cash, or, with the consent of the Committee and to the extent
permitted by it:
(a) with Common Stock of the Company valued at fair market value on date
of exercise, but only if held by the Optionee for a period of time
sufficient to prevent a pyramid exercise that would create a charge
to the Company's earnings,
(b) with a full recourse interest bearing promissory note of the
Optionee, secured by a pledge of the shares of Common Stock received
upon exercise of such Option, and having such other terms and
conditions as determined by the Committee,
(c) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to sell shares acquired upon
exercise of the Option and promptly to deliver to the Company a
portion of the proceeds thereof equal to the exercise price, or
(d) any combination of any of the foregoing.
9. Option Exercises.
Options shall be exercised by submitting to the Company a signed copy of
notice of exercise in a form to be supplied by the Company. The exercise of an
Option shall be effective on the date on which the Company receives such notice
at its principal corporate offices. The Company may cancel such exercise in the
event that payment is not effected in full, subject to the other terms of this
Plan.
10. Limited Transferability of Option.
No Option shall be assignable or transferable by the Optionee to whom it is
granted, other than by will or the laws of descent and distribution, except
that, upon approval by the Board, the Optionee may transfer an Option that is
not intended to constitute an ISO (a) pursuant to a qualified domestic relations
order as defined for purposes of the Employee Retirement Income Security Act of
1974, as amended, or (b) by gift: to a member of the "Family" (as defined below)
of the Optionee, to or for the benefit of one or more organizations qualifying
under Code sec. 501(c) (3) and 170(c) (2) (a "Charitable Organization") or to a
trust for the exclusive benefit of the Optionee, one or more members of the
Optionee's Family, one or more Charitable Organizations, or any combination of
the foregoing, provided that any such transferee shall enter into a written
agreement to be bound by the terms of this Agreement. For this purpose, "Family"
shall mean the ancestors, spouse, siblings, spouses of siblings, lineal
descendants and spouses of lineal descendants of the Optionee. During the
lifetime of an Optionee to whom an ISO is granted, only such Optionee (or, in
the event of legal incapacity or incompetence, the Optionee's guardian or legal
representative) may exercise the ISO.
3
<PAGE>
11. Other Plan Terms
(a) The Committee may grant more than one Option to an individual, and,
subject to the requirements of Section 422 of the Code, with respect
to ISOs, such Option may be in addition to, in tandem with, or in
substitution for, Options previously granted under the Plan or of
another corporation and assumed by the Company.
(b) The Committee may permit the voluntary surrender of all or a portion
of any Option granted under the Plan or otherwise to be conditioned
upon the granting to the employee of a new Option for the same or a
different number of shares of Common Stock as the Option surrendered,
or may require such voluntary surrender as a condition precedent to a
grant of a new Option to such employee. Such new Option shall be
exercisable at the price, during the period, and in accordance with
any other terms or conditions specified by the Committee at the time
the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the price, period of
exercise, or any other terms or conditions of the Option surrendered.
(c) Options under the Plan may be granted at any time after the Plan has
been approved by the shareholders of the Company. However, no Option
shall be granted under the Plan after April 4, 2009.
(d) In the event of a reorganization, recapitalization, liquidation,
stock split, stock dividend, combination of shares, merger or
consolidation, or the sale, conveyance, lease or other transfer by
the Company of all or substantially all of its property, or any
change in the corporate structure or shares of common stock of the
Company, pursuant to any of which events the then outstanding shares
of the common stock are split up or combined or changed into, become
exchangeable at the holder's election for, or entitle the holder
thereof to other shares of common stock, or in the case of any other
transaction described in Section 424(a) of the Code, the Committee
may change the number and kind of shares of Common Stock available
under the Plan and any outstanding Option (including substitution of
shares of common stock of another corporation) and the price of any
Option and the fair market value determined under this Plan in such
manner as it shall deem equitable in its sole discretion.
(e) An Optionee or a legal representative thereof shall have none of the
rights of a stockholder with respect to shares of Common Stock
subject to Options until such shares shall be issued or transferred
upon exercise of the Option.
(f) The Company shall effect the grant of Options under the Plan, in
accordance with determinations made by the Committee, by execution of
instruments in writing in a form approved by the Committee. Each
Option shall contain such terms and conditions (which need not be the
same for all Options, whether granted at the time or at different
times) as the Committee shall deem to be appropriate and not
inconsistent with the provisions of the Plan, and such terms and
conditions shall be agreed to in writing by the Optionee.
12. Certain Definitions.
(a) Fair Market Value. As used in the Plan, the term "fair market value"
shall mean as of any date:
(i) if the Common Stock is not traded on any over-the-counter market
or on a national securities exchange, the value determined by
the Committee using the best available facts and circumstances,
(ii) if the Common Stock is traded in the over-the-counter market,
based on most recent closing prices for the Common Stock on the
date the calculation thereof shall be made, or
(iii)if the Common Stock is listed on a national securities
exchange, based on the most recent closing prices for the Common
Stock of the Company on such exchange.
(b) Subsidiary and Parent. The term "subsidiary" and "parent" as used in
the Plan shall have the respective meanings set forth in Sections
424(f) and (e) of the Internal Revenue Code.
4
<PAGE>
13. Not an Employment Contract.
Nothing in the Plan or in any Option or stock option agreement shall confer
on any Optionee any right to continue in the service of the Company or any
parent or subsidiary of the company or interfere with the right of the Company
to terminate such Optionee's employment or other services at any time.
14. Withholding Taxes
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the
right to require the Optionee to remit to the Company an amount
sufficient to satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates
for such shares. Alternatively, the Company may, in its sole
discretion from time to time, issue or transfer such shares of Common
Stock net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the
shares of Common Stock shall be valued on the date the withholding
obligation is incurred.
(b) In the case of shares of Common Stock that an Optionee receives
pursuant to his exercise of an Option which is an ISO, if such
Optionee disposes of such shares of Common Stock within two years
from the date of the granting of the ISO or within one year after the
transfer of such shares of Common Stock to him, the Company shall
have the right to withhold from any salary, wages, or other
compensation for services payable by the Company to such Optionee,
amounts sufficient to satisfy any withholding tax obligation
attributable to such disposition.
(c) In the case of a disposition described in Section (b), the Optionee
shall give written notice to the Company of such disposition within
30 days following the disposition within 30 days following the
disposition, which notice shall include such information as the
Company may reasonably request to effectuate the provisions hereof.
15. Agreements and Representations of Optionees:
As a condition to the exercise of an Option, unless counsel to the Company
opines that it is not necessary under the Securities Act of 1933, as amended,
and the pertinent rules thereunder, as the same are then in effect, the Optionee
shall represent in writing that the shares of Common Stock being purchased are
being purchased only for investment and without any present intent at the time
of the acquisition of such shares of Common Stock to sell or otherwise dispose
of the same.
16. Administration of the Plan:
(a) The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have authority,
in its discretion, to determine the individuals to receive Options,
the times when they shall receive them and the number of shares of
Common Stock to be subject to each Option, and other terms relating
to the grant of Options. Directors, including those that may be
members of the Committee, shall be eligible to receive Options under
the Plan.
(b) Subject to the express provisions of the Plan, the Committee shall
have authority to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating
to the Plan, to determine the terms and provisions of the respective
option agreements (which need not be identical) and, as specified in
this Plan, the fair market value of the common stock, and to make all
other determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any option agreement in
the manner and to the extent it shall deem expedient to carry it into
effect, and it shall be the sole and final judge of such expediency.
The determinations of the Committee on the matters referred to in
this Section 16 shall be conclusive.
(c) The Committee may, in its sole discretion, and subject to such terms
and conditions as it may adopt, accelerate the date or dates on which
some or all outstanding Options may be exercised.
(d) The Committee may require that any Option Shares issued be legended
as necessary to comply with applicable federal and state securities
laws.
5
<PAGE>
17. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any time alter, suspend
or terminate the Plan, but no change shall be made which will have a
materially adverse effect upon any Option previously granted, unless
the consent of the Optionee is obtained; provided, however, that the
Board of Directors may not without further approval of the
shareholders, (i) increase the maximum number of shares of Common
Stock for which Options may be granted under the Plan or which may be
purchased by an individual Optionee, (ii) decrease the minimum option
price provided in the Plan, or (iii) change the class of persons
eligible to receive Options.
(b) The Company intends that Options designated by the Committee as ISO's
shall constitute ISOs under Section 422 of the Code. Should any
provision in this Plan for ISO's not be necessary in order to so
comply or should any additional provisions be required, the Board of
Directors of the Company may amend the Plan accordingly without the
necessity of obtaining the approval of the shareholders of the
Company.
18. Other Conditions:
(a) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Option
granted under the Plan is or may in the circumstances be unlawful
under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale
or delivery, and the Company shall not be required to make any
application or to effect or to maintain any qualification or
registration under the Securities Act of 1933 or otherwise with
respect to shares of Common Stock or Options under the Plan, and the
right to exercise any such Option may be suspended until, in the
opinion of said counsel, such sale or delivery shall be lawful.
(b) At the time of any grant or exercise of any Option, the Company may,
if it shall deem it necessary or desirable for any reason connected
with any law or regulation of any governmental authority relative to
the regulation of securities, condition the grant and/or exercise of
such Option upon the Optionee making certain representations to the
Company and the satisfaction of the Company with the correctness of
such representations.
19. Approval; Effective Date; Governing Law.
The Plan was adopted by the Board of Directors on April 5, 1999, and was
concurrently therewith approved by the stockholders of the Company. This Plan
shall be interpreted in accordance with the internal laws of the State of New
York.
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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<NAME> IR Operating Corporatin
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-01-1999
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0
0
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