<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended OCTOBER 31, 1995.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT
For the transition period from to
-------- --------
Commission File No.: 0-18935
ORGANIK TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter.)
WASHINGTON 81-0440517
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization.) Identification No.)
1919 70TH AVENUE WEST, TACOMA, WASHINGTON 98466
(Address of principal executive offices.) (Zip Code.)
Issuer's telephone number: (206) 564-1400
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 .
--- ---
6,650,698 SHARES OF COMMON STOCK OUTSTANDING AS OF DECEMBER 8, 1995
Indicate the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date.
Transitional Small Business Disclosure Format (check one): Yes No X .
--- ---
Page 1 of 26
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Organik Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 31, July 31,
1995(Unaudited) 1995
------------------ ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash on hand and cash equivalents $ 1,899,142 $ 134,920
Accounts receivable less allowance
for doubtful accounts of $48,429
and $13,142, respectively 745,203 28,961
Other receivables 19,408 7,622
Inventories, net 824,118 994,118
Prepaid expenses 154,034 103,359
------------------ ---------------
Total current assets 3,641,905 1,268,980
Property and equipment, net of
accumulated depreciation 705,809 755,732
Other assets:
Purchased cotton technology net of
accumulated amortization of
$135,000 and $127,500, respectively 165,000 172,500
Other 159,410 196,746
------------------ ---------------
Total assets $ 4,672,124 $ 2,393,958
------------------ ---------------
------------------ ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to others $ - $ 126,898
Accounts payable 171,673 262,799
Accrued payroll and related liabilities 188,046 231,517
Other accrued expenses 429,665 325,098
------------------ ---------------
Total current liabilities 789,384 946,312
Shareholders' equity:
Preferred stock, no par value,
10,000,000 shares authorized,
11,500 shares outstanding 100,317 100,317
Common stock and additional paid-in
capital, no par value, 50,000,000
shares authorized, 6,650,698 and
5,180,523 shares issued and
outstanding, respectively 15,904,304 12,363,989
Accumulated deficit (12,121,881) (11,016,660)
------------------ ---------------
Total shareholders' equity 3,882,740 1,447,646
------------------ ---------------
Commitments and contingencies
Total liabilities and shareholders'
equity $ 4,672,124 $ 2,393,958
------------------ ---------------
------------------ ---------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 2
<PAGE>
Organik Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31,
1995 1994
---------------- ----------------
<S> <C> <C>
Net sales $ 1,063,325 $ 1,469,250
Cost of sales 1,429,401 1,578,411
---------------- ----------------
Gross loss (366,076) (109,161)
Selling, general and administrative expenses 707,493 480,463
---------------- ----------------
Loss from operations (1,073,569) (589,624)
Other income (expense)
Interest income (expense) 12,025 11,890
Loan fees and other (40,802) (2,500)
---------------- ----------------
Net loss $ (1,102,346) $ (580,234)
---------------- ----------------
---------------- ----------------
Net loss per common share $(0.18) $(0.13)
---------------- ----------------
---------------- ----------------
Weighted average number of shares outstanding 6,038,041 4,376,502
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 3
<PAGE>
Organik Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31,
1995 1994
---------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,102,346) $ (580,234)
Adjustments to reconcile net loss to net cash used in operating
activities:
Common stock and warrants issued for services provided
and other costs 6,000 -
Depreciation and amortization 57,423 47,128
Consulting fees 18,375 -
Changes in:
Accounts receivable (716,242) (208,270)
Other receivables (11,786) (666)
Inventories 170,000 (10,938)
Prepaid expenses (50,675) 115,980
Accounts payable (91,126) (229,138)
Accrued expenses 61,096 155,043
---------------- -----------------
Net cash used in operating activities (1,659,281) (711,095)
---------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment - (218,039)
Proceeds from disposal of property and equipment 16,105 -
Other 12,050 9,551
---------------- -----------------
Net cash (used) provided by investing activities 28,155 (208,488)
---------------- -----------------
Cash flows from financing activities:
Prepaid consulting fees (75,000) -
Proceeds from short-term debt incurred 255,377 -
Retirement of short-term debt (382,275) -
Gross proceeds from issuance of common stock and warrants 3,822,442 -
Common stock and warrant offering costs (325,627) -
Deferred offering costs capitalized 103,306 -
Payment of preferred stock dividends (2,875) (2,875)
---------------- -----------------
Net cash (used) provided by financing activities 3,395,348 (2,875)
---------------- -----------------
Net increase (decrease) in cash 1,764,222 (922,458)
Beginning cash and cash equivalents 134,920 1,641,803
---------------- -----------------
Ending cash and cash equivalents $ 1,899,142 $ 719,345
---------------- -----------------
---------------- -----------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 4
<PAGE>
Organik Technologies, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1. FINANCIAL PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They do not include all information and disclosures
required by generally accepted accounting principles for annual financial
statements. Users of these interim consolidated financial statements should
refer to the consolidated annual financial statements for additional information
and disclosure.
In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation have been
included. Interim operating results are not necessarily indicative of the
results that may be expected for a full year.
The Company has experienced losses since July 31, 1994. Management
believes that the Company has adequate resources to continue at the present
level of operations, should it choose to do so, through the end of its current
fiscal year (July 31, 1996), subject to a reduction of operating losses.
However, the Company's internal forecasts indicate that it may have need for
additional funds through equity or debt financing, in order for the Company
to fully manufacture its backlog of ORGANIK-TM- apparel orders. Should the
Company not be able to obtain suitable financing, or if the Company's
operating expectations should be substantially less than anticipated, the
Company may elect to scale back its operations by taking one or more of the
following actions: liquidating non-essential equipment and inventories,
deferring planned capital expenditures, and decreasing personnel expenditures
through reduction of administrative support staff and deferral of certain
management salaries. There can be no assurance that any such measures, if
taken, would be adequate to reduce costs to an acceptable level or would not
unduly damage the Company's credibility as a supplier to its major customers to
an extent that would not preclude its ability to timely recover operations to an
acceptable level.
NOTE 2. INVENTORIES
Inventories at October 31, 1995 and July 31, 1995, net of reserves of
$235,000 and $45,000, respectively, consist of the following:
<TABLE>
<CAPTION>
October 31, July 31,
1995 1995
--------- ---------
<S> <C> <C>
Raw materials $720,835 $763,997
Work in process 77,140 153,465
Finished Goods 26,143 76,656
--------- ---------
$824,118 $994,118
--------- ---------
--------- ---------
</TABLE>
NOTE 3. EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average number
of common shares outstanding for each period. The potential effect of common
shares contingently issuable have not been included in the calculation as their
effect would be antidilutive. The net loss per share for the three month
periods have been adjusted for dividends paid to the holders of the Company's
preferred stock.
NOTE 4. CONVERTIBLE PROMISSORY NOTE
On August 16, 1995, the Company issued a $255,377 convertible promissory
note and repaid the note in full August 25, 1995 with proceeds from the July 17,
1995 offering. (See Note 5) The note bore interest at 9% annually. In
connection therewith the Company issued warrants to purchase 25,538 shares of
the Company's common stock at $1.75 per share. The warrants, valued at $6000,
are included in loan fees for the quarter ended October 31, 1995.
Page 5
<PAGE>
NOTE 5.
On July 17, 1995 and for a period of time initially expiring August 18,
1995, which was extended until September 12, 1995 (the "Special Offering
Period"), the Company allowed warrantholders to exercise the outstanding Class A
and Class B Warrants at $3.25 per warrant, and receive one-quarter share of
Common Stock and a Class C Warrant. Each Class C Warrant entitles the
warrantholder to purchase one share of Common Stock for $5.00 and expires in
March 1999. As of September 12, 1995, 245,552, or 86% of the then outstanding
Class A Warrants and 921,584 or 84% of the outstanding Class B Warrants were
exercised generating net proceeds to the Company of $3,496,815. The proceeds
from the exercise of the Class A and Class B Warrants were added to working
capital for general corporate purposes, including financing the manufacture of
the Company's products off-shore and the implementation of a marketing program
for obtaining additional orders for Organik garments. This offering may or may
not limit the Company's ability to utilize net operating loss carryforwards due
to changes in ownership.
In October 1995, the Company entered into an agreement with the
underwriter of its 1994 stock offering, Whale Securities Co., L.P., to extend
its current consulting agreement which expires in March 1996, another two years.
The terms include $75,000 of cash compensation and a warrant to purchase 150,000
shares of common stock at a price of $3.23 per share. The warrants were valued
at $37,500.
NOTE 6. STOCK OPTIONS
In October 1995, the Company granted, subject to certain conditions, a
director and Board Vice Chairman a non-qualified stock option to purchase 75,000
shares at $3.23 per share, vesting between April 1996 and April 1998. Non-
qualified stock options to purchase an additional 35,000 shares at $3.23 per
share were granted, subject to certain conditions, on the same date to employees
of the Company.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Included in cash and cash equivalents is a $100,000 short-term certificates
of deposit. This deposit is collateral for a standby letter of credit issued to
the Company's factor as security against potential chargebacks, if any,
allowable under contract with one of its customers.
NOTE 8. CONSOLIDATED STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In October 1995 warrants were issued to Whale Securities Co., L.P., valued
at $37,500, were recorded as an increase to both common stock and deferred
consulting fees.
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
During the 1st quarter 1996, the Company shipped $1,063,000 of ORGANIK
garments as compared to $473,000 in first quarter 1995. Of the $2,400,000 of
orders booked through November 1995 for initial production in Central America,
the Company shipped approximately 64% of the backlog net of returns and
markdowns. Substantial quality control problems and production inefficiencies
associated with start up operations and liquidity limitations in August and
September 1995 as well as inadequate production and accounting controls have
led to losses during the initial start-up operations in Central America. The
Company anticipates that during fiscal 1996, its workforce will become trained
and stabilized, supplier relations will be further developed, and production
and accounting controls and procedures will be subsequently improved. However,
there can be no assurance that the Company will be successful in eliminating
manufacturing losses in the future, or that its off-shore manufacturing
operations or cost-reduction strategies will result in increased revenues or
profitable operations. Expenditures of various types related to the
establishment of Central American manufacturing operations are expected to
continue at least through the second quarter of fiscal 1996. Reflecting the
Company's seasonality, at December 14, 1994, the backlog of orders for ORGANIK
apparel was approximately $1,300,000 compared to approximately $60,000 a year
ago.
In December 1995 the Board of Directors appointed Jeff Harden as Chief
Executive Officer. Mr. Harden who has been a member of the Board of Directors
since January of 1994 has had over 20 years of apparel industry experience.
Since 1993, Mr. Harden has been the President and Chief Executive Officer of
Pacific Print Works, a privately-held apparel screen printer. From 1987 to
1993, Mr. Harden was Western Divisional Vice President of London Fog, a
division of Londontown Manufacturing Co., a manufacturer of outerwear apparel.
Previously, Mr. Harden spent 12 years as Sales Manager for Jantzen, Inc., an
international sportswear manufacturer. The Company is conducting a search for
a new Chief Financial Officer to fill an anticipated vacancy in that position.
Page 7
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1995 COMPARED TO THREE MONTHS ENDED OCTOBER
31, 1994
In accordance with its cost reduction strategy, in June 1995, the Company
closed its domestic sewing operations and relocated the manufacture of its
ORGANIK products off-shore which as expected, affected revenues during this
transitional period. Net sales for the three months ended October 31, 1995 were
$1,063,325, a decrease of $405,925, or 27.6 percent as compared to net sales
for the three months ended October 31, 1994. The decrease in net sales was
attributable to a decrease in domestic contract manufacturing services of
$996,414, partially offset by an increase in ORGANIK product sales of $590,267.
Of the $2,400,000 of orders booked through November 1995 for initial production
in Honduras, the Company shipped approximately 64% of the backlog net of returns
and markdowns. Certain liquidity constraints and start-up Central American
operations caused production inefficiencies which resulted in delayed shipments
and cancellations of some orders. During fiscal 1996, the Company anticipates
continuing to concentrate its sales efforts on ORGANIK products and improving
off-shore production capabilities and profitability. The 36% cancellations,
returns, and markdowns of the $2,400,000 backlog of orders booked through
November 1995, may adversely affect results of the Company's sales efforts in
the next several quarters.
The following table sets forth information relating to the dollar amounts
and percentages of revenues derived from the Company's principal activities.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1995 1994
---------------------- -----------------------
<S> <C> <C> <C> <C>
Organik Products $1,063,096 100.0% $ 472,829 32.2%
Contract Manufacturing - 996,414 67.8
Other 229 7
---------- ------ ---------- ------
$1,063,325 100.0% $1,469,250 100.0%
---------- ------ ---------- ------
---------- ------ ---------- ------
</TABLE>
Gross loss for the three months ended October 31, 1995 was $(366,076) as
compared to $(109,161) in the three months ended October 31, 1994. The gross
margin also decreased as a percent of sales from (7.4)% for the 1994 three
month period to (34.4)% for the same period in 1995. The decreases were the
result of substantial quality and production inefficiencies associated with
start-up operations in Central America. The Company also increased inventory
reserves for potential losses on goods either not shipped on time, which do
not meet quality standards, or which may be overstated as inventory due to
production waste, theft, or inventory error, all of which are presently under
review. The Company anticipates that during fiscal 1996, its workforce will
become trained and stabilized, supplier relations will be further developed,
and production and accounting controls and procedures will be substantially
improved.
Selling, general and administrative expenses for the three months ended
October 31, 1995 were $707,493 an increase of $227,030, or 47.3%, from the same
period of the same period of the prior year. This increase reflects the
Company's increased focus on marketing, filling several management positions
primarily related to the offshore operations, significant travel and other
costs associated with the development of off-shore sourcing and manufacturing
capabilities, and air freight to customers due to late deliveries.
For the three months ended October 31, 1995, loan fees of $39,530 were
related to bridge loans funded and repaid in August 1995.
As a result of the foregoing, the Company incurred a net loss of
$(1,102,346) or $(0.18) per share, for the three months ended October 31, 1995,
compared to a net loss of $(580,234), or $(0.13) per share, for the three months
ended October 31, 1994.
Page 8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's strategy to reduce costs, including the establishment of off-
shore operations, has required significant up front expenditures. This strategy
has been financed through a public stock offering in March 1994 and warrant
exercises in May 1995 and September 1995. Since inception, the Company has been
substantially dependent upon the sales of its securities and various borrowings
in order to finance its working capital requirements and expects to be
substantially dependent on such sales and borrowings for the foreseeable future.
The Company had working capital of $2,852,521 on October 31, 1995, as
compared to working capital of $322,668 on July 31, 1995. Subsequent to July
31, 1995, working capital was substantially increased when the Company
received net proceeds of approximately $3,500,000 through the exercise of its
outstanding Class A and Class B Warrants. Accounts receivable increased from
$28,961 at July 31, 1995 to $745,203 at October 31, 1995 due to low levels of
shipments in June and July associated with closing the domestic manufacturing
operation as compared to start-up shipments from the Honduran manufacturing
during first quarter 1996. The allowance for doubtful accounts was increased
from $13,142 at July 31, 1995 to $48,429 due to returns and markdowns
associated with late deliveries and quality control problems. Because of the
startup phase of Honduran operations, there can be no assurance that the
reserve for allowance for doubtful accounts will prove to be adequate. The
reduction in inventory from $994,118 at July 31, 1995 to $824,118 at October
31, 1995 reflects the increase in inventory reserves from $45,000 to
$235,000. Reserves were increased for potential losses on goods not shipped
on time, which do not meet quality standards, or which may be overstated as
inventory due to production waste, theft, or inventory error, all of which are
presently under review. Reserves will be reduced as the Company trains and
develops a stable workforce, develops supplier relations, sells excess and
poor quality inventories, and substantially improves production and
accounting controls.
During the three months ended October 31, 1995 net cash used in operations
was $1,659,281. Losses from the Company's start-up manufacturing operations
were $1,102,346. During the transition from domestic contract manufacturing
to private label off-shore production, the Company, as anticipated,
experienced a substantial reduction in revenues, income, liquidity, and cash
flow.
Net cash provided by investing activities was $28,155 for the three
months ended October 31, 1995. Investing activities consisted primarily of
the sale of excess fixed assets associated with the closedown of the domestic
manufacturing facility. During the three months ended October 31, 1995, net
cash provided by financing activities was $3,395,348, reflecting the proceeds
received from the exercise of the Company's outstanding Class A and Class B
Warrants, together with the borrowing and repayment of bridge financing.
In January 1995, the Company entered into a factoring agreement secured by
the Company's accounts receivable and other collateral. Advances under the
agreement may be made for up to 80% to 90% of the eligible accounts receivable
and bear interest at prime plus 4% to 7%, depending on the outstanding balance.
As of October 31, 1995, the Company had no advances against receivables and
incurred interest of $2,189 at a weighted average interest rate of 16% under
this agreement during three months ended October 31, 1995. The high credit
under the agreement was $226,885 and the average credit was $55,143.
Encumbrance of certain of the Company's assets pledged to secure the above
factoring agreement has resulted in such assets, which excludes inventory and
the process technology, not being available to secure additional indebtedness,
which may adversely affect the Company's ability to borrow in the future,
including the ability to obtain a working capital loan.
On July 17, 1995 and for a period of time initially expiring August 18,
1995, which was extended until September 12, 1995 (the "Special Offering
Period"), the Company allowed warrantholders to exercise the outstanding Class A
and Class B Warrants at $3.25 per warrant, and receive an additional one-quarter
share of Common Stock and a Class C Warrant. As of September 12, 1995, 254,552,
or 86% of the then outstanding Class A Warrants and 921,584, or 84% of the
outstanding Class B Warrants were exercised generating net proceeds to the
Company of approximately $3,500,000. The proceeds from the exercise of the
Class A and Class B Warrants are being used to refine and enhance the Company's
process technology, purchase equipment, finance production of ORGANIK products,
expand sales and marketing, and otherwise for working capital and general
corporate purposes.
In July 1995, the Company entered into a $100,000 unsecured note payable
bearing interest at 14% with its Honduran landlord. During the three months
ended October 31, 1995, the note was paid in full.
On August 16, 1995, the Company issued a $255,377 convertible promissory
note and repaid the note in full August 25, 1995 with proceeds from the July 17,
1995 offering. (See Note 5) The note bore interest at 9% annually. In
connection therewith the Company issued warrants to purchase 25,538 shares of
the Company's common stock at $1.75 per share.
Page 9
<PAGE>
The Company's cash flow and capital requirements are significantly affected
by the seasonal nature of its business. The timing of production orders for
private label products and manufacturing services are also generally seasonal,
with product shipments heavily concentrated in advance of the fall and spring
seasons. Unanticipated events, including insufficient funds to purchase, or
delays in securing, adequate raw materials at the time of peak sales or
significant decreases in sales during such periods, could result in significant
losses which would not be easily reversed before the following year. At this
time, the Company anticipates making additional capital expenditures of
approximately $300,000 during fiscal 1996, primarily in investments in
technology for the manufacture of its Organik fabrics and finished garments,
including the enhancement of off-shore manufacturing operations.
The Company is not currently generating sufficient cash flow to fund its
operations and is dependent on the net proceeds from the recent exercises of the
Class A and Class B Warrants to meet its backlog of Organik apparel orders, and
further implement its cost reduction strategy. In the event that these net
proceeds, together with the current factoring agreement, prove to be
insufficient to fund operations (due to seasonal customer product demands,
unanticipated expenses, technical difficulties, problems or otherwise), the
Company will require additional financing until such time as the Company is able
to generate sufficient profits to fund operations. The Company believes that
increasing its profitability is dependent upon, among other things, the
Company's ability to successfully implement its cost reduction strategy and
significantly increase the sale of its private label products. The Company
has not identified any potential sources of financing beyond its current
factoring line and there can be no assurance that the Company would be able
to obtain additional financing if and when needed or that, if available,
financing would be on terms acceptable to the Company. Should the Company
not be able to obtain suitable financing, or if the Company's operating
expectations should be substantially less than anticipated, the Company may
elect to scale back its operations. In this regard, the Company has
periodically experienced liquidity constraints (including in recent months)
which have resulted in the deferral or cancellation of orders. There can be
no assurance that any measures taken would be adequate to reduce costs and
increase cash flow to an acceptable level or would not unduly damage the
Company's credibility as a supplier to its major customers.
At December 14, 1995, the Company had cash of approximately $934,000,
receivables of approximately $1,093,000 and borrowings against receivables of
approximately $39,559.
To provide incentive to employees, officers, directors, lenders and
consultants of the Company, as well as to minimize cash expenditures, the
Company has traditionally issued options and warrants as a means of
compensation or payment for services. During the three months ended
October 31, 1995, officers, directors, employees, consultants, and a lender
were granted options and warrants to purchase an aggregate of 360,538 shares
of Common Stock at prices ranging from $1.75 to $3.23 per share. The Company
has and intends to continue this form of compensation or payment for services
in fiscal 1996.
NET OPERATING LOSS CARRYFORWARDS
At July 31, 1995, the Company had net operating loss carryforwards for
federal tax purposes of $10,562,000 to offset future taxable income. Due to a
change in ownership, the Company is subject to an annual limitation of
approximately $350,000 on its ability to utilize net operating loss
carryforwards for losses prior to July 31, 1994. Utilization of these
carryforwards is dependent on future taxable income. The July 17, 1995 Warrant
Offerring may or may not limit the Company's ability to utilize net operating
loss carryforwards due to changes in ownership.
INFLATION
Inflation has historically not had a material effect on the Company's
operations.
Page 10
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
Not applicable
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
ITEM 5. OTHER INFORMATION.
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
NUMBER DESCRIPTION
------ -----------
10.21 Extension of March 21, 1994 Consulting Agreement with Whale
Securities Co., L.P.; dated October 25, 1995 including Warrant
Agreement and Warrant Certificate.
27.1 Financial Data Schedule
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.
ORGANIK TECHNOLOGIES, INC.
Registrant
/s/ Helen M. Hull DECEMBER 15, 1995
- - --------------------------------------- -----------------
Helen M. Hull, Chief Financial Officer Date
Page 11
<PAGE>
EXHIBIT NO. 10.21
WARRANT AGREEMENT dated as of October 11, 1995 between Organik
Technologies, Inc., a Washington corporation (the "Company") and Whale
Securities Co., L.P. (hereinafter referred to as the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company has agreed to issue to the Consultant warrants
("Warrants") to purchase up to 150,000 shares (the "Shares") of common stock of
the Company (the "Common Stock"); NOW, THEREFORE, in
consideration of the premises, the agreements herein set forth and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. GRANT.
The Consultant, and/or its designees are hereby granted
the right to purchase, at any time from October 11, 1995, until 5:00 P.M., New
York City time, on October 11, 2000 (the "Warrant Exercise Term"), up to 150,000
Shares at an initial exercise price (subject to adjustment as provided in
Article 8 hereof) of $2.875 per Share.
2. WARRANT CERTIFICATES.
The warrant certificates (the "Warrant Certificates") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth as Exhibit
A, attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. EXERCISE OF WARRANTS.
3.1 CASH EXERCISE. The Warrants initially are
exercisable at a price of $2.875 per Share, payable in cash or by check to the
order of the Company, or any combination of cash or check, subject to adjustment
as provided in Article 8 hereof. Upon surrender of the Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price (as hereinafter defined) for the Shares purchased, at the
Company's principal offices in the State of Washington (presently located at
1919 70th Avenue West, Tacoma, Washington 98466) the registered holder of a
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Shares so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder hereof, in whole or in part (but not as to fractional shares of the
Common Stock). In the case of the purchase of less than all the Shares
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
3.2 CASHLESS
EXERCISE. At any time during the Warrant Exercise Term, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Shares determined in accordance with
this Section 3.2, by surrendering this Warrant at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice stating
such holder's intent to effect such exchange, the number of Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
Shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the Shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Shares (rounded to the next highest integer)
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equal to (i) the number of Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Shares equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price (as hereinafter defined) by (B) the Market Price (as
hereinafter defined) of a share of Common Stock on the Exchange Date.
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares shall be made forthwith (and in any event within
three business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 5
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares shall
be executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company under its corporate seal reproduced
thereon, attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants, in part or in
whole, certificates representing the Shares shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be offered
or sold except (i) pursuant to an effective registration statement under the
Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of securities), or (iii)
upon the delivery by the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the issuer, stating that an exemption from
registration under such Act is available."
5. INVESTMENT INTENT.
The Holder of a Warrant Certificate, by its acceptance thereof, covenants
and agrees that the Warrants are being acquired as an investment and not with a
view to the distribution thereof.
6. PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. The
initial exercise price of each Warrant shall be $2.875 per Share. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Article 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF
1933. The Warrants and the Shares have not been registered for purposes of
public distribution under the Act.
7.2 REGISTRABLE SECURITIES. As used herein
the term "Registrable Security" means each of the Shares and any shares of
Common Stock issued
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upon any stock split or stock dividend in respect of such Shares; PROVIDED,
HOWEVER, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered under the Act and disposed of pursuant
thereto, (ii) registration under the Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of
any merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Article 7.
7.3 PIGGYBACK REGISTRATION. If, at any time
during the seven years following the date of this Agreement, the Company
proposes to prepare and file any registration statement or post-effective
amendments thereto covering equity or debt securities of the Company, or any
such securities of the Company held by its shareholders (in any such case, other
than in connection with a merger, acquisition or pursuant to Form S-8 or
successor form), (for purposes of this Article 7, collectively, a "Registration
Statement"), it will give written notice of its intention to do so by registered
mail ("Notice"), at least thirty (30) business days prior to the filing of each
such Registration Statement, to all holders of the Registrable Securities. Upon
the written request of such a holder (a "Requesting Holder"), made within twenty
(20) business days after receipt of the Notice, that the Company include any of
the Requesting Holder's Registrable Securities in the proposed Registration
Statement, the Company shall, as to each such Requesting Holder, use its best
efforts to effect the registration under the Act of the Registrable Securities
which it has been so requested to register ("Piggyback Registration"), at the
Company's sole cost and expense and at no cost or expense to the Requesting
Holders; provided, however, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of all or a
portion of the Registrable Securities requested to be registered, when added to
the securities being registered by the Company or the selling shareholder(s),
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or
(ii) without otherwise materially adversely affecting the entire offering, then
the Company may exclude from such offering all or a portion of the Registrable
Securities which it has been requested to register.
If securities are proposed to be offered for sale
pursuant to such Registration Statement by other security holders of the Company
and the total number of securities to be offered by the Requesting Holders and
such other selling security holders is required to be reduced pursuant to a
request from the managing underwriter (which request shall be made only for the
reasons and in the manner set forth above), the aggregate number of Registrable
Securities to be offered by Requesting Holders pursuant to such Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the underwriter believes may be included for all the
selling security holders (including the Requesting Holders) as the original
number of Registrable Securities proposed to be sold by the Requesting Holders
bears to the total original number of securities proposed to be offered by the
Requesting Holders and the other selling security holders.
If, subsequent to exercise of the demand registration
right referred to in Section 7.4 below, any Registrable Securities requested to
be included in a Piggyback Registration are not so included because of the
operation of the proviso of the first paragraph of this Section 7.3, then the
holders of such excluded Registrable Securities shall have the right to require
the Company, at its expense, to prepare and file another Registration Statement
under the Act covering such Registrable Securities, provided that, if the
underwriter so requests, such
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Registrable Securities shall not be sold until the expiration of 90 days from
the effective date of the offering that gave rise to the piggyback registration
rights that are the subject of this Section 7.3. Nothing contained in the
foregoing sentence shall require the Company to undergo an audit, other than in
the ordinary course of business. Notwithstanding the provisions of this Section
7.3, the Company shall have the right at any time after it shall have given
written notice pursuant to this Section 7.3 (irrespective of whether any written
request for inclusion of such securities shall have already been made) to elect
not to file any such proposed Registration Statement, or to withdraw the same
after the filing but prior to the effective date thereof.
7.4 DEMAND REGISTRATION.
(a)
In the event that the Company does not file a Registration Statement within
the twelve (12) months following the date hereof, in which the Registrable
Securities of the Consultant have been included, at any time during the four (4)
years thereafter, any "Majority Holder" (as such term is defined in Section
7.4(c) below) of the Registrable Securities shall have the right (which right is
in addition to the piggyback registration rights provided for under Section 7.3
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole expense of the
Company, a Registration Statement and such other documents, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Majority Holder), in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof, for nine (9) consecutive months.
(b)
The Company covenants and agrees to give written notice of any Demand
Registration Request to all holders of the Registrable Securities within ten
(10) days from the date of the Company's receipt of any such Demand Registration
Request. After receiving notice from the Company as provided in this Section
7.4(b), holders of Registrable Securities may request the Company to include
their Registrable Securities in the Registration Statement to be filed pursuant
to Section 7.4(a) hereof by notifying the Company of their decision to include
such securities within ten (10) days of their receipt of the Company's notice.
(c)
The term "Majority Holder" as used in this Section 7.4 shall mean any
holder or any combination of holders of Registrable Securities, if included in
such holders' Registrable Securities are that aggregate number of Shares
(including Shares already issued and Shares issuable pursuant to the exercise of
outstanding Warrants) as would constitute a majority of the aggregate number of
Shares (including Shares already issued and Shares issuable pursuant to the
exercise of outstanding Warrants) included in all of the Registrable Securities.
7.5 COVENANTS OF THE COMPANY WITH RESPECT TO
REGISTRATION. The Company covenants and agrees as follows:
(a)
In connection with any registration under Section 7.4 hereof, the Company
shall file the Registration Statement as expeditiously as possible, but in no
event later than twenty (20) business days following receipt of any demand
therefor; provided, however, that in the event that the Company is engaged in
negotiations with respect to an acquisition or other material event which would
require the Company, in the written opinion of its counsel, to file a Form 8-K
in the event that such acquisition or other is consummated or has otherwise
occurred, the Company shall file the Registration as expeditiously as possible,
but in no event later than sixty (60) days following receipt of any demand
therefor. The Company shall use its best efforts to have any such Registration
Statement declared effective at the earliest possible time, and shall furnish
each holder of Registrable Securities such number of
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prospectuses as shall reasonably be requested.
(b)
The Company shall pay all costs, fees and expenses in connection with all
Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses.
(c)
The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a Registration
Statement for offering and sale under the securities or blue sky laws of such
states as are requested by the holders of such securities.
(d)
The Company hereby agrees to indemnify any holder of the Registrable
Securities to be sold pursuant to any Registration Statement and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such holder or underwriter or person deemed to be an underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such Registration Statement.
(e)
Any holder of Registrable Securities to be sold pursuant to a Registration
Statement, and its successors and assigns, shall severally, and not jointly,
indemnify, the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, but only to the extent
that any such liability arises from information furnished in writing by or on
behalf of such holder, or its successors or assigns, for specific inclusion in
such Registration Statement.
(f)
Nothing contained in this Agreement shall be construed as requiring any
Holder to exercise his Warrants prior to the initial filing of any Registration
Statement or the effectiveness thereof.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
8.1 SUBDIVISION AND COMBINATION. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
8.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article 8,
the number of Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full Share by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.3 RECLASSIFICATION, CONSOLIDATION, MERGER,
ETC. In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the
case of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the Company
is the surviving corporation and which does not result in any reclassification
or change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to
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another corporation of the property of the Company as an entirety, the Holders
shall thereafter have the right to purchase the kind and number of shares of
stock and other securities and property receivable upon such reclassification,
change, consolidation, merger, sale or conveyance as if the Holders were the
owners of the shares of Common Stock underlying the Warrants immediately prior
to any such events at a price equal to the product of (x) the number of shares
issuable upon exercise of the Warrants and (y) the Exercise Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holders had exercised the
Warrants.
8.4 DIVIDENDS AND OTHER DISTRIBUTIONS WITH
RESPECT TO OUTSTANDING SECURITIES. In the event that the Company shall at any
time prior to the exercise of all Warrants declare a dividend (other than a
dividend consisting solely of shares of Common Stock or a cash dividend or
distribution payable out of current or retained earnings) or otherwise
distribute to its shareholders any monies, assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another person or entity, or any other thing of value, the
Holder or Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the same
monies, property, assets, rights, evidences of indebtedness, securities or any
other thing of value that they would have been entitled to receive at the time
of such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Subsection 8.4.
8.5 SUBSCRIPTION RIGHTS FOR SHARES OF COMMON
STOCK OR OTHER SECURITIES. In the case the Company or an affiliate of the
Company shall at any time after the date hereof and prior to the exercise of all
the Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, the Holders of the unexercised Warrants shall be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise of the Warrants, to receive such rights at the time such rights are
distributed to the other shareholders of the Company.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without
expense, upon the surrender hereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Shares in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
11. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock
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issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any shareholder. As long
as the Warrants shall be outstanding, the Company shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by NASDAQ and the Boston Stock Exchange.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as conferring upon
the Holder or Holders the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the
holders of its shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the
holders of its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding
up of the Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. NOTICES.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered, or mailed
by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the
Warrants, to the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set
forth in Section 3 of this Agreement or to such other address as the
Company may designate by notice to the Holders.
14. SUPPLEMENTS AND AMENDMENTS.
The Company and the Consultant may from time to time supplement or amend
this Agreement without the approval of any Holders of Warrant Certificates in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Consultant may deem necessary or desirable and which
the Company and the Consultant deem not to adversely affect the interests of the
Holders of Warrant Certificates.
15. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the benefit of
the
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Company and the Holders inure to the benefit of their respective successors and
assigns hereunder.
16. TERMINATION.
This Agreement shall terminate at the close of business on October 11,
2002. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares issuable
upon exercise of the Warrants have been resold to the public; provided, however,
that the provisions of Section 7.4 shall survive such termination until the
close of business on October 11, 2005.
17. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
18. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Consultant and any other registered
holder or holders of the Warrant Certificates, Warrants or the Shares any legal
or equitable right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company and the Consultant
and any other holder or holders of the Warrant Certificates, Warrants or the
Shares.
19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
ORGANIK TECHNOLOGIES, INC.
By: s/s John McNulty
------------------------------
Name:John McNulty
Title: Chief Executive Officer
Attest:
Finn E. Walstad
- - -------------------------
WHALE SECURITIES CO., L.P.
By: WHALE SECURITIES CORP.
By:
----------------------------------
Name:
Title:
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<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, OCTOBER 11, 2000
No. W-1 75,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co., L.P. or
registered assigns, is the registered holder of Warrants to purchase, at any
time from October 11, 1995 until 5:00 P.M. New York City time on October 11,
2000 ("Expiration Date"), up to 75,000 shares ("Shares") of fully-paid and non-
assessable common stock ("Common Stock"), of Organik Technologies, Inc. a
Washington corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $2.875 per Share upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the warrant agreement dated as of
October 11, 1995 between the Company and Whale Securities Co., L.P. (the
"Warrant Agreement"). Payment of the Exercise Price may be made in cash, or by
certified or official bank check in New York Clearing House funds payable to the
order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and/or number of the Company's securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be
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issued to the transferee(s) in exchange for this Warrant Certificate, subject to
the limitations provided herein and in the Warrant Agreement, without any charge
except for any tax, or other governmental charge imposed in connection
therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: October 11, 1995
ORGANIK TECHNOLOGIES, INC.
[SEAL]
By:s/s John McNulty
----------------
Name: John McNulty
Title: Chief Executive Officer
Attest:
Finn E. Walstad
- - ---------------
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<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Shares and
herewith tenders in payment for such Shares cash or a certified or official bank
check payable in New York Clearing House Funds to the order of Organik
Technologies, Inc. in the amount of $ __________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such Shares be
registered in the name of _____________________, whose address is
__________________, and that such Certificate be delivered to
__________________, whose address is _____________.
Dated: Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
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<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________
hereby sells, assigns and transfers unto
_________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
Page 26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORGANIK
TECHNOLOGIES, INC. CONSOLIDATED FINANCIAL STATEMENTS IN THE 10QSB FILING FOR THE
FIRST QUARTER ENDED OCTOBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 1,899,142
<SECURITIES> 0
<RECEIVABLES> 793,632
<ALLOWANCES> 48,429
<INVENTORY> 824,118
<CURRENT-ASSETS> 3,641,905
<PP&E> 1,175,112
<DEPRECIATION> 469,303
<TOTAL-ASSETS> 4,672,124
<CURRENT-LIABILITIES> 789,384
<BONDS> 0
<COMMON> 15,904,304
0
100,317
<OTHER-SE> (12,121,881)
<TOTAL-LIABILITY-AND-EQUITY> 4,672,124
<SALES> 1,063,325
<TOTAL-REVENUES> 1,063,325
<CGS> 1,429,401
<TOTAL-COSTS> 1,429,401
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,898
<INTEREST-EXPENSE> 5,573
<INCOME-PRETAX> (1,102,346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,102,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,102,346)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
