SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16079
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AIR METHODS CORPORATION
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(Exact name of Registrant as Specified in Its Charter)
Delaware 84-0915893
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7301 South Peoria, Englewood, Colorado 80112
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (303) 792-7400
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N/A
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Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares of Common Stock, par value $.06,
outstanding as of May 11, 1995 was 8,072,976.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 1
Consolidated Statements of Operations for the
three months ended March 31, 1995 and 1994 3
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
Assets (unaudited) (unaudited)
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,896 696
Short-term investments -- --
Current installment of notes receivable 332 324
Receivables:
Trade 1,183 900
Insurance proceeds 65 49
Employees and other 174 65
------- -------
1,422 1,014
------- -------
Inventories 1,273 1,522
Work-in-progress on medical interiors 287 240
Assets held for sale 14 4,529
Prepaid expenses and other 933 1,511
------- -------
Total current assets 6,157 9,836
------- -------
Equipment and leasehold improvements:
Flight and ground support equipment 37,479 36,900
Furniture and office equipment 891 1,161
------- -------
38,370 38,061
------- -------
Less accumulated depreciation and amortization (5,276) (4,667)
------- -------
Net property and equipment 33,094 33,394
------- -------
Excess of cost over the fair value of net assets acquired,
net of accumulated amortization of $357 and $308 at March 31,
1995 and December 31, 1994, respectively 2,095 2,119
Notes receivable, less current installments 2,111 2,197
Patent application costs and other assets, net of
accumulated amortization of $444 and $424 at
March 31, 1995 and December 31, 1994, respectively 1,246 1,267
------- -------
$44,703 48,813
======= =======
(Continued)
See accompanying notes to consolidated financial statements.
</TABLE>
1<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
Liabilities and Stockholders' Equity (unaudited) (unaudited)
------------------------------------
<S> <C> <C>
Current Liabilities:
Notes Payable $ 1,445 2,278
Current installments of long-term debt 1,075 4,870
Current installments of obligations under capital leases 725 722
Accounts payable 1,099 746
Accrued overhaul and parts replacement costs 1,058 804
Deferred revenue 519 10
Accrued restructuring expenses and
other accrued liabilities 1,991 2,298
-------- --------
Total current liabilities 7,912 11,728
-------- --------
Long-term debt, less current installments 7,287 7,569
Obligations under capital leases, less current installments 5,147 5,302
Accrued overhaul and parts replacement costs 4,401 4,559
Other liabilities 933 945
-------- --------
Total liabilities 25,680 30,103
-------- --------
Stockholders' equity:
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,098,582 and 8,051,765 shares at March 31, 1995
and December 31, 1994, respectively 484 481
Additional paid-in capital 49,630 49,572
Accumulated deficit (note 3) (31,091) (31,343)
-------- --------
Total Stockholders' equity 19,023 18,710
-------- --------
$ 44,703 48,813
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
2<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
(unaudited) (unaudited)
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Flight revenue 6,596 $ 6,507
Sales of medical interiors and products 1,281 497
Gain (loss) on disposition of assets (15) 25
------- -------
7,862 7,029
------- -------
Operating expenses:
Flight centers 2,131 2,296
Aircraft operations 1,945 2,222
Aircraft rental 481 851
Medical interiors and parts 1,087 347
Depreciation and amortization 656 584
General and administrative 991 1,737
Restructuring and other non-recurring expenses -- 2,635
------- -------
7,291 10,672
------- -------
Operating income (loss) 571 (3,643)
Other income (expense):
Interest expense (439) (322)
Interest and dividend income 66 68
Other, net 55 (5)
------- -------
Net income (loss) 253 $(3,902)
======= =======
Income (loss) per common share $ .03 $ (.53)
======= =======
Weighted average number of
common shares outstanding 8,048,233 7,309,973
========= ==========
See accompanying notes to consolidated financial statements.
</TABLE>
3<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) 253 $ (3,902)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 656 584
Vesting of common stock and options issued for services and in connection
with employee stock compensation agreements, net of forfeitures 60 (295)
Gain on retirement and sale of equipment 15 (206)
Loss (Gain) on extinguishment of debt -- 181
Provision for restructuring and non-recurring expenses 2,332
Changes in assets and liabilities:
Decrease (Increase) in prepaid and other current assets 970 (1,090)
Decrease (Increase) in receivables (370) 302
Decrease (Increase) in parts inventories 143 (190)
Decrease in work-in-process on medical interiors 23 109
Increase in accounts payable, accrued expenses
and accrued restructuring expenses 46 1,144
Increase in deferred revenue and other liabilities 497 164
Increase in accrued overhaul and parts replacement costs 96 267
-------- --------
Net cash flow provided (used) by operating activities 2,389 (600)
-------- --------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (322) (1,751)
Proceeds from retirement and sale of equipment 4,109 351
Net decrease (increase) in patent development costs and other assets 85 (143)
-------- --------
Net cash provided (used) by investing activities 3,872 (1,543)
-------- --------
Cash flows from financing activities:
Issuance of common stock and warrants for cash -- 6,058
Net payments under short-term notes payable (833) (1,827)
Payments for syndication and solicitation costs -- (152)
Proceeds from issuance of debt -- 600
Payments of long-term debt (4,076) (288)
Payments of capital lease obligations (152) (1,253)
-------- --------
Net cash provided (used) by financing activities (5,061) 3,138
-------- --------
Increase in cash and cash equivalents 1,200 995
Cash and cash equivalents at beginning of period 696 2,154
-------- --------
Cash and cash equivalents at end of period 1,896 $ 3,149
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
4<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the consolidated financial statements for the
respective periods. Interim results are not necessarily
indicative of results for a full year. The consolidated
financial statements should be read in conjunction with the
Company's audited consolidated financial statements and
notes thereto for the fiscal year ended June 30, 1994.
(2) GAIN (LOSS) PER SHARE
Per-share information is based on the weighted-average
number of shares of common stock outstanding during each of
the periods. Shares issuable upon the exercise of warrants
and stock options are not included in the calculations,
since their inclusion would be anti-dilutive.
(3) STOCKHOLDERS' EQUITY
Changes in the stockholders' equity for the three months
ended March 31, 1995 consisted of the following (amounts in
thousands except share amounts):
Three Months Ended
March 31, 1995
------------------
Shares Amount
--------- --------
Balance at January 1, 1995 8,051,765 $18,710
Issuance of common shares for
options exercised and services rendered 46,817 63
Amortization of deferred compensation expense -- (3)
Net loss -- 253
Balance at March 31, 1995 8,098,582 $19,023
========= =======
As of March 31, 1995 the Company's total accumulated deficit was
$31,091,000. Of that amount, $20,467,000 relates to Cell
Technology, a predecessor company, which was involved in the
research and development of a biological response modifier.
5<PAGE>
(4) CHANGE IN FISCAL YEAR END
On March 29, 1995, the Company announced that it would
change its fiscal year end from June 30 to December 31.
Comparative periods on this quarterly statement have been
modified to be consistent with the Company's new fiscal
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net income of $253,000 for the three
months ended March 31, 1995, as compared to a loss of
$3,902,000 for the three months ended March 31, 1994. The
results for the quarter ended March 1994 included a
restructuring charge of $2,635,000. Without this
restructuring charge, the Company would have reported a net
loss of $1,267,000. The significant improvement in
operating results of the current quarter can be attributed
primarily to a $746,000 reduction of general and
administrative expenses, the elimination of three
unprofitable airplane contracts, improved performance in the
Company's Products Division, renegotiation of the Company's
least profitable air medical service contracts, and income
received from the short-term sublease of one of its
aircraft.
Sales of medical interiors increased by 157.7% for the three
months ended March 31, 1995, in comparison to the three
months ended March 31, 1994 and increased by 322.8% over
revenues for period ended December 31, 1994. This increase
is due primarily to revenue generated by the sale of
passenger oxygen systems, the sale of a medical interior to
an outside customer, and the refurbishment of an interior
for an existing customer. The cost of medical interiors
also increased by 213.2% and 321.3% over the quarters ended
March 31, 1994 and December 31, 1994, respectively, due to
increases in manufactured products sales.
Flight revenue increased 1.4% for the three months ended
March 31, 1995, compared to the quarter ended March 31,
1994. Revenue received from the sublease of one of the
Company's aircraft, which was subsequently sold in the
quarter, was largely offset by the termination of the
Company's air charter operations and three airplane medical
contracts during the quarter ended September 1994. Charter
operations and the discontinued airplane medical contracts
contributed approximately $571,000 of the total flight
revenue in the quarter ended March 1994. Flight center
expenses, which include pilot and mechanic salaries,
benefits, and training, decreased by 7.2% in the first
quarter of fiscal 1995 related to the decrease in airplane
medical contracts. These expenses generally vary with the
number of customer bases and, to a lesser degree, with the
number of aircraft operated by the Company.
6<PAGE>
Aircraft operating expenses decreased by 12.4% for the
quarter ended March 31, 1995, compared to the quarter ended
March 31, 1994, primarily because of the discontinuation of
unprofitable airplane medical contracts. Aircraft operating
expenses consist of fuel, insurance, and maintenance costs
and generally are a function of the size of the fleet, the
type of aircraft flown, and the number of hours flown by the
fleet.
Depreciation and amortization expense also fluctuates with
the size and value of the Company's fleet, as reflected by
the 12.3% increase in the first quarter of fiscal 1995 as
compared to fiscal 1994. The Company has increased its
depreciable asset base by $6.9 million since March 31, 1994,
through the acquisition of additional equipment and the
manufacture and installation of additional medical interiors
to service existing hospital contracts. The primary change
in asset base resulted from placing a medical interior into
service on one of the Company's aircraft in May 1994.
Aircraft rental expense decreased by 43.5% for the quarter
ended March 31, 1995 compared to the same period in fiscal
1994. Subsequent to March 31, 1994, the Company eliminated
four leased aircraft from its fleet. A fifth previously
leased aircraft was purchased by one of the Company's
hospital customers during the quarter ended March 31, 1995
and is still operated by the Company.
The 42.9% decrease in general and administrative expenses
reflects the effects of the Company's restructuring plan
which was implemented in fiscal 1994. The restructuring
plan included a reduction in the administrative work force
and a decreased reliance on outside contractors, resulting
in a decline in administrative expense of approximately
$191,000 and $126,000, respectively, compared to the quarter
ended March 1995. In addition, the Company's Board of
Directors has met quarterly in the current year as compared
to monthly in previous years, resulting in a decrease of
$110,000 in costs for the quarter ended March 31, 1995.
Interest and dividend income remained constant in the first
quarter of fiscal 1995 compared to the same period in the
prior year and in both periods consists primarily of
interest earned on two promissory notes held by the Company.
The income reflected in Other net income includes a write-
off of a $53,000 liability carried over from the recently
discontinued operations of Golden Eagle Charters, Inc.
following the Company's disposition of Golden Eagle.
FINANCIAL CONDITION
The Company had cash and cash equivalents of $1,896,000 and
a working capital deficit of $1,755,000 as of March 31,
1995, as compared to cash and cash equivalents of $696,000
and a working capital deficit of $1,892,000 at December 31,
1994. The increase in cash and cash equivalents in the
7<PAGE>
first quarter of fiscal 1995 is primarily due to the sale of
one of the Company's aircraft which generated approximately
$700,000 in cash to the Company after retirement of the
related debt and to incremental cash generated by the
Company's two operating divisions during the first quarter.
The quarters ending June 30 and September 30 have
historically been the most profitable for the Air Medical
Services Division, as flight revenues increase in the summer
and fall and as operating costs per hour decrease with
higher utilization and lower scheduled maintenance. The
Company's Products Division is also currently negotiating a
contract to provide design and installation services on a
medical interior for a Lockheed L-1011. If the Company
succeeds in concluding favorable negotiations on this
contract, increases are expected in both cash flow and
operating income for the Company. Should negotiations be
unsuccessful, the Company believes that additional
downsizing of the Products Division is possible and that
sufficient cash resources are available from existing
business to carry on normal operations without additional
financing. In addition, the Company has four unencumbered
aircraft valued at approximately $7,400,000 which could be
used to obtain additional financing, if needed.
8<PAGE>
PART II: OTHER INFORMATION
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
The 1994 Annual Meeting of Stockholders was held on
February 9, 1995. At the meeting, Messrs. Donald R. Segner and
George W. Belsey were elected to Class 1 directorships. Two
additional matters were brought before stockholders:
Proposal II, amending the Company's Employee Stock Option Plan to
provide the Board of Directors greater flexibility in
establishing post-employment expiration dates of stock options;
and Proposal III, permitting the Company to issue shares of its
Common Stock in partial payment of its severance obligation to
Marilyn J. Pauley, a former executive officer of the Company.
Voting results were as follows:
SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
----------------------------------------
Total Vote For Total Vote Withheld
Each Director From Each Director
-------------- -------------------
Donald R. Segner 6,958,379 151,450
George W. Belsey 6,997,760 112,069
Broker
Proposal II For Against Abstain Non-Votes
(Employee Stock --- ------- ------- ---------
Option Plan) 5,978,998 372,944 43,142 714,745
Broker
Proposal III For Against Abstain Non-Votes
(Stock to Marilyn J. --- ------- ------- ---------
Pauley) 5,979,892 356,613 58,879 714,445
9<PAGE>
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation/1/
3.2 Amendments to Certificate of Incorporation/2/
3.3 Bylaws, as amended/3/
4.1 Air Methods Corporation Employee Stock Option Plan, as
amended
27.1 Financial Data Schedule
____________________
/1/ Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 33-15007), as declared
effective on August 27, 1987, and incorporated herein by
reference.
/2/ Filed as an exhibit to the Company's Registration Statement
on Form 10-K for the fiscal year ended June 30, 1992, and
incorporated herein by reference.
/3/ Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994, and
incorporated herein by reference.
(b) Reports on Form 8-K
(1) Current Report on Form 8-K, dated April 5, 1995
and filed with the Securities and Exchange
Commission on April 7, 1995, reporting the change
in the Company's fiscal year.
10<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AIR METHODS CORPORATION
Date: May 22, 1995 By GEORGE W. BELSEY
---------------------------------
On behalf of the Company, and as
Principal Financial and Accounting
Officer
11
AIR METHODS CORPORATION
STOCK OPTION PLAN
(AS AMENDED THROUGH FEBRUARY 9, 1995)
I. PURPOSE
-------
The Air Methods Corporation Stock Option Plan (the
"Plan") provides for the grant of Stock Options, Stock
Appreciation Rights and Supplemental Bonuses to Employees of Air
Methods Corporation ("Company"), and such of its subsidiaries (as
defined in Section 424(f) of the Internal Revenue Code of 1986,
as amended ("Code"), as the Board of Directors of the Company
("Board") shall from time to time designate ("Participating
Subsidiaries"), in order to advance the interests of the Company
and its Participating Subsidiaries through the motivation,
attraction and retention of their Employees.
II. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
-------------------------------------------------------
The Stock Options granted under the Plan may be either:
(a) Incentive Stock Options ("ISOs") which are
intended to be "Incentive Stock Options" as that term
is defined in Section 422 of the Code; or
(b) Non-Incentive Stock Options ("Non-ISOs")
which are intended to be options that do not qualify as
"Incentive Stock Options" under Section 422 of the
Code.
All Stock Options shall be ISOs unless the Option Agreement
clearly designates the Stock Options granted thereunder, or a
specified portion thereof, as Non-ISOs. Subject to the other
provisions of the Plan, a Participant may receive ISOs and Non-
ISOs at the same time, provided that the ISOs and Non-ISOs are
clearly designated as such.
Except as otherwise expressly provided herein, all of
the provisions and requirements of the Plan relating to Stock
Options shall apply to ISOs and Non-ISOs.
III. ADMINISTRATION
--------------
3.1 Committee. With respect to grants of Stock
Options, Stock Appreciation Rights and Supplemental Bonuses to
Employees other than officers and directors of the Company, the
Plan shall be administered by a committee (the "Committee")
composed of at least two members of the Board of Directors. With
respect to grants of Stock Options, Stock Appreciation Rights and
Supplemental Bonuses to officers and directors, the Plan shall be
administered by the Board of Directors, if each director is a
<PAGE>
Disinterested Person, or by a committee of two or more directors,
all of whom are Disinterested Persons. Such committee may be the
Committee if all of the members thereof are Disinterested
Persons, or a special committee appointed by the Board of
Directors composed of at least two Disinterested Persons. The
Committee or the Board, as the case may be, shall have full
authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and to adopt
such rules and regulations for administering the Plan as it may
deem necessary in order to comply with the requirements of the
Code, in order that Stock Options that are intended to be ISOs
will be classified as incentive stock options under the Code, or
in order to conform to any regulation or to any change in any law
or regulation applicable thereto. The Committee or the Board may
delegate any of its responsibilities under the Plan, other than
its responsibility to grant Stock Options, to determine whether
the Stock Appreciation Rights or Supplemental Bonuses, if any,
payable to a Participant shall be paid in cash, in shares of
Common Stock or a combination thereof, or to interpret and
construe the Plan. If the Board of Directors is composed
entirely of Disinterested Persons, the Board of Directors may
reserve to itself any of the authority granted to the Committee
as set forth herein, and it may perform and discharge all of the
functions and responsibilities of the Committee at any time that
a duly constituted Committee is not appointed and serving. All
references in the Plan to the "Committee" shall be deemed to
refer to the Board of Directors whenever the Board is discharging
the powers and responsibilities of the Committee, and to any
special committee appointed by the Board to administer particular
aspects of the Plan.
3.2 Actions of Committee. All actions taken and all
interpretations and determinations made by the Committee in good
faith (including determinations of Fair Market Value) shall be
final and binding upon all Participants, the Company and all
other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation
made in good faith with respect to the Plan, and all members of
the Committee shall, in addition to their rights as directors, be
fully protected by the Company with respect to any such action,
determination or interpretation.
IV. DEFINITIONS
-----------
4.1 "Stock Option". A Stock Option is the right
granted under the Plan to an Employee to purchase, at such time
or times, and at such price or prices ("Option Price"), as are
determined by the Committee, the number of shares of Common Stock
determined by the Committee.
4.2 "Stock Appreciation Right". A Stock Appreciation
Right is the right to receive payment, in shares of Common Stock,
cash, or a combination of shares of Common Stock and cash, of the
2<PAGE>
Redemption Value of a specified number of shares of Common Stock
then purchasable under a Stock Option.
4.3 "Redemption Value". The Redemption Value of
shares of Common Stock purchasable under a Stock Option shall be
the amount, if any, by which the Fair Market Value of one share
of Common Stock on the date on which the Stock Option is
exercised exceeds the Option Price for such share.
4.4 "Common Stock". A share of Common Stock means a
share of authorized but unissued or reacquired Common Stock (par
value $.01 per share) of the Company.
4.5 "Fair Market Value". For the purpose of this
Plan, the Fair Market Value of a share of Common Stock on any
date shall be the average of the representative closing bid and
asked prices, as quoted by the National Association of Securities
Dealers through NASDAQ (its automated system for reporting
quotes), for the date in question or, if the Common Stock is
listed on the NASDAQ National Market System or is listed on a
national stock exchange, the officially-quoted closing price on
such exchange on the date in question. In the event the Common
Stock is not traded publicly, the Fair Market Value of a share of
Common Stock on any date shall be determined, in good faith, by
the Committee after such consultation with outside legal,
accounting and other experts as the Committee may deem advisable,
and the Committee shall maintain a written record of its method
of determining such value.
4.6 "Employee". An Employee is an employee of the
Company or any Participating Subsidiary.
4.7 "Participant". A Participant is an Employee to
whom a Stock Option is granted.
4.8 "Disinterested Person". A Disinterested Person is
a director of the Company who is not, during the one year prior
to service as an administrator of the Plan, granted or awarded
equity securities pursuant to the Plan or any other plan of the
Company or any of its affiliates except as may be permitted by
Rule 16b-3(c)(2) under the Securities Exchange Act of 1934 or any
successor to such rule.
4.9 "Supplemental Bonus". A Supplemental Bonus is the
right to receive payment, in shares of Common Stock, cash, or a
combination of shares of Common Stock and cash, of an amount
determined under Section 7.5.
V. ELIGIBILITY AND PARTICIPATION
-----------------------------
Grants of Stock Options, Stock Appreciation Rights and
Supplemental Bonuses may be made to Employees of the Company or
any Participating Subsidiary, including directors of the Company
who are also Employees. The Committee shall from time to time
3<PAGE>
determine the Employees to whom Stock Options shall be granted,
the number of shares of Common Stock subject to each Stock Option
to be granted to each such Employee, the Option Price of such
Stock Options, and the terms and provisions of such Stock
Options, all as provided in this Plan. The Option Price of any
ISO shall be not less than the Fair Market Value of a share of
Common Stock on the date on which the Stock Option is granted,
but the Option Price of a Non-ISO may be less than the Fair
Market Value on the date the Non-ISO is granted if the Committee
so determines. If an ISO is granted to an Employee who then owns
stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any parent or
subsidiary corporation of the Company, the Option Price of such
ISO shall be at least 110% of the Fair Market Value of the Common
Stock subject to the ISO at the time such ISO is granted, and
such ISO shall not be exercisable after 5 years after the date on
which it was granted. Each Stock Option shall be evidenced by a
written agreement ("Option Agreement") containing such terms and
provisions as the Committee may determine, subject to the
provisions of the Plan.
VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
------------------------------------------
6.1 Maximum Number. The maximum aggregate number of
shares of Common Stock that may be made subject to Stock Options
shall be 1,500,000. With respect to ISOs, the aggregate Fair
Market Value (determined as of the time the ISO is granted) of
the Common Stock as to which all ISOs granted to an Employee may
first become exercisable in a particular calendar year may not
exceed $100,000. If any shares of Common Stock subject to Stock
Options are not purchased or otherwise paid for before such Stock
Options expire, such shares may again be made subject to Stock
Options.
6.2 Capital Changes. In the event any changes are
made to the shares of Common Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend
in excess of ten percent (10%) at any single time, stock split,
combination of shares, exchange of shares, change in corporate
structure or otherwise), appropriate adjustments shall be made
in: (i) the number of shares of Common Stock theretofore made
subject to Stock Options, and in the purchase price of said
shares; and (ii) the aggregate number of shares which may be made
subject to Stock Options. If any of the foregoing adjustments
shall result in a fractional share, the fraction shall be
disregarded, and the Company shall have no obligation to make any
cash or other payment with respect to such a fractional share.
VII. EXERCISE OF STOCK OPTIONS
-------------------------
7.1 Time of Exercise. Subject to the provisions of
the Plan, including without limitation Section 7.3, the
Committee, in its discretion, shall determine the time when a
Stock Option, or a portion of a Stock Option, shall become
4<PAGE>
exercisable, and the time when a Stock Option, or a portion of a
Stock Option, shall expire. Such time or times shall be set
forth in the Option Agreement evidencing such Stock Option. An
ISO shall expire, to the extent not exercised, no later than the
tenth anniversary of the date on which it was granted, and a Non-
ISO shall expire, to the extent not exercised, no later than ten
years and one month after the date on which it was granted.
7.2 Exchange of Outstanding Stock. The Committee, in
its sole discretion, may permit a Participant to surrender to the
Company shares of the Common Stock previously acquired by the
Participant as part or full payment for the exercise of a Stock
Option. Such surrendered shares shall be valued at their Fair
Market Value on the date of exercise.
7.3 Termination of Employment Before Exercise. If a
Participant's employment with the Company or a Participating
Subsidiary shall terminate for any reason other than the
Participant's death or disability, any Stock Option then held by
the Participant, to the extent then exercisable under the
applicable Option Agreement(s) and unless otherwise determined by
the Committee and set forth in a Participant's applicable Option
Agreement(s), shall remain exercisable after the termination of
his employment for a period of three months (but, in the case of
an ISO, in no event beyond ten years from the date of grant of
the ISO). If the Participant's employment is terminated because
the Participant is disabled within the meaning of
Section 22(e)(3) of the Code, any Stock Option then held by the
Participant, to the extent then exercisable under the applicable
Option Agreement(s) and unless otherwise determined by the
Committee and set forth in a Participant's applicable Option
Agreement(s) shall remain exercisable after the termination of
his employment for a period of twelve months (but, in the case of
an ISO, in no event beyond ten years from the date of grant of
the ISO). In the event of a Participant's death, any Stock
Option then held by the Participant, to the extent then
exercisable under the applicable Option Agreement(s), shall
remain exercisable after such termination of employment until the
expiration of the stated term of the Stock Option as set forth in
the applicable Option Agreement(s) (but, in the case of an ISO,
in no event beyond ten years from the date of grant of the ISO.
If the Stock Option is not exercised during the applicable
period, it shall be deemed to have been forfeited and of no
further force or effect.
7.4 Disposition of Forfeited Stock Options. Any
shares of Common Stock subject to Stock Options forfeited by a
Participant shall not thereafter be eligible for purchase by the
Participant but may be made subject to Stock Options granted to
other Participants.
7.5 Grant of Supplemental Bonuses. The Committee,
either at the time of grant or at any time prior to exercise of
any Non-ISO or Stock Appreciation Right, may provide for a
5<PAGE>
Supplemental Bonus from the Company or Participating Subsidiary
in connection with a specified number of shares of Common Stock
then purchasable, or which may become purchasable, under a Stock
Option, or a specified number of Stock Appreciation Rights which
may be or become exercisable. Such Supplemental Bonus shall be
payable upon the exercise of the Non-ISO or Stock Appreciation
Right with regard to which such Supplemental Bonus was granted.
A Supplemental Bonus shall not exceed the amount necessary to
reimburse the Participant for the income tax liability incurred
by him upon the exercise of the Non-ISO or upon the exercise of
such Stock Appreciation Right, calculated using the maximum
combined Federal and Colorado income tax rates then in effect and
taking into account the tax liability arising from the
Participant's receipt of the Supplemental Bonus. The Committee
may, in its discretion, elect to pay any part or all of the
Supplemental Bonus in: (i) cash; (ii) shares of Common Stock; or
(iii) any combination of cash and shares of Common Stock. The
provisions of Section 8.3 shall apply to the giving of notice,
the determination of the number of shares to be delivered, and
the time for delivering shares. In applying Section 8.3, the
Supplemental Bonus shall be treated as if it were a Stock
Appreciation Right that the Participant exercised on the day the
Supplemental Bonus became payable. Shares of Common Stock issued
pursuant to this Section 7.5 shall not be deemed to have been
issued upon the exercise of a Stock Option for purposes of the
limitations imposed by Section 6.1 of the Plan.
VIII. STOCK APPRECIATION RIGHTS
-------------------------
8.1 Grant of Stock Appreciation Rights. The Committee
may, from time to time, grant Stock Appreciation Rights to a
Participant with respect to not more than the number of shares of
Common Stock which are, or may become, purchasable under any
Stock Option held by the Participant. The Committee may, in its
sole discretion, specify the terms and conditions of such rights,
including without limitation the date or dates upon which such
rights shall expire and become void and unexercisable; provided,
however, that in no event shall such rights expire and become
void and unexercisable later than the time when the related Stock
Option is exercised, expires or terminates. Each Participant to
whom Stock Appreciation Rights are granted shall be given
written notice advising him of the grant of such rights and
specifying the terms and conditions of the rights, which shall be
subject to all the provisions of this Plan.
8.2 Exercise of Stock Appreciation Rights. Subject to
Section 8.3, and in lieu of purchasing shares of Common Stock
upon the exercise of a Stock Option held by him, a Participant
may elect to exercise the Stock Appreciation Rights, if any, he
has been granted and receive payment of the Redemption Value of
all, or any portion, of the number of shares of Common Stock
subject to such Stock Option with respect to which he has been
granted Stock Appreciation Rights; provided, however, that the
Stock Appreciation Rights may be exercised only when the Fair
6<PAGE>
Market Value of the Common Stock subject to such Stock Option
exceeds the exercise price of the Stock Option. A Participant
shall exercise his Stock Appreciation Rights by delivering a
written notice to the Committee specifying the number of shares
with respect to which he exercises Stock Appreciation Rights and
agreeing to surrender the right to purchase an equivalent number
of shares of Common Stock subject to his Stock Option. If a
Participant exercises Stock Appreciation Rights, payment of his
Stock Appreciation Rights shall be made in accordance with
Section 8.3 on or before the 90th day after the date of exercise
of the Stock Appreciation Rights.
8.3 Form of Payment. If a Participant elects to
exercise Stock Appreciation Rights as provided in Section 8.2,
the Committee may, in its absolute discretion, elect to pay any
part or all of the Redemption Value of the shares with respect to
which the Participant has exercised Stock Appreciation Rights in:
(i) cash; (ii) shares of Common Stock; or (iii) any combination
of cash and shares of Common Stock. The Committee s election
pursuant to this Section 8.3 shall be made by giving written
notice to the Participant within said 90-day period, which notice
shall specify the portion which the Committee elects to pay in
cash, shares of Common Stock or a combination thereof. In the
event any portion is to be paid in shares of Common Stock, the
number of shares to be delivered shall be determined by dividing
the amount which the Committee elects to pay in shares of Common
Stock by the Fair Market Value of one share of Common Stock on
the date of exercise of the Stock Appreciation Rights. Any
fractional share resulting from any such calculation shall be
disregarded. Said shares, together with any cash payable to the
Participant, shall be delivered within said 90-day period.
IX. NO CONTRACT OF EMPLOYMENT
-------------------------
Nothing in this Plan shall confer upon the Participant
the right to continue in the employ of the Company, or any
Participating Subsidiary, nor shall it interfere in any way with
the right of the Company, or any such Participating Subsidiary,
to discharge the Participant at any time for any reason
whatsoever, with or without cause.
X. NO RIGHTS AS A STOCKHOLDER
--------------------------
A Participant shall have no rights as a stockholder
with respect to any shares of Common Stock subject to a Stock
Option. Except as provided in Section 6.2, no adjustment shall
be made in the number of shares of Common Stock issued to a
Participant, or in any other rights of the Participant upon
exercise of a Stock Option by reason of any dividend,
distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the Participant's
Stock Option.
7<PAGE>
XI. ASSIGNABILITY
-------------
No Stock Option, Stock Appreciation Right or
Supplemental Bonus right granted under this Plan, nor any other
rights acquired by a Participant under this Plan, shall be
assignable or transferable by a Participant, other than by will
or the laws of descent and distribution or, in the case of a Non-
ISO, pursuant to a qualified domestic relations order as defined
by the Code, Title I of the Employee Retirement Income Security
Act ("ERISA"), or the rules thereunder. Notwithstanding the
preceding sentence, the Committee may, in its sole discretion,
permit an assignment or transfer of a Non-ISO by a Participant
and the exercise thereof by a person other than such Participant,
on such terms and conditions as the Committee in its sole
discretion may determine. In the event of his death, the Stock
Option or any Stock Appreciation Right or Supplemental Bonus
right may be exercised by the Personal Representative of the
Participant's estate or, if no Personal Representative has been
appointed, by the successor or successors in interest determined
under the Participant's will or under the applicable laws of
descent and distribution.
XII. MERGER OR LIQUIDATION OF THE COMPANY
------------------------------------
If the Company or its stockholders enter into an
agreement to dispose of all, or substantially all, of the assets
or outstanding capital stock of the Company by means of a sale or
liquidation, or a merger or reorganization in which the Company
is not the surviving corporation, all Stock Options outstanding
under the Plan as of the day before the consummation of such
sale, liquidation, merger or reorganization, to the extent not
exercised, shall for all purposes under this Plan become
exercisable in full as of such date even though the dates of
exercise established pursuant to Section 7.1 have not yet
occurred.
XIII. AMENDMENT
---------
The Board may from time to time alter, amend, suspend
or discontinue the Plan, including, where applicable, any
modifications or amendments as it shall deem advisable in order
that ISOs will be classified as incentive stock options under the
Code, or in order to conform to any regulation or to any change
in any law or regulation applicable thereto; provided, however,
that no such action shall adversely affect the rights and
obligations with respect to Stock Options at any time outstanding
under the Plan; and provided further that no such action shall,
without the approval of the stockholders of the Company, (i)
increase the maximum number of shares of Common Stock that may be
made subject to Stock Options (unless necessary to effect the
adjustments required by Section 6.2), (ii) materially increase
the benefits accruing to Participants under the Plan or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
8<PAGE>
XIV. REGISTRATION OF OPTIONED SHARES
-------------------------------
The Stock Options shall not be exercisable unless the
purchase of such optioned shares is pursuant to an applicable
effective registration statement under the Securities Act of
1933, as amended, or unless in the opinion of counsel to the
Company, the proposed purchase of such optioned shares would be
exempt from the registration requirements of the Securities Act
of 1933, as amended, and from the qualification requirements of
any state securities law.
XV. WITHHOLDING TAXES
-----------------
The Company, or Participating Subsidiary, may take such
steps as it may deem necessary or appropriate for the withholding
of any taxes which the Company, or the Participating Subsidiary,
is required by any law or regulation or any governmental
authority, whether federal, state or local, domestic or foreign,
to withhold in connection with any Stock Option, Stock
Appreciation Right or Supplemental Bonus including, but not
limited to, the withholding of all or any portion of any payment
or the withholding of issuance of shares of Common Stock to be
issued upon the exercise of any Stock Option or Stock
Appreciation Right or upon payment of any Supplemental Bonus,
until the Participant reimburses the Company, or Participating
Subsidiary, for the amount the Company or Participating
Subsidiary is required to withhold with respect to such taxes, or
cancelling any portion of such payment or issuance in an amount
sufficient to reimburse itself for the amount it is required to
so withhold. Notwithstanding any other provision of this Plan,
whenever any such withholding of taxes is required in connection
with any such Stock Option, or Stock Appreciation Right or
Supplemental Bonus issued in shares of Common Stock, issued to a
Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, shares of Common Stock shall be withheld as
the method of reimbursement for such tax withholding in lieu of
any other form of withholding under the Plan.
XVI. NON-EXCLUSIVITY OF THE PLAN
---------------------------
Neither the adoption of the Plan by the Board nor the
submission of the Plan to stockholders of the Company for
approval shall be construed as creating any limitations on the
power or authority of the Board to adopt such other or additional
incentive or other compensation arrangements of whatever nature
as the Board may deem necessary or desirable or preclude or limit
the continuation of any other plan, practice or arrangement for
the payment of compensation or fringe benefits to employees
generally, or to any class or group of employees, which the
Company or any Participating Subsidiary now has lawfully put into
effect, including, without limitation, any retirement, pension,
savings and stock purchase plan, insurance, death and disability
benefits, and executive short term incentive plans.
9<PAGE>
XVII. EFFECTIVE DATE
--------------
This Plan was adopted by the Board and became effective
on June 1, 1987, and was approved by the Company's stockholders
on August 25, 1987. On October 4, 1991, the Company's
stockholders approved an amendment to the Plan increasing the
maximum aggregate number of shares of Common Stock that may be
made subject to Stock Options from 800,000 to 1,500,000. On
January 29, 1992, the Company's Board of Directors made further
amendments to the Plan. As a result of the one-for-six reverse
split of the Company's Common Stock which became effective on
April 7, 1992, the number of shares that may be made subject to
Stock Options was reduced to 250,000. On March 12, 1993, the
Company's stockholders approved an amendment to the Plan
increasing the maximum aggregate number of shares of Common Stock
that may be made subject to Stock Options from 250,000 to
750,000. On October 29, 1993, the Company's stockholders
approved an amendment to the Plan increasing the maximum
aggregate number of shares of Common Stock that may be made
subject to Stock Options from 750,000 to 1,500,000. On
February 9, 1995 the Company's stockholders approved an amendment
to the Plan revising the post-employment Stock Option expiration
provisions of Section 7.3. No Stock Options shall be granted
subsequent to ten years after the effective date of the Plan.
Stock Options outstanding subsequent to ten years after the
effective date of the Plan shall continue to be governed by the
provisions of the Plan.
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE
QUARTER ENDING MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1896
<SECURITIES> 0
<RECEIVABLES> 1767
<ALLOWANCES> (13)
<INVENTORY> 1560
<CURRENT-ASSETS> 6157
<PP&E> 38370
<DEPRECIATION> (5276)
<TOTAL-ASSETS> 44703
<CURRENT-LIABILITIES> 7912
<BONDS> 0
<COMMON> 484
0
0
<OTHER-SE> 49630
<TOTAL-LIABILITY-AND-EQUITY> 44703
<SALES> 1281
<TOTAL-REVENUES> 7862
<CGS> 1087
<TOTAL-COSTS> 7291
<OTHER-EXPENSES> (55)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373<F2>
<INCOME-PRETAX> 253
<INCOME-TAX> 0
<INCOME-CONTINUING> 253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253
<EPS-PRIMARY> .03
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<FN>
<F1> Net non-operating income
<F2> Net of interest income of 66
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