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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000 OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________to___________________
Commission File Number 0-20701
COMPOSITECH LTD.
(Exact Name of Registrant as specified in its charter)
Delaware 11-2710467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
710 Koehler Avenue, Ronkonkoma, New York 11779
(Address of principal executive offices)
Registrant's telephone number, including area code: (631) 585-7710
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 requirement for the past 90 days. Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of August 12, 2000:
Common Stock $.01 par value 20,034,205
--------------------------- ----------
Class Number of shares
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<PAGE>
COMPOSITECH LTD.
Index
<TABLE>
<CAPTION>
Part I - Financial Information Page
------------------------------ ----
Item 1. Financial Statements
<S> <C>
Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999...............2
Statements of Operations (unaudited) for the three-month and six-month
periods ended June 30, 2000 and 1999.............................................3
Statements of Cash Flows (unaudited) for the six months
ended June 30, 2000 and 1999.....................................................4
Notes to Financial Statements (unaudited)..........................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................7
Part II - Other Information
Item 1. Legal Proceedings.....................................................................11
Item 2. Changes in Securities.................................................................11
Item 6. Exhibits and Reports on Form 8-K......................................................12
Signature......................................................................................12
</TABLE>
<PAGE>
COMPOSITECH LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
------------ -------------
ASSETS (unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,036 $ 73,197
Accounts receivable trade - net 82,783
Inventories 15,000
Prepaid expenses and other 77,750 48,412
------------ ------------
Total current assets 84,786 219,392
Property and equipment held for sale 2,000,000 2,000,000
Investment in joint venture 466,000
Deferred debt expense - net of accumulated amortization of $461,078 49,163
Other assets and other deferred charges, net of accumulated amortization
of $931,055 (2000) and $658,375 (1999) 519,274 401,894
------------ ------------
Total assets $ 2,604,060 $ 3,136,449
============ ============
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable $ 2,013,658 $ 1,814,421
Deferred salaries 149,181 152,362
Accrued interest - $20,802 (2000) and $44,276 (1999) to stockholders 148,572 104,423
Other accrued liabilities 592,313 642,762
Loans and notes payable 2,034,772 2,976,935
Notes payable to directors/stockholders 158,333 158,333
------------ ------------
Total current liabilities 5,096,829 5,849,236
Non-current liabilities:
Notes payable to directors/stockholders 1,420,000 1,420,000
Deferred salaries - officers / directors 977,827 913,135
Accrued interest - directors/stockholders 471,315 366,476
Deferred licensing income 643,840
Advances received 500,000
------------ ------------
Total non-current liabilities 2,869,142 3,843,451
Commitments
Stockholders' (deficiency) :
Undesignated preferred stock; authorized 3,799,780 shares, none issued and
outstanding
Series A convertible preferred stock, par value $3.00 per share;
authorized shares - 714,161, issued and outstanding shares - 326,665 (2000) and 393,997 (1999) 979,995 1,181,991
Series C 8% convertible preferred stock, par value $0.01 per share; authorized shares - 200,000
issued and outstanding shares - 54,000 540,000 540,000
Common stock, par value $.01 per share; authorized shares - 50,000,000,
issued and outstanding shares - 20,983,790 (2000) and 18,023,613 (1999) 209,838 180,236
Additional paid-in capital 47,252,126 44,449,398
Deficit (51,787,658) (50,349,052)
------------ ------------
(2,805,699) (3,997,427)
Less treasury shares to be received - 949,585 (2000) and 951,000 (1999) (1,744,388) (1,746,987)
Less notes receivable received for issuance of common stock (811,824) (811,824)
------------ ------------
Total stockholders' (deficiency) (5,361,911) (6,556,238)
------------ ------------
Total liabilities and stockholders' (deficiency) $ 2,604,060 $ 3,136,449
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
COMPOSITECH LTD.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------------ -----------------------------
2000 1999 2000 1999
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ -- $ 119,985 $ -- $ 215,965
Licensing 15,861 -- 28,451
------------ ------------ ------------ ------------
Total revenues 135,846 -- 244,416
Costs and expenses:
Manufacturing -- 1,370,465 -- 2,573,307
Selling, general and administrative 454,205 418,924 1,010,524 788,503
Research and development -- 80,421 -- 147,807
------------ ------------ ------------ ------------
Total operating expenses 454,205 1,869,810 1,010,524 3,509,617
(Loss) from operations (454,205) (1,733,964) (1,010,524) (3,265,201)
Other income (expenses):
Interest income 16,394 8,927 32,901 20,579
Interest expense, net of interest capitalized (98,186) (51,930) (197,464) (117,520)
Amortization of debt discount and expenses (194,468) (259,869) (237,302)
Other income (expense) (1,679) (81,378) (3,650) (85,878)
------------ ------------ ------------ ------------
(83,471) (318,849) (428,082) (420,121)
------------ ------------ ------------ ------------
(Loss) from operations before equity in operations of joint venture (537,676) (2,052,813) (1,438,606) (3,685,322)
Equity in operations of joint venture (41,701) -- (47,214)
------------ ------------ ------------ ------------
Net (loss) (537,676) (2,094,514) (1,438,606) (3,732,536)
Preferred stock dividends 3,841 -- 15,692
------------ ------------ ------------ ------------
(Loss) attributable to common stockholders ($ 537,676) ($ 2,098,355) ($ 1,438,606) ($ 3,748,228)
============ ============ ============ ============
(Loss) per common share - basic and diluted ($ 0.03) ($ 0.13) ($ 0.08) ($ 0.25)
============ ============ ============ ============
Shares used in computing (loss) per common share 19,815,059 15,786,991 19,000,246 15,210,462
============ ============ ============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
COMPOSITECH LTD.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) ($1,438,606) ($3,732,536)
Adjustments to reconcile net (loss) to net cash and
cash equivalents used in operating activities:
Depreciation and amortization, including capital leases 8,818 555,553
Amortization of debt discount and expenses 259,869 237,302
Amortization of deferred charges 214,034
Issuance of common stock as compensation to directors 43,000
Issuance of common stock in exchange for consulting services 18,000
Equity in net loss of joint venture 47,214
Changes in operating assets and liabilities:
Accounts receivable trade - net 82,783 (52,585)
Accounts receivable from joint venture (38,342)
Inventories 15,000 29,625
Prepaid expenses and other (29,338) (54,613)
Other assets and other deferred charges 14,010 29,156
Accounts payable 199,237 181,895
Deferred salaries 61,511 43,452
Accrued interest 185,509 100,114
Deferred licensing income (84,419)
Other accrued liabilities (47,850) 209,956
----------- -----------
Net cash and cash equivalents (used) in operating activities (414,023) (2,528,228)
Cash Flows from Investing Activities
Purchase of property and equipment - net (234,559)
Patent costs deferred (4,070) (6,947)
----------- -----------
Net cash and cash equivalents (used in) investing activities (4,070) (241,506)
Cash Flows from Financing Activities
Net proceeds from issuance of common stock 159,382 2,070,535
Net proceeds from exercise of warrants 157,864 1,282
Net proceeds from loans and notes payable 45,686 992,250
Payment of capital lease obligations (15,632)
Payment of loans and notes payable (11,000) (204,167)
----------- -----------
Net cash and cash equivalents provided by financing activities 351,932 2,844,268
----------- -----------
Increase (decrease) in cash and cash equivalents (66,161) 74,534
Cash and cash equivalents at beginning of period 73,197 102,286
----------- -----------
Cash and cash equivalents at end of period $ 7,036 $ 176,820
=========== ===========
Supplemental disclosures of cash flow information
Noncash financing activities:
Dividends on 7% Series B convertible preferred stock $ 15,692
Issuance of common stock in repayment of promissory notes
including accrued interest $ 1,174,248
Issuance of common stock as compensation for bridge financing $ 30,000
Issuance of common stock as compensation to directors $ 43,000
Cash paid for:
Interest $ 11,879 $ 36,498
</TABLE>
See accompanying notes.
4
<PAGE>
COMPOSITECH LTD.
Notes to Financial Statements
(Unaudited)
March 31, 2000
Note 1 - Basis of Presentation and Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Annual Report on
Form 10-KSB for the year ended December 31, 1999 of Compositech Ltd. (the
"Company"). In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month and six-month periods ended June
30, 2000 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2000.
Note 2 - Common Stock Issuances and Stock Options
During January 2000, pursuant to the Company's Amended and Restated Stock
Award Plan (the "Award Plan"), the Company issued to its non-employee directors
stock awards of 36,365 shares of its common stock, vesting on a quarterly basis
over a one-year period, as payment of the annual $10,000 per year, per director,
retainer for the year 2000 and 13,094 shares of its common stock, as
compensation for the 1999 meeting attendance of the Board of Directors and
related subcommittees.
During February 2000, pursuant to the Award Plan, the Company granted
incentive options to its employees to purchase 600,000 shares of common stock at
$0.01 per share. These options are exercisable only in the event of a successful
transfer of the Company's technology or financing to restart production, while
still employed by the Company.
During February 2000, the Compensation Committee approved the repricing of
stock options held by current employees, to an exercise price of $1.4375 per
share, the market price on the date approved by the Committee, for all stock
options with exercise prices in excess of $1.4375 per share. The authorization
covered options to purchase 584,544 shares of common stock, of which 575,271
shares are exercisable as of the current date. At June 30, 2000, the market
price of the Company's common stock was lower than the repriced exercise price
and, therefore, there was no charge to earnings.
In the six months ended June 30, 2000, 67,332 shares of the Series A
convertible preferred stock were converted at the existing conversion rate into
33,665 shares of common
5
<PAGE>
stock, resulting in a decrease in stockholders' equity relating to Series A
convertible preferred stock of $201,996, an increase in stockholders' equity
relating to common stock of $337 and an increase in additional paid-in capital
of $201,322, net of expenses of $337.
During January 2000, in connection with an agreement to provide financial
public relations and investor relations services, the Company issued 500,000
shares of its common stock to a consultant. The Company has estimated the value
of the stock at $323,500, which is being amortized over the twelve-month life of
the agreement. This issuance resulted in an increase in stockholders' equity
relating to common stock of $5,000 and an increase in additional paid-in capital
of $313,500, net of expenses of $5,000.
During February 2000, in connection with the settlement agreement which
terminated the Taiwan joint venture agreement, the Company issued 587,372 shares
of its common stock to its former joint venture partner, resulting in an
increase in stockholders' equity relating to common stock of $5,874 and an
increase in additional paid-in capital of $666,092, net of expenses of $5,874
(see Note 3).
On March 31, 2000, the Company issued 789,563 shares of its common stock in
connection with the conversion of the first tranche of a term note series which
totaled $898,128, including accrued interest, resulting in an increase in
stockholders' equity relating to common stock of $7,896 and an increase in
additional paid-in capital of $882,336, net of expenses of $7,896.
During May 2000, in connection with the first three months of an agreement
to provide consulting services in connection with the Company's licensing
efforts, the Company issued 25,398 shares of common stock, resulting in an
increase in stockholders' equity relating to common stock of $254 and an
increase in additional paid-in capital of $17,492, net of expenses of $254.
During the six months ended June 30, 2000, the Company sold 395,319 shares
of its common stock, in a private placement, realizing $174,119, net of
expenses, resulting in an increase in stockholders' equity relating to common
stock of $3,953 and an increase in additional paid-in capital of $170,166.
During the six months ended June 30, 2000, the Company sold 141,583 shares
of its common stock in connection with the exercise of warrants, realizing
$159,280, resulting in an increase in stockholders' equity relating to common
stock of $1,415 and an increase in additional paid-in capital of $156,449, net
of expenses of $1,416.
During the six months ended June 30, 2000, the Company issued 456,000
shares of its common stock in connection with the repayment of certain
promissory notes payable totaling $276,120, including accrued interest and
$20,000 which was borrowed during January 2000, resulting in an increase in
stockholders' equity relating to common stock of $4,560 and an increase in
additional paid-in capital of $267,001, net of expenses of $4,559.
6
<PAGE>
Note 3 - Joint Venture
As of February 17, 2000, the Company reached a settlement agreement with
its joint venture partner/licensee in Taiwan, which terminated the joint venture
agreement and the license for use of the Company's proprietary technology in
Taiwan. Under the terms of the settlement, in exchange for the issuance of
587,372 shares of its common stock to the licensee, the Company retained the $1
million license down payment it received in 1998. Additionally, in exchange for
returning the equity held by the Company in the Taiwanese joint venture, the
Company retained the $500,000 advance it received to make the investment. The
Company has recorded the value of the shares issued in connection with this
settlement at $677,840, representing the net balance of the accounts on its
balance sheet as of the agreement date, relating to the investment in the joint
venture, the deferred licensing income and the advances received on the sale of
common stock.
On April 25, 2000, the Board of Directors for the Company's Canadian joint
venture approved the dissolution and liquidation of the joint venture. In
accordance with that action, the Company will receive back 949,585 shares of its
common stock, which is adjusted from the 951,000 shares which were recorded as
treasury shares to be received in the Company's financial statements as of
December 31, 1999.
Note 4 - Subsequent Events
As of June 2, 2000, the Company signed a letter of intent with the Aeon
Group, Inc., regarding a potential merger of the two companies. On August 14,
2000, the parties terminated their merger discussions.
On July 12, 2000, the Company sold 500 shares of Series D 8% Convertible
Preferred Stock (the "Series D stock") in a private placement to an accredited
investor, for a total of $500,000, which after expenses netted $420,000, as part
of a bridge financing. The purchase agreement requires the Company to lend
$100,000 of the net proceeds to the Aeon Group, Inc.. The Series D stock is
intended to be a bridge financing to be redeemed from future financings to be
received in connection with a merger of the Company. In connection with the sale
of the Series D stock, the Company issued warrants to the investor to purchase
709,849 shares of its common stock, exercisable at $0.7326 per share, of which
number, one-half is exercisable immediately, three-quarters is exercisable if
the Series D stock is not redeemed within 120 days of the closing for the Series
D stock and the balance is exercisable if the Series D stock is not redeemed
within 180 days of that closing,.
On July 14, 2000, the holders of certain term notes payable, totaling
approximately $1,651,000 including accrued interest as of June 30, 2000, agreed
to an extension of the due date on such notes to July 21, 2000, which was
subsequently extended to September 25, 2000.
7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of a number
of important factors. For a discussion of important factors that could affect
the Company's results, in addition to the discussions below, please refer to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999 and
the risk factors listed therein.
Overview
Compositech Ltd. (the "Company"), a Delaware corporation, has developed a
proprietary technology for the manufacture of innovative and superior
copper-clad fiberglass epoxy laminates used to make printed circuit boards.
In the last half of 1999, we experienced a demand for product that was
greater than our production capability. In addition, we were unable to obtain
adequate financing to maintain or expand our manufacturing capabilities. On
December 3, 1999, we suspended our manufacturing operations and refocused our
resources on locating suitable licensees, joint venture partners or purchasers
for our technology. As a result, we reduced our staff from 124 employees to six.
We are also exploring potential mergers and acquisitions or other strategic
transactions.
In March 2000, we formally launched our licensing program by sending
proposals to a limited number of select candidates supported by our
recommendation letters from several original equipment manufacturers ("OEM's")
and printed circuit board customers. At the current date, we are having
licensing discussions with five potential licensees. These include two laminate
manufacturers and two suppliers to the industry.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. In addition to the matters discussed
above, the Company has incurred recurring operating losses and has a working
capital deficiency. The Company requires, and is negotiating for, additional
funding from financing or other sources to satisfy its existing liabilities and
cover future operating expenses until sufficient revenues are generated. Since
December 31, 1999, the Company has received private placement funding from the
sales of its common stock and Series D 8% Convertible Preferred Stock. In
addition, the Company has initiated discussions with certain creditors to
provide accommodations with regard to outstanding liabilities. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
8
<PAGE>
Results of Operations
In light of the Company's decision to suspend its manufacturing operations
on December 3, 1999 and refocus its resources on locating suitable licensees,
joint venture partners or purchasers for its patented technology and equipment
design, management's comparative analysis is limited to those areas for which
data is available for both periods. During the first six months of 2000, the
Company did not record any sales, manufacturing or research and development
expenses. Lease related obligations of the idled manufacturing facility,
totaling approximately $100,000 were charged to the restructuring provision
recorded as of December 31, 1999.
Selling, general and administrative expenses increased to $454,205 for the
three months ended June 30, 2000 from $418,924 for the three months ended June
30, 1999 and to $1,010,524 for the six months ended June 30, 2000 from $788,503
for the six months ended June 30, 1999. Decreases in payroll related, travel and
promotion expenses were more than offset by an increase in non-cash charges of
approximately $186,000 due to amortization of the value of warrants and common
stock issued in exchange for professional services and $43,000 for directors'
compensation, paid in common stock. For the six months ended June 30, 2000,
there was an increase of approximately $142,000 in legal and professional fees
related to creditor activities and the pursuit of licensing and financings. In
addition, expenses for the 1999 period reflected a reduction of approximately
$243,000 of expenses that were charged to the Company's Canadian joint venture,
in accordance with the joint venture agreements.
Interest expense increased to $98,186 for the three months ended June 30,
2000 from $51,930 for the three months ended June 30, 1999 and to $197,464 for
the six months ended June 30, 2000 from $117,520 for the six months ended June
30, 1999. The increase is related to the borrowing cost of the term note series,
as well as the increases in the prime lending rate, which affects the interest
expense of some of the stockholder loans and notes payable.
The foregoing resulted in the Company having a net loss of $537,676 for the
three months ended June 30, 2000 compared with $2,094,514 for the three months
ended June 30, 1999 and a net loss of $1,438,606 for the six months ended June
30, 2000 compared with $3,732,536 for the six months ended June 30, 1999. The
decreased loss was attributable to the lower operating costs, due to the
redirection of the Company's operations from manufacturing to licensing
activities, offset partially by an increase in the amortization of the fair
market value of common stock and warrants and other non-cash items.
Liquidity and Capital Resources
The Company has incurred significant losses and has substantial negative
cash flow since its inception. The Company's independent auditors have included
an explanatory paragraph in their report covering the December 31, 1999
financial statements, which expresses substantial doubt about the Company's
ability to continue as a going concern. The Company expects operating losses to
continue in 2000. As of June 30, 2000, the Company had approximately $7,000 of
available cash resources. On July 12, 2000, the Company sold 500 shares of
Series D 8% Convertible Preferred Stock (the "Series D stock") in a private
placement to an accredited investor, for an total of $500,000, which after
expenses netted $420,000, as part of a bridge financing. The purchase agreement
requires the Company to lend $100,000 of the net proceeds to the Aeon Group,
Inc.. The Series D stock is intended to be a bridge financing to be redeemed
9
<PAGE>
from future financings to be received in connection with a merger of the
Company. However, the Company will require additional funding to cover current
operations, which require approximately $75,000 a month based on current levels
of operations, until revenues from licensing, joint ventures or technology sales
are sufficient.
Current liabilities include approximately $1,558,000 of convertible term
notes, which the Company anticipates will be converted into shares of its common
stock. Non-current liabilities include approximately $978,000 in deferred
salaries due to officers, accrued interest of approximately $471,000 due to
stockholders and notes payable of $1,420,000 due to officers/directors, whose
due dates have historically been extended because the Company did not have the
available cash resources to repay on the scheduled due dates.
The Company is negotiating for additional funding. Such additional funding
may be raised through sources including license fees, sales of equipment in
connection with licensing operations, joint ventures or other collaborative
relationships, as well as equity or debt financing. No assurance can be given
that funding will be sufficient and available or, if it is available, that it
will be available on acceptable terms. If additional funds are not available to
satisfy our past due accounts payable and our short-term or long-term capital
requirements, we may not be able to continue as a going concern.
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30, 1999
Net cash and cash equivalents used in operating activities decreased to
$414,023 for the six months ended June 30, 2000 from $2,528,228 for the six
months ended June 30, 1999. The decreased level of activities and continued
deferral of salaries, accrued interest and other accrued liabilities contributed
to the lower use of cash during the first half of 2000.
Net cash and cash equivalents used in investing activity decreased to
$4,070 for the six months ended June 30, 2000, from $241,506 for the six months
ended June 30, 1999. During the first half of 2000, there were no expenditures
for property and equipment, which totaled $234,559 during the six months ended
June 30, 1999.
Cash flows from financing activities decreased to $351,932 for the six
months ended June 30, 2000, from $2,844,268 for the six months ended June 30,
1999. The primary sources of the funds, net of expenses, provided by financing
activities in the first half of 2000 were the private placement of the Company's
common stock and the sale of the Company's common stock through the exercise of
warrants. The primary sources of the funds, net of expenses, provided by
financing activities in the first half of 1999 were the private placement of the
Company's common stock, totaling $2,070,535 and the closing of the first and
second tranches of the term notes series, totaling approximately $779,000, net
of expenses.
10
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
The Company is a party to the following legal proceedings :
1. On April 3, 2000, the Company entered into a stipulation agreement with
Reckson Operating Partnership, L.P. ("Reckson") as a result of a summary
proceeding that was instituted on March 14, 2000 in the District Court of
the County of Suffok, NY by Reckson with regard to non-payment of
approximately $72,000 of rent and real estate taxes. The Company and
Reckson have agreed to a payment schedule and to terminate the Company's
lease as of June 30, 2000. The Company made the final payment under the
stipulation agreement on July 5, 2000.
2. On March 28, 2000, the Company filed a verified answer in regard to an
action commenced on January 11, 2000 in the Supreme Court of State of New
York by Yates Foil USA, Inc., which seeks damages of approximately $140,000
for goods sold and delivered. The amount of the claim is accrued on the
books of the Company as at December 31, 1999.
3. The Company is also a party to several legal proceedings relating to
creditors which are not material.
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities.
During the three months ended June 30, 2000, the Company sold 236,572
shares of its common stock to certain accredited investors in a private
placement, for an aggregate offering of $94,200. In connection with the private
placement, Trautman Wasserman & Company, Inc., the placement agent, received
cash commissions of $7,536.
The sales of the shares of common stock in the private placement were made
in reliance upon the exemption from registration under the Securities Act of
1933, as amended (the "Securities Act"), provided by Section 4(2) of the
Securities Act.
11
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
3.7* Certificate of Designation for the Company's Series D 8% Convertible
Preferred Stock, filed on July 10, 2000. (Incorporated by reference to
Exhibit 3.7 previously filed with Compositech's registration statement
on Form S-3 filed on July 21, 2000)
10.74* Letter Agreement, dated June 2, 2000, between Compositech and
Sovereign Capital Advisors, LLC, to extend the due date on a certain
Secured Convertible Bridge Financing Note. (Incorporated by reference
to Exhibit 10.32 previously filed with Compositech's registration
statement on Form S-3 filed on July 21, 2000)
10.75* Letter Agreement, dated June 26, 2000 between Compositech and SovCap
Equity Partners, Ltd., Sovereign Capital Advisors LLC, Arab Commerce
Bank, Ltd., Correllus International Ltd. and Bronia GmbH, extending
the term of the Repricing Warrants from 90 days to 180 days.
(Incorporated by reference to Exhibit 10.33 previously filed with
Compositech's registration statement on Form S-3 filed on July 21,
2000)
10.76* Letter Agreement between Compositech and SovCap Equity Partners, Ltd.,
Sovereign Capital Advisors LLC, Arab Commerce Bank, Ltd., Correllus
International Ltd. and Bronia GmbH dated July 14, 2000, to extend the
due dates on certain Bridge Financing Notes. (Incorporated by
reference to Exhibit 10.34 previously filed with Compositech's
registration statement on Form S-3 filed on July 21, 2000)
10.77* Letter Agreement, dated July 7, 2000, between Compositech and SovCap
Equity Partners, Ltd., as Representative for the Purchasers amending a
certain Bridge Note Purchase and Security Agreement as to certain
collateral. (Incorporated by reference to Exhibit 10.35 previously
filed with Compositech's registration statement on Form S-3 filed on
July 21, 2000)
10.78* Convertible Preferred Stock and Warrants Purchase Agreement dated July
7, 2000 between Compositech and The Gross Foundation, Inc.
(Incorporated by reference to Exhibit 10.36 previously filed with
Compositech's registration statement on Form S-3 filed on July 21,
2000)
10.79* Registration Rights Agreement dated as of July 7, 2000, between
Compositech and The Gross Foundation, Inc. (Incorporated by reference
to Exhibit 10.37 previously filed with Compositech's registration
statement on Form S-3 filed on July 21, 2000)
10.80* Common Stock Purchase Warrant dated July 12, 2000 between Compositech
and The Gross Foundation, Inc. (Incorporated by reference to Exhibit
10.38 previously filed with Compositech's registration statement on
Form S-3 filed on July 21, 2000)
10.81* Letter Agreement, dated July 19, 2000, between Compositech and SovCap
Equity Partners, Ltd., as Representative for the Purchasers amending
certain Registration Rights Agreements. (Incorporated by reference to
Exhibit 10.39 previously filed with Compositech's registration
statement on Form S-3 filed on July 21, 2000)
12
<PAGE>
10.82 Letter Agreement, dated July 21, 2000, between Compositech and
Sovereign Capital Advisors, LLC, to extend the due date on a certain
Secured Convertible Bridge Financing Note.
10.83 Letter Agreement between Compositech and SovCap Equity Partners, Ltd.,
Sovereign Capital Advisors LLC, Arab Commerce Bank, Ltd., Correllus
International Ltd. and Bronia GmbH dated July 21, 2000, to extend the
due dates on certain Bridge Financing Notes.
27 Financial Data Schedules ( Edgar version only )
* Previously filed
(b) Reports on Form 8-K
NONE
All other items required in Part II have been filed previously or are not
applicable for the quarter ended June 30, 2000.
Signature
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.
COMPOSITECH LTD.
Dated: August 14, 2000 /s/ Samuel S. Gross
---------------------------------------------
Executive Vice President and Treasurer
(Principal Accounting Officer officer
duly authorized to sign this report on behalf
of the registrant)
13
