UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the six months ended JUNE 30, 2000
[ ] 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: 000-20786
LEAPFROG SMART PRODUCTS, INC.
FORMERLY ALBARA CORPORATION
(Name of small business issuer in its charter)
COLORADO 84-1076959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1011 MAITLAND CENTER COMMONS, MAITLAND, FLORIDA 32751
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number (407) 838-0400
Securities registered pursuant to Section 12(b) of the
Securities Exchange Act:
NONE
Securities registered pursuant to section 12(g) of the
Securities Exchange Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section13 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 [ ]
State issuer's revenues for its most recent fiscal year:
December 31, 1999 - $121,533
As of July 31, 2000, 6,883,949 shares of the issuer's Common Stock were
outstanding.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The unaudited condensed financial statements of Leapfrog Smart Products,
Inc. for the six months ended June 30, 2000 and 1999 follow. The financial
statements reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
represented.
It is suggested that these financial statements 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.
INDEX TO FINANCIAL STATEMENTS
________
Page
NUMBER
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets -
June 30, 2000 and December 31,1999 3
Consolidated Condensed Statements of Operations -
Quarters ended June 30,2000 and 1999, the Six
Months ended June 30, 2000 and 1999 and for the
Period April 11, 1996 (Date of Inception) Through
June 30, 2000 4
Consolidated Condensed Statements of Changes in
Stockholders' Equity (Deficit) -
Six Months ended June 30, 2000 and 1999 5
Consolidated Condensed Statements of Cash Flows -
Six Months ended June 30, 2000 and 1999 and
for the Period April 11, 1996 (Date of Inception)
Through March 31, 2000 7
Notes to Consolidated Financial Statements 8
2
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 8,183 $ 18,529
Accounts receivable 8,200 6,554
Unbilled progress receivables 142,111 -
Inventory 92,277 52,639
Prepaid expenses 336,621 219,740
Notes receivable - related party 46,409 26,600
Other receivables 2,727 9,226
TOTAL CURRENT ASSETS 636,528 333,288
PROPERTY AND EQUIPMENT, NET 301,833 267,073
OTHER ASSETS
Related-party advances 177,887 43,116
Notes receivable - related party - 5,000
Deposits 38,136 8,600
Capitalized software costs, net of accumulated
amortization of $15,915 and $7,600 81,520 68,400
Costs in excess of fair market value of assets
acquired, net of accumulated amortization of 26,000 27,500
$4,000 and $2,500
$ 1,261,904 $ 752,977
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Notes payable $ 1,756,184 $ 1,859,049
Notes payable - related party 215,258 75,258
Accounts payable 639,926 223,474
Accrued expenses 237,580 99,816
TOTAL CURRENT LIABILITIES 2,848,948 2,257,597
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 500 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - no par value; 30,000,000
shares authorized; 6,603,777 and 5,189,769
shares issued and outstanding 6,161,469 4,006,025
Convertible preferred stock - no par value per
share;
10,000,000 shares authorized;
Series A; 125,000 and 0 shares issued 480,000 -
and outstanding
Series F; 195 and 0 shares issued and 14,625 -
outstanding
Deficit accumulated during development stage (8,243,638) (5,510,645)
(1,587,544) (1,504,620)
$ 1,261,904 $ 752,977
</TABLE>
3
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
From
April 11,
1996
Six Months Six Months Quarter Quarter (Inception)
Ended Ended Ended Ended Through
June 30, June 30, June 30, June 30, June 30,
2000 2000 2000 2000 2000
<S> <C> <C> <C> <C> <C>
REVENUES $ 167,740 $ 37,096 $ 145,397 $ 3,934 $1,048,530
COST OF SALES 158,429 33,712 129,080 1,637 748,858
GROSS PROFIT 9,311 3,384 16,317 2,297 299,672
OPERATING EXPENSES
Personnel and 1,230,187 443,482 593,570 267,014 3,786,936
related expenses
Consulting fees 222,908 91,434 151,660 46,433 677,373
General and 1,021,445 347,178 568,859 230,957 3,210,297
administrative
Depreciation and 46,869 27,516 24,370 14,251 178,068
amortization
TOTAL OPERATING 2,521,409 909,610 1,338,459 558,655 7,852,674
EXPENSES
OTHER INCOME (EXPENSE)
Other income, net 40,091 2,121 1,196 1,267 62,013
Interest expense (251,616) (173,338) (120,979) (143,112) (743,279)
(211,525) (171,217) (119,783) (141,845) (681,266)
NET LOSS $(2,723,623) $(1,077,443) $(1,441,925)$(698,203) $(8,234,268)
Dividends on
preferred stock (9,370) - (7,480) -
Net loss
attributable to $(2,732,993) $(1,077,443) $(1,449,405)$(698,203)
common shareholders
BASIC AND DILUTED
NET LOSS PER COMMON
SHARE $ (.46) $ (.27) $ (.23)$ (0.17)
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 5,944,854 3,980,125 6,291,375 4,012,120
</TABLE>
4
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated Total
Common Stock Preferred Stock During Stockholders'
No Par Value No Par Value Development Equity
Shares Amount Shares Amount Stage (Deficit)
BALANCE -
DECEMBER 31, 1999 5,189,769 $4,006,025 - - $(5,510,645) $(1,504,620)
MERGER TRANSACTION
WITH ALBARA
CORPORATION 616,797 (14,625) 195 $14,625 - -
ISSUANCE OF COMMON
AND PREFERRED STOCK
FOR CASH 454,500 1,251,000 125,000 480,000 - 1,731,000
ISSUANCE OF COMMON
STOCK FOR SERVICES 101,000 259,750 - - - 259,750
ISSUANCE OF COMMON
STOCK FOR PAYMENT
OF DEBT 2,500 6,500 - - - 6,500
ISSUANCE OF COMMON
STOCK FOR CONVERSION
OF DEBENTURES 153,211 459,601 - - - 459,601
ISSUANCE OF COMMON
STOCK FOR EXERCISE
OF STOCK OPTIONS 11,000 31,968 - - - 31,968
ISSUANCE OF COMMON
STOCK RELATED TO
DEBT FINANCING 75,000 56,250 - - - 56,250
ISSUANCE OF STOCK
OPTIONS FOR SERVICES - 105,000 - - - 105,000
ACCRUED DIVIDENDS
ON PREFERRED STOCK - - - - (9,370) (9,370)
NET LOSS - - - - (2,723,623) (2,723,623)
BALANCE - JUNE 30,
2000 6,603,777 $6,161,469 125,195 $494,625 $(8,243,638) $(1,587,544)
5
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated Total
Common Stock Preferred Stock During Stockholders'
No Par Value No Par Value Development Equity
Shares Amount Shares Amount Stage (Deficit)
BALANCE -
DECEMBER 31, 1998 3,767,219 $1,778,411 - - $(2,413,005) $ (634,594)
ISSUANCE OF COMMON
STOCK FOR CASH 167,418 291,234 - - - 291,234
ISSUANCE OF COMMON
STOCK ON EXERCISE
OF STOCK OPTIONS 64,075 16,019 - - - 16,019
ISSUANCE OF COMMON
STOCK FOR SERVICES 43,720 21,277 - - - 21,277
ISSUANCE OF COMMON
STOCK FOR PAYMENT
OF DEBT 25,000 25,000 - - - 25,000
ISSUANCE OF COMMON
STOCK FOR ACQUISITION
OF MINORITY
INTEREST POSITION
IN SUBSIDIARY 40,000 30,000 - - - 30,000
ISSUANCE OF COMMON
STOCK RELATED TO
DEBT FINANCING 172,009 129,507 - - - 129,507
NET LOSS - - - - (1,077,443) (1,077,443)
BALANCE -
JUNE 30, 1999 4,279,441 $2,291,448 - - $(3,490,448) $(1,199,000)
6
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
</TABLE>
<TABLE>
<CAPTION>
Cumulative:
April 11,
Six Six Months 1996
Months Ended (Inception)
Ended June 30, Through
June 30, 1999 June 30,
2000 2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,723,623) $(1,077,443) $(8,159,268)
Reconciliation of net loss to net
cash used in operating activities
Depreciation 37,770 26,516 163,458
Depreciation and amortization charged 11,795 18,738 38,134
to cost of sales
Amortization 9,100 1,000 11,599
Assets expensed to research and 18,158 - 18,158
development
Loss on disposal of assets, net - 2,667 10,127
Loss on write-off of related party - 17,870 17,870
note receivable
Common stock and options issued 456,718 150,784 1,359,312
for services and interest
Cash provided by (used in) change in:
Accounts receivable (1,646) 445 (8,200)
Unbilled progress revenues (142,111) - (142,111)
Related party advances (134,771) (1,694) (177,887)
Other receivables 6,499 (1,318) (2,727)
Inventory (39,638) (10,757) (92,277)
Prepaid expenses and other assets (145,198) (30,590) (343,538)
Bank overdraft - 52,337 -
Accounts payable 415,279 (37,043) 656,420
Accrued expenses 182,495 (13,896) 282,311
Deferred income - (11,500) -
Minority interest 500 11,018 500
NET CASH USED IN OPERATING ACTIVITIES(2,048,673) (902,866) (6,368,119)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (101,768) (85,525) (531,867)
Net increase in notes receivable - (14,809) (19,000) (64,279)
related party
Capitalization of software costs (21,435) (76,000) (97,435)
Proceeds from sale of vehicles - - 8,473
NET CASH USED IN INVESTING ACTIVITIES (138,012) (180,525) (685,108)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 701,902 760,000 3,117,768
Payments on notes payable (399,313) (18,434) (723,797)
Proceeds from exercise of common 2,750 16,019 451,370
stock options
Proceeds from sale of common stock 1,251,000 291,234 3,520,811
Proceeds from sale of preferred stock 480,000 - 480,000
Proceeds from related-party borrowings 140,000 - 222,658
Repayments of related-party borrowings - (6,300) (7,400)
NET CASH PROVIDED BY 2,176,339 1,042,519 7,061,410
FINANCINGACTIVITIES
NET INCREASE (DECREASE) IN CASH (10,346) (40,872) 8,183
CASH AT BEGINNING OF PERIOD 18,529 40,872 -
CASH AT END OF PERIOD $ 8,183 $ _ $ 8,183
</TABLE>
7
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Six Months and Quarters Ended June 30, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Leapfrog Smart Products, Inc. (a Colorado corporation) and
Subsidiaries (the "Company") operations include the design,
development, and licensing of Smart card applications and related
hardware and database management systems and services. The Smart
card is a wallet-sized plastic card with an embedded computer chip
carrying accessible data that is retrievable on demand and is
capable of integrating various functions with security features.
Leapfrog Smart Products, Inc. (Leapfrog) was incorporated under
the laws of the State of Florida in 1996 originally under the name
Telephones! Telephones! Inc. Leapfrog was merged into a 100%
owned subsidiary of the Company named Leapfrog Merger, Inc.
Leapfrog owns approximately 95% of the outstanding common stock of
Leapfrog Global IC Products, Inc. (LGIC) and approximately 96% of
the outstanding common stock of Conduit Healthcare Solutions, Inc.
(Conduit). LGIC issued 52,895 shares of it common stock as an
incentive to purchase Leapfrog stock. Another 5,000 shares were
issued in LGIC from the exercise of an option for $500. Conduit
was originally incorporated in 1997 under the name Leapfrog
Healthcare Products, Inc.
Effective February 18, 2000, Albara Corporation (Albara) acquired,
through its wholly owned subsidiary Leapfrog Merger, Inc., 100% of
the outstanding common stock of the Company in exchange for
5,350,049 shares of Albara common stock. Additionally, the
outstanding stock options of the Company were converted, on a pro
rata basis, into 2,434,950 Albara stock options. Prior to the
merger, Albara was considered to be a publicly held shell company
with no revenues and insignificant expenses, assets and liabilities.
Subsequent to the merger, the Albara records have not been made
available to the Company. Accordingly, since management has been
advised that there are no significant balance sheet or income
statement amounts, proforma information has not been presented.
Upon completion of the merger, the original shareholders of Albara
held 616,796 shares of its common stock and 195 shares of preferred
stock. As a result of the exchange, the former stockholders of the
Company gained control of Albara. For accounting purposes, the
acquisition has been accounted for as a recapitalization of the Company
with the Company being treated as the acquiring entity (reverse
acquisition) with no goodwill recorded. Accordingly, the historical
financial statements prior to February 18, 2000 are those of Leapfrog
Smart Products, Inc. and Subsidiaries with the related stockholders'
equity section being retroactively restated to reflect the equivalent
number of Albara shares received in the merger after giving effect to
the differences in par value. In connection with the merger, Albara
changed its name to Leapfrog Smart Products, Inc. In January 2000
Albara increased its authorized shares of no par value common
stock to 30,000,000 and increased its authorized shares of no par
value preferred stock to 10,000,000.
8
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the accounts of Leapfrog Smart Products, Inc.,
Leapfrog Merger, Inc., Conduit Healthcare Solutions, Inc., and
Leapfrog Global IC Products, Inc. (collectively, the Company).
All significant intercompany transactions and balances have been
eliminated in the condensed consolidated financial statements.
These statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q 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. In the
opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair
presentation of the results of operations for the periods
presented have been included. Operating results for the six month
periods and the three month periods are not necessarily indicative
of the results that may be expected in the future.
DEVELOPMENT STAGE COMPANY
Since its inception, the Company's planned principal operations
have not yet begun to produce significant revenue; accordingly,
the Company is considered to be a development stage enterprise.
REVENUE AND EXPENSE RECOGNITION
Revenues are generally recognized when the service has been performed
and related costs and expenses are recognized when incurred.
Contracts for the development of software and installation of the
related hardware that extend over more than one reporting period
are accounted for using the percentage-of-completion method of
accounting. Revenue recognized at the financial statement date
under these contracts is that portion of the total contract price
that costs expended to date bears to the total anticipated final
cost, based on current estimates of cost to complete. Revisions
in total costs and earnings estimates during the course of the
contract are reflected in the accounting period in which the
circumstances necessitating the revision become known. At the time
a loss on a contract becomes known the entire amount of the
estimated loss is recognized in the financial statements. Costs
attributable to contract disputes are carried in the accompanying
balance sheet only when realization is probable. Amounts received
on contracts in progress in excess of the revenue earned, based
upon the percent of completion method, are recorded as deferred
revenue and the related costs and expenses incurred are recorded
as deferred costs.
NET LOSS PER SHARE OF COMMON STOCK
The basic and diluted net loss per common share in the
accompanying consolidated statements of operations are based upon
the net loss after the deduction of preferred dividends divided by
the weighted average number of common shares outstanding during
the periods presented. Diluted net loss per common share is the
same as basic net loss per common share since the inclusion of all
potentially dilutive common shares that would be issuable upon the
exercise of outstanding stock options and the convertible
preferred stock and promissory notes would be anti-dilutive.
9
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STATEMENT OF CASH FLOWS
As an incentive to several investors in debentures, 75,000 and 172,009
shares of stock were issued for a dollar value of $56,250 and
$130,000 for the six months ended June 30, 2000 and 1999,
respectively. As an incentive to several investors in debentures,
153,352 shares of stock were issued for a dollar value of
$115,000 for the three months ended June 30, 1999.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CONTINUED OPERATIONS
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements during the three
month periods ended June 30, 2000 and 1999, the Company incurred
losses of approximately $1.4 million and $698,000, respectively,
and had a deficiency in working capital of approximately $2.2
million at June 30, 2000. The Company incurred losses of $2.7
million and $1.1 million for the six months ended June 30, 2000
and 1999, respectively. These factors, among others, may indicate
the Company will be unable to continue as a going concern for a
reasonable period of time. The accompanying consolidated
financial statements do not include any adjustments relating to
the outcome of this uncertainty.
LIQUIDITY AND PLAN OF OPERATIONS
At June 30, 2000, the Company had cash of approximately $8,000 and
a deficiency in working capital of $2.2 million.
The Company has a limited operating history and its prospects are
subject to the risks, expenses and uncertainties frequently
encountered by companies in new and rapidly evolving markets such
as Smart card products and services. These risks include the
failure to develop and extend the Company's products and services,
the rejection of such services by Smart card customers, vendors
and/or advertisers, the inability of the Company to maintain and
increase its customer base, as well as other risks and
uncertainties. In the event that the Company does not
successfully implement its business plan, certain assets may not
be recoverable.
10
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
LIQUIDITY AND PLAN OF OPERATIONS (CONT'D)
The Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its
obligations on a timely basis. The Company's primary source of
liquidity has been through the private placement of equity and
debt securities. The Company is presently exploring possibilities
with respect to raising working capital through additional equity
and/or debt financings in the near future. In July 2000, the
Company received approval from the Securities and Exchange
Commission for an SB-1 authorizing a total of 2,909,635 of
registered shares. Subsequent to June 30, 2000 through August 14,
2000, the Company has sold 465,544 additional shares of common
stock for $906,750 in net proceeds. Also, $150,000 in debentures
that were due March 1, 2000 plus interest of approximately $8,000
were converted into 78,792 shares of common stock in August.
However, there can be no assurance that the Company will be
successful in achieving profitable operations or acquiring
additional capital or that such capital, if available, will be on
terms and conditions favorable to the Company. Based upon its
current business plan, the Company believes that it will generate
sufficient cash flow through operations and external sources of
capital to continue to meet its obligations in a timely manner.
NOTE 2 - NOTES PAYABLE
In the second quarter of 2000, the Company issued a note for
$100,000 to a bank at the bank's prime rate plus 1.5%. The note
was due on July 15, 2000. As of August 14, 2000 it has not been
repaid. The Company also issued a $100,000 note to a related
individual with 10% interest on April 28, 2000. This note is due
on August 15, 2000.
On June 30, 2000, $405,500 in debentures plus accrued interest of
approximately $54,000 were converted into 153,211 shares of common
stock.
Cash paid for interest during the three months ended June 30, 2000
and 1999 was $22,312 and $16,237, respectively. Cash paid for
interest during the six months ended June 30, 2000 and 1999 was
$41,790 and $23,984, respectively.
All notes payable are past due except for the related party note
discussed above and several related party notes that are not due
until December of 2000 totaling $50,258.
11
NOTE 3 - STOCKHOLDERS' EQUITY
ISSUANCES OF COMMON OR PREFERRED STOCK
Subsequent to the merger, the Company issued 125,000 shares of Series
A Convertible Preferred Stock and received net proceeds of $480,000.
The holders of the Series A Preferred Shares are entitled to
cumulative dividends at the rate of 6% per annum. Each share of
Series A convertible Preferred Stock is convertible into one share
of common stock at the election of the holder thereof. The Company
may require mandatory conversion of all, but not less than all, of
the Series A Preferred shares on or after the first anniversary of
the initial sale if certain stock trading prices are attained or if
there is a reorganization of the Company involving an exchange of
its common stock for shares of a United States domiciled
corporation the shares of which are traded on a national exchange
or an the NASDAQ national market system. Additional issuances of
the preferred stock, under substantially identical terms and
conditions of the aforementioned shares, may be sold until Series A
Convertible Preferred Stock having an aggregate purchase price of
$6,000,000 have been sold, provided that all such sales are held
prior to May 2, 2000. For as long as at least 50% of the Series A
Convertible Preferred shares are outstanding, the holders thereof
may elect one board member to the Company's board of directors.
During the first quarter of 2000, the Company issued an aggregate
of 211,000 shares of its common stock for cash and received
proceeds of $838,500.
During the second quarter of 2000, the Company issued an aggregate
of 254,500 shares of its common stock for cash and received
proceeds of $415,250.
The shares issued to Albara shareholders consisted of 616,797
shares of common stock and 195 shares of preferred stock. The
preferred stock is Series F and is entitled to receive dividends on
a pro rata basis with holders of common stock. These holders are
entitled to a $100 per share preference on any liquidation of the
Company and shall share pro rata with the common stockholders in
any remaining amounts distributed. Each share is convertible into
15 shares of common stock after August 31, 1993.
AUTHORIZED SHARES
In January 2000, prior to the merger, the authorized shares of no
par value common stock were increased to 30,000,000 and the
authorized shares of no par value preferred stock were increased
to 10,000,000.
WARRANT
On January 31, 2000 a warrant was issued which was effective on
February 18, 2000 to the former majority shareholder of Albara for the
right to purchase 500,000 shares of common stock at $3.50 per
share on or after April 30, 2000. The warrant expires on January
31, 2010. The exercise price of $3.50 shall be adjusted to $.035
in the event the Company has not closed an equity offering raising
an aggregate of at least $2,500,000 by July 16, 2000.
12
NOTE 3 - STOCKHOLDERS' EQUITY (CONT'D)
OPTIONS
Options to purchase 200,000 shares of common stock were issued to
a consultant on May 24, 2000. Options for 50,000 of the shares
vested immediately at a $4 strike price. Additionally, three
50,000 blocks of options vest 60 days, 90 days and 180 days later
at strike prices of $5, $6 and $7, respectively. The options
expire two years after the underlying shares were issued which was
under the Company's SB-1 that was approved in July 2000.
Options were also issued along with the $100,000 related party
note issued on April 28, 2000. The options totaled 20,000 at a
strike price of $1.75 and expire in two years.
STOCK UNDER EMPLOYMENT AGREEMENTS
Under two employment agreements, the Company as obligated to issue
free trading shares to two employees of 25,000 each. The agreement was
approved by the Board of Directors on June 29, 2000 and the
employees on July 10, 2000. The shares were not issued by June
30, 2000 because it was postponed until the approval on the SB-1
was received which occurred in July. These agreements also call
for cash bonuses to be paid to these employees of 5% of income
from operations, defined as net income before taxes, minority
interests, extraordinary items, amortization of intangibles,
interest on long-term debt, and these bonuses.
NOTE 4 - SUBSEQUENT EVENTS
The Company was in the process of closing a private placement at the
end of the last quarter. The terms are still being negotiated but the
Company is still committed to fund $150,000 into a newly formed
Singapore company, Smart Products International ("SPI"), for a now
50% ownership. SPI will have certain non-exclusive and certain
exclusive rights in and to the Company's products and technologies
and the use of the Leapfrog name and marks. This company was
formed to market, sell and distribute the Company's software and
hardware products throughout the Asia-Pacific region (excluding
Peoples' Republic of China), and also to market and sell those
products elsewhere as agreed.
An additional warrant was issued on August 8, 2000 with the sale
of shares that granted the shareholder the ability to purchase up
to 100,000 shares of common stock for $2.50 per share for ninety
days.
On August, 3, 2000, options were approved by the Board of
Directors for 50,000 shares at the strike price of $1.75 to a
consultant.
On July 27, 2000, the Company filed suit in Federal Court in
Florida "Leapfrog Smart Products, Inc., a Colorado corporation, v.
Real Provencher" alleging his violation of Rule 144 and Section 16
of the Securities and Exchange Act. Immediately following, Real
Provencher filed suit against the Company in Texas on matters
arising from the same facts, "Real Provencher v. Leapfrog Smart
Products, Inc. f/k/a Albara Corporation, and American Securities
Transfer, Incorporated." The Company has filed a motion to move
the Texas case to Florida based upon the "First Filed Rule." It
is not possible, at this time, to give any reasonable estimate of
damages.
13
NOTE 4 - SUBSEQUENT EVENTS (CONT'D)
On August 1, 2000, Publicard filed a lawsuit, "Publicard, Inc.
f/k/a Publicker Industries, Inc. vs. Leapfrog Smart Products,
Inc.," against the Company attempting to collect on a Promissory
Note in the amount of $50,000. The Company has not yet answered
the Complaint, but will assert that the Promissory Note is subject
to certain set-offs and that the remainder of the note was
satisfied. At this time it is not practicable to assess potential
exposure or probability for success. The Company has a recorded
liability to Publicard of $100,000 (which includes an additional
$50,000 note) plus interest that is past due.
The Company has signed an agreement with an underwriter for a
public offering of approximately $10 million.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OR
PLAN OF OPERATION
The following discussion should be read in conjunction with the Financial
Statements and notes thereto.
PLAN OF OPERATION
LEAPFROG did not have any external sources of working capital since
inception except for the sale of stock to individuals and the issuance of
short-term notes payable while it was a private company. On February 18,
2000, LEAPFROG merged with Albara Corporation through a reverse acquisition
in which Albara acquired LEAPFROG and the existing shareholders of LEAPFROG
obtained control of Albara. Even with the completion of this business
combination transaction, there can be no assurance that the combined
companies will have sufficient funds to undertake any significant
development, marketing and manufacturing activities. Accordingly, the
Company is being required to seek additional debt or equity financing or
funding from third parties, in exchange for which the Company might be
required to issue a substantial equity position.
For the three months ended June 30, 2000, additional debt of $100,000 was
issued to a bank and another $100,000 to a related individual. Shares of
common stock totaling 254,500 were issued for cash of approximately
$415,250 for both the exercise of stock options and the private placements
of stock with individuals.
From the period January 1, 2000 through June 30, 2000, total additional
debt of $750,000 was issued to third parties and 454,500 shares of
restricted common stock were issued for approximately $1.3 million and
125,000 shares of convertible preferred stock were issued for net proceeds
of $480,000.
There is no assurance that the Company will be able to obtain additional
financing on terms acceptable to the Company. If Management is successful
in obtaining additional funding, these funds will be used primarily to
provide working capital needed for repayment of outstanding notes payable,
software development, sales and marketing expense, to finance research,
development and advancement of intellectual property concerns and for
general administration.
The Company was in the process of closing a private placement at the end of
the last quarter. The terms of the deal have not been finalized and are still
under negotiation, but the Company is still committed to fund $150,000 into a
newly formed Singapore subsidiary, Smart Products International, for a 50%
ownership. This subsidiary was formed to market, sell and distribute the
Company's software and hardware products throughout the Asia-Pacific region
(excluding Peoples' Republic of China), and also to market and sell those
products elsewhere as agreed.
Management has committed to a $225,000 investment into its China subsidiary
for funding a joint venture to produce and market biometric readers
internationally.
15
In July 2000, the Company received approval from the Securities and
Exchange Commission for an SB-1 authorizing a total of 2,909,635 of
registered shares. This has increased the Company's ability to obtain
equity financing. Subsequent to June 30, 2000 through August 14, 2000, the
Company has sold 465,544 additional shares of common stock for $906,750 in
net proceeds. Also, $150,000 in debentures that were due March 1, 2000
plus interest of approximately $8,000 were converted into 78,792 shares of
common stock in August.
RESULTS OF OPERATIONS
REVENUES AND GROSS PROFITS:
LEAPFROG is a development stage company with virtually no revenues.
Revenues for the six months ended June 30, 2000 increased $131,000 to
$168,000 from the $37,000 reported for the six months ended June 30, 1999.
Revenues for the three months ended June 30, 2000 of $145,000 increased
$141,000, from $4,000 for the three months ended June 30, 1999. The
increase in revenues in the second quarter of 2000, was due to the
recognition of revenue on the percentage of completion method for two
substantially complete projects involving both hardware and software
installation and development. The completion of both projects will serve
as working models for future sales. All revenues were associated with the
sale of predominantly hardware related items such as Smart card
readers/writers utilized in pilot evaluation programs, software testing
programs and specialized software solutions by potential future users of
LEAPFROG's software products. Gross margin for the three months ended June
30, 2000 was $16,000 or 11% of revenue. Gross margin for the six months
ended June 30, 2000 was $9,000 or 6% of revenue. The gross margin for the
six months ended June 30, 2000 being lower than in the second quarter is
due to a loss taken on a specialized software solution and the related
hardware in the first quarter of 2000. During the first six months of 2000
and 1999, LEAPFROG initiated pilot programs by providing software and
hardware at cost or near cost. These gross margins are not indicative of
margins expected in future years.
TOTAL OPERATING EXPENSES:
Total operating expenses for the quarter ended June 30, 2000 increased
$780,000 from $559,000 to $1.3 million, a 140% increase compared to the
same period in 1999. This increase is net of $21,000 and $14,000 in
software development expenditures that were capitalized during the quarters
ended June 30, 2000 and 1999, respectively. This increase is also net of
approximately $54,000 in employee costs charged to costs of sales and
inventory for work directly chargeable to projects in the second quarter of
2000. This increase is primarily associated with expense incurred in hiring
additional marketing and sales personnel to prepare for an intended roll-
out of products in the second quarter of 2000 as well as administrative
staff. Significant legal and professional expenses were incurred in the
second quarter of 2000 related to various recurring and non-recurring SEC
filings.
16
Total operating expenses for the six months ended June 30, 2000 increased
$1.6 million from $910,000 to $2.5 million, a 177% increase compared to the
same period in 1999. This increase is net of $21,000 and $76,000 in
software development expenditures that were capitalized during the six
months ended June 30, 2000 and 1999, respectively. This increase is also
net of approximately $54,000 in employee costs charged to costs of sales
and inventory for work directly chargeable to projects in 2000. This
increase is primarily associated with expense incurred in hiring additional
marketing and sales personnel to prepare for an intended roll-out of
products in 2000 as well as administrative staff and the related overhead.
Significant legal and professional expenses were incurred related to the
closing of the merger in the first quarter of 2000 and continued into the
second quarter with various recurring and non-recurring SEC filings.
Personnel and related expenses increased $327,000 or 122% to $594,000 for
the quarter ended June 30, 2000 compared to $267,000 for the same period in
1999. This increase is net of $21,000 and $14,000 in software development
expenditures that were capitalized during the quarters ended June 30, 2000
and 1999, respectively. This increase is also net of approximately $54,000
in employee costs charged to costs of sales and inventory for work directly
chargeable to projects in the second quarter of 2000. This increase was
primarily due to a 103% increase in the number of the staff, including
senior marketing and sales personnel to prepare for an intended rollout of
products in 2000 and other administrative staff in preparation for expected
growth and the reporting responsibilities of a public company.
Personnel and related expenses increased $787,000 or 177% to $1.2 million
for the six months ended June 30, 2000 compared to the $444,000 for the
same period in 1999. This increase is net of $21,000 and $76,000 in
software development expenditures that were capitalized during the six
months ended June 30, 2000 and 1999, respectively. This increase is also
net of approximately $54,000 in employee costs charged to costs of sales
and inventory for work directly chargeable to projects in 2000. This
increase was primarily due to a 107% increase in the number of staff,
including senior marketing and sales personnel to prepare for an intended
rollout of products in 2000 and other administrative staff in preparation
for expected growth and the reporting responsibilities of a public company.
The increase was also due to increased salaries paid to individuals given
more responsibility.
Consulting fees increased by $105,000 from the $46,000 incurred for the
quarter ended June 30, 1999 to $152,000 for the quarter ended June 30,
2000. Consulting fees increased by $131,000 from the $91,000 incurred for
the six months ended June 30, 1999 to $223,000 for the six months ended
June 30, 2000. The expenses in 2000 and 1999 related primarily to fees
paid to individuals and companies that assisted the Company in identifying
potential contract opportunities and recruiting distributors and value
added resellers who may participate in the intended product rollout in
2000. Expenses were higher in 2000 partially due to payment for services
of consultants to assist in maintaining a public market presence.
17
General and administrative expenses increased to $569,000 for the quarter
ended June 30, 2000 from $231,000 for the same period in 1999. This
$338,000 or 146% increase was due largely to increased legal and other
professional costs related to becoming a public company. General and
administrative expenses increased in several areas with the hiring of new
personnel requiring more space and general overhead. Travel, both domestic
and international, increased approximately $50,000 in the second quarter of
2000 compared to the same period in 1999 due the Singapore and China joint
ventures and the travel of the newly hired sales force domestically.
General and administrative expenses increased to $1.0 million for the six
months ended June 30, 2000 from $347,000 for the same period in 1999. This
$674,000 or 194% increase was due largely to increased legal and other
professional costs related to the merger. General and administrative
expenses increased in several areas with the hiring of new personnel
requiring more space and general overhead. Travel, both domestic and
international, increased approximately $100,000 in the second quarter of
2000 compared to the same period in 1999 due to the Singapore and China
joint ventures and the travel of the newly hired sales force domestically.
Depreciation and amortization expenses increased $10,000 or 71% to $24,000
for the quarter ended June 30, 2000 compared to $14,000 for the same period
in 1999. The increase was due to the purchase of additional assets as well
as the amortization of capitalized software costs and the addition
attributable to costs of assets acquired in excess of fair market value.
Depreciation and amortization expenses increased $19,000 or 70% to $47,000
for the six months ended June 30, 2000 compared to $28,000 for the same
period in 1999. The increase was due to the purchase of additional assets
as well as the amortization of capitalized software costs and the addition
attributable to costs of assets acquired in excess of fair market value.
OTHER INCOME AND EXPENSE:
Interest expense for the quarter ended June 30, 2000 decreased $77,000 from
$143,000 to $66,000 when compared to the same period in 1999. In March
through July 1999, LEAPFROG completed a short-term debt offering to a
select group of accredited investors providing net proceeds of $1,402,000.
During the second quarter of 1999, the Company issued an aggregate of
$460,000 of these 10% debenture notes. The Company also issued an
aggregate of 153,342 shares of it common stock to some of these debenture
holders as incentive to enter into the agreements. For accounting
purposes, these shares of common stock were valued at $115,000 and that
value was included in 1999 interest expense. Substantially all of the
remaining interest expense in the second quarter of 1999 is directly
associated with the $350,000 in bank notes and other short-term notes
payable to one individual totaling $250,000 and only a small portion of the
debentures mentioned above. Interest expense for the quarter ended June
30, 2000 included $55,000 attributable to the value of the stock options
issued with the $100,000 related party note on April 28, 2000.
18
Interest expense for the six months ended June 30, 2000 increased $78,000
from $173,000 to $252,000 when compared to the same period in 1999. In
March through July 1999, LEAPFROG completed a short-term debt offering to a
select group of accredited investors providing net proceeds of $1,402,000.
During the first six months of 1999, the Company issued an aggregate of
$510,000 of these 10% debenture notes. The Company also issued an
aggregate of 172,009 shares of it common stock to some of the debenture
holders as incentive to enter into the agreements. For accounting
purposes, these shares of common stock were valued at $130,000 and that
value was included in interest expense. Substantially all of the remaining
interest expense in the first six months of 1999 is directly associated
with the $350,000 in bank notes and other short-term notes payable to one
individual totaling $250,000 and only a small portion of the debentures
mentioned above.
In January of 2000, $550,000 in debentures were issued with 75,000 shares
of common stock issued as an incentive to enter into these agreements.
These shares resulted in $56,250 in interest expense being recorded. Also,
included in interest expense was $55,000 attributable to the value of the
stock options issued with the $100,000 related party note on April 28,
2000. Therefore, interest expense was higher in the first six months of
2000 as substantially all debt remained outstanding from 1999 in addition
to new debt issued in 2000. The interest related to stock issued with
debentures and options issued with the note that was more in 1999 than in
2000 was not enough to offset the usual interest accrued on the debt.
NET LOSS:
The net loss for the quarter ended June 30, 2000 increased $744,000 from
$698,000 to $1.4 million, a 107% increase compared to the quarter ended
June 30, 1999. This increase is net of $14,000 in software development
expenditures that were capitalized during the quarter ended June 30, 1999.
This increase is primarily associated with expense incurred in hiring
additional marketing and sales personnel to prepare for an intended roll-
out of products in 2000 as well as administrative staff. Significant legal
and professional expenses were incurred related to recurring and non-
recurring SEC filings. Net loss per common share increased from $.17 per
share in 1999 to $.23 in 2000. This increase is primarily due to the
increase in losses realized offset by an increase in the weighted average
number of common shares outstanding from 4,012,120 for the quarter ended
June 30, 1999 to 6,291,375 for the quarter ended June 30, 2000.
The net loss for the six months ended June 30, 2000 increased $1.6 million
from $1.1 million to $2.7 million, a 153% increase compared to the six
months ended June 30, 1999. This increase is net of $76,000 in software
development expenditures that were capitalized during the six months ended
June 30, 1999. This increase is primarily associated with expense incurred
in hiring additional marketing and sales personnel to prepare for an
intended roll-out of products in 2000 as well as administrative staff.
Significant legal and professional expenses were related to the closing of
the merger in first quarter 2000 and other recurring and non-recurring SEC
filings. Net loss per share of common stock increased from $.27 per share
in the first six months1999 to $.46 in the same period for 2000. This
increase is primarily due to the increase in losses realized offset by an
increase in the weighted average number of common shares outstanding from
3,980,125 for the six months ended June 30, 1999 to 5,944,854 for the six
months ended June 30, 2000.
19
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities increased $1.1 million from $903,000
for the six months ended June 30, 1999 to $2.0 million for the six months
ended June 30, 2000. The increase is primarily due to the higher net loss,
higher receivables and higher prepaid expenses offset slightly by the
common stock and stock options issued for services and interest and the
increase in accounts payable and accrued expenses.
Net cash used for investing activities decreased $43,000 from $181,000 in
the first six months of 1999 compared to $138,000 in the same period of
2000. The decrease was primarily due to $55,000 less being spent on
capitalization of software costs in the first six months of 2000.
Net cash provided by financing activities increased approximately $1.1
million from $1.0 million for the six months ended June 30, 1999 to $2.2
million for the six months ended June 30, 2000. Financing activities
during 2000 included the issuance of common stock providing $1.7 million in
the aggregate and the issuance of notes payable which provided $702,000
offset by an $399,000 repayment of existing notes payable. Financing
activities during 1999 included the issuance of common stock providing
$307,000 in the aggregate and the issuance of notes payable that provided a
net of $760,000 after repayment of principal in the amount of $25,000.
Like many early stage technology companies, the majority of LEAPFROG's
assets are intangible assets such as copyrights, trademarks, and research
and development costs which by their very nature are not reflected in the
Company's balance sheet as assets.
In the past, LEAPFROG's Management has been successful in attracting
accredited investors who have purchased newly issued common stock. However,
there can be no assurance that the Company will be able to obtain
additional equity financing on similar terms in the future. Over the past
two years all of LEAPFROG's debt financing has been short-term notes
payable. These notes can only be repaid if the Company successfully raises
additional equity or debt financing. In addition to the cash requirement
associated with repaying these notes, LEAPFROG will not be able to mount an
effective national marketing campaign for its products without an
additional infusion of capital. The Company does not have any commitments
to provide additional capital funding. Accordingly, there can be no
assurance that any additional funds will be available to the Company to
allow it to repay its outstanding debt and to cover the expenses associated
with executing its sales and marketing plan.
20
Y2K COMPLIANCE
LEAPFROG concluded its efforts concerning its exposure relative to year
2000 issues for both information and non-information technology systems.
Management actively monitors the status of the readiness program of the
Company. LEAPFROG`s out of pocket cost associated with becoming Year 2000
compliant were not significant. These cost were expensed as incurred, and
the Company does not anticipate any additional material expenditure as a
result of Year 2000 issues. Based on operations since January 1, 2000,
including the leap year date of February 29, 2000, the Company has not
experienced any significant disruption or change, and does not expect any
significant impact to its ongoing business a result of the Year 2000 issue.
Additionally, the Company is not aware of any significant Year 2000 issues
or problems that have arisen for its significant customers, vendors or
service providers. As there can be no assurance that the Company's efforts
to achieve Year 2000 readiness have been completely successful or that
customers, vendors and service providers will not experience Year 2000
related failures in the future, the Company will continue to monitor its
exposure to Year 2000 issues and will leave its contingency plans in place
in the event that any significant Year 2000 related issues arise.
FORWARD LOOKING STATEMENT
This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes a number of forward-looking statements that
reflect Management's current views with respect to future events and
financial performance. Those statements include statements regarding the
intent, belief or current expectations of LEAPFROG and members of its
management team as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Readers are urged to
carefully review and consider the various disclosures made by the Company
in this report and in the Company's other reports filed with the Securities
and Exchange Commission. Important factors currently known to Management
could cause actual results to differ materially from those in forward-
looking statements. The Company undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future operating
results over time. The Company believes that its assumptions are based upon
reasonable data derived from and known about its business and operations
and the business and operations of LEAPFROG. No assurances are made that
actual results of operations or the results of the Company's future
activities will not differ materially from its assumptions.
21
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 27, 2000, the Company filed suit in Federal Court in Florida
"Leapfrog Smart Products, Inc., a Colorado corporation, v. Real Provencher"
alleging his violation of Rule 144 and Section 16 of the Securities and
Exchange Act. Immediately following, Real Provencher filed suit against
the Company in Texas on matters arising from the same facts, "Real
Provencher v. Leapfrog Smart Products, Inc. f/k/a Albara Corporation, and
American Securities Transfer, Incorporated." The Company has filed a
motion to move the Texas case to Florida based upon the "First Filed Rule."
It is not possible, at this time, to give any reasonable estimate of
damages.
On August 1, 2000, Publicard filed a lawsuit, "Publicard, Inc. f/k/a
Publicker Industries, Inc. vs. Leapfrog Smart Products, Inc.," against the
Company attempting to collect on a Promissory Note in the amount of
$50,000. The Company has not yet answered the Complaint, but will assert
that the Promissory Note is subject to certain set-offs and that the
remainder of the note was satisfied. Again, at this time it is not
practicable to assess potential exposure or probability for success. The
Company has a recorded liability to Publicard of $100,000 (which includes
an additional $50,000 note) plus interest that is past due.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith or have been included as
exhibits to previous filings with the Commission and are incorporated
herein by this reference:
EXHIBIT NO. EXHIBIT
### 2.1 Agreement and Plan of Merger
## 3(a) Articles of Incorporation
## 3(b) Bylaws
# 4(a) Agreements Defining Certain Rights of Shareholders
# 4(b) Specimen Stock Certificate
# 10(a) Pre-incorporation Consultation and Subscription
Agreement
## 10.1 Consultation Services Agreement
## 10.2 Legal Services Engagement Agreement
### 10.3 Bleed-Out Agreement
### 10.4 Consulting Agreement
### 10.5 Warrant Agreement
### 10.6 Registration Rights Agreement
x 11 Statement re Computation of Earnings per Share
[required unless the computation can be clearly
determined from financials]
#### 16 Letter on Change in Certifying Accountant
x 21 Subsidiaries of the Registrant
x 27 Financial Data Schedule
# 99.1 Safe Harbor Compliance Statement
____________________________
23
x filed herewith
# previously filed with the Company's Definitive Information Statement
on Schedule 14C on January 18, 2000.
## previously filed with the Company's Registration Statement on Form S-8
on February 29, 2000
### previously filed with the Company's Form 8-K dated March 8, 2000
#### previously filed with the Company's Form 8-K dated March 17, 2000
#####incorporated herein by reference from the Company's Form SB-1/A filed
July 6, 2000
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the second quarter of the
2000 fiscal year:
24
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEAPFROG SMART PRODUCTS, INC.
By: /S/ RANDOLPH TUCKER
Randolph Tucker, CEO
Date: August 21, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
/S/ RANDOLPH TUCKER CEO August 21, 2000
Randolph Tucker & Director
/S/ JAMES K. GORNTO Chief Financial Officer August 21, 2000
James K. Gornto
24
