U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended MARCH 31, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________
Commission File number 33-58694
VITRIX, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 13-3465289
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
51 West Third Street, Suite 310, Tempe, Arizona 85281
-----------------------------------------------------
(Address of principal executive offices)
(480) 967-5800
---------------------------
(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At May 11, 2000, the issuer had
outstanding 30,243,531 shares of Common Stock, par value $.005 per share.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS.
VITRIX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 956,599 $ 376,365
Accounts receivable - trade, net 184,294 42,596
Inventory 79,622 28,397
Prepaid expenses and other current assets 33,527 10,591
----------- ---------
TOTAL CURRENT ASSETS 1,254,042 457,949
PROPERTY AND EQUIPMENT, NET 155,410 60,865
----------- ---------
TOTAL ASSETS $ 1,409,452 $ 518,814
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 44,423 $ 28,848
Accounts payable 77,518 146,084
Accrued liabilities 112,877 64,125
Deferred revenue 99,131 13,235
----------- ---------
TOTAL CURRENT LIABILITIES 333,949 252,292
LONG-TERM DEBT, LESS CURRENT PORTION 41,746 14,466
----------- ---------
TOTAL LIABILITIES 375,695 266,758
----------- ---------
COMMITMENTS: -- --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 10,000,000 shares authorized,
0 and 10,000,000 shares issued and outstanding -- 100,000
Common stock, $.005 par value, 50,000,000 shares authorized,
30,243,531 and 13,241,031 shares issued and outstanding 151,218 66,205
Contributed capital 2,493,505 956,468
Accumulated deficit (1,610,966) (870,617)
----------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,033,757 252,056
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,409,452 $ 518,814
=========== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
2
<PAGE>
VITRIX, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 308,407 $ 135,690 $ 834,237 $ 463,787
Services revenue 68,105 23,319 106,150 67,114
------------ ------------ ------------ ------------
TOTAL REVENUES 376,512 159,009 940,387 530,901
------------ ------------ ------------ ------------
COST OF REVENUES:
Product 111,549 48,227 319,233 164,838
Services 30,052 -- 30,052 --
------------ ------------ ------------ ------------
TOTAL COST OF REVENUES 141,601 48,227 349,285 164,838
------------ ------------ ------------ ------------
GROSS PROFIT 234,911 110,782 591,102 366,063
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Sales and marketing 236,936 48,177 522,458 170,631
Research and development 152,260 52,879 359,765 140,375
General and administrative 174,557 40,212 457,360 106,614
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 563,753 141,268 1,339,583 417,620
------------ ------------ ------------ ------------
NET LOSS FROM OPERATIONS (328,842) (30,486) (748,481) (51,557)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (4,438) (6,438) (8,564) (22,270)
Interest income 7,731 1,271 16,696 3,176
------------ ------------ ------------ ------------
3,293 (5,167) 8,132 (19,094)
------------ ------------ ------------ ------------
NET LOSS $ (325,549) $ (35,653) $ (740,349) $ (70,651)
============ ============ ============ ============
BASIC LOSS PER SHARE $ (0.01) $ (0.00) $ (0.03) $ (0.00)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 28,279,218 15,437,711 26,272,949 14,480,850
============ ============ ============ ============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
3
<PAGE>
VITRIX, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999 AND
THE NINE MONTH PERIOD ENDED MARCH 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------------ ---------------------- CONTRIBUTED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- --------- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 7,536,681 $ 75,367 6,476,139 $ 32,381 $ 387,873 $ (601,315) $ (105,694)
Conversion of related party
debt and interest 1,463,319 14,633 1,257,404 6,287 243,650 -- 264,570
Sale of stock, net of
costs of $9,063 1,000,000 10,000 859,283 4,296 176,622 -- 190,918
Merger with Vitrix
Incorporated 4,648,205 23,241 148,323 171,564
Net loss -- -- -- (269,302) (269,302)
----------- --------- ---------- --------- ---------- ----------- ----------
Balance at June 30, 1999 10,000,000 $ 100,000 13,241,031 $ 66,205 $ 956,468 $ (870,617) $ 252,056
Issuance of stock options -- -- -- -- 12,000 -- 12,000
Exercise of stock options 70,000 350 26,375 -- 26,725
Sale of common stock,
net of costs -- -- 6,732,500 33,663 1,409,662 -- 1,443,325
Issuance of common stock
for services -- -- 200,000 1,000 39,000 -- 40,000
Preferred stock conversion (10,000,000) (100,000) 10,000,000 50,000 50,000 --
Net loss -- -- -- -- -- (740,349) (740,349)
----------- --------- ---------- --------- ---------- ----------- ----------
Balance at March 31, 2000 -- $ -- 30,243,531 $ 151,218 $2,493,505 $(1,610,966) $1,033,757
=========== ========= ========== ========= ========== =========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
4
<PAGE>
VITRIX, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Net Loss $ (740,349) $ (70,651)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 30,983 20,701
Accrued interest converted to equity -- 64,570
Common stock and stocks options issued for services 52,000 --
Changes in Assets and Liabilities:
Accounts receivable-trade (141,698) (5,026)
Inventory (51,225) (11,492)
Prepaid expenses and other current assets (22,936) (8,600)
Accounts payable (68,566) 23,173
Accrued liabilities 48,752 (26,926)
Deferred revenue 85,896 --
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (807,143) (14,251)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (73,384) (15,725)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (73,384) (15,725)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital leases (9,289) (2,814)
Proceeds from issuance of stock and exercise
of stock options 1,470,050 190,918
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,460,761 188,104
----------- -----------
Net change in cash and cash equivalents 580,234 158,128
Cash and cash equivalents at beginning of period 376,365 96,775
----------- -----------
Cash and cash equivalents at end of period $ 956,599 $ 254,903
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 6,370 $ 2,541
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock and stock options for services $ 52,000 $ --
=========== ===========
Assets acquired by entering into capital leases $ 52,145 $ 24,049
=========== ===========
Conversion of related party notes and accrued
interest to equity $ -- $ 264,570
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
5
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements of Vitrix, Inc. ("Vitrix" or the
"Company") have been prepared in accordance with generally accepted accounting
principles ("GAAP"), pursuant to the rules and regulations of the Securities and
Exchange Commission, and are unaudited. Accordingly, they do not include all the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results for the interim
periods presented have been made. The results for the nine month period ended
March 31, 2000, may not be indicative of the results for the entire year. These
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1999.
NAME CHANGE:
The Company changed its name from FBR Capital Corporation to Vitrix, Inc.
pursuant to approval by a vote of the Company's shareholders at its annual
meeting held on October 7, 1999.
COMMITMENTS:
During the quarter ended March 31, 2000, the Company entered into a lease
agreement for additional office space in its existing location in Tempe, Arizona
under a non-cancelable operating lease agreement which expires December 31,
2004. The Company also leases office space in Tempe, Arizona under a
non-cancelable operating lease agreement which expires in May 2001.
Future minimum lease payments due under the operating lease agreements are as
follows:
YEAR ENDING
YEAR MARCH 31,
---- -----------
2001 $ 224,400
2002 216,400
2003 220,500
2004 229,000
2005 175,600
-----------
$ 1,065,900
===========
LOSS PER SHARE:
Basic loss per share of common stock was computed by dividing the net loss by
the weighted average number of shares outstanding of common and preferred stock.
The common and preferred stock amounts in the accompanying financial statements
have been restated to give effect to the exchange ratio established in the
Exchange Agreement, dated April 15, 1999, between FBR Capital Corporation and
Vitrix Incorporated. The preferred stock has been included in the calculation
for all periods presented due to its automatic conversion into common stock at
such time as the Company had sufficient authorized common stock to issue the
common shares. In October 1999, the Company amended its Articles of
Incorporation to increase the number of shares of authorized common stock to
50,000,000, resulting in the automatic conversion of the preferred stock to
shares of common stock on a one-for-one basis.
6
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE (CONTINUED):
Diluted earnings per share are computed based on the weighted average number of
shares of common stock and dilutive securities outstanding during the period.
Dilutive securities are options and warrants that are freely exercisable into
common stock at less than the prevailing market price. Dilutive securities are
not included in the weighted average number of shares when inclusion would
increase the earnings per share or decrease the loss per share.
STOCKHOLDERS' EQUITY:
During the quarter ended March 31, 2000, the Company completed a private
placement of $946,500 of common stock and common stock warrants. The securities
were issued under an Agreement with one institutional investor and various
accredited investors. The offering consisted of 4,732,500 shares of common stock
and warrants to purchase an aggregate of 2,366,250 shares of common stock. The
warrants are exercisable at $.28 per share for a period of three years.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
REVENUES. Revenue for the nine month period ended March 31, 2000 (the
"reporting period"), rose 77% to $940,387, compared to revenue of $530,901 for
the nine month period ended March 31, 1999 (the "comparable period"). This
growth was principally the result of increased customer demand for the Company's
software and hardware solutions, which resulted in an increase in sales volume.
GROSS PROFIT. Gross profit as a percentage of revenue was 63% in the
reporting period, compared to 69% in the comparable period. The decrease in
gross profit as a percentage of revenue was primarily attributable to an
increase in the proportion of bundled software and hardware solutions sales to
software-only solutions sales. The average gross profit per unit sold on
software and hardware units is lower than the average gross profit margin on
software-only solutions. Due to the Company's increased service revenue volume,
the Company also has added additional service support personnel resulting in an
increase in cost of services.
EXPENSES. Sales and marketing expenses were $522,458, or 56% of
revenues, in the reporting period, compared to $170,631, or 32% of revenues, in
the comparable period. The increase in sales and marketing expense is
attributable to increased labor costs resulting from the hiring of additional
sales and marketing personnel and increased advertising and promotional
expenses.
Research and development expenses were $359,765, or 38% of revenues, in
the reporting period, compared to $140,375, or 26% of revenues, in the
comparable period. The increase in research and development expense is
attributable to increased labor costs for the development of the Company's ASP
(Application Service Provider) product and to enhance its existing products.
General and administrative expenses were $457,360, or 49% of revenues,
in the reporting period, compared to $106,614, or 20% of revenues, in the
comparable period. The increase in general and administrative expenses is
primarily attributable to the hiring of additional management personnel and
additional expenses incurred as a result of the Company being a public reporting
company.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
REVENUES. Revenue for the three month period ended March 31, 2000 (the
"reporting quarter"), rose 137% to $376,512, compared to revenue of $159,009 for
the three month period ended March 31, 1999 (the "comparable quarter"). This
growth was principally the result of increased customer demand for the Company's
software and hardware solutions, which resulted in an increase in sales volume.
GROSS PROFIT. Gross profit as a percentage of revenue was 62% in the
reporting quarter, compared to 70% in the comparable quarter. The decrease in
gross profit as a percentage of revenues was primarily attributable to the
Company's increased service revenue volume, which resulted in the Company adding
additional service support personnel.
8
<PAGE>
EXPENSES. Sales and marketing expenses were $236,936, or 63% of
revenues, in the reporting quarter, compared to $48,177, or 30% of revenues, in
the comparable quarter. The increase in sales and marketing expense is
attributable to increased labor costs resulting from the hiring of additional
sales and marketing personnel and increased advertising and promotional
expenses.
Research and development expenses were $152,260, or 40% of revenues, in
the reporting quarter, compared to $52,879, or 33% of revenues, in the
comparable quarter. The increase in research and development expense is
attributable to increased labor costs for the development of its ASP
(Application Service Provider) product and to enhance its existing products.
General and administrative expenses were $174,557, or 46% of revenues,
in the reporting quarter, compared to $40,212, or 25% of revenues, in the
comparable quarter. The increase in general and administrative expenses is
primarily attributable to the hiring of additional management personnel and
additional expenses incurred as a result of the Company being a public reporting
company.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of March 31, 2000 was $920,093, compared to $240,005
at March 31, 1999. Cash and cash equivalents at those dates amounted to $956,599
and $254,903, respectively.
OPERATIONS. Net cash used by operations increased to $807,143 in the
reporting period, compared to $14,251 in the comparable period. The increase in
net cash used was primarily attributable to an increase in the net loss,
accounts receivable, inventory and prepaid expenses and a decrease in accounts
payable.
INVESTMENT ACTIVITIES. For the reporting period, the Company used
$73,384 to purchase property and equipment, compared to $15,725 of property and
equipment purchases in the comparable period.
FINANCING ACTIVITIES. Net cash provided by financing activities
increased to $1,460,761 in the reporting period, compared to $188,104 in the
comparable period. The increase was primarily due to the Company raising
$1,470,050 through a private placement of common stock and common stock warrants
in the reporting period.
The Company believes that, with its current working capital and funds
generated through its recently completed private placements, along with the cash
flow from operations, it will have sufficient working capital to address the
anticipated growth of demand and market for its products for the next 12 months.
The Company may, however, seek to obtain additional capital through a line of
credit at a financial institution or through additional debt or equity offerings
during this time period. The raising of additional capital in public markets
will primarily be dependent upon prevailing market conditions and the demand for
the Company's products and services. No assurance can be given that the Company
will be able to raise additional capital, or that such capital, if available,
will be on acceptable terms.
9
<PAGE>
YEAR 2000 COMPLIANCE
The Company has reviewed its computer systems to identify those areas
that could be adversely affected by the Year 2000 ("Y2K") issue. The Y2K issue
is the result of computer programs being written using two digits rather than
four to define the applicable year. The Company has determined that all of its
information systems are Y2K compliant. The compliance effort to date has
resulted in immaterial cost to the Company. Although the Company expects that
any future expenditures made in connection with Y2K conversions will not be
material, the Company may experience material unanticipated problems and costs
caused by undetected errors or defects in its systems.
The Company believes that some of its customers may be impacted by the
Y2K problem, which could in turn negatively impact the Company's sales efforts
with respect to such customers and the Company's results of operations.
The Company has completed an inquiry of key vendors to assess their Y2K
readiness. Based on this inquiry, the Company is not aware of any problems that
would materially affect its business, results of operations or financial
condition. However, the inability of such vendors to meet Y2K requirements could
materially impact the Company's ability to procure materials from these vendors
and to meet its obligations to supply products to its customers.
The Company has formulated a contingency plan to address the possible
effects of problems encountered as a result of Y2K issues. The Company expects
the costs of this plan to be immaterial. As of the date of this filing, the
Company is not aware of any material Y2K related issues.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements and information which the Company believes are within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements
contained herein can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates," or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The Company wishes
to caution the reader that these forward-looking statements that are not
historical facts are only predictions. No assurances can be given that the
future results indicated, whether expressed or implied, will be achieved. While
sometimes presented with numerical specificity, these projections and other
forward-looking statements are based upon a variety of assumptions relating to
the business of the Company, which, although considered reasonable by the
Company, may not be realized. Because of the number and range of assumptions
underlying the Company's projections and forward-looking statements, many of
which are subject to significant uncertainties and contingencies that are beyond
the reasonable control of the Company, some of the assumptions inevitably will
not materialize, and unanticipated events and circumstances may occur subsequent
to the date of this report. These forward-looking statements are based on
current expectations and the Company assumes no obligation to update this
information. Therefore, the actual experience of the Company and the results
achieved during the period covered by any particular projections or
forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements
should not be regarded as a representation by the Company or any other person
that these estimates and projections will be realized, and actual results may
vary materially. There can be no assurance that any of these expectations will
be realized or that any of the forward-looking statements contained herein will
prove to be accurate.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is from time to time involved in legal proceedings arising
from the normal course of business. As of the date of this report, the Company
is not currently involved in any legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On February 8, 2000, the Company completed a private placement of
$946,500 of common stock and common stock warrants. The offering consisted of
4,732,500 shares of common stock and warrants to purchase an aggregate of
2,366,250 shares of common stock. The warrants are exercisable at $.28 per share
for a period of three years. The common stock and warrants issued in the private
offerings were issued in reliance on the exemption provided under Section 4(2)
of the Securities Act of 1933, as amended, and Regulation D thereunder.
The proceeds from the private offerings are being used for general
working capital needs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed herewith pursuant to Regulation SB:
NO. DESCRIPTION
--- -----------
10.1 First Amendment to Office Lease Agreement,
dated March 28, 2000, between LAFP Phoenix, Inc,
as Lessor, and the Registrant, as Lessee
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended March
31, 2000.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VITRIX, INC.
Dated: May 11, 2000 By /s/ Craig J. Smith
-----------------------------
Craig J. Smith
Chief Financial Officer
12
FIRST AMENDMENT TO OFFICE LEASE AGREEMENT
THIS FIRST AMENDMENT TO OFFICE LEASE AGREEMENT ("AMENDMENT") is made as
of the 28th day of March, 2000, by and between LAFP Phoenix, Inc., a California
corporation ("LANDLORD"), and Vitrix, Inc., a Nevada corporation ("TENANT").
RECITALS
A. Landlord and Tenant entered into an Office Lease Agreement dated
September 3, 1999 ("LEASE"), pursuant to which Tenant agreed to lease from
Landlord Suite 310 on the third floor of the building (the "BUILDING") commonly
known as Hayden Square located at 310, 350, 404 and 410 S. Mill Avenue and 51 W.
Third Street, Tempe, Arizona 85281, as more fully described in the Lease
("EXISTING PREMISES"). Capitalized terms that are used but not otherwise defined
herein shall have the meanings set forth in the Lease.
B. Tenant desires to lease from Landlord the premises on the third
floor of the Building that are adjacent to, and to the east of the Existing
Premises, containing approximately 3,442 rentable square feet which includes
approximately 3,073 usable square feet ("EXPANSION PREMISES") upon the terms set
forth in this Amendment. Landlord and Tenant desire to amend the Lease to
include the Expansion Premises.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Landlord and
Tenant agree that, as of the Expansion Commencement Date (defined below), the
Lease shall be amended and modified as follows:
1. EXPANSION COMMENCEMENT DATE. The term "EXPANSION COMMENCEMENT DATE"
shall mean the earlier of (i) Substantial Completion of the Tenant Improvements
(as those terms are defined below) or (ii) May 15, 2000. "Substantial
Completion" shall mean the first to occur of the following: (a) Landlord has
sufficiently completed all the work required to be performed by Landlord in
accordance with this Amendment (notwithstanding the punch list items, which
Landlord shall thereafter promptly complete) such that Tenant can conduct normal
business operations from the Expansion Premises; (b) Landlord has obtained a
certificate of occupancy for the Expansion Premises; or (c) Tenant has been
delivered reasonable access to the Expansion Premises (and other required
portions of the Building) sufficient to allow Tenant to install its equipment or
operate its business.
<PAGE>
2. PREMISES. Section 1.1(i) of the Lease is deleted in its entirety and
a new Section 1.1(i) is substituted therefor as follows:
"Premises: Suite 310 on the third floor of the Building as
shown on Exhibit A, containing approximately 9,093 rentable
square feet which includes approximately 8,119 usable square
feet. All references to "rentable" or "usable" square feet,
footage or area, shall be deemed measured, as the case may be,
in accordance with American National Standard Z65.1-1996, as
published by BOMA International. Landlord has the right to
measure the Premises following delivery of the Expansion
Premises to Tenant. If the number of rentable square feet in
the Premises, based on the aforementioned BOMA standards is
more or less than stated herein, the Minimum Monthly Rent set
forth in Section 1.1(j) and Tenant's Pro Rata Share set forth
in Section 1.1(k) shall be adjusted by Landlord to conform to
the actual rentable square feet."
3. MINIMUM MONTHLY RENT. Section 1.1(j) of the Lease is deleted in its
entirety and a new Section 1.1(j) is substituted therefor as follows:
"Minimum Monthly Rent: Minimum Monthly Rent shall be payable
commencing on the Expansion Commencement Date and on the first
day of each month thereafter until December 31, 2004,
according to the following schedule:
Equal monthly installments of $16,859.94 for the period
commencing on the Expansion Commencement Date and continuing
through December 31, 2000 (rental rate of $22.25 per rentable
square foot);
Equal monthly installments of $17,617.69 for the period of
January 1, 2001 through December 31, 2001 (rental rate of
$23.25 per rentable square foot);
Equal monthly installments of $18,186.00 for the period of
January 1, 2002 through December 31, 2002 (rental rate of
$24.00 per rentable square foot);
Equal monthly installments of $18,943.75 for the period of
January 1, 2003 through December 31, 2003 (rental rate of
$25.00 per rentable square foot); and
Equal monthly installments of $19,512.06 for the period of
January 1, 2004 through December 31, 2004 (rental rate of
$25.75 per rentable square foot).
Tenant shall receive a rental credit in the amount of
$4,761.50, to be applied toward the first month's installment
of Minimum Monthly Rent payable from and after the Expansion
Commencement Date."
-2-
<PAGE>
4. TENANT'S PRO RATA SHARE. Section 1.1(k) of the Lease is deleted in
its entirety and a new Section 1.1(k) is substituted therefor as follows:
"Tenant's Pro Rata Share: Approximately 8.54% (see Article 5).
The actual amount of Tenant's Pro Rata Share shall be
determined after the Expansion Commencement Date, and may be
adjusted from time to time thereafter, based upon the actual
amount of rentable square feet in the Building and the
Premises. Upon any expansion of the Premises, Tenant's Pro
Rata Share shall be increased to reflect the inclusion of the
additional square feet comprising the expanded Premises.
Tenant's Pro Rata Share shall be the percentage calculated as
follows: the rentable square feet comprising the Premises
divided by the total number of rentable square feet in the
Building provided, however, that during any period in which
any portion of the Building is unusable as a result of
casualty or condemnation, the rentable square footage of the
Building shall be deemed to be the rentable square footage of
the Building immediately prior to such casualty or
condemnation."
5. TENANT IMPROVEMENTS. Landlord and Tenant agree that Landlord shall
have no obligation to construct any tenant improvements in the Existing Premises
or the Expansion Premises, except that Landlord, at its expense, shall provide a
buildout of the Expansion Premises in accordance with a space plan mutually
approved by Landlord and Tenant prior to the Expansion Commencement Date
("TENANT IMPROVEMENTS"). The Tenant Improvements shall be completed using
Landlord's standard Building finishes prior to Tenant taking possession of the
Expansion Premises and shall be performed by and at the direction of Landlord or
the agents or contractors selected by Landlord in its discretion. Each and every
cost, expense and expenditure incurred in connection with the Tenant
Improvements, including, without limitation, the costs of labor and materials
("TENANT IMPROVEMENT COSTS"), shall be borne by the parties and paid as follows:
(a) Tenant Improvement Allowance. The portion of the Tenant
Improvement Costs equal to the product of $15.00 multiplied by
the number of usable square feet in the Expansion Premises
("TENANT IMPROVEMENT ALLOWANCE"), shall be borne and paid by
Landlord.
(b) Excess Cost. Tenant shall bear and pay so much ("EXCESS
COST") of the Tenant Improvement Costs as exceeds the Tenant
Improvement Allowance. Prior to Tenant taking possession of
the Expansion Premises, Tenant shall deposit with Landlord in
cash the amount of the Excess Cost. After completion of the
Tenant Improvements and payment of the Tenant Improvement
Costs, Landlord shall pay to Tenant any amount by which the
deposited funds exceeded the Excess Cost and Tenant, upon
demand, shall pay Landlord any amount by which the Excess Cost
exceeded the deposited funds.
(c) Excess Allowance. To the extent that the Tenant
Improvement Allowance exceeds the Tenant Improvement Costs,
Tenant shall have the right to use such excess to make further
alterations or improvements to the interior of the Premises,
-3-
<PAGE>
provided that such improvements are completed on or before May
15, 2001, in accordance with the terms of the Lease.
6. PARKING. The first sentence of the second paragraph of EXHIBIT E to
the Lease is deleted in its entirety and a new sentence is substituted therefor
as follows:
"At all times during the Lease Term, Tenant shall have the
right to use the following number and type of parking spaces:
(a) Six (6) unreserved parking spaces located in the Garage; and
(b) Thirty-six (36) unreserved parking spaces located in the West Lot."
7. EXHIBIT A. EXHIBIT A to the Lease is hereby deleted in its entirety
and substituted with the new EXHIBIT A attached to this Amendment.
8. EFFECTIVE DATE. This Amendment shall be in full force and effect as
a binding obligation of the parties from and after the date of this Amendment.
The Lease shall be amended as provided herein effective as of the Expansion
Commencement Date, except for Section 5 of this Amendment, which shall be
effective as of the date of this Amendment.
9. RATIFICATION. Landlord and Tenant ratify and confirm the continued
force and effect of the Lease as modified by this Amendment. Landlord and Tenant
agree that all terms and provisions of the Lease shall be and remain in full
force and effect as therein written, except as otherwise expressly provided
herein.
10. CONFLICT. In the event of a conflict between the terms and
provision of this Amendment and the Lease, the terms and provisions of this
Amendment shall prevail.
11. BINDING EFFECT. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
12. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to
be executed as of the day and year first above written.
LANDLORD:
LOWE ENTERPRISES INVESTMENT MANAGEMENT, INC.,
as authorized agent for LAFP PHOENIX, INC.,
a California corporation
By: /s/ Tom Rollins
-----------------------------------------
Name
----------------------------------------
Its:
----------------------------------------
TENANT:
Vitrix, Inc.
a Nevada corporation
By: /s/ Craig J. Smith
-----------------------------------------
Name
----------------------------------------
Its:
----------------------------------------
-5-
<PAGE>
EXHIBIT A
FLOOR PLAN OF THE BUILDING INDICATING THE PREMISES
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 956,599
<SECURITIES> 0
<RECEIVABLES> 184,294
<ALLOWANCES> 0
<INVENTORY> 79,622
<CURRENT-ASSETS> 1,254,042
<PP&E> 250,079
<DEPRECIATION> 94,669
<TOTAL-ASSETS> 1,409,452
<CURRENT-LIABILITIES> 333,949
<BONDS> 0
0
0
<COMMON> 151,218
<OTHER-SE> 2,493,505
<TOTAL-LIABILITY-AND-EQUITY> 1,409,452
<SALES> 940,387
<TOTAL-REVENUES> 940,387
<CGS> 349,285
<TOTAL-COSTS> 1,339,583
<OTHER-EXPENSES> (8,132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,564
<INCOME-PRETAX> (740,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (740,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (740,349)
<EPS-BASIC> (.03)
<EPS-DILUTED> 0
</TABLE>
