U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996.
Commission file number: 33-26789NY
EFTEK CORP.
(Name of small business issuer in its Charter)
Nevada 93-0996501
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
408 Bloomfield Drive, Units 1 & 2
West Berlin, New Jersey 08091
(Address of Principal Executive Offices)
Registrant's Telephone Number: (609) 767-2300
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
None None
Securities to be registered under Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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:
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form,
10-KSB or any amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year: $207,677
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of March 31, 1997 was approximately $4,444,557 based on
the average high and low bid prices for such common stock as reported on
the O-T-C Bulletin Board.
The number of shares of Common Stock outstanding as of March 31, 1997 was
29,004,311. The number of Class A Redeemable Common Stock Purchase
Warrants outstanding as of March 31, 1997 was 65,412. The number of Class
B Redeemable Common Stock Purchase Warrants outstanding as of March 31,
1997 was 82,824.
Documents Incorporated by Reference - Various exhibits from the Company's
Post-Effective Amendment No. 1 to Form S-18 Registration Statement, Sec.
File No. 33-26789NY filed June 1, 1989 and such other documents contained
in Item 13(a)(iii).
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
<PAGE>
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
The Company was incorporated in the State of Nevada on December 30, 1988.
The Company became a Public Company by filing and registering with the
Securities and Exchange Commission under Form S-18, certain Units
consisting of four shares of common stock and forty Class A and forty Class
B redeemable common stock purchase warrants. Its Registration Statement
became effective on June 1, 1989. A total of 32,000 Units were sold at the
offering price of $5.50 per Unit for gross total proceeds of $176,000. The
net total proceeds after deducting the various costs of the offering was
$121,369.
On January 5, 1990, Savoy Capital Group, Ltd. acquired all of the
outstanding common stock of Exotic Bodies, Inc., a Pennsylvania
Corporation, which became a wholly owned subsidiary of Savoy Capital Group,
Ltd. in exchange for 15,857,600 shares of the Company's Common Stock.
Pursuant to said Agreement, Savoy Capital Group, Ltd. amended its
Certificate of Incorporation to change its name to Exotic Bodies, Inc., and
the wholly owned subsidiary changed its name to Exotic Bodies of
Pennsylvania, Inc.
The Company operating under the name Exotic Bodies, Inc., endeavored to
begin operations of automobile theme museums and entertainment complexes
featuring the display of exotic, European automobiles and associated exotic
car products and services. The Company's attempt to setup and operate such
exotic automobile theme museums was unsuccessful and the Company
essentially ceased such operations in mid-1992 and began to search for a
suitable acquisition candidate.
On July 25, 1994, the Company completed the acquisition of R & D
Innovators, Inc., a New Jersey corporation, engaging in the development,
manufacturing and sales of equipment for the bottling and packaging
industry. As part of such acquisition, the Company divested itself of the
assets relating to the business of exotic automobiles including all of the
logos and trade names in consideration for the cancellation by Bruce Selig,
the former Chairman of the Board of the Company, of all of his outstanding
loans to the Company. Furthermore, simultaneously with the Closing on July
25, 1994, prior management was replaced by the management of R & D
Innovators, Inc.
Effective, August 15, 1994, the Company amended its Certificate of
Incorporation to change its name to EFTEK Corp., and on August 22, 1994 the
Company effected a 1 for 17 reverse stock split.
BUSINESS OF ISSUER AFTER THE ACQUISITION OF R & D INNOVATORS, INC.
On July 25, 1994, the Company completed the acquisition of R & D
Innovators, Inc., a New Jersey corporation, organized in July 1990, to
engage in the development, manufacturing and sales of equipment for the
bottling and packaging industry.
R & D Innovators, Inc. developed and attempted to market a device called
the Water Ballaster/Rinser System ("Ballaster"). The Ballaster addresses
a problem encountered by various companies that fill polyethylene
terephthalate (PET) plastic bottles, namely that this variety of container
used typically for Coca-Cola, Pepsi and other soft drinks is top-heavy and
thus tends to tip over prior to filling. The result is that these bottles
can not be run through filling or bottling lines at anywhere near the speed
and efficiency normally associated with glass or Base-Cup (more costly and
environmentally unsound) equipped plastic bottles. Existing bottling lines
are set up to accommodate only glass bottles with tabletop conveyors which
deliver the bottles to the filler. The introduction of PET bottles onto
the existing tabletop conveyor lines designed for glass bottles has created
inefficiency and has delayed the speed of the bottling lines by failing to
deliver bottles to the filler as quickly as glass bottles. The filler
speeds vary and are not being utilized to their full capacity thereby
producing fewer bottles (cases) per minute.
Until early 1995, the Company experienced difficulties in attempting to
market the Ballaster. Accordingly, the Company made the decision not to
further divert the Company's resources to pursue this marketing in the near
future. Essentially, all efforts in this regard were suspended in order to
further concentrate the Company's efforts on its new core business. The
Company intends to license its patents and technologies to other companies
who have more resources and contacts in the industry to further market the
Ballaster.
In 1994 and 1995, the Company became interested in the colorization of
amorphous mixed cullet (broken glass) from recycled glass containers of
green, amber and flint (clear color) bottles that are recycled and
collected by trash haulers. The Company entered into a Purchase Agreement
with International Cullet Exchange, Inc. which applied for a patent
concerning colorizing of 3-MIX cullet to result in a single color to be
utilized by the glass container industry. The Closing of the acquisition
never occurred, as it was determined that there was great resistance
to utilization of mixed cullet irrespective of color unless it was
free of contaminants. Therefore, the Company believed that it had an
opportunity to form a new core business of processing 3-MIX cullet to meet
the qualifications of the glass bottling and fiberglass industries. The
following sections describe the Company's proposed new core business and
plan of operation for the foreseeable future.
THE IMPORTANCE OF 3-MIX GLASS CULLET RECYCLING
Today recycling is at an all time high due to its economic attractiveness
and the ever growing environmental conscious society. One of the major
materials recycled in the United States is glass. When glass is recycled,
it is usually color separated at trash sorting facilities and by haulers
into green, amber and flint. This process, however, is not perfect. Due
to the inherent fragile characteristics of this material and the handling
procedures during the entire recycling process, approximately 50% of all
recyclable glass breaks, becomes amorphous 3-MIX cullet (broken glass),
unsuitable for cost-effective color separation, and ends up in landfills
or, at best, goes in limited quantities to asphalt production and road
construction.
At the same time, single color cullet is a very valuable raw material for
fiberglass and container glass manufacturing. It has a lower viscosity
than other glassmaking materials (sand, etc.) and liquefies at a lower
Fahrenheit than for the virgin batch. As a result, not only the melting
process speeds up and the wear of the furnace refracting bricks lessens
(leading to its longer production life) but, most importantly, substantial
savings of natural gas, the principal fuel for glass furnaces, is achieved.
A Federal Department of Energy study claims that every 10% increment of
recycled glass in a batch reduces energy demand by 2%-3%. The US Glass
Packaging Institute estimated that in a standard size furnace for every 10%
increase in cullet, the annual consumption of gas is reduced by about 24.5
million cubic feet. Also, cullet use in glass production is more
environmentally sound, since it reduces the use of landfills and lowers
furnace air emissions. Landfill space availability, especially in
Metropolitan areas, is becoming more scarce. Incinerator disposal of waste
materials is growing. Some waste materials such as presently unusable
glass cannot be disposed of by incineration, but are disposed of in
landfills. Unusable scrap glass, referred to as cullet, can be recycled if
the contaminants can be removed. Manufacturers of fiberglass and glass
containers do use clean cullet, even in relatively small amounts of
different colors of commingled glass. The U.S. Fiberglass Market for
cullet is several hundred thousand tons annually. As technologies advance
the use of commingled (3-MIX) cullet, their usage can equal the bottle
glass usage.
CONTAMINANT DETECTION AND EXTRACTION
With all the attractiveness of 3-MIX from the economic and environmental
standpoints, this material has not been used very much by the fiberglass
industry. The major reason is the approximate 10% of contaminants
contained in an average 3-MIX batch. The fiberglass industry limits the 3-MIX
contaminant content and imposes other requirements for the cullet it
uses. While there have been developed ways to automatically remove paper,
plastics and metals, ceramics and other solid contaminants, both
transparent and opaque still are a major problem, precluding the large-scale
use of 3-MIX in fiberglass production. Melting temperature varies
from a minimum of 400 degrees higher than that of a virgin batch and, as a
result, unmelted ceramic seeds and stones block (and often damage)
fiberglass extruders and disrupt the whole manufacturing process. So far,
ceramics have been removed from 3-MIX for the most part manually. This
method is not only unreasonably expensive, but highly inefficient as well.
While non-transparent ceramic pieces (still only the larger ones) can be
removed this way, fragments of Pyrex, which looks very similar to glass, go
undetected and cause an unacceptably high level of 3-MIX contamination.
EFTEK's wholly owned subsidiary, C.F.C., Inc., is developing and has
applied for a patent for an automatic Contaminant Detector and Ejector.
Although there is no assurance that this system will work efficiently in
production, the Company believes that this system will expose a layer of 3-MIX,
fed onto a conveyor belt, to a special electromagnetic treatment and
then scan the activated cullet. The computerized scanner is being designed
to electronically divide the scanned area of the 3 feet wide conveyor belt
into sectors and identify those which contain ceramic and other contaminant
pieces. With the help of proprietary software, the scanner will be
coordinated with the contaminant ejection unit, which is activated in the
"kick-out area" at the right time to discard the contaminated sector of the
conveyor. With a projected high level of efficiency and limited waste,
C.F.C.'s Contaminant Detector when combined with the use of existing
technology could more effectively solve the problem of contaminant
contamination of 3-MIX cullet and open the possibility for more use of this
material in fiberglass (as well as container glass) production.
EFTEK'S RECYCLING PLANT
The Company has determined that if it can process mixed cullet to remove
organics, paper, plastic, ceramics, metals and other contaminants
(resulting in an end product that the Company names "Premium Cullet") so
that this Premium Cullet meets qualifications and specifications from the
U.S. Fiberglass and Glass Bottlers industries, of which there is no
assurance, there can be a substantial market of over one million tons
annually.
In order to penetrate this market, the Company proposes to develop and
operate, either for its own use or by joint-ventures, various recycling
plants throughout the U.S. To establish proof of operation, acceptance of
market, and economic viability, the Company purchased in June of 1996
approximately 137 acres of land in South New Jersey containing a 1200 feet
long by 65 feet wide preformed concrete building large enough to house two
production lines as well as storage of raw unprocessed 3-MIX cullet, as
well as the processed Premium Cullet. Plans are to operate up to two
shifts of production 7.5 hours per shift. Total employment with two shifts
of operation is expected to be 17 people. The projected schedule for start
up of one shift is late May 1997.
INCOME FROM RAW MATERIAL ACCEPTANCE
What the Company believes is unique to the recycling industry, various
waste removers, haulers and other recycling companies have to pay landfills
or other environmentally acceptable depositories tipping fees for the
disposal of unusable mixed cullet, which can range from $20 to $50 per ton
on the average, depending upon location and availability in the U.S.
EFTEK as an anticipated processor of mixed cullet began receiving
deliveries from various recyclers within a 150 mile range. Tipping fees
averaged $6.00 per ton (net), depending on volume, delivered to the Company's
processing plant. The Company intends to enter into supply agreements with
recyclers in the area once the processing plant is fully operational.
As a processor of 3-MIX cullet, the Company believes that it is complying with
all special permits required and other regulations from State or Federal
agencies.
The acceptance of the cullet raw material and thus the payment to the Company of
tipping fees resulted in immediate cash flow and should be a continuous
source of revenue in the future.
During January 1997, management elected to cease accepting cullet
deliveries due to price discrepancies with suppliers and waiting for end user
qualification. It is anticipated that the Company will resume accepting cullet
at an increased fee schedule, immediately upon being "qualified" by certain of
its end users.
DESCRIPTION OF PLANT OPERATION
EFTEK's program for processing 3-MIX cullet consists of machinery that
removes organics, paper, plastic, ceramics and other contaminants. The
process begins with receipt of cullet from recyclers. The first step of
the process is to remove all ferrous (magnetic) metals. After ferrous
metals are removed, paper, plastics and other organics are removed. Next,
it is crushed to a size not greater than two inches. After crushing,
non-ferrous metals are removed. The next step in the process is to wash (and
recycle the water) and then dry the cullet to remove the remaining
organics, plastics and paper. Following the drying process, non-transparent
contaminants such as opaque ceramics, stones, rocks, etc. are
removed. The next step of the process is to remove transparent ceramics,
vision ware, pyrex, etc. by EFTEK's patent pending contaminant detector
presently under development. The final step of the process is to size the
cullet to customer specifications. The finished product will be loaded in
trucks and rail for delivery to customers. The removed contaminants should
be a small percentage of the total. All materials separated from the
cullet will be either sold to an end user, or disposed of in the most
economical acceptable manner.
GOVERNMENT REGULATION
The Company believes that its processing plant will be subject to minor
State or Federal regulations (such as filing for a Class A Recycling
Permit). The Company, upon acceptance of the raw cullet material, will be
responsible for either its processing or ultimate disposal if it can not be
properly processed.
FUTURE PLANS
Upon successful performance from the first processing plant, subsequent
plants will be considered in locations where cullet supplies are available
and there are customers within a reasonable radius.
RISKS AND UNCERTAINTIES
Although the Company's proposed plans have a high upside potential,
shareholders are cautioned that there are also substantial risks including,
but not limited to, the following: 1) Requirements for acceptance of the
Company's Premium Cullet by the proposed end users may be too restrictive
to economically satisfy; 2) New more economic technologies may be developed
to satisfy end users' requirements; 3) Raw mixed cullet may become too
scarce affecting availability, or too abundant, reducing tipping fees; 4)
Government regulations may either change or be interpreted differently; 5)
The Company could encounter higher operational costs or delays; 6) or other
unforeseen circumstances could arise to adversely affect the Company's
operations.
FIRE DOCTOR, INC.
In April 1996, the Company acquired 100% of stock of Fire Doctor, Inc.
("Fire Doctor") in exchange for two million shares of restricted common
stock of EFTEK. The acquisition was handled as a non-taxable
reorganization pursuant to the Internal Revenue Code of 1986, as amended.
After the reorganization, Fire Doctor became a wholly owned subsidiary of
EFTEK. As part of the acquisition, the Company loaned $250,000 of its
Private Placement proceeds to Fire Doctor. Further, the Company agreed
that Fire Doctor would be independent of control of EFTEK unless or until
for the year ending December 31, 1997, Fire Doctor does not achieve a pre-tax
profit of a minimum of $100,000; and a minimum of $500,000 for the year
ending December 31, 1998. Berkshire International Finance, Inc.
("Berkshire") through its affiliate Sierra Growth & Opportunity Fund, Inc.
who is now, and William N. Levy ("Mr. Levy") who was, more than 5% owners of
the stock of the Company, owned 30% and 13%, respectively, of the common
stock of Fire Doctor. The acquisition was negotiated between various
officers and directors of both entities with Mr. Levy declining to
participate. The Company and Fire Doctor waived any potential conflict
from Mr. Levy's past dual legal representation of both parties.
Fire Doctor developed and markets a proprietary chemical formula designed
to retard the spread of flame. Fire Doctor has been in business for
approximately three years of which it devoted to developing a product line
of fire retardant chemicals. Their main product, Fire Barrier II, has
received "Underwriter's Laboratories Recognition" in their flame reduction
category. To Fire Doctor's knowledge, this is the only product that has
been recognized by Underwriter's Laboratories in this category.
Fire Doctor has submitted the product for testing to various independent
testing organizations which results have shown that use of the product is
an effective treatment on natural and most synthetic fibers as well as
natural wood. In addition, the product has been tested and classified as
non-toxic and a non-irritant. Towards this end, Fire Doctor successfully
sold its product as an "added value" item to Yenkin-Majestic, a major paint
manufacturer, for inclusion in its line of "kid proof" paint.
Fire Doctor's current marketing strategy is as follows:
1. To enter into agreements with key manufacturers to incorporate Fire
Doctor's product into their core offering such as paints, shelf liners,
wicker furniture, etc.
2. To target distributors in various "after market" industries to market
through service providers to the end user. These include carpet cleaners
and replacement roof companies.
3. To target selective broadcast media marketers to incorporate the
product in both infomercial and commercial format.
Fire Doctor utilizes commissioned manufacturers sales representatives to
call on a pre-assigned list of potential customers.
Herbert Siegel was appointed President of Fire Doctor, Inc. in August, 1996
(see Item 9. for biography of Herbert Siegel).
ITEM 2. DESCRIPTION OF PROPERTY
The Company has leased approximately 4,500 square feet of office space
located at 408 Bloomfield Drive, Bloomfield Business Park, Units 1 and 2,
Berlin, New Jersey 08009, from a non-affiliate for a period of a remaining
six months for rent of $2,600 per month. Fire Doctor, Inc. subsidiary is
sharing the leased premises.
In June 1996, the Company purchased an approximate 137 acre industrial
compound located in Winslow Township, New Jersey, from High Concrete
Structures, Inc., for the total consideration of $650,000. There are currently
seven structures located on the property totaling 148,000 square feet,
including an 80,000 square foot industrial plant and a 8,000 square foot
commercial office building. The Company houses its proprietary 3-Mix Cullet
processing operations in the 80,000 square foot facility.
ITEM 3. LEGAL PROCEEDINGS
As of March 26, 1997, there were no material actions, proceedings or
litigations pending at that time, or to the knowledge of the Company,
threatened, to which the property of the Company was subject, or to which
the Company was a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Shareholder's Meeting was held on August 19, 1996, at
which time three matters were submitted to the Company's stockholders for
a vote. The majority of the stockholders voted for the appointment of
Baratz & Associates, P.A., as the Company's independent auditors for fiscal
year 1996, adoption of the 1996 Stock Incentive Plan (800,000 shares), and
the election of the following Directors: Frank Whitmore, Thomas L. Brandt,
Robert H. Rudman, Oleg Batratchenko and Kevin J. Coffey, Esquire.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted in the Over-The-Counter market on the
OTC Bulletin Board under the trading symbol "EFTK". The following table
indicates the high and low bid prices of the Common Stock from January 1995
to March 31, 1996 for the quarterly periods ended on the dates set forth
(reflecting the Company's common stock 1 for 17 reverse stock split in
August, 1994).
<TABLE>
<CAPTION>
QUARTERLY PERIOD ENDED HIGH BID LOW BID
<S> <C> <C>
1995
March 31 3-3/4 3
June 30 3-3/4 2-3/4
September 30 2-3/4 2-1/4
December 31 2-1/4 3/4
1996
March 31 1-1/2 5/8
June 30 1-1/16 3/4
September 30 1-1/8 7/16
December 31 1-1/2 3/4
1997
March 31 1-15/32 9/16
</TABLE>
As of March 31, 1997, the high and low bid quotations for the Company's
Common Stock were 9/16 and 9/16.
No price is currently available for the redeemable warrants which have been
restructured so that each warrant (after the 1 for 17 reverse stock split)
permits the warrant holder to purchase six shares of the Registrant's
common stock at an exercise price of $2.00 per share, with an extended
expiration date for the warrants of December 31, 1997. As of this date,
Units, which were comprised of the Company's common stock and warrants, are
no longer available or being traded.
There are approximately 252 holders of record of the Company's common
stock, however, the Company believes that its beneficial shareholders are
in excess of 700 in street name in various brokerage accounts. The Company
has never declared a dividend on its common stock and does not plan to do
so in the near future. The prices set forth above are not necessarily
indicative of the depth of the trading market of the Company's common
stock. These over-the-counter market quotations reflect inter-dealer
prices without markups, markdowns, or commissions and may not necessarily
reflect actual transactions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's primary source of funds and liquiditity to date has been
through the sale of its securities. The Company also received $202,620 in
tipping fees for the delivery and acceptance of 3 mix cullet (see below).
Additionally, an option, which was not subsequently exercised, was sold for
the licensing of the ballaster technology. The Company continues to be
receptive to any offers to license its technologies but is not actively
pursuing this area which would divert resources from its current core
business.
The Company believes there is a substantial and lucrative market for clean,
non-contaminated cullet. In an effort to tap this market the Company
purchased in June of 1996 a 137 acre industrial compound including an
80,000 square foot industrial building as the site of the first processing
facility. The property was purchased for $650,000 with an additional
$726,786 of improvements made to date. There is also additional office and
other building totaling 48,000 square feet as well as land available to
rent to third parties.
In addition to the building improvements, approximately $1,482,157 of
equipment and machinery, labor and supplies were incurred through December
31, 1996 in developing the processing line. The line is expected to be
completed by May 15,1997.
As a subsequent event, management decided during January 1997 to cease
accepting 3 mix cullet due to price discrepancies with suppliers and waiting
for end user qualification. However, it continues to receive and process
"flint" glass which has immediate end use. It is anticipated that the Company
will resume accepting cullet at an increased fee schedule, immediately upon
being "qualified" by certain of its end users.
In April, 1996, the Company acquired, as a diversification hedge, 100% of
the stock of Fire Doctor, Inc. The wholly owned subsidiary markets and
sells a chemical which substantially retards the spread of flame. Fire
Doctor has successfully sold its product as an "added value" item to a
major paint manufacturer for inclusion in its line of "kids proof" paint.
This potential market, combined with the obvious consumer use with Christmas
trees, decks, etc. has been the basis for the Company's continued support
despite slow sales performance.
Throughout 1996, management continuously reviewed, revised and addressed
its overhead costs in order to maximize efficiencies during the processing
line construction and development. These efforts continue in 1997 as the
line becomes operational and future sites are identified and pursued.
As a subsequent event, the Company sold at various times in 1997,
additional shares of its common stock in a Private Placement to mainly
institutional foreign investors for a consideration of $781,125.
Although there is no assurance, the Company believes that additional
financing through Private Placement is available and such funds, in
addition to tipping fees and, eventually, the sale of premium cullet to end
users should provide enough financing for the Company for the next year.
ITEM 7. FINANCIAL STATEMENTS.
The Company's financial statements are presented under Item 13 of this
report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None. PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following are the Officers and Directors of the Company as of March 26,
1997:
Name Age Position Held with Company
- ----- ----- ----------------------------
Frank Whitmore(1) 61 President, Chief Executive
Officer, Director
Frank G. Pringle(2) 52 Vice President R & D, Director
Shawn Pringle 28 Treasurer and Chief Financial Officer
Kevin J. Coffey, Esq.(3) 38 Director
Thomas L. Brandt(4) 42 Director
Herbert Siegel(5) 46 President of Fire Doctor, Inc.,
Director
Gerard T. Wisla(6) 39 Secretary, Director
Oleg Batratchenko 31 Director
______________________________
1 Appointed January 31, 1996
2 President until January 31, 1996; resigned as Director on June 12, 1996,
and no longer an officer and employee as of April 15, 1997.
3 Resigned as Secretary on June 12, 1996.
4 Appointed March 13, 1996.
5 Appointed August 2, 1996, as President of Fire Doctor, Inc.(and a Director
until March 19, 1997).
6 Appointed Secretary June 12, 1996 and a Director since March 19, 1997.
FRANK WHITMORE, President, Chief Executive Officer since January 31, 1996
and a Director of the Registrant, a general consultant since 1991, retired
in 1991 from Anchor Glass Container Corporation where he served as a
Corporate Officer and Vice President of Technical Services from 1984 to
1990. From 1983 to 1984 he was President of Midland Glass Company. From
1981 to 1983 Mr. Whitmore was Vice President of Engineering &
Manufacturing. He held various positions with Anchor Hocking Corporation of
Lancaster, Ohio between 1960 and 1981, beginning as a plant engineer, and
advancing to Engineering Manager, Plant Manager, to Vice President of
Operations. Mr. Whitmore received a bachelor of science degree in
Electrical Engineering from Ohio University.
FRANK G. PRINGLE, President and Chairman of the Board of Directors of the
Registrant and its subsidiary until January 31, 1996, and no longer an
employee as of April 15, 1997, has worked in the packaging industry since
1969 being initially employed by R.A. Jones. From 1971 through 1975, he
was employed by Standard Knapp Packaging Machinery where his last position
was as Regional Sales Manager. From 1975 to 1979, Mr. Pringle was employed
as Sales Manager for Simplimatic Engineering Corporation. In 1979, Mr.
Pringle purchased a part interest in Ambec Systems, serving as Vice
President of Marketing and New Machine Development. At such time, he
helped to developed a patented machine called "10" Conveyor. In 1981, Mr.
Pringle left Ambec Systems and the packaging field due to a covenant not to
compete and became involved in the ownership of health clubs, which
continued until 1985 when he started Pringle Systems, a company that
installed packaging equipment and manufactured conveyors and other
packaging machinery. In 1990, Mr. Pringle organized R & D Innovators, Inc.
and has been employed by such company to the present time as well as by
EFTEK Corp., the parent company. Mr. Pringle holds a number of patents in
the field of engineering.
SHAWN F. PRINGLE, Treasurer and Chief Financial Officer of the Registrant
and its subsidiary, is the son of Frank G. Pringle. From 1987 to 1991, he
was involved on a part time basis in the fabrication, engineering and
drafting work of Pringle Systems while working for a Bachelor of Science
Degree in biology at the University of South Carolina which he received in
December of 1992. Thereafter, he joined R & D Innovators, Inc. full time
and has been responsible for certain aspects of corporate operations and
engineering.
KEVIN J. COFFEY, ESQ., Director of the Registrant and its Subsidiary has
been a partner since 1986 in the law firm of Donner, Coffey & Donner, which
engages in multi-state general litigation and general practice, and now is
in private practice by himself. He received Juris Doctorate Degree from
Delaware Law School in 1985 and a Bachelor of Arts from the University of
Connecticut in 1980.
THOMAS L. BRANDT, a Director of the Registrant and its subsidiary, is the
founder, President and Chief Operating Officer of Brandt Technologies, Inc.
("BTI"). BTI has operated since 1985 as a supplier of precision inspection
equipment and packaging technologies to the glass and plastics container
industries worldwide. From 1983 to 1985, Mr. Brandt served on the
management team of Emhart/Powers Machinery Group integrating glass
manufacturing systems throughout North America, Europe and the Middle East.
From 1980 to 1983, he held the position of Site Project Engineer for
Guardian Industries, responsible for the construction of a 186,000 square
foot windshield manufacturing plant. Between 1975 - 1980, Mr. Brandt held
various positions with Thatcher Glass beginning as Corporate Layout
Engineer and advancing to Assistant Plant Engineer at the Lawrenceburg,
Indiana manufacturing facility. Mr. Brandt received a two year technical
degree through the State University of New York for Mechanical Design and
holds three (3) U.S. and International patents, jointly holds two (2)
European patents and four (4) patents pending in progress.
HERBERT SIEGEL, President of Fire Doctor, Inc. subsidiary and Director
until February, 1997. Herbert Siegel is the founder, President and Partner
of Herb Siegel, Inc. ("HSI"), a manufacturers representatives firm which
represents a wide variety of domestic and foreign manufacturers from all
categories of consumer products. In 1957, Mr. Siegel received an honorable
discharge from the U.S. Army. Following discharge from the service, Mr.
Siegel became the National Sales Manager of a Philadelphia based
manufacturer of consumer products. In 1968, Mr. Siegel founded HSI and
subsequently formed Asia Combine, LTD., a manufacturer and Agent/Trading
Company for sourcing and manufacturing importing products from Asia.
GERARD WISLA, Secretary and Director of the Registrant is a Certified
Public Accountant and a principal partner of Wisla & Cohen Certified Public
Accountants for the last five years. Mr. Wisla was previously a
shareholder and Director of Quality Control for a large regional accounting
firm. His experience includes presentations at continuing education
seminars and articles published in various newsletters. Mr. Wisla is a
graduate of Drexel University. He is a member of the American and
Pennsylvania Institutes of Certified Public Accountants. Mr. Wisla is a
past Board member of an alumni association at Drexel University and
currently serves as Treasurer and Chairman of the Finance Committee of a
local non-profit organization.
OLEG BATRATCHENKO, Director. Since April, 1995, Mr. Batratchenko was Vice
President of Research at Berkshire International Finance, Inc., a New York
corporate finance and investment banking company. Also, Mr. Batratchenko is
a Senior Vice President of an affiliate organization, Fifth Avenue Research and
Advisory Group, Inc. Mr. Batratchenko has been managing many of the public
relations services rendered to a number of growth oriented small cap companies.
From 1993 to 1995, Mr. Batratchenko was employed in the capacity of Research
Analyst by Safian Investment Research, Inc., a White Plains, New York financial
research and money management firm. Prior to that, Mr. Batratchenko worked as
a Performance Analyst with Newberger and Berman, a major New York money
management firm. Between 1987 and 1990, Mr. Batratchenko was a Research
Associate at the Moscow Institute of World Economy and International Relations,
where he completed a Masters program in Economics and was involved in a number
of high profile research projects being conducted by this leading Russian think
tank for the Kremlin. In 1992, Mr. Batratchenko obtained a Masters Degree in
International Political Economy from New York University. He is an Associate
member of the Financial Analysts - Money Managers Society (New York).
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------- ------------------------
Awards Payouts
------- ---------
(a)Name and (b) (c) (d) (e)Other (f)Restricted (g)Securities (h) (i)
Principal Annual Stock Underlying LTIP All Other
Position Year Salary Bonus($) Compensation Awards($) Option/SARs(#) Payouts($) Compensation
- ----------- ---- ------ -------- ------------ --------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank Whitmore,1996 $ 41,667 0 0 0 0 0 0
President(1)
Frank Pringle, 1996 $102,500 0 0 0 0 0 0
(Past Pres.) 1995 $ 63,750 0 0 0 0 0 0
1994 $112,950 0 0 0 0 0 0
</TABLE>
(1) Frank Whitmore, the current President of the Company, agreed to receive
$50,000 annual salary and 500,000 stock options, (200,000 of which are
already vested and an additional 100,000 options to be vested each year
thereafter as long as he is still employed by the Company). Mr. Whitmore
also received 7,500 stock options for Director compensation for 1995.
See Item 11. footnotes for stock option grants to other Directors and
Officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
RECORD AND BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
(A)(B)The following table sets forth certain information with regard to the
record and beneficial ownership of the Company's common stock as of March 31,
1997 by (i) each shareholder owner of record or beneficially 5% or more of
the Company's common stock (ii) each Director individually and (iii) all
Officers and Directors of the Company as a group. All numbers have been
adjusted for the 1 for 17 reverse stock split, which occurred August 22,
1994:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER SHARES OWNED OF CLASS
<S> <C> <S> <C>
Common Frank Whitmore 207,500(1) .72%
Bloomfield Business Park
408 Bloomfield Drive, Units 1 & 2
West Berlin, New Jersey 08091
Common Frank G. Pringle 3,480,176(2) 12.0%
8 Tallowood Drive
Medford, NJ 08055
Common Kevin J. Coffey, Esq. 363,540(3) 1.25%
153 Lost Lake
Marlton, NJ 08053
Common Shawn Pringle 245,168(2) .85%
Bloomfield Business Park
408 Bloomfield Drive, Units 1 & 2
West Berlin, New Jersey 08091
Common Thomas L. Brandt 7,500(4) .03%
Bloomfield Business Park
408 Bloomfield Drive, Units 1 & 2
West Berlin, New Jersey 08091
Common Herbert Siegel 61,666(5) .21%
405 Lakeside Drive
South Hampton, PA 18966
Common Sierra Growth & Opportunity Fund 2,651,000 9.14%
551 Fifth Avenue, Suite 605
New York, NY 10017
Common Gerard Wisla 41,003(6) .14%
4808 Rainbow Ridge Circle
Schwenksville, Pennsylvania 19473
Common Oleg Batratchenko 57,500(7) .20%
551 Fifth Avenue, Suite 605
New York, NY 10017
Common Arista Capital Growth Fund Ltd. 1,925,797 6.64%
P.O. Box 20043
Phase 3, British American Center
Georgetown, Grand Cayman
Cayman Islands, British West Indies
Common Veco Capital Growth Fund 1,889,206 6.51%
P.O. Box 20043
Phase 3, British American Center
Georgetown, Grand Cayman
Cayman Islands, British West Indies
Common Arista High Technology Growth Fund 4,319,747 14.89%
P.O. Box 20043
Phase 3, British American Center
Georgetown, Grand Cayman
Cayman Islands, British West Indies
All Officers and Directors as a group (7 in number) 983,877 3.39%
__________________________
1 Includes 200,000 stock options vested and excludes 300,000 stock options
still not vested at the exercise price of $.625 per share and 7,500 stock
options granted to Mr. Whitmore as a member of the Board of Directors in 1995
at the exercise price of $.625 per share.
2 Frank G. Pringle and Shawn Pringle, father and son, each disclaim beneficial
ownership of the shares of Registrant held by the other. The Company has been
advised, according to a Court Order of the U.S. Bankruptcy Court filed March 5,
1997, that all of Mr. Frank G. Pringle's shares are now beneficially owned
solely by a Creditors' Trust in consideration of the release of Mr. Pringle
of certain obligations of his bankruptcy estate.
3 Includes 15,000 stock options all of which are vested for compensation for
being a Director in 1995 and 1996 at the rate of 7,500 stock options per
year exercisable at $1.75 and $.875, respectively. Does not include 7,500
stock options which are not vested for compensation for being a Director for
1997.
4 Includes 7,500 stock options granted to Mr. Brandt as compensation for being
a Director in 1996 which are vested. Does not include 7,500 stock options
granted to Mr. Brandt as compensation for being a Director in 1997 which are
not vested.
5 Includes 50,000 stock options which are vested at the exercise price of
$1.00. Does not include 100,000 stock options exercisable at $1.00 which are
not vested.
6 Does not include 7,500 stock options exercisable at $1.25 which are not
vested, granted to Mr. Wisla as a member of the Board of Directors of 1997.
Included are 12,500 options exercisable at $.62 granted to Mr. Wisla for past
services rendered, all of which are vested.
7 Includes 7,500 stock options exercisable at $.875 which are vested, granted
as compensation for being a Director for the year 1996. Does not include
7,500 stock options exercisable at $1.25, which are not vested, granted as
compensation for being a Director for the year 1997.
(C) CHANGE IN CONTROL
None.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FIRE DOCTOR, INC. for certain transactions concerning William N. Levy and
Berkshire International Finance, Inc. as set forth in Part I, Item 1.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following documents are filed as a part of this Form 10-KSB at the
page indicated.
Page Number
(a)(i) Financial Statements
Auditor's Report as of April15, 1997...............F1
Consolidated Balance Sheets - December 31, 1996 and
1995...............................................F2
Consolidated Statement of Operations - For the years
ended December 31, 1996 and 1995...................F3
Statement of Shareholder's Equity - For the years
ended December 31, 1996 and 1995...................F4
Statement of Cash Flows - For the years ended
December 31, 1996 and 1995.........................F5
Consolidated Notes to Financial Statements.........F6-F10
(a)(ii) Consolidated Schedules - None.
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
(a)(iii) Exhibits
Sequential
NUMBER DESCRIPTION Page Number
3(a) Articles of Incorporation of the Company
(Savoy Capital Group, Inc.) *
3(b) By-Laws of the Company *
3(c) Certificate of Incorporation of Exotic Bodies, Inc. **
3(d) Amendment of Articles of Incorporation of Savoy
Capital Group Ltd. changing its name to Exotic Bodies,
Inc. **
3(f) Amendment to Certificate of Incorporation of Exotic
Bodies, Inc. changing its name to EFTEK Corp. ***
10(a) Stock Purchase Agreement of January 5, 1990 between
the Registrant and Exotic Bodies, Inc. **
10(b) Stock Purchase Agreement dated July 25, 1994 by and
between the Registrant and R & D Innovators, Inc. ***
10(c) Stock Purchase Agreement dated February, 1996 by and
between the Registrant and the Shareholders of Fire
Doctor, Inc. ****
10(d) Purchase Agreement between EFTEK Corp.
and High Concrete Structures, Inc. dated June 5, 1996. ****
10(e) 1996 Stock Incentive Plan 18
* Incorporated by reference from the like-numbered exhibit to Form S-18
Registration Statement, SEC File No. 33-26789-NY Post-Effective Amendment No.
1 filed June 1, 1989.
** Incorporated by reference from the like-numbered exhibit to Form S-18
Registration Statement, SEC file No. 33-26789-NY Post-Effective Amendment No.
3 filed April 25, 1990.
*** Incorporated by reference from the Exhibit to Form 10-KSB for the fiscal
year ended December 31, 1994.
**** Incorporated by reference from the Exhibit to Form 10-KSB for the fiscal
year ended December 31, 1995.
(b) Form 8-K
Reports on Form 8-K filed during the last quarter of the period covered by
this report are as follows:
i. Notification of Private Placements filed December 23,1996.
As a subsequent event, reports filed on Form 8-K filed after December 31,
1996, but prior to the filing of this report are as follows:
i. Notification of Private Placements filed February 27, 1997.
ii. Notification of Private Placements filed March 25, 1997.
iii. Notification of Private Placements filed April 11, 1997.
<PAGE>
EFTEK CORPORATION
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
Page(s)
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
EFTEK Corporation
408 Bloomfield Drive
Berlin, NJ 08009
We have audited the accompanying consolidated balance sheets of
EFTEK Corporation and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of EFTEK
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
BARATZ & ASSOCIATES, P.A.
February 13, 1997
<PAGE>
EFTEK CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Assets
------
Current Assets
- --------------
Cash $ 172,919 $ 391
Receivables:
Trade 63,857
Related parties (Note 3) 261,764 258,338
Other 900
Prepaid expenses 44,120
----------- -----------
Total Current Assets 543,560 258,729
-------------------- ----------- -----------
Property and Equipment, Net (Note 2) 2,873,025 19,113
- --------------------------- ----------- -----------
Other Assets
- ------------
Patent costs, net (Note 2) 54,375 49,540
Organization costs, net (Note 2) 750 1,050
Deposits 7,300 3,300
----------- -----------
Total Other Assets 62,425 53,890
------------------ ----------- -----------
Total Assets 3,479,010 331,732
------------ =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
- -------------------
Current portion of long term debt (Note 4) 38,104
Accounts payable and accrued
liabilities 191,329 70,023
Income taxes payable (Note 6) 300
Due to related party (Note 3) 4,776
----------- -----------
Total Current Liabilities 229,733 74,799
-------------------------
Long Term Debt, Less Current
Portion (Note 4) 138,543
- ---------------------------- ----------- -----------
Total Liabilities 368,276 74,799
----------------- ----------- -----------
Commitments and Contingencies (Note 5)
- -----------------------------
Stockholders' Equity
- --------------------
Common stock, $.001 par; authorized
25,000,000 shares; issued and out-
standing 25,991,076 and 11,861,435
shares at December 31, 1996 and
1995, respectively (Notes 7&9) 25,991 11,861
Additional paid in capital 4,820,446 1,385,178
Deficit (1,735,457) (1,139,860)
----------- -----------
3,110,980 257,179
Common stock held in treasury
(14,434 shares), at cost 246 246
----------- -----------
Total Stockholders' Equity 3,110,734 256,933
-------------------------- ----------- -----------
Total Liabilities and Stockholders'
Equity $ 3,479,010 $ 331,732
---------------------------------- =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Revenues $ 207,677 $
- -------- ------------ ------------
Costs and Expenses
Cost of revenues 167,072 12,347
Selling, general and
administrative (Notes 2 & 5) 654,855 326,626
------------ ------------
Total Costs and
Expenses 821,927 338,973
- --------------- ------------ -------------
Loss From Operations ( 614,250) ( 338,973)
- -------------------- ------------ ------------
Other Income (Expenses)
- -----------------------
Interest income (Note 3) 15,926 20,729
Miscellaneous income 16,466 1,634
Interest expense (Note 4) ( 5,068)
Miscellaneous expense ( 8,071) ( 1,007)
------------ ------------
Total Other Income
(Expenses) 19,253 21,356
- ------------------ ------------ ------------
Loss Before Income Taxes ( 594,997) ( 317,617)
- ------------------------
Income Taxes (Notes 2 & 6) 600
- ------------ ------------ ------------
Net Loss $( 595,597) $( 317,617)
- -------- ============ ============
Net Loss Per Common Share (Note 2) $( .03) $( .03)
- ------------------------- ============ ============
Weighted Average Common
Shares Outstanding 17,899,723 10,832,120
- ----------------------- ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Additional Treasury
Common Stock Paid-In Stock,
Shares Amount Capital Deficit at Cost Total
------ ------ ---------- ------- --------- -----
<C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 11,761,435 $ 11,761 $ 1,295,278 $( 822,243) $(246) $ 484,550
Common stock issued 100,000 100 89,900 90,000
Net loss for the year ( 317,617) ( 317,617)
---------- -------- ----------- ---------- --------- -----------
Balance, December 31, 1995 11,861,435 11,861 1,385,178 (1,139,860) (246) 256,933
Common stock issued 14,078,140 14,130 3,412,992 3,427,122
Acquisition (Notes 2 & 8) 22,276 22,276
Net loss for the year (595,597) ( 595,597)
---------- --------- ----------- ---------- --------- -----------
Balance, December 31, 1996 25,939,575 $ 25,991 $ 4,820,446 $(1,735,457) $(246) $ 3,110,734
========== ======== =========== =========== ====== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EFTEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
- ------------------------------------
Net loss for the year $(595,597) $(317,617)
Adjustments to Reconcile Net Loss to
Net Cash Used In Operating Activities
- ---------------------------------------
Depreciation and amortization 7,927 7,367
Changes in Operating Assets
and Liabilities
- ---------------------------
Increase in receivables ( 68,183) ( 22,163)
(Increase) decrease in prepaid expenses ( 44,120) 11,232
Increase in deposits ( 4,000) ( 400)
Increase in accounts payable and
accrued liabilities 121,306 23,363
Increase in income taxes payable 300
---------- --------
Net Cash Used in Operating Activities ( 582,367) (298,218)
- ------------------------------------- ---------- --------
Cash Flows From Investing Activities
- ------------------------------------
Additions to intangible assets ( 7,598) ( 6,812)
Purchase of property and equipment (2,858,776)
Acquisition 22,276
---------- --------
Net Cash Used in Investing Activities (2,844,098) ( 6,812)
- ------------------------------------- ---------- --------
Cash Flows From Financing Activities
- ------------------------------------
Related party advance 4,776
Reduction of related party debt ( 4,776)
Proceeds from long term debt 176,647
Proceeds from issuances of common stock 3,427,122 90,000
---------- --------
Net Cash Provided By Financing Activities 3,598,993 94,776
- ----------------------------------------- ---------- --------
Net Increase (Decrease) In Cash 172,528 (210,254)
- -------------------------------
Cash at Beginning of Year 391 210,645
- ------------------------- ---------- --------
Cash at End of Year $ 172,919 $ 391
- ------------------- =========== =========
Supplemental Cash Flow Information (Note 8)
- ----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EFTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. Description of Business
EFTEK Corporation (the Company), incorporated in the state of
Nevada, is engaged in processing mixed cullet (broken glass) into a
recycled, uncontaminated product for use in fiberglass and glass
container manufacturing industries. The Company also develops and
sell various fire retardant chemicals.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Use of 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 period. Actual results could
differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided using the straight line method over the estimated useful
lives of the assets. Depreciation expense for the years ended
December 31, 1996 and 1995 was $4,864 and $4,148, respectively.
Expenditures for maintenance and repairs are charged against income
as incurred. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any gain
or loss is included in income.
Property and equipment consisted of the following at December 31:
1996 1995
Land $ 338,073
Building 312,068
Building improvements 726,786
Equipment 1,482,157 $ 10,829
Furniture and fixtures 17,511 12,003
Leasehold improvements 2,500 2,500
2,879,095 25,332
Less accumulated depreciation 11,083 6,219
Net property and equipment $ 2,868,012 $ 19,113
<PAGE>
Intangible Assets
Certain intangible assets have been capitalized and are amortized
over the estimated useful lives of the assets using the
straight-line method. Patent costs are amortized over a period
of 17 years. Organization costs are amortized over a period of 5
years.
Income Taxes
The Company uses Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109) in reporting deferred
income taxes. SFAS 109 requires a company to recognize deferred tax
assets and liabilities for the expected future income tax
consequences of events that have been recognized in the company's
financial statements. Under this method, deferred tax assets and
liabilities are determined based on temporary differences between
the financial carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
the temporary differences are expected to reverse.
Net Loss Per Common Share
Net loss per common share is based upon the weighted average number
of common and common equivalent shares (stock warrants)
outstanding in each period. The computation of fully diluted net
loss per common and common equivalent share was antidilutive in each
of the periods presented.
Acquisition
On April 20, 1996, the Company acquired Fire Doctor, Inc. (Fire) by
issuing two million shares of the Company's common stock in exchange
for all Fire's outstanding shares of common stock. The acquisition
was accounted for as a purchase. Proforma results of the Company,
assuming the acquisition occurred at the beginning of the year,
would not be materially different from the actual results reported.
3. Related Party Transactions
Related party transactions included the following:
At January 1, 1995, the Company was due $225,109 from a stockholder
(former Company president). During 1995, stockholder advances and
interest charges were $38,229 collectively and repayments were
$5,000 resulting in a $258,338 balance due from the stockholder at
December 31, 1995. In 1996, stockholder additions (interest
charges) were $15,926 and repayments were $12,500, leaving a
$261,764 balance due at December 31, 1996.
At December 31, 1995, the Company owed an affiliate $4,776; the
amount was repaid in 1996 in its entirety.
<PAGE>
4. Long Term Debt
Long term debt consisted of the following at December 31, 1996:
A note payable in monthly installments of
$417, inclusive of interest at 18.72% per
annum. The note matures in October 1999
and is collateralized by equipment costing
$11,410. $ 10,929
A note payable in monthly installments of
$707, inclusive of interest at 8.89% per
annum. The note matures in November 1999
and is collateralized by equipment costing
$22,000. 21,718
A note payable in monthly installments of
$1,903, inclusive of interest at 9.25% per
annum. The note matures in September 2000
and is collateralized by equipment costing
$95,000. 72,121
A note payable in monthly installments of
$1,711, inclusive of interest at 13.96%
per annum. The note matures in October
2001 and is collateralized by equipment
costing $73,597. 71,879
176,647
Less current portion 38,104
Total long term debt $ 138,543
The aggregate maturities of long term debt are as follows:
1997 $ 38,104
1998 42,689
1999 46,326
2000 33,462
2001 16,066
$ 176,647
5. Commitments and Contingencies
Technology License Agreement
On May 15, 1993, R & D Innovators, Inc. (R&D), a subsidiary of the
Company, entered into a technology license agreement with an
affiliated company, whereby R & D granted certain licensing and
patent rights to the affiliate in exchange for royalties equal to
10% of the affiliated company sales. In 1996 and 1995, no
royalties were earned or due to R & D.
Operating Leases
The Company leases office facilities and transportation
equipment under noncancellable operating leases with expiration
dates through October 1997. Rent expense amounted to $38,353 and
$24,600 in 1996 and 1995, respectively.
Future minimum rental commitments under noncancellable
lease agreements are $30,090 (1997).
Litigation
The Company's balance sheet includes a $15,500 accounts payable to
a contractor who has litigated against the Company for alleged
breach of contract and unpaid fees. The Company believes the suit
is without merit and intends to vigorously defend its position.
Counsel has estimated a maximum potential loss of $20,000.
6. Income Taxes
Operating losses in 1996 and 1995 eliminated the need for income tax
provisions except for the statutory state minimum tax. At December
31, 1996, the Company had available federal and state operating loss
carryforwards in the respective amounts of $1,787,000 and
$1,746,380. The loss carryforwards expire 2011 (federal) and 2003
(state).
Income taxes, including those currently payable to the state, were
$600 at December 31, 1996.
No provisions were made for deferred income taxes in 1996 and 1995.
Net deferred tax assets were entirely eliminated by a valuation
allowance as follows:
Deferred income tax components:
1996 1995
Deferred Tax Asset
Net operating loss carryforwards $ 764,904 $ 410,094
Deferred Tax Liability
Start-up costs ( 55,457) 40,204
Net Deferred Tax Asset 709,447 450,298
Less Valuation Allowance (709,447) (450,298)
$ 0 $ 0
A valuation allowance is provided when it is more likely than not
that some portion of the deferred tax asset will not be realized.
At December 31, 1996 and 1995, management believed that portion of
the net operating loss carryforwards would not be realized before
their expiration.
7. Stock Options and Warrants
Common Stock Options
The Company's 1996 stock incentive plan provides for the granting of
incentive and non-statutory stock options for the purchase of shares
of common stock to officers, directors, nonsalaried directors,
employees and consultants. as provided by the plan. The option
exercise price is the bid price on the date of grant. The Board of
Directors determines the vesting period and expiration date
(generally five years). Stock option transactions were as follows:
Shares Under Option
1996
Outstanding, beginning of year 0
Granted 177,500
Outstanding, end of year (at exercise
prices ranging from $.625 to $1.00 per
share) 177,500
Common Stock Warrants
At December 31, 1996 and 1995, the Company had outstanding 65,000
Class A redeemable common stock warrants and 83,000 Class B
redeemable common stock warrants. Each warrant allows for the
purchase of six shares of the Company's common stock at an
exercise price of $2 per share. Warrant expiration dates were
extended to December 31, 1997.
<PAGE>
8. Supplemental Cash Flow Information
Non cash investing and financing activities for the year ended
December 31, 1996 consisted of the acquisition of Fire Doctor, Inc.
through the issuance of stock. The transaction was recorded as
follows:
Fair value of assets acquired $ 61,009
Liabilities assumed (38,733)
Adjustment to additional paid in capital $ 22,276
Cash paid for interest and income taxes during 1996 was $5,068 and
$300, respectively.
9. Subsequent Event
The Company anticipates either a reverse stock split approved only
by the Board of Directors or an increase in the authorized number of
common shares during the second quarter of 1997 subject to
stockholder approval at the annual meeting of stockholders. In
either event, the authorized common shares would be sufficient to
cover the increased issuance. The financial statements have not
been adjusted to reflect the impact of the proposed actions.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, EFTEK Corp. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EFTEK CORP.
Dated: April 16, 1997 By:/s/Frank Whitmore
______________________
FRANK WHITMORE
President, Chief Executive
Officer and Director
Dated: April 16, 1997 By:/s/Shawn Pringle
__________________________
SHAWN PRINGLE
Treasurer and Chief Financial Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on behalf of EFTEK
Corp. and in the capacities and on the dates indicated.
Dated: April 16, 1997 By:/s/Frank Whitmore
____________________________
FRANK WHITMORE
President, Chief Executive
Officer and Director
Dated: April 16, 1997 By:/s/Shawn Pringle
_____________________________
SHAWN PRINGLE
Treasurer and Chief Financial Officer
Dated: April 16, 1997 By:/s/Kevin J. Coffey
____________________________
KEVIN J. COFFEY, Director
Dated: April 16, 1997 By:/s/Thomas L. Brandt
___________________________
THOMAS L. BRANDT, Director
Dated: April 16, 1997 By:/s/Oleg Batratchenko
____________________________
OLEG BATRATCHENKO, Director
Dated: April 16, 1997 By:/s/Gerard T. Wisla
-----------------------------
GERARD T. WISLA
Secretary and Director*
* Director as of March 19, 1997
EFTEK\1996.10K
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary
information extracted from the
Consolidated Statements of
Operations and Consolidated Balance
Sheets of EFTEK Corp. And is
qualified in its entirety by
reference to such financial
statements
</LEGEND>
<CIK> 0000846476
<NAME> EFTEK Corp.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 12-MOS
<CASH> 172,919
<SECURITIES> 0
<RECEIVABLES> 326,521
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,560
<PP&E> 2,879,095
<DEPRECIATION> 11,083
<TOTAL-ASSETS> 3,479,010
<CURRENT-LIABILITIES> 229,733
<BONDS> 0
0
0
<COMMON> 25,911
<OTHER-SE> 3,084,989
<TOTAL-LIABILITY-AND-EQUITY> 3,479,010
<SALES> 207,677
<TOTAL-REVENUES> 207,677
<CGS> 167,072
<TOTAL-COSTS> 821,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,068
<INCOME-PRETAX> (694,997)
<INCOME-TAX> 600
<INCOME-CONTINUING> (595,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (595,597)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
EFTEK CORP.
1996 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Stock Incentive Plan (the "Plan") is to enable
EFTEK Corp. (the "Company") to attract and retain the services of
selected employees, officers, directors and other key contributors
(including consultants and nonemployee agents) of the Company or
any subsidiary of the Company. Notwithstanding the foregoing,
grants to Non-Employee Directors (as defined in subparagraph 11.1)
of options or other awards under the Plan shall be made solely in
accordance with the provisions of paragraph 11.
2. Shares Subject to the Plan.
Subject to adjustment as provided below, the shares to be offered
under the Plan shall consist of Common Stock of the Company, and
the total number of shares of Common Stock that may be issued under
the Plan shall not exceed 800,000 shares. The shares issued under
the Plan may be authorized and unissued shares or reacquired
shares. If an option granted under the Plan expires, terminates or
is canceled, the unissued shares subject to such option shall again
be available under the Plan. If shares sold or awarded as a bonus
under the Plan or forfeited to the Company or repurchased by the
Company, the number of shares forfeited or repurchased shall again
be available under the Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall become effective as of August
19, 1996.
3.2 Duration. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all
restrictions on such shares have lapsed. The Board of Directors
may suspend or terminate the Plan at any time except with respect
to options and shares subject to restrictions then outstanding
under the Plan. Termination shall not affect any outstanding
option, any right of the Company to repurchase shares or the
forfeitability of shares issued under the Plan.
4. Administration.
4.1 Board of Directors. The Plan shall be administered by the
Board of Directors of the Company, which shall determine and
designate from time to time the individuals to whom awards shall be
made, the amount of the awards and the other terms and conditions
of the awards. Subject to the provisions of the Plan, the Board of
Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the
lapse of any waiting period, accelerate any exercise date, waive or
<PAGE>
modify any restriction applicable to shares (except those
restrictions imposed by law) and make all other determinations in
the judgment of the Board of Directors necessary or desirable for
the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements
by the Board of Directors shall be final and conclusive. The Board
of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement
in the manner and to the extent it shall deem expedient to carry
the Plan into effect, and it shall be the sole and final judge of
such expediency.
4.2 Committee. The Board of Directors may delegate to a "stock
compensation committee" of the Board of Directors or specified
officers of the Company, or both (the "Committee"), any or all
authority for administration of the Plan. If authority is
delegated to a committee, all references to the Board of Directors
in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors, (ii) that only the
Board of Directors may amend or terminate the Plan as provided in
paragraphs 3 and 15 and (iii) that a Committee including officers
of the Company shall not be permitted to grant options to persons
who are officers of the Company unless the officers who are to be
compensated abstain from voting.
5. Types of Awards; Eligibility.
The Board of Directors may, from time to time, take the following
actions, separately or in combination, under the Plan: (i) grant
Incentive Stock Options, as defined in Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in
paragraphs 6.1 and 6.2; (ii) grant options other than Incentive
Stock Options ("Non-Statutory Stock Options") as provided in
paragraphs 6.1 and 6.3; (iii) award stock bonuses as provided in
paragraph 7; (iv) sell shares subject to restrictions as provided
in paragraph 8; (v) grant cash bonus rights as provided in
paragraph 11; and (vi) grant foreign qualified awards as provided
in paragraph 10. Any such awards may be made to employees,
including employees who are officers or directors, directors, and
to nonemployees (including consultants) who the Board of Directors
believes have made or will make an important contribution to the
Company or its subsidiaries; provided, however, that only employees
of the Company, or its subsidiaries, shall be eligible to receive
Incentive Stock Options under the Plan. The Board of Directors
shall select the individuals to whom awards shall be made and shall
specify the action taken with respect to each individual to whom an
award is made. At the discretion of the Board of Directors, an
individual may be given an election to surrender an award in
exchange for the grant of a new award.
6. Option Grants.
6.1 General Rules Relating to Options.
(a) Terms of Grant. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of
Directors shall determine the number of shares subject to the
option, the option price, the period of the option, the time or
times at which the option may be exercised and whether the option
is an Incentive Stock Option or a Non-Statutory Stock Option.
<PAGE>
Until exercise, the Option Holder shall not have any voting rights
of the underlying common stock.
(b) Exercise of Options. Except as provided in paragraph 6.1(d)
or as determined by the Board of Directors, no option granted under
the Plan may be exercised unless at the time of such exercise
the optionee is employed by or in the service of the Company or any
subsidiary of the Company (except for consultants) and shall have
been so employed or provided such service continuously since the
date such option was granted. However, as to Employees, such
grants of options shall vest 33 1/3% for each twelve months of
continuous service until fully vested, on a month by month basis.
Absence on leave or on account of illness or disability under rules
established by the Board of Directors shall not, however, be deemed
an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, vesting of options
shall not continue during an absence on leave (including an
extended illness) or on account of disability. Except as provided
in paragraphs 6.1(d) and 12, options granted under the Plan may be
exercised from time to time over the period stated in each option
in such amounts and at such times as shall be prescribed by the
Board of Directors, provided that options shall not be exercised
for fractional shares. Unless otherwise determined by the Board of
Directors, if the optionee does not exercise an option in any one
year with respect to the full number of shares to which the
optionee is entitled in that year, the optionee's rights shall be
cumulative and the optionee may purchase those shares in any
subsequent year during the term of the option.
(c) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors, each other option
granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at
the time of death, and each option by its terms shall be
exercisable during the optionee's lifetime only by the optionee.
(d) Termination of Employment or Service.
(i) General Rule. Unless otherwise determined by the Board of
Directors, in the event the employment or service of the optionee
with the Company or subsidiary terminates for any reason other than
because of physical disability or death as provided in
subparagraphs 6.1(d)(ii) and (iii), the option may be exercised at
any time prior to the expiration date of the option or the
expiration of 60 days after the date of such termination, whichever
is the shorter period, but only if and to the extent the optionee
was entitled to exercise the option at the date of such
termination.
(ii) Termination Because of Physical Disability. Unless otherwise
determined by the Board of Directors, in the event of the
termination of employment or service because of physical disability
(as that term is defined in Section 22(e)(3) of the Code), the
option may be exercised at any time prior to the expiration date of
the option or the expiration of 12 months after the date of such
termination, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option at the
date of such termination.
<PAGE>
(iii) Termination Because of Death. Unless otherwise
determined by the Board of Directors, in the event of the death of
an optionee while employed by or providing service to the Company
or a parent or subsidiary, the option may be exercised at any time
prior to the expiration date of the option or the expiration of 12
months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination and only by the
person or persons to whom such optionee's rights under the option
shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of
death.
(iv) Amendment of Exercise Period Applicable to Termination. The
Board of Directors, at the time of grant or at any time thereafter,
may extend the 60 day and 12-month exercise periods any length of
time not later than the original expiration date of the option, and
may increase the portion of an option that is exercisable, subject
to such terms and conditions as the Board of Directors may
determine.
(v) Failure to Exercise Options. To the extent that the option of
any deceased optionee or of any optionee whose employment or
service terminates is not exercised within the applicable period,
all further rights to purchase shares pursuant to such option shall
cease and terminate.
(d) Purchase of Shares. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted
under the Plan only upon receipt by the Company of notice in
writing from the optionee of the optionee's intention to exercise,
specifying the number of shares as to which the optionee desires to
exercise the option and the date on which the optionee desires to
complete the transaction, and, if required in order to comply with
the Securities Act of 1933, as amended, containing a representation
that it is the optionee's present intention to acquire the shares
for investment and not with a view to distribution, and any other
information the Board of Directors may request. Unless the Board
of Directors determines otherwise, on or before the date specified
for completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Board of
Directors, cash that may be the proceeds of a loan from the
Company) or, with the consent of the Board of Directors, in whole
or in part, in Common Stock of the Company valued at fair market
value, restricted stock, or other contingent awards denominated in
either stock or cash, deferred compensation credits, promissory
notes and other forms of consideration. The fair market value of
Common Stock provided in payment of the purchase price shall be
determined by the Board of Directors. No shares shall be issued
until full payment therefor has been made. Each optionee who has
exercised an option shall immediately upon notification of the
amount due, it any, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding
requirements. If additional withholding is or becomes required
beyond any amount deposited before delivery of the certificates,
the optionee shall pay such amount to the Company on demand. If
the optionee fails to pay the amount demanded, the Company may
<PAGE>
withhold that amount from other amounts payable by the Company to
the optionee, including salary, subject to applicable law. Upon
the exercise of an option, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares
issued upon exercise of the option, less the number of shares
surrendered in payment of the option exercise.
6.2 Incentive Stock Options. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(a) Limitation on Amount of Grants. An Incentive Stock Option
shall by its terms prohibit the exercise of all options in excess
of the amount provided for in Section 422(d) of the Code. Should
it be determined that any Incentive Stock Option granted under the
Plan inadvertently exceeds such maximum, such Incentive Stock
Option grant shall be deemed to be a grant of a Nonqualified Stock
Option to the extent, but only to the extent, of such excess.
(b) Limitation on Grants to 10 Percent Shareholders. An Incentive
Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or of any parent or
subsidiary of the Company only if the option price is at least 110
percent of the fair market value of the Common Stock subject to the
option on the date it is granted, as described in paragraph 6.2(d),
and the option by its terms is not exercisable after the expiration
of five years from the date it is granted.
(c) Duration of Options. Subject to paragraphs 6.1(b) and 6.2(b),
Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors, except that
no Incentive Stock Option shall be exercisable after the expiration
of five years from the date it is granted.
(d) Option Price. The option price per share shall be determined
by the Board of Directors at the time of grant. Except as provided
in paragraph 6.2(b), the option price shall not be less than 100
percent of the fair market value of the Common Stock covered by the
Incentive Stock Option at the date the option is granted. The fair
market value shall be determined by the Board of Directors.
(e) Limitation on Time of Grant. No Incentive Stock Option shall
be granted on or after the fifth anniversary of the effective date
of the Plan.
(f) Conversion of Incentive Stock Options. The Board of Directors
may at any time without the consent of the optionee convert an
Incentive Stock Option to a Non-Statutory Stock Option.
6.3 Non Statutory Stock Options. Non-Statutory Stock Options
shall be subject to the following additional terms and conditions:
(a) Options Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time
of grant. The option price may be less than the fair market value
of the shares on the date of grant. The fair market value of
shares covered by a Non-Statutory Stock Option shall be determined
by the Board of Directors.
<PAGE>
(b) Duration of Options. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the
Board of Directors.
7. Stock Bonuses.
The Board of Directors may award shares under the Plan as stock
bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors.
The restrictions may include restrictions concerning
transferability and forfeiture of the shares awarded, together with
such other restrictions as may be determined by the Board of
Directors. The Board of Directors may require the recipient to
sign an agreement as a condition of the award. The agreement may
contain any terms, conditions, restrictions, representations and
warranties required by the Board of Directors. The certificates
representing the shares awarded shall bear any legends required by
the Board of Directors. The Company may require any recipient of
a stock bonus to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount
demanded, the Company may withhold that amount from other amounts
payable by the Company to the recipient, including salary or fees
for services, subject to applicable law. Upon the issuance of a
stock bonus, the number of shares reserved for issuance under the
Plan shall be reduced by the number of shares issued.
8. Restricted Stock.
The Board of Directors may issue shares under the Plan for such
consideration (including promissory notes and services) as
determined by the Board of Directors, which consideration may be
less than fair market value of the Common Stock at the time of
issuance. shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of
Directors. The restrictions may include restrictions concerning
transferability, repurchase by the Company and forfeiture of the
shares issued, together with such other restrictions as may be
determined by the Board of Directors. All Common Stock issued
pursuant to this paragraph 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of
certificates representing such shares to the recipient. The
purchase agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of Directors.
The certificates representing the shares shall bear any legends
required by the Board of Directors. The Company may require any
purchaser of restricted stock to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state
or local tax withholding requirements. If the purchaser fails to
pay the amount demanded, the Company may withhold that amount from
other accounts payable by the Company to the purchaser, including
salary, subject to applicable law. Upon the issuance of restricted
stock, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.
<PAGE>
9. Cash Bonus Rights.
9.1 Grant. The Board of Directors may grant cash bonus rights
under the Plan in connection with (i) options granted or previously
granted; (ii) stock bonuses awarded or previously awarded; and
(iiv) shares sold or previously sold under the Plan. Cash bonus
rights will be subject to rules, terms and conditions as the Board
of Directors may prescribe. The payment of a cash bonus shall not
reduce the number of shares of Common Stock reserved for issuance
under the Plan.
9.2 Cash Bonus Rights in Connection with Options. A cash bonus
right granted in connection with an option will entitle an optionee
to a cash bonus when the related option is exercised in whole or in
part. If an optionee purchases shares upon exercise of an option,
the amount of the bonus shall be determined by multiplying the
excess of the total fair market value of the shares to be acquired
upon the exercise over the total option price for the shares by the
applicable bonus percentage.
9.3 Cash Bonus rights in Connection with Stock Bonus. A cash
bonus right granted in connection with a stock bonus will entitle
the recipient to a cash bonus payable when the stock bonus is
awarded or restrictions if any, to which the stock is subject
lapse. If bonus stock awarded is subject to restrictions and is
repurchased by the Company or forfeited by the holder, the cash
bonus right granted in connection with the stock bonus shall
terminate and may not be exercised. The amount and timing of
payment of a cash bonus shall be determined by the Board of
Directors.
9.4 Taxes. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any
applicable federal, state and local withholding requirements.
10. Foreign Qualified Grants.
Awards under the Plan may be granted to such officers and employees
of the Company and its subsidiaries and such other persons
described in paragraph 1 residing in foreign jurisdictions as the
Board of Directors may determine from time to time. The Board of
Directors may adopt such supplements to the Plan as may be
necessary to comply with the applicable laws of such foreign
jurisdictions and to afford participants favorable treatment under
such laws; provided, however, that no award shall be granted under
any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
11. Option Grants to Non-Employee Directors and Advisory Board
Directors.
11.1 Initial Non-Discretionary Grants. Each person who became, is
or becomes a Non-Employee Director or Advisory Board Director after
January 1, 1995 shall be automatically granted an option to
purchase 7,500 shares of Common Stock on the date he or she becomes
a Non-Employee Director. A "Non-Employee Director" is a director
who is not an employee of the Company or any of its subsidiaries
and has not been an employee of the Company or any of its
<PAGE>
subsidiaries within one year of any date as of which a
determination of eligibility is made, and has not received either
options, stock grants, discounted stock, or cash for services as a
Director within a twelve month period prior to such grant.
11.2 Annual Non-Discretionary Grants to Continuing Non-Employee
Directors or Advisory Board Directors. Each person who became, is
or becomes a Continuing Non-Employee Director or Advisory Board
Director after January 1, 1995 shall automatically annually
receive, on January 1st of the following year, a nondiscretionary
grant of the option to purchase up to 7,500 shares of the Company's
Common Stock. A "Continuing Non-Employee Director" is a Non-Employee
Director or Advisory Board Director who continuously
serves as a Non-Employee Director of the Company during a period of
time which includes the date(s) upon which one or more annual
shareholder meetings of the Company are held. However, such
options shall vest 100% after one year of continuous service.
11.3 Exercise Price. The exercise price of any option granted
pursuant to this paragraph 11 shall be equal to the fair market
value of the Common Stock as determined in accordance with the
procedure set forth in paragraph 6.2(d).
11.4 Term of Option. The term of each option granted pursuant to
this paragraph 11 shall be 5 years from the date of grant.
11.5 "Complete Month". For all purposes of this paragraph 11, a
complete month shall be deemed to be the period which starts on the
day of grant and ends on the same day of the following calendar
month, so that each successive "complete month" ends on the same
day of each successive calendar month (or, in respect of any
calendar month which does not include such a day, that "complete
month" shall end on the first day of the next following calendar
month).
11.6 Termination as a Director. If an optionee ceases to be a
director of the Company for any reason, including death, all
options granted pursuant to this paragraph 11 may be exercised at
any time prior to the expiration date of the option or the
expiration of 60 days (or 12 months in the event of death) after
the last day the optionee served as a director, whichever is the
shorter period, but only if and to the extent the optionee was
entitled to exercise the option as of the last day the optionee
served as a director.
11.7 Nontransferability. Each option granted pursuant to this
paragraph 11 by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation
of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of
death or pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974.
12. Changes in Capital Structure.
If the outstanding Common Stock of the Company is hereafter
increased or decreased or changed into or exchanged for a different
<PAGE>
number or kind of shares or other securities of the Company or of
another corporation by reason of any recapitalization,
reclassification, stock split, combination of shares or dividend
payable in shares, appropriate adjustment shall be made by the
Board of Directors in the number and kind of shares available for
awards under the Plan. In addition, the Board of Directors shall
make appropriate adjustment in the number and kind of shares as to
which outstanding options, or portions thereof then unexercised,
shall be exercisable, so that the optionee's proportionate interest
before and after the occurrence of the event is maintained. The
Board of Directors may also require that any securities issued in
respect of or exchanged for shares issued hereunder that are
subject to restrictions be subject to similar restrictions.
Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in
the issuance or fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for in
any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.
13. Effect of Liquidation or Reorganization.
13.1 Cash, Stock or Other Property for Stock. Except as provided
in paragraph 13.2, upon a merger, consolidation, acquisition of
property or stock, reorganization or liquidation of the Company, as
a result of which the stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their
shares of Common Stock, any option granted hereunder shall
terminate, but the optionee shall have the right during a 30-day
period immediately prior to any such merger, consolidation,
acquisition of property or stock, reorganization or liquidation to
exercise his or her option in whole or in part whether or not the
vesting requirements applicable to the option have been satisfied
at the discretion of the Board of Directors.
13.2 Conversion of Options on Stock for Stock Exchange. If the
stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of
Common Stock in any transaction involving a merger, consolidation,
acquisition of property or stock, separation or reorganization, all
options granted hereunder shall be converted into options to
purchase shares of Exchange Stock unless the Board of Directors, in
its sole discretion, determines that any or all such options
granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance
with the provisions of paragraph 13.1. The amount and price of
converted options shall be determined by adjusting the amount and
price of the options granted hereunder in the same proportion as
used for determining the number of shares of Exchange Stock the
holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization.
14. Corporate Mergers, Acquisitions, Etc.
The Board of Directors may also grant options, stock bonuses and
cash bonuses and issue restricted stock under the Plan having
terms, conditions and provisions that vary from those specified in
this Plan, provided that any such awards are granted in
<PAGE>
substitution for, or in connection with the assumption of, existing
options, stock bonuses, cash bonuses and restricted stock granted,
awarded or issued by another corporation and assumed or otherwise
agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
15. Amendment of Plan.
The Board of Directors may at any time, and from time to time,
modify or amend the Plan in such respect as it shall deem advisable
because of changes in the law while the Plan is in effect or for
any other reason. Except as provided in paragraphs 6.1(d), 12 and
13, however, no change in an award already granted shall be made
without the written consent of the holders of such award.
16. Approvals.
The obligations of the Company under the Plan are subject to the
approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company shall not be obligated to
issue or deliver Common Stock under the Plan if such issuance or
delivery would violate applicable state or federal securities laws.
17. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall: (a)
confer upon any employee any right to be continued in the
employment of the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary by whom such
employee is employed to terminate such employee's employment at any
time, for any reason, with or without cause, or to decrease such
employee's compensation or benefits, or (b) confer upon any person
engaged by the Company any right to be retained or employed by the
company or to the continuation, extension, renewal, or modification
of any compensation, contract, or arrangement with or by the
Company.
18. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights as
a shareholder with respect to any Common Stock until the date of
issue to the recipient of a stock certificate for such shares.
Except as otherwise expressly provided in the plan, no adjustment
shall be made for dividends or other rights for which the record
date occurs prior to the date such stock certificate is issued.
Date adopted by Board July 15, 1996
Date Approved by Stockholders August 19, 1996
Date Last Amended by the Shareholders ___N/A__, 1996
eftek\1996stk.pln
