SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB/A
(Amendment No. 2)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
For Quarter Ended December 31, 1999 Commission File No. 33-28562
AUTHORISZOR INC.
(Exact name of registrant as specified in charter)
Delaware 75-2661571
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
1 Justin Road
Natick, MA 01760-5565
- --------------------------------------------------------------------------------
(Address of princ (Postal Code)
executive offices)
Registrant's telephone number, including area code: (508) 650-3916
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
As of February 22, 2000, there were 17,414,081 shares of the common stock, $0.01
par value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
------ ------
<PAGE>
AUTHORISZOR INC.
December 31, 1999
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999
(unaudited) and June 30, 1999...........................................F-1
Consolidated Statements of Operations for the three
and six months ended December 31, 1999, and 1998
(unaudited) and for the period January 15, 1997
(date of inception) to December 31, 1999 (unaudited)....................F-2
Consolidated Statement of Stockholders' Equity for
the six months ended December 31, 1999 (unaudited)......................F-3
Consolidated Statements of Cash Flows for the six
months ended December 31, 1999 and 1998 (unaudited)
and for the period January 15, 1997 (date of inception)
to December 31, 1999 (unaudited)........................................F-4
Notes to Consolidated Financial Statements (unaudited)..................F-5
Item 2. Management's Discussion and Analysis or Plan
of Operation.....................................................1
PART II. OTHER INFORMATION...............................................5
Item 1. Legal Proceedings................................................5
Item 2. Changes in Securities ...........................................5
Item 3. Defaults Upon Senior Securities..................................6
Item 4. Submission of Matters to a Vote of
Security Holders.................................................6
Item 5. Other Information................................................6
Item 6. Exhibits and Reports on Form 8-K................................10
SIGNATURES...............................................................12
i
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1999 June 30, 1999
(unaudited)
$ $
ASSETS
Cash 394,505 698
VAT recoverable and other assets 82,269 2,498
---------------- ----------------
Total current assets 476,774 3,196
Advance receivable (Note C) 160,800 -
Investment in securities, at cost 346,500 -
Investment in subsidiary held-for-sale (Notes D and G) 1,415,950 -
Computer and office equipment, net of accumulated
depreciation 155,928 21,594
Intangible assets (Note E) 30,000 -
---------------- ----------------
2,109,178 21,594
---------------- ----------------
2,585,952 24,790
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable to related parties 27,906 -
Accounts payable and other liabilities 155,968 100,670
---------------- ----------------
Total current liabilities 183,874 100,670
Stockholders' equity (deficit) (Notes F and G)
Preferred stock, par value $.01 per share; authorized: 2,000,000
shares; issued and outstanding: none - -
Common stock, $.01 par value per share; authorized:
30,000,000 shares; issued and outstanding: 14,316,808 shares and
60 shares respectively 143,168 9
Additional paid-in capital 4,057,819 -
Accumulated other comprehensive income (5,354) 2,846
Accumulated deficit during the development stage (1,793,555) (78,735)
---------------- ----------------
2,402,078 (75,880)
---------------- ----------------
2,585,952 24,790
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-1
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the periods ended
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
January 15, 1997
For the three months ended For the six months ended (inception) to
December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999
$ $ $ $ $
Net sales - 32,682 - 32,682 37,001
Cost of sales - 8,962 - 8,962 10,559
--------------- --------------- -------------- --------------- -----------------
Gross profit - 23,720 - 23,720 26,442
Operating expenses
Professional fees 660,405 2,494 696,399 5,071 701,470
Marketing and advertising 183,720 - 212,229 - 212,229
Administrative 359,482 15,672 715,549 30,449 815,655
--------------- --------------- -------------- --------------- -----------------
Total operating costs and expenses 1,203,607 18,166 1,624,177 35,520 1,729,354
Operating (loss) income (1,203,607) 5,554 (1,624,177) (11,800) (1,702,912)
Other income (expense)
Interest income 1,296 - 1,526 - 1,526
Writedown of subsidiary
held-for-sale (291,448) - (291,448) - (291,448)
Gain on sale of investments - - 199,279 - 199,279
--------------- --------------- -------------- --------------- -----------------
Total other income (expense) (290,152) - (90,643) - (90,643)
--------------- --------------- -------------- --------------- -----------------
Net (loss) earnings (1,493,759) 5,554 (1,714,820) (11,800) (1,793,555)
=============== =============== ============== =============== =================
Weighted average shares
outstanding
Basic and Diluted 13,907,193 13,765,808 13,844,311 13,765,808
=============== =============== ============== ===============
Net/(loss) income per
common share
Basic and Diluted $ (0.11) $ 0.00 $ (0.12) $ (0.00)
=============== =============== ============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the period ended
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated
other
Additional compre- Compre-
Preferred Stock Common Stock paid-in Accumulated hensive hensive
Shares Amount Shares Amount capital deficit income Total income
$ $ $ $ $ $ $
Balance at July 1, 1999 - - 60 9 - (78,735) 2,846 (75,880)
Issuance of common stock
($0.16 per share) - - 17,835 2,828 - - - 2,828
Recapitalization - - 13,747,913 134,821 3,097,172 - - 3,231,993
Issuance of common stock
for cash
($1.00 per share) - - 436,000 4,360 450,789 - - 455,149
($2.10 per share) - - 15,000 150 31,360 - - 31,510
Issuance of common stock
for services
($4.79 per share) - - 100,000 1,000 478,498 - - 479,498
Comprehensive income:
Foreign currency
translation adjustment - - - - - - (8,200) (8,200) (8,200)
Net loss during the
period - - - - - (1,714,820) - (1,714,820) (1,714,820)
Total comprehensive -------------
loss (1,723,020)
--------- -------- ---------- --------- --------- ------------ --------- ------------ =============
Balance at
December 31, 1999 - - 14,316,808 143,168 4,057,819 (1,793,555) (5,354) 2,402,078
(unaudited) ========= ======== ========== ========= ========= =========== ========= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the periods ended
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Jan. 15, 1997
(inception) to
Six months ended December 31, December 31,
1999 1998 1999
$ $ $
Net cash flows (used in) provided by operating
activities
Net loss during the period (1,714,820) (11,800) (1,793,555)
Adjustments to reconcile net loss
to net cash (used in) provided by operating
activities:
Fair value in exchange for services 406,600 - 406,600
Non-cash compensation expense 52,849 - 52,849
Writedown of subsidiary
held for sale 291,448 - 291,448
Gains on sale of investments (199,279) - (199,279)
Depreciation 27,901 604 38,296
Receivables and other assets (80,766) (18,944) (83,354)
Accounts payable and accrued liabilities 83,570 39,261 187,990
-------------- -------------- --------------
582,323 20,921 694,550
Net cash (used in) provided by operating
activities (1,132,497) 9,121 (1,099,005)
Net cash flows (used in) provided by investing
activities
Acquisition of equipment (161,740) (1,027) (194,515)
Sale of investments in securities 1,360,579 - 1,360,579
Advance in WRDC (160,800) - (160,800)
Purchase of intangible assets (30,000) - (30,000)
-------------- -------------- --------------
Net cash flows (used in) provided by investing
activities 1,008,039 (1,027) 975,264
Cash flows provided by financing activities
Proceeds from issuance of stock 506,708 - 506,717
Recapitalization 711 - 711
-------------- -------------- --------------
Net cash flows provided by financing activities 507,419 - 507,428
Effect of exchange rate changes on cash 10,846 (583) 10,818
-------------- -------------- --------------
Net increase in cash 393,807 7,511 394,505
Cash at beginning of period 698 617 -
Cash at end of period 394,505 8,128 394,505
============== ============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - - -
Income taxes - - -
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
NOTE A - BASIS OF PREPARATION
The consolidated financial statements of Authoriszor Inc. and subsidiaries (the
"Company") contained herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary for a fair presentation of the
consolidated financial position as of December 31, 1999 and the consolidated
results of operations and cash flows for the six months then ended have been
made. All such adjustments, in the opinion of management, are of a normal
recurring nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes as of June 30, 1999, included in the Company's Form
8-K/A.
NOTE B - RECAPITALIZATION OF SHARES
On July 22, 1999, Toucan Gold Corporation (Toucan) acquired all of the
outstanding capital stock of Authoriszor Limited (formerly known as ITIS
Technologies Ltd) a UK company, in exchange for restricted shares of common
stock of Toucan (the Exchange) pursuant to a Share Exchange Agreement between
Toucan and Authoriszor Limited. Toucan exchanged 4,680,375 shares of common
stock for all of Authoriszor Limited's issued and outstanding shares of common
stock. At June 30, 1999, Toucan had disposed of all of its operations. For
accounting purposes, the Exchange has been treated as a recapitalization of
Authoriszor Limited. The accompanying financial statements are those of
Authoriszor Limited. Also, Toucan changed its name to Authoriszor Inc. and its
fiscal year end to June 30, that of Authoriszor Limited. Immediately after the
Exchange, Authoriszor Limited's former shareholders owned approximately 34% of
the outstanding common stock of Toucan.
NOTE C- ADVANCE RECEIVABLE
The Company has advanced $160,800 ((pound)100,000) to a private company, WRDC
Limited (WRDC) at December 31, 1999. The advance is part of a formal agreement
dated January 27, 2000 wherein the Company has agreed to purchase 25.1% of the
share capital of WRDC for a total cost of $604,800 ((pound) 378,000) with an
option to acquire the balance of the issued share capital of WRDC after October
31, 2001 at a price based on the revenue and profits of WRDC for the previous
accounting period at the relevant time. The Company will make a further advance
to WRDC of $195,200 ((pound) 122,000). The total advances of $356,000
((pound)222,000) will be converted into a note repayable to the Company over a
five year period bearing interest at 6% with quarterly principal and interest
payments of (pound)18,500 beginning on the second anniversary date of the first
drawdown.
NOTE D - INVESTMENT IN SUBSIDIARY HELD - FOR - SALE
The Company had previously announced a spin-off to its stockholders of Toucan
Mining plc (Toucan Mining) a wholly owned subsidiary of the Company, subject to
the satisfaction of certain conditions, including the registration of the shares
of Toucan Mining pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In light of the Company's desire to dispose of Toucan
Mining in a timely fashion in order to be able to pursue its current internet
security business, the Company determined to sell Toucan Mining rather than
pursuing the proposed spin-off.
F-5
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
On January 28, 2000, the Company completed the sale (the "sale") of all of the
share capital of Toucan Mining for an aggregate consideration of $809,750
((pound)500,000) in cash. The sale of Toucan Mining was made to Golden Ridge
Group Limited, a company registered in the British Virgin Islands, pursuant to a
Share Sale Agreement, dated January 28, 2000 ( the "Agreement").
On the same date, and prior to the aforementioned sale of Toucan Mining, Toucan
Mining transferred to the Company 2 million ordinary shares of Minmet, (the
"Minmet Shares"). The Minmet Shares cannot be sold by the Company without the
consent of Minmet until January 6, 2001. In addition, Toucan Mining transferred
to the Company warrants to subscribe for a further 7.7 million ordinary shares
of Minmet at an exercise price of $0.13 ((pound) 0.08) (the "Warrant Shares").
The Company is not contractually restricted from selling the Warrant Shares.
Accordingly, at the time of the Sale, the assets of Toucan Mining consisted
primarily of certain mining claims in Brazil, the right to acquire certain
additional mining claims in Brazil, and 8,030,000 shares of Minmet, 8 million
shares of which cannot be sold without the consent of Minmet until January 6,
2001.
At December 31, 1999 the investment in subsidiary held-for-sale is carried at
the lower of cost or market.
NOTE E - INTANGIBLE ASSETS
On July 22, 1999 the Company acquired the unregistered intellectual property
rights to the Authoriszor computer software from Messrs James Jackson and David
Wray, Directors of the Company and David Blanchfield, Director of Authoriszor
Limited for consideration of $30,000 ((pound)19,032).
NOTE F - GRANT OF STOCK OPTIONS AND STOCK TRANSACTIONS
In October 1999, the Authoriszor Inc. 1999 Stock Plan (the "Plan") was ratified
by the Company's Board of Directors. Pursuant to the Plan, the Company may grant
Incentive Stock Options to any employee or officer of the Company or of any
parent or subsidiary of the Company, and may grant Non-qualified Stock Options
to any person eligible to receive Incentive Stock Options, and also to
consultants or advisors of the Company or its subsidiaries. The maximum number
of shares that may be subject to Options and issued under the Plan is 1,000,000
shares of common stock. As of December 31, 1999, individuals have been granted
options to acquire 282,214 shares of common stock that vest periodically through
January 2008. The options have been granted at prices ranging from $2.00 to
$4.67.
The Company has entered into Stock Option Agreements outside of the Plan. As of
December 31, 1999, individuals have been granted options to acquire 480,000
shares of common stock that vest periodically through October 2002. The options
have been granted at prices ranging from $1.00 to $3.00.
In August 1999, the Company entered an agreement with a consultant wherein the
consultant is to be issued 120,000 shares of common stock for services. At
December 31, 1999, 100,000 shares had been earned through services rendered.
Expense equivalent to the trading value of the shares of common stock at the
point in time when the shares were earned has been recorded at $406,600 and is
included in professional fees. The 100,000 shares have been reflected as being
issued in the Statement of Stockholders' Equity and Earnings Per Share
calculation. The additional 20,000 shares were earned by the consultant in
January 2000.
In October 1999, the Company repaid a $41,415 ((pound)25,000) loan from an
employee/director with $16,566 ((pound)10,000) cash consideration and 15,000
shares of common stock at a 20% discount from the market price at the date of
the transaction. Compensation cost of $6,600 was recorded and is included in
administrative expenses.
F-6
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
During December 1999, the Company was seeking to raise additional short term
capital and offered an incentive to unrelated parties holding 436,000 warrants
to exercise their warrants by reducing the exercise price from $1.50 to $1.00.
Each of the 436,000 warrants were exercised during December 1999.
NOTE G - ADJUSTMENTS
The reduction in the exercise price of the 436,000 warrants as explained above
in Note F was originally treated as an expense of $2,345,680. The Company has
concluded that this price reduction should be reflected as an equity financing
transaction resulting in no expense being recorded.
Adjustments have also been made as a result of the sale of Toucan Mining in
January 2000, to write down the investment in Toucan Mining at December 31, 1999
to provide for a loss of $291,448.
The effect of the above two adjustments are shown below:
December 31, 1999
(unaudited)
Stockholders equity previously reported $2,693,526
=================
Adjusted stockholders' equity $2,402,078
3 months ended 6 months ended
December 31, 1999 December 31, 1999
(unaudited) (unaudited)
Net loss previously reported $(3,547,991) $(3,769,052)
================= =================
Net loss per share previously reported $(0.26) $(0.29)
================= =================
Adjusted net loss $(1,493,759) $(1,714,820)
================= =================
Adjusted net loss per share $(0.11) $(0.12)
================= =================
F-7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Discussion and Analysis or
Plan of Operation" constitutes forward- looking statements for purposes of the
Securities Act of 1933, as amended (the " Securities Act" ), and the Securities
Exchange Act of 1934, as amended (the " Exchange Act"), and as such involves
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. The words "expect," "estimate," anticipate,"
"predict," "believes," "plan," "seek," "objective" and similar expressions are
intended to identify forward-looking statements. Important factors that could
cause the actual results, performance or achievement of the Company to differ
materially from the Company's expectations include the following:
o one or more of the assumptions or other cautionary factors discussed in
connection with particular forward-looking statements or elsewhere in
this Form 10-QSB prove not to be accurate;
o the Company is unsuccessful in securing sales through its anticipated
sales and marketing efforts;
o errors in cost estimates and cost overruns;
o the Company's inability to obtain financing for general operations
including the marketing of the Company's products;
o non-acceptance of one or more products of the Company in the market-
place for whatever reason;
o the Company's inability to supply any product to meet market demand;
o generally unfavorable economic conditions that would adversely effect
purchasing decisions by distributors, resellers or end-users;
o development of a similar competing product at a similar price point;
o the inability to successfully integrate one or more acquisitions, joint
ventures or new subsidiaries with the Company's operations (including
the inability to successfully integrate businesses that may be diverse
as to type, geographic area, or customer base and the diversion of
management's attention among several acquired businesses) without
substantial costs, delays, or other problems;
o if the Company experiences labor and/or employment problems such as the
loss of key personnel, inability to hire and/or retain competent
personnel, etc.;
o if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God
etc.), or is adversely affected by problems of its suppliers, shippers,
customers or others;
o a slowing of the growth of the acceptance and use of the Internet as a
source of information and a vehicle for commerce and business;
o if the Company encounters difficulties in expanding and conducting
business in foreign markets;
o if larger and more established competitors successfully employ their
greater financial, marketing and sales resources, name recognition,
customer contacts and/or relationships with business and technology
partners to gain significant advantages over the Company; and/or
o the risk factors set forth in the Company's Form 10-QSB for the quarter
ended June 30, 1999.
All written or oral forward-looking statements attributable to the
Company are expressly qualified in their entirety by such factors. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
1
<PAGE>
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
Review of Operations
The Company is a provider of a patent-pending security solution that
secures corporate Web-related information while enabling businesses to provide
secure access to their corporate Web Site and Applications and to conduct secure
communications over computer networks and the Internet. The Company's products
and processes enable a corporation to provide secure access to the information
on its Web Server to its customers, suppliers, employees and public visitors
from the Internet, according to their pre-determined security profile.
The Company believes that its solution is innovatively different from
any current security solution available today. The Company's solution provides
security by securing a customer's Website, corporate information assets and
contents off- line, thereby making this information completely inaccessible,
except through the Authoriszor Protected Server. This eliminates any direct
contact between the requestor and the corporate information assets.
The benefit of the Authoriszor product suite is that it has been
designed to provide an added dimension of security to existing security
products, such as firewalls, virtual private networks, encryption, security
tokens, smart cards and biometrics. Customer investments in these other security
technologies can be retained.
As reported in a Form 8-K filed with the Securities and Exchange
Commission on August 6, 1999 and in order to begin its operations as an
Internet-based company, the Company, which was previously conducting operations
as a mineral development company, on July 22, 1999 acquired Authoriszor Ltd.,
United Kingdom Internet-based company. Following this acquisition, the name of
the Company was changed to Authoriszor Inc., and the trading symbol for the
Company's common stock on the OTC Bulletin Board was changed to "AUOR."
The principal elements of the Company's strategy to achieve a leading
position in the worldwide electronic security solutions market are as follows:
Technological leadership. The Company believes that it offers one of
the most innovative and best Web security solutions available in the market
today. The Company intends to maintain this technological lead by devoting
substantial resources to product research and development, and, if appropriate,
by acquiring new products and technologies. In addition, the Company intends to
increase the current functionality of its solutions which management of the
Company anticipates will create further sales opportunities and additional
technological barriers for others. The Company will continue to focus on open,
flexible and scalable solutions while broadening the scope of its electronic
security solutions.
Global presence. The Company intends to be a leading provider of Web
security solutions to large enterprises in Europe and North America and other
high growth markets by expanding its sales and marketing and support
organizations. To this end, the Company has increased its staff to 17 employees,
including Richard A. Langevin, the Company's Chief Executive Officer, President
and Interim Chief Financial Officer. See Part II. Item 5. Other Information in
this Form 10-QSB for more information. The Company also intends to create a
network of resellers, systems integrators and other security application vendors
as clients and sales channel partners of the Authoriszor products.
Target new industry sectors and commercial certificate authorities. The
Company plans to continue to focus its sales and marketing efforts on industries
where Web security is essential. These markets are currently financial services,
healthcare services, government branches and large enterprises. The Company
intends to target leading companies in these markets and will also target
digital certificate service providers, known as commercial certificate
authorities or trusted third parties.
Develop strategic partnerships and customer relationships. The Company
is working to establish strategic relationships with leading partners to broaden
and accelerate the market acceptance of its Web security solutions. It will
strategically target relationships with companies and other organizations that
it expects to play a critical role in the future of electronic business. These
relationships should facilitate broad market acceptance of the Company's
electronic security solutions and management believes that they will help
achieve the Company's goal of becoming a leading global provider of Web security
products and services.
2
<PAGE>
Pursue selective growth opportunities. The Company intends to grow through
both organic expansion as well as through selected acquisitions which management
of the Company considers will accelerate the product, customer and geographic
penetration.
In January 2000, the Company secured a contract with Univentures
International Limited to implement a secure Web application for use throughout
nine universities located in Northern England.
The Company's business plan and business are described in more detail in
the Company's Form 10-QSB for the quarter ended June 30, 1999. Certain specific
activities implementing the Company's business plan are set forth in Part II.
Item 5. Other Information in this Form 10-QSB.
Results of Operations
The following is a discussion of the results of operations for the three
and six months ended December 31, 1999 compared with the three and six months
ended December 31, 1998.
The operating loss increased to $1,203,607 and $1,624,177 for the three and
six months ended December 31, 1999 respectively compared to income from
operations of $5,554 and an operating loss of $11,800 for the respective periods
in 1998. This increase was attributable primarily to the Company entering into
an agreement with consultants wherein the consultants are to be issued 120,000
shares of the Company's Common Stock for services rendered. At December 31,
1999, 100,000 shares had been earned and expenses equivalent to the trading
value of the shares of Common Stock at the point in time when the shares were
earned has been recorded at approximately $407,000. The remaining increase is
attributable to costs incurred in setting up the Company's development center,
preparing for the opening of the sales office, recruiting employees, legal and
professional fees in connection with the recapitalization transaction (Note B to
the Financial Statements) and costs in connection with being a public company.
The Company did not have any sales in the three and six months ended
December 31, 1999 compared to $32,682 for the three and six months ended
December 31, 1998.
In the six months ended December 31, 1999, the Company recognized a gain on
the sale of investment securities in the amount of $199,279. These securities
had been received in connection with the aforementioned recapitalization
transaction. The Company also recorded a write-down of its investment in Toucan
Mining Plc in the amount of $291,448 in the three and six months ended December
31, 1999.
In January 2000, the Company agreed to reduce the exercise price on options
held by certain individuals, including Robert P. Jeffcock, former officer and
current Director of the Company, Robert A. Pearce, former officer and Director
and L. Clark Arnold, former officer and Director, from the original exercise
price of $1.00 to a new exercise price of $0.66 provided the option holders
exercised their options on or prior to January 31, 2000. Each of the individuals
exercised their options by January 31, 2000. The Company will record
compensation expense of approximately $2,000,000, which will be reflected in the
quarter ended March 31, 2000.
Financing Management's Plan of Operation
Following the acquisition of Authoriszor Ltd. in July 1999, the Company had
approximately $1,600,000 in cash and other liquid assets, including securities
of Minmet Plc. ("Minmet"). Following the acquisition of Authoriszor Ltd., the
Company sold in the quarter ended September 30, 1999 10.5 million Minmet shares
with Minmet's consent at the price of 8 pence (sterling) per share. These
transactions resulted in net cash proceeds to the Company of approximately
$1,360,000. Pursuant to its agreement with Minmet, the Company may not sell any
of its remaining Minmet shares until January 6, 2001 without Minmet's prior
approval; provided, however, that Minmet has agreed that the Minmet Shares may
be placed through Minmet's brokers with Minmet's consent at any time, and Minmet
has undertaken to act reasonably in respect of any requests with regard to such
sales of Minmet shares.
3
<PAGE>
The Company has provided loans to Authoriszor Ltd. through December 31,
1999 of approximately $1,200,000.
In December 1999, the Company engaged Beeson Gregory of London, England
as its financial advisor and investment banker to raise a substantial amount of
capital for the Company in a placement in Europe and the United Kingdom. To
raise funds on a short term basis to permit the Company to continue its
operations and to make a loan to WRDC Limited ("WRDC") in the principal amount
of $160,800 as part of its investment agreement with WRDC, the Company
considered various alternatives. The Company proposed to Minmet Plc that the
Company be permitted to sell additional Minmet shares, but Minmet refused to
consent to such further sales. The Company sought to raise additional short term
capital by offering an incentive to holders of warrants to purchase 436,000
shares of common stock to exercise such warrants in December by reducing the
exercise price of such warrants from $1.50 to $1.00 per share if the warrants
were exercised by December 20, 1999. The warrant holders exercised their
warrants by December 20, 1999. See Part II. Item 2. Changes in Securities.
Similarly, in January 2000, the Company offered a similar incentive to holders
of options to purchase 350,000 shares of common stock by reducing the exercise
price of such options from $1.00 to $.66 per share if such stock options were
exercise by January 31, 2000. All of such stock options were exercised by
January 31, 2000. See Part II, Item 5. Other Information
In addition, in January 2000 the Company sold the stock of its subsidiary
Toucan Mining Plc (formerly Toucan Mining Limited) for $809,750 ((pound)500,000)
in cash. This transaction was undertaken because of the Company's need to
dispose of its mining interests (except for the retained Minmet securities) in a
timely fashion to be able to pursue its current Internet security business and
to facilitate the proposed placement that was being arranged by Beeson Gregory.
Prior to the sale, Toucan Mining Plc transferred to the Company warrants to
purchase 7.7 million shares of Minmet Plc at an exercise price of 8 pence
(sterling) per share and 2 million Minmet Shares. The shares of Minmet Plc to be
acquired on exercise of the warrants are not subject to any contractual
restrictions with Minmet Plc; however, the Minmet Shares cannot be sold until
January 2001 without the consent of Minmet Plc. See Part II. Item 5. Other
Information.
In February 2000, the Company placed (the "Placement") 2,727,273 shares
of common stock ("Placing Shares") at $11.00 per share. The Placement was made
pursuant to Regulation S under the Securities Act in the United Kingdom and
Europe. The gross proceeds of the Placement were $30,000,003. In addition, the
Company granted an option to Beeson Gregory, the placement agent, to purchase
136,363 shares of common stock at an exercise price of $11.00 per share for a
term of two years. The Company has granted certain registration rights to the
purchasers and future holders of the Placing Shares. See Part II. Item 5. Other
Information.
Beeson Gregory received a commission of 5% of the total gross proceeds. The
Company has also appointed Beeson Gregory as its financial advisor and has
agreed to pay Beeson Gregory an annual financial advisory fee of $40,000
((pound)25,000). The Company estimates that the proceeds of the offering, net of
commissions payable to Beeson Gregory and reimbursement of Beeson Gregory's
expenses and other expenses, will result in cash available to the Company of
approximately $28,015,000. Additional expenses will be incurred in connection
with the registration of the Placing Shares. The Company intends to use such net
proceeds to provide working capital to the Company and its subsidiaries and to
fund strategic investments, acquisitions and research and development.
Upon completion of the Placement, the Company, through Authoriszor Holdings
Limited, has acquired 25.1% of the stock of WRDC for an aggregate subscription
price of $604,800 ((pound)378,000) . In addition, on making the subscription,
the Company made a loan in the principal amount of $195,200 ((pound)122,000) to
WRDC, repayable (with interest) over a five year period beginning on the second
anniversary date of the first drawdown. The Company has converted the terms of
the existing interest free loan to WRDC in the principal amount of $160,800
((pound)100,000) to similar terms. The Company also has the option to purchase
the remaining 74.9% of WRDC at a pre-determined price, over the next five years.
See Part II. Item 5. Other Information.
As the result of these transactions, management considers that the cash
resources of the Company are adequate for its working capital requirements for
approximately the next twelve months.
Year 2000 Compliance
The Year 2000 issue results from the historical use in computer
software programs and operating systems of a two digit number to represent the
applicable year. Marketplace concerns arose as to whether certain software and
hardware would fail to properly function when confronted with dates that contain
"00" as a two digit year. To address the potential risk of disruption of
operations, the Company reviewed its own software products and conducted an
impact analysis. The Company determined that all of the Company's products were
designed to record, store, and process calendar dates occurring before and after
January 1, 2000 with the same full-year accuracy (i.e. four numeric characters
instead of two) and the impact analysis identified no major risk of failure
within the Company's in-house computer systems, which include the accounting and
management information systems.
4
<PAGE>
To date, the Company has not experienced any material problems relating
to the Year 2000 issue. However, the Company has not yet experienced all factors
(such as the February leap year date and future shipments from suppliers) that
might have Year 2000 readiness implications. The Company will continue to
monitor and evaluate internal Year 2000 compliance.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(a) None
(b) None
(c) On October 6, 1999, the Company repaid a $41,415 ((pound)25,000) loan from
James L. Jackson with $16,566 ((pound)10,000) in cash consideration and
15,000 shares of the Company's common stock, $.01 par value (the "Common
Stock"), at a 20% discount from the then current market price. James
Jackson subsequently transferred 7,500 shares of the Common Stock to an
assignee. These shares of Common Stock were issued pursuant to the
exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act") set forth in Section 4(2) of the Securities Act.
In December 1999, (i) Zalcany Limited exercised a warrant to purchase
124,667 shares of Common Stock at an exercise price of $1.00 per share;
(ii) Zalcany Limited, as nominee for Richard Harris, exercised a warrant to
purchase 70,000 shares of Common Stock at an exercise price of $1.00 per
share; (iii) Roy Williams exercised a warrant to purchase 68,000 shares of
Common Stock at an exercise price of $1.00 per share; (iv) Igor
Mousasticoshvily exercised a warrant to purchase 133,333 shares of Common
Stock at an exercise price of $1.00 per share; and (v) Mustardseeds Estates
Limited exercised a warrant to purchase 40,000 shares of Common Stock at an
exercise price of $1.00 per share. As an incentive to the holders of the
warrants to exercise their warrants, the Company reduced the exercise price
from $1.50 to $1.00 if the warrants were exercised prior to December 20,
1999. Certificates evidencing these shares have not yet been issued but the
shares are included in the number on the cover page indicating the total
number of currently issued and outstanding shares of Common Stock. These
shares of Common Stock will be issued by the Company pursuant to the
exemption from registration under the Securities Act set forth in Section
4(2) of the Securities Act.
The Company has agreed to issue 120,000 shares of Common Stock to certain
consultants in compensation for services rendered. Certificates evidencing
these shares have not yet been issued and the shares are included in the
number on the cover page indicating the total number of currently issued
and outstanding shares of Common Stock. The shares of Common Stock will be
issued pursuant to the exemption from registration under the Securities Act
set forth in Section 4(2) of the Securities Act.
The Company has agreed to grant certain options (the "Options") to purchase
shares (the "Option Shares") of the Common Stock to certain employees of
the Company pursuant to the 1999 Stock Plan and to certain consultants,
officers and directors of the Company by separate agreements. See Part II.
Item 5. Other Information. It is contemplated that the 1999 Stock Option
Plan will be registered under the Securities Act on Form S-8.
5
<PAGE>
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
The following significant events have occurred during the quarter ended
December 31, 1999 or subsequent thereto:
1. Effective October 1, 1999, Sir Malcolm Rifkind was appointed as a
consultant to Authoriszor Limited. Pursuant to his Consulting Agreement,
Sir Malcolm Rifkind was granted stock options to acquire 200,000 shares of
the Common Stock at an exercise price of $1.00 per share. On January 12,
2000, Sir Malcolm Rifkind was appointed to the Company's Board of
Directors.
2. On December 1, 1999, Barry Jones was appointed as the Marketing Director of
Authoriszor Limited and was also appointed to the Board of Directors of
Authoriszor Ltd. In connection therewith, Barry Jones was granted stock
options to acquire 131,214 shares of the Common Stock at an exercise price
of $2.00 per share.
3. On December 1, 1999, Raymond Seitz, former United States ambassador to the
United Kingdom and currently Vice Chairman - Lehman Brothers Europe, was
named Chairman of the Board of the Company. The Company granted Mr. Seitz
stock options to acquire 200,000 shares of the Common Stock at an exercise
price of $3.00 per share.
4. At a meeting of the Company's Board held on January 12, 2000, Richard A.
Langevin was elected to the Board and his appointment as Chief Executive
Officer and President of the Company was ratified. Mr. Langevin had
replaced Robert Jeffcock as Chief Executive Officer and President of the
Company effective January 1, 2000. Mr. Langevin is based in the Boston,
Massachusetts area at the Company's new headquarters located at 1 Justin
Road, Natick, Massachusetts 01760-5565. Mr. Langevin entered into an
Executive Employment Agreement with the Company, dated as of January 1,
2000, under which he has been appointed Chief Executive Officer of the
Company. The term of this Agreement is four (4) years, expiring December
31, 2003, and terminable immediately for cause by either the Company or Mr.
Langevin. Mr. Langevin is entitled to compensation of (i) a base salary of
$225,000 (the "Salary"); (ii) a minimum annual bonus of $125,000, payable
in pro rata quarterly increments, provided that certain quarterly
Management-By-Objectives targets are achieved (the "Bonus"); and (iii)
stock options to purchase a cumulative total of 500,000 shares of the
Common Stock in increments of (A) 200,000 shares exercisable on or after
January 1, 2001, (B) 100,000 shares exercisable on or after January 1,
2002, (C) 100,000 shares exercisable on or after January 1, 2003 and (D)
100,000 shares exercisable on or after January 1, 2004, all at an exercise
price of $6.75 per share (the "Langevin Options"). In the event of a sale
of the Company during the term of the Agreement, all Salary payments and
Bonus payments under the Agreement would become immediately due and payable
and all of the Langevin Options would become immediately exercisable. If
not terminated due to certain other events listed, each of the Langevin
Options terminates on December 31, 2009.
5. Robert P. Jeffcock resigned from the offices of President and Secretary of
the Company and remained a Director of the Company. Effective January 28,
2000, James L. Jackson was elected Vice President and Secretary of the
Company.
6. Andrew M. Cussons was appointed as Financial Director of Authoriszor
Limited and commenced his duties on January 1, 2000.
7. Pursuant to an agreement, dated January 12, 2000, between the Company and
Authoriszor Holdings Limited ("AHL"), the Company transferred its entire
holding of shares in Authoriszor Limited to AHL. The consideration payable
for this transfer was the issue and allotment of 100,000 fully paid shares
in AHL to the Company.
6
<PAGE>
8. Robert A. Pearce and L. Clark Arnold resigned from the Company's Board of
Directors and from their offices.
9. In February 2000, the Company placed (the "Placement") 2,727,273 shares of
the Common Stock the ("Placing Shares") at $11.00 per share. The Placement
was made pursuant to Regulation S under the Securities Act in the United
Kingdom and Europe. The gross proceeds of the Placement were $30,000,003.
In addition, the Company granted an option to Beeson Gregory, the placement
agent, to purchase 136,363 shares of common stock at an exercise price of
$11.00 per share for a term of two years. Beeson Gregory also received a
commission of 5% of the total gross proceeds, the reimbursement of certain
of its expenses, and has been appointed as the Company's financial advisor
at an annual advisory fee of $40,000 ((pound)25,000). The Placing Agreement
contained warranties, representations, indemnities, undertakings, covenants
and other agreements on the part of the Company and certain of the
Directors. In connection with the Placement, the Directors of the Company
entered into an agreement with the Company and Beeson Gregory on January
28, 2000 whereby each Director agreed that, except in certain specified
events, he will not, without the prior written consent of Beeson Gregory,
dispose of any of his shares of Common Stock, including shares that are the
subject of options or warrants during the six month period following the
date of this agreement.
The offering of such securities in the Placement has not been registered
under the Securities Act pursuant to Regulation S, and the shares were not
offered, sold, or delivered in the United States or for the account or
benefit of any United States Person (as such terms are defined in
Regulation S). Such securities may not be reoffered or resold in the United
States absent registration under the Securities Act or pursuant to an
applicable exemption from such registration requirements. Hedging
transactions in the common stock may not be engaged in unless in compliance
with the Securities Act.
10. The Company has agreed to grant certain registration rights to the holders
(the "Holders") of the Placing Shares pursuant to a Registration Rights
Agreement entered into at the completion of the Placement. The Registration
Rights Agreement provides that the Company shall prepare and shall file
with the Securities and Exchange Commission (the "SEC") as soon as
reasonably practicable, but in any event not later than that date which is
thirty calendar days after the completion of the Placement, a Registration
Statement (the "Reoffer Registration Statement") with respect to the offer
and sale of the Placing Shares by the Holders from time to time, in
brokerage transactions, over a stock exchange, utilizing the facilities of
an inter-dealer quotation system, in an underwritten offering or in
privately negotiated off-market transactions. The Company shall cause the
Reoffer Registration Statement to become effective under the Securities Act
not later than that date which is sixty days after the Reoffer Registration
Statement is filed; provided that if the placement agent of the Placing
Shares determines, such determination to be made reasonably, that the
Company is acting in good faith to cause the Reoffer Registration Statement
to be declared effective, such date will be extended to ninety days after
filing thereof.
The Company is obligated to use its best efforts to keep the Reoffer
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of two
years from the date the Reoffer Registration Statement is declared
effective by the SEC.
If, (i) for any reason the Reoffer Registration Statement is not filed with
the SEC or the Reoffer Registration Statement is not declared effective, in
each instance, within the time periods described above or (iii) the Reoffer
Registration Statement ceases to be effective so that the Prospectus
contained therein is not usable by the Holders during the time period
described above; or (iii) any of the securities remain "restricted
securities" as defined in Rule 144 promulgated by the SEC under the
Securities Act following the time when the Reoffer Registration Statement
is effective, then if any holder so requests the following will apply:
The Company shall as promptly as practicable (but in no event not more than
30 days after so requested by any holder) file with the SEC and thereafter
shall cause to be declared effective under the Securities Act, a
registration statement (which may be at the election of the holder so
requesting a "shelf" registration statement) relating to the offer and sale
of the Placing Shares by the requesting holder from time to time in
accordance with the methods of distribution elected by such holder and set
forth in such registration statement; provided, that if permitted under the
Securities Act and by the SEC, the Company may file a pre- or post
effective amendment or supplement to the Reoffer Registration Statement if
such action would completely fulfil its obligations.
The Company shall bear all expenses incurred in connection with any
registration statement and will reimburse the holders whose Placing Shares
are included in any registration statement for the reasonable fees and
disbursements of one firm or counsel (in addition to one local counsel in
each relevant jurisdiction) designated by the holders of a majority of
shares included in such registration statement to act as counsel for
Holders in connection therewith up to $20,000.
In the event that the Company fails to comply with any provision of the
Registration Rights Agreement, the Company shall within thirty days after
the date on which the Company was required to take any action or, if such
date is undeterminable, the date of the receipt by the Company of a demand
from any holder (in either case, the
7
<PAGE>
"Initial Date"), purchase from each Holder all securities which could have
been included in any registration statement held by each respective holder
for a purchase price (the "Purchase Price") equal to the product of (a) the
average Market Value Per Share (as defined below) during the period
beginning on the Initial Date and ending on the date of payment of the
Purchase Price multiplied by (b) the number of securities being purchased
from such holder. The Company shall also pay all reasonable costs
(including all transfer taxes, stamp duty or SDRT) and fees associated with
such purchase by the Company. Each holder may, in its sole discretion,
waive its right, in whole or in part, to have the Company repurchase such
securities held by him and retain the ownership of such securities. For
purpose of calculating the Purchase Price, "Market Value Per Share" at any
date shall be (i) the highest reported sale price on that date with respect
to each type of security in question listed on an international securities
exchange or admitted to unlisted trading privileges on such an exchange or,
if applicable, (ii) the highest reported sale price on that date with
respect to each type of security in question quoted or traded on the NASD
OTC Bulletin Board or NASDAQ National Market System ("NASDAQ NMS") or the
European Association of Securities Dealers Automated Quotation System
("EASDAQ") or, if applicable, (iii) if no such sale is made on such day,
the mean of the closing bid and asked prices for such day on such exchange
or reported by NASD OTC Bulletin Board or NASDAQ NMS or EASDAQ.
In the event that the resale of the Placing Shares pursuant to the Reoffer
Registration Statement is not effected pursuant to an underwritten
offering, certain holders of piggyback registration rights with respect to
the Company's securities may be entitled to include their shares of Common
Stock in the Reoffer Registration Statement.
11. On January 28, 2000, the Company completed the sale of all of the share
capital of Toucan Mining Plc ("Toucan Mining"), a wholly owned subsidiary
of the Company, for an aggregate consideration of $809,750
((pound)500,000). The sale of Toucan Mining was made to Golden Ridge Group
Limited, a company registered in the British Virgin Islands, pursuant to a
Share Sale Agreement, dated January 28, 2000. On the same date, and prior
to the aforementioned sale of Toucan Mining, Toucan Mining transferred to
the Company for a consideration of(pound)1.00 the beneficial interest in 2
million ordinary shares of Minmet plc (the "Minmet Shares"). The Minmet
Shares cannot be sold by the Company without the consent of Minmet plc
until January 6, 2001. In addition, Toucan Mining transferred to the
Company for a consideration of(pound)1.00 warrants to subscribe for a
further 7.7 million ordinary shares of Minmet plc at an exercise price
of(pound)0.08 (the "Warrant Shares"). The Company is not contractually
restricted from selling the Warrant Shares. The Company had previously
announced a spin-off of Toucan Mining to its stockholders, subject to the
satisfaction of certain conditions, including the registration of the
shares of Toucan Mining pursuant to the Securities Exchange Act of 1934, as
amended. Toucan Mining had filed with the Securities and Exchange
Commission a registration statement on Form 20-F to register its shares
under the Exchange Act but had not completed the registration process. In
light of the Company's need to dispose of its mining interests (except for
the retained Minmet Shares and Warrant Shares) in a timely fashion in order
to be able to pursue its current Internet security business, the Company
determined to sell Toucan Mining rather than completing the registration
process and pursuing the proposed spin-off of Toucan Mining.
12. On January 27, 2000, AHL, a wholly owned subsidiary of the Company, entered
into an agreement (the "WRDC Agreement") pursuant to which AHL subscribed
for 840,000 "D" Ordinary Shares of one penny each in WRDC Limited ("WRDC"),
a company organized pursuant to United Kingdom law, for an aggregate
subscription price of $604,800 ((pound)378,000), conditioned upon the
completion of the Placement prior to April 30, 2000. The WRDC Agreement
contains the terms of an option pursuant to which AHL has the right to
acquire the balance of the issued share capital of WRDC after October 31,
2001, at a price based on the revenue and profits of WRDC for the previous
accounting period at the relevant time. In addition, on making the
subscription, the Company made a loan of $195,200 ((pound)122,000) to WRDC,
repayable (with interest) over a five year period beginning on the second
anniversary date of the first drawdown, and Authoriszor Limited had
converted the terms of an existing interest free loan to WRDC for $160,800
((pound)100,000) to similar terms. WRDC offers professional services in
information technology focused on core technologies of messaging,
directories, network security and data communications. Technology underpins
all WRDC projects, ranging from strategic and operational consultancy,
through the design and implementation of systems integration projects, to
the provision of fully managed information technology services.
13. In December 1999, the Company entered into a letter of intent to acquire an
application service provider in the United Kingdom. The letter of intent
contained certain conditions which had to be met in order to complete the
contemplated arrangements and, as these conditions were not met by January
31, 2000, the Company withdrew from the contemplated transaction.
8
<PAGE>
14. The Authoriszor Inc. 1999 Stock Plan (the "Plan") was ratified by the
Company on October 4, 1999. Pursuant to the Plan, the Company may grant
Incentive Stock Options to any employee, officer or director of the Company
or of any parent or subsidiary of the Company, and may grant Non-qualified
Stock Options to any person eligible to receive Incentive Stock Options,
and also to consultants or advisors of the Company or its subsidiaries. The
maximum number of shares that may be subject to Options and issued under
the Plan is 1,000,000 shares of Common Stock. The following table describes
Options that the Company has granted or agreed to grant under the Plan in
the fiscal quarter ending December 31 and thereafter:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
Andrew 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year
Llewellyn starting on the vesting date.
Christopher 25,000 $4.67 12/1/2000 12/1/2007 Up to a maximum of 6,250 per year
Noble starting on the vesting date.
Clifford Gladwin 25,000 $3.45 12/1/2000 12/1/2007 Up to a maximum of 6,250 per year
starting on the vesting date.
Frank 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year
Majkowski starting on the vesting date.
Shaun Summers 1,000 $3.00 12/1/2000 12/1/2007 Up to a maximum of 250 per year
starting on the vesting date.
Andrew 25,000 $6.75 1/1/2001 12/31/2008 Up to a maximum of 6,250 per year
Cussons starting on the vesting date.
Andrew 75,000 $6.75 4/1/2001 4/1/2008 Options vest subject to certain
Cussons performance conditions up to a
maximum of 18,750 per year.
Andrew Cole 25,000 $7.10 2/1/2001 2/1/2008 Up to a maximum of 6,250 per year
starting on the vesting date.
Barry Jones 131,214 $2.00 10/1/2000 9/30/2007 Up to a maximum of 25% per year
starting on the vesting date.
David Blain 25,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 6,250 per year
starting on the vesting date.
Ian 40,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 10,000 per year
Weatherhogg starting on the vesting date.
Ian Joyce 2,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 500 per year
starting on the vesting date.
Shaun Summers 1,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 375 per year
starting on the vesting date.
Paul 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year
Leivesley starting on the vesting date.
John Pitt 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year
starting on the vesting date.
</TABLE>
15. The Company has entered into Stock Option Agreements outside of the Plan
with certain individuals in the fiscal quarter ending December 31 and
thereafter, the details of which are described below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
Henry 20,000 $3.00 11/1/99 9/30/2002 None
Bellingham+
Richard 20,000 $3.00 11/1/99 9/30/2002 None
Roscoe+
Richard A. 500,000 $6.75 1/1/2001 12/31/2009 Shares vest on schedule detailed in
Langevin* paragraph 4 of this Item 5.
Raymond 200,000 $3.00 11/1/99 10/30/2002 None
Seitz*
Beeson 136,364 $11.00 2/11/2000 2/1/2002 None
Gregory
Limited+
</TABLE>
9
<PAGE>
*An employee, director or officer of the Company.
+Advisor or consultant to the Company.
16. On January 10, 2000, the Company filed a Registration Statement on Form S-8
covering the issuance of 350,000 shares of Common Stock underlying options
held by David Carmichael, L. Clark Arnold, Robert P. Jeffcock and Robert A.
Pearce (the "Option Holders") pursuant to certain stock option agreements
between these individuals and the Company. As an incentive to the holders
of these options to exercise their options on or before January 31, 2000,
the Company reduced the exercise price from $1.00 per share to 66.66 cents
per share of Common Stock, provided that the Option Holders exercised their
options on or prior to January 31, 2000. Each Option Holder exercised in
January 2000 at the discounted exercise price.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
<TABLE>
<S> <C>
+10.1* Executive Employment Agreement, dated as of January 1, 2000,
by and between the Company and Richard A. Langevin. (Exhibit 10.1)
+10.2* Authoriszor Inc. 1999 Stock Plan. (Exhibit 10.2)
+10.3* Form of Agreement under the 1999 Stock Plan and Schedule of
Agreements (Exhibit 10.3)
+10.4* Consulting Agreement, dated November 12, 1999, by and among
the Company and The Honorable Raymond G H Seitz (Exhibit 10.4)
+10.5* Consulting Agreement, dated September 23, 1999, by and among
the Company and The Rt. Hon. Sir Malcolm Rifkind KCMG QC
(Exhibit 10.5)
+10.6* Stock Option Agreement, dated as of September 23, 1999, by and
between the Company and Sir Malcolm Rifkind. (Exhibit 10.6)
10.7* Placing Agreement, dated as of January 28, 2000, by and among
the Company, Beeson Gregory Limited and certain Directors of
the Company. (Exhibit 10.7)
10.8* Supplemental Placing Agreement, dated as of February 9, 2000,
by and among the Company, Beeson Gregory Limited and certain
Directors of the Company. (Exhibit 10.8)
10.9* Registration Rights Agreement, dated February 16, 2000, by
and between the Company and Beeson Gregory Limited. (Exhibit 10.9)
10.10* Lock-up Agreement, dated January 2000, by and among the Company,
Beeson Gregory Limited and Raymond Seitz and Others. (Exhibit 10.10)
10.11* Deed of Covenant, dated as of February 22, 2000, by and among
Authoriszor Holdings Limited, WRDC Limited and certain persons
named in Schedule 1 to the Deed. (Exhibit 10.11)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
10.12* Shareholders' Agreement, dated as of January 27, 2000, by
and among Authoriszor Holdings Limited, WRDC Limited, the
shareholders of WRDC Limited and the Company, relating to WRDC
Limited. (Exhibit 10.12)
10.13* Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.13)
10.14* Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.14)
10.15(a) Share Sale Agreement, dated as of January 28, 2000, by and
between the Company and Golden Ridge Group Limited. (Exhibit 2.1)
27** Financial Data Schedule. (Exhibit 27)
</TABLE>
- ------------------
* Filed with Form 10-QSB.
** Filed herewith.
+ Compensation plan, benefit plan or employment contract or arrangement
(a) Incorporated by reference to the exhibit shown in parentheses from the
Company's Current Report on Form 8-K, filed on February 14, 2000 with
the Securities and Exchange Commission.
Reports on Form 8-K
1. The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on December 15, 1999 reporting a change in the
Company's fiscal year end from December 31 to June 30.
2. On November 17, 1999, the Company filed an Amendment to the Current
Report on Form 8-K filed on August 6, 1999 with the Securities and
Exchange Commission providing certain financial statements related to
the Form 8-K filing.
3. The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on February 14, 2000 describing the sale of Toucan
Mining Limited.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Amended Quarterly Report to be
signed on its behalf by the undersigned thereunto duly authorized.
AUTHORISZOR INC.
(Registrant)
Date: March 21, 2000 By: /s/ Richard A. Langevin
----------------------------------
Richard A. Langevin, President,
Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
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<NAME> AUTHORISZOR INC.
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