SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
For Quarter Ended March 31, 2000
Commission File No. 33-28562
AUTHORISZOR INC.
(Exact name of registrant as specified in charter)
Delaware 75-2661571
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
1 Justin Road
Natick, MA 01760-5565
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(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (508) 650-3916
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(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 March 31, 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
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<PAGE>
<TABLE>
<CAPTION>
AUTHORISZOR INC.
March 31, 2000
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited)
and June 30, 1999 ............................................................................F-1
Consolidated Statements of Operations for the three and nine
months ended March 31, 2000 and 1999 (unaudited) and for the
period
January 15, 1997 (date of inception) to March 31, 2000 (unaudited)............................F-2
Consolidated Statement of Stockholders' Equity for the nine months
ended March 31, 2000 (unaudited)..............................................................F-3
Consolidated Statements of Cash Flows for the nine months
ended March 31, 2000 and 1999 (unaudited) and for the period
January 15,
1997 (date of inception) to March 31, 2000 (unaudited)........................................F-4
Notes to Consolidated Financial Statements (unaudited)........................................F-5
Item 2. Management's Discussion and Analysis or Plan of Operation.......................................1
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PART II. OTHER INFORMATION...............................................................................5
Item 1. Legal Proceedings...............................................................................5
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Item 2. Changes in Securities ..........................................................................5
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Item 3. Defaults Upon Senior Securities.................................................................6
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Item 4. Submission of Matters to a Vote of Security Holders.............................................6
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Item 5. Other Information...............................................................................6
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Item 6. Exhibits and Reports on Form 8-K...............................................................10
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SIGNATURES.......................................................................................................12
</TABLE>
i
<PAGE>
AUTHORISZOR INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
March 31, 2000
(unaudited) June 30, 1999
$ $
ASSETS
<S> <C> <C>
Cash 27,792,157 698
VAT recoverable and other assets 71,184 2,498
--------------------- ---------------------
Total current assets 27,863,341 3,196
Note receivable (WRDC) (Note C) 356,100 -
Investment in securities, available-for-sale (Note D) 3,620,605 -
Computer and office equipment, net of accumulated
depreciation 273,726 21,594
Investment in WRDC at cost, adjusted for equity in earnings or
losses (Note C) 600,190 -
Intangible assets 41,706 -
--------------------- --------------------------
4,892,327 21,594
------------------- ---------------------
32,755,668 24,790
=================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable to related parties 8,017 76,144
Accounts payable and other liabilities 596,452 24,526
--------------------- -------------------
Total current liabilities 604,469 100,670
Stockholders' equity (deficit)
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: 17,414,081 shares
and 60 shares respectively 174,141 9
Additional paid-in capital 34,058,343 -
Accumulated other comprehensive income 2,606,314 2,846
Accumulated deficit during the development stage (4,687,599) (78,735)
-------------------- ---------------------
32,151,199 (75,880)
------------------- ---------------------
32,755,668 24,790
=================== =====================
</TABLE>
The accompanying notes are an integral part of these statements.
F-1
<PAGE>
AUTHORISZOR INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the periods ended
For the three months ended For the nine months ended January 15, 1997
(date of inception) to
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999 March 2000
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Net sales 121,186 - 121,186 32,682 158,187
Cost of sales 1,277 - 1,277 8,962 11,836
------------ ------------ ------------- ------------- -------------
Gross profit 119,909 - 119,909 23,720 146,351
Operating expenses
Professional fees 435,210 - 1,131,615 5,071 1,136,686
Marketing and advertising 280,179 - 492,408 - 492,408
Administrative 2,462,470 15,704 3,178,013 46,153 3,278,119
------------ ------------ ------------- ------------- -------------
Total operating costs and
expenses 3,177,859 15,704 4,802,036 51,224 4,907,213
Operating loss (3,057,950) (15,704) (4,682,127) (27,504) (4,760,862)
Other income (expense)
Interest income 162,064 - 163,590 - 163,590
Writedown of subsidiary
held-for-sale - - (291,448) - (291,448)
Gain on sale of investments - - 199,279 - 199,279
Equity in earnings of WRDC 1,842 - 1,842 - 1,842
------------ ------------ ------------- ------------- -------------
Total other income 163,906 - 73,263 - 73,263
------------ ------------ ------------- ------------- -------------
Net loss (2,894,044) (15,704) (4,608,864) (27,504) (4,687,599)
============ ============ ============= ============= =============
Weighted average shares
outstanding
Basic and Diluted 15,719,212 13,765,808 14,462,226 13,765,808
============ ============ ============= ============= =============
Net loss per common share
Basic and Diluted $(0.18) $(0.00) $(0.32) $(0.00)
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AUTHORISZOR INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the period ended
Accumulated
other
Additional compre- Compre-
Common Stock paid-in Accumulated hensive hensive
Shares Amount capital deficit income Total Income
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
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
($1.01 per share) 436,000 4,360 436,105 - - 440,465
($0.67 per share) 350,000 3,500 229,835 - - 233,335
Net proceeds from issuance
of stock through private
placement 2,727,273 27,273 27,866,632 - - 27,893,905
Issuance of common stock
for services
($1.66 per share) 15,000 150 24,699 - - 24,849
($4.07 per share) 100,000 1,000 405,600 - - 406,600
($9.13 per share) 20,000 200 182,300 - - 182,500
Compensation expense
resulting from issuance
of stock options - - 1,694,000 - - 1,694,000
Issuance of stock options
with exercise price less
than fair value - - 122,000 - - 122,000
Comprehensive income:
Foreign currency
translation adjustment - - - - (64,437) (64,437) (64,437)
Unrealized gain on
available-for-sale
securities - - - - 2,667,905 2,667,905 2,667,905
Net loss during the
period - - - (4,608,864) - (4,608,864) (4,608,864)
----------
Total comprehensive loss (2,005,396)
--------- ------- ---------- ---------- --------- ---------- ==========
Balance at March 31, 2000
(unaudited) 17,414,081 174,141 34,058,343 (4,687,599) 2,606,314 32,151,199
========== ======= ========== ========== ========= ==========
</TABLE>
The accompanying notes are in integral part of this statements.
F-3
<PAGE>
AUTHORISZOR INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the periods ended
Jan. 15, 1997
(inception) to
Nine months ended March 31, March 31,
2000 1999 2000
$ $ $
<S> <C> <C> <C> <C> <C> <C>
Net cash flows (used in) provided by operating
activities
Net loss during the period (4,608,864) (27,504) (4,608,864)
Adjustments to reconcile net loss
to net cash (used in) provided by operating
activities:
Issuance of stock in exchange for services 613,949 - 613,949
Non-cash compensation expense 1,816,000 - 1,816,000
Writedown of subsidiary held-for-sale 291,448 - 291,448
Equity earnings in WRDC 1,842 - 1,842
Gain on sale of investments (199,279) - (199,279)
Depreciation and amortization 43,197 926 53,592
Receivables and other assets (69,353) (93) (71,941)
Accounts payable and accrued liabilities 506,395 32,551 610,815
------------- ------------ ---------------
3,004,199 33,384 3,116,426
Net cash (used in) provided by operating
activities (1,604,665) 5,880 (1,571,173)
Cash flows (used in) provided by investing
activities
Proceeds from sale of subsidiary 809,750 - 809,750
Acquisition of equipment (292,815) (2,216) (325,590)
Sale of investments in securities 1,360,579 - 1,360,579
Investment in WRDC (606,617) - (606,617)
Advances to WRDC (356,997) - (356,997)
Purchase of intangible assets (42,126) - (42,126)
------------- ------------ ---------------
Net cash flows (used in) provided by investing
activities 871,774 (2,216) 838,999
Cash flows provided by financing activities
Proceeds from issuance of stock 28,567,705 - 28,567,714
Recapitalization 711 - 711
------------- ------------ ---------------
Net cash flows provided by financing activities 28,568,416 - 28,568,425
Effect of exchange rate changes on cash (44,066) 730 (44,094)
------------- ------------ ---------------
Net increase in cash 27,791,459 4,394 27,792,157
Cash at beginning of period 698 617 -
------------- ------------ ---------------
Cash at end of period 27,792,157 5,011 27,792,157
============= ============ ===============
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>
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 March 31, 2000 and the consolidated
results of operations and cash flows for the nine 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
S-1 Registration Statement filed with the Securities and Exchange Commission on
March 20, 2000.
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 - ACQUISITION OF WRDC
On February 22, 2000, the Company acquired a 25.1% interest in WRDC Limited, a
private UK company, (WRDC) for a purchase price of $604,800 ((pound)378,000).
The Company has accounted for its 25.1% interest in WRDC under the equity
method. The purchase price of WRDC exceeded the Company's proportionate share of
the net assets acquired by $584,500 ((pound)366,236), which was recorded as
goodwill and is being amortized on a straight line basis over ten years. The
Company made a cash advance to WRDC in December 1999 of $160,800
((pound)100,000) and made a further advance in February 2000 of $195,200
((pound)122,000). The total advances have been converted into a note repayable
to the Company over a five year period bearing interest at 6% with quarterly
principal
F-5
<PAGE>
and interest payments of (pound)18,500, beginning on the second anniversary date
of the first drawdown. The Company has the option to purchase the remaining
74.9% of WRDC Limited after October 31, 2001, at a price based on the revenue
and profits of WRDC for the previous accounting period at the relevant time.
NOTE D - INVESTMENT IN SECURITIES HELD - FOR - SALE
On January 28, 2000, the Company completed 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"). The Company wrote its
investment in Toucan Mining down at December 31, 1999 to net realizable value
which resulted in a loss of $291,448.
On the same January 28, 2000 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 $0.13 ((pound)0.08)
(the "Warrant Shares"). The Company is not contractually restricted from selling
the Warrant Shares. Independent of the Minmet Shares and the Warrant Shares that
were transferred to the Company from Toucan Mining, the Company already held an
additional 3,000,000 shares in Minmet. The 3,000,000 shares carry the same
restrictions as the Minmet Shares. The closing market price of Minmet shares at
March 31, 2000 was (pound).23 per share ($.36 at the then exchange rate).
The Company has classified these equity securities as available-for-sale.
Available-for-sale securities are measured at fair value, with net unrealized
gains and losses report in equity. The cost, unrealized gains and fair values of
the Company's available-for-sale securities held at March 31, 2000 is summarized
as follows:
<TABLE>
<CAPTION>
Cost Gross Unrealized Estimated Fair
Gains Value
<S> <C> <C> <C>
5,000,000 Minmet Shares $567,700 $1,251,851 $1,819,551
7,700,000 Warrant Shares 385,000 1,416,054 1,801,054
----------- ------------ ------------
$952,700 $2,667,905 $3,620,605
========== =========== ===========
</TABLE>
NOTE E - STOCK TRANSACTIONS
In February 2000, the Company completed, in the United Kingdom and Europe, a
private placement of 2,727,273 shares of common stock at $11.00 per share
pursuant to Regulation S under the Securities Act. The gross proceeds of the
placement were $30,000,003.
During the months of December 1999 and January 2000, the Company was seeking to
raise short term capital. In December, the Company offered an incentive to
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 was exercised
during December 1999. In January, the Company offered a similar incentive
F-6
<PAGE>
to the then President and a current director of the Company holding options to
purchase 200,000 shares of common stock along with three other individuals
holding options to purchase in the aggregate 150,000 shares of common stock.
Each of the 350,000 options had an exercise price of $1.00 per share. The
Company reduced the exercise price to $0.66 per share and recorded a
compensation expense of $1,694,000. Each of the 350,000 options was exercised in
January.
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 on 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.
In August 1999, the Company entered an agreement with consultants wherein the
consultants were to be issued 120,000 shares of common stock for services. At
March 31, 2000, the 120,000 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 $589,100 and is
included in professional fees.
NOTE F - STOCK OPTIONS
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
directors, 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. During the quarter ended March 31,
2000, individuals were granted options to acquire 263,500 shares of common stock
that vest periodically through April 2005. The options were granted at prices
ranging from $2.50 to $20.00 per share.
The Company has entered into Stock Option Agreements outside of the Plan. During
the quarter ended March 31, 2000, options to acquire 636,364 shares of common
stock were granted. Options to acquire 136,364 shares of common stock vested at
the date of grant. These options were granted at an exercise price of $11.00 per
share. Options to acquire 500,000 shares of common stock vest periodically
through January 2004 and were granted at an expense price of $6.75 per share.
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.;
1
<PAGE>
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 Registration Statement on Form
S-1 and the Prospectus contained therein filed with the Securities and
Exchange Commission on March 20, 2000.
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.
Results of Operations
The following is a discussion of the results of operations for the
three and nine months ended March 31, 2000 compared with the three and nine
months ended March 31, 1999.
The operating loss increased to $3,057,950 and $4,682,127 for the three
and nine months ended March 31, 2000, respectively, compared to $15,704 and
$27,504 for the respective periods in 1999. This increase was attributable
primarily to the Company agreeing 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. The Company recorded a compensation
expense of $1,694,000. The Company also entered into an agreement with
consultants wherein the consultants were to be issued 120,000 shares of the
Company's common stock, par value $.01 per share ("Common Stock") for services
rendered. At March 31, 2000, all of the 120,000 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
$589,100. 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 had sales of $121,000 in the three and nine months ended
March 31, 2000 compared to $33,000 for the three and nine months ended March 31,
1999.
2
<PAGE>
In the nine months ended March 31, 2000, 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 nine months 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.
The Company has provided loans to Authoriszor Ltd. and Authoriszor
Holdings Limited, a wholly owned subsidiary of the Company ("AHL") through March
31, 2000 of approximately $3,600,000.
In January 2000, the Company, in an effort to raise capital, reduced
the exercise price of certain options to purchase 350,000 shares of Common Stock
from $1.00 to $.66 per share if such stock options were exercised 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 Regulation S private placement
that was being arranged by Beeson Gregory. Prior to the sale, Toucan Mining Plc
transferred to the Company warrants (the "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. Subsequently, in May,
2000, the Company exercised the Warrants and sold the underlying 7.7 million
shares of Minmet Plc for sales proceeds, net of the exercise price, of
$2,209,130 (pound 1,463,000, based upon the currency exchange rate of 1.51
British Pound per $1.00 U.S. on May 15, 2000), exclusive of brokerage
commissions.
In February 2000, the Company placed (the "Placement") 2,727,273 shares
of common stock ("Placing Shares") at $11.00 per share pursuant to certain
placing documents (the "Placing Documents"). 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,
3
<PAGE>
the Company granted an option to Beeson Gregory, Limited ("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. Pursuant to the Placing Documents, the Company has
filed a registration statement on Form S-1 ("Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") to register the resale
of the Placing Shares. Additional expenses were incurred in the quarter ended
March 31, 2000 and will continue to 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 AHL, 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 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. See
Part II. Item 5. Other Information.
In the quarter ended March 31, 2000, the Company incurred expenses in
setting up its interim U.S. office at the home office of the Chief Executive
Officer in Natick, Massachusetts. In May, 2000 the Company signed a commercial
real estate lease in order to move the Company's headquarters to a permanent
location in Burlington, Massachusetts. The lease commenced on May 1, 2000, and
as a result the Company will incur a rental obligation of approximately $376,000
per annum over the term of the five year lease. In preparing the new
headquarters for operation, the Company expects to spend approximately $40,000
to build and redesign the new location. The Company has entered into personal
property leases for telephone systems and computer equipment for a term of three
years that will cost the Company approximately $190,000 in the aggregate over
the course of such leases. Additionally, the Company expects to spend
approximately $200,000 in furnishings for the Burlington headquarters.
The Company's commitments for salaries will be significantly higher
subsequent to March 31, 2000. The Company has increased its U.S. staff
significantly. At present, the Company has employed 11 individuals, including
Richard Langevin in the following areas: four technology related employees,
three employees and one full-time consultant in sales and marketing and two
administrative employees.
4
<PAGE>
The Company's operations headquarters are currently located on the
first floor of a leased facility in North Yorkshire, England consisting of
approximately 1,375 square feet of office space. The rent for this facility is
approximately $34,100 per year. The Company is planning to add 1,475 square feet
to the North Yorkshire facility, which will increase the rent to approximately
$42,558 per year. The Company maintains additional UK offices in a 244 square
foot leased facility in Birmingham, England and a 2,312 square foot leased
facility in Bradford, England. The rent for these office spaces is approximately
$13,400 per year in the aggregate. The Company's U.K. operational office has
also increased its staff. Presently, there are eight employees in sales and
marketing, twelve employees in research and development, four in administration
and three in professional services.
The Company's future success will depend, in part, on its ability to
attract, retain and motivate highly qualified technical and management
personnel. The Company intends to increase its sales and distribution, technical
services and administrative staff in the UK and to increase the sales and
distribution and administrative infrastructures in the U.S. In addition the
Company is actively seeking a Chief Financial Officer. As a result the Company
expects to incur significant expenses related to such personnel growth in the
future.
The Company believes its future success will depend in large part on
its ability to enhance and leverage its technologies. The Company intends to
continue to develop new and innovative solutions to respond to the needs of its
customers. The Company intends to offer products that are compatible with new
and emerging operations platforms such as UNIX and to seamlessly integrate its
product without the need for re-registration in the case clients require major
upgrades.
The Company aims to maintain its security software technology
leadership position by continuing to enhance and broaden the Company's product
offerings. Through constant monitoring of the industry, the Company plans to
identify new security features and trends in the marketplace that are required
to maintain its competitive edge. The research and development team has
currently identified several competitive enhancements that are being considered
for development, such as:
o native code conversion to further improve system performance;
o implementation of secure file transfer;
o expanded user selectable encryption;
o active lightweight directory access protocol support; and
o the development of extended application programming interfaces.
For the nine months ended March 31, 2000, the Company incurred
approximately $530,000 in research and development. The Company expects that it
will continue to commit significant resources to its research and development
team in the future, including over the course of the next 12 months.
As of the quarter ended March 31, 2000, twelve full-time employees were
engaged in research and development for the Company. In addition, most of the
Company's technical staff and management team contribute to design and
development activities.
5
<PAGE>
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.
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.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company's primary market risk exposure is fluctuation in the value
of its investment in the common stock and stock purchase warrants of Minmet Plc.
These securities have been classified as available-for-sale which requires that
they be carried at the market. Based on the current market prices, these
securities have a value of approximately $3,600,000. Fluctuations in value could
result both from the price of the equity securities in general as well as
changes in the market's perception of the value of the shares of Minmet Plc. The
Company has not deemed it prudent to enter into transactions such as various
types of hedges to minimize risk. A 10% change in the market price of Minmet
shares would cause a $360,000 change in stockholder's equity.
The Company also has risk related to currency exchange rate
fluctuations. A portion of its revenues are expected to be received in non-U.S.
securities. Also there are loans outstanding to the Company's U.K. subsidiaries
of approximately $3,600,000. Based on this loan amount, a 10% fluctuation in
currency rates would have a $360,000 effect on net income or loss. Although the
Company may choose to do so in the future, to date, the Company has not engaged
in foreign exchange hedging.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
6
<PAGE>
Item 2. Changes in Securities.
(a) None
(b) None
(c) The Company has agreed to issue 120,000 shares of Common Stock
to certain consultants in compensation for services rendered.
These shares of Common Stock 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
were 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 directors, officers and
consultants 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. The Company has granted Options to certain
directors, executive officers, consultants and others outside
of the 1999 Stock Plan. Such Options have been granted and the
underlying shares will be issued pursuant to the exemption
from registration contained in Section 4(2) of the Securities
Act.
In February 2000, the Company placed 2,727,273 shares of
common stock at $11.00 per share pursuant to the Placing
Documents. 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.
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
March 31, 2000 or subsequent thereto:
7
<PAGE>
1. 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 interim headquarters presently 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.
2. 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 and Richard Langevin was
elected Interim Chief Financial Officer and Assistant Secretary.
3. Andrew M. Cussons was appointed as Financial Director of
Authoriszor Limited and commenced his duties on January 1, 2000.
4. Pursuant to an agreement, dated January 12, 2000, between the
Company and 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.
5. Sir Malcolm Rifkind was elected to the Board of Directors of the
Company in January 2000. As a result, and in light of the
resignations of Robert Pearce and L. Clark Arnold from the Board,
the Board of Directors consisted of Raymond Seitz, Malcolm
Rifkind, David Wray, James L. Jackson, Richard A. Langevin and
Donald Box. Additionally, Messrs. Box and Seitz were appointed to
the Audit Committee of the Board of Directors with Mr. Box acting
as Chairman of the Audit Committee and Messrs. Box and Rifkind
were appointed to the Compensation Committee with Mr. Rifkind as
Chairman of the Compensation Committee.
8
<PAGE>
6. In February 2000, the Company placed 2,727,273 shares of the
Common Stock 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.
7. 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 filed a Registration Statement
with the Securities and Exchange Commission on March 20, 2000 to
register the resale of the Placing Shares under the Securities
Act, in compliance with the Registration Rights Agreement.
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
9
<PAGE>
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 filed a Registration Statement with the
Securities and Exchange Commission on March 20, 2000 to register
the resale of the Placing Shares under the Securities Act, in
compliance with the Registration Rights Agreement.
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 "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,
10
<PAGE>
"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.
8. On January 28, 2000, the Company completed the sale of all of the
share capital of Toucan Mining, 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 SEC 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.
9. On January 27, 2000, AHL, entered into an agreement (the "WRDC
Agreement") pursuant to which AHL subscribed for 840,000 "D"
Ordinary Shares of one penny each in WRDC, 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
11
<PAGE>
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 has 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.
10. 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.
11. 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 March
31, 2000:
<TABLE>
<CAPTION>
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
- ------------------- ----------- ------------ ------------- -------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Andrew 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year starting
Llewellyn on the vesting date.
Frank Majkowski 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year starting
on the vesting date.
Andrew Cussons 25,000 $6.75 1/1/2001 12/31/2008 Up to a maximum of 6,250 per year starting
on the vesting date.
Andrew Cussons 75,000 $6.75 4/1/2001 4/1/2008 Options vest subject to certain 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.
David Blain 25,000 $10.31 2/1/2001 2/1/2000 Up to a maximum of 6,250 per year starting
on the vesting date.
Ian Weatherhogg 40,000 $10.31 2/1/2001 2/1/2000 Up to a maximum of 10,000 per year
starting on the vesting date.
Ian Joyce 2,000 $10.31 2/1/2001 2/1/2000 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 Leivesley 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year starting
on the vesting date.
12
<PAGE>
John Pitts 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year starting
on the vesting date.
Ron Goss 25,000 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
David Wall 2,500 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
Ryan Jenkins 2,500 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
Richard Atkinson 10,000 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
=================== =========== ============ ============= ============== =========================================
12. The Company has entered into Stock Option Agreements outside of the Plan
with certain individuals in the fiscal quarter ending March 31, 2000 and
thereafter, the details of which are described below:
No. of Option Vesting Vesting
Name Options Exercise Date Date End Vesting Conditions
Price Start
- -------------- ------------- ------------- ------------- --------------- -------------------------------------
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.
Beeson 136,364 $11.00 2/11/2000 2/1/2002 None
Gregory
Limited+
<FN>
============== ============= ============= ============= =============== =====================================
*An employee, director or officer of the Company. +Advisor or consultant to the
Company.
</FN>
</TABLE>
13. 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.
14. On March 20, 2000 the Company filed a Registration Statement with the
Securities Exchange Commission to register the resale of the Placing Shares
and shares held pursuant to the exercise of certain warrants.
15. On February 3, 2000 the Company filed a Nasdaq National Market Application
for Public Securities ("Listing Application"); however, there is no
assurance that the Company's securities will be listed on the Nasdaq NMS.
16. Following the end of the quarter, the Company transferred its transfer
agency services to American Securities Transfer & Trust, Inc. ("AST"). AST
is located at 12039 West Alameda Pkwy., Lakewood, Colorado 80228,
telephone: (303) 984-4100, telecopy: (303) 984-4110, Attention: Jo
Petersen.
Item 6. Exhibits and Reports on Form 8-K.
13
<PAGE>
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
+10.1^ Executive Employment Agreement, dated as of January 1, 2000, by and
between the Company and Richard A. Langevin. (Exhibit 10.1)
+10.3* Form of Agreement under the 1999 Stock Plan and Schedule of Agreements
(Exhibit 10.3)
10.4^ 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)
10.5^ 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)
10.6^ Registration Rights Agreement, dated February 16, 2000, by and between
the Company and Beeson Gregory Limited. (Exhibit 10.9)
10.7^ Lock-up Agreement, dated January 2000, by and among the Company, Beeson
Gregory Limited and Raymond Seitz and others. (Exhibit 10.10)
10.8^ 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)
10.9^ 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)
10.10^ Letter Agreement, dated February 22, 2000, by and between Authoriszor
Holdings Limited and WRDC Limited regarding credit facility. (Exhibit
10.13)
10.11^ Letter Agreement, dated February 22, 2000, by and between Authoriszor
Holdings Limited and WRDC Limited regarding credit facility. (Exhibit
10.14)
10.12o 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)
- ------------------
* Filed herewith
+ Compensation plan, benefit plan or employment contract or arrangement
14
<PAGE>
^ Incorporated by reference to the exhibit shown in parentheses from the
Company's Quarterly Report on Form 10-QSB, filed on February 22, 2000
with the Securities and Exchange Commission
o 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 February 14, 2000 describing the sale of Toucan
Mining Limited, the completion of the Placement and certain other
matters.
2. The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on March 8, 2000, describing the purchase by AHL, a
wholly owned subsidiary of the Company, of a 25.1% interest in WRDC.
3. The Company filed a Current Report on Form 8-K/A with Securities and
Exchange Commission on May 9, 2000, providing the consolidated
financial statements of WRDC.
15
<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: May 15, 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)
16
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit
- ------- ----------------------
10.3 Form of Agreement under the 1999 Stock Plan and Schedule of
Agreements (Exhibit 10.3)
27 Financial Data Schedule. (Exhibit 27)
17
Authoriszor Inc.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT ("Notice of Grant")
Name
The undersigned Optionee has been granted an Option to purchase Common Stock of
the Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price per Share: $____ ("Exercise Price")
Total Number of Shares Granted:
Type of Option: ___ Incentive Stock Option
Non-statutory Stock Option
Term/Expiration Date:
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
Up to a maximum of 25% of the total number of shares granted in each of the four
years commencing on the Vesting Commencement Date.
Notwithstanding the foregoing, the Administrator in its sole discretion, may
(but is not obligated to) accelerate the date on which all or any portion of an
otherwise unexercisable Option may be exercised.
Termination Period:
The vested portion of this Option shall be exercisable for three months after
Optionee ceases to be a Service Provider; except that upon Optionee's death or
Disability, this Option may be exercised for one year after Optionee ceases to
be a Service Provider. In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above.
Page 1
<PAGE>
II. AGREEMENT
1. Grant Of Option.
---------------
The Administrator of the Plan hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase the number of
Shares set forth in the Notice of Grant, at the Exercise Price and subject to
the terms and conditions of the Plan, which is incorporated herein by reference.
Subject to Section 13(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule
of Code Section 422(d), this Option shall be treated as a Non-statutory Stock
Option ("NSO").
2. Exercise of Option
------------------
(a) Right to Exercise. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an
exercise notice in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised,
and such other representations and agreements as may be required by the
Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
issued to the Optionee on the date on which the Option is exercised
with respect to such Shares.
(c) The Optionee may satisfy his withholding tax obligations by electing to
have the Company withhold from the Shares to be issued upon exercise of
the Options that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares
to be withheld for this purpose shall be made on such forms and under
such conditions as the Administrator may deem necessary or advisable.
3. Optionee's Representations.
--------------------------
In the event the Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act") , at the time this Option is exercised,
the Optionee shall, if required by the Company, concurrently with the exercise
of all or any portion of this Option, deliver to the Company his or her
Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Stand Off Period.
-----------------------
Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering (the "Offering") of any securities of the Company under the Securities
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period (or such other period as may
be requested in writing by the Managing Underwriter
Page 2
<PAGE>
with respect to the Offering and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act. Such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act after the effective date of the Plan that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment.
-----------------
Payment of the aggregate Exercise Price shall be by any of the following, or a
combination thereof, at the election of the Optionee:
(a) cash or check; or
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the
Plan;
(c) shares including Shares acquired upon exercise of the Option
that have a Fair Market Value on the date of surrender equal
to the aggregate Exercise Price of the Shares as to which such
Option shall be exercised; or
(d) any combination of the foregoing methods of payment.
6. Restrictions on Exercise.
------------------------
This Option may not be exercised if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
-----------------------------
This Option may not be transferred in any manner otherwise than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
Optionee only by Optionee. The terms of the Plan and this Option Agreement shall
be binding upon the executors, administrators, heirs, successors and assigns of
the Optionee.
8. Term of Option.
--------------
This Option may be exercised only within the term set out in the Notice of
Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Option, subject to the right of the Administrator to amend
or waive certain terms and conditions of the Option and to accelerate the date
on which all or any portion of an otherwise unexerciable Option may be
exercised.
9. Tax Consequences.
----------------
Optionee understands that Optionee may suffer adverse tax consequences as a
result of Optionee's purchase or disposition of the Shares. OPTIONEE REPRESENTS
THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANTS OPTIONEE DEEMS ADVISABLE IN
CONNECTION WITH THE
Page 3
<PAGE>
PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE
COMPANY FOR ANY TAX ADVICE.
10. Entire Agreement. Governing Law.
-------------------------------
The Plan is incorporated herein by reference. The Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof. This Option Agreement is governed by the internal substantive laws, but
not the choice of law rules, of Delaware.
11. No Guarantee of Continued Service.
---------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER OR
EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER OR EMPLOYEE FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER OR EMPLOYEE AT ANY TIME, WITH OR WITHOUT CAUSE, SUBJECT TO ANY OTHER
CONTRACTUAL TERMS AND CONDITIONS OF ENGAGEMENT.
12. Interpretation.
--------------
(a) If any provision of this Option Agreement is held invalid for any
reason, such holding shall not affect the remaining provisions hereof,
but instead the Option Agreement shall be construed and enforced as if
such provision had never been included in the Option Agreement.
(b) Headings contained in this Option Agreement are for convenience only
and shall in no manner be construed as part of this Option Agreement.
(c) Any reference to the masculine, feminine, or neuter gender shall be
reference to such other gender as is appropriate.
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
OPTIONEE Authoriszor Inc.
By:
Signature Name:
Title:
Print Name
Residence Address:
Page 4
<PAGE>
EXHIBIT A
1999 STOCK PLAN
EXERCISE NOTICE
Authoriszor Inc.
[
]
Attention: Secretary
1. Exercise of option. Effective as of today, [ ] the undersigned ("Optionee")
hereby elects to exercise Optionee's option to purchase [ ] shares of the Common
Stock (the "Shares") of Authoriszor Inc. (the "Company") under and pursuant to
the Authoriszor Inc. 1999 Stock Plan (the "Plan") and the Stock Option Agreement
dated [ ] (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the Aggregate
Exercise Price of the Shares, as set forth in the Option Agreement, by the
following means [fill in method of payment].
3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorised transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Shares shall be issued to the Optionee
reasonably promptly after the Option is exercised. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date of
issuance.
5. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee's purchase or disposition of the Shares.
Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders
(a) Legends. Optionee understands and agrees that the Company may cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION
THEREUNDER.
A-1
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance
with the restrictions referred to herein, the Company may issue appropriate
"stop transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on
its books any Shares that have been sold or otherwise transferred in violation
of any of the provisions of this Agreement or (ii) to treat as owner of such
Shares or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Shares shall have been so transferred.
7. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. Interpretation. Any dispute regarding the interpretation of this Agreement
shall be submitted by Optionee or by the Company forthwith to the Administrator
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Administrator shall be final and binding on all parties.
9. Governing Law; Severability. This Agreement is governed by the internal
substantive laws but not the choice of law rules, of Delaware.
10. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and may not be modified adversely to the Optionee's
interest except by means of a writing signed by the Company and Optionee.
Submitted By: Accepted By:
OPTIONEE Authoriszor Inc.
By:
Signature Name:
Title:
Print Name
Residence Address:
A-2
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: Authoriszor Inc.
SECURITY: COMMON STOCK
NUMBER OF SHARES:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial condition
and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. Optionee is acquiring
these Securities for investment for Optionee's own account only and not with a
view to, or for resale in connection with any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend that prohibits the transfer of the Securities unless they are
registered under the Securities Act or such registration is not required under
the Securities Act in the opinion of counsel satisfactory to the Company, and
any other legend required under applicable state or foreign securities laws.
(c) Optionee is familiar with the provisions of Rule 144 promulgated under the
Securities Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
A-3
<PAGE>
Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event. Signature of Optionee:
Date:
<TABLE>
<CAPTION>
SCHEDULE OF STOCK OPTION AGREEMENTS
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
- ------------------- ----------- ------------ ------------- -------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Andrew 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year starting
Llewellyn on the vesting date.
Andrew Cussons 25,000 $6.75 1/1/2001 12/31/2008 Up to a maximum of 6,250 per year starting
on the vesting date.
Andrew Cussons 75,000 $6.75 4/1/2001 4/1/2008 Options vest subject to certain 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.
David Blain 25,000 $10.31 2/1/2001 2/1/2000 Up to a maximum of 6,250 per year starting
on the vesting date.
Ian Weatherhogg 40,000 $10.31 2/1/2001 2/1/2000 Up to a maximum of 10,000 per year
starting on the vesting date.
Ian Joyce 2,000 $10.31 2/1/2001 2/1/2000 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 Leivesley 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year starting
on the vesting date.
John Pitts 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year starting
on the vesting date.
Ron Goss 25,000 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
David Wall 2,500 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
Ryan Jenkins 2,500 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
Richard Atkinson 10,000 $20.00 3/20/2000 4/1/2008 Up to a maximum of 25% per year starting
on the vesting date.
<FN>
============== ============= ============= ============= =============== =====================================
*An employee, director or officer of the Company. +Advisor or consultant to the
Company.
</FN>
</TABLE>
A-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedules for Authoriszor Inc.
</LEGEND>
<CIK> 0000850083
<NAME> Authoriszor Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 27,792,157
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,863,341
<PP&E> 273,726
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,755,668
<CURRENT-LIABILITIES> 604,469
<BONDS> 0
0
0
<COMMON> 174,141
<OTHER-SE> 31,992
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 121,106
<TOTAL-REVENUES> 121,106
<CGS> 1,277
<TOTAL-COSTS> 1,277
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,891,011)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,891,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,891,011)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
