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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended -- December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 33-33042-NY
CORONADO INDUSTRIES, INC.
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(Name of small business issuer in its charter)
Nevada 22-3161629
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
16929 E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268
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(Address of principal executive offices) (as of date of filing) (Zip Code)
Issuer's telephone number (602) 837-6810
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Securities registered under Section 12(b) of the Exchange Act: None
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Title of each class Name of each exchange on which registered
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Securities registered under Section 12(g) of the Exchange Act: None
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject such filing requirements for the past 90 days. Yes[X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
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CORONADO INDUSTRIES, INC.
FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
Page
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PART I
Item 1. Business Development..................................... 2
Item 2. Description of Property.................................. 9
Item 3. Legal Proceedings........................................ 9
Item 4. Submission of Matters to a Vote of Security Holders...... 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters.................................... 10
Item 6. Management's Discussion and Analysis or Plan of
Operation............................................... 11
Item 7. Financial Statements..................................... 15
Item 8. Changes In and Disagreement with Accountants on
Accounting and Financial disclosure..................... 15
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons' Compliance with Section 16(a) of the
Exchange Act............................................ 16
Item 10. Executive Compensation................................... 18
Item 11. Security Ownership of Certain Beneficial Owners
and Management.......................................... 19
Item 12. Certain Relationships and Related Transactions........... 20
PART IV
Item 13. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K............................................. 20
SIGNATURES................................................................ 21
SUPPLEMENTAL INFORMATION AND EXHIBITS..................................... 22
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PART I
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this document
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Registrant intends that such forward-looking statements be subject to the safe
harbors created thereby. Such forward-looking statements involve risks and
uncertainties and include, but are not limited to, statements regarding future
events and the Registrant's plans and expectations. The Registrant's actual
results may differ materially from such statements. Although the Registrant
believes that the assumptions underlying the forward-looking statements herein
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in such forward-looking
statements will be realized. In addition, the business and operations of the
Registrant are subject to substantial risks which increase the uncertainties
inherent in the forward-looking statements included in this document. The
inclusion of such forward-looking information should not be regarded as a
representation by the Registrant or any other person that the future events,
plans or expectations contemplated by the Registrant will be achieved.
ITEM 1(A). BUSINESS DEVELOPMENT. INITIAL PUBLIC OFFERING
The Registrant was incorporated under the name First Lloyd Funding,
Inc. pursuant to the laws of the State of New York on December 21, 1989. The
effective date of the Registrant's public offering was March 13, 1990. The
Offering closed on May 1, 1990. For further information concerning the
Registration Statement, see File No. 33-33042-NY at the Securities and Exchange
Commission's Regional Office in New York City or at its principal office in
Washington, D.C. In January 1997, the New York corporation at that time named
Coronado Industries, Inc. merged into and became a Nevada corporation of the
same name.
OPHTHALMIC INTERNATIONAL, L.L.C. AND AMERICAN GLAUCOMA, INC.
After a series of immaterial acquisitions and spin-offs from May 1990
to September 1996, on November 5, 1996 the Registrant entered into an Asset
Purchase Agreement with Ophthalmic International, L.L.C. ("OI"), and American
Glaucoma, a joint venture ("AG"), which provided for the purchase of the assets
of OI and AG in exchange for 15,592,224 shares of the Registrant's common stock
(85%) to be issued to the Registrant's current three Directors. An additional
855,000 shares were issued as finders fees to twelve entities and individuals.
The assets of OI transferred to the Registrant were a patent pending and other
proprietary information concerning equipment and a process for the treatment of
open angle glaucoma. The assets of AG transferred to the Registrant were the
concept and a business plan for forty glaucoma treatment centers in the United
States.
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ITEM 1(b). BUSINESS OF ISSUER
OVERVIEW
The Registrant is a holding company and all business operations are
conducted through its two wholly-owned subsidiaries. The Registrant, through its
Ophthalmic International, Inc. subsidiary, manufactures and markets a fixation
device with a patented designed suction ring that treats Open Angle and
Pigmentary glaucoma. American Glaucoma, Inc. ("AGI"), the Registrant's other
subsidiary, operated a glaucoma treatment center in Scottsdale, Arizona from
September 1997 to March 1999 and intends to open a similar treatment center in
the Clearwater, Florida.
In the United States, glaucoma is the second leading cause of blindness
affecting approximately 3,000,000 persons. Of those, about 60,000 are legally
blind. If detected and treated early, glaucoma need not cause blindness or even
severe vision loss. While there is no cure for glaucoma, the Registrant believes
that its patented device and process provide an effective treatment for
afflicted persons and that a significant global market for its patented process,
equipment and rings currently exists.
Glaucoma may have many forms which cause or present a feature of
progressive damage to the optic nerve due to increased pressure within the
eyeball. As the optic nerve deteriorates, blind spots and patterns develop. If
left untreated, the result may be total blindness. The space between the lens
and the cornea in the eye is filled with a fluid called the aqueous humor. This
fluid circulates from behind the colored portion of the eye (the iris) through
the opening at the center of the eye (pupil) and into the space between the iris
and cornea. The aqueous humor is produced constantly, so it must be drained
constantly. The drain is at the point where the iris and cornea meet, known as
the drainage angle, which directs fluid into a channel (Schlemm's canal) that
then leads it to a system of small veins outside the eye. When the drainage
angle does not function properly, the fluid cannot drain and pressure builds up
within the eye. Pressure also is exerted on another fluid in the eye, the
vitreous humor behind the lens, which in turn presses on the retina. This
pressure affects the fibers of the optic nerve, slowly damaging them. The result
over time is a loss of vision.
THE FIXATION DEVICE
After four years of ongoing studies involving Dr. John T. LiVecchi,
M.D., F.A.C.S., Assistant Clinical Professor of Ophthalmology, Allegheny
University and Dr. Guillermo Avolos, Professor of Ophthalmology, University of
Guadalajara, Mexico, it was determined that a 2 minute treatment with Ophthalmic
International's "vacuum fixation device and patented design suction ring"
temporarily reduced inter-ocular pressure ("I.O.P.") in the treatment of Open
angle Glaucoma by approximately 6 Hg for an average of three months at which
time the treatment can be repeated with no serious side effects. This I.O.P.
lowering is achieved when the external suction device is applied over the
perilimbal area for a specified time. With this treatment the Registrant
believes that there are no harmful side effects, like those associated with eye
drop treatments. In addition, the patent entitled "Open Angle Glaucoma Treatment
Apparatus and Method" has been approved and is believed to allow the Registrant
to achieve a significant market advantage over competitors.
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The first clinical study of the Registrant's product was conducted on
86 patients over an 8 month period in 1992 by Dr. Avolos in Guadalajara, Mexico.
The second clinical study of the Registrant's product was conducted on 250
patients over a two-year period ending in 1996 by Dr. Avolos and Dr. LiVecchi.
The Registrant initiated a third study in September 1997 was conducted by Dr.
Leo Bores, the Medical Director of the Registrant's Scottsdale treatment center.
This third study involved approximately 150 patients.
The Registrant views the gross losses incurred at its Scottsdale
treatment center from September 1997 through March 2, 1999 (approximately
$464,000) as the major expense of preparing the clinical studies which may be
required for FDA product approval. The Registrant believes the total past and
future costs of its current and future treatment centers are recoverable from
clinical patients and from the sale of the product to physicians, pursuant to
FDA regulations. See "- Governmental Regulation" below.
Dr. John LiVecchi, a Registrant Director, and Dr. Leo Bores, an
employee, have been asked to address to different medical conventions of
ophthalmologists in March and April 1999 concerning the results of the studies
of Registrant's procedure and equipment. These presentations to the ultimate
end-users of Registrant's products serve to educate the industry about the
Registrant's products and their efficacy.
Registrant's subsidiary, Ophthalmic International, Inc., manufactures
and sells the vacuum equipment, the patented rings and the process in the United
States and abroad through media advertising and presentations at ophthalmic
conferences. In the future the Registrant intends to sell primarily through
distributors who will be assigned specific geographical territories, on the
basis of continents or countries. Ophthalmic International entered into a
confidentiality agreement with Alcon Co. in March, 1997 as the first step in
negotiating for Alcon to become a distributor. In 1997 Ophthalmic International
has executed a second confidentiality agreement with one additional potential
distributor for exclusive worldwide distribution rights. Negotiations concerning
distribution likely will not be completed and definitive agreements executed
until the labeling of the product as a "device to lower inter-ocular pressure"
is approved by the FDA.
The Registrant expects its distributors will purchase the vacuum
equipment for approximately $5,000-$7,000 per unit and purchase the patented
ring which is placed on the patient's eye, for approximately $10 to $15 each,
depending upon volume. The Registrant expects, without assurance, to have a
gross profit margin on the vacuum equipment and patented rings in excess of 60%.
The Registrant's vacuum equipment is composed of special order parts,
such as molded case, display board, circuit boards, and motors, all for which
Registrant has established manufacturing relationships with manufacturers.
Registrant's subsidiary, Ophthalmic International, Inc., assembles the vacuum
fixation device at its offices in Fountain Hills, Arizona. At such time as
Registrant executes an agreement with a major worldwide distributor, Registrant
may also sell the manufacturing rights to the same company. The Registrant has
contracted for the manufacture of the patented rings with a medical device
manufacturer located in California.
Registrant has received a CE mark for its PNT product and has been
advised that its manufacturing facility could be prepared to receive ISO 9000
clearance in as little as six weeks. Therefore, the Registrant believes its
manufacturing facility is prepared to move forward with European distribution of
its product as soon as a distributor is located.
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TREATMENT CENTERS
Registrant's subsidiary, American Glaucoma, Inc., opened its first
glaucoma treatment center in Scottsdale, Arizona in September 1997. During 1998
the Registrant's Scottsdale Center generated approximately $293,000 of gross
revenues and a net loss from operations of $220,000, before allocation of
management overhead. The Registrant closed the Scottsdale treatment center on
March 2, 1999.
The Registrant is hopeful of opening one treatment center during 1999,
subject to adequate funding. This center was planned for the Clearwater, Florida
area in 1998. In July 1998 the Registrant's Florida subsidiary executed a
three-year lease for medical office space in the Clearwater area. However,
initial contract discussions with a local ophthalmologist broke down
subsequently and the Registrant was not able to locate a suitable
ophthalmologist in 1998 to open the Clearwater treatment center. The Registrant
anticipates that its advertising and telemarketing techniques initiated and
refined at the Registrant's Scottsdale treatment center will enable the
Registrant's Clearwater treatment center to reach profitability within a short
time after opening.
GOVERNMENTAL REGULATION
No medical device may be sold or distributed in the United States
without FDA approval or an exemption from such approval. The FDA has the
authority to enjoin the manufacture and sale of a medical device, to seize such
device and to levy fines against a manufacturer or seller of a medical device
which has not been registered or approval for sale in the United States. A
device which needs FDA approval is considered a Class III device, unless a
similar product with a similar intended use has previously been granted FDA
approval (a "Class II Device") or the FDA has listed the product as generally
safe and not needing FDA approval (a "Class I Device"). The process for having
the FDA remove a device from the Class III category to a Class II category is
called a 510(k) application.
The Registrant submitted a 510(k) premarket notification to the FDA on
its PNT product in August of 1998. The FDA rejected this notification in October
of 1998, on the basis that the Registrant PNT produce was not substantially
equivalent to other products currently on the market and intended to lower
intraocular pressure. The Registrant met with the FDA in February of 1999 to
discuss the concerns expressed by the agency with respect to the substantial
equivalence and safety of the PNT product. The Registrant is now preparing a
submission for delivery to the FDA in April of 1999 that is intended to provide
the agency with detailed information addressing many of the concerns expressed
by the FDA at the February meeting. If the submission satisfies the FDA with
respect to the patient risk associated with the clinical use of the PNT product,
the Registrant would expect to file a new 510(k) premarket notification with the
agency by July of 1999.
If the April submission does not satisfy the FDA, the agency may
request that more information be submitted on patients treated to date with the
PNT product, or that further studies be conducted on additional patients.
Furthermore, the agency may demand that ongoing patient studies cease until the
agency reviews and approves a new and different clinical protocol. With respect
to the new 510(k) premarket notification that the Registrant plans to file with
the FDA by July of 1999, although the Registrant is hopeful that it will be
favorably received by the FDA thereby permitting commercial distribution of the
PNT product at some point during the latter half of 1999, there can be no
assurance that the Registrant's PNT product will ever receive the necessary FDA
clearance for commercial marketing.
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A Class III device may be approved for sale and distribution in the
United States by the FDA pursuant to a Premarket Approval Application ("PMA").
The FDA approves PMAs after a review of the clinical trials information
contained therein demonstrating that the device is safe and effective for its
labeled indications. In addition, the FDA will inspect the facilities where the
device is manufactured prior to approving a PMA. The Registrant has not
discussed with the FDA the type and quantity of clinical and manufacturing
information that might be required to secure PMA approval for its PNT product,
because of the Registrant's continuing belief that the product is more suitably
reviewed by the FDA in a 510(k) premarket notification, rather than a PMA.
Clinical data to support either a 510(k) premarket notification or a
PMA must be collected pursuant to the FDA's Investigational Device Exemption
("IDE") regulation The IDE regulation describes two types of device studies: 1)
significant risk and 2) nonsignificant risk studios. The principal difference
from a regulatory point of view between the two types of studies is that
significant risk studies must be reviewed and approved by both the FDA and an
Institutional Review Board ("IRB") before they may be initiated, while
nonsignificant risk studies require only IRB review and approval prior to study
initiation. The Registrant believes that its studies of its PNT product are
nonsignificant risk in nature. The Registrant therefore has conducted several
clinical studios of the PNT product after receiving IRB approval in 1994, 1996,
and 1998 from three different IRBs. The approximately 170 patients treated at
the Registrant's Scottsdale treatment center since 1997 were treated in
accordance with the clinical protocols that received IRB approval in 1994 and
1998, while the future treatment of patients at the Registrant's Clearwater
center will be in accordance with the clinical protocol that received IRB
approval in 1998. To date, no negative adverse reactions have been reported in
connection with the use of the PNT device on glaucoma patients for any of the
studies conducted.
Under the IDE regulation, a sponsor of a clinical study may charge for
the investigational device, provided that the price charged for the device is no
larger than that necessary to recover costs of manufacture, research,
development, and handling associated with the device. The IDE regulation does
not prohibit or limit charges for medical or laboratory services. It is the
Registrant's position that approximately $1,000,000 of net losses incurred by
the Registrant in connection with its Scottsdale treatment center and certain
past management salaries are properly recoverable under the IDE regulation, and
the Registrant therefore intends to impose a charge on the distribution of PNT
product to clinical investigators who purchase the PNT product and enroll in its
IDE studies which are consistent with the IDE regulation.
The manufacturer of a medical device which is to be distributed in the
United States must be inspected and licensed by the FDA. The company which
currently manufactures the Registrants's suction ring and the company which
sterilizes and packages this ring are licensed as medical device manufacturers
by the FDA. The Registrant's facility was inspected and licensed by the FDA as a
manufacturer of the predecessor fixation device product and the PNT product in
1996.
No medical device may be advertised for sale in the United States with
a false or misleading label or advertisement. The fixation device which preceded
the PNT product device was advertised, used and sold as a device for certain
types of invasive eye surgeries. Therefore, that product was labeled as only
being used for eye surgery, and not the treatment of glaucoma. The labeling of
the Registrant's PNT product as a glaucoma treatment device or a device for the
lowering of inter-ocular pressure of glaucoma patients must be approved by the
FDA (or the product must be exempt from FDA registration as a Class I or Class
II device), for the Registrant to advertise and sell its PNT device as a
glaucoma treatment product.
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In July 1997 the Registrant's Scottsdale treatment center registered
with the State of Arizona Department of Health Services as a "health care
treatment institution" and the proposed Clearwater treatment center will be
required to register with the State of Florida. The Registrant is unable to
predict at this time the exact amount of time and expense which will be needed
to register as a health care provider in the State of Florida. There is no
assurance that the Registrant will be able to register as a health care provider
in Florida.
PATENT
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
process, equipment and the procedure which has been licensed to the Registrant.
The Registrant believes, without assurance, that this patent provides the
Registrant with a substantial competitive advantage over current and future
glaucoma treatment competitors. The Registrant is not aware of any other patent
being granted for glaucoma treatment. The granting of a patent to the Registrant
does not assure that the FDA will ever approve the commercial distribution of
the Registrant's PNT product in the U.S.
The Registrant intends to follow a policy of aggressively pursuing
claims of infringement on its patent and the Registrant does not believe its
patent, or product or services infringe on the rights of any other person.
COMPETITION
The medical device and service industries are highly competitive. The
Registrant's patented device and treatment process are and will be in
competition with established and future glaucoma treatment procedures and
products. The following table sets forth the type and names of the most commonly
recommended prescription glaucoma medications, the approximate monthly retail
cost of such medications, and the side effects of each type of medication as
published by The American Academy of Ophthalmology. Since Medicare does not
currently reimburse patients for the cost of these prescription medications but
does pay for the PNT procedure, the Registrant believes a substantial number of
the glaucoma patients in the U.S. would benefit economically from the PNT
procedure to the extent their prescription medication could be reduced.
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Medication Monthly Cost Side Effects
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BETA BLOCKERS Congestive Heart Failure
Timolol $21.00 Bronchospasm
Levobunolol $42.00 Bradycardia
Carleolol $36.00 Depression, confusion
Betaxolol $65.00 Worsening of myasthenia gravis
ADRENERGIC AGONISTS Increased blood pressure,
Alphagan $50.00 Tachyarrythmia
Dipivefrin $33.00 Tremor, Headache,
Apracionidine $41.00 Anxiety, Burning on Instillation,
Conjunctival Injection, Pupullary
dilation, Allergic Reactions
CHOLINERGIC AGONISTS
Pilocarpine $25.00 Increased bronchial secretion
Carbochol $26.00 Nausea
Echothiophate iodide $31.00 Vomiting, Diarrhea, Apnea,
Increased myopia, Eye or brow
pain, Decreased vision
ORAL CARBONIC ANHYDRASE INHIBITORS Malaise, anorexia, depression,
parashesias
Acetazolamide $33.00 Serum electrolyte abnormalities
Methazolamide $19.00 Renal calculi, Blood dyscrsias
The Registrant's treatment centers will compete directly with other
medical care providers. The future sale of the Registrant's products to
ophthalmologists, optometrists, medical clinics and hospitals may meet
substantial resistance from distributors and potential customers, particularly
until the FDA product label is changed and the insurance/Medicare billing codes
are established. The Registrant is presently unable to predict when such billing
codes will be established on a national basis. Ophthalmologists not employed by
the Registrant are likely to discount the benefits of the Registrant's products
to their patients from fear of losing patients to the Registrant's treatment
centers, even though the clinical results of the Registrant's products have been
presented at ophthalmic conventions in the United States for over three years.
Further, the Registrant will need to establish the economic benefit of its
products to the satisfaction of health maintenance organizations ("HMO") before
the Registrant's glaucoma treatment centers receive patient treatment referrals
from HMOs. Today HMOs are responsible for the medical treatment of a substantial
percentage of the population of the United States.
EMPLOYEES
In addition to its two officers, the Registrant employs two persons
full-time at the corporate headquarters, including Dr. Leo Bores. The Registrant
anticipates hiring additional administrative and marketing personnel upon
receipt of additional funding.
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ITEM 2. DESCRIPTION OF PROPERTY.
During calendar year 1998, the Registrant's offices were located at
16929 E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268, where Registrant
is currently leasing approximately 1,600 square feet of space from a third party
landlord. Registrant is paying approximately $1,000 per month, including
utilities, in rent for this space on a five-year lease. In June 1998, the
Registrant entered into a month-to-month lease for 1,800 square feet of space
adjacent to its original space in Fountain Hills, Arizona, for approximately
$1,400 per month rent, including utilities. This combined space will be adequate
for the Registrant's needs throughout its initial manufacturing stages, when
commenced.
On July 28, 1997 the Registrant executed a lease with Dr. Leo Bores,
the Registrant's Medical Director, for a 4,200 square foot medical facility
located at 8049 N. 85th Way, Scottsdale, Arizona. This facility is the site of
the Registrant's first treatment center. The monthly lease rate on this facility
is $3,500. The Registrant has a two-year option to purchase this building for
the sum of $400,000 cash. The Registrant believes this facility is adequate to
serve up to 60 glaucoma patients per day.
In July 1998 the Registrant entered into a three-year lease of a 3,936
square foot medical office in Largo, Florida, a suburb of Clearwater, Florida.
The lease term commenced on October 1, 1998 and requires an initial monthly
payment of $3,526 per month with an increase of $.50 per annual square foot rent
each subsequent year.
In June 1998 the Registrant prepaid a one-year lease of a two-bedroom
condo in Clearwater, Florida for Registrant's employees and consultants to use
while visiting the planned Clearwater treatment center. The monthly lease rate
on this condo is $1,115.
ITEM 3. LEGAL PROCEEDINGS.
There were no legal proceedings involving the Registrant pending or
threatened at December 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During calendar year 1998 no matters were submitted to a vote of the
Registrant's security holders.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information. The principal U.S. market in which the Registrant's
common shares (all of which are one class, $.001 par value) were traded was the
over-the-counter market. The aforesaid securities are not traded or quoted on
any automated quotation system. Such over-the-counter market quotations reflect
inter-dealer prices without retail markup, markdown or commission and may not
necessarily represent actual transactions. The following table shows the low and
the high bid reported by the NASDAQ Bulletin Board System in 1997 and 1998, by
fiscal quarter, and through March 22, 1999.
Low High
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January 1, 1997 - March 31, 1997 $3.00 $6.75
April 1, 1997 - June 30, 1997 $2.50 $5.94
July 1, 1997 - September 30, 1997 $1.94 $4.38
October 1, 1997 - December 31, 1997 $1.00 $2.75
January 1, 1998 - March 27, 1998 $0.63 $3.09
April 1, 1998 - June 30, 1998 $0.66 $1.75
July 1, 1998 - September 30, 1998 $0.31 $1.00
October 1, 1998 - December 31, 1998 $0.09 $0.91
January 1, 1999 - March 22, 1999 $0.22 $0.59
HOLDERS. The Registrant has approximately 365 stockholders of record
including nominee firms for securities dealers.
DIVIDENDS. The Registrant has not paid or declared any dividends upon
its common shares since its inception and, by reason of its present financial
status and its contemplated financial requirements, does not intend to pay or
declare any dividends upon its common shares within the foreseeable future.
COMMON STOCK
The authorized capital stock of the Registrant consists of 50,000,000
shares of common stock, par value $0.001 per share, and 3,000,000 shares of
Preferred Stock, par value $0.0001 per share. As of March 19, 1999, there were
31,623,292 shares of common stock and 0 shares of Preferred Stock issued and
outstanding. Holders of common stock are entitled to one vote for each share
held on each matter to be acted upon by stockholders of the Registrant.
Stockholders do not have preemptive rights or the right to cumulate votes for
the election of directors. Shares are not subject to redemption nor to any
liability for further calls. All shares of common stock issued and outstanding
are entitled to receive such dividends, if any, as may be declared by the Board
of Directors in its discretion out of funds legally available for that purpose,
and to participate pro rata in any distribution of the Registrant's assets upon
liquidation or dissolution.
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In the event of liquidation or dissolution of the Registrant, all
assets available for distribution after satisfaction of all debts and other
liabilities and after payment or provision for any liquidation preference on any
issued Preferred Stock are distributable among the holders of the common stock.
The transfer agent for the Registrant's common stock is Olde Monmouth
Stock Transfer Co., Inc., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716.
PREFERRED STOCK
The Registrant is authorized to issue 3,000,000 shares of Preferred
Stock, par value $.0001 per share, of which no shares were issued and
outstanding at the date of this Prospectus. The Preferred Stock shares shall
have the rights, limitations and obligations which the Board of Directors shall
determine at the time the Preferred Stock is issued. The Registrant has no
present intention of issuing any Preferred Stock in the foreseeable future.
COMMON STOCK PURCHASE WARRANTS
The Registrant has reserved for issuance 1,805,023 shares of common
stock for issuance in the event of the exercise of 1,805,023 outstanding Common
Stock Purchase Warrants (the "Warrants"). The Warrants themselves have not been
and will not be registered. The Warrants are exercisable at any time at an
exercise price of $2.50 per share through December 31, 2000 on which date the
unexercised Warrants expire.
The Warrants are not subject to redemption by the Registrant. The
holders of the Warrants do not have any of the rights or privileges of
stockholders of the Registrant, such as voting rights or the right to receive
dividends, prior to exercise of the Warrants. The exercise price of the Warrants
and the number of Warrants are subject to automatic proportionate adjustment in
the event of any stock dividend, stock split or other recapitalization affecting
the outstanding Registrant common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
YEAR 2000 ISSUES
The Company believes its present operations are Year 2000 compliant
because the Company's current use of computers on the headquarters level is
minimal and the primary customer of the Company's treatment centers is the
federal government. At the headquarters level the Company's computers are used
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exclusively for word processing, as opposed to accounting, functions. Since the
Company's present and future product sales will be done on a cash-on-delivery or
pre-paid basis, the Company will have no significant accounts receivable for
product sales. All of the Company's employee payroll functions are handled by a
nationwide third-party vendor which has advised the Company that its operations
are Year 2000 compliant.
With respect to the Company's treatment centers, the Company purchased
a computer software system in December 1997 which was represented as Year 2000
compliant and the Company's computers purchased in 1997 use an operating system
which is represented as Year 2000 compliant. At this time the Company believes
the risks to its operations from a Year 2000 problem are minimal.
YEAR ENDING DECEMBER 31, 1998
OPERATIONS. Registrant was a development stage company through the
quarter ended September 30, 1997, with revenues having been generated from its
Scottsdale glaucoma treatment center starting on September 1, 1997. Therefore,
there is no comparable complete prior year's operations to which to compare the
operating results of December 31, 1998.
For the year ending December 31, 1998 Registrant experienced a net loss
from operations of $1,607,063, which was comprised of a net loss from
Registrant's Scottsdale treatment center of $220,181 and its general and
administrative expenses incurred at the corporate level of $1,386,892. 70.0% of
Registrant's corporate expenses consisted of officers salaries of $200,000
(14.4%), professional expenses of $187,584 (13.5%), stock option issuance
expenses of $186,235 (13.4%) and shareholder services and media promotion of
$397,753 (28.7%). Registrant expects its professional expenses in 1999 to remain
at a high level as a result of its continuing costs for its FDA application
presently estimated at $25,000 per month. Registrant expects no change in its
officers salaries in 1999 and expects some stock option expense may be incurred
at the end of 1999. Since most of Registrant's shareholder services expenses are
paid with Registrant's stock and not cash, Registrant's shareholder services
expenses are likely to remain high in 1999.
During 1998 Registrant's Scottsdale treatment center generated $292,788
of gross revenues. Included in these revenues are billings for the Registrant's
patented procedure from the last quarter of 1997 which were rebilled to Medicare
in the first quarter, because Medicare began to pay for the patented procedure.
The Registrant generally recognizes services rendered as revenues when rendered
to the patient. However, at the end of the final quarter of 1997 the Registrant
wrote-off approximately $35,000 of revenues from its patented procedure because
Medicare was refusing to pay for these procedures at December 31, 1997. At the
present time Medicare is paying over 95% of the amount charged by the Registrant
for its patented treatments. Any amount not paid by Medicare or another
third-party payor for the Registrant's patented procedure or a traditional
diagnostic or treatment procedure is written off by the Registrant on a
patient-by-patient basis when the payment is received by the Registrant, which
is the general practice in the medical profession. At 1998 year-end the
Registrant wrote-off $12,655 of receivables as uncollectible, which the
Registrant does not consider material to its total revenues or results of
operations in 1998.
During 1998 the Registrant's Scottsdale treatment center produced a net
loss of $220,181, with revenues of $292,788 and costs of revenues of $512,969
without allocation of management overhead. 82.1% of the Scottsdale center's
expenses were represented by advertising costs of $112,283 (21.9%) and personnel
salaries of $309,039 (60.2%). In the first quarter of 1999 the services of Dr.
Leo Bores, the Medical Director of the Scottsdale treatment center, were needed
at the Registrant's headquarters in connection with the Registrant's FDA product
approval process and the Scottsdale treatment center was closed on March 2,
1999. However, the Registrant intends to move the equipment used in the
Scottsdale center to the Clearwater center without incurring any loss on that
equipment. No charges or write-offs will be incurred from the closure of the
Scottsdale treatment center, and all losses incurred in the past at the
Scottsdale treatment center are recoverable from the sale of the Registrant's
patented equipment in the U.S. prior to FDA product approval (see below).
12
<PAGE>
In July 1998 the Registrant commenced with its plans to open a glaucoma
treatment center in Clearwater, Florida. The Registrant was successful in
negotiating a three-year lease on office space which commenced in October 1998
and Registrant thought it had negotiated an employment contract with a suitable
physician to serve as medical director of the Clearwater center. However, the
negotiations with the doctor were not completed and the Registrant has not been
able to locate a suitable medical director as yet. The Registrant currently
plans on opening its Clearwater treatment center within three months of securing
the services of a suitable medical director and obtaining sufficient financing
for the center (see below). The Registrant incurred expenses of $54,945 in 1998
in connection with the Clearwater treatment center. The Registrant is hopeful,
without any assurance, that the right physician will be able to make the
Clearwater treatment center profitable. However, the Registrant will incur
substantial travel expenses in the future in managing the Clearwater treatment
center, expenses which were not involved in managing the Scottsdale treatment
center.
LIQUIDITY AND CAPITAL RESOURCES. On a short-term and long-term basis
Registrant requires only minimal capital to sustain its manufacturing of the
patented equipment, because of Registrant's current inventory levels. Because of
the Registrant's cash position at year-end and minimal general and
administrative cash expenses totaling approximately $700,000 per year, the
Registrant is currently suffering from a liquidity shortage. The Registrant will
be collecting its outstanding accounts receivable of $61,405 during the first
half of 1999, as well as attempting to enter into a sale-and-leaseback
transaction of its treatment center equipment for approximately $100,000 and the
sale of the building used for the Scottsdale treatment center for $200,000 to
$300,000 of net proceeds. These funds, if obtained, would allow the Registrant
to survive through the first half of 1999. However, as of March 15, 1999, the
Registrant was unable to secure any sale-and -leaseback financing committment.
Thus far in 1999 the Registrant has borrowed approximately $12,000 from each of
G. Richard Smith and Gary R. Smith, the Registrant's Chairman and President,
respectively. The Registrant's Chairman and President may be willing to loan
additional funds to the Registrant in the future, but have made no written
committment to the Registrant at this time. The Registrant's liquidity in the
second half of 1999 is dependent on obtaining substantial additional funding or
dramatically increased sales of its patented product (see below).
Registrant also requires approximately $400,000 to $600,000 to
adequately fund the first year's operation of its planned Clearwater glaucoma
treatment center. Registrant is presently planning to secure debt financing in
1999 to finance the Clearwater treatment center. However, at this time
Registrant has received no commitments from any source to provide such financing
and its financing sources appear limited.
In the fourth quarter of 1998 the Registrant commenced the sale of a
limited number of units of its patented equipment to ophthalmologists in the
United States over the next several months, pursuant to FDA investigational
device exemption regulations. These FDA regulations permit the Registrant to
recover from the sale of its product an amount equal to its costs of preparing
its product for FDA approval. The Registrant's patented product was presented to
a number of U.S. physicians at the convention of American Academy of
Ophthalmologists in New Orleans in November 1998 and a conference in Hawaii in
January 1999. The Registrant has arranged with a lender for the financing of
purchases of up to 200 units of the Registrant's patented equipment by U.S.
ophthalmologists. The monthly payment for the equipment by the physician will be
approximately equal to the dollar amount reimbursed to the physician by Medicare
13
<PAGE>
for the treatment of one glaucoma patient each month. Through March 15, 1999 the
Registrant had sold 3 units of its product in the U.S. The Registrant expects,
without assurance, that its limited sale of its product to U.S. physicians in
the coming months will have a positive impact on the Registrant's short-term
liquidity; however, its sales effort may be severely limited by the Registrant's
lack of funding for marketing.
Prior to and as a result of the presentation of the Registrant's
patented equipment at the New Orleans' convention of ophthalmologists in
November 1998, the Registrant has held discussions with potential distributors
for the Registrant's product in the U.S. on a non-exclusive and an exclusive
basis. The Registrant also had negotiations in November and December 1998 with a
European distributor concerning exclusive distribution of the Registrant's
product in Europe pursuant to a multi-year agreement. The Registrant expects
negotiations on one or more U.S. and European distribution agreements to
continue throughout 1999; however, there is no assurance that any distribution
contracts will ever be executed by the Registrant. Any distribution agreement
executed in the near future by the Registrant will likely have a positive impact
on the Registrant's liquidity and profitability in 1999.
On a long-term basis, Registrant anticipates, without assurances, that
the sale of its product in the U.S. and internationally will provide sufficient
liquidity to the Registrant.
In December 1996 through April 1997 Registrant issued a series of
promissory notes to a third party aggregating $220,000, all payable one year
after issuance and bearing 15% annual interest. These notes and accrued interest
were repaid in full in March 1998.
In February 1998 Registrant issued a $25,000 convertible promissory
note which bears 15% interest. The interest on this note ceased on March 30,
1998 when Registrant offered to repay this note and the holder indicated a
possibility of converting into equity. 5,000 shares of Registrant's common stock
were issued to the holder in February 1998 as additional interest on this note.
$20,000 of the principal of this note was repaid and the remaining principal and
interest was converted to Registrant's common stock in May 1998.
In July 1997 the Registrant issued a $75,000 promissory note bearing
10% annual interest in partial consideration for the purchase of medical
equipment and office furnishings at the Scottsdale treatment center. This note
required a $37,500 principal payment on July 18, 1998 (which was made) and a
$37,500 final principal payment on January 18, 1999 (which was made).
In February and March 1999 the Registrant received a loan of $12,000
from each of G. Richard Smith and Gary R. Smith, the Registrant's Chairman and
President, respectively. These loans bear annual interest at the rate of 15%.
YEAR ENDING DECEMBER 31, 1997
For the year ended December 31, 1997 Registrant experienced a net loss
from operations of $810,806, which was comprised of a net loss from Registrant's
treatment center operation of $243,629 and its general and administrative
expenses incurred at the corporate level of $567,177. 68.7% of Registrant's
corporate expenses consisted of officers salaries of $200,000 (35.3%) and
professional expenses of $189,228 (33.4%). Registrant expects its professional
expenses to remain at a high level as a result of its continued attempts to
obtain financing in 1998 for two additional treatment centers, as well as
incurring the legal costs of acquiring and opening additional treatment centers.
See "Liquidity and Capital Resources" below.
14
<PAGE>
During the four months in which Registrant's Scottsdale treatment
center was receiving patients, the center generated $26,107 of revenues. During
the first quarter of 1998 the revenues of the center were substantially higher
on a monthly basis than in 1997. Registrant currently expects the Scottsdale
treatment center to be profitable in the second half of 1998, if not sooner.
Since the Registrant incurred advertising and personnel expenses during the
month preceding the opening of its treatment center, Registrant's center
expenses of $269,736 represented five months of costs. 79.0% of the center's
expenses were represented by advertising costs of $120,300 (44.5%) and personnel
salaries of $93,072 (34.5%). Registrant expects the treatment center's personnel
costs to remain fairly constant during 1998, and perhaps increase in the second
half of the year as increased patients require additional personnel. Registrant
expects its advertising costs of the Scottsdale center to decrease substantially
in 1998, because the initial advertising expenses will not be required in 1998
and Registrant has sufficient capital on hand in 1998 to pay for advertising in
advance, which should result in a substantial discount.
LIQUIDITY AND CAPITAL RESOURCES. On a short-term and long-term basis
Registrant requires only minimal capital to sustain its manufacturing and
marketing of the patented Vacuum Fixation Device and the patented suction rings,
because of Registrant's current inventory levels and the low cost of marketing
these patented products. However, on a short-term basis Registrant requires
approximately $800,000 to $1,000,000 to adequately fund the first year's
operation of any additional glaucoma treatment centers. Registrant is presently
planning to conduct another private placement of its securities or secure debt
financing in 1998 to secure financing for one or more treatment centers.
However, at this time Registrant has received no commitments from any source to
provide such financing. On a long-term basis, Registrant anticipates, without
assurances, that its initial glaucoma treatment centers will be sufficiently
profitable to permit additional glaucoma treatment centers to be funded during
subsequent years from a combination of internal and external sources.
During the second half of 1997 the Registrant received a total of
$710,500 of proceeds from a private placement of its securities. These funds
were used primarily to purchase and open the Scottsdale treatment center and to
pay various professional expenses.
During the first quarter of 1998 Registrant received a total of
$834,544 from two private placement offerings of its securities. Registrant
expects these funds, along with the future profitably of the Scottsdale
treatment center, will provide financial stability for the Registrant's current
operations throughout 1998.
In December 1996 through April 1997 Registrant issued a series of
promissory notes to a third party aggregating $220,000 at year end, all payable
on one year after issuance and bearing 15% annual interest. These notes and
accrued interest thereon were repaid in full on March 19, 1998.
ITEM 7. FINANCIAL STATEMENTS.
See Financial Statements starting on page F-1 for this information.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Registrant has not changed accountants or had any disagreements
with its accountants during the audits of the last two fiscal years.
15
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS'
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors and executive officers of the Registrant as of December
31, 1998 were as follows:
Name and Address Position
---------------- --------
G. Richard Smith Director, Chairman and Secretary
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Gary R. Smith Director, President and Treasurer
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
John T. LiVecchi Director
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
The Registrant presently has two vacancies on its Board of Directors.
Richard and Gary Smith are brothers.
G. Richard Smith, age 50, has been a Director of the Registrant since
November 5, 1996 and Secretary of the Registrant since November 5, 1996. He
became Chairman in March, 1998. From July, 1995 to November 5, 1996 G. Richard
Smith was a joint venture partner in American Glaucoma, the company that
developed the concept of glaucoma treatment centers throughout the U.S which was
sold to the Registrant. From July, 1995 to November 5, 1996 G. Richard Smith was
a member and President of Ophthalmic International, L.L.C., the company that
developed and patented the glaucoma treatment which was sold to the Registrant.
From 1987 to June, 1995 G. Richard Smith was co-owner and President of Southern
California Medical Distributors, Ltd. ("SCMD") which developed a turbine powered
keratome for eye surgery. G. Richard Smith attended Oakland University in
Oakland County, Michigan from 1968 to 1970.
Gary R. Smith, age 54, has been a Director of the Registrant since
November 5, 1996, and President and Treasurer of the Registrant since November
5, 1996. From July, 1995 to November 5, 1996 Gary R. Smith was a joint venture
partner in American Glaucoma, the company that developed the concept of glaucoma
treatment centers throughout the U.S which was sold to the Registrant. From
July, 1995 to November 5, 1996 Gary R. Smith was a member and Vice President of
Product Development and Manufacturing of Ophthalmic International, L.L.C., the
company that developed and patented the glaucoma treatment which was sold to the
Registrant. From 1987 to June, 1995 Gary R. Smith was co-owner and Vice
President of Product Development and Manufacturing for Southern California
Medical Distributors, Ltd. ("SCMD"), where he developed a turbine powered
keratome for eye surgery. Gary R. Smith attended Detroit Institute of Technology
in Detroit, Michigan from 1961 through 1963.
16
<PAGE>
John T. LiVecchi, age 50, has been a Director of the Registrant since
December 16, 1996. From July, 1995 to November 5, 1996 Dr. LiVecchi was a member
of Ophthalmic International, L.L.C., the company that developed and patented the
glaucoma treatment which was sold to the Registrant. Dr. LiVecchi had no
relationship to American Glaucoma. Dr. LiVecchi received his medical degree in
1977 from the University of Rome, Italy. From 1983 to present Dr. LiVecchi has
been in private medical practice in the field of ophthalmology in the Scranton,
Pennsylvania area. Dr. LiVecchi has been on the staff of several hospitals and
universities. Dr. LiVecchi is licensed to practice medicine in the States of New
York, Michigan and Pennsylvania. Dr. LiVecchi has authored numerous articles and
presentations. In 1994 Dr. LiVecchi undertook the project of developing
equipment and procedures for treating open angle glaucoma, along with the
Registrant's other Directors.
Messrs. Smith, Smith and LiVecchi were the three owners of SCMD which
developed a turbine powered keratome for eye surgery. They sold this company to
its Chinese distributor in 1995. During the last year before its sale, this
company had total revenues of approximately $1,050,000 and net income of
approximately $695,000. This company was sold for a multiple of its net income.
Messrs. Smith, Smith and LiVecchi sold SCMD to devote their efforts to the
development of the glaucoma treatment process and equipment, which they felt
could be more profitable than the turbine keratome.
KEY EMPLOYEE
Dr. Leo Bores, as the former Medical Director of the Registrant's
Scottsdale glaucoma treatment center, is a key employee of the Registrant. Dr.
Bores received a B.S. degree in Biochemistry and Biology in 1958 from Wayne
State University. Dr. Bores received his degree from the Wayne State University
College of Medicine in 1962 and he served his internship at Harper Hospital in
Detroit, Michigan in 1962 and 1963. Dr. Bores was a resident in Ophthalmology
from 1963 to 1968 and was certified by the American Board of Ophthalmology in
1969. Dr. Bores is internationally known for his contributions to the
development of radial keratotomy ("RK"). In 1994, Dr. Bores received the 1st
Annual Award for outstanding scientific contributions to eye microsurgery. In
1995 Dr. Bores became the 12th recipient of the Innovators in Ophthalmology
Award from the American Society for Cataract and Refractive Surgery for
outstanding contributions in ophthalmic surgery. Prior to joining the Registrant
in July 1997 Dr. Bores owned and operated The Bores Eye Institute in Scottsdale,
Arizona, practicing ophthalmic surgery and specializing in RK for approximately
10 years.
17
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the salaries of the Registrant's three
directors for the fiscal year ending December 31, 1998.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation -------------------------------
---------------------------------- Securities Awards Payouts
Name and Other Restricted Underlying ------ -------
Principal Annual Stock Options/ LTIP All Other
Position Year Salary($) Bonus($) Compensation($) Awards($) SARS(#) Payouts($) Compensation($)
- -------- ---- --------- -------- --------------- --------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Richard Smith, 1998 $ 0 -- $125,000(1) -- 400,000(2) -- --
Chairman
Gary R. Smith, 1998 $ 0 -- $125,000(1) -- 400,000(2) -- --
President
John LiVecchi 1998 $ 0 -- -- -- 400,000(2) -- --
Director
</TABLE>
- ----------
(1) $100,000 of accrued salary for 1998 and $20,000 of salary accrued from 1997
was paid to each of G. Richard Smith and Gary R. Smith in the form of
restricted common stock at the rate of $.03 per share on December 21, 1998,
which was the same rate offered to all employees for accrued salaries. G.
Richard Smith and Gary R. Smith also received $5,000 cash as interest on
their accrued salaries in October 1998.
(2) These options were awarded in December 1998, have a ten-year term and an
exercise price of $.05 per share.
On July 18, 1997, the Registrant executed a two-year agreement with Dr.
Leo Bores, pursuant to which Dr. Bores will be paid a salary of $150,000 for the
first year and $200,000 for the second year.
STOCK OPTION PLAN
On December 21, 1998, the Registrant's Board of Directors adopted The
1998 Stock Option Plan (the "Option Plan") and 1,550,000 shares will be reserved
for issuance thereunder. The Option Plan is structured to allow the Board of
Directors discretion in creating equity incentives to management, key employees
and professional consultants for the purpose of assisting the Registrant in
motivating and retaining appropriate talent. On December 21, 1998, the
Registrant granted options for a total of 1,550,000 shares of Registrant's
common stock. These options have ten-year terms and may be exercised within 3
months after termination of employment, except if the optionee dies while
employed, the option may be exercised by the optionee's beneficiary. All options
issued have stock appreciation rights whereby the option may be exercised by
redeeming the appreciated value of the option and without cash being paid by the
optionee, except the Registrant's officers must wait one year after the date of
grant to exercise stock appreciation rights. The following individuals received
options for the following number of shares at the indicated option price: G.
Richard Smith 400,000 shares at $.05; Gary R. Smith 400,000 shares at $.05; Dr.
John T. LiVecchi 400,000 shares at $.05; and Dr. Leo Bores 200,000 shares at
$.075. A consultant to the Registrant received an option for 150,000 shares at
$.075 per share. Since these options were granted on a date when the average
market price for the Registrant's stock was $.10, the Registrant accounted for
the granting of these options as an expense and increase to stockholder's equity
of $186,235. None of these options has been exercised as of March 15, 1999.
The Registrant currently has no pension, retirement, annuity, savings
or similar benefit plan which provides compensation to its executive officers or
directors.
18
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of March 19, 1998 there were 31,623,292 outstanding shares. The
following table sets forth the name, address, number of shares beneficially
owned, and the percentage of the Registrant's total outstanding common stock
shares owned by: (i) each of the Registrant's Officers and Directors; (ii) the
Registrant's Officers and Directors as a group; and (iii) other shareholders of
5% or more of the Registrant's total outstanding common stock shares.
Name and Address Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
Common Stock Gary R. Smith 9,992,512 (1) 31.6%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock G. Richard Smith 10,367,612 (2) 32.8%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock John T. LiVecchi 2,000,000 (3) 6.3%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock Officers and Directors, as a 22,360,124 (4) 70.7%
Group (3 People)
- ----------
(1) Does not include 400,000 shares of stock which may be purchased by Mr.
Smith under the Registrant's Stock Option Plan. In the event Mr. Smith
purchased all of those shares, Mr. Smith would own 32.5% of the
Registrant's total outstanding shares.
(2) Does not include 400,000 shares of stock which may be purchased by Mr.
Smith under the Registrant's Stock Option Plan. In the event Mr. Smith
purchased all of those shares, Mr. Smith would own 33.6% of the
Registrant's total outstanding shares.
(3) Does not include 400,000 shares of stock which may be purchased by Dr.
LiVecchi under the Registrant's Stock Option Plan. In the event Dr.
LiVecchi purchased all of those shares, Dr. LiVecchi would own 7.5% of the
Registrant's total outstanding shares.
(4) Does not include 400,000 shares of stock which may be purchased by each of
Mr. Gary R. Smith, Mr. G. Richard Smith and Dr. LiVecchi under the
Registrant's Stock Option Plan. In the event Messrs. Smith, Smith and
LiVecchi purchased all of those shares, they would collectively own 71.8%
of the Registrant's total outstanding shares.
19
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On November 5, 1996, the Registrant entered into the Asset Purchase
Agreement with Ophthalmic International, L.L.C., and American Glaucoma, whereby
6,796,112 restricted shares of the Registrant's common stock were issued to each
of Gary R. Smith and G. Richard Smith, and 2,000,000 restricted shares were
issued to John T. LiVecchi. Messrs. Smith, Smith and LiVecchi became the
Registrant's sole Directors as a result of this transaction. For accounting
purposes, Messrs. Smith, Smith and LiVecchi are deemed to have no cost in the
assets transferred to the Registrant.
On July 28, 1997 the Registrant purchased medical equipment and office
furniture from Dr. Leo Bores for $50,000 cash and a $75,000 promissory note
bearing 10% annual interest. One-half of this promissory note was paid in July
1998 and the other half was paid in December 1998. The approximate fair market
value of this furniture and equipment was determined to be $125,000 by an
independent appraiser. The Registrant also executed a two-year lease with Dr.
Bores in July, 1997 for the site of the Registrant's Scottsdale treatment
center. The $3,500 monthly lease rate for this 4,200 square foot space is
roughly equal to the mortgage payment of Dr. Bores on this space. The Registrant
also has a two-year option to purchase this building for $400,000 cash, as
negotiated between the parties.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8K.
Reference is herewith made to the financial statements and notes
thereto included herein and to the cover page of this 10-KSB with respect to
documents incorporated by reference in accordance with Rule 12b-33.
Exhibits 10.1 Lease for Clearwater Office
10.1 Lease for Clearwater Condo
10.3 1998 Stock Option Plan
10.4 Stock Option Agreement with Michael K. Hair
10.5 Stock Option Agreement with Dr. Leo Bores
10.6 Stock Option Agreement with Dr. John T. LiVecchi
10.7 Stock Option Agreement with Gary R. Smith
10.8 Stock Option Agreement with G. Richard Smith
Financial Statements -- F-1
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf on March 30, 1999 by the undersigned, thereunto authorized.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
--------------------------------
Gary R. Smith, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities on the date(s) indicated.
/s/ G. Richard Smith Chairman (Chief Executive Dated: March 30, 1999
- ------------------------- Officer), Secretary and
G. Richard Smith Director
/s/ Gary R. Smith President, Dated: March 30, 1999
- ------------------------- Treasurer (Chief Accounting
Gary R. Smith Officer), Director
- ------------------------- Director Dated:
John LiVecchi
21
<PAGE>
SUPPLEMENTAL INFORMATION AND EXHIBITS
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Registrant's fiscal year ended December 31, 1998. The Registrant
currently has not held its Annual Meeting of Stockholders.
Four copies of all material to be mailed to stockholders with respect
to such meeting will be furnished to the Securities and Exchange Commission but
such documents, when furnished, will not be deemed to be filed with the
Securities and Exchange Commission or otherwise subject to liabilities of
Section 18 of the Act (except to the extent that the Registrant specifically
incorporates such material by reference in any subsequent Form 10-KSB); it is
expected that such documents will consist of a Form of Proxy, Notice of Annual
Meeting, Information Statement with Schedules and/or Exhibits annexed thereto.
22
<PAGE>
CORONADO INDUSTRIES, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Coronado Industries, Inc.
We have audited the accompanying consolidated balance sheet of Coronado
Industries, Inc. as of December 31, 1998, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended December 31, 1998 and 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Coronado Industries,
Inc. as of December 31, 1998, and the results of its operations, changes in
stockholders' equity, and its cash flows for the years ended December 31, 1998
and 1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 to
the consolidated financial statements, the Company's significant operating
losses raise substantial doubt about its ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Certified Public Accountants /s/ Semple & Cooper, LLP
Phoenix, Arizona
March 10, 1999
F-2
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1998
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 36,844
Accounts receivable, trade, net (Note 1) 61,405
Inventory (Note 1) 24,865
Prepaid expenses 22,490
-----------
Total Current Assets 145,604
Property and Equipment, net (Notes 1 and 2) 144,436
Other Assets:
Intangible assets, net (Notes 1 and 3) 32,589
-----------
Total Assets $ 322,629
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 28,989
-----------
Total Current Liabilities 28,989
-----------
Commitments: (Notes 4 and 7) --
Stockholders' Equity: (Note 5)
Preferred stock - $.0001 par value; 3,000,000 shares
authorized, none issued or outstanding --
Common stock - $.001 par value; 50,000,000 shares
authorized, 31,560,176 shares issued and outstanding 31,561
Additional paid-in capital 2,778,926
Accumulated deficit (2,516,847)
-----------
Total Stockholders' Equity 293,640
-----------
Total Liabilities and Stockholders' Equity $ 322,629
===========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-3
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1998 and 1997
1998 1997
------------ ------------
Patient Revenues, Net (Note 1) $ 292,788 $ 26,107
Cost of Patient Revenues 512,969 269,736
------------ ------------
Gross Loss (220,181) (243,629)
General and Administrative Expenses 1,386,892 567,177
------------ ------------
Loss from Operations (1,607,063) (810,806)
Interest Expense (15,007) (26,381)
Other Income 66 7,485
------------ ------------
Net Loss $ (1,622,014) $ (829,702)
============ ============
Basic Loss per Share (Note 1) $ (.08) $ (.04)
============ ============
Weighted Average Shares Outstanding 20,741,855 18,504,392
============ ============
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-4
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Total
Common Stock Stock-
--------------------- Additional holders'
Shares Paid-in Accumulated Equity
Outstanding Amount Capital Deficit (Deficit)
---------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 18,344,253 $18,344 $ 37,149 $ (65,131) $ (9,638)
Proceeds from sale of stock,
net of costs of $138,659 568,400 568 573,523 -- 574,091
Stock issued for services 50,000 50 119,950 -- 120,000
Net loss -- -- -- (829,702) (829,702)
---------- ------- ---------- ----------- -----------
Balance at December 31, 1997 18,962,653 18,962 730,622 (894,833) (145,249)
Proceeds from sale of stock,
net of costs of $259,320 3,715,367 3,716 1,315,079 -- 1,318,795
Stock issued for services 8,866,334 8,867 539,095 -- 547,962
Stock issued as loan payment 15,822 16 7,895 -- 7,911
Stock options issued for
services -- -- 186,235 -- 186,235
Net loss -- -- -- (1,622,014) (1,622,014)
---------- ------- ---------- ----------- -----------
Balance at December 31, 1998 31,560,176 $31,561 $2,778,926 $(2,516,847) $ 293,640
========== ======= ========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-5
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1998 and 1997
1998 1997
---------- ---------
Cash Flows from Operating Activities:
Cash received from customers $ 239,258 $ 25,783
Cash paid to suppliers and employees (1,249,697) (609,807)
----------- ---------
Net cash used by operating
activities (1,010,439) (584,024)
----------- ---------
Cash Flows from Investing Activities:
Purchase of fixed assets (26,666) (92,935)
Cash disbursements for patents -- (30,684)
----------- ---------
Net cash used by investing
activities (26,666) (123,619)
----------- ---------
Cash Flows from Financing Activities:
Cash received from notes payable -- 192,000
Repayment of notes payable (310,477) --
Cash received from sale of stock 1,318,795 574,091
----------- ---------
Net cash provided by financing
activities 1,008,318 766,091
----------- ---------
Net increase (decrease) in cash and
cash equivalents (28,787) 58,448
Cash and cash equivalents at beginning of year 65,631 7,183
----------- ---------
Cash and cash equivalents at end of year $ 36,844 $ 65,631
=========== =========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-6
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For The Years Ended December 31, 1998 and 1997
1998 1997
--------- ---------
Reconciliation of Net Loss to Net Cash Used
by Operating Activities:
Net loss $(1,622,014) $(829,702)
----------- ---------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 31,632 27,332
Amortization 3,756 2,605
Stock issued for services 547,962 120,000
Interest added to principal of notes
payable 15,007 26,381
Stock options issued for services 186,235 --
Changes in Assets and Liabilities:
Accounts receivable
- trade (53,596) (7,809)
- other 3,999 (3,999)
Inventory 18,166 (32,464)
Prepaid expenses 82,010 (104,500)
Accounts payable (47,701) 72,793
Accrued salaries (153,673) 123,117
Accrued payroll taxes and other (22,222) 22,222
----------- ---------
611,575 245,678
----------- ---------
Net Cash Used by Operating Activities $(1,010,439) $(584,024)
=========== =========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-7
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies, Nature of Operations and
Use of Estimates:
Organization:
Coronado Industries, Inc. (the Company) was originally incorporated under the
laws of the State of New York in December 1989 as First Lloyd Funding, Inc.,
which subsequently changed its name to Logical Computer Services of New York,
Ltd. In September, 1996, the Company changed its name to Coronado Industries,
Inc. The Company was a non-operating shell corporation with nominal net
assets prior to its merger on November 5, 1996, when the Company acquired one
hundred percent (100%) of the assets of Ophthalmic International, L.L.C. and
American Glaucoma.
The stockholders of American Glaucoma and Ophthalmic International, L.L.C.,
which are the same for both corporations, obtained majority control of the
Company in the combination, and therefore, were considered the accounting
acquiror. Therefore, the transaction was accounted for as a reverse merger.
The Company was in the development stage from its acquisition of Ophthalmic
International, L.L.C. and American Glaucoma in November, 1996 through
September, 1997. In September, 1997, American Glaucoma opened their first
glaucoma treatment clinic in Scottsdale, Arizona. Ophthalmic International,
L.L.C. has received a patent on the method for treating Open Angle Glaucoma,
as well as the devices used in the treatment, including the Vacuum Fixation
Device. The Company intends to manufacture and market the patented Vacuum
Fixation Device and the patented suction rings to major medical supply
companies and health care providers throughout the world. However, Ophthalmic
International, L.L.C. has yet to generate any revenues.
Principles of Consolidation:
The consolidated financial statements include the activity of Coronado
Industries, Inc., together with its wholly-owned subsidiaries, Ophthalmic
International, Inc., American Glaucoma, Inc. and Arizona Glaucoma Institute,
Inc. All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies, Nature of Operations and
Use of Estimates: (Continued)
Cash and Cash Equivalents:
Cash and cash equivalents are considered to be all highly liquid investments
purchased with an initial maturity of three (3) months or less.
Inventories:
Inventories consist primarily of raw materials and are stated at the lower of
cost, as determined on a first-in/first-out (FIFO) basis or market.
Property and Equipment:
Property and equipment are stated at cost. Maintenance and repairs that
neither materially add to the value of the property nor appreciably prolong
its life are charged to operations as incurred. Betterments or renewals are
capitalized when incurred. Depreciation is provided using accelerated methods
over the following useful lives:
Office furniture and equipment 5-7 years
Machinery and equipment 5-7 years
Leasehold improvements 7-39 years
Deferred Income Taxes:
Deferred income taxes are provided on an asset and liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax basis. Deferred tax assets are reduced by a valuation allowance when in
the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Loss Per Share:
Basic loss per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share are not
presented, as their effect is anti-dilutive.
F-9
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies, Nature of Operations and
Use of Estimates: (Continued)
Intangible Assets:
The Company reviews its intangible assets at least annually to evaluate
potential impairment by comparing the carrying value of the intangible assets
with expected future net operating cash flows from the related operations. If
the expected future net operating cash flows are less than the carrying
value, the Company recognizes an impairment loss equal to the amount by which
the carrying value exceeds the discounted expected future net operating cash
flows from the related operations.
Accounts Receivable - Trade:
Accounts receivable - trade represents amounts earned but not collected in
connection with the performance of medical procedures.
Allowance for Doubtful Accounts:
The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance method recognizes bad debt expense as a
percentage of accounts receivable based on a review of individual accounts
outstanding. At December 31, 1998, an allowance of $12,655 has been provided
for potentially uncollectible accounts receivable. Bad debt expense for the
year ended December 31, 1998 was $12,655.
Allowance for Contractual Adjustments:
In addition, the Company estimates contractual adjustments to its billings by
third-party payors based on the Company's historical experience. At December
31, 1998, an allowance in the amount of $10,784 has been accrued and offset
against revenues.
Advertising:
Advertising costs are charged to operations when incurred. Advertising costs
for the years ended December 31, 1998 and 1997 were $120,102 and $124,857,
respectively.
Revenue Recognition:
The Company recognizes revenues on the accrual basis, when the procedures are
performed.
Stock Based Compensation:
The Company has elected to follow Accounting Principals Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and the related
interpretations in accounting for its employee stock options. Under APB 25,
if the exercise price of employee stock options equals or exceeds the market
price of the underlying stock on the date of grant, no compensation expense
is recorded. If the exercise price of employee stock options is below the
market price of the underlying stock on the date of grant, compensation
expense is recorded in the year of grant in accordance with FAS No. 123. See
Note 5 below. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-based Compensation (Statement No. 123) when the exercise price equals
or exceeds the market price on the date of grant.
New Accounting Pronouncements:
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS No. 130). SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. Adoption of SFAS No. 130 did not have any effect on the
Company's financial position or results of operations.
F-10
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies, Nature of Operations and
Use of Estimates: (Continued)
New Accounting Pronouncements: (Continued)
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", (SFAS No. 131). SFAS No. 131 requires
that public companies report certain information about operating segments,
products, services and geographical areas in which they operate and their
major customers. Adoption of SFAS No. 131 did not have any effect on the
Company's financial position or results of operations.
2. Property and Equipment:
At December 31, 1998, property and equipment consists of the following:
Office furniture and equipment $ 58,433
Machinery and equipment 141,270
Leasehold improvements 5,463
--------
205,166
Less: accumulated depreciation (60,730)
--------
Net property and equipment $144,436
========
Depreciation expense was $31,632 and $27,332, respectively, for the years
ended December 31, 1998 and 1997.
3. Intangible Assets:
Intangible assets consist of goodwill, which represents the excess of the
cost of the combined companies over the fair value of their net assets at the
date of combination, and legal costs incurred to secure patents. Goodwill and
patents are being amortized ratably over five (5) and fifteen (15) years,
respectively. Amortization expense charged to operations for the years ended
December 31, 1998 and 1997 was $3,756 and $2,605, respectively.
4. Related Party Transactions:
Commitments:
The Company currently leases office space for its glaucoma treatment center
in Scottsdale, Arizona from a related party under a non-cancellable operating
lease agreement, which expires in July, 1999. Under the terms of the lease,
the Company pays monthly rent of $3,500. For the year ended December 31,
1998, rent expense under the aforementioned non-cancellable operating lease
agreement was $42,000.
F-11
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Related Party Transactions: (Continued)
Commitments: (Continued)
Future minimum payments due under the operating lease agreement, are as
follows:
Year Ending
December 31, Amount
------------ ------
1999 $24,500
=======
5. Stockholders' Equity (Deficit):
Common Stock and Common Stock Warrants:
The Company issued 3,715,367 shares of stock for $1,318,795, net of costs of
$259,320, through private offerings during the year ended December 31, 1998.
In relation to those offerings, the Company issued a total of 1,236,623
common stock warrants to the underwriter and their representatives.
The Company issued 568,400 shares of common stock for $574,091, net of costs
of $138,659, through private offerings throughout the year ended December 31,
1997. In relation to those offerings, the Company issued a total of 568,400
common stock warrants to the underwriter and its representatives.
All outstanding warrants have an exercise price of $2.50 per share through
December 31, 2000, when they expire.
Employee Stock Options and Stock Plans:
On December 21, 1998, the Board of Directors approved The 1998 Coronado
Industries, Inc. Stock Option Plan. The Plan authorizes the Company to grant
stock options to key employees of the Company. Under the above Plan,
1,550,000 shares of common stock are reserved for issuance.
Following is a summary of the status of the stock option plan for employees
and directors during the year ended December 31, 1998.
Weighted
Average
Number Exercise
of Options Price
---------- -----
Outstanding at December 31, 1997 -- --
Granted in 1998 1,400,000 .05
--------- ----
Outstanding at December 31, 1998 1,400,000 .05
========= ====
Weighted
Average
Remaining
Exercise Number Contractual
Price of Options Life
----- ---------- -----------
$.05 1,200,000 10
$.075 200,000 10
---------
1,400,000
=========
All of the above options are currently exercisable.
F-12
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Stockholders' Equity (Deficit): (Continued)
All stock options issued to employees have an exercise price less than
the fair market value of the Company's common stock on the date of grant. In
accordance with accounting for such options under FAS No. 123, $186,235 in
related compensation expense was recorded in the Company's financial statements
for the year ended December 31, 1998.
In 1998, the Company issued 650,000 options for services rendered. The
options were issued to two entities in the amounts of 500,000 and 150,000.
The exercise price for the options is $1.25 and .075, respectively and are
exercisable until February, 1999 and December 2008, respectively.
Following is a summary of the status of non-employee stock options and
warrants during the years ended December 31, 1998 and 1997:
Number Weighted
of Options Average
and Exercise
Warrants Price
-------- -----
Outstanding at December 31, 1997 -- --
Granted in 1998 650,000 .98
------- ----
Outstanding at December 31, 1998 650,000 $.98
======= ====
F-13
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income Taxes:
As of December 31, 1998, the components of deferred income taxes are as
follows:
Current Deferred Tax Assets (Liabilities):
Allowance for doubtful accounts $ 3,000
Less: valuation allowance (3,000)
---------
Net Current Deferred Tax Asset $ --
=========
Long-term Deferred Tax Assets (Liabilities):
Net operating loss carryforwards $ 588,500
Depreciation and amortization (8,000)
--------
580,500
Less: valuation allowance (580,500)
--------
Net Long-term Deferred Tax Liability $ --
=========
Based on the weight of available evidence, the Company has provided a full
valuation allowance on its deferred tax asset at December 31, 1998.
As of December 31, 1998, the Company has net operating loss carryforwards
available to offset future federal and state taxable income in the amounts of
$2,452,685 and $2,315,490, respectively, and expiring as follows:
Net Loss Carryforward
---------------------
Amount Available Year of Expiration
---------------------- ------------------
Year Federal State Federal State
---- ------- ----- ------- -----
1993 $ 137,195 $ -- 2008 --
1994 65,131 65,131 2009 1999
1995 96,528 96,528 2010 2000
1996 31,021 31,021 2011 2001
1997 673,948 673,948 2012 2002
1998 1,448,812 1,448,812 2013 2003
---------- ----------
$2,452,685 $2,315,490
========== ==========
F-14
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Commitments:
The Company currently leases office space in Fountain Hills, Arizona and
Largo, Florida under non-cancellable operating lease agreements which expire
through September, 2001. Under the terms of the lease agreements, the Company
pays monthly rents in the approximate aggregate amount of $4,500. For the
year ended December 31, 1998 and 1997, rent expense under the aforementioned
non-cancellable operating lease agreements was $20,234 and $10,411,
respectively.
Future minimum payments due under the operating lease agreements, are as
follows:
Year Ending
December 31, Amount
------------ ------
1999 $ 53,979
2000 53,979
2001 37,567
--------
$145,525
========
8. Non-Cash Investing and Financing Activities:
The Company recognized investing and financing activities that affected
assets, liabilities, and equity, but did not result in cash receipts or
payments.
For the year ended December 31, 1998, these non-cash activities are as
follows:
15,822 shares of common stock were issued as repayment of a
note payable and related accrued interest totaling $7,911.
8,866,334 shares of common stock were issued for services and
accrued salaries, which were valued at $547,962.
For the year ended December 31, 1997, these non-cash activities are as
follows:
50,000 shares of common stock were issued for services valued
at $120,000.
Purchased equipment through the issuance of a note in the
amount of $75,000.
F-15
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Subsequent Event:
Subsequent to December 31, 1998, the Company ceased patient operations at
its Scottsdale, Arizona facility. The Company intends to use the equipment
and furniture from the Scottsdale treatment center at its Clearwater,
Florida treatment center, subject to obtaining sufficient financing to open
the Clearwater facility. All of the revenues for the years ended December
31, 1998 and 1997 were generated by this facility.
10. Year 2000 Issue: (Unaudited)
Like other companies, Coronado Industries, Inc. could be adversely affected
if the computer systems it, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" issue. Additionally, this issue could impact non-computer
systems and devices such as production equipment, elevators, etc. At this
time, because of the complexities involved in the issue, management cannot
provide assurances that the Year 2000 issue will not have an impact on the
Company's operations.
11. Going Concern:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has sustained
continuing operating losses.
The primary business of the Company is to manufacture and market a patented
treatment device for Open Angle Glaucoma, and to operate glaucoma treatment
clinics where the patented treatment procedures are performed. The first of
these clinics was opened in 1997, but was not profitable, and was closed
subsequent to the balance sheet date.
In addition, the Company has incurred net losses of $1,622,014 and $829,702
in 1998 and 1997, respectively. Unaudited information subsequent to December
31, 1998, indicates that the losses are continuing.
The above conditions indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
F-16
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Unaudited Pro Forma Condensed Consolidated Financial Statements:
The following unaudited pro forma condensed consolidated financial
statements give effect to the closing of the Scottsdale Clinic subsequent to
December 31, 1998. They are based on the estimates and assumptions set forth
herein and in the notes to such statements. This pro forma information has
been prepared utilizing the historical financial statements and notes
thereto, which are incorporated by reference herein. The pro forma financial
data does not purport to be indicative of the results which actually would
have been obtained had the closing been effected on the dates indicated or
of the results which may be obtained in the future.
The pro forma entries are described in the accompanying notes to the
unaudited pro forma condensed consolidated financial statements. The pro
forma unaudited condensed consolidated statements of operations assume the
closing took place on the first day of the period presented.
F-17
<PAGE>
CORONADO INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For The Year Ended December 31, 1998
Pro Forma Consolidated Financial Statements:
The following represents pro forma condensed consolidated statements of
operations for the year ended December 31, 1998, assuming the closing of the
Scottsdale Clinic was as of January 1, 1998:
Coronado Pro Forma
Industries, Pro Forma Consolidated
Inc. Adjustments Amounts
----------- ----------- ------------
Revenues $ 292,788 $(292,788)(1) --
Cost of Revenues (512,969) 512,969 (1) --
----------- -----------
Gross Loss (220,181) --
General and Administrative
Expenses (1,386,892) (150,000)(2) (1,536,892)
----------- -----------
Loss from Operations (1,607,083) (1,536,892)
Other Expense (14,941) (14,941)
----------- -----------
Net Loss $(1,622,014) $(1,551,833)
=========== ===========
Loss per Share:
Basic $ (.08) $ (.07)
=========== ===========
Weighted Average Number of
Shares Outstanding:
Basic 20,741,855 20,741,855
=========== ===========
(1) To eliminate sales and costs of sales of the Scottsdale Clinic.
(2) To record salaries from the Scottsdale Clinic which will be absorbed by the
corporate offices.
F-18
<PAGE>
CORONADO INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For The Year Ended December 31, 1997
Pro Forma Consolidated Financial Statements:
The following represents pro forma condensed consolidated statements of
operations for the year ended December 31, 1997, assuming the closing of the
Scottsdale Clinic was as of January 1, 1997:
Coronado Pro Forma
Industries, Pro Forma Consolidated
Inc. Adjustments Amounts
----------- ----------- ------------
Revenues $ 26,107 $(26,107)(1) $ --
Cost of Revenues (269,736) 269,736 (1) --
---------- -----------
Gross Loss (243,629) --
General and Administrative
Expenses (567,177) (50,000)(2) (617,177)
---------- -----------
Loss from Operations (810,806) (617,177)
Other Expense (18,896) (18,896)
---------- -----------
Net Loss $ (829,702) $ (636,073)
========== ===========
Loss per Share:
Basic $ (.04) $ (.03)
========== ===========
Weighted Average Number of
Shares Outstanding:
Basic 18,504,392 18,504,392
========== ===========
(1) To eliminate sales and costs of sales of the Scottsdale Clinic.
(2) To record salaries from the Scottsdale Clinic which will be absorbed by the
corporate offices.
F-19
LEASE AGREEMENT
THIS LEASE ("Lease") is entered into by and between TANNENBAUM PROPERTIES, INC.
with offices at 193 1A West Martin Luther King Boulevard, Tampa, Florida 33607
("Landlord") and American Glaucoma Institute of Florida -Clearwater, Inc., a
Florida Corporation, with offices at 7491 Ulmerton Road, Suite 1, Largo, Florida
34641 ("Tenant").
1. PREMISES. Landlord leases to Tenant, and Tenant leases and rents from
Landlord, the space shown and identified on the schematic attached hereto as
Exhibit "A" and incorporated herein, comprising approximately 3,936 square feet
of rentable floor area known as Suite I ("Premises") in the building located at
7491 Ulmerton Road, Largo, FL ("Building").
2. TERM. The term of this Lease shall be three (3) year(s) unless sooner
terminated or extended as provided herein. The term shall commence on October 1,
1998 ("Commencement Date") and shall end at 6:00 PM on September 30, 2001
("Expiration Date").
3. TENDER OF POSSESSION. In the event possession of the Premises is not tendered
by Landlord to Tenant on Commencement Date for any reason or cause, Landlord
shall not be liable or responsible for any claims, damages or liabilities in
connection with or by reason thereof nor shall the obligations of Tenant
hereunder be excused by reason of any such delay; provided, however, that Tenant
shall not be obligated to pay any rents and charges (other than deposits) until
Landlord has tendered possession of the Premises; and provided further, that if
Landlord shall not have tendered possession of the Premises within sixty (60)
days from the Commencement Date, Tenant may, at Tenants' option, by written
notice to Landlord within ten (10) days thereafter, cancel and terminate this
Lease. If Landlord shall not have tendered possession of the Premises within one
year from the Commencement Date, Landlord may by written notice to Tenant within
the (10) days thereafter cancel and terminate this Lease. If either party so
cancels this Lease, according to the provisions stated above, Landlord shall
return without interest any moneys previously deposited by Tenant, and the
parties shall be discharged from any and all further obligations hereunder.
4. RENTS. Tenant agrees to pay Landlord rental of ($10.75psf) $42,312.00 per
year plus sales and use tax, as adjusted annually pursuant to Section 6 ("Base
Rent").
The Base Rent shall be payable in equal and consecutive monthly installments of
$3,526.00 plus applicable sales tax in advance on the 1st day of each calendar
month during the term.
If the Commencement Date occurs on a date other than the first day of a calendar
month, rent shall be prorated (on daily basis) for the fractional month at the
beginning of the term and paid on the Commencement Date, and rent for the
fractional month at the end of the term shall similarly be prorated.
Tenant covenants and agrees to pay as additional rent a late fee equal to ten
(10%) percent of any Base Rent, additional rent or other charges or payments due
under this Lease that are not paid within five (5) days of their due date. Said
fee is intended to reimburse Landlord for the additional bookkeeping and
administrative costs resulting from Tenants late payment.
Upon execution of the Lease, Tenant shall pay first month's rent plus sales tax
equaling $3,772.82, and a security deposit in accordance with paragraph 7 herein
equaling $3,772.82, for a total of $7,545.64.
5. OPERATING COSTS. Tenant agrees to pay promptly before delinquency all charges
for electricity, gas, water, sewer, and other utilities supplied to the
Premises, whether determined by separate meter or otherwise. Such utilities
shall be paid within the prescribed time therefor set by the billing authority.
In the event such billing be made through a metering device whereby the charges
therefor may be billable to Landlord, then Landlord shall
<PAGE>
deliver written notice, thereof to Tenant and Tenant shall pay its portion
thereof upon demand. Said amount Shall be for the purpose of determining a
default under this Lease and deemed rent pursuant to Section 4 hereof. Tenant
shall pay interest on any payments made by Landlord on behalf of Tenant pursuant
hereto at the maximum legal contract rate permitted by the laws of the State of
Florida. Notwithstanding same, Landlord shall not be obligated to tender any
such payments on behalf of Tenant.
6. ADJUSTMENT OF BASE RENT. The Base Rent shall be increased for the second and
each succeeding lease year by an amount equivalent to fifty cents per square
foot ($.50psf) over the Base Rent for the immediately preceding lease year.
7. SECURITY DEPOSIT. Tenant shall deposit with Landlord, upon execution hereof;
$3,772.82 as security for Tenant's faithful performance of Tenant's obligations
hereunder. If Tenant fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision hereof; Landlord may use, apply
or retain all or any portion of said deposits for the payment of any rent or
other charge in default or for the payment of any other sum to which Landlord
may become obligated by reason of Tenants default, or to compensate Landlord for
any loss or damage which Landlord may suffer thereby.
If Landlord so uses or applies all or any portion of said deposit, Tenant shall,
within ten (10) days after written demand therefor, deposits cash with Landlord
in an amount sufficient to restore said deposit to the full amount hereinabove
stated, and Tenant's failure to do so shall be material breach hereof. Landlord
shall not be required to keep said deposit separate from its general accounts.
If Tenant performs all of Tenant's obligations hereunder, said deposit, or so
much thereof as has not therefore been applied by Landlord, shall be returned;
without payment Of interest or other increment for its use, to Tenant (or, at
Landlord's option, to the last assignee, if any, of Tenant's interest hereunder)
within thirty (30) days after the expiration of the term hereof, and after
Tenant has vacated the Property.
8. USE. The Premises shall be used for office and related purposes and no other
purpose. The Premises shall not be used for retail sales or for any illegal
purpose, nor in any manner that would create any nuisance or trespass or vitiate
any insurance on the Premises of the Building. Tenant agrees to comply with all
governmental rules' regulation, decrees, or requirements applicable to the use
and occupancy of the premises. If Tenant receives notice of any claim of
violation of any law, rule or regulation applicable to the Premises of Building,
Tenant shall promptly notify Landlord of such claim. Tenant shall not do or
permit anything to be done in or about the Premises which will interfere with
the rights of other Tenants in the Building or use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose. Tenant shall
not commit or suffer to be committed any waste in or upon the Premises.
9. LANDLORD'S INTEREST NOT SUBJECT TO LIENS. As provided in 713.10, Florida
Statutes, the interest of Landlord shall not be subject to liens for
improvements made by Tenant, and Tenant shall notify any contractor making such
improvements of this provision. An appropriate notice of this provision may be
recorded by Landlord in the Public Records of the County in which the property
exists, in accordance with said statute, without Tenant's joinder or consent.
10. REPAIR AND MAINTENANCE.
a. Tenant accepts the Premises and the Building in their present condition as
suited for the use intended by Tenant. Tenant will, at its sole expense,
maintain the Premises in a clean, attractive condition and in good repair.
At the Expiration Date or other termination of the term, Tenant shall
surrender and deliver up the Premises (together with all keys to the
Premises) in like good order and condition as the same now are or shall be
at the Commencement Date, ordinary wear and tear, and damage by fire and
other unavoidable casualty not due to the negligence of Tenants, excepted.
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b. Landlord will repair and maintain the structural portions of the Building,
including the basic plumbing, air-conditioning. beating, and electrical
systems, installed or furnished by Landlord, unless such maintenance and
repairs are caused in part or whole by the act, neglect, fault or omission
of Tenant, Tenant's pests or invitees, or persons otherwise permitted on
the Premises by Tenant, in which case Tenant shall directly pay to Landlord
the reasonable cost of such maintenance or repairs. Landlord shall not be
liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time
after written notice of the need of such repairs or maintenance is given to
Landlord by Tenant. Except as may be hereinafter provided, there shall be
no abatement of rent and no liability of Landlord by reason of any injury
to or interference with tenants business arising from the making of any
repairs, alterations, or improvements in or to any portion of the Building
or the premises or in or to fixtures, appurtenances, and equipment therein.
Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect. Tenant will be
responsible for normal maintenance on plumbing, a/c, heating and electrical
systems up to $250.00 per occurrence.
11. ALTERATIONS, ADDITIONS, OR IMPROVEMENTS. Tenant shall not make any
alterations additions or improvements (structural or otherwise) in or upon the
Premises or the Building, without obtaining Landlord's prior written consent.
Any permitted additions or alterations shall conform to all building code
standards and other requirements of the federal, state and local governments;
and Tenant shall obtain all required governmental permits and approvals prior to
beginning any work at the Premises.
All additions, alterations, installations, changes, replacements or improvements
upon the Premises (including, but limited to, floor coverings, wall and ceiling
lighting fixtures, window blinds and coverings, drapes and drapery hardware),
whether made or installed by Tenant or by Landlord for Tenant's benefit, shall
remain upon the Premises, become the property of Landlord, and be surrendered
with the Premises and without disturbance or injury at the Expiration Date or
other termination of this Lease. Should Landlord elect that certain alterations,
installations, replacements, additions to or improvements upon the Premises be
removed upon the Expiration Date or other termination of this Lease, Tenant
shall cause the same to be removed at Tenant's sole cost and expense, and Tenant
shall repair any damage that may be caused by said removal.
No later than the Expiration Date, Tenant shall remove all its property from the
Premises and shall repair all injury done in connection with the installation or
removal of said property. All personal property of Tenant remaining on the
Premises after the Expiration Date shall be deemed abandoned and may, at the
election of Landlord, be removed and Tenant shall reimburse Landlord any costs
of removing the same.
In doing work of the nature described in this section, Tenant shall use only
contractors or workmen approved by Landlord. Tenant shall also remove or
appropriately bond off any lien for material or labor claimed to be furnished to
the Premises on Tenant's behalf within ten (10) business days of Tenant's notice
of the filing of such a lien.
Landlord, at Landlord's sole expense, shall recarpet the Leased Premises (carpet
samples shall be given to the Tenant for color selection) and repair and repaint
the existing front doors. Landlord, after full execution of the Lease and the
bank clearance of the first month's rent and security deposit checks, shall
allow the Tenant access to the Leased Premises to begin their Tenant
modifications. Tenant will abide by all stipulations, restrictions and covenants
of the Lease during this access period (to include, but not limited to,
insurance requirements).
12. FIXTURES AND EQUIPMENT: REPAIR OR DAMAGE. Landlord shall have the right to
prescribe the weight and position of all safes, computer facilities, and other
heavy equipment or fixtures on the Premises. Tenant shall not install or operate
any heavy equipment or electrically operated equipment or machinery (other than
typewriters, adding machines and other items normally used in modem offices)
without first obtaining the written consent of Landlord. Such consent may be
conditioned by Landlord upon the payment by Tenant of additional rent as
compensation for the excess consumption of water and/or electricity or the cost
of additional wiring occasioned by the operation of said equipment or machinery.
Tenant shall not install any other equipment of any kind which would necessitate
changes, replacements or additions to the water system, plumbing system, heating
system, air
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conditioning system, or electric system, the Premises or the Building, without
the prior written consent of Landlord, which consent may be conditioned upon the
payment by Tenant of the cost of any such changes, replacements or additions to
any of said systems.
The Landlord shall be given two (2) business days notice of all movement by
Tenant of furniture, equipment or other materials within the public or common
areas and the Landlord, shall not be responsible for any damages to or charges
for moving the same. Any injury to the Premises or the Building caused by moving
property of Tenant into or out of the Building, and all breakage caused by
Tenant or the agents, servants, employees and visitors of Tenant shall be
repaired by Tenant at its expense.
13. SIGNS AND ADVERTISING. No sign, advertising or notices shall be inscribed,
affixed or displayed on any part of the outside or the inside of the Building,
or on any part of the outside of the Premises, except as approved in writing in
advance by Landlord which approval shall not be unreasonably withheld. Landlord
shall have the right to prohibit any advertisement of Tenant which in Landlord's
opinion tends to impair the reputation of the Building or its desirability as a
high-quality office building. All such signs and advertising shall comply with
the applicable laws and ordinances.
14. INSURANCE. Landlord shall insure the Building against damage by fire and
casualty, including extended coverage, in any amount Landlord in its sole
discretion shall deem adequate, and shall maintain such insurance throughout the
term.
Tenant shall insure all of its property, including leasehold improvements, at
the Premises against damage by fire and casualty, including extended coverage,
in such amount as shall be approved by Landlord, and Tenant shall maintain such
insurance throughout the term. In addition, Tenant shall maintain with respect
to the premises, comprehensive public liability insurance, with minimum limits
of $1,000,000 for personal injury and $1,000,000 for property damage, such
insurance shall be for the joint benefit of Landlord and Tenant and shall name
Landlord and Managing Agent as additional insureds.
The insurance coverages required of Tenant shall be maintained with companies
qualified to do business in Florida and otherwise acceptable to Landlord. Tenant
shall deliver certificates of insurance indicating the above-specified coverages
to Landlord no later than the Commencement Date, and continuing evidence of such
coverages annually thereafter. Such insurance policies shall be in a form
reasonably satisfactory to the Landlord and Managing Agent and shall provide for
non-cancellation without at least ten (10) days prior written notice.
15. INSURANCE RATING. if any increase in rating of fire insurance or other
insurance as stated by any insurance company or by the applicable Insurance
Rating Bureau to be due to activity or equipment in or about the Premises, such
statement shall be evidence that the increase in such rate is due to such
activity or equipment and, as a result thereof Tenant shall be liable for such
increase and shall reimburse Landlord therefore.
16. MUTUAL WAIVERS OF SUBROGATION. Neither Landlord, nor Managing Agent shall be
liable (by way of subrogation or otherwise) to any party (or to pay insurance
company insuring another party) for any loss or damage to any property covered
by insurance, even though such loss or damage might have been occasioned by the
negligence of Landlord, Tenant or Managing Agent, or their respective agents,
employees invitees, or guests. This provision shall be in effect only so long as
the applicable insurance policies shall provide that the aforementioned waiver
shall not affect the right of the insured to recover under such policies, and
each party shall use its best efforts (including payment of additional premiums,
if necessary) to have its insurance policies contain the standard waiver of
subrogation clause. In the event landlord's or Tenant's insurance carrier
decline to accept a standard waiver of subrogation clause, Landlord or Tenant,
as the case may be, shall promptly notify the other party, in which event the
other party shall not be required to have its insurance policies contain waiver
of subrogation clause.
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17. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
a. Tenant's failure to make payments of any Base Rent Additional Rents or
other rents and charges due hereunder, where such failure shall continue
for a period of five (5) days after rent or charges are due-,
b. Tenant's failure to perform or comply with any of its covenants, agreements
or obligations hereunder for a period of five (5) days after written notice
by Landlord;
c. The vacating or abandonment of the Premises;
d. The making by Tenant of any general assignment or general arrangement for
the benefit of creditors; or the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt, or a petition or reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant the same is dismissed within sixty (60) days
of the appointment or a trustee or a receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenants
interest in this Lease, where possession is not restored to Tenant within
thirty (30) days or the attachment execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged in thirty (30)
days; or
e. The assignment or subletting of all or part of the Premises, either
voluntary or by operation of law, without the written consent of Landlord.
8. REMEDIES ON DEFAULT. In the event of any default or breach by Tenant,
Landlord may at any time thereafter, with or without notice or demand:
a. Terminate Tenant's right to possession under the lease and reenter and
retake possession of the Premises and relet or attempt to relet the
Premises on behalf of Tenant at such rent and under such terms and
conditions as Landlord may deem best under the circumstances for the
purpose of reducing Tenant's liability. Landlord shall not be deemed to
have thereby accepted a surrender of the Premises, and Tenant shall remain
liable for all Rents and Charges due under this Lease and for all damages
suffered by Landlord because of Tenant's breach of any of the covenants of
the Lease.
b. Declare this Lease to be terminated, ended and null and void, and reenter
upon and take possession of the Premises whereupon all right, title and
interest of the Tenant in the Premises shall end.
c. Accelerate and declare the entire remaining unpaid Base Rent and Additional
Rent for the balance of this Lease to be immediately due and payable
forthwith, and may, at once, take legal action to recover and collect the
same.
All rights and remedies of Landlord herein enumerated shall be cumulative
and nothing herein contained shall exclude any other right or remedy
allowed by law.
No reentry or retaking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a
written notice of such intention be given to Tenant. Nor shall pursuit of
any remedy herein provided constitute a forfeiture or waiver of any Rents
and Charges due to Landlord hereunder or any damages accruing to Landlord
by reason of the violations of any of the terms, provisions and covenants
herein contained. Landlord's acceptance of rent or Additional Rent
following any event of default hereunder shall not be construed as
Landlord's waiver of such event of default. Forbearance by landlord to
enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute a waiver of any
other violation or default.
5
<PAGE>
Legal options to recover for loss or damage that Landlord may suffer by
reason of termination of this Lease or the deficiency from any reletting as
provided for above shall include the expense of repossession and any
repairs or remodeling undertaken by Landlord following repossession.
19. LANDLORD'S CURE OF DEFAULT BY TENANT. If Tenant fails to make any payment or
to promptly do any act or perform any obligation required of Tenant hereunder,
then Landlord at its option may make such payment or do such act or perform such
obligation. In such case, any charges or expenses paid, incurred or suffered by
Landlord, together with interest thereon at the rate of eighteen (18 %) percent
per annum, from the date paid by Landlord, shall constitute additional rent due
and payable by Tenant to Landlord along with the next monthly installment of
Rents and Charges after Landlord has sent a written invoice therefore; provided,
however, that any such payments, actions or performance by Landlord shall not
operate to cure such failure(s) by Tenant, or to estop Landlord from the pursuit
of any remedy to which Landlord would otherwise be entitled.
20. NO WAIVER. If under the provisions hereof any compromise or settlement shall
be made, or if Landlord or Tenant fails to insist upon strict performance by the
other party of any provision hereof-, it shall not be construed as a waiver or
relinquishment for the future of any such provision, but such provision shall
remain in fig force and effect. No waiver of any provision of this Lease shall
be deemed to have been made, unless in writing and signed by the party to be
charged therewith. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly installments of Rents and Charges herein stipulated
shall be deemed to be other than on account of the earliest stipulated Rents and
Charges, nor shall any endorsement or statement on any check (or any letter
accompanying any check or payment) be deemed an accord and satisfaction, and
Landlord may accept any such check or payment without prejudice to Landlord's
right to recover the balance of such Rents and Charges or to pursue any other
remedy in this Lease. No reentry by Landlord, and no acceptance by Landlord of
keys from Tenant, shall be considered an implied acceptance of a surrender of
this Lease.
21. LANDLORD'S LIEN. Tenant hereby pledges and assigns to Landlord, and grants
to Landlord a security interest in and against (under the Uniform Commercial
Code as enacted in Florida) all goods, furniture, equipment fixtures, and other
personal property of Tenant which are presently or may hereafter be situated on
the Premises, and all proceeds therefrom, as security for payment of the Rents
and Charges hereunder. The lien and security interest hereby created may be
enforced and/or perfected, at the election of Landlord in any lawful manner.
22. INSPECTION. Tenant shall allow Landlord, its agents and employees, to enter
the Premises at all reasonable times without charge to examine or inspect the
Premises, or to prevent damage of injury to the same, or to make such
alterations and repairs as Landlord may deem necessary, or to exhibit the same
to prospective tenants during the last three months of the term.
23. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSONS. Landlord shall not be
liable to Tenant for (i) any accident or damage caused by electric lights or
wires or the operation of elevators, heating, lighting or plumbing apparatus, or
any accident or injury occurring in the connection with the Building and its
services, (ii) losses of or damage to property of Tenant caused by rain, water
or steam that may leak into or flow from any part of the Building through any
defect in the roof or plumbing or from any other source, including but not
limited to acts or omissions on the part of other tenants of the Building or
person using or present at the Building, or (iii) thefts or losses of, or damage
to, any goods, cask personal effects or other personal property stored or placed
by Tenant (or its employees, agents visitors, licensees or invitees) in or about
the Premises or the Building, unless the losses or damages referred to in said
items (i) through (iii) are caused by negligence of Landlord and are covered by
casualty or liability insurance carried by Landlord.
24. INDEMNIFICATION. Tenant shall indemnify and save harmless Landlord and its
Managing Agent from and against any and all claims, actions, damages, liability
and expenses, including court costs and reasonable attorneys' fees, in
connection with the loss of life, personal injury and/or damages arising in
whole or in part from or out of any occurrence in, upon or at the Premises, (ii)
the occupancy or use by Tenant or any other party of the Premises, or (iii) any
act or omission of Tenant, its agents, servants, employees, assignees or
invitees.
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25. FIRE AND CASUALTY DAMAGE. If the portion of the Building of which the
Premises are a part Is damaged by fire or other casualty but remains tenable,
Landlord shall repair and restore said portion of the Building within one
hundred twenty (120) days (or such longer period of time as may be reasonably
necessary under the circumstances) thereafter and this Lease shall not be
terminated. In such event during the period that Tenant is deprived of the use
of the Premises, Tenant shall be required to utilize any of the Premises that
Tenant is able to occupy, the Rents and Charges for said remaining space shall
be that portion of the total Rents and Charges which the amount of square foot
area that can be occupied bears to the total square foot area of the entire
Premises.
If said portion of the Building shall be so damaged by fire or other casualty as
to be untenable, then unless said damage is repaired by Landlord within ninety
(90) days thereafter, either party hereto, upon written notice to the other
party given at any time following the expiration of said 90-day period, may
terminate this Lease, in which case all Rents and Charges shall be apportioned
and paid to the date of said fire or other casualty.
Notwithstanding the preceding provision, if the Building is so severely damaged
or destroyed by fire or other casualty (although the Premises may not be
affected) that Landlord shall decide within a reasonable time not to rebuild or
reconstruct the Building, then this Lease shall terminate. No compensation or
claim for diminution of Rents and Charges will be allowed or paid by Landlord,
by reasons of inconvenience, annoyance or injury to business, arising from the
necessity of repairing the Premises, or any portions of the Building. If the
Leasehold Improvements of the Premises are destroyed by fire or other casualty,
Tenant, at Tenant's sole expense, shall promptly restore the Leasehold
Improvements as nearly as possible to their condition prior to such damage or
destruction.
26. CONDEMNATION. If the Premises, or any part thereof, shall be taken or
condemned or sold for public or quasi-public use or purpose by or to any
government authority, this Lease shall fully cease and terminate as of the date
when possession is delivered to such authority. In such event, Tenant shall have
no claim against Landlord (for the value of the unexpired term, for leasehold
improvements, for goodwill or loss of business, or otherwise), and shall not
have any claim or right to any portion of the award or damages that may be paid
as a result of any such condemnation, and any rights of tenant to damages
therefore are hereby assigned by Tenant to Landlord.
27. ASSIGNMENT AND SUBLETTING. Tenant will not sublet the Premises or any part
thereof (or transfer possession or occupancy thereof) to any person, firm or
corporation, or transfer or assign this Lease, without the prior written consent
of Landlord, nor shall any subletting or assignment be effected by operation of
law or otherwise than by the prior written consent of Landlord. The consent by
Landlord to any assignment transfer or subletting shall not be construed as a
waiver or release of Tenant from the terms of any covenant or obligation under
this Lease, nor shall the collection or acceptance of Rents; and Charges from
any such assignee, transferee, subtenant or occupant constitute or be construed
as such a waiver or release of Tenant or Guarantor.
28. HOLDING OVER. In the event Tenant shall not immediately surrender the
Premises on the Expiration Date, Tenant shall become a tenant by the month at
twice the monthly Rents and Charges in effect during the month preceding the
Expiration Date. Tenant shall thereafter be subject to all conditions and
covenants of this Lease as though the same had originally been a monthly
tenancy. Thereafter, Tenant shall give Landlord at least thirty (30) days'
written notice of any intention to quit the Premises, and Tenant shall be
entitled to thirty (30) days' written notice from Landlord to quit the Premises
(except in the event of any failure or breach under Section 19, in which event
the provisions of Section 19 shall govern).
Notwithstanding the foregoing provisions, in the event that Tenant shall hold
over after the Expiration Date and Landlord shall desire to regain possession of
the Premises promptly at such time then at any time prior to Landlord's
acceptance of rents and charges from Tenant as a monthly tenant hereunder,
Landlord at its option may reenter and take possession of the Premises in any
manner permissible under the laws of the State of Florida.
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29. SUBORDINATION. This Lease is subject and subordinate to any mortgage which
may now or hereafter encumber or otherwise affect the real estate (including the
Building) of which the Premises form a part, and to all renewals, extensions,
modifications, consolidations, replacements, recastings and/or refinancing
thereof. This provision shall be self-operative, and no further instrument of
subordination shall be required by any mortgagee. In confirmation of such
subordination, upon Landlord's request, Tenant shall promptly execute any
requisite or appropriate certificate or document. Tenant hereby constitutes and
appoints Landlord as Tenant's attorney-in-fact to execute any such certificate
for or on behalf of Tenant. In the event that any proceedings are brought for
the foreclosure of any such mortgage, Tenant shall attorn to the purchaser at
such foreclosure sale and shall recognize such purchaser as the landlord under
this Lease, and Tenant waives the provisions of any statute or rule of law (now
or hereafter in effect) which may give or purport to give Tenant any right to
terminate or otherwise adversely affect this Lease and the obligations of Tenant
hereunder in the event that any such foreclosure proceeding is prosecuted or
completed. At the written request of the party secured by any such mortgage,
Tenant shall also execute, acknowledge and deliver any instrument that has for
its purpose and effect the confirmation of the above subordination of the Lease
to any mortgage.
30. ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to time, upon
not less than ten (10) days' prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect or, if there have been
modifications, that this Lease is in full force and effect as modified and
stating any such modification; (ii) certifying that Tenant has accepted
possession of the Premises; (iii) stating that no rents and charges under this
Lease have been paid more than thirty (30) days in advance' (iv) stating the
address to which notices to Tenant should be sent; (v) certifying that Tenant,
as of the date of any such certification, has no charge, lien or claim of set
off under this Lease otherwise, against Rents and Charges; and (vi) stating
whether or not, to the best of Tenants knowledge, landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease,
and, if so, specifying each such default of which Tenant may have knowledge.
Any statement delivered pursuant hereto may be relied upon by any prospective
mortgagee of the Building or of Landlord's interest or any prospective assignee
of any such mortgage.
Tenant further agrees that it will not seek to terminate this Lease by reason of
any act or omission of Landlord until Tenant shall have given written notice of
such act or omission to any mortgagees of Landlord as may have been given to
Tenant by Landlord from time to time, at such address or addresses and until a
reasonable period of time shall have elapsed following the giving of such
notice, during which period of time Landlords mortgagees shall have the right,
but shall not be obligated, to remedy such act or omission.
31. NOTICES. All notices and communications required or desired to be given
hereunder by either party to the other shall be given either by personal
delivery or by certified or registered mail, postage prepaid, return receipt
requested, and shall be deemed to have been given upon the earlier of actual
receipt or three business days after posting. All such notices shall be
addressed as follows:
LANDLORD:
TANNENBAUM PROPERTIES, INC.
c/o Fox and Associates, Inc.
8902 North Dale Mabry Highway, #101
Tampa, Florida 33614
TENANT:
American Glaucoma Institute of Florida - Clearwater, Inc.
7491 Ulmerton Road, Suite I
Largo, Florida 34641
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Either party may, by like written notice, designate a new address to which such
notices shall be directed, In addition, all Rents and Charges payable by Tenant
to Landlord shall be paid to the Managing Agent at his address set forth above.
32. NO PARTNERSHIP. Nothing contained in this Lease Shall be deemed or construed
to create a partnership or joint venture among Landlord, Managing Agent and/or
Tenant, or create any other relationship between the parties hereto other than
that of Landlord and Tenant.
33. NO REPRESENTATION BY LANDLORD. Neither Landlord nor any agent or employee of
Landlord, has made any representations or promises with respect to the Premises
or the Building except as herein expressly set forth, and no rights, privileges,
easements or licenses are acquired by Tenant except as herein set forth.
'Me taking of possession of the Premises by Tenant shall be conclusive evidence
that the Premises and the Building are in good and satisfactory condition as of
the Commencement Date, except as herein expressly set forth the taking of
possession of the Premises by Tenant shall be conclusive evidence that the
Premises, and the Building are in good and satisfactory condition as of the
Commencement Date.
34. BROKERAGE. Each party represents that it has not had dealing with any real
estate broker, finder or other person with respect to this Lease, except FOX AND
ASSOCIATES, INC. Each party shall indemnify and hold harmless the other party
from all damages resulting from claims asserted against the other party by any
other broker, finder or persons with whom the party has or purportedly has
dealt, and Landlord shall pay any commissions or fees that are payable to the
aforesaid named broker or finder with respect to the Lease, in accordance with
the provisions of a separate commission contract.
35. QUIET ENJOYMENT. Tenant shall have the peaceful and quiet use of the
Premises for the term of this Lease, without hindrance or interruption by
Landlord or any other person lawfully claiming by, through or under Landlord,
subject to Tenant's observance and performance of all terms and conditions of
this Lease, and to any and/or Landlord's interest in the Premises and the
Building, may be subordinate. Landlord warrants that he has full right and
authority to enter into this Lease for the full term.
36. RULES AND REGULATIONS. Tenant will observe and comply with any reasonable
rules and regulations that Landlord may prescribe (by written notice to Tenant)
for the safety, care and cleanliness of the Building and the Parking Area, and
the comfort, quiet and convenience of other occupants of the Building.
37. RENTABLE FLOOR AREA. As used in this Lease, the term "rentable floor area"
shall mean (i) the number of usable square feet of floor area within die
Premises, plus (ii) Tenant's deemed pro rata share of the square footage within
the common areas of the Building,
38. LENDER'S MODIFICATION. If in connection with securing financing for the
Building, an institutional lender shall request reasonable modifications in this
Lease as a condition to such financing, Tenant will not unreasonably withhold or
delay its consent, provided that such modifications do not increase the
obligations of Tenant hereunder or materially adversely affect Tenants leasehold
interest or Tenant's use and enjoyment of the Premises.
39. APPLICABLE LAW. Florida Law shall govern the validity, performance and
enforcement of this Lease. If any provisions of this Lease shall at any time be
deemed to be invalid or illegal by any court of competent jurisdiction, this
Lease shall not be invalidated thereby. In such event, THIS Lease shall be
construed as if such invalid or illegal provisions had not been contained
herein, thereby preserving all of the other terms, conditions, and provisions of
this Lease.
9
<PAGE>
40. ATTORNEY'S FEES, ETC. Should either party employ an attorney or attorneys to
enforce any of the provisions hereof or to protect its interest in any matter
arising hereunder, or to recover damages for the breach
hereof the party prevailing shall be entitled to recover from the other party
all reasonable costs, charges and expenses, including attorneys' fees, the value
of time charged by paralegal and/or other staff members operating under the
supervision of an attorney, and other legal costs expended or incurred in
connection therewith, before, during and subsequent to any litigation, including
arbitration and appellate proceedings, bankruptcy or similar debtor/creditor
proceedings, and proceedings to enforce any indemnity agreement herein
contained.
41. ENTIRE AGREEMENT. This Lease, together with the Exhibits incorporated
herein, contains the entire and only agreement between the parties, and no oral
statements or representations or prior written matter not contained or referred
to in this instrument shall have any force or effect. This Lease shall not be
modified in any way except in writing subscribed by both Landlord and Tenant.
42. HEIRS AND ASSIGNS: MISCELLANEOUS. The provisions of this Lease shall inure
to the benefit of and be binding upon Landlord and Tenant, and their respective
successors, heirs, executors, administrators, legal representatives and assigns.
Landlord may freely and fully assign its interest hereunder, and the term
"Landlord" as used in this Lease means only the then owner of the Building and
the Premises.
Accordingly, in the event of any sale or lease of the Building and the Premises,
Landlord shall be entirely relieved of all covenants and obligations of Landlord
accruing thereafter, and it shall be deemed without further agreement that the
purchaser of the lease, as the case may be, have assumed and agreed to carry out
all covenants and obligations of Landlord hereunder during the period such party
has ownership and/or possession of the Building and the Premises. Neither the
shareholders, nor the officers nor the directors of Landlord shall be liable for
the performance of Landlord's obligations under this Lease. Tenant further
agrees that the liability of Landlord for its obligations under this Lease is
specifically limited to Landlord's interest in the Building and the Premises,
and Landlord shall never be personally liable with respect to any of the terms,
covenants and conditions of this Lease.
43. RADON GAS DISCLOSURE. The following language is required by law in any
contract involving the sale or lease of any building within the State of
Florida:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who arc exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit."
44. ENVIRONMENTAL COMPLIANCE.
a. Tenant shall not use, generate, manufacture, produce, store, release,
discharge or dispose of, on, under or about the Property, or transport to
or from the Property, any Hazardous Substance (as defined below), or allow
any other person or entity to do so. Tenant shall keep and maintain the
Property in compliance with, and shall not cause or permit the Property to
be in violation of any Environment Laws (as defined below), except those
substances properly permitted for by all governmental agencies.
b. Tenant shall give prompt notice to Landlord of (i) any proceeding or
inquiring by any governmental authority (including without limitation the
Florida Environmental Protection Agency or Florida Department of Health and
Rehabilitative Services) with respect to the presence of any Hazardous
Substance on the Property or the migration thereof from or to other
property; (ii) all claims made or threatened by any third party against
Tenant, Landlord or the Property relating to any loss or injury resulting
from any hazardous Substance; and (iii) Tenant's discovery of any
occurrence or condition on any real property adjoining or in the vicinity
of the Property that could cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or
use of the Property under any Environmental Law or any regulation adopted
in accordance therewith.
10
<PAGE>
c. Tenant shall protect, indemnify and hold harmless Landlord, its directors,
officers, employees, agents, successors and assigns any and all loss,
damage, cost, expense or liability (including attorneys' fees and costs)
directly or indirectly arising out of or attributable to the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal, transport or presence of a Hazardous Substance on,
under, about, to or from the Property, including without limitation all
foreseeable consequential damages and the costs of any necessary repair,
cleanup or detoxification of the Property, in any way arising from the acts
of Tenants.
d. "Environmental Laws" shall mean any federal, state or local law, statute,
ordinance or regulation pertaining to health, industrial hygiene, or
environmental conditions on, under or about the Property, including without
limitation the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended from time to time (CERCLA"), 42 U.S.C.
Sections 9601 et seq. and the Resource Conservation and Recovery Act of
1976, as amended from time to time ("RCRA"), 42 U.S.C. Sections 6901 et
seq.
The term "Hazardous Substance's shall include without limitation: (i) those
substances included within the definitions of "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in CERCLA,
RCRA, and the Hazardous Materials Transportation, Act, 49 U.S.C. Sections
1801 et seq. and in the regulations promulgated pursuant to said laws; (ii)
those substances defined as "hazardous wastes" in any Florida Statute and
in the regulations promulgated pursuant to any Florida Statute; (iii) those
substances listed in the United States Department of Transportation Table
(49 CER 172. 101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR Part 302
and amendments thereto); (vi) such other substances, materials and wastes
which are or become regulated under applicable local, state or federal law,
or which arc - classified as hazardous or toxic under federal, state or
local laws or regulations; and (v) any material, waste or substance which
is (1) petroleum, (2) asbestos, (3) polychlorinated biphenyl, (4) designed
as a "hazardous substance" pursuant to Section 311 of the Clean Water Act,
33 U. S. C. Sections 1251 et seq., or listed pursuant to Section 307 of the
Clean Water Act, (5) flammable explosive, or (6) radioactive materials.
e. Landlord shall have the right to inspect the Property and audit Tenant's
operations thereon to ascertain Tenants compliance with the provisions of
this Lease at any reasonable time, and Tenant shall provide periodic
certifications to Landlord, upon request, that Tenant is in the compliance
with the environmental restrictions contained herein. Landlord shall have
the right, but not the obligation, to enter upon the Property and perform
any obligation of Tenant hereunder of which Tenant is in default, including
without limitation any remediation necessary due to environmental impact of
Tenant's operations on the Property, without waiving or reducing Tenant's
liability for Tenant's default hereunder.
f. All of the terms and provisions of the Section shall survive expiration or
termination of this Lease for any reason whatsoever.
45. AMERICANS WITH DISABILITIES ACT OF 1990 ("ADA"). Within five (5) days after
receipt, Tenant shall advise Landlord in writing, and provide Landlord with
copies of (as applicable), any notices alleging violation of the Americans with
Disabilities Act of 1990 ("ADA") relating to any portion of the Premises; any
claims made or threatened in writing regarding noncompliance with the ADA and
relating to any portion of the Premises; or any governmental, or regulatory
actions or investigations instituted or threatened regarding noncompliance with
the ADA and relating to any portion or the Premises.
11
<PAGE>
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE
PROPERTY.
NEITHER LANDLORD NOR TENANT SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LEGATION PROCEEDING BASED UPON OR ARISING OUT OF THIS
LEASE, ANY RELATED AGREEMENT OR INSTRUMENT OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN LANDLORD AND TENANT. NEITHER LANDLORD NOR TENANT WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED.
THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY TENANT AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER LANDLORD NOR TENANT HAS IN
ANY WAY AGREED WITH OR REPRESENTED THAT THE PARAGRAPH WILL NOT BE FULLY ENFORCED
IN ALL INSTANCES.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
Signed, sealed and delivered LANDLORD:
in the presence of:
TANNENBAUM PROPERTIES, INC.
/s/ Signature Illegible By: /s/ Signature Illegible
- ----------------------- --------------------------
/s/ Signature Illegible Date: 8/10/98
- ----------------------- -------------------------
TENNANT:
By: /s/ G. Richard Smith, President/Director
----------------------------------------
G. Richard Smith, President/Director
--------------------------------------
Its:
---------------------------------------
Date: 8/8/98
---------------------------------------
12
<PAGE>
EXHIBIT "A"
7491 ULMERTON ROAD
ST. PETERSBURG, FLORIDA
SUITE 1
SUITE 2A
SUITE 2B
SUITE 3A
SUITE 3B
13
<PAGE>
NOTICE TO
OWNERS, PROSPECTIVE TENANTS AND BUYERS OF REAL PROPERTY
REGARDING THE "AMERICAN WITH DISABILITIES ACT"
Please be advised that an owner or tenant of real Property may be subject to the
Americans with Disabilities Act (the ADA), a Federal law codified at 42 USC
Section 12101 et seq. Among other requirements of the ADA that could apply to
your property, Title III of the ADA requires owners and tenants of "public
accommodations" to remove barriers to allow access by disabled persons and
provide auxiliary aids and services for hearing, vision or speech impaired
persons by January 26, 1992. The regulations under Title III of the ADA are
codified at 28 CFR Part 36.
We recommend that you and your attorney review the ADA and the regulations, and,
if appropriate, your proposed lease or purchase agreement, to determine if this
law could apply to you, and the nature of the requirements. These are legal
issues. You are responsible for conducting your own independent investigation of
these issues. Fox and Associates, Inc. cannot give you legal advice on these
issues.
Please acknowledge your receipt of this notice by signing and dating it below.
Received on: 8-8, 1998
Signature: /s/ G. Richard Smith
--------------------
Printed Name G. Richard Smith
--------------------
14
Residential Lease for Unit in Condominium or Cooperative
FLORIDA ASSOCIATION OF REALTORS
(FOR A TERM NOT TO EXCEED ONE YEAR)
(Not To Be Used For Commercial, Agricultural, or Other Residential Property)
WARNING: IT IS VERY IMPORTANT TO READ ALL OF THE LEASE CAREFULLY. THE LEASE
IMPOSES IMPORTANT LEGAL OBLIGATIONS, AN ASTERISK (*) OR A BLANK SPACE ( )
INDICATES A PROVISION WHERE A CHOICE OR A DECISION MUST BE MADE BY THE PARTIES,
NO CHANGES OR ADDITIONS TO THIS FORM MAY BE MADE UNLESS A LAWYER IS CONSULTED.
I. TERM AND PARTIES. This is a lease ("the Lease") for a period of 12
(number) months (the "Lease Term"), beginning 6/24/98 (month, day, year)
and ending 6/23/99, between THERESA MATUSZEK and G. RICHARD SMITH of (In
the Lease, the owner, whether one or more, of the property is called
"Landlord." All persons to whom the property is leased are called
"Tenant")
II. PROPERTY RENTED. Landlord leases to Tenant unit no. 508 in the building
located at 450 Gulfview known as 440 West Bld, Clearwater Florida 33767
together with the following furniture and appliances: SEE ATTACHED
INVENTORY SHEET. [List all furniture and appliances. If none, write
"none."] (In the Lease the property leased, including furniture and
appliances, if any, is called "the Premise")
III. COMMON AREAS. Landlord grants to Tenant permission to use, along with
others, the common areas of the building and the development of which the
Premises are a part
IV. RENT PAYMENTS AND CHARGES. Tenant shall pay rent for the Premises in
installments of $ 1,150.00 each on the 1st day of each month. (A "Rental
Installment Period," as used in the Lease, shall be a month if rent is
paid monthly and a week if rent is paid weekly.) Tenant shall pay with
each rent payment all taxes imposed on the rent by taxing authorities. The
amount of taxes payable on the beginning date of the Lease is $NA for each
Installment. The amount of each installment of rent plus taxes ("the Lease
Payment") as of to data the Lease begins, is $ NA. Landlord will notify
Tenant if the amount of the tax changes. Tenant shall pay the rent and all
other charges required to be paid under the Lease by cash, valid check, or
money order. Landlord may appoint an agent to collect the Lease Payment
and to perform Landlord's obligations.
* LANDLORD/ Tenant (circle one) shall pay the common area, maintenance
fees attributable to the Premises during the Lease Term. Such fees
are $_______________ per month / quarter (circle one) and are
payable at the following address: _______.Failure by Tenant to pay
any such few that are Tenant's obligations shall be a default in
payment of rent
* The Lease Payments must be PAID IN ADVANCE/ in arrears (circle one)
beginning____________ (date).
V. DEPOSITS, ADVANCE RENT, AND LATE CHARGES. In addition to the Lease
Payments described above, Tenant shall pay the following: (check only
those item that apply)
[X] a security deposit of $ 1,000.00 to be paid upon signing the Lease.
[ ] advance rent in the amount of $ __________ for the Rental
Installment Periods of __________ to be paid upon signing the Lease.
[ ] a pet deposit in the amount of $ __________ to be paid upon
signing the Lease.
[X] a late charge in the amount of $ 10.00 for each Lease Payment made
more than 10 number of days after the date it is due.
[X] a bad check fee in the amount of $20.00 (not to exceed $20.00, or 5%
of the Lease Payment, whichever is greater if Tenant makes any Lease
Payment with a bad check. If Tenant makes any Lease Payment with a
bad check. Landlord can require Tenant to pay all future Lease
Payments in cash or by money order.
VI. SECURITY DEPOSITS AND ADVANCE RENT. If Tenant has paid a security deposit
or advance rent the following provisions apply.
A Landlord shall hold the money in a separate interest-bearing or
noninterest-bearing account in a Florida banking institution for
fine benefit of Tenant. If Landlord deposits the money in an
interest-bearing account, Landlord must pay Tenant interest of at
least 75% of the annualized average interest paid by the bank of 5%
per year simple interest, whichever Landlord chooses. Landlord
cannot mix such money with any other funds of Landlord or pledge,
mortgage or make any other use of such money until the money is
actually due to Landlord; or B. Landlord must post a surety bond in
the manner allowed by law. If Landlord posts the bond, Landlord
shall pay Tenant 5% interest per year.
At the and of the Lease, Landlord will pay Tenant, or credit against
rent, the interest due to Tenant. No interest will be due Tenant if
Tenant wrongfully terminates the Lease before the end of the Lease
Term.
It Landlord rents five or more dwelling units, then within 30 days
of Tenant's payment of the advance rent or any security deposit,
Landlord must notify Tenant in writing of the manner in which
Landlord is holding such money, the interest rate, if any, that
Tenant will receive, and when such payments will be made.
VII. NOTICES. CYNTHIA HARRINGTON/ CLEARWATER BEACH R.E. is Landlord's
Agent. All notices to Landlord and all Lease Payments must be sent to
LANDLORD'S Agent at 140 Manchester Dr. Unit 210, Buffalo Grove Il unless
Landlord gives Tenant written notice of a change. Landlord's Agent may
perform inspections on behalf of Landlord. All notices to Landlord shall
be given by certified mail, return receipt requested, or by hand delivery
to Landlord or Landlord's Agent.
Any notice to Tenant shall be given by certified mail, return receipt
requested, or delivered to Tenant at the Premises. If Tenant is absent
from the Premises, a notice to Tenant may be given by leaving a copy of
the notice at the Premises.
<PAGE>
VIII. USE OF PREMISES. Tenant shall use the Premises only for residential
purposes. Tenant also shall obey, and require anyone on the Premises to
obey, all laws and any restrictions that apply to the Premises. Landlord
will give Tenant notice of any restrictions that apply to the Premises.
The Premises are located in a condominium or cooperative development. The
Lease, and Tenant's rights under the lease, shall be subject to all terms,
conditions, provisions, and restrictions set out in the Declaration of
Condominium, the plat, and restrictions, rules, and regulations as now
exist or may be adopted, modified, amended, or repealed by the governing
association during the Lease Term.
Tenant acknowledges that the governing association may adopt modify,
amend, or repeal rules and regulations for the use of the common areas
and the Premises during the Lease Term
* Occasional overnight guests are / are not permitted. An occasional
overnight guest is one who does not stay more than ______________ nights.
in any calendar month. Landlords written approval is / is not (circle one)
required to allow anyone also to occupy the Premises.
* Tenant may / may not keep or allow pets or animals on the Premises without
Landlords approval of the pet or animal in writing.
Tenant shall not keep any dangerous or flammable items that might increase
the danger of fire or damage on the Premises without Landlord's consent.
Tenant shall not create any environmental hazards on or about the
Premises.
Tenant shall not destroy, deface, damage, impair, or remove any part of
the Premises belonging to Landlord, nor permit any person to do so.
* Tenant may / my not make any alterations or improvements to the Premises
without first obtaining Landlords written consent to the alteration
Improvement.
Tenant must act and require all other persons on the Premises to act, in a
manner that does not unreasonably disturb any neighbors or constitute a
breach of the peace
IX. MAINTENANCE. Landlord and Tenant agree that the maintenance of the
Premises must be performed by the person indicated below:
A. Structural and Building Codes. Landlord and Tenant acknowledge that
the maintenance of the structural elements and common areas is
performed by the condominium association as part of the common area
maintenance. Landlord shall assure that the association complies
with applicable building, housing, and health codes relating to the
Premises. If there are no applicable building, housing, or health
codes, Landlord shall assure that the association maintains and
repairs the roofs porches, windows, exterior walls, screens,
foundations, floors, structural components, and steps, and keeps the
plumbing in reasonable working order. Landlord will be responsible
for the maintenance of any items listed above for which the
association is not responsible.
B. Elective Maintenance. Fill in each blank space in this section with
Landlord or Tenant to show who will take care of the item noted. If
a space is left blank. Landlord will be required to take care of
that item.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Tenant Smoke detectors Condo Assn. Running water Landlord Appliances
Condo Assn Extermination of Landlord Hot water Landlord/Ten Fixtures
rats, mice,
roaches, ants, wood NA Lawn Condo Assn. Pool (including
destroying organisms, filters, machinery.
and bedbugs And equipment)
Tenant Heating and air
Landlord/TenLocks and keys Landlord Heat conditioning filters
Condo Assn. Clean and safe Landlord Air conditioning Other:_________
condition of outside
areas Tenant Furniture
Condo Assn Garbage removal and
outside garbage receptacles
</TABLE>
* Tenants responsibility, if any, indicated above, shall / shall not include
major maintenance or major replacement of equipment
Landlord shall be responsible for major maintenance or major replacement
of equipment, except for equipment for which Tenant has accepted
responsibility if major maintenance or major replacement in the previous
paragraph.
Major maintenance or major replacement means a repair or replacement that
costs more than $_____________________.
Tenant shall be required to vacate the Premises on 7 days' written notice,
if necessary, for extermination pursuant to this subparagraph. When
vacation of the Premises is required for extermination, Landlord shall not
be liable for damages but shall abate the rent
Nothing in this section makes Landlord responsible for any condition
created or caused by the negligent or wrongful act or omission of Tenant,
any member of Tenant's family, or any other person on the Premises with
Tenant's consent.
C. Tenant's Required Maintenance. At all times during the Lease Term,
Tenant shall:
1 comply with all obligations imposed upon tenants by applicable
provisions of building, housing, and health codes;
2. keep the Premises clean and sanitary;
3. remove all garbage from the dwelling unit in a clean and
sanitary manner;
4. keep all plumbing fixtures in the dwelling unit clean, sanitary,
and in repair; and
5. use and operate in a reasonable manner all electrical, plumbing,
sanitary, heating, ventilating, air conditioning, and other
facilities and appliances, including elevators.
X. UTILITIES. Tenant shall pay all charges for hook-up connection, and
deposit for providing all utilities and utility services to the Premises
during this lease except 0 ,which Landlord agrees to provide at Landlords
expense. (Specify any utilities to be provided and paid for by Landlord
such as water, sewer, oil, gas, electricity, telephone, garbage removal,
etc.)
XI. LANDLORD'S ACCESS TO PREMISES. Landlord or Landlords Agent may enter the
Premises in the following circumstances:
A. At any time for the protection or preservation of the Premises.
B. After reasonable notice to Tenant at reasonable times for the
purpose of repairing the Premises. C. To inspect the Premises; make
necessary or agreed upon repairs, decorations, alterations, or
improvements; supply agreed services; or exhibit the Premises to
prospective or actual purchasers, mortgagees, tenants, workers, or
contractors under any of the following circumstances:
1. with Tenant's consent;
2. in case of emergency.
3. when Tenant unreasonably withholds consent or
4. If Tenant is absent from the Promises for a period of at least
one-half a Rental Installment Period. (If the rent is current
and Tenant notifies Landlord of an intended absence, then
Landlord may enter only with Tenants consent or for the
protection or preservation of the Premises.)
XII. PROHIBITED ACTS BY LANDLORD.
A. Landlord cannot cause, directly or indirectly, the termination or
unreasonable interruption of any utility service furnished to
Tenant, including, but not limited to, water, heat, light,
electricity, gas, elevator, garbage collection, or refrigeration
(whether or not the utility service is under the control of or
payments made by, Landlord).
B. Landlord cannot prevent Tenant's access to the Premises by any
means, including, but not limited to, changing the locks or using
any bootlock or similar device.
C. Landlord cannot remove the outside doors, locks, roof, walls, or
windows of the Premises except for purposes of maintenance, repair,
or replacement. Landlord cannot remove Tenant's personal property
from the Premises unless the action is taken after surrender,
abandonment, or a lawful eviction. If provided in a written
agreement separate from the lease upon surrender or abandonment by
Tenant, Landlord shall not be liable or responsible for storage or
disposition of Tenant's personal property. (For the purposes of this
section, abandonment means Tenant is absent from the Premises for at
least one-half a Rental installment period without paying rent or
giving Landlord reasonable notice of Tenant's absence.)
XIII. CASUALTY DAMAGE If the Premises are damaged or destroyed other than by
wrongful or negligent acts of Tenant or persons on the Premises with
Tenant's consent so that the use of the Premises is substantially
impaired, Tenant may terminate the Lease within 30 days after the damage
or destruction and Tenant immediately vacate the premises. If Tenant
vacates, Tenant is not liable for rent that would have been due after the
date of termination. Tenant may vacate the part of the Premises rendered
unusable by the damage or destruction, in which case Tenant's liability
for rent shall be reduced by the fair rental value of the part of the
premises that was damaged or destroyed.
<PAGE>
XIV. DEFAULT.
A. Landlords Default. Except as noted below, Landlord will be in
default it Landlord fails to comply with Landlords required
maintenance Obligations under Section IX(A) or fails to comply with
other material provisions of the a Lease and such failure continues
for more then 7 days after Tenant delivers a written notice to
Landlord that tells Landlord how Landlord has violated the lease.
If Landlord's failure to comply is due to causes beyond the
Landlords control and if Landlord has made, and continues to make,
every reasonable effort to correct the problem, the Lease may be
altered by the parties, as follows:
1. If Landlords failure to comply makes the Promises uninhabitable
and Tenant vacates, Tenant shall not be liable for rant during
the period the Premises re mains uninhabitable.
2. If Landlords failure to comply does not make the Premises
uninhabitable and Tenant continues to occupy the Premises, the
rent for the period of noncompliance will be reduced by an
amount in proportion to the loss of rental value caused by the
noncompliance
B. Tenant's Default. Tenant will be in default it any of the following
occur.
1. Tenant fails to pay rent when due and the default continues for
3 days, excluding Saturday, Sunday, and legal holidays, after
delivery of written demand by Landlord for payment of the rent
or possession of the Promises.
2. Tenant fails to perform it's obligations under the Lease, and
the failure is such that Tenant should not be given an
opportunity to correct it or the failure occurs within 12 months
of a written warning by Landlord of a similar failure. Examples
of such failures which do not require an opportunity to correct
include, but are not limited to, destruction, damage, or misuse
of Landlords or other Tenant's property by an intentional act or
a subsequent or continued unreasonable disturbance.
3. Except as provided above, Tenant fails to perform any other
obligation under the lease and the default continues for more
than 7 days after delivery of written notice to Tenant from
Landlord specifying the default.
C. Waiver of Default. If Landlord accepts rent knowing of Tenant's
default or accepts performance by Tenant of any provision of the
Lease different from the performance required by the Lease, or If
Tenant pays rent knowing of Landlords default or accepts performance
by Landlord of any provision of the Lease different from the
performance required by the Lease, the party accepting the rent or
performance or making the payment shall not have the right to
terminate the Lease or to bring a lawsuit for that default, but may
enforce any later default.
XV. REMEDIES AND DEFENSES.
A. Tenant's Remedies.
1. If Landlord has defaulted under the Lease and if Tenant has given
Landlord a written notice describing the default and Tenant's
intention to withhold rent if the default is not corrected within 7
days, Tenant may withhold an amount of rent equal to the loss in
rental value caused by the default. If Tenant's notice advises
Landlord that Tenant intends to terminate the lease if the default
is not cured within 7 days and the default is not cured within the 7
days, Tenant may terminate the Lease.
2. If Tenant has given the notice referred to in subparagraph (1)
above, and if Landlord has not corrected the default within 7 days,
Tenant may, in addition to withholding the applicable amount of
rent, file a lawsuit in county court to require Landlord to correct
the default and for damages.
3. If Landlords default makes the Premises uninhabitable, and if Tenant
has given Landlord a notice describing the default and informing
Landlord that Tenant intends to terminate the Lease, then If
Landlord does not cure the default within the 7-day period, Tenant
may terminate the Lease at the end of the 7 days
4. If Landlord violates the provisions of section XII, Landlord shall
be liable to Tenant for actual and consequential damages or 3
months' rent whichever is greater, for each violation.
B. Landlord's Remedies.
1. If Tenant remains on the Premises after expiration or termination of
the Lease without Landlords permission, Landlord may recover
possession of the Premises in the manner provided for by law.
Landlord also may recover double rent for the period during which
Tenant refuses to vacate the Promises.
2. If Tenant defaults under the Lease by failing to pay rent, as set
forth in section XIV(B)(1), Landlord may terminate Tenant's rights
under the Lease and Tenant shall vacate the Premises immediately. If
Tenant defaults under the Lease for any other reason, as set forth
in sections XIV(B)(2) or (3) above, Landlord may terminate Tenant's
rights under the Lease and Tenant shall vacate the Premises within 7
days of delivery of the notice of termination.
3. If Tenant fails to cure a default within the time specified in the
notice to Tenant, Landlord may recover possession of the Premises as
provided by law.
4. Landlord shall not recover possession of the Premises except: a in a
lawsuit for possession b. when Tenant has surrendered possession of
the Premises to Landlord; or c. when Tenant has abandoned the
Premises. Absent actual knowledge of abandonment the Premises shall
be considered abandoned if Tenant is absent from them # for at least
one-half a Rental Installment Period, the rent is not current, and
Tenant has not notified Landlord, in writing, of an intended absence
5. If Tenant has defaulted under the Lease and Landlord has obtained a
writ of possession, if Tenant has surrendered possession of the
Premises to Landlord or it Tenant has abandoned the Premises,
Landlord may: a. treat the Lease as terminated, retake possession
for Landlords own account and any further liability of Tenant will
be ended; b. retake possession of the Premises for Tenant's account.
Tenant will remain liable for the difference between rent agreed to
be paid under the Lease and rent Landlord is able to recover in good
faith from a new tenant; or c. do nothing, and Tenant will be liable
for the rent as it comes due.
6. If Landlord retakes possession of the Premises for Tenant's account,
Landlord must make a good faith effort to re-lease the Premises. Any
rent receive, by Landlord as a result of the new lease, shall be
deducted from the rent due from Tenant For purposes of this section,
"good faith" in trying to re-lease the Premises means that Landlord
shall use at least the same efforts to re-lease the Premises as were
used in the initial rental or at least the same efforts as Landlord
uses in attempting to lease other similar property. It does not
require Landlord to give a preference in leasing the Premises over
other vacant properties that Landlord owns or has the responsibility
to rent.
C. Other Remedies. Each party also my have other remedies available at
law or in equity
D. Defenses. In a lawsuit by Landlord for possession of the Premises based
upon nonpayment of rent or in a lawsuit by Landlord seeking to obtain
unpaid rent Tenant may assert as a defense Landlords failure to perform
required maintenance, as set forth in Section IX(A) above. Landlord's
failure to provide elective maintenance, as set forth in Section IX(B)
above, shall not be a defense to any lawsuit by Landlord for possession of
the Premises unless otherwise provided by the Lease or applicable law
Tenant also may raise any other defense, whether legal or equitable, that
Tenant may have, Including the defense or retaliatory Conduct.
E. Payment of Rent to Court. In any lawsuit by Landlord for possession of the
Premises, if Tenant raises any defense other than payment, Tenant must pay
into the registry of the court the past due rent set forth in Landlords
complaint, or an amount determined by to court, and the rent which comes
due during the lawsuit, as it comes due. Failure of Tenant to pay the rent
into the registry of the court will be a waiver of Tenant's defenses other
than payment.
F. Attorney's Fees. In any lawsuit brought to enforce the Lease or under
applicable law, the party who wins may recover its reasonable court costs
and attorneys fees from the party who loses.
*XVI. ASSIGNMENT AND SUBLEASING. Tenant may / may not assign the Lease or
sublease all or any part of the Premises without first obtaining
Landlord's written approval and consent to the assignment or sublease.
*XVII.RISK OF LOSS. Landlord shall / shall not be liable for any loss by reason
of damage, theft, or otherwise to the contents, belongings, and personal
effects of the Tenant. or Tenant's family, agents, employees, guests. or
visitors located in or about the Premises. or for damage or injury to
Tenant or Tenant's family, agents, employees, guests, or visitors.
Landlord shall not be liable if such damage, theft, or loss is caused by
Tenant, Tenant's family, agents, employee's, guests or visitors. Nothing
contained in this provision shall relieve Landlord or Tenant from
responsibility for loss, damage, or injury caused by its own negligence or
willful conduct.
XVIII.SUBORDINATION. The Lease is subordinate to the lien of any mortgage
encumbering the fee title to the Premises from time to time.
XIV. LIENS. Tenant shall not have the right or authority to encumber the
Premises or to permit any person to claim or assert any lien for the
improvement or repair of the Premises made by Tenant. Tenant shall notify
all parties performing work on the Premises at Tenant's request that the
Lease does not allow any liens to attach to Landlords interest.
*XX. APPROVAL CONTINGENCY. The Lease is/ is not conditioned upon approval of
Tenant by the association that governs the Premises.
XXI. RENEWAL/EXTENSION. The Lease can be renewed or extended only by a written
agreement signed by both Landlord and Tenant. but no renewal may ex tend
the term to a date more then 1 year after the lease begins. A new lease is
required for each year.
CORONADO INDUSTRIES, INC.
1998 STOCK OPTION PLAN
I. PURPOSE
This 1998 Stock Option Plan is intended to aid in maintaining and
developing strong management through encouraging the ownership of common stock
of Coronado Industries, Inc. by employees of and consultants to the Corporation
through stimulating their efforts by giving suitable recognition, in addition to
salaries and bonuses, to their ability and industry which contribute materially
to the success of the Corporation's business interests.
II. DEFINITIONS
In this Plan, except where the context otherwise clearly indicates, the
following definitions apply:
(1) "Board" means the Board of Directors of the Corporation.
(2) "Corporation" means Coronado Industries, Inc., a Nevada corporation, or
any entity that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with Coronado Industries,
Inc.
(3) "Date of Grant" means the date on which the Board approves the grant of
the Option under this Plan to the Optionee.
(4) "Incentive Stock Option" means any Option granted under this Plan which
complies with the provisions of Section 422A of the Internal Revenue Code of
1986, as amended from time to time (herein called the "Code").
(4) "Key Employee" means any employee who is an officer or is employed in a
managerial, professional or other key position (including directors who provide
services beyond the normal activities of a director); provided, however, the
term "Key Employee" shall not include any employee (hereinafter called
"Shareholder Employee") of the Corporation who, at the date of grant, owns more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation (or its parent or subsidiary, if applicable). For the
purposes of this limitation, an employee shall be considered as owning Shares
owned directly or indirectly by or for his brothers and sisters, spouse,
ancestors and lineal descendants; and stock owned directly or indirectly by or
for a corporation, partnership, estate or trust shall be considered as being
owned proportionately by or for its shareholders, partners or beneficiaries.
(5) "Non-Qualified Stock Option" means any Option granted under this Plan
which does not qualify in whole or in part as an "incentive stock option" under
the provisions of Section 422A of the Code.
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(6) "Option" means a common stock option granted pursuant to the Plan.
(7) "Optionee" means a person or entity to whom a common stock option is
granted under this Plan, including, but not limited to, a Key Employee.
(8) "Plan" means this 1998 Stock Option Plan.
(9) "Share" means a share of the $.001 par value common stock of the
Corporation that has been previously authorized but unissued, or issued and
reacquired by the Corporation.
(10) "Value" means the arithmetic mean between the bid and asked price
published by the National Association of Securities Dealers, Inc. (or registered
securities exchange or NASDAQ, if appropriate) of the Shares on the date of
grant, or if not available for that day, then the next earliest preceding day in
which the price is available. If the Shares should become listed on a national
registered securities exchange, then the Value shall be the reported closing
price for the day in question. In all other cases, the Value shall be the fair
market value determined by the method the Board deems reasonable. Value shall be
determined without regard to securities law restrictions, or any other
restriction which by its terms will lapse.
III. TERM OF PLAN
This Plan shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten years unless sooner terminated under
Article XI. This Plan shall remain in effect after its term for the purpose of
administration of any Option granted pursuant to its provisions. No Option
granted during the term of the Plan shall be adversely affected by the end of
the term of this Plan. Options must be granted within ten years of the date on
which the Plan is adopted or the date the Plan is approved by the stockholders,
whichever is earlier.
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IV. SHARES TO BE OPTIONED
The maximum number of Shares which may be optioned and sold under this Plan
is 1,550,000 Shares. If Options granted under this Plan shall terminate or
expire without being wholly exercised, new Options may be granted under this
Plan covering the number of Shares to which such termination or expiration
relates.
V. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the
Corporation, or a committee of Board members, if such is appointed.
VI. INCENTIVE STOCK OPTIONS
One or more Incentive Stock Options may be granted to any Optionee under
this Plan. Each Incentive Stock Option granted under this Article VI shall be
subject to the following conditions except as provided in Article VI(7) below:
(1) The aggregate Value (determined at the time the Incentive Stock Option
is granted) of the Shares for which any Key Employee may be granted Incentive
Stock Options in any calendar year under all Incentive Stock Option plans of the
Corporation shall not exceed $100,000.
(2) The Option price shall be at least one hundred percent (100%) of the
Value of the Share at the date of grant; or, in the case of a Shareholder
Employee as defined in Article II(5), the Option price shall be at least one
hundred ten percent (110%) of the Value of the Share at the Date of Grant.
(3) During the Optionee's lifetime, Incentive Stock Options granted under
this Article VI may not be sold, pledged, assigned or transferred in any manner,
and may be exercised during lifetime only by the Optionee. Any Incentive Stock
Option that is exercisable after the Optionee's death is exercisable by the
person or persons to whom his rights under the Option shall have passed by will
or the laws of descent and distribution.
(4) Each Incentive Stock Option granted under this Article VI shall be
exercised during the period beginning one year from the Date of Grant and ending
on the ten (10) year anniversary of the Date of Grant; provided, however, that a
Shareholder Employee as defined in Article II(5) must exercise each Incentive
Stock Option during the period beginning one year from Date of Grant and ending
on the five (5) year anniversary of the Date of Grant.
(5) An Incentive Stock Option shall be exercised when written notice of
such exercise is given to the Corporation at its principal business office by
the Optionee and full payment for the Shares with respect to which the Option is
exercised has been received by the Corporation. Until the Incentive Stock Option
is properly exercised and the exercise price paid to the Corporation, no right
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to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the optioned Shares notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other rights for which the record
date is prior to the date that the stock certificate is issued. Payment for the
Shares shall be made with cash, previously acquired Shares having a Value equal
to the Option price, or previously acquired Shares having a Value less than the
Option price, plus cash. Upon exercise of an Incentive Stock Option and payment
of the purchase price, the Corporation shall promptly issue the Shares to the
Optionee.
(6) In the event an Optionee who is an Employee of the Corporation who
during his lifetime ceases to be employed by the Corporation for any reason, any
Incentive Stock Option or unexercised portion thereof which was otherwise
exercisable on the date of termination of employment shall expire unless
exercised within a period of three (3) months from the date his employment
terminates, but in no event later than ten (10) years from the Date of Grant. In
the event of the death of an Optionee (who is an employee of the Corporation)
during the three (3) month period, the Incentive Stock Option may be exercised
by the person or persons to whom his rights under the Option passed by will or
laws of descent and distribution to the same extent and during the same period
that the Optionee could have exercised the Incentive Stock Option had the
Optionee not died. If an Optionee dies while employed by the Corporation, any
Option or unexercised portion thereof which was otherwise exercisable at the
time of the Optionee's death may be exercised within twelve (12) months of the
Optionee's death, but in no event later than ten (10) years from the Date of
Grant, by the person or persons to whom his rights under the Option passed by
will or laws of descent of distribution. In the event an Optionee who is an
Employee of the Corporation ceases to be employed by the Corporation because he
has become "disabled" as defined by Section 22(e)3 of the Internal Revenue Code,
as amended, such Optionee may exercise any Option or unexercised portion thereof
within 12 months from the date his employment terminates, but in no event later
than ten (10) years from the Date of Grant. An Optionee's continuous employment
shall not be deemed interrupted by a leave of absence approved by the
Corporation.
(7) All of the above notwithstanding, in the event that any Incentive Stock
Option granted under this Article VI fails to qualify as an incentive stock
option as defined in Section 422A of the Internal Revenue Code of 1954, as
amended, for any reason whatsoever, such option shall automatically, effective
as of the date of grant, be a Non-qualified Stock Option, with the same exercise
terms as originally granted except that all limitations herein which apply to
qualification as an Incentive Stock Option, including but not limited to, terms
concerning employment and valuation, shall be inapplicable.
VII. NON-QUALIFIED STOCK OPTIONS
One or more Non-qualified Stock Options may be granted to any Optionee
under this Plan. Each Non-qualified Stock Option granted under this Article VII
shall be subject to the following conditions:
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(1) The number of Shares which may be acquired pursuant to any
Non-qualified Stock Option or Options granted to an Optionee during any calendar
year shall not exceed 750,000 Shares.
(2) The Option price shall be at least fifty percent (50%) of the Value of
the Share at the Date of Grant.
(3) During the Optionee's lifetime, Non-qualified Stock Options granted
under this Article VII may not be sold, pledged, assigned or transferred in any
manner, and may be exercised during the Optionee's lifetime only by the
Optionee. Any Option that is exercisable after the Optionee's death is
exercisable by the person or persons to whom his rights under the Option shall
have passed by will or the laws of descent and distribution.
(4) Each Non-qualified Stock Option granted under this Article VII shall be
exercised during the period beginning on the Date of Grant and ending on the ten
(10) year anniversary of the Date of Grant.
(5) A Non-qualified Stock Option shall be exercised when written notice of
such exercise is given to the Corporation at its principal business office by
the Optionee and full payment for the Shares with respect to which the option is
exercised has been received by the Corporation. Until the issuance of the stock
certificates, no right to vote or to receive dividends or any other rights as a
stockholder shall exist with respect to the optioned Shares notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other
rights for which the record date is prior to the date that the stock certificate
is issued. Payment for the Shares shall be made with cash, previously acquired
Shares having a Value equal to the Option price, or previously acquired Shares
having a Value less than the Option price, plus cash. Upon exercise of
Non-qualified Stock Option and payment of the purchase price, the Corporation
shall promptly issue the Shares to the Optionee.
(6) In the event an Optionee who is an Employee of the Corporation who
during his lifetime ceases to be employed by the Corporation for any reason, any
Non-qualified Stock Option or unexercised portion thereof which was otherwise
exercisable on the date of termination of employment shall expire unless
exercised within a period of three (3) months from the date his employment
terminates, but in no event later than ten (10) years from the Date of Grant. In
the event of the death of an Optionee (who is an employee of the Corporation)
during the three (3) month period, the Non-qualified Stock Option may be
exercised by the person or persons to whom his rights under the Option passed by
will or laws of descent and distribution to the same extent and during the same
period that the Optionee could have exercised the Non-qualified Stock Option had
the Optionee not died. If an Optionee dies while employed by the Corporation,
any Non-qualified Stock Option or unexercised portion thereof which was
otherwise exercisable at the time of the Optionee's death may be exercised
within twelve (12) months of the Optionee's death, but in no event later than
ten (10) years from the Date of Grant, by the person or persons to whom his
rights under the Option passed by will or laws of descent or distribution. An
Optionee's continuous employment shall not be deemed interrupted by a leave of
absence approved by the Corporation.
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VIII. EXERCISE OF OPTIONS - STOCK APPRECIATION RIGHTS
(1) The Board may by separate agreement, in conjunction with all or part of
any Option granted under the Plan, either at the time of grant of such Option or
at any subsequent time during the term of the Option, permit an Optionee to
exercise the Option in an alternative manner based on the appreciated value of
the Corporation's common stock subject to Option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted to an Optionee who
is an officer of the Corporation shall be exercisable during the twelve month
period following the Date of Grant, except that such limitation shall not apply
in the event of death or physical disability of such Optionee occurring prior to
the expiration of such twelve month period. Stock Appreciation Rights may be
exercised by an Optionee by surrendering the related Option or applicable
portion thereof. Upon such exercise and surrender, the Optionee shall be
entitled to receive the value of such Stock Appreciation Rights determined in
the manner prescribed in this Article VIII. Options which have been so
surrendered, in whole or in part, shall no longer be exercisable.
(2) The agreement evidencing Stock Appreciation Rights shall contain such
terms and conditions not inconsistent with other provisions of the Plan as shall
be determined from time to time by the Board, which may include the following or
the agreement evidencing Stock Appreciation Rights may merely refer to this
Article VIII:
(a) Stock Appreciation Rights shall be exercisable at such time or
times and only to the extent that the Option to which they relate shall be
exercisable.
(b) Upon the exercise of Stock Appreciation Rights, an Optionee shall
be entitled to receive the Value thereof, which Value shall be equal to the
excess of the Value on the date of exercise of one share of common stock over
the Option price per share specified in the related Option multiplied by the
number of Shares in respect of which the Stock Appreciation Rights shall have
been exercised. The Value of Shares on the date of exercise of Stock
Appreciation Rights shall be determined in the same manner as the Value of the
Shares on the Date of Grant of an Option is determined pursuant to Article II(4)
above.
(c) Upon an exercise of Stock Appreciation Rights, the Optionee shall
notify the Corporation of the form in which payment of the value thereof will be
made (i.e., cash, common stock, or any combination thereof); provided however,
in the case of Optionee who is an officer of the Corporation or other person
subject to Section 16(b) of the Securities Exchange Act of 1934, the Board may
at any time impose any limitations upon the exercise of Stock Appreciation
Rights which, in the Board's sole discretion, are necessary or desirable in
order to comply with Section 16(b) and the rules and regulation thereunder, or
in order to obtain any exemption therefrom.
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(3) Upon the exercise of Stock Appreciation Rights, the Option or part
thereof to which such Stock Appreciation Rights is related shall be deemed to
have been exercised for the purpose of the limitation of the number of Shares of
common stock to be issued under the Plan as set forth in Article IV above. Stock
Appreciation Rights shall be deemed exercised on the date written notice of
exercise is received by the secretary of the Corporation.
IX. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Whenever a stock split or stock dividend occurs, (1) the number of Shares
that can thereafter be purchased, and the Option price per Share, under each
Option that has been granted under this Plan and not exercised, and (2) every
number of Shares used in determining whether a particular Option is grantable
thereafter, shall be appropriately adjusted.
X. CORPORATE TRANSACTIONS
(1) If the Corporation is dissolved or liquidated, or is merged or
consolidated into or with another corporation, other than by a merger or
consolidation in which the Company is the surviving corporation, the then
exercisable and unexercised Options granted under the Plan may or may not be
exercisable after the date of such dissolution, liquidation, merger or
consolidation, as determined by the Board at the time of such event or at the
Date of Grant of the Option.
(2) Notwithstanding any provision of this Plan, the Board is authorized to
take such action upon the Date of Grant of an Option or at any time thereafter
as it determines to be necessary or advisable, and fair and equitable to
Optionees, with respect to Options held by Optionees in the event of a sale or
transfer of all or substantially all of the Company's assets, or merger or
consolidation (other than a merger or consolidation in which the Company is the
surviving corporation and no shares are converted into or exchanged for
securities, cash or any other thing of value). Such action may include (but is
not limited to) the following:
(a) Accelerating the exercisability of any Option to permit its
exercise in full during such period as the Committee in its sole discretion
shall prescribe following the public announcement of a sale or transfer of
assets or merger or consolidation.
(b) Permitting an Optionee, at any time during such period as the
Committee in its sole discretion shall prescribe following the consummation of
such a merger, consolidation or sale or transfer of assets, to surrender any
Option (or any portion thereof) to the Company for cancellation.
(c) Requiring any Optionee, at any time following the consummation of
such a merger, consolidation or sale or transfer of assets, if required by the
terms of the agreements relating thereto, to surrender any Option (or any
portion thereof) to the Company in return for a substitute Option which is
issued by the corporation surviving such merger or consolidation or the
corporation which acquired such assets (or by an affiliate of such corporation)
and which the Committee, in its sole discretion, determines to have a value to
the Optionee substantially equivalent to the value to the Optionee of the Option
(or portion thereof) so surrendered.
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(4) Subject to any action which the Committee may take pursuant to the
provisions of this Article X, in the event of any merger, consolidation or sale
or transfer of assets referred to in this Article X, upon any exercise
thereafter of an Option, and Optionee shall, at no additional cost other than
payment of the Option price, be entitled to receive in lieu of Shares, (i) the
number and class of Shares or other security, or (ii) the amount of cash, or
(iii) property, or (iv) a combination of the foregoing, to which the Optionee
would have been entitled pursuant to the terms of such merger, consolidation or
sale or transfer of assets, if immediately prior thereto the Optionee had been
the holder of record of the number of Shares for which such Option shall be so
exercised.
XI. ADDITIONAL PROVISIONS APPLICABLE TO OPTIONS AND CERTAIN POWERS OF THE BOARD
The Board, in addition to any other powers granted it hereunder, shall have
the power, subject to the express provisions of the Plan:
(1) To determine the provisions of the respective Options other than those
provisions expressly stated or limited herein, which terms and provisions may be
set forth in Option agreements:
(2) Without limiting the generality of the foregoing, to provide in Option
agreements, in its discretion:
(a) For an agreement by the Optionee to render services to the
Corporation upon such terms and conditions as shall be specified in the
agreement.
(b) For restrictions on the transfer, sale, or disposition of the
stock to be issued to the Optionee upon the exercise of his Option.
(3) To require, whether or not provided for in the pertinent Option or
Option agreement of any person exercising an Option granted under the Plan, at
the time of such exercise, the execution of any paper or the making of any
representation or the giving of any commitment when the Board shall, in its
discretion, deem necessary or advisable by reason of the securities laws of the
United States or of any State.
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(4) To amend Options previously granted and outstanding under this Plan,
but no amendment to any Option agreement shall be made without the consent of
the Optionee if such amendment would adversely affect the Optionee; and no
amendment shall be made to any Option agreement which would cause the inclusion
therein of any term or provisions inconsistent with the Plan or Section 422A of
the Internal Revenue Code, as amended (if applicable).
(5) To grant Options after the date the Plan is adopted provided the
Options granted are specifically contingent upon approval of this Plan by
holders of a majority of the Corporation's outstanding common stock.
XII. POWER TO AMEND OR TERMINATE THE PLAN
(1) The Board may terminate this Plan at any time, or amend or modify the
Plan without shareholder approval in such respects as it shall deem advisable in
order that Options granted to Key Employees shall be "Incentive Stock Options"
as defined in Section 422A of the Internal Revenue Code of 1954, as amended, or
to conform to any change in the law, or in order to comply with the provisions
of any rule or regulations of the Securities and Exchange Commission or other
applicable governmental agency required to exempt the Plan or any transactions
under this Plan from the operation of Section 16(b) of the Securities Exchange
Act of 1934, as amended, or in any other respect which shall not be inconsistent
with the provisions of Section 422A of the Internal Revenue Code of 1954, as
amended, or Section 16(b) of the Securities Exchange Act of 1934, as amended.
(2) The Board may terminate this Plan. Any termination shall not affect
stock options already granted as those Options shall remain in force and effect
as if this Plan had not been terminated. The termination or any modification or
amendment of this Plan shall not, without the consent of the Optionee, affect
his rights under an Option previously granted to him.
(3) Only with shareholder approval can the Board amend the Plan in the
following areas:
(a) Increasing the maximum number of Shares that may be effectively
optioned, otherwise than through the making of an adjustment pursuant to Article
IX.
(b) Changing the class of employees eligible for Options.
(c) Decreasing the prices at which previously granted Options may be
exercised.
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XIII. STOCKHOLDER APPROVAL
This Plan shall become effective upon receipt by the Corporation of
approval from the holders of a majority of the shares of common stock of the
Corporation entitled to vote thereon. This Plan shall not be effective unless
such consents are obtained within twelve (12) months before or after the Plan is
adopted.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------------
Gary R. Smith, President
ATTEST:
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
Date Approved By Shareholders: December 11, 1998
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CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
Date of Grant: December 21, 1998
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation")
hereby grants to MICHAEL K. HAIR (the "Optionee"), pursuant to the 1998 Stock
Option Plan of the Corporation (the "Plan") which is incorporated herein by
reference, an option to purchase a total of ONE HUNDRED FIFTY THOUSAND (150,000)
Shares as defined in the Plan (the "Option"), on the terms and conditions set
forth in the Plan and hereinafter. This Option shall not be exercisable later
than December 20, 2008 (herein referred to as the "Expiration Date").
1. VESTING. Subject to the terms and conditions of this Agreement, the
Shares subject to this Option shall be fully vested and exercisable as of this
date of grant, December 21, 1998.
2. OPTION PRICE. The Option price for the 150,000 Shares of this Option
shall be $.075 per share.
3. TERMINATION. This option and all rights hereunder to the extent such
rights shall not have been exercised shall terminate and become null and void if
the Optionee ceases to be engaged by the Company or its subsidiaries (whether by
resignation, retirement, dismissal, death or otherwise), except that (a) in the
event of the death or disability of the Optionee while engaged by the Company,
this option only to the extent exercisable at the date of death or disability
may be exercised within the applicable period of time and by the persons
indicated in Article VII (6) of the Plan, and (b) in the event of the
termination of the Optionee's engagement by the Company for any other reason,
this option only to the extent exercisable at the date of such termination may
be exercised prior to the expiration of three (3) months from the date of such
termination, and shall terminate in all other respects; PROVIDED, HOWEVER, that
in no event may this option be exercised after the Expiration Date.
4. EXERCISE. This Option is exercisable with respect to all, or from
time to time with respect to any portion, of the Shares described above which
have at that time become vested, by delivering written notice of such exercise,
in the form prescribed by the Board, to the principal office of the Secretary of
the Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Corporation hereby grants to the Optionee the
right to make payment for the Shares of this Option pursuant to Article VIII of
the Plan (i.e., with Stock Appreciation Rights).
<PAGE>
5. NON-TRANSFERABLE. This Option shall during the Optionee's lifetime
be exercisable only by the Optionee, and neither this Option nor any right
thereunder shall be transferable except by will or laws of descent and
distribution, or be subject to attachment, execution or other similar process.
In the event of any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right thereunder, except
as provided for herein, or in the event of the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Corporation
may terminate this Option by notice to the Optionee and this Option shall
thereupon become null and void.
6. LEGAL RESTRICTIONS. If the sale of the Shares purchased hereunder is
not registered under the Securities Act of 1933, but an exemption is available
which requires an investment or other representation, the Optionee shall
represent and agree at the time of exercise that the Shares being acquired upon
exercising this Option are being acquired for investment, and not with view to
the sale or distribution thereof, and shall make such other representations as
are deemed necessary or appropriate by the Corporation and its counsel. In
addition, the Optionee agrees that the following legend may be included on the
certificate representing the Shares:
The shares represented hereby have not been registered under the United
States Securities Act of 1933, as amended, and may not be sold, pledged, or
otherwise transferred without an effective registration thereof under such act
or an opinion of counsel, satisfactory to the company and its counsel, that such
registration is not required.
7. CORPORATE TRANSACTIONS.
(a) If the Corporation is merged or consolidated into or with another
corporation (other than by a merger or consolidation in which the Corporation is
the surviving corporation) or the Corporation or the Corporation's assets are
purchased by another company in exchange for stock, the Corporation shall give
the Optionee written notice of the Corporation's initial or preliminary
agreement to the transaction and the details of the transaction at least 60 days
prior to the closing of the transaction and an additional 30 days written notice
prior to the closing date of the transaction and each postponed closing date of
the transaction. The then exercisable but unexercised Shares granted in the
Option may be exercised by the Optionee at any time prior to the closing date of
the transaction and such exercised Shares shall then be deemed outstanding at
the close of the transaction.
2
<PAGE>
8. MISCELLANEOUS.
(a) Neither the granting of this Option nor the exercise thereof shall
be construed as conferring upon the Optionee any right to continue in the
engagement of the Corporation or any of its subsidiaries, or as interfering with
or restricting in any way the right of the Corporation to terminate such
engagement at any time.
(b) Neither the Optionee, nor any person entitled to exercise his
rights in the event of his death, shall have any of the rights of a stockholder
with respect to the Shares subject to this Option, except after such date the
Optionee or such person has been issued the Shares by the Corporation or its
agent.
(c) The Corporation is relieved from any liability for the non-issuance
or non-transfer or any delay in the issuance or transfer of any Shares subject
to this Option which results from the inability of the Corporation to obtain, or
in any delay in obtaining, from each regulatory body having jurisdiction all
requisite authority to issue or transfer Shares of the Corporation in
satisfaction of this Option if counsel for the Corporation deems such authority
necessary for the lawful issuance or transfer of any such shares.
(d) No Shares acquired by exercise of this Option shall be sold or
otherwise disposed of in violation of any federal or state securities law or
regulation in the Untied States.
(e) This Option shall be exercised in accordance with such
administrative regulations as the Corporation's Board may from time to time
adopt. All decisions of the Board upon any legitimate question arising under the
Plan or under this Stock Option Agreement shall be conclusive and binding upon
the Optionee and all other persons, if determined in good faith.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed as of
the day and year first written above.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------------
Gary R. Smith, President
ATTEST:
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
3
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
Date of Grant: December 21, 1998
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation")
hereby grants to DR. LEO D. BORES (the "Optionee"), pursuant to the 1998 Stock
Option Plan of the Corporation (the "Plan") which is incorporated herein by
reference, an option to purchase a total of TWO HUNDRED THOUSAND (200,000)
Shares as defined in the Plan (the "Option"), on the terms and conditions set
forth in the Plan and hereinafter. This Option shall not be exercisable later
than December 20, 2008 (herein referred to as the "Expiration Date").
1. VESTING. Subject to the terms and conditions of this Agreement, the
Shares subject to this Option shall be fully vested and exercisable as of this
date of grant, December 21, 1998.
2. OPTION PRICE. The Option price for the 200,000 Shares of this Option
shall be $.075 per share.
3. TERMINATION. This option and all rights hereunder to the extent such
rights shall not have been exercised shall terminate and become null and void if
the Optionee ceases to be a employee of the Company or its subsidiaries (whether
by resignation, retirement, dismissal, death or otherwise), except that (a) in
the event of the death or disability of the Optionee while an employee of the
Company, this option only to the extent exercisable at the date of death or
disability may be exercised within the applicable period of time and by the
persons indicated in Article VII (6) of the Plan, and (b) in the event of the
termination of the Optionee's employment by the Company for any other reason,
this option only to the extent exercisable at the date of such termination may
be exercised prior to the expiration of three (3) months from the date of such
termination, and shall terminate in all other respects; PROVIDED, HOWEVER, that
in no event may this option be exercised after the Expiration Date.
4. EXERCISE. This Option is exercisable with respect to all, or from
time to time with respect to any portion, of the Shares described above which
have at that time become vested, by delivering written notice of such exercise,
in the form prescribed by the Board, to the principal office of the Secretary of
the Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Corporation hereby grants to the Optionee the
right to make payment for the Shares of this Option pursuant to Article VIII of
the Plan (i.e., with Stock Appreciation Rights).
<PAGE>
5. NON-TRANSFERABLE. This Option shall during the Optionee's lifetime
be exercisable only by the Optionee, and neither this Option nor any right
thereunder shall be transferable except by will or laws of descent and
distribution, or be subject to attachment, execution or other similar process.
In the event of any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right thereunder, except
as provided for herein, or in the event of the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Corporation
may terminate this Option by notice to the Optionee and this Option shall
thereupon become null and void.
6. LEGAL RESTRICTIONS. If the sale of the Shares purchased hereunder is
not registered under the Securities Act of 1933, but an exemption is available
which requires an investment or other representation, the Optionee shall
represent and agree at the time of exercise that the Shares being acquired upon
exercising this Option are being acquired for investment, and not with view to
the sale or distribution thereof, and shall make such other representations as
are deemed necessary or appropriate by the Corporation and its counsel. In
addition, the Optionee agrees that the following legend may be included on the
certificate representing the Shares:
The shares represented hereby have not been registered under the United
States Securities Act of 1933, as amended, and may not be sold, pledged, or
otherwise transferred without an effective registration thereof under such act
or an opinion of counsel, satisfactory to the company and its counsel, that such
registration is not required.
7. CORPORATE TRANSACTIONS.
(a) If the Corporation is merged or consolidated into or with another
corporation (other than by a merger or consolidation in which the Corporation is
the surviving corporation) or the Corporation or the Corporation's assets are
purchased by another company in exchange for stock, the Corporation shall give
the Optionee written notice of the Corporation's initial or preliminary
agreement to the transaction and the details of the transaction at least 60 days
prior to the closing of the transaction and an additional 30 days written notice
prior to the closing date of the transaction and each postponed closing date of
the transaction. The then exercisable but unexercised Shares granted in the
Option may be exercised by the Optionee at any time prior to the closing date of
the transaction and such exercised Shares shall then be deemed outstanding at
the close of the transaction.
2
<PAGE>
8. MISCELLANEOUS.
(a) Neither the granting of this Option nor the exercise thereof shall
be construed as conferring upon the Optionee any right to continue in the
engagement of the Corporation or any of its subsidiaries, or as interfering with
or restricting in any way the right of the Corporation to terminate such
engagement at any time.
(b) Neither the Optionee, nor any person entitled to exercise his
rights in the event of his death, shall have any of the rights of a stockholder
with respect to the Shares subject to this Option, except after such date the
Optionee or such person has been issued the Shares by the Corporation or its
agent.
(c) The Corporation is relieved from any liability for the non-issuance
or non-transfer or any delay in the issuance or transfer of any Shares subject
to this Option which results from the inability of the Corporation to obtain, or
in any delay in obtaining, from each regulatory body having jurisdiction all
requisite authority to issue or transfer Shares of the Corporation in
satisfaction of this Option if counsel for the Corporation deems such authority
necessary for the lawful issuance or transfer of any such shares.
(d) No Shares acquired by exercise of this Option shall be sold or
otherwise disposed of in violation of any federal or state securities law or
regulation in the Untied States.
(e) This Option shall be exercised in accordance with such
administrative regulations as the Corporation's Board may from time to time
adopt. All decisions of the Board upon any legitimate question arising under the
Plan or under this Stock Option Agreement shall be conclusive and binding upon
the Optionee and all other persons, if determined in good faith.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed as of
the day and year first written above.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------------
Gary R. Smith, President
ATTEST:
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
3
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
Date of Grant: December 21, 1998
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation")
hereby grants to DR. JOHN T. LIVECCHI (the "Optionee"), pursuant to the 1998
Stock Option Plan of the Corporation (the "Plan") which is incorporated herein
by reference, an option to purchase a total of FOUR HUNDRED THOUSAND (400,000)
Shares as defined in the Plan (the "Option"), on the terms and conditions set
forth in the Plan and hereinafter. This Option shall not be exercisable later
than December 20, 2008 (herein referred to as the "Expiration Date").
1. VESTING. Subject to the terms and conditions of this Agreement, the
Shares subject to this Option shall be fully vested and exercisable as of this
date of grant, December 21, 1998.
2. OPTION PRICE. The Option price for the 400,000 Shares of this Option
shall be $.05 per share.
3. TERMINATION. This option and all rights hereunder to the extent such
rights shall not have been exercised shall terminate and become null and void if
the Optionee ceases to be a employee of the Company or its subsidiaries (whether
by resignation, retirement, dismissal, death or otherwise), except that (a) in
the event of the death or disability of the Optionee while an employee of the
Company, this option only to the extent exercisable at the date of death or
disability may be exercised within the applicable period of time and by the
persons indicated in Article VII (6) of the Plan, and (b) in the event of the
termination of the Optionee's employment by the Company for any other reason,
this option only to the extent exercisable at the date of such termination may
be exercised prior to the expiration of three (3) months from the date of such
termination, and shall terminate in all other respects; PROVIDED, HOWEVER, that
in no event may this option be exercised after the Expiration Date.
4. EXERCISE. This Option is exercisable with respect to all, or from
time to time with respect to any portion, of the Shares described above which
have at that time become vested, by delivering written notice of such exercise,
in the form prescribed by the Board, to the principal office of the Secretary of
the Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Corporation hereby grants to the Optionee the
right to make payment for the Shares of this Option pursuant to Article VIII of
the Plan (i.e., with Stock Appreciation Rights).
<PAGE>
5. NON-TRANSFERABLE. This Option shall during the Optionee's lifetime
be exercisable only by the Optionee, and neither this Option nor any right
thereunder shall be transferable except by will or laws of descent and
distribution, or be subject to attachment, execution or other similar process.
In the event of any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right thereunder, except
as provided for herein, or in the event of the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Corporation
may terminate this Option by notice to the Optionee and this Option shall
thereupon become null and void.
6. LEGAL RESTRICTIONS. If the sale of the Shares purchased hereunder is
not registered under the Securities Act of 1933, but an exemption is available
which requires an investment or other representation, the Optionee shall
represent and agree at the time of exercise that the Shares being acquired upon
exercising this Option are being acquired for investment, and not with view to
the sale or distribution thereof, and shall make such other representations as
are deemed necessary or appropriate by the Corporation and its counsel. In
addition, the Optionee agrees that the following legend may be included on the
certificate representing the Shares:
The shares represented hereby have not been registered under the United
States Securities Act of 1933, as amended, and may not be sold, pledged, or
otherwise transferred without an effective registration thereof under such act
or an opinion of counsel, satisfactory to the company and its counsel, that such
registration is not required.
7. CORPORATE TRANSACTIONS.
(a) If the Corporation is merged or consolidated into or with another
corporation (other than by a merger or consolidation in which the Corporation is
the surviving corporation) or the Corporation or the Corporation's assets are
purchased by another company in exchange for stock, the Corporation shall give
the Optionee written notice of the Corporation's initial or preliminary
agreement to the transaction and the details of the transaction at least 60 days
prior to the closing of the transaction and an additional 30 days written notice
prior to the closing date of the transaction and each postponed closing date of
the transaction. The then exercisable but unexercised Shares granted in the
Option may be exercised by the Optionee at any time prior to the closing date of
the transaction and such exercised Shares shall then be deemed outstanding at
the close of the transaction.
2
<PAGE>
8. MISCELLANEOUS.
(a) Neither the granting of this Option nor the exercise thereof shall
be construed as conferring upon the Optionee any right to continue in the
engagement of the Corporation or any of its subsidiaries, or as interfering with
or restricting in any way the right of the Corporation to terminate such
engagement at any time.
(b) Neither the Optionee, nor any person entitled to exercise his
rights in the event of his death, shall have any of the rights of a stockholder
with respect to the Shares subject to this Option, except after such date the
Optionee or such person has been issued the Shares by the Corporation or its
agent.
(c) The Corporation is relieved from any liability for the non-issuance
or non-transfer or any delay in the issuance or transfer of any Shares subject
to this Option which results from the inability of the Corporation to obtain, or
in any delay in obtaining, from each regulatory body having jurisdiction all
requisite authority to issue or transfer Shares of the Corporation in
satisfaction of this Option if counsel for the Corporation deems such authority
necessary for the lawful issuance or transfer of any such shares.
(d) No Shares acquired by exercise of this Option shall be sold or
otherwise disposed of in violation of any federal or state securities law or
regulation in the Untied States.
(e) This Option shall be exercised in accordance with such
administrative regulations as the Corporation's Board may from time to time
adopt. All decisions of the Board upon any legitimate question arising under the
Plan or under this Stock Option Agreement shall be conclusive and binding upon
the Optionee and all other persons, if determined in good faith.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed as of
the day and year first written above.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------------
Gary R. Smith, President
ATTEST:
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
3
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
Date of Grant: December 21, 1998
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation")
hereby grants to GARY R. SMITH (the "Optionee"), pursuant to the 1998 Stock
Option Plan of the Corporation (the "Plan") which is incorporated herein by
reference, an option to purchase a total of FOUR HUNDRED THOUSAND (400,000)
Shares as defined in the Plan (the "Option"), on the terms and conditions set
forth in the Plan and hereinafter. This Option shall not be exercisable later
than December 20, 2008 (herein referred to as the "Expiration Date").
1. VESTING. Subject to the terms and conditions of this Agreement, the
Shares subject to this Option shall be fully vested and exercisable as of this
date of grant, December 21, 1998.
2. OPTION PRICE. The Option price for the 400,000 Shares of this Option
shall be $.05 per share.
3. TERMINATION. This option and all rights hereunder to the extent such
rights shall not have been exercised shall terminate and become null and void if
the Optionee ceases to be a employee of the Company or its subsidiaries (whether
by resignation, retirement, dismissal, death or otherwise), except that (a) in
the event of the death or disability of the Optionee while an employee of the
Company, this option only to the extent exercisable at the date of death or
disability may be exercised within the applicable period of time and by the
persons indicated in Article VII (6) of the Plan, and (b) in the event of the
termination of the Optionee's employment by the Company for any other reason,
this option only to the extent exercisable at the date of such termination may
be exercised prior to the expiration of three (3) months from the date of such
termination, and shall terminate in all other respects; PROVIDED, HOWEVER, that
in no event may this option be exercised after the Expiration Date.
4. EXERCISE. This Option is exercisable with respect to all, or from
time to time with respect to any portion, of the Shares described above which
have at that time become vested, by delivering written notice of such exercise,
in the form prescribed by the Board, to the principal office of the Secretary of
the Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Corporation hereby grants to the Optionee the
right to make payment for the Shares of this Option pursuant to Article VIII of
the Plan (i.e., with Stock Appreciation Rights).
<PAGE>
5. NON-TRANSFERABLE. This Option shall during the Optionee's lifetime
be exercisable only by the Optionee, and neither this Option nor any right
thereunder shall be transferable except by will or laws of descent and
distribution, or be subject to attachment, execution or other similar process.
In the event of any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right thereunder, except
as provided for herein, or in the event of the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Corporation
may terminate this Option by notice to the Optionee and this Option shall
thereupon become null and void.
6. LEGAL RESTRICTIONS. If the sale of the Shares purchased hereunder is
not registered under the Securities Act of 1933, but an exemption is available
which requires an investment or other representation, the Optionee shall
represent and agree at the time of exercise that the Shares being acquired upon
exercising this Option are being acquired for investment, and not with view to
the sale or distribution thereof, and shall make such other representations as
are deemed necessary or appropriate by the Corporation and its counsel. In
addition, the Optionee agrees that the following legend may be included on the
certificate representing the Shares:
The shares represented hereby have not been registered under the United
States Securities Act of 1933, as amended, and may not be sold, pledged, or
otherwise transferred without an effective registration thereof under such act
or an opinion of counsel, satisfactory to the company and its counsel, that such
registration is not required.
7. CORPORATE TRANSACTIONS.
(a) If the Corporation is merged or consolidated into or with another
corporation (other than by a merger or consolidation in which the Corporation is
the surviving corporation) or the Corporation or the Corporation's assets are
purchased by another company in exchange for stock, the Corporation shall give
the Optionee written notice of the Corporation's initial or preliminary
agreement to the transaction and the details of the transaction at least 60 days
prior to the closing of the transaction and an additional 30 days written notice
prior to the closing date of the transaction and each postponed closing date of
the transaction. The then exercisable but unexercised Shares granted in the
Option may be exercised by the Optionee at any time prior to the closing date of
the transaction and such exercised Shares shall then be deemed outstanding at
the close of the transaction.
2
<PAGE>
8. MISCELLANEOUS.
(a) Neither the granting of this Option nor the exercise thereof shall
be construed as conferring upon the Optionee any right to continue in the
engagement of the Corporation or any of its subsidiaries, or as interfering with
or restricting in any way the right of the Corporation to terminate such
engagement at any time.
(b) Neither the Optionee, nor any person entitled to exercise his
rights in the event of his death, shall have any of the rights of a stockholder
with respect to the Shares subject to this Option, except after such date the
Optionee or such person has been issued the Shares by the Corporation or its
agent.
(c) The Corporation is relieved from any liability for the non-issuance
or non-transfer or any delay in the issuance or transfer of any Shares subject
to this Option which results from the inability of the Corporation to obtain, or
in any delay in obtaining, from each regulatory body having jurisdiction all
requisite authority to issue or transfer Shares of the Corporation in
satisfaction of this Option if counsel for the Corporation deems such authority
necessary for the lawful issuance or transfer of any such shares.
(d) No Shares acquired by exercise of this Option shall be sold or
otherwise disposed of in violation of any federal or state securities law or
regulation in the Untied States.
(e) This Option shall be exercised in accordance with such
administrative regulations as the Corporation's Board may from time to time
adopt. All decisions of the Board upon any legitimate question arising under the
Plan or under this Stock Option Agreement shall be conclusive and binding upon
the Optionee and all other persons, if determined in good faith.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed as of
the day and year first written above.
CORONADO INDUSTRIES, INC.
By: /s/ G. Richard Smith
---------------------------
G. Richard Smith, Chairman
3
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
Date of Grant: December 21, 1998
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation")
hereby grants to G. RICHARD SMITH (the "Optionee"), pursuant to the 1998 Stock
Option Plan of the Corporation (the "Plan") which is incorporated herein by
reference, an option to purchase a total of FOUR HUNDRED THOUSAND (400,000)
Shares as defined in the Plan (the "Option"), on the terms and conditions set
forth in the Plan and hereinafter. This Option shall not be exercisable later
than December 20, 2008 (herein referred to as the "Expiration Date").
1. VESTING. Subject to the terms and conditions of this Agreement, the
Shares subject to this Option shall be fully vested and exercisable as of this
date of grant, December 21, 1998.
2. OPTION PRICE. The Option price for the 400,000 Shares of this Option
shall be $.05 per share.
3. TERMINATION. This option and all rights hereunder to the extent such
rights shall not have been exercised shall terminate and become null and void if
the Optionee ceases to be a employee of the Company or its subsidiaries (whether
by resignation, retirement, dismissal, death or otherwise), except that (a) in
the event of the death or disability of the Optionee while an employee of the
Company, this option only to the extent exercisable at the date of death or
disability may be exercised within the applicable period of time and by the
persons indicated in Article VII (6) of the Plan, and (b) in the event of the
termination of the Optionee's employment by the Company for any other reason,
this option only to the extent exercisable at the date of such termination may
be exercised prior to the expiration of three (3) months from the date of such
termination, and shall terminate in all other respects; PROVIDED, HOWEVER, that
in no event may this option be exercised after the Expiration Date.
4. EXERCISE. This Option is exercisable with respect to all, or from
time to time with respect to any portion, of the Shares described above which
have at that time become vested, by delivering written notice of such exercise,
in the form prescribed by the Board, to the principal office of the Secretary of
the Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Corporation hereby grants to the Optionee the
right to make payment for the Shares of this Option pursuant to Article VIII of
the Plan (i.e., with Stock Appreciation Rights).
<PAGE>
5. NON-TRANSFERABLE. This Option shall during the Optionee's lifetime
be exercisable only by the Optionee, and neither this Option nor any right
thereunder shall be transferable except by will or laws of descent and
distribution, or be subject to attachment, execution or other similar process.
In the event of any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right thereunder, except
as provided for herein, or in the event of the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Corporation
may terminate this Option by notice to the Optionee and this Option shall
thereupon become null and void.
6. LEGAL RESTRICTIONS. If the sale of the Shares purchased hereunder is
not registered under the Securities Act of 1933, but an exemption is available
which requires an investment or other representation, the Optionee shall
represent and agree at the time of exercise that the Shares being acquired upon
exercising this Option are being acquired for investment, and not with view to
the sale or distribution thereof, and shall make such other representations as
are deemed necessary or appropriate by the Corporation and its counsel. In
addition, the Optionee agrees that the following legend may be included on the
certificate representing the Shares:
The shares represented hereby have not been registered under the United
States Securities Act of 1933, as amended, and may not be sold, pledged, or
otherwise transferred without an effective registration thereof under such act
or an opinion of counsel, satisfactory to the company and its counsel, that such
registration is not required.
7. CORPORATE TRANSACTIONS.
(a) If the Corporation is merged or consolidated into or with another
corporation (other than by a merger or consolidation in which the Corporation is
the surviving corporation) or the Corporation or the Corporation's assets are
purchased by another company in exchange for stock, the Corporation shall give
the Optionee written notice of the Corporation's initial or preliminary
agreement to the transaction and the details of the transaction at least 60 days
prior to the closing of the transaction and an additional 30 days written notice
prior to the closing date of the transaction and each postponed closing date of
the transaction. The then exercisable but unexercised Shares granted in the
Option may be exercised by the Optionee at any time prior to the closing date of
the transaction and such exercised Shares shall then be deemed outstanding at
the close of the transaction.
2
<PAGE>
8. MISCELLANEOUS.
(a) Neither the granting of this Option nor the exercise thereof shall
be construed as conferring upon the Optionee any right to continue in the
engagement of the Corporation or any of its subsidiaries, or as interfering with
or restricting in any way the right of the Corporation to terminate such
engagement at any time.
(b) Neither the Optionee, nor any person entitled to exercise his
rights in the event of his death, shall have any of the rights of a stockholder
with respect to the Shares subject to this Option, except after such date the
Optionee or such person has been issued the Shares by the Corporation or its
agent.
(c) The Corporation is relieved from any liability for the non-issuance
or non-transfer or any delay in the issuance or transfer of any Shares subject
to this Option which results from the inability of the Corporation to obtain, or
in any delay in obtaining, from each regulatory body having jurisdiction all
requisite authority to issue or transfer Shares of the Corporation in
satisfaction of this Option if counsel for the Corporation deems such authority
necessary for the lawful issuance or transfer of any such shares.
(d) No Shares acquired by exercise of this Option shall be sold or
otherwise disposed of in violation of any federal or state securities law or
regulation in the Untied States.
(e) This Option shall be exercised in accordance with such
administrative regulations as the Corporation's Board may from time to time
adopt. All decisions of the Board upon any legitimate question arising under the
Plan or under this Stock Option Agreement shall be conclusive and binding upon
the Optionee and all other persons, if determined in good faith.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed as of
the day and year first written above.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
---------------------------
Gary R. Smith, President
3
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