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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, 1999
[ ] 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
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
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, 1999
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............................................... 12
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................................... 17
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. 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.
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 $563,000) as the
major expense of preparing the clinical studies which may be required for FDA
product approval.
Dr. John LiVecchi, a Registrant Director, and Dr. Leo Bores, an employee,
have been asked to address to different medical conventions of ophthalmologists
in April 2000 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., will manufacture
and sell 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
executed a second confidentiality agreement with one additional potential
distributor for exclusive worldwide distribution rights. In 1999 Ophthalmic
International executed a third confidentiality agreement with a third potential
worldwide distributor. 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.
In December 1999, Dr. Leo Bores demonstrated the PNT procedure on some 29
Chinese citizens in four different cities in China. Registrant has entered into
a verbal arrangement with a distributor of the PNT products for China.
Registrant expects Dr. Bores and the Chinese distributor to return to China
during the summer of 2000 for the purpose of securing an initial order from the
Chinese government.
In February 2000, Dr. Bores addressed a representaive of the ministers of
health for various European countries at European Parliament in Brussels,
Belgium. Dr. Bores answered questions concerning the PNT device and its effects
on glaucoma. He turned over Registrant's study data to be presented to the
Ministry of Health in each country in the Euro-Pac. Registrant hopes, without
assurance, to commence selling units to European hospitals and physicians during
2000.
The Registrant expects its distributors will purchase the vacuum equipment
for approximately $5,000-$10,000 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%.
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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.
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 intended on opening one treatment center during 1999 in the
Clearwater, Florida area. 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. In January
2000, Registrant postponed the concept of opening a Florida treatment center due
to working capital constraints.
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 approved 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 product 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 made a submission to
the FDA in April 1999 that was intended to provide the agency with detailed
information addressing many of the concerns expressed by the FDA at the February
1999 meeting. This submission did not satisfy the FDA with respect to the
patient risk associated with the clinical use of the PNT product.
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In February 1999, the FDA requested more information be submitted on
patients treated to date with the PNT product. In September 1999, the FDA
demanded Registrant submit a new clinical protocol for additional patient
studies. Since December 1999, Registrant has been in discussion with the FDA
concerning the details of the requested protocol for additional patient studies.
There is no assurance Registrant will ever be able to negotiate a protocol for
this additional patient study, or Registrant will be able to fund the new
patient study, if ever agreed upon. Therefore, there can be no assurance
Registrant's PNT products will ever receive FDA approval for sale in the United
States.
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 studies. 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 studies 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. However, as of March 3, 2000, the FDA is maintaining that the
PNT product presents "significant risk" to patients and is requiring the
additional patient study proceed under "significant risk" criteria.
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.
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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.
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
has paid 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.
FUTURE ACQUISITIONS
In February 2000, Registrant announced plans to seek out acquisitions in
the medical and other industries. Registrant intends to acquire companies or
assets which provide cash flow to Registrant immediately. Registrant will
attempt to finance such acquisitions with cash from the exercise of its
outstanding warrants or with its common stock. However, there is no assurance
that Registrant will be able to complete any acquisition in the future.
EMPLOYEES
In addition to its two officers, the Registrant has engaged two persons as
full-time consultants 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 1999, 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 was 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 which it exercised in June, 1999 and subsequently sold this
building for a net gain of approximately $107,000.
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, 1999. However, in February 2000, Registrant was
served with a demand for arbitration in San Diego, California by a former public
relations firm of Registrant. This firm claims a monetary debt of approximately
$19,000 and the issuance of 300,000 shares of Registrant's common stock.
Registrant does not deny the monetary debt, but claims the written agreement
with this public relations firm includes no provision for the issuance of
Registrant's stock. At this time there can be no assurance of the outcome of
this arbitration.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During calendar year 1999 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 bulletin board 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 1998 and 1999, by fiscal quarter, and through March 15, 2000.
Low High
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January 1, 1999 - March 31, 1999 $0.17 $0.59
April 1, 1999 - June 30, 1999 $0.15 $0.70
July 1, 1999 - September 30, 1999 $0.125 $0.39
October 1, 1999 - December 31, 1999 $0.125 $0.25
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, 2000 - March 15, 2000 $0.15 $4.00
In February 2000, Registrant announced plans to have its common stock
listed for trading on the Hamburg, Germany exchange. Its common stock is also
traded on the Frankfurt, Germany exchange. Registrant will attempt to have its
common stock listed for trading on the NASDAQ National Market System or the
NASDAQ Small Cap System at such time as its stock price becomes stabilized at
the appropriate price - $5.00 and $4.00 per share, respectively.
HOLDERS. The Registrant has approximately 480 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 16, 2000, there were
34,803,084 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. Registrant may register the shares of common stock underlying
the Warrants in the near future in the event Registrant's stock price indicates
a substantial number of Warrants would be exercised.
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.
11
<PAGE>
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
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. At this time the Company believes the risks to its
operations from a Year 2000 problem are minimal.
YEAR ENDING DECEMBER 31, 1999
OPERATIONS. Since Registrant closed its Scottsdale glaucoma treatment
center on March 2, 1999, there is no complete year or quarter of the 1999 fiscal
year to compare to the prior year's operations.
For the year ending December 31, 1999 Registrant experienced a net loss of
$1,171,734, which was comprised primarily of a net loss from the Scottsdale
treatment clinic of $99,613, its general and administrative expenses incurred at
the corporate level of $1,122,361 and a net gain from the sale of the Scottsdale
treatment center building of $108,500. The Registrant had a net loss from
operations of $1,221,974 for the year ending December 31, 1999. 58.1% of
Registrant's 1999 corporate expenses consisted of officers salaries of $300,000
(26.7%), professional expenses of $221,224 (19.7%) and shareholder services and
media promotion of $131,305 (11.7%). In comparison, during the 1998 fiscal year
70.0% of Registrant's corporate expense of $1,386,892 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 management salaries to
increase in 2000 because in March 2000 Dr. LiVecchi was granted an annual salary
of $75,000 and Registrant will be required to appoint as many as two new outside
Directors in 2000 in order to obtain listing for its stock on the NASD NMS or
Small Cap markets. Registrant expects its professional expenses in 2000 to
remain at a high level as a result of its continuing costs for its FDA
application presently estimated at $15,000 per month. As Registrant continues
its foreign marketing efforts in 2000, its promotional expenses will likely
remain high.
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 were 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>
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).
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 is
hopeful, without any assurance, that the right physician will be able to make
the Clearwater treatment center much more profitable than the Scottsdale center.
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 general and administrative
expenses totaling approximately $1,200,000 per year, the Registrant suffered
from a liquidity shortage during 1999. On May 4, 1999 Registrant obtained a loan
of $270,000 from a third party, bearing an annual interest rate of 18% and
secured by Registrant's equipment, inventory and accounts receivable, a security
deposit of $40,000 from the loan proceeds and the personal guaranty of
Registrant's Chairman, G. Richard Smith. In June 1999 Registrant arranged for
the sale of the building in which its Scottsdale treatment center had previously
operated. Registrant received $108,500 of net proceeds from this sale.
Even with the May 1999 loan and the June 1999 building sale, Registrant was
required to borrow a total of $68,800 through December 31, 1999 from its two
officers, Richard and Gary Smith. Unless substantial product sales are achieved
in the near future, Registrant will continue to experience a liquidity shortage.
There can be no assurance as to when Registrant's product will be approved for
sale in the United States by the FDA or when foreign sales will commence in a
substantial manner. There is no assurance Registrant will be able to obtain any
financing in the future.
13
<PAGE>
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 financing in 2000 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.
As a result of the presentation of the Registrant's patented equipment at
the various conventions of ophthalmologists in 1998 and 1999, the Registrant has
held discussions with potential distributors for the Registrant's product in the
U.S. and internationally on a non-exclusive and an exclusive basis. The
Registrant expects negotiations on one or more U.S. and European distribution
agreements to continue throughout 2000; however, there is no assurance that any
distribution contracts will ever be executed by the Registrant.
As of March 1, 2000 Registrant had warrants for over 1,800,000 shares of
Registrant's common stock held be some 25 individuals as a result of
Registrant's 1997 and 1998 private placements. These warrants have an exercise
price of $2.50 and an expiration date of December 31, 2000. Registrant is
hopeful that a substantial number of these warrants will be exercised in the
second half of 2000, if the stock underlying the warrants can be registered with
the SEC and the market price of Registrant's stock can rise above and remain at
$4.00 per share.
Registrant is hopeful it can acquire one or more assets or companies in
2000 which can provide Registrant with cashflow with which to fund its
operations. Registrant would attempt to finance such acquisitions with cash from
the exercise of outstanding warrants or with its common stock. However, there is
no assurance that Registrant will be able to complete any acquisition in the
future. Additionally, compliance with state and federal securities laws may make
any attempted acquisitions time-consuming and expensive.
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 February through April 1999 the Registrant received loans totaling
$40,000 from each of G. Richard Smith and Gary R. Smith, the Registrant's
Chairman and President, respectively. These loans accrued annual interest at the
rate of 15% and were repaid in May 1999. During the second half of 1999
Registrant received loans totaling $68,800 from G. Richard Smith and Gary R.
Smith. These loans accrue annual interest at the rate of 15%.
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.
14
<PAGE>
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.
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,
1999 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 51, 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 55, 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.
John T. LiVecchi, age 51, 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.
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<PAGE>
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 $695,000. This company was sold for a multiple of its net income.
Messrs. Smith, Smith and LiVecchi sold SCMD to devote their efforts to the
development of the glaucoma treatment process and equipment, which they felt
could be more profitable than the turbine keratome.
KEY EMPLOYEE
Dr. Leo Bores, as the former Medical Director of the Registrant's
Scottsdale glaucoma treatment center, is a key employee of the Registrant. Dr.
Bores received a B.S. degree in Biochemistry and Biology in 1958 from Wayne
State University. Dr. Bores received his degree from the Wayne State University
College of Medicine in 1962 and he served his internship at Harper Hospital in
Detroit, Michigan in 1962 and 1963. Dr. Bores was a resident in Ophthalmology
from 1963 to 1968 and was certified by the American Board of Ophthalmology in
1969. Dr. Bores is internationally known for his contributions to the
development of radial keratotomy ("RK"). In 1994, Dr. Bores received the 1st
Annual Award for outstanding scientific contributions to eye microsurgery. In
1995 Dr. Bores became the 12th recipient of the Innovators in Ophthalmology
Award from the American Society for Cataract and Refractive Surgery for
outstanding contributions in ophthalmic surgery. Prior to joining the Registrant
in July 1997 Dr. Bores owned and operated The Bores Eye Institute in Scottsdale,
Arizona, practicing ophthalmic surgery and specializing in RK for approximately
10 years.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the salaries of the Registrant's three
directors for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation ---------------------------------
------------------------------------ Securities Awards Payouts
Name and Other Restricted Underlying ---------- ---------------
Principal Annual Stock Options/ LTIP All Other
Position Year Salary($) Bonus($) Compensation($) Awards($) SARS(#) Payouts($) Compensation($)
- -------- ---- --------- -------- --------------- --------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Richard Smith, 1999 $ 0(1) -- $ 0 -- 400,000(2) -- --
Chairman 1998 $ 0 -- $125,000(3) -- 500,000(4) -- --
Gary R. Smith, 1999 $ 0(1) -- $ 0 -- 400,000(2) -- --
President 1998 $ 0 -- $125,000(3) -- 500,000(4) -- --
John LiVecchi 1999 $ 0 -- -- -- 400,000(2) -- --
Director 1998 $ 0 -- -- -- 400,000(5) -- --
</TABLE>
- ----------
(1) An annual salary of $150,000 was accrued but not paid to G. Richard Smith
and Gary R. Smith during 1999.
(2) These options were awarded in December 1998, have a ten-year term and an
exercise price of $.05 per share.
(3) $100,000 of accrued salary for 1998 and $20,000 of salary accrued from 1997
was paid to each 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 1996.
(4) These options were awarded in November 1999, have a five-year term, may not
be exercised until November 2000 and have an exercised price of $.20 per
share.
(5) These options were awarded in November 1999, have a five-year term, may not
be exercised until November 2000 and have an exercise price of $.20 per
share.
17
<PAGE>
In August 1999, Dr. Bores commenced serving the Registrant as a consultant
for the annual salary of $120,000. In March 2000, the Board of Directors
approved an annual salary of $75,000 for Dr. LiVecchi to commence on April 1,
2000, although this salary will not be paid until Registrant's cash flow
condition improves.
STOCK OPTION PLANS
In December 1998, the Registrant's Board of Directors adopted The 1998
Stock Option Plan (the "1998 Option Plan") and 1,550,000 shares were reserved
for issuance thereunder. The 1998 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 in 1998. In February 2000, Dr. Bores exercised all of his options.
In November 1999, the Registrant's Board of Directors adopted The 1999
Employee Stock Option Plan (the "1999 Employee Option Plan") and 575,000 shares
were reserved for issuance thereunder. The 1999 Employee Option Plan is
structured to allow the Board of Directors discretion in creating equity
incentives to key employees and professional consultants for the purpose of
assisting the Registrant in motivating and retaining appropriate talent. On
November 3, 1999, the Registrant granted options for a total of 575,000 shares
of Registrant's common stock. These options have ten-year terms and may be
exercised at any time after one year from the date of grant until 3 months after
termination of employment, except if the optionee dies while employed, the
option may be exercised by the optionee's beneficiary. Dr. Leo Bores was granted
an option for 300,000 shares with an exercise price of $.20 per share. A
consultant to the Registrant received an option for 150,000 shares at $.20 per
share and three additional independent contractors received options for a total
of 125,000 shares at $.20 per share. These options may not be exercised until
November 3, 2000.
In November 1999, the Registrant's Board of Directors adopted The 1999
Management Stock Option Plan (the "1999 Management Option Plan") and 1,400,000
shares were reserved for issuance thereunder. The 1999 Management Option Plan is
structured to allow the Board of Directors discretion in creating equity
incentives to Directors for the purpose of assisting the Registrant in
motivating and retaining appropriate talent. On November 3, 1999, the Registrant
granted options for a total of 1,400,000 shares of Registrant's common stock.
These options have ten-year terms (except for 10% shareholders who only have
five-year terms) and may be exercised at any time after one year from the date
of grant until 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
18
<PAGE>
whereby the option may be exercised by redeeming the appreciated value of the
option and without cash being paid by the optionee. The following individuals
received options for the following number of shares at the indicated option
price: G. Richard Smith, 500,000 shares at $.20; Gary R. Smith, 500,000 shares
at $.20 and Dr. John T. LiVecchi, 400,000 shares at $.20. These options may not
be exercised until November 3, 2000.
The Registrant currently has no pension, retirement, annuity, savings or
similar benefit plan which provides compensation to its executive officers or
directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of March 16, 2000 there were 34,803,084 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 8,595,012 (1) 24.7%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock G. Richard Smith 8,992,612 (2) 25.8%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock John T. LiVecchi 1,670,000 (3) 4.8%
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Common Stock Officers and Directors, as a 19,257,624 (4) 55.3%
Group (3 People)
- ----------
(1) Does not include 900,000 shares of stock which may be purchased by Mr.
Smith under the Registrant's Stock Option Plans. In the event Mr. Smith
purchased all of those shares, Mr. Smith would own 26.6% of the
Registrant's total outstanding shares.
(2) Does not include 900,000 shares of stock which may be purchased by Mr.
Smith under the Registrant's Stock Option Plans. In the event Mr. Smith
purchased all of those shares, Mr. Smith would own 27.7% of the
Registrant's total outstanding shares.
(3) Does not include 800,000 shares of stock which may be purchased by Dr.
LiVecchi under the Registrant's Stock Option Plans. In the event Dr.
LiVecchi purchased all of those shares, Dr. LiVecchi would own 6.9% of the
Registrant's total outstanding shares.
(4) Does not include a total of 2,600,000 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 Plans. In the event Messrs.
Smith, Smith and LiVecchi purchased all of those shares, they would
collectively own 58.4% 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. In June 1999,
Registrant exercised its option to purchase this building for $400,000 cash,
from Dr. Bores.
During 1999 G. Richard Smith loaned Registrant a total of $82,500, of which
$36,800 was repaid in May, 1999. These loans bear 15% annual interest rate. At
December 31, 2000 G. Richard Smith was owed $53,700. Through March 15, 2000 G.
Richard Smith had loaned an additional $116,000 to Registrant on the same terms.
During 1999 Gary R. Smith loaned Registrant a total of $35,000 of which $11,900
was repaid in May, 1999. These loan bear 15% annual interest rate. At December
31, 2000 Gary R. Smith was owed $26,260. Through March 15, 2000 Gary R. Smith
had loaned an additional $116,000 to Registrant on the same terms. 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 1999 Management Stock Option Plan
10.2 1999 Employee Stock Option Plan
10.3 Form of 1999 Management Stock Option Agreement
10.4 Form of 1999 Employee Stock Option Agreement
27 Financial Data Schedule
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 27, 2000 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 27, 2000
- ------------------------- Officer), Secretary and
G. Richard Smith Director
/s/ Gary R. Smith President, Dated: March 27, 2000
- ------------------------- 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, 1999. 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>
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, 1999, and the related consolidated
statements of operations, changes in stockholders' equity (deficit), and cash
flows for the years ended December 31, 1999 and 1998. 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, 1999, and the results of its operations, changes in
stockholders' equity (deficit), and its cash flows for the years ended December
31, 1999 and 1998 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 10 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 20, 2000
F-1
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 3,454
Inventory (Notes 1 and 9) 24,265
-----------
Total Current Assets 27,719
Property and Equipment, Net (Notes 1, 2 and 9) 115,767
Other Assets:
Intangible assets, net (Notes 1 and 3) 28,833
Deferred loan expenses 26,000
-----------
Total Assets $ 198,319
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 94,252
Notes payable - related parties (Note 4) 79,960
Accrued salaries 276,090
Other liabilities 2,835
-----------
Total Current Liabilities 453,137
Long-Term Liabilities:
Note payable (Note 9) 230,000
-----------
Total Liabilities 683,137
-----------
Commitments: (Note 7) --
Stockholders' Equity (Deficit): (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, 33,385,046 shares issued and outstanding 33,385
Additional paid-in capital 3,170,378
Accumulated deficit (3,688,581)
-----------
Total Stockholders' Equity (Deficit) (484,818)
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 198,319
===========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-2
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
Revenues $ 74,005 $ 292,788
Cost of Revenues 173,618 512,969
------------ ------------
Gross Loss (99,613) (220,181)
General and Administrative Expenses 1,122,361 1,386,892
------------ ------------
Loss from Operations (1,221,974) (1,607,073)
------------ ------------
Other Income (Expense):
Interest expense (35,780) (15,007)
Interest income 25 --
Other miscellaneous expense (22,505) --
Other Income 108,500 66
------------ ------------
Total Other Income (Expense) 50,240 (14,941)
------------ ------------
Net Loss $ (1,171,734) $ (1,622,014)
============ ============
Basic Loss per Share (Note 1) $ (.04) $ (.08)
============ ============
Weighted Average Shares Outstanding 32,208,146 20,741,858
============ ============
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-3
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<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, 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
Stock issued for services 1,017,357 1,017 245,939 -- 246,956
Stock issued for salaries 807,513 807 124,233 -- 125,040
Options and warrants issued for
services -- -- 21,280 -- 21,280
Net loss -- -- -- (1,171,734) (1,171,734)
---------- ------- ---------- ----------- -----------
Balance at December 31, 1999 33,385,046 $33,385 $3,170,378 $(3,688,581) $ (484,818)
========== ======= ========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-4
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
Cash Flows from Operating Activities:
Cash received from customers $ 243,910 $ 239,258
Cash paid to suppliers and employees (551,505) (1,249,697)
Interest paid (35,780) --
Interest received 25 --
----------- -----------
Net cash used by operating activities (343,350) (1,010,439)
----------- -----------
Cash Flows from Investing Activities:
Purchase of fixed assets -- (26,666)
----------- -----------
Net cash used by investing activities -- (26,666)
----------- -----------
Cash Flows from Financing Activities:
Repayment of notes payable -- (310,477)
Cash received from sale of stock -- 1,318,795
Proceeds from debt 309,960 --
----------- -----------
Net cash provided by financing activities 309,960 1,008,318
----------- -----------
Net decrease in cash and cash equivalents (33,390) (28,787)
Cash and cash equivalents at beginning of year 36,844 65,631
----------- -----------
Cash and cash equivalents at end of year $ 3,454 $ 36,844
=========== ===========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-5
<PAGE>
CORONADO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
Reconciliation of Net Loss to Net Cash
Used by Operating Activities:
Net loss $(1,171,734) $(1,622,014)
----------- -----------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 28,669 31,632
Amortization 3,756 3,756
Stock issued for services 246,956 547,962
Interest added to principal of notes
payable -- 15,007
Stock options issued for services 21,280 186,235
Stock issued for salaries 125,040 --
Changes in Assets and Liabilities:
Accounts receivable
- trade 61,405 (53,596)
- other -- 3,999
Inventory 600 18,166
Prepaid expenses 22,490 82,010
Deferred loan expenses (26,000) --
Accounts payable 65,263 (47,701)
Accrued salaries 276,090 (153,673)
Other liabilities 2,835 (22,222)
----------- -----------
828,384 611,575
----------- -----------
Net Cash Used by Operating Activities $ (343,350) $(1,010,439)
=========== ===========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-6
<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 its 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.
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-7
<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 loss
to common stockholders by the weighted average number of common shares
outstanding for the period. Assumed exercise of the outstanding stock
options and warrants at December 31, 1999 and 1998 of 5,430,023 and
3,355,023, respectively, have been excluded from the calculation of basic
net loss per common share as their effect is antidilutive. In addition, as
the Company has a net loss available to common stockholders for the years
ended December 31, 1999 and 1998 the diluted EPS calculation has been
excluded from the financial statements.
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)
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.
Advertising:
Advertising costs are charged to operations when incurred. Advertising
costs for the years ended December 31, 1999 and 1998 were $26,050 and
$120,102, respectively.
Revenue Recognition:
The Company recognizes revenues on the accrual basis, when the procedures
are performed, or equipment is delivered.
Stock Based Compensation:
The Company has elected to follow Accounting Principals Board Opinion No.
25, Accounting for Stock Issued to Employees (APB No. 25) and the related
interpretations in accounting for its employee stock options. Under APB No.
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.
2. PROPERTY AND EQUIPMENT:
At December 31, 1999, 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 (89,399)
--------
Net property and equipment $115,767
========
Depreciation expense was $28,669 and $31,632, for the years ended December
31, 1999 and 1998, respectively.
F-9
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 1999 and 1998 was $3,756 and $3,756,
respectively.
4. RELATED PARTY TRANSACTIONS:
Notes Payable - Related Parties:
As of December 31, 1999, notes payable - related parties consist of various
15% notes to two principal stockholders. The combined balance at December
31, 1999 is $79,960. These notes are considered short-term in nature.
5. STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock and Common Stock Warrants:
100,000 common stock warrants valued at $2,830 were issued for financing
fees in 1999, with an exercise price of $2.00 per share, exercisable
through May 4, 2002.
1,805,023 common stock warrants were issued in conjuction with stock
offerings in 1998, with an exercise price of $2.50 per share, exercisable
through December 31, 2000.
None of the above 1,905,023 common stock warrants have been exercised as of
December 31, 1999. They are all currently exercisable.
Employee Stock Options and Stock Plans:
On November 3, 1999, the Board of Directors approved the 1999 Coronado
Industries, Inc. Employee Stock Option Plan. The Plan authorizes the
Company to grant stock options to key employees of and consultants for the
Company. Under the above Plan, 575,000 shares of common stock are reserved
for issuance.
F-10
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
Employee Stock Options and Stock Plans: (Continued)
A summary of the activity of the Plan follows:
Weighted
Average
Number Exercise
Of Options Price
---------- --------
Outstanding at December 31, 1998 -- $ --
Granted 575,000 0.20
------- ------
Outstanding at December 31, 1999 575,000 $ 0.20
======= ======
Additional information about outstanding options to purchase the Company's
common stock as of December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------
Weighted
Average Weighted
Remaining Average
Exercise Number Contractual Weighted Average Exercise
Price of Shares Life (in years) Exercise Price No. of Shares Price
----- --------- --------------- -------------- ------------- -----
$ .20 575,000 9.84 $ .20 575,000 $ .20
On November 3, 1999, the Board of Directors approved the 1999 Coronado
Industries, Inc. Management Stock Option Plan. The Plan authorizes the
Company to grant stock options to key employees of and consultants for the
Company. Under the above Plan, 1,400,000 shares of common stock are
reserved for issuance.
A summary of the activity of the Plan follows:
Number Weighted Average
of Options Exercise Price
---------- --------------
Outstanding at December 31, 1998 -- $ --
Granted 1,400,000 0.20
--------- ------
Outstanding at December 31, 1999 1,400,000 $ 0.20
========= ======
F-11
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
Employee Stock Options and Stock Plans: (Continued)
Additional information about outstanding options to purchase the Company's
common stock as of December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------
Weighted
Average Weighted
Remaining Average
Exercise Number Contractual Weighted Average Exercise
Price of Shares Life (in years) Exercise Price No. of Shares Price
----- --------- --------------- -------------- ------------- -----
$ .20 1,400,000 6.24 $.20 1,400,000 $ .20
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. A summary of
the activity of the Plan follows:
Number Weighted Average
of Options Exercise Price
---------- --------------
Outstanding at December 31, 1998 2,050,000 $ 0.34
Forfeited (500,000) (1.25)
--------- ------
Outstanding at December 31, 1999 1,550,000 $ 0.05
========= ======
Additional information about outstanding options to purchase the Company's
common stock as of December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------
Weighted
Average Weighted
Remaining Average
Exercise Number Contractual Weighted Average Exercise
Price of Shares Life (in years) Exercise Price No. of Shares Price
----- --------- --------------- -------------- ------------- -----
$ .20 1,550,000 9.84 $ .20 1,550,000 $ .20
F-12
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
Employee Stock Options and Stock Plans: (Continued)
The stock options issued to employees have an exercise price not less than
the fair market value of the Company's common stock on the date of grant.
In accordance with accounting for such options utilizing the intrinsic
value method, there is no related compensation expense recorded in the
Company's financial statements for the years ended December 31, 1999 and
1998. Had compensation cost for stock-based compensation been determined
based on the fair value of the options at the grant dates consistent with
the method of SFAS 123, the Company's net loss for the years ended December
31, 1999 and 1998 would have been increased to the pro forma amounts
presented below:
1999 1998
----------- ------------
Net loss:
As reported $(1,171,734) $(1,622,014)
=========== ===========
Loss per share $ (.04) $ (.08)
=========== ===========
Pro forma $(1,396,209) $(1,622,014)
=========== ===========
Loss per share $ (.04) $ (.08)
=========== ===========
The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following
weighted average assumptions for all grants, expected life of options of
five (5) to ten (10) years, risk-free interest rates of eight percent (8%),
and a zero percent (0%) dividend yield. The weighted average fair value at
date of grant for options granted during the years ended December 31, 1999
and 1998 approximated $.12 and $.10, respectively.
6. INCOME TAXES:
As of December 31, 1999, the components of deferred income taxes are as
follows:
Long-term Deferred Tax Assets (Liabilities):
Net operating loss carryforwards $ 877,000
Depreciation and amortization (12,000)
---------
865,000
Less: valuation allowance (865,000)
---------
Net Long-term Deferred Tax Asset $ --
=========
Based on the weight of available evidence, the Company has provided a full
valuation allowance on its deferred tax asset at December 31, 1999.
F-13
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES: (CONTINUED)
As of December 31, 1999, the Company has net operating loss carryforwards
available to offset future federal and state taxable income in the amounts
of $3,553,753 and $3,451,427, respectively, and expiring as follows:
Net Loss Carryforward Year of Expiration
----------------------------------- ------------------
Year Amount Available
---- -------------------------
Federal State Federal State
---------- ---------- ------- -----
1993 $ 37,195 $ -- 2008 --
1994 65,131 -- 2009 --
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
1999 1,201,118 1,201,118 2014 2004
---------- ----------
$3,553,753 $3,451,427
========== ==========
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 years ended December 31, 1999 and 1998, rent expense under
the aforementioned non-cancellable operating lease agreements was $69,324
and $20,234, respectively.
Future minimum payments due under the operating lease agreements, are as
follows:
Year Ending
December 31, Amount
------------ --------
2000 $ 53,784
2001 37,470
--------
$ 91,254
========
F-14
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 1999, these non-cash activities are as
follows:
1,824,870 shares of common stock were issued for services and
salaries, which were valued at $371,996.
250,000 stock options and warrants were issued to non-employees for
services, which are valued at $21,280.
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 in the total amount of $7,911.
8,866,334 shares of common stock were issued for services and accrued
salaries, which were valued at $547,962.
9. NOTE PAYABLE:
At December 31, 1999, note payable consists of the following:
Note payable to TLD Funding Group with monthly
interest payments of $4,050, with principal
due on May 4, 2002, interest imputed at 18%
per annum; secured by equipment and inventory. $ 230,000
=========
10. 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
March 2, 1999.
In addition, the Company has incurred net losses of $1,171,734 and
$1,622,014 in 1999 and 1998, respectively. Unaudited information subsequent
to December 31, 1999, indicates that the losses are continuing.
F-15
<PAGE>
CORONADO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. GOING CONCERN: (CONTINUED)
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
CORONADO INDUSTRIES, INC.
1999 MANAGEMENT STOCK OPTION PLAN
I. PURPOSE
This 1999 Management 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.
<PAGE>
(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.
(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 1999 Management 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 XII. 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.
IV. SHARES TO BE OPTIONED
The maximum number of Shares which may be optioned and sold under this Plan
is 1,400,000 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.
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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.
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(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
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
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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:
(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
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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.
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
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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.
(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
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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.
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(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.
(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:
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(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.
(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.
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(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.
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.
ATTEST:
By: /s/ Gary R. Smith
------------------------------------
Gary R. Smith, President
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
Date Approved By Shareholders: November 3, 1999
11
CORONADO INDUSTRIES, INC.
1999 EMPLOYEE STOCK OPTION PLAN
I. PURPOSE
This 1999 Employee 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,
<PAGE>
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.
(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 1999 Employee 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 575,000 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.
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(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
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.
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(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:
(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
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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.
VIII. 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.
6
<PAGE>
IX. 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.
7
<PAGE>
(4) Subject to any action which the Committee may take pursuant to the
provisions of this Article IX, in the event of any merger, consolidation or sale
or transfer of assets referred to in this Article IX, 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.
X. 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.
(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
8
<PAGE>
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.
XI. 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 VIII.
(b) Changing the class of employees eligible for Options.
(c) Decreasing the prices at which previously granted Options may be
exercised.
9
<PAGE>
XII. 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.
ATTEST:
By: /s/ Gary R. Smith
------------------------------------
Gary R. Smith, President
/s/ G. Richard Smith
- ---------------------------
G. Richard Smith, Secretary
Date Approved By Shareholders: November 3, 1999
10
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1999 MANAGEMENT STOCK OPTION PLAN
Date of Grant: November 3, 1999
CONSULT YOUR PERSONAL TAX ADVISOR: SUBSTANTIAL TAX CONSE- QUENCES WILL
RESULT FROM YOUR EXERCISE OF THIS STOCK OPTION
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation") hereby
grants to _____________ (the "Optionee"), pursuant to the 1999 Management Stock
Option Plan of the Corpora- tion (the "Plan") which is incorporated herein by
reference, an option to purchase a total of _________________ 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 November 2,
2009 (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, November 3, 1999.
2. OPTION PRICE. The Option price for the __________ Shares of this Option
shall be $.20 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, retire- ment, 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
<PAGE>
Corporation. Each such notice shall be accompanied by payment in full of the
Option price of such Shares. The Board of Directors may grant 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).
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 representa- tions 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
2
<PAGE>
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.
8. TAX CONSEQUENCES.
This Stock Option is intended as an "Incentive Stock Option" under Section
422A of the Internal Revenue Code of 1986, as amended. Substantial tax
consequences are involved in the decision to exercise this Option. Therefore,
the Optionee should consult with and seek advice from his personal tax
consultant prior to exercising this Option.
9. 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
3
<PAGE>
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
4
CORONADO INDUSTRIES, INC.
STOCK OPTION AGREEMENT
UNDER 1999 EMPLOYEE STOCK OPTION PLAN
Date of Grant: November 3, 1999
CONSULT YOUR PERSONAL TAX ADVISOR: SUBSTANTIAL TAX CONSE- QUENCES WILL
RESULT FROM YOUR EXERCISE OF THIS STOCK OPTION
CORONADO INDUSTRIES, INC., a Nevada corporation (the "Corporation") hereby
grants to___________________(the "Optionee"), pursuant to the 1999 Employee
Stock Option Plan of the Corporation (the "Plan") which is incorporated herein
by reference, an option to purchase a total of_________________ 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 November
2, 2009 (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, November 3, 1999.
2. OPTION PRICE. The Option price for the _________ Shares of this Option
shall be $.20 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, retire- ment, 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 VI (6) of the Plan, and (b) in the event of the
termination of the Optionee's employ- ment 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
<PAGE>
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.
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 representa- tions 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
2
<PAGE>
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.
8. TAX CONSEQUENCES.
This Stock Option is intended as an "Incentive Stock Option" under Section
422A of the Internal Revenue Code of 1986, as amended. Substantial tax
consequences are involved in the decision to exercise this Option. Therefore,
the Optionee should consult with and seek advice from his personal tax
consultant prior to exercising this Option.
9. 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.
3
<PAGE>
(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
4
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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0
0
<COMMON> 33,385
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<TOTAL-LIABILITY-AND-EQUITY> 198,319
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