U.S. Securities and Exchange Commission
Washington D. C., 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from__________ to ___________.
Commission file number 0-20924
-------
RECONDITIONED SYSTEMS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
ARIZONA 86-0576290
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
444 WEST FAIRMONT, TEMPE, ARIZONA 85282
----------------------------------------
(Address of principal executive offices)
480-968-1772
--------------------------
(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 to such filing requirements for the past 90 days. Yes [X] No [ ].
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as of November 9, 1999, the number of
shares outstanding of the Registrant's common stock was 1,348,031.
Transitional Small Business Disclosure Format. Yes [ ] No [X].
<PAGE>
ITEM 1
PART 1 - FINANCIAL STATEMENTS
RECONDITIONED SYSTEMS, INC.
UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
2
<PAGE>
RECONDITIONED SYSTEMS, INC.
BALANCE SHEETS
September 30, 1999 and 1998
(Unaudited)
1999 1998
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,523,570 $ 836,411
Accounts receivable - trade, net of allowance
for doubtful accounts of $35,000 and
$27,250, respectively 1,391,598 1,426,217
Inventory 857,161 793,735
Prepaid expenses and other current assets 79,620 57,065
----------- -----------
TOTAL CURRENT ASSETS 3,851,949 3,113,428
----------- -----------
PROPERTY AND EQUIPMENT, NET: 220,661 152,945
----------- -----------
OTHER ASSETS:
Notes receivable - officers 75,000 150,000
Refundable deposits 13,036 13,930
Other 37,190 24,661
----------- -----------
125,226 188,591
----------- -----------
TOTAL ASSETS $ 4,197,836 $ 3,454,964
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 0 $ 13,248
Accounts payable 425,516 422,477
Customer deposits 103,411 38,356
Accrued severance charges 292,984 0
Accrued expenses and other current liabilities 332,193 276,552
----------- -----------
Total current liabilities 1,154,104 750,633
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000,000 shares
shares authorized $ 4,587,586 $ 4,586,982
Accumulated deficit (1,224,532) (1,882,651)
----------- -----------
3,363,054 2,704,331
Less: treasury stock, 125,785 and 0 shares
respectively, at cost (319,322) 0
----------- -----------
3,043,732 2,704,331
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,197,836 $ 3,454,964
=========== ===========
3
<PAGE>
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Three and Six Month Periods Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 2,458,090 $ 3,121,374 $ 4,755,886 $ 5,774,466
Cost of sales 1,834,247 2,451,134 3,551,262 4,479,916
----------- ----------- ----------- -----------
Gross profit 623,843 670,240 1,204,624 1,294,550
Selling & administrative expenses 427,823 435,879 850,962 828,763
Severance charge (Note 3) 292,984 0 292,984 0
----------- ----------- ----------- -----------
Income (Loss) from operations (96,964) 234,361 60,678 465,787
Other income (expense):
Interest income 19,078 11,153 35,246 21,594
Interest expense 0 (408) 0 (1,047)
Other 156 1,124 156 2,443
----------- ----------- ----------- -----------
Net income (loss) $ (77,730) $ 246,230 $ 96,080 $ 488,777
=========== =========== =========== ===========
Basic earnings (loss) per share (Notes 1
and 2) $ (0.06) $ 0.17 $ 0.07 $ 0.33
=========== =========== =========== ===========
Basic weighted average number
of shares outstanding 1,399,441 1,473,950 1,428,837 1,473,950
=========== =========== =========== ===========
Diluted earnings (loss) per common
and common equivalent share
(Notes 1 and 2) $ (0.06) $ 0.14 $ 0.06 $ 0.29
=========== =========== =========== ===========
Diluted weighted average number
of shares outstanding 1,399,441 1,700,481 1,632,524 1,696,210
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Year Ended March 31, 1999 and the Six Month Period Ended
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
| COMMON COMMON
| STOCK STOCK COMMON RETAINED
| SHARES SHARES STOCK EARNINGS TREASURY
| ISSUED OUTSTANDING AMOUNT (DEFICIT) STOCK TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
|
BALANCE AT |
MARCH 31, 1998 | 1,473,950 1,473,950 $4,586,982 $(2,367,674) $ (3,754) $2,215,554
|
RETIREMENT OF |
TREASURY SHARES | (134) (134) -- (3,754) 3,754 --
|
NET INCOME | -- -- -- 1,050,816 -- 1,050,816
|--------------------------------------------------------------------------------------
|
BALANCE AT |
MARCH 31, 1999 | 1,473,816 1,473,816 $4,586,982 $(1,320,612) $ -- $3,266,370
|
PURCHASE OF |
TREASURY SHARES | -- (127,000) -- -- (322,212) (322,212)
|
TRANSFER OF |
SHARES TO ESOP |
PLAN | -- 1,215 604 -- 2,890 3,494
|
NET INCOME | -- -- -- 96,080 -- 96,080
|--------------------------------------------------------------------------------------
|
BALANCE AT |
SEPTEMBER 30, 1999 | 1,473,816 1,348,031 $4,587,586 $(1,224,532) $(319,322) $3,043,732
|======================================================================================
</TABLE>
5
<PAGE>
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Three and Six Month Periods Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and cash equivalents provided by
operating activities $ 294,171 $ 183,102 $ 665,451 $ 168,601
Cash and cash equivalents used by investing
activities (39,885) (32,560) (63,988) (45,577)
Cash and cash equivalents used by financing
activities (9,968) (9,912) (181,218) (19,644)
----------- ----------- ----------- -----------
Increase in cash and cash equivalents 244,318 140,630 420,245 103,380
Cash and cash equivalents at beginning of
period 1,279,252 695,781 1,103,325 733,031
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,523,570 $ 836,411 $ 1,523,570 $ 836,411
=========== =========== =========== ===========
</TABLE>
Non-cash Investing and Financing Activities:
During the quarter ended September 30, 1999, the Company recognized investing
and financing activities that affected its assets, liabilities and stockholders'
equity, but did not result in cash receipts or payments.
These non-cash activities are as follows:
The Company relieved a note receivable and accrued interest totaling
$80,484 as part of a severance agreement with its former President and CEO
(see Note 3).
6
<PAGE>
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION:
The unaudited financial statements include only the accounts and
transactions of the Company.
INTERIM FINANCIAL STATEMENTS:
The unaudited interim financial statements include all adjustments
(consisting of normal recurring accruals) which, in the opinion of
management, are necessary in order to make the financial statements
not misleading. Operating results for the three and six months ended
September 30, 1999 are not necessarily indicative of the results that
may be expected for the entire year ending March 31, 2000. These
financial statements have been prepared in accordance with the
instructions to Form 10-QSB and do not contain certain information
required by generally accepted accounting principles. These statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the year ended March
31, 1999.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Basic earnings (loss) per share include no dilution and are computed
by dividing income (loss) available to common stockholders by the
weighted average number of shares outstanding for the period.
Diluted earnings (loss) per share amounts are computed based on the
weighted average number of shares actually outstanding plus the shares
that would be outstanding assuming the exercise of dilutive stock
options, all of which are considered to be common stock equivalents.
The number of shares that would be issued from the exercise of stock
options has been reduced by the number of shares that could have been
purchased from the proceeds at the average market price of the
Company's stock. Diluted loss per common and common equivalent share
for the three month period ended September 30, 1999 is not presented
as it is antidilutive.
7
<PAGE>
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 2.
EARNINGS (LOSS) PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC EPS
Net Income (Loss) $ (77,730) $ 246,230 $ 96,080 $ 488,777
=========== =========== =========== ===========
Weighted average number of shares outstanding 1,399,441 1,473,950 1,428,837 1,473,950
Basic earnings (loss) per share $ (0.06) $ 0.17 $ 0.07 $ 0.33
=========== =========== =========== ===========
DILUTED EPS
Net Income (Loss) $ (77,730) $ 246,230 $ 96,080 $ 488,777
=========== =========== =========== ===========
Weighted average number of shares outstanding 1,399,441 1,473,950 1,428,837 1,473,950
Effect of dilutive securities:
Stock options 0 226,531 203,687 222,260
----------- ----------- ----------- -----------
Total common shares + assumed conversions 1,399,441 1,700,481 1,632,524 1,696,210
=========== =========== =========== ===========
Per Share Amount $ (0.06) $ 0.14 $ 0.06 $ 0.29
=========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3.
SEVERANCE CHARGES
- --------------------------------------------------------------------------------
Effective September 30, 1999, the Board of Directors entered into a Severance
Agreement with and accepted the resignation of Wayne R. Collignon, the Company's
President and Chief Executive Officer (CEO). Under the terms of this agreement,
the Company agreed to pay Mr. Collignon $430,484 in exchange for 50,000 shares
of the Company's Common Stock and options to purchase 100,000 shares of the
Company's Common Stock held by Mr. Collignon. The agreement is payable in one
installment of $260,000 due November 10, 1999, a final payment of $90,000 due on
January 3, 2000 and through the relief of a note and interest receivable owed by
Mr. Collignon to the Company. In addition, Mr. Collignon has the option to
remain a consultant to the Company through January 3, 2000 for which he will be
paid $3,846.15 bi-weekly.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this report that are not historical facts may
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
These forward-looking statements involve risks and uncertainties, including, but
not limited to, the risk of increased competition from "budget" newly
manufactured product-lines, the risk that the Company may not be able to
successfully diversify its operations, the risk that the Company may not see
increased sales and profitability, and the risk that the stock market may not
recognize the Company's positive financial results and potential for future
prospects. In addition, the Company's business, operations and financial
condition are subject to substantial risks that are described in the Company's
reports and statements filed from time to time with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1999.
RESULTS OF OPERATIONS
SALES REVENUE
Sales for the three month period ended September 30, 1999 (hereinafter the
"reporting quarter") were $2,458,090, a decrease of $663,284 or 21.3% over the
three month period ended September 30, 1998 (hereinafter the "comparable
quarter"). Sales for the six months ended September 30, 1999 (hereinafter the
"reporting period") totaled $4,755,886, down $1,018,580 or 17.6% over the six
month period ended September 30, 1998 (hereinafter the "comparable period").
These decreases were primarily due to lower wholesale sales.
Wholesale sales for the reporting quarter were down $526,397 or 26% over the
comparable quarter and down $849,137 or 23.2% for the reporting period in
contrast to the comparable period. Management has responded to these lower sales
by implementing a new wholesale pricing structure designed to increase the
Company's competitive position against the new "budget" newly manufactured
product-lines. Initial response to this new pricing structure has been positive.
Sales within the Phoenix retail market during the reporting quarter decreased
12.5% or $136,887 over the comparable quarter. The Company experienced an 8%
decrease in retail sales for the reporting period as compared to the comparable
period. These decreases were primarily due to fewer sales personnel in the
reporting period versus during the comparable period. In addition, demolition
and remodeling of the Company's retail showroom during the reporting quarter
presented certain challenges to the retail sales staff and may have had a slight
impact on retail sales.
GROSS MARGIN
The Company's gross profit margin for the reporting quarter was 25.4%, as
compared to 21.5% for the comparable quarter, a 3.9% improvement. The gross
margin for the reporting period was 25.3% versus 22.4% in the comparable period,
a 2.9% improvement. These improvements were primarily attributable to an
increased percentage of retail versus wholesale sales and lower product costs.
Retail sales comprised 39% of total sales during the reporting quarter and 41%
during the reporting period, up 4% from the comparable quarter and comparable
period, respectively. As retail margins are typically higher than those charged
on wholesale sales, this change in the retail/wholesale mix accounts for a
portion of the improved margins. In addition, increased supply of used Haworth
product available on the aftermarket has driven the Company's product costs
down, further improving gross margins.
9
<PAGE>
OPERATING EXPENSES
The Company's selling and administrative expenses increased from 14% of sales in
the comparable quarter to 17.4% for the reporting quarter and from 14.35% in the
comparable period to 17.9% for the reporting period. These increases are
primarily a result of fixed costs and lower sales volume, and the development of
the Company's new retail sales program.
Beginning July 1, 1999, the Company instituted its new retail sales expansion
program. The Company hired a sales manager, added additional sales personnel and
began tenant improvements to its existing facility which included remodeling and
expansion of the Company's showroom and office space. Following the completion
of the showroom in October, 1999, the retail unit began doing business under the
new name of "Total Office Interiors." The new retail showroom features the
Company's remanufactured Haworth workstations, as well as an expanded
product-line, including new workstations manufactured by Teknion and a complete
line of new chairs, desks, filing and other case products. Management believes
the new d.b.a. will attract a larger group of consumers and position the Company
as a complete office furniture dealer.
SEVERANCE CHARGES
Effective September 30, 1999, the Board of Directors entered into a Severance
Agreement with and accepted the resignation of Wayne R. Collignon, the Company's
President and Chief Executive Officer (CEO). Under the terms of this agreement,
the Company agreed to pay Mr. Collignon $430,484 in exchange for all of the
Company's Common Stock and options held by Mr. Collignon. The agreement is
payable in one installment of $260,000 due November 10, 1999, a final payment of
$90,000 due on January 3, 2000 and through the relief of a note and interest
receivable owed by Mr. Collignon to the Company. In addition, Mr. Collignon has
the option to remain a consultant to the Company through January 3, 2000 for
which he will be paid $3,846.15 bi-weekly.
Scott W. Ryan, Chairman of the Board, assumed the role of Chief Executive
Officer and Dirk D. Anderson, Chief Financial Officer, was also named Chief
Operating Officer. While Mr. Collignon was instrumental in effecting the
turn-around of the Company, his resignation is not expected to have a material
negative impact on the current business operations of the Company.
OTHER INCOME AND EXPENSES
The Company's other income and expenses, which consist primarily of interest
income and expense, improved by $7,365 from the comparable quarter to the
reporting quarter and by $12,412 from the comparable period to the reporting
period. These improvements were primarily attributable to increased interest
income generated from the Company's current cash reserves.
FORWARD LOOKING STATEMENTS
The Company continues to face increasing competition with "budget" newly
manufactured product-lines. These product-lines have had a significant impact on
the Company's wholesale sales. Management has responded to this competitive
pressure by implementing a new pricing structure for the wholesale market.
Beginning July 1, 1999, the Company's wholesale department began offering deeper
discounts and implemented a new freight policy modeled after those offered by
new furniture manufacturers. In addition, wholesale marketing efforts have been
intensified in an attempt to maintain and strengthen our existing network of
dealers. However, there can be no assurance that the new pricing structure and
increased wholesale marketing efforts will enable the Company to compete
successfully with the "budget" newly manufactured product-lines on a wholesale
level.
10
<PAGE>
While lower product costs have partially offset the negative effects of the
deeper wholesale discounts on the Company's gross margins, management intends to
focus its efforts on developing and pursuing long-term growth in the retail
market. The Company began implementing a new retail marketing program during the
reporting period. The primary focus of this program is to change the Company's
image in the Phoenix marketplace from that of a used furniture refurbisher to
that of a full service office furniture dealership. The Company began doing
business under the new trade name of "Total Office Interiors" in October, 1999.
Along with the new trade name, the Company's new retail sales showroom and
remodeled office space within its existing Tempe facility were completed during
October, 1999. In addition to showcasing and marketing the Company's
remanufactured systems furniture, the space now features the Company's new
expanded product-line, including files, chairs, desks and newly manufactured
systems furniture. Management believes this name change and expanded
product-line will broaden the Company's customer-base and position the Company
as a source for all office furniture needs.
Effective July 1, 1999, the Company promoted one of its sales representatives to
sales manager to lead the Company's sales force and assist in the creation and
development of the Company's new marketing program. The Company plans to
increase its retail sales staff from six to nine over the next 12 - 18 months
and intends to use the Tempe retail operation as a prototype for developing
other retail sales offices throughout the Western region of the United States.
In addition, management is currently conducting test marketing in the Las Vegas,
Nevada area in hopes of possible expansion into that market.
INCOME TAXES
During the periods ended September 30, 1999 and 1998, the Company's taxable net
income was fully offset by net operating loss carryforwards. As a result, the
Company incurred no income tax expense during these periods.
FINANCIAL CONDITION AND LIQUIDITY
As of September 30, 1999, the Company's cash and cash equivalents totaled
$1,523,570. In addition, the Company's net worth and working capital totaled
$3,043,732 and $2,697,845, respectively. The Company has no long-term debt.
The Company reported cash flows from operations of $665,451 during the reporting
period. This was primarily a result of operating income and increased
collections of accounts receivable. The Company used approximately $64,000 of
these funds for investment activities primarily for the purchase of a delivery
truck, production machinery and fixed asset additions related to the Year 2000
compliance program, and it used approximately $181,000 to finance the purchase
of treasury shares. The remaining funds were added to the Company's cash
reserves.
Management believes current cash reserves and cash flows from operations will be
adequate to fund all projected expenditures without the need for outside
financing. In addition, the Company has $1,000,000 available on its line of
credit with M&I Thunderbird Bank.
YEAR 2000 COMPLIANCE
The "Year 2000 problem" arose because many existing computer programs use only
the last two digits to refer to a year. Therefore, these computer programs do
not properly recognize a year that begins with "20" instead of the familiar
"19." If not corrected, many computer applications could fail or create
erroneous results when the year 2000 begins.
11
<PAGE>
The Company implemented a program to assess and monitor the progress of its
material customers, suppliers and other material third parties in resolving Year
2000 compliance issues. Although the Company has taken, and will continue to
take, reasonable efforts to gather information to determine the Year 2000
readiness of material third parties, the Year 2000 compliance of third parties
is substantially beyond the Company's knowledge and control. While the Company
does not anticipate any negative impact associated with the Year 2000 readiness
of material third parties, there can be no assurances that the Company will not
be adversely affected by the failure of a third party to adequately address Year
2000 compliance.
The Company has evaluated its existing systems, including information technology
and non-information technology systems, for Year 2000 compliance and has taken
certain corrective actions. At this time, the Company believes all of its
computer hardware, software, telephone and manufacturing equipment are in Year
2000 compliance.
The Company replaced its previous computer hardware with new Year 2000 compliant
equipment. The replacement cost totaled approximately $35,000. The Company's
existing accounting software program has been upgraded to bring it into Year
2000 compliance. In addition, the existing accounting software program will be
replaced with a new accounting/manufacturing software program. The anticipated
cost of this program, including implementation and training, is estimated to be
approximately $75,000. Implementation began May 13, 1999 and is scheduled for
completion on November 30, 1999. These capital expenditures are expected to
improve administrative efficiency. As of September 30, 1999, the total capital
expenditures related to the Year 2000 project, including both hardware and
software, were approximately $90,000. All remaining costs associated with this
project will be funded from current cash reserves and are not expected to have a
material effect on the Company's operating results.
The Company's reconditioning and sale of workstations in not dependent upon
computer operations. Accordingly, management does not believe there is a risk of
interruption in its supply of workstations to its customers or lost revenues
with any potential Year 2000 compliance issues. Further, management does not
believe that the Company faces any potential liability to third parties for
breach of contract or other harm if its systems are not Year 2000 compliant.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not party to any pending legal proceeding other than routine
litigation incidental to the business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting was held on August 6, 1999. Shareholders voted on
the appointment of the Company's auditors, election of the Company's Board of
Directors and the adoption of the Reconditioned Systems, Inc. 1999 Employee
Stock Purchase Plan.
<TABLE>
<CAPTION>
Shares
Proposal Eligible Voted For Voted Against Abstentions Broker Non-Votes
- -------- -------- --------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
1 - Election of
directors:
Wayne Collignon 1,401,816 1,051,712 0 23,710 0
Dirk Anderson 1,401,816 1,054,054 0 21,368 0
Scott Ryan 1,401,816 1,074,422 0 1,000 0
Warren Palitz 1,401,816 1,069,603 0 5,819 0
2 - Ratification of
Employee Stock
Purchase Plan 1,401,816 574,304 12,030 200 488,888
3 - Appointment of
auditors 1,401,816 1,074,422 0 0 0
</TABLE>
ITEM 5. OTHER INFORMATION
None.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith pursuant to Regulation S-B:
No. Description Reference
- --- ----------- ---------
3.1 Articles of Incorporation of the Registrant,
as amended and restated 3
3.2 Bylaws of Registrant, as amended and restated 3
4.1 Form of Common Stock Certificate 1
4.5 Registration Rights Agreements 2
*4.9 Options issued to Wayne R. Collignon 4
*4.10 Options issued to Dirk D. Anderson 4
*4.11 Amendment to Options issued to Wayne Collignon 5
*4.12 Amendment to Options issued to Dirk D. Anderson 5
*4.13 Options issued to Wayne R. Collignon 5
*4.14 Options issued to Dirk D. Anderson 5
*4.15 Options issued to Scott W. Ryan 5
*4.16 Options issued to Scott W. Ryan 5
10.1 Lease Agreement, dated April 12, 1990 between Boston
Safe Deposit and Trust Company, as Lessor, and Registrant
as Lessee 1
10.33 Loan document between M&I Thunderbird Bank and the Registrant 6
*10.34 Severance Agreement between Wayne R. Collignon and Registrant 7
(1) Filed with Registration Statement on Form S-18, No.
33-51980-LA, under the Securities Act of 1933, as
declared effective on December 17, 1992
(2) Filed with Form 10-KSB on July 13, 1995
(3) Filed with Form 10-KSB on July 2, 1996
(4) Filed with Form 10-QSB on November 14, 1996
(5) Filed with 10-KSB on September 26, 1997
(6) Filed with 10-QSB on August 11, 1999
(7) Filed herein
(*) Indicates a compensatory plan or arrangement
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended September 30, 1999.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RECONDITIONED SYSTEMS, INC.
Date: November 15, 1999 /s/ Scott W. Ryan
-----------------------------------------
Scott W. Ryan, Chief Executive Officer
Date: November 15, 1999 /s/ Dirk D. Anderson
-----------------------------------------
Dirk D. Anderson, Chief Financial Officer
15
Exhibit 10.34
AGREEMENT
This agreement was made and is effective on the 30th day of September, 1999,
between Reconditioned Systems, Inc. (an Arizona corporation, "RSI") and Wayne
Collignon.
RECITALS
1. RSI and Mr. Collignon entered into an Employment Agreement and certain
amendments thereto.
2. RSI and Mr. Collignon wish to cancel the Employment Agreement.
AGREEMENTS
1. The Employment Agreement between RSI and Mr. Collignon will be canceled
effective immediately upon execution of this agreement and Mr. Collignon will
tender a resignation letter to RSI.
2. RSI will pay Mr. Collignon $430,484 as follows: $260,000 on November 10,
1999, $90,000 on January 3, 2000, and $80,484 via relief of a note and interest
owed RSI by Mr. Collignon.
3. Mr. Collignon will give back to RSI 50,000 shares of RSI Common Stock and
100,000 options to purchase RSI Common Stock at $1.00 per share.
4. By executing this agreement, Mr. Collignon agrees that RSI's purchase of
his stock and stock options represents fair value and that he is not entitled to
any additional amount if the price of RSI's Common Stock goes up in the future.
5. RSI will publicly announce Mr. Collignon's resignation within one week of
the execution of this agreement and receipt of Mr. Collignon's resignation
letter.
6. Mr. Collignon has the option to remain with RSI on a consulting basis
through January 3, 2000 for which he will be paid $3,846.15 bi-weekly. If Mr.
Collignon elects to leave prior to January 3, 2000, the bi-weekly consulting
fees will discontinue.
7. On December 31, 1999 Mr. Collignon will receive his standard bonus which is
equal to 5% of the pre-tax profits earned by RSI from July 1, 1999 to September
30, 1999. This will be Mr. Collignon's final bonus.
8. Mr. Collignon will be free to compete with RSI on the earlier of January 4,
2000 or the day on which he elects to discontinue his consulting services.
9. Mr. Collignon will indemnify RSI for any expenses it incurs on claims
brought before January 3, 2000 as a direct result of any improper actions by him
while he was an employee of RSI.
10. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Arizona without regard
to its conflicts of law principles.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of
November 5, 1999.
/s/ Wayne R. Collignon
-------------------------------------
Wayne R. Collignon
/s/ Dirk D. Anderson
-------------------------------------
Dirk D. Anderson, Secretary/Treasurer
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<CIK> 0000891915
<NAME> RECONDITIONED SYSTEMS, INC.
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