<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period April 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PROTECH COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3281593
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
3311 INDUSTRIAL 25TH STREET, FORT PIERCE, FLORIDA 34946
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(561)464-5100
- -------------------------------------------------------------------------------
(Issuer's telephone number)
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 last predictable date:
Class Number of Shares Outstanding
on June 14, 1999
Common Stock, Par Value $.001 Per Share 4,254,000
<PAGE> 2
PROTECH COMMUNICATIONS, INC.
Index
Page
Part I Financial Information
Item 1 Financial Statements
Balance Sheets at April 30, 1999
and 1998 (Unaudited) 3
Statements of Operations
for the Three months ended April 30,
1999 and 1998 (Unaudited) 4
Statements of Operations
for the Six months ended April 30,
1999 and 1998 (Unaudited) 5
Statements of Cash Flows
for the Six months ended April 30,
1999 and 1998 (Unaudited) 6
Notes to Financial Statements
(Unaudited) 7
Item 2 Management's Discussion and Analysis or
Plan of Operation 9
Part II OTHER INFORMATION
OPTION AGREEMENTS
Option Agreement Richard Hennessey 10.1
Restated Option Agreement Keith Larkin 10.2
Exhibit 27 Financial Data Schedule
(for SEC use only)
SIGNATURES 12
<PAGE> 3
ProTech Communications, Inc.
Balance Sheets
April 30, 1999 and April 30, 1998
(unaudited)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 42,025 $ 145,847
Short-term Investments 145,083 257,936
Accounts receivable less allowance for doubtful
accounts of $14,868 and $12,095 in 1999 and 1998, 263,507 286,415
Inventory (note 2) 363,657 308,284
Due from officers and employees 1,750 41,500
Other current assets 19,864 7,103
---------- ----------
Total current assets 835,886 1,047,085
Net property and equipment 177,027 189,122
Due from officer 42,860 --
---------- ----------
Total Assets $1,055,773 $1,236,207
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable 34,969 13,469
Accrued expenses (note 3) 176,249 88,863
---------- ----------
Total current liabilities 211,218 104,332
Stockholder's Equity:
Common Stock, $.001 par value, authorized 10,000,000
shares, issued and outstanding 4,254,000 4,254 4,254
Additional Paid in Capital 1,137,018 1,122,018
Retained Earnings(deficit) (296,717) 5,603
---------- ----------
Total Stockholders' Equity 844,555 1,131,875
---------- ----------
$1,055,773 $1,236,207
========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
ProTech Communications, Inc.
Statements of Operations
Three months ended April 30, 1999 and April 30, 1998
(unaudited)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $ 265,994 $ 245,367
Cost of Goods Sold 99,337 76,933
----------- -----------
Gross Profit 166,657 169,434
Selling, general and administrative expenses 222,772 188,361
----------- -----------
(Loss) from operations (56,115) (18,927)
Other income (expense):
Interest income 2,696 2,610
----------- -----------
(Loss) before income taxes (53,419) (16,317)
Income taxes 0 0
Net (Loss) $ (53,419) $ (16,317)
----------- -----------
Loss per common share:
Basic $ (0.01) $ (0.00)
Average common shares outstanding 4,254,000 4,254,000
=========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
ProTech Communications, Inc.
Statements of Operations
Six months ended April 30, 1999 and April 30,1998
(unaudited)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $ 497,155 $ 491,959
Cost of Goods Sold 193,076 148,380
----------- -----------
Gross Profit 304,079 343,579
Selling, general and administrative expenses 415,646 380,052
----------- -----------
Loss from operations (111,567) (36,473)
Other income (expense):
Interest income 7,069 10,879
----------- -----------
Loss before income taxes (104,498) (25,594)
Income taxes 0 0
Net loss $ (104,498) $ (25,594)
----------- -----------
Loss per common share:
Basic $ (0.02) $ (0.00)
Average common shares outstanding 4,254,000 4,254,000
=========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
ProTech Communications, Inc.
Statements of Cash Flows
For the Six months ended April 30, 1999 and April 30,1998
(unaudited)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from operating activities:
Cash received drom the sale of merchandise $ 504,224 $ 424,211
Cash paid to vendors and employees (763,537) (593,578)
Interest received 7,069 10,879
---------- ----------
Net cash used by operating activities (252,244) (158,488)
---------- ----------
Cash flows from investing activities:
Purchase of short-term investments -- --
Proceeds on maturity of short-term investments 109,462 --
Purchase of property and equipment (13,990) (51,992)
Net cash provided (used) in investing activities 95,472 (51,992)
---------- ----------
Cash flows from financing activities:
Net cash provided by financing activities 0 0
---------- ----------
Net (decrease) in cash and cash equivalents (156,772) (210,480)
Cash and cash equivalents at the beginning of period 198,797 356,327
---------- ----------
Cash and cash equivalents at the end of period 42,025 145,847
========== ==========
Reconcilliation of net income (loss) to net cash used by operating activities:
Net income (loss) $ (104,498) $ (25,594)
---------- ----------
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization 18,232 18,270
Increase in accounts receivable (63,272) (61,743)
Decrease of employee accounts receivable (12,841) (7,535)
Increase in inventory (118,047) (147,675)
(Decrease) increase in accounts payable (1,411) 1,530
Increase (decrease) in accrued expenses 2,784 29,929
Decrease (increase) in other assets 1,127 34,330
---------- ----------
Total adjustments (147,746) (132,894)
---------- ----------
Net cash used by operating activities $ (252,244) $ (158,488)
========== ==========
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
PRO TECH COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 AND 1998
(UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Pro Tech Communications, Inc. (the Company) was organized and
incorporated under the laws of the State of Florida for the
purpose of designing, developing, producing and marketing
lightweight telephone headsets. The Company presently
manufactures and markets its headsets primarily for fast food
companies and other large quantity users of headset systems.
The Company is in the process of completing the development of
a second design for the telephone user market, which includes
telephone operating companies, government agencies and business
offices. The Company's business strategy is to offer
lightweight headsets with design emphasis on performance and
durability at a cost below that of its competitors.
(B) ACCOUNTING POLICIES
In the opinion of management, the unaudited financial
statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the
Company's financial position as of April 30, 1999 and the
results of operations and cashflows for the six months ended
April 30, 1999. The accompanying interum financial statements
should be read in conjunction with the Company's Form 10-KSB
filing for the year ended October 31, 1998.
(C) LOSS PER SHARE
Earnings per share is accounted for by using the basic and
diluted earnings per share method perscribed by SFAS No. 128,
which became effective for years ending after December 15,1997.
Basic loss per share is based on the weighted average number of
shares of common stock outstanding during the year. Diluted
loss per share is based on shares of common stock and dilutive
potential common stock (stock Options and Stock Warrants)
outstanding during the year. Diluted loss per share was
antidilutive due to the net loss generated by the Company
during the 1999 and 1998 periods and is therefore not reported.
(D) COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, reporting
comprehensive income (Statement 130), which establishes
standards for reporting and display of comprehensive income and
its components in a financial statement having the same
prominence as other financial statements. Statement 130 is
effective for years beginning after December 15, 1997 (Fiscal
Year 1999 for the Company). During the six months ended April
30, 1999 and 1998, the Company had no components considered to
be other comprehensive income.
7
<PAGE> 8
(2) INVENTORY
Inventory at April 30, 1999 and 1998 consists of the
following:
1999 1998
---- ----
Raw materials $102,827 $122,440
Work in process 165,308 128,972
Finished goods 95,522 56,872
-------- --------
$363,657 $308,284
======== ========
(3) ACCRUED EXPENSES
Accrued expenses consisted of the following at April 30, 1999
and 1998:
1999 1998
---- ----
Accrued warranty expense $156,406 $55,000
Accrued executive compensation 0 22,500
Other accrued expenses 19,843 11,363
-------- -------
$176,249 $88,863
======== =======
8
<PAGE> 9
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on June 14, 1999.
PROTECH COMMUNICATIONS, INC.
(REGISTRANT)
By: /s/ Richard Hennessey
---------------------------------
Richard Hennessey, President
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Keith Larkin Treasurer and Chairman of the Board June 14, 1999
- -------------------------------- (Principal Executive, Financial
Keith Larkin and Accounting Officer)
/s/ Richard Hennessey Director, Secretary June 14, 1999
- -------------------------------- and President
Richard Hennessey
</TABLE>
12
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
================================================================================
RESULTS OF OPERATION
Three months ended April 30, 1999 compared to three Months Ended April 30, 1998
For the quarter ended April 30, 1999, the Company realized a net loss of
$(53,419) compared to a net loss of $(16,317) for the quarter ended April 30,
1998. This difference is attributed to the fact that in the 1999 period, the
Company has increased its investment in engineering and marketing in preparation
for several new product introductions which occurred this quarter. The Company
is also near complete in its transition of resources to support these
introductions.
Net sales for the current fiscal year 1999 period were $20,627 or 8.4% higher
than last year's comparable period, $265,994 in the current period versus
$245,367 in the comparable 1998 period. This increase is the result of a
positive introduction of the manager's headset to the fast-food market along
with initial sales of the company's new telephone headsets. All revenues for the
period February 1, 1999 through April 30, 1999 period are the result of direct
and distribution sales of the ProCom IV, ProCom V and manager's headsets. The
company expects telephone headset sales to increase dramatically as the impact
from direct marketing occurs. The Company's distribution net revenues and unit
volumes continue to increase as percent to total net sales to 8% and 10%
respectively over the comparable period. This change is the result of the
Company's continued efforts to move all sales in the fast-food market to
distributors and move its market focus to other targeted markets.
Gross profit decreased to approximately 63% in the current period versus 69% in
the comparable 1998 period. This decrease is the result of the Company's hiring
of short-term production personnel to insure maximum quality control with the
Company's first run of new products. The Company expects to move all future
production off-shore in order to take advantage of the cost savings. This change
is planned to occur in late Q3 of this fiscal year. Inventories have increased
to $363,657 versus $308,284 in the comparable 1998 period in preparation for the
shift of production to the newer headsets planned for introduction in the 3rd
quarter of this fiscal year. This increase allows for the Company to support the
current and planned demand for the existing fast-food headsets provided by the
Company and to begin preparations to produce the Company's new products. SG&A
expenses increased 24% or $44,411 over the comparable period, $222,772 versus
$188,361 in the comparable 1998 period. The increase is primarily due to
marketing expenses of $26,789 for new product introductions. The remainder of
the increase is from additional investments in Research and Development.
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
================================================================================
RESULTS OF OPERATION
Six months ended April 30, 1999 compared to six months ended April 30, 1998
For the six month period ended April 30, 1999, the Company realized a net loss
of $(104,498) compared to a net loss of $(25,594) in the same comparable period
ended April 30, 1998. This difference is attributed to the fact that in the 1999
period, the Company has increased its investment in engineering and marketing in
preparation for several new product introductions which occurred this quarter.
The Company is also near complete in its transition of resources to support
these introductions.
Net sales for the current fiscal year 1999 period were $5,196 or 1% higher than
last year's comparable period, $497,155 in the current period versus $491,959 in
the comparable 1998 period. Sales remained flat as a result of the discontinuing
of the Freedom headset to the fast-food market and replacing it with the
manager's headset. The Company introduced its new telephone products late in
this fiscal period and therefore realized very little sales results in this
period. The Company expects this result to occur in the next reporting period.
All revenues for the period November 1, 1998 through April 30, 1999 period are
the result of direct and distribution sales of the ProCom IV, ProCom V and
manager's headsets. The company expects telephone headset sales to increase
dramatically as the impact from direct marketing occurs. The Company's
distribution net revenues and unit volumes continue to increase as percent to
total net sales to 10% and 12% respectively over the comparable period. This
change is the result of the Company's continued efforts to move all sales in the
fast-food market to distributors and move its market focus to other targeted
markets.
Gross profit decreased to approximately 61% in the current period versus 70% in
the comparable 1998 period. This decrease is the result of the Company's hiring
of short-term production personnel to insure maximum quality control with the
Company's first run of new products. The expects to move all future production
off-shore in order to take advantage of the cost savings. Inventories have
increased to $363,657 versus $308,284 in the comparable 1998 period in
preparation for the shift of production to the newer headsets planned for
introduction in the 3rd quarter of this fiscal year. This increase allows for
the Company to support the current and planned demand for the existing fast-food
headsets provided by the Company and to begin preparations to produce the
Company's new products. SG&A expenses increased 9% or $35,594 over the
comparable period, $415,646 versus $380,052 in the comparable 1998 period. The
increase is primarily due to marketing expenses for new product introductions.
The remainder of the increase is from additional investments in Research and
Development.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
================================================================================
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio (current assets to current liabilities) was 3.95 to
1.00 at April 30, 1999 as compared to 10.04 to 1.00 at April 30, 1998. At April
30, 1999, the Company's current assets exceeded its current liabilities by
approximately $624,668.
The Company intends to use the cash it generates from operations and the net
proceeds from the prior private sales of common stock to increase it share of
the fast-food headset market and to enter the telephone user market. Management
believes that the Company has sufficient funds to meet the Company's anticipated
working capital requirements for at least 12 months. However, in order for the
Company to expand into additional markets, including government agencies and
personal computers, the Company will require additional capital. It is
anticipated that the Company will seek to raise such additional financing
through a private or public offering of equity, therefore has retained an
investment banking firm to source additional capital. However no assurances can
be given that the Company will be able to obtain such additional financing. The
Company presently does not intend to finance, to any significant extent, its
growth through debt financing.
Effective December 9, 1994, the Company entered into an amended and restated
employment agreement with Keith Larkin, Chairman of the Board and Treasurer of
the Company. Under the agreement, Mr. Larkin will be entitled to receive the
annual salary of a maximum of $90,000 (as adjusted each year by at least the
percentage increase in the Consumer Price Index). The Company, however, is only
required to pay Mr. Larkin such a maximum annual salary if the Company generates
annual sales for a fiscal year of at least $2 million and has pretax income
equal to at least 20% of the Company's annual sales. In all other cases, the
board of directors sets Mr. Larkin's salary, taking into account the Company's
projected financial performance and cash required to satisfy the Company's
anticipated operating expenditures.
PART II - OTHER INFORMATION
(a) Exhibits
10.1 Stock Option Agreement, dated April 13, 1999, between the
Company and Richard Hennessey.
10.2 Amended and Restated Stock Option Agreement, dated April 13,
1999, between the Company and Keith Larkin.
27 Financial Data Schedule (for SEC use only)
11
<PAGE> 1
Exhibit 10.1
Optionee: Richard Hennessey
Grant: 200,000 shares
PRO TECH COMMUNICATIONS, INC.
1998 STOCK OPTION PLAN
NONSTATUTORY
STOCK OPTION AGREEMENT
----------------------
OPTION AGREEMENT (the "Agreement") dated as of April 13, 1999 between
Pro Tech Communications, Inc., a Florida corporation (the "Company"), having its
principal executive office at 3311 Industrial 25th Street, Ft. Pierce, Florida
34946, and Richard Hennessey (the "Optionee"), having his address at 5410 West
Echo Pines Circle, Ft. Pierce, FL.
The Company has adopted the 1998 Stock Option Plan (the "Plan"), a copy
of which is attached hereto, and desires to grant to the Optionee the
Nonstatutory Stock Option provided for herein, all subject to the terms and
conditions of the Plan. Capitalized terms used herein and not defined have the
same meanings as set forth in the Plan.
IT IS AGREED as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee on the
date hereof a Nonstatutory Stock Option (the "Option") to purchase (subject to
adjustment pursuant to Section 9 of the Plan) an aggregate of 200,000 of its
shares of Common Stock (the "Shares") at an option price per Share of $0.38.
2. OPTION PERIOD.
A. The Option shall vest as follows:
i. The Optionee may immediately exercise up to 100,000
Shares;
ii. The Optionee may exercise up to an additional 50,000
Shares on or after April 13, 2000; and
iii. The Optionee may exercise up to an additional 50,000
Shares on or after April 13, 2001.
B. The Optionee's right to exercise any vested Options shall
expire on April 13, 2004.
3. EXERCISE OF OPTION. The Optionee may exercise the Option, or any
portion thereof, by delivering to the Company a written notice duly signed by
the Optionee in the form attached hereto as Exhibit A stating the number of
Shares that the Optionee has elected to purchase, and accompanied by payment (in
cash or by certified check) of an amount equal to the sum of (i) the full
purchase price for the Shares to be purchased, plus (ii) any withholding tax
required to be paid pursuant to Section 14(a) of the Plan. After receipt by the
Company of such notice and payment, the Company shall (subject to Section 10 of
the Plan) issue the Shares in the name of the Optionee and deliver the
certificate therefor to the Optionee. No Shares shall be issued until full
payment therefor and any withholding tax has been made, and the Optionee shall
have none of the rights of a shareholder in respect of such Shares until they
are issued.
<PAGE> 2
4. EMPLOYMENT. Nothing contained in this Agreement shall confer upon
the Optionee any right to be employed by the Company nor prevent the Company
from terminating its current relationship with the Optionee at any time, with or
without cause. If the Optionee's current relationship with the Company is
terminated for any reason, the Option shall be exercisable only as to those
Shares immediately purchasable by the Optionee at the date of termination and,
subject to Section 2 hereof, thereafter as provided in the Plan.
5. TRANSFERABILITY OF OPTION. This Option may not be transferred other
than by laws of descent and distribution, provided, however, that if Form S-8
under the Securities Act of 1933 is hereafter amended to permit the transfer of
an option to family members by gift or otherwise, then this Option may be so
transferred to family members in accordance with and to the full extent
permitted by Form S-8.
6. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
7. INCORPORATION OF PLAN. The Option granted hereby is subject to, and
governed by, all the terms and conditions of the Plan, which are hereby
incorporated by reference. This Agreement, including the Plan incorporated by
reference herein, is the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings. In the case of any conflict between the terms of this Agreement
and the Plan, the provisions of the Plan shall control.
8. PURCHASE FOR INVESTMENT. As a condition to the exercise in whole or
in part of the Option hereby granted, each written notice of election shall
include a representation by the Optionee that the Shares are being purchased for
investment and not for distribution or resale.
9. NOTICES. Any notice to be given by the Optionee hereunder shall be
sent to the Company at its principal executive offices, and any notice from the
Company to the Optionee shall be sent to the Optionee at his address set forth
above; all such notices shall be in writing and shall be delivered in person or
by registered or certified mail. Either party may change the address to which
notices are to be sent by notice in writing given to the other in accordance
with the terms hereof.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PRO TECH COMMUNICATIONS, INC.
By: /s/ Keith Larkin
--------------------------
Keith Larkin, its CEO
OPTIONEE:
/s/ Richard Hennessey
-----------------------------
Richard Hennessey
<PAGE> 3
PURCHASE FORM
(To be signed and delivered to
Pro Tech Communications, Inc. upon exercise of the Option)
The undersigned, the holder of the foregoing Nonstatutory Stock Option,
hereby irrevocably elects to exercise the purchase rights represented by such
Option, and to purchase thereunder __________ shares of common stock, par value
of $.001 of Pro Tech Communications, Inc. ("Shares") and herewith makes payment
of $_________ ($_____ per share) therefor, plus $__________ ($_____ per share)
for withholding tax, if any, required pursuant to Section 14(a) of the Plan and
requests that the Certificates for the Shares be issued in the name(s) of, and
delivered to __________________________________________________ whose
address(es) is/are ________________________________________________.
The undersigned hereby represents that the Shares being purchased by
the exercise of this Option are being purchased for investment only and not with
a view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify Pro Tech Communications, Inc.
of any early disposition of the Shares, and agrees to pay any additional
withholding tax due in connection therewith, all in accordance with Section
14(b) of the Plan.
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Dated: __________________, ____
<PAGE> 1
Exhibit 10.2
Optionee: Keith Larkin
Grant: 540,000 shares
PRO TECH COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
AMENDED AND RESTATED
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
THIS AMENDED AND RESTATED STOCK OPTION AGREEMENT (the "Agreement"),
dated April 13, 1999, is entered into between Pro Tech Communications, Inc., a
Florida corporation (the "Company"), having its principal executive office at
3311 Industrial 25th Street, Ft. Pierce, Florida 34946 and Keith Larkin (the
"Optionee"), having his address at A1A Barkley Beach Club, Ft. Pierce, FL.
The Company has granted to the Optionee the Nonstatutory Stock Option
provided for herein, subject to the terms and conditions of the Company's 1996
Stock Option Plan (the "Plan). Capitalized terms used herein and not defined
have the same meanings as set forth in the Plan.
IT IS AGREED as follows:
1. PRIOR OPTIONS GRANTED TO THE OPTIONEE. This Agreement amends and
restates in its entirety the Nonstatutory Stock Option Agreement entered into
between the parties on April 15, 1996.
2. GRANT OF OPTION. The Company granted to the Optionee on April 15,
1996 a Nonstatutory Stock Option (the "Option") to purchase (subject to
adjustment pursuant to Section 9 of the Plan) an aggregate of 540,000 of its
shares of Common Stock (the "Shares") at an option price per Share of $0.50.
3. OPTION PERIOD. The Option granted shall expire on April 13, 2001
subject to earlier termination as provided in the Plan.
4. EXERCISE OF OPTION.
A. The Optionee may immediately exercise the Option, or any portion
thereof, until April 13, 2001.
B. The Optionee may exercise the Option, or any portion thereof, by
delivering to the Company a written notice duly signed by the Optionee in the
form attached hereto as Exhibit A stating the number of Shares that the Optionee
has elected to purchase, and accompanied by payment (in cash or by certified
check) of an amount equal to the sum of (i) the full purchase price for the
Shares to be purchased, plus (ii) any withholding tax required to be paid
pursuant to Section 14(a) of the Plan. After receipt by the Company of such
notice and payment, the Company shall (subject to Section 10 of the Plan) issue
the Shares in the name of the Optionee and deliver the certificate therefor to
the Optionee. No Shares shall be issued until full payment therefor and any
withholding tax has been made, and the Optionee shall have none of the rights of
a shareholder in respect of such Shares until they are issued.
<PAGE> 2
5. EMPLOYMENT. Nothing contained in this Agreement shall confer upon
the Optionee any right to be employed by the Company nor prevent the Company
from terminating its current relationship with the Optionee at any time, with or
without cause. If the Optionee's current relationship with the Company is
terminated for any reason, the Option shall be exercisable only as to those
Shares immediately purchasable by the Optionee at the date of termination and,
subject to Section 3 hereof, thereafter as provided in the Plan.
6. TRANSFERABILITY OF OPTION. The Option may be transferred in whole or
in part.
7. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
8. INCORPORATION OF PLAN. The Option granted hereby is subject to, and
governed by, all the terms and conditions of the Plan, which are hereby
incorporated by reference. This Agreement, including the Plan incorporated by
reference herein, is the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings. In the case of any conflict between the terms of this Agreement
and the Plan, the provisions of the Plan shall control.
9. PURCHASE FOR INVESTMENT. As a condition to the exercise in whole or
in part of the Option hereby granted, each written notice of election shall
include a representation by the Optionee that the Shares are being purchased for
investment and not for distribution or resale.
10. NOTICES. Any notice to be given by the Optionee hereunder shall be
sent to the Company at its principal executive offices, and any notice from the
Company to the Optionee shall be sent to the Optionee at his address set forth
above; all such notices shall be in writing and shall be delivered in person or
by registered or certified mail. Either party may change the address to which
notices are to be sent by notice in writing given to the other in accordance
with the terms hereof.
11. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PRO TECH COMMUNICATIONS, INC.
By: /s/ Richard Hennessey
------------------------------
Name: Richard Hennessey
Title: President
OPTIONEE:
/s/ Keith Larkin
----------------------------------
Keith Larkin
<PAGE> 3
EXHIBIT A
PURCHASE FORM
-------------
(To be signed and delivered to
Pro Tech Communications, Inc. upon exercise of the Option)
The undersigned, the holder of the foregoing Nonstatutory Stock Option,
hereby irrevocably elects to exercise the purchase rights represented by such
Option, and to purchase thereunder shares of common stock, par value of $.001 of
Pro Tech Communications, Inc. ("Shares") and herewith makes payment of
$____________ ($____________ per share) therefor, plus $____________
($____________ per share) for withholding tax, if any, required pursuant to
Section 14(a) of the Plan and requests that the Certificates for the Shares be
issued in the name(s) of, and delivered to ___________________________ whose
address(es) is/are ____________________________________________________.
The undersigned hereby represents that the Shares being purchased by
the exercise of this Option are being purchased for investment only and not with
a view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify Pro Tech Communications, Inc.
of any early disposition of the Shares, and agrees to pay any additional
withholding tax due in connection therewith, all in accordance with Section
14(b) of the Plan.
---------------------------
---------------------------
---------------------------
---------------------------
Dated:__________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PRO TECH COMMUNICATIONS, INC. FOR THE PERIOD ENDED APRIL
30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 42,025
<SECURITIES> 145,083
<RECEIVABLES> 263,057
<ALLOWANCES> 14,868
<INVENTORY> 363,657
<CURRENT-ASSETS> 835,886
<PP&E> 186,238
<DEPRECIATION> 9,311
<TOTAL-ASSETS> 1,055,773
<CURRENT-LIABILITIES> 211,218
<BONDS> 0
0
0
<COMMON> 4,254
<OTHER-SE> 844,555
<TOTAL-LIABILITY-AND-EQUITY> 1,055,773
<SALES> 497,155
<TOTAL-REVENUES> 504,224
<CGS> 193,076
<TOTAL-COSTS> 415,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,498)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
