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Projections for the Future of VitroTech (???)
I would just like to get some honest opinions on VitroTech. Right now, the stock is trading at .52, would you consider this a good time to buy? If so, how long would it be before you think the stock will be selling again at 2.00?
I have read some news articles and things of that nature on VitroTech Corp, but I'm just don't know very much about the stock market. Any comments, ideas, suggestions, etc... would be greatly appreciated.
By the way, still no sign of WHY VitroTech dropped so drastically from two dollars to thirty cents?
CS
FREE FALLING AND FOR NO APPARENT REASON. I liked the news but someone doesn't care. There may be a little panic selling taking place today.
FREE FALLING AND FOR NO APPARENT REASON. I liked the news but someone doesn't care. There may be a little panic selling taking place today.
selling continues - excellent news released today, yet still no volume, and pps continues to drop near 52-wk lows.
Possibly a large block of shares being sold off over the weeks.
Watching for support at .50, if not, well, there no support below that.
m-ojo
Very interesting market action. I think the MMs are driving this one down. It's easier on these stocks with low vol. I think this company's products are amazing and has huge potential.
However, I also watch the charts, and vrot keeps making lows and not showing much support.
Unbelievable, but I wont fight the trend.
m-ojo
No clue as to "why"....I just wish I would've taken some profits off the table a few days back. Now it looks like I'll be holding until next year. Not worried though, if I had any funds to play with, I would definatly be buying at these levels if you are looking to hold for about a year.
Just my opinion.
Any clues as to the drop in price?
Anyone with a little "insider" info?
The news on inking the distribution agreement with Sumitomo (SHI) sounds like huge news. Although we don't we details of the agreement itself, to have SHI make an Agreement means this otc company has it's act together.
Investors will start showing up as people start to catch wind of this company.
On a personal note, I was pleasantly surprised to receive a call from their IR yesterday regarding an email I sent them.
m-ojo
Only other board I know of is "BullBoards", but there's not much going on there either. Not suprising, as this company is virtually unknown....not for long though. Once they have a couple of quarterly earnings released, people will start to take notice. As far as I know, they basically have a monopoly on their products.
I like this company's product, are there any investor message boards where there is a decent discussion about this company?
TIA,
m-ojo
VROT - out yesterday @ 2.19 and today @ 2.15
bot last week @ 1.93, to see if little rally would continue,
but small daily increases with declining volume...time to bail out.
VROT.....
I received a multi-page flyer in the mail earlier this week
covering (and of course promoting) VROT.
Briefly, some excerpts from the publication,
but keep an open mind:
VitroTech Corp. is extremely small, with a market capitalizzation of only $253 million.
And they're completely unknown on Wall Street.
But that is about to change in coming months.
VitroTech has exclusive rights to an estimated 35-billion pounds of a rare material that's expected to produce a strong demand by plastic produders, it's been called industrial heroin, because once a company uses it, they will not quit.
The company has 3 products:
VITROLITE: The flagship product. It is technically defined as
a process enhancer which consistantly reduces the production, or cycle time for plastic processes and increases production [whether by blow, injection or extrusion molding] between 20% to 111%. Vitrolite reduces manufacturing time, reduces wear and tear on manufacturing equipment......
Vitrolite acts as if it were a "super industrial lubricant", so impressive, it's like WD40 on steroids!
VITROPURGE: enables color changes in molding, compounding and pigment processing machines at a fraction of the cost in time and money.
VITROCOTE: imparts improved optical qualities to paints and coating as well as increasing resistance to scratch and abrasian. Other formulations have applications for other industrial pricucts
Right now, Vitrolite, Vitrocote, and Vitropurge are in battery cases, buckets, containers, housewares, plastic lumber, PVCf pipe, paint on selected Lexus cars, and used in vinyl fabric in Lazy Boy, Ford, Chrysler, and GM products.
And this is just the tip of the iceberg......
Borealis
FORM 10-QSB For the quarterly period ended March 31, 2004
http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001144204%2D04%2D007550%2Etxt&FilePath....
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to____________
Commission File No. 0-49692
VITROTECH CORPORATION
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0504050
--------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5 Hutton Centre Drive, Suite 700
Santa Ana, CA 92707
----------------------------------------
(Address of principal executive offices)
(714) 708-4700
--------------------------
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 May 20, 2004, the Registrant had 145,499,998 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes /_/ No /X/
--------------------------------------------------------------------------------
VITROTECH CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet - March 31, 2004.................. 3
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2004 and 2003....................................... 4
Condensed Consolidated Statement of Stockholders' Deficit for the
Three Months Ended March 31, 2004................................... 5
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2004 and 2003....................................... 6
Notes to Condensed Consolidated Financial Statements................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........14
ITEM 3. CONTROLS AND PROCEDURES............................................18
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES..............................................19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................20
SIGNATURES
CERTIFICATIONS
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VITROTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 2004
ASSETS
Current assets:
Cash $ 257,919
Accounts receivable, net of allowance
for doubtful accounts of $385,164 286,105
Cost of materials 1,162,662
Receivable from related party 319,487
Advances receivable 5,000
Prepaid expenses 107,082
Debt issue costs - current portion 242,762
------------
Total current assets 2,381,017
Property and equipment, net 137,134
Deposits 75,735
Debt issue costs, net of current portion 67,499
------------
Total assets $ 2,661,385
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 1,191,599
Due to related parties - material and advances 1,079,008
Accrued interest 227,072
Accrued expenses 110,342
Capital leases payable - current portion 15,248
Notes payable - current portion 5,934,659
------------
Total current liabilities 8,557,928
Capital leases payable, net of current portion 46,148
Notes payable, net of current portion 1,937,000
------------
Total liabilities 10,541,076
Commitments and Contingencies --
Stockholders' deficit
Common stock, $.001 par value, authorized 500,000,000
shares; 145,499,998 issued and outstanding 145,500
Additional paid-in capital 14,786,546
Accumulated deficit (22,811,737)
------------
Total stockholders' deficit (7,879,691)
------------
Total liabilities and stockholders' deficit $ 2,661,385
============
See accompanying notes to condensed consolidated financial statements.
3
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VITROTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, 2004 and 2003
Three Months Ended March 31,
------------------------------
2004 2003
------------- -------------
Revenue $ 225,870 $ 878,264
Cost of goods sold (related party) 109,496 291,067
------------- -------------
Gross profit 116,374 587,197
------------- -------------
Selling, general and administrative expenses 2,264,138 1,111,592
Research and development expense 43,629 152,671
------------- -------------
Total 2,307,767 1,264,263
------------- -------------
Loss before other income (expense) (2,191,393) (677,066)
Other income (expense):
Interest expense (205,889) (376,828)
Debt issue costs (93,719) (98,674)
Interest income 697 4,010
------------- -------------
Total other expense (298,911) (471,492)
------------- -------------
Net loss before taxes (2,490,304) (1,148,558)
Income taxes -- --
------------- -------------
Net loss $ (2,490,304) $ (1,148,558)
============= =============
Net loss per share
Basic and diluted $ (0.02) $ (0.02)
============= =============
Weighted average shares outstanding
Basic and diluted 113,883,053 49,573,170
============= =============
See accompanying notes to condensed consolidated financial statements.
4
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VITROTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
For the Three Months Ended March 31, 2004
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 118,698,047 $ 118,698 $ 11,396,865 $(20,321,433) $ (8,805,870)
Issuance of common stock for
conversion of notes payable 801,953 802 1,238,498 -- 1,239,300
Issuance of common stock for
acquisition of Star Computing Limited 20,000,000 20,000 (20,000) -- --
Net deficit of operations
not transferred -- -- (314,623) -- (314,623)
Issuance of common stock for cash 5,333,332 5,333 1,994,667 -- 2,000,000
Offering costs paid in cash -- -- (8,194) -- (8,194)
Issuance of common stock from
the exercise of warrants 666,666 667 499,333 -- 500,000
Net loss -- -- -- (2,490,304) (2,490,304)
------------ ------------ ------------ ------------ ------------
Balance, March 31, 2004 145,499,998 $ 145,500 $ 14,786,546 $(22,811,737) $ (7,879,691)
============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
5
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VITROTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, 2004 and 2003
Three Months Ended March 31,
--------------------------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,490,304) $(1,401,123)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 10,638 20,568
Change in allowance for bad debts 173,740 --
Change in assets and liabilities:
(Increase) decrease in assets
Accounts receivable (202,741) (373,575)
Cost of materials (47,281) (70,134)
Receivables from related parties (1,312) (8,261)
Prepaid expenses (61,527) (6,000)
Deposits 24,904 6,858
Change in debt issue costs 41,494 98,674
Increase (decrease) in liabilities
Accounts payable 279,000 61,996
Due to related parties - material and advances (124,789) 323,087
Accrued interest (166,865) (3,666)
Accrued expenses 24,531 --
----------- -----------
Net cash used in operating activities (2,540,512) (1,351,576)
----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Property and equipment (23,417) (6,011)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,491,806 113,499
Proceeds from notes payable 357,300 1,492,000
Payments of notes payable -- (30,365)
Payments on capital lease obligations (15,927) --
----------- -----------
Net cash provided by financing activities 2,833,179 1,575,134
----------- -----------
Net deficit of operations not transferred (314,623) (217,547)
----------- -----------
Net change in cash (45,373) --
Cash, beginning of year 303,292 500
----------- -----------
Cash, end of period $ 257,919 $ 500
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 380,496 $ 149,452
=========== ===========
Cash paid for income taxes $ -- $ --
=========== ===========
Non-cash investing and financing activities
During the quarter ended March 31, 2004, the Company converted notes payable totaling $1,239,300 to common stock.
See accompanying notes to condensed consolidated financial statements.
6
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VITROTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
1. ORGANIZATION
VitroTech Corporation ("VitroTech" or the "Company"), a Nevada corporation, originally incorporated under the name Star Computing Limited ("Star"), was formed on July 16, 2001. The Company is engaged in the materials technology business which includes, but is not limited to, the mining, processing, marketing and sale of a family of proprietary amorphous aluminosilicate (the "Mineral") based products designed to improve performance and quality of a broad array of manufacturing applications.
On February 3, 2004, pursuant to the terms of a Stock Purchase Agreement (the "Stock Purchase Agreement"), Star acquired 100% of VitroCo Incorporated (formerly, VitroCo Materials LLC) ("VitroCo") in exchange for 15,000,000 shares (60,000,000 shares after giving effect to a March 2004 4:1 stock split) of Star common stock and also acquired 100% of the stock of VitroTech Corporation ("VitroTech Delaware") in exchange for 14,875,000 shares (59,500,000 shares after giving effect to the March 2004 4:1 stock split) of Star common stock (the "Exchange"). In conjunction with the Exchange, 6,043,496 shares (24,173,984 shares after giving effect to the March 2004 4:1 stock split) of Star common stock held by Star shareholders were redeemed for $22,500, resulting in 20,000,000 shares outstanding immediately prior to the exchange. Immediately following the Exchange, the pre-Exchange shareholders of VitroCo and VitroTech Delaware held approximately 85.7% of our common stock and the pre-Exchange shareholders of Star held approximately 14.3% of our common stock.
The Exchange has been accounted for as a recapitalization of Star with VitroCo as the acquirer (a "reverse acquisition"). On this basis, subsequent to the Exchange and going forward, the historical financial statements presented herein, prior to the Exchange on February 3, 2004, are those of VitroCo and the historical shareholders' equity as of February 3, 2004, has been presented to reflect the equivalent number of shares issued in the Exchange.
VitroCo, our principal operating subsidiary, prior to and in conjunction with the Exchange, acquired the principal operations and assets, and assumed certain liabilities, of Hi-Tech Environmental Product, LLC ("Hi-Tech").
Following the Exchange, we assumed as our principal operations the operations of VitroCo, and changed our name, effective April 1, 2004, to VitroTech Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information - The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally presented in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The condensed consolidated financial statements should be read in conjunction with the description of business and management's plan of operations, contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, and the financial statement information contained in the Company's Form 8-K/A, Amendment No. 2, dated February 3, 2004, as amended on May 3, 2004.
Basis of presentation - The consolidated financial statements of VitroTech as of March 31, 2004 include the accounts of the Company and its wholly-owned subsidiaries VitroCo, VitroTech Delaware and VitroCo Processing Incorporated ("VitroCo Processing"). VitroTech Delaware was incorporated on September 10, 2003, and had only minimal operations to date. VitroCo Processing was incorporated in Nevada on March 22, 2004, and had no operations. All significant inter-company accounts and transactions have been eliminated in consolidation. The consolidated results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004, or for any future period.
As reflected in the accompanying financial statements, the Company has losses, negative cash flows from operations and negative working capital. These matters raise substantial doubt about the Company's ability to continue as a going concern.
7
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In view of the matters described in the preceding paragraph, the continued operations of the Company is dependent upon the Company's ability to raise capital and generate positive cash flows from operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence. Management's intentions are as follows:
O Following the Exchange through April 2004, VitroTech raised approximately $3.8 million in equity capital.
O Management is actively pursuing raising additional capital and anticipates generating positive cash flows from its operations by the end of 2004.
Cash and Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.
Revenue Recognition - The Company recognizes revenue upon shipment of mineral products to customers, provided that the other conditions of sale as established by the Securities and Exchange Commission's Staff Accounting Bulleting ("SAB") No. 104, are satisfied:
O Persuasive evidence of an arrangement exists, O Delivery has occurred, upon shipment when title passes, or services have been rendered,
O The seller's price to the buyer is fixed or determinable, and O Collectibility is reasonably assured.
The Company evaluated reporting revenue in accordance with EITF 99-19 and determined that it was appropriate to report revenue on a gross basis (versus net basis) because the Company acts as a principal in its sales transactions and, among other factors:
O is the primary obligor in the arrangement O has latitude in establishing price O determines the product specifications, and O significantly changes the product
Cost of Materials - Cost of materials, which consists of mining, processing and transportation costs, is stated at cost. The Company incurs all costs associated with the mining, processing and transportation of the Mineral from the time the Mineral is removed from the earth through all processing and warehousing. The mineral products are shipped FOB warehouse to customers. The actual acquisition cost of the Mineral is recorded as cost of goods sold and as a payable when the product is shipped, but is not due to be paid to the affiliates until after the sale proceeds are collected from the Company's customers. Mineral inventory held for sale by the Company is, in fact, consigned raw mineral inventory owned by the Company's affiliates that has been mined, processed and transported at the Company's sole expense. The cost of the acquisition of the consigned raw mineral inventory is not recorded by the Company in the accompanying financial statements until the Company has sold the material to the customer. The Company had capitalized $1,162,662 of costs as of March 31, 2004 associated with the consigned inventory, excluding the cost of acquisition of the Mineral. The amount of costs above that are associated with finished goods totaled $938,893 as of March 31, 2004. The remaining costs were associated with "in process" consigned inventory.
Property and Equipment - Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of three to seven years. Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations
Long-Lived Assets - In accordance with the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company reviews its long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. Estimated losses are included in the results of operations.
Research and Development Costs - Research and development costs are charged to expense as incurred. Equipment used in research and development with alternative uses is capitalized. Research and development costs include internal costs and payments to universities, consultants and laboratories for research on minerals, polymers, paint and coatings, and product processing techniques.
8
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Fair Value of Financial Instruments - The carrying values of cash, accounts receivable, accounts payable and accrued expenses, none of which are held for trading, approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts for the Company's long-term notes approximate fair value because current interest rates and terms offered to the Company are at current market rates.
Use of Estimates - The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management has estimated the allowance for doubtful accounts, the liability for contingent interest on notes payable, and the price increase for Mineral costs payable to affiliates. Actual results could differ from those estimates.
Concentrations of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist of temporary cash investments and trade receivables. At times, the Company's cash account balances may be in excess of the maximum amount insured by the FDIC. Three customers accounted for approximately 91% of sales for the three months ended March 31, 2004. Four customers accounted for approximately 91% of accounts receivable at March 31, 2004.
Income Taxes - The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and the tax basis of assets and liabilities using enacted rates in effect for the periods in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Basic and Diluted Loss Per Share - In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of March 31, 2004 and 2003, the Company had no outstanding stock options. The Company had 4,666,666 warrants outstanding at March 31, 2004.
Recently Issued Accounting Pronouncements:
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB-51 does not apply. The Interpretation changes the criteria by which one company includes another entity in its consolidated financial statements. The general requirement to consolidate under ARB-51 is based on the presumption that an enterprise's financial statement should include all of the entities in which it has a controlling financial interest (i.e., majority voting interest). Interpretation 46 requires a variable interest entity to be consolidated by a company that does not have a majority voting interest, but nevertheless, is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. In December 2003, the FASB concluded to revise certain elements of FIN 46, primarily to clarify the required accounting for interests in variable interest entities. FIN-46R replaces FIN-46, that was issued in January 2003. FIN-46R exempts certain entities from its requirements and provides for special effective dates for entities that have fully or partially applied FIN-46 as of December 24, 2003. In certain situations, entities have the option of applying or continuing to apply FIN-46 for a short period of time before applying FIN-46R. In general, for all entities that were previously considered special purpose entities, FIN 46 should be applied for registrants who file under Regulation SX in periods ending after March 31, 2004, and for registrants who file under Regulation SB, in periods ending after December 15, 2004. The Company has relationships with various LLC's, that are related parties, that were established prior to 2003. The Company is in the process of evaluating if these entities are Variable Interest Entities in accordance with this pronouncement. They will complete their analysis prior to the implementation date of this pronouncement.
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In December 2003, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB 104 supersedes SAB 101, "Revenue Recognition in Financial Statements." SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers ("the FAQ") issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104, which was effective upon issuance. The adoption of SAB 104 did not impact the consolidated financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2004 consisted of the following:
Machinery and equipment $ 114,971
Computer equipment 94,312
Office equipment 57,521
------------
266,804
Accumulated depreciation (129,670)
------------
$ 137,134
============
4. PURCHASE COMMITMENTS - RELATED PARTIES
The Company has entered into purchase agreements with Enviro Investment Group, LLC ("EIG"), Red Rock Canyon Mineral, LLC ("Red Rock") and Valley Springs Mineral, LLC ("Valley Springs"), (all "Affiliated Mineral Entities").
The EIG agreement provides for the purchase of all of the Mineral owned by EIG. This agreement expires on March 31, 2017 and establishes minimum annual purchase requirements by the Company at certain prices per pound. The agreement was amended to require a minimum purchase amount by the Company of $125,000 per year, from January 1, 2003 through the term of the original agreement. The agreement states that the Company is responsible for all costs associated with removing the Mineral from the property, as well as all costs related to processing and transportation of the Mineral. Pursuant to the terms of the EIG Mining Agreement, the Company may not sell or distribute products that are competitive with the Mineral, other than Mineral from the Red Rock Canyon Property, the Valley Springs Property or a property under common ownership with EIG or those properties, until such time as the Company has purchased and paid for at least 75% of the Mineral located on the EIG Property. Additionally, pursuant to the EIG Mining Agreement, the Company granted EIG a non-terminable worldwide, non-exclusive royalty free and paid up perpetual license to utilize all of the Company's technologies relating to the Minerals from and after a default by the Company under the EIG Mining Agreement or the termination, for any reason, of the EIG Mining Agreement.
As of March 31, 2004, the Company owed EIG $738,542, all of which relates to the purchase obligation. This amount includes the cost of Mineral sold to customers but not paid for and the increased Mineral purchase payment due when the customer's payment is received. Interest is not charged on this obligation. Purchases from EIG were $37,911 and $156,073 for the three months ended March 31, 2004 and 2003, respectively. The Mineral purchase payment per pound increased to $0.875 in 2004, and will increase to $1.00 plus CPI adjustment in 2005, and is subject to CPI adjustment thereafter.
Under the Red Rock Canyon Mining Agreement, the Company is obligated to pay to Red Rock amounts per pound of Mineral excavated and sold from the Red Rock Canyon Property and is subject to cumulative minimum purchase requirements. Both the per pound payment and the minimum purchase requirements with respect to the Red Rock Canyon Property are identical to the requirements established for the EIG Property. However, any Mineral purchased from any Affiliated Mineral Entity shall be credited against the minimum requirement. The Red Rock Canyon Mining Agreement includes non-compete and license provisions identical to those pertaining to the EIG Property. The Company is also obligated to advance to Red Rock all amounts necessary to secure the rights relative to the Red Rock Property, all of which amounts will be treated as advances against per pound payment obligations.
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Under the Valley Springs Mining Agreement, the Company is obligated to pay to Valley Springs amounts per pound of Mineral excavated and sold from the Valley Springs Property and is subject to cumulative minimum purchase requirements. Both the per pound payment and the minimum purchase requirements with respect to the Valley Springs Property are identical to the requirements established for the EIG Property. However, any Mineral purchased from any Affiliated Mineral Entity shall be credited against the minimum requirement. The Valley Springs Mining Agreement includes non-compete and license provisions identical to those pertaining to the EIG Property. The Company is also obligated to advance to Valley Springs all amounts necessary to secure the rights relative to the Valley Springs Property (including the payments to the land owners), all of which amounts will be treated as advances against per pound payment obligations. Under this provision no amount has been paid.
The Valley Springs Property has not previously been mined but is zoned for mining. The Company is processing the Valley Springs property for the owners to obtain mining permits and entitlement approval is expected by December 31, 2004. There is no guaranty that the Company will be successful in obtaining mining entitlements. Closing on the acquisition of mining rights to the Valley Springs property from the present landowner has not, as of May 2004, occurred.
The Company incurs all costs associated with the mining, processing and transportation of the Mineral from the time the Mineral is removed from the earth through all processing and warehousing. The actual acquisition cost of the Mineral is recorded as cost of goods sold and as a payable when the product is shipped to its customer, but is not due to be paid to the Affiliated Mineral Entities until after the sale proceeds are collected from the Company's customers. Mineral inventory held for sale by the Company is, in fact, consigned raw mineral inventory owned by the Affiliated Mineral Entities that has been mined, processed and transported at the Company's sole expense. The cost of the acquisition of the consigned raw mineral inventory is not recorded by the Company in the accompanying financial statements until the Company has sold the material to the customer.
The Company does not have title or risk of loss on the cost of Minerals that are consigned by the Affiliated Mineral Entities.
5. NOTES PAYABLE
Notes payable at March 31, 2004 consisted of the following:
Private Offering - 9/1/99 Memorandum $ 608,428
Private Offering - 3/19/01 Memorandum 1,659,187
Private Offering - 4/22/02 Memorandum 2,967,044
Private Offering - 2/24/03 Memorandum 1,937,000
Other notes payable 700,000
-----------
7,871,659
Less: current portion 5,934,659
-----------
Non-current portion $ 1,937,000
===========
Notes payable mature as follows:
2004 $5,934,659
2005 1,937,000
--------------
Total $7,871,659
==============
Private Offering - 9/1/99 Memorandum
In September 1999, the Company initiated a $5,000,000 private offering of promissory notes with an interest rate of 10% per annum. The original maturity date of these notes was December 31, 2001. The principal of $4,540,000 of these notes was extended until April 30, 2003. Accrued interest of $424,225 due on the notes has been converted to principal and extended until April 30, 2003, as well. The remaining $460,000 of original principal of these notes was due and payable at December 31, 2002, for which the Company is in default. The Company is required to make ongoing interest payments under the same terms and conditions as the original $5,000,000 private offering. The notes also provide for contingent interest equal to $0.15 per pound on the first one billion pounds of the Company's products sold and collected. The contingent interest will be shared pro rata by the total notes issued and shall be paid quarterly in arrears. As of March 31, 2004, all amounts for interest and contingent interest have been paid or accrued.
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Private Offering - 3/19/01 Memorandum
In March 2001, the Company initiated a $5,000,000 private offering of promissory notes with an interest rate of 10% per annum. Accrued interest in the amount of $279,354 that was due on December 31, 2002 was converted to principal. The notes matured on December 31, 2003, but were extended at the Company's option to December 31, 2004. The notes also provide for contingent interest equal to $0.10 per pound on the first five hundred million pounds of the Company's products sold and collected. The contingent interest will be shared pro rata by the total notes issued and shall be paid quarterly in arrears. As of March 31, 2004, all amounts for interest and contingent interest have been paid or accrued.
Private Offering - 4/22/02 Memorandum
In April 2002, the Company initiated a $5,000,000 private offering of promissory notes with an interest rate of 10% per annum. During 2002, $1,448,044 of notes were issued. The offering concluded in February, 2003 after an additional $1,519,000 of notes were issued, for a total amount raised of $2,967,044. The notes mature on December 31, 2004 but may be extended by the Company to December 31, 2005. The notes also provide for contingent interest equal to $0.07 per pound on the first five hundred million pounds of the Company's products sold and collected. The contingent interest will be shared prorata by the total notes issued and shall be paid quarterly in arrears. As of March 31, 2004, all amounts for interest and contingent interest have been paid or accrued.
Private Offering - 2/24/03 Memorandum
In February 2003, the Company initiated a $5,000,000 private offering of promissory notes with an interest rate of 10% per annum. During 2003, $1,542,000 of notes were issued. During the three months ended March 31, 2004, the Company issued $395,000 of additional notes, and received $357,300 in cash, net of offering costs of $37,700. The notes mature on December 31, 2005 but may be extended by the Company to December 31, 2006. The notes also provide for contingent interest equal to $0.07 per pound on the first five hundred million pounds of the Company's products sold and collected. The contingent interest will be shared prorata by the total notes issued and shall be paid quarterly in arrears. As of March 31, 2004, all amounts for interest and contingent interest have been paid or accrued.
Other Notes Payable
The Company has notes payable to others, aggregating $700,000, with an interest rate of 10%, plus contingent interest based on product sales, due December 31, 2004.
6. COMMON STOCK
During the three months ended March 31, 2004, the Company issued the following shares of common stock (see Note 9 - Subsequent Events):
O Issued 801,953 shares for conversion of notes payable for net consideration of $1,239,300.
O Issued 20,000,000 shares for acquisition of Star Computing Limited.
O Issued 5,333,332 shares in a private placement for $2,000,000, before fees of $8,194.
O Issued 666,666 shares upon exercise of warrants totaling $500,000.
7. WARRANTS
During February 2004, the Company completed a private placement of 5,333,332 shares of common stock at a price of $0.375 per share for $2 million. The Company also issued to the investors warrants to purchase an aggregate of 5,333,332 shares of common stock at an exercise price of $0.75 per share. The warrants are exercisable at any time until February 11, 2009.
The table below summarizes warrants outstanding as of March 31, 2004:
Warrants outstanding at December 31, 2003 -
Granted 5,333,332
Exercised at $0.75 per share (666,666)
Cancelled -
--------------
Warrants outstanding and
exercisable at March 31, 2004 4,666,666
==============
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8. COMMITMENTS
The Company has entered into purchase commitments for the Mineral. These commitments are described in NOTE 4 - PURCHASE COMMITMENTS - RELATED PARTIES.
The Company leases its office and warehouse facilities under operating leases that expire through 2010.
9. SUBSEQUENT EVENTS
Effective April 1, 2004, the Company changed its name to VitroTech Corporation.
In April 2004, the Company received $1,257,500 pursuant to the exercise of warrants to purchase shares of the Company's common stock at $0.75 per share, for which the Company is obligated to issue 1,676,666 shares of common stock.
In April 2004, the Company agreed to issue to a financial advisor 125,000 warrants, exercisable for five years, to purchase shares of the Company's common stock at $1.55 per share. The Company will account for the issuance of these warrants using the fair value method pursuant to SFAS 123 using the Black-Scholes option pricing model.
In April 2004, the Company entered into an agreement to acquire from Indian Hill Processing, LLC, the Indian Hill Processing Facility for $864,000, of which $464,000 is payable at closing with the balance accruing interest at 10% per annum and payable in monthly payments of $30,000 subject to acceleration in the event of receipt of funding to pay the balance.
In April 2004, an aggregate of 290,000 options were granted under the 2004 Option Plan to an officer and non-employee directors. All such options are subject to approval of the 2004 Option Plan by our shareholders. These options have a ten year life and may be exercised at $1.58. Options granted to non-employee directors are fully vested and options to an officer vest over three years.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-QSB quarterly report of VitroTech Corporation (the "Company") for the three months ended March 31, 2004, contains certain 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, which are intended to be covered by the safe harbors created thereby. To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement, where the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.
Certain factors that could cause actual results or events to differ materially from those anticipated are set forth in our Form 10-KSB for the year ended December 31, 2003 under the caption "Risk Factors That May Affect Future Results" within "Management's Discussion and Analysis or Plan of Operations" and elsewhere herein and in our other reports filed from time to time with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company believes the information contained in this Form 10-QSB to be accurate as of the date hereof. Changes may occur after that date, and the Company will not update that information except as required by law in the normal course of its public disclosure practices.
Additionally, the following discussion regarding the Company's financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part 1 of this Form 10-QSB, as well as the financial statements in Item 7 of Part II of the Company's Form 10-KSB for the fiscal year ended December 31, 2003 and the financial statements filed with the Company's Form 8-K/A, Amendment No. 2, dated February 3, 2004, as amended May 3, 2004.
OVERVIEW
On February 3, 2004, we completed a reverse merger (the "Exchange") pursuant to which Star Computing Limited acquired 100% of the stock of VitroCo, Inc. and VitroTech Corporation in exchange for shares of common stock representing approximately 85.7% of our common stock. Following the Exchange, and through April 1, 2004, we (1) assumed as our principal plan of operations the business of VitroCo, (2) terminated the prior operations of Star Computing, (3) changed our name from Star Computing Limited to VitroTech Corporation, (4) carried out a 4-for-1 stock split, (5) sold, for $2 million, 5,333,332 shares of our common stock (after giving effect to the stock split) and 5,333,332 common stock purchase warrants exercisable at $0.75 per share (after giving effect to the stock split), and (6) issued 666,666 shares of common stock for $500,000 pursuant to the exercise of warrants.
The Exchange has been accounted for as a recapitalization of Star with VitroCo as the acquirer (a "reverse acquisition"). On this basis, subsequent to the Exchange and going forward, the historical financial statements presented herein, prior to the Exchange on February 3, 2004, are those of VitroCo and the historical shareholders' equity, as of February 3, 2004, has been presented to reflect the equivalent number of shares issued in the Exchange.
Readers should review the "Plan of Operations" discussion in the "Management's Discussion and Analysis or Plan of Operation" in our Form 10-KSB for the year ended December 31, 2003 for an overview of our principal revenue sources and principal operating expenses and factors effecting our revenues and expenses.
During the quarter ended March 31, 2004, we implemented the Plan of Operations described in our Form 10-KSB. We also devoted substantial management time and financial resources to consummation of the Exchange, capital raising efforts, investor relations programs, implementation of policies, procedures and systems designed to facilitate our functioning as a publicly held company, establishing of expanded distribution channels and evaluation of various acquisition strategies with the intent of enhancing our production and distribution capabilities. We also continued our ongoing efforts to close on the acquisition of rights relating to the Mineral on the Valley Springs Property. Pursuant to those efforts, our counsel has advised that the primary term of the agreement to acquire the Mineral on the Valley Springs Property had expired and that any party thereto could terminate the agreement. Notwithstanding the lapse of the term to close, the parties continue to pursue the transaction and we continue to believe that we will secure the rights with respect to the Valley Springs Property on the terms described in our Form 10-KSB.
All of the undertakings described above resulted in our experiencing substantially higher operating expenses and reduced focus on sales during the quarter ended March 31, 2004 as compared to the same quarter in 2003.
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CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company believes certain critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements. The following describes the critical accounting policies used in reporting our financial condition and results of operations.
Revenue Recognition - We recognize revenue upon shipment of mineral products to customers, provided that the other conditions of sale as established by the Securities and Exchange Commission's Staff Accounting Bulleting ("SAB") No. 104, are satisfied:
O Persuasive evidence of an arrangement exists, O Delivery has occurred, upon shipment when title passes, or services have been rendered, O The seller's price to the buyer is fixed or determinable, and O Collectibility is reasonably assured.
We evaluated reporting revenue in accordance with EITF 99-19 and determined that it was appropriate to report revenue on a gross basis (versus net basis) because we act as a principal in sales transactions and, among other factors:
O are the primary obligor in the arrangement O have latitude in establishing price O determine the product specifications, and O significantly change the product
Cost of Materials - Cost of materials, which consists of mining, processing and transportation costs, is stated at cost. We incur all costs associated with the mining, processing and transportation of the Mineral from the time the Mineral is removed from the earth through all processing and warehousing. The mineral products are shipped FOB warehouse to customers. The actual acquisition cost of the Mineral is recorded as cost of goods sold and as a payable when the product is shipped, but is not due to be paid to the affiliates until after the sale proceeds are collected from our customers. Mineral inventory held for sale is, in fact, consigned raw mineral inventory owned by our affiliates that has been mined, processed and transported at our sole expense. The cost of the acquisition of the consigned raw mineral inventory is not recorded in the accompanying financial statements until we have sold the material to the customer. We had capitalized $1,162,662 of costs as of March 31, 2004 associated with the consigned inventory, excluding the cost of acquisition of the Mineral. The amount of costs above that are associated with finished goods totaled $938,893 as of March 31, 2004. The remaining costs were associated with "in process" consigned inventory.
We evaluate our cost of material periodically to determine if there is any impairment in the value of such material costs. If an impairment is found to exist, we reduce the carrying amount of the cost of material to an amount determined to be market value. We review a number of factors in evaluating potential impairment of our cost of material including market prices and our ability to recover the cost of materials through the sale of Mineral. As of March 31, 2004, we determined that no impairment had occurred with respect to our cost of materials.
Impairment of Long-Lived Assets - We review all long-lived assets on a regular basis to determine if there has been an impairment in the value of those assets. If, upon review, it is determined that the carrying value of those assets may not be recoverable, we will record a charge to earnings and reduce the value of the asset on the balance sheet to the amount determined to be recoverable.
For purposes of evaluating recoverability of long-lived assets, the recoverability test is performed using undiscounted cash flows of the individual assets compared to the related carrying value. If the undiscounted operating income is less than the carrying value, the amount of the impairment, if any, will be determined by comparing the carrying value of each asset with its fair value. Fair value is generally based on a discounted cash flow analysis.
Based on our review of our long-lived assets, during the three months ended March 31, 2004, we recorded no impairments of our long-lived assets.
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Valuation of Accounts Receivable - We review all of our accounts receivable on a regular basis to determine the collectability of each account based on age, response to collection efforts, and other factors. We establish a reserve for those accounts where collection seems doubtful. If a determination is made that the customer will definitely not pay, the amount is written off against the reserve.
Based on our review at March 31, 2004, the current reserve for uncollectable accounts receivable is adequate.
RESULTS OF OPERATIONS
The condensed consolidated financial statements of VitroTech as of March 31, 2004 include the accounts of the Company and its wholly-owned subsidiaries VitroCo, VitroTech Delaware and VitroCo Processing Incorporated ("VitroCo Processing"). VitroTech Delaware was incorporated on September 10, 2003, and had only minimal operations to date. VitroCo Processing was incorporated in Nevada on March 22, 2004, and had no operations. All significant inter-company accounts and transactions have been eliminated in consolidation. The March 31, 2003 financial statements reflect the operating results of certain assets and operations of Hi-Tech Environmental Products, LLC which were acquired by VitroCo in contemplation of the Exchange.
Revenue. Revenue for the three months ended March 31, 2004 was $225,870, a decrease of $652,394, or 74.3%, compared with $878,264 during the same period in the prior year. The reduction in revenues for the period was principally attributable to (1) the development and implementation of a revised sales and marketing strategy during the period and (2) a reduced focus on end-user sales during the current period.
The revised sales and marketing strategy developed during the quarter is designed to focus our efforts on three clearly defined channels, consisting of application specific sales, joint venture/strategic partnerships and acquisitions. Application specific sales entails identification of certain product applications and industries where we have developed a data base of proven performance enhancement and hiring a team of professionals with experience in the target industry to target potential customers operating in those target applications and industries. Joint venture/strategic partnership sales entails the establishment of joint venture or partnership relationships with key suppliers to the plastics industry, including resin manufacturers, masterbatchers and specialty compounders, to develop performance products in partnership with those suppliers wherein our product is added "up stream" of the end-users at the resin manufacturing stage, masterbatch production stage or compounding stage. Acquisitions entail identification and planned acquisition of companies operating within the plastics industry where we can gain customers, capabilities and distribution channels and enhance profitability by introduction of our products in the acquired businesses' operations. While the development and implementation of our revised sales and marketing strategy is expected to require more time and entail greater expense than maintaining our prior direct sales model, which transition was a substantial cause of our decline in sales for the quarter, we believe that our revised strategy will better position us to gain broad market acceptance, grow sustainable recurring sales and service customers.
The reduced focus on sales during the period reflected the investment of substantial time, money and resources by our sales and marketing team in development and ongoing implementation of the revised sales and marketing strategy and the devotion of substantial management and financial resources to completion of the Exchange, capital raising efforts and implementation of procedures and processes to facilitate functioning as a publicly held company and to facilitate anticipated growth.
Cost of Sales and Gross Margins. Cost of goods sold totaled $109,496 during the current period as compared to $291,067 during the same period in 2003, a decrease of 62.4%. Cost of goods sold during the current period included $58,296 of direct cost of mineral and $51,200 of processing and related costs. Cost of goods sold during the same period in 2003 included $156,073 of direct cost of mineral and $134,994 of processing and related costs. Cost of goods sold as a percentage of sales was 48.5% during the current period as compared to 33.1% in the 2003 period. The decline in cost of goods sold was attributable to the reduction in sales volume during the period. The increase in cost of goods sold as a percentage of sales was partially attributable to the payment of a higher per pound price for mineral during 2004 compared to 2003. Under the terms of our mineral purchase agreements, we paid $0.75 per pound for mineral mined and sold during 2003. During 2004, we pay $0.875 per pound for mineral. Additionally, the reduced gross margin percentage in 2004 reflects a change in the product mix and the associated cost of manufacturing the product. As a result of this change in product focus, our target gross margin percentage is 50% in future periods.
The decrease in sales combined with the increase in our per pound cost of materials resulted in a reduction in our gross margins from $587,197 in the 2003 period to $116,374 during the March 31, 2004 quarter.
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Selling, General and Administrative Expense. Selling, general and administrative expenses ("SG&A") increased to $2,264,138 in the three months ended March 31, 2004, compared with $1,111,592 in the prior year, an increase of 103.7%. The increase in SG&A is primarily attributable to costs associated with business development (consulting fees, sales staffing and travel), legal and accounting fees associated with the reverse merger, investor relations programs associated with becoming a public company and costs associated with implementation of our revised sales and marketing strategy, including investigation, due diligence and other costs associated with identification of acquisition candidates. Additionally during 2004, we began paying a royalty of $1.00 per pound of mineral sold and collected to Hi-Tech Environmental Products. Hi-Tech royalties totaled $65,467 during the quarter.
Research and Development Expense. Research and development expense for the three months ended March 31, 2004 was $43,629, compared with $152,671 for the same period in the prior year, a decrease of 71.4%. The higher R&D expense in the prior year quarter reflected payments to universities for product research that has been completed.
Interest Expense. Interest expense decreased $170,939, or 45% in the first quarter of 2004 compared to the same period in 2003. Notes payable totaled $7,871,659 and $14,518,257 at March 31, 2004 and 2003, respectively. The decrease in interest expense reflects the decrease in notes payable as a result of debt conversions to equity and assumption of notes for equity.
FINANCIAL CONDITION
Liquidity and Capital Resources. At March 31, 2004, we had a cash balance of $257,919 and a working capital deficit of $6,176,911 compared to a pro forma cash balance of $303,292 and a pro forma working capital deficit of $7,515,964 at December 31, 2003.
As discussed in the footnotes to the financial statements included herewith and in the financial statements included in our Form 8-K/A dated May 3, 2004, our losses, negative cash flows from operations and negative working capital raise substantial doubt about our ability to continue as a going concern.
In view of the matters described in the preceding paragraph, our continued operations are dependent upon our ability to raise capital and generate positive cash flows from operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should we be unable to continue our existence.
During the quarter ended March 31, 2004, we issued 5,333,332 shares (after giving effect to a 4-for-1 stock split) of common stock and warrants for aggregate gross proceeds of $2 million. The warrants issued during the quarter are exercisable at $0.75 per share (after giving effect to the 4-for-1 stock split). During the quarter 666,666 of the warrants were exercised providing additional proceeds of $500,000.
Subsequent to March 31, 2004, in April 2004, an additional 1,676,666 of the warrants were exercised providing an additional $1,257,500 of capital. Also in April 2004, we agreed to issue to a financial advisor 125,000 warrants, exercisable for five years, to purchase shares of our common stock at $1.55 per share.
In order to support our operations and capital commitments through December 31, 2004, we estimate that we will require $22,900,000 from operating cash flow, infusions of additional equity or debt or other sources. Additionally, we will likely require substantial additional capital to support the acquisition component of our revised sales and marketing strategy. We are continuing in our efforts to secure the necessary capital to support our operations and our acquisition strategy. In order to facilitate our capital raising efforts we have engaged, and expect to engage in the future, investment banking firms and financial advisors to assist in the evaluation and financing of our operations and prospective acquisitions. We presently have no firm commitments from third parties to provide such financing and there can be no assurance that we will receive such financing. Should we be unable to secure needed financing we may be unable to fully implement our planned operations and acquisitions, we may be required to curtail our operations in part or in whole.
Notes Payable. At March 31, 2004, our notes payable totaled $7,871,659, of which $5,934,659 represented current maturities reflected in our working capital deficit. $460,000 of those notes payable were in default at March 31, 2004. The balance of the notes, in the amount of $1,937,000, mature December 31, 2005, but may be extended by the Company to December 31, 2006.
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Capital Expenditures and Commitments. We periodically purchase equipment and related items to support operations. During the quarter ended March 31, 2004, we purchased $23,417 of equipment. In addition to our needs for capital to support operations and routine capital expenditure requirements, we require capital to fund our proposed acquisition of, and commencement of processing operations at, the Indian Hill Processing Facility. Completion of the proposed acquisition of the Indian Hill Processing Facility will require a cash payment at closing of $464,000. The balance of the purchase price, in the amount of $400,000, will bear interest at 10% per annum and will be payable in monthly installments of $30,000, subject to mandatory prepayment to the extent that we secure additional capital. Commencement of operation of the Indian Hill Processing Facility will require the purchase and installation of processing equipment at an estimated cost of $1,250,000. Acquisition and installation of equipment and commencement of operation of the Indian Hill Processing Facility is not expected to occur before October 31, 2004.
Operating Leases. At March 31, 2004, we, and our subsidiaries, were obligated under leases covering our executive offices, warehouses and other facilities. Such leases contain minimum rent provisions which provided for the payment of minimum aggregate annual rental payments of approximately $293,882 in 2004.
Contractual Obligations. Our only material contractual obligations requiring determinable future payments on our part are various notes payable and our leases relating to our executive offices and other facilities, each of which is described above.
OFF-BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements or guarantees of third party obligations at March 31, 2004.
INFLATION
We believe that inflation has not had a significant impact on our operations since inception.
ITEM 3. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure.
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure.
There has been no significant change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
SALES OF UNREGISTERED SECURITIES
On February 3, 2004, we issued an aggregate of 29,875,000 shares (119,500,000 shares after giving effect to the March 2004 stock split) of common stock to 20 shareholders pursuant to the terms of a Stock Purchase Agreement (the "Stock Purchase Agreement") in exchange for 100% of the equity securities of VitroCo Incorporated (formerly, VitroCo Materials LLC) ("VitroCo") and 100% of the equity securities of VitroTech Corporation ("VitroTech Delaware").
In February 2004, we issued an aggregate of 1,333,333 shares (5,333,332 after giving effect to the March 2004 stock split) of common stock and $3.00 warrants for a purchase price of $2,000,000 to four accredited investors. The $3.00 warrants are exercisable for 5 years to purchase shares of our common stock at $3.00 per share. Pursuant to the terms of the 4-for-1 stock split effected in March 2004, the exercise price of the $3.00 warrants was reduced to $0.75 per share and the number of shares issuable upon exercise of the warrants increased to 5,333,332.
In March 2004, we issued an aggregate of 666,666 shares of common stock to four accredited investors upon the exercise of outstanding warrants for which we received $500,000 in exercise proceeds.
The issuance of all shares of our common stock and warrants described above was pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended and related state private offering exemptions. All of the investors were Accredited Investors as defined in the Securities Act who took their shares for investment purposes without a view to distribution and had access to information concerning the Company and our business prospects, as required by the Securities Act.
In addition, there was no general solicitation or advertising for the purchase of our shares. All certificates for our shares contain a restrictive legend. Finally, our stock transfer agent has been instructed not to transfer any of such shares, unless such shares are registered for resale or there is an exemption with respect to their transfer.
No commissions were paid in connection with the issuances described above.
STOCK REPURCHASES
During the quarter ended March 31, 2004, we repurchased shares of our common stock as set forth in the following table:
-------------------------------------------------------------------------------------------------------------
Total Number of
Shares Purchased as Maximum Number of
Total Number of Part of Publicly Shares that May Yet
Shares Purchased Average Price Paid Announced Plans or Be Purchased Under
(1)(2) Per Share Programs the Plans or Programs
-------------------------------------------------------------------------------------------------------------
January 2004 -- -- -- 0
-------------------------------------------------------------------------------------------------------------
February 2004 6,043,496 $ 0.0037 -- 0
-------------------------------------------------------------------------------------------------------------
March 2004 -- -- -- 0
-------------------------------------------------------------------------------------------------------------
Total 6,043,496 $ 0.0037 -- 0
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(1) We repurchased 6,043,496 shares of our common stock pursuant to the terms, and as a condition, of the Stock Purchase Agreement whereby we acquired 100% of the stock of VitroCo and VitroTech Delaware.
(2) The shares shown as purchased do not reflect a 4-for-1 stock split carried out in March 2004. Giving effect to the split, the total number of shares repurchased would have been 24,173,984.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are in default on $460,000 of original principal on our 9/1/99 private offering promissory notes. These notes were due and payable on December 31, 2002. We are required to make ongoing interest payments under the same terms and conditions as the original notes. The required interest has been paid through March 31, 2004.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 24, 2004, two stockholders, holding an aggregate of 77.3% of the outstanding shares of our common stock, executed a written consent, in lieu of a meeting, approving the following amendments to our Articles of Incorporation:
(i) changing our name from Star Computing Limited to "VitroTech Corporation;"
(ii) increasing our authorized shares of common stock to 500,000,000; (iii) allowing our Board to change the number of directors from time to time; (iv) changing our resident agent; (v) limiting the liabilities of our directors and providing for the indemnification of our directors and officers to the extent permitted by Nevada law; (vi) electing not to be governed by the share control law or the business combination laws of Nevada; and (vii) removing restrictions on our actions, to the extent permitted by Nevada law.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
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31.1 Section 302 Certification of CEO
31.2 Section 302 Certification of CFO
32 Section 906 Certifications
(b) Reports on Form 8-K
Current Report on Form 8-K, dated February 3, 2004, regarding the stock purchase agreement and changes in control of registrant.
Current Report on Form 8-K, dated February 3, 2004, and amended on February 12, 2004, regarding the stock purchase agreement and changes in control of registrant.
Current Report on Form 8-K, dated March 1, 2004, regarding the four-for-one forward stock split of common stock.
Current Report on Form 8-K, dated March 3, 2004, regarding the changes in registrant's certifying accountant.
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.
Date: May 24, 2004 VITROTECH CORPORATION
By: /s/ Jess Rae Booth
-------------------------------------
Jess Rae Booth
President and CEO
By: /s/ Thomas M. Costales
-------------------------------------
Thomas M. Costales
Chief Financial Officer
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Exhibit 31.1
CERTIFICATION PURSUANT TO 15 U.S.C. SECTION 10A,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Jess Rae Booth, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of VITROTECH CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) [omitted in accordance with SEC Release Nos. 33-8238 and 34-47986];
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: May 24, 2004 /s/ Jess Rae Booth
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Jess Rae Booth
President and Chief Executive Officer
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Exhibit 31.2
CERTIFICATION PURSUANT TO 15 U.S.C. SECTION 10A,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Thomas M. Costales, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of VITROTECH CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) [omitted in accordance with SEC Release Nos. 33-8238 and 34-47986];
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: May 24, 2004 /s/ Thomas M. Costales
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Thomas M. Costales
Chief Financial Officer
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Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
I, Jess Rae Booth, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of VitroTech on Form 10-QSB for the quarter ended March 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB fairly presents in all material respects the financial condition and results of operations of VitroTech Corporation.
By: /s/ Jess Rae Booth
-------------------------------------
Name: Jess Rae Booth
Title: Chief Executive Officer
May 24, 2004
I, Thomas M. Costales, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of VitroTech on Form 10-QSB for the quarter ended March 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB fairly presents in all material respects the financial condition and results of operations of VitroTech Corporation.
By: /s/ Thomas M. Costales
-------------------------------------
Name: Thomas M. Costales
Title: Chief Financial Officer
May 24, 2004
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MOST RECENT 14C INFORMATION >>>
http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001144204%2D04%2D005733%2Etxt&FilePath....
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
VITROTECH CORPORATION
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(Name of Registrant As Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14C-5(G) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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4. Date Filed:
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VITROTECH CORPORATION
5 Hutton Centre Dr., Suite 700
Santa Ana, California 92707
TO THE STOCKHOLDERS OF VITROTECH CORPORATION:
VitroTech Corporation (the "Company") has obtained the written consent of a majority of its stockholders of record as of April 15, 2004 to approve (1) an amendment to the Company's Articles of Incorporation to authorize the issuance of up to 50,000,000 shares of Preferred Stock (the "Preferred Stock") and (2) adoption of the VitroTech Corporation 2004 Stock Option Plan (the "2004 Option Plan"). Amendment of the Articles of Incorporation and adoption of the 2004 Option Plan have both been approved by the Company's Board of Directors. Therefore, your consent is not required and is not being solicited in connection with this action.
Pursuant to the Nevada Revised Statutes, you are hereby being provided with notice of the approval by less than unanimous written consent of the Company's stockholders of the foregoing amendment to the Company's Articles of Incorporation and adoption of the 2004 Option Plan. Pursuant to the Securities Exchange Act of 1934, as amended, you are being furnished an information statement relating to this action with this letter.
Jess Rae Booth President and Chief Executive Officer
Santa Ana, California
May [ ], 2004
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VITROTECH CORPORATION
5 Hutton Centre Dr., Suite 700
Santa Ana, California 92707
INFORMATION STATEMENT
BACKGROUND
We are furnishing this Information Statement to the stockholders of VitroTech Corporation, a Nevada corporation (the "Company"), in connection with (1) the amendment to the Company's Certificate of Incorporation to authorize the issuance of up to 50,000,000 shares of the Company's preferred stock, par value $0.001 per share ("Preferred Stock")(the "Amendment") and (2) the adoption and approval of the VitroTech Corporation 2004 Stock Option Plan (the "2004 Option Plan").
The Board of Directors has adopted resolutions setting forth the Amendment and adoption of the 2004 Option Plan, declaring their advisability and calling on the stockholders to consider the Amendment and adoption of the 2004 Option Plan. In order to amend the Company's Articles of Incorporation and to adopt the 2004 Option Plan, the holders of a majority of the outstanding shares of Common Stock must vote in favor of the Amendment and adoption of the 2004 Option Plan. The Company's Articles of Incorporation permit shareholders to act by written consent rather than at a meeting of the stockholders. Hi-Tech Environmental Products, LLC (an entity controlled by various shareholders, officers and employees of the Company) and Elgin Investments, LLC collectively hold 77.3% of the Company's outstanding Common Stock and have adopted a resolution by written consent of stockholders to approve the Amendment and the 2004 Option Plan. Therefore, the requirements of the Nevada Revised Statutes and the Company's Articles of Incorporation and Bylaws have been met and no further action by the stockholders is required to approve the Amendment and the 2004 Option Plan.
In accordance with the regulations of the Securities and Exchange Commission (the "Commission"), the stockholders' consent will become effective approximately 21 days following the mailing of this Information Statement to the Company's stockholders. It is expected that the Amendment to the Articles of Incorporation will become effective on or about May __, 2004 upon its filing with the Secretary of State of the State of Nevada.
The approximate date on which this information statement is first being sent or given to stockholders is May __, 2004. It is being sent to holders of the Company's common stock as of the close of business on May __, 2004, the record date.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Company will pay the entire cost of furnishing this Information Statement. The Company will request brokerage houses, nominees, custodians, fiduciaries and other like parties to forward this Information Statement to the beneficial owners of the Common Stock held of record by them. The close of business on April 15, 2004 has been fixed as the record date (the "Record Date") for the determination of holders of Common Stock of the Company who are entitled to receive this Information Statement.
You are being provided with this Information Statement pursuant to Section 14C of the Securities Exchange Act of 1934, as amended, and Rule 14c and Schedule 14C thereunder.
VOTING SECURITIES
As of April 15, 2004, the Company had 144,833,332 shares of Common Stock issued and outstanding. Each share of outstanding Common Stock is entitled to one vote on matters submitted for stockholder approval. On April 15, 2004, Hi-Tech Environmental Products, LLC and Elgin Investments, LLC, which collectively hold 112,000,000 shares of the Common Stock (or approximately 77.3% of the shares of Common Stock then outstanding), executed and delivered to the Company a written consent approving the Amendment and adoption of the 2004 Option Plan. Since the Amendment and adoption of the 2004 Option Plan have been approved by the holders of the required majority of Common Stock, no proxies are being solicited with this Information Statement.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 15, 2004, based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock held by (i) each person known by us to be the owner of more than 5% of our outstanding shares of common stock,
(ii) each director, (iii) each named executive officer, and (iv) all executive officers and directors as a group:
Name and Address Number of Shares Percentage
of Beneficial Owner (1) Beneficially Owned (2) of Class
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DIRECTORS AND NAMED EXECUTIVE OFFICERS
Jess Rae Booth (3) 11,849,488 8.2%
John Boddie (4) 60,000 *
Larry S. Poland (4) 159,148 *
James Roth (4) 60,000 *
John Sutherland (4) 60,000 *
All directors and executive officers
as a group (8 persons) 13,397,516 9.2%
5% SHAREHOLDERS
Hi-Tech Environmental Products, LLC (5) 60,000,000 41.4%
Elgin Investments LLC (6) 52,000,000 35.9%
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* Less than 1%
(1) Unless otherwise indicated, each beneficial owner has both sole voting and sole investment power with respect to the shares beneficially owned by such person, entity or group. The number of shares shown as beneficially owned include all options, warrants and convertible securities held by such person, entity or group that are exercisable or convertible within 60 days of April 15, 2004.
(2) The percentages of beneficial ownership as to each person, entity or group assume the exercise or conversion of all options, warrants and convertible securities held by such person, entity or group which are exercisable or convertible within 60 days, but not the exercise or conversion of options, warrants and convertible securities held by others shown in the table.
(3) Address is 5 Hutton Centre Dr., Suite 700, Santa Ana, California 92707. Shares shown as beneficially owned by Jess Rae Booth reflect Mr. Booth's allocable interest in shares held of record by Hi-Tech Environmental Products LLC.
(4) Includes options for 60,000 shares exercisable within 60 days of April 15, 2004.
(5) Address is 5 Hutton Centre Dr., Suite 700, Santa Ana, California 92707. Based on a Schedule 13D/A, dated March 8, 2004, James Kangas and Glenn Easterbrook, as Chairman Manager and Manager, respectively, of Hi-Tech Environmental Products LLC, have voting and dispositive power with respect to all shares held of record by Hi-Tech Environmental Products LLC.
(6) Address is 8501 Wilshire Blvd., Suite 220, Beverly Hills, California 90211. Based on a Schedule 13D, dated February 3, 2004, Steve Merry, as Manager of Elgin Investments, LLC, has voting and dispositive power with respect to all shares held of record by Elgin Investments, LLC.
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COMPENSATION OF EXECUTIVE OFFICERS
During the period from our inception on April 1, 2001 through December 31, 2003, no salary or any other compensation was paid to the Company's Chief Executive Officer or any officer for the services provided to us.
EMPLOYMENT CONTRACTS
Effective March 18, 2004, we entered into an employment agreement with Thomas M. Costales in connection with his hiring to serve as our Chief Financial Officer. Mr. Costales' employment agreement provides for an annual salary of $165,000 and the grant of 50,000 stock options. The agreement is for a term ending December 31, 2004 and is "at-will" thereafter.
We have no other employment agreements with any of our employees but intend to enter into employment agreements with key officers and employees.
COMPENSATION OF DIRECTORS
Commencing April 2004, each director who is not an employee is paid (1) an annual fee of $30,000, payable in quarterly installments, (2) $1,000 per day per meeting, including one travel day for each meeting for out-of-state directors, and (3) out-of-pocket expenses. Each non-employee director is also granted options to purchase 60,000 shares of our common stock on initial appointment and 20,000 options following each subsequent shareholders meeting after which the director continues to serve. In addition, each non-employee director is paid $500 per meeting for each committee meeting attended. The Chair of the Audit Committee is paid an annual fee of $7,500. Other committee chairs are paid an annual fee of $1,000.
ACTION 1
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
AUTHORIZE SHARES OF PREFERRED STOCK
The Board of Directors has unanimously adopted and the shareholders, by means of the Written Consent, have approved an amendment to the Articles of Incorporation, as amended, of the Company (the "Authorized Shares Amendment") to authorize 50,000,000 shares of preferred stock (the "Preferred Stock"). The form of Restated Articles of Incorporation reflecting the Authorized Shares Amendment is attached as Appendix A and is incorporated herein by reference.
The Board of Directors has deemed it advisable and in the best interests of the Company to amend the Articles of Incorporation to authorize 50,000,000 shares of Preferred Stock. The purpose of such authorization is to place the Company in a position where it will have shares of authorized and unissued Preferred Stock that can be issued for, or in connection with, such corporate purposes as may, from time to time, be considered advisable by the Board of Directors. Having such shares available for issuance in the future will give the Company greater flexibility and will allow such shares to be issued as determined by the Board of Directors of the Company without the expense and delay of a special stockholders' meeting to approve such additional authorized capital stock. Such corporate purposes could include, without limitation: (a) issuance in connection with any desirable acquisitions which may be presented to the Company, (b) the payment of stock dividends or issuance pursuant to stock splits, and (c) issuance in connection with an offering to raise capital for the Company.
The Preferred Stock will be "blank check" preferred stock, giving the Board the authorization to issue preferred stock from time to time in one or more series and to fix the number of shares and the relative dividend rights, conversion rights, voting rights and special rights and qualifications of any such series. The authorized shares of Preferred Stock issued will be available for issuance for such purposes as the Board of Directors may deem advisable without further action by the stockholders, except as may be required by the Articles of Incorporation and applicable laws and regulations. Any future issuance of shares will be subject to the rights of holders of shares of any then outstanding Preferred Stock.
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The Authorized Shares Amendment may have the result of making it more difficult for any persons or group of persons, other than the current principal stockholders and management, to acquire control of the Company by expanding the ability of the Company to issue shares and thereby dilute the voting power of any person or group that might accumulate shares in order to attempt to effect a change in control. Although the Authorized Shares Amendment might have such effect, the Authorized Shares Amendment has been proposed by the Board of Directors for the reasons set forth above and not for anti-takeover reasons. The Company is not aware of any present effort to accumulate shares of Common Stock or to attempt to change control of the Company. The Company has no present plans to issue shares of Preferred Stock either to the current principal stockholders, the directors, the executive officers or any other person or entity.
The Authorized Shares Amendment will become effective upon the filing of the Restated Articles of Incorporation with the Secretary of State of Nevada, which is expected to occur on the 21st day following the mailing of this Information Statement, or approximately May __, 2004.
ACTION 2
APPROVAL OF THE COMPANY'S 2004 STOCK OPTION PLAN
In April of 2004, the Company's Board of Directors adopted and approved, and by means of the Written Consent the shareholders adopted and approved, a stock option plan for the Company, the VitroTech Corporation 2004 Stock Option Plan (the "2004 Option Plan"), under which stock options awards may be made to employees, directors and consultants of the Company. A copy of the 2004 Option Plan is attached hereto as Annex B.
General. The purpose of the 2004 Option Plan is to provide us with a means of providing employees, directors and consultants the benefits of ownership of our common stock. The 2004 Option Plan is designed to help attract and retain personnel of superior ability for positions of exceptional responsibility, to reward employees, directors and consultants for past services and to motivate such individuals through added incentives to further contribute to our future growth and success.
Under the 2004 Option Plan ("Awards") may be granted from time to time to Eligible Persons (hereinafter defined), all generally in the discretion of the Compensation Committee which is responsible for administering the 2004 Option Plan. Each Award under the Plan will be evidenced by a separate written agreement which sets forth the terms and conditions of the Award. "Eligible Persons" generally include any employee, including employees of subsidiaries, members of the Board of Directors and any consultant or other person whose participation the Compensation Committee determines is in our best interest. There is no maximum number of persons eligible to receive Awards under the 2004 Option Plan, nor is there any limit on the amount of Awards that may be granted to any such person, except as described below with respect to incentive stock options. We intend that Awards under the 2004 Option Plan to persons subject to
Section 16 of the Exchange Act will satisfy the requirements of Rule 16b-3 under the Exchange Act ("Rule 16b-3").
We have initially reserved 14,483,333 shares of common stock for issuance under the 2004 Option Plan, subject to adjustment to protect against dilution in the event of certain changes in our capitalization and subject to an annual "evergreen" adjustment to the number of shares such that, during the life of the 2004 Option Plan, the total shares available for option grants will equal 10% of our total outstanding shares.
Administration. The 2004 Option Plan will be administered by a committee of our Board of Directors that consists of two or more directors. To the extent necessary to comply with Rule 16b-3, the committee will consist solely of two or more "non-employee directors," as that term is defined in Rule 16b-3. Under the 2004 Option Plan, generally the committee will have complete authority to determine the persons to whom Awards will be granted from time to time, as well as the terms and conditions of such Awards. The committee also will have discretion to interpret the 2004 Option Plan and the Awards granted under the 2004 Option Plan and to make other determinations necessary or advisable for the administration of the 2004 Option Plan. Under the 2004 Option Plan, the full Board of Directors can act as the committee, if all of the members of the Board of Directors otherwise are eligible to serve on the committee. The full Board of Directors generally also may grant Awards under the 2004 Option Plan from time to time. The Compensation Committee of the Board of Directors will act as the committee until otherwise determined by the Board of Directors.
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Stock Options Terms. The Compensation Committee may grant either incentive stock options (for purposes of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) or nonqualified stock options under the 2004 Option Plan. Except as described below for incentive stock options, the Compensation Committee generally has the discretion to determine the persons to whom stock options will be granted, the numbers of shares subject to such options, the exercise prices of such options, the vesting schedules with respect to such options, the terms of such options, as well as the period, if any, following a participant's termination of service during which such option may be exercised, and the circumstances in which all or a portion of an option may become immediately exercisable or be forfeited. The Compensation Committee also has the discretion, exercisable either at the time an option is granted or at the time of a participant's termination of service, to provide for accelerated vesting of the exercisability of an option for a limited period following such termination of service. Such terms may differ among the various persons to whom the options are granted and among the various options granted to any such person. Notwithstanding the foregoing, under the terms of the 2004 Option Plan, no options may be exercised following the termination of service of a participant for cause.
In the discretion of the Compensation Committee, the price due upon exercise of an option may be paid in cash or in shares of our common stock valued at their then current fair market value, or a combination of both. Shares delivered in payment of such price may be shares acquired by prior exercises of options or otherwise, in the Compensation Committee's discretion. Also in the discretion of the Compensation Committee, a participant may exercise an option as to only a part of the shares covered thereby and then, in an essentially simultaneous transaction, use the shares so acquired in payment of the exercise price for additional option shares.
Generally, options granted under the 2004 Option Plan may not be transferred by a participant other than by will or by the laws of descent and distribution and generally will be exercisable during the participant's lifetime only by such participant or his or her guardian or legal representative.
The Compensation Committee may also, in its discretion, allow the voluntary surrender of all or a portion of a stock option conditioned upon the granting to the participant of a new stock option for the same or a different number of shares, or may require the surrender as a condition precedent to the grant of a new stock option. The Compensation Committee may also purchase a participant's outstanding option, on such terms and conditions as the Compensation Committee in its discretion determines.
Holders of options shall have no rights as shareholders unless and until such options are exercised and shares are delivered to such persons in accordance with the 2004 Option Plan.
Incentive Stock Options. Incentive stock options may be granted only to persons who are employees (including directors who are also employees but excluding non-employee directors). Generally, incentive stock options must be granted within ten years of the date the 2004 Option Plan is adopted, and the term of any incentive stock option may not exceed ten years. Furthermore, the aggregate fair market value of shares of common stock with respect to which any incentive stock options are exercisable for the first time by a participant during any calendar year, whether such incentive stock options are granted under the 2004 Option Plan or any other plans we may adopt, may not exceed $100,000. Furthermore, the exercise price of incentive stock options must be at least 100% of the fair market value of the common stock at the time the incentive stock option is granted, except in the case of incentive stock options granted to any individual who owns more than 10% of the total combined voting power of all classes of our stock, in which case the exercise price of incentive stock options must be at least 110% of the fair market value of the common stock at the time of grant.
The 2004 Option Plan also provides that, with respect to incentive stock options, the period during which an option may be exercisable following a termination of service generally may not exceed three months, unless (i) employment is terminated as the result of disability, in which case in the discretion of the Compensation Committee the incentive stock options may be exercised during a period of one year following the date of such disability, or
(ii) employment is terminated as the result of death, or if the employee dies following a termination of service (other than as a result of disability) and during the period that the incentive stock option is still exercisable, in which case in the discretion of the Compensation Committee the incentive stock option may be exercised during a period of one year following the date of such death. In no event, however, may an incentive stock option be exercised after the expiration of its original term.
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Changes of Control or Other Fundamental Change. The 2004 Option Plan provides that upon certain mergers or other reorganizations to which we or any subsidiary is a party that involves an exchange or conversion or other adjustment of our outstanding common stock, each participant generally shall be entitled upon the exercise of his or her stock options to receive the number and class of securities or other property to which such participant would have been entitled in the merger or reorganization if such participant had exercised such stock option prior to such merger or reorganization.
The 2004 Option Plan also provides that, upon the occurrence of a change of control the Compensation Committee has the right, but not the obligation, to accelerate the time at which all or a portion of any outstanding options may be exercised.
Miscellaneous. The Board of Directors generally may amend or terminate the 2004 Option Plan or any provision of the 2004 Option Plan at any time. To the extent required by the Exchange Act or the Code, however, absent approval by our shareholders, no amendment may (i) materially alter the group of persons eligible to participate in the 2004 Option Plan; (ii) except as specifically provided in Section 6.11 of the 2004 Option Plan, increase the number of shares available for Awards under the 2004 Option Plan; (iii) extend the period during which incentive stock options may be granted beyond April 7, 2014; or (iv) decrease the exercise price of any option granted under the 2004 Option Plan. Furthermore, without the consent of the participant, no amendment to or discontinuance of the 2004 Option Plan or any provision thereof shall adversely affect any Award granted to the participant under the 2004 Option Plan.
Federal Income Tax Consequences. The following is a brief description of the Federal income tax consequences to the participants and the Company of the issuance and exercise of stock options under the 2004 Option Plan. All ordinary income recognized by a participant with respect to Awards under the 2004 Option Plan shall be subject to both wage withholding and employment taxes. The deduction allowed to us for the ordinary income recognized by a participant with respect to an Award under the 2004 Option Plan will be limited to amounts that constitute reasonable, ordinary and necessary business expenses.
-- Incentive Stock Options. In general, no income will result for Federal income tax purposes upon either the granting or the exercise of any incentive option issued under the 2004 Option Plan. If certain holding period requirements (at least two years from the date of grant of the option and at least one year from the date of exercise of the option) are satisfied prior to a disposition of stock acquired upon exercise of an incentive option, the excess of the sales price upon disposition over the option exercise price generally will be recognized by the participant as a capital gain, and the Company will not be allowed a business expense deduction.
If the holding period requirements with respect to incentive options are not met, the participant generally will recognize, at the time of the disposition of the stock, ordinary income in an amount equal to the difference between the option price of such stock and the lower of the fair market value of the stock on the date of exercise and the amount realized on the sale or exchange. The difference between the option price of such stock and the fair market value of the stock on the date of exercise is a tax preference item for purposes of calculating the alternative minimum tax on an participant's federal income tax return. If the amount realized on the sale or exchange exceeds the fair market value of the stock on the date of exercise, then such excess generally will be recognized as a capital gain. In the case of a disposition prior to satisfaction of the holding period requirements which results in the recognition of ordinary income by the participant, we generally will be entitled to a deduction in the amount of such ordinary income in the year of the disposition.
If a participant delivers shares of our common stock in payment of the option price, the participant generally will be treated as having made a like-kind exchange of such shares for an equal number of the shares so purchased, and no gain or loss will be recognized with respect to the shares surrendered in payment of said option price. In such a case, the participant will have a tax basis in a number of shares received pursuant to the exercise of the option equal to the number of shares of common stock used to exercise the option and equal to such participant's tax basis in the shares of common stock submitted in payment of the option price. The remaining shares of common stock acquired pursuant to the exercise of the option will have a tax basis equal to the gain, if any, recognized on the exercise of the option and any other consideration paid for such shares on the exercise of the option.
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Notwithstanding the foregoing, if a participant delivers any stock that was previously acquired through the exercise of an incentive stock option in payment of all or a portion of the option price of an option, and the holding period requirements described above have not been satisfied with respect to the shares of stock so delivered, the use of such stock to pay a portion of the option price will be treated as a disqualifying disposition of such shares, and the participant generally will recognize income.
-- Nonqualified Stock Options. The grant of nonqualified stock options under the 2004 Option Plan will not result in any income being taxed to the participant at the time of the grant or in any tax deduction for us at such time. At the time a nonqualified stock option is exercised, the participant will be treated as having received ordinary income equal to the excess of the fair market value of the shares of common stock acquired as of the date of exercise over the price paid for such stock. At that time, we will be allowed a deduction for Federal income tax purposes equal to the amount of ordinary income attributable to the participant upon exercise. The participant's holding period for the shares of common stock acquired will commence on the date of exercise, and the tax basis of the shares will be the greater of their fair market value at the time of exercise or the exercise price.
-- New Plan Benefits
As of April 9, 2004, an aggregate of 290,000 options had been granted under the 2004 Option Plan. The options granted to date consist of 50,000 options issued pursuant to the initial employment of Thomas Costales as our Chief Financial Officer and 60,000 options issued to each of John Boddie, Larry Poland, James Roth and John Sutherland pursuant to their service as non-employee directors.
STOCKHOLDERS SHARING AN ADDRESS
The Company will deliver only one Information Statement to multiple stockholders sharing an address unless the Company has received contrary instructions from one or more of the stockholders. The Company undertakes to deliver promptly, upon written or oral request, a separate copy of the Information Statement to a stockholder at a shared address to which a single copy of the Information Statement is delivered. A stockholder can notify the Company that the stockholder wishes to receive a separate copy of the Information Statement by contacting the Company at the telephone number or address set forth above.
Jess Rae Booth President and Chief Executive Officer
Santa Ana, California
May [ ], 2004
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APPENDIX A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VITROTECH CORPORATION
VitroTech Corporation, pursuant to Sections 78.390 and 78.403 of the Nevada Revised Statutes, adopts this Amended and Restated Articles of Incorporation. The following Amended and Restated Articles of Incorporation were adopted by the Board of Directors and by a majority of the Stockholders in accordance with the Nevada Revised Statutes.
The following Amended and Restated Articles of Incorporation amends the original Articles of Incorporation in its entirety, as follows:
FIRST: The name of the corporation is VitroTech Corporation.
SECOND: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under Chapter 78 of the Nevada General Corporation Law.
THIRD: The total number of shares of capital stock that the Corporation is authorized to issue is 550,000,000 shares, consisting of 500,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, par value $0.001 per share. The Corporation's capital stock may be sold from time to time for such consideration as may be fixed by the Board of Directors, provided that no consideration so fixed shall be less than par value.
A. Preferred Stock
The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions of this Article, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Nevada, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
1. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
a. The number of shares constituting that series and the distinctive designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be cumulative, and if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
c. Whether that series shall have voting rights, in addition to the voting rights provided by law, and if so, the terms of such voting rights;
d. Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
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e. Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
f. Whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund;
g. The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and
h. Any other relative rights, preferences and limitations of that series.
2. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment, before any dividends shall be paid or declared and set apart for payment on Common Stock with respect to the same dividend period.
3. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.
4. Unless otherwise provided in any resolution of the Board of Directors providing for the issuance of any particular series of Preferred Stock, no holder of Preferred Stock shall have any pre-emptive right as such holder to subscribe for, purchase or receive any part of any new or additional issue of capital stock of any class or series, including unissued and treasury stock, or obligations or other securities convertible into or exchangeable for capital stock of any class or series, or warrants or other instruments evidencing rights or options to subscribe for, purchase or receive any capital stock of any class or series, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend.
B. Common Stock
1. Subject to the prior and superior rights of the Preferred Stock and on the conditions set forth in the foregoing parts of this Article or in any resolution of the Board of Directors providing for the issuance of any particular series of Preferred Stock, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor.
2. Except as otherwise provided by law, by this Certificate of Incorporation or by the resolution or resolutions of the Board of Directors providing for the issue of any series of the Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share held.
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3. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or
involuntary, and after the holders of the
Preferred Stock of each series shall have been
paid in full the amount to which they
respectively shall be entitled, or a sum
sufficient for such payments in assets of the
Corporation shall be distributed pro rata to
the holders of the Common Stock in accordance
with their respective rights and interests, to
the exclusion of the holders of the Preferred
Stock.
FOURTH: The election of directors need not be by written ballot
unless otherwise provided by the By-laws of the
Corporation.
FIFTH: The Board of Directors of the Corporation is authorized
and empowered from time to time in its discretion to make, alter, amend or repeal the By-laws of the Corporation, except as such power may be restricted or limited by the Nevada General Corporation Law.
SIXTH: Anything to the contrary in this Articles of Incorporation notwithstanding, no director or officer shall be liable personally to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, provided, however, that nothing in this paragraph shall eliminate or limit the liability of a director or officer: (i) for any breach of such director's or officer's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 78.300 of the Nevada General Corporation Law; or (iv) for any transaction from which such director or officer derived an improper personal benefit. If the Nevada General Corporation Law is amended after approval by the stockholders of this article to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the Nevada General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation shall indemnify, in the manner and to the fullest extent permitted by law, each person (or the estate of any such person) who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, by reason of being or having been a director, officer, employee or agent of the Corporation or being or having served at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The indemnification provided for herein shall be made only as authorized in the specific case upon a determination, in the manner provided by law, that indemnification of the director, officer, employee or agent is proper under the circumstances. The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any such person against any liability that may be asserted against such person. To the fullest extent permitted by law, the indemnification provided herein shall include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, and, in the manner provided by law, any such expenses shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
EIGHTH: The provisions of Nevada General Corporation Law ss.78.378 to 78.3793, inclusive, regarding the acquisition of controlling interest, shall not govern or apply to this Corporation.
NINETH: The provisions of Nevada General Corporation Law ss.78.411 to 78.444, inclusive, regarding combinations with interested stockholders, shall not govern or apply to this Corporation.
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TENTH: This Corporation reserves the right to amend, alter, change, in any manner now or hereafter prescribed by statute, or by these Articles of Incorporation.
IN WITNESS WHEREOF, the undersigned Corporation has caused this Amended and Restated Articles of Incorporation to be signed by a duly authorized officer this ___ day of _____________ 2004.
VITROTECH CORPORATION
By: ___________________________
Name: Jess Rae Booth
Its: President
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APPENDIX B
VITROTECH CORPORATION
2004 STOCK OPTION PLAN
1. Purpose. The purpose of this VITROTECH CORPORATION 2004 STOCK OPTION PLAN ("Plan") is to encourage ownership of common stock, $0.001 par value ("Common Stock"), of VITROTECH CORPORATION, a Nevada corporation (the "Company"), by eligible key employees, consultants and directors of the Company and its Affiliates (as defined below) and to provide increased incentive for such employees, consultants and directors to render services and to exert maximum effort for the business success of the Company. In addition, the Company expects that this Plan will further strengthen the identification of employees, consultants and directors with the shareholders. Certain options to be granted under this Plan are intended to qualify as Incentive Stock Options ("ISOs") pursuant to Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), while other options granted under this Plan will be nonqualified options which are not intended to qualify as ISOs ("Nonqualified Options"), either or both as provided in the agreements evidencing the options as provided in Section 6 hereof. As used in this Plan, the term "Affiliates" means any "parent corporation" of the Company and any "subsidiary corporation" of the Company within the meaning of Sections 424(e) and (f), respectively, of the Code.
2. Administration.
2.1 Administration by the Board or the Compensation Committee. This Plan shall be administered by the Board of Directors (the "Board") unless the Board establishes a committee comprised of one or more of its members to carry out such administration, in which case administration of the Plan shall be by a Compensation Committee (the "Committee") designated by the Board of the Company, which shall also designate the Chairman of the Committee.
2.2 Board or Committee Action. The Board, or the Committee as appropriate, shall hold its meetings at such times and places as it may be determine. A majority of the members of such
Board or Committee shall constitute a quorum, and all determinations of the Board or Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be fully effective as if it had been made by a majority vote of its members at a meeting duly called and held. The Board or Committee may designate the Secretary of the Company or other Company employees to assist the Board or Committee in the administration of this Plan, and may grant authority to such persons to execute award agreements or other documents on behalf of the Board or the Committee and the Company. Any duly constituted committee of the Board satisfying the qualifications of this Section 2 may be appointed as the Committee.
2.3 Expenses. All expenses and liabilities incurred by the Board or the Committee in the administration of this Plan shall be borne by the Company. The Board or the Committee may employ attorneys, consultants, accountants or other persons.
3. Stock Reserved.
3.1 Initial Reserve. Subject to adjustment as provided in
Section 3.2 and 6.11 hereof, the aggregate number of shares of Common Stock that may be optioned under this Plan is 14,483,333. The shares subject to this Plan shall consist of authorized but unissued shares of Common Stock and such number of shares shall be and is hereby reserved for sale for such purpose. Any of such shares which may remain unsold and which are not subject to outstanding options at the termination of this Plan shall cease to be reserved for the purpose of this Plan, but until termination of this Plan or the termination of the last of the options granted under this Plan, whichever last occurs, the Company shall at all times reserve a sufficient number of shares to meet the requirements of this Plan. Should any option expire or be canceled prior to its exercise in full, the shares theretofore subject to such option may again be made subject to an option under this Plan.
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3.2 Additional Shares. The aggregate number of shares of Common Stock that may be optioned under this Plan, as specified in Section 3.1, shall be automatically increased on the first
trading day of each calendar year during the term of the Plan, beginning with calendar year 2005, to a number of shares equal to ten percent (10%) of the shares of Common Stock outstanding as of the last day of the preceding calendar year.
4. Eligibility. The persons eligible to participate in this Plan as a recipient of options ("Optionee") shall include only key employees, consultants and directors of the Company or its Affiliates at the time the option is granted. An employee or consultant who has been granted an option hereunder may be granted an additional option or options, if the Board or the Committee, as appropriate, shall so determine.
5. Grant of Options.
5.1 Discretion. The Board or Committee, as appropriate, shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those key employees, consultants and directors of the Company or its Affiliates who are to receive options under this Plan, (ii) to determine the number of shares of Common Stock to be covered by such options and the terms thereof, and (iii) to determine the type of option granted: ISOs, Nonqualified Options or a combination of ISOs and Nonqualified Options; provided that consultants and directors who are not employees of the Company may not receive any ISOs. The Board or Committee shall thereupon grant options in accordance with such determination as evidenced by a written option agreement. Subject to the express provisions of this Plan, the Board or the Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to this Plan, to interpret this Plan, to prescribe and amend the terms of the option agreements (which need not be identical) and to make all other determinations deemed necessary or advisable for the administration of this Plan.
5.2 Shareholder Approval. All options granted under this Plan are subject to, and may not be exercised before, the approval of this Plan by the shareholders prior to the first anniversary date of the Board meeting held to approve this Plan, by the affirmative vote of the holders of a majority of the outstanding shares of the Company present, or represented by proxy, and entitled to vote thereat or written consent in accordance with the laws of the State of Nevada; provided that if such approval by the shareholders of the Company is not forthcoming, all options previously granted under this Plan shall be void.
5.3 Limitation on Incentive Stock Options. The aggregate fair market value (determined in accordance with Section 6.2 of this Plan at the time the option is granted) of the Common Stock with respect to which ISOs may be exercisable for the first time by any Optionee during any calendar year under all such plans of the Company and its Affiliates shall not exceed $100,000.
6. Terms and Conditions. Each option granted under this Plan shall be evidenced by an agreement, in a form approved by the Board or the Committee, which shall be subject to the following express terms and conditions and to such other terms and conditions as the Board or the Committee may deem appropriate.
6.1 Option Period. The Board or the Committee shall promptly notify the Optionee of the option grant and a written agreement shall promptly be executed and delivered by and on behalf of the Company and the Optionee, provided that the option grant shall expire if a written agreement is not signed by said Optionee (or his agent or attorney) and returned to the Company within 60 days from date of receipt by the Optionee of such agreement. The date of grant shall be the date the option is actually granted by the Board or the Committee, even though the written agreement may be executed and delivered by the Company and the Optionee after that date. Each option agreement shall specify the period for which the option thereunder is granted (which in no event shall exceed ten years from the date of grant in the case of an ISO) and shall provide that the ISO shall expire at the end of such period. If the original term of an option is less than ten years from the date of grant, the option may be amended prior to its expiration, with the approval of the Board or the Committee and the Optionee, to extend the term so that the term as amended is not more than ten years from the date of grant. However, in the case of an ISO granted to an individual who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Affiliate ("Ten Percent Stockholder"), such period shall not exceed five years from the date of grant.
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6.2 Exercise Price. The exercise price of each share of Common Stock subject to each option granted pursuant to this option is granted and, in the case of ISOs, shall not be less than 100% of the fair market value of a share of Common Stock on the date the option is granted, as determined by the Board or the Committee. In the case of ISOs granted to a Ten Percent Stockholder, the exercise price shall not be less than 110% of the fair market value of a share of Common Stock on the date the option is granted. The exercise price of each share of Common Stock subject to a Nonqualified Option under this Plan shall be determined by the Board or the Committee prior to granting the option. The Board or the Committee shall set the exercise price for each share subject to a Nonqualified Option at such price as the Board or the Committee in its sole discretion shall determine, provided that the exercise price of each share of Common Stock subject to a Nonqualified Option shall not be less than 85% of the fair market value of a share of Common Stock on the date the option is granted as determined by the Board or the Committee.
For all purposes under this Plan, the fair market value of a share of Common Stock on a particular date shall be equal to the mean of the reported high and low sales prices of the Common Stock on the principal market on which the Common Stock is listed on that date, or if no prices are reported on that date, on the last preceding date on which such prices of the Common Stock are so reported. If the Common Stock is not traded on public market at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the closing bid and ask prices of the Common Stock on the most recent date the Common Stock was publicly traded. In the event the Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made by the Board or the Committee in such manner as it deems appropriate.
6.3 Exercise Period. The Board or the Committee may provide in the option agreement that an option may be exercised immediately or over the period of the grant and in whole or in increments. However, no portion of any option may be exercisable by an Optionee prior to the approval of this Plan by the shareholders of the Company.
6.4 Procedure for Exercise. Options shall be exercised by the delivery by the Optionee of written notice to the Secretary of the Company setting forth the number of shares of Common Stock with respect to which the option is being exercised. The notice shall be accompanied by, at the election of the Optionee and as permitted by the Board or the Committee in the Agreement granting such options, (i) cash, cashier's check, bank draft, or postal or express money order payable to the order of the Company, (ii) certificates representing shares of Common Stock theretofore owned by the Optionee duly endorsed for transfer to the Company, (iii) an election by the Optionee to have the Company withhold the number of shares of Common Stock the fair market value, less the exercise price, of which is equal to the aggregate exercise price of the shares of Common Stock issuable upon exercise of the option, or (iv) any combination of the preceding, equal in value to the full amount of the exercise price. Notice may also be delivered by telecopy provided that the exercise price of such shares is received by the Company via wire transfer on the same day the telecopy transmission is received by the Company. The notice shall specify the address to which the certificates for such shares are to be mailed. An option to purchase shares of Common Stock in accordance with this Plan, shall be deemed to have been exercised immediately prior to the close of business on the date (i) written notice of such exercise and (ii) payment in full of the exercise price for the number of share for which options are being exercised, are both received by the Company and the Optionee shall be treated for all purposes as the record holder of such shares of Common Stock as of such date.
As promptly as practicable after receipt of such written notice and payment, the Company shall deliver to the Optionee certificates for the number of shares with respect to which such option has been so exercised, issued in the Optionee's name or such other name as Optionee directs; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Optionee at the address specified pursuant to this
Section 6.4.
6.5 Termination of Employment. If an employee to whom an option is granted ceases to be employed by the Company or its affiliates for any reason other than death or disability or if a director or consultant to whom an option is granted ceases to serve on the Board or as a consultant for any reason other than death or disability, any option which is exercisable on the date of such termination of employment or cessation of serving on the Board or cessation of service as a consultant shall expire three-months from the date of such termination or cessation but in no event may the option be exercised after its expiration under the terms of the option agreement.
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6.6 Disability or Death. In the event the Optionee dies or is determined under this Plan to be disabled while the Optionee is employed by the Company or its Affiliates, acts as consultant or while serves on the Board of the Company, the options previously granted to the Optionee may be exercised (to the extent the Optionee would have been entitled to do so at the date of death or the determination of disability) at any time and from time to time, within a three-month period after such death or determination of disability, by the Optionee, the guardian of the Optionee's estate, the executor or administrator of the Optionee's estate or by the person or persons to whom the Optionee's rights under the option shall pass by will or the laws of descent and distribution, but in no event may the option be exercised after its expiration under the terms of the option agreement. An Optionee shall be deemed to be disabled if, in the opinion of a physician selected by the Board or the Committee, the Optionee is incapable of performing services for the Company of the kind the Optionee was performing at the time the disability occurred by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. The date of determination of disability for purposes hereof shall be the date of such determination by such physician.
6.7 Transferability. An option granted pursuant to this Plan shall not be assignable or otherwise transferable by the Optionee otherwise than by Optionee's will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the code or Title I of the Employee Retirement Income Security Act, as amended, or the rules thereunder. During the lifetime of an Optionee, an option shall be exercisable only by such Optionee. Any heir or legatee of the Optionee shall take rights granted herein and in the option agreement subject to the terms and conditions hereof and thereof. No such transfer of any option to heirs or legatees of the Optionee shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Board or the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.
6.8 Incentive Stock Options. Each option agreement may contain such terms and provisions as the Board or the Committee may determine to be necessary or desirable in order to qualify under the Code of option designated as an incentive stock option.
6.9 No Rights as Shareholder. No Optionee shall have any rights as a shareholder with respect to shares covered by an option until the option is exercised by written notice and accompanied by payment as provided in
Section 6.4 above.
6.10 Extraordinary Corporate Transactions. The existence of outstanding options shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company recapitalizes or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the forgoing a "Fundamental Change"), then thereafter upon any exercise of an option theretofore granted the Optionee shall be entitled to purchase under such option, in lieu of the number of shares of Common Stock as to which option shall then be exercisable, the number and class of shares of stock and securities to which the Optionee would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Optionee had been the holder of record of the number of shares of Common Stock as to which such option is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii) the Company sells all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary), (iii) any person or entity (including a "group" as contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of (including, without limitation, power to vote) more than 50% of the outstanding shares of Common Stock, (iv) the Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event in clauses (i) through (v) above is referred to herein as a "Corporate Change"), the committee, in its sole discretion, may accelerate the time at which all or a portion of an Optionee's options may be exercised for a limited period of time before or after a specified date.
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6.11 Changes in Capital Structure. If the outstanding shares of Common Stock or other securities of the Company, or both, for which the option is then exercisable shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares or recapitalization, the number and kind of shares of Common Stock or other securities which are subject to this Plan or subject to any options theretofore granted, and the exercise prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares or other securities without changing the aggregate exercise price.
6.12 Acceleration of Options. Except as hereinbefore expressly provided, (i) the issuance by the Company of shares of stock of any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than Common Stock, or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to options thereto fore granted or the purchase price per share, unless the Board or the Committee shall determine in its sole discretion that an adjustment is necessary to provide equitable treatment to Optionee. Notwithstanding anything to the contrary contained in this Plan, the Board or the Committee may in its sole discretion accelerate the time at which any option may be exercised, including, but not limited to, upon the occurrence of the events specified in this Section 6.
7. Amendments or Termination. The Board may amend, alter or discontinue this Plan, but no amendment or alteration shall be made which would impair the rights of any Optionee, without his consent, under any option theretofore granted, or which, without the approval of the shareholders, would:
(i) except as is provided in Section 6.11 of this Plan, increase the total number of shares reserved for the purposes of this Plan, (ii) change the class of persons eligible to participate in this Plan as provided in Section 4 of this Plan, (iii) extend the applicable maximum option period provided for in Section
6.1 of this Plan, (iv) extend the expiration date of this Plan set forth in
Section 14 of this Plan, (v) except as provided in Section 6.11 of this Plan, decrease to any extent the exercise price of any option granted under this Plan or (vi) withdraw the administration of this Plan from the Board or the Committee.
8. Compliance With Other Laws and Regulations. This Plan, the grant and exercise of options thereunder, and the obligation of the Company to sell and deliver shares under such options, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Common Stock prior to the completion of any registration or qualification of such shares under any federal or state law or issuance of any ruling or regulation of any government body which the Company shall, in its sole discretion, determine to be necessary or advisable. Any adjustments provided for in Sections 6.10, .11 and .12 of this Plan shall be subject to any shareholder action required by Nevada corporate law.
9. Purchase for Investment. Unless the options and shares of Common Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person exercising an option under this Plan may be required by the Company to give a representation in writing that such person is acquiring such shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.
10. Taxes.
10.1 The Company may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with any options granted under this Plan.
10.2 Notwithstanding the terms of Section 10.1, each Optionee must pay all taxes required to be withheld by the Company or paid by the Optionee in connection with the exercise of a Nonqualified Option.
11. Replacement of Options. The Board or the Committee from time to time may permit an Optionee under this Plan to surrender for cancellation any unexercised outstanding option and receive from the Company in exchange an option for such number of shares of Common Stock as may be designated by the Board or the Committee. The Board or the Committee may, with the consent of the person entitled to exercise any outstanding option, amend such option, including reducing the exercise price of any option to not less than the fair market value of the Common Stock at the time of the amendment and extending the term thereof.
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12. No Right to Employment. Employees shall be considered to be in the employment of the Company so long as they remain employees of the Company or its Affiliates. Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined by the Board or the Committee, and its determination shall be final. Nothing contained herein shall be construed as conferring upon the Optionee the right to continue in the employ of the Company or its Affiliates, nor shall anything contained herein be construed or interpreted to limit the "employment at will" relationship between the Optionee and the Company or its Affiliates. The option agreements may contain such provisions as the Board or the Committee may approve with reference to the effect of approved leaves of absence.
13. Liability of Company for Non-Issuance of Shares and Tax Consequences. The Company and any Affiliates that are in existence or hereafter come into existence shall not be liable to an Optionee or other persons as to:
13.1 The non-issuance or sale of shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares hereunder; and
13.2 Any tax consequence expected, but not realized, by any Optionee or other person due to the exercise of any option granted hereunder.
14. Effectiveness and Expiration of Plan. This Plan shall be effective on the date of adoption by the Board. If the shareholders of the Company fail to approve this Plan within twelve months of the date of the Board adoption, this Plan shall terminate and all options previously granted under this Plan shall become void and of no effect. This Plan shall expire ten years after the date of the Board adopts this Plan and thereafter no option shall be granted pursuant to this Plan.
15. Non-Exclusivity of this Plan. Neither the adoption by the Board nor the submission for approval of this Plan to the shareholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of restricted stock or stock options otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
16. Governing Law. This Plan and any agreements hereunder shall be interpreted and construed in accordance with the laws of the State of Nevada and applicable federal law.
17. Cashless Exercise. The Board or the Committee also may allow cashless exercises as permitted under the Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Board or the Committee determines to be consistent with this Plan's purpose and applicable law. The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing by directors of the Company, VitroTech Corporation has caused these presents to be duly executed in its name and behalf by its proper officers thereunto duly authorized as of this 7th day of April 2004.
VITROTECH CORPORATION
ATTEST:
By:___________________________ ________________________________ Name: Jess Rae Booth Secretary Title: President
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some nice size blocks went through today. looks like VROT is getting noticed. i'm still learning about their products and their multiple applications in the various sectors thye can penetrate. i don't understand the entire information content they are providing but my gut says buy at these levels.
here are the last ten trades of the day:
Last 10 trades
Time Price Volume Exchange Info
16:09:01 1.880 65600 OTCBB
16:00:04 1.940 500 OTCBB
15:59:08 1.930 2500 OTCBB at Bid
15:59:02 1.940 5000 OTCBB
15:57:36 1.940 500 OTCBB
15:56:53 1.940 500 OTCBB
15:56:18 1.940 500 OTCBB
15:56:03 1.930 1500 OTCBB at Bid
15:55:54 1.940 1000 OTCBB
15:55:50 1.940 6000 OTCBB
someone slipped in a 65,600 trade at 1.88. now i can't determine if that trade was a buy or a sell because the bid/ask is;
Bid: 1.930
Ask: 1.950
Bid/Ask Size: 1,245,100 / 500
strange trade tha 65,600.
at 16:00 a 500 share trade at the ask.
then at 16:09 the 65,600 trade goes through below the bid.
can anyone determine if that is a buy or sell.
that trade = $123,328.00
either there is a very confident investor who bought or an insider of large shareholder selling.
any comments are welcome.
thanks in advance.
Nice to see VROT board...
I've held a private offering in this company since June 2003. Definately long and strong. Didn't think it would go public at the time....still have mixed feelings about that, but I guess it's easier to get noticed. I believe that it will only be a couple more quarters before you see the filings start to turn positive, at which point the upside potential becomes huge.
All IMHO
P.S. If you do your DD here, you will find that the plastics industry is not the only potential here.
RECENT NEWS>VitroTech Partners With Sumitomo Corporation of America to DeliverRevolutionary Vitrolite(R) Technology Worldwide
SANTA ANA, Calif., May 25, 2004 /PRNewswire-FirstCall via COMTEX/ -- VitroTech Corporation (OTC Bulletin Board: VROT) today announced it has entered into a distribution agreement with Sumitomo Corporation of America, a subsidiary of one of the world's leading fully integrated trading and investment enterprises and a major distributor of commodities, industrial goods and consumer goods. Under terms of the partnership, Sumitomo will distribute VitroTech's revolutionary material technology Vitrolite(R) worldwide.
The distribution contract is the culmination of many months of collaboration and product testing and is expected to dramatically empower VitroTech's worldwide sales and marketing efforts. Sumitomo's vast global customer base in the paint and plastics industry represents an outstanding source of potential new customers for VitroTech's innovative product portfolio. Sumitomo's own plastics businesses, covering a broad spectrum of products from PVC to specialty chemicals, are also prime candidates for use of VitroTech's products.
"We expect Vitrolite(R) to make a positive impact in the polymer world," said Yojiro Ishibashi, Senior Vice President and General Manager of Sumitomo Corporation of America, "Its unique qualities and production benefits make it easy to integrate into the overall sales strategy of the corporation."
"Sumitomo is recognized globally for their leading-edge technology and extensive business network," said Jess Rae Booth, Chairman and CEO of VitroTech Corporation. Mr. Booth added: "This partnership will strengthen our team, enabling VitroTech to increase its market presence and facilitate customer engagements both in Japan and around the world. We expect this agreement to contribute significantly to VitroTech's growth over the next fiscal year."
About Sumitomo Corporation of America
Established in 1952 and headquartered in New York, Sumitomo Corporation of America (www.sumitomocorp.com) is the largest wholly owned subsidiary of Sumitomo Corporation, with offices in 10 major U.S. cities. As an integrated global trading firm with diversified investments and trading businesses, Sumitomo Corporation of America works closely with its parent as an organizer of multinational projects and financier.
About Sumitomo Corporation
Sumitomo Corporation (www.sumitomocorp.co.jp) is one of the world's leading fully integrated trading and investment enterprises, and a major distributor of commodities, industrial goods, and consumer goods. Besides its role as international trader, Sumitomo Corporation is an active investor in a diverse range of businesses that integrate with existing operations, or that position the company in markets with long-term potential. Sumitomo Corporation is headquartered in Japan, and has offices in 73 other countries around the world.
About VitroTech Corporation
VitroTech Corporation is a materials technology and research company, headquartered in Santa Ana, California, with rights to purchase, process and sell approximately 35 billion pounds of rare amorphous aluminosilicate deposits which are used to produce its primary products, Vitrolite(R) and Vitrocote(R). These products enhance both the physical qualities and production of plastics, paint/coatings, and a variety of other market segments. (www.vitroco.com)
VitroTech Corporation Due Diligence page
COMPANY WEBSITE
http://www.vitroco.com/discovery/
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COMPANY OVERVIEW
VitroTech Corporation, a Nevada corporation, effective February 2004, owns the former operating assets of Hi-Tech, as it relates to the Vitrolite® business, in a separate wholly owned subsidiary, VitroCo Incorporated. Owners of Hi-Tech are for the most part also owners of the separate other LLCs that control the mine resources in addition to owning shares of VitroTech.
Hi-Tech Environmental Products, LLC ("Hi-Tech") was established in 1997 as a Nevada limited liability company. Hi-Tech was primarily an R&D operation that under long term contracts had the exclusive right to extract material out of three mines (raw material/mineral product) that Hi-Tech had researched and sought to utilize in further commercial applications. These functions have now been assumed and will be performed by VitroCo. The extraction of the raw material from each of the three mining LLCs will continue to be performed on a contract basis by VitroCo. Each mining LLC has a long term (from 13 to 32 years) supply contract with VitroCo that allows for a royalty back to each LLC as well as to Hi-Tech. The royalties cover the cost of the raw material from the mines.
Enviro Investment Group, LLC (“EIG”) owns in excess of two billion pounds of material and has approximately 13 years to remove the material from the site. VitroCo has contracted for the purchase of all material extracted from the mine through March 2017 at a pre-fixed price and minimum amount. VitroCo is responsible for all costs associated with mining the material, processing and shipping.
Red Rock Canyon Mineral, LLC (“Red Rock”) owns the 288 acre mine site, in which only 20 acres have been explored. Reserves are estimated to be in excess of 6 billion pounds. VitroCo has contracted for the purchase of all material extracted from the mine through March 2036 at a pre-fixed price and minimum amount. VitroCo is responsible for all costs associated with mining the material, processing and shipping.
Valley Springs Mineral, LLC (“Valley Springs”) purchase agreement and terms with VitroCo are similar to EIG (the contract in this case runs for 34 years with extension rights). Reserves are estimated to exceed 27 billion pounds. VitroCo is processing the Valley Springs mine site for mining entitlements that should be completed by the end of 2004.
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WHO WE ARE
VitroTech Corporation, through its wholly owned subsidiary VitroCo Incorporated, is a materials technology and research company, headquartered in Santa Ana, California, with rights to over 35 billion pounds of rare amorphous aluminosilicate deposits. The products produced from this material enhance both the physical qualities and production of plastics, purge, paint/coatings and a variety of other market segments (companies principle products include Vitrolite®, Vitrocote®, Vitropurge®). Renowned research authorities believe that Vitrolite® may be one of the greatest breakthroughs in polymer technology in the past 30 years.
In order to expedite the capture of global market dominance, as well as to establish further liquidity to support both internal growth as well as that through acquisitions, Hi-Tech's operations have become a subsidiary of a public company that has been renamed VitroTech Corporation, (“VitroTech”). VitroTech acquired the assets of Hi-Tech related to the plastics and paint/coatings industries. Hi-Tech has contributed all management and operating infrastructure, as well as ownership of all intellectual property created by Hi-Tech to the new subsidiary, VitroCo Incorporated (“VitroCo”). VitroTech will serve as a holding company for the subsidiary.
The newly formed VitroCo will maintain control of the 35 billion pounds of the material subject to royalty payments through contractual agreements.
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CORPORATE EXECUTIVES
Excecutive Bios
Jess Rae Booth - Chairman & CEO
Mr. Booth founded Hi-Tech in 1997, and was its acting Chairman and CEO, and remains one of its largest owners. While at Hi-Tech he, in a short period, orchestrated all stages of development of Hi-Tech, from a proverbial start-up through to full commercialization. In its current stage, VitroTech is poised for dramatic growth. It is Mr. Booth’s vision that makes the addition of VitroTech so important in establishing a platform to support VitroTech and fulfill market expectations. As such, recognizing the strategic importance of VitroTech, and need to establish a corporate culture consistent with that which he established at Hi-Tech, Mr. Booth has resigned from Hi-Tech in order to lead VitroTech. In addition to his proven results at Hi-Tech, Mr. Booth brings over thirty years of operations, finance, and senior management experience to VitroTech. Prior to founding Hi-Tech, Mr. Booth built several companies that developed over 7000 single family residences, 10,000 apartment units and numerous commercial projects.
Mr. Booth’s prior extensive experience in real estate construction and land development with excavation and earthmoving has and will be of continued benefit. Most importantly, Mr. Booth’s exemplary ability to lead and further business development through rational foresight drives VitroTech into the future.
Alex Kabatoff - COO
Mr. Kabatoff brings extensive of experience in controlling and accounting to VitroTech. His experience in financial management of chemicals, mining, and petroleum companies is proving to be invaluable. His career started off as a financial analyst and later a Senior Auditor at AMOCO Canada. After several years with AMOCO, he accepted the position of Manager of Inter Audit for Alberta Gas Trunkline. This company soon became NOVA Corporation. At NOVA, Mr. Kabatoff held the positions of Corporate Vice President in charge of the manufacturing division, Vice President of Internal Audit and Compliance Manager, and Contract Administrator for the NOVA Chemical Joffre 2000 project (a $2 billion Olefins Petrochemical expansion). Immediately prior to joining VitroTech, Mr. Kabatoff was on loan by Talisman Energy Company to their Sudan joint venture. His position was that of cost controller for their $250 million dollar oilfield expansion.
Mr. Kabatoff joins the VitroTech as Chief Operations Officer responsible for acquisition integration and day-to-day operations of VitroTech. Mr. Kabatoff’s many years of experience in this specific field are a great asset to VitroTech.
Tom Costales - CFO
Mr. Costales has served as our Chief Financial Officer since March 2004. From 2001 until joining the Company, Mr. Costales was a financial consultant to both privately-held and publicly-traded companies. In 2000, until its sale to Motorola in November 2000, Mr. Costales served as Chief Financial Officer, Treasurer and Secretary of Printrak International, Inc., a Nasdaq listed enterprise software company. From 1995 to 1999, Mr. Costales served as Chief Financial Officer and Treasurer and, from July 1999 to May 2000, as a financial consultant and advisor of Impco Technologies, Inc., a Nasdaq listed manufacturer of engine systems components. Mr. Costales is a CPA and holds a MBA in Corporate Finance from the University of Southern California.
Ed Johnson - VP Sales & Marketing
Mr. Johnson is an International Business Development Executive experienced in identifying opportunities and developing solutions in complex, multi-cultural environments. He has been retained by numerous multi-nationals including Hewlett Packard, Dow Elanco, Heineken Breweries, Stryker Medical, Honeywell and PriceWaterhouse Coopers. Mr. Johnson has brought leading Remote Sensing Technology through development to commercial markets world wide, built and managed successful mass marketing projects and launched numerous small IT companies on the International market. A graduate in International Economics from the University of Western Ontario, Canada, Mr. Johnson has delivered MBA courses at 8 Universities in the United States and Europe including The University of California, Berkeley, Boston University, Brussels and The University of Southern Europe, Monaco.
As Vice President, Sales and Marketing, Mr. Johnson is responsible for the ongoing development of VitroTech’s Sales worldwide. In this capacity, he has sharpened the company’s strategic focus and opened new markets in Europe, Australasia and Japan since Fall of 2002.
Board of Directors Bios
Jess Rae Booth - Chairman of the Board
Mr. Booth has served as Chairman of the Board, Chief Executive Officer and President since February 2004. Mr. Booth was a founding member of Hi-Tech Environmental Products, LLC, and served as the company's Chairman-Manager from 1997 until February 2004, when Hi-Tech was merged into a subsidiary of a public company and renamed VitroTech Corporation. Prior to founding Hi-Tech, for over twenty years Mr. Booth owned and operated various entities engaged in the real estate construction and land development business, developing over 7,000 single family residences, 10,000 apartment units and numerous commercial projects.
John Boddie - Director
Mr. Boddie has served as a Director of the Company since April 2004. Since 2000, Mr. Boddie has served as Director and Business Management Consultant for Paula Boddie & Associates, Ltd., a business consulting firm specializing in litigation support, with an emphasis on securities industry litigation and regulatory proceedings, corporate finance, corporate governance and human resources. Mr. Boddie has served as an officer, director and/or consultant to numerous Canadian publicly held companies, including service since 2000 as a Director of Copacabana Capital Investments; consultant to the boards of Highwire Entertainment Group and Enwave Technologies Ltd; and Chief Executive Officer of Vision2Hire Solutions. From 2000 to 2004, Mr. Boddie served as President and a Director of Creation Capital VCC Ltd. From 1988 to 2000, Mr. Boddie served in various management positions with the Canadian Venture Exchange (previously known as the Vancouver Stock Exchange).
Larry Poland - Director
Mr. Poland has served as a Director of the Company since April 2004. Mr. Poland served as President, Treasurer and a Director of Star Computing Limited from inception in July 2001 until February 2004. From 2000 to 2002, Mr. Poland served as Vice President of Sales of AAIM, an independent sales department for large electronics manufactures selling to large retailers, where he designed, developed, and initiated the sales department and program. From 1995 to 2000, Mr. Poland was Vice President of Sales of Packard Bell, a global computer company. From 1985 to 1992, Mr. Poland was the National Sales Manager of the computer products division of Fuji Photo Film, USA.
James Roth - Director
Mr. Roth has served as a Director of the Company since April 2004. Mr. Roth is retired from GRC International, Inc., a provider of advanced engineering and scientific technologies, where he held key executive management positions from July 1974 to June 1996, retiring as President and Chief Executive Officer, and serving on the board of directors from January 1992 to November 1998. Mr. Roth is also a Director of Titan Corporation, EDO Corporation and Digimarc Corporation.
John P. Sutherland, Ph.D. - Director
Mr. Sutherland has served as a Director of the Company since April 2004. Since 1985, Mr. Sutherland has been Senior Partner of J.P. Sutherland and Associates, a business-consulting firm located in Calgary, Alberta, Canada, serving the chemical and energy sectors with a focus on strategic planning, project and venture analysis, market assessments and organization studies. Previously, from 1974 to 1985, Mr. Sutherland served in various executive capacities with the predecessor of Nova Chemicals, including service as Executive Vice President and a Director from 1981 to 1984, and as Vice Chairman in 1985. Mr. Sutherland received a bachelor degree and a PhD in chemical engineering.
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CEO Cast Interview, March 30, 2004
Jess Rae Booth, Chairman and CEO
http://www.vitroco.com/companyinfo/speechesevents.html
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SEC FILINGS
http://www.sec.gov/cgi-bin/browse-edgar?company=vitrotech&CIK=&filenum=&State=&SIC=&...
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INDUSTRY OVERVIEW
We believe that the development and sale of performance enhancing products for industrial and manufacturing applications is a multi-billion annual industry. A vast array of specialty powders and chemicals are sold to virtually every manufacturing segment worldwide to enhance product performance and manufacturing economics. Our initial target markets -- the plastics industry and the paint and coatings industry -- incorporate a wide variety of specialty chemicals and powders designed to improve flow and dispersion properties, reduce raw material usage, improve appearance and durability and reduce overall manufacturing costs, among other applications.
According to published sources, worldwide plastics production exceeds 375 billion pounds annually. The North American market accounts for approximately 27% of worldwide plastics consumption with the U.S. plastics industry accounting for annual sales of approximately $400 billion. Principal products include polypropylene (PP), polyvinyl chloride (PVC), high density polyethylene (HDPE), low density polyethylene (LDPE), polycarbonate (PC) and polystyrene (PS). Principal consumers of plastics products are the packaging, agricultural, automotive and electronics industries.
According to published sources, the paint industry is comprised of manufacturers, raw materials suppliers and distributors whose annual sales in North America were approximately 1.3 billion gallons or $16.5 billion in 1999.
The paint industry is generally classified in three segments -- the architectural segment, or house paint; the OEM segment, also known as industrial coatings; and the special purpose coatings segment.
Architectural coatings are paints and coatings applied on-site to new and existing residential, commercial, institutional and industrial buildings and include exterior paint, interior paint, lacquers and other finishes. Architectural coatings are sold to consumers, painters, builders, contractors, and the government through both retail and wholesale channels.
Principal users of OEM, or industrial, coatings include the automotive, machinery and equipment, metal container, and metal furniture and fixtures industries, among others. Industrial coatings are coatings that are factory-applied to manufactured goods as part of the production process.
Industrial coatings decorate and protect virtually all manufactured goods. Illustrative of uses of industrial coatings is the automotive industry, a $300
billion annual industry, in which the cost of paint represents approximately one percent of the selling price of an average automobile. Paints and coatings are the primary inhibitor of rust on automobiles.
Special purpose coatings are primarily used where durability is the key objective. Applications of special purpose coatings include: high performance maintenance coatings used to combat corrosion of exposed steel in structures, tanks, pipes, industrial equipment and tank linings; marine coatings used to protect ships, pleasure craft, oil rigs and equipment exposed to water; automotive refinishing applications; and highway and traffic signs, among other applications.
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PRODUCTS
We are developing a family of proprietary products incorporating the Mineral as a performance additive in a variety of industrial applications.
Our initial product offerings are targeted to the plastics industry and to the paint and coatings industry. Additional product offerings are being considered for the cementitious, textile, rubber, electronics, ceramics and refractory industries.
Plastics Applications
We presently market to the plastics industry high performance powder and compounds under the trade name Vitrolite(R). Vitrolite(R) is a white translucent, odorless powder comprised of non-toxic amorphous aluminosilicate.
Vitrolite(R) is offered in a variety of grades suited to different end use applications. Vitrolite XP and CL are used to reduce costs and increase productivity in plastic processing and manufacturing operations. Use of small
amounts of Vitrolite(R) (up to 1% by weight) in polymers changes the polymer viscosity in all plastics manufacturing processes, thus offering a variety of benefits that may include:
o reduced cycle time
o decreased raw material usage
o reduced cost of additives because of improved dispersion
o reduced mechanical stress and parts rejection
o reduced polymer costs, if lower cost resins can be used or re-processed material can be incorporated
o improved product finish
o improved overall process economics
Vitrolite(R) is chemically non-reactive, non-migratory and is compatible with all known polymers.
Paint and Coatings Applications
We presently market to the paints, polymer coatings and fabrics industries an optical enhancer, rheology modifer and physical performance aid for polymer coatings and fabrics under the tradename Vitrocote(R). Vitrocote(R) is a white, transparent to translucent (depending on particle size) odorless powder comprised of non-toxic amorphous aluminosilicate. Vitrocote(R) is offered in
grades F and FC. These products have a particle size cut off of 10 microns and the FC product is of higher purity and has less coloration contamination.
Used as an optical enhancer in high performance paint coatings, Vitrocote(R) acts as a spacer between particles of mica, aluminum or micro-fine glass in pigmented coatings dramatically improving desired optical effects at a wide
range of viewing angles. Blended as a replacement for equivalent weights of inert or, in some cases, active pigment at 1% to 5% by pigment weight (or, in the case of highly pigmented systems, >10%), Vitrocote(R):
o increases optical depth, clarity and brilliance in metallic coatings
o improves distinctiveness of image in solid color coatings
o reduces active pigment loading while achieving desired color saturation, brilliance and other film esthetics
o improves control of interfering pigments
o reduces mottling and orange peel, providing a uniform, reduced blemish surface
As an optical enhancer, Vitrocote(R) is chemically non-reactive and is compatible with metallic and solid color basecoats, clear topcoats and specialty coatings, both in solvent and water based systems.
Used as a rheology modifer, Vitrocote(R) enhances the flow properties of materials under specific delivery conditions, including spraying, rolling and extruding. Based on the enhanced dispersion and distribution of companion
additives in formulas, Vitrocote(R):
o provides vastly improved and faster dispersion of pigments, extenders and other coating raw materials
o improves the performance of other additives in formulations, minimizing the loading of expensive materials
When tested as a high performance processing aid for thermal barrier coatings, Vitrocote(R) decreased thermal conductivity properties of coatings. Use of small
amounts of Vitrocote(R) (1% to 4% by weight) aids in the performance of thermal barrier coatings by:
o dramatically decreasing the thermal conductivity of coatings/films
o improving the efficiency of dispersing metallic fillers, binders and other raw materials
o improving the suspension of coatings materials
As a processing aid for thermal barrier coatings, Vitrocote(R) is chemically non-reactive and compatible with most coatings materials.
Potential Rubber Applications
We anticipate developing a product line incorporating the Mineral for use in the rubber industry to be marketed under the name Vitrosil(R). Based on research and testing to date, we believe that Vitrosil(R) will offer improved strength, durability and overall performance for both standard and custom molded rubber parts. Product testing and market research are continuing and no firm schedule
has, as yet, been set for the introduction of Vitrosil(R).
Potential Cementitious Applications
We have conducted research with California State University, Fullerton regarding uses of the Mineral in the cement industry to improve strength, reduce weight,
improve finish and improve resistance to moisture, weathering and temperature extremes. Based on this effort, we believe that significant opportunities for sales of our Mineral will result from these discoveries.
Potential Ceramics and Refractory Applications
We anticipate developing a product line incorporating the Mineral for use in the ceramics and refractories industries to be marketed under the name Vitrotherm(TM). Based on research and testing to date, we believe that Vitrotherm(TM) will offer improved flow properties for self-leveling and pumpable castable refractories, reduced shrinkage in the casting process, and increased strength, reduced thermal conductivity and increased resistance to thermal shock in ceramic products. Product testing and market research are continuing and no firm schedule has, as yet, been set for the introduction of Vitrotherm(TM).
Other Potential Products and Applications
We are conducting ongoing research and product development to deliver additional products to our current and anticipated markets and to develop products for other industrial applications.
We are presently developing a product line incorporating the Mineral for use in both the plastics and the paint and coatings industries to be marketed under the name Vitropurge(R). Based on extensive research and testing to date, we believe that Vitropurge(R) will offer improved purging or cleaning of machinery and equipment used in both paint and coatings applications, processing and manufacturing and plastics molding and processing. Product testing and market
research are continuing and no firm schedule has, as yet, been set for the introduction of Vitropurge(R).
We have also identified potential uses of the Mineral in the electronics industry to improve electrical, thermal, structural, rheological and flame suppression properties and, the hazardous waste industry as an impermeable water
barrier to eliminate migration of hazardous materials in landfills and nuclear waste sites. Product research and development will be conducted to develop products for each of these and other industrial applications. No schedule has,
as yet, been set for the introduction of any other products.
MINING OPERATIONS
Mining Properties and Mineral Interests
We hold rights to mine all of the Mineral located on an eighteen (18) acre site in Calaveras County, California (the "EIG Property") and a 288 acre site in Kern
County, California (the "Red Rock Canyon Property") and, subject to closing on the acquisition of underlying property or Mineral interests by Valley Springs
LLC an eighty (80) acre site in Calaveras County, California (the "Valley Springs Property").
EIG Property. Pursuant to the terms of the EIG Mining Agreement, we have the right to mine Minerals from the EIG Property through March 31, 2017. Our rights to mine the EIG Property are subject to satisfaction of EIG's ongoing
obligations under a September 1997 Purchase and Sale Agreement pursuant to which EIG originally acquired the rights to mine the property through March 31, 2017
in exchange for certain payments from EIG to the property owner, which payment obligations include a required annual payment in an amount equal to the greater of $50,000 or $1.39 per cubic yard of Mineral mined during the year.
Under the EIG Mining Agreement, we are obligated to pay to EIG the following amounts per pound of Mineral excavated from the EIG Property and sold and collected by us:
Year Price Per Pound
2004 $0.875
2005 $1.00 plus Cost of Living Adjustment
Beginning in January 2005, and annually thereafter, the price per pound is subject to annual increase based on the annual increase in the Bureau of Labor Statistics Paint Raw Material Index (comparing the month of October of the
immediately preceding year to the month of October in the prior year).
Under the EIG Mining Agreement, we are also obligated to purchase from EIG (in aggregate with purchases from Red Rock LLC and Valley Springs LLC), after February 3, 2004 and by the following dates, the following aggregate minimum
amounts of Mineral:
Purchase Date Amount in Pounds
December 1, 2005 7,500,000
December 1, 2006 10,000,000
December 1, 2007 12,500,000
December 1, 2008 15,000,000
Each December 1 thereafter 10% in excess of the prior year's minimum
requirement
Based on drill borings on the site, Golder Associates, Inc., an independent geotechnical engineering consultant, estimated reserves of amorphous aluminosilicate in place on the EIG Property of approximately 1.6 billion pounds. Mining of the EIG Property is of an open-pit nature. No estimate has been made with respect to the potential loss of material that may result from mining or preparation operations. As of December 31, 2003, from the commencement
of mining operations by Hi-Tech at the site, approximately 35 million pounds of Mineral had been mined from the EIG Property. Mining of the property will be conducted on an as needed basis to meet our anticipated product delivery
requirements.
The EIG Property is readily accessible from state and county roadways. Because of the nature of mining operations conducted, there is no physical plant or equipment located on the EIG Property.
Prior to commencement of Hi-Tech's mining operations on the EIG Property, mining operations were conducted on the property from the mid-1800s to present by various property owners.
Pursuant to the terms of the EIG Mining Agreement, we may not sell or distribute products that are competitive with the Mineral, other than Mineral from the Red Rock Canyon Property, the Valley Springs Property or a property under common ownership with EIG or those properties, until such time as we have purchased and paid for at least 75% of the Mineral located on the EIG Property. Additionally,
pursuant to the EIG Mining Agreement, we granted EIG a non-terminable worldwide,non-exclusive royalty free and paid up perpetual license to utilize all of our technologies relating to the Minerals from and after a default by us under the EIG Mining Agreement or the termination, for any reason, of the EIG Mining Agreement.
Red Rock Canyon Property. Pursuant to the terms of the Red Rock Canyon Mining Agreement, we have the right to mine Minerals from the Red Rock Canyon Property through April 2036. Our rights to mine the Red Rock Canyon Property are subject to satisfaction of Red Rock LLC's ongoing obligations under a July 2002 agreement pursuant to which Red Rock LLC originally acquired the rights to mine the property through July 2036 in exchange for certain payments from Red Rock LLC to the property owner. Red Rock LLC is obligated to pay to the property owner a total of $1.5 million, $300,000 of which was paid at closing with the
balance of $1.2 million being payable over seven years based on Mineral production subject to minimum annual payments of $150,000 plus interest at 7% on the unpaid balance. The sellers of the Red Rock Canyon Property reserved the right to mine up to 1,000 tons of calcium bentonite from the Red Rock Canyon Property.
Under the Red Rock Canyon Mining Agreement, we are obligated to pay to Red Rock LLC amounts per pound of Mineral excavated from the Red Rock Canyon Property and
sold by us and we are subject to cumulative minimum purchase requirements. Both the per pound payment and the minimum purchase requirements with respect to the Red Rock Canyon Property are identical to the requirements established for the EIG Property. The Red Rock Canyon Mining Agreement includes non-compete and license provisions identical to those pertaining to the EIG Property. We are also obligated to advance to Red Rock LLC all amounts necessary to secure the rights relative to the Red Rock Property (including the payments to the land
owners), all of which amounts will be treated as advances against per pound payment obligations.
Prior to the sale of the Red Rock Canyon Property to Red Rock LLC, the owner, Joseph Mathewson, conducted mining operations for more than twenty years. The Red Rock Canyon Property is zoned for mining, all entitlements are in place to continue mining activities on the property and no royalties are payable to the prior owners. The Red Rock Canyon Property is estimated to contain approximately
6.0 billion pounds of material. Mining of the Red Rock Canyon Property is of an open-pit nature. No estimate has been made with respect to the potential loss of material that may result from mining or preparation operations. Hi-Tech commenced mining of the Red Rock Canyon Property in 2003 and, as of March 31, 2004, had mined approximately 2 million pounds of Mineral.
The Red Rock Canyon Property is readily accessible from state and county roadways pursuant to a Bureau of Land Management right of way. The right of way expires in five years, at which time the right of way is subject to renewal.
Because of the nature of mining operations conducted, there is no physical plant or equipment located on the Red Rock Canyon Property.
Valley Springs Property. Pursuant to the terms of the Valley Springs Mining Agreement, we have the right to mine Minerals from the Valley Springs Property through April 2036. Our rights to mine the Valley Springs Property are subject to satisfaction of Valley Springs LLC's ongoing obligations under a July 2002 agreement pursuant to which Valley Springs LLC has entered into an agreement to
acquire the rights to mine the property through July 2036 in exchange for certain payments from Valley Springs LLC to the property owner. Valley Springs LLC will be obligated to pay to the property owners (1) to one owner, a total of
$1.75 million, $250,000 of which is to paid at closing with the balance of $1.5 million being payable in quarterly installments of $100,000 and, (2) to a second owner, a royalty based on Mineral excavated and sold in the amount of $0.50 per pound in 2004, $0.59 per pound in 2005 and thereafter $0.67 per pound subject to an annual cost of living adjustment. Our rights to mine the Valley Springs
Property are subject to the right of one property owner to require us to mine for, and sell to, it up to fifty percent (50%) of the Mineral on the property for cost (including certain overhead related costs) plus a five percent (5%)
markup. Closing on the acquisition of mining rights to the Valley Springs Property from the present landowner has not, as of March 31, 2004, occurred.
Under the Valley Springs Mining Agreement, we are obligated to pay to Valley Springs LLC amounts per pound of Mineral excavated from the Springs Property and sold by us and we are subject to cumulative minimum purchase requirements. Both the per pound payment and the minimum purchase requirements with respect to the Valley Springs Property are identical to the requirements established for the EIG Property. The Valley Springs Mining Agreement includes non-compete and license provisions identical to those pertaining to the EIG Property. We are also obligated to advance to Valley Springs LLC all amounts necessary to secure the rights relative to the Valley Springs Property (including the payments to the land owners), all of which amounts will be treated as advances against per pound payment obligations.
The Valley Springs Property has not previously been mined but is zoned for mining. We are processing the Valley Springs property for the owners to obtain mining permits and entitlement approval is expected by December 31, 2004. There is no guaranty that we will be successful in obtaining mining entitlements.
The Valley Springs Property is estimated to contain approximately 27 billion pounds of material. Mining of the Valley Springs Property will be of an open-pit nature. No estimate has been made with respect to the potential loss of material that may result from mining or preparation operations. Assuming we secure the mining entitlements for the Valley Springs Property, mining of the Valley Springs Property will be conducted on an as needed basis to meet our anticipated product delivery requirements.
The Valley Springs Property is readily accessible from state and county roadways. Because of the nature of mining operations expected to be conducted, there is no, and is expected to be no, physical plant or equipment located on
the Valley Springs Property.
Mine Operations
All mining operations are contracted to independent excavation operators. Mining operations are conducted in deposits in an open pit fashion using large bulldozers and bucket loaders to remove topsoil and vegetation from the Mineral deposit and dislodge the Mineral from the deposit using a ripper. The Mineral is crushed as needed to permit loading in rock trucks for hauling to milling
facilities.
We have no long-term contracts with excavation operators or trucking companies but retain services on an as needed basis. Excavation operators are typically paid on a per cubic yard basis for all Mineral excavated. Trucking companies are typically paid on a per mile basis for transporting Mineral to milling facilities.
Excavation and trucking capacity are readily scalable by the use of additional heavy equipment and trucks by the operators and/or the retention of additional operators. Mining and trucking capacity are not expected to be a constraint on our ability to deliver product.
We have certain mine site restoration requirements following the completion of mining operations pursuant to our mining entitlements. Calaveras County has required a surety bond in the amount of $14,206 to be posted to guarantee our completion of future reclamation of the site. Kern County has required a surety bond in the amount of $40,260 to be posted to guarantee our completion of future
reclamation of the site.
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MOST RECENT NEWS
VitroTech's Revolutionary Performance Additive Vitrolite(R) Adopted byPlastics Industry Leader Ropak Packaging
SANTA ANA, Calif., May 19, 2004 /PRNewswire-FirstCall via COMTEX/ -- VitroTech Corporation (OTC Bulletin Board: VROT) announced today that Ropak Packaging has adopted Vitrolite(R) technology and products in their North American facilities. Vitrolite(R) performance additives enhance both the physical properties and production of plastics, paints and coatings as well as a variety of other products.
Ropak is a member of the LINPAC group of companies. LINPAC, headquartered in Birmingham, UK, is a diversified supplier of paper and plastics-based packaging, returnable packaging systems and plastic automotive components. It manufactures in five continents and sells in nearly every country in the world. For the year ended December 2002, LINPAC reported revenues of pounds Sterling 1.2 billion (approximately US$2.1 billion).
Ropak serves the packaging needs for a wide range of industries from food (dairy and bakery) to industrial (petroleum products, coatings and adhesives) and hazardous materials (chemicals). Consumer products include pet food, cat litter, detergents, seeds, paint, and fasteners. Other products are specially designed for the fishing and agricultural markets.
"Ropak is widely acknowledged as a leading adopter of new technologies in the plastics manufacturing industry," said Jess Rae Booth, Chairman and CEO of VitroTech Corp. Mr. Booth added: "This deal will have a significant material impact on Vitrolite(R)'s growth over the next fiscal year."
Headquartered in Fullerton, Calif., Ropak Packaging is one of North America's leading manufacturers of innovative plastic packaging used in a wide range of applications. The company has eight manufacturing facilities throughout the United States and Canada. For more information, please visit the Web site at www.ropakcorp.com.
Headquartered in Santa Ana, California, VitroTech Corporation is a materials technology and research company with rights to purchase, process and sell approximately 35 billion pounds of rare amorphous aluminosilicate deposits, which are used to produce its primary products, Vitrolite (R) and Vitrocote(R). These products enhance both the physical qualities and production of plastics, paint/coatings, and a variety of other market segments. For more information, please visit VitroTech on the web at: www.vitroco.com.
SOURCE VitroTech Corporation
CONTACT: Jess Rae Booth, Chairman & CEO of VitroTech Corporation,
+1-714-708 4700
URL: www.ropakcorp.com
www.vitroco.com
www.prnewswire.com
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