SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
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
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
(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 14a-6(I)(4) and 0-11. (1)
Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction apply:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $
--------------------------------------------------------------------------------
(5) Total fee paid: $
--------------------------------------------------------------------------------
[_] 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:
--------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------------------------------------------------
(3) Filing party:
--------------------------------------------------------------------------------
(4) Date filed:
--------------------------------------------------------------------------------
1
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
5 Whatney
Irvine, California 92618
INFORMATION STATEMENT
December___, 2003
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ACTION, DEFINED BELOW, HAS ALREADY BEEN APPROVED BY WRITTEN CONSENT
OF HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON STOCK OF THE COMPANY. A VOTE
OF THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
General
This Information Statement is first being furnished on or about
December___, 2003 to shareholders of record as of the close of business on
October 30, 2003 (the "Record Date") of the common stock, no par value per share
(the "Common Stock") of Advanced Refrigeration Technologies, Inc. ("ART" or the
"Company") in connection with the following (the "Action"):
I. PROPOSAL NUMBER ONE. AMENDMENT TO THE ARTICLES OF INCORPORATION, CHANGING THE
NAME OF THE COMPANY TO JOYSTAR, INC.
II. PROPOSAL NUMBER TWO. ADOPTION OF AMENDED 2002 EQUITY AND STOCK OPTION PLAN.
III. PROPOSAL NUMBER THREE. ADOPTION OF 2003 EQUITY COMPENSATION PLAN.
The Board of Directors has approved, and a majority of the shareholders
(the "Consenting Shareholders") representing not less than 12,820,000 shares of
the 18,228,439 shares outstanding of the Common Stock as of the Record Date have
consented in writing to the Action. Such approval and consent constitute the
approval and consent of a majority of the total number of shares of outstanding
of Common Stock and are sufficient under the California General Corporation Law
and ART's Bylaws to approve the Action. Accordingly, the Action will not be
submitted to the other shareholders of ART for a vote and this Information
Statement is being furnished to shareholders to provide them with certain
information concerning the Action in accordance with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
regulations promulgated thereunder, including Regulation 14C.
ART will pay all costs associated with the distribution of the Information
Statement, including the costs of printing and mailing. ART will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending this Information Statement to the
beneficial owners of ART's Common Stock.
The principal executive office of ART is located at 5 Whitney, Irvine,
California 92618.
2
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has unanimously adopted and the Consenting
Shareholders have approved an amendment to the Articles of Incorporation, as
amended, of ART (the "Name Amendment") to change the name of the Company from
"Advanced Refrigeration Technologies, Inc." to "Joystar, Inc." The text of the
Name Amendment is attached as Exhibit A and is incorporated herein by reference.
Reasons for the Name Change
In the judgment of the Board of Directors, the change of ART's corporate
name is desirable in view of the acquisition by ART pursuant to the Agreement
and Plan of Reorganization dated as of June 10, 2003 (the "Agreement") by and
between ART and Joystar, Inc. ("Joystar"). Pursuant to the Agreement, as of June
11, 2003, the Company acquired from the shareholders of Joystar all of the
shares of Joystar (the "Acquisition") and Joystar became a wholly owned
subsidiary of the Company. Joystar is a provider of online travel services.
Following the Acquisition, the Company discontinued its operations relating to
refrigeration fan controllers business and concentrated on the business
conducted by Joystar. Accordingly, the directors of the Company believe that the
Name Amendment will result in the Company having a name which more accurately
reflects its business and the focus of its operations.
Description of the Acquisition of Joystar
1. Summary Term Sheet as of June 11, 2003 (the Closing of the
Acquisition):
- exchange of all of the outstanding shares of Joystar for 13,880,599 newly
issued shares of ART to Joystar shareholders;
- total outstanding shares of Joystar: 13,880,599 shares of common stock;
- total outstanding shares of ART: 3,322,840 shares of common stock;
- outstanding shares of ART after the Acquisition: 17,203,439 shares of
common stock;
- appointment of William A. Alverson to the Board of Directors of the Company
and as the President, CEO and CFO of the Company; resignation of the then
current officers and directors;
- payment of debts of ART by Joystar in the amount of $60,000;
- assumption of additional liabilities of ART by Joystar in the approximate
amount of $50,000;
- concurrent with the Closing of the Acquisition, the sale of certain assets
of ART valued at approximately $98,000 to Advanced Refrigeration Controls,
Inc., a California corporation controlled by Allen and Clare Schrum in
consideration for assumption of certain liabilities of ART in the
approximate amount of $118,000.
2. Contact Information
The contact information for the Company is William A. Alverson, President. The
Company's address is 5 Whitney, Irvine,California 92618. The Company's previous
address was at 9309 Narnia Drive, Riverside, California 92503.
3. Business Conducted.
ART was in the business of designing, manufacturing and marketing an energy
efficiency evaporator fan motor controller for walk-in refrigerators and
freezers that can save the customers in refrigeration energy costs. The Company
has not been able to successfully sell enough units to be profitable and has
sustained losses every year since inception. The Company has not been successful
in obtaining necessary funding to continue the business. Since August, 2002, the
Company has been actively engaged in finding a potential investor to acquire the
Company and bring in a new business.
Joystar is a provider of online and offline travel services for the leisure and
small business traveler. Joystar offers reliable, real time access to research
and reservation services for over 400 airlines, 50,000 lodging properties, all
major cruise lines, tour operators, and car rental companies. By accessing
Joystar's website, both Joystar's agents and customers enter a one stop shopping
environment for their travel purchases 24 hours a day, 7 days a week.
The Company also develops and markets its Independent Travel Agent Program- a
business opportunity targeted to two main groups: (1) affluent leisure travelers
and small business owners who are looking to save money on their travel; and
(2) the growing population of people who wish to supplement their primary income
working part-time as well as full-time home-based entrepreneurs.
Joystar's travel agent program, is designed for individuals from all walks of
life who desire to earn a part-time or full-time income from the comfort of
their home or office. The simplicity of the program allows people to receive
commissions on their travel as well as travel purchases made by people they
refer to the agency. The travel agent program centers more on loyalty marketing
than any special skills required by the independent agent as the actual
bookings, payment processing, and fulfillment are handled by Joystar or the
travel supplier (airline, hotel, cruise line, etc.).
The benefits of being an independent travel agent include access to "agent only"
specials and deeply discounted travel offered by travel suppliers, cash
incentives and the possibility of upgrades when the agent is traveling. Booking
tools, exclusive specials, on-line training and educational opportunities,
important news and comprehensive information for initiating and increasing sales
are all available to Joystar travel agents. Essential to this is building
meaningful preferred supplier relationships to the ultimate benefit of the
traveler. With the buying power of tens of thousands of travel agents, Joystar
can strive to provide exceptional value to its consumers and agents alike.
Joystar blends the best of the online model (instant access to vast amounts of
information) with personal service from experience travel agents. Joystar
provides its "outside" travel agents and their customers reliable, real-time
access to one of the largest databases of "published" travel products, including
over 400 airlines, 65,000 lodging properties, and all major car rental
companies. In addition, Joystar provides access to "unpublished" fares. These
products, in particular, offer our agents dramatically enhanced commissions
while still providing significantly lower costs to their retail customers.
Joystar's most basic assumption is that Joystar has two key customers: the
consumer and the independent travel agent. Joystar's success depends on the
loyalty and growth of both groups.
The Company maintains its corporate offices in Irvine, California. The Company
occupies 6,200 square fees pursuant to the lease agreement entered in June,
2003. The Company pays $1.10 per square foot. The lease agreement is for a term
of one year with three one year options to extend the lease.
4. Terms of the Transaction
As of June 11, 2003, Advanced Refrigeration Technologies, Inc., a California
corporation ("ART" or the "Company") consummated a transaction, whereby the
Company acquired all of the issued and outstanding shares of Joystar, Inc., a
Nevada corporation ("Joystar") in exchange for the issuance by the Company of a
total of 13,880,599 newly issued restricted shares of common voting stock to the
Joystar shareholders pursuant to the Agreement and Plan of Reorganization (the
"Agreement"), dated as of June 10, 2003, by and between the Company and Joystar
(the "Closing"). Pursuant to the terms of the Agreement, Joystar provided the
payment of debts of ART in the amount of $60,000 and assumed additional
liabilities of ART in the approximate amount of $50,000. Immediately prior to
the share exchange, there were approximately 3,322,840 shares of the Company's
common stock issued and outstanding. As a result of the acquisition, there were
approximately 17,203,439 shares of common stock issued and outstanding.
Concurrent with the Closing of the Acquisition, the Company sold certain assets
of ART valued at approximately $98,000 to Advanced Refrigeration Controls, Inc.,
a California corporation controlled by Allen and Clare Schrum in consideration
for assumption of certain liabilities of ART in the approximate amount of
$118,000, pursuant to the Asset Sale and Purchase Contract by and between ART
and Advanced Refrigeration Controls, Inc. Upon the Closing, William M. Alverson
was appointed to the Board of Directors of the Company. The present officers of
the Company resigned and William M. Alverson was appointed as the Company's
President, Chief Financial Officer and Secretary. Subsequently to the Closing,
Rick McEwan resigned as a director of the Company on June 18, 2003, and
Katherine T. West was appointed as a new director.
Since ART has not been able to successfully sell enough units to be profitable
and has sustained losses every year since inception and it has not been
successful in obtaining necessary funding to continue the business, the Company
has been actively engaged in finding a potential investor to acquire the Company
and bring in a new business. At the time of the Acquisition, ART did not have
any operations, did not have any funding to pay off its liabilities and did not
have any funds to maintain its filing requirements with the Securities and
Exchange Commission. The Company approved the Acquisition because it was in the
best interest of the Company and it was the only viable option for the Company
and its shareholders to bring in a new business, have its liabilities paid off
and to continue operations.
The approval of shareholders for the Acquisition of Joystar was not required by
the California law. The Board of Directors of the Company approved the
Acquisition. The majority shareholders and the board of directors of Joystar
approved the Acquisition.
There are no differences in the rights of security holders of ART following the
Acquisition of Joystar.
The Acquisition of Joystar by the Company as of June 11, 2003 has been accounted
for as a purchase and treated as a reverse acquisition since the former owners
of Joystar controlled 81% of the total shares of common stock of the Company
outstanding immediately following the Acquisition. On this basis, the historical
financial statements prior to June 11, 2003 have been restated to be those of
the accounting acquirer Joystar. The historical stockholders' equity prior to
the reverse acquisition has been retroactively restated (a recapitalization) for
the equivalent number of shares received in the acquisition after giving effect
to any difference in par value of the issuer's and acquirer's stock. The
original 3,322,840 shares of common stock outstanding prior to the
reorganization have been reflected as an addition in the stockholders' equity
account of the Company on June 11, 2003.
The management of the Company believes that the Acquisition was exempt from any
federal income taxes and there are no federal tax consequences to the Company.
5. Regulatory Approvals.
The Board of Directors of ART and the Board of Directors and the majority
shareholders of Joystar approved the Acquisition. No other approvals were
required.
6. Reports, opinions, appraisals.
No report, opinion or appraisal was obtained with respect to the Acquisition.
7. Financial Information
Set forth below is the following financial information for Joystar, Inc. and
Advanced Refrigeration Technologies,Inc.:
Independent Auditors' Report of Berger Mendoza & Company, LLP.
Balance Sheets as of December 31, 2001 and December 31, 2002
Statements of Operations for the Fiscal Year Ended December 31, 2002, for the
period from inception (May 23, 2001) through December 31, 2001 and for the
period from inception (May 23, 2001) through December 31, 2002
Statement of Changes in Stockholders' Equity (Deficit)
Statements of Cash Flows for the Fiscal Year Ended December 31, 2002, for the
period from inception (May 23, 2001) through December 31, 2001 and for the
period from inception (May 23, 2001) through December 31, 2002
Notes to Financial Statements
Balance Sheets as of December 31, 2002 and June 30, 2003 (unaudited)
Statements of Operations for the Six Months Ended June 30, 2003 (unaudited), for
the Six Months Ended June 30, 2002 and for the period from inception (May 23,
2001) through June 30, 2003 (unaudited)
Statement of Changes in Stockholders' Equity (Deficit)from inception (May 23,
2001) through June 30, 2003
Statements of Cash Flows for the Six Months Ended June 30, 2003 (unaudited), for
the Six Months Ended June 30, 2002 and for the period from inception (May 23,
2001) through June 30, 2003 (unaudited)
Notes to Financial Statements
Balance Sheets as of December 31, 2002 and September 30, 2003 (unaudited)
Statements of Operations for the Nine Months Ended September 30, 2003
(unaudited), for the Nine Months Ended September 30, 2002 and for the period
from inception (May 23, 2001) through September 30, 2003 (unaudited)
Statement of Changes in Stockholders' Equity (Deficit)from inception (May 23,
2001) through September 30, 2003
Statements of Cash Flows for the Nine Months Ended September 30, 2003
(unaudited), for the Nine Months Ended September 30, 2002 and for the period
from inception (May 23, 2001) through September 30, 2003 (unaudited)
Notes to Financial Statements
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001)
THROUGH DECEMBER 31, 2002
TABLE OF CONTENTS
Independent Auditors' Report................................................. 1
Balance Sheets................. ............................................. 2
Statements of Operations..................................................... 4
Statement of Changes in Stockholders' Equity (Deficit)....................... 5
Statements of Cash Flows..................................................... 6
Notes to Financial Statements................................................ 7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Joystar, Inc.
We have audited the accompanying balance sheets of Joystar, Inc. (formerly known
as Solutions Resource, Inc. and a development stage company) as of December 31,
2002 and 2001 and the related statements of operations, changes in stockholders'
equity (deficit) and cash flows for the year ended December 31, 2002, for the
period from inception (May 23, 2001) through December 31, 2001 and for the
period from inception (May 23, 2001) through December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Joystar, Inc. as of December
31, 2002 and 2001, and the results of its operations and cash flows for the year
ended December 31, 2002, for the period from inception (May 23, 2001) through
December 31, 2001 and for the period from inception (May 23, 2001) through
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed further in Note 3, the Company
has been in the development stage since its inception ( May 23, 2001) and
continues to incur significant losses. The Company's viability is dependent upon
its ability to obtain future financing and the success of its future operations.
These factor raise substantial doubt about the Company's ability to continue as
a going concern. Management's plan in regard to these matters is also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
MENDOZA BERGER & COMPANY, LLP
August 12, 2003
Irvine, California
1
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------
ASSETS
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
Current assets:
Cash $ 5,025 $ --
---------------- ----------------
Total current assets 5,025 --
---------------- ----------------
Property and equipment, net (Note 4) 2,406 --
---------------- ----------------
Total assets $ 7,431 $ --
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 9,718 $ --
Accrued salaries 81,811 --
Accrued rent 54,000 --
Advances from shareholder 62,577 --
---------------- ----------------
Total current liabilities 208,106 --
---------------- ----------------
Commitments (Note 9) -- --
Stockholders' equity:
Common Stock, par value $0.001per share, 50,000,000 shares authorized;
16,785,667 and 16,715,000 shares issued and outstanding at December 31,
2002 and December 31, 2001,
respectively 16,786 16,715
Additional paid in capital 105,927 --
Deficit accumulated during development stage (323,388) (16,715)
---------------- ----------------
Total stockholders' equity (deficit) (200,675) --
---------------- ----------------
Total liabilities and stockholders' equity $ 7,431 $ -
================ ================
The accompanying notes are an integral part of these financial statements
2
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE AMOUNTS
FROM INCEPTION
FOR THE YEAR FROM INCEPTION (MAY (MAY 23, 2001)
ENDED 23, 2001) THROUGH THROUGH
DECEMBER 31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2002
----------------- ----------------- -----------------
Income:
Travel agent program $ 6,263 $ -- $ 6,263
---------------- ---------------- ----------------
Operating expenses:
General and administrative 190,518 16,715 207,233
Marketing and sales 122,418 -- 122,418
---------------- ---------------- ----------------
Total operating expenses 312,936 16,715 329,651
---------------- ---------------- ----------------
Loss from operations (306,673) (16,715) (323,388)
---------------- ---------------- ----------------
Provision for taxes (Note 8) -- -- --
---------------- ---------------- ----------------
Net loss $ (306,673) $ (16,715) $ (323,388)
================ ================ ================
Loss per share $ (0.02) $ (0.004)
================ ================
Weighted average number of common shares outstanding 16,822,686 4,462,376
================ ================
The accompanying notes are an integral part of these financial statements
3
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
-------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK TOTAL
--------------------------------- RETAINED STOCKHOLDERS'
NUMBER OF PAR VALUE ADDITIONAL EARNINGS EQUITY
SHARES $0.001 PAID-IN CAPITAL (DEFICIT) (DEFICIT)
--------------- --------------- --------------- --------------- ---------------
Balance, inception (May 23, 2001) -- $ -- $ -- $ -- $ --
Stock issued for services (Note 7) 16,715,000 16,715 -- -- 16,715
Net loss -- -- -- (16,715) (16,715)
--------------- --------------- --------------- --------------- ---------------
Balance, December 31, 2001 16,715,000 16,715 -- (16,715) --
Stock issued various dates for
cash at $1.50 per share (Note 7) 70,667 71 105,927 -- 105,998
Net loss -- -- -- (306,673) (306,673)
--------------- --------------- --------------- --------------- ---------------
Balance, December 31, 2002 16,785,667 $ 16,786 $ 105,927 $ (323,388) $ (200,675)
=============== =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements
4
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE AMOUNTS
FROM INCEPTION FROM INCEPTION
FOR THE YEAR (MAY 23, 2001) (MAY 23, 2001)
ENDED THROUGH THROUGH
DECEMBER 31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2002
----------------- ----------------- -----------------
Cash flows from operating activities:
Net loss $ (306,673) $ (16,715) $ (323,388)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services -- 16,715 16,715
Changes in assets and liabilities:
Increase in accounts payable 9,718 -- 9,718
Increase in accrued salaries 81,811 -- 81,811
Increase in accrued rent expense 54,000 -- 54,000
-------------- -------------- --------------
Net cash used by operations (161,144) -- (161,144)
-------------- -------------- --------------
Cash flows used by investing activities:
Acquisition of fixed assets (2,406) -- (2,406)
-------------- -------------- --------------
Net cash used by investing activities (2,406) -- (2,406)
-------------- -------------- --------------
Cash flows from financing activities:
Advances from shareholder 62,577 -- 62,577
Issuance of common stock 105,998 -- 105,998
-------------- -------------- --------------
Net cash provided by financing activities 168,575 -- 168,575
-------------- -------------- --------------
Net increase in cash 5,025 -- 5,025
Cash, beginning of period -- -- --
-------------- -------------- --------------
Cash, end of period $ 5,025 $ -- $ 5,025
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for services $ -- $ 16,715 $ 16,715
============== ============== ==============
The accompanying notes are an integral part of these financial statements
5
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
1. ORGANIZATION AND HISTORY
------------------------
Joystar, Inc. (the Company), a Nevada Corporation, was incorporated on
May 23, 2001. The Company is a provider of online and offline travel
services for the leisure and small business traveler.
The Company has been in the development stage since its inception, May
23, 2001. It is primarily engaged in raising capital to increase sales
and marketing activity, licensing and product development, acquisitions
and infrastructure development.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets,
which is seven years for furniture and equipment and three years for
computer equipment. No property and equipment has been depreciated.
USE OF ESTIMATES
----------------
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
------------
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
6
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------
NET LOSS PER SHARE
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128 "Earnings Per Share" which requires the Company to
present basic and diluted earnings per share, for all periods
presented. The computation of loss per common share (basic and diluted)
is based on the weighted average number of shares actually outstanding
during the period. The Company has no common stock equivalents, which
would dilute earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Financial instruments consist principally of cash and various current
liabilities. The estimated fair value of these instruments approximates
their carrying value.
3. GOING CONCERN
-------------
The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. However, the Company has been in the development stage
since its inception (May 23, 2001), sustained significant losses and
has used capital raised through the issuance of stock and debt to fund
activities. Continuation of the Company as a going concern is
contingent upon establishing and achieving profitable operations. Such
operations will require management to secure additional financing for
the Company in the form of debt or equity.
Management believes that actions currently being taken to revise the
Company's funding requirements will allow the Company to continue its
development stage operations. However, there is no assurance that the
necessary funds will be realized by securing debt or through stock
offerings.
7
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
Office furniture $ 1,864 $ --
Computers 542 --
--------------- ---------------
2,406 --
Less: accumulated depreciation -- --
--------------- ---------------
$ 2,406 $ --
=============== ===============
The property and equipment was acquired at the end of 2002.
Depreciation will start in 2003.
6. RELATED PARTY TRANSACTIONS
--------------------------
Advances from shareholder of $62,577 at December 31, 2002 are
non-interest bearing, currently payable and not evidenced by any notes.
7. CAPITAL STOCK
-------------
COMMON STOCK
------------
On November 2, 2001, the Company issued 16,715,000 restricted shares of
common stock at $0.001 per share totaling $16,715 for services rendered
in connection with the start up of the Company.
At various dates in 2002, the Company issued for cash of $105,998,
70,667 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
8
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
7. CAPITAL STOCK (Continued)
-------------
COMMON STOCK SPLIT
------------------
On November 1, 2001, the Board of Directors of the Company approved a
stock split of the Company's common stock at a ratio of 1,000 for 1.
All references in the accompanying financial statements to the number
of common stock and per share amounts reflect the stock split.
STOCK CANCELED AND ISSUED SUBSEQUENT TO DECEMBER 31, 2002
---------------------------------------------------------
A majority shareholder canceled 3,000,000 shares of stock in
anticipation of the acquisition of Advanced Refrigeration Technologies,
Inc. (see "subsequent event" footnote 10).
At various dates in 2003, the Company issued for cash of $142,300,
94,932 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
8. INCOME TAXES
------------
The components of the deferred tax asset is as follows:
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
Deferred tax assets:
Net operating loss carryforward $ 128,000 $ 6,500
Less: valuation allowance (128,000) (6,500)
-------------- --------------
Net deferred tax assets $ -- $ --
============== ==============
The Company's operations are headquartered in the State of California
and are subject to California state income taxes. The Company had
available approximately $323,000 of unused Federal and State net
operating loss carryforwards at December 31, 2002 that may be applied
against future taxable income. These net operating loss carryforwards
expire
9
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
8. INCOME TAXES (Continued)
------------
through 2022 for Federal purposes. There is no assurance that the
Company will realize the benefit of the net operating loss
carryforwards.
SFAS No. 109 requires a valuation allowance to be recorded when it is
more likely than not that some or all of the deferred tax assets will
not be realized. At December 31, 2002 and 2001, valuations for the full
amount of the net deferred tax asset were established due to the
uncertainties as to the amount of the taxable income that would be
generated in future years.
Reconciliation of the differences between the statutory tax rate and
the effective income tax rate is as follows:
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
Statutory federal tax (benefit) rate (34.00)% (34.00)%
Statutory state tax (benefit) rate (5.83)% (5.83)%
----------------- -----------------
Effective tax rate (39.83)% (39.83)%
Valuation allowance 39.83% 39.83%
----------------- -----------------
Effective income tax rate 0.00% 0.00%
================= =================
9. COMMITMENTS
-----------
OPERATING LEASE
---------------
The Company leases office space under an operating lease which expires
in April of 2004. As of December 31, 2002, future minimum lease
payments are as follows:
2003 $ 90,000
2004 18,000
---------------
$ 108,000
===============
10
JOYSTAR, INC.
(FORMERLY KNOWN AS SOLUTIONS RESOURCE, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2001,
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FROM INCEPTION (MAY 23, 2001) THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
9. COMMITMENTS (continued)
-----------
Subsequent to December 31, 2002, the Company entered into a month to
month lease for office space at $3,000 per month.
Rent expense totaled $54,000, $54,000 and $0, from inception (May 23,
2001) through December 31, 2002, for the year ended December 31, 2002
and the period ended December 31, 2001, respectively.
10. SUBSEQUENT EVENT
----------------
On June 11, 2003, the Company, entered into an agreement and plan of
reorganization with Advanced Refrigeration Technologies (Advanced), a
publicly held company. The stockholders of the Company exchanged 100%
of their common shares for 13,880,599 newly issued restricted shares of
Advanced common voting stock.
Since the former shareholders of Joystar, Inc. acquired control of
Advanced upon the merger closing, the merger will be accounted for as a
reverse acquisition. Accordingly, for financial statement purposes,
Joystar, Inc. will be considered the accounting aquiror and the related
business combination will be considered a recapitalization of Joystar,
Inc., rather than an acquisition by Advanced. The historical financial
statements presented prior to June 11, 2003, in all future public
filings, will be those of Joystar, Inc.
11
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
---------------------------------------------------------------------------------------
ASSETS
JUNE 30, 2003 DECEMBER 31,
UN-AUDITED 2002
------------ ------------
Current assets:
Cash $ 37,637 $ 5,025
Prepaid rent 3,000 --
------------ ------------
Total current assets 40,637 5,025
Property and equipment (net) 8,040 2,406
------------ ------------
Total assets $ 48,677 $ 7,431
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 71,211 $ 9,718
Accrued salaries 181,425 81,811
Accrued rent 60,000 54,000
Loans from shareholders 97,139 62,577
------------ ------------
Total current liabilities 409,775 208,106
Shareholders' equity:
Preferred stock (no par value) 10,000,000 shares
authorized; none issued -- --
Common stock (no par value) 50,000,000 shares
authorized; at June 30, 2003 and December 31,
2002, 18,228,439 and 16,785,667 issued and
outstanding, respectively 304,313 122,713
Common stock subscribed, 3,000 shares 4,500 --
Accumulated deficit during development stage (669,911) (323,388)
------------ ------------
Total shareholders' equity (deficit) (361,098) (200,675)
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 48,677 $ 7,431
============ ============
The accompanying notes are an integral part of these financial statements
3
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2003 AND
2002 AND FOR THE PERIOD FROM INCEPTION MAY 23, 2001 TO
JUNE 30, 2003
(UN-AUDITED)
----------------------------------------------------------------------------------------------------------------
CUMULATIVE
AMOUNTS FROM
FOR THE SIX FOR THE SIX FOR THE THREE FOR THE THREE INCEPTION MAY
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED 23, 2001 TO
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2003
------------- ------------- ------------- ------------- -------------
Income
Travel agent program $ 20,933 $ -- $ (346) $ -- $ 27,196
Operating expenses:
General and
Administrative 212,454 69,407 114,351 59,329 419,687
Marketing and sales 39,060 46,588 12,456 31,560 161,478
------------- ------------- ------------- ------------- -------------
Total expenses 251,514 115,995 126,807 90,889 581,165
------------- ------------- ------------- ------------- -------------
Loss from operations (230,581) (115,995) (127,153) (90,889) (553,969)
------------- ------------- ------------- ------------- -------------
Provision for income taxes -- -- -- -- --
Net loss (230,581) $ (115,995) $ (127,153) $ (90,889) $ (553,969)
============= ============= ============= ============= =============
Net loss per share $ (0.02) $ (0.01) $ (0.01) $ (0.01)
============= ============= ============= =============
Weighted average number of
common shares outstanding
14,170,584 16,730,778 13,846,347 16,730,778
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
4
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION MAY 23, 2001 TO JUNE 30, 2003
--------------------------------------------------------------------------------------------------------------
COMMON STOCK
-----------------------------------
Deficit
Additional Common Accumulated Total
Number of Paid-in Stock During the Stockholders'
Shares Amount Capital Subscibed Development Stage Equity
------------ ------------ ------------ ------------ ------------ --------------
Balance at inception - May 23, 2001 -- $ -- $ -- $ -- $ -- $ --
Stock issued for services 16,715,000 16,715 -- -- -- 16,715
Net loss -- -- -- -- (16,715) (16,715)
------------ ------------ ------------ ------------ ------------ --------------
Balance at December 31, 2001 16,715,000 16,715 -- -- (16,715) --
------------ ------------ ------------ ------------ ------------ --------------
Stock issued various dates for cash
at $1.50 per share 70,667 71 105,927 -- -- 105,998
Net loss -- -- -- -- (306,673) (306,673)
------------ ------------ ------------ ------------ ------------ --------------
Balance at December 31, 2002 16,785,667 16,786 105,927 -- (323,388) (200,675)
------------ ------------ ------------ ------------ ------------ --------------
Shares canceled by majority
Shareholder (3,000,000) -- -- -- -- --
Common stock subscribed -- -- -- 4,500 -- 4,500
Stock issued various dates
for cash at $1.50 per share 94,932 95 142,205 -- -- 142,300
------------ ------------ ------------ ------------ ------------ --------------
Balance June 11, 2003 date of
acquisition of Joystar, Inc. shares
in a reverse merger 13,880,599 16,881 248,132 4,500 (323,388) (53,875)
Cancel Joystar shares (13,880,599) -- -- -- --
Advanced Refrigeration shares
outstanding at June 11, 2003 3,322,840 -- -- -- -- --
Issue Advanced Refrigeration
Technologies, Inc. shares 13,880,599 248,132 (248,132) -- (115,942) (115,942)
Stock issued pursuant to the stock option plan June 11, 2003 at market value of
stock $0.03 per
share 810,000 24,300 -- -- -- 24,300
Stock issued for services 215,000 15,000 -- -- -- 15,000
Net loss -- -- -- -- (230,581) (230,581)
------------ ------------ ------------ ------------ ------------ --------------
Balance at June 30, 2003
(un-audited) 18,228,439 $ 304,313 $ -- $ 4,500 $ (669,911) $ (361,098)
============ ============ ============ ============ ============= =============
The accompanying notes are an integral part of these financial statements
5
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
AND CUMULATIVE FROM INCEPTION MAY 23, 2001 TO JUNE 30, 2003
(UN-AUDITED)
-----------------------------------------------------------------------------------------------------
CUMULATIVE
AMOUNTS FROM
INCEPTION
FOR THE SIX FOR THE SIX (MAY 23, 2001)
MONTHS ENDED MONTHS ENDED THROUGH
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2003
------------- ------------- -------------
Cash flows from operating activities:
Net loss $ (230,581) $ (115,995) $ (553,969)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and depreciation 332 -- 332
Stock issued for services 24,300 -- 41,015
Changes in assets and liabilities:
Increase in prepaid expenses (3,000) -- (3,000)
Increase in accounts payable 76,493 -- 86,211
Increase in salaries 99,614 32,000 181,425
Increase in rent accrual 6,000 24,000 60,000
------------- ------------- -------------
Net cash used in operations (26,842) (59,995) (187,986)
------------- ------------- -------------
Cash flows used by investing activities:
Acquisition of fixed assets (5,966) -- (8,372)
------------- ------------- -------------
Net cash used by investing activities (5,966) -- (8,372)
------------- ------------- -------------
Cash flows from financing activities:
Issuance of common stock 142,300 30,000 248,298
Advances from shareholders 34,562 27,274 97,139
Subscribed stock not issued 4,500 -- 4,500
Bank overdraft -- 2,721 --
Adjusting entry to reflect reverse acquisition
and recapitalization (115,942) -- (115,942)
------------- ------------- -------------
Net cash from financing activities 65,420 59,995 233,995
------------- ------------- -------------
Net increase (decrease) in cash 32,612 -- 37,637
Cash, beginning of period 5,025 -- --
------------- ------------- -------------
Cash, end of period $ 37,637 $ -- $ 37,637
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for services $ 24,300 $ -- $ 41,015
Issuance of stock for accounts payable 15,000 -- 15,000
============= ============= =============
The accompanying notes are an integral part of these financial statements
6
ADVANCED REFRIGERATION TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
AND CUMULATIVE FROM INCEPTION MAY 23, 2001 TO JUNE 30, 2003
(UN-AUDITED)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
On June 11, 2003, Advanced Refrigeration Technologies, Inc. a California
corporation (" the Company") acquired all of the issued and outstanding common
stock of Joystar, Inc., a Nevada corporation ("Joystar") in exchange for the
issuance by the Company of a total of 13,880,599 newly issued restricted shares
of common voting stock to the Joystar shareholders pursuant the Agreement an
Plan of Reorganization dated as if June 10, 2003. Prior to the issuance of the
shares, the Company had 3,322,840 shares of common stock issued and outstanding.
Subsequent to the exchange there were 17,203,439 shares issued and outstanding.
The shareholders of Joystar own 81% of the common stock outstanding of the
Company after the issuance of the 13,880,599 shares.
The acquisition of Joystar by the Company on June 11, 2003 has been accounted
for as a purchase and treated as a reverse acquisition since the former owners
of Joystar controlled 81% of the total shares of Common Stock of the Company
outstanding immediately following the acquisition.
On this basis, the historical financial statements prior to June 11, 2003 have
been restated to be those of the accounting acquirer Joystar. The historical
stockholders' equity prior to the reverse acquisition has been retroactively
restated (a recapitalization) for the equivalent number of shares received in
the acquisition after giving effect to any difference in par value of the
issuer's and acquirer's stock. The original 3,322,840 shares of common stock
outstanding prior to the exchange reorganization have been reflected as an
addition in the stockholders' equity account of the Company on June 11, 2003.
The Company has been in the development stage since its inception May 23, 2001.
2. INTERIM FINANCIAL INFORMATION
-----------------------------
The financial statements of Advanced Refrigeration Technologies, Inc. (the
Company) as of June 30, 2003 and for the six months ended June 30, 2003 and 2002
and related footnote information are un-audited. All adjustments (consisting
only of normal recurring adjustments) have been made which, in the opinion of
management, are necessary for a fair presentation. Results of operations for the
six months and three months ended June 30, 2003 and 2002 are not necessarily
indicative of the results that may be expected for any future period. The
balance sheet at December 31, 2002 was derived from audited financial
statements.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, have been omitted. These financial statements
should be read in conjunction with the financial statements and notes for the
year ended December 31, 2002 included in an 8-K filed with the Securities and
Exchange Commission on August 26, 2003.
7
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets,
which is seven years for furniture and equipment and three years for
computer equipment. No property and equipment has been depreciated.
USE OF ESTIMATES
----------------
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
------------
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
8
NET LOSS PER SHARE
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128 "Earnings Per Share" which requires the Company to
present basic and diluted earnings per share, for all periods
presented. The computation of loss per common share (basic and diluted)
is based on the weighted average number of shares actually outstanding
during the period. The Company has no common stock equivalents, which
would dilute earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Financial instruments consist principally of cash and various current
liabilities. The estimated fair value of these instruments approximates
their carrying value.
4. GOING CONCERN
-------------
The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. However, the Company has been in the development stage
since its inception (May 23, 2001), sustained significant losses and
has used capital raised through the issuance of stock and debt to fund
activities. Continuation of the Company as a going concern is
contingent upon establishing and achieving profitable operations. Such
operations will require management to secure additional financing for
the Company in the form of debt or equity.
Management believes that actions currently being taken to revise the
Company's funding requirements will allow the Company to continue its
development stage operations. However, there is no assurance that the
necessary funds will be realized by securing debt or through stock
offerings.
5. CAPITAL STOCK
-------------
COMMON STOCK
------------
On November 2, 2001, the Company issued 16,715,000 restricted shares of
common stock at $0.001 per share totaling $16,715 for services rendered
in connection with the start up of the Company.
At various dates in 2002, the Company issued for cash of $105,998,
70,667 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
COMMON STOCK SPLIT
------------------
On November 1, 2001, the Board of Directors of the Company approved a
stock split of the Company's common stock at a ratio of 1,000 for 1.
All references in the accompanying financial statements to the number
of common stock and per share amounts reflect the stock split.
9
STOCK CANCELED
--------------
A majority shareholder canceled 3,000,000 shares of stock in
anticipation of the acquisition of Advanced Refrigeration Technologies,
Inc.
At various dates in 2003, the Company issued for cash of $142,300,
94,932 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
STOCK ISSUED IN REVERSE MERGER JUNE 11, 2003
---------------------------------------------
The Company acquired all of the issued and outstanding common stock of
Joystar, Inc., a Nevada corporation ("Joystar") in exchange for the
issuance by the Company of a total of 13,880,599 newly issued
restricted shares of common dated as if June 10, 2003.
RECONCILIATION OF COMMON STOCK AT DECEMBER 31, 2002
---------------------------------------------------
Common stock at par value $0.001 $ 16,786
Additional paid in capital 105,927
-----------
$ 122,713
===========
STOCK ISSUED UNDER STOCK OPTION PLAN AND FOR PAYMENT OF SERVICES
----------------------------------------------------------------
The Company issued 810,000 shares of common stock pursuant to the Company's
Stock Option Plans on June 11, 2003 valued at the market price of the stock on
that date $0.03.
The Company issued 215,000 shares of common stock in payment of invoices for
professional services in June, 2003.
6. RELATED PARTY TRANSACTIONS
--------------------------
Advances from shareholder of $17,689 at June 30, 2003 are non-interest bearing,
currently payable and not evidenced by any notes.
The Company received loans in the amount of $70,000 and $9,450 from two other
shareholders. The $70,000 bears interest at 10% and is evidenced by a note
payable. The $9,450 bears interest at 10% but is not evidenced by a note.
7. STOCK OPTIONS
-------------
The Board of Directors has approved in April, 2003 a Company's stock option
plan, which was amended by the Company in July, 2003. All the shares (480,000
shares) under 2002 Equity and Stock Option Plan were issued in June, 2003. In
July, 2003, the Company approved 2003 Equity Compensation Plan which provides
for the grant to directors, officers, employees and consultants of the Company
of stock based awards and options to purchase up to an aggregate of 2,500,000
shares of Common Stock. No grants have been made yet under 2003 Equity
Compensation Plan.
On June 11, 2003 the Company granted a total of 810,000 shares under the 2000
and 2002 stock compensation plans for services to the Company. The valuation of
the shares issued were at the market price on the Grant date $0.03.
10
ADVANCED REFRIGERATION TECHNOLOGIES, INC. & SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
-----------------------------------------------------------------------------------------
ASSETS
SEPTEMBER 30, 2003 DECEMBER 31,
UN-AUDITED 2002
------------ ------------
Current assets:
Cash $ 127,358 $ 5,025
Other receivables 2,382 --
Prepaid expenses 161,667 --
------------ ------------
Total current assets 291,407 5,025
Property and equipment (net) 21,317 2,406
------------ ------------
Total assets $ 312,724 $ 7,431
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 79,660 $ 9,718
Accrued salaries and payroll taxes 197,528 81,811
Accrued rent 35,000 54,000
Loans from shareholders 89,597 62,577
------------ ------------
Total current liabilities 401,785 208,106
Shareholders' equity:
Preferred stock (no par value) 10,000,000 shares
authorized; none issued -- --
Common stock (no par value) 50,000,000 shares
authorized; at September 30, 2003 and December 31,
2002, 18,228,439 and 16,785,667 issued and
outstanding, respectively 304,313 122,713
Common stock subscribed, 777,933 shares 586,400 --
Accumulated deficit during development stage (979,774) (323,388)
------------ ------------
Total shareholders' equity (deficit) (89,061) (200,675)
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 312,724 $ 7,431
============ ============
The accompanying notes are an integral part of these financial statements
3
ADVANCED REFRIGERATION TECHNOLOGIES, INC. & SUSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
AND FOR THE PERIOD FROM INCEPTION MAY 23, 2001 TO SEPTEMBER 30, 2003
(UN-AUDITED)
----------------------------------------------------------------------------------------------------------------
CUMULATIVE
AMOUNTS FROM
FOR THE NINE FOR THE NINE FOR THE THREE FOR THE THREE INCEPTION MAY 23
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED 2001 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002 2003
------------- ------------- ------------- ------------- -------------
Income
Travel agent program $ 31,137 $ -- $ 10,204 $ -- $ 37,400
Operating expenses:
General and
Administrative 411,403 125,915 198,949 56,508 618,636
Marketing and sales 155,473 76,154 116,413 29,566 277,891
------------- ------------- ------------- ------------- -------------
Total expenses 566,876 202,069 315,362 86,074 896,527
------------- ------------- ------------- ------------- -------------
Loss from operations (535,739) (202,069) (305,158) (86,074) (859,127)
------------- ------------- ------------- ------------- -------------
Interest expense 4,705 -- 4,705 -- 4,705
Provision for income taxes -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Net loss $ (540,444) $ (202,069) $ (309,863) $ (86,074) $ (863,832)
============= ============= ============= ============= =============
Net loss per share $ (0.03) $ (0.01) $ (0.02) $ (0.01)
============= ============= ============= =============
Weighted average number of
common shares outstanding
15,561,366 13,741,169 18,228,439 13,763,794
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
4
ADVANCED REFRIGERATION TECHNOLOGIES, INC. & SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION MAY 23, 2001 TO SEPTEMBER 30, 2003
------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
-----------------------------------
Deficit
Accumulated
Additional Common During the Total
Number of Paid-in Stock Development Stockholders'
Shares Amount Capital Subscribed Stage Equity
------------ ------------ ------------ ------------ ------------ --------------
Balance at inception - May 23, 2001 -- $ -- $ -- $ -- $ -- $ --
Stock issued for services 16,715,000 16,715 -- -- -- 16,715
Net loss -- -- -- -- (16,715) (16,715)
------------ ------------ ------------ ------------ ------------ --------------
Balance at December 31, 2001 16,715,000 16,715 -- -- (16,715) --
------------ ------------ ------------ ------------ ------------ --------------
Stock issued various dates for cash
at $1.50 per share 70,667 71 105,927 -- -- 105,998
Net loss -- -- -- -- (306,673) (306,673)
------------ ------------ ------------ ------------ ------------ --------------
Balance at December 31, 2002 16,785,667 16,786 105,927 -- (323,388) (200,675)
------------ ------------ ------------ ------------ ------------ --------------
Shares canceled by majority
Shareholder (3,000,000) -- -- -- -- --
Common stock subscribed (3,000 shares) -- -- -- 4,500 -- 4,500
Stock issued various dates
for cash at $1.50 per share 94,932 95 142,205 -- -- 142,300
------------ ------------ ------------ ------------ ------------ --------------
Balance June 11, 2003 date of
acquisition of Joystar, Inc. shares
in a reverse merger 13,880,599 16,881 248,132 4,500 (323,388) (53,875)
Cancel Joystar shares (13,880,599) -- -- -- --
Advanced Refrigeration shares
outstanding at June 11, 2003 3,322,840 -- -- -- -- --
Issue Advanced Refrigeration
Technologies, Inc. shares 13,880,599 248,132 (248,132) -- (115,942) (115,942)
Stock issued pursuant to the stock
option plan June 11, 2003
at market value of
stock $0.03 per
share 810,000 24,300 -- -- -- 24,300
Stock issued for services 215,000 15,000 -- -- -- 15,000
Common stock subscribed (774,933 shares) -- -- -- 581,900 -- 581,900
Net loss -- -- -- -- (540,444) (540,444)
------------ ------------ ------------ ------------ ------------ --------------
Balance at September 30, 2003
(un-audited) 18,228,439 $ 304,313 $ -- $ 586,400 $ (979,774) $ (89,061)
============ ============ ============ ============ ============ ==============
The accompanying notes are an integral part of these financial statements
5
ADVANCED REFRIGERATION TECHNOLOGIES, INC. & SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
AND CUMULATIVE FROM INCEPTION MAY 23, 2001 TO SEPTEMBER 30, 2003
(UN-AUDITED)
-----------------------------------------------------------------------------------------------------
CUMULATIVE
AMOUNTS FROM
INCEPTION
FOR THE NINE FOR THE NINE (MAY 23, 2001)
MONTHS ENDED MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003
------------- ------------- -------------
Cash flows from operating activities:
Net loss $(540,444) $(202,069) $(863,832)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and depreciation 1,068 -- 1,068
Stock issued for services 83,633 -- 100,348
Changes in assets and liabilities:
Increase in prepaid expenses (3,000) -- (3,000)
Increase in other receivables (2,382) -- (2,382)
Increase in accounts payable 69,942 20 79,660
Increase in accrued salaries and payroll taxes 115,717 20,668 197,528
Increase (decrease) in rent accrual (19,000) 30,000 35,000
---------- ---------- ----------
Net cash used in operations (294,466) (151,381) (455,610)
---------- ---------- ----------
Cash flows used by investing activities:
Acquisition of fixed assets (19,979) -- (22,385)
---------- ---------- ----------
Net cash used by investing activities (19,979) -- (22,385)
---------- ---------- ----------
Cash flows from financing activities:
Issuance of common stock 142,300 89,998 248,298
Advances from shareholders 27,020 63,532 89,597
Subscribed stock not issued (294,600 shares) 383,400 -- 383,400
Adjusting entry to reflect reverse acquisition
and recapitalization (115,942) -- (115,942)
---------- ---------- ----------
Net cash from financing activities 436,778 153,530 605,353
---------- ---------- ----------
Net increase (decrease) in cash 122,333 2,149 127,358
Cash, beginning of period 5,025 -- --
---------- ---------- ----------
Cash, end of period $ 127,358 $ 2,149 $ 127,358
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of stock for services $ 83,633 $ -- $ 100,348
Issuance of stock for prepaid expense 158,667 -- 158,667
========== ========== ==========
The accompanying notes are an integral part of these financial statements
6
ADVANCED REFRIGERATION TECHNOLOGIES, INC. & SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
AND CUMULATIVE FROM INCEPTION MAY 23, 2001 TO SEPTEMBER 30, 2003
(UN-AUDITED)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
On June 11, 2003, Advanced Refrigeration Technologies, Inc. a California
corporation (" the Company") acquired all of the issued and outstanding common
stock of Joystar, Inc., a Nevada corporation ("Joystar") in exchange for the
issuance by the Company of a total of 13,880,599 newly issued restricted shares
of common voting stock to the Joystar shareholders pursuant the Agreement an
Plan of Reorganization dated as if June 10, 2003. Prior to the issuance of the
shares, the Company had 3,322,840 shares of common stock issued and outstanding.
Subsequent to the exchange there were 17,203,439 shares issued and outstanding.
The shareholders of Joystar own 81% of the common stock outstanding of the
Company after the issuance of the 13,880,599 shares.
The acquisition of Joystar by the Company on June 11, 2003 has been accounted
for as a purchase and treated as a reverse acquisition since the former owners
of Joystar controlled 81% of the total shares of Common Stock of the Company
outstanding immediately following the acquisition.
On this basis, the historical financial statements prior to June 11, 2003 have
been restated to be those of the accounting acquirer Joystar. The historical
stockholders' equity prior to the reverse acquisition has been retroactively
restated (a recapitalization) for the equivalent number of shares received in
the acquisition after giving effect to any difference in par value of the
issuer's and acquirer's stock. The original 3,322,840 shares of common stock
outstanding prior to the exchange reorganization have been reflected as an
addition in the stockholders' equity account of the Company on June 11, 2003.
The Company has been in the development stage since its inception May 23, 2001.
2. INTERIM FINANCIAL INFORMATION
-----------------------------
The financial statements of Advanced Refrigeration Technologies, Inc. (the
Company) as of September 30, 2003 and for the nine months ended September 30,
2003 and 2002 and related footnote information are un-audited. All adjustments
(consisting only of normal recurring adjustments) have been made which, in the
opinion of management, are necessary for a fair presentation. Results of
operations for the nine months and three months ended September 30, 2003 and
2002 are not necessarily indicative of the results that may be expected for any
future period. The balance sheet at December 31, 2002 was derived from audited
financial statements.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, have been omitted. These financial statements
should be read in conjunction with the financial statements and notes for the
year ended December 31, 2002 included in an 8-K filed with the Securities and
Exchange Commission on August 26, 2003.
7
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets,
which is seven years for furniture and equipment and three years for
computer equipment. No property and equipment has been depreciated.
USE OF ESTIMATES
----------------
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
------------
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
8
NET LOSS PER SHARE
------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128 "Earnings Per Share" which requires the Company to
present basic and diluted earnings per share, for all periods
presented. The computation of loss per common share (basic and diluted)
is based on the weighted average number of shares actually outstanding
during the period. The Company has no common stock equivalents, which
would dilute earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Financial instruments consist principally of cash and various current
liabilities. The estimated fair value of these instruments approximates
their carrying value.
4. GOING CONCERN
-------------
The accompanying financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United
States of America, contemplates the continuation of the Company as a
going concern. However, the Company has been in the development stage
since its inception (May 23, 2001), sustained significant losses and
has used capital raised through the issuance of stock and debt to fund
activities. Continuation of the Company as a going concern is
contingent upon establishing and achieving profitable operations. Such
operations will require management to secure additional financing for
the Company in the form of debt or equity.
Management believes that actions currently being taken to revise the
Company's funding requirements will allow the Company to continue its
development stage operations. However, there is no assurance that the
necessary funds will be realized by securing debt or through stock
offerings.
5. CAPITAL STOCK
-------------
COMMON STOCK
------------
On November 2, 2001, the Company issued 16,715,000 restricted shares of
common stock at $0.001 per share totaling $16,715 for services rendered
in connection with the start up of the Company.
At various dates in 2002, the Company issued for cash of $105,998,
70,667 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
COMMON STOCK SPLIT
------------------
On November 1, 2001, the Board of Directors of the Company approved a
stock split of the Company's common stock at a ratio of 1,000 for 1.
All references in the accompanying financial statements to the number
of common stock and per share amounts reflect the stock split.
9
STOCK CANCELED
--------------
A majority shareholder canceled 3,000,000 shares of stock in
anticipation of the acquisition of Advanced Refrigeration Technologies,
Inc.
At various dates in 2003, the Company issued for cash of $142,300,
94,932 shares of common stock at $1.50 per share through a private
placement, pursuant to provisions of Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D.
STOCK ISSUED IN REVERSE MERGER JUNE 11, 2003
---------------------------------------------
The Company acquired all of the issued and outstanding common stock of
Joystar, Inc., a Nevada corporation ("Joystar") in exchange for the
issuance by the Company of a total of 13,880,599 newly issued
restricted shares of common dated as if June 10, 2003.
RECONCILIATION OF COMMON STOCK AT DECEMBER 31, 2002
---------------------------------------------------
Common stock at par value $0.001 $ 16,786
Additional paid in capital 105,927
------------
$ 122,713
============
STOCK ISSUED UNDER STOCK OPTION PLAN AND FOR PAYMENT OF SERVICES
----------------------------------------------------------------
The Company issued 810,000 shares of common stock pursuant to the Company's
Stock Option Plans on June 11, 2003 valued at the market price of the stock on
that date $0.03.
The Company issued 215,000 shares of common stock in payment of invoices for
professional services in June, 2003.
On July 30, 2003 the Company approved an issuance of 400,000 shares of common
stock to two consultants for services to be provided over future periods. The
value of the services were based on the stock price on the agreement date of
$0.42. The Company recorded $9,333 of expense for the period ended September 30,
2003, $158,667 to prepaid expenses and $168,000 to subscribed stock.
On July 30, 2003 the Company entered into a four-year employment agreement for a
Vice President of Business Development. The agreement provides for 500,000
shares of restricted Common stock to be issued annually over the four years for
a total of 2,000,000 shares. The value of the compensation was based on the
stock price on the agreement date of $0.42, a total of $840,000. The Company
recorded compensation expense of $35,000 for period ended September 30, 2003 and
83,333 shares as stock subscribed $35,000.
On July 30, 2003 the Company granted certain employees options to purchase
100,000 shares of common stock at $1.90 per share, with a one year vesting
period. The quoted market share price on the grant date of the options was $.42
6. RELATED PARTY TRANSACTIONS
--------------------------
The Company received loans in the amount of $85,000 and $5,000 from two
shareholders. The $85,000 bears interest at 10% and is evidenced by a note
payable to the shareholder and can be converted to common stock at $1.50 per
share. The $5,000 bears interest at 10%, but is not evidenced by a note.
7. STOCK OPTIONS
-------------
The Board of Directors has approved in April, 2003 a Company stock option plan,
which was amended by the Company in July, 2003. All the shares (480,000 shares)
under 2002 Equity and Stock Option Plan were issued in June, 2003. In July,
2003, the Company approved 2003 Equity Compensation Plan which provides for the
grant to directors, officers, employees and consultants of the Company of stock
based awards and options to purchase up to an aggregate of 2,500,000 shares of
Common Stock. No grants have been made yet under 2003 Equity Compensation Plan.
On June 11, 2003 the Company granted a total of 810,000 shares under the 2000
and 2002 stock compensation plans for services to the Company. The valuation of
the shares issued were at the market price on the Grant date $0.03.
The Name Amendment will become effective upon the filing of a certificate of
amendment relating thereto with the Secretary of State of the State of
California, which will occur on or about December___, 2003. Under federal
securities, laws, ART cannot file the certificate of amendment until at least 20
days after the mailing of this Information Statement.
II. PROPOSAL NUMBER TWO. ADOPTION OF AMENDED 2002 EQUITY AND STOCK OPTION PLAN
In April, 2003, the Company's Board of Directors unanimously approved the
Company's 2002 Stock Option Plan, which the Company's Board of Directors amended
as of June 30, 2003 (collectivly, the "2002 Plan"). The Consenting Shareholders
approved the 2002 Plan in July, 2003. The purpose of the 2002 Plan is to enable
the Company to attract and retain top-quality employees, officers, directors and
consultants and to provide such employees, officers, directors and consultants
with an incentive to enhance stockholder returns. The full text of the 2002 Plan
appears as Exhibit B to this Information Statement and the description of the
2002 Plan herein is qualified by reference to Exhibit B.
DESCRIPTION OF THE 2002 PLAN
Administration and Participation. The Company's 2002 Plan is administered
by the Company's Board of Directors, which may delegate its duties in whole or
in part to any subcommittee solely consisting of at least two individuals who
are non-employee directors within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. 2002 Plan
allows the Compensation Committee to make awards of stock options and stock
based awards to any individual who is selected by the Compensation Committee to
participate in 2002 Plan.
The Compensation Committee has the authority to interpret our stock
incentive plan, to establish, amend and rescind any rules and regulations
relating to our 2002 Plan and to make any other determinations that the
Compensation Committee deems necessary or desirable for the administration of
our 2002 Plan. The Compensation Committee may also correct any defect or supply
any omission or reconcile any inconsistency in our stock incentive plan in the
manner and to the extent the Compensation Committee deems necessary or
desirable. Any decision of the Compensation Committee in the interpretation and
administration of our 2002 Plan lies within its sole and absolute discretion and
is final, conclusive and binding on all parties concerned, including
participants in our 2002 Plan and their beneficiaries or successors.
Limitations. An aggregate of 480,000 shares of the Company's common stock
has been authorized and issued under the Company's 2002 Plan.
Stock options. Stock options granted under our 2002 Plan may be
non-qualified or incentive stock options for federal income tax purposes. The
Compensation Committee will set option exercise prices and terms and will
determine the time at which stock options will be exercisable. However, the term
of a stock option may not exceed 10 years.
The Compensation Committee may also grant options that are intended to be
incentive stock options, which comply with Section 422 of the Internal Revenue
Code of 1986, as amended. Fair market value is defined as the closing price of
the shares as reported on the grant date as quoted on the NASD's Bulletin Board.
Stock-based awards. The Compensation Committee has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock. Stock-based
awards may be granted on a stand-alone basis or in addition to any other awards
granted under our 2002 Plan. The Compensation Committee will determine the form
of stock-based awards and the conditions on which they may be dependent. The
conditions may include the right to receive one or more shares of common stock
or the equivalent value in cash upon the completion of a specified period of
service or the occurrence of an event or the attainment of performance
objectives. The Compensation Committee will also determine the participants to
whom stock-based awards may be made, the timing of those awards, the number of
shares to be awarded, whether those other stock-based awards will be settled in
cash, stock or a combination of cash and stock and all other terms of those
awards.
General. Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. The Company may deduct
sufficient sums to pay withholding required for federal, state and local taxes
or other taxes as a result of the exercise of a stock award.
In the event of any stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
stock or other corporate exchange or any distribution to shareholders other than
regular cash dividends, the Compensation Committee may, in its sole discretion,
make a substitution or adjustment, as the Compensation Committee deems to be
equitable, to the number or kind of stock issued or reserved for issuance under
our 2002 Plan under outstanding awards and the term, including option price, of
those awards.
Except as otherwise provided in a stock award agreement, in the event of
our change in control or a change of control of the Company, the Compensation
Committee may, in its sole discretion, accelerate a stock award, cause us to
make a cash payment in exchange for a stock award or require the issuance of a
substitute stock award.
4
Certain income tax consequences. The Company has been advised by counsel
that the material federal income tax consequences to the Company and the
participants in the 2002 Plan of the grant and exercise of options under
existing and applicable provisions of the Internal Revenue Code of 1986, as
amended, and regulations will generally be as follows:
Incentive stock options. A participant will not realize any taxable
income at the time an incentive stock option is granted or exercised, and
the Company will not receive an income tax deduction at the time of grant
or exercise. If a participant does not sell stock acquired upon the
exercise of an incentive stock option within (1) two years after the date
of the grant or (2) one year after the date of exercise, then a subsequent
sale of such stock generally will be taxed as capital gain or loss. If a
participant disposes of shares acquired upon the exercise of an incentive
stock option within the period set forth in clause (1) or (2) above, then
that participant will generally realize ordinary income in an amount equal
to the lesser of (a) the gain realized by that participant upon such
disposition and (b) the excess of the fair market value of the stock on the
date of exercise over the exercise price. In that event, the Company would
generally be entitled to an income tax deduction equal to the amount
recognized as ordinary income by the applicable participant. Any gain in
excess of the amount recognized by the participant as ordinary income would
be taxed as short-term or long-term capital gain, depending on the holding
period.
Non-qualified stock options. A participant will not realize taxable
income upon the grant of a non-qualified stock option, and the Company will
not receive an income tax deduction at such time. Upon exercise of a
non-qualified stock option, the applicable participant will realize
ordinary income in an amount equal to the excess of the fair market value
of the stock on the date of exercise over the exercise price. Upon a
subsequent sale of such stock, the participant will recognize short-term or
long-term capital gain depending on his or her holding period for the
shares. The Company is generally allowed an income tax deduction at the
same time and in the same amount recognized as ordinary income by the
participant.
Stock-based awards. Amounts received by the participant upon the grant
of other stock-based awards are ordinarily taxed as ordinary income when
received. However, if such other stock-based awards consist of property
subject to restrictions, the amounts generally will not be taxed until the
restrictions lapse or until the participant makes an election under Section
83(b) of the Internal Revenue Code. The Company is generally allowed an
income tax deduction at the same time and in the same amount recognized as
ordinary income by the participant.
Compliance with Section 162(m). Our 2002 Plan should allow certain
stock options and other stock-based awards to be treated as qualified
performance-based compensation under Section 162(m) of the Internal Revenue
Code. However, the Compensation Committee may, from time to time, award
compensation that is not deductible under Section 162(m).
5
III. PROPOSAL NUMBER THREE. ADOPTION OF 2003 EQUITY COMPENSATION PLAN
In July, 2003, the Company's Board of Directors unanimously approved the
Company's 2003 Equity Compensation Plan, (the "2003 Plan"). The Consenting
Shareholders approved the 2003 Plan in July, 2003. The purpose of the 2003 Plan
is to enable the Company to attract and retain top-quality employees, officers,
directors and consultants and to provide such employees, officers, directors and
consultants with an incentive to enhance stockholder returns. The full text of
the 2003 Plan appears as Exhibit C to this Information Statement and the
description of the 2003 Plan herein is qualified by reference to Exhibit C.
DESCRIPTION OF THE 2003 PLAN
The 2002 Plan provides for the grant to directors, officers, employees and
consultants of the Company (including its subsidiaries) of stock based awards
and options to purchase up to an aggregate of 2,500,000 shares of Common Stock.
All of the Company's executive officers, directors and employees of the
Company and its subsidiary will be eligible to participate in the 2003 Plan. The
Company has not granted any options yet nor other stock awards under the 2003
Plan.
Administration and Participation. The Company's 2003 Plan is administered
by the Company's Board of Directors, which may delegate its duties in whole or
in part to any subcommittee solely consisting of at least two individuals who
are non-employee directors within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. 2003 Plan
allows the Compensation Committee to make awards of stock options and stock
based awards to any individual who is selected by the Compensation Committee to
participate in 2003 Plan.
The Compensation Committee has the authority to interpret our stock
incentive plan, to establish, amend and rescind any rules and regulations
relating to our 2003 Plan and to make any other determinations that the
Compensation Committee deems necessary or desirable for the administration of
our 2003 Plan. The Compensation Committee may also correct any defect or supply
any omission or reconcile any inconsistency in our stock incentive plan in the
manner and to the extent the Compensation Committee deems necessary or
desirable. Any decision of the Compensation Committee in the interpretation and
administration of our 2003 Plan lies within its sole and absolute discretion and
is final, conclusive and binding on all parties concerned, including
participants in our 2003 Plan and their beneficiaries or successors.
Limitations. An aggregate of 2,500,000 shares of the Company's common stock
has been authorized for issuance under the Company's 2003 Plan. No options to
purchase common stock nor other stock awards has been issued by the Company.
Stock options. Stock options granted under our 2003 Plan may be
non-qualified or incentive stock options for federal income tax purposes. The
Compensation Committee will set option exercise prices and terms and will
determine the time at which stock options will be exercisable. However, the term
of a stock option may not exceed 10 years.
The Compensation Committee may also grant options that are intended to be
incentive stock options, which comply with Section 422 of the Internal Revenue
Code of 1986, as amended. Fair market value is defined as the closing price of
the shares as reported on the grant date as quoted on the NASD's Bulletin Board.
Stock-based awards. The Compensation Committee has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock.
6
Stock-based awards may be granted on a stand-alone basis or in addition to any
other awards granted under our 2003 Plan. The Compensation Committee will
determine the form of stock-based awards and the conditions on which they may be
dependent. The conditions may include the right to receive one or more shares of
common stock or the equivalent value in cash upon the completion of a specified
period of service or the occurrence of an event or the attainment of performance
objectives. The Compensation Committee will also determine the participants to
whom stock-based awards may be made, the timing of those awards, the number of
shares to be awarded, whether those other stock-based awards will be settled in
cash, stock or a combination of cash and stock and all other terms of those
awards.
General. Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. The Company may deduct
sufficient sums to pay withholding required for federal, state and local taxes
or other taxes as a result of the exercise of a stock award.
In the event of any stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
stock or other corporate exchange or any distribution to shareholders other than
regular cash dividends, the Compensation Committee may, in its sole discretion,
make a substitution or adjustment, as the Compensation Committee deems to be
equitable, to the number or kind of stock issued or reserved for issuance under
our 2003 Plan under outstanding awards and the term, including option price, of
those awards.
Except as otherwise provided in a stock award agreement, in the event of
our change in control or a change of control of the Company, the Compensation
Committee may, in its sole discretion, accelerate a stock award, cause us to
make a cash payment in exchange for a stock award or require the issuance of a
substitute stock award.
Certain income tax consequences. The Company has been advised by counsel
that the material federal income tax consequences to the Company and the
participants in the 2003 Plan of the grant and exercise of options under
existing and applicable provisions of the Internal Revenue Code of 1986, as
amended, and regulations will generally be as follows:
Incentive stock options. A participant will not realize any taxable
income at the time an incentive stock option is granted or exercised, and
the Company will not receive an income tax deduction at the time of grant
or exercise. If a participant does not sell stock acquired upon the
exercise of an incentive stock option within (1) two years after the date
of the grant or (2) one year after the date of exercise, then a subsequent
sale of such stock generally will be taxed as capital gain or loss. If a
participant disposes of shares acquired upon the exercise of an incentive
stock option within the period set forth in clause (1) or (2) above, then
that participant will generally realize ordinary income in an amount equal
to the lesser of (a) the gain realized by that participant upon such
disposition and (b) the excess of the fair market value of the stock on the
date of exercise over the exercise price. In that event, the Company would
generally be entitled to an income tax deduction equal to the amount
recognized as ordinary income by the applicable participant. Any gain in
excess of the amount recognized by the participant as ordinary income would
be taxed as short-term or long-term capital gain, depending on the holding
period.
7
Non-qualified stock options. A participant will not realize taxable
income upon the grant of a non-qualified stock option, and the Company will
not receive an income tax deduction at such time. Upon exercise of a
non-qualified stock option, the applicable participant will realize
ordinary income in an amount equal to the excess of the fair market value
of the stock on the date of exercise over the exercise price. Upon a
subsequent sale of such stock, the participant will recognize short-term or
long-term capital gain depending on his or her holding period for the
shares. The Company is generally allowed an income tax deduction at the
same time and in the same amount recognized as ordinary income by the
participant.
Stock-based awards. Amounts received by the participant upon the grant
of other stock-based awards are ordinarily taxed as ordinary income when
received. However, if such other stock-based awards consist of property
subject to restrictions, the amounts generally will not be taxed until the
restrictions lapse or until the participant makes an election under Section
83(b) of the Internal Revenue Code. The Company is generally allowed an
income tax deduction at the same time and in the same amount recognized as
ordinary income by the participant.
Compliance with Section 162(m). Our 2003 Plan should allow certain
stock options and other stock-based awards to be treated as qualified
performance-based compensation under Section 162(m) of the Internal Revenue
Code. However, the Compensation Committee may, from time to time, award
compensation that is not deductible under Section 162(m).
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Persons Entitled to Notice
The Record Date for the determination of the shareholders entitled to
notice of and to consent to the Action has been fixed as of the close of
business on July 11, 2003. As of July 11, 2003, there were outstanding 18228,439
shares of Common Stock. The Actions have been duly approved by the Consenting
Shareholders holding a majority of the outstanding Common Stock. Approval or
consent of the remaining shareholders is not required and is not being solicited
hereby or by any other means.
The California General Corporation Law does not provide for dissenters
rights in connection with the adoption of the Actions.
8
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of October 30, 2003, the stock ownership of
all persons known to own beneficially five percent or more of the Company's
voting stock and all directors and officers of the Company, individually and as
a group. Each person has sole voting and investment power over the shares
indicated, except as noted. Unless otherwise stated in the notes to the table,
each person named below has sole authority to vote and dispose of the shares
shown. Under Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended, in calculating percentage ownership, each person named below is deemed
to beneficially own securities that such person has the right to acquire within
sixty days through the exercise of any option or warrant or through the
conversion of any security. Shares of Common Stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding such
options or warrant, but are not deemed outstanding for purposes of computing the
percentage of any other person. As of October 30, 2003, there were 18,228,439
shares of common stock issued and outstanding. The address of those individuals
for which an address is not otherwise indicated is 5 Whatney, Irvine, California
92618.
Percent of
Number of Outstanding
Name and Address Voting Shares Voting Shares
---------------- ------------- -------------
William M. Alverson 10,820,000 59.36%
Director, President
CFO & Secretary
5 Whatney
Irvine, CA 92618
Katherine T. West 2,000,000 10.97%
Director*
5 Whatney
Irvine, CA 92618
Rick McEwan -0-
Former Officer & Director
Allan E. Schrum -0-
Former Director & Officer
Clare C. Schrum -0-
Former Officer
All directors and officers 12,820,000 70.33%
as a group (2 persons)
*Ms. West is married to Mr. Alverson.
As of October 30, 2003, there were approximately 80 shareholders of record.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William M. Alverson
--------------------------------------------
William M. Averson, President and Secretary
9
Exhibit A
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ADVANCED REFRIGERATION TECHNOLOGIES, INC.,
A California Corporation
William M. Alverson certifies that:
1. He is the President and the Secretary, respectively, of Advanced
Refrigeration Technologies, Inc., a California corporation (the "Corporation").
2. Article I. of the Articles of Incorporation of this Corporation is
amended to read as follows:
"The name of this corporation is: Joystar, Inc.".
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of Shareholders in accordance with Section 902 of
the Corporations Code. The total number of outstanding shares of the Corporation
is 18,228,439. The number of shares voting in favor of the amendment was
10,820,000 (70.3%) constituting a majority of the outstanding shares entitled to
vote.
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of my own knowledge.
DATE: December___, 2003
/s/ William M. Alverson
--------------------------------------------
William M. Alverson, President and Secretary
A-1
Exhibit B
AMENDED 2002 EQUITY AND STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company, its Subsidiaries and
Affiliates, as may be applicable, in recruiting and retaining key individuals of
outstanding ability and to motivate such individuals to exert their best efforts
on behalf of the Company, its Subsidiaries and Affiliates by providing
incentives through the granting of Awards. The Company expects that it will
benefit from the added interest which such key individuals will have in the
welfare of the Company as a result of their proprietary interest in the
Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) Affiliate: With respect to the Company, any company directly or
indirectly controlling, controlled by, or under common control
with, the Company or any other entity designated by the Board of
Directors of the Company in which the Company has an interest.
(c) Award: An Option or Stock-Based
Award granted pursuant to the Plan. (d) Beneficial Owner: A
"beneficial owner", as such term is defined in Rule 13d-3 under
the Act (or any successor rule thereto).
(d) Beneficial Owner: A "beneficial owner" as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto)
(e) Board: The Board of Directors of the Company.
(f) Board Change: Within the twenty-four consecutive month period
following the occurrence of any of the events set forth in Section
2(v)(i), individuals who immediately prior to the occurrence of
any of such events constitute the Board cease for any reason to
constitute at least a majority thereof (other than in the event of
a director's death or Disability).
(g) Cause: In the event that a Participant is a party to an employment
agreement with the Company, the Parent, a Subsidiary or an
Affiliate at the date an Award is granted, "Cause" shall have the
same meaning ascribed to such term in such employment agreement.
In the event that a Participant is not party to any such
employment agreement or there is no
(h) such definition, "Cause" shall be defined as follows:
(i) a Participant's continued failure substantially to perform the
Participant's duties (other than as a result of total or
partial incapacity due to physical or mental illness) for a
period of 10 days following written notice by the Company to
the Participant of such failure; or
B-1
(ii)dishonesty in the performance of, or willful malfeasance or
willful misconduct in connection with, a Participant's duties;
or
(iii) an act or acts on a Participant's part constituting (x) a
felony under the laws of the United States or any state thereof
or (y) a misdemeanor involving moral turpitude; or
(iv)any act or omission of a Participant which is materially
injurious to the financial condition or business reputation of
Parent, the Company or any of its Subsidiaries or Affiliates;
or
(v) a Participant's breach of any restrictive covenants contained
in any agreement with the Company or any of its Subsidiaries or
Affiliates to which Participant is a party.
(i) Change in Control: The occurrence of any of the following events:
(i) any Person, other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of Stock of the Company,
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, (a) representing a greater
percentage of the combined voting power of the Company's
then-outstanding securities than the percentage of the
combined voting power of the Company's then-outstanding
securities held by Parent and its Affiliates and (b)
representing 30% or more of the combined voting power of the
Company's then-outstanding securities; or
(ii) during any period of twenty-four months (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new
director (other than (A) a director nominated by a Person who
has entered into an agreement with the Company to effect a
transaction described in Sections 2(h)(i), (iii) or (iv) of
the Plan, (B) a director nominated by any Person (including
the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated
would constitute a Change in Control or (C) a director
nominated by any Person, other than Parent and its
Affiliates, who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of the combined voting power of the Company's
securities) whose election by the Board or nomination for
election by the Company's shareholders was approved in
advance by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof; or
(iii) the Company is merged or consolidated with any other company,
other than a merger or consolidation which would result in
the shareholders of the Company immediately prior thereto
B-2
continuing to own (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company or
sale of its assets to an Affiliate into a wholly-owned
subsidiary.
(j) Code: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(k) Committee: The Board of Directors of the Company, the
Compensation Committee of the Board, or, if applicable, the
subcommittee to which such Committee delegates its duties and
powers.
(l) Company: Advanced Refrigeration Technologies, Inc.
(m) Disability: Inability to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which constitutes a permanent and total disability, as
defined in Section 22(f)(3) of the Code (or any successor section
thereto). The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A Participant
shall not be considered disabled unless he or she furnishes such
medical or other evidence of the existence of the Disability as
the Committee, in its sole discretion, may require.
(n) Effective Date: The date set by the Company's Board of Directors.
(o) Employer: The Company, a Subsidiary or an Affiliate, as
applicable, which employs any given Participant.
(p) Fair Market Value: on a given date, the closing price of the
Shares as reported on such date on the Composite Tape of the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if no Composite Tape exists
for such national securities exchange on such date, then on the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if the Shares are not listed
or admitted on a national securities exchange, the per Share
closing bid price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee
in good faith; If no sale of Shares shall have been reported on
such Composite Tape or such national securities exchange on such
date or quoted on the National Association of Securities Dealer
Automated Quotation System on such date, then the immediately
preceding date on which sales of the Shares have been so reported
or quoted shall be used.
B-3
(q) ISO: An Option that is also an incentive stock option granted
pursuant to Section 6(d) of the Plan.
(r) Stock-Based Awards: Awards granted pursuant to Section 8 of the
Plan. Option: A stock option granted pursuant to Section 6 of the
Plan. Option Price: The purchase price per Share of an Option, as
determined pursuant to Section 6(a) of the Plan.
(w) Participant: An employee or director of the Company, its Parent,
Subsidiary or Affiliate, or an individual who is not such an
employee or director but who otherwise performs services for the
Company, its Parent, Subsidiary or Affiliate, and in any case,
who is selected by the Committee to participate in the Plan.
(x) Performance-Based Awards: Certain Other Stock-Based Awards
granted pursuant to Section 8(b) of the Plan.
(y) Person: A "person", as such term is used for purposes of Section
13(d) or 14(d) of the Act (or any successor section thereto).
(z) Plan: The Advanced Refrigeration Technologies, Inc. Amended 2002
Equity and Stock Option Plan.
(aa) Public Offering: A sale of shares of the Company's common stock
to the public pursuant to a registration statement under the
Securities Act of 1933, as amended, that has been declared
effective by the Securities and Exchange Commission (other than a
registration statement on Form S-4 or Form S-8, or any other
successor or other forms promulgated for similar purposes, or a
registration statement in connection with an offering to
employees of the Company and its Subsidiaries) that results in an
active trading market in the Company's common stock; provided,
that there shall be deemed to be an "active trading market" if
the Company's common stock is listed or quoted on a national
stock exchange or the NASDAQ National Market.
(bb) Shares: Shares of Common Stock of the Company, no par value per
Share.
(cc) Subsidiary: A subsidiary corporation, as defined in Section
424(f) of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is less than
15% of the total Shares outstanding, which shall not exceed 480,000 Shares. The
Shares may consist, in whole or in part, of unissued Shares or treasury Shares.
The issuance of Shares or the payment of cash upon the exercise of an Award
shall reduce the total number of Shares available under the Plan, as applicable.
Shares which are subject to Awards which terminate or lapse may be granted again
under the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors or the Committee,
which may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are intended to
qualify as "non-employee directors" within the meaning of Rule 16b-3 under the
Act (or any successor rule thereto) and "outside directors" within the meaning
B-4
of Section 162(m) of the Code (or any successor section thereto). Awards may, in
the discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be
counted against the aggregate number of Shares available for Awards under the
Plan. The Committee is authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). The Committee shall have the full power
and authority to establish the terms and conditions of any Award consistent with
the provisions of the Plan and to waive any such terms and conditions at any
time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee shall require payment of any amount it may determine
to be necessary to withhold for federal, state, local or other taxes as a result
of the exercise of an Award. Unless the Committee specifies otherwise, the
Participant may elect to pay a portion or all of such withholding taxes by (a)
delivery in Shares or (b) having Shares withheld by the Company from any Shares
that would have otherwise been received by the Participant.
5. LIMITATIONS
No Award may be granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the Committee,
nonqualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be determined by
the Committee.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may
be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
(c) Exercise of Options. Except as otherwise provided in the Plan or
in an Award agreement, an Option may be exercised for all, or from
time to time any part, of the Shares for which it is then
exercisable. For purposes of Section 6 of the Plan, the exercise
date of an Option shall be the later of the date a notice of
exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii)
or (iii) in the following sentence. The purchase price for the
Shares as to which an Option is exercised shall be paid to
B-5
the Company in full at the time of exercise at the election of the
Participant (i) in cash or its equivalent (e.g., by check); (ii)
in Shares having a Fair Market Value equal to the aggregate Option
Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that
such Shares have been held by the Participant for no less than six
months (or such other period as established from time to time by
the Committee or generally accepted accounting principles); (iii)
partly in cash and partly in such Shares; or (iv) through the
delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate Option
price for the shares being purchased. No Participant shall have
any rights to dividends or other rights of a stockholder with
respect to Shares subject to an Option until the Participant has
given written notice of exercise of the Option, paid in full for
such Shares and, if applicable, has satisfied any other conditions
imposed by the Committee pursuant to the Plan.
(d) ISOs. The Committee may grant to employees Options under the Plan
that are intended to be ISOs. Such ISOs shall comply with the
requirements of Section 422 of the Code (or any successor section
thereto), including, without limitation the requirement that the
Option Price per Share subject to an ISO shall not be less than
100% of the Fair Market Value of the Shares on the date an ISO is
granted.. No ISO may be granted to any Participant who at the time
of such grant, owns more than ten percent of the total combined
voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least
110% of the Fair Market Value of a Share on the date the ISO is
granted and (ii) the date on which such ISO terminates is a date
not later than the day preceding the fifth anniversary of the date
on which the ISO is granted. Any Participant who disposes of
Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year
after the transfer of such Shares to the Participant, shall notify
the Company of such disposition and of the amount realized upon
such disposition.
(e) Attestation. Wherever in this Plan or any agreement evidencing an
Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by
delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement
by presenting proof of beneficial ownership of such Shares, in
which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the
Shares acquired by the exercise of the Option.
7. STOCK-BASED AWARDS
(a) Generally. The Committee, in its sole discretion, may grant Awards of
Shares, Awards of restricted Shares and Awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Stock-Based Awards"). Such Stock-Based Awards shall
be in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to receive
one or more Shares (or the equivalent cash value of such Shares) upon
the completion of a specified period of service, the occurrence of an
event and/or the attainment of performance objectives. Stock-Based
Awards may be granted alone or in addition to any
B-6
other Awards granted under the Plan. Subject to the provisions of the
Plan, the Committee shall determine to whom and when other Stock-Based
Awards will be made, the number of Shares to be awarded under (or
otherwise related to) such Stock-Based Awards; whether such Stock-Based
Awards shall be settled in cash, Shares or a combination of cash and
Shares; and all other terms and conditions of such Awards (including,
without limitation, the vesting provisions thereof and provisions
ensuring that all Shares so awarded and issued shall be fully paid and
non-assessable).
(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Stock-Based Awards granted under this Section 8 may be
granted in a manner which is deductible by the Company under Section
162(m) of the Code (or any successor section thereto)
("Performance-Based Awards"). A Participant's Performance-Based Award
shall be determined based on the attainment of written performance
goals approved by the Committee for a performance period established by
the Committee (i) while the outcome for that performance period is
substantially uncertain and (ii) no more than 90 days after the
commencement of the performance period to which the performance goal
relates or, if less, the number of days which is equal to 25 percent of
the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria:
(i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per Share; (v) book value
per Share; (vi) return on shareholders' equity; (vii) expense
management; (viii) return on investment; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi)
cash flow; (xvii) working capital and (xviii) return on assets. The
foregoing criteria may relate to the Company, one or more of its
Subsidiaries or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis
and/or be relative to one or more peer group companies or indices, or
any combination thereof, all as the Committee shall determine. In
addition, to the degree consistent with Section 162(m) of the Code (or
any successor section thereto), the performance goals may be calculated
without regard to extraordinary items. The Committee shall determine
whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the
applicable Performance Based Award. No Performance-Based Awards will be
paid for such performance period until such certification is made by
the Committee. The amount of the Performance-Based Award actually paid
to a given Participant may be less than the amount determined by the
applicable performance goal formula, at the discretion of the
Committee. The amount of the Performance-Based Award determined by the
Committee for a performance period shall be paid to the Participant at
such time as determined by the Committee in its sole discretion after
the end of such performance period; provided, however, that a
Participant may, if and to the extent permitted by the Committee and
consistent with the provisions of Section 162(m) of the Code, elect to
defer payment of a Performance-Based Award.
B-7
8. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of Shares or other corporate exchange, or
any distribution to shareholders of Shares other than regular cash
dividends or any transactions similar to the foregoing, the
Committee in its sole discretion and without liability to any
person may make such substitution or adjustment, if any, as it
deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price
and/or (iii) any other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an Award
agreement or an employment, severance or change in control
agreement, in the event of a Change in Control or a Parent
Triggering Event, the Committee in its sole discretion and without
liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the
payment of a cash amount in exchange for the cancellation of an
Award and/or (iii) the requiring of the issuance of substitute
Awards that will substantially preserve the value, rights and
benefits of any affected Awards previously granted hereunder) as
of the date of the consummation of the Change in Control.
9. NO RIGHT TO EMPLOYMENT OR AWARDS
The granting of an Award under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment or service or consulting
relationship of a Participant and shall not lessen or affect the Company's or
Subsidiary's right to terminate the employment or service or consulting
relationship of such Participant. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee's determinations and interpretations with
respect thereto need not be the same with respect to each Participant (whether
or not such Participants are similarly situated).
10. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
11. NONTRANSFERABILITY AWARDS
Unless otherwise determined by the Committee or as hereinafter provided, an
Award shall not be transferable or assignable by the Participant otherwise than
by will or by the laws of descent and distribution. An Award exercisable after
the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. However, unless the Award
agreement provides otherwise, a Participant may transfer his or her rights under
a nonqualified Option agreement, by assignment, satisfactory in form and
substance to the Committee, to a trust or similar entity established solely for
the benefit of the Participant's lineal descendants; provided, that such
assignee must first agree to be bound by the same terms and conditions as the
Participant with respect to such Option; and provided, further, that the rights
of such assignee shall not themselves be transferable.
B-8
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the Company, would (except as is provided in Section 9 of
the Plan), increase the total number of Shares reserved for the purposes of the
Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b) without the consent of a Participant, would impair any of
the rights or obligations under any Award theretofore granted to such
Participant under the Plan; provided, however, that the Committee may amend the
Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws. Notwithstanding
anything to the contrary herein, the Board may not amend, alter or discontinue
the provisions relating to Section 8(b) of the Plan after the occurrence of a
Change in Control.
13. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United States
of America and who are not (and who are not expected to be) "covered employees"
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such
Participants in order to conform such terms with the requirements of local law.
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of California, without regard to conflicts of laws.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Effective Date.
B-9
EXHIBIT C
2003 EQUITY COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company, its Subsidiaries and
Affiliates, as may be applicable, in recruiting and retaining key individuals of
outstanding ability and to motivate such individuals to exert their best efforts
on behalf of the Company, its Subsidiaries and Affiliates by providing
incentives through the granting of Awards. The Company expects that it will
benefit from the added interest which such key individuals will have in the
welfare of the Company as a result of their proprietary interest in the
Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) Affiliate: With respect to the Company, any company directly or
indirectly controlling, controlled by, or under common control
with, the Company or any other entity designated by the Board of
Directors of the Company in which the Company has an interest.
(c) Award: An Option or Stock-Based
Award granted pursuant to the Plan. (d) Beneficial Owner: A
"beneficial owner", as such term is defined in Rule 13d-3 under
the Act (or any successor rule thereto).
(d) Beneficial Owner: A "beneficial owner" as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto)
(e) Board: The Board of Directors of the Company.
(f) Board Change: Within the twenty-four consecutive month period
following the occurrence of any of the events set forth in Section
2(v)(i), individuals who immediately prior to the occurrence of
any of such events constitute the Board cease for any reason to
constitute at least a majority thereof (other than in the event of
a director's death or Disability).
(g) Cause: In the event that a Participant is a party to an employment
agreement with the Company, the Parent, a Subsidiary or an
Affiliate at the date an Award is granted, "Cause" shall have the
same meaning ascribed to such term in such employment agreement.
In the event that a Participant is not party to any such
employment agreement or there is no
(h) such definition, "Cause" shall be defined as follows:
(i) a Participant's continued failure substantially to perform the
Participant's duties (other than as a result of total or
partial incapacity due to physical or mental illness) for a
period of 10 days following written notice by the Company to
the Participant of such failure; or
C-1
(ii)dishonesty in the performance of, or willful malfeasance or
willful misconduct in connection with, a Participant's duties;
or
(iii) an act or acts on a Participant's part constituting (x) a
felony under the laws of the United States or any state thereof
or (y) a misdemeanor involving moral turpitude; or
(iv)any act or omission of a Participant which is materially
injurious to the financial condition or business reputation of
Parent, the Company or any of its Subsidiaries or Affiliates;
or
(v) a Participant's breach of any restrictive covenants contained
in any agreement with the Company or any of its Subsidiaries or
Affiliates to which Participant is a party.
(i) Change in Control: The occurrence of any of the following events:
(i) any Person, other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
Stock of the Company, becomes the Beneficial Owner, directly
or indirectly, of securities of the Company, (a)
representing a greater percentage of the combined voting
power of the Company's then-outstanding securities than the
percentage of the combined voting power of the Company's
then-outstanding securities held by Parent and its
Affiliates and (b) representing 30% or more of the combined
voting power of the Company's then-outstanding securities;
or
(ii) during any period of twenty-four months (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new
director (other than (A) a director nominated by a Person who
has entered into an agreement with the Company to effect a
transaction described in Sections 2(h)(i), (iii) or (iv) of
the Plan, (B) a director nominated by any Person (including
the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated
would constitute a Change in Control or (C) a director
nominated by any Person, other than Parent and its
Affiliates, who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of the combined voting power of the Company's
securities) whose election by the Board or nomination for
election by the Company's shareholders was approved in
advance by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof; or
(iii) the Company is merged or consolidated with any other company,
other than a merger or consolidation which would result in
the shareholders of the Company immediately prior thereto
C-2
continuing to own (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company or
sale of its assets to an Affiliate into a wholly-owned
subsidiary.
(j) Code: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(k) Committee: The Board of Directors of the Company, the
Compensation Committee of the Board, or, if applicable, the
subcommittee to which such Committee delegates its duties and
powers.
(l) Company: Advanced Refrigeration Technologies, Inc.
(m) Disability: Inability to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which constitutes a permanent and total disability, as
defined in Section 22(f)(3) of the Code (or any successor section
thereto). The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A Participant
shall not be considered disabled unless he or she furnishes such
medical or other evidence of the existence of the Disability as
the Committee, in its sole discretion, may require.
(n) Effective Date: The date set by the Company's Board of Directors.
(o) Employer: The Company, a Subsidiary or an Affiliate, as
applicable, which employs any given Participant.
(p) Fair Market Value: on a given date, the closing price of the
Shares as reported on such date on the Composite Tape of the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if no Composite Tape exists
for such national securities exchange on such date, then on the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if the Shares are not listed
or admitted on a national securities exchange, the per Share
closing bid price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee
in good faith;
If no sale of Shares shall have been reported on such Composite
Tape or such national securities exchange on such date or quoted
on the National Association of Securities Dealer Automated
Quotation System on such date, then the immediately preceding
date on which sales of the Shares have been so reported or quoted
shall be used.
C-3
(q) ISO: An Option that is also an incentive stock option granted
pursuant to Section 6(d) of the Plan.
(r) Stock-Based Awards: Awards granted pursuant to Section 8 of the
Plan. Option: A stock option granted pursuant to Section 6 of the
Plan. Option Price: The purchase price per Share of an Option, as
determined pursuant to Section 6(a) of the Plan.
(w) Participant: An employee or director of the Company, its Parent,
Subsidiary or Affiliate, or an individual who is not such an
employee or director but who otherwise performs services for the
Company, its Parent, Subsidiary or Affiliate, and in any case,
who is selected by the Committee to participate in the Plan.
(x) Performance-Based Awards: Certain Other Stock-Based Awards
granted pursuant to Section 8(b) of the Plan.
(y) Person: A "person", as such term is used for purposes of Section
13(d) or 14(d) of the Act (or any successor section thereto).
(z) Plan: The Advanced Refrigeration Technologies, Inc. 2003 Equity
Compensation Plan.
(aa) Public Offering: A sale of shares of the Company's common stock
to the public pursuant to a registration statement under the
Securities Act of 1933, as amended, that has been declared
effective by the Securities and Exchange Commission (other than a
registration statement on Form S-4 or Form S-8, or any other
successor or other forms promulgated for similar purposes, or a
registration statement in connection with an offering to
employees of the Company and its Subsidiaries) that results in an
active trading market in the Company's common stock; provided,
that there shall be deemed to be an "active trading market" if
the Company's common stock is listed or quoted on a national
stock exchange or the NASDAQ National Market.
(bb) Shares: Shares of Common Stock of the Company, no par value per
Share.
(cc) Subsidiary: A subsidiary corporation, as defined in Section
424(f) of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is less than
15% of the total Shares outstanding, which shall not exceed 2,500,000 Shares.
The Shares may consist, in whole or in part, of unissued Shares or treasury
Shares. The issuance of Shares or the payment of cash upon the exercise of an
Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may be
granted again under the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors or the Committee,
which may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are intended to
C-4
qualify as "non-employee directors" within the meaning of Rule 16b-3 under the
Act (or any successor rule thereto) and "outside directors" within the meaning
of Section 162(m) of the Code (or any successor section thereto). Awards may, in
the discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be
counted against the aggregate number of Shares available for Awards under the
Plan. The Committee is authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). The Committee shall have the full power
and authority to establish the terms and conditions of any Award consistent with
the provisions of the Plan and to waive any such terms and conditions at any
time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee shall require payment of any amount it may determine
to be necessary to withhold for federal, state, local or other taxes as a result
of the exercise of an Award. Unless the Committee specifies otherwise, the
Participant may elect to pay a portion or all of such withholding taxes by (a)
delivery in Shares or (b) having Shares withheld by the Company from any Shares
that would have otherwise been received by the Participant.
5. LIMITATIONS
No Award may be granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the Committee,
nonqualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be determined by
the Committee.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may
be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
(c) Exercise of Options. Except as otherwise provided in the Plan or
in an Award agreement, an Option may be exercised for all, or from
time to time any part, of the Shares for which it is then
exercisable. For purposes of Section 6 of the Plan, the exercise
date of an Option shall be the later of the date a notice of
exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii)
or (iii) in the following sentence. The purchase price for the
Shares as to which an Option is exercised shall be paid to
C-5
the Company in full at the time of exercise at the election of the
Participant (i) in cash or its equivalent (e.g., by check); (ii)
in Shares having a Fair Market Value equal to the aggregate Option
Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that
such Shares have been held by the Participant for no less than six
months (or such other period as established from time to time by
the Committee or generally accepted accounting principles); (iii)
partly in cash and partly in such Shares; or (iv) through the
delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate Option
price for the shares being purchased. No Participant shall have
any rights to dividends or other rights of a stockholder with
respect to Shares subject to an Option until the Participant has
given written notice of exercise of the Option, paid in full for
such Shares and, if applicable, has satisfied any other conditions
imposed by the Committee pursuant to the Plan.
(d) ISOs. The Committee may grant to employees Options under the Plan
that are intended to be ISOs. Such ISOs shall comply with the
requirements of Section 422 of the Code (or any successor section
thereto), including, without limitation the requirement that the
Option Price per Share subject to an ISO shall not be less than
100% of the Fair Market Value of the Shares on the date an ISO is
granted.. No ISO may be granted to any Participant who at the time
of such grant, owns more than ten percent of the total combined
voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least
110% of the Fair Market Value of a Share on the date the ISO is
granted and (ii) the date on which such ISO terminates is a date
not later than the day preceding the fifth anniversary of the date
on which the ISO is granted. Any Participant who disposes of
Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year
after the transfer of such Shares to the Participant, shall notify
the Company of such disposition and of the amount realized upon
such disposition.
(e) Attestation. Wherever in this Plan or any agreement evidencing an
Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by
delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement
by presenting proof of beneficial ownership of such Shares, in
which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the
Shares acquired by the exercise of the Option.
7. STOCK-BASED AWARDS
(a) Generally. The Committee, in its sole discretion, may grant Awards of
Shares, Awards of restricted Shares and Awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Stock-Based Awards"). Such Stock-Based Awards shall
be in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to receive
one or more Shares (or the equivalent cash value of such Shares) upon
the completion of a specified period of service, the occurrence of an
event and/or the attainment of performance objectives. Stock-Based
Awards may be granted alone or in addition to any
C-6
other Awards granted under the Plan. Subject to the provisions of the
Plan, the Committee shall determine to whom and when other Stock-Based
Awards will be made, the number of Shares to be awarded under (or
otherwise related to) such Stock-Based Awards; whether such Stock-Based
Awards shall be settled in cash, Shares or a combination of cash and
Shares; and all other terms and conditions of such Awards (including,
without limitation, the vesting provisions thereof and provisions
ensuring that all Shares so awarded and issued shall be fully paid and
non-assessable).
(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Stock-Based Awards granted under this Section 8 may be
granted in a manner which is deductible by the Company under Section
162(m) of the Code (or any successor section thereto)
("Performance-Based Awards"). A Participant's Performance-Based Award
shall be determined based on the attainment of written performance
goals approved by the Committee for a performance period established by
the Committee (i) while the outcome for that performance period is
substantially uncertain and (ii) no more than 90 days after the
commencement of the performance period to which the performance goal
relates or, if less, the number of days which is equal to 25 percent of
the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria:
(i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per Share; (v) book value
per Share; (vi) return on shareholders' equity; (vii) expense
management; (viii) return on investment; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi)
cash flow; (xvii) working capital and (xviii) return on assets. The
foregoing criteria may relate to the Company, one or more of its
Subsidiaries or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis
and/or be relative to one or more peer group companies or indices, or
any combination thereof, all as the Committee shall determine. In
addition, to the degree consistent with Section 162(m) of the Code (or
any successor section thereto), the performance goals may be calculated
without regard to extraordinary items. The Committee shall determine
whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the
applicable Performance Based Award. No Performance-Based Awards will be
paid for such performance period until such certification is made by
the Committee. The amount of the Performance-Based Award actually paid
to a given Participant may be less than the amount determined by the
applicable performance goal formula, at the discretion of the
Committee. The amount of the Performance-Based Award determined by the
Committee for a performance period shall be paid to the Participant at
such time as determined by the Committee in its sole discretion after
the end of such performance period; provided, however, that a
Participant may, if and to the extent permitted by the Committee and
consistent with the provisions of Section 162(m) of the Code, elect to
defer payment of a Performance-Based Award.
C-7
8. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of Shares or other corporate exchange, or
any distribution to shareholders of Shares other than regular cash
dividends or any transactions similar to the foregoing, the
Committee in its sole discretion and without liability to any
person may make such substitution or adjustment, if any, as it
deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price
and/or (iii) any other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an Award
agreement or an employment, severance or change in control
agreement, in the event of a Change in Control or a Parent
Triggering Event, the Committee in its sole discretion and without
liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the
payment of a cash amount in exchange for the cancellation of an
Award and/or (iii) the requiring of the issuance of substitute
Awards that will substantially preserve the value, rights and
benefits of any affected Awards previously granted hereunder) as
of the date of the consummation of the Change in Control.
9. NO RIGHT TO EMPLOYMENT OR AWARDS
The granting of an Award under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment or service or consulting
relationship of a Participant and shall not lessen or affect the Company's or
Subsidiary's right to terminate the employment or service or consulting
relationship of such Participant. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee's determinations and interpretations with
respect thereto need not be the same with respect to each Participant (whether
or not such Participants are similarly situated).
10. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
11. NONTRANSFERABILITY AWARDS
Unless otherwise determined by the Committee or as hereinafter provided, an
Award shall not be transferable or assignable by the Participant otherwise than
by will or by the laws of descent and distribution. An Award exercisable after
the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. However, unless the Award
agreement provides otherwise, a Participant may transfer his or her rights under
a nonqualified Option agreement, by assignment, satisfactory in form and
substance to the Committee, to a trust or similar entity established solely for
C-8
the benefit of the Participant's lineal descendants; provided, that such
assignee must first agree to be bound by the same terms and conditions as the
Participant with respect to such Option; and provided, further, that the rights
of such assignee shall not themselves be transferable.
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the Company, would (except as is provided in Section 9 of
the Plan), increase the total number of Shares reserved for the purposes of the
Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b) without the consent of a Participant, would impair any of
the rights or obligations under any Award theretofore granted to such
Participant under the Plan; provided, however, that the Committee may amend the
Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws. Notwithstanding
anything to the contrary herein, the Board may not amend, alter or discontinue
the provisions relating to Section 8(b) of the Plan after the occurrence of a
Change in Control.
13. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United States
of America and who are not (and who are not expected to be) "covered employees"
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such
Participants in order to conform such terms with the requirements of local law.
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of California, without regard to conflicts of laws.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Effective Date.
C-9