-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CAXic8DtPyRLSQinKHNmJd87ORq1Z4Mx4ZXsJmBKeDMPgoLTKEywVPtzKIg7Tt3a fSFglonsYHWIvFIhfm9R0A== 0000914190-01-000001.txt : 20010123 0000914190-01-000001.hdr.sgml : 20010123 ACCESSION NUMBER: 0000914190-01-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST TEAM SPORTS INC CENTRAL INDEX KEY: 0000820242 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 411545748 STATE OF INCORPORATION: MN FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16442 FILM NUMBER: 1506859 BUSINESS ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303 BUSINESS PHONE: 6127804454 MAIL ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303-1092 10-Q 1 0001.txt FORM 10-Q FOR THIRD QUARTER SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: Commission File No.: November 30, 2000 0-16442 FIRST TEAM SPORTS, INC. (Exact name of Registrant as specified in its charter) Minnesota 41-1545748 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1201 Lund Boulevard Anoka, Minnesota 55303 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 576-3500 -------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__x__ No_____ --------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 5,907,511 shares of Common Stock, $.01 par value per share, outstanding as of January 10, 2001. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS November 30, 2000 and February 29, 2000
November 30, February 29, ASSETS 2000 2000 ----------- ----------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,136,151 $ 860,671 Receivables: Trade, less allowance for doubtful accounts of $790,000 at November 30, 2000 and $765,000 at February 29, 2000 9,878,301 15,918,474 Inventories 9,923,177 12,079,722 Prepaid expenses 995,067 1,331,238 Deferred income taxes 778,000 1,179,000 ----------- ----------- Total current assets 22,710,696 31,369,105 PROPERTY AND EQUIPMENT, Land 600,000 600,000 Building 4,988,680 4,988,680 Production equipment 2,455,218 2,382,555 Office furniture and equipment 2,236,209 1,956,004 Warehouse equipment 1,047,232 945,377 Vehicles 91,495 97,007 ----------- ----------- 11,418,834 10,969,623 Less accumulated depreciation 5,064,216 4,411,801 ----------- ----------- 6,354,618 6,557,822 DEFERRED INCOME TAXES 1,893,000 1,821,000 OTHER ASSETS License agreements, less accumulated amortization of $4,298,000 at November 30, 2000 and $4,036,000 at February 29, 2000 1,068,713 1,330,704 Goodwill, less accummulated amortization of $617,000 at November 30, 2000 and $463,000 at February 29, 2000 875,918 1,029,528 Other 78,520 140,349 ----------- ----------- 2,023,151 2,500,581 ----------- ----------- $32,981,465 $42,248,508 =========== ===========
See accompanying notes. FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) November 30, 2000 and February 29, 2000
November 30, February 29, LIABILITIES AND SHAREHOLDERS' EQUITY 2000 2000 ----------- ----------- (Unaudited) CURRENT LIABILITIES Notes payable to bank $ -- $ 4,912,275 Current maturities of long-term debt 546,125 850,859 Accounts payable, trade 2,112,133 4,656,107 Accrued expenses 1,125,859 1,735,399 ----------- ----------- Total current liabilities 3,784,117 12,154,640 LONG-TERM DEBT, less current maturities 5,312,094 5,693,696 Deferred income taxes 71,000 90,000 DEFERRED REVENUE 511,480 523,000 SHAREHOLDERS' EQUITY Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,907,511 shares at November 30, 2000, and 5,803,848 February 29, 2000 59,075 58,602 Additional paid-in capital 10,006,638 9,926,180 Retained earnings 14,436,426 14,665,261 Accumulated other comprehensive loss (1,199,365) (862,871) ----------- ----------- 23,302,774 23,787,172 ----------- ----------- $32,981,465 $42,248,508 =========== ===========
See accompanying notes. FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Nine months ended November 30, November 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Net sales $ 8,349,138 $ 9,575,365 $ 32,784,845 $ 30,900,446 Cost of goods sold 5,798,029 7,159,744 22,746,161 22,211,351 ------------ ------------ ------------ ------------ Gross profit 2,551,109 2,415,621 10,038,684 8,689,095 ------------ ------------ ------------ ------------ Operating expenses: Selling 1,109,390 943,483 3,789,683 3,192,789 General and administrative 1,815,367 1,935,576 5,788,957 5,929,599 ------------ ------------ ------------ ------------ 2,924,757 2,879,059 9,578,640 9,122,388 ------------ ------------ ------------ ------------ Operating (loss)/Income (373,648) (463,438) 460,044 (433,293) Other income (expense): Interest expense (203,684) (274,985) (762,620) (713,728) ------------ ------------ ------------ ------------ Loss before income tax benefit (577,332) (738,423) (302,576) (1,147,021) Income tax benefit 179,257 285,559 73,740 350,511 ------------ ------------ ------------ ------------ Net loss for the period $ (398,075) $ (452,864) $ (228,836) $ (796,510) ============ ============ ============ ============ Net loss per share: Basic and Diluted ($ 0.07) ($ 0.08) ($ 0.04) ($ 0.14) Shares used in computation of net loss per share: Basic and Diluted 5,899,846 5,852,188 5,876,164 5,832,057
See accompanying notes FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Nine Months Ended November 30, 2000 and 1999 (Unaudited)
November 30, November 30, CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999 ----------- ----------- Net Loss $ (228,836) $ (796,510) Adjustments required to reconcile net loss to net cash provided by operating activities: Depreciation 661,515 869,810 Amortization 477,424 432,290 Deferred income taxes 310,000 -- Deferred revenue (11,520) -- Change in assets and liabilities: Receivables 5,949,102 1,552,159 Inventories 1,949,717 (1,552,755) Prepaid expenses 329,991 148,770 Accounts payable (2,509,134) 395,683 Accrued expenses (593,328) (525,404) Income taxes -- 942,156 ----------- ----------- Net cash provided by operating activities 6,334,931 1,466,199 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (464,647) (147,364) ----------- ----------- Net cash used in investing activities (464,647) (147,364) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net payments on short-term borrowings (4,912,275) (260,052) Proceeds on long-term borrowings -- 4,500,000 Principal payments on long-term borrowings (686,182) (4,757,269) Net proceeds from exercise of stock options 80,931 85,334 ----------- ----------- Net cash used in financing activities (5,517,526) (431,987) ----------- ----------- Increase in cash and cash equvalents 352,758 886,848 Effect of foreign currency translation (77,278) (48,200) Cash and cash equivalents: Beginning 860,671 723,574 ----------- ----------- Ending $ 1,136,151 $ 1,562,222 =========== ===========
See accompanying notes FIRST TEAM SPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. The operating results for the period ended November 30, 2000 are not necessarily indicative of the operating results to be expected for the full fiscal year. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report or Form 10-K for the year ended February 29, 2000. NOTE 2. During the quarters ended November 30, 2000 and 1999, total comprehensive loss amounted to ($571,787) and ($393,073) respectively. During the nine-month period ended November 30, 2000 and 1999, total comprehensive loss amounted to ($565,330) and ($953,146) respectively. NOTE 3.
Basic EPS Diluted EPS 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands, except per share data) Three Months Ended November 30 Net Loss ($ 398) ($ 453) ($ 398) ($ 453) ======= ======= ======= ======= Weighted average common shares outstanding 5,899 5,852 5,899 5,852 Stock options -- -- -- -- ------- ------- ------- ------- Total common equivalent shares outstanding 5,899 5,852 5,899 5,852 ======= ======= ======= ======= Net Loss per share ($ .07) ($ .08) ($ .07) ($ .08) Nine Months Ended November 30 Net Loss ($ 228) ($ 797) ($ 228) ($ 797) ======= ======= ======= ======= Weighted average common shares outstanding 5,876 5,832 5,876 5,832 Stock options -- -- -- -- ------- ------- ------- ------- Total common equivalent shares outstanding 5,876 5,832 5,876 5,833 ======= ======= ======= ======= Net Loss per share ($ .04) ($ .14) ($ .04) ($ .14)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations First Team Sports, Inc. is a leading manufacturer, designer and marketer of brand name sporting goods. The Company's product groups consist of in-line skates, in-line accessories and parts (primarily protective wear and replacement wheels and bearings), ice hockey sticks, ice hockey and figure skates, and ice hockey protective wear and accessories. Within the product groups, the Company maintains Ultra Wheels(TM) and Skate Attack(TM) in-line product lines and a Hespeler(TM) ice hockey line. The Ultra Wheels line consists of higher quality and higher priced products that are targeted for specialty and sporting goods chain store customers. The Skate Attack line consists of lower priced products for the mass merchant customers. The Hespeler ice hockey line consists of high quality products that are targeted for the specialty and sporting goods chain stores. RESULTS OF OPERATIONS Net Sales. Net sales were $8.4 million in the third quarter of fiscal 2001, a decrease of 12.5% over the comparable quarter of fiscal 2000 when sales were $9.6 million. Net sales for the first nine months of fiscal 2001 were $32.8 million, compared to $30.9 million for the first nine months of fiscal 2000, an increase of 6.1%. A decrease in unit sales of Skate Attack brand in-line skates was the principal factor in the Company's net sales decrease in the third quarter of fiscal 2001. An increase in unit sales of the Ultra Wheels brand of in-line skates and Hespeler ice hockey products along with an increase in the overall sales price per unit were the principal factors in the Company's net sales increase for the nine-month period of fiscal 2001. A breakdown and analysis for the Company's main product lines is as follows:
Third Quarter ----------------------------------------------------------- (dollar amount in millions) Fiscal 2001 Fiscal 2000 ----------- ----------- Amount % Amount % % Change ------------ ----------- ----------- ------------ ----------- In-line Skates $6.0 71.4 $6.9 71.9 (13.0) In-line Accessories and Parts 0.7 8.3 1.1 11.5 (36.4) Ice Hockey Sticks 0.5 6.0 0.6 6.2 (16.7) Ice Hockey Protective and Access. 1.2 14.3 1.0 10.4 20.0 ------------ ----------- ----------- ------------ ----------- Total Net Sales $8.4 100.0% $9.6 100.0% (12.5%) ============ =========== =========== ============ =========== Nine Months YTD ----------------------------------------------------------- (dollar amount in millions) Fiscal 2001 Fiscal 2000 ----------- ----------- Amount % Amount % % Change ------------ ----------- ----------- ------------ ----------- In-line Skates $22.3 68.0 $21.1 68.3 5.7 In-line Accessories and Parts 3.3 10.1 3.7 12.0 (10.8) Ice Hockey Sticks 2.1 6.4 2.2 7.1 (4.5) Ice Hockey Protective and Access. 5.1 15.5 3.9 12.6 30.8 ------------ ----------- ----------- ------------ ----------- Total Net Sales $32.8 100.0% $30.9 100.0% 6.1% ============ =========== =========== ============ ===========
The Company distributes products to numerous countries worldwide. A geographic breakdown is as follows:
Third Quarter ----------------------------------------------------------- (dollar amount in millions) Fiscal 2001 Fiscal 2000 ----------- ----------- % Amount % Amount % Change ------------ ----------- ----------- ------------ ----------- Domestic $7.0 83.3 $8.2 85.4 (14.6) Canada 1.1 13.1 0.7 7.3 57.1 Europe 0.1 1.2 0.5 5.2 (80.0) Other International 0.2 2.4 0.2 2.1 -- ------------ ----------- ----------- ------------ ----------- Total Net Sales $8.4 100.0% $9.6 100.0% (12.5%) ============ =========== =========== ============ =========== First Nine Months ----------------------------------------------------------- (dollar amount in millions) Fiscal 2001 Fiscal 2000 ----------- ----------- % Amount % Amount % Change ------------ ----------- ----------- ------------ ----------- Domestic $23.0 70.1 $19.5 63.1 17.9 Canada 7.4 22.5 8.3 26.9 (10.8) Europe 1.2 3.7 2.2 7.1 (45.5) Other International 1.2 3.7 0.9 2.9 33.3 ------------ ----------- ----------- ------------ ----------- Total Net Sales $32.8 100.0% $30.9 100.0% 6.1% ============ =========== =========== ============ ===========
Several factors contributed to the Company's sales performance in the third quarter and nine-month period of fiscal 2001. The decrease in domestic sales in the third quarter was the result of a large decline in sales of the Company's Skate Attack products to mass merchant customers due to their general reduction in branded in-line skate offerings. This decrease was partially offset by a continued increase in sales of the Company's Ultra Wheels products to the large national sporting goods chains ("big box" retailers). The increase in domestic sales during the first nine months of fiscal 2001 is the result of the strong acceptance of the Company's Ultra Wheels products by the big box retailers. During the third quarter and nine-month period of fiscal 2001, approximately 84% and 70%, respectively, of the Company's in-line skate sales were to sporting good chain stores, compared to 43% and 43%, respectively, during the third quarter and nine-month period of fiscal 2000. The increased sales in Canada for the third quarter was primarily the increase in holiday product sales over the prior year. The decreased sales in Canada for the first nine months of fiscal 2001 was primarily the result of the Company receiving product from its manufacturers earlier this calendar year than in prior years and filling a greater portion of Spring season orders from Canada during the Company's fourth quarter ended February 29, 2000, combined with a slight slow down in reorders due to poor weather conditions throughout the spring season in Canada. The decrease in European sales for the quarter and nine-month period was primarily the result of continued competitive pressures in the European in-line skate market, the continued number of in-line skate customers buying direct from Pacific Rim manufacturers and the effects of the strong US dollar. The increase in other international sales was primarily the result of the Company's continued efforts to open up new accounts in the international arena. The national and international markets in-line skating continue to be very competitive and under extreme price competition. Gross Margin. As a percentage of net sales, the Company's gross margin was 30.6% in the third quarter of fiscal 2001, compared to 25.2% in the third quarter of fiscal 2000. The gross margin as a percentage of net sales for the nine-month period of fiscal 2001 was 30.6%, compared to 28.1 % for fiscal 2000. The increase in the gross margin in the third quarter and for the nine-month period is primarily due to an increase in the percentage of Ultra Wheels skate sales versus Skate Attack skate sales and an increase of total sales related to Hespeler products. The Company's UltraWheels brand of in-line skates accounted for approximately 99% and 96%, respectively, of total in-line skate sales in the third quarter and for the nine- month period of fiscal 2001, compared to 73% and 81%, respectively, in fiscal 2000, while the Company's Skate Attack brand accounted for 1% and 4%, respectively, of total in-line skate sales in the third quarter and for the nine-month period of fiscal 2001, compared to 27% and 19%, respectively, in fiscal 2000. The Hespeler brand accounted for approximately 20% and 22% of total net sales in the third quarter and for the nine-month period of fiscal 2000, compared to 17% and 20%, respectively, in fiscal 2000. Operating Expenses. Selling expenses were $1.1 million, or 13.3% of total net sales, in the third quarter and $3.8 million, or 11.6% of total net sales, for the nine-month period of fiscal 2001, compared to $940,000 or 9.9% in the third quarter and $3.2 million or 10.3% for the nine-month period of fiscal 2000. The increase in selling expenses in fiscal 2001 is primarily the result of an increase in commissions and co-op advertising costs associated with the increased sales volume to the big box retailers. General and administrative expenses were $1.8 million, or 21.6% of total net sales in the third quarter and $5.8 million, or 17.7% of total net sales, for the nine-month period of fiscal 2001 compared to $1.9 million or 20.2 % in the third quarter and $5.9 million or 19.2% for the nine-month period of fiscal 2000. The decrease in the general and administrative expenses in the third quarter and in the nine-month period of fiscal 2001 was primarily due to the Company's continued control over expenditures despite an increase in sales volume. Other Income and Expense. Interest expense was $204,000 in the third quarter and $763,000 for the nine-month period of fiscal 2001, compared to $275,000 in the third quarter and $714,000 for the nine-month period of fiscal 2000. The decrease in interest expense for third quarter was primarily due to a decrease in the Company's line of credit facility. The increase in interest expense for the nine-month period of fiscal 2001 was primarily an increase in the bank prime which affected both the Company's revolving line of credit facility and its term loan. Provision for Income Taxes. The Company's effective tax rate was 31.0% and 24.4%, respectively, in the third quarter and the nine-month period of fiscal 2001, compared to 38.7% and 30.6%, respectively, in the third quarter and nine-month period of fiscal 2000. The decrease in 2001 was primarily due to the effect of state and foreign tax rates, the percentage of state and foreign revenues, deferred tax items and the level of pre-tax losses. Net Loss. The Company had a net loss of ($398,000), or ($.07) per share, in the third quarter of fiscal 2001, compared to a net loss of ($453,000), or ($.08) per share, in fiscal 2000. The Company had a net loss of ($229,000), or ($.04) per share, for the nine-month period of fiscal 2001 compared to a net loss of ($797,000), or ($.14) per share, in fiscal 2000. The decrease in the net loss for the both the third quarter and the nine-month periods can be attributed to the increased net sales, improved gross margins, and management's continued control over the Company's operating expenses, all as discussed above. LIQUIDITY AND CAPITAL RESOURCES In the nine-month period of fiscal 2001, the Company's operations provided $6.3 million of cash compared to $1.5 million of cash in the nine-month period of fiscal 2000. The cash provided by operations in the current year was primarily the result of a decrease in the Company's receivable and inventory balances. The cash provided by operations in the prior year was primarily the result of a decrease in the Company's receivable balances and a receipt of income tax refunds. Net cash used in investing activities was $465,000 in the nine-month period of fiscal 2001, compared to $148,000 in the nine-month period of fiscal 2000. The use of cash for investing activities in both fiscal 2001 and 2000 was attributable to equipment purchases. Net cash used in financing activities was $5.5 million in the nine-month period of fiscal 2001, compared to $432,000 in the nine-month period of fiscal 2000. The cash used by this activity in fiscal 2001 was primarily due to the change in the Company's credit facility. The Company's debt to worth ratio was .4 to 1 as of November 30, 2000, compared to .8 to 1 as of February 29, 2000 and .6 to 1 as of November 30, 1999. The Company's long-term debt, which consists primarily of a mortgage note on the Company's facility and obligations under endorsement license agreements, less current maturities, was $5.3 million as of November 30, 2000. The Company's primary financing facility is a $10 million revolving credit line, which expires August 31, 2002, bears interest at the banks' prime rate and is subject to a borrowing base that is calculated monthly. The borrowing base is based on a percentage of eligible receivables and inventories. As of November 30, 2000, the borrowing base limitation was $10 million. In connection with this revolving credit facility, the Company agreed, among other things, to maintain certain minimum equity, income levels and capital expenditure. The Company believes its current cash position, funds available under existing bank arrangements, the ability to obtain additional financing, and cash generated from operations will be sufficient to finance the Company's operating requirements through the Fourth Quarter of fiscal 2001, and fiscal 2002. Item 3. Quantitative and Qualitative Disclosures About Market Risk Market Risk. The Company's sales and results of operations are subject to foreign currency fluctuations. The Company's foreign operations are in countries with fairly stable currencies; therefore the effect of foreign currencies has not been significant. The Company attempts to limit its exposure to translation gains and losses by maintaining and controlling its foreign cash flows when possible, thus reducing such exposure. Interest Rate Risk. The Company's interest rate risk exposure results from the floating prime rate on the Company's revolving credit line and term loan. The impact of an increase in interest rates by 100 basis points (1%) would not have a material effect on the Company's financial statements. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index immediately following the signature page of this Form 10-Q. (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the quarter to which this Form 10-Q relates. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST TEAM SPORTS, INC. By: /s/ John J. Egart John J. Egart President and CEO and By: /s/ Kent A. Brunner Kent A. Brunner Vice President and CFO Dated: January 11, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 November 30, 2000 - ------------------------------------------------------------------------------- FIRST TEAM SPORTS, INC. - ------------------------------------------------------------------------------- Exhibit Number Description 3.1 Restated Articles of Incorporation -- incorporated by reference to Exhibit 3.1 to the Company's Form 10-K for the year ended February 28, 1997 3.2 Bylaws -- incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-18 Reg. No. 33-16345C 4.1 Specimen of Common Stock Certificate--incorporated by reference to 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 28, 1991 4.2 Certificate of Designations of Series A Preferred Stock (included in Restated Articles of Incorporation -- see Exhibit 3.1) 4.3 Rights Agreement dated as of March 15, 1996 between the Company and Norwest Bank Minnesota, N.A. as Rights Agent -- incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422 4.4 Form of Right Certificate -- incorporated by reference to Exhibit 2.2 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422 4.5 Summary of Rights to Purchase Share of Series A Preferred Stock- incorporated by reference to Exhibit 2.3 to the Company's Registration Statement of Form 8-A, Reg. No. 0-16422 -----END PRIVACY-ENHANCED MESSAGE-----