**U.S.SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM10-KSB**

 

| **ý** | **Annual report under Section 13  or 15 (d) of the Securities Exchange Act of 1934 for the fiscal year ended  June 30, 2002**                                                                                                                                                                                                                          |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **o**      | **Transition report under Section 13 or 15 (d) of  the Securities Exchange Act of 1934 for the transition period from                     to                    ** |

 

**Commission File Number: 000-27869**

 

**AUTHORISZORINC.**

(Name of Small BusinessIssuer in its Charter)

 

| **Delaware**                                                                      | **75-2661571**                        |
|-----------------------------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization)                  | (I.R.S. Employer  Identification No.) |
|                                                                              |                                  |
| **WRDCLogsys,  First Floor  Ebor Court, Westgate, Leeds  LS1 4ND United Kingdom** | **LS1 4ND**                           |
| (Address of Principal  Executive Offices)                                         | (Zip code)                            |
|                                                                              |                                  |
| **011-44-113-245-4788**                                                           |
| (Issuer’s Telephone Number,  Including Area Code.)                           |
|                                                                              |                                  |
| Securities registered under Section 12(b) of the  Exchange Act:                   |

 

| **Title of Each Class** | ** ** | **Name of Each Exchange  on Which Registered** |
|-------------------------|------------|------------------------------------------------|
| NONE                    |       | N/A                                            |

 

| Securities registered under Section 12(g) of the  Exchange Act: | **Common  Stock, $0.01 par value** |   |
|-----------------------------------------------------------------|------------------------------------|--------|
|                                                            | (Title of class)                   |   |

 

Check whether theissuer:  (1) filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for past 90 days.      Yes    o    No    ý

 

Indicate bycheckmark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-B is not contained in this form, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB. ý

 

State issuer’s revenues for its most recent fiscal year:  $6,880,483

 

The aggregate market value of the voting and non-voting stock held bynon-affiliates of the registrant as of October 21, 2004 was approximately$143,379.58.  For purposes of thiscomputation, all executive officers, directors and 10% stockholders were deemedaffiliates.  Such a determination shouldnot be construed as an admission that such executive officers, directors or 10%stockholders are affiliates.

 

As of October 25,2004, there were 20,768,511 shares of the common stock, $0.01 par value, of theCompany issued and outstanding.

 

Transitional Small Business Disclosure Format: Yes     o No     ý

 

 

----

 

**AUTHORISZOR INC.**

 
| **PART  I**           | ** **                                                                                                                  |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------|
|                  | Item 1: DESCRIPTION OF  BUSINESS                                                                                            |   |
|                  | ITEM 2: DESCRIPTION  OF PROPERTIES                                                                                          |   |
|                  | ITEM 3: LEGAL PROCEEDINGS                                                                                                   |   |
|                  | ITEM  4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                |   |
| **PART  II**          | ** **                                                                                                                  |
|                  | ITEM  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL  BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES |   |
|                  | ITEM  6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                     |   |
|                  | ITEM 7. FINANCIAL  STATEMENTS                                                                                               |   |
|                  | ITEM 8. CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                               |   |
|                  | ITEM 8A: CONTROLS AND PROCEDURES                                                                                            |   |
|                  | ITEM 8B: OTHER INFORMATION                                                                                                  |   |
| **PART III**          | ** **                                                                                                                  |
|                  | ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE  REGISTRANT                                                                 |   |
|                  | ITEM 10. EXECUTIVE COMPENSATION                                                                                             |   |
|                  | ITEM 11. SECURITY OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                    |   |
|                  | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS                                                                    |   |
|                  | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                                   |   |
| **SIGNATURES**        | ** **                                                                                                                  |
| **INDEX TO EXHIBITS** | ** **                                                                                                                  |

 

i

----

 

# **PARTI**

 

This report containsforward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933, as amended (the “Securities Act”), and Section 21E of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-lookingstatements are subject to certain risks and uncertainties that could causeactual results to differ materially from historical results or anticipatedresults, including those set forth under “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and elsewhere in, orincorporated by reference into, this report.

 

Unless the contextotherwise requires, “Authoriszor,” the “Company,” “we,” “our,” “us” and similarexpressions refers to Authoriszor Inc., its subsidiaries and itspredecessors.  The term “Auth US” refersto Authoriszor Inc. only.

 

This report is being filed late with a series of priorreports which are also late.  All of ourreports which are part of this late filing (starting with June 30, 2002) andall reports after this date as a result should be read in their entiretytogether. All matters stated in this report are stated as of the date of thisreport, which is June 30, 2002, even though this report has been filed at a latertime.  Except as otherwise noted herein,events that have taken place after June 30, 2002, are covered in our filingsafter this date based on when they happened.

 

## **ITEM1:  DESCRIPTION OF BUSINESS**

 

**History**

 

Auth US’spredecessor was incorporated as a Colorado corporation on January 20, 1989under the name Starlight Acquisitions Inc. On May 10, 1996, Starlight Acquisitions, Inc. acquired Toucan Mining Plc(then named Toucan Mining Limited), incorporated in the Isle of Man, theholding company of a mining group operating in South America.

 

On July 29, 1996,Starlight Acquisitions, Inc. was reincorporated as a Delaware corporation onJuly 22, 1996 under the name Toucan Gold Corporation.  Effective June 30, 1999, Toucan Mining Plcsold its sole operating subsidiary to Minmet Plc, a company listed on the IrishStock Exchange and the London Stock Exchange, in consideration for the issue ofMinmet ordinary shares, the grant of warrants and other consideration.  Funding of the consideration for thetransaction was completed on July 15, 1999. On July 22, 1999, we acquired all of the outstanding capital stock ofAuthoriszor Limited, which was then named ITIS Technologies Limited, whose,business consisted primarily of developing internet security software.  On August 25, 1999, our name was changed toAuthoriszor Inc., and the name of our subsidiary was changed to AuthoriszorLimited.

 

On January 12,2000, Authoriszor Holdings Limited, our newly created wholly-owned subsidiary,acquired the whole of the issued share capital of Authoriszor Limited as partof an intra-group reorganization.

 

On January 27,2000, we sold our wholly-owned subsidiary, Toucan Mining Plc, to Golden RidgeGroup Limited for an aggregate consideration of $809,750 (£500,000) incash.  On the same date, Toucan MiningPlc agreed to transfer to us the beneficial interest in 2,000,000 shares inMinmet for a consideration of £1. Subsequently, we have exercised such warrants and sold all of the Minmetshares beneficially owned by us.

 

On February 22, 2000, weacquired a 27.2% (25.1% on a fully diluted basis) interest in WRDC Limited(WRDC), a private UK company, for a purchase price of $604,800. The purchaseprice of WRDC exceeded the Company’s proportionate share of the net assetsacquired by $584,400, which was being amortized on a straight line basis overten years.  WRDC provides a broad arrayof strategic services and a number of strategic technologies, such as,electronic messaging, directory services, security architectural and interesttechnologies, and the combination of these technologies and concepts to itscustomers.

 

On May 8, 2001, wepurchased an additional equity interest in WRDC, increasing its ownershipinterest from 27.2% to 66.4%.  We issued929,914 shares of common stock, paid cash of approximately $1,716,000 andissued 237,000 stock options (fair valued at $248,900) to WRDC employees forthe additional equity interest.  We alsocommitted to issue an additional 195,000 shares of our common stock to theshareholders of WRDC subject to the realization of certain of WRDC’s accountsreceivable.  Also on this date, wecommitted to acquire the remaining

 

1

----

 

33.6% interest inWRDC upon the occurrence of certain events, but in no event later than January1, 2002.    For further informationconcerning the terms and conditions upon which we acquired WRDC, please see ourCurrent Report on Form 8-K/A that was filed on September 17, 2001.

 

As of May 8, 2001, wechanged from the equity method to the consolidation method to account for ourownership of WRDC.

 

On July 3, 2001, ourwholly owned subsidiary, Authoriszor Holdings Limited, initially acquiredapproximately a 68% interest in Logsys Solutions Limited in exchange for a cashpayment of approximately $237,000, and, if certain conditions were met, theissuance of 186,453 shares of our common stock. These shares were issued in January 2002.  In addition, our ownership interest in Logsyshas increased to approximately 99.75% of the outstanding capital stock ofLogsys as we have purchased the stock held by certain former Logsys employeesin exchange cash payable by us at the same price per share we paid at the timeof our initial acquisition of capital stock of Logsys. For further informationconcerning the terms and conditions upon which we acquired Logsys, please seeour Current Report on Form 8-K that was filed on July 16, 2001.

 

In December 2001,we acquired the remaining equity in WRDC., increasing its ownership interest to100% of the outstanding capital stock of WRDC for total consideration equal tothe following: (i) $1,236,650 payable in cash, (ii) the issuance of 2,125,360shares of common stock, par value $.01 per share of the Company, and (iii) theissuance of 389,794 shares of our Series A Cumulative Redeemable PreferredStock, par value $.01 per share.

 

For more informationconcerning our acquisition of the remaining capital stock of WRDC, please seeour Report on Form 8K/A filed with the SEC on January 30, 2002.

 

**ImportantPost Balance Sheet Events:**

 

As reportedin  our Form 10-QSB for the quarter endedMarch 31, 2002, in the absence of additional financing, we and our subsidiariesdo not have sufficient working capital to continue to operate substantiallybeyond the end of our fiscal year, June 30, 2002.  As of the date of this report, June 30, 2002,and after it, this continued to be the view and the Post Balance sheet eventsnoted below that have occurred have further solidified this view.

 

After exploring multiplepotential options and strategies, our Board of Directors determined, after muchdeliberation, to raise additional working capital in order to enable us tosatisfy our existing liabilities by raising additional working capital. We didthis by entering into the Investment Agreement described below.

 

Notwithstanding thishowever, our position has continued to worsen significantly since oursub-tenant defaulted on its sublease for the property leased by us inBurlington, Massachusetts, which is also described further below.  Due to this default, we now face liabilitieswe did not expect and as a result we believe that we will have to enter intonegotiations with our creditors to establish alternative payment arrangements.

 

*TheInvestment Agreement*

 

On July 18, 2002,we consummated an investment agreement (the “Investment Agreement’) withAuthoriszor Holdings Limited (“Authoriszor Holdings Limited”), Roy Williams (“Williams”);Garcia Hanson (“Hanson”), Zalcany Limited (“Zalcany”) and Noblepoint Limited (“Noblepoint,”)and collectively with Williams, Hanson and Zalcany, (the “Investors”), pursuantto which we transferred our capital stock in WRDC,  which constituted approximately 69.7% of theoutstanding shares of capital stock of WRDC, and our capital stock inAuthoriszor Limited, in turn which constituted approximately 74.8% of theoutstanding shares of capital stock of Authoriszor Limited, to AuthoriszorHoldings Limited for a nominal sum and the Investors purchased PreferredOrdinary Shares of Authoriszor Holdings Limited (the “Authoriszor HoldingsLimited Preferred Shares”), our subsidiary, for an aggregate purchase price of£574,994.94 ($902,684.56).  As a result,our equity interest in Authoriszor Holdings Limited, which is in the form ofordinary shares of Authoriszor Holdings Limited (the “Authoriszor HoldingsLimited Ordinary Shares”), has decreased from 100% to 35%.

 

Following theInvestment Agreement transaction and a restructuring of the ownership of sharesof its subsidiaries, Authoriszor Holdings Limited owns all of the capital stockof WRDC Limited, Authoriszor Limited,

 

2

----

 

Logsys SolutionsLimited and, indirectly through WRDC, over 75% of the stock of PAD (London)Limited and WRDC AG.

 

The Investment Agreementrestricts Authoriszor Holdings Limited from making payments to us without theconsent of the Investors however, approximately $68,992.38 of the investmentproceeds were paid to us by Authoriszor Holdings Limited in satisfaction ofcertain inter-company indebtedness.  Inconnection with this transaction, we redeemed 117,742.5 shares of our Series ACumulative Redeemable Preferred Stock owned by Hanson, our Chief ExecutiveOfficer and the Managing Director of Authoriszor Holdings Limited, for theaggregate redemption price set forth in the Series A Preferred Stockdesignations of $235,485. Hanson utilized all the proceeds from the redemptionin connection with the purchase of his Authoriszor Holdings Limited OrdinaryShares.

 

The Investment Agreementprohibits Authoriszor Holdings Limited from issuing shares of its stock withoutthe consent of the Investors, except that Authoriszor Holdings Limited mayissue a certain number of additional shares (the “Additional Shares”) at apurchase price not less than the price paid by the Investors.  If all the Additional Shares are issued, ourequity interest in Authoriszor Holdings Limited would be reduced to 32.4%.  As of July 18, 2002 this occurred.

 

The Investment Agreementprovides that the board of directors of Authoriszor Holdings Limited shallconsist of not more than four persons, including two persons nominated by theInvestors.  The current members of theboard of directors of Authoriszor Holdings Limited are Hanson, Ian McNeill, andPeter Hughes.  We do not have the rightto nominate a director.

 

The powers, preferencesand rights of the Authoriszor Holdings Limited Ordinary Shares and AuthoriszorHoldings Limited Preferred Shares are set forth in the Articles of Associationof Authoriszor Holdings Limited (“Authoriszor Holdings Limited Articles”).  The Authoriszor Holdings Limited Articlescontain a right of first refusal provision that grants to any shareholder ofAuthoriszor Holdings Limited, which currently consists of the Company and theInvestors (collectively, the “Authoriszor Holdings Limited Shareholders”), thefirst right to purchase the shares of Authoriszor Holdings Limited that anotherAuthoriszor Holdings Limited Shareholder desires to sell to a third-party.  The price of such purchase will be determinedby either a mutual agreement between the directors of Authoriszor HoldingsLimited and the transferring Authoriszor Holdings Limited Shareholder or by anindependent accountant.

 

*TheSublease*

 

In May 2001, we begansubleasing the office space of our prior U.S. headquarters to a subtenant,Directech.  The sublease calls formonthly payments in the amount of $31,400 per month through April 2005, whichis equal to the monthly payments and term of the underlying lease.

 

On July 19, 2002 we wereinformed by the tenant, Directech that it was experiencing grave financialdifficulties as a direct consequence of its main customer, Worldcom, defaultingon the payment of its debts to Directech. We have entered into discussions with the landlord and with Directechwith the objective of resolving this matter, but we do not consider it likelythat Directech will be able to make any further payments on the sublease. Thefull amount of the rental payable to the landlord from February 28, 2003 of$801,725 is the full amount payable of $1,053,094 at June 30 2002 less paymentmade for July of $31,369 and a letter of credit of $220,000. We expect that ourlandlord will draw down on the letter of credit supporting the lease of$220,000 if we are not able to make or otherwise resolve the payments owing toit.  An additional amount of $100,000 hasbeen provided in the accounts, to cover legal fees payable for both partiesunder the agreement in the event of a dispute.

 

**Overview of the Business**

 

As of the date of this report (June 30, 2002) our operationshave been largely discontinued. We now own due to post-June 30, 2002 eventsapproximately 35% of the outstanding shares of capital stock of AuthoriszorHoldings Limited as opposed to 100% (See discussion above under History – PostBalance Sheet Events).  As noted inprevious reports, Authoriszor Holdings Limited and its WRDL Limited and LogsysSolutions Limited subsidiaries provide technology consulting and developmentservices, and also sell and support a suite of security software for companiesand governmental bodies that wish to deploy e-commerce, security and workflowapplications within their organization. They perform the following services:

 

3

----

 

•                                          Technologyand Process Consulting

•                                          TechnologyProvision

•                                          SystemsDevelopment

•                                          SystemsSupport.

 

Their focus is primarily on provision of technology services to thefollowing five defined market sectors:

 

•                                          Airlinesand Travel

•                                          Bankingand Finance

•                                          Industrials

•                                          PublicSector (defense, health, police and Government)

•                                          Utilities(electricity, water, gas and telecoms)

 

Authoriszor Holdings Limited and its WRDC Limited andLogsys Solutions Limited subsidiaries develop, enhance and support softwareproducts, under license. In addition, they also develop applications andsoftware products based on the X.400 messaging standard.  They also have relationships with a number ofcompanies, and resell applications. Important relationships include Preworx,Access360, Critical Path and Insider Technology. They also currently developand tailor applications for public sector organizations to automate tribunalhearing and vetting requirements.  Theyalso have an established 24x7x365 International Support Helpdesk that providessupport services.

 

**IndustryBackground**

 

The market for technologyand consulting services has been changing rapidly over the last several years,and we expect this level of change to continue. The market for advanced technology expanded rapidly during the periodfrom 1999 through mid-2000, but has declined significantly since.  We believe that our success will depend, inpart, on our ability to develop technology and service offerings that keep pacewith rapid and continuing changes in technology, evolving industry needs andchanging client preferences.  We alsobelieve that our success will also depend on our ability to develop andimplement ideas that successfully apply existing and new technologies todeliver tangible value to our clients. We may not be successful in addressingthese developments on a timely basis or in selling our services and products inthe marketplace. If we are not, our business will decline.

 

**AHL Core Technology Business Unit**

 

As part of restructuring plans, the remaining teammade up of a staff of four directly involved with Authoriszor Holdings Limited’ssecurity product “Positive ID” was made redundant, effective March 31, 2002.The success of Positive ID required further investment, and as we were unableto fund this investment, we believed that it was more prudent to focus on theservices businesses of WRDC and Logsys, based on the revenue performance. Asmanagement remained committed to supporting the Positive ID product AuthoriszorHoldings Limited entered into a subsequent agreement with these four formermembers of the staff and their new company, Sandford Technology Limited (“Sandford”).The terms of the agreement are that Authoriszor Limited licenses Positive ID toSandford on an exclusive basis to market and sell Positive ID. The intellectualproperty rights of Positive ID are retained by Authoriszor Limited. Theagreement also provides an option that Authoriszor Limited can purchase theentire share capital of Sandford on a pre-agreed basis from a date three (3)years after the signing of the agreement and continuing in force for theduration of the agreement. Additionally and provided in the agreement, Sandfordmay purchase the Positive ID intellectual property from Authoriszor Limited ona pre-agreed basis during the term of an option period described in the contract,valid from July 1,2004 and continuing in force for the duration ofthe agreement. Also, Sandford may exercise its option in the event thatAuthoriszor Limited receives an offer for its intellectual property rights froma 3rd party during the term of the agreement.

 

**Researchand Development**

 

For the one-yearperiod ending June 30, 2002, Authoriszor Holdings Limited incurred costs ofapproximately $700,000, including professional services, directly related toresearch and development. We are not able to continue to commit significantresources to research and development work going forward.

 

4

----

 

**Employeesand Other Changes**

 

During the year, we have had to significantly decrease our staff becauseof market conditions, the lack of meaningful revenues for our products, and therecessive market conditions our industry.

 

As of June 30,2002 there were no operational staff employed by us on a full-time basis.  Authoriszor Holdings Limited and itssubsidiaries employed 51 people in the United Kingdom and Switzerland. Theyalso employ free-lance consultants from time to time to assist various specificprojects.

 

Our Chief ExecutiveOfficer, Paul Ayres, and Chief Financial Officer, Andrew Cussons, resignedeffective March 28, 2002.

 

Mr. Ayres remains on ourBoard as a non-executive director. Garcia Hanson was appointed as interim CEOand CFO of Auth US effective March 28, 2002.

 

**ImportantPost-Fiscal Year End Events:**

 

The appointment of Mr.Hanson as our actual Chief Executive Officer and Chief Financial Officer wasconfirmed by our Board on September 2, 2002. In addition, Peter Hughes, the Operations Director of WRDC, wasappointed as our Chief Operations Officer.

 

On September 2, 2002,Raymond Seitz resigned as Chairman of the Board and Godfrey Shingles, JamesJackson and Sir Malcolm Rifkind also resigned as non executive directors.

 

**ITEM 2: DESCRIPTION OF PROPERTIES**

 

**Facilities**

As of the date of thefiling of this report, our executive offices are currently located in theoffices of WRDC in Leeds, England.  As ofthe date of the validity of this report (June 30, 2002) our UK headquarterswere located on the first floor of a leased facility in Harrogate, Englandconsisting of approximately 3,132 square feet of office space.  As of the date of this report (June 30,2002), the rent and service charge for this facility was approximately $72,000per year.  As of the date of this report(June 30, 2002), this space was currently empty and tenants for a sub-leasewere being sought. Provision for restructuring costs of $99,512 were made forthe remaining rental payable and related costs. Remaining staff relocated toLeeds.

 

WRDC maintains officespace in Leeds, England of 2,370 square feet at a rent of $22,450 per annum.

 

Logsys maintains officespace in Wokingham, England that consists of 9,400 square feet at a cost of$103,000 per annum.

 

In the opinion of ourmanagement, as of the date of this report (June 30, 2002) our UK properties areadequately covered by insurance.

 

In May 2001, we subleasedthe office space of our prior U.S. headquarters to a subtenant, Directech.  The sublease with Directech called formonthly payments in the amount of $31,400 per month through April 2005, whichwas substantially equal to the monthly payments and term of the underlyinglease.

 

**Important Fiscal Year End Events:**

 

On July 19, 2002 we wereinformed by our sub-tenant for the U.S. lease, Directech, that Directech wasexperiencing grave financial difficulties as a direct consequence of its main customer,WorldCom, defaulting on the payment of its debts to Directech.  We entered into discussions with the landlordand Directech with the objective of resolving this matter, but we do notconsider it likely that Directech will be able to make any further payments onthe sublease and it has not done so as of the date of this report. The fullamount of the rental payable to the landlord from February 28, 2003 of $801,725is the full amount payable of $1,053,094 at June 30, 2002, less payment madefor July of $31,369 and the letter of credit of $220,000. We expect that ourlandlord will draw down on this letter of credit if we are not able to make orotherwise resolve the payments owing to it. An additional amount of $100,000

 

5

----

 

has been providedin the accounts, to cover legal fees payable for both parties under theagreement in the event of a dispute.

 

**Investment Policies**

 

We have no funds to invest and no current investmentpolicy as a result.

 

**ITEM 3:  LEGALPROCEEDINGS**

 

On May 14, 2002, Authoriszor Holdings Limited served awrit in the Leeds District Registry in the United Kingdom upon the formerowners of Logsys Solutions Limited (Mr. Stewart Lesley Ashton and LogsysHoldings Limited) in the sum of approximately $950,000 relating to certainindemnities that we allege were covered and provided for in the Sale andPurchase Agreement dated July 3, 2001, relating to the acquisition of LogsysSolutions Limited, which includes an amount of $345,000 relating to softwaredevelopment work carried out for a major client. Legal expenses with regard tothis action may be significant.

 

**ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

There have been no matters submitted for vote to thesecurity holders through the solicitation of proxies or otherwise in the fourthquarter of the fiscal year (2002) covered by this report.

 

6

----

 

**PART II**

 

**ITEM 5. MARKET FOR COMMON EQUITYAND RELATED STOCKHOLDER MATTERS**

 

Until March 2,2002 our common stock was quoted on the NASDAQ National Market System under thesymbol “AUTH.” Thereafter, and as of the date of this report (June 30, 2002)our common stock has been quoted on the OTC Bulletin Board under the symbol “AUTH.OB.”  The following table sets forth, for theperiods indicated, the range of high and low closing price information pershare of our common stock. These quotations reflect inter-dealer prices,without retail mark-up, mark-down or commission and may not represent actualtransactions.

 
| ** **        | ** ** | **Closing Price** | ** ** |
|-------------------|------------|-------------------|------------|
| **Fiscal Period** | ** ** | **High ($)**      | ** ** | **Low ($)** | ** ** |
|              |       |              |       |   |   |
| **2001**          |       |              |       |   |   |
| First Quarter     |       | 2.88              |       | 0.94 |   |
| Second Quarter    |       | 1.18              |       | 0.44 |   |
| Third Quarter     |       | 0.38              |       | 0.13 |   |
| Fourth Quarter    |       | 0.50              |       | 0.10 |   |
| **2002**          |       |              |       |   |   |
| First Quarter     |       | 0.38              |       | 0.05 |   |
| Second Quarter    |       | 0.12              |       | 0.01 |   |
| Third Quarter     |       | 0.03              |       | 0.01 |   |
| Fourth Quarter    |       | —            |       | — |   |

 

As of June 30, 2002, there were 20,768,511 shares ofcommon stock outstanding, held by approximately 421 holders of record.

 

**DividendPolicy**

 

We have not declared or paid any dividends on ourcommon stock since our inception and do not anticipate declaring or payingdividends in the foreseeable future.  Ourcurrent policy is to retain earnings, if any, for payment to our creditors and,thereafter, to enhance stockholder value. The future payment of dividends will depend on the results ofoperations, financial condition, and other factors that we deem relevant andwill be at the sole discretion of our Board of Directors.

 

**Recent Sales of Unregistered Securities**

 

We did not sell any of our securities during thefiscal year ended June 30, 2002; however we did enter into the InvestmentAgreement described in Part I of this Report whereby we sold some of theinterest we had in our subsidiaries.

 

**ITEM 6. MANAGEMENT’S DISCUSSIONAND PLAN OF OPERATIONS**

 

The following descriptionof “Management’s Plan of Operation” contains forward-looking statements forpurposes of the Securities Act and the Exchange Act and as such involves knownand unknown risks, uncertainties and other factors that may cause our actualresults to be materially different from future results expressed or implied.The words “expect”, “estimate”, “anticipate”, “predict”, “believes”, “plan”, “seek”,“objective” and similar expressions are intended to identify forward-lookingstatements elsewhere in this report. There are important factors that could cause the actual results todiffer materially from our expectations. These factors can affect the futureperformance of Authoriszor Holdings Limited, in which we own 35% following therestructuring transaction of July 18, 2002, as previously described. Thefactors include the following: 1) one or more of the assumptions or otherfactors discussed in connection with particular forward-looking statements orelsewhere in this report prove not to be accurate; 2) in our cost estimates andcost overruns; 3) our inability to obtain financing for operations; 4) if we

 

7

----

 

experienceunanticipated problems and/or force majeure events (including but not limitedto accidents, fires, acts of God etc.). All written or oral forward-looking statements attributable to us areexpressly qualified in their entirety by such factors.

 

The following discussionshould be read in conjunction with the Consolidated Financial Statements,including the notes thereto.

 

**Overview**

 

During the year, ourconsolidated revenues were almost entirely comprised from the activities ofWRDC and Logsys (more than 95%). Despite the increased revenue performanceoverall, our net cash burn continues to be a significant issue. A downturn inthe IT sector has also adversely affected the WRDC and Logsys revenues.

 

The Company has thereforeaccelerated its cost cutting and re-financing programs.

 

Following the resignationof our former Chief Executive Officer and Chief Financial Officer in March2002, our Board has implemented a further aggressive restructuring and costreduction program.  As we have beenunable to support the ongoing development costs of Positive ID, a component ofthe Authoriszor software suite we entered into the agreement with SandfordTechnology to have Sandford be the exclusive distributor of the product.

 

We have continuallysought inward investment opportunities and have continued a program of meetingsand engagements in connection with these efforts and engaged professionaladvisors to help us with this. We have however had no meaningful interest frompotential investors and have exhausted our efforts in this regard at thispoint. We have concluded that, because of the market conditions, the trackrecord of the Company, and the resulting sentiments of the investor community,that no inward investment is likely at this critical period.

 

Our CEO Mr. Hanson hasapproached WRDC’s bankers in the United Kingdom to seek a borrowing facility ofapproximately $450,000 us, to which the Board members agreed to underpin such afacility by offering personal security. Despite the track record of WRDC andits relationship with the bank, and the security offered, the bank havingconsidered the proposal have since declined to provide such a facility on theinsistence of their underwriters.

 

In order to address ourliabilities as far as possible and have sufficient working capital forcontinued operations of our operating subsidiaries, we have entered into theInvestment Agreement described below.

 

We have no plansto employ any staff in future and, in addition to the rentals payable to ourU.S. landlord we expect that expenses will be limited to payments for ongoingprofessional services, franchise taxes and insurance premiums.

 

Our ability to meet ourcreditor obligations has been and continues to be significantly impairedbecause of the liability for the lease in Burlington, Massachusetts.

 

**Resultsof Operations**

 

(Fiscal Year Ended June30, 2002 Compared To Fiscal Year Ended June 30, 2001)

 

Revenues

 

Revenues for the year ended June 30, 2002 were $6,880,483 compared to $708,477 for the year ended June 30, 2001.  This increase resulted primarily from consolidating the operations of Logsys following our acquisition of Logsys in July 2001, and from the acquisition of the remaining share capital of WRDC in December 2001.  For the year ended June 30, 2002, our five largest customers accounted for approximately 20.2% of our revenue, compared to 45% for the year ended June 30, 2001.

 

8

----

 

Costs of Revenues

 

Cost of revenues during the fiscal year ended June 30, 2002 increased to $2,230,549 compared to $254,048 for the fiscal year ended June 30, 2001.  This increase resulted from an increase in share of consolidated operations as explained in the Notes to our Consolidated Financial Statement relating to Revenues, the level of cost of sales as a percentage of revenue increased due to a change in revenue mix to lower margin product sales.

 

Operating Expenses

 

Administrative expenses consist primarily of salaries and benefits paid to our employees, travel costs incurred by our employees, occupancy and office costs, severance costs associated with the resignation of our former Chief Executive Officer and Chief Financial Officer and severance costs associated with the termination of UK employees as a result of the implementation of management’s new business plan.  Administrative expenses for the fiscal year ended June 30, 2002 fell to $11.5 million compared to $16.4 million in the fiscal year ended June 30, 2001.  The reduction was attributable to the following expenses:

 

•                  Salary and benefits fell to $6,594,030 for the fiscal year ended June 30, 2002 compared to $7,343,133 for the fiscal year ended June 30, 2001.  The reduction is primarily due to our reducing our staff and reductions in staff at Authoriszor Limited during the fiscal year.  The savings in salary and benefits outweighed the effect of additional staff acquired in connection with the acquisition of Logsys and WRDC. There were 53 permanent staff within the group as of June 30, 2002.

 

•                  Travel expenses were $613,159 in the fiscal year ended June 30, 2002 compared to $1,062,988 in the previous fiscal year.  The restructuring of our group of companies and the closing of field offices during the latter part of the previous fiscal year meant there was little Trans-Atlantic travel required in the fiscal year ended June 30, 2002, and the fall off of operations within Authoriszor Limited resulted in savings that outweighed travel expenses within WRDC and Logsys.

 

•                  Occupancy and office costs were $919,529 for the fiscal year ended June 30, 2002 compared to $1,313,634 for the fiscal year ended June 30, 2001.  The reduction is primarily a result of the savings from the closure and sub-letting of our former company headquarters in the U.S. outweighing costs of the offices of WRDC and Logsys.

 

•                  Recruitment costs were $61,868 for the fiscal year ended June 30, 2002 compared to $610,000 in the previous fiscal year. Headcount was steadily increased in the early part of the previous fiscal year (2001) in Authoriszor Limited however our refocus away from these businesses in 2002 towards WRDC and Logsys meant that Authoriszor Limited and Authoriszor, Inc. did not recruit and hire much in the fiscal year ended June 30, 2002.

 

Marketing andAdvertising

 

Marketing and advertisingexpenses were $261,318 for the fiscal year ended June 30, 2002 compared to$1,569,869 in the previous fiscal year. This decrease is attributable primarily to costs incurred during thefirst ten months of the fiscal year ended June 30, 2001 in setting upadditional sales offices, branding of our products through website constructionand other promotional activities and hiring new sales and marketing employees.The refocus away from Authoriszor Limited and Authoriszor, Inc. towards themore established brands of WRDC, and Logsys meant a reduction in expenditure inthe fiscal year ended June 30, 2002.

 

Restructuring andExit Costs

 

We incurred restructuringand exit costs of $1,331,226 in the fiscal year ended June 30, 2002. Thisamount comprises $738,616 as a result of our decision to reduce the level of UKoperations, and $592,630 to provide for remaining rental payable on the leaseat our former U.S. headquarters in Burlington, Massachusetts.  Please see Note 3 to our ConsolidatedFinancial Statements for more detail.

 

Other Income andExpense

 

Interest income was$169,212 for the fiscal year ended June 30, 2002 compared to $1,056,979 in theprevious fiscal year.  The decrease is aresult of the reduction in cash balances over the fiscal year.

 

9

----

 

We incurred gains onforeign exchange transactions of $405,265 for the year ended June 30, 2002compared to losses of $1,774,694 in the previous fiscal year.  The gains were due primarily to maintainingthe majority of our operating cash in a pound sterling bank account.  The British pound gained against the U.S.dollar throughout the fiscal year ended June 30, 2002.

 

There werewrite-downs in the carrying value of the investments in WRDC and Logsystotaling $6,447,181 in the fiscal year ended June 30, 2002. There were no suchwrite-downs in the previous year. These write-downs are explained in theaccounting policy note on the treatment of goodwill.

 

**Financing Management’s Plan ofOperation**

 

On July 3, 2001, ourwholly owned subsidiary, Authoriszor Holdings Limited, initially acquiredapproximately a 68% interest in Logsys in exchange for a cash payment ofapproximately $237,000, and, if certain conditions were met, the issuance of186,453 shares of our common stock. These shares were issued in January 2002.  In addition, our ownership interest in Logsysincreased to approximately 99.75% of the outstanding capital stock of Logsys asa result of the solicitation by Logsys of holders of its capital stock, otherthan shares of capital stock already owned by us, to tender their respectiveshares of capital stock in exchange for cash consideration payable by us at thesame price per share as our initial acquisition of capital stock of Logsys.

 

In December 2001, weacquired the remaining equity in WRDC Limited, increasing its ownershipinterest to 100% of the outstanding capital stock of WRDC for totalconsideration equal to the following: (i) $1,236,650 payable in cash, (ii) theissuance of 2,125,360 shares of common stock, par value $.01 per share, and(iii) the issuance of 389,794 shares of Series A Cumulative RedeemablePreferred Stock, par value $.01 per share.

 

For more informationconcerning our acquisition of the remaining capital stock of WRDC, please seeour Current Report on Form 8K/A filed with the SEC on January 30, 2002.

 

As reported in out QuarterlyReport for the quarter ending December 31, 2001, further funds were required byus in order to avoid a severe curtailment of our operations. During the threemonths between November 2001 and February 2002, the management team spent aconsiderable time seeking funds for us from the financial markets but failed tosecure any financing or equity participation. Accordingly, management executeda further round of overhead cuts and intensified its efforts to seek workingcapital funds from suitable sources.

 

In order to manage ourcash resources and to support its capital raising activities, the managementteam in March 2002 produced a new business plan, including profit and loss andcash flow forecasts based on the continuation of the service-based businessesof WRDC and Logsys. We continued to make overhead cuts and made certainfavorable payment arrangements with its creditors in order to reduce cashoutlays.

 

During February 2002, ourthen President and Chief Executive Officer, Paul Ayres, evaluated the presentand future market conditions, and the forecast revenue performance from allparts of the business, and concluded that the business required furtherrestructuring and overhead cutbacks. This was required to right size theoverheads to match the forecast and likely revenues from the now essentiallyservice-based businesses of WRDC and Logsys.

 

As part of arestructuring plan approved by our Board of Directors, Paul Ayres has resignedas our President and Chief Executive Officer, and from other various executiveand director positions that he had held with us and our subsidiaries. Mr. Ayreshas entered into a Compromise Agreement with us.  Also, Mr. Ayres will continue to be retainedas a non-executive director on a no fee basis for a limited time. Pursuant tothe terms of the Compromise Agreement, we have paid Mr. Ayres £15,000 onexecution of the agreement and an additional payment of £5,000 was made in June2002. We also issued to Mr. Ayres 40,142 shares of our Series A CumulativeRedeemable Preferred Stock (“Preferred Stock”). The provision of a company carand healthcare benefits will continue in force for Mr. Ayres until December 31,2002. Additionally, 400,000 stock options previously granted to Mr. Ayres werevested immediately on execution of the agreement.

 

In addition as part ofthese restructuring plans, our Chief Financial Officer and Secretary, AndrewCussons, resigned from the various executive officer and director positionsthat he had held with us and our subsidiaries. Mr. Cussons has entered into aCompromise Agreement with us. Pursuant to the terms of the CompromiseAgreement, we have paid Mr. Cussons £10,000 on the execution of the agreementand have made additional payments of £9,500

 

10

----

 

in June 2002 and£10,000 in July 2002. We also issued to Mr. Cussons 61,952 shares of ourPreferred Stock. The provision of healthcare benefits will continue in forcefor Mr. Cussons until December 31, 2002. Additionally, 300,000 stock optionspreviously granted to Mr. Cussons vested immediately on execution of theagreement.

 

We entered into aConsultancy Agreement, dated as of May 23, 2002, with a company owned by Mr.Ayres and Mr. Cussons that has agreed to provide certain consulting services tous for six (6) months following the effective date of the ConsultancyAgreement. We agreed to pay the consulting company payments aggregating £5,500.The sum of £10,000 was paid in June 2002 and the balance of £40,500 was paid inJuly 2002. In addition it was agreed that a further payment would be made tothe consulting company exclusively dependent on, and receipt by us of,anticipated funds in relating to a tax credit we were seeking. Application wasmade to the UK Inland Revenue in the amount of $261,385 with respect to the taxcredit (the “First Tax Credit”) and the sum of £80,000 was to be paid to theconsulting company on receipt by the company of the First Tax Credit. Theproceeds of the tax credit were received in July 2002 and to date £41,150 hasbeen paid to the consulting company.  Afurther 50% of the amount of a second tax credit (the “Second Tax Credit”)received by the company will be paid to the consulting company. It isanticipated that the calculation of and application for the Second Tax Creditwill be made by the Company in November 2002. The receipt by the Company offunds with respect to the Second Tax Credit is subject to the Inland Revenueapproving the amount of the applicable tax credit claimed by the Company. TheInland Revenue subsequently approved the Second Tax Credit and the consultingcompany invoiced the Company £26,133.50 in December 2002 and it was paid inOctober 2003 as a result of receiving the funds from the Inland Revenue. Inaddition, the consulting company is entitled to receive a further payment of£20,000 if the Company (or any subsidiary) receives funding in the sum of£250,000 or more from a specified private UK investment company as a result ofthe consulting company’s services.

 

In connection with therestructuring plans the Board of Directors appointed our current ChiefOperating Officer, Garcia Hanson, as President, Chief Executive Officer, ChiefFinancial Officer and Secretary of the Company and appointed Peter Hughes, theOperations Director of WRDC, as our Chief Operations Officer.

 

Important PostBalance Sheet (Post June 30, 2002) Events:

 

As reported in theour Form 10-QSB for the quarter ended March 31, 2002, in the absence ofadditional financing Auth US and its subsidiaries do not have sufficientworking capital to continue to operate substantially beyond the end of itsfiscal year, June 30, 2002.  As of thedate of this report, June 30, 2002, and after it, this continued to be the viewand the Post Balance sheet events have occurred which have now furthersolidified this view.

 

After exploring multiplepotential options and strategies, the Board of Directors of Auth US determinedafter much deliberation that the only viable option to enable us to satisfy ourexisting liabilities was to raise additional working capital throughAuthoriszor Holdings Limited, and thereby relinquish control of our AuthoriszorLimited, WRDC and Logsys subsidiaries. As a result we entered into theInvestment Agreement described below.

 

Notwithstanding this however, our position has continued to worsensignificantly since our sub-tenant defaulted on its sublease for the propertyleased by us in Burlington, Massachusetts, which is also described furtherbelow.  Due to this default, we now faceliabilities we did not expect and as a result we believe that we will have toenter into negotiations with our creditors to establish alternative paymentarrangements.

 

*TheInvestment Agreement*

 

After exploring multiplepotential options and strategies, our Board of Directors determined after muchdeliberation to raise additional working capital through Authoriszor HoldingsLimited to satisfy our existing liabilities and, thereby relinquish control ofour Authoriszor Limited, WRDC and Logsys subsidiaries.

 

On July 18, 2002,we consummated an investment agreement (the “Investment Agreement’) withAuthoriszor Holdings Limited (“Authoriszor Holdings Limited”), Roy Williams (“Williams”);Garcia Hanson (“Hanson”), Zalcany Limited (“Zalcany”) and Noblepoint Limited (“Noblepoint,”)and collectively with Williams, Hanson and Zalcany, (the “Investors”), pursuantto which we transferred our capital stock in WRDC,  which constituted approximately 69.7% of theoutstanding shares of capital stock of WRDC, and our capital stock inAuthoriszor Limited, in turn which constituted approximately 74.8% of theoutstanding shares of capital stock of Authoriszor Limited, to AuthoriszorHoldings Limited for a nominal sum and the Investors purchased Preferred

 

11

----

 

Ordinary Shares ofAuthoriszor Holdings Limited (the “Authoriszor Holdings Limited PreferredShares”), our subsidiary, for an aggregate purchase price of £574,994.94($902,684.56).  As a result, our equityinterest in Authoriszor Holdings Limited, which is in the form of ordinary sharesof Authoriszor Holdings Limited (the “Authoriszor Holdings Limited OrdinaryShares”), has decreased from 100% to 35%.

 

Following theInvestment Agreement transaction and a restructuring of the ownership of sharesof its subsidiaries, Authoriszor Holdings Limited owns all of the capital stockof WRDC Limited,  Authoriszor Limited,Logsys Solutions Limited and, indirectly through WRDC, over 75% of the stock ofPAD (London) Limited and WRDC AG.

 

The Investment Agreementrestricts Authoriszor Holdings Limited from making payments to us without theconsent of the Investors however, approximately $68,992.38 of the investmentproceeds were paid to us by Authoriszor Holdings Limited in payment of certaininter-company indebtedness that was owed to us. In connection with this transaction, we redeemed 117,742.5 shares of ourSeries A Cumulative Redeemable Preferred Stock owned by Hanson, our ChiefExecutive Officer and Authoriszor Holdings Limited, for the aggregateredemption price set forth in the Series A Preferred Stock Certificate ofDesignation of $235,485.  Hanson utilizedall the proceeds from the redemption to purchase Authoriszor Holdings LimitedOrdinary Shares.

 

The Investment Agreementalso prohibits from issuing shares of its stock without the consent of theInvestors, except that Authoriszor Holdings Limited may issue a certain numberof additional shares (the “Additional Shares”) at a purchase price not lessthan the price paid by the Investors.  Ifall the Additional Shares are issued, our equity interest in AuthoriszorHoldings Limited would be reduced to 32.4%. The Investment Agreement provides that the board of directors ofAuthoriszor Holdings Limited shall consist of not more than four persons,including two persons nominated by the Investors.  The current members of the board of directorsof Authoriszor Holdings Limited are Hanson, Ian McNeill, and Peter Hughes.  We do not have the right to nominate adirector.

 

Further informationconcerning the Investment Agreement and the related transaction is in ourCurrent Report on form 8K filed on August 2, 2002.  The powers, preferences and rights of theAuthoriszor Holdings Limited Ordinary Shares and Authoriszor Holdings LimitedPreferred Shares are set forth in the Articles of Association of AuthoriszorHoldings Limited (“AHL Articles”), which is filed as Exhibit 2.2 to the 8KReport.  The AHL Articles contain a rightof first refusal provision that grants to any shareholder of AuthoriszorHoldings Limited, which currently consists of Auth US and the Investors(collectively, the “AHL Shareholders”), the first right to purchase the sharesof Authoriszor Holdings Limited that another AHL Shareholder desires to sell toa third-party.  The price of suchpurchase will be determined by either a mutual agreement between the directorsof Authoriszor Holdings Limited and the transferring AHL Shareholder or by anindependent accountant.

 

In connection with the Investment Agreementtransaction, the Board of Directors of the Company adopted resolutions pursuantto Rule 3a-2 (a)(2) of the Investment Company Act of 1940 (the “40 Act”) forthe Company to be treated as a transient investment company under the 40 Act.These resolutions evidenced our intent to be engaged as soon as is reasonablypossible (but in no event later than one year) in a business other than owningor holding securities.

 

*TheSublease*

 

In May 2001, we begansubleasing the office space of our prior U.S. headquarters to a subtenant,Directech.  The sublease calls formonthly payments in the amount of $31,400 per month through April 2005, whichis equal to the monthly payments and term of the underlying lease.

 

On July 19, 2002 we wereinformed by the tenant, Directech that it was experiencing grave financialdifficulties as a direct consequence of its main customer, WorldCom, defaultingon the payment of its debts to Directech. We have entered into discussions with the landlord and with Directechwith the objective of resolving this matter, but we do not consider it likelythat Directech will be able to make any further payments on the sublease. Thefull amount of the rental payable to the landlord from February 28, 2003 of$801,725 is the full amount payable of $1,053,094 at June 30 2002 less paymentmade for July of $31,369 and a letter of credit of $220,000. We expect that ourlandlord will draw down on the letter of credit supporting the lease of$220,000if we are not able to pay or otherwise resolve the payments owing toit.  An additional amount of $100,000 hasbeen provided in the accounts, to cover legal fees payable for both partiesunder the agreement in the event of a dispute.

 

12

----

 

**Quantitativeand Qualitative Disclosure of Market Risk**

 

We have risk related to currency exchange rate fluctuations, and a majority of our cash flows will be received in pound sterling.  A portion of our cash flows are expected to be received in non-U.S. currencies.  In addition, as of June 30, 2002, we had deposited cash in pound sterling denominated accounts in the amount of $160,187.  A ten (10%) percent fluctuation in currency rates would have a $16,018 effect on our stockholders’ equity.  Also, as of June 30, 2002, there are U.S. dollar denominated loans outstanding from us to our UK subsidiaries of approximately $5,175,000 that are not of a long-term investment nature.  A ten (10%) percent fluctuation in currency rates would have a $517,500 effect on income. We hope to close these loans as part of a financing and restructuring transaction we are pursuing however as of the date of this report, nothing has been finalized.

 

Although we may choose to do so in the future, to date, we have not engaged in foreign exchange hedging transactions.

 

13

----

 

## **ITEM 7. FINANCIAL STATEMENTS**

 

**AUTHORISZORINC.**

**ANDSUBSIDIARIES**

**FINANCIALSTATEMENTS AND REPORT OF**

**INDEPENDENTREGISTERED PUBLIC**

**ACCOUNTINGFIRM**

 

***Years Ended June 30, 2002 and 2001(Unaudited)***

 

14

----

 
| **Report of Independent Registered Public  Accounting Firm** |
|--------------------------------------------------------------|
| ** **                                                   |
| **Financial Statements**                                     |
| ** **                                                   |
| Balance Sheet                                                |
|                                                         |
| Statements of  Operations                                    |
|                                                         |
| Statement  of Stockholders’ Equity (Deficiency)         |
|                                                         |
| Statements of  Cash Flows                                    |
|                                                         |
| Notes to  Financial Statements                               |

 

----

 

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

Contents

*Years Ended June 30, 2002 and 2001*

 

**Report of Independent Registered Public Accounting Firm**

 

Board of Directors

Authoriszor Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheet of Authoriszor Inc. and Subsidiaries as of June 30, 2002, and the related consolidated statements of operations, stockholders’ equity (deficiency) and cash flows for the year then ended. 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 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Authoriszor Inc. and Subsidiaries as of June 30, 2002 and the consolidated results of their operations and their consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss approximating $14,081,000 during the year ended June 30, 2002, and, as of that date, the Company’s current liabilities exceeded its current assets by approximately $1,877,000 and its total liabilities exceeded its total assets by approximately $956,000. These factors, among others, as discussed in Note 1 to the financial statements, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

As stated in Note 1 to the financial statements, on July 18, 2002, the Company was restructured such that Authoriszor Inc. no longer controls the UK operating companies. These UK operating companies generated all revenue and cash flows for the Company prior to the restructuring.

 

 

Holtz Rubenstein Reminick LLP

 

 

Melville, New York

September 15, 2004

 

F-1

----

 

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

**ConsolidatedBalance Sheet**

*June 30, 2002*

 
| **Assets**                                                              |   |        |      |
|-------------------------------------------------------------------------|--------|-------------|-----------|
|                                                                    |   |        |      |
| Current Assets:                                                         |   |        |      |
| Cash and cash  equivalents                                              |   | $           | 194,943   |   |
| Accounts  receivable (less allowance for doubtful accounts of $615,000) |   | 1,692,603   |      |
| Other                                                                   |   | 432,443     |      |
| Deferred costs  payable on contracts                                    |   | 291,000     |      |
| Prepaid expenses                                                        |   | 275,084     |      |
| Restricted cash                                                         |   | 220,000     |      |
| Total Current  Assets                                                   |   | 3,106,073   |      |
|                                                                    |   |        |      |
| Intangible  Assets, net                                                 |   | 157,800     |      |
|                                                                    |   |        |      |
| Goodwill, net                                                           |   | 482,960     |      |
|                                                                    |   |        |      |
| Property and  Equipment, net of accumulated depreciation of $1,659,186  |   | 338,656     |      |
| Total Assets                                                            |   | $           | 4,085,489 |   |
|                                                                    |   |        |      |
| **Liabilities  and Stockholders’ Deficiency**                      |   |        |      |
|                                                                    |   |        |      |
| Current Liabilities:                                                    |   |        |      |
| Accounts payable                                                        |   | $           | 1,177,114 |   |
| Accrued expenses                                                        |   | 1,834,817   |      |
| Accrued  restructuring charges                                          |   | 991,850     |      |
| Deferred revenue                                                        |   | 880,518     |      |
| Current portion  of long-term obligations                               |   | 98,499      |      |
| Total Current  Liabilities                                              |   | 4,982,798   |      |
|                                                                    |   |        |      |
| Long-Term  Obligations                                                  |   | 58,673      |      |
| Total  Liabilities                                                      |   | 5,041,471   |      |
|                                                                    |   |        |      |
| Mandatorily  Redeemable Preferred Stock                                 |   | 983,776     |      |
|                                                                    |   |        |      |
| Commitments and  Contingencies                                          |   |        |      |
|                                                                    |   |        |      |
| Stockholders’  Deficiency:                                         |   |        |      |
| Common stock                                                            |   | 207,685     |      |
| Additional  paid-in-capital                                             |   | 36,903,135  |      |
| Deficit                                                                 |   | (39,050,578 | )         |
| Total  Stockholders’ Deficiency                                    |   | (1,939,758  | )         |
| Total  Liabilities and Stockholders’ Deficiency                    |   | $           | 4,085,489 |   |

 

*See notes to consolidated financial statements.*

 

F-2

----

 

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

**ConsolidatedStatements of Operations**

*Years Ended June 30,*

 
| ** **                                    | ** ** | **2002**        |            | **2001**        | ** ** |
|-----------------------------------------------|------------|-----------------|-----------------|-----------------|------------|
|                                          |       | ** **      |            | **(Unaudited)** |       |
| Revenue                                       | ** ** | **$**           | **6,880,483**   |            | $          | 708,477 |   |
| Cost of Revenue                               | ** ** | **2,230,549**   |            | 254,048         |       |
| Gross Profit                                  | ** ** | **4,649,934**   |            | 454,429         |       |
|                                          |       |            |            |            |       |
| Operating  Expenses:                          |       |            |            |            |       |
| Marketing and  advertising                    | ** ** | **261,318**     |            | 1,569,869       |       |
| General and  administrative expenses          | ** ** | **11,540,417**  |            | 16,376,814      |       |
| Impairment of  goodwill                       | ** ** | **6,447,181**   |            | —          |       |
| Restructuring  and exit costs                 | ** ** | **1,331,226**   |            | 1,136,601       |       |
| ** **                                    |       | **19,580,142**  |            | 19,083,284      |       |
|                                          |       |            |            |            |       |
| Loss from  Operations                         | ** ** | **(14,930,208** | **)**           | (18,628,855     | )          |
|                                          |       |            |            |            |       |
| Other Income  (Expense):                      |       |            |            |            |       |
| Interest income,  net                         | ** ** | **169,212**     |            | 1,056,979       |       |
| Gain on sale of  investments                  | ** ** | **283,018**     |            | 60,529          |       |
| Gain (loss) on  foreign exchange transactions | ** ** | **405,265**     |            | (1,774,694      | )          |
| Equity in loss  of WRDC                       | ** ** | **—**      |            | (29,663         | )          |
| Loss on  equipment sale                       | ** ** | **—**      |            | (123,043        | )          |
| Other                                         | ** ** | **(8,424**      | **)**           | —          |       |
| Net Loss                                      | ** ** | **(14,081,137** | **)**           | (19,438,747     | )          |
| Preferred  Dividend                           | ** ** | **(45,479**     | **)**           | —          |       |
| Net Loss  Applicable to Common Stock          | ** ** | **$**           | **(14,126,616** | **)**           | $          | (19,438,747 | ) |
|                                          |       |            |            |            |       |
| Weighted average  shares outstanding:         |       |            |            |            |       |
| Basic and  diluted                            | ** ** | **19,761,955**  |            | 17,625,101      |       |
| Loss per common  share:                       |       |            |            |            |       |
| Basic and  diluted                            | ** ** | **$**           | **(0.71**       | **)**           | $          | (1.10 | ) |

 

*See notes to consolidated financial statements.*

 

F-3

----

** **

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

**ConsolidatedStatement of Stockholders’ Equity (Deficiency)**

*YearsEnded June 30, 2002 and 2001*

 
| ** **                                                     | ** ** | **Total**   | ** ** | ** ** | ** ** | ** ** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Deficit** | ** ** | **Accumulated  Comprehensive  Income** | ** ** |
|----------------------------------------------------------------|------------|-------------|------------|------------|------------|------------|------------|----------------------------------|------------|-------------|------------|----------------------------------------|------------|
| **Common  Stock**                                              |
| **Shares**                                                     | ** ** | **Amount**  |
|                                                           |       |        |       |       |       |       |       |                             |       |        |       |                                   |       |
| Balance, July 1,  2000 (Unaudited)                             |       | $           | 30,258,485 |       | 17,414,081 |       | $          | 174,141                          |       | $           | 33,948,976 |                                   | $          | (5,485,215 | ) | $ | 1,620,583 |   |
| Issuance of  common stock upon exercise of warrants            |       | 400,000     |       | 100,000    |       | 1,000      |       | 399,000                          |       | —      |       | —                                 |       |
| Issuance of  common stock for services                         |       | 60,000      |       | 12,703     |       | 127        |       | 59,873                           |       | —      |       | —                                 |       |
| Issuance of  common stock for Acquisition of WRDC              |       | 837,853     |       | 929,914    |       | 9,299      |       | 828,554                          |       | —      |       | —                                 |       |
| Issuance of stock  options for services                        |       | 689,014     |       | —     |       | —     |       | 689,014                          |       | —      |       | —                                 |       |
| Issuance of stock  options in Connection with WRDC acquisition |       | 248,900     |       | —     |       | —     |       | 248,900                          |       | —      |       | —                                 |       |
| Comprehensive  income (loss):                                  |       |        |       |       |       |       |       |                             |       |        |       |                                   |       |
| Foreign currency  translation adjustment                       |       | 787,239     |       | —     |       | —     |       | —                           |       | —      |       | 787,239                                |       |
| Unrealized losses  on available-for-sale securities            |       | (999,815    | )          | —     |       | —     |       | —                           |       | —      |       | (999,815                               | )          |
| Reclassification  of gains on sale                             |       | (60,529     | )          | —     |       | —     |       | —                           |       | —      |       | (60,529                                | )          |
| Net loss during  the year                                      |       | (19,438,747 | )          | —     |       | —     |       | —                           |       | (19,438,747 | )          | —                                 |       |
| Total  Comprehensive Loss                                      |       | (19,711,852 | )          |       |       |       |       |                             |       |        |       |                                   |       |
|                                                           |       |        |       |       |       |       |       |                             |       |        |       |                                   |       |
| Balance, June 30,  2001 (Unaudited)                            |       | 12,782,400  |       | 18,456,698 |       | 184,567    |       | 36,174,317                       |       | (24,923,962 | )          | 1,347,478                              |       |
| Issuance of  common stock for Acquisition of WRDC              |       | 743,072     |       | 2,125,360  |       | 21,254     |       | 721,818                          |       | —      |       | —                                 |       |
| Issuance of  common stock for Acquisition of Logsys            |       | 1,864       |       | 186,453    |       | 1,864      |       | —                           |       | —      |       | —                                 |       |
| Fair value  adjustment on stock options                        |       | 7,000       |       | —     |       | —     |       | 7,000                            |       | —      |       | —                                 |       |
| Comprehensive  income (loss):                                  |       |        |       |       |       |       |       |                             |       |        |       |                                   |       |
| Foreign currency  translation adjustment                       |       | (982,753    | )          | —     |       | —     |       | —                           |       | —      |       | (982,753                               | )          |
| Reclassification  of gains on sale                             |       | (364,725    | )          | —     |       | —     |       | —                           |       | —      |       | (364,725                               | )          |
| Net loss during  the year                                      |       | (14,126,616 | )          | —     |       | —     |       | —                           |       | (14,126,616 | )          | —                                 |       |
| Total  comprehensive loss                                      |       | (15,474,094 | )          |       |       |       |       |                             |       |        |       |                                   |       |
| Balance, June 30,  2002                                        |       | $           | (1,939,758 | )          | 20,768,511 |       | $          | 207,685                          |       | $           | 36,903,135 |                                   | $          | (39,050,578 | ) | $ | — |   |

 

*See notes to consolidated financial statements.*

 

F-4

----

 

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

**ConsolidatedStatements of Cash Flows**

*Years Ended June 30,*

 
| ** **                                                                   | ** ** | **2002**       | ** **      | **2001**        | ** ** |
|------------------------------------------------------------------------------|------------|----------------|-----------------|-----------------|------------|
| ** **                                                                   | ** ** | ** **     | ** **      | **(Unaudited)** | ** ** |
| Cash Flows from  Operating Activities:                                       |       |           |            |            |       |
| Net loss                                                                     | ** ** | **$**          | **(14,126,616** | **)**           | $          | (19,438,747 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |           |            |            |       |
| Issuance of  stock and stock options in exchange for services                | ** ** | **—**     |            | 689,014         |       |
| Non-cash  compensation expense                                               | ** ** | **—**     |            | 60,000          |       |
| Equity loss in  WRDC                                                         | ** ** | **—**     |            | 29,663          |       |
| Loss on  writedown and sale of fixed assets                                  | ** ** | **30,362**     |            | 596,881         |       |
| Gain on foreign  exchange                                                    | ** ** | **405,265**    |            | —          |       |
| Gain on sale of  investments                                                 | ** ** | **(283,018**   | **)**           | (60,529         | )          |
| Impairment of  goodwill                                                      | ** ** | **6,447,181**  |            | —          |       |
| Amortization of  intangibles                                                 | ** ** | **539,802**    |            | 156,660         |       |
| Depreciation                                                                 | ** ** | **409,224**    |            | 325,033         |       |
| Bad debts                                                                    | ** ** | **555,976**    |            | —          |       |
| Changes in  operating assets and liabilities:                                |       |           |            |            |       |
| (Increase)  decrease in operating assets:                                    |       |           |            |            |       |
| Accounts  receivable                                                         | ** ** | **100,529**    |            | (354,489        | )          |
| Prepaid expenses                                                             | ** ** | **887,866**    |            | (205,261        | )          |
| Other                                                                        | ** ** | **(313,229**   | **)**           | —          |       |
| (Decrease)  increase in operating liabilities:                               |       |           |            |            |       |
| Accounts payable                                                             | ** ** | **(127,499**   | **)**           | 169,626         |       |
| Accrued expenses  and other payables                                         | ** ** | **(2,637,538** | **)**           | 4,376,012       |       |
| Deferred revenue                                                             | ** ** | **(373,871**   | **)**           | 96,312          |       |
| Total  adjustments                                                           | ** ** | **5,641,050**  | ** **      | 5,878,922       |       |
| Net Cash Used in  Operating Activities                                       | ** ** | **(8,485,566** | **)**           | (13,559,825     | )          |
|                                                                         |       |           |            |            |       |
| Cash Flows from  Investing Activities:                                       |       |           |            |            |       |
| Acquisition of  property and equipment                                       | ** ** | **(91,973**    | **)**           | (214,841        | )          |
| Sale of  investment in securities                                            | ** ** | **793,948**    |            | 117,298         |       |
| Acquisitions of  businesses                                                  | ** ** | **(1,457,650** | **)**           | (1,409,458      | )          |
| Decrease  (increase) in restricted cash                                      | ** ** | **1,508,276**  |            | (1,323,362      | )          |
| Net Cash  Provided by (Used in) Investing Activities                         | ** ** | **752,601**    |            | (2,830,363      | )          |
|                                                                         |       |           |            |            |       |
| Cash Flows from  Financing Activities:                                       |       |           |            |            |       |
| Proceeds from  issuance of stock, preferred                                  | ** ** | **211,188**    |            | —          |       |
| Payments on  long-term obligations                                           | ** ** | **(88,550**    | **)**           | (353,504        | )          |
| Proceeds from  issuance of stock, common                                     | ** ** | **—**     |            | 400,000         |       |
| Net Cash  Provided by Financing Activities                                   | ** ** | **122,638**    |            | 46,496          |       |
|                                                                         |       |           |            |            |       |
| Effect of  exchange rate change on cash                                      | ** ** | **(1,534,759** | **)**           | (1,412,041      | )          |
|                                                                         |       |           |            |            |       |
| Net Decrease in  Cash and Cash Equivalents                                   | ** ** | **(9,145,086** | **)**           | (17,755,733     | )          |
| Cash and Cash  Equivalents, beginning of year                                | ** ** | **9,340,029**  |            | 27,095,762      |       |
| Cash and Cash  Equivalents, end of year                                      | ** ** | **$**          | **194,943**     |            | $          | 9,340,029 |   |
| Supplemental  Disclosure:                                                    |       |           |            |            |       |
| Cash paid for  interest                                                      | ** ** | **$**          | **31,044**      |            | $          | 25,000 |   |
| Cash paid for  income taxes                                                  | ** ** | **$**          | **—**      |            | $          | — |   |
| Noncash  Investing and Financing Activities:                                 |       |           |            |            |       |
| Value of stock  and stock options issued                                     | ** ** | **$**          | **—**      |            | $          | (1,086,756 | ) |

 

*See notes to consolidated financial statements.*

 

F-5

----

 

**AUTHORISZOR INC.**

**AND SUBSIDIARIES**

 

**Notes to Consolidated Financial Statements**

*Years Ended June 30, 2002 and 2001(Unaudited)*

 

**1.****             ****Summary of SignificantAccounting Policies**

 

A summary of significant accounting policiesconsistently applied in the preparation of the accompanying consolidatedfinancial statements follows. Prior to fiscal year 2001, the Company was in thedevelopment stage and presented its financial statements as a development stagecompany.

 

***Organization -***Authoriszor Inc. and Subsidiaries (the“Company”) provide technology consulting services and a suite of securitysoftware in the e-commerce, security and workflow sectors of the informationtechnology industry internationally. As described below, on July 18, 2002, theCompany became an investment holding company.

 

***Basis of presentation and realization ofassets -***Thefinancial statements have been prepared on a basis that contemplatesAuthoriszor Inc.’s continuation as a going concern and the realization of ourassets and liquidation of our liabilities in the ordinary course of business.We have an accumulated deficit $39,051,000 at June 30, 2002, and negative cashflows from operations approximating $8,891,000 for the year ended June 30,2002. Authoriszor Inc. also has negative working capital at June 30, 2002 ofapproximately $1,877,000. These matters, among others, raise substantial doubtabout our ability to remain a going concern for a reasonable period of time.The financial statements do not include any adjustments relating to therecoverability or classification of assets or the amounts and classification ofliabilities that might result from the outcome of this uncertainty.Authoriszor’s continued existence is dependent on its ability to obtainadditional financing sufficient to allow it to meet its obligations as theybecome due and to achieve profitable operations.

 

In March 2002, it becameclear that the Company had insufficient working capital for its needs, andafter exploring several potential options the Directors decided that the onlyoption open to them was to raise additional working capital through theCompany’s UK subsidiary, Authoriszor Holdings Limited (“AHL”). On July 18,2002, Authoriszor Inc. effectively sold 65% of its holding in AHL to (“theInvestors”) for approximately $906,000. As a result of this transaction, theCompany owned 35% of AHL, and AHL owns all the groups operating subsidiaries.

 

Following the Investment Agreement of July 18, 2002our financial ability to meet our creditor obligations worsened significantlybecause our sub-tenant defaulted on the rental agreement for the premises weleased in Burlington, Massachusetts. Prior to this increased liability, management believed that we would beable to satisfy our financial obligations.

 

Once it became clear that this might not be the casewe entered into a series of Settlement Agreements and Pledge Agreements datedMarch, April and May of 2003, which provided the creditors of the Company setout in the table below (the “Creditors”), with a continuing and unconditionalsecurity interest in all of the stock held by the Company in WRDCLogsys Ltd, tosecure the prompt, timely and complete payment of all obligations andliabilities has to the creditors. The Pledge Agreements remain in force untilthe earlier of the payment in full of the debt within 100 days from the date ofsignature of the pledge agreement, or the creditor’s realization of thecollateral provided.

 

The proportion of WRDCLogsys shares pledged isproportional to the amount owed, and in the case of WRDCLogsys all creditorshave consented that WRDCLogsys has shares pledged at twice the proportion inview of the cash that has continued to be introduced into the Company byWRDCLogsys at the behest of its shareholders. Upon the terms of the agreements,upon default of the Company to pay the debt to the creditor, the creditors havetherefore consented jointly to receive shares in WRDCLogsys Ltd in thefollowing proportions:

 

F-6

----

 
| **Creditor**                                 | ** ** | **Amount Owed** | ** **    | **No. of Shares Pledged as  Security** | ** **     |
|----------------------------------------------|------------|-----------------|---------------|----------------------------------------|----------------|
| Alec Karys  (former employee)                |       | $               | 26,130        |                                   | 152,221        |   |
| Decherts  (Lawyers)                          |       | $               | 53,480        |                                   | 311,546        |   |
| Massachusetts  Mutual Life Insurance Company |       | $               | 475,000       |                                   | 2,767,112      |   |
| “UK Consortium”                    |       | $               | 618,892       |                                   | 7,210,713      |   |
| **Totals**                                   | ** ** | **$**           | **1,173,502** | ** **                             | **10,441,592** | ** ** |

 

In addition, on May 2, 2003, $618,892 of debt owing bythe Company to AHL was assigned to a consortium of investors “UK Consortium”,which included Pelican Capital Limited, which Ian McNeill, a director of AHLand WRDCLogsys Ltd is the controlling party of. The proposal hasbeen for the Company to settle the debt it owes to WRDC Logsys, by movingshares to this consortium because of the provisions of Section 151 of the UKCompanies Act 1985, in which it would be deemed illegal for a company toreceive its own shares in settlement of a debt, and would be considered “financialassistance” under the provisions of that Act

 

***Post FiscalYear End Events*:**

 

The Company defaulted on the obligations owing underthe agreements on the termination of the 100 days from the date on which thepledge agreements were signed. As a result, the Creditors called up theirshares based on the provisions of the agreements, and the Company no longer hasa minority ownership interest (35%) in WRDCLogsys Ltd., as these shares are nowheld by the Creditors.  The call was madeby Massachusetts Mutual on July 24, 2003, UK Consortium  on August 12, 2003, Alec Karys on October 16,2003  and Decherts on March 10, 2004

 

***Principlesof consolidation -***The consolidated financial statementsinclude the accounts and operations of Authoriszor, Inc., and its subsidiaries.All significant intercompany accounts and transactions have been eliminated inconsolidation.

 

***Softwaredevelopment costs -***Software development costs areexpensed as incurred. Statement of Financial Accounting Standard No. 86“Accounting for the Costs of Computer Software to be Sold, Leased, or OtherwiseMarketed” (SFAS No. 86) requires the capitalization of certain softwaredevelopment costs once technological feasibility is established, which theCompany defines as establishment of a working model. The working model criteriaused as the Company’s process of creating software (including enhancements)does not include a detailed program design. To date, the period betweenachieving technological feasibility and the general availability of such softwarehas been short and software development costs qualifying for capitalizationhave been insignificant. Accordingly, the Company has not capitalized anysoftware development costs.

 

***Propertyand equipment -***Property and equipment are stated atcost. Depreciation is provided in amounts sufficient to relate the cost ofdepreciable assets to operations over their estimated service lives, using thestraight-line method. The range of useful lives for the classes of assets areas follows:

 
|   | Computers and Equipment | 4 years |
|--------|-------------------------|---------|

 

Expenditures for repairs and maintenance are chargedto expense as incurred and additions and improvements that significantly extendthe lives of assets are capitalized. Upon sale or retirement of depreciableproperty, the cost and accumulated depreciation are removed from the relatedaccounts and any

 

F-7

----

 

gain or loss is reflected in the results ofoperations.

 

***Cashand cash equivalents -***For the purposes of the financialstatements, the Company considers all highly liquid investments purchased withan original maturity of three months or less to be cash equivalents.

 

Restricted cash consists of a deposit in the amount of$220,000 maintained as security for a standby letter of credit in relation to alease on a property in Burlington, Massachusetts. As detailed in the Note 5,the landlord drew down the full amount of this deposit in September 2002.

 

***Allowancefor doubtful accounts -***Management must make estimates ofuncollectability of accounts receivable. Management specifically analyzesaccounts receivable and analyzes historical bad debts, customer concentrations,credit worthiness, current economic trends and changes in customer paymentterms when evaluating adequacy of the allowance for doubtful accounts.

 

***Incometaxes -***The Company utilizes the liability method ofaccounting for income taxes. Under the liability method, deferred tax assetsand liabilities are provided on differences between financial reporting and taxbases of assets and liabilities and are measured using the enacted tax ratesand laws that will be in effect when the differences are expected to reverse.An allowance against deferred tax assets is recorded when it is more likelythan not that such tax benefits will not be realized.

 

***Useof estimates in financial statements -***In preparingfinancial statements in conformity with generally accepted accountingprinciples, management makes estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosures of contingent assets andliabilities at the date of the financial statements, as well as the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

***Lossper share -***The Company computes basic loss per sharebased on the weighted average number of common shares outstanding. Diluted lossper common share is also computed using the weighted average number of commonshares outstanding, except if the effect of inclusion of stock options andwarrants would be antidilutive.

 

The Company has adopted the disclosure only provisionsof Statement of Financial Accounting Standards No. 123, “Accounting forStock-Based Compensation” (SFAS 123). Had compensation cost for stock optionsgranted to employees been determined consistent with SFAS 123, the Company’snet loss and loss per share would have been the following pro forma amounts:

 
| **Years Ending June 30,**                       | *** *** | **2002**        | ** **      | **2001**    | ** ** |
|-------------------------------------------------|--------------|-----------------|-----------------|-------------|------------|
|                                            |         |            |            |        |       |
| Net Loss as  Reported                           | ** **   | **$**           | **(14,126,616** | **)**       | $          | (19,438,747 | ) |
| Net Loss – Proforma                        | ** **   | **(15,443,292** | **)**           | (23,142,163 | )          |
| Loss Per Share -  Basic and Diluted as Reported | ** **   | **(0.71**       | **)**           | (1.10       | )          |
| Loss Per Share –  Proforma                 | ** **   | **(0.78**       | **)**           | (1.31       | )          |
|                                                 |              |                 |                 |             |            |  |  |

 

***Fairvalue of financial instruments -***The Company’s financialinstruments consists of cash, cash equivalents, and trade receivables, forwhich the carrying amount approximates the fair values because of their shortmaturity, and investment securities which are carried at market value. The fairvalue of the preferred stock cannot be determined as no market exists.

 

***Offbalance sheet risk and concentration of credit -***Financialinstruments which potentially subject the Company to concentrations of creditrisk consist principally of cash, cash equivalents, and trade receivables. TheCompany places its cash investments with highly creditable financialinstitutions. Generally, accounts receivable are due within 30 days. Creditlosses have historically been insignificant and consistent with management’sexpectations.

 

***Revenuerecognition -***The Company recognizes revenue inaccordance with the provisions of Statements of

 

F-8

----

 

Position 97-2 and 98-9 issued by the AmericanInstitute of Certified Public Accountants. It recognizes revenue from softwaresales at the time of product shipment, or in accordance with the terms of thelicensing contracts, when collectability is probable and the Company has nosignificant obligations remaining under the license agreement. In instanceswhere significant obligations remain, revenue recognition is delayed until suchobligations have been satisfied. The Company also provides training, consultingand on-going support.

 

Revenue on long-term contracts reflects the contractactivity during the period and represents the proportion of total contractvalue that costs incurred to date bear to total expected costs.

 

***Foreigncurrency translation and transaction losses -***Assets andliabilities of the Company’s subsidiaries are translated at the rate ofexchange in effect at the close of the period. Revenues and expenses aretranslated at the weighted average of exchange rates in effect during theperiod. The effects of exchange rate fluctuations on translating foreigncurrency assets and liabilities into U.S. dollars are included as part of theaccumulated other comprehensive income component of stockholders’ equity(deficiency). The Company made currency transaction gains of approximately$406,000 during the year ended June 30, 2002 and losses of $1,775,000 in theyear ended June 30, 2002. The gains are a result of the Company maintaining themajority of its operating cash in pound sterling denominated. The British poundgained against the U.S. dollar throughout the year ended June 30, 2002. Thetransaction gains have been reflected in the statement of operations.

 

***Goodwill-***In July 2001, the Financial Accounting Standards Boardissued Statement of Financial Accounting Standards No. 141 (SFAS 141),“Business Combinations”. This standard eliminates the pooling method ofaccounting for business combinations initiated after June 30, 2001. Inaddition, SFAS 141 addresses the accounting for intangible assets and goodwillacquired in a business combination. This portion of SFAS 141 is effective forbusiness combinations completed after June 30, 2001. The Company does notexpect SFAS 141 to have a material effect on the Company’s financial positionor results of operations.

 

In July 2001, the Financial Accounting Standards Boardissued Statement of Financial Accounting Standards No. 142 (SFAS 142),“Goodwill and Intangible Assets”, which revises the accounting for purchasedgoodwill and intangible assets. Under SFAS 142, goodwill and intangible assetswith indefinite lives will no longer be amortized, but will be tested forimpairment annually, and also in the event of an impairment indicator. TheCompany adopted SFAS 142 on January 1, 2002.

 

Due to the slow down in the industry, the goodwillarising from the Company’s acquisition of Logsys Solutions Ltd., a companyincorporated in the UK (“Logsys”), and WRDC Ltd., a company incorporated in theUnited Kingdom (“WRDC”), was considered to be materially impaired from theoriginal carrying value.

 

The value of the Company’s investment in thesesubsidiaries has been written down by approximately $6,447,000. The value as ofJune 30, 2002 is based upon the proceeds received from the sale on July 18,2002 of 65% of the shares in AHL, which owns 100% of Logsys and WRDC.

 

The goodwill that resulted from the Company’sacquisition of WRDC was being amortized using the straight-line method over aperiod of ten years.

 

***Stock-basedcompensation -***The Company accounts for stock-basedcompensation to employees using the intrinsic value method. Accordingly,compensation cost for employee stock options is measured as the excess, if any,of the quoted market price of the Company’s stock at the date of the grant overthe amount an employee must pay to acquire that stock. Stock options granted tonon-employees are recorded at fair value at the time of grant.

 

***Accountingfor impairment of long-lived assets -***The Companyevaluates long-lived assets and intangibles for impairment whenever events orchanges in circumstances indicate that the carrying amounts may not berecoverable. Impairment is recognized when the undiscounted cash flowsestimated to be generated by those assets are less than the carrying amounts ofsuch assets.

 

F-9

----

 

***Newaccounting standards not yet adopted -***In June 2001, theFASB issued Statement of Financial Accounting Standards No. 143,”Accounting forAsset Retirement Obligations” (Statement 143). Statement 143 requires that thefair value of a liability for an asset retirement obligation be recognized inthe period in which it is incurred if a reasonable estimate of fair value canbe made. We are required to adopt Statement 143, for the year beginning July 1,2002. The adoption of Statement 143 is not expected to have a material effecton our consolidated financial position or results of operations.

 

The FASB issued SFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets,” in August 2001. SFAS No. 144,which addresses financial accounting and reporting for the impairment oflong-lived assets and for long-lived assets to be disposed of, supercedes SFASNo. 121 and is effective for fiscal years beginning after December 15, 2001. Wewill be required to adopt SFAS 144 on July 1, 2002 and management is currentlyreviewing if the adoption will have any impact on our financial position orresults of operations.

 

In June 2002, the FASB issued Statement 146,“Accounting for Costs Associated with Exit or Disposal Activities”. SFAS 146replaces previous accounting guidance provided by EITF 94-3, “LiabilityRecognition for Certain Employee Termination Benefits and Other Costs to Exitan Activity (including Certain Costs Incurred in a Restructuring)”, andrequires companies to recognize costs associated with exit or disposalactivities only when a liability for these costs are incurred (subsequent to acommitment to a plan) rather than at the date of a commitment to an exit ordisposal plan. Examples of costs covered by the Statement include leasetermination costs and certain employee severance costs that are associated witha restructuring, discontinued operations, plant closings, or other initiatedafter December 31, 2002. We believe the adoption of SFAS 146 will not have amaterial impact on the Company’s financial statements.

 

**2.****              Acquisitions**

 

On February 22, 2000, the Company acquired a 27.2%(25.1% on a fully diluted basis) interest in WRDC Ltd, a private UK company,for a purchase price of $604,800. The purchase price of WRDC exceeded theCompany’s proportionate share of the net assets acquired by $584,400, which wasbeing amortized on a straight-line basis over ten years. WRDC provides a broadarray of strategic services and a number of strategic technologies, such as,electronic messaging, directory services, security architectural and internettechnologies, and the combination of these technologies and concepts to its customers.

 

On May 8, 2001, the Company purchased an additionalequity interest in WRDC, increasing its ownership interest from 27.2% to 66.4%.The Company issued approximately 930,000 shares of common stock, paid cash ofapproximately $1,716,000 and issued 237,000 stock options (fair valued at$248,900) to WRDC employees for the additional equity interest. The Companycommitted to issue an additional 195,000 shares of its common stock to theshareholders of WRDC subject to the realization of certain of WRDC’s accountsreceivable. Also on this date, the Company committed to acquire the remaining33.6% interest in WRDC upon the occurrence of certain events, but in no eventlater than January 1, 2002.

 

As of May 8, 2001, the Company changed from the equitymethod to the consolidation method to account for its ownership of WRDC.

 

In December 2001, the Company acquired the remainingequity in WRDC Ltd., increasing its ownership interest to 100% of theoutstanding capital stock of WRDC for total consideration equal to thefollowing: (i) $1,236,650 payable in cash, (ii) the issuance of 2,125,360shares of common stock, par value $.01 per share (“common stock”), of theCompany, and (iii) the issuance of 389,794 shares of Series A CumulativeMandatorily Redeemable Preferred Stock, par value $.01 per share (“PreferredStock”).

 

For more information concerning the Company’sacquisition of the remaining capital stock of WRDC, please see the Company’sCurrent Report on Form 8K/A filed with the SEC on January 30, 2002.

 

F-10

----

 

With respect to our acquisition of Logsys, our whollyowned subsidiary, Authoriszor Holdings Ltd., initially acquired approximately a68% interest in Logsys in exchange for a cash payment of approximately $237,000,and, if certain conditions are met, the issuance of 186,453 shares of theCompany’s common stock. These shares were issued in January 2002. In addition,our ownership interest in Logsys has increased to approximately 99.75% of theoutstanding capital stock of Logsys as a result of the solicitation by Logsysof holders of its capital stock, other than shares of capital stock alreadyowned by us, to tender their respective shares of capital stock in exchange forcash consideration payable by us at the same price per share as our initialacquisition of capital stock of Logsys. For further information concerning theterms and conditions upon which we acquired Logsys, please see our CurrentReport on Form 8-K that was filed with the Securities and Exchange Commissionon July 16, 2001.

 

**3.****              Restructuring andExit Charges**

 

***Closure of U.K.headquarters and operations -***During the fourth quarter2002 and following the resignation of the Chief Executive Officer and ChiefFinancial Officer, a decision was made to close the U.K. Headquarters inHarrogate and relocate remaining staff to the offices of WRDC in Leeds. As aresult of this closure the Company has accrued liabilities at June 30, 2002 forseverance costs and termination benefits for terminated employees and lease andother contract obligations, as well as for legal and other professional costsassociated with the restructuring on July 18, 2002.

 

In May 2001, the Company subleased the office space ofour prior headquarters in Burlington, Massachusetts to Directech, Inc. as aresult of the restructuring undertaken by management.  The sublease with Directech called formonthly payments to be made to us in the amount of $31,400 per month, which wassubstantially equal to the amount that we paid in monthly rent under our priorlease.

 

The sublease was effective until April 28, 2005, whichwas equal to the length of the original lease that we entered into in May2001.  On July 19, 2002, Directechdefaulted on its sublease with the Company because of the status of theirlargest customer, WorldCom.  The Companyentered into discussions with the landlord and Directech with the objective ofresolving this matter, but Directech has not able to make any further paymentson the sublease since its default on the lease.

 

The landlord has drawn down on the Company’s  letter of credit issued by Citizens Banksupporting the lease of $220,000 in September 2002 as payment of rentals inadvance for part of the period remaining under the lease and we entered into aseries of Settlement Agreements and Pledge Agreements described above, whichprovided our landlord, Massachusetts Mutual Life with a continuing andunconditional security interest in all of the stock held by the Company inWRDCLogsys Ltd, to secure the prompt, timely and complete payment of allobligations and liabilities the Company had to it.

 

**Important Post Fiscal Year EndEvents:**

 

The Company defaulted on the obligations owing underthe Pledge Agreements on or about July 8, 2003. As a result, MassachusettsMutual on July 24, 2003 called up its shares based on the provisions of theagreements and the Company’s obligations under the Pledge Agreement (and underthe lease) were satisfied in full.

 

F-11

----

 
| ** **                                       | ** ** | **Accrued  June 30,  2001** | ** ** | **Charge** | ** ** | **Paid**   | ** ** | **June 30,  2002** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|------------|------------|------------|------------|--------------------|------------|
| ** **                                       | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** **         | ** ** |
| Legal and Other  Professional Fees               |       | $                           | —     |       | $          | 318,096    |       | $                  | 186,096    | ** ** | **$** | **132,000** | ** ** |
| Employee  Severance and Termination Benefits     |       | 559,793                     |       | 420,500    |       | 713,073    | ** ** | **267,220**        | ** ** |
| Leased  Facilities and Related Termination Costs |       | 102,970                     |       | 592,630    |       | 102,970    | ** ** | **592,630**        | ** ** |
|                                             |       | $                           | 662,763    |       | $          | 1,331,226  |       | $                  | 1,002,139  | ** ** | **$** | **991,850** | ** ** |

 

The charge in the year comprises the following:

 

Legal & other professional fees incurred inrelation to the restructuring on July 18, 2002 of $318,096.

 

The employee severance and termination benefitsincludes $277,200 payable to the former CEO and CFO and to Utilis Ventures asexplained under Financing Management’s Plan of Operation, and $143,300 inrespect of a reduction in staff numbers at Logsys in an effort to reduceongoing operating costs.

 

Leased facilities andrelated costs includes $99,512 in respect of the Harrogate office, $18,394 forthe London office of WRDC which was closed in the year and approximately$475,000 for Burlington, Massachusetts which was the settlement value agreedwith the landlord following the default of the sub tenant in July 2002.

 

**4.****              Commitments**

 

***Operatingleases -***The Company leases office space, under operatinglease agreements which expire through December 2008. Rent expense totaledapproximately $660,000 and $681,000 the years ended June 30, 2002 and2001, respectively.

 

The future minimum rental commitments under operatingleases as of June 30, 2002 are as follows:

 
| ** **                          | ** ** | **Office  Space** | ** ** |
|-------------------------------------|------------|-------------------|------------|
|                                |       |              |       |
| 2003                                |       | $                 | 517,000    |   |
| 2004                                |       | 524,000           |       |
| 2005                                |       | 462,000           |       |
| 2006                                |       | 108,000           |       |
| 2007                                |       | 108,000           |       |
| Less Provision  Made for U.S. Lease |       | (647,000          | )          |
|                                |       | $                 | 1,072,000  |   |

 

In May 2001, the Company began subleasing the officespace of its prior U.S. headquarters. The sublease

 

F-12

----

 

calls for monthly payments in the amount of $31,400per month through April 2005, which is equal to the monthly payments and termof the underlying lease. See note 3.

 

The leases generally provide that property taxes,insurance and maintenance expenses are obligations of the Company.

 

***Chief ExecutiveOfficer and Chief Financial Officer Severance Obligation -***OnMarch 28, 2002, the Company’s Chief Executive Officer and Chief FinancialOfficer resigned. The Executive and representatives of the Board of Directorsnegotiated the terms of a Severance and Release Agreement (the “SeveranceAgreements”) with the Executives. Details of these are referred to in theexhibits.

 

In accordance with the terms of the SeveranceAgreements, the Company agreed to pay the Executives $277,200 in March 2002.The balance due of $200,030 has been accrued at June 30, 2002.

 

**5.****              Accrued Liabilities**

 
| **June 30, 2002**           | *** *** | *** *** | *** *** |
|-----------------------------|--------------|--------------|--------------|
|                        |         |         |         |
| Accrued  Commission Payable |         | $            | 331,187      |   |
| Taxes Other Than  Income    |         | 334,363      |         |
| Other                       |         | 1,169,267    |         |
|                        |         | $            | 1,834,817    |   |

 

**6.****              Long-TermObligations**

 
| **June 30, 2002**                  | *** *** | *** *** | *** *** |
|------------------------------------|--------------|--------------|--------------|
|                               |         |         |         |
| Other                              |         | $            | 75,952       |   |
| Capital Lease  Obligations         |         | 102,060      |         |
|                               |         | 178,012      |         |
| Less Amount  Representing Interest |         | 20,840       |         |
|                               |         | 157,172      |         |
| Less Current  Maturities           |         | 98,499       |         |
|                               |         | $            | 58,673       |   |

 

Capital lease obligations are collateralized byproperty and equipment with cost and related accumulated depreciationapproximating $121,000 and $60,000 respectively at June 30, 2002.

 

Long-term obligations matureas follows:

 
| **Years Ending June 30,** | *** *** | *** *** | *** *** |
|---------------------------|--------------|--------------|--------------|
|                      |         |         |         |
| 2003                      |         | $            | 95,000       |   |
| 2004                      |         | 62,000       |         |
| 2005                      |         | 9,000        |         |
| 2006                      |         | 2,000        |         |
|                           |              |              |              |  |

 

**7.****              Stock Options, Warrants and Stock BasedCompensation**

 

***Stock and stock options -*****The Company’s 1999 Stock Plan (the 1999Plan) provides for grants of options up to 1,000,000 shares of common stock,and the 2000 Stock Plan (the 2000 Plan) provides for grants of options up to1,700,000 shares. Pursuant to the Plans, the Company may grant Incentive StockOptions to

 

F-13

----

 

any employee or officer of the Company or of anysubsidiary of the Company, and may grant Non-qualified Stock Options to anyperson eligible to receive Incentive Stock Options, and also to directors,consultants or advisors of the Company or its subsidiaries. As of June 30,2002, there were 775,284 options available for grant.

 

In July 2000, the Company entered into a six-monthconsulting agreement with an individual. In accordance with the terms of theagreement, the individual agreed to provide a minimum of 10 days per month ofconsulting services for the Company at the rate of $3,000 per day. The dailycompensation paid to the individual was comprised of $2,000 in cash and suchnumber of restricted shares of the Company’s common stock equal to $1,000 perconsulting day, calculated weekly for the days worked in such week at the lastreported sales price of the Company’s common stock at the close of business onthe last business day of the week in which the individual performed theconsulting services. In January 2001, the Company issued 12,703 shares of stockto the consultant for his services. The market value of the shares earned($60,000) under the agreement has been charged to expense. In addition, theindividual received an option to purchase 100,002 shares of Company common stock.The options vested on a monthly pro-rata basis and are exercisable over athree-year period. The options granted have an exercise price of $7.75 pershare, which was the market price of the stock on the date of grant. Theoptions granted were recorded by the Company at fair value resulting in anaccounting charge of approximately $689,000 for the year ended June 30, 2001.

 

Following is a summary of stock option activityincluding grants outside of the Plans:

 
| ** **                  | ** ** | **Options** | ** ** | **Exercise  Price** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|-----------------------------|------------|-------------|------------|---------------------|------------|----------------------------------------|------------|
|                        |       |        |       |                |       |                                   |       |
| Outstanding,  July 2000     |       | 1,671,078   |       |                |       | $                                      | 4.85       |   |
| Granted                     |       | 2,274,502   |       | 1.01 - 22.50        |       | 6.10                                   |       |
| Forfeited                   |       | (1,004,500  | )          | 1.50 - 22.50        |       | 7.13                                   |       |
| Outstanding,  June 30, 2001 |       | 2,941,080   |       | 1.00 - 22.50        |       | 4.97                                   |       |
| Granted                     |       | —      |       | —              |       | —                                 |       |
| Forfeited                   |       | (612,328    | )          | 1.50 - 10.25        |       | 5.28                                   |       |
| Outstanding,  June 30, 2002 |       | 2,328,752   |       |                |       | 4.71                                   |       |
|                        |       |        |       |                |       |                                   |       |
| Exercisable,  June 30, 2001 |       | 1,767,917   |       | 1.00 - 22.50        |       | 3.52                                   |       |
| Exercisable,  June 30, 2002 |       | 1,336,250   |       | 1.01 - 10.75        |       | 3.13                                   |       |
|                             |            |             |            |                     |            |                                        |            |  |

 

Following is additional informationregarding stock options outstanding at June 30, 2002:

 
| ** **                    | ** **   | **Outstanding**         | ** ** | **Exercisable**                                     | ** ** |
|-------------------------------|--------------|-------------------------|------------|-----------------------------------------------------|------------|
| **Range of  Exercise Prices** | ** **   | **Number  Outstanding** | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Weighted  Average  Exercise Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise Price** | ** ** |
|                          |         |                    |       |                                                |       |   |   |   |   |   |   |
| $                             | 1.00 - 1.50  |                    | 963,750    |                                                | 5.5        |   | $ | 1.26 |   | 963,750 |   | $ | 1.26 |   |
| $                             | 2.50 - 3.00  |                    | 265,000    |                                                | 3.4        |   | 2.95 |   | 72,500 |   | 2.91 |   |
| $                             | 6.75 - 7.75  |                    | 700,002    |                                                | 6.3        |   | 7.04 |   | 125,000 |   | 7.75 |   |
| $                             | 8.75 - 22.50 |                    | 400,000    |                                                | 5.3        |   | 10.13 |   | 175,000 |   | 10.18 |   |
|                          |         | 2,328,752               |       |                                                |       |   |   | 1,336,250 |   |   |   |
|                               |              |                         |            |                                                     |            |  |  |  |  |  |  |  |  |  |

 

F-14

----

 

**8.****              Income Taxes**

 

Due to taxable losses, the company has no tax expensefor either the year ended June 30, 2002 or 2001.

 

At June 30, 2002, the Company has a net operating losscarryforwards of approximately $39,000,000, expiring through 2022, available tooffset future taxable income. Deferred tax assets consist primarily of the netoperating loss carryforward. Deferred tax liabilities are not significant.

 

The Company’s net deferred tax asset of approximately$13,000,000 has been offset by a valuation allowance of an equal amount at June30, 2002, due to the uncertainty of realizing the net deferred tax assetthrough future operations. Utilization ofnet loss carryforwards in the future may be limited if changes in the Company’sstock ownership create a change in control as provided in Section 382 of theInternal Revenue Code.

 

**9.****              Major Customers**

 

No individual customer accounted for greater than 10% of the Company’s revenues for theyear ended June 30, 2002. Three individual customers accounted for 16%,10.8% and 10.6% of the Company’s revenues for the year ended June 30, 2001.

 

**10.****       Business Segments andForeign Operations**

 

The Company has two reportable segments: Consultingand Implementation Services and Technology Business. The Consulting andImplementation Services segment provides functional business solutions ande-business transformation services incorporating business processes andinterest technologies. The Technology Business segment sells security softwareand solutions designed to secure corporate information while enablingbusinesses to provide secure access to their corporate website and applicationsand to conduct secure communications over computer networks and the internet...

 

The accounting policies of the segments are the sameas those described in the summary of significant accounting policies. TheCompany measures segment profit or loss as operating income (loss). The Companydoes not allocate expenditures for assets on a segment basis for internalmanagement reporting and, therefore, such information is not presented.Information on segments is as follows:

 
| **June 30, 2002**                  | *** *** | **Consulting  and  Implementation  Services** | ** **    | **Technology  Services** | ** ** | **Unallocated  Corporate** | ** ** | **Total**       | ** **  |
|------------------------------------|--------------|-----------------------------------------------|---------------|--------------------------|------------|----------------------------|------------|-----------------|-------------|
| ** **                         | ** **   | ** **                                    | ** **    | ** **               | ** ** | ** **                 | ** ** | ** **      | ** **  |
| **Revenue**                        | ** **   | **$**                                         | **2,123,335** | ** **               | **$**      | **4,609,573**              | ** ** | **$**           | **147,575** | ** ** | **$** | **6,880,483** | ** ** |
| **Depreciation  and Amortization** | ** **   | **10,565**                                    | ** **    | **6,472,570**            | ** ** | **6,951,029**              | ** ** | **13,434,164**  | ** **  |
| **Operating  Profit (Loss)**       | ** **   | **167,319**                                   | ** **    | **(6,596,098**           | **)**      | **(8,501,429**             | **)**      | **(14,930,208** | **)**       |
| **Assets**                         | ** **   | **1,021,447**                                 | ** **    | **1,957,774**            | ** ** | **1,106,568**              | ** ** | **4,085,489**   | ** **  |
|                                    |              |                                               |               |                          |            |                            |            |                 |             |  |  |  |  |

 

F-15

----

 
| **June 30, 2001**              | *** *** | **Consulting  and  Implementation  Services** | ** ** | **Technology  Services** | ** ** | **Unallocated  Corporate** | ** ** | **Total**   | ** ** |
|--------------------------------|--------------|-----------------------------------------------|------------|--------------------------|------------|----------------------------|------------|-------------|------------|
| ** **                     | ** **   | ** **                                    | ** ** | ** **               | ** ** | ** **                 | ** ** | ** **  | ** ** |
| Revenue                        |         | $                                             | 647,658    |                     | $          | 60,819                     |       | $           | —     |   | $ | 708,477 |   |
| Depreciation and  Amortization |         | 33,234                                        |       | 197,566                  |       | 250,893                    |       | 481,693     |       |
| Operating Profit  (Loss)       |         | (135,997                                      | )          | (8,330,113               | )          | (10,162,745                | )          | (18,628,855 | )          |
| Assets                         |         | 2,433,527                                     |       | 10,388,517               |       | 9,167,033                  |       | 21,989,077  |       |
|                                |              |                                               |            |                          |            |                            |            |             |            |  |  |  |  |

 

Information regardingforeign operations for the years ended June 30, 2002 and 2001 is as follows.Sales are attributed to countries based upon the location of the customer.

 
| **June 30,**        | *** *** | **2002**      | ** **    | **2001**   | ** ** |
|---------------------|--------------|---------------|---------------|------------|------------|
| ** **          | ** **   | ** **    | ** **    | ** ** | ** ** |
| Revenue:            |         |          |          |       |       |
| United States       | ** **   | **$**         | **282,051**   |       | $          | — |   |
| United Kingdom      | ** **   | **6,364,718** |          | 708,477    |       |
| ** **          |         | **$**         | **6,646,769** |       | $          | 708,477 |   |
| Long-Lived  Assets: |         |          |          |       |       |
| United States       | ** **   | **$**         | **640,760**   |       | $          | 6,000,252 |   |
| United Kingdom      | ** **   | **338,656**   |          | 612,527    |       |
| ** **          |         | **$**         | **979,416**   |       | $          | 6,612,779 |   |

 

F-16

----

 

## **ITEM 8**.  CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have no disagreements on accounting or financialdisclosure matters with the independent accountants to report under this Item8.

 

# **ITEM 8A****. CONTROLS AND PROCEDURES**

 

Our Chief Executive Officerand Chief Financial Officer, has evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934) as of the end of the period covered by this Report. Basedon that evaluation and given the state of our company, our Chief ExecutiveOfficer and Chief Financial Officer has concluded that our disclosure controlsand procedures are effective in enabling us to record, process, summarize, andreport information required to be included in our periodic SEC filings.

 

In addition, our Chief Executive Officer and ChiefFinancial Officer has evaluated whether any change in our internal control overfinancial reporting (as defined in Rule 13a-15(f) under the SecuritiesExchange Act of 1934) occurred during the period covered by this report. Basedon that evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that there has been no change in our internal control over financialreporting during the period covered by this report that has materiallyaffected, or is reasonably likely to materially affect our internal controlover financial reporting.

 

**ITEM 8B.****OTHERINFORMATION**

 

None.

 

# **PARTIII**

 

## **ITEM 9**.  DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT

 

**ExecutiveOfficers**

 

 
| **Name**      | ** ** | **Position**                                                                          |
|---------------|------------|---------------------------------------------------------------------------------------|
|          |       |                                                                                  |
| Paul Ayres    |       | Director                                                                              |
| Don Box       |       | Director                                                                              |
| Garcia Hanson |       | Chief Executive Officer, Chief Financial Officer,  Chief Operating Officer, Secretary |

 

Important Recent Events: Subsequent to the periodcovered by this report, on September 2, 2002, Board resignations were receivedfrom Raymond Seitz, James Jackson, Sir Malcolm Rifkind and Godfrey Shingles.The remaining board is comprised of Garcia Hanson, our Chief Executive Officer,Chief Financial Officer, Chief Operating Officer and Secretary of the Company,Paul Ayres and Don Box.

 

Paul Ayers has been a Director since January2001.  From January 2001 to March 28,2002 he served as our President and Chief Executive Officer.  He also served from October 2000 to March2002  as Managing Director of AuthoriszorLimited.  Prior to joining AuthoriszorLimited, Mr. Ayres was the General Manager for European Operations for RealNetworks, Inc., a company engaged in the internet software business, from 1997until joining Authoriszor.  During1995-1997, Mr. Ayres was General Manager for Netscape Communications’ NorthernEuropean operations.  Mr. Ayres attendedthe University of Essex/Cambridge University, majoring in Political Science andLaw.

 

15

----

 

Don Box has served as one of our Directors since May1996 and served as our Assistant Secretary from May 1996 through January2000.  Mr. Box has served as ExecutiveVice President at Remington Oil and Gas Corporation, a publicly held oil andgas exploration and production company, since November 1997.  He served as Chairman of the Board of BoxEnergy Corporation, which was listed on NASDAQ, public company owning oil andgas interests in the Gulf of Mexico and mainland U.S., from 1993 throughNovember 1997, and served as Chief Executive Officer and President of BoxEnergy Corporation from January 1996 through November 1997.  Since 1992, Mr. Box has been President and aDirector of Box Brothers Holding Company, which is engaged in the oil and gasbusiness.  From 1990 until 1996, Mr. Boxwas President of Race Circuits Management of Texas, which was engaged in motorsports promotion.  Don Box holds aBachelor of Science degree in Economics from the Wharton School of Business anda Masters degree in Business Administration from Southern Methodist University.

 

Garcia Hanson has been our Chief Executive Officer andChief Financial Officer since March 28, 2002. He is also our Chief Operating Officer. Mr. Hanson has also served on our Board of Directors since March 28, 2002.  Mr. Hanson also serves as the ManagingDirector of WRDC Limited and Logsys Solutions Limited, two of oursubsidiaries.  Mr. Hanson has served asthe Managing Director of WRDC Limited since 1994.

 

Section 16 (a) Beneficial Ownership Reporting Compliance

 

Section 16 (a) of the Securities Exchange Act of 1934,as amended, requires our directors, officers and persons who beneficially ownmore than 10% of our common stock (“10% Stockholders”) to file reports ofownership and changes in ownership with the Securities and Exchange Commission(the “SEC”).  Based solely uponinformation provided to us by our directors, officers and 10% Stockholders, toour knowledge, we believe that all of these filing requirements were satisfiedby our directors, officers and 10% Stockholders.

 

## **ITEM 10**.  EXECUTIVE COMPENSATION

 

**DirectorCompensation**

 

Our directors arereimbursed for actual and reasonable out of pocket expenses in connection withattendance at Board and committee meetings.

 

**ExecutiveCompensation**

 

The following tableprovides summary information concerning compensation paid by us to our ChiefExecutive Officers and the other Named Executive Officers for the three mostrecent fiscal years. The summary information provided is for the 12 monthsended June 30, 2002, 2001, and 2000. All of the officers referred to below have been paid in pound sterlingthrough Authoriszor Limited.  Forpurposes of Summary Compensation Table and the discussion set forth under “ExecutiveCompensation – Employment Contracts, Termination of Employment and Change-inControl Agreements, the foreign currency exchange rate of $1.40 per poundsterling has been used.

 

For purposes ofthis disclosure, the Named Executive Officers consist of:

 

•                  ourChief Executive and Finance Officers during the fiscal year ended June 30, 2002(the “Fiscal Year 2002”).

 

## **Summary Compensation Table**

 
| **Name and Principal Position** | ** ** | **Fiscal  Year** | ** ** | **Annual  Salary** | ** ** | **Bonus**  | ** ** | **Long Term  Compensation  No. of Securities  Underlying Options** | ** ** | **All Other  Annual  Compensation(1)** | ** ** |
|---------------------------------|------------|------------------|------------|--------------------|------------|------------|------------|-------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                      | ** ** | ** **       | ** ** | ** **         | ** ** | ** ** | ** ** | ** **                                                              | ** ** | ** **                             | ** ** |
| **Chief  Executive Officers**   |       |             |       |               |       |       |       |                                                                    |       |                                   |       |
| Garcia Hanson(1)                |       | 2002             |       | $                  | 377,399    |       | $          | 98,875                                                                  |       | 400,000                                |       | $ | 38,539 |   |
| Chief Executive  Officer and    |       | 2001             |       | 34,346             |       | N/A        |       | N/A                                                                     |       | N/A                                    |       |
|                                 |            |                  |            |                    |            |            |            |                                                                         |            |                                        |            |  |  |  |

 

----

(1)  Mr. Hanson was appointedChief Operations Officer on May 8, 2001. He was subsequently appointed to be Chief Executive Officer andPresident on March 28, 2001. He was paid a salary of $210,000 per annum up toFebruary 28, 2002, at the date he agreed to reduce his salary to $140,000 perannum.  He received a car allowance of$15,120, which was unchanged throughout. He received a pension of 7.5% of the original salary of $210,000, whichhe elected to reduce to 3.75% of this salary from February 28, 2002.

 

16

----

 
| **Name and Principal Position**        | ** ** | **Fiscal  Year** | ** ** | **Annual  Salary** | ** ** | **Bonus**  | ** ** | **Long  Term  Compensation  No. of Securities  Underlying Options** | ** ** | **All  Other  Annual  Compensation(1)** | ** ** |
|----------------------------------------|------------|------------------|------------|--------------------|------------|------------|------------|--------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                             | ** ** | ** **       | ** ** | ** **         | ** ** | ** ** | ** ** | ** **                                                               | ** ** | ** **                              | ** ** |
| President                              |       | 2000             |       | N/A                |       | N/A        |       | N/A                                                                      |       | N/A                                     |       |
| ** **                             | ** ** | ** **       | ** ** | ** **         | ** ** | ** ** | ** ** | ** **                                                               | ** ** | ** **                              | ** ** |
| Paul Ayres(2)                          |       | 2002             |       | $                  | 346,173    |       | N/A        |                                                                     | 400,000    |                                    | $          | 841,753 | (4) |
| Chief Executive  Officer and President |       | 2001             |       | $                  | 312,256    |       | N/A        |                                                                     | 500,000    |                                    | -0-        |   |
|                                   |       | 2000             |       | N/A                |       | N/A        |       | N/A                                                                      |       | N/A                                     |       |
|                                   |       |             |       |               |       |       |       |                                                                     |       |                                    |       |
| Andrew  Cussons(3)                     |       | 2002             |       | N/A                |       | N/A        |       |                                                                     |       |                                    |       |
| Chief Financial  Officer               |       | 2001             |       | $                  | 209,958    |       | -0-        |                                                                     | 300,000    |                                    | $          | 30,867 |   |
|                                   |       | 2000             |       | N/A                |       | N/A        |       | N/A                                                                      |       | N/A                                     |       |

 

**StockOptions**

 

There were nostock options granted to officers or employees during Fiscal Year 2002.

 

The following table provides certain informationconcerning the exercise of stock options in Fiscal Year 2002 by the ChiefExecutive Officers and the Named Executive Officers and unexercised stockoptions held by such officers at the end of Fiscal Year 2002.

 

**AGGREGATEDSTOCK OPTION EXERCISES IN LAST FISCAL**

**ANDOPTION VALUES FOR FISCAL YEAR ENDED JUNE 30, 2002**

 
| ** **     | ** ** | ** **                        | ** ** | ** **          | ** ** | **Number of Securities  Underlying Unexercised  Options at June 30, 2001** | ** ** | **Value of Unexercised In-the-  Money Options at  June 30, 20021 ($) (1)** | ** ** |
|----------------|------------|-----------------------------------|------------|---------------------|------------|----------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| **Name**       | ** ** | **Shares  Acquired  on Exercise** | ** ** | **Value  Realized** | ** ** | **Exercisable**                                                            | ** ** | **Unexercisable**                                                          | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
|           |       |                              |       |                |       |                                                                       |       |                                                                       |       |   |   |   |   |
| Garcia Hanson  |       | -0-                               |       | -0-                 |       | —                                                                     |       | —                                                                     |       | -0- |   | -0- |   |
| Paul Ayres     |       | -0-                               |       | -0-                 |       | 250,000                                                                    |       | 150,000                                                                    |       | -0- |   | -0- |   |
| Andrew Cussons |       | -0-                               |       | -0-                 |       | 225,000                                                                    |       | 75,000                                                                     |       | -0- |   | -0- |   |

 

----

(1)    Market value of underlying securities atexercise date or fiscal year end, as the case may be, minus the exercise price.

 

During Fiscal Year 2002, the UK subsidiary AuthoriszorLimited made certain contributions to directors, executive officers and otheremployees of Authoriszor Limited with respect to the personal pension plan ofeach such person in the UK.  Pursuant tothe terms of such plan, Authoriszor Limited made a contribution to the personalpension plans of directors and officer of Authoriszor Limited in an amount thatdid not exceed 7.5% of the annual salary of such directors and executiveofficers. Certain of our Named Executive Officers have received contributionspursuant to such plan.  See footnotes 1-3contained under the table captioned “Summary Compensation Table.”

 

**EmploymentContracts, Termination of Employment and Change-in-Control Agreements**

 

In connection withthe execution of the agreement to acquire WRDC, our Board of Directorsappointed Garcia Hanson as our Chief Operating Officer, effective May 8,2001.  In addition, the Board ofDirectors of Authoriszor

 

----

(2)    Mr. Ayres was paid a salary of $420,000 perannum up to February 28, 2002, at that date he agreed to reduce his salary to$280,000 per annum.  He received a carallowance until October 31, 2001 pro-rata at an annual rate of $15,120, andpension pro-rata of 7.5% of his original salary of $420,000.  Mr. Ayres resigned as Chief Executive Officerand President on March 28, 2002. Therefore, the compensation information reflected herein for Fiscal Year2002 reflects compensation through such date. Please see “Executive Compensation – Employment Contracts, Terminationof Employment and Change-in-Control Agreements” for further informationconcerning the compensation paid to Mr. Ayres in connection with hisresignation.

(3)    Mr. Cussons was paid a salary of $280,000per annum up to February 28, 2002, at that date he agreed to reduce his salaryto $210,000 per annum.  He received a carallowance until January 31, 2002 pro-rated at an annual rate of $15,120, andpension pro-rata of 7.5% of salary.  Mr.Cussons resigned as Chief Financial Officer on March 28, 2002.  Therefore, the compensation informationreflected herein for Fiscal Year 2002 reflects compensation through suchdate.  Please see “Executive Compensation– Employment Contracts, Termination of Employment and Change-in-ControlAgreements” for further information concerning the compensation paid to Mr.Cussons in accordance with his resignation.

 

17

----

 

Holdings Limited (“AHL”)appointed Mr. Hanson as the Operations Director of Authoriszor Limited, awholly owned subsidiary of Authoriszor Holdings Limited.  Mr. Hanson also continued in his capacity asManaging Director of WRDC.

 

TheEmployment Agreement with Mr. Hanson was for an unspecified term, with eitherparty able to terminate the Employment Agreement upon 12 months prior notice ofsuch termination.  Pursuant to theEmployment Agreement, the Executive was entitled to compensation of:

 

•                  abase salary of $220,000; and

•                  abonus based upon the achievement of certain quarterly targets as determined byour Board of Directors.

 

The agreementcontained a nondisclosure provision with an unlimited duration and non-competitionand non-interference provisions effective for twelve months subsequent totermination of the agreement.

 

Mr. Hanson becamePresident and Chief Executive Officer on March 28, 2002 and was appointed tothe Board of Directors on that date.   The Compensation Committee of the Board of Directors agreed to amend andrestate that certain Employment Agreement, dated as of May 8, 2002, by andbetween Mr. Hanson and us, effective March 1, 2002.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement should be amended to include thefollowing terms:

 

•               A base salary of $146,667

 

Wepreviously entered into Executive Employment Agreement with Richard A.Langevin (the “Executive”), dated as of January 1, 2000, under which theExecutive was appointed as our Chief Executive Officer, President and InterimChief Financial Officer. The term of this agreement was four years, expiringDecember 31, 2003, and was terminable immediately for cause by either theExecutive or us.  Pursuant to theEmployment Agreement, the Executive was entitled to compensation of:

 

•                  abase salary of $225,000;

•                  aminimum annual bonus of $125,000, payable in *pro rata*quarterly increments, provided that certain quarterly Management-by-Objectivestargets were achieved; and

•                  stockoptions to purchase a cumulative total of 500,000 shares of our common stock atan exercise price of $6.75 per share, subject to certain adjustments asprovided in those certain stock option agreements, in increments of: 200,000shares exercisable on or after January 1, 2001; 100,000 shares exercisableon or after January 1, 2002; 100,000 shares exercisable on or afterJanuary 1, 2003; and 100,000 shares exercisable on or afterJanuary 1, 2004.

 

The optionsterminated on December 31, 2009.  Atthe Executive’s request, we undertook to file a registration statement onForm S-8 registering the issuance of the shares underlying his options,provided that we met the requirements of Form S-8.  In the event our business was sold during theterm of the agreement, all salary payments and bonus payments under theagreement became immediately due and payable and all options became immediatelyexercisable. The agreement contained a nondisclosure provision with anunlimited duration and non-competition and non-interference provisionseffective for twelve months subsequent to termination of the agreement.

 

On January 31,2001, the Executive resigned his position as our President, Chief ExecutiveOfficer and Interim Chief Financial Officer, and his position as director onour Board of Directors. In addition, the Executive resigned from the variousofficer and director positions he held in certain of our affiliate companies,including our wholly-owned subsidiaries, Authoriszor Holdings Corporation,Authoriszor U.S. Corporation and Authoriszor Holdings Limited.  In connection with such resignation, weentered into a Severance and Release Agreement, dated January 31, 2001 (the “SeveranceAgreement”), with the Executive.

 

In accordance withthe terms of the Severance Agreement, we paid the Executive the following sumsof money: (i) $19,791, minus applicable withholdings for federal and stateincome tax, FICA, and any other withholdings required by federal, state orlocal law, which payment reflects salary and bonus earned through January 31,2001; (ii) $450,000, minus applicable withholdings for federal and state incometax, FICA, and any other withholdings required by federal, state or local law,which payments reflect a severance payment equal to two years of salary; (iii) $31,250,minus applicable withholdings for federal and state income tax, FICA, and anyother withholdings required by federal, state or local law, for purposes of theExecutive’s October to December bonus for the year 2000;

 

18

----

 

and (iv) $23,958,minus applicable withholdings for federal and state income tax, FICA, and anyother withholdings required by federal, state or local law, reflecting paymentfor the Executive’s accrued but unused vacation time during the year 2000.

 

On January 31,2002, we released from escrow funds to pay the Executive the sum of $250,000,minus applicable withholdings for federal and state income tax, FICA, and anyother withholdings required by federal, state or local law, as an additionalseverance payment equal to the Executive’s bonus compensation for a two yearperiod. All interest earned on the funds held in the escrow account wasretained by us.

 

In addition, weand the Executive entered into a Stock Option Agreement, dated as of January31, 2001 (the “Stock Option Agreement”). The Severance Agreement provides that all stock option agreements forwhich the Executive is not vested as of the date of January 31, 2001 arerescinded and declared null and void and replaced by the Stock OptionAgreement.  The Stock Option Agreementprovides the Executive with an option to purchase 200,000 shares of our commonstock exercisable in increments of (i) 100,000 shares exercisable beginning onJanuary 31, 2001, and (ii) 100,000 shares exercisable beginning on January 31,2002, all at an exercise price of $6.75 per share.  Neither the Severance Agreement nor the StockOption Agreement affects the Executives, rights to options granted under priorstock option agreements and which were vested as of the date of the SeveranceAgreement.

 

The Executiveelected to reinstate and continue in accordance with the terms of our medicalplan and the Consolidated Omnibus Budget Reconciliation Act of 1985, asamended, (“COBRA”), and we have agreed to pay on behalf of the Executive, theapplicable premium which is required to reinstate and continue such groupmedical coverage, but only to the extent such coverage was in effect on thedate immediately prior to the Executive’s resignation date. This was paid untilthe first anniversary of the Executive’s resignation date.  This was paid until the first anniversary ofthe Executive’s resignation date.

 

In considerationof the payment of the above described sums of money and the issuance of theoptions to purchase shares of our common stock, the Executive agreed to releaseand waive any and all claims against us and our subsidiaries, including anyclaim under state or federal law which provides for civil remedies for theenforcement or rights arising out of the employment relationship, any claimsfor unpaid or withheld wages, and any claims sounding in contract, tort orotherwise; provided, however, that the Executive remains subject to certainprovisions in his prior Employment Agreement relating to non-competition, non-disclosureand non-solicitation provisions.

 

The SeveranceAgreement also provided that the Executive was required to return all ourproprietary material, including notes, records, reports and such other itemsobtained by him during the course of his employment.  In addition, the Executive was required toreturn the vehicle provided to him by us. We permitted the utilization by the Executive, at the Executive’s ownexpense, of a certain third-party executive recruiting firm.

 

OnOctober 7, 2000, we entered into an Employment Agreement with Paul Ayrespursuant to which Mr. Ayres became the Managing Director of AuthoriszorLimited.  The term of this agreement wasone year, expiring October 6, 2002.  TheEmployment Agreement was terminable immediately for cause by us, terminablevoluntarily by Mr. Ayres upon 45 days written notice, and after the one yearterm of employment has lapsed, both we and Mr. Ayres were required to give sixmonths notice of termination.  Mr. Ayerswas entitled to compensation in the following amount (assuming a currencyconversion ration of £1.50 British Pounds per $1.00 United States):

 

•                  abase salary of $277,500;

•                  amaximum annual bonus of $210,000, payable monthly, provided that certainrevenue targets were achieved; provided, however, that $26,250 shall be payableas a minimum guaranteed bonus for the first three months of employment;

•                  inaddition, up to an additional $45,000 was payable in the event that otheragreed upon targets were achieved;

•                  stockoptions to purchase a cumulative total of 200,000 shares our common stock at anexercise price of $9.75 per share, subject to certain adjustments as providedin the stock option agreement to be executed, that vest 25% per year for aperiod of four years.

 

The options terminate on October 6, 2010.  In the event we are sold during the term ofthe agreement, all salary payments and bonus payments under the agreementbecame immediately due and payable.

 

19

----

 

Subsequently, in connection with the resignation ofthe Executive, our Board of Directors announced that it had appointed PaulAyres, the Managing Director of Authoriszor Limited, to the positions ofPresident and Chief Executive Officer and appointed Andrew Cussons, the FinanceDirector of Authoriszor Limited, our Chief Financial Officer to replace theExecutive, effective as of January 31, 2001. In addition, effective January 29, 2001, our Board of Directors appointedMr. Ayres and Mr. Cussons to our Board of Directors.

 

In connection with theforegoing, the Compensation Committee of the Board of Directors agreed to amendand restate that certain Employment Agreement, dated as of October 7, 2000, byand between Mr. Ayres and us, effective February 9, 2001.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement should include the following terms:

 

•                  a base salary of $440,000; and

•                  stock options topurchase a cumulative total of 200,000 shares of our common stock at anexercise price of $1.50 per share under our 2000 Omnibus Stock Option andIncentive Plan (the “2000 Plan”), subject to certain adjustments as provided inthe stock option agreement to be negotiated and executed in connection withsuch grant.

 

The Compensation Committee of the Board of Directorsagreed to amend and restate that certain Employment Agreement dated February 9,2001 by and between Mr. Ayres and us, effective March 1, 2002.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement be amended to including the followingterms:

 

•               A base salary of$293,334;

 

As part of a restructuring plan approved by our Boardof Directors, Paul Ayres has resigned as our President and Chief ExecutiveOfficer, and from other various executive and director positions that he hadheld with us and our subsidiaries. Mr. Ayres has entered into a Compromise Agreementwith us.  Also, Mr. Ayres will continueto be retained as a non-executive director on a no fee basis for a limitedtime. Pursuant to the terms of the Compromise Agreement, we have paid Mr. Ayres£15,000 on execution of the agreement and an additional payment of £5,000 wasmade in June 2002. We also issued to Mr. Ayres 40,142 shares of our Series ACumulative Redeemable Preferred Stock (“Preferred Stock”). The provision of acompany car and healthcare benefits will continue in force for Mr. Ayres untilDecember 31, 2002. Additionally, 400,000 stock options previously granted toMr. Ayres were vested immediately on execution of the agreement.

 

In addition, the Compensation Committee of the Boardof Directors agreed to amend and restate that certain Employment Agreement byand between Mr. Cussons and us, effective February 9, 2001.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement should include the following terms:

 

•               a base salaryof  $293,334;

•               stock options topurchase a cumulative total of 200,000 shares of our common stock at anexercise price of $1.50 per share under the 2000 Plan, subject to certainadjustments as provided in the stock option agreement to be negotiated andexecuted in connection with such grant.

 

The Compensation Committee of the Board of Directorsagreed to amend and restate that certain Employment Agreement, dated February9, 2001 by and between Mr. Cussons and us, effective March 1, 2002.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement be amended to include the following terms.

 

•               a base salaryof  $150,000

 

In additionas part of these restructuring plans, our Chief Financial Officer andSecretary, Andrew Cussons, resigned from the various executive officer anddirector positions that he had held with us and our subsidiaries. Mr. Cussonshas entered into a Compromise Agreement with us. Pursuant to the terms of theCompromise Agreement, we have paid Mr. Cussons £10,000 on the execution of theagreement and have made additional payments of £9,500 in June 2002 and £10,000in July 2002. We also issued to Mr. Cussons 61,952 shares of our PreferredStock. The

 

20

----

 

provision of healthcarebenefits will continue in force for Mr. Cussons until December 31, 2002.Additionally, 300,000 stock options previously granted to Mr. Cussons vestedimmediately on execution of the agreement.

 

Weentered into a Consultancy Agreement, dated as of May 23, 2002, with a companyowned by Mr. Ayres and Mr. Cussons that has agreed to provide certainconsulting services to us for six (6) months following the effective date ofthe Consultancy Agreement. We agreed to pay the consulting company paymentsaggregating £50,500. The sum of £10,000 was paid in June 2002 and the balanceof £40,500 was paid in July 2002. In addition it was agreed that a furtherpayment would be made to the consulting company exclusively dependent on, andreceipt by us of, anticipated funds in relating to a tax credit we wereseeking. Application was made to the UK Inland Revenue in the amount of$261,385 with respect to the tax credit (the “First Tax Credit”) and the sum of£80,000 was to be paid to the consulting company on receipt by the company ofthe First Tax Credit. The proceeds of the tax credit were received in July 2002and to date £41,150 has been paid to the consulting company.  A further 50% of the amount of a second taxcredit (the “Second Tax Credit”) received by the company will be paid to theconsulting company. It is anticipated that the calculation of and applicationfor the Second Tax Credit will be made by the Company in November 2002. Thereceipt by the Company of funds with respect to the Second Tax Credit issubject to the Inland Revenue approving the amount of the applicable tax creditclaimed by the Company. The Inland Revenue subsequently approved the Second TaxCredit and the consulting company invoiced the Company £26,133.50 in December2002 and it was paid in October 2003 as a result of receiving the funds fromthe Inland Revenue. In addition, the consulting company is entitled to receivea further payment of £20,000 if the Company (or any subsidiary) receivesfunding in the sum of £250,000 or more from a specified private UK investmentcompany as a result of the consulting company’s services.

 

The Compensation Committee of the Board of Directorsagreed to amend and restate the Employment Agreement by and between Mr. Karys,our Vice President of Engineering and us, effective February 9, 2001.  Subject to the negotiation and execution ofdefinitive documentation with respect to such agreement, the CompensationCommittee determined that the agreement should include the following terms:

 

•                  a base salary of $250,000;

•                  stock options topurchase a cumulative total of 100,000 shares of our common stock at anexercise price of $1.50 per share under the 2000 Plan, subject to certainadjustments as provided in the stock option agreement to be negotiated andexecuted in connection with such grant.

 

Effective July 1, 2002, Mr. Karys resigned and weagreed to pay Mr. Karys his salary and car allowance in accordance with hisemployment agreement.  Other matters weresettled in connection with the Pledge and Settlement Agreements described inPart I, Item 1 of this report.

 

Effective November 30,2001, David R. Wray, a member of our Board and Chief Technical Officer ofAuthoriszor Limited resigned.  Inaddition, effective November 30, 2001, David J. Blanchfield, Research andDevelopment Director of Authoriszor Limited resigned his position with us.  In connection with the resignations ofMessrs. Wray and Blanchfield, we have entered into Compromise Agreements witheach of said officers.  Pursuant to theterms of the Compromise Agreements, we are not obligated to pay anyconsideration to ether Mr. Wray or Blanchfield. Accordingly, we have accrued no expenses related to the resignations ofMessrs. Wray and Blanchfield.  Inaddition, effective October 31, 2001, we have discontinued all payments thatwere otherwise due to members of our Board in exchange for their service to ourBoard, with the exception that all stock option agreements previously enteredinto by and between us and certain members of our Board remain in full forceand effect.

 

**ITEM 11****.  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

Our only outstandingclass of equity securities is our common stock and our Series A PreferredRedeemable Stock.  The following tablesets forth certain information with respect to what we believe is thebeneficial ownership as of June 30, 2002, by

 

•               eachperson known by us to beneficially own more than 5% of the outstanding sharesof common stock;

•               ourdirectors; and

•               allof our directors and executive officers as a group.

 

21

----

 
| **Person or Group(1)**                           | ** ** | **Shares  of  Common Stock  Beneficially  Owned (1A)** | ** ** | **Percentage  of  Shares of Common  Stock Beneficially  Owned (1A)** | ** ** | **Shares  of Series A  Preferred Stock  Beneficially  Owned (1B)** | ** ** | **Percentage  of Shares  of Series A Preferred  stock Beneficially  Owned (1B)** | ** ** | **Total  Shares  Beneficially  Owned (1A, 1B)** | ** ** | **Percentage  of Total  Shares Beneficially  Owned (1A, 1B)** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **Directors****:**                               |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
|                                             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Paul  Ayres(2)+                                  |       | 300,000                                                |       | 1.4                                                                  | %          | 40,142                                                             |       | 8.2                                                                              | %          | 340,142                                         |       | 1.6                                                           | %          |
| Don  Box (3)++                                   |       | 120,500                                                |       |                                                                 | *          |                                                               |       |                                                                             |       | 120,500                                         |       |                                                          | *          |
| Garcia  Hanson +                                 |       | 1,527,637                                              |       | 7.4                                                                  | %          | 194,897                                                            |       | 39.6                                                                             | %          | 1,722,534                                       |       | 8.1                                                           | %          |
|                                             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| **Directors and Executive Officers as a Group:** |       | 1,948,137                                              |       | 9.2                                                                  | %          | 235,039                                                            |       | 47.8                                                                             | %          | 2,183,176                                       |       | 10.3                                                          | %          |
| (3  persons)  (4)                           |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
|                                             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| **Beneficial Owners of 5% or More:**             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
|                                             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Roy  Williams  (4)                          |       | 2,154,842                                              |       | 10.4                                                                 | %          |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Birkett  House, 27 Albermarle Street             |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| London  WIX 4LQ, England                         |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Brian  Edmondson                                 |       | 1,527,637                                              |       | 7.4                                                                  | %          | 194,897                                                            |       | 39.6                                                                             | %          | 1,722,534                                       |       | 8.1                                                           | %          |
| 1st  Floor, Ebor Court                           |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Westgate,  Leeds L514ND, England                 |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| James  Leonard Jackson (5)                       |       | 1,280,108                                              |       | 6.2                                                                  | %          |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| 2  Parklands, Studley Roger                      |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Ripon,  North Yorkshire, GH4 3AY,                |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| England                                          |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| David  John Blanchfield (5)                      |       | 1,275,037                                              |       | 6.1                                                                  | %          |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Sunwood  Farm Cocun Lane,                        |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Clayton,  Bradford                               |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| West  Yorkshire, BD14 GPY, England               |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| David  Robert Wray(5)                            |       | 1,260,429                                              |       | 6.1                                                                  | %          |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Dove  House, Shimden Hall Rd.,                   |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |
| Halifax,  HX3 9XA, England                       |       |                                                   |       |                                                                 |       |                                                               |       |                                                                             |       |                                            |       |                                                          |       |

 

22

----

 

----

| +      |   | The address for this  executive officer is 1st Floor Ebor Court, Westgate, Leeds LS1  4ND, England.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ++     |   | The address for this  director is 8201 Preston Road, Suite 600, Dallas, Texas 75225-6211.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *      |   | Less than one percent  (1%)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (1)    |   | Based upon 20,768,511  shares of common stock outstanding as of June 30, 2002 and a total of 491,888  shares of Preferred Stock on that date as well , and in each case calculated  in accordance with Rule 13d-3 promulgated under the Securities Exchange Act  of 1934, as amended (the “Exchange Act”). Unless otherwise indicated,  includes shares owned by a spouse, minor children or by relatives sharing the  same home, entities owned or controlled by the named person. Also includes  shares if the named person has the right to acquire such shares within 60  days of June 30, 2002 by the exercise of any right or option. Unless  otherwise noted, shares are owned of record and beneficially by the named  person.                                       |
| (2)    |   | Mr. Ayres was granted an  option to purchase 200,000 shares of common stock at an exercise price of  $9.75 per share which vests up to 25% per year annually beginning on October  7, 2001. In addition, effective February 9, 2001, Mr. Ayres was granted a  further option to acquire 200,000 shares of common stock at an exercise price  of $1.50. This further option is immediately exercisable for a 10 year  term.                                                                                                                                                                                                                                                                                                                                                        |
| (3)    |   | Mr. Box was granted a  stock option to acquire 100,000 shares of our common stock at an exercise  price of $7.75 per share on November 10, 2000. The stock option is  immediately exercisable for a three (3) year term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (4)    |   | Includes 655,334 shares  of the Company’s common stock held by Zalcany Limited, a company organized  under the laws of the UK of which Roy Williams owns 50% of the issued and  share capital and is one of two directors; 290,000 shares of our common stock  held by Mustardseed Estates Ltd., a company organized under the laws of the  UK of which Roy Williams retains 99.9% voting control; and 67,500 shares of  our common stock held by the Cardinal Williams Pension Fund of which Roy  Williams is one of two trustees and the sole beneficiary. Includes 484,008  shares held by an Isle of Man trust in which Roy Williams is included in  a class of potential beneficiaries. Mr. Williams disclaims beneficial  ownership of the shares owned by this trust. |
| (5)    |   | Includes shares of our  common stock issued to these individuals pursuant to the acquisition of ITIS  Technologies Ltd., now named Authoriszor Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

23

----

 

**Securities Authorized forIssuance Under Equity Compensation Plans**

 

As of June 30, 2002, ourequity compensation plan information was as follows:

 

**EquityCompensation Plan Information**

** **
| **Plan  Category**                                          | ** ** | **Number of securities to  be issued upon exercise  of outstanding options,  warrants and rights** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in  column (a))** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**                                                                                            | ** ** | **(b)**                                                                            | ** ** | **(c)**                                                                                                                                               | ** ** |
| Equity  compensation plans approved by security holders     |       | 1,924,716                                                                                          |       | 4.41                                                                               |       | 775,284                                                                                                                                               |       |
| Equity  compensation plans not approved by security holders |       | 404,036                                                                                            |       | 6.14                                                                               |       | 0                                                                                                                                                     |       |
| Total                                                       |       | 2,328,752                                                                                          |       | 4.71                                                                               |       | 775,284                                                                                                                                               |       |

 

**ITEM 12.****  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

 

On May8, 2001, we entered into certain agreements (the “Acquisition Agreements”)pursuant to which the Company, directly or through Authoriszor HoldingsLimited, agreed to (i) initially increase its ownership interest from 25.1% (ona fully diluted basis) to 66.4% (on a fully diluted basis) of the outstandingcapital stock of WRDC, (referred to herein as the “First Step Transaction,”);and (ii) ultimately acquire the remaining shares of WRDC capital stock not thenalready owned by the Company or Authoriszor Holdings Limited upon theoccurrence of certain events (the “Second Step Transaction”).  The consideration payable in connection withthe First Step Transaction and the Second Step Transaction was determinedpursuant to arms-length negotiations among the parties thereto.  The source of the cash consideration withrespect to the First Step Transaction was our cash reserves.  Each of the dollar amounts contained hereinreflect the currency exchange rate in effect immediately prior to the executionof the Acquisition Agreements.

 

TheFirst Step Transaction was consummated, in part, at a closing (the “InitialClosing”) on May 8, 2001.  In connectionwith the Initial Closing, in exchange for certain shares of capital stock ofWRDC held by shareholders (the “Shareholders”) of WRDC, Garcia Hanson and BrianEdmondson, the Company (i) share (“Common Stock”), of the Company to theShareholders and (ii) paid to the Shareholders approximately $1,356,000 ((pound) 941,766) in cash.  The Company was alsoobligated to issue to the Shareholders up to 195,555 additional shares (the “ContingentShares”) of Common Stock, subject to the realization of certain accountsreceivables of WRDC.  As of the datehereof, the Company has not finalized its determination as to whether therequirements for the issuance of the Contingent Shares have beensatisfied.  Also, as part of the FirstStep Transaction the Company subscribed for an additional amount of capitalstock directly form WRDC for an aggregate subscription price of $720,000purposes.  One-half of this amount waspaid by the Company at the Initial Closing with the balance (the “SubscriptionBalance”) to be paid to WRDC no later than six (6) months after the InitialClosing.  The Subscription Balance hasnot been paid by the Company to WRDC at this time.

 

TheAcquisition Agreements obligated the Company to purchase the remaining sharesof WRDC capital stock not then already owned by the Company or AuthoriszorHoldings Limited upon the occurrence of certain events, but in no event laterthan January 1, 2002.  The considerationto be paid in connection with the Second Step Transaction was to consist of 55%in shares of Common Stock and 45% in cash; provided, however, that in no eventwas the Company required to issue more than 19.9% of the issued and outstandingshares of Common Stock as of the date (the”Measuring Date”) immediately priorto the Initial Closing.  If the exchangeratio set forth in the Acquisition Agreements would otherwise require theCompany to issue more shares (the “Excess Shares”) than 19.9% of the issued andoutstanding shares of Common Stock and/or currency fluctuations during theinterim between the Initial Closing and the Second Closing (as defined herein)or otherwise, the Company was required to

 

24

----

 

pay to the Shareholder anamount in cash (the “Cash Equivalent”) equivalent to the aggregate market valueof the Excess Shares.

 

TheCompany and the Shareholders have decided to close the Second Step Transactionat this time and to amend the Acquisition Agreements to provide thatShareholders shall receive a new class of preferred stock in lieu of the CashEquivalent.

 

Inconnection with the second closing of the WRCD acquisition on December 4, 2001we paid to Garcia Hanson, our Chief Executive Officer and Chief FinancialOfficer and Brian Edmondson $618,328 ((pound) 438, 546) in cash and agreed toissue to Garcia Hanson and Brian Edmondson 1,062,680 shares of Common Stock and194,897 shares of Series A Cumulative Redeemable Preferred Stock, par value$0.01 per share (“Series A Preferred”), respectively.  The powers, preferences and rights of theSeries A Preferred are set forth in our Certificate of designations,Preferences and Relative Rights, Qualifications, Limitations and Restrictions.(“Certificate of Designations”).

 

TheCertificate of Designations requires us to pay cumulative dividends to theholders of the Series A Preferred a rate of ten percent (10%) per annum of theoriginal purchase price of $2.00 per share (“Original Purchase Price”) of theSeries A Preferred annually on December 31 of each year commencing December 31,2002.  In addition, upon any liquidation,dissolution or winding up of the Company, the holders of the Series A Preferredshall be entitled to receive, in preference to the holders of Common Stock, aper share amount equal to the Original Purchase Price plus any accrued butunpaid dividends.

 

Further,the holders of at least fifty-one percent (51%) of the then outstanding sharesof Series A Preferred may elect to require us to redeem their shares of SeriesA Preferred upon (i) the occurrence of certain Redemption Dates (as defined inthe Certificate of Designations), (ii) the closing of a secondary fundraisingby the Company in which the Company raises at last $5 million, or (iii) theconsolidation, merger or reorganization of the Company with or into any othercorporation, where the holders of Common Stock determined on a fully dilutedbasis immediately before such merger, consolidation or reorganization hold lessthan fifty percent (50%) of the Common Stock of the Company or the capitalstock of the surviving entity as so determined immediately after suchtransaction.  Upon such redemption, theholders of the Series A Preferred shall be entitled to receive an amount incash equal to the Original Purchase Price plus any accrued but unpaid dividendsthen owed.

 

For solong as any of the shares of Series A Preferred issued by us remainoutstanding, the holders of a majority of the then outstanding Series APreferred are entitled to nominate and elect one (1) director to our Board ofDirectors.  Except for the right to elect(1) director to the Board, the holders of the Series A Preferred shall not havethe right to vote their stock as shareholders unless we violate any materialpowers, preference or rights of the Series A Preferred.   As of the date hereof, the holders of theSeries A Preferred have not nominated a director to the Board.

 

Inconnection with the Initial Closing, the Board appointed Garcia Hanson, one ofthe Shareholders, as Chief Operating Officer of the Company and the Board ofDirectors of Authoriszor Holdings Limited appointed Mr. Hanson as theOperations Director of Authoriszor Limited, a wholly owned subsidiary ofAuthoriszor Holdings Limited.  Mr. Hansoncontinued in his capacity as Managing Director of WRDC.

 

Theforegoing summary is not intended to be complete and is subject to, and isqualified in its entirety by reference to, all of the provisions of theexhibits to the Form 8-K/A, filed January 30, 2002.

 

The followingsummarizes certain material agreements between us and our executive officers,directors and existing stockholders with a beneficial interest in excess of 5%of our outstanding common stock. It is not a complete description of suchagreements and, therefore, this discussion is qualified in its entirety byreference to the agreements, copies of which will be made available forinspection upon written request and have been filed by us with the Securitiesand Exchange Commission. It is our intention that in the future, anytransactions with our directors, officers, employees or affiliates will beminimal and will be approved in advance by a majority of the disinterestedmembers of our Board.

 

On May 8, 2001, wepurchased an additional equity interest in WRDC Limited, a company incorporatedin the United Kingdom, increasing our ownership interest from 27.2% (25.1% on afully diluted basis) to 66.4%.  We issuedto certain shareholders of WRDC 929,914 shares of our common stock, one half ofwhich was issued to

 

25

----

 

Garcia Hanson, who is anofficer, director and greater than 5% stockholder and paid cash ofapproximately $996,000 to such shareholders of WRDC, one half of which was paidto Mr. Hanson.  We also committed toissue an additional 195,555 shares of our common stock equally to each of Mr.Hanson and other shareholders of WRDC, subject to the realization of certain ofWRDC’s accounts receivable.  Also on thisdate we subscribed for additional WRDC shares from WRDC for a purchase price ofapproximately $720,000 and granted options to WRDC employees to purchase237,000 shares of our common stock.  Wealso on this date committed to acquire the remaining 33.6% ownership interestin WRDC not already owned by us upon the occurrence of certain events, but inno event later than January 1, 2002. The purchase price payable to such othershareholders for the remaining interest is approximately $3,100,000, of whichMr. Hanson received one-half.  We arerequired to pay approximately $1,564,000 in cash, of which $1,260,000 is in anescrow account, and we are required to pay the remaining portion by issuing sharesof our common stock to such shareholders of WRDC.  However, in the event that the exchange ratioset forth in the acquisition documents would require us to issue more than19.9% of the issued and outstanding shares of our common stock, as of May 7,2001, we will instead be required to pay to such shareholders of WRDC an amountin cash equal to the aggregate market value of such excess shares.  Moreover, when we acquire the remainder ofshares of outstanding capital stock of WRDC, we may be obligated to make suchpayment entirely in cash if:

 

•                  wedeclare, or otherwise seek, or are forced to seek, protection from creditorsunder the federal bankruptcy laws; or

•                  ifon the date that we are otherwise required to purchase the remainingoutstanding shares of capital stock of WRDC, we are not listed on NASDAQ or theOTC Bulletin Board, or otherwise quoted on a public market in North America orEurope.

 

Subsequently and as ofDecember 4, 2001 the Company purchased the remaining 33.6% ownership interestin WRDC by paying each shareholder $618,328.15 in cash, 1,062,680 in shares ofcommon stock, and 194,897 shares of Series A Cumulative Redeemable PreferredStock.

 

In connection with thetransaction whereby we increased our ownership interest in WRDC, our Board appointedGarcia Hanson as our Chief Operating Officer. In addition, Mr. Hanson has joined the Board of Directors of AuthoriszorHoldings Limited and Authoriszor Limited, and has been appointed as theOperations Director of Authoriszor Limited. Mr. Hanson will also continue in his capacity as Managing Director ofWRDC.  For further information concerningthe terms and conditions upon which we acquired WRDC, please see our AnnualReport on Form 10-KSB that was filed with the Securities and ExchangeCommission on October 19, 2001.

 

Inconnection with the transaction whereby we increased our ownership interest inWRDC, our Board of Directors appointed Garcia Hanson as our Chief OperatingOfficer.  In addition, Mr. Hanson hasjoined the Board of Directors of Authoriszor Holdings Limited and AuthoriszorLimited, and has been appointed as the Operations Director of AuthoriszorLimited.  Mr. Hanson will also continuein his capacity as Managing Director of WRDC. For further information concerning the terms and conditions upon whichwe acquired WRDC, please see our Annual Report on Form 10-KSB that was filed onOctober 19, 2001.

 

On July 18, 2002,(we entered into an investment agreement (the “Investment Agreement”), dated asof July 18th July, 2002, with Authoriszor Holdings Limited (“AHL”),Roy Williams (“Williams”), a beneficial owner of more than 5% of theoutstanding shares of Common Stock, Garcia Hanson (“Hanson”), our President, adirector, and beneficial owner of more than 5% of the outstanding shares ofCommon Stock, Zalcany Limited (“Zalcany”) and Noblepoint Limited (“Noblepoint,”and collectively with Williams, Hanson and Zalcany, the “Investors”), pursuantto which, the Investors purchased Preferred Ordinary Shares of AuthoriszorHoldings Limited (the “AHL Preferred Shares”), a subsidiary of the Company, foran aggregate purchase price of £574,994.94 ($902,684.56).   As a result, the Company’s equity interestin Authoriszor Holdings Limited, which is in the form of ordinary shares ofAuthoriszor Holdings Limited (the “AHL Ordinary Shares”), has decreased from100% to 35%.

 

Followingthis transaction and a restructuring of the ownership of shares of itssubsidiaries, Authoriszor Holdings Limited owns all of the capital stock ofWRDC Limited, Authoriszor Limited, Logsys Limited and, indirectly through WRDCLimited, over 75% of the stock of PAD (London) Limited and WRDC AG.  Also, Authoriszor Holdings Limited’s name waschanged to WRDC Logsys Limited.  TheInvestment Agreement restricts Authoriszor Holdings Limited from makingpayments to the Company without the consent of the Investors however,approximately £300,000 ($470,970.00) of the investment proceeds were paid toCompany by Authoriszor Holdings Limited in payment of certain inter-companyindebtedness.  In connection with thistransaction, the Company

 

26

----

 

redeemed 117,742.5 sharesof the Company’s Series A Cumulative Redeemable Preferred Stock owned by Hansonfor the aggregate redemption price set forth in the Series A Preferred Stockdesignations of £150,000 ($235,845.00). Also, since we no longer control Authoriszor Holdings Limited, effectiveJuly 18, 2002, we will not be able to consolidate the financial statements ofAuthoriszor Holdings Limited and its subsidiaries.

 

Hansonutilized a significant portion of the proceeds from the redemption inconnection with the purchase of his Authoriszor Holdings Limited PreferredShares.  The Investment Agreement alsoprohibits Authoriszor Holdings Limited from issuing shares of its stock withoutthe consent of the Investors, except that Authoriszor Holdings Limited mayissue a certain number additional shares (the “Additional Shares”) at apurchase price not less than the price paid by the Investors.  If all the Additional Shares are issued, theCompany’s equity interest in Authoriszor Holdings Limited would be reduced to32.4%.  The Investment Agreement providesthat the board of directors of Authoriszor Holdings Limited shall consist ofnot less than four persons, including two persons nominated by theInvestors.  The current members of theboard of directors of Authoriszor Holdings Limited following the completion ofthe transaction are Hanson, Godfrey Stephen Shingles and Ian McNeill.  We do not have the right to nominate adirector.

 

Thepowers, preferences and rights of the Authoriszor Holdings Limited OrdinaryShares and Authoriszor Holdings Limited Preferred Shares are set forth in theArticles of Association of Authoriszor Holdings Limited (“AHL Articles”), whichis incorporated by reference as an exhibit to this Form 10-KSB.  The Authoriszor Holdings Limited Articlescontain a right of first refusal provision that grants to any shareholder ofAuthoriszor Holdings Limited, which currently consists of the Company and theInvestors (collectively, the “AHL Shareholders”), the first right to purchasethe shares of Authoriszor Holdings Limited that another Authoriszor HoldingsLimited Shareholder desires to sell to a third-party.  The price of such purchase will be determinedby either a mutual agreement between the directors of Authoriszor HoldingsLimited and the transferring Authoriszor Holdings Limited Shareholder or by anindependent accountant.

 

Pleasealso see the section “Employment Contracts, Termination of Employment andChange-in-Control Agreements” under Part III Item 10, Executive Compensation ofthis Report for a description of additional transactions and agreements withour officers, directors and greater than 5% stockholders.

 

**ITEM 13.****EXHIBITS AND REPORTS ON FORM 8-K**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                  |
|----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                             |
| 2.1                  |       | Agreement and Plan of  Merger, dated July 29, 1996, and among Toucan Gold Corporation and  Starlight Acquisitions, Inc. (incorporated by reference from the Current  Report on Form 8-K dated July 29, 1996, Exhibit 2.1).   |
| 2.2                  |       | Share Exchange  Agreement, dated May 10, 1996, by and among Starlight Acquisitions, Inc.  and Toucan Mining Limited (incorporated by reference from the Current Report  on Form 8-K dated May 13, 1996, Exhibit 2).          |
| 2.3(4)               |       | Share Sale Agreement  regarding ITIS Technologies Ltd., dated July 22, 1999, by and among  David J. Blanchfield, James L. Jackson, David R. Wray, Barry  Jones, Ian McNeill and Toucan Gold Corporation. (Exhibit 10.1) |
| 2.4(12)              |       | Stock Purchase  Agreement, dated as of May 8, 2001, by and among Authoriszor Inc.,  Authoriszor Holdings Limited and the Shareholders named therein (Exhibit  2.1).                                                                              |
| 2.5(12)              |       | Subscription Agreement,  dated as of May 8, 2001, by and among Authoriszor Inc., Authoriszor Holdings  Limited, WRDC Limited and the Shareholders named therein (Exhibit 2.2).                                                                   |
| 2.6(12)              |       | Articles of Association  of WRDC Limited, dated as of May 8, 2001 (Exhibit 2.3).                                                                                                                                                                 |
| 2.7(12)              |       | Deed of Mortgage, dated  as of May 8, 2001, by and between Authoriszor Inc., Garcia Hanson and Brian  Edmondson (Exhibit 2.4)                                                                                                                    |
| 2.8(14)              |       | Stock Purchase  Agreement, dated as of July 3, 2001, by and among Authoriszor Holdings  Limited, Logsys Holdings Limited and Stewart Leslie Ashton (Exhibit 2.1)                                                                                 |
| 2.9(15)              |       | Deed of Agreement,  dated as of December 4, 2001, by and among Authoriszor Inc., Authoriszor  Holdings Limited, WRDC Limited, Garcia Hanson and Brian Edmondson (Exhibit  2.5)                                                                   |
| 2.10(15)             |       | Side Letter to the Deed  of Agreement, dated as of December 4, 2001, by and among Authoriszor Inc.,  Authoriszor Holdings Limited, Garcia Hanson and Brian Edmondson (Exhibit 2.6)                                                               |
| 3.1                  |       | Certificate of  Incorporation of Toucan Gold Corporation filed on July 22, 1996 with the  Secretary                                                                                                                                         |

 

27

----

 
|      |   | of State of the State  of Delaware (incorporated by reference from the Current Report on Form 8-K  dated July 29, 1996, Exhibit 4.1).                                                                                                             |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2       |   | Amendment to our  Certificate of Incorporation filed on August 25, 1999, with the  Secretary of State of Delaware (incorporated by reference to our Quarterly  Report on Form 10-QSB for the quarter ended September 30, 1999,  Exhibit 3.1) |
| 3.3(13)   |   | Bylaws of Authoriszor  Inc., as amended March 21, 2001 (Exhibit 3.1).                                                                                                                                                                                       |
| 3.4(15)   |   | Certificate of  Designation, Preferences and Related Rights, Qualifications, Limitations and  Restrictions of Series A Cumulative Redeemable Preferred Stock of Authoriszor  Inc. (Exhibit 4.1)                                                                  |
| 4.1(3)    |   | Option Agreement, dated  September 27, 1997, by and between L. Clark Arnold and Toucan Gold  Corporation (incorporated by reference to Exhibit 10.2 to our Annual  Report on Form 10-KSB for the period ended December 31, 1997)        |
| 4.2(3)    |   | Amendment Number One to  Stock Option Agreement, dated as of April 27, 1999, by and between  L. Clark Arnold and Toucan Gold Corporation (Exhibit 4.2)                                                                                            |
| 4.3(3)    |   | Amended and Restated  Stock Option Agreement, dated as of April 1, 1999, by and between  Robert P. Jeffcock and Toucan Gold Corporation (Exhibit 4.4)                                                                                             |
| 4.4(3)    |   | Option Agreement, dated  February 2, 1998, by and between Robert A. Pearce and Toucan Gold  Corporation (incorporated by reference to Exhibit 10.4 to our Annual  Report on Form 10-KSB for the period ended December 31, 1997)         |
| 4.5(3)    |   | Amendment Number One to  Stock Option Agreement, dated as of April 27, 1999, by and between  Robert A. Pearce and Toucan Gold Corporation (Exhibit 4.6)                                                                                           |
| 4.6(3)    |   | Amended and Restated  Stock Option Agreement, dated as of April 1, 1999, by and between David  Carmichael and Toucan Gold Corporation (Exhibit 4.8)                                                                                                    |
| 10.1(1)   |   | Warrant Agreement,  dated July 29, 1996, by and between Toucan Gold Corporation and R. Haydn  Silleck (Exhibit 10.1).                                                                                                                                  |
| 10.2(1)   |   | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and John B.  Marvin (Exhibit 10.2).                                                                                                                                |
| 10.3(1)   |   | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and Peter S.  Daley (Exhibit 10.3).                                                                                                                                |
| 10.4(1)   |   | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and Jay Lutsky  (Exhibit 10.4).                                                                                                                                         |
| 10.5(2)   |   | Agreement for the sale  and purchase of the whole of the issued share capital of Anagram Limited,  dated December 3, 1998, among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Minmet Plc (Exhibit 10.1).                                  |
| 10.6(2)   |   | Supplemental Agreement  dated December 3, 1998 among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Minmet Plc (Exhibit 10.2).                                                                                                              |
| 10.7(2)   |   | Option Agreement Regarding  Mineradora De Bauxita Ltda, dated December 3, 1998, among Toucan Mining  Limited, Toucan Gold Corporation, Inc. and Anagram Limited  (Exhibit 10.3).                                                                       |
| 10.8(2)   |   | Agreement for the  purchase of the whole of the issued share capital of Mineradora de Bauxita Ltda,  dated December 3, 1998 among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Anagram Limited (Exhibit 10.4).                            |
| 10.9(2)   |   | Form of Minmet Plc  Warrant Instrument (Exhibit 10.5).                                                                                                                                                                                                 |
| 10.10(4)  |   | Deed of Indemnity,  dated July 22, 1999, by and among David J. Blanchfield,  James L. Jackson, David R. Wray, Barry Jones, Ian McNeill and  Toucan Gold Corporation. (Exhibit 10.2)                                                |
| 10.11(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between David J. Blanchfield and ITIS  Technologies Ltd. (Exhibit 10.3)                                                                                                                       |
| 10.12(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between James L. Jackson and ITIS  Technologies Ltd. (Exhibit 10.4)                                                                                                                           |
| 10.13(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between David R. Wray and ITIS  Technologies Ltd. (Exhibit 10.5)                                                                                                                              |
| 10.14(4)  |   | Engagement Letter,  dated July 22, 1999, by and between CCM Ventures Ltd. and ITIS  Technologies Ltd. (Exhibit 10.7)                                                                                                                                   |
| 10.15(4)  |   | Engagement Letter dated  July 22, 1999, by and between Robert Jeffcock and Toucan Gold  Corporation. (Exhibit 10.8)                                                                                                                                    |
| +10.16    |   | Consulting Agreement,  dated September 23, 1999 by and between Sir Malcolm Rifkind and  Authoriszor Limited (incorporated by reference to our Quarterly Report on  Form 10-QSB for the quarter ended September 30, 1999,  Exhibit 10.9)      |
| +10.17(5) |   | Executive Employment  Agreement, dated as of January 1, 2000, by and between Authoriszor Inc.  and Richard A. Langevin. (Exhibit 10.1)                                                                                                       |

 

28

----

 
| +10.18(5)  |   | Authoriszor Inc. 1999  Stock Plan. (Exhibit 10.2)                                                                                                                                                                             |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.19(7)  |   | Form of  Agreement under the 1999 Stock Plan and Schedule of Agreements                                                                                                                                                       |
| +10.20(5)  |   | Agreement, dated  November 12, 1999, by and between Authoriszor Inc. and  Raymond G. H. Seitz (Exhibit 10.4)                                                                                                   |
| +10.21(5)  |   | Consulting Agreement,  dated September 23, 1999, by and between Authoriszor Inc. and Sir  Malcolm Rifkind (Exhibit 10.5)                                                                                                 |
| +10.22(5)  |   | Stock Option Agreement,  dated as of September 23, 1999, by and between Authoriszor Inc. and Sir  Malcolm Rifkind. (Exhibit 10.6)                                                                                        |
| 10.23(5)   |   | Placing Agreement,  dated as of January 28, 2000, by and among Authoriszor Inc., Beeson  Gregory Limited and certain Directors of Authoriszor Inc. (Exhibit 10.7)                                                        |
| 10.24(5)   |   | Supplemental Placing  Agreement, dated as of February 9, 2000, by and among Authoriszor Inc.,  Beeson Gregory Limited and certain Directors of Authoriszor Inc.  (Exhibit 10.8)                                          |
| 10.25(5)   |   | Registration Rights  Agreement, dated February 16, 2000, by and between Authoriszor Inc. and  Beeson Gregory Limited. (Exhibit 10.9)                                                                                     |
| 10.26(5)   |   | Lock-up Agreement,  dated January 2000, by and among Authoriszor Inc., Beeson Gregory Limited and  Raymond Seitz and others. (Exhibit 10.10)                                                                                  |
| 10.27(5)   |   | Deed of Covenant, dated  as of February 22, 2000, by and among Authoriszor Holdings Limited, WRDC  Limited and certain persons named in Schedule 1 to the Deed.  (Exhibit 10.11)                                         |
| 10.28(5)   |   | Shareholders’  Agreement, dated as of January 27, 2000, by and among Authoriszor  Holdings Limited, WRDC Limited, the shareholders of WRDC Limited and  Authoriszor Inc., relating to WRDC Limited. (Exhibit 10.12) |
| 10.29(5)   |   | Letter Agreement, dated  February 22, 2000, by and between Authoriszor Holdings Limited and WRDC  Limited regarding credit facility. (Exhibit 10.13)                                                                     |
| 10.30(5)   |   | Letter Agreement, dated  February 22, 2000, by and between Authoriszor Holdings Limited and WRDC  Limited regarding credit facility. (Exhibit 10.14)                                                                     |
| 10.31(6)   |   | Share Sale Agreement,  dated as of January 28, 2000, by and between Authoriszor Inc. and Golden  Ridge Group Limited. (Exhibit 2.1)                                                                                      |
| +10.32(7)  |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.33).                                                                                                 |
| +10.33(7)  |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.34).                                                                                                 |
| +10.34(7)  |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.35)                                                                                                  |
| +10.35(7)  |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.36).                                                                                                 |
| +10.36(7)  |   | Stock Option Agreement,  dated as of November 1, 1999, between Authoriszor Inc. and Raymond Seitz  (Exhibit 10.37).                                                                                                           |
| 10.37(7)   |   | Lease Agreement, dated  as of April 28, 2000, between Authoriszor Inc. and Massachusetts Mutual  Life Insurance Company (Exhibit 10.38).                                                                                      |
| 10.38(7)   |   | Consulting Agreement,  dated as of April 2000, between Authoriszor Inc. and Fred Sawin (Exhibit  10.39).                                                                                                                           |
| 10.39(7)   |   | Employment Agreement,  dated as of March 15, 2000, between Authoriszor Inc. and Ed Vasko  (Exhibit 10.40).                                                                                                                    |
| 10.40(8)   |   | Consulting  Agreement, dated July 1, 2000, between Authoriszor Inc. and Commercial  Technology Ltd (Exhibit 10.40).                                                                                                                |
| 10.41(8)   |   | Reimbursement  Agreement, dated September 28, 2000 and effective as of October 1, 1999,  between Authoriszor Inc. and Authoriszor Limited (Exhibit 10.41).                                                                         |
| +10.42(9)  |   | Letter  Agreement, dated as of September 30, 2000, and executed as of October 31,  2000, by and between Authoriszor Inc. and Godfrey S. Shingles (Exhibit 10.1).                                                                   |
| +10.43(9)  |   | Letter of  Employment, dated October 16, 2000, by and between Authoriszor Inc. and Alec  P. Karys (Exhibit 10.2).                                                                                                                  |
| +10.44(9)  |   | Letter of  Employment, dated October 4, 2000, by and between Authoriszor Inc. and Paul  Ayres (Exhibit 10.3).                                                                                                                      |
| 10.45(9)   |   | Consulting  Agreement, dated July 21, 2000, by and between Authoriszor Inc. and Edward F.  Rogers (Exhibit 10.4).                                                                                                                  |
| +10.46(10) |   | Authoriszor Inc.  2000 Omnibus Stock and Incentive Plan.                                                                                                                                                                           |
| +10.47(7)  |   | Letter of  Employment, dated May 1, 2000, by and between Authoriszor Inc. and Fred Sawin  (Exhibit 10.39)                                                                                                                          |

 

29

----

 
| +10.48(11)   |   | Severance and  Release Agreement, dated as of January 29, 2001, by and between Authoriszor  Inc. and Richard A. Langevin.                                                                                                                                    |
|--------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.49(11)   |   | Stock Option  Agreement, dated as of January 31, 2000, by and between Authoriszor Inc. and  Richard A. Langevin.                                                                                                                                             |
| +10.50(12)   |   | Service  Agreement, dated as of May 8, 2001, by and among Authoriszor Inc. and Garcia  Hanson. Form of Stock Option Agreement, dated as of May 8, 2001, by and  between the Authoriszor Inc. and each of the former holders of WRDC Options  (Exhibit 10.1). |
| +10.51(12)   |   | Form of Stock  Option Agreement, dated as of May 8, 2001, by and between the Authoriszor  Inc. and each of the former holders of WRDC Options (Exhibit 10.2).                                                                                                |
| 10.52†  |   |                                                                                                                                                                                                                                                         | Sublease  Agreement, effective as of July 1, 2001, by and between Authoriszor Inc. and  Directech, Inc. |
| +10.53† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of October 7, 2000, by and between Authoriszor Inc. and  Paul Ayres. |
| +10.54† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of October 16, 2000, by and between Authoriszor Inc. and  Alec Karys. |
| +10.55† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of November 10, 2000, by and between Authoriszor Inc. and  Don Box. |
| +10.56† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of October 18, 2000, by and between Authoriszor Inc. and  Geoff Shingles. |
| +10.57† |   |                                                                                                                                                                                                                                                         | Form of Stock  Option Agreement by and between Authoriszor Inc. and various employees with  respect to the Authoriszor Inc. 2000 Omnibus Stock and Incentive Plan. |
| +10.58† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Paul Ayres. |
| +10.59† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Andrew Cussons. |
| +10.60† |   |                                                                                                                                                                                                                                                         | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Alec Karys. |
| +10.61(16)   |   | Stock Option  Agreement, dated as of July 3, 2001, by and between Authoriszor Inc. and S.  Ashton (Exhibit 10.1)                                                                                                                                             |
| +10.62(17)   |   | Service  Agreement, dated as of September 27, 2001, by and between Authoriszor Inc.  and Paul Ayres (Exhibit 10.1)                                                                                                                                           |
| +10.63(17)   |   | Compromise  Agreement, dated as of March 29, 2002, by and between Authoriszor Inc. and  Paul Ayres (Exhibit 10.2)                                                                                                                                            |
| +10.64(17)   |   | Consultancy  Agreement, dated as of May 23, 2002, by and between Authoriszor Inc. and  Utilis Ventures Limited (Exhibit 10.3)                                                                                                                                |
| +10.65(17)   |   | Service  Agreement, dated as of September 27, 2001, by and between Authoriszor Inc.  and Andrew Cussons (Exhibit 10.4)                                                                                                                                       |
| +10.66(17)   |   | Compromise  Agreement, dated as of March 29, 2001, by and between Authoriszor Inc. and  Andrew Cussons (Exhibit 10.5)                                                                                                                                        |
| 10.67(17)    |   | License and  Distribution Agreement, by and between Authoriszor Inc. and Sanford  Technologies, Inc. dated as of March 25, 2002, and supplemental letter, dated  May 9, 2002 (Exhibit 10.6)                                                                  |
| 10.68(18)    |   | Investment  Agreement, dated as of July 18, 2002, by and among Authoriszor Inc.,  Authoriszor Holdings Limited, Roy Williams, Garcia Hanson, Zalcany Limited  and Noblepoint Limited (Exhibit 2.4)                                                           |
| 10.69(18)    |   | Articles of  Association of Authoriszor Holdings Limited (Exhibit 2.2)                                                                                                                                                                                       |
| 31.2         |   |                                                                                                                                                                                                                                                         | Certification  pursuant to Rules 13a – 14(a) and 15(d)-14(a) promulgated under the  Securities Exchange Act of 1934 |
| 32.1         |   |                                                                                                                                                                                                                                                         | Certification  pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 |
|              |        |                                                                                                                                                                                                                                                              |  |  |

 

----

| † |   | Filed herewith.                                                                                                                                                                                                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +      |   | Compensation plan,  benefit plan or employment contract or arrangement.                                                                                                                                                  |
| (1)    |   | Incorporated by  reference to the exhibit shown in parenthesis included in our Annual Report  on Form 10-KSB for the period ended December 31, 1996, filed by us  with the Securities and Exchange Commission. |

 

30

----

 
| (2)  |   | Incorporated by  reference to the exhibit shown in parenthesis included in our Current Report  on Form 8-K, filed January 5, 1999 by us with the Securities and  Exchange Commission.                                                |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  |   | Incorporated by  reference to the exhibit shown in parenthesis to our Registration Statement  on Form S-8 filed with the Securities and Exchange Commission on  January 10, 2000.                                                    |
| (4)  |   | Incorporated by  reference to the exhibit shown in parenthesis included in our Current Report  on Form 8-K, filed by us with the Securities and Exchange Commission on  August 6, 1999.                                              |
| (5)  |   | Incorporated by  reference to the exhibit shown in parenthesis from our Quarterly Report on  Form 10-QSB for the quarter ended December 31, 1999.                                                                                    |
| (6)  |   | Incorporated by  reference to the exhibit shown in parenthesis from our Current Report on  Form 8-K, filed by us on February 14, 2000 with the Securities and  Exchange Commission.                                                  |
| (7)  |   | Incorporated by  reference to the Exhibit shown in parenthesis from our Registration Statement  on Form S-1, filed by us on May 18, 2000 with the Securities and Exchange  Commission.                                                         |
| (8)  |   | Incorporated by  reference to the exhibit shown in parenthesis from our Annual Report on  Form 10-KSB, filed by us on September 29, 2000 with the Securities and  Exchange Commission.                                                    |
| (9)  |   | Incorporated by reference  to the exhibit shown in parenthesis from our Quarterly Report on Form 10-QSB,  filed by us on November 14, 2000 with the Securities and Exchange Commission.                                                   |
| (10) |   | Incorporated by  reference to Appendix A contained in our definitive Proxy Statement pertaining  to the 2000 Annual Meeting of Stockholders filed with the Securities and  Exchange Commission on October 10, 2000 pursuant to Regulation 14A. |
| (11) |   | Incorporated by  reference to the exhibit shown in parenthesis from our Current Report on Form  8-K filed by us with the Securities and Exchange Commission on January 30,  2001.                                                              |
| (12) |   | Incorporated by  reference to the exhibit shown in parenthesis from our Current Report on Form  8-K filed by us with the Securities and Exchange Commission on May 9, 2001.                                                                    |
| (13) |   | Incorporated by  reference to the exhibit shown in parenthesis from our Quarterly Report on  Form 10-QSB filed by us with the Securities and Exchange Commission on  February 14, 2001.                                                        |
| (14) |   | Incorporated by  reference to the exhibit shown in parenthesis from our Current Report on Form  8-K filed by us with the Securities and Exchange Commission on July 16, 2001.                                                                  |
| (15) |   | Incorporated  by reference to the exhibit shown in parenthesis from our Current Report on  Form 8-K filed by us with the Securities and Exchange Commission on January  30, 2002.                                                              |
| (16) |   | Incorporated  by reference to the exhibit shown in parenthesis from our Quarterly Report on  Form 10-QSB filed by us with the Securities and Exchange Commission in  November 14, 2001.                                                        |
| (17) |   | Incorporated  by reference to the exhibit shown in parenthesis from our Quarterly Report on  Form 10-QSB filed by us with the Securities and Exchange Commission on June  24, 2002.                                                            |
| (18) |   | Incorporated  by reference to the exhibit shown in parenthesis from our Current Report on  Form 8-K filed by us with the Securities and Exchange Commission on August 2,  2002.                                                                |

 

(d)           Reportson Form 8-K.

 

(1)           Wefiled a Current Report on Form 8-K with the Securities and Exchange Commissionon July 16, 2001, reporting the execution and consummation of the acquisitionby us of approximately 68% of the outstanding capital stock of Logsys.

 

(2)           Wefiled a Current Report on Form 8-K with the Securities and Exchange Commissionon August 2, 2002 reporting a restructuring of the ownership of shares of itssubsidiaries and following such restructuring the issuance by AuthoriszorHoldings Limited (“Authoriszor Holdings Limited”) of additional shares of itscapital stock as a result of which the Company’s ownership of AuthoriszorHoldings Limited decreased from 100% to approximately 35%.

 

31

----

 

**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, on November 29, 2004.

 
|   | **AUTHORISZOR INC.** |
|--------|----------------------|
|   |                 |
|   | By:                  | /s/ Garcia Hanson |   |
|   |                 | Garcia Hanson |
|   |                 | Chief Executive  Officer, President and  Chief Financial Officer |
|   |                 | (Principal Executive  Officer and  (Principal Financial Officer) |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated. Each person whose signature to this report appears below hereby appointsGarcia Hanson as his attorney-in-fact to sign on his behalf, individually andin each capacity stated below, and to file all amendments to this report, whichamendment or amendments may make such changes in and additions to the report asany such attorney-in-fact may deem necessary or appropriate.

 
| **Signature**    | ** ** | **Title**                                                                     | ** **                          | **Date**                                       |
|------------------|------------|-------------------------------------------------------------------------------|-------------------------------------|------------------------------------------------|
| ** **       | ** ** | ** **                                                                    | ** **                          | ** **                                     |
| ** **       | ** ** | ** **                                                                    | ** **                          | ** **                                     |
| /s/Paul Ayres    |       |                                                                          | Director                            |                                           | November 19,  2004 |
| Paul Ayres       |       |                                                                          |                                |                                           |
|             |       |                                                                          |                                |                                           |
|             |       |                                                                          |                                |                                           |   |
| Don D. Box       |       | Director                                                                      |                                | November      ,  2004 |
|             |       |                                                                          |                                |                                           |
|             |       |                                                                          |                                |                                           |
|             |       | Chief Executive  Officer, President                                           |                                |                                           |
| /s/Garcia Hanson |       |                                                                          | Chief Financial  Officer, Secretary |                                           | November 26,  2004 |
| Garcia Hanson    |       | and Director (Principal  Executive  Officer and Principal Financial  Officer) |                                |                                           |
|                  |            |                                                                               |                                     |                                                |  |  |

 

32

----

 

# **INDEX TO EXHIBITS**

** **

The following documentsare filed as a part of this report. Those exhibits previously filed and incorporated herein by reference areidentified below.  Exhibits not requiredfor this report have been omitted.

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                  |
|----------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                             |
| 2.1                  |       | Agreement and Plan of  Merger, dated July 29, 1996, and among Toucan Gold Corporation and  Starlight Acquisitions, Inc. (incorporated by reference from the Current  Report on Form 8-K dated July 29, 1996, Exhibit 2.1).                   |
| 2.2                  |       | Share Exchange  Agreement, dated May 10, 1996, by and among Starlight Acquisitions, Inc.  and Toucan Mining Limited (incorporated by reference from the Current Report  on Form 8-K dated May 13, 1996, Exhibit 2).                          |
| 2.3(4)               |       | Share Sale Agreement  regarding ITIS Technologies Ltd., dated July 22, 1999, by and among  David J. Blanchfield, James L. Jackson, David R. Wray, Barry  Jones, Ian McNeill and Toucan Gold Corporation. (Exhibit 10.1)                 |
| 2.4(12)              |       | Stock Purchase  Agreement, dated as of May 8, 2001, by and among Authoriszor Inc.,  Authoriszor Holdings Limited and the Shareholders named therein (Exhibit  2.1).                                                                                              |
| 2.5(12)              |       | Subscription Agreement,  dated as of May 8, 2001, by and among Authoriszor Inc., Authoriszor Holdings  Limited, WRDC Limited and the Shareholders named therein (Exhibit 2.2).                                                                                   |
| 2.6(12)              |       | Articles of Association  of WRDC Limited, dated as of May 8, 2001 (Exhibit 2.3).                                                                                                                                                                                 |
| 2.7(12)              |       | Deed of Mortgage, dated  as of May 8, 2001, by and between Authoriszor Inc., Garcia Hanson and Brian  Edmondson (Exhibit 2.4)                                                                                                                                    |
| 2.8(14)              |       | Stock Purchase  Agreement, dated as of July 3, 2001, by and among Authoriszor Holdings  Limited, Logsys Holdings Limited and Stewart Leslie Ashton (Exhibit 2.1)                                                                                                 |
| 3.1                  |       | Certificate of  Incorporation of Toucan Gold Corporation filed on July 22, 1996 with the  Secretary of State of the State of Delaware (incorporated by reference from  the Current Report on Form 8-K dated July 29, 1996,  Exhibit 4.1).    |
| 3.2                  |       | Amendment to our  Certificate of Incorporation filed on August 25, 1999, with the  Secretary of State of Delaware (incorporated by reference to our Quarterly  Report on Form 10-QSB for the quarter ended September 30, 1999,  Exhibit 3.1) |
| 3.3(13)              |       | Bylaws of Authoriszor  Inc., as amended March 21, 2001 (Exhibit 3.1).                                                                                                                                                                                       |
| 4.1(3)               |       | Option Agreement, dated  September 27, 1997, by and between L. Clark Arnold and Toucan Gold  Corporation (incorporated by reference to Exhibit 10.2 to our Annual  Report on Form 10-KSB for the period ended December 31, 1997)        |
| 4.2(3)               |       | Amendment Number One to  Stock Option Agreement, dated as of April 27, 1999, by and between  L. Clark Arnold and Toucan Gold Corporation (Exhibit 4.2)                                                                                            |
| 4.3(3)               |       | Amended and Restated  Stock Option Agreement, dated as of April 1, 1999, by and between  Robert P. Jeffcock and Toucan Gold Corporation (Exhibit 4.4)                                                                                             |
| 4.4(3)               |       | Option Agreement, dated  February 2, 1998, by and between Robert A. Pearce and Toucan Gold  Corporation (incorporated by reference to Exhibit 10.4 to our Annual  Report on Form 10-KSB for the period ended December 31, 1997)         |
| 4.5(3)               |       | Amendment Number One to  Stock Option Agreement, dated as of April 27, 1999, by and between Robert A.  Pearce and Toucan Gold Corporation (Exhibit 4.6)                                                                                           |
| 4.6(3)               |       | Amended and Restated  Stock Option Agreement, dated as of April 1, 1999, by and between David  Carmichael and Toucan Gold Corporation (Exhibit 4.8)                                                                                                    |
| 10.1(1)              |       | Warrant Agreement,  dated July 29, 1996, by and between Toucan Gold Corporation and R. Haydn  Silleck (Exhibit 10.1).                                                                                                                                  |
| 10.2(1)              |       | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and John B.  Marvin (Exhibit 10.2).                                                                                                                                |
| 10.3(1)              |       | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and Peter S.  Daley (Exhibit 10.3).                                                                                                                                |
| 10.4(1)              |       | Warrant Agreement dated  July 29, 1996, by and between Toucan Gold Corporation and Jay Lutsky  (Exhibit 10.4).                                                                                                                                         |
| 10.5(2)              |       | Agreement for the sale  and purchase of the whole of the issued share capital of Anagram Limited,  dated December 3, 1998, among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Minmet Plc (Exhibit 10.1).                                  |

 

33

----

 
| 10.6(2)   |   | Supplemental Agreement,  dated December 3, 1998 among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Minmet Plc (Exhibit 10.2).                                                                                                        |
|-----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7(2)   |   | Option Agreement  Regarding Mineradora De Bauxita Ltda, dated December 3, 1998, among  Toucan Mining Limited, Toucan Gold Corporation, Inc. and Anagram Limited  (Exhibit 10.3).                                                                  |
| 10.8(2)   |   | Agreement for the  purchase of the whole of the issued share capital of Mineradora de Bauxita  Ltda, dated December 3, 1998 among Toucan Mining Limited, Toucan Gold  Corporation, Inc. and Anagram Limited (Exhibit 10.4).                       |
| 10.9(2)   |   | Form of Minmet Plc  Warrant Instrument (Exhibit 10.5).                                                                                                                                                                                            |
| 10.10(4)  |   | Deed of Indemnity,  dated July 22, 1999, by and among David J. Blanchfield,  James L. Jackson, David R. Wray, Barry Jones, Ian McNeill  and Toucan Gold Corporation. (Exhibit 10.2)                                      |
| 10.11(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between David J. Blanchfield and ITIS  Technologies Ltd. (Exhibit 10.3)                                                                                                                  |
| 10.12(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between James L. Jackson and ITIS  Technologies Ltd. (Exhibit 10.4)                                                                                                                      |
| 10.13(4)  |   | Letter of Appointment,  dated July 22, 1999, by and between David R. Wray and ITIS  Technologies Ltd. (Exhibit 10.5)                                                                                                                         |
| 10.14(4)  |   | Engagement Letter,  dated July 22, 1999, by and between CCM Ventures Ltd. and It is  Technologies Ltd. (Exhibit 10.7)                                                                                                                             |
| 10.15(4)  |   | Engagement Letter,  dated July 22, 1999, by and between Robert Jeffcock and Toucan Gold  Corporation. (Exhibit 10.8)                                                                                                                              |
| +10.16    |   | Consulting Agreement,  dated September 23, 1999 by and between Sir Malcolm Rifkind and  Authoriszor Limited (incorporated by reference to our Quarterly Report on  Form 10-QSB for the quarter ended September 30, 1999,  Exhibit 10.9) |
| +10.17(5) |   | Executive Employment  Agreement, dated as of January 1, 2000, by and between Authoriszor Inc.  and Richard A. Langevin. (Exhibit 10.1)                                                                                                  |
| +10.18(5) |   | Authoriszor Inc. 1999  Stock Plan. (Exhibit 10.2)                                                                                                                                                                                                      |
| +10.19(7) |   | Form of  Agreement under the 1999 Stock Plan and Schedule of Agreements                                                                                                                                                                                |
| +10.20(5) |   | Agreement, dated  November 12, 1999, by and between Authoriszor Inc. and  Raymond G. H. Seitz (Exhibit 10.4)                                                                                                                            |
| +10.21(5) |   | Consulting Agreement,  dated September 23, 1999, by and between Authoriszor Inc. and Sir  Malcolm Rifkind (Exhibit 10.5)                                                                                                                          |
| +10.22(5) |   | Stock Option Agreement,  dated as of September 23, 1999, by and between Authoriszor Inc. and Sir  Malcolm Rifkind. (Exhibit 10.6)                                                                                                                 |
| 10.23(5)  |   | Placing Agreement,  dated as of January 28, 2000, by and among Authoriszor Inc., Beeson  Gregory Limited and certain Directors of Authoriszor Inc. (Exhibit 10.7)                                                                                 |
| 10.24(5)  |   | Supplemental Placing  Agreement, dated as of February 9, 2000, by and among Authoriszor Inc.,  Beeson Gregory Limited and certain Directors of Authoriszor Inc.  (Exhibit 10.8)                                                                   |
| 10.25(5)  |   | Registration Rights  Agreement, dated February 16, 2000, by and between Authoriszor Inc. and  Beeson Gregory Limited. (Exhibit 10.9)                                                                                                              |
| 10.26(5)  |   | Lock-up Agreement,  dated January 2000, by and among Authoriszor Inc., Beeson Gregory Limited and  Raymond Seitz and others. (Exhibit 10.10)                                                                                                           |
| 10.27(5)  |   | Deed of Covenant, dated  as of February 22, 2000, by and among Authoriszor Holdings Limited, WRDC  Limited and certain persons named in Schedule 1 to the Deed.  (Exhibit 10.11)                                                                  |
| 10.28(5)  |   | Shareholders’  Agreement, dated as of January 27, 2000, by and among Authoriszor  Holdings Limited, WRDC Limited, the shareholders of WRDC Limited and  Authoriszor Inc., relating to WRDC Limited. (Exhibit 10.12)                          |
| 10.29(5)  |   | Letter Agreement, dated  February 22, 2000, by and between Authoriszor Holdings Limited and WRDC  Limited regarding credit facility. (Exhibit 10.13)                                                                                              |
| 10.30(5)  |   | Letter Agreement, dated  February 22, 2000, by and between Authoriszor Holdings Limited and WRDC  Limited regarding credit facility. (Exhibit 10.14)                                                                                              |
| 10.31(6)  |   | Share Sale Agreement,  dated as of January 28, 2000, by and between Authoriszor Inc. and Golden  Ridge Group Limited. (Exhibit 2.1)                                                                                                               |
| +10.32(7) |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.33).                                                                                                                          |
| +10.33(7) |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.34).                                                                                                                          |
| +10.34(7) |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.35)                                                                                                                           |

 

34

----

 
| +10.35(7)    |   | Stock Option Agreement,  dated as of January 1, 2000, between Authoriszor Inc. and  Richard A. Langevin (Exhibit 10.36).                                                                                                                           |
|--------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.36(7)    |   | Stock Option Agreement,  dated as of November 1, 1999, between Authoriszor Inc. and Raymond Seitz  (Exhibit 10.37).                                                                                                                                     |
| 10.37(7)     |   | Lease Agreement, dated  as of April 28, 2000, between Authoriszor Inc. and Massachusetts Mutual  Life Insurance Company (Exhibit 10.38).                                                                                                                |
| 10.38(7)     |   | Consulting Agreement,  dated as of April 2000, between Authoriszor Inc. and Fred Sawin (Exhibit  10.39).                                                                                                                                                     |
| 10.39(7)     |   | Employment Agreement,  dated as of March 15, 2000, between Authoriszor Inc. and Ed Vasko  (Exhibit 10.40).                                                                                                                                              |
| 10.40(8)     |   | Consulting  Agreement, dated July 1, 2000, between Authoriszor Inc. and Commercial  Technology Ltd (Exhibit 10.40).                                                                                                                                          |
| 10.41(8)     |   | Reimbursement  Agreement, dated September 28, 2000 and effective as of October 1, 1999,  between Authoriszor Inc. and Authoriszor Limited (Exhibit 10.41).                                                                                                   |
| +10.42(9)    |   | Letter  Agreement, dated as of September 30, 2000, and executed as of October 31,  2000, by and between Authoriszor Inc. and Godfrey S. Shingles (Exhibit 10.1).                                                                                             |
| +10.43(9)    |   | Letter of  Employment, dated October 16, 2000, by and between Authoriszor Inc. and Alec  P. Karys (Exhibit 10.2).                                                                                                                                            |
| +10.44(9)    |   | Letter of  Employment, dated October 4, 2000, by and between Authoriszor Inc. and Paul  Ayres (Exhibit 10.3).                                                                                                                                                |
| 10.45(9)     |   | Consulting  Agreement, dated July 21, 2000, by and between Authoriszor Inc. and Edward F.  Rogers (Exhibit 10.4).                                                                                                                                            |
| +10.46(10)   |   | Authoriszor Inc.  2000 Omnibus Stock and Incentive Plan.                                                                                                                                                                                                     |
| +10.47(7)    |   | Letter of  Employment, dated May 1, 2000, by and between Authoriszor Inc. and Fred Sawin  (Exhibit 10.39)                                                                                                                                                    |
| +10.48(11)   |   | Severance and  Release Agreement, dated as of January 29, 2001, by and between Authoriszor  Inc. and Richard A. Langevin.                                                                                                                                    |
| +10.49(11)   |   | Stock Option  Agreement, dated as of January 31, 2000, by and between Authoriszor Inc. and  Richard A. Langevin.                                                                                                                                   |
| +10.50(12)   |   | Service  Agreement, dated as of May 8, 2001, by and among Authoriszor Inc. and Garcia  Hanson. Form of Stock Option Agreement, dated as of May 8, 2001, by and  between the Authoriszor Inc. and each of the former holders of WRDC Options  (Exhibit 10.1). |
| +10.51(12)   |   | Form of Stock  Option Agreement, dated as of May 8, 2001, by and between the Authoriszor  Inc. and each of the former holders of WRDC Options (Exhibit 10.2).                                                                                                |
| 10.52†  |   | Sublease  Agreement, effective as of July 1, 2001, by and between Authoriszor Inc. and  Directech, Inc.                                                                                                                                                      |
| +10.53† |   | Stock Option  Agreement, dated as of October 7, 2000, by and between Authoriszor Inc. and  Paul Ayres.                                                                                                                                                       |
| +10.54† |   | Stock Option  Agreement, dated as of October 16, 2000, by and between Authoriszor Inc. and  Alec Karys.                                                                                                                                                      |
| +10.55† |   | Stock Option  Agreement, dated as of November 10, 2000, by and between Authoriszor Inc. and  Don Box.                                                                                                                                                        |
| +10.56† |   | Stock Option  Agreement, dated as of October 18, 2000, by and between Authoriszor Inc. and  Geoff Shingles.                                                                                                                                                  |
| +10.57† |   | Form of Stock  Option Agreement by and between Authoriszor Inc. and various employees with  respect to the Authoriszor Inc. 2000 Omnibus Stock and Incentive Plan.                                                                                           |
| +10.58† |   | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Paul Ayres.                                                                                                                                                      |
| +10.59† |   | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Andrew Cussons.                                                                                                                                                  |
| +10.60† |   | Stock Option  Agreement, dated as of February 9, 2001, by and between Authoriszor Inc. and  Alec Karys.                                                                                                                                                      |
| +10.61(16)   |   | Stock Option  Agreement, dated as of July 3, 2001, by and between Authoriszor Inc. and S.  Ashton (Exhibit 10.1)                                                                                                                                             |
| +10.62(17)   |   | Service  Agreement, dated as of September 27, 2001, by and between Authoriszor Inc.  and Paul Ayres (Exhibit 10.)                                                                                                                                            |
| +10.63(17)   |   | Compromise  Agreement, dated as of March 29, 2002, by and between Authoriszor Inc. and  Paul Ayres (Exhibit 10.2)                                                                                                                                            |

 

35

----

 
| +10.64(17)       |   | Consultancy  Agreement, dated as of May 23, 2002, by and between Authoriszor Inc. and  Utilis Ventures Limited (Exhibit 10.3)                                                                           |
|------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| +10.65(17)       |   | Service  Agreement, dated as of September 27, 2001, by and between Authoriszor Inc.  and Andrew Cussons (Exhibit 10.4)                                                                                  |
| +10.66(17)       |   | Compromise  Agreement, dated as of March 29, 2001, by and between Authoriszor Inc. and  Andrew Cussons (Exhibit 10.5)                                                                                   |
| 10.67(17)        |   | License and  Distribution Agreement, by and between Authoriszor Inc. and Sanford  Technologies, Inc. dated as of March 25, 2002, and supplental letter, dated  May 9, 2002 (Exhibit 10.6)               |
| 10.68(18)        |   | Investment  Agreement, dated as of July 18, 2002, by and among Authoriszor Inc.,  Authoriszor Holdings Limited, Roy Williams, Garcia Hanson, Zalcany  Limited and Nobelpoint Limited (Exhibit 2.4) |
| 10.69(18) † |   | Articles of  Association of Authoriszor Holdings Limited (Exhibit 2.2)                                                                                                                                  |
|             |   |                                                                                                                                                                                                    |
| 31.2             |   | Certification  pursuant to Rules 13a – 14(a) and 15(d)-14(a) promulgated under the  Securities Exchange Act of 1934                                                                                |
| 32.1             |   | Certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                                                                                  |

 

----

†                                          Filedherewith.

+                                         Compensationplan, benefit plan or employment contract or arrangement.

(1)                                  Incorporatedby reference to the exhibit shown in parenthesis included in our Annual Reporton Form 10-KSB for the period ended December 31, 1996, filed by uswith the Securities and Exchange Commission.

(2)                                  Incorporatedby reference to the exhibit shown in parenthesis included in our Current Reporton Form 8-K, filed January 5, 1999 by us with the Securities andExchange Commission.

(3)                                  Incorporatedby reference to the exhibit shown in parenthesis to our Registration Statementon Form S-8 filed with the Securities and Exchange Commission onJanuary 10, 2000.

(4)                                  Incorporatedby reference to the exhibit shown in parenthesis included in our Current Reporton Form 8-K, filed by us with the Securities and Exchange Commission onAugust 6, 1999.

(5)                                  Incorporatedby reference to the exhibit shown in parenthesis from our Quarterly Report onForm 10-QSB for the quarter ended December 31, 1999.

(6)                                  Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K, filed by us on February 14, 2000 with the Securities andExchange Commission.

(7)                                  Incorporatedby reference to the Exhibit shown in parenthesis from our RegistrationStatement on Form S-1, filed by us on May 18, 2000 with the Securities andExchange Commission.

(8)                                  Incorporatedby reference to the exhibit shown in parenthesis from our Annual Report onForm 10-KSB, filed by us on September 29, 2000 with the Securities andExchange Commission.

(9)                                  Incorporatedby reference to the exhibit shown in parenthesis from our Quarterly Report onForm 10-QSB, filed by us on November 14, 2000 with the Securities andExchange Commission.

(10)                            Incorporatedby reference to Appendix A contained in our definitive Proxy Statementpertaining to the 2000 Annual Meeting of Stockholders filed with the Securitiesand Exchange Commission on October 10, 2000 pursuant to Regulation 14A.

(11)                            Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K filed by us with the Securities and Exchange Commission on January 30,2001.

(12)                            Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K filed by us with the Securities and Exchange Commission on May 9,2001.

(13)                            Incorporatedby reference to the exhibit shown in parenthesis from our Quarterly Report onForm 10-QSB filed by us with the Securities and Exchange Commission on February14, 2001.

(14)                            Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K filed by us with the Securities and Exchange Commission on July 16,2001.

(15)                            Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K filed by us with the Securities and Exchange Commission on January 30,2002.

(16)                            Incorporatedby reference to the exhibit shown in parenthesis from our Quarterly Report onForm 10-QSB filed by us with the Securities and Exchange Commission in November14, 2001.

(17)                            Incorporatedby reference to the exhibit shown in parenthesis from our Quarterly Report onForm 10-QSB filed by us with the Securities and Exchange Commission on June 24,2002.

 

36

----

 

(18)                            Incorporatedby reference to the exhibit shown in parenthesis from our Current Report onForm 8-K filed by us with the Securities and Exchange Commission on August 2,2002.

 

37

----