Family Values, Raser Tech Style (RZ)

Raser Tech. (RZ), a company that purports to be developing and licensing electric motor, controller and related technologies, should be a familiar name to regular readers of the 10Q Detective blog. Management continues to tout its “breakthrough” electromagnetic technology, yet for the year ending December 31, 2005, the Company only managed to book $331,375 in sales—the result of an existing Cooperative Research and Development Agreement [CRADA] between Raser and the US Army.

Since its inception three years ago, Raser has accumulated a deficit of approximately $16.98 million.

As of December 31, 2005, Raser had 26 full-time employees, including 15 in engineering and 4 in sales and marketing and 7 in its executive and administrative department. Management considers its employee relationships to be positive. One might say that Raser provides an “enriching” work environment:

Del Higginson, the brother of the Company’s Chairman of the Board of Directors, Kraig Higginson, was an employee of the company. Del Higginson served as a mechanical technician and had an annual salary of $43,200. In connection with his employment, the company granted Del Higginson an option to purchase 10,000 shares of the company’s common stock at an exercise price of $3.65 per share (which reflected the fair market value per share of our common stock at the time of the grant). Del Higginson resigned from the company in 2005, but prior to leaving, he exercised 3,333 options. The remaining 6,667 options were unvested at the time of his resignation and returned to the company.

Kort Sandberg, the brother-in-law of Ned Warner, a beneficial holder of 12.4% of the outstanding shares of common stock of the company, was an employee of the company. Kort Sandberg served as an electrical engineer and had an annual salary of $60,000. In connection with his employment, the eompany granted Kort Sandberg an option to purchase 100,000 shares of the company’s common stock at an exercise price of $3.65 per share. Kort Sandberg had vested in 55,556 options at the time of his resignation in 2005. The vesting schedule for an additional 25,000 shares was accelerated in settlement of an ownership and employment dispute. All 80,556 vested options were exercised in 2005, and the remaining 19,444 options that were unvested at the time of his resignation were returned to the company.

Kevin Kerlin, the son of Jack Kerlin, a beneficial holder of 10.85% of the outstanding shares of common stock of the company, is currently an employee of the company. Kevin Kerlin serves as a mechanical engineer and has an annual salary of $48,000. In addition, in connection with his employment, the company granted Kevin Kerlin an option to purchase 50,000 shares of the company’s common stock at an exercise price of $3.65 per share.

Like we said, Raser provides an enriching work environment—especially for those with familial connections.

RZ 1-yr chart: