SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
|_| Preliminary Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
|X| Definitive Information Statement
REGENT GROUP, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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2) Aggregate number of securities to which transaction applies: N/A
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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DEFINITIVE COPY
REGENT GROUP, INC.
One Anderson Hill Road, Suite 103
Bernardsville, NJ 07924
NOTICE OF ACTION BY WRITTEN CONSENT
To the Stockholders of Regent Group, Inc.:
Notice is hereby given that certain stockholders ("collectively, the
"Majority Stockholders") who, together, own a majority of the issued and
outstanding voting stock of Regent Group, Inc., a Delaware corporation (the
"Company"), have approved and adopted, by written consent in lieu of a meeting
of stockholders, the following actions ("Corporate Actions"):
o amendment of the Company's Certificate of Incorporation to:
o change the name of the Company to "Millennium Biotechnologies
Group, Inc.";
o increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 75,000,000 and reduce the par
value of the Company's Common Stock from $0.06-2/3 per share
to $0.001 per share;
o reverse split the outstanding shares of the Company's Common
Stock on a one-for-12 basis, so that every 12 issued and
outstanding shares of Common Stock, before the split, shall
represent one share of Common Stock after the split with all
fractional shares rounded up to the next whole share;
o add provisions related to limiting directors' liability; and
o remove the following provisions of the Certificate of
Incorporation which, in the judgment of the Board of
Directors, are not material and no longer relevant:
|X| all enumerated purposes in Article III other than the
general purposes clause;
|X| all references to the Series A Preferred Stock; there
being no shares of Series A Preferred Stock issued or
outstanding;
|X| all remaining references to Class B Capital Stock; the
Class B Capital Stock previously having been removed by
amendment to the Certificate of Incorporation; and
|X| the provision that states that dividends on common stock
may only be paid in common stock;
o add the following provisions to the Certificate of
Incorporation which restate provisions of the Delaware General
Corporation Law:
|X| the provisions that permit indemnification of directors,
officers, employees and agents; and
|X| a provision to the effect that contracts or transactions
between the Company and one or more of its directors or
officers shall not be void or voidable solely because of
his or her interest in the transaction, or solely
because he or she is present at or participates in the
meeting of the Board of Directors, provided stated
standards of disclosure are made regarding the interest
of the director or officer; and
o restate the Certificate of Incorporation to reflect all of the
foregoing changes in one document and update the language to
make it consistent with all amendments; and
o adoption of the 2001 Employee Stock Option Plan.
The Board of Directors of the Company has approved the Corporate Actions.
The record date for the determination of Stockholders of the Company entitled to
receive this Notice of Action by Written Consent and the accompanying
Information Statement and the determination of the number of shares of Voting
Stock necessary to approve the Corporate Actions has been fixed as of the close
of business on December 3, 2001.
By Order of the Board of Directors
Bruce L. Deichl, Secretary
Bernardsville, NJ
March 11, 2002
DEFINITIVE COPY
REGENT GROUP, INC.
One Anderson Hill Road
Suite 103
Bernardsville, NJ 07924950
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
Purpose of the Information Statement
This Information Statement is being furnished by the Board of Directors of
Regent Group, Inc. (the "Company" or "Regent") to provide Company Stockholders
with information concerning the merger of our newly formed subsidiary into
Millennium Biotechnologies, Inc. and to notify Company Stockholders of the
following corporate actions (the "Corporate Actions") approved by holders of a
majority of the Company's voting stock ("Majority Stockholders"):
o amendment of the Company's Certificate of Incorporation to:
o change the name of the Company to "Millennium Biotechnologies
Group, Inc.";
o increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 75,000,000 and decrease the
par value of the Company's Common Stock from $0.06-2/3 per
share to $0.001 per share;
o reverse split the outstanding shares of the Company's Common
Stock on a one-for-12 basis, so that every 12 issued and
outstanding shares of Common Stock, before the split, shall
represent one share of Common Stock after the split with all
fractional shares rounded up to the next whole share;
o add provisions related to limiting directors' liability; and
o remove the following provisions of the Certificate of
Incorporation which, in the judgment of the Board of
Directors, are not material and no longer relevant:
|X| all enumerated purposes in Article III other than the
general purposes clause;
|X| all references to the Series A Preferred Stock; there
being no shares of Series A Preferred Stock issued or
outstanding;
|X| all remaining references to Class B Capital Stock; the
Class B Capital Stock previously having been removed by
amendment to the Certificate of Incorporation; and
|X| the provision that states that dividends on common stock
may only be paid in common stock;
o add the following provisions to the Certificate of
Incorporation which restate provisions of the Delaware General
Corporation Law:
|X| the provisions that permit indemnification of directors,
officers, employees and agents; and
|X| a provision to the effect that contracts or transactions
between the Company and one or more of its directors or
officers shall not be void or voidable solely because of
his or her interest in the transaction, or solely
because he or she is present at or participates in the
meeting of the Board of Directors, provided stated
standards of disclosure are made regarding the interest
of the director or officer; and
o restate the Certificate of Incorporation to reflect all of the
foregoing changes in one document and update the language to
make it consistent with all amendments; and
o adoption of the Company's 2001 Employee Stock Option Plan.
The Company's Restated and Amended Certificate of Incorporation ("Revised
Charter") is set forth in Exhibit A and the 2001 Employee Stock Option Plan
("2001 ESOP") is set forth in Exhibit B to this Information Statement.
This Information Statement was first mailed to stockholders of the Company
on or about March 11, 2002.
Summary Term Sheet - Consummated Merger with Millennium Biotechnologies, Inc.
In July 2001, we consummated a merger of a newly formed Company subsidiary
into Millennium Biotechnologies, Inc. We discuss the merger in more detail below
under the section "Background - Merger and Change of Control." The merger was
approved by the stockholders of Millennium. It did not require the approval of
our stockholders. We are providing information on the merger because the
following actions discussed in this information statement were a direct result
of the merger:
o the name change;
o the increase in the number of authorized shares of common stock; and
o the reverse split of the outstanding shares of common stock.
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As a result of the merger:
o Millennium is our wholly-owned subsidiary;
o Millennium paid $145,000 of our debts;
o Millennium stockholders received .025 shares of our newly created Series D
Preferred Stock in exchange for each share of their Millennium common
stock;
o each share of D Preferred Stock is convertible into 641.215 shares of
Company Common Stock and entitles the holder of D Preferred Stock to
641.215 votes per share;
o a total of 237,049.7 shares of D Preferred Stock were issued to the
Millennium stockholders which, at that time, entitled the Millennium
stockholders to approximately 96.2% of the voting rights of our capital
stock;
o Millennium's executive management and directors became our executive
officers and directors; and
o our sole substantive business operations are those of Millennium.
Millennium is a research-based bio-nutraceutical company specializing in the
field of nutritional science. It launched its first product, RESURGEX(TM), in
September 2001. RESURGEX(TM) is a nutritional adjunct to the medical treatment
for certain chronic immuno-compromising debilitating diseases such as AIDS. For
more information on the business of Millennium, see General Information;
Business.
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TABLE OF CONTENTS
Page
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Approval of the Corporate Actions..............................................5
Background.....................................................................6
Amendment To The Certificate Of Incorporation Concerning
Name Change..................................................................7
Amendments To The Certificate Of Incorporation Concerning
Common Stock.................................................................8
Amendments To The Certificate Of Incorporation Concerning
Limitation Of Directors' Liability ..........................................9
Restatement Of And Non-Material Amendments To The
Certificate of Incorporation................................................10
Adoption of 2001 Employee Stock Option Plan...................................11
General Information ..........................................................14
Business....................................................................14
Legal Proceedings...........................................................21
Security Ownership Of Certain Beneficial Owners And
Management ...............................................................22
Market for Common Stock and Related Stockholder Matters.....................25
Executive Compensation .......................................................27
Management ...................................................................28
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations and Plan of Operations .........................29
Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.......................................32
Financial Statements .......................................................33
Unaudited Pro forma Financial Information...................................33
EXHIBIT A - Amended And Restated Certificate Of Incorporation
Of Regent Group, Inc.......................................................A-1
EXHIBIT B - Millennium Biotechnologies Group, Inc. 2001
Stock Option Plan..........................................................B-1
EXHIBIT C - Unaudited Financial Statements At And For
The Three Months Ended October 31, 2001....................................C-1
EXHIBIT D - Unaudited Financial Statements At And For
The Five Months Ended December 31, 2001....................................D-1
EXHIBIT E - Audited Financial Statements At And For
The Year Ended July 31, 2001...............................................E-1
EXHIBIT F - Unaudited Pro Forma Financial Information........................F-1
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Approval of the Corporate Actions
The Corporate Actions were approved by the Majority Stockholders by
written consent on December 3, 2001 in lieu of a meeting of Stockholders
pursuant to Section 228 of the Delaware General Corporation Law ("Delaware
GCL"). However, under federal law, these Corporate Actions may not be effected
until at least 20 days after this Information Statement has first been sent to
Company Stockholders.
Section 228 of the Delaware GCL permits stockholder action in lieu of a
meeting of stockholders if holders of a sufficient number of voting shares to
approve the actions consent to the actions in writing. Approval of the Revised
Charter requires the vote of stockholders who own a majority of the shares
represented by the Company's issued and outstanding shares of voting stock.
Approval of the 2001 ESOP requires the vote of stockholders who own a majority
of the shares represented by the Company's voting stock present at a meeting of
stockholders.
Only Stockholders of record of the Company's voting stock outstanding at
the close of business on December 3, 2001, the Record Date, are entitled to
receive this Information Statement and the Notice of Action by Written Consent.
As of the Record Date, the following shares of voting stock of the Company
were issued and outstanding:
Common Stock: 19,678,148 shares, each share entitled to one vote; 19,678,148
votes in the aggregate.
Series D
Preferred Stock: 268,150.87 shares, each share entitled to 641.215 votes;
171,942,360 votes in the aggregate.
As of the Record Date, The Majority Stockholders own an aggregate of
153,405 shares of Series D Preferred Stock that, in the aggregate, equal
98,365,587 of the votes represented by the Company's issued and outstanding
shares of voting stock, a sufficient amount to approve the Corporate Actions.
The holders of the Company's capital stock do not have dissenters' or
appraisal rights with regard to any of the Corporate Actions.
The mailing address of the principal executive office of the Company is
One Anderson Hill Road, Suite 103, Bernardsville, NJ 07924. The phone number of
the Company is (908) 630-8700
5
Background
Merger and Change of Control
On July 27, 2001, the Company, Millennium Biotechnologies, Inc.
("Millennium") and the Millennium stockholders entered into and consummated an
Agreement and Plan of Reorganization (the "Merger Agreement") whereby a new
wholly-owned Regent subsidiary merged into Millennium (the "Merger"). Since the
Merger, the Company's only material operations are conducted by Millennium. The
Merger was approved by Millennium stockholders. Approval of the Merger by
Company stockholders was not required and not obtained. You are not being asked
to approve the Merger.
As a result of the Merger:
o Millennium is Regent's wholly-owned subsidiary;
o Millennium paid $145,000 of Regent's debts;
o the Millennium stockholders received .025 shares of newly created Regent
Series D Preferred Stock ("D Preferred Stock") in exchange for each share
of their Millennium common stock;
o each share of D Preferred Stock is convertible into 641.215 shares of
Company Common Stock and entitles the holder of D Preferred Stock to
641.215 votes per share;
o a total of 237,049.7 shares of D Preferred Stock were issued to the
Millennium stockholders which, at that time, entitled the Millennium
stockholders to approximately 96.2% of the voting rights of Regent's
capital stock;
o all of Regent's officers and one of its directors resigned;
o Jerry Swon was appointed the Company's President, Chief Executive Officer
and a Director; and
o Bruce Deichl was appointed the Company's Chief Operating Officer,
Secretary and a Director.
On October 15, 2001, the Company's two remaining pre-Merger Directors
resigned and were replaced by Michael G. Martin and David Sargoy.
Prior to the merger, Regent had no active substantive business operations.
It consummated the merger to obtain business operations. Millennium consummated
the merger to become a public company. Millennium is a research-based
bio-nutraceutical company specializing in the field of nutritional science. It
launched its first product, RESURGEX(TM), in September 2001. RESURGEX(TM) is a
nutritional adjunct to the medical treatment for certain chronic
immuno-compromising debilitating diseases.
For more detailed information on Millennium's business, see General Information;
Business.
On April 24, 2001, the Company and Millennium entered into a letter of
intent pursuant to which Millennium stockholders would acquire approximately 95%
of the Company in exchange for 100% of their Millennium shares. Initially, the
Company offered Millennium stockholders 90% of the Company after consummation of
the merger. Following negotiations and taking into account the factors discussed
below, the parties settled on 95%. Between April 24, 2001 and July 27, 2001, the
parties conducted their due diligence, agreed upon an exchange rate of .025
shares of D Preferred Stock for each share of Millennium common stock and set
the D Preferred Stock conversion rate of 641.215 shares of Company Common Stock
for each share of D Preferred Stock. The letter of intent and the terms of the
definitive merger agreement were negotiated by the Company's Chairman and
Millennium's Chief Executive Officer. Principal factors taken into account in
determining the percentage of the Company to be owned by Millennium stockholders
and existing Company stockholders following consummation of the merger were:
o the value to Millennium of the Company as a public vehicle;
o the amount of Company debt that Millennium would be required to pay
to consummate the merger;
o the amount of Company debt that Millennium would inherit upon
consummation of the merger;
o the amount of Company debt that would be converted to equity prior
to consummation of the merger; and
o the current and anticipated value of Millennium's business.
6
The Merger was effected by the filing of a Certificate of Merger with the
State of Delaware and was consummated pursuant to exemptions from federal and
applicable state securities registration provisions. The parties were not
required to comply with any other federal or state regulatory requirements or
obtain any other material approvals in connection with the Merger.
For accounting purposes, the merger was treated as an acquisition of
Regent by Millennium, and a recapitalization of Millennium.
The Tax Reform Act of 1986 provided for a limitation on the use of net
operating loss (NOL) carryforwards following certain ownership changes. As a
result of the merger, a change in ownership greater than 50% has occurred as to
Regent. Under such circumstances, the potential benefits from the utilization of
such NOL carryforwards of Regent may be substantially limited or reduced in the
future.
Amendment To The Certificate Of Incorporation Concerning Name Change
The Board of Directors of the Company has unanimously determined that it
is advisable to amend the Company's Certificate of Incorporation to change the
name of the Company to "Millennium Biotechnologies Group, Inc." The Board
recommended this name change to the Company's stockholders and the Majority
Stockholders have approved it.
Since the Merger, the Company's sole substantive business operations have
been those of its wholly-owned subsidiary, Millennium Biotechnologies, Inc.
Management believes that changing the Company's name to "Millennium
Biotechnologies Group, Inc." will better reflect the Company's business
operations.
Amendments To The Certificate Of Incorporation Concerning Common Stock
The Board of Directors of the Company has unanimously determined that it
is advisable to amend the Company's Certificate of Incorporation to:
1. increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 75,000,000 and decrease the
par value of the Company's Common Stock from $0.06-2/3 per
share to $0.001 per share; and
2. effect a one-for-12 reverse split of the Company's Common
Stock with all fractional shares rounded up to the next whole
share ("Reverse Split").
The Board recommended these changes to the Company's Common Stock to the
stockholders and the Majority Stockholders have approved them. The Revised
Charter adopting the above changes is set forth in Exhibit A to this Information
Statement.
7
Reasons For These Changes To The Company's Common Stock
Increase in Authorized Shares. The increase in the number of authorized
shares of Common Stock is required to provide sufficient authorized but unissued
shares of Common Stock to permit:
o conversion of all outstanding shares of D Preferred Stock; and
o the raising of additional funds through the sale of the Company's
securities.
The Company has no specific plans with regard to its use of the authorized
but unissued/unreserved shares; however, it anticipates that it will continue
its efforts to raise capital through the sale of its Common Stock.
The Board of Directors has authorized the conversion of all of the issued
and outstanding shares of D Preferred Stock into Common Stock immediately
following the filing of the Revised Charter.
Reverse Split. Management believes that the Reverse Split is necessary to
promote a more efficient and realistic trading market for the Company's Common
Stock.
General Effect Of These Changes To The Company's Common Stock
Stockholders will not realize any dilution in their percentage of
ownership of the Company or their voting rights as a result of the foregoing
changes. However, the Reverse Split most likely will affect the market value of
the Common Stock. No assurance can be given that the market value of the Common
Stock will increase in inverse proportion to the ratio of the Reverse Split.
Issuances of significant numbers of additional shares of Common Stock in the
future (i) will dilute stockholders' percentage ownership of the Company and,
(ii) if such shares are issued at prices below what current stockholders paid
for their shares, may dilute the value of current stockholders' shares. In
addition, the Company's Board of Directors could issue large blocks of Company
Common Stock to fend off unwanted tender offers or hostile takeovers without
further stockholder approval.
Amendments To The Certificate Of Incorporation
Concerning Limitation Of Directors' Liability
The Board of Directors of the Company has unanimously determined that it
is advisable to amend the Company's Certificate of Incorporation to add
provisions related to limiting directors' liability.
The Board recommended these changes to the Company's Common Stock to the
stockholders and the Majority Stockholders have approved them. The Revised
Charter adopting the above changes is set forth in Exhibit A to this Information
Statement.
8
Reasons For And General Effect Of These Changes
The limitation of directors' liability provision is intended to facilitate
the Company's ability to attract and retain qualified directors to serve on the
Board of Directors. The provision gives the Company's directors the full
protection against personal liability that is permitted under the Delaware GCL
by eliminating the personal liability of directors to the Company and its
stockholders for monetary damages for breach of duties as a director except for:
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) liability under
Section 174 of the Delaware GCL which relates to unlawful payment of dividends
or unlawful stock purchases or redemptions, or (iv) any transaction from which
the director derived an improper personal benefit. The provision limiting the
liability of directors shall not be applicable to any act or omission occurring
prior to the adoption of said provision.
Adoption of the provision limits the remedies otherwise available to a
stockholder seeking to challenge a decision by the Board of Directors,
including, for example, a decision relating to an acquisition proposal or a
similar transaction, even if such a decision was grossly negligent. While the
provision limits the directors' liability for monetary damages for breach of
fiduciary duty, it would not limit the availability of equitable remedies such
as an injunction or rescission based on a director's breach of those duties, nor
apply to claims against a director arising out of actions taken as an officer of
the Company or limit a stockholder's ability to seek relief under any other law,
including the federal securities laws. Although equitable remedies such as
injunction and rescission would continue to be available, the provision may
nevertheless reduce the likelihood of derivative litigation against directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of duty, even though such an action, if successful,
might have benefited the Company and its stockholders. The Board of Directors
believes that the limitation of directors' liability provision strikes the
proper balance between the need to attract and retain highly qualified directors
and the need to hold directors accountable to the Company and its stockholders
for actions that are not in the Company's best interest. Stockholders should
note, however, that because the Company's directors may benefit from the added
protection the provision provides, the directors have a personal interest in its
adoption.
Restatement Of And Non-Material Amendments To The Certificate of Incorporation
The Board of Directors of the Company has unanimously determined that it
is advisable to restate the Certificate of Incorporation to consolidate and
clarify in one document the current provisions of the Certificate of
Incorporation that, prior to such restatement, only could be found in the
original Certificate as subsequently changed in a number of amendments thereto
and certificates of designations. In this regard the Board determined that the
following provisions in the Company's Certificate of Incorporation should be
removed because they are no longer material and/or relevant:
9
|X| all enumerated purposes in Article III other than the general
purposes clause;
|X| all references to the Series A Preferred Stock; there being no
shares of Series A Preferred Stock issued or outstanding;
|X| all remaining references to Class B Capital Stock; the Class B
Capital Stock previously having been removed by amendment to
the Certificate of Incorporation; and
|X| the provision that states that dividends on common stock may
only be paid in common stock.
The Board also determined to update the language to make it consistent with all
amendments. By way of example, the conversion rate for the Series B Preferred
stock was adjusted for the Reverse Split.
The Board also added the following provisions that merely recite
provisions of the Delaware GCL available whether or not they are set forth in
the Certificate of Incorporation:
o no contract or transaction between the Company and one or more
of its directors or officers shall be void or voidable solely
because of the interest of the director or officer in the
transaction, or solely because the director or officer is
present at or participates in the meeting of the Board of
Directors, provided that (i) the material facts as to his or
her relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of
Directors, and the Board of Directors in good faith authorizes
the contract or transaction by the affirmative votes of the a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum, or (b) the
material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by such
stockholders, or (c) the contract or transaction is fair as to
the Company as of the time it is authorized, approved or
ratified by the Board of Directors or the stockholders
entitled to vote thereon; and
o the provisions that permit indemnification of directors,
officers, employees and agents.
The Board recommended these changes to the Company's Common Stock to the
stockholders and the Majority Stockholders have approved them. The Revised
Charter adopting the above changes is set forth in Exhibit A to this Information
Statement.
10
Reasons For And General Effect Of These Changes
Restatement and Non-Dividend Changes. The original Certificate of
Incorporation was filed in 1967. It was subsequently changed by the filing of a
series of amendments and certificates of designations. Restating the Certificate
of Incorporation and effecting these changes consolidates all of the material
and relevant provisions of the Certificate of Incorporation in one coherent
document. The non-material additions merely recite provisions that are
applicable whether or not they are set forth in the Certificate of
Incorporation.
Common Stock Dividends. The change related to dividends on common stocks
removes the restriction on declaring common stock dividends only in common
stock. As a result, the Board is now capable of declaring dividends in cash or
other securities. The current Board sees no reason to retain the prior
restriction on common stock dividends.
Adoption of 2001 Employee Stock Option Plan
Summary of the 2001 Employee Stock Option Plan
The Company's Board of Directors adopted the 2001 Stock Option Plan (the
"Plan") on December 3, 2001. The Plan authorizes the Company to issue 1,500,000
post-reverse split shares of common stock for issuance upon exercise of options.
It also authorizes the issuance of stock appreciation rights ("SARs"). The Plan
authorizes the Company to grant (i) incentive stock options to purchase shares
of common stock (ii) non-qualified stock options to purchase shares of common
stock and (iii) SARs.
Objectives
The objective of the Plan is to provide incentives to the Company's
officers, other key employees, consultants, professionals and non-employee
directors to achieve financial results aimed at increasing stockholder value and
attracting talented individuals to the Company. Persons eligible to be granted
incentive stock options under the Plan will be those employees, consultants,
professionals and non-employee directors whose performance, in the judgment of
the Company's Board of Directors, or a Committee thereof, can have significant
effect on the Company's success.
Oversight
The Board of Directors or a Committee of the Board consisting of at least
two non-employee directors as defined in Rule 16b-3 of the Securities Exchange
Act of 1934 will administer the Plan by making determinations regarding the
persons to whom options should be granted and the amount, terms, conditions and
restrictions of the awards. It also has the authority to interpret the
provisions of the Plan and to establish and amend rules for its administration
subject to the Plan's limitations.
11
Types of grants
The Plan allows for the grant of incentive stock options, non-qualified
stock options, SARs in connections with options and independent SARs. The Plan
does not specify what portion of the awards may be in the form of any of the
foregoing. Incentive stock options awarded to Company employees are qualified
stock options under the Internal Revenue Code.
Statutory Conditions On Stock Options
- Exercise Price
Incentive stock options granted under the Plan must have an exercise price
at least equal to 100% of the fair market value of the Common Stock as of the
date of grant. Incentive stock options granted to any person who owns,
immediately after the grant, stock possessing more than 10% of the combined
voting power of all classes of Company stock, or of any parent or subsidiary
corporation, must have an exercise price at least equal to 110% of the fair
market value of the Common Stock on the date of grant.
Non-statutory stock options may have exercise prices as determined by the
Board of Directors provided such exercise price is at least equal to 85% of the
fair market value of the Common Stock as of the date of grant.
- Dollar Limit
The aggregate fair market value, determined as of the time an incentive
stock option is granted, of the Common Stock with respect to which incentive
stock options are exercisable by an employee for the first time during any
calendar year cannot exceed $100,000. However, there is no aggregate dollar
limitation on the amount of non-statutory stock options that may be exercisable
for the first time during any calendar year.
- Expiration Date
Any option granted under the Plan will expire at the time fixed by the
Board or Board committee, which cannot be more than ten years after the date it
is granted or, in the case of any person who owns more than 10% of the combined
voting power of all classes of our stock or of any subsidiary corporation, not
more than five years after the date of grant.
- Exerciseability
The Board or Board committee may also specify when all or part of an
option becomes exercisable, but in the absence by such specification, the option
will ordinarily be exercisable in whole or part at any time during its term.
However, Board or Board committee may accelerate the exerciseability of any
option at its discretion.
12
- Assignability
Options granted under the Plan are not assignable. Incentive stock options
may be exercised only while the optionee is employed by us or within twelve
months after termination by reason of death or disabilities or within three
months after termination for any other reason.
Payment Upon Exercise Of Options
Payment of the exercise price for any option may be in cash, by withheld
shares which, upon exercise, have a fair market value at the time the option is
exercised equal to the option price (plus applicable withholding tax) or in the
form of shares of Company Common Stock.
Stock Appreciation Rights
A Stock Appreciation Right is the right to benefit from appreciation in
the value of the Company's Common Stock. The SAR holder, on exercise of the SAR,
is entitled to receive from the Company in cash or Common Stock an amount equal
to the excess of (x) the fair market value of the Common Stock covered by the
exercised portion of the SAR, as of the date of such exercise, over (y) the fair
market value of the Common Stock covered by the exercised portion of the SAR as
of the date on which the SAR was granted. The Board or Committee may grant SARs
in connection with all or any part of an Option granted under the Plan, either
concurrently with the grant of the Option or at any time thereafter, and may
also grant SARs independently of Options.
Tax Consequences.
An employee or director will not recognize income on the awarding of
incentive stock options and nonstatutory options under the Plan.
An optionee will recognize ordinary income as the result of the exercise
of a nonstatutory stock option in the amount of the excess of the fair market
value of the stock on the day of exercise over the option exercise price.
An employee will not recognize income on the exercise of an incentive
stock option, unless the option exercise price is paid with stock acquired on
the exercise of an incentive stock option and the following holding period for
such stock has not been satisfied. The employee will recognize long-term capital
gain or loss on a sale of the shares acquired on exercise, provided the shares
acquired are not sold or otherwise disposed of before the earlier of: (i) two
years from the date of award of the option or (ii) one year from the date of
exercise.
If the shares are not held for the required period of time, the employee
will recognize ordinary income to the extent the fair market value of the stock
at the time the option is exercised exceeds the option price, but limited to the
gain recognized on sale. The balance of any such gain
13
will be a short-term capital gain. Exercise of an option with previously owned
stock is not a taxable disposition of such stock. An employee generally must
include in alternative minimum taxable income the amount by which the price he
paid for an incentive stock option is exceeded by the option's fair market value
at the time his rights to the stock are freely transferable or are not subject
to a substantial risk of forfeiture.
General Information
Business
The Company's sole material operations are conducted by its subsidiary,
Millennium. Millennium was incorporated in the State of Delaware in November
2000 and is a research-based bio-nutraceutical company specializing in the field
of nutritional science. The Company's mission is to bring innovative supplements
to patients and health care providers, by designing nutraceutical products that
complement traditional therapeutic treatments of infectious diseases.
At the time of the Merger, Millennium had not yet realized any revenues.
It commenced sale of its first product, RESURGEX(TM), in September 2001 in New
Jersey and Connecticut where RESURGEX(TM) qualifies for Medicaid reimbursement.
Millennium developed RESURGEX(TM) to play an important role as a
nutritional adjunct to the medical treatment for certain chronic
immuno-compromising debilitating diseases such as Acquired Immune Deficiency
Syndrome ("AIDS") and cancer. Those infected with AIDS/HIV (Human
Immunodeficiency Virus) and other chronic debilitating diseases present a
multitude of medical/nutritional problems which include weight loss, immune
dysfunction, free-radical pathology and loss of energy production. Millennium
believes that RESURGEX(TM) is the first multi-component nutritional supplement
designed to deal with each of these conditions. Specifically, RESURGEX(TM) has
been formulated to address the loss of lean muscle, nutrient depletion, immune
support, mitochondrial dysfunction and oxidative stress (free-radical damage) in
individuals undergoing medical treatment for chronic medical conditions.
The Company's proprietary formulation combines a unique blend of
nutritional components that enable the individual to better tolerate both the
effect of the disease and the side effects brought on by common medication
regimes. The palatable taste, flavor and sweetness of RESURGEX(TM) and its
easy-to-use delivery method are designed to promote sustained acceptance under
long-term use and should have a significant impact on a patient's propensity to
follow an ongoing regimen of compliance.
Superoxide dismutase ("SOD/gliadin") is an integral component of
RESURGEX(TM). SOD/gliadin is a unique patented, vegetarian form of the SOD
master cellular defense enzyme, developed for oral use. In July 2001, Millennium
entered into an exclusive license agreement with Isocell S.A., the holder of the
patent for SOD/gliadin. Pursuant to the license, Millennium has the exclusive
North American rights to purchase, promote and distribute SOD/gliadin in the
14
channel of distribution for direct sale of nutraceutical products to physicians
for resale to their patients or through physician prescription for
Medicaid/Medicare reimbursement for nutritional supplements.(1)
RESURGEX(TM) has been designed to:
o Replenish: reduce oxidative stress, support immune function
o Rebuild: maintain lean muscle, and
o Revitalize: increase energy.
Replenish:
Research has demonstrated the relationship between oxidative stress and
the overall strength of the immune system. Many scientists believe that there is
a direct correlation between oxidation and health impairment. RESURGEX(TM) helps
repair the negative effects of oxidation by replenishing the body's supply of
specific essential antioxidants. One of the most clinically key antioxidants in
RESURGEX(TM) is Superoxide Dismutase (SOD), a master cellular defense enzyme
that also helps regulate other defense enzymes in the cell.
RESURGEX(TM) contains a special form of SOD that is wrapped in gliadin.
Gliadin protects SOD as it passes through the stomach, so it can be easily
absorbed - and provides substantial antioxidant protection. Clinical studies
have found that reduced levels of SOD are associated with impaired health.
Accordingly, the Company believes that SOD Gliadin serves as a vital component
to replenish this important antioxidant enzyme.
Rebuild:
A compromised immune system is typically accompanied by loss of lean
muscle, which hampers the body's ability to fight infection and function
normally. Conversely, increased lean muscle mass can benefit immune function. In
order to maintain lean muscles, the body needs high-quality protein that
includes essential and non-essential amino acids - such as those found in
RESURGEX(TM).
RESURGEX(TM) provides what researchers consider one of the best sources of
protein for building and retaining lean muscle mass: undenatured whey and
instantized casein proteins. Whey is a complete protein, containing all of the
essential and non-essential amino acids. High quality undenatured whey - like
that found in RESURGEX(TM) - boasts the highest branched chain amino acids and
immunogloblins. That is why undenatured whey is so important for individuals
undergoing medical treatment for chronic wasting caused by the loss of lean
muscle mass. RESURGEX(TM) also provides important dietary supplements such as
Ornithine Alpha-
- ----------
(1) The above statements and other similar statements contained in this Report
concerning RESURGEX(TM), SOD/gliadin and other RESURGEX(TM) ingredients
have not been evaluated by the Food and Drug Administration and are not
intended to diagnose, treat, cure or prevent any disease.
15
Ketoglutarate, Nucleotides, L-Glutamine and Branched Chain Amino Acids. These
supplements play key roles in muscle recovery, muscle growth, and energy
maintenance - and protect against muscle damage during stress.
Revitalize:
Every living thing - including cells and organs - needs a certain amount
of energy to function properly. To maintain a healthy immune system, the body
must continuously manufacture ATP (Adenosine Triphosphate), the primary
energy-carrying molecule. This is a particularly serious challenge for people
undergoing medical treatment for degenerative diseases. RESURGEX(TM) helps
revitalize energy production by providing important nutrients that support the
mitochondria, the area in cells where ATP is produced. These nutrients -
including D-Ribose, L-Carnitine, and Coenzyme Q10 - are used by almost every
living cell and they work to help the body naturally generate the energy it
needs for a variety of important functions.
Key Specialty Ingredients in RESURGEX(TM)
SOD/gliadin is one of the key ingredients contained in RESURGEX(TM), that
help to reduce oxidative stress. Other RESURGEX(TM) ingredients which play a
role in this category, include the following:
Beta-1, 3-D-glucans
Coenzyme Q10
Fruit polyphenols
High immunoglobulin whey protein
L-Glutamine
L-Lysine Nucleotides
RESURGEX(TM) builds lean muscle by providing the following high quality
protein and other central nutrients including:
Undenatured whey protein
Branched chain amino acids
Instantized casein
L-Glutamine
Nucleotides
OKG (ornithine alpha ketoglutarate)
RESURGEX(TM) supports mitochondrial function and provides the following
nutrients that help increase energy production:
Coenzyme Q10
D-Ribose
SOD/gliadin
16
L-Carnitine
MCT (medium chain triglycerides)
L-Glutamine
Principal Market
The principal market for the Company's products is comprised of patients
whose immune systems have been compromised as a result of chronic and acute
viral based infections. The first market segment targeted by the Company is
patients with HIV caused AIDS cases. Management believes that there is a
significant demand and expanding market for RESURGEX(TM) because of the large
population of HIV infected persons. Nutritional supplements are steadily
becoming an adjunct in the treatment of people living with HIV and AIDS.
RESURGEX(TM) is a nutritional supplement targeted to support immuno-compromised
individuals undergoing medical treatment for chronic debilitating diseases that
cause tissue wasting (weight loss), oxidative stress, mitochondrial failure
(fatigue/low energy) and immune dysfunction.
Long term, the Company plans to expand its focus to patients suffering
from other chronic debilitating diseases such as cancer, hepatitis and chronic
fatigue syndrome. In addition, we plan to explore RESURGEX(TM)'s application to
the health market as a supplement to enhancing health and well being.
Intellectual Property
Millennium owns all rights to the formulation of RESURGEX(TM) and has
filed a compositional patent application with respect to this formulation. It
also has filed for trademark protection for the name "RESURGEX". These
applications are presently pending before the United States Patent and Trademark
Office. No assurance can be given that the patent or trademark will be issued or
that, if issued, their rights will afford adequate protection to the Company. In
addition, the Company relies on trade secrets and unpatented proprietary
technology. There is no assurance that others may not independently develop the
same or similar technology.
On July 25, 2001, Millennium entered into an exclusive limited patent
sublicense and distribution agreement with Isocell SA, a French company, which
owns the rights to the combination of oral administrable SOD/gliadin. Isocell SA
also owns the United States patent for Pharmaceutical compositions containing a
Superoxide Dismutase which includes gliadin. Pursuant to the License Agreement,
Millennium is granted an exclusive sublicense to promote and distribute
SOD/gliadin for use as a dietary supplement or functional food in certain
defined medical market channels of distribution in North America involving
direct sales of nutraceutical products to physicians for resale to their
patients or through physician prescription for Medicaid/Medicare reimbursement
for nutritional supplements.
The License Agreement provides for the sale of SOD/gliadin to Millennium
at stated unit prices subject to volume discounts. The term of the agreement is
for five years, provided that
17
Isocell may cancel the license (or make it non-exclusive) in the event that
Millennium purchases of SOD/gliadin do not meet scheduled minimum quotas for any
calendar quarter during the term. In such event, Millennium may avoid
termination of the license by paying 50% of the prescribed purchase minimum.
Regulatory Environment
The manufacturing, processing, formulation, packaging, labeling and
advertising of RESURGEX(TM) are subject to regulation by federal agencies,
including the Food and Drug Administration (the "FDA"), the Federal Trade
Commission, the Consumer Product Safety Commission, the United States Department
of Agriculture, the United States Postal Service and the United States
Environmental Protection Agency. These activities are also subject to regulation
by various agencies of the states and localities in which the Company plans to
sell RESURGEX(TM).
The "Dietary Supplement Health and Education Act of 1994" (the "Dietary
Supplement Law") broadly regulates nutritional labeling, claims and
manufacturing requirements for dietary supplements. The Dietary Supplement Law
provides for regulation of Statements of Nutritional Support ("Statements").
These Statements may be made if they are truthful and not misleading and if
"adequate" substantiation for the claims is available. Statements can describe
claims of enhanced well-being from use of the dietary supplement or product
statements that relate to affecting a structure or function of the body.
However, Statements cannot claim to diagnose, treat, cure, or prevent any
disease, regardless of the possible existence of scientific reports
substantiating such claims.
Statements appearing in dietary supplement labeling must be accompanied by
disclaimer stating that the FDA has not evaluated the Statements. Notification
to the FDA of these Statements is not considered approval of the Statements. If
the FDA determines in possible future proceedings that dietary supplement
Statements fail to met the requirements of the Dietary Supplement Law, a product
may be subject to regulation as a drug. The FDA retains all enforcement means
available to it (i.e. seizure, civil or criminal penalties, etc.), when
investigating or enforcing labeling claims.
The Federal Trade Commission ("FTC") regulates advertising of dietary
supplements such as RESURGEX(TM). The Federal Trade Commission Act prohibits
unfair or deceptive trade practices and false or misleading advertising. The FTC
has recently been very active in its enforcement of advertising against
manufacturers and distributors of nutritional dietary supplements having
instituted several enforcement actions resulting in signed agreements and
payment of large fines. Although the Company has not been the target of a FTC
investigation, there can be no assurance that the FTC will not investigate the
Company's advertising in the future.
The Company is unable to predict the nature of any future laws,
regulations, interpretations, or applications, nor can it predict what effect
additional governmental regulations
18
or administrative orders, when and if promulgated, would have on its business in
the future. They could, however, require the reformulation of certain products
not possible to be reformulated, imposition of additional record keeping
requirements, expanded documentation of the properties of certain products,
expanded or different labeling and scientific substantiation regarding product
ingredients, safety or usefulness. Any or all such requirements could have a
material adverse effect on the Company's results of operations and financial
condition.
Medicaid Reimbursement
Approval for reimbursement by state Medicaid programs is important for the
marketing efforts undertaken by the Company. To that effect, Millennium had
applied for and has recently gained inclusion into the First Data Bank ("FDB").
FDB provides pharmaceutical and nutraceutical pricing and product information to
all 50 states, as well as the District of Columbia. FDB, a wholly owned
subsidiary of the Hearst Corporation, is the world's leading supplier of
healthcare knowledge databases, supplying drug knowledge to over 40,000
pharmacies, 4,000 hospitals, all 50 state Medicaid programs and virtually all
major vendor and private drug benefit programs. The majority of drug wholesalers
and manufacturers also use one or more of its products. Inclusion in FDB
facilitates access to all state Medicaid programs, Managed Care Organizations
and other important health care and reimbursement organizations.
With inclusion in FDB, most state Medicaid organizations qualify
RESURGEX(TM) automatically under the open formulary system. Several states,
however, require a more formal application process, among them the State of New
York. Millennium has applied for approval by Medicaid and ADAP (Aids Drug
Assistance Program) for the State of New York. It has completed and submitted
its application to the New York State Medicaid Department. In addition, it is
selling RESURGEX(TM) to physicians and obtaining Medicaid reimbursement in New
Jersey and Connecticut.
Marketing Strategy
Millennium will seek to build awareness and brand name recognition by
cooperating with recognized researchers and scientists that are most likely to
advocate proactive approaches to therapeutic treatments. While these
relationships bring to the Company valuable expertise they will be sought also
to potentially facilitate the successful demonstration of the benefits gained
from the use of Millennium's products.
A successful marketing strategy for RESURGEX(TM) emphasizes support of
Medicaid and other organizations that provide reimbursement programs. Support in
this sense means that Medicaid includes RESURGEX(TM) in its universe of products
that qualify for reimbursement when prescribed by the medical profession. With
reimbursement covered, doctors can prescribe it to their patients and more
persons in need can have access to it. This carries certain significance since
many people in the target groups are economically disadvantaged. The recent
inclusion of RESURGEX(TM) in First Data Bank resulted in approval under the open
formula
19
category, by 42 states, including the important markets of New Jersey and
Connecticut. As noted above, the Company also has moved to obtain approval by
Medicaid and ADAP in New York.
The tri-state New York geographical area accounts for a substantial number
of the persons affected by immune systems dysfunction in the United States. The
Company's goal is to reach a minimum of ten percent of this market within three
years.
Competition
There are many other nutraceutical products on the market that have been
approved for Medicaid reimbursement in various states as dietary supplements in
the field of immuno-deficiencies. However, RESURGEX(TM) is the only product
available that features the patent-protected SOD/Gliadin formulation. Millennium
has the exclusive right to market and distribute SOD/gliadin in certain defined
medical markets in the North America. There can be no guaranty, however, that a
competitive product will not emerge with features and characteristics that are
superior to those of RESURGEX(TM).
Product Production
All manufacturing, warehousing and distribution functions are outsourced
to various vendors and suppliers.
Seasonality and Dependency
The industry segment in which the Company does business is not seasonal.
Employees
As of February 15 2002, the Company employed 11 persons, of whom six were
primarily engaged in sales and marketing, one in research and development, and
four in managerial and general administrative functions. The Company has no
collective bargaining agreements with its employees.
Facilities
The Company's administrative facilities are located in approximately 2,200
square feet leased office space at One Anderson Hill Road, Bernardsville, New
Jersey, for which the Company has entered into a five-year lease that commenced
January 1, 2001. The lease calls for monthly base rent of $5,807 plus allocated
expenses. All manufacturing, warehousing and distribution functions are
outsourced and corresponding facilities are operated by third entities.
The Company plans to move its primary headquarters operations in the near
future to larger facilities in the same area and sublet its current facilities.
In October 2001, the Company signed a five-year lease commencing in May 2002,
for approximately 4,500 square feet of office
20
space. The lease calls for monthly base rent of $9,116 plus allocated expenses
and taxes during the first two years. Base rent increases to $9,876 per month
for the last three years of the term. This lease has been personally guaranteed
by an officer of the Company.
Legal Proceedings
The Company is not presently a party to any material litigation.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth as of February 26, 2002 the beneficial
ownership of Common Stock and D Preferred Stock of the Company after giving
effect to the Reverse Split by (i) each person who is known to be the beneficial
owner of more than 5% of the Company's voting stock, (ii) each of the Directors,
Executive Officers and key employees of the Company and Millennium and (iii) all
directors, officers and key employees of the Company and Millennium as a group.
Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common and preferred stock owned by them.
Name and Address Amount of Amount of Percentage of
of Beneficial Common Stock Stock D Preferred Voting Stock
Owner (1) Beneficially owned Beneficially owned Outstanding (2)
- ---------------- ------------------ ------------------ ---------------
Robert M. Long 144,271(3) 0 **
Anthony Vickerson 0(4) 0 **
Jane Swon 0 74,015.625(5) 23.8%
P. Elayne Wishart 0 71,890.625(6) 23.1%
Jerry E. Swon 133,334(7) 0 **
Bruce L. Deichl 133,334(8) 0 **
David Sargoy 133,334(9) 375 **
Michael G. Martin 133,334(10) 0 **
David Miller 0 49,022(11) 16.6%
1748 Monroe Ave
Bronx, NY 10457
21
Greg Palmacci 133,334(12) 34,576.95(12) 12.6%
4 Pinehurst Ct
Frisco, TX 75034
Carl Germano 83,334(13) 5,273.125(13) 2.3%
Christopher DeMarzo 25,000(14) 3,000(14) 1.2%
Frank Guarino 0 0 0%
Jerry T. Swon 0 6,250(15) 2.1%
John Swon 0 6,250(15) 2.1%
All Current Directors, Officers
and other significant
employees as a
Group (9 persons)
(7)(8)(9)(10)(13)(14)(15) 641,670 21,148.125 10.3%
- ----------
** Less than 1%
(1) The address of each beneficial owner is c/o Regent Group, Inc., One Anderson
Hill Rd., Suite 103, Bernardsville, NJ 07924.
(2) The information contained in this table reflects beneficial ownership, which
means generally any person who, directly or indirectly, has or shares voting
power or investment power with respect to a security. The percentage of voting
stock is calculated by combining the number of votes attributable to the Common
and D Preferred Stock beneficially owned by a stockholder divided by the total
number of votes attributable to all issued and outstanding shares of Common and
D Preferred Stock. Each share of Common stock is entitled to one vote and each
share of D Preferred Stock is entitled to 641.215 votes. As noted above, this
table takes into account the Reverse Split. As a result, shares of common stock
have been divided by 12. Although the D Preferred Stock is not reverse split,
according to its terms, the number of votes per share of D Preferred Stock has
been proportionately reduced by 12 as a result of the Reverse Split. In
accordance with the rules promulgated by the Securities and Exchange Commission,
beneficial ownership includes shares currently owned as well as shares which the
named person has the right to acquire beneficial ownership of within 60 days,
including through the exercise of options, warrants or other rights, or through
the conversion of a security. More than one person may be deemed to be a
beneficial owner of the same securities.
22
(3) Mr. Long served as a director of the Company until October 15, 2001. All of
the shares listed are owned by Longview Partners. Mr. Long has sole voting and
dispositive power of the shares of Common Stock held by Longview Partners.
(4) Mr. Vickerson served as Chief Operating Officer until July 27, 2001 and as a
Director of the Company until October 15, 2001.
(5) Includes all D Preferred Stock issuable upon exercise of her Millennium
warrants. Ms. Swon acquired 54,015.625 shares of D Preferred Stock pursuant to
the Merger in exchange for 2,160,625 shares of Millennium common stock. The
foregoing also includes 4,412.7 shares of D Preferred Stock that Ms. Swon
intends to transfer to each of three individuals in furtherance of a settlement
by her husband, Jerry Swon, of a 1995 civil lawsuit. Ms. Swon is the registered
holder of five year warrants to purchase 800,000 shares of Millennium. As a
result of the Merger, the warrants now entitle the holder to purchase 20,000 of
the Company's D Preferred Stock. Jerry E. Swon, Ms. Swon's husband, disclaims
beneficial ownership of all Company securities owned by Ms. Swon.
(6) Includes all D Preferred Stock issuable upon exercise of her Millennium
warrants. Ms. Wishart acquired 51,890.625 shares of D Preferred Stock of the
Company pursuant to the Merger in exchange for 2,072,385 shares of Millennium
common stock. The foregoing also includes 4,412.7 shares of D Preferred Stock
that Ms. Wishart intends to transfer to each of three individuals in furtherance
of a settlement by her husband, Bruce Deichl, of a 1995 civil lawsuit. In
addition, Ms. Wishart is the registered holder of five year warrants to purchase
800,000 shares of Millennium. As a result of the Merger, the warrants now
entitle the holder to purchase 20,000 of the Company's D Preferred Stock. Bruce
Deichl, Ms. Wishart's husband, disclaims beneficial ownership of all Company
securities owned by Ms. Wishart.
(7) Includes shares issuable upon exercise of warrants to purchase 133,334
shares of the Company's post Reverse Split Common Stock. The warrants have a
cashless exercise provision and include certain piggyback registration rights.
Does not include any securities owned by Jane Swon, Mr. Swon's spouse, which
securities Mr. Swon disclaims beneficial ownership.
(8) Includes shares issuable upon exercise of warrants to purchase 133,334
shares of the Company's post Reverse Split Common Stock. The warrants have a
cashless exercise provision and include certain piggyback registration rights.
Does not include any securities owned by P. Elayne Wishart, Mr. Deichl's spouse,
which securities Mr. Deichl disclaims beneficial ownership.
(9) Includes shares issuable upon exercise of warrants to purchase 133,334
shares of the Company's post Reverse Split Common Stock. The warrants have a
cashless exercise provision and include certain piggyback registration rights.
23
(10) Includes shares issuable upon exercise of warrants to purchase 133,334
shares of the Company's post Reverse Split Common Stock. The warrants have a
cashless exercise provision and include certain piggyback registration rights.
(11) Mr. Miller holds options to purchase 150,000 shares of Millennium common
stock, which are exercisable into 3,750 shares of D Preferred Stock pursuant to
the terms of the Merger Agreement. Mr. Miller's holding include these 3,750
shares. Mr. Miller's holdings also include 32,081.95 shares that are subject to
an option he granted to Greg Palmacci. As noted in footnote 12, Mr. Palmacci's
holdings include these shares too.
(12) Common Stock represents shares issuable upon exercise of warrants to
purchase 133,334 shares of the Company's post Reverse Split Common Stock. The
warrants have a cashless exercise provision and include certain piggyback
registration rights. D Preferred Stock includes shares issuable upon exercise of
a warrant from David Miller to purchase up to 32,081.95 shares of D Preferred.
(13) Mr. Germano holds options to purchase 1,054,625 shares of Millennium common
stock, of which 210,925 are vested and are exercisable into 5,273.125 shares of
D Preferred Stock pursuant to the terms of the Merger Agreement. Mr. Germano's
holdings include these 5,273.125 shares of D Preferred Stock. Also includes
shares issuable upon exercise of options to purchase 41,667 shares of post
Reverse Split Company Common Stock.
(14) Mr. DeMarzo holds options to purchase 600,000 shares of Millennium common
stock, of which 120,000 are vested and are exercisable into 3,000 shares of D
Preferred Stock pursuant to the terms of the Merger Agreement. Mr. DeMarzo's
holdings include these 3,000 shares. Also includes shares issuable upon exercise
of options to purchase 12,500 shares of post Reverse Split Company Common Stock.
(15) Jerry T. Swon and John Swon each hold options to purchase 250,000 shares of
Millennium common stock, which are exercisable into 6,250 shares of D Preferred
Stock pursuant to the terms of the Merger Agreement. Jerry T. Swon's and John
Swon's holding each include the 6,250 shares of D Preferred Stock issuable upon
exercise of their respective options.
Restrictions On Sales By Pre-Merger Affiliates.
Pursuant to a no-action letter issued by the staff of the Securities and
Exchange Commission (NASD Regulations, Inc., January 21, 2000), shareholders who
are affiliates, or transferees of such affiliates, of a "blank check company"
prior to a merger between that company and an operating company may not be
eligible to rely on the safe harbor contained in Rule 144 of the Securities Act
of 1933 with regard to the sale of their shares of the blank check company after
the merger. A "blank check company" is a development stage company that has no
specific business plan or purpose or has indicated its business plan is to
engage in a merger or acquisition with an unidentified company. Accordingly,
those persons who were affiliates of Regent prior to the merger, and their
transferees, may not be able to sell their Regent shares after
24
the merger absent registration under the Securities Act and any such sales made
by them after the merger may have been in violation of the Securities Act.
Commencing February 12, 2002, the Company instructed its transfer agent to
place stop transfer instructions on all shares held of record by such affiliates
and all shares of transferees of such affiliates which the Company has been able
to identify. The Company also has notified these affiliates that they should not
sell or transfer any such shares and that they should advise their transferees
to refrain from doing so. The Company intends to use its best efforts to file a
registration statement to register the foregoing shares after the mailing of
this Information Statement.
Market for Common Stock and Related Stockholder Matters
Regent's Common Stock is traded in the over-the-counter market on the OTC
Bulletin Board. The following table sets forth, for the periods indicated, the
high and low closing bid prices for one share of Common Stock. These prices were
obtained from the Pink Sheets LLC. The quotations represent prices between
dealers and do not include retail markups, markdowns or commissions and do not
necessarily represent actual transactions.
The market for the Common Stock has been sporadic and there have been long
periods during which there were few, if any, transactions in the Common Stock
and no reported quotations. Accordingly, reliance should not be placed on the
quotes listed below, as the trades and depth of the market may be limited, and
therefore, such quotes may not be a true indication of the current market value
of the Company's Common Stock.
Bid Prices
----------
High Low
---- ---
Fiscal Year ended July 31, 2000
First Quarter....................... $ 1.6875 $ 0.40625
Second Quarter...................... 0.4375 0.23
Third Quarter ...................... 0.78125 0.22
Fourth Quarter ..................... 0.625 0.375
Fiscal Year Ended July 31, 2001
First Quarter....................... $ 0.625 $ 0.375
Second Quarter...................... 0.65625 0.3125
Third Quarter ...................... 0.54 0.55
Fourth Quarter ..................... 0.15 0.072
25
Fiscal Year Ending July 31, 2002
First Quarter....................... $ 0.50 $ 0.16
Second Quarter...................... 0.27 0.14
As of February 13, 2002, there were approximately 1,176 holders of record
of the Company's Common Stock. In addition, there were approximately 10 holders
of record of the Company's Series B Convertible Preferred Stock, 67 holders of
record of the Company's Series C Preferred Stock and approximately 96 holders of
record of the Company's D Preferred Stock.
No cash or stock dividends have been declared or paid during the last two
fiscal years. No cash dividends may be declared or paid on the Company's Common
Stock if, and as long as, the Series B Preferred Stock is outstanding or there
are unpaid dividends on outstanding shares of Series C Preferred Stock. No
dividends may be declared on the Series C Preferred Stock if, and as long as,
the Series B Preferred Stock is outstanding. Accordingly, it is unlikely the
Company will declare any cash dividends in the foreseeable future.
Executive Compensation
The following table sets forth, for the fiscal years ended July 31, 2001,
2000 and 1999, the compensation awarded to, earned by or paid to persons who
served as the Company's Chief Executive Officer or in similar function during
the fiscal year ended July 31, 2001, and such information with respect to other
most highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 for the fiscal year ended July 31, 2001 (collectively, the
"Named Executive Officers").
Long-Term Compensation
----------------------
Annual Compensation
Awards Payouts
Fiscal Other Restricted Securities All
Year Annual Stock underlying LTIP Other
Name and Principal Ended Salary Bonus Compensation Award Options Payouts Compen-
Position July 31 ($) ($) ($) ($) SARs ($) sation($)
- ------------------ ------- ------ ------ ------------ ---------- ---------- ------- ---------
Jerry E. Swon (1) 2001 75,000 25,000 (4) -0- -0- -0- (4)
President, CEO 2000 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
Bruce L. Deichl (2) 2001 75,000 25,000 (4) -0- -0- -0- (4)
COO, Secretary 2000 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
Robert M. Long (3) 2001 40,000 -0- -0- -0- -0- -0- -0-
Chairman of the Board 2000 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
26
- ----------
(1) Salary includes $25,000 paid to Mr. Swon for services in the period from
November 2000 through March 2001 under a consultancy arrangement. Mr. Swon also
received warrants to purchase 1,600,000 common shares of the Company,
exercisable during five years at $0.25 per share.
(2) Salary includes $25,000 paid to Mr. Deichl for services in the period from
November 2000 through March 2001 under a consultancy arrangement. Mr. Deichl
also received warrants to purchase 1,600,000 common shares of the Company,
exercisable during five years at $0.25 per share.
(3) Mr. Long served as the Company's chairman of the board until July 27, 2001.
(4) The named individual receives a non-accountable expense allowance of $1,500
per month. The value of other non-cash compensation paid to individuals named
above did not exceed 10% of the aggregate cash compensation or $50,000, paid to
such individual, or to all executive officers as a group.
The following table sets forth stock options and stock purchase warrants
granted during the fiscal year ended July 31, 2001 and subsequent thereto the
Named Executive Officers:
- --------------------------------------------------------------------------------
Number of Common %of Total Options
Shares(1) Underlying Granted to Employees Exercise Expiration
Name Options and Warrants in Fiscal Year Price ($/Sh.) Date
- --------------------------------------------------------------------------------
J.E. Swon 1,600,000 4.2% $0.25 4/1/2006
B. Deichl 1,600,000 4.2% $0.25 4/1/2006
Each of the Company's directors received 1,600,000 warrants to purchase
Company Common Stock at an exercise price of $0.25 per share for their services
as advisors of the Company and members of its Board of Directors. The warrants
have certain piggy-back registration rights. Directors who are non-officers or
non-employees may, at the Company's discretion, receive nominal compensation to
cover travel costs.
Management
The following is a summary of the employment agreements between the Named
Executive Officers and Millennium:
Jerry E. Swon. Pursuant to an employment agreement, dated April 1, 2001,
with Millennium, Jerry Swon is entitled to a base salary of $150,000 per year
pro rated for 2001; $250,000 per year for 2002; and $300,000 per year for the
following years. In the first year of the term, payment of up to 40% of Mr.
Swon's base salary shall be deferred until such time as Millennium, in its
reasonable judgment, has the financial resources to pay such deferred
compensation. Millennium acknowledges deferred compensation due to Mr. Swon as
of July 31,
27
2001, in the amount of $45,000 for services rendered prior to July 31, 2001. In
addition to the base salary Millennium may pay an annual bonus during each year
of the term, at its sole discretion. Mr. Swon also receives a monthly expense
allowance.
Bruce L. Deichl. Pursuant to an employment agreement, dated April 1, 2001,
with Millennium, Bruce Deichl is entitled to a base salary of $150,000 per year
pro rated for 2001; $250,000 per year for 2002; and $300,000 per year for the
following years. In the first year of the term, payment of up to 40% of Mr.
Deichl's base salary shall be deferred until such time as Millennium, in its
reasonable judgment, has the financial resources to pay such deferred
compensation. Millennium acknowledges deferred compensation due to Mr. Deichl as
of July 31, 2001, in the amount of $45,000 for services rendered prior to July
31, 2001. In addition to the base salary Millennium may pay an annual bonus
during each year of the term, at its sole discretion. Mr. Deichl also receives a
monthly expense allowance.
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations and Plan of Operation
Cautionary Statement Pursuant To "Safe Harbor" Provisions Of
Section 21E Of The Securities Exchange Act Of 1934
Except for historical information, the Company's reports to the Securities
and Exchange Commission on Form 10-KSB and Form 10-QSB and periodic press
releases, as well as other public documents and statements, including this
Information Statement, contain "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by the statements.
These risks and uncertainties include general economic and business conditions,
development and market acceptance of the Company's products, reliance on third
parties to produce the products, availability of Medicaid reimbursement for the
purchase of Company products and other risks and uncertainties identified in the
Company's reports to the Securities and Exchange Commission, periodic press
releases, or other public documents or statements.
Readers are cautioned not to place undue reliance on forward-looking
statements. The Company undertakes no obligation to republish or revise
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrences of unanticipated events.
Results of Operations:
The following information relates to the first quarter of the Company's
old fiscal year ending July 31, 2002. Please note that, on January 15, 2002, the
Company changed its fiscal year to December 31.
28
Quarter ended October 31, 2001
During the quarter ended October 31, 2001, the Company recorded its first
orders for Millennium's RESURGEX(TM) nutritional supplement, the Company's
premier product. This marked the culmination of an intensive effort during the
previous three quarters to complete product research and design, prepare the
product for market, and set up initial sales and distribution channels.
A successful marketing strategy for RESURGEX(TM) emphasizes support of
Medicaid and other organizations that provide reimbursement programs. Support in
this sense means that Medicaid includes RESURGEX(TM) in its universe of products
that qualify for reimbursement when prescribed by the medical profession. With
reimbursement covered, doctors can prescribe it to their patients and more
persons in need can have access to it. The recent inclusion of RESURGEX(TM) in
First Data Bank resulted in approval under the open formula category, by 42
states, including the important markets of New Jersey and Connecticut.
Separately, the Company has moved to obtain approval by Medicaid and ADAP in New
York, a most important market segment that does not currently subscribe to First
Data Bank's open formula categorization of RESURGEX(TM) for purpose of
reimbursement qualification in their area. . Revenues for the quarter ended
October 31, 2001, amounted to $36,355, all such revenues generated by the
Company's wholly owned subsidiary Millennium Biotechnologies, Inc. primarily
from the sales of the Company's proprietary RESURGEX(TM) product. This revenue
figure represents initial orders through not yet fully developed distribution
channels. Management believes that future quarters will see a marked
acceleration in product sales as those channels mature.
Gross profits during the quarter amounted to $11,286 for a 31% gross
margin. Costs-of-Goods sold contain certain non-linear expenses. Since direct
product costs are comparatively lower, the gross margin is expected to
significantly increase as revenues grow. After deducting selling expenses and
general and administrative expenses of $565,302 the Company realized an
operating loss of $554,016, compared to an operating loss of $103,488 for the
first quarter in fiscal year 2001. Non-operating expenses totaled $3,272
primarily in form of interest expense. The net result for the quarter was a loss
of $557,288 or $0.05 per share, compared to a loss of $54,838 or $0.01 per share
for the same period last year. Comparisons to last year, however, are of little
relevance, since the Company at that time had no revenues and virtually no
operations.
The quarter's net result was significantly affected by the need for
expenditures in connection with putting in place marketing and sales operations
and the supporting administrative infrastructure, resulting in relatively high
operating expenses. Management does not consider this atypical for a new company
engaged in launching a new product. The Company will continue to invest in
further expanding its operations and in a comprehensive
29
marketing campaign with the goal of accelerating the education of potential
clients and promoting the name and products of the Company.
The following information relates to the five month period from July 31,
2001, the end of the Company's old fiscal year, to December 31, 2001, the end of
the Company's new fiscal year.
Five Months Ended December 31, 2001
-----------------------------------
During the five month period ended December 31, 2001, the Company recorded
its first orders for Millennium's RESURGEX(TM) nutritional supplement, the
Company's premier product. Sales commenced in September 2001. This marked the
culmination of an intensive effort during the previous three quarters to
complete product research and design, prepare the product for market, and set up
initial sales and distribution channels.
A successful marketing strategy for RESURGEX(TM) emphasizes support of
Medicaid and other organizations that provide reimbursement programs. Support in
this sense means that Medicaid includes RESURGEX(TM) in its universe of products
that qualify for reimbursement when prescribed by the medical profession. With
reimbursement covered, doctors can prescribe it to their patients and more
persons in need can have access to it. The recent inclusion of RESURGEX(TM) in
First Data Bank resulted in approval under the open formula category, by 42
states, including the important markets of New Jersey and Connecticut.
Revenues for November and December, 2001, totaled $42,987, bringing total
revenues since the receipt of the first orders in September 2001 to $79,342. All
these revenues were generated by the Company's wholly owned subsidiary
Millennium Biotechnologies, Inc., primarily from the sales of the Company's
proprietary RESURGEX(TM) product. This revenue figure represents initial orders
through not yet fully developed distribution channels. Management believes that
future quarters will see a marked acceleration in product sales as those
channels mature.
Gross profits during the five months ended December 31, 2001 amounted to
$42,104 for a 53% gross margin. Costs-of-Goods sold contain certain non-linear
expenses. Since direct product costs are comparatively lower, the gross margin
is expected to significantly increase as revenues grow. After deducting selling
expenses and general and administrative expenses of 1,034,247, the Company
realized an operating loss of $992,143. Non-operating expenses totaled $20,028
primarily in the form of interest expense. The net result for the reporting
period was a loss of $1,012,171 or $0.07 per share. Comparisons to the same
period in last year are of little relevance, since the Company at that time had
no revenues and virtually no operations.
The period's net result was significantly affected by the need for
expenditures in connection with putting in place marketing and sales operations
and the supporting administrative infrastructure, resulting in relatively high
operating expenses. Management does not consider this atypical for a new company
engaged in launching a new product. The Company will continue to invest in
further expanding its operations and in a comprehensive marketing campaign with
the goal of accelerating the education of potential clients and promoting the
name and products of the Company.
30
Liquidity and Capital Resources
In view of the start-up nature of the Company's business at this stage in
its development, its operations were financed entirely by new equity investments
through private placements with accredited investors who, during the five
months' period ended December 31, 2001, purchased an aggregate 24,258 Series D
convertible preferred shares (convertible into common stock at the rate of 1
preferred share for 641.215 common shares) and 9,824,994 common shares that, in
the aggregate, added $1,960,000 to equity and working capital. This capital
inflow was more than sufficient to compensate for the negative cash-flow from
operations during the period and resulted in a working capital surplus of
$388,411 at December 31, 2001.
Management intends to further strengthen the Company's balance sheet and
liquidity reserves through additional capital transactions during the upcoming
quarters that involve further private placements of its equity securities with
accredited investors. Discussions with several such potential investors are
underway and are expected to yield positive results before the end of the first
quarter in 2002.
Plan of Operations
Through the new fiscal year ending December 31, 2002, the Company plans to
continue and expand the market introduction of RESURGEX(TM), initially in the
tri-state New York/New Jersey/Connecticut area and in Philadelphia, Baltimore
and Washington, D.C. and later throughout the U.S. and Canada. This program
involves the promotion of brand recognition through inclusion in the First Data
Bank network, cooperation with recognized personalities in the
medical/nutritional community, and direct sales efforts directed towards
pharmacies and physicians. Where necessary and desirable from a marketing point
of view, the Company will undertake to apply for approval by certain Medicaid
organizations that do not automatically adopt the First Data Bank open formula
categorization of RESURGEX(TM) for purpose of reimbursement qualification in
their area.
To accomplish the foregoing, the Company anticipates that it will need to
continue its research and development and significantly expand its sales force
and supporting infrastructure. To accommodate such larger operations, the
Company's administrative headquarters will move to larger facilities in the
north central New Jersey area in the Spring of 2002. Management believes, but
cannot assure that it will be able to cover the foregoing costs from cash on
hand from its recent and on-going financing activities, operating revenues and
the proceeds from future equity and/or debt securities offerings and warrant
exercises. In the event that expenses are greater than anticipated, revenues
from product sales are less than anticipated, proceeds
31
from future financings are less than anticipated and/or certain other unforeseen
circumstances occur, the Company may be required to cut back certain of its
activities.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
As reported by the Company in its Form 8-K filed on October 10, 2001, the
Company dismissed its former independent accountants, the firm of Wiener,
Goodman & Company, P.C., and appointed the accountants for its subsidiary,
Millennium, the firm of Rosenberg Rich Baker Berman and Company, as the
Company's independent auditors.
There were no disagreements with either accountant on accounting or
financial disclosure.
Financial Statements
The Company's unaudited financial statements at and for the quarter ended
October 31, 2001 are attached hereto as Exhibit C.
The Company's unaudited financial statements at and for the five months
ended December 31, 2001 are attached hereto as Exhibit D.
The Company's audited financial statements at and for the fiscal year
ended July 31, 2001 are attached hereto as Exhibit E.
Unaudited Pro forma Financial Information
Unaudited pro forma financial information that illustrates the effect of
the Merger as if such transaction took place on January 1, 1999 is attached
hereto as Exhibit F.
32
EXHIBIT "A"
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REGENT GROUP, INC.
Regent Group, Inc., a corporation organized and existing under the law of
the State of Delaware (the "Corporation"), which was originally incorporated
under the name NMC Corp. pursuant to the original certificate of incorporation
filed with the Secretary of State of the State of Delaware on November 28, 1967,
hereby certifies as follows:
At a meeting of the Board of Directors of the Corporation, a resolution
was duly adopted pursuant to Section 242 and 245 of the General Corporation Law
of the State of Delaware, setting forth a proposed amendment and restatement of
the Certificate of Incorporation of the Corporation and declaring its
advisability. The stockholders of the Corporation approved the proposed
amendment by written consent pursuant to Sections 228 and 242(b) of the General
Corporation Law of the State of Delaware, as follows:
RESOLVED, that the Certificate of Incorporation is hereby restated
and amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation (hereinafter called the "Corporation" or the
"Company") is "MILLENNIUM BIOTECHNOLOGIES GROUP, INC."
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, New
Castle County. The name of the registered agent at such address is the
Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
A-1
ARTICLE IV
A. REVERSE SPLIT.
Immediately prior to the filing of this Amended and Restated Certificate
of Incorporation, the Corporation was authorized to issue 20,000,000 shares of
common stock, par value $0.06-2/3 per share, of which 19,678,148 shares were
issued and outstanding and 321,852 shares were unissued. The Certificate of
Incorporation of the Corporation is hereby amended to effect a reverse split of
the Company's issued and outstanding common stock, par value $.06-2/3 per share,
in the ratio of one (1) share for every twelve (12) shares outstanding. All
fractional shares resulting from the reverse split will be rounded up to the
next whole share. As a result of this reverse split and the increase in the
number of authorized shares of common stock reflected in Paragraph B of this
Article IV, the number of shares of authorized common stock shall be increased
to 75,000,000, par value $.001 per share, of which approximately 1,639,846
shares will be issued and outstanding and approximately 73,360,154 shares will
be unissued.
B. AUTHORIZED SHARES.
Upon the filing of this Amended and Restated Certificate of Incorporation,
the aggregate number of shares of all classes of capital stock which the
Corporation shall have authority to issue shall be Seventy Five Million Five
Hundred Thousand (75,500,000) shares, consisting of:
(1) Five Hundred Thousand (500,000) shares of preferred stock, par
value $1.00 per share ("Preferred Stock"); and
(2) Seventy-Five Million (75,000,000) shares of common stock, par
value $0.001 per share.
C. PREFERRED STOCK
1. Powers and Rights of Preferred Stock. Shares of Preferred Stock
may be issued from time to time in one or more series as may be determined from
time to time by the Board of Directors, each such series to be distinctly
designated. All shares of any one series of Preferred Stock so designated by the
Board of Directors shall be alike in every particular, except that shares of any
one series issued at different times may differ as to the dates from which
dividends thereon shall accrue and/or be cumulative. The voting rights, if any,
of each series and the preferences and relative, participating, optional other
special rights of each series and the qualifications, limitations and
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding; and the Board of Directors of the Corporation is hereby
expressly granted authority to fix, by resolutions duly adopted prior to the
issuance of any shares of a particular series of Preferred Stock so designated
by the Board of Directors, the voting powers of stock of such series, if any,
and the designations, preferences and relative,
A-2
participating, optional and other special rights and the qualifications,
limitations and restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(a) The rate and times at which, and the terms and conditions on
which, dividends on Preferred Stock of such series will be paid;
(b) The right, if any, of the holders of Preferred Stock of such
series to convert the same into, or exchange the same for, shares of other
classes or series of stock of the Corporation and the terms and conditions
for such conversion or exchange, including provision for adjustment of the
conversion price or rate in such events as the Board of Directors shall
determine;
(c) The redemption price or prices and the time or times at which,
and the terms and conditions on which, Preferred Stock of such series may
by redeemed; and
(d) The rights of the holders of Preferred Stock of such series upon
the voluntary or involuntary dissolution, liquidation or winding up on the
Corporation.
Shares of one or more series of Preferred Stock may be authorized or
issued in an aggregate amount not exceeding the total number of shares of
Preferred Stock authorized by this Certificate of Incorporation, from time to
time as the Board of Directors shall determine, and for such lawful
consideration as shall be fixed by the Board of Directors.
2. Designations, Preferences and Rights of Series B and C
Convertible Preferred Stock
(1) Designation; Number of Shares.
(a) Sixty-Five Thousand One Hundred Forty-One (65,141)
shares of Preferred Stock shall be designated as and shall
constitute the "Series B Convertible Preferred Stock", par
value $1.00 per share (the "Series B Preferred); and
(b) Sixty-Four Thousand Seven Hundred Sixty-Three
(64,763) shares shall be designated as and shall constitute
the "Series C Convertible Preferred Stock", par value $1.00
per share (the "Series C Preferred").
A-3
(2) Dividends. The holders of Series B Preferred shall not
receive any dividends. The holders of Series C Preferred shall be entitled to
receive, out of funds legally available therefor, as and when declared by the
Board of Directors, cash dividends at the rate of $.65 per share per annum, and
no more, payable annually on May 31 in each year commencing with the May 31 next
following the first day on which none of the shares of the Series B Preferred
remain outstanding to stockholders of record on the date fixed for such purpose
by the Board of Directors in advance of payment of such dividend in each year.
Dividends upon the Series C Preferred shall be cumulative annually commencing
the first day on which none of the shares of the Series B Preferred remain
outstanding so that, if in respect of any past dividend period or periods full
dividends upon the outstanding Series C Preferred at the rate fixed therefor
shall not have been paid, the deficiency shall be declared and paid or set apart
for payment before any cash dividends shall be declared and paid or set apart
for payment upon the Common Stock. A dividend period shall begin on June 1 in
each year and end on the next succeeding May 31, provided, however, that if the
first day on which none of the shares of the Series B Preferred remain
outstanding shall be other that June 1, the initial dividend period shall begin
on such day and end on the next succeeding May 31 and the dividend payable on
such May 31 shall be the product obtained (rounded to the next lower cent ) by
multiplying the annual dividend per share by a fraction, the numerator of which
is the number of days in the initial dividend period and the denominator is 365.
(3) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, then (a) before any
distribution or payment shall be made to the holders of Series C Preferred or
Common Stock, the holders of the Series B Preferred shall be entitled to receive
for each share thereof the sum of $2, and (b) before any distribution or payment
shall be made to the holders of Common Stock, the holders of Series C Preferred
shall be entitled to receive for each share thereof the sum of $10, plus a sum
equal to accrued and unpaid dividends thereon, if any, whether or not earned or
declared. After payment to the holders of the Series B Preferred and Series C
Preferred as set forth above the holders of Preferred Stock of any such series
shall have no claims to any of the remaining assets of the Corporation. If upon
any such liquidation, dissolution, or winding up of the Corporation, the assets
distributable among the holders of the Series B Preferred shall be insufficient
to permit the payment in full to such holders of the preferential amounts
aforesaid, then the entire assets of the Corporation so to be distributed shall
be distributed ratably among the holders of the Series B Preferred. If upon any
such liquidation, dissolution, or winding up of the Corporation, the assets
distributable among the holders of the Series C Preferred shall be insufficient
to permit payment in full to such holders of the preferential amounts aforesaid,
then the entire assets of the Corporation so to be distributed shall be
distributed ratably among the holders of the Series C Preferred.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, subject to all of the preferential rights of the
holders of Preferred Stock on distribution or otherwise, the holders of Common
Stock shall be entitled to receive ratably all remaining assets of the
Corporation.
A-4
Nothing herein contained, however, shall be deemed to prevent the
redemption or purchase of Series B Preferred or Series C Preferred in the manner
permitted or prescribed by Article IV.C.2(4) and (5) hereof. Neither the merger
or consolidation of the Corporation with or into another corporation or
corporations nor the sale, transfer or lease of all or any part of the assets of
the Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Article IV.C.2(3).
(4) Redemption. (a) The shares of Series B Preferred and
Series C Preferred shall be redeemable, upon the terms and conditions provided
herein, at any time as a whole or from time to time in part at the following
redemption prices per share (except that no shares of Series C Preferred shall
be redeemable so long as any shares of Series B Preferred remain outstanding):
Series Redemption Prices
------------------------------------------------------------
Series B Preferred $ 2.00
Series C Preferred $10.00
together with, in the case of Series C Preferred, an amount equal to accrued and
unpaid dividends thereon, if any, to the date fixed for redemption, whether or
not earned or declared (the "redemption price"). If less than all the
outstanding shares of Series B Preferred or Series C Preferred are to be called
for redemption, the shares to be redeemed may be selected by lot or pro rata or
by any other means which the Board of Directors deems equitable.
(b) Notwithstanding any redemption which may be effected
at the option of the Corporation as provided in Article IV.C.2(4)(a), the Series
B Preferred shall be subject to redemption pursuant to Article IV.C.2(5) hereof.
(c) Notice of any proposed redemption, stating the
redemption date, the redemption price and the place of payment thereof and, if
less than all of the shares of Series B Preferred or Series C Preferred held by
any holder are to be redeemed, identifying the number of shares of such holder
to be redeemed, shall be mailed at least 10 days prior to the date fixed for
such redemption to each holder of record of the shares to be redeemed, at his
address as it appears on the records of the Corporation. Neither failure to mail
any such notice to one or more such holders nor any defect in any such notice
shall affect the sufficiency of the proceedings for redemption as to other
holders. From and after the date fixed in such notice as the date of redemption
(unless default be made by the Corporation in providing moneys for payment of
the redemption price ) all dividends, if any, upon the shares thereby called for
redemption shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive payment of the
redemption price thereof upon the surrender of certificates representing the
same) shall cease and determine, and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
(d) If the Corporation shall deposit as a trust fund in
any bank or trust company in the City of New York having a capital and surplus
of at least
A-5
$50,000,000 according to its last published statement of condition, a sum
sufficient to redeem on the date fixed for redemption thereof, any shares of
Series B Preferred or Series C Preferred called for redemption, with irrevocable
instructions and authority to such bank or trust company to pay the redemption
price of such shares to the holders thereof upon surrender of the certificate or
certificates evidencing the shares to be redeemed, then from and after the date
of such deposit (even if prior to the date fixed for redemption) such shares
shall not be deemed to be outstanding for any purpose whatsoever and all rights
of the holders of such shares shall cease and terminate except only the right to
receive the redemption price, and the right, if any, to convert such shares into
shares of Common Stock. Any funds so deposited which shall not be required for
such redemption because of the exercise of the right of conversion after the
data of such deposit shall be returned to the Corporation forthwith. Any funds
so deposited which shall remain unclaimed by such holders at the end of five
years after the date of redemption shall be paid by the bank or trust company
with which such deposit shall have been made to the Corporation, and thereafter
such holders shall look only to the Corporation therefor. Any interest which
such bank or trust company may allow on funds so deposited shall be paid to the
Corporation from time to time.
(e) Nothing herein shall be deemed to prohibit the
purchase of Series B Preferred or Series C Preferred, either at public or
private sale, of the whole or any part of one or more such series; provided,
however, that no such purchase shall be made at a price (excluding customary
brokerage paid) greater that the redemption price thereof.
(f) Any shares of Series B Preferred or Series C
Preferred so redeemed or purchased and any shares of Series B Preferred redeemed
by operation of the Series B Sinking Fund, respectively, shall be permanently
retired, shall no longer be deemed outstanding and shall not be reissued and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized number of shares of each such series
accordingly and to restore the shares so retired to the status of authorized and
unissued Preferred Stock.
(5) Series B Preferred Sinking Fund (a) So long as any of the
Series B Preferred shall be outstanding, the Corporation, as a sinking fund for
the redemption of the Series B Preferred (hereinafter called the "Series B
Sinking Fund") shall set aside on its books on or before May 20 in each year
commencing with the year 1976 to and including the year 1979 a sum (a "Series B
Sinking Fund Installment") sufficient to redeem on June 1 of such year, at the
redemption price thereof, the lesser of (i) 25% of the maximum number of shares
of Series B Preferred outstanding at any time and (ii) all of the then
outstanding shares of Series B Preferred.
The Corporation may, in lieu of setting aside the sum required to be
set aside for any Series B Sinking Fund Installment, apply to such Series B
Sinking Fund Installment shares of Series B Preferred theretofore acquired by it
by purchase or by redemption (otherwise than through operation of the Series B
Sinking Fund) or as a result of conversions (and, in any case, not theretofore
applied to the Series B Sinking Fund), and the Corporation
A-6
shall be entitled to treat any shares so applied as the equivalent of money at
the redemption price thereof.
(b) Any amount in the Series B Sinking Fund on May 20 in
each year shall, to the extent permitted by law, be used to redeem on the
following June 1 in the manner set forth in Article IV.C.2(4) such number of
shares of Series B Preferred as shall exhaust the moneys then in the Series B
Sinking Fund (provided, however, that if such moneys do not exceed $10,000, the
Corporation may, but, except in the case of the year 1979, shall not be required
to, make such redemption) at the redemption price. Any balance remaining in the
Series B Sinking Fund after such redemption shall be retained in the Series B
Sinking Fund but shall not reduce the Corporation's obligation with respect to
any future Series B Sinking Fund Installment. When no shares of Series B
Preferred shall remain outstanding, any balance in the Series B Sinking Fund
shall become part of the general funds of the Corporation and be available for
general corporate purposes.
(6) Conversion Provisions. (a) Shares of Series B Preferred
may be converted, at the option of the holder, in the manner hereinafter
provided, into shares of Common Stock of the Corporation (as such shares may be
constituted on the conversion date) at the rate of one-twelfth (1/12) of one
share of Common Stock for each share of Series B Preferred, subject to
adjustment as provided herein; provided, however, that as to any shares of
Series B Preferred which shall have been called for redemption, the conversion
right shall terminate at the close of business on the third business day prior
to the date fixed for redemption. Shares of Series C Preferred shall not be
convertible.
(b) The holder of a share or shares of Series B
Preferred may exercise the conversion right as to any thereof by delivering to
the Corporation during regular business hours at the office of any transfer
agent of the Corporation for Series B Preferred, or at such other place as may
be designated by the Corporation, the certificate or certificates for the shares
to be converted, duly endorsed or assigned in blank or to the Corporation (if
require by it), accompanied by written notice stating that the holder elects to
convert such shares and stating the name or names (with address) in which the
certificate or certificates for Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery is made, and such
date is referred to herein as the "conversion date". As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written order
of such holder, at such office or other place designated by the Corporation, a
certificate or certificates for the number of full shares of Common Stock to
which he is entitled. The person in whose name the certificate or certificates
of Common Stock are to be issued shall be deemed to have become a stockholder of
record on the conversion date. No payment or adjustment shall be made for
dividends on any shares of Common Stock delivered upon conversion. Upon any
conversion, fractional shares shall not be issued but any fraction shall be
adjusted in cash on the basis of the market price for shares of Common Stock at
the close of business on the last business day before the conversion date unless
the Board of Directors shall determine to adjust them by the issuance of
fractional scrip certificates or in some other manner. The Corporation shall pay
all issue taxes, if any, incurred in respect of the issue of
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the Common Stock on conversion, provided, however, that the Corporation shall
not be required to pay any transfer or other taxes incurred by reason of the
issuance of such Common Stock in names other than those in which the Series B
Preferred surrendered for conversion may stand.
Anything herein to the contrary notwithstanding if, at the time of
delivery of shares of Series B Preferred for conversion, the Common Stock
issuable upon conversion shall not be registered under the Securities Act of
1933, as amended, the Corporation may require, as a condition of allowing such
conversion, that the person to whom shares of Common Stock are to be issued and
delivered upon conversion furnish to the Corporation such information and
representations as, in the opinion of counsel for the Corporation, are
reasonably necessary or appropriate to establish that such shares may be issued
without registration under said Act, including representations that such shares
will not be sold except pursuant to an effective registration under said Act or
pursuant to an exemption therefrom established to the reasonable satisfaction of
such counsel. Each certificate representing shares of Common Stock issued upon
conversion may be stamped or otherwise marked with a legend regarding the
restrictions on the transferability thereof and appropriate stop transfer orders
may be place on the stock transfer records of the Corporation.
(c) The conversion rate for the Series B Preferred
provided in subparagraph (a) shall be subject to the following adjustments,
which shall be made to the nearest one-hundredth of a share of Common Stock or,
if none, to the next lower one-hundredth:
(i) If the Corporation shall pay to the holders of
its Common Stock a dividend in shares of Common Stock or in securities
convertible into Common Stock, the respective conversion rates in effect
immediately prior to the record date fixed for the determination of the holders
of Common Stock entitled to such dividend shall be proportionately increased,
effective at the opening of business on the business day next following such
record date.
(ii) If the Corporation shall split the
outstanding shares of its Common Stock into a greater number of shares or
combine the outstanding shares into a smaller number, the respective conversion
rates in effect immediately prior to such action shall be proportionately
increased in the case of a split of decreased in the case of a combination,
effective at the opening of business on the business day next following the day
such action becomes effective.
(d) In case of any reclassification or change of the
outstanding shares of Common Stock of the Corporation (except a split or
combination or shares) or in case of any consolidation or merger to which the
Corporation is a party (except a merger in which the Corporation is the
surviving corporation and which does not result in any reclassification of or
change in the outstanding Common Stock of the Corporation except a split of
combination of shares) or in case of any sale or conveyance to another
corporation of all or substantially all of the property of Corporation,
effective provision shall be made by the
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Corporation or by the successor or purchasing corporation (1) that the holder of
each share of Series B Preferred then outstanding shall thereafter have the
right to convert such share into the kind and amount of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock of the Corporation into which such share of Series B Preferred
might have been converted immediately prior thereto, and (2) that there shall be
subsequent adjustments of the respective conversion rates which shall be
equivalent, as nearly as practicable, to the adjustments provided for in Article
IV.C.2(6)(c) above. The provisions of this Article IV.C.2(6)(d) shall similarly
apply to successive reclassifications, changes, consolidations, mergers, sales
or conveyances.
(e) Whenever the conversion rate is adjusted as herein
provided, the Corporation shall forthwith file at its principal office and with
the transfer agent or agents for the Series B Preferred a statement signed by an
officer of the Corporation showing in detail the facts requiring such adjustment
and the conversion rate after such adjustment, and shall make such statement
available for inspection by stockholders of the Corporation, and any adjustment
so evidenced, made in good faith, shall be binding upon all stockholders and
upon the Corporation.
(f) Shares of Common Stock issued on conversion of
shares of Series B Preferred shall be issued as fully paid shares and shall be
non-assessable by the Corporation. The Corporation shall at all times reserve
and keep available, free from preemptive rights, for the purpose of effecting
the conversion of Series B Preferred, such number of its duly authorized shares
of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of Series B Preferred.
(g) Shares of Series B Preferred Stock converted as
provided herein shall be permanently retired, shall no longer be deemed
outstanding and shall not be reissued and the Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of each such series accordingly and to restore such
shares so retired to the statues of authorized but unissued preferred Stock.
(7) Voting Rights. (a) Except as otherwise providing herein
and except as provided by statute, neither the Series B Preferred, nor the
Series C Preferred shall have any voting rights.
(b) If the Corporation shall have defaulted in complying
with the requirements of Article IV.C.2(5) hereof, and such default or defaults
shall have continued for at least 90 days, the number of directors of the
Corporation shall be increased by four at the first annual meeting of the
stockholders of the Corporation held thereafter, and at such meeting and at each
subsequent annual meeting until the Corporation shall have cured all defaults in
complying with the requirements of Article IV.C.2(5), the holders of shares of
Series B Preferred and the holders of shares of Series C Preferred shall have
the right, voting as
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separate classes, each to elect two of such four additional members of the Board
of Directors to hold office for the term of one year unless such term is sooner
terminated as hereinafter provided; provided, however, that if at the time of
such first annual meeting no shares of Series B Preferred or Series C Preferred
shall be outstanding, the number of directors shall be increased by two, instead
of four, and such additional two directors shall be elected at such meeting and
at each subsequent annual meeting as aforesaid by the holders of the shares of
the series which remains outstanding. When all such defaults shall have been
cured, the terms of the additional directors so elected shall forthwith
terminate, and the number of directors of the Corporation shall be reduced
accordingly, and such voting right of the holders of shares of Series B
Preferred and Series C Preferred shall cease, subject to increase in the number
of directors as aforesaid and revesting of such voting right in the event of
each and every additional default in compliance with the requirements of Article
IV.C.2(5) hereof. The terms of the two additional directors elected by the
holders of Series B Preferred or Series C Preferred, as the case may be, shall
also forthwith terminate and the number of directors reduced by two when all
shares of the series, the holders of which have elected such additional
directors, have been retired.
(c) Nothing contained herein shall limit or restrict the
holders of Series B or Series C Preferred Stock from exercising any rights or
remedies available to them under applicable law.
(8) Dividend Restriction. The Corporation shall not declare or
pay any dividend on Common Stock of the Corporation (other than a dividend
payable solely in shares of Common Stock) on or prior to June 1, 1976 and not
thereafter if, and so long as, (a) the Corporation shall be in default in
complying with the requirements of Article IV.C.2(5) hereof, or (b) the
Corporation shall be in default in the payment of dividends on any outstanding
shares of Series C Preferred provided, however that the foregoing restrictions
shall terminate when no shares of Series B Preferred and Series C Preferred are
outstanding.
3. Designations, Preferences and Rights
of Series D Preferred Stock
(1) Designation; Number of Shares. Three Hundred Seventy
Thousand (370,000) shares of Preferred Stock shall be designated as and shall
constitute the "Series D Preferred Stock", par value $1.00 per share.
(2) Rank. The Series D Preferred Stock shall rank prior to all
of the Company's common stock, $.001 par value per share (the "Common Stock"),
and any other capital stock of the Company, now outstanding or hereafter issued
(such Common Stock and other capital stock being referred to herein collectively
as "Junior Stock"), except for preferred stock of any class established after
July 26, 2001, which ranks on a par with the Series D Preferred Stock and Senior
Stock (as hereinafter defined), as to declaration of dividends and distributions
of assets upon the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary. "Senior Stock" shall mean one or more series
of preferred stock hereafter authorized and designated as ranking prior to the
Series D Preferred Stock, both as to
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payments of dividends and as to distributions of assets upon the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary. The
Series D Preferred Stock shall rank junior to all Senior Stock, both as to
payments of dividends and as to distributions of assets upon the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary.
(3) Dividends. The shares of Series D Preferred Stock shall
not bear any dividends.
(4) Distribution of Assets Upon Liquidation. Subject to the
preferential rights of the Senior Stock, in the event the Company shall be
liquidated, dissolved or wound up, whether voluntarily or involuntarily, each
holder of shares of Series D Preferred Stock and the holders of shares of any
other class of stock ranking on parity with the Series D Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Company shall be entitled to receive, ratably with the other holders of shares
of Series D Preferred Stock, that portion of the assets of the Company available
for distribution to its stockholders as the liquidation preference of the Series
D Preferred Stock held by such holder bears to the aggregate liquidation
preference of the total number of (a) shares of Series D Preferred Stock and (b)
shares of any other class or series of preferred stock equal in rank with Series
D Preferred Stock as to the distribution of assets upon liquidation, dissolution
or winding up of the Company.
(5) Voting Rights. Each holder of outstanding shares of Series
D Preferred Stock shall be entitled to the number of votes equal to the number
of whole shares of Common Stock into which the share of Series D Preferred Stock
held by such holder would then be convertible assuming a sufficient number of
shares of Common Stock were then authorized and available for issuance (as
adjusted from time to time pursuant to Article IV.C.3(6) hereof), at each
meeting of the stockholders of the Company (and written actions of stockholders
in lieu of meetings) with respect to any and all matters presented to the
stockholders of the Company for their action or consideration (including without
limitation, any matter voted on together with the holders of Common Stock).
Except as provided by law, by any of the provisions contained herein or by the
provisions establishing any other series of stock, holders of Series D Preferred
Stock shall vote together with the holders of Common Stock as a single class.
(6) Conversion of Preferred Shares. The shares of Series D
Preferred Stock shall be convertible into shares of Common Stock at the rate of
53.4345833 shares of Common Stock for each share of Series D Preferred Stock,
subject to adjustment as set forth in Article IV.C.3(6)(c) below (the
"Conversion Rate"), on the terms and conditions set forth in this Article
IV.C.3(6).
(a) Mandatory Conversion. At any time, at the Company's
option, upon the vote of the majority of the Board of Directors of the Company,
all but not less than all of the shares of Series D Preferred Stock shall be
automatically converted into shares of Common Stock at the Conversion Rate then
in effect (a "Mandatory Conversion");
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provided, in no event shall the Company require a Mandatory Conversion until
such time as there is a sufficient number of authorized but unissued shares of
Common Stock available for issuance upon conversion of all of the issued and
outstanding shares of Series D Preferred Stock.
In the event that the Company elects to effect a Mandatory Conversion, the
Company shall deliver to each holder of outstanding shares of Series D Preferred
Stock a notice setting forth such election to effect Mandatory Conversion (the
"Mandatory Conversion Notice"). Upon receipt of the Mandatory Conversion Notice,
each holder of Series D Preferred Stock shall, as soon as practical, surrender
its or his/her certificate or certificates of Series D Preferred Stock, duly
endorsed, at the principal executive office of the Company or of any transfer
agent for the Series D Preferred Stock and shall give written notice to the
Company at its principal executive office of the names or names in which the
certificate or certificates for shares of Common Stock are to be issued. The
Company shall, as soon as practical thereafter, issue or cause to be issued and
deliver to such holder of Series D Preferred Stock, or to the nominee or
nominees thereof, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled. Mandatory Conversion under
this Article IV.C.3(6)(a) shall be deemed to have been made, and the person or
persons entitled to receive shares of Common Stock issuable upon the Mandatory
Conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock, immediately prior to the close of business on the
date the Board of Directors of the Company approves the Mandatory Conversion.
(b) No Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of shares of Series D Preferred Stock;
instead, the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole number.
(c) Adjustments of Conversion Rate for Stock Dividends,
Subdivisions, Combinations or Consolidation of Common Stock.
(i) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then on the date such payment is made or such change is effective,
the Conversion Rate of the Series D Preferred Stock shall be increased so that
the number of shares of Common Stock issuable on conversion of any shares of the
Series D Preferred Stock shall be increased in proportion to such increase of
outstanding shares.
(ii) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then on the effective date of such
combination, the Conversion Rate for each series of Series D Preferred Stock
shall be decreased so that the number of shares of Common Stock issuable on
conversion of shares of the Series D Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
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(d) In the event any shares of Series D Preferred Stock
shall be converted pursuant to this Article IV.C.3(6) or otherwise reacquired by
the Company, the shares so converted or reacquired shall be canceled, may not be
reissued as Series D Preferred Stock and shall revert to the status of
authorized but unissued and undesignated shares of Preferred Stock and may be
redesignated and reissued.
(7) Reservation of Shares. As soon as practicable, the Company
shall hold a meeting of its stockholders for the authorization of (i) an
increase in the number of authorized shares of Common Stock or (ii) a
subdivision of the outstanding shares of Common Stock and to take any other
action as may be necessary to have available out of the Company's authorized and
unissued Common Stock, a number of shares of Common Stock as shall be sufficient
to effect the Mandatory Conversion. Thereafter, the Company shall, so long as
any of shares of Series D Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued shares of Common Stock, for the
purpose of effecting the Mandatory Conversion, such number of its authorized
shares of Common Stock as shall from time to time be sufficient to effect the
Mandatory Conversion.
(8) Lost or Stolen Certificates. Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificate representing the shares of Series D
Preferred Stock and, in the case of loss, theft or destruction, of any
indemnification undertaking by the holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of the certificate,
the Company shall execute and deliver a new preferred stock certificate of like
tenor and date.
(9) Specific Shall Not Limit General; Construction. No
specific provision contained in this Article IV.C.3 shall limit or modify any
more general provision contained herein.
D. COMMON STOCK
1. Voting Rights. All shares of Common Stock shall be entitled to
vote at all meetings of stockholders, each share entitled to one vote. Except as
otherwise provided by law, in this Amended and Restated Certificate of
Incorporation or by action of the Board of Directors in granting voting rights
to the shares of any series of Preferred Stock, the entire voting powers of the
Corporation shall be vested in the Common Stock.
2. Dividends. After any requirements with respect to preferential
dividends upon the share of any series of Preferred Stock shall have been met,
each share of Common Stock shall be entitled to receive dividends when and as
declared by the Board of Directors.
3. Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, and after
payment to the holders of any series of Preferred Stock of preferential amounts
to which they are entitled, the holders of the
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shares of Common Stock (and of any series of Preferred Stock at the time
entitled thereto) shall share equally, share and share alike, in any assets
available for distribution to stockholders.
4. Merger. In the event of merger or consolidation, Common Stock
(and any series of Preferred Stock if by its terms at the time entitled thereto)
shall be treated equally on a share for share basis.
ARTICLE V
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders.
(1) Election of directors need not be by written ballot unless the
By-Laws so provide.
(2) The Board of Directors is expressly authorized and empowered to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation, subject to the power of the stockholders of the Corporation
to alter or repeal any By-Laws made by the Board of Directors.
(3) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby authorized
and empowered, without any vote or other action by stockholders other than
such as at the time shall be expressly required by statute or by the
provisions hereof (and amendments hereof, if any) or of the By-Laws, to
exercise all of the powers, rights and privileges of the Corporation
(whether expressed or implied herein or conferred by statute) and do all
acts and things which may be done by the Corporation.
ARTICLE VI
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware is hereafter amended to authorize
corporate action further limiting or eliminating the personal liability of
directors, then the liability of a director to the Corporation shall be limited
or eliminated to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended from time to time. No repeal or
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modification of this Article VI, directly or by adoption of an inconsistent
provision of this Certificate of Incorporation, by the stockholders of the
Corporation shall be effective with respect to any cause of action, suit, claim
or other matter, that, but for this Article VI, would accrue or arise prior to
such repeal or modification.
ARTICLE VII
The Corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons, including directors, officers,
employees and agents of the Corporation, whom it shall have power to indemnify
under said section (the "Indemnitee") from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation shall pay in advance of the final disposition of such Indemnitee
upon the receipt of an undertaking by or on behalf of such Indemnitee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VII.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability, or loss, whether or not the Corporation would have the
power to indemnity such person against such expense, liability or loss under the
General Corporation Law.
ARTICLE VIII
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association of other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose if (i) the material facts as to his or
her relationship or interest and as to the contract or transaction are disclosed
or are known to the Board of Directors, and the Board of Directors in good faith
authorizes the contract or transaction by the affirmative votes of the a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum, or (b) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith of such stockholders, or (c) the
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contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors or the stockholders
entitled to vote thereon. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes the contract or transaction.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and other persons are subject to this reserved power.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by Jerry E. Swon, its president, as of
the ___ day of ___________, 200_.
___________________________________
Jerry E. Swon, President
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EXHIBIT B
MILLENNIUM BIOTECHNOLOGIES GROUP, INC.
2001 STOCK OPTION PLAN
1. Purpose
The purpose of the 2001 Stock Option Plan ("Plan") is to provide a method
whereby selected key employees, selected key consultants, professionals and non-
employee directors of Millennium Biotechnologies Group, Inc. ("Corporation") and
its subsidiaries may have the opportunity to invest in shares of the
Corporation's Common Stock ("Common Stock" or "Shares"), thereby giving them a
proprietary and vested interest in the growth and performance of the
Corporation, and in general, generating an increased incentive to contribute to
the Corporation's future success and prosperity, thus enhancing the value of the
Corporation for the benefit of stockholders. Further, the Plan is designed to
enhance the Corporation's ability to attract and retain individuals of
exceptional managerial talent upon whom, in large measure, the sustained
progress, growth, and profitability of the Corporation depends.
2. Administration
The Plan shall be administered by the Corporation's Board of Directors
("the Board") or if so designated by resolution of the Board by a Committee
("Committee") in accordance with Rule 16b-3 of the Securities Exchange Act of
1934 ("Exchange Act"). Any Committee which has been delegated the duty of
administering the Plan by the Board shall be composed of two or more persons
each of whom (i) is a Non-Employee Director as defined in Rule 16b-3 and (ii) is
an outside director as defined in 162(m)(4) of the Internal Revenue Code, as
amended (the "Code"). To the extent reasonable and practicable, the Plan shall
be consistent with the provisions of Rule 16b-3 to the degree necessary to
ensure that transactions authorized pursuant to the Plan are exempt from the
operation of Section 16(b) of the Exchange Act. If such a Committee is
appointed, the Committee shall have the same power and authority to construe,
interpret and administer the Plan and from time to time adopt such rules and
regulations for carrying out this Plan as it may deem proper and in the best
interests of the Company as does the Board. Any reference herein to the Board
shall, where appropriate, encompass a Committee appointed to administer the Plan
in accordance with this Section 2. From time to time the Board, or if so
designated the Committee, may grant stock options ("Stock Options" or "Options")
to such eligible parties and for such number of Shares as it in its sole
discretion may determine. A grant in any year to an eligible Employee (as
defined in Section 3 below) shall neither guarantee nor preclude a grant to such
Employee in subsequent years. Subject to the provisions of the Plan, the Board,
shall be authorized to interpret the Plan, to establish, amend and rescind any
rules and regulations relating to the Plan, to determine the terms and
provisions of the Option agreements described in Section 5(h) thereof to make
all other determinations necessary or advisable for the administration of the
Plan. The Board, or if so designated the Committee, may correct any defect,
supply any omissions or reconcile any inconsistency in the Plan or in any
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Option in the manner and to the extent it shall deem desirable. The
determinations of the Board in the administration of the Plan, as described
herein, shall be final and conclusive. The validity, construction, and effect of
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware.
3. Eligibility
The class of employees eligible to participate under the Plan shall
include, employees of the Corporation, key consultants or professionals and
non-employee directors of the Company and its subsidiaries (collectively and
individually, "Employees"). Nothing in the Plan or in any agreement thereunder
shall confer any right on an Employee or key vendor of goods and services to
continue in the employ of the Corporation or shall interfere in any way with the
right of the Corporation or its subsidiaries, as the case may be, to terminate
his employment at any time.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 7, an aggregate of 1,500,000
shares of Common Stock* shall be available for issuance under the Plan. The
shares of Common Stock deliverable upon the exercise of Options may be made
available from authorized but unissued Shares or Shares reacquired by the
Corporation, including Shares purchased in the open market or in private
transactions. If any Option granted under the Plan shall terminate for any
reason without having been exercised or settled in Common Stock or in cash
pursuant to related Common Stock appreciation rights, the Shares subject to, but
not delivered under, such Option shall be available for other Options.
5. Grant Term and Conditions of Options
The Board or if so designated the Committee, may from time to time after
consultation with management select employees to whom Stock Options shall be
granted. The Options granted may be incentive Stock Options ("Incentive Stock
Options") within the meaning of Section 422 of the Code, or non-statutory Stock
Options ("Non-statutory Stock Options"), whichever the Board, or if so
designated the Committee, shall determine, subject to the following terms and
conditions:
----------
* The above mentioned 1,500,000 shares are deemed post reverse
split, following the 1 for 12 reverse split approved by majority of
stockholders on December 3, 2001.
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(a) Price. The purchase price per share of Common Stock deliverable
upon exercise of each Incentive Stock Option shall not be less than 100
percent of the Fair Market Value of the Common Stock on the date such
Option is granted. Provided, however, that if an Incentive Stock Option is
issued to an individual who owns, at the time of grant, more than ten
percent (10%) of the total combined voting power of all classes of the
Company's Common Stock, the exercise price of such Option shall be at
least 110% of the Fair Market Value of the Common Stock on the date of
grant and the term of the Option shall not exceed five years from the date
of grant. The Option price of Shares subject to Non-statutory Stock
Options shall be determined by the Board of Directors or Committee in its
absolute discretion at the time of grant of such Option, provided that
such price shall not be less than 85% of the Fair Market Value of the
Common Stock at the time of grant. For purposes of this plan, Fair Market
Value shall be: (i) the average of the closing Bid and Ask prices for the
Common Stock on the date in question or if no trading market exists for
the Common Stock, Fair Market Value shall be determined by the Board of
Directors.
(b) Payment. Options may be exercised only upon payment of the
purchase price thereof in full. Such payment shall be made in such form of
consideration as the Board or Committee determines and may vary for each
Option. Payment may consist of cash, check, notes, delivery of shares of
Common Stock having a fair market value on the date of surrender equal to
the aggregate exercise price, or any combination of such methods or other
means of payment permitted under the Delaware General Corp. Law.
(c) Term of Options. The term during which each Option may be
exercised shall be determined by the Board, or if so designated the
Committee, provided that an Incentive Stock Option shall not be
exercisable in whole or in part more than 10 years from the date it is
granted. All rights to purchase Common Stock pursuant to an Option shall,
unless sooner terminated, expire at the date designated by the Board or,
if so designated the Committee.
The Board, or if so designated the Committee, shall determine the
date on which each Option shall become exercisable and may provide that an
Option shall become exercisable in installments. The Shares comprising
each installment may be purchased in whole or in part at any time after
such installment becomes purchasable, except that the exercise of
Incentive Stock Options shall be further restricted as set forth herein.
The Board, or if so designated the Committee, may in its sole discretion,
accelerate the time at which any Option may be exercised in whole or in
part, provided that no Option shall be exercisable until one year after
grant.
(d) Limitations on Grants. The aggregate Fair Market Value
(determined at the time the Option is granted) of the Common Stock with
respect to which the Incentive Stock Option is exercisable for the first
time by an Optionee during any calendar year (under all plans of the
Company and its parent or any subsidiary of the Corporation) shall
B-3
not exceed $100,000. The foregoing limitation shall be modified from time
to time to reflect any changes in Section 422 of the Code and any
regulations promulgated thereunder setting forth such limitations.
(e) Termination of Employment.
(i) If the employment of an Employee by the Company or a subsidiary
corporation of the Company shall be terminated voluntarily by the Employee
or for cause by the Company, then his Option shall expire forthwith.
Except as provided in subparagraphs (ii) and (iii) of this Paragraph (e),
if such employment shall terminate for any other reason, then such Option
may be exercised at any time within three (3) months after such
termination, subject to the provisions of subparagraph (iv) of this
Paragraph (e). For purposes of this subparagraph, an employee who leaves
the employ of the Company to become an employee of a subsidiary
corporation of the Company or a corporation (or subsidiary or parent
corporation of the corporation) which has assumed the Option of the
Company as a result of a corporate reorganization, etc., shall not be
considered to have terminated his employment.
(ii) If the holder of an Option under the Plan dies (a) while
employed by, or while serving as a non-employee Director for, the Company
or a subsidiary corporation of the Company, or (b) within three (3) months
after the termination of his employment or services other than voluntarily
by the employee or non-employee Director, or for cause, then such Option
may, subject to the provisions of subparagraph (iv) of this Paragraph (e),
be exercised by the estate of the employee or non-employee Director or by
a person who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of such employee or non-employee
Director at any time within one (1) year after such death.
(iii) If the holder of Option under the Plan ceases employment
because of permanent or total disability (within the meaning of Section 22
(e) (3) of the Code) while employed by the Company or a subsidiary
corporation of the Company, then such Option may, subject to the
provisions of subparagraph (iv) of this paragraph e, be exercised at any
time within one year after his termination of employment due to
disability.
(iv) An Option may not be exercised pursuant to this Paragraph (e),
except to the extent that the holder was entitled to exercise the Option
at the time of termination of employment, termination of Directorship, or
death, and in any event may not be exercised after the expiration of the
Option. For purpose of this Paragraph (e), the employment relationship of
an employee of the Company or of a subsidiary corporation of the company
will be treated as continuing intact while he is on military or sick leave
or other bona fide leave of absence (such as temporary employment by the
Government) if such leave does not exceed ninety (90) days, or, if longer,
so long as his right to reemployment is guaranteed either by statute or by
contract.
B-4
(f) Nontransferability of Options. No Option shall be transferable
by a Holder otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Employee to whom an Option is
granted it may be exercised only by the employee, his guardian or legal
representative if permitted by Section 422 and related sections of the
Code and any regulations promulgated thereunder.
(g) Listing and Registration. Each Option shall be subject to the
requirement that if at any time the Board, or if so designated the
Committee, shall determine, in its discretion, the listing, registration
or qualification of the Common Stock subject to such Option upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such Option or the
issue or purchase of Shares thereunder, no such Option may be exercised in
whole or in part unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions
not acceptable to the Board, or if so designated the Committee.
(h) Option Agreement. Each Employee, to whom an Option is granted,
shall enter into an agreement with the Corporation which shall contain
such provisions, consistent with the provisions of the Plan, as may be
established by the Board, or if so designated the Committee.
(i) Withholding. Prior to the delivery of certificates for shares of
Common Stock, the Corporation or a subsidiary shall have the right to
require a payment from an Employee to cover any applicable withholding or
other employment taxes due upon the exercise of an Option. An Optionee may
make such payment either (i) in cash, (ii) by authorizing the Company to
withhold a portion of the stock otherwise issuable to the Optionee, (iii)
by delivering already-owned Common Stock, or (iv) by any combination of
these means.
6. Stock Appreciation Rights
The Board or Committee may grant stock appreciation rights ("SARs") in
connection with all or any part of an Option granted under the Plan, either
concurrently with the grant of the Option or at any time thereafter, and may
also grant SARs independently of Options.
(a) SARs Granted in Connection with an Option. An SAR granted in
connection with an Option entitles the Optionee to exercise the SAR by
surrendering to the Company, unexercised, the underlying Option. The Optionee
receives in exchange from the Company an amount equal to the excess of (x) the
Fair Market Value on the date of surrender of the underlying Option (y) the
exercise price of the Common Stock covered by the surrendered portion of the
Option.
An SAR is exercisable only when and to the extent the underlying Option is
exercisable and expires no later than the date on which the underlying Option
expires. Notwithstanding the
B-5
foregoing, neither an SAR nor a related Option may be exercised during the first
six (6) months of its respective term: provided, however, that this limitation
will not apply if the Optionee dies or is disabled within such six (6) month
period.
(b) Independent SARs. The Board or the Committee may grant SARs without
related Options. Such an SAR will entitle the Optionee to receive from the
company on exercise of the SAR an amount equal to the excess of (x) the fair
market value of the Common Stock covered by the exercised portion of the SAR, as
of the date of such exercise, over (y) the fair market value of the Common Stock
covered by the exercised portion of the SAR as of the date on which the SAR was
granted.
SARs shall be exercisable in whole or in part at such times as the Board
or the Committee shall specify in the Optionee's SAR grant or agreement.
Notwithstanding the foregoing, an SAR may not be exercised during the first six
(6) months of its term: provided, however, that this limitation will not apply
if the Optionee dies or is disabled within such six (6) month period.
(c) Payment on Exercise. The Company's obligations arising upon the
exercise of an SAR may be paid in cash or Common Stock, or any combination of
the same, as the Board or the Committee may determine. Shares issued on the
exercise of an SAR are valued at their fair market value as of the date of
exercise.
(d) Limitation on Amount paid on SAR Exercise. The Board or the Committee
may in its discretion impose a limit on the amount to be paid on exercise of an
SAR. In the event such a limit is imposed on an SAR granted in connection with
an Option, the limit will not restrict the exercisability of the underlying
Option.
(e) Persons Subject to 16(b). An Optionee subject to Section 16(b) of the
Exchange Act, may only exercise an SAR during the period beginning on the third
and ending on the twelfth business day following the Company's public release of
quarterly or annual summary statements of sales and earnings and in accordance
with all other provisions of Section 16(b).
(f) Non-Transferability of SARs. An SAR is non-transferable by the
Optionee other than by will or the laws of descent and distribution, and is
exercisable during the Optionee's lifetime only by the Optionee, or, in the
event of death, by the Optionee's estate or by a person who acquires the right
to exercise the Option by bequest or inheritance.
(g) Effect on Shares in Plan. When an SAR is exercised, the aggregate
number of shares of Common Stock available for issuance under the Plan will be
reduced by the number of underlying shares of Common Stock as to which the SAR
is exercised.
B-6
7. Adjustment of and Changes in Common Stock
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of Shares, merger, consolidation, distribution of assets,
or any other changes in the corporate structure or Shares of the Corporation,
the Board, or if so designated the Committee, shall make such adjustments as it
deems appropriate in the number and kind of Shares and SARs authorized by the
Plan, in the number and kind of Shares covered by the Options granted and in the
exercise price of outstanding Options and SARs.
8. Mergers, Sales and Change of Control
In the case of (i) any merger, consolidation or combination of the
Corporation with or into another corporation (other than a merger, consolidation
or combination in which the Corporation is the continuing corporation and which
does not result in its outstanding Common Stock being converted into or
exchanged for different securities, cash or other property, or any combination
thereof) or a sale of all or substantially all of the business or assets of the
Corporation or (ii) a Change in Control (as defined below) of the Corporation,
each Option or SAR then outstanding for one year or more shall (unless the
Board, or if so designated the Committee, determines otherwise), receive upon
exercise of such Option or SAR an amount equal to the excess of the Fair Market
Value on the date of such exercise of (a) the securities, cash or other
property, or combination thereof, receivable upon such merger, consolidation or
combination in respect of a share of Common Stock, in the cases covered by
clause (i) above, or (b) the final tender offer price in the case of a tender
offer resulting in a Change in Control or (c) the value of the Common Stock
covered by the Option or SAR as determined by the Board, or if so designated the
Committee, in the case of a Change in Control by reason of any other event, over
the exercise price of such Option, multiplied by the number of shares of Common
Stock with respect to which such Option or SAR shall have been exercised
provided that in each event the amount payable in the case of an Incentive Stock
Option shall be limited to the maximum permissible amount necessary to preserve
the Incentive Stock Option status. Such amount may be payable fully in cash,
fully in one or more of the kind or kinds or property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more such
kind or kinds of property, all in the discretion of the Board or if so
designated the Committee.
Any determination by the Board, or if so designated the Committee, made
pursuant to this Section 8 may be made as to all outstanding Options and SARs or
only as to certain Options and SARs specified by the Board, or if so designated
the Committee and any such determination shall be made (a) in cases covered by
clause (i) above, prior to the occurrence of such event, (b) in the event of a
tender or exchange offer, prior to the purchase of any Common Stock pursuant
thereto by the offeror and (c) in the case of a Change in Control by reason of
any other event, just prior to or as soon as practicable after such Change in
Control.
A "Change in Control" shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, shall own
B-7
beneficially 25% or more of the Common Stock outstanding, or (b) if following
(i) a tender or exchange offer for voting securities of the Corporation, or (ii)
a proxy contest for the election of directors of the Corporation, the persons
who were directors of the Corporation immediately before the initiation of such
event cease to constitute a majority of the Board of Directors of the
Corporation upon the completion of such tender or exchange offer or proxy
contest or within one year after such completion.
9. No Rights of Stockholders
Neither an Employee nor the Employee's legal representative shall be, or
have any of the rights and privileges of, a stockholder of the Corporation in
respect of any Shares purchasable upon the exercise of any Option, in whole or
in part, unless and until certificates for such Shares shall have been issued.
10. Plan Amendments
The plan may be amended by the Board, as it shall deem advisable or to
conform, to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of stockholders:
(i) increase the aggregate number of Shares available for Options except as
permitted by Section 7; (ii) materially increase the benefits accruing to
participants under this Plan; (iii) extend the maximum period during which an
Option may be exercised; or (iv) change the Plan's eligibility requirements. Any
discrepancy between the Board and any committee regarding this Plan shall be
decided in any manner directed by the Board.
11. Term of Plan
The Plan became effective upon its approval by the Corporation's majority
stockholders on December 3, 2001. No Options or SARs shall be granted under the
Plan after the date which is ten years after the date on which the Plan was
approved by the Corporation stockholders.
B-8
EXHIBIT C
UNAUDITED FINANCIAL STATEMENTS AT AND FOR
THE THREE MONTHS ENDED OCTOBER 31, 2001
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
October 31, 2001
----------------
ASSETS (Unaudited)
Current Assets
Cash ................................................. $ 73,015
Accounts receivable, net of allowance for
doubtful accounts of 0 .......................... 16,464
Due from officers .................................... 1,700
Miscellaneous receivables ............................ 17,663
Inventories .......................................... 128,292
Prepaid expenses ..................................... 17,107
-----------
Total Current Assets .............................. 254,241
Property, plant and equipment, net of accumulated
depreciation of $10,894 ........................... 58,237
Other assets ......................................... 53,195
-----------
TOTAL ASSETS .............................................. 365,673
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses ................ 410,997
Loans and notes payable .............................. 117,740
-----------
Total Current Liabilities ......................... 528,737
Unearned income, less current portion ................ 45,000
-----------
TOTAL LIABILITIES ......................................... 573,737
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value,
810,360 shares authorized:
Convertible, Series B, non-voting, 65,141
shares issued and outstanding,
at redemption value ................................ 130,282
Cumulative, Series C, non-voting, 64,762 shares
issued and outstanding ............................. 64,763
Convertible, Series D, voting, 247,357.31 shares
issued and outstanding ............................. 247,357
Common Stock, $0.06 2/3 par value, 20,000,000 shares
authorized, 17,996,792 shares issued and outstanding 1,199,789
Additional paid-in capital ........................... 38,929
Accumulated deficit .................................. (1,889,184)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ...................... (208,064)
TOTAL LIABILITIES AND EQUITY .............................. $ 365,673
===========
See notes to consolidated financial statements
C-1
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
October 31,
2001 2000
------------ ------------
Total Revenues ................................ $ 36,355 $ 0
Cost of Goods Sold ....................... 25,069 0
------------ ------------
Gross Profit .................................. 11,286 0
Selling expenses ......................... 102,651 0
General & administrative expenses ........ 462,651 103,488
------------ ------------
Operating Income (Loss) ....................... (554,016) (103,488)
Other Income (Expense)
Miscellaneous income ..................... 0 50,000
Interest expense, net .................... (3,272) (1,350)
------------ ------------
Total Other Income (Expense) .................. (3,272) 48,650
------------ ------------
Net Loss ...................................... $ (557,288) $ (54,838)
============ ============
Loss per Common Share ......................... $ (0.05) $ (0.01)
============ ============
Weighted Average Number of
Common Shares Outstanding ................ 11,981,033 5,344,796
============ ============
Net Loss ...................................... $ (557,288) $ (54,838)
Unrealized loss on marketable securities.. 0 (86,750)
------------ ------------
Comprehensive loss ............................ $ (557,288) $ (141,588)
============ ============
See notes to consolidated financial statements
C-2
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
October 31,
2001 2000
---------- ---------
Cash Flows from Operating Activities
Net income (loss) .......................... $(557,288) $ (54,838)
Adjustments to net income (loss) to net cash
provided (used) by operating activities
Depreciation and amortization ........... 3,955 0
Decreases (increases) in Assets
Accounts receivable ..................... (16,464) 0
Miscellaneous receivables ............... 53,731 0
Inventories ............................. (128,292) 0
Prepaid expenses ........................ 58,280 0
Other assets ............................ (18,352) 0
Increases (decreases) in Liabilities
Accounts payable and accrued expenses ... (43,845) 39,296
--------- ---------
Net Cash Provided (Used) by Operating Activities (648,275) (15,542)
Cash Flows from Investing Activities
Purchases of equipment and fixtures ........ (1,606) 0
Net Cash Provided (Used) by Investing Activities (1,606) 0
Cash Flows from Financing Activities
Proceeds from notes payable ................ 17,740 0
Repayment of loans and notes ............... (180,000) 0
Issuance of preferred stock ................ 140,000 0
Issuance of common stock ................... 712,000 40,000
--------- ---------
Net Cash Provided (Used) by Financing Activities 697,240 40,000
Net Increase (Decrease) in Cash ................. 32,359 24,458
Cash at Beginning of Period ..................... 33,156 551
--------- ---------
Cash at End of Period ........................... $ 73,015 $ 25,009
========= =========
See notes to consolidated financial statements
C-3
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Regent Group, Inc. (the Company or Regent), formerly NMC Corp., is a
holding company for its subsidiary Millennium Biotechnologies, Inc.
("Millennium").
Millennium was incorporated in the State of Delaware on November 9, 2000
and is located in New Jersey. Millennium is a research based
bio-nutraceutical corporation involved in the field of nutritional science.
Millennium's principal source of revenue is expected to be from sales of
its nutraceutical supplement, RESURGEX(TM), which serves as a nutritional
support for immuno-compromised individuals undergoing medical treatment for
chronic debilitating diseases Millennium had not yet generated revenue from
sales of this product as of July 31, 2001, such sales having commenced in
September, 2001.
The Company acquired Millennium on July 27, 2001, when it completed a
merger with Millennium. In the merger, new Convertible Preferred Series D
stock was issued in exchange for all the outstanding stock of Millennium.
Such preferred shares are convertible into approximately 96% of the
outstanding common stock of the Company at the time of issuance. Under the
terms of the Agreement and Plan of Reorganization, a new wholly-owned
Regent subsidiary merged into Millennium. For accounting purpose, the
merger has been treated as an acquisition of Regent by Millennium, and a
re-capitalization of Millennium. The historical financial statements prior
to July 31, 2001, are those of Millennium. Subsequent to July 31, 2001, the
financial statements are those of the Company and its wholly-owned
subsidiary Millennium on a consolidated basis.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required for annual financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and related footnotes included in the Company's annual
report on Form 10-KSB for the year ended July 31, 2001.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's
financial position as of October 31, 2001, and the results of operations
and cash flows for the three months ended October 31, 2001 and 2000 have
been included.
C-4
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Principles of Consolidation
The Company's operations presently consist almost exclusively of the
operations of Millennium. The consolidated financial statements include the
accounts of the Company and its subsidiary from the acquisition date and/or
through their respective disposition dates. All significant intercompany
transactions and balances have been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation, which includes amortization of assets under capital leases,
is calculated using the straight-line method over the estimated useful
lives of the assets: 3-8 years for machinery and equipment, leasehold
improvements are amortized over the shorter of the estimated useful lives
or the underlying lease term. Repairs and maintenance expenditures which do
not extend the useful lives of related assets are expensed as incurred. For
Federal income tax purposes, depreciation is computed under accelerated
methods over the assets class life.
Revenue Recognition
Revenue is recognized at the date of shipment to customers.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation". The standards encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock option and other
equity instruments to employees based on fair value.
Loss Per Common Share
Basic and diluted loss per common share are computed by dividing net loss
by the weighted average number of common shares outstanding during the
periods. Potential common shares used in computing diluted earnings per
share related to stock options, warrants, convertible preferred stock and
convertible debt which, if exercised, would have a dilutive effect on
earnings per share, have not been included, except that the effect of a
conversion of the outstanding Series D Convertible Preferred Stock which is
anticipated to incur has been shown for illustrative purpose. During the
quarter ended October 31, 2001, the weighted average number of Series D
convertible preferred shares outstanding was 247,357 which if converted
into common shares, would have increased the weighted average number of
common shares outstanding from 11,981,033 to 170,590,058.
C-5
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Fair Value of Financial Instruments
For financial instruments including cash, prepaid expenses and other
current assets, short-term debt, accounts payable and accrued expenses, it
was assumed that the carrying values approximated fair value because of
their short-term maturities.
Reclassification
Certain reclassifications have been made to prior year balances to conform
with the current year's presentation.
ACQUISITIONS AND MERGERS
On July 27, 2001, pursuant to an Agreement and Plan of Reorganization,
Millennium paid Regent $146,000, which was used to pay certain indebtedness
of Regent, and each share of common stock of Millennium was converted into
preferred series D shares of Regent at a rate of .025 preferred shares for
each common share of Millennium. Each of these preferred series D shares is
convertible into 641.215 common shares of Regent and is entitled to 641.215
votes. The preferred series D shares are non-dividend bearing and are
subject to adjustment in accordance with certain anti-dilution clauses. In
addition, on November 15, 2001, the Company paid off pre-merger Regent
liabilities of $89,640.
INVENTORIES
Inventories consist of work-in-process and finished goods for the Company's
RESURGEX(TM) product line. Cost-of-goods sold are calculated using the
average costing method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at October 31, 2001, consists of the
following:
Furniture and Equipment $34,560
Leasehold improvements 34,571
-------
Subtotal 69,131
Less accumulated depreciation 10,894
-------
Total $58,237
=======
C-6
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at October
31, 2001:
Accounts payable $238,555
Accrued interest 5,278
Accrued reverse merger expenses 50,000
Accrued professional fees 31,000
Accrued payroll and payroll taxes 76,041
Miscellaneous accruals 10,123
--------
Total $410,997
========
DEBT
Short-term debt at October 31, 2001, is as follows:
Unsecured convertible note, dated April 20, 2001, due April 20, 2002,
Interest at 10% per annum,
payable upon maturity, personally
guaranteed by an officer (1) $100,000
Non-interest bearing cash advance by
an accredited investor $ 17,740
--------
$117,740
========
(1) The principal and interest of the unsecured convertible note are convertible
into Series D convertible preferred shares of the Company at an exchange rate of
$12 per share.
C-7
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001
INCOME TAX
At July 31, 2001, the Company had a net operating loss ("NOL")
carry-forward of approximately $11,126,000 for tax purposes expiring in the
years 2003 through 2021. The Company has not reflected any benefit of such
net operating loss carryforward in the accompanying financial statements in
accordance with Financial Accounting Standards Board Statement No. 109
"Accounting for Income Taxes" (SFAS 109) as the realization of this
deferred tax benefit is not more than likely.
The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carry-forwards, following certain ownership changes. As a result of
transactions in the Company's stock during the year ended July 31, 1999 and
July 31, 2001, a change in ownership of greater than 50%, as defined, has
occurred. Under such circumstances, the potential benefits from utilization
of tax carry-forward may be substantially limited or reduced on an annual
basis.
COMMITMENTS AND CONTINGENCIES
The Company leases certain office space and equipment under operating
leases.
The Company's administrative facilities are located in approximately 2,200
square feet of leased office space in Bernardsville, New Jersey, as to
which Millennium entered into a 5 year lease, starting January 1, 2001. The
lease calls for a monthly rent of $5,807 plus allocated expenses.
In October 2001, the Company signed a 5-year lease commencing in the Spring
of 2002 for approximately 4,500 square feet of office space at a monthly
rental of $10,000 plus an allocated portion of certain operating expenses.
RELATED PARTY TRANSACTIONS
During the quarter, the Company issued warrants for the purchase of an
aggregate of 6,400,000 common shares, exercisable at $0.25 per share, to
four directors of the Company. Also, two executive officers purchased a
total of 650,000 common shares, for an aggregate purchase price of
$65,000.
SUBSEQUENT EVENTS
On August 9, 2001, the Board of Directors decided to effect a reverse split
of issued and outstanding shares of Common Stock. In December 2001, the
Company obtained the consent of the majority stockholders for an amendment
of the Company's Certificate of Incorporation to
o increase the number of authorized shares of the Company's Common Stock
from 20,000,000 to 75,000,000 and reduce the par value of the
Company's Common Stock from $0.06-2/3 per share to $0.001 per share;
o reverse split the outstanding shares of the Company's Common Stock on
a one-for-12 basis, so that every 12 issued and outstanding shares of
Common Stock, before the split, shall represent one share of Common
Stock after the split with all fractional shares rounded up to the
next whole share; and
o change the name of the Company to "Millennium Biotechnologies
Corporation",
and for the adoption of the 2001 Employee Stock Option Plan.
C-8
Since the end of the first quarter and through November 30, 2001, the
Company has obtained further equity investments that totaled approximately
$1,120,000, through private placements by accredited investors who
purchased a total 20,794 shares Series D Convertible Preferred Stock and
1,681,356 shares of Common Stock.
C-9
EXHIBIT D
UNAUDITED FINANCIAL STATEMENTS AT AND FOR
THE FIVE MONTHS ENDED DECEMBER 31, 2001
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 2001
-----------------
ASSETS (Unaudited)
Current Assets
Cash ............................................................................. $ 495,553
Accounts receivable, net of allowance for
doubtful accounts of 0 ........................................................ 42,852
Miscellaneous receivables ........................................................ 69,975
Inventories ...................................................................... 127,977
Prepaid expenses ................................................................. 50,119
-----------
Total Current Assets .......................................................... 786,476
Property, plant and equipment, net of accumulated
depreciation of $13,729 ....................................................... 61,864
Other assets ..................................................................... 53,195
-----------
TOTAL ASSETS .......................................................................... 901,535
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses ............................................ 280,325
Loans and notes payable .......................................................... 117,740
-----------
Total Current Liabilities ..................................................... 398,065
Unearned income, less current portion ............................................ 45,000
-----------
TOTAL LIABILITIES ..................................................................... 443,065
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value, 810,360 shares authorized:
Convertible, Series B, non-voting, 65,141 shares issued and outstanding,
at redemption value .......................................................... 130,282
Cumulative, Series C, non-voting, 64,762 shares issued and outstanding ........... 64,763
Convertible, Series D, voting, 268,150.87 shares issued and outstanding .......... 268,151
Common Stock, $0.06 2/3 par value, 20,000,000 shares authorized,
19,678,148 shares issued and outstanding ......................................... 1,311,880
Additional paid-in capital ....................................................... 1,027,460
Accumulated deficit .............................................................. (2,344,066)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) .................................................. 458,470
TOTAL LIABILITIES AND EQUITY .......................................................... $ 901,535
===========
See notes to consolidated financial statements
D-1
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
November 9, 2000 November 9, 2000
(Date of (Date of
Two Months Inception) Five Months Inception)
Ended to Ended to
December 31, December 31, December 31, December 31,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Total Revenues ............................... $ 42,987 $ 0 $ 79,342 $ 0
Cost of Goods Sold ...................... 12,169 0 37,238 0
------------ ------------ ------------ ------------
Gross Profit ................................. 30,818 0 42,104 0
Selling expenses ........................ 89,704 10,186 192,356 10,186
General & administrative expenses ....... 379,240 58,778 841,891 58,778
------------ ------------ ------------ ------------
Operating Income (Loss) ...................... (438,126) (68,964) (992,143) (68,964)
Other Income (Expense)
Miscellaneous income (expense) .......... (15,917) 0 (15,917) 0
Interest expense, net ................... (839) (417) (4,111) (417)
------------ ------------ ------------ ------------
Total Other Income (Expense) ................. (16,756) (417) (20,028) (417)
------------ ------------ ------------ ------------
Net Loss ..................................... (454,882) $ (69,381) $ (1,012,171) $ (69,381)
============ ============ ============ ============
Loss per Common Share ........................ $ (0.02) $ (0.07)
============ ============
Weighted Average Number of
Common Shares Outstanding ............... 19,257,807 15,092,243
============ ============
See notes to consolidated financial statements
D-2
REGENT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
November 9, 2000
Five Months (Date of
Ended Inception) to
December 31, December 31,
2001 2000
------------ -----------
Cash Flows from Operating Activities
Net (loss) ............................................ $(1,012,171) $ (69,381)
Adjustments to net income (loss) to net
Cash provided (used) by operating activities
Depreciation and amortization ...................... 6,789 168
Decreases (increases) in Assets
Accounts receivable ................................ (42,853) 0
Miscellaneous receivables .......................... 3,120 0
Inventories ........................................ (127,977) (2,805)
Prepaid expenses ................................... 25,268 (4,229)
Other assets ....................................... (18,352) (34,844)
Increases (decreases) in Liabilities
Accounts payable and accrued expenses .............. (174,516) 48,405
----------- -----------
Net Cash (Used) by
Operating Activities ................................ (1,340,692) (62,686)
----------- -----------
Cash Flows from Investing Activities
Purchases of equipment and fixtures ................... (8,067) (6,849)
----------- -----------
Net Cash (Used) by
Investing Activities ................................ (8,067) (6,849)
----------- -----------
Cash Flows from Financing Activities
Proceeds from notes payable ........................... 17,740 75,000
Repayment of loans and notes .......................... (180,000) 0
Issuance of common and preferred stock ................ 1,973,416 0
----------- -----------
Net Cash Provided by
Financing Activities ................................. 1,811,156 75,000
----------- -----------
Net Increase in Cash ....................................... 462,397 5,465
Cash at Beginning of Period ................................ 33,156 0
----------- -----------
Cash at End of Period ...................................... $ 495,553 5,465
=========== ===========
See notes to consolidated financial statements
D-3
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Regent Group, Inc. (the Company or Regent), formerly NMC Corp., is a
holding company for its subsidiary Millennium Biotechnologies, Inc.
("Millennium").
Millennium was incorporated in the State of Delaware on November 9, 2000
and is located in New Jersey. Millennium is a research based
bio-nutraceutical corporation involved in the field of nutritional
science. Millennium's principal source of revenue is expected to be from
sales of its nutraceutical supplement, RESURGEX(TM), which serves as a
nutritional support for immuno-compromised individuals undergoing medical
treatment for chronic debilitating diseases. Millennium had not yet
generated revenue from sales of this product as of July 31, 2001, such
sales having commenced in September, 2001.
The Company acquired Millennium on July 27, 2001, when it completed a
merger with Millennium. In the merger, new Convertible Preferred Series D
stock was issued in exchange for all the outstanding stock of Millennium.
Such preferred shares are convertible into approximately 96% of the
outstanding common stock of the Company at the time of issuance. Under the
terms of the Agreement and Plan of Reorganization, a new wholly-owned
Regent subsidiary merged into Millennium. For accounting purpose, the
merger has been treated as an acquisition of Regent by Millennium, and a
re-capitalization of Millennium. The historical financial statements prior
to July 27, 2001, are those of Millennium. Subsequent to July 27, 2001,
the financial statements are those of the Company and its wholly-owned
subsidiary Millennium on a consolidated basis.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required for annual financial statements.
These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's annual report on Form 10-KSB for the year ended July 31, 2001,
and the Company's quarterly report on Form 10-QSB for the three months
period ended October 31, 2001.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's
financial position as of December 31, 2001, the results of operations for
the two and five months ended December 31, 2001 and the period from
November 9, 2000 (date of inception) to December 31, 2000, and the cash
flows for the five months ended December 31, 2001 and the period from
November 9, 2000 (date of inception) to December 31, 2000, have been
included.
D-4
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Principles of Consolidation
The Company's operations presently consist almost exclusively of the
operations of Millennium. The consolidated financial statements include
the accounts of the Company and its subsidiary from the acquisition date
and/or through their respective disposition dates. All significant
intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation, which includes amortization of assets under capital leases,
is calculated using the straight-line method over the estimated useful
lives of the assets: 3-8 years for machinery and equipment, leasehold
improvements are amortized over the shorter of the estimated useful lives
or the underlying lease term. Repairs and maintenance expenditures which
do not extend the useful lives of related assets are expensed as incurred.
For Federal income tax purposes, depreciation is computed under
accelerated methods over the assets class life.
Revenue Recognition
Revenue is recognized at the date of shipment to customers.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation". The standards encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees based on fair value.
Loss Per Common Share
Basic and diluted loss per common share are computed by dividing net loss
by the weighted average number of common shares outstanding during the
periods. Potential common shares used in computing diluted earnings per
share related to stock options, warrants, convertible preferred stock and
convertible debt which, if exercised, would have a dilutive effect on
earnings per share, have not been included. During the two months period
ended December 31, 2001, the weighted average number of Series D
convertible preferred shares outstanding was 252,754 which if converted
into common shares, would have increased the weighted average number of
common shares outstanding from 19,678,148 to 181,747,766.
D-5
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Fair Value of Financial Instruments
For financial instruments including cash, prepaid expenses and other
current assets, short-term debt, accounts payable and accrued expenses, it
was assumed that the carrying values approximated fair value because of
their short-term maturities.
Reclassification
Certain reclassifications have been made to prior year balances to conform
with the current year's presentation.
ACQUISITIONS AND MERGERS
On July 27, 2001, pursuant to an Agreement and Plan of Reorganization,
Millennium paid Regent $146,000, which was used to pay certain
indebtedness of Regent. In addition, in November and December, 2001, the
Company paid off pre-merger Regent liabilities of $91,640. At the time of
the merger, each share of common stock of Millennium was converted into
preferred series D shares of Regent at a rate of .025 preferred shares for
each common share of Millennium. Each of these preferred series D shares
is convertible into 641.215 common shares of Regent and is entitled to
641.215 votes. The preferred series D shares are non-dividend bearing and
are subject to adjustment in accordance with certain anti-dilution
clauses.
MISCELLANEOUS RECEIVABLES
Miscellaneous receivables consist of the following:
Due from officers $ 46,625
Miscellaneous 23,350
--------
Total $ 69,975
INVENTORIES
Inventories consist of work-in-process and finished goods for the
Company's RESURGEX(TM) product line. Cost-of-goods sold are calculated
using the average costing method. Inventories at December 31, 2001,
consists of the following:
Work in Process $ 24,333
Finished Goods 103,644
---------
Total $ 127,977
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2001, consists of the
following:
Furniture and Equipment $41,022
Leasehold improvements 34,571
-------
Subtotal 75,593
Less accumulated depreciation 13,729
-------
Total $61,864
D-6
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at
December 31, 2001:
Accounts payable $ 156,078
Accrued interest 6,944
Accrued professional fees 22,000
Accrued payroll and payroll taxes 61,197
Miscellaneous accruals 34,106
---------
Total $ 280,325
=========
DEBT
Short-term debt at December 31, 2001, is as follows:
Unsecured convertible note, dated April 20, 2001,
due April 20, 2002, Interest at 10% per annum,
payable upon maturity,
personally guaranteed by an officer (1) $100,000
Non-interest bearing cash advance by an
accredited investor $ 17,740
--------
$117,740
========
(1) The principal and interest of the unsecured convertible note are
convertible into Series D convertible preferred shares of the Company at
an exchange rate of $12 per share.
D-7
REGENT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
INCOME TAX
At July 31, 2001, the Company had a net operating loss ("NOL")
carry-forward of approximately $11,126,000 for tax purposes expiring in
the years 2003 through 2021. The Company has not reflected any benefit of
such net operating loss carry-forward in the accompanying financial
statements in accordance with Financial Accounting Standards Board
Statement No. 109 "Accounting for Income Taxes" (SFAS 109) as the
realization of this deferred tax benefit is not more than likely.
The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carry-forwards, following certain ownership changes. As a result of
transactions in the Company's stock during the year ended July 31, 1999
and July 31, 2001, a change in ownership of greater than 50%, as defined,
has occurred. Under such circumstances, the potential benefits from
utilization of tax carry-forward may be substantially limited or reduced
on an annual basis.
COMMITMENTS AND CONTINGENCIES
The Company leases certain office space and equipment under operating
leases.
The Company's administrative facilities are located in approximately 2,200
square feet of leased office space in Bernardsville, New Jersey, as to
which Millennium entered into a 5 year lease, starting January 1, 2001.
The lease calls for a monthly rent of $5,807 plus allocated expenses.
In October 2001, the Company signed a 5-year lease commencing in the
Spring of 2002 for approximately 4,500 square feet of office space at a
monthly rental of $10,000 plus an allocated portion of certain operating
expenses.
SUBSEQUENT EVENTS
On December 10, 2001, amended on January 30, 2002, the Company filed a
preliminary information statement on Schedule 14C, informing of a written
consent of certain stockholders owning a majority of the issued and
outstanding voting stock of the Company, approving an August 9, 2001,
resolution of the Board of Directors with respect to the following
actions:
o increasing the number of authorized shares of the Company's Common
Stock from 20,000,000 to 75,000,000 and reduce the par value of the
Company's Common Stock from $0.06-2/3 per share to $0.001 per share;
o effecting a reverse split of the outstanding shares of the Company's
Common Stock on a one-for-12 basis, so that every 12 issued and
outstanding shares of Common Stock, before the split, shall
represent one share of Common Stock after the split with all
fractional shares rounded up to the next whole share;
o changing the name of the Company to "Millennium Biotechnologies
Group, Inc",
o adopting the 2001 Employee Stock Option Plan; and
o effecting certain changes to the Company's Certificate of
Incorporation.
D-8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934
Except for historical information, the Company's reports to the Securities
and Exchange Commission on Form 10-KSB and Form 10-QSB and periodic press
releases, as well as other public documents and statements, contain
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by the statements. These risks
and uncertainties include general economic and business conditions,
development and market acceptance of the Company's products, reliance on
third parties to produce the products, availability of Medicaid
reimbursement for the purchase of Company products and other risks and
uncertainties identified in the Company's reports to the Securities and
Exchange Commission, periodic press releases, or other public documents or
statements.
Readers are cautioned not to place undue reliance on forward-looking
statements. The Company undertakes no obligation to republish or revise
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrences of unanticipated events.
Results of Operations for the five months ended December 31, 2001:
During the five months' period ended December 31, 2001, the Company
recorded its first orders for Millennium's RESURGEX(TM) nutritional
supplement, the Company's premier product. This marked the culmination of
an intensive effort during the previous three quarters to complete product
research and design, prepare the product for market, and set up initial
sales and distribution channels.
A successful marketing strategy for RESURGEX(TM) emphasizes support of
Medicaid and other organizations that provide reimbursement programs.
Support in this sense means that Medicaid includes RESURGEX(TM) in its
universe of products that qualify for reimbursement when prescribed by the
medical profession. With reimbursement covered, doctors can prescribe it
to their patients and more persons in need can have access to it. The
recent inclusion of RESURGEX(TM) in First Data Bank resulted in approval
under the open formula category, by 42 states, including the important
markets of New Jersey and Connecticut.
Revenues for November and December, 2001, totaled $42,987, bringing total
revenues since the receipt of the first orders in September 2002 to
$79,342. All these revenues were generated by the Company's wholly owned
subsidiary Millennium Biotechnologies, Inc., primarily from the sales of
the Company's proprietary RESURGEX(TM) product. This revenue figure
represents initial orders through not yet fully developed distribution
channels. Management believes that future quarters will see a marked
acceleration in product sales as those channels mature.
Gross profits during the five months ended December 31, 2001 amounted to
$42,104 for a 53% gross margin. Costs-of-Goods sold contain certain
non-linear expenses. Since direct product costs are comparatively lower,
the gross margin is expected to significantly increase as revenues grow.
After deducting selling expenses and general and administrative expenses
of 1,034,247 the Company realized an operating loss of $992,143.
Non-operating expenses totaled $20,028 primarily in form of interest
expense. The net result for the reporting period was a loss of $1,012,171
or $0.07 per share. Comparisons to the same period in last year are of
little relevance, since the Company at that time had no revenues and
virtually no operations.
D-9
The period's net result was significantly affected by the need for
expenditures in connection with putting in place marketing and sales
operations and the supporting administrative infrastructure, resulting in
relatively high operating expenses. Management does not consider this
atypical for a new company engaged in launching a new product. The Company
will continue to invest in further expanding its operations and in a
comprehensive marketing campaign with the goal of accelerating the
education of potential clients and promoting the name and products of the
Company.
Liquidity and Capital Resources
In view of the start-up nature of the Company's business at this stage in
its development, its operations were financed entirely by new equity
investments through private placements with accredited investors who,
during the five months' period ended December 31, 2001, purchased an
aggregate 24,258 Series D convertible preferred shares (convertible into
common stock at the rate of 1 preferred share for 641.215 common shares)
and 9,824,994 common shares that in the aggregate added $1,960,000 to
equity and working capital. This capital inflow was more than sufficient
to compensate for the negative cash-flow from operations during the period
and resulted in a working capital surplus of $388,411 at December 31,
2001.
Management intends to further strengthen the Company's balance sheet and
liquidity reserves through additional capital transactions during the
upcoming quarters that involve further private placements of its equity
securities with accredited investors. Discussions with several such
potential investors are underway and are expected to yield positive
results before the end of the first quarter in 2002.
D-10
EXHIBIT E
AUDITED FINANCIAL STATEMENTS AT AND FOR
THE YEAR ENDED JULY 31, 2001
Regent Group, Inc. and Subsidiary
Index to the Consolidated Financial Statements
Page
Independent Accountant's Report........................................ E-1
Financial Statements
Consolidated Balance Sheet........................................ E-2
Consolidated Statement of Operations.............................. E-3
Consolidated Statement of Stockholders' Equity (Deficiency)....... E-4
Consolidated Statement of Cash Flows.............................. E-5
Notes to the Consolidated Financial Statements.................... E-6-E-15
Independent Auditors' Report
To the Board of Directors and Stockholders of
Regent Group, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Regent Group,
Inc. and Subsidiary, as of July 31, 2001, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
November 9, 2000 (date of inception) to July 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Regent Group, Inc.
and Subsidiary as of July 31, 2001, and the results of its operations and its
cash flows for the period November 9, 2000 (date of inception) to July 31, 2001
in conformity with accounting principles generally accepted in the United States
of America.
/s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
November 12, 2001
E-1
Regent Group, Inc. and Subsidiary
Consolidated Balance Sheet
July 31, 2001
Assets
Current Assets:
Cash $ 33,156
Prepaid expenses and other current assets 75,387
Due from officers 67,000
Miscellaneous receivables 6,094
-----------
Total Current Assets 181,637
Property, plant and equipment, net of accumulated depreciation of $6,940 60,585
Other assets 34,843
-----------
Total Assets 277,065
===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 454,840
Short-term debt 280,000
-----------
Total Current Liabilities 734,840
-----------
Unearned Revenue 45,000
-----------
Stockholders' Equity:
Preferred stock, par value $1; authorized 810,360 shares Convertible Series
B, at redemption value; issued and outstanding
65,141 shares 130,282
Cumulative Series C, par value $1; issued and outstanding 64,763 shares 64,763
Convertible Series D, par value $1; issued and outstanding 241,199 shares 241,199
Common stock, par value $.06-2/3; authorized 20,000,000 shares; issued
and outstanding 6,073,154 shares 404,877
Stock subscriptions receivable (12,000)
Deficit (1,331,896)
-----------
Total Stockholders' Equity (Impairment) (502,775)
-----------
Total Liabilities and Stockholders' Equity $ 277,065
===========
See notes to consolidated financial statements.
E-2
Regent Group, Inc. and Subsidiary
Consolidated Statements of Operations
November 9, 2000
(date of inception)
to July 31, 2001
-------------------
Sales $ --
Cost of Sales --
---------
Gross Profit --
Selling, general and administrative expenses 763,410
---------
Loss from operations (763,410)
---------
Other income (expense)
Interest expense (5,230)
---------
Total Other Income (expense) (5,230)
---------
Net Loss (768,640)
=========
Net Loss Per Share $ (0.13)
=========
Weighted average number of common share outstanding 6,073,154
=========
See notes to consolidated financial statements.
E-3
Regent Group, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity (Deficiency)
For the period November 9, 2000 (date of inception) to July 31, 2001
Preferred Stock
-------------------------------------------------------------
Convertible Convertible Cumulative Cumulative
Series B Series B Series C Series C
Shares Amount Shares Amount
----------- ----------- ---------- ----------
November 9, 2000 (date of inception) -- $ -- -- $ --
Issuance of Millennium, Inc. stock for patent formula -- -- -- --
Issuance of Millennium, Inc. stock in connection with loan -- -- -- --
Issuance of Millennium stock in lieu of legal fees -- -- -- --
Issuance of Millennium, Inc. stock -- private placements -- -- -- --
Expenses related to reverse merger -- -- -- --
------ -------- ------ -------
Subtotal -- Millennium, Inc. -- -- -- --
Reorganization pursuant to reverse merger 65,141 130,282 64,763 64,763
Net (loss) -- -- -- --
------ -------- ------ -------
Balance, July 31, 2001 65,141 $130,282 64,763 $64,763
====== ======== ====== =======
Preferred Stock Common Stock
-------------------------------- ------------------------
Convertible Convertible
Series D Series D
Shares Amount Shares Amount
----------- ----------- ------ -------
November 9, 2000 (date of inception) -- $ -- -- $ --
Issuance of Millennium, Inc. stock for patent formula 50,000 50,000 -- --
Issuance of Millennium, Inc. stock in connection with loan 1,250 1,250 -- --
Issuance of Millennium stock in lieu of legal fees 3,125 3,125 -- --
Issuance of Millennium, Inc. stock -- private placements 182,675 182,675 -- --
Expenses related to reverse merger -- -- -- --
------- -------- --------- --------
Subtotal -- Millennium, Inc. 237,050 237,050 -- --
Reorganization pursuant to reverse merger 4,149 4,149 6,073,154 404,877
Net (loss) -- -- -- --
------- -------- --------- --------
Balance, July 31, 2001 241,199 $241,199 6,073,154 $404,877
======= ======== ========= ========
Additional Stock
Paid in Subscriptions
Capital Receivable Deficit Total
---------- ------------- ------- -----
November 9, 2000 (date of inception) $ -- $ -- $ -- $ --
Issuance of Millennium, Inc. stock for patent formula (50,000) -- -- --
Issuance of Millennium, Inc. stock in connection with loan (1,250) -- -- --
Issuance of Millennium stock in lieu of legal fees (3,125) -- -- --
Issuance of Millennium, Inc. stock -- private placements 413,826 (12,000) -- 584,501
Expenses related to reverse merger (86,000) -- -- (86,000)
--------- -------- ----------- ---------
Subtotal -- Millennium, Inc. 273,451 (12,000) -- 498,501
Reorganization pursuant to reverse merger (273,451) -- (563,256) (232,636)
Net (loss) -- -- (768,640) (768,640)
--------- -------- ----------- ---------
Balance, July 31, 2001 $ -- $(12,000) $(1,331,896) $(502,775)
========= ======== =========== =========
See notes to consolidated financial statements.
E-4
Regent Group, Inc. and Subsidiary
Consolidated Statement of Cash Flows
November 9, 2000
(date of inception)
to July 31, 2001
-------------------
2001
-------------------
Cash flows from Operating Activities:
Net loss $(768,640)
Adjustments to reconcile net loss to net cash provided
(used) by Operating Activities:
Depreciation 6,940
Changes in assets and liabilities
(Increase) in prepaid expenses (75,387)
(Increase) in deposits (34,843)
Increase in miscellaneous receivables (6,094)
Increase in accounts payable and accrued expenses 306,740
Increase in unearned revenue 45,000
---------
Net Cash (Used in) Operating Activities (526,284)
---------
Cash flows from Investing Activities:
Net payments pursuant to reverse merger (4,535)
Purchases of property and equipment (67,525)
Increase in due from officers (67,000)
---------
Net Cash (Used in) Investing Activities (139,060)
---------
Cash flows from Financing Activities:
Expenses relating to reverse merger (86,000)
Proceeds from borrowings 200,000
Proceeds from issuance of common stock 584,500
---------
Net Cash Provided by (Used in) Financing Activities 698,500
---------
Net Increase (decrease) in Cash 33,156
Cash - beginning of year --
---------
Cash - end of year $ 33,156
=========
Supplemental information:
Cash paid during the year for:
Interest $ 3,140
=========
Income taxes $ --
=========
See notes to consolidated financial statements.
E-5
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Regent Group Inc. (the Company or Regent), formerly NMC Corp., is a
holding company for its subsidiary. On April 3, 2000, the Company executed
a merger agreement with Vulcan Minerals and Energy, Inc. (formerly Playa
Minerals and Energy, Inc., herein "Vulcan"), a company engaged in the
acquisition and development of proven oil and gas reserves located
primarily in the San Juan Basin and the Gulf Coast.
Under the terms of the agreement, Vulcan shareholders would receive 92% of
the equity of Regent. Current shareholders of Regent would retain 8% of
the Company and the Company would receive $265,000 in cash, of which
$200,000 had been received as of July 31, 2000, in the form of a
non-refundable deposit and recorded the deposit as income in the Company's
consolidated statement of operations for the year ended July 31, 2000.
On February 26, 2001, the Company received notification from Vulcan that
Vulcan was exercising its right to terminate the executed merger agreement
between the two companies. In its letter, Vulcan gave no reason for its
termination decision.
On July 27, 2001 the Company completed a merger with Millennium
Biotechnologies, Inc. (Millennium) whereby new Convertible Preferred
Series D stock was issued in exchange for all the outstanding stock of
Millennium. Such preferred shares are convertible into approximately 96%
of the outstanding common stock of the Company at the time of issuance.
Under the terms of the Agreement and Plan of Reorganization, a new
wholly-owned Regent subsidiary merged into Millennium.
For accounting purposes, the acquisition has been treated as an
acquisition of Regent by Millennium, and a recapitalization of Millennium.
The historical financial statements prior to July 27, 2001 are those of
Millennium. Subsequent to the exchange, the Company and Millennium remain
as two separate legal entities whereby the operations of the newly
combined entity are currently comprised solely of the operations of
Millennium.
Millennium was incorporated in the State of Delaware on November 9, 2000
and is located in New Jersey. Millennium is a research based
bio-nutraceutical corporation involved in the field of nutritional
science. Millennium's principal source of revenue is expected to be from
sales of its nutroceutical supplement, RESURGEX(TM), which serves as a
nutritional support for immuno-compromised individuals undergoing medical
treatment for chronic debilitating diseases. Millennium had not yet
generated revenue from sales of this product as of July 31, 2001, such
sales having commenced in September, 2001
The Company's operations presently consist almost exclusively of the
operations of Millennium.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its Subsidiary from the acquisition date and/or through their
respective disposition dates. All significant intercompany transactions
and balances have been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
E-6
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation, which includes amortization of assets under capital leases,
is calculated using the straight-line method over the estimated useful
lives of the assets: 20-30 years for buildings and building improvements
and 3-8 years for machinery and equipment, leasehold improvements are
amortized over the shorter of the estimated useful lives of the underlying
lease term. Repairs and maintenance expenditures which do not extend the
useful lives of related assets are expensed as incurred. For Federal
income tax purposes, depreciation is computed under accelerated methods
over the assets class life.
Evaluation of Long-Lived Assets
Long-lived assets are assessed for recoverability on an ongoing basis. In
evaluating the fair value and future benefits of long-lived assets, their
carrying value would be reduced by the excess, if any, of the long-lived
asset over management's estimate of the anticipated undiscounted future
net cash flows of the related long-lived asset.
Revenue Recognition
Revenue is recognized at the date of shipment to customers.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". The standards encourages, but does not require, companies
to recognize compensation expense for grants of stock, stock option and
other equity instruments to employees based on fair value.
Loss Per Common Share
Basic and diluted loss per common share are computed by dividing net loss
by the weighted average number of common shares outstanding during the
year. Potential common shares used in computing diluted earnings per share
related to stock options, warrants, convertible preferred stock and
convertible debt which, if exercised, would have a dilutive effect on
earnings per share. The number of potential common shares outstanding were
250,722,728 for the period ended July 31, 2001. During the period ended
July 31, 2001 potential common shares were not used in the computation of
diluted loss per common share as their effect would be antidilutive.
Fair Value of Financial Instruments
For financial instruments including cash, prepaid expenses and other
current assets, short-term debt, accounts payable and accrued expenses, it
was assumed that the carrying values approximated fair value because of
their short-term maturities.
ACQUISITIONS AND MERGERS
On July 27, 2001, pursuant to an Agreement and Plan of Reorganization,
Millennium paid Regent $146,000, which was used to pay certain
indebtedness of Regent, and each share of common stock of Millennium was
converted into preferred series D shares of Regent at a rate of .025
preferred shares for each common share of Millennium. Each of these
preferred series D shares are convertible into 641.215 common shares of
Regent and are entitled to voting rights of 641.215 votes. The preferred
series D shares are non-dividend bearing and are subject to adjustment in
accordance with certain anti-dilution clauses.
E-7
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, less accumulated depreciation at
July 31, 2001, consists of the following:
July 31,
2001
--------
Equipment $ 32,954
Leasehold improvements 34,571
--------
Subtotal 67,525
Less accumulated depreciation 6,940
--------
Total $ 60,585
========
Depreciation expense charged to operations was $6,940 for the period ended
July 31, 2001
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted
of the following at July 31, 2001:
Accounts payable $ 59,776
Accrued interest 2,090
Accrued reverse merger expenses 50,000
Accrued professional fees 218,307
Accrued payroll 112,067
Miscellaneous accruals 12,600
--------
$454,840
========
DEBT
Short-term debt is as follows:
July 31,
2001
--------
Unsecured convertible note, due June 30, 2001 interest at $ 80,000
6% per annum, payable quarterly (1)
Unsecured convertible note, dated April 20, 2001, due
April 20, 2002, Interest at 10% per annum, payable
upon maturity, personally guaranteed by an officer (2)
$100,000
Unsecured note, dated May 24, 2001, due the earlier of
90 days from the date of the note or 5 business days
following the completion of additional financing,
interest at 12% per annum, payable upon maturity.
The note was paid in full in August 2001. 100,000
--------
$280,000
========
(1) The unsecured convertible note was payable to a shareholder of the
Company. In December 1999 and August 2001, the note was assigned to an
unaffiliated third party. In December 2000 the note was extended to
June 30, 2001, and subsequently to September 30, 2001. Under the terms
of the first extension agreement, the outstanding balance on the note
was convertible into shares of Regent common stock at a price of $.25
per share. As of the report date, the note has been converted to
equity.
(2) The unsecured convertible note is convertible into Preferred Series D
shares of the Company at an exercise price of $12 per share.
E-8
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
INCOME TAX
The Company has a net operating loss ("NOL") carryforward of approximately
$11,126,000 for tax purposes expiring in the years 2003 through 2021. The
Company has not reflected any benefit of such net operating loss
carryforward in the accompanying financial statements in accordance with
Financial Accounting Standards Board Statement No. 109 "Accounting for
Income Taxes" (SFAS 109) as the realization of this deferred tax benefit is
not more than likely.
The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carryforwards, following certain ownership changes. As a result of
transactions in the Company's stock during the year ended July 31, 1999 and
July 31, 2001, a change in ownership of greater than 50%, as defined, has
occurred. Under such circumstances, the potential benefits from utilization
of tax carryforward may be substantially limited or reduced on an annual
basis.
The Company and Millennium file separate tax returns and have different tax
years. The Company files on a fiscal year ended July 31; Millennium has a
calendar year end.
There is no provision for income taxes during the period ended July 31,
2000 as the Company and Millennium had no taxable income due to net
operating losses.
A reconciliation of annualized taxes on income at the federal statutory
rate for Millennium to amounts provided is as follows:
2001
----------
Tax benefit computed at the Federal statutory rate $(348,000)
Increase in taxes resulting from:
Effect of unused tax losses 348,000
---------
$ --
=========
The temporary difference between the tax bases of assets and the financial
reporting amount that gives rise to the deferred tax asset and the
approximate tax effect at July 31, 2001 are as follows:
Temporary
Difference Tax Effect
------------ -----------
Net operating loss carryforward $ 11,126,000 $ 4,457,000
Valuation allowances (11,126,000) (4,457,000)
------------ -----------
$ -- --
============ ===========
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement, dated April 1, 2001, between
Millennium and the Company's President and CEO, Jerry Swon, Mr. Swon is
entitled to a base salary of $150,000 per year during the first calendar
year of his term of employment; $250,000 per year for the second calendar
year of employment; and $300,000 per year for the third calendar year
through the end of the term. In the first year of the term, payment of up
to 40% of Mr. Swon's base salary shall be deferred until such time as
Millennium, in its reasonable judgment, has the financial resources to pay
such deferred compensation. Millennium acknowledges deferred compensation
due to Mr. Swon as of July 31, 2001, in the amount of $45,000 for services
rendered prior to July 31, 2001. In addition to a base salary Millennium
shall pay a discretionary bonus, payable annually during each year of the
term, at the sole and exclusive discretion of Millennium. Mr. Swon also
receives a monthly expense allowance.
E-9
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
EMPLOYMENT AGREEMENTS, Continued
Pursuant to an employment agreement, dated April 1, 2001, between
Millennium and the Company's Secretary and COO, Bruce Deichl, Mr. Deichl is
entitled to a base salary of $150,000 per year per year during the first
calendar year of his term of employment; $250,000 per year for the second
calendar year of employment; and $300,000 per year for the third calendar
year through the end of the term. In the first year of the term payment of
up to 40% of Mr. Deichl's base salary shall be deferred until such time as
Millennium, in its reasonable judgment, has the financial resources to pay
such deferred compensation. Millennium acknowledges deferred compensation
due to Mr. Deichl as of July 31, 2001, in the amount of $45,000 for
services rendered prior to July 31, 2001. In addition to a base salary
Millennium shall pay a discretionary bonus, payable annually during each
year of the term, at the sole and exclusive discretion of Millennium. Mr.
Deichl also receives a monthly expense allowance.
Pursuant to a five year employment agreement, dated May 18, 2001, with
Millennium, Carl Germano was appointed Senior Vice President of New Product
Development & Research. He is entitled to a base salary of $200,000 per
year. In addition to the base salary Millennium will pay Mr. Germano a
bonus equal to .008 of the gross proceeds from the sales of RESURGEX(TM)
each calendar quarter and a bonus equal to .008 of the gross profits of
other Millennium products. He also received options to purchase 26,365.6
shares of D Preferred Stock at $20 per share with 20% vested upon the
signing of the employment agreement and the balance vest 20% per year. Mr.
Germano also receives a monthly automobile allowance.
Pursuant to a four year employment agreement, dated July 2, 2001, with
Millennium, Christopher R. DeMarzo was appointed Executive Vice President
of Sales and Marketing. He is entitled to a base salary of $150,000 per
year. In addition to the base salary Millennium will pay Mr. DeMarzo an
annual bonus based upon Millennium obtaining certain minimum annual sales.
The bonus ranges from $55,000 for the first year, provided Millennium
generates at least $7,000,000 in sales during that year, to $87,500 for the
fourth year, provided Millennium generates at least $25,000,000 in sales
during that year. He also received options to purchase 15,000 shares of D
Preferred Stock at $20 per share with 20% vested upon the signing of the
employment agreement and the balance vest 20% per year.
Pursuant to a three year employment agreement, dated May 1, 2001, with
Millennium, John Swon was appointed Vice President of Business Development.
He is entitled to a base annual salary of $50,000 during the first year
with 10% annual increases each year thereafter. In addition to the base
salary, Millennium will pay Mr. Swon a bonus equal to .01663 of the gross
proceeds from the sales of RESURGEX(TM) and a bonus equal to .01663 of the
gross profits of other Millennium products. He also received options to
purchase 6,250 shares of D Preferred Stock at $20 per share.
Pursuant to a three year employment agreement, dated May 1, 2001, with
Millennium, Jerry T. Swon was appointed Assistant Vice President of
Marketing and Sales. He is entitled to a base annual salary of $50,000
during the first year with 10% annual increases each year thereafter. In
addition to the base salary, Millennium will pay Mr. Swon a bonus equal to
.01663 of the gross proceeds from the sales of RESURGEX(TM) and a bonus
equal to .01663 of the gross profits of other Millennium products. He also
received options to purchase 6,250 shares of D Preferred Stock at $20 per
share.
CAPITAL STOCK
a) Preferred Stock
Convertible Series B preferred shares ("Series B") are non-dividend
bearing, and are convertible into shares of the Company's common
stock at any time at the option of the holder and are subject to
adjustment in accordance with certain anti-dilution clauses.
Cumulative Series C preferred shares ("Series C") are not convertible
but are entitled to cumulative cash dividends at the rate of $.65 per
share per annum, payable
E-10
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
CAPITAL STOCK, Continued
in each year commencing the year after all the shares of Series B
are retired. Convertible Series D preferred shares ("Series D") are
non-dividend bearing and are convertible into shares of the Company's
common stock at the option of the Company and are subject to
adjustment in accordance with certain anti- dilution clauses.
Pursuant to the Agreement and Plan of Reorganization with Millennium,
237,049.7 Series D shares were issued in exchange for all outstanding
common stock of Millennium. An additional 4,148.8 shares were issued
in July 2001 at prices between $24.00 and $36.00 per share to four
individual accredited investors.
b) Voting Rights
The holders of Series B and Series C preferred stock have no voting
rights. Each share of common stock is entitled to one vote and each
share of Series D preferred stock is entitled to 641.215 votes.
c) Dividend Restrictions
No cash dividends may be declared or paid on the Company's common
stock if, and as long as, Series B preferred stock is still
outstanding or there are dividends in arrears on outstanding shares
of Series C preferred stock. No dividends may be declared on Series C
shares if, and as long as, any Series B shares are outstanding.
d) Other information is summarized as follows:
Convertible Cumulative Convertible
Series B Series C Series D
----------- ---------- -----------
Number of common shares to be issued upon
conversion of each preferred share 10 None 641.215
Redemption price and involuntary liquidation value per
preferred shares (if redeemed, ranking would be
Convertible Series D then, Convertible Series B then
Cumulative Series C) $2.00 $10.00 (1) $1.00
(1) Plus any dividend in arrears.
Because the Series B preferred stock had mandatory redemption
requirements at the time of its issuance (which are no longer
applicable), these shares are stated at redemption value. Series B
shares are stated at par value.
e) Common Stock
During July 2001, 519,769 shares of the Company's common stock were
issued to creditors of Regent in exchange for $120,293 of accounts
payable.
OPTIONS AND WARRANTS
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (FAS No. 123). Accordingly, no compensation cost for
employees has been recognized for the stock options and warrants awarded.
In February 2000, Millennium adopted its 2001 Stock Option Plan ("The 2001
Plan"). The 2001 Plan provides that certain options granted thereunder are
intended to qualify as "Incentive Stock Options" (ISO) within the meaning
of Section 422A of the United States Internal Revenue Code of 1986, while
non-qualified options may also be granted under the Plan. The Plan provided
for the grant of options for up to 500,000 shares. The purchase price per
common stock deliverable upon exercise of each ISO shall not be less than
100% of the fair market value of the common stock on the date such option
is granted. If an ISO is issued to an individual who owns, at the time
E-11
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
OPTIONS AND WARRANTS, Continued
of grant, more than 10% of the total enhanced voting power of all classes
of Millennium's common stock, the exercise price of such option shall be at
least 110% of the fair market value of the common stock on the date of
grant and the term of the option shall not exceed five years from the date
of grant. The purchase price of shares subject to non-qualified stock
options shall be determined by a committee established by the Board of
Directors with the condition that such prices shall not be less than 85% of
the fair market value of the common stock at the time of grant. Millennium
had no options issued pursuant to this Plan as of July 31, 2001.
The granting of the following Company stock options was not under a formal
stock option plan.
Information regarding the Company's stock options and warrants for fiscal
years ended July 31, 2001 and 2000 is as follows:
July 31, 2001 July 31, 2000
---------------------------- ---------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------- ------------- ------------- -----------
Options outstanding --
beginning of year 475,000 $0.46 475,000 $0.46
Options exercised -- -- -- --
Options granted 36,944,003 0.03 -- --
Options cancelled -- -- -- --
---------- ----- ------- -----
Options outstanding --
end of year 37,419,003 $0.04 475,000 0.46
========== ===== ======= =====
Option price range at end of year $0.0312 to $1.00 $.0667 to $1.00
Option price range for
exercised shares -- -- -- --
Options available for
grant at end of year N/A N/A N/A
Warrants outstanding -- beginning of year 850,000 1.15 850,000 1.15
Warrants exercised -- -- --
Warrants granted 52,071,996 0.08 -- --
Warrants expired 300,000 2.00 -- --
---------- ------ -------- -----
Warrants outstanding -- end of year 52,621,996 $0.098 $850,000 $ --
========== ====== ======== =====
Warrants price range at end of year $0.03 to $1.1 0 $.33 to $2.50
Warrants price range
for exercised shares -- -- -- --
Warrants available for N/A N/A N/A
grant at end of year
E-12
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
OPTIONS AND WARRANTS, continued
The weighted exercise price and weighted fair value of options and warrants
granted by the Company for fiscal years ended 2001 and 2000, are as
follows:
July 31, 2001 July 31, 2000
---------------------------- ---------------------------
Weighted Weighted
Average Weighted Average Weighted
Exercise Average Exercise Average
Price Fair Value Price Fair Value
------------- ------------- ------------- -----------
Weighted average of options and warrants granted
during the year whose exercise price exceeded fair
market value at the date of grant (1) $0.26 $0.18 $ -- $ --
Weighted average of options and warrants granted $0.26 $0.18 $ -- $ --
during the year whose exercise price was less than
fair market value at the date of grant (1)
(1) Does not include warrants issued to previous holders of Millennium
warrants whose securities have been exchanged for securities of the
Company in accordance with the terms of the Merger Agreement.
The following table summarizes information about fixed-price stock options
and warrants outstanding at July 31, 2001.
Average
Number Remaining Weighted Number Weighted
Range of Outstanding at Contractual Average Exercisable at Average
Exercise Prices July 31, 2001 Life Exercise Price July 31, 2001 Exercise Price
-------------------- -------------- ----------- -------------- -------------- --------------
$0.0312-$0.0625 79,717,914 4.8 years $0.0373 58,498,507 $0.0373
$0.0667 - $0.33 9,625,000 4.79 years 0.2431 9,625,000 0.2431
$0.624 - $0.625 248,085 4.9 years 0.6245 248,085 0.6245
$1.00 - $2.50 450,000 2.44 years 1.06 450,000 1.06
---------- ----------
90,040,999 68,821,592
========== ==========
OPERATING LEASE COMMITMENTS
The Company leases certain office space and equipment under operating
leases.
The Company's administrative facilities are located in approximately 2,200
square feet of leased office space in Bernardsville, New Jersey, as to
which Millennium entered into a 5 year lease, starting January 1, 2001. The
lease calls for a monthly rent of $5,807 plus allocated expenses and is
personally guaranteed by certain officers of the Company.
E-13
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
OPERATING LEASE COMMITMENTS, Continued
The following is a schedule of future minimum rental payments (exclusive of
allocated expenses) required under operating leases that have initial or
non-cancelable lease terms in excess of one year as of July 31, 2001:
Year Ending July 31,
--------------------
2002 $69,687
2003 69,687
2004 69,687
2005 69,687
2006 29,036
--------
Total minimum payments required $307,784
========
Rent expense for the Company under operating leases for the period ended
July 31, 2001 was $33,996.
RELATED PARTY TRANSACTIONS
In June 2001, the Company entered into agreements with two officers which
allowed for advances of up to $75,000 to each officer. The notes bear
interest at 7.5% per annum and are due March 2002. As of July 31, 2001,
each officer had a balance of $33,500 outstanding.
COMMITMENTS
Millennium retained the services of David Miller pursuant to a consulting
agreement dated May 1, 2001 to advise and assist it with sales, marketing
and the development of its customer base and products. The term of the
agreement is for three years commencing on May 1, 2001 unless terminated
prior as provided for in the agreement. Mr. Miller shall receive an annual
compensation of $48,000 and has received options to purchase 150,000 shares
of common stock, which are exchangeable into shares of Series D Preferred
stock convertible into 2,404,557 shares of common stock pursuant to the
terms of the Merger Agreement.
Millennium entered into certain Royalty and Investment Agreements, dated
January 11, 2001 with David Miller, Jane Swon (spouse of Jerry Swon) and
Elayne Wishart (spouse of Bruce Deichl). Miller, Swon and Wishart each
acquired certain securities of Millennium, which are convertible into
shares of Series D convertible Preferred stock under the terms of the
Merger Agreement on July 27, 2001. Pursuant to the Investment and Royalty
Agreements, Millennium also agreed to pay a perpetual royalty to each of
Miller, Swon and Wishart equal to: (a) the product of .033 and the gross
sales of Regent's initial product offering under the name of RESURGEX(TM)
(net of discounts and returns); and (b) the product of .033 and gross
profits (as defined under the agreement) from the sale of additional
products. Consideration received under the agreements was $50,000. The
royalty agreements were determined to have a 10 year life over which they
are being amortized. The Company has not sold any product and as royalties
are based on product sales there have been no royalty payments as of July
31, 2001.
MAJOR VENDORS
For the sourcing of raw materials, procurement of inherent specialty
ingredients, manufacture of bulk product; quality control and testing; and
contact research assistance, the Company has retained the services of one
vendor.
E-14
Regent Group, Inc. and Subsidiary
Notes to Consolidated Financial Statements
SUBSEQUENT EVENTS
On August 9, 2001, the Board of Directors decided to effect a reverse split
of issued and outstanding shares of Common Stock. The Board has determined
that the reverse split will be approximately one-for-twelve. Stockholder
approval of the reverse split is required under Delaware law.
On August 8, 2001, the Company signed a letter of intent for a 5-year lease
commencing in the Spring of 2002 for approximately 4,500 square feet of
office space at an annual rental of $120,000.
Between August 2, 2001 and November 8, 2001, the Company has raised
additional capital of $1,477,000 through the issuance of approximately
20,450,000 common shares or common share equivalents.
E-15
EXHIBIT F
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Regent Group, Inc. and Subsidiaries
The Unaudited ProForma Combined Statement of Operations of the Company for the
twelve month periods ended December 31, 2000 and 1999 and the three month
periods ended March 31, 2001 and 2000 (the "ProForma Statements of Operations")
and the Unaudited ProForma Combined Balance Sheets of the Company as of December
31, 2000 and March 31, 2001 (the "ProForma Balance Sheets" and together with the
ProForma Statements of Operations, the "ProForma Combined Financial Statements")
have been prepared to illustrate the effect of the merger of Millennium
Biotechnologies, Inc. ("Millennium") on July 27, 2001 as if such transaction
took place on January 1, 1999. The ProForma Combined Financial Statements do not
purport to be indicative of the results of operations or financial position of
the Company that would have actually been obtained had such transactions been
completed as of the assumed dates and for the periods presented, or which may be
obtained in the future. The ProForma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that the Company believes are reasonable. The ProForma Combined
Financial Statements should be read in conjunction with the historical financial
statements of Millennium.
F-1
Regent Group, Inc. and Subsidiaries
Unaudited ProForma Combined Balance Sheets
March 31, 2001
---------------------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
------------ ------------ ------------ ------------
Assets
Current Assets
Cash $ 5,762 $ 6,470 $ -- $ 12,232
Marketable securities -- 6,000 -- 6,000
Inventories 2,805 -- -- 2,805
Prepaid expenses 8,375 8,593 -- 16,968
--------- ------------ ------------ ------------
16,942 21,063 -- 38,005
Property, Plant and Equipment 49,243 -- -- 49,243
Other Assets 34,843 -- -- 34,843
--------- ------------ ------------ ------------
Total Assets 101,028 21,063 -- 122,091
========= ============ ============ ============
Liabilities and Stockholders'
(Deficiency) Equity
Current Liabilities
Accounts payable and accrued
expenses 114,142 233,484 -- 347,626
Prepayments received -- -- -- --
Short term debt 30,042 90,000 -- 120,042
--------- ------------ ------------ ------------
Total Current Liabilities 144,184 323,484 -- 467,668
--------- ------------ ------------ ------------
Deferred Royalty Obligation 45,000 -- -- 45,000
Stockholders' (Deficiency) Equity
Preferred Stock
Convertible Series B -- 130,282 -- 130,282
Convertible Series C -- 64,763 -- 64,763
Convertible Series D -- --A 237,050 237,050
Common Stock 83 365,472A (83) 365,472
Additional Paid in Capital 139,917 16,960,408A (236,967) 16,863,358
Deficit (228,156) (17,820,346) -- (18,048,502)
Cumulative Other
Comprehensive Income -- (3,000) -- (3,000)
--------- ------------ ------------ ------------
Total Stockholders'
(Deficiency) Equity (88,156) (302,421) -- (390,577)
--------- ------------ ------------ ------------
Total Liabilities and Stockholders'
(Deficiency) Equity $ 101,028 $ 21,063 $ -- $ 122,091
========= ============ ============ ============
December 31, 2000
---------------------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
------------ ------------ ------------ ------------
Assets
Current Assets
Cash $ 5,465 $ 782 $ -- $ 6,247
Marketable securities -- 32,550 -- 32,550
Inventories 2,805 -- -- 2,805
Prepaid expenses 4,229 8,593 -- 12,822
------------ ------------ ------------ ------------
12,499 41,925 -- 54,424
Property, Plant and Equipment 6,682 -- -- 6,682
Other Assets 34,843 -- -- 34,843
------------ ------------ ------------ ------------
Total Assets 54,024 41,925 -- 95,949
============ ============ ============ ============
Liabilities and Stockholders'
(Deficiency) Equity
Current Liabilities
Accounts payable and accrued
expenses 48,405 193,900 -- 242,305
Prepayments received 25,000 -- -- 25,000
Short term debt 50,000 90,000 -- 140,000
------------ ------------ ------------ ------------
Total Current Liabilities 123,405 283,900 -- 407,305
------------ ------------ ------------ ------------
Deferred Royalty Obligation -- -- -- --
Stockholders' (Deficiency) Equity
Preferred Stock
Convertible Series B -- 130,282 -- 130,282
Convertible Series C -- 64,763 -- 64,763
Convertible Series D -- --A 237,050 237,050
Common Stock -- 365,472 -- 365,472
Additional Paid in Capital -- 16,855,418A (237,050) 16,618,368
Deficit (69,381) (17,753,460) -- (17,822,841)
Cumulative Other
Comprehensive Income -- 95,550 -- 95,550
------------ ------------ ------------ ------------
Total Stockholders'
(Deficiency) Equity (69,381) (241,975) -- (311,356)
------------ ------------ ------------ ------------
Total Liabilities and Stockholders'
(Deficiency) Equity $ 54,024 $ 41,925 $ -- $ 95,949
============ ============ ============ ============
F-2
Regent Group, Inc. and Subsidiaries
Unaudited ProForma Combined Statement of Operations
Twelve Months Ended December 31, 2000
----------------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
----------- ----------- ----------- -----------
Net Sales $ -- $ 44,806 $ -- $ 44,806
Cost of Goods Sold -- -- -- --
----------- ----------- ----------- -----------
Gross Profit -- 44,806 -- 44,806
Selling, General and Administrative
Expenses 68,964 (791,847) -- (722,883)
----------- ----------- ----------- -----------
Income (Loss) From Operations (68,964) 836,653 -- 767,689
Other Income (Expense)
Miscellaneous Income -- 247,500 -- 247,500
Interest Expense, Net (417) (8,367) -- (8,784)
Amortization of Goodwill -- (5,653,037) -- (5,653,037)
----------- ----------- ----------- -----------
Total Other Income
(Expense) (417) (5,413,904) -- (5,414,321)
Loss Before Provision for Income
Taxes (69,381) (4,577,251) -- (4,646,632)
Provision for Income Taxes -- -- -- --
----------- ----------- ----------- -----------
Net Loss $ (69,381) $(4,577,251) $ -- $(4,646,632)
=========== =========== =========== ===========
Twelve Months Ended December 31, 1999
----------------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
----------- ----------- ----------- -----------
Net Sales $ -- $ 119,625 $ -- $ 119,625
Cost of Goods Sold -- 16,725 -- 16,725
----------- ----------- ----------- -----------
Gross Profit -- 102,900 -- 102,900
Selling, General and Administrative
Expenses -- 2,393,460 -- 2,393,460
----------- ---------- ----------- -----------
Income (Loss) From Operations -- (2,290,560) -- (2,290,560)
Other Income (Expense)
Miscellaneous Income -- -- -- --
Interest Expense, Net -- (121,426) -- (121,426)
Amortization of Goodwill -- (237,320) -- (237,320)
----------- ----------- ----------- -----------
Total Other Income
(Expense) -- (358,746) -- (358,746)
Loss Before Provision for Income
Taxes -- (2,649,306) -- (2,649,306)
Provision for Income Taxes -- -- -- --
----------- ----------- ----------- -----------
Net Loss $ -- $(2,649,306) $ -- $(2,649,306)
=========== =========== =========== ===========
F-3
Regent Group, Inc. and Subsidiaries
Unaudited ProForma Combined Statement of Operations
Three Months Ended March 31, 2001
-----------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
----------- --------- ------------ ----------
Net Sales $ -- $ -- $ -- $ --
Cost of Goods Sold -- -- -- --
--------- --------- --------- ---------
Gross Profit -- -- -- --
Selling, General and Administrative
Expenses 156,844 83,036 -- 239,880
--------- --------- --------- ---------
(Loss) From Operations (156,844) (83,036) -- (239,880)
Other Income (Expense)
Miscellaneous -- 17,500 -- 17,500
Interest Expense (1,931) (1,350) -- (3,281)
--------- --------- --------- ---------
Total Other Income (Expense) (1,931) 16,150 -- 14,219
Loss Before Provision for Income
Taxes (158,775) (66,886) -- (225,661)
Provision for Income Taxes -- -- -- --
--------- --------- --------- ---------
Net Loss $(158,775) $ (66,886) $ -- $(225,661)
========= ========= ========= =========
Three Months Ended March 31, 2000
-----------------------------------------------------
ProForma
ProForma Combined
Millennium Regent Adjustments Company
----------- --------- ------------ ----------
Net Sales $ -- $ 3,750 $ -- $ 3,750
Cost of Goods Sold -- -- -- --
--------- --------- --------- ---------
Gross Profit -- 3,750 -- 3,750
Selling, General and Administrative
Expenses -- 976,025 -- 976,025
--------- --------- --------- ---------
(Loss) From Operations -- (972,275) -- (972,275)
Other Income (Expense)
Miscellaneous -- 130,000 -- 130,000
Interest Expense -- (2,750) -- (2,750)
--------- --------- --------- ---------
Total Other Income (Expense) -- 127,250 -- 127,250
Loss Before Provision for Income
Taxes -- (845,025) -- (845,025)
Provision for Income Taxes -- -- -- --
--------- --------- --------- ---------
Net Loss $ -- $(845,025) $ -- $(845,025)
========= ========= ========= =========
F-4
Regent Group, Inc. and Subsidiaries
Notes to the ProForma Combined Financial Statements
Note A.
On July 27, 2001, pursuant to an agreement and plan of reorganization among the
Company, its newly-formed wholly-owned subsidiary (the "Subsidiary"),
Millennium, and its stockholders, the Subsidiary merged into Millennium. For
accounting purposes, this transaction is treated as an acquisition of the
Company by Millennium and a recapitalization of Millennium.
The merger resulted in the issuance to Millennium shareholders of a new Series D
$1 par value Convertible Preferred Stock ("D Preferred Stock") of the Company in
exchange for all of the issued and outstanding common stock of Millennium. The
Millennium stockholders received .025 shares of the Company's D Preferred Stock
in exchange for each share of Millennium common stock. Each share of D Preferred
Stock is convertible into 641.215 shares of the Company's common stock and
entitles the holder of D Preferred Stock to 641.215 votes. A total of 237,049.7
shares of D Preferred Stock have been issued to former Millennium shareholders
as a result of the transaction.
The ProForma Combined Balance Sheets are those of Millennium at December 31,
2000 and March 31, 2001 as well as those of the Company at January 31, 2001 and
April 30, 2001, respectively. The ProForma Combined Statements of Operations are
those of Millennium for the twelve and three month periods ended December 31 and
March 31 as well those of the Company for the twelve and three month periods
ended January 31 and April 30, respectively.
F-5