File No. 333-41672
- --------------------------------------------------------------------------------
As filed with the Securities & Exchange Commission on February 13, 2002
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
POST EFFECTIVE AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
ABOVE AVERAGE INVESTMENTS, LTD.
(Name of small business issuer in its charter)
Nevada 6770 98-0204736
(State or jurisdiction (Primary Standard (IRS Employer
of incorporation Industrial Classification
or organization) Identification No.) Code No.)
-------------------------
Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(Address of principal place of business or intended principal place of business
-------------------------
Devinder Randhawa
Above Average Investments, Ltd.
Suite 104, 1456 St. Paul St., Kelowna
British Columbia, Canada V1Y 2E6
(250) 868-8177 tel.
(Name, address and telephone number of agent for service)
-------------------------
Copies to:
Antoine M. Devine, Esq. Michael D. Karsch, Esq.
Foley & Lardner Quick-Med Technologies, Inc.
One Maritime Plaza, 6th Floor 401 NE 25th Terrace
San Francisco, CA 94111 Boca Raton, Florida 33431
(415) 438-6456 (561) 750-4202
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
- ------------------- ------------ ---------------- ---------------- ------------
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities registered offering price aggregate registration
to be registered per unit (1) offering price fee
- ------------------- ------------ ---------------- ---------------- ------------
Common Stock, par 2,500,000 $.05 $125,000 $56.00 (2)
value $0.0001
- ------------------- ------------ ---------------- ---------------- ------------
(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
(2) Previously paid.
- -------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant will file a
further amendment which specifically states that this registration statement
will thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement will become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PROXY STATEMENT
RECONFIRMATION OFFERING
PROSPECTUS
ABOVE AVERAGE INVESTMENTS, LTD.
2,500,000 SHARES OF COMMON STOCK
$.05 PER SHARE
The boards of directors of Above Average Investments, Ltd. and Quick-Med
Technologies, Inc. have approved the merger of Above and Quick-Med. Under the
terms of the merger, based on the number of securities of Quick-Med that are
expected to be outstanding at the closing of the merger, the holders of
Quick-Med common stock will receive approximately 10,260,000 shares of Above
common stock. After giving effect to the merger, it is expected that Quick-Med
shareholders will own approximately 80% of Above's issued and outstanding common
stock. There is currently no market for Above common stock.
The merger cannot be completed unless Above shareholders approve the
merger, the merger agreement and the issuance of shares of Above common stock to
be delivered in connection with the merger, and Quick-Med shareholders approve
the merger and the merger agreement. The board of directors of Above has called
a special meeting of Above shareholders to be held on __________, 2002 to vote
on these matters. Above shareholders that own shares of Above common stock as of
the record date, which is the close of business on _________, 2002, may vote at
the Above special meeting or by proxy. Quick-Med shareholders will vote on the
merger by written consent. Holders of shares of Quick-Med common stock at the
close of business on the date the first written consent is given are entitled to
submit written consents.
THE BOARDS OF DIRECTORS OF ABOVE AND QUICK-MED ARE FURNISHING THIS DOCUMENT
TO YOU TO PROVIDE YOU WITH IMPORTANT INFORMATION ABOUT THE MERGER AND OTHER
MATTERS. IN ADDITION TO FURNISHING YOU WITH THIS IMPORTANT INFORMATION, THIS
DOCUMENT ALSO CONSTITUTES NOTICE TO THE SHAREHOLDERS OF QUICK-MED OF RIGHTS TO
DISSENT IN ACCORDANCE WITH THE DELAWARE REVISED STATUTES. Holders of Quick-Med
shares who are not in favor of the merger and who wish to assert appraisal
rights must comply with the relevant procedures detailed under Delaware law,
which are set forth in the statutory provisions reproduced in Appendix C to this
proxy statement/ prospectus. Above shareholders are not entitled to appraisal
rights under the Delaware General Corporation Law.
THE PROPOSED MERGER IS A COMPLEX TRANSACTION. ABOVE AND QUICK-MED STRONGLY
URGE YOU TO READ AND CONSIDER THIS PROXY STATEMENT/ PROSPECTUS IN ITS ENTIRETY,
INCLUDING THE MATTERS REFERRED TO UNDER "RISK FACTORS" BEGINNING ON PAGE 17.
/s/ Devinder Randhawa /s/ David S. Lerner
President and Chairman of President of
Above Average Investments, Ltd. Quick-Med Technologies, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE ABOVE COMMON STOCK TO BE ISSUED
UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED THE ADEQUACY OR ACCURACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This proxy statement/prospectus/information statement is dated ___________,
2002, and was first mailed to shareholders on or about ____________, 2002.
2
RECONFIRMATION OFFERING
This prospectus also relates to the reconfirmation offering required by
Rule 419 of Regulation C under the Securities Act of 1933 concerning 2,500,000
shares of common stock, $.0001 par value of Above Average Investments, Ltd. The
shares were initially sold in an initial public offering of 2,500,000 shares of
common stock, which was completed in November 2000. In March 2001, we executed
an agreement with Quick-Med Technologies, Inc. to acquire all of Quick-Med's
issued and outstanding shares of capital stock in exchange for 10,260,000 shares
of our common stock. In July 2001, the agreement was amended to provide for the
purchase by Quick-Med, as part of the merger, of our currently outstanding
500,000 shares for $0.05 per share. This prospectus is being furnished to
investors in the offering so they may consider reconfirming their investment as
a result of the proposed acquisition.
Prior to the offering and this reconfirmation offering, there has been no
market for common stock and we cannot assure you that a market will exist after
the proposed acquisition is completed.
-------------------------
The offering and the reconfirmation offering are being conducted under Rule
419 of Regulation C under the Act.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. It is illegal for anyone to tell you
otherwise.
-------------------------
Offering Information
- ------------------------- --------------- ------------------ ------------
Number of shares sold in Price per share Gross proceeds to Net proceeds
initial public offering Above Management
- ------------------------- --------------- ------------------ ------------
2,500,000 $.05 $125,000 $125,000
- ------------------------- --------------- ------------------ ------------
3
TABLE OF CONTENTS
Page
Notice of Special Meeting of Shareholders to be
Held on _____________, 2002................................................ 7
Where You Can Find More Information.......................................... 9
Questions and Answers about the Merger....................................... 10
Prospectus Summary........................................................... 13
Summary Pro Forma Combined Financial Data.................................... 16
Risk Factors................................................................. 17
Your Rights and Substantive Protection Under Rule 419
Deposit of Offering Proceeds and Securities................................ 22
The Merger................................................................... 24
Use of Proceeds.............................................................. 27
Capitalization Table......................................................... 28
The Above Special Meeting.................................................... 29
Quick-Med Solicitation of Written Consents................................... 32
Appraisal Rights............................................................. 33
Management's Discussion and Analysis......................................... 37
Quick-Med Plan of Operation.................................................. 40
Business..................................................................... 44
Principal Shareholders....................................................... 60
Management................................................................... 63
Executive Compensation....................................................... 66
Summary Compensation Table................................................... 66
Certain Relationships and Related Transactions............................... 67
Legal Proceedings............................................................ 68
Market for our Common Stock.................................................. 68
Description of Securities.................................................... 69
Shares Eligible for Future Resale............................................ 71
Reports to Stockholders...................................................... 71
Legal Matters................................................................ 71
Experts...................................................................... 71
Indemnification of Officers and Directors.................................... 72
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................ 72
Financial Statements.........................................................F-1
4
Appendix A -- Proxy Card
Appendix B -- Form of Quick-Med Written Consent
Appendix C -- Section 262 of the Delaware General Corporate Law:
Appraisal Rights
Appendix D -- Definitive Proxy Statement for the February 11, 2002
Annual Meeting
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, the words
"we," "us" and "our" refer to Above Average Investments, Ltd. (unless the
context indicates otherwise).
5
ABOVE AVERAGE INVESTMENTS, LTD.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________, 2002
TO THE SHAREHOLDERS OF ABOVE AVERAGE INVESTMENTS, LTD.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Above
Average Investments, Ltd., a Nevada corporation, will be held on _____________,
2002 at 9:00 a.m. local time at Above's principal executive offices, Suite 104,
1456 St. Paul St., Kelowna, British Columbia, Canada, to consider and vote upon
the following proposals:
o To approve the Agreement and Plan of Reorganization by and among
Above, and Quick-Med Technologies, Inc., a Delaware corporation, to
approve the merger of Above and Quick-Med, and to approve the issuance
of shares of Above common stock to Quick-Med shareholders in the
merger. After the merger, Quick-Med will become a wholly-owned
subsidiary of Above. A copy of the merger agreement is available by
request from Above at 250-868-8177 or at www.sec.gov. -----------
o To approve the change of our name to Quick-Med Technologies, Inc.
o To change the maximum number of directors who may serve on the board
The foregoing proposals are more fully described in the accompanying Proxy
Statement/Prospectus. The Above board of directors unanimously recommends that
you vote in favor of the proposals listed above.
The Board of Directors has fixed the close of business on _________, 2002
as the record date for the determination of shareholders entitled to notice of
and to vote at this special meeting of shareholders and at any adjournments or
postponements thereof.
By Order of the Board of Directors
/s/ Devinder Randhawa
President
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ABOVE MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ABOVE
MEETING. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
6
ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
You should rely only on the information contained or incorporated by
reference in this document to vote or consent with respect to the matters
submitted to you. Neither Above nor Quick-Med has authorized anyone to provide
you with information that is different from what is contained in this document.
This proxy statement/prospectus is dated _____________, 2002. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date, and the issuance of Above common
stock in the merger will not create any implication to the contrary. Above
provided the information concerning Above. Quick-Med provided the information
concerning Quick-Med.
7
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company, and are subject to the reporting requirements
of the Exchange Act. We voluntarily filed a Form 10-SB on October 4, 1999. We
have filed a registration statement with the SEC on form SB-2 to register the
offer and sale of the shares. This prospectus is part of that registration
statement, and, as permitted by the SEC's rules, does not contain all of the
information in the registration statement. For further information about us and
the shares offered under this prospectus, you may refer to the registration
statement and to the exhibits and schedules filed as a part of the registration
statement. You can review the registration statement and its exhibits and
schedules at the public reference facility maintained by the SEC at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The registration statement is also available electronically on the World Wide
Web at http://www.sec.gov.
IF YOU ARE AN ABOVE OR QUICK-MED SHAREHOLDER AND WOULD LIKE TO REQUEST
DOCUMENTS FROM ABOVE, PLEASE DO SO BY _____________, 2002 TO RECEIVE THEM BEFORE
THE SPECIAL MEETING.
8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHEN IS IT EXPECTED THAT THE MERGER WILL BE COMPLETED?
A: Above and Quick-Med are working toward completing the merger as quickly as
possible, and hope to complete the merger shortly following the Above
special meeting to be held on _________________, 2002. In order to complete
the merger, the shareholders of both Above and Quick-Med must approve the
merger. Following approval by the Above and Quick-Med shareholders, the
merger will be complete when all of the other conditions to completion of
the merger are satisfied or waived. The merger will become effective when
amended articles are filed with the Secretary of State of Nevada.
Q. AS A QUICK-MED SHAREHOLDER, WHAT WILL I RECEIVE IN THE MERGER?
A: Based on the number of securities of Quick-Med that are expected to be
outstanding at the closing of the merger, you will receive 1 share of Above
common stock for each share of Quick-Med stock that you own, subject to
some adjustments provided for in the merger agreement. For example, if you
own 1,000 shares of Quick-Med stock, you will receive 1,000 shares of Above
common stock. You will receive only whole shares.
Q. WHAT WILL HAPPEN TO QUICK-MED'S OUTSTANDING OPTIONS?
A: In accordance with the terms of the merger agreement, each option
outstanding as of the date of the completion of the merger will be assumed
by Above, which is changing its name to Quick-Med Technologies, Inc. and
automatically will become options to purchase shares of "new Quick-Med"
common stock on the same terms and conditions as the "old Quick-Med"
options.
Q. AS AN ABOVE SHAREHOLDER, WILL I RECEIVE ADDITIONAL SHARES OF ABOVE COMMON
STOCK IN THE MERGER?
A: No, you will continue to hold the same number of shares of Above common
stock after the merger. Shares of Above common stock will be issued only to
Quick-Med shareholders in the merger. The merger will result in Above
shareholders holding a smaller percentage of the combined company's stock
than the percentage of Above stock they currently hold. Assuming 100% of
the investors in the offering reconfirm their investment, after the merger,
it is expected that pre-merger Above shareholders will own approximately
18.4% of the outstanding shares of Above common stock on a fully diluted
basis.
Q. HAS SOMEONE DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE
ABOVE AND QUICK-MED SHAREHOLDERS?
A: Yes, the boards of directors of Above and Quick-Med have determined that
the merger is in the best interests of their respective shareholders. The
board of directors of each of Above and Quick-Med has approved the merger
and the merger agreement, and the board of directors of Above has approved
the issuance of Above common stock in the merger.
Q. WILL ABOVE SHAREHOLDERS VOTE ON THE MERGER?
A: Yes, Above shareholders will vote on the merger at Above's special meeting
of shareholders.
9
Q. ARE QUICK-MED SHAREHOLDERS ENTITLED TO APPROVE THE MERGER?
A: Yes, Quick-Med shareholders will have the opportunity to approve the merger
and the merger agreement by written consent. The merger and the merger
agreement require the approval of a majority of the issued and outstanding
shares of both Quick-Med's common stock.
Q. WHAT DO ABOVE SHAREHOLDERS NEED TO DO NOW?
A: Above shareholders should promptly mail their signed proxy card in the
enclosed postage-paid envelope so that their shares will be represented at
the Above special meeting.
Q. CAN ABOVE SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE DELIVERED THEIR
PROXIES?
A: Yes, Above shareholders can change their votes by delivering a written
notice of revocation with Above's secretary, sending in later-dated, signed
proxy cards to Above's secretary, attending the Above special meeting and
voting in person.
Q. WHAT DO QUICK-MED SHAREHOLDERS NEED TO DO NOW?
A: Quick-Med shareholders should promptly mail their signed written consents
in the enclosed postage-paid envelope to vote their shares of Quick-Med
stock for the merger.
Q. CAN QUICK-MED SHAREHOLDERS CHANGE THEIR VOTES AFTER THEY HAVE MAILED IN
THEIR WRITTEN CONSENTS?
A: A Quick-Med shareholder can only revoke or change an action by written
consent prior to the time that Quick-Med has received the requisite number
of consents to approve the merger. This will be a short period of time, as
Quick-Med expects to receive sufficient consents to approve the merger
promptly.
Q. SHOULD QUICK-MED SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. After the merger is complete, Above will send Quick-Med shareholders a
letter to transmittal and written instructions for exchanging their stock
certificates. Quick-Med shareholders should not surrender their Quick-Med
stock certificates until after the merger and until they receive the letter
of transmittal.
10
Q. WHO CAN ANSWER QUESTIONS REGARDING THE MERGER?
A: If you would like additional copies of this proxy statement/prospectus, or
if you have questions about the merger or the other matters discussed in
this document, you should contact:
For Above: For Quick-Med:
Above Average Investments, Ltd. Quick-Med Technologies, Inc.
Suite 104 401 NE 25th Terrace
1456 St. Paul St., Kelowna Boca Raton, Florida 33431
British Columbia, V1Y 2E6 Attention: David S. Lerner
Canada
Attention: Devinder Randhawa
11
PROSPECTUS SUMMARY
Above Average Investments, Ltd.
We were organized as a Nevada corporation on April 21, 1997 for the purpose
of creating a corporate vehicle to seek, investigate and, if the investigation
warrants, acquire an interest in business opportunities presented to us by
persons or firms who or which desire to employ our funding in their business or
to seek the perceived advantages of a publicly-held corporation.
Our executive offices are located at Suite 104-1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6. The telephone number is (250) 868-8177.
In November 2000, we completed an initial public offering for 2,500,000
shares of our common stock for $.05 per share pursuant to a Registration
Statement that became effective with the Securities and Exchange Commission on
September 19, 2000.
Quick-Med Technologies, Inc.
Quick-Med Technologies, Inc. was incorporated in the State of Delaware on
October 20, 1997. Quick-Med is a biomedical technology company in the
development stage with no sales or revenues to date.
Quick-Med Acquisition
In March 2001, we executed an agreement with Quick-Med and its shareholders
to acquire all of Quick-Med's issued and outstanding shares in exchange for
10,000,000 shares of our common stock. In July 2001, the agreement was amended
to increase the number of shares to be exchanged to 10,260,000. The share
exchange is structured so that Quick-Med's current shareholders will own at
least 81.6% of the outstanding shares in the post-merger entity on a fully
diluted basis.
We believe, after examining Quick-Med's business plan, interviewing their
management, and examining their proposed products, that if adequately
capitalized, Quick-Med's planned products, if successfully developed and
marketed, may enable Quick-Med to establish itself as a viable competitor in the
military, pharmaceutical and cosmetic industries.
High Risk
Investment in our securities is highly speculative, involves a high degree
of risk, and only persons who can afford the loss of their entire investment
should vote to reconfirm their investment.
Use of Proceeds
In our initial public offering, we raised $125,000 in proceeds. None of the
deposited funds have been or will be expended to merge Quick-Med into us. The
deposited funds will be transferred to us upon completion of the merger.
12
The Offering
Shares outstanding prior to the offering 500,000 (1)
Shares sold in the offering 2,500,000 (2)
Shares to be issued to Quick-Med 10,260,000 (3)
Shares outstanding after the merger 13,600,000 (1) (3) (4)
(1) The 500,000 shares held by current Above Average shareholders will be
purchased by Quick-Med as part of the merger, and will be cancelled when the
merger is consummated. The Articles of Incorporation authorize the issuance of
100,000,000 shares of common stock.
(2) Assumes that 100% of the purchasers reconfirm their investment. There
were 18 purchasers in the offering.
(3) Includes 260,000 shares that have been issued to a principal
shareholder of Quick-Med upon conversion of outstanding indebtedness.
(4) This includes shares issuable upon the exercise of stock options by
Quick-Med, which we are assuming.
Reconfirmation Offering Conducted in Compliance with Rule 419
According to Rule 419, investors must have no fewer than 20 and no more
than 45 business days from the effective date of the post-effective amendment to
decide to reconfirm their investment and remain an investor or, alternately,
require the return of their investment. Each investor has 20 business days from
the date of this prospectus to reconfirm his/her investment. Any investor not
making any decision within the 20 business day period will automatically have
his/her investment returned.
The rule further provides that if we do not complete an acquisition meeting
the specified criteria within 18 months of the effective date of the initial
public offering, all of the deposited funds in the escrow account must be
returned to investors. Therefore, even though we only require a majority of the
shareholders to approve the merger with Quick-Med under Nevada corporate law,
Rule 419 also requires that we receive reconfirmation from 80% of the investors
in the Rule 419 offering in order to consummate a merger.
Expiration Date
This offering will expire on March 19, 2002. If a merger has not been
consummated, funds held in escrow will be promptly returned to the investors.
Execution of the Merger Agreement
Our board, based upon its evaluation of Quick-Med, recommends that the
investors elect to accept the reconfirmation offering. The merger agreement was
approved by the directors and shareholders of Quick-Med at a meeting held on
March 5, 2001. The merger agreement was confirmed by the unanimous consent of
our directors on March 19, 2001. The agreement was amended, upon unanimous
consent of our directors, in July of 2001.
13
Escrow Account Discrepancy
In September 2001, our auditors discovered that the $125,000 raised in the
Rule 419 offering that closed on November 28, 2000 had not been deposited in the
escrow account at City National Bank. Therefore, these funds were not in our
possession and should not have been included on the balance sheets of our
December 31, 2000 and March 31, 2001 reports on Form 10-QSB. Amendments to these
reports have been filed.
The funds were held on deposit in the trust account of Martin & Adams,
PLLC, a Washington, D.C. law firm which held the funds on behalf of Euro
Atlantic Capital Corporation, the organization that is facilitating the merger
of our company and Quick-Med. Euro received no commissions or other compensation
for raising these funds, and is one of the investors in the offering. Euro acted
as Quick-Med's agent in locating a blank check company in order to execute a
reverse merger and become a public company. When this discrepancy was brought to
the attention of our management, the law firm was immediately notified to
transfer the funds. The funds were transferred to City National Bank on
September 10, 2001, and received into the escrow account on September 12, 2001.
14
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The following table presents our summary pro forma combined financial data, as adjusted for the effects of the merger and the
consummation of this offering and the application of the net proceeds. Please refer to the other financial statements and notes
included in this prospectus.
Historical Historical Proforma
---------- ---------- --------
AA Investments Quick-Med Three Months
-------------- --------- ------------
Twelve months Twelve months AA Investments Quick-Med Twelve Months ended
------------- ------------- -------------- --------- ------------- -----
ended ended Three months ended Three months ended ended September 30,
----- ----- ------------------ ------------------ ----- -------------
June 30, 2001 June 30, 2001 September 30, 2001 September 30, 2001 June 30, 2001 2001
------------- ------------- ------------------ ------------------ ------------- ----
Revenues earned $ $ $ $ $ $
Cost of revenues earned - - - - - -
Gross profit - - - - - -
Operating expenses:
Selling, general and
admn expense 127,535 622,668 55,258 143,697 750,203 198,955
--------- ----------- ---------- ----------- ----------- -----------
Total operating expense 127,535 622,668 55,258 143,697 750,203 198,955
Loss from operations (127,535) (622,668) (55,258) (143,697) (750,203) (198,955)
Other expense
Interest expense 13,689 7,124 13,689 7,124
----------- ----------- ----------- -----------
Net loss $(127,535) $ (636,357) $ (55,258) $ (150,821) $ (763,892) $ (206,079)
Basic net loss per share $ (0.26) $ (0.06) $ (0.06) $ (0.01) $ (0.06) $ (0.02)
Weighted average shares
outstanding 500,000 10,260,000 1,000,000 10,260,000 12,760,000 12,760,000
Fully diluted net loss
per share $ (0.26) $ (0.06) $ (0.06) $ (0.01) $ (0.06) $ (0.02)
Fully diluted average
shares outstanding 500,000 10,260,000 1,000,000 10,260,000 12,760,000 12,760,000
Balance sheet data:
Working capital (144,035) (810,608) (65,318) (977,358) (739,663) (927,358)
Total assets 10,035 383,813 161,535 375,396 483,813 475,396
Total long term debt - - - - -
Stockholders' equity 144,035 (442,144) (190,318) (601,996) (371,179) (551,996)
15
RISK FACTORS
We are insolvent on a pro forma combined basis and will be unable to
continue operations without raising additional capital or generating revenues
from product sales or licensing. On a pro forma combined basis, we are insolvent
since we have not yet raised sufficient funds to operate our planned business.
We incurred pro forma net losses of $120,487 in 2000 and $763,892 in 2001.
Quick-Med expects to incur operating losses for the next several years as it
invests in product research and development, preclinical and clinical testing
and regulatory compliance. Quick-Med will require substantial additional funding
to complete the research and development of its product candidates, and, to
market its products.
Quick-Med may have to dedicate a substantial portion of any future cash
flow to make interest and principal payments on its debt, which will reduce
funds available for operations, capital expenditures and other purposes. If we
do not have positive cash flow from operations on a timely basis, we may be
unable to develop our products or to conduct our business in an effective or
competitive manner.
Quick-Med's accountants have issued a going concern opinion due to the lack
of capital. Because of the uncertainties in its ability to satisfy its future
capital needs, Quick-Med's auditors' report on its financial statements for the
year ended December 31, 2000 contains an explanatory paragraph about its ability
to continue as a going concern.
Because Quick-Med is a new business venture with no products in the market,
you do not have any history on which to rely upon in determining whether to
invest in Quick-Med. Quick-Med has limited experience and a short history of
operations, and has no experience in marketing and selling any products. It has
not generated any revenues from operations. None of its products have sought or
received regulatory approval. Quick-Med cannot assure you that it will be able
to complete designing and testing its products, that the products will be
approved by the FDA or accepted in the marketplace, or that it will be able to
sell them at a profit. Furthermore, as a young company, Quick-Med is especially
vulnerable to the problems, delays, expenses, and difficulties encountered by
any company in the development stage, because it does not have an operating
history and experience to rely upon or an established infrastructure.
Quick-Med has not proven any of its products' effectiveness and may not be
able to do so in the future. Quick-Med has just started developing its primary
products and will require substantial laboratory and clinical testing before it
can market a product to consumers. This testing could take several years to
complete.
Quick-Med's proposed products may not be accepted in the market, adding to
the time before it receives any revenue from product sales. Quick-Med plans to
develop and market products to U.S. and foreign militaries and pharmaceutical
and cosmetic companies for sale to civilian retail customers. Military sales
will require detailed and rigorous research and development process that may be
lengthy and uncertain in outcome. Although Quick-Med will not sell directly to
civilian retail customers, these consumers must still accept its wound dressing
or cosmetic products as beneficial and worthwhile. Patients, doctors and
third-party payors must also accept Quick-Med-developed products as medically
useful and cost-effective. Market acceptance will require substantial education
about the
16
benefits of its wound care products and other products. Quick-Med cannot assure
you that the market will accept its products, even if approved for marketing, on
a timely basis. If retail consumers, patients, the medical community, and
third-party payors do not accept its products or acceptance takes a long time,
then revenues and profits would be reduced.
Quick-Med will require additional capital to be successful, which will
potentially dilute the value of shares of then current shareholders. Quick-Med
expects to continue to incur substantial losses for at least another two years.
During this period, it does not expect to obtain significant revenues from
operations but will need substantial funds, primarily for the following
purposes:
o To continue product development of its proposed products;
o To conduct clinical trials of its wound dressing product and otherwise
pursue regulatory approvals for this product; and
o To begin to develop new products based on its wound care technology,
and to conduct the clinical tests necessary to develop and refine new
products.
To finance Quick-Med's operations to date, it has relied almost entirely on
private offerings of common stock and loans from officers. The terms on which it
obtains additional financing may dilute the existing shareholders investments,
or otherwise adversely affect its position. It is also possible that Quick-Med
will be unable to obtain the additional funding it needs as and when it needs
it. If it were unable to obtain additional funding as and when needed, Quick-Med
could be forced to delay the progress of its development efforts. These delays
would hurt its ability to bring a product to market and obtain revenues, and
could result in competitors developing products ahead of Quick-Med and/or in its
being forced to relinquish rights to technologies, products or potential
products.
Quick-Med has recently received bridge financing that could result in a
change of control if not paid. Quick-Med has received a commitment for up to
$500,000 of bridge financing from a merchant banking firm, payable $50,000 per
month commencing February 2002. Any funds borrowed are repayable on the earlier
of February 7, 2003 or such time as Quick-Med obtains $2 million of equity
funding, the sale of Quick-Med's assets or the receipt of funding from
third-party sources. If Quick-Med is unable to obtain additional funding by
February 7, 2003, the notes payable may be converted at Euro's discretion into
voting convertible preferred stock. A default on the note after which the notes
are converted will also may result in this firm assuming control of Quick-Med.
Quick-Med will depend upon others for marketing and distributing its
products. Quick-Med has both military and civilian target markets. While some
members of its management have experience in selling to military organizations,
Quick-Med currently lacks marketing and sales experience and personnel,
distribution channels and other infrastructure needed to successfully market and
distribute a product in civilian markets. It intends to rely on collaborative
arrangements with one or more other companies which possess strong marketing and
distribution resources to perform these functions. Quick-Med does not, however,
currently have any agreements with other companies for marketing or distributing
its products. It may be forced to enter into contracts to market and distribute
its products that substantially limit the potential benefits to it from
commercializing these products. Quick-Med will not have the same control over
marketing and distribution that it would have if it conducted these functions
itself.
17
Quick-Med relies on key personnel who may leave on short notice. Because
its business is mostly scientific, Quick-Med depends greatly on attracting and
retaining management and scientific personnel. It has only one full-time
executive, David S. Lerner, its president. Its other officers are consultants
who devote substantial time to other employers. Losing any of these individuals
could have a material adverse effect on Quick-Med.
Quick-Med depends on licenses it has obtained on patented technology, the
loss of which would mean it could not develop or market many of its products.
Quick-Med's rights to develop several of its proposed products comes primarily
from one license agreement. In the event that this primary license agreement
terminates for any reason, including failure to make royalty payments,
challenges to the underlying patent or a breach, Quick-Med would lose its rights
to manufacture and market its proposed anti-wrinkle skin care and mustard gas
products. Quick-Med may also be required to license additional rights in order
to market its products and may not be able to obtain these rights on favorable
terms or at all.
Quick-Med has multiple U.S. and international patent applications that may
not be granted. Quick-Med cannot assure you that its applications will be
granted or that its patent rights will provide it with significant protection
against competitive products or otherwise be commercially viable. As a result
Quick-Med may not be able to protect its proprietary information.
Quick-Med may experience a significant delay in obtaining patent protection
for its products due to a substantial backlog of pharmaceutical and
biotechnology patent applications at the U.S. Patent and Trademark Office,
commonly known as the PTO. Because patent applications in the U.S. have been
maintained until recently in secrecy until patents issue, other competitors may
have filed or maintained patent applications for technology used by Quick-Med or
covered by pending applications without its being aware of these applications.
A failure to maintain relationships with the University of Florida could
cause Quick-Med to lose rights to intellectual property and access to some of
its scientists. Quick-Med has sought a close and favorable relationship with the
University of Florida. It is in negotiations to license exclusive rights to
technologies relating to some of its main research areas from the University and
two members of its research and development team are faculty members at the
University. Quick-Med cannot assure you that disputes will not cause it to lose
its relationship with the University.. The termination of this relationship
could cause Quick-Med to lose exclusive rights to portions of its technology in
development and prohibit it from working with University scientists. If no
agreement is reached, then the University of Florida may have the right to use
some of these patents in possible competition with Quick-Med.
18
A breach of the State of Florida and University of Florida conflicts of
interest laws and rules could prohibit Quick-Med from working with the
University or prevent University scientists from working on Quick-Med projects.
Several members of Quick-Med's research and development team are affiliated with
the University of Florida. As a result, it must comply with Florida statutes and
University policy on conflicts of interest. In order for it to do business with
the University, which includes licensing technology or cooperative research, the
University must also approve its employees' service on Quick-Med's research and
development team. If the University were to decline to approve the outside
activities of the University employees who are members of Quick-Med's research
and development team, or were to change the terms of its conflicts of interest
policy, Quick-Med would have to replace several scientists who have been
important to Quick-Med's current development activities. To date, the required
waivers for these scientists have not been obtained from the State of Florida.
The regulatory approval process is costly and lengthy and Quick-Med may not
be able to successfully obtain all required regulatory approvals, which would
prohibit it from selling some or all of its planned products. The preclinical
development, clinical trials, manufacturing, marketing and labeling of
pharmaceuticals are all subject to extensive regulation by numerous governmental
authorities and agencies in the U.S. and other countries. Quick-Med must obtain
regulatory approval for some of its product candidates before marketing or
selling them. It is not possible to predict how long the FDA's or any other
applicable federal, state or foreign regulatory authority or agency's approval
process for any of its products will take or whether any approvals will be
granted. Positive results in preclinical testing and/or early phases of clinical
studies offer no assurance of success in later phases of the approval process.
Generally, preclinical and clinical product testing can take many years, and can
require the expenditure of substantial resources. Any delay or failure to obtain
approvals will adversely affect Quick-Med's ability to market its products and
its ability to general product revenue. Factors that can impact the approval
process include:
o Delays or rejections in the regulatory approval process based on the
failure of clinical or other data to meet expectations, or the failure
of the product to meet a regulatory agency's requirements for safety,
efficacy and quality; and
o Regulatory approval, if obtained, may significantly limit the
indicated uses for which a product may be marketed.
Quick-Med's clinical trials could take longer to complete and cost more
than it expects, which would require raising additional funds and lengthen the
time before Quick-Med could realize any revenue. Quick-Med will need to conduct
a complete study of each of its product candidates. These studies are costly,
time consuming and unpredictable. Any unanticipated costs or delays in its
clinical studies could cause Quick-Med to expend substantial funds unexpectedly
or delay or modify its plans significantly, either of which would harm its
business, financial condition and results of operations. The factors that could
contribute to these costs, delays or modifications include:
o The cost of conducting human clinical trials for any potential
product. These costs can vary dramatically based on a number of
factors, including the order and timing of clinical indications
pursued and the development and financial support from corporation
partners; and
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o Intense competition in the pharmaceutical market, which may make it
difficult for it to obtain sufficient patient populations or clinician
support to conduct its clinical trials as planned.
Quick-Med does not have product liability insurance and may not be able to
get any on reasonable terms. Its business exposes it to product liability claims
inherent in the testing and marketing of medical products. It currently carries
no product liability insurance, but intends to acquire insurance prior to
selling any of its products for commercial use. Quick-Med cannot assure you that
it will be able to get or keep adequate liability insurance at a reasonable
cost. Its inability to get or keep insurance at an acceptable cost could prevent
or inhibit the commercial development of its products. A liability claim, even
one without merit, could result in major legal expenses.
The hazardous material Quick-Med will use in part of its research and
development could result in significant liabilities. Quick-Med will use
hazardous materials in some of its research and development activities. In most
instances these materials are only handled by the U.S. military in conducting
tests jointly on behalf of Quick-Med and the military. In some other instances,
these materials may be handled within the private sector. While it believes that
it will be in substantial compliance with federal, state and local laws and
regulations governing the use of these materials, accidental injury or
contamination may occur. An accident or contamination could result in
substantial liabilities, which could exceed its financial resources. The cost of
compliance with environmental and safety laws and regulations may also increase
in the future, which could adversely effect revenues.
There is no public market for our common stock and none is expected to
develop immediately after this offering is completed, which means you may
experience difficulty in selling your shares. At the present time, there is no
public market for our securities. It is unlikely that a regular trading market
will develop when the reconfirmation offering is concluded, or if developed,
that a market will be sustained, or that our securities purchased by the public
in the offering may be resold at their original offering price or at any other
price. Any market for our securities that may develop will very likely be a
limited one. While we intend to continue to timely file periodic reports under
the Securities Exchange Act of 1934 for so long as we may be required to do so,
we cannot assure you that we will continue to file such reports on a voluntary
basis. In any event, due to the low price of the securities, many brokerage
firms may choose not to engage in market making activities or effect
transactions in such securities. Purchasers of the securities may have
difficulties in reselling them and many banks may not grant loans utilizing our
securities as collateral. Our securities will not be eligible for listing on the
Nasdaq Stock Market when this reconfirmation offering is completed.
20
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deducting underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by you and other investors in this offering, be deposited
into an escrow or trust account governed by an agreement that contains certain
terms and provisions specified by Rule 419. Under Rule 419, the funds will be
released to us and the securities will be released to you only after we have met
the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any. We have entered into an agreement with Quick-Med.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. We must
also disclose the specific amount and use of funds disbursed to us to date,
including payments to officers, directors, controlling shareholders or
affiliates, specifying the amounts and purposes of these payments. We must also
disclose the terms of the reconfirmation offer with the conditions prescribed by
the rules. The post-effective amendment must also contain information about the
acquisition candidate and business, including audited financial statements. This
prospectus complies with this requirement.
Third, we will mail a copy of the prospectus to each investor within five
business days of the effectiveness of the post-effective amendment. This
prospectus is the reconfirmation prospectus. The reconfirmation offering is
being made as described under "Prospectus Summary; ." After we submit a letter
to the escrow agent that the requirements of Rule 419 have been met and after
the acquisition is closed, the escrow agent can release the funds and
securities.
We entered into an escrow agreement with City National Bank, N.A., Los
Angeles, California, which provides that the proceeds are to be deposited into
the escrow account maintained by the escrow agent promptly upon receipt. While
Rule 419 permits 10% of the funds to be released to us prior to the
reconfirmation offering, we do not intend to release these funds. The funds and
any dividends or interest earned, are to be held for the sole benefit of the
investor and can only be invested in bank deposit, in money market mutual funds,
federal government securities or securities for which the principal or interest
is guaranteed by the federal government. Due to a failure of communication
between our management and other parties involved in the transaction, the
proceeds of the offering were held in the trust account of a Washington,
D.C.-based law firm until September 12, 2001.
All securities issued for the offering and any other securities issued,
including stock splits, stock dividends or similar rights are to be deposited
directly into the escrow account promptly upon issuance. The proceeds were
deposited in the escrow account on September 10, 2001. The certificates
21
were issued on December 11, 2000, and sent to escrow on January 3, 2001. Your
name must be included on the stock certificates or other documents evidencing
the securities. The securities held in the escrow account are to remain as
issued, and are to be held for your sole benefit. You retain the voting rights,
if any, to the securities held in your name. The securities held in the escrow
account may neither be transferred or disposed of nor any interest created in
them other than by will or the laws of descent and distribution, or under a
qualified domestic relations order as defined by tax laws or retirement laws.
We may fail to obtain a sufficient number of investors to reconfirm the
offering, which will not permit us to complete the Quick-Med merger. If a
sufficient number of investors do not reconfirm their investment in the
reconfirmation offering, the merger will not be closed. If so, none of the
securities held in escrow will be issued and your funds will be promptly
returned to you without interest if another transaction is not approved by March
19, 2002.
22
THE MERGER
Background of the Merger Agreement
In November 2000 we commenced a "blank check" offering under Rule 419 of
the Securities Act. The offering was successful in raising $125,000 in gross
proceeds from investors. Under Rule 419, $125,000 and the 2,500,000 shares
purchased by the investors were placed in escrow pending:
o distribution of a reconfirmation prospectus to the investors
describing the acquisition of Quick-Med; and
o the subsequent reconfirmation by at least 80% of the investors that
they have elected to remain investors.
In the event the merger is not approved by at least 80% of the investors,
then the shares deposited in the escrow account will not be released to the
investors. Instead, the $125,000 in offering proceeds in the escrow account will
be promptly returned to the investors, and the share certificates will be
cancelled. Under Rule 419, the fair value of Quick-Med must represent at least
80% of the maximum offering proceeds, or $100,000. Based upon the audited
financial statements, we believe that Quick-Med's business value is more than
$100,000.
Terms and Conditions of Merger Agreement
Under the merger agreement, Quick-Med will be merged into us. We will
consummate the transaction contemplated by the merger agreement when, among
other things, reconfirmation by at least 80% of the investors. If the merger is
consummated, 10,260,000 shares of common stock will be issued to former
Quick-Med shareholders. Each investor in this offering who accepts the
reconfirmation offer will, after consummation, hold the same number of shares
held prior to the merger, but the aggregate percentage interest in Above Average
will be reduced to approximately 20%. Quick-Med will merge into Above Average
with Above Average as the surviving entity.
Our name will be changed to "Quick-Med Technologies, Inc." after the
merger. The merger is intended to be consummated so that the transaction will be
tax-free to all parties involved under Internal Revenue Code Section
368(a)(1)(A). Each investor who rejects the reconfirmation offer will be paid
his or her pro rata share of the amount in the escrow account at $.05 per share,
and current holders of our common stock, which is restricted from resale under
United States securities laws, will tender their shares to us for cancellation.
Governmental approval is not required to consummate the merger.
The result of the merger, assuming that 80% of the investors reconfirm
their investment, is that former Quick-Med shareholders will own approximately
81.6% of the surviving entity while our current shareholders will own
approximately 18.4% of Above Average on a fully diluted basis.
Investors deciding to accept the reconfirmation offer are directed to sign
a reconfirmation letter and return it to Above Average Investments, Inc.,
Attention: Devinder Randhawa, who will forward each reconfirmation letter to our
escrow agent. Any investor who fails to return his or her form so that it is
received by Mr. Devinder Randhawa within 45 business days from the date of their
23
reconfirmation prospectus will be deemed to have rejected the reconfirmation
offer and will automatically be sent a check within five business days
representing his or her pro rata share of the funds in the escrow account for
the benefit of the investors.
Accounting Treatment
Although we are the legal surviving corporation, for accounting purposes,
the value of our net assets after the public shell merger is the same as their
historical book value. Subsequent to the merger, assuming all of our
shareholders reconfirm their investment, our shareholders will retain 18.4% of
the outstanding shares of our capital stock on a fully-diluted basis.
Above Special Meeting
The Above Special Meeting of Shareholders will be held at Above's offices
located at Suite 104, 1456 St. Paul St., Kelowna, British Columbia, Canada on
_________________, 2002 at 9:00 a.m., local time. At the Above special meeting,
holders of Above common stock will be asked to consider and vote upon:
- The merger, the merger agreement and the issuance of shares of Above
common stock in the merger
- Change of our name to Quick-Med Technologies, Inc.
- Change the maximum number of directors
- Any other business that may properly come before the Above special
meeting or any postponement or adjournment
Above shareholders are entitled to vote at the Above meeting if they owned
shares of Above as of ___________, 2002, Above's record date. On that date,
there were 3,000,000 shares of Above common stock outstanding and entitled to
vote at the Above meeting.
Quick-Med Written Consents
Quick-Med shareholders will have an opportunity to approve the merger and
the merger agreement by written consent. Holders of shares of Quick-Med common
stock at the close of business on the date the first written consent is given
are entitled to submit written consents. As of ___________, 2002 there were
____________ shares of Quick-Med common stock issued and outstanding. Approval
of the merger and merger agreement requires the approval of the holders of a
majority of the outstanding shares of Quick-Med common stock.
24
Quick-Med Optionholders
Each outstanding option to acquire shares of Quick-Med common stock shall
be assumed by Above. As a result of the merger, each Quick-Med stock option
shall be treated as an option to acquire shares of Above common stock upon the
same manner determined by multiplying the number of shares presently subject to
the Quick-Med options by the exchange ratio by which the Quick-Med common shares
are to be exchanged for shares of Above common stock in the merger and by
dividing the exercise price for such shares of Quick-Med common stock by the
exchange ratio to determine the new exercise price. Based on the number of
Quick-Med options that are expected to be outstanding at the closing of the
merger, these options will be converted into options to purchase approximately
840,000 shares of Above common stock.
Rights of Dissenting Shareholders
Above
Under the Nevada Revised Statutes, Above shareholders do not have appraisal
rights. However, if the merger is not approved by the investors in the offering,
their funds will be promptly returned.
Quick-Med
Under Delaware General Corporation Law, even if enough holders of Quick-Med
common stock approve the merger, a Quick-Med shareholder can refuse the merger
consideration and exercise his appraisal rights to dissent and obtain payment
for the fair value of his common stock.
Certain Income Tax Consequences
The merger is intended to qualify as a tax-free reorganization for purposes
of the federal income tax law so that Above Average's and Quick-Med's
shareholders will not recognize gain or loss from the transaction. The
transaction is not expected to result in the recognition of gain or loss to
either Above Average or Quick-Med in the respective jurisdictions where each
entity is subject to taxation. No opinion of counsel nor a ruling from the
Internal Revenue Service has been obtained. This statement is for general
information only and our stockholders should consult their own tax advisors as
to the specific tax consequences of the merger to them.
25
Use of Proceeds
The gross proceeds of this offering were $125,000. Rule 419 permits 10% of
the funds or $12,500 to be released from escrow to us prior to the
reconfirmation of the offering. However, we did not request release of these
funds. We will receive the gross proceeds in the event a business combination
with Quick-Med is closed under Rule 419.
We have not incurred and do not intend to incur in the future any debt from
anyone other than management for our organizational activities. Debt to
management will not be repaid. Management is not aware of any circumstances that
would change this policy. None of the proceeds are being used to repay debt.
Management will pay the offering expenses. These payments are classified as
additional paid-in capital..
Under Rule 419, after the reconfirmation offering and the closing of the
business combination, $125,000, plus any dividends received, but less any amount
returned to investors who did not reconfirm their investment under Rule 419,
will be released to us and applied to working capital.
Amount Percent
------ -------
Gross Proceeds $125,000 100%
Offering Expenses $ 0 0.0%
Research and development and $100,000 80%
operating expenses
Purchase of shares from original $ 25,000 20%
shareholders
The anticipated application of the net proceeds are for research and
development expenses and operating expenses.
The proceeds received in this offering were placed into the escrow account
on September 10, 2001 pending closing of the pending business combination with
Quick-Med, after having been on deposit in the trust account of a Washington,
D.C. law firm. These funds are in an insured financial institution in either a
certificate of deposit, interest bearing savings account or in short term
federal government securities as placed by City National Bank, N.A., Los
Angeles, California.
26
Capitalization Table
Our capitalization on September 30, 2001 and as adjusted to give effect to the issuance of shares to
Quick-Med's shareholders after the proposed acquisition is completed, is as follows:
Historical Pro Forma
AA Investments Quick-Med ---------
September 30, 2001 September 30, 2001 Total Adjustments Combined
------------------ ------------------ ----- ----------- --------
Stock subject to
redemption 125,000 125,000 (b) (125,000) -
Stockholders' equity:
Common stock 50 10,260 10,310 (a) (9,034) 1,276
Additional paid in 11,340 430,314 441,654 (a), 47,644 489,298
capital (b)
Outstanding stock
options 8,550 8,550 8,550
Accumulated deficit (201,708) (1,051,120) (1,252,828)(a) -201,708 (1,051,120)
-------- ---------- ---------- -------- ----------
Total stockholders'
equity (190,318) (601,996) (792,314) 240,318 (551,996)
Total capitalization (190,318) (601,996) (792,314) 240,318 (551,996)
(a) To record the public shell merger of the Registrant and Quick-Med. 10,260,000 shares of common stock
issue in exchange for 100% of Quick-Med common stock and the IPO of 2,500,000 shares in exchange for
$125,000 of the Registrant. (The total number of shares outstanding after the merger will be
12,760,000 shares). The assets of AAI are records at their net asset value.
(b) To reclassify the accounts payable and common stock subject to redemption to additional paid in
capital and common stock.
27
THE ABOVE SPECIAL MEETING
When and Where the Meeting will be held
This proxy statement/prospectus is being furnished to Above shareholders as
part of the solicitation of proxies by the Above board of directors for use at
the Above special meeting, to be held on ______________, 2002 at 9:00 a.m.,
local time at Above's corporation headquarters at Suite 104, 1456 St. Paul St.,
Kelowna, British Columbia, Canada and at any adjournments or postponements
thereof.
This proxy statement/prospectus, and the accompanying proxy card, are first
being mailed to holders of Above common stock on or about ________________,
2002.
What Will Be Voted Upon
The purpose of the Above special meeting is to consider and vote upon the
following proposal:
- to approve the merger, the merger agreement and the issuance of shares
of Above common stock in connection with the merger
- change the name of our company to Quick-Med Technologies, Inc.
- increase the maximum number of directors
The Above board of directors does not presently intend to bring any
business before the Above meeting other than the specific proposals referred to
above and specified in the notice of the Above special meeting. The Above board
of directors knows of no other matters that are to be brought before the Above
special meeting. If any other business properly comes before the Above special
meeting, including the consideration of a motion to adjourn the meeting,
including for purposes of soliciting additional votes, it is the intention of
persons named in the enclosed form of proxy to vote the shares they represent as
the Above board of directors may recommend.
Which Shareholders May Vote
Only holders of record of Above common stock at the close of business on
_______________, 2002, the Above record date, are entitled to notice of and to
vote at the Above annual meeting. As of the close of business on the Above
record date, there were 3,000,000 shares of Above common stock outstanding and
entitled to vote, held of record by 28 shareholders. A majority, or 1,530,000 of
these shares, present in person or represented by proxy, will constitute a
quorum for the transaction of business.
How Do Above Shareholders Vote
The Above proxy card accompanying this proxy statement/prospectus is
solicited on behalf of the Above board of directors for use at the Above
meeting. Shareholders are requested to complete, date and sign the accompanying
proxy and promptly return it in the accompanying envelope or
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otherwise mail it to Above. All proxies that are properly executed and returned,
and that are not revoked, will be voted at the Above special meeting in
accordance with the instructions indicated. EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED FOR APPROVAL AND ADOPTION OF ALL OF THE MATTERS LISTED ON THE PROXY
CARD.
How To Change Your Vote
An Above shareholder who has given a proxy may revoke it at any time before
it is exercised at the Above meeting, by doing one of the following:
- delivering a written notice of revocation with Mr. Devinder Randhawa,
President, Suite 104, 1456 St. Paul Street, Kelowna, British Columbia,
V1Y 2E6 Canada
- executing a subsequently dated proxy and delivering it Mr. Devinder
Randhawa, President, Suite 104, 1456 St. Paul Street, Kelowna, British
Columbia, V1Y 2E6 Canada
- attending the Above special meeting and voting in person.
Attending the Above special meeting will not, by itself, revoke a proxy.
The Above shareholder must also vote at the meeting.
Vote Required To Approve Each Proposal
Under Nevada law and the charter documents of Above, approval of the
merger, approval of the merger agreement and the issuance of shares of Above
common stock in connection with the merger and the proposals for the name change
and the change in the board composition require the affirmative vote of a
majority of the outstanding shares of Above common stock.
THE MATTERS TO BE CONSIDERED AT THE ABOVE MEETING ARE OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF ABOVE. ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
Solicitation Of Proxies And Expenses Of Solicitation
Above's management will bear the cost of the solicitation of proxies in the
enclosed form from its shareholders. In addition to solicitation by mail, the
directors, officers and employees of Above may solicit proxies from shareholders
by telephone, telegram, letter, email, facsimile or in person.
Deadline For Receipt Of Shareholder Proposals
Under Rule 14a-8 of the Securities Exchange Act, a shareholder intending to
present a proposal to be included in Above's proxy statement for its 2002 Annual
Meeting of Shareholders must deliver a proposal in writing to its executive
offices no later than ______________, 2002.
29
QUICK-MED SOLICITATION OF WRITTEN CONSENTS
Purpose Of Consent Solicitation
Quick-Med is soliciting written consents from its shareholders to approve
the merger and the merger agreement.
In accordance with Quick-Med's bylaws and Delaware law, the merger may be
approved and adopted without a meeting of Quick-Med shareholders by written
consent of at least a majority of the shares of Quick-Med common stock. If the
holders of a majority of the shares of the Quick-Med common stock consent to the
merger and approve the merger agreement, no further action will be required by
Quick-Med shareholders to approve the merger and the merger agreement.
The Quick-Med board of directors has approved the merger and the merger
agreement, believes that the terms of the merger agreement are fair to and in
the best interests of Quick-Med and its shareholders, and recommends that the
Quick-Med shareholders vote "FOR" the merger by executing and returning
Quick-Med written consents.
Record Date And Consent Rights
The date for determining shareholders of record entitled to give or
withhold consent to the merger will be the date on which the first written
consent is given. Only holders of shares of Quick-Med common stock at the close
of business on the date the first written consent is given will be entitled to
submit written consents. As of ____________, 2002, there were approximately 17
holders of record of Quick-Med shares. There were 10,260,000 shares of Quick-Med
common stock issued, and each share of which is entitled to one vote on the
merger.
A written consent may be revoked by delivery of written notice to the
secretary of Quick-Med at any time prior to the time duly executed Quick-Med
written consents have been returned, and not revoked, by the holders of a
majority of the outstanding Quick-Med common stock.
Expenses Of Consent Solicitation
Quick-Med written consents are being solicited by and on behalf of the
Quick-Med board of directors. Quick-Med will bear all expenses in connection
with such solicitation. In addition to solicitation by use of the mail,
Quick-Med written consents may be solicited by directors, officers and employees
of Quick-Med in person or by telephone or other means of communication. Such
directors, officers and employees will not be additionally compensated for, but
may be reimbursed for out-of-pocket expenses incurred in connection with any
solicitations.
Required Consents
Approval of the merger and merger agreement requires the approval of the
holders of a majority of the outstanding shares of Quick-Med common stock. As of
____________, 2002, neither Above nor any of its executive officers or directors
beneficially owned any outstanding shares of Quick-Med common stock.
30
QUICK-MED SHAREHOLDERS SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION
PRESENTED IN THIS DOCUMENT, AND COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED QUICK-MED WRITTEN CONSENT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
APPRAISAL RIGHTS
Statutory Appraisal Rights
The Delaware General Corporation Law grants appraisal rights in the merger
to the holders of Quick-Med common stock. Under Section 262 of the Delaware
General Corporation Law, Quick-Med stockholders may object to the merger and
demand in writing that Quick-Med pay to them the fair value of their shares of
Quick-Med stock. Fair value takes into account all relevant factors but excludes
any appreciation or depreciation in anticipation of the applicable merger.
Stockholders who elect to exercise appraisal rights must comply with all of the
procedures set forth in Section 262 to preserve their appraisal rights. We have
attached a copy of Section 262 of the Delaware General Corporation Law (which
sets forth the appraisal rights) as Appendix C to this proxy
statement/prospectus.
Section 262 sets forth the required procedure a stockholder requesting
appraisal must follow. Making sure that you actually perfect your appraisal
rights can be complicated. The procedural rules are specific and must be
followed completely. Failure to comply with the procedure set forth in Section
262 may cause a termination of your appraisal rights. We are providing you only
with a summary of your appraisal rights and the procedure. The following
information is qualified in its entirety by the provisions of Section 262, a
copy of which is attached as Appendix C to this proxy statement/prospectus.
Please review Section 262 carefully for the complete procedure. Quick-Med will
not give you any notice other than as described in this proxy
statement/prospectus and as required by the Delaware General Corporation Law.
Appraisal Rights Procedures
If you are a Quick-Med stockholder and you wish to exercise your appraisal
rights, you must satisfy the provisions of Section 262 of the Delaware General
Corporation Law. Section 262 requires the following:
You Must Make a Written Demand for Appraisal. You must deliver a written
demand for appraisal to Quick-Med before the vote on the merger agreement and
the merger is taken at the special meeting. This written demand for appraisal
must be provided to Quick-Med separately from your proxy. In other words, a vote
against the Quick-Med merger agreement and the merger will not alone constitute
a valid demand for appraisal. Additionally, this written demand must reasonably
inform the corporation of your identity and of your intention to demand the
appraisal of your shares of Quick-Med stock.
You Must Refrain from Voting for Approval of the Merger. You must not vote
for approval of the merger agreement and the merger. If you vote, by proxy or in
person, in favor of the merger agreement and the merger, this will terminate
your right to appraisal. You can also terminate your
31
right to appraisal if you return a signed proxy and (1) fail to vote against
approval of the merger agreement and the merger or (2) fail to note that you are
abstaining from voting. Your appraisal rights will be terminated even if you
previously filed a written demand for appraisal.
You Must Continuously Hold Your Quick-Med Shares. You must continuously
hold your shares of Quick-Med stock, from the date you make the demand for
appraisal through the effective date of the merger. If you are the record holder
of Quick-Med stock on the date the written demand for appraisal is made but
thereafter transfer the shares prior to the effective date of the merger, you
will lose any right to appraisal in respect of those shares. You should read the
paragraphs below for more details on making a demand for appraisal.
A written demand for appraisal of Quick-Med stock is effective only if it
is signed by, or for, the stockholder of record who owns such shares at the time
the demand is made. The demand must be signed as the stockholder's name appears
on his/her/its stock certificate(s). If you are the beneficial owner of
Quick-Med stock, but not the stockholder of record, you must have the
stockholder of record sign a demand for appraisal.
If you own Quick-Med stock in a fiduciary capacity, such as a trustee,
guardian or custodian, you must disclose the fact that you are signing the
demand for appraisal in that capacity.
If you own Quick-Med stock with more than one person, such as in a joint
tenancy or tenancy in common, all of the owners must sign, or have signed for
them, the demand for appraisal. An authorized agent, which could include one or
more of the joint owners, may sign the demand for appraisal for a stockholder of
record; however, the agent must expressly disclose the identity of the
stockholder of record and the fact that the agent is signing the demand as that
stockholder's agent. If you are a Quick-Med stockholder who elects to exercise
appraisal rights, you should mail or deliver a written demand to:
Quick-Med Technologies, Inc.
401 NE 25th Terrace
Boca Raton, Florida 33431
Attention: David S. Lerner
It is important that Quick-Med receive all written demands for appraisal
before the vote concerning the merger agreement and the merger is taken at the
special meeting. As explained above, this written demand should be signed by, or
on behalf of, the stockholder of record. The written demand for appraisal should
specify the stockholder's name and mailing address, the number of shares of
stock owned, and that the stockholder is thereby demanding appraisal of that
stockholder's shares. If you fail to comply with any of these conditions and the
merger becomes effective, you will only be entitled to receive the merger
consideration provided in the merger agreement.
Written Notice. Within ten days after the effective date of the merger,
Quick-Med must give written notice that the merger has become effective to each
stockholder who has fully complied with the conditions of Section 262.
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Petition with the Chancery Court. Within 120 days after the effective date
of the merger, either the surviving corporation or any stockholder who has
complied with the conditions of Section 262, may file a petition in the Delaware
Court of Chancery. This petition should request that the chancery court
determine the value of the shares of stock held by all of the stockholders who
are entitled to appraisal rights. If you intend to exercise your rights of
appraisal, you should file such a petition in the chancery court. Quick-Med has
no intention at this time to file such a petition. Because Quick-Med has no
obligation to file such a petition, if you do not file such a petition within
120 days after the effective date of the merger, you will lose your rights of
appraisal.
Withdrawal of Demand. If you change your mind and decide you no longer want
appraisal rights, you may withdraw your demand for appraisal rights at any time
within 60 days after the effective date of the merger. You may also withdraw
your demand for appraisal rights after 60 days after the effective date of the
merger, but only with the written consent of Quick-Med. If you effectively
withdraw your demand for appraisal rights, you will receive the merger
consideration provided in the merger agreement.
Request for Appraisal Rights Statement. If you have complied with the
conditions of Section 262, you are entitled to receive a statement from
Quick-Med. This statement will set forth the number of shares that have demanded
appraisal rights, and the number of stockholders who own those shares. In order
to receive this statement, you must send a written request to Quick-Med within
120 days after the effective date of the merger. After the merger, Quick-Med has
10 days after receiving a request to mail the statement to you.
Chancery Court Procedures. If you properly file a petition for appraisal in
the chancery court and deliver a copy to Quick-Med, Quick-Med will then have 20
days to provide the chancery court with a list of the names and addresses of all
stockholders who have demanded appraisal rights and have not reached an
agreement with Quick-Med as to the value of their shares. The chancery court
will then send notice to all of the stockholders who have demanded appraisal
rights. If the chancery court thinks it is appropriate, it has the power to
conduct a hearing to determine whether the stockholders have fully complied with
Section 262 of the Delaware General Corporation Law and whether they are
entitled to appraisal rights under that section. The chancery court may also
require you to submit your stock certificates to the Registry in Chancery so
that it can note on the certificates that an appraisal proceeding is pending. If
you do not follow the chancery court's directions, you may be dismissed from the
proceeding.
Appraisal of Shares. After the chancery court determines which stockholders
are entitled to appraisal rights, the chancery court will appraise the shares of
stock. To determine the fair value of the shares, the chancery court will
consider all relevant factors except for any appreciation or depreciation due to
the anticipation or accomplishment of the merger. After the chancery court
determines the fair value of the shares, it will direct Quick-Med to pay that
value to the stockholders who are entitled to appraisal rights. The chancery
court can also direct Quick-Med to pay interest, simple or compound, on that
value if the chancery court determines that the payment of interest is
appropriate. In order to receive the fair value of your shares, you must then
surrender your Quick-Med stock certificates to Quick-Med.
33
The chancery court could determine that the fair value of your shares of
Quick-Med stock is more than, the same as, or less than the merger
consideration. In other words, if you demand appraisal rights, you could receive
less consideration than you would under the merger agreement. You should also be
aware that an opinion of an investment banking firm that the merger is fair is
not an opinion that the merger consideration is the same as the fair value under
Section 262.
Costs and Expenses of Appraisal Proceeding. The costs and expenses of the
appraisal proceeding may be assessed against Quick-Med and the stockholders
participating in the appraisal proceeding, as the chancery court deems equitable
under the circumstances. You can request that the chancery court determine the
amount of interest, if any, Quick-Med should pay on the value of stock owned by
stockholders entitled to the payment of interest. You may also request that the
chancery court allocate the expenses of the appraisal action incurred by any
stockholder pro rata against the value of all of the shares entitled to
appraisal.
Loss of Stockholder's Rights. If you demand appraisal rights, from and
after the effective date of the merger you will not be entitled to:
o vote your shares of Quick-Med stock, for any purpose, for which you
have demanded appraisal rights;
o receive payment of dividends or any other distribution with respect to
such shares, except for dividends or distributions, if any, that are
payable to holders of record as of a record date prior to the
effective time of the merger; or
o receive the payment of the consideration provided for in the merger
agreement (unless you properly withdraw your demand for appraisal).
If no petition for an appraisal is filed within 120 days after the
effective date of the merger, your right to an appraisal will cease. You may
withdraw your demand for appraisal and accept the merger consideration by
delivering to Quick-Med a written withdrawal of your demand, except that (1) any
attempt to withdraw your demand for appraisal made more than 60 days after the
effective date of the merger will require the written approval of Quick-Med, and
(2) an appraisal proceeding in the chancery court cannot be dismissed unless the
chancery court approves such dismissal.
If you fail to comply strictly with the procedures described above you will
lose your appraisal rights. Consequently, if you wish to exercise your appraisal
rights, we strongly urge you to consult a legal advisor before attempting to
exercise your appraisal rights.
If you do not vote in favor of the merger and fail to properly demand
appraisal rights, or if for some reason your right to appraisal is withdrawn or
lost, your shares will, upon surrender as described above at the effective time
of the merger, be converted into the right to receive the applicable merger
consideration as described above, subject to the deposit of 10% of the shares of
Quick-Med common stock payable to Quick-Med stockholders into escrow to be used
in the event that Quick-Med is entitled to indemnification under the merger
agreement or to the extent that there is a reduction in the purchase price based
on a post-closing audit adjustment.
34
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read along with the financial statements
and notes appearing in other parts of this prospectus.
Above Average Investments
We were in the development stage as of June 30, 2001 and completed an
initial public offering in November 2000 using a Registration Statement that
became effective with the SEC on September 19, 2000 and sold 2,500,000 shares of
its common stock, $.0001 par value, at a price of $.05 per share. The offering
was conducted directly by us without an underwriter. We are a "blank check"
company subject to Rule 419 of the Securities Act that was organized to obtain
funding from persons purchasing in the offering in order to provide a vehicle to
take advantage of business opportunities which management believes arise from
time to time.
The deposited funds and the securities to be issued to subscribers are
remaining in escrow and may not be released until an acquisition meeting certain
specified criteria has been made and enough subscribers reconfirm their
investments according to the procedures outlined in Rule 419.
We had no revenues for each of the years ended June 30, 2001 and June 30,
2000 and for the three months ended September 30, 2001 and 2000. We had a net
loss of ($127,535) for the year ended June 30, 2001 as compared to a net loss of
($17,157) for the year ended June 30, 2000. At June 30, 2000, we had total
assets of $0 and total liabilities of $3,795. We had a net loss of $55,258 for
the three months ended September 30, 2001 compared to a net loss of $12,394 for
the 2000 period. At September 30, 2001 we had total assets of $0 and total
liabilities of $161,535.
In March 2001, we executed an agreement with Quick-Med, to acquire all of
Quick-Med's issued and outstanding shares of capital stock in exchange for
10,260,000 shares of our common stock. Assuming this reconfirmation offering and
acquisition is completed, Quick-Med's business will be our sole business.
Quick-Med Technologies
Quick-Med was incorporated in Delaware in December 1997. Its business
primarily consists of research and development of biomedical products and
devices for antibacterial applications. Quick-Med is in the development stage
and does not have any revenues or sales to date.
Results of Operations
Quick-Med had no sales for the years ended December 31, 2000 and December
31, 1999 or the nine months ended September 30, 2001 as its products are still
in the development stage.
Quick-Med reported an operating loss of ($313,903) for the year ended
December 31, 2000, and an operating loss of ($166,291) for the year ended
December 31, 1999. Quick-Med reported an operating loss of ($525,410) for the
nine months ended September 30, 2001. This change resulted primarily from the
increase in total expenses in 2001 as operating levels increased and research
and
35
development accelerated. In both 2001 and 2000, Quick-Med also incurred various
costs and expenses normally associated with a start-up business. In the 2001
period, most of the expenses were related to research and development of its
primary proposed products. Quick-Med expects that costs will continue to
increase as it product development efforts continue to increase.
Liquidity and Capital Resources
At December 31, 2000, Quick-Med had a working capital deficit of
($714,549), primarily due to loans of $334,734, a license fee payable in 2001 of
$260,000 and accounts payable of $77,014. At December 31, 2000, Quick-Med had a
stockholders' deficit of ($339,412). At September 30, 2001, Quick-Med had a
working capital deficit of ($977,358), primarily due to loans of $517,966, a
license fee payable in 2001 of $260,000 and accounts payable of $178,733. At
September 30, 2001, Quick-Med had a stockholders' deficit of ($601,996). In
March 2001, the first $260,000 of shareholder loans were converted into common
stock at $1.00 per share.
To date, Quick-Med has funded its activities principally from short term
loans totaling approximately $850,000 from a shareholder and an affiliated
company and a $200,000 loan from a merchant banking firm. The funds have been
loaned with 6% interest. In March 2001, the first $260,000 shareholder loan was
converted into common stock at $1.00 per share. At January 31, 2002, shareholder
and affiliate loans totaling $590,000 were outstanding. It is anticipated that
Quick-Med will continue to depend on the receipt of investment capital or other
financing to fund its continuing activities. In January 2002, Mr. Granito, who
has loaned Quick-Med approximately $825,000, and Quick-Med entered into a
revolving note agreement that provides for him to loan Quick-Med up to $750,000,
including the outstanding $565,000. The agreement provides that the outstanding
balance is convertible into common stock at $1.00 per share at Mr. Granito's
option. The maturity date of the note is December 31, 2002. These funds will be
available until Quick-Med is able to raise sufficient funds from third parties.
To date, Quick-Med has been able to meet its obligations on a timely or delayed
basis as funding has been made available on an as-needed basis. However,
Quick-Med cannot assure you that Mr. Granito will continue to provide funding
beyond the amount of the revolving note agreement.
Quick-Med has received a commitment for up to $500,000 of bridge financing
from Euro Atlantic Capital Corp., a merchant banking firm, payable $50,000 per
month commencing February 2002. The first installment has been received. Any
funds borrowed are repayable on the earlier of February 7, 2003 or such time as
Quick-Med obtains $2 million of equity funding, the sale of Quick-Med's assets
or the receipt of funding from third-party sources. If Quick-Med is unable to
obtain additional funding by February 7, 2003, the notes payable to Euro may be
converted at Euro's discretion into voting convertible preferred stock. The
conversion ratio will be determined using Quick-Med's book value on the date of
the note. The note is guaranteed by Michael Granito, Quick-Med's chairman and a
principal shareholder. Quick-Med intends to seek additional equity financing
after the merger. Quick-Med believes that it will obtain the equity financing
prior to the maturity of the bridge financing, which will enable it to repay the
note and to continue operations. We cannot assure you that Quick-Med will obtain
this financing, or, if obtained, it will be on favorable terms. Failure to
obtain financing might cause Quick-Med to materially alter its business plan or
to cease operations. A default on the note, which may result in its conversion,
may also result in Euro assuming control of Quick-Med. Quick-Med does not
currently believe that the costs to be incurred in seeking financing will be
material.
36
Any short-term cash obligations in excess of the $50,000 per month bridge
financing until an equity financing is completed may be funded by loans or
advances from shareholders, including Mr. Granito.
37
QUICK-MED PLAN OF OPERATION
Research and Development
Over the next 12 months Quick-Med intends to continue the development of
its four main product groups. Assuming it raises sufficient funds, product
development activities are expected to accelerate. Quick-Med has recently opened
a small research facility in Gainesville, Florida near its University of Florida
researchers, but will also continue its research and development with existing
and new partners in order to conserve resources. For each potential product,
Quick-Med will continue to monitor the appropriate time to enter into
negotiations towards a license agreement with a joint venture partner. To the
extent that Quick-Med enters into a joint venture agreement, it is anticipated
that the partner will assume some or all of the development costs in exchange
for a percentage of the profits for that product. These ventures will have the
effect of decreasing cash flow over the near term and long term, but will help
sustain Quick-Med's operations since it should be able to devote its limited
resources to more projects than it could otherwise do without partners.
Quick-Med anticipates hiring additional employees, and expects to retain
scientific and product marketing consultants on a project basis over the next
year. These consultants will be paid on a hourly, milestone or project basis in
cash or equity. Quick-Med currently employs five scientific consultants on a
part-time basis. Their consulting fees range from $5,000 per year to $54,000 per
year in cash and 2,500 to 40,000 shares of stock. The agreements also provide
for bonuses of up to $10,000 per year. In order to conserve its cash, Quick-Med
intends to seek employees who are willing to receive a combination of cash and
equity for compensation. Bonuses may be awarded for achievement of milestones
such as entering into a license agreement or receipt of regulatory approval for
a particular product.
Capital Expenditures and Requirements
Quick-Med has spent approximately $200,000 over the last two years on the
acquisition of patents and exclusive license agreements, and owes an additional
$160,000, which is due when certain milestones are met.
Over the next 12 months Quick-Med does not anticipate earning revenues from
any of its products. Over the next 12 months, Quick-Med is not required to pay
any royalties for its license to its primary MMP inhibitor. However, should
Quick Med receive revenues pursuant to its license of its primary MMP inhibitor
they will be required to pay a royalty to the licensor of 2.0% of the first $1.5
million of revenue, and 1.5% thereafter. Quick-Med anticipates over the next 12
months that it will spend approximately $750,000 on operations, all of which is
expected to come from third party funding, which could include the bridge
financing described in "Liquidity and Capital Resources" above, private
placements, strategic partnerships or license agreements. It is anticipated that
the majority of any funds raised will be used for research and development,
patent prosecutions and licenses for proposed products. It is also possible that
a licensing arrangement will be made with one or more strategic partners that
will pay a license fee to Quick-Med or assume a portion of the research
expenses.
Quick-Med does not expect any significant additions to property, plant and
equipment.
38
Skin Care
According to a market report by the Southern Technology Applications
Center, or STAC. one of the largest health care markets is skin care, especially
in the aging population where natural chemical processes like declining estrogen
levels lead to skin deterioration. Quick-Med is developing an anti-wrinkle
cosmetic cream with particular application to post-menopausal women as a
healthier alternative to estrogen replacement.
The goal of this project is to develop a cosmetic product that visibly
reduces the signs of skin aging by reducing the appearance of lines and
wrinkles, increasing skin firmness while it softens and smoothes the skin. The
main feature of the cosmetic product currently under development is a
formulation containing a combination of a patented matrix metalloproteinase or
MMP inhibitor and a plant extract containing a phytoestrogen in an emollient
cream. Previous scientific research published in leading medical journals
referred to later has demonstrated that the activity of MMPs increases in the
skin with age, especially in postmenopausal women, and that topical application
of estrogen reduces the level of MMP activity in the skin of women and increases
the amount of skin collagen. Combining a phytoestrogen-containing plant extract
with the MMP inhibitor is anticipated to produce a synergistic benefit on the
extracellular matrix of the skin. See the following articles published in
medical journals for results on research related to MMPs. Dr. Gregory Schultz,
one of the authors, is a director, officer and consultant of Quick-Med.
G.S. Ashcroft, M.A. Horan, R.W. Tarnuzzer, G.S. Schultz, M.A. Horan, and
M.W.J. Ferguson. Estrogen Accelerates Cutaneous Wound Healing Associated with
and Increase in TGF- 1. Nature Medicine 3:1209-1215, 1997.
G.S. Ashcroft, S.E. Herrick, R.W. Tarnuzzer, G.S. Schultz, M.A. Horan, and
M.W.J. Ferguson. Age-Related Changes in the Temporal and Spatial Regulation of
Matrix Metalloproteinases (MMP) Protein and mRNA Profiles in Normal Skin and
Acute Cutaneous Wounds of Healthy Humans. Cell Tissue Res 290:581-591, 1997.
G.S. Ashcroft, S.E. Herrick, R.W. Tarnuzzer, M.A. Horan, G. Schultz, and
M.W.J. Ferguson. Human Aging Impairs Injury-Induced in Vivo Expression of Tissue
Inhibitors of Matrix Metalloproteinases (TIMP)-1 and -2 Proteins and mRNA. J
Pathol 183:169-176, 1997.
For the anti-aging cream, Quick-Med will continue product formulations and
completed its first clinical trials in late 2001. Additional trials are expected
once additional formulations are completed and funding is obtained. Testing may
be conducted by Quick-Med or in collaboration with a university or
pharmaceutical or cosmetic company. This product is not currently expected to
require FDA approval. If further trials are successful and funding is obtained,
a product may be commercialized in 2003.
Chemical Warfare
As exemplified by the recent Anthrax incidents, chemical warfare is now a
leading threat posed by rogue military states or terrorists. Quick-Med is
developing a post-injury chemical warfare agent for treatment of mustard gas and
other chemical burns to be sold to the U.S. military and friendly
39
states, as well as for civil defense. Related products will target the civilian
chemical burn market in areas like industrial accidents and civilian or military
exposures to hazardous materials.
For the sulfur mustard product, Quick-Med will continue its development
pursuant to the Cooperative Research and Development Agreement, or CRADA, with
U.S. Army Medical Research Institute of Chemical Defense. The CRADA provides
that all of the research is done by the Army in consultation with Quick-Med. If
development and trial studies are successful and regulatory approvals obtained,
a product may be ready for commercialization by the end of 2003.
Wound dressings
With an aging population, the market for severe or chronic wound dressings
used in hospitals and outpatient facilities is substantial. Quick-Med is
developing a proprietary modern bandage, which employs an advanced wound
dressing that utilizes its super absorbent polymer technology to kill bacteria
and fungi at the same time as absorbing exudate, which is fluid released from a
wound.
For the wound-care bandage, Quick-Med will continue its product development
at its own and outside laboratories with the intent of seeking to commercialize
this potential product in collaboration with a major medical device
manufacturer. Preliminary discussions have commenced with potential partners. If
development and clinical trials are successful and regulatory approvals
obtained, a product may be ready for commercialization by 2005. Little emphasis
will be placed on this project until adequate funding or a partner is obtained.
Protective clothing
Based on the Department of Defense or DOD Nuclear Biological/Chemical
Defense Annual Report To Congress Dated March 2000 the Department of Defense is
expected to spend $1 billion by 2010 for Chemical Protective Clothing to protect
our forces from Chemical /Biological warfare attacks. DOD has a stated need and
an aggressive research and development effort to find a new technology to
replace the carbon based clothing to provide lighter and longer lasting clothing
for its forces. The current protective gear consists of heavy clothing laced
with activated carbon that is difficult to wear and requires frequent
replacement. Quick-Med is developing a fabric comprised of layers of high
efficiency filtration fiber webs, some of which are treated with neutralizers
for chemical warfare agents. This technology may also be used for emergency
response forces and hazardous material handlers. This project is on hold until
funding is obtained.
For the protective clothing project, Quick-Med is currently in early stage
development work. It is seeking a joint venture partner with an industry leader
in protective clothing fabric and garment manufacturer because it believes that
it will not be able to develop a product without substantial collaboration.
40
BUSINESS
Introduction
Above Average Investments was incorporated on April 21, 1997 under the laws
of the State of Nevada to engage in any lawful corporate purpose. Other than
issuing shares to its shareholders, we never commenced any other operational
activities. We can be defined as a "blank check" company, whose sole purpose at
this time is to locate and consummate a merger or acquisition with a private
entity. Our board has elected to implement of our principal business purpose,
which is described below.
In November 2000, we completed an initial public offering of 2,500,000
shares of our common stock at a price of $.05 per share using a Registration
Statement that became effective with the Securities and Exchange Commission on
September 19, 2000. In March 2001, we executed an agreement with Quick-Med to
acquire all of Quick-Med's issued and outstanding shares of capital stock in
exchange for 10,260,000 shares of our common stock. In July 2001, the agreement
was amended to provide for the purchase of our currently outstanding shares for
$0.05 per share. Quick-Med was incorporated in Delaware in December 1997 and is
a biomedical technology company in the development stage. As of the date of this
prospectus, Quick-Med has reported no sales or revenues.
In the interim, we have filed post-effective amendments in conjunction with
the issuance of this prospectus, which, when declared effective, we intend to
utilize to facilitate the reconfirmation offering. Until we consummate a merger,
we will continue to be a blank check company. If we are unable to consummate the
merger with Quick-Med, management intends to continue to seek a qualified
entity. However, we cannot assure you that management will continue to provide
the financial support required to allow us to maintain our status as a reporting
company. If market conditions warrant, management may decide to suspend filing
periodic reports, and possibly dissolve the company.
Quick-Med
Quick-Med intends to fund the research efforts necessary to develop the
planned products, administer the patent process, subcontract the manufacture of
its products and, in many cases, enter joint ventures with other companies to
move products to the marketplace. Quick-Med itself does not intend to
manufacture and distribute final products. Quick-Med intends to focus its
attention on the value-added activities of developing and commercializing new
core technologies. Scientific experts in relevant fields will be identified and
retained through consulting contracts. Senior management will be identified to
ensure broad experience in all aspects of the business. Operating costs have
been kept relatively low because Quick-Med has been compensating non-executive
management and the scientific team mostly in equity, and not in cash salaries
and benefits. To date, Quick-Med has required only one full time employee, its
president. and chief operating officer.
Quick-Med's vision is to rapidly deliver products in targeted civilian and
military health care markets where it can leverage its core technologies.
41
Quick-Med's Business Model
Quick-Med's goal is to develop core technologies with multiple applications
in targeted areas showing what it perceives to be wide gaps between available
science and application. To accelerate research and development Quick-Med has
retained qualified researchers who it believes can prototype, test and help to
effectively commercialize attractive products in targeted areas.
When it develops new technologies, Quick-Med will seek patent protection in
all major geographic end markets and it will seek exclusive ownership of the
associated patent rights. Exclusive rights may maximize Quick-Med's ability to
profitably commercialize the technology. If Quick-Med personnel are not the
exclusive inventors of the technology, which means that Quick-Med is not the
sole owner of patent rights then there will be other inventors who, according to
patent law, are also able to exploit their rights under the patent. While
Quick-Med can still seek to commercialize the technology under such a
non-exclusive patent, its ability to do so is reduced since it could face
competition from one of the other inventors named on the patent, or an entity to
whom the other inventors might have assigned their rights. In cases where there
are such other inventors, Quick-Med will seek a license agreement with the other
inventors or their assignees so that Quick-Med has exclusive rights to
commercialize the technology. To date, Quick-Med has licensed the rights to 13
patents on an exclusive basis and has filed three patent applications for its
own inventions, none of which have been granted as of the date of this
prospectus.
Quick-Med does not intend to distribute its products to it's anticipated
end-markets. Quick-Med expects to develop the technology to the point of
developing a prototype, determining the potential for market acceptance and then
finding a strategic partner or purchaser of the potential product. It seeks to
choose partners to reduce risk and accelerate growth in manufacturing or
distribution. For products where the ultimate end user or buyer is a civilian
entity, Quick-Med intends to license its technology to a branded distributor and
receive a royalty on end-market sales.
Manufacturing will also be outsourced, in many cases to the same company
distributing the product. For products where the user is a military or civil
defense entity, Quick-Med will sell the product itself to the user but will
outsource manufacturing to firms with military approval. In this case revenues
can be earned directly from sales.
Quick-Med believes that there can be significant benefits to strategic
partnerships with larger corporations. Larger corporations may have capital,
manufacturing resources, access to markets, and strong consumer brands.
Quick-Med seeks to gain the capacity and channels to deliver its technology and
Quick-Med believes that the larger companies need to add new products to their
lines, which can allow it to develop successful relationships.
Quick-Med currently conducts its research with contract research
organizations. It has recently opened a research facility with one of these
contract research organizations in Gainesville, Florida near its University of
Florida researchers. Research and development is also being conducted with the
US Army pursuant to a CRADA agreement.
In the future, Quick-Med intends to conduct research and development in its
own facilities or with contract research organizations. Research and development
is completed at such time as a
42
potential product has proven efficacy and safety. If the product requires
regulatory approval, then regulatory review will occur subsequent to completion
of research and development. If no approval is required, then the product will
be commercialized upon completion of development. If available, Quick-Med will
seek patent protection as soon in the development stage as management determines
a patentable invention has been discovered.
Most of Quick-Med's proposed products will require regulatory approval
before they can be sold. Quick-Med has not yet commenced the regulatory approval
process on any of its products or made any filings with government agencies
other than its patent applications. Quick-Med cannot predict when regulatory
filings will be made and when the process will be completed.
Management Team
Quick-Med's management team is composed of bankers, scientists, attorneys,
retired military generals and business professionals, all with 16 to 35 years of
experience in their respective fields, and have attained senior levels in their
corporate, scientific or military careers.
Scientific Team
Quick-Med's scientific team consists of experienced leading academic and
private sector researchers in the targeted research and development segments.
The team has extensive experience in the areas of wound healing, cosmetic skin
treatments, biochemistry, physical and surface chemistry and material science.
The team has also extensive experience in managing research and development
processes for both the military and major private sector companies. Quick-Med
has retained five scientists as consultants. Three additional scientists serve
as officers and directors but do not receive any compensation.
Products Under Development
Quick-Med's strategy is to develop core technologies that can apply to
multiple targets in the civilian and military health care markets. Quick-Med
presently has two technologies that it is seeking to use in four markets:
Ilomostat
Quick-Med has an exclusive license on a new bio-medical compound called
Ilomostat. Ilomostat is a member of a class of compounds called Matrix
Metallaproteinese Inhibitors or MMPIs. As discussed in articles listed above in
Quick-Med Plan of Operations, scientific research by members of Quick-Med's team
and other independent researchers have shown that MMPIs block the production of
Matrix Metallaproteinese or, MMPs, in skin cells. They have also shown that MMPs
are naturally occurring compounds that can cause detrimental effects in the skin
when events trigger an over-production of MMPs in skin cells. Events that can
trigger an over-production of MMPs include certain external chemical exposures,
sun damage or even natural aging in which the levels of other compounds in skin
cells, such as estrogen in women, decline.
This core technology will be developed into two product lines: chemical
warfare and skin care.
43
Chemical Warfare
As exemplified by the recent Anthrax incidents, chemical warfare is now a
the leading threat posed by rogue military states or terrorists. Quick-Med is
developing a post-injury chemical warfare agent for treatment of mustard gas and
other chemical burns to be sold to the U.S. military and friendly states, as
well as for civil defense. Related products to be developed will target the
civilian chemical burn market in areas like industrial accidents and civilian or
military exposures to hazardous materials.
Quick-Med expects to complete research and development of the post-injury
agent within 12 to 24 months of the date of this prospectus. It expects final
product specification, initial contract awards, manufacturing and distribution
to be initiated within 18 to 24 months of the completion of the research and
development stage. Quick-Med will have exclusive rights to this potential
product subject to its obligation under the CRADA to sell any product to the
U.S. Army and is required to pay royalties to the MMP patent holder.
Skin Care
Quick-Med believes that one of the largest health care markets is skin
care, especially in the aging population where natural chemical processes like
declining estrogen levels lead to skin deterioration. Quick-Med is developing an
anti-wrinkle cosmetic cream with particular application to post-menopausal women
as a healthier alternative to estrogen replacement. Related products will target
the general marketplace for skin care products.
Quick-Med expects to complete research and development of the cosmetic
cream within 9 to 18 months of the date of this prospectus. It expects to
license the formulation to a manufacturing and distribution partner within 6 to
12 months after the completion of research and development. Quick-Med has filed
a patent application for the formulation of this product and will have exclusive
rights to this product, subject to its obligation to pay royalties to the
inventor.
Advanced Super Absorbent Polymers
Quick-Med has filed a patent application for a second core technology for
super absorbent polymers that are chemically engineered to create new products
in the following target markets:
Wound dressings
Based upon a report by STAC, which forecasts an aging population, Quick-Med
believes the market for severe or chronic wound dressings used in hospitals and
outpatient facilities is large and growing rapidly. Yet the technology used in
the current high margin products like the gauze bandage still found in most
medicine cabinets lags far behind available science. Quick-Med is developing a
proprietary modern bandage, which employs an advanced wound dressing that
utilizes its super absorbent polymer technology to deliver medication while
disinfecting and absorbing exudate.
Quick-Med expects to complete research and development of the wound
dressing within 9 to 18 months of the date of this prospectus. Quick-Med has
filed a patent application that is currently pending and will provide them with
exclusive rights to use should a patent be granted. It expects to
44
license the technology to a manufacturing and distribution partner within 6 to
12 months of the completion of the research and development stage.
Quick-Med is exploring other uses of this technology that would benefit
from the antimicrobial properties, since the dressing can be included in many
kinds of fabrics. Potential uses are surgical clothing, tablecloths, shoes and
masks.
Protective clothing
Based on the Department of Defense Nuclear Biological/Chemical Defense
Annual Report to Congress Dated March 2000, the U.S. Army is expected to spend
over $1 billion by 2010 to purchase clothing for protecting soldiers from
chemical warfare attacks. The current protective gear, consists of heavy
clothing laced with activated carbon that is difficult to wear and requires
frequent replacement. Quick-Med is developing a fabric comprised of layers of
high efficiency filtration fiber webs, some of which are treated with
neutralizers for chemical warfare agents. This technology may also be used for
emergency response forces and hazardous material handlers. This project is on
hold until funding is obtained.
If sufficient funding is obtained, it expects to complete research and
development of a protective fabric within 18 to 30 months after funding. In
order to develop a commercial product, Quick-Med needs to find a manufacturing
partner that meets U.S. Military requirements within 6 to 12 months of the
completion of research and development. Currently, there are no pending patents
or patent applications for this proposed product.
Current Status of the Projects
The goals and current status of the four research and development projects
are:
Anti-Wrinkle Cosmetic Product
The goal of this project is to develop a cosmetic product that visibly
reduces the signs of skin aging by reducing the appearance of lines and
wrinkles, increasing skin firmness while it softens and smoothes the skin. The
main feature of the cosmetic will be a formulation containing a combination of a
patented matrix metalloproteinase or MMP inhibitor and a plant extract
containing a phytoestrogen in an emollient cream. Previous scientific research
published in leading medical journals cited above has demonstrated that the
activity of MMPs dramatically increases in the skin with age, especially in
postmenopausal women, and that topical application of estrogen reduces the level
of MMP activity in the skin of women and increases the amount of skin collagen.
Combining a phytoestrogen-containing plant extract with the MMP inhibitor is
anticipated to produce a strong synergistic benefit on the extracellular matrix
of the skin.
A patent application on the skin care formulation was submitted to the U.
S. Patent Office. Current development involves optimizing the composition of the
formulation. Efforts are underway with expert consultants in the fields of cream
and hydrogel formulations, phytoestrogens, MMP inhibitors, consumer preferences
and marketing research.
45
Animal and human testing of a potential product began in the summer of
2001. Assuming development is successful, Quick-Med intends to attempt to
commercialize this potential product in collaboration with a major cosmetic
manufacturer and retailing company. The compounds it intends to use in this
product will be safe to humans and are already used in commercially available
products. In addition, it will not use concentrations of materials that will
require regulation as a drug by the FDA. It will use concentrations and make
effectiveness claims that allow the product to be regulated by the FDA as a
cosmetic and not a drug. This implies a less time consuming and less costly
testing protocols than for a drug and does not require FDA approval. It expects
the testing to take 9-18 months after commencement and to require not more than
$250,000 in development costs.
Treatment of Sulfur Mustard Injuries of the Skin and Eye
The goal of this project is to develop a drug formulation that will reduce
tissue damage following exposure to vesicating or blistering chemical agents.
Even prior to the September 11, 2001 terrorist attacks, the U.S. Army has
determined that changing political conditions in the world have placed U.S.
troops and civilians at significant risk for exposure to chemical warfare
agents, especially the vesicating agent sulfur mustard. Previous research of
sulfur mustard injuries to the eye, skin, and lungs indicates that chronically
elevated levels of proteases cause much of the tissue damage in tissues exposure
to sulfur mustard. Quick-Med has an exclusive license for a synthetic MMP
Inhibitor that has been proven in clinical studies conducted by Glycomed, Inc.
to reduce damage in ocular tissues of patients with infections and in animals
following severe chemical injury to the eye. These studies are described in
"Galardin Reduced Corneal Perforations in Clinical Trials," press release by
Glycomed, Inc., December 22, 1994. G.S. Schultz, S. Strelow, G.S. Stern, N.
Chegini, M.B. Grant, R.E. Galardy, D. Grabelny, J.J. Rowsey, C. Stonecipher, and
V. Parmley. Inhibition of Cornea Ulceration After Severe Alkali Injury by a
Synthetic Metalloproteinase Inhibitor. Invest Ophthalmol Vis Sci 33:3325-3331,
1992.
A Cooperative Research and Development Agreement, or CRADA, was signed in
2000 with the U.S. Army Medical Research Institute of Chemical Defense to
develop the MMP inhibitor for treatment of sulfur mustard injuries to the eye
and skin. Initial tests of Ilomostat, one of the MMP inhibitors, for treatment
of sulfur mustard injuries in mouse skin have produced encouraging results.
Animal tests are underway evaluating Ilomostat for treatment of sulfur mustard
injury in rabbit eyes. Under the terms of the CRADA, the U.S. Military will
design, pay for and conduct all tests, handling of hazardous materials and
compliance with environmental regulations. Quick-Med does not expect testing on
human subjects. The U.S. Military will also be responsible for product
acceptance testing and associated regulatory approvals. While the term of the
CRADA extends for five years, it is expected that product development and
testing will require 12 to 24 months.
Assuming development is successful, Quick-Med will attempt to commercialize
this potential product, which will be achieved in collaboration with a major
ocular drug company. In addition, Quick-Med may attempt to commercialize the
product for treatment of household and industrial chemical burns. Preliminary
discussions have commenced with potential partners.
Wound Dressing Project
The goal of this project is to develop a bandage suitable for application
on severe wounds received in both military and civilian activities. The main
feature of the dressing is an highly effective
46
antimicrobial capable of substantially reducing pathogen load over extensive
intervals or until permanent wound care can be administered.
The agent chosen is not susceptible to the shortcomings of antibiotics
because it is:
o Broadly effective against bacteria, fungi and viruses
o Not hindered by the presence of body fluids
o Capable of deactivating bacterial species that are resistant to
antibiotics
o Non-allergenic and non-extractable from the wound dressing
This goal has been substantially achieved by the invention of a polymer
that can be grafted or attached to a variety of materials that have the
properties essential for use in a bandage.
Microbiological lab testing by Quick-Med has confirmed the effectiveness of
the polymer grafted to cellulose in deactivating at levels of 99.99% or more of
bacteria, fungus or virus type isolates which are associated with more than 75%
of commonly occurring wound infections. Future phases of the project are
intended to add a super absorbent polymer as well as a blood coagulating agent
to the dressing.
Assuming development is successful, Quick-Med will attempt to commercialize
this potential product in collaboration with a major medical device
manufacturer.
Protective Clothing Project
The goal of this project is to develop fabrics and apparel suitable as
protective barriers to the challenges of hazardous materials including chemical
and biological warfare agents and industrial solvent chemicals.
The proposed fabric is constructed so as to permit the transmission of
moisture from the body of the wearer without sacrificing its effectiveness as a
barrier. It is expected to be comfortable and durable to damage from wear over
extended periods of wear in military field use and reusable after laundering.
In early testing, a grafted chemical molecule capable of neutralizing and
permanently binding mustard gas was prepared and, upon preliminary testing,
found to be sufficiently effective for the intended applications. A grafted
chemical molecule is one that has been chemically attached to another molecule.
The microbiocide is attached to a substrate layer such as cellulose with the aid
of a polymer.
Future development involves the evaluation of neutralizing agents for other
hazardous materials, combination of layers that represent barriers to all
chemical challenges and the inclusion of a polymer graft layer already
demonstrated to be effective against bacteria and viruses. A polymer graft layer
is a layer of material that contains a polymer to which a microbiocide has been
attached and which contains an entire layer of these grafted molecules attached
to its surface.
47
Quick-Med determined that collaboration and joint development with one or
more companies capable of producing the fabrics and clothing is necessary.
Quick-Med has determined that limited efforts will be directed towards this
product until a suitable partner is found.
Patents and Exclusive Licenses
Quick-Med's strategy is to obtain original patents or exclusive composition
and use licenses to practice patents relating to core technologies and their use
in targeted applications. These patents or licenses provide the legal basis for
Quick-Med to develop and in the future to commercialize its products. If
Quick-Med files a patent application, then it will generally have exclusive
rights to the product.
If a promising invention has been discovered but proper testing results
have not been obtained, a provisional application may be filed. A provisional
patent is a filing that demonstrates an intention to patent a certain
technology. The inventor is given up to one year to apply for a permanent
patent. If the patent applied for is approved, the date that is assigned is the
original filing date of the provisional patent.
Quick-Med does not own any patents. It has filed the patent applications
listed below and has also licensed granted patents also listed below.
Quick-Med's Patent Applications
o Quick-Med has filed and owns the rights to three original patent
applications for: A super absorbent polymer antimicrobial wound
dressing for use in the wound care product;
o An advanced non-estrogen anti-aging/anti-wrinkle topical cream for the
cosmetic anti-wrinkle skin care product; and
o Compositions for treating skin and eyes exposed to mustard gas.
Wound Dressings. In June 2001, Quick-Med filed a patent application
relating to the wound dressing project, which if granted, would expire in
December 2019. Related applications have been filed since that date to expand
the scope of the additional filings. Also, corresponding international
applications were filed.
Presently, Quick-Med owns an undivided one-half interest in these patent
applications. University of Florida Research Foundation owns the other one-half
undivided interest. Quick-Med is negotiating with the University for exclusive
rights to these applications. If these negotiations are not successful, then the
University will have the right to use these patents. However, Quick-Med believes
that the University may be effectively barred from competing with its proposed
product since, in its opinion, Quick-Med believes that these rights alone are
not sufficient to commercialize a product. Quick-Med has not obtained a legal
opinion regarding these rights.
48
Anti-Wrinkle Cosmetic Cream. The Anti-Wrinkle Cosmetic Cream application
was filed on June 29, 2001. The application was filed in the names of David
Lerner and Gregory S. Schultz, directors of Quick-Med, and has been assigned to
Quick Med.
Mustard Gas. The Mustard Gas application was filed on September 25, 2001.
The application was filed in the names of David Lerner and Gregory S. Schultz,
directors of Quick-Med, and has been assigned to Quick Med.
Quick-Med's Licensed Patents
The following is a list of patents licensed by Quick-Med for the MMP
compound family from the inventors and are being used for both the skin care and
chemical warfare projects:
U.S. Patents
Expiration
No. Date Description
- --- ---------- -----------
5,183,900 11/21/10 Matrix metalloprotease inhibitors
5,189,178 11/21/10 Matrix metalloprotease inhibitors
5,239,078 11/21/10 Matrix metalloprotease inhibitors
5,268,384 12/07/10 Inhibition of angiogenesis by synthetic matrix
metalloprotease inhibitors
5,270,326 11/21/07 Treatment for tissue ulceration
5,696,147 12/09/14 Inhibition of angiogenesis by synthetic matrix
metalloprotease inhibitors
5,773,438 06/30/15 Synthetic matrix metalloprotease inhibitors and use
thereof
5,892,112 04/06/16 Process for preparing synthetic matrix metalloprotease
inhibitors
Related International Patents:
No. Expiration Date
- --- ---------------
2736285 (Japan) November 21, 2011
4501333 (Japan) November 21, 2011
652016 (Australia) November 21, 2011
1971367 (Japan) November 21, 2011
EPO558681 (Europe) November 21, 2011
The European patent designates Germany, Spain, France, United Kingdom and
Italy as the countries in which patent protection is effective. All of these
patents relate to the U.S. patents described above.
49
License Agreements
Quick-Med entered in to a license agreement in September 2000 with Richard
Galardny and Damian Grobelny, the inventors, for the patented compounds for MMP
Inhibitors listed above. This license agreement transfers to Quick-Med the
technology for all topical applications that is the subject of issued U.S.A. and
worldwide patents listed above as well as some world wide pending patent
applications, which were started by the original inventors. The license
agreement also gives Quick-Med the right to defend, maintain and enforce each
patent in its country of issuance. Although the license agreement grants
exclusive worldwide rights to Quick-Med , one or more of the patents may have
lapsed, expired, or may no longer be in force. The license agreement remains in
force on a country-by-country basis for the life of the last-to-expire patent
licensed to Quick-Med under the license agreement, which is April 6, 2016. For
some of the patents licensed, since the inventors are not the sole inventors,
the University of Florida Research Foundation may have rights to grant a license
or assign rights to others who may develop similar products.
This agreement covers composition of matter and the associated method for a
new technology in treating chemical wounds to the eyes and skin for both
military and civilian uses, and for treating intrinsic skin aging and
deterioration. Quick-Med has paid the inventors $200,000 of cash and 160,000
shares of common stock and is required to make future payments based on meeting
developmental milestones. Quick-Med may have to pay up to $160,000 over the next
12 months in royalties and milestone payments.
Quick-Med has obtained non-exclusive patent rights in cases where partial
funding or research support for the invention was provided by the U.S.
Government or a university. In November 2000, Quick-Med entered into a
Cooperative Research and Development Agreement or CRADA with the U.S. Army
Medical Research Institute of Chemical Defense to focus on treatment of sulfur
mustard injuries to the eye and the skin with protease inhibitors. The
background for the collaboration comes from published results in animal models
and clinical trials using Ilomostat for treatment of severe and moderate corneal
ulcers produced by chemical injury or bacterial infection and psoriasis. The
goal of the CRADA is to develop a product for use in treating these injuries
that the military will purchase.
In the case of university support, most universities maintain the policy
that patents resulting from work by or with faculty members are at least
partially owned by the university. This affects Quick-Med because several of the
companies current scientists are University of Florida faculty. Quick-Med is
negotiating an arrangement with the University of Florida under which Quick-Med
will have exclusive rights to commercialize the affected inventions. Until an
agreement is negotiated, none of these faculty members are conducting any
research on behalf of Quick-Med.
Agreements with Consultants and Employees
All of Quick-Med's employees and consultants have signed agreements that
assign to Quick-Med all intellectual property rights to any inventions or other
proprietary information in any area in which that person is working with
Quick-Med. None of these agreements provide for the payment of any royalties.
Dr. Gregory Schultz, who is on the faculty of the University of Florida Medical
School, is the only consultant who currently has any rights in any intellectual
property that may be shared with Quick-Med. Dr. Schultz may be paid a royalty by
the University out of royalties that may be paid by
50
Quick-Med to the University. The agreements with the other three researchers
affiliated with the University of Florida are structured so that the University
does not have any rights in the research conducted or funded by Quick-Med.
Research and Development Spending
In the past two fiscal years Quick-Med has not incurred research and
development expenses. However, it began incurring such expenses in 2001, when it
employed scientists to conduct research. For the year ended December 31, 2001,
research and development expense was $170,936.
Potential Markets for Quick-Med Products
Quick-Med's strategy is to provide premium products in military and
civilian health care markets where it can leverage its core technologies with
multiple applications. Quick-Med has focused on markets where the performance of
current products can be substantially improved through more modern technology
and where there is low price sensitivity by the ultimate consumer.
The U.S. government has allocated $10 billion alone for the Defense
Preparedness Program, in addition to significant programs currently administered
by the U.S. Army Chemical and Biological Medical Research Command that have
allocated $4 billion over the next four years for research and development of
defenses against chemical or biological warfare. Based on the initial scientific
evidence for its compound Ilomostat, Quick-Med has entered a Cooperative
Research and Development Agreement with the Department of Defense to develop a
post-injury agent for mustard gas and similar chemical agents. These agreements
are beneficial to Quick-Med because they not only provide funding and military
assistance in developing the product, they also indicate interest and financial
commitment to the project by the military.
The wound care market is a major priority, as Quick-Med believes it is a
growing market with potential in both the military and civilian areas. It is
currently served by largely low-tech products. For example, the gauze bandage
remains the primary over-the-counter and emergency room product with little
change in 50 years.
Quick-Med believes there is a new, emerging, worldwide market for premium
wound care products that combine instant coagulation, bactericidal, and
biodegradable features in dressings for serious wounds. It expects that demand
will be driven by quality preferences as well as by cost savings in the case of
dressings whose medical properties permit less frequent application and more
rapid healing time.
At present, there are no products on the market satisfying this need, as
these products are still in the research and development stage. The Department
of The Army's Institute of Surgical Research indicates that at least two
companies have work-in-progress for products for this market, including the
American Red Cross. The American Red Cross received an Army grant because the
Army places a high priority on saving soldiers' lives on the battlefield.
Quick-Med's Advanced Super-Absorbent Polymers technology is intended to
apply to a wide variety of end markets:
51
Potential Customers for Quick-Med
End Uses Industries and Professions
-------- --------------------------
Households Automotive
Hospitals Airlines
Emergency Rooms Cruise Lines
Nursing Homes Buses
E.M.S. Services Railroads/Subways
Fire/Rescue Taxis
All Schools Factories with risk of major accidents
First Aid Kits Medicine
Veterinary Clinics Construction
Over-The-Counter Police
Military
Quick-Med also intends to focus on the feminine hygiene, pediatric diaper,
and adult incontinency markets as its business develops. This unique technology
is expected to add beneficial medical capabilities to the standard feminine
napkins, pediatric diapers, and adult incontinence products, whose total annual
sales is approximately $15 billion according to the Southern Technology
Applications Center at the University of Florida.
Another important market for Quick-Med is the cosmetic skin care products
for anti-aging and anti-wrinkling, particularly for post-menopausal women. Due
to the aging of the "baby boom" population, this market is generally expected to
grow significantly over the next five to ten years. With Ilomostat, given its
known therapeutic effects, Quick-Med believes it has an opportunity to introduce
more effective products to this market, particularly for post-menopausal women
as an alternative to estrogen replacement therapy.
A related market opportunity is in protective clothing that defends against
chemical attack. At present, Tex-Shield is the sole source contractor for the
Joint Service Light Integrated Suit Technology chemical suit for all of the U.S.
armed services, with a $1 billion plus multi-year contract. These protective
suits are fabricated with an old technology based on activated carbon. The
military has expressed great interest in replacing this technology with more
effective techniques within several years. Quick-Med's new chemically modified,
high filtration fiber web technology can form the basis for the next generation
of protective fabric. It intends to pursue a Cooperative Research and
Development Agreement for this technology at the appropriate time.
In summary, the core technologies can lead to products in several
multi-billion dollar markets where consumers are not particularly cost-conscious
and where significant demand exists for premium products that deliver enhanced
performance.
52
Government Regulation
The research and development, manufacture, and marketing of human
pharmaceutical and diagnostic products and devices are subject to regulation
primarily by the FDA in the United States and by comparable authorities in other
countries. These national agencies and other federal, state, and local entities
regulate, among other things, research and development activities and the
testing, manufacturing, safety, handling, effectiveness, labeling, storage,
record keeping, approval, advertising, and promotion of the products the
Quick-Med is developing.
Noncompliance with applicable requirements can result in refusal to approve
product licensing or revocation of approvals previously granted. Noncompliance
can also result in fines, criminal prosecution, recall or seizure of products,
total or partial suspension of production, or refusal to enter into additional
contracts with Quick-Med.
The FDA approval process for bio-medical devices has historically been
costly and time consuming. Recently, the FDA has shortened the approval process
for medical devices to approximately six months from the normal 18 months
required for drug products. Under current law, each medical product
manufacturing establishment must be registered with, and determined to be
adequate by, the FDA before the product is approved.
Quick-Med has not filed for regulatory approval of any potential product as
none of its products have reached the development stage requiring a filing. Any
regulatory approvals that Quick-Med receives for a product may be subject to
limitations on the indicated uses for which the product may be marketed. After
Quick-Med obtains marketing approval for any product, the manufacturer and the
manufacturing facilities for that product will be subject to continual review
and periodic inspections by the FDA and other regulatory authorities. If
previously unknown problems with the product or with the manufacturer or
facility are discovered, restrictions on the product or manufacturer may result,
including an order to withdraw the product from the market. If Quick-Med fails
to comply with applicable requirements, it may be fined, suspended or subject to
withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution.
Quick-Med has a three part strategy to ensure it complies with government
regulations and minimizing the time required for regulatory approval of its
products:
Quick-Med has retained Covington & Burling, a law firm specializing in
regulatory affairs activities affecting the pharmaceutical, cosmetic, medical
device industries. This firm will assist Quick-Med with the following regulatory
activities when required:
Regulatory Strategy and Liaison with FDA
o Non-clinical and clinical program assessment/development
o Non-clinical and clinical protocol review/monitoring of studies
o Regulatory affairs management/guidance
53
Product Development and Launch Strategy
o Validation of methods/processes
o Product development strategies/assessment
o Product Compliance
o Label and labeling compliance
For two of its planned products, Quick-Med anticipates working in
cooperation with the U.S. Military under Cooperative Research and Development
Agreements. If so, military tests of product safety and efficacy will satisfy
U.S. regulatory requirements.
Quick-Med intends to only develop working arrangements with individuals and
organizations that already have satisfactory records in government regulatory
compliance or approvals.
Properties
We own no properties and at this time have no agreements to acquire any
properties.
Quick-Med occupies 600 square feet at 401 N.E. 25th Terrace, Boca Raton,
Florida. Space is provided to us at $500 per month by David S. Lerner,
Quick-Med's president.
Quick-Med has leased 1,600 square feet of laboratory space in Gainesville,
Florida pursuant to a one-year lease with payments of $800 per month. Quick-Med
spent approximately $12,000 for leasehold improvements and equipment for the
lab.
Legal Proceedings
There is no litigation pending or threatened by or against us or Quick-Med.
Employees
Above Average
We currently have no employees. However, our 2 officers, Devinder Randhawa
and Bob Hemmerling, devote approximately 5% of their time on a monthly basis to
our business affairs, more if necessary.
Quick-Med
Quick-Med currently employs David Lerner on a full-time basis as president
and five part-time scientific consultants and two part-time administrative
independent contractors.
54
PRINCIPAL SHAREHOLDERS
The table below lists as of the date of this prospectus, the beneficial
ownership of our voting securities by each person known by us to be the
beneficial owner of more than 5% of our securities, as well as the securities
beneficially owned by all our directors and officers. The table indicates the
number and percentage of shares held before and after the proposed acquisition.
Unless specifically indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Shares Beneficially Shares to be
Directors, Officers and Prior Owned Beneficially Owned
5% Stockholders to Acquisition After Acquisition
- ----------------------- ------------------- ------------------
Number Percent Number Percent
------ ------- ------ -------
David Lerner 0 0 4,523,000(1) 33.5%
401 NE 25th Terrace
Boca Raton, FL 33431-7524
Michael Granito, Ph.D. 0 0 3,205,000(2) 25.0%
30 E. 37th Street
New York, NY 10016
Ret. Lt. Gen. Paul Cerjan 0 0 690,000(2) 5.3%
1460 North Woodhouse Road
Virginia Beach, VA 23454
Ret. Maj. Gen. George Friel 0 0 420,000(2) 3.2%
R.R. 2, Box 69
Buckeye, WV 24924
Gerald M. Olderman, Ph.D. 0 0 420,000 3.2%
17 Pickman Drive
Bedford, MA 01730
Gregory Schultz, Ph.D. 0 0 690,000 5.3%
University of Florida
Department of Ob/Gyn
Box 100294
1600 SW Archer Road
Gainesville, FL 32610
Michael Karsch 0 0 150,000(2) 1.1%
301 Yamato Road, Suite 4150
Boca Raton, FL 33431
Devinder Randhawa 152,000 30.4% 0 0%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada V1Y 2E6
Bob Hemmerling 152,000 30.4% 0 0%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada V1Y 2E6
55
All Above Average directors 304,000 60.8% 0 0%
and officers as a group
(2 persons)
All Quick-Med directors and 9,758,000 76.4%
officers as a group
(7 persons)
(1) Includes 250,000 shares issuable upon the exercise of options
(2) Includes 15,000 shares issuable upon the exercise of options
All the stock shown above are common stock. The balance of our outstanding
Common stock are held by 8 persons.
56
MANAGEMENT
Quick-Med's directors and officers are as follows:
Name Age Position
- ---- --- --------
Michael R. Granito, Ph.D. 50 Chairman
David S. Lerner 48 President and Director
Paul G. Cerjan, Lt. Gen./Ret. 62 Vice-President, Worldwide Military
Affairs and Director
George E. Friel, 58 Vice President, Military Research &
Maj. Gen/Ret. Development and Director
Gerald M. Olderman, Ph.D. 67 Vice-President, Commercial Research and
Development and Director
Gregory S. Schultz, Ph.D. 51 Vice President, Clinical Laboratory
Research and Development and Director
Michael D. Karsch 41 General Counsel, Secretary and Director
Michael D. Granito, Ph.D. was appointed to his position with Quick-Med in
July 2000. Since 1979, he has been a Managing Director for J.P. Morgan
Investment Management in New York. He was responsible for world-wide Capital
Market Research activities in London, Frankfurt, Tokyo, and Melbourne offices,
and was Chair of Foundation for Research in International Banking and Finance or
FRIBF. Mr. Granito earned a doctorate in Finance, and graduated with triple
major in accounting, finance, and economics from The Wharton School of The
University of Pennsylvania. He also served as an Adjunct Professor of Finance at
Yale University and New York University and author of a book and 14 papers on
finance and foreign exchange topics.
David S. Lerner was appointed to his position upon incorporation of
Quick-Med in December 1997. Since late 1995 he has been engaged on a full-time
basis in the formation and development of Quick-Med. Prior to Quick-Med, Mr.
Lerner has 20 years experience in international and domestic manufacturing,
marketing, sales, and business development. He has had business activities in
Asia, Europe, South America, and Mexico; and successfully handled export
financing activities, including letter of credit and manufacturing arrangements.
Mr. Lerner has also dealt with major retailers like Sears, K-Mart, and WalMart
and developed markets for private label and nationally-branded products through
large mass retailers and department stores. Mr. Lerner earned a B.A. from Queens
College at the City University of New York.
57
Lt. Gen. Paul G. Cerjan (Ret.) - U.S. Army Lieutenant General, was
appointed his position in July 2000. From December 1997 to September 2000, Mr.
Cerjan was president of Regent University in Virginia Beach, Virginia. From
August 1994 to October 1997, he served as director tactical systems for Lockheed
Martin (NYSE:LMT) in Arlington, Virginia. He was in the U.S. Army from 1960 to
1994, rising to the rank of Lieutenant General. Mr. Cerjan served as project
manager for the design and construction of a small city for 26,000 people valued
at $1.3 billion, managed 22 separate organizations in Europe with 70,000 people;
supervised all aspects of community life in Europe for 300,000 Americans and
served as CEO for a university organization educating the most senior leadership
of the Department of Defense. Mr. Cerjan has an M.S. in Construction Management
from Oklahoma State University; a B.S. in Engineering from United States
Military Academy at West Point, and is a registered professional engineer in
Virginia.
Maj. Gen. George E. Friel (Ret.) - U.S. Army Major General, was appointed
to his position in July 2000. Since September 1998, he has been self-employed as
a consultant to various organizations in the defense industry. He was in the
U.S. Army from 1967 to 1998, rising to the rank of Major General. Mr. Friel was
the Commanding General of the U.S. Army Chemical and Biological Defense Command,
at the Aberdeen Proving Ground in Maryland, Deputy Chief of Staff for Chemical
and Biological Matters of the Army Material Command, Alexandria, Virginia from
1992 to 1998, and was responsible for a $1 billion contract for protective
military clothing. He served as Commanding General, 59th Ordinance Brigade,
Pinnasens, Germany; Chief, Nuclear Chemical Division, U.S. Army Europe; and
Commander, Miesau Army Depot in Germany. Mr. Friel was also responsible for $600
million budget for Nuclear Biological and Chemical Defense Command for six years
and directed over 1,100 scientists and engineers including 150 Ph.D.s. Mr. Friel
has also served as Chairman of the boards of The Nuclear, Biological, and
Chemical Defense Enterprise at the Edgewood Arsenal, and The Army Material
Command, Acquisition and Procurement Enterprise. He earned a B.S. from
University of Nebraska and M.B.A. from Northwest Missouri State University and
is a graduate of the U.S. Army Chemical School Basic and Advanced Courses.
Gerald M. Olderman, Ph.D. was appointed to his position in July 2000. Since
November 1996, he has been a Vice-President and Associate of R.F. Caffrey &
Associates, a management consultant to medical device companies and suppliers.
From November 1991 to November 1996, he served a Director and Head of Research
and Development for C.R. Bard, Inc.'s Cardiopulmonary Division, manufacturer of
health care products and a subsidiary of TYCO International, (NYSE:TYC). He has
35 years in the health care industry, 31 years in technical management, and 25
years as the head of research and development activities for Fortune 500
companies. He organized a new product development process for the
cardiopulmonary division of C.R. Bard Co. in which 19 new medical devices were
developed, including an intra-aortic balloon and pump and a centrifugal heart
by-pass pump. From 1985 to 1991, as vice president for domestic and
international research and development for Baxter Healthcare Corp., (NYSE:BAX),
Dr. Olderman directed technical programs for surgical, medical, home health
care, and industrial market segments including programs for wound management.
From 1978 to 1985, as vice president for research and development for the
Convertors Division of American Hospital Supply prior to its acquisition by
Baxter, he led product development and made material changes in a program that
helped to increase market share from 30% to 45% of a $750 million market. He
also handled quality assurance, business planning and market research. From 1972
to 1978, as vice president for research and development and director of
Surgikos, Inc., a
58
subsidiary of Johnson & Johnson, (NYSE:JNJ), he built technical organization to
support the company's goals and entered the additional market of extracorporeal
products. He led the development of products for the surgical line including
package development, clinical research, regulatory compliance and quality
assurance. From 1961 to 1964, he served as a Senior Scientist in the Hospital
Division of J & J, assigned to wound care dressings and absorbent products. Dr.
Olderman received a B.S. in Chemistry from Rensselaer Polytechnic Institute in
Troy, New York in 1958. He also earned an M.S. in Physical Chemistry in 1972,
and a Ph.D. in Physical Chemistry in 1973 from Seton Hall University in South
Orange, New Jersey.
Gregory S. Schultz, Ph.D. was appointed to his position in July 2000. Since
July 1989 he has served as a Professor of Obstetrics/Gynecology in the College
of Medicine and researcher at the University of Florida in Gainesville. From
1986 to 1988, Dr. Schultz served as principle investigator for U.S. Army Medical
Research Contracts. Dr. Schultz previously was an Associate Professor of
Ophthalmology and Associate Professor of Biochemistry at University of
Louisville School of Medicine. Dr. Schultz earned a doctorate in biochemistry
from Oklahoma State University and a postdoctoral fellowship in cell biology at
Yale University. His specialty is the development of growth factors for the
wound healing process. Growth factors are those elements that speed the healing
processes. He also serves as Quick-Med's principal investigator and has been a
principal investigator on 20 research grants since 1980.
Michael D. Karsch was appointed Director, General Counsel and Secretary in
July 2000. Since November 2001, Mr. Karsch has been a partner with Sachs, Sax &
Klein, P.A., a Boca Raton, Florida law firm. From May to November 2001, Mr.
Karsch was a Managing Director of MCG Partners, Inc., a merchant banking firm.
From June 2000 to April 2001, Mr. Karsch was a Vice President and General
Counsel of MerchantOnline.com, Inc., a provider of secure online transactions.
In October 2001, MerchantOnline filed for bankruptcy under Chapter 11 of the US
Bankruptcy Code. From June 1998 to June 2000, he was a partner for Broad &
Cassel, a Boca Raton, Florida law firm. From May 1997 to May 1998, he was a
partner with the law firm of Bernstein & Wasserman in Boca Raton, Florida. From
June 1996 to March 1997, he served as general counsel for U.S. Diagnostic, Inc.,
a health care management company in West Palm Beach, Florida. From August 1990
to June 1996, he was a partner with the law firm of Bachner, Talley, Polevoy and
Misher in New York. From 1986 to 1990, he was an associate with the law firm of
Skadden, Arps, Slate, Meagher & Flom in New York. He earned a B.S., graduating
cum laude from The Wharton School of the University of Pennsylvania in 1982, and
earned a J.D. from the University of Pennsylvania Law School in 1985.
The above listed officers and directors will serve until the next annual
meeting of the shareholders or until their death, resignation, retirement,
removal, or disqualification, or until their successors have been duly elected
and qualified. Vacancies in the existing board are filled by majority vote of
the remaining directors. Our officers serve at the will of the board. There are
no family relationships between any executive officer and director.
Mr. Lerner devotes his full business time to Quick-Med and is the only
employee. The other listed persons are not employees and devote from 10 to 25
percent of their business time to Quick-Med business. Quick-Med pays Messrs.
Lerner and Karsch and Dr. Schultz cash compensation described below.
59
EXECUTIVE COMPENSATION
Above Average
None of our officers or directors have received any compensation in 1999,
2000 or 2001 for their respective services rendered unto us. They all have
agreed to act without compensation until authorized by the Board of Directors,
which is not expected to occur until the we have generated revenues from
operations after consummation of a merger or acquisition. As of the date of this
registration statement, we have no funds available to pay officers or directors.
Further, none of the officers or directors is accruing any compensation under
any agreement with us.
Quick-Med
David S. Lerner is currently paid at an annual rate of $128,441 per year,
Michael D. Karsch is currently paid at an annual rate of $24,000 per year and
Gregory Schultz is paid $15,000 per year. Quick-Med's other officers have agreed
to act without cash compensation until authorized by the board, which is not
expected to occur until Quick-Med has generated revenues from operations or has
obtained sufficient capital. The officers or directors are not otherwise
accruing any compensation under any agreement with Quick-Med. The officers and
directors have been granted stock options for past services, as set forth below.
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Name Year Title Salary Options Exercise Expiration
- ---- ---- ----- ------ ------- -------- ----------
Price
David S. Lerner 2001 President $128,441(1)
2000 President $ 45,000 250,000 $2.00 8/16/05
Michael D. Karsch 2001 General Counsel $ 24,000
2000 $ 14,000 15,000 $2.00 8/16/05
Paul G. Cerjan 2001 Vice President $ 0
2000 15,000 $2.00 8/16/05
George E. Friel 2001 Vice President $ 0
2000 15,000 $2.00 8/16/05
Gerald M. Olderman 2001 Vice President $ 0
2000 $ 0
Gregory S. Schultz 2001 Vice President $ 15,000
2000 $ 15,000
Michael R. Granito 2001 Chairman $ 0
2000 15,000 $2.00 8/16/05
(1) This includes $3,441 for life and health insurance.
No cash compensation was paid prior to 2000. All of the above received the
shares listed under "Principal Shareholders" in 1998, 1999 or 2000, which may be
deemed compensation. In addition, an aggregate of 385,000 shares were issued in
1999 and 2000 to three scientific consultants as compensation. No additional
shares are owed to any of the officers, directors or consultants under any
current arrangement, although options are expected to be granted in the future.
60
No retirement, pension or insurance programs or other similar programs have
been adopted for Quick-Med's employees. A stock option plan has been approved by
Quick-Med's board, and 840,000 options to purchase common stock have been
granted to officers, directors and consultants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Above Average
The shareholders of Above Average, including Bob Hemmerling and Devinder
Randhawa, its current officers, have agreed to return the 500,000 shares of
stock held by them immediately prior to the closing for cancellation. They will
be paid $.05 per share for the return of the shares. Mr. Hemmerling and Mr.
Randhawa will receive $7,600.00 each. Messrs. Hemmerling and Randhawa are deemed
to be the promoters of Above Average.
There have not been any other transactions with the promoters.
Quick-Med
At December 31, 2000, Quick-Med had a note payable of $23,710 for funds
advanced from Think Tank Associates, Inc., a company owned by our President,
David S. Lerner. The note bears interest at 6.0% and the maturity date has been
extended to December 31, 2002.
At December 31, 2000, Quick-Med had another note payable of $150,000 for
funds advanced from Michael R. Granito, our Chairman. The note was short term
and bore interest at 6.0%. An additional $110,000 was advanced through March
2001. In March 2001, these loans were converted into 260,000 shares of Quick-Med
common stock at an effective conversion rate of $1.00 per share. From April 2001
through January 2002, Mr. Granito advanced an additional $565,000 to Quick-Med,
all of which is currently outstanding. In January 2002, Mr. Granito, who has
loaned Quick-Med approximately $825,000, and Quick-Med entered into a revolving
note agreement that provides for him to loan Quick-Med up to $750,000, including
the outstanding $565,000. The agreement provides that the outstanding balance is
convertible into common stock at $1.00 per share at Mr. Granito's option. These
funds will be available until Quick-Med is able to raise sufficient funds from
third parties. The agreement also extended the maturity date to December 31,
2002.
Messrs. Lerner and Granito are deemed to be the promoters of Quick-Med. Mr.
Lerner received 4,273,000 shares and Mr. Granito 2,930,000 shares for founding
Quick-Med. There have not been any other transactions with promoters.
Other than the relationships with the University of Florida, no officer or
director has any relationship with any company or entity that will be working on
developing Quick-Med's technology or patents.
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against Above or
Quick-Med.
61
MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there has
been no trading market to date. Management has not undertaken any discussions
with any prospective market maker concerning the participation in the
aftermarket for our securities and management does not intend to initiate any
discussions until we have consummated a merger or acquisition. We cannot
guarantee that a trading market will ever develop or if a market does develop,
that it will continue.
Our common stock is not quoted at the present time. The SEC has adopted a
rule that defines a "penny stock," for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions in
penny stocks; and
o the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
To approve a person's account for transactions in penny stocks, the broker
or dealer must:
o obtain financial information and investment experience and objectives
of the person; and
o make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stock
in both public offering and in secondary trading, and about commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
Management intends that the merger with Quick-Med will allow our securities
to be traded on the OTC Bulletin Board. Initially, the trading will likely have
these limitations. Failure to qualify our securities for Nasdaq or the OTC
Bulletin Board or to meet the relevant maintenance criteria after qualification
in the future may result in our securities being delisted. However, trading, if
any, in our securities may then continue in the non-Nasdaq over-the-counter
market. As a result, a shareholder may find it more difficult to dispose of, or
to obtain accurate quotations for our securities.
62
Holders
There are currently 28 holders of Above Average Common Stock, and 17
holders of Quick-Med Common Stock. Immediately after the merger we will have 35
shareholders both beneficially and of record if all of the investors reconfirm
their investment.
Dividends
We have not paid any dividends to date, and have no plans to do so in the
immediate future.
Transfer Agent
After the merger the transfer agent will be Continental Stock Transfer &
Trust Company, 2 Broadway, New York, NY 10004.
DESCRIPTION OF SECURITIES
Above Average
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. There are 3,000,000 shares of common stock
issued and outstanding, as of the date of this filing. However, some outstanding
shares may be cancelled if any, but not more than 20%, of the investors in the
offer decide not to approve the merger. If 80% of the investors do not approve
the merger, the funds in escrow will be promptly returned, and the 2,500,000
shares sold in the offering will be cancelled.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting for electing directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event we are liquidated, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of legally
available funds.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. 500,000 of the shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act.
63
Quick-Med's authorized capital stock consists of 16,000,000 shares of which
15,000,000 are common stock, par value $.001 per share, and 1,000,000 are
preferred stock, par value $.001 per share. There are 10,260,000 shares of
common stock issued and outstanding, as of the date of this filing. No preferred
stock has been issued.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting for electing directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event we are liquidated, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of legally
available funds.
Quick-Med Options
Quick-Med has issued 840,000 options to its officers, directors and
employees. Quick-Med's management has adopted a stock option plan providing for
the issuance of options to purchase up to 3,000,000 shares of common stock. We
are assuming the stock option plan and agreements as part of the merger.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot assure
you that a significant public market for our common stock will be developed or
be sustained after this offering. Sales of substantial amounts of common stock
in the public market after this offering, or the possibility of substantial
sales, could harm prevailing market prices for the common stock or our future
ability to raise capital through an offering of equity securities.
If 100% of the investors reconfirm their investment, we will have 3,000,000
shares outstanding. The 2,500,000 shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act
unless purchased by "affiliates" of Quick-Med, as that term is defined in Rule
144 under the Securities Act described below. The 10,260,000 shares to be issued
when the merger is consummated will be restricted stock under Rule 144. The
500,000 shares of restricted stock currently outstanding will be purchased by
Above Average as part of the merger, and canceled when the merger is
consummated.
64
Quick-Med has issued 840,000 options to its officers, directors and
employees under its stock option plan. These options will be assumed by us as
part of the merger transaction.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year. Quick-Med's fiscal year ends on December 31st.
LEGAL MATTERS
The validity of the shares offered under this prospectus was passed upon
for us by Evers & Hendrickson, LLP of San Francisco, California, and is now
being passed upon by Foley and Lardner of San Francisco, California.
EXPERTS
Our financial statements as of the period ended June 30, 2000, and included
in this prospectus and in the registration statement, have been so included in
reliance upon the reports of Cordovano & Harvey, P.C., independent certified
public accountants, included in this prospectus, and on the authority of the
firm as experts in accounting and auditing.
The financial statements of Above Average for the year ended June 30, 2001
and of Quick-Med for the years ended December 31, 2000 and December 31, 1999
included in this prospectus have been audited by Daszkal Bolton Manela Devlin &
Co., Certified Public Accountants, 2401 N.W. Boca Raton Boulevard, Suite 100,
Boca Raton, Florida 33431, independent auditors, and are included in reliance
upon the reports of the firm and on their authority as experts in accounting and
auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our Bylaws,
as amended, states certain indemnification rights. Our Bylaws provide that we
will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in any action, suit or proceedings,
whether civil, criminal, administrative or investigative, to which the person is
a party by reason of being a director or officer if it is determined that the
person acted under the applicable standard of conduct stated in the statutory
provisions. Our directors and officers are indemnified to the full extent
permitted by Nevada law in our Articles of Incorporation.
65
We may also purchase and maintain insurance for the benefit of any director
or officer that may cover claims for situations where we could not provide
indemnification.
Although indemnification for liabilities arising under the Securities Act
may be permitted to officers, directors or persons controlling us under Nevada
law, we have been informed that in the opinion of the SEC, this form of
indemnification is against public policy as expressed in the Securities Act, and
is considered unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace Kish,
Leake & Associates, P.C. as our principal accountants. The report of Kish, Leake
& Associates, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Cordovano &
Harvey, P.C. on any accounting or financial reporting matters in the periods
prior to their appointment. The change in accountants was approved by the Board
of Directors. We filed a Form 8-K with the Commission (File No. 000-27545) on
January 24, 2000.
In September, 2001, we appointed Daszkal Bolton Manela Devlin & Co. to
replace Cordovano & Harvey, P.C. as our principal accountants. The report of
Cordovano & Harvey, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Daszkal
Bolton Manela Devlin & Co. on any accounting or financial reporting matters in
the periods prior to their appointment. The change in accountants was approved
by the Board of Directors. We filed a Form 8-K with the Commission (File No.
000-27545) on September 7, 2001.
66
Index to Financial Statements
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
Page
----
Independent auditor's report.............................................. F-2-3
Balance sheet as of June 30, 2001........................................... F-4
Statement of operations for the years ended June 30, 2001 and
2000 and for the period from April 21, 1997 (inception) through
June 30, 2001 (unaudited).................................................. F-5
Statement of shareholders' equity (deficit), from April 21, 1997
(inception) through June 30, 2001.......................................... F-6
Statement of cash flows for the years ended June 30, 2001 and
2000 and for the period from April 21, 1997 (inception) through
June 30, 2001 (unaudited).................................................. F-7
Notes to financial statements as of June 30, 2001........................ F-8-13
Condensed Balance Sheet (unaudited) as of September 30, 2001............... F-14
Condensed Statements of Operations (unaudited) for the three
months ended September 30, 2001 and 2000, nine months ended
September 30, 2001 and 2000 and from April 21, 1997 (inception)
through September 30, 2001................................................ F-15
Condensed Statements of Cash Flows (unaudited) for the nine
months added September 30, 2001 and 2000 From April 21, 1997
(inception) through September 30, 2001.................................... F-16
Notes to Condensed Financial Statements............................... F-17-F-18
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
Independent Auditors' Report............................................... F-19
Balance Sheet as of December 31, 2000 and June 30, 2001
(unaudited)...........................................F-20
Statements of Operations and Accumulated Deficit for the years
ended December 31, 2000 and 1999 and unaudited for the period
from December 9, 1997 (inception) through December 31, 2000 and
for the six months ended June 30, 2001 and 2000........................... F-21
Statement of Stockholders' Deficit for the years ended
December 31, 2000 and 1999, and unaudited for the period from
December 9, 1997 (inception) through June 30, 2001 for the six
months ended June 30, 2001................................................ F-22
Statements of Cash Flows for the years ended December 31 2000
and 1999 and unaudited for the period from December 9, 1997
(inception) through June 30, 2001 and for the six months ended
June 30, 2001.......................................................... F-23-24
Notes to Financial Statements......................................... F-25-F-31
UNAUDITED PRO FORMA FINANCIAL DATA
Cover Letter to Pro Forma Combined Financial Statements.................... F-32
Pro Forma Combined Balance Sheet as of June 30, 2001....................... F-33
Pro Forma Combined Statements of Income (Loss) as of June 30, 2001......... F-34
Pro Forma Combined Balance Sheet as of September 30, 2001.................. F-35
Pro Forma Combined Statement of Income (Loss) as of September 30, 2001..... F-36
F-1
DASZKAL BOLTON MANELA DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders
Above Average Investments, Ltd.
We have audited the accompanying balance sheets of Above Average Investments,
Ltd. (a Development Stage Company) as of June 30, 2001, and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the year then ended and for the period from April 21, 1997 (inception)
through June 30, 2001. We did not audit the period from April 21, 1997
(inception) through June 30, 2000, which statements reflect a cumulative loss
totaling $18,915. Those statements were audited by other auditors whose reports
have been furnished to us and our opinion, insofar as it relates to the
cumulative amounts for the period ending June 30, 1997 through June 30, 2000, is
based solely on the reports of the other auditors. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Above Average Investments, Ltd.
as of June 30, 2001, and the results of its operations and its cash flows for
the year then ended and for the period from April 21, 1997 (inception) through
June 30, 2001 in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has experienced recurring losses
in the development stage. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters are described in the footnotes accompanying the financial
statements. These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
November 28, 2001
F-2
To the Board of Directors and Shareholders
Above Average Investments, Ltd.
Independent Auditors' Report
We have audited the balance sheet of Above Average Investments, Ltd. (a
development stage company) as of June 30, 2000 and the related statements of
operations, shareholders' equity (deficit) and cash flows for the year ended
June 30, 2000 and for the period April 21, 1997 (inception) through June 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Above Average Investments, Ltd.
as of June 30, 2000, and the related statements of operations, shareholders'
equity (deficit) and cash flows for the year ended June 30, 2000 and for the
period April 21, 1997 (inception) through June 30, 2000 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at June 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Cordovano and Harvey, P.C.
Cordovano and Harvey, P.C.
Denver, Colorado
July 24, 2000
F-3
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
BALANCE SHEETS
JUNE 30, 2001 AND 2000
================================================================================
ASSETS
------
2001 2000
---------- ----------
Prepaid acquisition costs $ 10,030 $ -
---------- ----------
Total assets $ 10,030 $ -
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 129,065 $ 3,795
Liability to repurchase stock 25,000 -
---------- ----------
Total current liabilities 154,065 3,795
---------- ----------
Common stock subject to redemption; 2,500,000 shares 125,000 -
Stock subscriptions receivable (125,000) -
---------- ----------
Total - -
---------- ----------
Stockholders' deficit:
Common stock, $0.0001 par value, 100,000,000 shares
authorized; 500,000 shares issued and outstanding 50 50
Additional paid-in capital 2,365 15,070
Accumulated deficit (146,450) (18,915)
---------- ----------
Total stockholders' deficit (144,035) (3,795)
---------- ----------
Total liabilities and stockholders' deficit $ 10,030 $ -
========== ==========
See accompanying notes to financial statements.
F-4
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
==========================================================================================================
April 21, 1997
(inception)
Year Ended through
June 30, June 30,
2001 2000 2001
---------- ---------- ----------
Costs and expenses:
Legal fees $ 94,584 $ 8,629 103,213
Accounting fees 25,970 2,233 29,826
Printing 6,804 5,954 12,758
Licenses and fees 177 341 603
Stock-based compensation for organizational costs - - 50
---------- ---------- ----------
Loss from operations (127,535) (17,157) (146,450)
---------- ---------- ----------
Net loss $ (127,535) $ (17,157) $ (146,450)
========== ========== ==========
Net loss per share - basic and diluted $ (0.26) $ (0.03)
========== ========
Weighted average number of shares - basic and diluted 500,000 500,000
========== ========
See accompanying notes to financial statements.
F-5
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
================================================================================================================================
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-in Development
Shares Amount Shares Amount Capital Stage Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
Beginning balance, April 21, 1997 - $ - - $ - $ - $ - $ -
Common stock issued in exchange for
organization costs - - 500,000 50 - - 50
Net loss for the period ended June 30, 1997 - - - - - (50) (50)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1997 - - 500,000 50 - (50) -
Net loss for the year ended June 30, 1998 - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 - - 500,000 50 - (50) -
Third party expenses paid by an affiliate on
behalf of the Company - - - - 85 - 85
Net loss for the year ended June 30, 1999 - - - - - (1,708) (1,708)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 - - 500,000 50 85 (1,758) (1,623)
Third party expense paid by an affiliate on
behalf of the Company - - - - 14,985 - 14,985
Net loss for the year ended June 30, 2000 - - - - - (17,157) (17,157)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2000 - - 500,000 50 15,070 (18,915) (3,795)
Third party expenses paid by an affiliate on
behalf of the Company - - - - 12,295 - 12,295
Common stock to be repurchased - - - - (25,000) - (25,000)
Net loss for the year ended June 30, 2001 - - - - - (127,535) (127,535)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2001 - $ - 500,000 $ 50 $ 2,365 $ (146,450) $ (144,035)
========== ========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
F-6
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
==========================================================================================================
April 21, 1997
(inception)
Year Ended through
June 30, June 30,
2001 2000 2001
---------- ---------- ----------
Net cash provided by operating activities:
Net loss $ (127,535) $ (17,157) $ (146,450)
Non-cash transactions:
Stock-based compensation for
organizational costs - - 50
Third party expenses paid by affiliate on
behalf of the Company, recorded as
additional paid-in capital 12,295 14,985 27,365
Changes in operating assets and liabilities:
Prepaid acquisition costs (10,030) - (10,030)
Accounts payable and accrued liabilities 125,270 2,172 129,065
---------- ---------- ----------
Net cash used in operating activities - - -
---------- ---------- ----------
Net cash used in financing activities - - -
---------- ---------- ----------
Net cash from investing activities - - -
---------- ---------- ----------
Net increase in cash and equivalents - - -
Cash at beginning of period - - -
---------- ---------- ----------
Cash at end of period $ - $ - $ -
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ - $ - $ -
========== ========== ==========
Income taxes $ - $ - $ -
========== ========== ==========
Non-cash financing activities:
500,000 shares common stock issued for services $ - $ - $ 50
========== ========== ==========
Liability to repurchase stock and decrease in
additional paid in capital $ 25,000 $ - $ 25,000
========== ========== ==========
See accompanying notes to financial statements.
F-7
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1 - BASIS OF PRESENTATION
Above Average Investments, Ltd. (the "Company") was incorporated under the laws
of Nevada on April 21, 1997 to engage in any lawful corporate undertaking. The
Company entered into the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) no. 7 and is a "blank check" company with
the purpose to evaluate, structure and complete a merger with, or acquisition
of, a privately owned corporation.
The Company has been in the development stage since inception and has no
significant operations to date. Since its inception, the Company has been
dependent upon the receipt of capital investment or other financing to fund its
continuing activities. In addition to the normal risks associated with a new
business venture, there can be no assurance that the Company will successfully
complete a merger with an operating company. Further, the Company is dependent
upon certain related parties to provide continued funding and capital resources.
NOTE 2 - MANAGEMENT'S PLANS AND ISSUES AFFECTING LIQUIDITY
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has sustained losses since
inception and no revenue. There is substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible effects on the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents. The Company has no
cash equivalents at June 30, 2001 and 2000.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Earnings Per Share
Earnings per share are computed based on the weighted average number of common
shares as if they were outstanding. Basic and diluted earnings per share are the
same for the years ended 2001 and 2000.
F-8
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," was issues in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair Value of Financial Instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payables,
and other accrued liabilities approximate fair value due to the short-term
maturity of the instruments.
Recently Issued Accounting Pronouncements
On June 29, 2001, the Financial Accounting Standards Board ("FASB") unanimously
approved the issuance of Statements of Financial Accounting Standards No. 141,
Business Combinations (Statement 141), and No. 142, Goodwill and Other
Intangible Assets (Statement No. 142). Statement No. 141 eliminates the
pooling-of-interests method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 1, 2001.
Statement No. 141 changes the criteria to recognize intangible assets apart from
goodwill. The requirements of Statement No. 141 are effective for any business
combination accounted for by the purchase method that is completed after June
30, 2001.
Under Statement No. 142, goodwill and indefinite lived intangible assets are no
longer amortized but are reviewed annually, or more frequently if impairment
indicators arise, for impairment. Identifiable intangible assets will continue
to be amortized over their estimated useful lives. The requirements of Statement
No. 142 are effective for fiscal years beginning after December 15, 2001.
In June 2001, the FASB also approved for issuance Statement of Financial
Accounting Standards No. 143, Asset Retirement Obligations. The Statement
establishes accounting requirements for obligations associated with tangible
long-lived assets.
The adoption of Statements No. 141, 142 and 143 are not expected to have a
material effect on the Company's financial position or results of operations.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company maintains a mailing address at an affiliate's address. This address
is Suite 104, 1456 St. Paul Street, Kelowa, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
F-9
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 4 - RELATED PARTY TRANSACTIONS, continued
The Company has issued 500,000 shares of common stock to an officer in exchange
for services related to management and organization costs of $50. The officer
will provide administrative and marketing services as needed. The officer may,
from time to time, advance to the Company any additional funds that the Company
needs for costs in connection with searching for or completing an acquisition or
merger.
The Company does not maintain a checking account and all expenses incurred by
the Company are paid by an affiliate. For the years ended June 30, 2001 and
2000, the affiliate paid $12,295 and $14,985 in expenses on behalf of the
Company. The affiliate does not expect to be repaid for the expenses it pays on
behalf of the Company. Accordingly, as the expenses are paid, they are
classified as additional paid-in capital.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires, among other things, recognition of future tax consequences,
measured by enacted tax rates attributable to taxable and deductible temporary
differences between financial statement and income tax bases of assets and
liabilities. Valuation allowances are established, when necessary, to reduce the
deferred tax assets to the amounts expected to be realized. Income tax expense
or benefit is the tax payable or refundable, respectively, for the period plus
or minus the change during the period in the deferred tax assets and
liabilities. The tax amounts have been calculated using the 34% and 19.04%
federal income tax rates for the years ended June 30, 2001 and 2000,
respectively.
The Company's evaluation of the tax benefit of its net operating loss
carryforward is presented in the following table. The tax amounts have been
calculated using the 34% and 19.04% federal income tax rates.
Year Ended June 30,
------------------------
2001 2000
----------- -----------
U.S. statutory federal rate 0.00% 15.00%
State income tax rate, net of federal benefit 0.00% 4.04%
Net operating loss for which no tax benefit
is currently available 0.00% -19.04%
----------- -----------
0.00% 0.00%
=========== ===========
F-10
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5 - INCOME TAXES, continued
Reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is as follows:
Year Ended June 30,
------------------------
2001 2000
----------- -----------
Benefit computed at the statutory rates
(34% and 19.04%, respectively) $ (43,362) $ (3,266)
Reinstatement/change in deferred tax
asset valuation allowance 43,362 3,255
Tax provision (benefit) $ - $ -
=========== ===========
The components of the deferred tax assets were as follows at June 30:
Year Ended June 30,
------------------------
2001 2000
----------- -----------
Deferred tax assets:
Net operating loss carryforward $ 12,577 $ 3,266
Start-up costs 30,785 -
----------- -----------
Total deferred tax assets 43,362 3,266
----------- -----------
Deferred tax liabilities:
Other - -
----------- -----------
Total deferred tax liabilities - -
----------- -----------
Net deferred tax asset 43,362 3,266
----------- -----------
Valuation allowance:
Beginning of year (3,266) -
Increase during the year (40,096) (3,266)
----------- -----------
Ending balance (43,362 (3,266)
----------- -----------
Net deferred taxes $ - $ -
=========== ===========
As of June 30, 2001, the Company's net operating loss carry forward of
approximately $36,990 will expire from 2019 through 2020.
F-11
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT)
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On August 3, 1999 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $0.0001. On April 22, 1997
the Company issued 500,00 shares of common stock for services valued at $0.0001
per share. The shares were valued nominally at $50 as there was no market price
for the Company's common stock as of the date of issuance.
On August 19, 1999 the Company filed amended articles with the state of Nevada
to change the authorized shares of common stock originally approved by the Board
of Directors on April 21, 1997 from 25,000, no par value to 100,000,000, $0.0001
par value. Nevada Revised Statutes Section 78.385 (C) treats this amendment as
if it was filed on April 21, 1997, therefore, giving the Company enough shares
for the original issuance of 500,000 shares of common stock.
In December 2000, the Company completed an initial public offering of 2,500,000
common shares at $0.05 per share for cash proceeds of $125,000. Beginning in
September 2001, the proceeds of the offering and the common stock issued
pursuant thereto are being held in an escrow account, and shall remain in the
escrow account until an acquisition meeting specific criteria is completed, and
before the deposited funds and deposited securities can be released to the
Company and the investors, respectively, the Company is required to update its
registration statement with post-effective amendment, and within five business
days after the effective date thereof, the Company is required to furnish the
investors with the prospectus produced thereby containing the terms of a
reconfirmation offer and information regarding the proposed acquisition
candidate and its business. Investors must have no fewer than 20 and no more
than 45 business days from the effective date of the post-effective amendment to
decide to reconfirm their investment and remain an investor or, alternatively,
require the return of their investment. Each investor shall have 20 business
days from the date of this prospectus to reconfirm their investment. Any
investor not making any decision within the 20-business-day period will
automatically have their investment returned (see note 7).
If the Company does not complete an acquisition meeting the specified criteria
within 18 months of the effective date of its initial public offering, all of
the deposited funds in the escrow account must be returned to investors.
The 500,000 shares issued and outstanding prior to the shares sold in the
offering completed in December 2000 will be purchased by the Company as part of
the merger for $0.05 per share. These shares will be cancelled when the merger
is consummated. The Company has recorded a $25,000 liability for the payment for
these shares.
NOTE 7 - ESCROW ACCOUNT DISCREPANCY
In September 2001, our auditors discovered that the $125,000 raised in the Rule
419 offering that closed on November 28, 2000 had not been deposited in the
escrow account at City National Bank. Therefore, these funds were not in our
possession and should not have been included on the balance sheets of our
December 31, 2000 and March 31, 2001 reports on Form 10-QSB. Amendments to these
reports have been prepared and filed with the SEC.
The funds have been held on deposit in the trust account of Martin & Adams,
PLLC, a Washington, D.C. law firm which held the funds on behalf of Euro
Atlantic Capital Corporation ("Euro"), the organization that is facilitating the
merger of our company and Quick-Med. Euro received no commissions or other
compensation for raising these funds, and is one of the investors in the
offering. Euro acted as Quick-Med's agent in locating a blank check company in
order to execute a reverse merger and become a public company. When this
discrepancy was brought to the attention of our management, the law firm
F-12
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
was immediately notified to transfer the funds. The funds were transferred to
City National Bank on September 10, 2001, and received into the escrow account
on September 12, 2001.
NOTE 8 - MERGER AGREEMENT
During March 2001, the Company entered into an agreement with Quick-Med
Technologies, Inc. (QMT), a Delaware corporation, and its shareholders to
acquire all of the issued and outstanding shares of capital stock of QMT in
exchange for 10,260,000 shares of the Company's capital stock. For accounting
purposes, the public shell merger will be treated as a recapitalization of QMT.
The value of the net assets of the Company after the public shell merger is the
same as their historical book value.
Subsequent to the merger, assuming all of the Company's shareholders reconfirm
their investment, the Company's shareholders will retain approximately 20% of
the outstanding shares of the Company's capital stock. Upon ratification of the
public shell merger by its shareholders, the Company will change its name to
Quick-Med Technologies, Inc.
F-13
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(UNAUDITED)
================================================================================
ASSETS
September 30, 2001
------------------
Assets:
Restricted cash $ 125,000
Prepaid acquisition costs 10,030
Prepaid financing costs 26,505
---------
Total assets $ 161,535
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued liabilities $ 201,853
Liability to repurchase stock 25,000
---------
Total current liabilities 226,853
---------
Common stock subject to redemption; 2,500,000 shares 125,000
---------
Stockholders' deficit:
Common stock, $0.0001 par value, 100,000,000 shares
authorized; 500,000 shares issued and outstanding 50
Additional paid-in capital 11,340
Deficit accumulated during the development stage (201,708)
----------
Total stockholders' deficit (190,318)
----------
Total liabilities and stockholders' deficit $ 161,535
=========
See accompanying notes to condensed financial statements.
F-14
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
=====================================================================================================
Three Months Ended April 21, 1997
September 30, (inception)
--------------------------- through
2001 2000 June 30,
------------ ------------ --------------
Costs and expenses:
Legal fees $ 32,511 $ 4,072 $ 135,724
Accounting fees 22,747 1,500 52,573
Printing -- 6,804 12,758
Licenses and fees -- -- 603
Stock-based compensation for organizational costs -- -- 50
--------- --------- ---------
Loss from operations (55,258) (12,376) (201,708)
--------- --------- ---------
Benefit (provision) for income taxes -- -- --
--------- --------- ---------
Net loss $ (55,258) $ (12,376) $(201,708)
========= ========= =========
Net loss per share - basic and diluted $ (0.06) $ (0.02)
========= =========
Weighted average number of shares - basic and diluted 1,000,000 500,000
========= =========
See accompanying notes to condensed financial statements.
F-15
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=================================================================================================
Three Months Ended April 21, 1997
September 30, (inception)
-------------------------- through
2001 2000 June 30,
------------ ------------ ------------
Net cash provided by operating activities:
Net loss $ (55,258) $ (12,376) $(201,708)
Non-cash transactions:
Stock-based compensation for
organizational costs -- -- 50
Third party expenses paid by affiliate on
behalf of the Company, recorded as
additional paid-in capital 8,975 13,523 36,340
Changes in operating assets and liabilities:
Prepaid acquisition costs -- -- (10,030)
Prepaid financing costs (26,505) -- (26,505)
Accounts payable and accrued liabilities 72,788 (1,147) 201,853
--------- --------- ---------
Net cash provided by (used in) operating activities -- -- --
--------- --------- ---------
Net cash provided by (used in) financing activities -- -- --
--------- --------- ---------
Net cash provided by (used in) investing activities -- -- --
--------- --------- ---------
Net increase in cash and equivalents -- -- --
Cash at beginning of period -- -- --
--------- --------- ---------
Cash at end of period $ -- $ -- $ --
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -- $ -- $ --
========= ========= =========
Income taxes $ -- $ -- $ --
========= ========= =========
Non-cash financing activities:
500,000 shares common stock issued for services $ -- $ -- $ 50
========= ========= =========
Liability to repurchase stock and decrease in
additional paid in capital $ -- $ -- $ 25,000
========= ========= =========
See accompanying notes to condensed financial statements.
F-16
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Above Average
Investments, Ltd. (the "Company") have been prepared in accordance with the
accounting policies in its audited financial statement for the year ended June
30, 2001 as filed with the Securities and Exchange Commission in its Form 10-SB
and should be read in conjunction with the financial statements and footnotes
thereto. The Company is a "blank check" company with the purpose to evaluate,
structure and complete a merger with, or acquisition of, a privately owned
corporation.
In the opinion of management, all adjustments consisting of normal recurring
adjustments considered necessary to provide a fair presentation of the operating
results for the interim periods presented have been made. These results have
been determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's Annual Financial Statements for the year ended June 30, 2001.
Operating results for the three months ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2002.
Since its inception, the Company has been dependent upon certain related parties
to provide continued funding and capital resources to fund its negative cash
flow from operations. The Company's auditors have included a paragraph in their
audit report in the Company's annual financial statements for the year ended
June 30, 2001, which expresses concern about the Company's ability to continue
as a going concern unless it can secure continued funding.
NOTE 2 -SHARE CAPITAL
In December 2000, the Company completed an initial public offering of 2,500,000
common shares at $0.05 per share for cash proceeds of $125,000. The proceeds of
the offering and the common stock issued pursuant thereto are being held in an
escrow account, and shall remain in the escrow account until an acquisition
meeting specific criteria is completed, and before the deposited funds and
deposited securities can be released to the Company and the investors,
respectively, the Company is required to update its registration statement with
post-effective amendment, and within five business days after the effective date
thereof, the Company is required to furnish the investors with the prospectus
produced thereby containing the terms of a reconfirmation offer and information
regarding the proposed acquisition candidate and its business. Investors must
have no fewer than 20 and no more than 45 business days from the effective date
of the post-effective amendment to decide to reconfirm their investment and
remain an investor or, alternatively, require the return of their investment.
Each investor shall have 20 business days from the date of this prospectus to
reconfirm their investment. Any investor not making any decision within the
20-business-day period will automatically have their investment returned.
If the Company does not complete an acquisition meeting the specified criteria
within 18 months of the effective date of its initial public offering, all of
the deposited funds in the escrow account must be returned to investors.
The 500,000 shares issued and outstanding prior to the shares sold in the
offering completed in December 2000 will be purchased by the Company as part of
the merger for $0.05 per share. These shares will be cancelled when the merger
is consummated. The Company has recorded a $25,000 liability for the payment for
these shares.
NOTE 3 - ESCROW ACCOUNT DISCREPANCY
In September 2001, our auditors discovered that the $125,000 raised in the Rule
419 offering that closed on November 28, 2000 had not been deposited in the
escrow account at City National Bank. Therefore, these funds were not in our
possession and should not have been included on the balance sheets of our
December 31, 2000 and March 31, 2001 reports on Form 10-QSB. Amendments to these
reports have been prepared and filed with the SEC.
F-17
ABOVE AVERAGE INVESTMENTS, LTD.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
================================================================================
NOTE 3 - ESCROW ACCOUNT DISCREPANCY, continued
The funds have been held on deposit in the trust account of Martin & Adams,
PLLC, a Washington, D.C. law firm which held the funds on behalf of Euro
Atlantic Capital Corporation ("Euro"), the organization that is facilitating the
merger of our company and Quick-Med. Euro received no commissions or other
compensation for raising these funds, and is one of the investors in the
offering. Euro acted as Quick-Med's agent in locating a blank check company in
order to execute a reverse merger and become a public company. When this
discrepancy was brought to the attention of our management, the law firm was
immediately notified to transfer the funds. The funds were transferred to City
National Bank on September 10, 2001, and received into the escrow account on
September 12, 2001.
NOTE 4 - MERGER AGREEMENT
During March 2001, the Company entered into an agreement with Quick-Med
Technologies, Inc. ("QMT"), a Delaware corporation, and its shareholders to
acquire all of the issued and outstanding shares of capital stock of QMT in
exchange for 10,260,000 shares of the Company's capital stock. For accounting
purposes, the public shell merger will be treated as a recapitalization of QMT.
The value of the net assets of the Company after the public shell merger is the
same as their historical book value.
Subsequent to the merger, assuming all of the Company's shareholders reconfirm
their investment, the Company's shareholders will retain approximately 20% of
the outstanding shares of the Company's capital stock. Upon ratification of the
public shell merger by its shareholders, the Company will change its name to
Quick-Med Technologies, Inc.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company does not maintain a checking account and all expenses incurred by
the Company are paid by an affiliate. For the three months ended September 30,
2001, the Company incurred $55,258 in expenses. The affiliate does not expect to
be repaid for the expenses it pays on behalf of the Company. Accordingly, as the
expenses are paid, they are classified as additional paid-in capital.
F-18
DASZKAL BOLTON MANELA DEVLIN & Co.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Quick-Med Technologies, Inc.
We have audited the accompanying balance sheets of Quick-Med Technologies, Inc.
(a development stage company) as of December 31, 2000, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the years ended December 31, 2000 and 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quick-Med Technologies, Inc.,
as of December 31, 2000, and the results of its operations and its cash flows
for the years ended December 31, 2000 and 1999, in conformity with accounting
principles generally accepted in the United States of America.
These financial statements were previously issued and reported on, by us, on
February 6, 2001 and May 16, 2001. Since our report dated February 6, 2001, we
have determined that license fees payable totaling $160,000, which were not
recorded on the balance sheet, have been recorded and classified as an
intangible asset in accordance with Generally Accepted Accounting Principles as
more fully described in Note 4.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has experienced recurring losses
and negative cash flows from operations for the years ended December 31, 2000
and 1999 and has a net capital deficiency. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding those matters are described in the footnotes accompanying the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/S/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida
December 6, 2001
F-19
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
========================================================================================================
ASSETS
(UNAUDITED)
December 31, SEPTEMBER 30,
2000 1999 2001
------------ ------------ ------------
Current assets:
Cash $ 5,113 $ 179 $ 34
------------ ------------ ------------
Property and equipment, net 3,101 3,910 2,129
------------ ------------ ------------
Other assets:
Deposits 6,020 - 847
Intangible asset, net 366,016 - 372,386
------------ ------------ ------------
Total other assets 372,036 - 373,233
------------ ------------ ------------
Total assets $ 380,250 $ 4,089 $ 375,396
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 77,014 $ 19,475 $ 178,733
Accrued expenses 48,014 20,311 20,693
License payable 260,000 - 260,000
Loan payable 150,000 - 150,000
Shareholder loans payable 159,300 - 344,300
Due to affiliate/shareholder 25,334 20,861 23,666
------------ ------------ ------------
Total current liabilities 719,662 60,647 977,392
------------ ------------ ------------
Stockholders' deficit:
Common stock, $0.001 par value; 15,000,000
authorized shares; 10,000,000, 9,605,000 and
10,260,000 shares issued and outstanding at
December 31, 2000, December 31, 1999,
and September 30, 2001, respectively 10,000 9,606 10,260
Additional paid-in capital 167,748 145,643 430,314
Outstanding stock options 8,550 - 8,550
Deficit accumulated during the development stage (525,710) (211,807) (1,051,120)
------------ ------------ ------------
Total stockholders' deficit (339,412) (56,558) (601,996)
------------ ------------ ------------
Total liabilities and stockholders' deficit $ 380,250 $ 4,089 $ 375,396
============ ============ ============
See accompanying notes to financial statements.
F-20
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
====================================================================================================================
December 7,
Nine Months 1997 (inception)
ended through
September 30, September 30,
December 31, 2001 2001
2000 1999 (Unaudited) (Unaudited)
Sales $ - $ - $ - $ -
Cost of sales - - - -
------------ ------------ ------------ ------------
Gross profit - - - -
Selling, general and administrative expenses 308,206 165,270 509,225 1,028,217
------------ ------------ ------------ ------------
Loss from operations (308,206) (165,270) (509,225) (1,028,217)
------------ ------------ ------------ ------------
Other income and (expense):
Other income - - - -
Interest expense (5,697) (1,021) (16,185) (22,903)
------------ ------------ ------------ ------------
Total other income and (expense) (5,697) (1,021) (16,185) (22,903)
------------ ------------ ------------ ------------
Income before income taxes (313,903) (166,291) (525,410) (1,051,120)
------------ ------------ ------------ ------------
Provision (benefit) for income taxes - - - -
------------ ------------ ------------ ------------
Net loss $ (313,903) $ (166,291) $ (525,410) $ (1,051,120)
============ ============ ============ ============
Net loss per share (basic and diluted) $ (0.03) $ (0.02) $ (0.05)
============ ============ ============
Weighted average common shares outstanding 9,783,426 8,347,478 10,189,524
============ ============ ============
See accompanying notes to financial statements.
F-21
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
==================================================================================================================================
Accumulated
Additional Deficit
Common Stock Paid-In Development Outstanding
Shares Amount Capital Stage Stock Options Total
Balance, December 31, 1997 - $ - $ - $ - $ - $ -
------------ ------------ ------------ ------------ ------------ ------------
Common stock issued 2,997,500 2,998 28,778 - - 31,776
Stock issued for services 4,223,000 4,223 - - - 4,223
Net loss - December 31, 1998 - - - (45,516) - (45,516)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 7,220,500 7,221 28,778 (45,516) - (9,517)
Stock issued for services 2,385,000 2,385 116,865 - - 119,250
Net loss - December 31, 1999 - - - (166,291) - (166,291)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 9,605,500 9,606 145,643 (211,807) - (56,558)
Stock issued for services 230,000 230 11,270 - - 11,500
Stock issued for license agreement 160,000 160 7,840 - - 8,000
Stock options granted for license
and consulting - - - - 8,550 8,550
Stock issued for cash 4,500 4 2,995 - - 2,999
Net loss - December 31, 2000 - - - (313,903) - (313,903)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2000 10,000,000 10,000 167,748 (525,710) 8,550 (339,412)
------------ ------------ ------------ ------------ ------------ ------------
Stock issued in debt conversion 260,000 260 262,566 - - 262,826
Net loss - September 30, 2001 (unaudited) - - - (525,410) - (525,410)
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 2001 (unaudited) 10,260,000 $ 10,260 $ 430,314 $ (1,051,120) $ 8,550 $ (601,996)
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
F-22
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
==============================================================================================================
December 7,
Nine Months 1997 (inception)
ended through
September 30, September 30,
December 31, 2001 2001
2000 1999 (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (313,903) $ (166,291) $ (525,410) $ (1,051,120)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 16,444 134 29,437 46,015
Common stock issued for services 11,500 119,250 - 134,973
Stock options granted for services 550 - 550
Stock subscriptions receivable - 1,270 - -
(Increase) decrease in:
Deposits (6,020) - 5,173 (847)
Increase (decrease) in:
Accounts payable 57,538 14,602 101,720 178,734
Accrued expenses 27,703 12,060 (24,496) 23,518
Due to affiliate 4,473 (1,050) (1,668) 23,666
------------ ------------ ------------ ------------
Net cash used by operating activities (201,715) (20,025) (415,244) (644,511)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment - (4,044) - (4,044)
Intangible assets (105,651) - (34,835) (140,486)
------------ ------------ ------------ ------------
Net cash used by investing activities (105,651) (4,044) (34,835) (144,530)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Issuance of common stock, net 3,000 - - 34,775
Increase in loans payable 309,300 23,710 445,000 754,300
------------ ------------ ------------ ------------
Net cash provided by financing activities 312,300 23,710 445,000 789,075
------------ ------------ ------------ ------------
Net increase (decrease) in cash 4,934 (359) (5,079) 34
Cash at beginning of period 179 538 5,113 -
------------ ------------ ------------ ------------
Cash at end of period $ 5,113 $ 179 $ 34 $ 34
============ ============ ============ ============
See accompanying notes to financial statements.
F-23
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
==============================================================================================================
December 7,
Nine Months 1997 (inception)
ended through
September 30, September 30,
December 31, 2001 2001
2000 1999 (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
Supplementary information:
Cash paid for:
Interest $ - $ - $ - $ -
============ ============ ============ ============
Income taxes $ - $ - $ - $ -
============ ============ ============ ============
Non-cash disclosures of investing and
financing activities:
License fee and related payable $ 260,000 $ - $ - $ 260,000
============ ============ ============ ============
Common stock issued for license $ 8,000 $ - $ - $ 8,000
============ ============ ============ ============
Stock options granted to licensor
and consultant $ 8,550 $ - $ - $ 8,550
============ ============ ============ ============
Conversion of debt to equity $ - $ - $ 262,826 $ 262,826
============ ============ ============ ============
See accompanying notes to financial statements.
F-24
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1 - DESCRIPTION OF BUSINESS AND DEVELOPMENT STAGE RISK
Quick-Med Technologies, Inc. (the "Company") is a Delaware corporation organized
in December 1997. The Company specializes in the development of premium health
care products. The Company funds research efforts necessary to develop products
and administer the patent process, subcontracts the manufacture of its products,
and collaborates with other companies to introduce its products into the
marketplace. The Company neither produces nor directly markets its products.
Instead, it intends to rely on outside organizations for those activities.
The Company has no revenues to date. Since its inception, the Company has been
dependent upon the receipt of capital investment or other financing to fund its
continuing activities. In addition to the normal risks associated with a new
business venture, there can be no assurance that the Company's product
development will be successfully completed or that it will be a commercial
success. Further, the Company is dependent upon certain related parties to
provide continued funding and capital resources.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. The Company had no
cash equivalents at December 31, 2000 and 1999.
Use of Estimates
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Stock Compensation
The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 encourages the
use of a fair-value-based method of accounting for stock-based awards under
which the fair value of stock options is determined on the date of grant and
expensed over the vesting period. Under SFAS 123, companies may, however,
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees." Companies that apply APB No. 25 are required to include
pro forma disclosures of net earnings and earnings per share as if the
fair-value-based method of accounting had been applied. The Company elected to
account for such plans under the provisions of APB No. 25. The Company accounts
for stock options granted to consultants under SFAS 123.
Unaudited Interim Information
The information presented as of September 30, 2001 has not been audited. In the
opinion of management, the unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of September 30, 2001, and
the results of its operations and its cash flows for the nine months ended
September 30, 2001, and the stockholders' deficit for the nine months ended
September 30, 2001. The results of operations for the nine month period ended
September 30, 2001 are not necessarily indicative of the results for the full
year.
F-25
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Intangible Assets
The cost of obtaining license agreements along with the costs to defend the
patents underlying the license agreements are capitalized and are amortized
using the straight line method over the estimated useful lives of the underlying
patents. The costs of obtaining and maintaining new patents are capitalized and
amortized using the straight line method over the estimated useful lives of the
patents. The cost of patents in process is not amortized until the patent is
issued.
Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the expected useful
lives of the assets.
Earnings Per Share
Earnings per share are computed based on the weighted average number of common
shares as if they were outstanding. Basic and diluted earnings per share are the
same for the years ended 2000 and 1999.
Reclassification
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 financial presentation.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2000:
Depreciation expense for the years ended December 31, 2000 and 1999 was $809 and
$134, respectively.
2000 1999
------------ ------------
Computer equipment $ 4,044 $ 4,044
Less: accumulated epreciation (943) (134)
------------ ------------
Net property and equipment $ 3,101 $ 3,910
============ ============
NOTE 4 - INTANGIBLE ASSET
License Agreement
The license agreement with two inventors for the worldwide rights to the MMP
inhibitors and uses thereof, commenced on September 13, 2000. The license
agreement transfers to the Company the technology that is the subject of issued
patents as well as pending patent applications, which were filed by the original
inventors. The licenses are amortized on a straight-line basis over the
estimated useful lives of the underlying patents or the license agreement. The
U.S. patents expire beginning November 2007 through November 2016 and the
international patents expire on November 21, 2011. Accumulated amortization was
$15,635 at December 31, 2000.
The Company assesses whether its intangible assets are impaired as required by
SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of," based on an evaluation of undiscounted
F-26
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 4 - INTANGIBLE ASSET, continued
projected cash flows through the remaining amortization period. If impairment
exists, the amount of such impairment is calculated as the estimated fair value
of the assets.
Under the terms of the license agreement, the Company paid $100,000 and granted
160,000 shares of common stock valued at $0.05 per share and granted 160,000
stock options. The stock options are valued at the estimated minimum value in
accordance with SFAS 123 of $8,000. In addition, the Company is required to pay
an additional $100,000 in September 2001 to the licensors. In order to maintain
the exclusive rights to the licenses, the agreements require a total payment of
$160,000 if certain milestones regarding the proof-of-concept and development of
a prototype are completed. If a milestone is not met by the third anniversary of
the agreement, the Company shall pay each inventor $25,000 per year until all
such milestones are completed. The Company has determined that the likelihood of
meeting the milestones is greater than not, and the Company recorded the license
payable of $160,000.
As additional compensation to the licensors, the Company will pay a royalty on
the Company's net sales of licensed products. The royalty rate is 2% on the
first $1,500,000 of applicable quarterly revenue and 1.5% in sales above
$1,500,000. For each sublicense the Company grants, the licensors will be paid
3% of the up-front licensing fee, limited to $100,000. The University of Florida
Research Foundation may have some rights with respect to the use of patents and
the Company is in the process of negotiating with the University the extent of
these rights.
September 2001 (Unaudited)
New Patents
Subsequent to December 31, 2000, the Company filed three new patent applications
relating to three projects: wound dressings, anti aging and vesicant wounds. The
capitalized costs to date of these three patent applications are $34,835. This
amount will be amortized over the estimated useful lives of the new patents upon
granting of the patents. The termination dates for the patents that would issue
from the three applications mentioned above are December 8, 2019, June 29, 2021
and September 25, 2022, respectively.
In October 2001, the Company paid the $100,000 owed in September 2001 to the
licensors in accordance with the license agreement.
NOTE 5 - RELATED PARTY TRANSACTIONS
September 2001 (Unaudited)
In July, August and September 2001, the company obtained short term notes
payable due to a shareholder in the amount of $155,000. The notes bear interest
at 6% per annum and are expected to be paid by December 31, 2001.
In April, May and June 2001, the Company obtained short term notes payable due
to a shareholder in the total amount of $135,000. The notes bear interest at 6%
per annum and are expected to be paid by December 31, 2001.
In March 2001, the Company obtained a short-term note payable due to a
shareholder in the amount of $45,000. The note bears interest at 6% per annum
and is expected to be paid by December 31, 2001.
F-27
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5 - RELATED PARTY TRANSACTIONS, continued
In January 2001, the Company obtained a short-term note payable in the amount of
$110,000, due to a shareholder. The note bears interest at 6% per annum. In
March 2001, the Company agreed to convert $150,000 of the outstanding note
payable to a shareholder at December 31, 2000 and the additional $110,000 note
payable obtained in January 2001 from the same shareholder plus accrued interest
of $2,826 into 260,000 shares of common stock. The shareholder and the Company
agreed to a negotiated value of approximately $1 for one share conversion ratio.
2000
At December 31, 2000 the Company had a note payable of $25,334 for funds
advanced from an affiliated company/shareholder, through common ownership. The
note is short-term, bears interest at 6% and is expected to be paid by December
31, 2001.
At December 31, 2000, the Company had notes payable of $150,000 for funds
advanced from a shareholder of the Company. The note is short term and bears
interest at 6.0%. In March 2001, the Company issued approximately 150,000 shares
of its common stock in satisfaction of these notes.
At December 31, 2000, the Company had notes payable to a relative of the
President of $9,300. The note is short term; bears interest at 6.0% and is
expected to be paid by December 31, 2001.
At December 31, 2000, the Company has $4,097 in the accounts payable balance
that is due to shareholders of the Company for reimbursable expenses.
At December 31, 2000, the Company paid $2,250 in rent to the President for the
sub-lease of office space. The sub-lease is for a period of one year and expires
in July 2001.
NOTE 6 - STOCKHOLDERS' DEFICIT
The Company is authorized to issue 11,000,000 shares of stock, of which
10,000,000 are common stock, par value $0.001 per share, and 1,000,000 shares of
preferred stock, par value $0.001 per share. Earnings per share have been
calculated as if the shares had been issued at December 31, 2000 and 1999.
September 2001 (Unaudited)
In March 2001, the Company increased the number of authorized common shares to
15,000,000.
2000
During the year ended December 31, 2000, the Company issued 230,000 shares of
common stock for consulting and legal services. The Company recorded $11,500
($0.05 per share) in compensation expense.
On September 12, 2000, the Company issued 160,000 common shares in connection
with the acquisition of the license agreement. These shares were valued at $0.05
per share.
During the year, the Company sold 4,500 shares of its common stock for cash of
$3,000 ($0.67 per share).
F-28
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 6 - STOCKHOLDERS' DEFICIT, continued
1999
The Company issued 2,385,000 shares of common stock in 1999 for consulting
services provided to the Company. These shares were assigned a value of $0.05
per share in 1999, and the Company recognized $119,250 in consulting expense.
The Company is not obligated to issue additional shares under these consulting
agreements.
NOTE 7 - STOCK OPTIONS
During the years ended December 31, 2000 and 1999, 215,000 and 360,000 options
were granted to officers and directors of the Company at exercise prices of
$2.00 to $3.00 per share.
The Company has elected to account for the stock options under the Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, no compensation expense has been
recognized on the employee stock options. The Company accounts for stock options
granted to consultants under Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation."
Had the compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the methodology
prescribed under Statements of Financial Standards No. 123, "Accounting for
Stock Based Compensation," the Company's net earnings for the years ended
December 31, 2000 and 1999 would have been decreased by $-0- and $2,376,
respectively. The fair value of each option is estimated on the date of grant
using the fair market option-pricing model with the assumption:
Risk-free interest rate 6.5%
Expected life (years) Various
Expected volatility N/A
Expected dividends None
A summary of options during the years ended December 31, 2000 and 1999 is shown
below:
December 31, 2000 December 31, 1999
----------------------------- -----------------------------
Number Weighted-Average Number Weighted-Average
of Shares Exercise Price of Shares Exercise Price
----------- ----------------- ----------- ----------------
Outstanding at January 1 625,000 $ 2.00 265,000 $ 2.00
Granted 215,000 2.93 360,000 2.00
Exercised - - - -
Forfeited - - - -
----------- ----------------- ----------- ----------------
Outstanding at December 31 840,000 $ 2.24 625,000 $ 2.00
----------- ================= ----------- ================
Exercisable at December 31 840,000 625,000
----------- -----------
Available for issuance at December 31 840,000 625,000
=========== ===========
At December 31, 2000 and 1999, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
F-29
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 7 - STOCK OPTIONS, continued
2000 1999
------------ ------------
Net Loss
As reported $ 313,903) $ 168,667)
============ ============
Pro forma $ 313,903) $ 168,667)
============ ============
Loss per share
As reported $ (0.03) $ (0.02)
============ ============
Pro forma $ (0.03) $ (0.02)
============ ============
September 2001 (Unaudited)
The Company adopted a qualified equity incentive plan on March 4, 2001. Under
the Plan the Company is authorized to grant up to 3,000,000 shares of common
stock. As of September 30, 2001 the Company has not granted any options under
the Plan.
NOTE 8 - INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires, among other things, recognition of future tax consequences,
measured by enacted tax rates attributable to taxable and deductible temporary
differences between financial statement and income tax bases of assets and
liabilities. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable for the period and the change during the period in the deferred
tax asset and liability.
For income tax purposes, the Company has elected to capitalize the start-up
costs incurred during 1999 and 2000 of $45,000 and approximately $283,000,
respectively. The start-up costs will be amortized over sixty (60) months in
accordance with the Internal Revenue Code. The Company's evaluation of the tax
benefit of its carry forward is presented in the following table. The tax
amounts have been calculated using the 34% federal and 6.0% state income tax
rates.
The (provision) benefit for income taxes consists of the following:
2000 1999
------------ ------------
Current $ - $ -
Deferred $ - $ -
------------ ------------
$ - $ -
============ ============
Deferred tax assets for 2000 and 1999 consist of the following:
2000 1999
------------ ------------
Deferred tax asset:
Tax benefit of capitalized start-up costs $ 111,456 $ 23,765
Net operating loss carry forward $ 15,907 $ 2,633
Less: valuation allowance (127,363) (26,398)
------------ ------------
Deferred tax asset $ - $ -
============ ============
The Company has a net operating loss carry forward of approximately $40,000,
which will begin to expire in 2013.
F-30
QUICK-MED TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 9 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
organization will continue as a going concern. The organization has negative
cash flows from operations and an accumulated deficit that raises substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Management expects that until completion of its reverse merger described in Note
11, that it will fund its working capital through loans and advances from
stockholders.
NOTE 10 - NOTE PAYABLE
The Company has a $150,000 note payable with a merchant banker. The note is
secured by a lien on certain assets. Interest accrues at a rate of 6% per annum.
The principle and accrued interest is due by December 31, 2001.
NOTE 11 - MERGER AGREEMENT (Unaudited)
In March 2001 the Company entered into an agreement with Above Average
Investments, Ltd. ("AAI") and its shareholders to acquire all of the issued and
outstanding shares of capital stock of the Company in exchange for 10,260,000
shares of AAI's capital stock. For accounting purposes, the public shell merger
will be treated as a recapitalization of the Company.
Subsequent to the merger, assuming AAI's shareholders reconfirm their
investment, the Company's shareholders will retain approximately 80% of the
outstanding shares of capital stock. Upon ratification of the public shell
merger by its shareholders, AAI, the surviving entity, will change its name to
Quick-Med Technologies, Inc.
NOTE 12 - SUBSEQUENT EVENTS (Unaudited)
In the months of October and November 2001, the Company obtained short term
notes payable due to a shareholder in the amount of approximately 242,000. The
notes bear interest at 6% per annum.
Quick-Med has received a commitment for up to $500,000 of bridge financing from
Euro Atlantic Capital Corp., a merchant banking firm, payable $50,000 per month
commencing February 2002. The first installment has been received. Any funds
borrowed are repayable on the earlier of February 7, 2003 or such time as
Quick-Med obtains $2 million of equity funding, the sale of Quick-Med's assets
or the receipt of funding from third-party sources. If Quick-med is unable to
obtain additional funding by February 7, 2003, the note payable to Euro may be
converted at Euro's discretion into voting convertible preferred stock. The
conversion ratio will be determined using Quick-Med's book value on the date of
the note. The note is guaranteed by Michael Granito, Quick-Med's chairman and a
principal shareholder. Quick-Med intends to seek additional equity financing
after the merger. Quick-Med believes that it will obtain the equity financing
prior to the maturity of the bridge financing, which will enable it to repay the
note and to continue operations. We cannot assure you that Quick-Med will obtain
this financing, or, if obtained, it will be on favorable terms. Failure to
obtain financing might cause Quick-Med to materially alter its business plan or
to cease operations. A default on the note, which may result in its conversion,
may also result in Euro assuming control of Quick-Med. Quick-Med does not
currently believe that the costs to be incurred in seeking financing will be
material.
On November 25, 2001 the Company granted the option to convert all of the
outstanding shareholder and affiliate loans payable plus accrued interest into
common stock at $1.00 per share. As of November 25, 2001 the total amount of the
notes payable plus accrued interest totaled approximately $610,000 and is
convertible into approximately 610,000 common shares.
F-31
ABOVE AVERAGE INVESTMENTS, LTD.
(a) Pro Forma financial information.
In March 2001, Above Average Investments, Ltd. ("AAI"), executed an agreement
with Quick-Med Technologies, Inc. ("QMT"), to acquire all of the issued and
outstanding shares of common stock of QMT in exchange for 10,260,000 shares of
AAI common stock. This resulted in QMT acquiring an aggregate of approximately
80% of the outstanding common shares of AAI and gaining control.
The following Pro Forma Combined Balance Sheets of AAI have been prepared by
management of AAI based upon the balance sheets of AAI for the year ended June
30, 2001 and the three month period ending September 30, 2001. The Pro Forma
Combined Statements of Operations was prepared based upon the statement of
operations for the Registrant for the year ended June 30, 2001 and the three
months ended September 30, 2001. The pro forma statements of operations also
include QMT's losses for the twelve months ended June 30, 2001 and the three
months ended September 30, 2001. The pro forma statements give effect to the
transaction as a public shell merger and the assumptions and adjustments in the
accompanying notes to pro forma combined financial statements. The pro forma
combined balance sheets as of June 30, 2001 and September 30, 2001 give effect
to the merger as if it had occurred as of June 30, 2001 and September 30, 2001.
The pro forma combined statements of operations for the twelve months ended June
30, 2001 and three months ended September 30, 2001, give effect to the
acquisition as if it had occurred as of July 1, 2000, and 2001, respectively.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma combined
financial statements do not purport to represent what the combined companies'
financial position or results of operations would actually have been had the
acquisition occurred on such date or as of the beginning of the period
indicated, or to project the combined companies' financial position or results
of operations for any future period.
F-32
Above Average Investments, LTD.
Pro Forma Combined Balance Sheets
June 30, 2001
(Unaudited)
Historical
AA Investments Quick-Med Pro Forma
June 30, 2001 June 30, 2001 Total Adjustments Combined
------------- ------------- ----- ----------- --------
Current assets:
Cash $ - $ 15,329 $ 15,329 (b) $ 100,000 $ 115,329
Restricted cash (b) - $ -
Prepaid acuisition costs 10,030 10,030 (c) (10,030) -
Total current assets 10,030 15,329 25,359 89,970 115,329
Property and equipment, net - 2,455 2,455 - 2,455
Other assets:
Deposits - - -
Intangible assets, net - 366,029 366,029 - 366,029
Total other assets - 366,029 366,029 - 366,029
-----------------------------------------------------------------------------------------
Total assets $ 10,030 $ 383,813 $ 393,843 $ 89,970 $ 483,813
=========================================================================================
Current liabilities:
Accounts payable $ 129,065 $ 161,754 $ 290,819 (c) $ (100,000) $ 190,819
Accrued expenses - 45,149 45,149 - 45,149
License payable - 260,000 260,000 - 260,000
Loans payable - 150,000 150,000 - 150,000
Shareholder loans payable - 189,300 189,300 - 189,300
Due to affiliate/shareholder - 19,724 19,724 - 19,724
Liability for common stock 25,000 25,000 (c) (25,000) -
-----------------------------------------------------------------------------------------
Total current liabilities 154,065 825,927 979,992 (125,000) 854,992
Common stock subject to redemption 125,000 125,000 (b) (125,000) -
Stock subscription receivable (125,000) (125,000) (b) 125,000 -
-----------------------------------------------------------------------------------------
Total - - - - -
Stockholders' equity:
Common stock 50 10,260 10,310 (a) (9,034) 1,276
Additional paid in capital 2,365 430,314 432,679 (a),(b),(c) 77,554 510,233
Outstanding stock options 8,550 8,550 8,550
Accumulated deficit (146,450) (891,238) (1,037,688) (a) 146,450 (891,238)
-----------------------------------------------------------------------------------------
Total stockholders' equity (144,035) (442,114) (586,149) 214,970 (371,179)
Total liabilities and stockholders' equity $ 10,030 $ 383,813 $ 393,843 $ 89,970 $ 483,813
-----------------------------------------------------------------------------------------
=========================================================================================
1. The Pro Forma Balance Sheet at June 30, 2001 is based upon the balance sheets of the Registrant and Quick-Med Technologies,
Inc. as of June 30, 2001.
(a) To record the public shell merger of the Registrant and Quick-Med. 10,260,000 shares of common stock issue in exchange for
100% of Quick-Med common stock and the IPO of 2,500,000 shares in exchange for $125,000 of the Registrant's Common stock.
(The total number of shares outstanding after the merger will be 12,760,000 shares.) The assets of AAI are recorded at their
net asset value.
(b) To reclass the restricted cash to unrestricted cash and to reclass the stock subject to redemption to common stock. (The net
assets of AAI at June 30, 2001 as adjusted to reflect the receipt of the $125,000 and the reclassification of $100,000 of
Accounts payable to APIC is approximately $71,000.)
(c) To record the purchase by Quick-Med Technologies, Inc. of 500,000 shares of AAI outstanding June 30, 2001.
F-33
Above Average Investments, LTD.
Pro Forma Combined Statement of Operations
For the twelve months ended June 30, 2001
(Unaudited)
Historical
AA Investments Quick-Med
Twelve months ended Twelve months ended Pro Forma
June 30, 2001 June 30, 2001 Total Adjustments Combined
------------- ------------- ----- ----------- --------
Revenues earned $ - $ - $ - $ - $ -
Cost of revenues earned - - - - -
Gross profit - - - - -
Operating expenses:
Selling, general and admn expense 127,535 622,668 750,203 - 750,203
-----------------------------------------------------------------------------------------
Total operating expenses 127,535 622,668 750,203 - 750,203
Loss from operations (127,535) (622,668) (750,203) - (750,203)
Other expense
Interest expense - 13,689 13,689 - 13,689
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net loss $ (127,535) $ (636,357) $(736,514) $ - $ (763,892)
=========================================================================================
Basic net loss per share $ (0.26) $ (0.06)
============= ==========
Wieghted average shares
outstanding 500,000 12,760,000
============= ==========
Fully diluted net loss per share $ (0.26) $ (0.06)
============= ==========
Fully diluted average shares
outstanding 500,000 12,760,000
============= ==========
1. The Pro Forma Statement of Operations for the twelve months ended June 30, 2001 is based upon the twelve months ended June
30, 2001 for the Registrant and Quick-Med Technologies, Inc. and gives effect to the acquisition as if it had occured on July
1, 2000.
2. The June 30, 2001 earnings per share has been adjusted to reflect the 10,260,000 shares issued for Quick-Med and the
2,500,000 IPO shares. The total number of shares outstanding after the merger will be 12,760,000 shares.
F-34
Above Average Investments, LTD.
Pro Forma Combined Balance Sheets
September 30, 2001
(Unaudited)
Historical
AA Investments Quick-Med Pro Forma
September 30, 2001 September 30, 2001 Total Adjustments Combined
------------- ------------- ----- ----------- --------
Current assets:
Cash $ - $ 34 $ 34 (b) $ 100,000 $ 100,034
Restricted cash 125,000 125,000 (b) (125,000) -
Prepaid financing costs 26,505 26,505 (26,505) -
Prepaid acuisition costs 10,030 10,030 (c) (10,030) -
-----------------------------------------------------------------------------------------
Total current assets 161,535 34 161,569 (61,535) 100,034
-----------------------------------------------------------------------------------------
Property and equipment, net - 2,129 2,129 - 2,129
-----------------------------------------------------------------------------------------
Other assets:
Deposits - 847 847 847
Intangible assets, net - 372,386 372,386 - 372,386
-----------------------------------------------------------------------------------------
Total other assets - 373,233 373,233 - 373,233
-----------------------------------------------------------------------------------------
Total assets $ 161,535 $ 375,396 $ 536,931 $ (61,535) $ 475,396
=========================================================================================
Current liabilities:
Accounts payable $ 201,853 $ 178,733 $ 380,586 (c) $ (151,853) $ 228,733
Accrued expenses - 20,693 20,693 - 20,693
License payable - 260,000 260,000 - 260,000
Loans payable - 150,000 150,000 - 150,000
Shareholder loans payable - 344,300 344,300 - 344,300
Due to affiliate/shareholder - 23,666 23,666 - 23,666
Liability for common stock 25,000 - 25,000 (c) (25,000) -
-----------------------------------------------------------------------------------------
Total current liabilities 226,853 977,392 1,204,245 (176,853) 1,027,392
Common stock subject to redemption 125,000 125,000 (b) (125,000) -
Stock subscription receivable - - - -
-----------------------------------------------------------------------------------------
Total 125,000 - 125,000 (125,000) -
Stockholders' equity:
Common stock 50 10,260 10,310 (a) (9,034) 1,276
Additional paid in capital 11,340 430,314 441,654 (b) 47,644 489,298
Outstanding stock options 8,550 8,550 8,550
Accumulated deficit (201,708) (1,051,120) (1,252,828) (a) 201,708 (1,051,120)
-----------------------------------------------------------------------------------------
Total stockholders' equity (190,318) (601,996) (792,314) 240,318 (551,996)
-----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity$ 161,535 $ 375,396 $ 536,931 $ (61,535) $ 475,396
=========================================================================================
1. The Pro Forma Balance Sheet at September 30, 2001 is based upon the balance sheets of the Registrant and Quick-Med
Technologies, Inc. as of September 30, 2001.
(a) To record the public shell merger of the Registrant and Quick-Med. 10,260,000 shares of common stock issue in exchange for
100% of Quick-Med common stock and the IPO of 2,500,000 shares in exchange for $125,000 of the Registrant's Common stock.
(The total number of shares outstanding after the merger will be 12,760,000 shares.) The assets of AAI are recorded at their
net asset value.
(b) To reclass the restricted cash to unrestricted cash and to reclass the stock subject to redemption to common stock. (The net
assets of AAI at September 30, 2001 as adjusted to reflect the receipt of the $125,000 and the reclassification of $151,853
of Accounts payable to APIC is approximately $50,000.)
(c) To record the purchase by Quick-Med Technologies, Inc. of 500,000 shares of AAI outstanding September 30, 2001.
F-35
Above Average Investments, LTD.
Pro Forma Combined Statement of Operations
For the three months ended September 30, 2001
(Unaudited)
Historical
AA Investments Quick-Med
Three months ended Three months ended Pro Forma
------------------ ------------------ ---------
September 30, 2001 September 30, 2001 Total Adjustments Combined
------------- ------------- ----- ----------- --------
Revenues earned $ - $ - $ - $ - $ -
Cost of revenues earned - - - - -
Gross profit - - - - -
Operating expenses:
Selling, general and admn expense 55,258 $ 143,697 198,955 - 198,955
-----------------------------------------------------------------------------------------
Total operating expenses 55,258 143,697 198,955 - 198,955
Loss from operations (55,258) (143,697) (198,955) - (198,955)
Other expense
Interest expense - 7,124 7,124 - 7,124
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net loss $ (55,258) $ (150,821) $(191,831) $ - $ (191,831)
=========================================================================================
Basic net loss per share $ (0.06) $ (0.02)
============= ==========
Weighted average shares
outstanding 1,000,000 12,760,000
============= ==========
Fully diluted net loss per share $ (0.06) $ (0.02)
============= ==========
Fully diluted average shares
outstanding 1,000,000 12,760,000
============= ==========
1. The Pro Forma Statement of Operations for the three months ended September 30, 2001 is based upon the three months ended
September 30, 2001 for the Registrant and Quick-Med Technologies, Inc. and gives effect to the acquisition as if it had
occured on July 1, 2001.
2. The September 30, 2001 earnings per share has been adjusted to reflect the 10,260,000 shares issued for Quick-Med and the
2,500,000 IPO shares. The total number of shares outstanding after the merger will be 12,760,000 shares.
F-36
Appendix A
ABOVE AVERAGE INVESTMENTS, LTD.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of ABOVE AVERAGE INVESTMENTS, LTD., a Nevada
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Proxy Statement/Prospectus, each dated _______________, 2002,
and hereby appoints Devinder Randhawa as proxy and attorney-in-fact, with full
power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Special Meeting of Shareholders of ABOVE
AVERAGE INVESTMENTS, LTD., to be held on ________________, 2002 at 9:00 a.m.,
local time, at Suite 104, 1456 St. Paul St., Kelowna, British Columbia V1Y 2E6,
Canada, and any adjournment(s) or postponement(s) thereof, and to vote all
shares of common stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth on the reverse side.
Proposal to approve the Merger, approve and
adopt the Merger Agreement and approve
the issuance of shares pursuant to the
Merger Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal to CHANGE THE NAME OF THE CORPORATION TO
QUICK-mED TECHNOLOGIES, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal to INCREASE THE MAXIMUM NUMBER OF DIRECTORS
TO SERVE ON THE BOARD TO NINE.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matter(s) which may properly come before the meeting and at any adjournment(s)
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE APPROVAL OF THE MERGER, THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT, AND THE APPROVAL OF THE ISSUANCE OF SHARES OF ABOVE COMMON STOCK
PURSUANT TO THE MERGER AGREEMENT.
70
Such attorney or substitute shall have and may exercise all of the powers of
said attorney-in-fact hereunder.
Dated:
-----------------------------
- -----------------------------------
Signature
- -----------------------------------
Signature
(This proxy should be marked, dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicated. If shares are held
by joint tenants or as community property, both should sign.)
71
Appendix B
WRITTEN CONSENT OF THE STOCKHOLDERS OF
QUICK-MED TECHNOLOGIES, INC.
IN LIEU OF SPECIAL MEETING
As authorized by Section 262 of the Delaware General Corporation Law and by
Section 1.5 of the bylaws of Quick-Med Technologies, Inc. (the "Corporation"),
the undersigned, constituting record holders of (i) a majority of the issued and
outstanding common stock of the Corporation, without a meeting and based upon
this written consent, do hereby take and consent to the following action:
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
WHEREAS, the Boards of Directors of Above Average Investments, Ltd.
("Above") and this Corporation believe that it is advisable and in the best
interests of the corporations and their stockholders that this Corporation
succeed Above through a reverse merger (the "Merger") of this Corporation and
Above, as provided in the Agreement and Plan of Reorganization dated as of March
19, 2001 by and among Above and Quick-Med Corporation (the "Merger Agreement");
and
WHEREAS, the Board of Directors of this Corporation found that the Merger
is fair and in the best interests of this Corporation's stockholders.
RESOLVED: That the stockholders of this Corporation hereby approve the
terms of the Merger and hereby adopt the Merger Agreement;
RESOLVED FURTHER: That the said Merger Agreement and the terms and
conditions set forth and provided therein are hereby in all respects approved,
adopted, authorized, and agreed to;
RESOLVED FURTHER: That the proper officers of this Corporation are hereby
authorized and directed to execute and file a certificate of merger in the
office of the Secretary of the State of the State of Nevada; and
72
RESOLVED FURTHER: That this Written Consent may be executed in one or more
counterparts each of which shall constitute an original, but all of which, taken
together, shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned has duly executed this Written Consent
as of the date hereof:
Dated: _______________, 2002 [STOCKHOLDER]
----------------------------------------
Name of Authorized Representative
(if shareholder is an institution)
----------------------------------------
Title (if applicable)
----------------------------------------
Signature
Number of Shares Held
Common Stock ____________________________
73
Appendix C
DELAWARE GENERAL CORPORATE LAW
ss. 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this
title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
74
b. Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu
of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to
a merger effected under ss. 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253
of this title, each constituent corporation, either before the effective date of
the merger or consolidation or within ten
75
days thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights of
the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective date of
the merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
76
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
77
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
(8 Del. C. 1953,ss.262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,ss.24; 57 Del.
Laws, c. 148,ss.ss.27-29; 59 Del. Laws, c. 106,ss.12; 60 Del. Laws, c.
371,ss.ss.3-12; 63 Del. Laws, c. 25,ss.14; 63 Del. Laws, c. 152,ss.ss.1, 2; 64
Del. Laws, c. 112,ss.ss.46-54; 66 Del. Laws, c. 136,ss.ss.30-32; 66 Del. Laws,
c. 352,ss.9; 67 Del. Laws, c. 376,ss.ss. 19, 20; 68 Del. Laws, c. 337,ss.ss.3,
4; 69 Del. Laws, c. 61,ss.10; 69 Del. Laws, c. 262,ss.ss.1-9; 70 Del. Laws, c.
79,ss.16; 70 Del. Laws, c. 186,ss.1; 70 Del. Laws, c. 299,ss.ss.2, 3; 70 Del.
Laws, c. 349,ss.22; 71 Del. Laws, c. 120,ss.15; 71 Del. Laws, c.
339,ss.ss.49-52.)
78
Appendix D
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ?240.14a-12
ABOVE AVERAGE INVESTMENTS, LTD.
(Name of Registrant as Specified In Its Charter)
Board of Directors -- Above Average Investments, Ltd.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
Total fee Paid:
----------------------------------------------------------------------
79
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------
80
ABOVE AVERAGE INVESTMENTS, LTD.
Suite 104-1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
PROXY STATEMENT
For the Annual Meeting of Shareholders
to be held on Monday, February 11, 2002
This Proxy Statement and the accompanying proxy are furnished to the
shareholders of Above Average Investments, Ltd. (the "Company") in connection
with the solicitation of proxies by the Board of Directors for use at the 2002
Annual Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting will
be held on Monday, February 11, 2002, beginning at 9:00 am at the Company's
headquarters, located at Suite 104-1456 St. Paul St., Kelowna, British Columbia,
Canada V1Y 2E6, and at any postponements or adjournments of the Annual Meeting.
The Annual and Interim Report of the Company for the year ended June 30, 2001
and the three month period ended September 30, 2001, the Waiver of Notice of
Annual Meeting, this Proxy Statement and the enclosed proxy were initially
mailed to the shareholders on or about February 8, 2002. The enclosed proxy is
being solicited by the Board of Directors of the Company.
No meeting was held in 2001, as the Board of Directors anticipated a change
in control in conjunction with a merger. Since the merger has been delayed for
various reasons, the Board believes it is in the best interests of the Company
to hold a meeting at this time.
The Company is paying all costs of preparing, assembling and mailing this
Proxy Statement. The Company has made arrangements to forward copies of proxy
materials to brokerage houses, custodians, nominees and fiduciaries for
forwarding of proxy soliciting material to the beneficial owners of the Common
Stock of the Company at the Company's expense. In addition to the solicitation
of proxies by mail, some of the officers, directors and regular employees of the
Company may without additional compensation solicit proxies by telephone or
personal interview. The Company will bear the costs of these solicitations.
Voting and Revocability of Proxies
Shareholders are encouraged to complete the enclosed proxy and return it to
the Company as soon as possible. Any person who completes the enclosed proxy may
revoke it at any time prior to its exercise by delivering to the Secretary of
the Company either a signed statement revoking the proxy or a properly executed
proxy bearing a later date. A shareholder may also revoke a proxy by attending
the Annual Meeting and voting his or her shares personally. Proxies that have
been properly dated, signed and returned will be voted in accordance with the
instructions given by the shareholder. If a proxy is signed and returned
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but no voting instructions are given, each valid proxy will be voted in the
election of directors FOR those nominees presented by the Board of Directors and
FOR approval of Daszkal Bolton Manela Devlin & Co. as the independent auditors
of the Company. Should any other business properly come before the Annual
Meeting, the person or persons named as the proxy shall be allowed to vote on
such matter as that person or those persons determine in his, her or their sole
discretion.
Abstentions will be counted as shares present or represented and entitled
to vote for the purposes of determining whether a quorum exists at the Annual
Meeting. Broker non-votes are deemed to be not present for the purposes of
determining whether a quorum exists.
Shareholders of record as of the close of business on December 31, 2001 are
entitled to notice of the Annual Meeting and to vote in person or by proxy. The
Common Stock of the Company (the "Common Stock") is the only class of
outstanding securities entitled to vote at the Annual Meeting. As of the close
of business on December 31, 2001, there were 500,000 shares of Common Stock
outstanding and entitled to vote. The presence of a majority of the outstanding
shares of Common Stock, either in person or by proxy, will constitute a quorum
at the Annual Meeting.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist of
between one and five members, with the exact number of directors between one and
five to be determined by the Board of Directors. The Board of Directors has set
the number of directors at two, and there are currently two members of the Board
of Directors.
Persons may be nominated for election to the Board of Directors by the
shareholders upon the making of a proper motion at the Annual Meeting.
Two directors are to be elected at the Annual Meeting to serve until the
following annual meeting of shareholders. The Board of Directors will present at
the Annual Meeting for election and recommends a vote FOR the following
nominees: Devinder Randhawa and Bob Hemmerling. Each nominee was recommended
unanimously by the Board of Directors for presentation to the shareholders for
election at the Annual Meeting. Each nominee is currently a member of the Board
of Directors.
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected to the Board of Directors. A "plurality" means that the individuals
who receive the largest number of votes cast are elected as directors up to the
maximum number of directors to be chosen. Votes against any candidate and any
shares not voted (such as by abstention or broker non-votes) will have no impact
on the election of directors. All proxies will be voted FOR the
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election of each of these nominees unless authority to vote for the election of
any nominee or nominees is withheld by the shareholder giving the proxy. If any
nominee should unexpectedly decline or be unable to act as a director, the
proxies may be voted for a substitute nominee to be designated by the Board of
Directors. The Board of Directors does not believe that any nominee will decline
to serve.
Shareholders are entitled to one vote for each share held.
Background information with respect to the two nominees for election to the
Board of Directors is set forth below.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
Devinder Randhawa, President and chairman of the Company, was appointed to
his positions with the Company on April 21, 1997. Upon completing his MBA in
1985, Mr. Randhawa has been in the venture capital/corporate finance
(sub-investment banking). Mr. Randhawa was either a registered representative or
an analyst for 8 years before founding RD Capital Inc. RD Capital, Inc. is a
privately held consulting firm assisting emerging companies in the resource and
non-resource sectors. Mr. Randhawa was the founder of startup's such as First
Smart Sensor and Strathmore Resources Ltd. Mr. Randhawa received a Bachelors
Degree in Business Administration with Honors from Trinity Western College of
Langley, British Columbia in 1983 and received his MBA from the University of
British Columbia in 1985. He devotes only such time as necessary to the business
of the Company, which time is expected to be nominal.
Robert Hemmerling, Secretary, Treasurer and a director, was appointed to
his positions with the Company on April 21, 1997. In addition to his positions
with the Company, since September 1996, Mr. Hemmerling has been employed with
Strathmore Resources, Ltd., Kelowna, British Columbia in the investor relations
department. Strathmore Resources is engaged in the business of acquiring and
developing uranium properties. Prior, from January 1996 through August 1996, Mr.
Hemmerling was unemployed. From January 1992 through December 1995, Mr.
Hemmerling was an electrician with Concord Electric, Kelowna, British Columbia.
He devotes only such time as necessary to the business of the Company, which
time is expected to be nominal.
Directors are elected at annual meetings of the shareholders to terms which
extend until the following annual meeting. Officers are appointed by, and serve
at the discretion of, the Board of Directors.
The Board of Directors met once in 2002 as of the date of this Proxy
Statement. Each director has attended all of the meetings of the Board of
Directors during such period as that director has been a member of the Board of
Directors.
83
No members of the Board of Directors are currently compensated for
attending meetings of the Board of Directors.
There are no agreements between the Company and any of its officers or
directors which concern changes of control of the Company.
Reports under Section 16(a) of the Exchange Act
Mr. Randhawa and Mr. Hemmerling filed Forms 3 and 5 on January 3, 2002.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the number of
shares of the voting securities which each director, each nominee for election
to the Board of Directors the percentage of shares which the executive officers
and directors owned as a group as of December 31, 2001. The only class of equity
securities which has a present right to vote in elections of directors is the
Common Stock.
- --------------------------------------------------------------------------------
Number of
Shares Percent
Director Beneficially of
Name(1) Since Address Owned Class
- ----------------- -------- ---------------------------- ------------ -------
Devinder Randhawa 1997 Suite 104-1456 St. Paul St., 152,000 30.4
Kelowna, British Columbia,
Canada V1Y 2E6
- ----------------- -------- ---------------------------- ------------ -------
Bob Hemmerling 1997 Suite 104-1456 St. Paul St., 152,000 30.4
Kelowna, British Columbia,
Canada V1Y 2E6
- ----------------- -------- ---------------------------- ------------ -------
All Executive Officers and Directors 304,000 60.8
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
Compensation of Executive Officers
None of our officers and/or directors receive any compensation for their
respective services rendered unto the Company, nor have they received such
compensation in the past. They all have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until the
we have generated revenues from operations after consummation of a merger or
acquisition. As of the date of this registration statement, the
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Company has no funds available to pay directors. Further, none of the directors
are accruing any compensation pursuant to any agreement with the Company.
PROPOSAL NUMBER 2
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors has selected Daszkal Bolton Manela Devlin & Co.
("Daszkal") as the independent auditors for the Company for the fiscal year
ending June 30, 2002.
In September, 2001, we appointed Daszkal Bolton Manela Devlin & Co. to
replace Cordovano & Harvey, P.C. as our principal accountants. The report of
Cordovano & Harvey, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Daszkal
Bolton Manela Devlin & Co. on any accounting or financial reporting matters in
the periods prior to their appointment. The change in accountants was approved
by the Board of Directors.
It is not anticipated that representatives of Daszkal will be present at
the Annual Meeting. If representatives are present, they will be provided an
opportunity to make a statement should they wish to do so and to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" approval of Daszkal Bolton
Manela Devlin & Co. as the Company's independent auditors for the fiscal year
ending September 30, 2000.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
2003 ANNUAL MEETING OF SHAREHOLDERS
The 2003 Annual Meeting of Shareholders has been scheduled to take place on
April 23, 2003. Shareholder proposals for presentation at that meeting must be
received by the Company by no later than January 15, 2003.
OTHER BUSINESS
It is not intended that any business other than that set forth in the
Notice of Annual Meeting and more specifically described in this Proxy Statement
will be brought before the Annual Meeting. If any other business should properly
come before the Annual Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote in accordance with their best judgment
85
on that business or any matters dealing with the conduct of the Annual Meeting
pursuant to the discretionary authority granted in the proxy.
By Order of the Board of Directors,
/s/Bob Hemmerling
-----------------
Bob Hemmerling,
Secretary
86
[BACK COVER]
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of officers and directors
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the prospectus.
Item 25. Other Expenses of Issuance and Distribution
Our estimated expenses in connection with the issuance and distribution of
the securities being registered are estimated to be as follows:
Securities and Exchange Commission filing fee $ 56
Legal fees and expenses 100,000
Marketing expenses 1,000
Miscellaneous 500
---------
Total $ 101,556
=========
Management will bear all expenses shown above.
Item 26. Recent Sales of Unregistered Securities
Above Average
On April 21, 1997, the Company issued 500,000 shares of common stock to
Devinder Randhawa, for $50. The Company relied on exemption provided by Section
4(2) of the Securities Act of 1933, as amended, for the issuance of 500,000
shares of common stock to Mr. Randhawa. All of the shares of common stock of the
Company previously issued have been issued for investment purposes in a "private
transaction" and are "restricted" shares as defined in Rule 144 under the `33
Act, as amended. These shares may not be offered for public sale except under
Rule 144, or otherwise, pursuant to the `33 Act.
On April 21, 1997, Mr. Randhawa gifted 152,000 shares of common stock to
Bob Hemmerling, President of the Company, and 196,000 shares of common stock to
eight other shareholders for a total of 348,000 shares of common stock. The
shares were gifted to increase the number of shareholders. Mr. Randhawa relied
on exemption provided by Section 4(1) of the Securities Act of 1933, as amended,
for the transfer of the 348,000 shares. All of these shares are "restricted"
shares as defined in Rule 144 under the Securities Act of 1933, as amended (the
"Act"). These shares may not be offered for public sale except under Rule 144,
or otherwise, pursuant to the Act.
As of the date of this registration statement, all of the issued and
outstanding shares of the Company's common stock would normally be eligible for
sale under Rule 144 promulgated under the `33 Act, subject to certain
limitations included in said Rule. However, the SEC staff, through a letter to
the NASD in November of 1999, has eliminated the availability of Rule 144 for
the public sale of all shares issued by blank check companies in private
placements, unless those shares are sold under a registration statement. As a
result, the 500,000 shares issued by the Company prior to the filing of this
registration statement may not be sold on the secondary market unless a
registration statement is filed for their sale.
II-1
In general, under Rule 144, a person, or persons whose shares are
aggregated, who has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of shares that
does not exceed the greater of one percent of the then outstanding common stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a two-year
holding period and who is not, and has not been for the preceding three months,
an affiliate of the Company.
Quick-Med
Following is a description of all securities that Quick-Med has issued
within the past three years without registering the securities under the
Securities Act:
o In 1998, Quick-Med sold an aggregate of 7,220,500 shares of common
stock for aggregate cash consideration of $30,275 (or $.004193 per
share of common stock) to 5 persons.
o In 1999, Quick-Med issued an aggregate of 2,385,000 shares of common
stock to 6 persons, all for services.
o In 2000, Quick-Med issued 9,230,000 shares for payment of services to
6 new stockholders and one existing stockholder, issued 160,000 shares
with respect to a license agreement and sold 4,500 shares for cash to
one person. Quick-Med also granted stock options to purchase an
aggregate of 840,000 shares of common stock to officers, directors and
consultants with an exercise price of $2.00 per share pursuant to its
stock option plan. As of December 26, 2001, no shares of common stock
have been issued upon exercise of options.
o In 2001, Quick-Med issued an aggregate of 260,000 shares of common
stock to its chair of the board in exchange for cancellation of
$260,000 of notes payable.
No underwriters were used in connection with these sales and issuances
above. We relied upon Section 4 (2) of the Securities Act in each of the private
placement transactions listed above. We determined, based on information
received from the investors, including questionnaires and representations
contained in the purchase agreements, that each investor was either an
accredited investor or had such knowledge and experience in financial matters
such that he or she was capable of evaluating the merits and risks of the
investments. All recipients either received adequate information about us or had
access, through employment or other relationships, to such information. The
recipients of securities in each transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates and other instruments issued in such transactions.
Item 27. Exhibits
2.1** Merger Agreement dated March 19, 2001 between Above Average
Investments Ltd. and Quick-Med Technologies, Inc.
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
4.1.2** Share Purchase Agreement
5.1** Opinion of Foley & Lardner with respect
to the legality of the shares being registered
10.1** Quick-Med's MMP License Agreement
II-2
10.1.1** Amendment to Merger Agreement
10.2** Form of Quick-Med Stock Option Plan
10.3** Cooperative Research and Development Agreement with the US Army
Medical Research Institute of Chemical Defense
10.4** Financing Agreement with Euro Atlantic Capital Corporation
10.5** Consulting Agreement-Gregory Schultz
10.5.1** Consulting Agreement-Christopher T. Batich
10.5.2** Consulting Agreement-Bruce Mast
10.5.3** Consulting Agreement-William Toreki
10.6 Note issued to Michael Granito by Quick-Med
23.1.1 Consent of Cordovano & Harvey, P.C.
23.1.2 Consent Daszkal Bolton Manela Devlin & Co.
23.1.3 Consent Daszkal Bolton Manela Devlin & Co.
23.2** Consent of Foley & Lardner (included in Exhibit 5.1)
23.3.1** Consent of Michael R. Granito, Ph.D.
23.3.2** Consent of David S. Lerner
23.3.3** Consent of Paul G. Cerjan, Lt. Gen./Ret.
23.3.4** Consent of George E. Friel, Maj. Gen./Ret.
23.3.5** Consent of Gerald M. Olderman, Ph.D.
23.3.6** Consent of Gregory S. Schultz, Ph.D.
23.3.7** Consent of Michael D. Karsch
99.1** Escrow Agreement
99.2** Form of Reconfirmation Letter
99.3 Assignment of Patent for Wound Care
99.3.1 Assignment of Patent for Mustard Gas
99.3.2 Assignment of Patent for Anti-wrinkle cream
* Incorporated by reference to Form 10-SB, File No. 000-27545, filed
October 4, 1999.
** Previously filed.
Item 28. Undertakings
We undertake that we will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the bona fide offering.
II-3
3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
We undertake to provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as the underwriter requires to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kelowna, Province of British Columbia, Canada,
on February 11, 2002.
ABOVE AVERAGE INVESTMENTS, LTD.
/s/ Bob Hemmerling
----------------------------------------
Bob Hemmerling, Director
Signature Title Date
/s/ Bob Hemmerling Director February 11, 2002
- ---------------------------------
Bob Hemmerling,
/s/ Devinder Randhawa President and Director February 11, 2002
- ---------------------------------
Devinder Randhawa
II-5