SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act
August 18, 2005
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Date of Report
(Date of earliest event reported)
THE AUTOLINE GROUP, INC.
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(Exact name of registrant as specified in its charter)
Utah 000-49817 87-0671592
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
5063 North Riverpark Way
Provo, Utah 84604
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(Address of Principal Executive Offices)
(801) 319-2324
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(Registrant's Telephone Number)
5442 South 900 East #125
Salt Lake City, Utah 84117
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(Former Name or Former Address if changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the Registrant under any of
the following provisions (see general instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14-a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
(a) Effective as of August 18, 2005, the Registrant, ("Autoline," the
"Company," "we," "our," "us" and words of similar import); Autoline
Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of
Autoline ("Subsidiary"); and GeNOsys, Inc., a Nevada corporation ("GeNOsys");
executed an Agreement and Plan of Merger (the "Merger Agreement"), whereby
Subsidiary merged with and into GeNOsys with GeNOsys being the surviving
entity and becoming a wholly-owned subsidiary of ours; and whereby each one
(1) share of issued and outstanding common stock of GeNOsys (the "GeNOsys
Shares") were exchanged by the GeNOsys stockholders (the "GeNOsys
Stockholders") for one (1) share of our common stock, amounting to 40,000,000
shares in the aggregate, all "restricted securities" as defined in Rule 144
(the "Merger").
Our Board of Directors conditioned the completion of the Merger Agreement
on the execution and delivery of a Compromise and Settlement Agreement (the
"Settlement Agreement") by and among 1017975 Alberta Ltd., a corporation
incorporated under the laws of the Province of Alberta ("1017975"); the
shareholders of 1017975 (the "1017975 Shareholders"); John W. R. Miller
("Miller") and Christie M. Jones ("Jones"), both of whom were and are
currently directors and executive officers of GeNOsys, and GeNOsys, a copy of
which was attached to the initially filed Current Report and incorporated
herein by reference, and under which we are a third party beneficiary, along
with the execution and delivery of a Shareholder Consent to Proposed Merger
(the "Shareholder Consent") by each of the GeNOsys Stockholders, a copy of
which was also attached to the initially filed Current Report and incorporated
herein by reference. There were no dissenters to the Merger. See Item 9.01,
Exhibits A and B of Exhibit 2.1.
As a part of the execution and delivery of the Settlement Agreement,
Miller, Jones, Larry Kincade ("Kincade") and Richard Bayly ("Bayly")
executed and delivered a Technology Transfer Agreement (the "Technology
Transfer Agreement") that was also attached to the initially filed Current
Report and incorporated herein by reference and by which Miller, Jones,
Kincade and Bayly assigned all of their right, title and interest in the
technology (the "Technology") listed in the Technology Agreement to GeNOsys.
See Item 9.01, Exhibit C of Exhibit 2.1. Pursuant to the Settlement
Agreement, 1017975 and the 1017975 Shareholders also agreed that neither owned
nor had any right to acquire certain patents and other intellectual property
rights (the "Rights") described therein; that the 1017975 Shareholders would
be issued shares of common stock that were "restricted securities" of GeNOsys,
and then of our Company under the Merger, and that they would have "piggy-back
registration rights" on such shares of common stock; that all disputes
regarding the Rights were compromised and settled; and that each party to the
Settlement Agreement would indemnify and hold harmless the other parties with
respect to any claims arising out of any such disputes.
The combination of these entities was treated as a "reverse" purchase for
accounting purposes, with GeNOsys becoming our wholly-owned subsidiary on the
closing of the Merger Agreement.
The following are the principal terms of the Merger Agreement:
1. Subsidiary merged with and into GeNOsys, with GeNOsys being the
Surviving Corporation (as defined therein); the separate existence of
Subsidiary ceased.
2. Each one (1) GeNOsys Share was exchanged for one (1) share of our
common stock, amounting to 40,000,000 shares in the aggregate.
3. James P. Doolin ("Doolin"), our former President and director, in
consideration of the sum of $25,000 in cash that we had the 30 day option of
paying by the conveyance of the outstanding voting securities of our other
wholly-owned subsidiary, The Autoline Group 2, Inc. ("Autoline 2"), which was
engaged in the purchase and sale of automobiles, executed and delivered an
Indemnification Agreement regarding the payment and personal indemnification
of us and GeNOsys from and against any breach of warranty or false
representation made in the Merger Agreement and any and all past liabilities
of any type or nature whatsoever of ours existing immediately prior to the
closing, and which included but were not limited to our expenses related to
the negotiation and the closing of the Merger Agreement, and the compromise
and settlement of any amounts due and owing by us to Mr. Doolin for advances,
loans or services to or for the benefit of us or otherwise that were incurred
by us prior to closing. Effective September 12, 2005, our Board of Directors
elected to convey to Doolin the outstanding voting securities of Autoline 2,
in lieu of payment of the $25,000; at that date, the assets and operations of
Autoline 2 were nominal, and Doolin assumed all liabilities of Autoline 2.
As of the closing of the Merger Agreement, and including our currently
outstanding shares, there are or will be on issuance, 42,556,500 post-Merger
outstanding shares of our common stock.
A copy of the Merger Agreement, including all material exhibits
and related instruments, accompanied the initially filed Current Report,
which, by this reference, is incorporated herein; the foregoing summary is
modified in its entirety by such reference. See Item 9.01, Exhibit 2.1.
Item 2.01 Completion of Acquisition or Disposition of Assets.
(a) See Item 1.01 above.
(b) Pursuant to the Technology Transfer Agreement, certain intellectual
property rights (the "Technology Rights") to the technologies
described in the patents, patent applications and design
registration and design application described therein, were sold,
transferred and assigned to GeNOsys.
(c) The Technology Rights were sold, transferred and assigned by Miller,
Jones, Kincade and Bayly, all of whom were 1017975 Shareholders.
Following the closing of the Merger, Miller and Jones became
directors of our Company and the President and Secretary/Treasurer,
respectively, of our Company.
(d) The purchase price paid for the Technology Rights was $20.00, which
was paid by the issuance to Miller, Jones, Kincade and Bayly of a
total of 200,000 shares of the GeNOsys Shares, 75,000 shares each to
Miller and Jones and 25,000 shares each to Kincade and Bayly.
Item 3.02 Unregistered Sales of Equity Securities.
See Items 1.01 and 2.01 above.
Item 5.01 Changes in Control of Registrant.
See Items 1.01 and 2.01 above.
Pursuant to the Merger Agreement and by virtue of the percentage of our
common stock acquired under the Merger by the GeNOsys Stockholders, this
Merger is deemed to have involved a "change of control" of our Company.
The source of the consideration used by the GeNOsys Stockholders to
acquire their interests in our Company was the exchange of their respective
GeNOsys Shares as outlined above.
The primary basis of such "control" by the GeNOsys Stockholders is stock
ownership and/or executive officer or director positions.
To the knowledge of our management and based upon a review of the
stock ledger maintained by our transfer agent and registrar, the following
table sets forth the beneficial ownership of persons who owned more than five
percent of our common stock prior to the closing of the Merger, and the share
holdings of the then members of our management, such computations being based
upon the 2,556,500 shares of our common stock that were then outstanding:
Name Positions Held Shares Owned %
- ---- -------------- ------------- --
Steven Brand Stockholder 237,500 9.3%
885 E. Three Fountains Dr. #212
Salt Lake City, UT 84107
Elinore Doolin* Stockholder 235,000 9.2%
8439 South Sun Valley Dr.
Sandy, UT 84093
James P. Doolin President and 1,000,000 39.1%
5130 S. Fort Apache, #215-413 Director
Las Vegas, Nevada 89148
Cory Powers Stockholder 237,500 9.3%
864 Northcrest
Salt Lake City, UT 84103
Quad D LTD Partnership* Stockholder 240,000 9.4%
Sharlene Doolin
5 Pepperwood Drive
Sandy, UT 84092
Burke Staker Secretary/ 500,000 19.5%
10292 So. Dimple Dell Road Treasurer and
Sandy, UT 84092 Director
TOTAL 2,450,000 95.8%
* Sharlene Doolin is deemed a beneficial owner of these shares as
she is the general partner of Quad D LTD Partnership; and she is
the mother of James Doolin. She is also the daughter-in-law of
Elinore Doolin.
To the knowledge of our management and based upon a review of the stock
ledger maintained by our transfer agent and registrar, the following table
sets forth the beneficial ownership of persons who owned more than five
percent of our common stock following the closing of the Merger, and the share
holdings of the new members of our management, such computations being based
upon the 42,556,500 shares of our common stock that are or will be outstanding
following the closing of the Merger:
Name Positions Held Shares Owned %
- ---- -------------- ------------ ---
John W. R. Miller President and 25,093,592* 58.9%
5063 N. Riverpark Way Director
Provo, Utah 84604
Christie Melanie Woodruff Secretary/ 195,000* 0.46%
Jones Treasurer and
5063 N. Riverpark Way Director
Provo, Utah 84604
Clark M. Mower Director 8,357,864 19.6%
5509 Mountain View Drive
Mountain Green, Utah 84050
Smith Consulting Services, Inc. Stockholder 3,800,000 8.9%
455 East 500 So., #201
Salt Lake City, Utah 84111
Total: 37,446,456* 87.9%
* These amounts include 120,000 shares which are jointly owned by
John W. R. Miller and Christie Melanie Jones.
The following is additional information regarding GeNOsys, Inc., a Nevada
corporation ("GeNOsys").
ORGANIZATION AND BUSINESS DEVELOPMENT AND BUSINESS.
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Organization and Business Development.
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References to our "Company," "our," "we," "us" and words of similar
import refer to The Autoline Group, Inc., a Utah corporation (the "Registrant"
or "Autoline"), GeNOsys or the combined Autoline and its wholly-owned
subsidiary, GeNOsys, as applicable. Our only current operations are those of
GeNOsys that are and will be conducted through GeNOsys as our wholly-owned
subsidiary.
Autoline.
---------
For any historical information regarding Autoline under any caption that
is not included below, please see the Registrant's 10SB Registration
Statement, as amended, duly filed with the Securities and Exchange Commission
on May 14, 2002, and amended on September 10, 2002, November 19, 2002 and
December 9, 2002 (our 10SB"); the Registrant's 10-KSB Annual Report for the
year ended November 30, 2004, duly filed with the Securities and Exchange
Commission on February 24, 2005 (our "2004 10-KSB"); and the Registrant's 10-
QSB Quarterly Report for the quarter ended May 31, 2005, duly filed with the
Securities and Exchange Commission on July 14, 2005 (our "May 31 10-QSB")
which are incorporated herein by reference. See Item 9.01.
Effective September 12, 2005, we conveyed all of the securities of our
wholly-owned subsidiary, Autoline 2, through which we conducted all of our
automobile purchase and sale operations, as payment of our obligations under
our Indemnification Agreement with Doolin; with this conveyance, we ceased all
of these operations. Our only current operations are those intended to be
conducted by GeNOsys that are discussed below. See Item 1.01.
On September 19, 2005, we filed a Definitive Information Statement with
the Securities and Commission and mailed it to our shareholders on that date
respecting resolutions of our Board of Directors and persons owning a majority
of our outstanding voting securities that would amend our Articles of
Incorporation by changing our name to "GeNOsys, Inc.," to be effective on or
about October 10, 2005.
GeNOsys.
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The following contains "Forward-looking Statements." See the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION," below, for a
summary of these forward-looking statements that are incorporated in the
discussion below.
GeNOsys was organized under the laws of the State of Nevada on June 30,
2005.
On inception, John W. R. Miller, GeNOsys' President and our President and
a director, subscribed to purchase 24,873,592 shares for which he paid
$2,487.36; and Clark M. Mower, a director of GeNOsys and our Company,
subscribed to purchase 8,357,864 shares for which he paid $835.79.
Under the Settlement Agreement referenced in Item 1.01 above, the 1017975
Shareholders were issued an aggregate of 2,768,544 shares; and under the
Technology Transfer Agreement referenced in Item 1.01, an aggregate of 200,000
shares were issued, 75,000 shares each to John W. R. Miller and Christie
Woodruff Jones (the GeNOsys Secretary/Treasurer and our Secretary/Treasurer
and a director), and 25,000 shares each to Larry Kincade and Richard Bayly.
Pursuant to a Consulting Agreement executed prior to the incorporation of
GeNOsys on March 31, 2005, with Smith Consulting Services, Inc., a Utah
corporation ("SCS"), and adopted and ratified by the Board of Directors of
GeNOsys on July 14, 2005, SCS was issued 3,800,000 shares valued at $0.01 per
share for services rendered to GeNOsys.
For additional information regarding these share issuances, see the
caption "RECENT SALES OF UNREGISTERED SECURITIES," below.
Business.
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Autoline.
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For a discussion of Autoline's prior business operations, see Part I,
Item 1, of the 2004 10-KSB.
GeNOsys.
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We have not commenced planned principal operations. Our only business
conducted to the date hereof was the acquisition of our Technology Rights
pursuant to the Technology Transfer Agreement referenced in Item 1.01 above
and as specifically described under the heading "Patents, Trademarks,
Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts," of
this caption, below. The Technology Rights primarily cover the patent and
design applications of our nitric oxide gas generator and our medical gas
generator that have been filed in the United States and Canada.
GeNOsys (generated nitric oxide systems) is a medical research and
development company that intends to specialize in pharmaceutical, bio-
technical and medical gas generating systems. Nitric oxide gas will be the
primary gas for medical and non-medical uses that will be generated by us,
along with various combinations of beneficial medical gases suitable for the
treatment of human diseases.
Nitric oxide gas is produced and sold commercially by all major gas
companies as a specialty gas mixture and calibration gas. Nitrogen dioxide is
present in all nitric oxide gas currently produced; that limits the size of
the dose of nitric oxide gas that can be administered to humans and animals.
We have developed a proprietary compound formulation of tablets that will
be utilized to produce nitric oxide gas in our generators. The nitric oxide
gas is produced by in our desktop generators by heating this tablet compound
to 325 degrees Centigrade. We believe that with further formulation of our
proprietary compound, we can make nitric oxide gas with less toxic amounts of
nitrogen dioxide so that the nitric oxide gas that is produced by our tablet
formulation in our generators can be given in higher doses than are currently
allowed to be given in the treatment of human and animal diseases. Our
founders and 1017975 (see Item 1.01) were successful in producing nitric oxide
gas with smaller amounts of nitrogen dioxide in 2003 and early 2004. We
believe our process can produce nitric oxide gas in ample quantities for any
current or prospective use and at a substantially reduced price of all
currently available technologies. Our generators are also presently capable of
producing carbon dioxide and oxygen for various uses.
Our current generator model is capable of delivering sufficient
quantities of nitric oxide gas for individual laboratory desktop use; we will
require a smaller inexpensive version for one time use for the treatment of
Tuberculosis ("TB") as discussed below; and for the treatment of animals on a
farm or commercial enterprise, our generators would have to be larger. Dose
size is proportionate to the size of the generator, with tablets for human use
anticipated to be about 10 grams or about the size of vitamin C tablet. We
need to further develop our generator and our tablet formulation for high
production quantities and consistency. The tablets must have a known shelf
life and be available in various configurations and produce known
concentrations and known volumes of gas. Packaging will be another
developmental process that will need to be addressed.
We estimate that non-medical sales should be able to take place earlier
than United Stated Food and Drug Administration ("FDA") approval; however, the
development of our proprietary formulation tablet is the bottleneck to both
the non-medical market as well as the application for an Investigation New
Drug Number requirement to begin the FDA study. Selling our generator earlier
into the market as laboratory equipment will pave the way for sales of our
medical generator and proprietary tablets; but expected financial
contributions from non-medical generator and tablet sales will be too late to
help with the substantial costs of the FDA approval process for human medical
uses. The contributions will be able to support our manufacturing and set-up
costs and contribute to the overall profitability of our Company in due time,
but we believe that they will require there own financing too. We anticipate
that we can produce nitric oxide gas for the non-medical market as early as
the beginning of fiscal 2007.
All human medical uses of nitric oxide gas require FDA approval and the
approval of similar international agencies. That is a long and expensive
process, with no assurance that any such approval can ever be gained. We
believe that we can reduce regulatory time by "proving equivalence" to
existing, FDA approved, nitric oxide, compressed gas cylinders. We estimate
that we can enter this market in fiscal 2011, if we are successful in
"providing equivalence" in our testing, and subject to the availability of
required funding. See the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION," specifically, the heading "Plan of Operation," below, for
a discussion of our milestones and funding requirements.
Our desire is to target TB as the first disease to be attenuated through
the use of inhaled nitric oxide generators because of the definitive end point
of the disease, meaning that regulatory approval where a patient may die
without the treatment usually involves a shorter research and development time
line. We will probably require a small personal generator for the treatment
of TB, along with tablets formulated for this use.
Our objectives are to establish GeNOsys as the premier nitric oxide
generating pharmaceutical company and to:
* manufacture and sell medical grade nitric oxide generators and
tablets for use in the relief of human diseases;
* offer value added services such as custom generators adapted for
the treatment of various diseases;
* hire staff both currently identified and unidentified to implement
our business concept;
* complete studies that will verify the correct dosage and duration
of inhaled nitric oxide;
* use these studies to obtain an IND No. from the FDA;
* conduct conclusive studies of inhaled nitric oxide for the relief
of TB;
* gain FDA approval of our generating system for the relief of TB; to
reach a break-even point by the end of year five; and
* establish GeNOsys as the generator system that will be used off-
label for a host of other diseases.
We have identified certain key strategies that we feel are essential for
our success:
* the development of portable, economic, consistent generation of
pure nitric oxide gas for medical use;
* key financial management team members;
* technological advantage made possible through technical advancement
in disease control using nitric oxide;
* experienced, previously successful FDA regulatory management
members gives us a strategic advantage;
* financially successful nitric oxide applications; and
* general public awareness of other nitric oxide medical products.
Principal Products or Services and Their Markets.
-------------------------------------------------
Our principal products are our nitric oxide gas generator; our medical
gas generator; and our proprietary compound formulation for use in these
generators for producing nitric oxide gas. We believe that our Technology
Rights represent an improvement in existing methods of producing and
delivering nitric oxide gas. See the heading "Patents, Trademarks, Licenses,
Franchises, Concessions, Royalty Agreements or Labor Contracts," of this Item,
below. There are no current human medical uses for nitric oxide that do not
require prior FDA approval. See the heading "Need for any Governmental
Approval of Principal Products or Services," of this Item, below.
Our business model is built upon the sale of our gas generators to
hospitals, laboratories and other medical groups requiring our products, with
ongoing revenues being expected from the continued sale of our proprietary
nitric oxide producing tablets.
In order to further shorten the time line to cash flow and to lessen the
cash demand, laboratory sales of generating devices will commence as soon as
possible. Less stringent regulatory demands make this an attractive method of
infiltration into the research community. Traditionally, research and
laboratory markets are offered "safe harbor" status from patent infringement
and legal entanglements that are designed to impede entry by newcomers into
the market. As sales increase in the laboratory market, new uses for the gas
generator will be spawned as well as new applications and dose ranges for
other diseases that may be unknown at this time. This new knowledge can be
used to our advantage in customizing and updating generators for these new
markets.
The following are some of the projected uses of our Technology:
Laboratory and Testing.
-----------------------
There is a substantial market for use of nitric oxide gas for use in
experiments and various medical and non-medical trials and experiments, most
of which do not require the use of a medically approved nitric oxide gas,
which costs as much as $48,000 for a 2,500 PSI cylinder. We will target that
market as soon as we have completed planned additional development of our
generator and the further formulation of our proprietary compound, estimated
to be completed by late fiscal 2006 or early fiscal 2007.
TB.
---
There is an urgent need to tackle TB in the world, with one billion cases
expected by 2020 and 70 million moralities by 2020. Due to the high costs of
antibiotics and the resistance of the new stain of TB to these antibiotics, TB
has once again become a worldwide issue. Preliminary tests on human subjects
at the University of Alberta Medical Research Center indicated successful
treatment of this disease can be accomplished by the inhalation of 80 parts
per million nitric oxide gas for a period of 24 consecutive hours. In
discussions with the World Health Organization ("WHO"), the magnitude of
producing enough nitric oxide gas for this therapy requires that a generator
be used. The low cost and high volumes required make our nitric oxide
generator the ideal choice for this project.
Bovine TB.
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This disease is easily transmitted from cattle, elk, deer and other herd
animals to humans by means of sputum. This disease impacts the elk industry
because any known cases of the disease require that the entire herd be
terminated. In addition, herds that the infected animal originated from are
also terminated. This presents a financial hardship for elk ranchers in that
a dependable and economical cure has not been available. The generation of
nitric oxide and the opportunity for low cost eradication of the disease will
now be available through the use of our nitric oxide generators. The market
size of this opportunity is indicated by the fact that the entire elk
population in New Zealand has been diagnosed with bovine TB. As the approvals
for the equine applications are obtained, a parallel track will be taken to
gain approvals for bovine TB.
Pets and Small Animals.
-----------------------
The generation of nitric oxide for use in the animal pet industry is of
significant financial interest in that the market size is larger than the
large animal industry. It is growing at an unprecedented rate with the advent
of pet owners spending more on the health of their pets than on their own
personal health. Caesarian section on poodles is not uncommon. Human
medicine is reflected in the animal industry in every surgical procedure,
analgesic application and ethical medical practice.
Distribution Methods of the Products or Services.
-------------------------------------------------
In North America, the FDA restricts sales of drugs that do not meet with
their approval. Our strategy will be to ensure that our human medical
products are FDA approved. After FDA approval, we will choose an appropriate
distributor that has a complimentary line of products. The estimated time to
market is approximately five years. Existing sales of nitric oxide gas are
over 100 million per year at very high dosage costs. We expect to
significantly expand this market by reducing the per unit dosage costs. It is
of importance to note that third world countries follow the lead of the FDA on
matters concerning sale of pharmaceuticals in their countries. Regardless of
their own health protection agencies, the FDA must first approve the product;
then their own approval is ordinarily granted as a formality. Sales to third
world countries will be done in conjunction with the World Bank as well as the
WHO. Sales of the pharmaceuticals to China for potential use in the treatment
of SARS will be handled through a Canadian distribution company.
Market strategy is linked to the key users of our products during our
clinical trials. Early innovators will be sought out to use our products in
our clinical trials. The early innovators are the best word of mouth
advertisers in the medical community. We intend to secure the services of
several key individuals who may be specifically helpful in advancing our sales
and marketing opportunities.
Generally, we will have direct to customer contacts to gain interest in
our products by demonstration and use, and then, when productive, we will
engage a distributor to handle our marketing and distribution.
Status of any Publicly Announced New Product or Service.
--------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
--------------------------------
We are entering the medical device and therapy business. Although
competitive, there are certain protections allowed an FDA approved drug. When
approval is given, by default, other competitors are excluded because of the
high costs of attaining the approval as well as the futility of duplicating
the same drug application as investment in the same drug, would be
unprofitable duplication. Patents also inhibit competition. Additionally,
our anticipated low production cost nitric oxide gas may inhibit competitors
from entry into the market. We estimate that 10 grams of our tablet
formulation will produce one liter of one million parts per million gas.
Therapeutic doses of gas range from 1ppm to 300ppm, thus allowing a serious
volume advantage to us. Production costs of the chemical are expected to be a
fraction of current industry costs.
Regardless, we expect that all of our products under development will
face intense competition from existing and future products marketed by large
companies, including our generators and our proprietary compound formulation
of tablets that will be utilized to produce nitric oxide gas. For risks
associated with patent rights and other proprietary rights, see the Risk
Factor, "We Face Intense Competition in the Markets Targeted by Our Products.
Most All of Our Competitors Have Substantially Greater Resources than We Do,
and We Expect That All of Our Products Candidates under Development Will Face
Intense Competition from Existing or Future Drugs or Applications, Many of
Which May Rely on Nitric Oxide as a Primary Source," below, under the caption
"RISK FACTORS." Nitric oxide is sold commercially by all major gas companies
as a specialty gas mixture and calibration gas. These gases are not medical
use gases. The major competitors in this industry are Praxair (Union
Carbide); Airgas; Air Liquide (Liquid Air); AGA (Europe); and Mattheson Gas.
Extensive research is currently being done by numerous pharmaceutical
companies, colleges and universities on various treatments utilizing nitric
oxide gas. Over 20,000 articles have been published on various nitric oxide
experiments and another 5,000 are being published yearly. Findings of these
studies will only increase the current competition in this field for medical
uses of nitric oxide.
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
- ----------
The substances that make up our proprietary compound formulation of
tablets that will be utilized to produce nitric oxide gas in our generators
are common substances that are readily available from many sources.
Dependence on One or a Few Major Customers.
-------------------------------------------
It is not presently anticipated that we will be dependent upon one or a
few major customers for our success or for the sale of our products. We
believe the markets for nitric oxide gas are wide and varied and will continue
to grow. If our Technology is successful in producing low cost nitric oxide
gas for non-medical use and for use in the treatment of human diseases and
maladies as outlined above, we believe the use of nitric oxide gas will
increase substantially, following further testing of its potential benefits
for commercial use and in the treatment of humans.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
- ------------------------------
We have and have succeeded to the following rights with respect to our
products:
* Nitric Oxide Gas Generator, Canadian Patent Application, Serial
Number 2,413,834, Filed December 10, 2002;
* Medical Gas Generator, Canadian Design Registration, Patent No.
104685, Issued November 23, 2004;
* Nitric Oxide Gas Generator, U. S. Patent Application, Serial No.
10/733,805, Filed December 10, 2003;
* Method of Inducing Bleeding After Dental Surgery, Canadian Patent
Application, Serial No. 2,423,678, Filed March 27, 2003;
* Method of Inducing Bleeding After Dental Surgery, U. S. Patent No.
Application, Serial No. 10/811/778, Filed March 29, 2004; and
* Medical Gas Generator, U. S. Design Application, Serial No.
29/204,287, Filed April 27, 2004.
We have not filed any patent applications or other applications that may
protect our proprietary compound formulation of tablets that will be utilized
to produce nitric oxide gas in our generators; however, following further
development and formulation of this compound, we anticipate filing patent
applications in the United States, Canada and other foreign countries that
will cover the molecular composition of this compound and its planned use or
uses. We also anticipate further development and design of our generators.
See the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION,"
below, specifically, the heading "Plan of Operation."
For risks associated with patent rights and other proprietary rights, see
the Risk Factors, "If We Fail to Protect Our Technology, Our Ability to Pursue
the Development of Our Technologies and Products Would Be Negatively
Affected," "We Have Not Commissioned an Extensive Investigation Concerning Our
Freedom to Practice or the Validity or Enforceability of Our Technology or
Product Candidates, and We May Be Held to Infringe the Intellectual Property
Rights of Others" and "We May Be Involved in Lawsuits to Protect or Enforce
Our Patents, Which Could Be Expensive and Time Consuming," below, under the
caption "RISK FACTORS."
Need for any Governmental Approval of Principal Products or Services.
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One of our corporate strategies is produce nitric oxide gas for use in
the treatment of human diseases and maladies. That application will require
prior FDA approval, which is expected to take many years; which is never
assured; and which is very time consuming and costly. We do not presently have
the funds available for these purposes, and no assurance can be given that we
will be able to raise the required funding for this planned application of our
products.
The following is brief a summary of applicable governmental regulations
to which we may be subject in our planned business operations that related to
the use of our products in the treatment of humans.
Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the timing of the
commercialization of our generator and our nitric oxide tablet product. For
human use of either, both will require regulatory approval by governmental
agencies prior to commercialization. Various laws and regulations govern or
influence the research and development, manufacturing, safety, labeling,
storage, record keeping and marketing of our products. The lengthy process of
seeking these approvals, and the subsequent compliance with applicable laws
and regulations require the expenditure of substantial resources. Any failure
by us to obtain or maintain, or any delay in obtaining or maintaining,
regulatory approvals could materially adversely affect our business. Our
policy will be to conduct our research and development activities in
compliance with current FDA guidelines, and with comparable guidelines in
other countries where we may be conducting clinical trials or other
developmental activities.
Clinical testing, manufacturing and marketing of human pharmaceutical
products require prior approval from the FDA and comparable agencies in
foreign countries. The FDA has established mandatory procedures and safety and
efficacy standards that apply to the testing, manufacture and marketing of
such products in the United States. In the United States, these procedures
include pre-clinical studies, the filing of an Investigational New Drug
Application ("IND") or equivalent, human clinical trials and approval of a New
Drug Application ("NDA"). The results of pre-clinical testing, which include
laboratory evaluation of product chemistry and animal studies to assess the
potential safety and efficacy of the product and its formulations, must be
submitted to the FDA as part of an IND that must be reviewed before clinical
testing can begin. Clinical trials generally involve a three-phase process:
* Phase I trials are conducted in volunteers or patients to
determine the early side effect profile and, perhaps, the pattern
of drug absorption, distribution and metabolism;
* Phase II trials are conducted in groups of patients with a
specific disease in order to determine appropriate dosages and
dose regimens, expand evidence of the safety profile and, perhaps,
determine preliminary efficacy; and
* Phase III large scale, comparative trials are conducted on
patients with a target disease in order to generate enough data to
provide the statistical proof of efficacy and safety required by
national regulatory agencies.
The results of the preclinical and clinical testing are then submitted to
the FDA in the form of an NDA for approval to commence commercial sales. The
FDA may, in responding to an NDA, grant marketing approval, request additional
information or deny the approval if it determines that the NDA does not
provide an adequate basis for approval. Among the conditions for an NDA
approval is the requirement that the prospective manufacturer's quality
control and manufacturing procedures conform on an ongoing basis with current
Good Manufacturing Practices ("GMP"). In complying with GMP, we must continue
to expend time, money and effort in the areas of production and quality
control to ensure full compliance or engage the services of outside
contractors who are well versed in compliance with these requirements.
Following approval of the NDA, we are subject to periodic inspections by the
FDA. Any determination by the FDA of manufacturing deficiencies could
materially adversely affect our business.
It is not presently anticipated that we will be manufacturing our
generator or our nitric oxide tablet; we intend to develop our products
through testing and then to contract to manufacture, sale or license those
products for manufacture and sale by others.
European countries generally follow the same procedures. The European
Union has established a unified filing system administered by the Committee
for Proprietary Medicinal Products ("CPMP") designed to reduce the
administrative burden of processing applications for pharmaceutical products
derived from new technologies. Following CPMP review and approval, marketing
applications are submitted to member countries for final approval and pricing
approval, as appropriate. In addition to obtaining regulatory approval of
products, it is generally necessary to obtain regulatory approval of the
facility in which the product will be manufactured. The approval process for
medical devices in Europe is similar but is administered by private
certification organizations known as Notified Bodies, which are accredited by
each member state of the European Union. The receipt of regulatory approvals
often takes a number of years, involves the expenditure of substantial
resources and depends on a number of factors, including the severity of the
disease in question, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials. On occasion, regulatory
authorities may require larger or additional studies, leading to unanticipated
delay or expense. There can be no assurance that any approval will be granted
and, even if granted, such approval may be withdrawn if compliance with
regulatory standards is not maintained. In addition, the regulatory approval
processes for products in the U.S., European countries and other countries
around the world are undergoing or may undergo changes, and we cannot predict
what effect any changes in the regulatory approval process may have on our
business.
In addition to the foregoing, our present and future business may be
subject to various laws and regulations relating to safe working conditions,
clinical, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents,
used in connection with our research, as well as national restrictions on
technology transfer, and import, export and customs regulations and similar
laws and regulations in foreign countries.
Effect of Existing or Probable Governmental Regulations on
Business.
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The following regulations are applicable to us:
Sarbanes-Oxley Act.
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On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide
variety of new regulatory requirements on publicly-held companies and their
insiders. Many of these requirements will affect us. For example:
* Our chief executive officer and chief financial officer must now
certify the accuracy of all of our periodic reports that contain
financial statements;
* Our periodic reports must disclose our conclusions about the
effectiveness of our disclosure controls and procedures; and
* We may not make any loan to any director or executive officer and
we may not materially modify any existing loans.
The Sarbanes-Oxley Act has required us to review our current procedures
and policies to determine whether they comply with the Sarbanes-Oxley Act and
the new regulations promulgated thereunder. We will continue to monitor our
compliance with all future regulations that are adopted under the Sarbanes-
Oxley Act and will take whatever actions are necessary to ensure that we are
in compliance.
Penny Stock.
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Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:
* with a price of less than five dollars per share;
* that are not traded on a "recognized" national exchange;
* whose prices are not quoted on the NASDAQ automated quotation
system; or
* in issuers with net tangible assets less than $2,000,000, if the
issuer has been in continuous operation for at least three years,
or $5,000,000, if in continuous operation for less than three
years, or with average revenues of less than $6,000,000 for the
last three years.
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and
Exchange Commission require broker/dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the
document before making any transaction in a penny stock for the investor's
account. You are urged to obtain and read this disclosure carefully before
purchasing any of our shares.
Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:
* get information about the investor's financial situation,
investment experience and investment goals;
* reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor and that the
investor can evaluate the risks of penny stock transactions;
* provide the investor with a written statement setting forth the
basis on which the broker/dealer made his or her determination;
and
* receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investors'
financial situation, investment experience and investment goals.
Compliance with these requirements may make it harder for our
stockholders to resell their shares.
Reporting Obligations.
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Section 14(a) of the Exchange Act requires all companies with securities
registered pursuant to Section 12(g) of the Exchange Act to comply with the
rules and regulations of the Securities and Exchange Commission
regarding proxy solicitations, as outlined in Regulation 14A. Matters
submitted to stockholders of our Company at a special or annual meeting
thereof or pursuant to a written consent will require our Company to provide
our stockholders with the information outlined in Schedules 14A or 14C of
Regulation 14; preliminary copies of this information must be submitted to the
Securities and Exchange Commission at least 10 days prior to the date that
definitive copies of this information are forwarded to our stockholders.
We are also required to file annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB with the Securities Exchange Commission on a regular
basis, and will be required to timely disclose certain material
events (e.g., changes in corporate control; acquisitions or dispositions of a
significant amount of assets other than in the ordinary course of business;
and bankruptcy) in a current report on Form 8-K.
Small Business Issuer.
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The integrated disclosure system for small business issuers adopted by
the Securities and Exchange Commission in Release No. 34-30968 and effective
as of August 13, 1992, substantially modified the information and financial
requirements of a "Small Business Issuer," defined to be an issuer that has
revenues of less than $25,000,000; is a U.S. or Canadian issuer; is not an
investment company; and if a majority-owned subsidiary, the parent is also a
small business issuer; provided, however, an entity is not a small business
issuer if it has a public float (the aggregate market value of the issuer's
outstanding securities held by non-affiliates) of $25,000,000 or
more. We are deemed to be a "small business issuer."
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc. ("NASAA") have
expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets.
Research and Development.
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We have not commenced planned principal operations. The development of
our business plan and our Plan of Operation will require substantial
expenditures for research and development of our products, including our
generator and our proprietary tablet formulation for production of nitric
oxide gas. See the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION," below, specifically, the heading "Plan of Operation." It is
estimated that our founders and 1017975 spent approximately $900,000 in
research and development of our Technology that we acquired under the
Technology Transfer Agreement. See Item 1.01.
Cost and Effects of Compliance with Environmental Laws.
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Neither we nor GeNOsys anticipate any material expense for compliance
with environmental laws in connection with our planned or contemplated
business operations as our Plan of Operations details that we will be using
contractors well versed in dealing with the applicable hazzards associated
with producing and packaging nitric oxide gas and other pharmaceuticals. See
the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION,"
specifically the heading "Plan of Operation," below.
Number of Employees.
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We do not have any employees and will consider our employment needs as
business developments require; however, we anticipate filling most of our
needs for services through contract organizations and outside agreements with
suppliers of services in the industries of our planned business operations as
may be required.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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Forward-looking Statement.
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Statements made in this Form 8-K Current Report which are not purely
historical are forward-looking statements with respect to our goals, plan
objectives, intentions, expectations, financial condition, results of
operations, future performance and business, including, without limitation,
(i) our ability to raise capital, and (ii) statements preceded by, followed by
or that include the words "may", "would", "could", "should", "expects",
"projects", "anticipates", "believes", "estimates", "plans", "intends",
"targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our Company's control) that could
cause actual results to differ materially from those set forth in the
forward-looking statements, including the following, general economic or
industry conditions, nationally and/or in the communities in which we conduct
business, changes in the interest rate environment, legislation or regulatory
requirements, conditions of the securities markets, our ability to raise
capital, changes in accounting principles, policies or guidelines, financial
or political instability, acts of war or terrorism, other economic,
competitive, governmental, regulatory and technical factors affecting our
operations, products, services and prices.
Accordingly, results actually achieved may differ materially from
expected results in these statements. Forward-looking statements speak only
as of the date they are made. We do not undertake, and specifically
disclaims, any obligation to update any forward-looking statements to reflect
events or circumstances occurring after the date of such statements.
Plan of Operation.
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In December, 2003, our founders were successful in producing a portable,
medical gas generator. We were able to produce oxygen, carbon dioxide and
nitric oxide gas. The following year, 2004, improvements and simplifications
were made in order to produce nitric oxide. Preliminary safety tests on
animals were conducted and the results were eminently successful. The thrust
to produce nitric oxide will be the main focus for the generator in the
following phases. Each phase coincides with a specific milestone, cost and
development process.
Phase 1: In the first 12 months, we intend to contract with a
pharmaceutical formulation development laboratory, (IriSys, Inc. is presently
anticipated to be that laboratory) to improve the formulation and deliver the
first nitric oxide generating tablets that will be produced under the FDA,
Good Laboratory Practices, guidelines. Generators capable of using these
tablets will also be manufactured by contractors, (Paradigm Group is presently
anticipated to be that contractor) under the FDA, Good Manufacturing
Practices, guidelines in preparation for entry into the commercial laboratory
market as well as use for feasibility studies and preliminary animal safety
and efficacy trials. These trials will also be contracted (Cato Venture Group
["Cato"]) is presently anticipated to be that company) and will be conducted
within FDA and overseas requirement guidelines, in order to determine
acceptable dose ranges for treatment of TB. This will be done in preparation
for application to the FDA for an Investigational New Drug Number ("IND No.").
Protection of proprietary, intellectual property, with molecular patent
applications, will also be filed. Estimated time and cost for Phase I is not
to exceed one year and $2,270,000.
Phase II: In the following 12 months, we will prepare and submit IND No.
application to the FDA. We will then begin human clinical trials for TB with
our newly designed generators and formulated tablets. Coinciding with the
clinical trials, the initial production improvements and Canadian Electrical
Safety Association and Underwriters Laboratories Electrical Safety USA
approvals for the generator will also be completed in order to facilitate
multiple unit production. We will then contract an FDA approved, manufacturer
to build the first production runs of commercial laboratory generators. These
will be used for laboratory sales as well as for clinical trials. It is of
strategic importance that the same generators be used for the clinical trials
as will be commercially available for the medical market in order to have the
device approved at the same time as the therapy. We will initiate and train a
limited number of sales and service personnel in order to facilitate
transition to a distributor. At this time, we will hire a CEO and the
associated staff and lease appropriate office space. Estimated time and cost
for Phase II is also one year and $2,500,000.
Phase III: Complete contracted clinical trials for TB and submit to FDA
for approval. Estimated time and cost for clinical trials is three to five
years and between $6,000,000 to $7,000,000. We will continue laboratory
generator sales and examine non-human spin-off opportunities for use of our
product.
Phase IV: Obtain FDA approval of generators for attenuation of TB.
Overall time and cost to FDA approval is estimated to be six to eight years
and $12,000,000. At this time, we will expand staff and facilities consistent
with an orderly transition; train clinicians and distributors; manufacture and
sell tablets and generators for TB; minimize costs of manufacturing and
increase profits; and examine off-label uses for generators.
These cost estimates were made by John W. R. Miller, our President, who
has approximately 25 years of experience in the medical gas industry.
Our plan of operation for the next 12 months is to complete the
preparation and submission of the U.S. FDA Investigational New Drug
Application ("IND") to support the generation of Nitric Oxide for use in
treatment of human diseases.
A Gap Analysis for the U.S. IND, meaning a Non-clinical Assessment, a
Clinical Assessment and Chemistry, Manufacturing and Controls Assessment
("CMC"), preparation for attendance at a Pre-IND meeting with the FDA, and
the U.S. IND, with the aid and assistance of Cato and IriSys.
A Clinical Program and Study Design (s), meaning clinical experts will be
utilized for assessment as well as attendance at a Pre-IND meeting, (if
requested, with the aid and assistance of Cato).
Our ability to carry out our plan depends entirely upon our ability to
obtain additional substantial equity, debt financing or royalties. We can not
assure you that we will receive this financing. If we do not receive such
funding, we will not be able to proceed with our intended business plans.
Funding.
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During the fourth quarter of 2005, we will conduct a private offering of
approximately 3,833,334 shares of our common stock that are "restricted
securities" as defined in Rule 144 to "accredited investors" only pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
at an offering price of $0.60 per share to raise approximately $2,300,000, to
fund the commencement of our Plan of Operation. Substantial additional funds
will still be required if we are to reach our goals that are outlined above,
even if this planned offering is a success. We currently have no arrangements
or understandings that will assure that we can successfully complete this
offering, and no assurance can be given that we will be able to do so.
Without this funding, we cannot commence our planned business operations.
Assumptions.
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Our projections are based upon the following assumptions, among others:
* a slow-growth economy, without a major world recession;
* that there are no unforeseen changes in technology that make our
products obsolete;
* access to substantial equity capital and financing sufficient;
* FDA approval of our TB generator;
* that WHO will remain positive in its support for eradication of TB;
and
* that our FDA approved device for TB will be sold and prescribed
off-label for numerous diseases.
RISK FACTORS.
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We are subject to the risks inherent in any newly formed,
undercapitalized and developmental stage company, including, among other risk
factors, the following:
We Have Not Had Any Operations; We Require Substantial Funding to Undertake
Our Plan of Operation; and We May Never Generate Revenues Or, If We Are Able
to Generate Revenues, Achieve Profitability.
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We are focused on product development, and we have not generated any
revenues to date utilizing our Technology. The process of developing our
products requires significant clinical, development and laboratory testing and
clinical trials. In addition, commercialization of our products will require
that we obtain necessary regulatory approvals and establish sales and
marketing capabilities, either through internal hiring or through contractual
relationships with others. We expect to incur substantial losses for the
foreseeable future as a result of anticipated increases in our research and
development costs, including costs associated with conducting preclinical
testing and clinical trials and regulatory compliance activities.
Our ability to generate revenues and achieve profitability will depend on
numerous factors, including success in:
* developing and testing our products;
* receiving regulatory approvals;
* commercializing our products; and
* establishing a favorable competitive position.
Many of these factors will depend on circumstances beyond our control.
We cannot assure you that we will ever bring any product to market or, if we
are successful in doing so, that we will ever become profitable.
Our Products Are Based on a Technology That Could Ultimately Prove
Ineffective.
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Our products are to be created using our proprietary Technology. We have
not yet conducted laboratory or animal studies to establish whether the
Technology is safe and effective for all of our intended uses. Ultimately,
our research currently indicating that our Technology possesses beneficial
properties, may prove to be incorrect. In this case, our products made from
our Technology may not differ substantially from existing treatment methods
and may in fact be inferior to them. If these products are substantially
identical or inferior to treatment methods already available, the market for
our products would be reduced or eliminated.
Our Products Are at an Early Stage of Development. If We Are Unable to
Develop and Commercialize Our Products Successfully, We May Never Generate
Revenues Or, If We Are Able to Generate Revenues, Achieve Profitability.
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We have not commercialized any of our products or recognized any revenue
from product sales utilizing our Technology. All of our proposed products
using our Technology are in early stages of development. We must conduct
significant additional research and development activities before we will be
able to commercialize any products utilizing our Technology. We must
successfully complete adequate and well-controlled studies designed to
demonstrate the safety and efficacy of the product candidates and obtain
regulatory approval before we are able to commercialize these product
candidates for many uses. We may not be able to fund all of these programs to
completion or provide the support necessary to perform the clinical trials,
seek regulatory approvals or market any approved products. Even if we succeed
in developing and commercializing one or more of our products utilizing our
Technology, we may never generate sufficient or sustainable revenue to enable
us to be profitable.
We Face Intense Competition in the Markets Targeted by Our Products. Most All
of Our Competitors Have Substantially Greater Resources than We Do, and We
Expect That All of Our Products Candidates under Development Will Face Intense
Competition from Existing or Future Drugs or Applications, Many of Which May
Rely on Nitric Oxide as a Primary Source.
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We have not yet devoted substantial research efforts or capital to the
development of our Technology and our products. However, even if our future
efforts are successful in this regard, we expect that all of our products
under development will face intense competition from existing and future
products marketed by large companies. The markets for treatments for TB and
other diseases are well developed and populated with established drugs
marketed by large pharmaceutical, biotechnology and generic drug companies.
Each of these companies has significantly greater financial and other
resources than we do. If we obtain regulatory approval to market one or more
of our products, we will compete with these established drugs and will need to
show that our products have safety or efficacy advantages in order to take
market share and be successful, for many uses.
If We Lose Our Key Personnel or Are Unable to Hire Additional Personnel, We
Will Have Trouble Growing Our Business.
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We will depend to a large extent on the abilities of our President, John
W. R. Miller. The loss of Mr. Miller or our inability to attract or retain
other qualified employees could seriously impair our results of operations and
financial condition.
Our future success depends on our ability to attract, retain and motivate
highly skilled technical, marketing, management, accounting and administrative
personnel. Competition for qualified personnel is intense. As a result, we
may be unable to attract, assimilate or retain qualified personnel. We may
also be unable to retain the employees that we currently employ or to attract
additional technical personnel. The failure to retain and attract the
necessary personnel could seriously harm our business, financial condition and
results of operations.
If We Fail to Protect Our Technology, Our Ability to Pursue the Development of
Our Technologies and Products Would Be Negatively Affected.
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Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our Technology and products. If we do not
adequately protect our intellectual property, competitors may be able to use
our Technology to produce and market nitric oxide in direct competition with
us and erode our competitive advantage. Some foreign countries lack rules and
methods for defending intellectual property rights and do not protect
proprietary rights to the same extent as the United States. Many companies
have had difficulty protecting their proprietary rights in these foreign
countries. We may not be able to prevent misappropriation of our proprietary
rights. In addition, patent positions can be uncertain and involve complex
legal and factual questions. We can protect our proprietary rights from
unauthorized use by third parties only to the extent that our proprietary
technologies are covered by valid and enforceable patents or are effectively
maintained as trade secrets. Others may challenge our patents, or our patent
applications may not result in issued patents. Moreover, any patents issued
to us may not provide us with meaningful protection, or others may challenge,
circumvent or narrow our patents. Third parties may also independently
develop products similar to our products, duplicate our unpatented products or
design around any patents on products we develop. Additionally, extensive
time is required for development, testing and regulatory review of a potential
product. While extensions of patent term due to regulatory delays may be
available, it is possible that, before any of our product candidates can be
commercialized, any related patent, even with an extension, may expire or
remain in force for only a short period following commercialization, thereby
reducing any advantages of the patent.
In addition to patents, we will rely on a combination of trade secrets,
confidentiality, nondisclosure and other contractual provisions, and security
measures to protect our confidential and proprietary information. These
measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties
could use our technology, and we could lose any competitive advantage we may
have. In addition, others may independently develop similar proprietary
information or techniques or otherwise gain access to our trade secrets, which
could impair any competitive advantage we may have.
We Have Not Commissioned an Extensive Investigation Concerning Our Freedom to
Practice or the Validity or Enforceability of Our Technology or Product
Candidates, and We May Be Held to Infringe the Intellectual Property Rights of
Others.
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Our ability to freely practice our products may be dependent upon the
duration and scope of other patents held by third parties. Our patent, prior
art and infringement investigations have been conducted primarily by us.
Although we have consulted with our patent counsel in connection with our
Technology investigations, our patent counsel has not undertaken an extensive
independent analysis to determine whether our Technology or products infringe
upon any issued patents or whether our patent applications relating to the
Technology could be invalidated or rendered unenforceable for any reason or
could be subject to interference proceedings. There may be patents or patent
applications of which we are unaware, and avoiding patent infringement may be
difficult. We may inadvertently infringe third-party patents. Third-party
patents may impair or block our ability to conduct our business. There are no
unresolved communications, allegations, complaints or threats of litigation
related to the possibility that we might infringe patents held by others.
Claims may be asserted against us that our products or Technology
infringes patents or other intellectual property owned by others. We may be
exposed to future litigation by third parties based on claims that our
products or activities infringe the intellectual property rights of others.
In the event of litigation, any claims may not be resolved in our favor. Any
litigation or claims against us, whether or not valid, may result in
substantial costs and may result in an award of damages, lost profits,
attorneys fees, and tripling of those damages in the event that a court finds
an infringement to have been willful. A lawsuit could also place a
significant strain on our financial resources, divert the attention of
management and harm our reputation. In addition, intellectual property
litigation or claims could force us to do one or more of the following:
* cease making, selling, offering or using any products that
infringe a third party's intellectual property through an
injunction;
* obtain a license or an assignment from the holder of the infringed
intellectual property right, which license or assignment may be
costly or may not be available on reasonable terms, if at all;
* redesign our products, which would be costly and time-consuming,
and may not be possible.
We May Be Involved in Lawsuits to Protect or Enforce Our Patents, Which Could
Be Expensive and Time Consuming.
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Competitors may infringe our patents, if and when filed and granted, and
we may file infringement claims to counter infringement or unauthorized use.
This can be expensive, particularly for a company of our size, and
time-consuming. In addition, in an infringement proceeding, a court may
decide that a patent of ours is not valid or is unenforceable, or may refuse
to stop the other party from using the technology at issue on the grounds that
our patents do not cover our Technology. An adverse determination of any
litigation or defense proceedings could put one or more of our patents at risk
of being invalidated or interpreted narrowly.
Also, a third party may assert that our patents are invalid and/or
unenforceable. There are no unresolved communications, allegations,
complaints or threats of litigation related to the possibility that our patent
applications are invalid or unenforceable. Any litigation or claims against
us, whether or not merited, may result in substantial costs, place a
significant strain on our financial resources, divert the attention of
management and harm our reputation. An adverse decision in a litigation could
result in inadequate protection for our products and/or substantially reduce
our ability to effectuate our business plan.
Interference proceedings brought before the U.S. Patent and Trademark
Office may be necessary to determine priority of invention with respect to our
patents or patent applications. During an interference proceeding, it may be
determined that we do not have priority of invention for one or more aspects
in our patents or patent applications and could result in the invalidation in
part or whole of a patent or could put a patent application at risk of not
issuing. Even if successful, an interference may result in substantial costs
and distraction to our management.
Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation or interference proceedings,
there is a risk that some of our confidential information could be compromised
by disclosure. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments. If
investors perceive these results to be negative, the price of our common stock
in any market that may develop for it could be adversely affected.
We Intend to Rely on Third Parties to Manufacture the Compounds Used in One or
More of Our Products. If These Third Parties Do Not Manufacture Our Product
in Sufficient Quantities and at an Acceptable Cost, Development and
Commercialization of Our Product Candidates Could Be Delayed, Prevented or
Impaired.
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We have no manufacturing facilities, and we have no experience in the
clinical or commercial-scale manufacture of drugs or in designing drug
manufacturing processes. We expect that certain specialized manufacturers
will provide us with pharmaceutical compounds. We do not have any short-term
or long-term manufacturing agreements with any of these manufacturers. If we
fail to contract for manufacturing on acceptable terms or if third-party
manufacturers do not perform as we expect, our development programs could be
materially adversely affected.
We intend to rely on third parties to manufacture some or all of our
products that reach commercialization. We believe that there are a variety of
manufacturers that we may be able to retain to produce these products.
However, once we retain a manufacturing source, if our manufacturers do not
perform in a satisfactory manner, we may not be able to develop or
commercialize potential products as planned.
Failure by Our Third-party Manufacturers to Comply with the Regulatory
Guidelines Set Forth by the FDA with Respect to Our Products Could Delay or
Prevent the Commercialization of Our Products.
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Our reliance on third-party manufacturers will expose us to the following
additional risks, any of which could delay or prevent the completion of our
clinical trials, the approval of our products by the FDA for some uses or
other regulatory agencies or the commercialization of our products, result in
higher costs or deprive us of potential product revenues:
* Manufacturers are obligated to operate in accordance with
FDA-mandated current good manufacturing practice ("cGMP")
requirements. A failure of any of our third-party manufacturers to
establish and follow cGMP requirements and to document their
adherence to such practices may lead to significant delays in the
availability of our products for commercial distribution.
* Replacing our third-party manufacturers or contracting with
additional manufacturers may require re-validation of the
manufacturing processes and procedures in accordance with cGMP and
compliance with supplemental approval requirements. Any such
necessary re-validation and supplemental approvals may be costly
and time-consuming.
* Drug manufacturers are subject to ongoing periodic unannounced
inspections by the FDA and corresponding state and foreign
agencies to ensure strict compliance with cGMP requirements and
other requirements under federal drug laws, other government
regulations and corresponding foreign standards. If our
third-party manufacturers or we fail to comply with applicable
regulations, sanctions could be imposed on us, including fines,
injunctions, civil penalties, seizures or recalls of product,
operating restrictions and criminal prosecutions.
Our Products May Not Be Accepted by the Market.
- -----------------------------------------------
Our products may not gain market acceptance among physicians, patients,
healthcare payors and the medical community. The degree of market acceptance
of any pharmaceutical product that we develop will depend on a number of
factors, including:
* cost-effectiveness;
* the safety and effectiveness of our products, including any
potential side effects, as compared to alternative products or
treatment methods;
* the timing of market entry as compared to competitive products;
* the rate of adoption of our products by doctors and nurses;
* product labeling or product insert required by the FDA for each of
our products;
* reimbursement policies of government and third-party payors;
* effectiveness of our sales, marketing and distribution
capabilities and the effectiveness of such capabilities of our
collaborative partners, if any; and
* unfavorable publicity concerning our products or any similar
products.
Our products, if successfully developed, will compete with a number of
products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may
also compete with new products currently under development by others.
Physicians, patients, third-party payors and the medical community may not
accept and utilize any of our product candidates. Physicians may not be
inclined to prescribe the treatment methods created utilizing our Technology
unless our products bring substantial and demonstrable advantages over other
products currently marketed for the same indications. If our products do not
achieve market acceptance, we will not be able to generate significant
revenues or become profitable.
If We Fail to Establish Marketing, Sales and Distribution Capabilities, or
Fail to Enter into Arrangements with Third Parties, We Will Not Be Able to
Create a Market for Our Product Candidates.
- -------------------------------------------
Our strategy with our products is to control, directly or through
contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not
have any sales, marketing or distribution capabilities. In order to generate
sales of any product candidates, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting
distribution capabilities or make arrangements with third parties to perform
these services for us. The acquisition or development of a sales and
distribution infrastructure would require substantial resources, which may
divert the attention of our management and key personnel and defer our product
development efforts. To the extent that we enter into marketing and sales
arrangements with other companies, our revenues will depend on the efforts of
others. These efforts may not be successful. If we fail to develop sales,
marketing and distribution channels, or enter into arrangements with third
parties, we will experience delays in product sales and incur increased costs.
In the Event That We Are Successful in Bringing Any Products to Market, Our
Revenues May Be Adversely Affected If We Fail to Obtain Acceptable Prices or
Adequate Reimbursement for Our Products from Third-party Payors.
- ----------------------------------------------------------------
Our ability to commercialize pharmaceutical products successfully may
depend in part on the availability of reimbursement for our products from:
* government and health administration authorities;
* private health insurers; and
* other third party payors, including Medicare.
We cannot predict the availability of reimbursement for health care
products. Third-party payors, including Medicare, are challenging the prices
charged for medical products and services. Government and other third-party
payors increasingly are limiting both coverage and the level of reimbursement
for new drugs. Third-party insurance coverage may not be available to
patients for any of our products.
The continuing efforts of government and third-party payors to contain or
reduce the costs of health care may limit our commercial opportunity. If
government and other third-party payors do not provide adequate coverage and
reimbursement for any product we bring to market, doctors may not prescribe
them or patients may ask to have their physicians prescribe competing drugs
with more favorable reimbursement. In some foreign markets, pricing and
profitability of prescription pharmaceuticals are subject to government
control. In the United States, we expect that there will continue to be
federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products. Cost control initiatives
could decrease the price that we receive for any products in the future.
Further, cost control initiatives could impair our ability to commercialize
our products and our ability to earn revenues from this commercialization.
We Could Be Forced to Pay Substantial Damage Awards If Product Liability
Claims That May Be Brought Against Us Are Successful.
- -----------------------------------------------------
We may be exposed to liability claims and financial losses resulting from
the use or sale of our products. We may not be able to maintain insurance
coverage at a reasonable cost or in sufficient amounts or scope to protect us
against losses.
DESCRIPTION OF PROPERTY.
- ------------------------
Our executive offices are located at 5063 North Riverpark Way, Provo,
Utah 84604. We lease approximately 3,000 square feet at a lease price of
$1,600 for a one year term that commenced on December 15, 2004.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ---------------------------------------------------------------
The following table sets forth certain information as of August 18, 2005,
regarding beneficial ownership of the shares of our common stock by (i) each
person known by us to own more than five percent of our outstanding common
stock, (ii) each of our executive officers and directors, and (iii) all of our
executive officers and directors as a group. Except as noted, each person has
sole voting and sole investment or dispositive power with respect to the
shares shown. The information presented is based upon 42,556,500 shares of
our common stock being outstanding on such date.
Name Positions Held Shares Owned %
- ---- -------------- ------------ ---
John W. R. Miller President and 25,093,592* 58.9%
5063 N. Riverpark Way Director
Provo, Utah 84604
Christie Melanie Woodruff Secretary/ 195,000* 0.46%
Jones Treasurer and
5063 N. Riverpark Way Director
Provo, Utah 84604
Clark M. Mower Director 8,357,864 19.6%
5509 Mountain View Drive
Mountain Green, Utah 84050
Smith Consulting Services, Inc. Stockholder 3,800,000 8.9%
455 East 500 So., #201
Salt Lake City, Utah 84111
Total: 37,446,456* 87.9%
Directors and Officers (3) 33,646,456* 79.1%
* These amounts include 120,000 shares which are jointly owned by
John W. R. Miller and Christie Melanie Woodruff Jones.
Contractual Arrangements Regarding Changes in Control.
- ------------------------------------------------------
Except as indicated above or in Item 1.01, there are no arrangements or
understandings that may result in a change in control of our Company.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
- ----------------------------------------------------------------
Identity of Directors and Executive Officers.
---------------------------------------------
See Item 5.02 below.
Family Relationships.
- ---------------------
There are no family relationship by or between any of the directors or
executive officers.
Pending Legal Proceedings.
- --------------------------
To the knowledge of our management, no director or executive officer is
party to any action in which any has an interest adverse to us.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
To the knowledge of our management and during the past ten (10) years, no
present or former director, person nominated to become a director, executive
officer, promoter or control person of our Company:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed,
whether at the time of such filing or two years prior
thereto;
(2) Was convicted in a criminal proceeding or named the subject
of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
him from or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or
in connection with any violation of federal or
state securities laws or federal commodities
laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the
judgment in such civil action or finding by the Securities
and Exchange Commission has not been subsequently reversed,
suspended, or vacated; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
EXECUTIVE COMPENSATION.
- -----------------------
For information on us and our directors and executive officers prior to
the closing of the Merger with GeNOsys, please see our 2004 10-KSB that is
incorporated by reference in Item 9.01.
Compensation.
-------------
The following table sets forth the aggregate compensation paid by GeNOsys
for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Inception to Other Rest- Under- LTIP Other
Name and Period Salary Bonus Annual ricte dlying Pay- Comp-
Position Ended ($) ($) Compen- Stock Options outs ensat'n
- ---------------------------------------------------------------------
John W.R. 06/30/05 0 0 0 0 0 0 0
Miller,
President
& Director
Christie 06/30/05 0 0 0 0 0 0 0
Jones,
S/T and
Director
Clark M. 06/30/05 0 0 0 0 0 0 0
Mower,
Director
Commencing November 1, 2005, John W. R. Miller will be paid an annual
salary of $120,000 for his service as President and a director; and commencing
on November 1, 2005, Christie Jones will be paid $30 per each hour worked for
her service as Secretary/Treasurer and a director, to an annual maximum of
$60,000.
Stock Option Plans.
-------------------
No cash compensation, deferred compensation or long-term incentive plan
awards were issued or granted to our Company's management during the period
ended June 30, 2005, or for the calendar years ended December 31, 2004 or
2003. Further, no member of our Company's management has been granted any
option or stock appreciation rights; accordingly, no tables relating to such
items have been included within this Item.
Compensation of Directors.
--------------------------
Subject to availability of funding, our outside Board members will each
be paid $1,000 monthly for service as directors, commencing November 1, 2005.
No additional amounts are payable to our Company's directors for committee
participation or special assignments.
Termination of Employment and Change of Control Arrangement.
------------------------------------------------------------
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from our Company, with respect to any
director or executive officer of our Company which would in any way result in
payments to any such person because of his or her resignation, retirement or
other termination of employment with our Company, any change in control of the
Company, or a change in the person's responsibilities following a change in
control of our Company.
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------
All reports required to be filed pursuant to Section 16(a) of the
Exchange Act have been filed with respect to the change of control referenced
in Items 1.01 and 5.01 on a timely basis.
Audit, Nominating and Compensation Committees.
----------------------------------------------
We have no audit, nominating or compensation committees; and we do not
believe that our failure to have any of these committees at this time is
material, based upon our current lack of any significant business operations;
however, we will review these requirements annually in light of future
operations and compliance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -----------------------------------------------
Transactions with Management and Others.
----------------------------------------
Except as described below, there have been no material transactions
involving $60,000 or more between GeNOsys and/or its directors, executive
officers or five percent stockholders other than compensatory arrangements set
forth under the caption "Executive Compensation," above.
Our Board of Directors conditioned the completion of the Merger Agreement
with GeNOsys on the execution and delivery of the Settlement Agreement and the
Technology Transfer Agreement that are outlined in Item 1.01 above. Also see
Item 9.01. John W. R. Miller and Christie M. Woodruff Jones, respectively our
President and Secretary/Treasurer and who held the same positions with
GeNOsys, were both 1017975 Shareholders.
DESCRIPTION OF SECURITIES.
- --------------------------
For a complete description of our securities, see Part I, Item 8, of our
10-SB.
GeNOsys is authorized to issue one class of securities, being comprised
of $0.0001 par value common voting stock.
The holders of GeNOsys' $0.0001 par value common stock had traditional
rights as to voting, dividends and liquidation. All shares of common stock
are entitled to one vote on all matters; there are no pre-emptive rights and
cumulative voting is not allowed. GeNOsys common stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation, the holders of GeNOsys common stock are entitled to share equally
in corporate assets after satisfaction of all liabilities. GeNOsys is now a
wholly-owned subsidiary of ours.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
- --------
Market Information.
-------------------
Our shares of common stock are traded on the OTC Bulletin Board under the
symbol "AULN.OB"; however, there is not and has not been any "established
trading market" for these securities. With the contemplated name change to
"GeNOsys, Inc.," anticipated to be effective on or about October 10, 2005, we
will be required to get another trading symbol.
There has never been a publicly-traded market for the securities of
GeNOsys.
No assurance can be given that any "established trading market" will ever
commence, or continue, if one does commence. The resale of "restricted
securities" and other securities of our Company that are currently outstanding
or that may be issued in the future could have an adverse effect on any such
market that may commence or exist in the future. All 2,556,500 shares of our
Company that were issued and outstanding immediately prior to the closing of
the Merger with GeNOsys have satisfied all requirements of Rule 144 to be
publicly traded; however, 1,302,500 of those shares are subject to resale by
SCS under various Lock-Up/Leak-Out Agreements between SCS and the persons from
whom these shares were acquired, that provide that for a period of 12 months
from the closing of the GeNOsys Merger on August 18, 2005, that SCS can only
sell 1/12th of these shares in any monthly period, on a non-cumulative basis,
in accordance with the "manner of sale" and "brokers' transaction"
requirements of Rule 144. "Non-cumulative is defined to mean that if no
shares are sold in one monthly period, they cannot be carried over to the next
period. As part of this share purchase, SCS cancelled a like number of shares
of our common stock that were issued to it under the Merger Agreement with
GeNOsys. This share purchase and cancellation was effected on September 12,
2005, and reduced our outstanding shares of common stock to 41,254,000 shares.
For additional information about the share holdings in our Company of SCS, see
SCS' Schedules 13D and 13D-1 that were respectively filed with the Securities
and Exchange Commission on August 22, 2005, and September 22, 2005.
On or after August 18, 2006, all of the remaining 38,687,500 shares or
our currently outstanding common stock will be available for public resale
under Rule 144, provided, however, the resale of certain of these shares will
be subject to certain volume restrictions for those shares that are held by
members of our management or other "affiliates" of our Company.
Generally, "restricted securities" can be resold under Rule 144 once they
have been held for at least one year (subparagraph (d) thereof), provided that
the issuer of the securities satisfies the "current public information"
requirements (subparagraph (c)) of the Rule; no more than 1% of the
outstanding securities of the issuer are sold in any three month period
(subparagraph (e)); the seller does not arrange or solicit the solicitation of
buyers for the securities in anticipation of or in connection with the sale
transaction and does not make any payment to anyone in connection with the
sales transaction except to the broker/dealer whom executes the trade or
trades in the securities (subparagraph (f)); the shares are sold in "brokers'
transactions" only (subparagraph (g)); the seller files a Notice on Form 144
with the Securities and Exchange Commission at or prior to the sales
transaction (subparagraph (h)); and the seller has a bona fide intent to sell
the securities within a reasonable time of the filing of such Form. Once two
years have lapsed, assuming the holder of the securities is not an "affiliate"
of the issuer, unlimited sales can be made without further compliance with the
terms and provisions of Rule 144.
Holders.
--------
The number of record holders of our common stock as of September 20,
2005, was approximately 110.
GeNOsys had approximately 79 holders of its common stock prior to the
completion of the Merger with us, with the majority of whom were not "U. S.
Persons" as defined in Regulation S of the Securities and Exchange Commission
and who were 1017975 Shareholders who were required to execute and deliver the
Settlement Agreement that was a condition to the closing of the GeNOsys
Merger. See Item 1.01.
Dividends.
----------
We have not declared any cash dividends with respect to our common stock
and do not intend to declare dividends in the foreseeable future. Our future
dividend policy cannot be ascertained with any certainty; however, there are
no material restrictions limiting, or that are likely to limit, our ability to
pay dividends on our common stock.
GeNOsys has not declared or paid any dividends since its inception.
Legal Proceedings.
- ------------------
Neither us nor GeNOsys is a party to any pending legal proceeding and, to
the knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against us or GeNOsys. No director,
executive officer or affiliate of ours, GeNOsys or owner of record or
beneficially of more than five percent of our or GeNOsys' common stock is a
party adverse to us or GeNOsys or has a material interest adverse to us or
GeNOsys in any proceeding.
Code of Ethics.
- ---------------
We are in the process of adopting a Code of Ethics for our executive
officers. We expect to adopt such a Code of Ethics at our next regularly
scheduled Board of Directors meeting.
GeNOsys also does not have a Code of Ethics, and as a wholly-owned
subsidiary of ours, any Code of Ethics adopted by us will apply to GeNOsys.
RECENT SALES OF UNREGISTERED SECURITIES.
- ----------------------------------------
Pursuant to the Merger Agreement, we issued 40,000,000 shares of our
"restricted securities" to the stockholders of GeNOsys. The stockholders of
GeNOsys acquired their shares as follows:
(i) On inception, John W. R. Miller subscribed to purchase 24,873,592
shares for which he paid $2,487.36; and Clark M. Mower subscribed
to purchase 8,357,864 shares for which he paid $835.79;
(ii) Pursuant to the terms of the Compromise and Settlement Agreement,
the 1017975 Shareholders were issued an aggregate of 2,768,544
shares;
(iii) Pursuant to the terms of the Technology Transfer Agreement, all
right, title and interest in and to the technology rights
described therein were conveyed to GeNOsys for the amount of
$20.00, which sum was paid by the issuance of an aggregate of
200,000 shares, 75,000 shares each to John W. R. Miller and
Christie Woodruff Jones, and 25,000 shares each to Larry Kincade
and Richard Bayly; and
(iv) Pursuant to a Consulting Agreement executed March 31, 2005, with
SCS and adopted and ratified by the Board of Directors of GeNOsys
on July 14, 2005, SCS was issued 3,800,000 shares valued at $0.01
per share for services rendered to GeNOsys.
These securities were issued to persons who were either "accredited
investors," or "sophisticated investors" or who were not "U. S. Persons" who,
by reason of education, business acumen, experience or other factors, were
fully capable of evaluating the risks and merits of an investment in GeNOsys
or our Company; and each had prior access to all material information about us
and GeNOsys. We believe that the offer and sale of these securities was exempt
from the registration requirements of the Securities Act pursuant to Sections
4(2) and 4(6) thereof and Rule 506 of Regulation D of the Securities and
Exchange Commission, which preempt state exemptions, and with respect to the
those whom were not "U. S. Persons," pursuant to Regulation S of the
Securities and Exchange Commission.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
- ------------------------------------------
Autoline.
---------
Section 16-10a-902(1) of the Utah Revised Business Corporation
Act authorizes a Utah corporation to indemnify any director against
liability incurred in any proceeding if he or she acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from indemnifying
a director in a proceeding by or in the right of the corporation in which
the director was adjudged liable to the corporation or in a proceeding in
which the director was adjudged liable on the basis that he or she improperly
received a personal benefit. Otherwise, Section 16-10a-902(5) allows
indemnification for reasonable expenses incurred in connection with a
proceeding by or in the right of a corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905
authorizes a director to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction. Section 16-10a-907(1)
extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903
requires that a corporation indemnify a director who was successful, on the
merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expenses incurred in connection therewith. Section
16-10a-907(1) extends this protection to officers of a corporation as well.
Pursuant to Section 16-10a-904(1), the corporation may advance a
director's expenses incurred in defending any proceeding upon receipt of an
undertaking and a written affirmation of his or her good faith belief that he
or she has met the standard of conduct specified in Section 16-10a-902.
Unless limited by the Articles of Incorporation, Section 16-10a-907(2)
extends this protection to officers, employees, fiduciaries and agents of a
corporation as well.
Regardless of whether a director, officer, employee, fiduciary or agent
has the right to indemnity under the Utah Revised Business Corporation Act,
Section 16-10a-908 allows the corporation to purchase and maintain insurance
on his or her behalf against liability resulting from his or her corporate
role.
GeNOsys.
--------
Section 78.7502(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee, or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his or her corporate role. Section 78.7502(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding if he
acted in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful."
Section 78.7502(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the
right of the corporation. The party must have been acting in good faith and
with the reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.7502(1) or 78.7502(2), Section 78.7502(3) of the NRS
requires that he be indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him or her in connection with the
defense."
Section 78.751(1) of the NRS limits indemnification under Sections
78.7502(1) and 78.7502(2) to situations in which either (1) the stockholders,
(2)the majority of a disinterested quorum of directors, or (3) independent
legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(2) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(3)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(3)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has the
right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his or her behalf against liability resulting from his
corporate role.
FINANCIAL STATEMENTS OF GENOSYS.
- --------------------------------
See Item 9.01(a) below.
Item 5.02 Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers.
See Items 1.01, 2.01 and 5.01 above.
Pursuant to the Merger Agreement with GeNOsys, the current officers and
directors of GeNOsys became members of our Board of Directors and our
executive officers, to serve until the next respective annual meetings of our
stockholders and our Board of Directors and until their respective successors
are elected and qualified or until their prior resignations or terminations.
Effective on August 18, 2005, they were: John W. R. Miller, President and
Director; Christie M. Woodruff Jones, Secretary/Treasurer and Director; and
Clark M. Mower, Director. Our directors and executive officers, James P.
Doolin and Burke Staker, resigned, in seriatim, on closing of the Merger.
The following delineates certain information concerning our newly
designated directors and executive officers:
Positions
Positions with with
Name Age the Company GeNOsys
---- --- ----------- -------
John W. R. Miller 55 President and President and
Director Director
Clark M. Mower 58 Director Director
Christie M. Woodruff 23 Secretary/Treasurer Secretary/
Jones and Director Treasurer and
Director
Directors are elected by our stockholders to serve until the next
annual meeting of our stockholders or until their successors have been elected
and have duly qualified. Officers are appointed to serve until the annual
meeting of our Board of Directors following the next annual meeting of our
stockholders and until their successors have been elected and have qualified.
The following is a summary of the business experience of each of our
current directors and executive officers:
John W. R. Miller. Mr. Miller is 55 years old. In 2003, he co-founded
Alberta 1017975 with Christie Woodruff Jones. From 2001 to 2003, Mr. Miller
was self-employed. Mr. Miller was the President and a Co-Founder of Pulmonox
Medical Corp., a biotechnology corporation, where he worked from 1990 to 2001,
where he was responsible for the FDA approval of inhaled nitric oxide therapy.
Mr. Miller sold his interest in Pulmonox in 2001. Mr. Miller received a B.S.
Degree in Education/Business from Brigham Young University in 1972.
Clark M. Mower. Mr. Mower is a director of our Company and is 58 years old.
From December 2004 to the present, Mr. Mower has been the President/CEO and a
director of Flexpoint Sensor Systems, Inc., a producer of sensors for
automotive and industrial uses. His responsibilities include all areas of
management, including staffing and financial responsibilities of a growing
sensor company. From August 2002 to the present, Mr. Mower has also served as
a co-founder and managing member of Polar Energy, LLC, of Mountain Green,
Utah, and Littleton, Colorado, which provides consulting services to companies
that are considering divestiture, mergers or acquisitions. From January 2000
to August 2002, Mr. Mower was Senior Vice President, Mergers and Acquisitions,
Merchant Energy Group, with El Paso Energy in Golden, Colorado, where he
worked on or lead teams that successfully closed power related acquisitions
and divestitures. Mr. Mower studied Business and Accounting at the University
of Utah.
Christie M. Woodruff Jones. Ms. Jones is 23 years old. Ms. Jones co-
founded Alberta 1017975 in 2003 and is the President of Alberta 1017975. In
fall of 2003, she became President of GeNOsys Canada, a biotechnology
corporation. Ms. Jones has been Executive Assistant to John W.R. Miller
since 1999. Her responsibilities included: tracking nitric oxide research
projects, supervising manufacturing contractors, payroll, scheduling, and
supervision of personnel. Ms. Jones studied mathematics at Grants MacEwan
Community College in Edmonton, Alberta, Canada.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
To the knowledge of management, no present or former director, person
nominated to become a director, executive officer, promoter or control person
of our Company or of GeNOsys:
(1) Was a general partner or executive officer of any business
by or against which any bankruptcy petition was filed,
whether at the time of such filing or two years prior
thereto;
(2) Was convicted in a criminal proceeding or named the subject
of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
him from or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
ii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or
in connection with any violation of federal or
state securities laws or federal commodities
laws;
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in
any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the
judgment in such civil action or finding by the Securities
and Exchange Commission has not been subsequently reversed,
suspended, or vacated; or
(6) Was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
GeNOsys, Inc.
Financial Statements
June 30, 2005
GeNOsys, Inc.
Balance Sheet
June 30, 2005
ASSETS
Assets
Current Assets
Cash $ 3,323
-----------
Total Current Assets 3,323
-----------
Total Assets $ 3,323
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities $ 0
-----------
Total Current Liabilities 0
-----------
Total Liabilities $ 0
Stockholders' Equity
Common Stock - 50,000,000 shares authorized,
par value of $0.0001 per share, 33,231,456
shares issued and outstanding 3,323
-----------
Total Stockholders' Equity 3,323
-----------
Total Liabilities and Stockholders'
Equity $ 3,323
===========
See accompanying notes to the financial statements
GeNOsys, Inc.
Notes to Interim Financial Statements
June 30, 2005
NOTE 1 BASIS OF PRESENTATION
The accompanying financial statements have been prepared without audit,
pursuant to the rules and regulations of the Security and Exchange
Commission. The interim financial statements reflect all adjustments
which, in the opinion of management, are necessary to present a fair
statement of the results for the period.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
NOTE 2 - GOING CONCERN
The Company does not have significant assets, nor has it established
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. It is the intent of the
Company to seek a merger with an existing, well-capitalized operating
company. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
NOTE 3 EQUITY TRANSACTIONS
On June 30, 2005, the Company issued 33,231,456 shares, at par value,
for $3,323 cash.
NOTE 4 SUBSEQUENT EVENTS
On August 18, 2005, the Company entered into an agreement and plan of
merger with The Autoline Group, Inc ("Autoline"). All outstanding
shares of the Company were converted into and exchanged for one share
of Autoline. In conjunction with this agreement, GeNOsys issued
200,000 shares of stock in order to obtain intellectual property
rights. In addition, GeNOsys issued 2,768,544 shares as part of a
compromise and settlement agreement to obtain additional intellectual
property rights. Furthermore, GeNOsys issued 3,800,000 shares for a
consulting agreement. Finally, a shareholder paid attorney fees of
$20,000 on behalf of GeNOsys. Autoline agreed to pay a director $25,000
for an Indemnification Agreement.
(b) Pro Forma Financial Information.
GeNOsys, Inc.
[Formerly known as The Autoline Group, Inc.]
Pro Forma Financial Statements
June 30, 2005
GeNOsys, Inc.
Pro Forma Balance Sheet
June 30, 2005
(Unaudited)
Pro Forma
Giving Effect to
Autoline Merger as of
Group, Inc. GeNOsys, Inc. Adjustments June 30, 2005
Current Assets:
Cash and cash
equivalents 8,161 3,323 (8,161) 3,323
---------- ------------ ----------- --------------
Total current
assets 8,161 3,323 (8,161) 3,323
Other assets:
Intangible assets 0 0 677 677
---------- ------------ ----------- -------------
Total other assets 0 0 677 677
---------- ------------ ----------- -------------
Total Assets 8,161 3,323 (7,484) 4,000
========== ============ =========== =============
Current Liabilities:
Accrued
Liabilities 4,067 0 (4,067) 0
Sales Tax Payable 4,587 0 (4,587) 0
Related Party
Payable 36,167 0 (16,167) 20,000
----------- ------------ ----------- --------------
Total current
liabilities 44,821 0 (24,821) 20,000
Related Party Note
Payable 15,258 0 (15,258) 0
----------- ------------ ----------- --------------
Total Liabilities 60,079 0 (40,079) 20,000
Stockholders' Equity:
Common Stock 2,557 3,323 36,677 42,557
Paid-in Capital 26,243 0 (64,800) (38,557)
Accumulated Deficit (80,718) 0 60,718 (20,000)
------------ ------------ ----------- --------------
Total
stockholders'
equity (51,918) 3,323 32,595 (16,000)
------------ ------------ ----------- --------------
Total Liabilities and
Stockholders' Equity 8,161 3,323 (7,484) 4,000
============ ============ =========== ==============
See accompanying notes to Pro Forma Financial Statements.
GeNOsys, Inc.
Notes to Pro Forma Financial Statements
June 30, 2005
(Unaudited)
Note 1 DESCRIPTION OF THE TRANSACTION
Effective August 18, 2005, Autoline Group, Inc. ("Autoline"), entered
into an agreement and plan of merger ("the agreement") with GeNOsys,
Inc. ("GeNOsys") a Nevada corporation. The agreement calls for each
share of issued and outstanding common stock of GeNOsys be converted
into and exchanged for one share of Autoline. In conjunction with this
agreement, the Company had the option of paying a director $25,000 or
divesting a newly created subsidiary, The Autoline Group 2, Inc., which
includes the automobile dealership operations, for an Indemnification
Agreement. These Pro Forma Statements have been prepared under the
assumption that the Company chose the option to divest the dealership
operations, which is currently the intent of management. Accordingly,
the remaining assets and liabilities were divested through the
subsidiary. Also pursuant to this agreement, GeNOsys issued 200,000
shares of stock in order to obtain intellectual property rights. In
addition, GeNOsys issued 2,768,544 shares as part of a compromise and
settlement agreement to obtain additional intellectual property rights.
Furthermore, GeNOsys issued 3,800,000 shares for a consulting agreement.
Finally, a shareholder paid attorney fees of $20,000 on behalf of
GeNOsys.
(c)(i) Registrant's Exhibits:
Exhibits Previously Filed With Initial Current Report:
------------------------------------------------------
2.1 Agreement and Plan of Merger
Exhibit A Compromise and Settlement Agreement
Exhibit B Shareholder consent to Proposed Merger
Exhibit C Technology Transfer Agreement
Schedule 2.1 GeNOsys Disclosure Schedule
Schedule 3.1 Autoline Disclosure Schedule
Schedule 6.4(b) Indemnification Agreement
3 Certificate of Merger
(c)(ii) GeNOsys' Exhibits:
3.1 Articles of Incorporation.
3.2 Bylaws.
Documents Incorporated by Reference:
------------------------------------
10-SB Registration Statement, as amended, filed with the Securities and
Exchange Commission on December 9, 2002.
Part I, Item 8: Description of Securities.
10-KSB Annual Report for the year ended November 30, 2004, filed with the
Securities and Exchange Commission on February 24, 2005.
Part I, Item 1: Business.
10-QSB Quarterly Report for the quarter ended May 31, 2005, filed with the
Securities and Exchange Commission on July 14, 2005.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
The AUTOLINE GROUP, INC.
Date: 09/27/05 s/ John W. R. Miller
-------------- ------------------------
John W. R. Miller
President and Director