EXHIBIT 10.5
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Board of Directors of Doblique, Inc.
April 7, 2003
Jeffrey Katz C.A.
3737 The Boulevard
Westmount, Quebec
Canada H3Y 1T3
Telephone 514-487-8966
Fax: 514-487-2138
E-Mail: jkatz@qc.aira.com
Dated as of April 7, 2003
To: The Board of Directors of Doblique, Inc.
Ladies and Gentlemen:
You have requested that Jeffrey Katz C.A. ["Katz"] provide you with an opinion
as to the fairness, from a financial point of view, of the transaction in
connection with the Stock Exchange Agreement (the "Agreement") as at April 7,
2003 (thereafter "the valuation date"), by and among Inyx Pharma Limited, a
company registered in England and Wales ("Inyx Pharma"), the parties listed in
Schedule 1 of the Agreement (each an "Inyx Pharma Shareholder," and collectively
the "Inyx Pharma Shareholders") and Doblique, Inc. ("Doblique" or the
"Company"), pursuant to which each Inyx Pharma Shareholder shall contribute
their ordinary shares in Inyx Pharma for shares of the Company's common stock
(the "Company Shares").
Inyx Pharma was prior to the valuation date engaged in the development and
contract manufacturing of specialized pharmaceutical aerosol products for the
treatment of respiratory, allergy, dermatological and topical conditions
(thereafter "the Business").
Under the Agreement, each Inyx Shareholder shall assign, transfer and deliver
their respective number of Inyx shares amounting to 1 million outstanding
ordinary shares of Inyx Pharma, in total, to the Company, who shall purchase
such number of Inyx Pharma Shares from each such Inyx Pharma Shareholder. In
consideration for the sale, assignment and transfer of the Inyx Pharma Shares to
the Company on the Closing Date, the Company shall issue to each Inyx
Shareholder a proportionate number of shares of Company Shares amounting to 16
million common shares in total. The Company shall have no obligation to purchase
any Inyx Pharma Shares unless all of the Inyx Pharma Shares are being
simultaneously purchased. As a result of the exchange transaction, Doblique will
own 100 percent of Inyx Pharma's issued share capital or 80 percent of Inyx
Pharma's authorized share capital, as there are 1,250,000 authorized shares in
Inyx Pharma, 250,000 shares of which have been authorized and reserved to a
convertible note holder.
In arriving at the opinion set forth below, Katz has completed the following
tasks:
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1. Reviewed Inyx Pharma's 2003 Business Plan as prepared by its
management.
2. Reviewed the financial statements of Inyx Pharma and Doblique for the
several years ended December 31, 2002, and various closing documents,
accounting and other records as of the valuation date.
3. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flows and assets of the Business,
furnished to me by or on behalf on Inyx Pharma.
4. Conducted discussions with members of the management of Inyx
concerning the business and prospects of the Business; discussions
were also conducted with other industry participants.
5. Reviewed the report by Berkovits, Lago and Company, LLP on Doblique,
Inc. and Inyx Pharma Limited reverse acquisition transaction
6. Compared the results of operations of the Business with that of
certain companies which I deemed relevant.
7. Conducted a financial review of the financial condition of Inyx Pharma
with respect to its liquidity and capital position as of the valuation
date.
8. Reviewed the Stock Purchase Agreement and ancillary agreements
thereto.
9. Performed such other analyses and reviewed and analyzed such other
information as Katz deemed appropriate.
In rendering this opinion, Katz did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Inyx Pharma, Doblique, or the publicly available information
regarding other companies.
Katz has assumed that all such financial and other information is accurate and
complete. Katz has further relied on the assurances of Inyx Pharma and Doblique
management that they are not aware of any facts that would make such financial
or other information inaccurate, incomplete or misleading. With respect to
forecasts and financial projections of Inyx Pharma provided by management, Katz
has assumed, for the purpose of this opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgements of management at the time of their preparation as to the future
performance of the Business. Katz has further assumed, with your consent, that
any material liabilities (contingent or otherwise, known or unknown) of the
Business are as set forth in the financial statements.
I have not been engaged to make, nor have I made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Business
nor have we been furnished with any such evaluation or appraisals except for the
Plant, Machinery, and Equipment by Henry Butcher International Inc. and by
Weatherall Green & Smith Northe Ltd. My opinion is based upon regulatory,
economic, market and monetary conditions existing on the date hereof. I also
understand that each respective party of the Agreement has sought its own legal
advice as to the nature of the contemplated transaction and as to the legal
standing of each respective entity, as these are outside of the scope of my
engagement.
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This opinion has been prepared for your information in connection with the Stock
Exchange Agreement and shall not be, in whole or in part, reproduced,
summarized, described or referred to in any other opinion, document or report,
or provided to any person or otherwise made public without the prior consent of
Katz. This opinion is delivered as of the date hereof and I disclaim any
responsibility to update this opinion at any time following the date hereof. On
the basis of, and subject to the foregoing, I am of the opinion that the
transaction as outlined in the Stock Exchange Agreement is fair to the
unaffiliated shareholders of the Company from a financial point of view. The
opinion expressed above is based on a review of the contemplated transaction,
relevant information provided by the respective management of each company,
industry and market comparatives, and is subject to the following assumptions
and qualifications:
>> The Company is economically dependant on a number of key customers
which include, Merck Generics and Stiefel, which can together account
for more than 50% of the Company's revenues by 2005. I would strongly
suggest a further diversification and growth of Inyx Pharma's customer
base.
>> The Company should be seeking to locate its development operations in
locations which promote tax incentives for research and development
activities. One such example is the Province of Quebec in Canada which
provides a number of tax incentives that can significantly offset
certain development costs. Additionally, there is also a number of
multinational pharmaceutical companies located in Quebec. The Company
can significantly add value from the synergistic effects of locating a
development operation amongst these other pharmaceutical companies.
>> In the coming months, the Company will require a significant injection
of capital in order to provide for capital equipment and assets, IT
infrastructure and regulatory requirements and improvements. I have
not commented on the Company's financing plans.
>> One of the areas of growth that the Company has not adequately
addressed in its business plan is growth by acquisition of similar
pharmaceutical businesses. This is not the only area of growth as
there is unused potential and capacity in existing capital assets
owned by the Company.
>> I have not seen a clear strategy for growth through strategic
partnerships within the industry. For example, Inyx Pharma should be
introduced to such companies as "Chaichen Pharmaceuticals", a bulk
manufacturer of Taxol as a possible joint venture partner. These types
of companies can provide a number of development and manufacturing
opportunities.
Yours very truly,
/s/ Jeffrey Katz
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Jeffrey Katz C.A.
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