As filed with the Securities and Exchange Commission on May 15, 2001
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ENDOVASC LTD., INC.
(Exact name of small business Issuer as specified in its charter)
Nevada 76-0512500 2836
(State or other jurisdiction of (I.R.S. Employer Identification Number) (Primary Standard Industrial
incorporation or organization) Classification Code Number)
15001 Walden Road
Suite 108
Montgomery, Texas 77356
(936) 448-2222
(Address and telephone number of principal executive offices)
Mr. David P. Summers
15001 Walden Road
Suite 108
Montgomery, Texas 77356
(936) 448-2222
(Name, address and telephone number of agent for service)
Copies of all communications to:
Richard A. Friedman, Esq.
Sichenzia, Ross & Friedman, LLP
135 West 50th Street
New York, New York 10022
Telephone No.: (212) 664-1200
Facsimile No.: (212) 664-7329
Approximate date of proposed sale to the public:
From time to time after the effective date of this Registration Statement
in light of market conditions and other factors.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. []
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. []
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to be Price Per Offering Registration
to be Registered Registered Share(1) Price Fee
Common Stock, .001 par value (2) 67,324,190 $0.12 $8,078,902.80 $2,019.72
Common Stock, .001 par value (3) 333,333 $0.12 $39,999.96 $ 10.00
Common Stock, .001 par value (3) 166,667 $0.12 $20,000.04 $ 5.00
Common Stock, .001 par value (3) 166,667 $0.12 $20,000.04 $ 5.00
Total $2,039.72
-----------------
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
(2) Issuable upon the conversion of convertible preferred stock. This is not
intended to constitute a prediction as to the number of shares of common stock
into which the preferred stock will be converted. The number of shares currently
issuable upon conversion of the outstanding preferred stock is one half of this
amount; the actual number of shares to be issued on conversion is dependent, in
part, on the price of the common stock at the time of conversion. Also
registered are an indeterminate amount of additional shares of common stock that
may become issuable by virtue of anti-dilution provisions in the preferred
stock.
(3) Issuable upon the exercise of warrants issued in connection with the sale of
the convertible preferred stock. Also registered are an indeterminate amount of
additional shares of common stock that may become issuable by virtue of
anti-dilution provisions in the warrants.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Preliminary Prospectus Subject to Completion, Dated May 15, 2001
ENDOVASC, LTD., INC.
34,328,762 shares of common stock
This prospectus relates to the resale by the selling stockholders of
up to 34,328,762 shares of our common stock. The selling stockholders may sell
common stock from time to time in the principal market on which the stock is
traded at the prevailing market price or in negotiated transactions. The selling
stockholders are deemed underwriters of the shares of common stock which they
are offering.
We will not receive any proceeds from the sale of shares by the
selling stockholders. However, we will receive proceeds upon the exercise of any
warrants that may be exercised by the selling stockholders.
Our common stock is quoted on the Over-the-Counter Bulletin board
under the symbol "ENDV." On May 9, 2001, the closing price of our common stock
was $0.12 per share.
This investment involves a high degree of risk. See the "Risk Factors"
beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is complete or accurate. Any representation to the contrary is a
criminal offense.
Table of Contents
Section Page Number
Prospectus Summary............................................................
Risk Factors..................................................................
Use of Proceeds...............................................................
Market For Securities.........................................................
Dividend Policy...............................................................
Capitalization................................................................
Selected Financial Data.......................................................
Management's Discussion and
Analysis of Financial Condition and Results of Operations...........
Business......................................................................
Management....................................................................
Summary Compensation Table....................................................
Security Ownership of Management and Certain Beneficial Owners................
Description of Securities.....................................................
Shares Eligible for Future Sale...............................................
Certain Transactions..........................................................
Selling Stockholders..........................................................
Plan of Distribution..........................................................
Experts.......................................................................
Legal Matters.................................................................
Index to Financial Statements ............................................
PROSPECTUS SUMMARY
We develop, market and license biopharmaceutical products, particularly
liposomal drug delivery methods, for the human healthcare industry. We develop
microscopic cell-like spheres, liposomes, to entrap and protect drugs from
degradation in the blood stream and deliver drugs to their intended target for
controlled and efficient administration.
Our current product development focuses on two technologies -
Liprostin(TM) and Nicotine Receptor Agonist. Our Liprostin technology is a
Prostaglandin E-1 delivery system for lung and heart related medical
applications. Our Nicotine Receptor Agonist technology promotes blood vessel
growth intended for use in various biological applications. Our products are in
the process of clinical testing and have not been approved for general sales.
Consequently, we have not generated revenues and have historically operated with
significant losses. We intend to develop several medical treatment product lines
based on these two technologies.
The Offering
Common stock outstanding before this
offering............................ We have 22,526,412 shares of common stock outstanding prior to this offering.
Common stock offered by the
selling stockholders................ Up to 34,328,762 shares of common stock
Common stock outstanding after this
offering............................ Up to 56,855,174 shares, assuming the issuance of all securities registered
hereunder.
Use of proceeds..................... We will not receive any proceeds from the sale of securities by the selling
stockholders.
Risk factors........................ Investing in these securities involves a high degree of risk and immediate and
substantial dilution of your investment. As an investor, you should be able to
bear a complete loss of your investment. See "Risk Factors" and "Dilution" for
a more detailed discussion.
Forward-looking statements.......... This prospectus contains forward-looking statements that address, among other
things, our expansion and acquisition strategy, business development, use of
proceeds, projected capital expenditures, liquidity, and our development of
additional revenue sources. The forward-looking statements are based on our
current expectations and are subject to risks, uncertainties and assumptions.
We base these forward-looking statements on information currently available to
us, and we assume no obligation to update them. Our actual results may differ
materially from the results anticipated in these forward-looking statements,
due to various factors.
SUMMARY FINANCIAL DATA
The information set forth below for the years ended June 30, 2000 and 1999,
which is derived from the audited financial statements; and for the six months
ended December 31, 2000 and 1999, which is derived from the unaudited financial
statements, should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements, including the notes thereto and other financial
information, appearing elsewhere in this registration statement.
Six Months Ended Year Ended
December 31, June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------
(Unaudited) (Audited)
STATEMENT OF OPERATIONS DATA
Revenues $ 75,000 $ 14,283 $ 24,312 $ 5,000
Net loss (1,196,981) (481,869) (2,975,327) (796,543)
Basic and dilutive net
loss per share (0.09) (0.05) (0.31) (0.11)
BALANCE SHEET DATA
Total assets $ 739,775 $ 85,102 $ 1,129,636 $ 137,455
Working capital deficit (349,880) 661,850 (137,563) (461,280)
Total liabilities 867,390 870,731 1,086,542 797,270
Stockholders' equity
(deficit) (127,615) (785,629) 43,094 (659,815)
RISK FACTORS
Investing in our securities will provide you with an equity ownership
interest in Endovasc. As one of our shareholders, your investment will be
subject to risks inherent in our business. If any of the following risks
actually occur, our business could be harmed. In that event, the trading price
of our shares might decline, and you could lose all or part of your investment.
You should carefully consider the following factors as well as other information
contained in this prospectus before deciding to invest in shares of our
securities.
Our Limited Operating History Makes It Difficult For You To Evaluate
Our Business And Prospects. Due to our limited operating history, our ability to
operate successfully is materially uncertain. We are subject to all risks
inherent in a developing business enterprise. Our limited operating history
makes it difficult to evaluate our products, as well as the likelihood of
regulatory approval, commercial viability, and market acceptance of our
products. Our potential success must be evaluated in light of the problems,
expenses and difficulties frequently encountered by new businesses in general
and biopharmaceutical businesses specifically.
We Have A History Of Losses And We May Never Achieve Profitability. We
incurred net losses of $(2,975,327) and $(1,196,981), for our fiscal year ended
June 30, 2000 and six months ended December 31, 2000, respectively. Our products
are in clinical testing and are subject to government approval for general
sales. Consequently, we have not generated any revenues and have historically
operated with significant losses. We expect operating losses to continue
indefinitely, due to research, marketing, government filing, commercialization,
pre-clinical and clinical program expenses. Our revenues may never exceed
expenses. If our operating losses continue on a long-term basis, our operations
may be adversely and materially effected.
We Are Dependent Upon The Continued Availability Of Adequate Financing
To Fund Our Operations And Expand Our Business. We may have insufficient capital
resources to develop and implement our business plan, and may need to raise
additional capital. We have not investigated the availability, sources or terms
of additional capital, and are unlikely to do so until we need additional
capital. If additional capital is needed, there is no assurance that it will be
available or based on acceptable terms. If additional capital is unavailable, we
may be forced to limit our operations accordingly. This may adversely and
materially effect our operations.
The Limited Trading Market For Our Common Stock May Result in Extreme
Volatility Of Our Stock Prices. Our common stock trades publicly on the OTC
Bulletin Board. We cannot assure that a regular trading market for the common
stock will develop, and if it develops, that it can be sustained. OTC Bulletin
Board trading affords us limited market liquidity. Consequently, our shares'
trading market may be adversely affected by the influx of shares offered
pursuant to this prospectus. Although it is impossible to predict market
influences and prospective values for securities, an increase in the number of
shares available for public sale may adversely affect our trading market. Until
a trading market develops, if at all, the market price for our common stock may
be volatile and shift dramatically based on the success of our operations, among
other factors. Stock markets also have experienced, and continue to experience,
extreme price and volume fluctuations in the market price of small
capitalization companies. These fluctuations may be unrelated to the Company's
operating performance. These market fluctuations, as well as general economic
and political conditions, may adversely affect our common stock's market price.
"Penny Stock" Regulations May Impose Certain Restrictions On
Marketability Of Stock, Which May Affect The Ability Of Holders Of Our Common
Stock To Sell Their Shares. The Securities and Exchange Commission has adopted
regulations that generally define a "penny stock" to be any equity security that
has a market price of less than $5.00 per share. Our common stock is currently
subject to these rules that impose additional sales practice requirements. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of the common shares and must have
received the purchaser's written consent to the transaction prior to the
purchase. The "penny stock" rules also require the delivery, prior to the
transaction, of a risk disclosure document mandated by the SEC relating to the
penny stock market. The broker-dealer must also disclose:
o the commission payable to both the broker-dealer and the registered
representative,
o current quotations for the securities, and
o if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the
market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
These rules apply to sales by broker-dealers to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse), unless our common shares trade above $5.00 per share.
Consequently, the "penny stock" rules may restrict the ability of broker-dealers
to sell our common shares, and may affect the ability to sell the common shares
in the secondary market as well as the price at which such sales can be made.
Also, some brokerage firms will decide not to effect transactions in "penny
stocks" and it is unlikely that any bank or financial institution will accept
"penny stock" as collateral.
Control by Existing Shareholders; Anti-Takeover Effects. Our executive
officers, Directors and other principal shareholders, beneficially own
approximately 38% of our outstanding shares of common stock. The voting power of
these shareholders may delay or prevent a change in control of our company.
Similarly, minority shareholders may be unable to elect any of our Directors,
because our shareholders cannot accumulate their votes to form the majority
necessary to elect a Director.
No Assurance of Regulatory Approval. Before we can market our products,
they are subject to rigorous preclinical and clinical testing and approval by
the Food and Drug Administration, comparable agencies in other countries, and
state regulatory authorities. The clinical trial and regulatory approval
processes for biopharmaceutical products typically lasts several years and
involves significant expenditures. Even after receipt of regulatory approval for
a product, we remain subject to periodic review from government regulatory
bodies. Any product dangers that are discovered after a product's release may
result in withdrawal of that product from the market or restrictions on its
future use. Our inability to obtain and maintain regulatory approval for our
products may materially and adversely affect our operations.
We Are Dependent Upon Market Acceptance Of Developing Technology. Our
success and competitive position depends upon acceptance of the products we
develop. Although liposome and lipid-based products have been approved for sale
in some European countries, none are commercially available in the United
States. Our products must undergo extensive clinical testing, government agency
review, and commercial development prior to their release in the United States.
Unanticipated side effects or unfavorable publicity surrounding any liposome or
lipid-based product may adversely effect our ability to obtain physician,
patient or third-party payer sales of our products. We cannot assure our ability
to achieve product commercialization or that physicians, patients or third-party
payers will accept our products. Our inability to achieve commercialization or
market acceptance of our products may materially and adversely affect our
operations.
We Depend On Key Personnel Who May Leave Us At Any Time. Our success
depends on the continuing services of Dr. David Summers, our Chief Executive
Officer. The loss of Dr. Summers could have a material and adverse effect on our
operations. Our success also depends on our ability to attract and retain
qualified scientific, engineering, manufacturing, sales, marketing, and
management personnel. We believe that our industry's employment market is highly
competitive. We cannot assure our success in attracting and retaining key
personnel for our operations. Our inability to attract and retain key personnel
may materially and adversely affect our operations.
Our Success is Dependent Our Ability To Obtain Additional Facilities,
Manufacturing and Marketing Personnel. Our facilities and personnel are
insufficient for large-scale production and marketing of our products. In
addition, we have limited experience in marketing biopharmaceutical products. We
cannot assure our success in expanding our manufacturing and marketing
capabilities. Our inability to establish adequate manufacturing and marketing
capabilities may materially and adversely affect our operations.
We Are Dependent On Third-Party Distributors and Agents. Upon
commercial distribution of our products, if any, third-party distributors or
agents may affect most of our sales. We cannot assure the availability of
third-party distributors and agents, or that an agreement with them will be
available on terms acceptable to us. Our potential dependence on third-party
distributors or agents may cause fluctuations in product revenues, based on
their success in selling our product. Our inability to enter into agreements
with third-party distributors or agents and our dependence on their sales of our
product may materially and adversely affect our operations.
We Are Dependent On Third-Party Manufacturers. Upon commercial
distribution of our products, if any, third-party contract manufacturers may
affect large-scale production of our products. We cannot assure the availability
of third-party manufacturers that meet governmental regulatory standards for the
manufacture of our products, or that an agreement with them will be available on
terms acceptable to us. Our potential dependence on third-party manufacturers
may cause fluctuations in product revenues, based on their ability to
manufacture our products according to our specifications and production
requirements. Our inability to enter into agreements with third-party
distributors or agents and our dependence on their manufacture of our product
may materially and adversely affect our operations.
We Are Dependent On Raw Materials. Although our current agreements
provide adequate supplies of raw materials for our products, the number of
qualified suppliers of these materials is limited. We cannot assure our ability
to obtain adequate supplies of raw materials for our products from current
suppliers or alternative sources. Our inability to obtain adequate supplies of
key raw materials may materially and adversely affect our operations.
Risks Associated with Intellectual Property. Our success depends upon
our ability to obtain and maintain proprietary technology used in our products.
Accordingly, we rely on patent, trade secret, trademark and copyright law to
protect our proprietary technology. Although we have sought to protect this
technology under United States intellectual property law, we cannot assure that
any of our filed patent applications will not be invalidated, circumvented,
challenged or licensed to others. Similarly, we cannot assure that any rights
granted pursuant to our patent filings will provide us with a competitive
advantage or that any of our pending or future patent applications will provide
the scope of proprietary coverage that we seek. We also cannot assure that
others will not develop similar or superior technologies, or circumvent our
proprietary protection through new designs. In addition, we may be unable or
unwilling to obtain effective patent, trademark, copyright and trade secret
protection in certain foreign countries. We cannot assure our ability to protect
our proprietary technology and our inability to do so may materially and
adversely affect our operations.
Typically, companies in our industry vigorously pursue and defend
intellectual property rights or positions, which often results in extensive
litigation. Although there is no intellectual property litigation currently
pending against us, we may be notified of claims that we are infringing on other
parties' intellectual property rights. If necessary or desirable, we may seek
license agreements for such intellectual property rights from these parties. We
cannot assure that these parties will offer us any license agreement or that the
terms of any offered license will be acceptable to us. Our inability to obtain a
license for such intellectual property may require us to stop manufacturing or
distributing products using that technology. In addition, any litigation related
to our infringement of intellectual property rights may materially affect our
financial and human resources, whether or not such litigation is decided in our
favor. In the event that such litigation is decided against us, we may also be
required to pay substantial damages, cease the manufacture, use, sale or
importation of infringing products, discontinue the use of certain processes,
expend significant resources to develop or acquire non-infringing technology, or
obtain licenses to the infringing technology. We cannot assure our success in
dealing with any circumstances arising from litigation related to our
infringement of intellectual property rights. Our inability to deal with
circumstances arising from intellectual property litigation may materially and
adversely affect our operations.
Product Liability. Our testing, manufacturing, marketing and
distribution of biopharmaceutical products carry a material risk of product
liability. We cannot assure that we have adequate insurance to protect against
product liability, that we can renew such insurance, or that the amount and
scope of our insurance coverage will be adequate in the event of a successful
product liability claim. Inadequate insurance coverage may materially and
adversely affect us in the event of a successful product liability claim.
Government Health Care Reform. Government legislation regulating health
care may materially affect the biopharmaceutical industry's profitability.
Federal, state and local officials and legislators, as well as foreign
government officials and legislators, have discussed a variety of health care
system reforms that may affect our revenues. We cannot assure that government
regulation of health care system changes will not materially and adversely
affect our business.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholders of our company.
There will be no proceeds to our company from the sale of shares of common stock
in this offering, except upon the exercise of warrants.
MARKET FOR SECURITIES
Our common stock trades on the Over-The-Counter Bulletin Board under
the symbol "ENDV". The following table sets forth the range of high and low bid
quotations for our common stock for each quarter of the last two fiscal years,
as reported on the Over-The-Counter Bulletin Board. The quotations represent
inter-dealer prices without retail markup, markdown or commission, and may not
necessarily represent actual transactions.
Date Low / Bid Price High / Ask Price
1st Quarter - 1998 * *
2nd Quarter - 1998 * *
3rd Quarter - 1998 3/8 6
4th Quarter - 1998 5/8 1 1/2
1st Quarter - 1999 3/16 1
2nd Quarter - 1999 3/8 7/8
3rd Quarter - 1999 1/8 5/8
4th Quarter - 1999 3/50 3/10
1st Quarter - 2000 1/10 15
2nd Quarter - 2000 1.25 15
3rd Quarter - 2000 2.125 0.75
4th Quarter - 2000 7/8 0.16
1st Quarter - 2001 0.40 0.125
2nd Quarter - 2001 0.18 0.09
(through May 7, 2001)
o No bids or trades reported
The approximate number of holders of record of our common stock, as of
March 31, 2001, was 4,418.
DIVIDENDS
Holders of our common stock are entitled to receive such dividends as may be
declared by our board of directors. No dividends on our common stock have ever
been paid, and we do not anticipate that dividends will be paid on our common
stock in the next fiscal year. Our ability to pay dividends on common stock may
be limited by agreements with institutional lenders or others.
CAPITALIZATION
The following table summarizes our long-term obligations and capitalization as
of December 31, 2000. This table should be read together with our financial
statements included elsewhere in this prospectus.
Debt-notes payable $ 651,884
------------
Stockholders' deficit:
Common stock, par value $0.001 per share;
100,000,000 shares authorized; 17,137,211
shares issued and 15,052,211 shares outstanding 17,137
Preferred stock, par value $0.001 per share; 20,000,000
shares authorized; 19,924 shares issued and outstanding 20
Additional paid-in capital 6,821,184
Accumulated deficit (6,949,045)
Treasury stock (16,911)
------------
Total stockholders' deficit (127,615)
------------
Total capitalization $ 524,269
=============
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and notes
thereto included elsewhere in this prospectus. This document contains certain
forward-looking statements including, among others, anticipated trends in our
financial condition and results of operations and our business strategy. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties. Actual results could differ
materially from these forward-looking statements. Important factors to consider
in evaluating such forward-looking statements include (i) changes in external
competitive market factors or in our internal budgeting process which might
impact trends in the our results of operations; (ii) unanticipated working
capital or other cash requirements; (iii) changes in the our business strategy
or an inability to execute its strategy due to unanticipated changes in the
industries in which we operates; and (iv) various competitive factors that may
prevent the us from competing successfully in the marketplace.
General - Research and Development
The Company is in the research and development stage and has had
limited operating revenues since its inception on June 10, 1996. From June 10,
1996 through December 31, 2000, the Company had an accumulated deficit of
$6,949,045. During the Company's quarter ended December 31, 2000, the Company
has moved forward with clinical trials of Liprostin(TM) (liposome encapsulated
prostaglandin E-1) for critical limb ischemia (CLI); advanced in the animal
studies of Nicotine Receptor Agonist (NRA); and entered into a collaboration
with a major medical device manufacturer in the development of the Company's
stent coating technology. On October 3, 2000, the company filed its
investigational new drug application (IND) for Liprostin(TM) with the Food and
Drug Administration (FDA). Following the successful review of the IND by the
FDA, the company began Phase I clinical trial preparation. Phase I studies were
designed to establish the effects of Liprostin(TM) in a small population of
healthy humans to determine toxicity, absorption, distribution and metabolism.
Phase I clinical site selected by the Company was Healthcare Discoveries in San
Antonio, Texas, with Dr. Dennis A. Ruff as the Investigator. Following
evaluation of Phase I data in January 2001, the IND will be submitted to the FDA
for Phase II clinical trials, which will be conducted in a larger patient
population of individuals afflicted with CLI and will test for safety and
efficacy.
The Company confirmed plans for a human pilot study to be conducted at
EMO Centro Cuore Columbus in Milan, Italy by Investigator Dr. Antonio Colombo
using its nicotine-based blood vessel growth agent, NRA. The human pilot study
will involve patients with diseased heart muscle due to the deficiency of blood
caused by obstruction in the blood vessel (ischemic cardiomyopathy) and chronic
or uncontrolled chest pain (intractable angina pectoris). In animal studies
conducted at Stanford University Medical Center in the laboratory of Dr. John
Cooke, the application of minute amounts of nicotine administered directly to
blocked arteries resulted in very significant new blood vessel growth
(angiogenesis) in both mice and rabbits. Further studies of NRA in animals (dogs
and pigs) will be conducted at Columbia University by Dr. Daniel Burkhoff in the
first quarter of 2001.
Results of Operations
Three month period ended December 31, 2000 and December 31, 1999
During the three months ended December 31, 2000, the Company had
revenues of $75,000 compared with revenues of $-0- for the three months ended
December 31, 1999. This revenue was a result of a feasibility study agreement,
relating to the Company's stent-coating technology, with Advanced Cardiovascular
Systems, Inc., a California Corporation and subsidiary of Guidant Corporation.
Patent activity for the Company during the three months ended December
31, 2000 included the filing of two new patents: Method and Apparatus for
Treating Vascular Disease with PGE-1 Bearing Liposomes, patent application
serial no. 08/867,189; and Resorbable Prosthesis for Medical Treatment, patent
application serial no. 60/236,593.
During the three months ended December 31, 2000 and 1999, costs and
operating expenses were $686,408 and $158,623, respectively. The increase in
costs and operating expenses is primarily due to an increase in research and
development, facilities, personnel and overhead as rent and other costs
increased due to the ongoing expenditures required in the furnishing, equipment
purchase and staffing of the new in-house laboratory, as well as the advances
made in animal studies of NRA and human clinical trials of Liprostin(TM).
Research and development expenses totaled $336,000 during the three
months ended December 31, 2000, compared to $89,548 during the three months
ended December 31, 1999. This increase of $246,452 was related to the cost of
new equipment, materials, labor and travel connected to the initiation of the
rabbit study at Stanford University with NRA, the Phase I and II clinical
studies and preparation with Liprostin(TM) and the ongoing, in-house projects
for medicinally coated vascular stents.
Six month period ended December 31, 2000 and December 31, 1999
During the six months ended December 31, 2000, the Company had revenues
of $75,000 compared with revenues of $14,283 for the six months ended December
31, 1999. This increase in revenue was a result of a feasibility study
agreement, relating to the Company's stent-coating technology, with Advanced
Cardiovascular Systems, Inc., a California Corporation and subsidiary of Guidant
Corporation.
During the six months ended December 31, 2000 and 1999, costs and
operating expenses were $1,271,981 and $496,152, respectively. The increase in
costs and operating expenses is primarily due to an increase in research and
development, facilities, personnel and overhead as rent and other costs
increased due to the ongoing expenditures required in the furnishing, equipment
purchase and staffing of the new in-house laboratory, as well as the advances
made in animal studies of NRA and human clinical trials of Liprostin(TM).
Research and development expenses totaled $654,600 during the six
months ended December 31, 2000, compared to $319,460 during the six months ended
December 31, 1999. This increase of $335,140 was related to the cost of new
equipment, materials, labor and travel associated with the initiation of the
rabbit study at Stanford University with NRA, the Phase I and II clinical
studies and preparation with Liprostin(TM) and the ongoing, in-house projects
for medicinally coated vascular stents.
Cash flows used in operating activities for the six months ended
December 31, 2000 increased $713,486 to $1,013,108, compared to $299,262 for the
six months ended December 31, 1999, primarily due to the increased cost of
scientific personnel, materials and drug manufacturing in preparation for the
Liprostin(TM) clinical trials.
Liquidity and Capital Resources
We had a working capital deficit at December 31, 2000, of $349,880,
compared to a working capital deficit of $137,563 at June 30, 2000.
We require significant additional funds to enable it to proceed with
its Phase II/III Liprostin(TM) clinical trials, as well as research and
development of its licensed product nicotine receptor agonist (NRA).
During the fiscal year ended December 31, 2000, we sustained our
operations from the sale of equity securities. Specifically, we completed the
following financings:
o In May 2000, we issued an aggregate of $1,500,000 of Series A 8%
Cumulative Convertible Preferred Stock in a private placement to six
investors. In connection with such transactions, the placement agents
received cash fees of $300,000, and warrants to purchase an aggregate
of approximately 333,333 shares.
o In addition, in November 2000, we issued an aggregate of $750,000 of
Series A 8% Cumulative Convertible Preferred Stock in a private
placement to four investors. In connection with such transactions, the
placement agents received cash fees of $150,000, and warrants to
purchase an aggregate of approximately 166,667 shares.
The Company continues to actively pursue additional financing,
collaborations with firms, and other arrangements aimed at increasing its
capital resources. Failure to acquire such funds may adversely impact the
scheduled marked introduction of Liprostin(TM) and possibly adversely affect the
Company's operations. In order to continue as a going concern, the Company must
raise additional funds as noted above and ultimately achieve profit from its
operation.
Subsequent Events - Recent Financing
In April 2001, we issued an aggregate of $750,000 of Series A 8% Cumulative
Convertible Preferred Stock in a private placement to two investors. In
connection with such transactions, the placement agents received cash fees of
$75,000, and warrants to purchase an aggregate of approximately 166,667 shares.
BUSINESS
History
We incorporated as a biopharmaceutical company under the laws
of the state of Nevada on June 10, 1996, under the name Endovasc, Inc. Upon our
initial incorporation, we were authorized to issue an aggregate of 25,000 shares
of capital stock with a par value of $0.001 per share. On September 5, 1996, we
amended our articles of incorporation to increase our authorized shares to
100,000,000 shares of common stock, par value $0.001 per share. On May 28, 1997,
we amended our articles of incorporation to change our name to Endovasc Ltd.,
Inc. On June 2, 1997, we amended our articles of incorporation to authorize a
total of 120,000,000 shares of capital stock, par value $0.001 per share, of
which 100,000,000 shares are common shares and 20,000,000 shares are preferred
shares.
On or about October 8, 1999, we received preclinical approval to file
an Investigational New Drug application for Phase I and II clinical trials of
our Liprostin technology. On or about February 25, 1999, we obtained the
exclusive licensing rights to Nicotine Receptor Agonist technology from the
University of Stanford, in exchange for stock and cash. We have commenced
preclinical trials on the safety and efficacy of NRA in conjunction with
Stanford University. Pursuant to our agreement with Stanford University, we are
financing their staff's clinical trials and animal studies of NRA at their
California facilities.
The Company has not been subject to bankruptcy, receivership or any
similar proceeding.
Overview
We develop, market and license biopharmaceutical products, particularly
liposomal drug delivery methods, for the human healthcare industry. We develop
liposomes, which are microscopic cell-like spheres composed of a thin, durable
lipid membrane surrounding a hollow compartment. Liposomes entrap and protect
drugs from degradation in the blood stream and can be engineered to regulate the
transport of molecules across their outer membrane. Using this technology, we
are developing products that deliver drugs to their intended target and release
them with efficiency and control.
Currently, our product development is focused on two product lines -
Liprostin and Nicotine Receptor Agonist. Although we hold patents and patents
pending for products in the process of clinical testing, our products have not
been approved for general sales. Consequently, we have not generated any
revenues and have historically operated with significant losses. Although our
current development efforts focus on vascular (heart and lung) applications of
our products, we intend to develop our technologies for use in many medical
treatment applications. We believe that this unique and highly adaptable
technology will put our products at the forefront of the $2 billion drug market.
Liprostin Technology
Our Liprostin products provide targeted delivery of Prostaglandin E-1
to blood vessels in connection with angioplasty procedures. Angioplasty is a
common medical procedure that utilizes a small balloon-like structure to expand
and clear blocked cardio-pulmonary blood vessels. Prostaglandin E1, a naturally
occurring hormone, is used to prevent common secondary blockages from occurring
after angioplasty treatment; these blockages are known as restenosis. Restenosis
following balloon angioplasty or stent placement is the most common problem
occurring in the over 1,000,000 patients undergoing these procedures annually
worldwide, according to the American Heart Association. The incidence of
restenosis can be as high as 40-50%, according to the American Heart
Association, within six months of the procedure (slightly less with stents) and
most drugs tested have not yet been proven to reduce restenosis significantly in
clinical trials. Similarly, Prostaglandin E1's short lifespan in the blood
stream can render it ineffective in preventing restenosis. Liprostin delivery
system uses polymer coatings and emulsions to provide a longer and more
controlled release of Prostaglandin E1 and to improve therapeutic effectiveness
of the drug.
We are developing Lipostrin coated balloon catheters and stents for
varied vascular applications. As described above, balloon catheters are utilized
to physically expand and clear blocked blood vessels in vascular surgical
procedures. Conversely, stents are small structures used during and after
vascular surgery to support vessels and deliver agents that promote healing. We
intend to develop our Liprostin product lines further to treat conditions such
as restenosis, coronary arrest, occlusive disease, ischemic ulcers, CLI (limb
salvage), claudicants, liver disease and arthritis.
We are conducting clinical trial testing of Liprostin to obtain the
Federal Drug Administration approval of its sale in the United States. Phase I
clinical trials test product safety and tolerance levels using a small group of
subjects, as well as providing information about the product's effectiveness and
dosage levels. Phase II clinical trials test product efficacy, optional dosage
levels and potential contraindications or side effects using a larger patient
group. We intend to complete both phases of clinical trials by approximately
December 31, 2002.
We have protected our proprietary rights to Liprostin technology
through US Patent 4,820,732, US Patent 4,955,878 and Notice of Allowance to US
Patent 5,980,551 received on November 9, 1999, and Trademark Application Ser.
No. 75/632,736 (Liprostin) and various patents pending.
Nicotine Receptor Agonist Technology
Our Nicotine Receptor Agonist technology promotes new growth of blood
vessels (known as angiogenesis or vasculogenesis), and has applications in the
treatment of heart disease, stroke, limb circulatory disease, and wound healing.
Researches at Stanford University discovered the technology during a 1999 study
funded by the Tobacco-Related Diseases Research Program of the University of
California, the American Heart Association, the National Institutes of Health
and the Deutsche Froschungsgemeinschkaft. While studying the damaging effects of
tobacco smoke, researchers discovered that smokers appeared less susceptible to
deaths due to infarction as compared to non-smokers. This counterintuitive
discovery suggested that low-dose (non-smoked) nicotine had extraordinary
angiogenic and vasculogenic growth factor potential. To develop technology based
on this unique discovery, we obtained a worldwide exclusive right to the patent
application for Nicotine Receptor Agonist in February 2000.
Further study of our Nicotine Receptor Agonist technology revealed more
conclusive results. Experiments have shown that nicotine promotes angiogenesis
and vasculogenesis in areas of the body that are deprived of proper blood
supply. Blockages of the arteries that feed an organ, often caused by build-up
of fatty material, cholesterol and plaques in arterial walls, may deprive the
tissue of proper blood supply. These blockages reduce the body's ability to
supply organs and surrounding tissue with nutrients, particularly oxygen, which
results in a condition called ischemia. Ischemia reduces cells' ability to
function and in severe cases causes rapid cell death. The body naturally defends
against ischemia by reducing the work required from the affected area and
attempting to grow new blood vessels into the ischemic area. Stanford
researchers found tobacco smokers had significantly more growth of new vessels
around such blockages than non-smokers, apparently due to the therapeutic
effects of nicotine. Upon further analysis, researchers determined that a
particular fraction of the nicotine molecule could provide a method of treating
and preventing a range of diseases and ailments involving angiogenesis. These
diseases, such as myocardial and cerebral infarction, mesenteric or limb
ischemia, common wounds, vascular occlusion, and vascular stenosis, commonly
called "hardening of the arteries", affect millions of persons every year in the
United States alone (American Heart Association).
We estimate that the market for treatment of these diseases is over $5
billion. For example, we estimate that a course of treatment for coronary
ischemia utilizing Nicotine Receptor Agonist drugs would cost approximately
$10,000 to $15,000. This type of treatment would be significantly less expensive
and intensive than current alternatives of angioplasty and or open heart
surgery. We hope to market a commercially viable product using this Nicotine
Receptor Agonist technology within three years.
Distribution Methods
Upon receipt of necessary governmental regulatory consent, we intend to
distribute products utilizing our Liprostin and Nicotine Receptor Agonist
technologies worldwide. As previously described, we are developing Lipostrin
coated balloon catheters and stents for varied vascular applications. We also
intend to develop new products that use Liprostin to treat conditions such as
coronary arrest, occlusive disease, ischemic ulcers, CLI (limb salvage),
claudicants, liver disease and arthritis. Although we have not developed
specific product applications for our Nicotine Receptor Agonist technology, we
intend to develop and distribute products for treatment of myocardial and
cerebral infarction, mesenteric or limb ischemia, common wounds, vascular
occlusion and vascular stenosis.
In addition to peer review, seminars, journals and direct sales, we
intend to market and distribute our products in conjunction with business
partners experienced in marketing and distribution in the biopharmaceutical and
medical industries. If we are unable to reach an agreement with marketing and
distribution partners that is acceptable to us, we may raise the funds necessary
to create our own production, marketing and distribution infrastructure through
a public offering of our securities.
Patents and Proprietary Rights
We believe that adequate protection of our proprietary technology is a
vital aspect of our business operations. Consequently, we pursue patent
protection for our proprietary technology in the United States and in foreign
countries, as deemed necessary to protect development of our operations.
We have patent protection for several products and are pursuing patent
and trademark applications for additional products. In August 1996, Dr. Jackie
R. See transferred and assigned patent rights in the United States, Germany and
Canada for two of our products. The first patent, United States Patent No.
4,820,732, was issued on April 11, 1989, and protects our proprietary technology
regarding a "Method and Composition for Reducing Dysfunction in Angioplasty
Procedures." The second patent, United States Patent No. 4,955,878, was issued
on September 11, 1990, and protects our proprietary technology regarding a "Kit
for Treating Arterial Dysfunction Resulting from Angioplasty Procedures." We
have not maintained the application of this second patent and intend to let its
protections expire to the benefit of the public domain, except as limited by
patent applications described below.
In addition to these assigned patents, we obtained a United States
patent for our proprietary technology regarding a "Composition and Method for
Making a Biodegradable Drug Delivery Stent," on November 9, 1999. Similarly, we
have filed a patent application for this technology under the Patent Cooperation
Treaty, as well as with the European Patent office and European Union. These
applications seek patent protection in France, Germany and the United Kingdom.
We have United States patent applications pending for several other
technologies. In June 1997, we filed a United States patent application for our
proprietary technology regarding a "Method and Apparatus for Treating Vascular
Disease with PGE-1 Bearing Liposomes." In May 1999, we filed a United States
patent application for our proprietary technology regarding "Prosthesis with
Biodegradable Surface Coating and Method for Making Same." The May 1999
application is a "continuation in part" of our patent application regarding
"Composition and Method for Making a Biodegradable Drug Delivery Stent," and, if
granted, will protect this technology's application in various medical products.
In June 1999, we filed a United States patent application for our proprietary
technology regarding "Sterically Stabilized Liposomes with Improvement of Blood
Retention Times and Targeting of Sites of Disease by Prostaglandins in
Particulate Drug Carriers."
We are seeking trademark protection for the name Liprostin(TM) under
Trademark Application Ser. No. 75/632,736. In May of 1999, the United States
Patent and Trademark Office notified us that our pending Patent US Ser. No.
09/309,949 would be allowed (Notice of Allowance). We also own rights to several
trademarks employed in our business, including our logo, the registered domain
name of www.endovasc.com, and other trade and service marks identifying our
products and services.
In February 2000, we obtained exclusive worldwide licensing rights to
develop, manufacture, use and sell products incorporating nicotine and nicotine
agonists for therapeutic angiogenesis. Pursuant to our acquisition of these
product rights from the Leland Stanford Junior University, we agreed to pay
royalties to the university on sales of any products incorporating the nicotine
agonist technology. Our licensing rights may be terminated in the event that we
default on payment of royalties, in addition to certain other circumstances.
It is important to note that other public and private institutions may
have obtained, or filed applications for, patents that we may need for
development of our products. We cannot know the scope or validity of such
patents, the extent that we may desire to acquire licenses under such patents,
or the availability of such licenses upon terms that are acceptable to us.
Governmental Regulation
United States and international governmental regulation of the
biopharmaceutical industry is a significant factor in our operations,
particularly our research and development activities. In the United States the
Food and Drug Administration oversees clinical testing, production and marketing
of our products for human therapeutic use through rigorous mandatory procedures
and safety.
The Food & Drug Administration requires satisfaction of several
procedures prior to approving marketing and distribution of pharmaceutical
products in the United States. These includes (i) preclinical tests, (ii)
submission of an application for an Investigational New Drug, which must become
effective before commencing human clinical trials, (iii) thoroughly documented
and supervised human clinical trials to determine drug safety and efficacy in
its intended application, (iv) submission and acceptance of an Investigational
New Drug Application, in the case of drugs, or a Product License Application, in
the case of biologics, and (v) approval of the Investigational New Drug
Application or Product License Application prior to commercial sale or shipment
of the drug or biologic. In addition to this process, each domestic drug
manufacturing establishment must be registered or licensed with the Food and
Drug Administration. Domestic manufacturing establishments are also subject to
inspections by the FDA and by other federal, state and local agencies and must
comply with Good Manufacturing Practices as required.
Clinical trials are typically conducted in three sequential phases,
which may overlap. Phase I clinical studies test dosage and tolerance upon
initial introduction of the drug to humans. Phase II clinical studies document
evaluation of drug safety and efficacy. Phase III trials document large scale
evaluation of drug safety and efficacy and may utilize larger patient pools,
depending on the type of marketing approval that is sought.
Clinical testing and the Food and Drug Administration approval process
for a new product often involves significant time and resources. The Food and
Drug Administration may grant an unconditional approval of a drug for a
particular indication or may grant approval pending further post-marketing
testing. In addition, further clinical studies may be required to provide
additional safety data or to gain approval for an alternative product
application than was originally approved.
International biopharmaceutical product sales and distribution are
subject to widely varying regulatory requirements. Generally, the European Union
has coordinated its member states' common standards for clinical testing of new
drugs. Due to difference in regulatory restrictions in the European Union and
other foreign jurisdictions the time required to obtain regulatory approval from
a foreign country's regulatory agencies may be longer or shorter than that
required for Food and Drug Administration approval.
In addition to these regulations, our operation is subject to
regulations under state and federal law regarding occupational safety,
laboratory practices, the use and handling of radioisotopes, environmental
protection and hazardous substance control as well as other present and possible
future local, state, federal and foreign regulation.
Competition
Competition in the biopharmaceutical industry and the liposome and
lipid-based product area is intense. Factors such as product performance,
patient compliance, physician acceptance, ease of use, safety, price, marketing,
distribution and adaptability of administration are crucial to capturing market
position in our industry. Competition may also be based on other company's
development of alternative products and approaches aimed at the treatment,
diagnoses or prevention of the same diseases as our products.
Competition from other companies is based on scientific and
technological factors, the availability of patent protection, the ability to
commercialize technological developments, the ability to obtain government
approval for testing, manufacturing and marketing and the economic factors
resulting from the use of those products. Many companies, both public and
private, including well-known pharmaceutical and chemical companies, many of
which have greater capital resources than we do, are seeking to develop lipid
and liposome based products similar to our own. In addition, colleges,
universities, and public and private research institutions are similarly seeking
to establish proprietary rights to these product technologies.
We face established and well-funded competition from other companies
developing liposome based drug delivery systems. These competitors include Eli
Lilly, The Liposome Company and Schering-Plough. These companies generally use
liposome for the delivery of antitumor drugs, while our products are primarily
intended for use in vascular treatments. To our knowledge, current competition
in the vascular treatment area is limited to ReoPro(R) sold by Censtocor and
marketed by Eli Lilly, which is used in angioplasty.
Research and Development
We maintain 3,500 square feet of lab space equipped with customary wet
laboratory equipment at our headquarters in Montgomery, Texas.
Our research and development efforts are focused on our core product -
Liprostin. We are conducting clinical trial testing of Liprostin to obtain the
Federal Drug Administration approval of its sale in the United States. Phase I
clinical trials test product safety and tolerance levels using a small group of
subjects, as well as providing information about the product's effectiveness and
dosage levels. Phase II clinical trials test product efficacy, optional dosage
levels and potential contraindications or side effects using a larger patient
group. We intend to complete both phases of clinical trials by approximately
December 31, 2002.
In addition, we are conducting feasibility studies with prospective
strategic partners to find practical collaborative products that incorporate
Liprostin with other technologies. We intend to develop new uses for our core
product Liprostin, including applications in hip or bone prostheses, cancer
treatment, inflammatory disease, liver disease and other diseases that have
responded well to prostaglandin treatment.
We are monitoring and assisting Stanford University's research and
development of our Nicotine Receptor Agonist technology and have commenced
preclinical trials, in conjunction with the university, on the safety and
fficacy of this technology. Pursuant to our agreement with Stanford University,
we are financing their staff's clinical trials and animal studies of Nicotine
Receptor Agonist, conducted at their California facilities. We are currently
developing this technology for use in treatment of peripheral occlusive arterial
disease, in addition to other applications.
To date, all of our research and development has been carried out
without the need of additional plant and equipment. Although we cannot assure
the adequacy of our current plant and equipment for future operations, we do not
intend to obtain additional plant or equipment at this time.
Employees
As of March 01, 2001, we employed fourteen employees, including five
management and nine support staff employees. In addition, we employ twelve
part-time consultants. None of our employees or independent contractors is
subject to a collective bargaining agreement and we believe that our relations
with our employees are good.
Properties
We maintain our executive offices and research and development
facilities at 15001 Walden Road, Suites 108, 234 and 235, Montgomery, Texas
77356. We lease these 4,750 square foot facilities at an aggregate monthly
rental rate of $4,200.
Legal Proceedings
We are not involved in any material litigation or legal proceedings and
are not aware of any potential material litigation or proceeding threatened
against us.
MANAGEMENT
Directors and Executive Officers
Our Directors, executive officers, and key employees are as follows:
Period Served As
Name Age Position Officer/Director/Key
Employee
David P. Summers 61 Chief Executive Officer Inception (1996)
and Chairman Present
Diane Dottavio 49 Acting Chief Scientific Officer January 2000 to Present
and Director of Research and and
Development March 2000 to Present
Barbara J. Richardson 53 Vice President of Operations, January 2000 to Present
Secretary and Director
M. Dwight Cantrell 54 Chief Financial Officer, January 1997 to Present
Treasurer and Director
Gary R. Ball 40 Director July 1996 to Present
Claudio R. Roman 42 Director January 1997 to Present
Set forth below is a brief background of the executive officers, Directors and
key employees of the Company, based on information supplied by them.
Dr. David P. Summers serves as our Chief Executive Officer and Chairman.
Dr. Summers has served in this capacity on a full-time basis since our inception
and is primarily responsible for our operations as a whole. Prior to working
with Endovasc, Dr. Summers founded American BioMed, Inc. and served as its
President and Chief Executive Officer from 1984 to 1995. Dr. Summers is a Fellow
in the American College of Angioplasty as well as the inventor of several
medical devices used to treat cardiovascular diseases. He is the author of 18
issued patents and has 8 patents pending. Prior to founding American BioMed, Dr.
Summers assisted with the management of several corporations, including C.R.
Bard, Inc., a manufacture and distributor of cardiovascular medical products,
Karl Stortz Endoscopy, an endoscopic instrument company, and Pall Corporation, a
manufacturer and distributor of blood filtration products. Dr. Summers holds an
M.B.A. degree from Pepperdine University as well as a Ph.D. in International
Economics from Kennedy-Western University. He is also a member of the New York
Academy of Sciences, the American Association of Advancement of Science, the
Houston Inventors Association, the International Society for Endovascular
Surgery, the European Vascular Society, and the Society of Plastic Engineers.
Diane Dottavio serves as our Acting Chief Scientific Officer and Director
of Research and Development. Prior to joining us, Ms. Dottavio served as Senior
Scientist with Leukosite, Inc., from 1994 to 1996, and as Director of Laboratory
Instruction and Research at the University of Houston, from 1997 to this year.
Ms. Dottavio holds a B.S. in Biology and a M.S. in Organic Chemistry from the
University of New Mexico, as well as a Ph.D. in Biochemistry from the University
of Texas.
Barbara J. Richardson serves as our Vice President of Operations, Secretary
and Director. Ms. Richardson is experienced in small business management and
marketing. Prior to joining us in January of this year, Ms. Richardson served as
Senior Administrative Coordinator for Baylor College of Medicine, from 1994 to
this year.
M. Dwight Cantrell serves as our Chief Financial Officer, Treasurer and
Director, on a part-time basis. Mr. Cantrell has maintained, and continues to
maintain, a public accounting practice in the state of Texas since 1976. Mr.
Cantrell is a public accountant, and holds a B.S. in accounting from Southern
Ohio University.
Gary R. Ball serves as our Director and is one of our co-founders. Prior to
co-founding us in July 1996, Mr. Ball served as a mechanical engineer with
American BioMed, Inc., from 1991 to 1996. Mr. Ball is a co-inventor of two U.S.
patents and is experienced in prototype design, research, and development, as
well as reliability testing and patent research and filing.
Claudio R. Roman serves as our Director. Mr. Roman is a practicing attorney
in the State of Texas. Mr. Roman has maintained, and continues to maintain, a
private law practice in the state of Texas since 1985. Mr. Roman holds a J.D.
degree from the University of Houston School of Law.
Our Directors hold office until the next annual meeting of our stockholders
and until their successors have been elected and duly qualified. Executive
officers are elected by our Board of Directors annually and serve at the
discretion of the Board.
Compensation of Directors
Non-employee Directors receive no salary for their services and receive no
fee from the Company for their participation in meetings, although all Directors
are reimbursed for reasonable travel and other out-of-pocket expenses incurred
in attending meetings of the Board.
Executive Compensation
The following table sets forth certain summary information with respect
to the compensation paid to the our executive officers for services rendered to
us, in all capacities, for the fiscal years ended June 30, 2000, 1999, and 1998.
Other than as listed below, we had no executive officers whose total annual
salary and bonus exceeded $100,000 for that fiscal year:
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities
Annual Restricted Under- Other
Name and Compen- Stock Lying LTIP Compen-
Principal Salary Bonus sation Awards Options/ Payouts sation
Position Year ($) ($) ($) ($) ($) ($) SARs(#)
- ----------- ------ -------- -------- ------- ---------- -------- ------- -------
David P. Summers 2000 72,000 - - - 200,000 $0.25 -
CEO and Director 1999 75,000 - - - 1,000,000 $0.25 -
1998 60,000 - - - - - -
Directors of the Company receive no compensation for their services as
Directors.
Employment Agreements
We have entered into employment agreements with Dr. David Summers and
Ms. Barbara Richardson. We entered into a three-year employment contract with
Dr. Summers in 1996, providing for annual compensation of $150,000 in cash and
equity interests. The original term of this contract has expired, but the term
has been renewed for a one-year period each June since its original expiration.
We also have a one-year automatically renewable employment contract
with Ms. Richardson, providing for annual compensation of $60,000 in cash and
equity interests.
Stock Option Plans
In December 2000, the Board of Directors adopted a stock option plan
(the "2000 Plan") that had been approved by shareholders in at the Annual
Meeting, pursuant to which 2,000,000 shares of common stock are reserved for
issuance. The following is a description of the 2000 Plan:
The 2000 Plan is administered by the Board of Directors, or by a
committee with at least two Directors as delegated by the Board of Directors who
determine among other things, those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of common stock issuable upon the exercise of the options and
the option exercise price.
The 2000 Plan is for a period of ten years. Options under the 2000 Plan
must be issued within ten years from the effective date of the 2000 Plan.
Options may be granted to officers, Directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to us.
Options granted under the 2000 Plan may be exercisable for up to ten years, may
require vesting, and shall be at an exercise price all as determined by the
Board of Directors. Options will be non-transferable except to an option
holder's personal holding company or registered retirement savings plan and
except by the laws of descent and distribution or a change in our control, as
defined in the 2000 Plan, and are exercisable only by the participant during his
or her lifetime. Change in control includes (i) the sale of substantially all of
our assets and merger or consolidation with another, or (ii) a majority of the
Board of Directors changes other than by election by the shareholders pursuant
to a Board of Directors' solicitation or by vacancies filled by the Board of
Directors caused by death or resignation of such person.
If a participant ceases affiliation with us by reason of death,
permanent disability or the retirement of an optionee either pursuant to a
pension or retirement plan we adopted on the normal retirement date prescribed
by us from time to time, the option remains exercisable for three months from
such occurrence but not beyond the option's expiration date. Other termination
gives the participant three months to exercise, except for termination for cause
that results in immediate termination of the option.
Options granted under the 2000 Plan, at the discretion of the
compensation committee or the Board of Directors, may be exercised either with
cash, by certified check or bank cashier's check, common stock having a fair
market equal to the cash exercise price, the participant's promissory note, or
with an assignment to us of sufficient proceeds from the sale of the common
stock acquired upon exercise of the Options with an authorization to the broker
or selling agent to pay that amount to us, or any combination of the above.
The exercise price of an option may not be less than the fair market
value per share of common stock on the date that the option is granted in order
to receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the common stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether Directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by us become available again for issuance
under the 2000 Plan.
The 2000 Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of common stock reserved for
issuance upon the exercise of options granted under the 2000 Plan may not be
increased without the consent of our shareholders.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date of this
prospectus regarding certain ownership of our outstanding common stock by all
officers and directors individually, all officers and directors as a group, and
all beneficial owners of more than five percent of the common stock.
Percentage of
Name and Address of Amount of Beneficial
Beneficial Owner Beneficial Ownership
Ownership(1)
David P. Summers 3,581,278 (2) 15.89
Barbara J. Richardson 52,000 0.23
M. Dwight Cantrell 100,000 (3) 0.44
Gary R. Ball 993,500 (4) 4.41
Claudio R. Roman 50,000 0.22
Celeste Trust Reg. 3,333,333*(5)(6) 14.79
Balmore Funds 6,269,841*(5)(7) 27.83
All Directors and Executive Officers as a Group 14,379,952 21.19
(5 persons)
- ----------------------
* Except as otherwise noted, the address of the beneficial owners described
in this table shall be c/o Endovasc Ltd., Inc., 15001 Walden Road, Suite 108,
Montgomery, Texas 77356.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of the registration
statement upon the exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants that are
held by such person and which are exercisable within 60 days of the date of this
registration statement have been exercised. Unless otherwise indicated, the
company believes that all persons named in the table have voting and investment
power with respect to all shares of common stock beneficially owned by them.
(2) Mr. Summer's beneficially owned shares include approximately 243,000
shares beneficially owned by his wife, Dorothy Summers. Mr. Summers exercises no
investment or voting power over any of the shares owned by his wife, and
disclaims beneficial ownership of those shares.
(3) Mr. Cantrell's beneficially owned shares include approximately 50,000
shares beneficially owned by his wife, Jane Cantrell. Mr. Cantrell exercises no
investment or voting power over any of the shares owned by his wife, and
disclaims beneficial ownership of those shares.
(4) Mr. Ball's beneficially owned shares include approximately 5,000 shares
beneficially owned by his wife, Sherry Ball. Mr. Ball exercises no investment or
voting power over any of the shares owned by his wife, and disclaims beneficial
ownership of those shares.
(5) Represents shares of common stock issuable upon conversion of preferred
stock at an assumed conversion price of $0.063 per share. Because the number of
shares of common stock issuable upon conversion of the preferred stock is
dependent in part upon the market price of the common stock prior to a
conversion, the actual number of shares of common stock that will be issued upon
conversion will fluctuate daily and cannot be determined at this time. However,
the selling shareholder has contractually agreed to restrict its ability to
convert its preferred stock and receive shares of our common stock such that the
number of shares of common stock held by it and its affiliates after such
conversion exceed 9.99% of the then issued and outstanding shares of common
stock following such conversion.
(6) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934, Thomas Hackl may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the meaning of
Section 2(11) of the Securities Act of 1933.
(7) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934, Gisela Kindle may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the meaning of
Section 2(11) of the Securities Act of 1933.
CERTAIN TRANSACTIONS
As of the date of this prospectus, we have not entered into a transaction
during the past two years with a value in excess of $60,000 with a Director,
officer, or beneficial owner of 5% or more of our capital stock, or members of
their immediate families that had, or is to have, a direct or indirect material
interest in us, except as follows:
Effective October 1, 1999, we entered into a stock option agreement with
Dr. David P. Summers. Under this agreement, Dr. Summers is granted an option to
purchase up to 1,000,000 shares of our common stock at a purchase price below
the prevailing market price. The option is for a five year period ending October
31, 2004. In December 2000, Dr. Summers exercised his rights under the agreement
in exchange for $250,000 in debt.
Effective December 9, 1997, we entered into a stock option agreement with
Gary R. Ball. Under this agreement, Mr. Ball is granted an option to purchase up
to 600,000 shares of our common stock at a purchase price below the prevailing
market price. The option is for a three year period expiring December 8, 2000.
In January 2000, Mr. Ball exercised his option under the agreement in exchange
for $60,000 in accrued debt.
During the fiscal year ended June 30, 1998, we also entered into an
agreement with M. Dwight Cantrell under the terms of which he was compensated
for past services as our Director. Under the terms of this agreement, Mr.
Cantrell was granted an option to purchase 50,000 shares of our common stock at
a purchase price of $0.75 per share for a term of three years. In December 2000,
Mr. Cantrell exercised his right under the agreement in exchange for $25,000 in
accrued debt.
During the fiscal year ended June 30, 1999, we entered into an agreement
with Claudio Roman, Esq., pursuant to which he was compensated for past services
as our legal counsel. Under the terms of this agreement, Mr. Roman was granted
an option to purchase 50,000 shares of our common stock at a purchase price of
$0.25 per share for a term of three years.
During the fiscal year ended June 30, 1998, we entered into an agreement to
purchase the rights to patent number 4,820,732 and patent number 955,878 from
Francis Pizzulli. The purchase price was $125,000, $50,000 of which was payable
upon execution and $75,000 of which was due by December 31, 1997. The agreement
also called for the issuance of 200,000 shares of our common stock. We made the
initial $50,000 payment and issued the 200,000 shares of stock, pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended. However, we did not make the $75,000 payment as scheduled. The
agreement indicated that if the final payment was not made within seven months
from the execution of the agreement that the final payment would be increased to
$150,000 plus the issuance an additional 200,000 shares of stock. We issued a
total of 300,000 shares in final settlement of the agreement, in March 2000.
Between March 1998 and December 1999, David Summers, our Chairman of the
Board of Directors and Chief Executive Officer, made two advances to us in the
amounts of $123,000 and $25,000, respectively. These advances were made on an
unsecured basis, with no interest accrual, and were due and payable on June 30,
2000. During December 1999, we issued 1,250,000 shares of common stock, valued
at $0.10 per share as of the date of the issuance, in full and final repayment
of the aforementioned advances.
During the fiscal year ended June 30, 2000, David Summers, our Chairman of
the Board of Directors, and Chief Executive Officer, made advances to the
corporation totaling $795,748. In December, 2000 $250,000 of this debt was
retired to exercise as stock option as noted above.
In December 2000, the Board of Directors granted stock options to the
following officers and directors: David P Summers, CEO, 200,000 shares: Barbara
J Richardson, Executive Vice President, 100,000 shares; and Dwight Cantrell,
Chief Financial Officer, 200,000 shares. The options were for 3 years at an
exercise price of $0.40.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 120,000,000 shares of capital stock,
par value $0.001 per share, of which 100,000,000 shares are common stock shares
and 20,000,000 shares are preferred stock shares that may be issued in one or
more series at the discretion of the Board of Directors. As of the date hereof,
22,526,412 shares of common stock, options and warrants to purchase up to
2,021,083 shares of common stock, and 21,207 shares of preferred stock are
issued and outstanding.
Common Stock
Holders of shares of our common stock are entitled to one vote per
share on each matter submitted to vote at any meeting of shareholders. Shares of
common stock do not carry cumulative voting rights and, therefore, holders of a
majority of the outstanding shares of common stock will be able to elect the
entire Board of Directors, and, if they do so, minority shareholders would not
be able to elect any members to the Board of Directors. Our Board of Directors
has authority, without the action by our shareholders, to issue all or any
portion of the authorized but unissued shares of common stock, which would
reduce our shareholders' ownership interest in us and which may dilute our
common stock's book value.
Our by-laws provide that a majority of the shares issued and
outstanding and entitled to vote on a matter shall constitute a quorum for
shareholders' meetings, except with respect to matters for which a greater
quorum is required by law.
Our shareholders have no pre-emptive rights to acquire additional
shares of common stock. The shares of common stock are not subject to redemption
and carry no subscription or conversion rights. In the event of our liquidation,
the shares of common stock are entitled to share equally in corporate assets
after satisfaction of all liabilities. All of the shares of common stock
currently issued and outstanding are fully paid and non-assessable.
Holders of shares of common stock are entitled to receive such
dividends as the Board of Directors may from time to time declare out of funds
legally available for the payment of dividends. We have not paid dividends on
our shares of common stock and there can be no assurance that we will pay
dividends in the foreseeable future.
Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by our Board of Directors.
Our Board of Directors has authority, without action by the shareholders, to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights and any other rights of such series. Any Preferred Shares, if
and when issued, may carry rights superior to those of the shares of common
stock.
Options and Warrants
The following is a summary of outstanding options and warrants to
purchase our common stock, as at March 1, 2001:
Number
of Shares Vested Expiration Date Exercise Price
100,000 100,000 June, 2001 $ 0.40
50,000 50,000 May, 2001 0.75
50,000 50,000 December, 2003 1.00
675,500 0 December, 2003 0.40
250,000 250,000 May, 2003 0.10
395,583 395,583 May, 2003 1.89
--------- -------
TOTAL 1,521,083 845,583
Securities Included in this Prospectus
In this prospectus, we are registering 33,662,095 shares of Common
Stock underlying 21,207 shares of outstanding Series A 8% Cumulative Convertible
Preferred Stock issued to six investors pursuant to a Subscription Agreement
entered into in May 2000 in which the investors originally agreed to purchase an
aggregate of $4.5million of convertible preferred stock, in three (3) $1.5
million tranches.
Holders of the preferred stock are entitled to receive cash dividends,
payable quarterly and have preferential liquidation rights above all other
issuances of common stock for an amount equal to the stated value. The preferred
stock and unpaid dividends are convertible into shares of common stock equal to
an amount determined by the market value of the common stock at the date of
conversion, adjusted for changes in the market price prior to the conversion.
Holders of the preferred stock do not have voting rights.
As of the date hereof, the number of shares of common stock issuable
upon conversion of the outstanding convertible preferred stock is 33,662,095,
based on a conversion price of $0.063 per share. We are required to register
200% of this amount, for a total of 67,324,190 shares. In addition, 666,666
shares underlying warrants are being registered. These warrants have exercise
price between 0.147 and $1.89 per share.
On May 9, 2001, Endovasc and the subscribers agreed to amend the terms
of their agreements such that no further issuances of securities will be made
under the agreements with the subscribers.
The conversion price for the convertible preferred stock shall be the
lesser of (a) 85% of the average of the three lowest closing bid prices for the
thirty (30) trading days immediately preceding the issue date of the convertible
preferred stock, or (b) 70% of the average of the three (3) lowest closing bid
prices for the thirty (30) days immediately preceding the conversion of the
shares of convertible preferred stock. The maximum number of shares of common
stock that any subscriber or group of affiliated subscribers may own after
conversion at any given time is 9.99%.
The parties have made mutually agreeable standard representations and
warranties. We have also entered into certain covenants including, but not
limited to, the following: (i) we may not redeem the convertible debentures
without the consent of the holder; (ii) we will pay to certain finders a cash
fee for location of the financings; (iii) we have agreed to incur certain
penalties for untimely delivery of the shares.
Transfer Agent
Nevada Agency & Trust Company, Valley Bank Plaza, Suite 880, 50 West
Liberty Street, Reno, Nevada 89501, will act as transfer agent and registrar for
our securities.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, we have outstanding 22,526,412
shares of common stock.
6,561,831 of our shares of outstanding common stock are "restricted
securities" as that term is defined in Rule 144 under the Securities Act of
1933, as amended ("Act"), and under certain circumstances may be sold without
registration pursuant to that rule.
In general, under Rule 144 as currently in effect, subject to
satisfaction of certain other conditions, a person (or persons whose shares are
required to be aggregated), including our affiliates, who beneficially owns
"restricted shares" for a period of at least two years is entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of 1% (225,264 as of the date of this prospectus) of the then
outstanding shares of common stock, or if the common stock is quoted on the
NASDAQ System, the average weekly trading volume of the common stock during the
four calendar weeks preceding the filing of the required notice of sale with the
Securities and Exchange Commission. The seller also must comply with the notice
and manner of sale requirements of Rule 144, and there must be current public
information available about us. In addition, any person (or persons whose shares
are aggregated) who is not, at the time of the sale, nor during the preceding
three months, our affiliate, and who has beneficially owned restricted shares
for at least three years, can sell such shares under Rule 144 without regard to
any of the limitations described above.
No predictions can be made of the effect, if any, that future sales of
restricted shares or the availability of restricted shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the restricted shares of common stock in the public
market could adversely affect the then prevailing market prices for the common
stock and could impair our ability to raise capital through the sale of our
equity securities.
SELLING STOCKHOLDERS
The table below sets forth information concerning the resale of the
shares of common stock by the selling stockholders. We will not receive any
proceeds from the resale of the common stock by the selling stockholders. We
will receive proceeds from the exercise of the warrants. Assuming all the shares
registered below are sold by the selling stockholders, none of the selling
stockholders will continue to own any shares of our common stock.
The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of
shares of common stock beneficially owned by each person, the number of shares
of common stock that may be sold in this offering and the number of shares of
common stock each person will own after the offering, assuming they sell all of
the shares offered.
Total
Total Shares Percentage Percentage Percentage
of Common of Common of Common Beneficial of Common
Name Stock Issuable Stock, Shares of Beneficial Stock Ownership Stock Owned
Upon Assuming Common Stock Ownership Owned After the After
Conversion of Full Included in Before the Before Offering Offering
Notes Conversion Prospectus Offering Offering (1) (1)
The Keshet Fund (8) 11,759,508 (2) 34.30% 23,519,015 (4) 1,123,645 4.99% (6) -- --
Keshet, L.P. (8) 9,464,984 (2) 29.59% 18,929,968 (4) 1,123,645 4.99% (6) -- --
Balmore S.A. (9) 6,269,841 (3) 21.77% 6,269,841 (4) 2,250,389 9.99% (7) -- --
Celeste Trust Reg. (10) 3,333,333 (3) 12.89% 3,333,333 (4) 2,250,389 9.99% (7) -- --
Nesher Ltd. (8) 1,123,645 (2) 4.99% 2,925,206 (4) 1,123,645 4.99% (6) -- --
Talbiya B. Investments Ltd. 1,123,645 (2) 4.99% 2,743,650 (4) 1,123,645 4.99% (6) -- --
(8)
Alon Enterprises Ltd. (11) -- -- 422,222 (5) 422,222 (5) 1.8% -- --
Libra Finance S.A. (12) -- -- 244,445 (5) 244,445 (5) 1.1% -- --
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the debentures and exercise of the debenture warrants is subject to
adjustment depending on, among other factors, the future market price of the
common stock, and could be materially less or more than the number estimated in
the table.
(1) Assumes that all securities registered will be sold.
(2) Represents shares of common stock issuable upon conversion of preferred
stock at an assumed conversion price of $0.063 per share. Because the
number of shares of common stock issuable upon conversion of the
preferred stock is dependent in part upon the market price of the common
stock prior to a conversion, the actual number of shares of common stock
that will be issued upon conversion will fluctuate daily and cannot be
determined at this time. However, the selling shareholder has
contractually agreed to restrict its ability to convert its preferred
stock and receive shares of our common stock such that the number of
shares of common stock held by it and its affiliates after such
conversion exceed 4.99% of the then issued and outstanding shares of
common stock following such conversion or exercise.
(3) Represents shares of common stock issuable upon conversion of preferred
stock at an assumed conversion price of $0.063 per share. Because the
number of shares of common stock issuable upon conversion of the
preferred stock is dependent in part upon the market price of the common
stock prior to a conversion, the actual number of shares of common stock
that will be issued upon conversion will fluctuate daily and cannot be
determined at this time. However, the selling shareholder has
contractually agreed to restrict its ability to convert its preferred
stock and receive shares of our common stock such that the number of
shares of common stock held by it and its affiliates after such
conversion exceed 9.99% of the then issued and outstanding shares of
common stock following such conversion or exercise.
(4) Includes 200% of the shares issuable on conversion of the preferred
stock, based on an assumed conversion price of $0.063 per share. The
number of shares of common stock issuable upon conversion of the
preferred stock is dependent in part upon the market price of the common
stock prior to a conversion, the actual number of shares of common stock
that will be issued in respect of such conversions and, consequently,
offered for sale under this registration statement, cannot be determined
at this time.
(5) Represents shares of common stock issuable upon the exercise of warrants
to purchase common stock
(6) Represents shares of common stock issuable upon conversion of debentures
or exercise of warrants of the selling shareholder. However, the selling
shareholder has contractually agreed to restrict its ability to convert
its debentures or exercise its warrants and receive shares of our common
stock such that the number of shares of common stock held by it and its
affiliates after such conversion or exercise exceed 4.99% of the then
issued and outstanding shares of common stock following such conversion
or exercise. This restriction may not be waived.
(7) Represents shares of common stock issuable upon conversion of debentures
or exercise of warrants of the selling shareholder. However, the selling
shareholder has contractually agreed to restrict its ability to convert
its debentures or exercise its warrants and receive shares of our common
stock such that the number of shares of common stock held by it and its
affiliates after such conversion or exercise exceed 9.99% of the then
issued and outstanding shares of common stock following such conversion
or exercise.
(8) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
John Clark may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933. Keshet LP, Keshet
Fund LP, Talbiya B. Investments Ltd. and Nesher Ltd. are under common
control and all shares registered hereunder may be deemed to be
beneficially owned by such control person. All such selling stockholders
may be deemed to be a purchasing group for purposes of Rule 13d, but are
not required to file a Form 13d because of the limitation of their
beneficial ownership to 4.99%, as a group.
(9) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
Gisela Kindle may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933.
(10) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
Thomas Hackl may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933.
(11) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
Shmuel Elmakis may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933.
(12) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
Seymour Braun may be deemed a control person of the shares owned by such
entity. The selling shareholder is deemed an "underwriter" within the
meaning of Section 2(11) of the Securities Act of 1933.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. There is no assurance that the selling stockholders
will sell any or all of the common stock in this offering. The selling
stockholders may use any one or more of the following methods when selling
shares:
o Ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers.
o Block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction.
o An exchange distribution following the rules of the applicable exchange
o Privately negotiated transactions
o Short sales or sales of shares not previously owned by the seller
o A combination of any such methods of sale any other lawful method
The selling stockholders may also engage in:
o Short selling against the box, which is making a short sale when the
seller already owns the shares.
o Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by the
stockholder.
o Pledging shares to their brokers under the margin provisions of
customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer to sell the pledged
shares.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from selling stockholders in amounts to be negotiated.
If any broker-dealer acts as agent for the purchaser of shares, the
broker-dealer may receive commission from the purchaser in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be considered to be "underwriters" within the
meaning of the Securities Act for such sales. An underwriter is a person who has
purchased shares from an issuer with a view towards distributing the shares to
the public. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities Act.
Because the following selling shareholders are deemed "underwriters"
within the meaning of Section 2(11) of the Securities Act, they will be subject
to the prospectus delivery requirements:
The Keshet Fund
Keshet, L.P.
Balmore S.A.
Celeste Trust Reg.
Nesher Ltd.
Talbiya B. Investments Ltd.
Alon Enterprises Ltd.
Libra Finance S.A.
We are required to pay all fees and expenses incident to the
registration of the shares in this offering. However, we will not pay any
commissions or any other fees in connection with the resale of the common stock
in this offering. We have agreed to indemnify the selling shareholders and their
officers, directors, employees and agents, and each person who controls any
selling shareholder, in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act. Each selling shareholder
has agreed to indemnify us and our directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
If the selling stockholder notifies us that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to amend the registration statement of which this prospectus
is a part, and file a prospectus supplement to describe the agreements between
the selling stockholder and the broker-dealer.
EXPERTS
Our financial statements as of June 30, 2000 and for the years ended
June 30, 2000 and 1999, and for the period from inception, June 10, 1996, to
June 30, 2000 (Audited), have been included herein and in the registration
statement in reliance upon the reports of Ham, Langston & Brezina, LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed
upon for us by our United States securities counsel, Sichenzia, Ross & Friedman
LLP 135 West 50th Street, 20th Floor, New York, New York, 10020. Certain members
of Sichenzia, Ross & Friedman LLP are the beneficial owners of an aggregate
54,000 shares of our common stock.
OTHER AVAILABLE INFORMATION
We are subject to the reporting requirements of the Securities and
Exchange Commission. We file periodic reports, proxy statements and other
information with the commission under the Securities Exchange Act of 1934. We
will provide without charge to each person who receives a copy of this
prospectus, upon written or oral request, a copy of any information that is
incorporated by reference in this prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference).
We have filed a registration statement on Form SB-2 under the
Securities Act of 1933 Act with the Commission in connection with the securities
offered by this prospectus. This prospectus does not contain all of the
information that is the registration statement, you may inspect without charge,
and copy our filings, at the public reference room maintained by the Commission
at 450 Fifth Street, N.W. Washington, D.C. 20549. Copies of this material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W. Washington, D.C. 20549, at prescribe rates. Information about
the public reference room is available from the commission by calling
1-800-SEC-0330.
The commission maintains a web site on the Internet that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the commission. The address of the site is
www.sec.gov.
Visitors to the site may access such information by searching the EDGAR
archives on this web site.
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with any information that is
different.
The selling security holders are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where such offers and sales
are permitted.
The information contained in this prospectus is accurate only as of the
date of this prospectus.
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
----------
Page(s)
Report of Independent Accountants F-2
Financial Statements:
Balance Sheet as of June 30, 2000 F-4
Statement of Operations for the years ended
June 30, 2000 and 1999, and for the period from
inception, June 10, 1996, to June 30, 2000 F-5
Statement of Stockholders' Deficit for the years
ended June 30, 2000 and 1999, and for the period
from inception, June 10, 1996, to June 30, 2000 F-6
Statement of Cash Flows for the years ended
June 30, 2000 and 1999, and for the period from
inception, June 10, 1996, to June 30, 2000 F-8
Notes to Financial Statements F-9
Balance Sheet as of December 31, 2000 and
June 30, 2000 F-20
Statement of Operations for the three and six months ended December 31, 2000
and 1999, and for the period from inception, June 10, 1996,
to December 31, 2000 F-21
Statement of Changes in Stockholders" Deficit
for the six months ended December 31, 2000 F-22
Statement of Cash Flows for the six months ended December 31, 2000 and 1999,
and for the period from inception, June 10, 1996, to
December 31, 2000 F-23
Notes to Unaudited Financial Statements F-24
F-1
Report of Independent Accountants
To the Stockholders of
Endovasc Ltd., Inc.
We have audited the accompanying balance sheet of Endovasc Ltd., Inc. (a
development stage enterprise) as of June 30, 2000, and the related statements of
operations, stockholders' equity and cash flows for the years ended June 30,
2000 and 1999, and for the period from inception, June 10, 1996, to June 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Endovasc Ltd., Inc. as of June
30, 2000, and the results of its operations and its cash flows for the years
ended June 30, 2000 and 1999, and for the period from inception, June 10, 1996,
to June 30, 2000, in conformity with generally accepted accounting principles.
Continued
F-2
Endovasc Ltd., Inc.
Page 2
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements
and discussed in Note 9, the Company has incurred significant recurring losses
from operations since inception, is in a negative working capital and
accumulated deficit position at June 30, 2000, and is dependent on outside
sources of financing for the continuation of its operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans with regard to this matter are also discussed in Note 9.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Ham, Langston & Brerira, L.L.P.
Houston, Texas
September 19, 2000
F-3
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
June 30, 2000
----------
ASSETS
Current assets:
Cash and cash equivalents $ 926,121
----------
Total current assets 926,121
Property and equipment, net 43,244
Other assets, net 160,271
----------
Total assets $1,129,636
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 37,387
Note payable to shareholder 795,748
Accounts payable 196,375
Accrued liabilities 34,174
----------
Total current liabilities 1,063,684
Long-term debt, net of current maturities 22,858
----------
Total liabilities 1,086,542
----------
Commitment and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000
shares authorized, 14,553,370 shares issued
and 12,468,370 shares outstanding 14,553
Preferred stock, $.001 par value, 20,000,000
shares authorized, 15,000 shares of Series A 8% cumulative convertible
preferred stock issued and outstanding, stated value $100
per share 15
Additional paid-in capital 5,797,501
Losses accumulated during the development
stage (5,752,064)
Treasury stock (16,911)
----------
Total stockholders' equity 43,094
----------
Total liabilities and stockholders'
equity $1,129,636
==========
The accompanying notes are an integral
part of these financial statements.
F-4
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the years ended June 30, 2000 and 1999 and
for the period from inception, June 10, 1996, to June 30, 2000
----------
Year Ended Year Ended Inception
June 30, June 30, to June 30,
2000 1999 2000
----------------------------------------------------
Income:
Sales $ 24,312 $ 5,000 $ 29,312
Interest income 6,775 - 7,428
Other income - - 3,618
----------- ---------- -----------
Total income 31,087 5,000 40,358
----------- ---------- -----------
Costs and expenses:
Operating, general and administrative
expenses 1,775,044 396,454 3,159,247
Research and development costs 976,798 211,278 2,176,130
Interest expense 127,197 193,811 329,670
----------- ---------- -----------
Total costs and expenses 2,879,039 801,543 5,665,047
----------- ---------- -----------
Net loss before extraordinary item (2,847,952) (796,543) (5,624,689)
Extraordinary loss on extinguishment
of convertible debentures 127,375 - 127,375
----------- ---------- -----------
Net loss $(2,975,327) $ (796,543) $(5,752,064)
=========== ========== ===========
Weighted average shares outstanding 9,575,153 7,217,096
=========== ==========
Basic and diluted net loss per common Share:
Before extraordinary item $ (0.30) $ (0.11)
Extraordinary item (0.01) -
----------- ----------
Net loss per common share $ (0.31) $ (0.11)
=========== ==========
The accompanying notes are an integral
part of these financial statements.
F-5
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' DEFICIT
for the years ended June 30, 2000 and 1999, and
for the period from inception, June 10, 1996 to June 30, 2000
----------
Losses
Accumulated
Additional During the
Common Stock Preferred Stock Paid-In Treasury Development
Amount Shares Amount Shares Capital Stock Stage Total
Balance at inception, June 10,
1996 $ -- -- $- - $ -- $ -- $ -- $ --
Stock issued for equity secur-
ities in 1996 ................. 2,332 2,332,000 -- - 300,000 -- -- 302,332
Stock issued for purchase of
patent rights in 1996 ......... 2,188 2,188,000 -- - 282,252 -- -- 284,440
Stock issued for services in
1997 1,702 1,702,000 -- - 354,198 -- -- 355,900
Stock issued for cash in 1997 ... 305 304,571 -- - 205,196 -- -- 205,501
Stock issued for purchase of
patent rights in September
1997 200 200,000 -- - 199,800 -- -- 200,000
Stock issued for services in 1998 77 77,380 -- - 55,516 -- -- 55,593
Stock subject to rescission ..... -- -- -- - -- (16,911) -- (16,911)
Losses accumulated during the
period from inception, June 10,
1996, to June 30, 1998 ........ -- -- -- - -- -- (1,980,194) (1,980,194)
----------- ----------- ---- ---- --------- ----------- ----------- -----------
Balance at June 30, 1998 ........ 6,804 6,803,951 -- - 1,396,962 (16,911) (1,980,194) (593,339)
The accompanying notes are an integral
part of these financial statements.
Continued
F-6
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' DEFICIT, Continued
for the years ended June 30, 2000 and 1999, and
for the period from inception, June 10, 1996 to June 30, 2000
----------
Losses
Accumulated
Additional During the
Common Stock Preferred Stock Paid-In Treasury Development
Amount Shares Amount Shares Capital Stock Stage Total
--------- ----------- ---- ------ --------- -------- ----------- -----------
Conversion of debentures to
common stock .............. 1,208 1,208,077 -- -- 443,792 -- -- 445,000
Stock issued for services ... 362 362,462 -- -- 284,705 -- -- 285,067
Net loss accumulated in 1999 -- -- -- -- -- -- (796,543) (796,543)
--------- ----------- ---- ------ --------- -------- ----------- -----------
Balance at June 30,1999 ..... 8,374 8,374,490 -- -- 2,125,459 (16,911) (2,776,737) (659,815)
Conversion of debentures to
common stock .............. 2,570 2,569,546 -- -- 841,555 -- -- 844,125
Stock issued for services ... 1,869 1,869,334 -- -- 1,388,241 -- -- 1,390,110
Conversion of note payable to
shareholder to common stock 1,250 1,250,000 -- -- 146,750 -- -- 148,000
Issue of common stock in con-
nection with license agree-
ment ...................... 190 190,000 -- -- 62,511 -- -- 62,701
Issue of common stock in set-
tlement of lawsuit ........ 300 300,000 -- -- 192,700 -- -- 193,000
Issuance of preferred stock . -- -- 15 15,000 1,040,285 -- -- 1,040,300
Net loss accumulated in 2000 -- -- -- -- -- -- (2,975,327) (2,975,327)
--------- ----------- ---- ------ --------- -------- ----------- -----------
Balance at June 30, 2000 ....$ 14,553 14,553,370 $ 15 15,000 $ 5,797,501 $ (16,911) $(5,752,064) $ 43,094
========= ========== ===== =========== =========== ========== ============ ===========
The accompanying notes are an integral
part of these financial statements.
F-7
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
for the years ended June 30, 2000 and 1999, and
for the period from inception, June 10, 1996, to June 30, 2000
----------
Year Ended Year Ended Inception
June 30, June 30, to June 30,
2000 1999 2000
----------- ----------- -------------------
Cash flows from operating activities:
Net loss $(2,975,327) $ (796,543) $(5,752,064)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock and stock options
issued as compensation for services 1,390,110 285,067 2,286,670
Extaordinary loss 127,375 - 127,375
Write down of long-lived assets to
fair value - - 284,440
Depreciation and amortization expense 11,774 3,242 21,286
Deferred income tax expense - - 7,994
Amortization of discount on con-
vertible debentures 125,000 125,000 250,000
Changes in operating assets and
liabilities:
(Increase) decrease in other assets (94,670) 22,336 (102,584)
Increase (decrease) in accounts
payable and accrued liabilities (150,838) (16,474) 216,936
----------- ----------- -------------------
Net cash used in operating
activities (1,566,576) (377,372) (2,659,947)
----------- ----------- -------------------
Cash flows from investing activities:
Capital expenditures (38,756) (3,198) (57,751)
Proceeds received from repayment of
loan to stockholder - - 71,854
----------- ----------- -------------------
Net cash provided by (used in)
investing activities (38,756) (3,198) 14,103
----------- ----------- -------------------
Cash flows from financing activities:
Proceeds from sale of equity securities - - 302,332
Proceeds from sale of common stock - - 205,501
Proceeds from sale of convertible
debenture and related conversion
feature 536,750 500,000 1,036,750
Net proceeds from issuance of preferred
stock 1,040,300 - 1,040,300
Issuance of notes payable 8,965 - 105,755
Repayment of notes payable (33,120) (12,390) (45,510)
Proceeds from advances from
stockholders 858,500 10,100 943,748
Purchase of treasury stock - - (16,911)
----------- ----------- -------------------
Net cash provided by financing
activities 2,411,395 497,710 3,571,965
----------- ----------- -------------------
Net increase in cash and cash equivalents 806,063 117,140 926,121
Cash and cash equivalents at beginning
of period 120,058 2,918 -
----------- ----------- -------------------
Cash and cash equivalents at end of
period $ 926,121 $ 120,058 $ 926,121
=========== =========== ===================
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 7,903 $ 63,105 $ 79,670
=========== ========== ====================
Cash paid for income taxes $ - $ - $ -
=========== ========== ====================
The accompanying notes are an integral
part of these financial statements.
F-8
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
----------
1. Organization and Summary of Significant Accounting Policies
Endovasc, Ltd., Inc. (the "Company") was incorporated under the laws of
the State of Nevada on June 10, 1996. The Company's principal business is
the production of various drugs that can be administered using an
advanced drug delivery system. The Company believes that its drug
delivery system will ultimately be widely used by cardiologists,
interventional radiologists and vascular surgeons. The Company is
considered a development stage enterprise because it has not yet
generated significant revenue from sale of its products and has devoted
substantially all of its efforts in raising capital.
Significant Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from estimates making it
reasonably possible that a change in the estimates could occur in the
near term.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with an
original maturity of three months or less when purchased to be cash
equivalents.
The Company maintains cash deposits in banks which may occasionally
exceed the amount of federal deposit insurance available. Management
periodically assesses the financial condition of the institutions and
believes that any possible deposit loss is minimal.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets,
which range from five to seven years. Expenditures for major renewals and
betterments that extend the original estimated economic useful lives of
the applicable assets are capitalized. Expenditures for normal repairs
and maintenance are charged to expense as incurred. The cost and related
accumulated depreciation of assets sold or otherwise disposed of are
removed from the accounts, and any gain or loss is included in
operations.
Continued
F-9
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
1. Organization and Summary of Significant Accounting Policies, continued
Issuance Costs
Debt issuance costs are deferred and recognized, using the interest
method, over the term of the related debt.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded to reflect the tax
consequences on future years of temporary differences between the tax
basis of assets and liabilities and their financial amounts at year-end.
The Company provides a valuation allowance to reduce deferred tax assets
to their net realizable value.
Research and Development
Research and development costs are expensed as incurred. These costs
consist of direct and indirect costs associated with specific projects.
Stock-Based Compensation
Stock-based compensation is accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees", rather than applying the fair
value method prescribed in SFAS No. 123, "Accounting for Stock-Based
Compensation".
Loss Per Share
Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period.
Common equivalent shares from common stock options and warrants are
excluded from the computation as their effect would dilute the loss per
share for all periods presented.
Fair Value of Financial Instruments
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different
from the book value. When the book value approximates fair value, no
additional disclosure is made.
Continued
F-10
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
1. Organization and Summary of Significant Accounting Policies, continued
Impairment of Long-Lived Assets
In the event facts and circumstances indicate the carrying value of a
long-lived asset, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated
future undiscounted cash flows associated with the asset to the asset's
carrying amount to determine if a write-down to market value or
discounted cash flow is required.
2. License Agreement
In February 2000 the Company entered into an exclusive license agreement
with Stanford University to assist in the development of the Nicotine
Receptor Agonist technology. For the exclusive rights to this license,
the Company paid a non-refundable license fee of $100,000 plus 190,000
shares of the Company's common stock to Stanford University and the
inventors of the technology. The term of the agreement is for 10 years or
five years from the first commercial sale of a licensed product by the
Company, whichever occurs first. The Company is also required to pay an
annual royalty of $100,000 beginning February 1, 2001 and each year
thereafter and a 6% royalty on net sales of any licensed product. The
Company is required to pay to Stanford an additional $100,000 upon FDA
approval of Phase I clinical trials, $300,000 upon FDA approval of Phase
III clinical trials and $500,000 within six months after FDA marketing
approval.
The costs of obtaining the license of $162,701 were capitalized and
included in other assets in the accompanying balance sheet. These costs
are being amortized on a straight line basis over the term of the
agreement.
Continued
F-11
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
3. Property and Equipment
Property and equipment at June 30, 2000 consists of the following:
Office furniture, fixtures and equipment $ 57,751
Less accumulated depreciation (14,507)
----------
$ 43,244
==========
Depreciation expense during the year ended June 30, 2000 was $4,995.
4. Notes Payable and Convertible Debentures
Notes payable at June 30, 2000 consist of the following:
Notes payable to a bank, bearing int- erest of prime (9.00% at June 30,
2000) plus 1% per year and due in individual monthly installments of up
to $1,238, including interest, through November 2002. These notes are
uncollateralized but are guaranteed by two stockholders
of the Company. $ 60,245
Notes payable to stockholders, non- interest bearing and due on demand.
These notes are uncollateralized. 795 798
----------
Total notes payable 856,043
Less current maturities (833,185)
----------
$ 22,858
==========
Continued
F-12
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
4. Notes Payable and Convertible Debentures, continued
At June 30, 1999, the Company owed amounts under convertible debentures
totaling $180,000 and received additional proceeds from convertible
debentures of $536,750 during the year ended June 30, 2000. The
debentures bore interest at a stated rate of 8% per year, payable at
maturity in common stock of the Company. These debentures, originally
scheduled to mature in July 2001, were convertible to shares of the
Company's common stock at a conversion price per share equal to 75% of
the average closing bid price of the common stock for the three days
immediately preceding the date of conversion. Accordingly, the actual
weighted average interest rate on these debentures, including the effect
of the cost of the discounted conversion feature, is approximately 33%.
During the fiscal year ended June 30, 2000 all of the outstanding
debentures were converted to common stock through a settlement which cost
the Company an additional $127,375.
Future annual maturities of notes payable at June 30, 2000 are as
follows:
Year Ended
June 30, Amount
2001 $ 833,185
2002 18,276
2003 4,582
----------
$ 856,043
5. Income Tax
The composition of deferred tax assets and the related tax effects at
June 30, 2000 are as follows:
Benefit from carryforward of net
operating losses $ 942,456
Less valuation allowance (942,456)
----------
Net deferred tax asset $ -
==========
Continued
F-13
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
5. Income Tax, continued
The difference between the income tax benefit in the accompanying
statement of operations and the amount that would result if the U.S.
Federal statutory rate of 34% were applied to pre-tax loss is as follows:
2000 1999
-----------------------------------------------------------
Percentage Percentage
of Pre-Tax of Pre-Tax
Amount Loss Amount Loss
Benefit for income tax at
federal statutory rate $1,011,611 34.0% $ 270,825 34.0%
Non-deductible expenses (473,145) (15.9) (17,096) (2.1)
Increase in valuation
allowance (538,466) (18.1) (253,729) (31.9)
---------- ------ ----------- -----
Total $ - - % $ - - %
========== ====== =========== =====
The non-deductible expenses shown above related primarily to the issuance
of common stock for services using different valuation methods for
financial and tax reporting purposes.
At June 30, 2000, for federal income tax and alternative minimum tax
reporting purposes, the Company has approximately $2,800,000 of unused
net operating losses available for carryforward to future years. The
benefit from carryforward of such net operating losses will expire in
various years between 2016 and 2020 and could be subject to severe
limitations if significant ownership changes occur in the Company.
6. Stock Options and Warrants
The Company periodically issues incentive stock options and warrants to
key employees, officers, directors and outside consultants to provide
additional incentives to promote the success of the Company's business
and to enhance the ability to attract and retain the services of
qualified persons. The issuance of such options are approved by the Board
of Directors. The exercise price of an option or warrant granted is
determined by the fair market value of the stock on the date of grant.
Effective December 9, 1997, the Company entered into a stock option
agreement with an employee that granted the employee an option to
purchase up to 600,000 shares of the Company's restricted common stock at
a below market purchase price. The option is for a three year period
expiring December 8, 2000. According to the agreement the employee vests
in these options as follows:
Date Vested Amount
December 9, 1998 $ 200,000
December 9, 1999 200,000
December 9, 2000 200,000
----------
$ 600,000
Continued
F-14
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. Stock Options and Warrants, continued
The Company recognized compensation expense with respect to these stock
options in the amount of $50,000. During the year ended June 30, 2000 the
employee terminated his employment with the Company and by approval of
the Board of Directors became fully vested in his stock options which
were all subsequently exercised.
During the year ended June 30, 1998, the Company also granted stock
options to acquire 1,350,000 shares of the Company's restricted common
stock at $0.25 to $0.75 per share, which approximates market value, for
terms of three years.
During the year ended June 30, 1999, the Company granted stock options to
acquire up to 250,000 shares of the Company's restricted common stock.
These stock options have a three year term and exercise prices of $0.40
to $0.75 per share, which approximated market value at date of grant.
During the year ended June 30, 2000 the Company issued stock warrants to
acquire 332,778 shares of the Company's common stock to certain companies
for their role in the completion of the Company's preferred stock
offering. These warrants have a three year term and an exercise price of
$1.89 per share, which approximated market value at the date of grant.
The Company also issued stock warrants to acquire 500,000 shares of the
Company's common stock to a company as a finder's fee for the placement
of the preferred stock offering. The warrants have a five year term and
an exercise price of $0.10 per share. The costs associated with these
stock warrants do not effect the Company's statement of operations as all
costs would be offset against the offering proceeds and recorded through
stockholder's equity.
Continued
F-15
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
The Company has issued stock options to employees and non-employee
consultants as follows:
Weighted
Number of Shares Average
Non- Exercis- Exercise Exercise
Employee Employee Total able Price Price
--------------------------------------------------------------------------------------
Options outstanding
at June 30, 1998 1,600,000 350,000 1,950,000 1,200,000 $0.10-$0.75 $0.27
Options granted - 250,000 250,000 100,000 $0.40-$0.75 $0.61
--------- ------- --------- ---------
Options outstanding
at June 30, 1999 1,600,000 600,000 2,200,000 1,550,000 $0.10-$0.75 $0.30
Options granted - - - -
Options exercised (600,000) - (600,000) - $0.10 $0.10
-------- ------- --------- ---------
Options outstanding
at June 30,2000 - 600,000 1,600,000 1,550,000 $0.25-$0.75 $0.38
======== ======= ========= =========
Following is a summary of outstanding options at June 30, 2000:
Number of Shares Vested Expiration Date Exercise Price
1,000,000 1,000,000 June, 2001 $0.25
100,000 100,000 June, 2004 0.25
200,000 150,000 June, 2001 0.75
50,000 50,000 May, 2001 0.75
100,000 100,000 June, 2001 0.40
150,000 150,000 October, 2001 0.75
--------- ---------
1,600,000 1,550,000
========= =========
During the year ended June 30, 2000, for the first time, the Company has
issued stock warrants to certain companies in payment of stock offering
costs as follows:
Weighted
Average
Number of Exercis- Exercise Exercise
Shares able Price Price
Warrants issued 832,778 832,778 $0.10-$1.89 $0.82
Warrants cancelled - - - -
Warrants exercised - - - -
--------- -------
Warrants outstanding at
June 30, 2000 832,778 832,778 $0.10-$1.89 $0.82
========= =======
Continued
F-16
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation",
requires use of option valuation models that were not developed for use
in valuing employee stock options.
Proforma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that Statement. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1999: risk-free interest rate
of 6%; no dividend yield; weighted average volatility factor of the
expected market price of the Company's common stock of 0.70; and a
weighted-average expected life of the options of 3 years. There were no
new options granted in the fiscal year ended June 30, 2000.
The Black-Scholes option valuation model was developed for use in
estimating fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
Continued
F-17
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
For purposes of proforma disclosures, the estimated fair value of the
options is included in expense at the date of issuance because the
options may be fully exercised at that date. The Company's proforma
information follows:
2000 1999
--------------------------------------
Net loss available to common
stockholders $(2,975,327) $ (796,543)
Proforma net loss available to
common stockholders $(2,975,327) $ (886,943)
Proforma basic and dilutive
loss per share $ (0.31) $ (0.12)
7. Preferred Stock
The Company's articles or incorporation authorize the issuance of up to
20,000,000 shares of preferred stock with characteristics determined by
the Company's board of directors. Effective May 5, 2000, the board of
directors authorized the issuance and sale of up to 55,000 shares of
Series A 8% convertible preferred stock.
On May 9, 2000, the Company issued 15,000 shares of $0.001 par value and
$100 per share stated and liquidation value Series A 8% non-voting
convertible preferred stock for $1,500,000. The actual proceeds received
by the Company were $1,040,300, which are net of related offering costs.
The Series A convertible preferred stock can be converted to common stock
at any time at the option of the holder. The conversion rate is the
stated value per share plus any accrued and unpaid dividends divided by
85% of the average of the three lowest closing bid prices of the
Company's common stock for the thirty trading days immediately preceding
May 9, 2000, or 70% of the average of the three lowest closing bid prices
for the thirty days immediately preceding the conversion of the
respective preferred stock.
In addition, the Series A preferred stockholders were originally
obligated to purchase an additional 30,000 shares of Series A 8%
convertible preferred stock ("Put Stock") at the option of the Company
subject to the Company's compliance with various covenants. The Company
has violated certain of these covenants but the stockholders retain the
right to waive any violations. The purchase price of the additional
shares is $100 per share.
If the conversion price is lower than the initial price at the date of
issue, the Company has the right to redeem the shares of Series A
preferred stock at 130% of its liquidation value per share.
Continued
F-18
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
8. Commitments and Contingencies
The Company is subject to certain legal proceedings and claims which
arose in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these
actions will not materially affect the financial position, results of
operations or cash flows of the Company.
The Company has entered into a one-year lease agreement for office space
which is accounted for as an operating lease. Rent expense for the years
ended June 30, 2000 and 1999 was $17,250 and $15,606, respectively.
9. Going Concern Considerations
Since its inception, as a development stage enterprise, the Company has
not generated significant revenue and has been dependent on debt and
equity raised from individual investors to sustain its operations. The
Company has conserved cash by issuing its common stock to satisfy
obligations, to compensate individuals and vendors and to settle disputes
that have arisen. However, during the years ended June 30, 2000 and 1999,
the Company incurred net losses of $(2,975,327) and ($796,543),
respectively, and negative cash flows from operations of ($1,566,576) and
($377,372), respectively. These factors along with a ($137,563) negative
working capital position at June 30, 2000 raise substantial doubt about
the Company's ability to continue as a going concern.
Management plans to take specific steps to address its difficult
financial situation as follows:
C In the near term the Company plans additional private sales of debt and
common and preferred stock to qualified investors to fund its current
operations.
C In the intermediate term, the Company plans a public registration of its
common stock under the Securities and Exchange Act of 1933 to provide a
means of expanding the market for its common stock and to provide a means
of obtaining the funds necessary to bring its products to the commercial
market.
C In the long-term, the Company believes that cash flows from
commercialization of its products will provide the resources for
continued operations.
Continued
F-19
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
----------
9. Going Concern Considerations, continued
There can be no assurance that the Company's planned private sales
of debt and equity securities or its planned public registration
of common stock will be successful or that the Company will have
the ability to commercialize its products and ultimately attain
profitability. The Company's long-term viability as a going
concern is dependent upon three key factors, as follows:
o The Company's ability to obtain adequate sources of debt or equity
funding to meet current commitments and fund the commercialization
of its products.
o The ability of the Company to obtain positive test results of its
products in clinical trials.
o The ability of the Company to ultimately achieve adequate
profitability and cash flows to sustain its operations.
10. Non-Cash Investing and Financing Activities
During the years ended June 30, 2000 and 1999, and for the period of
inception, June 10, 1996 to June 30, 2000) the Company engaged in certain
non-cash investing and financing activities as follows:
Inception
2000 1999 to Date
-------------------------------------------------
Common stock issued in exchange
for equity securities $ - $ - $ 302,332
========== ========== ==========
Common stock issued upon conver-
sion of debentures $ 841,555 $ 320,000 $ -
========== ========== ==========
Common stock issued for purchase
of patent rights $ - $ - $ 484,440
========== ========== ==========
Common stock issued in settlement
of lawsuit and related liabil-
ities $ 193,000 $ - $ -
========== ========== ==========
Common stock issued in connection
with license agreement $ 62,701 $ - $ -
========== ========== ==========
Conversion of note payable to
shareholder to common stock $ 148,000 $ - $ -
========== ========== ==========
Continued
F-20
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
----------
December 31, 2000 and June 30, 2000
December 31, June 30,
2000 2000
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 431,862 $ 926,121
---------- ----------
Total current assets 431,862 926,121
Property and equipment-net 152,522 43,244
Other assets 155,391 160,271
---------- ----------
Total assets $ 739,775 $1,129,636
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 25,182 $ 37,387
Note payable-stockholder 541,054 795,748
Accounts payable 126,015 196,375
Accrued liabilities 89,491 34,174
---------- ----------
Total current liabilities 781,742 1,063,684
Long term debt, net of current maturities 85,648 22,858
---------- ----------
Total liabilities 867,390 1,086,542
---------- ----------
Stockholders" deficit:
Common stock, $.001 par value, 100,000,000 shares authorized, 17,137,211 and
14,553,370 shares issued and 15,052,211 and 12,468,370 shares outstanding at
December 31, 2000
and June 30, 2000, respectively 17,137 14,553
Preferred stock, $.001 par value, 20,000,000
shares authorized, 19,924 and 15,000 shares of series A 8% cumulative
convertible pre- ferred stock issued and outstanding at December 31, 2000
and June 30, 2000, respec-
tively, stated value $100 per share 20 15
Additional paid in capital 6,821,184 5,797,501
Losses accumulated during the development
stage (6,949,045) (5,752,064)
Treasury stock (16,911) (16,911)
---------- ----------
Total stockholders" equity (deficit) (127,615) 43,094
---------- ----------
Total liabilities and stockholders"
deficit $ 739,775 $1,129,636
========== ==========
Note: The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
F-21
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the three months and six months ended December 31,
2000 and 1999 and for the period from inception,
June 10, 1996, to December 31, 2000
----------
(Unaudited)
Three Months Ended Six Months Ended Inception to
December 31, December 31, December 31,
2000 1999 2000 1999 2000
---------- ------- ------- ------- --------
Revenue $ 75,000 $ - $ 75,000 $ 14,283 $ 115,358
---------- ---------- ----------- ---------- -----------
Operating expenses:
Operating, general and ad-
ministrative expenses 319,058 64,955 556,195 149,583 3,715,442
Research and development
costs 336,000 89,548 654,600 319,460 2,830,730
Interest expense 31,350 4,120 61,186 27,109 390,856
---------- ---------- ----------- ---------- -----------
Total costs and expenses 686,408 158,623 1,271,981 496,152 6,937,028
---------- ---------- ----------- ---------- -----------
Net loss before extraordi-
nary item 611,408 158,623 1,196,981 481,869 6,821,670
Extraordinary loss on ex-
tinguishment of conver-
tible debentures - - - - 127,375
---------- ---------- ----------- ---------- -----------
Net loss $ (611,408) $ (158,623) $(1,196,981) $ (481,869) $(6,949,045)
========== ========== =========== ========== ===========
Basic and dilutive net loss
per common share $ (0.04) $ (0.02) $ (0.09) $ (0.05)
========== ========== =========== ==========
Weighted average shares
outstanding 14,023,721 8,937,266 14,023,721 8,937,266
========== ========= ========== =========
See accompanying notes.
F-22
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS" DEFICIT
for the six months ended December 31, 2000
----------
(Unaudited)
Common Stock Preferred Stock
Number of Dollar Number of Dollar Paid-In Treasury Accumulated
Shares Amount Shares Amount Capital Stock Deficit
---------- ---------- ---------- ---------- ----------- ---------- ----------
Balance at June 30, 2000 . 14,553,370 $ 14,553 15,000 $ 15 $ 5,797,501 $ (16,911) $(5,752,064)
Issue of common stock upon
exercise of warrants ... 250,000 250 -- -- 24,750 -- --
Issue of common stock upon
exercise of options .... 1,100,000 1,100 -- -- 273,900 -- --
Issue of common stock for
services ............... 390,201 390 -- -- 156,127 -- --
Issue of preferred stock . -- -- 7,500 7 569,750 -- --
Conversion of preferred
stock to common stock .. 843,640 844 (2,576) (2) (844) -- --
Net loss ................. -- -- -- -- -- -- (1,196,981)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31,
2000 17,137,211 $ 17,137 19,924 $ 20 $ 6,821,184 $ (16,911) $(6,949,045)
=========== =========== =========== =========== =========== =========== ===========
See accompanying notes.
F-23
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended December 31, 2000 and 1999 and
for the period from inception, June 10, 1996, to December 31, 2000
----------
(Unaudited)
Inception to
December 31, December 31,
2000 1999 2000
----------- ---------- -----------
Cash flows used in operating
activities $(1,013,108) $ (299,262) $(3,673,055)
----------- ---------- -----------
Cash flows used in investing
activities (66,183) (1,302) (52,080)
----------- ---------- -----------
Cash flows from financing activities:
Proceeds from sale of equity
securities - - 302,332
Proceeds from sale of common stock 25,000 131,000 230,501
Purchase of treasury stock - - (16,911)
Proceeds from sale of convertible
debt - 130,500 1,036,750
Net proceeds from issuance of preferred
stock 569,757 - 1,610,057
Issuance (repayment) of notes payable (5,031) (9,104) 55,214
Issuance (repayment) of note payable
to stockholder, net (4,694) - 939,054
----------- ---------- -----------
Net cash provided by financing
activities 585,032 252,396 4,156,997
----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents (494,259) (48,168) 431,862
Cash and cash equivalents, beginning
of period 926,121 120,058 -
----------- ---------- -----------
Cash and cash equivalents, end of
period $ 431,862 $ 71,890 $ 431,862
=========== ========== ===========
Non-cash investing and financing
activities:
Common stock issued for services
and license and patent rights $ 156,517 $ - $ 2,286,670
=========== ========== ===========
Common stock issued for equity
securities $ - $ - $ 302,332
=========== ========== ===========
Common stock issued for settlement
of lawsuit $ - $ - $ 210,000
=========== ========== ===========
Common stock issued upon conversion
of debentures $ - $ 80,000 $ 1,241,555
=========== ========== ===========
Reduction of note payable to stock-
holder and accrued liabilities
through exercise of stock options $ 275,000 $ - $ 275,000
=========== ========== ===========
Issuance of note payable for the
purchase of equipment $ 55,616 $ - $ 55,616
=========== ========== ===========
See accompanying notes.
F-24
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
1. Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles and
the rules of the U.S. Securities and Exchange Commission, and should be
read in conjunction with the audited financial statements and notes
thereto for the year ended June 30, 2000. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of financial position and the results
of operations for the interim periods presented have been included.
Operating results for the interim periods are not necessarily indicative
of the results that may be expected for the respective full year.
A summary of the Company"s significant accounting policies and other
information necessary to understand the interim financial statements is
presented in the Company"s audited financial statement for the years
ended June 30, 2000 and 1999. Accordingly the Company"s audited financial
statements should be read in connection with these financial statements.
2. Income Taxes
The difference between the 34% federal statutory income tax rate and
amounts shown in the accompanying interim financial statement is
primarily attributable to an increase in the valuation allowance applied
against the tax benefit from utilization of net operating loss
carryforwards.
3. Preferred Stock
The Company's articles of incorporation authorize the issuance of up to
20,000,000 shares of preferred stock with characteristics determined by
the Company's board of directors. Effective May 5, 2000, the board of
directors authorized the issuance and sale of up to 55,000 shares of
Series A 8% convertible preferred stock.
Continued
F-25
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
3. Preferred Stock, continued
On May 9, 2000, the Company issued 15,000 shares of $0.001 par value and
$100 per share stated and liquidation value Series A 8% non-voting
convertible preferred stock for $1,500,000. The actual proceeds received
by the Company were $1,040,300, which are net of related offering costs.
The Series A convertible preferred stock can be converted to common stock
at any time at the option of the holder. The conversion rate is the
stated value per share plus any accrued and unpaid dividends divided by
85% of the average of the three lowest closing bid prices of the
Company's common stock for the thirty trading days immediately preceding
May 9, 2000, or 70% of the average of the three lowest closing bid prices
for the thirty days immediately preceding the conversion of the
respective preferred stock. During the six months ended December 31,
2000, 2,576 shares of preferred stock were converted to 843,640 shares of
common stock.
In addition, the Series A preferred stockholders are obligated to
purchase an additional 30,000 shares of Series A 8% convertible preferred
stock ("Put Stock") at the option of the Company subject to the Company
being in compliance with various covenants. The Company is currently not
in compliance with these covenants but the stockholders maintain a right
to waive any violations. The purchase price of the additional shares is
$100 per share, which is its stated and liquidation value. During
November 2000, the Company issued an additional 7,500 shares of this
Series A preferred stock for proceeds to the Company of $569,757, which
is net of related offering costs.
If the conversion price is lower than the initial price on the date of
issue, the Company has the right to redeem the shares of Series A 8%
convertible preferred stock at 130% of its stated value per share.
4. Stock Options and Warrants
During the six months ended December 31, 2000, 250,000 shares of the
Company's common stock were issued due to the exercise of warrants. In
addition, 1,100,000 shares of common stock were issued due to the
exercise of stock options, of which 1,000,000 of the shares was paid for
through the reduction in the note payable to stockholder.
Continued
F-26
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
----------
4. Stock Options and Warrants, continued
On December 13, 2000 the Company granted options to purchase 1,325,500
shares of the Company's common stock at a price ranging from $0.40 to
$1.00 per share, which was greater than the market price of the stock at
the grant date.
F-27
================================================================================
34,328,762 SHARES OF
COMMON STOCK
ENDOVASC LTD., INC.
-----------------
PROSPECTUS
-----------------
THE DATE OF THIS PROSPECTUS IS [ ]
================================================================================
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law allows us
to indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was our Director, officer, employee or agent, or is or
was serving at our request as a Director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise. We may
advance expenses in connection with defending any such proceeding, provided the
indemnitee undertakes to pay any such amounts if it is later determined that
such person was not entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our Directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
SEC registration fee...........................................................................$ 2,032.72
Printing and engraving......................................................................... 2,000.00
Accountant's fees and expenses................................................................. 2,500.00
Legal fees..................................................................................... 10,000.00
Miscellaneous.................................................................................. 5,000.00
Total..................................................................$21,532.72
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of recent sales of unregistered securities that we
have accounted for prior to the end of our third operating quarter, ended March
31, 2000.
1. On or about July 25, 1997, we issued at total of 300,000 of our common
stock pursuant to the exemption for registration provided by Regulation
D. We relied on such exemption from registration based upon the fact
that issuance of these shares complied with the requirements of
Regulation D and that we made the required informational filing
pursuant to Regulation D. The total consideration paid the shares was
$300,000, or $1.00 per share. Such shares were issued to the following
individuals in the following amounts:
Name Shares
---- ------
Ronald & Judy Neddings 15,000
Paul & Helen Jones 30,000
Rafael and Ana Moreno 30,000
Drexal Global Fund 100,000
Ebensfeld Corporation 125,000
2. On or about September 26, 1997, we issued 382,571 shares of our common
stock for a total consideration of $500,000, or $1.30 per share. Such
shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. Such shares
were issued to the following individuals in the following amounts:
Name Shares
---- ------
Richard M. Johnson & Assoc. 300,000
James Mundt 3,571
Claudio R. Roman 20,000
M. Dwight Cantrell 25,000
Nick Nichols 10,000
Lester Summers 1,000
Dorothy Summers 1,000
Allan Burns 5,000
Dan Halman 2,000
Eric Gilles 10,000
Charles Siedel 5,000
Susan Cohen, Esq. 2,044
II-2
3. On or about November 13, 1997, we issued 200,000 shares to Geothermica,
in consideration of certain patent rights. Such shares were valued at
$4.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
4. On or about June 16, 1998, we issued 100,000 shares of our common
stock to Alexander H. Walker Jr., in consideration for legal
services rendered to us. Such shares were valued at $1.00 per share
and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
5. On or about June 16, 1998, we issued 300,000 shares of our common stock
to Dorothy Summers,in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
6. On or about June 30, 1998, we issued 50,000 shares of our common stock
to Danilo D. Lasic,in exchange for technical advisement services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
7. On or about September 23, 1998, we issued 18,987 shares of our
common stock to Nick A. Nichols Jr., in exchange for patent counsel and
filing services. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
8. On or about September 24, 1998, we issued 25,000 shares of our common
stock to M. Dwight Cantrell, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
9. On or about September 28, 1998, we issued 1,416 shares of our common
stock to Janet S. Clark, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
10. On or about September 28, 1998, we issued 1,190 shares of our common
stock to James Mundt, in exchange for dividends. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
11. On or about October 19, 1998, we issued 2,083 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection
with designing our brochures and website. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
12. On or about November 19, 1998, we issued 14,380 shares of our common
stock to Susan Cohen, in consideration for legal services rendered to
us. Such shares were valued at $1.00 per share and were issued pursuant
to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
13. On or about November 30, 1998, we issued 50,000 shares of our common
stock to James D. Regan, in exchange for technical advisement services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
14. On or about November 30, 1998, we issued 10,416 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection
with designing Company brochures and designing our website. Such shares
were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
II-3
15. On or about December 29, 1998, we issued 650,000 shares of our common
stock to Edward H. Burnbaum, in exchange for escrow. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
16. On or about January 8, 1999, we issued 35,556 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
17. On or about January 14, 1999, we issued 20,000 shares of our common
stock to Phoenix Investment Group, in exchange for services. Such
shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
18. On or about January 14, 1999, we issued 5,200 shares of our common
stock to James Regan, in exchange for technical advisement services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
19. On or about January 22, 1999, we issued 10,116 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection
with designing Company brochures and designing our website. Such shares
were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
20. On or about January 28, 1999, we issued 80,000 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
21. On or about February 3, 1999, we issued 2,000 shares of our common
stock to John G. Charles, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
22. On or about February 3, 1999, we issued 5,200 shares of our common
stock to James D. Regan, in exchange for technical advisement services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
23. On or about February 18, 1999, we issued 106,667 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
24. On or about February 23, 1999, we issued 100,000 shares of our common
stock to Patrick M. Rost, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
25. On or about February 23, 1999, we issued 5,000 shares of our common
stock to Shawn F. Hackman in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Rule 504 of Regulation D. Mr. Hackman returned
these shares to us on or about September 1, 1999. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
26. On or about March 9, 1999, we issued 248,889 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
27. On or about March 23, 1999, we issued 13,201 shares of our common stock
to Hiroko Yoshida, in exchange for technical advisement services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
II-4
28. On or about April 6, 1999, we issued 127,348 shares of our common stock
to Amram Rothman, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
29. On or about April 13, 1999, we issued 5,166 shares of our common stock
to Alenka Lasic, in exchange for services rendered in connection with
designing Company brochures and designing our website. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
30. On or about April 19, 1999, we issued 187,324 shares of our common
stock to Mr. Amram Rothman, in debt conversion. Such shares were valued
at $0.3203 and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from
registration based upon the fact that issuance of these shares complied
with the requirements of Regulation D and we made the required
informational filing pursuant to Regulation D.
31. On or about April 29, 1999, we issued 139,132 shares of our common
stock to Mr. Amram Rothman, in debt conversion. Such shares were valued
at $0.35937 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
32. On or about May 20, 1999, we issued 65,308 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
33. On or about May 27, 1999, we issued 1,000 shares of our common stock to
Janet S. Clark, in exchange for services. Such shares were valued at
$0.3828 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
34. On or about June 8, 1999, we issued 16,487 shares of our common stock
to Hiroko Yoshida, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
35. On or about June 24, 1999, we issued 124,444 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at
$0.28125 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
36. On or about July 8, 1999, we issued 10,000 shares of our common stock
to John G. Charles, in exchange for services. Such shares were valued
at $1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
37. On or about July 27, 1999, we issued 5,000 shares of our common stock
to Sherry R. Ball, in exchange for corporate video design and
development services. Such shares were valued at $1.00 per share and
were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
38. On or about July 26, 1999, we issued 98,467 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at
$0.30467 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
39. On or about July 29, 1999, we issued 18,577 shares of our common stock
to Hiroko Yoshida, in exchange for scientific and product development
services rendered to us. Such shares were valued at $1.00 per share and
were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
40. On or about August 6, 1999, we issued 9,883 shares of our common stock
to Hiroko Yoshida, in exchange for scientific and product development
services rendered to us. Such shares were valued at $1.00per share and
were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
41. On or about August 6, 1999, we issued 50,000 shares of our common stock
to Danilo Lasic, in exchange for scientific, laboratory, and technical
advice rendered to us. Such shares were valued at $1.00 per share and
were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
II-5
42. On or about September 27, 1999, we issued 200,000 shares of our common
stock to Francis Pizzuli, in connection with a settlement reach in
litigation. Such shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
43. On or about September 27, 1999, we issued 237,079 shares of our common
stock to Amram Rothman, in connection with the conversion of
convertible debentures owned by Mr. Rothman. Such shares were issued
pursuant to the exemption from registration under Rule 504 of
Regulation D. We relied on such exemption from registration based upon
the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant
to Regulation D.
44. On or about October 4, 1999, we issued 4,000 shares of our common stock
to John G. Charles, in exchange for sales and marketing services. Such
shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
45. On or about October 13, 1999, we issued 384,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at
$0.09375 per share and were issued pursuant to the exemption from
registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
46. On or about October 18, 1999, we issued 100,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at
$0.09 per share and were issued pursuant to the exemption from
registration under Rule 504 or Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
47. On or about October 18, 1999, we issued 70,880 shares of our common
stock to Hermes Bioscience, Inc., in exchange for research and
development laboratory services. Such shares were valued at $1.00 per
share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
48. On or about October 18, 1999, we issued 5,000 shares of our common
stock to each of Dr. Charles Seidel and Dr. Alan Burns, in exchange for
services. Such shares were valued at $1.00 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
49. On or about October 28, 1999, we issued 500,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at
$0.08 per share and were issued pursuant to the exemption from
registration under Rule 504 or Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these
shares complied with the requirements of Regulation D and we made the
required informational filing pursuant to Regulation D.
50. On or about October 28, 1999, we issued 70,880 shares of our common
stock to Hermes Bioscience, Inc., in exchange for research and
development laboratory services. Such shares were valued at $0.05 per
share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
51. On or about November 10, 1999, we issued 4,000 shares of our common
stock to John Charles, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
52. On or about December 8, 1999, we issued 1,000,000 shares of our common
stock to Southwest Securities, Inc., in exchange for services. Such
shares were valued at $0.46 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
53. On or about December 20, 1999, we issued 1,250,000 shares of our common
stock to Dr. David Summers, our Chairman and Chief Executive Officer,
in debt conversion. Such shares were valued at $0.12 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
54. On or about December 20, 1999, we issued 600,000 shares of our common
stock to Gary Ball, in lieu of payment of salary. Such shares were
valued at $0.10 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
55. On or about December 20, 1999, we issued 50,000 shares of our common
stock to Dwight Cantrell, in exchange for financial services. Such
shares were valued at $0.50 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
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56. On or about December 20, 1999, we issued 50,000 shares of our common
stock to Roman Claudio, in exchange for legal services. Such shares
were valued at $0.50 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
57. On or about January 19, 2000, we issued 200,325 shares of our common
stock to Nick Nichols, in exchange for legal and patent services. Such
shares were valued at $0.10 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
58. On or about February 2, 2000, we issued 24,000 shares of our common
stock to Barbara Richardson, in lieu of payment of salary and bonuses.
Such shares were valued at $0.01 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
59. On or about February 2, 2000, we issued 50,000 shares of our common
stock to Collaborative, Inc., in exchange for research and development
services. Such shares were valued at $0.20 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
60. On or about February 2, 2000, we issued 25,000 shares of our common
stock to Janet Greeson, in exchange for consulting services. Such
shares were valued at $0.40 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
61. On or about February 2, 2000, we issued 10,000 shares of our common
stock to Dr. Representacoes Ltd., in exchange for legal and consulting
services. Such shares were valued at $0.50 per share and were
issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
62. On or about February 2, 2000, we issued 10,000 shares of our common
stock to William Lamar, in exchange for services. Such shares were
valued at $0.40 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
63. On or about February 9, 2000, we issued 10,000 shares of our common
stock to each of Richard Smalling and Michel Henry, in exchange for
research and development consulting services. Such shares were valued
at $0.10 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
64. On or about February 18, 2000, we issued 1,820 shares of our common
stock to James Regan, in exchange for consulting services. Such shares
were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
65. On or about February 18, 2000, we issued 33,933 shares of our common
stock to Hiroko Yoshida, in exchange for scientific and product
development services rendered to us. Such shares were valued at $1.00
per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
66. On or about February 18, 2000, we issued 136,173 shares of our common
stock to Board of Trustees of Leland and 13,457 shares of our common
stock to each of John Cooke, Christopher Heeschen, Phillip Tsao, and
James Jang, in exchange for scientific and product development services
rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
67. On or about February 19, 2000, we issued 300,000 shares of our common
stock to Geotermica, Ltd., in debt conversion. Such shares were valued
at $0.50 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
68. On or about March 2, 2000, we issued 14,000 shares of our common stock
to Barbara Richardson, in lieu of payment of salary. Such shares were
valued at $4.80 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
69. On or about March 2, 2000, we issued 50,000 shares of our common stock
to John Charles and 25,000 shares of our common stock to Roy Robertson,
in exchange for consulting services. Mr. Charles' shares were valued at
$0.30 per share and Mr. Robertson's shares were valued at $7.25 per
share. These shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
70. On or about March 3, 2000, we issued 14,000 shares of our common stock
to Barbara Richardson, in lieu of payment of salary. Such shares were
valued at $7.25 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
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71. On or about March 7, 2000, we issued 1,000 shares of our common stock
to each of John Sorsi Jr. and Gary Parker, in exchange for promotional
services. Such shares were valued at $1.00 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
72. On or about March 13, 2000, we issued 20,000 shares of our common
stock to Curtis Wenger, Esq. and 25,000 shares of our common stock
to each of Alexander Walker III, Esq. and Alexander Walker Jr., in
exchange for legal services. Mr. Wenger's shares were valued at
$0.35 per share, Mr. Walker and Mr. Walker Jr.'s shares were
each valued at $6.00 per share. These shares were issued pursuant to
the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
73. On or about March 13, 2000, we issued 25,000 shares of our common stock
to Incubud, Inc., in exchange for promotional services. Such shares
were valued at $0.25 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
74. On or about March 13, 2000, we issued 12,000 shares of our common stock
to Sichenzia, Ross & Friedman LLP, in exchange for legal services. Such
shares were valued at $6.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
In addition to the foregoing, the following is a description of a
recently concluded private placement of our securities:
o In May 2000, we issued an aggregate of $1,500,000 of Series A 8%
Cumulative Convertible Preferred Stock in a private placement to six
investors pursuant to a Subscription Agreement in which the investors
originally agreed to purchase an aggregate of $4.5million of
convertible preferred stock, in three (3) $1.5 million tranches. The
conversion price for the convertible preferred stock shall be the
lesser of (a) 85% of the average of the three lowest closing bid prices
for the thirty (30) trading days immediately preceding the issue date
of the convertible preferred stock, or (b) 70% of the average of the
three (3) lowest closing bid prices for the thirty (30) days
immediately preceding the conversion of the shares of convertible
preferred stock. In connection with such transactions, the placement
agents received cash fees of $300,000, and warrants to purchase an
aggregate of approximately 333,333 shares.
o In November 2000, we issued an additional $750,000 of Series A 8%
Cumulative Convertible Preferred Stock to four investors. In connection
with such transactions, the placement agents received cash fees of
$150,000, and warrants to purchase an aggregate of approximately
166,667 shares.
o In April 2001, we issued an additional $750,000 of Series A 8%
Cumulative Convertible Preferred Stock to two investors. In connection
with such transactions, the placement agents received cash fees of
$75,000, and warrants to purchase an aggregate of approximately 166,667
shares.
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ITEM 27. INDEX TO EXHIBITS
Exhibit No. Exhibit
3.1 Articles of Incorporation of the Company **
3.2 Bylaws of the Company **
4.1 Form of 8% Series A Senior Subordinated Convertible Redeemable Debenture **
4.2 Form of 8% Series B Senior Subordinated Convertible Redeemable Debenture **
4.3 Specimen Stock Certificate of the Company **
5.1 Opinion of Sichenzia, Ross & Friedman, LLP
10.1 Form of Employment Agreement with Dr. David Summers, dated December 18, 1996*
10.2 Form of Employment Agreement with Ms. Barbara Richardson, dated June 1, 2000*
10.3 Form of Consulting Services Agreement with Mr. Roy Robertson, dated March 1, 2000*
10.4 Form of Subscription Agreement for Purchase of Series A 8% Cumulative Convertible Preferred Stock*
10.5 Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions and Relative Rights
of Series A 8% Cumulative Convertible Preferred Stock*
10.6 Form of Common Stock Purchase Warrant*
10.7 Lease of Company's Facility at 15001 Walden Road, Suite 108, Montgomery, Texas 77356*
10.8 Lease of Company's Facility at 15001 Walden Road, Suites 234 and 235, Montgomery, Texas 77356*
16.1 Letter on change in certifying accountant **
23.1 Consent of Ham, Langston & Brezina, LLP
23.2 Consent of Sichenzia, Ross & Friedman, LLP (included in Exhibit 5.1)
27.1 Financial Data Schedule*
* Incorporated by reference to the Registrant's Registration Statement, as
amended, on Form SB-2, originally filed on June 30, 2000.
** Incorporated by reference from the Registrant's Form 10-SB, filed on
December 3, 1999.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file a post-effective amendment to this Registration Statement
during any period in which offers or sales are being made:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually, or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement of any
material change to such information in the Registration Statement.
(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(4) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
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(5) That, insofar as indemnification for liabilities arising from the
Securities Act may be permitted to Directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
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SIGNATURES
Pursuant to the requirements of the Act, the Company certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the State of
Texas, on May 15, 2001.
Signature Title Date
/s/David P. Summers Chief Executive Officer and May 15, 2000
David P. Summers Chairman
/s/Barbara J. Richardson Secretary and Director May 15, 2000
Barbara J. Richardson
/s/M. Dwight Cantrell Chief Financial Officer, May 15, 2000
M. Dwight Cantrell Treasurer and Director
/s/Gary R. Ball Director May 15, 2000
Gary R. Ball
/s/Claudio R. Roman Director May 15, 2000
Claudio R. Roman
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