2
As filed with the Securities and Exchange Commission
on April 23, 2000
Commission File Number 333-77461
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment 2 to
FORM SB-2
REGISTRATION STATEMENT
Under The Securities Act of 1933
BioNet Technologies, Inc.
NEVADA 84-1247085
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdictions Classification Code Number) Identification number)
of incorporation
or organization
1070 East Indian Town Road, Suite 208-210
Jupiter, Florida 33477
Telephone: (561) 745-1949
(Address and telephone number of registrant's principal executive
offices and principal place of business.)
(Name, address and telephone number of agent for service.)
with copies to:
Jody M. Walker
Attorney At Law
7841 South Garfield Way
Littleton, Colorado 80122
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, check the following box: | x |
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed Amount of
class of Amount to be offering aggregate registration
securities registered price offering price fee
common stock(1)
$.001 par value 2,000,000 $.56(2) $1,120,000 $350.00
(1)Represents common stock to be registered for selling security
holders.
(2)Based on bid price of our common stock solely for purposes of
computing the registration fee
The registrant hereby amends this registration statement on the 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 a date as the
Commission, acting pursuant to said Section 8(a), may determine.
3
PRELIMINARY PROSPECTUS DATED April 23, 2000
SUBJECT TO COMPLETION
2,000,000 common shares on behalf of selling security holders
BioNet Technologies, Inc.
- - We will not receive any cash or other proceeds in connection
with selling security holder's sale
Trading Symbol: BNTK
Recent Price: $.312
Consider carefully the risk factors beginning on page 10 in this
prospectus.
Neither the SEC nor any state securities commission has approved these
common shares or determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
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. This prospectus
is not soliciting an offer to buy these securities in any state where
the state does not permit the offer or sale.
The date of the prospectus is April 23, 2000
4
TABLE OF CONTENTS
PROSPECTUS SUMMARY 6
RISK FACTORS 8
DILUTION 13
BIONET 13
BUSINESS ACTIVITIES 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION 15
Trends and Uncertainties
Capital and Source of Liquidity
Results of Operations
MANAGEMENT 17
Officers and Directors
Remuneration
Indemnification
CERTAIN TRANSACTIONS 19
PRINCIPAL SHAREHOLDERS 19
MARKET FOR REGISTRANT'S COMMON EQUITY 21
DESCRIPTION OF SECURITIES 22
LEGAL MATTERS 23
LEGAL PROCEEDINGS 23
EXPERTS 23
INTERESTS OF NAMED EXPERTS AND COUNSEL 23
5
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PROSPECTUS SUMMARY
- ----------------------------------------------------
In analyzing this offering, you should read this entire prospectus and
carefully consider, among other things, the following risk factors:
Bionet Our company was incorporated in the
State of Florida on May 22, 1986
using the name Global Wrestling
Alliance, Inc. We were authorized
to issue 75,000,000 common shares at
$.0001 par value. We had limited
operations from 1988 through 1990 and
ceased operations at that time.
We experienced a change in control in
May 31, 1993, and pursuant to
Articles of Amendment, changed our
name to Pratt, Wylce & Lords, Ltd.
and we did a One for One Hundred
reverse stock split.
We changed our domicile to the state
of Nevada on August 18, 1993.
Pursuant to the Articles of Merger
used solely to change the domicile,
we are authorized to issue 75,000,000
common shares at $.001 par value.
In 1998, we changed our name to
Bionet Technologies, Inc. to more
accurately reflect the nature of our
business.
Our previous business objective was
to provide consulting services that
assist the client-company in becoming
a publicly traded company. Since we
stopped providing financial
consulting activities, we have
carried out administrative functions
and have begun liquidating our
investment portfolio. We are
currently seeking new business
activities unrelated to the provision
of financial services.
During the years ended January 31,
1997 and 1998, we made working
capital advances to Immune
Technologies, Inc. (Immune), a former
client company, amounting to $79,800.
The business of Immune consists of
research and development and
marketing of products based on new
technology for the prevention and
related therapy of infectious
diseases in animals.
In June 1998 we entered into a
purchase and sale agreement with
Immune where we purchased assets of
Immune consisting primarily of
accounts receivable, furniture,
equipment and intangible assets. The
purchase price paid consisted of
2,000,000 shares of our common stock
and the cash we made to Immune.
6
During August 1998, we issued
1,900,000 shares of our restricted
common stock to the shareholders of
Greengold Corporation in exchange for
100% of the outstanding common stock
of Greengold.
Greengold, to date, has been engaged
in research and development of
technology that it hopes to utilize
in the recycling and disposal of
animal waste with the first
application being hog waste.
Additional applications of its
technology are in the treatment of
industrial and municipal water and
waste treatment facilities. The
assets and liabilities of Greengold
consist of patent costs of $7,500 and
accounts payable of $28,649 at the
acquisition date. The fair value of
the stock issued in the transaction
amounted to $475,000.
Greengold has not yet begun any
revenue generating operations.
Bionet is currently evaluating and
attempting to resolve a dispute with
an officer of Greengold regarding its
proprietary rights and may pursue
actions that include but are not
limited to litigation to resolve its
rights regarding Greengold.
Our principal offices are located at
1070 E. Indian Town Road, Jupiter,
Florida 33477. Our telephone
number is (561) 745-1949.
Resales by Selling
Shareholders. We are registering common
shares on behalf of selling
security holders.
We will not receive any cash or
other proceeds from the selling
security holders' sale of
their common shares.
We are not selling any common
shares on behalf of selling
security holders.
We have no control
or affect on these selling
security holders.
Market for common shares Prior to the date hereof, we have had
only a limited trading market for our
common shares. The NASD Electronic
Bulletin Board provides quotes on our
common shares
We cannot assure you that we can
develop an active or liquid trading
or that we can maintain it if we do
develop an active or liquid market.
Absence of Dividends;
Dividend Policy Management does not currently intend
to pay regular cash dividends on our
common stock Our board of directors
will review this policy from time to
time in light of, among other things,
our earnings and financial position.
We do not anticipate paying dividends
on our common shares in the
foreseeable future.
7
Transfer Agent Florida Atlantic Stock Transfer, Inc.
is our transfer agent.
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RISK FACTORS
- ----------------------------------------------------------
In analyzing this offering, prospective investors should read this
entire prospectus and carefully consider, among other things, the
following Risk Factors:
Risk Factors relating Our Business.
We do not meet the requirements for our stock to be quoted on NASDAQ
and the tradability in our stock will be limited under the penny stock
regulation.
If the trading price of our common stock is less than $5.00 per share,
trading in the common stock would also be subject to the requirements
of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers
who recommend low-priced securities to persons other than established
customers and accredited investors must satisfy special sales practice
requirements. The broker/dealer must make an individualized written
suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
SEC regulations also require additional disclosure in connection with
any trades involving a "penny stock", including the delivery, prior to
any penny stock transaction, of a disclosure schedule explaining the
penny stock market and its associated risks. Such requirements severely
limit the liquidity of the common stock in the secondary market because
few broker or dealers are likely to undertake such compliance
activities. Generally, the term penny stock refers to a stock with a
market price of less than $5.00 per share.
If our common stock has no active trading market, you may not be able
to sell your common shares at all.
Our common shares have only a limited trading market. We cannot assure
you an active trading market will ever develop. If no market develops,
you may not be able to sell your common shares easily, if at all.
We have made forward looking statements that may not prove to be
correct.
Certain statements in this prospectus constitute forward-looking
statements within the meaning of Regulation Section 27A of the
Securities Act and Regulation Section 21E of the Exchange Act. These
statements include, but are not limited to, statements regarding
business and financing plans, business trends and future operating
revenues and expenses. Although we believe that the expectations
reflected in these statements are reasonable, we can give no assurance
that such expectations will prove to be correct.
Forward-looking statements are typically identified by the words:
believe, expect, anticipate, intend, estimate and similar expressions,
which by their nature refer to future events. We cautions you that any
forward-looking statements made by us are not guarantees of future
performance and that actual results may differ materially from those in
the forward-looking statements as a result of various factors,
including, but not limited to our ability to be able to continue our
projected growth or be able to fully implement its various business
strategies.
We are a development company and must
- implement and successfully execute our business strategy;
- continue to develop and upgrade our technology;
- respond to competitive development;
- attract, retain and motivate qualified personnel; and
- meet the expectations of its strategic partners.
We cannot assure you that we will be successful in addressing such
risks, and our failure to do so could have a material negative effect
our business, prospects, financial condition and results of operations.
8
Risk Factors relating to our division, Immune Technologies.
Immune Technologies shall file for approval of its products to be
utilized on animals with the United States Department of Agriculture.
If Immune does not obtain the required approval, Immune will be limited
to products utilized on animals only.
We cannot assure you that Immune Technologies will be able to obtain
the required approvals. For Immune Technologies' products that will
be utilized by humans, Immune Technologies shall not pursue Food and
Drug Administration approval. Immune Technologies shall pursue and
obtain any and all approvals.
We have not conducted any independent market research of potential
demand for Immune's current operations.
Immune has not conducted independent market research providing
management with independent assurance from which it can estimate
potential demand for its business operations. Even in the event market
demand is independently identified, we cannot be assured that Immune
Technologies will be successful.
Risk Factors relating to Bionet's subsidiary, GreenGold International.
GreenGold has a limited operating history and needs to develop
recurring revenue to successfully continue operations.
Since its incorporation in 1995, GreenGold's activities have been
principally devoted to positioning itself to achieve its business
objectives. GreenGold has had no operating revenue to date and expects
to incur losses and administrative expenses until sales of its products
commence and/or revenues are received from any of its proposed
operations.
GreenGold's operations will not be successful if GreenGold cannot
create an efficient distribution system. A number of aspects of the
commercial Aquameal system remain to be proven in full-scale operation.
These include design of the specialized harvesting unit, system
robustness and ease of operation, large-scale field drying, routine
treatment efficacy, and efficiency of duckweed feed in commercial
animal husbandry.
The Aquameal System is a new technology with important differences from
existing acquacultural technologies. This puts a special burden on
the distribution system that GreenGold proposes to create in North
Carolina.
Any soybean price fluctuations in the commodities Market will
negatively affect our gross margin
. While the long-range trend for soybean prices is expected to
continue upward in the coming years, we cannot guarantee that prices
will not continue to fluctuate significantly. A season or more of
lower-than-average prices may erode GreenGold's projected gross margin.
GreenGold's operations may be limited if GreenGold cannot successfully
develop all of its proposed products.
Certain applications of GreenGold's technologies are in early or middle
stages of development and will require significant further research,
development, testing and regulatory clearances prior to
commercialization. We cannot assure you that any of these applications
will be successfully developed, prove to be safe and efficacious,
receive requisite regulatory approvals, be capable of being produced in
commercial quantities at reasonable costs or be successfully marketed
and distributed.
GreenGold will depend on third parties to distribute some of its
products. GreenGold may not be able to obtain acceptable terms with
any third party distributors.
If GreenGold's products are successfully developed and/or approved by
applicable regulatory agencies, GreenGold intends to market and
distribute some of its products through others pursuant to contractual
arrangements such as joint venture, licensing or similar collaborative
arrangements or distribution agreements. Any contractual arrangements
9
with others may result in a lack of some element of control by
GreenGold over any or all of the marketing and distribution of these
products.
If we cannot successfully protect Greengold's proprietary technology,
GreenGold's business operations may not be successful.
GreenGold holds a patent on its AquamealTM System. We cannot assure
you that the patent will provide GreenGold with significant competitive
advantages, or that challenges will not be instituted against the
validity or enforceability of any patent owned by GreenGold or, if
instituted, that these challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement can be
substantial.
GreenGold has filed a trademark application with the United States
Patent and Trademark Office to register its mark and design.
Furthermore, we cannot assure you that others will not independently
develop similar technologies or duplicate GreenGold's technologies or
design around the patented aspects of GreenGold's technologies.
However, if further patents are not issued on innovations from present
or future patent applications, GreenGold may be subject to greater
competition. In some cases, GreenGold may rely on trade secrets to
protect its innovations. We cannot be assure you that trade secrets
will be established, that secrecy obligations will be honored, or that
others will not independently develop similar or superior technology.
GreenGold's operations are subject to various federal, state and local
government regulations. GreenGold's business will be negatively
affect if our clients do not maintain waste management permits.
Greengold's business is subject to regulations relating to the quality
of surface and ground water under state approved farm waste management
plans. Obtaining and maintaining licenses and permits is a client
obligation. The failure by clients to maintain current waste
management permits would have a material adverse effect on GreenGold's
operating results.
- -----------------------------------------
AVAILABLE INFORMATION
- -----------------------------------------
We have filed with the Securities and Exchange Commission
a registration statement including all amendments and required
exhibits, under the Act with respect to the securities we are offering.
This prospectus does not contain all of the information found in the
registration statement. We have omitted some parts of the registration
statement pursuant to the rules and regulations of the Commission. You
can examine the registration statement for further information with
respect to Bionet and the securities we are offering. You can examine
without charge at or obtain copies of these materials by paying
prescribed fees from:
- the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549,
- the Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and
- the New York Regional Office, 7 World Trade Center, New York,
New York 10048.
We will voluntarily file periodic reports in the event the Commission
suspends our obligation to file these reports under Section 15(d) of
the Exchange Act.
The Commission maintains a Web site -- //www.sec.gov -- that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission.
10
- --------------------------------------
SELLING SECURITY HOLDERS
- --------------------------------------
We are not selling any common shares on behalf of selling security
holders. We have no control or affect on the sale of common shares by
these selling security holders which are not subject to any lock-up
agreement.
The selling security holders may sell their common shares
- in one or more transactions (which may include block
transactions in the over-the-counter market),
- in negotiated transactions or in a combination of
these methods of sales,
- at fixed prices which may be changed, at market
prices prevailing at the time of sale,
- at prices related to the prevailing market prices or
- at negotiated prices.
The selling security holders may effect such transactions
- by selling the common shares directly to purchasers, or
- may sell to or through agents, dealers or underwriters
designated from time to time.
These agents, dealers or underwriters may receive compensation in the
form of discounts, concessions or commissions from the selling security
holders and/or the purchaser(s) of the common shares for whom they may
act as agent or to whom they may sell as principals, or both.
The selling security holders and any agents, dealers or underwriters
that act in connection with the sale of the common shares might be
deemed to be underwriters within the meaning of Section 2(11) of the
Securities Act, and any discount or commission received by them and any
profit on the resale of the common shares as principal might be deemed
to be underwriting discounts or commissions under the Securities Act.
The offering by selling security holders will terminate on or before
June 30, 2001.
On behalf of the selling security holders, we are registering 2,000,000
common shares. The percentage owned prior to and after the offering
reflects all of the then outstanding common shares. The amount and
percentage owned after the offering assumes the sale of all of the
common shares being registered on behalf of the selling security
holders
Name Amount Total Number % Owned Number of % Owned
Being Owned Prior to Shares Owned After
Registered Currently Offering After Offering Offering
American Financial Funding 1,494,952 1,919,952 20.18% 425,000 4.47%
Kevin Tatsugawa 11,250 11,250 .12% 0 0.00%
Laurie Tatsugawa 17,500 17,500 .18% 0 0.00%
Elizabeth Gheen 12,190 12,190 .13% 0 0.00%
Alan R. Filson 15,238 15,238 .16% 0 0.00%
Mitsuo Tatsugawa Defined
Benefit Trust U/A
Dated 9-1-88 23,704 23,704 .25% 0 0.00%
Robert and Susanna Ichikawa 15,238 15,238 .16% 0 0.00%
Dennis Knepp 9,143 9,143 .10% 0 0.00%
Robert Hinchey 30,475 30,475 .32% 0 0.00%
Dale R. Benson and Karen
F. Benson, Jt. Tenants 35,556 35,556 .37% 0 0.00%
Abigail Miles 7,822 7,822 .08% 0 0.00%
Robert L. Watson 11,952 11,952 .13% 0 0.00%
Joseph Petrucelli 7,111 7,111 .07% 0 0.00%
Garry Stephenson 9,143 9,143 .10% 0 0.00%
Patrick Gundlach 15,238 15,238 .16% 0 0.00%
Sarah L. O'Malia 9,173 9,173 .10% 0 0.00%
Harry Faddis 45,714 45,714 .48% 0 0.00%
Robert Gerner 9,143 9,143 .10% 0 0.00%
R E Hunt, Trustee U/A/ DTD
8/28 12,190 12,190 .13% 0 0.00%
John Polli 7,529 7,529 .08% 0 0.00%
Thomas Geise 31,030 31,030 .33% 0 0.00%
Paul Spiegler 9,143 9,143 .10% 0 0.00%
John Wong 15,238 15,238 .16% 0 0.00%
11
James Yanai 21,333 21,333 .22% 0 0.00%
L. Alan Schafler 123,094 500,000 5.25% 376,906 3.96%
We are not aware of any current or future plans, proposals,
arrangements or understandings by any selling security holders to
distribute their registered common shares of Bionet to their
respective outstanding shareholders or partners.
We are not aware of any plans, arrangements or understandings by any
selling security holders to sell their registered shares of common
stock to any particular individual(s) or to use these registered shares
to satisfy contractual obligations.
We will receive no portion of the proceeds from the sale of the
common shares by the selling security holder and will bear all of the costs
relating to the registration of this offering (other than any fees and
expenses of counsel for the selling security holders). Any
commissions, discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale of any
of the common shares will be paid by the selling security holders.
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DILUTION
- -------------------------------------------------------
Further Dilution. We may issue additional restricted common shares
pursuant to private business transactions. Any sales under Rule 144
after the applicable holding period may have a depressive effect upon
the market price of our common shares.
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BIONET
- -------------------------------------------------------
Organizational History. Bionet was incorporated in the State of
Florida on May 22, 1986 using the name Global Wrestling Alliance, Inc.
Bionet was authorized to issue 75,000,000 common shares at $.0001 par
value. Bionet had limited operations from 1988 through 1990 and
ceased operations at that time. Bionet experienced a change in
control and pursuant to Articles of Amendment on May 31, 1993, the name
of the corporation was changed to Pratt, Wylce & Lords, Ltd. and a One
for One Hundred reverse stock split was effectuated. Bionet was
reincorporated in the State of Nevada on August 18, 1993. Pursuant to
the Articles of Merger filed to change the our domicile, Bionet is
authorized to issue 75,000,000 common shares at $.001 par value and as
of December 31, 1998 there were 3,204,270 common shares outstanding. In
1998, the name of Bionet was changed to Bionet Technologies, Inc. to
more accurately reflect the nature of its proposed business.
The previous business objective of Bionet was to provide consulting
services which assist the client-company in becoming a publicly traded
company. Since its cessation of financial consulting activities,
Bionet has carried out administrative functions and has begun
liquidating its investment portfolio. Bionet is currently seeking new
business activities unrelated to the provision of financial services.
Due to the ratio of the securities received as partial compensation
from its client companies to assets, Bionet registered as a Business
Development Company. Upon termination of its consulting activities
and cessation of receipt of any securities for services and due to its
current and proposed activities, Bionet ceased to be a Business
Development Company on November 6, 1998 upon filing Form N-54C under
the Act.
During the years ended January 31, 1997 and 1998, Bionet made working
capital advances to Immune Technologies, Inc. (Immune), a former client
company, amounting to $79,800. The business of Immune consists of
research and development and marketing of products based on new
technology for the prevention and related therapy of infectious
diseases in animals.
In June 1998 Bionet entered into a purchase and sale agreement with
Immune whereby Bionet would purchase assets of Immune consisting
primarily of accounts receivable, furniture, equipment and intangible
assets. The purchase price paid consisted of 2,000,000 shares of
Bionet's common stock and the cash advances made. The 2,000,000
common shares were distributed to Bionet shareholders.
12
During August 1998, Bionet agreed to issue 1,900,000 shares of its
restricted common stock to the shareholders of Greengold Corporation
(Greengold) in exchange for 100% of the outstanding common stock of
Greengold. Greengold, to date, has been engaged in research and
development of technology that it hopes to utilize in the recycling and
disposal of animal waste with the first application being hog waste.
Additional applications of its technology are in the treatment of
industrial and municipal water and waste treatment facilities. The
assets and liabilities of Greengold consist of patent costs of $7,500
and accounts payable of $28,649 at the acquisition date. The fair
value of the stock issued in the transaction amounted to $475,000. The
excess of the fair value of the purchase price over the assets acquired
has been treated as the purchase of research and development costs by
Bionet and has been charged to expense during the current quarter.
Greengold has not yet begun any revenue generating operations. Bionet
is currently evaluating and attempting to resolve a dispute with an
officer of Greengold regarding its proprietary rights and may pursue
actions that include but are not limited to litigation to resolve its
rights regarding Greengold.
Competition. Any proposed business of Bionet could be very
competitive. Bionet will encounter competition in its chosen business
who are already offering, or will in the future offer, the same or
similar products services as those which may be offered by Bionet.
Entities with greater established financial resources and contacts than
Bionet may be competitors in Bionet's chosen business industries.
They may develop marketing strategies that are competitive with or
superior to Bionet's products and/or services or which can be marketed
more effectively.
Federal and/or State Regulation. Bionet is not subject to any federal
or state regulations regarding its services or proposed activities.
However, Bionet files required reports under Section 12g of the
Securities Act of 1934.
Employees. Bionet has currently has only one full time employee and
no part time employees. Mr. Schafler is the key employee and handles
almost all of the administrative functions. Bionet shall employ
additional individuals as required.
Seasonal Nature of Business Activities. Bionet's business activities
are not seasonal. The business activities of Bionet's subsidiary may
be seasonal in the future.
- -------------------------------------------------
BUSINESS ACTIVITIES
- -------------------------------------------------
Bionet provides the management control and oversight, maintains
operating systems and provides the capital necessary to operate each
division and subsidiary. Bionet also coordinates the
interrelationship between the various divisions and subsidiaries.
Bionet provides management oversight, establishes controls and
maintains operating systems.
Immune Division. The business of Immune consists of research and
development and marketing of products based on new technology for the
prevention and related therapy of infectious diseases in animals. To
date, no revenues have been received from Immune's operations.
GreenGold International is a subsidiary of Bionet. Greengold, to
date, has been engaged in research and development of technology that
will be utilized in the recycling and disposal of animal waste with the
first application being hog waste. Additional applications of its
technology are in the treatment of industrial and municipal water and
waste treatment facilities. To date, no revenues have been received
from GreenGold's operations.
Immune Technologies and GreenGold each have their own executive
structure but the management of all divisions and subsidiaries is
responsible to Mr. Schafler, the president of Bionet.
12
- ----------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------
Trends and Uncertainties. Due to its change in business, Bionet
no longer operate on revenues from its consulting fee income.
During June, 1998, Bionet issued 2,000,000 restricted Common
Shares to Immune Technologies, Inc. (Immune) in exchange for certain
assets of Immune. Immune had been a client of Bionet and the
Company had advanced an aggregate of $79,800 to Immune during 1997 and
1998 to assist in meeting that company's working capital requirements.
Immune, to date, had been engaged in research and development of
technology that it hopes to utilize in the diagnosis and treatment of
animal diseases. The assets acquired from Immune consist of cash,
inventory and fixed assets aggregating $100,972 at the purchase date.
During August 1998, Bionet issued 1,900,000 of its restricted
common stock to the certain shareholders of Greengold Corporation
(Greengold) in exchange for 80% of the outstanding common stock of
Greengold. Greengold, to date, has been engaged in research and
development of technology that it hopes to utilize in the recycling and
disposal of animal waste with the first application being hog waste.
Additionally applications of its technology are in the treatment of
industrial and municipal water and waste treatment facilities. The
assets and liabilities of Greengold consist of patent costs of $7,500
and accounts payable of $28,649 at the acquisition date.
Bionet will have to seek equity or debt financing to continue
operations regarding its new acquisitions.
Capital Resources and Source of Liquidity. Bionet currently has
no material commitments for capital expenditures. Bionet can
meet its short term cash flow needs for the next six months from the
sale of investment securities ($41,438 for the nine months ended
October 31, 1999) and the proceeds from stock subscriptions of
$781,755. In the next twelve months, Bionet shall utilize the sale
of its investment securities to meet its cash flow needs until Bionet
can implement it s new business plan.
Going Concern. Bionet is not currently delinquent on any of its
obligations even though Bionet has ceased to generate revenue from
its consulting services.
For the nine months ended October 31, 1999, Bionet received the
proceeds from the sale of investment securities of $41,438 and
purchased fixed assets of $7,057 resulting in net cash provided by
investing activities of $34,381.
For the nine months ended October 31, 1998, Bionet received
proceeds from the sale of investments of $71,220 and purchased fixed
assets of $18,812. This resulted in net cash provided by investing
activities of $52,408 for the nine months ended October 31, 1998.
For the nine months ended October 31, 1999, Bionet received
proceeds from stock subscriptions of $781,755 resulting in net cash
provided by financing activities of $781,755.
For the nine months ended October 31, 1998, Bionet received from
the sale of common stock of $1,550 and proceeds from stock
subscriptions of $160,965. Additionally, Bionet received advances
of $147,151 from stockholders for the nine months ended October 31,
1998. This resulted in net cash provided by financing activities of
$309,666 for the nine months ended October 31, 1998.
Results of Operations:
For the nine months ended October 31, 1999, Bionet did not receive
any revenue due to the cessation of previous operations and the
subsequent acquisitions of Immune and Greengold. Bionet had
general and administrative expenses of $821,319 for the nine months
ended October 31, 1999 which consisted primarily of salaries and wages
of $184,259, legal of $33,464, accounting of $16,884, travel of
$48,374, advertising of $1,720, telephone of $6,845, insurance of
$41,129, consulting of $260,836, moving expense of $3,089, rent of
$23,411, maintenance of $18,755, research and development of 80,619,
14
other expenses of $82,934 and depreciation and amortization expenses
of $18,000. Material changes in the above expenses were due mainly
to the acquisition of Immune and Greengold.
For the nine months ended October 31, 1998, Bionet did not receive
any revenue due to the cessation of previous operations. Bionet had
general and administrative expenses of $392,716 for the nine months
ended October 31, 1998 which consisted primarily of salaries and wages
of $181,727, legal of $2,423, accounting of $10,975, travel of
$16,130, advertising of $890, telephone of $4,545, insurance of
$29,928, consulting of $67,900, moving expense of $18,489, rent of
$6,133 and other expenses of $52,235. Bionet incurred the above
expenses mainly in our search for new businesses to conduct.
Plan of Operation. During January 1997, Bionet determined that it
was unable to complete certain of its consulting projects and would be
unable to accept new consulting clients in the future. Bionet
negotiated contract termination agreements with all of its active clients
that provide for the immediate discontinuance of consulting services.
The termination contracts provide that Bionet retains as revenue all
cash paid to date and that Bionet returns all or a major portion of
common stock issued to it by client companies.
Bionet currently intends to acquire businesses and assets as may
provide gain for the shareholders. Bionet has acquired certain
assets of Immune Technologies, Inc. and intends to continue to pursue
Immune's business plan. Additionally, Bionet acquired 80% of the
outstanding common stock of Greengold Corporation and is continuing
Greengold's business plan. Bionet may also choose to form
corporations for the purpose of pursuing such business ventures as are
deemed potentially profitable by the Board of Directors.
- ---------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------
Officers and Directors. Pursuant to the Articles of Incorporation,
each Director shall serve until the annual meeting of the stockholders,
or until his successor is elected and qualified. Bionet's basic
philosophy mandates the inclusion of directors who will be
representative of management, employees and the minority shareholders
of Bionet. Directors may only be removed for cause. The term of
office of each officer of Bionet is at the pleasure of Bionet's Board.
The executive officers and directors are:
L. Alan Schafler, age 63 President/Secretary/Treasurer June 1997
Treasurer Director to present
Erich Schmid, age 52 Director November, 1997
to present
James Yanai, age 59 Director November, 1997
to present
Resumes:
L. Alan Schafler. Mr. Schafler has been President, Treasurer and a
Director of Bionet since June 1997. Mr. Schafler has been the
president of L. Alan Schafler & Associates for the last five years.
From 1974 to present, Mr. Schafler has been a management consultant
providing strategic planning and problem solving resource in a wide
range of corporate disciplines. Mr. Schafler's specialty is the review
and appropriate realignment of integrated corporate functions to
maximize the growth and profitability of the business enterprise.
Mr. Schafler obtained a B.B.A. degree in accounting from Hofstra
University in 1957 and an MBA in Finance/Management from New York
University Graduate School of Business in 1959. Mr. Schafler has
attended continuing financial/management post MBA studies and seminars
at New York University Graduate School of Business. Mr. Schafler has
been an instructor and advisor for Management Decision Laboratory at
the NYU Graduate School of Business. and attended and instructed
programming and systems courses at the Systems Research Institute.
15
James Yanai. Mr. Yanai is currently a director of Bionet. He has
worked as a buyer for Delta Floral Distributors, a flower distributor
since 1993.
Erich K. Schmid. From 1994 to present, Mr. Schmid has been President
of Business Intermediary Services, Ltd., a business brokerage firm he
co-founded specializing in middle-market transactions. Mr. Schmid has
also been a Director of Redneck Foods, Inc., a restaurant company from
January 31, 1997. From 1985 to 1994, Mr. Schmid was a Vice President
with New South Business Ventures, Inc. and its predecessor T.C.
Wilkinson, Jr. & Associates, Inc., general business brokerage firms.
He is a member of the International Business Brokers Association, Inc.
and is a Certified Business Intermediary. Mr. Schmid earned a
Bachelor of Science in industrial management and a Master of Science in
management from the University of Akron in 1971 and 1996, respectively.
Indemnification. Bionet shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the state
of Nevada, any person made, or threatened to be made, a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of Bionet, or served any other enterprise as director, officer
or employee at the request of Bionet. The board of directors, in its
discretion, shall have the power on behalf of Bionet to indemnify any
person, other than a director or officer, made a party to any action,
suit or proceeding by reason of the fact that he/she is or was an
employee of Bionet.
Pursuant to Bionet's bylaws, Bionet shall have the right to indemnify ,
to purchase indemnity insurance for, and to pay and advance expenses
to, Directors, Officers and other persons who are eligible for, or
entitled to, this indemnification, payments or advances, in accordance
with and subject to the provisions of The Nevada Revised Statutes and
any amendments thereto, to the extent this indemnification, payments or
advances are either expressly required by these provisions or are
expressly authorized by the hoard of directors within the scope of
these provisions. The right of Bionet to indemnify these persons shall
include, but not be limited to, the authority of Bionet to enter into
written agreements for indemnification with these persons.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of Bionet,
Bionet has been advised that in the opinion of the Securities and
Exchange Commission, this indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against these liabilities (other than
the payment by Bionet of expenses incurred or paid by a director,
officer or controlling person of Bionet in the successful defense of
any action, suit or proceedings) is asserted by this director, officer,
or controlling person in connection with any securities being
registered, Bionet 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 this indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of these issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING BIONET FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
Conflicts of Interest Policy. Bionet has adopted a policy that any
transactions with directors, officers or entities of which they are
also officers or directors or in which they have a financial interest,
will only be on terms consistent with industry standards and approved
by a majority of the disinterested directors of Bionet's Board of
Directors. None of these transactions by Bionet shall be either void
or voidable solely because of this relationship or interest of
directors or officers or solely because these directors are present at
the meeting of the Board of Directors of Bionet or a committee thereof
which approves these transactions, or solely because their votes are
counted for this purpose if:
- the fact of this common directorship or financial interest is
disclosed or known by the Board of Directors or committee and noted in
the minutes, and the Board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote for that
purpose without counting the vote or votes of these interested
directors; or
16
- the fact of this common directorship or financial interest is
disclosed to or known by the shareholders entitled to vote and they
approve or ratify the contract or transaction in good faith by a
majority vote or written consent of shareholders holding a majority of
the common shares entitled to vote (the votes of the common or
interested directors or officers shall be counted in any this vote of
shareholders), or
- the contract or transaction is fair and reasonable to Bionet
based on the material similarity of terms to recent consulting
agreements not involving interested parties, or in all other agreements
by competitive bids, at the time it is authorized or approved. In
addition, interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors of Bionet
or a committee that approves the transactions.
Non-Qualified and Incentive Stock Option Plans. During 1995, Bionet
adopted the 1995 Non-Statutory Stock Option Plan that provides for
granting to Bionet's officers, directors, employees and other
individuals who consult with or advise Bionet, options to acquire
750,000 shares of Bionet's common stock. The shares issuable under
the 1995 plan are at a price not less than 85% of the fair market value
of the stock on the date of grant. The exercise periods of the
options are not to exceed ten years.
The board of directors suspended the Plan on June 12, 1996 and any
options granted in 1996 were suspended. The board reinstated the plan
after Bionet removed itself from the Investment Act of 1940 in November
1998. However, the board of directors did not reinstate any of the
suspended options. These options have expired and/or were terminated.
Executive Compensation. The following table sets forth certain
summary information concerning the total remuneration paid or accrued
by Bionet, to or on behalf of Bionet's Chief Executive Officer and
Bionet's executive officers determined as of the end of last year.
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs Outs sation
Position Year ($) ($) ($) ($) ($) ($) ($)
Alan Schafler 1998 $52,500 - - - $7,500(2) - -
President,
Treasurer
Chief Financial
Officer
Timothy Miles
President,
Treasurer
Chief Financial
Officer 1997 $17,500 - - - - - -
1996 $ 177,000 - - - - - -
No other officer has received compensation in the last three years.
In June 1997, Mr. Schafler received options valued at $.01 per option
to purchase 750,000 common shares of Bionet exercisable at $.19 per
common share for a period of three years. These options were not
issued under Bionet's stock option plans.
- ------------------------------------------------------
CERTAIN TRANSACTIONS
- ------------------------------------------------------
During the years ended January 31, 1999 and 1998, Timothy Miltes,
Bionet's former president who is currently a major shareholder of
Bionet made working capital advances to Bionet of $108,119 and $86,819,
respectively. The shareholder has agreed to convert the balance due to
him at January 31, 1999 into shares of Bionet's restricted common at a
conversion rate of $.19 per share. The stock price represents the
17
trading bid price of Bionet's common stock as of the date the
conversion was approved by Bionet's board of directors. There is no
relationship between Mr. Miles and Immune or GreenGold.
- ----------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ----------------------------------------------------------------
There are currently 9,515,602 common shares outstanding. The following
tabulates holdings of shares of Bionet by each person who, subject to
the above, at the date of this prospectus, holds of record or is known
by management to own beneficially more than 5.0% of the common shares
and, in addition, by all directors and officers of Bionet individually
and as a group.
Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable community property laws.
20
Shareholdings
Number & Class
Name and Address of Shares Percentage
L. Alan Schafler
2035 Staysail Lane
Jupiter, Florida 33477 500,000 5.25%
Erich K. Schmid
40 Spring Hollow Lane
Fairview, NC 28730 10,000(2) .11%
James Yanai
17600 Van Ness
Torrence, CA 90504 10,000(2) .11%
Timothy Miles and MaryEllen Miles
#9 Niblick
Hilton Head Island, SC 29938 1,918,604 20.16%
Paul Skillicorn
Rt. 1, Box 440
Snow Hill, NC 28580 760,608 8.41%
William Spira
14221 Park Avenue South
Burnsville, MN 55337 760,608 8.41%
All Directors & Officers
as a group (3 persons) 500,000 5.53%%
(1) Mr. and Mrs. Miles are former officers and directors of Bionet.
(2)Assumes exercise of outstanding options. In December 1998, Bionet
issued Erich Schmidt and James Yanai, directors, each an option to
purchase 10,000 common shares at $.25 per common shares. The option
period is for three years from December, 1998.
Options. Bionet has issued Dexter Thompson, a non-affiliate an
option to purchase 9,000 common shares at $.437 per common share. The
option vests in three equal installments annually beginning April 5,
2000.
18
Bionet has issued Anthony Bertrami, a non-affiliate, an option to
purchase 20,000 common shares at $.25 per common shares. The option
period is for three years from December, 1998.
Bionet has issued Clint Clark, a non-affiliate an option to purchase
10,000 common shares at $.25 per common shares. The option period is
for two years from May 30, 1997.
These option were issued pursuant to Section 4(2) of the Act. These
option holders are sophisticated investors who have an ongoing
relationship with Bionet.
- ----------------------------------------------------------
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------
Bionet's common stock is traded on the OTC Bulletin Board under the
symbol "BNTK". The following table sets forth the range of high and
low bid quotations for Bionet's common stock for each quarter of the
last two fiscal years, as reported by the OTC Bulletin Board. Bionet's
market makers are Paragon Capital Corp., Olsen Payne Company, Sharpe
Capital, Inc., Wien Securities Corp. and North American Institutional
Brokers. The quotations represent inter-dealer prices without retail
markup, markdown or commission, and may not necessarily represent
actual transactions.
Quarter Ended Bid Price
High Low
1/31/99 .360 .200
10/31/99 .312 .312
7/31/99 .625 .625
4/30/99 .562 .562
1/31/99 1.125 .937
10/31/98 .25 .25
7/31/98 .437 .375
4/30/98 .375 .375
Bionet's common stock commenced trading on the over-the-counter market
in October 1996. Prior to that time, there was no market for the
securities of Bionet.
Dividends. Holders of Bionet's common stock are entitled to receive
these dividends as may be declared by its Board of Directors. Since
inception no cash dividends on Bionet's common stock have ever been
paid, and Bionet does not anticipate that dividends will be paid on its
common stock in the foreseeable future.
Broker-Dealer Sales of Company Securities.
We will apply to NASDAQ upon meeting the requirements for a NASDAQ
quotation, if ever. Upon completion of this offering, we will not
meet the requirements for a NASDAQ quotation. Until we obtain a
quotation on NASDAQ, if ever, our securities will be covered by a rule
that imposes additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers
and institutional accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse).
For transactions covered by the rule, the broker-dealer must give all
investors in penny stocks
- - a risk disclosure document required by Rule 15g-9 of the
Securities Exchange Act of 1934;
- make a special suitability determination of the purchaser,
and
- have received the purchaser's written agreement to the
transaction prior to the sale.
In order to approve a person's account for transactions in penny
stock, the broker or dealer must
- obtain information concerning the
person's financial situation, investment experience and
investment objectives;
- reasonably determine, based on the information required by
19
paragraph (1) that transactions in penny stock are suitable
for the person and that the person has sufficient knowledge
and experience in financial matters that the person
reasonably may be expected to be capable of
evaluating the rights of transactions in penny stock; and
- deliver to the person a written statement setting
forth the basis on which the broker or dealer made the
determination required in this section,
stating in a highlighted format that it is unlawful for the
broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (2) of this
section unless the broker or dealer has received, prior to
the transaction, a written agreement to the transaction
from the person; and stating in a highlighted format
immediately preceding the customer signature line that the
broker or dealer is required to provide the person with the
written statement and the person should not sign and
return the written statement to the broker or dealer if it
does not accurately reflect the person's financial
situation, investment experience and investment objectives
and obtain from the person a manually signed and dated copy
of the written statement.
A penny stock means any equity security other than a security:
- - registered, or approved for registration on
notice of issuance on a national securities exchange that
makes transaction reports available pursuant to 17 CFR
11Aa3-1
- - authorized or approved for authorization upon notice
of issuance, for quotation in the NASDAQ system;
- - that has a price of five dollars or more or .
. . .
- - whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less
than fifteen months previously that the broker or dealer
has reviewed and has a reasonable basis to believe are true
and complete in relation to the date of the transaction
with the person.
Consequently, broker-dealers may be unable to sell our securities and
also you may be unable to sell your common shares easily in the
secondary market.
Bionet's securities will likely continue to trade below $5.00 and these
securities will be subject to the penny stock rules discussed above.
- --------------------------------------------------------------
DESCRIPTION OF SECURITIES
- ---------------------------------------------------------------
The following statements constitute brief summaries of Bionet's
certificate of incorporation and bylaws, as amended.
Bionet's articles of incorporation authorize it to issue up to
75,000,000 common shares. Shares of common stock purchased in this
offering will be fully paid and non-assessable.
Common stock. There are presently outstanding 9,515,602 common shares.
Holders of common shares of Bionet are entitled to cast one vote for
each share held at all shareholders meetings for all purposes. There
are no cumulative voting rights. Upon liquidation or dissolution, each
outstanding common share will be entitled to share equally in the
assets of Bionet legally available for distribution to shareholders
after the payment of all debts and other liabilities. Common shares
are not redeemable, have no conversion rights and carry no preemptive
or other rights to subscribe to or purchase additional common shares in
the event of a subsequent offering. All outstanding common shares are,
and the shares offered hereby will be when issued, fully paid and non-
assessable.
There are no limitations or restrictions upon the rights of the Board
of directors to declare dividends out of any funds legally available
therefor. Bionet has not paid dividends to date and it is not
anticipated that any dividends will be paid in the foreseeable future.
The board of directors initially may follow a policy of retaining
20
earnings, if any, to finance the future growth of Bionet. Accordingly,
future dividends, if any, will depend upon, among other considerations,
Bionet's need for working capital and its financial conditions at the
time.
Board of Directors, and shares so issued, the consideration for which
have been paid or delivered, shall be deemed fully paid stock and the
holder of these shares shall not be liable for any further payment
thereon.
The capital stock of Bionet, after the amount of the subscription price
or par value has been paid in full, shall not be subject to assessment
to pay debts of Bionet and no paid up stock and no stock issued as
fully paid shall ever be accessible or assessed and the Articles of
Incorporation shall not be amended in this particular.
Transfer Agent. Florida Atlantic Stock Transfer, Inc. acts as transfer
agent for Bionet.
- -----------------------------------------------------------
LEGAL MATTERS
- -----------------------------------------------------------
Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon by Jody M. Walker, Attorney-At-Law
- --------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------
Bionet is not involved in any legal proceedings as of the date of this
prospectus.
- --------------------------------------------------------
EXPERTS
- --------------------------------------------------------
The audited financial statements included in this prospectus have been
so included in reliance on the report of James E. Scheifley and
Associates, P.C., Certified Public Accountants, on the authority of
this firm as experts in auditing and accounting.
- --------------------------------------------------------
INTERESTS OF NAMED
EXPERTS AND COUNSEL
- --------------------------------------------------------
None of the experts or counsel named in the prospectus are affiliated
with Bionet.
- -------------------------------------------------------
REPORTS TO SECURITY HOLDERS
- -------------------------------------------------------
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and file reports and other
information with the Securities and Exchange Commission. You can
inspect and copy the reports and other information we file at the
public reference facilities that the Commission maintains in
Washington, D.C. and at the Chicago Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
the New York Regional Office, 7 World Trade Center, New York, New York
10048. You can obtain copies of this material from the Public
Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates.
We will furnish to shareholders:
- an annual report containing financial information our certified
public accountants have examined and reported upon;
- unaudited financial statements for each of the first three
quarters of the fiscal year; and
- additional information concerning our business and operations
that our board of directors deem appropriate.
21
- --------------------------------------------------
AVAILABLE INFORMATION
- --------------------------------------------------
We have filed with the Securities and Exchange Commission a
registration statement (together with all necessary amendments and
exhibits, under the Act with respect to the securities we are offering.
This prospectus does not contain all of the information set forth in
the registration statement, some parts are omitted as allowed by the
with the rules and regulations of the Commission. For further
information with respect to us and the securities we offer, you can
examine the registration statement. You can examine or obtain copies
of these materials without charge at, by paying prescribed fees from,
the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at the Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and the New York Regional Office, 7 World
Trade Center, New York, New York 10048.
We will voluntarily file periodic reports in the event the Commission
suspends our obligation to file these reports under Section 15(d) of
the Exchange Act.
We will provide without charge to each person who receives a
prospectus, upon written or oral request of this person, a copy of any
of the information that was incorporated by reference in the prospectus
(not including exhibits to the information that is incorporated by
reference unless the exhibits are themselves specifically incorporated
by reference). You should make any requests for copies of these
documents to L. Alan Schafler, President, BioNet Technologies, Inc.,
3035 Staysail Lane, Jupiter, Florida 33477
The Commission maintains a Web site -- //www.sec.gov -- that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission.
- --------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------
Until , 1999 (90 days after the date of the prospectus), all
persons making transactions in the registered securities, whether or
not participating in the offering, may be required to deliver a
prospectus. This is in addition to the obligation of these persons to
deliver a prospectus when acting as underwriters and when utilizing
their unsold allotments or subscriptions.
No dealer, salesman, agent or any other person has been authorized to
give any information or to make any representation other than those
contained in this prospectus. If given or made, you cannot rely upon
this information or as having been authorized by
Bionet, or the underwriter, if an underwriter assists in the
sale of the securities.
This prospectus is not an offer or a solicitation by anyone to any
person in any state, territory or possession of the United States in
which an offer or solicitation is not authorized by the laws of a
state, territory or possession of the United States, or to any person
to whom it is unlawful to make an offer or solicitation.
Neither the delivery of this prospectus or any sale made hereunder
shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this prospectus or in our
affairs since the date of this prospectus.
22
- --------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------
Unaudited Consolidated Balance Sheet
As of July 31, 1999 23
Unaudited Consolidated Statements of Operation
For the three and six months ended July 31,
1999 and 1998 24
Unaudited Consolidated Statements of
Cash Flows for the Six Months ended July 31,
1999 and 1998 25
Notes to Unaudited Financial Statements 26
Independent Auditor's Report 27
Consolidated Balance Sheet as of January
31, 1999 28
Consolidated Statements of Operations for the
Year ended January 31, 1999 and 1998 29
Consolidated Statements of Stockholders'
Equity for the Years ended January 31,
1999 and 1998 30
Consolidatee Statements of Cash Flows for the
Year ended January 31, 1999 and 1998 31
Notes to Financial Statements 32
23
BioNet Technologies, Inc.
Consolidated Balance Sheet
October 31, 1999
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 86,909
Trading securities 127,750
Inventory 11,890
-----------
Total current assets 226,549
Property and equipment, at cost, net of
accumulated depreciation of $25,049 103,272
Other assets 34,043
----------
$ 363,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,086
Accrued expenses 52,303
----------
Total current liabilities 124,389
Stockholders' equity:
Preferred stock, $.001 par value,
50,000 shares authorized,
5,000 shares issued and outstanding 5
Common stock, no par value,
75,000,000 shares authorized,
10,157,296 shares issued and outstanding 10,157
Additional paid in capital 2,963,155
Subscriptions to common stock 728,434
Unearned services -
Accumulated deficit (3,462,276)
-----------
239,276
-----------
$ 363,864
See accompanying notes to consolidated financial statements.
24
BioNet Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
1999 1998 1999 1998
Revenues $ - $ - $ - $ -
Costs and expenses
General and administrative 247,989 196,776 821,319 392,716
Charge off of acquired research and development costs - 476,358 - 1,455,186
----------- --------- -------- ----------
(Loss) from operations (247,989) (673,134) (821,319) (1,847,902)
Other income and (expense):
Gain (loss) realized from sale of investments - (1,517) (21,062) 35,435
Unrealized gain (loss) on investments (11,000) 7,593 (44,000) 9,578
Interest income 1,626 - 1,626 -
Interest espense - - (925) -
----------- --------- -------- ----------
(9,374) 6,076 (64,361) 45.013
(Loss) before income taxes (257,363) (667,058) (885,680) (1,802,889)
Provision for income taxes - - - -
----------- --------- -------- ----------
Net income (loss) $ (257,363) $ (667,058) $(885,680) $(1,802,889)
Basic earnings (loss) per share:
Net income (loss) $ (0.03) $ - $ (0.10) $ (0.34)
Weighted average shares outstanding 9,578,240 7,208,949 9,308,678 5,301,824
See accompanying notes to consolidated financial statements.
25
BioNet Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
October 31,
1999 1998
Net cash provided by (used in)
operating activities $ (746,969) $ (303,400)
Cash flows from investing activities:
Proceeds from sale of investments 41,438 71,220
Purchase of fixed assets (7,057) (18,812)
------------ ----------
Net cash provided by (used in) investing activities 34,381 52,408
Cash flows from financing activities:
Proceeds from sale of common stock - 1,550
Proceeds from stock subscriptions 781,755 160,965
Advances from stockholders - 147,151
------------ ----------
Net cash provided by (used in) financing activities 781,755 309,666
------------ ----------
Increase (decrease) in cash 69,167 58,674
Cash and cash equivalents,
beginning of period 17,742 1,528
------------ ----------
Cash and cash equivalents,
end of period $ 86,909 $ 60,202
See accompanying notes to consolidated financial statements.
26
BioNet Technologies, Inc.
Notes to Unaudited Financial Statements
October 31, 1999
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
provisions of Regulation SB. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. These
financial statements should be read in conjunction with
information provided in Bionet's report on Form 10-K for
the year ended January 31, 1999.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the
full year.
Income (loss) per share was computed using the weighted average
number of common shares outstanding.
Investments
At October 31, 1999 Bionet had investments in common
equity securities as follows:
Historical Fair
Shares Cost Value
Level Best Golf, Inc. 3,500 5,250 -
Immune Technologies, Inc. 10,000 15,000 -
National Sorbents, Inc. 88,000 264,000 55,000
Advanced Sterilizer Technology 10,000 15,000 -
Casinovations, Inc. 29,100 43,650 72,750
Grand Slam Licensing, Inc. 10,000 15,000 -
First Nordic 55,000 5,000 -
--------- ---------
$362,900 $127,750
Fair value of National Sorbents Inc. as of October 31, 1999 was
determined by reference to price quoted on the NASDAQ OTC
Bulletin Board. No public market exists for the other
securities listed. Fair value of these securities is based on
the price paid by qualified investors in recent private
placements of the securities as adjusted by management to
reflect significant changes in investee company financial
conditions.
During the nine months ended October 31, 1999, Bionet
received net proceeds from the sale of investment securities
aggregating $41,438 and recorded losses from the transactions
aggregating $21,062.
During the nine months ended October 31, 1999, Bionet
received gross proceeds from the sale of stock subscriptions
aggregating $781,755. Additionally, Bionet issued an
aggregate of 1,116,732 shares of common stock representing
$398,588 of the subscriptions received.
27
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
BioNet Technologies, Inc.
(formerly Pratt, Wylce & Lords, Ltd.)
We have audited the consolidated balance sheet of BioNet Technologies,
Inc. as of January 31, 1999, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of
the two years then ended. These financial statements are the
responsibility of Bionet's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above, present fairly, in all material respects, the financial position
BioNet Technologies, Inc. as of January 31, 1999, and the results of
its operations, changes in stockholders' equity and cash flows for each
of the two years then ended, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the financial statements, investment
securities not readily marketable amounting to $135,250 as of January
31, 1999, have been valued at fair value as determined by the Board of
Directors. We have reviewed the procedures applied by the directors in
valuing such securities and investments and have inspected underlying
documentation, and in the circumstances, we believe the procedures are
reasonable and the documentation appropriate. However, because of the
inherent uncertainty of valuation, the Board of Directors estimate of
fair values may differ significantly from the values that would have
been used had a ready market existed for the securities, and the
difference could be material.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
June 12, 1999
28
BioNet Technologies, Inc.
Consolidated Balance Sheet
January 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 17,742
Trading securities 99,000
Inventory 11,890
------------
Total current assets 128,632
Property and equipment, at cost, net of
accumulated depreciation of $13,049 108,215
Available for sale securities 135,250
Other assets 9,103
------------
$ 381,200
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 91,618
Accrued expenses 41,182
------------
Total current liabilities 132,800
Stockholders' equity:
Preferred stock, $.001 par value,
50,000 shares authorized,
5,000 shares issued and outstanding 5
Common stock, $.001 par value,
75,000,000 shares authorized,
7,915,564 shares issued and outstanding 9,041
Additional paid in capital 2,565,683
Subscriptions to common stock 345,267
Unearned services (95,000)
Accumulated deficit (2,576,596)
------------
248,400
------------
$ 381,200
See accompanying notes to consolidated financial statements.
29
BioNet Technologies, Inc.
Consolidated Statements of Operations
Year Ended January 31,
1999 1998
Revenues $ - $ -
Costs and expenses
General and administrative 832,901 217,052
Charge off of acquired research and develpoment costs 1,475,949 -
---------- ----------
(Loss) from operations (2,308,850) (217,052)
Other income and (expense):
Gain (loss) realized from sale of investments 34,194 20,797
Unrealized gain (loss) on investments 69,756 (244,474)
Interest espense (1,087) -
---------- ----------
102,863 (223,677)
(Loss) before income taxes (2,205,987) (440,729)
Provision for income taxes - -
---------- ----------
Net (loss) $(2,205,987) $ (440,729)
Basic earnings (loss) per share:
Net income (loss) $ (.39) $ (.14)
Weighted average shares outstanding 5,715,465 3,040,652
See accompanying notes to consolidated financial statements.
30
BioNet Technologies, Inc.
Consolidated Statement of Stockholders' Equity
Years Ended January 31, 1999 and 1998
Additional Unpaid
Preferred Stock Common Stock Paid In Stock Unearned Accumulated
Shares Amount Shares Amount Capital Subscriptions Services Deficit Total
Balance, January 31, 1997 2,874,596 $ 2,875 $ 455,461 $ (31,500) - $ 15,923 $(362,966)
Sale of common stock for cash 380,674 380 99,580 - - 99,960
Collection of stock subscriptions 31,500 31,500
Net loss for the year (386,532) (386,532)
-------- ------ ---------- -------- ----------- ----------- --------- ---------- ----------
Balance, January 31, 1998 3,255,270 3,255 555,041 (370,609) 187,687
Sale of stock for cash 760,294 761 196,923 197,683
Common stock issued for services 1,125,000 1,125 212,625 $ (95,000) 118,750
Preferred shares
issued for services 5,000 $ 5 - - 4,995 5,000
Fair value of preferred stock conversion
rights vested during year 125,000 125,000
Stock subscriptions received in cash 150,329 150,329
Stock subscriptions received for debt conversion 194,938 194,938
Common shares issued for merger 1,900,000 1,900 473,100 475,000
Common shares issued for asset purchase 2,000,000 2,000 998,000 1,000,000
Net loss for the year (2,205,987) (2,205,987)
------- ------ ---------- ----- --------- --------- -------- --------- ---------
Balance, January 31, 1999 5,000 $ 5 9,040,564 $9,041 $ 2,565,683 $ 345,267 (95,000) $(2,576,596) $ 248,400
See accompanying notes to consolidated financial statements.
31
BioNet Technologies, Inc.
Consolidated Statements of Cash Flows
Year Ended January 31,
1999 1998
Cash flows from operating activities:
Net income (loss) $ (2,205,987) $ (440,729)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,837 1,343
Unrealized (appreciation) depreciation on investments (69,796) 244,474
Gain from sale of investments (34,194) (20,797)
Write off of purchased research costs 1,475,000 -
Common stock issued for services 248,750 14,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts and notes receivable - 1,100
Inventory (11,890) -
Trading securities 44,988 396,791
(Decrease) increase in:
Accounts payable 9,285 (97,600)
Accrued expenses 39,433 -
----------- ---------
Total adjustments 1,798,119 315,634
----------- ---------
Net cash provided by (used in)
operating activities (407,868) (125,095)
Cash flows from investing activities:
Advances to affiliate - (56,100)
Purchase of fixed assets (32,049) (1,000)
----------- ---------
Net cash provided by (used in) investing activitie (32,049) (57,100)
----------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock 197,683 85,961
Proceeds from stock subscriptions 150,329 -
Advances from stockholders 108,119 86,819
----------- ---------
Net cash provided by (used in) financing activitie 456,131 172,780
----------- ---------
Increase (decrease) in cash 16,214 (9,415)
Cash and cash equivalents,
beginning of period 1,528 10,943
----------- ---------
Cash and cash equivalents,
end of period $ 17,742 $ 1,528
========== ========
See accompanying notes to consolidated financial statements.
32
BioNet Technologies, Inc.
Consolidated Statements of Cash Flows
Year Ended January 31,
1999 1998
Supplemental cash flow information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
See accompanying notes to consolidated financial statements.
33
BioNet Technologies, Inc.
Notes to Consolidated Financial Statements
Note 1. Summary of significant accounting policies.
Organization
Bionet was incorporated in the State of Florida on May 22, 1986 as
Global Wrestling Alliance, Inc. Bionety had limited operations
from1988 through 1990 and ceased operations at that time. Bionet
experienced a change in control and began operations of its present
business as of May 31, 1993. Bionet was reincorporated in the State
of Nevada on August 18, 1993 and during the year ended January 31,
1999 changed its name to BioNet Technologies, Inc.
Bionet was in the business of providing financial consulting
services for corporate clients. As compensation for these services,
Bionet received both cash and common stock of the companies to which
it provided its services. Bionet had elected to be treated as a
Business Development Company pursuant to Section 54 of the Investment
Company Act of 1940.
During January 1997, Bionet determined that it was unable to
complete certain of its consulting projects and would be unable to
accept new consulting clients in the future. Bionet negotiated
contract termination agreements with all of its active clients which
provide for the immediate discontinuance of consulting services. The
termination contracts provide that Bionet retain as revenue all cash
paid to date and that Bionet return all or a major portion on common
stock issued to it by client companies. Since its cessation of
financial consulting activities during January 1997 Bionet has carried
out administrative functions and has begun liquidating its investment
portfolio. Bionet is currently seeking new business activities
unrelated to the provision of financial services and during the year
ended January 31, 1999 has completed a merger with GreenGold
Corporation, Inc. and an asset acquisition agreement with Immune
Technologies, Inc. (see Note 2,)
Principles of Consolidation
The consolidated financial statements include the accounts of BioNet
Technologies, Inc. and its wholly-owned subsidiary, Greengold
Corporation. All significant inter-company balances and transactions
have been eliminated. Bionet operates the business acquired from
Immune Technologies, Inc. (see Note 2.) as a division.
Securities Valuation
Investments in unrestricted securities that are traded in the over-the-
counter market are generally valued at the closing bid price on the
last day of the year. These securities are considered to be "trading
securities" as it is management's intent to liquidate them in the near
term as market conditions warrant. Restricted securities and
securities for which no public market exist are valued at fair value as
determined by the Board of Directors. These securities are initially
valued at the price per share provided for in the client company's
private sale of its securities. Periodic adjustments to the initial
fair value are made when deemed appropriate by the directors based upon
intervening events or circumstances that would have a material effect
on Bionet's ability liquidate the securities. Such intervening events
and circumstances would include among others material changes in the
client's financial position and results of operations, doubts about the
client's ability to continue as a going concern, a petition in
bankruptcy, the discovery of a material legal or environmental claim,
more recent sales of non-trading securities or the abandonment of plans
to complete a registration of the securities for public sale. These
securities are considered to be "available for sale securities" as
Bionet's ability to liquidate them in the near term is not assured and
is dependent upon the establishment of a public market for the
securities at an undetermined future date.
Inventory
Inventory is valued at the lower of cost or market. Inventories are
reviewed periodically and items considered to be slow-moving or
obsolete are reduced to estimated net realizable value through an
appropriate reserve. Inventory consists principally of raw material
and production supplies at January 31, 1999:
34
Cash and cash equivalents
For purposes of the statement of cash flows, Bionet considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. Bionet had no cash equivalents
during the periods presented.
Furniture and equipment
Furniture and equipment are stated at cost. Depreciation is provided
for by the straight-line method over estimated useful lives as follows:
Equipment 5 years
Revenue
Revenue from the sale of investments is recorded on settlement dates as
determined by independent brokers and dealers in securities. The use of
trade dates for determination of such revenue would not have a material
effect on reported amounts.
Income taxes
Deferred taxes are provided to reflect the income tax effects of
amounts included for financial statement purposes in different periods
than for tax purposes, principally unrealized appreciation of
investments and the valuation of securities received as revenue, the
constructive receipt of which for income tax purposes precedes the
establishment of fair value under generally accepted accounting
principles. Valuation of the securities for income tax purposes is
based on fair value at the date the shares are issued to Bionet, which
is generally one to three months prior to the private sale of stock by
the client company.
Per share amounts
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes and
simplifies the existing computational guidelines under Accounting
Principles Board ("APB") Opinion No. 15, "Earnings Per Share."
The statement is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces
it with basic earnings per share for which common stock equivalents are
not considered in the computation. It also revises the computation of
diluted earnings per share. Bionet has adopted SFAS No. 128 and there
is no material impact to Bionet's earnings per share, financial
condition, or results of operations. Bionet's earnings per share have
been restated for all periods presented to be consistent with SFAS No.
128.
The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding for
the period. Loss per share is unchanged on a diluted basis since the
assumed exercise of common stock equivalents would have an anti-
dilutive effect.
Concentration of credit risk
Financial instruments that potentially subject Bionet to a
concentration of credit risk consist principally of cash and
investments in client company common stocks. During the year Bionet
did not maintain cash deposits at financial institutions in excess of
the $100,000 limit covered by the Federal Deposit Insurance
Corporation. Client company common stocks are generally thinly traded
new issues traded in the over-the-counter market or securities for
which no market exists. Attempts by Bionet or others to sell
substantial positions in these securities could have material negative
effects on quoted market prices and the resulting fair value of the
securities.
Estimates
The preparation of Bionet's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from these estimates. Management estimates the fair value of
its investments in securities for which no public market exists based
on the factors mentioned above. It is reasonably possible that changes
may occur in the near future with respect to client company activities
that would require adjustment of the fair value of these securities.
Stock-based Compensation
Bionet adopted Statement of Financial Accounting Standard No. 123
(FAS 123), Accounting for Stock-Based Compensation beginning with the
35
Company's first quarter of 1996. Upon adoption of FAS 123, Bionet
continued to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB
No. 25, Accounting for Stock Issued to Employees. Bionet paid stock
based compensation to certain officers and shareholders as described in
Notes 4 and 8.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines
for all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1997 and reclassification financial statements for earlier
periods will be required for comparative purposes. To date, Bionet has
not engaged in transactions which would result in any significant
difference between its reported net loss and comprehensive net loss as
defined in the statement.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1
provides authoritative guidance on when internal-use software costs
should be capitalized and when these costs should be expensed as
incurred.
Effective in 1998, Bionet adopted SOP 98-1, however Bionet
has not incurred costs to date which would require evaluation in
accordance with the SOP.
Effective December 31, 1998, Bionet adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards for
the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and
major customers.
The adoption of SFAS 131 did not affect results of operations or
financial position. To date, Bionet has not operated in any
business activity.
Effective December 31, 1998, Bionet adopted the provisions of SFAS
No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure
requirements in SFAS No. 87, Employers' Accounting for Pensions, and
SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other
Than Pensions. The overall objective of SFAS 132 is to improve and
standardize disclosures about pensions and other post-retirement
benefits and to make the required information more understandable. The
adoption of SFAS 132 did not affect results of operations or financial
position.
Bionet has not initiated benefit plans to date which would require
disclosure under the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which is required to be adopted in years beginning after
June 15, 1999. SFAS 133 will require Bionet to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change
in fair value of hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings. Bionet has not yet determined what the effect of SFAS
133 will be on earnings and the financial position of Bionet,
however it believes that it has not to date engaged in significant
transactions encompassed by the statement.
36
Note 2. Business acquisitions
On May 29, 1998, Bionet completed a merger agreement whereby
2,000,000 shares of its restricted common stock became issuable to the
shareholders of Immune Technologies, Inc. (ITI) in exchange for certain
assets of ITI. ITI had been a client of Bionet and Bionet had
advanced an aggregate of $79,800 to Immune during 1997 and 1998 to
assist in meeting that company's working capital requirements. Immune
to date has been engaged in research and development of technology it
hopes to utilize in the diagnosis and treatment of animal diseases.
The assets acquired from ITI consist of cash, inventory and fixed
assets aggregating $100,972 at the purchase date based on original
cost. No adjustments were made to the carryover values of these assets.
The fair value of the stock issued in the transaction amounted to
$1,000,000 based upon the closing price of Bionet's common stock at the
merger date of $.50 per share. The excess of the fair value of the
purchase price over the assets acquired has been treated as the
purchase of research and development costs by Bionet and has been
charged to expense during the current year. Bionet believes that this
charge-off is appropriate as the acquired business has not begun
commercial operation and Bionet has no indication that its products or
processes for the treatment of animal diseases will be commercially
successful if operations commence. The controlling shareholders of
Immune retained a significant ownership interest in the acquired
business as a result of number of shares issued to complete the asset
purchase.
On August 18, 1998, completed an agreement of sale/exchange whereby the
Company agreed to issued 1,900,000 shares of its restricted common
stock to the certain shareholders of Greengold Corporation (Greengold)
in exchange for 80% of the outstanding common stock of Greengold.
Greengold to date has been engaged in research and development of
technology it hopes to utilize in the recycling and disposal of hog
farm waste.
The assets and liabilities of Greengold consist of patent costs of
$7,500 and accounts payable of $28,649 at the acquisition date. The
fair value of the assets and liabilities acquired are based on cost in
the case of assets and stated value for the liabilities assumed. The
fair value of the stock issued in the transaction amounted to $475,000
based upon the closing price of Bionet's common stock at the merger
date of $.25 per share. The excess of the fair value of the purchase
price over the assets acquired has been treated as the purchase of
research and development costs by Bionet and has been charged to
expense during the current year. Bionet believes that this charge-off
is appropriate as the acquired business has not begun commercial
operation and Bionet has no indication that its process to dispose of
hog farm waste will be commercially successful if operations commence.
The former controlling shareholders of Greengold retained a significant
ownership interest in the acquired business as a result of number of
shares issued to complete the merger.
Had the above described acquisitions occurred at the beginning of the
fiscal year ended January 31, 1999, Bionet's results of operations
would be as follows:
Revenues $ -
Net loss $(2,099,874)
Basic loss per share $ (.29)
Note 3. Investments
Common stock of client companies was issued to Bionet as payment for
its services and was recorded as revenue ratably over the term of the
consulting contract. As indicated in Note 1, Bionet has completed
termination agreements with all of its consulting clients.
Trading Securities:
At January 31, 1999 Bionet had investments in listed common equity
securities as follows:
37
Historical Fair
Shares Cost Value
Free trading shares:
National Sorbents, Inc. 88,000 $264,000 $ 99,000
First Nordic 55,000 5,000 -
-------- --------
$269,250 $ 99,000
Fair value of securities as of January 31, 1999 was determined by
reference to prices quoted on the NASDAQ OTC Bulletin Board.
The shares of National Sorbents, Inc. were issued to Bionet during
November 1995. At January 31, 1997, the Board of Directors determined
that intervening events and circumstances had arisen that would require
adjustment of the fair value of these securities as of January 31, 1997
to zero value. Specifically, Bionet has suffered significant
deterioration of financial position and results of operations and has
halted its efforts to register its securities for public sale. During
the year ended January 31, 1998, this client company was able to
establish limited trading of its securities in the over the counter
market.
Available For Sale Securities:
At January 31, 1998 Bionet had investments in common equity
securities for which no public market exists as follows:
Historical Fair
Shares Cost Value
Rubicon Sports, Inc. 25,000 $ 37,500 $ 62,500
Immune Technologies, Inc. 10,000 15,000 -
Casinovations Incorporated 29,100 43,650 72,750
---------- ----------
$ 96,150 $ 135,250
The securities of Rubicon Sports, Inc and Casinovations Incorporated were
valued at their fair value, which in both cases amounted to $2.50 per
share. Both of these companies have continued private offerings of their
securities at $2.50 per share during the year ended January 31, 1999. No
intervening events or circumstances occurred subsequent to the valuation
of these securities that would require an adjustment to their valuation
as of January 31, 1999. The shares of Immune Technologies, Inc. have
been reduced to a zero value as that company became an inactive shell
company as a result of the business acquisition described in Note 2.
Bionet has had no activity in the number of shares owned for any
investment classified as available for sale during the years ended
January 31, 1999 and 1998.
During the year ended January 31, 1999, Bionet completed the
following transactions with respect to its portfolio of trading
securities:
Sales for cash
Shares Proceeds Gain
Players Network, Inc. 25,000 $ 43,282 $ 5,782
Coronado Industries, Inc. 100,000 $ 88,412 $ 28,412
During the year ended January 31, 1998, Bionet completed the
following transactions with respect to its portfolio of trading
securities:
Sales for cash
Shares Proceeds Gain (Loss)
National Sorbents, Inc. 40,000 $ 7,520 $(52,480)
Gaming Ventures, Inc. 13,444 $ 32,988 $ 12,822
Level Best Golf 48,101 $132,606 $ 60,455
Note 4. Furniture and equipment
Furniture and equipment consists of the following at January 31, 1999:
Office equipment $ 27,007
Lab equipment 92,757
Leasehold improvements 15,100
--------
134,864
Less accumulated depreciation (13,049)
--------
$121,815
38
Depreciation expense charged to operations was $9,838 and $1,343 during
the years ended January 31, 1999 and 1998 respectively.
Note 5. Capital share transactions
During the year ended January 31, 1998 Bionet issued 380,674 shares
of its common stock to a limited investor group for cash aggregating
$99,960.
During the year ended January 31, 1999 Bionet issued 760,294 shares
of its common stock to a limited investor group for cash aggregating
$197,683 and collected an additional $150,329 in cash and converted
$197,938 of shareholder debt in exchange for subscriptions to its
restricted common stock. The subscribed stock will be issued at $.19
per share based in the trading value of Bionet's common stock at
September 30, 1998, the date of the subscription.
Additionally during 1999, Bionet issued an aggregate of 3,900,000
shares of its common stock for the acquisitions of ITI and GGC (see Note
2).
In connection with an employment contract with its president, Bionet
issued 5,000 shares of its $.001 par value preferred stock at a nominal
value of $1.00 per share for services provided by the officer. Bionet
charged an amount of $5,000 to compensation expense in connection with
the issuance of preferred stock. The shares are convertible into
common stock at the rate of 1,000 shares of common stock for each share
of preferred stock to be converted. Conversion rights vest to the
officer based upon performance goals for Bionet as included in the
employment contract.
During the year ended January 31, 1999, the first performance goal was
attained whereby Bionet became obligated to convert 250 shares of
the preferred stock into its restricted common stock. The fair value of
the common stock at the vesting date (May 29, 1998) amounted to $.50
per share based upon the bid value of the stock. Bionet has recorded
$125,000 of compensation expense in connection with the vesting of the
conversion rights. Additional vesting of the conversion rights will be
based upon the maintenance of minimum bid prices of Bionet's common
stock for a thirty day period at the following levels: 250 shares at
$.50, 250 shares at $.75, 250 shares at $1.50, balance of the shares
(4,000) 250 shares are convertible for each $.50 increase in the minimum
bid price for the thirty day period or upon Bionet achieving an
annual net profits and annual increases thereof of $.05 per share for
each subsequent 250 share preferred stock series. Subsequent to January
31, 1999, 500 shares of the preferred stock became convertible.
During the year ended January 31, 1999, Bionet issued an aggregate
of 1,125,000 shares of its common stock as compensation to an officer
and others for services performed and to be performed for Bionet. The
shares were valued at fair value based on the bid price of Bionet's
common stock ($.19 per share) at September 30, 1998, the date that the
compensation shares were approved by Bionet and the recipients. The
value of the compensation shares issued for future services amounted to
$95,000 and has been shown in the accompanying financial statements as
unearned services, a reduction of stockholders' equity. This amount
will be recorded as expense during the year ended January 31, 2000.
Note 6. Commitments
Bionet has entered into an operating lease for its office and
research facility which calls for annual rental payments aggregating
$19,200. The lease term extends through June 30, 2003. Minimum annual
rental payments under the lease are as follows for the years ended
January 31, 2000 through 2003: 2000 - $19,200; 2001 - $19,200; 2002 -
$19,200; 2003 - $8,000.
Rent expense amounted to $14,558 and $5,590 for the years ended January
31, 1999 and 1998, respectively.
Bionet has entered into an employment agreement with its president
Dated December 28, 1998, which provides for annual compensation and
benefits aggregating $153,000 for the year ended January 31, 2000 and
$168,000 annually thereafter through 2003.
39
Note 7. Income taxes
Deferred income taxes may arise from temporary differences resulting
from income and expense items reported for financial accounting and tax
purposes in different periods. Deferred taxes are classified as
current or non-current, depending on the classification of assets and
liabilities to which they relate. Deferred taxes arising from
temporary differences that are not related to an asset or liability are
classified as current or non-current depending on the periods in which
the temporary differences are expected to reverse.
Bionet currently has net tax operating loss carryforwards
aggregating approximately $2,800,000 which expire beginning in 2008.
The principal difference between Bionet's book operating losses
and income tax operating losses results from recognition of unrealized
gains or losses on securities owned for financial statement purposes.
The deferred tax asset resulting from the operating loss carryforward
described above (approximately $952,000) has been fully reserved. The
increase in the reserve during the year ended January 31, 1999 amounted
to approximately $665,000.
Note 8. Stock option plan
During 1995, Bionet adopted the 1995 Non-Statutory Stock Option
Plan which provides for granting to Bionet's officers, directors,
employees and certain other individuals who consult with or advise the
Company, options to acquire up to 750,000 shares of Bionet's
common stock. The shares issuable under the 1995 plan are at a price
not less than 85% of the fair market value of the stock on the date of
grant. The exercise periods of the options are not to exceed ten
years. No options have been granted pursuant to the plan as of January
31, 1999.
In connection with the employment agreement disclosed in Note 6, the
Company's president was granted options to purchase 750,000 shares of
Bionet's common stock at an exercise price of $.19 per share, the fair
value of the common stock (based on the closing bid price for the
Company's common stock) at the date specified for the option grant
(March 26, 1998) as previously approved by Bionet's Board of Directors.
The option is exercisable for a five-year period. Bionet has not
recorded compensation expense in connection with the option grantThe
fair value of the options at the date of grant was estimated using the
Black-Scholes model with assumptions as follows:
Market value $ .19
Expected life in years 5
Interest rate 6.5%
Volatility 10%
Dividend yield 0.00%
The average fair value of the options granted during 1999 amounted to
$.05 per option. Stock based compensation costs would have increased
pretax losses by $39,150 ($.00 per share) 1999 if the fair value of the
options granted during the year had been recognized as compensation
expense.
Note 9. Related Party Transactions.
During the years ended January 31, 1999 and 1998, Bionet's former
president who is currently a major shareholder of Bionet made working
capital advances to Bionet of $108,119 and $86,819, respectively. The
shareholder has agreed to convert the balance due to him at January 31,
1999 into shares of Bionet's restricted common at a conversion rate of
$.19 per share. The stock price represents the trading bid price of
Bionet's common stock as of the date the conversion was approved by
Bionet's Board of Directors.
Note 10. Supplemental Statement of Operations Information.
During the years ended January 31, 1999 and 1998, Bionet incurred
$833,850 and $217,052 of general and administrative expenses
respectively, the components of which are as follows:
1999 1998
Employee compensation $474,913 $101,702
Consulting expense 129,706 -
Travel expense 22,270 18,106
Professional fees 42,012 20,271
Insurance 45,931 -
40
Rent 14,558 5,590
Depreciation & amortization 10,917 1,344
Research & development 23,930 -
Moving expense 19,233 -
Maintenance 7,723 -
Telephone expense 6,208 10,401
Other expenses 57,621 59,638
-------- --------
$855,022 $217,052
41
PART II
INFORMATION NOT REQUIRED BY PROSPECTUS
Item 24. Indemnification of Officers and Directors.
The By-Laws of Bionet provides that a director of the registrant shall
have no personal liability to the Registrant or its stockholders for
monetary damages for breach of a fiduciary duty as a director, except
for liability (a) for any breach of the director's duty of loyalty to
the Registrant or its stockholders, (b) for acts and omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, and (c) pursuant to Nevada law for any transaction
from which the director derived an improper personal benefit.
Registrant's By-Laws exculpates and indemnifies the directors,
officers, employees, and agents of the registrant from and against
certain liabilities. Further the By-Laws also provides that the
Registrant shall indemnify to the full extent permitted under Nevada
law any director, officer employee or agent of Registrant who has
served as a director, officer, employee or agent or the Registrant or,
at the Registrant's request, has served as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING BIONET FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
Item 25. Other Expenses of Issuance and Distribution.
Other expenses in connection with this offering which will be paid
by Bionet are estimated to be substantially as follows:
Amount
Payable
Item By Company
S.E.C. Registration Fees 350.00
State Securities Laws (Blue Sky) Fees and Expenses .00
Printing and Engraving Fees 1,500.00
Legal Fees 15,000.00
Accounting Fees and Expenses 5,000.00
Transfer Agent's Fees 500.00
Miscellaneous 500.00
Total $22,850.00
Item 26. Recent Sales of Unregistered Securities.
Name Total Number cash
Date Issued of common shares payment
Wilhelm Schleidt 5/20/96 1,000 2.75
Johnny Wong 7/19/96 3,000 2.625
Jared Mcgowan 8/29/96 1,000 2.812
Mark Mcalister 9/4/97 40,000 0.25
Mark Schklar 9/4/97 20,000 0.25
Michael Schklar 9/4/97 20,000 0.25
Johnny and Barbara Wong TTEES 9/4/97 20,000 0.25
U/A DTD 7/16/80 FBO Johnny and Barbara Wong
Paul Spiegler and Renee
Spiegler JT TN 9/4/97 40,000 0.25
James Yanai 9/4/97 16,000 0.25
Kazu Fujita 9/4/97 20,000 0.25
John Polli 9/4/97 25,000 0.25
Mark Schklar 10/9/97 20,000 0.25
Michael Schklar 10/9/97 15,000 0.25
Mark Mcalister 12/8/97 60,000 0.25
Itsuo Shiotani 12/8/97 8,000 0.25
Elizabeth Gheen 1/23/98 48,000 0.3125
Mitsuo Tatsugawa Defined
Benefit 2/25/98 28,674 0.3125
Pension Plan U/A DTD 9/1/88
James Yanai 2/25/98 15,000 0.3125
42
Johnny and Barbara
Wong TTEES 2/25/98 15,000 0.3125
U/A DTD 7/16/80 FBO
Johnny and Barbara Wong
Immune Technologies 5/8/98 2,000,000 22.12%
Marcorp, Inc. 6/26/98 6,200 0.25
Larry Zonner 9/24/98 1,500 0.156
Parool A Vyas 9/24/98 2,000 0.156
Larry Zonner 10/16/98 4,500 0.16
Kieth Gold 10/21/98 40,936 0.187
Peter Polakoff 11/4/98 10,000 0.25
Nick Davidge 11/4/98 40,000 0.25
Tomas and Susan Lanzaro
JT TEN 4/28/98 40,000 0.375
Ronald Conklin 4/28/98 60,000 0.375
Anthony Bertrami 4/28/98 40,000 0.375
Harvey Brice 4/28/98 60,000 0.375
Leon Ruchlamer 4/28/98 100,000 0.375
Harvey Brice 11/18/98 66,666 0.375
Nick Davidge 11/20/98 20,000 0.5
Cynthia Levine 11/23/98 40,000 0.5
Anthony Bertrami 11/23/98 20,000 0.5
Lionel Nakisher 11/23/98 20,000 0.5
Yochanan Ben-Ner 12/15/98 60,000 0.468
Ralph and Carol Lynn
Kingrey 12/28/98 20,000 0.218
Kingrey JT TEN
Theodore Kolbert 12/28/98 6,000 0.218
Peter Polakoff 12/28/98 10,000 0.218
Ronald Conklin 12/28/98 20,000 0.218
Timothy Miles 12/28/98 1,731,421 0.19
L. Alan Schafler 12/28/98 500,000 0.16
Ann B Anderson 12/29/98 12,500 0.218
Jarrod Ray Kingrey 1/13/99 2,850 0.937
Bruce E Winter DTD 3-20-92 3/30/99 27,778 0.687
Bruce E Winter TTEE
Elizabeth Gheen 3/29/99 275,000 0.45
Alan Filson 3/29/99 132,000 0.45
Mitsuo Tatsugawa 3/29/99 250,000 0.45
Timothy Miles 3/29/99 125,000 0.45
Kevin Tatsugawa 3/29/99 11,250 0.45
Laurie Tatsugawa 3/29/99 17,500 0.45
These sales were made pursuant to an exemption from registration
pursuant to Section 505 of Regulation D. Based on subscription
agreement disclosure received from each investor, the offering was made
to no more than 35 non-sophisticated investors. The offering was
approved and/or exempted by the required states and the appropriate
Form D was filed with the Securities and Exchange Commission.
During June 1998, we issued 2,000,000 common shares to Immune
Technologies, Inc. which were subsequently distributed to its
shareholders. The issuance was made pursuant to Rule 505 of
Regulation D of the Securities Act of 1933. The Form D was not timely
filed. These issuances were made to no more than 35 non-accredited
investors based on management's inquiries of each shareholder.
During August 1998, we issued 1,900,000 shares of our restricted common
stock to the shareholders of Greengold Corporation in exchange for 100%
of the outstanding common stock of Greengold. This issuance was made
to four unaffiliated individuals pursuant to an exemption from
registration under Section 4(2) of the Act.
43
Item 27. Exhibit Index.
The following of exhibits are filed with this report:
(1) Not Applicable
(2) Articles of Incorporation incorporated by reference to Form
10SB File Number 0-25792
(2.1) Articles of Merger incorporated by reference to Form 10SB,
File Number 0-25792
(2.2) Bylaws incorporated by reference to Form 10SB, File
Number 0-25792
(3) common stock Certificate incorporated by reference to Form
10SB, File Number 0-25792
(4) Not Applicable
(5) Opinion re: legality and consent of Jody M. Walker, Attorney-
at-Law
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10.1) Purchase and Sale Agreement dated May, 1998 between the
Company and Immune Technologies, Inc. incorporated by
reference to Form SB-2 file No. 333-77461
(11) Not Applicable
(12) 1995 Non-Statutory Stock Option Plan incorporated by reference
to Amendment 3 to Form 10SB, File Number 0-25792
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(21) Subsidiaries of the registrant
(22) Not Applicable
(23) Consent of James E. Scheifley & Associates, P.C.
(24) Not Applicable
(25) Not Applicable
(26) Not Applicable
(27) Financial Data Schedule
(28) Not Applicable
Item 28. Undertaking.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(I) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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 formation set forth in
the Registration Statement.
(iii) To include any additional or changed material information on the
plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of these securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Delivery of Certificates. The undersigned registrant hereby
undertakes to provide to the Transfer Agent at the closing,
certificates in the denominations and registered in the names as are
required by the Transfer Agent to permit prompt delivery to each
purchaser.
44
(c) Indemnification. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
provisions set forth in Bionet's Articles of Incorporation or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission, the indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against these 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
this 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 this
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
45
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized
this registration statement to be signed on its behalf by the
undersigned, in the City of Jupiter, State of Florida on the 23rd day of
April, 2000.
BioNet Technologies, Inc.
/s/ L. Alan Schafler
-------------------------------
- -
By: L. Alan Schafler, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the
capacities and on the dates stated.
Signature Capacity Date
/s/L. Alan Schafler Principal Executive Officer April 23, 2000
- ------------------- Principal Financial Officer
L. Alan Schafler Controller/Director
/s/Erich Schmid Director April 23, 2000
- -------------------
Eerich Schmid
/s/James Yanai Director April 23, 2000
- -------------------
James Yanai