SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. 1) Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission only (as permitted by Rule 14a-b(e)(2) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 Harrier, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [ ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: ---------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:(1) ---------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------------------- 5) Total fee paid: ---------------------------------------------------------------------- [X] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ----------------------------------------------- 2) Form, Schedule or Registration Statement No.: ----------------------------------------------- 3) Filing Party: ----------------------------------------------- 4) Dated Filed: ----------------------------------------------- - -------------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. PRELIMINARY COPIES HARRIER, INC. 2200 PACIFIC COAST HIGHWAY, SUITE 301 HERMOSA BEACH, CALIFORNIA 90254 (310) 376-7721 ------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD _______ , 1998 ------------- To the Stockholders of Harrier, Inc.: An annual meeting (the "Annual Meeting") of the stockholders of Harrier, Inc. (the "Company") will be held at 10:00 a.m., Pacific Time, on _________ , 1998, at 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254 to consider and vote on the following matters: 1. The approval and adoption of the Stock Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") by and among the Company, COPE AG, a Swiss corporation ("COPE"), and the shareholders of COPE ("COPE Shareholders") whereby the COPE Shareholders will become the controlling stockholders of the Company and COPE will become a wholly-owned subsidiary of the Company (the "Reorganization Proposal"). 2. If the Reorganization Proposal is approved, the approval and adoption of the Common Stock Purchase Agreement ("Glycosyn Agreement") between the Company, Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), and the New Capital Investment Fund, a Cayman Islands investment fund ("NCIF"), whereby (i) NCIF will purchase from the Company 2,850,000 shares of the $.001 par value common stock ("Glycosyn Common Stock") of Glycosyn in consideration of NCIF's cancellation of all of the indebtedness owed to it by the Company ($595,167 as of December 31, 1997); and (ii) Glycosyn will acquire all of the assets and assume all of the liabilities of the Company (the "Glycosyn Proposal"). 3. If the Reorganization Proposal and Glycosyn Proposal are approved, the approval and adoption of an Amendment to the Certificate of Incorporation of the Company to: (i) change the name of the Company to "COPE, Inc."; and (ii) reverse split the outstanding shares of Common Stock of the Company on a one for 45 basis (the "Amendment Proposal"). 4. If the Reorganization Proposal, the Glycosyn Proposal and Amendment Proposal are approved, to elect the five directors specified by COPE in the Reorganization Agreement to hold office commencing upon the closing of the Reorganization Agreement and to expire on the next annual meeting of stockholders or until their successors are duly elected and qualified (the "COPE Director Proposal"). 5. If the foregoing proposals are approved, to elect Atag Ernst & Young, a member of Ernst & Young International, as the Company's independent auditors for the fiscal year ending December 31, 1998 ("COPE Independent Auditor Proposal"). 6. If either of the Reorganization Proposal, Glycosyn Proposal or Amendment Proposal is not approved, to elect as directors Jurg Kehrli, Kevin DeVito and William Cordeiro to hold office until the next annual meeting of stockholders or until their successors are duly elected and qualified (the "Harrier Director Proposal"). 7. To transact such other business as may properly come before the Annual Meeting or at any and all adjournments thereof. The Board of Directors has fixed 5:00 p.m. Pacific Time, on April 3, 1998, as the record date for determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. Only stockholders of record at that time are entitled to notice of, and to vote at, such Annual Meeting. Whether or not you plan to attend the Annual Meeting, please complete, date and sign your proxy and return it promptly in the enclosed envelope. Your proxy may be revoked in the manner described in the accompanying Proxy Statement at any time before it has been voted at the Annual Meeting. By Order of the Board of Directors, Candace Beaver SECRETARY April ___, 1998 Hermosa Beach, California YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. HARRIER, INC. 2200 PACIFIC COAST HIGHWAY, SUITE 301 HERMOSA BEACH, CALIFORNIA 90254 ------------- ANNUAL MEETING OF STOCKHOLDERS OF HARRIER, INC. TO BE HELD ON _______, 1998 ------------- PROXY STATEMENT This Proxy Statement is being furnished to the holders of the Common Stock, $.001 par value ("Harrier Common Stock"), of Harrier, Inc., a Delaware corporation (the "Company" or "Harrier"), in connection with the solicitation of proxies by the Board of Directors of the Company for use at an Annual Meeting of Stockholders of the Company to be held on _________, 1998, and any postponements or adjournments thereof (the "Annual Meeting"). The Annual Meeting is being held for the purpose of voting on the five proposals identified in the Notice of Annual Meeting and described in this Proxy Statement. The Reorganization Proposal (Proposal No. 1), the Glycosyn Proposal (Proposal No. 2), the Amendment Proposal (Proposal No. 3) and the COPE Director Proposal (Proposal No. 4) are not independent. The Reorganization Agreement cannot be effected unless the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal are also approved. If the Reorganization Proposal is rejected, the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal will not be voted on. If the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal are approved and the transactions under the Reorganization Agreement ("Reorganization") are consummated, the Company will continue with the management of COPE described in "Management of the Company Following the Reorganization" herein. If either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal is rejected, the Company will continue its current operations with the directors elected pursuant to the Harrier Director Proposal ("Proposal No. 6") and its current officers. The Reorganization Agreement contemplates the following: (i) stockholder approval of the Reorganization pursuant to which COPE will become a wholly-owned subsidiary of the Company; (ii) stockholder approval of (a) the Company's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF and (b) Glycosyn's acquisition of all of the assets and assumption of all of the liabilities of the Company; (iii) an amendment to the Company's Certificate of Incorporation to effect: (a) a change in the name of the Company to "COPE, Inc.;" and (b) a reverse split the outstanding shares of Common Stock on a one for 45 basis; and (iv) the election of a board of five directors nominated by the COPE shareholders. A copy of the Reorganization Agreement is attached to this Proxy Statement as Appendix A. The Board of Directors of the Company has determined that the Reorganization is fair and in the best interests of the Company and its stockholders and unanimously recommends that the stockholders vote for the Reorganization Proposal, for the Glycosyn Proposal the Amendment Proposal and for the COPE director nominees. Certain members of the Board of Directors of the Company have conflicts of interest in making this recommendation. See "Risk Factors Relating to the Reorganization," "Proposal No. 1: Reorganization Proposal - Conflicts of Interest of Company Management," and "Proposal No. 2: Glycosyn Proposal - -Conflicts of Interest of Company Management." ------------- This Proxy Statement is dated and was first mailed to the Company's stockholders on or about April __, 1998. TABLE OF CONTENTS PROXY STATEMENT ------------- SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA . . . . . . . . . . . 5 GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SHARES OUTSTANDING AND VOTING RIGHTS . . . . . . . . . . . . . . . . . 7 RISK FACTORS RELATING TO THE REORGANIZATION . . . . . . . . . . . . . . 8 PROPOSAL NO. 1: REORGANIZATION PROPOSAL . . . . . . . . . . . . . . . . 10 PROPOSAL NO. 2: GLYCOSYN PROPOSAL . . . . . . . . . . . . . . . . . . . 13 PROPOSAL NO. 3: AMENDMENT PROPOSAL . . . . . . . . . . . . . . . . . . 16 PROPOSAL NO. 4: COPE DIRECTOR PROPOSAL . . . . . . . . . . . . . . . . 18 PROPOSAL NO. 5: COPE INDEPENDENT AUDITOR PROPOSAL . . . . . . . . . . . 18 PROPOSAL NO. 6: HARRIER DIRECTOR PROPOSAL . . . . . . . . . . . . . . 19 OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 19 BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 20 MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 21 HARRIER MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. . . 23 PRINCIPAL STOCKHOLDERS OF THE COMPANY . . . . . . . . . . . . . . . . . 23 BUSINESS OF COPE . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 COPE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION . . . . . . . . . . . . 33 MANAGEMENT OF THE COMPANY FOLLOWING THE REORGANIZATION . . . . . . . . 36 CERTAIN INFORMATION CONCERNING CAPITAL STOCK OF THE COMPANY AND COPE . . . . . . . . . . . . . . . . . . . . . . . . 37 ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 38 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 38 INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 39 APPENDICES - ---------- Reorganization Agreement . . . . . . . . . . . . . . . . . . . Appendix A Amendment to Certificate of Incorporation . . . . . . . . . . . Appendix B (i) SUMMARY The following is a brief summary of certain information contained elsewhere in this Proxy Statement, including a summary of the material terms of the Reorganization Agreement and the proposals submitted for shareholder approval. The summary should be read in conjunction with, and is qualified in its entirety by reference to, the more detailed information appearing elsewhere in this Proxy Statement and in the information and documents incorporated by reference herein, which provide important disclosure of all of the material terms and provisions of the matter set forth below. Capitalized terms used but not defined in this summary have the meanings ascribed to them elsewhere in this Proxy Statement. THE MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING ARE OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF THE COMPANY BECAUSE, IF THE REORGANIZATION AGREEMENT IS APPROVED AND ADOPTED AND THE PROPOSED REORGANIZATION IS CONSUMMATED, THE STOCKHOLDERS' EQUITY INVESTMENT IN THE COMPANY WILL BECOME AN EQUITY INVESTMENT IN COPE. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION SUMMARIZED BELOW AND PRESENTED ELSEWHERE IN THIS PROXY STATEMENT. Date, Time and Place of the Annual Meeting........................... ________, 1998, at 10:00 a.m., Pacific Time, at 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California. See "Introduction." Reorganization Proposal............ To consider and vote upon a proposal to approve the reorganization of the Company pursuant to the Reorganization Agreement, a copy of which is attached hereto as Appendix A, providing for the issuance of 2,862,000 shares (post- split) of the Company's Common Stock to the former shareholders of COPE (the "COPE Shareholders"). The COPE Shareholders will control the Company after the Reorganization. See "Proposal No 1: Reorganization Proposal" and "Proposal No. 4: COPE Director Proposal." Glycosyn Proposal In the event the Reorganization Proposal is approved, to consider and vote upon a proposal to approve and adopt the Common Stock Purchase Agreement ("Glycosyn Agreement") between the Company, Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), and the New Capital Investment Fund, a Cayman Islands investment fund ("NCIF"), whereby (i) NCIF will purchase from the Company 2,850,000 shares of the $.001 par value common stock ("Glycosyn Common Stock") of Glycosyn in consideration of NCIF's cancellation of all of the indebtedness owed to it by the Company ($595,167 as of December 31, 1997), and (ii) Glycosyn will acquire all of the assets and assume all of the liabilities of the Company. Pursuant to the Reorganization Agreement, the Company is required to divest itself of its controlling interest in Glycosyn and otherwise substantially divest itself of all of its assets and liabilities as a condition to the consummation of the Reorganization. Certain members of management of the Company have a significant interest in NCIF. See "Risk Factors Relating to the Reorganization - Interests of Company Management," "Management of the Company - Certain Transactions." See also "Proposal No. 2 "Glycosyn Proposal." Amendment Proposal................. In the event the Reorganization Proposal and the Glycosyn Proposal are approved, to consider and vote upon a proposal to amend the Certificate of Incorporation of the Company to: (i) change its name to "COPE, Inc.;" and (ii) to reverse split the outstanding shares of Common -1- Stock on a one for 45 basis. See "Proposal No. 3: "Amendment Proposal." COPE Director Proposal In the event the Reorganization Proposal, the Glycosyn Proposal and the Amendment Proposal are approved, to elect the nominees of COPE as directors to hold office until the next meeting of stockholders or until their successors are duly elected and qualify, which terms will commence on the closing of the Reorganization Agreement. See "Proposal No. 4: Election of COPE Directors." COPE Independent Auditor Proposal.. In the event that the foregoing proposals are approved, to elect Atag Ernst & Young, COPE's current auditors, as the Company's independent auditors for the fiscal year ending December 31, 1998. Election of Harrier Directors Proposal.......................... In the event that either the Reorganization Proposal, the Glycosyn Proposal, Amendment Proposal or the COPE Director Proposals is not approved, to elect as directors Jurg Kehrli, Kevin DeVito and William Cordeiro to hold office until the next annual meeting of stockholders or until their successors are duly elected and qualified. See "Proposal No. 6: Election of Harrier Directors." Stockholders Entitled to Vote...... Only stockholders of record at 5:00 p.m., Pacific Time on April 3, 1998 (the "Record Date") are entitled to notice of and to vote at the Annual Meeting. On the Record Date there were 15,517,923 issued and outstanding shares of Common Stock, $.001 par value of the Company ("Harrier Common Stock"). Vote Required...................... Under Delaware General Corporate Law, the approval and adoption of the Reorganization Agreement is not required; however, the Reorganization Agreement requires, as a condition to the closing thereof, the approval thereof by the affirmative vote of a quorum of the Harrier Common Stock present at the meeting. See "Reorganization Proposal-Conditions to the Reorganization." All current Harrier directors and officers have indicated that they intend to vote their shares of Harrier Common Stock to approve the Reorganization. Interest of Harrier Management..... As of March 31, 1998, directors and officers of the Company and their affiliates beneficially owned an aggregate of 853,582 shares of Harrier Common Stock, representing approximately 5.6% of the outstanding shares of Harrier Common Stock. See "Principal Stockholders of the Company." See "Proposal No. 1: Reorganization Proposal - The Reorganization Agreement; Conditions of the Reorganization." Terms of the Reorganization........ After the reverse split and just prior to the closing of the Reorganization Agreement, there will be slightly in excess of 344,843 shares of Harrier Common Stock outstanding. On closing of the Reorganization, the COPE Shareholders, will receive a total of 2,862,000 shares of Harrier Common Stock in exchange for 100% of the outstanding shares of capital stock of COPE. At that time, there will be approximately 3,206,843 shares of Harrier Common Stock outstanding. See "Proposal No. 1: Reorganization Proposal - The Reorganization Agreement" and "-Conditions to the Reorganization." -2- The Company and COPE............... The Company has been engaged in the discovery, development and sale of selected products and technologies in the health, fitness and medical markets. Most recently the Company has been engaged in the distribution of the Bioptron-Registered Trademark- Lamp ("Lamp"), a pain relief medical device, and through its 94% owned subsidiary, Glycosyn, the development and testing of certain new synthetic drugs using the Company's proprietary GLYCOSYLATION processes. The Company discontinued the distribution of the Bioptron Lamp in June 1997. See "Business of the Company." COPE is a Swiss-based provider of data storage and information management consulting services and solutions. COPE provides information management consulting, services and solutions to a variety of companies in the financial, insurance, pharmaceutical and telecommunication industries located in Switzerland, Germany and Austria. COPE's principal operations consist of the design, implementation and management of information systems that provide data storage, data security and data warehousing solutions. COPE generally provides its information systems on a turn-key basis and purchases for resale the hardware and software components made part of its information systems solutions. COPE is a value-added reseller of hardware and software products offered by the leading vendors in the data storage industry, including ADIC, AMPEX, ATL, Data General, DG CLARiiON BU, HP, IBM, Legato, NSM, Oracle, Overland, Platinum, Qualix, Storage Tek, SUN, and VERITAS. COPE was founded in 1991 and is headquartered in Rotkreuz, Switzerland. (See "Business of COPE.") Reorganization Proposal: Recommendation of Board of Directors.......................... The Board of Directors of the Company has duly approved the Reorganization Agreement and recommends a vote in favor of the Reorganization Proposal in the belief that the Reorganization is in the best interests of the Company and its Stockholders. Before giving this approval, the Board of Directors reviewed a number of factors, including the financial condition of the Company, the business and prospects of COPE and the terms of the Reorganization Agreement. Certain members of the Board of Directors of the Company have conflicts of interest in making this recommendation. See "Risk Factors Relating to the Reorganization," "Proposal No. 1: Reorganization Proposal - Conflicts of Interest of Company Management," and "Proposal No. 2: Glycosyn Proposal - Conflicts of Interest of Company Management." Federal Income Tax Consequences of the Reorganization..................... For federal income tax purposes, it is intended that the Reorganization will constitute a tax-free reorganization under Internal Revenue Code Section 368(a)(1)(B) so that no gain or loss will be recognized by the Company's stockholders as a result of the Reorganization. See "Proposal No. 1: Reorganization Proposal -- Federal Income Tax Consequences of Reorganization." Accounting Treatment............... The Company intends to account for the Reorganization as a reverse acquisition. Conditions to the Reorganization; Termination....................... Notwithstanding approval of the Reorganization Proposal by the Company's stockholders by the requisite vote, consummation of the Reorganization is subject to a -3- number of conditions which, if not fulfilled or waived, permit termination of the Reorganization Agreement. These conditions include, but are not limited to: the consummation of the Company's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF; the Company's divestiture of its assets (other than a minority interest in Glycosyn) and its liabilities; the approval of the Amendment; the release of the Company by its creditors and their consent to the assumption of the Company's liabilities by Glycosyn; the election of COPE designees as directors of the Company; and the fulfillment of certain other covenants and conditions by the parties. The Reorganization may also be abandoned by mutual consent, and in certain other circumstances. See "Proposal No. 1: Reorganization Proposal -- Conditions to the Reorganization." Closing............................ If the Reorganization Proposal is approved at the Annual Meeting, and all other conditions to the Reorganization have been met or waived, the closing ("Closing") of the Reorganization will be effected as soon as practicable following the filing of the Amendment with the Secretary of the State of Delaware. If the Reorganization Proposal, the Glycosyn Proposal and the Amendment Proposal are each approved at the Annual Meeting, and all other conditions to the Reorganization have been met or waived, the parties expect the Closing of the Reorganization to be effected shortly thereafter. If all conditions are not met or waived, there could be a delay in the Closing or the Reorganization Agreement could be terminated. Expenses........................... The party incurring costs and expenses in connection with the Reorganization shall pay them. Market Price Data.................. COPE Common Stock is not publicly traded. Harrier Common Stock is quoted on the OTC Bulletin Board. The last reported sale transaction on April 3, 1998 was $.11 per share of Harrier Common Stock. On December 1, 1997, the last full trading day immediately preceding the public announcement of the Reorganization Proposal, the last reported sale transaction for the Harrier Common Stock was $0.10 per share. Pro Forma Financial Data........... See the table on the next page and "Financial Statements." New Symbol......................... Harrier Common Stock will continue to be listed for trading on the OTC Bulletin Board, and will be quoted under the symbol "COPE", from and after the closing of the Reorganization. -4- SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA The following tables set forth for the periods indicated (i) certain historical information with respect to the Company and COPE and (ii) certain information on an unaudited pro forma combined basis for the Company giving effect to the consummation of the transactions contemplated by the Reorganization Proposal, the Glycosyn Proposal and the Amendment Proposal. Such information is based on the historical financial statements of COPE and the Company and the unaudited pro forma condensed consolidated financial statements and the related notes thereto included elsewhere herein. This financial data should be read in conjunction with the Financial Statements and with Management's Discussion and Analysis of Financial Condition or Plan of Operations for the Company and COPE included elsewhere herein. Six Months Ended Year Ended June 30, December 31, 1997 --------------------------- ------------------ 1996 1997 ------------- ------------ HARRIER HISTORICAL Revenue................... $ 66,687 $ 48,069 $ - Net loss.................. (1,325,556) (686,236) (271,570) Total assets.............. 748,987 325,482 384,564 Stockholders' equity (deficit)............... (371,104) (961,790) (1,093,660) Year Ended December 31, --------------------------------------------- 1995 1996 1997 ------------- ------------ --------------- COPE HISTORICAL Revenue.................. $ 11,020,356 $ 12,515,123 $ 17,916,171 Net income............... 88,202 315,823 632,897 Total assets............. 3,352,233 3,970,289 7,191,912 Stockholders' equity..... 858,277 1,005,028 2,260,925 Year Ended December 31, 1997 -------------------------------- PRO FORMA COMBINED HARRIER AND COPE Revenue.................. $ 17,916,171 Net income............... 342,536 Total assets............. 7,274,745 Stockholders' equity..... 2,266,879 COMPARATIVE PER SHARE DATA Pro Forma COPE Harrier Combined COPE Historical Historical and Harrier ----------------------------------- BOOK VALUE PER SHARE: December 31, 1997 $2,132.95 ($0.07) $0.71 INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS: For the year ended December 31, 1997(1) $597.07 ($0.04) $0.11 CASH DIVIDENDS PER SHARE: For the year ended December 31, 1997(1) $0.00 $0.00 $0.00 SHARES OUTSTANDING AT DECEMBER 31, 1997 1,060 15,298,780 3,163,010 - --------------------------- 1. The historical information presented for Harrier, Inc. at December 31, 1997 is presented on a rolling-twelve month basis as Harrier's fiscal year end is June 30. -5- GENERAL INFORMATION This Proxy Statement and the accompanying notice and form of proxy are being sent to stockholders of the Company on or about April __, 1998 in connection with the solicitation by the Board of Directors of Harrier of proxies to be used at the Annual Meeting of stockholders of the Company to be held on ________, 1998 at 10:00 a.m., Pacific Time, and at any and all adjournments thereof. The Annual Meeting will be held at 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California. The Annual Meeting is to be held for the purpose of allowing the stockholders of the Company to consider and vote on various proposals, including the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal; however, the four proposals are not independent and in the event that either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal is not approved, none of them shall be consummated. The Reorganization Proposal provides for the acquisition of 100% of the outstanding shares of capital stock of COPE so that upon closing of the Reorganization Agreement COPE will become a wholly-owned subsidiary of the Company. The Glycosyn Proposal provides for (i) the Company's sale of 2,850,000 shares of Glycosyn Common Stock to New Capital Investment Fund, a Cayman Islands investment fund ("NCIF") in consideration of NCIF's cancellation of all of the indebtedness owed it by the Company ($595,167 as of December 31, 1997); and (ii) Glycosyn's acquisition of all of the assets subject to the liabilities of the Company. The Amendment Proposal provides for an amendment to the Company's Certificate of Incorporation to effect: (a) a change in the name of the Company to "COPE, Inc."; and (b) a reverse split of the Harrier Common Stock on a one for 45 basis. The COPE Director Proposal provides for the election of five directors nominated by the COPE shareholders to hold office until the next meeting of stockholders or until their successors are duly elected and qualified. If either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal is not approved, none of them shall be consummated and the stockholders will vote on the Harrier Director Proposal, which provides for the election of three directors nominated by present management of the Company to hold office until the next meeting of stockholders or until their successors are duly elected and qualified. The Company is not aware of any matters to come before the Annual Meeting other than as stated herein. However, if any other matters properly come before the Annual Meeting, the persons named on the enclosed form of proxy will vote the proxy in accordance with their best judgment on such matters. PERSONS MAKING THE SOLICITATION The proxy is being solicited on behalf of the Board of Directors of the Company. In addition to solicitation of proxies by mail, proxies may be solicited in person or by telephone or telegram by directors and officers of the Company who will not receive additional compensation for such services. The Company will also request brokerage firms and other custodians, nominees, and fiduciaries to forward soliciting materials to the beneficial owners of stock held of record by them. The Company will reimburse such brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by them. The expense of all such solicitations, including mailing, will be borne by the Company. TERMS OF THE PROXY The enclosed Proxy indicates the matters to be acted upon at the Annual Meeting and provides boxes to be marked to indicate the manner in which the stockholder's shares are to be voted with respect to each such matter. By appropriately marking the boxes, a stockholder may specify, with respect to each matter, whether the proxy holders shall vote for or against or shall be without authority to vote the shares represented by the Proxy. The Proxy also confers upon the holders thereof discretionary voting authority with respect to such other business as may properly come before the Annual Meeting. If the Proxy is executed properly and is received by the proxy holders prior to the Annual Meeting, the shares represented by the Proxy will be voted. Where a stockholder specifies a choice with respect to any matter to be acted upon, the shares will be voted in accordance with such specification. Any Proxy which is executed in such a manner as not to withhold authority to vote for the approval of a particular proposal shall be deemed to confer such authority. A Proxy may be revoked at any time prior to its exercise by giving written notice of the revocation thereof to Candace Beaver, Secretary, Harrier, Inc., 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254, by attending the meeting and electing to vote in person, or by a duly executed proxy bearing a later date. VOTING SECURITIES The securities entitled to vote at the Annual Meeting consist of all of the issued and outstanding shares of the Company's common stock, $.001 par value per share. The close of business on April 3, 1998 -6- has been fixed by the Board of Directors of the Company as the record date. Only stockholders of record as of the record date may vote at the Annual Meeting. As of the record date, there were 15,517,923 issued and outstanding shares of Harrier Common stock entitled to vote at the Annual Meeting and approximately 382 holders of record of Harrier Common Stock. SHARES OUTSTANDING AND VOTING RIGHTS The only authorized class of capital stock of the Company outstanding and entitled to vote at the Annual Meeting is Harrier Common Stock. Each outstanding share of Harrier Common Stock is entitled to one (1) vote on each matter submitted to the Annual Meeting. The presence at the Annual Meeting of the holders of an amount of shares of Harrier Common Stock and proxies representing the right to vote shares of Harrier Common Stock in excess of one-half of the number of shares outstanding as of the Record Date will constitute a quorum for transacting business. Holders of a majority of the outstanding shares of Harrier Common Stock entitled to vote must be present in person or represented by proxy to constitute a quorum at the Annual Meeting. The affirmative vote of the holders of a quorum of the outstanding shares of Harrier Common Stock present or represented at the meeting is required for approval of the Reorganization Proposal. See Proposal "No. 1: The Reorganization Proposal - Conditions to the Reorganization." The affirmative vote of the holders of a majority of the shares of Harrier Common Stock present or represented at the Annual Meeting is required to elect each of the nominees for director. Cumulative voting is not permitted in the election of directors. The Board of Directors of the Company has designated Candace Beaver and Tycanne Ryan, and each of them, as proxies to vote shares of Harrier Common Stock solicited on its behalf. If the enclosed form of proxy is executed and returned, it may nonetheless be revoked at any time prior to the vote at the Annual Meeting by written notice to Candace Beaver, Secretary, 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254, by attending the meeting and electing to vote in person, or by proper delivery of a duly executed proxy bearing a later date. The persons named in the enclosed proxy will vote as directed with respect to each proposal, or in the absence of any direction, in favor of approval and adoption of the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal, the COPE Director Proposal and the COPE Independent Auditor Proposal, or, in the event any one of the foregoing is rejected, the Harrier Director Proposal. -7- RISK FACTORS RELATING TO THE REORGANIZATION PRIOR TO VOTING ON THE REORGANIZATION PROPOSAL, STOCKHOLDERS OF THE COMPANY SHOULD CAREFULLY EXAMINE THIS ENTIRE PROXY STATEMENT AND THE APPENDICES HERETO. IF THE REORGANIZATION AGREEMENT IS APPROVED AND ADOPTED AND THE REORGANIZATION IS CONSUMMATED, THE COMPANY'S STOCKHOLDERS' EQUITY INVESTMENT IN THE COMPANY WILL BECOME AN EQUITY INVESTMENT IN COPE. ACCORDINGLY, THE COMPANY'S STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE FOLLOWING INVESTMENT CONSIDERATIONS. CONFLICTS OF INTEREST OF COMPANY MANAGEMENT Certain officers and Directors of the Company and their associates have an interest in the consummation of the Reorganization. As of December 31, 1997, the Company was indebted to NCIF in the amount of $595,167. NCIF is a Cayman Islands investment fund managed by two of the Company's Directors, Mr. Jurg Kehrli and Mr. Kevin DeVito. In connection with the Glycosyn Recapitalization, the Company proposes to issue 2,850,000 shares of Glycosyn Common Stock to NCIF in consideration of NCIF's cancellation of all of the indebtedness owed to it by the Company. The consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF is subject to the approval of the Company's shareholders and Harrier's receipt of an opinion from an independent business appraiser that the terms of the transaction are fair to the Company's shareholders. However, due to the interests of Messrs. Kehrli and DeVito in both NCIF and the Company, the sale of the Glycosyn Common Stock in consideration of the cancellation of indebtedness cannot be considered to be an arms length transaction. FAILURE TO CONSUMMATE THE REORGANIZATION In the event that the Company is unable to consummate the Reorganization with COPE, the Company will have to either locate a new reorganization candidate or pursue the development of the business of its subsidiary, Glycosyn. In either event, the Company's future will be jeopardized by the lack of working capital and revenue producing operations and the Company will require significant additional capital in order to maintain its present level of research and development currently being undertaken by Glycosyn. The Company had a working capital deficit of ($1,307,983) and revenues of $35,401 for the six months ended December 31, 1997. In addition, the report from the Company's independent accountants accompanying the Company's audited financial statements as of and for the fiscal year ended June 30, 1997 expresses doubt as to the Company's ability to continue as a going concern. RELIANCE ON COPE PERSONNEL Since its inception, COPE has been under the management of its Stephan Isenschmid, President, and Adrian Knapp, Chairman. Messrs. Isenschmid and Knapp are responsible for the overall direction of COPE. The success of COPE is dependent to a significant degree upon the efforts of Messrs. Isenschmid and Knapp and the loss or unavailability of either of them could have a material adverse affect upon COPE's operations. COPE has obtained key-man insurance in the amount of Sfr500,000 upon each of the lives of Mr. Isenschmid and Mr. Knapp, however, there can be no assurance that such policies will adequately protect COPE against the loss of either officer. COPE RISKS OPERATIONAL RISKS. COPE's business is subject to significant operational risks, including, without limitation, intense competition, rapid and continuous developments and changes in prevailing technologies and standards in the data storage industry, the availability of additional capital as required and general economic conditions. There can be no assurance that COPE will be able to successfully compete in the future. See "Business of COPE." DEPENDENCE ON THIRD PARTIES. An important part of the data storage and information management consulting services and solutions provided by COPE are the hardware and software products which it resells to its customers. In most cases COPE acts as a wholesale distributor of those products pursuant to nonexclusive contracts which are cancelable at the will of the vendor. While COPE believes it has excellent relations with each of its vendors, there can be no assurance that a vendor in the future will restrict or deny COPE the ability to purchase its hardware or software products at the wholesale price. The inability of COPE to purchase products from an important vendor at the wholesale price could have a materially adverse impact on COPE's business. See "Business of COPE." FURTHER GROWTH. A significant amount of COPE's future growth is expected to come from European markets outside of Switzerland. Although COPE has substantial experience in marketing and providing its services and solutions in Austria and Germany, the continued expansion of COPE outside of Switzerland will present certain management and logistical issues on a level that COPE has previously not encountered. COPE's inability to successfully administer its growth outside of the Swiss market could have a materially adverse impact on COPE's future profitability. See "Business of COPE." CONTROL BY FORMER COPE SHAREHOLDERS Following the Reorganization, the current management of Harrier will be replaced and the former management of COPE will continue essentially unchanged as the management of the Company and the headquarters and operations of the Company will be relocated to Rotkreuz, Switzerland, the present home of COPE. There can be no assurance that COPE's management will be an effective management team, or that it will successfully carry out the expansion strategy or the business plan of COPE. In addition, no member of the COPE management than has any prior experience in managing a public company that trades in the US securities markets. The former shareholders of COPE will own approximately 89.2% of the outstanding shares of Harrier Common Stock after consummation of the Reorganization. Accordingly, the former shareholders of COPE will continue to have the right to elect a majority of the Board of Directors and to control the affairs of the Company and to approve or disapprove any matter submitted to a vote of the stockholders. -8- FORWARD LOOKING STATEMENTS The following discussion contains certain forward-looking statements that are based on the Company's and COPE's beliefs as well as assumptions made by and information currently available to the Company and COPE. When used below and elsewhere in this in this Proxy Statement, the words "believe," "expect," "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions, including (i) the intense competition in COPE's industry; (ii) future developments and changes in prevailing technologies and standards in the data storage industry; (iii) availability of additional capital as required; and (iv) general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. The Company and COPE caution shareholders of the Company and potential investors not to place undue reliance on any such forward-looking statements, all of which speak only as of the date made. FEDERAL INCOME TAX CONSEQUENCES It is anticipated that the Reorganization will qualify as a reorganization described in Section 368(a)(1)(B) of the Internal Revenue Code of 1986. However, no ruling from the Internal Revenue Service ("IRS") has been requested that the Reorganization will so qualify nor has the Company sought an opinion of counsel on the matter. The Board of Directors of Harrier has approved the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal, the COPE Director Proposal and the COPE Independent Auditor Proposal by unanimous vote of all directors and recommends that stockholders vote "for" the approval and adoption of the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal, the COPE Director Proposal and the COPE Independent Auditor Proposal. Proxies solicited by the Board of Directors of Harrier will be voted to approve the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal, the COPE Director Proposal and the COPE Independent Auditor Proposal unless stockholders specify in their proxies a contrary choice. Certain members of the Board of Directors of the Company have conflicts of interest in making this recommendation. See "Risk Factors Relating to the Reorganization," "Proposal No. 1: Reorganization Proposal - Conflicts of Interest of Company Management," and "Proposal No. 2: Glycosyn Proposal - Conflicts of Interest of Company Management." -9- PROPOSAL NO. 1: REORGANIZATION PROPOSAL GENERAL The Company, COPE and the COPE Shareholders have entered into the Reorganization Agreement which sets forth the terms and conditions upon which the Reorganization is to be effected and certain representations, warranties and covenants relating to the Reorganization. The Reorganization Agreement provides that at the closing of the Reorganization (the "Closing") in exchange for all of the outstanding capital shares of COPE, the Company shall issue 2,862,000 shares (post-split) of Harrier Common Stock. Immediately upon completion of the Reorganization, the Company will have approximately 3,202,398 shares of Harrier Common Stock outstanding, approximately 89.2% of which will be held by the former COPE Shareholders. At the Closing, COPE shall become a wholly-owned subsidiary of the Company. All references to the Reorganization and the terms and conditions thereof in this Proxy Statement are qualified by reference to the Reorganization Agreement set forth as Appendix A hereto, which is incorporated herein by reference. PRINCIPAL REASONS FOR REORGANIZATION The Company has historically been engaged in the discovery, development and sale of selected products and technologies in the health, fitness and medical markets. Since 1996, the Company's strategic focus has been to find a merger candidate. The Company has considered a merger to be a priority due to the absence of significant sales of the Company's Bioptron lamp ("Lamp") and the Company's continuing inability to obtain the additional capital necessary to fund its pharmaceutical research and development operations. Management of the Company believe that in the absence of significant additional capital, its reorganization with an operating business was its only viable alternative. During the fiscal years ended June 30, 1996 and 1997, the Company had revenues of $66,687 and $48,069 from the sale of the Bioptron Lamps. In 1997, the Company and Naturade, Inc. ("Naturade"), its joint venture marketing partner, mutually agreed to terminate all operations relating to the Bioptron Lamp. Since then, the Company has had no revenue from the sale of Bioptron Lamps. The Company's and Naturade's decision was based on their inability to generate significant sales of the Bioptron Lamps and the scheduled termination of the Company's marketing rights to the Bioptron Lamp. Since approximately June 1996, the Company has sought to identify a company or business opportunity which could be acquired by the Company in exchange for shares of Harrier Common Stock. During the last 18 months, management of the Company reviewed a number of business plans and negotiated with a number of acquisition candidates before entering into the Reorganization Agreement with COPE. Management believes that COPE is superior to all other acquisition candidates reviewed by the Company for several reasons, including the capabilities of COPE's management, COPE's level of operations and profitability, the prospects for growth in the data storage industry generally and COPE's competitive position within that industry and the amount of dilution to be experienced by the shareholders of the Company. The Company's negotiations with COPE commenced in the fourth quarter of 1996. At that time, Adrian Knapp, Chairman of the Board of COPE, initiated contact with New Capital AG ("NCA"), a Zurich based management and financial consulting firm. Mr. Jurg Kehrli and Mr. Kevin DeVito, both of whom are directors of the Company, are principals of NCA. Mr. Knapp initiated contact with NCA for purposes of obtaining advice and assistance regarding COPE's interest in going public in the United States. The negotiations and discussions between NCA and COPE were carried out primarily by Mr. DeVito on behalf of NCA, and later the Company, and Mr. Knapp on behalf of COPE. In the fourth quarter of 1996, COPE retained NCA to conduct certain financial analysis and consulting concerning going public in the United States. In the course of the analysis, NCA discussed with COPE various manners of effectively taking COPE public in the United States securities markets, including a direct initial public offering by COPE and COPE's reorganization with a publicly-traded U.S. corporation. The management of COPE came to an early decision that they would like to take COPE public in the United States by way of a reorganization with a publicly-traded U.S. corporation. Prior to contacting NCA, COPE had discussed a U.S. initial public offering with certain U.S. underwriters, during which COPE was made aware that the class of underwriters that it would prefer to represent it in an initial public offering had minimum public offering requirements of approximately $10 million, whereas COPE did not have a need at that time for such an amount of money. At the same time, however, COPE wished to achieve public status in order to obtain future access to the U.S. capital markets and provide stock based compensation to its key employees. For these reasons, COPE chose to pursue a reorganization with a U.S. public corporation. In the course of their discussions, NCA and COPE discussed various U.S. public corporations and the relative advantages and disadvantages. These discussions focused primarily on shell corporations which were not listed on any exchange and had no assets or operations versus corporations with the securities listed on the OTC Bulletin Board or a more senior exchange. During these discussions, COPE was made aware of Harrier as a possible reorganization candidate. By February 1997, COPE came to a preliminary decision that it would like to go public in the United States through a reorganization with Harrier, subject to Harrier's divestiture of all of its assets, liabilities and operations. At that time, Messrs. Kehrli and DeVito of NCA informed COPE that due to their conflict of interest between NCA and Harrier, it would be best for COPE to terminate its relationship with NCA. Accordingly, in February 1997, COPE terminated its consulting contract with NCA including all obligations on the part of COPE to further compensate NCA or any principals of NCA in connection with activities relating to the reorganization of COPE and Harrier. Prior to that time COPE had paid NCA approximately $20,000 for financial analysis and consulting services rendered. On March 2, 1997, the Company and COPE entered into a non-binding Letter of Intent for the Reorganization. The Letter of Intent was on substantially the same terms as the Reorganization Agreement, with the exception that the Letter of Intent originally provided that Harrier was required to divest itself of all assets, liabilities and operations, including the entire ownership of its Glycosyn subsidiary. Over the next several months, the Company and COPE, along with their respective professional representatives, conducted due diligence inquiries of the other party and drafted and negotiated the Reorganization Agreement. In the course of those discussions and negotiations, the Company informed COPE that it was unable to find a buyer for its Glycosyn subsidiary on any reasonable terms. Management of the Company asked COPE to consider completing the Reorganization with Glycosyn remaining as an operating subsidiary of the Company. COPE informed the Company that it would only close the Reorganization with COPE as a subsidiary as long as the Company's percentage ownership of Glycosyn was reduced to an amount that would not require the consolidation of Glycosyn's financial condition or results of operations with that of the post-Reorganization Company. To this end, the Company pursued the sale of Glycosyn Common Stock to NCIF in cancellation of the indebtedness owed by the Company to that fund. Management's decision to reorganize with COPE was based on the fact that COPE's financial condition, results of operations and prospects were far superior to any other acquisition candidate. In terms of the amount of dilution to be experienced by the shareholders of the Company, most of the acquisition candidates reviewed by the Company expressed their desire to receive 85% to 90% of the issued and outstanding shares of Common Stock after giving effect to a possible reorganization. The Company has agreed that the COPE shareholders will receive 89.2% of the issued and outstanding shares of Common Stock after giving effect to the Reorganization. Although this represents a higher amount of dilution to the Company's shareholders than other acquisition candidates reviewed by the Company, management of the Company believes that the market value of the equity to be retained by the Company's present shareholders after giving effect to the Reorganization will be significantly higher than the market value of the equity that would have been retained by the Company's present shareholders after giving effect to reorganizations with the other acquisition candidates. Management's belief is based on its perception that COPE's financial condition, results of operations and prospects supported a significantly higher valuation for COPE itself over all other acquisition candidates. THE REORGANIZATION AGREEMENT On October 30, 1997, the Company entered into a Securities Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE and the COPE Shareholders. The Reorganization Agreement provides that immediately prior to the Closing of the Reorganization, the Company shall effect the Glycosyn Recapitalization and file an amendment (the "Amendment") to the Company's Certificate of Incorporation to: (i) change the name of the Company to COPE Inc.; and (ii) reverse split the outstanding shares of Common Stock of the Company on a one for 45 basis. At the Closing, and subject to the satisfaction of the foregoing, the Company will issue 2,862,000 shares (post-split) of the Company's $.001 par value common stock ("Harrier Common Stock"), representing 89.2% of the issued and outstanding shares of Harrier Common Stock after giving effect to the Closing, in exchange for the COPE shareholders' transfer of all of the issued and outstanding capital shares of COPE to the Company. The Reorganization Agreement also requires that the five designees of the COPE Shareholders, Adrian Knapp, Stephan Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito, be elected directors of the Company. See "Proposal No. 4: Election of COPE Directors The Closing shall occur when: (i) the Company's stockholders shall have adopted and approved the Reorganization Agreement, the Glycosyn Recapitalization, the Amendment Proposal and the COPE Director Proposal; (ii) the Amendment shall have been filed with the Secretary of State of Delaware; and (iii) all conditions to closing of the Reorganization Agreement shall have been met and all closing documents shall have been delivered. The Reorganization Agreement contains typical representations and warranties of the parties for transactions of this type. The foregoing does not purport to be a complete statement of the terms of the Reorganization -10- Agreement. Stockholders are encouraged to read the entire Reorganization Agreement, a copy of which is appended hereto as Appendix A. CONDITIONS TO THE REORGANIZATION The Reorganization Agreement sets forth certain representations and warranties by each of the parties and the terms, covenants and conditions to be complied with and performed by each of them on or before the Closing. Consummation of the Reorganization is conditioned upon satisfaction or waiver of conditions precedent set forth in the Reorganization Agreement, including, among other things: (i) the approval of the Reorganization Agreement, the Glycosyn Recapitalization, the Amendment Proposal and the COPE Director Proposal by the affirmative vote of a quorum of the Harrier Common Stock; (ii) the filing of the Amendment with the Delaware Secretary of State for purposes of changing the name of the Company to COPE, Inc. and effecting the one for 45 reverse split; (iii) the Company's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF; (iv) the Company's transfer of all assets and liabilities to Glycosyn and the release of the Company by its creditors with respect to all of its liabilities; (v) the absence of any material adverse change in the condition, financial or otherwise, of the Company or COPE; (vi) the absence of material misrepresentations or breaches of covenants; and (vii) the absence of any temporary restraining order, preliminary or permanent injunction, or other order preventing consummation of the Reorganization or any transaction contemplated by the Reorganization Agreement. The Reorganization Agreement may be terminated and the Reorganization abandoned (whether before or after approval by the Company stockholders): (i) by the mutual consent of the COPE Shareholders and the Company; (ii) by the Company in the event of the material breach by COPE or the COPE Shareholders of any provision of the Reorganization Agreement; or (iii) by the COPE or the COPE Shareholders in the event of the material breach by the Company of any provision of the Reorganization Agreement. Subsequent to the approval of the Reorganization Agreement by the shareholders of the Company, either party may waive any of the conditions to its obligations to close the transactions under the Reorganization Agreement. In the event of any material changes or amendments to the Reorganization Agreement or the terms of the Reorganization itself, whether before or after shareholder approval of the Reorganization Agreement, the Company will resolicit proxies pursuant to an appropriately revised Proxy Statement. CONFLICTS OF INTEREST OF COMPANY MANAGEMENT Certain officers and Directors of the Company and their associates have an interest in the consummation of the Reorganization, as follows: NCIF LOAN. During the year ended June 30, 1996 the Company entered into a $500,000 loan agreement with New Capital Investment Fund ("NCIF"), a Cayman Islands investment fund managed by two of the Company's Directors, Mr. Jurg Kehrli and Mr. Kevin DeVito. The loan bears interest on the unpaid principal amount at the rate of twelve percent (12%) per annum, with interest payable monthly. The principal outstanding under the loan is due and payable on June 4, 1998. Loan obligations can be paid with securities of either the Company or its Glycosyn subsidiary. As of December 31, 1997, the Company was indebted to NCIF in the amount of $595,167. In connection with the Glycosyn Recapitalization, the Company proposes to sell 2,850,000 shares of Glycosyn Common Stock to NCIF in consideration of NCIF's cancellation of all of the indebtedness. The consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF is subject to the approval of the Company's shareholders and Harrier's receipt of an opinion from an independent business appraiser that the terms of the transaction are fair to the Company's shareholders. STOCK OWNERSHIP. As of April 3, 1998, directors and officers of the Company and their affiliates beneficially owned an aggregate of 853,582 shares of Harrier Common Stock, representing approximately 5.6% of the outstanding shares of Harrier Common Stock. See "Principal Stockholders of the Company." ACCOUNTING TREATMENT The Reorganization will be treated as a reverse acquisition with COPE being the accounting acquiror. EXPENSES Pursuant to the Reorganization Agreement, the parties have agreed that the party incurring costs and expenses in connection with the Reorganization shall pay them. -11- FEDERAL INCOME TAX CONSEQUENCES OF REORGANIZATION The following discussion summarizes the material federal income tax consequences of the Reorganization but does not purport to be a complete statement of all federal tax considerations that may apply to a particular shareholder and does not address any state, local, or foreign tax consequences. This summary is based upon existing law which is subject to change by legislation, administrative action and judicial decision. The Company has not obtained any tax opinions from professional tax advisors nor has the Company sought a ruling from the IRS. Stockholders are urged, therefore, to consult with their own tax advisors with regard to the potential tax consequences of the Reorganization in light of their individual circumstances. It is anticipated that the Reorganization will qualify as a reorganization described in Section 368(a)(1)(B) of the Internal Revenue Code of 1986 (the "Code") and thus, no gain or loss will be recognized by the holders of Harrier Common Stock or the COPE Shareholders as a result of the Reorganization. However, no ruling from the Internal Revenue Service that the Reorganization will so qualify has been requested and it is not a condition to the Reorganization that an opinion of counsel be received to the effect that the Reorganization will so qualify. DISSENTERS' RIGHTS Neither the Company's Bylaws nor the Delaware General Corporation Law provide dissenters rights to the holders of Harrier Common Stock who do not vote in favor of the Reorganization Proposal. VOTE REQUIRED Under Delaware law, to approve the Reorganization, the vote of outstanding shares of Harrier Common Stock is not technically required. However, the approval of the stockholders of the Company of the Reorganization is required by the Reorganization Agreement. Thus, the approval of a majority of the shares present or represented at the Annual Meeting will be required for approval of the Reorganization. The officers and directors of the Company and their affiliates owning beneficially an aggregate of approximately 5.6% of the outstanding Harrier Common Stock have indicated they intend to vote in favor of the Reorganization Proposal. -12- PROPOSAL NO. 2: GLYCOSYN PROPOSAL GENERAL Glycosyn is approximately a 94% owned subsidiary of the Company and was formed to further develop and finance technologies currently owned or licensed by the Company in a field of carbohydrate chemistry called glycosylation, which the Company believes to have broad applications in the fields of medical therapeutics. Patents have been filed and issued for several pharmaceutical compounds created through the Company's glycosylation process. Furthermore, newer technologies are in the "discovery" stage, meaning chemical activity has been characterized and further development is underway to support additional patent applications. Since its inception in 1996, Glycosyn has generated $100,000 of revenue, all of which was received under one government grant. The Glycosyn Recapitalization is part of a broader recapitalization of the Company in connection with the COPE Reorganization. COPE conditioned its agreement to reorganize with the Company upon the Company's substantial divestiture of all assets, liabilities and operations. Initially, COPE insisted on the Company's sale or transfer of its entire interest in Glycosyn. Company management considered and pursued alternative means of satisfying COPE's demands, including the analysis of a spin-off of the Company's approximately 94% equity interest in Glycosyn and sale of its approximately 94% interest in Glycosyn. After consideration of the available alternatives and in the absence of any equitable offers to purchase Glycosyn, the Company has structured the following series of transactions (referred to herein as the "Glycosyn Recapitalization") for purposes of satisfying COPE's demands: - Concurrent with the close of the COPE Reorganization, Harrier will transfer all of its assets and liabilities to Glycosyn. In connection therewith, the principal creditors of Harrier, except NCIF which is presently owed $595,167 by Harrier, will agree to release Harrier of any further liability for their claims. - Concurrent with the close of the COPE Reorganization, Harrier will sell to NCIF 2,850,000 shares of its 5,000,000 Glycosyn Common Stock shares in consideration of NCIF's agreement to cancel all of the indebtedness owed by Harrier ($595,167 as of December 31, 1997). NCIF is an investment fund in which Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin DeVito, are retained as managers. The close of the COPE Reorganization is a condition to the Company's sale of Glycosyn Common Stock to NCIF and in the event the COPE Reorganization does not close for any reason the Company will not sell the Glycosyn Common Stock to NCIF. The Company's decision to sell 2,850,000 shares of Glycosyn Common Stock to NCIF is the result of (i) the Company's desire to retain ownership of Glycosyn in the absence of an acceptable purchase offer and (ii) COPE's demand that Harrier substantially divest all of its assets and liabilities. Upon the sale of the 2,850,000 shares of Glycosyn Common stock, Harrier's interest in Glycosyn will be reduced to approximately 40% and, as a result, the financial condition and results of operations of Glycosyn will not be consolidated with the Company's subsequent to the close of the COPE Reorganization. The Company's reduction of its ownership interest in Glycosyn to a level which terminated the Company's requirement to consolidate Glycosyn's financial statements has satisfied COPE's demand for the substantial divestiture of all its assets and, at the same time, allows the Company to retain a significant ownership interest in the subsidiary. In furtherance of its obligation under the Reorganization Agreement to effect the Glycosyn Recapitalization, the Company intends to enter into an agreement ("Glycosyn Agreement") with NCIF and Glycosyn pursuant to which, immediately prior to the Closing: (i) the Company will sell 2,850,000 shares of Glycosyn Common Stock to NCIF in exchange for NCIF's cancellation of all indebtedness owed by the Company; and (ii) the Company will transfer to Glycosyn all of its assets, consisting primarily of equipment and furniture, subject to Glycosyn's assumption of all of the Company's liabilities as of the Closing. The Glycosyn Agreement sets forth certain representations and warranties by each of the parties and the terms, covenants and conditions to be complied with and performed by each of them on or before the close of the transactions thereunder. Consummation of the transactions under the Glycosyn Agreement are conditioned upon satisfaction or waiver of conditions precedent set forth in the Reorganization -13- Agreement, including, among other things: (i) the approval of the Reorganization Agreement and the Glycosyn Recapitalization by the stockholders of the Company; (ii) the Company's receipt of a fairness opinion from an independent business appraiser that the terms of the Company's sale of the 2,850,000 shares of Glycosyn Common Stock are fair to the shareholders of the Company; (iii) the absence of material misrepresentations or breaches of covenants; and (iv) the absence of any temporary restraining order, preliminary or permanent injunction, or other order preventing consummation of the Reorganization or any transaction contemplated by the Reorganization Agreement or the Glycosyn Agreement. FAIRNESS OPINION Business Valuation & Planning Group ("BVPG"), of Orange, California, has been engaged by the Company to advise the Board of Directors of the Company as to the fairness, from a financial point of view, of the proposed Glycosyn Recapitalization. Prior to its engagement of BVPG, the Company and NCIF had agreed in principle on the terms of the Glycosyn Recapitalization and BVPG was asked to render an opinion on those terms. In January 1998, BVPG rendered an opinion to the Company's Board of Directors that, as of the date of such opinion, the Company's sale of 2,850,000 shares of its Glycosyn Common Stock in exchange for NCIF's cancellation of all of the indebtedness owed to it by the Company ($595,167 as of December 31, 1997) is fair to stockholders of the Company from a financial point of view. In arriving at its fairness determination and preparing its opinions, BVPG performed certain quantitative financial analysis, including a comparative financial and operating analysis of Glycosyn. In its written opinion, BVPG states that it has concluded that a reasonable estimate of the total fair market value of all of the issued and outstanding shares of Common Stock of Glycosyn as of December 31, 1997 was $930,423. BVPG stated that this value is determined by the income value method (a.k.a. the discounted cash flow method), such method having been determined by BVPG to be the most applicable method of valuing Glycosyn since it took into account Glycosyn's market demand and future expectations of the technology being developed by Glycosyn. In rendering its opinions, BVPG reviewed a variety of financial and other records of Glycosyn. However, in connection with its review, BVPG did not independently verify any of such information and relied on such information to be complete and accurate in all material respects. In rendering its fairness opinion, BVPG made certain assumptions concerning Glycosyn and its internal and external environment. These assumptions are: 1. That Glycosyn will have the necessary resources and commitments to develop its business. 2. That Glycosyn will be an on-going concern, and as such have a value in excess of the book value of its assets, and meet its internal financial projections. 3. The stated fair market value is only valid for the date of the valuation and for the purpose specified. 4. That all information and documents provided by the Company and Glycosyn to BVPG are truthful, accurate and complete. BVPG also obtained a value of $1,092,217 for Glycosyn under the market value method, which sought to utilize values of publicly disclosed transactions involving comparable companies. This value was substantially equal to the value derived by the income value method, but was eliminated from the fairness opinion since the comparable companies of the study were too dissimilar to Glycosyn, in terms of size and operational characteristics. The income value method was considered more applicable by BVPG since it took into account Glycosyn's market demand and the future expectations of the technology under development by Glycosyn. BVPG stated in its fairness opinion that the fair market value fairly represents the amount the Company can expect to receive at the time of sale for its interest in Glycosyn. BVPG's opinion is based on the analysis of the financial statements, sales forecasts; market, industry and competitive analysis; and knowledge of the Glycosyn as provided by management. BVPG stated that the fair market value represents the amount the Company would net from a sale before taxes, commissions, and other selling costs. This value may be increased by offering terms which allow the prospective buyer to reduce the amount of the initial cash investment. However, BVPG stated that the exact amount the Company might receive for the stock or assets of Glycosyn is dependent on the terms of the sale, tax provisions existing at the time of sale, financial performance and conditions at the time of sale, as well as other factors that impact value. BVPG is located in Orange, California and for the past 14 years has been engaged in the business of providing business valuations of privately held businesses. The Company selected BVPG based on the level of its experience in valuing privately owned businesses and the terms of the engagement proposed by BVPG, including its fees. The Company paid BVPG $5,000 for its valuation services. CONFLICTS OF INTEREST OF COMPANY MANAGEMENT NCIF is a Cayman Islands investment fund managed by two of the Company's Directors, Mr. Jurg Kehrli and Mr. Kevin DeVito. See Proposal No.1: COPE Reorganization - Interest of Management. EXPENSES The Company will pay all of the expense to be incurred by the Company or Glycosyn in connection with Glycosyn Recapitalization. All expense of NCIF will be paid by NCIF. FEDERAL INCOME TAX CONSEQUENCES OF REORGANIZATION The Company believes that the sale of the Glycosyn Common Stock to NCIF and the transfer of its assets to Glycosyn and the assumption of all liabilities by Glycosyn will not result in a material tax consequence to either the Company or Glycosyn. DISSENTERS' RIGHTS Neither the Company's Bylaws nor the Delaware General Corporation Law provide dissenters rights to the holders of Harrier Common Stock who do not vote in favor of the Glycosyn Recapitalization Proposal. -14- VOTE REQUIRED Under Delaware law, to approve the Glycosyn Recapitalization, the vote of outstanding shares of Harrier Common Stock is not technically required. However, the approval of the stockholders of the Company of the Glycosyn Recapitalization is required by the Reorganization Agreement. Thus, the approval of a majority of the shares present or represented at the Annual Meeting will be required for approval of the Glycosyn Recapitalization. The officers and directors of the Company and their affiliates owning beneficially an aggregate of approximately 5.6% of the outstanding Harrier Common Stock have indicated they intend to vote in favor of the Glycosyn Recapitalization Proposal. -15- PROPOSAL NO. 3: AMENDMENT PROPOSAL GENERAL The Board of Directors of the Company believes that the best interests of the Company and its stockholders will be served by approving the Amendment. The Amendment will: (i) change the name of the Company to "COPE, Inc.;" and (ii) effect a reverse split of the outstanding shares of Harrier Common Stock on a one for 45 basis. Stockholders are urged to read carefully the following sections of this Proxy Statement, including the Amendment, Appendix B hereto, before voting on this proposal. NAME CHANGE As a condition to the Reorganization, the stockholders of the Company will be approving a change in the name of the Company to COPE, Inc. In the event the Reorganization Agreement is not approved, the Amendment Proposal will be withdrawn. The purpose of the name change is to enable third parties to more easily identify the Company after the Reorganization is effected. REASONS FOR THE REVERSE SPLIT Pursuant to the reverse split, each 45 shares of presently issued and outstanding Harrier Common Stock would be converted and exchanged into one share of post-split common stock ("New Common Stock"). Authorization for the reverse split includes the authorization for the rounding-up of all fractional shares resulting from the reverse split. Thus, there will be slightly over 344,843 shares issued and outstanding prior to the time the Reorganization is effected. The proposed reverse stock split will not affect materially any stockholder's proportionate equity interest in the Company other than a slight adjustment which may occur due to the rounding-up of fractionalized interests resulting from the reverse split. The purpose of the reverse split is to accomplish the financial terms agreed upon with COPE and the COPE Shareholders in the Reorganization Agreement as it relates to equity ownership interest in the Company. The management of COPE has negotiated for the one for 45 reverse split based on their desire to reach a stock price of at least $4.00 per share in order to qualify the New Common Stock for a listing on the NASDAQ Small Cap Stock Market. There can be no assurance, however, that the New Common Stock will trade at a price near or above $4.00 per share or that the Company will be able to list its New Common Stock on the NASDAQ Small Cap Stock Market. The reverse split will not affect the stockholders' equity of the Company as reflected on the financial statements of the Company, except to change the number of issued and outstanding shares of New Common Stock. EXCHANGE OF CERTIFICATES No scrip or fractional share certificates of New Common Stock will be issued in connection with the proposed reverse stock split. Shareholders of record holding a number of shares not evenly divisible by 45 who would otherwise receive a fractional share of New Common Stock will receive one share of New Common Stock in lieu of each fractional share resulting from the proposed reverse stock split. The shareholders of the Company are not being asked to exchange the certificates for their existing shares of Common Stock for certificates for shares of New Common Stock, however, they are entitled to do so if they wish. FEDERAL INCOME TAX CONSEQUENCES The federal income tax consequences of the proposed reverse stock split will be as set forth below. The following information is based upon existing law which is subject to change by legislation, administrative action and judicial decision and is necessarily general. Therefore, stockholders are advised to consult with their own tax advisor for more detailed information relating to their individual tax -16- circumstances. 1. The proposed reverse stock split will be a tax-free recapitalization for the Company and its stockholders to the extent that shares of Harrier Common Stock are "exchanged" for shares of New Common Stock. 2. The receipt of New Common Stock due to the issuance of a whole share of New Common Stock in lieu of any fractional shares resulting from the proposed reverse stock split should constitute a nontaxable stock dividend. 3. The shares of New Common Stock in the hands of stockholder will have an aggregate basis for computing gain or loss equal to the aggregate basis of shares of Harrier Common Stock held by that shareholder immediately prior to the proposed reverse stock split. 4. A stockholder's holding period for shares of New Common Stock will include the holding period of shares of Harrier Common Stock exchanged therefor, provided that the shares of Harrier Common Stock were capital assets in the hands of the stockholder. VOTE REQUIRED In accordance with Delaware law, the affirmative vote of the holders of at least a majority of the outstanding shares of Harrier Common Stock present or represented at the Annual Meeting will be required for approval of the Amendment. The officers and directors of the Company and their affiliates owning beneficially an aggregate of approximately 5.6% of the outstanding Harrier Common Stock have indicated that they intend to vote in favor of the Amendment Proposal. -17- PROPOSAL NO. 4: COPE DIRECTOR PROPOSAL GENERAL In the event that the Reorganization Proposal, the Glycosyn Proposal and the Amendment Proposal are all approved, five directors nominated by the COPE Shareholders are to be elected at the Annual Meeting to hold office until the next annual meeting of stockholders or until their successors have been duly elected and qualified. The five nominees for director are Adrian Knapp, Stephan Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito. See "Management of the Company following the Reorganization" below for information with respect to the age, current positions and background of each of these nominees. The Company's Certificate of Incorporation and Bylaws give the Board of Directors ("Board") the authority to determine the size of the Board. The Board currently consists of three directors. The Company's governing charter documents provide that each director of the Company holds office until the next annual meeting of stockholders or until his successor is duly elected and qualified. Subject to the approval of the Reorganization Agreement by the stockholders, the Board has authorized an increase in the number of directors to five and has authorized the nomination of Adrian Knapp, Stephan Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito to serve as directors, commencing upon the Closing of the Reorganization Agreement, until the next annual meeting of stockholders or until his successor is duly elected and qualified. VOTE REQUIRED The affirmative vote of holders of a majority of the Harrier Common Stock present or represented at the Annual Meeting will be required to elect each of the nominees for director. Cumulative voting is not permitted in the election of directors. The officers and directors of the Company and their affiliates owning beneficially an aggregate of approximately 5.6% of the outstanding Harrier Common Stock have indicated that they intend to vote in favor of the COPE Director Proposal. Subject to the approval of the Reorganization Agreement by the stockholders, management recommends the election of all nominees for director listed in Proposal No.4. PROPOSAL NO. 5: COPE INDEPENDENT AUDITOR PROPOSAL The Company's independent auditors for the fiscal years ended June 30, 1997 and 1996 were Raimondo Pettit Group (formerly Raimondo, Pettit & Glassman). Based on an expectation of the stockholders' approval of the Reorganization Proposal, the Board of Directors of the Company has approved a change in the Company's fiscal year end to December 31 and has nominated Atag Ernst & Young, a member of Ernst & Young International, COPE's current independent auditors, as the Company's independent auditors for the fiscal year ending December 31, 1997. In the event the Reorganization Proposal is not approved, the Company would not expect to retain Atag Ernst & Young and, instead, Raimondo Pettit Group. Representatives of Raimondo Pettit Group are expected to be present at the meeting and will be available to make a statement and respond to appropriate questions. Representatives of Atag Ernst & Young are not expected to be present at the meeting. VOTE REQUIRED Under Delaware law, to approve the COPE Independent Auditor Proposal, the vote of outstanding shares of Harrier Common Stock is not technically required. The officers and directors of the Company and their affiliates owning beneficially an aggregate of approximately 5.6% of the outstanding Harrier Common Stock have indicated they intend to vote in favor of the COPE Independent Auditor Proposal. -18- PROPOSAL NO. 6: HARRIER DIRECTOR PROPOSAL GENERAL In the event that either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposals is not approved, three directors nominated by the Board of Directors of the Company are to be elected at the Annual Meeting to hold office until the next annual meeting of stockholders or until their successors have been duly elected and qualified. The three nominees for director are Jurg Kehrli, Kevin DeVito and William Cordeiro. See "Management of the Company" for information with respect to the age, current positions and background of each of these nominees. VOTE REQUIRED The vote of the holders of a majority of the Harrier Common Stock present or represented at the Annual Meeting will be required to elect each of the nominees for director. Cumulative voting is not permitted in the election of directors. In the event that either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposals is not approved, management recommends the election of all nominees for director listed in Proposal No. 6. OTHER MATTERS Except for the matters referred to in the accompanying Notice of Annual Meeting, management does not intend to present any matter for action at the Annual Meeting and knows of no matter to be presented at the Annual Meeting that is a proper subject for action by the stockholders. DESCRIPTION OF SECURITIES CURRENT The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, $.001 par value ("Harrier Common Stock"), of which, as of April 3, 1998, 15,517,923 shares of Harrier Common Stock were issued and outstanding and held of record by approximately 382 persons. Each holder of shares of Harrier Common Stock is entitled to one vote for each share held on all matters to be voted upon by the stockholders generally. The shares do not have cumulative voting rights, which means that the holders of more than 50% of the shares of Harrier Common Stock voting for the election of directors can elect all the directors, and that in such an event the holders of the remaining shares would not be able to elect a single director. The approval of proposals submitted to stockholders at a meeting requires the favorable vote of a majority of the shares voting, except in the case of certain fundamental matters (such as certain amendments to the Certificate of Incorporation, and certain mergers and reorganizations), in which cases Delaware law and the Company's Bylaws require the favorable vote of at least a majority of all outstanding shares. Stockholders are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefor, and in the event of liquidation, dissolution or winding up of the Company to share ratably in all assets remaining after payment of liabilities. The holders of shares of Harrier Common Stock have no preemptive, conversion or subscription rights. AFTER THE REORGANIZATION If the Reorganization Proposal is approved and the Reorganization is consummated, the authorized capital stock of the Company will consist of 30,000,000 shares of New Common Stock and there will be slightly in excess of 3,206,843 shares of New Common Stock issued and outstanding, exclusive of any options to purchase shares. -19- TRANSFER AGENT The Transfer Agent for the Harrier Common Stock is Interwest Transfer Company, Salt Lake City, Utah. -20- BUSINESS OF THE COMPANY GENERAL Harrier, Inc., a Delaware corporation ("Harrier" or "the Company"), has historically been engaged in the discovery, development and sale of selected products and technologies in the health, fitness and medical markets. Since 1996, the Company's strategic focus has been to find a merger candidate. The Company has considered a merger to be a priority due to the absence of significant sales of the Company's Bioptron lamps and the Company's continuing inability to obtain the additional capital necessary to fund its pharmaceutical research and development operations. Unless the context otherwise requires, the term "Company" refers to Harrier, Inc., a Delaware corporation, and its majority owned subsidiary, Glycosyn Pharmaceuticals, Inc., a Delaware corporation, and its equity interest in DermaRay International, LLC, a California limited liability company. See Part 1, Item 1 of the Company's 1997 Annual Report, a copy of which accompanies this Proxy Statement, for a description of the business of the Company, such information being incorporated by this reference into this Proxy Statement. MANAGEMENT OF THE COMPANY DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH SECTION 16(a) NAME AGE POSITION - ---- --- -------- Jurg Kehrli 55 Chairman/Director William P. Cordeiro 53 Director Kevin DeVito 37 President/Director Candace Beaver 36 Secretary and Chief Financial Officer All Directors and Executive Officers of the Company, are elected or appointed, respectively, to serve for a one year term and hold their office until their successors are elected or appointed and qualified. The following is a brief resume of each Director and Executive Officer of the Company: Mr. Kehrli has served as Chairman of the Board of the Company since 1987. Since 1996, Mr. Kehrli has also served as a principal of New Capital A.G., a Zurich based financial and management consulting firm for European-based companies. Dr. Cordeiro has served as a director of the Company since June 1994. Since 1990, Dr. Cordeiro has served as Professor in the Management Department of California State University's School of Business and Economics in Los Angeles. Dr. Cordeiro holds a B. S. in Biology from the University of San Francisco, an MBA in Finance from the University of Southern California, and a Ph.D. in Executive Management from the Peter Drucker Graduate Management Center, the Claremont Graduate School. Dr. Cordeiro is also a director of Virtual Telecom, Inc. Mr. DeVito has served as President and Director of the Company since July 1992. Since 1996, Mr. DeVito has served as a principal of New Capital A.G., a Zurich based financial and management consulting firm for European-based companies. -21- Candace Beaver has served as Secretary and Chief Financial Officer of the Company since June 1991. Those required to make filings under Section 16(a) have done so to the best of the Company's knowledge. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended June 30, 1996 the Company entered into a $500,000 loan agreement with New Capital Investment Fund ("NCIF"), an entity affiliated with the President and the Chairman of the Board. The loan bears interest of 12%. The loan was extended for one (1) year and is now due on June 4, 1998. Loan obligations can be paid with securities of either the Company or its Glycosyn subsidiary. Common shares of Glycosyn have been paid to NCIF at a value of $1.00 per Glycosyn share. NCIF has agreed to extend the term of the note if the Company does not have funds to pay the loan back or if the value of common stock payments is overly dilutive to the Company. (See Note 8 to the financial statements included herein.). NCIF is currently advised on certain transactions by two of the Company's Directors, Mr. Kehrli and Mr. DeVito. Both Mr. Kehrli and Mr. DeVito abstained from voting on the approval of the loan by the Company's board. As of December 31, 1997, the Company was indebted to NCIF in the amount of $595,167. In connection with the Glycosyn Recapitalization, the Company proposes to issue 2,850,000 shares of Glycosyn Common Stock to NCIF in consideration of NCIF's cancellation of all of the indebtedness. The consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF is subject to the approval of the Company's shareholders and Harrier's receipt of an opinion from an independent business appraiser that the terms of the transaction are fair to the Company's shareholders. Notwithstanding the fairness opinion, Glycosyn has in the past sold shares of Common Stock at prices of up to $1.00 per share, which is significantly more than the price of $0.21 per share being paid by NCIF. Management attributes the difference in sale price to the fact that Glycosyn's value has declined over the last few years as Glycosyn's lack of capital has allowed the competition in the area of glycosylation to catch up to and, in some cases, exceed Glycosyn's technology. EXECUTIVE COMPENSATION The Summary Compensation Table below includes, for each of the fiscal years ended June 30, 1997, 1996, and 1995 individual compensation for services to the Company and its subsidiaries of the Chief Executive Officer (the "Named Officer"). SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts ----------------------------- ----------------------- ---------- (a) (b) (c) (d) (e) (f) (g) (h) (i) Other Name Annual Restricted All Other and Compen- Stock LTIP Compen- Principal sation Award(s) Options/ Payouts sation Position Year Salary($) Bonus ($) ($) ($) SARs(#) ($) ($) - -------- ---- --------- -------- ------ -------- -------- ---------- ------- Kevin DeVito 1997 64,147 (1) -0- -0- -0- -0- President 1996 94,994 (2) -0- -0- -0- -0- 1995 116,233 -0- -0- -0- -0- (1)Include $3,600 per year for car allowance and $1,680 per year for executive insurance. (2)Includes $900 per year for car allowance and $1,680 per year for executive insurance. -22- OPTION/SAR GRANTS IN LAST FISCAL YEAR No options were granted in fiscal year 1997. DIRECTOR COMPENSATION Dr. Cordeiro is paid a Director's fee of $500 per month. No other Director compensation was paid during fiscal year 1997. HARRIER MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS See Part II, Item 6 of the Company's 1997 Annual Report, a copy of which accompanies this Proxy Statement, and the Company Quarterly Report on Form 10-QSB/A for the quarter ended December 31, 1997 for disclosure concerning Management's Discussion and Analysis or Plan of Operations of the Company, such information being incorporated by this reference into this Proxy Statement. PRINCIPAL STOCKHOLDERS OF THE COMPANY See Part III, Item 11 of the Company's 1997 Annual Report, a copy of which accompanies this Proxy Statement, for a description of the security ownership of the Company, such information being incorporated by this reference into this Proxy Statement. -23- BUSINESS OF COPE GENERAL COPE is a Swiss-based provider of data storage and information management consulting services and solutions. COPE's principal operations consist of the design, implementation and management of information systems that provide data storage, data security and data warehousing solutions. COPE offers its clients a staff of 20 consultants and engineers trained to analyze each client's specific needs and then design and implement an information system that integrates the hardware and software products that best meet the identified objective. COPE generally provides its information systems on a turn-key basis and purchases for resale the hardware and software components made part of its information systems solutions. COPE is a value added reseller of hardware and software products offered by the major vendors in the data storage industry, including ADIC, AMPEX, ATL, DATA GENERAL, DG- CLARiiON BU, HP, IBM, LEGATO, NSM, ORACLE, OVERLAND, PLATINUM, QUALIX, STORAGE TEK, SUN, and VERITAS. COPE provides information management consulting, services and solutions to a variety of companies in the financial, insurance, pharmaceutical and telecommunication industries located in Switzerland, Germany and Austria. COPE was founded in 1991 and is headquartered in Rotkreuz, Switzerland. COPE commenced operations in 1991 as a provider of consulting services and data storage systems to the Swiss market. Typical customers at that time were PC retailers, specifically those selling IBM PS/2 products. In the European market at that time, computer manufacturers were not directing significant corporate resources into data storage. This opportunity allowed COPE to immediately enter the market with a competitive mix of quality products suitable for customized internal and external data storage applications. In early 1993, COPE began to study the RAID (redundant array of inexpensive disk-drives) sector, designing corresponding solutions for their clients. In the Fall of 1993, the first family of RAID systems was introduced by COPE to the Swiss market. Some of these systems are still in use today. In 1994, COPE signed a distribution contract with Data General for the distribution of Open CLARiiON systems. COPE led all other distributors throughout Europe from 1994 through 1996. In 1994, COPE began to market its services and systems in Austria. In 1995, COPE commenced offering consulting services and systems in the area of data storage. In late 1995, COPE expanded its operations to the Federal Republic of Germany. In 1997, COPE commenced offering services and systems in the area of data warehousing. COPE seeks to become the leading provider of data storage services and solutions throughout Central Europe. COPE continues to expand its expertise in data storage throughout all disciplines. Certain terms used below are defined in the Section "Glossary." COPE's operations in the Federal Republic of Germany are conducted by its wholly-owned subsidiary, COPE GmbH, and its operations in Austria are carried out by its wholly-owned subsidiary, COPE Handelsges.m.b.h. All references in this section to COPE include COPE AG, a Swiss corporation and its subsidiaries. COPE's executive offices are located at Grundstrasse 14, 6343 Rotkreuz, Switzerland. COPE's telephone number (from the U.S.) is 011-41-41-798-33-33. INDUSTRY OVERVIEW The data storage business involves data availability (to minimize the impact of system failures on business-critical applications), data protection (to eliminate the loss of essential data), data warehousing (to provide day-to-day decision support and business intelligence for business executives), and disaster recovery (saving data in the event of a disaster). Set forth below is a general description of the foregoing data storage applications: DATA AVAILABILITY. Continuous, uninterrupted access to data gives an advantage over most companies. Visionary leadership will approach the problem of potential data loss preventatively by -24- eliminating the possibility through preplanning. A by-product of using COPE's service as a guide, is the development of an efficient system for managing information. A company with a poor data access plan, or no plan at all, is vulnerable to being overtaken by the competition when problems arise. Also, a bad system is an overworked system. And an overworked system means expensive maintenance or replacement and valuable loss of time. In every sense, the cost of doing things right is much less than the cost of ignoring the problem. DATA PROTECTION. Data storage implies continual updating and incorporation of changes. As a company grows, so does the mass of data being processed. Backing-up data becomes more time-consuming and expensive. Without a good back-up and restoration plan in place, more time may be spent on data retrieval because of slow system response and the frequent breakdowns that occur with increased demand. COPE can help streamline the process by identifying hardware and software combinations that make sense for a company. DATA WAREHOUSING. Proper data warehousing allows information to be retrieved in order to make successful decisions. With a corporate-wide plan in place, information from internal and external data sources is gathered, consolidated, edited, prepared, and released to executive staff for review, analysis, and other uses. In order to be cost-effective, data warehousing systems must provide quick access, but also be simple to manage. And, the manner in which data is presented should highlight changes and trends in business and facilitate in-depth analysis on-line. DISASTER RECOVERY. Even easy access and frequent back-up cannot offset a really devastating event, or "super crash." Floods, fires, earthquakes, and other natural disasters can destroy records and hardware. To make things worse, management can be held responsible for the failure to institute disaster contingency plans, leading to a loss of data. A disaster recovery plan is perhaps the most important part of a data storage system. Current data storage solutions provide secure, high capacity data repositories based primarily on three technologies -- magnetic disk, optical disk and magnetic tape. Magnetic tape remains the most cost effective storage medium, and is used most often for backup and archival functions. The development of automated tape libraries, which address the historically high degree of costly human intervention involved in using tape storage, is helping to drive the expanded use of magnetic tape. Automated tape libraries also provide improved throughput, increased data capacity and unattended operation through the use of multiple drives and cartridges. In addition, business managers are increasingly perceiving data to be critical at a company-wide level as opposed to only being important at the individual workstation level. As a result, central management of data has been increasing. The data storage industry has experienced rapid growth in recent years in response to the significant increase in the amount of electronically stored data. COPE believes that this growth will continue due to (i) the introduction of increasingly powerful computing platforms, (ii) the spreading use of computers for tasks that previously were performed manually, (iii) the increasing number, size, bandwidth and complexity of computer networks, particularly client/server networks, (iv) the rapid growth of data-intensive applications and (v) the growth of intranet and Internet based computing. In addition, emerging data intensive applications, such as still image, motion video, check imaging and other multimedia applications and character recognition uses, are accelerating the demand for data storage solutions. -25- PRODUCTS AND SERVICES COPE's principal operations consist of the design, implementation and management of information systems that provide data storage, data security and data warehousing operations on a turn-key basis. In addition to providing turn-key data storage systems, COPE also provides its clients consulting, training and systems servicing. In 1997, approximately $1,310,996 (or 7.3%) of COPE's $17,916,171 in revenue represented consulting fees unrelated to sales of storage data systems, however the company intends to increase its marketing efforts in the area of consulting services and expects that consulting revenues will in the future increase as a percentage of overall revenue. SYSTEM DESIGN AND IMPLEMENTATION. COPE provides information systems on a turn-key basis and purchases for resale the hardware and software components made part of its information systems. As of the date of this Proxy Statement, COPE employs a staff of 20 consultants and engineers trained to analyze each client's specific data storage needs and then design and implement an information system that integrates the hardware and software products that best meet the identified objective. COPE is a value added reseller of hardware and software products offered by the leading vendors in the data storage industry, including ADIC, AMPEX, ATL, DATA GENERAL, DG CLARiiON BU, HP, IBM, LEGATO, NSM, ORACLE, OVERLAND, PLATINUM, QUALIX, STORAGE TEK, SUN, and VERITAS. Because COPE represents several hardware and software vendors, they can provide an objective and independent analysis of a client's needs, whether they involve the integration of existing equipment or the establishment of a completely new enterprise storage system. COPE has provided data storage systems to a variety of companies in the financial, insurance, pharmaceutical and telecommunication industries located in Switzerland, Germany and Austria. COPE is a value added reseller of a number of hardware and software products to its customers, including tape libraries, data storage disk arrays, high-end servers, other storage equipment and numerous other peripheral products related to the installation and utilization of data storage technology. COPE sells data storage software under various reselling arrangements with several software companies where COPE functions as an operating and other software system vendor. The following table sets forth the vendors with which COPE works in various selling partnerships, the vendor's products resold by COPE and the amount of COPE's revenue from the sale of hardware and software products during fiscal 1997 represented by each vendor: COMPANY PRODUCT BUSINESS RELATIONSHIP % OF PRODUCT REVENUE - -------------------------------------- -------------------------------- --------------------- -------------------- ADIC Tape Libraries Value Added Reseller 14% ATL Products Tape Libraries Value Added Reseller 4% Data General - CLARiiON Business Unit CLARiiON Disk Arrays Value Added Reseller 18% IBM High End Servers Value Added Reseller 18% Legato Systems Back-up and archiving Software Value Added Reseller 12% NSM CD Jukeboxes Value Added Reseller 7% Oracle Data Base and OWH Value Added Reseller 2% OVERLAND DATA Tape Libraries Value Added Reseller 4% Qualix Failure and Data Replication Value Added Reseller 1% Software STORAGE TEK Tape Libraries Value Added Reseller 11% -26- SUN Microsystems High End Servers Value Added Reseller 1% VERITAS Software Data Management, Failure, Backup Value Added Reseller 5% and Activity Software COPE generally contracts to deliver information systems, including all hardware and software, on a turn-key basis pursuant to fixed price contracts. Consistent with industry practice, COPE generally is not able to obtain significant up-front or progress payments on its contracts providing for the design, implementation and sale of information systems. Accordingly, COPE is required to finance its clients contracts, including the purchase of the hardware and software components of the information systems. COPE's principal sources of working capital are cash from operations and an operating line of credit from Credit Suisse in the maximum amount of SFr2,000,000. COPE has been successful to date in securing extensions on its line with Credit Suisse for purposes of financing certain client contracts as needed, however there can be no assurance that COPE will continue to do so in the future. CONSULTING. COPE's consulting and education division offers professional services such as analyses, conceptual solutions, target-performance comparisons, quantity structures, feasibility studies, capital budgeting and ROI calculations, as well as project management and user training. In addition to training and education, the COPE service division implements and maintains data management plans recommended by the consulting division. COPE service engineers are certified by strategic partners such as IBM, SUN and Microsoft. The service department contracts directly with the end-user to maintain systems and manage the plan, be it data recovery, warehousing, security or availability. SALES AND MARKETING COPE markets its high volume information management consulting, services and solutions primarily through its field sales organization complemented by other sales channels, including systems integrators, OEMs, VARs and international distributors. As of December 31, 1997, COPE's field sales force consisted of 12 personnel, including seven sales representatives and five sales engineers that provide technical assistance for systems sales. COPE currently has five sales offices, most of which are staffed with both sales and technical pre-sales personnel. COPE uses a consultative sales approach for selling to major accounts. This model entails the collaboration of technical and sales personnel, typically in a one-to-one ratio, to formulate proposals that address the specific requirements of the customer. COPE focuses its initial sales efforts on senior MIS department personnel, and works closely with system and network administrators for evaluation and deployment. COMPETITION The information management market is intensely competitive, highly fragmented and characterized by rapidly changing technology and evolving standards. Competitors vary in size and in the scope and breadth of the products and services offered. COPE's major competitors are vendors of information management software and hardware products, including Hewlett Packard, EMC, Unisys, Digital Equipment Corp. and Tandem Computer Corporation. COPE also experiences significant competition from other independent consulting and engineering firms. Many of the COPE's current and potential competitors, particularly information management hardware and software vendors, have significantly greater financial, technical, marketing and other resources than COPE. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or, in the case of vendors, to devote greater resources to the development, promotion, sale and support of their products than the company. COPE also expects that competition will increase as a result of future software industry consolidations, which have occurred in the information management market in the past. In addition, current and potential competitors have -27- established or may establish cooperative relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. There can be no assurance that COPE will be able to compete successfully against current or future competitors or that competitive pressures faced by the company will not materially adversely affect its business, operating results or financial condition. In addition to competition for client contracts, COPE also competes for qualified technical engineers. COPE's future success depends in significant part upon the continued service of its key technical personnel and its continuing ability to attract and retain highly qualified technical engineers and consultants. Competition for such personnel is intense, and there can be no assurance that COPE can retain its key technical and managerial employees or that it can attract, assimilate or retain other highly qualified technical personnel in the future. LITIGATION There are no legal proceedings to which COPE or any of its officers or directors is party or to which the property of the company is subject. EMPLOYEES As of December 31, 1997, COPE had a total of 51 employees. Of the total, 20 were in consulting and engineering, 21 were in sales and marketing, and 10 in finance, administration and operations. None of COPE's employees are represented by a labor union. COPE has not experienced any work stoppages and considers its relations with its employees to be good. PROPERTIES COPE's executive offices are located in Rotkreuz, Switzerland and consist of approximately 6,300 square feet of leased space. COPE leases this space pursuant to a one year lease expiring in March 1998, at the rate of SFr12,000 per month. COPE also maintains the following sales office: Location Size Monthly Rental Rate - -------- ---- ------------------- Munich, Germany 1,800 sq. ft. $1,700 Frankfurt, Germany 1,800 sq. ft. $2,400 Gera, Germany 1,800 sq. ft. $1,900 Dresden, Germany 1,500 sq. ft. $2,200 Vienna, Austria 2,000 sq. ft. $2,000 GLOSSARY -28- Cache: A portion of memory that collects and holds data until a processing or storage module processes it. Data Warehouse: A separate database dedicated to decision support. Data is transferred from transaction processing systems and integrated. It is arranged by customer, not by date or transaction. It is accessed to provide management information through report writers, query tools, data access and retrieval tools OLAP servers and enterprise information systems. It is a software architecture not a product. Disaster: Any event that creates an inability on an organization's part to provide critical business functions for some predetermined period of time. SIMILAR TERMS: Business Interruption; Outage; Catastrophe. Disaster Recovery Software: An application program developed to assist an organization in writing a comprehensive disaster recovery plan. Disk Array: A group of storage devices that provides higher data-transfer rates, higher data availability, or both. -29- Redundant Array of Inexpensive Disks (RAID): A technique for grouping drives to improve performance and data availability. RAID devices with multiple disks appear as one disk to the OS. If one disk fails, others can still operate because a separate disk provides parity information that can supply the missing data. -30- COPE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION This "Management's Discussion and Analysis of Financial Condition and Results of Operations" (i) should be read in conjunction with COPE's annual audited (1997, 1996 and 1995) consolidated financial statements, the notes thereto and the other financial data included elsewhere in this Proxy Statement and (ii) includes forward-looking statements which involve risks and uncertainties. COPE's actual results may differ materially from the results predicted by such forward-looking statements due to various factors, including but not limited to those which are discussed below and elsewhere in this Proxy Statement, including "Risk Factors Relating to the Reorganization - -COPE Risks." OVERVIEW GENERAL. COPE is a Swiss-based provider of data storage and information management consulting services and solutions. The Company's principal operations consist of the design and implementation of information systems in the areas of data storage, data security and data warehousing. The company was founded in 1991 and is headquartered in Rotkreuz, Switzerland. COPE presently conducts business throughout Switzerland, Germany and Austria. COPE regularly enters into certain financial commitments payable in Swiss Francs, the unit of currency of Switzerland. All Swiss Franc based amounts are designated by the symbol SFr. As of December 31, 1997, the Swiss Franc-Dollar exchange rate was 1.45 Swiss Franc to 1 U.S. Dollar. CURRENCY EXCHANGE RATES. Although COPE reports its results in US dollars, virtually all of its sales are denominated in other currencies, including, primarily, Swiss francs and, to a lesser extent, Deutsche marks and the Austrian schillings. A significant amount of COPE's cost of sales (i.e., hardware and software purchases) on the other hand, are denominated in US dollars. Consequently, the Company's cost of doing business is directly affected by any changes in the exchange rate between the US dollar, on the one hand, and the Swiss franc and, to a lesser extent, the Deutsche mark and Austrian schilling, on the other hand. The financial position and results of operations of COPE and the company's foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of COPE and its subsidiaries are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from differences in exchange rates from period to period are included in the cumulative translation adjustment account in stockholders' equity. In recent years, particularly in the 1996-1997 period, the US dollar has generally strengthened against the Swiss franc. This has had the effect of reducing sales denominated in Swiss francs when translated to US dollars as compared to prior periods. Furthermore, because most of the Company's cost of sales are denominated in US dollars the strengthening of the US dollar also has had an adverse effect on COPE's operating profits. COPE typically enters into forward exchange contracts covering fifty percent (50%) of its hardware and software purchases for its client contracts in order to mitigate the adverse effects of currency exchange fluctuations. However, these actions generally provide only a partial mitigation of the adverse effects of changes in currency rates and there can be no assurance that changes in currency rates in the future will not have a material adverse affect on COPE's business, financial condition and results of operations. -31- RESULTS OF OPERATIONS Results of Operations Fiscal 1997 Compared to Fiscal 1996 NET SALES During the 12 months ended December 31, 1997, COPE had net sales of $17,916,171, which amounts to an increase of 43% over the net sales of $12,513,123 during the prior year period as a result of further market share increase. Sales of services increased 92% during the year reaching $1,810,996 as compared to $680,422 in 1996. This increase is due to increased demand for consulting services as a result of greater market share. COST OF SALES During fiscal year 1997, cost of sales was $12,817,738 compared to $8,829,711 for the prior year, 71.3% and 70.6% of the total revenues, respectively, which amounts to an increase of 44%. Cost of sales consists exclusively of COPE's cost for the hardware acquired for resale as part of its information systems solutions. GROSS PROFIT The Company's gross profit margin for fiscal 1997 was 28.5% compared to 29.4% for the prior year. COPE's strategy for the future is the deemphasis of lower margin stock (such as the distribution of hardware and software without associated consulting work) and the emphasis of higher margin work (such as the sale of stand-alone consulting work). The slight decrease in gross margin is due in part to an increase in hardware costs. A portion of the increase in hardware costs is due to a stronger U.S. dollar during this year as compared to the Swiss franc as almost all of the purchases of hardware are U.S. dollar denominated. As consulting services becomes a greater percentage of the sales mix, margins are expected to increase. Gross margins in Switzerland and Austria increased in 1997 over those of 1996. However, Germany has not seen this same trend as consulting services have not reached the same levels obtained in the other countries. SELLING, GENERAL, ADMINISTRATIVE AND CONSULTING EXPENSES COPE's selling, general, administrative and consulting expenses as a percentage of net sales was substantially unchanged between fiscal 1997 (24.2%) and fiscal 1996 (23.5%). FISCAL 1996 COMPARED TO FISCAL 1995. NET SALES During the 12 months ended December 31, 1996, COPE had net sales of $12,513,123, which amounts to an increase of 13% over the net sales of $11,020,356 during the prior year. The increase is attributable to an increase in market share, particularly in Switzerland and Germany. Consulting services revenue increased approximately 30% over the prior year ($680,422 in 1996 compared to $520,145 in 1995). COST OF SALES During fiscal year 1996, cost of sales was $8,831,006 compared to $8,154,271 for the prior year. Cost of sales consists exclusively of COPE's cost for the hardware and software acquired for resale as part of its information systems. GROSS PROFIT The company's gross profit margin for fiscal 1996 was 29.4% compared to 26% for the prior year. COPE's strategy for the future is the deemphasis of lower margin work (such as the distribution of hardware and software without associated consulting work) and the emphasis of higher margin work (such as the sale of stand-alone consulting work). The increase in the gross profit margin for 1996 was the result of increased consulting services during 1996 and the decrease in sales of hardware and software. SELLING, GENERAL, ADMINISTRATIVE AND CONSULTING EXPENSES COPE's selling, general, administrative and consulting expenses as a percentage of net sales was substantially unchanged between fiscal 1996 (23.5%) and fiscal 1995 (23.2%). EQUITY TRANSACTIONS During the quarter ended September 30, 1997, COPE issued 60 shares at a nominal value of SFr100 each. The shares were sold to 29 European investors. The proceeds of the sale of the shares were used as additional working capital. The nominal value of the shares issued totaling $4,112 was posted to the share capital account whereas the remainder of the proceeds amounting to $690,199 was recorded as additional paid in capital. After this increase the share capital of COPE consists of 1,060 issued and outstanding shares, with a nominal value of SFr100 (368.5) each. Each ordinary share is entitled to one vote. No stock options or convertible securities existed at December 31, 1997 and 1996. Dividends may only be declared and paid from the accumulated rested earnings (after deductions of certain legally required reserve allocations) shown in COPE's annual Swiss statutory unconsolidated financial statements presented in Swiss Francs ("SFr"). Any dividends to be declared will be payable in Swiss francs. Such amounts differ from the related earnings as a result of the adjustments made to present the Consolidated Financial Statements in accordance with U.S. GAAP. As of December 31, 1997, COPE's Swiss statutory unconsolidated financial statements reflected SFr558,532 ($382,818) of retained earnings available for distribution. LIQUIDITY AND FINANCIAL CONDITION COPE's historical working capital requirements include the financing of all costs involved in the design, implementation and sale of information systems. COPE generally contracts to deliver information systems, including all hardware and software, on a turn-key basis pursuant to fixed price contracts. Consistent with industry practice, COPE generally is not able to obtain significant up-front or progress payments on its contracts providing for the design, implementation and sale of information systems. Accordingly, COPE is generally required to finance its clients' contracts, including the purchase of the hardware and software components of the information systems. COPE's principal sources of working capital are cash from operations and an operating line of credit from Credit Suisse in the maximum amount of -32- SFr2,000,000. COPE has been successful to date in securing extensions on its line with Credit Suisse for purposes of financing certain client contracts as needed, however there can be no assurance that COPE will continue to do so in the future. As of December 31, 1997, COPE had working capital of approximately $1,071,807, compared to a working capital position of $676,779 as of December 31, 1996. The increase in working capital over the prior year end was due, in part, to a significant customer advance received on a contract in progress at year end. Additionally, inventories increased by approximately 41% at December 31, 1997 over that of the prior year. The increase is attributable to the increase in the volume of business and represents hardware and software products received which are undergoing testing and configuration for contracts in progress. While COPE believes that its available working capital, including presently available credit lines, is adequate for its current working capital requirements, the company believes that it will require significant additional working capital in order to finance continued growth. In 1995, COPE began to offer consulting services and information systems in Germany and its plan of operations for the next three years are based on the company's continued development of the market for information systems in Germany. Upon the close of the Reorganization, the Company intends to seek additional debt or equity capital through additional bank lines of credit or the sale of shares of the equity securities of the Company. At the present time, there are no firm commitments or agreements on the part of any party at this time to provide any additional debt or equity capital to the Company and there can be no assurance that the Company will be able to obtain additional capital. The Company's inability to obtain additional debt or equity capital on a timely basis will, in all likelihood, materially adversely affect the future growth of the operations and revenues of COPE. YEAR 2000 ISSUE COPE has developed a plan to modify its information technology to recognize the Year 2000 and has begun converting its critical data processing systems. COPE is mainly using internal resources to address this issue, and believes that these resources will be sufficient to to mitigate any potentially significant problems. Related expenses are charged to income as incurred. FORWARD LOOKING STATEMENTS The foregoing discussion contains certain forward-looking statements that are based on COPE's beliefs as well as assumptions made by and information currently available to COPE. When used herein and elsewhere in this in this Proxy Statement, the words "believe," "expect," "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions, including (i) the intense competition in COPE's industry; (ii) future developments and changes in prevailing technologies and standards in the data storage industry; (iii) availability of additional capital as required; and (iv) general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. The Company and COPE caution shareholders of the Company and potential investors not to place undue reliance on any such forward-looking statements, all of which speak only as of the date made. -33- MANAGEMENT OF THE COMPANY FOLLOWING THE REORGANIZATION DIRECTORS AND EXECUTIVE OFFICERS OF COPE All of the existing officers of COPE will become officers of the Company following the Reorganization. Pursuant to Proposal No. 4, it is also expected that all of the directors of the Company immediately following the consummation of the Reorganization will be those persons designated by the COPE Shareholders. The following table sets forth the directors and executive officers of COPE after the Reorganization. Their prior positions with COPE or Harrier are discussed below: Upon the Closing of the Reorganization, the directors and executive officers of COPE will be: NAME AGE POSITION ---- --- -------- Adrian Knapp 35 Chairman of the Board and Executive Vice President Stephan Isenschmid 37 President, Chief Executive Officer and Director Markus Bernhard 33 Chief Financial Officer Peter Koch 72 Director Markus Stalder 45 Director Kevin DeVito 37 Director IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES Other than those officers set forth above, no other persons are expected to make significant contributions to the business of COPE. FAMILY RELATIONSHIPS There are no family relationships between any of the above-mentioned officers or directors. BUSINESS EXPERIENCE Biographical information with respect to these individuals follows: ADRIAN KNAPP, co-founded COPE in 1991 and has served as Chairman of the Board since inception. STEPHAN ISENSCHMID, co-founded COPE in 1991 and has served as President, Chief Executive Officer and a director since inception. MARKUS BERNHARD has served as Chief Financial Officer of COPE since September 1997. From 1991 to September 1997, Mr. Bernhard was employed as a public accountant at Revisuisse Price Waterhouse. PETER KOCH has served as General Manager of acp GmbH, a German-based distributor of computer products and peripherals since 1991. MARKUS STALDER has been a partner in the law firm, Stalder & Murer, located in Sihlbrugg, Switzerland, since 1991. Stalder & Murer has acted as general counsel to COPE since 1991. -34- KEVIN DEVITO has served as President and a director of Harrier, Inc. since June 1992. From 1990 to June 1992, Mr. DeVito served as the marketing manager for the Company. NEW NASDAQ SYMBOL After the Reorganization, shares of the Company's common stock will be traded on NASDAQ under the symbol "COPE." CERTAIN INFORMATION CONCERNING CAPITAL STOCK OF THE COMPANY AND COPE MARKET PRICE OF HARRIER COMMON STOCK The Company's common stock currently is traded on the OTC Bulletin Board under the symbol "HARE". The following table sets forth, for the respective periods indicated, the high and low bid prices for the common stock of the Company. The quotations presented reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions in the common stock of the Company. Quarter Ended High Bid Low Bid ------------- -------- ------- June 30, 1996 $0.220 $0.220 September 30, 1996 $0.188 $0.125 December 31, 1996 $0.062 $0.062 March 31, 1997 $0.160 $0.130 June 30, 1997 $0.065 $0.065 September 30, 1997 $0.15 $0.06 December 31, 1997 $0.15 $0.07 March 31, 1998 $0.24 $0.06 On April 3, 1998, the bid and ask prices as quoted on the OTC Bulletin Board for the Company's Common Stock were $.10 and $.12 respectively. On April 3, 1998, there were approximately 382 holders of record of the 15,317,923 shares of the Company's Common Stock issued and outstanding. Since its inception, no dividends have been paid on the Company's common stock, and the Company does not presently have retained earnings to permit the payment of a dividend. Although there are no restrictions on the declaration or payment of dividends set forth in the Articles of Incorporation of the Company or any other agreement with stockholders, the Company expects future earnings will be utilized for the development of its business. Therefore, the Company does not anticipate paying dividends on its common stock in the foreseeable future. COPE COMMON STOCK There has never been a public market for shares of COPE Common Stock. DIVIDENDS - COPE COPE has not paid any dividends on COPE Common Stock since inception. -35- ANNUAL REPORT Company's annual report to stockholders for the fiscal year ended June 30, 1997 was mailed to stockholders on or about April __, 1998. STOCKHOLDER PROPOSALS Any stockholder proposal intended to be presented at the next Annual Meeting of Stockholders and included in the Company's proxy statement must be received by the Company's Secretary not later than February 1, 1999. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, or portions of documents, are incorporated herein by reference: The Company's Annual Report on Form 10-KSB/A for the year ended June 30, 1997; and The Company's Quarterly Report on Form 10-QSB/A for the quarter ended December 31, 1997. Also incorporated by reference herein are all reports filed by the Company under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Proxy Statement and prior to the date of the Annual Meeting. Any statement contained in the information or a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Proxy Statement to the extent that any statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement. -36- INDEX TO FINANCIAL STATEMENTS Page ---- HARRIER, INC. Independent Auditors' Report . . . . . . . . . . . . . . . . . . 40 Consolidated Balance Sheet as of June 30, 1997 . . . . . . . . . 41 Consolidated Statements of Operations for the Years Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 42 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended June 30, 1997 and 1996 . . . . . 43 Consolidated Statements of Cash Flows for the Years Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 44 Notes to Consolidated Financial Statements . . . . . . . . . . . 47 Unaudited Consolidated Balance Sheet as of December 31, 1997 . . 64 Unaudited Consolidated Statements of Operations for the Six Months Ended December 31, 1997 and 1996. . . . . . . . . . . . 65 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1997 and 1996. . . . . . . . . . . . 66 Notes to Unaudited Financial Statements . . . . . . . . . . . . 67 COPE AG Independent Auditors' Report . . . . . . . . . . . . . . . . . . 68 Consolidated Balance Sheets as of December 31, 1997 and 1996 . . 69 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . 70 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . 71 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . 72 Notes to Audited Consolidated Financial Statements . . . . . . . 73 PRO FORMA COMBINED FINANCIAL INFORMATION Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . 88 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1997. . . . . . . . 89 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 92 39 RAIMONDO, PETTIT & GLASSMAN A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS CERTIFIED PUBLIC ACCOUNTANTS UNION BANK TOWER, SUITE 1250 21515 HAWTHORNE BOULEVARD Telephone (910) 540-5990 TORRANCE, CALIFORNIA 90503 Fax (310) 543-3066 INDEPENDENT AUDITORS' REPORT To the Board of Directors Harrier, Inc. Hermosa Beach, California We have audited the accompanying consolidated balance sheet of Harrier, Inc. as of June 30, 1997, and the related statement of operations, changes in stockholders' equity (deficit), and cash flows for the two years in the period then ended. The financial statements are the responsibility of the Company'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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harrier, Inc. as of June 30, 1997 and the consolidated results of their operations and their cash flows for the two years in the period then ended, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has negative working capital and a stockholders' deficit. The Company's continued existence depends primarily on its ability to complete a merger with an operational entity or to raise additional debt or equity financing to develop and market its biochemical technologies. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. RAIMONDO, PETTIT & GLASSMAN Torrance, California August 29, 1997, except for the last sentence of the penultimate paragraph of Note 4 and Note 16, as to which the date is October 31, 1997 40 HARRIER, INC. CONSOLIDATED BALANCE SHEET JUNE 30, 1997 - ----------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 58,237 Amounts receivable from related parties 160,478 Grant contribution receivable 20,000 Other current assets 24,344 - ----------------------------------------------------------------------------- Total current assets 263,059 - ----------------------------------------------------------------------------- Property and equipment, net 30,636 Intangible assets, net 31,787 - ----------------------------------------------------------------------------- TOTAL ASSETS $ 325,482 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIT LIABILITIES Accounts payable and accrued expenses $ 609,322 Convertible note payable to related party 564,500 Deferred grant revenue 20,000 Dividend payable to Glycosyn preferred stockholders 4,450 - ----------------------------------------------------------------------------- Total current liabilities 1,198,272 - ----------------------------------------------------------------------------- MINORITY INTERESTS 89,000 COMMITMENTS AND CONTINGENCY (NOTES 10, 11, 13 AND 14) - ----------------------------------------------------------------------------- STOCKHOLDERS' DEFICIT Preferred stock, $.001 par value - authorized, 5,000,000 shares; issued and outstanding, 0 shares - Common stock, $.001 par value - authorized, 30,000,000 shares; issued and outstanding, 13,968,394 shares 13,968 Additional paid-in capital 15,323,740 Accumulated deficit (16,261,789) Cumulative translation adjustment (37,709) - ----------------------------------------------------------------------------- Total stockholders' deficit (961,790) - ----------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 325,482 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 41 HARRIER, INC. CONSOLIDATED STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 1997 1996 - ------------------------------------------------------------------------------- SALES $ 48,069 $ 66,687 COST OF SALES 50,383 123,724 - ------------------------------------------------------------------------------- GROSS PROFIT (LOSS) (2,314) (57,037) - ------------------------------------------------------------------------------- EXPENSES Selling, general and administrative 274,142 587,410 Salaries and related expenses 311,249 418,445 Research and development 62,100 176,773 Amortization and depreciation 40,489 23,895 - ------------------------------------------------------------------------------- TOTAL EXPENSES 687,980 1,206,523 - ------------------------------------------------------------------------------- LOSS FROM OPERATIONS (690,294) (1,263,560) - ------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) National Cancer Institute grant 80,000 - Interest income (expense), net (57,638) 5,905 Write off of intangible assets - (134,923) Loss on sale of marketable securities (15,716) - Miscellaneous income 6,600 78,500 Amortization and equity in loss of joint venture - (50,108) Loss on sale of investment in joint venture (7,448) - Unrealized loss on investment - (8,775) - ------------------------------------------------------------------------------- TOTAL OTHER INCOME (EXPENSE) 5,798 (109,401) - ------------------------------------------------------------------------------- LOSS BEFORE PROVISION FOR INCOME TAXES (684,496) (1,372,961) PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,740 (47,405) - ------------------------------------------------------------------------------- NET LOSS $ (686,236) $ (1,325,556) - ------------------------------------------------------------------------------- NET LOSS PER COMMON SHARE $ (.06) $ (0.11) - ------------------------------------------------------------------------------- AVERAGE COMMON SHARES OUTSTANDING 12,468,780 11,783,861 - ------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 42 HARRIER, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - ------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 - ------------------------------------------------------------------------------- Total Additional Cumulative Stockholders Common Stock Paid-in Accumulated Translation Equity Capital Deficit Adjustment (Deficit) Shares Amount Balances, July 1, 1995 11,684,266 $11,684 $15,013,577 $(14,245,547) $(37,652) $742,062 Issuance of common stock net of $15,750 in offering costs 284,128 284 212,163 212,447 Net loss for the year ended June 30, 1996 (1,325,556) (1,325,556) Translation adjustment as of June 30, 1996 (57) (57) Balances, July 1, 1996 11,968,394 11,968 15,225,740 (15,571,103) (37,709) (371,104) Issuance of common stock 2,000,000 2,000 98,000 100,000 Dividend payable to Glycosyn preferred stockholders (4,450) (4,450) Net loss for the year ended June 30, 1997 (686,236) (686,236) Translation adjustment as of June 30, 1997 - - Balances, June 30, 1997 13,968,394 $13,968 $15,323,740 $(16,261,789) $(37,709) $(961,790) ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 43 HARRIER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(686,236) $(1,325,556) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 40,489 23,895 Provision for uncollectible amounts - (16,014) Write-down of inventory - 74,767 Write-off of uncollectible amounts - 61,811 Miscellaneous income recognized upon sale of inventory - (66,000) Amortization and equity in loss of joint venture - 50,108 Loss on sale of investment in joint venture 7,448 - Unrealized loss on investment - 8,775 Loss on sale of marketable securities 15,716 - Write-off of intangible assets - 134,979 Services received and loan fees in exchange for stock - 55,100 Accrued interest 60,833 3,667 Increase (decrease) resulting from changes in: Accounts receivable, trade - (3,541) Amount receivable from sale of assets - 17,000 Receivables from joint research and development agreement - 34,680 Receivables from related parties 45,070 29,539 Inventory 40,411 61,446 Other current assets (11,522) 1,280 Accounts payable and accrued expenses (7,102) 62,908 Net cash used in operating activities (494,893) (791,156) 44 HARRIER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 1997 1996 CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property and equipment $ (54,849) (7,841) Proceeds from sale of marketable securities 46,159 - Intangible assets expenditure - (5,339) Collection on note receivable for sale of equity in joint venture and inventory 20,000 - Collection of receivable from related party 5,798 - Net cash provided by (used in) investing activities 17,108 (13,180) CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Issuance of common stock 100,000 157,290 Issuance of preferred stock of subsidiary 89,000 - Borrowings from related party - 500,000 Net cash provided by financing activities 189,000 657,290 Net decrease in cash (288,785) (147,046) Cash and cash equivalents, beginning of year 347,022 494,068 Cash and cash equivalents, end of year $ 58,237 $ 347,022 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ - $ - Taxes 1,740 1,711 Non-cash investing and financing activities: Stock issued for services and loan fees $ - $ 55,100 Note receivable in consideration for sale of equity in joint venture and inventory $ 175,000 $ - SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 45 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Harrier, Inc. was organized under the laws of the State of Utah on October 8, 1985 and later was reincorporated in the State of Delaware. The Company is engaged in research, development and marketing of a number of products which are at various stages of development. Until June 30, 1997, the Company was selling the Bioptron Lamp (cosmetic and medical uses) in the Western Hemisphere. Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is organized as a majority-owned subsidiary under the laws of the State of Delaware. Glycosyn holds all of the Company's biomedical technologies rights and obligations. The biomedical technologies are currently in the pre-clinical development phase. In December 1996, Glycosyn was awarded a $100,000 grant from the National Cancer Institute to cover certain research costs. The accompanying consolidated financial statements include the accounts of Harrier, Inc., its wholly-owned subsidiary, Harrier GmbH, a German corporation, and Glycosyn (collectively, the "Company"). All significant intercompany transactions and balances have been eliminated. The Company has incurred losses from inception of $16,261,789 including $686,236 during the year ended June 30, 1997 and with the sale of its investment in Derma Ray (see Note 3) has no on-going revenue generating operations. As disclosed in Note 3, in September 1992 the Company disposed of its European operations that had accounted, to that date, for a significant part of its business. The Company continues to concentrate on developing its biochemical technologies and is in the process of seeking a merger partner (see Note 16 - Subsequent Event - COPE Reorganization). However, there can be no assurance that the Company will successfully acquire or merge with an operational entity, or develop its biochemical technologies. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. Financing for activities to date has previously come from the sale of Company assets, sale of the Company's stock and short-term borrowings. To continue the development of its biochemical technologies beyond the pre-clinical testing phase, the Company will require substantially more capital than it currently has. There can be no assurance as to the Company's ability to fully develop and license its biochemical technologies and other products. The consolidated financial statements do not include any adjustments that might result from the outcome of the above-mentioned uncertainties. 46 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES MANAGEMENT'S ESTIMATES The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVENTORY Inventory, consisting of finished goods, is recorded at the lower of cost or market, with cost being determined using the first-in, first-out ("FIFO") method. All inventory was sold at June 30, 1997 (see Note 3). PROPERTY AND EQUIPMENT Property and equipment, including significant improvements thereto, are stated at cost and are depreciated using the straight-line method over an estimated useful life of 5 years. Maintenance and repairs are charged to expense as incurred. INVESTMENTS Investments represent up to their disposition (see note 6) equity securities and a 50% interest in an unconsolidated joint venture. The equity securities were classified as available-for-sale and stated at their fair market value based on quoted market prices. The Company had no majority control over the joint venture's operations or management; accordingly, the investment in joint venture was accounted for under the equity method. The Company's share of the income or loss of the joint venture was recognized as an increase or decrease, respectively, in the Company's investment. Profits and losses on transactions with the joint venture were eliminated to the extent of the Company's ownership interest. The Company assesses whether there has been a permanent impairment in the value of its investments by considering factors such as quoted market prices, estimated joint venture revenues and prospects and other economic factors. 47 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets include patents, product rights and technology costs. All patent, product rights and technology costs are capitalized and amortized over ten years using the straight-line method. The Company assesses whether there has been a permanent impairment in the value of intangible assets by considering factors such as expected future product revenues, anticipated product demand and prospects and other economic factors. INCOME TAXES The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and the tax basis of assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. FOREIGN CURRENCY TRANSLATION Financial statements of foreign operations where the local currency is the functional currency are translated using exchange rates in effect at period-end for assets and liabilities and average exchange rates during the period for results of operations. Related translation adjustments are reported as a separate component of stockholders' equity. The Company has determined that the local currency of its international subsidiary is the functional currency. Gains and losses from foreign currency transactions are generally included in operations. All references to foreign currencies in the following notes to the financial statements have been translated using June 30 year-end exchange rates, except where otherwise noted. There were no foreign currency transaction gains or losses included in the statements of operations for the year ended June 30, 1997 and 1996. LOSS PER COMMON SHARE The computation of loss per common share is based on the weighted average number of shares of common stock outstanding during the periods presented. Common stock equivalents have not been included in the loss per common share because their effect would be anti-dilutive. 48 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS The Company considers short-term investments which have maturities of three months or less at the date of acquisitions to be cash equivalents. From time to time, the Company's cash on deposit with banks exceeds the $100,000 federally-insured limit. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of financial instruments included in current assets and liabilities approximates fair value because of the short maturity of these items. CONCENTRATION OF CREDIT RISK For the years ended June 30, 1997 and 1996, the Company earned approximately 100% and 32%, respectively, of its operating revenues from one customer. ISSUANCE OF STOCK FOR SERVICES Shares of the Company's common stock issued for services are recorded in accordance with Accounting Principles Board Opinion No. 16, "Business Combinations" and Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), at the fair market value of the stock issued or the fair market value of the services provided, whichever value is the more clearly evident. STOCK COMPENSATION PLAN SFAS 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company elected to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. 49 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING DEVELOPMENT In February, 1997, the FASB adopted Statement No. 128, "Earnings Per Share." This new standard requires dual presentation of basic and diluted earnings per share ("EPS") on the face of the statement of income and requires reconciliation of the numerators and the denominators of the basic and diluted EPS calculations. This statement will be effective for the second quarter of the Company's 1998 fiscal year. The Company has not yet quantified what effect, if any, the adoption of SFAS 128 will have on its earnings per share of common stock. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in an entity's financial statements. This statement requires an entity to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of a statement of financial position. This pronouncement is effective for fiscal years beginning after December 15, 1997 and the Company expects to adopt the provision of this statement in fiscal year 1998. Management does not expect this statement to significantly impact the Company's financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." This statement requires public enterprises to report financial and descriptive information about its reportable operating segments and establishes standards for related disclosures about product and services, geographic areas, and major customers. This pronouncement is effective for fiscal years beginning after December 15, 1997 and the Company expects to adopt the provisions of this statement in fiscal year 1998. Management does not expect this statement to significantly impact the Company's financial statements. 3. SALE OF ASSETS SALE OF BIOPTRON A.G. Bioptron A.G. ("Bioptron") was the Company's former subsidiary which developed, manufactured and marketed the Bioptron Lamps. In September 1992, the Company sold Bioptron's assets and its share capital to an unaffiliated entity. The aggregate consideration was of approximately $3,000,000 plus a 4% royalty on future Bioptron Lamp sales. The Company retained exclusive rights to market and distribute the Bioptron Lamps in the Western Hemisphere (the "Territory") and is marketing and selling Bioptron Lamps directly and through distributors in the Territory. 3. SALE OF ASSETS (CONTINUED) On June 30, 1994, the Company amended the Bioptron sales agreement and received 5,000 B1 lamps and twenty B2 lamps as payment in full, in lieu of future Bioptron royalty payments. Accordingly, the Company recorded $60,000, which was net of a $290,000 allowance, as inventory at June 30, 1994 related to this transaction. Based on sales activity during fiscal year 1996, a $66,000 reduction of such allowance was recognized as miscellaneous income in 1996. The allowance was reversed in connection with the sale of inventory to Derma Ray. 50 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- SALE OF BIOPTRON LAMP INVENTORY AND REDEMPTION OF DERMA RAY'S INTEREST During the year ended June 30, 1995, the Company acquired a 50% interest in Derma Ray International Limited Liability Corporation ("Derma Ray"). Derma Ray was formed to market, distribute and sell various health and cosmetic products, including the Company's Bioptron Lamps. On June 30, 1997, the Company sold its Bioptron Lamp inventory to Derma Ray and agreed to the redemption of its entire membership in consideration for $175,000 (see Note 4). 4. AMOUNTS RECEIVABLE FROM RELATED PARTIES The following is a summary of amounts receivable from related parties as of June 30, 1997: Receivable from Derma Ray $ 155,000 Employee receivable 5,478 ------------ $ 160,478 ------------ On June 30, 1997, the Company sold its entire inventory and its interest in Derma Ray in consideration for $40,000 in cash (of which $20,000 was paid before year end) and a note receivable of $135,000. The note is non-interest bearing and is due no later than June 30, 1998, provided that Derma Ray shall apply all of the gross proceeds of the sale of the Bioptron Lamps towards the reimbursement of the note and use its best efforts to repay the note principal as soon as possible. As of October 31, 1997, $75,000 had been repaid on the note. The employee receivable amount was applied after year-end against compensation due to the employee. 51 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5. PROPERTY AND EQUIPMENT The following is a summary of property and equipment at cost, less accumulated depreciation as of June 30, 1997: Equipment $ 66,062 Furniture and fixtures 17,645 Leasehold improvements 32,585 ----------- $ 116,292 Accumulated depreciation 85,656 ----------- $ 30,636 ----------- Total depreciation expense for the years ended June 30, 1997 and 1996 was $36,766 and $4,396, respectively. 6. INVESTMENTS During fiscal 1997, the Company sold $61,875 in marketable securities for $46,159, recognizing a $15,716 loss included in the consolidated statement of operations. During the year ended June 30, 1996, the Company recorded a $8,775 valuation allowance to reduce its investment in equity securities to its estimated net realizable value based on quoted market prices. Since management believed that the decline in market price is permanent, the Company recorded the change in valuation allowance in the 1996 consolidated statement of operations. During the year ended June 30, 1995, the Company acquired a 50% interest in Derma Ray for a $200,000 initial capital contribution. The excess of the Company's contribution over its equity in the joint venture's net assets amounted to $50,000 and is amortized over five years. During the years ended June 30, 1997 and 1996, Derma Ray incurred gains (losses) of $16,803 and ($68,550), of which $8,402 and ($34,275) were allocated to the Company and recorded in the 1997 and 1996 consolidated statements of operations. As disclosed in Note 3, the Company sold the Bioptron lamps and its membership interest to Derma Ray and recorded a net loss of $7,448. The last $5,000 payment under the note will be deemed to have redeemed the Company's entire membership interest. 52 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. INVESTMENTS (CONTINUED) Condensed financial information (unaudited) relating to Derma Ray is as follows: CONDENSED BALANCE SHEET JUNE 30, 1997 ----------------------- ------------- ASSETS Cash $ 36,578 Inventories and other current assets 213,704 Investment in Naturade, Inc.'s common stock 150,000 ------------ $ 400,282 ------------ LIABILITIES AND EQUITY Payable to Harrier, Inc. $ 155,000 Equity 245,282 ------------ $ 400,282 ------------ CONDENSED INCOME STATEMENT -------------------------- Year Ended June 30 ------------------------- 1997 1996 Sales $ 163,520 $ 1,814 ------------ ---------- Gross Profit $ 44,933 $ (1,211) ------------ ---------- Expenses $ 28,130 $ 67,339 ------------ ---------- Net Gain (Loss) $ 16,803 $ (68,550) ------------ ---------- 53 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. INTANGIBLE ASSETS The following is a summary of intangible assets, net as of June 30, 1997: Patents and patent applications $ 37,219 Accumulated amortization 5,432 ----------- $ 31,787 ----------- ----------- The Company has filed individual and continuation-in-part patents on its modified glycosylation compounds and related chemical processes since January 1990. In September, 1992, the Company filed new patent applications covering significant additions to its glycosylation process. These patents, which have subsequently been issued, are co-owned by the Company and the University of Michigan because they involve technologies developed pursuant to research agreements entered into with the University. Compensation to the University for future revenues generated from technology related to the co-owned patents has not been determined at this time. Total amortization charged to operations was $3,723 and $19,499 for the years ended June 30, 1997 and 1996, respectively. During fiscal year 1996, the Company abandoned and wrote off all intangibles relating to a product under development designated as the "Calorimeter." The net write off of $134,923 is included in the fiscal 1996 Consolidated Statement of Operations. 8. CONVERTIBLE NOTE PAYABLE TO RELATED PARTY On June 9, 1996, the Company entered into a $500,000 loan agreement with an entity affiliated with the President and the Chairman of the Board. The loan bears interest at 12% and is due on June 4, 1998. At the Company's option, the loan's principal and interest can be repaid using the Company's stock (or its subsidiary's stock, if publicly traded), valued at 75% of the average price 90 days preceding the repayment date. In consideration for entering into the agreement Glycosyn issued 52,100 shares, with a value representative of 1% of loan fees. 54 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 9. MINORITY INTEREST At June 30, 1997, the Company owns approximately 94% of Glycosyn. During the year ended 1997, Glycosyn sold 44,500 shares of its Series A preferred stock for $89,000 to a related party. The stock has a liquidation preference of $2 per share ($89,000), is convertible into shares of Glycosyn common stock and entitles the holder to a dividend of 12% of the liquidation preference, payable quarterly in common stock of Glycosyn. The preferred stock has been presented in the accompanying financial statements as minority interest. 10. COMMON STOCK AND STOCK OPTION PLAN During the year ended June 30, 1997, the Company issued 2,000,000 shares of common stock (total value $100,000) and 2,000,000 common stock purchase warrants (see Note 11) to existing share-holders and related parties. During the year ended June 30, 1996, the Company issued 284,128 shares for a total of $212,447 ($157,290 in cash), net of approximately $15,750 in stock offering costs, and including 290,000 common stock purchase warrants (see Note 11). During the year ended June 30, 1990, the Company adopted an incentive stock option and award plan. A total of 1,500,000 shares of common stock may be issued under the plan and have been reserved by the Board of Directors for that purpose. Options may be granted to Directors, Officers, employees and other individuals at terms and exercise prices to be determined by the Board of Directors. The following is a summary of all common stock options outstanding: JUNE 30, 1997 JUNE 30, 1996 --------------------------- ----------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE Outstanding, beginning of year 813,996 2.72 1,052,998 3.19 Granted - - - - Canceled-expired (363,996) 5.46 (239,002) 4.78 Exercised - - - - -------- -------- Outstanding, end of year 450,000 .50 813,996 2.72 -------- -------- -------- -------- Exercisable, end of year 450,000 .50 813,996 2.72 -------- -------- -------- -------- 55 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 10. COMMON STOCK AND STOCK OPTION PLAN (CONTINUED) In 1997 and 1996, there were no options granted by the Company. Each option allows the holder to purchase one share of common stock at the exercise price at any time after the vesting date, which has been immediate, and before the expiration date. Options outstanding at June 30, 1997 are summarized as follows: WEIGHTED AVERAGE NUMBER REMAINING NUMBER OF SHARES EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE -------------- ----------- ----------------- ---------------- $ .50 450,000 11 Months 450,000 56 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 11. WARRANTS Convertibility rights, weighted average exercise price and remaining contractual life attached to the common stock purchase warrants issued in connection with public and private stock offerings are as follows: 1994 1995 1996 1997 SERIES C AND D WARRANTS WARRANTS WARRANTS WARRANTS --------------- ------------------- ------------------- ------------------ ----------------- SHARES WAEP* SHARES WAEP SHARES WAEP SHARES WAEP SHARES WAEP ------- ------ --------- -------- --------- ------ -------- ------ -------- ------ Outstanding 426,480 $ .85 352,250 $ 1.08 1,964,367 $ .70 290,000 $ .44 - - beginning of the year Issued - - - - - - - - - - Cancelled- (426,480) .85 (352,250) 1.08 (1,964,367) .70 - - - - expired Exercised - - - - - - - - - - Outstanding & 0 - 0 - 0 - 290,000 .44 2,000,000 .13 exercisable - end of year Weighted average 7 mos. 33 mos remaining contractual life Range of exercise - - - - - - $ .22 - .70 $ .13 - price *Weighted average exercise price 57 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 12. INCOME TAXES The components of the provision for income taxes (tax benefit) are as follows: FOR THE YEARS ENDED JUNE 30, ---------------------------- 1997 1996 -------- -------- Current: State $ 1,740 $ 800 Foreign - (48,205) -------- -------- 1,740 (47,405) Deferred - - -------- -------- $ 1,740 $(47,405) -------- -------- -------- -------- The reconciliation of the effective tax rates and U.S. statutory tax rates are as follows: FOR THE YEARS ENDED JUNE 30, ----------------------------- 1997 1996 --------- -------- Tax benefit at statutory rate (34%) (34%) Foreign tax - (3%) Change in valuation allowance 34% 34% ----- --- 0% 3% At June 30, 1997, the Company has net operating loss carryforwards, for income tax reporting purposes, of approximately $11,783,000 and $3,180,000 available to offset future federal and California taxable income, respectively. The federal carryforwards expire in 2009 and the California carryforwards expire in 1998. The utilization of net operating loss carryforwards may be limited under the provisions of Internal Revenue Code Section 382. At June 30, 1997, the Company had available tax credit carryforwards comprised of federal and state research and experimentation credits of $57,467 and $8,007, respectively. The California federal and state research and experimentation credit carryforwards expire in 2009 and 1998, respectively. At June 30, 1997, the Company had approximately $3.9 million in capital loss carryforwards which are available until 1998 to offset capital gains for federal and California state tax purposes. Since it is not determinable at this time whether such credits will ever be realizable, they are not considered as deferred tax assets. 58 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 12. INCOME TAXES (CONTINUED) The components of the net deferred tax asset and (liability) are as follows: FOR THE YEARS ENDED JUNE 30, ---------------------------- 1997 1996 ---------- ---------- State taxes $ 354 $ 340 Royalty income 0 51,202 Net operating loss carryforward 4,383,141 4,059,141 Patents 1,738 (118) Credits 65,474 67,140 Other 28,270 33,601 ---------- ---------- Subtotal 4,478,977 4,211,306 Valuation allowance (4,478,977) (4,211,306) Total $ - $ - ---------- ---------- ---------- ---------- 13. COMMITMENTS OPERATING LEASES The Company leases office space under operating leases that expire throughout fiscal year 1999. Total rent expense amounted to $46,390 and $41,597 for the years ended June 30, 1997 and 1996, respectively. Minimum future rental payments under the noncancelable operating leases are as follows as of June 30: 1998 $29,310 1999 3,760 ------- $33,070 ------- ------- 59 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 14. CONTINGENCY - JOINT RESEARCH AND DEVELOPMENT AGREEMENT On May 1, 1993, the Company completed a drug development agreement with American Diagnostica, Inc. ("ADI"), a private company located in Greenwich, Connecticut. Pursuant to the agreement, ADI was required to develop and test synthetic drugs using the Company's proprietary glycosylation processes. ADI has committed to pay the Company $5,000 per month over 100 months and expend at least $800,000 for research and development. In June 1995, ADI informed the Company that it was unable to fund any further obligations pursuant to the research and development portion of the drug development agreement. The Company then terminated the related agreement for, among other things, anticipatory repudiation. On August 24, 1995, ADI filed a civil action for money damages alleging wrongful termination, substantial compliance under the agreement, and that the Company was indebted to the plaintiff for damages in an unspecified amount, plus punitive damages, attorney fees and interest. In December, 1995, Harrier moved the court for an order compelling the plaintiff to submit the dispute to arbitration. In September, 1996, the court granted the Company's motion, staying all proceedings pending the conclusion of mandatory arbitration in California, as the parties provided in the research and development agreement. As of the date of the financial statements, no arbitration proceeding has been commenced by either party. Management believes that it has meritorious defenses to all of ADI's claims and that the claims are substantially without merit. Under current circumstances, no determination can be made as to the ultimate outcome of the litigation or as to the necessity for any provision in the accompanying consolidated financial statements for any liability that may result from an unfavorable outcome. 15. NATIONAL CANCER INSTITUTE GRANT In December 1996, Glycosyn was awarded a $100,000 grant to finance research on its medical technologies. $80,000 was received and expensed before year end, whereas the remaining $20,000 was received and expensed after year end. 60 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 16. SUBSEQUENT EVENTS STOCK ISSUANCE Subsequent to year end the Company issued 1,200,000 shares at $.10 per share (total value $120,000) and common stock purchase warrants allowing the holders to purchase 900,000 shares of the Company's common stock at $.13 a share through September, 2000. COPE REORGANIZATION On October 30, 1997, the Company entered into a Securities Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a Swiss stock corporate engaged in the business of providing high volume information management consulting, services and solutions to Swiss, German and Austrian companies. Pursuant to the Reorganization Agreement, the shareholders of COPE will become the controlling stockholders of the Company and COPE will become a wholly-owned subsidiary of the Company (referred to herein as the "COPE Reorganization"). In connection with the proposed COPE Reorganization, the Company has terminated its Bioptron operations and entered into an agreement with a related party, New Capital Investment Fund ("NCIF"), to sell 2,850,000 shares of the $.001 par value common stock ("Glycosyn Common Stock") of its subsidiary, Glycosyn, to NCIF in exchange for NCIF's cancellation of $590,000 of indebtedness owed by the Company (referred to herein as the "Glycosyn Recapitalization"). See "Glycosyn Recapitalization" below. The Reorganization Agreement provides that immediately prior to the closing ("Closing") of the COPE Reorganization, the Company shall effect the Glycosyn Recapitalization and file an amendment (the "Amendment") to the Company's Certificate of Incorporation to: (i) change the name of the Company to COPE Inc.; and (ii) reverse split the outstanding shares of Common Stock of the Company on a one for 45 basis. At the Closing, and subject to the satisfaction of the foregoing, the Company will issue 2,862,000 shares (post-split) of the Company's $.001 par value common stock ("Harrier Common Stock"), representing 89.2% of the issued and outstanding shares of Harrier Common Stock after giving effect to the Closing, in exchange for the COPE shareholders' transfer of all of the issued and outstanding capital shares of COPE to the Company. The Closing shall occur when: (i) the Company's stockholders shall have adopted and approved the Reorganization Agreement and the Glycosyn Recapitalization; (ii) the Amendment shall have been filed with the Secretary of State of Delaware; and (iii) all conditions to closing of the Reorganization Agreement shall have been met and all closing documents shall have been delivered. The Reorganization Agreement contains typical representations and warranties of the parties for transactions of this type. The consummation of the COPE Reorganization and the Glycosyn Recapitalization are subject to the approval of the stockholders of the Company. An annual meeting of the stockholders of the Company has been tentatively scheduled for January 1998, at which the COPE Reorganization and the Glycosyn Recapitalization will be submitted for shareholder approval. Additional information concerning COPE, the COPE Reorganization and the Glycosyn Recapitalization will be included in a Proxy Statement to be filed with the Securities and Exchange Commission and distributed to shareholders of the Company. GLYCOSYN RECAPITALIZATION The Glycosyn Recapitalization is part of a broader recapitalization of the Company in connection with the COPE Reorganization. The Company has structured the following series of transactions (referred to herein as the "Glycosyn Recapitalization"): Concurrent with the close of the COPE Reorganization, Harrier will transfer all of its assets and liabilities to Glycosyn. In connection therewith, the principal creditors of Harrier, except NCIF which is presently owed $590,000 by Harrier, will be requested to agree to release Harrier of any further liability for their claims. Concurrent with the close of the COPE Reorganization, Harrier will sell to NCIF 2,850,000 shares of its 61 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 5,000,000 Glycosyn Common Stock shares in consideration of NCIF's agreement to cancel the $590,000 of indebtedness owed by Harrier. NCIF is an investment fund in which Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin DeVito, are retained as managers. Upon the sale of the 2,850,000 shares of Glycosyn Common stock, Harrier's interest in Glycosyn will be reduced to approximately 40% and, as a result, the financial condition and results of operations of Glycosyn will not be consolidated with the Company's subsequent to the close of the COPE Reorganization. The consummation of the Glycosyn Recapitalization is subject to the approval of the stockholders of the Company and the receipt of an opinion of the fairness of the terms of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock. An annual meeting of the stockholders of the Company has tentatively been scheduled for (March 12, 1998) at which the Glycosyn Recapitalization will be submitted for shareholder approval. 62 HARRIER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 16. SUBSEQUENT EVENTS (CONTINUED) NEW CONCEPT THERAPEUTICS INVESTMENT ACQUISITION Glycosyn acquired a minority interest in New Concept Therapeutics, Inc., a North Carolina corporation ("NCT"), pursuant to an agreement ("NCT Agreement") dated October 30, 1997. NCT was formed on July 1, 1997 for the purpose of manufacturing and distributing boron-containing pharmaceutical products for the treatment of cancer. NCT's products are used in connection with boron neutron capture therapy, an experimental cancer treatment currently under clinical trials in the United States and Europe. NCT is a start-up business with nominal assets and results of operations as of October 30, 1997. Pursuant to the NCT Agreement, Glycosyn has agreed to purchase 23 shares of the common stock of NCT, representing approximately 19% of the issued and outstanding common shares of NCT, in consideration of Glycosyn's delivery of an unsecured promissory note in the original principal amount of $250,000. The Note bears interest at the rate of 10% per annum. Glycosyn is required to pay a minimum of $50,000 of the principal amount under the Note on or before December 31, 1997, with the payment of the remaining $200,000 balance, and all accrued interest thereon on or before April 30, 1998. Glycosyn has also agreed to use its best efforts to prepay the principal amount under the Note as soon as practicable. As of October 31, 1997, Glycosyn has advanced $43,000 to NCT under the Note. As additional consideration for its receipt of the Note, NCT and its principal shareholders have granted Glycosyn an option ("NCT Option") to purchase all 123 of the issued and outstanding shares of NCT at an exercise price of $7,500 per share for a two year period. The NCT Option is exercisable by Glycosyn subject to its payment of the entire principal amount of the Note. The NCT Option provides that Glycosyn may pay for the underlying NCT common shares by Glycosyn's delivery of 1,225,000 shares of Glycosyn common stock (at a rate of $0.30 per Glycosyn share). The Company's intention with regard to NCT is to assist it in the development and marketing of its boron-containing pharmaceutical products and, in the event of the commercial success of NCT's products, acquire all of the issued and outstanding common shares of NCT. 63 HARRIER, INC. CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS December 31, 1997 ------------ CURRENT ASSETS: Cash and cash equivalents $ 13,962 Amount receivable from related party 55,000 Grant contribution receivable 0 Other current assets 12,479 ------------ Total Current Assets 81,441 ------------ PROPERTY AND EQUIPMENT, net 23,197 ------------ Intangible assets 29,926 Investment in New Concept Therapeutics 250,000 Total Assets $ 384,564 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 589,807 Convertible note payable to related party 595,167 Note payable to New Concept Therapeutics 200,000 Deferred grant revenue 0 Dividend payable to Glycosyn preferred stockholders 4,450 Total Current Liabilities 1,389,424 ------------ Minority Interests 89,000 STOCKHOLDERS' EQUITY: Common Stock 15,298 Additional paid-in capital 15,461,910 Accumulated deficit (16,533,357) Cumulative translation adjustment Total Stockholders' Equity (1,093,860) ------------ Total liabilities and stockholders' equity $ 384,564 ------------ ------------ 64 HARRIER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Six Months Ended December 31, -------------------------- 1997 1996 ----------- ---------- SALES $ 0 $ 12,668 COST OF SALES 0 11,674 ----------- ---------- GROSS PROFIT 0 994 ----------- ---------- EXPENSES: General and administrative 129,441 84,122 Amortization and depreciation 9,299 6,231 Salaries and related expenses 101,419 210,299 Research and development 20,000 5,000 ----------- ---------- Total expenses 260,159 305,652 ----------- ---------- LOSS FROM OPERATIONS (260,159) (304,658) ----------- ---------- OTHER INCOME (EXPENSE): Grant income 20,000 0 Loss on investment 0 (15,716) Interest income/(expense) (30,611) (27,935) ----------- ---------- Total Other Income (Expense) (10,611) (43,651) ----------- ---------- Income (loss) from continuing operations before provision for income taxes (270,770) (348,309) Provision for income taxes (800) (1,100) ----------- ---------- Net income (loss) (271,570) (349,409) ----------- ---------- Net income (loss) per common share $ (0.02) $ (0.03) ----------- ---------- The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 65 HARRIER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS DECEMBER 31, ---------------------------------- 1997 1996 ---- ---- Cash Flows from (used for) Operating Activities: Net Loss $(271,570) $(349,409) ----------- ----------- Adjustments to reconcile net income to net cash used by operating activities: Depreciation and Amortization 9,299 6,231 Accrued interest 30,666 30,666 Changes in assets and liabilities: Related party receivable 105,478 19,547 Inventory 0 11,751 Other current assets 11,865 3,683 Accounts payable and accrued expenses (19,511) (13,807) ----------- ----------- Total Adjustments 137,797 58,071 ----------- ----------- Cash Used by Operating Activities $(133,773) $(291,338) ----------- ----------- Cash Flows from Investing Activities: Payment for property and equipment 0 (57,404) Increase in investment (250,000) 0 Decrease in investment 0 61,875 ----------- ----------- Cash used by Investing Activities $(250,000) $ 4,471 ----------- ----------- Cash Flows from Financing Activities: Note payable to New Concept Therapeutics 200,000 0 Issuance of stock 139,500 0 ----------- ----------- Net Cash Flows Provided by Financing Activities $ 339,500 0 ----------- ----------- Effect of Exchange Rate Changes on Cash $ (2) $ 0 ----------- ----------- Net Increase in Cash and Cash Equivalents (44,275) (286,867) Cash and Cash Equivalents at Beginning of Period 58,237 347,022 ----------- ----------- Cash and Cash Equivalents at End of Period $ 13,962 $ 60,155 ----------- ----------- ----------- ----------- The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 66 HARRIER, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1 - CONDENSED FINANCIAL STATEMENTS The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 31, 1997, and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 1997 audited financial statements. The results of operations for the six months ended December 31, 1997 are not necessarily indicative of the operating results for the full year. NOTE 2 - CONVERTIBLE NOTE PAYABLE TO RELATED PARTY On June 9, 1996, the Company entered into a $500,000 loan agreement with an entity affiliated with the President and the Chairman of the Board. The loan bears interest of 12% and is due on June 4, 1998. At the Company's option, the loan's principal and interest can be repaid using the Company's stock (or its subsidiary's stock, if publicly traded), valued at 75% of the average price 90 days preceding the repayment date. In consideration for entering into the agreement, Glycosyn Pharmaceuticals, Inc. issued 52,100 shares valued to represent 1% in loan fees. NOTE 3 - SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION On October 30, 1997, the Company entered into a Securities Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a Swiss sock corporation engaged in the business of providing high volume information management consulting services and solutions to Swiss, German and Austrian industries. Pursuant to the Reorganization Agreement, the SHAREHOLDERS of COPE will become the controlling stockholders of the Company and COPE will become a wholly-owned subsidiary of the Company. (See ITEM 2) NOTE 4 - ISSUANCE OF COMMON STOCK 67 During the six months ended December 31, 1997 the Company issued approximately 130,000 shares of Harrier, Inc. common stock as payment in lieu of cash in the settlement of a lawsuit. In addition, the Company issued 1,200,000 shares of Harrier, Inc. common stock at $0.10 per shares and 900,000 common stock warrants. The shares were sold pursuant to Regulation S under the Securities Act of 1933 to seven European investors. There was no underwriter involved in the transaction. The proceeds from the sale of the shares will be used for working capital and administrative and professional fees associated with a prospective merger. 68 NOTE 5 - SUBSEQUENT EVENTS Subsequent to December 31, 1997 the Company issued 400,000 shares of Harrier, Inc common stock at $0.10 per share. The shares were sold pursuant to Regulation S under the Securities Act of 1933. There was no underwriter involved in the transaction. The proceeds from the sale of the shares will be used for working capital and administrative and professional fees associated with a prospective merger. 69 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of COPE AG Rotkreuz, Switzerland We have audited the accompanying consolidated balance sheets of Cope AG and subsidiaries as of December 31, 1996 and 1997 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of COPE AG and subsidiaries at December 31, 1996 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with accounting principles generally accepted in the United States of America. ATAG ERNST & YOUNG AG Kevin McCabe Edgar Christen Chartered Accountant Swiss Certified Accountant Zug, Switzerland March 23, 1998 COPE AG CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 (AMOUNTS IN US DOLLARS) ASSETS 1997 1996 ---------- --------- CURRENT ASSETS Cash 678,936 262,047 Trade accounts receivable Note 3 3,622,485 2,226,227 Inventories 1,383,191 981,941 Other current assets Note 4 318,182 171,647 ---------- ---------- TOTAL CURRENT ASSETS 6,002,794 3,641,862 ---------- ---------- Property and equipment, net Note 5 570,475 267,627 Loans receivable Note 6 394,406 0 Goodwill, net of amortization of 0 9,736 USD 1,757 and USD 1,217, respectively Intangible assets 125,631 51,064 Deferred income taxes assets Note 12 98,606 0 ---------- ---------- 1,189,118 328,427 ---------- ---------- TOTAL ASSETS 7,191,912 3,970,289 ---------- ---------- ---------- ---------- See notes to the consolidated financial statements COPE AG CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 (AMOUNTS IN US DOLLARS) LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 ---------- --------- CURRENT LIABILITIES Short-term borrowings Note 7 661,982 172,066 Trade accounts payable 2,779,683 2,116,029 Amounts due to related parties Note 13 97,984 190,048 Customer advances 704,915 0 Other payables Note 9 130,658 175,651 Accrued other liabilities Note 10 506,416 219,378 Current income taxes 49,349 36,989 Deferred income taxes Note 12 0 54,922 --------- --------- TOTAL CURRENT LIABILITIES 4,930,987 2,965,083 --------- --------- Commitments and contingent liabilities Note 15 Minority interests 0 178 --------- --------- SHAREHOLDERS' EQUITY Share capital: Note 11 80,448 76,336 Common stocks, SFR 100 (USD 75.89) par value: Autorized shares - 1,060 (1996: 1,000) , issued and outstanding shares - 1,060 (1996: 1,000) Legal reserves 44,330 44,330 Additional paid in capital 690,199 0 Cumulative translation adjustment (145,731) (74,420) Retained earnings 1,591,679 958,782 --------- --------- TOTAL SHAREHOLDERS' EQUITY 2,260,925 1,005,028 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,191,912 3,970,289 --------- --------- --------- --------- See notes to the consolidated financial statements COPE AG CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS DECEMBER 31, 1997, 1996 AND 1995 (AMOUNTS IN US DOLLARS) 1997 1996 1995 ----------- ---------- ---------- REVENUES Sales solution 16,605,175 11,834,701 10,500,211 Sales services 1,310,996 680,422 520,145 ---------- ---------- ---------- 17,916,171 12,515,123 11,020,356 ---------- ---------- ---------- OPERATING EXPENSES Cost of sales 12,817,738 8,829,711 8,126,940 Selling, general and administrative expenses 4,205,093 2,394,693 1,870,905 Consultancy expenses 131,723 540,347 688,236 Depreciation and amortization 220,363 262,155 195,320 Impairment of intangible assets 0 77,990 0 ---------- ---------- ---------- 17,374,917 12,104,896 10,881,401 ---------- ---------- ---------- OPERATING INCOME 541,254 410,227 138,955 OTHER INCOME (EXPENSE): Interest expense (76,197) (63,940) (64,341) Interest income 704 2,791 12,071 Other expense (270) (3,069) (5,908) Foreign exchange gain 38,716 12,408 10,085 ---------- ---------- ---------- (37,047) (51,810) (48,093) ---------- ---------- ---------- INCOME BEFORE INCOME TAX AND MINORITY INTERESTS 504,207 358,417 90,862 Minority interests 0 (696) 6,918 Current income tax expense (benefit) 34,076 42,775 (16,725) Deferred income tax (benefit) expense (162,766) 515 7,147 ---------- ---------- ---------- (128,690) 42,594 (2,660) NET INCOME 632,897 315,823 88,202 ---------- ---------- ---------- ---------- ---------- ---------- BASIC AND DILUTED EARNINGS PER SHARE 623.54 315.82 88.20 WEIGHTED AVERAGE NUMBER OF SHARES 1,015 1,000 1,000 See notes to the consolidated financial statements COPE AG CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DECEMBER 31, 1997, 1996 AND 1995 (AMOUNTS IN US DOLLARS) ADDITIONAL CUMULATIVE TOTAL NUMBER SHARE LEGAL PAID IN RETAINED TRANSLATION SHAREHOLDERS' OF SHARES CAPITAL RESERVES CAPITAL EARNINGS ADJUSTMENT EQUITY ---------- --------- -------- ---------- ----------- ----------- ------------- Balance at January 1, 1995 1,000 76,336 763 0 598,324 4,503 679,926 Exchange rate changes for the year 90,149 90,149 Net income 88,202 88,202 -------- -------- ------- ------- -------- -------- --------- Balance at December 31, 1995 1,000 76,336 763 0 686,526 94,652 858,277 Contributions to legal reserves 43,567 (43,567) 0 Exchange rate changes for the year (169,072) (169,072) Net income 315,823 315,823 -------- -------- ------- ------- -------- -------- --------- Balance at December 31, 1996 1,000 76,336 44,330 0 958,782 (74,420) 1,005,028 Issuance of share capital 60 4,112 690,199 694,311 Exchange rate changes for the year (71,311) (71,311) Net income 632,897 632,897 -------- -------- ------- ------- -------- -------- --------- Balance at December 31, 1997 1,060 80,448 44,330 690,199 1,591,679 (145,731) 2,260,925 -------- -------- ------- ------- -------- -------- --------- -------- -------- ------- ------- -------- -------- --------- See notes to the consolidated financial statements COPE AG CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (AMOUNTS IN US DOLLARS) 1997 1996 1995 --------- ---------- --------- CASH FLOW PROVIDED BY OPERATING ACTIVITIES Net income 632,897 315,823 88,202 ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 220,363 262,155 195,320 Deferred income taxes (162,766) 515 (7,147) Gains/Losses on disposal of fixed assets 0 2,697 0 Minority interest share in negative equity absorbed by parent 0 (696) (6,918) Inventory reserves (13,883) 13,883 0 EFFECTS OF CHANGES IN ASSETS AND LIABILITIES Accounts receivable (1,530,889) (872,870) 49,683 Inventories (474,609) (190,722) (107,290) Other current assets (226,326) (73,195) (19,820) Accounts payable 736,413 1,269,952 (180,836) Customer advances 704,915 0 0 Accruals 404,820 (68,910) 194,152 ---------- ---------- ---------- Total adjustments to net income (341,962) 342,809 117,144 ---------- ---------- ---------- NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 290,935 658,632 205,346 CASH FLOW USED IN INVESTING ACTIVITIES Purchase of property and equipment (585,881) (229,210) (273,412) Loans receivable (394,406) 0 0 Movements of intangible asssets (80,138) (6,998) (136,425) Proceeds from sale of property and equipment 4,653 9,778 10,871 Change in cash resulting from disposal of investment 0 (3,865) 0 ---------- ---------- ---------- NET CASH FLOW USED IN INVESTING ACTIVITIES (1,055,772) (230,295) (398,966) CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES Capital stock issued (share capital & additional paid in capital) 694,312 0 0 Increase/Decrease of short term borrowings 502,770 (293,085) (320,401) ---------- ---------- ---------- NET CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES 1,197,082 (293,085) (320,401) Effect of exchange rate changes on cash (15,356) (34,477) 65,478 NET DECREASE/INCREASE OF CASH AND CASH EQUIVALENTS 416,889 100,775 (448,543) Cash and cash equivalents at beginning of the period 262,047 161,272 609,815 ---------- ---------- ---------- Cash and cash equivalents at end of the period 678,936 262,047 161,272 ---------- ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL CASH FLOW DISCLOSURE Interest paid 76,197 63,940 64,341 Income taxes paid 22,643 13,525 7,122 COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997, 1996 AND 1995 NOTE 1- BASIS OF PRESENTATION The accompanying consolidated financial statements present the consolidated operations COPE AG and its majority owned subsidiaries (collectively hereinafter referred to as "COPE" or the "Company"). The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). In accordance with Swiss law, the Company is required to prepare its financial statements in accordance with the Swiss Code of Obligations ("Swiss GAAP"). Swiss GAAP varies in certain respects from U.S. GAAP. Accordingly, the Company has recorded certain adjustments in order to present the accompanying financial statements in accordance with U.S. GAAP. Certain amounts from prior years have been reclassified to conform to the current year presentation. NATURE OF OPERATIONS COPE provides comprehensive management solutions relating to information storage and retrieval subsystems including consulting, project implementation and hardware installation. The Company services its customers through its main office located in Rotkreuz, Switzerland, and its subsidiary company offices located in Taufkirchen, Germany and Vienna, Austria. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of COPE AG and its majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. SIGNIFICANT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. REVENUE RECOGNITION Consulting revenue is recognized at the time of delivery of the service. Revenue from the sale of hardware and related software is recognized at the time of acceptance by the customer, generally after installation at a customer's site. Revenue from certain customer-installable products is recognized at the time of shipment. Costs associated with post-installation warranty obligations are estimated and accrued at the time of revenue recognition. End users of equipment sold by the Company generally contract with the Company for equipment service and software support, which includes normal maintenance and repair or replacement of product components. Revenue from these service and support contracts is recognized ratably over the term of the contract and the cost associated with these activities is expensed as incurred. CUSTOMER ADVANCES Customer advances include advance payments on contracts in progress at year end. These amounts will be recognized as income after acceptance by the customers. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the weighted average cost method. Inventories consist of finished products held for resale. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 PROPERTY AND EQUIPMENT Property and equipment are carried at cost and are generally depreciated using the straight-line method over the estimated useful lives of the assets. The useful lives utilized for this purpose are: Machinery and equipment......................................3 - 5 years Leasehold improvements....................10 years or shorter lease term GOODWILL Goodwill represents the cost in excess of net assets acquired on business acquisitions and is amortized on a straight-line basis over 10 years. The Company periodically evaluates the realizability of the carrying value of goodwill by assessing current and future trading performance and cash flows. At December 31, 1997, the Company disposed of one subsidiary. Goodwill of USD 1,757 has been written off. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets and certain identifiable intangibles to be held and used or disposed of for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Where the undiscounted cash flows is less than the carrying amount of the asset, the asset is written down to its net realizable value measured on the basis of discounted expected cash flows. INTANGIBLE ASSETS Intangible assets are carried at cost and are generally depreciated using the straight-line method over the estimated useful lives of the assets. The useful lives utilized for this purpose are: License ........................................ 3 - 5 years Startup cost for business operations ................5 years FOREIGN CURRENCIES The financial statements of the Company's foreign operations are measured in the currency in which that entity primarily conducts its business (the functional currency). The functional currency of all the Company's foreign operations is the applicable local currency. When translating foreign functional currency and the parent Company financial statements into U.S. Dollars ("USD"), year-end exchange rates are applied to asset and liability accounts, while average annual rates are applied to income statement accounts. Adjustments resulting from this process are recorded in a separate component of shareholders' equity. Foreign currency transaction gains and losses resulting from the settlement of amounts receivable or payable denominated in a currency other than the functional currency are credited or charged to income. A certain amount of the Company's purchases are settled in U.S. Dollars and the Company enters into forward exchange contracts for the purchase of U.S. Dollars. Since there are no firm purchase commitments, such exchange contracts do not qualify as a hedge under FAS 52 and, accordingly, the gains or losses are included in income in the period in which the exchange rates change. INCOME TAXES The Company accounts for certain income and expense items differently for financial reporting purposes than for tax purposes. Provisions for deferred taxes are made in recognition of such temporary differences, following the requirements of Financial Accounting Standards Board No. 109 "Accounting for Income Taxes". COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share". Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. The adoption of this statement did not impact the Company. Basic and diluted earnings per share are calculated by dividing net income by the weighted average shares outstanding as the Company had no outstanding preferred shares or stock options plans as of December 31, 1997, 1996 and 1995. Weighted average shares used in the calculations are 1,015 shares for 1997, 1,000 shares for 1996 and 1995. NOTE 3 - TRADE ACCOUNTS RECEIVABLE Trade accounts receivable consist of the following: Years ended December 31, ------------------------------ 1997 1996 ----------- ----------- (USD) Trade accounts receivable 3,622,485 2,264,746 Allowance for doubtful accounts 0 (38,519) ----------- ----------- Total trade accounts receivable, net 3,622,485 2,226,227 ----------- ----------- ----------- ----------- A summary of activity in the allowance for doubtful accounts is as follows: Years ended December 31, ------------------------------ 1997 1996 ----------- ----------- (USD) Balance at beginning of year (38,519) (42,109) Provisions 0 (2,115) Accounts written off 0 5,705 Reverse the allowance for doubtful accounts 38,519 0 ----------- ----------- Balance at end of year 0 (38,519) ----------- ----------- ----------- ----------- In the year 1996 the Company has written off USD 5,705 (1997: USD 0) for doubtful accounts. Therefore the Company does not consider an allowance for doubtful accounts to be necessary for it's business operations. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 4 - OTHER CURRENT ASSETS Other current assets consist of the following: Years ended December 31, ------------------------------ 1997 1996 ----------- --------- (USD) Deferred costs 138,821 0 Prepaid expenses 87,505 85,237 Deposits (maturity more than 3 months) 20,893 10,155 Other 70,963 76,255 ----------- --------- Total other receivables 318,182 171,647 ----------- --------- ----------- --------- NOTE 5 - PROPERTY AND EQUIPMENT Property, plant and equipment consist of the following: Years ended December 31, ------------------------------ 1997 1996 ----------- --------- (USD) Leasehold improvements 35,347 35,347 Machinery and equipment 1,138,946 715,735 Accumulated depreciation (603,818) (483,455) ----------- --------- Total property and equipment, net 570,475 267,627 ----------- --------- ----------- --------- NOTE 6 - LOANS Loans receivable bear interest at market rates ranging from 5 % to 7.5 %. The Company will receive repayment of approximately USD 348,000 of loans receivable through royalty payment streams. Approximately USD 39,000 of the balance is due from a related party. See note 13 for further discussion. NOTE 7 - SHORT-TERM BORROWINGS As of December 31, 1997, the Company has established short-term overdraft facilities under which the Company and its subsidiaries could borrow up to USD 1,370,800. Amounts drawn down on the facilities are due on demand and collateralized by account receivable balances and by life insurance policies on the major shareholders, Mr. A. Knapp and Mr. S. Isenschmid, for USD 342,700 each. Amounts outstanding at December 31, 1997 total USD 661,982. As of December 31, 1997, the Company had available approximately USD 709,000 under these facilities. The weighted average interest rate on amounts outstanding 1997 was 7.0 %. Interest paid for the years ending December 31, 1997, 1996 and 1995, amounted to USD 76,197, USD 63,940 and USD 64,341, respectively. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 8 - PENSION PLANS Substantially all of the Company's employees are covered by government pension plans administered by the respective countries' governmental authorities. The employees' contributions are based on a percentage of gross salary. The Company generally contributes an amount equal to that contributed by the employees. The Company provides no additional pension or post-retirement benefits. The cost of these plans charged to operations for the years ended December 31, 1997, 1996 and 1995 was USD 26,904, USD 29,180 and USD 13,258 respectively. NOTE 9 - OTHER PAYABLES Other payables consist of the following: Years ended December 31, ------------------------------- 1997 1996 ----------- ----------- (USD) Social security 24,091 57,378 Value Added Taxes 87,691 0 Other 18,876 118,273 ----------- ----------- 130,658 175,651 ----------- ----------- ----------- ----------- NOTE 10 - ACCRUED OTHER LIABILITIES Accrued other liabilities consist of the following: Years ended December 31, ------------------------------- 1997 1996 ----------- ----------- (USD) Warranty reserve 18,849 96,296 Accrual for unbilled supplies 194,213 0 Legal, professional and other fees 67,190 48,148 Personnel and social security expenses 139,945 68,519 Other 86,219 6,415 ----------- ----------- 506,416 219,378 ----------- ----------- ----------- ----------- Product warranty is provided by the original equipment manufacturer. The Company only warrants the services provided. Therefore, the warranty reserve is adjusted to the expected amount of warranty cost based on the ISO (9001) Management reviews. NOTE 11 - SHAREHOLDERS' EQUITY During the quarter ended September 30, 1997 the Company issued 60 shares at a nominal value of SFR 100 each. The shares were sold to 29 investors. The proceeds of the sale of the shares was used as additional working capital. The nominal value of the shares issued totaling USD 4,112 was recorded as share capital and the remainder of the proceeds amounting to USD 690,199 was recorded as additional paid in capital. After this increase the share capital of the Company consists of 1,060 issued and outstanding shares, with a nominal value of SFR 100 (USD 75.89) each. Each ordinary share is entitled to one vote. No stock options or convertible securities existed during 1997, 1996 and 1995. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED) Dividends may only be declared and paid from the accumulated retained earnings (after deduction of certain legally required reserve allocations) shown in the Company's annual Swiss statutory unconsolidated financial statements presented in Swiss Francs ("SFR"). Any dividends to be declared will be payable in Swiss Francs. Such amounts differ from the retained earnings as a result of the adjustments made to present the Consolidated Financial Statements in accordance with U.S. GAAP. As of December 31, 1997, the Company's Swiss statutory unconsolidated financial statements reflected SFR 558,532 (USD 382,818) of retained earnings available for distribution. NOTE 12 - INCOME TAXES Pretax income (loss) for the years ended December 31, 1997, 1996 and 1995 was taxed in the following jurisdictions: Years ended December 31, ----------------------------------------- 1997 1996 1995 ---------- ----------- ----------- (USD) Switzerland 994,782 401,093 43,766 Foreign (490,575) (42,676) 47,096 ---------- ----------- ----------- 504,207 358,417 90,862 ---------- ----------- ----------- ---------- ----------- ----------- Components of the provision for income taxes are as follows: Years ended December 31, ----------------------------------------- 1997 1996 1995 ---------- ----------- ----------- (USD) Current: Switzerland 34,688 36,453 19,098 Foreign (612) 6,322 (2,373) ---------- ----------- ----------- Total current 34,076 42,775 16,725 ---------- ----------- ----------- Deferred: Switzerland 39,074 515 (7,147) Foreign (201,840) 0 0 ---------- ----------- ----------- Total deferred (162,766) 515 (7,147) ---------- ----------- ----------- (128,690) 43,290 9,578 ---------- ----------- ----------- ---------- ----------- ----------- COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 12 - INCOME TAXES (CONTINUED) The Company has net deferred tax assets (tax liabilities) as of December 31, 1997 and 1996 as follows: Years ended December 31, ------------------------ 1997 1996 ----------- --------- (USD) Deferred tax assets: Net operating losses 309,652 131,110 Valuation allowance 0 0 ----------- --------- 309,652 131,110 ----------- --------- Deferred tax liabilities: Inventories 94,629 102,270 Trade accounts receivable 22,207 12,800 Deductible provisions eliminated on consolidation 65,150 67,486 Warranty accrual 18,814 0 Other 10,246 3,476 ----------- --------- 211,046 186,032 ----------- --------- Net deferred tax assets /liabilities 98,606 (54,922) ----------- --------- ----------- --------- Management believes it is more likely than not that all deferred tax assets are realizable. Under Swiss corporate tax law, taxes on income are composed of State and Federal taxes. The Company's composite corporate tax rates were 18% or 8.5% (Basic change in Swiss tax law in 1998) for the year ended December 31, 1997. For the years 1996 and 1995 the corporate tax rate was 18%. A reconciliation of income taxes determined using the statutory rate to actual income taxes provided is as follows: Years ended December 31, ---------------------------------------- 1997 1996 1995 --------- --------- ---------- (USD) Income tax expense at statutory rates 25,670 64,515 16,355 Varying foreign tax rates (157,280) (35,226) 59,972 Utilization of foreign NOLs 0 0 (55,292) Permanent differences: Goodwill 0 6,997 (8,869) Other 2,920 7,004 (2,588) --------- --------- ---------- (128,690) 43,290 9,578 --------- --------- ---------- --------- --------- ---------- At December 31, 1997, the Company had German and Austrian net loss carryforwards for tax purposes of approximately USD 710,279 respectively. Under applicable German tax law, the net operating losses can be carried forward for an indefinite period of time. A current change in the Austrian tax law permits tax losses arising since 1991 to be carried forward for an indefinite period of time and can be offset against income arising in fiscal years 1998 and thereafter. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 13 - RELATED PARTY TRANSACTIONS Mr. Knapp, Chairman, has been an employee of the Company since July 1, 1997. For the six months from July to December 1997 he earned a salary of USD 53,461. In the past his services were charged to the Company by Adrian Knapp Consulting, a sole proprietorship owned by Mr. Knapp. For the year ended December 31, 1996, consultancy expenses include USD 168,067 in respect of services rendered by Mr. Knapp. Mr. Knapp is also a major shareholder holding approximately 45.3% of the issued share capital. Mr. Isenschmid, Chief Executive Officer, has been an employee of the Company since July 1, 1997. For the six months from July to December 1997 he earned a salary of USD 53,461. In the past his services were charged to the Company by STI Marketing- und Organisationsberatung, a sole proprietorship owned by Mr. Isenschmid. For the year ended December 31, 1996 consultancy expenses include USD 166,589 in respect of services rendered by Mr. Isenschmid. Mr. Isenschmid is also a major shareholder holding approximately 45.3% of the issued share capital. Mr. Schallhorn, the General Manager of COPE GmbH, Germany, is a salaried employee of COPE GmbH. Mr. Schallhorn, is also the sole proprietor of UPM Unternehmensberatung und Vertrieb ("UPM"). In terms of an agreement dated March 6, 1995, between COPE GmbH and UPM, UPM invoices COPE GmbH in respect of marketing and distribution consulting services rendered by Mr. Schallhorn. The amount to be charged by UPM is dependent upon the achievement of certain performance targets. For the years ended December 31, 1997, 1996 and 1995, consultancy expenses include USD 88,894 and USD 70,888 ,respectively, for consulting services rendered by Mr. Schallhorn. As of December 31, 1997 a loan amount of USD 38,954 was owed by Mr. Schallhorn. This loan bears interest at 7.5 % and is reported under loans as described in note 6. At December 1, 1997, the Company disposed of its investment in Xpert Inc., located in Chicago, Illinois, to Messrs. Knapp and Isenschmid jointly. Xpert Inc. had no significant operations or balance sheet accounts in 1997 or 1996. Messrs. Knapp and Isenschmid acquired Xpert Inc. by taking over the amount owed to the Company of USD 30,432 (SFR 44,400) . No cash was received in respect of disposal. Payables due to the main shareholders were reduced by SFR 44,400. As at December 31, 1997 and 1996, the financial statements included the following liabilities due to related parties: Years ended December 31, ------------------------ 1997 1996 ---------- ---------- (USD) A. Knapp 118,874 148,635 S. Isenschmid (20,890) 41,413 ---------- ---------- 97,984 190,048 ---------- ---------- ---------- ---------- COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) DECEMBER 31, 1997, 1996 AND 1995 NOTE 14 - LEASES The Company has operating leases primarily for office space and equipment which expire at various dates through the year 2000 with, in some instances, renewal privileges. Certain leases provide for escalation of the rentals based on the increase in the consumer price index and base mortgage rates. Operating lease costs are charged to income as incurred. The minimum annual rental commitments under long-term non-cancelable operating leases as of December 31, 1997, were as follows: 1997 -------- (USD) 1998 88,947 1999 71,894 2000 9,011 -------- Total future minimum lease payments 169,852 -------- -------- Total rent expense for operating leases was approximately USD 120,484, USD 133,333 and USD 86,440 for the years ended December 31, 1997, 1996 and 1995, respectively. NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES Management is not aware of any matters that could give rise to any liability to the Company that would have a material adverse effect on the Company's business, financial condition or results of operations. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) AS OF DECEMBER 31, 1997, 1996 AND 1995 NOTE 16 - OPERATIONS BY GEOGRAPHICAL AREA The Company operates in one business segment which consists of the provision of comprehensive management solutions relating to information storage and retrieval subsystems including consulting, project implementation and hardware installation. Information concerning the Company's geographic locations is summarized as follows: Years ended December 31, ----------------------------------------- 1997 1996 1995 ----------- ----------- ---------- (USD) NET SALES Switzerland Unaffiliated 11,850,517 10,187,333 9,652,337 Intercompany 182,757 448,179 207,874 ----------- ----------- ---------- 12,033,274 10,635,512 9,860,211 Foreign 6,733,917 3,673,308 2,614,842 ----------- ----------- ---------- Total 18,767,191 14,308,820 12,475,053 Eliminations (851,020) (1,793,697) (1,454,697) ----------- ----------- ---------- Total consolidated 17,916,171 12,515,123 11,020,356 ----------- ----------- ---------- ----------- ----------- ---------- OPERATING INCOME (LOSS) Switzerland 1,067,896 538,978 194,207 Foreign (487,926) (130,046) (82,583) ----------- ----------- ---------- Total consolidated 579,970 408,932 111,624 ----------- ----------- ---------- ----------- ----------- ---------- IDENTIFIABLE ASSETS Switzerland 4,664,271 3,027,571 2,588,947 Foreign 2,527,641 942,718 763,286 ----------- ----------- ---------- Total consolidated 7,191,912 3,970,289 3,352,233 ----------- ----------- ---------- ----------- ----------- ---------- Intercompany sales between Switzerland and other geographic areas are generally at purchase cost. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) AS OF DECEMBER 31, 1997, 1996 AND 1995 NOTE 17 - FINANCIAL INSTRUMENTS FAIR VALUE The carrying value of financial instruments such as cash, accounts receivable, accounts payable approximate their fair value due to the short-term maturities of these instruments. CONCENTRATION OF RISKS Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company's cash is principally denominated in Swiss Francs and is maintained principally with one financial institution in Switzerland. The Company provides credit in its normal course of business to a wide variety of customers and, generally, requires no collateral from its customers. The allowance for non-collection of accounts receivable is based upon management's expectations of collectibility . In the year ended December 31, 1997, sales to the five biggest customers of the Company amounted to 29% of consolidated net sales (1996: 29 %). In both years sales to one of these five customers exceeded 10 %. The Company performs ongoing credit evaluations of its customers. The Company enters into forward exchange contracts to hedge significant USD purchase transactions. As of December 31, 1997, 1996 and 1995, the Company had approximately SFR 2,470,200 (USD 1,750,000), SFR 310,675 (USD 250,000) and SFR 1,143,100 (USD 1,000,000), respectively, of outstanding foreign exchange contracts in which U.S. Dollars were purchased. At December 31, 1997, seven contracts were open which had settlement dates from January to June 1998. At December 31, 1996, one contract was open which had a March 1997 settlement date. The fair values of foreign exchange forward contracts as obtained from the trading department of the Company's bank as per December 31, 1997, 1996 and 1995 were SFR 2,549,945, SFR 334,625 and SFR 1,132,025, respectively NOTE 18 - REORGANIZATION AGREEMENT On October 30, 1997, the Company entered into a Securities Purchase Agreement and Plan of Reorganization (Reorganization Agreement) with Harrier, Inc., a Delaware corporation (referred to as Harrier). Harrier has historically been engaged in the discovery, development and sale of selected products and technologies in the health, fitness and medical markets. Pursuant to the Reorganization Agreement, the shareholders of COPE will become the controlling stockholders of Harrier and COPE will become a wholly-owned subsidiary of Harrier. In connection with the proposed reorganization with Harrier, Harrier will divest of its controlling interest in its subsidiary containing all of Harrier's assets, liabilities and operations. The Reorganization Agreement provides that immediately prior to the closing of the transaction with the Company, Harrier shall change the name of Harrier to COPE Inc. and effect a one for 45 reverse split of the outstanding shares of common stock of Harrier. Then Harrier will issue 2,862,000 shares o a post-split basis of Harrier's $.001 par common stock, representing 89.2 % of the then issued and outstanding shares of Harrier common stock giving effect to the closing. All events and transactions are subject to approval by the stockholders of Harrier at an annual meeting of the stockholders to be held in April 1998. COPE AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) AS OF DECEMBER 31, 1997, 1996 AND 1995 NOTE 19 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR ---------- --------- ------------ ----------- --------- (USD) (USD) (USD) (USD) (USD) 1997 - -------- Revenue 3,093,942 4,750,732 4,746,691 5,324,806 17,916,171 Gross profit 843,312 1,419,509 1,152,346 1,683,266 5,098,433 Net income 12,133 90,686 124,789 405,289 632,897 Earnings per share 12.13 90.69 124.79 382.35 623.54 1996 - -------- Revenue 2,308,829 2,822,970 3,045,785 4,337,539 12,575,123 Gross profit 658,341 907,381 916,450 1,203,240 3,685,412 Net income (133,376) 64,282 124,371 260,546 315,823 Earnings per share (13.38) 64.28 124.37 260.55 315.82 HARRIER, INC. AND COPE A.G. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997, FOR THE YEAR ENDED DECEMBER 31, 1997 (Unaudited) To Reflect the Disposition of a Majority Interest in Glycosyn and the Reverse Acquisition of Cope A.G. ---------------------- The following pro forma condensed consolidated balance sheet (unaudited) as of December 31, 1997, and the pro forma condensed consolidated statements of operations (unaudited), for the year ended December 31, 1997, give effect to the reverse acquisition of all the outstanding shares of Cope A.G. ("Cope") and related recapitalization of Glycosyn, by Harrier, Inc. ("Harrier" or "the Company") which transactions are expected to be completed during the Second quarter of 1998 and accounted for under the purchase method. The pro forma consolidated information is based on the historical financial statements of Harrier and includes assumptions and adjustments set forth in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma unaudited consolidated balance sheet and the pro forma unaudited condensed consolidated statements of operations present the financial position of Harrier and its results of operations as if Harrier had acquired Cope as of January 1, 1997. The pro forma condensed consolidated balance sheets (unaudited) as of December 31, 1997 and the pro forma condensed statements of operations (unaudited) for the year ended December 31, 1997 may not be indicative of the results that actually would have occurred if the acquisition had been in effect on the dates indicated or which may be obtained in the future. These pro forma consolidated financial statements (unaudited) should be read in connection with the Harrier audited financial statements and notes for the year ended June 30, 1997 and the unaudited financial statements for the six and three month periods ended December 31, 1997 included in Harrier's Annual Report on Form 10K-SB and quarterly report on Form 10Q-SB, respectively, and the Cope consolidated financial statements and notes thereto contained elsewhere herein. F-16 HARRIER, INC. AND COPE A.G. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 (UNAUDITED) ------------- Cope AG Harrier, Inc. Proforma Adjustments Pro Forma Glycosyn Consolidated recapitalizat Cope reverse totals ion merger ------------------------- ------------- ------------ ----------- Cash 678,936 13,962 (1,829) (1) 691,069 A/R - Trade 3,622,485 3,622,485 Other receivable 0 A/R - Related Parties 55,000 55,000 Inventory 1,383,191 1,383,191 Other Current Assets 318,182 12,479 330,661 0 ------------------------- ------------- ------------ ----------- Total Current Assets 6,002,794 81,441 (1,829) 0 6,082,405 Property and Equipment, net 570,475 23,197 (19,975) (1) 573,697 Investments, Glycosyn 0 (1) 0 Loans 394,406 394,406 0 Intangible assets, net 125,631 29,926 (29,926) (1) 125,631 Investment in NCT 250,000 (250,000) (1) 0 Deferred income tax asset 98,606 98,606 ------------------------- ------------- ------------ ----------- Total Assets 7,191,912 384,564 (301,730) 0 7,274,745 ------------------------- ------------- ------------ ----------- ------------------------- ------------- ------------ ----------- Short term borrowings 661,982 661,982 A/P & Accrued Expenses 2,779,683 589,807 (512,928) (1) 2,858,582 Notes Payable & other amounts due to related parties 97,984 595,167 (595,167) (1) 97,984 Note payable to NCT 200,000 (200,000) (1) 0 Customer advances 704,915 704,915 Other payables 130,658 130,658 Other accrued liabilities 506,416 506,416 Current income tax payable 49,349 49,349 Dividend payable 4,450 (4,450) (1) 0 0 ------------------------- ------------- ------------ ----------- Total Liabilities 4,930,987 1,389,424 (1,312,545) 0 5,007,866 ------------------------- ------------- ------------ ----------- ------------------------- ------------- ------------ ----------- Minority Interest 89,000 (89,000) (1) 0 ------------------------- ------------- ------------ ----------- Common stock 80,448 15,298 (98,948) (3) (3,202) Legal reserves 44,330 (44,330) (3) 0 Additional Paid In Capital 690,199 15,461,910 (15,480,410) (3) 734,528 44,330 (3) 18,500 (3) Retained Earnings (Accumulated Deficit) 1,591,679 (16,533,357) 1,099,815 (1) 15,471,253 (3) 1,681,284 (37,711) (1) 89,605 (3) Cumulative Transition Adj. (145,731) (37,711) 37,711 (1) (145,731) ------------------------- ------------- ------------ ----------- Stockholders' Equity (Deficit) 2,260,925 (1,093,860) 1,099,815 0 2,266,879 ------------------------- ------------- ------------ ----------- Total Liabilities & S/E (Deficit) 7,191,912 384,564 (301,730) 0 7,274,745 ------------------------- ------------- ------------ ----------- ------------------------- ------------- ------------ ----------- Shares outstanding 15,298,780 After split N/A 339,973 2,862,000 3,201,973 F-17 HARRIER, INC. AND COPE A.G. PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) COPE AG HARRIER, INC. PROFORMA ADJUSTMENTS PRO FORMA CONSOLIDATED GLYCOSYN TOTALS RECAPITOLIZAT COPE REVERSE ION MERGER ----------------------------- ------------- --------------- ------------ Sales 17,918,171 36,401 (2) (36,401) (4) 17,916,171 Cost of Sales 12,817,738 38,709 (38,709) (4) 12,817,738 ----------------------------- ------------- --------------- ------------ Gross Profit 5,098,433 (3,308) 0 3,308 5,098,433 ----------------------------- ------------- --------------- ------------ Expenses: Selling, General & Administrative 4,205,093 319,461 (79,933) (2) (92,200) (4) 4,352,421 Selanters, consulting & Related Expenses 131,723 202,359 (64,712) (2) 269,380 Research & Development 0 77,100 (77,100) 0 Depreciation & Amortization 220,363 43,557 (40,563) (2) 223,357 ----------------------------- ------------- --------------- ------------ Total Expenses 4,557,179 642,487 (262,308) (92,200) 4,845,158 ----------------------------- ------------- --------------- ------------ Gain (Loss) from Operations 541,254 (645,795) 262,308 95,508 253,275 Other Income (Expense): Grant Income 0 100,000 (100,000) (2) 0 Interest expense, net (75,493) (60,314) 60,000 (2) (75,807) Miscellaneous Income (270) 6,600 0 6,330 Equity in Loss of Joint Venture (7,448) 0 (7,448) Foreign exchange gain or loss 38,716 0 0 38,716 ----------------------------- ------------- --------------- ------------ Total Other Income (Expense) (37,047) 38,838 (40,000) 0 (38,209) ----------------------------- ------------- --------------- ------------ Profit (Loss) Before Income Taxes 504,207 (608,957) 222,308 95,508 215,066 Provision (benefit) for Income Taxes (128,690) 1,440 (220) (2) (127,470) ----------------------------- ------------- --------------- ------------ Net Profit (Loss) 632,897 (608,397) 222,528 95,508 342,536 ----------------------------- ------------- --------------- ------------ Weighted average number of shares: Basic N/A 301,010 2,862,000 (5) 3,163,010 Diluted N/A 301,010 2,911,407 (5) 3,212,417 0 ------------ ------------ Earnings/Loss per share: Basic N/A/ ($2.02) $0.11 ------------ ------------ Diluted N/A/ ($2.02) $0.11 ------------ ------------ F-19 HARRIER, INC. AND COPE A.G. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) ------------- 1. BASIS OF PRESENTATION The pro forma condensed consolidated balance sheet (unaudited) as of December 31, 1997 and the pro forma condensed consolidated statements of operations (unaudited) for the year ended December 31, 1997 reflect the change in year end of Harrier, Inc. to December 31 and the following transactions: COPE REORGANIZATION On October 30, 1997, the Company entered into a Securities Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a Swiss stock corporation. Pursuant to the Reorganization Agreement, the shareholders of COPE will become the controlling stockholders of the Company and COPE will become a wholly-owned subsidiary of the Company (referred to herein as the "COPE Reorganization). In connection with the proposed COPE Reorganization, Harrier has terminated its Bioptron operations and entered into an agreement with a related party, New Capital Investment Fund ("NCIF"), to sell 2,850,000 shares of the $.001 par value common stock ("Glycosyn Common Stock") of its subsidiary, Glycosyn, to NCIF in exchange for NCIF's cancellation of approximately $595,000 of indebtedness owned by the Company (referred to herein as the Glycosyn Recapitalization"). See "Glycosyn Recapitalization" below. The Reorganization Agreement provides that immediately prior to the closing ("Closing") of the COPE Reorganization, the Company shall effect the Glycosyn Recapitalization and file an amendment (the "Amendment") to the Company's Certificate of Incorporation to: (i) change the name of the Company to COPE Inc., and (ii) reverse split the outstanding shares of Common Stock of the Company on a one for 45 basis. At the Closing, and subject to the satisfaction of the foregoing, the Company will issue 2,862,000 shares (post-split) of the Company's $.001 par value common stock ("Harrier Common Stock"), representing approximately 89% of the issued and outstanding shares of Harrier Common Stock after giving effect to the Closing, in exchange for the COPE shareholders' transfer of all of the issued and outstanding capital shares of COPE to the Company. The Closing shall occur when (i) the Company's stockholders shall have adopted and approved the Reorganization Agreement and the Glycosyn Recapitalization; (ii) the Amendment shall have been filed with the Secretary of State of Delaware; and (iii) all conditions to closing of the Reorganization Agreement shall have been met and all closing documents shall have been delivered. F-20 HARRIER, INC. AND COPE A.G. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) ------------- 1. BASIS OF PRESENTATION (CONTINUED) COPE REORGANIZATION (CONTINUED) The consummation of the COPE Reorganization and the Glycosyn Recapitalization the subject to approval by the stockholders of the Company. An annual meeting of the stockholders of the Company has been tentatively scheduled for ________, 1998, at which the COPE Reorganization and the Glycosyn Recapitalization will be submitted for shareholder approval. GLYCOSYN RECAPITALIZATION The Glycosyn Recapitalization is part of a broader recapitalization of the Company in connection with the COPE Reorganization. The Company has structured the following series of transactions (referred to herein as the "Glycosyn Recapitalization"): - Concurrent with the close of the COPE Reorganization, Harrier will transfer all of its assets and liabilities to Glycosyn. In connection therewith, the principal creditors of harrier, except NCIF which is presently owed approximately $595,000 by Harrier, will be requested to agree to release Harrier of any further liability for their claims. - Concurrent with the close of the COPE Reorganization, Harrier will sell to NCIF 2,850,000 shares of 5,000,000 Glycosyn Common Stock shares in consideration of NCIF agreement to cancel the $595,000 of indebtedness owed by Harrier. NCIF is an investment fund in which Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin De Vito, are retained as managers. Upon the sale of the 2,850,000 shares of Glycosyn Common stock, Harrier's interest in Glycosyn will be reduced to approximately 40% and, as a result, the financial condition and results of operations of Glycosyn will not be consolidated with Harrier, Inc.'s subsequent to the close of the COPE Reorganization. The consummation of the Glycosyn Recapitalization is subject to approval by the stockholders of the Company and the receipt of an opinion of the fairness of the terms of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock. An annual meeting of the stockholders of the Com-pany has tentatively been scheduled for ____________, 1998 at which time the Glycosyn Recapitalization will be submitted for shareholder approval. F-21 HARRIER, INC. AND COPE A.G. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) ------------- 1. BASIS OF PRESENTATION (CONTINUED) These pro forma condensed consolidated financial statements (unaudited) represent the consolidated financial position and operations of Harrier and Cope as if the transactions described above had occurred January 1, 1997. 2. DESCRIPTION OF PRO FORMA ADJUSTMENTS (1) GLYCOSYN RECAPITALIZATION This adjustments reflects the assignment of $512,928 in payables to Glycosyn and the deconsolidation of Glycosyn after the sale of 55% of the Company's 95% interest Glycosyn's common stock. The $579,833 in debt to related party will be canceled in consideration for the sale of the majority interest. Because of Glycosyn's negative equity, the Company's basis is nihil and Harrier will record a gain on assignment and disposition of majority interest of $1,099,815. (2) RECOGNITION OF GLYCOSYN'S RECAPITALIZATION IN THE STATEMENT OF OPERATIONS This adjustment reflects the decrease in costs associated with the sale of Harrier's majority interest in Glycosyn, as if the sale had occurred on January 1, 1997. The adjustment also reflects the reversal of interest expense that would not have been incurred had the sale and related debt cancellation occurred on January 1, 1997. Since the Company's basis in Glycosyn would have been nihil, there is no equity in losses of Glycosyn for the period presented. F-22 HARRIER, INC. AND COPE A.G. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) ------------- 2. DESCRIPTION OF PRO FORMA ADJUSTMENTS (CONTINUED) (3) REVERSE MERGER OF COPE A.G. Since the owners of Cope A.G. will remain 89.2% owners of the combined entity after the acquisition, Cope was deemed the accounting acquiror and the acquisition will be accounted for as a reverse merger under the purchase method. Accordingly, from an accounting standpoint, Cope's equity is carried forward as the equity of the combined entity. There will be no step up in Harrier's accounting bases and, as a result, Cope is assumed to have acquried Harrier at Harrier's book value of $89,605 (after Glycosyns recapitalization). This adjustment reflects the elimination of Harrier's equity and accumulated deficit. Minority interests in Harrier are immaterial and have not been reflected for purposes of this pro forma adjustment. 4. NON-RECURRING REVENUES AND EXPENSES Because the disposition of Harrier's bioptron lamp operations, which occurred in June 1997, was a prerequisite for the Cope merger to occur, revenues and expenses relating to the Bioptron lamp operations have been removed in this pro forma adjustment. In addition, approximately $92,200 in outside legal and consulting expenses incurred during the year ended December 31, 1997 are directly related to the acquisition and reorganization transactions described above. These expenses will not be recurring and they were reversed on a pro forma basis. (5) PRO FORMA EARNINGS PER SHARE (EPS) Weighted number of shares reflects the one for forty-five share reverse split to be effected as part of the Cope merger transaction. The 2,862,000 shares of adjustment reflects the issuance of stock in connection with the Cope reverse merger. The EPS has been presented in accordance with statements of Financial Accounting Standard (SFAS) 128, and reflects basic and diluted earnings per share. For diluted EPS, the weighted average number of shares has been adjusted to include all common stock equivalents (for purposes of the pro forma information, all options and warrants are assumed to have an exercise price lower than the fair market value of the stock). Such common stock equivalents are excluded when the inclusion would be antidilutive. F-23 APPENDIX A SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into on October 30, 1997 by and among HARRIER, INC., a Delaware corporation ("Harrier"), COPE AG, a Swiss corporation ("COPE"), and STEPHAN ISENSCHMID ("Isenschmid") and ADRIAN KNAPP ("Knapp") as majority stockholders of COPE (the "Majority Stockholders"). R E C I T A L S A. Harrier has authorized capital stock consisting of 30,000,000 shares of common stock, $.001 par value ("Harrier Common Stock"), and 5,000,000 shares of preferred stock, $.001 par value ("Harrier Preferred Stock"). Harrier has issued and outstanding 15,317,923 shares of Harrier Common Stock and no shares of Harrier Preferred Stock. B. Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is a Delaware corporation with authorized capital stock consisting of 10,000,000 shares of common stock, $.001 par value ("Glycosyn Common Stock"), and 5,000,000 shares of preferred stock, $.001 par value ("Glycosyn Preferred Stock"). Glycosyn has issued and outstanding 5,262,100 shares of Glycosyn Common Stock, of which Harrier owns 5,000,000 shares, and 250,000 shares of Glycosyn Preferred Stock designated as Series A Preferred Stock. C. COPE has share capital of SFr106,000 consisting of 1,060 shares (the "COPE Shares") of SFr100 par value capital stock ("COPE Capital Stock"). D. Prior to the Closing (as defined in Section 1.4), Harrier shall effect a 1 for 45 reverse split ("Reverse Split") of the issued and outstanding shares of Harrier Common Stock. E. Prior to Closing, each stockholder of COPE other than the Majority Stockholders shall execute a subscription agreement substantially in the form of Exhibit B hereto (the "Subscription Agreement") (each such other stockholder a "Subscriber" and all of the Subscribers together with the Majority Stockholders, the "Selling Stockholders"). F. The Selling Stockholders wish to sell the COPE Shares and Harrier wishes to acquire the COPE Shares, at the Closing, in exchange for the transfer to the Selling Stockholders of an aggregate of 2,862,000 shares (post-split) of Harrier Common Stock ("Harrier Shares"), subject to the terms and upon the conditions hereinafter set forth. A G R E E M E N T It is agreed as follows: 1. SECURITIES PURCHASE AND REORGANIZATION. 1.1 AGREEMENT TO EXCHANGE SECURITIES. Subject to the terms and upon the conditions set forth herein, and in the case of the Subscribers, pursuant to the Subscription Agreement, each Selling Stockholder agrees to sell, assign, transfer and deliver to Harrier, and Harrier agrees to purchase from each Selling Stockholder, at the Closing, the COPE Shares owned by the respective Selling Stockholder as set forth on the List of Selling Stockholders, in exchange for the transfer, at the Closing, by Harrier to each Selling Stockholder of a pro rata share of Harrier Shares. A Selling Stockholder's pro rata share of Harrier Shares shall be determined by multiplying the total number of Harrier Shares (I.E., 2,862,000 shares (post-split) of Harrier Common Stock) by a fraction, the numerator of which is the total number of COPE Shares owned by the Selling Stockholder at the Closing and the denominator of which is the total number of COPE Shares issued and outstanding at the Closing. 1.2 INSTRUMENTS OF TRANSFER. (a) COPE SHARES. The Selling Stockholders shall deliver to Harrier at the Closing evidence of the COPE Shares with such endorsements, assignments and other instruments of transfer, in form satisfactory to Harrier and its counsel, in order to effectively vest in Harrier all of the Selling Stockholders' right, title and interest in and to the COPE Shares. From time to time after the Closing, and without further consideration, the Selling Stockholders will execute and deliver such other instruments of transfer and take such other actions as Harrier may reasonably request in order to more effectively transfer to Harrier the securities intended to be transferred hereunder. (b) HARRIER SHARES. Harrier shall deliver to the Selling Stockholders at the Closing original certificates evidencing Harrier Shares, in form and substance satisfactory to COPE and its counsel, in order to effectively vest in the Selling Stockholders all right, title and interest in and to the Harrier Shares. From time to time after the Closing, and without further consideration, Harrier will execute and deliver such other instruments and take such other actions as the Selling Stockholders may reasonably request in order to more effectively issue to them Harrier Shares. 1.3 APPROVAL OF HARRIER STOCKHOLDERS. Harrier will duly call and will promptly hold a meeting of its stockholders for the purpose of approving its acquisition of the COPE Shares on the terms and conditions set forth in this Agreement and in connection therewith will comply fully with the applicable provisions of the Bylaws of Harrier and the Delaware General Corporation Law relating to the calling and holding of a meeting of stockholders for such purpose. In connection with the foregoing, and except as expressly limited by Section 3.9, Harrier will comply fully with the requirements of the Securities Exchange Act of 1934 Act, as amended ("Exchange Act"), and the rules and regulations thereunder with respect to the solicitation of proxies for use at such meeting. 1.4 CLOSING. The closing ("Closing") of the exchange of the COPE Shares and Harrier Shares shall take place at Holiday Inn Crowne Plaza, 300 North Harbor Drive, Redondo Beach, California, at 10:00 a.m., local time, on January 30, 1998, or at such other time and place as may be mutually agreed to in writing by the Selling Stockholders and Harrier ("Closing Date"). 2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each Majority Stockholder severally represents, warrants and covenants to and with Harrier as follows: 2.1 POWER AND AUTHORITY. The Majority Stockholder has all requisite individual power and authority to enter into and to carry out all of the terms of this Agreement and all other documents executed and delivered in connection herewith. All individual action on the part of the Majority Stockholder necessary for the authorization, execution, delivery and performance of this Agreement by the Majority Stockholder has been taken and no further authorization on the part of the Majority Stockholder is required to consummate the transactions provided for in this Agreement. When executed and delivered by the Majority Stockholder, this Agreement shall constitute the valid and legally binding obligation of the Majority Stockholder enforceable in accordance with its terms, subject to the qualification and limitation that the procedural and remedial rights of the other parties to this Agreement may be limited or rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, (ii) legal or equitable principles now or hereafter in effect relating to or affecting the enforcement of rights or remedies generally, or (iii) the availability of equitable remedies. 2.2 OWNERSHIP OF AND TITLE TO SECURITIES. The List of Majority Stockholders set forth on Exhibit A hereto (the "Stockholder List") accurately sets forth the name, residence address and number of shares of COPE Capital Stock owned by the Majority Stockholder. The Majority Stockholder represents that, except for the COPE Shares or as disclosed on the COPE Disclosure Schedule attached as Schedule 1 hereto ("COPE Disclosure Schedule"), there are no warrants, options, subscriptions, calls, or other similar rights of any kind for the issuance or purchase of any securities of COPE held by the Majority Stockholder. The Majority Stockholder represents that the Majority Stockholder has and will transfer to Harrier good and marketable title to the COPE Shares which it owns as set forth on the Stockholder List, free and clear of all pledges, security interests, mortgages, liens, claims, charges, restrictions or encumbrances, except for restrictions under applicable U.S. federal or state securities laws. 2.3 INVESTMENT AND RELATED REPRESENTATIONS. (a) HARRIER SHARES AS REGULATION S OR "RESTRICTED" SECURITIES. The Majority Stockholder is aware that neither the Harrier Shares nor the offer or sale thereof to the Majority Stockholder has been registered under the U.S. Securities Act of 1933, as amended ("Securities Act"), or under any foreign or state securities law. The Majority Stockholder further understands that no registration statement has been filed with the Securities and Exchange Commission ("SEC"), nor with any other U.S. or foreign regulatory authority and that, as a result, any benefit which might normally accrue to an investor such as the Majority Stockholder by an impartial review of such a registration statement by the SEC or other regulatory commission will not be forthcoming. The Majority Stockholder acknowledges that the Harrier Shares are being offered alternatively pursuant to Regulation S under the Securities Act and certain exemptions from Section 5 of the Securities Act. The Majority Stockholder acknowledges that, except as otherwise disclosed on the COPE Disclosure Schedule, it is not a "U.S. person" as defined by Rule 902(o) under the Securities Act, a copy of which has been provided to each Majority Stockholder, and that it is not acquiring the Harrier Shares for the account or benefit of any "U.S. person." The Majority Stockholder understands that to the extent Regulation S does not apply to Harrier's issuance of Harrier Shares to the Majority Stockholder, the Harrier Shares will be characterized as "restricted" securities under U.S. federal securities laws inasmuch as they are being acquired in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Majority Stockholder represents that the Majority Stockholder is familiar in general with Rule 144 under the Securities Act (which provides generally for a one year holding period and limitations on the amount of "restricted" securities that can be sold in compliance with the rule upon completion of the holding period), and understands the resale limitations imposed thereby and by the Securities Act. The Majority Stockholder agrees that the Majority Stockholder will not sell all or any portion of Harrier Shares except in accordance with Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration under the Securities Act. The Majority Stockholder understands that each certificate for Harrier Shares issued to the Majority Stockholder or to any subsequent transferee shall be stamped or otherwise imprinted with an appropriate legend summarizing the restrictions described in this Section 2.4(a) and that Harrier shall refuse to transfer the Harrier Shares except in accordance with such restrictions, such legend to be substantially as follows: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION, IN EACH CASE AS CONFIRMED IN AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND IN EACH CASE IN ACCORDANCE WITH ANY OTHER APPLICABLE LAW. (b) INVESTMENT REPRESENTATION. This Agreement is made with the Majority Stockholder in reliance upon the Majority Stockholder's representation to the other parties to this Agreement, which by the Majority Stockholder's execution of this Agreement the Majority Stockholder hereby confirms, that the Harrier Shares to be received by the Majority Stockholder are being acquired pursuant to this Agreement for investment and not with a view to the public resale or distribution thereof unless in accordance with Regulation S, pursuant to an effective registration statement or exemption under the Securities Act. (c) NO PUBLIC SOLICITATION. The Majority Stockholder is acquiring the Harrier Shares after private negotiation and has not been attracted to the acquisition of the Harrier Shares by any press release, advertising or publication. (d) ACCESS TO INFORMATION. The Majority Stockholder believes it has received all of the information it considers necessary or appropriate for deciding whether to acquire the Harrier Shares, including, but not limited to the copies of the Harrier SEC Reports (as defined in Section 4.4). The Majority Stockholder further represents that it has had an opportunity to ask questions of, and to receive answers from, Harrier regarding Harrier, its business and prospects, and the Harrier Shares. (e) INVESTOR SOPHISTICATION AND ABILITY TO BEAR RISK OF LOSS. The Majority Stockholder, if a corporation or a partnership, has not been organized for the purpose of acquiring the Harrier Shares. The Majority Stockholder acknowledges that it is able to protect its interests in connection with the acquisition of the Harrier Shares and can bear the economic risk of investment in such securities without producing a material adverse change in the Majority Stockholder's financial condition. The Majority Stockholder otherwise has such knowledge and experience in financial or business matters that the Majority Stockholder is capable of evaluating the merits and risks of the investment in the Harrier Shares. 3. REPRESENTATIONS AND WARRANTIES OF COPE, ISENSCHMID AND KNAPP. COPE, Isenschmid and Knapp each severally represents, warrants and covenants to and with Harrier as follows: 3.1 CORPORATE ORGANIZATION, ETC. COPE is a Swiss corporation duly organized, validly existing and in good standing under the laws of Switzerland and is duly qualified to do business and is in good standing as a foreign corporation under the laws of each jurisdiction in which the character or location of the assets owned or leased by it require qualification, except where the failure to so qualify would not materially adversely affect the business or condition, financial or otherwise, of COPE. COPE has delivered or prior to the Closing Date will deliver to Harrier complete and correct copies of its bylaws and other organizational documents, as amended, certified by the Chairman of COPE to be complete and correct. COPE owns all of the issued and outstanding securities of COPE GmbH, Ltd., a German corporation, COPE Handelsgmbh, an Austrian limited liability company, and Xpert, Inc., a Florida corporation. Other than COPE GmbH, COPE Handelsgmbh and Xpert, Inc. (the "COPE Subsidiaries"), COPE has no subsidiaries or equity ownership in any other entities. No warrants, options, subscriptions, calls, commitments, or other rights or agreements of any kind for the purchase, issuance or sale of the capital shares of COPE GmbH, COPE Handelsgmbh or Xpert, Inc. are outstanding or otherwise exist. 3.2 CAPITALIZATION. The authorized, issued and outstanding capitalization of COPE is as recited in the second recital to this Agreement. All issued and outstanding shares of COPE Capital Stock have been duly authorized and validly issued and are fully paid and non-assessable and none of such issued and outstanding shares of COPE Capital Stock have been issued in violation of the preemptive rights of any past or present stockholders. No warrants, options, subscriptions, calls, commitments or other rights or agreements of any kind issued, granted or entered into by COPE for the purchase, issuance or sale of, or security exchangeable for or convertible into, any authorized shares of COPE Capital Stock are outstanding or otherwise exists and no authorized unissued shares of COPE Capital Stock are reserved for any purpose. The Majority Stockholders are the only holders of COPE Capital Stock and the Stockholder List accurately sets forth the names and residence addresses and number of COPE Shares owned by the Majority Stockholders. 3.3 CORPORATE POWER AND AUTHORITY. COPE and each of the COPE Subsidiaries has all requisite corporate power and authority to own or lease all of its properties and assets, to operate its properties and assets and to carry on its businesses as now conducted. COPE has all requisite corporate power and authority to enter into and to carry out all of the terms of this Agreement. All corporate action on the part of COPE and its stockholders necessary for the authorization, execution, delivery and performance of this Agreement by COPE has been taken and no further corporate authorization on the part of COPE is required to consummate the transactions provided for in this Agreement. Neither the execution, delivery nor performance of this Agreement by COPE or the Majority Stockholders shall violate or result in a breach of any provisions of the Bylaws or other organizational documents, as amended, of COPE. Neither the execution, delivery nor performance of this Agreement by the Majority Stockholders shall constitute a default or result in a breach of or accelerate the performance required under any mortgage, deed of trust, lien, lease, restriction or other contract or agreement to which COPE or any of its properties or assets are bound or affected, or violate any order, writ, injunction, decree, judgment or other restriction of any court, administrative agency or governmental body. 3.4 FINANCIAL STATEMENTS. COPE has furnished to Harrier its consolidated balance sheet as of the end of its fiscal year ended December 31, 1996 and its consolidated statements of earnings, stockholders' equity and cash flows for the fiscal years ended December 31, 1996 and 1995, together with appropriate notes to such consolidated financial statements. Prior to the Closing, COPE shall deliver to Harrier the aforementioned financial statements, accompanied by reports thereon containing opinions without comment or qualification, except as therein noted, by its independent certified public accountants. COPE has also furnished to Harrier its consolidated balance sheet as of June 30, 1997 and its consolidated statements of earnings and cash flows for the six months ended on such date, together with appropriate notes to such consolidated financial statements. All of the foregoing consolidated financial statements (collectively, the "COPE Financial Statements"), including in each case the related notes, have been prepared in conformity with United States generally accepted accounting principles consistently applied and are correct and complete in all material respects and such consolidated financial statements fairly present the financial position of COPE and the COPE Subsidiaries as of the dates of such balance sheets and the results of operations for the respective periods indicated. 3.5 ABSENCE OF UNDISCLOSED LIABILITIES. COPE and the COPE Subsidiaries have no material liabilities, fixed or contingent, other than (i) liabilities fully reflected in the COPE Financial Statements, or (ii) liabilities incurred since June 30, 1997 in the ordinary course of business or as contemplated or permitted by this Agreement or referred to in the COPE Disclosure Schedule, all of which in the aggregate, taking into consideration all other changes in the financial condition of COPE and the COPE Subsidiaries in the ordinary course of business, have had no material adverse affect on the financial position or results of operations of COPE and the COPE Subsidiaries, taken as a whole, or on the conduct of its businesses. 3.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the COPE Disclosure Schedule or the COPE Financial Statements, since June 30, 1997, there has not been (i) any material adverse change in the assets or liabilities or in the condition, financial or otherwise, or business, properties, earnings or net worth of COPE and the COPE Subsidiaries, taken as a whole, or (ii) any damage or destruction in the nature of a casualty loss, whether covered by insurance or not, materially and adversely affecting any property or business of COPE or the COPE Subsidiaries which is material to the consolidated financial condition, operation or business of COPE and the COPE Subsidiaries, taken as a whole. 3.7 CONTRACTS AND AGREEMENTS. Set forth in the COPE Disclosure Schedule is a list of all contracts and agreements (including loan agreements), other than contracts for goods or services in the ordinary course of business, to which COPE or any COPE Subsidiary is a party or by which it is bound, involving more than $50,000. Except as set forth in the COPE Disclosure Schedule, none of the contracts and agreements will expire or be terminated or be subject to any modification of terms or conditions upon the consummation of the transactions contemplated by this Agreement. Except as set forth in the COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary is in default in any material respect under the terms of any such contract or agreement nor in default in the payment of any principal of or interest on any indebtedness for borrowed money nor has any event occurred which, with the passage of time or giving of notice, would constitute such a default by COPE or any COPE Subsidiary and no other party to any such contract or agreement is in default in any material respect thereunder nor has any such event occurred with respect to such party. 3.8 NO VIOLATION OR LITIGATION. Except as set forth in the COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary is in material violation of any law or order, writ, injunction or decree of any court or other governmental department, commission, board, bureau, agency or instrumentality, and there are no material lawsuits, proceedings, claims or governmental investigations pending or, to the knowledge of any executive officer of COPE, threatened against COPE, any COPE Subsidiary or against the properties or business of any of them, nor is there any reasonable basis known to COPE for any such action and there is no action, suit, proceeding or investigation pending, threatened or, to the knowledge of COPE, contemplated which questions the legality, validity or propriety of the transactions contemplated by this Agreement. 3.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special meeting and proxy statement ("Proxy Statement"), including any amendments or supplement thereto, will, when the Proxy Statement is mailed to the stockholders of Harrier as contemplated by Section 1.3 hereof, contain the information with respect to COPE and the Selling Stockholders required by the Exchange Act and the rules and regulations thereunder. The Proxy Statement will not, at the time of mailing, at the time of the meeting of stockholders of Harrier or at the Closing, include any untrue statement of a material fact or omit to state a material fact with respect to COPE or the Selling Stockholders required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Selling Stockholders make no representations as to statements or omissions regarding information solely relating to Harrier, it being the agreement of the parties that responsibility for such statements or omissions rests solely with Harrier. 3.10 EMPLOYEE OR CONSULTING AGREEMENTS. The COPE Disclosure Schedule lists all plans, contracts, and arrangements, oral, implied or written, included but not limited to union contracts, employment agreements, consulting agreements, employee manuals, incentive payment plans and employee benefit plans, whereunder COPE or any COPE Subsidiary has any obligations (other than obligations to make current wage or salary payments terminable on notice of 90 days or less) to its officers or employees or other persons or their beneficiaries or whereunder any of such person owes money to COPE or any COPE Subsidiary, except to the extent any such obligation is set forth in the COPE financial statements. 3.11 INSURANCE. COPE and the COPE Subsidiaries each maintain policies of fire and casualty, liability and other forms of insurance in such amounts and against such risks and losses as are reasonable for its businesses and properties, and will keep such insurance in full force and effect through the Closing. A list and brief description (including effective and termination dates) of all policies of insurance, including insurance providing benefits for employees, owned or held by COPE or the COPE Subsidiaries on the date hereof and of all material performance bonds maintained by COPE on the date hereof are set forth in the COPE Disclosure Schedule. Neither COPE nor any of the COPE Subsidiaries are subject to any liabilities as a self-insurer of its business and property which could have a material adverse impact on its business, properties or prospects, taken as a whole, except as disclosed in the COPE Disclosure Schedules. 3.12 TRADEMARKS AND PATENTS. COPE and the COPE Subsidiaries have no material trademarks, trade names, copyrights, inventions, patents or applications therefor which are owned, used, registered in the name of or licensed to COPE or any COPE Subsidiary, except for those listed in the COPE Disclosure Schedule. Except as disclosed in the COPE Disclosure Schedule, no proceedings have been instituted or are pending or threatened or contemplated which challenge the validity of the ownership by COPE or any COPE Subsidiary of any such trademark, trade name, copyright, invention or patent. Except as disclosed in the COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary has licensed anyone to use any such trademark or any technical know how or other proprietary rights of COPE or any COPE Subsidiary. 3.13 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any court or administrative agency is in effect which restrains or prohibits COPE or the Selling Stockholders from consummating the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person or legal or administrative proceeding has been instituted or threatened which questions the validity or legality of COPE's or the Selling Stockholders' consummation of the transactions contemplated hereby. 3.14 APPROVALS AND CONSENTS. There are no permits, consents, mandates or approvals of public authorities, either U.S. or Swiss, federal, state or local, or of any third party necessary for COPE's or the Selling Stockholders' consummation of the transactions contemplated hereby. 3.15 BROKERAGE. No broker or finder has acted directly or indirectly for the Selling Stockholders in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder's fee or other commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of the Selling Stockholders. 3.16 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in the COPE Disclosure Schedule, COPE and the COPE Subsidiaries currently possess all permits, licenses, certificates and other authorizations from third parties, including, without limitation, foreign and domestic governmental authorities, necessary or required by applicable provisions of law and judicial decisions, and by the property and contract rights of third parties, for it to own or lease its properties and assets and to operate its business in the manner in which it is intended. 3.17 EMPLOYEE RETIREMENT PLANS. Neither COPE nor any COPE Subsidiary has an employee pension, retirement or benefit plan. 3.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All personal property owned, leased or used by COPE and the COPE Subsidiaries is reflected in the COPE Financial Statements, and is in good operating and working condition and fit for operation in the usual course of business, ordinary wear and tear excepted. Except as set forth in the COPE Disclosure Schedule, COPE and the COPE Subsidiaries have good and marketable title to all of their assets, and a good and valid leasehold interest in all property leased by the corporation, free and clear of all liens. 3.19 ENVIRONMENTAL MATTERS. There has been no manufacture, refining, storage, disposal or treatment of Hazardous Substances (as hereinafter defined) by COPE or any COPE Subsidiary at any real property currently or in the past owned, operated, used, leased or contracted for by COPE or any COPE Subsidiary, or otherwise in violation of any Environmental Laws (as hereinafter defined) or which would require remedial action under any Environmental Law. During the past three years neither COPE nor any COPE Subsidiary has received (a) notice of any such violation with respect to any Hazardous Substance at or by any of such real property, (b) notice from any governmental agency that COPE or any COPE Subsidiary, or any present or former owner, lessee or operator of such real property, is a potentially responsible party for cleanup liability with respect to the emission, discharge or release of any Hazardous Substance or for any other matter arising under the Environmental Laws or in any litigation, administrative proceeding, finding, order, citation, notice, investigation or complaint under any Environmental Law, or (c) notice of violation, citation, complaint, request for information, order, directive, compliance schedule, notice of claim, proceeding or litigation from any party concerning COPE's or any COPE Subsidiaries' compliance with any Environmental Law. As used herein "Environmental Laws" means the Resource Conservation Recovery Act, the Comprehensive Environmental Responsibility Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water Act, and other similar foreign, federal, state and local laws, as amended, together with all regulations issued or promulgated thereunder, relating to pollution, the protection of the environment or the health and safety of workers or the general public. As used herein "Hazardous Substance" means any hazardous substance, hazardous or toxic waste, hazardous material, pollutant or contaminant, as those or similar terms are used in the Environmental Laws, including, without limitation, asbestos and asbestos-related products, chlorofluorocarbons, oils or petroleum derived compounds, polychlorinated biphenyl, pesticides and radon. 3.20 TAX MATTERS. COPE and each COPE Subsidiary has timely filed all tax returns and all information returns and reports required to be filed by or with respect to it under the laws of its jurisdiction for all periods ending on or prior to the date hereof and will timely file all such returns and reports required to be filed from the date hereof through the Closing Date. COPE and the COPE Subsidiaries have paid all taxes which have become due or payable, and will pay on or prior to the Closing Date all taxes which have become due or payable on or prior to the Closing Date. 3.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the notes to the COPE Financial Statements or the COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary has purchased, acquired or leased any property or services from, or sold, transferred or leased any property or services to, or loaned or advanced any money to, or borrowed any money from, or guaranteed or otherwise become liable for any indebtedness or other obligations of, or acquired any capital stock, obligations or securities of, or made any management, consulting or similar fee arrangement with any officer, director, employee or stockholder of COPE or any COPE Subsidiary (nor any spouse, child or affiliate thereof), nor is COPE or any COPE Subsidiary a party to any agreement oral or written with respect to any of the foregoing. 3.22 OTHER INFORMATION. None of the written information, documents or memoranda furnished or to be furnished by COPE or the Majority Stockholders to Harrier or any of their representatives is false or misleading in any material respect or omits to state a material fact required to be stated therein or necessary in order to make any of the statements therein, in the light of the circumstances under which they were made, not misleading. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HARRIER. Harrier represents, warrants and covenants to and with COPE and the Selling Stockholders as follows: 4.1 CORPORATE ORGANIZATION, ETC. Harrier and Glycosyn are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware, and are duly qualified to do business and are in good standing as foreign corporations under the laws of each jurisdiction in which the character or location of the assets owned or leased by each of them require qualification, except where the failure to so qualify would not materially adversely affect the business or condition, financial or otherwise, of Harrier on a consolidated basis. Harrier and Glycosyn have delivered or prior to the Closing Date will deliver to COPE complete and correct copies of their certificates of incorporation, as amended, and bylaws, as amended, certified by their respective secretaries to be complete and correct. As of the date of this Agreement, Harrier is the owner of 5,000,000 shares of the Glycosyn Common Stock and a membership interest in DermaRay LLC, a California limited liability company ("DermaRay"). Other than Glycosyn and DermaRay, Harrier has no other subsidiaries or equity ownership in any other entity. 4.2 CAPITALIZATION. The authorized, issued, outstanding and reserved capital stock of Harrier and Glycosyn is as recited in the recitals to this Agreement. All issued and outstanding shares of capital stock of Harrier and Glycosyn have been duly authorized and validly issued and are fully paid and non-assessable and none of such issued and outstanding shares have been issued in violation of the preemptive rights of any past or present stockholder. Except as set forth in the recitals or the Harrier Disclosure Schedule attached hereto as Schedule 2 ("Harrier Disclosure Schedule"), no warrants, options, subscriptions, calls, commitments or other rights or agreements of any kind issued, granted or entered into by Harrier or Glycosyn for the purchase, issuance or sale of, or security exchangeable for or convertible into, any shares of such authorized capital stock is outstanding or otherwise exists and no authorized unissued shares of Harrier or Glycosyn are reserved for any purpose. 4.3 CORPORATE POWER AND AUTHORITY. Harrier and Glycosyn have all requisite corporate power and authority to own or lease all of their respective properties and assets, to operate their respective properties and assets and to carry on their respective businesses as now conducted. Harrier has all requisite corporate power and authority to enter into and to carry out all of the terms of this Agreement. The execution, delivery and performance of this Agreement has been or prior to the Closing will be duly authorized and approved by vote of Harrier board of directors without dissent. All corporate action on the part of Harrier, its officers, directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by Harrier will have been taken prior to the Closing and no further corporate authorization on the part of Harrier will be required to consummate the transactions provided for in this Agreement. Harrier has furnished or on or before the Closing Date will furnish COPE with certified copies of all corporate resolutions or consents relating to the execution, delivery and performance of this Agreement. When executed and delivered by Harrier, this Agreement shall constitute the valid and legally binding obligation of Harrier enforceable in accordance with its terms subject to the qualification and limitation that COPE and the Selling Stockholders' procedural and remedial rights may be limited or rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, (ii) equitable principles now or hereafter in effect relating to or affecting the enforcement of rights or remedies generally, or (iii) the availability of equitable remedies. Neither the execution, delivery nor performance of this Agreement by Harrier shall violate or result in a breach of any provisions of Harrier's certificate of incorporation or bylaws. Except where such violation or breach would not adversely affect the performance by Harrier of its obligations hereunder and would not have a material adverse affect on the business or condition, financial or otherwise, of Harrier on a consolidated basis, neither the execution, delivery nor performance of this Agreement by Harrier shall constitute a default or result in a breach of or accelerate the performance required under any mortgage, deed of trust, lien, lease, restriction or other contract or agreement to which Harrier or Glycosyn or any of their properties or assets are bound or affected, or violate any order, writ, injunction, decree, judgment or other restriction of any court, administrative agency or governmental body. 4.4 FINANCIAL STATEMENTS; SEC REPORTS. Harrier has furnished to the Selling Stockholders its consolidated balance sheet as of the end of its fiscal year ended June 30, 1997 and its consolidated statements of earnings, stockholders' equity and cash flows for the fiscal years ended June 30, 1997 and 1996. Prior to the Closing, Harrier shall deliver to COPE the aforementioned financial statements, together with appropriate notes to such consolidated financial statements, accompanied by reports thereon containing opinions without comment or qualification, except as therein noted, by its independent certified public accountants. All of the foregoing consolidated financial statements (collectively, the "Harrier Financial Statements"), including in each case the related notes, have been prepared in conformity with generally accepted accounting principles consistently applied and are correct and complete in all material respects and such consolidated financial statements fairly present the financial position of Harrier and the Glycosyn as of the dates of such balance sheets and the results of operations for the respective periods indicated. Harrier has also furnished to the Selling Stockholders its Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, and all quarterly reports on Form 10-QSB and current reports on Form 8-K which it has filed with the SEC since June 30, 1996. Prior to the Closing, Harrier shall deliver to the Selling Stockholders its Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997. The above reports of Harrier to the SEC are sometimes collectively referred to hereinafter as the "Harrier SEC Reports." The Harrier SEC Reports contain all of the information required by the Exchange Act and the rules and regulations thereunder and do not contain any untrue statements of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Harrier and Glycosyn have no material liabilities, fixed or contingent, other than (i) liabilities fully reflected in the Harrier Financial Statements, or (ii) liabilities incurred since June 30, 1997 in the ordinary course of business or as contemplated or permitted by this Agreement or referred to in the Harrier Disclosure Schedule, all of which in the aggregate, taking into consideration all other changes in the financial condition of Harrier and Glycosyn in the ordinary course of business, have had no material adverse effect on the financial position or results of operations of Harrier and Glycosyn, taken as a whole, or on the conduct of its businesses. 4.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the Harrier Disclosure Schedule or Harrier Financial Statements, since June 30, 1997, there has not been any material adverse change in the assets or liabilities or in the condition, financial or otherwise, or business, properties, earnings or net worth of Harrier and Glycosyn, taken as a whole, or (ii) any damage or destruction in the nature of a casualty loss, whether covered by insurance or not, materially and adversely affecting any property or business of Harrier or Glycosyn which is material to the consolidated financial condition, operation or business of Harrier and Glycosyn, taken as a whole. 4.7 CONTRACTS AND AGREEMENTS. Set forth in the Harrier Disclosure Schedule is a list of all contracts and agreements (including loan agreements) to which Harrier or Glycosyn is a party or by which it is bound, involving more than $5,000. Except as set forth in the Harrier Disclosure Schedule, none of the contracts and agreements will expire or be terminated or be subject to any modification of terms or conditions upon the consummation of the transactions contemplated by this Agreement. Except as set forth in the Harrier Disclosure Schedule, neither Harrier nor Glycosyn is in default in any material respect under the terms of any such contract or agreement nor in default in the payment of any principal of or interest on any indebtedness for borrowed money nor has any event occurred which, with the passage of time or giving of notice, would constitute such a default by Harrier or Glycosyn and no other party to any such contract or agreement is in default in any material respect thereunder nor has any such event occurred with respect to such party. 4.8 NO VIOLATION OR LITIGATION. Except as set forth in the Harrier Disclosure Schedule, neither Harrier nor Glycosyn is in violation of any law or order, writ, injunction or decree of any court or other governmental department, commission, board, bureau, agency or instrumentality, and there are no lawsuits, proceedings, claims or governmental investigations pending or, to the knowledge of any executive officer of Harrier, threatened against Harrier, Glycosyn or against the properties or business of any of them, nor is there any reasonable basis known to Harrier for any such action and there is no action, suit, proceeding or investigation pending, threatened or, to the knowledge of Harrier, contemplated which questions the legality, validity or propriety of the transactions contemplated by this Agreement. 4.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special meeting and proxy statement ("Proxy Statement"), including any amendments or supplement thereto, will, when the Proxy Statement is mailed to the stockholders of Harrier as contemplated by Section 1.3 hereof, contain the information with respect to Harrier and Glycosyn required by the Exchange Act and the rules and regulations thereunder. The Proxy Statement will not, at the time of mailing, at the time of the meeting of stockholders of Harrier or at the Closing, include any untrue statement of a material fact or omit to state a material fact with respect to Harrier or Glycosyn required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Harrier makes no representations as to statements or omissions regarding information solely relating to COPE or the Selling Stockholders, it being the agreement of the parties that responsibility for such statements or omissions rests solely with the Selling Stockholders. 4.10 EMPLOYEE OR CONSULTING AGREEMENTS. The Harrier Disclosure Schedule lists all plans, contracts, and arrangements, oral, implied or written, included but not limited to union contracts, employment agreements, consulting agreements, employee manuals, incentive payment plans and employee benefit plans, whereunder Harrier or Glycosyn has any obligation (other than obligations to make current wage or salary payments terminable on notice of 30 days or less) to its officers or employees or other persons or their beneficiaries or whereunder any of such persons owe money to Harrier or Glycosyn. 4.11 INSURANCE. Harrier and Glycosyn each maintain policies of fire and casualty, liability and other forms of insurance in such amounts and against such risks and losses as are reasonable for its businesses and properties, and will keep such insurance in full force and effect through the Closing. A list and brief description (including policy numbers, deductibles, potential loss adjustments under retrospective policies, carriers and effective and termination dates) of all policies of insurance, including insurance providing benefits for employees, owned or held by Harrier or Glycosyn on the date hereof and of all material performance bonds maintained by Harrier on the date hereof are set forth in the Harrier Disclosure Schedule. Neither Harrier nor Glycosyn is subject to any liabilities as a self-insurer of its business and property which could have a material adverse impact on its business, properties or prospects, taken as a whole, except as disclosed in the Harrier Disclosure Schedules. 4.12 TRADEMARKS AND PATENTS. Harrier and the Harrier Subsidiaries have no material trademarks, trade names, copyrights, inventions, patents or applications therefor which are owned, used, registered in the name of licensed to Harrier or Glycosyn, except for those listed in the Harrier Disclosure Schedule. Except as disclosed in the Harrier Disclosure Schedule, no proceedings have been instituted or are pending or threatened or contemplated which challenge the validity of the ownership by Harrier or Glycosyn of any such trademark, trade name, copyright, invention or patent. Except as disclosed in the Harrier Disclosure Schedule, neither Harrier nor Glycosyn has licensed anyone to use any such trademark or any technical know how or other proprietary rights of Harrier or Glycosyn. 4.13 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in the Harrier Disclosure Schedule, Harrier and Glycosyn currently possess all permits, licenses, certificates and other authorizations from third parties, including, without limitation, foreign and domestic governmental authorities, necessary or required by applicable provisions of law and judicial decisions, and by the property and contract rights of third parties, for it to own or lease its properties and assets and to operate its business in the manner in which it is intended. 4.14 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any court or administrative agency is in effect which restrains or prohibits Harrier or Glycosyn from consummating the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person or legal or administrative proceeding has been instituted or threatened which questions the validity or legality of Harrier's or Glycosyn's consummation of the transactions contemplated hereby. 4.15 APPROVALS AND CONSENTS. Except as contemplated by Sections 1.3 and 5.6, there are no permits, consents, mandates or approvals of public authorities, either U.S. or Swiss, federal, state or local, or of any third party necessary for Harrier's consummation of the transactions contemplated hereby. 4.16 BROKERAGE. No broker or finder has acted directly or indirectly for Harrier in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder's fee or other commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of Harrier. 4.17 EMPLOYEE RETIREMENT INCOME SECURITY ACT. Neither Harrier nor Glycosyn has an "employee pension benefit plan," as such term is defined in Section 3 of the Employee Retirement Income Security Act of 1974. Neither Harrier nor Glycosyn, nor any ERISA Affiliate of either of them, has ever sponsored, maintained, or contributed to, or been required to sponsor, maintain or contribute to, any single or multiemployer plan as defined in Section 4001 of the Employee Retirement Security Act of 1974, as amended ("ERISA"). For purposes of the foregoing, "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA), which together with Harrier, or Glycosyn would be deemed to be a single employer plan (i) within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, or (ii) as a result of Harrier or Glycosyn being or having been a general partner of such person. 4.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All personal property owned, leased or used by Harrier and Glycosyn is reflected in the Harrier Financial Statements, and is in good operating and working condition and fit for operation in the usual course of business, ordinary wear and tear excepted. Except as set forth in the Harrier Disclosure Schedule, Harrier and Glycosyn have good and marketable title to all of its assets, and a good and valid leasehold interest in all property leased by the corporation, free and clear of all liens. 4.19 ENVIRONMENTAL MATTERS. There has been no manufacture, refining, storage, disposal or treatment of Hazardous Substances (as hereinafter defined) by Harrier or Glycosyn at any real property currently or in the past owned, operated, used, leased or contracted for by Harrier or Glycosyn, or otherwise in violation of any Environmental Laws (as hereinafter defined) or which would require remedial action under any Environmental Law. During the past three years neither Harrier nor Glycosyn has received (a) notice of any such violation with respect to any Hazardous Substance at or by any of such real property, (b) notice from any governmental agency that Harrier, or any present or former owner, lessee or operator of such real property, is a potentially responsible party for cleanup liability with respect to the emission, discharge or release of any Hazardous Substance or for any other matter arising under the Environmental Laws or in any litigation, administrative proceeding, finding, order, citation, notice, investigation or complaint under any Environmental Law, or (c) notice of violation, citation, complaint, request for information, order, directive, compliance schedule, notice of claim, proceeding or litigation from any party concerning the corporation's compliance with any Environmental Law. As used herein "Environmental Laws" means the Resource Conservation Recovery Act, the Comprehensive Environmental Responsibility Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water Act, and other similar federal, state and local laws, as amended, together with all regulations issued or promulgated thereunder, relating to pollution, the protection of the environment or the health and safety of workers or the general public. As used herein "Hazardous Substance" means any hazardous substance, hazardous or toxic waste, hazardous material, pollutant or contaminant, as those or similar terms are used in the Environmental Laws, including, without limitation, asbestos and asbestos-related products, chlorofluorocarbons, oils or petroleum derived compounds, polychlorinated biphenyl, pesticides and radon. 4.20 TAX MATTERS. Harrier and Glycosyn have timely filed all federal, state and local tax returns and all information returns and reports required to be filed by or with respect to it under the laws of the United States or any state or other jurisdiction for all periods ending on or prior to the date hereof and will timely file all such returns and reports required to be filed from the date hereof through the Closing Date. All federal, state, county, local, and foreign income, profits, franchise, sales, use, occupational, property, excise, payroll, withholding and other taxes (including interest and penalties) (collectively, "Taxes") required to have been paid or accrued by Harrier or Glycosyn have been fully paid or are adequately provided for on Harrier's consolidated balance sheet and any Taxes required to be paid or accrued prior to the Closing Date will be fully paid or adequately provided for on the books of Harrier or Glycosyn as the case may be. To the knowledge of Harrier, no issues have been raised (and are currently pending) by the Internal Revenue Service or any other taxing authority concerning the liability of Harrier, Glycosyn or DermaRay for Taxes, and no waivers of statutes of limitations have been given or requested with respect to Harrier, Glycosyn or DermaRay. There is no tax lien of any kind outstanding against the assets, property, or business of Harrier, Glycosyn or, to the knowledge of Harrier, DermaRay. All deficiencies asserted or assessments (including interest and penalties) made as a result of any examination by the Internal Revenue Service or by appropriate state or departmental tax authorities of the federal, state or local income tax, sales tax or franchise tax returns of or with respect to Harrier, Glycosyn or, to the knowledge of Harrier, DermaRay have been fully paid or are adequately provided for on Harrier's consolidated balance sheet and no proposed (but unassessed) additional taxes, interest or penalties have been asserted. 4.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Harrier SEC Reports or the notes to the Harrier Financial Statements, neither Harrier nor Glycosyn has purchased, acquired or leased any property or services from, or sold, transferred or leased any property or services to, or loaned or advanced any money to, or borrowed any money from, or guaranteed or otherwise become liable for any indebtedness or other obligations of, or acquired any capital stock, obligations or securities of, or made any management, consulting or similar fee arrangement with any officer, director, employee or stockholder of Harrier or Glycosyn (nor any spouse, child or affiliate thereof), nor is Harrier or Glycosyn a party to any agreement oral or written with respect to any of the foregoing. 4.22 OTHER INFORMATION. None of the written information, documents or memoranda furnished or to be furnished by Harrier to COPE or the Selling Stockholders or any of their representatives is false or misleading in any material respect or omits to state a material fact required to be stated therein or necessary in order to make any of the statements therein, in the light of the circumstances under which they were made, not misleading. 5. CERTAIN ADDITIONAL UNDERSTANDINGS AND AGREEMENTS. 5.1 APPROVALS AND CONSENTS. (a) IN GENERAL. The parties hereto shall each use all reasonable best efforts to obtain, and shall not take any action which jeopardizes obtaining, the necessary approvals and consents of other persons and governmental authorities required to be obtained to consummate the transactions contemplated by this Agreement. (b) COPE AND SELLING STOCKHOLDERS COMPLIANCE WITH SECURITIES LAWS. COPE and each Selling Stockholder shall take such actions as shall be required in order to exempt the offer and sale of the COPE Shares to Harrier from the registration and prospectus delivery requirements under the Securities Act and to register or qualify or exempt from registration and qualification requirements the offer and sale of the COPE Shares to Harrier under applicable foreign and state securities laws. (c) HARRIER COMPLIANCE WITH SECURITIES LAWS. Harrier shall cooperate with the Selling Stockholders in taking such actions as shall be required in order to exempt the offer and sale of the Harrier Shares to the Selling Stockholders from the registration and prospectus delivery requirements under the Securities Act and to register or qualify or exempt from registration and qualification requirements the offer and sale of the Harrier Shares to the Selling Stockholders under applicable foreign and state securities laws. 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a) COPE AND MAJORITY STOCKHOLDERS. The representations and warranties of COPE and the Majority Stockholders made herein shall not be affected by any information furnished to, or investigations made by Harrier or any of its employees or representatives in connection with the subject matter of this Agreement. The representations and warranties of the Majority Stockholders shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated thereby for a period of four (4) years after the Closing Date. The representations and warranties of COPE shall not survive the Closing. (b) HARRIER. The representations and warranties of Harrier made herein shall not be affected by any information furnished to, or investigations made by, COPE or the Majority Stockholders, or any of their employees or representatives, in connection with the subject matter of this Agreement and shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated thereby for period of four (4) years after the Closing Date. 5.3 CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE. From the date hereof until the Closing Date, COPE and the Majority Stockholders, on the one hand, and Harrier, on the other, shall each act as follows, except as otherwise expressly consented to by the other in writing, which consent shall not be unreasonably withheld, except such actions taken to consummate the transactions in accordance with this Agreement as contemplated thereby: (a) NOTIFICATION. COPE and the Majority Stockholders and Harrier shall each immediately notify the other of any material breaches of the representations and warranties or any material nonfulfillment of the covenants, agreements or obligations of it or of any developments which could materially adversely affect the value of the COPE Shares or Harrier Shares. Without limiting the foregoing, COPE and the Majority Stockholders and Harrier shall each immediately notify the other of (1) any unexpected emergency or other material change in the normal course of business or in the operation of its properties, (2) the instigation of or any material development in any litigation or regulatory proceedings, governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) in which COPE or Harrier is named as a party, and (3) budgets, capital expenditures and material decisions involving its material properties or assets. COPE and the Majority Stockholders and Harrier shall each keep the other fully informed of such events and permit its representatives access to all materials prepared in connection therewith. (b) FORBEARANCE. From the effective date hereof to the Closing Date, COPE and Harrier, or any of their subsidiaries, shall not, without the prior written consent of the other, which consent shall not be unreasonably withheld, except for such actions taken to consummate the transactions in accordance with this Agreement as contemplated thereby: (1) amend its articles of incorporation or bylaws; (2) issue any shares of capital stock or securities convertible into any such securities or enter into any agreement or commitment with respect to the issuance or purchase of any such securities; (3) declare, pay or set aside for payment any dividend or distribution in respect to any securities, or redeem, purchase or otherwise acquire any securities any options, warrants or other rights to purchase or subscribe to any securities; (4) make or contract for any capital investment, capital expenditure, capital addition or capital improvement; (5) negotiate with any person other than the other concerning any merger, disposition of all or substantially all of its business, properties, or assets, any tender offer, acquisition or other business combination, other than the transactions provided for in this Agreement; (6) organize any new subsidiary, acquire any capital stock or other debt or equity securities of any corporation, enter into any partnership or joint venture or acquire any equity or ownership interest in any business; or (7) take any action which would cause or constitute a material breach, or would, if it had been taken prior to the date hereof, have caused a material breach of the representations and warranties of it set forth herein. 5.4 ACCESS. Each of the parties hereto may, prior to the Closing Date, through its respective representatives, make such reasonable investigation as is permitted by the laws of its respective jurisdiction of organization of the property, records and the financial condition of the other parties hereto as it reasonably deems necessary or advisable to assure itself of the accuracy of the representations and warranties of the other parties hereto and compliance by the other parties hereto with all agreements and conditions to be satisfied by them. Such investigation shall be done at reasonable times and under reasonable circumstances. Each party shall each keep confidential in the same manner in which it preserves its own confidential information any information so obtained which is not otherwise publicly available or ascertainable and to which it has been given access by another party, subject to applicable reporting and disclosure requirements under applicable foreign, federal and state laws, including without limitation securities laws. Nothing in this Section 5.4 shall be deemed to constitute a waiver by any party, or an agreement of any party to waive, with respect to any document, any claim of attorney-client privilege or legal or contractual privilege or requirement of confidentiality; provided, however, that the party claiming such privilege or requirement shall identify to the extent it is legally permitted the subject matter thereof to the party seeking such document. 5.5 INDEMNIFICATION. (a) INDEMNIFICATION BY HARRIER. Harrier agrees to indemnify, defend and hold harmless the Selling Stockholders against and in respect of any and all claims, demands, losses, costs, expenses, liabilities and damages, including interest, penalties, and reasonable attorneys' fees, that the Selling Stockholders shall incur or suffer which arise, result from or relate to any material inaccuracy in or material breach or nonfulfillment of any of the representations, warranties, covenants or agreements made by Harrier in this Agreement, the schedules or exhibits hereto or in any other Document furnished by Harrier under this Agreement. (b) INDEMNIFICATION BY THE MAJORITY STOCKHOLDERS. Each Majority Stockholder agrees to indemnify, defend and hold harmless Harrier against and in respect of any and all claims, demands, losses, costs, expenses, liabilities and damages, including interest, penalties, and reasonable attorneys' fees, that Harrier shall incur or suffer which arise, result from or relate to any material inaccuracy in or material breach of nonfulfillment of any of the representations, warranties, covenants or agreements made by COPE or the Majority Stockholder in this Agreement, the schedules or exhibits hereto or in any other Document furnished by COPE or the Majority Stockholder under this Agreement. (c) PROCEDURES; RIGHTS TO SEPARATE COUNSEL. In the event any party receives a complaint, claim or other notice of any loss, claim or damage, liability or action, giving rise to a claim for indemnification under this Section 5.5, the party claiming indemnification shall promptly notify the indemnifying party of such complaint, notice, claim or action, and such indemnifying party shall have the right to investigate and defend any such loss, claim, damage, liability or action. The party claiming indemnification shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of the indemnifying party, unless the indemnifying party fails to promptly defend, in which case the fees and expenses of such separate counsel shall be borne by the indemnifying party. In no event shall an indemnifying party be obligated to indemnify another party for any settlement of any claim or action effected without the indemnifying party's prior written consent. 6. CONDITIONS TO THE OBLIGATIONS OF COPE AND THE MAJORITY STOCKHOLDERS. The obligations of COPE and the Majority Stockholders, hereunder are subject to the fulfillment at or before the Closing, of the following conditions (any of which may be waived in writing by COPE and the Majority Stockholders): 6.1 REPRESENTATIONS AND WARRANTIES, ETC. The representations and warranties of Harrier contained herein shall have been true and correct in all material respects when made and as of the Closing, except as affected by actions taken after the date hereof with the prior written consent of the Selling Stockholders. 6.2 PERFORMANCE OF COVENANTS. Harrier shall have performed and complied in all material respects with all covenants, agreements, terms and conditions and executed all documents required by this Agreement to be performed, complied with, or executed by it prior to the Closing. 6.3 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person or legal or administrative proceeding shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby. 6.4 APPROVALS AND CONSENTS. All permits, consents or approvals of applications to public authorities, federal, state or local, and all approvals of any third persons, including without limitation all approvals or consents under applicable federal or state securities laws, the granting of which are necessary for the consummation of the transactions contemplated hereby shall have been obtained. 6.5 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding shares of the Harrier Common Stock shall have approved, in accordance with Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to Harrier's Certificate of Incorporation; (iv) the election of the COPE nominees to Harrier's board of directors; and (v) Harrier's sale of Glycosyn common shares in accordance with Section 6.15. 6.6 DELIVERY OF INSTRUMENTS OF TRANSFER. Harrier shall have delivered to the Selling Stockholders or their representatives certificates evidencing Harrier Shares. 6.7 CERTIFICATE. The President and Chief Financial Officer of Harrier shall have delivered to the Selling Stockholders or their representatives a certificate certifying as of the Closing Date the matters set forth in Section 6.1 and 6.2. 6.8 DUE DILIGENCE. COPE's investigation of Harrier, Glycosyn and NCT shall not have revealed any matters regarding the financial condition, liabilities, operations or prospects of any of them which are not satisfactory to COPE. 6.9 TAX CONSEQUENCES. COPE's analysis of the proposed ownership structure of COPE following the Closing shall not have revealed any adverse income tax consequences which are not acceptable to COPE in its reasonable discretion. 6.10 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain director and stockholder approval of: (a) this Agreement and the transactions contemplated hereby; (b) the Reverse Split; (c) the change in the corporate name of Harrier to "COPE, Inc." or such other mutually agreeable name as may be available for use in the State of Delaware; (d) such amendments to the bylaws and certificate of incorporation of Harrier as may be reasonably requested by COPE; and (e) the election of a new board of directors of Harrier, including Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus Stalder and Kevin DeVito, effective upon and subject to the Closing. 6.11 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets, liquidated liabilities and indebtedness (including all threatened claims by American Diagnostica Inc. ("ADI")) and contractual obligations pursuant to the form of Assumption and Indemnification Agreement previously submitted to the Selling Stockholders in connection herewith. 6.12 RELEASE FROM HARRIER CREDITORS. Harrier shall have received from its creditors documentation unconditionally and irrevocably releasing Harrier from any further liability, claim or demand. In addition, Harrier shall have received from each party to an executory contract with Harrier (including ADI), documentation consenting to the assumption by Glycosyn and releasing Harrier of any further obligation thereunder. 6.13 SALE OF GLYCOSYN. Harrier shall obtain all necessary director and stockholder approval of, and shall carry out and effect, (i) the acquisition by Glycosyn of a nineteen percent (19%) ownership interest in New Concept Therapeutics, Inc., a North Carolina corporation ("NCT"), plus an option to acquire at least up to fifty-one percent (51%) of the ownership of NCT; and (ii) the sale of 2,850,000 shares of the common stock of Glycosyn presently owned by Harrier to New Capital Investment Fund ("NCIF") in cancellation of all indebtedness presently owed Harrier to NCIF, in each case pursuant to documentation reasonably acceptable to COPE. 6.14 LEGAL OPINION. COPE and the Selling Stockholders shall have received from Bruck & Perry, A Professional Corporation, counsel for Harrier, a favorable opinion dated the Closing Date in form and substance reasonably satisfactory to COPE and the Selling Stockholders and their counsel, to the effect that: (i) Harrier and Glycosyn are corporations duly incorporated, validly existing and in good standing under the laws of the State of Delaware and Harrier and Glycosyn have full corporate power and corporate authority to own or lease its properties and carry on its business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction where failure to so qualify would have a material adverse effect on the corporation. Harrier and Glycosyn have the corporate power and corporate authority to consummate the transactions as provided herein; (ii) the authorized capital stock of Harrier consists of 30,000,000 shares of Harrier Common Stock and 5,000,000 shares of Harrier Preferred Stock, of which 14,767,923 shares of Harrier Common Stock and no shares of Harrier Preferred Stock are issued and outstanding. To such counsel's knowledge, no options, warrants, convertible securities, rights of first refusal or other rights to obtain shares of the capital stock of Harrier, whether on conversion of other securities or otherwise, have been granted by Harrier, other than as set forth in the Harrier Disclosure Schedule; no holder of shares of Harrier's Common Stock has any preemptive rights with respect to any such shares or any securities convertible into such shares from Harrier. All of the issued and outstanding shares of Harrier's Common Stock on the Closing Date are validly issued, fully paid and non-assessable; and there are no other corporations or other entities in which Harrier owns, directly or indirectly, any equity interest, except Glycosyn, DermaRay and NCT. (iii) the Harrier Shares to be issued to the Selling Stockholders at the Closing will be, when delivered to the Selling Stockholders or their representatives, validly issued, fully paid and non-assessable shares of Harrier's Common Stock free and clear of all pledges, security interests, mortgages, liens, claims, charges, restrictions or encumbrances, except for restrictions under applicable U.S. federal or state securities laws, and, assuming the truth and accuracy of the Selling Stockholders' representations and warranties set forth in Section 2 and the Subscription Agreements, the Harrier Shares are exempt from the registration requirements of the Securities Act; and (iv) this Agreement and the transactions contemplated herein have been duly approved by the Boards of Directors and by the stockholders of Harrier and Glycosyn at meetings duly held in compliance with the Delaware Law and in compliance with the Exchange Act and the applicable regulations thereunder and this Agreement has been duly and validly executed and delivered by Harrier; and the consummation of the transactions contemplated herein in accordance with the terms of this Agreement is a valid and binding obligation of Harrier, subject to the qualification and limitation that the procedural and remedial rights of the other parties to this Agreement may be limited or rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, (ii) legal or equitable principles now or hereafter in effect relating to or affecting the enforcement of rights or remedies generally, or (iii) the availability of equitable remedies. The opinions set forth above may be expressly made subject to the qualifications and limitations that are contained in the Third-Party Legal Opinion Report (including the legal opinion accord) of the Section of Business Law, American Bar Association approved August 11, 1991 (the "Accord"). In giving such opinions, such counsel may rely, in accordance with the Accord, as to matters of fact, upon certificates of officers of Harrier and governmental agencies and Harrier's transfer agent and registrar, and as to matters of laws, upon opinions of other counsel satisfactory to them, and shall deliver copies thereof to COPE and the Selling Stockholders prior to the Closing Date. Such opinion may state that such counsel's opinion is furnished, as counsel to Harrier, to COPE and the Selling Stockholders and is solely for their benefit. 7. CONDITIONS TO THE OBLIGATIONS OF HARRIER. The obligations of Harrier hereunder are subject to the fulfillment on or before the Closing, of the following conditions (any of which may be waived in writing by Harrier): 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Selling Stockholders contained herein shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Closing. 7.2 PERFORMANCE OF COVENANTS. The Majority Stockholders shall have performed and complied in all material respects with all covenants, agreements, terms and conditions and executed all documents required by this Agreement to be performed, complied with or executed by them prior to or at the Closing. Each stockholder other than the Selling Stockholders shall have executed a Subscription Agreement. 7.3 INSTRUMENTS OF TRANSFER. The Selling Stockholders shall have delivered to Harrier instruments of transfer for the COPE Shares in form and substance reasonably satisfactory to Harrier and its counsel as shall be necessary to effectively transfer all of the Selling Stockholders' right, title and interest in the COPE Shares to Harrier. 7.4 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or other person or legal or administrative proceeding shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby. 7.5 APPROVALS AND CONSENTS. All permits, consents or approvals of applications to public authorities, federal, state or local, and all approvals of any third persons, including without limitation all approvals or consents under applicable federal or state securities laws, the granting of which are necessary for the consummation of the transactions contemplated hereby shall have been obtained. 7.6 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding shares of the Harrier Common Stock shall have approved, in accordance with Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to Harrier's Certificate of Incorporation; (iv) the election of the COPE nominees to Harrier's board of directors; and (v) Harrier's sale of Glycosyn common shares in accordance with Section 6.13. 7.7 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain director and stockholder approval of: (a) this Agreement and the transactions contemplated hereby; (b) the Reverse Split; (c) the change in the corporate name of Harrier to "COPE, Inc." or such other mutually agreeable name as may be available for use in the State of Delaware; (d) such amendments to the bylaws and certificate of incorporation of Harrier as may be reasonably requested by COPE; and (e) the election of a new board of directors of Harrier, including Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus Stalder and Kevin DeVito, effective upon and subject to the Closing. 7.8 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets, liquidated liabilities and indebtedness (including all threatened claims by American Diagnostica Inc. ("ADI")) and contractual obligations pursuant to the form of Assumption and Indemnification Agreement previously submitted to the Selling Stockholders in connection herewith. 7.9 RELEASE FROM HARRIER CREDITORS. Harrier shall have received from its creditors documentation unconditionally and irrevocably releasing Harrier from any further liability, claim or demand. In addition, Harrier shall have received from each party to an executory contract with Harrier (including ADI), documentation consenting to the assumption by Glycosyn and releasing Harrier of any further obligation thereunder. 7.10 SALE OF GLYCOSYN. Harrier shall obtain all necessary director and stockholder approval of, and shall carry out and effect, (i) the acquisition of a nineteen percent (19%) ownership interest in New Concept Therapeutics, Inc., a North Carolina corporation ("NCT"), plus an option to acquire at least up to fifty-one percent (51%) of the ownership of NCT; and (ii) the sale of 2,850,000 shares of the common stock of Glycosyn presently owned by Harrier to New Capital Investment Fund ("NCIF") in cancellation of all indebtedness presently owed Harrier to NCIF. 7.11 LEGAL OPINION. Harrier shall have received from counsel for COPE and the Selling Stockholders, a favorable opinion dated the Closing Date in form and substance reasonably satisfactory to Harrier and its counsel, to that effect that: (i) COPE and each of the COPE Subsidiaries are corporations duly incorporated, validly existing and in good standing under the laws of the country of their organization, and COPE and each of the COPE Subsidiaries have full corporate power and corporate authority to own or lease their properties and carry on their business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction where failure to so qualify would have a material adverse effect on the corporation. COPE and the Selling Stockholders each have the corporate or individual power and authority to consummate the transactions as provided herein; (ii) the authorized capital stock of COPE consists of SFr 106,000 shares of COPE Capital Stock, of which 1,060 shares are issued and outstanding. To such counsel's knowledge, no options, warrants, convertible securities, rights of first refusal or other rights to obtain shares of the capital stock of COPE or any COPE Subsidiary, whether on conversion of other securities or otherwise, have been granted by COPE or any COPE Subsidiary, other than as set forth in the COPE Disclosure Schedules; no holder of shares of COPE Capital Stock has any preemptive rights with respect to any such shares or any securities convertible into such shares from COPE; all of the issued and outstanding shares of COPE Capital Stock on the Closing Date are validly issued, fully paid and non-assessable; and there are no other corporations or other entities in which COPE owns, directly or indirectly, any equity interest, except for COPE GmbH, Ltd., COPE Handelsgmbh and Xpert, Inc.; (iii) the COPE Shares to be transferred and assigned by the Selling Stockholders to Harrier at the Closing will be, when delivered to Harrier, validly issued, fully paid and non-assessable shares of COPE Common Stock, and each Selling Stockholder has and will transfer to Harrier good and marketable title to the COPE Shares which it owns as set forth on the Stockholders List, free and clear of all pledges, security interests, mortgages, liens, claims, charges, restrictions or encumbrances, except for restrictions under applicable U.S. federal or state securities laws; and (iv) this Agreement and the transactions contemplated herein have been duly approved by the Selling Shareholders and managers and directors and stockholders of COPE in compliance with the Swiss Law, and this Agreement has been duly and validly executed and delivered by COPE and each Selling Stockholder; and the consummation of the transactions contemplated herein in accordance with the terms of this Agreement are the valid and binding obligation of COPE and each Selling Stockholder, subject to the qualification and limitation that the procedural and remedial rights of the other parties to this Agreement may be limited or rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, (ii) legal or equitable principles now or hereafter in effect relating to or affecting the enforcement of rights or remedies generally, or (iii) the availability of equitable remedies. The opinions set forth above may be expressly made subject to the qualifications and limitations that are contained in the Third-Party Legal Opinion Report (including the legal opinion accord) of the Section of Business Law, American Bar Association approved August 11, 1991 (the "Accord"). In giving such opinions, such counsel may rely, in accordance with the Accord, as to matters of fact, upon certificates of directors and managers of COPE and governmental agencies, and as to matters of laws, upon opinions of other counsel satisfactory to them, and shall deliver copies thereof to Harrier prior to the Closing Date. Such opinion may state that such counsel's opinion is furnished, as counsel to COPE and the Selling Stockholders, to Harrier and is solely for the benefit of Harrier. 8. MISCELLANEOUS. 8.1 CUMULATIVE REMEDIES. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law, which rights may be exercised cumulative and not alternatively. 8.2 SUCCESSORS AND ASSIGNS. The rights and obligations of the parties under this Agreement shall not be assignable without the written consent of COPE and Harrier and any such purported assignment without their written consent shall be void ab initio. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 8.3 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement or the other documents. 8.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts when taken together will constitute one and the same agreement. 8.5 NOTICES. Any approvals, consents or notices required or permitted to be sent or given shall be delivered in writing personally or mailed, certified mail, return receipt requested, to the following addresses and shall be deemed to have been received within five days after such mailing: If to COPE: COPE AG Grundstrasse 14 CH-6343 Rotkreuz Switzerland Attn: Adrian Knapp, Chairman With a copy to: Dechert, Price & Rhoads 30 Rockefeller Plaza New York, New York 10112 Attn: Fredric J. Klink, Esq. If to the Majority Stockholders: The Majority Stockholders Address set forth on Exhibit A with a copy to: Dechert, Price & Rhoads 30 Rockefeller Plaza New York, New York 10112 Attn: Fredric Klink, Esq. If to Harrier: Harrier, Inc. 2200 Pacific Coast Highway, Suite 301 Hermosa Beach, California 90254 Attn: Kevin DeVito, President with a copy to: Bruck & Perry A Professional Corporation 500 Newport Center Drive, Suite 700 Newport Beach, California 92660 Attn: Daniel K. Donahue, Esq. 8.6 GOVERNING LAW; ARBITRATION. The validity, meaning and effect of this Agreement shall be determined in accordance with the laws of the State of California, U.S.A. applicable to contracts made and to be performed in that state, without regard to its conflicts of laws rules; provided however that the Federal Arbitration Act of the United States shall govern issues as to arbitrability. If a dispute arises in connection with or relating to this Agreement and the parties are unable to resolve it within forty-five (45) days through direct negotiations, the dispute shall be referred to final and binding arbitration to be held in Los Angeles, California, U.S.A. in accordance with the rules of the American Arbitration Association for International Arbitration (as they may be amended from time to time). The award of the arbitrator(s) shall be final and binding upon the parties hereto and may be enforced by any court of competent jurisdiction pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, by which all parties agree to be bound. 8.7 SCHEDULES AND EXHIBITS. All schedules and exhibits are an integral part of this Agreement. 8.8 LITIGATION COSTS. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions thereof, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 8.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to the subject matter thereof, and supersedes all prior and contemporaneous agreements and understandings. IN WITNESS WHEREOF, each of the parties to this Agreement has executed Or caused this Agreement to be executed as of the date first above written. "HARRIER" Harrier, Inc. a Delaware corporation By: /S/ KEVIN DEVITO ------------------------------------------ Kevin DeVito, President "COPE" COPE AG, a Swiss corporation By: /S/ ADRIAN KNAPP ------------------------------------------ Adrian Knapp, Chairman "MAJORITY SHAREHOLDERS" /S/ STEPHAN ISENSCHMID ------------------------------------------ Stephan Isenschmid /S/ ADRIAN KNAPP ------------------------------------------ Adrian Knapp EXHIBIT A LIST OF Selling StockholderS Number of Shares of COPE Capital Name and Address of Stock Owned by Selling Stockholder Selling Stockholder - --------------------------------------- --------------------- Stephan Isenschmid 480 Buchenweg 5 CH-6034 Inwil SWITZERLAND Adrian Knapp 480 Oberseeburg 45 6006 Luzern SWITZERLAND Ketts & Co. 20 4th Floor, 50 Hans Crescent Knightsbridge, London SW1 0NB, U.K. Dr. Rudolf Fueter 10 Pilatusstrasse 141 6003 Luzern SWITZERLAND Gabriele Koch 10 Strahlerweg 123 76227 Karlsruhe GERMANY Bernd Rombach 10 Strahlerweg 16 76227 Karlsruhe GERMANY Maria Fischer 5 Bireggstr. 16 6003 Luzern SWITZERLAND Marco Scharer 5 Schoenbuehlstrand 19 6005 Luzern SWITZERLAND Verena Tritscheller 5 c/o Credit Suisse PB, Pde32 6002 Luzern SWITZERLAND Markus Vogel 4 Bergstrasse 21 6052 Hergiswil SWITZERLAND Hedwig Maters 3 c/o Alex Kolb Alte Landstr. 124 8801 Thalwil SWITZERLAND Number of Shares of COPE Capital Name and Address of Stock Owned by Selling Stockholder Selling Stockholder - --------------------------------------- --------------------- Paul Wasescha 3 Stegenhalde 11 6048 Horw SWITZERLAND Finn Cederstroem 2 c/o Prime Invest Usserhus 4 6023 Rothenburg SWITZERLAND Franz Knapp 2 Gartenheimstr. 5 6006 Luzern SWITZERLAND Peter Naf 2 c/o Prime Invest Usserhus 4 6023 Rothenberg Markus Zemp 2 Hofmatt 6142 Gettnau SWITZERLAND Hans Bitzi 1 c/o Credit Suisse PB, Pde32 6002 Luzern SWITZERLAND Reto Levy 1 St. Wendelin 8 6343 Holhausem SWITZERLAND Stefan Christen 1 Renggstrasse 29 6052 Hergiswil SWITZERLAND Klaus Eberle 1 Wieslocherstr. 4 69234 Dielheim GERMANY Hans Gerig 1 Zeughausgasse 20 6300 Zug SWITZERLAND August Harmeling 1 c/o Prime Invest Usserhus 4 6023 Rothenburg SWITZERLAND Rene Heini 1 Number of Shares of COPE Capital Name and Address of Stock Owned by Selling Stockholder Selling Stockholder - --------------------------------------- --------------------- c/o Prime Invest usserhus 4 6023 Rothenburg SWITZERLAND Karl-Ludwig Heldmann 1 c/o Credit Suisses PB, Pde32 6002 Luzern SWITZERLAND Bernadette Meier 1 Postfach 47 6032 Emmen SWITZERLAND Peter Muff 1 Schoenruetirain 5 6045 Meggen SWITZERLAND Alexander Schar 1 c/o Prime Invest Usserhus 4 6023 Rothenburg SWITZERLAND Josy Schar 1 c/o Prime Invest Usserhus 4 6023 Rothenburg SWITZERLAND Thomas Schar 1 c/o Prime Invest Usserhus 4 6023 Rothenburg SWITZERLAND Ralph Schmid 1 Rueggisingerstrasse 141 6032 Emmen SWITZERLAND Eugen Stocker 1 Talstrasse 8 6403 Kuessnacht SWITZERLAND Translex AG 1 Sihlbruggstr. 105 6340 Baar SWITZERLAND Esther Vogel-Felber 1 Bergstrasse 21 6052 Hergiswil SWITZERLAND SCHEDULE 1 COPE DISCLOSURE SCHEDULE ------------------------ Section 2.2. Options, Warrants, Subscription Calls ------------------------------------- None. Section 2.3. Selling Stockholders Who Are U.S. Persons ---------------------------------------- None Section 3.5 Undisclosed Liabilities None Section 3.6 Material Adverse Changes None Section 3.7 Contracts and Agreements involving more than $50,000 Customers: Ringier AG Zofingen Liechtensteinische Landesbank Vendors: IBM Zurich ADIC Paris Others: CS Credit Suisse Lucern, Sfr. 1 Million Credit Contract dated 9/3/96 BAWAG Wien, ATS 1 Million Credit Contract renewed 9/9/97 Office Lease Rotkreuz, New Contract dated 9/9/97, $110,000 Take over Office Interior Rotkreuz, Contract dated 9/9/97, $150,000. Section 3.8 Court Orders, Proceedings None Section 3.10 Employment Agreements Consulting Agreements: Section 3.11 Insurance Policy Life Insurance Stephan Isenschmid 5/95 Termination Date $350,000 Adrian Knapp 5/96 Termination Date $350,000 Wolfgang Schallhorn 2/97 Termination Date $150,000 Liability Insurance Effective date 6/97, Termination date 6/2002 $3,500,000 Transport Insurance Effective date 2/97, Termination date 2/2002 $650,000 Fire/ Water Insurance Effective date 1/95, Termination date 1/2000 $650,000 Section 3.12 Trademarks and Patents Trademark COPE, Organization Mondial de la Propriete Intellectuelle International Registry No. 658047, covering Germany, Austria, Benelux, France, Italy, Scandinavia Section 3.16 Permits or Operating Rights not Obtained None. SCHEDULE 2 HARRIER DISCLOSURE SCHEDULE SECTION 4.2 Set forth below are the outstanding warrants and options to purchase Harrier Common Stock responsive to Section 4.2: Number of Underlying Name of Holder Shares Exercise Price (Pre-Split) (Pre-Split) Expiration Date - ----------------------- -------------------- -------------- ----------------- O. Walter 30,000 $0.50 January 10, 1998 H. Maissen 50,000 $0.70 November 20, 1997 R. Stussi 100,000 $0.30 March 19, 1998 Hochstrasser 100,000 $0.30 March 19, 1998 Guignet 10,000 $0.22 March 10, 1998 DeVito 150,000 $0.50 May 22, 1998 Hollister 75,000 $0.50 May 22, 1998 Kehrli 75,000 $0.50 May 22, 1998 Beaver 75,000 $0.50 May 22, 1998 Bartik, Cordeiro & Assoc. 75,000 $0.50 May 22, 1998 Hans Maissen 1,000,000 $0.13 April 1, 2000 Daniel Huber 700,000 $0.13 April 23, 2000 Cornelia Cuniberti 100,000 $0.13 April 23, 1999 Annabella Schalchli A.S. 100,000 $0.13 April 23, 2000 Neil Gibbons 100,000 $0.13 April 23, 2000 Daniel Huber 200,000 $0.13 September 2, 2000 Neil Gibbons 500,000 $0.13 September 2, 1999 SECTION 4.7 Set forth below are the contracts and agreements of Harrier and Glycosyn responsive to Section 4.7: Research and Development Agreement dated May 1, 1993 between American Diagnostica, Inc. and Harrier, Inc. DermaRay International, L.L.C. Limited Liability Company Agreement dated November 29, 1994 between Harrier, Inc. and Naturade, Inc. Asset Transfer Agreement and Plan of Liquidation and Dissolution dated June 30, 1997 by and among Harrier, Inc., Naturade, Inc. and DermaRay International, L.L.C. Technology Transfer Agreement dated January 31, 1996 between Harrier, Inc. and Glycosyn Pharmaceuticals, Inc. Letter Agreement dated September 30, 1997 between Glycosyn Pharmaceuticals, Inc., New Concept Therapeutics, Inc., Gerald Head and David Spielvogel. APPENDIX B CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HARRIER, INC. Harrier, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that: I. The amendment to the Corporation's Certificate of Incorporation set forth below was duly adopted in accordance with the provisions of Section 242 and has been consented to in writing by the directors pursuant to a Unanimous Written Consent of the Directors effective as January 5, 1998 and by the stockholders of the Corporation at an annual meeting held on March __, 1998, in accordance with Section 228 of the General Corporation Law of the State of Delaware. II. ARTICLE I of the Corporation's Certificate of Incorporation is amended to read in its entirety as follows: "ARTICLE I Name of Corporation The name of this corporation is COPE, Inc." IN WITNESS WHEREOF, the undersigned hereby duly executes this Certificate of Amendment hereby declaring and certifying under penalty of perjury that this is the act and deed of the Corporation and the facts herein stated are true, this __ day of March 1998. HARRIER, INC. By: --------------------------------------- Kevin DeVito, Chief Executive Officer HARRIER, INC. PRELIMINARY COPIES 2200 Pacific Coast Highway, Suite 301 Hermosa Beach, California 90254 (310) 376-7721 PROXY FOR ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder of Harrier, Inc. (the "Company") hereby constitutes and appoints Candace Beaver and Tycanne Ryan, each with power of substitution, as attorneys and proxies, to appear, attend and vote all of the shares of the common stock of the Company standing in the name of the undersigned at the Annual Meeting of Stockholders of the Company to be held at the offices of the Company, 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254 on March 12, 1998, at 10:00 a.m., local time, and at any adjournment or adjournments thereof, upon the following: 1. To approve and adopt the Stock Purchase Agreement and Plan of Reorganization ("Reorganization Agreement") by and among the Company, COPE AG, a Swiss corporation ("COPE"), and the shareholders of COPE ("COPE Shareholders") (the "Reorganization Proposal"). / / FOR / / AGAINST / / ABSTAIN 2. If the Reorganization Proposal is approved, to approve and adopt the Agreement ("Glycosyn Agreement") between the Company, Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), and the New Capital Investment Fund, a Cayman Islands investment fund ("NCIF") (the "Glycosyn Proposal"). / / FOR / / AGAINST / / ABSTAIN 3. If the Reorganization Proposal and Glycosyn Proposal are approved, to approve and adopt the Amendment to the Certificate of Incorporation of the Company to: (i) change the name of the Company to "COPE, Inc."; and (ii) reverse split the outstanding shares of Common Stock of the Company on a one for 45 basis (the "Amendment Proposal"). / / FOR / / AGAINST / / ABSTAIN 4. If the Reorganization Proposal, Glycosyn Proposal and Amendment Proposal are approved, to elect five directors as follows: Adrian Knapp, Stephen Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito (the "COPE Director Proposal"). / / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for all nominees listed below (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.) - -------------------------------------------------------------------------------- 5. To elect Atag Ernst & Young as the Company's independent auditors for the fiscal year ending December 31, 1998. / / FOR / / AGAINST / / ABSTAIN 6. If either of the Reorganization Proposal, Glycosyn Proposal or Amendment Proposal is not approved, to elect as directors Jurg Kehrli, Kevin DeVito and William Cordeiro (the "Harrier Director Proposal"). / / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for all nominees listed below (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.) - -------------------------------------------------------------------------------- 7. To vote with discretionary authority on such other business as may properly come before the meeting. / / FOR / / AGAINST / / ABSTAIN The Reorganization Proposal (Proposal No. 1), the Glycosyn Proposal (Proposal No. 2), the Amendment Proposal (Proposal No. 3) and the COPE Director Proposal (Proposal No. 4) are not independent. The Reorganization Agreement cannot be effected unless the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal are also approved. If the Reorganization Proposal is rejected, the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal will not be voted on. If the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and the COPE Director Proposal are approved and the transactions under the Reorganization Agreement ("Reorganization") are consummated, the Company will continue with the management of COPE. If either the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal is rejected, the Company will continue its current operations with the directors elected pursuant to the Harrier Director Proposal ("Proposal No. 6") and its current officers. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS INDICATED AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER BUSINESS. Dated: ___________, 1998 ----------------------------------- Signature ----------------------------------- Signature (if jointly held) ----------------------------------- Print Name Please mark, date and sign your name EXACTLY AS IT APPEARS ON THE ENVELOPE and return this Proxy as promptly as possible in the postage-paid envelope provided. PLEASE CHECK IF YOU ARE PLANNING TO ATTEND THE MEETING / /