SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Amendment No. 1
FORM SB-2 REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
LVPS MicroFacility, Inc.
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(Name Of Small Business Issuer In Its Charter)
Delaware 3841 33-0845992
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(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
7755 Center Avenue, 11th Floor, Huntington Beach, CA 92647
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(714) 372-2251
(Address and Telephone Number of Principal Executive Offices)
7755 Center Avenue, 11th Floor, Huntington Beach, CA 92647
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(Address of Principal Place of Business or Intended Principal Place of Business)
Richard O. Weed
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4695 MacArthur Court, Suite 530, Newport Beach, CA 92660
(949) 475-9086
(Name, Address, and Telephone Number of Agent for Service)
Approximate Date of Commencement of Proposed Sale to the Public: as soon as
possible after this registration statement becomes effective
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
CALCULATION OF REGISTRATION FEE
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Title Of Each Proposed Proposed
Class Of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Offering Registration
Registered Registered Per Unit Price Fee
- ------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Common Stock 625,000 $8.00 $5,000,000 $1,390
- ------------------------- ----------------------- ----------------------- ---------------------- -----------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PART I
INFORMATION REQUIRED IN PROSPECTUS
Item 1. Front of Registration Statement and Outside Front Cover of Prospectus.
The Registrant may amend this registration statement. A registration statement
relating to these securities has been filed with the Securities and Exchange
Commission. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS
LVPS MicroFacility, Inc., a Delaware corporation
625,000 shares of common stock of LVPS MicroFacility, Inc. ("LVPS") at a price
of $8.00 per share. The Offering is for $5,000,000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The Offering will terminate nine months after the effective date of this
registration statement.
You should carefully consider the Risk Factors beginning on page 6 of this
prospectus before purchasing any of the common stock offered by this prospectus.
This is a self underwritten offering.
====================== ===================== ============================
Shares Sold (3) Offering Price (1) Proceeds to Company (2)
====================== ===================== ============================
Per Share $8.00 $8.00
====================== --------------------- ============================
Minimum
Shares $2,300,000 $2,300,000
287,500
====================== ===================== ============================
Maximum Shares
625,000 $5,000,000 $5,00,000
====================== ===================== ============================
(1) The offering price of the shares has been determined by LVPS and
not as the result of arm's-length negotiations. (2) Before deducting
expenses of the offering. (3) In the event the 287,500 shares have not
been sold within nine months after the effective date of this
registration statement, this offering will terminate. This offer may be
extended for an additional sixty days.
Until the minimum shares are sold, all funds and shares will be held in
escrow by Richard O. Weed pursuant to an Escrow Agreement with LVPS.
There is presently no market for these securities.
Until _________, 2000, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The date of this prospectus is November ___, 1999.
Item 2. Inside Front and Outside Back Cover Pages of Prospectus.
Table of Contents
Item 3. Summary Information ...............................................5
Risk Factors. ...................................................6
Item 4. Use of Proceeds ...................................................10
Item 5. Determination of Offering Price. ..................................10
Item 6. Dilution. .........................................................10
Item 7. Selling Security Holders. .........................................10
Item 8. Plan of Distribution. .............................................11
Item 9. Legal Proceedings. ................................................11
Item 10. Directors, Executive Officers, Promoters and Control Persons. ....11
Item 11. Security Ownership of Certain Beneficial Owners and Management. ..15
Item 12. Description of Securities. .......................................16
Item 13. Interest of Named Experts and Counsel. ...........................16
Item 14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities .......................................16
Item 15. Organization Within Last Five Years. .............................16
Item 16. Description of Business. .........................................17
Item 17. Management's Discussion and Analysis or Plan of Operation. .......20
Item 18. Description of Property. .........................................21
Item 19. Certain Relationships and Related Transactions. ..................21
Item 20. Market for Common Equity and Related Stockholder Matters. ........21
Item 21. Executive Compensation. ..........................................21
Item 22. Financial Statements. ............................................23
Item 23. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure .........................................34
SUMMARY
THE COMPANY
LVPS MicroFacility, Inc. ("LVPS") was incorporated in the State of Delaware on
December 16, 1998. LVPS was formed to manufacturer facilities for the production
of Large Volume Parenteral Solutions. The LVPS MicroFacility is a
state-of-the-art modular micro-manufacturing facility that will produce
intravenous solutions from local water sources. The LVPS MicroFacility plants
will be commissioned to US FDA and host country standards.
LVPS was recently formed and has no ongoing operations. There is no market for
its securities.
LVPS's executive office is at 7755 Center Avenue, 11th Floor, Huntington Beach,
CA 92647. The telephone number is (714) 372-2251.
THE OFFERING
Offering Size................................Maximum: 625,000 shares of common
stock ($5,000,000)
Minimum: 287,500 shares of common
stock ($2,300,000)
Description of Shares........................Shares of common stock, $.001 par
value
Offering Price...............................$8.00 per share
Common Stock
Currently Outstanding........................625,000 shares
Common Stock Minimum Maximum
Outstanding After Offering ..................912,500 1,250,000
Risk Factors.................................Investment in the shares involves a
high degree of risk.
Use of Proceeds..............................LVPS will use the net proceeds
from this sale of shares to
commence operations.
Subscription Procedure.......................To subscribe to the shares,
prospective investors are to
deliver (1) a completed and duly
executed copy of the subscription
agreement and (2) immediately
available funds in the amount of
$8.00 per share.
RISK FACTORS
An investment in the shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider, among other things, the
following factors concerning the business of LVPS and the offering, and should
consult independent advisors as to the technical, tax, business and legal
considerations regarding an investment in the shares.
LVPS is a Start-Up Stage Company with No Operating History and is Subject to All
of the Risks Inherent to a Business in the Start-up Phase
LVPS was established in December 1998 and has no operating history and no
revenues and is subject to all of the risks inherent in a business in the
start-up phase. LVPS has financed its activities to date through a private
placement of its equity securities and LVPS is dependent on the proceeds from
this offering and the sale of its prototype to fund its operations.
The LVPS MicroFacility is Subject to Extensive Government Regulation Which May
Delay or Impede LVPS's Operations
LVPS's industry is subject to extensive and frequently revised federal, state,
local and applicable foreign laws and regulations. The successful manufacture of
the LVPS MicroFacility will require applicable government permits,
authorizations and approvals, the nature of which may vary from jurisdiction to
jurisdiction, and continuing compliance with required packaging, labeling,
handling, treatment, disposal and documentation procedures and notice and
reporting obligations. The permits, authorizations and approvals required for
the MicroFacility could be difficult and time-consuming to obtain and, if and
when issued, may be subject to conditions or restrictions which may limit LVPS's
ability to operate efficiently or at all in the applicable jurisdiction. LVPS's
withdrawal from certification could have a material adverse effect on LVPS's
business. It is the intention of LVPS to first obtain the necessary permits,
authorizations and approvals in areas of the world where LVPS is likely to
encounter the least amount of difficulty in the approval process.
Failure of the LVPS MicroFacility to operate in compliance with the requirements
and limitations of any permit, or with the laws and regulations pursuant to
which the permit was issued, could jeopardize the permit. Routine compliance
inspections by the issuing regulatory agency, as well as complaints filed or
anonymously sponsored by LVPS's competitors or others alleging that LVPS is not
operating in compliance with a particular permit, could result in administrative
proceedings to modify, suspend or revoke the permit. Any such modification,
suspension or revocation could have a material adverse effect on LVPS's
business, financial condition and results of operations. Some permits have to be
renewed periodically, and there can be no assurance that any existing or future
permit which is required to be renewed will be renewed by the issuing regulatory
agency. The failure to obtain any such renewal could have a material adverse
effect on LVPS's business, financial condition and results of operations.
Like any technology, the LVPS MicroFacility may be subject to certain
technological limitations. Although LVPS has never been denied regulatory
approval because of any technological limitation on its MicroFacility, there can
be no assurance that specific limitations will not be identified by a regulatory
agency as a sufficient reason to withhold a necessary permit in a particular
jurisdiction or used by competitors to encourage customers or potential
customers to engage their services rather than those of LVPS. There can be no
assurance that any such actions would not have a material adverse effect on
LVPS's business, financial condition and results of operations.
LVPS's Growth May Require Substantial Expenditures Which LVPS May Not Be Able To
Fund
Any additional equity financing may be dilutive to LVPS's existing stockholders,
and any debt financing, if available, may involve restrictive covenants which
limit LVPS's operations. LVPS's failure to raise capital if and when needed
could delay or suspend LVPS's strategy and result in a material modification of
LVPS's business strategy. LVPS's inability to fund its capital requirements
could have a material adverse effect on LVPS's business, financial condition and
results of operations.
LVPS's Primary Source of Revenue and Business Will Come From the Sale of The
MicroFacility, Which May Not Support LVPS Growth
LVPS will derive its business and revenues from the sale of its MicroFacility.
To achieve market acceptance and penetration, LVPS must continually enhance and
improve its products and services, as well as increase its marketing and sales
efforts to effectively compete and increase customers' awareness of LVPS's
products and services. Although LVPS is aggressively continuing research and
development for expanded products, there can be no assurance that LVPS's
expanded marketing and sales efforts and increased expenditures will result in
successful commercialization and increased market penetration of LVPS's products
and services.
Technological Factors May Impede LVPS's Ability to Produce a Quality
MicroFacility and Related Products
There can be no guarantee that LVPS's products will prove to be sufficiently
reliable in widespread commercial use. It is common for manufacturing facilities
as complex and sophisticated as that incorporated in the LVPS MicroFacility to
experience problems during and subsequent to commercial introduction. There can
be no guarantee that LVPS will identify such errors in existing or future
products, or if LVPS identifies the errors, will correct the errors. Any such
errors could delay commercial introduction of new products and require
modifications in already installed products. Remedying such errors may be costly
and time consuming. Delays in remedying any such errors could materially
adversely affect LVPS's competitive position with respect to existing or new
technologies and products offered by its competitors. Further, LVPS remains
subject to all of the risks inherent in new product development, including
unanticipated technical or other development problems, which could result in
material delays in product commercialization or significantly increased costs.
As a Result of Rapid Expansion, LVPS May Not Have the Ability To Manage Growth
LVPS will expand its operations rapidly, which may create significant demands on
LVPS's administrative, operational, developmental and financial personnel and
other resources. Additional expansion by LVPS may further strain LVPS's
management, financial personnel and other resources. If LVPS's management is
unable to manage growth effectively, its business, financial condition and
results of operations could be materially adversely affected There can be no
guarantee that LVPS's systems, procedures, controls and existing space will be
adequate to support expansion of LVPS's operations. LVPS's future operating
results will depend, among other things, on its ability to manage changing
business conditions and to continue to improve its operational, financial
control and reporting systems.
LVPS's ability to manage growth depends in part upon LVPS's ability to attract,
train and retain a sufficient number of qualified personnel or independent
contractors. A heightened turnover rate among LVPS's employees would increase
LVPS's recruiting and training costs, and if LVPS were unable to recruit and
retain a sufficient number of employees or independent contractors, it could be
forced to limit its growth or possibly curtail its operations. However, LVPS has
in place a seasoned management team in the sales and marketing, manufacturing,
and regulatory areas.
Due to the Substantial Cost of the LVPS MicroFacility, LVPS's Customer Base May
be Limited
The estimated cost for the LVPS MicroFacility is $5,500,000. Revenues
attributable to a relatively small number of customers are likely in the
foreseeable future to represent a significant percentage, in any given period,
of its total revenues. The loss of one or more major customers could have a
materially adverse effect on LVPS's business, financial condition and results of
operations. There can be no guarantee that any future customers will maintain
business relationships with LVPS.
Competition in the Market For LVPS's MicroFacility Is Not Well Developed And
Emerging Competitors May Have A Materially Adverse Effect On LVPS Operations
LVPS believes that the principal competitive factors facing LVPS are the
existing methods of manufacturing intravenous solutions in large volume rotary
filling plants. While no one competes directly with LVPS in the manufacture of
manufacturing facilities for intravenous solutions, a number of large well
capitalized companies currently offer intravenous solutions for sale. An
increase in competition by these large pharmaceutical companies could result in
price reductions in the LVPS MicroFacility and related products and loss of
market share and could have a material adverse effect on LVPS's business,
financial condition and results of operations. There can be no guarantee that
LVPS will be able to compete successfully with its competitors.
Although LVPS has been unable to identify the likely response, LVPS hopes to
sell its MicroFacility to operators who will compete successfully against these
large companies.
LVPS is Dependant on Third-Party Vendors in the Manufacture of the
MicroFacility, Potential Loss of These Vendors Could Harm LVPS's Business
LVPS will depend on third-party vendors for hardware, component parts,
manufacturing, systems integration, quality assurance, administrative,
consulting and engineering services, which are incorporated in the
MicroFacility. Items required for the MicroFacillity that are available from two
vendors or less include the Pure Water RO Unit/Pre-Treatment System, available
from U.S. Filter or Letzner Inc., the Process Tanks, available from DCI
Equipment and Mueller Inc., the Vortex Mixers, available from Lightning Inc. and
Mueller Inc., the Blow Fill Sealer, available from Healthstar Pharmaceutical
Services Inc. and Rommelag USA, Inc., the Labeling Machine, available from EPC
Identification Services, the Hopper Feeder, available from Comet Corp. and the
Modules (Bare Shells), available from Sonic Industries. Although LVPS believes
that there are currently available substitute sources for all such equipment and
services, LVPS could be required to redesign its product to accommodate
substitutes therefor. Any inability or delay in establishing necessary
procurement arrangements or successfully modifying products could have a
material adverse effect on LVPS's business, financial condition and results of
operations.
The Success of LVPS's MicroFacility is Dependant on its Ability to Protect its
Proprietary Rights
LVPS currently has exclusive licenses from DenexCorp(TM)/LVPS MicroFacility for
the design and specifications of its MicroFacility. LVPS's strategy is to
protect its technology and other proprietary rights through patents, copyrights,
trademarks, nondisclosure agreements, license agreements, and other forms of
protection. There can be no guarantee that any pending or future patent
application of LVPS or its licensors will result in issuance of a patent, that
the scope of protection of any patent of LVPS or its licensors will be held
valid if subsequently challenged, or that third parties will not claim rights in
or ownership of the products and other proprietary rights held by LVPS or its
licensors. In addition, the laws of certain foreign countries do not protect
LVPS's intellectual property rights to the same extent as the laws of the United
States.
Litigation or regulatory proceedings which could result in substantial cost and
uncertainty to LVPS, may also be necessary to enforce patent or other
proprietary rights of LVPS or to determine the scope and validity of a third
party's proprietary rights. Although LVPS believes that its technology has been
independently developed and that its products do not infringe patents known to
be valid or violate other proprietary rights of third parties, it is possible
that such infringement of existing or future patents or violation of proprietary
rights may occur. LVPS's failure to successfully enforce its proprietary rights
or defend against infringement claims brought by third parties could have a
material adverse effect upon LVPS. In addition, there can be no assurance that
LVPS will have the resources necessary to successfully defend an infringement
claim brought by a third party.
LVPS is Dependent on Retaining and Attracting Key Personnel For The Success of
its MicroFacility
LVPS is dependent upon a limited number of key management, technical and sales
personnel including its Chairman, Ronald Patterson and CEO, Ross Boling to
produce and market the MicroFacility. LVPS's future success will depend, in
part, upon its ability to attract and retain highly qualified personnel with
experience and knowledge in the medical manufacturing area. LVPS's loss of key
personnel, especially if the loss is without advance notice, or LVPS's inability
to hire or retain key personnel, could have a material adverse effect on LVPS's
business, financial condition and results of operations. Further, LVPS faces
competition for key personnel from major medical manufacturers and may not have
the resources as a start-up company to compete effectively for such personnel.
LVPS has written employment agreements with its executive officers, Ron
Patterson and Ross Boling providing for specific terms of employment, but other
key personnel could leave LVPS's employ with little or no prior notice. LVPS
does not carry any key man life insurance.
Certain Beneficial Ownership of LVPS Common Stock May Subject LVPS to Continued
Control by Current Officers, Directors And Affiliated Entities
Following completion of this offering, LVPS's current executive officers and
directors, Ron Patterson and Ross Boling through an entity affiliated with them,
Denex Corp./LVPS MicroFacility, a Nevada corporation, will beneficially own, in
the aggregate, approximately 49% of LVPS's outstanding common stock. If they
were to act together, these stockholders may be able to control substantially
all matters requiring approval by LVPS's stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. This concentration of ownership could prevent a change in control
of LVPS, which may be beneficial to LVPS growth.
There Is No Public Market For The Shares
It is unlikely that any market will develop prior to the second anniversary of
LVPS's operations following this offering, if then. The offering price for the
shares was determined by management and not as the result of arms-length
negotiations.
LVPS Shares are Subject to Immediate And Substantial Dilution
Dilution is the reduction in the value of a purchaser's investment in common
stock measured by the difference between the purchase price per share and the
net tangible book value per share of the common stock after the purchase. The
net tangible book value of LVPS represents its total assets less its total
liabilities and intangible assets (consisting primarily of goodwill). The
offering price of $8.00 is substantially higher than the net tangible book value
per share of common stock. New investors purchasing shares in this offering
accordingly will incur immediate dilution of $4.00 per share.
LVPS Has Never Paid Any Cash Dividends On Its Common Stock And Does Not
Anticipate Paying Cash Dividends Within The Next Two Years
Item 4. Use of Proceeds.
USE OF PROCEEDS
The following table sets forth the use of the proceeds from this offering:
If Minimum Sold If Maximum Sold
Amount % Amount %
--------------- ---- --------------- ----
Total Proceeds $2,300,000 100% $5,000,000 100%
Less: offering expenses $230,000 10% $500,000 10%
Legal & Accounting $23,000 1% $50,000 1%
Copying & Printing $4,000 .2% $8,000 .2%
Net Proceeds from Offering $2,043,000 89% $4,442,000 89%
Use of Net Proceeds $2,043,000 100% $4,442,000 100%
Equipment $1,412,257 69% $2,384,667 54%
Services $498,175 24% $1,248,175 28%
Operating Expenses & $132,568 7% $809,158 18%
Working Capital
If the amount of securities sold are between the minimum and the maximum, the
purchase of equipment and services will have priority over operating expenses,
executive salaries and working capital. If the offering is not fully sold, then
executive salaries and overhead expenses will be proportionately reduced.
Item 5. Determination of Offering Price.
The Offering Price of the shares has been determined by LVPS and not as the
result of arm's-length negotiations. There is no established public market for
the shares. LVPS set the price of the shares to value LVPS before financing at
$5,000,000 and after full financing through this offering at $10,000,000.
Item 6. Dilution.
LVPS's existing officers, directors, promoters, and affiliated persons obtained
their 612,500 shares for cash consideration of $612 or $.001 per share. As a
comparison, investors in this offering will pay $8.00 per share. Therefore,
investors will suffer an immediate dilution of $4.00 per share. The net tangible
book value per share before this distribution is $0.00. After this distribution,
net tangible book value will be $4.00 per share. As such, there will be a $4.00
per share increase in net tangible book value per share attributable to the cash
payments made by purchasers of the shares being offered. The purchasers will
absorb an immediate dilution of $4.00 per share in net tangible book value from
the public offering price. The following table illustrates this per share
dilution.
Offering price to new investors ...........................................$8.00
Average price paid by existing stockholders................................$.01
Net tangible book value before the offering .................$0.00
Increase in tangible book attributable to this offering......$4.00
Pro forma net tangible book value after the offering.......................$4.00
Dilution of net tangible book value to new investors.......................$4.00
Dilution to new investors if the minimum number of shares are sold.........$5.48
Dilution to new investors if the maximum number of shares are sold.........$4.00
Item 7. Selling Security Holders.
None.
Item 8. Plan of Distribution.
LVPS is offering a minimum of 287,500 and a maximum of 625,000 shares at the
purchase price of $8.00 per share on an "all or none basis" as to the first
287,500 shares. This is a self underwritten offering. If the minimum number of
shares is not sold during the offering period, the proceeds received will be
promptly returned to the investors without any fees or interest. LVPS may
allocate among or reject any offers to purchase in whole or in part. Moreover,
LVPS's directors, officers, and principals of LVPS's counsel may purchase shares
on the same terms and conditions as all other investors; provided, however, that
any such shares so purchased (a) will not be included in calculating the minimum
number of shares to be sold and (b) will be acquired for investment and not with
an intention to resell such shares shortly thereafter.
Item 9. Legal Proceedings.
LVPS is not involved in any legal proceedings.
Item 10. Directors, Executive Officers, Promoters and Control Persons.
Identification of Directors and Executive Officers
Name Age Position held with the Term of office as a director Dates of service
Registrant
- --------------------------- ------- ---------------------------- ----------------------------- ----------------------------
Ronald Patterson 55 Chairman, President & One year December 16, 1998 to
CEO/Director present
Ross Boling 52 Chief Operating One year December 16, 1998 to
Officer/Secretary/Director present
At present there are two full-time employees of LVPS, Ron Patterson and Ross
Boling. Messiuers Patterson and Boling will not receive salaries from LVPS until
the securities offering is completed. Further, their salaries will be
proportionately reduced if less than the maximum offering is achieved.
Business experience:
Ronald R. Patterson. President, CEO & Chairman LVPS MicroFacility, Inc.
December 1998 to present. Founder of LVPS, Mr. Patterson has senior level
experience in manufacturing design, research and development and biomedical &
biomedicine, distribution in Marketing/Sales in the international Medical Field.
Extensive experience in manufacturing, sales, and new product development.
Author of "Success and Wealth for the Entrepreneur." published in 1992.
Inventor of several patents that are currently pending.
President & Chief Executive Officer DenexCorp(TM)/LVPS MicroFacility.
January 1994 to present. Ron Patterson founded DenexCorp to bring new and
innovative state-of-the-art medical products to the international community with
a totally integrated, complete, manufacturing; plant that produces I V solutions
for basic medical requirements. Based on his 25 years in the medical industry,
Ron realized that the medical industry was in drastic and dramatic change.
DenexCorp is structured to lead this change by offering new technology to the
domestic and international community with special emphasis on new and emerging
medical market nations. LVPS has been involved in research, international
development, and patents application. Complete development of FDA approval
process. The MicroFacility plant well exceeds industry standards for
pharmaceutical manufacturers specializing in emerging nations.
Additional business experience
General Clinical Plastics Corporation. Founding Partner/COO A start-up medical
injection molding facility with demonstrated strong marketing and development
strategy, the company swiftly became one of the premier medical injection
molding facility on the West Coast. From the sale of the company to Premium
Plastics, one of the largest medical plastics manufacturers in the U.S. Ron
formed Medexco, an import/ export company specializing in manufacturing and
packaging sterile surgical gloves and non-sterile examination gloves. Its Health
Care Equipment Services procured and distributed medical equipment to primary
markets in Mexico and Central and South America.
Medical Manufacturers Marketing Company (MMMC) Following a major restructuring
at Cenco, became a Principal in an established 'independent rep group with a
major distribution network extending throughout western U.S. and Hawaii.
Cenco Medical Health Supply Corporation Division Manager, Western Divisions. The
youngest Division Manager in the history of the company, responsible for
hospital planning, engineering, distribution, labor arbitration, implementation
of corporate procedures, sales forecasting, product marketing, national and
regional group contracting, data processing systems, and employee relations.
Education: Bachelor of Science, Business Administration Public Health-University
of Southern California Military; United States Army Green Beret-Honorable
Discharge Special Forces Medic-Fort Bragg, North Carolina/Republic of Vietnam
Awards: Bronze Star, Purple Heart, and Combat Medical Badge
Associations/Achievements
Ross T. Boling. Chief Operating Officer, Secretary & Director LVPS
MicroFacility, Inc. December 1998 to present. Co-founder of LVPS, Mr. Boling has
over 15 years of international development experience in several industries. His
background in sales, marketing, and finance gives further leadership in LVPS'
goal of world wide development of MicroFacility plants.
Chief Operating Officer DenexCorp(TM)/LVPS MicroFacility
January 1994 to present. Co-founder of DenexCorp, Ross Boling has over 15 years
of International Development Experience in several industries. Management
responsibility for Operations, Sales, and Marketing. Created the sales and
marketing strategies for global development of LVPS MicroFacility plants.
Supervision of LVPS's worldwide network of authorized independent sales
representatives.
Additional business experience
The Boling Group Owner/Principal,. An international marketing consulting firm
specializing in hospitality, health, telecommunications, and transportation
industries. Advisory services to major investment groups concerning proposed
take-over of a long distance telecommunications company; developed
marketing/advertising strategies for Greyhound Bus Lines Rural Connection
transportation service; awarded $700,000 contract to implement the State of
Michigan's Rural Transit service marketing program.
Pool/Sarraille Advertising, Inc. Vice President/COO Managed Dallas, Texas branch
of Los Angeles-based firm generating billing in excess of $4 million. Launched
International expansion of Brock Residence Inn Hotel system creating
marketing/advertising plan, franchise fullfillment brochures, investment film.
Managed agency account team, led new business activites, coordinated Franchise
Collateral Fullfillment program. Responsibility for the overall advertising and
public relations for Lincoln Hotels, Div. of Lincoln Property Company.
Hawthorn Suites Hotel Group Vice President/Director of Sales and Marketing.
Administered all system sales, marketing, public relations, and market research.
Participated in franchise sales activities and development; created national
brand identification of new all-suite hotel chain exceeding sales target of $3
million the first year; trained and motivated sales force for over 25 hotel
properties.
Chesebrough-Ponds, Inc. Territory Sales Manager for North Texas. Account
responsibility for major teaching hospitals and distributors.
Education: BA Communications-University of Texas
Identification of Significant Employees-The individuals named below are at
present consultants to both LVPS and DenexCorp on an ongoing basis. Our
intention is to employ either these individuals or individuals with similar
professional backgrounds and expertise as full-time employees or consultants to
LVPS once the securities offering is completed. Their backgrounds and experience
illustrate the type of professional employees required to oversee manufacture
and regulatory issues involved with the MicroFacility plant.
Name Age
- --------------------------- -------
Jon Gow 50
Douglas Platt 51
Steven Smith 43
Todd Marrs 50
Bill Hatton 45
Damon Jones 34
Previous business experience:
Jon W. Gow President & Owner Pacific Environmental Technologies, Inc. (PETI).
October 1989 to present. PETI is an international cleanroom design build and
manufacturing company. With over 20 years in the critical environment industry,
Mr. Gow has gained extensive experience in most aspects of cleanrooms facility
design and construction including air-conditioning (HVAC) systems, facility
layout, process layout, and commissioning with an emphasis on turnkey projects
and project management. Other areas of his expertise are controls design for
temperature and humidity; start up and balancing of HVAC systems; and innovative
design solutions that offer cost benefit results to the client. PETI provides:
clean room facility design, engineering, consulting, project management,
installation and construction services and commissioning/certification services
for a broad spectrum of industries. These include: aerospace, electronics, bio
medical device manufacturing, pharmaceutical, optical storage and others. Within
the company, Mr. Gow is actively involved in the engineering and design of the
LVPS MicroFacility under contract.
Previous to PETI, Mr. Gow has been involved in process systems and critical
manufacturing environments for over 20 years. His initial exposure to critical
environment processes and cleanrooms came in the micro electronics industry as a
process engineer where his chemistry background provided the basic knowledge and
analytical skills required in the semiconductor wafer processing industry. It
was during this period that he gained valuable knowledge and experience in
project management and engineering support for a new wafer fab facility. Mr.
Gow, after leaving the microelectronics industry, joined a Southern California
cleanroom manufacturing and contracting company, B.A.C. For the next 10 years
Mr. Gow provided technical experience in HVAC design, clean room design, project
management, sales and marketing in the international and domestic markets for
critical manufacturing environments that utilize cleanrooms. Mr. Gow worked
extensively in all aspects of the projects including project management,
estimating, design and commissioning of projects which include domestic projects
in the U.S. as well as overseas projects in Taiwan, S. Korea and the Middle
East.
Education: Bachelors of Science degree in Chemistry from the California
University at Pomona (California Polytechnics University).
Douglas B. Platt. President, East-West Technical Services
1988 to present. Mr. Platt has extensive experience in process development
through validation and license of pharmaceutical and biotechnology operations.
Regulatory matters like biocontainment. sterile processing with emphasis on
aseptic manufacturing, filtration. sterilization. cGMP compliance. validation
and the use of isolation and mobile technologies in aseptic processing. Other
areas of his expertise are facility design and planning, process flow,
WFI/Ultrapure water systems and equipment selection, evaluation and
qualifications. Mr. Platt is actively involved with the Parenteral Drug
Association, Filtration Society, Society of Pharmaceutical Engineers. the
Institute of Environmental Sciences, and the Water Quality Association.
Additional experience
Alpha Therapeutics Senior project management supervisor. Supervision and project
management responsibilities throughout LVP/S P manufacturing facility in
Southern California. Some of his duties were development with engineering and
quality assurance of the design, construction, and validation for a new $6
million sterile filling and filtration facility, which resulted in increased
productivity by approximately $20 million and doubled the capacity of the
filling operation on a daily basis. Designed and developed the first formal
certified and GMP compliant custodial program plant wide for Alpha Therapeutics.
Biomedical Department of Scientific Air Systems Chino, California Senior
Manager. Provided management and leadership for turnkey design/build
capabilities in the pharmaceutical. and biotech industries. His duties included
sales engineering providing international clients with conceptual design
engineering, equipment selection, costing, and contract negotiations.
Gelman Sciences Project Manager/Sales Engineer. Mr. Platt provided product
management and sales engineering expertise, writing, implementing and directing
the field efforts of a validation in plant program affecting over $30 million in
filtration products. He also, through his own initiative, was successful in
negotiating Gelman as one of the two providers of filtration products to a $500
million global ophthalmic manufacturing company with facilities in 5 countries
resulting in annual sales over $1 million.
Education: Bachelors of Science degree in Psychology in a Pre Medical program in
Tennessee. Certificate of Pharmacy, Fort Sam Houston, Texas Medical School
Certificate of Biocontainment Technology at John Hopkins University, Maryland.
Steven L. Smith. Senior Manufacturing Manager, McGaw, Inc.
1991 to present. Mr. Smith has over 15 years of management experience in the
pharmaceutical industry. He has expertise in medical products. process
development, capital and expense planning, market research; plastic materials
and processing, all methods of sterilization. processing equipment, and
automation. Currently overseeing cost effective drug delivery and IV container
systems. He has worked closely with other departments to revamp McGaw's entire
process and product development program. He has interfaced with world-renowned
pharmaceutical and biotech companies in the exploration and development of
mutual beneficial joint development projects. His achievements include the
development and successful introduction of the patented Excel(TM)IV system and
the development of the Duplex(TM) advanced drug delivery system. He was the
originator and the product champion behind both of these projects. He is
actively a member of ISPE. ASHP, and PDA.
American Hospital Supply Corporate Technical Consultant Corporate Technical
Consultant (Pacific International Division) providing technical and
manufacturing support. He increased the output, efficiency, and quality of
medical products produced and developed at various locations. He developed new
product technologies specifically designed to address the needs of each market.
This included a B/F/S irrigation and IV container system and the use of RO to
produce WFI.
Todd P. Mairs. Consultant Long Term Manufacturing Maintenance Systems
1993 to present. Mr. Mairs has over twelve years of experience in consulting to
commercial nuclear plant owners. the Electric Power Research Institute URI and
the Department of Energy (DOE) in the application of risk management methodology
and reliability engineering to improve facility capacity, production throughput.
and maintenance cost structure. He is actively involved in the design of
maintenance cost/performance strategies and the development of Life-cycle
Maintenance Cost Management process. Currently implementing Life-cycle
Maintenance cost Management at Calvert Cliffs Nuclear Power Plant, Cooper
Nuclear Station, and Boston Edison fossil generating stations to integrate risk,
reliability, maintenance, and cost engineering techniques into an asset and
resource management strategy.
Developed a risk and performance-based process for reducing operating costs by
reengineering the development, planning, scheduling, and conduct of maintenance
activities and inventory management for industrial facilities. The goal of the
Lifecycle Maintenance Cost Management (LCM2) process is to achieve significant
and sustained O&M cost reduction and capacity improvement throughout the
operating cycle of a plant without sacrificing safety. This cost-benefit
decision methodology for conducting maintenance activities during all modes of
operation (e.g., generation, production. or manufacturing) requires explicit
consideration of financial, operational, and safety risks.
Currently implementing the LCM2 strategy at Calvert Cliffs Nuclear Power Plant
and Cooper Nuclear Station. Additionally, he has consulted with ComEd. Southern
California Edison. Niagara Mohawk Power Corporation, PSE&G. and Duquesne Light
in developing maintenance policy, process, and procedures that assure safe plant
operation and equipment reliability, and achieve greater efficiencies in cost
performance. In addition. this methodology is being applied at other facilities,
including polyester and pharmaceutical manufacturing facilities, and a uranium
enrichment chemical processing plant.
Mr. Mairs continues to consult with EPRI on similar projects involving the
application of risk management strategies for optimizing the maintenance
business function.
William Hatton. Consultant
1989 to present Mr. Hatton has over 20 years combined experience working in
manufacturing, quality research and development, and regulatory affairs. Mr.
Hatton is responsible for the coordination of the commissioning and validation
efforts. He has supervised qualifications and validation for several
multi-million dollar construction projects. He also has hands on experience
working within Manufacturing, Metrology, Quality Control, and Quality Assurance.
R & D. and Regulatory Affairs groups. He is a member of the Regulatory Affairs
Professional Society
R.J.M. Laboratories Chemist. Chemist performing bench top to pilot plant scale
up-custom synthesis in stereospecific organometallic hydride reduction.
Richard's Surgical Manufacturing company Quality Engineer Responsible for
monitoring plant GMP compliance and in-house training programs. He performed
vendor audits, wrote inspection procedures, reviewed drawings prior to release,
reviewed rejects for defect analysis, made scrap or rework decisions., wrote
engineering change requests.
Westech Gear, Senior Quality Assurance Analyst Performed pre-award surveys for
multi-million dollar contracts (Air Force Nuclear Vault, Navy submarine
elastomeric coupling). He evaluated calibration systems to Mil-STD-45662A, and
audited vendor's quality systems (MIL-45208A and Mil-Q-9858AO).
International Medication Systems, Ltd. Metrology Supervisor and Validation
Project Leader. Implemented a cost effective calibration program reviewed by the
FDA and generated standard cost estimates for departmental budgets and supported
installation qualification for a facility upgrade. He also initiated a gamm
sterilization dosimetric release program and executed protocols for steam
sterilization of parenteral. solutions and dry heat depyrogenation of equipment
and components.
At Skyland Scientific Services Mr. Hatton was a Technical Manager assisting in
the development of validation master plans of new pharmaceutical manufacturing
facilities. He wrote protocols. made cost estimates and supervised the on-site
execution of the validation effort.
Education: University of California, Los Angeles, B.S. Psychobiology.
Damon P. Jones. Manager, product development, Medtronic
1994 to present. Mr. Jones has over 13 years experience in the medical device
manufacturing industry as a manager/supervisor. He is also a Certified Quality
Engineer (CQE). He received the U.S. Patent application and Medtronic
recognition award for Automated System and Process for Sterilizing and
Preserving a Product in an Aseptic Environment in April of 1994. Currently
Manager of Product Development Projects for Medtronic Heart Valve, Inc. He is
responsible for coordination and implementation of quality assurance systems,
quality assurance laboratories (Microbiology and Chemistry) and control and
improvement of surface modification processes. Mr. Jones has introduced and
sustained compliance programs for international and domestic regulations (FDA,
MDD, ISO, CEN). He is currently a member of the American Society for Quality
Control and Chairman of the United States technical advisory group (ISO sub-TAG)
to ISO TC 19 81WG 10 and Delegate to ISOTC 198.
For over 4 years Mr. Jones was a Senior Microbiologist for Medtronic, Inc.;
Heart Valve Division. He conducted sterilization validations for liquid
chemical, ethylene oxide, steam and irradiation sterilization's. He also planned
and coordinated environmental monitoring programs. bioburden monitoring
programs, water system monitoring and maintenance programs. He was responsible
for all microbiology quality assurance activities.
He also supervised the Heart Valve Division at Medtronic. His responsibilities
included supervision of all validation, inspection, test, and regulatory
activities related to Microbiology and Chemistry. He also managed the laboratory
personnel and coordinated biocompatibility, sterilization and microbiological
quality control for new product development activities.
Presently manages and coordinates the development of implantable cardiovascular
devices. Activities include identifying, organizing and leading individuals for
cross functional project teams. His product development project scope includes
identifying and cultivating product concepts. developing concepts into viable
product offerings, and obtaining United States and International market
approvals and release. Education: B.S. Microbiology
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------- ------------------------------------ ------------------- ----------------- -----------------
Title of Class Name and Address of Beneficial Amount and Nature Percent of Percent of
Owner of Beneficial Class Prior to Class Upon
Owner Offering Completion of
Offering
- ------------------------- ------------------------------------ ------------------- ----------------- -----------------
common stock, $.001 par DenexCorp (1) 612,500 98% 49%
value 7755 Center Avenue, 11th Floor
Huntington Beach, CA 92647
Ron Patterson (2)(3) 434,875 indirect 70% 35%
7755 Center Avenue, 11th Floor
Huntington Beach, CA 92647
Ross Boling (2)(3) 7755 Center 177,625 indirect 28% 14%
Avenue, 11th Floor
Huntington Beach, CA 92647
Officers and Directors 612,500 98% 49%
- ------------------------- ------------------------------------ ------------------- ----------------- -----------------
(1) LVPS, at present, is 98% owned by DenexCorp(TM)/LVPS , a Nevada
corporation ("DenexCorp"). As such, DenexCorp is an affiliate of LVPS.
Upon completion of this offering, DenexCorp will own 49% of LVPS.
(2) Ron Patterson and Ross Boling, who are officers and directors of LVPS,
are also the officers and directors of DenexCorp and together control
100% of the common stock of DenexCorp. Ron Patterson owns 71% of
DenexCorp and Ross Boiling owns 29% of DenexCorp. Following completion
of this offering, LVPS's current executive officers, directors and
entities affiliated with them will beneficially own, in the aggregate,
approximately 49% of LVPS's outstanding common stock.
(3) Ron Patterson, as the majority stockholder of DenexCorp. has sole
investment power and sole voting power on the shares of LVPS owned by
DenexCorp.
Item 12. Description of Securities.
LVPS is authorized to issue Twenty Million (20,000,000) shares of $.001 par
value common stock and One Million (1,000,000) shares of $.001 par value
preferred stock. Prior to this offering there are 625,000 shares of common stock
issued and outstanding. There are no shares of preferred stock outstanding at
the present time.
LVPS's board of directors has the power by resolution only and without further
action or approval, to cause LVPS to issue one or more classes or one or more
series of preferred stock within any class thereof and which classes or series
may have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the board of
directors, and to fix the number of shares constituting any classes or series
and to increase or decrease the number of shares of any such class or series.
Each stockholder is entitled to one vote in person or by proxy for each share of
the capital stock. Dividends upon the capital stock of LVPS, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of capital stock, subject to the
provisions of the Certificate of Incorporation. There are no preemptive rights.
Item 13. Interest of Named Experts and Counsel.
Certain legal matters, including the validity of the securities being issued,
will be passed upon by Richard O. Weed, counsel to LVPS, who at present owns 2%
of LVPS, and upon completion of this offering, will own 1% of LVPS. In addition,
Mr. Weed will receive 1% contingent compensation from the proceeds of the
offering.
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities .
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
LVPS's Certificate of Incorporation provides that a director of the corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach or fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
knowing misconduct or an intentional violation of the law, (iii) under section
174 of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived any personal benefit.
Item 15. Organization Within Last Five Years.
Transactions with promoters
LVPS, at present, is 98% owned by DenexCorp(TM)/LVPS MicroFacility, a Nevada
corporation ("DenexCorp"). As such, DenexCorp is an affiliate of LVPS. Upon
completion of this offering, DenexCorp will own 49% of LVPS. DenexCorp has taken
steps to protect the design of the MicroFacility, under the United States of
America and International Patent laws, as "Patent Pending", titled "Modular
Pharmaceutical Solution Manufacturing", preliminary class 604. All rights to the
patent, including any modifications, and the trademark LVPS/(TM) belong to
DenexCorp. LVPS has been granted the exclusive use of the patent and trademark
subject to the terms of a Licensing Agreement entered into on December 30, 1998
between DenexCorp and LVPS. The licensing agreement provides for a royalty of
two percent (2%) of the gross selling price on each MicroFacility sold by LVPS
during the ten- year term of the license. The license agreement was not the
subject of an arms length negotiation. As such, a portion of the revenue from
the sale of each MicroFacility will be paid to DenexCorp.
Item 16. Description of Business.
LVPS MicroFacility, Inc. was incorporated in the State of Delaware on December
16, 1998. LVPS was formed to be the manufacturer, under license from
DenexCorp/LVPS MicroFacility, of a self contained modular enclosure I V solution
manufacturing facility marketed to "third world" or emerging market nations.
LVPS does not sell finished I V solution product. The client is responsible for
selling the final I V solution product. LVPS will build the plant to produce the
solutions. The MicroFacility plant is a complete manufacturing facility that
produces IV solutions from local water sources; blows, fills, and seals the
plastic IV solution container; and sterilizes the finished product for quality
assurance testing, quarantined storage, required by the US FDA, and distribution
to wholesalers, hospitals, and clinics. No LVPS MicroFacility plant as described
above has been built to date. However, the MicroFacility plant is designed and
will be built to comply with all US FDA regulations for pharmaceutical
manufacturing plants and Host Country regulatory requirements. All
pre-manufacture activities are now complete, including finished renderings and
engineering drawings, FDA regulatory protocols, materials vendor identification,
all major components specifications to LVPS requirements, and preliminary
purchase price negotiation. Once the offering is completed, LVPS is ready to
begin manufacture of the first MicroFacility plant. Raw materials for the
production of the IV solutions are readily available in most countries.
Additionally, raw materials like plastic resins, used in the IV solution
container, are available for shipment at acceptable pricing levels from
multi-national companies like BASF and chemicals from Hoechst, Gelman Sciences,
AMOCO Chemicals and Union Carbide.
LVPS has obtained rights to the pending United States Patents and trademarks
from DenexCorp. In return, LVPS will pay DenexCorp a royalty of two percent (2%)
of the gross selling price on each MicroFacility during the ten- year term of
the license.
The MicroFacility plant will be built in accordance with current governmental
regulations that require IV solutions to be manufactured of United States
Pharmacopoeia quality meeting United States Food and Drug Administration current
Good Manufacturing Practices (cGMP's) in compliance with US FDA Regulations 21
CFR part 211, and USP 23/NF 18 of the National Formulary for pharmaceuticals.
LVPS will also comply with the host country health ministry requirements as they
pertain to IV solution manufacturing. LVPS will adhere to all applicable United
States occupational and Export laws as they pertain to the MicroFacility plant
manufacture and delivery to the client.
Existing governmental regulations will have a significant effect on LVPS's
business plan. LVPS will need to devote managerial resources toward
understanding and complying with applicable government regulations. Management
of LVPS and certain consultants identified by management possess the requisite
skill, training and experience to address the constraints of existing government
regulations.
We will finance the start-up activities and construction of a prototype
MicroFacility plant through this offering. LVPS has two full time employees that
serve without compensation. Once the prototype MicroFacility plant is completed,
it will be sold and other MicroFacility plants will begin production. LVPS has a
purchaser for the prototype MicroFacility plant under contract with a Purchase
Agreement and a ten year Technical Assistance Agreement, that commences with
delivery of the MicroFacility plant to the client's location. Sale of the
prototypical plant and future plant orders currently in negotiation are expected
to provide acceptable cash flow for future expansion and operations.
The world market for intravenous solutions exceeds $18 billion. In the United
States, the intravenous user rate is 4 units per capita. Outside the U.S., the
user rate is 2.5 units per capita, but climbing. Accessibility limits the user
rate. Strategically placed MicroFacility plant will reduce the accessibility
constraint in the third world emerging market nations.
On average, hospitals, group purchasing organizations, and home infusion
agencies pay $1.18 (non-contract) and $.81 (contract) per unit for intravenous
solutions. The MicroFacility can achieve direct production costs of $0.4777 per
unit, which is 45-65% lower than current market prices. Accordingly, there is a
market opportunity to build and deliver LVPS MicroFacilities to customers who,
in turn, profitably deliver intravenous solutions to their local and regional
markets.
Purified water is the primary ingredient in all I V solutions. Accordingly,
transportation costs significantly affect gross margins. At present, I v
solutions are produced in large volume rotary filling plants (i.e. the "Coca
Cola style bottling plant) that require a 100+million dollar investment and
500,000 to one million square feet of space. Other entrepreneurs have
unsuccessfully attacked the market with a collection of disparate pieces of
costly equipment, which, in the end, could not be validated or certified to US
FDA standards.
Under the current business model, our MicroFacility, which is constructed in a
modular enclosure, will be fabricated, assembled, validated, tested, and
certified to meet US FDA standards before the main components are disassembled
and shipped to the customer for reassembly and recertification. The LVPS
MicroFacility incorporates a class 100 cleanroom and single-operation blow-fill
machine to produce economically competitive I V solutions for regional
distribution in countries, like Russia, Ukraine, the Baltic States, India,
China, Czech Republic, Central Europe, Indonesia, Japan, Israel, Saudi Arabia,
and Sweden. The Company's 4,000,000 unit/year LVPS MicroFacility sells for $5.5
million and the 8,000,000 unit/year LVPS Micro Facility is priced at $9.4
million, both have gross profit margins of 24%.
Conceptual Drawing of LVPS MicroFacility No. 1.
LVPS MicroFacility Plant Overview
The Product
The LVPS MicroFacility was especially created to provide medically developing
countries with the indigenous capacity to produce the basic components for their
own quality medical care as well as high-value pharmaceutical products for
export. Using time and field-tested technology from several global industries,
the LVPS MicroFacility can produce virtually any intravenous solution product in
aseptically-filled and terminally-sterilized medical grade plastic containers.
Considering the current changes in health care and emphasis on cost savings
worldwide, the introduction of regional/local production of intravenous
solutions through the LVPS MicroFacility will revolutionize solutions
manufacturing and distribution for the estimated $18 billion world market. With
its design incorporating a unique, free-standing class 100 clean room and single
operation blow-fill-seal machine, the LVPS MicroFacility exceeds both US and
World quality standards (including ISO 9002 and European Union criteria) by
factors up to 3,000% while producing one 500ml unit of intravenous solution for
US$0.4777 (weighted market average production cost for the 8 most common
solutions/US rate labor) 45% to 65% lower than current market pricing.
Realizing that the experience of many countries has been that the arrival of
equipment alone does not produce a quality product, LVPS has committed itself to
provide all customers with four critical ingredients for successful and
profitable manufacturing operation:
1. Precise documentation and procedures of manufacturing methodology.
2. Known and reliable equipment, life cycle system maintenance planning
and performance strategy including comprehensive system monitoring and
tracking.
3. Properly trained personnel and continuous quality assurance validation.
4. Quality raw materials for manufacture.
All architectural, planning and design, manufacturing, fabrication, and US FDA
(cGMP) compliance and production and validation of the LVPS MicroFacility takes
place within a thirty minute drive of LVPS's corporate headquarters in
Huntington Beach, California. All manufacturing and intraveneous solution end
product are of United States Pharmacopoeia (USP)/NF (National Formulation)
quality, current Good Manufacturing Practices in compliance with US FDA
regulations 21 CFR Part 211 and USP No. XXIII. The LVPS MicroFacility can be
operated according to ISO 9002 certification plan and European Union (EU) CE
Mark quality standards. Under LVPS's plan of operation, the primary
fabrication/manufacturing facility is Pacific Environmental Technologies, Inc.,
Yorba Linda, California. LVPS has entered into a verbal agreement with this
company for the purpose of assuring quality of work and for cost containment of
the project manufacturing and fabrication portion of the work involved in
developing, building, and installing the LVPS MicroFacility and future product
lines.
Sales and Marketing Activities
LVPS's marketing and sales efforts are in the following countries: Russia,
Ukraine, Belarus, Baltic States, India, China, Czech Republic, Slovak Republic,
Indonesia, Israel, Jordan, Saudi Arabia, Pakistan, and Sweden. The challenge in
the majority of these countries is obtaining acceptable financing for LVPS's
MicroFacility. LVPS has from the outset been actively involved in securing
project financing for its potential customers. Most of LVPS's clients are
seeking United States lending institution financing, the approval process from
start to finish with the US Export Import Bank (Ex-Im Bank) can range from six
months to one year for final approval and funding. Loans for LVPS plants are in
process with Sanwa Bank, Bank of America International Trade Bank, Bank of New
York, Princeton Econometrics, and Venture Capital Resources.
The LVPS MicroFacility will be available in two production sizes: a
three-module, 4 million unit/year facility and a six-module, 8 million unit/year
facility. The selling price of the LVPS MicroFacility is US$5.5 million for the
4MM/year plant and US$9.4 million for the 8MM/year plant. The 8MM/year LVPS
MicroFacility has the added advantage of incorporating completely independent
systems providing total production redundancy virtually eliminating downtime due
to testing, maintenance/repairs, or product line changes. LVPS's sales and
marketing activities are implemented worldwide by independent, commissioned
Legal Authorized Agents responsible for generating sales inquires, providing
support services such as translation, and facilitating the client through the
sales process. In most cases the Legal Authorized Agent either lives in the
client country or by heritage is fluent in the language and customs of the
country. Performance is periodically reviewed and the Agent's contract renewed
predicated upon their productivity and reliability within their specified
territory. Independent agents will not sell competing products or services.
Competitive Analysis:
Initially, the LVPS MicroFacility may not encounter direct competition in terms
of price and delivery of a comparable intravenous solution manufacturing
facility for several years. Although the technology behind LVPS's MicroFacility
is known by the major intravenous solution manufacturers, there has been no
financial incentive to expand their manufacturing operations. Under LVPS's
analysis, the research and development and retooling costs required to change
production modes are prohibitive. Although unit product pricing has generally
been held to the rate of inflation over the last few years, the introduction of
the LVPS MicroFacility plant with its 45% to 65% reduction in production cost
will change the complexion of the marketplace, thus fueling possible widespread
changes in the traditional production and distribution methods.
The LVPS MicroFacility a patents pending product in the marketplace that is
innovative, expandable, and the leading edge in micro-manufacturing intravenous
solution technology specializing in the science and practice of pharmaceutical
manufacturing of dosage-form medications. The competitive set consists of two
primary intravenous solution plant configurations:
1. The Large Volume Rotary Filling Plant which represents the traditional way of
producing intravenous solutions (the "Coca Cola Bottling Plant"), requiring
hundreds of millions of dollars in investment and, in the case of United States
intravenous solution plants, as much as 500,000 square feet or more of space;
totally inappropriate for the emerging nations market. As water is the primary
ingredient in all intravenous solutions, the cost of transportation becomes
significant. Compare this to a LVPS MicroFacility investment of US$5.5 million
and approximately 15,000 sq. feet of production and warehousing space.
2. Packagers and/or distributors of various major pieces of equipment that
hopefully mesh together to manufacture basic intravenous solutions not in a
modular enclosure micro-manufacturing facility design and do not use a
blow-fill-self seal machine. These plants may be priced lower than the LVPS
MicroFacility, but cannot be validated and certified to US FDA standards.
In at least one verifiable instance, this type of plant was built and unable to
meet the host country start-up standards. For the last two years the plant has
stood idle. According to the Health Ministry of the country in question none of
the criteria's for pharmaceutical manufacturing will be approved. Again
reinforcing Company's insistence that all of the LVPS MicroFacilities will be US
FDA and host country validated and compliance, meeting or exceeding all
pharmaceutical manufacturing criteria.
Market Viability: A full 20% of all pharmaceutical costs are accounted for by
intravenous solutions. According to a Market Intelligence Research Corporation
study, this portion amounted to a total worldwide expenditure of $2.7 billion in
1990. But the study also estimated that by 1997, total IV solution expenditures
will have increased to $18.6 billion.
Domestic Markets: IV solutions are used at the rate of 4 units per inpatient day
in the typical U.S. hospital. The number of inpatient days served annually in a
given hospital is calculated by multiplying the licensed bed count by the
occupancy rate by 365 days. Annual intravenous solution consumption can then be
calculated as in the following example:
1,OOO beds x 80% occupancy rate x 365 days x 4 units/day= 1,168,000 units/yr
Alternatively, annual consumption can be calculated at the rate of 3.33 units
for each person in the total U.S. population. Best estimates put total U.S.
consumption at over 1 billion units per year.
The MIRC estimates the U.S. hospital intravenous market at $1.2 billion with an
annual growth rate of around 6% expected throughout the decade. But as more and
more care is being diverted or transitioned to home health care and alternate
health care treatment settings, larger and faster-growing markets have emerged
in these fields. In another study, Biomedical Business International projected
that home infusion revenues would increase almost 26% annually.
Market Comparison Chart.
World Markets: Although the U.S. market, currently almost 70% of the total world
market, presents a tremendous opportunity for the LVPS MicroFacility concept,
markets in third world and emerging nations are actually growling even faster.
This faster growth is due to the building of better and higher-quality health
care institutions and other health care infrastructures in areas once deemed to
be dormant.
World market growth is driven by population increase and constant up-scaling and
sophistication of health care delivery. As part of this up-scaling, intravenous
infusion therapy is becoming increasingly important in overall health care
treatment regimens as new developments in antibiotics and other medicants used
in areas such as chemotherapy, burn centers, and renal/peritoneal dialysis
centers favor intravenous use and application.
Cost Containment Trends: Finally, new pressures are being applied worldwide and
especially in the U.S. to curtail spiraling health care costs. The introduction
of new cost effective/high quality methods of production and delivery of health
care products and services are being universally hailed as much for their PR
value as for their actual impact on the industry.
Global Revenue Forecast Chart.
Risk capital is needed to build LVPS MicroFacility No. 1. There is currently no
prototype in existence.
LVPS will voluntarily send an annual report, including audited financial
statements, to its security holders.
LVPS will file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (SEC). The public may
read and copy any materials we file with the SEC at the SEC's Public Reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that web site is http://www.sec.gov.
Item 17. Management's Discussion and Analysis or Plan of Operation.
LVPS was formed on December 16, 1998, at which time LVPS entered into a license
agreement with DenexCorp. for the rights to further develop, and ultimately
manufacture and market the MicroFacility. Expenditures made by DenexCorp to
develop the MicroFacility prior to December 16, 1998 were expensed as research
and development as incurred. The MicroFacility has no revenues. Management
believes that the license does not constitute a trade or business as defined
under Rules and Regulation of Securities and Exchange Commission. Accordingly,
the accompanying financial statements include the accounts of LVPS MicroFacility
since inception; such financial statements do not include any of the accounts of
DenexCorp related to the MicroFacility.
During the period from inception through June 30, 1999, LVPS has been
substantially inactive. In accordance with the Rules and Regulations of the
Securities and Exchange Commission, LVPS is required to reflect in the financial
statements the value of services and costs incurred by DenexCorp on behalf of
LVPS. In management's opinion, such costs are not material.
In connection with the value ascribed to the license agreement obtained through
the issuance of 612,500 shares of common stock, management recorded the
transaction based on the carry-over basis of accounting of DenexCorp. Since
DenexCorp expenses research and development costs as incurred, LVPS recorded the
value of such license agreement at a nominal value. In connection with the
12,500 shares of common stock issued for legal services, the Company valued such
shares based on the services rendered, since the value of such services were
more readily determinable. The value of such services was $6,250 and was charged
to operations.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. In the course of its development, the
Company will continue to incur additional losses during its development of a
production prototype of the MicroFacility. As a result, the Company will require
approximately $4.1 million to complete the development of its production
prototype; the prototype completion is expected within 12 months from the
completion of its offering. The Company will require additional funds for its
operational activities and sales efforts. All these activities will be funded
through this Offering. There is no assurance that such funds will be available
on acceptable terms or available at all. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Upon the completion of this Offering, the Company
does not anticipate the need for additional financing in the next 12 months.
Item 18. Description of Property.
At present, LVPS utilizes office space without cost in Huntington Beach,
California leased to DenexCorp(TM)/LVPS MicroFacility, the major stockholder in
LVPS MicroFacility, Inc. The offices, engineering, administration, and
conference facilities are adequate for LVPS at this stage of operation.
Manufacturing and warehouse space will be provided by our prime third-party
vendors as part of their assembly fees to LVPS once this offering is completed.
Property and business insurance is carried by the prime third-party vendors.
There currently is no business insurance in force in favor of LVPS
MicroFacility, Inc.
Item 19. Certain Relationships and Related Transactions.
See Item 15.
Item 20. Market for Common Equity and Related Stockholder Matters.
LVPS is authorized to issue Twenty Million (20,000,000) shares of $.001 par
value common stock and One Million (1,000,000) shares of $.001 par value
preferred stock. Prior to this Offering there are 625,000 shares of common stock
issued and outstanding. There are no shares of preferred stock outstanding at
the present time.
There is currently no public trading market for LVPS's common stock There are no
amounts of common stock (i) that are subject to outstanding options or warrants
to purchase, or securities convertible into, common stock of LVPS; or (ii) that
could be sold pursuant to Rule 144 under the Securities Act or that LVPS has
agreed to register under the Securities Act for sale by security holders. A
minimum of 287,500 and a maximum of 625,000 shares of LVPS's common stock are
being offered to the public. These shares could have a material effect on the
market price of LVPS's common stock if and when a public trading market
develops. There are 2 holders of record. LVPS has never paid any cash dividends
on its common stock and does not anticipate paying cash dividends within the
next two years.
Item 21. Executive Compensation.
The following table sets forth the annual cash compensation proposed to be paid
by LVPS to the officers and directors of LVPS for their services, subject to
funding.
Name Salary Bonus Long-Term Compensation
- ---------------------------- ------ ----- ----------------------
Ron Patterson, CEO
1998 $0 None None
1999 $0 (1) None None
Ross Boling, COO, Secretary,
Principal Accounting Officer
1998 $0 None None
1999 $0 (2) None None
(1) If the offering is fully sold, then Mr. Patterson will receive a salary
of $180,000 per year. If only the minimum amount of shares are sold,
then Mr. Patterson's annual compensation will be proportionately
reduced.
(2) If the offering is fully sold, then Mr. Boling will receive a salary of
$120,000 per year. If only the minimum amount of shares are sold, then
Mr. Patterson's annual compensation will be proportionately reduced.
Since LVPS's inception the directors have served without compensation and are
expected to serve without compensation for the next 12 months. As such, there is
no standard arrangement for the compensation of directors, including any
additional amounts for committee participation or special assignments.
There have been no stock options granted to any person since LVPS's inception.
Item 22. Financial Statements.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ..............................................24
Financial Statements:
Balance Sheet as of June 30, 1999.....................................25
Statement of Operations for the period from inception
(December 16, 1998) to June 30, 1999 .................................26
Statement of Stockholders' Deficit for the period from inception
(December 16, 1998) to June 30, 1999 .................................27
Statement of Cash Flows for the period from inception
(December 16, 1998) to June 30, 1999 .................................28
Notes to Financial Statements.........................................29
INDEPENDENT AUDITORS' REPORT
Board of Directors
LVPS MicroFacility, Inc.
We have audited the accompanying balance sheet of LVPS MicroFacility, Inc. (the
"Company") as of June 30, 1999, and the related statements of operations,
stockholders' deficit and cash flows for the period from inception (December 16,
1998) through June 30, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LVPS MicroFacility, Inc. as of
June 30, 1999, and the results of its operations and its cash flows for the
period from inception (December 16, 1998) through June 30, 1999 are in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As further discussed in Note 2 to the
financial statements, the Company is in the development stage, has no revenues
from operations and is seeking significant capital to develop a prototype of its
MicroFacility. These conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are also described in Note 2. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
McKennon, Wilson & Morgan LLP
Irvine, California
September 9, 1999
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
BALANCE SHEET
June 30, 1999
ASSETS
Current assets - Cash $ 2,000
-----------------
Total assets $ 2,000
=================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities-
Accounts payable $ 5,000
Note payable to DenexCorp 3,125
-----------------
Total current liabilities 8,125
Stockholders' deficit:
Preferred stock, par value $.001; 1,000,000 shares authorized,
none issued and outstanding -
Common stock, par value $.001; 20,000,000 shares authorized,
625,000 shares issued and outstanding 625
Additional paid-in capital 6,237
Deficit accumulated during the development stage (12,987)
Total stockholders' deficit (6,125)
Total liabilities and stockholders' deficit $ 2,000
=================
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENT OF OPERATIONS
For the Period from Inception (December 16, 1998)
Through June 30, 1999
Revenues $ -
------------------
General and administrative expenses 12,987
Loss from operations (12,987)
Provision for taxes -
Net loss $ (12,987)
==================
Basic and dilutive net loss per common share $ (0.02)
==================
Weighted average number of shares outstanding 625,000
==================
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
For the Period from Inception (December 16, 1998)
Through June 30, 1999
Deficit
Preferred Common Accumulated
Stock Stock Additional During the
--------------------------- --------------------------- Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Deficit
------------- ------------- ------------- ------------- ------------ -------------- -----------
Inception, December 16, 1998 - $ - - $ - $ - $ - $ -
Common stock issued for license
rights - - 612,500 612 - - 612
Common stock issued for
services rendered - - 12,500 13 6,237 - 6,250
Net loss - - - - - (12,987) (12,987)
------------- ------------- ------------- ------------- ------------ -------------- -----------
Balances, June 30, 1999 - $ - 625,000 $ 625 $ 6,237 $ (12,987) $ (6,125)
============= ============= ============= ============= ============ ============== ===========
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENT OF CASH FLOWS
For the Period from Inception (December 16, 1998)
Through June 30, 1999
Cash flows from operating activities:
Net loss $ (12,987)
Adjustments to reconcile net loss to net cash
used in operating activities:
Issuance of common stock for License Agreement and
legal services 6,862
Changes in operating assets and liabilities-
Accounts payable 5,000
Net cash used in operating activities (1,125)
------------------
Cash flows from investing activities -
Issuance of note payable to DenexCorp 3,125
------------------
Net change in cash 2,000
Cash at beginning of period -
Cash at end of period $ 2,000
==================
Supplemental disclosures of cash flow information-
No income tax or interest was paid in 1999
Supplemental non-cash financing and investing activities:
During the fiscal 1999, the Company issued 612,500 shares of its common stock to
acquire the License Agreement valued at $612 and issued 12,500 shares of its
common stock valued at $6,250 for legal services.
NOTE 1 - ORGANIZATION AND HISTORY
Organization and Nature of Operations
LVPS MicroFacility, Inc. (the "Company") was incorporated in the state of
Delaware on December 16, 1998 (date of inception). The Company was formed to be
a manufacturer of clean room facilities for the production of large volume
parenteral solutions. The Company's primary product is the MicroFacility, a
modular micro-manufacturing facility that will produce intravenous solutions
from local water sources; blows, fills, and seals the plastic container; and
autoclaves the finished product for quality assurance testing, quarantined
storage, and distribution. The MicroFacility plants are commissioned to United
States Food and Drug Administration and host country standards. The Company is
in the development stage with no operating revenues since its inception.
DenexCorpTM/LVPS MicroFacility ("DenexCorp"), a Nevada Corporation, owns 98% of
the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. In the course of its development, the
Company will continue to incur additional losses during its development of a
production prototype of the MicroFacility. As a result, the Company will require
approximately $4.1 million to complete the development of its production
prototype; the prototype is expected to be completed within 12 months from the
completion of its offering. The Company will require additional funds for its
operational activities and sales efforts. Management is seeking private or
public equity financings and future collaborative arrangements with third
parties to meet its cash needs. There is no assurance that such additional funds
will be available on acceptable terms or available at all. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Fiscal Year End
The Company has elected a June 30 year end for financial and income tax
reporting purposes.
Risks, Uncertainties and Concentrations
The Company's industry is subject to federal, state, local and applicable
foreign laws and regulations. The successful manufacturing of the Company's
MicroFacility will require that certain permits be obtained. There is no
assurance that the Company will obtain these permits. The Company is also
subject to compliance inspections from certain regulatory agencies, which may
revoke or suspend the permits for any non-compliance to stated regulations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Use of 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 the 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.
Significant estimates that will be made in the future by management include,
among others, provisions for losses on accounts and contracts receivable,
provisions for slow moving and obsolete inventories and warranty obligations, as
well as valuations of the Company's common stock. Actual results could
materially differ from those that will be estimated.
Fair Value of Financial Instruments
At June 30, 1999, the Company has few assets and only limited liabilities
constituting accounts payable that would be considered financial instruments.
The carrying amounts of cash and accounts payable are representative of fair
value. In the future, the Company could have financial instruments whereby the
fair value of the financial instruments is different than that recorded on a
historical basis.
Property and Equipment
Property and equipment will be recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Maintenance and repairs will be charged to expense as incurred. Significant
renewals and betterments will be capitalized. At the time of retirement or other
disposition of property and equipment, the cost and accumulated depreciation
will be removed from the accounts and any resulting gain or loss will be
reflected in operations. At June 30, 1999, the Company had no property and
equipment.
The Company will assess the recoverability of property and equipment by
determining whether the depreciation and amortization of these assets over their
remaining life can be recovered through projected undiscounted future cash
flows. The amount of property and equipment impairment, if any, will be measured
based on fair value and is charged to operations in the period in which such
impairment is determined by management.
Deferred Offering Costs
The Company will defer costs incurred in connection with its offering of common
stock. In the event the offering of its common stock is unsuccessful, the
Company will charge such costs to operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Revenue Recognition
The Company intends to enter into contacts to construct its
MicroFacilities. Revenues will be recognized on a percentage of completion
basis, using actual labor hours or labor costs incurred to the total
estimated labor houirs or costs. In the event a contract results in a loss,
the loss will be recorded at the time the loss is known. The Company will
record revenues related to its technical and support services over the
period the services are provided.
Research and Development Expenses
Research and development costs will be expensed as incurred.
Allocation of Common Expenses
Since inception, the Company has had no operations. DenexCorp provides
management expertise and office space; however, these expenses are immaterial
due to minimal use of such resources since inception. No allocations have been
made through the date of these financial statements.
Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and diluted
EPS on the face of all income statements issued after December 15, 1997 for all
entities with complex capital structures. Basic EPS is computed as net income
divided by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other convertible
securities. Common stock equivalents, which relate to shares issuable upon the
exercise of common stock purchase warrants and options, are not included in the
per share calculation for the period as their effect are antidilutive. During
the period, no common stock equivalents were outstanding.
Income Taxes
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. A valuation
allowance is provided for significant deferred tax assets when it is more likely
than not that such assets will not be recovered through future operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Stock-based Compensation
During 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for
stock-based compensation. However, SFAS No. 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in SFAS No. 123 had been applied. The Company
issued no warrants or options during the period.
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income, as well as
certain non-shareholder items that are reported directly within a separate
component of stockholders' equity and bypass net income. The Company has adopted
the provisions of this statement during the period, with no impact on the
accompanying financial statements.
Disclosures about Segments of an Enterprise and Related Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" in fiscal year 1999. SFAS No. 131 establishes standards
for reporting information about operating segments and related disclosures about
products, geographic information and major customers.
NOTE 3 - STOCKHOLDERS' DEFICIENCY
During the period, the Company issued 612,500 shares of common stock to
DenexCorp for the rights to develop and market the MicroFacility. Under
generally accepted accounting principles, transfers of assets between companies
under common control must be reflected at their historical costs in a manner
similar to a pooling of interests. The value assigned to these rights was $612
based on the legal par value of the common stock. As discussed in Note 2,
research and development costs are expensed as incurred, and accordingly, no
asset for such license is reflected in the accompanying balance sheet.
During the period, the Company issued 12,500 shares of common stock valued by
the Board of Directors based on the value of the legal services received, or
$0.50 per share.
NOTE 4 - INCOME TAXES
The Company's net deferred tax asset of approximately $5,000 at June 30, 1999
consists of federal net operating loss carryforwards amounting to approximately
$12,600. At June 30, 1999, the Company provided a valuation allowance for these
net operating loss carryforwards totaling approximately $5,000. The difference
between the tax benefit of approximately $4,300 using the lower federal income
tax rate of 34% is the result of a full valuation allowance of the Company's
deferred tax asset.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
License Agreement
During the period, the Company entered into a license agreement (the "License
Agreement") with DenexCorp for the rights to develop the MicroFacility product.
Pursuant to the License Agreement, the Company will pay a 2% royalty fee for
each MicroFacilty sold within the term of the License Agreement. The royalty fee
will be based on the gross sales price of each MicroFacility sold by the Company
during the term of the License Agreement. No royalties were paid during the
period. The License Agreement expires on December 16, 2008.
Employment Agreements
On June 30, 1999, the Company entered into three-year employment contracts with
each of its two officers. The agreements require salaries to by paid, beginning
the date the Company completes an initial public offering ("IPO"), the aggregate
amount totaling $300,000 annually through June 30, 2002. No amounts will be
earned prior to the completion of an IPO.
NOTE 6 - RELATED PARTY TRANSACTIONS
DenexCorp has taken steps to protect the design of the MicroFacility, under the
United States of America and International Patent laws, as "Patent Pending,"
titled "Modular Pharmaceutical Solution Manufacturing," preliminary class 604.
All rights to the patent, including any modifications, and the trademark
LVPS/MicroFacilityTM belong to DenexCorp. The Company has been granted the
exclusive use of the patent and trademark subject to the terms of a License
Agreement between DenexCorp and the Company (Note 5).
On June 30, 1999, the Company issued a note payable totaling $3,125 to
DenexCorp., interest at 10% per annum, due on demand. Subsequent to June 30,
1999, DenexCorp. advanced an additional $9,000 for operating expenses of the
Company.
See Note 5 for discussion of employment contracts.
The following table sets forth the anticipated revenue and gross profit from the
sale of MicroFacility No. 1. The proceeds from the sale of MicroFacility No. 1
and the anticipated profit will provide the necessary working capital to
manufacture additional units. Management predicts an improvement in the gross
profit margin on the sale of additional units based upon economies of scale and
the learning curve. The cost savings on subsequent units will come from reduced
regulatory affairs, validation, and ANDA expenses.
ProForma Gross Profit Calculation for No. 1
Revenue $5,500,000
Less:
Royalty to DenexCorp(TM)/LVPS $110,000
Cost of Goods Sold (Detail)
Pure water/Pre-Treatment System $25,164
Multi Effect Still $164,700
Pure Steam Generator $76,100
Process Tanks $50,000
Vortex Mixers $50,000
Blow Fill Seal $972,420
Sterilyzer $360,515
Labeling Machine $40,000
Lab Equipment $133,600
Hopper Feeder $18,000
Modules (Bare Shells) $110,000
Process Piping, Pumps & Appertenances $384,598
Electrical $77,975
Heating Ventilating & Air Conditioning Equip. $89,700
Mechanical HVAC Piping $34,800
Ductwork Systems $18,700
Interior Finishing Works $21,500
Central Control/Monitoring System $90,000
Project Management $30,000
Commissioning $38,500
Detailed Manufacturing Engineering $97,000
Regulatory Affairs, Validation, ANDA $750,000
Sales Commission $440,000 $4,073,272
Gross Profit $1,316,728
==========
Item 23. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933. A true and
correct copy of Section 145 of the Delaware General Corporation Law which
addresses indemnification of officers, directors, employees and agents is
attached hereto as Exhibit 99.1
In addition, Section 102(b)(7) of the Delaware General Corporation Law and
LVPS's Certificate of Incorporation provide that a director of this corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for paying a
dividend or approving a stock repurchase in violation of Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.
LVPS's Certificate of Incorporation and Bylaws contain provisions that no
director of LVPS shall be liable to LVPS for monetary damages for breach of
fiduciary duty as a director involving any act or omission of such director
other than (i) for breach of director's duty of loyalty to LVPS or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit.
The effect of these provisions may be to eliminate the rights of LVPS and its
stockholders (through stockholders' derivative suits on behalf of LVPS) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) - (iv) of the
preceding sentence.
Item 25. Other Expenses of Issuance and Distribution.
The following sets forth the expenses in connection with the issuance and
distribution of the Securities being registered, other than underwriting
discounts and commissions. We shall bear all such expenses. All amounts set
forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $1,390.00
Accounting Fees and Expenses $15,000.00
Miscellaneous $10,000.00
----------
TOTAL $26,390.00
Item 26. Recent Sales of Unregistered Securities.
In December 1998, LVPS issued 612,500 shares to DenexCorp/LVPS MicroFacility for
the rights to develop and market the LVPS MicroFacility at an assigned value of
$612. Further, in December 1998, LVPS issued 12,500 shares to its legal counsel,
Richard O. Weed, for services rendered valued at $6,250 or $.50 per share. Both
transactions were exempt from registration under Section 4(2) the Securities Act
of 1933, as amended. In both transactions, there was no public offering, no
advertising, no general solicitation and no other offerees.
Item 27. Exhibits.
The following is a list of exhibits required by Item 601 of Regulation S-B that
are filed or incorporated by reference. The exhibits that are incorporated by
reference from LVPS's prior SEC filings are noted on the exhibit index. The
other exhibits are attached hereto and being filed with the SEC as part of this
registration statement.
Exhibit
Number Description of Exhibits
- --------------------------------------------------------------------------------
3.1 Articles of Incorporation of LVPS MicroFacility, Inc.
3.2 By-laws of LVPS MicroFacility, Inc.
4.1 Form of Common Stock Certificate
5 Opinion re: legality
10.1 License Agreement
10.2 Employment Agreement with Ron Patterson
10.3 Employment Agreement with Ross Boling
10.4 Escrow Agreement between LVPS and Richard O. Weed
23.1 Consent of Independent Auditors
23.2 Consent of counsel
27 Financial data schedule
99 Additional Exhibits [8 Del. Code Ann.ss.145 Indemnification of
officers, directors, employees and agents].
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
LVPS hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii)Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Huntington Beach, state of California, on November 22, 1999.
LVPS MicroFacility, Inc.
By: /s/ Ron Patterson
Name: Ron Patterson
Title: Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/ Ron Patterson
Ron Patterson Director, Chief Executive Officer November 22, 1999
/s/ Ross Boling Director, Chief Operating Officer, November 22, 1999
Ross Boling Secretary, Principal Financial
Officer
EXHIBIT INDEX
3.1 Articles of incorporation of LVPS MicroFacility, Inc.
3.2 By-laws of LVPS MicroFacility, Inc.
4.1 Form of Common Stock Certificate
5 Opinion re: legality
10.1 License Agreement
10.2 Employment Agreement with Ron Patterson
10.3 Employment Agreement with Ross Boling
10.4 Escrow Agreement between LVPS and Richard O. Weed
23.1 Consent of Independent Auditors
23.2 Consent of counsel
27 Financial data schedule
99 Additional Exhibits [8 Del. Code Ann.ss.145 Indemnification of
officers, directors, employees and agents].