U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form SB-2
REGISTRATION STATEMENT
UNDER
The Securities Act of 1933
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B. TWELVE, Inc.
(Exact Name of Register as Specified in Its Charter)
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Florida 2834 65-1086538
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code)
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3801 PGA Boulevard, Suite 802, Palm 3801 PGA Boulevard, Suite 802, Palm Michael S. Singer
Beach Gardens, Florida 33407 (416) Beach Gardens, Florida 33407 3801 PGA Boulevard, Suite 802, Palm
216-0980 Beach Gardens, Florida 33407
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(Address and telephone number of (Address of principal place of (Name, address and telephone number
principal executive offices) business or intended of agent for service)
principal place of business)
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Copies of Correspondence to:
Jean-Luc Berger
41A Avenue Road, at York Square
Toronto, Ontario, Canada, M5R 2G3
(416) 955-0159
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
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 the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title Of Each Class Of Securities Number of Shares Proposed Maximum Proposed Maximum Amount of
To Be Registered To Be Registered Offering Price Aggregate Registration Fee (2)
Per Unit Offering Price
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Common Stock (1) 5,000,000 $1.00 $5,000,000 $ o
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Total 5,000,000 $1.00 $5,000,000 $ o
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(1) We are offering 5,000,000 shares directly. There is no minimum amount
of shares that must be sold, the proceeds of the offering may be $0 to
$5,000,000 (exclusive of estimated offering expenses of $50,000).
(2) Calculated in accordance with Rule 457 (o) under the Securities Act of
1933.
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.
EXPLANATORY NOTE
This registration statement relates to the registration of a total of 5,000,000
shares of our common stock.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is declared 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.
We will offer the shares for sale for a period 120 days from the date of the
prospectus (Offering closing date: November 30, 2002).
Subject to Completion, July 31, 2002
B. TWELVE, INC.
5,000,000 SHARES OF COMMON STOCK
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This is our initial public offering. We are offering to sell up to 5,000,000
shares of our common stock at a price of $1.00 per share on a best effort no
minimum basis. This means that the proceeds from the offering will not be kept
in an escrow account pending completion of this offering. There is no maximum
investment amount per investor. At this time we intend to offer the shares
ourselves through our officers and directors. We have not retained any
underwriters, brokers or dealers to sell the shares for us.
There is no public market for our common stock nor can we give you any assurance
that such a market will in fact develop following completion of our offering.
Moreover, since we would not qualify for a listing on the Nasdaq Stock Market or
other national exchange following the offering, if a trading market were to
develop for our common stock it would most likely be on the NASD's Over the
Counter Bulletin Board market.
Since there is no minimum amount of shares that must he sold, the proceeds of
the offering may be $0 to $5,000,000 (exclusive of estimated offering expenses
of $50,000).
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Proceeds from the offering based on a percentage of shares sold
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0% 25% 50% 75% 100%
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$ - $1,250,000 $2,500,000 $3,750,000 $5,000,000
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See "RISK FACTORS" beginning on page 3 for a discussion of material issues to
consider before making an investment decision regarding the purchase of our
common stock.
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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 date of this prospectus is __________, 2002.
TABLE OF CONTENTS
PROSPECTUS SUMMARY................................................................................................1
RISK FACTORS......................................................................................................3
Cautionary Note Regarding Forward-looking Statements.............................................................10
USE OF PROCEEDS..................................................................................................11
ARBITRARY DETERMINATION OF OFFERING PRICE........................................................................12
DILUTION.........................................................................................................13
CAPITALIZATION...................................................................................................
DIRECTORS AND EXECUTIVE OFFICERS.................................................................................14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................15
DESCRIPTION OF CAPITAL STOCK.....................................................................................17
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILIITIES.............................18
DESCRIPTION OF OUR BUSINESS......................................................................................18
MANAGEMENT DISCUSSION OF PLAN OF OPERATIONS......................................................................
DESCRIPTION OF PROPERTY..........................................................................................47
EXECUTIVE COMPENSATION...........................................................................................47
FINANCIAL STATEMENTS.............................................................................................F-1
PROSPECTUS SUMMARY
This summary highlights selected material information from the prospectus, but
does not contain all of the information that may be important to you. We
encourage you to read the entire prospectus, including "RISK FACTORS" and our
financial statements and the related notes, before making an investment decision
regarding the purchase of our common stock.
THE OFFERING
Company: B. Twelve, Inc.
Organized: Incorporated under the laws of the
State of Florida in March 1999
Executive Offices: 3801 PGA Boulevard, Suite 802, Palm
Beach Gardens, Florida 33407
Telephone Number: 416-955-0159
Our Business: B Twelve is a development stage
biopharmaceutical company. B Twelve
develops early-stage drug
candidates which have potential use
as therapeutic agents for the
treatment of cancer and diseases of
the immune system. We are currently
engaged in the research and
development of a drug delivery
platform technology and monoclonal
antibodies that target the vitamin
B12 pathway. We have no
commercially viable products and,
we will not have commercially
viable products in the near future.
We have identified potential drug
candidates that are in early
development stage of development.
B Twelve has limited operation
history, and has an accumulated
deficit of $5,476,570, a working
capital deficiency of $532,586 at
March 31, 2002, losses from
operations of $2,959,415 in FY02,
and cash used in operations of
$115,081 during FY02. In that
regard, our Auditors have expressed
concerns that B Twelve will
continue as a going concern if
additional capital is not raised.
We need capital in order to
continue and complete our research
and development activities
currently contemplated. Because
there is no minimum amount of
proceeds that will be raised,
investors may end up holding shares
in a company that hasn't raised
sufficient proceeds from the
offering to continue operations and
has an illiquid smaller market for
their shares.
B Twelve's future operating results
will depend on many factors,
including demand for our
technologies and/or related drug
candidates, the level of
competition, our dependence on
collaborative partners, and our
ability to control costs.
1
The Offering: No minimum 5,000,000 shares at a
price of $1.00 per share.
Common Stock to be
Outstanding Upon
Completion of the Offering: 5,067,100 shares if no minimum
raised 10,067,100 shares if
offering completed
Risk Factors and
Suitability: An investment in the shares is not
liquid, involves a significant
degree of risk, (see "RISK
FACTORS"), and is suitable only for
persons who can afford the loss of
their entire investment.
Term of offering: We will offer the
shares for sale for a period 120
days from the date of the
prospectus (closing date: November
30, 2002).
No Trading Market for Our Common Stock
There is no trading market for our shares and no assurance can be given that
such a market will develop or, if such trading market does develop, that it will
be sustained. Even if we sold the maximum number of shares, we still would not
satisfy the listing criteria for a listing on the NASDAQ Stock Market, Inc. or
any national exchange. We have no arrangements or understandings with respect to
a possible listing of our securities on any such securities market. The absence
of such a trading market may limit the marketability and liquidity of our
shares.
Use of Proceeds
Since there is no minimum amount to be raised, proceeds from our sale of shares
will be available for use by us as the funds are received. Because we are
offering the shares on a "best efforts, no minimum" basis, we cannot represent
what percentage of the offered shares we will actually sell. We intend to apply
proceeds from the offering, after payment of expenses, as set forth in the
section of this prospectus entitled "USE OF PROCEEDS".
Because there is no minimum amount of proceeds that will be raised, investors
may end up holding shares in a company that hasn't raised sufficient proceeds
from the offering to continue operations and has an illiquid smaller market for
its shares.
2
RISK FACTORS
Investment in the common shares of B Twelve involves a high degree of risk and
should be regarded as speculative due to:
Risks Related to Our Business:
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(a) Development Stage Company and auditor's concern; Organized in March
1999, B Twelve has limited operation history and is considered a
development stage company. B Twelve has an accumulated deficit of
$5,476,570, a working capital deficiency of $532,586 at March 31, 2002,
losses from operations of $2,959,415 in 2002, and cash used in
operations of $115,081 during 2002. Our Auditors have expressed
concerns that B Twelve will continue as a going concern if additional
capital is not raised. We require immediately additional funds, in
order to continue and complete the research and development activities
currently contemplated. Because there is no minimum amount of proceeds
that will be raised, investors may end up holding shares in a company
that hasn't raised sufficient proceeds from the offering to continue
operations and has an illiquid smaller market for their shares.
In addition, we expect B Twelve's operating losses to continue over the
next several years. B Twelve's future operating results will depend on
the demand for its technologies and/or related drug candidates, the
level of competition, our dependence on collaborative partners, and our
ability to control costs.
(b) Capital requirements; We are in need of significant additional capital
to enable us to continue our business. Failure to obtain the financing
or to obtain it on a timely basis will have a substantial adverse
affect on our operations and our ability to complete our plan of
operation in whole or in part.
Our capital requirements and availability of capital depend upon many
factors, including continued scientific progress in research and
development programs, the scope and results of preclinical studies and
clinical trials, the time and costs involved in obtaining regulatory
approvals, the cost involved in filing, prosecuting and enforcing
patent claims, the effect of competing technological developments, the
cost of manufacturing scale-up, the cost of business development
activities, and other factors which may not be within our control.
The source, availability, and terms of such funds have not been
determined and there is no assurance that we will be able to obtain any
funding on acceptable terms or at all.
3
(c) Unproven technologies and related products; Because our drug candidates
are based on unproven novel technologies, we may never develop them
into commercial products.
Many of our drug candidates are still in research and preclinical
development, which means that they have not yet been tested on humans.
We will need to commit significant time and resources to develop these
and additional product candidates. We are dependent on the successful
completion of clinical trials and obtaining regulatory approval in
order to generate revenues.
Furthermore, preclinical results in animal studies may not predict
outcome in human clinical trials. Our product candidates may not be
proven safe or effective. Potential products that appear to be
promising at early stages of development may not reach the market for a
number of reasons. Specifically, potential products may: i) be found
ineffective or cause harmful side effects during preclinical testing or
clinical trials, ii) fail to receive necessary regulatory approvals,
iii) be difficult to manufacture on a large scale, iv) be uneconomical
to produce, v) fail to achieve market acceptance, or vi) be precluded
from commercialization by proprietary rights of third parties.
(d) Dependence on Collaborative Partners; The success of our business
strategy is largely dependent on our ability to maintain our actual
collaborations and/or to enter into new collaborations such as research
alliances and licensing arrangements with universities, biotechnology
companies and large pharmaceutical companies, and to effectively manage
the relationships that may come to exist as a result of this strategy.
We are currently seeking additional corporate collaborators, but there
can be no assurance that such efforts will lead to the establishment of
any favorable collaborations.
There can be no assurance that any of B Twelve's future or existing
collaborators: i) will commit sufficient resources to our research and
development programs ii) will not pursue existing or other
development-stage products either on their own or in collaboration with
others, including competitors, or alternative technologies in
preference to those being developed in collaboration with us, or that
disputes will not arise with respect to ownership of technology
developed under any such collaborations.
Management of B Twelve's collaborative relationships requires and will
continue to require significant time and effort from B Twelve's
management team and effective allocation of the management's resources.
Should any collaborative partner fail to develop successfully any
product to which it has rights, or any of the partner's products to
which we have rights, our business may be adversely affected. In
addition, since we are currently indebted to many of our partners, our
business could be materially harmed by delaying or interrupting our
research and development activities.
4
(e) B Twelve's reliance upon proprietary technologies and patents; We
consider patents and pending patent applications relating to various
aspects of our technologies and related products to be materially
significant to our business. These patents and pending patent
applications are co-assigned to B Twelve (see section "Intellectual
Property").
Specifically, there can be no assurance that:
o Any pending or future patent applications will be granted to B
Twelve or that any current or future patent will be
sufficiently broad to afford adequate protection for our
technologies and related products against competitors with
similar products.
o B Twelve is the creator of inventions covered by pending
patent applications or that it was the first to file patent
applications for any such inventions.
o Others will not independently develop similar technologies or
duplicate any technology developed by B Twelve, or that our
technologies will not infringe upon patents or other rights
owned by others.
o Any of B Twelve's patents will not be challenged, invalidated
or circumvented.
B Twelve may desire or be required to obtain licenses from others to
develop, manufacture and market commercially viable products
effectively, and there can be no assurance that such licenses will be
available to us on commercially reasonable terms or at all.
Patent-infringement lawsuits are common to our industry. Patent
litigation proceedings are extremely expensive and could result in
substantial cost to B Twelve. Patent litigation may be necessary to
enforce B Twelve's rights provided by its patents or to determine the
scope and validity of others' proprietary rights.
Patent applications relating to or affecting our business have been
filed by a number of pharmaceutical and biopharmaceutical companies in
research and academic institutions (see risk factor "The competition"
below).
(f) The competition; We have identified a certain number of companies as
competitors in terms of business plans, scientific rationale, and
technologies.
We have identified the following companies that are focused on the
development of vitamin based or related drug delivery technologies:
Access Pharmaceuticals Inc., Copharos Inc., Endocyte Inc., Manticore
Pharmaceuticals Inc., and Protarga, Inc.
5
To our knowledge, other companies that are involved in the development
and/or production, improved method of delivery or analogs of paclitaxel
include but are certainly not limited to Bristol-Myers Squibb Co., Cell
Therapeutics Inc., Ivax Corporation, Bioxell Pharma Inc., Supratek
Pharma Inc., Enzon Inc., Napro Biotherapeutics Inc., F.H. Faulding &
Co. Limited, Phytogen Inc., Aphios Corporation, Taxolog Inc.,
Cytoclonal Pharmaceutics Inc., Protarga Inc., and Mylan Laboratories
Inc.
The second aspect of B. Twelve's business is the development of human
monoclonal antibodies (Mabs). We are aware of only three monoclonal
antibodies approved in the United States for the treatment of cancer,
Rituxan(R), Campath(R), and Herceptin(R), although many more are in
development.
(g) B Twelve's current lack of commercial manufacturing capability and its
dependence on others to produce its products; To be successful, B
Twelve's drug candidates must be manufactured in commercial quantities,
at acceptable costs and in compliance with regulatory requirements.
However, there is no assurance that we will be successful in developing
consistently sufficient capacity. In addition, any manufacturing
facilities of B Twelve or its sub-licensees may be subject to
inspection and licensing by regulatory authorities, prior to and during
the production of commercial products. There can be no assurance that
we or our sub-licensees will be able to make the transition to
commercial production successfully.
(h) Absence of product liability insurance; Human clinical development of B
Twelve's drug candidates entail an inherent risk that product liability
claims would be asserted against the Company. We are not currently
insured against such liability claims and there is no assurance that
insurance will be available at acceptable premium rates if we are to
conduct human clinical trials. Further, B Twelve will not likely have
sufficient resources to satisfy significant claims, if required to do
so. Product liability claims could have a materially adverse effect on
our business and financial condition.
(i) Dependence on key personnel; B Twelve's success is principally
dependent on its current executive officer, Jean-Luc Berger, for the
operation of its business. B Twelve does not yet maintain "key man"
insurance on its executive officer. The loss of Jean-Luc Berger would
adversely affect the business of B twelve.
(j) Limited Management resources; We have no experience in manufacturing,
procuring products in commercial quantities or marketing, regulatory
approval process and only limited experience in negotiating, setting up
or maintaining strategic relationships and conducting clinical trials,
and there is no assurance that we will successfully continue or engage
in any of these activities.
Our business strategy requires that we establish and maintain good
strategic alliances. Currently we are seeking strategic alliances but
do not have any, beyond the Medarex' research collaboration agreement.
We have limited experience in establishing and maintaining strategic
alliances and we cannot give any assurance that we will be successful
in establishing one or, if we do establish one or more relationships,
be able to maintain the relationship(s) in a manner that is beneficial
to us.
6
(k) Management of growth and Expansion; We will need to implement and
improve our operational, financial and management information systems.
Furthermore, it is anticipated that B Twelve's continued expansion in
areas and activities requiring additional expertise, such as clinical
trials, regulatory approvals and marketing, will require additional
management and scientific personnel. Our ability to recruit and retain
highly qualified management and scientific personnel is critical to our
success.
(l) No Assurance of Profitability; We do not anticipate any significant
revenues in the near future. Our ability to successfully implement our
business plan is dependent on the completion of this Offering. There
can be no assurance that B Twelve will be able to develop into a
successful or profitable business.
(m) Currency Fluctuations; B Twelve reports its financial position and
results of operations in United States dollars in its annual financial
statements. Our operations may result in exposure to foreign currency
fluctuations because of B Twelve Limited, our fully owned Canadian
subsidiary. We are not in position to determine fluctuations in the
current and future exchange rate between United States and Canadian
dollars. Accordingly, we can not anticipate if such fluctuations will
materially affect our financial position and results of operations. We
do not currently take any steps to hedge against currency fluctuations.
Risks Related to Our Industry:
- ------------------------------
(n) Governmental regulation of our business; The development and
manufacture of B Twelve's drug candidates are subject to regulation by
governmental authorities in a number of countries.
Any product being developed by B Twelve must undergo an extensive
regulatory approval process. The process of obtaining regulatory
approval can take many years and require the expenditure of substantial
resources, and there can be no assurance that necessary approval or
clearance will be obtained on a timely basis, if at all, for our
products under development.
In addition, delays or rejections may be encountered based upon changes
in regulatory policy for product approval during the period of product
development and regulatory review, and laws or regulations which may be
adopted in the future could have a material adverse effect on our
business and operations.
(o) Animal rights; Certain of our research and development activities
involve animal testing. Such activities have been the subject of
controversy and adverse publicity. Animal rights groups and other
organizations and individuals have attempted to stop animal testing
activities by pressing for legislation and regulation in these areas.
To the extent the activities of these groups are successful, our
business could be materially harmed by delaying or interrupting our
research and development activities.
7
(p) Environmental Matters; B Twelve's discovery and development processes
involve the controlled use of hazardous materials. B Twelve and its
collaborators are subject to federal, provincial and local laws and
regulations governing the use, manufacture, storage, handling and
disposal of such materials and certain waste products. Although we
believe that B Twelve or its collaborators are in compliance, in all
material respects, with all such relevant laws and regulations, the
risk of accidental contamination or injury from these materials cannot
be completely eliminated. To date, all our research and development
activities have been conducted through agreements with third parties.
Therefore, B Twelve is not specifically insured with respect to this
liability. Our collaborators are however carrying insurances for such
liability within the normal course of their business.
Risks Related to This Offering:
- -------------------------------
(q) Control by officers, directors and entities affiliated with them; In
the aggregate, ownership of our shares by management represents
approximately 75% of our issued and outstanding shares of common stock
as of date of filing. These shareholders, if acting together, will be
able to significantly influence all matters requiring approval by our
shareholders, including the election of directors and the approval of
mergers or other business combination transactions.
(r) Medarex, Inc. - anti-dilution provisions; On January 2001, Medarex Inc.
and B Twelve have entered into an agreement for the research,
development and commercialization of novel cancer therapeutics. We
issued 400,000 fully vested shares to Medarex to be used as credit
against $1,200,000 future invoiced license and royalty fees. Based on
the contract valuation of $3.00 per share and anti-dilution provisions
provided to Medarex, the Company valued the 400,000 shares at
$1,200,000. The value, considered a prepaid expense, was recorded as
deferred fees deducted from stockholders' equity, to be amortized
against future invoices.
(s) Secured convertible debenture; On May 1st, 2002, we issued a $100,000,
5%, Senior Secured Convertible Debenture - Series A (the "Debenture")
to Credifinance Gestion S.A. (the "Investor"). Unless converted,
redeemed or retracted before maturity, interest payments are due May 1,
2003 and April 30, 2004. The debenture must be paid in full on the
earlier of April 30, 2004 or the closing date of the next round of
financing for a minimum of $1,000,000. The debenture is collateralized
by a Security Agreement on all of the Company's assets, including its
patents and patent applications. At any time at the option of the
holder, the outstanding principal amount of the debenture is
convertible into common shares of the Company at a conversion price of
$1.00 a share and accrued interest shall be payable in cash at that
time. The Debenture contains various covenants some of which restrict
the ability of the Company to issue further debt or issue further
equity securities. The debenture contains anti-dilution provisions
requiring the Company to issue additional shares to the Investor, based
upon a stipulated formula, if the Company sells any additional shares
at less than $3.00 per share.
The debenture is redeemable by the Company with a minimum of 10 and
maximum of 60 days notice to the holder, but may not be redeemed by the
Company before May 1, 2003. The debenture is redeemable for cash (or
common shares of the Company with approval of the holder at the
conversion price as defined in the debenture ) in whole, or in part
from time to time at a redemption price equal to the principal plus
accrued and unpaid interest. After May 1, 2003, the holder may also
elect redemption in cash only, at a redemption price equal to the
principal plus accrued and unpaid interest and with notice to the
Company the same as above.
8
(t) No minimum number of shares sold in this Offering; Since there is no
minimum amount to be raised, proceeds from our sale of shares will be
available for use by us as the funds are received. Failure to obtain
sufficient financing or to obtain it on a timely basis will have a
substantial adverse affect on our operations and our ability to
complete our plan of operation in whole or in part. Consequently,
investors may end up holding shares in a company that hasn't raised
sufficient proceeds from the offering to continue operations and has an
illiquid smaller market for its shares.
In addition, shares of our preferred stock may be issued in the future
without further shareholder approval and upon such terms and conditions
and having such rights, privileges and preferences, as the board of
directors may determine. The rights of the holders of common stock will
be subject to, and may be adversely affected by, the rights of any
holders of preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes,
could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, a majority of
our outstanding voting stock. We have no present plans to issue any
additional shares of preferred stock.
(u) The absence of dividends; We don't presently intend to pay dividends,
and it is not likely that any dividends will be paid in the foreseeable
future. Should our operations become profitable, it is likely that we
would retain much or all of the Company's earnings in order to finance
future growth and expansion.
(v) Immediate and Substantial Dilution. An investor in this Offering will
experience immediate and substantial dilution.
(w) Lack of Prior Market for Securities of B Twelve; No prior market has
existed for the securities being offered hereby and it is improbable
that a market will develop subsequent to this Offering.
(x) Investor Relations Arrangements; We have not entered into any written
or oral agreements or understandings with any person to provide
promotional or investor relations services for B Twelve. We currently
handle our own investor relations.
(y) Additional dilution and issuance of common shares for debt settlement;
In connection with services provided to B Twelve, New York University
("NYU") and SEED Intellectual Property Law Group PLLC ("SEED") have
agreed in principle to settle our outstanding debt with the issuance of
common shares of B Twelve. If issued, NYU and SEED will be granted a
"put" option to sell the common shares back to B Twelve after a period
of three (3) years from the date of acceptance. In the event that NYU
and SEED elect to exercise the "put" option, the common shares will be
repurchased by B Twelve, at a purchase price of $1.00 per common share
an in accordance with a mutually agreeable procedure. As a result, we
may have to issue about 150,000 common shares to these parties in
parallel to this offering. At the date of filing, we have not executed
such agreement with NYU or SEED.
9
Cautionary Note Regarding Forward-looking Statements
Some of the information in this prospectus contains forward-looking statements.
Forward-looking statements give our current expectations or forecasts of future
events and are based on our management's beliefs, as well as assumptions made by
and information currently available to them. You can identify these statements
by the fact that they do not relate strictly to historical or current facts.
These statements may include the words "anticipate," "believe," "budget,"
"estimate," "expect," "intend," "objective," "plan," "probable" "possible,"
"potential," "project" and other words and terms of similar meaning in
connection with any discussion of future operating or financial performances.
Any or all of our forward-looking statements in this prospectus may turn out to
be wrong. They can be affected by inaccurate assumptions or by known or unknown
risks and uncertainties. Many of these factors, including the risks outlined
under "RISK FACTORS", will be important in determining our actual future
results, which may differ materially from those contemplated in any
forward-looking statements. These factors include the following:
Risks Related to Our Business:
- ------------------------------
o Development Stage Company and Auditor's concern;
o Capital requirements;
o Unproven technologies and related products;
o Dependence on Collaborative Partners;
o B Twelve's reliance upon proprietary technologies and patents;
o The competition;
o B Twelve's current lack of commercial manufacturing capability and its
dependence on others to produce its products;
o Absence of product liability insurance;
o Dependence on key personnel;
o Limited Management resources;
o Management of growth and Expansion;
o No Assurance of Profitability;
o Currency Fluctuations;
Risks Related to Our Industry:
- ------------------------------
o Governmental regulation of our business;
o Animal rights;
o Environmental Matters;
Risks Related to This Offering:
- -------------------------------
o Control by officers, directors and entities affiliated with them;
o Medarex, Inc. - anti-dilution provisions;
o Secured convertible debenture;
o No minimum number of shares sold in this Offering;
o The absence of dividends;
o Immediate and Substantial Dilution.
o Lack of Prior Market for Securities of B Twelve;
o Investor Relations Arrangements;
o Additional dilution and issuance of common shares for debt settlement;
10
When you consider these forward-looking statements, you should keep in mind
these risk factors and other cautionary statements in this prospectus. Our
forward-looking statements speak only as of the date made.
Although we believe that the expectations reflected in the forward-looking
statement are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as otherwise required by federal
securities laws, we are under no duty to update any of the forward looking
statements after the date of this prospectus to conform them to actual results
or to changes in our expectations. All forward-looking statements attributable
to us are expressly qualified in their entirety by the foregoing cautionary
statement.
The Private Securities Litigation Reform Act of 1995, which provides a "safe
harbor" for similar "forward looking statements" by existing public companies,
does not apply to our offering.
USE OF PROCEEDS
Since there is no minimum amount to be raised, proceeds from our sale of shares
will be available for use by us as the funds are received. All subscriptions
that are accepted by us are, subject to any applicable laws, irrevocable.
Because we are offering the shares on a "best efforts no minimum" basis, we
cannot represent what percentage of the offered shares we will actually sell.
Because there is no minimum amount of proceeds that will be raised, investors
may end up holding shares in a company that hasn't raised sufficient proceeds
from the offering to continue operations and has an illiquid smaller market for
its shares.
Funds received for this offering will be used for pre-clinical development with
clinical and academic institutions and co-development research program with
Medarex Inc., and the balance for G&A including costs associated to the
intellectual protection of the Company's research. The following table shows our
intended application of the use of proceeds as a percentage of the gross
proceeds received from a minimum of 0% to a maximum of 100%:
11
- ------------------------------- --------------------------------------------------------------------------------------
Intended use of proceeds Proceeds from the offering based on a percentage of shares sold
- ------------------------------- --------------------------------------------------------------------------------------
0% 25% 50% 75% 100%
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Proceeds $ - $1,250,000 $2,500,000 $3,750,000 $5,000,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Use of Proceeds
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Product Development $ - $825,000 $1,750,000 $2,750,000 $3,750,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Working Capital $ - $300,000 $600,000 $800,000 $1,000,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Patents & Legal $ - $125,000 $150,000 $200,000 $250,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Total $ - $1,250,000 $2,500,000 $3,750,000 $5,000,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
The amounts set forth above represent our best estimate for the use of the net
proceeds of this offering in light of current circumstances. However, actual
expenditures could vary considerably depending upon many factors, including,
without limitation, changes in economic conditions, unanticipated complications,
delays and expenses, or problems relating to the development of additional
products and/or market acceptance for our products and services. Any
reallocation of the net proceeds of the offering will be made at the discretion
of our board of directors but will be a part of our strategy to develop our
products and commencement of preclinical and clinical trials. Our working
capital requirements are a function of our future growth and expansion, neither
of which can be predicted with any reasonable degree of certainty. We may need
to seek funds through loans or other financing arrangements in the future, and
there can be no assurance that we will be able to make these arrangements in the
future should the need arise.
Pending our use of the net proceeds of the offering, the funds will be invested
temporarily in certificates of deposit, short-term government securities, or
similar investments. Any income from these short-term investments will be used
for working capital.
The net proceeds from this offering, based on historical experience, are
expected to be adequate to fund our working capital needs for about 24 to 36
months if the maximum proceeds are received. If no proceeds are received, we
have currently enough cash to continue our operations for about 3 to 5 months.
Any intermediate proceeds from the offering will be significant in prolonging
our operations proportionally to the amount.
ARBITRARY DETERMINATION OF OFFERING PRICE
There is no active trading market for our common stock. The initial offering
price of $1.00 per share has been arbitrarily determined by us, and will not
necessarily bear any relationship to our assets, earnings, book value or any
other objective standard of value. Among the factors considered by us in
determining the initial offering price were:
o The lack of trading market;
o The proceeds to be raised by the offering;
o The amount of capital to be contributed by the public in proportion to
the amount of stock to be retained by present shareholders;
12
o Equity investment made by Medarex Inc. in January 2001 for a total
value consideration of $1,200,000 - at $3.00 per share - to be applied
against future invoices.
o Proceeds from private placements at $1.00 per common share; and o Secured
convertible debenture of $100,000 - Series A - at 5% annual
interest rate and conversion price of $1.00.
DILUTION
The difference between the public offering price per share and the pro forma net
tangible book value per share of our common stock after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share is determined by dividing our net tangible book value (total tangible
assets less total liabilities) by the number of outstanding shares of common
stock. Dilution arises mainly from the arbitrary decision by a company as to the
offering price per share. Dilution of the value of the shares purchased by the
public in this offering will also be due, in part, to the lower book value of
the shares presently outstanding, and in part, to expenses incurred in
connection with the public offering.
Net tangible book value is the net tangible assets of a company (total assets
less total liabilities and intangible assets; please refer to "Financial
Statements"). At March 31st, 2002, we had a net tangible book value deficiency
of $532,586 or ($0.11) per share.
After giving effect to the sale of the 5,000,000 shares being offered at an
initial public offering price of $1.00 per share and after deducting estimated
expenses of this offering ($50,000), our adjusted net tangible book value at
March 31st, 2002 after the offering would have been $4,420,615 or $0.44 per
share, representing an immediate increase in net tangible book value of
$4,950,000 per share to the existing shareholders and an immediate dilution of
$0.56 per share to new investors.
The following table illustrates the above information with respect to dilution
to new investors on a per share basis:
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
0% of shares 25% of shares 50% of shares 75% of shares 100% of shares
sold sold sold sold sold
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Initial public offering price $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Total Proceeds $0 $1,250,000 $2,500,000 $3,750,000 $5,000,000
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Pro-forma net tangible book (529,385) (529,385) (529,385) (529,385) (529,385)
value at March 31, 2002
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Increase in pro-forma net (50,000) 1,200,000 2,450,000 3,700,000 4,950,000
tangible book value
attributed to purchasers of
shares, net of offering
expenses
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Adjusted pro-forma net $(0.11) $0.11 $0.25 $0.36 $0.44
tangible book value per share
after our offering
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
Dilution to purchasers of $ - $0.89 $0.75 $0.64 $0.56
shares
- ------------------------------- ----------------- ---------------- ---------------- ----------------- ----------------
13
PLAN OF DISTRIBUTION
It is not the present intention of management that the sale of the securities
being offered herein shall be through underwriters or brokers. The management
intends that sales of the stock shall be conducted by officers and/or directors
of the Company without payment of commissions.
We reserve the right to reject any subscription in whole or in part, or to allot
to any prospective investor less than the number of shares subscribed for such
investor.
DIRECTORS AND EXECUTIVE OFFICERS
A) DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the directors and executive
officers of B Twelve.
- --------------------------------------------------------------------------------
Name Age Position
- --------------------------------------------------------------------------------
Jean-Luc Berger, Ph.D. 39 President & Chief Executive
Officer, Director
Georges Benarroch 54 Director
Don MacAdam 55 Director
- --------------------------------------------------------------------------------
The business experience of the persons listed above during the past five years
are as follows:
Dr. Jean-Luc Berger, Ph.D., President & Chief Executive Officer; Director.
Director of the Company since inception on March 5, 1999. Dr. Berger is
President and C.E.O. of B Twelve since May 15, 2001. He joined the Company as
Chief Operating Officer in September 2000. Prior to joining B Twelve, Dr. Berger
was a Pharmaceutical/Biotechnology analyst with Credifinance Securities Limited,
a Toronto-based, institutional investment and research firm, since 1996. Dr.
Berger obtained his M. Sc. From Universite de Montreal, his Ph.D. from
Universite LAVAL and completed his post-doctoral studies at McGill University
and has over thirty publications and scientific communications to his credit.
Dr. Berger is member of many biotechnology organizations including the
"Biotechnology Industry Organization" (BIO), the "Canadian Healthcare Licensing
Association" (CHLA), the "Biotechnology Network" and is an associate member of
the "Council for Continuing Pharmaceutical Education" (CCPE).
14
Mr. Georges Benarroch, Director.
Director of the Company since May 5, 2000. For the past five years, Mr.
Benarroch has been the Chairman, President & Chief Executive Officer of
Credifinance Securities Limited, the President and Chief Executive Officer of
InterUnion Financial Corporation, and the Chairman of InterUnion Asset
Management Ltd. InterUnion Financial Corporation is a public company. Mr.
Benarroch is also a director of Credifinance Gestion S.A.
Mr. Donald MacAdam, Director.
Director of the Company since November 17, 1999. Since January 2000, Mr. MacAdam
is a consultant to technology companies. From 1997 to 1999, he was President and
Chief Executive Officer of Tm Bioscience Corporation. Prior to Tm Bioscience
Corporation, Mr. MacAdam was President of CRS Robotics Corporation from 1993 to
1996. Both Tm Bioscience Corporation and CRS Robotics Corporation are public
companies. In addition to his work at B Twelve, Mr. MacAdam is currently a
director of: AutoBranch technologies Inc., Mississauga, Ontario; and, Hammond
Power Solutions, Guelph, Ontario.
B) SIGNIFICANT EMPLOYEES
B Twelve does not expect to receive a significant contribution from employees
that are not executive officers or directors.
C) FAMILY RELATIONSHIPS
Currently, there are no directors, executive officers or persons nominated or
persons chosen by B Twelve to become a director or executive officer of the
Company who are directly related to an individual who currently holds the
position of director or executive officer or is nominated to one of the said
position.
D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director, or officer, or promoter of B Twelve has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following persons (including any group as defined in Regulation S-B, Section
228.403) are known to B Twelve, as the issuer, to be beneficial owner of more
than five percent (5%) of any class of the said issuer's voting securities as of
July 31st, 2002.
15
- ------------------------ ----------------------------- -------------------------- -----------------------------
Title of Class Name and Address of Common Shares Percentage of Class
Beneficial
Owner
- ------------------------ ----------------------------- -------------------------- -----------------------------
Common Credifinance Gestion S.A. 3,300,000 65.1%
(1)
Geneva, Switzerland
Common Dr. Uri 902,025 17.8%
Sagman
Toronto, Ontario, Canada
Common Medarex 400,000 9.0%
Inc.
New Jersey, United States
Common Dr. Jean-Luc 377,025 7.4%
Berger
Toronto, Ontario, Canada
- ------------------------ ----------------------------- -------------------------- -----------------------------
(1) Credifinance Gestion S.A., incorporated in the Canton of Fribourg,
Switzerland, is a wholly owned subsidiary of Credifinance Capital Corp., a
privately held Delaware corporation. A director of B Twelve, Georges Benarroch
is the President & CEO of Credifinance Capital Corp. and is a non executive
director of Credifinance Gestion SA.
B) SECURITY OWNERSHIP OF MANAGEMENT
- ------------------------ ----------------------------- -------------------------- -----------------------------
Title of Class Name and Address of Common Shares Percentage of Class
Beneficial
Owner
- ------------------------ ----------------------------- -------------------------- -----------------------------
Common Georges Benarroch 17,525 0.3%
Common Dr. Jean-Luc Berger 377,025 7.4%
Common Don MacAdam (1) 17,525 0.3%
- ------------------------ ----------------------------- -------------------------- -----------------------------
Note: as of July 31st, 2002.
(1) Don MacAdam owns 14,525 common shares directly and 3,000 common shares
through A360 Inc., a private holding company.
C) CHANGES IN CONTROL
Currently, there is no such arrangement which may result in a change in control
of the Company.
16
DESCRIPTION OF SECURITIES
The following description of our securities and various provisions of our
Certificate of Incorporation and our bylaws are summaries. Statements contained
in this prospectus relating to such provisions are not necessarily complete, and
reference is made to the Certificate of Incorporation and bylaws, copies of
which have been filed with the Securities and Exchange Commission as exhibits to
our registration statement of which this prospectus constitutes a part, and
provisions of applicable law. Our authorized capital stock consists of
25,000,000 shares of common stock, $.0001 par value, of which 5,067,100 shares
were issued and outstanding as of date of filing of this prospectus, and
1,000,000 shares of preferred stock, $1.00 par value, of which none are
currently issued. As of July 31, 2002, there were 9 holders of record of our
common stock.
Common Stock
Each share of common stock is entitled to share pro rata in dividends and
distributions with respect to the common stock when, as and if declared by the
board of directors from funds legally available funds. No holder of any shares
of common stock has any pre-emptive right to subscribe for any of our
securities. Upon our dissolution, liquidation or winding up of our corporate
affairs, the assets will be divided pro rata on a share-for-share basis among
holders of the shares of common stock after any required distribution to the
holders of preferred stock, if any. All shares of common stock outstanding are
fully paid and non-assessable.
Each shareholder of common stock is entitled to one vote per share with respect
to all matters that are required by law to be submitted to shareholders. The
shareholders are not entitled to cumulative voting in the election of directors.
Accordingly, the holders of more than 50% of the shares voting in the election
of directors will be able to elect all the directors if they choose to do so.
In October 2000, 400,000 options were reserved in trust for future issuance in
accordance with an anti-dilution provision in an amended stockholder agreement.
During June 2001, 125,000 of these options were granted to Credifinance Gestion
S.A. and then exercised at a price of $1.00 per share. The Company recognized a
consulting expense of $254,346 based on the $3.00 current fair market value of
the warrants computed pursuant to the fair market value method of SFAS 123. In
May 2002, Credifinance Securities Limited received a fee of 25,000 common shares
from the trust for arranging the secured convertible debenture transaction and
options to purchase 25,000 common shares at of the Company at an exercise price
of $1.00 per share for a period of five years. At the date of filing, we have
250,000 options remaining in the trust for future issuance.
Preferred Stock
The board of Directors is authorized, without further shareholder approval, to
issue from time to time up to an aggregate of 1,000,000 shares of preferred
stock. As of July 31st, 2002, there are no issued preferred shares outstanding.
Shares of our preferred stock may be issued in the future without further
shareholder approval and upon such terms and conditions and having such rights,
privileges and preferences, as the board of directors may determine. The rights
of the holders of common stock will be subject to, and may be adversely affected
by, the rights of any holders of preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of our outstanding voting
stock. We have no present plans to issue any additional shares of preferred
stock.
17
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
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.
DESCRIPTION OF OUR BUSINESS
THE COMPANY
B. Twelve, Inc. is a development stage biopharmaceutical company incorporated in
the State of Florida on March 5th, 1999. The Company conducts business directly
and through B Twelve Limited, its wholly-owned Canadian subsidiary incorporated
in the Province of Ontario on March 5th, 1999. The registered office of the
Company is 3801 PGA Boulevard, Suite 802, Palm Beach Gardens, Florida 33407. The
Company's address for service, in Canada, is 41A Avenue Road, York Square,
Toronto, Ontario, M5R 2G3.
B Twelve was formed to acquire a patent portfolio and the rights to early-stage
compounds which have potential use as therapeutic agents for the treatment of
cancer and diseases of the immune system. The Company is currently engaged in
the development of a drug delivery platform technology and monoclonal antibodies
that target the vitamin B12 pathway.
18
BUSINESS OF B TWELVE
OVERVIEW
B Twelve is developing a portfolio of targeted biologic treatments based on:
(a) the delivery of cytotoxic drugs using the vitamin B12 as vehicle; and
(b) the therapeutic effect of vitamin B12 depletion on abnormal rapid
growth and deregulated cells, such as observed in cancer and some
diseases of the immune system.
Targeted disease in oncology refers to a focus on understanding the underlying
cause of disease and an attempt to attack cancer at its molecular roots. This
research is in sharp contrast to conventional treatments such as chemotherapy
used in oncology, which indiscriminately attacks rapidly dividing cells and
causes unwanted side effects. Targeted therapies pinpoint the underlying
molecular process of a tumor cell while sparing normal cells and healthy
tissues. The result is often a more efficacious drug with a more favorable
side-effect profile.
Cancer research associated with the vitamin B12 pathway is based on the
hypothesis that, by interfering with the signal's source, the messages necessary
for tumors to grow and stay alive - grow new vasculature, or migrate - can be
blocked. Vitamin B12 regulates one of two major cellular pathways for the
production of folates, the cell's primary source of carbon and the progenitor
for the synthesis of DNA. B Twelve has developed receptor-specific technologies
to control the uptake of vitamin B12 into dividing cells. There are two ways to
prevent the proliferation signal from reaching the command center in the
nucleus. They are (1) block the signaling pathway once the growth factor is
already bound or (2) block the receptor from binding its growth factor. The
first option is accomplished with the delivery of cytotoxic drugs issued of our
enabling drug delivery platform technology and the second with monoclonal
antibodies issued of our vitamin B12 depletion technology.
TECHNOLOGIES & PRODUCTS
B Twelve's portfolio consists of molecules at the research and development stage
which may ultimately prove useful in the treatment of certain types of cancer
and inflammatory diseases. We believe that there are several human therapeutics
applications for B Twelve's drug candidates. Specifically, a number of
properties of our drug delivery and vitamin B12 depletion technologies suggest a
potential role for our drug candidates in the therapy of solid tumors such as
colorectal and breast cancer in addition to treatment of leukemias. The
following table summarizes our research and product development programs:
19
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Technologies Drug Candidates Target Indication Phase of Development
Status
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Drug Delivery
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Bioconjugate Paclitaxel Oncology Proof of concept
Constructs Doxorubicin Oncology Proof of concept
Carboplatinum Oncology Proof of concept
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Anchor Technology
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Targeted - Oncology Discovery
liposome
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Vitamin B12 Depletion
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Monoclonal Transport Oncology Proof of concept
Antibodies protein
Receptor Oncology Development
- -------------------------------- ------------------------- ------------------------- ---------------------------------
Depletion Agents Receptor Oncology Proof of concept
modulators
- -------------------------------- ------------------------- ------------------------- ---------------------------------
B Twelve's lead drug candidates include a selectively targeting bioconjugate of
paclitaxel (also known as Taxol(R)) and vitamin B12, and monoclonal antibodies
currently being co-developed with Medarex Inc., a biotechnology company.
A diverse proprietary intellectual portfolio, which includes 9 issued, and 17
pending patent applications, protects B Twelve's technologies (see "Intellectual
Property" Section, below).
SCIENTIFIC & THERAPEUTIC RATIONALE
Vitamin B12 (or cobalamin) is an essential cofactor required for DNA synthesis
in proliferating cells. B Twelve has developed receptor-specific technologies to
control the uptake of vitamin B12 into dividing cells. Depletion of B12 levels
in cells leads to inhibition of cellular proliferation and induction of
apoptosis, or programmed cell death, in tumor cells.
The science underlying the importance of vitamin B12 and the effects of vitamin
B12 depletion is well known. Experimental data in vitro, in pre-clinical animal
models, and in patient studies have demonstrated the absolute requirement of
proliferating normal and neoplastic cells for vitamin B12. The feasibility of
using vitamin B12 depletion as therapy to treat cancer has been established in
patients. Clinical studies were performed using nitrous oxide to obtain whole
body inactivation of vitamin B12 (through an oxidation process) resulting in a
dramatic decline of leukemic cells in patients in the blast crisis phase of
acute myeloblastic leukemia. (Lassen, HCA and Kristensen ,HS. Remission in
chronic myeloid leukemia following prolonged nitrous oxide inhalation. Danish
Med Bull, 6:252-254, 1959; Eastwood, D.W. et al. Effect of nitrous oxide on the
white-cell count in leukemia. New Eng J Med, 268:297-299, 1963.) While the
results obtained from both patients and animal studies have revealed useful
potential therapeutic application of vitamin B12 depletion as anti-cancer
therapy, the results gained little recognition and no real application due to
the impracticality of the therapy and its toxicity.
20
In the cell, vitamin B12 is used as an essential enzyme cofactor in the
production of folates which are ultimately the carbon source for nucleotide and
DNA synthesis. The two key enzymes involved in folate production are methionine
synthase (MS) and dihydrofolate reductase (DHFR). The latter enzyme has been a
prime target for the design of anti-cancer agents, such as methotrexate, one of
the most widely used drugs. The former is B Twelve's target for regulation.
There is currently on the market existing anti-folate drugs which interfere with
other parts of the folate cycle. These include chemotherapeutic drugs such as
methotrexate and 5-fluoraracil (5-FU), which are widely used in cancer
treatment. However their efficacy is limited by significant toxicity and
ultimately the induction of drug resistance. Vitamin B12 depletion has been
demonstrated to kill cancer cells that are resistant to such conventional
chemotherapeutic drugs.
In Human, vitamin B12 is acquired by the diet. After being released from food,
vitamin B12 is transferred across the digestive tract to the blood stream where
it binds with a carrier protein, known as transcobalamin II ("TCII"). Then, the
vitamin B12/TCII complex is transported in the blood and eventually recognized
by high affinity receptors (TCII/ B12 receptors) present on dividing cells.
The receptors are specific to the TCII/vitamin B12 complex and solely
responsible for internalization of vitamin B12 into dividing cells. The
receptors are undetectable or non-active on non-dividing cells but are activated
and highly expressed when cells are stimulated to divide thus allowing for
vitamin B12 uptake. For uptake of vitamin B12 by the cell, the vitamin B12/TCII
complex first binds to the cell receptor. The receptor internalizes into the
cell and releases the vitamin B12/TCII complex. It then recycles to the surface
and is once again available for further binding.
Rapidly dividing cells associated with cancers and other proliferative diseases
express far more receptors than most normal cells. At the present time, over
expression of activated vitamin B12 receptor has been found on all of the human
solid tumor cell lines that have been examined. These include both hematological
malignancies (leukemia and lymphoma), and solid tumors such as colon and breast
cancers.
It is B. Twelve's mission to develop a commercially viable therapeutic approach
based on vitamin B12 depletion in and more targeted fashion, including the
delivery of therapeutic agents. A major thrust of the research program of the
Company has been to develop drugs that could repeat and improve upon the
therapeutic efficacy of vitamin B12 depletion.
A therapeutic niche therefore has been established by demonstrating the
potential of vitamin B12 depletion to circumvent drug resistance or in turn for
vitamin B12 depletion to be used in combination with other drugs as adjunct to
conventional chemotherapy. This overall approach further resulted in the
development of a drug delivery platform using the vitamin B12 as a vehicle to
deliver chemotherapeutic agents to tumors in a selectively manner.
B Twelve's Drug Delivery Technology
B Twelve is currently using vitamin B12 as a vehicle to deliver cytotoxic drugs
selectively to tumors. The process can be achieved by taking advantage of a
proprietary technology and expertise based on known biological transport
mechanisms. The technology, known as bioconjugation, creates a molecular complex
("bioconjugate") through the non-covalent binding of a transportable state of
the drug with the vitamin B12. The technology is designed to protect drugs from
degradation whilst allowing absorption through specific binding to a receptor.
21
Prior to development, potential drug candidates have to meet some criteria
including:
(a) Technical feasibility,
(b) Established biology and clinical enabling animal models,
(c) Unmet medical need,
(d) Therapeutic opportunity,
(e) Commercial potential,
(f) Patent protection, and
(g) Potential partnering.
A) Bioconjugates
Since oncology is an area of expertise of B Twelve, we demonstrated
that the vitamin B12 molecule could be derivatized and attached to
different antineoplastic agents, and yet maintain binding to the TCII
carrier molecule and its respective receptor, resulting in effective
delivery and release of the drug to the tumor. A number of different
types of bioconjugates were produced, including those with marketed
chemotherapeutic agents such as:
(a) Paclitaxel (Taxol(R)),
(b) Doxorubicin, and
(c) Carboplatinum.
B) Anchor Technology
B Twelve has initiated the development of a new generation of vitamin
B12 targeted liposome technology. Targeting factors which can be
attached to these liposomes include monoclonal antibodies and other
proteins. This approach is aimed at delivering a high drug payload,
specifically to targeted cells, with the intent to improve the
therapeutic index and reduce toxicity.
TARGETED DRUG DELIVERY TECHNOLOGY
We developed a core drug delivery technology that permits to generate:
1) vitamin B12 bioconjugates that are used as a vehicle to deliver drugs
selectively to tumors via a receptor-mediated pathway.
2) vitamin B12 analogues that are used to deplete the same tumors of the
vitamin B12, an essential co-factor for the biosynthesis of methionine
and nucleic acids (see "Depletion Technologies", below).
We use the terms bioconjugates and analogues for drug candidates involved in
drug delivery and depletion technologies, respectively.
A unique feature of our technology has been to found that the vitamin B12 needed
to be conjugated at a specific site in order to retain its binding capacity to
the TCII, its plasma protein carrier. The vitamin B12 includes six primary
amides around the central corrin ring structures, which primary amides are
labeled a-e, and g. The e-position of vitamin B12 proves most useful in drug
delivery because conjugates and analogues derivated at the e-position bound most
strongly with TCII, which is required for the receptor mediated drug delivery
(Pathare P.M., et al. Synthesis of cobalamin - biotin conjugates that vary in
the position of cobalamin coupling. Evaluation of cobalamin Derivatives binding
to Transcobalamin II, Bioconjugate Chemistry, 7; 217-232, 1996).
22
The e-isomer vitamin B12 can be further conjugated to a cytotoxic drug via a
linker group. The resulting bioconjugate, provides an anti-tumor effect as a
result of a specific, receptor-mediated event. We generated candidate molecules,
which have been shown to achieve the following in cell culture experiments:
o reduction of cell surface receptors following treatment
o killing of tumor cells
o induction of apoptosis (programmed cell death) in tumor cells
o inhibited by native B12, demonstrating that the killing effect
is specific and requires uptake via the receptor-mediated
system.
o works in the presence of the vitamin B12 carrier protein TCII,
which is required for cell surface receptor binding and
subsequent internalization.
The coupling of vitamin B12 to the cytotoxic agents selected by B Twelve
resulted specifically in the uptake of the drug candidates by the normal
mechanisms of transport. The bioconjugates were dependent of the TCII level in
the medium and being taking up by the TCII/receptor mediated pathway, resulting
in apoptosis (death) of the cancer cells, both in vitro and in vivo. Because the
uptake is TCII-mediated, toxicity can be prevented or reversed by dosing with
plain vitamin B12, which ties up the TCII and reverses or blocks further uptake.
Further experiments, including animal models are underway to better understand
the mode of action of those new bioconjugates.
Should these results be established by further testing and studies, it would
indicate that our drug candidates, if used as cancer chemotherapeutic agents,
would tend not to cause many of the side effects associated with or attributable
to currently administered chemotherapies, which are less target-specific. We
therefore believe that development and commercial exploitation of the subject
drug candidate(s), as to the success of which no assurances can be given, may
lead to a drug formulation which will attack certain malignant tumors while
producing fewer or less severe manifestations of the side effects caused by many
chemotherapies currently administered.
B TWELVE'S PROPOSAL
B Twelve's bioconjugate and anchor technologies are applicable to a very broad
range of therapeutic areas. Each specific technology has the potential to target
a large number of therapeutic candidate targets for creation of bioconjugate
candidates. New drug candidates can be synthesis from:
(b) Existing drugs
(c) Generic drugs
(d) Molecules in development.
(e) Molecules with attractive biological activity and potency that
were never developed because of too short half-life of
activity for commercial utility or inadequate safety profile.
23
We believe that B Twelve's core drug delivery technology exhibits a number of
properties that would make it attractive to potential partners and be
commercially viable:
(a) Core component (vitamin B12) and linker are safe and non toxic
(b) Core technology is protected by issued patents
(c) Versatility of the technology
(d) Diverse drug payloads
(e) Permit rapid drug creation
(f) New bioconjugate constructs are patentable
(g) Availability and low cost of raw material and
(h) Easy to scale-up and technology transfer.
We intend to exploit the concerns about the toxicity of synthetic materials used
in various drug delivery technologies. Others that explored the use of naturally
occurring drug carrier systems such as platelets, albumin, erythrocytes, viral
particles, and lipoprotein particles have exploited such concerns.
The drug candidates created by our bioconjugation technology platform are to be
administered by intravenous injection or rapid infusion. It permits to the
reactive bioconjugates to rapidly reach their target and bond their receptor in
a highly selective manner. When a bioconjugation technology is applied to
existing drugs, it creates new chemical entities (NCE) with substantially
improved pharmacokinetic profiles, broadened therapeutic indices, and other
advantages. Also, drug development risks can be reduced because the bioconjugate
can utilize drug moeities whose pharmacology and toxicity profiles are already
well understood. If manufacturing processes for the Drug Moeity are already
developed then the final chemical modification steps to form a bioconjugate are
usually fairly easy to achieve in a low risk, low cost conventional medicinal
chemistry manufacturing process. The timeline required to progress from project
feasibility to bioconjugate synthesis to pilot preclinical studies to formal
preclinical development is normally a matter of months, not years. From a
regulatory perspective, a bioconjugate will undergo the same review process as
other NCE's. Still, a therapeutic bioconjugate with a reactive chemistry
component has the potential to raise a number of regulatory questions.
DEPLETION TECHNOLOGIES
ANALOGUES OR DEPLETION AGENTS
As mentioned above, B Twelve has created a class of agents known as "analogues
or depletion agents", with the selectivity of the natural ligand (vitamin B12)
for its receptor, that cause a reduction in the number of receptors through
alterations in receptor movement on the surface of and within the cell.
Treatment with such drugs eventually result in cells devoid of receptors for a
period of time that are unable to respond to binding of the natural ligand and
triggering of biological responses i.e. biological unresponsiveness. Such drugs
would be fundamentally more effective in regulating biologic responses than
existing antagonist approaches because:
o they catalyze the depletion of cell surface receptors in a
ligand-specific fashion and are therefore more potent and longer acting
than antagonists
o they can be potentially applied to most receptors; including receptors
which transduce signals o they require only knowledge on the molecular
structure of the ligand to develop drug candidates, without knowledge
of receptor structure (unlike rational drug design)
24
o they may be able to receive selectivity of action, even with a
non-selective targeting moiety, due to differential processing of the
agents by different cell types
o In some cases, receptor modulators may be designed to have a longer
serum half-life or activity in the body compared to existing agonists
or antagonists
o As a design feature required for their activity, they may have a higher
binding activity for the receptor than the natural ligand
A number of different types of vitamin B12 analogues were produced:
o Dimerization of vitamin B12. Dimeric forms of vitamin B12 bind even
more avidly to TCII than natural vitamin B12. Further, these
derivatives result in formation of a complex containing two TCII
molecules. Such molecules might be capable of cross-linking cell
surface receptors and trigger more efficient internalization
o Conjugates with Reporter Functions. The reporter moiety is designed to
allow the in vitro and in vivo properties of new molecules to be
readily assessed. Biotin derivatives (as a reporter moeity) have been
produced.
o Radioiodinatable Derivatives of vitamin B12 were designed to obtain
high specific activity radiolabelled vitamin B12. Such derivatives have
been obtained to trace the mechanism of action of the compounds.
o Derivatives of vitamin B12. Most importantly, the vitamin B12 molecule
could be derivatized (attached to different chemical groups), and
binding TCII retained. This is critically important in order to
preserve specificity in receptor binding and to subsequently add groups
capable of modulating the vitamin B12 receptor.
B TWELVE'S MONOCLONAL ANTIBODIES
The second aspect of B. Twelve's business is the development of human
antibodies. Many of the product development issues for antibodies have been
addressed over the last ten years including immunogenicity and scale-up
manufacturing for therapeutic applications resulting in the approval or pending
approval of a number of products in the United States and Europe.
B Twelve is developing monoclonal antibodies as vitamin B12 receptor control
agents for certain pharmaceutical applications including treatment of cancer and
autoimmune diseases. The cell surface receptor for vitamin B12 requires that the
vitamin B12 molecule be associated with the serum carrier protein TCII for
recognition and uptake. Consequently, there are three ways in which antibodies
could be used to block vitamin B12 uptake resulting in cellular depletion:
o Type 1: binds the TCII molecule; These Mabs which react to apo-TCII (no
vitamin B12 bound) at the binding site for vitamin B12 inhibit uptake
of vitamin B12 into the carrier protein, thereby preventing uptake by
the B12/TCII receptor
25
o Type 2: binds the TCII-vitamin B12 complex; These Mabs deplete cellular
vitamin B12 by binding to holo-TCII (bound to vitamin B12) and
inhibiting its interaction with the B12/TCII receptor
o Type 3: binds the vitamin B12 receptor; These Mabs bind to the receptor
itself and prevent its contact with the B12/TCII complex
Development of fully human antibodies of the above types is currently the
subject of a co-development program and partnership between Medarex Inc. and B
Twelve.
B TWELVE'S PROPOSAL
The pharmaceutical industry is recognizing that human monoclonal antibodies are
the fastest, most cost-effective route to creating novel therapeutic products
using the plethora of newly discovered targets.
The key to our co-development program with Medarex is the creation of high
affinity, fully human antibodies against our proprietary targets in a matter of
months through a development program named "T-12 DevelopmentSM", using the
HuMAb-Mouse technology. While traditional drugs generally require five or more
years for pre-clinical development alone, according to Medarex, we have the
potential of taking a new product from the initial target to initiating clinical
trials in as few as 12 months.
Antibody product development offers several advantages when compared with
traditional pharmaceutical development. Compared to small-molecule chemical
entities, antibodies can be quickly generated against biological targets,
providing a much faster means of bringing a product to the clinic. Conventional
small molecule therapeutics generally go through a very lengthy and
unpredictable discovery process. In contrast to small molecule development,
antibody therapeutics would have a more rapid discovery process and cost less to
develop.
The HuMAb-Mouse of Medarex creates fully human high-affinity antibodies in a
matter of months avoiding the need for humanization or complicated genetic
engineering. The HuMAb-Mouse system is reported to be reliable and generates
high quality human antibodies with measured affinities from 100 to over 1,000
times greater than the affinities of antibody products currently on the market.
Following generation in the Medarex mouse system, the HuMAbs can be readily
transferred to stable hybridoma cell lines for standard large-scale production.
Native monoclonal antibodies derived from mice ("murine") are potent immunogens
and can, with repeated administration, provoke a powerful human anti-mouse
antibody (HAMA) response. A patient's immune response recognizes murine
antibodies as foreign substances, and when treatment is administered more than
once, it mounts an immunogenic reaction called human anti-mouse antibody or HAMA
response. HAMA response clears the murine antibodies rapidly from the serum,
preventing them from reaching the disease target to deliver their therapeutic
activity. During this clearing process, large immune response complexes are
formed, and inflammatory cytokines are released, causing patients to experience
flu-like symptoms (i.e. chills and fevers) and allergic reactions which, in
severe cases, can lead to systemic shock or death. With larger antibody doses,
serum sickness and organ damage may result. Several approaches have been
developed to reduce or prevent HAMA responses. Portions of antibodies, such as
Fab fragments, that include the original murine variable regions retain binding
specificity and provoke a HAMA response much less frequently than do intact
mouse antibodies. However, Fab fragments usually rely on lethal conjugates for
26
cytotoxicity, since they lack the Fc portion through which antibodies interact
with immune effector cells and complement. Chimeric antibodies retain murine
variable regions couple to human constant regions. Humanized antibodies contain
only the hypervariable or complementarity-determining regions (small segments of
the variable region that account for the antigen specificity) for the original
mouse antibody. The relative merits of these approaches have not been clinically
evaluated or compared. The risk of HAMA Formation may also vary according to
tumor type. Patients with B cell malignancies have been reported to develop HAMA
less frequently than those with T-cell malignancies or solid tumors.
Disappointingly low levels of cytotoxicity were reported during initial clinical
experience with unmodified murine antibodies, which typically interact weakly
with human immune effector mechanisms. There are, however, numerous potentially
effective means by which monoclonal antibodies can induce tumor cell death.
Today, the majority of Mabs being developed, as opposed to their murine and
chimeric predecessors, are created using human genes as to closely mimic the
natural antibodies found within the human body. This humanizing process
significantly improves the safety and efficacy profile since it minimizes the
immunogenicity problems, which have been largely considered the weakness of
antibody therapy. Better yet, transgenic mice (mice with human antibody genes
inserted) and phage display technologies have recently become commercially
available, enabling drug companies to generate fully human antibodies rapidly,
eliminating immunogenicity problems together.
Transgenic mice technology, such as offered by Medarex, has the capacity to
generate high affinity human antibodies in a rapid and cost efficient manner.
The genetic makeup of these transgenic mice strains has been altered through a
series of genetic manipulation such that the endogenous antibody genes are
silenced and replaced with a set of human antibody genes. The end result, a
hybridoma cell line producing fully human antibodies against the desired antigen
target, is a vast improvement over the traditional hybridoma method.
Overall, transgenic mice technology offers three key advantages for antibody
development:
a) No immunogenicity;
b) Reduces time of development; and
c) Lower royalty obligation.
For all the reasons describe above, we made the decision to go through the fully
human version of its first generation of antibodies.
Overall, the new generation of antibodies generated with Medarex is anticipated
to confirm the biological activities already observed. B Twelve believes that
products based upon this technology would have several advantages over existing
anti-proliferative agents and other experimental antibody cancer therapies.
Advantages of B Twelve's candidates to other therapeutic antibody products are
outlined below and in particular the company has defined on the following
competitive attributes in pursuing its product development strategy:
27
o Greater accessibility to target: Currently available antibody-based
tumor therapies are limited by tissue access. As the Company's Mab bind
to a more accessible carrier protein in serum, (TCII), they are not
restricted in delivery only to tumor cells in proximity to blood
vessels.
o Less modification of the antibody: A therapeutic effect should result
purely from the binding of the antibody to transcobalamin (TCII), the
essential carrier protein for vitamin B12. This contrasts with other
antibody therapies where there may be loss of antibody specificity or
potential for toxicity due to conjugation with toxins, drugs or
isotopes.
o Lower antibody dose: The levels of vitamin B12 cellular receptors and
carrier proteins in humans are typically very low. The Company
estimates that this will translate into a very low dose of antibodies
necessary to achieve therapeutic results.
o Reversible side effects: Studies of patients with hereditary
deficiencies of TCII indicate that the effects on normal tissues caused
by the inability of vitamin B12 to enter the cell can be overcome by
administration of very high doses of vitamin B12.
Market and Competition
CANCER OVERVIEW
We believe that there are several human therapeutics applications for B Twelve's
drug candidates. A number of properties of B Twelve's drug delivery and vitamin
B12 depletion technologies suggest a potential role for the Company's drug
candidates in the therapy of solid tumors such as colorectal and breast cancer
in addition to treatment of leukemias.
Existing therapies in oncology are generally toxic and frequently ineffective.
As a result, the cancer market is dominated by research and development efforts
aimed at safer and more effective agents. For these reasons, the primary focus
of current research is on innovative approaches to the disease and agents that
work along new biological pathways as reflected by the emergence of novel
targeted therapies. More specifically, competitors for the development of new
therapeutic products to treat cancer also focus on monoclonal antibody based
cancer therapeutics, cancer vaccines and other approaches that are based on both
active and passive immunotherapies and small molecule discovery and development.
Competition in our industry is intense and is expected to increase as disease
management and patient compliance become more important in the overall challenge
to contain health care costs.
Cancer is not a single disease, nor is it a simple one; rather it is a family of
at least 100 diseases that vary in age of onset, rate of growth, diagnostic,
response to treatment and prognosis. Cancer results from an abnormal, rapid
growth of cells. These cells divide and multiply unchecked, often becoming
tumors that invade healthy tissue. They also quickly adapt to changes in their
environment and are capable of developing mechanisms of resistance to accepted
treatment regimes. Surgery, radiation and chemotherapy remain the principal
effective treatment for cancer. In addition, although the reason is not clearly
understood, many cancer drugs are effective in only a subpopulation of
individuals with the same disease.
28
Given the vast affected population and the continuing toll in terms of morbidity
and mortality, cancer is major focus of drug research interest. According to
Decision Resources, in 1997, approx. 6.3 million people worldwide died from some
form of cancer, and most major international cancer agencies expect this number
to double by 2022. According to the International Labour Organization, the
biggest cause of death in the workplace was found to be cancer, causing about
640,000 or 32% of deaths. It is followed by circulatory diseases (23%),
accidents (19%), communicable diseases (17%) and respiratory diseases (7%).
Worldwide, an estimated 10 million people are diagnosed with some type of cancer
annually. In North America, where the incidence is approximately 1.25 million
cases per year, cancer is the second leading cause of disease-related death,
behind cardiovascular disease which is predicted to surpass in the next few
years. The principal reasons for this projection appear to be the aging
population in more developed countries, environmental issues related to
industrial development, and improvements in the treatment of cardiovascular
disease. North America, Europe, and Japan are the principal markets for cancer
therapies because of the established healthcare and payor systems.
One of every four deaths in the United States is caused by cancer, making it the
second leading cause of death in the country next to cardiovascular diseases.
The U.S. National Cancer Institute (NCI) estimates that about 8 million
Americans have or have had some form of cancer. Cancer claims annually about
560,000 American lives. The annual incidence of cancer in the seven major
developed markets (U.S., Japan, U.K., Germany, France, Italy and Spain) is over
2,000,000. Of those patients treated annually, more than 800,000 will become
refractory (unresponsiveness) to chemotherapy, often developing multi-drug
resistance and metastatic tumors. Despite significant strides in reducing cancer
mortality, many patients still fail to respond to any of the current therapies
and in fact 45% of all cancer patients develop resistance to the drugs used to
fight their disease.
The principal type of cancer in the United States, accounting for approximately
half of the incidence of all cancers, are prostate, breast, lung and colorectal.
These four types of cancer are also responsible for the highest combined
mortality, accounting for approximately 50% of all cancer deaths in the United
States. Bladder, ovarian, brain and oral cancer, as well as lymphoma, leukemia
and melanoma account for the majority of the balance of cancer deaths. The
incidence of a particular cancer varies greatly between continents, principally
because of diet and habit.
Overall costs of the disease are $107 billion annually; $37 billion in direct
medical costs. According to The Pharmaceutical Research and Manufacturers of
America (PhRMA) in 1999, pharmaceutical companies were developing about 350 new
medicines for cancer, some of which were in development for more than one type
of the disease, for a total of over 525 projects. The medicines include 63 for
breast cancer, 58 for skin cancer, including melanoma, 58 for lung cancer, and
46 for colon cancer, the second leading cancer killer of both men and women.
According to a study from Business Communications Co., Inc., the worldwide
cancer drug market approached $14.8 billion in 2000. Growing at an AAGR (average
annual growth rate) of 12.5%, this market is expected to exceed $26.7 billion in
2005. Between 2000 and 2005, an estimated 134 new drugs (including innovative
products as well as new formulations and/or indications for existing drugs) to
treat cancer will be introduced, which are expected to generate a 75% increase
in worldwide cancer drug sales. Established product lines currently constitute
nearly 90% of the market with estimated sales of $13.2 billion in 2000. This
segment will grow at an AAGR of 6.6% through the period to reach $18.2 billion
in 2005. The use of cancer therapies is forecast to increase as diagnostics
methods improve and, in particularly, as more effective treatments are
developed.
29
The market for innovative therapies was estimated at $1.5 billion in 2000 and,
with an AAGR of 40.2%, is likely to total $8.6 billion in 2005. Indeed the
entire market could nearly double in size from 2000 to 2005.
North America leads the regions with approximately 47 percent of the global
sales, followed by Europe with 24 percent and Japan with 16 percent. The factors
contributing to this growth are the social need for more effective treatments,
the increasing understanding of the disease and the positive climate at the FDA
and other regulatory agencies (promising cancer treatments are given priority by
these agencies).
DRUG DELIVERY INDUSTRY
The innovative drug industry is estimated to have total worldwide annual sales
in excess of $300 billion and is growing at an annual rate of approx. 10%. But
the branded industry is also facing patent expirations over the next five years
on drugs that generated close to $35.0 billion in U.S. sales alone in 1999.
Thus, we intend to clearly take advantage of an industry that has historically
rejuvenated itself with the development of new premium-priced breakthrough
therapies that have obsoleted older drugs and opened up entirely new markets.
According to industry sources, the drug delivery market was worth over $40
billion in 1999 and is anticipated to double by the year 2005.
Drug delivery has become one of the fastest growing areas in the pharmaceutical
industry with companies increasingly turning to novel delivery systems in order
to:
1. Extend the patent life of existing drugs
2. Increase product portfolio
3. Enhance safety and efficacy
4. Reduce unwanted side-effects
5. Improve patient compliance,
6. Take advantage of the regulatory approval cycle process, and
7. Maintain product sales against competition.
Novel systems have also been designed to provide new therapies by modifying the
activity of existing compounds. A wide range of drug delivery technologies has
specifically been designed to solve biological problems and physiological
constraints with clear clinical and cost benefits over existing therapies. In
the past, drugs have generally been administered orally or by injection,
although the steady plasma drug concentrations that are normally required for
optimal efficacy and safety of a drug are difficult to achieve with these
methods of delivery. Currently, candidates issued of B Twelve's proprietary
technology are aimed to be delivered to the body via the intraveinous (iv)
route. The iv route is generally used in situations where rapid responses are
required, or where there is no alternative because absorption is impaired or not
feasible by other routes. Even by the iv route it is possible to modify the
kinetics of disposition, and sometimes the metabolic profile of the drug, by its
incorporation into vesicles, such as liposomes, or its attachment to a carrier.
30
PACLITAXEL
New anti-cancer drugs showing efficacy and improved safety profile can have a
major influence on the market. This has been demonstrated by Taxol(R) -
paclitaxel -, which is now approved for ovarian, breast, and lung cancers as
well as for AIDS-related Kaposi's sarcoma. In just its second year on the market
back in 1994, Taxol(R) was the leading drug for this market with sales advancing
168% to $375 million (ovarian cancer was the first approved indication). BMS -
Bristol-Myers Squibb Co. - reported sales of $1.5 billion for Taxol in 1999 with
over 130,000 patients treated pa. The explosive growth rate of Taxol(R) since
its introduction reflects the very limited alternatives available for the
effective treatment of solid tumors.
The field is in its infancy and the introduction of the second and third
generations of improved drugs should accelerate market growth. Despite generic
competition, BMS reported sales of Taxol(R), the Company's leading anti-cancer
agent, of $330 million for the first quarter of 2001. Domestic sales decreased
28% to $179 million (due to generic competition), while international sales
increased 9% to $151 million, led by strong sales growth in Japan and France.
Paclitaxel, or commonly referred to as "Taxol" of Bristol-Myers Squibb Co., was
discovered by the National Cancer Institute ("NCI") in the United States in the
early 1960's. Despite promising anti-tumor activities, development of paclitaxel
as an anti-neoplasic agent progressed slowly because paclitaxel's scarcity and
the difficulty of large-scale isolation, extraction and preparation. In January
1991, after an open competition initiated by the NCI in 1989, BMS was selected
and given exclusive rights to develop and market paclitaxel pursuant to a
cooperative research and development agreement with the institute. Since,
paclitaxel received marketing approval in more than 50 countries around the
globe for late stage ovarian and metastatic breast cancer. But still, a major
side-effect observed in the use of Taxol(R) has been the damage to the bone
marrow, resulting in severe anemia, infections, diarrhea, mouth ulcers and hair
loss. The hypersensitivity reactions were initially life-threatening but they
are now controlled with a strict regime of premedication. The severity of the
neutropenia is now being reduced with a bone marrow stimulating medication
called GCSF.
There is no patent on the composition of paclitaxel and BMS does not hold any
orphan drug status on the drug. As a result, patents relating to paclitaxel
focus on method claims for the treatment of malignancy, and compositions of
matter claims have been granted for a large number of paclitaxel analogs or
derivatives. More recently, many companies have focused on the development of
new drug delivery system to reduce the side-effects associated to paclitaxel and
its derivatives. Due to the therapeutic potential of paclitaxel, over 200
patents have been issued in the United States regarding the above mentioned
claims.
Paclitaxel is an antimicrotubule agent that promotes the assembly of
microtubules from tubulin dimmers and stabilizes microtubules by preventing
depolimerization. In vitro, paclitaxel exhibits cytotoxic activity against a
wide variety of both human and rodent tumor cell lines including leukemia,
non-small cell lung carcinoma, small-cell lung carcinoma, CNS carcinoma,
melanoma, renal carcinoma, ovaria carcinoma and breast carcinoma.
31
COMPETITION LANDSCAPE
We have identified the following players as comparables and/or competitors in
terms of business plans, scientific rationale and technologies:
Endocyte, Inc is a private U.S. based biotechnology company focused on vitamin
based drug targeting and delivery systems. Similarly to B. Twelve, Endocyte's
mission is to use vitamins as "trojan horses" to target and deliver diagnostic
and therapeutic agents into cells for treatment of diseases. Endocyte's lead
project is the use of the vitamin folate to target and deliver anticancer
agents.
Protarga, Inc. is a private U.S. based pharmaceutical company that has developed
a technology involving the chemical attachment of natural fatty acids to
therapeutic agents that are accumulated by the cells. The Company's first
product candidate, Taxoprexin(R) Injection for cancer chemotherapy, is currently
being evaluated in eight Phase II clinical studies in the US and Europe.
Copharos Inc. is a private U.S. based biotechnology company that has developed a
method of attaching radioactive atoms to vitamin B12, such that the resulting
compound can be used with a standard gamma camera to detect and image sites of
cancer in the human body. This compound is designated as DTPA-adenosylcobalamin,
or "DAC," which is then labeled with Indium-111, one of several common
radioisotopes used for imaging. The focus of Copharos is medical imaging and
breast cancer.
Manticore Pharmaceuticals Inc. is a private U.S. based biotechnology company
that has developed a method to target the delivery of cytotoxic anticancer drugs
to tumor cells by using vitamin B12 as delivery vehicle similarly to B Twelve's
approach, except that their bioconjugates are synthesized by attaching cytotoxic
drugs to the cobalt atom of cobalamin. The bioconjugates need to be activated by
ultrasound to cleave the C-Co bond, thereby allowing release of the drug. They
also developed fluorescent cobalamin conjugates ("CobalaFluors") that may be
useful as diagnostic imaging agents in breast cancer surgery and other
diagnostic procedures where it is desirable to visualize cancer cells, similarly
to Copharos Inc.
Access Pharmaceuticals is a public U.S. based pharmaceutical company that has
proprietary patents or rights to seven drug delivery technology platforms:
synthetic polymer targeted delivery, vitamin mediated targeted delivery
(including oral), bioerodible hydrogel technology, nanoparticles, Residerm
topical delivery, carbohydrate targeting technology and agents for the
prevention and treatment of viral diseases, including HIV.
To our knowledge, other companies that are involved in the development and/or
production, improved method of delivery or analogs of paclitaxel include but are
not limited to Bristol-Myers Squibb Company, Cell Therapeutics Inc., Ivax
Corporation, Bioxell Pharma Inc., Supratek Pharma Inc., Enzon Inc., Napro
Biotherapeutics Inc., F.H. Faulding & Co. Limited, Phytogen Inc., Aphios
Corporation, Taxolog Inc., Cytoclonal Pharmaceutics Inc., Protarga Inc., and
Mylan Laboratories Inc.
32
MONOCLONAL ANTIBODIES
The second aspect of B. Twelve's business is the development of human monoclonal
antibodies (Mabs). There is a large spectrum of biotechnology companies engaged
in the development of Mabs therapies. Invariably technologies developed by these
companies target cancer, AIDS and autoimmune disorders, in addition to
cardiovascular, viral and organ transplant indications as well as medical
diagnostics. Antibody-based approaches developed by these companies include
toxin conjugates, radioisotope conjugates, and unconjugated antibodies.
Monoclonal antibodies were one of the first therapeutic products issued of the
biotechnology industry. Unlike most conventional drugs, these recombinant
proteins possess intrinsic properties that empower them to selectively
neutralize disease-causing targets without harming healthy neighboring cells.
However, in the early 1990s, the first generation of monoclonal antibodies
experienced clinical trial failures due to their murine nature. Many product
developments were derailed in 1992 when data from various clinical trials
revealed no clinical difference between the treated group and placebo and, in
fact, suggested that treatment may even have been harmful.
The first generation of Mabs failed human clinical development for the following
reasons:
A) Immunogenicity problems or HAMA response: Since Mabs were made from murine
genes, immunogenicity issues were largely responsible for causing toxicity and
neutralizing efficacy.
B) Inadequate cytotoxic activity: Because they originate in mice, these
antibodies were unable to activate important human immune function.
C) Poor target selection: Targets chosen were not appropriate for antibody-based
therapy often due to target hindrance and/or expression.
Among the first generation antibodies, the only therapeutic antibody to reach
the market was Johnson & Jonhson's OrthoClone (OKT3), which was approved in 1986
as an immunosuppressive agent to treat patients undergoing kidney
transplantation. Due to its significant toxicity profile, however, OrthoClone
has remained a niche product for end-stage transplant patients with market
potential of $50 million and is still the only murine monoclonal antibody
authorized as therapeutic.
Among cancers, lymphomas have been an attractive target for antibody therapy. A
number of antigens have been associated with solid tumours, and Mabs based
therapeutic products targeting those antigens have been produced. Many of them
are now in various stages of clinical development and these antigens include:
the epidermal growth factor receptor (EGF-R), carcinoembryonic antigen (CEA),
Tag 72 (tumour-associated glycoprotein 72), LeY (Lewis Y antigen), gd2
(ganglioside D2), transferring receptor, epcam (epithelial cell adhesion
molecule), tumour necrosis factor, PSMA (prostate-specific membrane antigen) and
numerous others.
The excitement surrounding Mabs began in November 1997, when the FDA approved
RituxanTM (Rituximab) for the treatment of advanced, recurrent non-Hodgkins
lymphoma -- the first time a monoclonal antibody had ever been cleared for use
in cancer therapy.
33
We are aware of only three monoclonal antibodies approved in the United States
for the treatment of cancer, Rituxan(R), Campath(R), and Herceptin(R), although
many more are in development.
Approved Anti-Cancer Antibody Products in The United States.
- ------------------------------ --------------------- ----------------------------------------- ------------
Company Product/Type Indication Status
- ------------------------------ --------------------- ----------------------------------------- ------------
IDEC Pharmaceuticals/ Rituxan(R) Non-Hodgkin's lymphoma 1997
Genentech "Chimeric"
- ------------------------------ --------------------- ----------------------------------------- ------------
Genentech Herceptin(R) Metastatic breast cancer 1998
"Humanized"
- ------------------------------ --------------------- ----------------------------------------- ------------
Berlex Laboratories Campath(R) Leukemia 2001
"Humanized"
- ------------------------------ --------------------- ----------------------------------------- ------------
Rituxan(R) binds specifically to the CD20 antigen expressed on the surfaces of
normal and malignant pre-B and mature B lymphocytes. Greater than 90% of B-cell
NHLs express the CD20 antigen.
Herceptin(R) (Trastuzumab) is approved for the treatment of HER2 protein
over-expressing metastatic breast cancer--approved for first-line use in
combination with paclitaxel. Amplification of the human epidermal growth factor
receptor 2 (HER2) gene results in HER2 protein overexpression. HER2
overexpression occurs in approximately 25% of breast cancer patients. Normal
cells express a small amount of HER2 protein on their plasma membranes in a
tissue-specific pattern.
Campath(R) (alemtuzumab) works by binding to the CD52 antigen that is present on
the surface of the malignant lymphocytes. After binding, the drug induces
antibody-dependent lysis, or killing. This causes the removal of malignant
lymphocytes from the blood, bone marrow, and other affected organs. CD52 is
expressed on the surface of normal and malignant B and T lymphocytes, NK cells,
monocytes, macrophages, and tissues of the male reproductive system.
Today, industry sources estimate that approx. 50% of therapeutic antibodies
currently in development are humanized, and in 1997, Protein Design Labs's
Zenapax(R) became the first humanized antibody product to be successfully
developed for commercialization. While the humanized therapeutic antibodies have
a significant improved profile in every parameter (safety, efficacy, and dosing
due to the lower incidence of immunogenicity) compared to their murine and
chimeric counterparts, these antibodies have still some important and unanswered
questions. Is there any risk of immunogenicity with prolonged treatment, and if
so how long long before it sets in? Most clinical trials for antibodies in
chronic therapy have been conducted in immunocompromised patients, so it still
remains unclear whether or not prolonged treatment in immunocompetent patients,
will trigger immunogenic reactions. To eliminate this risk altogether, fully
human antibodies may be a better approach.
A new generation of antibody technologies -transgenic mice and phage display -
is challenging both traditional hybridoma and humanizing production methods.
These novel technologies enable drug companies to produce fully human
antibodies. Since both approaches are relatively new for commercial use, the
majority of the fully human antibodies produced are still in early clinical or
preclinical development.
34
Industry sources estimate the total antibody therapeutic market in 1999 to be
$1.3 billion, up 336% and 63.1% from 1997 and 1998, respectively. Going forward,
the total antibody therapeutic market in 2002 could easily reach $3.1 billion in
worldwide sales from 19 approved products.
This growth trend is justified for the following reasons:
a) Near-term growth driven by market launch of recently approved antibody
products;
b) Physicians begin to embrace monoclonal antibodies as treatment option
for patients;
c) Additional growth driven by label expansion for existing approved
antibody products;
d) Long-term growth driven by a robust industry pipeline
Regulatory Environment
Drug Development and Approval Process
B Twelve's pre-clinical and clinical trials, as well as the manufacturing and
marketing of its potential products, are subject to extensive regulation for
safety and efficacy by various governmental authorities around the world. The
United States Food and Drug Administration ("FDA") plays a key role since it
regulates drug approval for the world's largest market.
The process of studying drugs intended for use in humans usually begins with
pre-clinical studies involving only animals. These pre-clinical studies are
followed by studies that involve humans on a scale to assess safety and which
are then expanded to a larger group to assess safety and efficacy. These various
studies are usually broken into four phases with multiple studies generally
conducted within each phase. Throughout these pre-clinical and clinical studies
drug concentrations are measured in biological fluid samples as part of the
assessment of drug safety and efficacy.
Preclinical Studies
Preclinical drug studies involve the evaluation of drug testing in animals in a
preliminary effort to determine toxicity, correct doses, side effects and
efficacy in animals to provide evidence of the safety of the drug prior to its
administration to humans. Bioanalytical research involves the use of instruments
that can detect and measure trace quantities of drugs, metabolites, genetic
material and other products in biological samples.
Clinical Studies
Upon successful completion of pre-clinical studies the drug undergoes a series
of evaluations in humans including healthy volunteers. The pharmaceutical
Company sponsoring the new drug must file an Investigational New Drug
application (IND), which includes results from the pre-clinical evaluations and
provides comprehensive descriptions of the proposed human clinical studies.
There are four generally accepted Phases in clinical studies, but the Phases may
overlap:
35
Phase I These studies usually take one year to complete and are conducted on
a small number of healthy human subjects to evaluate the drug's
pharmacological actions, toxicity, metabolism and pharmacokinetics.
Phase II These studies take an average of two years to complete and are
carried out on a relatively small number of patients suffering from
the targeted condition or disease, to determine the drug's
effectiveness and dose response relationship. This phase provides
additional safety data and the first substantiative evidence of the
drug's efficacy in humans.
Phase III These studies take an average of two years to three years to
complete and involve tests on a much larger population of patients
suffering from the targeted condition or disease, typically several
hundred to several thousand patients. Such studies measure the drug's
efficacy and its side effects on a large scale and typically involve
numerous hospitals and clinics.
Phase IV This final phase involves monitoring the long-term benefits and
risks of a drug after it has entered the market. These studies also
involve examining the efficacy and safety of different dosage forms or
focusing on specific sub-populations of patients for evaluation of the
drug's efficacy and safety. Such studies can be carried out on
thousands to tens of thousands of patients.
Upon completion of Phase III clinical studies, the pharmaceutical company
sponsoring the new drug assembles all the preclinical and clinical data in the
form of a New Drug Application (NDA), for submission to the FDA, or a New Drug
Submission (NDS) for the TPP. The review process generally takes 12 to 18 years
before the drug receives approval for marketing.
In Canada, these activities are regulated by the Food and Drug Act. The approval
procedure is substantially similar to that of the FDA, but the rules and
regulations promulgated thereunder are enforced by the Therapeutic Products and
Programs ("TPP") of Health Canada. Outside the United States and Canada, and
whether or not the FDA or TPP approval has been obtained, approval of a product
by local regulatory authorities must be obtained prior to the commencement of
commercial sales of the product in a given country. The requirements governing
the conduct of clinical trials and product approvals vary widely from country to
country, and the time required for approval may be longer or shorter than that
required for FDA or TPP approval. Although there are some procedures for unified
regulatory filings for certain European countries, in general, each country at
this time has its own procedures and requirements.
Drug manufacturing is also regulated, thus companies are required to ensure
compliance with GMPs quality standards that require the control of production
activities, raw-material procurement, complaint management, product recalls,
labeling and promotional material. In addition to these standards, which are
common to all drugs, manufacturers of biopharmaceutical products must
demonstrate that their products are homogeneous from one lot to the next,
failing which the applicable regulatory authority may prohibit the sale of a lot
and possibly require that a product be recalled.
Accelerated Approval in the United States
The FDA has enacted regulations which are intended to accelerate the process of
validating the development, assessment and marketing of new diagnostic drugs or
drugs used for the treatment of serious diseases for which there is no other
satisfactory treatment. This "fast-track" designation enables the FDA to
36
participate in the process of establishing research protocols and enables, but
does not require it to approve the marketing of the drug immediately following
the conclusion of Phase II clinical trials. The FDA may nonetheless require that
Phase III clinical trials for a drug be completed even if it has approved the
marketing of the drug.
PLAN OF OPERATION
The following discussion of our plan of operation should be read in conjunction
with the consolidated financial statements and the attached notes included
elsewhere in this prospectus.
We have historically funded our operations with funds from private placement
equity offerings. Since our inception in 1999, we have dedicated substantially
all of our resources to the research and development of our technologies and
related compounds. As of March 31, 2002, B Twelve has an accumulated deficit of
$5,476,569, a working capital deficiency of $529,384, losses from operations of
$2,959,244 in 2002, and cash used in operations of $114,991 during 2002. Our
Auditors have issued a report on our consolidated financial statements included
in this prospectus for the year ended March 31, 2002, and have expressed
concerns that B Twelve will continue as a going concern if additional capital is
not raised. We require immediately additional funds, in order to continue and
complete the research and development activities currently contemplated. Because
there is no minimum amount of proceeds that will be raised, investors may end up
holding shares in a company that hasn't raised sufficient proceeds from the
offering to continue operations and has an illiquid smaller market for its
shares.
Our plan of operation has been prepared assuming that we will continue to
operate as a going concern. Our capability to continue as a going concern is
contingent to the completion of this offering. The source, availability, and
terms of such funds have not been determined and there is no assurance that we
will be able to obtain any funding on acceptable terms or at all. Failure to
obtain the financing or to obtain it on a timely basis will have a substantial
adverse affect on our operations and our ability to complete our plan of
operation in whole or in part.
We require immediate and substantial additional funds, in order to continue and
complete the research and development activities currently contemplated. Our
capital requirements and availability of such capital depend upon many factors,
including continued scientific progress and cost associated to our research and
development programs, the scope and results of preclinical studies and clinical
trials, the time and costs involved in obtaining regulatory approvals, the cost
involved in filing, prosecuting and enforcing patent claims, the effect of
competing technological developments, the cost of manufacturing scale-up, the
cost of commercialization activities, and other factors which may not be within
our control.
If we are able to raise sufficient funds, further discovery, maintenance and
development of our anti-cancer drug candidates will likely cause our operational
expenses to increase over the next several years. We expect to incur significant
additional operating losses for at least the next several years unless such
operating losses are offset, if at all, by licensing revenues under strategic
alliances with larger pharmaceutical companies that we are currently seeking.
37
Our business strategy requires that we establish and maintain good strategic
alliances. Currently we are seeking strategic alliances but do not have any. We
have no experience in establishing and maintaining strategic alliances and we
cannot give any assurance that we will be successful in establishing one or, if
we do establish one or more relationships, be able to maintain the
relationship(s) in a manner that is beneficial to us.
We have no experience in manufacturing, procuring products in commercial
quantities or marketing, regulatory approval process and only limited experience
in negotiating, setting up or maintaining research collaboration and conducting
clinical trials, and there is no assurance that we will successfully continue or
engage in any of these activities.
Many of our drug candidates are still in research and preclinical development,
which means that they have not yet been tested on humans. We will need to commit
significant time and resources to develop these and additional product
candidates. We are dependent on the successful completion of clinical trials and
obtaining regulatory approval in order to generate revenues. Specifically, our
drug candidates that appear to be promising at early stages of development may
not reach the market for a number of reasons. Potential products may: i)be found
ineffective or cause harmful side effects during preclinical testing or clinical
trials, ii) fail to receive necessary regulatory approvals, iii) be difficult to
manufacture on a large scale, iv) be uneconomical to produce, v) fail to achieve
market acceptance, or vi) be precluded from commercialization by proprietary
rights of third parties.
Because we based several of our drug candidates on unproven novel technologies,
we may never develop them into commercial products. We base many of our product
candidates upon novel delivery technologies which we are using to discover and
develop drugs for the treatment of cancer. This technology has not been proven.
Furthermore, preclinical results in animal studies may not predict outcome in
human clinical trials. Our product candidates may not be proven safe or
effective. If this technology does not work, our drug candidates may not develop
into commercial products.
We may be unable to attain the raw materials used in the production of some of
our bioconjugate constructs in sufficient quantity to meet demand when and if
such product is approved. By example, paclitaxel is derived from certain
varieties of yew trees and is also used in one our of drug candidates. Supply of
yew trees is tightly controlled by a limited number of companies. To date we
have not entered into an agreement with a supplier to provide sufficient
quantity or quality of any drugs used in the construction of our bioconjugates.
We currently do not have internal facilities for the manufacture of any of our
products for clinical or commercial production.
Business Strategy
Our primary objective is to focus our financial resources and research
activities on the discovery and the development of human therapeutic products,
which maximize the utility and application of our platform technologies. To date
we minimized the costs of infrastructure and leveraged the research we sponsored
in selected medical and academic centers.
38
Our vision is to become a sustainable biopharmaceutical company offering
alternative and innovative solutions to the pharmaceutical industry. We believe
that this strategy would be achieved through a combination of:
o Using our specialty drug delivery technology platform, to
provide value-added therapeutics, both in-house and partnered;
o Further leverage our strategic alliances regarding the
development of fully human antibody(ies); and
o Through organic growth and acquisition.
B Twelve's strategy incorporates the following principal elements:
o Focus on quicker to market opportunities
o Establish broad applicability of its drug delivery technology
platform
o Expand existing and develop new collaborative relationships
o Enhance intellectual proprietary position
In common with other biotechnology companies, it has been our strategy to
develop technologies that target the development of therapeutics which address
large unmet market opportunities. A hallmark of this business strategy is to
leverage strategic alliances with other pharmaceutical and biotechnology
companies to enhance internal development and ultimately commercialization
capabilities. We have implemented the first phase intended to leverage the
development, regulatory and commercialization expertise of potential corporate
partners to accelerate the development of our products while retaining full or
co-promotion rights, as implemented with the research program with Medarex Inc.
Moreover we will continue to focus our resources on research and development
activities by outsourcing its requirements for manufacturing, regulatory and
clinical monitoring activities. This should allow us to focus on our core
discovery and development program and ultimately to potentially generate
additional product opportunities.
We believe this model is consistent with current biotechnology and
pharmaceutical industry licensing practices. In addition, although out-licensing
is a primary strategy of B Twelve, we may choose to retain co-development or
marketing rights to particular drug products if we consider it appropriate to do
so. Our objectives in seeking to out-license candidates include:
o Obtaining long term revenues streams from royalty payments on
the sale of the products
o Providing access to the resources and experience of large
pharmaceutical or biotechnology companies
o Obtaining up-front payments and licensing fees for products
licensing rights
o Minimizing development expenditures through cost sharing
programs
Business Development Plan
We believe that there are several applications for B Twelve's drug candidates. A
number of properties of our drug delivery and vitamin B12 depletion technologies
suggest a potential role for our drug candidates in the therapy of solid tumors
such as colorectal and breast cancer in addition to treatment of leukemias.
Specifically, B Twelve's research and product development programs include the
following projects:
39
- -------------------------------- ------------- ------------------ --------------------------------------------
Technologies / Clinical Status Collaborators*
Drug Candidates Market
- -------------------------------- ------------- ------------------ --------------------------------------------
Drug Delivery Bioconjugates
- -------------------------------- ------------- ------------------ --------------------------------------------
Paclitaxel Oncology Proof of concept New York University
The University of Texas,
MD Anderson Cancer Center
Doxorubicin Oncology Proof of concept
Carboplatinum Oncology Proof of concept
- -------------------------------- ------------- ------------------ --------------------------------------------
Anchor Technology
- -------------------------------- ------------- ------------------ --------------------------------------------
Targeted liposome Oncology Discovery The University of Texas,
MD Anderson Cancer Center
New York University
- -------------------------------- ------------- ------------------ --------------------------------------------
Vitamin B12
Depletion
Monoclonal
Antibodies
- -------------------------------- ------------- ------------------ --------------------------------------------
Transport Oncology Proof of concept Medarex Inc.
protein The Research Foundation of State
Receptor Oncology Development University of New York
The University of Texas, MD Anderson
Cancer Center
- -------------------------------- ------------- ------------------ --------------------------------------------
Depletion Agents
- -------------------------------- ------------- ------------------ --------------------------------------------
Receptor modulators Oncology Proof of concept New York University
The University of Texas, MD Anderson
Cancer Center
- -------------------------------- ------------- ------------------ --------------------------------------------
*: see status with collaborators below in section "Corporate partnerships".
We are conducting all our research and development through collaborative
research agreements with universities or research institutions throughout North
America. Currently, this strategy circumvents costly implementation and
operation of laboratory facilities, reduces development costs and maximizes
flexibility.
B Twelve typically bears the expense of patent prosecution and may sponsor and
direct some preclinical testing. However, to avoid the substantial costs and
risks associated with commercialization, we may sublicense the manufacturing and
marketing rights to portfolio drug candidates to one or more corporate partners
in exchange for license fees, milestone payments and royalty payments. Depending
on our financial capability, we may retain rights to our portfolio
pharmaceutical products and develop the products ourselves.
B Twelve's research network is formatted into groups with expertise in a)
medicinal chemistry, b) antibody engineering and c) pre-clinical and clinical
development. We have in addition a co-development research program with Medarex
Inc. In order to conduct the research necessary to proceed into pre-clinical and
human clinical trials, experience in several scientific areas is required. For
the current effort in targeting the vitamin B12 pathway, including its receptor,
these include:
(a) Knowledge of vitamin B12 metabolism and cellular uptake;
(b) Diseases and market awareness, with initial focus in Oncology;
(c) In vitro and in vivo models to study toxicity and therapeutic
efficacy of drug candidates;
40
(d) Organic synthesis, including rational drug design techniques
and combinatorial chemistry;
(e) Gene cloning and expression (i.e. recombinant protein
technology); and
(f) Scale-up manufacture of drug candidates;
MILESTONES
We anticipate accomplishing the following milestones in the coming months:
o Secure capital to proceed with business plan o Complete manufacturing
agreement for our bioconjugates o Additional in vitro and in vivo data
o Add or expand collaboration agreement(s) with industrial
partner(s)
o Initiate formal preclinical studies for one drug candidate
o Expand Company's presence at key scientific and partnering
meetings
o Grant applications
o Acquisition and/or licensing
o Strengthened intellectual property portfolio
Major achievements and activities of B twelve can be summarized as follows:
o Signing of a strategic co-development program with Medarex
Inc.
o Equity investment of $1.2M by Medarex Inc. to be used as a
credit against future invoices, milestones and/or royalty fees
o Initiation of a program to develop fully human monoclonal
antibodies against proprietary targets
o Positionement of our core technology as an enabling drug
delivery technology platform, with an initial focus on cancer
o Development of a methodology to rapidly construct
bioconjugates of vitamin B12 (scale-up manufacture)
o Demonstration of biological activity of bioconjugates of
vitamin B12 to selected in vitro models
o Demonstration of ability to deliver its bioconjugates of
vitamin B12 in selected in vivo models
o Strengthened intellectual property portfolio, bringing total
number of patents to 9 issued and 17 pending (including a new
patent application in the last 12 months)
o Scientific presentation at the American Chemical Society
We have access to a staff of over 15 professionals, most of them with a Ph.D.
degree, through our academic network and institution partners. During the
preclinical and clinical trials phase, we expect to increase the number of
employees in about 3 years to approximately 25 employees through our research
network and 6 in the Toronto's office (currently only Dr. Berger, as President &
C.E.O.).
DRUG DELIVERY TECHNOLOGY DEVELOPMENT PLAN
Due to capital constraint, we determined to focus our financial and scientific
resources to the pre-clinical development of our lead drug candidate based on
paclitaxel conjugated to vitamin B12 for out-licensing.
As our first drug candidate - paclitaxel conjugated to vitamin B12 - enters
formal preclinical program, we intend to outsource specific study components to
a Chemical Contract Manufacturer (CCM) and an integrated Contract Research
Organizations (CRO) to permit the conduct of concurrent studies in order to meet
time-limiting project milestones.
41
During the preclinical development of a new drug candidate, a diverse number of
studies relating chemistry, formulation, animal pharmacology, toxicology,
manufacturing and clinical supplies are required to meet the regulatory
requirements of an Investigational New Drug (IND) submission. We are also
reviewing the possibility to have a CRO as a strategic partner as opposed to a
service provider. Due to the limited internal project management staff, we may
prefer to outsource the entire pre-clinical program to a vertically integrated
CRO capable of handling studies from discovery screening to IND filing.
We anticipate a budget of about $2.0 million to file an IND with the FDA and a
development time frame of 18 to 24 month.
MONOCLONAL ANTIBODIES DEVELOPMENT PLAN
On January 2001, B Twelve and Medarex Inc. signed an agreement for the research,
development and commercialization of high affinity fully human monoclonal
antibodies through the application of Medarex's UltiMAb Human Antibody
Development Systemsm and cancer related targets provided by us.
Under terms of the agreement, we retained the rights to develop and
commercialize human antibody products resulting from this alliance. Medarex
invested in B Twelve by acquiring an equity stake of its issued stock. Medarex
is a shareholder of the Company with an equity investment of $1.2M value that
can be applied against certain license fees and milestone payments payable by B
Twelve to Medarex (see Section "Corporate Partnerships", below). The research
agreement includes the creation of high-affinity, fully human antibodies against
B Twelve's proprietary targets, clinical supply manufacturing expertise to be
produced in Medarex state of the art cGMP manufacturing facility, and IND filing
expertise.
Scientific Development plan emanating from the collaboration with Medarex is
outlined below:
o Creation of high-affinity, fully human antibodies against B
Twelve's proprietary targets
o Cell line development
o Purification process development
o Quality control assay development and validation
o Scale up of complete production process
o Production and release of lot for toxicology studies
o Production and release of vialed products for Phase I/II
clinical trials
o Preparation and maintenance of various reports and records,
including SOPs
o Preparation and submission of a Drug Master File to U.S. FDA,
and/or European regulatory agencies
By having access to Medarex' human antibody platform and development capability,
we believe to be in position to rapidly and efficiently advance our development
program to human clinical trials and reduce operating costs.
42
Based on discussion with Medarex, we anticipate a budget of $2.0 million to file
an IND with the FDA and a development time frame of 12 to 18 month per selected
antibody.
CORPORATE PARTNERSHIPS
B Twelve is currently conducting all of its research and development through
collaborative research agreements with universities or research institutions
throughout North America. Some of our product development programs depend on our
ability to maintain rights under these collaboration agreements. The
institutions have the power to terminate the agreements with us if we fail to
meet our obligations under these agreements. If we default under any of these
collaboration agreements, we may lose or partially lose our rights to market and
sell any future products based on the developed technology. As date of filing of
this prospectus, we have terminated only one agreement with The University of
Texas.
The Research Foundation of State University of New York
On August 1999, The Research Foundation of State University of New York
("RFSUNY") and B Twelve have entered into a research collaboration agreement
aimed to evaluate and investigate the biological activities of monoclonal
antibodies and vitamin B12 related agents that have potential uses in patient
care and treatment. This agreement was amended on November 2000 to reflect a
material transfer agreement signed with Medarex Inc. In consideration for the
work performed by RFSUNY, B Twelve agreed to pay the sum of $124,862 for the
first year and a sum of $129,856 for the second year. B Twelve owes RFSUNY the
sum of $97,392.00 in connection with the services provided to B Twelve under the
mentioned agreement. RFSUNY and B Twelve are co-assignees on pending patent
applications.
Should Medarex provide B Twelve with a fully human monoclonal antibody to be
further developed through clinical trials, B Twelve have an option to negotiate
a new agreement with respect to an exclusive worldwide license to use the
invention issued of the research agreement. Terms are to be negotiated on good
faith by the parties according to reasonable and customary terms and conditions
(including, but not limited to reasonable royalties) with respect to
university-industry agreements.
The University of Texas, MD Anderson Cancer Center
On August 1999, The University of Texas, MD Anderson Cancer Center ("MD
Anderson") and B Twelve have entered into a sponsored laboratory study agreement
to study the pharmacology of vitamin B12 related agents, including analogues and
monoclonal antibodies, against selected targets. In consideration for the work
performed by MD Anderson, B Twelve agreed to pay the total sum of $84,000. This
agreement was amended on November 2000 to reflect a delay in the research to be
conducted by MD Anderson. Only one payment was made, and the research agreement
was mutually terminated by the parties on April 2002. B Twelve is not indebted
to the MD Anderson Cancer Center and the parties have no obligation to each
other.
43
New York University
On November 1999, New York University ("NYU") and B Twelve have entered into a
collaborative research agreement to synthesize vitamin B12 analogs. Under the
agreement, B Twelve granted to NYU a non-exclusive research license under
patents assigned to B Twelve for the purpose of the research agreement. In
consideration for the work performed by NYU, B Twelve agreed to pay the total
sum of $373,250. B Twelve owes NYU the sum of $102,780.00 in connection with the
services provided to B Twelve under the mentioned agreement. NYU has agreed in
principle to settle the outstanding debt with the issuance of our common shares.
If issued, NYU will be granted a "put" option to sell the common shares back to
B Twelve after a period of three (3) years from the date of acceptance. In the
event that NYU elects to exercise the "put" option, the common shares will be
repurchased by B Twelve, at a purchase price of $1.00 per common share an in
accordance with a mutually agreeable procedure. At the date of filing, we have
not yet executed such agreement with NYU.
On August 2001, NYU reported to B Twelve an invention disclosure and filed a
patent application with the United States Patent Office. The patent is
prosecuted by NYU and B Twelve is to reimburse NYU for all costs and fees
incurred by NYU in connection with the filing, maintenance, prosecution and
protection of the patent. B Twelve has an exclusive option to negotiate a new
agreement with respect to an exclusive worldwide license to use the invention
issued of the research agreement. Terms are to be negotiated on good faith by
the parties according to reasonable and customary terms and conditions
(including, but not limited to reasonable royalties) with respect to
university-industry agreements.
Medarex Inc.
On January 2001, Medarex Inc. and B Twelve have entered into an agreement for
the research, development and commercialization of novel cancer therapeutics
through the application of Medarex's UltiMAb Human Antibody Development Systemsm
and B Twelve's targeted technology. Under terms of the agreement, B Twelve will
develop and commercialize human antibody products resulting from this alliance.
Medarex is responsible for generating fully human antibodies to targets provided
by B Twelve. Some of the scientific emanating from the collaboration with
Medarex is outlined below:
o Creation of high-affinity, fully human antibodies against B
Twelve's proprietary targets
o Cell line development
o Purification process development
o Quality control assay development and validation
o Scale up of complete production process
o Production and release of lot for toxicology studies
o Production and release of vialed products for Phase I/II
clinical trials
o Preparation and maintenance of various reports and records,
including SOPs
o Preparation and submission of a Drug Master File to U.S. FDA,
and/or European regulatory agencies
We issued 400,000 fully vested shares to Medarex to be used as credit against
$1,200,000 future invoiced license and royalty fees. Based on the contract
valuation of $3.00 per share and anti-dilution provisions provided to Medarex,
the Company valued the 400,000 shares at $1,200,000. The value, considered a
prepaid expense, was recorded as deferred fees deducted from stockholders'
equity, to be amortized against future invoices.
44
INTELLECTUAL PROPERTY
B Twelve's business and competition position is dependent upon its ability to
protect its proprietary technologies and avoid infringing the proprietary rights
of others. Company's current policy is to file patent applications on what the
management deems to be important technological developments that might relate to
its products, methods of using its products or therapeutic indications. To date,
all inventions have originated in the United States and all patents applications
were originally filed in the United States. We also seek to protect some of
these inventions through foreign counterpart applications in selected other
countries.
B Twelve's patent strategy has been to develop an "umbrella" of patents
protecting its core technology and their therapeutic uses and the underlying
technologies used to create them. The Company has filed a number of patent
applications in the United States, the PCT Member Countries, Japan, and in most
other jurisdictions to protect its proprietary rights in the development of its
technologies and products. To date, 9 patents have been issued, and 17 are
pending. B Twelve is co-assignee on the issued and pending patents along with
different universities. The following is a list of the issued patents:
- ---------------------- ------------------------------------------------------------- --------------- -----------------
PATENT NO. TITLE ISSUED EXPIRATION
- ---------------------- ------------------------------------------------------------- --------------- -----------------
NZ252,559 Anti-receptor agents to the vitamin B12/transcobalamin II 14/02/97 07/05/2013
receptor
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US5,688,504 Anti-receptor and growth blocking agents to the vitamin 18/11/97 11/18/2014
B12/transcobalamin II receptor
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US5,739,287 Biotinylated cobalamins 14/04/98 14/04/2015
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US5,840,712 Receptor modulating agents 24/11/98 24/11/2015
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US5,840,880 Vitamin B12 receptor modulating agents 24/11/98 24/11/2015
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US5,869,465 Methods for receptor modulation and uses thereto 09/02/99 09/02/2016
- ---------------------- ------------------------------------------------------------- --------------- -----------------
US6,083,926 Water soluble vitamin B12 receptor modulating agents and 04/07/00 14/04/2015
methods relating thereto
- ---------------------- ------------------------------------------------------------- --------------- -----------------
CA2,135,277 Anti-receptor and growth blocking agents to the vitamin 24/04/01 07/05/2013
B12/transcobalamin II receptor and use in preventing
cellular uptake of vitamin B12
- ---------------------- ------------------------------------------------------------- --------------- -----------------
KR297,310 Anti-receptor and growth blocking agents to the vitamin 21/05/01 07/05/2013
B12/transcobalamin II receptor and use in preventing
cellular uptake of vitamin B12
- ---------------------- ------------------------------------------------------------- --------------- -----------------
We believe that using our drug delivery technology to bond existing drugs may
yield patentable subject matter. We do not believe that our bioconjugate
constructs will infringe any third-party patents covering the underlying drug.
However, we may not receive a patent for our bioconjugate constructs and we may
be challenged by the holder of a patent covering the underlying drug.
The patent position of biopharmaceutical firms is known to be highly uncertain
and involves complex legal and factual questions. The U.S. Patent and Trademark
Office has not established a consistent policy regarding the breadth of claims
that it will allow in biotech patents. If it allows broad claims, the number and
cost of patent interference proceedings in the U.S. and the risk of infringement
litigation may increase. If it allows narrow claims, the risk of infringement
may decrease, but the value of our rights under our patents, licenses and patent
applications may also decrease.
45
We also rely upon trade secrets, proprietary know-how and continuing
technological innovation to remain competitive. Third parties may independently
develop such know-how or otherwise obtain access to our technology. While we
require our employees, consultants and corporate partners with access to
proprietary information to enter into confidentiality agreements, these
agreements may not be honored.
The management of our patent portfolio is complex, time and cost consuming. We
may prefer to not maintain issued patents or not continue the application of
pending patents if a) these patents become obsolete, b) we decide to not pursue
the development of technologies or related products protected by these patents,
or c) more favorable technologies or patents become available to us. In that
regard, patents issued to third parties may cover our products as ultimately
developed. We may need to acquire licenses to these patents or challenge the
validity of these patents. We may not be able to license any patent rights on
acceptable terms or successfully challenge such patents. The need to do so will
depend on the scope and validity of these patents and ultimately on the final
design or formulation of the products and services that we develop.
Moreover, much of the B Twelve's know-how technology which is not patentable may
constitute trade secrets. Therefore, we require our employees, consultants,
advisors and collaborators to enter into confidentiality agreements. However, no
assurance can be given that such agreements will provide for a meaningful
protection of trade secrets, know-how or other proprietary information in the
event of any unauthorized use or disclosure of information.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, we had approximately $3,800 in cash, and $5,500 of other
receivables.
Net cash used in operating activities decreased to approximately $115.081 during
the fiscal year ended March 31, 2002, compared to $360,906 for the same period
during 2001. The decrease in net cash used in operating activities during the
fiscal year ended March 31, 2002 as compared to the same period in 2001, was
primarily due to decreased research and development expenses and decreased
payments to vendors.
Net cash used by investing activities increased to $2,316 during the fiscal year
ended March 31, 2002, compared to net cash used in investing activities of zero
for the same period during 2001.
Net cash provided by financing activities decreased to $98,293 during the fiscal
year ended March 31, 2002, compared to $263,631 for the same period during 2000.
We raised less equity funds and repaid some related party loans during the
fiscal year ended March 31, 2002.
We have been able to control our operating cash consumption by carefully
monitoring our costs. The Company continues to evaluate a variety of
arrangements that would further strengthen its competitive position and provide
46
additional funding, but cannot predict whether or when any such arrangement or
additional funding will be consummated or whether additional funding will be
available. Without additional funding, we may have to decrease or eliminate the
development of some of our products. We expect that our existing capital
resources will enable us to maintain our current and planned operations until
October or December 2002. We require substantial funds to: (1) continue our
research and development programs, (2) in-license or acquire additional
technologies and (3) conduct preclinical studies and clinical trials. We may
need to raise additional capital to fund our operations repeatedly. We may raise
such capital through public or private equity financings, partnerships, debt
financings, bank borrowings, or other sources.
Our capital requirements will depend upon numerous factors, including the
following: i) the establishment of additional collaborations, ii) the
development of competing technologies or products, iii) the cost of protecting
our intellectual property rights, iv) the purchase of capital equipment, v)the
progress of our drug discovery and development programs, vi) the progress of our
collaborations, vii) payment/receipt of any option/license, milestone and
royalty payment resulting from those collaborations, and vii) in-licensing and
acquisition opportunities.
DESCRIPTION OF PROPERTY
B Twelve currently owns no real estate, nor does it hold leasehold interests.
B Twelve rents its office space on a month-to-month basis.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the common stock being offered herein and
there is no representation that a public trading market will develop in the
future.
As of July 31, 2002, there were 9 holders of record of our common stock.
We have not declared, and do not foresee declaring, any dividends now or into
the foreseeable future. We intend to retain earnings, if any, to finance the
development and expansion of its business. Future dividend policy will be
subject to the discretion of our Board of Directors and will be contingent upon
future earnings, if any, our financial condition, capital requirements, general
business conditions and other factors. Therefore, there can be no assurance that
any dividends of any kind will ever be paid.
EXECUTIVE COMPENSATION
A) Summary Compensation Table
The following table sets forth all annual and long term compensation for
services in all capacities rendered to B Twelve by its executive officers and
directors for each of the last three most recently completed financial years.
47
- --------------------- -------- ------------------------------- ------------------------------------ ---------------
Annual Compensation Long-Term Compensation
---------------------------- --------------------------------
Awards Payouts
----------------------- ---------
Securities Restricted
Other Under Shares or
Annual Options/ Restricted LTIP All Other
Name and Salary Bonus Compensation SARs Share Payouts Compen-sation
Principal Position Year $ $ $ Granted (#) Units ($) ($) ($)
- --------------------- -------- ---------- ------- ------------ ------------ ------------ ---------- ---------------
Jean-Luc Berger 2002 $40,000 $262,474
President and CEO 2001 $25,268 $114,525
2000 None -
- --------------------- -------- ---------- ------- ------------ ------------ ------------ ---------- ---------------
Georges Benarroch, 2002 None $3,000
Director
2001 None $14,525
2000 None
- --------------------- -------- ---------- ------- ------------ ------------ ------------ ---------- ---------------
Donald MacAdam, 2002 None $3,000
Director
2001 None $14,525
2000 None
- --------------------- -------- ---------- ------- ------------ ------------ ------------ ---------- ---------------
B) Option/SAR Grants in Last Fiscal Year
The following table (presented in accordance with the Regulation) sets
forth stock options granted under the Share Incentive Plan during the current
fiscal year to the name key employees:
- ------------------------ --------------------- ---------------------- --------------------- ----------------------
Name Number of % of Total Exercise or Base Expiration Date
Securities Options/SARs Granted Price ($/Sh)
Underlying to Employees in
Options/SARs Fiscal Year
Granted (#)
- ------------------------ --------------------- ---------------------- --------------------- ----------------------
Jean-Luc Berger 262,500 31 $0.0001 Exercised in
November 2001
- ------------------------ --------------------- ---------------------- --------------------- ----------------------
Uri Sagman 587,500 69 $0.0001 Exercised in
February 2002
- ------------------------ --------------------- ---------------------- --------------------- ----------------------
C) Aggregated Option/SAR Exercise in Latest Fiscal Year and Fiscal Year
End Option/SAR Value Table
The following table (presented in accordance with the Regulation) sets
forth details of all exercises of stock options/SARs during the fiscal year end
March 31, 2002 by the named executive officer and employees and the fiscal
year-end value of unexercised options/SARs on an aggregated basis:
48
- --------------- --------------- ------------ ------------------------------------ ------------------------------------
Number of Securities Underlying Value of Unexercised In-the-Money
Options/SARs Granted at FY-End (#) Options/SARs at FY-End ($)
Name Shares Value Exercisable/Unerxercisable Exercisable/Unerxercisable
Acquired on Realized
Exercise (#) ($)
- --------------- --------------- ------------ ------------------------------------ ------------------------------------
Jean-Luc 262,500 262,474 - - -
Berger
- --------------- --------------- ------------ ------------------------------------ ------------------------------------
Uri Sagman 587,500 587,441 - - -
- --------------- --------------- ------------ ------------------------------------ ------------------------------------
D) COMPENSATION OF DIRECTORS
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. The Board of Directors
appoints officers annually and each executive officer serves at the discretion
of the Board of Directors. The Company does not have any standing committees at
this time.
The Company does not currently maintain insurance for the benefit of
the directors and officers of B Twelve against liabilities incurred by them in
their capacity as directors or officers of B Twelve. B Twelve does not maintain
a pension plan for its employees, officers or directors. The Company intends to
obtain $500,000 insurance on the lives of its executive officers.
Any Director who is independent of the Company is entitled to an annual
fee of $2,000 and a fee of $200 for each meeting attended by such Director plus
reasonable expenses incurred in attending such meeting, upon presentation of
receipts therefor. As of the date hereof, no director has accrued any expenses.
However, directors received 14,525 and 3,000 common shares for services during
FY2001 and FY2002, respectively.
None of the directors or senior officers of B Twelve and no associate
of any of the directors or senior officers of B Twelve was indebted to B Twelve
during the financial period ended March 31st, 2002 of B Twelve other than for
routine indebtedness.
E) EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Uri Sagman in
June 1999, which expired on May 31, 2001. The agreement stipulates a salary
based on funding criteria and issuance of 1,200,000 common stock options, which
vest based on the Company meeting stipulated milestones. The options are
exercisable upon vesting at $0.0001 per share. The options were valued on the
grant date using the intrinsic value method of APB 25 and the contemporaneous
cash common stock sale price of $1.00 resulting in a $1.00 option value. Due to
the uncertainty of meeting milestones, a compensation expense based on the
estimated $1.00 value of the options will be recognized upon vesting. Through
March 31, 2001, none of the options vested. In May 2001, 587,500 of the options
vested, and a compensation expense of $587,500 was recognized.
49
The Company entered into an employment agreement with Jean-Luc Berger
in June 2000, which expired on May 31, 2001. The agreement stipulates a salary
based on funding criteria and issuance of 400,000 common stock options, which
vest based on the Company meeting stipulated milestones. The options are
exercisable upon vesting at $0.0001 per share. The options were valued on the
grant date using the intrinsic value method of APB 25 and the contemporaneous
cash common stock sale price of $1.00 resulting in a $1.00 option value. Due to
the uncertainty of meeting milestones, a compensation expense based on the
estimated $1.00 value of the options will be recognized upon vesting. Through
March 31, 2001, none of the options vested. In May 2001, 262,500 of the options
vested and a compensation expense of $262,500 was recognized.
In June 2001, the above employment agreements were renewed and the
remaining of 612,500 and 137,500 options under each agreement, respectively,
were reaffirmed with the milestone schedule.
In November 2001, the above employment agreements were terminated by
the Company and the related option agreements for 612,500 and 137,000 options
were also cancelled. A new consulting agreement was entered into with Jean-Luc
Berger to act as the President and Chief Executive Officer. The agreement
expires on November 15th, 2002 and stipulates a cash compensation of C$60,000 or
about $40,000.
50
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Financial Statements
Years Ended March 31, 2002, 2001, and Cumulative from
March 5, 1999 (Inception)
to March 31, 2002
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Contents
Page(s)
-------
Independent Auditors' Report F-1
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Changes in Stockholders' Deficiency F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-18
Independent Auditors' Report
To the Board of Directors of:
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of B. Twelve, Inc.
and Subsidiary (a development stage company) as of March 31, 2002 and the
related consolidated statements of operations, changes in stockholders'
deficiency and cash flows for the years ended March 31, 2002 and 2001 and
cumulative from March 5, 1999 (inception) to March 31, 2002. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the consolidated financial position of B.
Twelve, Inc. and Subsidiary (a development stage company) as of March 31, 2002,
and the consolidated results of their operations, changes in stockholders'
deficiency and cash flows for the years then ended and cumulative from March 5,
1999 (inception) to March 31 2002, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated financial statements, the Company has a deficit accumulated during
development stage of $5,476,570, a working capital deficiency of $532,586 at
March 31, 2002, losses from operations of $2,959,415 in 2002, and cash used in
operations of $115,081 during 2002, which raises substantial doubt about its
ability to continue as a going concern. Management's plan in regards to these
matters is also described in Note 9. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
July 18, 2002
F-1
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheet
March 31, 2002
Assets
Current Assets
Cash $ 3,801
Other receivables 5,550
Prepaid and other assets 4,997
-----------
Total Current Assets 14,348
-----------
Property and Equipment, net 3,201
-----------
Total Assets $ 17,549
===========
Liabilities and Stockholders' Deficiency
Current Liabilities
Accounts payable and accrued expenses $ 543,433
Loans payable - related parties 3,501
-----------
Total Current Liabilities 546,934
-----------
Stockholders' Deficiency
Common stock, $0.0001 par value, 25,000,000 shares authorized,
5,067,100 shares issued and outstanding 507
Additional paid-in capital 6,103,969
Deficit accumulated during development stage (5,476,570)
Accumulated other comprehensive income 67,706
-----------
695,612
Less: Deferred fees (1,200,000)
Less: Deferred loan fee to related party (24,997)
-----------
Total Stockholders' Deficiency (529,385)
-----------
Total Liabilities and Stockholders' Deficiency $ 17,549
===========
See accompanying notes to consolidated financial statements.
F-2
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
Cumulative from
Year Ended March 31, March 5, 1999
---------------------------- (Inception) to
2002 2001 March 31, 2002
----------- ------------- --------------
Operating Expenses
Compensation $ 893,061 $ 145,272 $ 1,363,111
Amortization 285,708 285,708 809,511
Consulting 254,345 870 904,650
Bad debt - - 12,819
Director fees 6,000 58,100 64,100
General and administrative 30,269 137,132 227,165
Research and development 298,015 342,158 907,542
Impairment loss 1,191,846 - 1,191,846
----------- ------------- --------------
Total Operating Expenses 2,959,244 969,240 5,480,744
----------- ------------- --------------
Loss from Operations (2,959,244) (969,240) (5,480,744)
----------- ------------- --------------
Other Income (Expense)
Interest income 396 2,451 4,741
Loss on disposal of assets (567) - (567)
----------- ------------- --------------
Total Other Income (Expense) (171) 2,451 4,174
----------- ------------- --------------
Net Loss $(2,959,415) $ (966,789) $ (5,476,570)
=========== ============= ==============
Net loss per share - basic and diluted $ (0.70) $ (0.31) $ (1.74)
=========== ============= ==============
Weighted average number of shares outstanding
during the period - basic and diluted 4,247,821 3,149,154 3,149,039
=========== ============= ==============
See accompanying notes to consolidated financial statements.
F-3
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Years Ended March 31, 2002, 2001 and from
Cumulative from March 5, 1999 (Inception) to March 31, 2002
Deficit
Accumulated
Preferred Shares Common Shares Additional During
--------------------- ----------------- Paid-in Development
Shares Amount Shares Amount Capital Stage
-------- --------- --------- ------ ---------- -----------
Common stock issued for
services to officer - $ - 300,000 $ 30 $ 299,970 $ -
Common stock issued for
services to consultant - - 255,000 25 254,975 -
Warrants issued
to consultant - - - - 345,000 -
Net loss, 1999 - - - - - (900,000)
-------- --------- --------- ---- ---------- -----------
Balance, March 31, 1999 - - 555,000 55 899,945 (900,000)
Preferred stock issued
for cash 250,000 250,000 - - - -
Offering costs - - - - (17,005) -
Common stock issued for
intangible assets - - 2,000,000 200 1,999,800 -
Common stock issued for
cash upon exercise
of warrants - - 100,000 10 99,990 -
Foreign currency
translation adjustment - - - - - -
Net loss, 2000 - - - - - (650,366)
-------- --------- --------- ---- ---------- -----------
Balance, March 31, 2000 250,000 250,000 2,655,000 265 2,982,730 (1,550,366)
Common stock issued as
director fees - - 58,100 6 58,094 -
Common stock issued for
cash upon exercise
of warrants - - 150,000 15 149,985 -
Common stock issued for
cash upon exercise
of warrants - - 345,000 35 - -
Common stock issued to
officer as compensation - - 100,000 10 99,990 -
Common stock issued
for cash - - 100,000 10 99,990 -
Common stock issued for
future services - - 400,000 40 1,199,960 -
Foreign currency
translation adjustment - - - - - -
Net loss, 2001 - - - - - (966,789)
-------- --------- --------- ---- ---------- -----------
Balance, March 31, 2001 250,000 250,000 3,808,100 381 4,590,749 (2,517,155)
Preferred stock converted
to common stock (250,000) (250,000) 250,000 25 249,975 -
Common stock options issued
for consulting services - - - - 254,346 -
Common stock issued for
cash upon exercise
of warrants - - 125,000 13 124,987 -
Common stock options issued
for services - - - - 849,915 -
Common stock issued for
cash upon exercise
of options - - 850,000 85 - -
Common stock issued to
directors as compensation - - 6,000 - 6,000 -
Common stock issued to
employee as compensation - - 3,000 - 3,000 -
Common stock issued
as loan fee - - 25,000 3 24,997 -
Foreign currency
translation adjustment - - - - - -
Net loss, 2002 - - - - - (2,959,415)
-------- --------- --------- ---- ---------- -----------
Balance, March 31, 2002 - $ - 5,067,100 $507 $6,103,969 $(5,476,570)
======== ========= ========= ==== ========== ===========
[RESTUBBED]
Accumulated
Other Deferred
Comprehensive Deferred Loan
Income Fees Fee Total
-------- ----------- --------- -----------
Common stock issued for
services to officer $ - $ - $ - $ 300,000
Common stock issued for
services to consultant - - - 255,000
Warrants issued
to consultant - - - 345,000
Net loss, 1999 - - - (900,000)
-------- ----------- --------- -----------
Balance, March 31, 1999 - - - -
Preferred stock issued
for cash - - - 250,000
Offering costs - - - (17,005)
Common stock issued for
intangible assets - - - 2,000,000
Common stock issued for
cash upon exercise
of warrants - - - 100,000
Foreign currency
translation adjustment (5,745) - - (5,745)
Net loss, 2000 - - - (650,366)
-------- ----------- --------- -----------
Balance, March 31, 2000 (5,745) - - 1,676,884
Common stock issued as
director fees - - - 58,100
Common stock issued for
cash upon exercise
of warrants - - - 150,000
Common stock issued for
cash upon exercise
of warrants - - - 35
Common stock issued to
officer as compensation - - - 100,000
Common stock issued
for cash - - - 100,000
Common stock issued for
future services - (1,200,000) - -
Foreign currency
translation adjustment 60,054 - - 60,054
Net loss, 2001 - - - (966,789)
-------- ----------- --------- -----------
Balance, March 31, 2001 54,309 (1,200,000) - 1,178,284
Preferred stock converted
to common stock - - - -
Common stock options issued
for consulting services - - - 254,346
Common stock issued for
cash upon exercise
of warrants - - - 125,000
Common stock options issued
for services - - - 849,915
Common stock issued for
cash upon exercise
of options - - - 85
Common stock issued to
directors as compensation - - - 6,000
Common stock issued to
employee as compensation - - - 3,000
Common stock issued
as loan fee - - (24,997) 3
Foreign currency
translation adjustment 13,397 - - 13,397
Net loss, 2002 - - - (2,959,415)
-------- ----------- --------- -----------
Balance, March 31, 2002 $ 67,706 $(1,200,000) $(24,997) $ (529,385)
======== =========== ========= ===========
See accompanying note to consolidate financial statements.
F-4
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
Cumulative
from
Year Ended March 31, March 5, 1999
------------------------ (Inception) to
2002 2001 March 31, 2002
----------- --------- --------------
Cash Flows from Operating Activities:
Net loss $(2,959,415) $(966,789) $(5,476,570)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 697 466 1,389
Amortization 285,708 285,708 809,511
Stock based compensation 852,915 100,000 1,252,915
Stock based consulting expense 254,345 - 854,345
Stock based director fees 6,000 58,100 64,100
Loss on disposal of equipment 567 - 567
Impairment loss 1,191,846 - 1,191,846
Changes in operating assets and liabilities:
(Increase) decrease in:
Other receivables (515) (2,300) (5,550)
Prepaids and other assets 341 159 (4,997)
Increase (decrease) in:
Accounts payable and accrued expenses 252,430 163,750 543,432
----------- --------- -----------
Net Cash Used In Operating Activities (115,081) (360,906) (769,012)
----------- --------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment (2,316) - (4,463)
----------- --------- -----------
Net Cash Used In Investing Activities (2,316) - (4,463)
----------- --------- -----------
Cash Flows from Financing Activities:
Proceeds from common stock issuance, net of offering costs 125,085 250,035 708,200
Proceeds from related parties, net - 13,596 30,293
Prepayment of loan to related parties (26,792) - (26,792)
----------- --------- -----------
Net Cash Provided By Financing Activities 98,293 263,631 711,701
----------- --------- -----------
Effect of Exchange Rate on Cash 13,397 60,104 65,576
----------- --------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (5,707) (37,171) (3,801)
Cash and Cash Equivalents at Beginning of Period 9,508 46,679 -
----------- --------- -----------
Cash and Cash Equivalents at End of Period $ 3,801 $ 9,508 $ 3,801
=========== ========= ===========
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The Company acquired intangible assets valued at $2,000,000 for 2,000,000 common
shares in June 1999.
The Company issued 400,000 common shares in 2001 for future services valued at
$1,200,000.
An Investor converted 250,000 preferred shares into 250,000 common shares in
2002.
See accompanying notes to consolidated financial statements.
F-5
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
Note 1 Nature of Business and Summary of Significant Accounting Policies
(A) Nature of Business
B. Twelve, Inc. was formed as a Florida corporation on March 5, 1999.
B. Twelve, Ltd., B. Twelve, Inc.'s wholly-owned Canadian subsidiary
(collectively referred to as the "Company"), was also formed on March
5, 1999.
The Company was formed to develop innovative minimally toxic and
non-immunosuppressive proprietary drugs for the treatment of cancer,
arthritis, and other proliferative and autoimmune diseases.
Activities during the development stage include acquisition of
financing and intellectual properties and research and development
activities conducted by others under contracts.
(B) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiary. All material intercompany balances
and transactions have been eliminated in consolidation.
(C) Basis of Presentation and Foreign Currency
The accompanying consolidated financial statements are presented under
accounting principles generally accepted in the United States of
America and in United States dollars.
The functional currency of the Company's Canadian subsidiary is the
Canadian dollar. The accounts of the Canadian subsidiary are translated
to United States dollars using the current rate method. Under the
current rate method, all assets and liabilities are translated using
exchange rates at the balance sheet date. Revenue and expense items are
translated using the average rate of exchange prevailing during the
period. Capital transactions are translated at their historical rates.
Exchange gains and losses resulting from translation of foreign
currencies are recorded in stockholders' equity as a cumulative
translation adjustment component of other accumulated comprehensive
income.
Gains and losses resulting from foreign currency transactions are
recognized in operations of the period incurred.
(D) Use of Estimates
In preparing consolidated financial statements, management is required
to make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
revenues and expenses during the period presented. Actual results may
differ from these estimates. In 2002, the Company estimated the
valuation of intangible assets resulting in an impairment loss. (See
Notes 3)
F-6
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
(E) Cash Equivalents
For the purpose of the consolidated cash flow statements, the Company
considers all highly liquid investments with original maturities of
three months or less at the time of purchase to be cash equivalents.
(F) Property and Equipment
Property and equipment is stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets of six to ten
years.
(G) Intangible Assets
Intangible assets consist primarily of patents and patents pending
which purchased in June 1999. These assets were recorded at cost. The
cost of patents and patents pending are amortized on a straight-line
basis over the lesser of their estimated useful lives or remaining
legal lives, not to exceed 17 years. Based on this policy the Company
had been amortizing the purchased patents and patents pending over a
seven year period through March 31, 2002. At March 31, 2002, the
Company wrote-off the remaining assets balance as an impairment loss.
(See Note 3)
(H) Long-Lived Assets
The Company uses Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of" ("SFAS 121"). SFAS 121 requires the Company
to review long-lived assets including intangible assets and certain
identifiable assets related to those assets for impairment whenever
circumstances and situations change such that there is an indication
that the carrying amounts may not be recoverable.
(I) Stock-Based Compensation
The Company accounts for stock options issued to employees in
accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation cost is measured on the date of
grant as the excess of the current market price of the underlying stock
over the exercise price. Such compensation amounts are amortized over
the shorter of the employment term or the vesting period of the option
grant. The Company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per
share disclosures for employee stock option grants as if the
fair-valued based method defined in SFAS No. 123 had been applied.
The Company accounts for stock options or warrants issued to
non-employees for goods or services in accordance with the fair value
method of SFAS 123. Under this method, the
F-7
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
Company records an expense equal to the fair value of the options or
warrants issued. The fair value is computed using an options pricing
model.
(J) Research and Development Costs
Research and development is conducted by others on behalf of the
Company under contractual agreements and such costs are charged to
expense as incurred. Research and development expense was $298,015 in
2002, $342,158 in 2001, and $907,542 from March 5, 1999 (inception) to
March 31, 2002.
(K) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("Statement 109").
Under Statement 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. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period, which includes the enactment date.
(L) Comprehensive Income
The Company accounts for Comprehensive Income under the Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("Statement No. 130").
Statement No. 130 establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is the
total of net income (loss) and other comprehensive income (loss).
The foreign currency translation gains resulting from the translation
of the consolidated financial statements of B. Twelve, Ltd. expressed
in Canadian dollars to United States dollars are reported as
Accumulated Other Comprehensive Income in the Consolidated Statement of
Changes in Stockholders' Equity.
(M) Net Loss Per Common Share
Basic net loss per common share (Basic EPS) excludes dilution and is
computed by dividing net loss available to common stockholder by the
weighted-average number of common shares outstanding for the period.
Diluted net loss per share (Diluted EPS) reflects the potential
dilution that could occur if stock options or other contracts to issue
common stock were exercised or converted into common stock. The assumed
exercise of the common stock equivalents was not utilized for the
periods presented in the accompanying consolidated financial statements
since the effect was antidilutive. At March 31, 2002, there were
options to issue 500,000 common shares and 275,000 common shares placed
into a trust for future grants, which may dilute future earnings per
share.
F-8
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
(N) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosures of
information about the fair value of certain financial instruments for
which it is practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or liquidation.
The carrying amounts of the Company's short-term financial instruments,
including other receivable, accounts payable, accrued expenses, and
loans payable - related parties, approximate fair value due to the
relatively short period to maturity for these instruments.
(O) New Accounting Pronouncements
Statement No. 141 "Business Combinations" ("SFAS 141") establishes
revised standards for accounting for business combinations.
Specifically, the statement eliminates the pooling method, provides new
guidance for recognizing intangible assets arising in a business
combination, and calls for disclosure of considerably more information
about a business combination. This statement is effective for business
combinations initiated on or after July 1, 2001. The adoption of this
pronouncement on July 1, 2001 did not have a material effect on the
Company's financial position, results of operations or liquidity.
Statement No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142")
provides new guidance concerning the accounting for the acquisition of
intangibles, except those acquired in a business combination, which is
subject to SFAS 141, and the manner in which intangibles and goodwill
should be accounting for subsequent to their initial recognition.
Generally, intangible assets with indefinite lives, and goodwill, are
no longer amortized; they are carried at lower of cost or market and
subject to annual impairment evaluation, or interim impairment
evaluation if an interim triggering event occurs, using a new fair
market value method. Intangible assets with finite lives are amortized
over those lives, with no stipulated maximum, and an impairment test is
performed only when a triggering event occurs. This statement is
effective for all fiscal years beginning after December 15, 2001. The
Company believes that the future implementation of SFAS 142 on April 1,
2002 will not have a material effect on the Company's financial
position, results of operations or liquidity.
Statement No. 143 "Accounting for Asset Retirement Obligations" ("SFAS
143") requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When
the liability is initially recorded, the entity capitalizes a cost by
increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and
the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement. The standard is effective for fiscal years beginning after
June 15, 2002. The adoption of SFAS 143 is not expected to have a
material impact on the Company's financial statements.
F-9
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
Statement No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" supercedes Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS 121"). Though it retains the basic requirements of
SFAS 121 regarding when and how to measure an impairment loss, SFAS 144
provides additional implementation guidance. SFAS 144 excludes goodwill
and intangibles not being amortized among other exclusions. SFAS 144
also supercedes the provisions of APB 30, "Reporting the Results of
Operations," pertaining to discontinued operations. Separate reporting
of a discontinued operation is still required, but SFAS 144 expands the
presentation to include a component of an entity, rather than strictly
a business segment as defined in SFAS 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS 144 also eliminates the
current exemption to consolidation when control over a subsidiary is
likely to be temporary. This statement is effective for all fiscal
years beginning after December 15, 2001. The Company believes that the
future implementation of SFAS 144 on April 1, 2002 will not have a
material effect on the Company's financial position, results of
operations or liquidity.
Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections,"
updates, clarifies, and simplifies existing accounting pronouncements.
Statement No. 145 rescinds Statement 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect.
As a result, the criteria in Opinion 30 will now be used to classify
those gains and losses. Statement 64 amended Statement 4, and is no
longer necessary because Statement 4 has been rescinded. Statement 44
was issued to establish accounting requirements for the effects of
transition to the provisions of the motor Carrier Act of 1980. Because
the transaction has been completed, Statement 44 is no longer
necessary. Statement 145 amends Statement 13 to require that certain
lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. This amendment is consistent with FASB's
goal requiring similar accounting treatment for transactions that have
similar economic effects. The adoption of SFAS No. 145 is not expected
to have a material impact on the Company's consolidated financial
statements.
Note 2 Property and Equipment
Property and equipment consists of the following at March 31, 2002:
Computers and equipment $ 3,898
Less: Accumulated depreciation (697)
-------
$ 3,201
=======
Depreciation was $697 and $466 for the years ended March 31, 2002 and
2001, respectively and $1,389 cumulative from March 5, 1999 (inception)
to March 31, 2001. During 2002, furniture and fixtures were disposed
of. The loss on the disposal for the year ended March 31, 2002 was
$567.
Note 3 Intangible Assets
On June 2, 1999, the Company purchased a portfolio of patents, patents
pending, and related intellectual property (collectively the
"Intellectual Property") from a third party in exchange for 2,000,000
shares of
F-10
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
the Company's common stock. The shares were valued at $1.00 per share
based on contemporaneous cash purchases of convertible preferred stock
and common stock warrants resulting in a value of $2,000,000. The
Company also capitalized certain legal costs.
The purchased Intellectual Property was being amortized over its
estimated useful life of seven years from the acquisition date and
through March 31, 2002.
Amortization expense was $285,708 and $285,708 for the years ended
March 31, 2002 and 2001, respectively and $809,511 cumulative from
March 5, 1999 (inception) to March 31, 2002.
As of March 31, 2002, management performed an impairment analysis of
the intellectual property. Due to the current status of the Company as
a development stage company and the inherent difficulties in projecting
future revenues, management decided to take a conservative approach and
recognize an impairment loss for the full book value of the asset
totaling $1,191,846.
Note 4 Commitments and Contingencies
(A) Employment Agreements
The Company entered into an employment agreement with an officer in
June 1999, which expired on May 31, 2001. The agreement stipulates a
salary based on funding criteria and issuance of 1,200,000 common stock
options, which vest based on the Company meeting stipulated milestones.
The options are exercisable upon vesting at $0.0001 per share. The
options were valued on the grant date using the intrinsic value method
of APB 25 and the contemporaneous cash common stock sale price of $1.00
resulting in an approximate $1.00 option value. Due to the uncertainty
of meeting milestones, a compensation expense based on the estimated
$1.00 value of the options will be recognized upon vesting. Through
March 31, 2001, none of the options vested. In May 2001, 587,500 of the
options vested, and a compensation expense of $587,441 was recognized.
(See Note 5)
The Company entered into an employment agreement with an officer in
June 2000, which expired on May 31, 2001. The agreement stipulates a
salary based on funding criteria and issuance of 400,000 common stock
options, which vest based on the Company meeting stipulated milestones.
The options are exercisable upon vesting at $0.0001 per share. The
options were valued on the grant date using the intrinsic value method
of APB 25 and the contemporaneous cash common stock sale price of $1.00
resulting in an approximate $1.00 option value. Due to the uncertainty
of meeting milestones, a compensation expense based on the estimated
$1.00 value of the options will be recognized upon vesting. Through
March 31, 2001, none of the options vested. In May 2001, 262,500 of the
options vested and a compensation expense of $262,474 was recognized.
(See Note 5)
In June 2001, the above employment agreements were renewed and the
remaining 612,500 and 137,500 options under each agreement,
respectively, were reaffirmed with the milestone schedule. However, in
November 2001, those employment agreements were terminated by the
Company and the related option agreements for 612,500 and 137,500
options were also cancelled.
F-11
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
One of those agreements was replaced with a consulting agreement to the
individual to act as President and Chief Executive Officer.
(B) Leases
The Company leases office space on a month-to-month basis. Rent expense
in 2002, 2001, and cumulative from March 5, 1999 (inception) to March
31, 2002 was $20,000, $12,648, and $47,931, respectively.
Note 5 Stockholders' Equity
(A) Preferred Stock
In June 2000, an investor purchased 250,000 shares of convertible
preferred stock for $1.00 per share or $250,000. The stock was
convertible to common stock on a one-for-one basis upon the earlier of:
(i) an initial public offering by the Company, as defined
(ii) the completion of a reverse take-over transaction
(iii) a minimum $3,000,000 private equity financing based on a
$10,000,000 valuation or
(iv) the merger of the Company with another corporation or
the sale of substantively all the assets of the
Corporation.
Upon conversion, each share of common stock issued was to be coupled
with a common stock purchase warrant at an exercise price of $1.00 per
share with a three-month term. In June 2001, pursuant to a letter of
intent, which was ratified by the shareholders, the preferred shares
were converted and the warrants were granted at an exercise price of
$1.00 with an amended term not to exceed five years.
(B) Common Stock and Options
In March 1999, the Company issued 300,000 common shares to the officer
for services, which were valued at a planned contemporaneous cash
offering price for one-for-one convertible preferred stock and common
stock warrants issued with an exercise price of $1.00 per share. A
compensation expense of $300,000 was recorded in 1999.
In March 1999, the Company issued 255,000 common shares and 345,000
common stock warrants exercisable at $0.0001 per share as a fee for
assistance in the acquisition of intangible assets. The common shares
were valued based on a contemporaneous cash-offering price of $1.00 per
share. The warrants were valued pursuant to SFAS 123, at $1.00 per
warrant. The aggregate consulting expense charged to operations in 1999
for the shares and warrants was $600,000.
In June 1999, the Company issued 2,000,000 common shares for a
portfolio of patents, patents pending, and related intellectual
property. The portfolio was valued at $2,000,000 based on a
F-12
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
$1.00 per share contemporaneous cash offering price for one-for-one
convertible preferred stock and common stock warrants issued with an
exercise price of $1.00.
In December 1999, 100,000 common stock warrants were exercised for
$100,000.
In May 2000, directors were granted an aggregate 58,100 common shares
for services rendered. The shares were valued at the contemporaneous
cash offering price of $1.00 per share resulting in a compensation
expense of $58,100 on the grant date.
In May 2000, 150,000 common stock warrants were exercised for $150,000.
In October 2000, 345,000 common stock warrants were exercised at
$0.0001 per share or a total of $35.
In October 2000, 100,000 common shares were issued to an officer as
compensation for services rendered. A compensation expense of $100,000
was recognized on the grant date based on the contemporaneous cash
offering price of $1.00 per common share.
In December 2000, 50,000 common shares were sold to an unrelated party
for $50,000 and another 50,000 common shares were sold to a stockholder
for $50,000.
During January 2001, the Company issued 400,000 fully vested shares to
a third party research and development subcontractor (the "Vendor") to
be used as credit against $1,200,000 future invoiced license and
royalty fees. Based on the contract valuation of $3.00 per share and
anti-dilution provisions provided to the Vendor, the Company valued the
400,000 shares at $1,200,000. The value, considered a prepaid expense,
was recorded as deferred fees deducted from stockholders' equity, to be
amortized against future invoices.
In May 2001, two officers vested in 850,000 common stock options
previously granted pursuant to their employment agreements upon the
achievement of certain milestones. A compensation expense of $849,915
was recognized under APB 25 based on the intrinsic value of the options
at the grant date. In November 2001 and March 2002, the 262,500 and
587,500 options, respectively, were exercised for $85 and 850,000
common shares were issued.
In May 2001, a principal stockholder was granted 125,000 common stock
options and a consulting expense of $254,346 was recognized pursuant to
SFAS 123 based on the $3.00 fair market value of the common shares. The
shareholder immediately exercised 125,000 options for 125,000 common
shares at an exercise price of $125,000. (See Note 7)
In May 2001, the 250,000 preferred shares were converted into 250,000
common shares. Pursuant to the warrant agreement attached to the
preferred shares, an additional 250,000 warrants were issued upon
conversion with an exercise term of five years at an exercise price of
$1.00 per share.
F-13
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
In December 2001, 3,000 shares were purchased by an employee at $0.0001
per share. A compensation expense was recognized at the actual cost of
$1.00 per share or $3,000 based on a contemporaneous cash offering
price.
In December 2001, two directors purchased 3,000 shares each at $0.0001
per share. A directors fee was recognized at the actual cost of $1.00
per share or $6,000 based on a contemporaneous cash offering price.
In March 2002, 25,000 shares were issued to a related party for $0.0001
per share as a loan fee relating to a convertible debenture issued
subsequently to March 31, 2002. A deferred loan fee was recorded at
$24,997 based on the contemporaneous cash offering price less the cash
paid of $2.50 of $1.00. (See Note 10)
(C) Stock Options and Warrants
The Company issues stock options and warrants to employees, service
providers, and investors.
In accordance with SFAS 123, for options issued to employees, the
Company applies APB Opinion No. 25 and related interpretations. During
2002 and 2001 and from March 9, 1999 (inception) to March 31, 2002, the
Company granted 0, 400,000, and 1,600,000 common stock options,
respectively, to officers. Due to the uncertain vesting period of these
grants due to vesting contingencies, compensation expense is recognized
only upon vesting. Accordingly, compensation cost of $849,915 has been
recognized for 850,000 options vested in May 2001 based on the $1.00
fair market value less the $85 exercise price. The remaining 750,000
potential options under the employment agreements were terminated by
the Board of Directors when the employment agreements were terminated
in November 2001. (See Note 4(A))
Had compensation cost for the Company's stock-based compensation plan
been determined on the fair value at the grant dates for awards under
that plan, consistent with Statement of Accounting Standards No 123,
"Accounting for Stock Based Compensation" (Statement No. 123), the
Company's net loss for the year ended March 31, 2002 and 2001 would not
have changed.
The effect of applying Statement No. 123 is not likely to be
representative of the effects on reported net income for future years
due to, among other things, the effects of vesting.
For stock options and warrants issued to non-employees, the Company
applies SFAS 123. Accordingly, consulting expense of $345,000 was
charged to operations in 1999 as reflected in the accompanying
consolidated statements of operations from March 5, 1999 (inception) to
March 31, 2002 and consulting expense of $254,346 was recognized in
2002 upon granting of 125,000 common stock options.
For consolidated financial statement disclosure purposes and for
purposes of valuing stock options and warrants issued to consultants,
the fair market value of each stock granted was estimated on the grant
date using the Black-Scholes Option-Pricing Model in accordance with
SFAS 123 using the following weighted-average assumptions in 1999:
expected dividend yield
F-14
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
0%, risk-free interest rate of 4.53%, volatility 0% and expected term
of two years and in 2002: dividend yield 0%, risk-free interest rate
3.57%, volatility 0% and expected term of one year.
A summary of the options outstanding, which were granted for cash or
services as of March 31, 2002, 2001, 2000, 1999 and changes during
these years, are presented below:
Number of Weighted
Options and Average
Warrants Exercise Price
----------- --------------
Stock Options
Granted in 1999 1,545,000 $ 0.0001
Balance at March 1, 1999 1,545,000 $ 0.0001
Granted 250,000 $ 1.00
Exercised (100,000) $ 1.00
---------- ------------
Balance at March 31, 2000 1,695,000 $ 0.0886
Granted 650,000 $ 0.3847
Exercised (495,000) $ 0.3031
---------- ------------
Balance at March 31, 2001 1,850,000 $ 0.1352
Granted 375,000 $ 1.00
Exercised (975,000) $ 0.13
Terminated (750,000) $ 0.001
---------- ------------
Balance at March 31, 2002 500,000 $ 1.00
========== ============
Options exercisable at March 31, 2002 500,000 $ 1.00
========== ============
Weighted average fair value of options
granted for services during 2001,
2000 and 1999 $ 1.00
============
Weighted average fair value of options
granted for services during 2002 $ 2.03
============
The following table summarizes information about options and warrants
outstanding at March 31, 2002:
Options and Warrants Outstanding Options and Warrants Exercisable
---------------------------------------------------------------- --------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding at Contractual Exercise Exercisable at Exercise
Price March 31, 2002 Life Price March 31, 2002 Price
-------- -------------- ----------- -------- -------------- --------
$ 1.00 250,000 4.17 Years 1.00 250,000 1.00
$ 1.00 250,000 1.17 Years 1.00 250,000 1.00
------- ------- ------- -------
500,000 $ 1.00 500,000 $ 1.00
======= ======= ======= =======
F-15
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
Note 7 Related Parties
In October 2000, 400,000 options were reserved in trust for future
issuance in accordance with an anti-dilution provision in an amended
stockholder agreement. During June 2001, 125,000 of these options were
granted to a principal stockholder and then exercised at a price of
$1.00 per share. The Company recognized a consulting expense of
$254,346 based on the $3.00 current fair market value of the warrants
computed pursuant to the fair market value method of SFAS 123. (See
Note 5)
Loans payable to related parties are non-interest bearing and due on
demand.
Note 8 Income Taxes
The Company files separate tax returns for the parent and its Canadian
subsidiary. There was no income tax expense for the years ended March
31, 2002 and 2001, due to the Company's net losses.
The blended Canadian Federal and Provincial Corporate tax rate of 41.5%
applies to loss before taxes of the Canadian subsidiary. The Company's
tax expense differs from the "expected" tax expense for Federal income
tax purposes for the years ended March 31, 2002 and 2001, (computed by
applying the United States Federal Corporate tax rate of 34% to loss
before taxes), as follows:
Years Ended March 31,
--------------------------
2002 2001
----------- ---------
Computed "expected" tax benefit $(1,006,201) $(328,708)
Stock based expenses 3,060 53,754
Foreign income taxes (3,180) (121,906)
Other non-deductible items (34,411) -
Change in deferred tax asset
valuation allowance 1,040,732 396,860
----------- ---------
$ - $ -
=========== =========
The effects of temporary differences that gave rise to significant
portions of deferred tax assets and liabilities at March 31, 2002 are
as follows:
Deferred tax assets:
United States net operating loss carry forward 870,430
Canadian net operating loss carryforward 1,210,564
Canadian stock based expenses -
-----------
Total gross deferred tax assets 2,080,944
Less valuation allowance (2,080,944)
-----------
Net deferred tax assets $ -
===========
The valuation allowance at March 31, 2001 was $1,040,262. The net
change in valuation allowance during the year ended March 31, 2002 was
an increase of approximately $1,040,732. The Company's subsidiary has
net operating losses of approximately $2,917,021 at March 31, 2002
available to offset the subsidiaries' net income through 2007 under
Canadian Federal and Provincial tax laws and the parent
F-16
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
United States entity has a net operating loss carryforward of
approximately $2,560,089 available to offset the parent's net income
through 2022.
Note 9 Going Concern
As reflected in the accompanying consolidated financial statements, the
Company has a deficit accumulated during development stage of
$5,476,570, a working capital deficiency of $532,586 at March 31, 2002,
losses from operations of $2,959,415 in 2002, and cash used in
operations of $115,081 during 2002. The ability of the Company to
continue as a going concern is dependent on the Company's ability to
raise additional funds and to successfully complete its research and
development resulting in a saleable product. The consolidated financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Management's plan of operation has been prepared assuming that the
Company will continue to operate as a going concern. The capability to
continue as a going concern is contingent to the completion of a
current offering. The source, availability, and terms of such funds
have not been determined and there is no assurance the Company will be
able to obtain any funding on acceptable terms or at all. Failure to
obtain the financing or to obtain it on a timely basis will have a
substantial adverse affect on the Company's operations and their
ability to complete the plan of operation in whole or in part.
Note 10 Subsequent Event
On May 1, 2002, the Company issued a $100,000, 5%, Senior Secured
Convertible Debenture - Series A (the "Debenture") to a principal
stockholder (the "Investor"). Unless converted, redeemed or retracted
before maturity, interest payments are due May 1, 2003 and April 30,
2004. The debenture must be paid in full on the earlier of April 30,
2004 or the closing date of the next round of financing for a minimum
of $1,000,000. The debenture is collateralized by a Security Agreement
on all of the Company's assets, including its patents and patent
applications. At any time at the option of the holder, the outstanding
principal amount of the debenture is convertible into common shares of
the Company at a conversion price of $1.00 a share and accrued interest
shall be payable in cash at that time. The Debenture contains various
covenants some of which restrict the ability of the Company to issue
further debt or issue further equity securities. The debenture contains
anti-dilution provisions requiring the Company to issue additional
shares to the Investor, based upon a stipulated formula, if the Company
sells any additional shares at less than $3.00 per share.
In March 2002, an outside party received a fee of 25,000 common shares
of the Company for arranging the transaction and in May 2002, the party
received options to purchase 25,000 common shares at of the Company at
an exercise price of $1.00 per share for a period of five years.
The value of the options granted is approximately $1,600 resulting in a
debt discount to be recognized as interest expense over the term of the
debenture.
The value of the 25,000 common shares issued as a loan fee, less cash
paid of $3.00 is recorded as a $24,997 deferred loan fee at March 31,
2002 to be amortized over the term of the debenture.
F-17
B. Twelve, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 2002
The debenture is redeemable by the Company with a minimum of 10 and
maximum of 60 days notice to the holder, but may not be redeemed by the
Company before May 1, 2003. The debenture is redeemable for cash (or
common shares of the Company with approval of the holder at the
conversion price as defined in the debenture ) in whole, or in part
from time to time at a redemption price equal to the principal plus
accrued and unpaid interest. After May 1, 2003, the holder may also
elect redemption in cash only, at a redemption price equal to the
principal plus accrued and unpaid interest and with notice to the
Company the same as above.
F-18
INDEMNIFICATION OF DIRECTORS AND OFFICERS
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. The Board of Directors
appoints officers annually and each executive officer serves at the discretion
of the Board of Directors. The Company does not have any standing committees at
this time.
The Company does not currently maintain insurance for the benefit of
the directors and officers of B Twelve against liabilities incurred by them in
their capacity as directors or officers of B Twelve. B Twelve does not maintain
a pension plan for its employees, officers or directors. The Company intends to
obtain $500,000 insurance on the lives of its executive officers.
Any Director who is independent of the Company is entitled to an annual
fee of $2,000 and a fee of $200 for each meeting attended by such Director plus
reasonable expenses incurred in attending such meeting, upon presentation of
receipts therefor. As of the date hereof, no director has accrued any expenses.
However, directors received 14,525 and 3,000 common shares for services rendered
during FY2001 and FY2002, respectively.
None of the directors or senior officers of B Twelve and no associate
of any of the directors or senior officers of B Twelve was indebted to B Twelve
during the financial period ended March 31st, 2001 of B Twelve other than for
routine indebtedness.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses of issuance and distribution will be paid by the issuer.
The Company has not received all the details of the cost associated to this
offering, but it is not expected to exceed $50,000. The following amounts have
being used to estimate the cost of this offering: i) registration fees $2,000,
ii) cost of printing and engraving $2,500, iii) legal $10,000, iv) accounting
$10,000, and v) other $2,500.
RECENT SALES OF UNREGISTERED SECURITIES
In March 1999, the Company issued 300,000 common shares to Uri Sagman
for services rendered, which were valued at a planned contemporaneous cash
offering price for one-for-one convertible preferred stock and common stock
warrants issued with an exercise price of $1.00 per share. A compensation
expense of $300,000 was recorded in 1999.
In March 1999, the Company issued 255,000 common shares and 345,000
common stock warrants to InterUnion Financial Corporation and New Researches
Corporation, respectively, exercisable at $0.0001 per share as a fee for
assistance in the acquisition of intangible assets. The common shares were
valued based on a contemporaneous cash-offering price of $1.00 per share. The
warrants were valued pursuant to SFAS 123, at $1.00 per warrant. The aggregate
consulting expense charged to operations in 1999 for the shares and warrants was
$600,000.
II-1
In June 1999, the Company issued 2,000,000 common shares to Receptagen
Ltd., a private biotechnology company, for a portfolio of patents, patents
pending, and related intellectual property. The portfolio was valued at
$2,000,000 based on a $1.00 per share contemporaneous cash offering price for
one-for-one convertible preferred stock and common stock warrants issued with an
exercise price of $1.00.
In December 1999, 100,000 common stock warrants were exercised by New
Researches Corporation for $100,000.
In May 2000, directors were granted an aggregate 58,100 common shares
for services rendered. The shares were valued at the contemporaneous cash
offering price of $1.00 per share resulting in a compensation expense of $58,100
on the grant date.
In May 2000, 150,000 common stock warrants were exercised by New
Researches Corporation for $150,000.
In October 2000, 345,000 common stock warrants were exercised by New
Researches Corporation at $0.0001 per share or a total of $35.
In October 2000, 100,000 shares were issued to Jean-Luc Berger as
compensation for services rendered. A compensation expense of $100,000 was
recognized on the grant date based on the contemporaneous cash offering of $1.00
per common share.
In December 2000, 50,000 common shares were sold to Rupert's Crossing
for $50,000 and another 50,000 common shares were sold to New Researches
Corporation for $50,000.
In October 2000, 400,000 options were reserved in trust for future
issuance in accordance with an anti-dilution provision in an amended stockholder
agreement. During June 2001, 125,000 of these options were granted to
Credifinance Gestion S.A. and then exercised at a price of $1.00. The Company
recognized a consulting expense of $254,345 based on the $3.00 current fair
market value of the warrants computed pursuant to the fair market value method
of SFAS 123.
In January 2001, the Company issued 400,000 fully vested shares to
Medarex Inc., a third party research and development subcontractor (the
"vendor") to be used as a credit against $1,200,000 future invoice license and
royalty fees. Based on the contract valuation of $3.00 per share and
anti-dilution provisions provided to the vendor, the Company valued the 400,000
shares at $1,200,000. The value, considered a prepaid expense, was recorded as
deferred fees deducted from stockholders' equity, to be amortized against future
invoices.
In May 2001, Uri Sagman and Jean-Luc Berger were granted 850,000 common
stock options pursuant to their option agreements upon the achievement of
certain milestones. A compensation expense of $850,000 was recognized under APB
25 based on the $1.00 intrinsic value of the options at the grant date. In
November 2001 and March 2002, 262,500 (Jean-Luc Berger) and 587,500 (Uri Sagman)
options, respectively, were exercised for $85 and 850,000 common shares were
issued.
In May 2001, Credifinance Gestion S.A., a principal stockholder, was
granted 125,000 common stock options and a consulting expense of $254,345 was
recognized pursuant to SFAS 123 based on the $3.00 fair market of the shares.
Credifinance Gestion S.A. immediately exercised 125,000 options for 125,000
common shares at an exercise price of $125,000.
II-2
In June 2000, New Researches Corporation purchased 250,000 shares of
convertible preferred stock for $1.00 per share or $250,000. The Stock is
convertible to common stock on a one-for-one basis upon the earlier of: (i) an
initial public offering, as defined, (ii) the completion of a reverse-take-over
transaction, (iii) a minimum $3,000,000 private equity financing based on a
$10,000,000 valuation, or (iv) the merger of the Company with another
corporation or the sale of substantively all the assets of the Corporation.
In May 2001, the 250,000 preferred shares were converted by
Credifinance Gestion S.A. into 250,000 common shares. Pursuant to the warrant
agreement attached to the preferred shares, an additional 250,000 warrants were
issued upon conversion with an exercise term of five years at an exercise price
of $1.00 per share.
In December 2001, the Company issued 3,000 shares each to two directors
and an employee for services rendered. The Company recognized an expense of
$9,000 based on a contemporaneous cash offering price of $1.00 per common share.
In May 2002, The Company issued a $100,000, 5%, Senior Secured
Convertible Debenture - Series A (the "Debenture") to Credifinance Gestion S.A.
(the "Investor"). Unless converted, redeemed or retracted before maturity,
interest payments are due May 1, 2003 and April 30, 2004. The debenture must be
paid in full on the earlier of April 30, 2004 or the closing date of the next
round of financing for a minimum of $1,000,000. The debenture is collateralized
by a Security Agreement on all of the Company's assets, including its patents
and patent applications. At any time at the option of the holder, the
outstanding principal amount of the debenture is convertible into common shares
of the Company at a conversion price of $1.00 a share and accrued interest shall
be payable in cash at that time. The Debenture contains various covenants some
of which restrict the ability of the Company to issue further debt or issue
further equity securities. The debenture contains anti-dilution provisions
requiring the Company to issue additional shares to the Investor, based upon a
stipulated formula, if the Company sells any additional shares at less than
$3.00 per share. The debenture is redeemable by the Company with a minimum of 10
and maximum of 60 days notice to the holder, but may not be redeemed by the
Company before May 1, 2003. The debenture is redeemable for cash (or common
shares of the Company with approval of the holder at the conversion price as
defined in the debenture ) in whole, or in part from time to time at a
redemption price equal to the principal plus accrued and unpaid interest. After
May 1, 2003, the holder may also elect redemption in cash only, at a redemption
price equal to the principal plus accrued and unpaid interest and with notice to
the Company the same as above.
In March 2002, the Company issued 25,000 shares to Credifinance
Securities Limited, a related party, for $0.0001 per share as a loan fee
relating to a convertible debenture issued subsequently to March 31, 2002. A
deferred loan fee was recorded at $24,997 based on the contemporaneous cash
offering price less the cash paid of $2.50 of $1.00.
Note: All sales of stock as listed above were private sales not
involving a public offering, pursuant to Section 4(2) of the Securities Act of
1933, as amended.
II-3
EXHIBITS
The following Exhibits are attached hereto:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1* Articles of Incorporation
3.2* Bylaws of Corporation
5* Opinion of Legality
10.1** Amended and restated unanimous shareholders' agreement [dated January 15, 2001]
10.2 Employment agreement Uri Sagman [dated June 1st, 2001]
10.3 Employment agreement Jean-Luc Berger [dated June 1st, 2001]
10.4 Employment termination agreement Uri Sagman [dated November 15, 2001]
10.5 Employment termination agreement Jean-Luc Berger [dated November 15, 2001]
10.6 Consulting agreement Jean-Luc Berger [dated November 15, 2001]
10.7** Option agreement Uri Sagman [dated March 5, 1999]
10.8 Option agreement Uri Sagman [dated June 1, 2001]
10.9 Option agreement Uri Sagman [dated June 1, 2001]
10.10** Research collaboration agreement between The Research Foundation of State
University of New York and B. Twelve Ltd. [dated August 19, 1999]
10.11** Extension/Modification research collaboration agreement between The Research
Foundation of State University of New York and B. Twelve Ltd. [dated November
01, 2000]
10.12** Sponsored laboratory study agreement, The University of Texas M.D. Anderson
Cancer Center [dated August 31,1999]
10.13** Amendment No. 1 to research agreement, The University of Texas M.D. Anderson
Cancer Center [dated November 20, 2000]
10.14** Termination Agreement, The University of Texas [dated February 28, 2002]
10.15** Collaborative research agreement, New York University [dated November 11, 1999]
10.16 Convertible Debenture - Series A - US$100,000 [dated May 1, 2002]
10.17 Price protection agreement [dated May 1, 2002]
10.18 Security agreement [dated May 1, 2002]
21* Subsidiaries of the Registrant
* Previously filed.
** To be filed by Amendment
II-4
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form SB-2
REGISTRATION STATEMENT
UNDER
The Securities Act of 1933
---------------------
B. TWELVE, Inc.
---------------------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
_________________ State of _______________________________ on _________________,
2002
(Registrant)
- ------------------------------------------------------------
By (Signatures and Title)
- --------------------------------------------------
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
(Signature)
--------------------------------------------------------
(Title)
--------------------------------------------------------
(Date)
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