<PAGE>2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10SB/A
AMENDMENT 3
General Form for Registration of Securities of Small
Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
INFECTECH, INC.
(Exact name of Small Business Issuer in its charter)
DELAWARE 34-1760019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite Two, 87 Stambaugh Avenue, Sharon, PA 16146
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (724) 346-1302
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Forward-Looking Statements and Associated Risk. This Registration
Statement, including the information incorporated herein by reference,
contains forward-looking statements including statements regarding,
among other items, the Company's growth strategies, and anticipated
trends in the Company's business and demographics. These forward-
looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which
are beyond the Company's control. Actual results could differ
materially from these forward-looking statements.
<PAGE>3
ITEM 1. DESCRIPTION OF BUSINESS
A. The Company was incorporated in June 1989 under the laws of the
State of Delaware. On November 19, 1996, the Articles of
Incorporation were amended to increase the authorized shares from
120,000 to 20,000,000 and a 50 to 1 stock split was declared. The
Company is a development stage company engaged in research and
development of diagnostic tests and therapeutics for infectious human
diseases. The Company's technology also has veterinary applications.
The Infectech Method. The Company's research regarding paraffin
as a sole carbon source led to the concept that paraffin-coated glass
slides may be used to grow, identify and perform antibiotic sensitivity
assays on paraffinophilic bacteria. Paraffinophilic bacteria are
bacteria that use paraffin as their sole food source. The Company
then developed a technology that employs a paraffin carbon source that
enables viable or living paraffinophilic organisms to be separated from
viable non-paraffinophilic bacteria and from non-viable or dead
bacteria. In this method only viable paraffinophilic bacteria are
growing on the paraffin coated glass slides. These living or viable
bacteria found on the surface of the paraffin coated slides may be
stained and examined microscopically to determine the presence of
suspect pathogens, or disease carrying organisms.
Having identified the disease-causing bacterium, providing a patient
cure is the next step. In a manner similar to identification of the
pathogen, tests are conducted with a separate series of tubes
containing antibiotics. Macroscopic and microscopic examination of the
paraffin-coated slides indicate those tubes where there is an absence
of bacterial growth on the paraffin slide surface. Such absence means
that the antibiotic in question was able to kill the pathogen at a
particular concentration of antibiotic. The Company's patented
technology will enable the medical community to conduct antibiotic
sensitivity testing upon a pathogen once it has been identified,
thereby enabling a more rapid and effective treatment of bacterial
infections. This enables the hospital or doctor to determine the most
appropriate antibiotic to use as well as the most effective in treating
the patient.
The Company's paraffin slide culture technology provides a simple and
inexpensive method for isolating, identifying and performing antibiotic
sensitivity testing of paraffinophilic pathogens in markets ranging
from the largest metropolitan urban hospitals to modest third world
field laboratories. Of particular benefit to small hospitals, medical
centers and third world field laboratories is the potential of using a
variety of body fluids and fecal matter to provide samples for
identification. The convenience, efficiency, and safety of this method
also provide enhanced safety to the patient because of the non-
intrusive nature of gathering the samples.
The IDENTIKITTM process, from the perspective of the physician and the
patient, will operate relatively simply. For example, a patient enters
a hospital with serious burns. Since burn patients are at high risk
for bacterial infection including pseudomonas, a bacteria which causes
pneumonia, blood poinsoning and other life-threatening disease, the
physician will order a sample of blood or sputum to be taken from the
patient. The sample will then be added to a series of test tubes
containing the Company's patented growth media. Paraffin slides are
then added to the tube, and, with respect to Pseudomonas, for example,
within 24 hours (using the IDENTIKITTM) a laboratory technician will be
able to observe the growth of bacteria on the paraffin and perform
biochemical tests on it which will enable the identification,
specification and antibiotic sensitivity testing of the patient's
strain of Pseudomonas. The physician will then be able to administer
the most appropriate antibiotic treatment.
Since 1997, the Company has obtained nearly two dozen additional
patents and has begun to use the Infectech technology at several
research hospital facilities in the United States. The Company has
also developed applications of its technology in the non-medical use of
environmental bioremediation. In this application, the Infectech
method is used to produce bacteria which feeds upon certain toxic
pollutants. This allows the bioremediation (or biological cleanups)
of polluted areas and such harmful substances as TCE (tri-
chlorylethufine). The Company has entered into a licensing agreement
with a bioremediation firm actively engaged in this field.
<PAGE>4
Products. IDENTIKITTM. The Company intends to offer two types
of IDENTIKITsTM, one utilizing nongenetic microbiology and one
utilizing genetic and amplification technology. Both types of
IDENTIKITsTM will be used for all applications outside of the body in a
noninvasive technique and may be used without additional specialized
equipment. Both types of IDENTIKITsTM can be used for identification,
specification and antibiotic sensitivity testing.
Both types of IDENTIKITsTM, nongenetic and genetic amplification
technology can be tailored with design, composition and instructions
intended to meet specific customer requirements in identifying one or
more of the paraffinophilic, nonparaffinophilic and
nonparaffinophic/hydrophobic (water repellant) microorganisms. The
price of each kit will be dependent on the number of paraffinophilic
microorganisms to be tested by the kit. For example, the cost of a kit
designed to identify all known paraffinophilic microorganisms will
exceed the cost of a kit specifically designed to identify one
microorganism (e.g. an MAI IDENTIKITTM).
The Nongenetic Microbiology Identification (NMI) IDENTIKITTM is of a
standard design and suitable for identifying any number of
paraffinophilic, nonparaffinophilic or nonparaffinophilic/hydrophobic
microorganisms. This kit is suitable for 100 tests. The anticipated
list price of the kit for this testing of one of the disease causing
organisms is $200.00.
The Nongenetic Microbiology Antibiotic Sensitivity (NMAS) IDENTIKITTM
is designed for determining the effectiveness of a drug or bacteria for
a paraffinophilic microorganism. Any number of paraffinophilic
microorganisms., up to a total of all paraffinophilic microorganisms.
This kit is also suitable for 100 tests and can be shipped from stock.
The anticipated list price of the kit determining the effectiveness of
a drug or bacteria is approximately $300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for
NonParaffinophilic Organisms (NMAS) IDENTIKITTM is designed for
determining antibiotic sensitivity for a specific nonparaffinophilic
microorganism. This kit is also suitable for 100 tests and can be
shipped from stock. The anticipated list price of this kit is
approximately $300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for
NonParaffinophilic Hydrophobic Organisms (NMAS) IDENTIKITTM is designed
for determining antibiotic sensitivity for a specific
nonparaffinophilic/hydrophobic microorganism. This kit is also
suitable for 100 tests and can be shipped from stock. The anticipated
list price of this kit is approximately $300.00.
The Nongenetic Microbiology Antibiotic Sensitivity for Several
Organisms (Paraffinophilic, Nonparaffinophilic,
Nonparaffinophilic/hydrophobic) is designed for determining antibiotic
sensitivity for several organisms (user's choice of organism). This
kit is also suitable for 100 tests and will be approximately $500.00
list price.
No additional research or development is necessary to complete the
nongenetic paraffinophilic kits. Additional research is presently
ongoing for the nonparaffinophilic and nonparaffinophilic/hydrophobic
nongenetic kits. This research is currently being conducted at the VA
Medical Center in New York City and at the Company's laboratory in
Medford, Pennsylvania. However, the manufacturing, marketing and
sales will need to occur through a relationship with a large
international corporation. See "Sales and Marketing." Once such
relationship is established, sales of the nongenetic kit can begin in
overseas markets and domestic experimental markets for use in
laboratory research. With the exception of experimental markets, sales
in the U.S. cannot occur until FDA approval is granted.
The Company has begun to obtain the requisite number of clinical trials
at the VA Medical Center in New York. We intend to obtain the
required clinical trials and to submit application for a 510-K (90
days) approval from the United States Food and Drug Administration.
Genetic Based Probe/Amplification Technology for Identification (PATID)
is designed to rapidly identify specific microorganisms. The kit is a
genetic based system and components are specific for the type of
organisms to be scanned for. One kit is suitable for 100 tests.
<PAGE>5
Genetic Based Probe/ Amplification Technology for Antibiotic
Sensitivity (PATAS is designed to perform rapid antibiotic sensitivity
testing for specific microorganisms. The kit genetic based procedure
and components are specific for type of organism to be assayed for
antibiotic sensitivity testing. One kit is suitable for 100 tests.
By using the Company's non-genetic IDENTIKITsTM, physicians will be
given better data earlier about their patients' conditions, freeing
them to make more effective treatment decisions. The following chart
illustrates comparisons of the Company's method with conventional
testing for two life-threatening diseases.
<TABLE>
<S> <C> <C> <C> <C>
Infectech
Genetic
Infectech IDENTIKIT
Conventional Conventional Genetic Antibiotic
Method of Antibiotic IDENTIKIT Sensitivity
Identification Sensitivity Identification Testing
Mycobacterium
avium-intracellularae
(MAI) 8-30 days An additional 18-25 days 4-21 days total 8 days
Pseudomonas 24-48 hours An additional 24-48 hours 24 hours total 24 hours
</TABLE>
MAI is an infection which affects organs, often the respiratory and
gastriateral tracts of AIDS patients and is often fatal.
Pseudomonas is a diease-causing bacteria which affects cystic-fibrosis,
urn unit patients and other persons suffering from immune deficiencies
resulting in serious illness and death.
The Company believes that its patented testing method may be the only
one available, which can be successfully used with amplification
techniques for rapid antibiotic sensitivity testing. As a result, the
Company is presently performing experimentation to combine its patented
method with amplification techniques in an easy-to-use amplification
IDENTIKITTM, resulting in even more accelerated identification and
antibiotic sensitivity testing, as the following chart illustrates:
<TABLE>
<S> <C> <C> <C> <C>
Infectech
Genetic
Infectech IDENTIKIT
Conventional Conventional Genetic Antibiotic
Method of Antibiotic IDENTIKIT Sensitivity
Identification Sensitivity Identification Testing
MAI 8-18 days An additional 18-25 days 48-96 hours 48-72 hours
Pseudomonas 24-48 hours An additional 24-48 hours 24 hours total 24 hours
</TABLE>
MD Diagnostics. In 1999, the Company became interested in the use of
the Internet for its diagnostics. Management believed that the
Internet offered an excellent method of interpreting microbiology test
results over distances for its own tests and other bacterial tests.
The Company formed MD Diagnostics-com, Inc. in the state of Delaware on
April 1000. MDD-com is developing a business plan that would offer
medical diagnostic second opinions using specialists who would
interpret a variety of medical tests, including CAT scans, EKGs and
other tests. The MDD-com activities are not limited to Infectech-
based medical technology and will be a resource for a wide range of
medical tests.
The Market. Markets for the IdentikitsTM include hospitals,
clinical laboratories, medical research institutions, medical schools,
pharmaceutical companies and physician's offices. There are over 9,000
hospitals and medical laboratories in the United States, all of which
are logical customers for the IdentikitTM products. It is anticipated
that the IdentikitTM can capture a large percentage of the worldwide
market for identification of paraffinophilic pathogens due to its low
cost and the rapidity with which an assay can be completed.
<PAGE>6
At present, before FDA approval, both the nongenetic and the
fluorescent amplification kit can be sold in overseas markets subject
to regulatory requirements in a particular country, which vary. It can
also be sold in domestic experimental markets for use in laboratory
research.
Marketing and Sales. The Company is positioning itself to
capture the market for MAI and Tuberculosis bacteria diagnosis and
antibiotic sensitivity testing. Prior to the AIDS epidemic, MAI was a
rare disease. After the advent of widespread AIDS infection, MAI was
found to infect AIDS patients at a very high rate. According to the
World Health Organization (Global Tuberculosis Control: March 1999)
world health authorities have estimated that more than 70% of AIDS
patients harbor an MAI infection. MAI affects the bone marrow, spleen,
liver and lungs. It compromises the lymph nodes, thereby further
destroying the patient's immune system. MAI also causes
opportunistic infections among non-HIV infected children and the
elderly. MAI is believed to be a major contributor to AIDS wasting
syndrome. Based on in-house research, in addition to MAI, there are at
least 20 other disease-causing paraffinophilic bacteria for which the
Company's Infectech method can be utilized.
The Company initially plans to market its products through licensing
and distribution arrangements with large, well-established medical
diagnostic companies. The Company's markets will potentially include
hospitals, clinical laboratories, medical research institutions,
medical schools, pharmaceutical companies (antibiotic sensitivity
testing methodology can be used to create new drugs to treat
paraffinophilic microorganisms), and physicians' offices.
Any contractual arrangements with others concerning the marketing and
distribution of its products may result in a lack of control by the
Company over any or all of the marketing and distribution of such
products. Although the Company is currently engaged in preliminary
efforts to establish such marketing arrangements, there can be no
assurance that the Company will be able to enter into any such
arrangements on terms acceptable to the Company, or at all.
As part of its overall service to the technical medical community, the
Company is prepared to offer workshops and consultation in the general
area of medical diagnostics. While these two activities are not large,
they will produce minor amounts of revenue, but more importantly will
serve as the focal point for the dissemination of information and
training required for the Company's. technology. The Company's future
growth and profitability will depend, in large part, on the success of
its personnel and others in fostering acceptance by the medical
community. Such acceptance will be substantially dependent on
educating the medical community as to the distinctive characteristics
and perceived benefits of the Company's proposed products. There can
be no assurance that the Company's efforts or those of others will be
successful, or that any of its products will receive the necessary
acceptance by the medical community.
Potential Markets for the Company's Technology.
Diagnostics. The Company believes that significant demand exists
for an inexpensive diagnostic test for pathogens that (i) does not need
highly skilled manpower or technology to isolate and distinguish deadly
bacteria (ii) produces results rapidly and accurately, (iii) limits
pre-preparation requirements, (iv) tests a broad range of specimens and
(v) assays for antibiotic sensitivity to determine the optimal
treatment method. The Company believes that its patented slide
culture technology meets these requirements.
The Company's technology provides for rapid and accurate identification
of at least 20 life-threatening paraffinophilic pathogens. These
pathogens include Pseudomonas, the major cause of death in intensive
care and burn units and the second leading cause of death in cancer
patients, Mycobacterium Avium Intracellular ("MAI"), the bacterial
infection most often associated with AIDS in the developed word) and
Mycobacterium Tuberculosis, a non-paraffinophilic hydrophobic pathogen
that can be grown via the Company's technology. Mycobacterium
Tuberculosis is the causative agent of tuberculosis, the world's
deadliest infection). Each year in the United States alone, more than
10,000,000 tests are conducted for Mycobacterium Tuberculosis,
5,000,000 tests are conducted for Pseudomonas and more than 1,000,000
tests are conducted for MAI.
<PAGE>7
Using the Company's patented slide-culture technology in combination
with gene application methodologies, life-threatening bacteria can
rapidly be identified. Using the Company's proprietary baiting
technology, the efficacy of potentially appropriate antibiotics (e.g.,
penicillin) to treat for these bacteria can be tested through rapid,
inexpensive antibiotic sensitivity tests. The Company believes that
its patented testing method may be the only method available that can
be successfully used with amplification techniques for rapid antibiotic
sensitivity testing.
According to the World Health Organization, approximately 1.7 billion
people worldwide carry the tuberculosis bacterium which equals
approximately 1 in 3 persons in the world. Although the majority of
these cases are in underdeveloped and developing countries, it is
though by experts that as many as 10 million Americans may be infected
with TB. (Global Tuberculosis Control, March 1999)
This widespread health problem indicates a huge need for diagnostic
testing of those infected individuals. At an average testing cost of
merely $.45 per individual, a potential global market of at least $200
million exists.
The Company is positioning itself to capture a significant share of the
market for MAI and tuberculosis bacteria diagnosis and bacteria
sensitivity. Historically, the search for MAI and other members of the
genus Mycobacterium Tuberculosis has been very difficult. These
organisms grow slowly, and specimens require rigorous preparation to
prevent overgrowth of other more rapidly growing organisms often found
co-existing in specimens. Handling of mycobacterial specimens has
required highly-trained technicians and specialized equipment. This is
not true of the Company's technology. The Identifkit is a self-
contained testing device which requires little preparation. The
sample is simplely added to the test tube. It is sealed and then
examined. The examination can be performed by any labratory
technician who need only analyze the visual results on the test tube
slide.
In addition, the Company's technology permits sampling of a variety of
tissues, not just blood or sputurn. Although MAI forms in the
gastrointestinal tract, physicians using conventional methods are
unable to detect the bacteria until they reach the bloodstream. Using
the Company's technology, physicians will be able to analyze fecal
matter or urine to detect MAI where it begins, in the gastrointestinal
tract thereby leading to earlier treatment of the disease. Management
is of the opinion that the convenience, efficiency and safety of the
Company's patented slide culture technology will provide enhanced
safety for patients because of the non-invasive nature of required
procedures.
Management believes that its slide-culture technology also can be used
to detect the presence of non-paraffinophilic bacteria through use of
non-paraffin-based carbon coatings in a clean-room environment and
sampling of certain body fluids such as blood and spinal fluid.
The Infectech patented technology of paraffin slide culture does not
require the use of highly skilled manpower. The Company's advantages
in this user-friendly method are:
1. Eliminates the need for many processing steps currently needed to
decontaminate and concentrate specimens. Since only a few types of
organisms grow on paraffin, overgrowth due to specimen contamination is
not a problem. This avoids the need for highly-trained
mycobacterialogists who are customarily required to manipulate the slow
growing organisms.
2. The system eliminates the need for expensive and sophisticated
machinery like centrifuges.
3. As a self-contained system, the Infectech technology can be used
even in facilities in which electrical power and refrigeration are not
available. The test media utilized can be stored in a dehydrated
state at room temperature.
In addition, the Company has filed a patent for a method of inducing
apoptosis, a method of controlled cell-death or cell "suicides", with
hydrophobic hydrocarbons, notably paraffin. Many types of cancer
therapy use drugs to kill cells. The use of paraffin to induce cell
<PAGE>8
death has important advantages, since paraffin is non-toxic and its
effect is local. Dr. Richard A. Lockshin, Ph.D., of St. John's
University, President of the Cell Death Society, has agreed to
collaborate with the Company on electron microscopy work necessary on
this project.
Bio-remediation of Chlorine-contaminated Aquifers, Air and Soil.
The Company believes that its utility patent for use of Compound C in
baiting paraffinophilic micro-organisms has broad application in
environmental bio-remediation of chlorine compounds such as
TriChloroEthylene. The Company has granted a world wide exclusive
license to use this technology for bio-remediation to a Pennsylvania-
based company. The company received a $250,000 grant from the state of
Pennsylvania to treat contaminated air streams containing styrene and
other hazardous air pollutants identified by the United States
Environmental Protection Agency, utilizing the Company's patented
technology.
Veterinary Applications. The Company intends to develop a kit to test
for Johne's Disease (caused by Mycobacterium Paratuberculosis) in
cattle. This organism has been cited as a possible cause of Crohn's
Disease in humans. Federal Drug Administration approval is not
required for this product.
Proprietary Slide-culture Technology. The Company has found
that paraffin-coated slides can be used to grow, identify and perform
antibiotic sensitivity assays on paraffinophilic bacteria. The
Company has developed a technology utilizing a paraffin carbon source
that enables viable or living paraffinophilic organisms to be separated
from viable non-paraffinophilic bacteria grow on the paraffin-coated
glass slides. Living or viable bacteria can then be stained and
examined microscopically to determine the present of suspect pathogens.
Efficacy of an antibiotic can be tested on disease-causing bacteria in
a manner similar to identification of the pathogen. Test tubes in
which there is an absence of bacterial growth can be determined.
Absence of bacterial growth indicates that the antibiotic was able to
kill the pathogen at a particular concentration. Presence of bacterial
growth can indicate lack of effectiveness of the antibiotics to treat
for the pathogen. The technology also enables the user to determine
appropriate concentration of the antibiotic.
These features make the Company's technology ideal for markets ranging
from large urban hospitals to third-world field laboratories. The
Company believes that its technology can contribute to reducing
healthcare costs and significantly improving patient care.
Rapid Detection Advantage of the Company's Slide-culture
Technology. By using the Company's technology, laboratories will be
able to accurately identify and perform antibiotic sensitivity testing
for multiple pathogens in less time than conventional methods and with
greater accuracy. Using the Company's technology, management
anticipates that:
The Company's methods permit the sampling of a variety of tissue
samples (not just blood or sputum) with minimal preparation. The
significance of this may be seen, for example, in the current state of
the art in identifying and treating MAI, the bacterial infection most
often associated with AIDS patients in the developed world. Although
MAI forms in the gastrointestinal tract, physicians normally cannot
detect it until it reaches the bloodstream using conventional methods.
Through analyzing fecal matter or urine, physicians using the Company's
methods can detect MAI where it begins in the gastrointestinal tract,
leading to earlier treatment which can sometimes make the difference
between life and death in an AIDS patient.
The Company's methods do not require specialized equipment or highly
skilled personnel to perform the protocols, unlike the existing
conventional methodologies. In fact, the Company's methods may be
automated, resulting in a faster, more precise and cheaper diagnostic
process for the more than 9,000 hospitals and medical laboratories in
the United States, and similar customers throughout the world. The
Company's solution can contribute to reducing health care costs, which
are continually rising.
<PAGE>9
Manufacturing. Before any sales of the Genetic Based
Probe/Amplification Technology kits can occur, the Company must reach
an agreement with a large international corporation to manufacture,
market and sell the product. Once this occurs, sales of the Genetic
Based Probe/Amplification Technology kits can begin in overseas markets
and domestic experimental markets for use in laboratory research.
The Company has entered into an exclusive, worldwide license and
royalty agreement for the manufacture and distribution of the
PARASLC/TM with Erie Scientific, Inc. ("Erie"). The PARA SL/CTM is
the paraffin-coated slide used solely as a central component of the
IDENTIKITTM. Erie is the largest manufacturer and distributor of
medical glass slides in North America, and a wholly owned subsidiary of
Sybron International Corporation. The license and royalty agreement
calls for a net royalty of 15% to be paid to the Company on all
worldwide sales of the PARASLC/TM by Erie. In addition, the Company
has agreed to provide to Erie consulting services for the paraffin
slide culture technology.
In the event that the Company does not manufacture any of its proposed
products directly, it will have to rely on others to manufacture such
products. The Company has an agreement with Sybcon International to
produce Identikits. To date, the production has been limited to
several thousand slide units due to the developmental state of the
Company. Although the Company is currently engaged in preliminary
efforts to establish other manufacturing arrangements with respect to
certain of its proposed products, there can be no assurance that the
Company will be able to enter into any such additional arrangements, on
acceptable terms or at all, or that any manufacturer will be able to
meet any demand for such products on timely basis.
Competition. The Company believes that most existing methodologies
for identification and antibiotic sensitivity testing of
paraffinophilic bacteria are expensive and time-consuming. The
Company further believes that there is limited competition in the field
of antibiotic sensitivity testing combined with amplification
techniques for paraffinophilic microorganisms. While the principal
components of the Company's technology are patented, there can be no
assurance that larger, better-financed companies will not enter the
market or that others will not develop competing technologies.
Currently, the market for manufacture and distribution of diagnostic
kits for each of these there pathogens is highly concentrated. The
competitors for manufacture and sale of kits for growing the pathogen
for tuberculosis on conventional solid media are Difco and Remel.
Difco recently was consolidated into Becton Dickinson, which holds the
majority of the market for diagnostic tests for tuberculosis using
continuous monitoring methods, which are utilized, extensively in major
urban U.S. areas. Similarly, the market for testing for Pseudomonas
and MAI is concentrated in Becton Dickinson, which sells petri-dish-
based diagnostic tests.
Licensing/Transactions. On September 14, 1999, the Company and
BioRemedial Technologies, Inc. (BRT) signed an exclusive licensing
agreement for the licensing of certain intellectual property and
patents relating to the application in bioremediation fields. BRT is
a company, which specializes in the biodegradation of chlorinated
compounds and hydrocarbons. Unlike other bioremediation companies,
BRT uses specially prepared microbes to degrade volatile organic
compounds from air, ground water and soil.
The term of the exclusive licensing agreement with BRT is for a period
of ten years. BRT will utilize the Company's intellectual property
solely as it applies in the field of biomediation for the creation of
microbes for the specific task of bioremediation. The Company shall
receive a royalty of 15% per bioremediation project during the
licensing period.
The Company shall allow BRT the ability to obtain intellectual property
protection for the methodology involved in degrading VOC air emission,
and ground water and solid remediation. The Company's management
believes that there will be a likelihood of success based upon early
in-house laboratory studies performed in conjunction with BRT which
showed the Company's methodology to be superior to any current
competing procedure in degrading trichloroethylene (TCE). TCE is the
most abundant groundwater contaminant in the United States. TCI is
not utilized as a food or energy source by the microorganisms in the
soil or groundwater. As a result, the chemical accumulated in the
environment and generates a public health risk. BRT will require EPA
approval for all site projects involving bioremediation.
<PAGE>10
The exclusive licensing agreement can be terminated early if
- - either the assets or stock of BRT are acquired;
- - BRT attempts to assign, sub-license, lease or otherwise transfer
its license without prior express written approval by Company.
- - insolvency of BRT
- - disqualification of BRT to conduct business;
- - material adverse change in the financial condition of BRT
- - BRT defaults on any provision of the agreement and does not cure
the default within 15 business days after written notice is
received.
The Company has entered into a letter of intent (LOI) on December 10,
1997 with Starplex Scientific of Canada for the manufacturing and sale
of an MAI/Tuberculosis media transport/isolator kit. Under the terms
of this LOI, Starplex Scientific has agreed to pay the Company a
royalty of 10% of its gross sales minus returns for full credit of the
device. Because this is an exclusive worldwide license for this
device, Starplex has agreed, subject to the completion of its due
diligence and the signing of a definitive licensing agreement, to the
following schedule of minimum royalties:
Agreement Year Minimum Royalty
1 $100,000
2 $250,000
3 and thereafter $500,000
On October 15, 1997 the Company signed a letter of intent (LOI) with
the Erie Scientific Company (a wholly owned subsidiary of Sybron
International) for the development of the Company's Paraffin Slide
Culture (Para SL/C) technology into a commercially marketable product
for the detection and susceptibility testing of pathogenic
Mycobacteria.
If development efforts are completed and all the requisite pre-
marketing regulatory approvals for any proposed products are obtained,
the Company will need to establish manufacturing and marketing
capabilities, either directly or through contractual arrangements with
others, such as joint venture, licensing or similar collaborative
agreements in order to commercialize any such products. The Company is
currently engaged in preliminary efforts to establish manufacturing and
marketing capabilities with respect to certain of its proposed
products; however, there can be no assurance that the Company will be
able to enter into such arrangements or that it will be able to obtain
the necessary financing to manufacture and market such products
directly.
Once a suitable manufacturing relationship is established, the
nongenetic and fluorescent amplification IDENTIKITsTM are essentially
ready for production.
The Company has signed a letter of intent (LOI) on September 8, 1997
with NEN Life Science Products for the combination of its patented
baiting technology with Tyramide Signal Amplification (TSA) for the
collaborative development of products pertaining to resistance genes in
bacterial pathogens.
On November 18, 1993, the Company entered into an exclusive worldwide
license and royalty agreement for the manufacture and distribution of
the PARA SL/CTM with Erie Scientific, Inc. The PARA SL/CTM is the
paraffin-coated slide used solely as a major component of the
IDENTIKITTM. Erie Scientific, Inc., is the largest manufacturer and
distributor of medical glass slides in North American, and is a wholly
owned subsidiary of Sybron International Corporation. The license and
royalty agreement calls for a net royalty of 15% paid to the Company of
all worldwide sales of the PARA SL/CTM Erie. In addition, the Company
has agreed to provide to Erie consulting services for the IDENTIKITTM.
<PAGE>11
Patents and Proprietary Rights. The Company has been issued and
granted twenty-five (25) U.S. patents, including:
<TABLE>
<CAPTION>
Patent No. Issue Date Title
<S> <C> <C>
5,153,119* October 6, 1992 Method For Speciating
And Identifying MAI
(Mycobacterium Avium-
Intracellular)
5,316,918 May 31, 1994 Method and Apparatus For
Testing MAI (Mycobacterium
Avium-Intracellulare) For
Antimicrobial Agent
Sensitivity
5,472,877 December 5, 1995 Apparatus For Determining
The Presence Or Absence of
MAI (Mycobacterium Avium-
Intracellular)
5,569,592 October 29,1996 Apparatus For Testing MAI
(Mycobacterium Avium-
Intracellular) For
Antimicrobial Agent
Sensitivity
5,637,5011 June 10, 1997 Method And Apparatus For
Automatically Testing The
Antibiotic Sensitivity Of
A Paraffinophilic
Microorganism
5,639,675 June 17, 1997 A Method Of Identifying
A Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus***
5,641,645 June 24, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus
5,654,194 August 5, 1997 A Method Of Identifying
A Nonparaffinophilic
Microorganism Using
Various Milieus And
An Associated Apparatus
5,663,0562 September 2, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism And An
Associated Apparatus***
5,668,010 September 16, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism Using
Various Milieus And An
Associated Apparatus
5,667,169 October 14, 1997 A Method For Determining
The Antimicrobial Agent
Sensitivity Of A
Nonparaffinophilic
Microorganism And An
Associated Apparatus
<PAGE>12
5,698,414 December 16, 1997 Method And Apparatus For
Testing Paraffinophilic
Microorganisms For
Antimicrobial Agent
Sensitivity
5,707,824 January 13, 1998 Method of Determining The
Presence Or Absence Of A
Paraffinophilic Microorganism***
5,721,112 February 24, 1998 A Method Of Determining The
Presence Or Absence Of A
Nonparaffinophilic Microorganism
In A Specimen And An Associated
Apparatus
5,726,030 March 10, 1998 Method for automatically testing
the antibiotic sensitivity of a
nonparaffinophilic microorganism
5,750,363 May 12, 1998 Method for determining the
antibiotic agent sensitivity
of a nonparaffinphilic
microorganism and an associated
apparatus
5,776,722 July 7, 1998 Method of testing a body specimen
taken from a patient for the presence
or absence of a microorganism and a
further associated method and associated
apparatus
5,801,009 September 1, 1998 Method for determining the antimicrobial
sensitivity of a paraffinophilic
microorganism using various milous and
an associated apparatus
5,804,406 September 8, 1998 Determing sensitivity of paraffinophilic
microorganisms to antimicrobials
5,846,760 December 8, 1998 Method for determining a presence of a
nonparaffinophilic hydrophobia microorganism
in a body specimen and an associated apparatus
5,854,013 December 29, 1998 Method of determining presence or absence of a
nonparaffinophilic microorganism in a specimen
5,854,014 December 29, 1998 Apparatus for testing paraffinophilic
microorganisms for antimicrobial sensitivity
5,882,919 March 16, 19993 Apparatus for determining the presence or
absence of a nonparaffinophilic microorganism in a
specimen
5,882,920 March 16, 19994 Apparatus for determining the presence or absence
of a nonparaffinophilic microorganism
5,891,662 April 6, 1999 Method for determining the antimicrobial agent
sensitivity of a nonparaffinophilic hydrophobic
microorganism
</TABLE>
* Corresponding patents in Australia (parent and divisional) and
Europe (parent and divisional); corresponding application in Canada
*** Corresponding patent in South Africa as of November 27, 1996
1 Corresponding applications will be filed in
AU/BR/CA/CH/EP/JP/MX/NZ/RF/SK
2 Corresponding applications will be filed in
AU/BR/CA/CH/EP/JP/MX/NZ/RF/SK
3 Term of patent shall not extend beyond expiration of Patent
5,677,169
4 Term of patent shall not extend beyond expiration of Patent
5,654,194
The Company is presently allowing its patented technology to be used at
the VA Medical Center of New York to perform research confirming the
efficacy of the IDENTIKITTM and to perform additional research with
amplification techniques. It is anticipated that the technique will
<PAGE>13
increase the rapidity with which both bacterial identifications and
antibiotic sensitivities can be determined, reducing the time required
by one or two orders of magnitude.
The slide culture technology may be automated. The Company is
presently in negotiation with several diagnostic companies for the
automation of the paraffin baiting method. The company has been
granted a patent for the automation method. This will potentially
lower the cost for identification and antibiotic sensitivity testing
for MAI and for all other paraffinophilic microorganisms.
There can be no assurance that any issued patents will provide the
Company with significant competitive advantages, or that challenges
will not be instituted against the validity or enforceability of any
patent owned by the Company or, if instituted, that such challenges
will not be successful. The cost of litigation to uphold the validity
and prevent infringement can be substantial. Furthermore, there can be
no assurance that others will not independently develop similar
technologies or duplicate the Company's technologies or design around
the patented aspects of the Company's technologies. While obtaining
patents is deemed important to the Company, patents are not considered
essential to the success of its business. However, if further patents
do not issue from present or future applications, the Company may be
subject to greater competition.
The Company also relies on a combination of non-competition and
confidentiality agreements with its employees, licensing agreements,
trademarks and trade secret laws to establish and protect proprietary
rights to its technologies. There can be no assurance that trade
secrets will be established, that secrecy obligations will be honored,
or that others will not independently develop similar or superior
technologies.
Dependence on One or a Few Major Customers. The Company does not
expect that any single customer will account for more than ten percent
of its business.
Employees. The Company employs two full time persons and six part
time persons. The Company shall employ additional individuals as
required.
Governmental Regulation. In order to gain broad acceptance, the
Company's diagnostic kits will require approval from the United States
Food and Drug Administration ("FDA") and regulatory bodies outside of
the United States. The Company intends to apply for FDA approval
based upon clinical testing programs conducted at major medical centers
including the New York's VA Hospital, the University of West Virginia
School of Medicine and the State University of New York School of
Medicine. Data obtained from these institutions will enable the
Company to apply for FDA approval process testing kits through the 510-
K application process.. No assurance can be given that the Company
will successfully develop or commercialize any proposed applications of
its technology.
With the exception of experimental markets, sales in the United States
cannot occur until FDA approval is granted. FDA approval will take no
less than one year. This includes 4-5 months of research, 4-5 months
of clinical trials and the 2-3 months for review by the FDA. The
research associated with the FDA approval will cost approximately
$200,000.
In addition to working on obtaining the necessary governmental
approvals to bring the product to market and looking for additional
marketing arrangements through established distribution channels, the
Company plans to perform contract experimental work testing for the
efficacy of chemotherapeutic agents against paraffinophilic
microorganisms. The Company has no specific time-frame for performing
experimental work for this testing.
The Company expects to begin clinical trials of its slide-culture
technology in early 1999 and expects to receive approval of its
technology from the FDA before the summer of 2000 through the 510-K
application process. The Company expects to begin marketing its test
kits internationally during the first quarter of 2000.
Compliance with Environmental Laws. The Company has no material costs
or effects of compliance with federal, state or local environmental
laws.
<PAGE>14
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Trends and Uncertainties. Demand for the Company's products will be
dependent on, among other things, market acceptance of the Company's
concept, the quality of its products, government approval and general
economic conditions, which are cyclical in nature. Inasmuch as a major
portion of the Company's activities will be the receipt of revenues
from the sales of its products, the Company's business operations may
be adversely affected by the Company's competitors and prolonged
recessionary periods.
Capital and Source of Liquidity. The Company requires substantial
capital in order to meet its ongoing corporate obligations and in order
to continue and expand its current and strategic business plans.
Initial working capital has been obtained by the private sale of the
Company's Common Shares from November 1996 to present.
For the nine months ended July 31, 1999, the Company had legal fees in
connection with the issuance of common stock of $3,285. The Company
received proceeds from the issuance of common stock of $133,234
resulting in net cash provided by financing activities of $129,949 for
the nine months ended June 30, 1999.
For the nine months ended September 30, 1998, the Company had proceeds
from the issuance of common stock of $270,074. As a result, the Company
had net cash used in investing activities of $270,074 for the nine
months ended September 30, 1999.
For the nine months ended September 30, 1999, the Company had patent
costs of $55,997, purchase of equipment of $2,450 and an increase in
deposits of $51 resulting in net cash used in investing activities of
$58,498. The Company anticipates that costs associated with product
testing and development will continue to increase.
For the nine months ended September 30, 1998, the Company received
$200,000 from the redeption of certificate of deposit. The Company
purchased equipment for $4,505 and had patent costs of $179,554 for the
nine months ended September 30, 1998. The Company had an increase in
deposits of $82 and had deferred merger and offering costs of $76,070
for that same period. As a result, the Company had net cash used in
investing activities of $60,211 for the nine months ended September 30,
1998.
The Company has a $10,500 line of credit, all of which was available at
September 30, 1998. The line of credit is collateralized by the
personal guarantee of a stockholder.
On a long-term basis, liquidity is dependent on continuation and
expansion of operation and receipt of revenues, additional infusions of
capital and debt financing. The Company believes that additional
capital and debt financing in the short term will allow the Company to
increase its marketing and sales efforts and thereafter result in
increased revenue and greater liquidity in the long term. However,
there can be no assurance that the Company will be able to obtain
additional equity or debt financing in the future, if at all.
Results of Operations. Since inception, the Company has not received
any material revenues from operations.
For the nine months ended September 30, 1999, the Company had operating
expenses of $54,242. These expenses consisted primarily of research
and development of $14,363, wages of $7,250, telephone of $1,656, legal
and accounting of $500, travel of $77, payroll taxes of $617, rent of
$6,293, depreciation and amortization of $11,156, office expense of
$919, public relations of $3,378, royalties of $1,822 and miscellaneous
operating expenses of $6,211.
For the nine months ended September 30, 1998, the Company had operating
expenses of $111,464. These expenses consisted primarily of research
and development of $42,504, wages of $11,027, telephone of $1.021,
insurance of 266, legal and accounting of $12,000, travel of $4,299,
payroll taxes of $819, state and local taxes of $1,374, rent of $8,304,
<PAGE>15
depreciation and amortization of $13,581, office expense of $2,070,
consulting and professional fees of $12,398 and miscellaneous operating
expenses of $1,801.
Plan of Operation. The Company is in the development stage and has not
conducted any significant operations to date or received any operating
revenues. The Company may experience problems; delays, expenses and
difficulties sometimes encountered by an enterprise in the Company's
stage of development, many of which are beyond the Company's control.
These include, but are not limited to, unanticipated problems relating
to product development, testing, regulatory compliance, manufacturing
costs, production and marketing problems, additional costs and expenses
that may exceed current estimates and competition.
The Company has funding needs of approximately $1.2 million. The
Company shall seek equity or debt financing for intellectual Property
($30,000), research and development for Tuberculosis Pseudomonas
($814,400), legal expense for patents ($263,419) and internet research
and development ($50,000). This does not include the Company's working
capital need. Research and development expenses will be dependent on
the availability of funds. The Company does not expect any additional
purchases of plant and equipment. There are no expected significant
changes in the number of employees. If the Company obtained funding,
support type of employees such as secretarial, etc, may be required.
As of September 30, 1999, the Company had working capital of $81,466.
The Company expects to use this capital to continue research and
development of patents and for the costs associated with executing an
initial public stock offering. The Company believes that the net
proceeds from equity financing together with revenues from operations,
if any, will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures until approximately December
1999. There can be no assurance, however, that the net proceeds from
equity financing will not be expended prior thereto due to
unanticipated changes in economic conditions or other unforeseen
circumstances. Unless growth in the Company's revenues from operations
substantially exceeds management's current expectations, by
approximately December 1999, the Company will be required to seek
additional equity or debt financing to fund the costs of its
operations, including continued development of its products. There can
be no assurance that additional financing will be available or that, if
available, such financing will be on acceptable terms to enable the
Company to complete development of or commercialize any of its proposed
products or technologies.
The Company is not delinquent in any of its obligations even though the
Company has generated limited operating revenues. The Company
intends to market its products utilizing cash made available from the
private and public sale of its securities. The Company's management is
of the opinion that revenues from the sale of its products and the
proceeds of the sales of its securities will be sufficient to pay its
expenses until additional restaurants can be added pursuant to the
initial business plan.
Year 2000 Issues. To date, the Company has had no material effects
from the Year 2000 issues.
ITEM 3. DESCRIPTION OF PROPERTY
The Company will operate out of two locations. The corporate
headquarters will remain in Sharon, Pennsylvania and the clinical lab
will be in Milford, Pennsylvania. These offices consist of 3100 square
feet. The Company pays approximately $2,500 per month for use of
these two locations. The Company may consolidate operations to a
single location once clinical testing is successfully completed. Also,
the Company will use the offices of Dr. Felder as its corporate
headquarters. Dr. Felder will sublease a portion of his offices at a
rate of approximately $550 per month to partially cover the cost of
rent, office equipment, utilities and office personnel. The Company
retains the right to increase these payments in accordance with any
rental time and increased need for office equipment, utilities and
office personnel at both locations.
<PAGE>16
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of shares of the Company by each
person who, subject to the above, at the date of this prospectus, holds
of record or is known by Management to own beneficially more than 5.0%
of the Common Shares and, in addition, by all directors and officers of
the Company individually and as a group. Each named beneficial owner
has sole voting and investment power with respect to the shares set
forth opposite his name.
Shareholdings at Date of
This Prospectus
<TABLE>
<CAPTION>
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
Mitchell S. Felder, M.D. (2) (3) 2,252,589 31.75%
Suite 2
87 Stambaugh Avenue
Sharon, PA 16146
Robert Ollar, Ph.D. (2) 1,697,322 23.92%
122 Cornelia Lane
Milford, PA 18337
David Bernstein, Esq. (2) (3) 246,837 3.48%
33111 Seneca Drive
Solon, OH 44139
Susan Felder (2) 382,967 5.40%
Suite 2
87 Stambaugh Avenue
Sharon, PA 16146
Stephen Lewis 100,000 1.41%
112 Mehard Avenue
Greenville, PA 16125
Thomas Inman 0 0.00%
27 Garrett Lane
Mercer, PA 16137
William Moder 0 0.00%
Kerrwood Place, Suit 104
2500 Highland Road
Hermitage, PA 16148
All Directors & Officers
as a group (7 persons) 4,679,715 65.96%
</TABLE>
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
(2)Assumes exercise of all outstanding stock options. Includes for
each of Dr. Felder, Dr. Ollar, Mr. Bernstein and Mrs. Felder, 42,535,
23,368, 37,978 and 29,167 shares, respectively, which such person has
the right to acquire under options issued to him/her under the 1996
Stock Option Plan at a purchase price of $1.20 per share.
(3)Includes for each of, Dr. Felder and Mr. Bernstein, 77,500 and
10,000 shares, respectively, for repayment of loans made to the
Company.
Stock Options. The Corporation has issued options for the purchase of
up to 828,852 shares of common stock to fourteen persons. The options
are "non-qualified stock options" which are not qualified for treatment
under Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>17
The term of the options has generally been up to ten years from the
date of grant, and provide for vesting over a period of three years
from the date of grant.
The Corporation's 1996 Stock Option Plan provides for the issuance of
options for the purchase of 1,182,750 shares of the Corporation's
Common Stock to employees and consultants. In lieu of salary for past
services, certain employees have received stock options to purchase up
to 322,406 shares at a purchase price of $1.20 per share under the
Stock Option Plan. Of the total 322,406 shares eligible for purchase
pursuant to options, Dr. Felder, Dr. Ollar, Thomas Inman, William Moder
II, David Bernstein, Steve Lewis, and Susan Felder have options to
purchase a total of 227,200 shares. The remaining 95,116 shares
eligible for purchase pursuant to options were distributed among 8
other employees.
The Corporation's 1998 Stock Option Plan provides for the issuance of
options for the purchase of 1,200,000 shares of the Corporation's
Common Stock to employees and consultants. Currently no options have
been issued under the 1998 Stock Option Plan.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Board of Directors. The following persons listed below have been
retained to provide services as director until the qualification and
election of his successor. All holders of Common Stock will have the
right to vote for Directors of the Company. The Board of Directors has
primary responsibility for adopting and reviewing implementation of the
business plan of the Company, supervising the development business
plan, review of the officers' performance of specific business
functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Company. Directors receive no cash compensation or fees for their
services rendered in such capacity.
The Executive Officers and Directors are:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Mitchell S. Felder, M.D.
age 45 CEO, President and Inception
Treasurer and Director to present
Robert A. Ollar, Ph.D.
age 50 Executive Vice President Inception
and Chief of Scientific to present
Affairs and Product Development
and Director
Susan Felder
age 44 General Manager and Director Inception
to present
David Bernstein, age 39 Corporate General Counsel
and Director
Stephen R. Lewis, age 38 Director 1995
to present
Thomas Inman, age 43 Secretary and Controller June 1995
to present
William J. Moder, III, age 46 Director Sept. 1998
to present
</TABLE>
Resumes:
Mitchell S. Felder, M.D., is a co-founder of the Company, a founding
member of the Company's Scientific Advisory Board, and serves as Vice
Chairman of the Company's board of directors. Dr. Felder is a
contributor to certain of the patent applications for the Company's
products, and has worked in the Company's clinical medical effort. He
received his M.D. degree from the University of Rome, Italy in 1983,
and has been an attending Neurologist at the Horizon Hospital System in
Greenville, Pennsylvania since 1997. Dr. Felder is married to Susan
Felder and is a first cousin of Mr. Bernstein.
<PAGE>18
Robert A. Ollar, Ph.D. is a co-founder of the Company, a founding
member of the Company's Scientific Advisory Board, and has served as
Chairman of the board of directors of the Company since 1989. Dr.
Ollar received his Ph.D. degree from the University of Surrey, England,
United Kingdom in 1993. Prior to that, he received his Master of
Science Degree majoring in Microbiology in 1984 from the University of
Glasgow, Great Britain. Prior to that, he performed research at the
Institute Pasteur Du Brabant in Brussels, Belgium. Dr. Ollar is the
inventor of the Company's slide culture technology. Dr. Ollar is
presently an Assistant Professor of Neurology at the New York Medical
College.
Susan Felder has served as General Manager and director of the Company
since its inception in 1989. From 1978 to 1989 she had progressive
analyst responsibilities with the Insurance Services Office, Inc.
leading to the position of Computer Programmer which she held until
1989. From 1978 to 1979 she held the position of Marketing Research
Analyst for the Continental Insurance Company. She received her B.A.
in Economics from Rutgers College in 1976. She is the wife of Dr.
Felder.
David Bernstein, Attorney-at-Law, is Corporate Counsel for the Company
and is a director of the Company. Mr. Bernstein is a sole practitioner
practicing law in Cleveland, Ohio. Prior to engaging in sole practice,
Mr. Bernstein was an attorney at Bekaert Corporation, a manufacturing
company. He received his Juris Doctor of Law from The University of
Akron in 1983 and his Bachelor's Degree in Accounting from Kent State
University in 1980. Mr. Bernstein is a first cousin of Dr. Felder.
Stephen R. Lewis has served as a director of the Company since 1995.
Mr. Lewis is an investment broker with, and shareholder of Butler Wick
& Co., Inc. of Sharon, Pennsylvania since 1988. He received his
Bachelor's Degree in Finance from Indiana University of Pennsylvania in
1983.
Thomas L. Inman is the Corporate Controller for the Company, having
served since June 1995. Mr. Inman is the Secretary of the Company.
Since 1999, Mr. Inman is employed by the Mercer County Agency on Aging
and was previously employed as an internal auditor for the County of
Mercer in Pennsylvania from 1990 to 1999.
William Moder, III is General Counsel for the Company and has been a
director of the Company since September, 1998. Mr. Moder is an
attorney engaged in private practice in Hermitage, Pennsylvania. He
has advised the Company as local counsel, primarily on contract issues.
Prior to entering private practice, Mr. Moder was corporate counsel for
First National Bank of Pennsylvania, a subsidiary of F.N.B.
Corporation, for 14 years. He is a 1974 graduate of Edinboro
University of Pennsylvania and earned his juris doctorate degree in
1980 from the University of Akron.
The Corporation has not established any committees, other than the
Compensation Committee and the Stock Option Plan Committee, which
administers the issuance of options under the Corporation's 1996 and
1998 Stock Option Plans. The Compensation Committee is composed of Dr.
Felder, Dr. Ollar, Mr. Shardy. and Mr. Moder. The Stock Option Plan
Committee consists of Dr. Felder and Dr. Ollar
Scientific Advisory Board. In July 1995 Dr. Ollar and Dr. Felder
founded the Corporation's Scientific Advisory Board, which in addition
to them consists of the following members:
Nancy D. Connell, Ph.D., Assistant Professor, Dept. Of Microbiology and
Molecular Genetics, UMDNJ/New Jersey Medical School
Carl Gene Coin, M.D., Department of Radiology, University of Miami
School of Medicine
Joseph Giordano, M.D., Attending Internist, Sharon Regional Health
System
Vincent LaBombardi, Ph.D. Chief of the Department of Microbiology, St.
Vincent's Hospital New York, New York; Assistant Professor of
Microbiology, New York Medical College.
Richard Steinfeld, M.D., Attending Internist, Sharon Regional Health
System
<PAGE>19
Benjamin M. Blumberg, Ph.D., Professor of Neurology, University of
Rochester Medical School
Joseph H. Kite, Jr., M.D., Professor of Microbiology; State University
at Buffalo School of Medicine and Biomedical Sciences
Jane Pascale, M.D., Assistant Professor of Microbiology; State
University at Buffalo, NY
Sheldon Brown, M.D., Assistant Professor of Medicine; Mt. Sinai School
of Medicine, NY, NY; Attending Physician Infectious Diseases; Bronx
V.A. Hospital
Dale Pokorney, M.D., Assistant Professor of Dermatology, Case Western
Reserve School of Medicine
Pattisapu R.J. Gangadharam, Ph.D., Professor of Medicine, Microbiology
and Pathology, Director of Mycobacteriology research, University of
Illinois at Chicago
Thomas Kelly, Ph.D., Professor of Microbiology Laboure College; Boston,
MA
David Sklansky, Author of seven books on probability theory and wagers
Zsuzua (Susan, Polgar, Women's World Chess Champion
Each member of the Scientific Advisory Board has received an option to
purchase six hundred fifty (650) shares of stock at $4.50 per share.
Such options vest over a three-year period beginning on December 6,
1996, and expire without further vesting within ninety (90) days after
each member's termination of Scientific Advisory Board service.
ITEM 6. EXECUTIVE COMPENSATION
No executive officer of the Corporation, except for Dr. Robert Ollar,
received any cash compensation for the fiscal year ended December 31,
1997. Dr. Ollar received cash compensation of $23,333 during fiscal
year ended December 31, 1997. Upon completion of the offering of the
Shares made hereby, Dr. Ollar will receive a salary of $65,000 per year
based on his full time work at the Corporation's laboratory; Dr. Felder
will receive a salary of $65,000 per year based upon part-time work;
and Mr. Inman will receive $12,000 per year for part-time work. The
Corporation retains the right to increase or decrease the cash
compensation of its employees as necessitated by business conditions.
In lieu of salary for past services, certain employees have received
options to purchase up to 322,406 shares of the Corporation's common
stock at a price of $1.20 per share. See "Stock Options."
Employment Agreements. Dr. Robert Ollar is employed under an
employment agreement for $20,000 per year. Other than the
Corporation's standard form of non-competition and confidentiality
agreement, the Corporation does not presently have any employment
contracts in effect with the named executive officers of the
Corporation, including any compensatory plans or arrangements resulting
from the resignation, retirement or other termination of the named
executive officers of the Corporation, other than the compensation
arrangements discussed above.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions. Prior to July 1995, all of the Company's
expenditures were funded by Dr. Mitchell Felder. Dr. Felder advanced
the Company $26,776 in 1993, $36,649 in 1994, $19,564 in 1995 and
$36,189 in 1996. Advances from inception of the Company to December
31, 1992 totaled $39,387. Under an agreement with the Company,
$64,833 of the amounts loaned were converted to common stock. At
December 31, 1995, $56,811 was payable to Dr. Felder.
In 1992, David Bertstein, a stockholder, provided legal services
amounting to $12,000 in exchange for a non-interest bearing note
payable due or before December 1, 1999. Mr. Bernstein has agreed to
accept 10,000 Common Shares of the Company as repayment of this debt
upon completion of this offering.
<PAGE>20
The Company subleases a portion of its office space from Dr. Felder,
President, at a rate of $550 per month to cover the cost of rent,
office rent, computer equipment, utilities and office personal. These
payments totaled $6,600 in 1998.
William Moder serves as general counsel for the Company. Mr. Moder is
paid on an hourly basis for professional services at the rate of $50
per hour and is also given stock options in an equal amount,
exercisable at a price of $1.20 per share. In 1998, Mr. Moder
received $11,015 in cash and 11,015 stock options for legal services
provided to the Company.
The Company entered into a consulting agreement with Steven Lewis, a
stockholder and director of the Company. The term of the consulting
agreement is one (1) year commencing May 18, 1998. The Company has
not extended the agreement and it expired May 18, 1999. Mr. Lewis
shall be paid a $4,000 per month payable quarterly under the terms of
the Agreement. Additionally, Mr. Lewis has received 30,000 stock
options with an option price of $1.20 per share. The agreement
provides that upon the Company receiving $300,000 during its term, that
Mr. Lewis shall receive an additional 30,000 stock options at the
option price of $1.20 per Common Share. During 1997 and 1996, Mr.
Lewis was paid $31,347 and $18,360, respectively for his prior services
to forfeiture, which number will be reduced by 16,137 Common Shares
ITEM 8. DESCRIPTION OF SECURITIES
Qualification. The following statements constitute brief
summaries of the Company's Certificate of Incorporation and Bylaws, as
amended. All material portions of the Certificate of Incorporation and
Bylaws have been discussed.
The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.02 per share. As of the date hereof, there are 6,265,588
shares of Common Stock outstanding, excluding shares reserved for
issuance upon the exercise of 828,852 issued and outstanding common
stock options.
The holders of the Common Stock are entitled to one vote per share with
respect to all matters on which holders of the Company's Common Stock
are entitled to vote. Holders of the Common Stock have the right to
dividends from funds legally available therefor, when, as and if
declared by the Board of Directors and re-entitled to share ratably, in
all of the assets of the Company available for distribution to holders
of shares of Common Stock upon liquidation, dissolution or winding up
of the affairs of the Company. Holders of Common Stock do not have
preemptive, subscriptive or conversion rights. The Common Stock does
not have cumulative voting rights and, therefore, holders of shares
entitled to exercise more than 50% of the voting power are able to
elect 100% of the Directors of the Company. As a result, the existing
shareholders of the Company have the power to retain control over the
Company, despite any accumulation of Common Stock pursuant to his
offering.
Transfer Agent. Florida Atlantic Stock Transfer, Inc. of
Tamarac Florida currently acts as the Company's transfer agent.
<PAGE.21
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company common shares are listed on the National Quotation Board
("pink sheets") under the symbol IFEC.
The Company has never paid any cash dividends nor does it intend, at
this time, to make any cash distributions to its shareholders as
dividends in the near future.
As of May 30, 1999, the number of holders of Company's common stock is
77.
ITEM 2. LEGAL PROCEEDINGS
Merger With Regal One Corporation ("Regal"). On April 7, 1998, the
Corporation entered into a Plan and Agreement of Merger with Regal, a
Florida Corporation, whose shares are listed on the OTC Bulletin Board
under the symbol "RONE." Regal was to issue approximately 26,320,520
Common Shares to the Corporation's stockholders so that on the
effective date of the merger, the shareholders of the Corporation would
have owned in the aggregate 85% of the Common Shares of Regal, which
upon closing will change its name to Infectech. A condition of the
merger was that the Corporation raise a minimum of $300,000 prior to
June 30, 1998. This condition was not met and the Corporation
exercised its right to terminate the transaction.
The Corporation filed for arbitration in Pennsylvania (AAA Case No. 55-
136-0131-98) to recover monies advanced to Regal One and other fees and
costs. The matter has been amicably settled.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Company's two most recent fiscal years or any later interim
period, there have been no changes in or disagreements with the
Company's principal independent accountant or a significant
subsidiary's independent accountant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the first and second quarter of 1997 the Company issued 522,450
Common Shares at $1.20 per share in cash to the following individuals
and entities.
Jean C. Harnett 46,250
James Gessler 10,000
James M. Holl & Steve D. Gurrera 10,000
Carl Shardy 42,000
David A. & Betty I. Geisel 5,000
Mark B. Jubelirer 10,000
John F. Loretta A. Hamley 3,000
Dale Pokorney 16,000
Martin M. Horowitz 50,000
Cathi Gurska 12,500
Samuel Bungo 7,000
Gary W. Podobrick 4,000
Beverly D. Beshore 20,000
Scott D. Payne 4,000
Karen Gagen 14,700
Richard J. Donatelli 2,500
M. Virginia Larimer 5,000
Charles O. & Lorraine A. Stepp 2,000
Alexis j. Loomis 10,000
Stacey B. Enck 5,000
Ian C. Horowitz 5,000
Annamarie Denis 5,000
Ronald L. Susan D. Campbell 33,000
Patricia E. Loomis & James L.
Gibson 10,000
Steven B. Bakst 40,000
Scott A. Riley 18,000
Glenn B. Harnell 80,000
Allen D. Kidd 15,000
Marten C. Owens 15,000
<PAGE>22
Steve D. Gurrera 2,500
Christine & David Kirita 10,000
John A. & Joyce A. Mackey
Custodians 10,000
These issuances were made in compliance with Rule 505, Regulation D of
the Securities Act of 1933 by Registrant's management, consultants and
selected broker/dealers. No commissions or other remuneration was paid
to anyone. No general solicitation was utilized. The determination
of whether an investor was accredited or nonaccredited was based on the
responses in the subscription agreement filled out by each investor.
During the second quarter of 1998, the Company issued 225,000 Common
Shares for cash payments of $1.20 to the following:
Bruno Melaragno 20,000
Anthony Melaragno 20,000
Carl Shardy 27,000
Dale Pokorney 10,000
John & Joyce Mackey, Custodians 10,000
Marten C. Owens 10,000
Peter Melaragno 20,000
Victor Melaragno 20,000
Ronald Campbell 10,000
Victor Melaragno, Custodian 10,000
Richard J. Donatelli 10,000
Steve D. Gurrera 3,000
Christine & David Kilna 10,000
A. William Senopole, Jr. 10,000
Aurelio Berardinelli 20,000
William E. Brest 15,000
These issuances were made in compliance with Rule 505, Regulation D of
the Securities Act of 1933 by Registrant's management, consultants and
selected broker/dealers. No commissions or other remuneration was paid
to anyone. No general solicitation was utilized. The determination
of whether an investor was accredited or nonaccredited was based on the
responses in the subscription agreement filled out by each investor.
In January 1998, the Company issued 121 Common Shares pursuant to
option exercise at $.01 per Common Shares to Thomas A. Kelly, Ph.D. The
Common Shares were issued to a sophisticated investor who had access to
information on the Company necessary to make an informed investment
decision for cash consideration pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933.
In the second and third quarters of 1998, the Company issued Common
Shares for option exercise at $.01 per Common Share as follows.
<PAGE>23
Name Common Shares Cash Payment
Thomas A. Kelly, Ph.D 1,017 $ 10.17
Robert A. Ollar, Ph.D. 6,250 $ 62.50
Jeffrey Lewis 49,825 $498.25
The Common Shares were issued to sophisticated investors who had access
to information on the Company necessary to make an informed investment
decision for cash consideration or services pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933.
During the first quarter of 1999, the Company issued 111,000Common
Shares at $1.20 per Common Share cash payment (aggregate of $133,200)
to the following:
Robert Hudock 10,000 Common Shares
James A. Hudock 10,000 Common Shares
John Zullo 10,000 Common Shares
Frank Shardy 19,000 Common Shares
Victor Melaragno 10,000 Common Shares
Anthony Melaragno 10,000 Common Shares
Bruno Melaragno 20,000 Common Shares
Aurelio Berarolineli 10,000 Common Shares
John Demas, Sr. 12,000 Common Shares
These issuances were made in compliance with Rule 504, Regulation D of
the Securities Act of 1933 by Registrant's management, consultants and
selected broker/dealers. No commissions or other remuneration was paid
<PAGE>23
to anyone. The determination of whether an investor was accredited or
nonaccredited was based on the responses in the subscription agreement
filled out by each investor.
In March 1999, the Company issued 3,334 Common Shares pursuant to
option exercise at $.01 per Common Shares to June Pasacic for financial
cunsulting services provided in 1996.. The Common Shares were issued
to a sophisticated investor who had access to information on the
Company necessary to make an informed investment decision for cash
consideration or services pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification. The Company shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State
of Delaware, any person made, or threatened to be made, a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of the Company, or served any other enterprise as director,
officer or employee at the request of the Company. The Board of
Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that
he/she is or was an employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Company, the Company 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 Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceedings) is asserted by
such director, officer, or controlling person in connection with any
securities being registered, the Company 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 Act
and will be governed by the final adjudication of such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
Limitation on Liability and Indemnification Matters. The Certificate
of Incorporation of the Corporation limits the liability of directors
of the Corporation to the Corporation or its stockholders to the
fullest extent permitted by Delaware law. Specifically, directors of
the Corporation will not be personally liable for money damages for
breach of a duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Act, which
relates to unlawful declarations of dividends or other distributions of
assets to stockholders or the unlawful purchase of shares of the
corporation, or (iv) for any transaction from which the director
derived an improper personal benefit.
PART F/S
The following financial statements required by Item 310 of Regulation
S-B are furnished below
Independent Auditor's Report dated March 24, 1999
Balance Sheet as of December 31, 1998 and 1997
Statement of Operations for the Years ended December 31, 1998, 1997 and
1996 and the period from June 21, 1989 (inception) to December 31, 1998
Statement of Stockholders' Equity for the Years ended December 31,
1998, 1997 and 1996 and for the period from June 21, 1989 to December
31, 1998
Statement of Cash Flows for the Years ended December 31, 1998, 1997 and
1996 and for the period from June 21, 1989 to December 31, 1998
Notes to Financial Statements
<PAGE>24
Balance Sheet as of September 30, 1999
Statement of Operations for the Nine Months ended September 30, 1999
and 1998
Statement of Cash Flows for the Nine Months ended September 30, 1999
and 1998
Notes to Financial Statements
<PAGE>25
March 24, 1999
Board of Directors
Infectech, Inc.
Sharon, Pennsylvania
Independent Auditors' Report
We have audited the accompanying balance sheets of Infectech, Inc., a
development statege enterprise, as of December 31, 1998 and 1997 and
the related statements of operations, stockholders equity (deficit) and
cash flows for each of the three years in the period ended December 31,
1998 and for the period from June 21, 1989 (inception) to December 31,
1998. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Infectech,
Inc. as of December 31, 1998 and 1997 and the results of its operations
and its cash flows for each of the three years in the period ended
December 31, 1998 and for the period from June 21, 1989 (inception) to
December 31, 1998 in conformity with generally accepted accounting
principles.
/s/Hill Barth & King, Inc.
Certified Public Accountants
Sharon, Pennsylvania
- -1-
<PAGE>26
BALANCE SHEETS
INFECTECH, INC
(A development stage enterprise)
December 31, 1998 and 1997
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
A S S E T S
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 217,295 $ 295,489
Certificate of deposit 0 200,000
EQUIPMENT
Medical equipment 43,517 37,013
Less accumulated depreciation 16,078 10,192
---------- ---------
NET EQUIPMENT 27,439 26,821
----------- ---------
OTHER ASSETS
Deposit 1,669 1,456
Patent costs, net of accumulated amortization
of $82,442 in 1998 and $51,686 in 1997 522,092 361,475
---------- ---------
TOTAL OTHER ASSETS 523,761 362,931
$ 768,495 $ 885,241
========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,006 $ 16,205
Accrued payroll taxes 522 363
Accrued state taxes 2,468 2,516
---------- ----------
TOTAL CURRENT LIABILITIES 35,996 19,084
---------- ----------
STOCKHOLDERS EQUITY - NOTES E, F, G AND H
Common stock - $.02 par value per share:
Authorized 20,000,000 shares; issued and
outstanding 6,366,450 shares in 1998
and 6,033,200 shares in 1997 127,329 120,664
Additional paid-in capital 1,853,546 1,446,993
Deficit accumulated during the
development stage (1,248,376) (701,500)
---------- ---------
TOTAL STOCKHOLDERS EQUITY 732,499 866,157
---------- ---------
$ 768,495 $ 885,241
========== ==========
</TABLE>
See accompanying notes to financial statements
- -2-
<PAGE>27
STATEMENTS OF OPERATIONS
INFECTECH, INC.
(A development stage enterprise)
Years ended December 31, 1998, 1997, 1996 and
period from June 21, 1989 (inception) to December 31, 1998
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 21, 1989
(INCEPTION)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998
----- ----- ----- ----
<S> <C> <C> <C> <C>
OPERATING INCOME
Sales $ 3,669 $ 0 $ 0 $ 3,669
OPERATING EXPENSES
Research and development 92,004 60,697 17,500 206,011
Wages 121,092 24,568 16,000 177,404
Telephone 7,592 9,955 3,595 29,255
Office expense 9,746 7,541 2,328 22,675
Insurance 5,536 5,066 6,765 17,692
Legal and accounting 61,556 60,938 80,711 234,743
Travel 11,467 27,053 9,310 68,416
Payroll taxes 3,185 2,268 1,573 8,627
State and local taxes 4,796 3,777 2,584 11,692
Amortization 30,756 20,669 14,194 85,282
Depreciation 5,886 5,288 4,410 16,079
Rent 28,212 26,713 19,808 74,733
Consulting and professional fees 183,466 104,971 43,360 331,797
Miscellaneous 6,656 8,355 956 17,526
------- ------- ------ --------
TOTAL OPERATING EXPENSES 571,950 367,859 223,094 1,301,932
-------- ------- ------- ----------
LOSS FROM OPERATIONS (568,281)(367,859)(223,094) (1,298,263)
-------- ------- ------- ---------
OTHER INCOME (DEDUCTION)
Interest expense 0 0 (661) (661)
Interest earned 21,405 21,634 2,833 50,548
-------- ------- ------- ----------
21,405 21,634 2,172 49,887
------- -------- ------ ---------
NET LOSS $(546,876)$(346,225)$(220,922) $(1,248,376)
========= ======== ======= =========
Basic Earnings (Loss) per share $ (.09)$ .06)$ (.04)
========= ========= =========
</TABLE>
See accompanying notes to financial statements
- -3-
<PAGE>28
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
INFECTECH, INC.
(A development stage enterprise)
Years ended December 31, 1998, 1997, 1996
and the period from June 21, 1989 (inception) to December 31, 1998
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING RECEIVABLE
COMMON PAID-IN DEVELOPMENT FROM SALE
STOCK CAPITAL STAGE OF STOCK TOTAL
------ ---------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance June 21, 1989 (inception) $ 0 $ 0 $ 0 $ 0 $ 0
Net loss 0 0 (98) 0 (98)
-------- -------- ------- ------- -----
Deficit December 31, 1989 0 0 (98) 0 (98)
Net loss 0 0 (388) 0 0
-------- -------- ------- ------- -----
Deficit December 31, 1990 0 0 (486) 0 (486)
Net loss 0 0 (907) 0 (907)
-------- -------- ------- ------- -----
Deficit December 31, 1991 0 0 (1,393) 0 (1,393)
Issuance of 1,849,300 shares of stock in
exchange for $20,000 in long-term loans 20,000 0 0 0 20,000
Issuance of 1,811,100 shares of stock in
exchange for research and development 35,810 0 0 0 35,810
Issuance of 100,000 shares of
stock for organization costs 2,000 0 0 0 2,000
Issuance of 105,000 shares of stock
for out-of-pocket costs 2,100 0 0 0 2,100
Issuance of 134,600 shares of stock in
exchange for legal services 13,000 0 0 0 13,000
Net loss 0 0 (67,027) 0 (67,027)
------ ------ ------- -------- -------
Balance (deficit) December 31, 1992 72,910 0 (68,420) 0 4,490
Net loss 0 0 (7,993) 0 (7,993)
------ ------ ------- -------- ------
Balance (deficit) December 31, 1993 72,910 0 (76,413) 0 (3,503)
Net loss 0 0 (14,160) 0 (14,160)
------ ------ ------- -------- ------
Balance (deficit) December 31, 1994 72,910 0 (90,573) 0 (17,663)
Conversion of long-term debt to
additional paid-in capital 0 44,833 0 0 44,833
Transfer of costs in excess of
par value upon change to $1
par value from no par value 7,090 (7,090) 0 0 0
Private placement of 500,000 shares of
stock at $.20 per share 10,000 90,000 0 0 100,000
Private placement of 507,500 shares of
stock at $.40 per share 10,150 192,850 0 0 203,000
6,120 361,080 0 0 367,200
Costs relating to sale of stock 0 (36,000) 0 0 (36,000)
Net loss 0 0 (220,922) 0 (220,922)
------- ---------- --------- ----- --------
Balance (deficit) December 31, 1996 110,215 762,528 (355,275) 0 517,468
Private placement of 522,450
shares of stock at $1.20 per share 10,449 616,491 0 0 626,940
Expense relating to stock options 0 67,974 0 0 67,974
Net loss 0 0 (346,225) 0 (346,225)
--------- --------- --------- ----- ---------
Balance (deficit) December 31, 1997 120,664 1,446,993 (701,500) 0 866,157
Private placement of 225,000 shares
of stock at $1.20 per share 4,500 265,500 0 0 270,000
Issuance of 57,213 shares of stock
upon exercise of options at
$.01 per share 1,144 (572) 0 0 572
Issuance of 51,037 shares of
stock for services 1,021 65,372 0 0 66,393
Costs relating to sale of stock 0 (41,148) 0 0 (41,148)
Expense relating to stock options 0 117,401 0 0 117,401
Net loss 0 0 (546,876) 0 (546,872)
------ -------- ---------- ---- --------
Balance (deficit) December 31, 1998 $127,329 $1,853,546 $(1,248,376) $ 0 $ 732,499
========= ========== =========== ====== =========
</TABLE>
See accompanying notes to financial statements
<PAGE>29
STATEMENTS OF CASH FLOWS
INFECTECH, INC.
(A development stage enterprise)
Years ended December 31, 1998, 1997, 1996
and the period from June 21, 1989 (inception) to December 31, 1998
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 21, 1989
(INCEPTION)
TO
DECEMBER 31,
1998 1997 1996 1998
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(546,876) $(346,225) $(220,922) $(1,248,376)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Amortization 30,756 20,669 14,194 85,282
Depreciation 5,886 5,288 4,410 16,079
Increase (decrease) in payables 16,801 (60,867) 71,089 31,212
Increase in accrued expenses 111 2,132 412 4,052
Expenses exchanged for capital 183,794 67,974 0 302,678
--------- -------- -------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (309,528) (311,029) (130,817) (809,073)
--------- -------- -------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase (redemption) of
certificate of deposit 200,000 (200,000) 0 0
Purchase of equipment (6,504) (849) (22,328) (43,518)
Patent costs (191,373) (108,549) (119,572) (605,374)
Increase in deposits (213) (26) (1,430) (1,669)
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,910 (309,424) (143,330) (650,561)
--------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Fees in connection with
issuance of stock (41,148) 0 (36,000) (87,348)
Proceeds from issuance of
long-term debt 0 0 36,189 170,565
Proceeds from issuance of
common stock 270,572 626,940 373,200 1,593,712
---------- ---------- --------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 229,424 626,940 373,389 1,676,929
---------- ---------- --------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (78,194) 6,487 99,242 217,295
CASH AND CASH EQUIVALENTS
Beginning of period 295,489 289,002 189,760 0
--------- --------- ---------- ---------
End of period $ 217,295 $ 295,489 $ 289,002 $ 217,295
========== ========= ========== ===========
CASH WAS PAID FOR
Interest $ 0 $ 0 $ 661 $ 661
========== ========= ========== ===========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>30
NOTES TO FINANCIAL STATEMENTS
INFECTECH, INC.
(A development stage enterprise)
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
These financial statements are those of a development stage company,
Infectech, Inc., that was incorporated in 1989 to develop diagnostic
tests for infectious diseases. A paraffin slide technology has been
developed that greatly reduces the time required to identify bacteria
and diagnose disease. This technology has been patented in the United
States, major European countries and Australia.
The company's operations have consisted primarily of incurring legal
costs to obtain patents in the United States and foreign countries and
conducting research and development activities.
Cash and Cash Equivalents:
The company considers highly liquid debt instruments purchased with
maturity dates of three months or less to be cash equivalents.
The company maintains deposits in savings, checking and transfer
accounts in one bank located in Hermitage, Pennsylvania. Deposits at
times may exceed federally insured amounts.
Equipment:
Equipment is stated at cost. Depreciation is computed on the straight-
line method.
Patent Costs:
Patent costs are stated net of amortization. Amortization is computed
on the straight-line method over a 17 year period. The company has
capitalized only legal fees related to patent rights acquired; all
other such costs have been expensed as incurred.
Research and Development Costs:
Research and development costs not directly reimbursable by others,
totalling $35,810 in 1992, were charged to expense when stock was
issued in exchange for patent rights. Research and development costs
of $92,004 in 1998, $60,697 in 1997 and $17,500 in 1996 were charged to
expense when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition
Substantially all revenues are recognized when finished products are
shipped or services have been rendered, with appropriate provision for
uncollectible accounts
Long-Lived Assets
In 1997, the Company adopted SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The
adoption of SFAS 121 had no impact on the Company's financial position
or on its results of operations.
In accordance with SFAS 121, long-lived assets held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an assets may not be
recoverable. For purposes of evaluating the recoverability of long-
lived assets, the recoverability test is performed using undiscounted
net cash flows estimated to be generated by those assets compared to
the carrying value of the asset.
NOTE B - LINE OF CREDIT
The company has a $10,500 line of credit, all of which was available at
December 31, 1998. The line of credit is collateralized by the personal
guarantee of a stockholder.
<PAGE>31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INFECTECH, INC.
(A development stage enterprise)
December 31, 1998 and 1997
NOTE C - LEASES WHERE COMPANY IS LESSEE
The company has a three year operating lease for laboratory space, with
a renewal option for an additional three years. Following is a summary
of future minimum lease payments as of the lease inception:
Year ending -
December 31, 1999 $ 3,602
NOTE D - INCOME TAXES
Following is a reconciliation between federal income taxes at statutory
rates and actual taxes based on income before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory taxes 35.0% (35.0%) (35.0%)
Effect of valuation reserve 35.0 35.0 35.0
------ ----- ------
.0% .0% .0%
======= ====== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are presented below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss $400,000 $215,000
Less valuation allowance (400,000) (215,000)
--------- ---------
NET DEFERRED TAX ASSETS $ 0 $ 0
</TABLE>
The company has no significant deferred tax liabilities.
At December 31, 1998, the company had unused net operating tax loss
carryovers of approximately $1,179,000 available for federal income tax
purposes for offset against future taxable income, $547,000 expiring in
2013, $325,000 expiring in 2012, $220,000 expiring in 2011, $43,800
expiring in 2010, $14,000 expiring in 2009, $8,000 expiring in 2008 and
the balance expiring in the years 2004 through 2008. The utilization
of the loss carryovers may be limited to a reduced annual amount after
an ownership change as defined by Section 382 of the Internal Revenue
Code.
NOTE E - STOCK OPTIONS
The company adopted a stock option plan, which provides for the
issuance of up to 1,182,750 shares of common stock to key employees and
directors and other individuals involved in the company. During 1998,
the plan was amended to increase the number of shares by 1,250,000.
A summary of the company's option plans at December 31, 1998 and
December 31, 1997 and changes during the periods ending on those dates
are shown below:
<PAGE>32
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
---------------- ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 729,184 $4.50 225,096 $1.29
Granted 215,837 .79 504,088 2.03
Options exercised (57,213) .01 0 .00
------- ----- ------- ----
Outstanding at end of period 887,808 1.67 729,184 1.80
======== ==== ======= ====
Options exercisable at end of period 435,066 $1.41 53,492 $ .30
======== ===== ======= =====
</TABLE>
All shares issued before 1998 vest in equal installments over a three
year period on each anniversary date of the grant. The shares granted
in 1998 vest immediately. The terms of the options are generally for
10 years.
In addition, one consultant to the company was granted an option to
purchase $15,000 worth of stock at a price equal to one-half of the
price any stock is sold in an initial public offering.
Following is a summary on the status of options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICE NUMBER LIFE PRICE NUMBER PRICE
<S> <C> <C> <C> <C> <C>
$ .01 78,750 10 years $ .01 75,416 $.01
.02 1,650 10 years .00 0 .00
.20 60,000 10 years .20 20,000 .20
1.20 438,308 10 years 1.20 233,150 1.20
3.00 300,000 10 years 3.00 100,000 3.00
4.50 9,100 9 years 4.50 6,500 4.50
</TABLE>
The fair value of each option granted is estimated on the grant date
using the Black-Scholes model. The following assumptions were made in
estimating fair value:
Dividend yield 0
Risk-free interest rate 5%
Expected life 10 years
Expected volatility None
The Company applies APB Opinion 25 in accounting for its stock options.
Accordingly, no compensation cost has been recognized only to the
extent that the market value at grant date exceeded the option price.
The amount of corporation cost recognized for 1998 was $83,300. No
compensation cost was recognized for the plan in 1997. Had
compensation cost been determined on the basis of fair value pursuant
to FASB Statement No. 123, net loss would have been increased as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net loss -
As reported $(546,876) $(346,225) $(220,922)
========= ========= =========
Per Share $(.09) $(.06) $(.04)
========= ========= =========
Pro forma $(587,931) $(449,891) $(324,399)
========= ========= =========
Pro forma Per Share $(.10) $(.08) $(.06)
========= ========= =========
</TABLE>
<PAGE>33
The independent contractors were granted options to purchase 57,459 and
60,146 shares from $.01 to $1.20 per share in exchange for services
rendered during 1998 and 1997, respectively. The company recognized an
expense of $34,667 for 1998 and $67,974 for 1997 equal to the value of
this option.
In addition, one independent contractor was granted 50,000 common
shares in exchange for services in 1998. The company recognized a
$60,000 expense for the value of the shares issued during 1998.
NOTE F - CONTROLLING INTEREST AND RELATED PARTY TRANSACTIONS
Controlling Interest:
Two individuals own 63.0% and 66.6% of the company's outstanding common
stock at December 31, 1998 and 1997, respectively.
Related Party Transactions:
Prior to July 1995, all of the company's expenditures were funded by a
loan from one of the controlling stockholders. The company also
utilizes office space provided by this stockholder at no charge to the
company.
The same stockholder advanced the company $26,776 in 1993, $36,649 in
1994, $19,564 in 1995 and $36,189 in 1996. Advances from inception of
the company to December 31, 1992 totaled $39,387.
Under an agreement with the company, $64,833 of the amounts loaned were
converted to common stock. At December 31, 1995, $56,811 was payable
to the stockholder.
One stockholder provided legal services in exchange for common stock.
This stockholder also provided legal services during 1992 in exchange
for a $12,000 note payable.
During 1996, $105,000 in loans from stockholders were converted to
87,500 shares of common stock.
The Company has entered into a two-year consulting agreement with a
stockholder and director of the company to provide consulting and
advisory services to the company in consideration for cash payments
equal to 5% of the gross proceeds to the company from a variety of
financial transactions in which they may engage. During 1998, 1997 and
1996, $32,000, $31,347 and $18,360, respectively, was expensed under
this agreement.
NOTE G - NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES
During the year ended December 31, 1992, the company issued common
stock in exchange for $13,000 in legal fees incurred and $35,810 in
research and development costs and $2,100 in organization costs. The
company also incurred $12,000 in long-term debt in exchange for legal
services. The company also converted $20,000 in long-term debt to
stock during 1992.
A stockholder paid company expenses or loaned amounts to the company on
a long-term basis as follows:
Year Amount
----- -------
1989 $ 2,522
1990 4,946
1991 8,914
1992 23,005
1993 26,776
1994 36,649
1995 19,564
1996 35,813
$158,189
========
During the year ended December 31, 1995, $44,833 in noninterest bearing
long-term debt was transferred to paid-in capital in exchange for a
transfer of stock among four stockholders.
<PAGE>34
During the year ended December 31, 1995, the Company issued common
stock to an individual in exchange for a $6,000 subscription
receivable, which was repaid during 1996.
During the year ended December 31, 1996, the company issued common
stock to two individuals in exchange for $105,000 in long-term debt.
NOTE H - STOCK SPLITS AND STOCK OFFERING
On November 19, 1996, the stockholders amended the articles of
incorporation increasing the authorized shares from 120,000 to
20,000,000. In addition, a 50 to 1 stock split was declared increasing
the outstanding shares to 5,117,250.
On June 1, 1995, the stockholders amended the articles of incorporation
increasing the authorized shares from 3,000 to 120,000 shares. In
addition, a 40 to 1 stock split was declared increasing the outstanding
shares to 120,000. At this time, the stockholders contributed 40,000
shares of stock back to the company. All per share amounts and number
of shares have been restated to reflect the stock splits.
On November 27, 1996, the company offered for sale 1,000,000 shares of
common stock under a private placement. As of December 31, 1998,
903,450 shares have been issued.
NOTE I - TERMINATION OF MERGER AGREEMENT
On April 7, 1998, the company signed a merger agreement with Regal One
Corporation, an inactive public company located in Las Vegas, Nevada.
The agreement called for each share of Infectech, Inc. to be exchanged
for 3.8483 shares of Regal One Corporation subject to adjustment for
stock options and any additional shares issued under the private
placement. After the merger, Infectech, Inc. stockholders would have
owned approximately 85% of the combined company. The agreement was
terminated in 1998. The company incurred approximately $56,000 in
expenses in connection with this failed merger which were charged to
operations during 1998.
<PAGE>35
Infectech, Inc.
Balance Sheet - (Unaudited)
As of September 30, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents 81,466
Due from Employee 291
-------
TOTAL CURRENT ASSETS 81,757
EQUIPMENT
Medical equipment 45,367
Office equipment 600
Less aaccumulated depreciation (20,872)
--------
NET EQUIPMENT 25,095
OTHER ASSETS
Patent costs 652,188
Less accumulated amortization (110,438)
-------
Net Patent Costs 541,750
-------
Organization costs 2,841
Less accumulated amortization (2,841)
-------
Net Organization Costs 0
Trademarks 8,343
Security deposits 1,430
-------
TOTAL OTHER ASSETS 551,523
-------
TOTAL ASSETS 658,375
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable 28,413
Accrued expenses 5,380
-------
TOTAL CURRENT LIABILITIES 33,793
LONG-TERM DEBT 0
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - $.02 par value
Authorized 20,000,000 shares issued and
outstanding 6,480,784 129,616
Additional paid-in capital 1,981,208
Deficit accumulated during the development
stage (1,486,242)
---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 624,582
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) 658,375
=========
<PAGE>36
Infectech, Inc.
Statement of Operations
(Unaudited)
For the Nine Months Ended September 30, 1999 and
the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
For the For the
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
<S> <C> <C>
OPERATING INCOME
Sales & Royalties $ 7,290.00 $0.00
OPERATING EXPENSES:
Research and development 14,363.00 42,504.00
Wages 7,250.00 11,027.00
Telephone 1,656.00 1,021.00
Office expense 919.00 2,070.00
Insurance 0.00 266.00
Legal & accounting 500.00 12,000.00
Travel 77.00 4,299.00
Payroll Taxes 617.00 819.00
State & local taxes 0.00 1,374.00
Amortization 9,470.00 11,933.00
Depreciation 1,686.00 1,648.00
Rent 6,293.00 8,304.00
Consulting & professional fees 0.00 12,398.00
Public relations 3,378.00 0.00
Royalties 1,822.00 0.00
Misc. operating expenses 6,211.00 1,801.00
---------- ------------
TOTAL OPERATING EXPENSES 54,242.00 111,464.00
----------- ------------
LOSS FROM OPERATIONS (46,952.00) (111,464.00)
OTHER INCOME (DEDUCTION)
Interest earned 1,144.00 3,022.00
---------- -----------
TOTAL OTHER INCOME (DEDUCTION) 1,144.00 3,022.00
---------- -----------
NET LOSS (45,808.00) (108,442.00)
========== ===========
Net Loss Per Common Share (.0071) (.0170)
</TABLE>
<PAGE>37
Infectech, Inc.
Statement of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 1999 and
the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
For the For the
Nine Months Nine Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($237,866) ($228,987)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 27,995 23,051
Depreciation 4,794 4,319
Increase (decrease) in payables (4,593) 2,077
Increase (decrease) in accrued expenses 2,390 1,141
Expenses exchanged for capital 0 0
-------- --------
NET CASH USED IN OPERATING ACTIVITIES ($207,280) ($198,399)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption (Purchase) of certificate of deposit 0 200,000
Purchase of equipment (2,450) (4,505)
Patent costs (55,997) (179,554)
Increase (decrease) in deposits (51) (82)
Deferred merger & offering costs 0 (76,070)
------- ------
NET CASHED USED IN INVESTING ACTIVITIES ($58,498) (60,211)
CASH FLOWS FROM FINANCING ACTIVITIES
Legal fees in connection with issuance of stock (3,285) 0
Proceeds from issuance of long-term debt 0 0
Proceeds from issuance of common stock 133,234 270,074
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES $129,949 $270,074
NET INCREASE IN CASH AND CASH EQUIVALENTS ($135,829) 11,464
CASH AND CASH EQUIVALENTS
Beginning of Period $217,295 $295,489
End of Period $ 81,466 $306,953
</TABLE>
<PAGE>7
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
These financial statements are those of a development stage company,
Infectech, Inc., that was incorporated in 1989 to develop diagnostic
tests for infectious diseases. A paraffin slide technology has been
developed that greatly reduces the time required to identify bacteria
and diagnose disease. This technology has been patented in the United
States, major European countries and Australia.
The Company's operations have consisted primarily of incurring legal
costs to obtain patents in the United States and foreign countries and
conducting research and development activities.
Cash and Cash Equivalents:
The Company considers highly liquid debt instruments purchased with
maturity dates of three months or less to be cash equivalents.
The Company maintains deposits in savings, checking and transfer
accounts in one bank located in Hermitage, Pennsylvania. Deposits at
times may exceed federally insured amounts.
Equipment:
Equipment is stated at cost. Depreciation is computed on the straight-
line method.
Patent Costs:
Patent costs are stated net of amortization. Amortization is computed
on the straight-line method over a 17 year period. The company has
capitalized only legal fees related to patent rights acquired; all
other such costs have been expensed as incurred.
Research and Development Costs:
Research and development costs not directly reimbursable by others,
totaling $35,810 in 1992, were charged to expense when stock was issued
in exchange for patent rights. Research and development costs are
charged to expense when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B - LINE OF CREDIT
The Company has a $10,500 line of credit, all of which was available at
September 30, 1999. The line of credit is collateralized by the
personal guarantee of a stockholder.
<PAGE>39
PART III
ITEM 1. INDEX TO EXHIBITS
(2) Charter and by-laws
(3) Instruments defining the rights of security holders
(5) Voting Trust Agreement - Not Applicable
(6) Material Contracts
(7) Material Foreign Patents - Not Applicable
(12) Additional Exhibits
ITEM 2. DESCRIPTION OF EXHIBITS
(2.1) Articles of Incorporation incorporated by reference to
Form 10SB filed June 17, 1999
(2.1.1) Amendment to Articles of Incorporation dated July 4, 1995
incorporated by reference to Form 10SB filed June 17, 1999
(2.1.2) Amendment to Articles of Incorporation dated November 21,
1996 incorporated by reference to Form 10SB filed June 17,
1999
(2.2) Bylaws incorporated by reference to Form 10SB filed June 17,
1999
(3.1) Common Stock Certificate - to be filed by amendment
(3.2) Preferred Stock Certificate - to be filed by amendment
(6.1) License Agreement dated October 4, 1993, between the Company
and Erie Scientific Company incorporated by reference to
Form 10SB filed June 17, 1999
(6.2) Investment and Licensing Agreement dated June 11, 1998
between the Company and BioRemedial Technologies, Inc.
incorporated by reference to Form 10SB filed June 17, 1999
(6.3) Consulting Agreement dated July 8, 1998, between the Company
and Breakthru Technologies, L.L.C. incorporated by reference
to Form 10SB filed June 17, 1999
(6.4) Consulting Agreement dated September 24, 1998, between the
Company and Timothy Miles d/b/a/ Little Pond Enterprises
incorporated by reference to Form 10SB filed June 17, 1999
(6.5) Letter agreement together with Option Agreement and Research
Agreement exhibits dated August 19, 1998, between the Company
and Brigham and Women's Hospital incorporated by reference to
Form 10SB filed June 17, 1999
(6.6) Consulting Agreement dated September 15, 1998, between the
Company and Merrill Weber & Co., Inc. incorporated by
reference to Form 10SB filed June 17, 1999
(6.7) Letter Agreements dated April 14, 1997 and May 14, 1997
between the Company and NEN Life Science, Inc. incorporated
by reference to Form 10SB filed June 17, 1999
(6.8) Letter Agreement dated November 19, 1997, between the Company
and Starplex Scientific incorporated by reference to Form
10SB filed June 17, 1999
(6.9) Exclusive Licensing Agreement dated September 14, 1999
between the Company and BioRemedial Technologies, Inc.
(6.10) Consulting Agreemet dated September 13, 1999 between the
Company and Bridgeport Group, LLC
<PAGE>40
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFECTECH, INC.
Mitchell Felder, M.C.
Date: February 23, 2000 -------------------------------
- -
By: Mitchell Felder, President
EXCLUSIVE LICENSING AGREEMENT
This Exclusive Licensing Agreement ("Agreement") is made as of
this Fourteenth (14th) day of September, 1999, by and between:
BIOREMEDIAL TECHNOLOGIES, INC., a Pennsylvania corporation,
with its principal office located at 2700 Kirila Drive, Hermitage,
Mercer County, Pennsylvania ("BRT")
AND
INFECTECH, INC., a Delaware corporation, with its principal
office located at 87 Stambaugh Avenue, Suite Two, Sharon, Mercer
County, Pennsylvania ("IFEC").
RECITALS:
A. BRT is actively engaged in the business of providing
environmental bioremediation services for third parties.
B. IFEC is actively engaged in the development of certain
processes and intellectual property having applications in the medical,
biological, veterinary and bioremediation fields and is the owner of
certain intellectual property and patents relating to same, and IFEC
is the Assignee of a certain patent granted to Robert A. Ollar, PhD
and Sara J. Giordano, PhD by the U.S. Patent Office which patent is
useable or has applications in the process of environmental
bioremediation (the "IFEC IP").
C. BRT and IFEC believe that certain of the IFEC IP, patents
and applications may be of use in the business of BRT in its services
to third parties and wish to provide for the licensing of the IFEC IP
to BRT for use and application in environmental bioremediation and for
the further research and development of the IFEC IP by IFEC.
D. The parties had engaged in prior arrangements and had an
agreement by which BRT would invest $630,000 into IFEC for exploring
the use of the IFEC IP and patents in environmental bioremediation
before May 1, 2001, and IFEC would raise $1,200,000 pursuant to a
private placement memorandum offered to investors in 1998, and which
arrangement the parties memorialized in a certain Investment and
Licensing Agreement dated June 11, 1998 ("ILA").
E. Certain conditions precedent of the ILA were not met and
are impossible to be fulfilled, however the parties mutually desire to
enter into this Agreement setting forth their respective rights,
responsibilities and licensing arrangements of the IFEC IP.
F. The parties hereto desire that the IFEC IP may be licensed
by IFEC to BRT on an exclusive basis as provided herein both
domestically and worldwide, and BRT agrees to pay royalties to IFEC for
license of same, all as provided in this Agreement.
WITNESSETH:
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises and covenants set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do agree and hereby agree as follows:
1. Incorporation of Recitals. The Recitals set forth above are
hereby expressly and totally incorporated herein by reference as if set
forth in full.
2. Commencement Date and Term. This Agreement shall be
effective as of the date of execution ("Commencement Date") and be for
a term of Ten (10) years, unless terminated earlier or extended as
provided herein.
3. License to BRT. Beginning on the Commencement Date, and for
a period of Ten (10) years thereafter IFEC hereby grants to BRT
exclusive domestic and worldwide license rights to the following:
<PAGE>42
(a) the application of IFEC IP as listed in Schedule "A" attached
hereto which is incorporated herein by reference as if set
forth in full, which application shall be limited solely to
application and use of the IFEC IP in activities directly
involved in the field of environmental bioremediation.
(b) BRT hereby agrees that the IFEC IP shall not be used, owned,
licensed or sub-licensed by BRT for any other use or purpose
outside of the specific field of environmental bioremediation,
and BRT shall not use the IFEC IP for any other purposes or
uses, including, without limitation, medical, clinical,
veterinary or any other use foreseen or unforeseen. BRT shall
have no licensee claim upon the IFEC IP for any use other than
that of environmental bioremediation without the express
written permission of IFEC.
(c) The exclusive worldwide license rights to the IFEC IP granted
to BRT hereunder shall cease, at the sole option and discretion
of IFEC, if BRT has not, within a period of three (3) years
from the date of this Agreement obtained a sub-license to
utilize the IFEC IP outside of the United States of America.
In any event, the exclusive domestic license rights of BRT
shall continue for a period of ten (10) years as provided in
this Agreement.
(d) Notwithstanding the license granted herein, IFEC retains
the rights to pursue all research and development concerning
the IFEC IP including, without limitation, obtaining research
grants, performing testing and assessments and related uses in
furtherance of the same. IFEC retains the unrestricted right
to utilize, develop, employ or apply the IFEC IP outside of the
field of environmental bioremediation. With respect to
applications of the IFEC IP by IFEC in the field of
environmental bioremediation, IFEC agrees that it will consult
with BRT on a case-by-case basis, however IFEC shall not
compete with BRT in environmental bioremediation. As used
herein, "bioremediation" means the process of remediation and
cleaning up toxic and non-toxic sites and residue, however
shall not include the scientific surveying, assaying, or
analyses of the procedures and methodologies used in
implementing the same.
4. Termination of Exclusivity. At the sole discretion of IFEC,
the license granted hereunder shall cease to be exclusive and shall
become non-exclusive upon the occurrence of any of the following:
(a) BRT shall fail to attain the applicable Gross Sales Level,
as defined herein, in each of the following years during the term
hereof:
Year 1 Not Applicable
Year 2 $1,000,000
Year 3 $2,500,000
Year 4 $5,000,000
"Gross Sales Level" shall mean the gross revenues generated and
received on a cash accounting basis by BRT for projects, uses and
applications in which the IFEC IP is utilized. It shall not include
revenues derived by BRT from any projects, uses or applications in
which IFEC IP is not utilized to any substantial extent or revenues
accrued but not yet received. BRT agrees to use its best efforts to
generate revenues by projects, uses and applications in which the IFEC
IP is utilized.
5. Royalties to be Paid for License; Reports and Monthly
Certifications. During the term hereof, and in consideration of the
License set forth in Paragraph 3, BRT agrees to pay IFEC a royalty per
each project or use of the IFEC IP which shall be equal to Fifteen
percent (15%) of the gross revenues of each project, use or
application undertaken by BRT in which the IFEC IP is utilized.
The gross revenues for all projects, uses and applications of
BRT shall be made available to Dr. Giordano, or her successor (as
provided herein), with an indication made as to which utilized IFEC
IP. Dr. Giordano shall be provided with all information reasonably
requested in order to verify the indication as to whether IFEC IP was
utilized or not as to all projects and all information regarding the
details and supporting documentation of the revenues, projects, uses
<PAGE>43
and applications. Dr. Giordano shall make a written certification in
form and substance acceptable to IFEC, delivered on a monthly basis to
the parties by the 15th day of each month for the prior month's uses,
application and work of BRT, summarizing the information, validating
its accuracy and stating the amount of royalties due to IFEC.
Revenues derived from joint ventures or teaming agreements or
similar arrangements shall be presumed to be a sub-licensing
relationship and subject to the provisions of Paragraph 6 and the
royalties payable thereunder, as provided hereinafter, unless BRT
demonstrates that the relationship is otherwise, in that BRT performs
substantial and actual work in the project or application.
6. Royalties to be Paid For Sub-Licenses. Subject to the
provisions and conditions set forth elsewhere herein, including the
prior consent of IFEC, the parties agree that the royalty BRT shall pay
to IFEC for each sub-license shall be 50% of the revenues received by
BRT for each permitted sub-license. BRT shall provide to Dr. Giordano
the same information and access to all records, reports and data as
that set forth in Paragraph 5 and otherwise in this Agreement. Dr.
Giordano shall make written certification for all sub-licenses and
royalties in similar form and substance as the certification required
in Paragraph 5.
7. Responsibilities of Dr. Sara J. Giodano; Successors. The
parties hereto recognize the integral involvement of Sara J. Giordano,
PhD, the co-author of certain of the IFEC IP, in the implementation of
the use of the IFEC IP and the administration of this Agreement. Dr.
Giordano agrees to use "best efforts" to share all pertinent scientific
matters involving the IFEC IP and/or Compound C with IFEC.
In the event Dr. Giordano is no longer able to carry out her
role in the administration of this Agreement, then the parties agree
that her responsibilities under this Agreement shall be performed by
and all rights to examination of records and otherwise provided herein,
shall succeed to Robert A. Ollar, PhD, the other co-author of certain
of the IFEC IP, or Dr. Ollar's designee. Such successor(s) shall not
be employees of BRT but the designated person(s) or entities employed
in order to obtain and verify the information and make the
certifications required of Dr. Giordano hereunder.
8. Early Termination: BRT Sale and Other. Further, IFEC shall
have the right to terminate this Agreement upon any of the following:
(a) Either the assets or stock of BRT are acquired in whole, a
controlling interest or a greater than 20% interest of BRT is
acquired by any third-party, person or entity not a party to
this Agreement or by a person or entity who is not currently a
shareholder of BRT.
(b) BRT attempts to assign, sub-license, lease or otherwise
transfer its license set forth in this Agreement, without the
express prior written permission of IFEC, however the refusal
of IFEC to grant its permission to a bona fide prospect for
sub-licensing by BRT shall not operate to prejudice BRT under
the provisions of 3 (c) above.
(c) BRT shall make an assignment for the benefit of its
creditors, or shall become the subject of insolvency or
conservator proceedings.
(d) BRT shall become disqualified to do business in the
Commonwealth of Pennsylvania or any other state in which it had
been formerly qualified to do business, and qualification for
reinstatement is not being diligently prosecuted and
reinstatement is not granted within six (6) months.
(e) A material adverse change in the financial condition of
BRT, which shall be determined in the sole and absolute
discretion of IFEC, subject, however, to Generally Accepted
Accounting Principles (GAAP) with respect to financial changes.
(f) BRT shall be in default of any provision of this Agreement
and shall not have cured the same within fifteen (15) business
days after written notice thereof.
<PAGE>44
9. Revocation of Exclusivity. IFEC shall have the right, in
addition to the termination provisions set forth herein and any other
remedies available at law or in equity, to revoke the exclusivity of
the license granted herein and to declare the license of BRT to be non-
exclusive, but otherwise subject to the terms of this Agreement upon
the occurrence of any event set forth in Paragraphs 4 or 6.
10. No Representations or Warranties. Except for the warranty
of title to the patents issued by the United States Patent Office,
IFEC makes no other representations or warranties, expressed or
implied, with respect to the IFEC IP, including without limitation, the
warranties of merchantability and fitness for a particular purpose.
11. Indemnification. BRT agrees to indemnify and hold
harmless IFEC, its officers, directors, agents and employees from and
against all liability, loss, cost, damages and expenses (including
attorneys' fees) arising out of claims or suits based upon BRT's
negligence or breach of representations arising from the proper or
improper use, employment or application of the IFEC IP by any person or
entity. IFEC agrees that it will assist BRT , at the expense of BRT,
in BRT's defense of any claims made against BRT in which the IFEC IP is
utilized.
12. Confidentiality; Remedies for Breach. Except as otherwise
agreed in writing, neither party shall appropriate, use or disclose,
directly or indirectly, for its own benefit or otherwise, any
information, materials, trade secrets, documents, correspondence, or
other tangible or intangible property of the other party, to which it
shall have obtained access hereunder or in contemplation of this
Agreement, or which shall otherwise in any way shall relate to the IFEC
IP or the subject matter of this Agreement, which has not been publicly
disclosed prior thereto. Any of the aforesaid which is or comes into
the possession of BRT shall be held IN TRUST for IFEC and remain the
sole and exclusive property of IFEC, subject to the rights of License
by BRT as provided herein.
The provisions of this Paragraph shall survive the termination
of this Agreement. FURTHER, the parties agree that there do not exist
adequate remedies at law for a violation of this Paragraph and
therefore, in addition to monetary and other damages, which may be
recovered for a breach hereof that IFEC shall be entitled to and may
obtain injunctive and other equitable and extraordinary relief and
remedies for any such breach.
13. Representations and Warranties. The parties hereto each
represent and warrant respectively as follows:
(a) Each is a corporation duly-organized, validly existing and
in good standing in its state of incorporation, the
Commonwealth of Pennsylvania and in all jurisdictions in which
the ownership of its properties or the nature of its business
makes such qualification necessary.
(b) Each has the requisite corporate power and authority to
conduct its business as presently conducted and to execute,
deliver and perform this Agreement and the transactions
contemplated hereby.
(c) This Agreement has been duly executed by the proper
officers of each party who are incumbent in their respective
positions and fully able to bind the party for the purposes
herein contained. Further on the Commencement Date this
Agreement shall constitute a legal, valid and binding
obligation of the party enforceable in accordance with its
terms.
(d) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby do not and will not:
(1) violate the party's charter or by-laws;
(2) breach or result in a default under (or an event
which, with the giving of notice or passage of time,
or both, would constitute a default hereunder),
require any consent, or give to others any rights of
termination, acceleration, suspension, revocation,
cancellation with regard to this Agreement; or
<PAGE>45
(3) breach or otherwise violate any Governmental Rule
or Governmental Order.
(e) There is no litigation threatened or pending which relates
to this Agreement or to the to the ability of the respective parties to
perform hereunder.
14. No Joint Venture. The parties hereto acknowledge that
nothing set forth in this Agreement nor the transactions contemplated
herein shall constitute a joint venture, partnership, agency or any
relationship other than BRT as an investor and licensee and IFEC as a
licensor entitled to royalty payments as provided hereunder.
15. Notices. All notices, requests, demands and other
communications required to be made under the terms of this Agreement
shall be made in writing and delivered personally, or three (3) days
after deposit with the United States Postal Service if sent by
certified or registered mail, or a recognized overnight or courier
provider, and shall be deemed given when delivered to the other, if
delivered personally, or three (3) days after deposit with the United
States Postal Service or overnight or courier provider. Such notices
shall be delivered as follows (or to such other address as a party may
have specified by notice given to the other pursuant to this provision:
If to BRT:
Donald F. Perry
CEO and President
Bioremedial Technologies, Inc.
2700 Kirila Drive
Hermitage, PA 16148
If to IFEC:
Mitchell S. Felder, M.D.
CEO and President
Suite Two, 87 Stambaugh Avenue
Sharon, PA 16146
With a copy to:
William J. Moder, III, Esquire
2500 Highland Road, Suite 104
Kerrwood Place, P.O. Box 1071
Hermitage, PA 16148
16. Maintenance and Examination of Books and Records. BRT
shall maintain its books and records on a regular basis with current
and complete information to clearly and accurately reflect its revenues
per project and consolidated information. The books and records of BRT
shall be preserved for a period of not less than three (3) years after
the close of BRT's fiscal year to which they relate.
BRT's books and records shall be open to inspection and
verification by IFEC, Dr. Giordano or any of its representatives at all
reasonable times. IFEC, its accountants Hill, Barth & King, or IFEC's
designees shall be entitled at any time to have BRT's books and records
relating to the licensing and royalties examined or audited and BRT
shall cooperate promptly and fully with the party or parties making any
examination or audit on behalf of IFEC. Should any examination or
audit of BRT's records be necessitated by BRT's failure to submit
information or to maintain the books and records as required by this
Agreement, then BRT shall be liable for any such costs thereof. Should
the audit not reveal any irregularities, misstatements or non-
conformity in such books and records with GAAP and/or the information
required under this Agreement, then IFEC shall be liable for the costs
thereof.
"Books and records" shall include, without limitation,
business plans, marketing strategies and studies, sales plans and
strategies, reports, and other information and data, including
projected information and results, with no duty on the part of BRT to
provide any such documents if they never existed, unless required by
this Agreement.
17. Counterparts. This Agreement may be executed in one or
more counterparts as the parties shall deem desirable, each of which
shall be deemed an original, but all of which shall constitute the same
instrument, however, in any action to enforce or with regard to this
Agreement, it shall not be necessary to produce all such counterparts.
<PAGE>46
18. Draftsmanship. This Agreement has been drafted by IFEC for
the convenience of the parties hereto, and such fact shall be
irrelevant in the construction and interpretation of the same; nor
shall any inference or presumption be made in favor of or against any
party hereto based upon the identity of the draftsman hereof.
19. Headnotes. The headnotes appearing at the beginning of
each paragraph are for the convenience of reference only and shall not
be construed to limit or otherwise affect the provisions set forth
therein.
20. Telefacsimile Execution. The parties agree that this
Agreement shall be fully binding upon the execution of same by
counterparts and/or facsimile and shall be effective when fully
executed by same, however all such counterparts and facsimiles shall
constitute one and the same instrument, nor shall it be necessary for
any party to produce all such counterparts in any action or proceeding
regarding the Agreement or the enforcement thereof.
21. Integration; Modifications to be in Writing. This
Agreement represents the entire agreement between the parties and there
are no other agreements, understandings or writings between them except
as set forth herein. This Agreement supersedes and replaces the ILA.
This Agreement may be amended or modified only in writing and signed by
the parties hereto.
22. Successors and Assigns. This Agreement shall bind the
parties hereto and their respective successors and assigns, however all
references herein to "assigns" shall mean only assigns permitted under
the terms of this Agreement.
23. Severability. Should any term or provision of this
Agreement be declared invalid or unenforceable in whole or in part by a
court of competent jurisdiction, then this Agreement shall be construed
and interpreted as if said term or provision were not included herein,
however all other terms and provisions hereof shall remain valid and
enforceable and the application of such invalid or unenforceable terms
and provisions to parties unaffected by such determination to the
fullest extent permitted by law.
24. Waiver. The waiver by either party to insist upon strict
compliance with this Agreement or to exercise any right or remedy
hereunder shall not constitute a waiver of the right of said party to
insist upon strict compliance with this Agreement or to exercise any
rights or remedies provided herein at any other time or under the same
or similar circumstances.
25. Survival of Certain Provisions. The applicability and
enforcement of this Agreement shall survive the termination of the
same when the sense so requires, and specifically the provisions of
Paragraphs 11, 12, 16, 18, 19, 23 and 30 shall survive and be
enforceable subsequent to the termination or early termination of this
Agreement.
26. Publicity and Disclosure. IFEC and BRT hereby acknowledge
that IFEC securities are currently traded publicly and that the company
is required to make certain reports, disclosures and public statements
required by law and regulations applicable to such companies. BRT
agrees to co-operate and use its best efforts in assisting IFEC upon
request in making such public announcements and providing such
information required by reports and filings or as desired by IFEC.
IFEC similarly agrees on a best efforts basis to provide information to
BRT which BRT is required to provide by law or regulation to
governmental and quasi-governmental entities regarding BRT or as BRT
requests. The mutual co-operation contemplated hereby shall be prompt
and complete, and on a best efforts basis. Neither party shall be
required to disclose information which would be "inside information" or
other information or data which is restricted or prohibited by law or
regulation.
27. Monthly Status Meetings. In order to maintain current and
strategic information between the parties and to co-ordinate efforts
for the mutual success of the parties hereunder, the parties agree that
they will meet on a monthly basis, or more often, in order to discuss
the status of the companies and the issues relating to this Agreement.
Such meetings shall include representatives of BRT, IFEC and also Dr.
Giordano or her successor.
<PAGE>47
28. Investment by BRT. BRT may, but is not required to,
provide or arrange for an investment in the amount of up to Six
Hundred Thirty Thousand Dollars ($630,000.00) into IFEC, in such
amounts and at such intervals as BRT deems appropriate SUBJECT TO the
terms and provisions of any private placement offering in effect from
time to time (including provisions relating to minimum investments)
which offering is duly-registered under applicable securities laws and
regulations with the Securities and Exchange Commission and other
regulatory bodies ("Investment"). The Investment shall be placed into
a separate escrow account administered by the attorney for IFEC
("Escrow Account"). BRT shall have until May 1, 2001 to make or
arrange the Investment.
Funds in the Escrow Account shall be utilized solely for the
research and development, protection of, or costs directly related to
environmental bioremediation. The parties agree that approximately 50%
of the Escrow Account will be utilized for research and development of
intellectual property, and the remaining approximately 50% will be
utilized to obtain or maintain patent protection of the same. Monies
in the Escrow Account may be disbursed provided that BRT submits to
IFEC an itemization of uses of the funds and the purposes for which the
same are to be applied, the payees to whom payments are to be made, and
the prior written consent of IFEC , which consent shall not
unreasonably be withheld.
29. IFEC Stock Options to BRT. As additional consideration of
this Agreement, and provided further that this Agreement is still in
force and effect at the time, upon the following condition precedent
IFEC agrees to grant to BRT Seventy-One Thousand Four Hundred Sixty-Six
(71,466) stock options at a price of One Cent ($.01) per share to
purchase common stock of Infectech Inc., which shares may be restricted
under securities laws:
The options agreed to hereunder shall be granted upon request
of BRT at any time after the publicly-traded price of Infectech, Inc.
common stock is Ten Dollars ($10.00) or greater for thirty (30)
consecutive calendar days. The options shall be exercisable on or
before the Tenth (10th) anniversary of the Commencement Date.
30. Governing Law; Jurisdiction and Venue. This Agreement
shall be construed and interpreted in all respects under the statutes
and case authority of the Commonwealth of Pennsylvania. Should a
dispute arise governing this Agreement or the enforcement thereof, then
the parties agree that jurisdiction and venue for any such action or
proceeding shall lie in the Court of Common Pleas of Mercer County,
Pennsylvania, or the United States District Court for the Western
District of Pennsylvania, the principles of conflicts of law
notwithstanding.
IN WITNESS WHEREOF, and intending to be legally bound in accord
with the Uniform Written Obligations Act (33 P.S sec 1 et seq), the
parties hereto have set their respective hands and seals the date first
above written.
WITNESS BIOREMEDIAL TECHNOLOGIES, INC.
/s/ William J. Moder, III BY: /s/ Donald F. Perry
Donald F. Perry, President & CEO
Date Signed:
ATTEST: INFECTECH, INC.
/s/ M. Felder, MD BY: /s/ Robert A. Ollar, PhD
Secretary Robert A. Ollar, Ph.D.,
Chairman of the Board
Date Signed:
Consulting and Advisory Agreement
THIS CONSULTING AND ADVISORY AGREEMENT is dated this
13th day of September, 1999, between INFECTECH, INC.
("Company"), and Bridgeport Group, LLC, a limited liability
company organized and existing under the laws of the State of
Arkansas, with an office located in 4401 Westover Place,
Washington, D.C. 20016 (''Consultant'').
In consideration of the mutual agreements contained in
this document, the parties, intending to be legally bound,
agree as follows:
RECITALS:
A. Consultant is a public relations and business
advisory company which specializes in the
public relations and financial consulting
industry; and
B. Company is a publicly traded corporation which is
engaged in approaching the public and private
markets for equity investment to expand its
development and operating capabilities; and
C. Company also desires to publicize itself in order
to make its name and business better known in
the industry, and among its shareholders,
investors and the public and private equity
markets;
D. Company desires to enter into this Agreement with
Consultant to provide public relations and
financial consulting services on a non-
exclusive basis and to recognize the efforts
and assistance rendered by Consultant since
July 1999; and
E. Consultant is willing to accept Company as a
client upon the terms and conditions set forth
hereunder.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed:
1. Recitals Incorporated. The Recitals set forth in
Paragraphs A through E above are incorporated herein by
reference as though fully set forth herein.
2. Company's Disclosure. Company shall furnish from
time to time an Information Package to Consultant including
disclosure and filing materials, financial statements, business
plans, promotional materials, annual reports and press releases
("Information Package"). Consultant may rely on, and assume
the accuracy of each Information Package provided by Company as
well as all public filings made by Company.
The Company agrees to notify Consultant immediately of
any changes in the status or nature of its business, the
possibility of any litigation, regulatory action or any other
developments that may require further disclosure in the
offering documents or render any Information Package to be
materially false or misleading.
3. Services to be Provided by Consultant. Consultant
has provided since July 1, 1999, and agrees during the term of
this Agreement to provide various public relations and
financial consulting services in an effort to expose the
Company to the brokerage community, the general public, and the
public and private equity markets. Such services may include
organizing or assisting road shows and speaking engagements,
press and news releases, broker packages, mail outs and broker
and market maker follow-up.
<PAGE>49
(a) Consultant will assist the Company and Newcomb &
Company, its investment banking consultant, or other
investment consulting firm in the coordination of a
private and/or public offering of its securities
utilizing equity, warrant or debt instruments.
(b) Consultant will aid the investment consulting
firm for the Company in the identification of
potential investors for any proposed private or public
offering. Consultant makes no guarantees as to the
success or failure of his efforts in this matter.
(c) Consultant will aid the investment consulting
firm for the Company in the obtainment of investment
opportunities, grant providers and equity candidates,
as well as other possible business combinations or
financial transactions which infuse capital, revenues
or assets into the Company. Consultant agrees to co-
ordinate such activities through the investment
consulting firm for the Company or Company unless
otherwise agreed in writing.
(d) Consultant shall assist the investment consulting
firm in arranging the preparation of such packaging
and promotional materials as Consultant and the
Company shall deem necessary. The Company, its
investment consulting firm and counsel shall approve
all materials prior to completion.
(e) Consultant agrees to assist the investment
consulting firm for the Company in establishing
relationships between the Company and licensed
securities broker/dealers for the purpose of
completing the initial capitalization as a public
company.
(f) Consultant shall make itself available to render
advice to the Company concerning shareholders
relations, market strategy, broker relations and
additional capitalization.
(g) Company will utilize Consultant's interest and
expertise in this regard, and Consultant will accept
such assignments for the period of One (1) year from
the date hereof (the ''Consulting Term'') to undertake
such duties and to perform such services as reasonably
may be assigned to it by the Board of Directors of
Company or by its officers.
(h) Consultant shall be an independent contractor and
not an employee, joint venturer, partner or other
business relationship of Company and will determine
his own methods of operation in accomplishing such
tasks as may be assigned. Consultant will not be
entitled to receive any compensation or benefits other
than those expressly provided in this Agreement.
(i) Nothing herein shall be interpreted or construed
to prohibit Company from utilizing the services of
others for the same or similar services, including
other consultants, nor from soliciting or obtaining
equity investments in the Company on a commissioned or
non-commissioned basis or otherwise. The services of
others, including other consultants, shall not be of
no consequence to nor need be considered by Company
when evaluating the performance or compensation of
Consultant under this Agreement.
4. Time of Performance. Services to be performed
under this Agreement shall commence upon execution of this
Agreement and shall continue until October 1, 2000, unless
terminated hereunder or unless extended for an additional one
year period by the mutual written agreement of both parties.
This Agreement, and the compensation provided herein, shall be
retroactive to July 1, 1999.
5. Compensation and Expenses. In consideration of
the services to be performed by Consultant, Company agrees to
pay compensation to Consultant in the amount set forth below:
<PAGE>50
(a) In connection with Consultant providing its public
relations and financial consulting services,
Consultant shall receive Eight Hundred Thirty-Three
(833) shares of stock of the Company per month to be
paid to Consultant on a monthly basis or if not paid,
to be accrued and payable, retroactive from July 1,
1999 and continue during the term of this Agreement.
This Agreement expires on October 1, 2000, unless
terminated earlier as provided herein.
(b) The Company, in addition to the fee described
above shall also reimburse Consultant extraordinary
expenses necessary for the performance of duties
hereunder. These expenses typically include expenses
for travel, hotel accommodations, meals and
miscellaneous costs and expenses actually incurred by
Consultant in performing overnight travel for the
services described above. All such expenses, if any,
shall be subject to pre-approval by the Company.
(c) The Company may, in its sole and absolute
discretion, consider the contributions of Consultant
to the Company and through its compensation committee
or other appropriate forum, and award Consultant a
monetary or non-monetary bonus or other consideration
which it determines to be appropriate.
6. Representations.
A. The Company represents warrants and covenants the
following:
(a) The Company will cooperate fully with
Consultant in performing the work the Company
is required to perform in supplying
information to Consultant so that Consultant
may perform its services under this Agreement.
(b) The Company agrees to refrain from
engaging in any activity scheme or plan to
circumscribe, prevent or refuse to pay the
compensation discussed above in Paragraph 5.
In addition, Company agrees not to circumvent
this Agreement either directly or indirectly
nor will it interfere with, impair, delay or
cause Consultant to perform work not described
in this Agreement.
(c) The Company and each of its subsidiaries
is a corporation duly organized and existing
under the laws of its state or incorporation
and is in good standing with the jurisdiction
of its incorporation in each state where it is
required to be qualified to do business.
(d) The Company will disclose to Consultant
all material facts and circumstances which may
affect the decisions or course of conduct of
Consultant and the Company will be ultimately
responsible for the veracity of all
disseminated information.
B. Consultant represents, warrants and covenants the
following:
(a) Consultant will devote its energies and
resources toward the obtaining of investment
through a public or private offering or
otherwise as contemplated in this Agreement
and co-ordinate its efforts with the Company
and/or its investment banking firm, Newcomb &
Company.
(b) Consultant will disclose to Company
and/or its investment banking firm all
material facts and circumstances which may
affect its ability to perform its undertaking
herein.
(c) Consultant will cooperate in a prompt and
professional manner with the Company, its
investment banking firm, and their attorneys,
accountants and agents in the performance of
the under-taking under this Agreement.
<PAGE>51
7. Confidentiality. Consultant agrees that all
information received from the Company and its investment
banking firm shall be treated as confidential information and
Consultant shall not disclose, share or otherwise disseminate
or permit to be disseminated such information with any other
person or entity, except the S.E.C., and/or attorneys,
accountants and the investment banking firm for the Company,
without the prior express written consent of the Company.
8. Notices. Any notice from either party in the
other shall be deemed received on the date such notice is
personally delivered. Any notice sent by fax transmission
shall be deemed received by the other party on the next
business day after it has been transmitted. Any notice sent by
mail by either party to the other shall be deemed received on
the third business day after it has been deposited at a United
States Post Office. For purposes of delivering or sending
notice to the parties to this Agreement such notices shall be
delivered or sent as follows:
If notice is delivered to Consultant to:
Bridgeport Group, LLC
Attn: Webster W. Hubbell, Manager
4401 Westover Place
Washington, D.C. 20016
If notice is delivered to the Company to:
Infectech, Inc.
ATTN: Mitchell S. Felder, President & CEO
c/o 87 Stambaugh Avenue, Suite 2
Sharon, PA 16146
With a copy to its attorney:
William J. Moder, III, Esquire
2500 Highland Road, Suite 104
Kerrwood Place, P.O. Box 1071
Hermitage, PA 16148
9. Validity. If for any reason any provision of this
Agreement will be determined to be invalid or unenforceable,
the validity and effect of the other provisions will not be
affected.
10. Waiver of Breach. The waiver by Company or by
Consultant of a breach of any provision of this Agreement by
the other party will not operate, or be construed, as a waiver
of any other breach of such other party, or a subsequent breach
of the same provision nor shall the same be in any way
construed or interpreted to be a modification or amendment of
this Agreement.
11. Termination Circumstances. This Agreement will
terminate immediately upon the dissolution or change of control
of Consultant during the Consulting Term. Further, Company
shall have the right to terminate this Agreement, without
cause, by providing thirty (30) days prior written notice to
Consultant. Consultant shall have the right to terminate this
Agreement upon written notice to Company. Should Consultant or
Company elect to terminate this Agreement then such termination
shall terminate the obligations of Company and Consultant
hereunder and any right of Consultant to any sums payable
hereunder after the effective date of the termination.
12. Assignment. This Agreement will inure to the
benefit of, and be binding upon, Company, its successors and
assigns. This Agreement will be binding on Consultant, its
successors and assigns, however, this Agreement will not be
assignable by Consultant nor shall the obligations of
Consultant be delegated, without express written consent of the
Company.
13. Entire Agreement. This Agreement represents the
entire understanding of the parties and there are no other
outstanding agreements or, provisions, except as set forth
herein. This Agreement may not be amended except by a writing
signed by the parties hereto.
14. Applicable Law. The parties agree that this
Agreement will be construed and enforced pursuant to the laws
of the Commonwealth of Pennsylvania, and venue and jurisdiction
will lie within said Commonwealth, subject to the arbitration
provisions set forth herein, notwithstanding the principles of
conflicts of laws.
15. Construction. This Agreement shall be construed
as if both parties participated equally in its negotiation and
drafting. This Agreement shall not be construed against one
party over another party due to the identity of the draftsman.
<PAGE>52
16. No Representation, Warranty or Guarantee of
Success. Consultant provides no representation, warranty or
guarantee of success in the capitalization of the Company.
17. Arbitration. The parties hereby agree that any
dispute, claim or controversy arising out of the construction,
interpretation or application of this Agreement and its
provisions shall be decided by mandatory arbitration conducted
under the Rules of the American Arbitration Association to be
decided in Pittsburgh, Pennsylvania. Enforcement and
collection of any award made hereunder, however, shall be
available to the prevailing party in any court of competent
jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to
be legally bound in accord with the provisions of the Uniform
Written Obligations Act (33 P.S. sec 1, et seq) have set their
hands as of the day and year first above written.
WITNESS/ATTEST: CONSULTANT:
Bridgeport Group, LLC
/s/ Suzanna Hubbell By: /s/ W. Hubbell
Print Name/Title: Webster W. Hubbell, Manager
Suzanna Hubbell
WITNESS/ATTEST: COMPANY: Infectech, Inc.
/s/ William J. Moder, III By: /s/ Mitchell S. Felder, M.D.
Print Name/Title
William J. Moder, III Mitchell S. Felder, M.D.,
Title: President & CEO
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 81,466
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<CURRENT-ASSETS> 81,757
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<TOTAL-ASSETS> 658,375
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0
0
<OTHER-SE> 494,966
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<SALES> 7,290
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