<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ______________________ to _____________________.
Commission File Number 000-22129
EUROTECH, LTD.
-------------
(exact name of registrant as specified in its charter)
District of Columbia 33-0662435
- ----------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1216 16th Street, NW
Suite 200
Washington, DC 20036-3772
-------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 466-5591
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports, and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___________No____________ NOT APPLICABLE
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's shares of
common stock, as of the latest practicable date. 44,767,539 shares common stock,
$.00025 par value, as of May 5, 2000
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
INDEX TO FORM 10-Q
MARCH 31, 2000
Page Nos.
---------
PART I - FINANCIAL INFORMATION:
BALANCE SHEETS
At December 31, 1999 and March 31, 2000 F-1
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 F-2
For the Three Months Ended March 31, 2000
For the Period from Inception (May 26, 1995) to
March 31, 2000
STATEMENTS OF STOCKHOLDERS' EQUITY F-3 - F-14
For the Period from Inception (May 26, 1995) to
December 31, 1999
For the Three Months Ended March 31, 2000
STATEMENTS OF CASH FLOWS F-15
For the Three Months Ended March 31, 1999
For the Three Months Ended March 31, 2000
For the Period from Inception (May 26, 1995) to
March 31, 2000
NOTES TO FINANCIAL STATEMENTS F-16 - F-24
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
<PAGE>
<TABLE>
ITEM I - FINANCIAL STATEMENTS.
EUROTECH, LTD.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
------
<CAPTION>
At December 31, At March 31,
1999 2000
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 3,547,011 $ 7,101,294
Other current assets 200 200
------------ ------------
TOTAL CURRENT ASSETS 3,547,211 7,101,494
PROPERTY AND EQUIPMENT - net of accumulated
depreciation of $19,491 at March 31, 2000 24,750 22,701
OTHER ASSETS:
Technology rights - net of accumulated
amortization of $536,513 at March 31, 2000 7,913,559 7,511,175
Patent costs - net of accumulated
amortization of $5,666 at March 31, 2000 24,573 24,135
Other assets 9,751 12,751
------------ ------------
TOTAL ASSETS $11,519,844 $14,672,256
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 450,000 $ -
Accounts payable and accrued liabilities 3,139,204 808,658
Deferred revenue 225,000 225,000
Current portion of convertible debentures 2,660,000 5,660,000
------------ ------------
TOTAL CURRENT LIABILITIES 6,474,204 6,693,658
------------ ------------
CONVERTIBLE DEBENTURES 3,900,000 -
------------ ------------
TOTAL LIABILITIES 10,374,204 6,693,658
----------- -----------
COMMITMENTS AND OTHER MATTERS (Notes 3, 4, 5,
6, 7 and 8)
STOCKHOLDERS' EQUITY:
Preferred stock - $0.01 par value; 1,000,000
shares authorized; -0- shares issued and
outstanding - -
Common stock - $0.00025 par value; 50,000,000
shares authorized; 39,399,343 and 42,767,539
shares issued and outstanding at December
31, 1999 and March 31, 2000, respectively 9,850 10,692
Additional paid-in capital 31,873,696 41,607,080
Deficit accumulated during the development
stage (30,737,906) (33,639,174)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,145,640 7,978,598
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,519,844 $14,672,256
============ ============
See notes to financial statements.
F-1
</TABLE>
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Period
For the Three Months Ended from Inception
March 31, (May 26, 1995)
----------------------------- to March 31,
1999 2000 2000
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ - $ - $ 150,000
------------- ------------- -------------
OPERATING EXPENSES:
Research and development 293,773 1,418,042 5,947,177
Depreciation and amortization 2,565 404,871 563,227
Consulting fees 113,900 189,125 2,057,742
Compensatory element of stock
issuances pursuant to consulting
and other agreements 89,900 368,745 4,152,651
Other general and administrative
expenses 151,651 428,691 5,788,529
------------- ------------- -------------
TOTAL OPERATING EXPENSES 651,789 2,809,474 18,509,326
------------- ------------- -------------
OPERATING LOSS (651,789) (2,809,474) (18,359,326)
------------- ------------- -------------
OTHER EXPENSES:
Interest expense 167,514 91,794 1,546,951
Amortization of deferred and
unearned financing costs 131,726 - 13,276,619
Litigation settlement - - 456,278
------------- ------------- -------------
TOTAL OTHER EXPENSES 299,240 91,794 15,279,848
------------- ------------- -------------
NET LOSS $ (951,029) $ (2,901,268) $(33,639,174)
============= ============= =============
BASIC AND DILUTED LOSS PER COMMON
SHARE $ (.05) $ (.07)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 18,074,782 41,176,845
============= =============
See notes to financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of -------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ------------ -----------
(1)
<S> <C> <C> <C> <C>
Period Ended December 31, 1995:
- ------------------------------
Founder shares issued
($0.00025 per share) 05/26/95 4,380,800 $ 1,095 $ (1,095)
Issuance of stock for offering
consulting fees
($0.0625 per share) 08/31/95 440,000 110 27,390
Issuance of stock
($0.0625 and $0.25 per share) Various 4,080,000 1,020 523,980
Issuance of stock for license
($0.0625 per share) 08/31/95 600,000 150 37,350
Issuance of stock options for
offering legal and consulting fees - - 75,000
Offering expenses - - (105,398)
Net loss - - -
----------- ------------ -----------
Balance - December 31, 1995 9,500,800 $ 2,375 $ 557,227
=========== ============ ===========
<CAPTION>
Deficit
Accumulated
Unearned During the
Due from Financing Development
Stockholders Costs Stage Total
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Period Ended December 31, 1995:
- ------------------------------
Founder shares issued
($0.00025 per share) $ - $ - $ - $ -
Issuance of stock for offering
consulting fees - - - 27,500
($0.0625 per share)
Issuance of stock
($0.0625 and $0.25 per share) (3,000) - - 522,000
Issuance of stock for license
($0.0625 per share) - - - 37,500
Issuance of stock options for
offering legal and consulting
fees - - - 75,000
Offering expenses - - - (105,398)
Net loss - - (513,226) (513,226)
----------- ----------- ------------ -----------
Balance - December 31, 1995 $ (3,000) $ - $ (513,226) $ 43,376
=========== =========== ============ ===========
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-3
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of -------------------------- Paid-in
Transaction Shares Amount Capital
----------- ----------- ------------ -----------
(1)
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
- ----------------------------
Balance - December 31, 1995 9,500,000 $ 2,375 $ 557,227
Issuance of stock ($0.25 per share) Various 1,278,000 320 319,180
Exercise of stock options 01/18/96 600,000 150 -
Issuance of stock for consulting fees
($0.34375 per share) 03/22/96 160,000 40 54,960
Issuance of stock for consulting fees
($0.0625 per share) 05/15/96 2,628,000 657 163,593
Issuance of stock for consulting fees
($0.590625 per share) 06/19/96 1,500,000 375 885,563
Issuance of stock for consulting fees
($1.82 per share) 11/12/96 57,036 14 104,275
Issuance of stock pursuant to bridge
financing ($1.81325 per share) 12/96 1,500,000 375 2,719,500
Amortization of unearned financing costs - - -
Repayment by stockholders - - -
Net loss - - -
----------- ------------ -----------
Balance - December 31, 1996 17,223,836 $ 4,306 $4,804,298
=========== ============ ===========
<CAPTION>
Deficit
Accumulated
Unearned During the
Due from Financing Development
Stockholders Costs Stage Total
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
- ----------------------------
Balance - December 31, 1995 $ (3,000) $ - $ (513,226) $ 43,376
Issuance of stock ($0.25 per share) - - - 319,500
Exercise of stock options - - - 150
Issuance of stock for consulting fees
($0.34375 per share) - - - 55,000
Issuance of stock for consulting fees
($0.0625 per share) - - - 164,250
Issuance of stock for consulting fees
($0.590625 per share) - - - 885,938
Issuance of stock for consulting fees
($1.82 per share) - - - 104,289
Issuance of stock pursuant to bridge
financing ($1.81325 per share) - (2,719,875) - -
Amortization of unearned financing costs - 226,656 - 226,656
Repayment by stockholders 3,000 - - 3,000
Net loss - - (3,476,983) (3,476,983)
----------- ------------ ------------ -----------
Balance - December 31, 1996 $ - $(2,493,219) $(3,990,209) $(1,674,824)
=========== ============ ============ ===========
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-4
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of --------------------------- Paid-in
Transaction Shares Amount Capital
----------- ------------ ------------ ------------
(1)
<S> <C> <C> <C> <C>
Year Ended December 31, 1997:
- ----------------------------
Balance - December 31, 1996 17,223,836 $ 4,306 $ 4,804,298
Issuance of stock for consulting fees
($2.50 per share) 03/97 64,000 16 159,984
Issuance of stock for consulting fees
($5.45 per share) 06/97 39,000 9 212,540
Issuance of stock for consulting fees
($5.00 per share) 09/97 59,000 15 294,986
Issuance of stock pursuant to penalty
provision of bridge financing
($5.45 per share) 06/97 500,000 125 2,724,875
Value assigned to conversion feature of
Convertible Debentures 11/97 - - 1,337,143
Value assigned to issuance of 127,500
warrants in consideration for interest and
placement fees in connection with
Convertible Debentures 11/97 - - 284,480
Value assigned to issuance of 35,000 warrants
to shareholder for consulting services 11/97 - - 39,588
Value assigned to issuance of 364,000
warrants to shareholder as additional
consideration for financing activities 11/97 - - 862,680
Issuance of stock for consulting fees
($4.00 per share) 12/97 43,000 11 171,989
Accrual of stock issued January 1998 pursuant
to penalty provision of bridge financing
($2.00 per share) 12/97 1,000,000 250 1,999,750
Amortization of unearned financing costs - - -
Net loss - - -
------------ ------------ ------------
Balance - December 31, 1997 18,928,836 $ 4,732 $12,892,313
============ ============ ============
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-5
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Deficit
Accumulated
Unearned During the
Financing Development
Costs Stage Total
------------- ------------- ------------
<S> <C> <C> <C>
Year Ended December 31, 1997:
- ----------------------------
Balance - December 31, 1996 $ (2,493,219) $ (3,990,209) $(1,674,824)
Issuance of stock for consulting fees
($2.50 per share) - - 160,000
Issuance of stock for consulting fees
($5.45 per share) - - 212,549
Issuance of stock for consulting fees
($5.00 per share) - - 295,001
Issuance of stock pursuant to penalty
provision of bridge financing
($5.45 per share) (2,725,000) - -
Value assigned to conversion feature of
Convertible Debentures (1,337,143) - -
Value assigned to issuance of 127,500
warrants in consideration for interest and
placement fees in connection with
Convertible Debentures (284,480) - -
Value assigned to issuance of 35,000
warrants to shareholder for consulting
services (39,588) - -
Value assigned to issuance of 364,000
warrants to shareholder as additional
consideration for financing activities (862,680) - -
Issuance of stock for consulting fees
($4.00 per share) - - 172,000
Accrual of stock issued January 1998
pursuant to penalty provision of bridge
financing ($2.00 per share) (2,000,000) - -
Amortization of unearned financing costs 8,426,793 - 8,426,793
Net loss - (12,441,242) (12,441,242)
------------- ------------- ------------
Balance - December 31, 1997 $ (1,315,317) $(16,431,451) $(4,849,723)
============= ============= ============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of --------------------------- Paid-in
Transaction Shares Amount Capital
----------- ------------ ------------ ------------
(1)
<S> <C> <C> <C> <C>
Year Ended December 31, 1998:
- ----------------------------
Balance - December 31, 1997 18,928,836 $ 4,732 $12,892,313
Issuance of stock for consulting fees
($2.58 per share) 03/98 43,000 11 110,930
Issuance of stock for consulting fees
($0.85 per share) 06/98 143,000 35 215,895
Issuance of stock for consulting fees
($0.32 per share) 09/98 126,617 32 107,503
Issuance of stock for consulting fees 12/98 155,427 39 81,505
Issuance of stock pursuant to penalty
provision of bridge financing
($1.0625 per share) 04/98 500,000 125 531,124
Value assigned to conversion feature of
Convertible Debentures and 60,000
warrants issued as additional interest 02/98 - - 1,100,000
Value assigned to conversion feature of
Convertible Debentures and 125,000 warrants
issued as additional interest 07/98 - - 475,000
Cancellation of stock issued for consulting
fees 07/98 (375,000) (94) (93,656)
Issuance of stock for conversion of debenture
note payable ($0.32 per share) 09/98, 11/98 100,002 25 32,169
Amortization of unearned financing costs - - -
Net loss - - -
------------ ------------ ------------
Balance - December 31, 1998 19,621,882 $ 4,905 $15,452,783
============ ============ ============
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-7
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Deficit
Accumulated
Unearned During the
Financing Development
Costs Stage Total
------------- ------------- ------------
<S> <C> <C> <C>
Year Ended December 31, 1998:
- ----------------------------
Balance - December 31, 1997 $ (1,315,317) $(16,431,451) $(4,849,723)
Issuance of stock for consulting fees
($2.58 per share) - - 110,941
Issuance of stock for consulting fees
($0.85 per share) - - 215,930
Issuance of stock for consulting fees
($0.32 per share) - - 107,535
Issuance of stock for consulting fees - - 81,544
Issuance of stock pursuant to penalty
provision of bridge financing
($1.0625 per share) (531,249) - -
Value assigned to conversion feature of
Convertible Debentures and 60,000
warrants issued as additional interest (1,100,000) - -
Value assigned to conversion feature of
Convertible Debentures and 125,000
warrants issued as additional interest (475,000) - -
Cancellation of stock issued for consulting
fees - - (93,750)
Issuance of stock for conversion of
debenture note payable ($0.32 per share) - - 32,194
Amortization of unearned financing costs 3,374,066 - 3,374,066
Net loss - (7,814,143) (7,814,143)
------------- ------------- ------------
Balance - December 31, 1998 $ (47,500) $(24,245,594) $(8,835,406)
============= ============= ============
</TABLE>
See notes to financial statements.
F-8
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of --------------------------- Paid-in
Transaction Shares Amount Capital
----------- ------------ ------------ ------------
(1)
<S> <C> <C> <C> <C>
Year Ended December 31, 1999:
- ----------------------------
Balance - December 31, 1998 19,621,882 $ 4,905 $15,452,783
Issuance of stock for consulting fees
($0.77 per share) 03/99 78,613 20 62,381
Issuance of stock for consulting fees
($0.72 per share) 06/99 611,572 153 429,035
Issuance of stock for consulting fees
($0.98 per share) 09/99 496,002 124 520,116
Issuance of stock for conversion of debenture
note payable ($0.35 per share) 02/99 987,201 247 341,029
Issuance of stock for finder's fee
($1.94 per share) 12/99 29,518 7 46,302
Issuance of stock for finder's fee
($0.77 per share) 09/99 82,580 20 63,727
Issuance of stock for consulting fees
($2.04 per share) 12/99 100,374 25 190,769
Value assigned to conversion feature of
Convertible Debentures and 84,750 warrants
issued as additional interest 01/99 - - 175,425
Value assigned to additional consideration
for financing activities ($0.72 per share) 05/99 100,000 25 71,975
Issuance of stock ($0.25 per share) 06/99 1,000,000 250 474,750
Issuance of stock ($0.25 per share) 09/99 2,000,000 500 499,500
Issuance of stock ($0.38 per share) 12/99 3,035,000 759 1,179,241
Issuance of stock ($0.25 per share) 12/99 930,000 233 232,267
Issuance of stock ($0.50 per share) 12/99 240,000 60 119,940
Issuance of stock for settlement of
litigation ($2.51 per share) 11/99 181,784 45 456,233
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-9
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Deficit
Accumulated
Unearned During the
Financing Development
Costs Stage Total
------------- ------------- ------------
<S> <C> <C> <C>
Year Ended December 31, 1999:
- ----------------------------
Balance - December 31, 1998 $ (47,500) $(24,245,594) $(8,835,406)
Issuance of stock for consulting fees
($0.77 per share) - - 62,401
Issuance of stock for consulting fees
($0.72 per share) - - 429,188
Issuance of stock for consulting fees
($0.98 per share) - - 520,240
Issuance of stock for conversion of
debenture note payable ($0.35 per share) - - 341,276
Issuance of stock for finder's fee
($1.94 per share) - - 46,309
Issuance of stock for finder's fee
($0.77 per share) - - 63,747
Issuance of stock for consulting fees
($2.04 per share) - - 190,794
Value assigned to conversion feature of
Convertible Debentures and 84,750 warrants
issued as additional interest (175,425) - -
Value assigned to additional consideration
for financing activities ($0.72 per share) (72,000) - -
Issuance of stock ($0.25 per share) - - 475,000
Issuance of stock ($0.25 per share) - - 500,000
Issuance of stock ($0.38 per share) - - 1,180,000
Issuance of stock ($0.25 per share) - - 232,500
Issuance of stock ($0.50 per share) - - 120,000
Issuance of stock for settlement of
litigation ($2.51 per share) - - 456,278
</TABLE>
See notes to financial statements.
F-10
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of --------------------------- Paid-in
Transaction Shares Amount Capital
----------- ------------ ------------ ------------
(1)
<S> <C> <C> <C> <C>
Year Ended December 31, 1999: (Continued)
- ----------------------------
Issuance of stock for exercise of warrants
($1.50 per share) 11/99/ 12/99 200,000 $ 50 $ 299,950
Acquisition of 6,795,000 shares of Kurchatov
Research Holdings, Ltd. ($1.07 per share) 09/99 4,530,000 1,133 4,840,305
Acquisition from KRHL for Ekor Technology
interest ($1.069 per share) 11/99 2,000,000 500 2,137,000
Issuance of stock to retire debt of KRHL
assumed with purchase of Ekor Technology
interest ($1.06 per share) 11/99 1,000,000 250 1,068,500
Issuance of stock for exercise of warrants
($0.36 per share) 11/99 75,000 19 26,981
Issuance of stock for conversion of debenture
note payable, interest and penalties
($0.36 per share) 11/99 217,464 54 230,458
Issuance of stock in private sale
($1.59 per share) 12/99 1,882,353 471 2,831,529
Modification of warrants issued - - 123,500
Amortization of unearned financing costs - - -
Net loss - - -
------------ ------------ ------------
Balance - December 31, 1999 39,399,343 $ 9,850 $31,873,696
============ ============ ============
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-11
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Deficit
Accumulated
Unearned During the
Financing Development
Costs Stage Total
------------- ------------- ------------
<S> <C> <C> <C>
Year Ended December 31, 1999: (Continued)
- ----------------------------
Issuance of stock for exercise of warrants
($1.50 per share) $ - $ - $ 300,000
Acquisition of 6,795,000 shares of Kurchatov
Research Holdings, Ltd. ($1.07 per share) - - 4,841,438
Acquisition from KRHL for Ekor Technology
interest ($1.069 per share) - - 2,137,500
Issuance of stock to retire debt of KRHL
assumed with purchase of Ekor Technology
interest ($1.06 per share) - - 1,068,750
Issuance of stock for exercise of warrants
($0.36 per share) - - 27,000
Issuance of stock for conversion of
debenture note payable, interest and
penalties ($0.36 per share) - - 230,512
Issuance of stock in private sale
($1.59 per share) - - 2,832,000
Modification of warrants issued - - 123,500
Amortization of unearned financing costs 294,925 - 294,925
Net loss - (6,492,312) (6,492,312)
------------- ------------- ------------
Balance - December 31, 1999 $ - $(30,737,906) $ 1,145,640
============= ============= ============
</TABLE>
See notes to financial statements.
F-12
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Common Stock Additional
Date of --------------------------- Paid-in
Transaction Shares Amount Capital
----------- ------------ ------------ ------------
(1)
<S> <C> <C> <C> <C>
Three Months Ended March 31, 2000
- ---------------------------------
Balance - December 31, 1999 39,399,343 $ 9,850 $31,873,696
Issuance of stock for consulting fees
($4.99 per share) 03/00 73,880 18 368,727
Issuance of stock for conversion of note
payable and related interest
($0.28 per share) 01/00 200,000 50 56,343
Issuance of stock for interest on convertable
debentures ($1.56 per share) 01/00 289,655 74 451,064
Issuance of stock for exercise of warrants
($2.00 per share) 02/00 60,000 15 119,985
Issuance of stock for exercise of warrants
($1.06 per share) 02/00 125,000 31 132,469
Issuance of stock ($5.00 per share) 02/00 1,200,000 300 5,999,700
Stock issued in connection with acquired
technology 03/00 54,000 13 311,837
Issuance of stock and warrants to settle
penalties of convertible debentures
($2.00 per share) 03/00 300,000 75 1,119,925
Issuance of stock for conversion of
debentures and interest ($1.06 per share) 03/00 965,661 242 1,023,358
Issuance of stock for exercise of warrants
($1.50 per share) 03/00 100,000 24 149,976
Net loss - - -
------------ ------------ ------------
Balance - March 31, 2000 42,767,539 $ 10,692 $41,607,080
============ ============ ============
</TABLE>
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-13
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
<CAPTION>
Deficit
Accumulated
During the
Development
Stage Total
--------------- ---------------
<S> <C> <C>
Three Months Ended March 31, 2000
- ---------------------------------
Balance - December 31, 1999 $ (30,737,906) $ 1,145,640
Issuance of stock for consulting fees
($4.99 per share) - 368,745
Issuance of stock for conversion of note
payable and related interest
($0.28 per share) - 56,393
Issuance of stock for interest on
convertable debentures ($1.56 per share) - 451,138
Issuance of stock for exercise of warrants
($2.00 per share) - 120,000
Issuance of stock for exercise of warrants
($1.06 per share) - 132,500
Issuance of stock ($5.00 per share) - 6,000,000
Stock issued in connection with acquired
technology - 311,850
Issuance of stock and warrants to settle
penalties of convertible debentures
($2.00 per share) - 1,120,000
Issuance of stock for conversion of
debentures and interest ($1.06 per share) - 1,023,600
Issuance of stock for exercise of warrants
($1.50 per share) - 150,000
Net loss (2,901,268) (2,901,268)
--------------- ---------------
Balance - March 31, 2000 $ (33,639,174) $ 7,978,598
=============== ===============
</TABLE>
See notes to financial statements.
F-14
<PAGE>
<TABLE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Three Months Ended For the Period
March 31, from Inception
--------------------------------- (May 26, 1995) to
1999 2000 March 31, 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (951,029) $ (2,901,268) $ (33,639,174)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 2,565 404,871 563,227
Amortization of deferred and unearned financing
costs 131,726 - 13,276,619
Stock issued for license - - 37,500
Issuance of stock for acquisition of technology - 311,850 311,850
Compensatory element of stock issuances 89,900 368,745 4,152,651
Modification of warrants issued - - 123,500
Issuance of stock in settlement of litigation - - 456,278
Cash provided by (used in) the change in assets
and liabilities:
Increase in prepaid expenses (5,347) - (200)
Increase in other assets (2,200) (3,000) (12,751)
Increase (decrease) in accrued liabilities 206,235 (629,415) 2,317,742
Increase in deferred revenue 100,000 - 225,000
--------------- --------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (428,150) (2,448,217) (12,187,758)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization and patent costs - - (31,358)
Capital expenditures - - (42,192)
--------------- --------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES - - (73,550)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options - - 150
Proceeds from issuance of common stock - 6,000,000 12,187,000
Proceeds from exercise of warrants - 402,500 729,500
Offering costs - - (2,898)
Repayment by stockholders - - 3,000
Proceeds from Convertible Debentures 450,000 - 7,000,000
Proceeds from notes payable - - 450,000
Repayment of notes payable - (400,000) (400,000)
Proceeds from bridge notes - - 2,000,000
Repayments of bridge notes - - (2,000,000)
Borrowings from stockholders - - 561,140
Repayment to stockholders - - (561,400)
Deferred financing costs - - (604,150)
--------------- --------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 450,000 6,002,500 19,362,602
------------ ----------- -----------
(DECREASE) INCREASE IN CASH 21,850 3,554,283 7,101,294
CASH - BEGINNING 1,940 3,547,011 -
--------------- --------------- ---------------
CASH - ENDING $ 23,790 $ 7,101,294 $ 7,101,294
=============== =============== ===============
Supplemental Disclosure of Cash Flow Information:
- ------------------------------------------------
Cash paid during the period for:
Interest $ - $ 508,244 $ 824,691
=============== =============== ===============
Income taxes $ - $ - $ -
=============== =============== ===============
</TABLE>
See notes to financial statements.
F-15
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are unaudited. These statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission ( the "SEC"). Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, the financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to state fairly the financial position and results of
operations as of and for the periods indicated. These financial statements
should be read in conjunction with the Company's financial statements and notes
thereto for the year ended December 31, 1999, included in the Company's Form
10-K as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with general 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 statement and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 - BUSINESS
Eurotech, Ltd. (the "Company") was incorporated under the laws of the District
of Columbia on May 26, 1995. The Company is a development-stage, technology
transfer, holding, marketing and management company, formed to commercialize
new, existing but previously unrecognized, and previously "classified"
technologies, with a particular current emphasis on technologies developed by
prominent research institutes and individual researchers in the former Soviet
Union and in Israel, and to license those technologies for business and other
commercial applications principally in Western and Central Europe, Ukraine,
Russia and North America. Since the Company's formation, it has acquired
development and marketing rights to a number of technologies by purchase,
assignments, and licensing arrangements. The Company intends to operate its
business by licensing its technologies to end- users and through development and
operating joint ventures and strategic alliances. To date, the Company has not
generated any substantial revenues from operations.
F-16
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 3 - TECHNOLOGY INTERESTS ACQUIRED
a) On August 26, 1996, the Company entered into an agreement with KRHL
pursuant to which it assigned to KRHL a 50% interest in the net profits
(after deducting development costs and related expenses attributable to
EKOR) derived by the Company from the sale or licensing of EKOR.
During 1999, the Company acquired from a former member of the Company's
board of directors doing business as CIS Development Corp. ("CIS")
6,795,000 shares, representing approximately 40% of the voting stock,
of KRHL. In exchange for the KRHL shares, the Company issued 4,530,000
shares of its own common stock valued at $4,841,438. The beneficial
owners of the exchanged KRHL shares consist of various Russian
scientists and researchers.
In an agreement, dated as of November 30, 1999, KRHL released to the
Company all of its rights in EKOR for the following consideration
provided by the Company:
o Released to KRHL all of the Company's royalty rights in the
Re-sealable Container Systems and TetraPak Container
technologies.
o Surrendered to KRHL the shares the Company had acquired from
CIS valued at $4,841,438.
o Issued to KRHL 2,000,000 shares of Eurotech's common stock
valued at $2,137,500.
o Agreed to pay to KRHL a royalty of 2% of gross sales, as
defined, received by Eurotech from all products and services
of EKOR by Eurotech, and
o Assumed KRHL's obligations to Spinneret Financial Systems,
Inc. Spinneret had previously loaned to KRHL $750,000 pursuant
to convertible notes on which KRHL was in default and on which
interest and penalties had accrued. Subsequently, and before
year-end, Spinneret converted this liability into 1,000,000
shares of Eurotech common stock valued at $1,068,750.
The total consideration provided to KRHL for the acquired technology
interest in EKOR totalled $8,047,688 and is being amortized over a
5-year period commencing November 30, 1999. Amortization expense
related to this intangible asset was $134,128 for the period ended
December 31, 1999 and $402,385 fro the three months ended March 31,
2000.
F-17
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 3 - TECHNOLOGY INTERESTS ACQUIRED (Continued)
b) During the quarter ended March 31, 2000, the Company made additional
investments, aggregating $725,000, in its six Israeli technology
companies in return for increased ownership interests.
The additional investments of $725,000 were charged to research and
development expenses during the quarter ended March 31, 2000, which
reduced the Company's carrying value of its investments in these
companies to zero.
c) During February 2000, the Company entered into a technology acquisition
agreement with a developer. The Company will form and fund a
corporation for the purpose of this agreement named Crypto.Com, Inc.
The Company agrees to pay the developer a salary of $6,000 per month,
plus usual Company benefits, for a period of one year. The Company will
be the controlling shareholder of Crypto.Com, Inc. upon the formation
of Crypto.Com, Inc.
d) Pursuant to a technology purchase agreement dated January 1, 1998, the
Company acquired the rights to a certain technology from Oleg L.
Figovsky, Ph.D., a consultant to the Company. The acquisition was
subject to a royalty, payable to Professor Figovsky, equal to 49% of
the net profits derived by the Company from such technology. During
February 2000, the Company acquired all of such royalty interest in the
net profits derived by the Company from such technologies, along with
rights to certain other technologies, for a cash payment to Professor
Figovsky of $235,000, 54,000 shares of the Company's common stock
valued at $311,850, a payment of $15,000 to an Israeli research
institute and a 1% royalty from gross revenue generated by the sales of
such technology for a period of 15 years.
Since the acquired technology is in the development stage, the Company
charged the purchase consideration of $561,850 to research and
development costs during the quarter ended March 31, 2000.
F-18
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 4 - 8% CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
<TABLE>
<CAPTION>
At December 31, At March 31,
1999 2000
--------------- ---------------
<S> <C> <C>
November 27, 1997 8% Convertible
Debentures $ 2,660,000 $ 2,660,000
February 23, 1998 8% Convertible
Debentures 3,000,000 3,000,000
July 20, 1998 8% Convertible Debenture 900,000 -
--------------- ---------------
Total 6,560,000 5,660,000
Less: Current maturities 2,660,000 5,660,000
--------------- ---------------
Long-term Portion $ 3,900,000 $ -
=============== ===============
</TABLE>
During the quarter ended March 31, 2000, accrued interest through December 31,
1999 on the November 1997 and the February 1998 Convertible Debentures totalling
$902,276 was satisfied for a cash payment of $451,138 and the issuance of
289,655 shares of common stock valued at $451,138.
During the quarter ended March 31, 2000, the obligation under the Convertible
Debenture dated July 1998 of $900,000, plus accrued interest of $123,600, was
satisfied by the issuance of 965,661 shares of common stock.
In January 2000, the Company settled penalties outstanding under the November
1997 and February 1998 Convertible Debentures, resulting from a failure to
obtain an effective registration statement during July 1998 and part of 1999.
The penalty was settled in full by Eurotech issuing to the holders of the
debentures 300,000 shares of the Company's common stock and warrants to purchase
250,000 shares of common stock at an exercise price of $3. The consideration
issued to the debenture holders was valued at $1,120,000, which was equal to the
penalty assessed. This obligation of $1,120,000 was included in accrued
liabilities as of December 31, 1999.
In addition, in January 2000, the holders of these Convertible Debentures agreed
to a conversion price floor of $2 per share on all outstanding indebtedness
under the November 1997 and February 1998 Convertible Debentures.
F-19
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 5 - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
At December 31, At March 31,
1999 2000
--------------- ---------------
<S> <C> <C>
Interest $ 1,087,490 $ 113,200
Penalties related to
registration 1,120,000 -
rights
Professional fees 471,119 240,818
Consulting fees 272,894 272,894
Other 187,701 181,746
--------------- ---------------
$ 3,139,204 $ 808,658
=============== ===============
</TABLE>
NOTE 6 - STOCKHOLDERS' EQUITY
Secured Promissory Note
- -----------------------
On January 6, 1999, the Company's then Chairman and the majority convertible
debt holder provided $450,000 of short-term financing to the Company evidenced
by two secured promissory notes. Each secured promissory note bore interest at
13% per annum and is due January 6, 2000. The promissory notes are
collateralized by the Company's intangible assets. These notes were satisfied in
full in January 2000, as discussed below.
During the quarter ended March 31, 2000, the obligation under a note payable
dated January 1999 of $452,142 was paid in full, including accrued interest of
$52,142.
During the quarter ended March 31, 2000, the obligation under a convertible
promissory note dated January 1999 of $50,000, plus accrued interest, payable to
a former Chairman of the Board of the Company, was satisfied by the issuance of
200,000 shares of common stock. In connection with this transaction, warrants to
purchase 9,750 shares of common stock were cancelled.
F-20
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 6 - STOCKHOLDERS' EQUITY (Continued)
On December 31, 1999, the Company completed the sale, to an accredited investor,
of 1,882,353 shares of its common stock and warrants to purchase 200,000 of its
common shares to one investor, resulting in net proceeds to the Company of
$2,832,000. Pursuant to the terms of the sale, the Company could have been
compelled to issue to the investor additional shares of common stock based on
certain average closing prices of its common stock over the four-month period
following December 31, 1999.
In addition, another agreement was entered into, with the same investor, under
which the Company, at its option, could sell to the investor up to $22 million
value of its common shares. The share must be registered and the agreement is
subject to monthly limits of $4,000,000, and various other limitations and
restrictions. The purchase price of the common stock for each sale is based on
90% of the average of certain closing prices of its common stock of the
preceding 20 days.
Pursuant to amended terms of an additional agreement with Woodward LLC, on March
2, 2000, the Company sold 1,200,000 shares of its common stock for net proceeds
of approximately $6,000,000. The purchaser agreed to hold such shares for a
minimum of six months. Additional shares of common stock may be issuable to the
purchaser in the event that the average bid price of the common stock during the
months of September of 2000 and October of 2000 are below $6.58.
Warrants
- --------
At March 31, 2000, the Company had outstanding warrants to purchase 1,381,500
shares of the Company's common stock at prices ranging from $0.75 to $5.02 as
described below.
Warrants Exercised
- ------------------
During the quarter ended March 31, 2000, various individuals exercised warrants
and purchased a total of 285,000 shares of the Company's common stock, for net
proceeds to the Company of $402,500.
F-21
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 6 - STOCKHOLDERS' EQUITY (Continued)
Earnings Per Share
- ------------------
Securities that could potentially dilute basic earnings per share ("EPS") in the
future that were not included in the computation of diluted EPS because to do so
would have been anti-dilutive for the periods presented consist of the
following:
<TABLE>
<S> <C>
Options to purchase common stock 650,000
Warrants to purchase common stock 1,381,500
Convertible Debentures (assumed conversion at March
31, 2000 market value price and at largest 2,386,000
discount) -----------
Total as of March 31, 2000 4,417,500
===========
Substantial issuance after March 31, 2000 through May 6,2000:
Sale of common stock for cash of $10 million and
other consideration 2,000,000
===========
Warrants to purchase common stock issued to
purchaser of common stock 500,000
===========
</TABLE>
NOTE 7 - OTHER MATTERS
Risk of Environmental Liability; Present Lack of Environmental Liability
Insurance
- --------------------------------------------------------------------------------
The Company's radioactive contaminant technology is subject to numerous national
and local laws and regulations relating to the storage, handling, emission,
transportation and discharge of such materials, and the use of specialized
technical equipment in the processing of such materials. There is always the
risk that such materials might be mishandled, or that there might be equipment
or technology failures, which could result in significant claims for personal
injury, property damage, and clean-up or remediation. Any such claims against
the Company could have a material adverse effect on the Company. The Company
does not presently carry any environmental liability insurance, and may be
required to obtain such insurance in the future in amounts that are not
presently predictable. There can be no assurance that such insurance will
provide coverage against all claims, and claims may be made against the Company
(even if covered by insurance policies) for amounts substantially in excess of
applicable policy limits. Any such event could have a material adverse effect on
the Company.
F-22
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 7 - OTHER MATTERS (Continued)
Concentration of Credit Risk
- ----------------------------
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of cash which is at one bank. Future
concentration of credit risk may arise from trade accounts receivable. Ongoing
credit evaluations of customers' financial condition will be performed and,
generally, no collateral will be required.
Business Risks
- --------------
The Company requires additional funds to commercialize its technologies and
continue research and development efforts. Until the commencement of sales, the
Company will have no operating revenues, but will continue to incur substantial
expenses and operating losses. No assurances can be given that the Company can
complete development of any technology, not yet completely developed, or that
with respect to any technology that is fully developed, it can be manufactured
on a large scale basis or at a feasible cost. Further, no assurance can be given
that any technology will receive market acceptance. Being a start-up stage
entity, the Company is subject to all the risks inherent in the establishment of
a new enterprise and the marketing and manufacturing of a new product, many of
which risks are beyond the control of the Company.
NOTE 8 - SUBSEQUENT EVENTS
Sale of Common Stock
- --------------------
The Company sold 2,000,000 shares of its common stock to Woodward, LLC for gross
proceeds of $10,000,000 plus other consideration. In addition, the purchaser
was issued warrants to purchase 500,000 shares of the Company's common stock at
$10 per share.
Investments in Israel Technology Companies
- ------------------------------------------
During the period commencing April 1, 2000 to April 30, 2000, the Company made
additional investments, aggregating $140,000, in six Israeli technology
companies in return for increased ownership interests.
The additional investments will be charged to research and development expenses
during the three months ended June 30, 2000.
F-23
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
NOTE 8 - SUBSEQUENT EVENTS (Continued)
Stock Repurchase Program
- ------------------------
The Board of Directors has authorized to repurchase up to 1,000,000 shares of
the Company's common stock to be purchased on the open stock market. In
addition, we purchased 1,000,000 shares from one shareholder at $2.00 per share.
F-24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF
OPERATION.
The following is a discussion of our financial condition, results of our
operations and liquidity. This discussion should be read together with our
financial statements and notes included in this 10-Q.
The following discussion contains certain forward-looking statements that
involve risks and uncertainties. Our actual future results could differ
materially from those foreseen in this discussion.
OVERVIEW
The Company, incorporated in May 1995, is a development stage, technology
transfer, holding and management company formed to commercialize new, existing
but previously unrecognized, and previously "classified" technologies, with a
particular current emphasis on technologies developed by prominent research
institutes and individual researchers in the former Soviet Union and in Israel,
and to commercialize those and other Western technologies for business and other
commercial applications principally in Europe, Ukraine, Russia and North
America.
Until recently, we had been principally engaged in identifying, monitoring,
reviewing and assessing technologies for their commercial applicability and
potential, and in acquiring selected technologies by equity investment,
purchase, assignment and licensing arrangements. Although we intend to continue
identifying, monitoring, reviewing and assessing new technologies, our primary
emphasis will be focused on commercializing our present technologies
("Technologies").
We believe that most of the Technologies are presently ready for
commercialization and marketing. To that end, we have decided to devote our
business activities and resources principally to the marketing and sale of the
Technologies. We recently have initiated a marketing and sales program for the
Technologies, and also have initiated discussions with a number of prominent
potential users of the Technologies with a view towards the future negotiation
and execution of licensing and/or joint venture marketing and sales agreements.
We intend to operate our business by licensing our technologies to end users and
through development and operating joint-ventures and strategic alliances. To
date, we have not generated any substantial revenues from our operations.
We have not been profitable since inception and may incur substantial operating
losses over the next twelve months. For the period from inception to March 31,
2000, we incurred a cumulative net loss of approximately $33,639,000. We expect
that we will generate losses until at least such time as we can commercialize
our technologies, if ever. No assurance can be given that any of the our
technologies can be manufactured on a large scale basis or at a feasible cost.
Further, no assurance can be given that any technology will receive market
acceptance. Being a start-up stage entity, we are subject to all the risks
inherent in the establishment of a new enterprise and the marketing and
manufacturing of a new product, many of which risks are beyond our the control.
<PAGE>
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2000 vs. the Three Months Ended March 31,
- ------------------------------------------------------------------------------
1999
- ----
Other than $150,000 of revenues recognized in the fourth quarter of 1999, we
have had no revenues since inception. Consulting expenses increased from
$114,000 for the three months ended March 31, 1999 to $190,000 for the three
months ended March 31, 2000. The increase in consulting expense resulted
principally from an increase in non-cash compensation issued to consultants.
Other general and administrative expenses increased from $152,000 for the three
months ended March 31, 1999, to $429,000 for the three months ended March 31,
2000. The increase is attributable to the addition of salaried employees at our
Washington, D.C. headquarters.
Research and development expenses increased for the three months ended March 31,
1999 from $294,000 to $1,418,000, for the three months ended March 31, 2000.
During 2000, we acquired, from Professor Oleg L. Figovsky, Ph.D., the remaining
49% of net profits of three Technologies for cash of $250,000 and 54,000 shares
of common stock. Such consideration of $562,000 was charged to research and
development expenses during the first quarter of 2000. Research an development
expenditures for 2000 also included $760,000 related to our continuing
investments in six Israeli technology companies and $96,000 for our Russian
technologies.
The depreciation and amortization increased from $3,000 for the three months
ended March 31, 1999 to $405,000 for the three months ended March 31, 2000. This
was due to the amortization expense of $402,000 related to the November 1999
purchase of technology rights from KRHL. Amortization expense related to this
asset for the year 2000 is expected to approximate $1,600,000.
For the three months ended March 31, 1999 and 2000, we incurred operating losses
of $651,000 and $2,809,000, respectively. The losses are principally due to
expenses incurred in the acquisition and development of the Technologies,
consulting costs, general and administrative expenses and the lack of revenues.
Other expenses, consisting of interest expense and amortization of deferred and
unearned finance costs, decreased from $299,000 for the three months ended March
31, 1999 to $92,000 for the three months ended March 31, 2000. Amortization of
deferred and unearned financing costs decreased from $131,000 for the three
months ended March 31, 1999 to $-0- for the three months ended March 31, 2000.
The decrease in the amortization of deferred and unearned financing costs is
principally attributable principally to portions of unearned financing costs
having been fully amortized during 1999.
We have reason to believe that we will begin to earn revenues in 2000, but such
revenues, if recognized, may be offset to a considerable extent by expenses
incurred by us in our continuing efforts to commercialize, sell and market our
technologies, as well as the amortization of intangible assets.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Our primary sources of working capital from inception have been net proceeds of:
o $842,000 from a limited offering of our common stock;
o $2,000,000 from a bridge financing completed in 1996 and subsequently
repaid;
o $3,000,000, $3,000,000 and $1,000,000 from private placements of 8%
Convertible Debentures due November 2000, February 2001 and July 2001,
respectively.
o $450,000 from a secured financing obtained in January 1999 and repaid
in January 2000;
o $975,000 from a private offering of 3,900,000 shares of our common
stock in the third quarter of 1999; and
o $3,000,000 from the issuance on December 31, 1999 of 1,882,353 shares
and of warrants to buy an additional 200,000 shares of the Company's
common stock to a single investor on December 31, 1999.
o $6,315,790 from the sale in March 2000 of 1,200,000 shares to such
investor.
o $10,000,000 and other consideration from the sale in April 2000 of
2,000,000 shares, and warrants to buy additional 500,000 shares, to
such investor.
o In connection with the last three items, we paid a total of $965,790 in
consulting fees.
The Debentures discussed above may be converted into shares of our common stock
at beneficial conversion rates based on the timing of the conversion. During the
three months ended March 31, 2000, a debenture holder converted the remaining
balance of the July 1998 obligation of $900,000 and related accrued interest in
exchange for 965,661 shares of our common stock. During 1999, a debenture holder
exercised the conversion right under the November 27, 1997 and July 20, 1998
Convertible Debenture agreements and converted principal of $410,000 and accrued
interest of $161,788 into 1,204,665 shares of our common stock. During 1998, a
debenture holder exercised the conversion right under the November 27, 1997
Convertible Debenture agreement and converted principal of $30,000 and accrued
interest of $2,194 into 100,002 shares of our common stock. Based on the bid
price of our common stock at March 31, 2000, the debentures' principal currently
outstanding could be converted into approximately 2.4 million shares of our
common stock. In January 2000, we reached an agreement with the holders of the
convertible debentures pursuant to which we paid all interest arrearages and the
holders agreed to a $2.00 per share conversion price floor on the debentures
that remain outstanding.
On January 6, 1999, our former Chairman and the majority convertible debt holder
provided $450,000 of short-term financing to us, evidenced by a $50,000 and a
$400,000 secured promissory notes, respectively. Each secured promissory note
bears interest at 8% per annum and is due January 6, 2000. The promissory notes
are collateralized by our intangible assets and can be exchanged for 8%
Convertible Debentures under terms similar to the current outstanding
debentures. We repaid the $400,000 note on its due date from the proceeds of the
December 31, 1999 $3,000,000 stock and warrant issue. In January 2000, our
former Chairman converted his $50,000 note, plus accrued interest, into 200,000
shares of our common stock.
<PAGE>
We have agreed in principle to fund the commercialization of certain
technologies developed in the former Soviet Union by scientists and researchers
at Kurchatov Institute (which is not related to KRHL) and members of Euro-Asian
Physical Society (EAPS). Kurchatov Institute will provide the materials,
facilities and personnel to complete the necessary work to commercialize such
technologies. We also have agreed in principle to provide funding in connection
with the marketing and sale of three of our other technologies. Total
expenditures under these programs approximated $856,000 during the three months
ended March 31, 2000. Our principal source of funding for these expenditures
during the three months ended March 31, 2000 was the proceeds of private sales
of our stock.
As part of the December 31, 1999 transaction, pursuant to which we issued
1,882,353 shares and a warrant to buy an additional 200,000 shares of our common
stock for $3,000,000, the investor agreed to permit us to sell to it additional
shares of common stock over time and subject to certain conditions for up to a
total of an additional $22,000,000. As mentioned above, another 1,200,000 shares
were issued to such investor in March 2000 for a further financing under this
commitment of $6,315,790, and in April 2000 for a further financing under this
commitment amounting to $10,000,000. We believe that this commitment provides us
with sufficient resources to launch the Company on a revenue-producing track.
As of March 31, 2000, we had working capital of $407,000 and stockholders'
equity of $7,979,000, respectively.
The improvement since December 31, 1999 is attributable principally to the
$6,000,000 of net proceeds from the sale of common stock in March 2000.
<PAGE>
EUROTECH, LTD.
EXHIBIT INDEX
Location
Exhibit No. Description Reference
- ----------- ----------- ---------
3.1 Articles of Incorporation of Eurotech, Ltd. 1
3.2.1 Bylaws of Eurotech Ltd. 1
3.2.2 Amendment to Bylaws adopted February 23, 2000 to fix the number of *
directors at 5.
4.1 Form of Common Stock certificate 1
10.1.1 License Agreement dated September 6, 1996 between Euro-Asian
Physical Society and ERBC Holding, Ltd. 1
10.1.2 Sub-License Agreement dated September 16, 1996 between ERBC
Holding, Ltd. and Eurotech, Ltd. 1
10.1.3 Agreement dated January 28, 1997 between Eurotech, Ltd. and
Kurchatov Research Holdings, Ltd. 1
10.1.4 Memorandum of Intent among Chernobyl Nuclear Power Plant, I. V.
Kurchatov Institute, Ukrstroj and Eurotech, Ltd. 1
10.1.5 Agreement dated December 6, 1996 between Ukrstoj and Chernobyl
Nuclear Power Plant 1
10.1.6 Agreement dated December 11, 1996 among Ukrstroj, Eurotech, Ltd. and
Euro-Asian Physical Society 1
10.2.1 Technology Purchase Agreement between Eurotech, Ltd. and Oleg L.
Figovsky 2
10.2.2 Technology Purchase Agreement between Eurotech , Ltd. and Oleg L.
Figovsky 2
10.2.3 Technology Purchase Agreement between the Company and Oleg L.
Figovsky 2
10.2.4 Agreement dated February 27, 2000 between Eurotech, Ltd. and Oleg L.
Figovsky (acquisition of the rights to 49% of net profits) 8
10.3 Preliminary EKOR (Component A)/Block Copolymer manufacturing
licensing agreement between Eurotech, Ltd. and NuSil Technology *
10.4 Reserved
10.5 Reserved
10.6.1 Form of Agreement among Eurotech, Ltd., V. Rosenband and C.
Sokolinsky, and Ofek Le-Oleh Foundation 2
<PAGE>
10.6.2 Equity Sharing Agreement between the Company, V. Rosenband and C.
Sokolinsky 2
10.6.3 Voting Agreement among Eurotech, Ltd., V. Rosenband and C.
Sokolinsky 2
10.7.1 Investment Agreement between Eurotech, Ltd. and Chemonol, Ltd. 2
10.7.2 Equity Sharing Agreement between the Company and Leonid
Shapovalov 2
10.7.3 Voting Agreement between Eurotech, Ltd. and Leonid Shapovalov 2
10.8.1 Agreement between Eurotech, Ltd. and Separator, Ltd. 2
10.8.2 Equity Sharing Agreement between Eurotech, Ltd. and Efim Broide 2
10.8.3 Voting Agreement between Eurotech, Ltd. and Efim Broide 2
10.9.1 Form of Agreement among Eurotech, Ltd., Ofek Le-Oleh Foundation and
Y. Kopit 2
10.9.2 Equity Sharing Agreement among Eurotech, Ltd., Y. Kopit and V.
Rosenband 2
10.9.3 Voting Agreement among Eurotech, Ltd., Y. Kopit and V. Rosenband 2
10.10 Form of License Agreement between the Company and ERBC Holdings,
Ltd. 2
10.11.1 Cooperation Agreement between Eurotech, Ltd. and Forschungszentrum
Julich GmbH 2
10.11.2 Agreement among Eurotech, Ltd., Forschungszentrum Julich and two
other entities for the testing of EKOR in Germany 7
10.12.1 Convertible Debenture Purchase Agreement among Eurotech, Ltd., JNC
Opportunity Fund, Ltd. and Diversified Strategies Fund, L.P. 2
10.12.2 Escrow Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd.
and Diversified Strategies Fund, L.P. and Robinson, Silverman, Pearce,
Aronsohn & Berman, LLP 2
10.12.3 Registration rights Agreement among Eurotech, Ltd., JNC Opportunity
Fund, Ltd. and Diversified Strategies Fund, L.P. 2
10.12.4 Form of 8% Convertible Debenture Due November 27, 2000 issued by
Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 2
10.12.5 Form of 8% Convertible Debenture Due November 27, 2000 issued by
Eurotech, Ltd. to Diversified Strategies Fund, L.P. 2
10.12.6 Warrant No. 1 issued by Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 2
<PAGE>
10.12.7 Warrant No. 2 issued by Eurotech, Ltd. to Diversified Strategies Fund,
L.P. 2
10.12.8 Warrant No. 3 issued by Eurotech, Ltd. to Diversified Strategies Fund,
L.P. 2
10.13.1 Convertible Debenture Purchase Agreement between Eurotech, Ltd. and
JNC Opportunity Fund, Ltd. 2
10.13.2 Escrow Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd.
and Robinson, Silverman, Pearce, Aronsohn and Berman, LLP 2
10.13.3 Registration Rights Agreement between Eurotech, Ltd. and JNC
Opportunity Fund Ltd. 2
10.13.4 Form of 8% Convertible Debenture Due February 23, 2001 issued by
Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 2
10.13.5 Warrant No. 3 issued by Eurotech, Ltd. to JNC Opportunity Fund Ltd. 2
10.14.1 Debenture Purchase Agreement between Eurotech, Ltd and JNC
Strategic Fund Ltd. 2
10.14.2 Form of 8% Convertible Debenture No.1 Due July 20, 2001 issued by
Eurotech, Ltd. to JNC Strategic Fund Ltd. 3
10.14.3 Form of 8% Convertible Debenture No.2 Due February 23, 2001 issued
by Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 3
10.14.4 Warrant No. 4 issued by Eurotech, ltd. to JNC Strategic Fund Ltd. 3
10.14.5 Registration Rights Agreement issued by Eurotech, Ltd. to JNC
Strategic Fund Ltd. 3
10.14.6 Amended and Revised 8% Convertible Debenture No.1 Due February 23,
2001 issued by Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 3
10.14.7 Amended and Revised 8% Convertible Debenture No.2 Due July 20, 2001
issued by Eurotech, Ltd. to JNC Strategic Fund Ltd. 3
10.14.8 Amended and Revised 8% Convertible Debenture No.13 Due November 27,
2000 issued by Eurotech, Ltd. to JNC Opportunity Fund, Ltd. 3
10.14.9 Amended and Revised 8% Convertible Debenture No.14 due November 27,
2000 issued by Eurotech, Ltd. to Diversified Strategies Fund, L.P. 3
10.14.10 Agreement dated February 25, 2000 regarding conversion price 3
10.15.1 Agreement between Eurotech, Ltd. and David Wilkes 3
10.15.2 Secured Promissory Note issued by Eurotech, Ltd. to JNC Strategic
Fund Ltd. 3
10.15.3 Secured Promissory Note issued by Eurotech, Ltd. to David Wilkes 3
10.15.4 Secured Promissory Note issued by Eurotech, Ltd. to David Wilkes 3
<PAGE>
10.15.5 Escrow Agreement among the Company, JNC Strategic Fund Ltd. and
Encore Capital Management, L.L.C. 3
10.15.6 Security Agreement by Eurotech, Ltd. in favor of JNC Strategic Fund
Ltd. and David Wilkes 3
10.15.7 Warrant issued by Eurotech, Ltd. to JNC Strategic Fund Ltd. 3
10.15.8 Warrant issued by the Company to David Wilkes 4
10.15.9 Form of 8% Convertible Debenture Due Three Years from Original Issue
Date issued by Eurotech, Ltd. to JNC Strategic Fund Ltd. 4
10.15.10 Employment Agreement between Eurotech, Ltd. and Frank Fawcett 4
10.15.11 Disengagement Agreement between Eurotech, Ltd. and Frank Fawcett 7
10.16.1 Employment Agreement between Eurotech, Ltd. and Don V. Hahnfeldt 4
10.16.2 Revised employment agreement between Eurotech, Ltd. and Don V.
Hahnfeldt 7
10.17 Agreement dated September 9, 1999 between Eurotech, Ltd. and Peter
Gulko (acquisition of KRHL shares) 5
10.18 Agreement dated as of November 30, 1999 between Eurotech, Ltd. and
Kurchatov Research Holdings, Ltd. 7
10.19 Agreement dated as of December 15, 1999 between Eurotech, Ltd. and
Spinneret Financial Systems, Inc. 7
10.20.1 Common Stock Purchase Agreement dated December 31, 1999 between
Eurotech, Ltd. and Woodward LLC 7
10.20.2 Warrant issued by the Company to Woodward LLC on December 31, 1999 7
10.20.3 Registration Rights Agreement dated December 31, 1999 between
Eurotech, Ltd. and Woodward LLC 7
10.20.4 Commitment Agreement ($22,000,000) between Eurotech, Ltd. and
Woodward LLC 7
10.20.5 Escrow Agreement dated December 31, 1999 among Eurotech, Ltd.,
Woodward LLC and Krieger & Prager 7
10.20.6 Common Stock Purchase Agreement dated as of March 1, 2000 between
Eurotech, Ltd. and Woodward LLC *
10.21 Technology Acquisition and Development Agreement related to
Cypto.Com, Inc. *
23.1 Consent of Tabb, Conigliaro & McGann 8
27 Financial data schedule 8
<PAGE>
Legend:
- -------
* Filed as an Exhibit to the current filing
+ To be filed as an amendment to the current filing
1 Incorporated by reference to such Exhibit filed with our registration
statement on Form 10 on file with the Commission, file number 000-22129
2 Incorporated by reference to such Exhibit filed with Pre-Effective
Amendment No. 2 to our registration statement on Form S-1, File No.
333-26673, on file with the Commission
3 Incorporated by reference to such Exhibit filed with our current report
on Form 8-K as of August 3, 1998, on file with the Commission
4 Incorporated by reference to such Exhibit filed with Post-Effective
Amendment No. 1 to our registration statement on Form, S-1, File No.
333-26673, on file with the Commission
5 Incorporated by reference to such Exhibit filed by Peter Gulko with his
Statement on Schedule 13D
6 Incorporated by reference to such Exhibit filed with our current report
on Form 8-K as of November 30, 1999, on file with the Commission
7 Incorporated by reference to such Exhibit filed with Post-Effective
Amendment No. 2 to our registration statement on Form S-1, File No.
333-26673, on file with the Commission
8 Incorporated by reference to such Exhibit filed with our annual report
on Form 10-K for the year ended December 31, 1999, on file with the
Commission
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The registrant is not currently a party to any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable
(b) Not applicable
(c) On March 2, 2000, the registrant sold to Woodward, LLC, a Cayman
Islands investment fund, 1,200,000 shares of its common stock, $.00025 par
value, for $6,315,790 cash. Such shares were not registered in reliance on
Section 4(2) of the Securities Act of 1933. Pursuant to an further agreement
dated April 24, 2000, pursuant to which the registrant sold additional 2,000,000
shares to the same investor (together with a warrant to purchase a further
500,000 shares), the registrant agreed to register, and intends to file a
registration statement on Form S-3 with respect to, these shares under the
Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant has distributed a notice of meeting and proxy statement
for an annual meeting of its shareholders to be held on June 13, 2000. A report
thereon will be included in the registrant's quarterly report on Form 10-Q for
the quarterly period to end June 30, 2000.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Exhibits listed in the attached Exhibit Index are filed
herewith or incorporated herein by reference, as indicated in therein.
(b) Reports on Form 8-K. None filed during the quarter being reported
on.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on his behalf by the
undersigned thereunto duly authorized.
May 11, 2000 EUROTECH, LTD.,
By /s/ Jon W. Dowie
----------------------------------
Jon W. Dowie
Vice President, Chief Financial Officer
May 11, 2000
EXHIBIT 3.2.2
EUROTECH, LTD.
BYLAW AMENDMENT
The undersigned hereby certifies that by action February 23, 2000, the Board of
Directors of Eurotech, Ltd., a District of Columbia corporation, amended the
corporations Bylaws to fix the number of directors to constitute the Board of
Directors at five, so that the first sentence of Article III, Section 1 of such
Bylaws now reads as follows:
"The number of directors shall be five."
IN WITNESS WHEREOF, I have executed this certificate this 11th day of
May, 2000.
/s/ Don V. Hahnfeld
---------------------------
Don V. Hahnfeldt
EXHIBIT 10.3
EKOR (COMPONENT A) I BLOCK COPOLYMER MANUFACTURING LICENSING AGREEMENT
This Agreement is made as of the effective date on the signature page at the end
of this Agreement by and between NuSil Technology, a California corporation,
having a place of business at 1050 Cindy Lane, Carpinteria, California 93013,
(hereinafter referred to as "Manufacturer" or "NuSil"), and EUROTECH, Ltd., a
District of Columbia corporation, located at 1216 16th St., N. W. Washington, DC
20036, (hereinafter referred to as "Licensor" or "Eurotech").
WHEREAS Eurotech has a worldwide (except Russia) exclusive license from
Euro-Asian Physical Society of Moscow, Russia to a certain family of products
jointly known as EKOR and the same to the key block copolymer ("Polymer"), which
i s used to produce EKOR Component A of EKOR ("Paste A"), and
WHEREAS Eurotech intends to transfer under the conditions set forth in this
Agreement all the needed parameters of the Paste A and Polymer manufacturing
technology, and
WHEREAS Eurotech desires a production facility in the USA that is capable of
producing commercial volumes of the Paste A, and
WHEREAS Eurotech will provide to NuSil the market and projects for Paste A
delivery and sales, and
WHEREAS NuSil desires to produce Polymer and Component A , and
WHEREAS NuSil has the capability to support the technology transfer and produce
the Polymer and Paste A, and
WHEREAS NuSil desires to sell Paste A to the markets and projects provided by
Eurotech, and agrees to pay to Eurotech certain licensing fees based on such
sales,
NOW THEREFORE, In consideration of the material covenants and undertakings
hereinafter set forth, NuSil agrees to manufacture and supply the Polymer and
the Paste A as set forth in this Agreement in accordance with the terms and
conditions that follow.
1. Technology transfer.
1.1 This Agreement will commence with the technology transfer for making of
Polymer and Paste A.
1.2 Polymer. Eurotech will provide all the necessary scientific support to
transfer the technology of Polymer, including finished charts and the techniques
and types of raw materials necessary for the process of the production of the
Polymer currently used in Russia for production of the same and chemists to
assist in this process. This process for making Polymer has already been
submitted for the Patent.
1.3 NuSil will provide the lab facilities and technical personnel required to
support such works. NuSil will translate and adjust the technological charts in
accordance with the US equipment and will make available the pilot production
facilities to produce small batches of Polymer in the amounts of 100s of kilos.
The Polymer obtained from the pilot production facilities will be independently
tested by the EAPS scientists for fitness to produce EKOR and if necessary the
process of producing Polymer will be modified by the combined efforts. The
Polymer technology transfer process will be considered successfully completed
upon acceptance by EAPS scientists of the structure of the Polymer produced on
the pilot industrial equipment.
<PAGE>
1.4 Eurotech will identify all needed fillers to be mixed with Polymer and
conditions of their mixing, and will make EAPS scientists available for
technical assistance to NuSil to produce Paste A.
1.5 NuSil will provide technical personnel and the mixing equipment (mixers,
mills) in accordance with the requirements to obtain Paste A. The Paste A
technology transfer process will be considered complete when NuSil demonstrates
the ability to produce an EKOR Paste A formulation acceptable to EAPS
scientists.
2. Term
2.1 This Agreement will commence as of the complete execution date of the
Agreement, and shall continue for a period of one (l) year therefrom, unless
earlier termination under the Agreement and automatically, from year-to-year
thereafter unless terminated in writing thirty (30) days prior to the annual
renewal anniversary or in accordance with other terms contained herein.
2.2 Renewal. This Agreement may be renewed by giving written notice to the other
party to this Agreement sixty (60) days before expiration of this Agreement.
3. Manufacture and Purchase Requirements
3.1 During the term of this Agreement, and subject to the limitations set forth
herein, NuSil shall be the United States Manufacturer of the Polymer and Paste
A, and shall manufacture for markets and projects provided by Licensor, the
total amount not to exceed Fifteen Million Pounds (15,000,000 lbs) of the
Polymer and Thirty Million Pounds (30,000,000 lbs) of Paste A each year of this
Agreement beginning in the year 2000.
3.2 In the event that Licensor shall require the Paste A in an amount in excess
of Thirty Million pounds (30,000,000 lbs), NuSil shall be extended a right of
first refusal to manufacture and supply to Licensor any amount of the Paste A
under the same price and delivery terms as set forth herein. Licensor is not
permitted to offer the rights to manufacture the Paste A until after NuSil has
rejected its right of first refusal to manufacture additional amounts of Paste
A.
4. Sales and Licensing Fees
4.1 Manufacturer will produce Paste A and Licensor will provide the markets and
projects for sales of the Paste A. Manufacturer will formulate a price structure
of the Paste A mutually agreed upon with Licensor, and will ship Paste A
directly to the projects.
4.2 Licensor will receive its profit and licensing fee from Manufacturer, both
of which will be determined in a supplemental pricing agreement.
5. Governmental Compliance: Indemnities
5.1 Manufacturer shall provide a warranty period of 6 months from date of
shipment when the Product is stored in the original unopened containers within
specified environmental conditions. The Manufacturer shall warrant that the
Product meets current Product specifications at time of shipment. The
Manufacturer specifically disclaims any other express or implied warranty,
including warranties of merchantability and of fitness for use. Purchaser's
remedy and the Manufacturer's sole liability for breach of warranty is limited
to refund of purchase price or replacement of Product shown to be other than as
warranted, and the Manufacturer disclaims any liability for incidental or
consequential damages. Manufacturer does not accept any responsibility or
liability whatsoever, for any performance of the Product or any claim made for
any formulations in which the Product is included or utilized by the Licensor.
<PAGE>
5.2 Manufacturer represents that the Polymer and Paste A covered by this
Agreement will be manufactured and sold in compliance with all federal, state
and municipal laws, rules and regulations as applicable.
5.3 Licensor shall indemnify and hold Manufacturer and its respective successors
assigns, agents officers, employees and contractors harmless from and against
all claims, liabilities, losses and damages asserted by any person, together
with all cost, expenses or liabilities relating thereto (including reasonable
attorneys' fees), based an a claim of infringement of a United States or foreign
patent or trademark, resulting from or relating to the manufacture, sale,
operation or use of the Paste A or any component thereof. Each party agrees to
notify promptly the other of any matters in respect of which the foregoing
indemnity may apply and of which the notifying party has knowledge.
6. Termination
6.1 This Agreement (and/or any purchase order placed hereunder) may be
terminated prior to expiration of the term provided in section 2 above;
6.2 At any time on mutual consent in writing;
6.3 Upon sixty (60) days written notice by either party, if the other party
shall fail to perform any of its duties or obligations under the Agreement and
does not remedy such failure within thirty (30) days of receipt of written
notice to the failing party;
6.4 Immediately upon notice from either party to the other party of inability to
mutually agree upon product pricing, or upon such other party's cessation of
operations generally or closing of its operations for a period of thirty or more
consecutive days.
7. Patents
7.1 Eurotech may desire to provide more then one process of making the Polymer
and request NuSil to assist in this process. In this case NuSil will provide the
lab facilities and personnel to support this effort at agreed upon cost to
Eurotech. Any resulting patent applications of the Polymer or EKOR material,
shall by law, belong to the inventor(s) but will be exclusively assigned to
Eurotech in right and title in areas of EKOR application including nuclear and
conventional decontamination and decommissioning; toxic, hazardous, chemical,
biological and radioactive waste containment, transportation, storage and
disposal; and insulating, fireproofing and waterproofing, of said patents for
the manufacture of the Product, and the material is purchased from the
Manufacturer to the limits of this Agreement.
7.2 In the event of a new patent where the Manufacturer is the inventor, the
Licensor will have exclusive rights to the use of the patented process or
material in the fields of application described in paragraph 7.1, and the sole
supplier of the process or material will be the Manufacturer within the limits
of this Agreement.
7.3 Any process improvements, changes or modifications to the manufacturing
processes for components of the Product shall belong to the Manufacturer. The
Manufacturer shall have sole assignment in right and title to any process
patents resulting from all filings by inventors for intellectual property
protection with appropriate governmental bodies. The Licensor shall have
exclusive rights, in the fields of nuclear decontamination and decommissioning
and radioactive waste containment, transportation, storage and disposal, to said
patents for the manufacture of the Product, if the material is purchased from
the Manufacturer.
<PAGE>
7.4 The Polymer. It is understood that Polymer will be manufactured in the
quantities required to support Paste A production only. If the Manufacturer
identifies a side market for the Polymer or Product, and the Licensor holds the
rights and title to the relevant Patent(s), the Manufacturer will notify
Licensor and will be permitted to sell the Polymer or product under separate
licensing agreement(s).
8. Confidentiality / Publicity
8.1 Licensor and Manufacturer acknowledge that by reason of their relationship
to each other hereunder each will have access to certain information and
materials concerning the other's business plans. Information pertaining to
Licensor's and Manufacturer's products (including but not limited to information
end materials contained in technical data provided from time to time) which is
confidential and of substantial value to the owner, and which would be impaired
if it were disclosed to third parties, will be held confidential except with the
prior written consent of the other party. Licensor and Manufacturer agree that
they shall not use in any way, for their own account or the account of any third
party, nor DISCLOSE TO ANY THIRD party, any such confidential information which
is revealed to either by the other party.
8.2 Each Party will take every reasonable precaution to protect the
confidentiality of such information. On termination of the Agreement, there
shall be no use or disclosure by either party of any confidential information
previously shared between the parties for two (2) years from the date of
termination of the Agreement.
8.3 Neither party shall make any press releases or other publicity regarding
this Agreement or any part thereof without the prior consent from the other
party.
9. Unforeseen Circumstances and Force Majeure
9.1 This Agreement constitutes the entire understanding between Manufacturer and
Buyer with respect to the subject matter hereof and may be amended or modified
only in writing signed by both parties.
9.2 Neither party shall be deemed liable for delays in the performance or
non-performance of any of its obligations under this Agreement if such default
is the result of laws of other acts of government, of laws of other countries,
acts of government, disruption of public utilities strikes, war or other
circumstances beyond the reasonable control of the affected party (hereinafter
"force majeure") provided, however, that the affected party shall promptly
notify the other party of the circumstances of such force majeure and the
parties shall thereupon exert all reasonable efforts to circumvent the effects
of such force maj eure at the earliest opportunity.
10. Other items:
10.1 If any term or provision of this Agreement shall be found to be illegal or
unenforceable, then, this Agreement shall remain in full force and effect and
such terms or provisions will be stricken.
10.2 This Agreement shall be binding upon inure to the benefit of the parties,
hereto and their respective successors and assigns provided, however, that
neither party assign this Agreement without prior written consent from the other
party.
<PAGE>
10.3 Each party represents and warrants to the other party that it is not a
party to or BOUND by any agreement or understanding oral or written, which
conflicts with, or purports to prohibit it from entering into, this Agreement or
performing any term or provision of this Agreement.
10.4 Each party warrants and represents that the person whose signature appears
below as signatory for it has been and is, on the date hereof, duly authorized
by all necessary and appropriate action to exercise this Agreement.
10.5 Manufacturer and Licensor shall be in the relationship of independent
contracting parties and nothing herein shall be deemed to constitute them in a
relationship of partnership, joint venture, employee and employer or any other
relationship other than that of independent contracting parties.
10.6 During the period of this Agreement, and after its termination for any
reason, the Manufacturer agrees to not compete in markets of the Licensor with
products and processes collaborated upon under this Agreement for the lifetime
of the EKOR related patents without the expressed written permission of the
Licensor.
10.7 GOVERNING LAW The governing law of this Agreement are those of the State of
California.
In WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
by their duly authorized representative as of the date set forth on the
signature page hereto.
LICENSOR
EUROTECH, Ltd.
1216 Sixteenth Street N.W.
Washington, D.C. 20036
/s/ Don V. Hahnfeldt
Name: Don V. Hahnfeldt Date: March 30, 2000
Title: President and CEO
MANUFACTURER
NUSIL TECHNOLOGY
1050 Cindy Lane
Carpinteria, California 93013
/s/ Richard Compton
Name: Richard Compton
Title: President and Chief Executive Officer Date: April 6, 2000
Page 1 of 1 EXHIBIT 10.20.6
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of March 1, 2000 (this
"AGREEMENT"), by and among EUROTECH, LTD., a District of Columbia corporation
(the "COMPANY"), and WOODWARD LLC, a Cayman Islands limited liability company
("PURCHASER""Purchaser").
RECITALS
A. Purchaser desires to purchase, and the Company desires to issue and
sell, shares ("SHARES") of the Company's Common Stock, $.00025 par value per
share ("COMMON STOCK"), on the terms and conditions set forth below. For
purposes of this Agreement, the Shares shall mean the Initial Shares (as defined
below) and the Repriced Shares (as defined below).
B. The parties hereto intend that the issuance of the Shares as
anticipated by this Agreement shall be accomplished without registration under
the U.S. Securities Act of 1933, as amended (the "SECURITIES ACT"), and without
registration or qualification under the securities laws of any state or other
jurisdiction, in reliance on exemptions from the registration requirements of
the Securities Act, including, without limitation, Regulation D under the
Securities Act and Section 4(2) of the Securities Act; PROVIDED, HOWEVER, that
nothing in this Agreement shall act or be construed as a limitation on
Purchaser's right to sell any of the Shares to be acquired pursuant to this
Agreement pursuant to the Registration Statement (the "REGISTRATION STATEMENT")
contemplated by the Registration Rights Agreement (as defined below), or other
provisions of the Registration Rights Agreement or in accordance with applicable
laws.
THEREFORE, in consideration of the mutual promises and covenants set
forth below and for other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge by their signatures below, the
parties hereto hereby agree as follows:
AGREEMENT
1. PURCHASE OF COMMON STOCK. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell, and Purchaser agrees to
acquire, one million two hundred thousand (1,200,000) fully paid and
non-assessable shares (the "INITIAL SHARES") in exchange for Purchaser's payment
to the Company of aggregate consideration of Six Million Three Hundred Dollars
($6,315,790). In no event shall theIf required by the Principal Market on which
the Common Stock is listed, the total number of Shares issued by the Company
pursuant to this Agreement shall not exceed 19.9% of the outstanding shares of
Common Stock immediately prior to the date of the Initial Closing, in the
absence of registration approval.
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1.1 FORM OF PAYMENT. Purchaser shall pay the Purchase Price
for the Initial Shares by delivering immediately available good funds in United
States Dollars to the escrow agent (the "ESCROW AGENT") identified in the Joint
Escrow Instructions attached hereto as EXHIBIT E (the "JOINT ESCROW
INSTRUCTIONS"). No later than the Closing Date (as defined below), the Company
shall deliver one or more certificates representing the Initial Shares duly
executed on behalf of the Company (collectively, the
"CERTIFICATE""Certificates") to the Escrow Agent. By signing this Agreement,
Purchaser and the Company, and subject to acceptance by the Escrow Agent, each
agrees to all of the terms and conditions of, and becomes a party to, the Joint
Escrow Instructions, all of the provisions of which are incorporated herein by
this reference as if set forth in full.
1.2 METHOD OF PAYMENT. PurchaserPurchasers shall pay into
escrow the Purchase Price for the Initial Shares by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, LLP
Account No.:637-1660567
Purchaser shall deliver payment of the Purchase Price at or before 1:00 p.m.,
New York time, on the date which is one (1) Business Day after the date of this
Agreement. Purchaser shall deposit the Purchase Price for the Initial Shares
with the Escrow Agent in immediately available funds. Time is of the essence
with respect to such payment, and failure by Purchaser to make such payment
shall allow the Company to cancel this Agreement. For purposes of this
Agreement, "BUSINESS DAY" shall mean a day on which the New York Stock Exchange
is open for business.
1.3 ESCROW PROPERTY. The Purchase Price and the Certificates
delivered to the Escrow Agent as contemplated by SECTION 1.1 hereof are referred
to as the "ESCROW PROPERTY."
2. CLOSING.
2.1 INITIAL CLOSING. Upon execution of this Agreement (the
"INITIAL CLOSING"), and on the date set forth above (the "Initial Closing
Date"), Purchaser shall pay Six Million Three Hundred Fifteen Thousand Seven
Hundred Ninety Dollars ($6,315,790). At the Initial Closing the parties hereto
shall execute and deliver the following documents (incorporated herein by this
reference, collectively with this Agreement, the "TRANSACTION DOCUMENTS"): (i)
the Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") in the
form attached hereto as EXHIBIT A; (ii) the Escrow Agreement in the form
attached hereto as EXHIBIT B. On the Closing Date (as defined below), the Escrow
Agent shall deliver (i) the Purchase Price to the Company and (ii) the
Certificates to the Purchaser.
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2.2 REPRICED SHARES. Definitions:
(a) As used herein, "CLOSING BID PRICE" shall mean
the closing bid price of the Common Stock as reported, at the option of
Purchaser, by Bloomberg, LP or the National Association of Securities Dealers
("NASD").
(b) "REPRICING PERIOD" shall mean each of the First
Repricing Period, the Second Repricing Period, and the Third Repricing Period,
each as defined below.
(c) "REPRICED SHARES" shall mean the First Repriced
Shares and the Second Repriced Shares, each as defined below.
2.3 FIRST REPRICING PERIOD. (a) The "FIRST REPRICING PERIOD"
shall commence on September 2, 2000, and end twenty (20) Business Days after
such date. If the average Closing Bid Price for the twenty (20) Business Days
during the First Repricing Period (the "FIRST REPRICING PRICE"), is not equal to
or greater than [$5.263 x 1.25], then Purchaser may request that up to one-half
(1/2) of the Initial Shares shall be repriced (the "FIRST REPRICED SHARES"). The
Company shall issue to Purchaser the number of additional Shares as determined
according to the following formula:
((5.263 x 1.25) - First Repricing Price) x (# of the First Repriced
Shares) / First Repricing Price.
2.4 SECOND REPRICING PERIOD. The "SECOND REPRICING PERIOD"
shall commence on the day immediately following the First Repricing Period and
end twenty (20) Business Days thereafter. If the average Closing Bid Price for
the twenty (20) Business Days during the Second Repricing Period (the "SECOND
REPRICING PRICE"), is not equal to or greater than [$5.263 x 1.25], then
Purchaser may request that up to one-half (1/2) of the Initial Shares shall be
repriced (the "SECOND REPRICED SHARES"). The Company shall issue to Purchaser
the number of additional Shares as determined according to the following
formula:
(($5.263 x 1.25) - Second Repricing Price) x (# of the Second Repriced
Shares) / Second Repricing Price.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce the Company's
acceptance of this Agreement, PurchaserPurchasers hereby certifies, represents
and warrants to the Company and its agents and attorneys as follows, which
representations and warranties are solely for the benefit of the Company and may
be waived in whole or in part at any time prior to the Initial Closing by the
Company:
3.1 INTENT. Purchaser will be acquiring the Shares for its own
account, and Purchaser has no present arrangement (whether or not legally
binding) to sell any of the Shares to or through any person or entity; PROVIDED,
HOWEVER, Purchaser does not agree to hold any of the Shares except as provided
for herein, for any minimum or other specific term and reserves the right to
dispose of the Shares at any time in accordance with U.S. federal and state
securities laws applicable to such disposition and any restrictions imposed on
such transfer by the Transaction Documents. Purchaser understands that the
Shares must be held indefinitely unless the Shares are subsequently registered
under the Securities Act or an exemption from registration is available.
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act.
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3.2 SOPHISTICATED INVESTOR. Purchaser is a "sophisticated
investor" (as described in Rule 506(b)(2)(ii) of Regulation D) and an
"accredited investor" (as defined in Rule 501(a) of Regulation D), and Purchaser
has such knowledge and experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Company.
3.3 ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Purchaser
acknowledges that the Shares are speculative investments and involve a high
degree of risk and Purchaser is able to bear the economic risk of an investment
in the Shares, and, at the present time, is able to afford a complete loss of
such investment.
3.4 AUTHORITY. Each of the Transaction Documents has been duly
authorized and validly executed and delivered by Purchaser and (assuming due
authorization and valid execution by the Company) is a legal, valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms, subject to general principles of equity and to bankruptcy, insolvency or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application. The
person or persons executing the Transaction Documents (except for the Warrant)
have all requisite authority to do so on behalf of Purchaser.
3.5 BROKERS, FINDERS. Except with respect to Spinneret
Financial Systems, Inc., Purchaser has taken no action which would give rise to
any claim by any person for brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby. The Company shall have no obligation with respect to such
fees or with respect to any claims made by or on behalf of other persons for
fees of a type contemplated in this section that may be due in connection with
the transactions contemplated hereby. Purchaser shall indemnify and hold
harmless the Company, its employees, officers, directors, agents and partners,
and their respective affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorneys' fees) and expenses
suffered in respect of any such claimed or existing fees, as and when incurred.
3.6 ORGANIZATION; AUTHORITY. Purchaser is an entity organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by this Agreement and to carry out its
obligations thereunder. The acquisition of the Shares and the payment of the
Purchase Price therefor by such Purchaser have been duly authorized by all
necessary action on the part of Purchaser.
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<PAGE>
3.7 ABSENCE OF CONFLICTS. The execution and delivery of each
of the Transaction Documents and the consummation of the transactions
contemplated by this Agreement and such other documents and instruments, and
compliance with the requirements thereof, will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Purchaser, or the provision of any indenture, instrument or agreement to which
Purchaser is a party or is subject, or by which Purchaser or any of its assets
is bound, or conflict with or constitute a material default thereunder, or
require the approval of any third-party pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which Purchaser is
subject or to which any of its assets, operations or management may be subject.
3.8 DISCLOSURE; ACCESS TO INFORMATION. Purchaser has received
copies of or has had access to all documents, records, books and other
information pertaining to Purchaser's investment in the Company and the Shares
that have been requested by Purchaser. Purchaser or its representative has been
afforded the opportunity to ask questions of the Company and its management.
Purchaser further acknowledges that it understands that the Company is subject
to the periodic reporting requirements of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and Purchaser has reviewed or received copies
of any such reports that it has requested.
3.9 MANNER OF SALE. At no time was Purchaser presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising with
respect to the Shares.
3.10 OFFSHORE TRANSACTION.
(i) Purchaser is not a U.S. person as that term
is defined under Regulation S.
(ii) Purchaser is outside the United States as of
the date of the execution and delivery of
this agreement.
(iii) Purchaser is purchasing the Common Stock for
its own account and not on behalf of any
U.S. person, and has not pre-arranged any
sale with purchaser in the United States.
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<PAGE>
(iv) Purchaser represents and warrants and hereby
agrees that all offers and sales of the
Securities prior to the expiration of a
period commencing on the date of the
transaction and ending after the
Distribution Compliance Period shall only be
made in compliance with the safe harbor
contained in Regulation S, pursuant to
registration of securities under the
Securities Act of 1933 or pursuant to an
exemption from registration, and all offers
and sales after the expiration of the
Distribution Compliance Period shall be made
only pursuant to such registration or to
such exemption from registration.
(v) Purchaser understands that in the view of
the SEC the statutory basis for the
exemption claimed for this transaction would
not be present if the offering of
Securities, although in technical compliance
with Regulation S, is part of a plan or
scheme to evade the registration provisions
of the 1933 Act. Purchaser is acquiring the
Securities for investment purposes and has
no present intention to sell the Shares in
the United States or to a U.S. Person or for
the account or benefit of a U.S. Person
either now or after the expiration of the
Distribution Compliance Period.
(vi) Purchaser is not an underwriter of, or
dealer in, the Securities, and Purchaser is
not participating, pursuant to a contractual
agreement, in the distribution of Share.
3.11 ACCURACY OF REPRESENTATIONS AND INFORMATION. All
representations made by Purchaser in the Transaction Documents, and all
information provided by Purchaser to the Company concerning Purchaser are
correct and complete in all material respects as of the date hereof.
3.12 Notwithstanding any other provision hereof or of any of
the other Transaction Agreements, in no event (except (i) as specifically
provided in this Agreement as an exception to this provision, or (ii) while
there is outstanding a tender offer for any or all of the shares of the
Company's Common Stock) shall the Purchaser be entitled to exercise Repricing
Rights or shall the Company have the obligation to deliver Repricing Shares to
the extent that, after such delivery, the sum of (1) the number of shares of
Common Stock beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership Repricing Shares not yet issued or unexercised portion of any warrant
issued by the Company and owned by Purchaser and its affiliates), and (2) the
number of shares of Common Stock issuable upon the exercise of Repricing Rights
or exercise of such warrants with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Purchaser and
its affiliates of more than 9.99% of the outstanding shares of Common Stock
(after taking into account the shares to be issued to the Purchaser upon such
exercise). For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), except as
otherwise provided in clause (1) of such sentence. The Purchaser, further agrees
that if the Purchaser transfers or assigns any of the Shares to a party who or
which would not be considered such an affiliate, such assignment shall be made
subject to the transferee's or assignee's specific agreement to be bound by the
provisions of this Paragraph 3.12 as if such transferee or assignee were the
original Purchaser hereof.
6
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Purchaser as follows, which representations and
warranties are solely for the benefit of Purchaser and may be waived in whole or
in part by Purchaser at any time prior to the Initial Closing:
4.1 COMPANY STATUS. The Company has registered the Common
Stock pursuant to Section 12(g) of the Exchange Act, is in full compliance with
all material reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued trading of the Common Stock, and
the Common Stock currently trades on the Over-the-Counter Bulletin Board.
4.2 CURRENT PUBLIC INFORMATION. The Company has furnished or
made available to Purchaser true and correct copies of all registration
statements, reports and documents filed with the SEC by or with respect to the
Company since December 31, 1998 and prior to the date of this Agreement,
pursuant to the Securities Act or the Exchange Act (collectively, the "SEC
DOCUMENTS"). The SEC Documents are the only filings made by or with respect to
the Company since December 31, 1998 pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act or pursuant to the Securities Act. The Company has
filed all reports, schedules, forms, statements and other documents required to
be filed under Sections 13(a), 14 and 15(d) of the Exchange Act since December
31, 1998 and prior to the date of this Agreement.
4.3 NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Shares.
4.4 VALID ISSUANCE OF COMMON STOCK. The authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, $.00025 par
value per share, of which ___________ shares are issued and outstanding as of
the date hereof; and 1,000,000 shares of preferred stock, .001 par value per
share, of which none have been designated or issued. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable. Except as set forth above or as
disclosed in the SEC Documents, as of the date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
7
<PAGE>
become bound to redeem or issue additional shares of capital stock of the
Company or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, (ii) there are no
outstanding debt securities and (iii) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their
securities under the Securities Act. Except as disclosed in the SEC Documents,,
there are no securities or instruments containing any anti-dilution, right of
first refusal, preemptive rights or similar provisions that will be triggered by
the issuance of the Shares as described in this Agreement. Upon issuance of the
Shares, such securities will be duly and validly issued, fully paid and
non-assessable.
4.5 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated and existing in good standing under the laws of
the District of Columbia, and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company does
not have any subsidiaries. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
effect on the business, operations, properties, prospects, or financial
condition of the entity or entities with respect to which such term is used and
which is material and adverse to such entity or to other entities controlling or
controlled by such entity, and/or any condition or situation which would
prohibit or otherwise interfere with the ability of the entity or entities with
respect to which said term is used to enter into and perform its obligations
under the Transaction Documents.
4.6 AUTHORIZATION: ENFORCEMENT. (i) The Company has the
requisite corporate power and authority to enter into and perform under the
Transaction Documents and to issue the Shares and the Warrant in accordance with
the terms of the Transaction Documents, (ii) the execution, issuance and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated by the Transaction Documents have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its board of directors or shareholders is
required, (iii) the Transaction Documents have been duly executed and delivered
by the Company, and (iv) the Transaction Documents (assuming due authorization
and valid and legal execution by Purchaser) constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
4.7 [Intentionally Omitted]
8
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4.8 NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby, including, without limitation, the
issuance of the Shares, do not and will not (i) result in a violation of the
Company's Articles of Incorporation or Bylaws, (ii) conflict with, or result in
a breach of or forfeiture of any rights (or result in an event which with notice
or lapse of time or both would become a breach of or forfeiture of any rights)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company is a party or (iii) result in a violation of any federal or state law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). To the best of its knowledge, the business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations which either singly or in
the aggregate do not and will not have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or issue and sell the Shares and the
Warrant in accordance with the terms of this Agreement (other than any SEC, NASD
or state securities filings which may be required to be made by the Company
subsequent to any Closing, and any registration statement which may be filed in
furtherance of this Agreement); PROVIDED that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of Purchaser herein.
The Company is not in violation of any material term of or in material default
under its Articles of Incorporation, of any outstanding series of preferred
stock or Bylaws or their organizational charter or Bylaws, respectively, or any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree of order or any statute, rule or regulation applicable to the
Company, which has not been duly waived as of the date of this Agreement.
4.9 SEC DOCUMENTS. The Company has not provided to Purchaser
any information which according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company but which
has not been so disclosed. As of their respective dates, the SEC Documents
complied, and all similar documents filed with the SEC prior to the Closing Date
will comply, in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and rules and regulations of the
SEC promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained, nor will any similar document filed with the SEC prior to the Closing
Date contain, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
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Documents, as of the dates thereof, complied, and all similar documents filed
with the SEC prior to the Closing Date will comply, as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC and other applicable rules and regulations with respect
thereto. Such financial statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements
as permitted by Form 10-Q of the SEC) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
4.10 NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations of a financial nature (whether accrued, absolute,
contingent or otherwise), which are material, individually or in the aggregate,
and are not disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company's business consistent with past practice since
December 31, 1999 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.
4.11 LITIGATION AND OTHER PROCEEDINGS. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or, to
the best knowledge of the Company, threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which might have a Material Adverse Effect on the Company or
which likely would have a Material Adverse Effect on the transactions
contemplated by this Agreement. Except as set forth in the SEC Documents, no
judgment, order, writ, injunction or decree or award has been issued by or, to
the best knowledge of the Company, requested of any court, arbitrator or
governmental agency which likely would have a Material Adverse Effect on the
transactions contemplated by this Agreement.
4.12 OTHER DOCUMENTS OR MATERIALS. With respect to any
document or other materials received by Purchaser from the Company or its
representatives other than the Transaction Documents and the SEC Documents, (i)
the Company has no reason to believe any of such documents and materials or any
projections contained therein, as of the date of such other documents or
materials, contained errors or misstatements or do not adequately describe the
status of the development of the Company's technologies or its business as of
such date, and (ii) such documents, materials and projections were prepared by
the Company and its management in good faith.
4.13 NATURE OF COMPANY. The Company is not an open-ended
investment company or a unit investment trust, registered or required to be
registered, or a closed end investment company required to be registered, but
not registered, under the Investment Company Act of 1940.
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4.14 BROKERS, FINDERS. Except for the payment of consulting
fees in the amount of $315,790 to Spinneret Financial Systems, Inc., payment of
which is the sole responsibility of the Company, the Company has taken no action
which would give rise to any claim by any person for brokerage commission,
finder's fees or similar payments by Purchaser relating to this Agreement or the
transactions contemplated hereby. Purchaser shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
persons for fees of a type contemplated in this SECTION 4.14 that may be due in
connection with the transactions contemplated hereby. The Company shall
indemnify and hold harmless each of Purchaser and its employees, officers,
directors, agents, partners and affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred.
4.15 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
SEC Documents, since December 31, 1999, no Material Adverse Effect has been
suffered by, and no material adverse development has occurred in the business,
properties, operations, financial condition or results of operations of the
Company. The Company has not taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to any bankruptcy law, nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings.
4.16 INTELLECTUAL PROPERTY RIGHTS. To its knowledge without
conducting any special investigation and except as set forth on SCHEDULE 4.16
the Company owns or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct its businesses as
now conducted. None of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights has expired or terminated, or is expected to
expire or terminate in the near future. .Except as set forth on SCHEDULE 4.16,
the Company does not have any knowledge of any infringement by the Company of
trademarks, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade
secrets or other similar rights of others, or of any such development of similar
or identical trade secrets or technical information by others and, there is no
claim, action or proceeding being made or brought against, or to the best
knowledge of the Company, being threatened against, the Company regarding
trademark, trade name, patent, patent rights, invention, copyright, license,
service name, service mark, service mark registration, trade secret or other
infringement; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
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4.17 INTERNAL ACCOUNTING CONTROLS. The Company is not aware
that its system of internal accounting controls is not sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
4.18 TAX STATUS.Except as set forth in SCHEDULE 4.18, the
Company has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports, declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports, or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
4.19 CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties and other than the grant of
stock options, none of the officers, directors or employees of the Company (or
any spouse or relative of any such person) is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.20 DILUTION. The number of shares of Common Stock issuable
as Repriced Shares may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines during the period between the Effective Date
and the end of the Final Repricing Period. The Company's executive officers and
directors have studied and fully understand the nature of the transactions
contemplated by this Agreement and recognize that they have a potential dilutive
effect. The board of directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Repriced
Shares is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.
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4.21 MARKET QUOTES. The Company's Common Stock is presently
quoted on the Over-the-Counter Bulletin Board under the symbol "EURO". Except as
set forth on SCHEDULE 4.21, the Company is not in receipt of any written notice
from any stock exchange, market or trading facility on which the Common Stock is
or has been listed or traded (or on which it is or has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such stock exchange, market or trading facility or that the
Common Stock will be delisted from such stock exchange, market or trading
facility.
4.22 a. Offshore Transaction. Company has not offered these
securities to any person in the United States or to any U.S. person as that term
is defined in Regulation S.
b. In regard to this transaction, Company has not conducted
any "directed selling efforts" as that term is defined in Rule 902 of Regulation
S nor has Company conducted any general solicitation relating to the offer and
sale of the within securities to persons resident within the United States or
elsewhere.
4.23 NO INTEGRATED OFFERING. Neither the Company nor any of
its affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since June 1, 1999, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Section 4(2) of the Securities Act in connection with the offer and sale of the
Shares as contemplated hereby.
5. USE AND DISPOSITION OF PROCEEDS. The Company will use the proceeds
from the sale of the Initial Shares (excluding amounts paid by the Company for
legal fees, finder's fees and escrow agent fees in connection with the sale of
the Initial Shares) for general capital purposes and acquisitions, but shall
not, directly or indirectly, use such proceeds for investment in any other
affiliate or to repay debt to affiliates.
6. COMPANY RELIANCE ON PURCHASER'S REPRESENTATIONS. Purchaser
understands that the Company is relying on the truth and accuracy of the
representations and warranties made herein by Purchaser in offering the Shares
for sale and in relying upon applicable exemptions available under the Act and
applicable state securities laws.
7. RESTRICTED SHARES. Purchaser understands and acknowledges that the
Shares have not been, and will not as of the time issued, be registered under
the Securities Act and that they will be issued in reliance upon exemptions from
the registration requirements of the Securities Act, and thus cannot be resold
unless they are included in an effective registration statement filed under the
Securities Act or unless an exemption from registration is available for such
resale. With regard to the restrictions on resales of the Shares for which a
Registration Statement is not effective, Purchaser is aware: (a) that the
Company will issue stop transfer orders to its stock transfer agent in the event
of attempts to improperly transfer any such Shares, and (b) that a restrictive
legend will be placed on certificates representing the Shares, which legend will
read substantially as follows:
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THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
The legend set forth above shall be promptly removed, and the Company shall
issue a certificate without such legend to the holder of any such Unlegended
Shares (as defined below) upon which such legend is stamped, if, unless
otherwise required by state securities laws, (i) such Shares are registered for
resale under the Securities Act, (ii) in connection with a sale transaction,
such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
such Shares may be made without registration under the Securities Act, or (iii)
such holder provides the Company with reasonable assurances that such Shares can
be sold pursuant to Rule 144 promulgated under the Securities Act without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold. Notwithstanding the removal of the legend set
forth above in the event the Shares are registered for resale on an effective
registration statement, the Company reserves the right to affix a legend on
certificates representing such Shares that any selling shareholder must comply
with the prospectus delivery requirements of the Securities Act in connection
with any resale. The Company shall bear the cost of the removal of any legend as
anticipated by this SECTION 7.
8. OTHER COVENANTS OF THE COMPANY.
8.1 FURNISHING OF INFORMATION. As long as Purchaser owns
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. If at any time prior to the date on which Purchaser may resell
all of its Shares without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as determined by counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company's transfer agent for the benefit of and enforceable by Purchaser)
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to Purchaser and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
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Exchange Act in the time period that such filings would have been required to
have been made under the Exchange Act. The Company further covenants that it
will take such further action as Purchaser may reasonably request, all to the
extent required from time to time to enable Purchaser to sell its Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act.
8.2 LISTING OF SHARES. The Company shall, if required by any
applicable listing agreement, (a) not later than the Effective Date, prepare and
file with any national securities exchange, market or trading facility on which
the Common Stock is then listed an additional shares listing application
covering the Shares, (b) take all steps necessary to cause such shares to be
approved for listing on any other national securities exchange, market or
trading facility on which the Common Stock is then listed as soon as possible
thereafter and (c) provide to Purchaser evidence of such listing, and the
Company shall maintain the listing of its Common Stock on such exchange or
market.
8.3 FIRST RIGHT. The Company shall not, directly or
indirectly, without the prior written consent of Purchaser, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition) any of its Common Stock or
securities convertible into Common Stock at a price that is less than the market
price of the Common Stock at the time of issuance of such security or investment
(a "SUBSEQUENT FINANCING") for a period of three hundred sixty (360) days after
the Effective Date, except (i) the granting of options or warrants to employees,
officers, directors and consultants, and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares issued upon exercise of any currently
outstanding warrants or options and upon conversion of any currently outstanding
convertible debenture, in each case disclosed Pursuant to SECTION 4.4, (iii)
securities issued in connection with the capitalization or creation of a joint
venture with a strategic partner, (iv) shares issued to pay part or all of the
purchase price for the acquisition by the Company of a person (which, for
purposes of this clause (iv), shall not include an individual or group of
individuals), and (v) shares issued in a bona fide public offering by the
Company of its securities, unless (A) the Company delivers to Purchaser a
written notice (the "SUBSEQUENT FINANCING NOTICE") of its intention to effect
such Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the person with whom such Subsequent
Financing shall be effected, and attached to which shall be a term sheet or
similar document relating thereto and (B) Purchaser shall not have notified the
Company by 5:00 p.m. (New York time) on the fifthtenth (5th10th) Business Day
after its receipt of the Subsequent Financing Notice of its willingness to
provide, subject to completion of mutually acceptable documentation, financing
to the Company on substantially the terms set forth in the Subsequent Financing
Notice. If Purchaser shall fail to notify the Company of its intention to enter
into such negotiations within such time period, then the Company may effect the
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Subsequent Financing substantially upon the terms and to the persons (or
affiliates of such persons) set forth in the Subsequent Financing Notice;
PROVIDED THAT the Company shall provide Purchaser with a second Subsequent
Financing Notice, and Purchaser shall again have the right of first refusal set
forth above in this SECTION 8.3, if the Subsequent Financing subject to the
initial Subsequent Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Financing Notice within thirty
(30) Business Days after the date of the initial Subsequent Financing Notice
with the person (or an affiliate of such person) identified in the Subsequent
Financing Notice. The rights granted to Purchaser in this SECTION 8.3 are not
subject to any prior right of first refusal given to any other person except as
disclosed on SCHEDULE 4.4.
8.4 CERTAIN AGREEMENTS. (a) The Company covenants and agrees
that it will not, without the prior written consent of Purchaser, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the date which is one hundred
eighty (180) days after the Effective Date, unless all of the Initial Shares and
Additional Shares held by the Purchaser have been redeemed by the Company
pursuant to SECTION 8.5 within ten (10) calendar days of the closing of such
subsequent offer or sale.
(b) The provisions of SECTION 8.4(A) will not apply to: (w)
Common Stock sold pursuant to Rule 144, provided the holder thereof is required
to hold such Common Stock for at least two years from the date of issuance; (x)
a secondary public offering of shares of Common Stock at market; or (y) the
issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, disposition or the exchange of the capital stock
for assets, stock or other joint venture interests; and provided further, that
such securities would not be included in the Registration Statement relating to
the Initial Shares and a registration statement in respect of such stock shall
not be filed prior to sixty (60) days after the Effective Date.
8.5 LIMITATION ON ISSUANCE OF COMMON STOCK. The Company shall
not issue an aggregate number of (i) Shares under this Agreement and (ii) shares
of Common Stock pursuant to any warrant heretofore issued by the Company to
Purchaser, that exceeds 19.9% of the shares of Common Stock issued and
outstanding on the date of the Initial Closing (the "SHARE LIMITATION"). If,
pursuant to this Agreement and any such warrant, the Company otherwise would be
required to issue a number of shares of Common Stock that exceeds the Share
Limitation, then Purchaser shall have the right to require the Company to redeem
each Repriced Share for the Redemption Amount (as defined below).
(i) the Company will take all steps reasonably
necessary to be in a position to issue Shares upon exercise of all such warrants
without violating the Cap Regulations and (ii) if, despite taking such steps,
the Company still cannot issue such Shares without violating the Cap
Regulations, the holder of Initial Shares and such warrants shall have the
option, excercisable in such holders' sole and absolute discretion, to elect
either of the following remedies:
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(x) require the Company to issue Repricing Shares at
a price equal to the average of the closing bid price per share of Common Stock
for the last five (5) consecutive trading days during a Repricing Period
(subject to certain equitable adjustments for certain events occurring during
such period); or
(y) require the Company to redeem each Repriced Share
for $6.57875.
8.6 AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the number of shares of Common Stock issuable
as may be required to issue the Repriced Shares.
8.7 REIMBURSEMENT. If (i) Purchaser, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Purchaser is
impleaded in any such action, proceeding or investigation by any person, or (ii)
Purchaser, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Purchaser is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Purchaser is a named party, the Company will pay to
Purchaser the charges, as reasonably determined by Purchaser, for the time of
any officers or employees of Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this Section 8.8 shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliates of Purchaser that are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of Purchaser and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Purchaser and any/
such affiliate and any such person.
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9. TRANSFER AGENT INSTRUCTIONS.
9.1 IRREVOCABLE INSTRUCTIONS. The Company will irrevocably
instruct its transfer agent to issue Repriced Shares from time to time in such
amounts as shall be specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in SECTION 7 of this Agreement
prior to registration of the Shares under the Securities Act, registered in the
name of Purchaser or its nominee and in such denominations to be specified by
Purchaser in connection with each Closing. The Company warrants that no
instruction other than such instructions referred to in this SECTION 9 and stop
transfer instructions to give effect to SECTION 7 hereof prior to registration
and sale of the Shares under the Securities Act will be given by the Company to
the transfer agent and that the securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this SECTION 9 shall affect in any way Purchaser's obligations
and agreement to comply with all applicable securities laws upon resale of the
Shares.
9.2 [Intentionally Omitted]
9.3 TRANSMISSION OF CERTIFICATES. The Company will transmit
the certificates representing the unlegended securities ("UNLEGENDED SHARES") to
be issued to Purchaser via express courier, by electronic transfer or otherwise,
within three (3) Business Days after receipt by the Company of the certificate
representing the legended Common Stock, and a representation by Purchaser that
such shares have been sold in accordance with the provisions of the Securities
Act (the "DELIVERY DATE").
9.4 DELAY. The Company understands that a delay in the
issuance of the Unlegended Shares beyond the Delivery Date could result in
economic loss to Purchaser. On and after the Effective Date as compensation to
Purchaser for such loss, the Company agrees to pay late payments to Purchaser
for late issuance of Unlegended Shares in accordance with the following schedule
(where "NO. OF DAYS Late" is defined as the number of days beyond five (5)
Business Days from Delivery Date):
Late Payment For Each
NO. OF DAYS LATE $10,000 OF COMMON STOCK
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
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The Company shall pay any payments incurred under this SECTION 9.4 in
immediately available funds upon demand. Nothing herein shall limit Purchaser's
right to pursue actual damages for the Company's failure to issue and deliver
the Unlegended Shares to Purchaser, except to the extent that such late payments
shall constitute payment for and offset any such actual damages alleged by
Purchaser, and any Buy In Adjustment Amount (as defined below).
9.5 COVER. If the Company fails for any reason to deliver the
Unlegended Shares after such Delivery Date and the holder of the Initial Shares
(a "HOLDER") purchases, in an open market transaction or otherwise, shares of
Common Stock (the "COVERING SHARES") in order to make delivery in satisfaction
of a sale of Common Stock by such Holder (the "SOLD SHARES"), which delivery
such Holder anticipated to make using the Unlegended Shares (a "BUY-IN"), then
the Company shall pay to such Holder, in addition to all other amounts
contemplated in other provisions of the Transaction Documents, and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The "BUY-IN ADJUSTMENT
AMOUNT" is the amount equal to the excess, if any, of (x) such Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by such
Holder from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to such Holder in immediately available funds immediately upon
demand by such Holder. By way of illustration and not in limitation of the
foregoing, if such Holder purchases Covering Shares having a total purchase
price (including brokerage commissions) of $11,000 to cover a Buy-In with
respect to shares of Common Stock that it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount that the Company will be required to pay to such Holder
will be $1,000.
9.6 ELECTRONIC TRANSFER. In lieu of delivering physical
certificates representing the Unlegended Shares issuable upon conversion,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of
Purchaser and its compliance with the provisions contained in this paragraph, so
long as the certificates therefor do not bear a legend and Purchaser thereof is
not obligated to return such certificate for the placement of a legend thereon,
the Company shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock to Purchaser by crediting the account
of Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system.
9.7 The Company will authorize its transfer agent to give
information relating to the Company directly to the Purchaser or the Purchaser's
representatives upon the request of the Purchaser or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Purchaser, or (ii) the number of
outstanding shares of Common Stock of all stockholders as of a current or other
specified date. The Company will provide the Purchaser with a copy of the
authorization so given to the transfer agent.
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9.8 Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, and following the expiration of any
applicable Distribution Compliance Period (as those terms are defined in
Regulation S), the Company, shall, at its expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates without restrictive legend or stop
orders in the name of Purchaser (or its nominee (being a non-U.S. Person) or
such non-U.S. Persons as may be designated by Buyer). Nothing in this Section,
however, shall affect in any way Buyer's or such nominee's obligations and
agreement to comply with all applicable securities laws upon resale of the
Common Stock or the Repriced Shares.
10. CLOSING DATE.
10.1 The closing of the issuance and sale of the Initial
Shares shall occur on the date (the "CLOSING DATE"), which is the first Business
Day after the fulfillment or waiver of all closing conditions pursuant to
SECTIONS 11 AND 12 hereof or such other date and time as is mutually agreed upon
by the Company and Purchaser.
10.2 Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property only
upon satisfaction of the conditions set forth in SECTIONS 11 AND 12 hereof.
11. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Purchaser understands that the Company's obligation to sell
the Initial Shares on the Closing Date to Purchaser pursuant to this Agreement
is conditioned upon:
11.1 The receipt and acceptance by Purchaser of this Agreement
as evidenced by Purchaser's execution and delivery of this Agreement.
11.2 Delivery by Purchaser to the Escrow Agent of good funds
as payment in full of an amount equal to the Purchase Price for the Initial
Shares in accordance with SECTION 1.2 hereof;
11.3 The accuracy on the Closing Date of the representations
and warranties of Purchaser contained in this Agreement as if made on the
Closing Date, and the performance by Purchaser on or before the Closing Date of
all covenants and agreements of Purchaser required to be performed on or before
the Closing Date;
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11.4 There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
12. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
The Company understands that Purchaser's obligation to
purchase the Initial Shares on the Closing Date is conditioned upon:
12.1 Acceptance by the Company of this Agreement for the sale
of the Initial Shares, as indicated by the Company's execution and delivery of
this Agreement;
12.2 Delivery by the Company to the Escrow Agent of the
Certificate in accordance with this Agreement;
12.3 The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date; and
12.4 On the Closing Date, Purchaser having received an opinion
of counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to Purchaser, to the effect set forth hereto, the
Registration Rights Agreement, the Warrant, if applicable.
12.5 No statute, rule, regulation, executive order, decree,
ruling or injunction shall be enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits or
adversely effects any of the transactions contemplated by the Transaction
Documents, and no proceeding or investigation shall have been commenced or
threatened which may have the effect of prohibiting or adversely effecting any
of the transactions contemplated by the Transaction Documents.
12.6 From and after the date hereof to and including the
Closing Date, the trading of the Common Stock shall not have been suspended by
the SEC, or the NASD and trading in securities generally on the New York Stock
Exchange or NASDAQ shall not have been suspended or limited, nor shall minimum
prices have been established for securities traded on NASDAQ, nor shall there be
any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of Purchaser makes it impracticable or inadvisable to
purchase the Initial Shares, as the case may be.
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13. GENERAL PROVISIONS.
13.1 ASSIGNMENT. Neither this Agreement nor any rights of
Purchaser hereunder may be assigned by either party to any other person without
the prior written consent of the Company.
13.2 ATTORNEYS' FEES. In the event any dispute arises under
this Agreement or the documents or instruments executed and delivered in
connection with this Agreement, and the parties hereto resort to litigation to
resolve such dispute, the prevailing party in any such litigation, in addition
to all other remedies at law or in equity, shall be entitled to an award of
costs and fees from the other party, which costs and fees shall include, without
limitation, reasonable attorneys' fees and legal costs.
13.3 CHOICE OF LAW; VENUE. This Agreement will be construed
and enforced in accordance with and governed by the laws of the State of
Delaware and the federal law of the United States without reference to
principles of conflicts of law. The parties agree that, in the event of any
dispute arising out this Agreement or the transactions contemplated thereby,
venue for such dispute shall be in the state or federal courts located in
Wilmington, and that each party hereto waives any objection to such venue based
on FORUM NON CONVENIENS.
13.4 COSTS AND EXPENSES. Company shall be responsible for and
shall pay the costs and expenses, including without limitation attorneys' fees
and accountants' fees and expenses of Purchaser, in connection with the conduct
of the due diligence inquiry, negotiation, execution and delivery of this
Agreement and the instruments, documents and agreements executed in connection
with this Agreement.
13.5 COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be
executed in one or more counterparts, each of which when so signed shall be
deemed to be an original, and such counterparts together shall constitute one
and the same instrument. In lieu of the original, a facsimile transmission or
copy of the original shall be as effective and enforceable as the original.
13.6 ENTIRE AGREEMENT: AMENDMENT. This Agreement, together
with the exhibits to this Agreement and the other instruments and documents
delivered in connection with this Agreement constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
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13.7 HEADINGS. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.8 NOTICES. All notices or other communications provided for
under this Agreement shall be in writing, and mailed, telecopied or delivered by
hand delivery or by overnight courier service, as follows:
IF TO THE COMPANY:
EUROTECH, LTD.
1216 16th Street, N.W.
Washington, D.C. 20036
ATTENTION: Mr. Jon W. Dowie
Tel No.: (202) 466-5448
Fax No.: (202) 466-5591
WITH A COPY TO (not deemed to be notice):
LEONARD HURT FROST LILLY & LEVIN PC
1701 K Street, N.W., Suite 300
Washington, DC 20006
ATTENTION: Max A. Stolper, Esq.
Tel No.: (202) 223-2500
Fax No.: (202) 223-2501
IF TO PURCHASER:
Woodward LC
Corporate Center
West Bay Road
Grand Cayman, Cayman Islands
Fax No.: (284) 494-4771
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WITH A COPY TO (not to be deemed notice)
Krieger & Prager, LLP
39 Broadway
New York, New York 10006
ATTENTION: Samuel M. Krieger, Esq.
Tel No.: 212-363-2900
Fax No: 212-363-2999
All notices and communications shall be effective as follows: when mailed, upon
three (3) Business Days after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the telecopied notice; when hand
delivered, upon delivery; and when sent by overnight courier, the next Business
Day after deposit of the notice with the overnight courier.
13.9 PUBLICITY. The Company and Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Purchaser without the prior written consent of such Purchaser, except to the
extent required by law. Purchaser acknowledges that this Agreement and all or
part of the Transaction Documents may be deemed to be "material contracts" as
that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company
may therefore be required to file such documents as exhibits to reports or
registration statements filed under the Securities Act or the Exchange Act.
Purchaser further agrees that the status of such documents and materials as
material contracts shall be determined solely by the Company, in consultation
with its counsel.
13.10 SEVERABILITY. Should any one or more of the provisions
of this Agreement be determined to be illegal or unenforceable, all other
provisions of this Agreement shall be given effect separately from the provision
or provisions determined to be illegal or unenforceable and shall not be
affected thereby.
13.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's representations and warranties herein shall survive the execution and
delivery of this Agreement for one (1) year, and shall inure to the benefit of
Purchaser and its successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE>
IN WITNESS WHEREOF, the parties named below have caused this Agreement
to be executed, as of the date first above written.
PURCHASER:
---------
WOODWARD LLC
By: /s/ David Sims
Its:
------------------------------------
THE COMPANY:
-----------
EUROTECH, LTD.
By: /s/ Don V. Hanhfeldt
Its: President
-----------------------------------
Don V. Hahnfeldt, President
25
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
26
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
27
<PAGE>
EXHIBIT D
ADDITIONAL AGREEMENTS
28
EXHIBIT 10.21
TECHNOLOGY ACQUISITION AND DEVELOPMENT AGREEMENT
AGREEMENT dated as of the 22 day of February 2000, by and
between Eurotech, Ltd. a Washington DC Corporation with offices located at 1216
16th street NW Washington DC 20036 (The "Company") and Mr. a developer, who
resides at (the "Developer").
W I T N E S E T H:
WHEREAS, the Developer has elaborated a concept of "Absolutely
Secret Communication over insecure Channels" (the "Product") as described in
Exhibit A. and the Developer desires to continue the development and bring it to
the marketing stage and ultimately to introduce the product to the market
WHEREAS, COMPANY being a technology transfer firm is willing
to form a start-up company, fund the rest of the development and introduce the
Product to the market and ultimately upon the success of the development to
license, sell, or otherwise turn the Product into a profitable business
including the possibility of taking the formed start-up public,
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and of the benefits of the business development and operations
herein provided, the COMPANY and the Developer agree as follows:
1 . The Company will form and fund a Corporation provisionally
fro the purpose of this Agreement named CryptoCom, Inc. solely to address the
business of this Agreement.
2. The Company requests and the Developer agrees to dedicate
all the time needed for the successful development of the Product. The Developer
will relocate to Washington DC for the time needed for such development and will
work out of the offices of the Company.
3. The Company agrees to pay the Developer the salary of
$6,000/month plus usual Company benefits for the period of one year effective
upon the date of relocation. The Company will pay to the Developer $2000
one-time relocation fee.
4. The Company being the controlling shareholder of CryptoCom
will issue to the Developer 2,000,000 (two million) common shares immediately
upon formation of the CryptoCom. The Company will form CryptoCom no later then
30 days from the date of this Agreement.
<PAGE>
2
The Company expects from the Developer the honest and
objective assessment of the progress and the success of the development of the
Product. In case the Developer feels that he is running into unexpected and/or
non-resolvable difficulties which may result into the significant delay of the
development or even preclude the Developer from finishing the Product or
preclude the Product due to the presently unforeseen and unknown circumstances
from been marketed, the Developer is obligated to inform and discuss such
circumstances with the management of the Company.
5. The Developer agrees that any development, patent or other
intellectual property related to the subject of this agreement will belong to
CryptoCom. The Developer agrees not to disclose the invention to any person or
entity unless the Board of Directors of the Company gives such privilege in
writing. In case the Developer quits the Company before the Product is patented
and successfully marketed the Developer agrees not to work on the invention of
the Product for the period of 5 years.
6. This agreement will remain in force for one year. However
either party to this agreement upon written notification can discontinue it
provided the above provisions are met.
7. This Agreement does not preclude any other arrangements
that might be made between the Company and the Developer in course of conducting
mutual business.
8. This Agreement supersedes any and all prior written and
oral agreements between the Company and the Developer.
9. This Agreement shall be governed by and construed under the
laws of the District of Columbia.
10. This Agreement may be amended or modified only by a
written agreement signed by the parties.
IN WITNESS WHEREOF, THE COMPANY and the Developer have
executed this Agreement as of the date first above written.
The Developer: COMPANY:
SIGNED BY DEVELOPER /s/ Don Hahnfeldt
Don Hahnfeldt
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EUROTECH,
LTD. BALANCE SHEET AS OF MARCH 31, 2000 AND STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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