As filed with the Securities and Exchange Commission on July 20, 2000
Registration No. 333-40650
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT No. 1 TO FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ENDOVASC LTD., INC.
(Exact name of small business Issuer as specified in its charter)
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Nevada 76-0512500 2836
(State or other jurisdiction of (I.R.S. Employer Identification Number) (Primary Standard Industrial
incorporation or organization) Classification Code Number)
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15001 Walden Road
Suite 108
Montgomery, Texas 77356
(936) 448-2222
(Address and telephone number of principal executive offices)
Mr. David P. Summers
15001 Walden Road
Suite 108
Montgomery, Texas 77356
(936) 448-2222
(Name, address and telephone number of agent for service)
Copies of all communications to:
Gregory Sichenzia, Esq.
Sichenzia, Ross & Friedman, LLP
135 West 50th Street
New York, New York 10022
Telephone No.: (212) 664-1200
Facsimile No.: (212) 664-7329
Approximate date of proposed sale to the public:
From time to time after the effective date of this Registration Statement
in light of market conditions and other factors.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<PAGE>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to be Price Per Offering Registration
to be Registered Registered Share Price Fee
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Common Stock, .001 par value 5,550,300 2.00 (1) 11,100,600 $2,931
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1. Based upon bid price of the common stock on June 29, 2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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ENDOVASC LTD., INC.
Cross Reference Sheet
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Form SB-2 Item Number and Caption Captions In Prospectus
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1. Front of Registration Statement and Outside Front Cover of Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus Cover Page, Inside Cover Page,
Outside Back Page
3. Summary Information and Risk Factors Prospectus Summary, Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page, Risk Factors
6. Dilution Not Applicable
7. Selling Stockholders Selling Stockholders, Plan of
Distribution
8. Plan of Distribution Prospectus Summary, Selling
Stockholders
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and Control Persons Management, Principal
Stockholders
11. Security Ownership of Certain Beneficial Owners and Management Principal Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters
14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Management
15. Organization Within Last Five Years Not Applicable
16. Description of Business Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of Operation Management's Discussion and
Analysis of
Financial
Condition and Results
of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related Shareholder Matters Front Cover Page, Description of
Securities
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure Not Applicable
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ENDOVASC, LTD., INC.
5,550,300 shares of common stock
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Endovasc, Ltd., Inc.: Our principal executive offices are located at Endovasc, Ltd., Inc.,
15001 Walden Road, Suite 108, Montgomery,
Texas 77356, and our telephone number is (936)
448-2222.
Over the Counter Electronic Bulletin Board Market Symbol: ENDV
The Offering: All of the shares of common stock being sold are offered by selling
stockholders. We will not receive any proceeds from the sale of the
shares by the selling stockholders.
A total of 5,550,300 shares of our common
stock are being offered.
The selling stockholders may sell all or any
portion of the shares in this offering in one
or more transactions by a variety of methods,
including through the Over The Counter
Bulletin Board or in negotiated transactions.
The selling stockholders will determine the
selling price of the shares. The selling
stockholders will also pay any broker or
dealer commission, fee or other compensation
or underwriter discount.
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YOUR INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE
INVESTING IN OUR COMMON STOCK, YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED
UNDER "RISK FACTORS" BEGINNING ON PAGE NINE.
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Neither the Securities and Exchange Commission nor any state Securities
Commission has approved or disapproved of these securities or Determined IF this
prospectus is complete or accurate. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is July 21, 2000
<PAGE>
PROSPECTUS SUMMARY
Endovasc Ltd., Inc.
The Offering
This prospectus relates to the possible sale of up to 5,550,300 shares of
common stock, including 4,285,717 shares of common stock underlying Series A
Convertible Preferred Stock, 395,583 shares of common stock underlying common
stock purchase warrants of Endovasc Ltd., Inc., and 869,000 shares of common
stock held by selling stockholders of Endovasc Ltd., Inc. The selling
stockholders may sell all or any portion of the shares in this offering from
time to time in one or more transactions by a variety of methods, including
through the Over the Counter Electronic Bulletin Board or in negotiated private
transactions. The selling stockholders will determine the selling price of their
shares.
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The Company..................... We develop, market and license
biopharmaceutical products, particularly
liposomal drug delivery methods, for the
human healthcare industry. We develop
microscopic cell-like spheres, known as
liposomes, to entrap and protect drugs
from degradation in the blood stream and
can deliver drugs to their intended
target for controlled and efficient
administration.
Our current product development focuses
on two technologies - Liprostin(TM) and
Nicotine Receptor Agonist. Our Liprostin
technology is a Prostaglandin E-1
delivery system for lung and heart
related medical applications. Our
Nicotine Receptor Agonist technology
promotes blood vessel growth intended for
use in various biological applications.
Our products are in the process of
clinical testing and have not been
approved for general sales. Consequently,
we have not generated revenues and have
historically operated with significant
losses. We intend to develop several
medical treatment product lines based on
these two technologies.
Shares Outstanding................... We are authorized to issue 100,000,000
shares of common stock and 20,000,000
shares of preferred stock, which may be
issued in one or more series. As of May
31, 2000, there were 12,736,675 shares of
common stock and 15,000 shares of
preferred stock issued and outstanding.
Use of Proceeds....................... We will not receive any proceeds from the
sale of the common stock offered by the
prospectus.
Trading Symbol..................... Our common stock trades on the Nasdaq
Over the Counter Electronic Bulletin
Board under the symbol ENDV.
Forward-Looking This prospectus contains forward-looking
Statements.......................... statements that address, among other
things, our expansion and acquisition
strategy, business development, use of
proceeds, projected capital expenditures,
liquidity, and our development of
additional revenue sources. The
forward-looking statements are based on
our current expectations and are subject
to risks, uncertainties and assumptions.
We base these forward-looking statements
on information currently available to us,
and we assume no obligation to update
them. Our actual results may differ
materially from the results anticipated
in these forward-looking statements, due
to various factors.
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SUMMARY FINANCIAL DATA
The following table contains historical operating data of Endovasc Ltd., Inc.
for the two fiscal years ended June 30, 1999 and 1998, which is derived from the
audited financial statements; and for the nine months ended March 31, 2000 and
1999, which is derived from the unaudited financial statements.
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Nine Months Ended Year Ended
March 31, June 30,
2000 1999 1999 1998
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(Unaudited) (Audited)
STATEMENT OF OPERATIONS DATA
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Revenues $ 24,283 $ 5,000 $ 5,000 $ -
Net loss (1,786,203) (366,249) (796,543) (1,032,834)
Basic and dilutive net
loss per share (0.16) (0.05) (0.11) (0.15)
BALANCE SHEET DATA
Total assets $ 211,518 $ 59,782 $ 137,455 $ 43,285
Working capital deficit (313,419) (645,790) (461,280) (533,247)
Total liabilities 539,337 1,154,187 797,270 636,084
Stockholders' equity
(deficit) (327,819) (1,094,405) (659,815) (592,799)
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CAPITALIZATION
The following table states our capitalization as of March 31, 2000. This table
should be read together with our financial statements included elsewhere in this
prospectus.
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Debt-notes payable $ 115,646
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Stockholders' deficit:
Common stock, par value $0.001 per share;
100,000,000 shares authorized; 13,864,335
shares issued and 11,129,335 shares outstanding 13,864
Additional paid-in capital 4,238,168
Accumulated deficit (4,562,940)
Treasury stock (16,911)
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Total stockholders' deficit (327,819)
-----------
Total capitalization $ (212,173)
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RISK FACTORS
Prospective investors should carefully consider the following factors,
in addition to the other information contained in this prospectus, in connection
with investments in the securities offered hereby. This prospectus contains
certain forward-looking statements which involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of certain factors, including those set
forth below and elsewhere in this prospectus. An investment in the securities
offered hereby involves a high degree of risk.
Limited Operating History. Due to our limited operating history, our
ability to operate successfully is materially uncertain. We are subject to all
risks inherent in a developing business enterprise. Our limited operating
history makes it difficult to evaluate our products, as well as the likelihood
of regulatory approval, commercial viability, and market acceptance of our
products. Our potential success must be evaluated in light of the problems,
expenses and difficulties frequently encountered by new businesses in general
and biopharmaceutical businesses specifically.
Net Operating Losses. We incurred net losses of $796,543 and $883,014,
for our fiscal year ended June 30, 1999 and quarter ended March 31, 2000,
respectively. Our products are in clinical testing and are subject to government
approval for general sales. Consequently, we have not generated any revenues and
have historically operated with significant losses. We expect operating losses
to continue indefinitely, due to research, marketing government filing,
commercialization, pre-clinical and clinical program expenses. Our revenues may
never exceed expenses. If our operating losses continue on a long-term basis,
our operations may be adversely and materially effected.
Need for Additional Financing. We may have insufficient capital
resources to develop and implement our business plan, and may need to raise
additional capital. We have not investigated the availability, sources or terms
of additional capital, and are unlikely to do so until we need additional
capital. If additional capital is needed, there is no assurance that it will be
available or based on acceptable terms. If additional capital is unavailable, we
may be forced to limit our operations accordingly. This may adversely and
materially effect our operations.
Limited Trading of the Our Common Stock; Possible Volatility of Stock
Prices. Our common stock trades publicly on the OTC Bulletin Board. We cannot
assure that a regular trading market for the common stock will develop, and if
it develops, that it can be sustained. OTC Bulletin Board trading affords us
limited market liquidity. Consequently, our shares' trading market may be
adversely affected by the influx of shares offered pursuant to this prospectus.
Although it is impossible to predict market influences and prospective values
for securities, an increase in the number of shares available for public sale
may adversely affect our trading market. Until a trading market develops, if at
all, the market price for our common stock may be volatile and shift
dramatically based on the success of our operations, among other factors. Stock
markets also have experienced, and continue to experience, extreme price and
volume fluctuations in the market price of small capitalization companies. These
fluctuations may be unrelated to the Company's operating performance. These
market fluctuations, as well as general economic and political conditions, may
adversely affect our common stock's market price.
Possible Limitations upon Trading Activities; Restrictions Imposed upon
Broker-Dealers Effecting Transactions in Certain Securities. The Securities and
Exchange Commission has adopted regulations restricting the trading of certain
low priced securities (referred to as "penny stock"). Under these regulations,
penny stock is defined as any equity security with a market price less than
$5.00 per share. This definition excepts any equity security listed on the
Nasdaq National Market System or SmallCap Market and any equity security issued
by an issuer that has (i) net tangible assets of at least $2,000,000, if such
issuer has been in continuous operation for three years, (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous operation
for less than three years, or (iii) average annual revenue of at least
$6,000,000 if such issuer has been in continuous operation for less than three
years. Unless an exception is available, a penny stock transaction must be
preceded by the delivery of a disclosure schedule explaining the penny stock
market and its risks. Also, under these regulations, certain broker/dealers who
recommend such securities to persons other than established customers and
certain accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale.
Our common stock presently constitutes a "penny stock;" accordingly,
trading activities for our common stock may be more difficult to execute than
trading activities for securities not defined as "penny stocks." This may
depress the market for our securities and hinder investors' ability to dispose
of our securities.
<PAGE>
Absence of Dividends. We have not paid or declared cash dividends to
holders of our common stock, and do not intend to do so in the foreseeable
future. Our Board of Directors is empowered to declare dividends, if any, to
holders of the common stock, based on our earnings, capital requirements,
financial condition, and other relevant factors. In addition, our credit
facility may prohibit the payment of dividends under certain circumstances. We
cannot assure that we will ever pay dividends to holders of our common stock.
Control by Existing Shareholders; Anti-Takeover Effects. Our executive
officers, Directors and other principal shareholders, beneficially own
approximately 38% of our outstanding shares of common stock. The voting power of
these shareholders may delay or prevent a change in control of our company.
Similarly, minority shareholders may be unable to elect any of our Directors,
because our shareholders cannot accumulate their votes to form the majority
necessary to elect a Director.
Competition. We operate in highly competitive markets, against
competitors that may have greater financial resources, longer operating
histories, greater technical capabilities, and greater name recognition than we
have. Many of our competitors are more familiar with pre-clinical and clinical
product development, as well as government regulatory processes, than we are.
The drugs we are developing compete with existing and new drugs designed by
established pharmaceutical, chemical, and academic entities worldwide. Moreover,
our competitors' existing and new products compete include the liposome and
lipid-based systems drug delivery technologies that we are developing. Our
failure to compete effectively with these competitors may materially and
adversely affect our business, operating results, and financial condition.
No Assurance of Regulatory Approval. Before we can market our products,
they are subject to rigorous preclinical and clinical testing and approval by
the Food and Drug Administration, comparable agencies in other countries, and
state regulatory authorities. The clinical trial and regulatory approval
processes for biopharmaceutical products typically lasts several years and
involves significant expenditures. Even after receipt of regulatory approval for
a product, we remain subject to periodic review from government regulatory
bodies. Any product dangers that are discovered after a product's release may
result in withdrawal of that product from the market or restrictions on its
future use. Our inability to obtain and maintain regulatory approval for our
products may materially and adversely affect our operations.
No Assurance of Market Acceptance of Developing Technology. Our success
and competitive position depends upon acceptance of the products we develop.
Although liposome and lipid-based products have been approved for sale in some
European countries, none are commercially available in the United States. Our
products must undergo extensive clinical testing, government agency review, and
commercial development prior to their release in the United States.
Unanticipated side effects or unfavorable publicity surrounding any liposome or
lipid-based product may adversely effect our ability to obtain physician,
patient or third-party payer sales of our products. We cannot assure our ability
to achieve product commercialization or that physicians, patients or third-party
payers will accept our products. Our inability to achieve commercialization or
market acceptance of our products may materially and adversely affect our
operations.
Dependence on Key Personnel; Need for Additional Personnel. Our success
depends on the continuing services of Dr. David Summers, our Chief Executive
Officer. The loss of Dr. Summers could have a material and adverse effect on our
operations. Our success also depends on our ability to attract and retain
qualified scientific, engineering, manufacturing, sales, marketing, and
management personnel. We believe that the our industry's employment market is
highly competitive. We cannot assure our success in attracting and retaining key
personnel for our operations. Our inability to attract and retain key personnel
may materially and adversely affect our operations.
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Dependence on Additional Facilities, Manufacturing and Marketing
Personnel. Our facilities and personnel are insufficient for large-scale
production and marketing of our products. In addition, we have limited
experience in marketing biopharmaceutical products. We cannot assure our success
in expanding our manufacturing and marketing capabilities. Our inability to
establish adequate manufacturing and marketing capabilities may materially and
adversely affect our operations.
Dependence on Third-Party Distributors and Agents. Upon commercial
distribution of our products, if any, third-party distributors or agents may
affect most of our sales. We cannot assure the availability of third-party
distributors and agents, or that an agreement with them will be available on
terms acceptable to us. Our potential dependence on third-party distributors or
agents may cause fluctuations in product revenues, based on their success in
selling our product. Our inability to enter into agreements with third-party
distributors or agents and our dependence on their sales of our product may
materially and adversely affect our operations.
Dependence on Third-Party Manufacturers. Upon commercial distribution
of our products, if any, third-party contract manufacturers may affect
large-scale production of our products. We cannot assure the availability of
third-party manufacturers that meet governmental regulatory standards for the
manufacture of our products, or that an agreement with them will be available on
terms acceptable to us. Our potential dependence on third-party manufacturers
may cause fluctuations in product revenues, based on their ability to
manufacture our products according to our specifications and production
requirements. Our inability to enter into agreements with third-party
distributors or agents and our dependence on their manufacture of our product
may materially and adversely affect our operations.
Dependence on Raw Materials. Although our current agreements provide
adequate supplies of raw materials for our products, the number of qualified
suppliers of these materials is limited. We cannot assure our ability to obtain
adequate supplies of raw materials for our products from current suppliers or
alternative sources. Our inability to obtain adequate supplies of key raw
materials may materially and adversely affect our operations.
Risks Associated with Intellectual Property. Our success depends upon
our ability to obtain and maintain proprietary technology used in our products.
Accordingly, we rely on patent, trade secret, trademark and copyright law to
protect our proprietary technology. Although we have sought to protect this
technology under United States intellectual property law, we cannot assure that
any of our filed patent applications will not be invalidated, circumvented,
challenged or licensed to others. Similarly, we cannot assure that any rights
granted pursuant to our patent filings will provide us with a competitive
advantage or that any of our pending or future patent applications will provide
the scope of proprietary coverage that we seek. We also cannot assure that
others will not develop similar or superior technologies, or circumvent our
proprietary protection through new designs. In addition, we may be unable or
unwilling to obtain effective patent, trademark, copyright and trade secret
protection in certain foreign countries. We cannot assure our ability to protect
our proprietary technology and our inability to do so may materially and
adversely affect our operations.
Typically, companies in our industry vigorously pursue and defend
intellectual property rights or positions, which often results in extensive
litigation. Although there is no intellectual property litigation currently
pending against us, we may be notified of claims that we are infringing on other
parties' intellectual property rights. If necessary or desirable, we may seek
license agreements for such intellectual property rights from these parties. We
cannot assure that these parties will offer us any license agreement or that the
terms of any offered license will be acceptable to us. Our inability to obtain a
license for such intellectual property may require us to stop manufacturing or
distributing products using that technology. In addition, any litigation related
to our infringement of intellectual property rights may materially affect our
financial and human resources, whether or not such litigation is decided in our
favor. In the event that such litigation is decided against us, we may also be
required to pay substantial damages, cease the manufacture, use, sale or
importation of infringing products, discontinue the use of certain processes,
expend significant resources to develop or acquire non-infringing technology, or
obtain licenses to the infringing technology. We cannot assure our success in
dealing with any circumstances arising from litigation related to our
infringement of intellectual property rights. Our inability to deal with
circumstances arising from intellectual property litigation may materially and
adversely affect our operations.
Product Liability. Our testing, manufacturing, marketing and
distribution of biopharmaceutical products carry a material risk of product
liability. We cannot assure that we have adequate insurance to protect against
product liability, that we can renew such insurance, or that the amount and
scope of our insurance coverage will be adequate in the event of a successful
product liability claim. Inadequate insurance coverage may materially and
adversely affect us in the event of a successful product liability claim.
<PAGE>
Government Health Care Reform. Government legislation regulating health
care may materially affect the biopharmaceutical industry's profitability.
Federal, state and local officials and legislators, as well as foreign
government officials and legislators, have discussed a variety of health care
system reforms that may affect our revenues. We cannot assure that government
regulation of health care system changes will not materially and adversely
affect our business.
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USE OF PROCEEDS
This prospectus has been distributed solely to permit the selling
stockholders to offer and sell their shares. Consequently, the selling
stockholders will receive all proceeds, and we will receive no proceeds, from
the sale of the shares being offered. Nonetheless, we previously received
proceeds from the original issuance of the shares covered by this prospectus.
DETERMINATION OF OFFERING PRICE
This offering is being affected solely to allow selling stockholders to
sell their shares. The selling stockholders may sell some or all of their shares
at the time and price that they choose. The selling stockholders will determine
the price for their shares as the market for the shares develops.
DIVIDENDS
We have paid no dividends on any shares of our common stock and our
Board of Directors has no intention of paying any dividends on our common stock
in the foreseeable future. Our payment of dividends on our common stock, if any,
is solely within the discretion of the Board of Directors and depends upon our
earnings, capital requirements and financial condition, as well as other factors
deemed relevant by our Board of Directors. Our ability to pay dividends on
common stock may be limited by agreements with institutional lenders or others.
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MARKET FOR SECURITIES
The following chart lists the high and low bid (price which a market
maker is willing to pay for a share of common stock) and offer (price at which a
market maker will sell a share of common stock) quotations for the common stock,
as reported by brokerage firms making markets in our securities on the specified
dates according to the OTC Bulletin Board. These quotations are between dealers,
do not include retail mark-ups, markdowns or other fees and commissions, and may
not represent actual transactions.
Date Low / Bid Price High / Ask Price
1st Quarter - 1998 * *
2nd Quarter - 1998 * *
3rd Quarter - 1998 3/8 6
4th Quarter - 1998 5/8 1 1/2
1st Quarter - 1999 3/16 1
2nd Quarter - 1999 3/8 7/8
3rd Quarter - 1999 1/8 5/8
4th Quarter - 1999 3/50 3/10
1st Quarter - 2000 1/10 15
2nd Quarter - 2000 1 1/5 3 1/2
(through May 31, 2000)
* No bids or trades reported
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this prospectus that are not historical are
forward-looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future.
Forward-looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward-looking statements included in this prospectus are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statement. It is important to note
that the Company's actual results could differ materially from those in such
forward-looking statements. Additionally, the following discussion and analysis
should be read in conjunction with the Financial Statements and notes thereto
appearing elsewhere in this prospectus.
We are in the development stage and have had limited operating revenues
since our inception on June 10, 1996. From June 10, 1996 through March 31, 2000,
we had an accumulated deficit of $3,659,751. During our fiscal nine months ended
March 31, 2000, we entered into an exclusive worldwide license agreement with
Stanford University for the patent rights to a patent application SUN-142-PRV.
This patent application covers a novel use of nicotine to promote growth of new
blood vessels (angiogenesis) into areas of blood-starved tissue, a condition
called ischemia. Pursuant to the license agreement, we obtained a ten year
exclusive right of novel use of nicotine in angiogenesis. Stanford will continue
research and development for our research products under the licensing
agreement, subject to pending agreements. Management anticipates that this
collaboration will save us approximately $500,000 in initial research costs
attributable to Stanford's allocation of research facilities and investigational
scientists. We believe that the Stanford research alliance and agreement has
significantly enhanced our technology portfolio.
In October 1999, we presented pre-clinical data to the United States
Food and Drug Administration (FDA) for our Investigational New Drug (IND) filing
regarding Liprostin. Liprostin is our liposomal prostaglandin E-1 (PGE-1) drug
intended for indications of critical limb ischemia (CLI). Upon review of our
data, the FDA has agreed to waive Phase I & II clinical trial requirements, if
we elect to proceed directly to a Phase III trial for the product. We have not
yet decided to accept this waiver or proceed with a conventional Phase I study,
which we were prepared to commence at the time of the FDA's pre-submission IND
meeting. In addition, we completed our FDA-required certified good manufacturing
practice ("cGMP") development of Liprostin at the Collaborative BioAlliance
manufacturing facility in Stoney Brook, New York. Clinical trial production
levels of Liprostin are expected by the end of the third quarter, 2000, when our
clinical studies will commence.
During the nine months ended March 31, 2000, our net revenues increased
to $24,283 compared with revenues of $5,000 for the same period in 1999. All
revenues during this period were from our sale of research and development
services to third parties. At March 31, 2000, we had agreements with two device
manufacturers for research and development of the proprietary use of Liprostin
in treatment of vascular diseases. Our proposed development uses include the
application of medicinal coatings to vascular stents for elimination or
reduction of new tissue growth in and around the stents, a condition known as
restenosis.
During the first nine months of 1999 and 2000, costs and operating
expenses were $371,249 and $1,810,486, respectively. This increase in costs and
operating expenses was primarily attributable to increased research and
development, facilities, and overhead costs.
Cash flows used in operating activities for the first nine months
increased $437,973 to $484,567 during the first nine months of 2000, compared to
$46,594 for the same period in 1999. This cash flow increase was primarily
attributable to increased costs of scientific personnel, materials and prototype
manufacturing.
Interest expense decreased for the nine months ending March 31, 2000 by
$41,917, or 41%. This interest expense decrease was primarily attributable to
reduced short term and long term debt, which was converted to equity.
Research and development expenses totaled $1,035,724 during the fiscal
nine months ended March 31, 2000, an increase of $825,565. This increase in
research and development expenses was primarily attributable to increased cost
of new equipment, materials, labor and travel connected to the production
scale-up for the Liprostin product under contract with Collaborative
BioAlliance, Inc. in Stoney Brook, New York and the ongoing, in-house projects
for medicinally coated vascular stents.
<PAGE>
Liquidity and Capital Resources
We had a working capital deficit on March 31, 2000, of $313,419,
compared to $366,249 as of March 31, 1999.
We need additional funds to continue our Liprostin product development
and to complete our FDA required clinical trials. In May 2000, we completed a
$4.5 million financing commitment through a private placement and sale of our
convertible preferred stock in three (3) $1.5 million traunches. Pursuant to the
commitment, we received $1.5 million on May 10, 2000, with $3 million remaining
in the take-down. We cannot assure that we will receive any funds from the
remaining traunches.
We continue to actively pursue additional financing, collaborations
with firms, and other arrangements aimed at increasing our capital resources.
Our inability to acquire additional funds may adversely impact our scheduled
Liprostin introduction and may adversely affect our operations.
<PAGE>
BUSINESS
History
We incorporated as a biopharmaceutical company under the laws of the state
of Nevada on June 10, 1996, under the name Endovasc, Inc. Upon our initial
incorporation, we were authorized to issue an aggregate of 25,000 shares of
capital stock with a par value of $0.001 per share. On September 5, 1996, we
amended our articles of incorporation to increase our authorized shares to
100,000,000 shares of common stock, par value $0.001 per share. On May 28, 1997,
we amended our articles of incorporation to change our name to Endovasc Ltd.,
Inc. On June 2, 1997, we amended our articles of incorporation to authorize a
total of 120,000,000 shares of capital stock, par value $0.001 per share, of
which 100,000,000 shares are common shares and 20,000,000 shares are preferred
shares.
On or about October 8, 1999, we received preclinical approval to file an
Investigational New Drug application for Phase I and II clinical trials of our
Liprostin technology. On or about February 25, 1999, we obtained the exclusive
licensing rights to Nicotine Receptor Agonist technology from the University of
Stanford, in exchange for stock and cash. We have commenced preclinical trials
on the safety and efficacy of NRA in conjunction with Stanford University.
Pursuant to our agreement with Stanford University, we are financing their
staff's clinical trials and animal studies of NRA at their California
facilities.
The Company has not been subject to bankruptcy, receivership or any similar
proceeding.
Overview
We develop, market and license biopharmaceutical products, particularly
liposomal drug delivery methods, for the human healthcare industry. We develop
liposomes, which are microscopic cell-like spheres composed of a thin, durable
lipid membrane surrounding a hollow compartment. Liposomes entrap and protect
drugs from degradation in the blood stream and can be engineered to regulate the
transport of molecules across their outer membrane. Using this technology, we
are developing products that deliver drugs to their intended target and release
them with efficiency and control.
Currently, our product development is focused on two product lines -
Liprostin and Nicotine Receptor Agonist. Although we hold patents and patents
pending for products in the process of clinical testing, our products have not
been approved for general sales. Consequently, we have not generated any
revenues and have historically operated with significant losses. Although our
current development efforts focus on vascular (heart and lung) applications of
our products, we intend to develop our technologies for use in many medical
treatment applications. We believe that this unique and highly adaptable
technology will put our products at the forefront of the $2 billion drug market.
Liprostin Technology
Our Liprostin products provide targeted delivery of Prostaglandin E-1 to
blood vessels in connection with angioplasty procedures. Angioplasty is a common
medical procedure that utilizes a small balloon-like structure to expand and
clear blocked cardio-pulmonary blood vessels. Prostaglandin E1, a naturally
occurring hormone, is used to prevent common secondary blockages from occurring
after angioplasty treatment; these blockages are known as restenosis. Restenosis
following balloon angioplasty or stent placement is the most common problem
occurring in the over 1,000,000 patients undergoing these procedures annually
worldwide, according to the American Heart Association. The incidence of
restenosis can be as high as 40-50%, according to the American Heart
Association, within six months of the procedure (slightly less with stents) and
most drugs tested have not yet been proven to reduce restenosis significantly in
clinical trials. Similarly, Prostaglandin E1's short lifespan in the blood
stream can render it ineffective in preventing restenosis. Liprostin delivery
system uses polymer coatings and emulsions to provide a longer and more
controlled release of Prostaglandin E1 and to improve therapeutic effectiveness
of the drug.
We are developing Lipostrin coated balloon catheters and stents for varied
vascular applications. As described above, balloon catheters are utilized to
physically expand and clear blocked blood vessels in vascular surgical
procedures. Conversely, stents are small structures used during and after
vascular surgery to support vessels and deliver agents that promote healing. We
intend to develop our Liprostin product lines further to treat conditions such
as restenosis, coronary arrest, occlusive disease, ischemic ulcers, CLI (limb
salvage), claudicants, liver disease and arthritis.
<PAGE>
We are conducting clinical trial testing of Liprostin to obtain the
Federal Drug Administration approval of its sale in the United States. Phase I
clinical trials test product safety and tolerance levels using a small group of
subjects, as well as providing information about the product's effectiveness and
dosage levels. Phase II clinical trials test product efficacy, optional dosage
levels and potential contraindications or side effects using a larger patient
group. We intend to complete both phases of clinical trials by approximately
December 31, 2002.
We have protected our proprietary rights to Liprostin technology
through US Patent 4,820,732, US Patent 4,955,878 and Notice of Allowance to US
Patent 5,980,551 received on November 9, 1999, and Trademark Application Ser.
No. 75/632,736 (Liprostin) and various patents pending.
Nicotine Receptor Agonist Technology
Our Nicotine Receptor Agonist technology promotes new growth of blood
vessels (known as angiogenesis or vasculogenesis), and has applications in the
treatment of heart disease, stroke, limb circulatory disease, and wound healing.
Researches at Stanford University discovered the technology during a 1999 study
funded by the Tobacco-Related Diseases Research Program of the University of
California, the American Heart Association, the National Institutes of Health
and the Deutsche Froschungsgemeinschkaft. While studying the damaging effects of
tobacco smoke, researchers discovered that smokers appeared less susceptible to
deaths due to infarction as compared to non-smokers. This counterintuitive
discovery suggested that low-dose (non-smoked) nicotine had extraordinary
angiogenic and vasculogenic growth factor potential. To develop technology based
on this unique discovery, we obtained a worldwide exclusive right to the patent
application for Nicotine Receptor Agonist in February 2000.
Further study of our Nicotine Receptor Agonist technology revealed more
conclusive results. Experiments have shown that nicotine promotes angiogenesis
and vasculogenesis in areas of the body that are deprived of proper blood
supply. Blockages of the arteries that feed an organ, often caused by build-up
of fatty material, cholesterol and plaques in arterial walls, may deprive the
tissue of proper blood supply. These blockage reduce the body's ability to
supply organs and surrounding tissue with nutrients, particularly oxygen, which
results in a condition called ischemia. Ischemia reduces cells' ability to
function and in severe cases causes rapid cell death. The body naturally defends
against ischemia by reducing the work required from the affected area and
attempting to grow new blood vessels into the ischemic area. Stanford
researchers found tobacco smokers had significantly more growth of new vessels
around such blockages than non-smokers, apparently due to the therapeutic
effects of nicotine. Upon further analysis, researchers determined that a
particular fraction of the nicotine molecule could provide a method of treating
and preventing a range of diseases and ailments involving angiogenesis. These
diseases, such as myocardial and cerebral infarction, mesenteric or limb
ischemia, common wounds, vascular occlusion, and vascular stenosis, commonly
called "hardening of the arteries", affect millions of persons every year in the
United States alone (American Heart Association).
We estimate that the market for treatment of these diseases is over $5
billion. For example, we estimate that a course of treatment for coronary
ischemia utilizing Nicotine Receptor Agonist drugs would cost approximately
$10,000 to $15,000. This type of treatment would be significantly less expensive
and intensive than current alternatives of angioplasty and or open heart
surgery. We hope to market a commercially viable product using this Nicotine
Receptor Agonist technology within three years.
Distribution Methods
Upon receipt of necessary governmental regulatory consent, we intend to
distribute products utilizing our Liprostin and Nicotine Receptor Agonist
technologies worldwide. As previously described, we are developing Lipostrin
coated balloon catheters and stents for varied vascular applications. We also
intend to develop new products that use Liprostin to treat conditions such as
coronary arrest, occlusive disease, ischemic ulcers, CLI (limb salvage),
claudicants, liver disease and arthritis. Although we have not developed
specific product applications for our Nicotine Receptor Agonist technology, we
intend to develop and distribute products for treatment of myocardial and
cerebral infarction, mesenteric or limb ischemia, common wounds, vascular
occlusion and vascular stenosis.
<PAGE>
In addition to peer review, seminars, journals and direct sales, we intend
to market and distribute our products in conjunction with business partners
experienced in marketing and distribution in the biopharmaceutical and medical
industries. If we are unable to reach an agreement with marketing and
distribution partners that is acceptable to us, we may raise the funds necessary
to create our own production, marketing and distribution infrastructure through
a public offering of our securities.
Patents and Proprietary Rights
We believe that adequate protection of our proprietary technology is a
vital aspect of our business operations. Consequently, we pursue patent
protection for our proprietary technology in the United States and in foreign
countries, as deemed necessary to protect development of our operations.
We have patent protection for several products and are pursuing patent and
trademark applications for additional products. In August 1996, Dr. Jackie R.
See transferred and assigned patent rights in the United States, Germany and
Canada for two of our products. The first patent, United States Patent No.
4,820,732, was issued on April 11, 1989, and protects our proprietary technology
regarding a "Method and Composition for Reducing Dysfunction in Angioplasty
Procedures." The second patent, United States Patent No. 4,955,878, was issued
on September 11, 1990, and protects our proprietary technology regarding a "Kit
for Treating Arterial Dysfunction Resulting from Angioplasty Procedures." We
have not maintained the application of this second patent and intend to let its
protections expire to the benefit of the public domain, except as limited by
patent applications described below.
In addition to these assigned patents, we obtained a United States patent
for our proprietary technology regarding a "Composition and Method for Making a
Biodegradable Drug Delivery Stent," on November 9, 1999. Similarly, we have
filed a patent application for this technology under the Patent Cooperation
Treaty, as well as with the European Patent office and European Union. These
applications seek patent protection in France, Germany and the United Kingdom.
We have United States patent applications pending for several other
technologies. In June 1997, we filed a United States patent application for our
proprietary technology regarding a "Method and Apparatus for Treating Vascular
Disease with PGE-1 Bearing Liposomes." In May 1999, we filed a United States
patent application for our proprietary technology regarding "Prosthesis with
Biodegradable Surface Coating and Method for Making Same." The May 1999
application is a "continuation in part" of our patent application regarding
"Composition and Method for Making a Biodegradable Drug Delivery Stent," and, if
granted, will protect this technology's application in various medical products.
In June 1999, we filed a United States patent application for our proprietary
technology regarding "Sterically Stabilized Liposomes with Improvement of Blood
Retention Times and Targeting of Sites of Disease by Prostaglandins in
Particulate Drug Carriers."
We are seeking trademark protection for the name Liprostin(TM) under
Trademark Application Ser. No. 75/632,736. In May of 1999, the United States
Patent and Trademark Office notified us that our pending Patent US Ser. No.
09/309,949 would be allowed (Notice of Allowance). We also own rights to several
trademarks employed in our business, including our logo, the registered domain
name of www.endovasc.com, and other trade and service marks identifying our
products and services.
In February 2000, we obtained exclusive worldwide licensing rights to
develop, manufacture, use and sell products incorporating nicotine and nicotine
agonists for therapeutic angiogenesis. Pursuant to our acquisition of these
product rights from the Leland Stanford Junior University, we agreed to pay
royalties to the university on sales of any products incorporating the nicotine
agonist technology. Our licensing rights may be terminated in the event that we
default on payment of royalties, in addition to certain other circumstances.
It is important to note that other public and private institutions may have
obtained, or filed applications for, patents that we may need for development of
our products. We cannot know the scope or validity of such patents, the extent
that we may desire to acquire licenses under such patents, or the availability
of such licenses upon terms that are acceptable to us.
<PAGE>
Governmental Regulation
United States and international governmental regulation of the
biopharmaceutical industry is a significant factor in our operations,
particularly our research and development activities. In the United States the
Food and Drug Administration oversees clinical testing, production and marketing
of our products for human therapeutic use through rigorous mandatory procedures
and safety.
The Food & Drug Administration requires satisfaction of several
procedures prior to approving marketing and distribution of pharmaceutical
products in the United States. These includes (i) preclinical tests, (ii)
submission of an application for an Investigational New Drug, which must become
effective before commencing human clinical trials, (iii) thoroughly documented
and supervised human clinical trials to determine drug safety and efficacy in
its intended application, (iv) submission and acceptance of an Investigational
New Drug Application, in the case of drugs, or a Product License Application, in
the case of biologics, and (v) approval of the Investigational New Drug
Application or Product License Application prior to commercial sale or shipment
of the drug or biologic. In addition to this process, each domestic drug
manufacturing establishment must be registered or licensed with the Food and
Drug Administration. Domestic manufacturing establishments are also subject to
inspections by the FDA and by other federal, state and local agencies and must
comply with Good Manufacturing Practices as required.
Clinical trials are typically conducted in three sequential phases,
which may overlap. Phase I clinical studies test dosage and tolerance upon
initial introduction of the drug to humans. Phase II clinical studies document
evaluation of drug safety and efficacy. Phase III trials document large scale
evaluation of drug safety and efficacy and may utilize larger patient pools,
depending on the type of marketing approval that is sought.
Clinical testing and the Food and Drug Administration approval process
for a new product often involves significant time and resources. The Food and
Drug Administration may grant an unconditional approval of a drug for a
particular indication or may grant approval pending further post-marketing
testing. In addition, further clinical studies may be required to provide
additional safety data or to gain approval for an alternative product
application than was originally approved.
International biopharmaceutical product sales and distribution are
subject to widely varying regulatory requirements. Generally, the European Union
has coordinated its member states' common standards for clinical testing of new
drugs. Due to difference in regulatory restrictions in the European Union and
other foreign jurisdictions the time required to obtain regulatory approval from
a foreign country's regulatory agencies may be longer or shorter than that
required for Food and Drug Administration approval.
In addition to these regulations, our operation is subject to
regulations under state and federal law regarding occupational safety,
laboratory practices, the use and handling of radioisotopes, environmental
protection and hazardous substance control as well as other present and possible
future local, state, federal and foreign regulation.
Competition
Competition in the biopharmaceutical industry and the liposome and
lipid-based product area is intense. Factors such as product performance,
patient compliance, physician acceptance, ease of use, safety, price, marketing,
distribution and adaptability of administration are crucial to capturing market
position in our industry. Competition may also be based on other company's
development of alternative products and approaches aimed at the treatment,
diagnoses or prevention of the same diseases as our products.
Competition from other companies is based on scientific and
technological factors, the availability of patent protection, the ability to
commercialize technological developments, the ability to obtain government
approval for testing, manufacturing and marketing and the economic factors
resulting from the use of those products. Many companies, both public and
private, including well-known pharmaceutical and chemical companies, many of
which have greater capital resources than we do, are seeking to develop lipid
and liposome based products similar to our own. In addition, colleges,
universities, and public and private research institutions are similarly seeking
to establish proprietary rights to these product technologies.
We face established and well-funded competition from other companies
developing liposome based drug delivery systems. These competitors include Eli
Lilly, The Liposome Company and Schering-Plough. These companies generally use
liposome for the delivery of antitumor drugs, while our products are primarily
intended for use in vascular treatments. To our knowledge, current competition
in the vascular treatment area is limited to ReoPro(R) sold by Censtocor and
marketed by Eli Lilly, which is used in angioplasty.
<PAGE>
Research and Development
We maintain 3,500 square feet of lab space equipped with customary wet
laboratory equipment at our headquarters in Montgomery, Texas.
Our research and development efforts are focused on our core product -
Liprostin. We are conducting clinical trial testing of Liprostin to obtain the
Federal Drug Administration approval of its sale in the United States. Phase I
clinical trials test product safety and tolerance levels using a small group of
subjects, as well as providing information about the product's effectiveness and
dosage levels. Phase II clinical trials test product efficacy, optional dosage
levels and potential contraindications or side effects using a larger patient
group. We intend to complete both phases of clinical trials by approximately
December 31, 2002.
In addition, we are conducting feasibility studies with prospective
strategic partners to find practical collaborative products that incorporate
Liprostin with other technologies. We intend to develop new uses for our core
product Liprostin, including applications in hip or bone prostheses, cancer
treatment, inflammatory disease, liver disease and other diseases that have
responded well to prostaglandin treatment.
We are monitoring and assisting Stanford University's research and
development of our Nicotine Receptor Agonist technology and have commenced
preclinical trials, in conjunction with the university, on the safety and
efficacy of this technology. Pursuant to our agreement with Stanford University,
we are financing their staff's clinical trials and animal studies of Nicotine
Receptor Agonist, conducted at their California facilities. We are currently
developing this technology for use in treatment of peripheral occlusive arterial
disease, in addition to other applications.
To date, all of our research and development has been carried out
without the need of additional plant and equipment. Although we cannot assure
the adequacy of our current plant and equipment for future operations, we do not
intend to obtain additional plant or equipment at this time.
Employees
As of May 31, 2000, we employed fourteen employees, including five
management and nine support staff employees. In addition, we employ twelve
part-time consultants. None of our employees or independent contractors is
subject to a collective bargaining agreement and we believe that our relations
with our employees are good.
Properties
We maintain our executive offices and research and development
facilities at 15001 Walden Road, Suite 108, Montgomery, Texas 77356. We lease
these 3,550 square foot facilities at a monthly rental rate of $2,750.
Legal Proceedings
We are not involved in any material litigation or legal proceedings and
are not aware of any potential material litigation or proceeding threatened
against us.
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our Directors, executive officers, and key employees are as follows:
<TABLE>
<CAPTION>
Period Served As
Name Age Position Officer/Director/Key
Employee
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David P. Summers 61 Chief Executive Officer Inception (1996)
and Chairman to Present
Danilo D. Lasic 47 Chief Scientific Officer June 1997 to Present
Diane Dottavio 49 Director of Research and March 2000 to Present
Development
Barbara J. Richardson 53 Vice President of Operations, January 2000 to Present
Secretary and Director
Roy A. Robertson 42 Vice President of March 2000 to Present
Business Development
M. Dwight Cantrell 54 Chief Financial Officer, January 1997 to Present
Treasurer and Director
Gary R. Ball 40 Director July 1996 to Present
Claudio R. Roman 42 Director January 1997 to Present
</TABLE>
Set forth below is a brief background of the executive officers, Directors and
key employees of the Company, based on information supplied by them.
Dr. David P. Summers serves as our Chief Executive Officer and Chairman.
Dr. Summers has served in this capacity on a full-time basis since our inception
and is primarily responsible for our operations as a whole. Prior to working
with Endovasc, Dr. Summers founded American BioMed, Inc. and served as its
President and Chief Executive Officer from 1984 to 1995. Dr. Summers is a Fellow
in the American College of Angioplasty as well as the inventor of several
medical devices used to treat cardiovascular diseases. He is the author of 18
issued patents and has 8 patents pending. Prior to founding American BioMed, Dr.
Summers assisted with the management of several corporations, including C.R.
Bard, Inc., a manufacture and distributor of cardiovascular medical products,
Karl Stortz Endoscopy, an endoscopic instrument company, and Pall Corporation, a
manufacturer and distributor of blood filtration products. Dr. Summers holds an
M.B.A. degree from Pepperdine University as well as a Ph.D. in International
Economics from Kennedy-Western University. He is also a member of the New York
Academy of Sciences, the American Association of Advancement of Science, the
Houston Inventors Association, the International Society for Endovascular
Surgery, the European Vascular Society, and the Society of Plastic Engineers.
Danilo D. Lasic, Ph.D. serves as our Chief Scientific Officer. Prior to
joining us in June 1997, Dr. Lasic served as a genetic and drug delivery
consultant with Liposome Consultations, Inc. for a year, and as a Director of
Lipid Research with MegaBios, Inc., from 1994 to 1996. Dr. Lasic is a
solid-state physicist specialized in drug delivery liposomes. Dr. Lasic holds a
B.S. and M.S. in Chemistry from the University of Ljubljana, as well as a Ph.D.
in Physics from the University of Ljubljana.
<PAGE>
Diane Dottavio serves as our Director of Research and Development. Prior to
joining us in March of this year, Ms. Dottavio served as Senior Scientist with
Leukosite, Inc., from 1994 to 1996, and as Director of Laboratory Instruction
and Research at the University of Houston, from 1997 to this year. Ms. Dottavio
holds a B.S. in Biology and a M.S. in Organic Chemistry from the University of
New Mexico, as well as a Ph.D. in Biochemistry from the University of Texas.
Barbara J. Richardson serves as our Vice President of Operations, Secretary
and Director. Ms. Richardson is experienced in small business management and
marketing. Prior to joining us in January of this year, Ms. Richardson served as
Senior Administrative Coordinator for Baylor College of Medicine, from 1994 to
this year.
Roy A. Robertson serves as our Vice President of Business Development. Mr.
Robertson is a Candidate in the International Business Masters Program at
Heriot-Watt University, The Edinburgh Business School in Edinburgh, Scotland and
has studied business administration at the University of Maryland, College Park,
Maryland. Mr. Robertson has 25 years of business development and marketing
experience. Prior to joining us in March 2000, Mr. Robertson served as Vice
President of Sales and Marketing with Millar Instruments, Inc., from 1995 to
1997, and as President of Pacific Biosystems, from 1998 to 1999. Mr. Robertson
holds a B.A. in Anthropology from the University of Maryland.
M. Dwight Cantrell serves as our Chief Financial Officer, Treasurer and
Director, on a part-time basis. Mr. Cantrell has maintained, and continues to
maintain, a public accounting practice in the state of Texas since 1976. Mr.
Cantrell is a public accountant, and holds a B.S. in accounting from Southern
Ohio University.
Gary R. Ball serves as our Director and is one of our co-founders. Prior to
co-founding us in July 1996, Mr. Ball served as a mechanical engineer with
American BioMed, Inc., from 1991 to 1996. Mr. Ball is a co-inventor of two U.S.
patents and is experienced in prototype design, research, and development, as
well as reliability testing and patent research and filing.
Claudio R. Roman serves as our Director. Mr. Roman is a practicing attorney
in the State of Texas. Mr. Roman has maintained, and continues to maintain, a
private law practice in the state of Texas since 1985. Mr. Roman holds a J.D.
degree from the University of Houston School of Law.
Our Directors hold office until the next annual meeting of our stockholders
and until their successors have been elected and duly qualified. Executive
officers are elected by our Board of Directors annually and serve at the
discretion of the Board.
Compensation of Directors
Non-employee Directors receive no salary for their services and receive no
fee from the Company for their participation in meetings, although all Directors
are reimbursed for reasonable travel and other out-of-pocket expenses incurred
in attending meetings of the Board.
<PAGE>
Executive Compensation
The following table sets forth certain summary information with respect
to the compensation paid to the our executive officers for services rendered to
us, in all capacities, for the fiscal years ended June 30, 1999, 1998, and 1997.
Other than as listed below, we had no executive officers whose total annual
salary and bonus exceeded $100,000 for that fiscal year:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Annual Restricted Under- Other
Name and Compen- Stock Lying LTIP Compen-
Principal Salary Bonus sation Awards Options/ Payouts sation
Position Year $ ($) ($) ($) ($) ($) SARs(#)
-------- ------ ------ ----- ------ ----- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Summers 1999 75,000 - - - 1,000,000 $0.25 -
CEO and Director 1998 60,000 - - - - - -
1997 60,000 - - - - - -
</TABLE>
Directors of the Company receive no compensation for their services as
Directors.
Employment Agreements
We have entered into employment agreements with Dr. David Summers and Ms.
Barbara Richardson. We entered into a three-year employment contract with Dr.
Summers in 1996, providing for annual compensation of $150,000 in cash and
equity interests. The original term of this contract has expired, but the term
has been renewed for a one-year period each June since its original expiration.
We also have a one-year automatically renewable employment contract with
Ms. Richardson, providing for annual compensation of $60,000 in cash and equity
interests.
In addition, we have a six-month consulting agreement with Mr. Roy
Robertson, providing for monthly compensation of $5,000. We intend to enter into
full-time employment agreements with Mr. Robertson and Mr. Danilo Lasic in the
near future.
Stock Option Plans
We intend to propose a stock option plan (the "2000 Plan") to our
shareholders for approval, pursuant to which 2,000,000 shares of common stock
are reserved for issuance. The following is a description of the 2000 Plan as it
is currently envisioned:
The 2000 Plan will be administered by the Board of Directors, or by a
committee with at least two Directors as delegated by the Board of Directors who
determine among other things, those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of common stock issuable upon the exercise of the options and
the option exercise price.
The 2000 Plan will be for a period of ten years. Options under the 2000
Plan must be issued within ten years from the effective date of the 2000 Plan.
Options may be granted to officers, Directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to us.
Options granted under the 2000 Plan may be exercisable for up to ten years, may
require vesting, and shall be at an exercise price all as determined by the
Board of Directors. Options will be non-transferable except to an option
holder's personal holding company or registered retirement savings plan and
except by the laws of descent and distribution or a change in our control, as
defined in the 2000 Plan, and are exercisable only by the participant during his
<PAGE>
or her lifetime. Change in control includes (i) the sale of substantially all of
our assets and merger or consolidation with another, or (ii) a majority of the
Board of Directors changes other than by election by the shareholders pursuant
to a Board of Directors' solicitation or by vacancies filled by the Board of
Directors caused by death or resignation of such person.
If a participant ceases affiliation with us by reason of death,
permanent disability or the retirement of an optionee either pursuant to a
pension or retirement plan we adopted on the normal retirement date prescribed
by us from time to time, the option remains exercisable for three months from
such occurrence but not beyond the option's expiration date. Other termination
gives the participant three months to exercise, except for termination for cause
that results in immediate termination of the option.
Options granted under the 2000 Plan, at the discretion of the
compensation committee or the Board of Directors, may be exercised either with
cash, by certified check or bank cashier's check, common stock having a fair
market equal to the cash exercise price, the participant's promissory note, or
with an assignment to us of sufficient proceeds from the sale of the common
stock acquired upon exercise of the Options with an authorization to the broker
or selling agent to pay that amount to us, or any combination of the above.
The exercise price of an option may not be less than the fair market
value per share of common stock on the date that the option is granted in order
to receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the common stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether Directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by us become available again for issuance
under the 2000 Plan.
The 2000 Plan may be terminated or amended at any time by the Board of
Directors, except that the number of shares of common stock reserved for
issuance upon the exercise of options granted under the 2000 Plan may not be
increased without the consent of our shareholders.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of May 31, 2000, by (i) each person
who, to our knowledge, beneficially owns more than 5% of our common stock; (ii)
each of our Directors and executive officers; and (iii) all of our executive
officers and Directors as a group:
<TABLE>
<CAPTION>
Percentage of
Name and Address of Amount of Beneficial
Beneficial Owner (1) Beneficial Ownership
Ownership(2)(3)
<S> <C> <C> <C>
David P. Summers 3,581,278 (4) 28.12
Danilo D. Lasic 10,000 0.08
Barbara J. Richardson 52,000 0.41
Roy Robertson 25,000 0.20
M. Dwight Cantrell 100,000 (5) 0.79
Gary R. Ball 993,500 (6) 7.80
Claudio R. Roman 50,000 0.39
Celeste Trust Reg. 1,075,179 (7) 7.78 (8)
Balmore Funds 1,218,536 (7) 8.73 (8)
Keshet L.P. 788,465 (7) 5.83 (8)
All Directors and Executive Officers as a Group 4,811,778 0.38
</TABLE>
(7 persons)
----------------------
Less than 1%.
(1) Except as otherwise noted, the address of the beneficial owners
described in this table shall be c/o Endovasc Ltd., Inc., 15001 Walden Road,
Suite 108, Montgomery, Texas 77356.
(2) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in the rules
and regulations promulgated under the Securities Exchange Act of 1934, as
amended, and accordingly, may include securities owned by and for, among others,
the spouse and/or minor children of an individual and any other relative who has
the same home as such individual, as well as other securities as to which the
individual has or shares voting or investment power or which such person has the
right to acquire within 60 days after the Record Date pursuant to the conversion
of convertible equity, exercise of options, or otherwise. Beneficial ownership
may be disclaimed as to certain of the securities.
(3) Based upon 12,736,675 shares of common stock outstanding as of May 31,
2000, assuming no other changes in the beneficial ownership of our securities,
except as noted in note (7) hereto.
(4) Mr. Summer's beneficially owned shares include approximately 243,000
shares beneficially owned by his wife, Dorothy Summers. Mr. Summers exercises no
investment or voting power over any of the shares owned by his wife, and
disclaims beneficial ownership of those shares.
(5) Mr. Cantrell's beneficially owned shares include approximately 50,000
shares beneficially owned by his wife, Jane Cantrell. Mr. Cantrell exercises no
investment or voting power over any of the shares owned by his wife, and
disclaims beneficial ownership of those shares.
(6) Mr. Ball's beneficially owned shares include approximately 5,000 shares
beneficially owned by his wife, Sherry Ball. Mr. Ball exercises no investment or
voting power over any of the shares owned by his wife, and disclaims beneficial
ownership of those shares.
(7) Represents shares of common stock issuable upon the conversion of
Series A Preferred Stock which have been, or may be, issued.
(8) Based upon the shares of common stock outstanding assuming conversion,
as of May 31, 2000, of Series A Preferred Stock which have been, or may be,
issued to this beneficial holder.
<PAGE>
CERTAIN TRANSACTIONS
As of the date of this prospectus, we have not entered into a transaction
during the past two years with a value in excess of $60,000 with a Director,
officer, or beneficial owner of 5% or more of our capital stock, or members of
their immediate families that had, or is to have, a direct or indirect material
interest in us, except as follows:
Effective October 1, 1999, we entered into a stock option agreement with
Dr. David P. Summers. Under this agreement, Dr. Summers is granted an option to
purchase up to 1,000,000 shares of our common stock at a purchase price below
the prevailing market price. The option is for a five year period ending October
31, 2004.
Effective December 9, 1997, we entered into a stock option agreement with
Gary R. Ball. Under this agreement, Mr. Ball is granted an option to purchase up
to 600,000 shares of our common stock at a purchase price below the prevailing
market price. The option is for a three year period expiring December 8, 2000.
During the fiscal year ended June 30, 1998, we also entered into an
agreement with M. Dwight Cantrell under the terms of which he was compensated
for past services as our Director. Under the terms of this agreement, Mr.
Cantrell was granted an option to purchase 50,000 shares of our common stock at
a purchase price of $0.75 per share for a term of three years.
During the fiscal year ended June 30, 1999, we entered into an agreement
with Claudio Roman, Esq., pursuant to which he was compensated for past services
as our legal counsel. Under the terms of this agreement, Mr. Roman was granted
an option to purchase 50,000 shares of our common stock at a purchase price of
$0.25 per share for a term of three years.
During the fiscal year ended June 30, 1998, we entered into an agreement to
purchase the rights to patent number 4,820,732 and patent number 955,878 from
Francis Pizzulli. The purchase price was $125,000, $50,000 of which was payable
upon execution and $75,000 of which was due by December 31, 1997. The agreement
also called for the issuance of 200,000 shares of our common stock. We made the
initial $50,000 payment and issued the 200,000 shares of stock, pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended. However, we did not make the $75,000 payment as scheduled. The
agreement indicated that if the final payment was not made within seven months
from the execution of the agreement that the final payment would be increased to
$150,000 plus the issuance an additional 200,000 shares of stock. We issued a
total of 200,000 shares in final settlement of the agreement, in March 2000.
Between March 1998 and December 1999, David Summers, our Chairman of the
Board of Directors and Chief Executive Office, made two advances to us in the
amounts of $123,000 and $25,000, respectively. These advances were made on an
unsecured basis, with no interest accrual, and were due and payable on June 30,
2000. During December 1999, we issued 1,250,000 shares of common stock, valued
at $0.10 per share as of the date of the issuance, in full and final repayment
of the aforementioned advances.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 120,000,000 shares of capital stock, par
value $0.001 per share, of which 100,000,000 shares are common stock shares and
20,000,000 shares are preferred stock shares that may be issued in one or more
series at the discretion of the Board of Directors. As of the date hereof,
12,736,675 shares of common stock, options and warrants to purchase up to
1,195,583 shares of common stock, and 15,000 shares of preferred stock are
issued and outstanding.
Common Stock
Holders of shares of our common stock are entitled to one vote per share on
each matter submitted to vote at any meeting of shareholders. Shares of common
stock do not carry cumulative voting rights and, therefore, holders of a
majority of the outstanding shares of common stock will be able to elect the
entire Board of Directors, and, if they do so, minority shareholders would not
be able to elect any members to the Board of Directors. Our Board of Directors
has authority, without the action by our shareholders, to issue all or any
portion of the authorized but unissued shares of common stock, which would
reduce our shareholders' ownership interest in us and which may dilute our
common stock's book value.
<PAGE>
Our by-laws provide that a majority of the shares issued and outstanding
and entitled to vote on a matter shall constitute a quorum for shareholders'
meetings, except with respect to matters for which a greater quorum is required
by law.
Our shareholders have no pre-emptive rights to acquire additional shares of
common stock. The shares of common stock are not subject to redemption and carry
no subscription or conversion rights. In the event of our liquidation, the
shares of common stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. All of the shares of common stock currently
issued and outstanding are fully paid and non-assessable.
Holders of shares of common stock are entitled to receive such dividends as
the Board of Directors may from time to time declare out of funds legally
available for the payment of dividends. We have not paid dividends on our shares
of common stock and there can be no assurance that we will pay dividends in the
foreseeable future. See "Dividend Policy" and "Risk Factors."
Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series as may from time to time be determined by our Board of Directors. Our
Board of Directors has authority, without action by the shareholders, to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights and any other rights of such series. Any Preferred Shares, if
and when issued, may carry rights superior to those of the shares of common
stock.
Options and Warrants
The following is a summary of outstanding options and warrants to purchase
our common stock, as at May 31, 2000:
<TABLE>
<CAPTION>
Number
of Shares Vested Expiration Date Exercise
Price
<S> <C> <C> <C>
600,000 200,000 December, 2000 $ 0.10
50,000 50,000 May, 2001 0.75
100,000 100,000 June, 2001 0.40
150,000 150,000 October, 2001 0.75
50,000 50,000 May, 2003 1.00
395,583 395,583 May, 2003 1.89
-------- --------
TOTAL 1,345,583 1,345,583
</TABLE>
Trading Information
Our common stock is quoted on the OTC Bulletin Board, a regulated
quotation service that captures and displays real-time quotes and/or indications
of interest in securities not listed on The NASDAQ Stock Market or any U.S.
exchange. As of May 31, 2000, the closing price for our common stock was $1.75
and the 52-week high and low prices were $15.00 and $0.06, respectively.
Information as to trading volumes, and bid and asked prices, for our common
stock may be obtained directly from the OTC Electronic Bulletin Board. See
"Market for Securities."
Legal Matters
Certain legal matters in connection with the Offering will be passed
upon for us by our United States securities counsel, Sichenzia, Ross & Friedman
LLP 135 West 50th Street, 20th Floor, New York, New York, 10020. Certain members
of Sichenzia, Ross & Friedman LLP are the beneficial owners of an aggregate
54,000 shares of our common stock.
<PAGE>
Experts
Our financial statements as of June 30, 1999 and for the years ended
June 30, 1999 and 1998, for the period from inception, June 10, 1996, to June
30, 1999 (Audited), for the nine months ended March 31, 2000 and 1999, and for
the period from inception, June 10, 1996, to March 31, 2000 (Unaudited) have
been included herein and in the registration statement in reliance upon the
reports of Ham, Langston & Brezina, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of such firm as
experts in accounting and auditing.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, we have outstanding 12,736,675
shares of common stock.
5,529,635 of our shares of outstanding common stock are "restricted
securities" as that term is defined in Rule 144 under the Securities Act of
1933, as amended ("Act"), and under certain circumstances may be sold without
registration pursuant to that rule.
In general, under Rule 144 as currently in effect, subject to
satisfaction of certain other conditions, a person (or persons whose shares are
required to be aggregated), including our affiliates, who beneficially owns
"restricted shares" for a period of at least two years is entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of 1% (54,675 as of the date of this prospectus) of the then outstanding
shares of common stock, or if the common stock is quoted on the NASDAQ System,
the average weekly trading volume of the common stock during the four calendar
weeks preceding the filing of the required notice of sale with the Securities
and Exchange Commission. The seller also must comply with the notice and manner
of sale requirements of Rule 144, and there must be current public information
available about us. In addition, any person (or persons whose shares are
aggregated) who is not, at the time of the sale, nor during the preceding three
months, our affiliate, and who has beneficially owned restricted shares for at
least three years, can sell such shares under Rule 144 without regard to any of
the limitations described above.
No predictions can be made of the effect, if any, that future sales of
restricted shares or the availability of restricted shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the restricted shares of common stock in the public
market could adversely affect the then prevailing market prices for the common
stock and could impair our ability to raise capital through the sale of our
equity securities.
<PAGE>
SELLING STOCKHOLDERS
The following table gives information on the selling stockholders based on
the number of outstanding shares of our common stock, as of May 31, 2000. The
number of shares to be beneficially owned following completion of the offering
is based on the assumption that the stockholder will sell all of the shares that
may be offered for the stockholder's account in this offering, and that the
stockholder will not purchase or sell any other shares. Stockholders are not
required to sell the shares that may be offered in this offering. Under SEC
rules, beneficial ownership includes all shares of our common stock issuable
within 60 days after the date of this prospectus upon exercise of outstanding
options, warrants, convertible securities or other rights.
<TABLE>
<CAPTION>
Name No. of Shares Percent of No. of Shares No. of
Beneficially Outstanding Shares Offered Shares
Owned Represented by Owned After
(1) (2) (3) Total (%) Sale
<S> <C> <C> <C> <C>
Celeste Trust Reg. 1,075,179 19.37 1,075,179 0
Balmore Funds 1,218,536 21.95 1,218,536 0
The Keshet Fund L.P. 430,072 7.75 430,072 0
Keshet L.P. 788,465 14.21 788,465 0
Talbiya B. Investments Ltd. 214,286 3.86 214,286 0
Nesher Ltd. 571,429 10.30 571,429 0
Alon Enterprises Limited A.B.V.I. 155,555 2.80 155,555 0
Libra Finance, S.A. 177,778 3.20 177,778 0
J.P. Turner & Company LLP 500,000 (4) 9.01 500,000 (4) 0
Mr. Martin Gross 25,000 (5) 0.45 25,000 (5) 0
Dr. Sherry Wider 25,000 (5) 0.45 25,000 (5) 0
Sichenzia, Ross & Friedman LLP 54,000 0.97 54,000 0
Incubud, Inc. 100,000 1.80 100,000 0
The Dilenschneider Group, Inc. 215,000 3.87 215,000 0
TOTAL 5,550,300 100.00 5,550,300 0
</TABLE>
(1) Except as otherwise noted herein, the number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the
Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual
has the right to acquire within 60 days of the date of this prospectus
through the exercise of any stock option or other right. Unless otherwise
indicated in the footnotes, each person has sole voting and investment
power, or shares such powers with his or her spouse, with respect to the
shares shown as beneficially owned.
(2) Assumes the sale of all shares of common stock offered hereby.
(3) Includes the following shares of common stock issuable upon the conversion
of Series A Preferred Stock which have been, or may be, issued: Celeste
Trust Reg. 1,071,429, Balmore Funds, S.A. 1,214,286, The Keshet Fund L.P.
428,572, Keshet L.P. 785,715, Talbiya B. Investments Ltd. 214,286, and
Nesher Ltd. 571,429. Also includes the following shares of common stock
issuable upon the exercise of warrants to purchase common stock: Celeste
Trust Reg. 3,750, Balmore Funds, S.A. 4,250, the Keshet Fund L.P. 1,500,
Keshet L.P. 2,750, Alon Enterprises Limited 155,555, and Libra Finance,
S.A. 177,778. The number of shares of common stock shown as beneficially
owned both prior to and after the offering by the selling shareholders
holding Series A Preferred Stock represents an estimate of the number of
shares of common stock to be offered by such selling shareholders assuming
a conversion price of $0.35 per share. The actual number of shares of
common stock issuable upon conversion of the Series A Preferred Stock is
indeterminate, is subject to adjustment and could be materially less or
more than such estimated number depending on factors which cannot be
<PAGE>
predicted by Endovasc at this time, including the future market price of
the common stock. The common stock being registered under this registration
statement includes, with respect to 5,550,300 shares of common stock
registered hereunder, 4,285,717 of the shares of common stock issuable upon
conversion of the Series A Preferred Stock issued and issuable on the date
of this prospectus at a conversion price of $0.35. The common stock being
registered under this registration statement also includes one share of
common stock for each warrant to purchase common stock issued or issuable
in connection with Series A Preferred Stock. The actual number of shares of
common stock issuable upon conversion of the Series A Preferred Stock shall
equal the sum of the stated value of $100 per share, as adjusted for any
stock dividends, combinations or splits with respect to such share, and
accrued and unpaid dividends on such share, divided by the conversion
price. The conversion price shall be at the election of the Holder of the
Series A Preferred Stock: (1) 85% of the three lowest average closing bid
prices of Endovasc Class A Common Stock for the thirty trading days
immediately preceding the date of the initial issuance of the shares of
Series A Preferred Stock or (2) 70% of the average of the three lowest
closing bid prices for the thirty trading days immediately preceding the
conversion of the respective shares of Series A Preferred Stock. Therefore,
the number of shares issuable upon conversion of the Series A Preferred
Stock may be less than or greater than the number of shares shown as
beneficially owned by the selling shareholders or otherwise covered by this
prospectus.
(4) Includes 300,000 shares that have not yet been issued, which the Company
anticipates issuing to J.P. Turner & Company LLP in exchange for services
to be rendered on the Company's behalf.
(5) Represents shares of common stock issuable upon the exercise of warrants to
purchase common stock.
PLAN OF DISTRIBUTION
We are registering this offering of shares on behalf of the selling
stockholders. We will pay all costs, expenses and fees related to the
registration, including all registration and filing fees, printing expenses,
fees and disbursements of our counsel, blue sky fees and expenses. The selling
stockholders will pay any underwriting discounts and selling commissions in
connection with the sale of the shares.
The selling stockholders may sell the shares covered by this prospectus
from time to time in one or more transactions through the OTC Bulletin Board or
an interdealer quotation system, on one or more securities exchanges, in
alternative trading markets or otherwise, at prices and at terms then prevailing
or at prices related to the then current market price, or in negotiated
transactions. The selling stockholders will determine the prices at which they
sell their shares in these transactions. The selling stockholders may effect the
transactions by selling the shares to or through broker-dealers. In effecting
sales, broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in the resales. The shares may be sold by one or
more, or a combination, of the following:
- a block trade in which the broker-dealer attempts to sell the shares
as agent but may position and resell a portion of the block as principal to
facilitate the transaction,
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- privately negotiated transactions.
The selling stockholders may enter into hedging transactions with
broker-dealers. In these transactions, broker-dealers may engage in short sales
of the common stock in the course of hedging the positions they assume with the
selling stockholders. The selling stockholders also may sell the common stock
short pursuant to this prospectus and redeliver the shares to close out these
short positions. The selling stockholders may enter into option or other
transactions with broker-dealers that require the delivery to the broker-dealer
of the shares covered by this prospectus. The broker-dealer may then resell or
otherwise transfer the shares pursuant to this prospectus. The selling
stockholders also may loan or pledge the shares to a broker-dealer. The
broker-dealer may then sell the loaned shares or, upon a default by the selling
stockholder, the broker-dealer may sell the pledged shares pursuant to this
prospectus.
The selling stockholders may engage in other financing transactions that
may include forward contract transactions or borrowings from financial
institutions in which the shares are pledged as security. In connection with any
of these forward contract transactions, the selling stockholders would pledge
shares to secure their obligations and the counterparty to these transactions
would sell the common stock short to hedge its transaction with the selling
stockholder. Upon a default by the selling stockholder under any of these
financings, including a forward contract transaction, the pledgee or its
transferee may sell the pledged shares pursuant to this prospectus. Any such
pledgee or its transferee will be identified in this prospectus by
post-effective amendment to the registration statement of which it is a part.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder.
Broker-dealers or agents may also receive compensation from the purchasers of
the shares for whom they act as agents or to whom they sell as principals, or
both. Compensation to a particular broker-dealer may be in excess of customary
commissions and will be in amounts to be negotiated with a selling stockholder
in connection with the sale. Broker-dealers or agents, any other participating
broker-dealers and the selling stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 in connection
with sales of the shares. Accordingly, any commission, discount or concession
received by them and any profit on the resale of the shares purchased by them
may be deemed to be underwriting discounts or commissions under the Securities
Act of 1933. Because the selling stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933, the selling
stockholders will be subject to the prospectus delivery requirements of the
Securities Act of 1933. Each selling stockholder has advised Telecom Wireless
Corporation that the stockholder has not yet entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of the shares.
<PAGE>
The selling stockholders have agreed to sell the shares only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states the shares may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from registration or qualification is available and is complied
with.
The selling stockholders will be subject to applicable provisions of the
Securities Exchange Act of 1934 and the associated rules and regulations,
including Regulation M. These provisions may limit the timing of purchases and
sales of shares of our common stock by the selling stockholders. We will make
copies of this prospectus available to the selling stockholders and has informed
them of the need for delivery of copies of this prospectus to purchasers at or
before the time of any sale of the shares.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement under the Act with respect to the Securities offered hereby. This
Prospectus omits certain information contained in the Registration Statement and
the exhibits thereto, and reference is made to the Registration Statement and
the exhibits thereto for further information regarding our operations and the
securities offered hereby. Each such statement is qualified in its entirety by
such reference. The Registration Statement, including exhibits and schedules
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois upon payment of the prescribed fees.
Electronic registration statements filed through the Electronic Data Gathering,
Analysis, and Retrieval System are publicly available through the Commission's
Website (http://www.sec.gov).
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
----------
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
as of June 30, 1999
and for the years ended June 30, 1999 and 1998,
and for the period from inception,
June 10, 1996, to June 30, 1999 (Audited)
and for the nine months ended March 31, 2000 and 1999,
and for the period from inception, June 10, 1996,
to March 31, 2000 (Unaudited)
<PAGE>
TABLE OF CONTENTS
----------
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Report of Independent Accountants F-2
Financial Statements:
Balance Sheet as of June 30, 1999 F-3
Statement of Operations for the years ended
June 30, 1999 and 1998, and for the period from
inception, June 10, 1996, to June 30, 1999 F-4
Statement of Stockholders" Deficit for the years
ended June 30, 1999 and 1998, and for the period
from inception, June 10, 1996, to June 30, 1999 F-5
Statement of Cash Flows for the years ended
June 30, 1999 and 1998, and for the period from
inception, June 10, 1996, to June 30, 1999 F-7
Notes to Audited Financial Statements F-8
Balance Sheet as of March 31, 2000 and
June 30, 1999 F-20
Statement of Operations for the nine months ended March 31, 2000 and 1999, and
for the period from inception, June 10, 1996, to
March 31, 2000 F-21
Statement of Changes in Stockholders" Deficit
for the nine months ended March 31, 2000 F-22
Statement of Cash Flows for the nine months ended March 31, 2000 and 1999, and
for the period from inception, June 10, 1996, to
March 31, 2000 F-23
Notes to Unaudited Financial Statements F-24
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Stockholders of
Endovasc Ltd., Inc.
We have audited the accompanying balance sheet of Endovasc Ltd., Inc. (a
development stage enterprise) as of June 30, 1999, and the related statements of
operations, stockholders" deficit and cash flows for the year then ended, and
for the period from inception, June 10, 1996, to June 30, 1999. These financial
statements are the responsibility of the Company"s management. Our
responsibility is to express an opinion on these financial statements based upon
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Endovasc Ltd., Inc. as of June
30, 1999, and the results of its operations and its cash flows for the year then
ended, and for the period from inception, June 10, 1996, to June 30, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements
and discussed in Note 9, the Company has incurred significant recurring losses
from operations since inception, is in a negative working capital and
stockholders" deficit position at June 30, 1999, and is dependent on outside
sources of financing for continuation of its operations. These factors raise
substantial doubt about the Company"s ability to continue as a going concern.
Management"s plans with regard to this matter are also discussed in Note 13.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Houston, Texas
September 2, 1999
/s/ Ham, Langston & Brezina, LLP
Ham, Langston & Brezina, LLP
F-2
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
June 30, 1999
----------
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ 120,058
Prepaid expenses 5,014
----------
Total current assets 125,072
Property and equipment, net 9,483
Deposits 2,900
----------
Total assets $ 137,455
==========
LIABILITIES AND STOCKHOLDERS" DEFICIT
Current liabilities:
Current maturities of long-term debt $ 53,482
Note payable to shareholder 85,248
Accounts payable 85,666
Accrued liabilities 361,956
----------
Total current liabilities 586,352
Long-term debt, net of current maturities 30,918
Convertible debentures 180,000
----------
Total liabilities 797,270
----------
Commitment and contingencies
Stockholders" deficit:
Common stock, $.001 par value, 100,000,000
shares, authorized, 8,374,490 shares
issued and 5,639,490 shares outstanding 8,374
Additional paid-in capital 2,125,459
Losses accumulated during the development
stage (2,776,737)
Treasury stock (16,911)
----------
Total stockholders" deficit (659,815)
----------
Total liabilities and stockholders"
deficit $ 137,455
==========
</TABLE>
The accompanying notes are an
integral part of these financial
statements.
F-3
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the years ended June 30, 1999 and
1998 and for the period from inception, June 10,
1996, to June 30, 1999
----------
<TABLE>
<CAPTION>
Year Ended
June 30,
Year Ended 1998 Inception
June 30, As Restated to June 30,
1999 (See Note 2) 1999
---------- ------------ --------------
Income:
<S> <C> <C> <C>
Sales $ 5,000 $ - $ 5,000
Interest income - - 653
Other income - - 3,618
---------- ----------- -----------
Total income 5,000 - 9,271
---------- ----------- -----------
Costs and expenses:
Operating, general and adminis-
trative expenses 396,454 418,056 1,384,203
Research and development costs 211,278 607,384 1,199,332
Interest expense 193,811 7,394 202,473
---------- ----------- -----------
Total costs and expenses 801,543 1,032,834 2,786,008
---------- ----------- -----------
Net loss $ (796,543) $(1,032,834) $(2,776,737)
========== =========== ===========
Weighted average shares outstanding 7,217,096 6,757,534
========== ===========
Basic and diluted net loss per
common share $ (0.11) $ (0.15)
========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS" DEFICIT
for the years ended
June 30, 1999 and 1998,
and for the period from
inception, June 10, 1996
to June 30, 1999
----------
<TABLE>
<CAPTION>
Losses
Accumulated
Additional During the
Common Stock Paid-In Treasury Development
Amount Shares Capital Stock Stage Total
------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception, June 10, 1996 $ - - $ - $ - $ - $ -
Stock issued for equity securities
in 1996 2,332 2,332,000 300,000 - - 302,332
Stock issued for purchase of patent
rights in 1996 2,188 2,188,000 282,252 - - 284,440
Stock issued for services in 1997 1,702 1,702,000 354,198 - - 355,900
Stock issued for cash in June 1997 305 304,571 205,196 - - 205,501
osses accumulated during the
period from inception, June 10,
1996, to June 30, 1997 - - - - (947,360) (947,360)
------ --------- ---------- ---------- ----------- ---------
Balance at June 30, 1997 6,527 6,526,571 1,141,646 - (947,360) 200,813
Stock issued for purchase of patent
rights in September 1997 200 200,000 199,800 - - 200,000
Stock issued for services in 1998 77 77,380 55,516 - - 55,593
Stock subject to rescission - - - (16,911) - (16,911)
Net loss accumulated in 1998 - - - - (1,032,834) (1,032,834)
------ --------- ---------- ---------- ----------- -----------
Balance at June 30, 1998 6,804 6,803,951 1,396,962 (16,911) (1,980,194) (593,339)
</TABLE>
The accompanying notes are
an integral part of these
financial statements.
F-5
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS" DEFICIT, Continued
for the years ended June 30, 1999 and 1998, and
for the period from inception, June 10, 1996 to June 30, 1999
(Continued)
----------
<TABLE>
<CAPTION>
Losses
Accumulated
Additional During the
Common Stock Paid-In Treasury Development
Amount Shares Capital Stock Stage Total
------- --------- ---------- ---------- ---------- ---------
Conversion of debentures to
<S> <C> <C> <C> <C>
common stock ............. 1,208 1,208,077 443,792 -- -- 445,000
Stock issued for services .. 362 362,462 284,705 -- -- 285,067
Net loss accumulated in 1999 -- -- -- -- (796,543) (796,543)
---------- ---------- ---------- ---------- ----------
Balance at June 30 ,1999 ... $ 8,374 8,374,490 $2,125,459 $ (16,911) $(2,776,737) $ (659,815)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are
an integral part of these
financial statements.
F-6
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
for the years ended June 30, 1999 and
1998, and for the period from inception, June
10, 1996, to June 30, 1999
----------
<TABLE>
<CAPTION>
Year Ended Year Ended Inception
June 30, June 30, to June 30,
1999 1998 1999
---------- ----------- -----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (796,543) $(1,032,834) $(2,776,737)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock and stock options
issued as compensation for services 285,067 55,593 896,560
Write down of long-lived assets to
fair value - 200,000 284,440
Depreciation expense 3,242 3,150 9,512
Deferred income tax expense - - 7,994
Amortization of discount on con-
vertible debentures 125,000 - 125,000
Changes in operating assets and
liabilities:
(Increase) decrease in prepaid
expenses and deposits 22,336 76,403 (7,914)
Increase (decrease) in accounts
payable and accrued liabilities (16,474) 448,330 439,628
---------- ----------- -----------
Net cash used in operating
activities (377,372) (249,358) (1,021,517)
---------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (3,198) - (18,995)
Proceeds received from repayment of
loan to stockholder - 71,854 -
---------- ----------- -----------
Net cash used in investing
activities (3,198) 71,854 (18,995)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of equity securities - - 302,332
Proceeds from sale of common stock - - 205,501
Proceeds from sale of convertible
debenture and related conversion feature 500,000 - 500,000
Issuance (repayment) of notes payable (12,390) 72,474 84,400
Proceeds from advances from stockholders 10,100 75,148 85,248
Purchase of treasury stock - (16,911) (16,911)
---------- ----------- -----------
Net cash provided by financing
activities 497,710 130,711 1,160,570
---------- ----------- -----------
Net increase in cash and cash equivalents 117,140 (46,793) 120,058
Cash and cash equivalents at beginning of
period 2,918 49,711 -
---------- ----------- -----------
Cash and cash equivalents at end of period $ 120,058 $ 2,918 $ 120,058
========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 63,105 $ 7,394 $ 71,767
========== =========== ===========
Cash paid for income taxes $ - $ - $ -
=========== =========== ============
</TABLE>
The accompanying notes are an
integral part of these financial
statements.
F-7
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS
----------
1. Organization and Summary of Significant Accounting Policies
Endovasc, Ltd., Inc. (the "Company") was incorporated under the laws of
the State of Nevada on June 10, 1996. The Company"s principal business is
the production of various drugs that can be administered using the
liposomal drug delivery system. The Company believes that its drug
delivery system will ultimately be widely used by cardiologists,
interventional radiologists and vascular surgeons. The Company is
considered a development stage enterprise because it has not yet
generated significant revenue from sale of its products and has devoted
substantially all of its efforts in raising capital.
Significant Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from estimates making it
reasonably possible that a change in the estimates could occur in the
near term.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with an
original maturity of three months or less when purchased to be cash
equivalents.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets,
which range from five to seven years. Expenditures for major renewals and
betterments that extend the original estimated economic useful lives of
the applicable assets are capitalized. Expenditures for normal repairs
and maintenance are charged to expense as incurred. The cost and related
accumulated depreciation of assets sold or otherwise disposed of are
removed from the accounts, and any gain or loss is included in
operations.
F-8
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
1. Organization and Summary of Significant Accounting Policies, continued
Issuance Costs
Debt issuance costs are deferred and recognized, using the interest
method, over the term of the related debt.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded to reflect the tax
consequences on future years of temporary differences between the tax
basis of assets and liabilities and their financial amounts at year-end.
The Company provides a valuation allowance to reduce deferred tax assets
to their net realizable value.
Research and Development Expenses
Research and development costs are expensed as incurred. These costs
consist of direct and indirect costs associated with specific projects.
Stock-Based Compensation
Stock-based compensation is accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees", rather than applying the fair
value method prescribed in SFAS No. 123, "Accounting for Stock-Based
Compensation".
Loss Per Share
Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period.
Common equivalent shares from common stock options and warrants are
excluded from the computation as their effect would dilute the loss per
share for all periods presented.
Fair Value of Financial Instruments
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different
from the book value. When the book value approximates fair value, no
additional disclosure is made.
F-9
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
1. Organization and Summary of Significant Accounting Policies, continued
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a
company to display an amount representing comprehensive income as part of
the Company"s basic financial statements. Comprehensive income includes
such items as unrealized gains or losses on certain investment securities
and certain foreign currency translation adjustments. The Company"s
financial statements include none of the additional elements that affect
comprehensive income. Accordingly, comprehensive income and net income
are identical.
2. Prior Period Adjustments
During the period from inception, June 10, 1996, to June 30, 1997, and
during the year ended June 30, 1998, the Company issued common stock to
compensate key employees, consultants and certain vendors and to purchase
the rights to use specific patents. The issuance of such stock was not
afforded consistent accounting treatment but was generally recorded at
par value or some other nominal value in the Company"s financial
statements. Generally accepted accounting principles require that common
stock issuances be recorded at the estimated fair value of the stock
issued or at the fair value of consideration received or services
provided if such value is more readily determinable.
During the year ended June 30, 1998 the Company entered into an agreement
to purchase the rights to a specific patent. The purchase price was
$125,000 (payable at $50,000 upon execution of the agreement and $75,000
by December 31, 1997) and 200,000 shares of the Company"s common stock.
The Company issued the stock and made the $50,000 payment. However, the
Company has yet to make the final $75,000 payment. Per the agreement, if
the final payment is not made within seven months of the execution of the
agreement, the final payment is increased to $150,000 plus the issuance
of an additional 200,000 shares of the Company"s common stock. Although
this matter is currently being disputed, generally accepted accounting
principles requires these additional amounts to be accrued in the period
they became due. Accordingly, these amounts have been accrued in the
financial statements for the year ended June 30, 1998.
F-10
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
2. Prior Period Adjustments, continued
The Company also capitalized the costs of purchasing and protecting
patent rights during the year ended June 30, 1998. Generally accepted
accounting principles require all long-lived assets to be reviewed for
impairment and written down to their estimated fair value based on
expected future cash flows generated by the asset. Since it is unknown
whether this patent will ever generate cash flow for the Company, all
costs associated with the patent have been recorded as research and
development expense during the year ended June 30, 1998.
The effect of correcting these errors in application of generally
accepted accounting principles on the Company"s financial statements at
June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---------- ----------
<S> <C> <C>
Decrease in total assets $ (321,815) $ -
========== ==========
Increase in total liabilities $ (209,000) $ -
========== ==========
Increase in additional paid-in
capital $ 36,317 $ 488,569
========== ==========
Increase in accumulated deficit $ (567,132) $ (488,569)
========== ==========
Increase in net loss for the
year ended June 30, 1998 $ (567,132)
==========
Increase in net loss per common
share for the year ended
June 30, 1998 $ (0.08)
==========
</TABLE>
F-11
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
3. Property and Equipment
<TABLE>
<CAPTION>
Property and equipment at June 30, 1999 consists of the following:
<S> <C>
Office furniture, fixtures and
equipment $ 18,995
Less accumulated depreciation (9,512)
----------
$ 9,483
</TABLE>
Depreciation expense during the year ended June 30, 1999 was $3,242.
4. Notes Payable and Convertible Debentures
Notes payable at June 30, 1999 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Notes payable to a bank, bearing int- erest of prime (8.25% at June 30,
1999) plus 1% per year and due in monthly installments of up to $1,238,
includ- ing interest, through November 2002. These notes are
uncollateralized but are guaranteed by two stockholders
of the Company. $ 65,689
Notes payable to a company, bearing
interest of 6%, with principal and
interest due on demand. These notes
are uncollateralized. 18,711
Notes payable to stockholders, bearing
interest of 10% per year and due on
demand. These notes are uncollater-
alized. 85,248
----------
Total notes payable 169,648
Less current maturities (138,730)
----------
$ 30,918
==========
</TABLE>
F-12
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
4. Notes Payable and Convertible Debentures, continued
At June 30, 1999, the Company owed amounts under convertible debentures
totaling $180,000. The debentures bear interest at a stated rate of 8%
per year, payable at maturity in common stock of the Company. These
debentures mature in July 2001 and are convertible to shares of the
Company"s common stock at a conversion price per share equal to 75% of
the average closing bid price of the common stock for the three days
immediately preceding the date of conversion. During the fiscal year
ended June 30, 1999 $320,000 of the original $500,000 debenture was
converted to common stock. Subsequent to June 30, 1999 an additional
$80,000 of the convertible debentures were converted to common stock.
Future annual maturities of notes payable and convertible debentures at
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended
June 30, Amount
<S> <C>
2000 $138,730
2001 12,578
2002 193,758
2003 4,582
--------
$349,648
========
</TABLE>
5. Income Tax
The composition of deferred tax assets and the related tax effects at
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Benefit from carryforward of net
operating losses ............. $ 406,769
Less valuation allowance ....... (406,769)
---------
Net deferred tax asset ....... $ --
=========
</TABLE>
F-13
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
5. Income Tax, continued
The difference between the income tax benefit in the accompanying
statement of operations and the amount that would result if the U.S.
Federal statutory rate of 34% were applied to pre-tax loss is as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
Percentage Percentage
of Pre-Tax of Pre-Tax
Amount Loss Amount Loss
Benefit for income tax at
<S> <C> <C> <C> <C>
federal statutory rate $ 270,825 34.0% $ 351,164 34.0%
Non-deductible expenses (17,096) (2.1) (198,124) (19.2)
Increase in valuation
allowance (253,729) (31.9) (153,040) (14.8)
---------- ----- ---------- -----
Total $ - - % $ - - %
========== ===== ========== =====
</TABLE>
The non-deductible expenses shown above related primarily to the issuance
of common stock for services using different valuation methods for
financial and tax reporting purposes.
At June 30, 1999, for federal income tax and alternative minimum tax
reporting purposes, the Company has approximately $1,200,000 of unused
net operating losses available for carryforward to future years. The
benefit from carryforward of such net operating losses will expire in
various years between 2016 and 2019 and could be subject to severe
limitations if significant ownership changes occur in the Company.
6. Stock Options
Effective December 9, 1997, the Company entered into a stock option
agreement with an employee that granted the employee an option to
purchase up to 600,000 shares of the Company"s restricted common stock at
a below market purchase price. The option is for a three year period
expiring December 8, 2000. According to the agreement the employee vests
in these options as follows:
<TABLE>
<CAPTION>
Date Vested Amount
---------------- ----------
<S> <C>
December 9, 1998 $200,000
December 9, 1999 200,000
December 9, 2000 200,000
--------
$600,000
========
</TABLE>
F-14
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
The Company recognized compensation expense with respect to these stock
options in the amount of $50,000.
During the year ended June 30, 1998, the Company also executed an
agreement with a former director of the Company under which the Company
compensated the former director for past services by grant of options to
acquire 50,000 shares of the Company"s restricted common stock at $0.75
per share, which approximates market value, for a term of three years.
During the year ended June 30, 1999, the Company also granted stock
options to acquire up to 250,000 shares of the Company"s restricted
common stock. These stock options have a three year term and an exercise
price of $0.40 - $0.75 per share, which approximated market value at date
of grant.
The Company periodically issues incentive stock options to key employees,
officers, directors and outside consultants to provide additional
incentives to promote the success of the Company"s business and to
enhance the ability to attract and retain the services of qualified
persons. The issuance of such options are approved by the Board of
Directors. The exercise price of an option granted is determined by the
fair market value of the stock on the date of grant.
The Company has issued stock options to employees and non-employee
consultants as follows:
<TABLE>
<CAPTION>
Number of Shares
Employee Non-employee Total Exercisable Exercise Price
<S> <C> <C> <C> <C> <C>
Options outstand-
ing at June 30,
1997 - - - -
Options granted 600,000 50,000 650,000 50,000 $0.10-$0.75
------- ------- ------- -------
Options outstand-
ing at June 30,
1998 600,000 50,000 650,000 50,000 $0.10-$0.75
Options granted - 250,000 250,000 100,000 $0.40-$0.75
------- ------- ------- -------
Options outstand-
ing at June 30,
1999 600,000 300,000 900,000 350,000 $0.10-$0.75
======= ======= ======= =======
</TABLE>
F-15
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
Following is a summary of outstanding options at June 30, 1999:
<TABLE>
<CAPTION>
Number of Shares Vested Expiration Date Exercise Price
<S> <C> <C> <C> <C>
600,000 200,000 December, 2000 $0.10
50,000 50,000 May, 2001 0.75
100,000 100,000 June, 2001 0.40
150,000 - October, 2001 0.75
------- -------
900,000 350,000
======= =======
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation",
requires use of option valuation models that were not developed for use
in valuing employee stock options.
Proforma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that Statement. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1999 and 1998: risk-free
interest rate of 6%; no dividend yield; weighted average volatility
factor of the expected market price of the Company"s common stock of
0.70; and a weighted-average expected life of the options of 3 years.
The Black-Scholes option valuation model was developed for use in
estimating fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company"s employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management"s opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
F-16
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
6. Stock Options, continued
For purposes of proforma disclosures, the estimated fair value of the
options is included in expense at the date of issuance because the
options may be fully exercised at that date. The Company"s proforma
information follows:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
Net loss available to common
<S> <C> <C>
stockholders $ (796,543) $(1,032,834)
Proforma net loss available to
common stockholders $ (886,943) $(1,048,334)
Proforma basic and dilutive
loss per share $ (0.12) $ (0.16)
</TABLE>
7. Commitments and Contingencies
Lease Commitments
The Company has entered into a one-year lease agreement for office space
which is accounted for as an operating lease. Rent expense for the years
ended June 30, 1999 and 1998 was $15,606 and $11,981, respectively.
Impact of Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
the Company"s computer programs that have time sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculation causing a
disruption of business activities.
The Company has performed a complete assessment of the Year 2000 issue
and believes that no significant modifications to its existing computer
software will be required and that its existing computer systems will
function properly with respect to dates in the year 2000 and thereafter.
The Company also believes that costs related to the Year 2000 issue will
not be significant because the Company"s systems have been designed to be
Year 2000 compliant.
Based on the Company"s assessment of its relationships with significant
suppliers and major customers to understand the extent to which the
Company is vulnerable to any failure by third parties to remedy their own
Year 2000 issues, management believes that the Company does not have
significant exposure with respect to third parties.
F-17
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
8. Going Concern Considerations
Since its inception, as a development stage enterprise, the Company has
not generated significant revenue and has been dependent on debt and
equity raised from individual investors to sustain its operations. The
Company has conserved cash by issuing its common stock to satisfy
obligations, to compensate individuals and vendors and to settle disputes
that have arisen. However, during the years ended June 30, 1999 and 1998,
the Company incurred net losses of ($796,543) and ($1,032,834),
respectively, and negative cash flows from operations of ($377,372) and
($272,761), respectively. These factors along with a ($461,280) negative
working capital position at June 30, 1999 raise substantial doubt about
the Company"s ability to continue as a going concern.
Management plans to take specific steps to address its difficult
financial situation as follows:
o In the near term the Company plans additional private sales of
debt and common stock to qualified investors to fund its current
operations.
o In the intermediate term, the Company plans a public registration
of its common stock under the Securities and Exchange Act of 1933
to provide a means of expanding the market for its common stock
and to provide a means of obtaining the funds necessary to bring
its products to the commercial market.
o In the long-term, the Company believes that cash flows from
commercialization of its products will provide the resources for
continued operations.
There can be no assurance that the Company"s planned private sales of debt and
equity securities or its planned public registration of common stock will be
successful or that the Company will have the ability to commercialize its
products and ultimately attain profitability. The Company"s long-term viability
as a going concern is dependent upon three key factors, as follows:
o The Company's ability to obtain adequate sources of debt or
equity funding to meet current commitments and fund the
commercialization of its products.
o The ability of the Company to obtain positive test results
of its products in clinical trials.
o The ability of the Company to ultimately achieve adequate
profitability and cash flows to sustain its operations.
F-18
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO AUDITED FINANCIAL STATEMENTS, Continued
----------
9. Non-Cash Investing and Financing Activities
During the years ended June 30, 1999, 1998 and 1997, the Company engaged in
certain non-cash investing and financing activities as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Common stock issued in exchange
for equity securities $ - $ - $302,332
======== ======== ========
Common stock issued upon conver-
sion of debentures $320,000 $ - $ -
======== ======== ========
Common stock issued for purchase
of patent rights $ - $200,000 $284,440
======== ======== ========
</TABLE>
F-19
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
March 31, 2000 and June 30, 1999
<TABLE>
<CAPTION>
Assets March 31, June 30,
2000 1999
(Unaudited) (Note)
Current assets:
<S> <C> <C>
Cash $ - $ 120,058
Prepaid expenses 198,345 5,014
---------------------------------
Total current assets 198,345 125,072
Property and equipment-net 10,273 9,483
Deposits 2,900 2,900
---------------------------------
Total assets $ 211,518 $ 137,455
=================================
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt $ 44,073 $ 53,482
Note payable stockholder 44,000 85,248
Book overdraft 10,452 -
Accounts payable 280,873 85,666
Accrued liabilities 132,366 361,956
---------------------------------
Total current liabilities 511,764 586,352
Long term debt, net of current maturities 27,573 30,918
Convertible debentures - 180,000
---------- ----------
Total liabilities 539,337 797,270
---------------------------------
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares authorized, 13,864,335 and
8,374,490 shares issued and 11,129,335 and 5,639,490 shares outstanding at
March 31, 2000
and June 30, 1999, respectively 13,864 8,374
Additional paid in capital 4,238,168 2,125,459
Losses accumulated during the development
stage (4,562,940) (2,776,737)
Treasury stock (16,911) (16,911)
---------- ----------
Total stockholders' deficit (327,819) (659,815)
---------- ----------
Total liabilities and stockholders'
deficit $ 211,518 $ 137,455
=================================
</TABLE>
Note: The balance sheet at June 30, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
F-20
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the nine months ended March 31, 2000 and 1999 and
for the period from inception, June 10, 1996, to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Inception
Nine Months Ended to
March 31, March 31, March 31,
2000 1999 2000
--------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 24,283 $ 5,000 $ 33,554
Operating expenses:
Research and development
costs 1,035,724 210,159 2,235,057
Operating, general and
administrative expenses 744,236 88,647 2,128,439
Interest expense 30,526 72,443 232,998
--------------------------------------------------------
Total costs and
expenses 1,810,486 371,249 4,596,494
--------------------------------------------------------
Net loss $(1,786,203) $ (366,249) $(4,562,940)
=========== ========== ===========
Basic and dilutive net
loss per common share $ (0.16) $ (0.05)
=========== ==========
Weighted average shares
outstanding 10,898,453 7,565,000
=================================
</TABLE>
See accompanying notes.
F-21
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT for the nine
months ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
Number of Dollar Paid-In Treasury Accumulated
Shares Amount Capital Stock Deficit
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999 8,374,490 $ 8,374 $2,125,459 $ (16,911) $(2,776,737)
Issue of common stock for
services 1,530,299 1,530 1,158,169 - -
Conversion of debentures
to common stock 2,219,546 2,220 408,280 - -
Conversion of note payable
to shareholder to common
stock 1,250,000 1,250 146,750 - -
Issue of common stock in
connection with license
agreement 190,000 190 189,810 - -
Issue of common stock in
settlement of lawsuit 300,000 300 209,700 - -
Net loss - - - - (1,786,203)
-----------------------------------------------------------------------------
Balance at March 31, 2000 13,864,335 $ 13,864 $4,238,168 $ (16,911) $(4,562,940)
==============================================================================
</TABLE>
See accompanying notes.
F-22
<PAGE>
ENDOVASC LTD., INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS for the nine months
ended March 31, 2000 and 1999 and
for the period from inception, June 10, 1996, to March 31, 2000
<TABLE>
<CAPTION>
Inception
to
March 31, March 31, March 31,
2000 1999 2000
-------------------------------------------------
Cash flows used in operating
<S> <C> <C> <C>
activities: $ (484,567) $ (46,594) $(1,266,336)
---------- ---------- -----------
Cash flows used in investing
activities: (1,237) - (20,232)
---------- -------------------------------
Cash flows from financing activities:
Proceeds from sale of equity
securities - - 302,332
Proceeds from sale of common stock - - 385,501
Purchase of treasury stock - - (16,911)
Proceeds from sale of convertible
debt 230,500 - 730,500
Issuance (repayment) of notes
payable (12,754) 71,513 71,646
Proceeds from issuance of note
payable to stockholder, net 148,000 - 44,000
---------- -------------------------------
Net cash provided by financing
activities 365,746 71,513 1,286,568
---------------------------------------------------
Increase (decrease) in cash and cash
equivalents (120,058) 24,919 -
Cash and cash equivalents, beginning
of period 120,058 11,152 -
---------------------------------------------------
Cash and cash equivalents, end of
period $ - $ 36,071 $ -
===================================================
Non-cash investing and financing
activities:
Common stock issued upon conversion
of debt $ 558,500 $ - $ 362,500
===================================================
Common stock issued for services
and license and patent rights $1,349,699 $ - $ 1,263,338
===================================================
Common stock issued for equity
securities $ - $ - $ 302,332
===================================================
Common stock issued for settlement
of lawsuit $ 210,000 $ - $ -
===================================================
</TABLE>
See accompanying notes.
F-23
<PAGE>
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
1. Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles and
the rules of the U.S. Securities and Exchange Commission, and should be
read in conjunction with the audited financial statements and notes
thereto for the year ended June 30, 1999. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of financial position and the results
of operations for the interim periods presented have been included.
Operating results for the interim periods are not necessarily indicative
of the results that may be expected for the respective full year.
A summary of the Company's significant accounting policies and other
information necessary to understand the interim financial statement is
presented in the Company's audited financial statement for the years
ended June 30, 1999 and 1998. Accordingly the Company's audited financial
statements should be read in connection with these financial statements.
2. Income Taxes
The difference between the 34% federal statutory income tax rate and
amounts shown in the accompanying interim financial statement is
primarily attributable to an increase in the valuation allowance applied
against the tax benefit from utilization of net operating loss
carryforwards.
3. Convertible Debentures
At June 30, 1999 the Company owed amounts under a Series B convertible
debenture totaling $180,000. These debentures bear interest at a stated
rate of 8% per year. These debentures mature in July 2001 and are
convertible to shares of the Company's common stock at a conversion price
per share equal to 75% of the average closing bid price of the common
stock for the three days immediately preceding the date of conversion.
During the nine months ended March 31, 2000 the remaining debentures were
converted to common stock.
F-24
<PAGE>
ENDOVASC LTD., INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000
4. Subsequent Event, continued
Series A Preferred Stock with a par value of $.001 for the
aggregated purchase price of $4.5 million and Common Stock Purchase
Warrants to purchase Class A Common Stock at an above market price.
For consideration received in the initial funding, the Company issued
15,000 shares of Preferred stock and 333,333 Warrants and paid
approximately $190,000 in commissions and legal fees. Additionally, as
consideration for the transaction Placement Agent Warrants to purchase
up to 62,250 shares Class A Common Stock were issued. The remaining
$3,000,000 in funding will not occur until certain criteria have been
met, as defined in the subscription agreement. Terms for the Placement
Agent Warrants are similar to the terms of the Warrants issued with
the Preferred Stock.
Holders of the Preferred Stock are entitled to receive cash
dividends, payable quarterly and have preferential liquidation rights
above all other issuances of common stock for an amount equal to the
stated value. The Preferred stock and unpaid dividends are convertible
into shares of Common stock equal to an amount determined by the
market value at the date of close of the common stock, adjusted for
changes in the market price prior to the conversion. The Preferred
stockholders do not have voting rights.
F-25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law allows us
to indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was our Director, officer, employee or agent, or is or
was serving at our request as a Director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise. We may
advance expenses in connection with defending any such proceeding, provided the
indemnitee undertakes to pay any such amounts if it is later determined that
such person was not entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our Directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee....................................................................... $ 2,931
Printing and engraving..................................................................... 1,000
Accountant's fees and expenses............................................................. 10,000
Legal fees................................................................................. 30,000
Blue sky fees and expenses................................................................. 5,000
Miscellaneous.............................................................................. 1,069
Total.............................................................. $50,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of recent sales of unregistered securities that we
have accounted for prior to the end of our third operating quarter, ended March
31, 2000.
1. On or about July 25, 1997, we issued at total of 300,000 of our common
stock pursuant to the exemption for registration provided by Regulation D. We
relied on such exemption from registration based upon the fact that issuance of
these shares complied with the requirements of Regulation D and that we made the
required informational filing pursuant to Regulation D. The total consideration
paid the shares was $300,000, or $1.00 per share. Such shares were issued to the
following individuals in the following amounts:
Name Shares
---- ------
Ronald & Judy Neddings 15,000
Paul & Helen Jones 30,000
Rafael and Ana Moreno 30,000
Drexal Global Fund 100,000
Ebensfeld Corporation 125,000
2. On or about September 26, 1997, we issued 382,571 shares of our common
stock for a total consideration of $500,000, or $1.30 per share. Such shares
were issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended. Such shares were issued to the following
individuals in the following amounts:
<PAGE>
Name Shares
---- ------
Richard M. Johnson & Assoc. 300,000
James Mundt 3,571
Claudio R. Roman 20,000
M. Dwight Cantrell 25,000
Nick Nichols 10,000
Lester Summers 1,000
Dorothy Summers 1,000
Allan Burns 5,000
Dan Halman 2,000
Eric Gilles 10,000
Charles Siedel 5,000
Susan Cohen, Esq. 2,044
3. On or about November 13, 1997, we issued 200,000 shares to Geothermica,
in consideration of certain patent rights. Such shares were valued at $4.00 per
share and were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
4. On or about June 16, 1998, we issued 100,000 shares of our common stock
to Alexander H. Walker Jr., in consideration for legal services rendered to us.
Such shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
5. On or about June 16, 1998, we issued 300,000 shares of our common stock
to Dorothy Summers,in exchange for services. Such shares were valued at $1.00
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
6. On or about June 30, 1998, we issued 50,000 shares of our common stock
to Danilo D. Lasic,in exchange for technical advisement services rendered to us.
Such shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
7. On or about September 23, 1998, we issued 18,987 shares of our common
stock to Nick A. Nichols Jr., in exchange for patent counsel and filing
services. Such shares were valued at $1.00 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
8. On or about September 24, 1998, we issued 25,000 shares of our common
stock to M. Dwight Cantrell, in exchange for services. Such shares were valued
at $1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
9. On or about September 28, 1998, we issued 1,416 shares of our common
stock to Janet S. Clark, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
10. On or about September 28, 1998, we issued 1,190 shares of our common
stock to James Mundt, in exchange for dividends. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
11. On or about October 19, 1998, we issued 2,083 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection with
designing our brochures and website. Such shares were valued at $1.00 per share
and were issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
12. On or about November 19, 1998, we issued 14,380 shares of our common
stock to Susan Cohen, in consideration for legal services rendered to us. Such
shares were valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended.
13. On or about November 30, 1998, we issued 50,000 shares of our common
stock to James D. Regan, in exchange for technical advisement services rendered
to us. Such shares were valued at $1.00 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
<PAGE>
14. On or about November 30, 1998, we issued 10,416 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection with
designing Company brochures and designing our website. Such shares were valued
at $1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
15. On or about December 29, 1998, we issued 650,000 shares of our common
stock to Edward H. Burnbaum, in exchange for escrow. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
16. On or about January 8, 1999, we issued 35,556 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
17. On or about January 14, 1999, we issued 20,000 shares of our common
stock to Phoenix Investment Group, in exchange for services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
18. On or about January 14, 1999, we issued 5,200 shares of our common
stock to James Regan, in exchange for technical advisement services rendered to
us. Such shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
19. On or about January 22, 1999, we issued 10,116 shares of our common
stock to Alenka Lasic, in exchange for services rendered in connection with
designing Company brochures and designing our website. Such shares were valued
at $1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
20. On or about January 28, 1999, we issued 80,000 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
21. On or about February 3, 1999, we issued 2,000 shares of our common
stock to John G. Charles, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
22. On or about February 3, 1999, we issued 5,200 shares of our common
stock to James D. Regan, in exchange for technical advisement services rendered
to us. Such shares were valued at $1.00 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
23. On or about February 18, 1999, we issued 106,667 shares of our common
stock to Amram Rothman, in exchange for purchase. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
24. On or about February 23, 1999, we issued 100,000 shares of our common
stock to Patrick M. Rost, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
25. On or about February 23, 1999, we issued 5,000 shares of our common
stock to Shawn F. Hackman in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. Mr. Hackman returned these shares to us on or
about September 1, 1999. We relied on such exemption from registration based
upon the fact that issuance of these shares complied with the requirements of
Regulation D and we made the required informational filing pursuant to
Regulation D.
<PAGE>
26. On or about March 9, 1999, we issued 248,889 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at $1.00 per
share and were issued pursuant to the exemption from registration under Rule 504
of Regulation D. We relied on such exemption from registration based upon the
fact that issuance of these shares complied with the requirements of Regulation
D and we made the required informational filing pursuant to Regulation D.
27. On or about March 23, 1999, we issued 13,201 shares of our common stock
to Hiroko Yoshida, in exchange for technical advisement services rendered to us.
Such shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
28. On or about April 6, 1999, we issued 127,348 shares of our common stock
to Amram Rothman, in exchange for services. Such shares were valued at $1.00 per
share and were issued pursuant to the exemption from registration under Rule 504
of Regulation D. We relied on such exemption from registration based upon the
fact that issuance of these shares complied with the requirements of Regulation
D and we made the required informational filing pursuant to Regulation D.
29. On or about April 13, 1999, we issued 5,166 shares of our common stock
to Alenka Lasic, in exchange for services rendered in connection with designing
Company brochures and designing our website. Such shares were valued at $1.00
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
30. On or about April 19, 1999, we issued 187,324 shares of our common
stock to Mr. Amram Rothman, in debt conversion. Such shares were valued at
$0.3203 and were issued pursuant to the exemption from registration under Rule
504 of Regulation D. We relied on such exemption from registration based upon
the fact that issuance of these shares complied with the requirements of
Regulation D and we made the required informational filing pursuant to
Regulation D.
31. On or about April 29, 1999, we issued 139,132 shares of our common
stock to Mr. Amram Rothman, in debt conversion. Such shares were valued at
$0.35937 per share and were issued pursuant to the exemption from registration
under Rule 504 of Regulation D. We relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and we made the required informational filing pursuant to
Regulation D.
32. On or about May 20, 1999, we issued 65,308 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at $1.00 per
share and were issued pursuant to the exemption from registration under Rule 504
of Regulation D. We relied on such exemption from registration based upon the
fact that issuance of these shares complied with the requirements of Regulation
D and we made the required informational filing pursuant to Regulation D.
33. On or about May 27, 1999, we issued 1,000 shares of our common stock to
Janet S. Clark, in exchange for services. Such shares were valued at $0.3828 per
share and were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
34. On or about June 8, 1999, we issued 16,487 shares of our common stock
to Hiroko Yoshida, in exchange for services. Such shares were valued at $1.00
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
35. On or about June 24, 1999, we issued 124,444 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at $0.28125
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
36. On or about July 8, 1999, we issued 10,000 shares of our common stock
to John G. Charles, in exchange for services. Such shares were valued at $1.00
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
37. On or about July 27, 1999, we issued 5,000 shares of our common stock
to Sherry R. Ball, in exchange for corporate video design and development
services. Such shares were valued at $1.00 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
38. On or about July 26, 1999, we issued 98,467 shares of our common stock
to Amram Rothman, in exchange for purchase. Such shares were valued at $0.30467
per share and were issued pursuant to the exemption from registration under Rule
504 of Regulation D. We relied on such exemption from registration based upon
the fact that issuance of these shares complied with the requirements of
Regulation D and we made the required informational filing pursuant to
Regulation D.
<PAGE>
39. On or about July 29, 1999, we issued 18,577 shares of our common stock
to Hiroko Yoshida, in exchange for scientific and product development services
rendered to us. Such shares were valued at $1.00 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
40. On or about August 6, 1999, we issued 9,883 shares of our common stock
to Hiroko Yoshida, in exchange for scientific and product development services
rendered to us. Such shares were valued at $1.00per share and were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
41. On or about August 6, 1999, we issued 50,000 shares of our common stock
to Danilo Lasic, in exchange for scientific, laboratory, and technical advice
rendered to us. Such shares were valued at $1.00 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
42. On or about September 27, 1999, we issued 200,000 shares of our common
stock to Francis Pizzuli, in connection with a settlement reach in litigation.
Such shares were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
43. On or about September 27, 1999, we issued 237,079 shares of our common
stock to Amram Rothman, in connection with the conversion of convertible
debentures owned by Mr. Rothman. Such shares were issued pursuant to the
exemption from registration under Rule 504 of Regulation D. We relied on such
exemption from registration based upon the fact that issuance of these shares
complied with the requirements of Regulation D and we made the required
informational filing pursuant to Regulation D.
44. On or about October 4, 1999, we issued 4,000 shares of our common stock
to John G. Charles, in exchange for sales and marketing services. Such shares
were valued at $1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
45. On or about October 13, 1999, we issued 384,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at $0.09375
per share and were issued pursuant to the exemption from registration under Rule
504 of Regulation D. We relied on such exemption from registration based upon
the fact that issuance of these shares complied with the requirements of
Regulation D and we made the required informational filing pursuant to
Regulation D.
46. On or about October 18, 1999, we issued 100,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at $0.09 per
share and were issued pursuant to the exemption from registration under Rule 504
or Regulation D. We relied on such exemption from registration based upon the
fact that issuance of these shares complied with the requirements of Regulation
D and we made the required informational filing pursuant to Regulation D.
47. On or about October 18, 1999, we issued 70,880 shares of our common
stock to Hermes Bioscience, Inc., in exchange for research and development
laboratory services. Such shares were valued at $1.00 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
48. On or about October 18, 1999, we issued 5,000 shares of our common
stock to each of Dr. Charles Seidel and Dr. Alan Burns, in exchange for
services. Such shares were valued at $1.00 per share and were issued pursuant to
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
49. On or about October 28, 1999, we issued 500,000 shares of our common
stock to Amram Rothman, in debt conversion. Such shares were valued at $0.08 per
share and were issued pursuant to the exemption from registration under Rule 504
or Regulation D. We relied on such exemption from registration based upon the
fact that issuance of these shares complied with the requirements of Regulation
D and we made the required informational filing pursuant to Regulation D.
50. On or about October 28, 1999, we issued 70,880 shares of our common
stock to Hermes Bioscience, Inc., in exchange for research and development
laboratory services. Such shares were valued at $0.05 per share and were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
51. On or about November 10, 1999, we issued 4,000 shares of our common
stock to John Charles, in exchange for services. Such shares were valued at
$1.00 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
<PAGE>
52. On or about December 8, 1999, we issued 1,000,000 shares of our common
stock to Southwest Securities, Inc., in exchange for services. Such shares were
valued at $0.46 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
53. On or about December 20, 1999, we issued 1,250,000 shares of our common
stock to Dr. David Summers, our Chairman and Chief Executive Officer, in debt
conversion. Such shares were valued at $0.12 per share and were issued pursuant
to the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
54. On or about December 20, 1999, we issued 600,000 shares of our common
stock to Gary Ball, in lieu of payment of salary. Such shares were valued at
$0.10 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
55. On or about December 20, 1999, we issued 50,000 shares of our common
stock to Dwight Cantrell, in exchange for financial services. Such shares were
valued at $0.50 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
56. On or about December 20, 1999, we issued 50,000 shares of our common
stock to Roman Claudio, in exchange for legal services. Such shares were valued
at $0.50 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
57. On or about January 19, 2000, we issued 200,325 shares of our common
stock to Nick Nichols, in exchange for legal and patent services. Such shares
were valued at $0.10 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
58. On or about February 2, 2000, we issued 24,000 shares of our common
stock to Barbara Richardson, in lieu of payment of salary and bonuses. Such
shares were valued at $0.01 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended.
59. On or about February 2, 2000, we issued 50,000 shares of our common
stock to Collaborative, Inc., in exchange for research and development services.
Such shares were valued at $0.20 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
60. On or about February 2, 2000, we issued 25,000 shares of our common
stock to Janet Greeson, in exchange for consulting services. Such shares were
valued at $0.40 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
61. On or about February 2, 2000, we issued 10,000 shares of our common
stock to Dr. Representacoes Ltd., in exchange for legal and consulting services.
Such shares were valued at $0.50 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
62. On or about February 2, 2000, we issued 10,000 shares of our common
stock to William Lamar, in exchange for services. Such shares were valued at
$0.40 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
63. On or about February 9, 2000, we issued 10,000 shares of our common
stock to each of Richard Smalling and Michel Henry, in exchange for research and
development consulting services. Such shares were valued at $0.10 per share and
were issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended.
64. On or about February 18, 2000, we issued 1,820 shares of our common
stock to James Regan, in exchange for consulting services. Such shares were
valued at $1.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
65. On or about February 18, 2000, we issued 33,933 shares of our common
stock to Hiroko Yoshida, in exchange for scientific and product development
services rendered to us. Such shares were valued at $1.00 per share and were
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
66. On or about February 18, 2000, we issued 136,173 shares of our common
stock to Board of Trustees of Leland and 13,457 shares of our common stock to
each of John Cooke, Christopher Heeschen, Phillip Tsao, and James Jang, in
exchange for scientific and product development services rendered to us. Such
shares were valued at $1.00 per share and were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended.
<PAGE>
67. On or about February 19, 2000, we issued 300,000 shares of our common
stock to Geotermica, Ltd., in debt conversion. Such shares were valued at $0.50
per share and were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
68. On or about March 2, 2000, we issued 14,000 shares of our common stock
to Barbara Richardson, in lieu of payment of salary. Such shares were valued at
$4.80 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
69. On or about March 2, 2000, we issued 50,000 shares of our common stock
to John Charles and 25,000 shares of our common stock to Roy Robertson, in
exchange for consulting services. Mr. Charles' shares were valued at $0.30 per
share and Mr. Robertson's shares were valued at $7.25 per share. These shares
were issued pursuant to the exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended.
70. On or about March 3, 2000, we issued 14,000 shares of our common stock
to Barbara Richardson, in lieu of payment of salary. Such shares were valued at
$7.25 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
71. On or about March 7, 2000, we issued 1,000 shares of our common stock
to each of John Sorsi Jr. and Gary Parker, in exchange for promotional services.
Such shares were valued at $1.00 per share and were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
72. On or about March 13, 2000, we issued 20,000 shares of our common stock
to Curtis Wenger, Esq. and 25,000 shares of our common stock to each of
Alexander Walker III, Esq. and Alexander Walker Jr., in exchange for legal
services. Mr. Wenger's shares were valued at $0.35 per share, Mr. Walker and Mr.
Walker Jr.'s shares were each valued at $6.00 per share. These shares were
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
73. On or about March 13, 2000, we issued 25,000 shares of our common stock
to Incubud, Inc., in exchange for promotional services. Such shares were valued
at $0.25 per share and were issued pursuant to the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
74. On or about March 13, 2000, we issued 12,000 shares of our common stock
to Sichenzia, Ross & Friedman LLP, in exchange for legal services. Such shares
were valued at $6.00 per share and were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
The sales listed above do not include sales of unregistered securities
since March 31, 2000, which have not yet been accounted for. Nonetheless, the
following is a description of a recently concluded private placement of our
securities:
On or about May 9, 2000, we received $1,500,000 in gross proceeds related
to an offering of up to 45,000 shares of 8% Cumulative Convertible Series A
Preferred Stock, with a par value of $.001, for the aggregate purchase price of
$4,500,000 and Common Stock Purchase Warrants to purchase our common stock (the
"Warrants")at an above-market price. For consideration received in the initial
funding, we issued 15,000 shares of Preferred stock and 333,333 Warrants and
paid approximately $190,000 in commissions and legal fees. Additionally, as
consideration for the transaction, we issued Placement Agent Warrants to
purchase up to 62,250 shares of our common stock. The remaining $3,000,000 in
funding will not occur until certain criteria have been met, as defined in the
subscription agreement. We cannot assure that these criteria will be met or that
the funding will occur. Terms for the Placement Agent Warrants are similar to
the terms of the Warrants issued with the Preferred Stock.
Holders of the Preferred Stock are entitled to receive cash dividends,
payable quarterly and have preferential liquidation rights above all other
issuances of common stock for an amount equal to the stated value. The Preferred
Stock and unpaid dividends are convertible into shares of common stock equal to
an amount determined by the market value of the common stock at the date of
conversion, adjusted for changes in the market price prior to the conversion.
Holders of the Preferred Stock do not have voting rights.
<PAGE>
ITEM 27. INDEX TO EXHIBITS
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<CAPTION>
Exhibit No. Exhibit
<S> <C>
3.1 Articles of Incorporation of the Company **
3.2 Bylaws of the Company **
4.1 Form of 8% Series A Senior Subordinated Convertible Redeemable Debenture **
4.2 Form of 8% Series B Senior Subordinated Convertible Redeemable Debenture **
4.3 Specimen Stock Certificate of the Company **
5.1 Opinion of Sichenzia, Ross & Friedman, LLP
10.1 Form of Employment Agreement with Dr. David Summers, dated December 18, 1996
10.2 Form of Employment Agreement with Ms. Barbara Richardson, dated June 1, 2000
10.3 Form of Consulting Services Agreement with Mr. Roy Robertson, dated March 1, 2000
10.4 Form of Subscription Agreement for Purchase of Series A 8% Cumulative Convertible Preferred
Stock*
10.5 Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions
and Relative Rights of Series A 8% Cumulative Convertible Preferred Stock*
10.6 Form of Common Stock Purchase Warrant*
10.7 Lease of Company's Facility at 15001 Walden Road, Suite 108, Montgomery, Texas 77356
10.8 Lease of Company's Facility at 15001 Walden Road, Suites 234 and 235, Montgomery, Texas 77356
16.1 Letter on change in certifying accountant **
23.1 Consent of Ham, Langston & Brezina, LLP*
23.2 Consent of Sichenzia, Ross & Friedman, LLP (included in Exhibit 5.1)
27.1 Financial Data Schedule*
* Previously filed with the Registrant's initial filing of this Form SB-2, filed on June 30, 2000.
** Incorporated by reference from the Registrant's Form 10-SB, filed on December 3, 1999.
</TABLE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file a post-effective amendment to this Registration Statement
during any period in which offers or sales are being made:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)to reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually, or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement of any
material change to such information in the Registration Statement.
(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(4) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) That, insofar as indemnification for liabilities arising from the
Securities Act may be permitted to Directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Company certifies that it has
reasonable grounds to believe that it meets all of the requirement for filing on
Form SB-2 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the State of Texas, on
June 30, 2000.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
____________________________ Chief Executive Officer and July 20, 2000
David P. Summers Chairman
____________________________ Secretary and Director July 20, 2000
Barbara J. Richardson
____________________________ Chief Financial Officer, July 20, 2000
M. Dwight Cantrell Treasurer and Director
____________________________ Director July 20, 2000
Gary R. Ball
____________________________ Director July 20, 2000
Claudio R. Roman
</TABLE>
