As filed with the Securities and Exchange Commission on June 30, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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<S> <C> <C>
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.
Leonardo Caruso, 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
</TABLE>
-----------------
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.
<PAGE>
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 Securityholders Selling Securityholders, Plan
of Distribution
8. Plan of Distribution Prospectus Summary, Selling
Securityholders
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
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 30, 2000
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.
</TABLE>
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.
------------------
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 June __, 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 purchases 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 is
focused on two technologies -
Liprostin(TM) and Nicotine Receptor
Agonist. Our Liprostin technology is a
Prostaglandin E-1 delivery system to be
used in lung and heart related medical
applications. Our Nicotine Receptor
Agonist technology promotes growth of new
blood vessels and is being developed for
use in various biological applications.
As our products are in the process of
clinical testing and have not been
approved for general sales, we have not
generated any revenues and have
historically operated with significant
losses. We intend to develop an expansive
line of products based on these two
products for use in diverse medical
treatment applications.
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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<PAGE>
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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<CAPTION>
Nine Months Ended Year Ended
March 31, June 30,
2000 1999 1999 1998
--------------------------------------------------------------------------
(Unaudited) (Audited)
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C> <C>
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)
</TABLE>
<PAGE>
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
-----------
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)
-----------
Total stockholders' deficit (327,819)
-----------
Total capitalization $ (212,173)
===========
</TABLE>
<PAGE>
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 the absence of an established
operating history, there is material uncertainty concerning our ability to
operate successfully. We are subject to all risks inherent in a developing
business enterprise. A limited operating history makes it difficult to evaluate
the products we are developing, as well as regulatory approval, commercial
viability, and market acceptance of our products. The likelihood of our success
must be considered in light of the problems, expenses and difficulties
frequently encountered by a new business in general and those specific to the
biopharmaceutical sector.
Net Operating Losses. For our fiscal year ended June 30, 1999 and
quarter ended March 31, 2000, we incurred net losses of $796,543 and $883,014,
respectively. As our products are in the process of clinical testing and have
not been approved for general sales, we have not generated any revenues and have
historically operated with significant losses. We expect operating losses to
continue indefinitely, due to research expenses, preclinical and clinical
programs, marketing expenses and other activities related to obtaining approval
and achieving commercialization of our products. It is possible that our
revenues may never exceed expenses. If operating losses continue beyond the
short term, our operations will be in jeopardy.
Need for Additional Financing. We may not have sufficient capital
resources to develop and implement our business plan. Therefore, our ultimate
success may depend upon our ability to raise additional capital. We have not
investigated the current availability, sources or terms of acquiring additional
capital, and the Board of Directors will not in all likelihood do so until it
has determined a need for such additional capital. If additional capital is
needed, there is no assurance that such capital will be available from any
source or, if available, made or proposed on terms which are acceptable to us.
If such capital is not available, it will be necessary for us to limit our
operations to those that can be financed with existing financial resources.
Limited Trading of the Our Common Stock; Possible Volatility of Stock
Prices. Our common stock trades publicly on the OTC Bulletin Board. There can be
no assurances that a regular trading market for the common stock will develop,
and if it develops, whether it can be sustained. By its very nature, trading on
the OTC Bulletin Board provides only limited market liquidity. The trading
market for the shares may be adversely affected by the subsequent influx into
the market of shares offered pursuant to this prospectus. Although it is
impossible to predict market influences and prospective values for securities,
it is possible that, in and of itself, the substantial increase in the number of
shares available for public sale could have a depressive effect on the market.
Until a trading market develops, if at all, the market price for our common
stock is likely to be volatile, and factors such as success or lack thereof in
accomplishing our business objectives may have a significant effect. In
addition, the stock markets generally have experienced, and continue to
experience, extreme price and volume fluctuations which have affected the market
price of many small capitalization companies and which have often been unrelated
to the operating performance of these companies. These broad market
fluctuations, as well as general economic and political conditions, may
adversely affect the market price of our common stock.
Possible Limitations upon Trading Activities; Restrictions Imposed upon
Broker-Dealers Effecting Transactions in Certain Securities. The Securities and
Exchange Commission has adopted regulations imposing limitations upon the manner
in which certain low priced securities (referred to as a "penny stock") are
publicly traded. Under these regulations, a penny stock is defined as any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include 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, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. 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.
<PAGE>
Our common stock presently constitutes a "penny stock," accordingly,
trading activities for our common stock will be made more difficult for
broker-dealers than in the case of securities not defined as "penny stocks."
This may have the result of depressing the market for our securities and an
investor may find it difficult to dispose of such securities.
Absence of Dividends. We have not paid or declared any cash dividends
with respect to the common stock, and we do not intend to declare any cash
dividends to holders of the common stock in the foreseeable future. The payment
of future dividends, if any, to holders of the common stock is within the
discretion of the Board of Directors and will depend on our earnings, capital
requirements, financial condition, and other relevant factors. There can be no
assurance that any dividends will ever be paid to holders of common stock. There
are certain circumstances under which our credit facility may prohibit the
payment of dividends.
Indemnification of Directors and Officers. Our certificate of
incorporation and bylaws reflect the adoption of the provisions of Section
102(b)(7) of the Delaware General Corporation Law, which eliminates or limits
the personal liability of a Director to us or our stockholders for monetary
damages for breach of fiduciary duty under certain circumstances. If the
Delaware law is amended to authorize corporate action further eliminating or
limiting personal liability of Directors, the certificate of incorporation
provides that the liability of our Directors shall be eliminated or limited to
the fullest extent permitted by the Delaware law. Our certificate of
incorporation and bylaws also provide that we shall indemnify any person, who
was or is a party to a proceeding by reason of the fact that he is or was a
Director, officer, employee or agent of ours, or is or was serving at our
request as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with a proceeding if he acted in good faith and in a manner he
reasonably believed to be or not opposed to our best interests, in accordance
with, and to the full extent permitted by the Delaware law. The determination of
whether indemnification is proper under the circumstances, unless made by the
court, shall be determined by our Board of Directors.
Control by Existing Shareholders; Anti-Takeover Effects. Our executive
officers, directors and other principal shareholders, in the aggregate,
beneficially own approximately 38% of our outstanding shares of common stock.
The voting power of these shareholders, under certain circumstances, could have
the effect of delaying or preventing a change in control of us. Further, the
holders of our shares of common stock are not entitled to accumulate their
votes. Accordingly, the holders of a majority of the shares of common stock
present at a meeting of shareholders will be able to elect all of our Directors
and the minority shareholders will not be able to elect a representative to our
Board of Directors.
Competition. The markets in which we operate are highly competitive.
The drugs we are developing compete with existing and new drugs. Many companies,
including established pharmaceutical and chemical companies, and
university-related entities both in the United States and abroad are developing
products based on improved drug delivery technologies, including liposome and
lipid-based research and product development. Many of our competitors have
greater financial resources, longer operating histories, greater technical
capabilities, and greater name recognition than we do. In addition, most such
companies have had significantly greater experience than we have in preclinical
and clinical product development and in obtaining regulatory approval to
manufacture and market pharmaceutical products. Our failure to compete
effectively would have a material adverse effect on our business, operating
results, and financial condition.
No Assurance of Regulatory Approval. Our products are subject to
rigorous preclinical and clinical testing and approval by the FDA and by
comparable agencies in other countries and, to a lesser extent, by state
regulatory authorities prior to marketing. The process of conducting clinical
trials and obtaining regulatory approval for a product typically takes a number
of years and involves significant expenditures. Following the grant of any
regulatory approval for a product, we remain subject to continuing review from
the applicable regulatory body. Later discovery of previously unknown problems
may result in restrictions on a product's future use or withdrawal of the
product from the market.
No Assurance of Market Acceptance of Developing Technology. Our future
success and competitive position depends upon the acceptance of our products in
development. While liposome and lipid-based products have been approved for sale
in certain European countries, no liposome or lipid-based therapeutic products
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 product utilizing liposome or lipid-based
<PAGE> technologies may adversely effect on our ability to obtain physician,
patient or third-party payer acceptance and sales of our products. There can be
no assurance as to our ability or the length of time required to achieve
commercialization of the Company's products or that physicians, patients or
third-party payers will accept our products as readily as traditional forms of
medication or at all.
Dependence on Key Personnel; Need for Additional Personnel. Our future
success depends on the continuing services of Dr. David Summers, our Chief
Executive Officer. The loss of Dr. Summers could have a material adverse effect
on our business or operations. Moreover, as we grow, our success will depend
largely upon our ability to attract and retain qualified scientific,
engineering, manufacturing, sales, marketing and management personnel. We
believe that the market for qualified personnel in our industry is highly
competitive. There is no assurance that we will be successful in attracting and
retaining key personnel with the skills and expertise necessary to manage our
business.
Dependence on Additional Facilities, Manufacturing and Marketing
Personnel. Our current facilities and staff are inadequate for the large-scale
production and marketing of our products under development. In addition, we have
limited experience in clinical development of therapeutic products, lack the
financial resources to commercialize and sell our products and have limited
experience in marketing products. There can be no assurance that we will be
successful in conducting additional clinical development or in manufacturing and
marketing our products.
Dependence on Third-Party Distributors and Agents. In the event that we
commence commercial distribution of our products, a majority of our sales may be
affected through third-party distributors or agents. There can be no assurance
that we will be able to reach agreements with such third-party distributors and
agents, or that such agreements will be available on terms acceptable to us. Our
potential dependence on such distributors or agents may cause significant
fluctuations in product revenues due to their success in selling our product.
There can be no assurance that these or other factors could not lead to
substantial fluctuations in our product revenues from period to period.
Dependence on Third-Party Manufacturers. In the event that we commence
commercial distribution of our products, we may be dependent upon contract
manufacturers for large-scale production of our products. There can be no
assurance that we will be able to locate manufacturers that will meet
governmental regulatory standards for the manufacture of our products.
Similarly, there can be no assurance that we will be able to reach agreements
with such third-party manufacturers, or that such agreements will be available
on terms acceptable to us.
Dependence on Raw Materials. While we have agreements in place to
obtain adequate supplies of our key raw materials, the number of qualified
suppliers of these materials is limited. There can be no assurance that we will
be able to obtain adequate supplies of our key raw materials from our current
suppliers or alternative sources. Our inability to obtain adequate supplies of
our key raw materials may adversely affect our operations.
Risks Associated with Intellectual Property. Our future success and
competitive position depends in part upon our ability to obtain and maintain
certain proprietary technology used in our principal products, and we rely in
part on patent, trade secret, trademark and copyright law to protect that
technology. While we have made efforts to protect this technology under United
States intellectual property law, there can be no assurance that any of the
patent applications we have filed will not be invalidated, circumvented,
challenged or licensed to others, that the rights granted thereunder will
provide competitive advantages to us or that any of our pending or future patent
applications will be issued with the scope of the claims sought by us, if at
all. Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned or licensed by us. In addition,
effective patent, trademark, copyright and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries. There can
be no assurance that steps taken by us to protect our technology will prevent
misappropriation of such technology.
<PAGE>
The biopharmaceutical industry is characterized by vigorous protection
and pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. There is no
intellectual property litigation currently pending against us; however, we may
from time to time be notified of claims that we may be infringing patents or
other intellectual property rights owned by other third parties. If it is
necessary or desirable, we may seek licenses under such patents or intellectual
property rights. However, there can be no assurance that licenses will be
offered or that the terms of any offered licenses will be acceptable to us. The
failure to obtain a license from a third party for technology used by us could
cause us to incur substantial liabilities and to suspend the manufacture or
shipment of products or the use by us of processes requiring the technology.
Litigation could result in significant expense to us, adversely affecting sales
of the challenged product or technology and diverting the efforts of our
technical and management personnel, whether or not such litigation is determined
in favor of us. In the event of an adverse result in any such litigation, we
could be required to pay substantial damages, cease the manufacture, use, sale
or importation of infringing products, expend significant resources to develop
or acquire non-infringing technology, discontinue the use of certain processes
or obtain licenses to the infringing technology. There can be no assurance that
we would be successful in such development or acquisition or that such licenses
would be available under reasonable terms and any such development, acquisition
or license could require expenditures by us of substantial time and other
resources.
Product Liability. Our products' testing, manufacture, marketing and
distribution will involve the risk of product liability. There can be no
assurance that we have obtained insurance to protect adequately against the risk
of product liability, that we can renew such amount of insurance, or that the
amount and scope of our insurance coverage will protect us adequately in the
event of a successful product liability claim. Inadequate insurance coverage may
adversely affect us in the event of a successful product liability claim.
Government Health Care Reform. Profitability of the biopharmaceutical
industry may be affected by governmental legislation regarding regulation of
health care. 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 the revenues we may obtain from commercial
sale of our products. There can be no assurance that government regulation of
health care systems will not change in a manner that adversely effects our
business.
<PAGE>
USE OF PROCEEDS
Because this prospectus is solely for the purpose of permitting the
selling stockholders to offer and sell shares, we will not receive any proceeds
from the sale of the shares being offered. The selling stockholders will receive
all the proceeds. We have, however, previously received proceeds from the
original issuance of the shares covered by this prospectus.
DETERMINATION OF OFFERING PRICE
This offering is solely for the purpose of allowing selling
stockholders to sell shares. The selling stockholders may elect to sell some or
all of their shares when they choose, in the near future or at a later date, at
the price at which they choose to sell. As the market develops, the selling
stockholders will determine the price for their shares.
DIVIDENDS
To date, we have paid no dividends on any shares of common stock and
our Board of Directors has no present intention of paying any dividends on the
common stock in the foreseeable future. The payment by us of dividends on the
common stock in the future, if any, rests solely within the discretion of the
Board of Directors and will depend upon, among other things, our earnings,
capital requirements and financial condition, as well as other factors deemed
relevant by our Board of Directors. Although dividends are not limited currently
by any agreements, it is anticipated that future agreements, if any, with
institutional lenders or others may also limit our ability to pay dividends on
the common stock.
<PAGE>
MARKET FOR SECURITIES
The high and low bid (price which a market maker is willing to pay for
a share of common stock) and offered (price at which a market maker will sell a
share of common stock) quotations for the common stock, as reported by brokerage
firms listed on the specified dates by the OTC Bulletin Board as making markets
in our securities are listed in the following chart. These quotations are
between dealers, do not include retail mark-ups, markdowns or other fees and
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
Date Low / Bid Price High / Ask Price
<S> <C> <C>
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)
</TABLE>
* No bids or trades reported
<PAGE>
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.
The Company is in the development stage and has had limited operating
revenues since its inception on June 10, 1996. From June 10, 1996 through March
31, 2000, the Company had an accumulated deficit of $3,659,751. During its
fiscal nine months ended March 31, 2000, the Company entered into an exclusive
worldwide license agreement with Stanford University for the patent rights to a
patent application SUN-142-PRV, a novel use of nicotine as an agent for
promoting growth of new blood vessels (angiogenesis) into areas of blood-starved
tissue, a condition called ischemia. Pursuant to the license agreement, the
Company obtained a 10 - year exclusive right of novel use of nicotine in
angiogenesis. Stanford will continue research and development for the Company's
research products under the licensing agreement, subject to pending agreements.
Management anticipates this action will result in the Company saving
approximately $500,000 in initial research cost due to Stanford's allocation of
research facility and investigational scientists. As a result of the Company's
decision in February 2000 to enter into the Stanford agreement and research
alliance with Stanford, we believe the Company's technology portfolio was
significantly enhanced.
In October 1999, the Company presented pre-clinical data to the U.S.
Food and Drug Administration (FDA) in preparation of its Investigational New
Drug (IND) filing for Liprostin, its liposomal prostaglandin E-1 (PGE-1) drug
for indications of critical limb ischemia (CLI). The FDA reviewed the Company's
data and responded with a waiver of Phas I & II clinical trials, if the Company
so elected to proceed directly to a Phase III trial for the product. At this
time, the Company has not decided whether or not this waiver will be accepted or
whether it will proceed on a conventional Phase I study, which it was prepared
to do prior to the FDA's pre-submission IND meeting. In addition, the Company
completed its 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 to be in place by the end of the third quarter 2000 as the Company's
clinical studies begin in full swing.
During the nine months ended March 31, 2000, the Company's 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 sales of research and
development services provided by the Company to third parties. At March 31,
2000, the Company had agreement s with two device manufacturers for original
research and development of the proprietary use of Liprostin in the treatment of
various vascular diseases by 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. The increase in costs and
operating expenses for the year is primarily due to an increase in research and
development, facilities, and overhead as rent and other costs increased.
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, primarily due to the increased cost of
scientific personnel, materials and prototype manufacturing.
Interest expense decreased for the nine months ending March 31, 2000 by
$41,917, or 41%. This was largely due to a significant reduction in both short
term and long term debt which was converted to equity.
<PAGE>
Research and development expenses totaled $1,035,724 during the fiscal
nine months ended March 31, 2000, an increase of $825,565. These expenses were
related to the 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.
Liquidity and Capital Resources
The Company had a working capital deficit on March 31, 2000, of
$313,419, compared to $366,249 as of March 31, 1999.
The Company requires significant additional funds to enable it to
continue its Liprostin product development and to complete its Food and Drug
Administration required clinical trials. In May 2000, the Company completed a
$4.5 million financing commitment related to the private placement and sale of
its convertible preferred stock in three (3) $1.5 million traunches. Pursuant to
the commitment the Company received $1.5 million on May 10, 2000, with $3
million remaining in the "take-down", however, there can be no assurance that
the Company will receive any funds from the remaining tranuches.
The Company continues to actively pursue additional financing,
collaborations with firms, and other arrangements aimed at increasing its
capital resources. Failure to acquire such funds may adversely impact the
scheduled marked introduction of Liprostin and possibly adversely affect the
Company's operations. In order to continue as a going concern, the Company must
raise additional funds as noted above and ultimately achieve profit from its
operation.
<PAGE>
BUSINESS
History
We incorporated 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. While 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, 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 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 improve therapeutic effectiveness of the drug.
Currently, 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 a product's 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 for efficacy, optional dosage
levels and potential contraindications or side effects using a larger patient
group. We estimate that both phases of clinical trial will be complete 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
areas 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 to be less
susceptible to deaths due to infarction compared to non-smokers. This
counterintuitive discovery led to a finding 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
interesting 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. This, in turn, reduces the body's ability to
supply that tissue with nutrients, the most important of which is oxygen, which
results in a condition called ischemia. This low oxygen supply reduces cells'
ability to function and in severe cases causes rapid cell death. The body's
defenses from ischemia include reducing the work required from the affected area
and attempting to grow a new network of 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. While we have not yet 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 additional
foreign countries as deemed necessary to protect development of our foreign
operations. Currently, 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, on November 9, 1999, we obtained a
United States patent for our proprietary technology regarding a "Composition and
Method for Making a Biodegradable Drug Delivery Stent." In conjunction with this
technology, we have a patent application pending under the Patent Cooperation
Treaty, as well as with the European Patent office and European Union for patent
protection in France, Germany and the United Kingdom.
We also 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 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". 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." This 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 allow us to protect this technology's application
in various medical products.
We have also applied for 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. Other trademarks that we utilize
include our logo, the registered domain name of www.endovasc.com, and other
trademarks 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. In connection with the acquisition of
these product rights from the Leland Stanford Junior University in February of
this year, we agreed to pay royalties to the university on sales of any products
incorporating the nicotine agonist technology. Pursuant to this agreement, 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
been issued, 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 to which we may desire to acquire licenses under such patents, or the
cost or availability of such licenses at terms 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 pharmaceutical field, liposome and lipid-based
product area is intense based on such factors as product performance, safety,
patient compliance, ease of use, price, physician acceptance, marketing,
distribution and adaptability to various modes of administration. 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 will be 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 well-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.
Currently, we are focused on the research and development of 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 a product's 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 for
efficacy, optional dosage levels and potential contraindications or side effects
using a larger patient group. We estimate that both phases of clinical trial
will be complete by approximately December 31, 2002.
In addition, we are conducting feasibility studies with prospective
strategic partners to determine the practicality of collaborative products
incorporating Liprostin with other technologies. The Company will continue to
attempt to develop new uses for its core product Liprostin, such as use in hip
or bone prosthesis to promote rapid bone growth, use of prostaglandin and other
therapeutic agents for treatment of cancer, inflammatory disease, liver disease
and other diseases which prostaglandin has demonstrated safety and efficacy.
We are also monitoring and assisting the research and development of
our Nicotine Receptor Agonist technology and 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. 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 there can be no
assurances that our efforts will not require additional facilities and
equipment, we have no plans for such outlays.
Employees
As of May 31, 2000, we employed fourteen employees, including five
management and nine support staff employees, as well as twelve part-time
consultants. None of the Company's employees or independent contractors is
subject to a collective bargaining agreement and the Company believes its
relations with its 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
The Company is not currently involved in any material litigation or
legal proceedings and is not aware of any potential material litigation or
proceeding threatened against the Company.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors, executive officers, and key employees of the Company 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 to Present
and Chairman
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 currently serves as the Chief Executive Officer and
Chairman of the Company. Dr. Summers has served in this capacity on a full-time
basis since the Company's inception and is primarily responsible for the
Company's 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 a number of 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 for medical use. 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 is a Senior Member of the Society of
Plastic Engineers.
Danilo D. Lasic, Ph.D. currently serves as the Company's Chief Scientific
Officer. Prior to joining the Company in June 1997, Dr. Lasic served as a
genetic and drug delivery consultant with Liposome Consultations, Inc. since
1996, and as Director of Lipid Research with MegaBios, Inc. from 1994 to 1996.
Dr. Lasic is a solid state physicist specialized in the design and development
of 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 currently serves as the Company's Director of Research and
Development. Prior to joining the Company in March of this year, Ms. Dottavio
served as Senior Scientist with Leukosite, Inc. from 1994 to 1996 and Director
of Laboratory Instruction and Research at the University of Houston since 1997.
Ms. Dottavio holds a B.S. in Biology and M.S. in Organic Chemistry from the
Univeristy of New Mexico, as well as a Ph.D. in Biochemistry from the University
of Texas.
Barbara J. Richardson currently serves as Vice President of Operations,
Secretary and a Director of the Company. Ms. Richardson has extensive experience
in small business management and marketing. Prior to joining the Company in
January of this year, Ms. Richardson served as Senior Administrative Coordinator
for Baylor College of Medicine since 1994.
Roy A. Robertson currently serves as the Company's 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 the Company 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 currently serves as Chief Financial Officer, Treasurer
and a Director of the Company. Mr. Cantrell works for the Company on a part-time
basis. Mr. Cantrell engages in a public accounting practice in the state of
Texas, and did so prior to joining the Company. Mr. Cantrell is a public
accountant, and holds a B.S. in accounting from Southern Ohio University.
Gary R. Ball currently serves as a Director of the Company. Prior to
co-founding the Company in July 1996, Mr. Ball served as a mechanical engineer
with American BioMed, Inc. since 1991. Mr. Ball is a co-inventor of two U.S.
patents and is experienced in designing, researching and developing prototypes,
reliability testing and patent research and filing.
Claudio R. Roman currently serves as a Director of the Company. 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.
Directors of the Company hold office until the next annual meeting of the
Company's stockholders and until their successors have been elected and duly
qualified. Executive officers are elected by the Board of Directors of the
Company 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 Company's executive officers for services
rendered in all capacities to the Company for the fiscal year ended June 30,
1999, 1998, and 1997. Other than as listed below, the Company 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
CEO and Director 1999 $75,000 $ None $ None $ None 1,000,000 $0.25 None
1998 $60,000 $ None $ None $ None None None None
1997 $60,000 $ None $ None $ None None None None
</TABLE>
Directors of the Company receive no compensation for their services as
directors.
Employment Agreements
The Company has entered into employment agreements with Dr. David Summers,
Ms. Barbara Richardson, Mr. Roy Robertson, and Dr. Danilo Lasic. The Company has
a three-year automatically renewable employment contract with Dr. Summers, which
shall renew in 2002, providing for annual compensation of $120,000 in cash and
equity interests. The Company also has a one-year automatically renewable
employment contract with Ms. Richardson, providing for annual compensation of
$55,000 in cash and equity interests. Similarly, the Company has a one-year
automatically renewable employment contract with Mr. Robertson, providing for
annual compensation of $65,000 in cash and equity interest. Finally, the Company
has a one-year automatically renewable employment contract with Dr. Lasic,
providing for annual compensation of $100,000 in cash and equity interests.
Stock Option Plans
The Company has adopted a Stock Option Plan (the "2000 Plan"), pursuant to
which 2,000,000 shares of Common Stock are reserved for issuance.
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 the
Company. 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. 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 control of the Company, as
defined in the 2000 Plan, and are exercisable only by the participant during his
or her lifetime. Change in control includes (i) the sale of substantially all of
the assets of the Company and merger or consolidation with another, or (ii) a
majority of the board changes other than by election by the shareholders
pursuant to board solicitation or by vacancies filled by the board caused by
death or resignation of such person.
<PAGE>
If a participant ceases affiliation with the Company by reason of
death, permanent disability or the retirement of an Optionee either pursuant to
a pension or retirement plan adopted by the Company or on the normal retirement
date prescribed from time to time by the Company, 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, 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 the Company 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 the Company, 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 the Company 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 the shareholders of the Company.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of May 31, 2000, by (i)
each person who, to the knowledge of the Company, beneficially owns more than 5%
of the Company's common stock; (ii) each director and executive officer of the
Company; and (iii) all executive officers and directors of the Company following
the Merger 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
(7 persons)
</TABLE>
----------------------
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 the Company's
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
During the past two years, the Company has not entered into a transaction
with a value in excess of $60,000 with a director, officer or beneficial owner
of 5% or more of the Company's capital stock, or members of their immediate
families had, or is to have, a direct or indirect material interest, except as
follows:
Effective October 1, 1999, the Company 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 the Company's 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, the Company 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 the Company's 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, the Company also entered into
an agreement with M. Dwight Cantrell under the terms of which he was compensated
for past services as a director of the Company. Under the terms of this
agreement, Mr. Cantrell was granted an option to purchase 50,000 shares of the
Company's 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, the Company entered into an
agreement with Claudio Roman, Esq., under the terms of which he was compensated
for past services as legal counsel for the Company. Under the terms of this
agreement, Mr. Roman was granted an option to purchase 50,000 shares of the
Company's 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, the Company 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 the Company's
common stock. The Company made the initial $50,000 payment and issued the
200,000 shares of stock. The stock was issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
However, the Company 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. The Company
issued a total of 200,000 shares in final settlement of the agreement, in March
2000.
Between March 1998 and December 1999, David Summers, Chairman of the Board
of Directors and Chief Executive Officer of the Company, made two advances to
the Company in the amounts of $123,000 and $25,000, respectively. These advances
were made on an unsecured basis, with no accrual of interest, and were due and
payable on June 30, 2000. During December 1999, the Company 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
The Company's 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 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 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. The Company's
Board of Directors has authority, without the action by the Company's
shareholders, to issue all or any portion of the authorized but unissued Shares
of common stock, which would reduce the percentage ownership of the Company of
its shareholders and which may dilute the book value of the Shares of common
stock.
<PAGE>
The Company's 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.
Shareholders of the Company 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
liquidation of the Company, 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. The Company has not paid
dividends on its Shares of common stock and there can be no assurance that it
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 the Company's Board of
Directors. The Company's 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 the Company's common stock, as at May 31, 2000:
<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
150,000 150,000 October, 2001 0.75
50,000 50,000 May 3, 2003 1.00
395,583 395,583 May 9, 2003 1.89
-------- --------
TOTAL 1,345,583 1,345,583
</TABLE>
Trading Information
The Shares of common stock are 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 the 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
the Shares of 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 the Company by its 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 common stock of the Company.
<PAGE>
Experts
The Company's 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, the Company has outstanding
12,736,675 shares of common stock.
Of the Company's shares of common stock currently outstanding,
5,529,635 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 any affiliate of the Company, 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 the Company. 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, an affiliate of the Company, 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 the Company's ability to raise capital through the sale
of its equity securities.
<PAGE>
SELLING STOCKHOLDERS
The following table gives information on the selling stockholders based on
the number of outstanding shares of 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
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.
<PAGE>
(4) Includes 300,000 shares which 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
Endovasc Ltd., Inc. is 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 its 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:
<TABLE>
<CAPTION>
<S> <C>
- 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.
</TABLE>
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"
<PAGE>
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.
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 the common stock of Endovasc Ltd., Inc. by the selling
stockholders. Endovasc Ltd., Inc. 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
The Company has filed with the 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 with respect to the Company 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). At the date hereof, the Company was not a
reporting company under the Securities Exchange Act of 1934, as amended.
<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
the Company 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 a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of any corporation, partnership, joint venture, trust
or other enterprise. The Company 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 the Company.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the 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
1. On or about July 25, 1997, the Company issued at total of 300,000 of its
common stock pursuant to the exemption for registration provided by Regulation
D. The Company relied on such exemption from registration based upon the fact
that issuance of these shares complied with the requirements of Regulation D and
the Company 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:
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
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
</TABLE>
2. On or about September 26, 1997, the Company issued 382,571 shares of its
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:
<TABLE>
<CAPTION>
<PAGE>
Name Shares
---- ------
<S> <C>
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
</TABLE>
3. On or about November 13, 1997, the Company 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, the Company issued 100,000 shares of its
common stock to Alexander H. Walker, Jr. in consideration for legal services
rendered to the Company. 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, the Company issued 300,000 shares of its
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, the Company issued 50,000 shares of its
common stock to Danilo D. Lasic in exchange for technical advisement services
rendered to the Company. 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, the Company issued 18,987 shares of its
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, the Company issued 25,000 shares of its
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, the Company issued 1,416 shares of its
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, the Company issued 1,190 shares of its
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, the Company issued 2,083 shares of its
common stock to Alenka Lasic in exchange for services rendered in connection
with designing the Company's brochures and designing the Company's 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, the Company issued 14,380 shares of its
common stock to Susan Cohen in consideration for legal services rendered to the
Company. 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, the Company issued 50,000 shares of its
common stock to James D. Regan in exchange for technical advisement services
rendered to the Company. 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, the Company issued 10,416 shares of its
common stock to Alenka Lasic in exchange for services rendered in connection
with designing Company brochures and designing the Company's 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, the Company issued 650,000 shares of its
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. The Company relied on such
exemption from registration based upon the fact that issuance of these shares
complied with the requirements of Regulation D and the Company made the required
informational filing pursuant to Regulation D.
16. On or about January 8, 1999, the Company issued 35,556 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
17. On or about January 14, 1999, the Company issued 20,000 shares of its
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, the Company issued 5,200 shares of its
common stock to James Regan in exchange for technical advisement services
rendered to the Company. 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, the Company issued 10,116 shares of its
common stock to Alenka Lasic in exchange for services rendered in connection
with designing Company brochures and designing the Company's 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, the Company issued 80,000 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
21. On or about February 3, 1999, the Company issued 2,000 shares of its
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, the Company issued 5,200 shares of its
common stock to James D. Regan in exchange for technical advisement services
rendered to the Company. 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, the Company issued 106,667 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
24. On or about February 23, 1999, the Company issued 100,000 shares of its
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. The Company relied on such
exemption from registration based upon the fact that issuance of these shares
complied with the requirements of Regulation D and the Company made the required
informational filing pursuant to Regulation D.
<PAGE>
25. On or about February 23, 1999, the Company issued 5,000 shares of its
common stock to Shawn F. Hackman in exchange for services. Such shares were
vlued 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 the Company on or about September 1, 1999. The Company relied on such
exemption from registration based upon the fact that issuance of these shares
complied with the requirements of Regulation D and the Company made the required
informational filing pursuant to Regulation D.
26. On or about March 9, 1999, the Company issued 248,889 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
27. On or about March 23, 1999, the Company issued 13,201 shares of its
common stock to Hiroko Yoshida in exchange for technical advisement services
rendered to the Company. 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, the Company issued 127,348 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
29. On or about April 13, 1999, the Company issued 5,166 shares of its
common stock to Alenka Lasic in exchange for services rendered in connection
with designing Company brochures and designing the Company's 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, the Company issued 187,324 shares of its
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. The Company relied on such exemption from registration
based upon the fact that issuance of these shares complied with the requirements
of Regulation D and the Company made the required informational filing pursuant
to Regulation D.
31. On or about April 29, 1999, the Company issued 139,132 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
32. On or about May 20, 1999 the Company issued 65,308 shares of its 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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
33. On or about May 27, 1999, the Company issued 1,000 shares of its 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, the Company issued 16,487 shares of its
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, the Company issued 124,444 shares of its
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, the Company issued 10,000 shares of its
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.
<PAGE>
37. On or about July 27, 1999, the Company issued 5,000 shares of its
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 the Company issued 98,467 shares of its
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. The Company relied on such
exemption from registration based upon the fact that issuance of these shares
complied with the requirements of Regulation D and the Company made the required
informational filing pursuant to Regulation D.
39. On or about July 29, 1999, the Company issued 18,577 shares of its
common stock to Hiroko Yoshida in exchange for scientific and product
development services rendered to the Company. 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, the Company issued 9,883 shares of its
common stock to Hiroko Yoshida in exchange for scientific and product
development services rendered to the Company. 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, the Company issued 50,000 shares of its
common stock to Danilo Lasic in exchange for scientific, laboratory, and
technical advice rendered to the Company. 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, the Company issued 200,000 shares of
its 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, the Company issued 237,079 shares of
its 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. The Company
relied on such exemption from registration based upon the fact that issuance of
these shares complied with the requirements of Regulation D and the Company made
the required informational filing pursuant to Regulation D.
44. On or about October 4, 1999, the Company issued 4,000 shares of its
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 the Company issued 384,000 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
46. On or about October 19, 1999 the Company issued 100,000 shares of its
common stock to Amram Rothman in debt conversion. Such shares were valued at
$0.075 per share and were issued pursuant to the exemption from registration
under Rule 504 or Regulation D. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
<PAGE>
47. On or about October 18, 1999, the Company issued 70,880 shares of its
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, the Company issued 5,000 shares of its
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, the Company issued 500,000 shares of its
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. The Company relied on such exemption from
registration based upon the fact that issuance of these shares complied with the
requirements of Regulation D and the Company made the required informational
filing pursuant to Regulation D.
50. On or about October 28, 1999, the Company issued 70,880 shares of its
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, the Company issued 4,000 shares of its
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.
52. On or about December 8, 1999, the Company issued 1,000,000 shares of
its 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, the Company issued 1,250,000 shares of
its common stock to Dr. David Summers, the Company's 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, the Company issued 600,000 shares of its
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, the Company issued 50,000 shares of its
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, the Company issued 50,000 shares of its
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, the Company issued 200,325 shares of its
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, the Company issued 24,000 shares of its
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.
<PAGE>
59. On or about February 2, 2000, the Company issued 50,000 shares of its
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, the Company issued 25,000 shares of its
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, the Company issued 10,000 shares of its
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, the Company issued 10,000 shares of its
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, the Company issued 10,000 shares of its
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, the Company issued 1,820 shares of its
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, the Company issued 33,933 shares of its
common stock to Hiroko Yoshida in exchange for scientific and product
development services rendered to the Company. 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, the Company issued 136,173 shares of its
common stock to Board of Trustees of Leland and 13,457 shares of its common
stock to each of John Cooke, Christopher Heeschen, Phillip Tsao, and James Jang
in exchange for scientific and product development services rendered to the
Company. 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.
67. On or about February 19, 2000, the Company issued 300,000 shares of its
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, the Company issued 14,000 shares of its
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, the Company issued 50,000 shares of its
common stock to John Charles and 25,000 shares of its 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.
<PAGE>
70. On or about March 3, 2000, the Company issued 14,000 shares of its
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, the Company issued 1,000 shares of its
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, the Company issued 20,000 shares of its
common stock to Curtis Wenger, Esq. and 25,000 shares of its 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, the Company issued 25,000 shares of its
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, the Company issued 12,000 shares of its
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.
<PAGE>
ITEM 27. INDEX TO EXHIBITS
<TABLE>
<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 Subbordinated Convertible Redeemable Debenture **
4.2 Form of 8% Series B Senior Subbordinated Convertible Redeemable Debenture **
4.3 Specimen Stock Certificate of the Company **
5.1 Opinion of Sichenzia, Ross & Friedman, LLP *
10.1 Form of 2000 Stock Option Plan *
10.2 Form of Employment Agreement with Dr. David Summers *
10.3 Form of Employment Agreement with Ms. Barbara Richardson *
10.4 Form of Employment Agreement with Mr. Roy Robertson *
10.5 Form of Employment Agreement with Mr. Dr. Danilo Lasic *
10.6 Form of Subscription Agreement for Purchase of Series A 8% Cumulative Convertible Preferred Stock
10.7 Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions and Relative
Rights of Series A 8% Cumulative Convertible Preferred Stock
10.8 Form of Common Stock Purchase Warrant
10.9 Lease of Company's Facility at 15001 Walden Road, Suite 108, 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
</TABLE>
-------------------------------------
* To be filed by amendment.
** Incorporated by reference from the Registrant's Form 10-SB, filed on
December 3, 1999.
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>
/s/David P. Summers Chief Executive Officer and June 30, 2000
David P. Summers Chairman
/s/Barbara J. Richardson Secretary and Director June 30, 2000
Barbara J. Richardson
/s/M. Dwight Cantrell Chief Financial Officer, June 30, 2000
M. Dwight Cantrell Treasurer and Director
/s/Gary R. Ball Director June 30, 2000
Gary R. Ball
/s/Claudio R. Roman Director June 30, 2000
Claudio R. Roman
</TABLE>
