FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCOTTSDALE SCIENTIFIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 13-3940486
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30806 Santana Street, Hayward, CA 94544 (Address of principal executive
offices)(Zip Code)
Registrant's telephone number, including area code: (800) 545-9960
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001
Preferred Stock, Par Value $0.25
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TABLE OF CONTENTS
Page
COVER PAGE ..................................................................1
TABLE OF CONTENTS ...........................................................2
PART I ................................................................3
DESCRIPTION OF BUSINESS .............................................3
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PROJECTED 1999 OPERATING
RESULTS...........................................................9
DESCRIPTION OF PROPERTY ............................................18
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES ..........18
REMUNERATION OF DIRECTORS AND OFFICERS .............................19
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS ................................................20
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS ..................................................20
SECURITIES BEING OFFERED ............................................21
PART II .................................................................21
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS ...................21
LEGAL PROCEEDINGS .................................................21
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ...................21
RECENT SALES OF UNREGISTERED SECURITIES .............................21
INDEMNIFICATION OF DIRECTORS AND OFFICERS ........................25
PART F/S ....................................................................26
FINANCIAL STATEMENTS ............................................26
PART III .................................................................26
INDEX TO EXHIBITS .................................................26
SIGNATURES ...............................................................27
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PART I
The issuer has elected to follow Form 10-SB, Disclosure Alternative 2.
ITEM 6. DESCRIPTION OF BUSINESS
Scottsdale Scientific, Inc. ("Scottsdale Scientific", "the Company") was
incorporated under the laws of the State of Florida on April 8, 1997 with an
authorized capital of 100,000,000 shares of common stock par value $0.001 per
share. As of March 31, 1999, the Company had issued 15,017,855 shares of its
stock. The Company currently trades on the NASDAQ OTC Bulletin Board under the
symbol STDS.
Scottsdale Scientific is a corporation involved in the wholesale
distribution of nutritional health supplements. These health supplements are
distributed to physicians, nutritionists, storefront businesses and direct to
consumers. In 1995, the Dietary Supplement Health Education act was passed,
providing nutritional supplement companies the ability to develop and market a
wider number of nutrients that have proven their effectiveness in non-western
cultures.
The Company's initial product line included vitamin C products, multiple
vitamins and minerals, essential fatty acids, superfood concentrates and live
cell therapy. Live Cell Therapy is a technical protocol that uses advanced
nutrients factors for tissue and organ renewal.
On May 1, 1997, the Company commenced an offering of 400,000 shares of its
common stock pursuant to Regulation D, Rule 504 at a price of $0.25 per share
for a total offering of $100,000. This offering was completed on July 10, 1997
with all shares sold. The proceeds from the offering were used for working
capital and to explore business opportunities in the health-related products
business.
On May 1, 1997, board members, Dave Gamache and Ken Finkelstein, resigned
from the board of directors due to their inability to commit to the time and
effort needed to support the company's efforts in seeking out new business
opportunities. On this same date, Harmel S .Rayat, Narinder Thouli and Wes
Janzen were elected to the board of directors by resolution of the board to fill
existing vacancies.
On October 28, 1997, the Company began an offering in reliance upon
Regulation D, Rule 504. This offering was for 4,300,000 shares of the Company's
common stock at a price of $0.10 per share for a total offering of $430,000. The
offering was completed on December 9, 1997 with all shares sold. The proceeds
from the offering were used for working capital, public relations and research
and development of the European market.
The board of directors approved the acquisition of NutriCology, Inc., a
California corporation, on December 8, 1997. Under the terms of this
transaction, the Company received all of the issued and outstanding shares of
NutriCology, Inc. in exchange for 6,800,000 shares of the
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Company's common stock to be issued to Stephen Levine as sole shareholder of
NutriCology, Inc. Additionally, 61,500 shares of the Company's common stock were
paid as a fee to Lorraine Peller for the facilitation of the introduction
between NutriCology and the Company. This acquisition was approved by the
shareholders of the Company on December 8, 1997 and was completed on February 3,
1998.
On December 11, 1997, Stephen Levine, Susan Levine, Marianne Sum and Arnold
Takemoto were elected as directors of the board at a meeting of the board of
directors. Narinder Thouli and Wes Janzen resigned from the board at this time.
Upon the election of the new directors, new officers of the corporation were
elected. Stephen Levine was named Chairman and Chief Executive Officer, Susan
Levine was elected Secretary and Treasurer and Marianne Sum replaced Harmel
Rayat as President and Chief Operating Officer. At this same meeting, the board
resolved to hold its 1998 Annual Meeting on April 15, 1998 at the Company's
offices in order to elect directors for the ensuing year, authorize the
amendment of the Articles of Incorporation in order to create a class of
preferred stock consisting of 1,000,000 shares with a par value of $0.25 per
share, authorize a 1998 Stock Option Plan for 1,000,000 shares and ratify the
appointment of Blume Law Firm, P.C. as Counsel to the Company and of Clancy &
Company, P.L.L.C., as independent public accountants for the firm.
In March 1998, the Company formed an alliance with Protein Research, a
contract manufacturer supplying nutritional supplements globally. Protein
Research managed the new automated packaging line installed in Hayward,
California and acted as a back-up warehouse until December 1998. At this time,
the Company began to establish its own packaging and manufacturing operation by
setting up its own automated packaging line and terminating its relationship
with Protein Research. The Company feels that this will streamline operations
and, when the plan is completed, reduce cost of goods and improve profit margin.
Scottsdale Scientific also signed distribution agreements with Aplacom,
Assessoria, Plancjamento e Comercia Ltda of Sao Paolo, Brazil (Aplacom) and with
Nutri-Link Ltd. in the United Kingdom in September 1998. Aplacom has a history
of working with the health and sanitary governmental authorities of Brazil,
which provides them with a privileged position from which to address the
Mercosul countries of Brazil, Argentina, Chile and Uruguay, and has 7,000
distributors in 50 cities throughout South America. (The Mercosul countries of
Argentina, Paraguay, Uruguay and Brazil are known as the Southern Common Market
and represent a total population of 190 million individuals.) Nutri-Link is a
nutritional supplement and functional medical laboratory testing company.
Nutri-Link is also involved in DNA testing and protocols implementing the use of
Scottsdale Scientific products.
On April 1, 1998, Harmel Rayat resigned from the board of directors for
personal reasons. Mr. Rayat did not have any disagreements with the Company. On
April 1, 1998, the Company approved a Regulation D, Rule 504 Placement Offering
of 96,000 shares at $1.625 per share with a warrant exercisable at $1.75 per
share until April 15, 2000. The proceeds from this offering were to be used for
advertising and marketing. The placement was completed on April 30, 1998 with
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all shares sold. The offering price was determined based upon the Company's
price range for the previous quarter on the OTC Bulletin Board of $1.875 to
$2.56 per share, with a slight discount given to attract investors.
The Regulation D, Rule 504 offering was approved July 1, 1998, authorizing
the sale of 46,855 shares of common stock of the Company at $3.18 per share. The
offering was completed in July, 1998, with all shares sold and the proceeds were
used as additional capital to develop the business of the Company's subsidiary,
NutriCology, Inc.. The offering price was determined based upon the Company's
price range for the previous quarter on the OTC Bulletin Board of $2.3125 to
$4.06 per share, with a slight discount given to attract investors.
The Company's annual meeting of shareholders was held on July 10, 1998. The
shareholders ratified the appointment of the officers and directors of the
Company for the coming year, approved the establishment of a class of Preferred
Stock consisting of 1,000,000 shares with a par value of $0.25 per share,
adopted the 1998 Stock Option Plan and the reservation of 1,000,000 shares of
common stock for issuance under that plan at a price of $2.00 per share, and the
appointment of the Company's corporate counsel and independent auditor for the
coming year.
The Board of Directors held a meeting on July 24, 1998. At this meeting,
the Board agreed to purchase the rights and trademark to "ProGreens" for
$175,000, to be completed on July 31, 1998 in exchange for 50,000 shares of the
Company's common stock in lieu of cash. The Board also agreed to offer 20,000
shares of the Company's common stock via a Regulation D, Rule 504 Placement
Memorandum at $2.50 per share with a warrant exercisable at $2.00 per share
until July 31, 2000. The proceeds from this offering, which was completed on
July 31, 1998 with all shares sold, were used to market the Company.
On September 11, 1998, the Company's Board of Directors approved a
Regulation D, Rule 504 offering of 50,000 shares of common stock at $2.00 per
share. This offering was completed on September 30, 1998 with all shares sold
and the proceeds were used to market the company. The Board also approved the
cancellation of the acquisition of the rights to "ProGreens" and the
cancellation of 50,000 shares paid to Jim Cassidy for these rights.
The Board of Directors met on October 9, 1998 and approved a Regulation D,
Rule 504 offering of 15,000 shares of the Company's common stock at $1.00 per
share and an additional 75,000 shares of common stock at $1.00 per share with a
warrant exercisable at $1.00 per share until October 13, 2000. These funds will
be used to meet the expenses of the company. The offering was completed on
October 30, 1998 with all shares sold.
A meeting of the Board of Directors was held at the Company's offices on
January 26, 1999. At this meeting, Arnold Takemoto and Susan Levine resigned
from the Board of Directors. Both Mr. Takemoto and Mrs. Levine resigned for
personal reasons and did not have any disagreements with the Company. Mrs.
Levine remains an employee of the Company. Both resigning directors relinquished
their interest in the 100,000 options awarded to directors, but Mrs. Levine was
granted
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150,000 options from the 1998 Employee Stock Option plan at $2.00 per share,
fully vested immediately. Dr. Ricki Pollycove was appointed to the Board at this
time and was granted 100,000 share options at $4.00 each as a director. Mr.
Stephen Levine relinquished his position as Chief Executive Officer of the
Company and the Board voted that Marianne Sum would assume the role of Chief
Executive Officer. Mr. Levine remains the Chairman of the Company's Board of
Directors and the Director of Research.
A Management Agreement was executed by Mr. Levine and Ms. Sum on January
29, 1999, to be effective for two years commencing February 1, 1999. Under the
terms of this Agreement, Ms. Sum is appointed as President of the Company and
manages the Company under the direction of the Board of Directors and Mr. Levine
is appointed as the Director of Research and is responsible for product
development subject to the supervision of Ms. Sum.
On February 9, 1999, a Voting Trust Agreement was signed between Stephen A.
Levine as Beneficiary and Marianne Sum as Trustee, whereby Mr. Levine
transferred his voting rights in the 9.8 million shares of the Company's common
stock held by him to Ms. Sum. This Agreement is effective as of February 1,
1999, and terminates January 31, 2000, with an option to extend the Agreement to
January 31, 2001 if both parties agree. The Trustee's powers include the right
to vote the stock, the right to participate in, consent to or ratify any
corporate or Stockholders' action, the right to receive all dividends and
distributions in cash or any other property and the right to become financially
interested in any matter or transaction to which the Company or its subsidiaries
and affiliates may be a party. All dividends and other stock distributions will
be distributed by the Trustee to the Beneficiary. The Trustee may not sell stock
so that Mr. Levine's interest in the Company is less than 51%.
The issuance of 100,000 options for the Company's Common Stock to each
member of the Board of Directors at a price of $2.00 per share in exchange for
services rendered was approved by the Board on March 25, 1999. These options
became exercisable immediately and expire on December 31, 2003.
NutriCology, Inc.
- -----------------
NutriCology, Inc. was incorporated in the state of California on March 13,
1980. On January 19, 1982, NutriCology amended its Articles to increase the
authorized number of directors from two to three. NutriCology has a line of over
350 products under the product line NutriCology/Allergy Research Group and has
introduced various specialty products, including melatonin, a neurohormone;
germenium sesquioxide; AntiOx, a broad spectrum antioxidant; and Buffered
Vitamin C, used as a nutritional supplement for its value associated with
medical treatment for opiate and stimulant abusers.
The Company's product line is different from its competitors because the
products are designed with the allergenic individual in mind. They are generally
made without yeast, corn, wheat soy, dairy products, flavorings, color, salt,
sugar, starch, common preservatives, binders or excipients.
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The Company has introduced many formulas that have since become well-known,
including: Buffered Vitamin C, organic germanium, melatonin and ProzaPlex (St.
John's Wort formula). The Company's product line consists of over 300 products
that can be grouped into various product categories, such as Vitamin B Products,
Vitamin C Products, Selenium and Bioflavonoids Products, Multiple Vitamin and
Minerals Products, Mixed Antioxinants and Vitamin E Products, Melatonin
Products, Essential Oils and Fatty Acids, Amino Acids Products, Gastric
Nutritional Support Products, Probiotics and Probiotic Enhancers Products, Live
Protein Products, Organic Glandular Products, Bioenergy Nutrients Products,
Connective Tissue Products, Superfood Concentrates, Eye Health Products, Immune
Products Total Nutrient Line Powder Products, Computer Syndrom Products and
Speciality Products. The Company's products retail from $4.95 to $500.00 and its
main products include Buffered Vitamin C, ProGreens, OcuDyne, Oralmat and Super
B Complex. Because the Company's product line consists mainly of its own
formulations and it currently contracts with contract manufacturers to produce
the products, the loss of any one supplier would not have a material effect on
the Company. The Company does not have any clients which represent more than 10%
of its yearly sales or its consolidated revenue.
On January 6, 1998, prior to its acquisition by the Company, NutriCology
finalized an exclusive one-year contract with The Right Solution ("TRS"), a
multi-level distributorship with over 35,000 distributors worldwide. TRS's
revenues for 1998 were estimated at approximately $2 million. This contract has
since expired because sales were below expectations; however, the Company is
still supplying TRS with its products without a contract. Negotiations with TRS
are continuing to provide for a new contract. It is expected to be executed
before December 1999.
Regulatory Consideration
- ------------------------
The nutritional supplement industry is currently under the regulation of
the Food and Drug Administration (FDA). With the introduction of the Dietary
Supplement Health and Education Act of 1994 (DSHEA), the industry has
experienced some loosening of the restrictions on sharing information with the
consumer. This will enable companies such as Scottsdale Scientific, which
introduce new products through research to be able to promote products with the
test data more readily available to doctors and end-users. The Company does not
use toxic chemicals in its product manufacturing processes, nor does it use any
harsh chemicals in any of its warehouses or offices. As a result, the Company
has minimal exposure to liability under the various EPA laws.
Competition
- -----------
Strong interest in nutritional supplements has resulted in a large number
of competitors in the marketplace. The market has many growth companies with
strong marketing and sales abilities, quality products and sound management.
According to the trade magazine Whole Foods, health food store sales throughout
the nation grew in revenues from $9 billion to $17 billion in 1998. Nutritional
supplements represent approximately 25% of those revenues according to Whole
Foods. A few of the competitors of the Company are listed below:
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Metagenics, Inc. The Company has a broad spectrum of medical professionals
who buy its products, whereas Metagenics primarily targets Chiropractors. The
two companies have different market focuses, as Scottsdale Scientific does not
concentrate on courting chiropractors.
Twin Labs. This is a mass market-focused company, whereas Scottsdale
Scientific concentrates on sales to medical professionals. The Company has plans
to enter the mass market in the next few years, but believes that
scientifically-based products such as the Company's will be sought after. There
will be some overlap with the Twin Labs customer base at this time, but it will
not adversely impact the Company's current revenue stream.
Nature's Way. This company focuses on the private label business segment,
not on sales to medical professionals. The Company has plans to enter the
private label segment. Management of the Company attended the European Private
Label Exhibit and received a favorable response to its products in the EU
marketplace. As the private label customer looks to add products into its line,
management believes scientifically-based products will be sought-after. There
will be some overlap with Nature's Way customer base, but this will not
adversely impact the Company's current revenue stream.
KAL. This company produces herbal products. The Company does not carry many
herbal products and does not view KAL as a direct competitor.
Solgar. Solgar has made in-roads into the international marketplace, which
is an arena management feels will be a viable growth avenue for the Company.
While competition with Solgar may cause some overlap, it will not adversely
impact our current revenue stream.
The companies listed above, and many other corporations in the health and
nutritional supplement business, are better funded and possess superior
managerial, marketing and technical talent. The Company plans to compete
primarily on the basis of superior service and differentiate itself by marketing
only quality products. The Company feels that the acquisition of NutriCology,
Inc., a well-managed, highly respected and very successful company in the
physician market, will also be of help competitively.
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Management's Discussion and Analysis and Projected 1999 Operating Results.
Three Months Ended March 31, 1999 compared to the Three Months Ended March 31,
1998.
Results of Operations
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The Company's net sales increased by 2.9% to $3,324,913 for the first
quarter of 1999, from $3,231,143 during the same quarter of 1998. The increase
was primarily attributable to increased sales in the health and medical sector.
Gross Profit increased by 14.12%, or $181,566 for the first quarter of 1999
compared to 1998. The gross profit margin for the first quarter of 1999 was
44.12%, compared to 39.77% for the first quarter of 1998. Increased profit
margins are a direct result of the Company's success in implementing planned
cost reduction programs. The Company is actively pursuing and replacing existing
vendors, with more favorable terms, resulting in reduced raw material costs and
storage costs. In addition, through the implementation of its packaging
operations, the Company is experiencing a savings of approximately $50,000 per
month in cost of goods expense, thereby increasing profit margins.
Operating expenses increased by 64.18%, or $764,745 for the first quarter
of 1999 compared to the same period in 1998. Operating expenses as a percentage
of net sales were 58.83% for the quarter ended March 31, 1999 compared to 36.87%
for the quarter ended March 31, 1998. This increase is primarily attributable to
increased payroll and related costs resulting from the placement of several key
personnel, increased leasing expenses for the new facility, and increased
consulting expenses related to implementing the Company's new 25,000 square foot
facility.
Interest expense increased 120%, or $10,281, for the first quarter of 1998
compared to the same quarter in 1998. The increase is a result of the Company
obtaining additional funds through its line of credit to provide working capital
as its cost reduction programs are implemented.
The Company will realize a tax benefit due prior years net operating loss
carryforwards to be realized when future taxable income can be offset by timing
differences, such as net operating loss carryforwards and start-up costs.
Liquidity and Capital Resources
- -------------------------------
As the Company's business continues to grow, the Company's liquidity
requirements continue to increase as a result of working capital needs,
primarily the need to finance accounts receivable and inventory, and the funding
of the Company's capital expenditures for the purposes of increasing its
manufacturing capacity.
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During the three months ended March 31, 1999, working capital decreased
$1,019,559, cash flow used by operations totaled $196,148, and working capital
funds of $250,000 were obtained as a result of the Company's expansion of its
manufacturing capacity and increased sales growth.
The Company's capital expenditures for facilities and equipment were
$75,283 for the three months ended March 31, 1999. Consistent with its ongoing
increase in net sales, the Company is investing substantial amounts to increase
its manufacturing and distribution capacity. The Company's planned capital
expenditures will require approximately $ 255,000 during the year ended December
31, 1999, to support the continuing sales growth.
Year Ended December 31, 1998 compared to the Year Ended December 31, 1997
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
The Company's net sales increased by 8.75% to $13,450,758 for the year
ended December 31, 1998, from $12,367,629 during the same quarter of 1998. The
increase was primarily attributable to increased sales in the health and medical
sector.
Gross profit margins remained relatively constant during 1998 compared to
1997. The gross profit margin for the 1998 was 40.19% compared to 42.69% for
1997.
Operating expenses increased by 40.69%, or $1,912,283 for the 1998 compared
to 1997. Operating expenses as a percentage of net sales were 49.15% for 1998
compared to 37.99% for 1997. This increase is primarily attributable to
increased payroll and related costs resulting from the placement of several key
personnel and increased consulting expenses.
Interest expense increased 19.01%, or $7,652 for 1998 compared to 1997. The
increase is a result of the Company obtaining additional funds through its line
of credit to provide working capital, primarily to finance accounts receivable
and inventory.
Income tax effect results in a income tax benefit of $134,150 for 1998
directly attributable to the recordation of a deferred tax asset of $135,000, to
be realized when future taxable income can be offset by timing differences, such
as net operating loss carryforwards and start-up costs.
Liquidity and Capital Resources
- -------------------------------
As the Company's business continues to grow, the Company's liquidity
requirements continue to increase as a result of working capital needs,
primarily the need to finance accounts receivable and inventory, and the funding
of the Company's capital expenditures for the purposes of increasing its
manufacturing capacity.
The Company has a positive working capital of $1,631,994, for the year
ended December 31, 1998, compared to a positive working capital of $2,519,733
for the year ended December 31, 1997. The decrease is a result of cash flow used
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by operations and investing expenditures of $601,024 to support continued sales
growth. Accounts receivable increased 16.37%, or $147,572 from 1997 because of
increased sales.
The Company's capital expenditures for facilities and equipment were
$757,998 for 1998 and $90,501 for 1997, or an increase of $667,497. Consistent
with its ongoing increase in net sales, the Company invested substantial amounts
to increase its manufacturing and distribution capacity.
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Management's Discussion and Analysis of Results of Operations and financial
condition.
Six Months Ended June 30, 1999 compared to the Six Months Ended June 30, 1998
Results of Operations
- ---------------------
The Company's net sales increased by $67,599 to $6,554,401 for the second
quarter of 1999, from $6,486,802 during the same quarter of 1998. The increase
was primarily attributable to increased sales in the health and medical sector.
Gross Profit increased by 9.40%, or $273,258 for the second quarter of 1999
compared to 1998. The gross profit margin for the second quarter of 1999 was
48.50%, compared to 44.79% for the second quarter of 1998. Increased profit
margins are a direct result of the Company's success in implementing planned
cost reduction programs. The Company is actively pursuing and replacing existing
vendors, with more favorable terms, resulting in reduced raw material costs and
storage costs. In addition, through the implementation of its packaging
operations, the Company is experiencing a savings of approximately $50,000 per
month in cost of goods expense, thereby increasing profit margins.
Operating expenses increased by 26.81%, or $778,727 for the second quarter
of 1999 compared to the same period in 1998. Operating expenses as a percentage
of net sales were 56.19% for the six months ended June 30, 1999 compared to
44.77% for the six months ended June 30, 1998. This increase is primarily
attributable to increased payroll and related costs resulting from the placement
of several key personnel, increased leasing expenses for the new facility, and
increased consulting expenses related to implementing the Company's new 25,000
square foot facility.
Interest expense increased 40.10%, or $13,773, for the second quarter of
1999 compared to the same quarter in 1998. The increase is a result of the
Company obtaining additional funds through its line of credit to provide working
capital as its cost reduction programs are implemented.
The Company will realize a tax benefit due to prior years' net operating
loss carryforwards to be realized when future taxable income can be offset by
timing differences, such as net operating loss carryforwards and start-up costs.
Liquidity and Capital Resources
- -------------------------------
As the Company's business continues to grow, the Company's liquidity
requirements continue to increase as a result of working capital needs,
primarily the need to finance accounts receivable and inventory, and the funding
of the Company's capital expenditures for the purposes of increasing its
manufacturing capacity.
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Management's Discussion and Analysis of Results of Operations and Financial
Conditions.
During the six months ended June 30, 1999, working capital decreased
$588,408 and cash flow used by operations totaled $229,018. Funds obtained to
support working capital requirements and the Company's expansion of its
manufacturing capacity include refundable income taxes of $220,995 received as a
result of the 1998 tax filing, and net borrowings on line of credit of $225,000.
The Company's capital expenditures for facilities and equipment were
$86,580 for the six months ended June 30, 1999. Consistent with its ongoing
increase in net sales, the Company is investing substantial amounts to increase
its manufacturing and distribution capacity. The Company's planned capital
expenditures will require approximately $255,000 during the year ended December
31, 1999, to support the continuing sales growth.
Year Ended December 31, 1998 compared to the Year Ended December 31, 1997
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
The Company's net sales increased by 8.75% to $13,450,758 for the year
ended December 31, 1998, from $12,367,629 during the same quarter of 1998. The
increase was primarily attributable to increased sales in the health and medical
sector.
Gross profit margins remained relatively constant during 1998 compared to
1997. The gross profit margin for the 1998 was 40.19% compared to 42.69% for
1997.
Operating expenses increased by 40.69%, or $1,912,283 for the 1998 compared
to 1997. Operating expenses as a percentage of net sales were 49.15% for 1998
compared to 37.99% for 1997. This increase is primarily attributable to
increased payroll and related costs resulting from the placement of several key
personnel and increased consulting expenses.
Interest expense increased 19.01%, or $7,652 for 1998 compared to 1997. The
increase is a result of the Company obtaining additional funds through its line
of credit to provide working capital, primarily to finance accounts receivable
and inventory.
Income tax effect results in a income tax benefit of $134,150 for 1998
directly attributable to the recordation of a deferred tax asset of $135,000, to
be realized when future taxable income can be offset by timing differences, such
as net operating loss carryforwards and start-up costs.
Liquidity and Capital Resources
- -------------------------------
As the Company's business continues to grow, the Company's liquidity
requirements continue to increase as a result of working capital needs,
primarily the need to finance accounts receivable and inventory, and the funding
of the Company's capital expenditures for the purposes of increasing its
manufacturing capacity.
The Company has a positive working capital of $1,631,994, for the year
ended December 31, 1998, compared to a positive working capital of $2,519,733
for the year ended December 31, 1997. The decrease is a result of cash flow used
by operations and investing expenditures of $601,024 to support continued sales
growth. Accounts receivable increased 16.37%, or $147,572 from 1997 because of
increased sales.
The Company's capital expenditures for facilities and equipment were
$757,998 for 1998 and $90,501 for 1997, or an increase of $667,497. Consistent
with its ongoing increase in net sales, the Company invested substantial amounts
to increase its manufacturing and distribution capacity.
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Projected 1999 Operating Results
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<TABLE>
<CAPTION>
QTR1 QTR2 QTR3 QTR4
<S> <C> <C> <C> <C>
Revenues $3,450,000 $3,642,000 $3,835,500 $4,030,500
Cost of Sales 1,837,125 1,939,365 2,042,404 2,146,241
Gross Profit 1,612,875 1,702,635 1,793,096 1,884,259
Operating Expenses
Selling, General and Administrative 1,368,598 1,385,478 1,393,241 1,452,057
Research and Development 230,000 230,000 230,000 230,000
Total Operating Expenses 1,598,598 1,615,478 1,623,241 1,692,057
Operating Income (Loss) 14,277 87,157 169,855 192,202
Other Income (Expense)
Interest Income 938 1,875 2,500 2,500
Interest Expense (4,125) 0 0 0
Loss on Disposal of Fixed Assets 0 0 0 0
Total Other Income (Expense) (3,188) 1,875 2,500 2,500
Net Income Before Taxes 11,090 89,032 172,355 194,702
Income Taxes 0 0
Net Income (Loss) 11,090 89,032 172,355 194,702
</TABLE>
<TABLE>
<CAPTION>
Projected 1999 Operating Results (continued)
- --------------------------------------------
% OF YR ENDED % OF
TOTAL SALES 12/31/98 SALES
<S> <C> <C> <C> <C>
Revenues $14,958,000 100.00% $13,450,758 100.00%
Cost of Sales 7,965,135 53.25% 8,044,907 59.81%
Gross Profit 6,992,865 46,75% 5,405,851 40.19%
Operating Expenses
14
<PAGE>
Selling, General and Administrative 5,609,374 37.50% 5,681,056 42.24%
Research and Development 920,000 6.15% 930,592 6.92%
Total Operating Expenses 6,529,374 43.65% 6,611,648 49.15%
Operating Income (Loss) 463,491 3,10% (1,205,797) -8.96%
Other Income (Expense)
Interest Income 7,812 0.05% 2,119 0.02%
Interest Expense (4,125) -0.03% (47,901) -0.36%
Loss on Disposal of Fixed Assets 0 0.00% (9,432) -0.07%
Total Other Income (Expense) 3,687 0.02% (55,214) -0.41%
Net Income Before Taxes 467,178 3.12% (1,261,011) -9.38%
Income Taxes 0 0.00% 134,150 1.00%
Net Income (Loss) 467,178 3.12% (1,261,011) -8.38%
</TABLE>
<TABLE>
<CAPTION>
Projected 1999 Operating Results (continued)
- --------------------------------------------
VARIANCE
<S> <C> <C>
Revenues $1,507,242 (1)
Cost of Sales (79,772)
Gross Profit 1,587,014
Operating Expenses
Selling, General and Administrative (71,682) (2)
Research and Development (10,592)
Total Operating Expenses (82,274)
Operating Income (Loss) 1,669,288
Other Income (Expense)
Interest Income
Interest Expense 43,776 (3)
Loss on Disposal of Fixed Assets
Total Other Income (Expense)
Net Income Before Taxes 1,728,189
Income Taxes (134,150) (4)
Net Income (Loss) 1,594,039
</TABLE>
Significant variances between the 1998 and the 1999 projected operating results
are as follows: (1) increase in sales of $1,507,242 due to an increase in sales
to existing customers, and new customers, as product awareness increases; (2)
15
<PAGE>
net decrease of 71,682 in selling, general, and administrative as a result of
the following: Salaries and related costs increased approximately $559,000 due
to the replacement of an outside consulting firm by the addition of two key
personnel to implement operations, directors' fees increase $30,000 due to the
Company going public, product catalogs expense increases of $162,000 to support
increased sales, freight expense decreases of approximately $276,000 as a result
of tighter management controls, and travel decreases of approximately $86,000 as
a result of time consumed by implementing planned cost reduction programs for
the Company as a whole; (3) interest expense decreases as a result of paying off
line of credit as a result of increased sales; and (4) income tax benefit
results due to prior year net operating loss carryforwards.
Discussion of Plan of Operations
- --------------------------------
In December 1998, the Company established a packaging division and an
in-house quality control laboratory. The Company leased a new location providing
12,800 square feet of space to house the packaging division and the in-house
quality control lab and the packaging line was retrieved from Protein Research
in January 1999. The line became operational in March 1999. Once such operating
potential has been realized, the Company anticipates a savings of $50,000 to
$100,000 in cost of goods expenses on an annual basis. The Company will work in
concert with its independent testing laboratory to further authenticate the
quality and safety of its products.
The Company is also in final contract discussions with Dr. Levine, Ph.D.
and his company Innovative Biomedicals, a research and development entity, to
provide a defined product introduction schedule. The R & D entity will grant the
Company first right of refusal on all of its product ideas. This information has
also been disclosed in the section regarding related party transactions.
Assumptions used in Preparing Twelve Month Plan
- -----------------------------------------------
Scottsdale Scientific, Inc. experienced 8.75% growth in 1997 and 10.1%
growth in 1998. Assuming this rate remains constant, the Company could
anticipate a 13.2% growth in 1999. The Company tends to be conservative,
however, and is using a 12.2% growth projection for 1999, which would mean gross
sales of $15.6 million. Although the packaging line will increase the Company's
gross margin, management is using the same of goods ratio used in 1998. The
Company will use the same Return and Discounts ratio as last year.
The main packaging line is composed of nine individual pieces of equipment
with a total cost of $160,000. The Company has ordered an additional
bundler/heat tunnel for $50,000 that will shrink wrap 12 bottles of the product
at a time, once the product hits the end of the production line. This reduces
labor and eliminates the need for boxes. In addition to the packaging equipment,
the Company spent another $50,000 to install the line and upgrade the leased
warehouse space to accommodate packaging and in-house lab needs.
The assumptions relied upon in preparing the Twelve Month Plan are as
follows:
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Employer Tax Burden
Employer FICA Rate 7.65%
FUTA Rate 0.80%
SUI Rate 3.60%
Workers' Compensation Rate (per $100) Modifier Extension
Stores/Warehouse 9.57 0.756561 7.2402888
Salesperson-Outside 1.22 0.756561 0.9230044
Clerical Office Employees 1.04 0.756561 0.7868234
Officers not covered
</TABLE>
Fifteen percent (15%) of the Company's employees are warehouse workers. The
rate used is calculated as ((7.2402888 *15) + (0.7868234*85)/100 which equals
1.7548. In calculating the Employer Tax Burden, the ceiling reached by employees
was not accounted for, therefore the maximum employer tax burden was used.
The Cost of Goods was calculated using 53.25% as the cost of goods. This
figure is derived from past history as adjusted for implementation of planned
cost reduction programs.
The R&D figure is derived based upon history.
Interest Expense and Income was calculated assuming $300,000, $200,000 and
$100,000 balances respectively paying 8.25% APR and 5% interest income for
balances of $50,000, $75,000, $100,000, $125,000, $150,000, $175,000 and
$200,000 balances, respectively.
The Company's leases were calculated at the rate of $16,000 per month for
the Hayward property, $7,000 per month for the San Rafael property and $0.62 per
foot times 13,000 feet for the Packaging Plant to be leased at the end of fiscal
1998.
Profit-sharing and bonuses were calculated as three percent of salaries.
Employees
- ---------
The Company currently consists of 61 employees, all of whom are full-time.
Scottsdale Scientific, Inc. is an at-will employer and its employees are not
covered by any collective bargaining agreement.
Year 2000 Issues
- ----------------
All of the Company's computer systems, including hardware and software,
utilize the date format specified in the underlying operating system of Windows
95 and, as a result, are fully Year 2000 compliant. As a result, the Company
does not anticipate any Year 2000 issues to arise, nor will there be any
expenses required in order to resolve Year 2000 issues.
The Company has obtained written assurances from its software vendors that
the various software programs used by the Company are Y2K compliant. Its POS
machines and credit card clearance are also Y2K compliant. In May 1999
Scottsdale Scientific has also forwarded written
17
<PAGE>
requests to its suppliers regarding Y2K compliance. The Company's operating
systems, Windows NT 4.0 B ackoffice and Windows 95/98; the main operating
application, MAS90 Client/Serve; and the Point of Sale credit card machines and
linking to the processing center, provided by NOVA, are all confirmed to be Y2K
compliant. As the Company does not use Electronic Data Interchange (EDI),
however, no particular risk or costs associated with suppliers and international
customers are anticipated. Orders are placed via faxes and international orders
are normally dispatched when the payment is made in US funds.
ITEM 7. DESCRIPTION OF PROPERTY
The Company currently rents office space located at 7332 East Butherus
Drive, Suite 101, Scottsdale, Arizona, 85260. The Company's subsidiary,
NutriCology, Inc., leases two warehouse office spaces, a main administrative and
warehouse location and an R&D and Sales office. The main administrative and
warehouse location, located in Hayward, California, is leased at a rate of
$13,738 per month for five years commencing June 1, 1998. The property consists
of approximately 25,440 square feet of office and warehouse space, of which
approximately 5,500 square feet is office space and 19,940 square feet consists
of warehouse space. The R&D and Sales office is located in San Rafael,
California and is leased at a rate of $7,000 per month for two years commencing
December 1, 1997.
The Company has established a packaging operation at a new location at the
end of March1998. This new location provides 12,800 square feet and is also used
to house the Company's quality control/in-house laboratory. This property costs
approximately $0.62 per square foot.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and
directors of the Company, their present positions with the Company and
biographical information.
Stephen Levine, Ph.D. (Age 49). Chairman and Director of Research. Dr.
Levine graduated cum laude from the State University College in Buffalo, New
York and received his Ph.D. from the University of California, Berkeley. In
1979, Dr. Levine founded Nutricology/Allergy Research Group and was employed as
its owner and operator from that time until 1998, when NutriCology was acquired
by the Company. He now serves as Chairman of the Board of Directors, as well as
being employed as Director of Research. Dr. Levine is the author of Antioxidant
Adaption, Its Role in Free Radical Pathology. Dr. Levine is the husband of Susan
Levine, who acts as Vice President of Convention Sales of the Company.
Marianne Sum. (Age 49). President, Chief Executive Officer and Director.
Ms. Sum graduated summa cum laude with a B.A. from Boston State College,
received her M.A. summa cum laude from Northeastern University and was a Ph.D.
candidate in History at Boston College. From 1992 to 1997 she was employed at
Fun and Fitness, where she was awarded Salesperson of the Year for 1992 and 1993
and was later promoted to Vice President of Sales and Marketing. She joined
NutriCology/Allergy Research Group in 1997 and has been President of Scottsdale
Scientific, Inc. since 1998 and its CEO since 1999.
18
<PAGE>
Ricki Pollycove, M.D., M.H.S. (Age 47). Director. Dr. Pollycove obtained
her B.A. in Zoology and Immunology in 1972 from the University of California at
Berkeley, her Master's in Health Sciences from the University of California at
Berkeley in 1975 and her M.D. from the University of California, San Francisco
in 1977. Dr. Pollycove completed an Internship in Obstetrics and Gynecology at
the University of California, Los Angeles and her residency in Obstetrics and
Gynecology at the University of California, San Francisco, where she was Chief
Resident at the UCSF Hospitals and Clinics in 1980- 1981. Since 1981, Dr.
Pollycove has been in private practice specializing in Obstetrics and
Gynecology, Breast Diseases and Integrative Medicine and is on the active staff
of California Pacific Medical Center. Dr. Pollycove was an Assistant Professor
at the University of Arizona College of Medicine from 1994 to the present, a
Clinical Instructor at the University of California, San Francisco, Department
of Obstetrics and Gynecology and Reproductive Sciences from 1981 to the present
and a Gynecology clinical consultant at ASU Women's Health Clinic in 1995. She
is licensed by the California State Medical Board, the Arizona State Medical
Board and the American Board of Obstetrics and Gynecology. Dr. Pollycove was the
Chief of the Division of Gynecology, California Pacific Medical Center from 1992
to 1995 and an Associate Director for Education, Breast Health Clinic, CPMC,
from 1992 to 1997. Dr. Pollycove has also held many consultant positions,
including the American Cancer Society Breast Cancer Task Force (1994 to
present), the Arizona Women's Cancer Network (1994 to 1997) and the Arizona
Women's Cancer Control Project (1994 to 1997).
Edward Lau (Age 38). General Manager. Mr. Lau holds a degree in Electrical
Engineering and Computer Science from the University of California at Berkeley.
He has been employed by NutriCology, Inc. for the past fifteen years. Mr. Lau
held the positions of Computers Operations/Accounting (09/84 to 09/90), Director
of Operations (09/90 to 11/97), and MIS Director (11/97 to 07/98). He was
promoted to General Manager of Scottsdale Scientific, Inc. in July 1998.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
In fiscal 1997, Harmel S. Rayat, a former director of the Company, received
three million (3,000,000) shares of common stock of the Company in exchange for
services rendered. These shares were transferred to Dr. Stephen Levine, Ph.D.
during the NutriCology acquisition. On November 1, 1998, each director received
100,000 options for shares of common stock of the Company at $2.00 each,
exercisable until December 31, 2003, in exchange for services rendered. No other
form of compensation, either in the form of cash or securities, has been
provided to directors. Compensation of $450,000.00 was paid executive officers
for services in fiscal 1998, as outlined in the following table.
19
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restricted
Annual Stock Options/ LTIP All Other ($)
Name Title Year Salary Bonus Compensation Awarded SARs (#) payouts Compensation
Stephen A. Chair 1998 $300,000 -0- -0- -0- 100,000 -0- -0-
Levine, Ph.D.
Marianne Pres., Dir. 1999 $150,000 -0- -0- -0- 100,000 -0- -0-
Sum CEO
Dr. Ricki Director 1999 -0- -0- -0- -0- 100,000 -0- -0-
Pollycove
</TABLE>
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth, as of March 31, 1999, the beneficial
ownership of the Company's Common Stock by each person known by the Company to
beneficially own more than 5% of the Company's Common Stock outstanding as of
such date and by the officers and directors of the Company as a group. Except as
otherwise indicated, all shares are owned directly.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) (2) (3) (4)
Name and address of Amount and Nature Percent
Title of Class beneficial owner of beneficial owner of class
- -------------------------------------------------------------------------------------------------------------------------
Common stock Stephen Levine, Ph.D. 9,800,000 shares * 65%
30806 Santana Street 100,000 options
Hayward, California 94544
Common Stock Marianne Sum 100,000 options 0%
30806 Santana Street
Hayward, California 94544
Common Stock Dr. Ricki Pollycove 100,000 options 0%
30806 Santana Street
Hayward, California 94544
Common stock Directors and Officers 9,800,000 shares 65%
as a group (3 person) 300,000 options
* Dr. Levine's 9,800,000 shares are controlled by Marianne Sum pursuant to a
Voting Trust Agreement dated February 9, 1999.
</TABLE>
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
None known.
20
<PAGE>
ITEM 12. SECURITIES BEING OFFERED
No securities are being offered in conjunction with this filing.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS
The shares of the Company's stock are traded on the OTC Bulletin Board
under the symbol STDS. Because the Company did not begin trading until October
22, 1997, it has only a limited trading history. The following have been the
average High and Low prices for the times indicated:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
October-December 1997 2.2500 0.1250
December-March 1998 2.5625 1.8750
April-June 1998 4.0625 2.3125
July-Sept 1998 4.0000 2.0000
Oct-Dec 1998 2.4000 1.0500
Jan-Mar 1999 2.6000 1.0700
Mar-Jun 1999 2.5000 0.9000
</TABLE>
As of March 31, 1999 there were 103 registered shareholders in the Company.
There are no dividend restrictions on the Company. Market makers who have posted
bids or offers during the period October 22, 1997 through March 31, 1999 are as
follows:
Public Securities, Inc.
300 North Argonne Road
Spokane, Washington 99212
William K. Frankel & Co.
30 Montgomery Street
Jersey City, NJ 07302
Paragon Capital Corp.
7 Hanover Square
New York, NY 10004
ITEM 2. LEGAL PROCEEDINGS
In 1993, a lawsuit was filed in the Circuit Court of the 15th Judicial
Circuit in and for Palm Beach County, Florida by NutriSupplies, Inc., successor
in the interest to rights of Robert H. Harris and the Earth Harvest, Inc.
against Nutricology, Inc. (which has since become a wholly-owned subsidiary of
21
<PAGE>
the Company), Stephen A. Levine (officer, director and beneficial shareholder of
the Company) and Nicholas Gonzales, M.D. This matter is a contract dispute
between Dr. Gonzales and NutriSupplies, Inc., which alleges that Dr. Gonzales
violated their contract agreement and then returned to NutriCology to supply his
patients' needs. NutriCology and Dr. Levine were named in the suit only because
NutriCology had been Dr. Gonzales' supplier. Dr. Gonzales has fully indemnified
NutriCology and Dr. Levine from any wrong-doing. NutriCology did not specify an
amount of relief sought in its suit. Dr. Gonzales has liability coverage of
$1,000,000 for this dispute. The Company anticipates that its potential
exposure, if any, will consist primarily of legal costs and will not exceed
$100,000.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants.
NutriCology, Inc., the Company's subsidiary, changed its accountant from
Deloitte & Touche to Clancy & Company, P.L.L.C., the independent auditor of
Scottsdale Scientific, Inc., after it was acquired by the Company on February 3,
1999.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On May 1, 1997, the Company commenced an offering of 400,000 shares of its
common stock pursuant to Regulation D, Rule 504 at a price of $0.25 per share
for a total offering of $100,000. This offering was completed on July 10, 1997
with all shares sold. The proceeds from the offering were used for working
capital and to develop the Company's wholesale distributing business. The
offering was sold to accredited and unaccredited investors as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Olga Alagich 1,000
26 Lower Greycliffe Street
Queenscliff NSW, 2096 Sydney, Australia
Nicole Alagich 1,000
1936 Peters Road
West Vancouver, BC V7J 1Y9 Canada
Sam L. Arnold 2,000
9441 Beverly Street
Bell Hower, CA 90706
Neil Baker 1,000
949 Monashee Place
Kelowna, B.C. Canada
Terry Baker 1,000
949 Monashee Place
Kleowna, B.C. Canada
Eric L. Barclay 2,000
500-1111 West Georgia Street
Vancouver, BC V6E 4W3 Canada
Tracy Bartram 1,000
#51-12311 Mc Neeley Drive
Richmond, BC V6V 2S2 Canada
Eli Basas 1,000
7790 Goodlad Street
Barnaby, BC V5E 2H6 Canada
Jody Bauer 1,000
206 Newby Court
Kelowna, BC V1X 4G6 Canada
Mickey Beal 1,000
3757 Shane Crescent
Prince George, B.C. V2N 4N2 Canada
Tanya Bell 1,000
1936 Peters Road
North Vancouver, BC V7J 1Y9 Canada
</TABLE>
21a
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Gurgan Birdi 4,000
8604-158A Avenue
Edmonton, Alberta T5J 2J9 Canada
Kathie Bishop 1,000
9031 Shanks Road
Winfield, B.C. V4V 1M4 Canada
Susan Bozyk 1,000
109-980 Dillworth Drive
Kelowna, BC V1V 1S6 Canada
Cody Brandel 500
11580 Hartford Court
Riverside, CA 92503
Lisa Brandel 500
11580 Hartford Court
Riverside CA 92503
Steve Brown 1,000
5512 Okanagan Avenue
Vernon, B.C. V1T 6Y5 Canada
Scott Bruce 1,000
3019 West 13th Avenue
Vancouver, BC V6K 2V1 Canada
James Carswell 1,000
5930 147th Street
Surrey, BC V3S 3A8 Canada
Chuan-Na Chang 4,000
208 West 41st Avenue
Vancouver, BC V5Y 2S4 Canada
Edwin Cheng 4,000
1135 West 48th Avenue
Vancouver, BC V6M 2N4 Canada
Jimmy Chi-Ming Tin 4,000
22191 Westminister Way
Richmond, BC V6V 1B5 Canada
</TABLE>
21b
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Satinder P. Choan 3,000
165 West 61st Avenue
Vancouver, BC V6B 1F8 Canada
Tajinder Chohan 20,000
165 West 61st Avenue
Vancouver, BC V6B 1F8 Canada
Leni M. Coreins 1,000
2887 East 44th Avenue
Vancouver, BC V5R 3A7 Canada
John L. Costin 1,000
109-2990 Quebec Street
Vancouver, BC V5T 4P7 Canada
Sandra Craig 2,000
1369 Compston Crescent
Tsawwassen, BC V4L 1P8 Canada
Vern Craig 4,000
1369 Compston Crescent
Tsawwassen, BC V4L 1P8 Canada
Biro Dhaliwal 4,000
3556 Calder Avenue
North Vancouver, BC V7N 3R9 Canada
Lambar Dhaliwal 4,000
3556 Calder Avenue
North Vancouver, BC V7N 3R9 Canada
Sonia Dhaliwal 5,000
4486 Triumph Street
Burnaby, BC V5C 1Z9 Canada
Paul Dhaliwal 5,000
4486 Triumph Street
Burnaby, BC V5C 1Z9 Canada
Jasvinder Dhesi 2,000
650 Madore Avenue
Coquitlam, BC V3K 2B3 Canada
</TABLE>
21c
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
J. Dutchyn 1,000
#13-750 Badke Road
Kelowna, BC V1X 6G9 Canada
Navruze Engineer 2,000
51 Foxwood Drive
Port Moody, BC V3H 4X2 Canada
Dorlyn Evancic 1,000
#203-1240 Quayside Drive
New Westminister, BC V3M 6H1 Canada
Deborah Faurot 2,000
2196 Bayswater Street
Vancouver, BC V6K 4P2 Canada
Ken H. Finkelstein 2,000
3295 West 8th Avenue
Vancouver, BC V6K 2C6 Canada
Barbara Forcier 1,000
9571-209 B Street
Langley, BC V1M 2A6 Canada
Joe A Gamache 2,000
1421 Barber Court
Banning, CA 92220
David Gamache 2,000
6805 Sundance Trail
Riverside, CA 92506
Tony Gambato 1,000
1570 Elm Street
Prince George, BC V2L 1C8 Canada
Dean Gardiner 2,000
42 Belgrave Street
Manly NSW, Australia
Larry Gerber 1,000
1197 Hammond Avenue
Coquitlam, BC V3K 2P2 Canada
</TABLE>
21d
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
John Gilfillan 1,000
3511 Rosamond Avenue
Richmond, BC V7C 2C9 Canada
Russell Bryce Gilfillan 1,000
11311 4th Avenue
Richmond, BC V7E 3G7 Canada
Robin Gilfillan 1,000
11311 4th Avenue
Richmond, BC V7E 3G7 Canada
Bryce Gilfillan 2,000
11311 4th Avenue
Richmond, BC V7E 3G7 Canada
Steven Giles 1,000
309-727 Houghton Road
Kelowna, BC V1X 7J7 Canada
Deborah Goble 1,000
23616 132nd Avenue
Maple Ridge, BC V4R 2S5 Canada
Dustin Gowilt 1,000
11416 78 Avenue
Delta, BC V4C 1N9 Canada
Charles Grahn 1,000
203-1386 West 73rd Avenue
Vancouver, BC V3C 3G2 Canada
Barry Hagan 2,000
3440 Trumond
Richmond, BC V7E 1B2 Canada
Tyson Hartman 1,000
#3-22875 125b Avenue
Maple Ridge, BC V2X 0W8 Canada
Blake Hardy 1,000
2620 Rubicon Road
West Bank, BC V3T 1H7 Canada
</TABLE>
21e
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Sharon L. Hebgin 2,000
202-2471 Bellevue Avenue
West Vancouver, BC V74 1E1 Canada
Hsin-Chien Hsu 2,000
603-10899 West Whalley Ring Road
Surrey, BC V3T 5V2 Canada
Anne Janusonis 1,000
101-7255 Southridge
Prince George, BC V2N 4Z3 Canada
Peter Jensen 4,000
6311 Chatsworth Road
Richmond, BC V7C 3S4 Canada
Niele Jiwan 2,000
250-7501 Cumberland Street
Burnaby, BC V3N 4Y6 Canada
Alnoor Jiwan 2,000
1216 Pretty Court
New Westminister, BC Canada
Heather Jiwan 2,000
1216 Pretty Court
New Westminister, BC Canada
Terry Johnston 6,000
1408-4300 Mayberry Street
Burnaby, BC V5H 4A4 Canada
Michael Johnston 2,000
153 Harris Street
Rockwood, Ontario N0B 2K0 Canada
Jageero S. Johl 4,000
122 West Braemar Road
North Vancouver, BC V7W 2S8 Canada
Anita Johnson 1,000
Box 1286
Port Nelson, BC V0C 1R0 Canada
</TABLE>
21f
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Kevin W. Jones 2,000
1810 Dunn Court
Westland, MI 48186
Larry Killeen 1,000
3938 Enemark Crescent
Prince George, BC V2N 2X5 Canada
Garry Kimpinski 1,000
General Delivery
Watson Lake, Yukon Territories, V0C 1C0
Canada
Emil Kit 1,000
5365 Bogetti Place
Kamloops, BC V2C 6B2 Canada
Lawrence Kit 1,000
Box 32
Vergreville, Alberta T9C 1R1 Canada
Rob Kozak 2,000
1103-9595 Erickson Drive
Burnaby, BC V3J 7N9 Canada
Lary Kozak 4,000
1003-9595 Erickson Drive
Burnaby, BC V3J 7N9 Canada
Jake Kroeker 2,000
#104-11240 Mellis Drive
Richmond, BC
Wes Kroeker 8,000
#312-7531 Minoru Boulevard
Richmond, BC V6Y 1Z3 Canada
Sinh Le 2,000
#1408-4300 Mayberry Street
Burnaby, BC V5H 4A4 Canada
Nicole LePage 2,000
8740 Ash Street
Richmond, BC V6Y 2S3 Canada
</TABLE>
21g
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Hawthorne Levine 2,000
Montgomery Research, Inc.
600-353 Sacramento Street
San Francisco, CA 94111
Amber Lindley ,000
10203-106 Street
Fort St. John, BC V1J 4E7 Canada
Lion Explorations, Ltd. 20,000
P.O. Box 120
Front Street
Grand Turk, Turks & Caicos Isl.
Janette Lovgren 1,000
5674 Kilmore Crescent West
Surrey, BC V3S 6L1 Canada
Grant Mackney 7,000
109-980 Dilworth Drive
Kelowna, BC V1V 1S6 Canada
Doris Mackney 1,000
Box 44031
Oyama, BC V4V 1Z5 Canada
Bob Mackney 1,000
Box 44021
Oyattia, BC V4V 1Z5 Canada
Nadine F. MacNeil 1,000
P.O. Box 3536
Fort Nelson, BC V0C 1R0 Canada
Bunso Mann 2,000
6228 Tiffany Boulevard
Richmond, BC V7C 4Z2 Canada
Balraj Mann 2,000
6228 Tiffany Boulevard
Richmond, BC V7C 4Z2 Canada
Nirmal S. Mann 2,000
1182 East 33rd Avenue
Vancouver, BC V5V 3B3 Canada
</TABLE>
21h
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Mahmood Mangalji 3,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Tazmina Mangalji 3,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Khallil Mangalji 2,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Azzra Mangalji 2,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Sameer Mapara 10,000
2932 Blackbear Court
Coquitlam, BC V3E 2V9 Canada
Zaher Mapara 4,000
1576 Lodgepole Place
Coquitlam, BC V3E 2V9 Canada
Riaz Mapara 4,000
1576 Lodgepole Place
Coquitlam, BC V3E 2V9 Canada
Fairous Mapara 4,000
1576 Lodgepole Place
Coquitlam, BC V3E 2V9 Canada
Anisha Mapara 4,000
2932 Blackbear Court
Coquitlam, BC V3E 3A2 Canada
Bhupinder S. Mann 4,000
1182 East 33rd Avenue
Vancouver, BC V5V 3B3 Canada
Stephanie Martin 2,000
1704 Smithson Drive
Kelowna, BC Canada
</TABLE>
21i
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Guy Martin 2,000
1704 Smithson Drive
Kelowna, BC Canada
Shawn McCluskey 1,000
#301-5500 Lynas Lane
Richmond, BC V7C 5R5 Canada
Wayne McCluskey 1,000
#51-12311 McNeely Drive
Richmond, BC V6V 2S2 Canada
Ryan McCluskey 1,000
#51-12311 McNeely Drive
Richmond, BC V6V 2S2 Canada
Arif Merali 1,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Sair Merali 1,000
8214 Lakeland Drive
Burnaby, BC V5A 2B5 Canada
Millenium Management Corp. 4,000
P.O. Box N-10850
Nassau, Bahamas
Charles Miller 1,000
SS2-S12-C33
Fort St. John, BC V1J 4M7 Canada
Sarat Mishra 1,000
4340 Corner Brook Crescent
Richmond, BC V7E 2H2 Canada
Noel Moss 1,000
Box 27
Parson, BC V0A 1L0 Canada
Valerie Mrakuzic 1,000
706-1500 Ostler Court
North Vancouver, BC V7G 2S2 Canada
</TABLE>
21j
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Darko Mrakuzic 1,000
706-1500 Ostler Court
North Vancouver, BC V7G 2S2 Canada
George Mueller 2,000
#6-3511 Granville Avenue
Richmond, BC V7C 1C8 Canada
Frank Mueller 2,000
8740 Ash Street
Richmond, BC V6Y 2S3 Canada
Noah Natovitch 2,000
121-3280 East 58th Avenue
Vancouver, BC VS8 3T2 Canada
Alice Niemela 2,000
305-5565 Inman Avenue
Barnaby, BC V5H 2M2 Canada
Jeff J. Parker 1,000
110-2300 Carrington Road
Westbank, BC V4T 2N6 Canada
Tim Pepin 1,000
P.O. Box 1825
Grand Forks, BC V0H 1H0 Canada
Brian Pinter 1,000
23616 132nd Avenue
Maple Ridge, BC V2X 7E7 Canada
Cathy Pinter 1,000
9517-209B Street
Langley, BC V1M 2A6 Canada
Mark Pinter 1,000
9517 209B Street
Langley, BC V1M 2A6 Canada
David R. Plut 1,000
P.O. Box 303
Rosemead, CA 91770
</TABLE>
21k
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Elizabeth Ponderec 1,000
P.O. Box 3298
Fort Nelson, BC V0C 1R0
Frank Primus 1,000
#47-1874 Parkview Court
Kelowna, BC V1X 7Q6 Canada
Todd Patz 2,000
8080 Reigate Road
Burnaby, BC V5E 4G2 Canada
Wade Rayner 1,000
1936 Peters Road
North Vancouver, BC V7J 1Y9 Canada
Elaine Rayner 500
329 Pawson Cove
Edmonton, Alberta T5T 5Y9 Canada
Kundan S. Rayat 20,000
5131 Highgate Street
Vancouver, BC V6G 3K3 Canada
Herdev S. Rayat 20,000
1025 Augusta Avenue
Burnaby, BC V3A 1K3 Canada
Jasvir S. Rayat 21,000
214-1628 West First Avenue
Vancouver, BC V6J 1G1 Canada
Craig C. Russell 1,000
1304 Diefenbaker Avenue
Prince George, BC V2L 4H7 Canada
Mohinder Sall 2,000
10011 117th Street
Surrey, BC V3V 7H5 Canada
Minpaul Sall 1,000
10011 117th Street
Surrey, BC V3V 7H5 Canada
</TABLE>
21l
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Eleanor E. Sampert 4,000
4705-53 A Street
Delta, BC V4K 3VK Canada
Navin Sami 1,000
855 Blue Mountain Road
Coquitlam, BC V3J 4S9 Canada
Linda C. Sandler 2,000
272 Wolverine Lake Drive
Wolverine Lake, MI 48390
Larry J. Sandler 2,000
272 Wolverine Lake Drive
Wolverine Lake, MI 48390
Donald Sawatsky 1,000
7344 Southridge Avenue
Prince George, BC V2N 4Y5 Canada
Raymond B. Schooley 2,000
P.O. Box 463010
Escondido, CA 92046-3010
Michael A.F. Schubert 1,000
716-248th Street
Aidergrove, BC V4W 2H2 Canada
Ramona L. Sexton 2,000
6805 Sundance Trail
Riverside, CA 92506
Sopinder Singh 2,000
305-5565 Inman Avenue
Barnaby, BC V5H 2M2 Canada
Pritam K. Singh 2,000
2109 Fell Avenue
North Vancouver, BC V7P 2K8 Canada
Kashmir Singh 8,000
1025 Augusta Avenue
Burnaby, BC V5A 1K3 Canada
</TABLE>
21m
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Jeff Spencer 1,000
250 Fremont Street
Redlands, CA 92373
Bob Stobbe 1,000
9240-98A Avenue
Fort St. John, BC V1S 1R4 Canada
Cameron Stolz 1,000
1091 Limestone Crescent
Prince George, BC V2M 4Z5 Canada
Al Tonn 1,000
Box 2347
Station R
Kelowna, BC V1X 6A5 Canada
Michael Travers 1,000
1709 Carnegie Crescent
Victoria BC V8N 1P2 Canada
Vince Truant 1,000
Box 202
MacKenzie, BC V8N 1P2 Canada
Karen Vold-Oakley 1,000
RR#1
Site 16, Camp 71
Prince George, BC V2N 2H8 Canada
Todd M. Weaver 2,000
2000 South Ocean Lane
Suite 11
Ft. Lauderdale, FL 33316
Diane L. Welch 1,000
7830 St. Thomas Place
Prince George, BC V2N 4K2 Canada
Gerard Wenckowski 500
429 Pawson Cove
Edmonton, AB T5T 5Y9 Canada
</TABLE>
21n
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Robert Witt 1,000
RR#1
Site #8, Camp #47
Prince George, BC V2N 2H8 Canada
Mohammed Yasin 2,000
2237 London Street
New Westminister, BC V3M 3G2 Canada
Robert Ziesman 1,000
Box 9
RR#2
Rock Creek, BC V0H L70 Canada
</TABLE>
21o
<PAGE>
On October 28, 1997, the Company began an offering in reliance upon
Regulation D, Rule 504. This offering was for 4,300,000 shares of the Company's
common stock at a price of $0.10 per share for a total offering of $430,000. The
offering was completed on December 9, 1997 with all shares sold. The proceeds
from the offering were used for working capital, public relations and research
and development of the European market. This offering was sold to unaccredited
investors as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
George Mahfouz, Jr. 425,000
10033 East Redfield Drive
Scottsdale, Arizona 85260
Paula Mahfouz 425,000
10033 East Redfield Drive
Scottsdale, Arizona 85260
Helen Austin 425,000
739 West Flint Street
Chandler, Arizona 85224
Charles Austin 190,000
739 West Flint Street
Chandler, Arizona 85224
Paramount Holdings Ltd. 10,000
P.P. Box Z5005
St. Georges Terrace
W. Australia 6831
Marvin Knight 10,000
1648 North Oleander Street
Tempe, Arizona 85281
Colleen Takemoto 230,000
8356 East San Ramon Drive
Scottsdale, Arizona 85258
Nicole Alagich 25,000
1936 Peters Road
North Vancouver, B.C. V7J 1V9 Canada
Terry Johnston 25,000
1408-4300 Mayberry Street
Burnaby, B.C. V5H 4A4 Canada
Bhupinder Mann 25,000
1182 East 33rd Avenue
Vancouver, B.C. V5V 3B3 Canada
Ranjit Bhogal 25,000
9042 135th street
Surrey, B.C. V7K 1PU Canada
Wes Janzen 5,000
5148 Galway Drive
Delta, B.C. V2C 6Y5 Canada
Sarbjeet Thouli 10,000
#9-- 1525 Bear Creek Road
Kelowna, B.C. V7Y 1A5 Canada
Raymond Levine 200,000
Century Village East
Tillford West, #480
Deerfield Beach, Florida 33442
Rachel Levine 200,000
Century Village East
Tillford West, #486
Deerfield Beach, Florida 33442
Jasvir Rayat 525,000
5131 Highgate Street
Vancouver, B.C. V6C 1A1 Canada
Kundan S. Rayat 410,000
5131 Highgate Street
Vancouver, B.C. V6C 1A1 Canada
Herdev S. Rayat 425,000
1025 Augusta Avenue
Burnaby, B.C. V5A 3G2 Canada
Northwest Management & Consulting 200,000
Services, Inc.
214-1628 West 1st Avenue
Vancouver, B.C. V6J 1G1 Canada
Tanjinder chohan 510,000
161 West 61st Avenue
Vancouver, B.C. V5T 2B1 Canada
</TABLE>
On April 1, 1998, the Company approved a Regulation D, Rule 504 Placement
Offering of 96,000 shares at $1.625 per share with a warrant exercisable at
$1.75 per share until April 15, 2000. The proceeds from this offering were to be
used for advertising and marketing. The placement was completed on April 30,
1998 with all shares sold. The following accredited investors purchased this
offering:
22
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
George Mahfouz, Jr. 48,000 Shares and 48,000 warrants
10033 East Redfield Drive
Scottsdale, Arizon 85260
Herdev S. Rayat 24,000 Shares and 24,000 warrants
1025 Augusta Avenue
Burnaby, B.C. V5A 1K3 Canada
Jasvir S. Rayat 24,000 Shares and 24,000 warrants
5131 Highgate Street
Vancouver, B.C. V6C 1A1 Canada
</TABLE>
The Company began offering 46,855 shares of its common stock pursuant to a
504 offering on July 1, 1998. These shares were offered at $3.18 each and the
proceeds used as additional capital to develop the business of the Company's
subsidiary, NutriCology, Inc. The offering was completed on July 31, 1998 with
all shares sold to Joseph Breslin, 707-11th Avenue, Las Vegas, Nevada, 87501.
On July 24, 1998, the Board of Directors approved the offering of 20,000
shares of the Company's common stock via a 504 Placement at $2.50 per share with
a warrant exercisable at $2.00 per share until July 31, 2000. The proceeds from
this offering, which was completed on July 31, 1998, with all shares sold, were
used to market the Company. The following investors, all of whom were
accredited, purchased this offering:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
George Mahfouz, Jr. 10,000 Shares and 10,000 warrants
10033 East Redfield Drive
Scottsdale, Arizona 85260
Herdev S. Rayat 5,000 Shares and 5,000 warrants
1025 Augusta Avenue
Burnaby, B.C. V5A 1K3 Canada
Jasvir S. Rayat 5,000 Shares and 5,000 warrants
5131 Highgate Street
Vancouver, B.C. V6C 1A1 Canada
</TABLE>
On September 11, 1998, the Company's Board of Directors met and approved a
Regulation D, Rule 504 offering of 50,000 shares of common stock at $2.00 per
share. The proceeds were use to market the Company. This offering was completed
on September 30, 1998 with all shares sold. The entire offering was sold to
Kirkland Capital S.A., Cockburn House, Cockburn Town, Grand Turk, Turks & Caicos
Isl, an offshore accredited investor.
The Board of Directors approved a Regulation D, Rule 504 offering of the
Company's common stock on October 9, 1998. This offering consisted of 15,000
shares to be sold at $1.00 per share plus and additional 75,000 shares of common
stock to be sold at $1.00 per share with a warrant exercisable at $1.00 per
share until October 13, 2000. The funds from this offering were used as working
capital.
23
<PAGE>
The offering was completed on October 30, 1998 with all shares sold. The
investors, consisting of both accredited and unaccredited investors, purchased
the warrantless portion of the offering consisting of 15,000 shares as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
Wah Shung Lau 10,000
1881 West Street
Hayward, California 94545
Paramount Holdings Ltd. 2,000
P.O. Box Z5005
St. Georges Terrace
W. Australia 6831
Michael Quel 1,000
10045 East Redfield Drive
Scottsdale, Arizona 85260
Kashmir Rayat 2,000
1025 Augusta Avenue
Burnaby, B.C. V5A 1K3 Canada
</TABLE>
The portion of the offering consisting of 75,000 shares with 75,000 warrants was
sold to the following accredited investors:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PURCHASED
- ---------------- ----------------
<S> <C>
George Mahfouz, Jr. 37,500 Shares and 37,500 warrants
10033 East Redfield Drive
Scottsdale, Arizona 85260
Herdev S. Rayat 18,750 Shares and 18,750 warrants
1025 Augusta Avenue
Burnaby, B.C. V5A 1K3 Canada
Jasvir S. Rayat 18,750 Shares and 18,750 warrants
5131 Highgate Street
Vancouver, B.C. V6C 1A1 Canada
</TABLE>
24
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The officers and directors of the Company are indemnified as provided under
F.S.A. ss.607.0850. No additional indemnification has been authorized.
25
<PAGE>
PART F/S
FINANCIAL STATEMENTS
NUTRICOLOGY, INC. FINANCIAL STATEMENTS
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . 1
Balance Sheet at December 31, 1997 and 1996 . . . . . . . . . . . . . . . 2-3
Statement of Income For The Years Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Stockholders' Equity For The Years Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Cash Flows For The Years Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . 8-14
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Nutricology, Inc.
Hayward, California 94544
We have audited the accompanying balance sheet of Nutricology, Inc., (the
Company), as of December 31, 1997, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Nutricology, Inc. for the year ended
December 31, 1996, were audited by other auditors whose report thereon, dated
January 21, 1998, expressed an unqualified opinion.
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 of the financial statements provides a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1997, and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
September 5, 1998
<PAGE>
NUTRICOLOGY, INC.
BALANCE SHEET
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 16,500 $ 237,873
Accounts Receivable, Net of Allowances for Doubtful
Accounts and Returns, $256,000 and $256,000
901,507 1,004,579
Inventories (Note 3) 3,915,400 2,059,474
Notes Receivable 5,121 8,721
Income Taxes Receivable 75,000 113,312
Prepaid Expenses and Other Current Assets 48,572 45,118
Deferred Taxes (Note 9) 0 195,625
- -------
Total Current Assets 4,962,100 3,664,702
Property and Equipment, Net (Note 4) 325,355 279,049
Other Assets
Deposits 7,100 0
Due From Stockholder (Note 5,10) 41,724 0
Cash Surrender Value of Life Insurance (Note 6) 30,369 0
Other Receivables 12,183 0
------ -
Total Other Assets 91,376 0
------ -
Total Assets $ 5,378,831 $ 3,943,751
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
NUTRICOLOGY, INC.
BALANCE SHEET
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---- ----
<S> <C> <C>
Current Liabilities
Accounts Payable and Accrued Liabilities $ 2,472,239 $ 1,384,198
Notes Payable, Current Portion (Note 7) 71,704 439,492
Due to Stockholder (Note 5,10) 0 143,810
Income Taxes Payable (Note 9) 10,942 0
------ -
Total Current Liabilities 2,554,885 1,967,500
Notes Payable, Noncurrent Portion (Note 7) 6,273 77,909
----- ------
Total Liabilities 2,561,158 2,045,409
Commitments and Contingencies (Note 8,12)
Stockholders' Equity
Common Stock, No Par Value, Authorized 25,000 Shares,
Issued and Outstanding, 100 Shares 2,000 2,000
Retained Earnings 2,815,673 1,896,342
--------- ---------
Total Stockholders' Equity 2,817,673 1,898,342
--------- ---------
Total Liabilities and Stockholders' Equity $ 5,378,831 $ 3,943,751
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NUTRICOLOGY, INC.
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues $ 12,367,629 $ 10,951,701
Cost of Sales 7,480,484 6,536,711
Gross Profit 4,887,145 4,414,990
Operating Expenses
Selling, General and Administrative 3,888,614 4,304,298
--------- ---------
Operating Income 998,531 110,692
Other Income (Expense)
Interest Income 920 3,600
Interest Expense (40,249) (48,412)
Loss on Disposal of Assets 0 (77,232)
Gain on the Sale of Securities 0 319,237
Other, Net 5,101 0
----- -
Total Other Income (Expense) (34,228) 197,193
------- -------
Income Before Provision For Income Taxes 964,303 307,885
Provision For Income Taxes (Note 9) 44,972 149,105
------ -------
Net Income $ 919,331 $ 158,780
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NUTRICOLOGY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Common Unrealized Retained
Shares Par Value Gains Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 (Restated) 100 $ 2,000 $ 87,336 $ 1,737,562 $ 1,826,898
Net Income 158,780 158,780
Unrealized Gains on Securities, Net of
Tax of $72,278
(87,336) (87,336)
------ --------- ------- --------- ---------
Balance, December 31, 1996 100 2,000 0 1,896,342 1,898,342
Net Income 919,331 919,331
------ --------- ------------ ----------- ----------
Balance, December 31, 1997 100 $ 2,000 $ 0 $ 2,815,673 $ 2,817,673
=== =========== =============
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NUTRICOLOGY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 919,331 $ 158,780
Adjustments to Reconcile Net Income to Net Cash Provided by
(Used in) Operating Activities
Depreciation and Amortization 44,195 71,700
Gain on Sale of Securities 0 (319,237)
Loss on Disposal of Fixed Assets 0 77,232
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 103,072 1,908
(Increase) Decrease in Provision for Allowances of Doubtful
Accounts and Returns 0 110,000
(Increase) Decrease in Inventories (1,855,926) (385,348)
(Increase) Decrease in Income Taxes Receivable 38,312 34,288
(Increase) Decrease in Prepaid Expenses and Other Current Assets 146 (18,988)
(Increase) Decrease in Deferred Taxes 195,625 (156,889)
(Increase) Decrease in Deposits (7,100) 0
(Increase) Decrease in Cash Surrender Value Life Insurance (30,369) 0
(Increase) Decrease in Other Receivables (12,183) 0
Increase (Decrease) in Accounts Payable and Accrued Liabilities 1,088,041 (63,819)
Increase (Decrease) in Income Taxes Payable 10,942 (448,450)
--------- --------
Total Adjustments (425,245) (1,097,603)
--------- ----------
Net Cash Provided by (Used in) Operating Activities 494,086 (938,823)
Cash Flows From Investing Activities
Purchase of Property and Equipment (90,501) (101,901)
Sale of Marketable Securities 0 460,212
-------- -------
Net Cash Flows Provided by Investing Activities (90,501) 358,311
Cash Flows From Financing Activities
Proceeds (Repayments) From Stockholder Loans (143,810) 143,810
Increase (Decrease) in Stockholders Loans (41,724) 32,115
Proceeds from Issuance of Long-term Debt 0 698,060
Payments on Long-term Debt (439,424) (180,659)
--------- ---------
Net Cash Provided By (Used In) Financing Activities (624,958) 693,326
--------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NUTRICOLOGY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents $ (221,373) $ 112,814
Cash and Cash Equivalents, Beginning of Year 237,873 125,059
------- -------
Cash and Cash Equivalents, End of Year $ 16,500 $ 237,873
======== =======
Supplemental Information:
Cash paid for:
Interest $ 40,249 $ 48,412
====== ========
Income taxes $ 177,652 $ 682,166
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION
- ---------------------
Nutricology, Inc., (the Company), was incorporated in California on March
11, 1980, primarily for the purpose of developing and marketing natural
nutritional supplements. The Company's sales are primarily to distributors
and health care professionals throughout the United States.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
A. Method of Accounting
-----------------------
The Company's financial statements are prepared using the accrual method of
accounting.
B. Cash and Cash Equivalents
----------------------------
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to
be cash and cash equivalents.
C. Allowance for Doubtful Accounts and Return Allowances
--------------------------------------------------------
Accounts Receivable are shown net of allowances for doubtful accounts and
returns which are estimated as a percent of accounts receivable and sales,
respectively, based on prior years experience.
D. Inventories
--------------
Inventories consist entirely of raw materials, finished goods and supplies.
Raw materials consist of bulk product that has not been mixed or
encapsulated. Finished goods consist of product that has been encapsulated
or made into tablet form and that has been packaged for sale. Inventories
are stated at the lower of cost or net realizable value, using the
first-in, first-out method.
E. Property, Equipment and Depreciation
---------------------------------------
Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives as follows:
<TABLE>
<CAPTION>
<S> <C>
Machinery and Equipment 2 to 10 years
Transportation Equipment 3 to 5 years
Office Furniture and Equipment 3 to 5 years
Leasehold Improvements Lesser of useful lives of assets (3 to
10 years or the related lease term)
</TABLE>
8
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
F. Revenue Recognition
----------------------
Revenue is recognized upon shipment to the customer. Sales are presented
net of returns and allowances of $972,621 and $673,310 for the years ended
December 31, 1997 and 1996, respectively.
G. Cost Recognition
-------------------
Cost of sales includes all direct material and labor costs and those
indirect costs of bringing raw materials to sale condition. Selling,
general and administrative costs are charged to operating expenses as
incurred.
H. Income Taxes
---------------
The Company accounts for income taxes under Statement of Financial
Standards No. 109 ("SFAS" 109), Accounting for Income Taxes, which utilizes
an asset and liability approach to accounting for income taxes.
I. Use of Estimates
-------------------
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing the financial statements.
J. Financial Statement Presentation
-----------------------------------
Certain accounts from prior years have been reclassified to conform with
the current year's presentation.
K. New Accounting Standards
---------------------------
The Company implemented SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, on January
1, 1996. The implementation of SFAS No. 121 had no effect on the Company's
financial statement.
The Company implemented SFAS No. 129, Disclosure of Information about
Capital Structure, on January 1, 1997. The implementation had no effect on
the Company's financial statement.
9
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
The Company implemented SFAS No. 130, Reporting Comprehensive Income. The
implementation had no effect on the Company's financial statement.
L. Pending Accounting Pronouncements
------------------------------------
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
NOTE 3 - INVENTORIES
- --------------------
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw Materials $ 968,053 $ 345,128
Finished Goods 3,015,982 1,955,724
Reserve for Obsolescence (68,635) (241,378)
------- --------
Total $ 3,915,400 $ 2,059,474
============= ============
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Machinery and Equipment $ 643,844 $ 527,317
Transportation Equipment 81,356 81,356
Office Furnitures and Fixtures 79,186 58,542
Leasehold Improvements 101,708 98,310
------- -------
Total 906,094 765,525
Less Accumulated Depreciation (580,739) (486,476)
-------- -------
Net Book Value $ 325,355 $ 279,049
=========== =============
</TABLE>
Depreciation expense charged to operation for the years ended December 31,
1997 and 1996 was $44,195 and $71,700, respectively.
NOTE 5 - DUE FROM/TO STOCKHOLDERS
- ---------------------------------
From time to time, the Company makes personal loans or receives advances
from/to its two principal stockholders. The balance due from stockholder of
$41,724 at December 31, 1997 and the balance due to stockholder at December
31, 1996 of $143,810, bear no interest and are receivable/payable on
demand.
10
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - CASH SURRENDER VALUE LIFE INSURANCE
- --------------------------------------------
The Company has purchased insurance in the face amount of $757,600 on the
lives of certain key employees, who are the beneficiaries. Two of the
policies, face amount $750,000, have been assigned to The Money Store. The
cash surrender value at December 31, 1997 was $30,369, with no policy loans
outstanding.
NOTE 7 - NOTES PAYABLE
- ----------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Notes Payable, Line of Credit. Secured
revolving credit line with bank up to $500,000,
interest payable monthly at prime plus one
(9.25% at December 31, 1996). All unpaid
principal and interest due April 1, 1997. $ 0 $ 362,000
Note Payable to bank, principal and interest
payments of $6,273 payable monthly at 9.25%.
All unpaid principal and interest due February
1999, collateralized by all significant assets. 77,977 143,239
Other notes payable 0 12,162
- ------
Total 77,977 517,401
Less Current Portion 71,704 439,492
------ -------
Noncurrent Portion $ 6,273 $ 77,909
============= ==========
</TABLE>
Principal maturities of long-term debt are as follows at December 31:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 6,273
=====
</TABLE>
The revolving loan with bank, which supports working capital and capital
expenditures, is secured by all significant assets of the Company. The loan
had available borrowings of $138,000 at December 31, 1996, subject to
borrowing base limitations as defined in the agreement. The agreement
contains certain restrictive covenants which relate to net worth, capital
expenditures and indebtedness, with which the Company was in compliance at
December 31, 1996.
NOTE 8 - LEASE OBLIGATIONS
- --------------------------
Operating Leases - The Company leases two warehouse office spaces, its main
administrative/warehouse location, and various equipment under operating
leases which are generally for one year periods.
Rent expense amounted to $207,727 and $117,969 for the years ended December
31, 1997 and 1996, respectively, including $96,000 paid to two Company's
shareholders.
11
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 8 - LEASE OBLIGATIONS (CONTINUED)
- --------------------------------------
Future minimum rental commitments under noncancelable leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 114,240
1999 $ 117,600
</TABLE>
NOTE 9 - INCOME TAXES
Effective January 1, 1997, the Company converted from a C corporation to an
S corporation, thereby changing its tax status from taxable to nontaxable.
The Company is required to file Internal Revenue Service Form 1120S, U.S.
Income Tax Return for an S Corporation, and to supply its shareholders with
Schedule K-1, Shareholder's Share of Income, Credits, Deductions, etc. The
income (loss) is taxed at the individual level. The Company is also
required to file a California S Corporation Franchise or Income Tax Return,
in which the Company will be liable for franchise taxes.
The provision for income taxes reflected in the financial statements is as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current payable
Federal $ 0 $ 232,344
State 10,942 73,560
------ ------
Subtotal 10,942 305,994
Deferred Taxes 34,030 (156,889)
------ --------
Total Provision for Income Taxes $ 44,972 $ 149,105
========== ============
</TABLE>
The provision for income taxes differs from amounts computed by applying
the federal income tax rate of 34% in 1996, to income before provision for
income taxes primarily due to California state taxes, and certain
nondeductible permanent items.
The following reconciles the differences between 1997 and 1996 current and
statutory provisions for income taxes:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Statutory Federal rate - % 35.0 %
State and local income taxes, net of
Federal income tax benefit 1.5 % 6.0 %
Change in Valuation Allowances - (12.0)%
Gains on Investments - 19.0 %
Permanent Items - 0.1 %
------ -----
Provision for Income Taxes 1.5 % 48.1 %
===== ======
</TABLE>
12
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9 - INCOME TAXES (CONTINUED)
- ---------------------------------
Due to the change in tax status from a taxable entity to a nontaxable
entity, the existing deferred tax assets and liabilities have been
eliminated through a charge to income tax expense for the period ended
December 31, 1997. The components of net deferred tax assets at December
31, 1996, are primarily associated with timing differences from accounts
receivable, sales returns, inventory reserves, and state taxes. Deferred
liabilities result primarily from timing differences associated with basis
differences in fixed assets for book and tax purposes.
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets $ 224,252
Deferred Tax Liabilities (28,627)
--------
Total Net Assets $ 195,625
=======
</TABLE>
NOTE 10 - RELATED PARTIES
- -------------------------
The Company leases warehouse and office space from two of the Company's
stockholders as described in Note 6.
Due From/To Stockholders-From time to time, the Company makes personal
loans or receives advances from/to its two principal stockholders. The
balance due from stockholder at December 31, 1997 of $41,724 and the
balance due to stockholder at December 31, 1996 of $143,810, bear no
interest and are receivable/payable on demand.
NOTE 11 - PROFIT SHARING PLAN
- -----------------------------
The Company has noncontributory profit sharing plan which covers
substantially all employees. The Company's contributions to the plan are
made at the sole discretion of the Company's board of directors.
Contributions to the plan were $46,372 and $153,160 for the years ended
December 31, 1997 and 1996, respectively.
NOTE 12 - SUBSEQUENT EVENTS
- ---------------------------
Merger
------
On February 3, 1998, the Company entered into an agreement to be acquired
by Scottsdale Scientific, Inc., a company engaged in the wholesale
distribution of nutritional supplements, in exchange for 9,800,000 shares
of Scottsdale Scientific, Inc., common stock to Stephen Levine, the
Company's former President.
After completion of the above transaction, Stephen Levine's ownership of
9,800,000 common shares represents 67.6% of the total issued and
outstanding common shares of Scottsdale Scientific, Inc.
Bank Financing
--------------
During March 1998, the Company increased its secured revolving credit line
with bank up to $1,000,000, with interest payable monthly at prime plus one
quarter of one percent
13
<PAGE>
NUTRICOLOGY, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 12 - SUBSEQUENT EVENTS (CONTINUED)
- ---------------------------------------
(.25%). The bank has a perfected first lien security interest in the
Company's accounts receivable, inventory, and equipment. All unpaid
principal due May 31, 1999.
Lease Commitments
-----------------
On March 26, 1998, the Company entered into an agreement to lease
approximately 25,440 square feet of office and warehouse space located in
Building "G", 30806 Santana Street, Hayward, California. The lease term
commences June 1, 1998 and expires on May 31, 2003. Base rent is $13,738
per month and a deposit of $18,019 was paid to effect the lease. The
Company moved its present headquartered operations at 400 Preda Street, San
Leandro, California, of which rent was paid to stockholders totaling $8,000
per month, in July 1998.
14
<PAGE>
CONTENTS
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Balance Sheet at December 31, 1998 and 1997 . . . . . . . 3-4
Consolidated Statement of Operations For the Year Ended
December 31, 1998 and For the Period From Inception
(April 8, 1997) Through December 31, 1997 . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity For the Period From
Inception (April 8, 1997) Through December 31, 1998 . . . . . . . 6-8
Consolidated Statement of Cash Flows For the Year Ended
December 31, 1998 and For the Period From Inception
(April 8, 1997) Through December 31, 1997 . . . . . . . . . . . . 9-10
Notes to the Consolidated Financial Statements . . . . . . . . . . . 11-20
Independent Auditors' Report on Supplemental Information . . . . . . 21
Consolidated Balance Sheet at December 31, 1998 and 1997
Giving Retroactive Effect to the Merger with Nutricology, Inc. . 22-23
Consolidated Statement of Operations For the Years Ended
December 31, 1998 and 1997 Giving Retroactive Effect
to the Merger with Nutricology, Inc. . . . . . . . . . . . . . . 24
Consolidated Statement of Stockholders' Equity For the Years
Ended December 31, 1998 and 1997 Giving Retroactive Effect
to the Merger with Nutricology, Inc. . . . . . . . . . . . . . . 25-27
Consolidated Statement of Cash Flows For the Years Ended
December 31, 1998 and 1997 Giving Retroactive Effect
to the Merger with Nutricology, Inc. . . . . . . . . . . . . . . 28-29
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Scottsdale Scientific, Inc.
Scottsdale, Arizona 85258
We have audited the consolidated balance sheet of Scottsdale Scientific, Inc.,
(the Company), as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31,1998 and for the period from inception (April 8, 1997) through
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 consolidated financial position of the Company at
December 31, 1998 and 1997, and the consolidated results of their operations and
their consolidated cash flows for the periods indicated, in conformity with
generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
March 5, 1999, except as to Note 7,
which is as of June 14, 1999
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 225,006 $ 112,518
Accounts Receivable, Net of Allowances for Doubtful
Accounts and Returns, $256,000 at December 31, 1998 1,049,079 0
Inventories (Note 3) 3,538,611 0
Refundable Income Tax Deposits 220,995 0
Prepaid Expenses and Other Current Assets 132,769 0
Deferred Tax Assets (Note 9) 135,000 0
-------- -------
Total Current Assets 5,301,460 112,518
Property and Equipment, Net (Note 4) 942,558 0
Other Assets
Deposits 38,630 250
Due From Stockholder (Note 5) 123,602 0
Cash Surrender Value of Life Insurance (Note 6) 33,953 0
Organization Costs, Net of Amortization of $635 and
$476 at December 31, 1998 and 1997 2,540 3,175
----- -----
Total Other Assets 198,725 3,425
------- -----
Total Assets $ 6,442,743 $ 115,943
========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 3,053,072 None
Line of Credit (Note 7) 533,005 0
Notes Payable, Current Portion (Note 8) 82,539 0
Income Taxes Payable (Note 9) 850 0
--- ---------
Total Current Liabilities 3,669,466 0
Long-Term Liabilities
Notes Payable, Noncurrent Portion (Note 8) 208,822 0
------- -------
Total Liabilities 3,878,288 0
Commitments and Contingencies (Note 10)
Stockholders' Equity
Preferred Stock, $0.25 Par Value, Authorized 1,000,000
Shares, Issued and Outstanding, None 0 0
Common Stock, $0.001 Par Value, Authorized
1,000,000 Shares, Issued and Outstanding, 15,017,855
and 7,700,000 at December 31, 1998 and 1997 15,018 7,700
Additional Paid In Capital 4,126,154 525,300
Retained Earnings (A Deficit) (1,576,717) (417,057)
--------- ---------
Total Stockholders' Equity 2,564,455 115,943
--------- --------
Total Liabilities and Stockholders' Equity $ 6,442,743 $ 115,943
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
For the Period
From Inception
Year Ended (April 8, 1997)
December 31, Through
1998 December 31, 1997
---- -----------------
<S> <C> <C>
Revenues $ 13,450,758 $ 0
Cost of Sales 8,044,907 0
--------- ---------
Gross Profit 5,405,851 0
Operating Expenses
Selling, General and Administrative 5,681,056 418,001
Research and Development 930,592 0
------- -------
Total Operating Expenses 6,611,648 418,001
--------- -------
Operating Loss (1,205,797) (418,001)
Other Income (Expense)
Interest Income 2,119 944
Interest Expense (47,901) 0
Loss on Disposal of Fixed Assets (9,432) 0
------- ---------
Total Other Income (Expense) (55,214) 944
-------- ---------
Net Loss Before Benefit For Income Taxes (1,261,011) (417,057)
Benefit For Income Taxes (Note 9) 134,150 0
------- ---------
Net Loss Available to Common Stockholders $ (1,126,861) $ (417,057)
========== =======
Net Loss Per Weighted Share of Common Stock $ (0.08) $ (0.15)
===== ====
Weighted Shares Outstanding 13,617,386 2,875,000
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock
For Services Rendered at
$.001 Per Share as of
April 8, 1997 0 $ 0 3,000,000 $ 3,000 $ 3,000
Issuance of Common Stock Under
504D Offering Dated May 1,
1997 For Cash at $.25 Per Share 400,000 400 99,600 100,000
Issuance of Common Stock Under
Private Placement Memorandum Dated
October 28, 1997 For Cash at
$.10 Per Share 1,097,588 1,098 108,661 109,759
Issuance of Common Stock Under
Private Placement Memorandum Dated
October 28, 1997 For Services
Rendered at $.10 Per Share 3,202,412 3,202 317,039 320,241
Loss From Inception (April 8, 1997)
Through December 31, 1997 (417,057) (417,057)
------ ------ ---------- ------- --------- -------- --------
Balance, December 31, 1997 7,700,000 7,700 525,300 (417,057) 115,943
Issuance of Common Stock in Exchange
For Acquisition of Nutricology, Inc.,
February 1998 6,800,000 6,800 2,810,873 2,817,673
Issuance of Common Stock Under Private
Placement Memorandum Dated April 15,
1998 For Cash at $1.625 Per Share 96,000 96 155,904 156,000
Exercise of Warrants Under Private
Placement Memorandum Dated April 15,
1998 For Cash at $1.75 Per Share 96,000 96 167,904 168,000
Issuance of Common Stock Under Private
Placement Memorandum Dated July 1, 1998
For Cash at $3.18 Per Share 46,855 46 148,953 148,999
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock Under
Private Placement Memorandum
Dated July 24, 1998 For Cash
at $2.50 Per Share 20,000 20 49,980 50,000
Exercise of Warrants Under Private
Placement Memorandum Dated July 24,
1998 For Cash at $2.00 Per Share 20,000 20 39,980 40,000
Issuance of Common Stock For Services
Rendered at $2.00 Per Share, July
31, 1998 61,500 62 122,938 123,000
Less Issuance Costs (123,000) (123,000)
Issuance of Common Stock Under Private
Placement Memorandum Dated September 15,
1998 For Cash at $2.00 Per Share 50,000 50 99,950 100,000
Issuance of Common Stock Under Private
Placement Memorandum Dated October 13,
1998 For Cash at $1.00 Per Share 15,000 15 14,985 15,000
Issuance of Common Stock Under Private
Placement Memorandum Dated October 13,
1998 For Cash at $1.00 Per Share 75,000 75 74,925 75,000
Exercise of Warrants Under Private
Placement Memorandum Dated October 13,
1998 For Cash at $1.00 Per Share 37,500 38 37,462 37,500
Prior Period Adjustment-Settlement of
Prior Years Income Taxes (Note 9) (32,799) (32,799)
Loss, Year Ended December 31, 1998 (1,126,861) (1,126,861)
-------- ------- --------- --------- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 0 $ 0 15,017,855 $ 15,018 $ 4,126,154 $(1,576,717) $ 2,564,455
======= ===== ========== ======== ========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
For the Period
From Inception
(April 8, 1997)
Year Ended Through
December 31, December 31,
1998 1997
---- ----
Cash Flows From Operating Activities
Net Loss $(1,126,861) $ (417,057)
Adjustments to Reconcile Net Loss to Net Cash
Used In Operating Activities
Common Stock Issued For Services 0 323,241
Settlement of Prior Years Income Taxes (32,799) 0
Depreciation and Amortization 131,997 0
Loss on Disposal of Fixed Assets 9,433 0
Cash Surrender Value Life Insurance (3,584) 0
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (147,572) 0
(Increase) Decrease in Inventories 376,789 0
(Increase) Decrease in Notes Receivable 5,121 0
(Increase) Decrease in Income Tax Deposits (220,995) 0
(Increase) Decrease in Prepaid Expenses and Other Current (84,197) 0
Assets
(Increase) Decrease in Deferred Tax Assets (135,000) 0
(Increase) Decrease in Deposits (31,280) (250)
(Increase) Decrease in Organization Costs 0 (3,175)
(Increase) Decrease in Other Receivables 12,183 0
Increase (Decrease) in Accounts Payable and Accrued 580,833 0
Liabilities
Increase (Decrease) in Income Taxes Payable (10,092) 0
--------- --------
Total Adjustments 450,837 319,816
--------- --------
Net Cash Used In Operating Activities (676,024) (97,241)
Cash Flows From Investing Activities
Acquisition of Property and Equipment (757,998) 0
Advances To Stockholder (6,878) 0
---------- -------
Net Cash Flows Used In Investing Activities (764,876) 0
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-9
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (APRIL 8, 1997)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
For the Period
From Inception
(April 8, 1997)
Year Ended Through
December 31, December 31,
1998 1997
---- ----
Cash Flows From Financing Activities
Proceeds From the Sale of Common Stock 790,499 209,759
Net Proceeds From Line of Credit 533,005 0
Cash Received for Common Shares in Connection with the
Nutricology Acquisition 16,500 0
Proceeds on Long-term Debt 213,384 0
---------- ------------
Net Cash Provided By Financing Activities 1,553,388 209,759
--------- -------
Increase in Cash and Cash Equivalents 112,488 112,518
Cash and Cash Equivalents, Beginning of Period 112,518 0
--------- ----------
Cash and Cash Equivalents, End of Period $ 225,006 $ 112,518
========== =======
Supplemental Information
------------------------
Cash Paid For:
Interest $ 47,901 $ 0
======== ==========
Income taxes $ 115,000 $ 0
======= ==========
Noncash Investing Activities:
On April 8, 1997, the Company Issued 3,000,000 Shares of
Common Stock for Services $ 0 $ 3,000
============ =======
Issuance of Common Stock Under Private Placement
Memorandum Dated October 28, 1997, for Services Rendered $ 0 $ 320,241
============ =======
at $0.10 Per Share
Issuance of 6,800,000 Shares of Common Stock In Exchange for
100% of Business
Details of Acquisition:
Fair Value of Assets $ 5,378,831
Liabilities (2,561,158)
---------
Book Value of Company 2,817,673
Less Cash Acquired (16,500)
---------
Total Acquisition, Net of Cash Received $ 2,801,173
=========
The accompanying notes are an integral part of these financial statements.
F-10
</TABLE>
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - ORGANIZATION
- ---------------------
Scottsdale Scientific, Inc. (the Company) was incorporated under the laws
of the State of Florida on April 8, 1997, with an authorized capital of
100,000,000 shares of common stock with a par value of one mil ($0.001) per
share. On January 15, 1998, the Company amended its Articles of
Incorporation to increase authorized capital by 1,000,000 shares of $0.25
par value preferred stock. The Company is engaged in the wholesale
distribution of health and nutritional supplements.
On February 3, 1998, the Company entered into an agreement to acquire
Nutricology, Inc., a company engaged in the distribution of hypoallergenic
nutritional supplements, in exchange for 9,800,000 shares of Scottsdale
Scientific, Inc.'s common stock, of which 6,800,000 are newly issued shares
and 3,000,000 are existing shares transferred in connection with the
acquisition. (See Note 2-E.) In addition to the supplemental information to
these financial statements, the following pro forma information presents a
summary of our consolidated results of operations as if the acquisition had
occurred January 1, 1997: Net Sales of $13,450,758 and $12,367,629, Net
Earnings (Loss) of ($1,126,861) and $502,274, and Net Earnings (Loss) Per
Share of ($0.08) and $0.17, at December 31, 1998 and 1997. Nutricology,
Inc., a California corporation, was incorporated on March 11, 1980.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
A. Method of Accounting
-----------------------
The Company's financial statements are prepared using the accrual method of
accounting.
B. Cash and Cash Equivalents
----------------------------
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash and cash equivalents.
C. Concentration of Credit Risk
-------------------------------
The Company maintains cash balances in excess of $100,000. The accounts are
insured by the Federal Deposit Insurance Corporation up to $100,000.
D. Principles of Consolidation
------------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Nutricology, Inc. All material
intercompany transactions have been eliminated in consolidation.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------
E. Purchase Method
------------------
Acquisition of the Company's subsidiary is accounted for by the purchase
method following the historical cost principle on the basis of the fair
value of the acquired assets less liabilities assumed, $2,817,673 (net book
value), less cash acquired of $16,500, in exchange for the issuance of
9,800,000 shares of the Company's common stock. See Note 1. The Company has
acquired 100% of the stock of Nutricology, Inc. and retains the acquired
company as a subsidiary. The results of operations are included as
supplemental information to these financial statements for comparative
purposes. The subsidiary is in the business of developing and marketing
natural nutritional supplements. The subsidiary's sales are primarily to
distributors and health care professionals throughout the United States.
F. Inventories
--------------
Inventories consist of raw materials, work in process, and finished goods.
Raw materials consist of bulk product that has not been mixed or
encapsulated. Work in Process consists of products in the
mixing/encapsulating stage. Finished goods consist of product that has been
encapsulated or made into tablet form and that has been packaged for sale.
Inventories are stated at the lower of cost or net realizable value, using
the first-in, first-out method.
G. Property and Equipment
-------------------------
Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives ranging from three
to ten years.
H. Revenue Recognition
----------------------
Revenues are recognized and title passes upon shipment to the customer.
Sales are presented net of returns and allowances of $980,323 for the year
ended December 31, 1998. For the year ended December 31, 1997, Nutricology
(prior to its acquisition by the Company) presented sales, net of returns
and allowances of $972,621.
I. Allowance for Doubtful Accounts and Return Allowances
--------------------------------------------------------
Accounts Receivable are shown net of allowances for doubtful accounts and
returns which are estimated as a percent of accounts receivable and sales,
respectively, based on prior years experience.
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
J. Cost Recognition
-------------------
Cost of sales includes all direct material and labor costs and those
indirect costs of bringing raw materials to sale condition. Selling,
general and administrative costs are charged to operating expenses as
incurred. Research and Development costs are charged to operations when
incurred and are included in operating expenses. Research and development
costs for the year ended December 31, 1998 is $930,592.
K. Use of Estimates
-------------------
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing the financial statements.
L. Income Taxes
---------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse. See Note 9.
M. Stock-Based Compensation
---------------------------
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation cost for stock
options, if any, is measured as the excess of the quoted market price of
the Company's stock at the date of grant over the amount an employee must
pay to acquire the stock.
SFAS No. 123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. The Company has
elected to remain on its current method of accounting as described above,
and has adopted the disclosure requirements of SFAS No. 123, effective
April 1997.
N. Earnings/Loss Per Share of Common Stock
------------------------------------------
Basic earnings or loss per share has been computed based on the weighted
average number of common shares. All earnings or loss per share amounts in
these financial
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
statements are basic earnings or loss per share as defined by SFAS No. 128,
"Earnings Per Share." Diluted weighted average shares outstanding for 1998
exclude the potential common shares from warrants and stock options because
to do so would have been antidilutive. The number of shares used in
computing earnings (loss) per common share at December 31, 1998 and 1997
was 13,617,386 and 2,875,000, respectively.
O. Capital Structure
--------------------
The Company has implemented SFAS No. 129, "Disclosure of Information about
Capital Structure," effective January 1, 1998, which established standards
for disclosing information about an entity's capital structure. The
implementation of SFAS No. 129 had no effect on the Company's financial
statements
P. Comprehensive Income
-----------------------
The Company has implemented SFAS No. 130, "Reporting Comprehensive Income,"
effective January 1, 1998, which requires companies to classify items of
other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid in capital in the equity section
of a statement of financial position. The implementation of SFAS No. 130
had no effect on the Company's financial statements.
Q. Business Segment Information
-------------------------------
The Company implemented SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," on January 1, 1998. The Company
operates in one industry segment, that being developing and marketing
natural nutritional supplements. The Company does not have any significant
customers or concentration of credit risk.
R. Start-up Costs
-----------------
Costs of start-up activities are expensed as incurred. During 1997,
start-up expenses represent organization costs of $417,057 and were charged
to operations as incurred. For income tax purposes, the Company has elected
to treat its organizational expenditures as deferred expenses and amortize
them over a period of sixty months, beginning in the first month the
Company is actively in business.
S. Presentation
---------------
Certain accounts from prior years have been reclassified to conform with
the current year's presentation.
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------
T. Pending Accounting Pronouncements
------------------------------------
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
NOTE 3 - INVENTORIES
- --------------------
Inventories consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Raw Materials $ 708,548
Work In Process 197,194
Finished Goods 2,751,504
Reserve for Obsolescence (118,635)
--------
Total $ 3,538,611
=========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Machinery and Equipment $ 586,054
Office Equipment 221,084
Transportation Equipment 43,161
Furniture and Fixtures 181,119
Computer Equipment 142,589
Computer Software 34,050
Leasehold Improvements 97,904
------
Total 1,305,961
Less Accumulated Depreciation (363,403)
---------
Net Book Value $ 942,558
=======
</TABLE>
Depreciation expense charged to operations during the year ended 1998 was
$131,730.
NOTE 5 - DUE FROM STOCKHOLDER
- -----------------------------
From time to time, the Company makes personal loans or receives advances
from/to its majority stockholder. The balance Due From Stockholder at
December 31, 1998 of $123,602 bears no interest and is payable on demand.
Of the total, $116,724 was advanced prior to the merger. The remaining
balance of $6,878 was advanced during 1998.
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 6 - CASH SURRENDER VALUE LIFE INSURANCE
- --------------------------------------------
The Company has purchased insurance in the face amount of $750,000 on
the lives of certain key employees, who are the beneficiaries. The
policies have been assigned to The Money Store. The cash surrender
value at December 31, 1998 is $33,953, with no policy loans
outstanding.
NOTE 7 - LINE OF CREDIT
- -----------------------
In March 1998, the Company entered into a credit agreement which
provides a line of credit of up to $1,000,000, to be used to finance
the Company's accounts receivable and inventory, and has a perfected
first lien security interest in the Company's accounts receivable,
inventory, and equipment. The Company's majority stockholder has also
personally guaranteed the loan. The credit agreement requires interest
to be due and payable monthly at the bank's floating Prime rate plus
one quarter of one percent (currently 7.75%), principal due and
payable at maturity, which is May 31, 1999. The credit agreement also
requires the Company to maintain a zero principal balance for at least
thirty consecutive days prior to May 31, 1999. The balance at December
31, 1998 is $533,005.
The credit agreement contains customary covenants and events of
default. Under the terms of the agreement, the bank may call the loan
if the Company is in violation of any restrictive covenants. At
December 31, 1998, the Company was in breach of certain restrictive
covenants for which the Company has received waivers and amendments on
June 14, 1999. These amendments contain among other things, provisions
for the payment of accrued interest of $5,394.04 through June 5, 1999,
an increase in the interest rate to Prime plus 2% (effective June 5,
1999), and five monthly payments of principal in the amount of $25,000
plus interest beginning June 25, 1999 and continuing on the
twenty-fifth day of each month thereafter until maturity, when the
remaining balance is due in full. The Bank waives the Company's
existing defaults of the financial covenants until November 5, 1999,
the extended maturity date.
At December 31, 1998, the Company had available borrowings of $466,995
under the agreement, subject to borrowing base limitations as defined
by the agreement.
NOTE 8 - NOTES PAYABLE
- ----------------------
Notes Payable at December 31, 1998, is as follows:
Note Payable to bank, principal and interest payments of $6,273
payable monthly at 9.25%. All unpaid principal and interest due
February 1999, collateralized by all significant assets. $ 6,225
Notes Payable, Pitney Bowes Credit Corporation, dated December 14,
1998, in the original amount of $38,067, without
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 8 - NOTES PAYABLE (CONTINUED)
- ----------------------------------
interest. Principal payments of $7,033 plus sales tax of $580,
totaling $7,613 are due in five equal payments, the first being due as
of the date of this agreement and each subsequent payment due in
quarterly installments, until paid in full. Secured by the equipment
itself. 30,453
Notes Payable to bank, dated November 25, 1998, in the original amount
of $259,426. Principal and interest payments of $5,002 payable in
sixty monthly installments due on the first of the month. A security
interest has been filed under the Uniform Commercial Code for the
equipment. 254,683
Total 291,361
Notes Payable, Current Portion 82,539
Notes Payable, Noncurrent Portion $ 208,822
=======
Principal maturities of long-term debt are as follows at December 31,
1998:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 82,539
2000 $ 48,715
2001 $ 51,748
2002 $ 54,969
2003 $ 53,390
</TABLE>
NOTE 9 - INCOME TAXES
- ---------------------
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the
deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating
loss carryforward period. Management has considered these factors in
reaching its conclusion as to the valuation allowance for financial
reporting purposes. The income tax effect of temporary differences
comprising the deferred tax assets and deferred tax liabilities on the
accompanying consolidated balance sheet is a result of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred Tax Assets:
Net Operating Loss Carryforwards $ 387,650 $ 0
Expenses Not Currently Deductible
For Tax Purposes 298,476 145,970
------- -------
Total 686,126 145,970
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - INCOME TAXES (CONTINUED)
- ---------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Valuation Allowance (419,236) (145,970)
-------- -------
Net Deferred Tax Asset 266,890 0
Deferred Tax Liabilities:
Depreciation 131,890 0
------- -------
Net Deferred Tax Asset $ 135,000 $ 0
======= =========
</TABLE>
The net change in the valuation allowance for 1998 principally
resulted from net operating loss carryforwards.
The reconciliation of income tax attributable to continuing operations
compared at the U.S. federal statutory rates to income tax expense
(benefit) is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Federal Tax at Statutory Rate $ (428,744) $ 0
Net Operating Loss Benefit 428,744 0
State Taxes 850 0
Increase in Deferred Tax Asset (135,000) 0
Income Tax Provision (Benefit) $ (134,150) $ 0
</TABLE>
A reconciliation between the statutory federal income tax rate (35%)
and the effective rate of income tax expense for each of the years
during the period ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Statutory Federal Income Tax Rate (35.0 %) (35.0%)
Net Operating Loss Benefit 35.0 % 35.0%
State Taxes 1.0% 0.0%
Increase in the Valuation Allowance (35.0%) 0.0%
----- -----
Effective Income Tax Rate (34.0%) 0.0%
===== =====
</TABLE>
At December 31, 1998 and 1997, the Company has available net operating
loss carryforwards of approximately $957,000 and $1,039,000 for tax
purposes to offset future taxable income, which expire principally in
the year 2018.
Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a
cumulative change in ownership of more than 50% is deemed to occur
within any three-year period.
During 1998, state income taxes of $32,799 were paid as settlement of
prior years income taxes for the years 1992, 1993, and 1994. This
amount was charged to retained earnings as a prior period adjustment
in accordance with SFAS No.16, "Prior Period Adjustments."
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company leases office space and equipment under various
noncancelable operating leases which are generally for one to five
year periods. Rent expense charged to operations for the year ended
December 31, 1998, was approximately $282,000, including $96,000 paid
to the majority stockholder. The Company also leases office space on a
monthly basis for approximately $2,000 per month.
Future minimum rental commitments under noncancelable leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 384,985
2000 $ 280,296
2001 $ 295,176
2002 $ 306,948
2003 $ 155,436
</TABLE>
NOTE 11 - PROFIT SHARING PLAN
- -----------------------------
The Company has a defined contribution plan which covers substantially
all employees. The Company's contributions to the plan are made at the
sole discretion of the Company's Board of Directors. Contributions to
the plan were $35,026 for the year ended December 31, 1998.
NOTE 12 - STOCK WARRANTS
- ------------------------
In October 1998, the Company offered 75,000 shares of common stock at
$1.00 per share under a Rule 504 Registration, with an additional
75,000 shares of purchase warrants at $1.00 each, good until October
13, 2000. In October 1998, one-half (or 37,500) of the warrants were
exercised at $1.00 per share, or $37,500. As of the date of these
financial statements, one-half (or 37,500) of the warrants remain
outstanding.
NOTE 13 - STOCK OPTIONS
- -----------------------
The Company has authorized 1,000,000 shares of common stock for
issuance to directors and key employees under the 1998 Stock Option
Plan (plan). The objectives of the plan include attracting and
retaining the best personnel, providing for additional performance
incentives, and promoting the success of the Company by providing
directors and key employees the opportunity to acquire common stock.
Options outstanding under the Company's plan have been granted at
prices which are either equal to or above the market value of the
stock on the date of grant and expire at various dates after the grant
date.
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 13 - STOCK OPTIONS (CONTINUED)
- -----------------------------------
The status of the Company's stock option plans is summarized below as
of December 31:
<TABLE>
<CAPTION>
Number of Option
Shares Price
<S> <C> <C>
Granted Under the 1998 Stock Option Plan 450,000 $ 2.00
Granted Under the 1998 Stock Option Plan 100,000 $ 4.00
--------
Options Outstanding at December 31, 1998 550,000 $2.00-$4.00
=======
</TABLE>
The Company accounts for stock-based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," under which no
compensation cost for stock options is recognized for stock options
awards granted at or above fair market value. Had compensation expense
for the Company's stock-based compensation plans been determined under
SFAS No. 123, based on the fair market value at the grant dates, the
Company's pro forma net loss and pro forma net loss per share at
December 31, 1998 would have been reflected as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Loss
As reported $ 1,126,861
Pro forma $ 1,152,836
Net Loss Per Share
As reported $ 0.08
Pro forma $ 0.08
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for those options granted in 1998:
dividend yield of 0%, expected volatility of 320%, risk-free interest
rate of 5%, and expected life of 5 years.
NOTE 14 - SUBSEQUENT EVENTS
- ---------------------------
As of the date of these financial statements, the Company has entered
into various noncancelable agreements for terms of one to six years,
for a total commitment of approximately $156,000.
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
Board of Directors
Scottsdale Scientific, Inc.
Scottsdale, Arizona 85258
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
consolidated balance sheet of Scottsdale Scientific, Inc. at December 31, 1998
and December 31, 1997, the related supplemental consolidated statement of
operations, stockholders' equity and cash flows for the years then ended, are
presented to give retroactive effect to the merger with Nutricology, Inc. on
February 22, 1998. We audited the financial statements of Nutricology, Inc. for
the year ended December 31, 1997. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Clancy and Co., P.L.LC.
Phoenix, Arizona
March 5, 1998
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
GIVING RETROACTIVE EFFECT TO THE MERGER
WITH NUTRICOLOGY, INC.
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 225,006 $ 129,018
Accounts Receivable, Net of Allowances for Doubtful
Accounts and Returns, $256,000 at December 31, 1998 1,049,079 901,507
Inventories (Note 3) 3,538,611 3,915,400
Notes Receivable 0 5,121
Refundable Income Tax Deposits 220,995 0
Prepaid Expenses and Other Current Assets 132,769 48,572
Deferred Tax Assets (Note 9) 135,000 0
--------- ----------
Total Current Assets 5,301,460 4,999,618
Property and Equipment, Net (Note 4) 942,558 325,355
Other Assets
Deposits 38,630 7,350
Due From Stockholder (Note 5) 123,602 116,724
Cash Surrender Value of Life Insurance (Note 6) 33,953 30,369
Other Receivables 0 12,183
Organization Costs, Net of Amortization of $635 and $476
at December 31, 1998 and 1997 2,540 3,175
--------- -------
Total Other Assets 198,725 169,801
--------- -------
Total Assets $ 6,442,743 $ 5,494,774
========= =========
The accompanying notes are an integral part of these financial statements.
F-22
</TABLE>
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
GIVING RETROACTIVE EFFECT TO THE MERGER
WITH NUTRICOLOGY, INC.
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 3,053,072 2,472,239
Line of Credit (Note 7) 533,005 0
Notes Payable, Current Portion (Note 8) 82,539 71,704
Income Taxes Payable (Note 9) 850 10,942
---------- ---------
Total Current Liabilities 3,669,466 2,554,885
Long-Term Liabilities
Notes Payable, Noncurrent Portion (Note 8) 208,822 6,273
--------- ---------
Total Liabilities 3,878,288 2,561,158
Commitments and Contingencies (Note 10)
Stockholders' Equity
Preferred Stock, $0.25 Par Value, Authorized 1,000,000
Shares, Issued and Outstanding, None 0 0
Common Stock, $0.001 Par Value, Authorized 100,000,000
Shares, Issued and Outstanding, 15,017,855 and
7,700,000 at December 31, 1998 and 1997 15,018 14,500
Additional Paid In Capital 4,126,154 2,416,842
Retained Earnings (A Deficit) (1,576,717) 502,274
--------- ---------
Total Stockholders' Equity 2,564,455 2,933,616
--------- ---------
Total Liabilities and Stockholders' Equity $ 6,442,743 $ 5,494,774
========= =========
The accompanying notes are an integral part of these financial statements.
F-23
</TABLE>
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GIVING RETROACTIVE EFFECT TO THE MERGER
WITH NUTRICOLOGY, INC.
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Revenues $ 13,450,758 $ 12,367,629
Cost of Sale 8,044,907 7,087,734
--------- ---------
Gross Profit 5,405,851 5,279,895
Operating Expenses
Selling, General and Administrative 5,681,056 4,665,348
Research and Development 930,592 34,017
---------- ---------
Total Operating Expenses 6,611,648 4,699,365
--------- ---------
Operating Loss (1,205,797) 580,530
Other Income (Expense)
Interest Income 2,119 1,864
Interest Expense (47,901) (40,249)
Loss on Disposal of Fixed Assets (9,432) 0
Other, Net 0 5,101
---------- --------
Total Other Income (Expense) (55,214) (33,284)
---------- --------
Net Loss Before Benefit For Income Taxes (1,261,011) 547,246
(Provision) Benefit For Income Taxes (Note 9) 134,150 (44,972)
---------- --------
Net Income (Loss) Available to Common
Stockholders $ (1,126,861) $ 502,274
========== =======
Net Loss Per Weighted Share of Common Stock $ (0.08) $ 0.17
===== =====
Weighted Shares Outstanding 13,617,386 2,875,000
========== =========
The accompanying notes are an integral part of these financial statements.
F-24
</TABLE>
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDER'S EQUITY GIVING
RETROACTIVE EFFECT TO THE MERGER WITH
NUTRICOLOGY, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock For Services
Rendered at $.001 Per Share as of April 8, 1997 0 $ 0 3,000,000 $ 3,000 0 $ 3,000
Issuance of Common Stock Under 504D Offering
Dated May 1, 1997 For Cash at $.25 Per Share 400,000 400 99,600 100,000
Issuance of Common Stock Under Private
Placement Memorandum Dated October 28,
1997 For Cash at $.10 Per Share 1,097,588 1,098 108,661 109,759
Issuance of Common Stock Under Private
Placement Memorandum Dated October 28,
1997 For Services Rendered at $.10 Per Share 3,202,412 3,202 317,039 320,241
Retained Earnings, December 31, 1996,
Nutricology, Inc. 1,898,342 1,898,342
Income, Year Ended December 31, 1997 -
Nutricology, Inc. 919,331 919,331
Loss From Inception (April 8, 1997) Through
December 31, 1997, Parent
(417,057) (417,057)
------ ------ --------- ------ ------- --------- ----------
Balance, December 31, 1997 0 0 7,700,000 7,700 525,300 2,400,616 2,933,616
Issuance of Common Stock in Exchange For
Acquisition of Nutricology, Inc., February 1998 6,800,000 6,800 2,810,873 (2,817,673) 0
Issuance of Common Stock Under Private 96,000 96 155,904 156,000
Placement Memorandum Dated April 15, 1998
For Cash at $1.625 Per Share
The accompanying notes are an integral part of these financial statements.
F-25
</TABLE>
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDER'S EQUITY GIVING
RETROACTIVE EFFECT TO THE MERGER WITH
NUTRICOLOGY, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Exercise of Warrants Under Private Placement 96,000 96 167,904 168,000
Memorandum Dated April 15, 1998 For Cash at
$1.75 Per Share
Issuance of Common Stock Under Private 46,855 46 148,953 148,999
Placement Memorandum Dated July 1, 1998
For Cash at $3.18 Per Share
Issuance of Common Stock Under Private 20,000 20 49,980 50,000
Placement Memorandum Dated July 24, 1998
For Cash at $2.50 Per Share
Exercise of Warrants Under Private Placement 20,000 20 39,980 40,000
Memorandum Dated July 24, 1998 For Cash at
$2.00 Per Share
Issuance of Common Stock For Services 61,500 62 122,938 123,000
Rendered at $2.00 Per Share, July 31, 1998
Less Issuance Costs (123,000) (123,000)
Issuance of Common Stock Under Private 50,000 50 99,950 100,000
Placement Memorandum Dated September 15,
1998 For Cash at $2.00 Per Share
Issuance of Common Stock Under Private 15,000 15 14,985 15,000
Placement Memorandum Dated October 13,
1998 For Cash at $1.00 Per Share
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDER'S EQUITY GIVING
RETROACTIVE EFFECT TO THE MERGER WITH
NUTRICOLOGY, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid In Earnings
Shares Amount Shares Amount Capital (A Deficit) Total
------ ------ ------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock Under Private 75,000 75 74,925
Placement Memorandum Dated October 13,
1998 For Cash at $1.00 Per Share 75,000
Exercise of Warrants Under Private Placement 37,500 38 37,462
Memorandum Dated October 13, 1998 For
Cash at $1.00 Per Share 37,500
Prior Period Adjustment-Settlement of Prior
Years Income Taxes (Note 9) (32,799) (32,799)
Loss, Year Ended December 31, 199 (1,126,861) (1,126,861)
------ ------ ---------- ------- ------- --------- ---------
Balance, December 31, 1998 0 $ 0 15,017,855 $15,018 $ 4,126,154 $(1,576,717) $ 2,564,455
====== ====== ========== ====== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
GIVING RETROACTIVE EFFECT TO THE MERGER
WITH NUTRICOLOGY, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (1,126,861) $ 502,274
Adjustments to Reconcile Net Loss to Net Cash Used In Operating
Activities
Common Stock Issued For Services 0 323,241
Settlement of Prior Years Income Taxes (32,799) 0
Depreciation and Amortization 131,997 44,195
Loss on Disposal of Fixed Assets 9,433 0
Cash Surrender Value Life Insurance (3,584) (30,369)
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (147,572) 103,072
(Increase) Decrease in Inventories 376,789 (1,855,926)
(Increase) Decrease in Notes Receivable 5,121 3,600
(Increase) Decrease in Income Tax Deposits (220,995) 113,312
(Increase) Decrease in Prepaid Expenses and Other Current Assets (84,197) (3,454)
(Increase) Decrease in Deferred Tax Assets (135,000) 195,625
(Increase) Decrease in Deposits (31,280) (7,350)
(Increase) Decrease in Organization Costs 0 (3,175)
(Increase) Decrease in Other Receivables 12,183 (12,183)
Increase (Decrease) in Accounts Payable and Accrued Liabilities 580,833 1,088,041
Increase (Decrease) in Income Taxes Payable (10,092) 10,942
--------- ----------
Total Adjustments 450,837 (30,429)
--------- ---------
Net Cash Used In Operating Activities (676,024) 471,845
Cash Flows From Investing Activities
Acquisition of Property and Equipment (757,998) (90,501)
Advances To Stockholder (6,878) (116,724)
--------- ----------
Net Cash Flows Used In Investing Activities (764,876) (207,225)
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-28
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
GIVING RETROACTIVE EFFECT TO THE MERGER
WITH NUTRICOLOGY, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Financing Activities
Cash Received for Common Shares in Connection with the
Nutricology Acquisition 16,500 237,873
Repayments To Stockholder 0 (143,810)
Proceeds From the Sale of Common Stock 790,499 209,759
Net Proceeds From Line of Credit 533,005 0
Proceeds on Long-term Debt 213,384 (439,424)
---------- --------
Net Cash Provided By Financing Activities 1,553,388 (135,602)
--------- --------
Increase in Cash and Cash Equivalents 112,488 129,018
Cash and Cash Equivalents, Beginning of Period 112,518 0
--------- -----------
Cash and Cash Equivalents, End of Period $ 225,006 $ 129,018
========== =======
Supplemental Information
- ------------------------
Cash Paid For:
Interest $ 47,901 $ 40,249
======= ========
Income taxes $ 115,000 $ 177,652
======= =======
Noncash Investing Activities:
On April 8, 1997, the Company Issued 3,000,000 Shares of
Common Stock for Services $ 0 $ 3,000
============ =======
Issuance of Common Stock Under Private Placement Memorandum
Dated October 28, 1997, for Services Rendered at $0.10 Per Share $ 0 $ 320,241
============ =======
Issuance of 6,800,000 Shares of Common Stock In Exchange for
100% of Business
Details of Acquisition:
Fair Value of Assets $ 5,378,831
Liabilities (2,561,158)
---------
Book Value of Company 2,817,673
Less Cash Acquired (16,500)
----------
Total Acquisition, Net of Cash Received $ 2,801,173
=========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-29
<PAGE>
TABLE OF CONTENTS
Consolidated Balance Sheet as of March 31, 1999 and
December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Operations for the Three Months
Ended March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . .
F-1
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 142,098 $ 225,006
Accounts Receivable, Net of Allowances for Doubtful
Accounts and Returns, $256,000 906,227 1,049,079
Inventories 2,920,465 3,538,611
Refundable Income Tax Deposits 220,995 220,995
Prepaid Expenses and Other Current Assets 117,137 132,769
Deferred Tax Assets 135,000 135,000
---------- ----------
Total Current Assets 4,441,922 5,301,460
Property and Equipment, Net 984,840 942,558
Other Assets
Deposits 39,530 38,630
Due From Stockholder 165,073 123,602
Cash Surrender Value of Life Insurance 33,953 33,953
Organization Costs, Net of Amortization of $793 and $635
March 31, 1999 and December 31, 1998 2,382 2,540
---------- ----------
Total Other Assets 240,938 198,725
---------- ----------
Total Assets $ 5,667,700 $ 6,442,743
========= =========
</TABLE>
F-2
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 2,555,969 $ 3,053,072
Line of Credit 783,005 533,005
Notes Payable, Current Portion 82,539 82,539
Income Taxes Payable 850 850
------------- -------------
Total Current Liabilities 3,422,363 3,669,466
Long-Term Liabilities
Notes Payable, Noncurrent Portion 188,815 208,822
------- ----------
Total Liabilities 3,611,178 3,878,288
Stockholders' Equity
Preferred Stock, $0.25 Par Value, Authorized 1,000,000
Shares, Issued and Outstanding, None 0 0
Common Stock, $0.001 Par Value, Authorized 100,000,000
Shares, Issued and Outstanding, 15,017,855 15,018 15,018
Additional Paid In Capital 4,126,154 4,126,154
Retained Earnings (A Deficit) (2,084,650) (1,576,717)
---------- ---------
Total Stockholders' Equity 2,056,522 2,564,455
---------- ---------
Total Liabilities and Stockholders' Equity $ 5,667,700 $ 6,442,743
========= =========
</TABLE>
F-3
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Revenues $ 3,324,913 $ 3,231,143
Cost of Sales 1,858,073 1,945,869
--------- ---------
Gross Profit 1,466,840 1,285,274
Operating Expenses
Selling, General and Administrative 1,662,782 1,017,700
Research and Development 293,434 173,771
---------- ----------
Total Operating Expenses 1,956,216 1,191,471
--------- ---------
Operating Loss (489,376) 93,803
Other Income (Expense)
Interest Income 274 54
Interest Expense (18,831) (8,550)
--------- ---------
Total Other Income (Expense) (18,557) (8,496)
--------- ---------
Net Income (Loss) Before Benefit For
Income Taxes (507,933) 85,307
Benefit For Income Taxes (Note 9) 0 0
------------- ------------
Net Loss Available to Common $ (507,933) $ 85,307
======== ---------
Stockholders
Basic (Income) Loss Per Common Share $ (0.03) $ 0.01
========= =========
Basic Weighted Average Common Shares
Outstanding 15,017,855 9,944,000
========== =========
</TABLE>
F-4
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ (507,933) $ 85,307
Adjustments to Reconcile Net Income (Loss) to Net
Cash Used In Operating Activities
Depreciation and Amortization 33,158 33,158
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 142,852 38,788
(Increase) Decrease in Inventories 618,146 642,806
(Increase) Decrease in Refundable Income Taxes 0 (155,500)
(Increase) Decrease in Prepaid Expenses and Other
Current Assets 15,632 (108,880)
(Increase) Decrease in Other Receivables 0 (5,219)
(Increase) Decrease in Deposits (900) (18,019)
Increase (Decrease) in Accounts Payable and
Accrued Liabilities (497,103) (823,789)
-------- --------
Total Adjustments 311,785 (396,655)
--------- --------
Net Cash Used In Operating Activities (196,148) (311,348)
Cash Flows From Investing Activities
Acquisition of Property and Equipment (75,283) (63,684)
Advances From (To) Stockholder (41,471) 400
--------- -----------
Net Cash Flows Used In Investing Activities (116,754) (63,284)
Cash Flows From Financing Activities
Net Borrowings on Line of Credit 250,000 487,454
Cash Received for Common Shares in Connection
with Acquisition of Sub 0 16,500
Payments on Long-term Debt (20,006) (4,827)
------- ---------
Net Cash Provided By Financing Activities 229,994 499,127
------- --------
</TABLE>
F-5
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents (82,908) 124,495
Cash and Cash Equivalents, Beginning of Period 225,006 112,518
------- -------
Cash and Cash Equivalents, End of Period $ 142,098 $ 237,013
======= =======
Supplemental Information
Cash Paid For:
Interest $ 18,831 $ 8,550
========== =========
Income taxes $ 0 $ 155,500
============== =======
Noncash Investing and Financing:
Issuance of 6,800,000 Shares of Common Stock In
Exchange for 100% of Business Details of Acquisition:
Fair Value of Assets $ 5,378,831
Liabilities (2,561,158)
---------
Book Value of Company 2,817,673
Less Cash Acquired (16,500)
----------
Total Acquisition, Net of Cash Received $ 2,801,173
=========
</TABLE>
F-6
<PAGE>
TABLE OF CONTENTS
Notes to the Consolidated Financial Statements . . . . . . . . . . F-1
Consolidated Balancesheet as of June 30, 1999 and
December 31, 1998 . . . .. . . . . . . . . . . . . . . F-2 - F-3
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1999 and 1998. . . . . . . . . . . . F-4 - F-5
Consolidated Statement of Operations for the Six Months
Ended June 30, 1999 and 1998 . . . . . . . . . . . . F-6 - F-7
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months period ended March 31,
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999. The unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-SB for the year
ended December 31, 1998.
F-1
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
(Unaudited)
June 30, December 31,
1999 1998
---- ----
ASSETS
Current Assets
Cash and Cash Equivalents $ 56,978 $ 225,006
Accounts Receivable, Net of Allowances for Doubtful
Accounts and Returns, $256,000 1,049,680 1,049,079
Inventories 2,275,953 3,538,611
Refundable Income Tax Deposits 0 220,995
Prepaid Expenses and Other Current Assets 122,256 132,769
Deferred Tax Assets 135,000 135,000
---------- ----------
Total Current Assets 3,639,867 5,301,460
Property and Equipment, Net 963,138 942,558
Other Assets
Deposits 39,530 38,630
Due From Stockholder 167,232 123,602
Cash Surrender Value of Life Insurance 33,953 33,953
Organization Costs, Net of Amortization of $953 and $635
June 30, 1999 and December 31, 1998 2,223 2,540
---------- ----------
Total Other Assets 242,938 198,725
---------- ----------
Total Assets $ 4,845,943 $ 6,442,743
========= ==========
</TABLE>
F-2
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
(Unaudited)
June 30, December 31,
1999 1998
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 1,791,565 $ 3,053,072
Line of Credit 758,005 533,005
Notes Payable, Current Portion 45,861 82,539
Income Taxes Payable 850 850
--------- ---------
Total Current Liabilities 2,596,281 3,669,466
Long-Term Liabilities
Notes Payable, Noncurrent Portion 211,690 208,822
--------- ----------
Total Liabilities 2,807,971 3,878,288
Stockholders' Equity
Preferred Stock, $0.25 Par Value, Authorized 1,000,000
Shares, Issued and Outstanding, None
0 0
Common Stock, $0.001 Par Value, Authorized 100,000,000
Shares, Issued and Outstanding, 15,017,855
15,018 15,018
Additional Paid In Capital 4,126,154 4,126,154
Retained Earnings (A Deficit) (2,103,200) (1,576,717)
---------- ----------
Total Stockholders' Equity 2,037,972 2,564,455
---------- ----------
Total Liabilities and Stockholders' Equity $ 4,845,943 $ 6,442,743
</TABLE>
F-3
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
Cash Flows From Operating Activities
Net Income (Loss) $ (526,483) $ (19,037)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Used In Operating Activities
Depreciation and Amortization 66,317 100,767
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (601) (22,208)
(Increase) Decrease in Inventories 1,262,658 742,805
(Increase) Decrease in Refundable Income Taxes 220,995 (155,500)
(Increase) Decrease in Prepaid Expenses and Other
Current Assets 10,513 (16,344)
(Increase) Decrease in Other Receivables 0 (5,869)
(Increase) Decrease in Deposits (900) (18,019)
Increase (Decrease) in Accounts Payable and Accrued
Liabilities (1,261,517) (1,057,676)
----------- ----------
Total Adjustments 297,465 (432,044)
----------- ----------
Net Cash Used In Operating Activities (229,018) (451,081)
Cash Flows From Investing Activities
Acquisition of Property and Equipment (86,580) (483,747)
Advances From (To) Stockholder (43,630) 400
-------- ---------
Net Cash Flows Used In Investing Activities (130,210) (483,347)
Cash Flows From Financing Activities
Net Borrowings on Line of Credit 225,000 766,224
</TABLE>
F-4
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
Advances, Other 0 48,850
Proceeds From the Sale of Common Stock 0 324,000
Cash Received for Common Shares in Connection with
Acquisition of Sub
0 16,500
Payments on Long-term Debt (33,810) (55,620)
-------- ----------
Net Cash Provided By Financing Activities 191,190 1,099,954
-------- ----------
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
Increase (Decrease) in Cash and Cash Equivalents (168,038) 165,526
Cash and Cash Equivalents, Beginning of Period 225,006 112,518
------- -------
Cash and Cash Equivalents, End of Period $ 56,978 $ 278,044
====== =======
Supplemental Information
- ------------------------
Cash Paid For:
Interest $ 34,331 $ 20,558
====== =======
Income taxes $ 0 $ 155,500
====== =======
Noncash Investing and Financing:
Issuance of 6,800,000 Shares of Common Stock In
Exchange for 100% of Business
Details of Acquisition:
Fair Value of Assets $ 5,378,831
Liabilities (2,561,158)
-----------
Book Value of Company 2,817,673
Less Cash Acquired (16,500)
-----------
Total Acquisition, Net of Cash Received $ 2,801,173
==========
</TABLE>
F-5
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
Revenues $ 6,554,401 $ 6,486,802
Cost of Sales 3,375,516 3,581,175
--------- ---------
Gross Profit 3,178,885 2,905,627
Operating Expenses
Selling, General and Administrative 3,136,741 2,529,942
Research and Development 546,172 374,244
--------- ---------
Total Operating Expenses 3,682,913 2,904,186
--------- ---------
Operating Income (Loss) (504,028) 1,441
Other Income (Expense)
Interest Income 11,876 80
Interest Expense (34,331) (20,558)
------ ------
Total Other Income (Expense) (22,455) (20,478)
------ ------
Net Income (Loss) Before Benefit For
Income Taxes (526,483) (19,037)
Benefit For Income Taxes (Note 9)
Net Loss Available to Common $ (526,483) $ (19,037)
======== ======
Stockholders
</TABLE>
F-6
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Basic Loss Per Common Share $ (0.04) $ (0.02)
====== ======
Basic Weighted Average Common Shares
Outstanding 15,017,855 9,998,667
========== =========
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
PART III
INDEX TO EXHIBITS
Page
<S> <C> <C>
Exhibit 2 Agreement of Purchase and Sale of Shares with NutriCology, Inc. E-1
Exhibit 3
Exhibit 3a Articles of Incorporation and Amendments E-7
Exhibit 3b Bylaws E-15
Exhibit 9 Voting Trust Agreement E-24
Exhibit 23 Consent of Independent Auditor E-34
Exhibit 27 Financial Data Schedule E-35
Exhibit 99
Exhibit 99a Management Agreement E-36
Exhibit 99b 504 Private Placement Memorandum dated May 1, 1997 E-40
Exhibit 99c 504 Private Placement Memorandum dated October 28, 1997 E-61
Exhibit 99d 504 Private Placement Memorandum dated April 15, 1998 E-81
Exhibit 99e 504 Private Placement Memorandum dated July 1, 1998 E-103
Exhibit 99f 504 Private Placement Memorandum dated July 24, 1998 E-122
Exhibit 99g 504 Private Placement Memorandum dated September 15, 1998 E-144
Exhibit 99h 504 Private Placement Memorandum dated October 13, 1998 E-165
(75,000 shares and 75,000 warrants)
Exhibit 99i 504 Private Placement Memorandum dated October 13, 1998 E-186
(15,000 shares of Common Stock)
</TABLE>
SIGNATURES
The issuer has duly caused this offering statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hayward,
State of California, on August 2, 1999.
22
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
By /s/ Marianne Sum
-------------------
Marianne Sum, President
This offering statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Stephen Levine
- ------------------
Stephen Levine, Chairman 8/2/99
/s/ Marianne Sum
- ----------------
Marianne Sum, President, CEO and Director 8/2/99
/s/ Ricki Pollycove
- -------------------
Ricki Pollycove, Director 8/2/99
23
<PAGE>
AGREEMENT OF PURCHASE AND SALE OF SHARES
This agreement of purchase and sale is made in two original copies
between:
SUSAN AND STEPHEN LEVINE (the "Vendor")
and
SCOTTSDALE SCIENTIFIC, INC. (the "Purchaser")
Whereas the Vendor owns all of the issued shares of
NUTRICOLOGY, INC. (the "Corporation")
IT IS AGREED AS FOLLOWS:
1.01 SUBJECT MATTER
The Purchaser agrees to buy and the Vendor agrees to sell to the Purchaser
all of the shares owned by the Vendor in the Corporation (the "Shares").
2.01 PURCHASE PRICE
The purchase price payable for all the Shares shall be 9,800,000 common
shares of Scottsdale Scientific, Inc. It is understood and agreed that the
purchase price of the Shares is based on the financial position of the
Corporation shown in the balance sheet produced by the Vendor for the
Corporation and appended as Schedule A.
3.01 TERMS OF PAYMENT
The Vendor acknowledges receiving 9,800,000 common shares of Scottsdale
Scientific, Inc., representing 67.6% of the total issued and outstanding shares
of Scottsdale Scientific, Inc., from the Purchaser on execution of this
agreement.
4.01 CONDITIONS, REPRESENTATIONS, AND WARRANTIES
In addition to anything else in this agreement, the following are
conditions of completing this agreement in favor of the Purchaser:
(a) that the Vendor owns all the issued shares of the Corporation;
(b) that the Shares are fully paid-up and non-assessable;
(c) that no agreement or option exists pursuant to which the Corporation is
or may be obliged to issue further shares of its authorized capital;
(d) that the Shares are sold free and clear of all liens, encumbrances, and
charges;
(e) that any consent required for the transfer of the Shares in accordance
with the Purchaser's direction is given;
(f) that the Corporation is duly incorporated, validly subsisting, and in
good standing under the laws of its jurisdiction of incorporation;
<PAGE>
(g) that the Corporation is not party to any collective agreement with a
labor union;
(h) that the Vendor give the Purchaser and all duly authorized
representatives of the Purchaser full and complete access during normal business
hours to the business premises and corporate, business, accounting, tax, and
employment records of the Corporation for the purpose of investigating the
business and affairs of the Corporation;
(i) that the Vendor supply or deliver on closing all of the closing
documents.
4.02 CONFIDENTIALITY
The Purchaser agrees that, unless and until the purchase of the Shares
contemplated in this agreement is completed, the Purchaser shall keep
confidential all information obtained by the Purchaser from the Vendor or the
Corporation about the Vendor and the business and affairs of the Corporation.
4.03 REPRESENTATIONS AND WARRANTIES OF VENDOR
The following representations and warranties are made and given by the
Vendor to the Purchaser and expressly survive the closing of this agreement. The
representations are true as of the date of this agreement and will be true as of
the date of closing when they shall continue as warranties according to their
terms:
(a) the Articles of Incorporation and all amendments to the Articles of
Incorporation of the Corporation are as stated in Schedule B;
(b) the issued share capital of the Corporation is as stated in Schedule C;
(c) the balance sheet appended in Schedule A and the financial statements
for the last three complete fiscal years of the Corporation produced by the
Vendor appended in Schedule D have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis and are fair and
accurate;
(d) the Corporation owns the assets recorded in the balance sheet appended
in Schedule A free and clear of liens, charges, and encumbrances except as noted
in Schedule E;
(e) the Corporation has properly reported and is not in arrears of payment
of any direct or indirect taxes or of any employee -related statutory deductions
or remittances;
(f) the corporate, business, accounting, tax, and employment records of the
Corporation are complete in all material respects;
(g) the business of the Corporation will not be adversely affected in any
material respect in any way, whether by the Vendor or by any other person or
cause whatsoever, up to the closing and the Vendor will not do anything before
or after closing to prejudice the goodwill of the Corporation;
(h) the Corporation will carry on business as usual until closing except
that it will not declare any dividends or make any other distributions of
capital or retained earnings or undertake or compromise any major contractual
liabilities without the express written consent of the Purchaser;
<PAGE>
(i) there are no outstanding legal actions or judgments against the
Corporation and the Corporation is not in default of any agreement to which the
Corporation is a party and all such agreements are in good standing and the
Corporation is entitled to all stated benefits in such agreements;
(j) the Vendor has made full and fair disclosure in all material respects
of any matter that could reasonably be expected to affect the Purchaser's
decision to purchase the shares on the terms set out in this agreement;
(k) the Vendor will execute such assignments, consents, clearances, or
assurances after closing, prepared at the Purchaser's expense, as the Purchaser
considers necessary or desirable to assure the Purchaser of the proper and
effective completion of this agreement.
4.04 REPRESENTATIONS AND WARRANTIES OF PURCHASER
The following warranty is made and given by the Purchaser to the Vendor in
consideration of the closing of this agreement:
(a) the Purchaser will indemnify and save the Vendor harmless from claims
on any outstanding personal guarantees given by the Vendor for the contractual
obligations of the Corporation;
(b) Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with all
requisite power and authority to own, lease, license, and use its properties and
assets and to carry on the business in which it is now engaged and in which it
contemplates engaging;
(c) the shares of Purchaser Common Stock to be delivered to the Vendor
pursuant to this Agreement, when issued in accordance with the terms and
provisions of this Agreement, will be validly authorized, validly issued, fully
paid, and non-assessable.
(d) the Purchaser has all the requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate proceedings of the
Purchaser have been duly taken to authorize the execution, delivery, and
performance of this Agreement by the Purchaser. This Agreement has been duly
authorized, executed, and delivered by the Purchaser, is the legal, valid, and
binding obligation of the Purchaser, and is enforceable as to them in accordance
with its terms;
(e) the Purchaser is acquiring the Nutricology' s Common Stock for its own
account (and not for the account of others) for investment and not with a view
to the distribution thereof. The Purchaser will not sell or otherwise dispose of
such shares (whether pursuant to a liquidating dividend or otherwise) without
registration under the Securities Act or an exemption therefrom, and the
certificate or certificates representing such shares may contain a legend to the
foregoing effect.
(f) the Purchaser (Scottsdale Scientific, Inc.) further warrants that it is
in compliance with all Federal law considerations of Section 5 of the Securities
Act of 1933, unless a specific exemption is available, and that the requirements
of that exemption are complied with.
<PAGE>
(g) the Purchaser further warrants that all SEC regulatory provisions set
forth in Rule 145 of the Securities Act of 1933 have been complied with, if
applicable.
(h) the Purchaser further warrants that all reorganization transactions
that require shareholder approval, and involve the issuance or exchange of stock
or other securities, comply with the applicable California Corporations Code
concerning corporate securities.
(i) the Purchaser further warrants that it has complied with all 'Blue Sky'
regulations or any exemptions thereof, and registered said compliance or
exemption with the proper authorities in the Department of Corporations, State
of California.
(j) Purchaser further warrants that it has obtained under California
Corporate Securities Law (11CSL11) a proper permit, issued by California
Department of Corporations or is in the process of applying for such a permit
(referred to as a "qualification") or pursuant to a specific exemption from such
qualification requirement that is provided by the CSL or by a ruling by the
commissioner of the California Commission of Corporations (CSL ss.25140).
(k) Purchaser further warrants that it has complied with CSL ss.25110,
which requires that a permit be obtained from the Department of Corporations to
offer or sell any security in California in an "issuer transaction" (which
includes share exchanges in business combination transactions), and CSL
ss.25120, which prohibits the offer or sale of securities "in an issuer
transaction in connection with any ... merger or consolidation ..." or any
changes in the "rights, preferences, privileges, or restrictions of or on any
outstanding securities", unless such a permit is obtained, or Purchaser is
exempt under CSL ss.25103(h) (Limited Offering Exemption for Mergers and
Corporate Asset Sales) .
5.01 RESIGNATIONS
Subsequent to the signing of the closing documents of this Agreement, a
Special Meeting of the Board of Directors will be called at which time the
resignations of four of the five man Board of Directors of Scottsdale
Scientific, Inc. will be accepted and Vendor will appoint four interim Directors
to serve on the five member board until new Director elections at the next
annual Shareholder's meeting of Scottsdale Scientific, Inc.
5.02 NON-COMPETITION
The Vendor covenants with the Purchaser that, in consideration of the
closing of this agreement, the Vendor will not operate a wholesale/retail
nutritional supplement business or in any way aid or assist any other person to
operate such a business in the City of San Francisco for a period of two years
from the date of closing.
<PAGE>
6.01 CLOSING DOCUMENTS
The Vendor shall deliver to the Purchaser, in registrable form where
applicable, the following closing documents (the "Closing Documents"), prepared
or obtained at the Vendor's expense on or before closing:
(a) certificates of the Shares duly assigned in accordance with the
direction of the Purchaser together with satisfactory proof of the giving of any
consent required for the assignment;
(b) all the corporate, business, accounting, tax, and employment records
for the Corporation;
(c) such other assignments, consents, clearances, or assurances as the
Purchaser reasonably considers necessary or desirable to assure the Purchaser of
the proper and effective completion of this agreement.
7.01 CLOSING DATE
The purchase and sale in this agreement shall close on
_______________________, 1998.
8.01 NUMBER AND GENDER
In this agreement, the singular includes the plural and the masculine
includes the feminine and neuter and vice versa unless the context otherwise
requires.
8.02 HEADINGS
The capitalized headings in this agreement are only for convenience of
reference and do not form part of or affect the interpretation of this
agreement.
8.03 SEVERABILITY
If any provision or part of any provision in this agreement is void for any
reason, it shall be severed without affecting the validity of the balance of
this agreement.
8.04 EFFECT OF WAIVER
The failure of any party at any time or times to require performance of a
provision of the Agreement will in no manner affect the right to enforce the
same. The waiver by any party of any breach of any provision of the Agreement
will not be construed to be a waiver by any such party of any breach of any
other provision.
8.05 TIME IS OF THE ESSENCE
Time is of the essence of this agreement.
8.06 COMPLETE AGREEMENT
There are no representations, warranties, conditions, terms, or collateral
contracts affecting the transaction contemplated in this agreement except as set
out in this agreement.
<PAGE>
8.07 MODIFICATION
This Agreement may not be modified, amended, altered, or supplemented
except upon the execution and delivery of a written agreement by each of the
parties.
8.08 BINDING NATURE
This agreement binds and benefits the parties and their respective heirs,
executors, administrators, personal representatives, successors, and assigns.
8.09 GOVERNING LAW
This agreement is governed by the laws of the State of California.
9.01 ACCEPTANCE
This agreement executed on behalf of the purchaser constitutes an offer to
purchase which can only be accepted by the Vendor by return of at least one
originally accepted copy of agreement to the Purchaser on or before
_____________________, 1998, failing which the offer becomes null and void.
DATED: February 3, 1998 /s/ Stephen Levine
---------------- -------------------
Dr. Stephen Levine
Authorized Signator by and for
Nutricology, Inc. as both an
Officer and Director
DATED: February 2, 1998 /s/ Harmel S. Rayat
---------------- -------------------
Mr. Harmel S. Rayat
Authorized Signator by and for
Scottsdale Scientific, Inc. as
both an Officer and Director
<PAGE>
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
April 8, 1997
SCOTTSDALE SCIENTIFIC, INC.
300 PARK AVE, 17TH FL
NEW YORK, NY 10022
The Articles of Incorporation for SCOTTSDALE SCIENTIFIC, INC. were filed on
April 8, 1997, effective April 7, 1997, and assigned document number
P97000031623. Please refer to this number whenever corresponding with this
office.
Enclosed is the certification requested. To be official, the certification for a
certified copy must be attached to the original document that was electronically
submitted and filed under FAX audit number H97000005650.
A corporation annual report will be due this office between January 1 and May 1
of the year following the calendar year of the file date year. A Federal
Employer Identification (FEI) number will be required before this report can be
filed. Please apply NOW with the Internal Revenue Service by calling
1-600-629-3576 and requesting form SS-4.
Please be aware if the corporate address changes, it is the responsibility of
the corporation to notify this office.
Should you have questions regarding corporations, please contact this office at
the address given below.
Beth Register
Corporate Specialist Supervisor
New Filings Section
Division of Corporations Letter Number: 897AO0017554
Division of Corporations - P.O. BOX 6327 - Tallahassee, Florida 32314
<PAGE>
ARTICLES OF INCORPORATION
Article I. Name
The name of this Florida corporation is:
Scottsdale Scientific, Inc.
Article 11. Address
The mailing address of the Corporation is:
Scottsdale Scientific, Inc.
300 Park Avenue, 17th Floor
New York NY 10022
Article III. Registered Agent
The name and address of the registered agent of the Corporation is:
Corporate Creations Enterprises, Inc.
4521 PGA Boulevard #211
Palm Beach Gardens FL 33418
Article IV. Board of Directors
The name of each member of the Corporation's Board of Directors is:
Ken H. Finkelstein
The affairs of the Corporation shall be managed by a Board of Directors
consisting of no less than one director. The number of directors may be
increased or decreased from time to time in accordance with the Bylaws of the
Corporation. The election of directors shall be done in accordance with the
Bylaws. The directors shall be protected from personal liability to the fullest
extent permitted by applicable law.
<PAGE>
Article V. Capital Stock
The Corporation shall have the authority to issue 100,000,000 shares of common
stock, par value $.001 per share.
Article VI. Incorporator
The name and address of the incorporator is:
Corporate Creations International Inc.
401 Ocean Drive #312 (Door Code 125)
Miami Beach FL 33139-6629
Article VII. Corporate Existence
The corporate existence of the Corporation shall begin effective April 7, 1997
The undersigned incorporator executed these Articles of Incorporation on April
7, 1997
Corporate Creations International Inc.
By: /s/ Brian R. Fons
------------------
Brian R. Fons Vice President
<PAGE>
CERTIFICATE OF DESIGNATION
REGISTERED AGENT/OFFICE
CORPORATION:
Scottsdale Scientific, Inc.
REGISTERED AGENT/OFFICE: .
Corporate Creations Enterprises, Inc.
4521 PGA Boulevard #211
Palm Beach Gardens FL 33418
I, agree to act as registered agent to accept service of process for the
corporation named above at the place designated in this Certificate. I agree to
comply with the provisions of all statutes relating to the proper and complete
performance of the registered agent duties. I am familiar with and accept the
obligations of the registered agent position.
/s/ Brian R. Fons
- ------------------
Corporate Creations Enterprises, Inc.
Brian R. Fons, Vice President
Date: April 7, 1997
<PAGE>
ARTICLES OF INCORPORATION
OF
NUTRI-COLOGY, INC.
1. The name of the corporation is NUTRI-COLOGY, INC.
2. The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may organized under the General Corporation Law
of California, other than the banking business or the practice of a profession
permitted to be incorporated by the California Corporations Code.
3. The number of the Directors of the corporation shall be two.
4. The names and addresses of the persons appointed to act as
initial Directors are:
STEVEN LEVINE MICHAEL ROSENBAUM
2095 Jackson St., #203 327 Deertrail Lane
San Francisco, CA Mill Valley, CA
5. The name and address in the State of California of the corporation's
initial agent for service of process is:
STEVEN LEVINE
2095 Jackson St., #203
San Francisco, CA
<PAGE>
6. The corporation is authorized to issue only one class of shares
having a total number of twenty-five thousand.
7. The corporation's issued shares shall be held of record by not more
than ten persons. This corporation is a close corporation.
8. No distinction shall exist between the shares of the corporation or
the holders thereof.
IN WITNESS WHEREOF, the undersigned who are the incorporators and the
above named initial Directors of this corporation have executed these Articles
of Incorporation on March 11, 1980.
/s/ Steven A. Levine
--------------------
STEVEN LEVINE
/s/ Michael Rosenbaum, M.D.
---------------------------
MICHAEL ROSENBAUM
<PAGE>
ACKNOWLEDGMENT
We, and each of us, declare:
1. We are the persons whose names are subscribed below.
2. We collectively are all of the incorporators of NUTRI-COLOGY,
INC. and all of the initial directors named in the foregoing
Articles of Incorporation and we have executed these Articles
of Incorporation.
3. The foregoing Articles of Incorporation are our act and deed,
jointly and severally.
Executed on March 11, 1980 at Mill Valley, California
/s/ Steven A. Levine
--------------------
STEVEN LEVINE
/s/ Michael Rosenbaum, M.D.
---------------------------
MICHAEL ROSENBAUM
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
STEPHEN LEVINE and SUSAN LEVINE certify that
1. They are the President and Secretary, respectively, of
NUTRI-COLOGY, INC., a California corporation.
2. Article 3 of the Articles of Incorporation of this Corporation
is amended to read as follows:
"3. The number of Directors of the Corporation shall be three."
3. The foregoing amendment of Articles of Incorporation has been
duly approved by the Board of Directors.
The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the Corporations Code. The total number of outstanding shares of the Corporation
is 4,000. The number of shares voting in favor of the amendment equalled or
exceeded. the vote required. The percentage vote required was more than 50%.
/s/ Stephen A. Levine, Ph.D.
----------------------------
STEPHEN LEVINE, President
/s/ Susan Levine, Secretary
----------------------------
SUSAN LEVINE, Secretary
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing certificate are true of their own knowledge.
Executed at 2784 Union St., SF., CA, 94123 on July 31, 1981.
/s/ Stephen A. Levine, Ph.D.
----------------------------
STEPHEN LEVINE, President
/s/ Susan Levine, Secretary
----------------------------
SUSAN LEVINE, Secretary
<PAGE>
Bylaws
of
Scottsdale Scientific, Inc.
ARTICLE I. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under the
authority of the Board of D 4 rectors. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
Directors must be natural persons who are at least 18 years of age but need not
be shareholders of the Corporation. Residents of any state may be directors.
Section 2. Compensation. The shareholders shall have authority to fix the
compensation of directors. Unless specifically authorized by a resolution of the
shareholders, the directors shall serve in such capacity without compensation.
Section 3. Presumption of Assent. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
arriving) to the holding of the meeting or transacting the specified business at
the meeting, or if the director votes against the action taken or abstains from
voting because of an asserted conflict of interest.
Section 4. Number. The Corporation shall have at least the minimum number of
directors required by law. The number of directors may be increased or decreased
from time to time by the Board of Directors.
Section 5. Election and Term. At each annual meeting of shareholders, the
shareholders shall elect directors to hold office until the next annual meeting
or until their earlier resignation, removal from office or death. Directors
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors, including
a vacancy created by an increase in the number of directors, may be filled by
the shareholders or by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders. If there are no remaining directors, the vacancy
shall be filled by the shareholders.
<PAGE>
Section 7. Removal of Directors. At a meeting of shareholders, any director or
the entire Board of Directors may be removed, with or without cause, provided
the notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast against removal.
Section 8. Quorum and Voting. A majority of the number of directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The act
of a majority of directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 9. Executive and Other Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more committees each of which must have at least two members.
Each committee shall have the authority set forth in the resolution designating
the committee.
Section 10. Place of Meeting. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the Corporation or
at another place designated by the person or persons giving notice or otherwise
calling the meeting.
Section 11. Time, Notice and Call of Meetings. Regular meetings of the Board of
Directors shall be held without notice at the time and on the date designated by
resolution of the Board of Directors. Written notice of the time, date and place
of special meetings of the Board of Directors shall be given to each director by
mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to a
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting constitutes a waiver of notice of that
meeting and waiver of all objections to the place of the meeting, the time of
the meeting, and the manner in which it has been called or convened, unless a
director objects to the transaction of business (promptly upon arrival at the
meeting) because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors must be specified in the notice or waiver of notice of
the meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of an adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place
<PAGE>
of the adjourned meeting are announced at the time of the adjournment, to the
other directors. Meetings of the Board of Directors may be called by the
President or the Chairman of the Board of Directors. Members of the Board of
Directors and any committee of the Board may participate in a meeting by
telephone conference or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
by these means constitutes presence in person at a meeting.
Section 12. Action By Written Consent. Any action required or permitted to be
taken at a meeting of directors may be taken without a meeting if a consent in
writing setting forth the action to be taken and signed by all of the directors
is filed in the minutes of the proceedings of the Board. The action taken shall
be deemed effective when the last director signs the consent, unless the consent
specifies otherwise.
ARTICLE II. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of officers and for such other business as may
properly come before the meeting shall be held at such time and place as
designated by the Board of Directors.
Section 2. Special Meeting. Special meetings of the shareholders shall be held
when directed by the President or when requested in writing by shareholders
holding at least 10% of the Corporation's stock having the right and entitled to
vote at such meeting. A meeting requested by shareholders shall be called by the
President for a date not less than 10 nor more than 60 days after the request is
made. only business within the purposes described in the meeting notice may be
conducted at a special shareholders' meeting.
Section 3. Place. Meetings of the shareholders will be held at the principal
place of business of the Corporation or at such other place as is designated by
the Board of Directors.
Section 4. Notice . A written notice of each meeting of shareholders shall be
mailed to each shareholder having the right and entitled to vote at the meeting
at the address as it appears on the records of the Corporation. The meeting
notice shall be mailed not less than 10 nor more than 60 days before the date
set for the meeting. The record date for determining shareholders entitled to
vote at the meeting will be the close of business on the day before the notice
is sent. The notice shall state the time and place the meeting is to be held. A
notice of a special meeting shall also state the purposes of the meeting. A
notice of meeting shall be sufficient for that meeting and any adjournment of
it. If a shareholder transfers any shares after the notice is sent, it shall not
be necessary to notify the transferee. All shareholders may waive notice
<PAGE>
of a meeting at any time.
Section 5. Shareholder Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is obtained.
Section 6. Shareholder voting. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. An alphabetical list of all shareholders who are entitled to
notice of a shareholders, meeting along with their addresses and the number of
shares held by each shall be produced at a shareholders, meeting upon the
request of any shareholder.
Section 7. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
officer or agent authorized to tabulate votes. No proxy shall be valid more than
11 months after the date of its execution unless a longer term is expressly
stated in the proxy.
Section 8. Validation. If shareholders who hold a majority of the voting stock
entitled to vote at a meeting are present at the meeting, and sign a written
consent to the meeting on the record, the acts of the meeting shall be valid,
even if the meeting was not legally called and noticed.
Section 9. Conduct of Business By Written Consent. Any action of the
shareholders may be taken without a meeting if written consents, setting forth
the action taken, are signed by at least a majority of shares entitled to vote
and are delivered to the officer or agent of the Corporation having custody of
the Corporation's records within 60 days after the date that the earliest
written consent was delivered. Within 10 days after obtaining an authorization
of an action by written consent, notice shall be given to those shareholders who
have not consented in writing or who are not entitled to vote on the action. The
notice shall fairly summarize the material features of the authorized action. If
the action creates dissenters' rights, the notice shall contain a clear
statement of the right of dissenting shareholders to be paid the fair value of
their shares upon compliance with and as provided for by the state law governing
corporations.
ARTICLE III. OFFICERS
Section 1. Officers; Election; Resignation; Vacancies. The
<PAGE>
Corporation shall have the officers and assistant officers that the Board of
Directors appoint from time to time. Except as otherwise provided in an
employment agreement which the Corporation has with an officer, each officer
shall serve until a successor is chosen by the directors at a regular or special
meeting of the directors or until removed. officers and agents shall be chosen,
serve for the terms, and have the duties determined by the directors. A person
may hold two or more offices.
Any officer may resign at any time upon written notice to the Corporation. The
resignation shall be effective upon receipt, unless the notice specifies a later
date. If the resignation is effective at a later date and the Corporation
accepts the future effective date, the Board of Directors may fill the pending
vacancy before the effective date provided the successor officer does not take
office until the future effective date. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 2. Powers and Duties of Officers. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as may be
prescribed by the Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
Section 3. Removal of Officers. An officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed by the Board with
or without cause whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer, agent or member of a committee shall not of itself create contract
rights. Any officer, if appointed by another officer, may be removed by that
officer.
Section 4. Salaries. The Board of Directors may cause the Corporation to enter
into employment agreements with any officer of the Corporation. Unless provided
for in an employment agreement between the Corporation and an officer, all
officers of the Corporation serve in their capacities without compensation.
Section 5. Bank Accounts. The Corporation shall have accounts with financial
institutions as determined by the Board of Directors.
ARTICLE IV. DISTRIBUTIONS
The Board of Directors may, from time to time, declare
<PAGE>
distributions to its shareholders in cash, property, or its own shares, unless
the distribution would cause (i) the Corporation to be unable to pay its debts
as they become due in the usual course of business, or (ii) the Corporation's
assets to be less than its liabilities plus the amount necessary, if the
Corporation were dissolved at the time of the distribution, to satisfy the
preferential rights of shareholders whose rights are superior to those receiving
the distribution. The shareholders and the Corporation may enter into an
agreement requiring the distribution of corporate profits, subject to the
provisions of law.
ARTICLE V. CORPORATE RECORDS
Section 1. Corporate Records. The corporation shall maintain its records in
written form or in another form capable of conversion into written form within a
reasonable time. The Corporation shall keep as permanent records minutes of all
meetings of its shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors on behalf of the
Corporation. The Corporation shall maintain accurate accounting records and a
record of its shareholders in a form that permits preparation of a list of the
names and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
The Corporation shall keep a copy of its articles or restated articles
of incorporation and all amendments to them currently in effect; these Bylaws or
restated Bylaws and all amendments currently in effect; resolutions adopted by
the Board of Directors creating one or more classes or series of shares and
fixing their relative rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding; the minutes of all shareholders'
meetings and records of all actions taken by shareholders without a meeting for
the past three years; written communications to all shareholders generally or
all shareholders of a class of series within the past three years, including the
financial statements furnished for the last three years; a list of names and
business street addresses of its current directors and officers; and its most
recent annual report delivered to the Department of State.
Section 2. Shareholders, Inspection Rights. A shareholder is entitled to inspect
and copy, during regular business hours at a reasonable location specified by
the Corporation, any books and records of the Corporation. The shareholder must
give the Corporation written notice of this demand at least five business days
before the date on which he wishes to inspect and copy the record(s) . The
demand must be made in good faith and for a proper purpose. The shareholder must
describe with reasonable particularity the purpose and the records he
<PAGE>
desires to inspect, and the records must be directly connected with this
purpose. This Section does not affect the right of a shareholder to inspect and
copy the shareholders' list described in this Article if the shareholder is in
litigation with the Corporation. in such a case, the shareholder shall have the
same rights as any other litigant to compel the production of corporate records
for examination.
The Corporation may deny any demand for inspection if the demand was
made for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders of
the Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of this
Corporation or any other corporation.
Section 3 Financial Statements for Shareholders. Unless modified by resolution
of the shareholders within 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders with annual financial statements
which may be consolidated or combined statements of the Corporation and one or
more of its subsidiaries, as appropriate, that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flows for that year. If financial statements are prepared for the
Corporation on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the President or the person responsible for the
Corporation's accounting records stating his reasonable belief whether the
statements were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation and describing any
respects in which the statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding year. The Corporation
shall mail the annual financial statements to each shareholder within 120 days
after the close of each fiscal year or within such additional time thereafter as
is reasonably necessary to enable the Corporation to prepare its financial
statements. Thereafter, on written request from a shareholder who was not mailed
the statements, the Corporation shall mail him the latest annual financial
statements.
Section 4. Other Reports to Shareholders. If the Corporation indemnifies or
advances expenses to any director, officer, employee or agent otherwise than by
court order or action by
<PAGE>
the shareholders or by an insurance carrier pursuant to insurance maintained by
the Corporation, the Corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next annual
shareholders' meeting, or prior to the meeting if the indemnification or advance
occurs after the giving of the notice but prior to the time the annual meeting
is held. This report shall include a statement specifying the persons paid, the
amounts paid, and the nature and status at the time of such payment of the
litigation or threatened litigation.
If the Corporation issues or authorizes the issuance of shares for
promises to render services in the future, the Corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
ARTICLE VI. STOCK CERTIFICATES
Section 1. Issuance. The Board of Directors may authorize the issuance of some
or all of the shares of any or all of its classes or series without
certificates. Each certificate issued shall be signed by the President and the
Secretary (or the Treasurer). The rights and obligations of shareholders are
identical whether or not their shares are represented by certificates.
Section 2. Registered Shareholders. No certificate shall be issued for any share
until the share is fully paid. The Corporation shall be entitled to treat the
holder of record of shares as the holder in fact and, except as otherwise
provided by law, shall not be bound to recognize any equitable or other claim to
or interest in the shares.
Section 3. Transfer of Shares. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation of the share certificates
duly endorsed by the holder of record or attorney-in-fact. If the surrendered
certificates are canceled, new certificates shall be issued to the person
entitled to them, and the transaction recorded on the books of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. If a shareholder claims to
have lost or destroyed a certificate of shares issued by the Corporation, a new
certificate shall be issued upon the delivery to the Corporation of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity as the Board reasonably requires.
ARTICLE VII. INDEMNIFICATION
<PAGE>
Section I. Right to Indemnification. The Corporation hereby indemnifies each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the
fullest-extent permitted or authorized by current or future legislation or
judicial or administrative decision against all fines, liabilities, costs and
expenses, including attorneys' fees, arising out of his or her status as a
director, officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses, whether or not the Corporation would have the
legal power to indemnify them directly against such liability.
Section 2. Advances. Costs, charges and expenses (including attorneys, fees)
incurred by a person referred to in Section 1 of this Article in defending a
civil or criminal proceeding shall be paid by the Corporation in advance of the
final disposition thereof upon receipt of an undertaking to repay all amounts
advanced if it is ultimately determined that the person is not entitled to be
indemnified by the Corporation as authorized by this Article, and upon
satisfaction of other conditions required by current or future legislation.
Section 3. Savings Clause. If this Article or any portion of it is invalidated
on any ground by a court of competent jurisdiction, the Corporation nevertheless
indemnifies each person described in Section 1 of this Article to the fullest
extent permitted by all portions of this Article that have not been invalidated
and to the fullest extent permitted by law.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws
adopted, by a majority vote of the directors or by a vote of the shareholders
holding a majority of the shares.
I certify that these are the Bylaw adopted by the Board of Directors of
the Corporation.
/s/
----------------------
Secretary
Date: May 1, 1997
-----------------
<PAGE>
VOTING TRUST AGREEMENT
This agreement is made this 9th day of February, 1999, among Stephen E.
Levine as Beneficiary and Marianne Sum as Trustee.
Whereas, Marianne Sum is the owner of 100,000 options for shares of
stock of Scottsdale Scientific, Inc., a Florida corporation, and the person who
signs this agreement as Beneficiary owns shares of the stock of Scottsdale
Scientific, Inc. in the number set forth opposite his signature to this
agreement.
Now, therefore, the Trustee and Beneficiary hereby enter into this
Agreement and Declaration of Trust for the purpose of insuring stability and
continuity in the management and control of the affairs of Scottsdale
Scientific, Inc. (the "Corporation") as follows:
ss. 1.1 Definitions. Unless otherwise stated in the agreement:
"Stock" or "Shares" refers to all voting stock of Scottsdale
Scientific, Inc., and includes all shares or other securities that may at any
time be exchanged for shares of the common stock of the Corporation pursuant to
a merger, consolidation or other reorganization.
"Corporation" refers to Scottsdale Scientific, Inc., and shall include
any and all successors to all or substantially all of the assets and business of
Scottsdale Scientific, Inc..
"Beneficiary: means those persons with the rights and duties of a
Beneficiary described herein.
"Trustee" means the persons with the rights and duties of the "Trustee"
described herein.
"Voting Trust Certificate" means the document given by the Trustee to
the Beneficiary to evidence deposit of stock with the Trustee by the
Beneficiary.
"Majority of Beneficiary" means the Beneficiary holding Voting Trust
Certificates representing a majority of the voting power of the stock deposited
with the Trustee pursuant to this agreement.
"Parties to this agreement" means any party hereto or his successor in
interest.
ss. 1.2 Creation and Termination of the Trust. The effective date of
this Agreement is February 1, 1999 and the agreement shall be irrevocable until
January 31, 2000.
At any time within thirty (30) days prior to the time of expiration of
the agreement as originally fixed or last extended, the Trustee under the voting
trust agreement may, by written
1
<PAGE>
agreement and with the written consent of the Trustee, extend the duration of
the voting trust agreement with respect to their shares for an additional period
not exceeding one (1) year from the expiration date of the trust as originally
fixed or last extended. This right shall be mutual, after one extension (after
January 31, 2000) providing that the Beneficiary and the Trustee must approve
the extension should it be requested beyond January 31, 2001. As an example
should the Trustee determine to extend the Voting Trust it will be effective
until January 31, 2000. After that time any extension beyond January 31, 2001
shall be done only with the mutual consent of Beneficiary and Trustee.
Provided, that the shares deposited in Trust by any Beneficiary may be
required by such Beneficiary to be sold free of this trust pursuant to the terms
of ss. 1.5 of this agreement.
ss. 1.3 Delivery of Shares into Trust, Issuance and Delivery of Voting
Trust Certificates; Redelivery of Stock Upon Termination of Trust. The
Beneficiary agrees to deliver to the Trustee the certificates of all stock of
the Corporation owned by such Beneficiary, and all stock of the Corporation
acquired after the effective date of this agreement and before the termination
of this agreement, duly endorsed for transfer, together with such sums as are
necessary to pay any taxes imposed on the transfer of such shares. The Trustee
agrees that she will cause the shares of stock to be transferred on the books of
the Corporation to the Trustee in her capacity as Trustee. The Trustee agrees to
issue and deliver to the Beneficiary a Voting Trust Certificate evidencing
receipt by the Trustee of Stock subject to the terms of this agreement. The
Voting Trust Certificate shall be in the form of Exhibit "A" attached hereto.
Within ten (10) days after the termination of this agreement, the Trustee shall
redeliver to the holders of record of Voting Trust Certificates, the stock
certificates representing the number of shares of stock or the net proceeds
thereof for which the Voting Trust Certificates were issued, provided the holder
of record of the Voting Trust Certificate surrenders the Voting Trust
Certificate properly endorsed and accompanied by payment of sums sufficient to
cover any stamp tax or governmental charge attributable to the transfer of or
redelivery of the stock certificates.
ss. 1.4 Powers and Rights Granted the Trustee. The Beneficiary in
conveying legal title to his stock to the Trustee agrees that, by virtue of her
control of the stock during the term of and pursuant to this agreement, the
Trustee shall be the sole possessor of the following Stockholders' rights in
that stock:
(a) the right to vote the stock in person or by nominee, agent,
attorney-in-fact or proxy at all meetings of Stockholders;
(b) the right to participate in, consent to, or ratify any corporate or
Stockholders' action;
(c) the right to receive all dividends and distributions in cash, kind,
or in any other property;
(d) the right to become financially interested in any matter or
transaction to which the Corporation or any company subsidiary to, controlled
by, or affiliated with the Corporation may be
2
<PAGE>
a party, and the right to contract with or become financially interested in any
company subsidiary to, controlled by or affiliated with the Corporation as fully
and freely as though the Trustee were not the Trustee hereunder.
It shall be the duty of the Trustee, and she shall have full power and
authority, and she is hereby fully empowered and authorized, to represent the
holders of such trust certificates and the stock transferred to the Trustee as
aforesaid, and to vote upon the said stock, as in the judgment of the Trustee
may be for the best interest of the said company, at all meetings of the
Stockholders of the said Corporation, in the election of Directors and upon any
and all matters and questions which may be brought before such meetings, as
fully as any Stockholder might do if personally present, provided, however, that
the Trustee shall vote on the following matters only as directed by the
beneficial owners of two-thirds in amount of the shares of stock subject of this
trust:
(1) Proposals to dissolve the Corporation, or to merge or consolidate
it with another Corporation or Corporations;
(2) Proposals to amend the Articles of Incorporation of the
Corporation;
(3) Proposals to sell substantially all the assets of the Corporation
not in the ordinary course of business; and
(4) Proposals which will have the effect, directly or indirectly, of
reducing substantially the voting power, right to dividends, or rights to the
assets of the Corporation upon liquidation, of the shares of stock subject of
the trust.
The Trustee, in accepting legal title to the stock deposited pursuant
to this Agreement, agrees to exercise her best judgment in the interest of the
Corporation to assure proper, stable, and continuous management of the affairs
of the Corporation, but the Trustee is not responsible for the acts of the
Directors and Officers of the Corporation whether or not taken pursuant to the
vote or consent of the Trustee as Stockholders, or whether ratified afterwards
by the Trustee as a Stockholder.
The Trustee does not have the right or authority to sell or otherwise
dispose of any of the stock deposited in Trust except as provided by this
agreement.
The Trustee shall, at all times during the term of this Agreement, be
elected, by vote of the Trustee, a Director of Scottsdale Scientific, Inc.
unless she declines, in writing, to act as such.
ss. 1.5 Dividends and Other Distributions; Sale of Shares Free of
Trust. The Trustee shall distribute to each registered holder of a Voting Trust
Certificate or Certificates cash payments equal to the amount of cash dividends
received by the Trustee on account of the stock for which such Voting Trust
Certificates were issued.
3
<PAGE>
The Trustee may fix a date not exceeding twenty (20) days preceding any
date for the payment or distribution of dividends or for the distribution of
assets or rights as a record date for the determination of the Voting Trust
Certificate holders entitled to receive such payment or distribution, and the
holders of Voting Trust Certificates of record on such date shall be exclusively
entitled to participate in such payments or distributions. In any case in which
the Trustee shall fail to fix such a record date, the date three (3) days prior
to the date of payment or distribution of dividends or the distribution of
assets or rights, shall constitute the record date for the determination of the
holders of Voting Trust Certificates entitled to receive such payment or
distribution.
If the Trustee receives, as a dividend or distribution on account of
stock held in this Trust, any additional shares of the stock of the Corporation,
the Trustee shall hold such additional shares in trust subject to all the terms
and conditions of this agreement. Any such dividend or distribution of stock
shall be held for the benefit of the Beneficiary who is the beneficial owner of
the stock on account of which the particular stock dividend or distribution was
issued and the Trustee shall issue to that Beneficiary additional Voting Trust
Certificates (in the form of Exhibit "A"), evidencing retention by the Trustee
of such stock dividends or distributions subject to this Trust.
If the Trustee receives any moneys (other than cash dividends), or any
property (other than shares of stock of the Corporation) through a distribution
by the Corporation to its Stockholders, the Trustee shall distribute such money
or property to the holders of Voting Trust Certificates to stock on account of
which such money or property was distributed.
If any securities of the Corporation shall be offered for subscription
to the holders of stock held by the Trustee subject to this agreement the
Trustee shall mail to each Voting Trust Certificate holder a copy of the notice
of such offer promptly upon the receipt of such notice by the Trustee. Upon
receipt of a request from a registered Voting Trust Certificate holder to
subscribe to the issuance of securities, the Trustee shall make such
subscription and payment on behalf of such Voting Trust Certificate holders;
provided that such request is received by the Trustee at least five (5) days
prior to the last date fixed by the Corporation for subscription and payment,
and provided further that such request is accompanied by the sum of money
required to be paid for such securities. Upon receiving from the Corporation the
certificates for voting securities so subscribed for, the Trustee shall retain
such voting securities and issue to the Voting Trust Certificate holder
subscribing to such voting securities a Voting Trust Certificate evidencing
retention by the Trustee of such voting securities subject to this Trust. Upon
receiving from the Corporation the certificates for non-voting securities so
subscribed for, the Trustee shall deliver such non-voting securities to the
Voting Trust Certificate holder subscribing to such non-voting securities.
If any subscription rights are not exercised by any of the Voting Trust
Certificate holders entitled to subscribe, the Trustee may subscribe and pay for
the new securities on behalf of any other Voting Trust Certificate holder or
holders who requests such subscription by sending notice of such request and
payment for the securities in the manner described above. Upon receipt of
securities so subscribed for, the Trustee shall distribute non-voting securities
or Voting Trust Certificates for voting securities, as provided above.
4
<PAGE>
Upon the request of any Beneficiary, the Trustee shall sell, free of
this agreement, any or all shares, the beneficial ownership of which is
evidenced by a Voting Trust Certificate registered in the name of such
Beneficiary on the records of the Trustee. All transfer taxes or other expenses
incident to any such sale shall be paid by the Beneficiary requesting such sale.
Such sale free of trust shall be on such terms as are approved by the
Beneficiary requesting the sale. However, any Beneficiary requesting a sale of
shares free of this trust shall redeposit in trust any shares of the Corporation
thereafter acquired by such Beneficiary by inter vivos gift or by purchase, but
need not deposit shares thereafter received by any bequest or inheritance.
ss. 1.6 Administration of Trust Agreement. The Trustee shall maintain a
Register of the holders of all outstanding Voting Trust Certificates and the
Trustee may treat the duly registered holder of each Voting Trust Certificate as
the absolute owner of such Voting Trust Certificate. Upon presentation to the
Trustee of a Voting Trust Certificate duly endorsed in blank for Transfer as
provided on the Voting Trust Certificate the Trustee shall enter in the register
the name of the Transferee as the absolute owner of such Voting Trust
Certificate. The Trustee is not bound or affected by any other notification of a
change in ownership of a Voting Trust Certificate although the Trustee may, at
her discretion, accept other evidence of such a change in ownership of a Voting
Trust Certificate and enter such change upon the register.
The Trustee may give any required notice to the registered holders of
Voting Trust Certificates by mailing such notice, postage prepaid, to the
address appearing on the register for such Voting Trust Certificate holders. Any
notice required to be given the Trustee shall be mailed, postage prepaid, to the
Trustee at _______ Street, _______, _______, or to such other address hereafter
fixed by the Trustee as the place where she is to receive notices. The Trustee
shall give to registered holders of Voting Trust Certificates notice of any
change of her address. Any notice to the Corporation by any party hereto must be
mailed, postage prepaid, to the Officers of the Corporation at its principal
place of business, 30806 Santana Street, Hayward, California 94544, or such
other location to which the principal place of business of the Corporation is
hereafter removed.
This Trust Agreement is to be governed by the laws of the State of
California. The Trustee is authorized to construe this agreement and her
reasonable construction made in good faith shall be conclusive and binding upon
holders of Voting Trust Certificates or any party claiming any right under this
trust. The Trustee may seek the advice of legal counsel, which counsel may also
be counsel for the Corporation, and any action taken in good faith in accordance
with the opinion of such counsel shall be conclusive upon the parties to this
agreement and the Trustee shall not be liable to the parties to this agreement
on account of such action.
The Trustee is authorized to incur and pay those reasonable expenses
and charges which she deems necessary to the administration of this agreement,
including, but not limited to, necessary fees and charges for the services of
legal counsel. The Trustee shall not be required to give any bond or other
security for the discharge of her duties under this trust. The Trustee shall be
entitled to reasonable compensation for their services as Trustee, and to
reimbursement for reasonable expenses
5
<PAGE>
and charges incurred in the administration of the agreement, which compensation
and reimbursement shall be paid by the Beneficiary in proportion to his
beneficial interests.
ss. 1.7 Inspection of Voting Trust Agreement. A duplicate of the voting
trust agreement and any extension thereof shall be filed with the Secretary of
the Corporation and shall be open to inspection by a Stockholder, a holder of a
voting trust certificate or the agent of either upon the same terms as the
record of Stockholders of the Corporation is open to inspection.
ss. 1.8 Trustee's Indemnity. The Trustee shall be entitled to be fully
indemnified out of the dividends coming to her hands against all costs, charges,
expenses, and other liabilities properly incurred by her in the exercise of any
power conferred upon her by these presents; and the Beneficiary hereby covenants
with the Trustee that in the event of the moneys and securities in her hands
being insufficient for that purpose the Beneficiary will in proportion to the
amounts of his shares and interests save harmless and keep indemnified the
Trustee of and from all loss or damage which she may sustain or be put to by
reason of anything she may lawfully do in the execution of this trust.
ss. 1.9 Additional Trustee. The voting Trustee for the time being shall
have the power and authority by a consent in writing filed with Scottsdale
Scientific, Inc. and a copy of which shall be mailed to the Beneficiary at his
address as the same shall appear upon the books of the Trustee, to add from time
to time one or more Trustees to the number of Trustees under this Agreement,
provided, however, that no person shall be so added as a Trustee unless he or
she shall at the time of his or her designation as a Trustee be the holder of
not less than one thousand (1,000) shares of the common stock of Scottsdale
Scientific, Inc. at the time of his or her acceptance of the designation as a
Trustee and as a condition to his or her becoming such a Trustee, shall be
transferred by him or her to the Trustee under the terms and provisions of this
Agreement, and provided further that such person so designated shall continue to
be a Stockholder of record with respect to at least one thousand (1,000) shares
of the common stock of Scottsdale Scientific, Inc. Any Trustee so appointed and
added shall immediately become vested with all the rights, property, powers and
authority vested in Trustee pursuant to this agreement.
ss. 2.1 Titles and Subtitles. Titles of the paragraphs and
subparagraphs are placed herein for convenient reference only and shall not to
any extent have the effect of modifying, amending or changing the express terms
and provisions of this Agreement.
ss. 2.2 Words and Gender or Number. As used herein, unless the context
clearly indicates the contrary, the singular number shall include the plural,
the plural the singular, and the use of any gender shall be applicable to all
genders.
ss. 2.3 Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be taken to be an original.
6
<PAGE>
ss. 2.4 Severability. In the event any parts of this Agreement are
found to be void, the remaining provisions of this Agreement shall nevertheless
be binding with the same effect as though the void parts were deleted.
ss. 2.5 Effective Date. This Agreement shall be effective only upon
execution by all of the proposed parties.
ss. 2.6 Waiver. No waiver of any provisions of this Agreement shall be
valid unless in writing and signed by the person or party against whom charged.
ss. 2.7 Applicable Law. This Agreement shall be subject to and governed
by the laws of the State of California.
ss. 2.8 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
Entered into this 9th day of February, 1999.
MARIANNE SUM, TRUSTEE
/s/ Marianne Sum
- ----------------
STEPHEN E. LEVINE, BENEFICIARY NUMBER OF SHARES
/s/ Stephen A. Levine 9.8 million
- ---------------------------------------- -----------------
7
<PAGE>
EXHIBIT "A"
VOTING TRUST CERTIFICATE FOR SHARES OF COMMON STOCK OF
SCOTTSDALE SCIENTIFIC, INC.
This document certifies that Stephen Levine is the registered
beneficial owner of 9.8 million shares of the common stock of Scottsdale
Scientific, Inc., a Florida corporation, and that those shares have been
transferred to, and are held by, Marianne Sum as Trustee pursuant to the Voting
Trust Agreement of February 9, 1999, between the Trustee and Steven Levine, a
stockholder of Scottsdale Scientific, Inc., as Beneficiary.
Under the terms of the agreement: (1) the Voting Trust will expire on
February 9, 2000 unless the term thereof is altered pursuant to the Agreement;
(2) the Trustee possess the right to vote the above-mentioned shares as the
absolute legal owner thereof and the holder of this Voting Trust Agreement
possesses no voting rights in such shares.
This Voting Trust Certificate may be transferred. The transferee will
be entitled to the rights enjoyed by the above named registered beneficial owner
of the shares only upon surrender of this Voting Trust Certificate properly
endorsed. Upon such surrender the Trustee shall issue to the transferee hereof a
new Voting Trust Certificate in the name of such transferee and will treat such
party as the beneficial owner of the shares represented by this certificate. The
transferee agrees to be bound by the terms of the Voting Trust Agreement, a copy
of which will be furnished by the Trustee to the holder or transferee of this
certificate upon request.
Dated: February 9, 1999.
By: /s/ Marianne Sum
- --------------------
As Trustee under the Voting Trust Agreement
8
<PAGE>
REVERSE OF VOTING TRUST CERTIFICATE:
For value received, Stephen A. Levine hereby transfers to Marianne Sum
the beneficial ownership of 9.8 million shares of Common Stock of Scottsdale
Scientific, Inc. represented by this Voting Trust Certificate and does hereby
irrevocably authorize the transferee to procure the transfer to the transferee
or his or her nominee of beneficial ownership of those shares on the records of
the Trustee holding legal title to those shares.
Dated: February 9, 1999.
- -----------------------------------------
In the presence of:
/s/ Samantha Jewert
- -----------------------------------
9
<PAGE>
ADDENDUM TO
VOTING TRUST AGREEMENT
The attached Voting Trust Agreement ("Agreement") between Stephen E. Levine
("Beneficiary")and Marianne Sum ("Trustee") dated February 9, 1999, is hereby
modified and supplemented as follows, with all capitalized terms herein having
the definitions set forth in the Agreement:
1. RESOLUTION OF DISPUTES. If any disputes arise between Beneficiary and Trustee
regarding the Agreement or the management of the Company during the time the
Agreement is in effect, such disputes shall be presented to the board of
directors of the Corporation and discussed at a special meeting of the board
called pursuant to applicable notice provisions for such meetings. All such
disputes shall be resolved by majority vote of the disinterested board members.
In connection with any such dispute, the Agreement shall be subject to
termination at any time by a majority vote of disinterested board members, which
termination shall be effective upon written notice hereof to Trustee and
Beneficiary.
2. DILUTION RESTRICTION. Notwithstanding any terms of the Agreement to the
contrary, Trustee shall not, without the prior written consent of Beneficiary,
vote any of the stock held in this Trust nor take any other action in favor of
any offering, sale or grant of shares of the Corporation which could result in a
dilution of the stock in the Trust to less than 51% equity ownership of the
Corporation.
3. TERM. Notwithstanding any other terms of the Agreement to the contrary, the
Agreement shall terminate one year from the date of the Agreement unless it is
renewed by the written consent of Trustee and Beneficiary.
This Addendum is executed this 9th day of February, 1999.
MARIANNE SUM, TRUSTEE
/s/ Marianne Sum
- ----------------
STEPHEN E. LEVINE, BENEFICIARY
/s/ Stephen A. Levine
- ---------------------
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
August 2, 1999
As independent auditors, we hereby consent to the incorporation by
reference in this Form 10SB Statement and amendments thereto of our report,
relating to the consolidated financial statements and financial statement
schedules of Scottsdale Scientific, Inc. and of its subsidiary, NutriCology,
Inc., for the years ended December 31, 1997 and 1998, and the period ended March
31, 1999 included on Form 10SB and amendments thereto for the years ended
December 31, 1997 and 1998 and the period ended March 31, 1999.
/s/ Clancy and Co.
------------------
CLANCY AND CO., P.L.L.C.
Certified Public Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 MAR-31-1999
<CASH> 16,500 225,006 142,098
<SECURITIES> 0 0 0
<RECEIVABLES> 901,507 1,049,079 906,227
<ALLOWANCES> 0 0 0
<INVENTORY> 3,915,400 3,538,611 2,920,465
<CURRENT-ASSETS> 4,962,100 5,301,460 4,441,922
<PP&E> 325,355 942,558 984,840
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 5,378,831 6,442,743 5,667,700
<CURRENT-LIABILITIES> 2,554,885 3,669,466 3,422,363
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 2,000 15,018 15,018
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 5,378,831 6,442,743 5,667,700
<SALES> 12,367,629 13,450,758 3,324,913
<TOTAL-REVENUES> 12,367,629 13,450,758 3,324,913
<CGS> 7,480,484 8,044,907 1,858,073
<TOTAL-COSTS> 7,480,484 8,044,907 1,858,073
<OTHER-EXPENSES> 3,888,614 6,611,648 1,956,216
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 920 2,119 (18,831)
<INCOME-PRETAX> 964,303 (1,261,011) (507,933)
<INCOME-TAX> 44,972 134,150 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 919,331 (1,126,861) (507,933)
<EPS-BASIC> 0 (0.08) (0.03)
<EPS-DILUTED> 0 (0.08) (0.03)
</TABLE>
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made and entered into this
29th day of January, 1999, by and between Scottsdale Scientific Corporation, a
Florida corporation (the "Company"), Stephen Levine, an individual ("Levine")
and Marianne Sum, an individual ("Sum").
RECITALS
A. The Company desires to be assured of the continued management of the
Company and of defining the roles of Levine and Sum.
B. Levine and Sum are willing and desire to be officers of the Company,
and the Company is willing to provide for the continued employment of Levine and
Sum as officers of the Company, upon the terms, covenants and conditions
hereinafter set forth.
C. This Agreement is not an employment contract, but is a defining
contract to detail the duties and responsibilities of Sum and Levine while in
the employ of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Sum as President, subject to
the supervision and direction of the Company's Board of Directors and Levine is
the Director of Research, subject to the supervision of Sum.
2. Term. The term of this Agreement shall be for a period of two (2)
years commencing on February 1, 1999, unless terminated earlier pursuant to
Section 8 below; provided, however, that Executive's obligations in Section 7
below shall continue in effect after such termination.
3. Compensation; Reimbursement. Sum and Levine will be compensated as
previously agreed.
4. Scope of Duties.
4.1 Sum as President shall be the principal executive officer of the
corporation and, subject to the control of the board of directors,
shall in general supervise and control all of the business and affairs
of the corporation. She shall, when present, preside at all meetings of
the shareholders and of the board of directors. She may sign, with the
secretary or any other proper officer of the corporation thereunto
authorized by the board of directors, certificates for shares of the
corporation and deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed,
except in cases where
1
<PAGE>
the signing and execution thereof shall be expressly delegated by the
board of directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to the
office of president and such other duties as may be prescribed by the
board of directors from time to time.
4.2 Levine as Director of Research shall be responsible for product
development and shall report to Sum for day to day instruction.
Financial matters and other operational considerations shall be those
of Sum. Levine shall operate within a budget established by the Board
of Directors and administered by Sum.
4.3 Disputes. Should any dispute arise regarding the management of the
Company or of the research operation, that dispute shall be presented
to the board of directors and discussed at a special meeting of the
board of directors. The notice requirements for such a meeting shall be
complied with. All disputes shall be resolved by a disinterested
majority of the Board of Directors.
4.4 Election and Term of Office. Sum and Levine are to be elected by
the board of directors annually at the first meeting of the board of
directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as conveniently may be. Each officer
shall hold office until their successor shall have been duly elected
and shall have qualified or until their death or until they shall
resign or shall have been removed in the manner hereinafter provided.
5. Termination.
5.1 Bases for Termination.
(1) This Agreement hereunder may be terminated at any time by
mutual agreement of the parties.
(2) This Agreement shall automatically terminate on the last
day of the month in which Levine or Sum dies or becomes permanently
incapacitated. "Permanent incapacity" as used herein shall mean mental
or physical incapacity, or both, reasonably determined by the Company's
Board of Directors based upon a certification of such incapacity by, in
the discretion of the Company's Board of Directors, either Sum or
Levine's regularly attending physician or a duly licensed physician
selected by the Company's Board of Directors, rendering Sum or Levine
unable to perform substantially all of his or her duties hereunder and
which appears reasonably certain to continue for at least six
consecutive months without substantial improvement. Sum or Levine shall
be deemed to have "become permanently incapacitated" on the date the
Company's Board of Directors has determined that they are permanently
incapacitated and are so notified.
2
<PAGE>
(3) The Board of Directors may terminate this Agreement with 10 days
written notice to Sum and Levine. The Board must determine to terminate
this Agreement with a disinterested majority of directors. Any matter
involving Sum and Levine shall require a vote of a disinterested
majority of the Board.
6. Miscellaneous.
6.1 Transfer and Assignment. This Agreement is personal as to
Sum and Levine and shall not be assigned or transferred by either
without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of all of the parties hereto
and their respective permitted heirs, personal representatives,
successors and assigns.
6.2 Severability. Nothing contained herein shall be construed
to require the commission of any act contrary to law. Should there be
any conflict between any provisions hereof and any present or future
statute, law, ordinance, regulation, or other pronouncement having the
force of law, the latter shall prevail, but the provision of this
Agreement affected thereby shall be curtailed and limited only to the
extent necessary to bring it within the requirements of the law, and
the remaining provisions of this Agreement shall remain in full force
and effect.
6.3 Governing Law. This Agreement is made under and shall be
construed pursuant to the laws of the State of California.
6.4 Counterparts. This Agreement may be executed in several
counter parts and all documents so executed shall constitute one
agreement, binding on all of the parties hereto, notwithstanding that
all of the parties did not sign the original or the same counterparts.
6.5 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements,
arrangements, and understandings with respect thereto. No
representation, promise, inducement, statement or intention has been
made by any party hereto that is not embodied herein, and no party
shall be bound by or liable for any alleged representation, promise,
inducement, or statement not so set forth herein.
6.6 Modification. This Agreement may be modified, amended,
superseded, or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by
a written instrument executed by the party or parties to be bound by
any such modification, amendment, supersession, cancellation, or
waiver.
6.7 Notices. Any notice under this Agreement must be in
writing, may be telecopied, sent by express 24-hour guaranteed courier,
or hand-delivered, or may be served by depositing the same in the
United States mail, addressed to the party to be notified,
postage-prepaid and registered or certified with a return receipt
requested. The addresses of
3
<PAGE>
the parties for the receipt of notice shall be as follows:
If to the Company: Scottsdale Scientific, Inc.
30806 Santana Street
Hayward, California 94544
If to Sum: 46 Olive Avenue If to Levine: Susan/Stephen Levine
Larkspur, CA 94939 75 Bridge
Kenefield, CA
Each notice given by registered or certified mail shall be deemed
delivered and effective on the date of delivery as shown on the return
receipt, and each notice delivered in any other manner shall be deemed
to be effective as of the time of actual delivery thereof. Each party
may change its address for notice by giving notice thereof in the
manner provided above.
6.8 Effective Date. This Agreement shall become effective as
of the date set forth on page 1 when signed by Executive and the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
/s/ Marianne Sum
- ----------------------------------
Marianne Sum
/s/ Stephen A. Levine
- -----------------------------------
Stephen Levine
SCOTTSDALE SCIENTIFIC CORPORATION
/s/ Marianne Sum
- ---------------------------------------
Printed Name: Marianne Sum
Title: President
4
<PAGE>
OFFERING MEMORANDUM
SCOTTSDALE SCIENTIFIC, INC.
(A Florida Corporation)
Offering Memorandum Dated May 1st, 1997
400,000 Shares
Scottsdale Scientific, Inc. (the "Company"), a Florida corporation, is
offering on a "best efforts, no minimum basis" up to a maximum of 400,000 shares
of common stock ("Common Stock"), $.001 par value, at $0.25 per Share. Since
there is no minimum, no proceeds will be held in escrow account and all funds
will be immediately available to the Company.
The Company intends to apply for inclusion of the Common Stock on the
Over the Counter Electronic, Bulletin Board. There can be no assurances that an
active trading marker will develop, even if the securities are accepted for
quotation. Additionally, even if the Company's securities are accepted for
quotation and active trading develops, the Company is still required to maintain
certain minimum, criteria established by NASDAQ, of which there can be no
assurance that the Company will be able to continue to fulfill such criteria.
Prior to this offering, there has been no public market for the common
stock of the Company. The price of the Shares offered hereby was arbitrarily
determined by the Company and does not bear any relationship to the Company's
assets, book value, net worth, results of operations or any other recognized
criteria of value. For additional information regarding the factors considered
in determining the offering price of the Shares, see "Risk Factors - Arbitrary
Offering Price", "Description of Securities".
The Company does not presently file reports or other information with
the Securities and Exchange Commission ("Commission"). However, following
completion of this offering, the Company intends to furnish its security holders
with annual reports containing audited financial statements and such interim
reports, in each case as it may determine to furnish or as may be required by
law.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OF ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OR AN OFFER TO PURCHASE, WITHDRAWAL, CANCELLATION OR MODIFICATION OF
THE OFFER, WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER,
IN WHOLE OR IN PART, FOR THE PURCHASE OF ANY OF THE SECURITIES OFFERED HEREBY.
This offering involves special risks concerning the Company (see "Risk
Factors"). Investors should carefully review the entire Memorandum and should
not invest any funds in this Offering unless they can afford to lose their
entire investment. In making an investment decision, investors must rely on
their own examination of the issuer and the terms of the Offering, including the
merit and risks involved.
<PAGE>
OFFERING SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements and notes thereto appearing
elsewhere in this Memorandum.
The Company is in the wholesale distribution of health and nutritional
supplements. The Company was incorporated in the State of Florida and its
principal executive office is located at 7150 East Camelback Rd., Suite 300,
Scottsdale, Arizona, 85251 (telephone: 602-423-7055).
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. ONLY THOSE PERSONS ABLE TO LOSE THEIR ENTIRE INVESTMENT SHOULD PURCHASE
THESE SECURITIES. PROSPECTIVE INVESTORS, PRIOR TO MAKINGAN INVESTMENT DECISION,
SHOULD CAREFULLY READ THIS PROSPECTUS AND CONSIDER, ALONG WITH OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS:
Risk Factors Relating to the Business of the Company
- ----------------------------------------------------
Start-up or Development Stage Company. The Company has had no
operations since its organization and is a "start-up" or "development stage"
company. No assurances can be given that the Company will be able to compete
with other companies in its industry. The purchase of the securities offered
hereby must be regarded as the placing of funds at a high risk in a new or
"start-up" venture with all the unforeseen costs, expenses, problems, and
difficulties to which such ventures are subject. See "Use of Proceeds to Issuer"
and "Description of Business."
No Assurance of Profitability. To date, the Company has not generated
any revenues from operations. The Company does not anticipate any significant
revenues in the near future. The Company is ability to successfully implement
its business plan is dependent on the completion of this Offering. There can be
no assurance that the Company will be able to develop into a successful or
profitable business.
No Assurance of Payment of Dividends. No assurances can be made that the
future operations of the Company will result in additional revenues or will be
profitable. Should the operations of the Company become profitable, it is likely
that the Company would retain much or all of its earnings in order to finance
future growth and expansion. Therefore, the Company does not presently intend to
pay dividends, and it is not likely that any dividends will be paid in the
foreseeable future. See "Dividend Policy."
Possible Need for Additional Financing. The Company intends to fund its
operations and other capital needs for the next 12 months substantially from the
proceeds of this Offering, but there can be no assurance that such funds will be
sufficient for these purposes. The Company may require additional amounts of
capital for its future expansion, operating costs and working capital. The
Company has made no arrangements to obtain future additional financing, and if
required, there can be no assurance that such financing will be available, or
that such financing will be available on acceptable terms. See "Use of
Proceeds."
Dependence on Management. The Company's success is principally dependent on
its current management personnel for the operation of its business.
Broad Discretion in Application of Proceeds. The management of the
Company has broad discretion to adjust the application and allocation of the net
proceeds of this offering, in order to address changed circumstances and
opportunities. As a result of the foregoing, the success of the Company will be
substantially dependent upon the discretion and judgment of the management of
the Company with respect to the application and allocation of the net proceeds
hereof. Pending use of such proceeds, the net proceeds of this offering will be
invested by the Company in temporary, short-term interest-bearing obligations.
See "Use of Proceeds."
<PAGE>
Arbitrary Offering Price. There has been no prior public market for the
Company's securities. The price to the public offering of the Shares offered
hereby his been arbitrarily determined by the Company and bears no relationship
to the Company's earnings, book value or any other recognized criteria of value.
Immediate and Substantial Dilution. An investor in this offering will
experience immediate and substantial dilution.
Lack of Prior Market for Securities of the Company. No prior market has
existed for the securities being offered hereby and no assurance can be given
that a market will develop subsequent to this offering.
No Escrow of Investors' Funds. This offering is being made on a "best
efforts, no minimum basis" As such, all the funds from this Offering will be
immediately available to the Company.
USE OF PROCEEDS
The proceeds from this Offering will be used for the development of its
wholesale business, including hiring sales personnel, advertising, marketing and
for working capital.
DIVIDEND POLICY
Holders of the Company's Common Stock are entitled to dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that any dividends of any kind will ever be paid.
THE COMPANY
The Company is the wholesale distribution of health and nutritional
supplements. There is no assurance, however, that the Company will be successful
in developing its business, or even if it does, that the Company will be
profitable.
Management
- ----------
The following sets forth the names of the Company's officers and
directors:
Harmel S. Rayat, is a Director of the Company and its President. Mr.
Rayat has been in the venture capital industry since 1981 and since January 1993
his been the president of Hartford Capital Corporation, a company specializing
in providing early stage funding and investment banking services to emerging
growth corporations. Mr. Rayat is also the chairman and CEO of MedCare
Technologies, Inc. and a director of Far West Resources, Inc., a non-reporting
company trading on the NASD OTC Bulletin Board.
Wes P. Janzen, is a Director of the Company. Mr. Janzen has over 19 years
of sales and marketing experience primarily in the real estate business. In
addition,Mr. J anzen has extensive experience in finance and personnel
management skills.
Narinder Thouli is a director and secretary/ treasurer of the Company.
He is an airline pilot and has over 9 years of successful experience as a
business consultant to medical/ technology companies. Mr. Thouli has provided
support in various areas including marketing, corporate finance, human
resources, research and development and clinical and regulatory affairs.
<PAGE>
EXECUTIVE COMPENSATION
Since the Company was recently incorporated, it has no historical
information with respect to executive compensation. At the conclusion of the
Offering,'the Company does not intend to compensate its officers for services to
the Company from the proceeds of this Offering and %%-ill only do so when and if
the Company generates profits.
Compensation of Directors
- -------------------------
Directors are not paid fees for their services nor reimbursed for
expenses of attending board meetings.
DESCRIPTION OF SECURITIES
Shares
- ------
The Company is offering hereby a "best efforts, no minimum basis" up to
400,000 shares of Common Stock at $0.25 per Share.
Common Stock
- ------------
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $.001 par value. Holders of the Common Stock do not have
preemptive tights to purchase additional shares of Common Stock or other
subscription rights. The Common Stock carries no conversion fights and is not
subject to redemption or toany sinking fund provisions. All shares of Common
Stock are entitled to share equally in dividends from sources legally available
therefor when, as and if declared by the Board of Directors and, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, to
share equally in the assets of the Company available for distribution to
stockholders. All outstanding shares of Common Stock are validly authorized and
issued, fully paid and nonassessable, and all shares to be sold and issued as
contemplated hereby, will be validly authorized and issued, fully paid and
nonassessable. The Board of Directors is authorized to issue additional shares
of Common Stock, not to exceed the amount authorized by die Company's
Certificate of Incorporation, on such terms and conditions and for such
consideration as the Board may deem appropriate without further stockholder
action. The above description concerning the Common Stock of the Company does
not purport to be complete. Reference is made to the Company's Certificate of
Incorporation and Bylaws which are available for inspection upon proper notice
at the Company's offices, as well as to the applicable statutes of the State of
Florida for a more complete description concerning the rights and liabilities of
stockholders.
Prior to this offering, there has been no market for the Common Stock
of the Company, and no predictions can be made of the effect, if anv, that
market sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of sigrdfic2nt
amounts of the Common Stock of the Company in the public market may adversely
affect prevailing market prices, and may impair the Company's ability to raise
capital at that time through the sale of its equity securities.
Each holder of Common Stock is entitled to one vote per share on all
marrers on which such stockholders are entitled to vote. Since the shares of
Common Stock do not have cumulative voting nights, the holders of more than 50
percent of the shares voting for the election of directors can elect all the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the Board of Directors.
PLAN OF DISTRIBUTION
The Company has no underwriter for this Offering. The Offering is
therefore a self-underwniting. The Shares will be offered by the Company at the
offering price of $0.25 per Share.
<PAGE>
Price of the Offering
- ---------------------
There is no, and never has been, a market for the Shares, and there is
no guaranty that a market will ever develop for the Company's shares.
Consequently, the offering price has been determined by the Company. Among other
factors considered in such determination were estimates of business potential
for the Company, the Company's financial condition, in assessment of the
Company's management and the general condition of the securities market at the
time of this Offering. However, such price does not necessarily bear any
relationship to the assets, income or net worth of the Company.
The offering price should not be considered an indication of the actual
value of the Shares. Such price is subject to change as a result of market
conditions and other factors, and no assurance can be given that the Shares can
be resold at the Offering Price.
There can be no assurance that an active trading market will develop
upon completion of this Offering, or if such market develops; that it will
continue. Consequently, purchasers of the Shares offered hereby may not find a
ready market for Shares.
ADDITIONAL INFORMATION
Each investor warrants and represents to the Company that, prior to
making an investment in the Company, that he has had the opportunity to inspect
the books and records of the Company and that he has had the opportunity to make
inquiries to the officers anddirectors of the Company and further that he has
been provided full access to such information.
<PAGE>
INVESTOR SUITABILITY STANDARDS AND
INVESTMENT RESTRICTIONS
Suitability
Shares will be offered and sold pursuant an exemption under the
Securities Act, and exemptions under applicable state securities and Blue Sky
laws. There are different standards under these federal and state exemptions
which must be met by prospective investors in the Company.
The Company will sell Shares only to those Investors it reasonably
believes meet certain suitability requirements described below.
Each prospective Investor must complete a Confidential Purchaser
questionnaire and each Purchaser Representative, if any, must complete a
Purchaser Representative Questionnaire.
EACH INVESTOR MUST BE RESPONSIBLE FOR DETERMINING THAT IT IS PERMITTED TO
INVEST IN THE COMPANY, THAT ALL APPROPRIATE ACTIONS TO AUTHORIZE SUCH AN
INVESTMENT HAVE BEEN TAKEN, AND THAT ANY REQUIREMENTS THAT ITS INVESTMENTS BE
DIVERSIFIED OR SUFFICIENTLY LIQUID HAVE BEEN MET.
An investor will qualify as an accredited Investor if it falls within
any one of the following categories at the time of the sale of the Shares to
that Investor:
(1) A bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company is defined in Section 2(13) of the
Securities Act, in investment company registered under the Investment CompanvAct
of 1940 or a business development company as defined in Section 2(a)(8) of that
Act; a Small Business Investment Company licensed by the United States Small
Business Administration under Section 301(c) or (d) of the Small Busuiless
Investment Act of 1938; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee ietiremenr Income Securitv Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of that Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $3,000,000, or, if aself-directed plan with the investment decisions made
solely by persons that are accredited investors;
(2) A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
(3) An organization described in Section 301 (c)(3) of the Internal
Revenue Code with total assets in excess of $5,000,000;
(4) A director or executive officer of the Company.
(5) A natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of such person's purchase of the Shares
exceeds $1,000,000;
(6) A natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) A trust with total assets in excess of $3,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as describe in Rule 506(b)(2)(ii) of
Regulation D; and
<PAGE>
(8) An entity in which all of the equity owners are accredited
investors (as defined above).
As used in this Memorandum, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
(5) above, the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by in
institutional lender making a secured loan, net of encumbrances. In determining
income an investor should add to the investor's adjusted gross income any
amounts attributable to tax exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to an IRA or KEOGH retirement plan, alimony payments, and any
amount by which income form long-term capital gains has been reduced in arriving
at adjusted gross income.
In order to meet the conditions for exemption from the registration
requirements under the securities laws of certain jurisdictions, investors who
are residents of such jurisdiction may be required to meet additional
suitability requirements.
An Investor that does not qualify as an accredited Investor is a
nonaccredited Investor and may acquire Shares only if:
(1) The Investor is knowledgeable and expenienced with respect to
investments in limited partnerships either alone or with its Purchaser
Representative, if any; and
(2) The Investor has been provided access to all relevant documents it
desires or needs; and
(3) The Investor is aware of its linaited ability to sell and/or transfer
its Shares in the Company; and
(4) The Investor can bear the econorruic risk (including loss of the
entire. inves tmen r) without impairing its ability to provide for its financial
needs and contingencies in the same mariner as it was prior to making such
investment.
THE COMPANY RESERVES THE RIGHT IN ITS ABSOLUTE DISCRETION TO DETERMINE IF A
POTENTIAL INVESTOR MEETS OR FAILS TO MEET THE SUITABLUTY STANDARDS SET FORTH IN
THIS SECTION
Additional Suitability Requirements for Benefit Plan Investor:
- --------------------------------------------------------------
In addition to the foregoing suitability standards generally applicable
to all Investors, the Employee Retirement Income Security Act of 1934, as
amended ("'ERISA"), and the regulations promulgated thereunder by the Department
of Labor impose certain additional suitability standards for Investors that are
qualified pension, profit-sharing or stock bonus plans ("Benefit Plan
Investor"). In considering the purchase of Shares, a fiduciary with respect to a
prospective Benefit Plan Investor must consider whether an investment in the
Shares will satisfy the prudence requirement of Section 404(a)(1)(B) of ERISA,
since there is not expected to be any market created in which to sell or
otherwise dispose of the Shares. In addition, the fiduciary must consider
whether the investment in Shareswill satisfy the diversification requirement of
Section 404(a)(1)(C) of ERISA.
Restrictions on Transfer or Resale of Shares
- --------------------------------------------
The Availability of Federal and state exemptions and the legality of
the offers and sales of the Shares are conditioned upon, among other things, the
fact that the purchase of Shares by all Investors are for investment purposes
only and not with a view to resale or distribution. Accordingly, each
prospective Investor will be required to represent in the Subscription Agreement
that it is purchasing the Shares for its own account and for the purpose of
investment only, not with a view to, or in accordance with, the distribution of
sale of the Shares and that it will not sell, pledge, assign or transfer or
offer to sell, pledge, assign or transfer any of its Shares without an effective
registration statement under the Securities Act, or an exemption there from and
an opinion of counsel acceptable to the Company that registration under the
Securities Act is not required and that the transaction complies with all other
applicable Federal and state securities or Blue Sky laws.
<PAGE>
CONFIDENTIAL INFORMATION
THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS CONFIDENTIAL
AND PROPRIETARY TO THE COMPANY AND IS BEING SUBMITTED TO PROSPECTIVE INVESTORS
IN THE COMPANY SOLELY FOR SUCH INVESTORS' CONFIDENTIAL USE WITH THE EXPRESS
UNDERSTANDING THAT, WITHOUT THE PRIOR WRITTEN PERMISSION OF THE COMPANY, SUCH
PERSONS WILL NOT RELEASE THIS DOCUMENT OR DISCUSS THE INFORMATION CONTAINED
HEREIN OR MAKE REPRODUCTIONS OF OR USE THIS OFFERING MEMORANDUM FOR ANY PURPOSE
OTHER THAN EVALUATING A POTENTIAL INVESTMENT IN THE SHARES.
A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS OFFERING
MEMORANDUM, AGREES PROMPTLY TO RETURN TO THE COMPANY THIS OFFERING MEMORANDUM
AND ANY OTHER DOCUMENTS OR INFORMATION FURNISHED IF THE PROSPECTIVE INVESTOR
ELECTS NOT TO PURCHASE ANY OF THE SHARES OFFERED HEREBY.
THE INFORMATION PRESENTED HEREIN WAS PREPARED BY THE COMPANY AND IS
BEING FURNISHED BY THE COMPANY SOLELY FOR USE BY PROSPECTIVE INVESTORS IN
CONNECTION WITH THE OFFERING. NOTHING CONTAINED HEREIN IS, OR SHOULD BE RELIED
ON AS, A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.
THIS OFFERING MEMORANDUM DOES NOT PURPORT TO BE ALL-INCLUSIVE OR TO
CONTAIN ALL THE INFORMATION THAT A PROSPECTIVE INVESTOR MAY DESIRE. IN
INVESTIGATING THE COMPANY, EACH INVESTOR MUST CONDUCT AND RELY ON ITS OWN
EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SHARES.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
IN CONNECTION WITH THE PURCHASE OF SHARES.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. EXCEPT AS OTHERWISE INDICATED, THIS OFFERING MEMORANDUM SPEAKS AS
OF THE DATE HEREOF. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OTHER THAN THAT
CONTAINED IN THIS OFFERING MEMORANDUM, OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE COMPANY DISCLAIMS ANY AND ALL LIABILITIES FOR
REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED, CONTAINED IN, OR OMISSIONS
FROM, THIS OFFERING MEMORANDUM OR ANY OTHER WRITTEN OR ORAL COMMUNICATION
TRANSMITTED OR MADE AVAILABLE TO THE RECIPIENT.
FOR RESIDENTS OF ALL STATES:
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
NOTICES TO PROSPECTIVE INVESTORS
THIS OFFERING MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING
OF THE SHARES AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE. BY
ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM, EACH RECIPIENT AGREES TO RETURN
THIS OFFERING MEMORANDUM AND ALL OTHER DOCUMENTS, IF THE RECIPIENT DOES NOT
AGREE TO PURCHASE ANY OF THE SHARES, TO THE COMPANY AT ITS ADDRESS LISTED ON THE
COVER OF THE OFFERING MEMORANDUM.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION, THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFERTO SELL OR THE
SOLICITATION OF AN OFFER TO PURCHASE SHARES TO ANY PERSON IN ANY STATE OR IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS UNLAWFUL. SUBJECT TO THE
PRECEDING SENTENCE, THIS OFFERING MEMORANDUM IS INTENDED FORTHE EXCLUSFVE USE
OFTHE PERSON TO WHOM IT IS DELIVERED BY AN AUTHORIZED AGENT OF THE COMPANY ON
BEHALF OF THE COMPANY.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS
CONFIDENTIAL OFFERING MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS AS
LEGAL, TAX OR INVESTMENT ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN COUNSEL,
ACCOUNTANT OR BUSINESS ADVISOR AS TO LEGAL, TAX AND RELATED MATTERS COVERING HIS
INVESTMENT.
THE SHARES ARE OFFERED SUBJECT TO THE ACCEPTANCE BY THE COMPANY OF
OFFERS BY PROSPECTIVE INVESTORS, ALLOCATION OF SHARES BY THE COMPANY AND OTHER
CONDITIONS SET FORTH HEREIN. THE COMPANY MAY REJECT ANY OFFER IN WHOLE OR IN
PART AND NEED NOT ACCEPT OFFERS IN THE ORDER RECEIVED.
THIS CONFIDENTIAL OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE
THE STATEMENTS MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS
PURPORTED TO BE SUMMARIZED HEREIN.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND SUCH LAWS. THE SHARES UNDERLYING THE SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING
OR THE ACCURACY OR ADEQUACY OF THE OFFERING MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE SUBSCRIPTION PRICE FOR THE SHARES IS PAYABLE IN FULL UPON
SUBSCRIPTION. THE OFFERING PRICE WAS DETERMINED ARBITRARILY BY THE COMPANY AND
BEARS NO RELATIONSHIP TO ASSETS, EARNINGS, BOOK VALUE OR ANY OTHER CRITERIA OF
VALUE. NO REPRESENTATION IS MADE THAT THE SHARES HAVE A MARKET VALUE OF, OR
COULD BE RESOLD AT, THAT PRICE (SEE "RISK FACTORS," "DILUTION," AND "USE OF
PROCEEDS").
THE SHARES WILL BE OFFERED BY THE COMPANY ON A BEST EFFORTS BASIS TO A
SELECT GROUP OF INVESTORS WHO MEET CERTAIN SUITABILITY STANDARDS. NO COMMISSIONS
AND NO NON-ACCOUNTABLE
<PAGE>
OR ACCOUNTABLE EXPENSE ALLOWANCE OF ANY KIND WILL BE PAID FROM OR DEDUCTED FROM
THE PROCEEDS RAISED HEREBY. THE COMPANY WILL ABSORB ALL MARKETING EXPENSES
ASSOCIATED WITH THIS OFFERING (SEE "USE OF PROCEEDS").
THE COMPANY HAS AGREED TO PROVIDE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH POTENTIAL PURCHASER OF SECURITIES (OR
HIS REPRESENTATIVES OR BOTH) THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM, THE COMPANY OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE
TERMS AND CONDITIONS OF THIS OFFERING AND TO OBTAIN ANY ADDITIONAL INFORMATION,
TO THE EXTENT THEY POSSESS SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO ANY PERSON WHO
DOES NOT MEET THE SUITABILITY STANDARDS DESCRIBED HEREIN. REPRODUCTION OF THIS
OFFERING MEMORANDUM IS STRICTLY PROHIBITED.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS OFFERING MEMORANDUM EXCEPT AS NOTED ABOVE
WITH REGARD TO QUESTIONS ASKED OF THE COMPANY AND OF THOSE AUTHORIZED TO ACT ON
ITS BEHALF. NO OFFERING LITERATURE OR ADVERTISING HAS BEEN AUTHORIZED BY THE
COMPANY EXCEPT THE INFORMATION CONTAINED HEREIN. ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ITS OFFICERS AND DIRECTORS. EXCEPT AS OTHERWISE
INDICATED, THIS OFFERING MEMORANDUM SPEAKS AS OF THE DATE ON THE COVER PAGE.
NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES AT WHICH THE
INFORMATION IS GIVEN HEREIN OR THE DATE HEREOF.
ANY UNSOLD SHARES MAY BE PURCHASED BY THE COMPANY OR ITS AFFILIATES ON
THE SAME TERMS AS SHARES PURCHASED BY OTHER INVESTORS.
NOTICES TO RESIDENTS OF CERTAIN STATES
NOTICE TO ALABAMA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
ALABAMA SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION. THE COMMISSION DOES
NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON
THE ACCURACY OR COMPLETENESS OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THE INVESTMENT OF AN
ALABAMA PURCHASER WHO IS NOT AN ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%)
PER CENT OF SUCH PURCHASER'S NET WORTH, EXCLUSIVE OF PRINCIPAL RESIDENCE,
FURNISHINGS AND AUTOMOBILES.
NOTICE TO ALASKA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ALASKA SECURITIES
ACT AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION
THEREFROM.
NOTICE TO ARIZONA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ARIZONA SECURITIES
ACT AND ARE BEING SOLD IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION
44-1844(l) OF SUCH ACT. THESE SECURITIES MAY NOT BE SOLD WITHOUT REGISTRATION
UNDER SUCH ACT OR EXEMPTION THEREFROM.
ARIZONA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF AT LEAST
SEVENTY FIVE THOUSAND ($75,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND A MINIMUM ANNUAL GROSS INCOME OF SEVENTY FIVE THOUSAND
($75,000) DOLLARS; OR (ii) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY FIVE
THOUSAND ($225,000) DOLLARS (AS COMPUTER ABOVE).
<PAGE>
NOTICE TO ARKANSAS RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER
SECTION 14(b)(14) OF THE ARKANSAS SECURITIES ACT AND SECTION 4(2) OF THE
SECURITIES ACT OF 1933. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS NOT BEEN FILED WITH THE ARKANSAS SECURITIES DEPARTMENT OR WITH THE
SECURITIES AND EXCHANGE COMMISSION. NEITHER THE DEPARTMENT NOR THE COMMISSION
HAS PASSED UPON THE VALUE OF THESE SECURITIES, MADE ANY RECOMMENDATIONS AS TO
THEIR PURCHASE, APPROVED OR DISAPPROVED THE OFFERING, OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AN INVESTMENT BY A
NON-ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PER CENT OF THE INVESTOR'S
NET WORTH AT THE TIME OF PURCHASE, ALONE OR JOINTLY WITH SPOUSE.
NOTICE TO CALIFORNIA RESIDENTS
IF THE COMPANY ELECTS TO SELL SHARES IN THE STATE OF CALIFORNIA, IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SHARES, OR OTHER INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
NOTICE TO CONNECTICUT RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE CONNECTICUT
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR
EXEMPTION THEREFROM.
NOTICE TO FLORIDA RESIDENTS
THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES
ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE
PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE
BY SUCH PURCHASE TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR
WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED
TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
NOTICE TO GEORGIA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE GEORGIA SECURITIES
ACT OF 1973, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION SET
FORTH IN SECTION 9(m) OF SUCH ACT AND THE SECURITIES CANNOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH
IS OTHERWISE IN COMPLIANCE WITH SAID ACT.
NOTICE TO IDAHO RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE CONNECTICUT
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR
EXEMPTION THEREFROM.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY A
NON-ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) PER CENT OF THE INVESTOR'S NET
WORTH.
NOTICE TO INDIANA RESIDENTS
EACH INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS EITHER (i) A NET
WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) EQUAL TO AT LEAST
THREE (3) TIMES THE
<PAGE>
AMOUNT OF HIS INVESTMENT BUT IN NO EVENT LESS THAN SEVENTY FIVE THOUSAND
($75,000) DOLLARS OR (ii) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND
AUTOMOBILES) OF TWO (2) TIMES HIS INVESTMENT BUT IN NO EVENT LESS THAN THIRTY
THOUSAND ($30,000) DOLLARS AND A GROSS INCOME OF THIRTY THOUSAND ($30,000)
DOLLARS.
NOTICE TO IOWA RESIDENTS
IOWA RESIDENTS MUST HAVE EITHER (i) A NET WORTH OF AT LEAST FORTY
THOUSAND ($40,000) DOLLARS (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES)
AND A MINIMUM ANNUAL GROSS INCOME OF FORTY THOUSAND ($40,000) DOLLARS, OR (ii) A
NET WORTH OF AT LEAST ONE HUNDRED TWENTY FIVE THOUSAND ($125,000) DOLLARS AS
COMPUTED ABOVE.
NOTICE TO KANSAS RESIDENTS
AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY
(20%) PER CENT OF THE INVESTOR'S NET WORTH; EXCLUDING PRINCIPAL RESIDENCE,
FURNISHINGS THEREIN AND PERSONAL AUTOMOBILES.
NOTICE TO KENTUCKY RESIDENTS
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR OTHER DOCUMENT),
HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR
QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREIN.
ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THE INVESTMENT BY A
NON-ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) PER CENT OF THE INVESTOR'S NET
WORTH.
NOTE TO MAINE RESIDENTS
THESE SECURITIES ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM
REGISTRATION WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION
10520(2)(R) OF TITLE 32 OF THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE
DEEMED RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL
THE SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES
LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS.
NOTE TO MARYLAND RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MARYLAND SECURITIES
ACT IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION SET FORTH IN SECTION
11-602(9) OF SUCH ACT. UNLESS THESE SECURITIES ARE REGISTERED, THEY MAY NOT BE
REOFFERED FOR SALE OR RESOLD IN THE STATE OF MARYLAND, EXCEPT AS A SECURITY, OR
IN A TRANSACTION EXEMPT UNDER SUCH ACT.
NOTE TO MASSACHUSETTS RESIDENTS
MASSACHUSETTS RESIDENTS MUST HAVE HAD EITHER (i) A MINIMUM NET WORTH OF
AT LEAST FIFTY THOUSAND ($50,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND HAD DURING THE LAST YEAR, OR IT IS ESTIMATED THAT THE
SUBSCRIBER WILL HAVE DURING THE CURRENT TAX YEAR, TAXABLE INCOME OF FIFTY
THOUSAND ($50,000) DOLLARS, OR (ii) A NET WORTH OF AT LEAST ONE HUNDRED FIFTY
THOUSAND ($150,000) DOLLARS (AS COMPUTED ABOVE).
NOTE TO MICHIGAN RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MICHIGAN SECURITIES
ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION UNDER THAT ACT OR
EXEMPTION THEREFROM.
THE COMPANY SHALL PROVIDE ALL MICHIGAN INVESTORS WITH A DETAILED
WRITTEN STATEMENT OF THE APPLICATION OF THE PROCEEDS OF THE OFFERING WITHIN SIX
(6) MONTHS AFTER COMMENCEMENT OF THE OFFERING OR UPON COMPLETION, WHICHEVER
OCCURS FIRST, AND WITH ANNUAL CURRENT BALANCE SHEETS AND INCOME STATEMENTS
THEREAFTER.
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
EACH NEW HAMPSHIRE INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS
EITHER (i) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) OF
TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS OR (ii) A NET WORTH (EXCLUSIVE OF
HOME, HOME FURNISHINGS AND AUTOMOBILES) OF ONE HUNDRED TWENTY-FIVE THOUSAND
($125,000) DOLLARS AND FIFTY THOUSAND ($50,000) DOLLARS ANNUAL INCOME.
NOTICE TO NEW JERSEY RESIDENTS
THE ATTORNEY GENERAL OF THE STATE HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING DOES NOT CONSTITUTE
APPROVAL OF THE ISSUE OR THE SALE THEREOF BY THE BUREAU OF SECURITIES OR THE
DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW JERSEY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NOTICE TO NORTH DAKOTA RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES COMMISSIONER OF THE STATE OF NORTH DAKOTA NOR HAS THE COMMISSIONER
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO NEW YORK RESIDENTS
THIS OFFERING MEMORANDUM HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL
PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS
NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THIS OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS
MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.
IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPORTED TO BE
SUMMARIZED HEREIN.
NOTICE TO NORTH CAROLINA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
NORTH CAROLINA SECURITIES ACT. THE NORTH CAROLINA SECURITIES ADMINISTRATOR
NEITHER RECOMMENDS NOR ENDORSES THE PURCHASE OF ANY SECURITY, NOR HAS THE
ADMINISTRATOR PASSED ON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED
HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO OKLAHOMA RESIDENTS
THE SECURITIES RENDERED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE OKLAHOMA SECURITIES ACT. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF
1933 AND/OR THE OKLAHOMA SECURITIES ACT OF AN OPINION OF COUNSEL TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY A
NON-ACCREDITED INVESTOR SHALL NOT EXCEED TEN (10%) PER CENT OF THE INVESTOR'S
NET WORTH.
NOTICE TO OREGON RESIDENTS
THE SECURITIES OFFERED HAVE BEEN REGISTERED WITH THE DIRECTOR OF THE
STATE OF OREGON UNDER THE PROVISIONS OF OAR 441-65-240. THE INVESTOR HAS ADVISED
THAT THE DIRECTOR HAS MADE ONLY A CURSORY REVIEW OF THIS REGISTRATION STATEMENT
AND HAS NOT REVIEWED THIS DOCUMENT SINCE THIS DOCUMENT IS NOT REQUIRED TO BE
FILED WITH THE DIRECTOR.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE COMPANY
CREATING THE SECURITIES, AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND
RISKS INVOLVED IN MAKING
<PAGE>
NOTICE TO MINNESOTA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER CHAPTER 80 OF THE
MINNESOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF FOR THE VALUE EXCEPT PURSUANT TO REGISTRATION OR OPERATION OF LAW.
NOTICE TO MISSISSIPPI RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
MISSISSIPPI SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS NOT BEEN FILED WITH THE MISSISSIPPI SECRETARY OF STATE OR WITH
THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THE SECRETARY OF STATE NOR THE
COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, NOR HAS APPROVED OR
DISAPPROVED THE OFFERING. THE SECRETARY OF STATE DOES NOT RECOMMEND THE PURCHASE
OF THESE OR ANY OTHER SECURITIES.
THERE IS NO ESTABLISHED MARKET FOR THESE SECURITIES AND THERE MAY NOT
BE ANY MARKET FOR THESE SECURITIES IN THE FUTURE. THE SUBSCRIPTION PRICE OF
THESE SECURITIES HAS BEEN ARBITRARILY DETERMINED BY THE ISSUER AND IS NOT AN
INDICATION OF THE ACTUAL VALUE OF THESE SECURITIES.
THE PURCHASER OF THESE SECURITIES MUST MEET CERTAIN SUITABILITY
STANDARDS AND MUST BE ABLE TO BEAR THEE ENTIRE LOSS OF HIS INVESTMENT.
ADDITIONALLY, ALL PURCHASERS WHO ARE NOT ACCREDITED INVESTORS MUST HAVE A NET
WORTH OF AT LEAST THIRTY THOUSAND ($30,000) DOLLARS OR A NET WORTH OF SEVENTY
FIVE THOUSAND ($75,000) DOLLARS. THESE SECURITIES MAY NOT BE TRANSFERRED FOR A
PERIOD OF ONE (1) YEAR EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
MISSISSIPPI SECURITIES ACT OR IN A TRANSACTION IN COMPLIANCE WITH THE
MISSISSIPPI SECURITIES ACT.
NOTICE TO MISSOURI RESIDENTS
THESE SECURITIES ARE SOLD TO, AND BEING ACQUIRED BY, THE HOLDER IN A
TRANSACTION EXEMPTED UNDER SECTION 10, SUBSECTION 409, 402(b), MISSOURI UNIFORM
SECURITIES ACT (RMSO 1969).
THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF
MISSOURI. UNLESS THE SHARES ARE REGISTERED, THEY MAY NOT BE REOFFERED OR RESOLD
IN THE STATE OF MISSOURI, EXCEPT AT A SECURITY, OR IN A TRANSACTION EXEMPT UNDER
SAID ACT.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTOR MUST HAVE A
MINIMUM ANNUAL INCOME OF THIRTY THOUSAND ($30,000) DOLLARS AND A NET WORTH OF AT
LEAST THIRTY THOUSAND ($30,000) DOLLARS, EXCLUSIVE OF HOME, FURNISHINGS AND
AUTOMOBILES OR A NET WORTH OF SEVENTY FIVE ($75,000) DOLLARS EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES.
AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY
(20%) PERCENT OF THE INVESTOR'S NET WORTH.
NOTICE TO MONTANA RESIDENTS
EACH MONTANA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING OFFERED
HEREBY AGREES NOT TO SELL SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS AFTER
DATE OF PURCHASE.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY A
NON-ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PERCENT OF THE INVESTOR'S
NET WORTH.
NOTICE TO NEBRASKA RESIDENTS
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THAT ACT OR EXEMPTION
THEREFROM. AN INVESTMENT ON THESE SECURITIES.
NOTICE TO PENNSYLVANIA RESIDENTS
ANY PERSON WHO ACCEPTS AN OFFER TO PURCHASE THE SECURITIES IN THE
COMMONWEALTH OF PENNSYLVANIA IS ADVISED THAT PURSUANT TO SECTION 207(m) OF THE
PENNSYLVANIA SECURITIES ACT, HE SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE,
AND RECEIVE A FULL REFUND OF ANY CONSIDERATION PAID, WITHOUT NOTICE OF THIS
WITHDRAWAL RIGHT AND RECEIVES THE PLACEMENT OFFERING MEMORANDUM. ANY PERSON WHO
WISHES TO EXERCISE SUCH RIGHT OF WITHDRAWAL IS ADVISED TO GIVE NOTICE BY LETTER
OR TELEGRAM SENT AND POSTMARKED BEFORE THE END OF THE SECOND BUSINESS DAY AFTER
EXECUTION. IF THE REQUEST FOR WITHDRAWAL IS TRANSMITTED ORALLY, WRITTEN
CONFIRMATION MUST BE GIVEN. ANY PERSON WHO PURCHASES INTERESTS WHO IS A
PENNSYLVANIA RESIDENT WILL NOT SELL SUCH INTERESTS FOR A PERIOD OF TWELVE (12)
MONTHS BEGINNING WITH THE
<PAGE>
CLOSING DATE. PENNSYLVANIA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF
THIRTY THOUSAND ($30,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND A MINIMUM ANNUAL GROSS INCOME OF THIRTY THOUSAND ($30,000)
DOLLARS, OR (ii) A NET WORTH OF AT LEAST SEVENTY FIVE THOUSAND ($75,000) DOLLARS
(AS COMPUTED ABOVE), AND MAY NOT INVEST MORE THAN TEN (10%) PERCENT OF THEIR NET
WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES).
NOTICE TO SOUTH CAROLINA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
SOUTH CAROLINA UNIFORM SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS NOT BEEN FILED WITH THE SOUTH CAROLINA SECURITIES
COMMISSIONER. THE COMMISSIONER DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY
SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS OFFERING
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO SOUTH DAKOTA RESIDENTS
THE SHARES HAVE NOT BEEN REGISTERED UNDER CHAPTER 47-31 OF THE SOUTH
DAKOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
FOR VALUE EXCEPT PURSUANT TO REGISTRATION, EXEMPTION THEREFROM OR OPERATION OF
LAW.
SOUTH DAKOTA RESIDENTS MUST HAVE EITHER (i) A MINIMUM NET WORTH OF AT
LEAST SIXTY THOUSAND ($60,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND A MINIMUM GROSS INCOME OF SIXTY THOUSAND ($60,000) DOLLARS, OR
(ii) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY FIVE THOUSAND ($225,000) DOLLARS
(AS COMPUTED ABOVE).
NOTICE TO TENNESSEE RESIDENTS
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR
SHALL NOT EXCEED TEN (10%) PERCENT OF THE INVESTOR'S NET WORTH.
NOTICE TO TEXAS RESIDENTS
THIS OFFERING MEMORANDUM IS FOR THE INVESTOR'S CONFIDENTIAL USE AND MAY NOT
BE REPRODUCED. ANY ACTION CONTRARY TO THESE RESTRICTIONS MAY PLACE SUCH INVESTOR
AND THE ISSUER IN VIOLATION OF THE TEXAS SECURITIES ACT.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR
SHALL NOT EXCEED (10%) PERCENT OF THE INVESTOR'S NET WORTH.
NOTICE TO UTAH RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UTAH SECURITIES ACT
AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION THEREFROM.
NOTICE TO WASHINGTON RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE WASHINGTON
SECURITIES ACT AND THE ADMINISTRATOR OF SECURITIES OF THE STATE OF WASHINGTON
HAS NOT REVIEWED THE OFFERING OR OFFERING MEMORANDUM. THESE SECURITIES MAY NOT
BE SOLD WITHOUT REGISTRATION UNDER THE ACT OR EXEMPTION THEREFROM.
IT IS THE RESPONSIBILITY OF ANY INVESTOR PURCHASING SHARES TO SATISFY
ITSELF AS TO FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY OUTSIDE THE
UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY
REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER APPLICABLE
REQUIREMENTS.
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
(A Florida Corporation)
400,000 Shares
at a Price of $0.25 Per Share
Subscription Documents
May 1st, 1997
<PAGE>
INSTRUCTION FOR COMPLETION:
In connection with your subscription for Shares of Scottsdale
Scientific, Inc. (the "Company'~, enclosed herewith are the following documents
which must be properly and fully completed and signed:
1. INVESTMENT AGREEMENT. Fully completed and signed. Please make your
check payable to Scottsdale Scientific, Inc. (Z\otc to partnerships who wish to
subscribe: each general partner of the partnership must fully complete and sign
the InvestmentAgreement).
2. CONFIDENTIAL PURCHASER QUESTIONNAIRE. Fully completed and sign.
(.Note to partnerships who -,xish to subscribe: each general partner of:-the
partnership must fully complete and sign the Investment Agreement).
3. PURCHASER REPRESENTATIVE QUESTIONNAIRE. To be completed and signed by
your Purchaser Representative only if you have elected to use a Purchaser
Representative. If you have elected not to use a Purchaser Representative, you
must so state in the Purchaser Questionnaire.
4. ACKNOWLEDGMENT OF USE OF PURCHASER REPRESENTATIVE. To be completed
and executed by the Investor only if an election to use i Purchaser
Representative has been made.
NOTES TO SUBSCRIBERS:
(2) Please indicate on the Subscription Agreement and the Confidential
Purchaser Questionnaire how the Units are to be held (s.&. joint tenants with
rights of survivorship, tenants by the entireties, etc.)
(b) Please return Subscription Documents and checks to the Company at
Suite 300, 7150 East Camelback Road, Scottsdale, AZ, 85251. Checks should be
made payable to the Company.
(c) Additional copies of the required forms are available from the
Company at Suite 300, 7150 East Camelback Road, Scottsdale,AZ, 85251or by
calling the Company at (602) 423-7055.
<PAGE>
INVESTMENT SUBSCRIPTION AGREEMENT
To: Scottsdale Scientific, Inc.
Suite 300, 7150 East Camelback Road
Scottsdale, AZ, 85251
Gentlemen:
You have informed me that the Company is offering up to 400,000 shares
of the Company's common stock at a price of $0.25 per share.
1. Subscription. Subject to the terms and conditions of this
Subscription Agreement (the "Agreement'~, the undersigned hereby tenders this
subscription, together with the payment (in cash or by bank check in lawful
funds of the United States) of an amount equal to $0.23 per Share, and the other
subscription documents, all in the forms submitted to the undersigned.
2. Acceptance of Subscription: Adoption and Appointment. It is
understood and agreed that this Agreement is made subject to the following terms
ind conditions:
(a)The Company shall have the right to accept or rqect
subscriptions in any order it shall determine, in whole oriin part, for any
reason (or for no reason).
(b) Investments are not binding on the Company until accepted
by the Company. The Company will refuse any subscription by giving written
notice to the purchaser by personal delivery or first-class mail. In its sole
discretion, the Company may establish a limit on the purchase of Units by a
particular purchaser.
(c) The undersigned hereby intends that his signattire hereon
shall constitute an irrevocable subscription to the Company of this Agreement,
subject to a three day right of rescission for Florida residents pursuant to
Section 517.061 of the Florida Securities and Investor Protection Act. Each
Florida resident has a right to withdraw his or her subscription for Units,
without anv Lability whatsoever, and receive a full refund of all monies
paid,,wid-Lin three days after the execution of this Agreement or payment for
the Units has been made, whichever is later. To accomplish this Withdrawal, a
subscriber need only send a letter or telegram to the Company at the address set
forth in this Agreement, indicating his or her intention to withdraw. Such
letter or telegram should be sent and postmarked prior to the end of the
aforementioned third day. It is prudent to send such letter by certified mail,
return receipt requested, to ensure that is received and also to evidence the
time when it was mailed. If the request is made orally (in person or by
telephone) to the Company a written confirmation that the request has been
received should be requested.
Upon satisfaction of the 211 the conditions referred to herein, copies
of this Agreement, duly executed by the Company, will be delivered to die
undersigned.
3. Representations and Warranties of the Undersigned. The
undersigned hereby represents and warrants to the Company as follows:
(a) The undersigned (T) has adequate means of providing for
his current needs and possible personal contingencies, and he has no need for
liquidity of his investment in the Company; (n) is an Accredited Investor, as
defined below, or has the net worth sufficient to beu die risk of losing his
entire investment; and (iii) has, alone or together with his Purchaser
Representative (as hereinafter defined), such knowledge and experience in
Enancial matters that the undersigned is capable of evaluating the relative
risks and merits of this investment.
"Accredited Investors" include: M accredited investors as
defined in Regulation D under the Securities Act of 1933, as amended C'Reg. D")
i.e., (a) $1,000,000 in net worth (including spouse) or (b) $200,000 in annual
income for the last two years and projected for the current year-, and (a) the
Company or affiliates of the Company.
"Non-Accredited Investors" are all subscribers who are not
"Accredited Investors."
All investors must have either a preexisting personal or
business reladonshipxith the Company or any of its affiliates, or bv reason of
their business or financial experience (or the business or financial expenience
of their unaffiliated professional advisors) would reasonably be assumed to have
the capacity to protect their own interests in connection, with this investment.
Each subscriber must represent that he is purchasing for his own account not
with a view to or for resale in connection with any distribution of the Units.
(b) The address set forth in his Purchaser Questionnaire is
his true and correct residence, and he has no present intention of becoming a
resident of any other State or jurisdiction.
<PAGE>
(c) The undersigned acknowledges that if R "Purchaser
Representative", as defined in Regulation D, has been utilized by the
undersigned, M the undersigned has completed -and executed the Acknowledgment of
Use of Purchaser Representative; (u) in evaluating his investment as
contemplated hereby, the undersigned has been advised by his Purchaser
Representative as to the merits and risks of the investment in general and the
suitability of the investment for the undersigned in particular; and (ii) the
undersigned's Purchaser Representative has completed and executed the Purchaser
Representative Questionnaire.
(d) The undersigned has received and read or reviewcd,~vith
his Purchaser Representative, if any, and represents he is familiar with this
Agreement; the other Subscription Documents and the Offering Memorandum
,accompanying these documents. The undersigned confirms that all documents,
records and books pertaining to the investment 'in the Company and requested by
the undersigned or his Purchaser Representative have been made available or have
been delivered to the undersigned and/or the undersigned's Purchaser
Representative.
(e) The undersigned and/or his Purchaser Representative have
had in opportunity to ask questions of and receive answers from the Company or a
person or persons acting on its behalf, concerning the terms and conditions of
this investment and the financial conLion, operations and prospects of the
Company.
(f) The undersigned understands that the Units have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws and are instead being offered and sold in reliance
on exemptions from registration; and the undersigned further understands that he
is purchasing an interest in a Company without being furruished any offering
literature or prospectus other than the material fin-nished hereb
(g) The Units for which the undersigned hereby subscribed are
being acquired solely for his own account, and are not beu'ig purchased with a
view to or for the resale, distribution, subdivision, or fractionalization
hereof. He has no present plans to enter into any such contract, undertaking,
agreement or arrangement. In order to induce the Company to sell and issue the
Units subscribed for hereby to the undersigned, it is agreed that the Company
will have no obligation to recognize the ownership, beneficial or otherwise, of
such Units bv anyone but the undersigned.
(h) The undersigned has received, completed and returned to
the Company the Purchaser Questionnaire relating to his general ability to bear
the risks of an investment in the Company and his suitability as-an investor in
a private offerui1g; and the undersigned hereby affirms the correctness of his
answers to such Confidential Purchaser Questionnaire and all other wnitten or
oral 'information concerning the undersigned's stuitability provided to the
Company by, or on behalf of, the undersigned.
(i) The person, if any, executing the Purchaser Representative
Questionnaire, a copy of which has been received by the undersigned, is acting
and is hereby designated to act as the undersigned's Purchaser Representative in
connection with the offer and sale of the Uru'ts to the undersigned. Tiiis
designation of a Purchaser Representative was made with the knowledge of die
representations and disclosures made in such Purchaser Representative
Questionnaire and other Subscription Documents.
(j) The undersigned acknowledges and is aware of the
following:
(k) That there are substantial restrictions on the
transferability of the Units and the Units will not be, and investors in the
Company have no rights to require that, the Units be registered under the
Securities act; the undersigned may not be able to avail himself of certain of
the provisions of Rule 144 adopted by the Securities and Exchange Commission
under the Securities Act with respect to the resale of the Units and,
accordinglv, the undersigned may be required to hold the Units for a substantial
period of time and it may not be possible for the undersigned to liquidate his
investment in the Company.
(ii) That no federal or state agency has made any finding or
detennination 2S to the fairness of the offering of Units for investment or any
recommendation or endorsement of the Units.
(1) The approximate or exact length of time that he
will be required to remain as owner of the Units.
(2) The prior performance on the part of the Company
or any Affiliate (as defined in Rule 405 under the
Securities Act), or its associates, agent,, or
employees or of any other person, will in any way
indicate the predictable results of the ownership of
the Units or of the overall Company.
(3) Subscriptions will be accepted in the order in
which they are received.
(iii) That the Company shall incur certain costs and expenses and
undertake other actions in reliance upon the irrevocability of the subscription
(following the three day rescission period described in Paragraph 2(c) of this
Agreement) for the Units made hereunder.
The foregoing representations and warranties are urue and accurate
as of the date of delivery of the Funds to the Company and shah survive such
delivery. If, in any respect, such representations and warranties shall not be
true and accurate prior to the
<PAGE>
delivery of the Funds pursuant to Paxagraph 1 hereof, the undersigned shall give
wrirten notice of such fact to his Purchaser Representative, if any, specifying
which representations and warranties are not true and accurate and the reasons
therefor, with a copy to the Company and otherwise to give the same information
to the Company directly.
4. Indemnification. The undersigned acknowledges that he understands
the meaning and legal consequences of the representations and warranties
contained in Paragraph 3 hereof, and he hereby indemnifies and holds harmless
the Company, agents, employees and affiliates, from and against any and all
losses, claims, 4amages or liabilities due to or arising out of a ~reach of any
representations(s) or warranry(s) of the undersigned contained 'in this
Agreement.
5. No Waive . Notwithstanding any of the representations, warranties,
acknowledgment or agreements made hereln bv the undersigned, the undersigned
does not thereby or in any other manner waive any rights granted to him under
federal or sate securities laws.
6. Transferability. The undersigned agrees not to transfer or assign
this Agreement, or any of his interest herein. Further, an investor in the Units
pursuant to this Agreement and applicable law, will not be permitted to transfer
or dispose of the Units unless they are registered or unless such transaction is
exempt from registration under the Securities Act or other securities laws and
in the case of the purportedly exempt sale, such investor provided (at his own
expense) in opinion of counsel reasonably satisfactory to the Company that such
exemption is, in fact available.
7. Revocation. The undersigned acknowledges and agrees that his
subscription for the Units made by the execution and delivery of this Agreement
by the undersigned is irrevocable and subject to the three day right of
rescission in Florida descri'bed in Section 2(c) herein, and that such
subscription shall survive the death or disability of the undersigned, except as
provided pursuant to the blue sky laws of the states in which the Units may be
offered, or any other applicable state statutes or regulations.
8. Miscellaneous.
(a) All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the undersigned at his
address set forth below and to
(b) Notwithstanding the place where this Agreement may be executed
by any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and shall be govern by
the laws of the State of Florida.
(c) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof any may be amended only
by writing executed by all parties.
(d) This Agreement shall be binding upon the heirs, estates, legal
representatives, successors and assigns of all parties hereto.
(e) All terms used herein shall be assumed to include the
masculine and the feminine and the singular and the plural as the context
requires.
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE FOR INDIVIDUALS
Number of Shares Subscribed for:
-----------------
Amount tendered at $0.25 per Share:
--------------
- ----------------------------- ----------------------------------
(Signature of Subscriber) (Signature of Spouse,
or joint tenant, if any)
- ----------------------------- ----------------------------------
(Printed Name of Subscriber) (Printed Name of Spouse, of other
joint tenant, if any)
- ----------------------------- ----------------------------------
(Address) (Address)
- ----------------------------- ----------------------------------
- ----------------------------- ----------------------------------
(Social Security Number) (Social Security Number)
APPROVED AND ACCEPTED in accordance vxrith the terms of thisAgreement
on this_____day of ____________________ ,1997.
SCOTTSDALE SCIENTIFIC, INC.
By:
-----------------------------------
HARMEL S. RAYAT, PRESIDENT
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No._______________
Name of Offeree:________________________
PRIVATE PLACEMENT MEMORANDUM
SCOTTSDALE SCIENTIFIC, INC.
(a Florida Corporation) (" Company")
4,300,000 of Common Stock
$.001 Par Value
$. 10 Per Share
MINIMUM INVESTMENT
5,000 SHARES
500.00
Prinicipal Executive Offices:
7150 East Camelback Rd., Suite 300
Scottsdale, AZ, 85251
(602) 423-7055
The date of this Memorandum is October 28th, 1997
1
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered: Shares of the Company's common stock, $0.001 par
value.
Number of Securities offered: 4,300,000 Shares.
Price per security : $. 10 per share.
Total proceeds : If all shares sold : $430,000.00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes , what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
NONE
4
<PAGE>
TABLE OF CONTENTS
Cover Page ....................................................................1
Disclosure Statements .........................................................2
Table of Contents .............................................................5
Summary of the Offering .......................................................6
The Company ...................................................................7
Risk Factors ..................................................................8
Use of Proceeds ..............................................................10
Description of Securities ....................................................11
Terms of the Offering ........................................................11
Directors, Officers and key Personnel of the Company .........................12
Principal Stockholders .......................................................13
Remuneration of Directors and Officers .......................................14
Reports ......................................................................14
Legal Matters ................................................................14
Litigation ...................................................................14
Additional Information .......................................................14
State Restrictions ...........................................................15
EXHIBITS
Exhibit A Subscription Agreement
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1997 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without the
prior written permission of Scottsdale Scientific, Inc.
5
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained elsewhere
in this Memorandum. This summary is qualified in its entirety by express
reference to the Memorandum and the exhibits referred to therein. Each
prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 300-7150 East Camelback Rd.,
Scottsdale, AZ, 85251
THE OFFERING. The Company is offering up to 4,300,000 of its common stock, par
value $.001 per share (the "Shares"). The Minimum investment for an Investor is
5,000 Shares, or $500. The Company, in its sole discretion, may accept
subscriptions for up to an aggregate of 4,300,000 or $430,000.00 until December
31st, 1997, or until such earlier date as the Company determines that this
Offering shall be terminated. In its sole discretion, the Company may elect to
terminate this Offering even if subscriptions for Shares have been received and
accepted by the Company. See "Terms of the Offering" and "Subscription for
Shares".
COMPANY'S BUSINESS: The Company is engaged in the wholesale distribution of
health and nutritional supplements. The Company has no sales and earnings to
date, and in fact expects to sustain significant losses. There is no assurance
that the company will be successful or profitable in the future.
RISK FACTORS: The offering involves speculative investment with substantial
risks, including those associated with an unproven startup venture, and risks
associated with the industry. Although the Company will use its best efforts to
protect the investments of the Investors, there is no assurance that the
Company's efforts will be successful. Accordingly, a prospective Investor should
not view the Company or its officers, directors, employees or agents as
guarantors of the financial success of an investment in the Shares. See "Risk
Factors".
LIMITED TRANSFERABILITY OF THE SHARES. The Shares have not been registered under
the 1933 Act or the securities laws of any state. The Shares of common stock
purchased pursuant to this Offering will not be "restricted" shares because the
shares are offered under Rule 504 and this offering is excluded from the
provisions of Regulation D pertaining to restricted shares. This does not mean,
however, that a public market does exist for the Shares. No market exists now
and none is foreseen.
See "Risk Factors" and "Terms of the Offering".
LIMITATION OF LIABILITY. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor will
be liable for any debts of the Company or be obligated to contribute any
additional capital or funds to the Company. See Risk Factors".
6
<PAGE>
SUITABILITY STANDARDS. Each Investor must meet certain eligibility standards
established by the Company for the purchase of the Shares. See "Terms of the
Offering" and "Subscription for Shares".
USE OF PROCEEDS. The Company plans to use the money received from this offering
to cover the costs involved with setting up office space, promoting and
marketing the Company's products and services and financial public relations.
The funds will not be deposited in an escrow account and will be available to
the Company immediately. No minimum amount of Shares is required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 7150 E. Camelback Rd., Suite 300
Scottsdale, Arizona 85251
(602) 423-7055
Fiscal Year: June 30th.
PRODUCTS
The Company is engaged in the wholesale distribution of health and nutritional
supplements.
MATERIAL CONTRACTS
The Company has no contracts at the present time.
MARKETING APPROACHES
The Company intends to solicit its business through personal visits by sales
representatives, magazines and newspapers, direct mail using a targeted mailing
list, and trade shows.
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
Investor should acquire the Shares unless he can afford a complete loss of his
investment. The risks described below are those which the Company deems most
significant as of the date hereof. Other factors which may have a material
impact on the operations of the Company may not be forseen. In addition to the
other factors set forth elsewhere in this Memorandum, prospective Investors
should carefully consider the following specific risk factors:
7
<PAGE>
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international conditions;
inflation or deflation; fluctuation in interest rates; the availability of, and
fluctuations in the money supply. The extent, type and sophistication of the
Company's competition; and government regulations.
Lack of Operations. The Company is in the formative stages of its business
ope and has no operating history.
Development Stage Company. The Company was organized in 1997 and has
engaged in minimal business operations. Accordingly, the Company is a
development stage company as defined by Statement of Financial Accounting
Standards No.7.
Dependence on Key Personnel. The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable personn.
Lack of Adequate Capital. Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the affairs
of the Company in a manner that maximizes its chances of success and,
accordingly, the best chances of raising future funding.
Inherent Business Risks. The business that the Company plans to engage
in involves substantial and inherent risks associated with a start-up and
development company with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment. The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it is
very likely that the Company will not be able to advance any business activities
and Investors could lose their entire investments.
Arbitrary Purchase Price; No Market. The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No assurance is or can be given that the Shares,
although transferable, could be sold for the purchase price, or for any amount.
There currently is no market for resale of the Shares.
Restriction of Transferability. While the Company believes that no
restriction exists for the transfer of the Shares being offered by the Company,
an investment in the Shares may be a long term
8
<PAGE>
investment. Investors who do not wish or who are not financially able to hold
the Shares for a substantial period of time are advised against purchasing
Shares. The Shares are not registered under the 1933 Act or under the securities
laws of any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase or
take down any of the Shares offered pursuant to this Offering. No escrow account
is maintained and no minimum amount is required to be sold. Funds will be
available to the Company upon receipt.
Management and Operation Experience. The Company's officers, directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations and marketing, but their experience
in these fields is limited. There is no assurance that such experience will
result in the success of the Company.
Other Risks. No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business is
undertaken by the Company, will generate cash sufficient to operate the business
of the Company or that other parties entering into agreements relating to the
Company's business will meet their respective obligations.
Dividends. The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the purpose of
increasing the net worth and reserves of the Company. Therefore, there can be no
assurance that any holder of Common Stock will receive any cash, stock or other
dividends on his shares of Common Stock. Future dividends on Common Stock, if
any, will depend on the future earnings, financing requirements and other
factors.
Additional Securities Available for Issuance. The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common Stock.
At this time, 3,400,000 shares of common stock have been issued. Accordingly,
including those purchasing the shares offered with the sale of these units,
investors will be dependent upon the judgement of management in connection with
the future issuance and sale of shares of the Company's capital stock, in the
event purchasers can be found for such securities.
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $10,000.00 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of Shares
are sold, the Company anticipates that the net proceeds to it from the Offering
will be as follows:
9
<PAGE>
Item Maximum
- ---- -------
Shares Sold
-----------
Gross Proceeds of Offering $430,000.00
Offering Expenses
Cost of Offering $10,000.00
TOTAL PROCEEDS RECEIVED: $420,000.00
Operating Expense
Purchase Product $250,000.00
Investor Relations $50,000.00
Working Capital $120,000.00
-----------
TOTAL $420,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $8,000.00, (ii) accounting fees of
approximately $1,500 and (iii) printing and other miscellaneous costs of
approximately $500. A sales commissions will be paid only to NASD broker/dealers
and no other person will receive any commissions or remuneration from the
Company.
The net proceeds of this offering, assuming all the Shares are sold,
will be sufficient to sustain the planned marketing and development activities
of the Company for a period of 6 months, depending upon the number of Shares
sold in the offering and other factors. Even if all the Shares offered hereunder
are sold, the Company will require additional capital in order to fund continued
development activities and capital expenditures that must be made. The Company's
business plan is based on the premise that additional funding will be obtained
through funds generated from operations, the exercising of the options and
warrants by shareholders, additional offerings of its securities, or other
arrangements. There can be no assurance that any securities offerings will take
place in the future, or that funds sufficient to meet any of the foregoing needs
or plans will be raised from operations or any other source.
DESCRIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
10
<PAGE>
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 3,400,000 common shares were issued
and outstanding as of the date of this Placement. All of the outstanding common
shares of the Company are fully paid for and nonassessable.
Voting Rights. Each share of the 3,400,000 shares of the Company's common
stock held by its current shareholders is entitled to one vote at shareholders
meetings.
Dividends. The Company has never paid a dividend and does not anticipate
doing so in
Options. The Company currently has no options outstanding in relation to
its common
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion rights,
no redemption or sinking fund provisions, and are not liable to further call or
assessment. The Shares, when paid for by Investors, will be fully paid and
nonassessable. Each share of the Company's common shares is entitled to a pro
rata share in any asset available for distribution to holders of equity
securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 4,300,000
Shares at a purchase price of $.10 per share of the Company's common stock. The
Company may, in its sole discretion, terminate the offering at any time. The
Offering will close on the earliest of December 31st, 1997 or the election of
the Company when all of the Shares are sold, in no event later than December 3
1st, 1997. The minimum subscription is $500 (5,000 Shares) per Investor,
although the Company, in its sole discretion, may accept subscriptions for
lesser amounts.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and related
exemptions from state registration requirements. Rule 504 permits the Company to
offer and sell its stock in an amount not exceeding $1,000,000 to an unlimited
number of persons. Until 1992, Rule 504(b)(2)(ii) imposed a limited disclosure
obligation of all issuers such as the Company which was intended to ensure that
investors in a Rule 504 transaction were clearly advised of the restricted
character of the securities being offered for sale. This requirement was
eliminated in July, 1992 at which time the Securities and Exchange Commission
adopted an amendment to - Rule 504 that eliminated all limitations on the manner
of offering of stock under that rule and/or the resale of stock purchased in
reliance on that rule. Therefore, following adoption of the 1992 amendment, the
securities being offered and sold by the Company pursuant to the present
Offering are available for immediate resale by nonaffiliates of the issuer.
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $ 10,000 as
detailed in the Use of Proceeds.
11
<PAGE>
DIRECTORS, OFFICERS AND KEY PERSONNEL OF THE COMPANY
Officers and Directors. The following information sets forth the names
of the officers and directors of the Company, their present position with the
Company and biographic information:
NAME POSITION HELD SINCE
Harmel Rayat President & Director May 1997
Wes Janzen Director May 1997
Narinder Thouli Secretary/Treasurer May 1997
Harmel Rayat, is a Director of the Company and the President. Mr. Rayat
has over fifteen years experience in the investment industry, as an investment
broker with leading international brokerage firms and as the President of
Hartford Capital Corporation. Mr. Rayat has vast Knowledge of both the Canadian
and U.S. markets, with extensive experience in investment banking, mergers and
acquisitions, early stage venture capital, second stage funding requirements for
high growth companies, and risk arbitrage.
Wes Janzen, is a Director of the Company. Mr. Janzen has over 19 years of
sales and marketing experience primarily in the real estate business. In
addition, Mr. Janzen has extensive experience in finance and personnel
management skills.
Narinder Thouli, is a Director and Secretary/Treasurer of the Company. Mr.
Thouli is an airline pilot and has over 9 years of successful experience as a
business consultant to medical/technology companies. Mr. Thouli has provided
support in various areas including marketing, corporate finance, human
resources, research and development and clinical and regulatory affairs.
12
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the date
of this Memorandum by (i) each person known to the Company to own of record or
beneficially 5% or more of tile 3,400,000 outstanding shares of Common Stock of
the Company, (ii) each Director of the Company, and (iii) all officers and
directors of the Company as a group, as of the date of this Memorandum and
adjusted to reflect share holdings after the sale of the maximum number of
Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
- --------------- --------- ----------
Harmel Rayat 3,000,000 88.24% 3,000,000 39%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company intends,
in the future, to pay Directors who are not employees of the Company,
compensation of $500 per Director's Meeting, as well as reimbursements of any
out of pocket expenses incurred in the Company's behalf.
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc. and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior notice,
access during reasonable business hours to such books and records,- and the
right to inspect and copy them. Within 120 days after the close of each fiscal
year, reports will be distributed to the shareholders which will include
financial statements (including a balance sheet and statements of income,
shareholder's equity, and cash flows) prepared in accordance with generally
accepted accounting principals, with a reconciliation to the tax information
supplementary supplied, accompanied by a copy of the accountant's report.
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix,
Arizona, 85028 will pass upon certain matters for the Company.
13
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or other
legal
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The Company
shall, to the extent such information is available or can be acquired without
unreasonable effort or expense, endeavor to provide the information to such
persons. All offerees are urged to make such personal investigations,
inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to Harmel Rayat
by calling (604) 659-5000. Requests for additional copies of this Memorandum or
assistance in executing subscription documents may be directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R.S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand these
securities cannot be resold without registration under the Arizona Securities
Act or an exemption therefrom. I am not an underwriter within the meaning of
A.R.S 44-1801(17), and I am acquiring these securities for myself, not for other
persons. If qualifying as a non-accredited investor, I further represent that
this investment does not exceed 20% of my net worth ( excluding principal
residence, furnishings therein and personal automobiles).
14
<PAGE>
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY SECTION
25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS
THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF SPECIFIC
EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY
PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981, IF SUCH REGISTRATION
IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE
ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF
MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS
PURPOSED TO BE SUMMARIZED HEREIN.
15
<PAGE>
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to the
Regulation D Rule 505 or 506, and that if all of the conditions and limitations
of Regulation D are not complied with, the Offering will be resubmitted to the
Attorney General for amended exemption. I understand that any literature used in
connection with this Offering has not been previously filed with the Attorney
General and has not been reviewed by the Attorney General. This Investment Unit
is being purchased for my own account for investment, and not for distribution
or resale to others. I agree that I will not sell or otherwise transfer these
securities unless they are registered under the Federal Securities Act of 1933
or unless an exemption from such registration is available. I represent that I
have adequate means of providing for my current needs and possible personal
contingencies of financial problems, and that I have no need for liquidity of
this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or my
offeree representative and myself, and that, upon reasonable notice, the books
and records of the issuer will be available for inspection by investors, at
reasonable hours at the principal place of business.
16
<PAGE>
EXHIBITS
SCOTTSDALE SCIENTIFIC. INC.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for shares of common stock(hereinafter
"Shares"), as described in the Private Offering Memorandum dated December 31st,
1997 ("Memorandum"), of Scottsdale Scientific, Inc., a Florida corporation (the
"Company"), being offered by the Company for a purchase price of $0.10 per share
and tenders herewith the sum of $___________ in payment therefor, together with
tender of this Subscription Document.
2. The undersigned represents and warrants that he is a bona fide resident of
the State of
- ----------------.
3 The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable; c. That the Company has a very limited
financial and operating history; d. That the Shares have not been
registered under the Securities Act of 1933, as amended, in reliance
upon exemptions contained in that Act, and that the Share have not been
registered under the securities acts of any state in reliance upon
exemptions contained in certain state's securities laws; and e. That
the representations and warranties provided in this Subscription
Document are being relied upon by the Company as the basis for the
exemption from the registration requirements of the Securities Act of
1933 and of the applicable securities laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased soley for the undersigned's
own account-.
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the merits and
risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk of
an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly familiar
with the Private Offering Memorandum and represents and warrants that
he is aware of the high degree of risk involved in making investment in
the Shares;
e. That the undersigned subscriber's decision to purchase the Shares is
based solely on the information contained in the Private Offering
Memorandum and on written answers to such
17
<PAGE>
questions as he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way with
any investment company, national or local brokerage firm or broker
dealer. The undersigned subscriber's decision to purchase the Shares is
not based in whole or in part on any assumption or understanding that
an investment company, national or local brokerage firm or other broker
dealer is involved in any way in this Offering or has endorsed or
otherwise recommended an investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk illiquid
addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess
of $50,000 or joint income with my suppose in excess of $50,000
in each of the two most recent years and who reasonably expects
an income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
an investment in the shares, or to verify that the investor has
retained the services of one or more purchaser representatives for the
purpose of evaluating the risks of investment in the shares, and hereby
represents and warrants that he has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the shares and of making an
informed investment decision and will not require a purchaser
representative.
5. The undersigned understands and agrees that this subscription is made subject
to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of each
Subscription Document, the Company shall have until December 31st, 1997
in which to accept or reject it. If no action is taken by the Company
within said period, the subscription shall be deemed to have been
accepted. In each case where the subscription is rejected, the Company
shall return the entire amount tendered by the subscriber, without
interest;
b. That the undersigned subscriber will, from time to time, execute and
deliver such documents or other instruments as may be requested by the
Company in order to aid the Company in the consummation of the
transactions contemplated by the Memorandum.
18
<PAGE>
6. The undersigned hereby constitutes and appoints the Company, with full power
of substitution, as attorney-in-fact for the purpose of executing and
delivering, swearing to and filing, any documents or instruments related to or
required to make any necessary clarifying or conforming changes in the
Subscription Document so that such document is correct in all respects.
7. As used herein, the singular shall include the plural and the masculine shall
include the feminine where necessary to clarify the meaning of this Subscription
Document. All terms not defined herein shall have the same meanings as in the
Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document this
____ day of ____________, 1997.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1997.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1997.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1997.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
MEMORANDUM NO. _____________
NAME OF OFFEREE: ______________________
PRIVATE PLACEMENT MEMORANDUM OF UNITS
OF
SCOTTSDALE SCIENTIFIC, INC.
(a Florida Corporation) ("Company")
96,000 Common Shares and 96,000 Common Share Purchase Warrants
$.001 Par Value
$1.625 Per Share
Warrants exercisable at $1.75 per Share expiring on April
15th, 2000.
MINIMUM INVESTMENT
10,000 Shares
$16,250.00
Principal Executive Offices:
8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
The date of this Memorandum is April 15th, 1998
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered : Shares of the Company's common stock, $0.001 par
value.
Number of Units offered : 96,000 Shares and 96,000 Warrants
Price per security : $1.625 per Share. Warrant exercisable at $1.75 per Share up
until April 15, 2000.
Total proceeds : If all shares sold : $156,000. If all Warrants exercised
$324,000.00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of the
Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 10
Description of Securities 11
Terms of the Offering 11-12
Directors, Officers and key Personnel of the Company 13
Principal Stockholders 14
Remuneration of Directors and Officers 14
Reports 15
Legal Matters 15
Litigation 15
Additional Information 15
State Restrictions 15-17
EXHIBITS
Exhibit A Subscription Agreement 18-22
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1998 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written permission of Scottsdale Scientific, Inc.
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety by
express reference to the Memorandum and the exhibits referred to therein.
Each prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 8655 East Via de
Ventura, Suite G204, Scottsdale, Arizona 85258.
The Offering. The Company is offering up to 96,000 of its common stock
units, par value $.001 per share (the "Shares"). The Minimum investment for
an Investor is 10,000 Shares, or $16,250. The Company, in its sole
discretion, may accept subscriptions for up to an aggregate of 96,000 or
$156,000.00 until April 30th, 1998, or until such earlier date as the
Company determines that this Offering shall be terminated. In its sole
discretion, the Company may elect to terminate this Offering even if
subscriptions for Shares have been received and accepted by the Company. See
"Terms of the Offering" and "Subscription for Shares".
Company's Business: The Company is engaged in the wholesale distribution of
nutritional supplements. Through its wholly owned subsidiary, Nutricology,
Inc./Allergy Research Group, is an innovative leader in the research and
formulation of nutritional supplements.
Risk Factors: The offering involves speculative investment with substantial
risks, including those risks associated with the industry. Although the
Company will use its best efforts to protect the investments of the
Investors, there is no assurance that the Company's efforts will be
successful. Accordingly, a prospective Investor should not view the Company
or its Officers, Directors, employees or agents as guarantors of the
financial success of an investment in the Shares. See "Risk Factors".
Limited Transferability of the Shares, The Shares have not been registered
under the 1933 Act or the securities laws of any state. The Shares of common
stock purchased pursuant to this Offering will not be "restricted" shares
because the shares are offered under Rule 504 and this offering is excluded
from the provisions of Regulation D pertaining to restricted shares. This
does not mean, however, that a public market does exist for the Shares.
Currently there is a market for the Shares on NASDAQ - OTC Bulletin Board.
See "Risk Factors" and "Terms of the Offering".
Limitation of Liability Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor
will be liable for any debts of the Company or be obligated to contribute
any additional capital or funds to the Company. See " Risk Factors".
Suitability Standards. Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
<PAGE>
Use of Proceeds. The Company plans to use the money received from this
offering to cover the costs involved with public relations and building of
investor awareness. The funds will not be deposited in an escrow account and
will be available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
Fiscal Year: December 31st
PRODUCTS
The Company is engaged in the wholesale distribution of health and
nutritional supplements,
MATERIAL CONTRACTS
The Company entered into an agreement with The Right Solution Group ( TRS )
to market the Nutricology, Inc., product line for a period of five years
commencing on January 6,1998
MARKETING APPROACHES
The Company intends to solicit its business through medical professionals,
other health care practitioners, the Internet, health magazines, newspapers,
direct mail using a targeted mailing list and trade shows.
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
-Investor should acquire the Shares unless he can afford a complete loss of
his investment. The risks described below are those which the Company deems
most significant as of the date hereof. Other factors which may have a
material impact on the operations of the Company may not be foreseen. In
addition to the other factors set forth elsewhere in this Memorandum,
prospective Investors should carefully consider the following specific risk
factors:
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international
conditions; inflation or deflation; fluctuation in interest rates; the
availability of, and fluctuations in the money supply. The extent, type and
sophistication of the Company's competition; and government regulations.
Operations. The Company's operating subsidiary Nutricology,inc /
Allergy Research has been in business for over 19 years.
Dependence on Key Personnel, The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable person.
Lack of Adequate Capital, Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the
affairs of the Company in a manner that maximizes its chances of success
and, accordingly, the best chances of raising future funding.
Inherent Business Risks, The business that the Company is engaged in
involves substantial and inherent risks associated with an emerging company
with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment, The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it
is very likely that the Company will not be able to advance any business
activities and Investors could lose their entire investments.
Arbitra[y Purchase Priceo No Market, The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No
<PAGE>
assurance is or can be given that the Shares, although transferable, could
be sold for the purchase price, or for any amount. There currently is a
market for resale of the Shares on the OTC/BB.
Restriction of Transferability, While the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the Shares
for a substantial period of time are advised against purchasing Shares. The
Shares are not registered under the 1933 Act or under the securities laws of
any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offerina. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase
or take down any of the Shares offered pursuant to this Offering. No escrow
account is maintained and no minimum amount is required to be sold. Funds
will be available to the Company upon receipt.
. Management and Operation Experience, The Company's Officers, Directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations, marketing and research but their
experience in these fields is limited. There is no assurance that such
experience will result in the success of the Company
Other Risks, No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business
is undertaken by the Company, will generate cash sufficient to operate the
business of the Company or that other parties entering into agreements
relating to the Company's business will meet their respective obligations.
Dividends, The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the
purpose of increasing the net worth and reserves of the Company. Therefore,
there can be no assurance that any holder of Common Stock will receive any
cash, stock or other dividends on his shares of Common Stock. Future
dividends on Common Stock, if any, will depend on the future earnings,
financing requirements and other factors.
Additional Securities Available for Issuance, The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common
Stock. At this time 14,500,000 shares of common stock have been issued.
Accordingly, including those purchasing the shares offered with the sale of
these units, investors will be dependent upon the judgement of management in
connection with the future issuance and sale of shares of the Company's
capital stock, in the event purchasers can be found for such securities.
<PAGE>
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $2,500 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of
Shares are sold, the Company anticipates that the net proceeds to it from
the Offering will be as follows:
Maximum
Item Shares Sold
---- -----------
Gross Proceeds of Offering $156,000.00
Offering Expenses
-----------------
Cost of Offering $ 1,500.00
-----------
TOTAL PROCEEDS RECEIVED: $154,500.00
Operating Expenses
------------------
Investor Relations $154,500.00
-----------
TOTAL $154,500.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $1,000.00, (ii) accounting fees of
approximately $500 and (iii) printing and other miscellaneous costs of
approximately $1000. A sales commissions will be paid only to NASD
broker/dealers and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Units are sold,
will be sufficient to sustain the planned marketing activities of the
Company for a period of 3 months, depending upon the number of Units sold in
the offering and other factors. Even if all the Units offered hereunder are
sold, the Company will require additional capital in order to fund continued
development activities and capital expenditures that must be made. The
Company's business plan is based on the premise that additional funding will
be obtained through funds generated from operations, the exercising of the
warrants by shareholders, additional offerings of its securities, or other
arrangements. There can be no assurance that any securities offerings will
take place in the future, or that funds sufficient to meet any of the
foregoing needs or plans will be raised from operations or any other source.
<PAGE>
DESCRIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 14,965,355 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
Voting Rights. Each share of the 14,965,355 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
Dividends. The Company has never paid a dividend and does not
anticipate doing the near future.
Options. The Company currently has 1,000,000 options outstanding in
relation to its common stock, no options have been exercised to date.
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund provisions, and are not liable to
further call or assessment. The Shares, when paid for by Investors, will be
fully paid and nonassessable. Each share of the Company's common shares is
entitled to a pro rata share in any asset available for distribution to
holders of equity securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 96,000
Share (Units) at a purchase price of $1.625 per share of the Company's
common stock, with a warrant that entitles the purchaser an additional
common share when exercised at $1.75 per share on or before April 15th,
2000. The Company may, in its sole discretion, terminate the offering at any
time. The Offering will close on the earliest of April 30th, 1998 or the
election of the Company when all of the Shares are sold, in no event later
than April 30th, 1998. The minimum subscription is $16,250 (10,000 Shares)
per Investor, although the Company, in its sole discretion, may accept
subscriptions for lesser amounts.
Terms of Sale: The Company hereby agrees to sell to the purchaser and
the purchaser hereby agrees to subscribe for 10,000 units in the capital of
the Company (the "Units") for a purchase of $1.625 US per Unit for an
aggregate purchase of $16,250.00 US ( the "Purchase Funds" ).
<PAGE>
Constitution of Shares: Each Unit will consist of one fully paid and
non-assessable common share in the capital stock ( the "Share" ) of the
Company and the right to purchase one share purchase warrant (the
"Warrants") with terms as described below.
Terms of Warrants: All Warrants will
(a) be comprised in one warrant certificate ( the "Warrant Certificate" ),
registered in the name of the purchaser, representing an aggregate number of
Warrants which be equal to the number of Units being acquired hereunder by
the Purchaser;
(b) be non-transferable;
(c) will be subject to the terms and conditions which are adopted by the
Company for the Warrants, which terms and conditions will, amongst other
things,
(i) provide for an adjustment in class and number of shares issuable
pursuant to any exercise thereof upon the occurrence of certain events,
including anysubdivision, consolidation or re-classification of the shares,
and
(ii) not provide for any adjustment in the number of shares issuable
pursuant to any exercise thereof in the event of the Company issuing any
other shares, warrants or options to acquire shares at prices either above,
at or below the exercise price of the Warrants;
(d) and each Warrant will provide for the right to purchase one additional
Share. The Warrant will be exercisable in whole or in part from time to
time at any time prior to 4:30 p.m. (PST) on April 15, 2000 at $1.75 per
Share.
The Shares are being offered and sold by the Company under the exemption
from registration contained in Rule 504 under Regulation D and related
exemptions from state registration requirements. Rule 504 permits the
Company to offer and sell its stock in an amount not exceeding $1,000,000 to
an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii) imposed a
limited disclosure obligation of all issuers such as the Company which was
intended to ensure that investors in a Rule 504 transaction were clearly
advised of the restricted character of the securities being offered for
sale. This requirement was eliminated in July, 1992 at which time the
Securities and Exchange Commission adopted an amendment to Rule 504 that
eliminated all limitations on the manner of offering of stock under that
rule and/or the resale of stock purchased in reliance on that rule.
Therefore, following adoption of the 1992 amendment, the securities being
offered and sold by the Company pursuant to the present Offering are
available for immediate resale by nonaffiliates of the issuer.
<PAGE>
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $2,500
as detailed in the Use of Proceeds.
DIRECTORS, OFFICERS AND KEY PERSONNEL OF THE COMPANY
officers and Directors, The following information sets forth the names
of the officers and directors of the Company, their present position with
the Company and biographic information:
NAME POSITION HELD SINCE
---- -------- ----------
Dr. Steven Levine Chairman, CEO and Director December 1997
Susan Levine Director, Secretary and Treasurer December 1997
Arnold Takemoto Director December 1997
Marianne Sum President, COO and Director December 1997
Dr. Stephen Levine Ph.D. is a Director, Chief Executive Officer. Dr.
Stephen Levine founded Nutricology/Allergy Research Group in 1979. Dr.
Levine graduated Cum Laude from the State University College in Buffalo, NY
and obtained his Ph.D. from the University of California, Berkeley; Horace
an Edith King Davis Memorial Fellow; NIH Training Grant, Predoctoral Fellow
1972 - 1976. Dr. Levine is internationally recognized as one of the
foremost innovative leaders and researchers in nutritional supplement
formulation. He is also recognized as an international lecturer with
several editorial positions in professionally sought after publications.
Dr. Levine is the author of Antioxidant Adaptation, it's role in Free
Radical Pathology, which is considered to be the leading resource on the
subjects.
Susan Levine. is a Director, Secretary and Treasurer of the Company. Mrs.
Levine holds a BA from the University of Berkeley in psychology and social
welfare. She developed and implemented housing programs, research and grant
proposals for funding of various community programs. This prior knowledge
and experience is a valuable asset to the Company. Currently Mrs. Levine
co-ordinates various national and international medical conferences along
with executive duties.
Arnold Takemoto, is a Director of the Company. Mr. Takernoto obtained a
B.SC., in Chemistry from Clarkson College of Technology as well as graduate
training at the University of Vermont Medical School and Denver University
graduate School. Mr. Takernoto has been a well known lecturer in the health
care community with a private practice designing state of the art
complementary health protocols with patients exhibiting chronic conditions,
tenacious viral conditions and immune deficiencies, allergies and assorted
rheurnatologic conditions, anti-aging and sport nutrition working
collaboratively to optimize patient health care. Mr. Takernoto's programs
are used by referral Physicians throughout the United States.
<PAGE>
Marianne Sum, is the President and Director to the Company. Ms. Sum
graduated Summa Cum Laude with a BA from Boston State College, Summa Cum
Laude with a MA from Northeastern University and a Ph.D. in I-Estory from
Boston College. Ms. Sum has a 25 year history as a successful
businessperson with 7 years in the health and wellness field. She is noted
for the tremendous growth that goes hand-in-hand with her direct management
expertise as well as her diligent quality control programs. Ms. Sum was
awarded Salesperson of the Year for 1991 and 1992 during her years with Fun
and Fitness; and was promoted to V.P. of Sales and Marketing.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the
date of this Memorandum by (i) each person known to the Company to own of
record or beneficially 5% or more of the 14,500,000 outstanding shares of
Common Stock of the Company, (ii) each Director of the Company, and (iii)
all officers and directors of the Company as a group, as of the date of this
Memorandum and adjusted to reflect share holdings after the sale of the
maximum number of Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
--------------- --------- ----------
Dr. Stephen Levine 9,800,000 67.58% 9,800,000 67.14%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company
intends, in the future, to pay Directors who are not employees of the
Company, compensation of $500 per Director's Meeting, as well as
reimbursements of any out of pocket expenses incurred in the Company's
behalf.
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc., and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior
notice, access during reasonable business hours to such books and records,
and the right to inspect and copy them. Within 120 days after the close of
each fiscal year, reports will be distributed to the shareholders which will
include financial statements (including a balance sheet and statements of
income, shareholder's equity, and cash flows) prepared in accordance with
generally accepted accounting principals, with a reconciliation to the tax
information supplementary supplied, accompanied by a copy of the
accountant's report.
<PAGE>
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix;
Arizona, will pass upon certain matters for the Company.
LITIGATION
The Company is not presently involved in any material litigation or
other legal proceedings.
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The
Company shall, to the extent such information is available or can be
acquired without unreasonable effort or expense, endeavour to provide the
information to such persons. All offeree's are urged to make such personal
investigations, inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to
Mr.Arnold Takernoto by calling (602) 922-2452. Requests for additional
copies of this Memorandum or assistance in executing subscription documents
may be directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R. S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEM[PTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within the
meaning of AR.S 44-1801(17), and I am acquiring these securities
<PAGE>
for myself, not for other persons. If qualifying as a non-accredited
investor, I further represent that this investment does not exceed 20% of my
net worth ( excluding principal residence, furnishings therein and personal
automobiles).
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE CON0,USSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY
SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEWT.
THE COMAIISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMNIEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIM[ITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981,
IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
<PAGE>
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT
OF MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND
DOCUMENTS PURPOSED TO BE SUMMARIZED HEREIN.
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to
the Regulation D Rule 504 or 505, and that if all of the conditions and
limitations of Regulation D are not complied with, the Offering will be
resubmitted to the Attorney General for amended exemption. I understand that
any literature used in connection with this Offering has not been previously
filed with the Attorney General and has not been reviewed by the Attorney
General. This Investment Unit is being purchased for my own account for
investment, and not for distribution or resale to others. I agree that I
will not sell or otherwise transfer these securities unless they are
registered under the Federal Securities Act of 1933 or unless an exemption
from such registration is available. I represent that I have adequate means
of providing for my current needs and possible personal contingencies of
financial problems, and that I have no need for liquidity of this
investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or
my offeree representative and myself, and that, upon reasonable notice, the
books and records of the issuer will be available for inspection by
investors, at reasonable hours at the principal place of business.
<PAGE>
EXHIBITS
Scottsdale Scientific, Inc.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for common stock (hereinafter
"Shares"), as described in the Private Offering Memorandum dated
October 13th, 1998 ("Memorandum"), of Scottsdale Scientific, Inc., a
Florida corporation (the "Company"), being offered by the Company for
a purchase price of $1.00 per Share and tenders herewith the sum of $
in payment therefor, together with tender of this Subscription
Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of ___________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. The Company has over 19 years of financial and operating history;
d. That the Shares have not been registered under the Securities Act
of 1933, as amended, in reliance upon exemptions contained in
that Act, and that the Shares have not been registered under the
securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as the
basis for the exemption from the registration requirements of the
Securities Act of 1933 and of the applicable state's securities
laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
<PAGE>
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the
merits and risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk
of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents and
warrants that he is aware of the high degree of risk involved in
making investment in the Shares;
e. That the undersigned subscriber's decision to purchase the Shares
is based solely on the information contained in the Private
Offering Memorandum and on written answers to such questions as
he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way
with any investment company, national or local brokerage firm or
broker dealer. The undersigned subscriber's decision to purchase
the Shares is not based in whole or in part on any assumption or
understanding that an investment company, national or local
brokerage firm or other broker dealer is involved in any way in
this Offering or has endorsed or otherwise recommended an
investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess of
$50,000 or joint income with my suppose in excess of $50,000 in
each of the two most recent years and who reasonably expects an
income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares
<PAGE>
and hereby represents and warrants that he has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the shares
and of making an informed investment decision and will not
require a purchaser representative.
5. The undersigned understands and agrees that this subscription is made
subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until October
30th, 1998 in which to accept or reject it. If no action is taken
by the Company within said period, the subscription shall be
deemed to have been accepted. In each case where the subscription
is rejected, the Company shall return the entire amount tendered
by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time, execute
and deliver such documents or other instruments as may be
requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with full
power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying or
conforming changes in the Subscription Document so that such document
is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document
this ___ day of ______________, 1998.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1998.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1998.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1998.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No.____________________
Name of Offeree :____________________
PRIVATE PLACEMENT MEMORANDUM OF UNITS
OF
Scottsdale Scientific, Inc.
(a Florida Corporation) (" Company")
46,855 Common Shares
$.001 Par Value
$3.18 Per Share
MINIMUM INVESTMENT
5,000 Shares
$15,900.00
Principal Executive Offices:
8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
The date of this Memorandum is July 1st, 1998
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered : Shares of the Company's common stock, $0.001
par value.
Number of Units offered: 46,855 Shares.
Price per security : $3.18 per Share.
Total proceeds : If all shares sold : $149,000.00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 10
Description of Securities 11
Terms of the Offering 11-12
Directors, Officers and key Personnel of the Company 13
Principal Stockholders 14
Remuneration of Directors and Officers 14
Reports 15
Legal Matters 15
Litigation 15
Additional Information 15
State Restrictions 15-17
EXHIBITS
Exhibit A Subscription Agreement 18-22
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1998 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written perrmssion of Scottsdale Scientific, Inc.
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety by
express reference to the Memorandum and the exhibits referred to therein.
Each prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 8655 East Via de
Ventura, Suite G204, Scottsdale, Arizona 85258.
The Offering. The Company is offering up to 15,000 of its common stock, par
value $.001 per share (the "Shares"). The Minimum investment for an Investor
is 1,000 Shares, or $1,000.00. The Company, in its sole discretion, may
accept subscriptions for up to an aggregate of 15,000 or $15,000.00 until
October 30th, 1998, or until such earlier date as the Company determines
that this Offering shall be terminated. In its sole discretion, the Company
may elect to terminate this Offering even if subscriptions for Shares have
been received and accepted by the Company. See "Terms of the Offering" and
"Subscription for Shares".
Company's Business. The Company is engaged in the wholesale distribution of
nutrional supplements. Through its wholly owned subsidiary, Nutricology,
Inc./Allergy Research Group, is an innovative leader in the research and
formulation of nutritional supplements.
Risk Factors. The offering involves speculative investment with substantial
risks, including those risks associated with the industry. Although the
Company will use its best efforts to protect the investments of the
Investors, there is no assurance that the Company's efforts will be
successful. Accordingly, a prospective Investor should not view the Company
or its Officers, Directors, employees or agents as guarantors of the
financial success of an investment in the Shares. See "Risk Factors".
Limited Transferability of the Shares. The Shares have not been registered
under the 1933 Act or the securities laws of any state. The Shares of common
stock purchased pursuant to this Offering will not be "restricted" shares
because the shares are offered under Rule 504 and this offering is excluded
from the provisions of Regulation D pertaining to restricted shares. This
does not mean, however, that a public market does exist for the Shares.
Currently there is a market for the Shares on NASDAQ - OTC Bulletin Board.
See "Risk Factors" and "Terms of the Offering".
Limitation of Liability. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor
will be liable for any debts of the Company or be obligated to contribute
any additional capital or funds to the Company. See " Risk Factors".
Suitability Standards. Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
<PAGE>
Use of Proceeds. The Company plans to use the money received from this
offering to cover the costs involved with public relations and building of
investor awareness. The funds will not be deposited in an escrow account and
will be available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
Fiscal Year: December 31st
PRODUCTS
The Company is engaged in the wholesale distribution of health and
nutritional supplements,
MATERIAL CONTRACTS
The Company entered into an agreement with The Right Solution Group ( TRS )
to market the Nutricology, Inc., product line for a period of five years
commencing on January 6,1998
MARKETING APPROACHES
The Company intends to solicit its business through medical professionals,
other health care practioners, the Internet, health magazines, newspapers,
direct mail using a targeted mailing list and trade shows.
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
'Investor should acquire the Shares unless he can afford a complete loss of
his investment. The risks described below are those which the Company deems
most significant as of the date hereof. Other factors which may have a
material impact on the operations of the Company may not be foreseen. In
addition to the other factors set forth elsewhere in this Memorandum,
prospective Investors should carefully consider the following specific risk
factors:
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international
conditions; inflation or deflation; fluctuation in interest rates; the
availability of, and fluctuations in the money supply. The extent, type and
sophistication of the Company's competition; and government regulations.
Operations. The Company's operating subsidiary Nutricology,Inc /
Allergy Research has been in business for over 19 years.
Dependence on Key Personnel. The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable person.
Lack of Adequate Capital. Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the
affairs of the Company in a manner that maximizes its chances of
success and, accordingly, the best chances of raising future funding.
Inherent Business Risk. The business that the Company is engaged in
involves substantial and inherent risks associated with an emerging company
with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment. The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it
is very likely that the Company will not be able to advance any business
activities and Investors could lose their entire investments.
Arbitrary Purchase Price; No Market. The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No
<PAGE>
assurance is or can be given that the Shares, although transferable, could
be sold for the purchase price, or for any amount. There currently is a
market for resale of the Shares on the OTC/ Bulletin Board.
Restriction of Transferability. While the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the Shares
for a substantial period of time are advised against purchasing Shares. The
Shares are not registered under the 1933 Act or under the securities laws of
any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase
or take down any of the Shares offered pursuant to this Offering. No escrow
account is maintained and no minimum amount is required to be sold. Funds
will be available to the Company upon receipt.
Management and Operation Experience. The Company's Officers, Directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations, marketing and research but their
experience in these fields is limited. There is no assurance that such
experience will result in the success of the Company.
Other Risks. No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business
is undertaken by the Company, will generate cash sufficient to operate the
business of the Company or that other parties entering into agreements
relating to the Company's business will meet their respective obligations.
Dividends. The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the
purpose of increasing the net worth and reserves of the Company. Therefore,
there can be no assurance that any holder of Common Stock will receive any
cash, stock or other dividends on his shares of Common Stock. Future
dividends on Common Stock, if any, will depend on the future earnings,
financing requirements and other factors.
Additional Securities Available for Issuance. The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common
Stock. At this time 14,596,000 shares of common stock have been issued.
Accordingly, including those purchasing the shares offered with the sale of
these units, investors will be dependent upon the judgement of management in
connection with the future issuance and sale of shares of the Company's
capital stock, in the event purchasers can be found for such securities.
<PAGE>
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $1,000 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of
Shares are sold, the Company anticipates that the net proceeds to it from
the Offering will be as follows:
Maximum
Item Shares Sold
---- -----------
Gross Proceeds of Offering $149,000.00
Offering Expenses
-----------------
Cost of Offering $ 1,000.00
-----------
TOTAL PROCEEDS RECEIVED: $148,000.00
Operating Expenses
------------------
Investor Relations $148,000.00
-----------
TOTAL $148,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $500.00, (ii) accounting fees of
approximately $250 and (iii) printing and other miscellaneous costs of
approximately $250. A sales commissions will be paid only to NASD
broker/dealers and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Shares are sold,
will be sufficient to sustain the planned marketing activities of the
Company for a period of 3 months, depending upon the number of Shares sold
in the offering and other factors. Even if all the Shares offered hereunder
are sold, the Company will require additional capital in order to fund
continued development activities and capital expenditures that must be
made. The Company's business plan is based on the premise that additional
funding will be obtained through funds generated from operations, the
exercising of the warrants by shareholders, additional offerings of its
securities, or other arrangements. There can be no assurance that any
securities offerings will take place in the future, or that funds
sufficient to meet any of the foregoing needs or plans will be raised from
operations or any other source.
<PAGE>
DESCRIIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 14,965,355 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
Voting Rights. Each share of the 14,965,355 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
Dividends. The Company has never paid a dividend and does not
anticipate doing the near future.
Options. The Company currently has 1,000,000 options outstanding in
relation to its common stock, no options have been exercised to date.
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund provisions, and are not liable to
further call or assessment. The Shares, when paid for by Investors, will be
fully paid and nonassessable. Each share of the Company's common shares is
entitled to a pro rata share in any asset available for distribution to
holders of equity securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 46,855
Shares at a purchase price of $3.18 per Share of the Company's common stock.
The Company may, in its sole discretion, terminate the offering at any time.
The Offering will close on the earliest of July 31 st, 1998 or the election
of the Company when all of the Shares are sold, in no event later than July
31st, 1998. The minimum subscription is $15,900 (5,000 Shares) per Investor,
although the Company, in its sole discretion, may accept subscriptions for
lesser amounts.
Terms of Sale: The Company hereby agrees to sell to the purchaser and
the purchaser hereby agrees to subscribe for 5,000 shares in the capital of
the Company (the "Shares") for a purchase of $3.18 US per Share for an
aggregate purchase of $15,900.00 US ( the "Purchase Funds" ).
<PAGE>
Constitution of Shares: Each Share will consist of one fully paid and
non-assessable common Share in the capital stock ( the "Share" ) of the
Company.
Terms of Warrants: All Warrants will
(a) be comprised in one warrant certificate ( the "Warrant Certificate" ),
registered in the name of the purchaser, representing an aggregate number of
Warrants which be equal to the number of Units being acquired hereunder by
the Purchaser;
(b) be non-transferable;
(c) will be subject to the terms and conditions which are adopted by the
Company for the Warrants, which terms and conditions will, amongst other
things,
(i) provide for an adjustment in class and number of shares
issuable pursuant to any exercise thereof upon the occurrence of
certain events, including any subdivision, consolidation or
re-classification of the shares, and
(ii) not provide for any adjustment in the number of shares
issuable pursuant to any exercise thereof in the event of the
Company issuing any other shares, warrants or options to acquire
shares at prices either above, at or below the
exercise price of the Warrants;
(d) and each Warrant will provide for the right to purchase one
additional Share. The Warrant will be exercisable in whole or in
part from time to time.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and
related exemptions from state registration requirements. Rule 504 permits
the Company to offer and sell its stock in an amount not exceeding
$1,000,000 to an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii)
imposed a limited disclosure obligation of all issuers such as the Company
which was intended to ensure that investors in a Rule 504 transaction were
clearly advised of the restricted character of the securities being offered
for sale. This requirement was eliminated in July, 1992 at which time the
Securities and Exchange Commission adopted an amendment to Rule 504 that
eliminated all limitations on the manner of offering of stock under that
rule and/or the resale of stock purchased in reliance on that rule.
Therefore, following adoption of the 1992 amendment, the securities being
offered and sold by the Company pursuant to the present Offering are
available for immediate resale by nonaffiliates of the issuer.
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $ 1,000
as detailed in the Use of Proceeds.
<PAGE>
Officers and Directors. The following information sets forth the names
of the officers and directors of the Company, their present position with
the Company and biographic information:
NAME POSITION HELD SINCE
---- -------- ----------
Dr. Steven Levine Chairman, CEO and Director December 1997
Susan Levine Director, Secretary and Treasurer December 1997
Arnold Takemoto Director December 1997
Marianne Sum President, COO and Director December 1997
Dr. Steven Levine Ph D is a Director, Chief Executive Officer. Dr. Stephen
Levine founded Nutricology/Allergy Research Group in 1979. Dr. Levine
graduated Cum Laude from the State University College in Buffalo, NY and
obtained his Ph.D. from the University of California, Berkeley; Horace an
Edith King Davis Memorial Fellow; NIH Training Grant, Predoctoral Fellow
1972 - 1976. Dr. Levine is internationally recognized as one of the
foremost innovative leaders and researchers in nutritional supplement
formulation. He is also recognized as an international lecturer with
several editorial positions in professionally sought after publications.
Dr. Levine is the author of Antioxidant Adaptation, it's role in Free
Radical Pathology, which is considered to be the leading resource on the
subjects.
Susan Levine is a Director, Secretary and Treasurer of the Company. Mrs.
Levine holds a BA from the University of Berkeley in psychology and social
welfare. She developed and implemented housing programs, research and grant
proposals for funding of various community programs. This prior knowledge
and experience is a valuable asset to the Company. Currently Mrs. Levine
co-ordinates various national and international medical conferences along
with executive duties.
Arnold Takemoto is a Director of the Company. Mr. Takemoto obtained a
B.SC., in Chemistry from Clarkson College of Technology as well as graduate
training at the University of Vermont Medical School and Denver University
graduate School. Mr. Takemoto has been a well known lecturer in the health
care community with a private practice designing state of the art
complementary health protocols with patients exhibiting chronic conditions,
tenacious viral conditions and immune deficiencies, allergies and assorted
rheumatologic conditions, anti-aging and sport nutrition working
collaboratively to optimize patient health care. Mr. Takemoto's programs are
used by referral Physicians throughout the United States.
Marianne Sum is the President and Director to the Company. Ms. Sum
graduated Summa Cum Laude with a BA from Boston State College, Summa Cum
Laude with a MA from Northeastern University and a Ph.D. in History from
Boston College. Ms. Sum has a 25 year history as a successful
businessperson with 7 years in the health and wellness field. She is noted
for the
<PAGE>
tremendous growth that goes hand-in-hand with her direct management
expertise as well as her diligent quality control programs. Ms. Sum was
awarded Salesperson of the Year for 1991 and 1992 during her years with Fun
and Fitness; and was promoted to V.P. of Sales and Marketing.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the
date of this Memorandum by (i) each person known to the Company to own of
record or beneficially 5% or more of the 14,965,355 outstanding shares of
Common Stock of the Company, (ii) each Director of the Company, and (iii)
all officers and directors of the Company as a group, as of the date of this
Memorandum and adjusted to reflect share holdings after the sale of the
maximum number of Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
--------------- --------- ----------
Dr. Steven Levine 9,800,000 65.48% 9,800,000 65.41%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company
intends, in the future, to pay Directors who are not employees of the
Company, compensation of $500 per Director's Meeting, as well as
reimbursements of any out of pocket expenses incurred in the Company's
behalf.
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc., and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior
notice, access during reasonable business hours to such books and records,
and the right to inspect and copy them. Within 120 days after the close of
each fiscal year, reports will be distributed to the shareholders which will
include financial statements (including a balance sheet and statements of
income, shareholder's equity, and cash flows) prepared in accordance with
generally accepted accounting principals, with a reconciliation to the tax
Information supplementary supplied, accompanied by a copy of the
accountant's report.
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix,
Arizona, 85028 will pass upon certain matters for the Company.
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or other
legal proceedings.
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading, Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The
Company shall, to the extent such information is available or can be
acquired without unreasonable effort or expense, endeavor to provide the
information to such persons. All offeree's are urged to make such personal
investigations, inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to
Mr.Arnold Takemoto by calling (602) 922-2452. Requests for additional copies
of this Memorandum or assistance in executing subscription documents may be
directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R. S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within the
meaning of AKS 44-1801(17), and I am acquiring these securities for myself,
not for other persons. If qualifying as a non-accredited investor, I further
represent that this investment does not exceed 20% of my net worth (
excluding principal residence, furnishings therein and personal
automobiles).
<PAGE>
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY
SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 198 1,
IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION OF THE
CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN
UNTRUE STATEMENT OF MATERIAL FACT AND DOES NOT OMIT ANY
MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. IT
<PAGE>
CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPOSED TO BE
SUMMARIZED HEREIN.
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to
the Regulation D Rule 504 or 505, and that if all of the
Conditions and limitations of Regulation D are not complied with, the
Offering will be resubmitted to the Attorney General for amended exemption. I
understand that any literature used in connection with this Offering has not
been previously filed with the Attorney General and has not been reviewed by
the Attorney General. This Investment Unit is being purchased for my own
account for investment, and not for distribution or resale to others. I agree
that I will not sell or otherwise transfer these securities unless they are
registered under the Federal Securities Act of 1933 or unless an exemption
from such registration is available. I represent that I have adequate means
of providing for my current needs and possible personal contingencies of
financial problems, and that I have no need for liquidity of this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or
my offeree representative and myself, and that, upon reasonable notice, the
books and records of the issuer will be available for inspection by
investors, at reasonable hours at the principal place of business.
<PAGE>
EXHIBITS
Scottsdale Scientific, Inc.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for common stock (hereinafter
"Shares"), as described in the Private Offering Memorandum dated
October 13th, 1998 ("Memorandum"), of Scottsdale Scientific, Inc., a
Florida corporation (the "Company"), being offered by the Company for
a purchase price of $1.00 per Share and tenders herewith the sum of $
in payment therefor, together with tender of this Subscription
Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of ___________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. The Company has over 19 years of financial and operating history;
d. That the Shares have not been registered under the Securities Act
of 1933, as amended, in reliance upon exemptions contained in
that Act, and that the Shares have not been registered under the
securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as the
basis for the exemption from the registration requirements of the
Securities Act of 1933 and of the applicable state's securities
laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
<PAGE>
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the
merits and risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk
of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents and
warrants that he is aware of the high degree of risk involved in
making investment in the Shares;
e. That the undersigned subscriber's decision to purchase the Shares
is based solely on the information contained in the Private
Offering Memorandum and on written answers to such questions as
he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way
with any investment company, national or local brokerage firm or
broker dealer. The undersigned subscriber's decision to purchase
the Shares is not based in whole or in part on any assumption or
understanding that an investment company, national or local
brokerage firm or other broker dealer is involved in any way in
this Offering or has endorsed or otherwise recommended an
investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess of
$50,000 or joint income with my suppose in excess of $50,000 in
each of the two most recent years and who reasonably expects an
income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares
<PAGE>
and hereby represents and warrants that he has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the shares
and of making an informed investment decision and will not
require a purchaser representative.
5. The undersigned understands and agrees that this subscription is made
subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until October
30th, 1998 in which to accept or reject it. If no action is taken
by the Company within said period, the subscription shall be
deemed to have been accepted. In each case where the subscription
is rejected, the Company shall return the entire amount tendered
by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time, execute
and deliver such documents or other instruments as may be
requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with full
power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying or
conforming changes in the Subscription Document so that such document
is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document
this ___ day of ______________, 1998.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1998.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1998.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1998.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No.
Name of Offeree :
PRIVATE PLACEMENT MEMORANDUM OF UNITS
OF
SCOTTSDALE SCIENTIFIC, INC.
(a Florida Corporation) (" Company")
20,000 Common Shares and 20,000 Common Share Purchase Warrants
$.001 Par Value
$2.50 Per Share
Warrants exercisable at $2. 00 per Share expiring on July 3 1 St., 2000.
MINIMUM INVESTMENT
1,000 SHARES
$2,500.00
Principal Executive Offices:
8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
The date of this Memorandum is July 24th, 1998
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered : Shares of the Company's common stock, $0.001
par value.
Number of Units offered : 20,000 Shares and 20,000 Warrants.
Price per security : $2.50 per Share. Warrant exercisable at $2.00 per
Share up until July 31st, 2000.
Total proceeds : If all shares sold : $50,000. If all Warrants exercised
$90,000.00.
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 10
Description of Securities 11
Terms of the Offering 11-12
Directors, Officers and key Personnel of the Company 13
Principal Stockholders 14
Remuneration of Directors and Officers 14
Reports 15
Legal Matters 15
Litigation 15
Additional Information 15
State Restrictions 15-17
EXHIBITS
Exhibit A Subscription Agreement 18-22
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1998 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written perrmssion of Scottsdale Scientific, Inc.
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety by
express reference to the Memorandum and the exhibits referred to therein.
Each prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 8655 East Via de
Ventura, Suite G204, Scottsdale, Arizona 85258.
The Offering. The Company is offering up to 20,000 of its common stock
units, par value $.001 per share (the "Shares"). The Minimum investment for
an Investor is 1,000 Shares, or $2,500,00. The Company, in its sole
discretion, may accept subscriptions for up to an aggregate of 20,000 or
$50,000.00 until July 31st, 1998, or until such earlier date as the Company
determines that this Offering shall be terminated. In its sole discretion,
the Company may elect to terminate this Offering even if subscriptions for
Shares have been received and accepted by the Company. See "Terms of the
Offering" and "Subscription for Shares".
Company's Business: The Company is engaged in the wholesale distribution of
nutrional supplements. Through its wholly owned subsidiary, Nutricology,
Inc./Allergy Research Group, is an innovative leader in the research and
formulation of nutritional supplements.
Risk Factors: The offering involves speculative investment with substantial
risks, including those risks associated with the industry. Although the
Company will use its best efforts to protect the investments of the
Investors, there is no assurance that the Company's efforts will be
successful. Accordingly, a prospective Investor should not view the Company
or its Officers, Directors, employees or agents as guarantors of the
financial success of an investment in the Shares. See "Risk Factors".
Limited Transferability of the Shares. The Shares have not been registered
under the 1933 Act or the securities laws of any state. The Shares of common
stock purchased pursuant to this Offering will not be "restricted" shares
because the shares are offered under Rule 504 and this offering is excluded
from the provisions of Regulation D pertaining to restricted shares. This
does not mean, however, that a public market does exist for the Shares.
Currently there is a market for the Shares on the NASDAQ - OTC Bulletin
Board. See "Risk Factors" and "Terms of the Offering".
Limitation of Liability. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor
will be liable for any debts of the Company or be obligated to contribute
any additional capital or funds to the Company. See " Risk Factors".
Suitability Standards. Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
<PAGE>
Use of Proceeds. The Company plans to use the money received from this
offering to cover the costs involved with public relations and building of
investor awareness. The funds will not be deposited in an escrow account and
will be available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
Fiscal Year: December 31st
PRODUCTS
The Company is engaged in the wholesale distribution of health and
nutritional supplements,
MATERIAL CONTRACTS
The Company entered into an agreement with The Right Solution Group ( TRS )
to market the Nutricology, Inc., product line for a period of five years
commencing on January 6,1998
MARKETING APPROACHES
The Company intends to solicit its business through medical professionals,
other health care practioners, the Internet, health magazines, newspapers,
direct mail using a targeted mailing list and trade shows.
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
-Investor should acquire the Shares unless he can afford a complete loss of
his investment. The risks described below are those which the Company deems
most significant as of the date hereof. Other factors which may have a
material impact on the operations of the Company may not be foreseen. In
addition to the other factors set forth elsewhere in this Memorandum,
prospective Investors should carefully consider the following specific risk
factors:
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international
conditions; inflation or deflation; fluctuation in interest rates; the
availability of, and fluctuations in the money supply. The extent, type and
sophistication of the Company's competition; and government regulations.
Operations . The Company's operating subsidiary Nutricology,lnc /
Allergy Research has been in business for over 19 years.
Dependence on Key Personnel. The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable person.
Lack of Adequate Capital. Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the
affairs of the Company in a manner that maximizes its chances of
success and, accordingly, the best chances of raising future funding.
Inherent Business Risks. The business that the Company is engaged in
involves substantial and inherent risks associated with an emerging company
with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment. The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it
is very likely that the Company will not be able to advance any business
activities and Investors could lose their entire investments.
Arbitrary Purchase Price; No Market. The purchase price for the Shares has
been arbitrarily determined by the Company, and is not necessarily indicative of
their value. No
<PAGE>
Restriction of Transferability. While the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the Shares
for a substantial period of time are advised against purchasing Shares. The
Shares are not registered under the 1933 Act or under the securities laws of
any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase
or take down any of the Shares offered pursuant to this Offering. No escrow
account is maintained and no minimum amount is required to be sold. Funds
will be available to the Company upon receipt.
Management and Operation Experience. The Company's Officers, Directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations, marketing and research but their
experience in these fields is limited. There is no assurance that such
experience will result in the success of the Company.
Other Risks. No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business
is undertaken by the Company, will generate cash sufficient to operate the
business of the Company or that other parties entering into agreements
relating to the Company's business will meet their respective obligations.
Dividends. The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the
purpose of increasing the net worth and reserves of the Company. Therefore,
there can be no assurance that any holder of Common Stock will receive any
cash, stock or other dividends on his shares of Common Stock. Future
dividends on Common Stock, if any, will depend on the future earnings,
financing requirements and other factors.
Additional Securities Available for Issuance. The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common
Stock. At this time 14,642,855 shares of common stock have been issued.
Accordingly, including those purchasing the shares offered with the sale of
these units, investors will be dependent upon the judgement of management in
connection with the future issuance and sale of shares of the Company's
capital stock, in the event purchasers can be found for such securities.
<PAGE>
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $1,000 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of
Shares are sold, the Company anticipates that the net proceeds to it from
the Offering will be as follows:
Item Maximum
---- -------
Shares Sold
-----------
Gross Proceeds of Offering $50,000
Offering Expenses
Cost of Offering $1,000,000
TOTAL PROCEEDS RECEIVED: $49,000.00
Operating Expenses
Investor Relations $49,000.00
TOTAL $49,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as follows:
(i) legal fees of approximately $500.00, (ii) accounting fees of
approximately $300 and (iii) printing and other miscellaneous costs of
approximately $200. A sales commissions will be paid only to NASD
broker/dealers and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Units are sold, will
be sufficient to sustain the planned marketing activities of the Company for
a period of 2 months, depending upon the number of Units sold in the
offering and other factors. Even if all the Units offered hereunder are
sold, the Company will require additional capital in order to fund continued
development activities and capital expenditures that must be made. The
Company's business plan is based on the premise that additional funding will
be obtained through funds generated from operations, the exercising of the
warrants by shareholders, additional offerings of its securities, or other
arrangements. There can be no assurance that any securities offerings will
take place in the future, or that funds sufficient to meet any of the
foregoing needs or plans will be raised from operations or any other source.
<PAGE>
DESCRIIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 14,965,355 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
Voting Rights. Each share of the 14,965,355 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
Dividends. The Company has never paid a dividend and does not
anticipate doing the near future.
Options. The Company currently has 1,000,000 options outstanding in
relation to its common stock, no options have been exercised to date.
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund provisions, and are not liable to
further call or assessment. The Shares, when paid for by Investors, will be
fully paid and nonassessable. Each share of the Company's common shares is
entitled to a pro rata share in any asset available for distribution to
holders of equity securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 20,000
Share (Units) at a purchase price of $2.50 per share of the Company's
common stock, with a warrant that entitles the purchaser an additional
common share when exercised at $2.00 per share on or before July 31st,
2000. The Company may, in its sole discretion, terminate the offering at
any time. The Offering will close on the earliest of July 31st, 1998 or the
election of the Company when all of the Shares are sold, in no event later
than July 31st, 1998. The minimum subscription is $2,500 (1,000 Shares) per
Investor, although the Company, in its sole discretion, may accept
subscriptions for lesser amounts.
Terms of Sale: The Company hereby agrees to sell to the purchaser and
the purchaser hereby agrees to subscribe for 1,000 units in the capital of
the Company (the "Units") for a purchase of $2.50 US per Unit for an
aggregate purchase of $2,500.00 US ( the "Purchase Funds" ).
<PAGE>
Constitution of Shares: Each Unit will consist of one fully paid and
non-assessable common share in the capital stock ( the "Share" ) of the
Company and the right to purchase one share purchase warrant (the
"Warrants") with terms as described below.
Terms of Warrants: All Warrants will
(a) be comprised in one warrant certificate ( the "Warrant Certificate" ),
registered in the name of the purchaser, representing an aggregate number of
Warrants which be equal to the number of Units being acquired hereunder by
the Purchaser;
(b) be non-transferable;
(c) will be subject to the terms and conditions which are adopted by the
Company for the Warrants, which terms and conditions will, amongst other
things,
(i) provide for an adjustment in class and number of shares issuable
pursuant to any exercise thereof upon the occurrence of certain
events, including any subdivision, consolidation or re-classification
of the shares, and
(ii) not provide for any adjustment in the number of shares issuable
pursuant to any exercise thereof in the event of the Company issuing
any other shares, warrants or options to acquire shares at prices
either above, at or below the exercise price of the Warrants;
(d) and each Warrant will provide for the right to purchase one additional
Share. The Warrant will be exercisable in whole or in part from time to
time at any time prior to 4:30 p.m. (PST) on JULY 31ST, 2000 AT $2.00 per
Share.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and
related exemptions from state registration requirements. Rule 504 permits
the Company to offer and sell its stock in an amount not exceeding
$1,000,000 to an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii)
imposed a limited disclosure obligation of all issuers such as the Company
which was intended to ensure that investors in a Rule 504 transaction were
clearly advised of the restricted character of the securities being offered
for sale. This requirement was eliminated in July, 1992 at which time the
Securities and Exchange Commission adopted an amendment to Rule 504 that
eliminated all limitations on the manner of offering of stock under that
rule and/or the resale of stock purchased in reliance on that rule.
Therefore, following adoption of the 1992 amendment, the securities being
offered and sold by the Company pursuant to the present Offering are
available for immediate resale by nonaffiliates of the issuer.
<PAGE>
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $ 1,000
as detailed in the Use of Proceeds.
NAME POSITION HELD SINCE
---- -------- ----------
Dr. Steven Levine Chairman, CEO and Director December 1997
Susan Levine Director, Secretary and Treasurer December 1997
Arnold Takemoto Director December 1997
Marianne Sum President, COO and Director December 1997
Dr. Steven Levine Ph D is a Director, Chief Executive Officer. Dr. Stephen
Levine founded Nutricology/Allergy Research Group in 1979. Dr. Levine
graduated Cum Laude from the State University College in Buffalo, NY and
obtained his Ph.D. from the University of California, Berkeley; Horace an
Edith King Davis Memorial Fellow; NIH Training Grant, Predoctoral Fellow
1972 - 1976. Dr. Levine is internationally recognized as one of the
foremost innovative leaders and researchers in nutritional supplement
formulation. He is also recognized as an international lecturer with
several editorial positions in professionally sought after publications.
Dr. Levine is the author of Antioxidant Adaptation, it's role in Free
Radical Pathology, which is considered to be the leading resource on the
subjects.
Susan Levine is a Director, Secretary and Treasurer of the Company. Mrs.
Levine holds a BA from the University of Berkeley in psychology and social
welfare. She developed and implemented housing programs, research and grant
proposals for funding of various community programs. This prior knowledge
and experience is a valuable asset to the Company. Currently Mrs. Levine
co-ordinates various national and international medical conferences along
with executive duties.
Arnold Takemoto is a Director of the Company. Mr. Takemoto obtained a
B.SC., in Chemistry from Clarkson College of Technology as well as graduate
training at the University of Vermont Medical School and Denver University
graduate School. Mr. Takemoto has been a well known lecturer in the health
care community with a private practice designing state of the art
complementary health protocols with patients exhibiting chronic conditions,
tenacious viral conditions and immune deficiencies, allergies and assorted
rheumatologic conditions, anti-aging and sport nutrition working
collaboratively to optimize patient health care. Mr. Takemoto's programs are
used by referral Physicians throughout the United States.
Marianne Sum is the President and Director to the Company. Ms. Sum
graduated Summa Cum Laude with a BA from Boston State College, Summa Cum
Laude with a MA from Northeastern University and a Ph.D. in History from
Boston College. Ms. Sum has a 25 year history as a successful
businessperson with 7 years in the health and wellness field. She is noted
for the
<PAGE>
tremendous growth that goes hand-in-hand with her direct management
expertise as well as her diligent quality control programs. Ms. Sum was
awarded Salesperson of the Year for 1991 and 1992 during her years with Fun
and Fitness; and was promoted to V.P. of Sales and Marketing.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the
date of this Memorandum by (i) each person known to the Company to own of
record or beneficially 5% or more of the 14,965,355 outstanding shares of
Common Stock of the Company, (ii) each Director of the Company, and (iii)
all officers and directors of the Company as a group, as of the date of this
Memorandum and adjusted to reflect share holdings after the sale of the
maximum number of Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
--------------- --------- ----------
Dr. Steven Levine 9,800,000 65.48% 9,800,000 65.41%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company
intends, in the future, to pay Directors who are not employees of the
Company, compensation of $500 per Director's Meeting, as well as
reimbursements of any out of pocket expenses incurred in the Company's
behalf
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc., and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior
notice, access during reasonable business hours to such books and records,
and the right to inspect and copy them. Within 120 days after the close of
each fiscal year, reports will be distributed to the shareholders which will
include financial statements (including a balance sheet and statements of
income, shareholder's equity, and cash flows) prepared in accordance with
generally accepted accounting principals, with a reconciliation to the tax
information supplementary supplied, accompanied by a copy of the
accountant's report.
<PAGE>
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix,
Arizona, 85028 will pass upon certain matters for the Company.
LITIGATION
The Company is not presently involved in any material litigation or other
legal proceedings.
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this memorandum
contains a fair presentation of the subjects discussed herein and does not
contain a misstatement of material fact or fail to state a material fact
necessary to make any statements made herein not misleading. Persons to whom
offers are made will be furnished with such additional information concerning
the Company and other matters discussed herein as they, or their purchaser
representative or other advisors, may reasonably request. The Company shall, to
the extent such information is available or can be acquired without unreasonable
effort or expense, endeavor to provide the information to such persons. All
offeree's are urged to make such personal investigations, inspections or
inquiries as they deem appropriate.
Questions or requests for additional information may be directed to Mr
Arnold Takemoto by calling (602) 922-2452. Requests for additional copies of
this Memorandum or assistance in executing subscription documents may be
directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R. S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within the
meaning of A.R. S 44-1801(17), and I am acquiring these securities
<PAGE>
for myself, not for other persons. If qualifying as a non-accredited
investor, I further represent that this investment does not exceed 20% of my
net worth ( excluding principal residence, furnishings therein and personal
automobiles).
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California% Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY
SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981,
IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
<PAGE>
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT
OF MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND
DOCUMENTS PURPOSED TO BE SUMMARIZED HEREIN.
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to
the Regulation D Rule 504 or 505, and that if all of the conditions and
limitations of Regulation D are not complied with, the Offering will be
resubmitted to the Attorney General for amended exemption. I understand that
any literature used in connection with this Offering has not been previously
filed with the Attorney General and has not been reviewed by the Attorney
General. This Investment Unit is being purchased for my own account for
investment, and not for distribution or resale to others. I agree that I
will not sell or otherwise transfer these securities unless they are
registered under the Federal
Securities Act of 1933 or unless an exemption from such registration is
available. I represent that I have adequate means of providing for my current
needs and possible personal contingencies of financial problems, and that I
have no need for liquidity of this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or
my offeree representative and myself,
and that, upon reasonable notice, the books and records of the issuer will be
available for inspection by investors, at reasonable hours at the principal
place of business.
<PAGE>
EXHIBITS
Scottsdale Scientific, Inc.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for common stock (hereinafter
"Shares"), as described in the Private Offering Memorandum dated
October 13th, 1998 ("Memorandum"), of Scottsdale Scientific, Inc., a
Florida corporation (the "Company"), being offered by the Company for
a purchase price of $1.00 per Share and tenders herewith the sum of $
in payment therefor, together with tender of this Subscription
Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of ___________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. The Company has over 19 years of financial and operating history;
d. That the Shares have not been registered under the Securities Act
of 1933, as amended, in reliance upon exemptions contained in
that Act, and that the Shares have not been registered under the
securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as the
basis for the exemption from the registration requirements of the
Securities Act of 1933 and of the applicable state's securities
laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
<PAGE>
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the
merits and risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk
of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents and
warrants that he is aware of the high degree of risk involved in
making investment in the Shares;
e. That the undersigned subscriber's decision to purchase the Shares
is based solely on the information contained in the Private
Offering Memorandum and on written answers to such questions as
he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way
with any investment company, national or local brokerage firm or
broker dealer. The undersigned subscriber's decision to purchase
the Shares is not based in whole or in part on any assumption or
understanding that an investment company, national or local
brokerage firm or other broker dealer is involved in any way in
this Offering or has endorsed or otherwise recommended an
investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess of
$50,000 or joint income with my suppose in excess of $50,000 in
each of the two most recent years and who reasonably expects an
income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares
<PAGE>
and hereby represents and warrants that he has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the shares
and of making an informed investment decision and will not
require a purchaser representative.
5. The undersigned understands and agrees that this subscription is made
subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until October
30th, 1998 in which to accept or reject it. If no action is taken
by the Company within said period, the subscription shall be
deemed to have been accepted. In each case where the subscription
is rejected, the Company shall return the entire amount tendered
by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time, execute
and deliver such documents or other instruments as may be
requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with full
power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying or
conforming changes in the Subscription Document so that such document
is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document
this ___ day of ______________, 1998.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1998.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1998.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1998.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No.
Name of Offeree:
PRIVATE PLACEMENT MEMORANDUM OF UNITS
OF
SCOTTSDALE SCIENTIFIC, INC.
(a Florida Corporation) (" Company")
50,000 Common Shares
$0.001 Par Value
$2.00 Per Share
MINIMUM INVESTMENT
5,000 SHARES
$10,000.00
Principal Executive Offices:
8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
The date of this Memorandum is September 15th, 1998
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered : Shares of the Company's common stock, $0.001
par value.
Number of Units offered: 50,000 Shares.
Price per security: $2.00 per Share.
Total proceeds : If all shares sold : $100,000.00.
is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes [ ] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 10
Description of Securities 11
Terms of the Offering 11-12
Directors, Officers and key Personnel of the Company 13
Principal Stockholders 14
Remuneration of Directors and Officers 14
Reports 15
Legal Matters 15
Litigation 15
Additional Information 15
State Restrictions 15-17
EXHIBITS
Exhibit A Subscription Agreement 18-22
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1998 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written perrmssion of Scottsdale Scientific, Inc.
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety by
express reference to the Memorandum and the exhibits referred to therein.
Each prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 8655 East Via de
Ventura, Suite G204, Scottsdale, Arizona 85258.
The Offering. The Company is offering up to 50,000 of its common stock, par
value $.001 per share (the "Shares"). The Minimum investment for an
Investor is 5,000 Shares, or $10,000.00. The Company, in its sole
discretion, may accept subscriptions for up to an aggregate of 50,000 or
$100,000.00 until September 30th, 1998, or until such earlier date as the
Company determines that this Offering shall be terminated. In its sole
discretion, the Company may elect to terminate this Offering even if
subscriptions for Shares have been received and accepted by the Company.
See "Terms of the Offering" and "Subscription for Shares".
Company's Business: The Company is engaged in the wholesale distribution of
nutrional supplements. Through its wholly owned subsidiary, Nutricology,
Inc./Allergy Research Group, is an innovative leader in the research and
formulation of nutritional supplements.
Risk Factor: The offering involves speculative investment with substantial
risks, including those risks associated with the industry. Although the
Company will use its best efforts to protect the investments of the
Investors, there is no assurance that the Company's efforts will be
successful. Accordingly a prospective Investor should not view the Company
or its Officers, Directors, employees or agents as guarantors of the
financial success of an investment in the Shares. See "Risk Factors".
Limited Transferability of the Shares. The Shares have not been registered
under the 1933 Act or the securities laws of any state. The Shares of common
stock purchased pursuant to this Offering will not be "restricted" shares
because the shares are offered under Rule 504 and this offering is excluded
from the provisions of Regulation D pertaining to restricted shares. This
does not mean, however, that a public market does exist for the Shares.
Currently there is a market for the Shares on the NASDAQ - OTC Bulletin
Board. See "Risk Factors" and "Terms
of the Offering".
Limitation of Liability. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor
will be liable for any debts of the Company or be obligated to contribute
any additional capital or funds to the Company. See " Risk Factors".
Suitability Standards. Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
<PAGE>
Use of Proceeds. The Company plans to use the money received from this
offering to cover the costs involved with public relations and building of
investor awareness. The funds will not be deposited in an escrow account and
will be available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
Fiscal Year: December 31st
PRODUCTS
The Company is engaged in the wholesale distribution of health and
nutritional supplements,
MATERIAL CONTRACTS
The Company entered into an agreement with The Right Solution Group ( TRS )
to market the Nutricology, Inc., product line for a period of five years
commencing on January 6,1998
MARKETING APPROACHES
The Company intends to solicit its business through medical professionals,
other health care practioners, the Internet, health magazines, newspapers,
direct mail using a targeted mailing list and trade shows.
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
Investor should acquire the Shares unless he can afford a complete loss of
his investment. The risks described below are those which the Company deems
most significant as of the date hereof Other factors which may have a
material impact on the operations of the Company may not be foreseen. In
addition to the other factors set forth elsewhere in this Memorandum,
prospective Investors should carefully consider the following specific risk
factors:
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international
conditions; inflation or deflation; fluctuation in interest rates; the
availability of, and fluctuations in the money supply. The extent, type and
sophistication of the Company's competition; and government regulations.
Operations. The Company's operating subsidiary Nutricology,Inc /
Allergy Research has been in business for over 19 years.
Dependence on Key Personnel, The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to
find suitable replacements for such personnel, or that suitable person.
Lack of Adequate Capital, Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the
affairs of the Company in a manner that maximizes its chances of success
and, accordingly, the best chances of raising future funding.
Inherent Business Risks, The business that the Company is engaged in
involves substantial and inherent risks associated with an emerging company
with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment, The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it
is very likely that the Company will not be able to advance any business
activities and Investors could lose their entire investments.
Arbitrary Purchase Price; No Market, The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No
<PAGE>
assurance is or can be given that the Shares, although transferable, could
be sold for the purchase price, or for any amount. There currently is a
market for resale of the Shares on the OTC/ BB.
Restriction of Transferability. Wile the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the Shares
for a substantial period of time are advised against purchasing Shares. The
Shares are not registered under the 1933 Act or under the securities laws of
any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering, The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase
or take down any of the Shares offered pursuant to this Offering. No escrow
account is maintained and no minimum amount is required to be sold. Funds
will be available to the Company upon receipt.
Management and Operation Experience, The Company's Officers, Directors
and other personnel have engaged in a variety of businesses and have been
involved in business
financing, operations, marketing and research but their experience in these
fields is limited. There is no assurance that such experience will result in
the success of the Company.
Other Risks, No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business
is undertaken by the Company, will generate cash sufficient to operate the
business of the Company or that other parties entering into agreements
relating to the Company's business will meet their respective obligations.
Dividends, The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the
purpose of increasing the net worth and reserves of the Company. Therefore,
there can be no assurance that any holder of Common Stock will receive any
cash, stock or other dividends on his shares of Common Stock. Future
dividends on Common Stock, if any, will depend on the future earnings,
financing requirements and other factors.
Additional Securities Available for Issuance, The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common
Stock. At this time 14,662,855 shares of common stock have been issued.
Accordingly, including those purchasing the shares offered with the sale of
these units, investors will be dependent upon the judgement of
management in connection with the future issuance and sale of shares of the
Company's capital stock, in the event purchasers can be found for such
securities.
<PAGE>
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $1000.00 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of
Shares are sold, the Company anticipates that the net proceeds to it from
the Offering will be as follows:
Item Maximum
---- -------
Shares Sold
-----------
Gross Proceeds of Offering $100,000.00
Offering Expenses
Cost of Offering $1,000.00
TOTAL PROCEEDS RECEIVED: $99,000.00
Operating Expenses
Investor Relations $99,000.00
TOTAL $99,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $500.00, (ii) accounting fees of
approximately $300 and (iii) printing and other miscellaneous costs of
approximately $200. A sales commissions will be paid only to NASD
broker/dealers and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Shares are sold,
will be sufficient to sustain the planned marketing activities of the
Company for a period of 4 months, depending upon the number of Shares sold
in the offering and other factors. Even if all the Shares offered hereunder
are sold, the Company will require additional capital in order to fund
continued development activities and capital expenditures that must be made.
The Company's business plan is based on the premise that additional funding
will be obtained through funds generated from operations, the exercising of
the warrants by shareholders, additional offerings of its securities, or
other arrangements. There can be no assurance that any securities offerings
will take place in the
<PAGE>
future, or that funds sufficient to meet any of the foregoing needs or plans
will be raised from operations or any other source.
DESCRIIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 14,965,355 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
Voting Rights. Each share of the 14,965,355 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
Dividends. The Company has never paid a dividend and does not
anticipate doing the near future.
Options. The Company currently has 1,000,000 options outstanding in
relation to its common stock, no options have been exercised to date.
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund provisions, and are not liable to
further call or assessment. The Shares, when paid for by Investors, will be
fully paid and nonassessable. Each share of the Company's common shares is
entitled to a pro rata share in any asset available for distribution to
holders of equity securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 50,000
Share at a purchase price of $2.00 per share of the Company's common stock.
The Company may, in its sole discretion, terminate the offering at any time.
The Offering will close on the earliest of September 30th, 1998 or the
election of the Company when all of the Shares are sold, in no event later
than September 30th, 1998. The minimum subscription is $10,000 (5,000
Shares) per Investor, although the Company, in its sole discretion, may
accept subscriptions for lesser amounts.
Terms of Sale: The Company hereby agrees to sell to the purchaser and
the purchaser hereby agrees to subscribe for 5,000 Shares in the capital of
the Company (the "Share's") for a purchase of $2.00 US per Share for an
aggregate purchase of $10,000-00 US ( the "Purchase Funds" ).
<PAGE>
Constitution of Shares: Each Share will consist of one fully paid and.
non-assessable common share in the capital stock ( the "Share" ) of the
Company.
Terms of Warrants: All Warrants will
(a) be comprised in one warrant certificate ( the "Warrant Certificate" ),
registered in the name of the purchaser, representing an aggregate number of
Warrants which be equal to the number of Units being acquired hereunder by
the Purchaser;
(b) be non-transferable;
(c) will be subject to the terms and conditions which are adopted by the
Company for the Warrants, which terms and conditions will, amongst other
things,
(i) provide for an adjustment in class and number of shares issuable
pursuant to any exercise thereof upon the occurrence of certain
events, including any subdivision, consolidation or
re-classification of the shares, and
(ii) not provide for any adjustment in the number of shares
issuable pursuant to any exercise thereof in the event of the
Company -issuing any other shares, warrants or options to acquire
shares at prices either above, at or below the exercise price of
the Warrants;
(d) and each Warrant will provide for the right to purchase one
additional Share. The Warrant will be exercisable in whole or in
part from time to time.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and
related exemptions from state registration requirements. Rule 504 permits
the Company to offer and sell its stock in an amount not exceeding
$1,000,000 to an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii)
imposed a limited disclosure obligation of all issuers such as the Company
which was intended to ensure that investors in a Rule 504 transaction were
clearly advised of the restricted character of the securities being offered
for sale. This requirement was eliminated in July, 1992 at which time the
Securities and Exchange Commission adopted an amendment to Rule 504 that
eliminated all limitations on the manner of offering of stock under that
rule and/or the resale of stock purchased in reliance on that rule.
Therefore, following adoption of
the 1992 amendment, the securities being offered and sold by the Company
pursuant to the present Offering are available for immediate resale by
nonaffiliates of the issuer.
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of
the Offering. The Company anticipates that such expenses will not exceed
$1,000 as detailed in the Use of Proceeds.
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or other
legal proceedings.
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The
Company shall, to the extent such information is available or can be
acquired without unreasonable effort or expense, endeavor to provide the
information to such persons. All offeree's are urged to make such personal
investigations, inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to
Mr.Arnold Takernoto by calling (602) 922-2452. Requests for additional
copies of this Memorandum or assistance in executing subscription documents
may be directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R.S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE,
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within the
meaning of A.R.S 44-1801(17), and I am acquiring these securities for
myself, not for other persons. If qualifying as a non-accredited investor, I
further represent that this investment does not exceed 20% of my net worth (
excluding principal residence, furnishings therein and personal
automobiles).
<PAGE>
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF TIES MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY
SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981,
IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF TIES
OFFERING. ANY REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT
OF MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. IT
<PAGE>
CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPOSED TO BE
SUMMARIZED HEREIN.
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to
the Regulation D Rule 504 or 505, and that if all of the conditions and
limitations of Regulation D are not complied with, the Offering will be
resubmitted to the Attorney General for amended exemption. I understand that
any literature used in connection with this Offering has not been previously
filed with the Attorney General and has not been reviewed by the Attorney
General. This Investment Unit is being purchased
for my own account for investment, and not for distribution or resale to
others. I agree that I will not sell or otherwise transfer these securities
unless they are registered under the Federal Securities Act of 1933 or unless
an exemption from such registration is available. I represent that I have
adequate means of providing for my current needs and possible personal
contingencies of financial problems, and that I have no need for liquidity of
this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or
my offeree representative and myself,
and that, upon reasonable notice, the books and records of the issuer will be
available for inspection by investors, at reasonable hours at the principal
place of business.
<PAGE>
EXHIBITS
Scottsdale Scientific, Inc.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for common stock (hereinafter
"Shares"), as described in the Private Offering Memorandum dated
October 13th, 1998 ("Memorandum"), of Scottsdale Scientific, Inc., a
Florida corporation (the "Company"), being offered by the Company for
a purchase price of $1.00 per Share and tenders herewith the sum of $
in payment therefor, together with tender of this Subscription
Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of ___________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. The Company has over 19 years of financial and operating history;
d. That the Shares have not been registered under the Securities Act
of 1933, as amended, in reliance upon exemptions contained in
that Act, and that the Shares have not been registered under the
securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as the
basis for the exemption from the registration requirements of the
Securities Act of 1933 and of the applicable state's securities
laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
<PAGE>
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the
merits and risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk
of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents and
warrants that he is aware of the high degree of risk involved in
making investment in the Shares;
e. That the undersigned subscriber's decision to purchase the Shares
is based solely on the information contained in the Private
Offering Memorandum and on written answers to such questions as
he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way
with any investment company, national or local brokerage firm or
broker dealer. The undersigned subscriber's decision to purchase
the Shares is not based in whole or in part on any assumption or
understanding that an investment company, national or local
brokerage firm or other broker dealer is involved in any way in
this Offering or has endorsed or otherwise recommended an
investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess of
$50,000 or joint income with my suppose in excess of $50,000 in
each of the two most recent years and who reasonably expects an
income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares
<PAGE>
and hereby represents and warrants that he has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the shares
and of making an informed investment decision and will not
require a purchaser representative.
5. The undersigned understands and agrees that this subscription is made
subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until October
30th, 1998 in which to accept or reject it. If no action is taken
by the Company within said period, the subscription shall be
deemed to have been accepted. In each case where the subscription
is rejected, the Company shall return the entire amount tendered
by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time, execute
and deliver such documents or other instruments as may be
requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with full
power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying or
conforming changes in the Subscription Document so that such document
is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document
this ___ day of ______________, 1998.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1998.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1998.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1998.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No._______________
Name of Offeree:________________________
PRIVATE PLACEMENT MEMORANDUM
SCOTTSDALE SCIENTIFIC, INC.
(a Florida Corporation) (" Company")
4,300,000 of Common Stock
$.001 Par Value
$. 10 Per Share
MINIMUM INVESTMENT
5,000 SHARES
500.00
Prinicipal Executive Offices:
7150 East Camelback Rd., Suite 300
Scottsdale, AZ, 85251
(602) 423-7055
The date of this Memorandum is October 28th, 1997
1
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered: Shares of the Company's common stock, $0.001 par
value.
Number of Securities offered: 4,300,000 Shares.
Price per security : $. 10 per share.
Total proceeds : If all shares sold : $430,000.00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes , what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [X] No
Is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes [X] No
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
NONE
4
<PAGE>
TABLE OF CONTENTS
Cover Page ....................................................................1
Disclosure Statements .........................................................2
Table of Contents .............................................................5
Summary of the Offering .......................................................6
The Company ...................................................................7
Risk Factors ..................................................................8
Use of Proceeds ..............................................................10
Description of Securities ....................................................11
Terms of the Offering ........................................................11
Directors, Officers and key Personnel of the Company .........................12
Principal Stockholders .......................................................13
Remuneration of Directors and Officers .......................................14
Reports ......................................................................14
Legal Matters ................................................................14
Litigation ...................................................................14
Additional Information .......................................................14
State Restrictions ...........................................................15
EXHIBITS
Exhibit A Subscription Agreement
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1997 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without the
prior written permission of Scottsdale Scientific, Inc.
5
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained elsewhere
in this Memorandum. This summary is qualified in its entirety by express
reference to the Memorandum and the exhibits referred to therein. Each
prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 300-7150 East Camelback Rd.,
Scottsdale, AZ, 85251
THE OFFERING. The Company is offering up to 4,300,000 of its common stock, par
value $.001 per share (the "Shares"). The Minimum investment for an Investor is
5,000 Shares, or $500. The Company, in its sole discretion, may accept
subscriptions for up to an aggregate of 4,300,000 or $430,000.00 until December
31st, 1997, or until such earlier date as the Company determines that this
Offering shall be terminated. In its sole discretion, the Company may elect to
terminate this Offering even if subscriptions for Shares have been received and
accepted by the Company. See "Terms of the Offering" and "Subscription for
Shares".
COMPANY'S BUSINESS: The Company is engaged in the wholesale distribution of
health and nutritional supplements. The Company has no sales and earnings to
date, and in fact expects to sustain significant losses. There is no assurance
that the company will be successful or profitable in the future.
RISK FACTORS: The offering involves speculative investment with substantial
risks, including those associated with an unproven startup venture, and risks
associated with the industry. Although the Company will use its best efforts to
protect the investments of the Investors, there is no assurance that the
Company's efforts will be successful. Accordingly, a prospective Investor should
not view the Company or its officers, directors, employees or agents as
guarantors of the financial success of an investment in the Shares. See "Risk
Factors".
LIMITED TRANSFERABILITY OF THE SHARES. The Shares have not been registered under
the 1933 Act or the securities laws of any state. The Shares of common stock
purchased pursuant to this Offering will not be "restricted" shares because the
shares are offered under Rule 504 and this offering is excluded from the
provisions of Regulation D pertaining to restricted shares. This does not mean,
however, that a public market does exist for the Shares. No market exists now
and none is foreseen.
See "Risk Factors" and "Terms of the Offering".
LIMITATION OF LIABILITY. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor will
be liable for any debts of the Company or be obligated to contribute any
additional capital or funds to the Company. See Risk Factors".
6
<PAGE>
SUITABILITY STANDARDS. Each Investor must meet certain eligibility standards
established by the Company for the purchase of the Shares. See "Terms of the
Offering" and "Subscription for Shares".
USE OF PROCEEDS. The Company plans to use the money received from this offering
to cover the costs involved with setting up office space, promoting and
marketing the Company's products and services and financial public relations.
The funds will not be deposited in an escrow account and will be available to
the Company immediately. No minimum amount of Shares is required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 7150 E. Camelback Rd., Suite 300
Scottsdale, Arizona 85251
(602) 423-7055
Fiscal Year: June 30th.
PRODUCTS
The Company is engaged in the wholesale distribution of health and nutritional
supplements.
MATERIAL CONTRACTS
The Company has no contracts at the present time.
MARKETING APPROACHES
The Company intends to solicit its business through personal visits by sales
representatives, magazines and newspapers, direct mail using a targeted mailing
list, and trade shows.
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
Investor should acquire the Shares unless he can afford a complete loss of his
investment. The risks described below are those which the Company deems most
significant as of the date hereof. Other factors which may have a material
impact on the operations of the Company may not be forseen. In addition to the
other factors set forth elsewhere in this Memorandum, prospective Investors
should carefully consider the following specific risk factors:
7
<PAGE>
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international conditions;
inflation or deflation; fluctuation in interest rates; the availability of, and
fluctuations in the money supply. The extent, type and sophistication of the
Company's competition; and government regulations.
Lack of Operations. The Company is in the formative stages of its business
ope and has no operating history.
Development Stage Company. The Company was organized in 1997 and has
engaged in minimal business operations. Accordingly, the Company is a
development stage company as defined by Statement of Financial Accounting
Standards No.7.
Dependence on Key Personnel. The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable personn.
Lack of Adequate Capital. Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the affairs
of the Company in a manner that maximizes its chances of success and,
accordingly, the best chances of raising future funding.
Inherent Business Risks. The business that the Company plans to engage
in involves substantial and inherent risks associated with a start-up and
development company with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment. The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it is
very likely that the Company will not be able to advance any business activities
and Investors could lose their entire investments.
Arbitrary Purchase Price; No Market. The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No assurance is or can be given that the Shares,
although transferable, could be sold for the purchase price, or for any amount.
There currently is no market for resale of the Shares.
Restriction of Transferability. While the Company believes that no
restriction exists for the transfer of the Shares being offered by the Company,
an investment in the Shares may be a long term
8
<PAGE>
investment. Investors who do not wish or who are not financially able to hold
the Shares for a substantial period of time are advised against purchasing
Shares. The Shares are not registered under the 1933 Act or under the securities
laws of any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering. The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase or
take down any of the Shares offered pursuant to this Offering. No escrow account
is maintained and no minimum amount is required to be sold. Funds will be
available to the Company upon receipt.
Management and Operation Experience. The Company's officers, directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations and marketing, but their experience
in these fields is limited. There is no assurance that such experience will
result in the success of the Company.
Other Risks. No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business is
undertaken by the Company, will generate cash sufficient to operate the business
of the Company or that other parties entering into agreements relating to the
Company's business will meet their respective obligations.
Dividends. The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the purpose of
increasing the net worth and reserves of the Company. Therefore, there can be no
assurance that any holder of Common Stock will receive any cash, stock or other
dividends on his shares of Common Stock. Future dividends on Common Stock, if
any, will depend on the future earnings, financing requirements and other
factors.
Additional Securities Available for Issuance. The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common Stock.
At this time, 3,400,000 shares of common stock have been issued. Accordingly,
including those purchasing the shares offered with the sale of these units,
investors will be dependent upon the judgement of management in connection with
the future issuance and sale of shares of the Company's capital stock, in the
event purchasers can be found for such securities.
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $10,000.00 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of Shares
are sold, the Company anticipates that the net proceeds to it from the Offering
will be as follows:
9
<PAGE>
Item Maximum
- ---- -------
Shares Sold
-----------
Gross Proceeds of Offering $430,000.00
Offering Expenses
Cost of Offering $10,000.00
TOTAL PROCEEDS RECEIVED: $420,000.00
Operating Expense
Purchase Product $250,000.00
Investor Relations $50,000.00
Working Capital $120,000.00
-----------
TOTAL $420,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $8,000.00, (ii) accounting fees of
approximately $1,500 and (iii) printing and other miscellaneous costs of
approximately $500. A sales commissions will be paid only to NASD broker/dealers
and no other person will receive any commissions or remuneration from the
Company.
The net proceeds of this offering, assuming all the Shares are sold,
will be sufficient to sustain the planned marketing and development activities
of the Company for a period of 6 months, depending upon the number of Shares
sold in the offering and other factors. Even if all the Shares offered hereunder
are sold, the Company will require additional capital in order to fund continued
development activities and capital expenditures that must be made. The Company's
business plan is based on the premise that additional funding will be obtained
through funds generated from operations, the exercising of the options and
warrants by shareholders, additional offerings of its securities, or other
arrangements. There can be no assurance that any securities offerings will take
place in the future, or that funds sufficient to meet any of the foregoing needs
or plans will be raised from operations or any other source.
DESCRIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
10
<PAGE>
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 3,400,000 common shares were issued
and outstanding as of the date of this Placement. All of the outstanding common
shares of the Company are fully paid for and nonassessable.
Voting Rights. Each share of the 3,400,000 shares of the Company's common
stock held by its current shareholders is entitled to one vote at shareholders
meetings.
Dividends. The Company has never paid a dividend and does not anticipate
doing so in
Options. The Company currently has no options outstanding in relation to
its common
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion rights,
no redemption or sinking fund provisions, and are not liable to further call or
assessment. The Shares, when paid for by Investors, will be fully paid and
nonassessable. Each share of the Company's common shares is entitled to a pro
rata share in any asset available for distribution to holders of equity
securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 4,300,000
Shares at a purchase price of $.10 per share of the Company's common stock. The
Company may, in its sole discretion, terminate the offering at any time. The
Offering will close on the earliest of December 31st, 1997 or the election of
the Company when all of the Shares are sold, in no event later than December 3
1st, 1997. The minimum subscription is $500 (5,000 Shares) per Investor,
although the Company, in its sole discretion, may accept subscriptions for
lesser amounts.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and related
exemptions from state registration requirements. Rule 504 permits the Company to
offer and sell its stock in an amount not exceeding $1,000,000 to an unlimited
number of persons. Until 1992, Rule 504(b)(2)(ii) imposed a limited disclosure
obligation of all issuers such as the Company which was intended to ensure that
investors in a Rule 504 transaction were clearly advised of the restricted
character of the securities being offered for sale. This requirement was
eliminated in July, 1992 at which time the Securities and Exchange Commission
adopted an amendment to - Rule 504 that eliminated all limitations on the manner
of offering of stock under that rule and/or the resale of stock purchased in
reliance on that rule. Therefore, following adoption of the 1992 amendment, the
securities being offered and sold by the Company pursuant to the present
Offering are available for immediate resale by nonaffiliates of the issuer.
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $ 10,000 as
detailed in the Use of Proceeds.
11
<PAGE>
DIRECTORS, OFFICERS AND KEY PERSONNEL OF THE COMPANY
Officers and Directors. The following information sets forth the names
of the officers and directors of the Company, their present position with the
Company and biographic information:
NAME POSITION HELD SINCE
Harmel Rayat President & Director May 1997
Wes Janzen Director May 1997
Narinder Thouli Secretary/Treasurer May 1997
Harmel Rayat, is a Director of the Company and the President. Mr. Rayat
has over fifteen years experience in the investment industry, as an investment
broker with leading international brokerage firms and as the President of
Hartford Capital Corporation. Mr. Rayat has vast Knowledge of both the Canadian
and U.S. markets, with extensive experience in investment banking, mergers and
acquisitions, early stage venture capital, second stage funding requirements for
high growth companies, and risk arbitrage.
Wes Janzen, is a Director of the Company. Mr. Janzen has over 19 years of
sales and marketing experience primarily in the real estate business. In
addition, Mr. Janzen has extensive experience in finance and personnel
management skills.
Narinder Thouli, is a Director and Secretary/Treasurer of the Company. Mr.
Thouli is an airline pilot and has over 9 years of successful experience as a
business consultant to medical/technology companies. Mr. Thouli has provided
support in various areas including marketing, corporate finance, human
resources, research and development and clinical and regulatory affairs.
12
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the date
of this Memorandum by (i) each person known to the Company to own of record or
beneficially 5% or more of tile 3,400,000 outstanding shares of Common Stock of
the Company, (ii) each Director of the Company, and (iii) all officers and
directors of the Company as a group, as of the date of this Memorandum and
adjusted to reflect share holdings after the sale of the maximum number of
Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
- --------------- --------- ----------
Harmel Rayat 3,000,000 88.24% 3,000,000 39%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company intends,
in the future, to pay Directors who are not employees of the Company,
compensation of $500 per Director's Meeting, as well as reimbursements of any
out of pocket expenses incurred in the Company's behalf.
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc. and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior notice,
access during reasonable business hours to such books and records,- and the
right to inspect and copy them. Within 120 days after the close of each fiscal
year, reports will be distributed to the shareholders which will include
financial statements (including a balance sheet and statements of income,
shareholder's equity, and cash flows) prepared in accordance with generally
accepted accounting principals, with a reconciliation to the tax information
supplementary supplied, accompanied by a copy of the accountant's report.
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix,
Arizona, 85028 will pass upon certain matters for the Company.
13
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or other
legal
ADDITIONAL INFORMATION
In the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The Company
shall, to the extent such information is available or can be acquired without
unreasonable effort or expense, endeavor to provide the information to such
persons. All offerees are urged to make such personal investigations,
inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to Harmel Rayat
by calling (604) 659-5000. Requests for additional copies of this Memorandum or
assistance in executing subscription documents may be directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to A.R.S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand these
securities cannot be resold without registration under the Arizona Securities
Act or an exemption therefrom. I am not an underwriter within the meaning of
A.R.S 44-1801(17), and I am acquiring these securities for myself, not for other
persons. If qualifying as a non-accredited investor, I further represent that
this investment does not exceed 20% of my net worth ( excluding principal
residence, furnishings therein and personal automobiles).
14
<PAGE>
NOTICE TO CALIFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY SECTION
25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS
THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF SPECIFIC
EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY
PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981, IF SUCH REGISTRATION
IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE
ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF
MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS
PURPOSED TO BE SUMMARIZED HEREIN.
15
<PAGE>
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to the
Regulation D Rule 505 or 506, and that if all of the conditions and limitations
of Regulation D are not complied with, the Offering will be resubmitted to the
Attorney General for amended exemption. I understand that any literature used in
connection with this Offering has not been previously filed with the Attorney
General and has not been reviewed by the Attorney General. This Investment Unit
is being purchased for my own account for investment, and not for distribution
or resale to others. I agree that I will not sell or otherwise transfer these
securities unless they are registered under the Federal Securities Act of 1933
or unless an exemption from such registration is available. I represent that I
have adequate means of providing for my current needs and possible personal
contingencies of financial problems, and that I have no need for liquidity of
this investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or my
offeree representative and myself, and that, upon reasonable notice, the books
and records of the issuer will be available for inspection by investors, at
reasonable hours at the principal place of business.
16
<PAGE>
EXHIBITS
SCOTTSDALE SCIENTIFIC. INC.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for shares of common stock(hereinafter
"Shares"), as described in the Private Offering Memorandum dated December 31st,
1997 ("Memorandum"), of Scottsdale Scientific, Inc., a Florida corporation (the
"Company"), being offered by the Company for a purchase price of $0.10 per share
and tenders herewith the sum of $___________ in payment therefor, together with
tender of this Subscription Document.
2. The undersigned represents and warrants that he is a bona fide resident of
the State of
- ----------------.
3 The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable; c. That the Company has a very limited
financial and operating history; d. That the Shares have not been
registered under the Securities Act of 1933, as amended, in reliance
upon exemptions contained in that Act, and that the Share have not been
registered under the securities acts of any state in reliance upon
exemptions contained in certain state's securities laws; and e. That
the representations and warranties provided in this Subscription
Document are being relied upon by the Company as the basis for the
exemption from the registration requirements of the Securities Act of
1933 and of the applicable securities laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased soley for the undersigned's
own account-.
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the merits and
risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk of
an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly familiar
with the Private Offering Memorandum and represents and warrants that
he is aware of the high degree of risk involved in making investment in
the Shares;
e. That the undersigned subscriber's decision to purchase the Shares is
based solely on the information contained in the Private Offering
Memorandum and on written answers to such
17
<PAGE>
questions as he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way with
any investment company, national or local brokerage firm or broker
dealer. The undersigned subscriber's decision to purchase the Shares is
not based in whole or in part on any assumption or understanding that
an investment company, national or local brokerage firm or other broker
dealer is involved in any way in this Offering or has endorsed or
otherwise recommended an investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk illiquid
addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess
of $50,000 or joint income with my suppose in excess of $50,000
in each of the two most recent years and who reasonably expects
an income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
an investment in the shares, or to verify that the investor has
retained the services of one or more purchaser representatives for the
purpose of evaluating the risks of investment in the shares, and hereby
represents and warrants that he has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the shares and of making an
informed investment decision and will not require a purchaser
representative.
5. The undersigned understands and agrees that this subscription is made subject
to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of each
Subscription Document, the Company shall have until December 31st, 1997
in which to accept or reject it. If no action is taken by the Company
within said period, the subscription shall be deemed to have been
accepted. In each case where the subscription is rejected, the Company
shall return the entire amount tendered by the subscriber, without
interest;
b. That the undersigned subscriber will, from time to time, execute and
deliver such documents or other instruments as may be requested by the
Company in order to aid the Company in the consummation of the
transactions contemplated by the Memorandum.
18
<PAGE>
6. The undersigned hereby constitutes and appoints the Company, with full power
of substitution, as attorney-in-fact for the purpose of executing and
delivering, swearing to and filing, any documents or instruments related to or
required to make any necessary clarifying or conforming changes in the
Subscription Document so that such document is correct in all respects.
7. As used herein, the singular shall include the plural and the masculine shall
include the feminine where necessary to clarify the meaning of this Subscription
Document. All terms not defined herein shall have the same meanings as in the
Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document this
____ day of ____________, 1997.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1997.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1997.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1997.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
CONFIDENTIAL
NOT TO BE REPRODUCED OR DISTRIBUTED
Memorandum No.
Name of Offeree :
PRIVATE PLACEMENT MEMORANDUM OF UNITS
OF
Scottsdale Scientific, Inc.
(a Florida Corporation) (" Company
15,000 Common Shares
$.001 Par Value
$ 1. 00 Per Share
MINIMUM INVESTMENT
1,000 Shares
$1,000.00
Principal Executive Offices:
8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
The date of this Memorandum is October 13th, 1998
<PAGE>
SCOTTSDALE SCIENTIFIC, INC.
Type of securities offered : Shares of the Company's common stock, $0.001
par value.
Number of Units offered : 15,000 Shares.
Price per security : $1.00 per Share.
Total proceeds : If all shares sold : $15,000-00
Is a commissioned selling agent selling the securities in this offering ?
[ ] Yes [X] No
If yes, what percent is commission of price to public ?
Is there other compensation to selling agent(s) ?
[ ] Yes [X] No
Is there a finder's fee or similar payment to any person ?
[ ] Yes [XI No
is there an escrow of proceeds until minimum is obtained ?
[ ] Yes [X] No
Is this offering limited to members of a special group, such as employees of
the Company or individuals ?
[ ] Yes
Is transfer of the securities restricted ?
[ ] Yes [X] No
THIS OFFERING OF SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OFFERING WILL TERMINATE UPON THE EARLIER OF ALL OF THE SHARES OR
OCTOBER 30th, 1998. THE COMPANY IS NOT REQUIRED TO SELL ANY MINIMUM NUMBER
OF SHARES IN ORDER TO SELL SHARES
<PAGE>
IN THE OFFERING. THE COMPANY MAY, IN ITS DISCRETION, CONDUCT MULTIPLE
CLOSINGS. (SEE "DESCRIPTION OF THE OFFERING.")
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE
PRIVATE PLACEMENT OF THE SHARES OFFERED HEREBY AND MAY NOT BE REPRODUCED OR
USED FOR ANY OTHER PURPOSE. THE OFFEREE AGREES TO RETURN TO THE COMPANY
THIS MEMORANDUM AND ALL ATTACHMENTS AND RELATED DOCUMENTATION IF THE
OFFEREE DOES NOT SUBSCRIBE TO PURCHASE SHARES IN THE OFFERING
THESE SECURITIES ARE BEING OFFERED ONLY TO INVESTORS WHO THE OFFEROR
BELIEVES HAVE THE QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE
OFFERED AND SOLD UNDER APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
ACT AND QUALIFICATION UNDER APPLICABLE STATE STATUTES. THE OFFEROR WILL BE
THE SOLE JUDGE OF WHETHER AN INVESTOR POSSESSES SUCH QUALIFICATIONS.
NOTWITHSTANDING DELIVERY OF THIS MEMORANDUM AND ASSOCIATED DOCUMENTATION,
THE OFFEROR DOES NOT INTEND TO EXTEND AN OFFER TO SELL OR TO SOLICIT AN
OFFER TO BUY THESE SECURITIES UNTIL THE OFFEROR DETERMINES THAT THE OFFEREE
IS QUALIFIED AND COMMUNICATES SUCH DETERMINATION TO INVESTORS IN WRITING.
THE SHARES ARE BEING OFFERED IN A PRIVATE PLACEMENT TO A LIMITED NUMBER OF
INVESTORS. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT PERMITTED UNDER
APPLICABLE LAW OR ANY FIRM OR INDIVIDUAL WHO DOES NOT POSSESS THE
QUALIFICATIONS DESCRIBED IN THIS MEMORANDUM.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF FLORIDA OR OTHER STATES,AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMP TIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THERE IS A PUBLIC MARKET FOR
SECURITIES OF THE COMPANY. EVEN IF SUCH A MARKET DID NOT EXIST, PURCHASERS
OF SHARES WILL BE REQUIRED TO REPRESENT THAT THE SHARES ARE BEING ACQUIRED
FOR INVESTUENT PURPOSES AND NOT WITH A VIEW TO SALE OR DISTRIBUTION, AND
PURCHASERS WILL NOT BE ABLE TO RESELL THE SHARES UNLESS THE SHARES ARE
REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE APPLICABLE STATE STATUTES
(UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE). PURCHASERS OF THE SHARES SHOULD BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE PURCHASE OF THESE SECURITIES WILL ENTAIL A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES AND HAVE NO LIQUIDITY IN THIS INVESTVEST. NO ONE
<PAGE>
SHOULD INVEST IN THE SHARES WHO IS NOT PREPARED TO LOSE THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS INDICATED UNDER "RISK FACTORS."
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION, WHETHER WRITTEN OR ORAL, FROM THE COMPANY, ITS FOUNDERS,
MANAGEMENT, EMPLOYEES OR AGENTS, AS LEGAL, TAX ACCOUNTING OR OTHER EXPERT
ADVICE. EACH INVESTOR SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT AND
0THER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING, AND RELATED
MATTERS CONCERNING HIS INVESTMENT AND ITS SUITABILITY FOR THEM.
NO PERSON (OTHER THAN OFFICERS OF THE COMPANY TO WHOM REQUESTS ARE DIRECTED
FOR ADDITIONAL INFORMATION CONCERNING THIS OFFERING) IS AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS (WHETHER ORAL OR WRITTEN) IN
CONNECTION WITH THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
THIS PRIVATE PLACEMENT MEMORANDUM AND THE ATTACHMENTS THERETO AND DOCUMENTS
REFERRED TO HEREIN. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN
AND THEREIN MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO SUBJECT TO THE STOCK
SUBSCRIPTION AGREEMENT ATTACHED AS ATTACHMENT OF THIS MEMORANDUM, WHICH
CONTAINS CERTAIN REPRESENTATIONS, WARRANTIES, TERMS AND CONDITIONS. EACH
INVESTOR SHOULD CAREFULLY REVIEW THE PROVISIONS OF THE SUBSCRIPTION
AGREEMENT BEFORE INVESTING.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ x] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other( Specify)_________________
( Check at one, as appropriate )
This offering has been registered for offer and sale in the following states:
State State File No Effective Date
----- ------------- --------------
<PAGE>
TABLE OF CONTENTS
Cover Page 1
Disclosure Statements 2
Table of Contents 5
Summary of the Offering 6
The Company 7
Risk Factors 8
Use of Proceeds 10
Description of Securities 11
Terms of the Offering 11-12
Directors, Officers and key Personnel of the Company 13
Principal Stockholders 14
Remuneration of Directors and Officers 14
Reports 15
Legal Matters 15
Litigation 15
Additional Information 15
State Restrictions 15-17
EXHIBITS
Exhibit A Subscription Agreement 18-22
This is an original unpublished work protected under copyright laws of the
United States and other countries. All Rights Reserved. Should publication
occur, then the following notice shall apply: Copyright 1998 Scottsdale
Scientific, Inc. All Rights Reserved. No part of this document may be
reproduced, stored in a retrieval system or transmitted, in any form or any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written perrmssion of Scottsdale Scientific, Inc.
<PAGE>
SUMMARY OF THE OFFERING
The following material is intended to summarize information contained
elsewhere in this Memorandum. This summary is qualified in its entirety by
express reference to the Memorandum and the exhibits referred to therein.
Each prospective investor is urged to read this Memorandum in its entirety.
Scottsdale Scientific, Inc, a Florida corporation (the " Company "), is the
issuer of the Shares. The address of the Company is 8655 East Via de
Ventura, Suite G204, Scottsdale, Arizona 85258.
The Offering. The Company is offering up to 15,000 of its common stock, par
value $.001 per share (the "Shares"). The Minimum investment for an Investor
is 1,000 Shares, or $1,000.00. The Company, in its sole discretion, may
accept subscriptions for up to an aggregate of 15,000 or $15,000.00 until
October 30th, 1998, or until such earlier date as the Company determines
that this Offering shall be terminated. In its sole discretion, the Company
may elect to terminate this Offering even if subscriptions for Shares have
been received and accepted by the Company. See "Terms of the Offering" and
"Subscription for Shares".
Company's Business. The Company is engaged in the wholesale distribution of
nutrional supplements. Through its wholly owned subsidiary, Nutricology,
Inc./Allergy Research Group, is an innovative leader in the research and
formulation of nutritional supplements.
Risk Factors. The offering involves speculative investment with substantial
risks, including those risks associated with the industry. Although the
Company will use its best efforts to protect the investments of the
Investors, there is no assurance that the Company's efforts will be
successful. Accordingly, a prospective Investor should not view the Company
or its Officers, Directors, employees or agents as guarantors of the
financial success of an investment in the Shares. See "Risk Factors".
Limited Transferability of the Shares. The Shares have not been registered
under the 1933 Act or the securities laws of any state. The Shares of common
stock purchased pursuant to this Offering will not be "restricted" shares
because the shares are offered under Rule 504 and this offering is excluded
from the provisions of Regulation D pertaining to restricted shares. This
does not mean, however, that a public market does exist for the Shares.
Currently there is a market for the Shares on NASDAQ - OTC Bulletin Board.
See "Risk Factors" and "Terms of the Offering".
Limitation of Liability. Except for the amounts paid by Investors for their
purchase of any Shares, and as required by Florida State law, no investor
will be liable for any debts of the Company or be obligated to contribute
any additional capital or funds to the Company. See " Risk Factors".
Suitability Standards. Each Investor must meet certain eligibility
standards established by the Company for the purchase of the Shares. See
"Terms of the Offering" and "Subscription for Shares".
<PAGE>
Use of Proceeds. The Company plans to use the money received from this
offering to cover the costs involved with public relations and building of
investor awareness. The funds will not be deposited in an escrow account and
will be available to the Company immediately. No minimum amount of Shares is
required to be sold.
THE COMPANY
Exact corporate name: Scottsdale Scientific, Inc.
State and date of incorporation: Florida State
April 8, 1997
Street address of principal office: 8655 East Via de Ventura, Suite G204
Scottsdale, AZ, 85258
(602) 922-2452
Fiscal Year: December 31st
PRODUCTS
The Company is engaged in the wholesale distribution of health and
nutritional supplements,
MATERIAL CONTRACTS
The Company entered into an agreement with The Right Solution Group ( TRS )
to market the Nutricology, Inc., product line for a period of five years
commencing on January 6,1998
MARKETING APPROACHES
The Company intends to solicit its business through medical professionals,
other health care practioners, the Internet, health magazines, newspapers,
direct mail using a targeted mailing list and trade shows.
<PAGE>
RISK FACTORS
An investment in the Shares involves a high degree of risk. No prospective
Investor should acquire the Shares unless he can afford a complete loss of
his investment. The risks described below are those which the Company deems
most significant as of the date hereof. Other factors which may have a
material impact on the operations of the Company may not be foreseen. In
addition to the other factors set forth elsewhere in this Memorandum,
prospective Investors should carefully consider the following specific risk
factors:
A. OPERATING RISKS
General. The economic success of an investment in the Shares depends,
to a large degree, upon many factors over which the Company has no control.
These factors include general economic, industrial and international
conditions; inflation or deflation; fluctuation in interest rates; the
availability of, and fluctuations in the money supply. The extent, type and
sophistication of the Company's competition; and government regulations.
Operations. The Company's operating subsidiary Nutricology,Inc /
Allergy Research has been in business for over 19 years.
Dependence on Key Personnel, The Company's success will depend, in
large part, upon the talents and skills of key management personnel. To the
extent that any of its management personnel is unable or refuses to continue
association with the Company, a suitable replacement would have to be found.
There is no assurance that the Company would be able to find suitable
replacements for such personnel, or that suitable person.
Lack of Adequate Capital. Additional capital will be required in the
Company's future operations. In the absence of any additional funding, the
Company's operations may be affected negatively. Therefore, the Company's
management will be careful and use its best judgement in directing the
affairs of the Company in a manner that maximizes its chances of success
and, accordingly, the best chances of raising future funding.
Inherent Business Risks, The business that the Company is engaged in
involves substantial and inherent risks associated with an emerging company
with limited financial resources.
B. INVESTMENT RISKS
Speculative Investment, The Shares are a very speculative investment.
There can be no assurance that the Company will attain its objective and it
is very likely that the Company will not be able to advance any business
activities and Investors could lose their entire investments.
Arbitra[y Purchase Price; No Market, The purchase price for the Shares
has been arbitrarily determined by the Company, and is not necessarily
indicative of their value. No
<PAGE>
assurance is or can be given that the Shares, although transferable, could
be sold for the purchase price, or for any amount. There currently is a
market for resale of the Shares.
Restriction of Transferability, While the Company believes that no
restriction exists for the transfer of the Shares being offered by the
Company, an investment in the Shares may be a long term investment.
Investors who do not wish or who are not financially able to hold the Shares
for a substantial period of time are advised against purchasing Shares. The
Shares are not registered under the 1933 Act or under the securities laws of
any state, but are being offered by the Company under the exemption from
registration provided by Rule 504 under Regulation D and related state and
foreign exceptions.
"Best Efforts" Offering, The Shares are being offered on a "best
efforts" basis by the Company. No person or entity is committed to purchase
or take down any of the Shares offered pursuant to this Offering. No escrow
account is maintained and no minimum amount is required to be sold. Funds
will be available to the Company upon receipt.
Management and Operation Experience, The Company's Officers, Directors
and other personnel have engaged in a variety of businesses and have been
involved in business financing, operations, marketing and research but their
experience in these fields is limited. There is no assurance that such
experience will result in the success of the Company.
Other Risks, No assurance can be given that the Company will be
successful in achieving its stated objectives, that the Company's business
is undertaken by the Company, will generate cash sufficient to operate the
business of the Company or that other parties entering into agreements
relating to the Company's business will meet their respective obligations.
Dividends, The Company's Board of Directors presently intends to cause
the Company to follow a policy of retaining earnings, if any, for the
purpose of increasing the net worth and reserves of the Company. Therefore,
there can be no assurance that any holder of Common Stock will receive any
cash, stock or other dividends on his shares of Common Stock. Future
dividends on Common Stock, if any, will depend on the future earnings,
financing requirements and other factors.
Additional Securities Available for Issuance, The Company's Certificate
of Incorporation authorizes the issuance of 100,000,000 shares of Common
Stock. At this time 14,965,355 shares of common stock have been issued.
Accordingly, including those purchasing the shares offered with the sale of
these units, investors will be dependent upon the judgement of management in
connection with the future issuance and sale of shares of the Company's
capital stock, in the event purchasers can be found for such securities.
<PAGE>
USE OF PROCEEDS
The Company will incur expenses in connection with the Offering in an
amount anticipated not to exceed $1,000 for legal fees, accounting fees,
filing fees, printing costs and other expenses. If the maximum number of
Shares are sold, the Company anticipates that the net proceeds to it from
the Offering will be as follows:
Maximum
Item Shares Sold
---- -----------
Gross Proceeds of Offering $15,000.00
Offering Expenses
-----------------
Cost of Offering $ 1,000.00
----------
TOTAL PROCEEDS RECEIVED: $14,000.00
Operating Expenses
------------------
Investor Relations $14,000.00
----------
TOTAL $14,000.00
NET FUNDS AVAILABLE TO COMPANY
The Company estimates that the costs of the Offering will be as
follows: (i) legal fees of approximately $500.00, (ii) accounting fees of
approximately $300 and (iii) printing and other miscellaneous costs of
approximately $200. A sales commissions will be paid only to NASD
broker/dealers and no other person will receive any commissions or
remuneration from the Company.
The net proceeds of this offering, assuming all the Shares are sold,
will be sufficient to sustain the planned marketing activities of the
Company for a period of 2 months, depending upon the number of Shares sold
in the offering and other factors. Even if all the Shares offered hereunder
are sold, the Company will require additional capital in order to fund
continued development activities and capital expenditures that must be made.
The Company's business plan is based on the premise that additional funding
will be obtained through funds generated from operations, the exercising of
the warrants by shareholders, additional offerings of its securities, or
other arrangements. There can be no assurance that any securities offerings
will take place in the future, or that funds sufficient to meet any of the
foregoing needs or plans will be raised from operations or any other source.
<PAGE>
DESCRIIPTION OF SECURITIES
The following discussion describes the stock and other securities of the
Company.
General. The Company currently has 100,000,000 authorized common
shares, par value $.001 per share, of which 14,965,355 common shares were
issued and outstanding as of the date of this Placement. All of the
outstanding common shares of the Company are fully paid for and
nonassessable.
Voting Rights. Each share of the 14,965,355 shares of the Company's
common stock held by its current shareholders is entitled to one vote at
shareholders meetings.
Dividends. The Company has never paid a dividend and does not
anticipate doing the near future.
Options. The Company currently has 1,000,000 options outstanding in
relation to its common stock, no options have been exercised to date.
Miscellaneous Rights and Provisions. Shares of the Company's common
stock have no pre-emptive rights. The Shares do not have any conversion
rights, no redemption or sinking fund provisions, and are not liable to
further call or assessment. The Shares, when paid for by Investors, will be
fully paid and nonassessable. Each share of the Company's common shares is
entitled to a pro rata share in any asset available for distribution to
holders of equity securities upon the liquidation of the Company.
TERMS OF THE OFFERING
The Company is offering to qualified investors a maximum of 15,000
Share's ("Shares") at a purchase price of $1.00 per share of the Company's
common stock. The Company may, in its sole discretion, terminate the
offering at any time. The Offering will close on the earliest of October
30th, 1998 or the election of the Company when all of the Shares are sold,
in no event later than October 30th, 1998. The minimum subscription is
$1,000 (1,000 Shares) per Investor, although the Company, in its sole
discretion, may accept subscriptions for lesser amounts.
Terms of Sale: The Company hereby agrees to sell to the purchaser and
the purchaser hereby agrees to subscribe for 1,000 Shares in the capital of
the Company (the "Shares") for a purchase of $1.00 US per Share for an
aggregate purchase of $1,000.00 US ( the "Purchase Funds" ).
<PAGE>
Constitution of Shares: Each Share will consist of one fully paid and
non-assessable common share in the capital stock ( the "Share" ) of the
Company.
Terms of Warrants: All Warrants will
(a) be comprised in one warrant certificate ( the "Warrant Certificate" ),
registered in the name of the purchaser, representing an aggregate number of
Warrants which be equal to the number of Units being acquired hereunder by
the Purchaser;
(b) be non-transferable;
(c) will be subject to the terms and conditions which are adopted by the
Company for the Warrants, which terms and conditions will, amongst other
things,
(i) provide for an adjustment in class and number of shares issuable
pursuant to any exercise thereof upon the occurrence of certain events,
including any subdivision, consolidation or re-classification of the
shares, and
(ii) not provide for any adjustment in the number of shares issuable
pursuant to any exercise thereof in the event of the Company issuing any
other shares, warrants or options to acquire shares at prices either above,
at or below the exercise price of the Warrants;
(d) and each Warrant will provide for the right to purchase one additional
Share. The Warrant will be exercisabel in whole or in part from time to
time.
The Shares are being offered and sold by the Company under the
exemption from registration contained in Rule 504 under Regulation D and
related exemptions from state registration requirements. Rule 504 permits
the Company to offer and sell its stock in an amount not exceeding
$1,000,000 to an unlimited number of persons. Until 1992, Rule 504(b)(2)(ii)
imposed a limited disclosure obligation of all issuers such as the Company
which was intended to ensure that investors in a Rule 504 transaction were
clearly advised of the restricted character of the securities being offered
for sale. This requirement was eliminated in July, 1992 at which time the
Securities and Exchange Commission adopted an amendment to Rule 504 that
eliminated all limitations on the manner of offering of stock under that
rule and/or the resale of stock purchased in reliance on that rule.
Therefore, following adoption of the 1992 amendment, the securities being
offered and sold by the Company pursuant to the present Offering are
available for immediate resale by nonaffiliates of the issuer.
The Shares are being offered on a "best efforts" basis by the Company
and certain expenses of the Offering will be paid from the proceeds of the
Offering. The Company anticipates that such expenses will not exceed $1,000
as detailed in the Use of Proceeds.
<PAGE>
DIRECTORS, OFFICERS AND KEY PERSONNEL OF THE COMPANY
Officers and Directors. The following information sets forth the names
of the officers and directors of the Company, their present position with
the Company and biographic information:
NAME POSITION HELD SINCE
---- -------- ----------
Dr. Steven Levine Chairman, CEO and Director December 1997
Susan Levine Director, Secretary and Treasurer December 1997
Arnold Takemoto Director December 1997
Marianne Sum President, COO and Director December 1997
Dr. Steven Levine Ph D is a Director, Chief Executive Officer. Dr. Stephen
Levine founded Nutricology/Allergy Research Group in 1979. Dr. Levine
graduated Cum Laude from the State University College in Buffalo, NY and
obtained his Ph.D. from the University of California, Berkeley; Horace an
Edith King Davis Memorial Fellow; NIH Training Grant, Predoctoral Fellow
1972 - 1976. Dr. Levine is internationally recognized as one of the
foremost innovative leaders and researchers in nutritional supplement
formulation. He is also recognized as an international lecturer with
several editorial positions in professionally sought after publications.
Dr. Levine is the author of Antioxidant Adaptation, it's role in Free
Radical Pathology, which is considered to be the leading resource on the
subjects.
Susan Levine is a Director, Secretary and Treasurer of the Company. Mrs.
Levine holds a BA from the University of Berkeley in psychology and social
welfare. She developed and implemented housing programs, research and grant
proposals for funding of various community programs. This prior knowledge
and experience is a valuable asset to the Company. Currently Mrs. Levine
co-ordinates various national and international medical conferences along
with executive duties.
Arnold Takemoto is a Director of the Company. Mr. Takemoto obtained a
B.SC., in Chemistry from Clarkson College of Technology as well as graduate
training at the University of Vermont Medical School and Denver University
graduate School. Mr. Takemoto has been a well known lecturer in the health
care community with a private practice designing state of the art
complementary health protocols with patients exhibiting chronic conditions,
tenacious viral conditions and immune deficiencies, allergies and assorted
rheumatologic conditions, anti-aging and sport nutrition working
collaboratively to optimize patient health care. Mr. Takemoto's programs are
used by referral Physicians throughout the United States.
Marianne Sum is the President and Director to the Company. Ms. Sum
graduated Summa Cum Laude with a BA from Boston State College, Summa Cum
Laude with a MA from Northeastern University and a Ph.D. in History from
Boston College. Ms. Sum has a 25 year history as a successful
businessperson with 7 years in the health and wellness field. She is noted
for the
<PAGE>
tremendous growth that goes hand-in-hand with her direct management
expertise as well as her diligent quality control programs. Ms. Sum was
awarded Salesperson of the Year for 1991 and 1992 during her years with Fun
and Fitness; and was promoted to V.P. of Sales and Marketing.
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the shares of
Common Stock of the Company owned of record and beneficially held as of the
date of this Memorandum by (i) each person known to the Company to own of
record or beneficially 5% or more of the 14,965,355 outstanding shares of
Common Stock of the Company, (ii) each Director of the Company, and (iii)
all officers and directors of the Company as a group, as of the date of this
Memorandum and adjusted to reflect share holdings after the sale of the
maximum number of Shares offered hereby.
Ownership No Shares % No Shares %
Name & Position Pre Issue Post Issue
--------------- --------- ----------
Dr. Steven Levine 9,800,000 65.48% 9,800,000 65.41%
REMUNERATION OF DIRECTORS AND OFFICERS
Directors of the Company who are also employees of the Company receive
no additional compensation for their services as Directors. The Company
intends, in the future, to pay Directors who are not employees of the
Company, compensation of $500 per Director's Meeting, as well as
reimbursements of any out of pocket expenses incurred in the Company's
behalf
REPORTS
The books and records of the Company will be maintained by the Company.
The books of account and records shall be kept at the principal place of
business of Scottsdale Scientific, Inc., and each shareholder, or his duly
authorized representatives, shall have upon giving ten (10) days prior
notice, access during reasonable business hours to such books and records,
and the right to inspect and copy them. Within 120 days after the close of
each fiscal year, reports will be distributed to the shareholders which will
include financial statements (including a balance sheet and statements of
income, shareholder's equity, and cash flows) prepared in accordance with
generally accepted accounting principals, with a reconciliation to the tax
information supplementary supplied, accompanied by a copy of the
accountant's report.
LEGAL MATTERS
Gary R. Blume, Esquire, 11801 North Tatum Blvd, Suite 108, Phoenix,
Arizona, 85028 will pass upon certain matters for the Company.
<PAGE>
LITIGATION
The Company is not presently involved in any material litigation or
other legal proceedings.
ADDITIONAL INFORMATION
in the opinion of the Board of Directors of the Company, this
memorandum contains a fair presentation of the subjects discussed herein and
does not contain a misstatement of material fact or fail to state a material
fact necessary to make any statements made herein not misleading. Persons to
whom offers are made will be furnished with such additional information
concerning the Company and other matters discussed herein as they, or their
purchaser representative or other advisors, may reasonably request. The
Company shall, to the extent such information is available or can be
acquired without unreasonable effort or expense, endeavour to provide the
information to such persons. All offeree's are urged to make such personal
investigations, inspections or inquiries as they deem appropriate.
Questions or requests for additional information may be directed to
Mr.Amold Takernoto by calling (602) 922-2452. Requests for additional copies
of this Memorandum or assistance in executing subscription documents may be
directed to the Company.
STATE RESTRICTIONS AND DISCLOSURES
FOR UNREGISTERED SECURITIES OFFERINGS
NOTICE TO ARIZONA RESIDENTS:
These securities are being sold in reliance upon Arizona's Limited
Offering exemption from registration pursuant to AR.S. 44-1844.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA
SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
As a purchaser of such securities hereby represent that I understand
these securities cannot be resold without registration under the Arizona
Securities Act or an exemption therefrom. I am not an underwriter within the
meaning of AKS 44-1801(17), and I am acquiring these securities for myself,
not for other persons. If qualifying as a non-accredited investor, I further
represent that this investment does not exceed 20% of my net worth (
excluding principal residence, furnishings therein and personal
automobiles).
<PAGE>
NOTICE TO CALIEFORNIA RESIDENTS:
These securities are being sold in reliance upon California's Limited
Offering Exemption. 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF TFUS MEMORANDUM HAS
NOT BEEN QUALIFIED WITH THE CONMSSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFROM PRIOR TO SUCH QUALIFICATIONS IS
UNLAWFUL, UNLESS THE SALE. OF SECURITIES IS EXEM[PT FROM THE QUALIFICATIONS
BY SECTION 25100, 25102 OR 26105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXENTT.
THE CONNUSSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT
RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.
NOTICE TO COLORADO RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASON OF
SPECIFIC EXEM[PTIONS THEREUNDER RELATING TO THE LIM[ITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981,
IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO NEW YORK RESIDENTS:
THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED
BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONTAIN AN
UNTRUE STATEMENT OF MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL
FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. IT
<PAGE>
CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPOSED TO BE
SUMMARIZED ]HEREIN.
Purchaser Statement:
I understand that this Offering of Shares has not been reviewed by the
Attorney General of the State of New York because of the Offeror's
representations that this intended to be a non-public Offering pursuant to
the Regulation D Rule 504 or 505, and that if all of the conditions and
limitations of Regulation D are not complied with, the Offering will be
resubmitted to the Attorney General for amended exemption. I understand that
any literature used in connection with this Offering has not been previously
filed with the Attorney General and has not been reviewed by the Attorney
General. This Investment Unit is being purchased for my own account for
investment, and not for distribution or resale to others. I agree that I
will not sell or otherwise transfer these securities unless they are
registered under the Federal Securities Act of 1933 or unless an exemption
from such registration is available. I represent that I have adequate means
of providing for my current needs and possible personal contingencies of
financial problems, and that I have no need for liquidity of this
investment.
It is understood that all documents, records and books pertaining to
this investment have been made available to my attorney, my accountant, or
my offeree representative and myself, and that, upon reasonable notice, the
books and records of the issuer will be available for inspection by
investors, at reasonable hours at the principal place of business.
<PAGE>
EXHIBITS
Scottsdale Scientific, Inc.
SUBSCRIPTION DOCUMENT
1. The undersigned hereby subscribes for common stock (hereinafter
"Shares"), as described in the Private Offering Memorandum dated
October 13th, 1998 ("Memorandum"), of Scottsdale Scientific, Inc., a
Florida corporation (the "Company"), being offered by the Company for
a purchase price of $1.00 per Share and tenders herewith the sum of $
in payment therefor, together with tender of this Subscription
Document.
2. The undersigned represents and warrants that he is a bona fide
resident of the State of ___________.
3. The undersigned acknowledges:
a. Receipt of a copy of the Private Offering Memorandum;
b. That this subscription, if accepted by the Company, is legally
binding and irrevocable;
c. The Company has over 19 years of financial and operating history;
d. That the Shares have not been registered under the Securities Act
of 1933, as amended, in reliance upon exemptions contained in
that Act, and that the Shares have not been registered under the
securities acts of any state in reliance upon exemptions
contained in certain state's securities laws; and
e. That the representations and warranties provided in this
Subscription Document are being relied upon by the Company as the
basis for the exemption from the registration requirements of the
Securities Act of 1933 and of the applicable state's securities
laws.
4. The undersigned represents and warrants as follows:
a. That the undersigned subscriber is purchasing said Shares as an
investment and said Shares are purchased solely for the
undersigned's own account.
<PAGE>
b. That the undersigned subscriber has sufficient knowledge and
experience in financial and business matters to evaluate the
merits and risks of an investment in the Shares;
c. That the undersigned subscriber is able to bear the economic risk
of an investment in the Shares;
d. That the undersigned subscriber has read and is thoroughly
familiar with the Private Offering Memorandum and represents and
warrants that he is aware of the high degree of risk involved in
making investment in the Shares;
e. That the undersigned subscriber's decision to purchase the Shares
is based solely on the information contained in the Private
Offering Memorandum and on written answers to such questions as
he has raised concerning the transaction;
f. That the undersigned subscriber is purchasing the Shares directly
from the Company and understands that neither the Company nor the
Offering is associated with; endorsed by nor related in any way
with any investment company, national or local brokerage firm or
broker dealer. The undersigned subscriber's decision to purchase
the Shares is not based in whole or in part on any assumption or
understanding that an investment company, national or local
brokerage firm or other broker dealer is involved in any way in
this Offering or has endorsed or otherwise recommended an
investment in these Shares.
g. That the undersigned subscriber has an investment portfolio of
sufficient value that he could suitably absorb a high risk
illiquid addition such as an investment in the Shares.
h. The undersigned further represents that (INITIAL APPROPRIATE
CATEGORY):
[ ] I am a natural person whose individual net worth, or joint worth
with my spouse at the time of purchase, exceeds $200,000;
[ ] I am a natural person who had an individual income in excess of
$50,000 or joint income with my suppose in excess of $50,000 in
each of the two most recent years and who reasonably expects an
income in excess of those amounts in the current year;
i. That Regulation D requires the Company to conclude that each
investor has sufficient knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares, or to verify that the
investor has retained the services of one or more purchaser
representatives for the purpose of evaluating the risks of
investment in the shares
<PAGE>
and hereby represents and warrants that he has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the shares
and of making an informed investment decision and will not
require a purchaser representative.
5. The undersigned understands and agrees that this subscription is made
subject to each of the following terms and conditions:
a. The Company shall have the right to accept or reject this
subscription, in whole or part, for any reason. Upon receipt of
each Subscription Document, the Company shall have until October
30th, 1998 in which to accept or reject it. If no action is taken
by the Company within said period, the subscription shall be
deemed to have been accepted. In each case where the subscription
is rejected, the Company shall return the entire amount tendered
by the subscriber, without interest;
b. That the undersigned subscriber will, from time to time, execute
and deliver such documents or other instruments as may be
requested by the Company in order to aid the Company in the
consummation of the transactions contemplated by the Memorandum.
6. The undersigned hereby constitutes and appoints the Company, with full
power of substitution, as attorney-in-fact for the purpose of
executing and delivering, swearing to and filing, any documents or
instruments related to or required to make any necessary clarifying or
conforming changes in the Subscription Document so that such document
is correct in all respects.
7. As used herein, the singular shall include the plural and the
masculine shall include the feminine where necessary to clarify the
meaning of this Subscription Document. All terms not defined herein
shall have the same meanings as in the Memorandum.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Document
this ___ day of ______________, 1998.
Number of Shares _____________
Total amount tendered $ ___________
INDIVIDUAL OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
<PAGE>
JOINT OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
OTHER OWNERSHIP: ---------------------------------------------
Name ( Please Type or Print )
---------------------------------------------
Signature
---------------------------------------------
Social Security Number
ADDRESS:
-----------------------------------------------------------------
Street City State Zip
Phone (Residence) Phone (Business)
--------------------- ------------------
I, __________________________, do hereby certify that the
representations made herein concerning my financial status are true, and
that all other statements contained herein are true, accurate and complete
to the best of my knowledge.
Date: 1998.
------------------,
Signature
-----------------------------------
<PAGE>
CERTIFICATE OF DELIVERY
I hereby acknowledge that I delivered the foregoing Subscription
Document to ________________ on the _________ day of _________________,
1998.
Signature
-----------------------------------
ACCEPTANCE
This Subscription is accepted by SCOTTSDALE SCIENTIEFIC, INC., as of
the _____ day of _____________________, 1998.
SCOTTSDALE SCIENTEFIC, INC.
By:
------------------------
Director
<PAGE>
