EX-99.1
SAFE HARBOR COMPLIANCE STATEMENT
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. PVAXX Corporation "PVAXX" or the "Company")
intends to qualify both its written and oral forward-looking statements for
protection under the Reform Act and any other similar safe
harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on
various expectations and assumptions concerning future events and they are
subject to numerous known and unknown risks and uncertainties which could
cause actual events or results to differ materially from those projected. Due
to those uncertainties and risks, the investment community is urged not to
place undue reliance on written or oral forward-looking statements of PVAXX.
The Company undertakes no obligation to update or revise this Safe Harbor
Compliance Statement for Forward-Looking Statements (the "Safe Harbor
Statement") to reflect future developments. In addition, PVAXX undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
RISK FACTORS
The shares offered hereby are speculative and involve a high degree of risk
and should not be purchased by investors who cannot afford the loss of their
entire investment.
We provide the following risk factor disclosure in connection with our
continuing effort to qualify our written and oral forward looking statements
for the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to us that could cause
actual results to differ materially from those in forward looking statements
include the following disclosures:
<PAGE> 2
1. The highly competitive biodegradable plastics market may negatively impact
our business, prospects, financial condition and results.
The biodegradable plastics industry in which we operate is highly
competitive. Some of our principal competitors in certain business lines are
substantially larger and better capitalized. Because of these resources,
these companies may be better able to obtain new customers and to pursue new
business opportunities or to survive periods of industry consolidation. There
can be no assurance that these threats of competition will not negatively
impact our operations and results.
2. Our early development stage may lead to potential fluctuations in quarterly
operating results that could have a material adverse effect on business,
prospects, financial condition and results of operations.
Our business and prospects must be considered along with the risks, expenses
and difficulties frequently encountered by companies in their early stages of
development. The risks we face include, but are not limited to,
(a) general economic conditions and economic conditions specific to the
biodegradable plastics industry;
(b) our ability to manage rapid growth;
(c) our ability to anticipate and adapt to a developing market and unforeseen
changes;
(d) developments in our strategic partners' activities and direction;
(e) our ability to retain and attract customers;
(f) the level of competition in the biodegradable plastics industry;
(g) our ability to upgrade and develop its products and infrastructure and
attract new personnel in a timely and effective manner;
(h) the amount and timing of operating costs and capital expenditures relating
to expansion of our business, operations and infrastructure; and
(i) governmental regulation.
To address these risks, we must, among other things:
(a) implement and successfully execute our business strategy;
(b) continue to develop and upgrade our products and technology;
(c) provide superior customer service;
(d) respond to competitive developments;
(e) attract, retain and motivate qualified personnel; and
(f) meet the expectations of our strategic partners.
<PAGE> 3
There can be no assurance that we will be successful in addressing such
risks, and the failure to do so could have a material adverse effect on
our business, prospects, financial condition and results of operations.
3. There can be no assurance that we will secure, or be able to protect any
patents, trademarks or intellectual property.
On November 24, 2000, the Company received an International Preliminary
Examination Report regarding International application No. PCT/GB99/02822,
originally filed August 26, 1999. Reasoned statements under Article 35(2) with
regard to novelty, inventive step and industrial applicability were confirmed
favorably by the International Preliminary Examining Authority on all claims
asserted (1-30) in connection with the application as follows:
Novelty Yes: Claims 1-30
No: Claims -
Inventive step (IS) Yes: Claims 1-30
No: Claims -
Industrial applicability Yes: Claims 1-30
No: Claims -
The Company is also the holder of the rights to patents published under
International Publication Numbers WO 98/26911 on June 25, 1998 and WO
00/12615 on March 9, 2000.
The Company has applied for trademark protection in the United States and all
other major-developed countries for the name PVAXX CORPORATION. There can be
no assurance that existing or future patents or trademarks, if any, will
adequately protect the Company. Also, there can be no assurances that any
patent or trademark applications will result in issued patents or trademarks.
In addition, there can be no assurances that the Company's patents or
trademarks will be upheld, if challenged. The Company also faces the risk that
competitors will develop similar or superior methods or products outside the
protection of any patent issued to the Company. Although the Company believes
that its current European patents and trademarks, potential United States
patent and trademarks, as well as the Company's products, do not and will not
infringe patents or trademarks or violate the proprietary rights of others, it
is possible that the Company's existing patent or trademark rights may not be
valid or that infringement of existing or future patents, trademarks or
proprietary rights may occur. Failure to do any of the foregoing could have a
material adverse effect upon the Company.
In addition, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent or
trademark infringement or proprietary rights violation action that may be
brought against it. Moreover, if the Company's products infringe patents,
trademarks or proprietary rights of others, the Company could, under certain
circumstances, become liable for damages, which also could have a material
adverse effect on the Company.
<PAGE> 4
4. Our dependence on key personnel could negatively impact our financial
condition and results of operations.
Our future success depends in large on part of the continued service of our
key marketing, engineering and management personnel. We must also be able to
continue to attract and retain qualified employees. The competition for such
personnel is intense, and the loss of key employees could have a material
effect on our financial condition and results of operations.
5. The control of the Company by principal shareholders, officers and directors
could impede its shareholders from having any ability to direct affairs and
business.
Our principal shareholders, officers and directors will beneficially own
approximately eighty percent (80%) of our company's common stock. As a
result, such persons will have the ability to control our company and direct
its affairs and business. Such concentration of ownership may also have the
effect of delaying, deferring or preventing change in control of our company.
6. Management's potential issuance of preferred stock may adversely affect
holders of common stock or delay or prevent corporate take-over.
Our Articles of Incorporation provide that we may, from time to time, issue
preferred stock in one or more series. The Articles of Incorporation authorize
our Board of Directors to determine the rights, preferences, privileges and
restrictions granted to and imposed upon any wholly unissued series of preferred
stock and the designation of any such shares, without any vote or action by
our shareholders. The Board of Directors may authorize and issue Preferred
stock with voting power or other rights that could adversely affect the voting
power or other rights of the holders of common stock. In addition, the
issuance of preferred stock could delay, defer or prevent a change in control
of the Company, because the terms of preferred stock that might be issued
could potentially prohibit the Company's consummation of any merger,
reorganization, sale of substantially all of its assets, liquidation or other
extraordinary corporate transaction without the approval of the holders of
the outstanding shares of the preferred stock.
7. Our stock price will be potentially volatile and may impede our ability to
secure equity financing or complete business combination transactions on
favorable terms to the Company.
There has been no public market for the Company's common stock. There can be
no assurance that an active trading market will develop or be sustained. At a
future date, provided a public market for the stock does develop, the market
price of the shares of common stock is likely to be highly volatile and may be
significantly affected by factors such as fluctuations in the Company's
operating results, announcements of technological innovations or new products
and/or services by the Company or its competitors, governmental regulatory
action, developments with respect to
<PAGE> 5
patents or proprietary rights and general market conditions. In addition, the
stock market has, from time to time, experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Significant fluctuations may impede our ability to secure equity
financing or complete business combination transactions on favorable terms
to the Company.
8. The possible need for additional financing may impeded our ability to
manage operations at an optimal level.
Our ultimate success may depend upon the ability to raise additional capital.
We have not investigated the availability, source, or terms that might govern
the acquisition of additional capital. We will not investigate these issues
until it determines a need for additional financing. If additional capital is
needed, there is no assurance that funds will be available from any source.
Also, if additional capital is available, there can be no assurance that
additional capital can be obtained on terms acceptable to the Company. If
additional capital is not available, our operations will be limited to those
that can be financed with our modest capital.
9. Our Company's indemnification of officers and directors may result in
substantial expenditures by the Company.
Our Articles of Incorporation provide for the indemnification of directors,
officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on
behalf of the Company. We will also bear the expenses of such litigation for
any directors, officers, employees, or agents, upon such person's promise to
repay the Company therefor if it is ultimately determined that any such person
shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditures by the Company that it will be
unable to recoup.
10. Rule 144 sales may have a depressive impact on the Company's stock.
Certain of the outstanding shares of common stock held by present stockholders
are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for a prescribed period may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that
does not exceed the greater of 1.0% of a company's outstanding common stock or
the average weekly trading volume during the four calendar weeks prior to the
sale. As a result of revisions to Rule 144 which became effective on or about
April 29, 1997, there will be no limit on the amount of
<PAGE> 6
restricted securities that may be sold by a nonaffiliate after the restricted
securities have been held by the owner for a period of two years. A sale
under Rule 144 or under any other exemption from the Act, if available, or
pursuant to subsequent registrations of shares of common stock of present
stockholders, may have a depressive effect upon the price of the common stock
in any market that may develop.
11. Required regulatory disclosure relating to low-priced stocks may
negatively impact liquidity in our common stock.
As long as the trading price of the common stock is less than US$5.00 per
share, trading in the common stock in the US secondary market is subject to
certain rules promulgated under the Securities Exchange Act of 1934, which
rules require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a "penny stock" (generally, any non-NASDAQ
equity security that has a market price of less than US$5.00 per share,
subject to certain exceptions). Such rules require the delivery, prior to any
penny stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transactions prior to sale.
The additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in our common stock,
which could severely limit the market liquidity and the ability of
stockholders to sell the common stock in the US secondary market.
12. Current prospectus and state blue sky requirements may impede our ability
to offer common stock in certain jurisdictions
We will be able to issue shares of its common stock only if there is then a
current prospectus relating to such common stock and only if such common stock
is qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of the
common stock reside. We have undertaken and intend to file and keep current a
prospectus that will permit the purchase and sale of the common stock, but
there can be no assurance that we will be able to do so. Although we intend to
seek to qualify for sale the shares of common stock in those states in which
the securities are to be offered, no assurance can be given that such
qualification will occur. The common stock may be deprived of any value and
the market for such shares may be limited if a current prospectus covering the
common stock is not kept effective or if such common stock is not qualified or
exempt from qualification in the jurisdictions in which the holders then
reside.
