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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended DECEMBER 31, 1999.
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________________ to _________________
Commission file number _______________________________
BIOLABS, INC.
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(Name of small business issuer in its charter)
NEW YORK 98-0163232
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1A-3033 KING GEORGE HIGHWAY,
SURREY B.C. CANADA V4P 1B8
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(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: (604) 542-0820
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Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on which
Title of each class registered
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Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.0001 / SHARE
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(Title of class)
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. NIL
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As of March 21, 2000, the aggregate market value for the 6,968,997 shares of the
Common Stock, par value $0.0001 per share, held by non-affiliates was
approximately $95,823,708.
The number of shares of Common Stock of the registrant outstanding as of
DECEMBER 31, 1999 was 8,178,997.
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DOCUMENTS INCORPORATED BY REFERENCE
NONE
TABLE OF CONTENTS
Page
PART I
Item 1 Description of Business......................................3
Item 2 Description of Property.....................................13
Item 3 Legal Proceedings...........................................13
Item 4 Submission of Matters to a Vote of Security Holders.........14
PART II
Item 5 Market for Common Equity and Related Stockholders Matters...15
Item 6 Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................16
Item 7 Financial Statements .......................................18
Item 8 Changes in and Disagreements with Accountant on Accounting
and Financial Disclosure.................................31
PART III
Item 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a)...................32
Item 10 Executive Compensation......................................33
Item 11 Security Ownership of Certain Beneficial Owners and
Management..............................................35
Item 12 Certain Relationships and Related Transactions..............36
Item 13 Exhibits and Reports on Form 8-K............................37
SIGNATURES ............................................................38
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BIOLABS, INC. - 10-KSB - ANNUAL REPORT
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
BioLabs, Inc. a New York corporation, having its principal place of business in
Surrey, British Columbia, Canada (herein, the "Company") is a development stage
company formed to manufacture and market certain cancer therapy tests developed
by others. The Company was previously known as Flexx Realm, Inc. Flexx Realm had
no business.
The Company entered into a joint venture agreement dated as of November 4, 1998
with an unrelated entity, Biotherapies Incorporated ("Biotherapies") to develop
and commercialize a Mammastatin Serum Assay Test (the "MSA Test"). The joint
venture operates as a Michigan Limited Liability corporation. The name of such
entity is Biomedical Diagnostics, LLC, and is herein referred to as the "Joint
Venture" or "JV". The Company owns an 11.1% minority interest in Biotherapies,
and has entered into a letter of intent to increase such percentage ownership to
19.9%. See "Proposed Transactions".
The Company has no revenue from operations, is in a start-up phase with its
existing assets and has no significant assets, tangible or intangible, other
than the opportunities for the Joint Venture disclosed herein. The Company
continues to have significant obligations with respect to the Joint Venture and
Biotherapies. In order to complete its obligations, the Company will require
additional financing. The Company expects to need to place additional securities
with investors in registered offerings or exempt transactions in order to raise
the capital required for its activities until such time as the Joint Venture and
the Company can generate revenues from operations. None of the Company's current
officers are employed directly by the Company. Although such officers are
engaged substantially full-time for the Company, in accordance with Canadian
practice, they are employed by the Company through a personal services holding
company. The Company has three full-time persons engaged through the holding
Company, and one other administrative employee, employed directly. (See Item 10:
"Executive Compensation").
There is no assurance that the Company will ever earn revenue, operate
profitably or provide a return on investment to its security holders. The
Company's activities to date have consisted primarily of efforts to raise funds;
establish a joint venture relationship with Biotherapies for the manufacture and
sale of the MSA Test; and acquire an equity interest in Biotherapies. As
currently structured, the Company proposes to derive all its revenue from its
50% partnership in the Joint Venture. A critical part of the Company's business
plan requires the Company to fund 50% of the cost to develop, manufacture,
market and distribute the MSA Test. There can be no assurance that the Company
will be able to successfully raise the capital required, when required, to meet
its proportionate costs in the future. See "Risk Factors."
The MSA Test is a blood test to determine breast cancer risk through the
detection and measurement of Mammastatin blood levels. Mammastatin is a
naturally occurring human protein found in the blood of over 85% of healthy
women and absent in the blood of over 90% of breast cancer patients. Clinical
trials for the MSA Test commenced in the fourth quarter of 1999, and conclude
prior to the end of the second quarter of 2000. The results of these trials will
be submitted in an application to the United States Food and Drug Administration
("FDA") for approval of the MSA Test as a medical device. There is no assurance
that the clinical trials will be completed as scheduled or that the MSA Test
will be approved or ever sold. See also "Risk Factors - Uncertain
Market/Government Regulations; Dependence on One Product/FDA Approval". It is
anticipated that this application will be submitted by the second quarter of
2000 with FDA action with respect to the application expected during the fourth
quarter of 2000. Based on such timetable, the MSA Test is not expected to be
launched in North America until the first quarter of 2001. The Company believes
it has adequate current cash resources, if appropriately allocated, to continue
operations as is for approximately 10 to 12 additional months. The potential
insufficiency of funds is a significant risk factor.
In the event that the Joint Venture receives FDA approval to manufacture and
distribute the MSA Test as a medical device, the MSA Test will be subject to
continuing regulation by the FDA and certain state agencies, including routine
inspection by the FDA and a host of regulatory requirements that generally apply
to medical devices marketed in the United States, including labeling
regulations, quality system regulations, the Medical Device Reporting regulation
and the FDA's prohibitions against promoting products for an unapproved or
"off-label" uses. Unanticipated changes in existing regulatory requirements or
adoption of new requirements could have a materially adverse effect on BioLabs'
business, financial condition and results of operations. BioMedical Diagnostics'
failure to comply with applicable
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BIOLABS, INC. - 10-KSB - ANNUAL REPORT
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regulatory requirements could result in enforcement action by the FDA, which
could have a material adverse effect on the business, financial condition and
results of operations of the Joint Venture and the Company.
Final product development, manufacturing, marketing, sales and distribution of
the MSA Test is expected to require a significant amount of capital. Under the
terms of the Joint Venture Agreement, each member of the Joint Venture is
obligated to fund its 50% portion of additional capital requirements. The
Company will require additional capital to meet such obligations. The Company
intends to finance its portion of these expenses through the proceeds of the
sales of securities by future private placements of securities or registered
public offering transactions. In the event that the Company is unable to raise
its 50% portion of Joint Venture expenses, the Company's interest in the Joint
Venture may be reduced to a minimum of 30%.
Under the terms of the Joint Venture Operating Agreement, as amended, the
Company agreed to make $1,500,000 of capital contributions to the JV, all of
which have been paid. The last $500,000 was paid on August 9, 1999. All amounts
set forth herein are in U.S. Dollars. Further, under terms of the Joint
Operating Agreement, as amended, the Company agreed to make capital
contributions totaling $3,500,000 to Biotherapies in connection with the ongoing
development of products using the Mammastatin technology. In August, 1999, the
Company paid $1,500,000 of this commitment, leaving a balance of $2,000,000 to
be paid as follows:
a. $1,000,000 (to be used exclusively for the ongoing development of
products utilizing the Mammastatin technology) within 60 days after
completion by Biomedical Diagnostic LLC (the Joint Venture) of
diagnostic clinical trials for some form of the Mammastatin Serum Assay
in the United States.
b. $1,000,000 (to be used exclusively for the ongoing development of
products utilizing the Mammastatin technology) within 30 days after the
date that Biomedical Diagnostic LLC (the Joint Venture) first achieves
in the aggregate $100,000 in gross revenue from any sale or license of
the Mammastatin Serum Assay (post-completion of the diagnostic clinical
trials).
Thus, as of December 31, 1999, the Company has contributed:
a. To Biomedical Diagnostics LLC - $1,500,000. This contribution completes
the obligation to Biomedical Diagnostics.
b. To Biotherapies Inc. - $1,500,000. A balance of $2,000,000 is payable
under certain circumstances as set forth above.
The JV is making necessary arrangements to assemble and collect a large database
required for the MSA Test. However, revenues are not expected to be realized
until the MSA clinical trials are completed, and FDA approval is granted, and
marketing or licensing of the MSA test on a commercial basis is feasible.
Although the Company is currently exploring licensing opportunities which would,
if consummated, enable it to pay such sums to Biotherapies, when due, without
future capital raise-ups, there can be no assurance thereof. The potential
insufficiency of funds is a significant risk factor. The Company is unable to
assure that sufficient funds will be available, when necessary, to meet its
obligations to Biotherapies, or that such funds, if available, will be available
on terms and conditions which are favorable to pre-existing investors in the
Company. The failure of the Company to meet its obligations to Biotherapies,
when due, can result in a dilution of the Company's interest in the Joint
Venture.
Within fourteen (14) days after the Joint Venture obtains the regulatory
approvals, the Company is required to issue Biotherapies 5% of the Company's
total outstanding shares of all classes on a fully diluted basis. This amount,
when incurred will constitute an additional investment cost in the Company's
participation in the Joint Venture. The Company also intends to seek other
commercial relationships relating to cancer therapy treatments and other
biotechnology projects. There is no assurance that any such relationships will
be established or, if established, that any such transactions or relationships
will be profitable or effective for the Company. See "Risk Factors".
The Company closed its convertible Preferred Share offering on August 30, 1999,
under which it raised a net total of $5,565,911. Of such amount, $1,000,000 was
paid to the Joint Venture and $500,000 was paid to Biotherapies, each on August
9, 1999. After meeting all current obligations, the Company currently has
approximately $628,665 of cash on hand. No further contribution payments are due
to Biotherapies or the Joint Venture until the Joint Venture reaches certain
critical milestones. Based on the current status, Management believes that it
has adequate current cash resources, if appropriately allocated, to continue
current operations as is, for approximately 10 to 12 months. The Company's
viability after 10 to 12 months is dependent on the achievement of certain
commercialization goals and
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milestones by the Joint Venture, and, even then, continued viability may be
dependent at least for the same undetermined period, on the Company's ability
to attract additional investment capital from qualified individuals and
institutions. See "Risk Factors - Need for Additional Financing". Unless the
Company is capable of securing an underwriter for a registered offering of its
securities, management expects to restrict its future capital raising
activities to qualified accredited investors and institutions.
PROPOSED TRANSACTIONS
As of December 31, 1999, the Company owned an 11.1% limited stock interest in
Biotherapies. The Company proposes to further increase its stock interest in
Biotherapies to 19.9%. Prior to December 31, 1999, the Company acquired 800,000
Series C preferred shares of I.D. Certify for $800,160. The Company proposes to
exchange the 800,000 Series C preferred shares and issue 1,100,000 BioLabs
Common Shares, subject to finalization, for 100,000 Biotherapies' shares owned
by an unrelated seller, Dynamed, Inc., a Washington State privately owned
corporation, plus Dynamed's interest in a separate joint venture with
Biotherapies relating to a test for prostrate cancer. The Company has paid a
non-refundable $50,000 deposit to Dynamed Inc. There is no assurance that the
transaction will be completed, or that if completed, it will prove to be
beneficial to the Company or its security holders. If the transaction is
completed, it will heighten the Company's dependence upon the uncertain future
progress of Biotherapies with respect to the MSA Test and related matters (see
below). See "Risk Factors - Need for Additional Financing".
BIOTHERAPIES-BACKGROUND
The Company owns a limited stock interest in Biotherapies. See "Proposed
Transactions" above. This discussion of Biotherapies is provided solely to
educate the reader concerning the background of the Company's technical partner
in the Joint Venture. The reader is cautioned not to confuse the activities or
capacities of Biotherapies with those of the Company. The Company does not
possess the technical expertise of Biotherapies.
Dr. Paul Ervin Jr., the founder of Biotherapies, has a senior position on the
Scientific Advisory Board for the Company.
Dr. Ervin had previously discovered the Mammastatin protein in 1987 at the
University of Michigan Cancer Center (now known as the Karamasoff Cancer Center
in Detroit, Michigan). Dr. Ervin observed that under certain laboratory
conditions, Mammastatin decreased the growth rate of breast cancer cells.
During his Ph.D. training from 1987 to 1994, Dr. Ervin continued his research
which resulted in the issuance of a patent to the University of Michigan in
1990, entitled Mammastatin Biochemical Characteristics. Dr. Ervin ultimately
discovered that Mammastatin is a naturally occurring human protein that has been
linked to the growth of normal mammary tissue layer cells in culture. Further,
that Mammastatin can be identified in female blood serum and Mammastatin levels
vary in the serum of healthy women during menstrual cycles. Additionally,
preliminary research indicated that Mammastatin is a naturally occurring human
protein, the function of which may be to regulate and inhibit breast cell
growth, without affecting the growth of other cells.
Mammastatin requires the addition of a phosphate group to be active. Cancer
cells have an excess of the enzyme that removes the phosphate group. Phosphate
group is a molecule to which a phosphorous and oxygen complex has been added.
Mammastatin is not active and levels are low in over 90% of breast cancer
samples analyzed; while it is active in all of the normal breast cells analyzed.
A gene for Mammastatin has since been isolated and identified. Dr. Ervin has
been successful in cloning the gene and is now preparing for synthetic
production for further research. In 1997, Biotherapies was given permission to
administer natural Mammastatin to Stage IV breast cancer patients on a
compassionate basis.
MSA TEST
Biotherapies subsequently developed a quantitative assay for measuring
Mammastatin in blood serum, known as the MSA test. Quantitative assay as to a
blood test refers to a methodology for numerical measurement of specified
chemical constituents and/or the relative proportion thereof. The MSA test
quantitatively measures the specific concentrations of the Mammastatin protein
in blood serum. The assay in all its forms is believed by management to be a
reliable system for measuring the quantity of Mammastatin protein in a liquid,
and thereby provide a reliable indicator of the potential presence or likely
absence of breast cancer cells.
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The Joint Venture has been formed to commercialize the MSA test, subject to the
FDA approval process. The Joint Venture envisions development of a "Kit" which
would allow antibody based detection of the Mammastatin protein. Components of
the Kit may include, in addition to antibodies and protein, substrates to
develop color from the serum assay, membrane to immobilize serum proteins, an
apparatus to perform the blot, a scanner to read the blot, and a software
program and computer to interpret the blot. In this context, substrates refers
to a substance or medium to be acted upon by the antibodies. The substrates will
provide the foundation from which the quantification of Mammastatin levels may
be carried out. Membrane refers to a thin pliable material that will be used as
a filter to separate or immobilize serum proteins. Neither the MSA Test nor its
component parts or the exact procedure to be followed has been finalized.
Through the Company's 50% ownership interest in the Joint Venture, the Company
is partially funding the development of the MSA Test for breast cancer.
Biotherapies provided certain intellectual property to the Joint Venture and
also granted to the Joint Venture the exclusive world wide rights to
manufacture, market and distribute the MSA Test.
The manufacturing and sale of pharmaceuticals is a highly competitive industry
dominated by a handful of large firms. As such, it is expected that the Joint
Venture will not manufacture the MSA test kit in-house, but instead will
sub-license these rights to a major pharmaceutical company. The Joint Venture
has had preliminary discussions with two major pharmaceutical companies for
potential sub-license agreements for the manufacture, distribution, and/or sale
of the MSA Test.
The expected cost to bring the MSA Test to market will be determined, in part,
by the terms and conditions of a potential sub-licensing agreements. The cost to
introduce the MSA Test into the larger clinical diagnostic market is not
pre-determinable and may far exceed the Company's current resources.
Acceptance of the MSA test by clinicians, pathologists, oncologists, physicians
and their patients will depend on BioMedical Diagnostic's ability to (i)
increase the level of awareness of Mammastatin ("MSA") Blood Test among women,
as well as laboratories and physicians who are expected to order the MSA test;
(ii) educate both the general public and medical community regarding the
benefits of early diagnosis of breast cancer with the MSA test; (iii) provide
data demonstrating clinical correlations to disease diagnosis and outcomes
detected by MSA tests; (iv) obtain third-party payor approval of and
reimbursement for the MSA tests.
MAMMASTATIN REPLACEMENT THERAPY
Biotherapies also holds the exclusive rights to patents pertaining to the use of
Mammastatin as a therapeutic for breast cancer. The Company has no direct
interest in Mammastatin as a therapeutic remedy, and will only participate in
the commercialization thereof solely through its ownership interest in
Biotherapies.
Biotherapies Mammastatin therapeutic remedy has been approved by the FDA for
their "Fast Track" program. Under the "Fast Track" program, the FDA approval
process for products for the treatment of life threatening diseases is
accelerated, and can be concluded (with or without such approval) in less than
two years. There is no assurance of FDA approval. Biotherapies has begun Phase
I/II clinical trials at the M.D. Anderson Cancer Center, in Houston. The
Mammastatin therapeutic clinical trials will, the Company anticipates, conclude
no earlier than mid-2001 and FDA approval is expected to take at least another
six to nine months. Accordingly, Mammastatin Replacement Therapy is not expected
to be launched as a commercial product until mid-2002 or later.
The sale of pharmaceuticals is a highly competitive industry dominated by a
handful of large firms. As such, it is expected that Biotherapies will
sub-license the distribution, marketing and sales rights to its Mammastatin
Replacement Therapy to a major pharmaceutical company. At present, Biotherapies
is conducting a preliminary search of major pharmaceutical companies for
potential sub-license agreements for the distribution, marketing and sale of the
Mammastatin Replacement Therapy.
INVOLVEMENT WITH UNIVERSITY OF MICHIGAN
Biotherapies president, Dr. Paul Ervin, was the University of Michigan's
principal investigative scientist with respect to Mammastatin. Biotherapies has
sole proprietary licenses from the University of Michigan with respect to
Mammastatin protein, and has patents pending for related product applications.
The Company has no business or other relationship with the University of
Michigan.
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The Mammastatin technology, including the MSA Test is protected by two existing
patents granted pursuant to Dr. Ervin's work at the University of Michigan.
Biotherapies manages the patent process. Both Biotherapies and the Joint Venture
intend to patent all practical patentable extensions of the existing technology.
In cooperation with the University of Michigan, Biotherapies has the following
patents and licenses on the Mammastatin technology:
Exclusive license from the University of Michigan on all of the University's
existing Mammastatin technology patents, subject to reimbursement of past
patent costs ($15,000 per year) and royalties: 15% on any sub-license
revenues, and 4% on any direct sales revenues.
Submittal of U.S. and international patent applications in October 1997, on
behalf of the University of Michigan for:
1. The DNA sequence that codes for Mammastatin.
2. The synthetic reproduction of the Mammastatin protein.
Submittal of U.S. and international patent applications in 1998 by
Biotherapies on behalf of the University of Michigan for:
1. The Mammastatin blood testing methodology.
2. Use of healthy human mammary tissues for Mammastatin production.
MAMMASTATIN PATENT AND LICENSE HOLDERS
<TABLE>
<CAPTION>
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PATENT APPLICATION PATENT HOLDER LICENSEE EXCLUSIVE USER
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<S> <C> <C> <C>
1. Mammastatin blood test (MSA) (submitted
1996; pending) University of Michigan Biotherapies Joint Venture
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2. Mammastatin DNA sequence and synthetic To Be Determined by
reproduction (submitted 1996; pending) University of Michigan Biotherapies Biiotherapies ("TBD")
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3. Mammastatin method to treat breast
cancer (submitted 1996; pending) University of Michigan Biotherapies TBD
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4. Mammastatin analog in other epithelial
tissues (submitted 1999; pending) University of Michigan Biotherapies TBD
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5. Mammastatin analog in prostate
(submitted 1999; pending) University of Michigan Biotherapies TBD
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</TABLE>
INTELLECTUAL PROPERTY
The Mammastatin technology, including the MSA test is, in the opinion of
management, covered by two patent applications filed in 1996. All patent
applications have been assigned to the University of Michigan according to the
terms of the licensing agreement for the Mammastatin technology between
Biotherapies and the University of Michigan. Biotherapies manages the patent
process. Both Biotherapies and the Joint Venture intend to patent any and all
novel extensions of the existing technology.
There can be no assurance that the patent applications will ultimately be
granted or that the patents, if granted, will fully protect Biotherapies, the
Company, or the Joint Venture from other competition. Both Biotherapies and the
Joint Venture will have to incur considerable costs in the future to obtain
patent protection in other countries, if any protection can be obtained at all.
Foreign patent applications on the one granted U.S. Patent have been applied for
in multiple jurisdictions throughout the world. Patent protection is limited in
duration. The Mammastatin blood test ("MSA") patent
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pending licensed to the Joint Venture will, if granted, have a 20 year life.
There is no assurance that any such patent protection will be issued, or
that, if issued to Biotherapies, that it will adequately protect the Company
or the Joint Venture.
CONTRIBUTIONS TO THE JOINT VENTURE/GOVERNANCE
Under the terms of the Operating Agreement, Biotherapies' contribution to the
Joint Venture is an exclusive, non-assignable, non-sub-licensable, royalty free
world-wide sub-license to use all of Biotherapies' rights under the License
Agreement with the University of Michigan, for the development, manufacturing,
marketing and sale of the MSA test. The Joint Venture owns all improvements,
including modifications and enhancements as well as any new product or material
which performs substantially the same function as the MSA test, but does so
through a different method or process.
So long as the Joint Venture remains in effect, the Company will be notified of
any opportunities for the development or commercialization of any other
diagnostic or screening test developed by Biotherapies.
The Joint Venture is managed by four committee members, two of whom were
appointed by the Company and two appointed by Biotherapies. Each member has one
vote. The committee has the power and authority to make all of the ordinary and
usual decisions concerning the business of the Joint Venture, including the
hiring of key officers. Tie votes are resolved by the President of Biotherapies,
currently, Mr. Tom Trimmer.
The Joint Venture Management Committee must refer the sale or hypothecation of
all or substantially all of the assets of the Joint Venture, capital
expenditures or major commitments in excess of $250,000, non-arms-length
transaction or issuance of any additional Joint Venture interests directly to
the Joint Venture partners. As currently constituted, any such transaction
requires the Company's consent.
The Joint Venture Agreement has no fixed term for expiry and both the Company
and Biotherapies can engage in competing technologies or business to the MSA
test. Either member of the Joint Venture may sell or encumber all or part of its
interest in the Joint Venture to another party by first granting the non-selling
member a 30 day right of first refusal.
ADDITIONAL CAPITAL REQUIREMENTS OF THE JOINT VENTURE
In the event that additional capital is required by the Joint Venture, each
member of the Joint Venture is obligated to fund its 50% portion of the total
requirements. The Company will require additional capital to fund its portion of
such expenses. The Company is not aware whether Biotherapies has the financial
capacity to pay its portion of the Joint Venture expenses. Should either member
of the Joint Venture fail to fund the shortfall within 60 days of the due date,
the other member has the option to fund the shortfall and correspondingly dilute
the non-funding member's ownership interest in the Joint Venture. The Company
currently has no way of raising its portion of the Joint Venture capital
otherwise than through the sale of securities by future private placements or
registered public offering transactions. The Company may suffer significant
dilution of its Joint Venture interest if it fails to meet its share of the
Joint Venture Capital Requirements.
HYPOTHETICAL LIQUIDATION CALCULATIONS - Subject to income tax regulations, and
generally accepted accounting principles and practices, the Joint Venture
intends to allocate Joint Venture profits or losses for each fiscal year in a
manner that would cause each member's adjusted capital account balance at the
end of the year to equal the amount that would be distributed to the members
under a hypothetical liquidation of the Joint Venture. In determining
hypothetical liquidation values, the Agreement presumes that all of the Joint
Venture's assets would be sold at fair market value net of liabilities. The
purpose of the calculation is to restate capital for internal bookkeeping
purposes only, as between the Company and Biotherapies, the Joint Venture's only
two members. The hypothecation liquidation value will not impact on the
Company's profits or losses from the Joint Venture, or on the Company's
distributions from the Joint Venture, see next paragraph. Except in the event of
certain extraordinary transactions, the costs of this annual allocation are
expected to be nominal, under $10,000 per annum.
It is intended that the Joint Venture will distribute operating cash flow, if
any, each calendar quarter. Operating cash flow is the gross cash proceeds
generated by the Joint Venture's operations less expenses, working capital,
interest and principal payments on Joint Venture debt, capital asset purchases
and contingencies, all as determined by the committee, and calculated in
accordance with generally accepted accounting principles. Operating cash flow
will also
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include a deduction for royalty payments due to the University of
Michigan. Operating cash will not include a deduction for depreciation and
amortization of capital equipment. There is no specific mechanism for operating
cash flow, previously paid out, to be re-collected from the Joint Venture
members.
THE FDA APPROVAL PROCESS
The FDA approval process is being managed by Biotherapies, which has retained a
team of expert regulatory and legal advisors. In 1997, the FDA accepted the
Mammastatin proof of concept studies under the "Fast Track" program, under which
new products of life threatening diseases can be concluded (with or without
approval) in less than two years. There is no assurance of FDA approval. The
proof of concept study involved a sample of 1000 blood samples and correlated
low Mammastatin levels with the incidence of breast cancer.
In 1998, Biotherapies received approval from the FDA to commence Phase I and II
clinical trials at the University of Texas, MD Anderson Cancer Center in
Houston, Texas. The trial protocols were completed in early 1999 and the program
was started in May, 1999. Phase I and II clinical trials will utilize naturally
produced Mammastatin and are likely to be completed in mid-2001. If Phase I and
II are successful, Biotherapies will still have to complete one or more Phase
III trials prior to obtaining FDA approval to commercially launch the product.
Phase III trials will involve the use of recombinant or synthetic Mammastatin
because of the limited production capability of natural Mammastatin. Phase III
testing will primarily focus on long term safety and efficacy and may take
several years.
In the United States, commercialization and sale of either therapeutic products
or diagnostic/screening tests are subject to review and authorization procedures
by the FDA. Generally, any proposed drug or medical device must pass each phase
of a multi-phase process, designed to prove safety, efficacy and effectiveness
over a sufficient sample. Regulatory authorities have a broad discretion when
granting or denying approvals. There is no assurance that the MSA Test will be
sanctioned for use. The FDA could impose additional product testing on the
therapeutic, and in the case of the MSA test, may require additional testing.
Any failure to obtain FDA approval for the MSA test, or to obtain it on a timely
basis, can be significantly adverse to the Company, which would be left without
products or revenues of any kind. As the Company is currently structured, it is
entirely dependent on timely FDA approval of the MSA test, of which there is no
assurance.
The MSA screening test will likely be subject to a less stringent trial process
because it is not an in-vitro therapeutic, but rather a blood test. The Company
anticipates that the duration of the test period will be approximately 6-9
months. The Joint Venture is currently in the process of reviewing the
requirements governing the test under a 510K application or a P.A. application
with FDA. Under a 510K, the FDA would, if accepted, sanction the use of the test
and approve limitations on the wording and terms of use of the product. A PMA
(Pre Market Approval) application, if required, may necessitate more stringent
testing in a controlled clinical environment.
The sample range test will consist of 500 healthy women and 500 breast cancer
patients to determine normal Mammastatin ranges. Histories will be available for
each patient. Measurement of Mammastatin levels will be made, and a
determination as to whether the levels correspond with the patient history. The
correlation test will consist of 1000 blood samples absent of patient history.
The purpose of the correlation test is to seek to identify from blood samples
only those patients who have tumors or breast cancer. The sample range and
correlation tests are designed to prove the efficacy of the MSA screening test
as a measurement and diagnostic tool.
The international jurisdictions in which the Joint Venture intends to market the
MSA test have similar legislation and regulations governing the sale of the
therapeutic products and cancer screening tests. Any failure to comply with
these provisions could result in immediate cessation of sales and distribution
activities.
Laws and regulations of the United States and other jurisdictions are subject to
change. There can be no assurance that any such change would not adversely
affect the Joint Venture, and the Joint Venture's proposed business. Any such
new laws or change in regulations could have an adverse impact on the operations
of the Company, and the Joint Venture's ability to obtain FDA approval for the
MSA Test and its ability to operate its business.
INDUSTRY OVERVIEW
Despite a multiplicity of new drugs and advanced technologies, cancer remains
one of the major causes of death in developed countries. For 1998, the American
Cancer Society estimated new breast cancer incidence alone at 180,300 with
43,900 related deaths in the USA. Breast cancer is a leading cause of cancer
mortality among women in the USA
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and the developed world. While the rate of incidence increase is greatest in
women under age 50, most cases occur after age 50.
Breast cancer, like other cancers, is a disease of abnormal cell growth.
Typically, the cells which line the milk producing ducts in the breast are the
cells that become cancerous. These cells undergo a controlled cycle of growth
and death during each menstrual cycle. The growth of these cells is thought to
be stimulated by the action of steroid hormones such as estrogen and
progesterone. Abnormal growth causes a dense accumulation of cells in a small
area, which is the early formation of a tumor and quite possibly breast cancer.
This abnormal growth or mutation, that ultimately leads to breast cancer, can be
passed in a hereditary manner (believed to be approximately 10% of all cases) or
may be caused by mutating environmental agents. Environmental agents that are
thought to cause mutation include radiation, synthetic chemicals, pesticides and
diets which generate a large amount of activated chemicals. Cancer incidence
rates also increase dramatically with age. The aging population is associated
with increasing health care expenditure for cancer diagnosis and management in
the USA and worldwide.
In most cancer cases, the disease is first diagnosed via patient complaint, or
discomfort, or the detection of lumps in abnormal tumor development.
In the past, cancer was primarily diagnosed via tissue biopsy, sample culture or
x-ray, or mammography. Recent advances permit cancer detection through the
identification of specific markers or screens in the body fluids of patients.
Tumor markers or screening tests are defined as either substances or antibodies
that can be measured quantitatively to detect the presence of a cancer. Such
tests can also establish the extent of tumor growth before treatment, to predict
prognosis, and to monitor therapeutic response.
The tumor marker and screening test industry has grown significantly over the
past several years due to increased awareness of the benefits of early
detection, and the FDA's reclassification of tumor marker tests as Class II
devices, in September, 1996. The reclassification allows manufacturers to submit
pre-market notification 510(K) to the FDA. The US market for immunoassay tumor
marker and screening tests is believed to have been in excess of $200 million in
1998 for existing products, and is expected to continue to grow significantly.
Current penetration rates in other developed countries are lower but are also
expected to grow at similar, if not better, rates with increased awareness.
The Company believes that the MSA screening test will be functionally similar to
the existing PSA test for prostrate cancer, in that it is an immunoassay test,
utilizing blood serum, that screens for levels of a key growth inhibiting
protein.
COMPETITION
Competition to the Biotherapies proposed therapeutic product consists of more
conventional treatments such as surgery, chemotherapy and radiation. In
addition, several other non-invasive therapeutics also exist, which are
manufactured and marketed by large multinational pharmaceutical companies. The
industry is dominated by four large competitors with Abbot Laboratories having
the major share (approximately 53%). The large companies are able to offer a
wide variety of tests for different cancers, and offer instrumentation giveaways
and other commercial incentives in exchange for test sales which the Company, as
presently structured, would be unable to provide. Such industry leaders also
have substantially greater resources, including capital and manpower, than the
Company.
Additional competition through better or improved products may arise while
Biotherapies completes its clinical trials. While the Company believes that
Biotherapies' Mammastatin therapeutic has the potential to prove to be superior
to other treatments currently in existence, there is no assurance thereof, or
that the product will not face severe competition from existing products and
procedures or other products and procedures developed in the future, which could
significantly impact the Company's performance. The reclassification of tests by
the FDA has resulted in a significant expansion in the number of new products
submitted to the FDA for clearance.
Competition in the tumor marker and screening test immunoassay market is
dependent primarily upon efficacy including, sensitivity of the test to a
particular cancer type (i.e. the number of false readings).
Currently, management is not aware of any direct competition to the proposed MSA
immunoassay screening test, but there can be no assurance that such competition
will not develop in the near future.
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HISTORY AND ORGANIZATION
The Company is a New York corporation which was incorporated on September 19,
1994, under the name Flexx Realm Inc. Current management of the Company was not
then associated with the Company. To the best knowledge of such management,
Flexx Realm did not carry on any tangible business at the time current
management first became associated with the Company in 1996. The Joint Venture
with Biotherapies was consummated in November of 1998. In anticipation of the
current focus, the name was changed to BioLabs, Inc. on August 19, 1998. The
Company began focusing on the biotechnology industry in 1998. In November, 1998,
the Company entered into the Joint Venture with Biotherapies.
EMPLOYEES
The Company is in the start-up phase of its operations, none of the Company's
principal officers are employed directly by the Company.
As of December 31, 1999, the Company had four full time employees, one employed
in administration, and the three officers employed indirectly through the
arrangement with Tynehead Capital.
FUTURE PROSPECTS
This annual report on Form 10-KSB contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements made with respect to the result of operations and businesses of the
Company. Words such as "may", "should", "believe", "anticipate", "estimate",
"expect", "intend", "plan", and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based upon
management's current plans, expectations, estimates and assumptions and are
subject to a number of risks and uncertainties that could significantly affect
current plans, anticipated actions and the Company's financial condition and
results of operations. Factors that may cause actual results to differ
materially from those discussed in such forward-looking statements include,
among others, the following possibilities: (i) fluctuations in foreign currency
exchange rates; (ii) heightened competition; (iii) the inability to carry out
development plans or to do so without delays; (iv) the loss of key executives;
and (v) general economic and business conditions. The Company does not intend to
update these cautionary statements.
RISK FACTORS
LACK OF PRIOR OPERATIONS AND EXPERIENCE. The Company has no revenue from
operations, is in a start-up phase with its existing assets and has no
significant assets, tangible or intangible, other than the opportunities for the
Joint Venture disclosed herein. There can be no assurance that the Company will
generate revenues in the future. There is no assurance that the Company will be
able to operate profitably in the future, if at all.
NEED FOR ADDITIONAL FINANCING. The Company continues to have significant
obligations with respect to the Joint Venture and Biotherapies. In order to
complete its obligations, the Company will require additional funding within
approximately 10 to 12 months. The Company has recently paid $800,160 for
800,000 Series C preferred shares of I.D. Certify. It proposes to exchange these
for 100,000 Biotherapies shares and a separate Joint Venture interest. See also
"Business - Proposed Transactions." These transactions have increased the
Company's dependency upon and interrelationship with Biotherapies. Further, the
Joint Venture may require additional operating capital by the year 2001, for
which the Company and Biotherapies are required to contribute equally. The
Company believes it has sufficient funds to carry its own expenses for
approximately 10 to 12 months. There can be no assurance that the Company will
obtain additional financing for the Joint Venture's current and future
operations or capital needs on favorable terms, if at all. The Company may fail
because it runs out of capital before the MSA Test can be concluded, or FDA
approval obtained or the Joint Venture has reached the point of
commercialization of the MSA Test. If the Company fails to provide its
proportionate share with respect to capital calls for the Joint Venture, its
interest therein may be substantially diluted.
UNCERTAIN MARKET/GOVERNMENT REGULATIONS. Biotherapies' therapeutic product
requires FDA approval in the USA and will likely undergo a series of long term
clinical trials. The product will have to likely go through similar testing in
foreign jurisdictions. The MSA test is also subject to successful completion of
limited trials in the USA and requires standardization with respect to methods
of use and packaging, subject to FDA approval. There can be no assurance
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that the tests and trials will ultimately be successful or that the product
can be commercialized in its current form, or approved for use, in either the
USA or any other foreign jurisdiction.
DEPENDENCE ON ONE PRODUCT/FDA APPROVAL. The size of the Company makes it
unlikely that the Company will be able to commit its funds to other business
opportunities, until and unless it has first succeeded in some way with the MSA
Test, to which there is no assurance. Any failure to obtain FDA approval for the
MSA test, or to obtain it on a timely basis, can be significantly adverse to the
Company, which would be left without products or revenues of any kind. As the
Company is currently structured it is entirely dependent on timely FDA approval
of the MSA test, of which there is no assurance. There is no assurance that the
clinical trials will be held as scheduled or that the MSA Test will be approved
or ever sold.
RELIANCE ON BIOTHERAPIES AND DR. ERVIN. As currently structured, the Company's
potential for future success is completely dependent upon the Joint Venture,
Biotherapies and Dr. Paul Ervin. Recent transactions and proposed transactions
have further increased the Company's dependency upon, and interrelationship
with, Biotherapies. No officer or director has any long term employment
agreement. There can be no assurance that Dr. Ervin will remain associated with
the Company.
COMPETITION. Even if the MSA test can be successfully developed, and approved by
the FDA, and marketed, the Company is likely to face intense competition from
very large, well established firms in the medical and biotechnology industries.
These entities typically have significantly more resources and well established
track records. Many of these competitors are in a better position to attract
clientele. The Company, Biotherapies and the Joint Venture will likely have to
form alliances or further joint ventures in order to successfully penetrate the
marketplace. There can be no assurance that a competitor will not develop
similar or superior products nor that the Company will be successful in
competing in the marketplace.
OTHER INTERESTS OF MANAGEMENT. The officers and directors, including Dr. Ervin,
have other interests to which they may devote time and each may continue to do
so, notwithstanding the fact that additional management time may be necessary to
conduct the business of the Company.
HISTORY OF LOSSES. The Company has incurred net losses of $1,259,862, $1,007,958
and $191,118 for the fiscal years ended December 31, 1999, 1998 and 1997
respectively. There can be no assurance that the Company will operate profitably
in the near future or at all.
NEGATIVE CASH FLOW. The Company has no current income or likely source of
current income in the immediate future. Management and consulting fees,
including legal and accounting fees, are currently costing the Company in excess
of Seventy Thousand ($70,000) Dollars monthly. The Company will be required to
place additional securities in new financings to make up for such negative cash
flow. Such transactions may have a negative or depressing effect on the trading
prices for the Company's publicly-traded securities.
PREFERRED STOCK/REGISTRATION REQUIREMENTS. From November of 1998 to August 30,
1999, the Company sold 2,000,000 shares of Convertible Preferred Stock to 29
persons. The Convertible Preferred Stock is convertible into Common Stock on a
1:1 basis. Under certain circumstances, the Company may be obligated to register
the Common Stock underlying the Convertible Preferred Stock for resale by the
holders, or the holders may otherwise become eligible to resell such shares
without registration. The existence of the Common Stock underlying the
Convertible Preferred, and/or any registration thereof, may have a negative or
depressing effect on the trading prices for the Company's publicly-traded
securities.
NO LIKELIHOOD OF DIVIDENDS. The Company has never paid any cash or other
dividend on either its Common or Preferred Stock. At present, the Company does
not anticipate paying dividends in the foreseeable future and intends to devote
any earnings to the development of the Company's businesses. Investors who
anticipate the need for income from their investment should refrain from
purchasing the Company's Stock.
LACK OF LISTING. The Company's securities are traded on the NASD Bulletin Board.
Continuation of such trading will be dependent, in part, on the Company's
ability to timely file required reports under the Securities Exchange Act of
1934 in the future. The Bulletin Board is not a national securities exchange.
The Bulletin Board does not provide holders of the Company's securities with the
liquidity which would or could be available, if the Company's common stock were
listed on a national securities exchange, or the NASDAQ electronic market.
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PENNY STOCK. The Company may be subject to the SEC's "penny stock" rules if our
common stock trades below $5.00 per share. These rules require the delivery
prior to any penny stock transaction of a disclosure schedule explaining the
penny stock market and all associated risks and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors, which are generally defined as
institutions or an investor with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with the spouse. 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
transaction prior to sale. In addition, broker-dealer and the registered
representative and current quotations for the securities they offer. 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 its market price and liquidity.
INDEMNIFICATION AND EXCLUSION OF LIABILITY OF DIRECTORS AND OFFICERS. So far as
permitted by law, the Company's Certificate of Incorporation and By-Laws provide
that the Company will indemnify its directors and officers against expenses and
liabilities they incur to defend, settle or satisfy any civil or criminal action
brought against them on account of their being or having been Company directors
or officers unless, in any such action, they are adjudged to have acted with
gross negligence or to have engaged in willful misconduct. As a result of such
provisions, stockholders may be unable to recover damages against the directors
and officers of the Company for actions taken by them which constitute
negligence or a violation of their fiduciary duties, which may reduce the
likelihood of stockholders instituting derivative litigation against directors
and officers and may discourage or deter stockholders from suing directors,
officers, employees and agents of the Company for breaches of their duty of
care, even though such action, if successful, might otherwise benefit the
Company and its stockholders.
ITEM 2 DESCRIPTION OF PROPERTY
The Company maintains its executive offices in approximately 2000 square feet of
space in Surrey, British Columbia, Canada, pursuant to a lease expiring on
November 30, 2001. The Company has an option to renew the lease for an
additional three years. Monthly lease payments are approximately Two Thousand
Three Hundred ($2,300.00 USD) Dollars per month.
ITEM 3 LEGAL PROCEEDINGS
None
ITEM 4 SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of fiscal year
1999.
[The remainder of this page is intentionally left blank]
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PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
MARKET INFORMATION
The Company's Common Stock began trading under the symbol "BILB" in the
over-the-counter market on the NASDAQ Electronic Bulletin Board on February 16,
1999.
The table set forth below presents the range, on a quarterly basis, of high and
low sales prices per share of Common Stock as reported by the OTC Bulletin
Board. The quotations represent prices between dealers and do not include retail
markup, markdown or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- -----------------------------------------------------------------
<S> <C> <C>
FISCAL 1999
March 31, 1999 $ 7.000 $3.500
June 30, 1999 $ 4.625 $2.000
September 30, 1999 $ 3.750 $2.875
December 31, 1999 $ 5.750 $3.250
FISCAL 2000
First quarter to date $18.125 $5.100
</TABLE>
As of March 22, 2000, there are approximately 1,201 holders of record of shares
of such Common Stock. There is no market for the Registrant's Class A
Convertible Preferred Stock. As of March 22, 2000 there are approximately 142
holders of record of shares of the Class A Convertible Preferred Stock. None of
Class A Convertible Preferred Stockholders have converted.
The Company has not paid dividends on the Common Stock or the Class A Preferred
Stock since inception and does not intend to pay any dividends to its stock
holders in the foreseeable future. The declaration of dividends in the future
will be at the election of the Board of Directors and will depend upon earnings,
capital requirements, financial position of the Company, general economic
conditions, and other factors the Board of Directors deems relevant
SALES OF UNREGISTERED SECURITIES
In the three years ended December 31, 1999, the Company has made the following
sales of unregistered securities, all of which sales were exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 3(b) hereof or as otherwise indicated herein.
In August, 1998, the Company sold 960,000 shares of Common Stock at $1.00 per
share (an aggregate of $960,000) to 181 non-accredited investors. The Company
believes that each issuance and sale of such securities was exempt from
registration pursuant to Section 3(b) of the Act and/or Rule 504 promulgated
thereunder. The Company filed a Form D relating to such transaction on August 1,
1998.
From November of 1998 to August 30, 1999, the Company sold 2,000,000 shares of
Series A Convertible Preferred Stock to 29 persons. 1,388,830 of the Convertible
Preferred Shares were placed by the Company with the same group of twenty-nine
(29) investors who purchased the earlier traunche of the same securities.
Proceeds of the Company's Private Placement Offerings, net of commissions and
costs have been applied by the Company solely to capital contributions to the
Joint Venture with Biotherapies, payments to Biotherapies (as per the JV
Operating Agreement) and payment of general operating expenses current and
future. The Company believes that such offerings are exempt from registration
pursuant to Regulation D and Sections 3(b) or 4(2) of the Act as well as
relevant exemptions in accordance with the Canadian Securities Laws and
provincial authorities, including Section 74(2)(4) of the Securities Act
(British Columbia) and 107(1)(d) of the Securities Act (Alberta).
All proceeds of the Company's private placement offerings, minus sales
commissions not exceeding (10%) percent of the amount thereof, have been applied
by the Company solely to capital contributions to the Joint Venture, other
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required capital commitments to Biotherapies and payment of general operating
expenses. Except to the extent disclosed herein Item 10, "Executive
Compensation", none of the proceeds were paid, directly or indirectly, to
directors, officers, general partners of the Company, 10% shareholders or any of
their affiliates (other than payments made to Biotherapies, which is an
affiliate of Dr. Paul Ervin, a member of the Scientific Advisory Board).
Each holder of the Series A Convertible Preferred Stock, par value $0.0001, (the
"Class A Stock") is entitled to receive, out of any funds legally available,
non-cumulative dividends at a rate of six percent (6%) per annum prior and in
preference to any payment of any dividend on the Common Stock in each calendar
year, and to participate pro rata with the Common Stock in any additional
dividends. Dividends are paid when, as and if declared by the board. The
dividend rights and preferences of the Class A Stock are senior to those of the
Common Stock. The Company has never paid any dividends, and there is no
likelihood that it will do so in the foreseeable future.
All of the Class A Stock is restricted as to retransfer. There is no liquid
market for the securities. None is expected to develop. In certain events
relating to liquidation, dissolution, consolidation or winding up of the Company
holders of the Class A Stock are entitled to receive an amount equal to the
original purchase price per share for the Class A Stock plus an amount equal to
all declared but unpaid dividends thereon (the "Preference Amount"). After the
full liquidation preference on all outstanding shares of the Class A Stock has
been paid, any remaining funds and assets of the Company legally available for
distribution to shareholders are distributed pro rata among the holders of the
Class A Stock and the Common Stock on an "as-if-converted" basis. If the Company
has insufficient assets to permit payment of the Preference Amount in full to
all the Class A Stock shareholders, then the holders of the Class A Stock will
receive lesser payments in proportion to the Preference Amount each such holder
would otherwise be entitled to receive, without any distribution to the holders
of the Common Stock.
The Company has rights to redeem all of the outstanding Class A Stock at any
time. The redemption price is 110% of the initial purchase price of the Class A
Stock plus all declared but unpaid dividends. Redemption is highly unlikely
under current circumstances.
The holders of the Class A Stock have the right to convert its Class A Stock
into shares of Common Stock at any time commencing one year after purchase. The
Conversion Rate is one share of Class A Stock for one share of Common Stock. The
holders and the Class A Stock also have information rights, demand and
piggy-back registration rights, which ensure such holders that, under certain
circumstances, the Company will be forced to register the underlying Common
Stock for resale by the holders. The existence of such registration rights is a
risk factor with respect to the Common Stock. All rights incident to a share of
Class A Stock will terminate automatically upon any conversion of such share
into Common Stock.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As of December 31, 1999, the Company held an 11.1% equity interest in
Biotherapies Inc. ("Biotherapies"), a privately held biotechnology company
specializing in the development of innovative cancer diagnostic and therapeutic
products. Biotherapies holds the exclusive rights, through the University of
Michigan, to patents pending for the use of Mammastatin as a diagnostic and
therapeutic for breast cancer. On June 15, 1999, with the financial support of
BioLabs, Biotherapies began Phase I/II of Clinical Trials utilizing Mammastatin
to treat Stage IV breast cancer, at the M.D. Anderson Cancer Center, Department
of Breast Medical Oncology, at the University of Texas. Clinical trials are
expected to end by mid 2000.
In addition, BioLabs holds a 50% equity interest in Biomedical Diagnostics, LLC
("Biomedical Diagnostics"), a joint venture with Biotherapies. Biomedical
Diagnostics holds the exclusive worldwide rights to manufacture, market and
distribute the Mammastatin Serum Assay ("MSA") diagnostic for breast cancer.
During the first quarter of 2000, the MSA will undergo Phase I Clinical Trials
which are designed to provide sufficient data to seek Pre-market Approval (PMA)
from the U.S. Food and Drug Administration. FDA determination for MSA is
expected by the first quarter of 2001.
The Company intends to enter into additional collaborative relationships to
locate and develop cancer inhibitor proteins associated with other common forms
of cancer, as well as continuing to fund existing research projects.
Biotherapies is leveraging its twelve year history in the research and
development of Mammastatin, to discover other related
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proteins that perform similar growth inhibitory functions in other frequently
cancerous tissues, such as the prostate, ovary, colon and lung.
LIQUIDITY
The Company expects to incur losses for at least the next several years,
primarily due to the operation of the joint venture which is developing cancer
diagnostic tests. As such, the Company expects its existing joint venture, as
well as any future joint venture projects, to incur substantial research and
development, sales, marketing and other expenses. The Company expects that
losses will fluctuate from quarter to quarter and that such fluctuations may be
substantial.
As of December 31, 1999, the Company had cash on hand of approximately $411,000.
In January 2000, the Company raised an additional $775,098 through private
placements of 140,950 units. In the opinion of management, cash on hand is
sufficient for the next 10 to 12 months.
Currently, the Company has no plans for the purchase or sale of any plant and
equipment or the addition of any employees.
The Company's future capital requirements will depend on many factors, including
advancement of the Company's existing joint venture research and development
programs; payments made to secure and develop additional joint venture programs
for additional cancer diagnostics technologies; the cost and availability of
third-party financing for development and commercialization activities; and
administrative and legal expenses. Because of the Company's long-term capital
requirements, the Company intends to raise funds through registered offerings or
exempt transactions when conditions are favorable.
RESULTS OF OPERATIONS
Year ended December 31, 1999 compared to December 31, 1998:
The Company incurred a loss of $1,259,862 for the year ended December 31, 1999,
an increase of $181,904 as compared to December 31, 1998. The increased loss was
primarily due to the recognition of the Company's 50% share of the Biomedical
Diagnostics LLC loss for 1999 of $190,186.
Loss per share was $.15 in 1999 compared to $.17 in 1998. The decrease in loss
per share is due to the increase in the number of outstanding common shares
during the year. The weighted average number of shares outstanding for the year
ended December 31, 1999 was 8,178,997 compared to 7,186,536 for the year ended
December 31, 1998.
The Company's total assets as at December 31, 1999 totaled $5,474,529 compared
to total assets of $1,022,779 as at December 31, 1998. The increase in total
assets is a result of the Company issuing 2,000,000 preferred shares which
netted the Company $5,565,911.
The Company increased its investment in both Biotherapies Incorporated and
Biomedical Diagnostics, LLC during 1999. The cost of the Company's investment in
Biotherapies Incorporated increased to $1,335,000 as at December 31, 1999
compared to $420,000 as at December 31,1998. The cost of the Company's
investment in Biomedical Diagnostics LLC likewise increased to $2,809,814 as at
December 31, 1999 compared to $500,000 as at December 31, 1998.
Stockholder equity as at December 31, 1999 was $5,062,927 compared to a
stockholder's deficiency of $415,622 as at December 31, 1998.
Cash flows used in operating activities totaled $782,790 for the year ended
December 31, 1999 compared to $112,225 for the year ended December 31, 1998. The
increase in cash flows used during 1999 relates primarily to the reduction of
the Company's accounts payable.
Cash flows used in investing activities totaled $4,040,002 for the year ended
December 31, 1999 compared to $928,861 for the year ended December 31, 1998. The
increase in funds invested during 1999 relates primarily to the Company's
increased investment in Biomedical Diagnostics LLC and Biotherapies Incorporated
as well as the investment in I.D. Certify Inc. preferred shares.
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Cash flows from financing activities totaled $5,151,911 for the year ended
December 31, 1999 compared to $1,122,837 for the year ended December 31, 1998.
The increase in 1999 is due to the issuance of 2,000,000 preferred shares for
cash and the resolution of open preferred share subscriptions.
ITEM 7 FINANCIAL STATEMENTS
INDEX TO THE FINANCIAL STATEMENTS
Page
Independent Auditors' Report..................................................19
Statement of Operations and Deficit...........................................20
Balance Sheets................................................................21
Statement of Stockholders' Equity.............................................22
Statement of Cash Flows.......................................................23
Notes to the Financial Statements.............................................24
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INDEPENDENT AUDITORS' REPORT
To the Shareholders of
BIOLABS, INC.
We have audited the accompanying balance sheet of BIOLABS, INC. (A New York
Corporation) as at December 31, 1999 and 1998 and the related statements of
operations and deficit and changes in cash flows for the years 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.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1999 and 1998
and the results of its operations and the changes in its cash flows for the
years then ended in accordance with generally accepted accounting principles.
The financial statements for the year ended December 31, 1997 were audited by
other auditors who expressed an opinion without reservation on those statements
in their report dated March 19, 1998.
/s/ LEMIEUX DECK MILLARD BOND
Chartered Accountants
Langley, British Columbia
February 11, 2000
Page 18
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
BIOLABS, INC.
STATEMENT OF OPERATIONS AND DEFICIT
(U.S.$)
<TABLE>
<CAPTION>
TOTAL FROM
INCEPTION
(SEPTEMBER 19,
1994) TO
DECEMBER 31,
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ - $ - $ - $ -
- ----------------------------------------------------------------------------------------------------------------
EXPENSES
Automobile 7,870 16,650 11,650 44,868
Depreciation and amortization 7,654 1,763 1,763 14,706
Interest and bank charges 6,792 3,136 8,088 18,139
Investor relations 123,329 - - 123,329
Legal and accounting 130,261 109,180 20,004 285,393
Listing and share transfer fees 47,793 37,802 - 85,595
Management and consulting fees 350,275 737,832 112,176 1,467,891
Office and miscellaneous 84,726 15,463 772 103,972
Rent and occupancy costs 27,344 3,196 - 30,540
Salaries and benefits 22,781 - - 22,781
Telephone 26,782 6,118 1,648 35,635
Travel and promotion 238,967 149,671 35,017 445,249
- ----------------------------------------------------------------------------------------------------------------
1,074,574 1,080,811 191,118 2,678,098
- ----------------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER ITEMS (1,074,574) (1,080,811) (191,118) (2,678,098)
Interest and miscellaneous income 4,898 2,853 - 7,751
Equity in loss of Biomedical Diagnostics, LLC (190,186) - - (190,186)
- ----------------------------------------------------------------------------------------------------------------
NET LOSS (1,259,862) (1,077,958) (191,118) (2,860,533)
DEFICIT, BEGINNING (1,600,671) (522,713) (331,595) -
- ----------------------------------------------------------------------------------------------------------------
DEFICIT, ENDING $(2,860,533) $(1,600,671) $(522,713) $(2,860,533)
================================================================================================================
LOSS PER COMMON SHARE (Note 9) $0.15 $0.17 $0.09
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 19
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
BIOLABS, INC.
BALANCE SHEETS
(U.S.$)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 411,272 $ 82,153 $ 402
Accounts receivable 19,540 - 288
Prepaid expenses 30,929 10,000 -
- --------------------------------------------------------------------------------------------------------------
461,741 92,153 690
DEPOSIT ON PURCHASE (Note 4) 50,000 - -
INVESTMENT IN I.D. CERTIFY, INC. - Preferred shares (Note 5) 800,160 - -
LONG-TERM INVESTMENT IN:
Biomedical Diagnostics, LLC (Note 2) 2,809,814 500,000 -
Biotherapies Incorporated - shares (11%; 1998-6%) 1,335,000 420,000 -
OFFICE EQUIPMENT (Note 3) 17,814 8,861 -
ORGANIZATIONAL EXPENSE - 1,765 3,528
- --------------------------------------------------------------------------------------------------------------
$ 5,474,529 $ 1,022,779 $ 4,218
==============================================================================================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 371,470 $ 984,269 $ 276,598
Preferred stock subscriptions (Note 8) - 414,000 -
Promissory notes payable - related parties (Note 4) 40,132 40,132 121,516
COMMITMENTS (NOTE 10)
- --------------------------------------------------------------------------------------------------------------
411,602 1,438,401 398,114
- --------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 7)
Preferred stock, $.0001 par value.
Authorized 100,000,000 shares;
Issued: 1999-2,000,000; 1998-NIL; 1997-NIL 200 - -
Common stock, $.0001 par value.
Authorized 100,000,000 shares;
Issued: 1999-8,178,997; 1998-7,186,536; 1997-3,176,536 818 719 318
Additional paid-in capital 7,922,442 1,184,330 128,499
Accumulated deficit (2,860,533) (1,600,671) (522,713)
- ---------------------------------------------------------------------------------------------------------------
5,062,927 (415,622) (393,896)
- ---------------------------------------------------------------------------------------------------------------
$ 5,474,529 $ 1,022,779 $ 4,218
===============================================================================================================
</TABLE>
Approved by the Directors:
_______________________Director
_______________________Director
The accompanying notes are an integral part of these financial statements.
Page 20
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
BIOLABS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(U.S.$)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED SHARES
----------------- ------------------- ADDITIONAL ACCUMU- TOTAL
NUMBER NUMBER PAID-IN LATED STOCKHOLDERS'
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL DEFICIT EQUITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issue of common stock on
organization of the company 8,816,992 $ 8,817 - $ - $ - $ - $ 8,817
Net loss - - - - - (147,192) (147,192)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 8,816,992 8,817 - - - (147,192) (138,375)
Consolidation of shares in
November on a 50 for 1 basis (8,640,456) (8,799) - - 8,799 - -
Net loss - - - - - (184,403) (184,403)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 176,536 18 - - 8,799 (331,595) (322,778)
Issue of common stock for
settlement of debt 3,000,000 300 - - 119,700 - 120,000
Net loss - - - - - (191,118) (191,118)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 3,176,536 318 - - 128,499 (522,713) (393,896)
Issue of common stock for
settlement of debt 3,000,000 300 - - 347,095 - 347,395
Issue of common stock for cash 1,010,000 101 - - 708,736 - 708,837
Net loss - - - - - (1,077,958) (1,077,958)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31,1998 7,186,536 719 - - 1,184,330 (1,600,671) (415,622)
Issue of common stock for
settlement of debt 872,500 87 - - 872,413 - 872,500
Common stock returned (39) - - - - - -
Issue of common stock for services 60,000 6 - - 59,994 - 60,000
Issue of common stock for shares
of Biotherapies Incorporated 60,000 6 - - 239,994 - 240,000
Issue of preferred stock for cash - - 2,000,000 200 5,565,711 - 5,565,911
Net loss - - - - - (1,259,862) (1,259,862)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 8,178,997 $ 818 2,000,000 $200 $7,922,442 $(2,860,533) $ 5,062,927
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 21
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
BIOLABS, INC.
STATEMENT OF CASH FLOWS
(U.S.$)
<TABLE>
<CAPTION>
TOTAL FROM
INCEPTION,
(SEPTEMBER 19,
1994) TO
DECEMBER 31,
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,259,862) $(1,077,958) $(191,118) $(2,860,533)
Adjustment to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 7,654 1,763 1,763 14,706
Equity in loss of Biomedical Diagnostics LLC 190,186 - - 190,186
Expenses paid by issuance of stock 60,000 - - 60,000
Changes in operating assets and liabilities:
Accounts receivable (19,540) 288 (288) (19,540)
Prepaid expenses (20,929) (10,000) - (30,929)
Promissory notes payable - 266,011 121,516 387,527
Accounts payable 259,701 707,671 68,529 1,363,970
- -----------------------------------------------------------------------------------------------------------------
(782,790) (112,225) 402 (894,613)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures on equipment (14,842) (8,861) - (23,703)
Purchase of shares of Biotherapies Inc. (675,000) (420,000) - (1,095,000)
Investment in Biomedical Diagnostics LLC (2,500,000) (500,000) - (3,000,000)
Investment in I.D. Certify, Inc. (800,160) - - (800,160)
Deposit on purchase (50,000) - - (50,000)
- -----------------------------------------------------------------------------------------------------------------
(4,040,002) (928,861) - (4,968,863)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - 708,837 - 708,837
Preferred stock subscriptions (414,000) 414,000 - -
Preferred stock issued for cash 5,565,911 - - 5,565,911
- -----------------------------------------------------------------------------------------------------------------
5,151,911 1,122,837 - 6,274,748
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 329,119 81,751 402 411,272
CASH, beginning 82,153 402 - -
- -----------------------------------------------------------------------------------------------------------------
CASH, ending $ 411,272 $ 82,153 $ 402 $ 411,272
=================================================================================================================
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued to settle debt $ 872,500 $ 347,395 $ 120,000 $ 1,339,895
Common stock issued for shares of
Biotherapies Inc. $ 240,000 $ - $ - $ 240,000
Common stock issued for services $ 60,000 $ - $ - $ 60,000
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 22
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
BIOLABS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
BioLabs, Inc., through its 50% interest in Biomedical Diagnostics, LLC., is
involved in the development of a mammastatin diagnostic assay to be used in
breast cancer detection.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which assume that
the Company will realize its assets and discharge its liabilities in the normal
course of business. Realization values may be substantially different from the
carrying values as shown in these financial statements should the Company be
unable to continue as a going concern. The Company's ability to meet its
obligations and maintain its operations is contingent upon successful completion
of additional financial arrangements and the continuing support of its
creditors.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
Cash equivalents include holdings of highly liquid investments with maturities
of three months or less when purchased.
LONG-TERM INVESTMENTS
The Company accounts for its investment in Biomedical Diagnostics, LLC by the
equity method, whereby the investment is initially recorded at cost and adjusted
thereafter to include the Company's pro-rata share of Biomedical Diagnostics,
LLC earnings and losses.
Long-term investments in companies in which the Company holds less than a 20%
interest are recorded at cost. When there is other than a temporary decline in
value, these investments are written down to provide for the loss.
EQUIPMENT
Equipment is recorded at cost less depreciation. Depreciation is primarily
accounted for on the straight-line method based on estimated useful lives.
ORGANIZATIONAL COSTS
Costs associated with the organization of the Company are capitalized and
amortized on a straight-line basis over a period of five years commencing
January 1, 1995.
STOCK-BASED COMPENSATION
The Company applies the intrinsic value method in accounting for its stock
option plan. The exercise price of stock options granted was greater than or
equal to the market price at the grant dates. Accordingly., no expense related
to the stock options has been recorded.
Page 23
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per Share", which
became effective in 1997, requires presentation of two calculations of earnings
per common share. "Basic" earnings per common share equals net income divided by
weighted average number of common shares outstanding during the period.
"Diluted" earnings per common share equal net income divided by the sum of
weighted average common shares outstanding during the period plus common stock
equivalents. Common stock equivalents are shares assumed to be issued if
outstanding stock options were exercised and are only considered if their effect
on earnings per common share is dilutive.
COMPREHENSIVE INCOME
In 1998 the Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income". SFAS 130 establishes standards for
the reporting of comprehensive income and its components. As defined in SFAS
130, the Company has no comprehensive income items.
NOTE 2 - INVESTMENT IN BIOMEDICAL DIAGNOSTICS, LLC
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in Biomedical Diagnostics, LLC (50%), at cost $3,000,000 $500,000 $ -
Equity in losses (190,186) - -
- -----------------------------------------------------------------------------------------------------------
$2,809,814 $500,000 $ -
===========================================================================================================
</TABLE>
The Company has entered into a joint venture agreement with Biotherapies
Incorporated for development of a mammastatin diagnostic assay. The joint
venture is named Biomedical Diagnostics, LLC and the Company and Biotherapies
Incorporated each have a 50% interest.
Under the terms of the Biomedical Diagnostics, LLC operating agreement, the
Company made capital contributions of $3,000,000.
The Company is also required, under the amended operating agreement, to make the
following additional payments to Biotherapies Incorporated:
- - $1,000,000 within 60 days of completion of certain diagnostic clinical
trials, and
- - $1,000,000 within 30 days of the joint venture achieving $100,000 in gross
revenues ("the Milestone").
Biomedical Diagnostics, LLC commenced operations May 1, 1999. Details of its
operations are set out below:
<TABLE>
<S> <C>
REVENUE $ -
- ----------------------------------------------------------
Research and development 145,543
Selling and administration 259,353
- ----------------------------------------------------------
Operating loss (404,896)
Interest income 24,523
- ----------------------------------------------------------
Net loss $(380,373)
==========================================================
</TABLE>
Within 14 days of Biomedical Diagnostics, LLC achieving the Milestone, the
Company will issue to Biotherapies Incorporated voting shares of the common
stock of the Company constituting 5% of the total outstanding shares of all
types on a fully diluted basis, taking into account allocations, convertible
debt and issued shares.
Page 24
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
Had the milestone been reached by December 31, 1999, the Company would have been
required to issue 559,226 (1998; 385,353 shares) determined as follows:
<TABLE>
<S> <C>
Preferred shares outstanding 2,000,000
Common stock 8,178,997
Stock options outstanding 845,000
Convertible debt ($40,132/$.25 per share) 160,528
- ----------------------------------------------------------------------------
11,184,525
X 5%
- ----------------------------------------------------------------------------
559,226 shares
============================================================================
</TABLE>
NOTE 3 - EQUIPMENT
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Office equipment $23,703 $8,861 $ -
Less: accumulated depreciation 5,889 - -
- ----------------------------------------------------------------------------
$17,814 $8,861 $ -
============================================================================
</TABLE>
NOTE 4 - DEPOSIT ON PURCHASE
Pursuant to the terms of a letter agreement dated September 2, 1999, between
the Company and Dynamed Inc. ("Dynamed"), the Company proposes to:
- - acquire 100,000 shares of Biotherapies Inc. common stock presently owned by
Dynamed and/or its shareholders,
- - acquire Dynamed's interest in a joint venture agreement with Biotherapies
Inc. for the development of technology regarding the treatment for prostate
cancer.
As consideration the Company has paid a deposit of $50,000 to Dynamed and
proposes to distribute the 800,000 Series C Preferred shares of ID Certify, Inc.
which it owns and issue 1,100,000 common shares of the Company.
NOTE 5 - INVESTMENT IN ID CERTIFY, INC.
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
800,000 Series C Preferred shares, at cost $800,160 $ - $ -
=====================================================================================
</TABLE>
Under the terms of a letter agreement dated September 2, 1999, the Company is
proposing to distribute these shares as part of its acquisition of certain
investments from Dynamed, Inc., as set out in Note 4 above.
NOTE 6 - PROMISSORY NOTES PAYABLE - RELATED PARTIES
Promissory notes payable to companies controlled by Officers and Directors of
the Company, repayable 30 days after demand, interest at prime plus 4%,
convertible into shares of the Company at $.25 per share after the shares are
listed for trading, secured by a security interest in and to all assets and book
accounts, equipment, furniture, cash as well as accounts receivable and
inventory owned by the Company.
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
$40,132 $40,132 $121,516
=====================================================================================
</TABLE>
Page 25
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY
Pursuant to a Directors resolution dated November 14, 1996, the authorized and
issued common stock of the corporation was consolidated on a 50 to 1 basis.
Pursuant to the resolution, the authorized capital of the Company was then
increased to 19,000,000 shares with a par value of $0.0001 per share of which
176,340 shares are issued.
In July 1998, the Company amended the Articles of Incorporation as follows:
- - The name of the Company was changed to BioLabs, Inc.
- - The authorized share capital of the Company was increased to
200,000,000 shares, comprised of:
- - 100,000,000 common shares with a par value of $0.0001 per common share.
- - 100,000,000 preferred shares with a par value of $0.0001 per preferred
share, leaving to the sole discretion of the directors the
determination of the rights and preferences of such shares.
PREFERRED STOCK OFFERING
During 1999 the Company completed the sale of 2,000,000 Class A Convertible
Preferred shares pursuant to an offering memorandum dated December 1, 1998. The
Series A Preferred shares carry a 6% non-cumulative dividend rate in preference
to any dividend on common stock, have a liquidation preference ahead of common
stock and are convertible into common stock on a one-for-one basis within one
year of the date of the subscription agreement.
Net proceeds to the company from this offering were $5,565,911.
NOTE 8 - STOCK OPTION PLAN
During 1998, the Company established a stock option plan to allow key employees,
directors, advisors and representatives of the Company to acquire Company common
stock. The stock option plan was amended in 1999 to increase the number of
common shares available under the plan from 650,000 to 930,000.
Stock options outstanding under this plan are summarized as follows:
<TABLE>
<CAPTION>
OPTION PRICE STOCK OPTIONS
PER SHARE OUTSTANDING
- ----------------------------------------------------------------------------
<S> <C> <C>
$ 1.000 485,000
$ 3.600 150,000
$ 3.875 140,000
$ 7.500 35,000
$10.000 35,000
- ----------------------------------------------------------------------------
$1.00 - $10.00 845,000
============================================================================
</TABLE>
Page 26
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1997 $ -
Granted 430,000 $1.00
Terminated - $ -
Exercised - $ -
- ------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1998 430,000 $1.00
Granted 415,000 $4.22
Terminated - $ -
Exercised - $ -
- ------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1999 845,000 $2.58
========================================================================================================================
</TABLE>
These options will expire if not exercised by specific dates ranging from
November 2000 to September 2004. No options were exercised during the year.
The exercise price of stock options granted was equal to or greater than the
market value at the grant date. No expenses related to the stock options have
been recorded.
The fair value of the options granted in 1998 and 1999 have been estimated at
the date of grant using the Black-Scholes option-pricing model with the
following assumptions: expected stock volatility of 58% in 1998 and 71% in 1999;
risk-free interest rate of 5.5% in 1998 and 6.0% in 1999; expected life of 5
years for 1998 and 4 years for 1999 and no dividend yield in all years as the
Company has no history of paying dividends.
The Black-Scholes option valuation model was developed for estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. Because option valuation models require the use of subjective
assumptions and changes in these assumptions can materially impact the fair
value of the options and the Company's options do not have the characteristics
of traded options, the option valuation models do not necessarily provide a
reliable measure of the fair value of its options. The estimated weighted
average fair value of stock options granted during 1998 and 1999 was $.68, $3.87
per share, respectively.
NOTE 9 - LOSS PER COMMON SHARE
Loss per common share is computed by dividing the net loss by the average number
of Common shares and common stock equivalents outstanding during the year. The
weighted average number of Common shares outstanding during the year ended
December 31, 1999 were approximately 7,965,484 and approximately 6,469,536
during the year ended December 31, 1998 and approximately 2,123,533 during the
year ended December 31, 1997.
Common stock equivalents are the net additional number of shares which would be
issuable upon the exercise of the outstanding common stock options (see Note 8),
assuming that the Company reinvested the proceeds to purchase additional shares
at market value. Common stock equivalents had no material effect on the
computation of earnings per share for the three years ended December 31, 1999.
Page 27
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTE 10 - COMMITMENTS
LEASE COMMITMENTS
The Company leases office premises for use in its operations. Rent expense was
$25,093 in 1999 and $3,196 in 1998. This table shows future minimum rental
commitments under the lease at December 31, 1999.
<TABLE>
<CAPTION>
2000 2001
- -------------------------------------------------------------------------------------
<S> <C> <C>
Lease commitment $37,194 $35,400
=====================================================================================
</TABLE>
FUNDING COMMITMENTS
Under the terms of the Biomedical Diagnostics, LLC operating agreement the
Company has agreed to fund Biotherapies Incorporated and Biomedical Diagnostics,
LLC as set out in Note 2 Investment in Biomedical Diagnostics, LLC.
MANAGEMENT SERVICES
The Company has a management services agreement with Tynehead Capital Corp.
Tynehead Capital Corp. is controlled by certain directors of the Company. Under
the terms of the agreement the Company has future commitments as set out in the
table below.
<TABLE>
<CAPTION>
2000 2001 2002 2003
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management services $274,000 $274,000 $274,000 $205,000
=====================================================================================
</TABLE>
SHARES FOR DEBT
The Company has agreed to issue 80,000 common shares to settle debts of
$269,375.
NOTE 11 - INCOME TAXES
The company has accumulated losses for tax purposes which may be carried forward
and used to reduce taxable income otherwise calculated. The benefit of these
available carry forwards has not been recorded in the accounts.
NOTE 12 - RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Management and consulting fees paid to officers and
directors of the Company and / or companies controlled
by officers and directors of the Company. $285,129 $137,055 $103,691
(b) Interest on promissory notes payable to companies
controlled by officers and directors of the Company. $ 4,813 $ 2,225 $ 7,574
(c) Included in the balance sheet are the following amounts due to
directors and officers and/or companies controlled by officers and
directors of the Company.
Accounts payable $ 35,569 $ 30,756 $248,098
Promissory notes payable $ 40,132 $ 40,132 $121,516
</TABLE>
(d) In 1997 the Company issued 3,000,000 common shares to companies
controlled by officers and directors of the Company to settle debt of
$120,000. During 1998 the Company issued 3,000,000 common shares to
companies controlled by officers and directors of the Company to settle
debt of $347,395.
Page 28
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTE 13 - FINANCIAL INSTRUMENTS
The fair value of the Company's cash, accounts receivable, accounts payable and
accrued liabilities, and promissory notes payable are estimated to approximate
their carrying values due to the immediate or short term maturity of these
financial instruments.
NOTE 14 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date.
Although the change in date has occurred, it is not possible to conclude that
all aspects of the Year 2000 Issue that may affect the entity, including those
related to customers, suppliers, or other third parties, have been fully
resolved.
NOTE 15 - SUBSEQUENT EVENT
Subsequent to the year end, the Company sold 140,950 units to net the treasury
$775,098. Each unit is comprised of one common share and a one-half share
purchase warrant. Each share purchase warrant entitles the holder to purchase a
common share of the Company at prices ranging from $7.00 to $11.125.
Page 29
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
[The remainder of this page is intentionally left blank]
Page 30
<PAGE>
BIOLABS, Inc. - 10-KSB - ANNUAL REPORT
- --------------------------------------------------------------------------------
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- --------------------------------------------------------------------------------
E. Greg McCartney 48 President, Chief Executive Officer and
Chairman of the Board of Directors
Lawrence J. Pasemko 62 Chief Financial Officer, Secretary and Director
Albert Klychak 41 Vice President, Corporate Relations and
Director
Dr. Ian B. Woods 55 Vice President, Operations and Director
Carol Patterson Neves 66 Director
E. GREG MCCARTNEY. Mr. McCartney has been the Company's President and Chief
Executive Officer since 1995. In addition, he serves as Chairman of the Board
for White Diamond Spirits Inc., an American distilled spirits importing company.
From 1992 to 1995, Mr. McCartney was Vice President of Corporate Development at
Advanced Gaming Technology Corp., a public company distributing and
manufacturing electronic gaming equipment. Prior to 1992, Mr. McCartney was a
founding partner in a number of private enterprises involved in the electronics
industry, real estate and the automotive distribution business.
LAWRENCE J. PASEMKO. Mr. Pasemko has been the Company's Chief Financial Officer
and Secretary Treasurer since 1995. From 1992 to 1995, Mr. Pasemko was the CFO
for Advanced Gaming Technology Corp., a public company which manufactured and
distributed electronic gaming equipment. Prior to his employment with Advanced
Gaming, Mr. Pasemko was president of Supercart Pacific Wholesale (Canada) Inc.,
a private distribution business with operations throughout the Pacific Northwest
and was President and General Manager of two Chrysler automobile dealerships
located in British Columbia.
DR. IAN B. WOODS. Dr. Woods has been the Company's Vice President, Operations
since February 1998. Dr. Woods is the senior founding partner of the Burke
Mountain Medical Centre in Port Coquitlam, British Columbia, where he has
conducted a general medical practice since 1977. He received his Ph.D. in
Physics and his M.D. from the University of British Columbia. He completed his
internship at the Royal Columbian Hospital. He has served on numerous medical
advisory committees and is a director of ETC Industries Ltd.
ALBERT KLYCHAK. Mr. Klychak has been the Company's Vice President, Corporate
Relations since 1995 and is primarily responsible for investor relations. From
1993 to 1996, Mr. Klychak was the President and Director of Quinchak Enterprises
Limited, a private company providing financing and investor relations services
and management services for a private equity fund. From 1986 to 1993, he managed
a private equity portfolio as an independent consultant. Mr. Klychak is also a
director of Lexus Capital, Inc.
CAROL PATTERSON NEVES. Ms. Neves was employed with Merrill Lynch, Pierce, Fenner
& Smith for approximately 40 years prior to her retirement in 1996. From 1986 to
1996, Ms. Neves was the First Vice President/Senior Research
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Analyst: Diversified Companies. Ms. Neves received her B.A. in Economics from
Trinity College, her graduate certificate from Harvard Business School and her
MBA from New York University. Ms. Neves was first elected to the Board on
March 1, 1999, by the Board of Directors.
Each director holds office until the Company's annual meeting of stockholders
and until his/her successor is duly elected and qualified. Officers are elected
by the Board of Directors and hold office at the discretion of the Board of
Directors. There are no family relationships between any of the directors or
executive officers of the Company. All of the directors were re-elected at a
meeting of the stockholders held on September 28, 1999.
Section 16(a) of the Securities and Exchange Act of 1934, as amended, generally
requires the Company's directors and executive officers and persons who own more
than 10% of a registered class of the Company's equity securities (10% owners)
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Directors and executive officers and 10% owners are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. No other reports were required to
be filed during the fiscal year ended December 31, 1999.
ITEM 10 EXECUTIVE COMPENSATION
The Company is in the start-up phase of its business and operations and
currently generates no revenues. None of the Company's principal officers are
employed directly by the Company. However, Messrs. McCartney, Pasemko and
Klychak, through their respective holding companies, are parties to an
employment agreement dated September 1, 1998, between Tynehead Capital Corp. and
the Company. The Employment Agreement employs the Executives, as independent
contractors, to provide described management services to the Company, including
setting objectives, structures, time frames, identifying resources required and
allocating and utilizing such resources. The Company pays a monthly management
fee, subject to annual review, at $22,833 to Tynehead. That amount is subject to
annual review for increases only. In addition, Tynehead may be entitled to an
annual incentive management fee on the basis of the recommendations of the Board
taking into account the financial performance of the Company and other relevant
factors. The Board of Directors of the Company is currently controlled by the
Executives. The Executives recognize this and expect that any recommendations
concerning increase in Tynehead compensation or incentive compensation will
require independent director recommendation, but no formal procedure for
independent director review has been agreed upon or otherwise established as of
this date.
The agreement provides that Messrs. McCartney, Pasemko and Klychak will not
compete with the Company for a period of one year subsequent to termination. The
enforcement of such non-compete clauses may be subject to challenge as against
public policy.
During the year ended December 31, 1999, fees aggregating $273,996 was paid or
was payable to Tynehead Capital Corp. in connection with management and
administrative services provided by such executive officers and their respective
holding corporations. The amount was divided equally among the three officers.
DIRECTOR COMPENSATION - Directors not otherwise employed by the Company did not
receive cash compensation for serving on the Board of Directors during the
fiscal year ended December 31, 1999, except that Dr. Woods was paid $11,133 for
scientific consultation services in 1999. However, directors received stock
options. See below.
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OPTION AND AWARD PLAN - On July 31, 1998, the stockholders approved the 1998
Stock Option Plan adopted by the Board of Directors of the Company. The plan
provides for the grant of incentive stock options for up to 650,000 shares of
Common Stock to those employees, officers, directors or consultants eligible
under the Plan to receive stock options. The plan was amended in 1999 to
increase the number of Common Shares available under the plan from 650,000 to
930,000.
The Plan is administered by the Board of Directors or a committee thereof, which
determines, among other things, those individuals who receive options, the time
period during which the options may be partially or fully exercised, the terms
of any restrictions, the number of shares of Common Stock issuable upon the
exercise of each option, the exercise price and the expiration date, which date
will not exceed ten years from the date of grant of the Option.
The exercise price per share of Common Stock subject to an incentive option may
not be less than the fair market value per share of Common Stock on the date the
option is granted, as determined by a formula contained in a standard stock
option agreement. The maximum grant to any individual cannot exceed 5% of the
total issued and outstanding Common Stock of the Company as of the date of the
grant of the option.
No stock option may be transferred by a plan participant other than by will, or
the laws of descent and distribution, and during the lifetime of the plan
participant, the option can be only exercised by the plan participant. In the
event of termination by death, retirement or the date a consultant ceases to be
a consultant by termination of the contract in accordance with its terms, or
ceases to be a director, the plan participant shall be entitled to exercise the
option within ninety days of the termination date. Options expire immediately in
all other instances. The plan administrator may amend the rules with respect to
termination in special circumstances.
Options issued under the Plan must be exercised within ten years from the date
the option is granted; however, all options granted to date provide for one to
five years. All options granted under the Plan provide for the payment of the
exercise price in cash or bank draft provided the plan participant delivers
notice of intent to exercise speaking the number of options to be exercised.
In the event of a merger, amalgamation or other corporate arrangement, including
but not limited to takeover, the Board of Directors may, in a fair and equitable
manner, determine the manner in which all unexercised option rights granted
under this plan will be treated, including the acceleration of time for the
exercise of such rights.
Any unexercised options that expire or that terminate upon a participant ceasing
to be employed by the Company become available again for issuance under the
Plan.
As of December 31, 1999, the following options to purchase Common Stock have
been granted to officers, directors and employees of the Company:
NAME OPTIONS HELD EXERCISE PRICE
- --------------------------------------------------------------------------------
E. Greg McCartney 90,000 $1.00
Lawrence J. Pasemko 90,000 $1.00
Albert Klychak 90,000 $1.00
Dr. Ian B. Woods 90,000 $1.00
Carol Neves 50,000 $1.00
Other Employees 5,000 $1.00
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company in the three fiscal years ended
December 31, 1999 of E. Greg McCartney, Lawrence J. Pasemko and Albert Klychak
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who are the Company's most highly compensated executive officers, and Dr. Ian
Woods, a key director of the Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------------ ------------------
SECURITIES
NAME AND PRINCIPLE POSITION FISCAL YEAR SALARY BONUS OTHER UNDERLYING OPTIONS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E. Greg McCartney, 1999 - - $91,332 (1) -
Chief Executive Officer 1998 - - $45,685 (1) $90,000 (3)
1997 - - $34,564 (1) -
Lawrence J. Pasemko, 1999 - - $91,332 (1) -
Chief Financial Officer 1998 - - $45,685 (1) $90,000 (3)
1997 - - $34,564 (1) -
Albert Klychak, 1999 - - $91,332 (1) -
Vice President 1998 - - $45,685 (1) $90,000 (3)
1997 - - $34,564 (1) -
Dr. Ian Woods, 1999 - - $11,133 (2) -
Vice President 1998 - - $ 5,318 (2) $90,000 (3)
1997 - - - -
</TABLE>
- -----------------------------
(1) Represents 1/3 of annual management fee paid to Tynehead Capital Corp.
(2) Represents scientific consulting fees paid to Dr. Woods
(3) Represents stock option to purchase 90,000 common shares at an exercise
price of $1.00 per share
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company, as of December
31, 1999, regarding the beneficial ownership of the Company's voting securities
by (i) each of the Company's directors and executive officers, and (ii) all
directors and executive officers of the Company as a group.
Except as indicated below, management is not aware of any individual or entity
that owns 5% or more of the voting stock of the Company, unless otherwise
indicated, each of the stockholders listed in the table below has sole voting
and dispositive power with respect to shares beneficially owned by such
stockholder.
<TABLE>
<CAPTION>
NAME AND ADDRESS COMMON PERCENT PERCENT OF VOTING
OF BENEFICIAL OWNER(1) SHARES OF CLASS OWNERSHIP(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
E. Greg McCartney 440,000 (3) 4.9% 4.00%
Lawrence J. Pasemko 440,000 (3) 4.9% 4.00%
Albert Klychak 300,000 (3) 3.3% 2.70%
Dr. Ian B. Woods 390,000 (3) 4.3% 3.50%
Carol Patterson Neves 50,000 (3) 0.6% 0.50%
All Directors and Officers as a Group 1,620,000 (3) 18.0% 14.70%
Lutz Family Trust 100,000 (4) 1.2% 11.04%
</TABLE>
- ----------------------------
(1) The address for each of Messrs. McCartney, Pasemko, Klychak, and Woods is
c/o Company, Inc., Suite #1A, 3033 King George Highway, Surrey, BC, Canada,
V4P 1B8.
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(2) The percentage shown reflects voting ownership after taking into account
the existing Class A Preferred Stock. None of the officers or directors
owns any of the Class A Preferred Stock.
(3) Includes vested options to purchase Common Shares held by such officers and
directors.
(4) The Trust also owns 1,024,162 shares of the Company's Convertible Preferred
Stock, Class A.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 4, 1997, the Company issued 3,000,000 common shares to companies
controlled by officers and directors of the Company to settle debt of $120,000
($.04 per Share). During 1998 the Company issued 3,000,000 additional common
shares to companies controlled by officers and directors of the Company to
settle debt of $347,395 ($.115 per Share). As of January 2, 1998, the Company,
then known as Flexx Realm, Inc. had an indebtedness (accounts payable and notes
payable) to Tynehead Capital Corp. (the management services company owned by the
principal managers of the Company) of $193,406.20. At the same time, the Company
had an indebtedness to a related entity Sterling Gate Financial Corporation -
for accounts payable and notes payable amounting to $153,988.63. Both sets of
indebtedness were settled by conversion to equity, 1,670,200 Shares to Tynehead
and 1,329,800 to Sterling Gate, or an aggregate of 3,000,000 Shares for the
$347,395 of debt. The 575,000 Shares issued to Tynehead were redistributed to
the accounts of certain officers and directors of the Company as follows:
On January 2, 1998, 200,000 shares of Common Stock of the Company were issued to
Aspenwood Holdings Ltd., a company controlled by E. Greg McCartney, as
settlement of outstanding debts and accounts ($23,160) owing from Tynehead to
Aspenwood.
On January 2, 1998, 215,000 shares of Common Stock of the Company were issued to
Supercart Pacific Wholesale (Canada) Inc., a company controlled by Lawrence J.
Pasemko, as settlement of outstanding debts and accounts ($22,497) owing from
Tynehead to Supercart.
On January 2, 1998, 100,000 shares of Common Stock of the Company were issued to
Dr. Ian B. Woods, an officer and director of the Company, as settlement of
outstanding debts and accounts ($8,635) owing from Tynehead to Dr. Woods.
On January 2, 1998, 60,000 shares of Common Stock of the Company were issued to
Albert Klychak, an officer and director of the Company, as settlement of
outstanding debts and accounts ($6,948) owing from Tynehead to Mr. Klychak.
Such issuances were made before there was a trading market in the securities of
the Company. All of such stock issuances were related party transactions. No
independent opinion as to the fairness of the issuances was obtained. No related
party equity transactions occurred in 1999.
In addition all of the above persons rendered services in connection with the
formation of the Company for which they received no cash compensation or other
payment.
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.1 Restated Certificate of Incorporation of Company, Inc. 2/9/99*
3.2 Class A Convertible Preferred Stock definition*
5.1 Opinion regarding legality of Shares*
10.1 Abstract of Limited Liability Company Operating Agreement of
BioMedical Diagnostics, LLC (Joint Venture Agreement)*
10.3 Management Services Agreement BioLabs, Inc. with Tynehead
Capital Corp.*
10.4 Letter Agreement with Dynamed, Inc. dated September 2, 1999*
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21.1 Subsidiaries of Registrant: None.
* FILED WITH FORM 10-SB
b. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended December 31, 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIOLABS, INC.
By: /s/ E. GREG MCCARTNEY MARCH 28, 2000
------------------------------- ---------------------------
E. Greg McCartney Date
President, Chief Executive
Officer and Chairman
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
/s/ E. GREG MCCARTNEY MARCH 28, 2000
- ----------------------------------- ---------------------------
E. Greg McCartney, Date
President, Chief Executive Officer and Chairman
/s/ LAWRENCE J. PASEMKO MARCH 28, 2000
- ----------------------------------- ---------------------------
Lawrence J. Pasemko, Date
Chief Financial Officer, Secretary and Director
/s/ ALBERT KLYCHAK MARCH 28, 2000
- ----------------------------------- ---------------------------
Albert Klychak, Date
Vice President and Director
/s/ DR. IAN B. WOODS MARCH 28, 2000
- ----------------------------------- ---------------------------
Dr. Ian B. Woods, Date
Vice President and Director
- ----------------------------------- ---------------------------
Carol Patterson Neves, Date
Director
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