SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Amendment No. 2
FORM SB-2 REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
LVPS MicroFacility, Inc.
(Name Of Small Business Issuer In Its Charter)
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<CAPTION>
Delaware 3841 33-0845992
<S> <C> <C>
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
</TABLE>
7755 Center Avenue, 11th Floor, Huntington Beach, CA 92647
(714) 372-2251
(Address and Telephone Number of Principal Executive Offices)
7755 Center Avenue, 11th Floor, Huntington Beach, CA 92647
(Address of Principal Place of Business or Intended Principal Place of Business)
Richard O. Weed
4695 MacArthur Court, Suite 530, Newport Beach, CA 92660
(949) 475-9086
(Name, Address, and Telephone Number of Agent for Service)
Approximate Date of Commencement of Proposed Sale to the Public:
as soon as possible after this registration statement becomes effective
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. o
- -------------------------------------------------------------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
- -------------------------------------------------------------------------------
1
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
- -------------------------------------------------------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
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<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Offering Registration
Registered Registered Per Unit Price Fee
- ------------------------ ----------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock 625,000 $8.00 $5,000,000 $1,390
- ------------------------ ----------------------- ----------------------- ----------------------- -----------------------
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
Item 1. Front of Registration Statement and Outside Front Cover of Prospectus.
The Registrant may amend this registration statement. A registration statement
relating to these securities has been filed with the Securities and Exchange
Commission. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS
LVPS MicroFacility, Inc., a Delaware corporation
625,000 shares of common stock of LVPS MicroFacility, Inc. at a price of $8.00
per share. The offering is for $5,000,000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The offering will terminate nine months after the effective date of this
registration statement.
You should carefully consider the Risk Factors beginning on page 7 of this
prospectus before purchasing any of the common stock offered by this prospectus.
This is a self-underwritten offering.
Shares Sold (3) Price (1) Proceeds to LVPS (2)
- --------------- ---------- --------------------
Per Share $8.00 $8.00
- --------------- ---------- --------------------
Minimum Shares $2,300,000 $2,300,000
287,500
- --------------- ---------- --------------------
Maximum Shares $5,000,000 $5,000,000
625,000
=============== ========== ====================
(1) The price of the shares has been determined by LVPS and not as the
result of arm's-length negotiations.
(2) Before deducting expenses of the offering.
(3) In the event the 287,500 shares have not been sold within nine
months after the effective date of this registration statement, this
offering will terminate. This offer may be extended for an additional
sixty days.
Until the minimum shares are sold, all funds and shares will be held in
escrow by Richard O. Weed pursuant to an Escrow Agreement with LVPS. There
is presently no market for these securities.
Until _________, 2000, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The date of this prospectus is February 28, 2000.
3
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Item 2. Inside Front and Outside Back Cover Pages of Prospectus.
Table of Contents
Item 3. Summary Information ..............................................6
Risk Factors. ....................................................7
Item 4. Use of Proceeds...................................................10
Item 5. Determination of Offering Price...................................14
Item 6. Dilution..........................................................14
Item 7. Selling Security Holders..........................................15
Item 8. Plan of Distribution..............................................15
Item 9. Legal Proceedings.................................................16
Item 10. Directors, Executive Officers, Promoters and Control Persons......16
Item 11. Security Ownership of Certain Beneficial Owners and Management....23
Item 12. Description of Securities. .......................................24
Item 13. Interest of Named Experts and Counsel.............................25
Item 14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities ..................................25
Item 15. Organization Within Last Five Years...............................25
Item 16. Description of Business. .........................................26
Item 17. Management's Discussion and Analysis or Plan of Operation.........31
Item 18. Description of Property. .........................................32
Item 19. Certain Relationships and Related Transactions. ..................33
Item 20. Market for Common Equity and Related Stockholder Matters..........33
Item 21. Executive Compensation............................................33
Item 22. Financial Statements..............................................35
Item 23. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ........................................47
4
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SUMMARY
LVPS MicroFacility, Inc.
LVPS MicroFacility, Inc. was incorporated in the State of Delaware on December
16, 1998. LVPS was formed to manufacture facilities for the production of large
volume parenteral solutions. The LVPS MicroFacility is a state-of-the-art
modular micro-manufacturing facility that will produce intravenous solutions
from local water sources. The LVPS MicroFacility plants will be commissioned to
US FDA and host country standards.
LVPS was recently formed and has no ongoing operations. There is no market for
its securities.
LVPS's executive office is at 7755 Center Avenue, 11th Floor, Huntington Beach,
CA 92647. The telephone number is (714) 372-2251.
OFFERING
Offering Size ..........................Maximum: 625,000 shares of common stock
at $5,000,000
Minimum: 287,500 shares of common stock
at $2,300,000
Description of Shares ..................Shares of common stock, $.001 par value
Offering Price .........................$8.00 per share
Common Stock Currently Outstanding .....625,000 shares
Common Stock Outstanding
After Offering .......................Minimum: 912,500
Maximum: 1,250,000
Risk Factors ...........................Investment in the shares involves a high
degree of risk.
Use of Proceeds ........................LVPS will use the net proceeds from this
sale of shares to commence operations.
Subscription Procedure .................To subscribe to the shares, prospective
investors are to deliver (1) a completed
and duly executed copy of the
subscription agreement and (2)
immediately available funds in the
amount of $8.00 per share.
6
<PAGE>
RISK FACTORS
An investment in the shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following factors concerning
the business of LVPS and the offering, and should consult independent advisors
as to the technical, tax, business and legal considerations regarding an
investment in the shares.
LVPS Is A Start-Up Stage Company With No Operating History And Is Subject To All
Of The Risks Inherent To A Business In The Start-Up Phase
LVPS was established in December 1998 and has no operating history and no
revenues and is subject to all of the risks inherent in a business in the
start-up phase. LVPS has financed its activities to date through a private
placement of its equity securities and LVPS is dependent on the proceeds from
this offering and the sale of its prototype to fund its operations. If LVPS
sells the minimum amount of securities in this offering it will only be able to
support its operations for six months, if LVPS sells the maximum amount of its
securities, it will only be able to support its operations for twelve months.
Further, there can be no guarantee that LVPS will be able to secure adequate
financing or additional funds from the sale of its prototype to continue to
operate as a going concern for an additional twelve months if the minimum
offering is sold or for an additional six months if the maximum offering is
sold.
The LVPS MicroFacility Is Subject To Extensive Government Regulation Which May
Delay Or Impede LVPS's Operations
LVPS's industry is subject to extensive and frequently revised federal, state,
local and applicable foreign laws and regulations. The successful manufacture of
the LVPS MicroFacility will require applicable government permits,
authorizations and approvals, the nature of which may vary from jurisdiction to
jurisdiction. The permits, authorizations and approvals required for the
MicroFacility could be difficult and time-consuming to obtain and, if and when
issued, may be subject to conditions or restrictions which may limit LVPS's
ability to operate efficiently or at all in the applicable jurisdiction.
Further, any modification, suspension or revocation of the permits,
authorizations and approvals could have a material adverse effect on LVPS's
business, financial condition and results of operations.
LVPS's Growth May Require Substantial Expenditures Which LVPS May Not Be Able To
Fund
Any additional equity financing may be dilutive to LVPS's existing stockholders,
and any debt financing, if available, may involve restrictive covenants which
limit LVPS's operations. LVPS's failure to raise capital if and when needed
could delay or suspend LVPS's strategy and result in a material modification of
LVPS's business strategy. LVPS's inability to fund its capital requirements
could have a material adverse effect on LVPS's business, financial condition and
results of operations.
7
<PAGE>
LVPS's Primary Source Of Revenue And Business Will Come From The Sale Of The
MicroFacility, Which May Not Support LVPS Growth And Therefore, LVPS's Continued
Operation
LVPS will derive its business and revenues from the sale of its MicroFacility.
To achieve market acceptance and penetration, LVPS must continually enhance and
improve its products and services, as well as increase its marketing and sales
efforts to effectively compete and increase customers' awareness of LVPS's
products and services. Failure of LVPS to achieve market success with its
MicroFacility could limit or suspend LVPS's business, financial condition, and
results of operations. Although LVPS is aggressively continuing research and
development for expanded products, there can be no assurance that LVPS's
expanded marketing and sales efforts and increased expenditures will result in
successful commercialization and increased market penetration of LVPS's products
and services.
Technological Factors May Impede LVPS's Ability To Produce A Quality
MicroFacility And Related Products, Which May Result In A Delay In The
MicroFacility's Commercial Acceptance And Therefore, Adversely Effect LVPS's
Financial Condition
LVPS has drafted plans for assembling the MicroFacility, which includes
architectural, mechanical and electrical planning and design and establishment
of protocol for regulatory affairs, but, at this time, does not have a working
prototype of the MicroFacility and is dependant on the proceeds of this offering
to construct the prototype. There can be no guarantee that such plans will
translate into an operating prototype and investors may lose most or all of
their investment. Further, LVPS remains subject to all of the risks inherent in
new product development, including unanticipated technical or other development
problems, which could result in material delays in product commercialization or
significantly increased costs. It is common for manufacturing facilities as
complex and sophisticated as that incorporated in the LVPS MicroFacility to
experience problems during and subsequent to commercial introduction.
As A Result Of Rapid Expansion, LVPS May Not Have The Ability To Manage Growth
Which May Strain LVPS's Resources And Therefore, Detrimentally Affect LVPS's
Future Operations
LVPS will expand its operations rapidly, which may create significant demands on
LVPS's administrative, operational, developmental and financial personnel and
other resources. Additional expansion by LVPS may further strain LVPS's
management, financial personnel and other resources. If LVPS's management is
unable to manage growth effectively, its business, financial condition and
results of operations could be materially adversely affected. There can be no
guarantee that LVPS's systems, procedures, controls and existing space will be
adequate to support expansion of LVPS's operations. LVPS's future operating
results will depend, among other things, on its ability to manage changing
business conditions and to continue to improve its operational, financial
control and reporting systems.
8
<PAGE>
Due To The Cost Of The LVPS MicroFacility, LVPS's Customer Base May Be Limited
The estimated cost for the standard three module LVPS MicroFacility is
$5,500,000. The larger volume six module LVPS MicroFacility is $9,400,000.
Revenues attributable to a relatively small number of customers are likely in
the foreseeable future to represent a significant percentage, in any given
period, of its total revenues. The loss of one or more major customers could
have a materially adverse effect on LVPS's business, financial condition and
results of operations. There can be no guarantee that an future customers will
maintain business relationships with LVPS.
The Success Of LVPS's MicroFacility Is Dependant On Its Ability To Protect Its
Proprietary Rights, Inability To Protect Such Rights Could Lead To Delay Or
Suspension In Production Of The MicroFacility And Costly Litigation
LVPS currently has exclusive licenses from DenexCorp(TM)/LVPS MicroFacility for
the design and specifications of its MicroFacility. LVPS's strategy is to
protect its technology and other proprietary rights through patents, copyrights,
trademarks, nondisclosure agreements, license agreements, and other forms of
protection. There can be no guarantee that any pending or future patent
application of LVPS or its licensors will result in issuance of a patent, that
the scope of protection of any patent of LVPS or its licensors will be held
valid if subsequently challenged, or that third parties will not claim rights in
or ownership of the products and other proprietary rights held by LVPS or its
licensors. In addition, the laws of certain foreign countries do not protect
LVPS's intellectual property rights to the same extent as the laws of the United
States.
Litigation or regulatory proceedings which could result in substantial cost and
uncertainty to LVPS may also be necessary to enforce patent or other proprietary
rights of LVPS or to determine the scope and validity of a third party's
proprietary rights. Although LVPS believes that its technology has been
independently developed and that its products do not infringe patents known to
be valid or violate other proprietary rights of third parties, it is possible
that such infringement of existing or future patents or violation of proprietary
rights may occur. LVPS's failure to successfully enforce its proprietary rights
or defend against infringement claims brought by third parties could have a
material adverse effect upon LVPS. In addition, there can be no assurance that
LVPS will have the resources necessary to successfully defend an infringement
claim brought by a third party.
There Is No Public Market For The Shares, Therefore, It Is Unlikely That LVPS
Shareholders Will Be Able To Sell Their Shares At the Public Market At A
Premium, If At All
It is unlikely that any market will develop prior to the second anniversary of
LVPS's operations following this offering, if then. The offering price for the
shares was determined by management and not as the result of arms-length
negotiations.
9
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Item 4. Use of Proceeds.
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USE OF PROCEEDS
The following table sets forth the use of the proceeds from this offering:
If Minimum Sold If Maximum Sold
Amount % Amount %
--------------- ---- --------------- ----
<S> <C> <C> <C> <C>
Total Proceeds $2,300,000 100% $5,000,000 100%
Less: offering expenses $230,000 10% $500,000 10%
Legal & Accounting $23,000 1% $50,000 1%
Copying & Printing $4,000 .2% $8,000 .2%
Net Proceeds from Offering $2,043,000 89% $4,442,000 89%
Use of Net Proceeds $2,043,000 100% $4,442,000 100%
Equipment $1,412,257 69% $2,384,667 54%
Services $498,175 24% $1,248,175 28%
Operating Expenses & $132,568 7% $809,158 18%
Working Capital
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10
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<TABLE>
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The use of the operating expenses and working capital is as follows:
LVPS MicroFacility, Inc.
Operating Expenses & Working Capital
Minimum Offering Shares Sold
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Total
------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries 12,500 12,500 12,500 12,500 12,500 12,500 75,000
Taxes/FICA (1) 1,375 1,375 1,375 1,375 1,375 1,375 8,250
Office Rent (2) 0 0 0 0 0 0 0
Telephone 450 450 450 450 450 450 2,700
Copy/printing/supply 300 300 300 300 300 300 1,800
Marketing 400 400 400 400 400 400 2,400
Operating Reserve 500 500 500 500 500 500 3,000
Travel & Expenses 1,046 1,046 1,046 1,046 1,046 1,046 6,276
Insurance/Liability 1,000 1,000 1,000 1,000 1,000 1,000 6,000
Operating Reserve 4,642 4,500 4,500 4,500 4,500 4,500 27,142
- ------------------- -------- ------- -------- -------- ------- ------- -------
Total 22,213 22,071 22,071 22,071 22,071 22,071 132,568
</TABLE>
(1) Tax burden 11%
(2) Rent paid by DenexCorp
<PAGE>
<TABLE>
<CAPTION>
LVPS MicroFacility
Working Capital & Operating Expense
Maximum Amount of Shares Sold
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Salaries (1) 25,000 25,000 25,000 25,000 25,000 25,000
Taxes/FICA (2) 3,250 3,250 3,250 3,250 3,250 3,250
Office Rent 500 500 500 500 500 500
Telephone 450 450 450 550 550 550
Copying & Printing 300 300 300 300 425 425
Marketing (3) 2,000 2,000 2,000 2,000 2,500 2,500
Operations Director (4) 0 0 0 0 0 0
Marketing Director (5) 5,500
Taxes/FICA (6) 0 0 0 0 0 715
Insurance/Liability 1,000 1,000 1,000 1,000 1,000 1,000
Travel/Expenses 1,000 1,500 1,500 2,000 2,000 2,500
Postage/Courier 200 200 200 275 275 325
Supplies 400 400 350 350 350 350
Consultants (7) 500 500 500 500 2,500 2,500
Dues/Subscriptions 200 200 200 200 200 200
Computer Equipment 4,500 500 500 500 500 1,500
Office Furniture/Equip 4,500 0 0 0 0 1,500
Operating Reserve 19,951 19,951 19,951 19,951 19,951 19,951
- ---------------- ------- -------- -------- -------- -------- --------
Total 63,751 55,751 55,701 56,376 59,001 68,266
</TABLE>
12
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<TABLE>
<CAPTION>
Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Salaries (1) 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Taxes/FICA (2) 3,250 3,250 3,250 3,250 3,250 3,250 39,000
Office RentOffice Rent 1,500 1,500 1,500 1,500 1,500 1,500 12,000
Telephone 625 625 625 625 625 625 6,750
Copying & Printing 425 425 425 425 425 425 4,600
Marketing (3) 2,750 2,750 2,750 2,750 2,750 2,750 29,500
Operations Director (4) 6,000 6,000 6,000 6,000 6,000 6,000 36,000
Marketing Director (5) 5,500 5,500 5,500 5,500 5,500 5,500 38,500
Taxes/FICA (6) 1,430 1,430 1,430 1,430 1,430 1,430 9,295
Insurance/Liability 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Travel/Expenses 3,000 3,000 3,000 3,000 3,000 3,000 28,500
Postage/Courier 325 325 325 375 375 375 3,575
Supplies 400 425 425 425 425 425 4,725
Consultants (7) 3,750 3,750 3,750 3,750 3,750 3,750 29,500
Dues/Subscriptions 200 200 300 300 300 300 2,800
Computer Equipment 1,500 500 500 500 500 500 12,000
Office Furniture/Equip 2,000 0 0 0 0 8,000
Operating Reserve 19,951 19,951 19,951 19,951 19,951 12,952 232,413
- ------------------ --------- ------- ------- -------- -------- ------- ---------
Total 78,606 75,631 75,731 75,781 75,781 68,782 809,158
</TABLE>
(1) Salaries of principal officers
(2) Tax/FICA burden 13%
(3) Including materials
(4) New hire at Month 7
(5) New hire at Month 6
(6) Tax/FICA burden 13%
(7) Independent, no benefits
The amounts allocated to equipment and services will be used to develop a
working prototype of the LVPS MicroFacility. If the amount of securities sold
are between the minimum and the maximum, the purchase of equipment and services
will have priority over operating expenses, executive salaries and working
capital. If the offering is not fully sold, then executive salaries and overhead
expenses will be proportionately reduced.
13
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Item 5. Determination of Offering Price.
The offering price of the shares has been determined by LVPS and not as the
result of arm's-length negotiations. There is no established public market for
the shares. LVPS set the price of the shares to value LVPS before financing at
$5,000,000 and after full financing through this offering at $10,000,000.
Item 6. Dilution.
LVPS's existing officers, directors, promoters, and affiliated persons obtained
their 612,500 shares for cash consideration of $612 or $.001 per share. As a
comparison, investors in this offering will pay $8.00 per share. Therefore,
investors will suffer an immediate dilution of $4.00 per share. The net tangible
book value per share before this distribution is $0.00. After this distribution,
net tangible book value will be $4.00 per share. As such, there will be a $4.00
per share increase in net tangible book value per share attributable to the cash
payments made by purchasers of the shares being offered. The purchasers will
absorb an immediate dilution of $4.00 per share in net tangible book value from
the public offering price. The following table illustrates this per share
dilution.
Offering price to new investors ......................................$8.00
Average price paid by existing stockholders...........................$.001
Net tangible book value before the offering ............$0.00
Increase in tangible book attributable to this offering.$4.00
Pro forma net tangible book value after the offering ......................$4.00
Dilution of net tangible book value to new investors ......................$4.00
Dilution to new investors if the minimum number of shares are sold ........$5.48
Dilution to new investors if the maximum number of shares are sold ........$4.00
14
<PAGE>
The following table sets out, among other things, the percentage of common stock
purchased and total consideration paid by existing stockholders and new
investors and the average price paid for LVPS shares. LVPS is authorized to
issue 20,000,000 shares of common stock.
<TABLE>
<CAPTION>
Percentage of Percentage of Average Price
Common Stock Total Consideration the Total Paid
Purchased Paid Consideration Per Share
- ------------- ------------- ------------------- ------------------ -------------
<S> <C> <C> <C> <C>
Existing 3.06% $612.00 If Minimum: .026% $.001
Stockholder If Maximum: .012%
- ------------- ------------- ------------------- ------------------ -------------
New Investors
If Minimum 11.5% 2,300,000 99.97% $8.00
If Maximum 25% 5,000,000 99.98% $8.00
- ------------- ------------- ------------------- ------------------ -------------
Total N/A N/A N/A
If Minimum 2,300,612
If Maximum 5,000,612
- ------------- ------------- ------------------- ------------------ -------------
</TABLE>
Item 7. Selling Security Holders.
None.
Item 8. Plan of Distribution.
LVPS is offering a minimum of 287,500 and a maximum of 625,000 shares at the
purchase price of $8.00 per share on an all or none basis as to the first
287,500 shares. This is a self underwritten offering. If the minimum number of
shares are not sold during the offering period, the proceeds received will be
promptly returned to the investors without any fees or interest. However,
because this is a self underwritten offering, investors will not have access to
their funds held in escrow or the ability to accrue interest on such funds
during the offering period. LVPS may allocate among or reject any offers to
purchase in whole or in part.
Moreover, LVPS's directors, officers, and principals of LVPS's counsel may
purchase shares on the same terms and conditions as all other investors;
provided, however, that any such shares so purchased (a) will not be included in
calculating the minimum number of shares to be sold and (b) will be acquired for
investment and not with an intention to resell such shares shortly thereafter.
This offering will terminate nine months after the effective date of this
registration statement and may be extended by LVPS for an additional sixty days.
LVPS reserves the right to use selling agents.
15
<PAGE>
LVPS's officers and directors will be conducting the offering. Under Section 15
of the Securities Exchange Act of 1934, LVPS's officers and directors are exempt
from registration as broker-dealers under the Act because they are not, and have
not in the past been, engaged in the business of effecting transactions in
securities for the account of others or engaged in the regular business of
buying or selling securities for their own account.
The shares will be held in escrow by Richard O. Weed. Subscribers are to deliver
to Richard O. Weed (1) a completed and duly executed copy of the subscription
agreement and (2) immediately available funds in the amount of $8.00 per share.
Once Richard O. Weed receives $2,300,000 in subscriber funds for the purchase of
at least 287,500 shares and subscription agreements are accepted by LVPS,
Richard O. Weed shall release the escrow funds to LVPS and shall release the
shares to the subscribers. Richard O. Weed shall deposit all funds received
under this arrangement in Richard O. Weed's escrow account at City National
Bank, Newport Beach, California or any other nationally recognized financial
institution that has an office in Newport Beach, California. In the event that
Richard O. Weed does not receive at least $2,300,000 in subscriber funds for the
purchase of 287,500 shares and/or LVPS does not accept at least 287,500
subscription agreements within nine months from the effective date of this
registratio statement, unless extended for an additional sixty days, Richard O.
Weed shall return the funds held in escrow to the subscribers without fees or
interest. Richard O. Weed is also LVPS's counsel with respect to this
registration statement.
Item 9. Legal Proceedings.
LVPS is not involved in any legal proceedings.
Item 10. Directors, Executive Officers, Promoters and Control Persons.
<TABLE>
<CAPTION>
Identification of Directors and Executive Officers
Name Age Position held with the Term of office as a Dates of service
Registrant director
- -------------------------- --------- ----------------------------- ------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Ronald Patterson 55 Chairman, CEO, One year December 16, 1998 to
Director present
Ross Boling 52 President, Secretary, One year Decembern16, 1998 to
Principal Financial present
Officer, Principal
Accounting Officer,
Director
</TABLE>
At present there are two full-time employees of LVPS, Ron Patterson and Ross
Boling. Messrs Patterson and Boling will not receive salaries from LVPS until
the securities offering is completed. Further, their salaries will be
proportionately reduced if less than the maximum offering is achieved.
16
<PAGE>
Business experience:
Ronald R. Patterson. CEO & Chairman LVPS MicroFacility, Inc.
December 1998 to present. Founder of LVPS, Mr. Patterson has senior level
experience in start-up manufacturing technologies, research and development,
patent application, and infrastructure distribution in marketing/sales in the
international medical industry. Extensive experience in biomedical and medical
device manufacturing and new product development. Strong knowledge of the FDA
regulatory environment. Inventor of several patents that are currently pending.
President & Chief Executive Officer DenexCorp(TM)/LVPS MicroFacility.
January 1994 to present. Ron Patterson founded DenexCorp to bring new and
innovative state-of-the-art medical products to the international community with
a totally integrated, complete, manufacturing plant that produces I V solutions
for basic medical requirements. Based on his 25 years in the medical industry,
Ron realized that the medical industry was in drastic and dramatic change.
DenexCorp is structured to lead this change by offering new technology to the
domestic and international community with special emphasis on new and emerging
medical market nations.
Additional business experience:
Patterson Publishing 1990 to 1994, Author. Author of business books for
self-employed people, medical business and research marketing. Author of
"Success and Wealth for the Entrepreneur" published in 1992.
Medexco 1982 to 1987, Founder. Founded an import/export company specializing in
manufacturing and packaging sterile surgical gloves and non-sterile examination
gloves. Services included procurement and distribution of medical equipment to
primary markets in Mexico and Central and South America.
General Clinical Plastics Corporation 1977 to 1982, Founding Partner/Chief
Operating Officer. A start-up medical injection molding facility with
demonstrated strong marketing and development strategy, General Clinical
Plastics Corporation swiftly became a major medical injection molding facility
on the West Coast. Sold the company to Premium Plastics, one of the largest
medical plastics manufacturers in the U.S.
Medical Manufacturers Marketing Company 1973 to 1989, Principal. Following a
major restructuring at Cenco, became a principal in an established independent
representatives group with a major distribution network extending throughout
western U.S. and Hawaii.
Cenco Medical Health Supply Corporation 1968 to 1973, Division Manager, Western
Divisions. The youngest Division Manager in the history of Cenco, responsible
for hospital planning, engineering, distribution, labor arbitration,
implementation of corporate procedures, sales forecasting, product marketing,
national and regional group contracting, data processing systems, and employee
relations.
17
<PAGE>
Education: Bachelor of Science, Business Administration Public Health-University
of Southern California
Military: United States Army Green Beret-Honorable Discharge Special Forces
Medic-Fort Bragg, North Carolina/Republic of Vietnam Awards: Bronze Star, Purple
Heart, and Combat Medical Badge
Ross T. Boling. President, Secretary & Director LVPS MicroFacility, Inc.
December 1998 to present. Co-founder of LVPS, Mr. Boling has extensive
international infrastructure development and financing experience in several
industries. His background in sales, marketing, and finance gives further
leadership in LVPS's goal of worldwide development of MicroFacility plants.
Additionally, Mr. Boling supervises the LVPS worldwide network of authorized
independent sales representatives.
Chief Operating Officer DenexCorp(TM)/LVPS MicroFacility
January 1994 to present. Co-founder of DenexCorp, management responsibility for
Operations, Sales, and Marketing. Created the sales and marketing strategies for
global development of LVPS MicroFacility plants. Involved in all phases of
research and development of the MicroFacility plant.
Additional business experience:
The Boling Group 1990 to 1994, Owner/Principal. An international marketing
consulting firm specializing in hospitality, health, telecommunications, and
transportation industries. Advisory services to major investment groups
concerning proposed takeover of a long distance telecommunications company;
developed marketing/advertising strategies for Greyhound Bus Lines Rural
Connection transportation service; awarded $700,000 contract to implement the
State of Michigan's Rural Transit service marketing program.
Pool/Sarraille Advertising, Inc. 1988 to 1990, Vice President/Chief Operating
Officer. Managed Dallas, Texas branch of Los Angelesbased firm generating
billing in excess of $4 million. Launched international expansion of Brock
Residence Inn Hotel system creating marketing/advertising plan, franchise
fullfillment brochures, investment film. Managed agency account team, led new
business activities, coordinated Franchise Collateral Fullfillment program.
Responsibility for the overall advertising and public relations for Lincoln
Hotels, Division of Lincoln Property Company. Regional marketing for Grand
Kampenski Hotels, division of Luftansa Airlines.
Hawthorn Suites Hotel Group 1986 to 1988, Vice President/Director of Sales and
Marketing. Administered all system sales, marketing, public relations, and
market research. Participated in franchise sales activities and development;
created national brand identification of new allsuite hotel chain exceeding
sales target of $3 million the first year; trained and motivated sales force for
over 25 hotel properties.
Education: BA Communications-University of Texas Recipient, American Hotel Sales
& Marketing Gold Medal for Best Marketing/Advertising Campaign.
United States Department of Transportation Outstanding Public/Private Sector
Award
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<PAGE>
Identification of Significant Employees- The individuals named below are at
present consultants to both LVPS and DenexCorp on an ongoing basis. Our
intention is to employ either these individuals or individuals with similar
professional backgrounds and expertise as full-time employees or consultants to
LVPS once the securities offering is completed. Their backgrounds and experience
illustrate the type of professional employees required to oversee manufacture
and regulatory issues involved with the MicroFacility plant.
Name Age
- -------------------------- ---------
Jon Gow 50
Douglas Platt 51
Steven Smith 43
Todd Marrs 50
Bill Hatton 45
Damon Jones 34
Previous business experience:
Jon W. Gow. President & Owner Pacific Environmental Technologies, Inc. (PETI).
October 1989 to present. PETI is an international cleanroom design build and
manufacturing company. With over 20 years in the critical environment industry,
Mr. Gow has gained extensive experience in most aspects of cleanroom's facility
design and construction including air-conditioning HVAC systems, facility
layout, process layout, and commissioning with an emphasis on turnkey projects
and project management. Other areas of his expertise are controls design for
temperature and humidity; start up and balancing of HVAC systems; and innovative
design solutions that offer cost benefit results to the client. PETI provides:
clean room facility design, engineering, consulting, project management,
installation and construction services and commissioning/certification services
for a broad spectrum of industries. These include: aerospace, electronics, bio
medical device manufacturing, pharmaceutical, optical storage and others. Within
LVPS, Mr. Gow is actively involved in the engineering and design of the LVPS
MicroFacility under contract.
Previous to PETI, Mr. Gow has been involved in process systems and critical
manufacturing environments for over 20 years. His initial exposure to critical
environment processes and cleanrooms came in the micro electronics industry as a
process engineer where his chemistry background provided the basic knowledge and
analytical skills required in the semiconductor wafer processing industry. It
was during this period that he gained valuable knowledge and experience in
project management and engineering support for a new wafer fab facility. After
leaving the microelectronics industry, Mr. Gow joined a Southern California
cleanroom manufacturing and contracting company, B.A.C. For the next 10 years,
Mr. Gow provided technical experience in HVAC design, clean room design, project
management, sales and marketing in the international and domestic markets for
critical manufacturing environments that utilize cleanrooms. Mr. Gow worked
extensively in all aspects of the projects including project management,
estimating, design and commissioning of projects which include domestic projects
in the U.S. as well as overseas projects in Taiwan, S. Korea and the Middle
East.
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<PAGE>
Education: Bachelors of Science in Chemistry from the California University at
Pomona, California Polytechnics University.
Douglas B. Platt. President, East-West Technical Services
1988 to present. Mr. Platt has extensive experience in process development
through validation and license of pharmaceutical and biotechnology operations.
Regulatory matters like biocontainment, sterile processing with emphasis on
aseptic manufacturing, filtration, sterilization, cGMP compliance, validation
and the use of isolation and mobile technologies in aseptic processing. Other
areas of his expertise are facility design and planning, process flow,
WFI/Ultrapure water systems and equipment selection evaluation and
qualifications. Mr. Platt is actively involved with the Parenteral Drug
Association, Filtration Society, Society of Pharmaceutical Engineers, the
Institute of Environmental Sciences, and the Water Quality Association.
Additional experience:
Alpha Therapeutics Senior Project Management Supervisor. Supervision and project
management responsibilities throughout LVP/S P manufacturing facility in
Southern California. Some of his duties were development with engineering and
quality assurance of the design, construction, and validation for a new $6
million sterile filling and filtration facility, which resulted in increased
productivity by approximately $20 million and doubled the capacity of the
filling operation on a daily basis. Designed and developed the first formal
certified and GMP compliant custodial program plant wide for Alpha Therapeutics.
Biomedical Department of Scientific Air Systems Chino, California Senior
Manager. Provided management and leadership for turnkey design/build
capabilities in the pharmaceutical and biotech industries. His duties included
sales engineering providing international clients with conceptual design
engineering, equipment selection, costing, and contract negotiations.
Gelman Sciences Project Manager/Sales Engineer. Mr. Platt provided product
management and sales engineering expertise, writing, implementing and directing
the field efforts of a validation in plant program affecting over $30 million in
filtration products. He also, through his own initiative, was successful in
negotiating Gelman as one of the two providers of filtration products to a $500
million global ophthalmic manufacturing company with facilities in 5 countries
resulting in annual sales over $1 million.
Education: Bachelors of Science in Psychology in a Pre Medical program in
Tennessee.
Certificate of Pharmacy, Fort Sam Houston, Texas Medical School
Certificate of Biocontainment Technology at John Hopkins University, Maryland.
Steven L. Smith. Senior Manufacturing Manager, McGaw, Inc.
1991 to present. Mr. Smith has over 15 years of management experience in the
pharmaceutical industry. He has expertise in medical products, process
development, capital and expense planning, market research, plastic materials
and processing, all methods of sterilization, processing equipment, and
automation. Currently overseeing cost effective drug delivery and IV container
20
<PAGE>
systems. He has worked closely with other departments to revamp McGaw's entire
process and product development program. He has interfaced with world-renowned
pharmaceutical and biotech companies in the exploration and development of
mutual beneficial joint development projects. His achievements include the
development and successful introduction of the patented Excel(TM)IV system and
the development of the Duplex(TM) advanced drug delivery system. He was the
originator and the product champion behind both of these projects. He is
actively a member of ISPE, ASHP, and PDA. PDA.
American Hospital Supply Corporate Technical Consultant, Pacific International
Division. Provided technical and manufacturing support. He increased the output,
efficiency, and quality of medical products produced and developed at various
locations. He developed new product technologies specifically designed to
address the needs of each market. This included a B/F/S irrigation and IV
container system and the use of RO to produce WFI.
Todd P. Mairs. Consultant Long Term Manufacturing Maintenance Systems
1993 to present. Mr. Mairs has over twelve years of experience in consulting to
commercial nuclear plant owners, the Electric Power Research Institute, URI and
the Department of Energy in the application of risk management methodology and
reliability engineering to improve facility capacity, production throughput and
maintenance cost structure. He is actively involved in the design of maintenance
cost/performance strategies and the development of life-cycle maintenance cost
management process. Currently implementing life-cycle maintenance cost
management at Calvert Cliffs Nuclear Power Plant, Cooper Nuclear Station, and
Boston Edison fossil generating stations to integrate risk, reliability,
maintenance, and cost engineering techniques into an asset and resource
management strategy.
Developed a risk and performance-based process for reducing operating costs by
reengineering the development, planning, scheduling, and conduct of maintenance
activities and inventory management for industrial facilities. The goal of the
lifecycle maintenance cost management process, LCM2, is to achieve significant
and sustained O&M cost reduction and capacity improvement throughout the
operating cycle of a plant without sacrificing safety. This cost-benefit
decision methodology for conducting maintenance activities during all modes of
operation, i.e. generation, production or manufacturing, requires explicit
consideration of financial, operational, and safety risks.
Currently implementing the LCM2 strategy at Calvert Cliffs Nuclear Power Plant
and Cooper Nuclear Station. Additionally, consulted with ComEd, Southern
California Edison, Niagara Mohawk Power Corporation, PSE&G, and Duquesne Light
in developing maintenance policy, process, and procedures that assure safe plant
operation and equipment reliability, and achieve greater efficiencies in cost
performance. In addition, this methodology is being applied at other facilities,
including polyester and pharmaceutical manufacturing facilities, and a uranium
enrichment chemical processing plant.
Mr. Mairs continues to consult with EPRI on similar projects involving the
application of risk management strategies for optimizing the maintenance
business function.
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<PAGE>
William Hatton. Consultant
1989 to present. Mr. Hatton has over 20 years combined experience working in
manufacturing, quality research and development, and regulatory affairs. Mr.
Hatton is responsible for the coordination of the commissioning and validation
efforts. He has supervised qualifications and validation for several
multi-million dollar construction projects. He also has hands on experience
working within Manufacturing, Metrology, Quality Control, Quality Assurance, R &
D and Regulatory Affairs groups. He is a member of the Regulatory Affairs
Professional Society.
R.J.M. Laboratories Chemist. Chemist performing bench top to pilot plant scale
up-custom synthesis in stereospecific organometallic hydride reduction.
Richard's Surgical Manufacturing Company Quality Engineer Responsible for
monitoring plant GMP compliance and in-house training programs. He performed
vendor audits, wrote inspection procedures, reviewed drawings prior to release,
reviewed rejects for defect analysis, made scrap or rework decision and wrote
engineering change requests.
Westech Gear, Senior Quality Assurance Analyst Performed pre-award surveys for
multi-million dollar contracts (Air Force Nuclear Vault, Navy submarine
elastomeric coupling). He evaluated calibration systems to Mil-STD-45662A, and
audited vendor's quality systems (MIL-45208A and Mil-Q-9858AO).
International Medication Systems, Ltd. Metrology Supervisor and Validation
Project Leader. Implemented a cost effective calibration program reviewed by the
FDA and generated standard cost estimates for departmental budgets and supported
installation qualification for a facility upgrade. He also initiated a gamm
sterilization dosimetric release program and executed protocols for steam
sterilization of parenteral solutions and dry heat depyrogenation of equipment
and components.
Skyland Scientific Services, Technical Manager. Assisted in the development of
validation master plans of new pharmaceutical manufacturing facilities. Wrote
protocols, made cost estimates and supervised the on-site execution of the
validation effort.
Education: University of California, Los Angeles, B.S. Psychobiology.
Damon P. Jones. Manager, Product Development, Medtronic
1994 to present. Mr. Jones has over 13 years experience in the medical device
manufacturing industry as a manager/supervisor. He is also a Certified Quality
Engineer. He received the U.S. Patent application and Medtronic recognition
award for Automated System and Process for Sterilizing and Preserving a Product
in an Aseptic Environment in April of 1994. Currently Manager of Product
Development Projects for Medtronic Heart Valve, Inc. He is responsible for
coordination and implementation of quality assurance systems, quality assurance
laboratories in microbiology and chemistry, and control and improvement of
surface modification processes. Mr. Jones has introduced and sustained
compliance programs for international and domestic regulations such as FDA, MDD,
ISO, CEN. He is currently a member of the American Society for Quality Control
and Chairman of the United States technical advisory group ISO sub-TAG to ISO TC
19 81WG 10 and Delegate to ISOTC 198.
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<PAGE>
For over 4 years, Mr. Jones was a Senior Microbiologist for Medtronic, Inc.,
Heart Valve Division. He conducted sterilization validations for liquid
chemical, ethylene oxide, steam and irradiation sterilization's. He also planned
and coordinated environmental monitoring programs, bioburden monitoring
programs, water system monitoring and maintenance programs. He was responsible
for all microbiology quality assurance activities.
He also supervised the Heart Valve Division at Medtronic. His responsibilities
included supervision of all validation, inspection, test, and regulatory
activities related to Microbiology and Chemistry. He also managed the laboratory
personnel and coordinated biocompatibility, sterilization and microbiological
quality control for new product development activities.
Presently manages and coordinates the development of implantable cardiovascular
devices. Activities include identifying, organizing and leading individuals for
cross functional project teams. His product development project scope includes
identifying and cultivating product concepts, developing concepts into viable
product offerings, and obtaining United States and international market
approvals and release.
Education: B.S. Microbiology
Item 11. Security Ownership of Certain Beneficial Owners and Management.
LVPS, at present, is 98% owned by DenexCorp(TM)/LVPS, a Nevada corporation. As
such, DenexCorp is an affiliate of LVPS. Upon completion of this offering,
DenexCorp will own 49% of LVPS. Ron Patterson and Ross Boling, who are officers
and directors of LVPS, are also the officers and directors of DenexCorp and
together control 100% of the common stock of DenexCorp. Ron Patterson owns 71%
of DenexCorp and Ross Boling owns 29% of DenexCorp. Following completion of this
offering, LVPS's current executive officers, directors and entities affiliated
with them will beneficially own, in the aggregate, approximately 49% of LVPS's
outstanding common stock. Ron Patterson, as the majority stockholder of
DenexCorp has sole investment power and sole voting power on the shares of LVPS
owned by DenexCorp.
23
<PAGE>
<TABLE>
<CAPTION>
The following table sets out the beneficial ownership of LVPS.
Title of Class Name and Address of Amount and Percent of Percent of
Beneficial Owner Nature of Class Prior Class Upon
Beneficial to Completion
Owner Offering of Offering
- ------------------------ ------------------------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
common stock, $.001 par DenexCorp 612,500 98% 49%
7755 Center Avenue, 11th
Floor
Huntington Beach, CA
92647
Ron Patterson 612,500 98% 49%
7755 Center Avenue, 11th indirect
Floor
Huntington Beach, CA
92647
Ross Boling 177,625 28% 14%
7755 Center Avenue, 11th
Floor
Huntington Beach, CA
92647
Officers and Directors 612,500 98% 49%
- ------------------------ ------------------------------------- ------------------- ------------------ ------------------
</TABLE>
Item 12. Description of Securities.
LVPS is authorized to issue twenty million shares of $.001 par value common
stock and one million shares of $.001 par value preferred stock. Prior to this
offering there are 625,000 shares of common stock issued and outstanding. There
are no shares of preferred stock outstanding at the present time.
LVPS's board of directors has the power by resolution only and without further
action or approval, to cause LVPS to issue one or more classes or one or more
series of preferred stock within any class thereof and which classes or series
may have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution o resolutions adopted by the board of
directors, and to fix the number of shares constituting any classes or series
and to increase or decrease the number of shares of any such class or series.
Each stockholder is entitled to one vote in person or by proxy for each share of
the capital stock. Dividends upon the capital stock of LVPS, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of capital stock, subject to the
provisions of the Certificate of Incorporation. There are no preemptive rights.
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<PAGE>
Item 13. Interest of Named Experts and Counsel.
Certain legal matters, including the validity of the securities being issued,
will be passed upon by Richard O. Weed, counsel to LVPS, who at present owns 2%
of LVPS, and upon completion of this offering, will own 1% of LVPS. In addition,
Mr. Weed will receive 1% contingent compensation from the proceeds of the
offering.
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controllin precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
LVPS's Certificate of Incorporation provides that a director of the corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach or fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
knowing misconduct or an intentional violation of the law, (iii) under section
174 of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived any personal benefit.
Item 15. Organization Within Last Five Years.
Transactions with promoters
LVPS, at present, is 98% owned by DenexCorp(TM)/LVPS MicroFacility, a Nevada
corporation. As such, DenexCorp is an affiliate of LVPS. Upon completion of this
offering, DenexCorp will own 49% of LVPS. DenexCorp has taken steps to protect
the design of the MicroFacility, under the United States of America and
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<PAGE>
International Patent laws, as "Patent Pending," titled "Modular Pharmaceutical
Solution Manufacturing," preliminary class 604. All rights to the patent,
including any modifications, and the trademark trademark LVPS/(TM) belong to
DenexCorp. LVPS has been granted the exclusive use of the patent and trademark
subject to the terms of a Licensing Agreement entered into on December 30, 1998
between DenexCorp and LVPS. The licensing agreement provides for a royalty of
two percent (2%) of the gross selling price on each MicroFacility sold by LVPS
during the ten-year term of the license. The license agreement was not the
subject of an arms length negotiation. As such, a portion of the revenue from
the sale of each each MicroFacility will be paid to DenexCorp.
Item 16. Description of Business.
LVPS MicroFacility, Inc. was incorporated in Delaware on December 16, 1998. LVPS
was formed to be the manufacturer, under license from DenexCorp/LVPS
MicroFacility, of a self contained modular enclosure IV solution manufacturing
facility marketed to "third world" or emerging market nations. LVPS does not
sell finished IV solution product. The client is responsible for selling the
final I V solution product. LVPS will build the plant to produce the solutions.
The MicroFacility plant is a complete manufacturing facility that produces IV
solutions from local water sources; blows, fills, and seals the plastic IV
solution container; and sterilizes the finished product for quality assurance
testing, quarantined storage, required by the US FDA, and distribution to
wholesalers, hospitals, and clinics. No LVPS MicroFacility plant as described
above has been built to date. However, the MicroFacility plant is designed and
will be built to comply with all US FDA regulations for pharmaceutical
manufacturing plants and Host Country regulatory requirements. All
pre-manufacture activities are now complete, including finished renderings and
engineering drawings, FDA regulatory protocols, materials vendor identification,
all major components specifications to LVPS requirements, and preliminary
purchase price negotiation. Once the offering is completed, LVPS is ready to
begin manufacture of the first MicroFacility plant. Raw materials for the
production of the IV solutions are readily available in most countries.
Additionally, raw materials like plastic resins, used in the IV solution
container, are available for shipment at acceptable pricing levels from
multi-national companies like BASF and chemicals from Hoechst, Gelman Sciences,
AMOCO Chemicals and Union Carbide.
LVPS has obtained rights to the pending United States patents and trademarks
pursuant to a license agreement with DenexCorp. In return, LVPS will pay
DenexCorp a royalty of two percent of the gross selling price on each
MicroFacility during the ten-year term of the license. Payments under this
agreement are to be made no later than the tenth day of each quarter beginning
June 30, 1999, assuming that a MicroFacility has been sold. Interest shall
accrue on all past due payments from their respective due dates until paid at a
rate of 1% per month, or if such rate exceeds the maximum rate allowed by law,
at the maximum rate allowed by law, and shall be payable upon demand.
The MicroFacility plant will be built in accordance with current governmental
regulations that require IV solutions to be manufactured of United States
Pharmacopoeia quality, meeting United States Food and Drug Administration
current Good Manufacturing Practices in compliance with US FDA Regulations 21
CFR part 211, and USP 23/NF 18 of the National Formulary for pharmaceuticals.
LVPS will also comply with the host country health ministry requirements as they
26
<PAGE>
pertain to IV solution manufacturing. LVPS will adhere to all applicable United
States occupational and export laws as they pertain to the MicroFacility plant
manufacture and delivery to the client.
Existing governmental regulations will have a significant effect on LVPS's
business plan. LVPS will need to devote managerial resources toward
understanding and complying with applicable government regulations. Management
of LVPS and certain consultants identified by management possess the requisite
skill, training and experience to address the constraints of existing government
regulations. LVPS has two full-time employees that serve without compensation.
LVPS will finance the start-up activities and construction of a prototype
MicroFacility plant through this offering. Once the prototype MicroFacility
plant is completed, it will be sold and LVPS will begin production of other
MicroFacility plants. LVPS has a purchaser for the prototype MicroFacility plant
under contract. The purchase agreement entered into on December 18, 1996 between
AO "GIRIYEY," a Russian corporation and DenexCorp/LVPS MicroFacility, an
affiliate of LVPS, provides for a LVPS MicroFacility to be sold to AO "GIRIYEY"
for $5,500,000 United States dollars. $550,000 was delivered upon execution of
the agreement and the remainder of the balance is to be paid over ten years in
one hundred and twenty monthly installments, after reception of the goods. The
parties also entered into a ten-year technical assistance agreement that
commences with delivery of the MicroFacility plant to the client's location. The
terms of this agreement provide that DenexCorp/LVPS MicroFacility will provid
advisory and technical assistance to the purchasers of the MicroFacility, as
sold under the purchase agreement, in exchange for the greater of $100,000 a
year or $116 for each unit of solution made by a factory each year. As
authorized under the agreements with AO "GIRIYEY," DenexCorp/LVPS MicroFacility
assigned its rights under the purchase agreement to LVPS on August 30, 1999.
Sale of the prototypical plant and future plant orders currently in negotiation
are expected to provide acceptable cash flow for future expansion and
operations.
Under the current business model, our MicroFacility, which is constructed in a
modular enclosure, will be fabricated, assembled, validated, tested, and
certified to meet US FDA standards before the main components are disassembled
and shipped to the customer for reassembly and recertification. The LVPS
MicroFacility incorporates a class 100 cleanroom and single-operation blow-fill
machine to produce economically competitive IV solutions for regional
distribution in countries like Russia, Ukraine, the Baltic States, India, China,
Czech Republic, Central Europe, Indonesia, Japan, Israel, Saudi Arabia, and
Sweden. LVPS's 4,000,000 unit/year LVPS MicroFacility sells for $5.5 million and
the 8,000,000 unit/year LVPS MicroFacility is priced at $9.4 million.
27
<PAGE>
Conceptual Drawing of LVPS MicroFacility No. 1.
LVPS MicroFacility Plant Overview
The Product
The LVPS MicroFacility was created to provide medically developing countries
with the indigenous capacity to produce the basic components for their own
quality medical care as well as highvalue pharmaceutical products for export.
Using time and field-tested technology from several global industries, the LVPS
MicroFacility can produce virtually any intravenous solution product in
aseptically-filled and terminally-sterilized medical grade plastic containers.
Considering the current changes in health care and emphasis on cost savings
worldwide, the introduction of regional/local production of intravenous
solutions through the LVPS MicroFacility will revolutionize solutions
manufacturing and distribution for the estimated $18 billion world market.
Realizing that the experience of many countries has been that the arrival of
equipment alone does not produce a quality product, LVPS has committed itself to
provide all customers with four critical ingredients for successful and
profitable manufacturing operation:
1. Precise documentation and procedures of manufacturing methodology.
2. Known and reliable equipment, life cycle system maintenance planning and
performance strategy including comprehensive system monitoring and
tracking.
3. Properly trained personnel and continuous quality assurance validation.
4. Quality raw materials for manufacture.
All architectural, planning and design, manufacturing, fabrication, and US
FDA/cGMP compliance and production and validation of the LVPS MicroFacility
takes place within a thirty minute drive of LVPS's corporate headquarters in
Huntington Beach, California. All manufacturing and intraveneous solution end
product are of United States Pharmacopoeia (USP)/NF (National Formulation)
quality, and current Good Manufacturing Practices in compliance with US FDA
regulations 21 CFR Part 211 and USP No. XXIII. The LVPS MicroFacility can be
operated according to ISO 9002 certification plan and European Union (EU) CE
Mark quality standards.
Sales and Marketing Activities
LVPS's marketing and sales efforts are presently targeted to the following
countries: Russia, Ukraine, the Baltic States, India, China, Czech Republic,
Central Europe, Indonesia, Israel, Japan, Jordan, Saudi Arabia and Sweden. The
challenge in the majority of these countries is obtaining acceptable financing
for LVPS's MicroFacility. LVPS has from the outset been actively involved in
securing project financing for its potential customers. Most of LVPS's clients
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<PAGE>
are seeking United States lending institution financing. The approval process
from start to finish with the US Export Import Bank can range from six months to
one year for final approval and funding. Loans for five LVPS plants are in
process with the following clients and financial institutions:
<TABLE>
<CAPTION>
Client Financial Institution
- ---------------------------------- -----------------------------------------
<S> <C>
RTV-Axis, Czech Republic Sanwa Bank, International
Sri-Krishna Pharmaceuticals, India Bank of America, International Trade Bank
Kavos Medical Corp, Czech Republic Zurich Insurance
Ipex Group, China Bank of China/U.S. Ex-Im Bank
Durlacher Co., Romania European Bank for Reconstruction and
Development
</TABLE>
There is currently one firm order for the LVPS MicroFacility plant by AO
"GIRIYEY," a Russian company, for $5,500,000 United States dollars. This
purchase agreement was entered into between AO "GIRIYEY" and Denex Corp/LVPS
MicroFacility, an affiliate of LVPS, on December 18, 1996 in Moscow, Russia and
was subsequently assigned, as authorized pursuant to the terms of the purchase
agreement, to LVPS on August 30, 1999.
The LVPS MicroFacility will be available in two production sizes: a
three-module, 4 million unit/year facility and a six-module, 8 million unit/year
facility. The selling price of the LVPS MicroFacility is US$5.5 million for the
4M/year plant and US$9.4 million for the 8M/year plant. The 8M/year LVPS
MicroFacility has the added advantage of incorporating completely independent
systems, providing total production redundancy and virtually eliminating
downtime due to testing, maintenance/repairs, or product line changes. LVPS's
sales and marketing activities are implemented worldwide by independent,
commissioned legal authorized agents responsible for generating sales inquires,
providing support services such as translation, and facilitating the client
through the sales process. In most cases, personnel of our representative firms
live in the client country or by heritage is fluent in the language and customs
of the country. Performance is periodically reviewed and the sales
representative's contract renewed predicated upon their productivity and
reliability within their specified territory. No LVPS sales representative will
represent competing products or services to the MicroFacility plant. Currently,
LVPS has 22 personnel in its sales representative organization.
Competitive Analysis:
LVPS may not encounter direct competition in terms of price and delivery of a
comparable intravenous solution manufacturing facility for several years.
Although the major IV solution manufacturers know the technology behind the
MicroFacility plant, there has been no financial incentive to expand their
manufacturing operations. Under their analysis, the research and development and
retooling costs required to change production modes are prohibitive. Although
unit product pricing has generally been held to the rate of inflation over the
last few years, the introduction of the LVPS MicroFacility plant with its 45% to
65% reduction in production cost will change the complexion of the marketplace,
thus fueling possible widespread changes in the traditional production and
distribution methods.
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<PAGE>
The LVPS MicroFacility brings to the marketplace an innovative, expandable, and
leading edge intravenous solution technology for pharmaceutical manufacturing of
dosage-form medications. The competitive set consists of two primary intravenous
solution plant configurations:
I. The Large Volume Rotary Filling Plant, operated by companies such as B/Braun
McGaw and Abbott Laboratories, represents the traditional way of producing
intravenous solutions and bears some similarities to a Coca-Cola type bottling
plant. These United States based intravenous solution plants require a capital
investment exceeding 100+ millions of dollars and as much as 500,000 to one
million square feet or more of space. The plant must produce several hundred
million units of product annually to make the plant economically viable.
Considering the plant costs and volume of solutions that must be sold, this
manufacturing method is probably not feasible for the third world market. While
these plants can compete effectively with LVPS in product pricing, because water
is the primary ingredient in all intravenous solutions, the cost of
transportation becomes significant. Freight costs to import solution product
from another country along with applicable import/excise duties may
substantially increase the selling price of the solution product. In contrast, a
MicroFacility investment of US$5.5 million to US$9.4 million only requires
approximately 18,000 to 25,000 square feet of production and warehousing space.
2. Packagers and/or distributors of various major pieces of pharmaceutical
equipment that attempt to mesh together to manufacture basic intravenous
solutions not in a modular enclosure design and do not use a blow-fill-self seal
machine IV solution filling technology. These plants may be priced lower than
the LVPS MicroFacility, but cannot be validated and certified to US FDA
standards and regulations.
In at least one verifiable instance, this type of plant was built and unable
to meet the host country start-up standards. For the last two years the plant
has stood idle. According to the Health Ministry of the country in question none
of the criteria for pharmaceutical manufacturing will be approved. This type of
outcome reinforces LVPS's insistence that all of the LVPS MicroFacilities will
be US FDA and host country validated and commissioned to meet or exceed all
pharmaceutical manufacturing criteria.
Market Viability: A full 20% of all pharmaceutical costs are accounted for by
intravenous solutions. According to a Market Intelligence Research Corporation
study, this portion amounted to a total worldwide expenditure of $2.7 billion in
1990. But the study also estimated that by 1997, total IV solution expenditures
will have increased to $18.6 billion.
Domestic Markets: IV solutions are used at the rate of 4 units per inpatient day
in the typical U.S. hospital. The number of inpatient days served annually in a
given hospital is calculated by multiplying the licensed bed count by the
occupancy rate by 365 days. Annual intravenous solution consumption can then be
calculated as in the following example:
1,000 beds x 80% occupancy rate x 365 days x 4 units/day= 1,168,000 units/yr
Alternatively, annual consumption can be calculated at the rate of 3.33 units
for each person in the total U.S. population. Best estimates put total U.S.
consumption at over 1 billion units per year.
30
<PAGE>
The MIRC estimates the U.S. hospital intravenous market at $1.2 billion with an
annual growth rate of around 6% expected throughout the decade. But as more and
more care is being diverted or transitioned to home health care and alternate
health care treatment settings, larger and faster-growing markets have emerged
in these fields. In another study, Biomedical Business International projected
that home infusion revenues would increase almost 26% annually.
Market Comparison Chart.
World Markets: Although the U.S. market, currently almost 70% of the total world
market, presents a tremendous opportunity for the LVPS MicroFacility concept,
markets in third world and emerging nations are actually growing even faster.
This faster growth is due to the building of better and higher-quality health
care institutions and other health care infrastructures in areas once deemed to
be dormant.
World market growth is driven by population increase and constant up-scaling and
sophistication of health care delivery. As part of this up-scaling, intravenous
infusion therapy is becoming increasingly important in overall health care
treatment regimens as new developments in antibiotics and other medicants used
in areas such as chemotherapy, burn centers, and renal/peritoneal dialysis
centers favor intravenous use and application.
Cost Containment Trends: Finally, new pressures are being applied worldwide and
especially in the U.S. to curtail spiraling health care costs. The introduction
of new cost effective/high quality methods of production and delivery of health
care products and services are being universally hailed as much for their PR
value as for their actual impact on the industry.
Global Revenue Forecast Chart.
Risk capital is needed to build LVPS MicroFacility No. 1. There is currently no
prototype in existence.
LVPS will voluntarily send an annual report, including audited financial
statements, to its security holders.
LVPS will file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (SEC). The public may
read and copy any materials we file with the SEC at the SEC's Public Reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1800SEC0330. The SEC maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. The address of that web site is http://www.sec.gov.
Item 17. Management's Discussion and Analysis or Plan of Operation.
LVPS was formed on December 16, 1998, at which time LVPS entered into a license
agreement with DenexCorp. for the rights to further develop, and ultimately
31
<PAGE>
manufacture and market the MicroFacility. Expenditures made by DenexCorp to
develop the MicroFacility prior to December 16, 1998 were expensed as research
and development as incurred. The MicroFacility has no revenues. Management
believes that the license does not constitute a trade or business as defined
under Rules and Regulation of Securities and Exchange Commission. Accordingly,
the accompanying financial statements include the accounts of LVPS MicroFacility
since inception; such financial statements do not include any of the accounts of
DenexCorp related to the MicroFacility.
During the period from inception through June 30, 1999, LVPS has been
substantially inactive. In accordance with the Rules and Regulations of the
Securities and Exchange Commission, LVPS is required to reflect in the financial
statements the value of services and costs incurred by DenexCorp on behalf of
LVPS. In management's opinion, such costs are not material.
In connection with the value ascribed to the license agreement obtained through
the issuance of 612,500 shares of common stock, management recorded the
transaction based on the carry-over basis of accounting of DenexCorp. Since
DenexCorp expenses research and development costs as incurred, LVPS recorded the
value of such license agreement at a nominal value. In connection with the
12,500 shares of common stock issued for legal services, LVPS valued such shares
based on the services rendered, since the value of such services were more
readily determinable. The value of such services was $6,250 and was charged to
operations.
The accompanying financial statements have been prepared assuming that LVPS will
continue as a going concern. In the course of its development, LVPS will
continue to incur additional losses during its development of a production
prototype of the MicroFacility. As a result, LVPS will require approximately
$4.1 million to complete the development of its production prototype; the
prototype completion is expected within 12 months from the completion of its
offering. The operational activities and sales efforts of LVPS will be funded
from proceeds of this offering. LVPS can satisfy its financial requirements for
six months if the minimum offering amounts are met and can satisfy its financial
requirements for twelve months if the maximum offering amounts are met. There is
no assurance that additional funds will be available on acceptable terms or
available at all. These factors raise substantial doubt about the LVPS's ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Item 18. Description of Property.
At present, LVPS utilizes office space without cost in Huntington Beach,
California leased to DenexCorp(TM)/LVPS MicroFacility, the major stockholder in
LVPS MicroFacility, Inc. The offices, engineering, administration, and
conference facilities are adequate for LVPS at this stage of operation.
Manufacturing and warehouse space will be provided by our prime third-party
vendors as part of their assembly fees to LVPS once this offering is completed.
Property and business insurance is carried by the prime third-party vendors.
There currently is no business insurance in force in favor of LVPS
MicroFacility, Inc.
32
<PAGE>
Item 19. Certain Relationships and Related Transactions.
See Item 15.
Item 20. Market for Common Equity and Related Stockholder Matters.
LVPS is authorized to issue twenty million shares of $.001 par value common
stock and one million shares of $.001 par value preferred stock. Prior to this
offering there are 625,000 shares of common stock issued and outstanding. There
are no shares of preferred stock outstanding at the present time.
There is currently no public trading market for LVPS's common stock. There are
no amounts of common stock (i) that are subject to outstanding options or
warrants to purchase, or securities convertible into, common stock of LVPS; or
(ii) that could be sold pursuant to Rule 144 under the Securities Act or that
LVPS has agreed to register under the Securities Act for sale by security
holders. A minimum of 287,500 and a maximum of 625,000 shares of LVPS's common
stock are being offered to the public. These shares could have a material effect
on the market price of LVPS's common stock if and when a public trading market
develops. There are 2 holders of record. LVPS has never paid any cash dividends
on its common stock and does not anticipate paying cash dividends within the
next two years.
Item 21. Executive Compensation.
If the offering is fully sold, then Mr. Patterson will receive a salary of
$180,000 per year. If only the minimum amount of shares are sold, then Mr.
Patterson's annual compensation will be proportionately reduced. If the offering
is fully sold, then Mr. Boling will receive a salary of $120,000 per year. If
only the minimum amount of shares are sold, then Mr. Boling's annual
compensation will be proportionately reduced. The following table sets forth all
compensation awarded to, earned by or paid by LVP to the named executive
officers of LVPS for their services.
<TABLE>
<CAPTION>
Summary Compensation Table
Name Salary Bonus Long-Term
Compensation
- ---------------------- ------ ----- ------------
<S> <C> <C> <C>
Ron Patterson,
Chairman, CEO
1998 $0 None None
1999 $0 None None
Ross Boling,
President, Secretary
Principal Accounting
Officer, Principal
Financial Officer
1998 $0 None None
1999 $0 None None
</TABLE>
33
<PAGE>
Since LVPS's inception the directors have served without compensation and are
expected to serve without compensation for the next 12 months. As such, there is
no standard arrangement for the compensation of directors, including any
additional amounts for committee participation or special assignments.
There have been no stock options granted to any person since LVPS's inception.
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<PAGE>
Item 22. Financial Statements.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ..............................................36
Financial Statements:
Balance Sheets as of June 30, 1999, and November 30, 1999 (unaudited).37
Statements of Operations for the period from inception
(December 16, 1998) to June 30, 1999, and the five months
ended November 30, 1999 (unaudited) ................................38
Statements of Stockholders' Deficit for the period from inception
(December 16, 1998), to June 30, 1999, and the five months
ended November 30, 1999 (unaudited) .................................39
Statements of Cash Flows for the period from inception
(December 16, 1998) to June 30, 1999, and the five months
ended November 30, 1999 (unaudited) ................................40
Notes to Financial Statements ........................................41
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
LVPS MicroFacility, Inc.
We have audited the accompanying balance sheet of LVPS MicroFacility, Inc. (the
"Company") as of June 30, 1999, and the related statements of operations,
stockholders' deficit and cash flows for the period from inception (December 16,
1998) through June 30, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LVPS MicroFacility, Inc. as of
June 30, 1999, and the results of its operations and its cash flows for the
period from inception (December 16, 1998) through June 30, 1999, are in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As further discussed in Note 2 to the
financial statements, the Company is in the development stage, has no revenues
from operations and is seeking significant capital to develop a prototype of its
MicroFacility. These conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are also described in Note 2. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
McKennon, Wilson & Morgan LLP
Irvine, California
September 9, 1999
36
<PAGE>
<TABLE>
<CAPTION>
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
BALANCE SHEETS
June 30, 1999 November 30, 1999
(unaudited)
--------------------- -----------------------
<S> <C> <C>
ASSETS
Current assets - Cash $ 2,000 $ 3,950
--------------------- -----------------------
Total assets $ 2,000 $ 3,950
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities-
Accounts payable $ 5,000 $ 2,130
--------------------- -----------------------
Note payable to DenexCorp 3,125 8,125
--------------------- -----------------------
Total current liabilities 8,125 10,255
--------------------- -----------------------
Stockholders' deficit:
Preferred stock, par value $.001;
1,000,000 shares authorized,
none issued and outstanding - -
Common stock, par value $.001;
20,000,000 shares authorized,
625,000 shares issued and outstanding 625 625
Additional paid-in capital 6,237 131,237
Deficit accumulated during the development-stage (12,987) (138,167)
--------------------- -----------------------
Total stockholders' deficit (6,125) (6,305)
--------------------- -----------------------
Total liabilities and stockholders' deficit $ 2,000 $ 3,950
--------------------- -----------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENTS OF OPERATIONS
Period From Five Months
December 16, 1998 Ended
(Inception) to November 30,
June 30, 1999 1999
(unaudited)
------------------ ----------------
<S> <C> <C>
Revenues $ - $ -
General and administrative expenses 12,987 125,180
Loss from operations (12,987) (125,180)
Provision for taxes - -
Net loss $ (12,987) $ (125,180)
Basic and dilutive net loss per common share $ (0.02) $ (0.20)
Weighted average number of shares outstanding 625,000 625,000
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
For the Period from Inception (December 16,
1998) Through June 30, 1999 and the Five Months
Ended November 30, 1999 (unaudited)
Deficit
Preferred Common Accumulated
Stock Stock Additional During the
--------------------------- --------------------------- Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Deficit
------------- ------------- ------------- ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception, December 16, 1998 - $ - - $ - $ - $ - $ -
Common stock issued for license
rights - - 612,500 612 - - 612
Common stock issued for
services rendered - - 12,500 13 6,237 - 6,250
Net loss - - - - - (12,987) (12,987)
------ ------- -------- -------- --------- ----------- -------
Balances, June 30, 1999 - - 625,000 625 6,237 (12,987) (6,125)
Net Loss - - - - - (125,180) (125,180)
Value of Services Provided by
Officers - - - - 125,000 - 125,000
Balances, November 30, 1999 - $ - 625,000 $ 625 $ 131,237 $ (138,167) $(6,305)
====== ======== ======= ======== ========= ============ ======
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
LVPS MICROFACILITY, INC.
(A Development-Stage Company)
STATEMENTS OF CASH FLOWS
Period From
December 16, 1998 Five Months
(Inception) to Ended
June 30, 1999 November 30, 1999
(unaudited)
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (12,987) $ (125,180)
Adjustments to reconcile net loss to net cash
used in operating activities:
Value of services provided by officers - 125,000
Issuance of common stock for License Agreement and
legal services 6,862 -
Changes in operating assets and liabilities-
Accounts payable 5,000 (2,870)
Net cash used in operating activities (1,125) (3,050)
Cash flows from investing activities -
Issuance of note payable to DenexCorp 3,125 5,000
Net change in cash 2,000 1,950
Cash at beginning of period - 2,000
Cash at end of period $ 2,000 $ 3,950
</TABLE>
Supplemental disclosures of cash flow information-
No income tax or interest was paid in 1999
Supplemental non-cash financing and investing activities:
During the fiscal 1999, the Company issued 612,500 shares of its common stock to
acquire the License Agreement valued at $612 and issued 12,500 shares of its
common stock valued at $6,250 for legal services.
40
<PAGE>
NOTE 1 - ORGANIZATION AND HISTORY
Organization and Nature of Operations
LVPS MicroFacility, Inc. (the "Company") was incorporated in the state of
Delaware on December 16, 1998 (date of inception). The Company was formed to be
a manufacturer of clean room facilities for the production of large volume
parenteral solutions. The Company's primary product is the MicroFacility, a
modular micro-manufacturing facility that will produce intravenous solutions
from local water sources; blows, fills, and seals the plastic container; and
autoclaves the finished product for quality assurance testing, quarantined
storage, and distribution. The MicroFacility plants are commissioned to United
States Food and Drug Administration and host country standards. The Company is
in the development stage with no operating revenues since its inception.
DenexCorpTM/LVPS MicroFacility ("DenexCorp"), a Nevada Corporation, owns 98% of
the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. In the course of its development, the
Company will continue to incur additional losses during its development of a
production prototype of the MicroFacility. As a result, the Company will require
approximately $4.1 million to complete the development of its production
prototype; the prototype is expected to be completed within 12 months from the
completion of its offering. The Company will require additional funds for its
operational activities and sales efforts. Management is seeking private or
public equity financings and future collaborative arrangements with third
parties to meet its cash needs. There is no assurance that such additional funds
will be available on acceptable terms or available at all. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Interim Financial Reporting
The accompanying unaudited financial statements for the five months ended
November 30, 1999, have been prepared in accordance with Rules and Regulations
of the Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all of the information and disclosures required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
accruals, considered necessary for a fair presentation have been included. The
results of operations and cash flows for the five months ended November 30, 1999
are not necessarily indicative of the operating results expected by management
for the year ending June 30, 2000.
Fiscal Year End
The Company has elected a June 30 year end for financial and income tax
reporting purposes.
41
<PAGE>
Risks, Uncertainties and Concentrations
The Company's industry is subject to federal, state, local and applicable
foreign laws and regulations. The successful manufacturing of the Company's
MicroFacility will require that certain permits be obtained. There is no
assurance that the Company will obtain these permits. The Company is also
subject to compliance inspections from certain regulatory agencies, which may
revoke or suspend the permits for any non-compliance to stated regulations.
42
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Use of 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 the 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.
Significant estimates that will be made in the future by management include,
among others, provisions for losses on accounts and contracts receivable,
provisions for slow moving and obsolete inventories and warranty obligations, as
well as valuations of the Company's common stock. Actual results could
materially differ from those that will be estimated.
Fair Value of Financial Instruments
At June 30, 1999, the Company has few assets and only limited liabilities
constituting accounts payable that would be considered financial instruments.
The carrying amounts of cash and accounts payable are representative of fair
value. In the future, the Company could have financial instruments whereby the
fair value of the financial instruments is different than that recorded on a
historical basis.
Property and Equipment
Property and equipment will be recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Maintenance and repairs will be charged to expense as incurred. Significant
renewals and betterments will be capitalized. At the time of retirement or other
disposition of property and equipment, the cost and accumulated depreciation
will be removed from the accounts and any resulting gain or loss will be
reflected in operations. At June 30, 1999, the Company had no property and
equipment.
The Company will assess the recoverability of property and equipment by
determining whether the depreciation and amortization of these assets over their
remaining life can be recovered through projected undiscounted future cash
flows. The amount of property and equipment impairment, if any, will be measured
based on fair value and is charged to operations in the period in which such
impairment is determined by management.
Deferred Offering Costs
The Company will defer costs incurred in connection with its offering of common
stock. In the event the offering of its common stock is unsuccessful, the
Company will charge such costs to operations.
Revenue Recognition
The Company intends to enter into contracts to construct its MicroFacilities.
Revenues will be recognized on a percentage of completion basis, using actual
labor hours or labor costs incurred to the total estimated labor hours or costs.
In the event a contract results in a loss, the loss will be recorded at the time
the loss is known. The Company will record revenues related to its technical and
support services over the period the services are provided.
Research and Development Expenses
Research and development costs will be expensed as incurred.
43
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Allocation of Common Expenses
Since inception, the Company has had no operations. DenexCorp provides
management expertise and office space; however, these expenses are immaterial
due to minimal use of such resources since inception. No allocations have been
made through the date of these financial statements.
Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and diluted
EPS on the face of all income statements issued after December 15, 1997 for all
entities with complex capital structures. Basic EPS is computed as net income
divided by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potentia dilution that could occur from common
shares issuable through stock options, warrants and other convertible
securities. Common stock equivalents, which relate to shares issuable upon the
exercise of common stock purchase warrants and options, are not included in the
per share calculation for the period as their effect are anti-dilutive. During
the period, no common stock equivalents were outstanding.
Income Taxes l
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to b recovered or settled. A valuation
allowance is provided for significant deferred tax assets when it is more likely
than not that such assets will not be recovered through future operations.
Stock-based Compensation
During 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for
stock-based compensation. However, SFAS No. 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in SFAS No. 123 had been applied. The Company
issued no warrants or options during the period.
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income, as well as
certain non-shareholder items that are reported directly within a separate
component of stockholders' equity and bypass net income. The Company has adopted
the provisions of this statement during the period, with no impact on the
accompanying financial statements.
44
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, (Continued)
Disclosures about Segments of an Enterprise and Related Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" in fiscal year 1999. SFAS No. 131 establishes standards
for reporting information about operating segments and related disclosures about
products, geographic information and major customers. The Company currently has
no operations which constitute a segment.
NOTE 3 - STOCKHOLDERS' DEFICIENCY
During the period, the Company issued 612,500 shares of common stock to
DenexCorp for the rights to develop and market the MicroFacility. Under
generally accepted accounting principles, transfers of assets between companies
under common control must be reflected at their historical costs in a manner
similar to a pooling of interests. The value assigned to these rights was $612
based on the legal par value of the common stock. As discussed in Note 2,
research and development costs are expensed as incurred, and accordingly, no
asset for such license is reflected in the accompanying balance sheet.
During the period, the Company issued 12,500 shares of common stock valued by
the Board of Directors based on the value of the legal services received, or
$0.50 per share.
NOTE 4 - INCOME TAXES
The Company's net deferred tax asset of approximately $5,000 at June 30, 1999
consists of federal net operating loss carryforwards amounting to approximately
$12,600. At June 30, 1999, the Company provided a valuation allowance for these
net operating loss carryforwards totaling approximately $5,000. The difference
between the tax benefit of approximately $4,300 using the lower federal income
tax rate of 34% is the result of a full valuation allowance of the Company's
deferred tax asset.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
License Agreement
During the period, the Company entered into a license agreement (the "License
Agreement") with DenexCorp for the rights to develop the MicroFacility product.
Pursuant to the License Agreement, the Company will pay a 2% royalty fee for
each MicroFacilty sold within the term of the License Agreement. The royalty fee
will be based on the gross sales price of each MicroFacility sold by the Company
during the term of the License Agreement. No royalties were paid during the
period. The License Agreement expires on December 16, 2008.
Employment Agreements
On June 30, 1999, the Company entered into three-year employment contracts with
each of its two officers. The agreements require salaries to by paid, beginning
the date the Company completes an initial public offering ("IPO"), the aggregate
amount totaling $300,000 annually through June 30, 2002. No amounts will be
earned prior to the completion of an IPO. The Company has reflected the value of
such services amounting to $125,000 during the five months ended November 30,
1999. No amounts were reflected during the period from inception to June 30,
1999, since no material participation by the officers was experienced during
this period.
45
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTIONS
DenexCorp has taken steps to protect the design of the MicroFacility, under the
United States of America and International Patent laws, as "Patent Pending,"
titled "Modular Pharmaceutical Solution Manufacturing," preliminary class 604.
All rights to the patent, including any modifications, and the trademark
LVPS/MicroFacilityTM belong to DenexCorp. The Company has been granted the
exclusive use of the patent and trademark subject to the terms of a License
Agreement between DenexCorp and the Company (Not 5).
On June 30, 1999, the Company issued a note payable totaling $3,125 to
DenexCorp., interest at 10% per annum, due on demand. Subsequent to June 30,
1999, DenexCorp. advanced an additional $5,000 for operating expenses of the
Company.
See Note 5 for discussion of employment contracts.
Item 23. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933. A true and
correct copy of Section 145 of the Delaware General Corporation Law which
addresses indemnification of officers, directors, employees and agents is
attached hereto as Exhibit 99.1
In addition, Section 102(b)(7) of the Delaware General Corporation Law and
LVPS's Certificate of Incorporation provide that a director of this corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for paying a
dividend or approving a stock repurchase in violation of Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.
LVPS's Certificate of Incorporation and Bylaws contain provisions that no
director of LVPS shall be liable to LVPS for monetary damages for breach of
fiduciary duty as a director involving any act or omission of such director
other than (i) for breach of director's duty of loyalty to LVPS or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit.
46
<PAGE>
The effect of these provisions may be to eliminate the rights of LVPS and its
stockholders, through stockholders' derivative suits on behalf of LVPS, to
recover monetary damages against a director for breach of fiduciary duty as a
director, including breaches resulting from negligent or grossly negligent
behavior, except in the situations described in clauses (i) - (iv) of the
preceding sentence.
Item 25. Other Expenses of Issuance and Distribution.
The following sets forth the expenses in connection with the issuance and
distribution of the Securities being registered, other than underwriting
discounts and commissions. We shall bear all such expenses. All amounts set
forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $1,390.00
Accounting Fees and Expenses $15,000.00
Miscellaneous $10,000.00
TOTAL $26,390.00
Item 26. Recent Sales of Unregistered Securities.
In December 1998, LVPS issued 612,500 shares to DenexCorp/LVPS MicroFacility for
the rights to develop and market the LVPS MicroFacility at an assigned value of
$612. Further, in December 1998, LVPS issued 12,500 shares to its legal counsel,
Richard O. Weed, for services rendered valued at $6,250 or $.50 per share. Both
transactions were exempt from registration under Section 4(2) the Securities Act
of 1933, as amended. In both transactions, there was no public offering, no
advertising, no general solicitation and no other offerees.
47
<PAGE>
Item 27. Exhibits.
The following is a list of exhibits required by Item 601 of Regulation S-B that
are filed or incorporated by reference. The exhibits that are incorporated by
reference from LVPS's prior SEC filings are noted on the exhibit index. The
other exhibits are attached hereto and being filed with the SEC as part of this
registration statement.
Exhibit
Number Description of Exhibits
3.1 Articles of Incorporation of LVPS MicroFacility, Inc.*
3.2 By-laws of LVPS MicroFacility, Inc.*
4.1 Form of Common Stock Certificate*
5 Opinion re: legality*
10.1 License Agreement*
10.2 Employment Agreement with Ron Patterson*
10.3 Employment Agreement with Ross Boling*
10.4 Escrow Agreement between LVPS and Richard O. Weed*
10.5 Micro-Manufacturing Facility Purchase Agreement between
DenexCorp(TM)/LVPS MicroFacility and AO "GIRIYEY"
10.6 Agreement on Technical Assistance between DenexCorp(TM)/LVPS
MicroFacility and AO "GIRIYEY"
10.7 Assignment Agreement between DenexCorp(TM)/LVPS MicroFacility and
LVPS MicroFacility, Inc.
10.8 Subscription Agreement
23.1 Consent of Independent Auditors*
23.2 Consent of counsel*
27 Financial data schedule*
99 Additional Exhibits [8 Del. Code Ann. ss.145 Indemnification of
officers, directors, employees and agents].*
* previously filed
48
<PAGE>
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controllin precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
LVPS hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
49
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Huntington Beach, State of California, on February 28, 2000.
LVPS MicroFacility, Inc.
By: /s/ Ron Patterson
----------------------------------
Name: Ron Patterson
Title: Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/ Ron Patterson
- ------------------------
Ron Patterson Director, Chief Executive Officer, Chairman
February 28, 2000
/s/ Ross Boling Director, President, Secretary, Principal
- ------------------------ Financial Officer, Principal Accounting Officer
Ross Boling February 28, 2000
50
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation of LVPS MicroFacility, Inc.*
3.2 By-laws of LVPS MicroFacility, Inc.*
4.1 Form of Common Stock Certificate*
5 Opinion re: legality*
10.1 License Agreement*
10.2 Employment Agreement with Ron Patterson*
10.3 Employment Agreement with Ross Boling*
10.4 Escrow Agreement between LVPS and Richard O. Weed*
10.5 Micro-Manufacturing Facility Purchase Agreement between
DenexCorp(TM)/LVPS MicroFacility and AO "GIRIYEY"
10.6 Agreement on Technical Assistance between DenexCorp(TM)/LVPS
MicroFacility and AO "GIRIYEY"
10.7 Assignment Agreement between DenexCorp(TM)/LVPS MicroFacility and
LVPS MicroFacility, Inc.
10.8 Subscription Agreement
23.1 Consent of Independent Auditors*
23.2 Consent of counsel*
27 Financial data schedule*
99 Additional Exhibits [8 Del. Code Ann. ss.145 Indemnification of
officers, directors, employees and agents].*
* previously filed
10.5 Micro-Manufacturing Facility Purchase Agreement between DenexCorp(TM)/LVPS
MicroFacility, Inc. and AO "GIRIYEY"
MICRO-MANUFACTURING FACILITY PURCHASE
AGREEMENT RT 775591697
[Russian translation omitted] THIS AGREEMENT, is made and entered into
as of the 18th day of December, 1996 in
Moscow, Russia by and between
DenexCorp/LVPS MicroFacility with its
principal office at 7755 Center Avenue,
Huntington Beach, California ( in the
person of President/General Director Ron
Pattersonthe "Seller") and AO "GIRIYEY"
with its principal office at 218
Sotsialisticheskaya
St,RostovonDon,344022 Russia ( in the
person of General Director Ovcharenko
N.G.the "Buyer") and is premised upon
the following circumstances (the
"Agreement"):
WHEREAS, Seller is a manufacturer
of modular MicroManufacturing Facilities
which plants are designed to produce
large volume parenteral solutions
("LVPS") in various sized containers;
WHEREAS Buyer desires to purchase
from Seller and Seller desires to sell
to Buyer a MicroManufacturing Facility
upon the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of
the foregoing and in consideration of
the mutual covenants, conditions,and
undertakings herein contained, Seller
and Buyer agree as follows:
1. Purchase of MicroManufacturing
Facility.
1. 1. Seller hereby sells to Buyer and
Buyer hereby purchases from Seller a
Micro-Manufacturing Facility, the
specifications and blueprints (the
"Specifications") for the manufacturing
modules and components which comprise
<PAGE>
said facility, and associated equipment
list (the "Equipment List") are more
particularly described in the attached
Exhibit 1, hereinafter referred together
with the inventory of spare parts and
supplies listed in the Specifications,
the "Modules and Components" and as to
the Manufacturing Facility by itself as
the "modules," for delivery to
Rostov-on-Don.
The Modules and Components will include
all equipment necessary for the
production of LVPS including molds for
two (2) sizesin two copies of packaging
and the inventory of Components, but
specifically excludes items such as real
estate, water supply, electrical or
other power of utilities, and general
site preparation, which are Buyer's
responsibility under Section 3.4 below.
The term "Specifications" shall include
the specifications delivered to Buyer by
Seller pursuant to Section 1.3(a) below.
1.2. The Seller represents that the
Modules and Components after final
installation and when property operated
in accordance with Seller's standard
proper operating procedures and with raw
materials meeting and otherwise in
accordance with Seller's specifications,
will enable Buyer to:
(a) Produce quality meeting United
States Food and Drug Administration
("US FDA") Good Manufacturing
Practices in compliance with US FDA
regulations, 21 CFR Pan 211and USP No.
XXIII; and
(b) Produce a minimum of 4,000,000
500ml units of such LVPS per year,
assuming not less than six (6) fully
operational (i.e. with no down time),
24 hour production shifts per week.
<PAGE>
1.3. In connections with the production
and sale of the Modules and Components,
Seller shall:
(a) Survey the Modules site selected
and acquired by Buyer in consultation
with Seller (the "Site"), and prepare
specifications for the Site based upon
information provided by Buyer pursuant
to Section 3.4 below relating to
general construction, water sources
(including chilled water supply and
still feed water), electrical power,
steam supply, oilfree compressed air
supply, oil-free vacuum requirements,
communication lines, sewage and waste
disposal transportation of the
Modules,
(b) Manufacture the Modules and
Components in the United States of
America, and upon completion, test the
Modules and Components, and certify in
writing to Buyer that the Modules
meets the production and quality
standards set forth in Section 1.2
above,
(c) Train six (6) of Buyer's personnel
(meeting the requirements set forth
below)(training in Russian language)
in the proper operation and
maintenance of the Modules, and be
responsible for the cost of room and
board for such personnel at a location
to be selected by Seller. Such
training shall last for a period not
to exceed four (4) weeks commencing
upon a date not more than fortyfive
(45) days after Seller's notice to
Buyer that Seller is ready to commence
such training.
(d) Obtain all necessary licenses and
permits in connection with the
shipment of the site with a safe berth
to which the parties may agree,
provided however, that Seller shall
have no obligation to obtain any
<PAGE>
license, permits, or other
authorizations, other charges
required, directly or indirectly, in
connection with the transportation or
operation of the Modules and
Components, or the reassembly of the
Modules at the Site, or the
preparation of, provision of utilities
to and/or the construction of the
building and/or improvements on the
Site, and
(e) Arrange for the packaging or
crating, shipment,
(f) Perform its obligations under this
Agreement in accordance with the
Implementation Schedule.
Seller shall be solely responsible for
the selection of the method of
transportation by which the Modules
and Components are shipped, and all
freights and insurance costs and risk
of loss until the Modules and
Components arrive DEQ the dock at the
port of Rostovon- Don.
<PAGE>
2. Purchase Price
2.1. U.S. S 550,000.00 Initial Purchase
Deposit will be paid upon execution of
this Agreement. Reimbursement of these
funds will only be by installments on
presentation of invoice in accordance
with Paragraph (4) 4.1 B. below.
The Buyer shall pay to Seller as
consideration of the plant project works
and the other obligations of Seller
pursuant to this Agreement as follows:.
The seller is obliged to present the
reports on use of money resources during
120 days from the moment of payment by
the Buyer of an initial payment
according to the requirements of the
Buyer and Seller on documenting the
bargain.
a) Consulting services,
informativeconsulting services in
marketing and study of opportunities
for optimum reagents deliveries and
components for manufacture of
solutions. The Seller is obliged to
advise the Buyer on all technical
questions and to give at his order
about sufficient volumes the necessary
engineering specifications 90000 US
dollars.
b) Survey of a place of accommodation
of a microfactory for manufacture of
solutions by the experts
DenexCorp/LVPS in Rostovon- Don (4
peoples. on 10 days) 60000 US dollars.
c) Making a shooting of territory by
the experts of DenexCorp1LVPS in
RostovonDon with distribution of the
recommendations on a lining of the
communications to Plant building,
conformity of premises of buildings,
architectonic form of a building in
conformity of the requirements of
norms FDA
(Distribution of the project of a
building part) 180000 US dollars.
<PAGE>
d) Training the managers of JSC
"Giriey" to design and operation of a
factory and realization of
examinations on norms FDA
(RostovonDon) on 10 day program-100000
US dollars
e) Administrative and juridical
expenses, financial agreement,
regulation questions with FDA USA on
accordance with law and juridical
norms 100000 USD (f) Test,
certification and state inspection.
Preparation of standard documentation
with agreement20000 USD.
2.2.Buyer shall pay the Purchase Price
to order of Seller as follows:
(a) The balance of U.S. $ 4 950 000.00
shall be paid over a period of ten
(10) years in one hundred and twenty
(120) monthly installments, after
reception of the goods.
Approximately price of the Agreement 5
500 000 USD It is possible to pay for
the Plant purchase before the
appointed time.
<PAGE>
Seller shall notify Buyer of the date
of shipment the Modules and Components
from a U.S. port of exit. Thereafter
Buyer shall make such payments to
Seller and/or Seller's agent on the
fifth (5th) business day of each and
every calendar month from the month
following the date of such notice
until paid in full.
Buyer hereby further agrees to grant
to Seller or its nominee an equivalent
of an American real estate mortgage
and/or grant deed, which is to be
recorded according to the Buyer's
local laws, on the Site as well as any
structure thereon in favor of Seller
until such time as the Purchase Price
of the Modules and Components due is
paid in full under Section 2.2(b).
Said titles and guarantees all to be
presented to Seller by the Buyer prior
to shipment of said Module and
Components.
3. Obligations of Buyer.
3. 1 Buyer shall be solely responsible
for the arrangement and expense of
acquiring the Site including, but not
limited to, all construction, water
sources, electrical power, steam supply,
oil-free compressed air supply, oil free
vacuum requirement, communication lines,
off-site warehousing. Buyer will provide
guarantees of government and/or utility
suppliers as to the above prior to
shipment of the Modules and Components
by Seller. Above improvements to Site by
Buyer are to be pledged to the Seller
upon execution of this Agreement until
Seller and/or Seller's agent is paid in
full by Buyer.
<PAGE>
3.2.Buyer agrees to sent for training
the next persons:
(a) Two (2) graduate pharmacists who
have graduated from a college or
university acceptable to Seller with a
Bachelors or equivalent degree in
pharmacology
(b) Two (2) entrylevel chemical or
mechanical engineers with a minimum
Bachelor of Science degree from a
college or university acceptable to
Seller, and
(c) Two (2) laboratory technicians
with educational credentials and
laboratory experience acceptable to
Seller.
Buyer hereby acknowledges and agrees
that Seller shall not be responsible
for the failure of any of Buyer's
personnel to complete the Seller's
framing course for any reason
whatsoever, nor shall Seller bear any
responsibility for such personnel
beyond providing the training, room
and board. Buyer is responsible for
all other expenses of the personnel,
and for the acts and omissions of the
personnel while being trained by and
at Seller's facility.
3.3 Buyer shall provide Seller with
sufficient information to enable Seller
to prepare specifications for the water
sources (including chilled water supply
and still feed water), electrical power,
steam supply, oilfree compressed air
supply, oilfree vacuum requirements,
communication lines, sewage and waste
disposal transportation facilities at
the Site, and for other improvements
required in connection with the
operation of the Modules.
<PAGE>
3.4.Buyer shall be responsible for
obtaining and agrees to obtain and/or
pay for, as applicable, in a timely
manner, such license, permits and other
authorizations as may be required by
Buyer's government and any subdivision
or agency thereof and other authorities
with jurisdiction or the color of right,
directly or indirectly, in connection
with the purchase, preparation of, and
construction of improvements on and
off-site for the Site and importation,
transportation, establishment and
operation of the Modules at Buyer's Site
and other transactions contemplated
hereby. Buyer shall provide government
guarantees to Selle prior to shipment of
the Modules and Components that all
licenses and/or permits issued to Buyer
inure to the Seller in the event of
default by Buyer.
3.5.Buyer shall be responsible for the
unloading of the Modules and Components
and their assembly at the Site. Buyer
acknowledges that it assumes all risk of
loss upon arrival of the Modules and
Components and that in the event of said
loss, all payments shall continue to
Seller as defined in Section 22(b) and
shall be made in compliance with this
Agreement.
3.6.Buyer shall be responsible for
submitting to Seller all financial
information required to insure the
credit worthiness of Buyer, including,
but not limited to the following:
Statements with regard to the latest
three (3) years of the Buyer's
operations, current profit and loss
statements, annual tax returns (when
applicable), current financials on all
principals, and any further financial
lender may require personal guarantees
subject t the creditworthiness of the
Buyer.
<PAGE>
4.Conditions; Precedent to Seller's
Performance.
4.1 Seller shall have no obligation to
manufacture the Modules unit as of the
following have been performed by Buyer.
(a) Buyer has remitted to Seller the
US$550,000.00 required by Section
2.2(a) above.
(b) Buyer's creditworthiness has been
confirmed. Seller shall have up to one
hundred twenty (120) days from receipt
of Buyer's financial information as
required in Section 3.6 of this
Agreement to confirm the credit
worthiness of Buyer. In the event that
Seller cannot confirm Buyer's credit
worthiness. Seller may, at its sole
discretion, either proceed to
manufacture the Modules and Components
or return Buyer's deposit of US
$550,000.00 during 120 days, in case
if works listed in p. 2.1 do not
fulfill. Said amount to be deducted
from Buyer's deposit If Seller elects
to return Buyer's deposit of US
$550,000.00 this Agreement will
terminate and the parties shall have
no further obligations to each other.
4.2.Seller shall have no obligation to
ship the Modules and Components until
all of the following have been performed
by the Buyer:
(a) Buyer shall have remitted to
Seller payment required by the terms
of this Agreement prior to shipment of
Modules and Components to the site,
<PAGE>
(b) Buyer shall have obtained all
necessary licenses and permits, and
paid or be ready, willing and able to
pay for all other charges pursuant to
Section 3.4 above, required to enable
Buyer to import, transport to,
receive, and assemble the Modules at
the Site, and Seller shall have
received Buyer's written certification
of the foregoing,
(c) Buyer shall have completed all
necessary Site preparations strictly
in accordance with the Specifications
theretofore delivered to it by Seller
pursuant to Section 1.3 (a), and
Seller and/or its representatives
shall have inspected the Site and
determined, in Seller's sole
discretion, that the Site is, in fact,
so prepared,
(d) Buyer shall have arranged for the
unloading of the Modules and
Components at the Site, and for the
labor and materials required for the
assembly of the Modules at the Site,
and have confirmed such arrangements
to Seller. Buyer shall provide labor
and material releases from all
contractors and/or subcontractors
prior to shipment of the Modules and
Components by the Seller,
(e) Buyer shall have delivered to
Seller Buyer's certificate of
insurance required by Section 6 below
prior to shipment of the Modules and
Components by the Seller. Buyer shall
name Seller as sole beneficiary on
said certificates of insurance. Said
insurance carrier shall be acceptable
to Seller, and
(f) Buyer and Seller shall have
executed the Technical Services
Agreement attached hereto as Exhibit
II.
<PAGE>
5.Cooperation: Seller's Obligations.
5.1 Buyer and Seller hereby acknowledge
and agree that the successful assembly
and operation of the Modules will
require the active cooperation and
support of both parties. It is intended
that Buyer shall have responsibility to
pay for the Modules and Components to
handle all contacts with governmental
and quasi-governmental authorities,
including those with color of right, to
obtain at its own expense all permits,
approvals and other authorizations
required for and to import, transport,
assemble, and operate the Modules. It is
intended and Seller agrees to assist
Buyer in the discharge of those
responsibilities, providing Buyer with
the benefit of Seller's technical
expertise in the construction,
operation, and maintenance of the
Modules.
5.2.Seller has made certain
representations to Buyer under Section
1.2 above. Seller's obligations under
the representations shall be deemed
fully discharged at such time as the
Modules have successfully performed the
validation procedures specified by the
US FDA in 21 CFR Part 211, and USP No.
XXIII at the volumes required to produce
4,000,000 500ml. Of LVPS annually in
accordance with the assumptions of
Section 1.2 (b) Thereafter, the terms of
Seller's obligations to buyer are set
forth in and are limited to the
Technical Services agreement.
5.3. Seller shall extend to Buyer
warranties on equipment and other
components contained in the
Specifications, which warranties shall
have a term of one (1) year from Buyer's
date of receipt of the Modules and
Components at the Site.
6.Insurance.
6.1 Seller shall at its own expense
provide:
<PAGE>
(a) All Risks Manufacturer's Risk
Insurance in the amount of Buyer's
payments to date increasing with each
payment made by Buyer, including
coverage for fire, extended coverage,
vandalism and malicious mischief,
covering Buyer's interest in the
Modules and Components at the United
States manufacturing site, and
(b) DEQ coverage as that term is
defined in the (INCOterms) currently
in effect covering the Modules and
Components in transit to the site.
6.2 Buyer shall at its own expense
provide the following insurance coverage
for the protection of Seller from a
comer acceptable to Seller at its own
discretion:
(a) Said insurance shall commence with
the unloading of the Modules and
Components, All Risks Manufacturer's
Risk Insurance in the amount of the
remaining Purchase Price not then paid
and decreasing with each payment made
by Buyer, including coverage for fire,
extended coverage, vandalism and
malicious mischief and cover Seller's
interest in the Modules and Components
in transit to the Site, and
(b) Until such time as the Purchase
Price for the Modules and Components,
insurance on the Modules and
Components against loss by fire, and
hazards included in the term "extended
coverage" in the amount of the
replacement cost of the Modules and
Components, with Seller being named as
an additional insured beneficiary.
<PAGE>
6.3 All insurance policies provided by
the parties shall be written by
companies acceptable to the applicable
protected party hereunder and
certificates of insurance shall be
provided by each to the other in the
limits above stated and showing
endorsements naming the applicable
protected party as an insured party,
waiving all right of subrogation against
the protected party, and requiring not
less than thirty (30) day written
notification from the insurer to the
protected party prior to cancellation.
Any change of insurance carriers or
material changes in the policies must be
mutually agreed upon in writing by both
parties.
7.Time of Performance; Force Majeure
7.1.Seller shall perform its obligations
in conformity with the Implementation
Schedule attached hereto as Exhibit 11.
Seller shall notify Buyer in writing of
the date of shipment of the Modules and
Components from the manufacturing site.
7.2.The Force Majeure (Exemption) clause
of the International Chamber of Commerce
(ICC Publication No. 421) is hereby
incorporated into this Agreement by
reference. The parties acknowledge and
agree that the inability of Buyer to
convert currency into US Dollars shall
not constitute an event of force
majeure.
7.3. Time of validity of the Agreement-
10(ten) years.
<PAGE>
8.Default;Termination.
8. 1. Buyer shall be in default under
this Agreement upon the occurrence of
any of the following provided that
notice of the default shall have been
provided by Seller to Buyer and such
default is not cured within thirty (30)
days after occurrence of an event of
default under this Agreement, the Seller
shall be entitled to accelerate the date
by which the entire indebtedness
hereunder is due and payable.
Notwithstanding the foregoing, Seller's
remedies shall be cumulative, and Seller
may take any action as may be provided
for herein, or otherwise by law or in
equity.
(a) If Buyer should fail to pay in a
timely fashion when due any
indebtedness or obligation of Buyer to
Seller, or any obligations or duties
under the Agreement,
(b) If there is a material
misstatement or material false
statement in connection with this
Agreement or noncompliance with or
nonperformance of any of Buyer's
obligations, agreements, or
affirmations under or emanating from
this Agreement, or
(c) On insolvency, business failure,
appointment of a receiver on any part
of the property of, assignment for,
the benefit of creditors by the
calling of a meeting of creditors, or
the commencement of any proceedings
under any bankruptcy or insolvency
laws by or against Buyer.
8.2. In the event that either party is
in breach of its obligations under this
Agreement, the aggrieved party may
terminate the Agreement upon the
expiration of thirty (30) days notice
specifying the breach to the breaching
party in the event that the breaching
party has not remedied the breach
specified within the notice period.
<PAGE>
8.3. Should Seller terminate this
Agreement in the event of Buyer's
default for failure of Buyer to make one
(1) or more payments under Section 2
above, none of the payments made to that
date shall be refundable and Seller
shall retain the right to pursue such
other rights and remedies which may be
available to Seller at law or in equity.
8.4 Should Buyer terminate this
Agreement for failure of Seller to
perform its obligations hereunder, Buyer
shall retain the right to pursue such
other rights and remedies which may be
available to Buyer at law or in equity.
9.Notices.
9. 1. All notices required or permitted
to be given under this Agreement shall
be deemed given when sent if they are in
writing and delivered personally or by
certified mail, return receipt requested
to the applicable address set out at the
head of this Agreement and, if to
Seller, with copy to:
John B. Miles, Esq.
McDermott, Will & Emery
1301 Dove Street
Newport Beach, CA 92660 USA
and, if to Buyer, with a copy to:
Ovcharenko N.G. General Director
JCS "Giriey"
218 Sotsialisticheskaya St,
RostovonDon, 344022 Russia
<PAGE>
Either party may change the address for
the giving of notice by written notice
to the other party as set forth above.
10. Brokers.
10. 1 Each party represents to the other
that, except in the case of MT. Yakov
Zakon, A&O Industries, (3601 W. Devon,
Suite 206, Chicago Industries 60659USA,
retained by Seller, it employed no
broker or falter in bringing about this
transaction, and each will hold the
other harmless from and identify the
other against all liability and expense
arising from any claim other than for
brokers' or finders' fees or commissions
in respect to this transaction based
upon its acts.
11. Confidentiality.
11. 1 Buyer shall during the term of
this Agreement and for five (5) years
thereafter keep confidential all
technical information which has been
disclosed to Buyer by Seller and/or its
personnel. Buyer shall cause each of its
employees to execute such agreements as
shall be necessary to ensure that such
employees maintain confidentiality
technical information. For the purposes
of this Agreement "technical
information" shall mean the secret and
proprietary information disclosed to
Buyer by Seller and its personnel in
written or oral form, relating to
processes, tests, and characteristics of
processes and their components, and all
other information and techniques
necessary for and/or useful in the
installation, service, maintenance,
repair and operation of the Module
11.2 The restrictions of this Section
shall not apply to any technical
information which:
<PAGE>
(a) was publicly available at the date
of disclosure by Seller or its
personnel,
(b) was in Buyer's possession before
the date of disclosure by Seller or
its personnel,
(c) becomes publicly available after
the date of disclosure by Seller or
its personnel without disclosure by
Buyer, or
(d) becomes legally available to Buyer
from any third party without
restriction on disclosure or use.
12.Miscellaneous.
12.1 Seller has the right to subcontract
its obligations under this Agreement to
third parties provided that Seller
retains the responsibility to the Buyer
for the performance of the obligations
subcontracted. Seller may at any time
assign and/or transfer its rights under
this Agreement without the consent of
the Buyer. Buyer may not assign its
rights and obligations under this
Agreement without the prior written
consent of Seller, which consent Seller
may withhold in its sole discretion.
12.2.The signatories on behalf of the
parties hereto warrant and represent
that they have full power and authority
to execute this Agreement on behalf of
their respective party, that the
execution of this Agreement has been
duly authorized by all necessary
corporate action and that this Agreement
represents a valid and binding
obligation, enforceable in accordance
with its terms. This Agreement shall be
binding upon the parties and inure to
the benefit of their successors and
permitted assigns.
12.3. In the event of a dispute,
controversy or claim arising out of or
in connection with this Agreement, or
the breach termination or validity of
<PAGE>
this Agreement, the parties shall
discuss such dispute, controversy or
claim in good faith to find a solution
acceptable to both parties. Should the
parties be unable to find a mutually
agreeable solution within thirty (30)
days after notice from one of the
parties to the other specifying the
details of the dispute, controversy or
claim, the parties shall submit the
dispute, controversy or claim to final
and binding arbitration in accordance
with the UNCITRAL Arbitration Rules as
presently in force. The appointing
authority shall be the Arbitration
Institute of the Stockholm Chamber of
Commerce. The arbitration shall be heard
and determined by three (3) arbitrators.
In selecting the presiding arbitrator of
the tribunal, the partyappointed
arbitrators shall not select a person
who is of the same nationality as either
party or of the same nationality of
either partyappointed arbitrator. The
place of arbitration shall be Stockholm,
Sweden, and the award shall be deemed a
Swedish award. The English language
shall be used in the arbitral
proceedings. The award shall be made and
payable in United States Dollars free of
tax or any other deduction. The award
shall include interest from the date of
any breach or other violation of this
Agreement. The arbitrators shall also
fix an appropriate rate of interest from
the date of the breach or other
violation to the date when the award is
paid in full. The parties agree that the
award of the arbitral tribunal will be
the sole and exclusive remedy between
them regarding any and all claims and
counterclaims presented to the tribunal.
12.4. The laws of the State of Nevada,
United States of America shall govern
the interpretation and performance of
without reference to conflict of law
principles.
<PAGE>
12.5. No failure on the part of either
party to exercise, and no delay in
exercising any right or remedy shall
operate as a waiver of such right or
remedy, nor shall any single or partial
exercise of any right or remedy preclude
any further or other exercise of such
right or remedy. All rights and remedies
under this Agreement are cumulative and
shall not be deemed exclusive of any
other rights or remedies provided by
law.
12.6. The Agreement, including the
Exhibits, contains the entire agreement
of the parties with respect to the
transactions described above and
supersedes all prior agreements and
understandings between the parties
respecting the matters set forth herein.
It may not be amended or changed in any
way except in a writing signed by the
party against whom enforcement of any
waiver, change, modification, extension
or discharge is sought.
12.7. If any section or part thereof
contained in the Agreement is declared
invalid by any court of competent
jurisdiction or a government agency
having jurisdiction, such declaration
shall not effect the remainder of the
other sections and each shall remain in
full force and effect.
12.8. The English language shall be
controlling in all respects,
notwithstanding any translation of this
Agreement for any purpose whatsoever.
All notices and other documentation
shall be delivered by one party to the
other in the English and Russian
languages.
<PAGE>
12.9. The Agreement is signed in two (2)
identical counterpart originals in the
English and Russian languages, each of
which is to be considered the final
Agreement of the parties.
12.10.The headings appearing in this
Agreement have been used for reference
purposes only and shall not affect the
interpretation of this Agreement.
12.11. Time is of the essence with
respect to all of the parties
obligations under this Agreement.
IN WITNESS WHEREOF, the parties by their
duly authorized representatives have
executed this Agreement as of the day
and year first above written.
218 Sotsialisticheskaya, St,
Rostov-on-Don, 344022 Russia
JCS "Giriey"
code on OKNH 61124
code on OKPO 24169413
TIN 6163010380
Rostov on Don
Brunch of commercial bank "MostBank"
p/c 1467060 c\a 00 1070165
kor\ac.700161683
in GRKS in Rostov on Don
GU CB of RF on Rostov region
BIA 046015783
DenexCorp/LVPS MicroFacility
7755 Center Avenue,
Huntington Beach, California, USA
Sanwa Bank California
6881 Warner Avenue
Huntington Beach, CA 92647 USA
Routing No. 122003 516
DenexCorp\LVPS MicroFacility
Depositori Account Number: 089629751
President/General Director
DenexCorp\LVPS
Ron Patterson
10.6 Agreement on Technical Assistance between DenexCorp(TM)/LVPS MicroFacility,
Inc and AO "GIRIYEY"
AGREEMENT ON TECHNICAL ASSISTANCE
[Russian translation omitted] The Agreement of technical help
The present Agreement is made between
corporation DenexCorp/LVPS MicroFacility
with its principal office at 7755 Center
Avenue, Huntington Beach, California
(hereinafter referred to as "ADVISER"
and JSC "Giriey" with its principal
office at 218 Sotsialisticheskaya St,
Rostovon-Don, Russia (hereinafter
referred to as "COMPANY') on the
following circumstances:
The adviser is the manufacturer of
modular microfactories for reception of
large volume parenteral solutions
(further "LVPS"), and the Company agrees
to get a microfacility (further
"facility") at the Adviser for the
contract, made by the parties _ of
number _ month 1996 of a year (further
the Agreement about a facility)
The company desires to use of the
Adviser as the adviser, rendering
technical services on a factory, placed
in RostovonDon, and. The Adviser agrees
to give such services on belowmentioned
conditions.
THE PARTIES HEREBY have agreed as
follows:
1. Services, rendered by the Adviser.
The adviser is obliged to render the
following services concerning a put
factory in Rostov-onDon (further
"Place"):
A. To advise the Company and to render
to it assistance in assembly of a
factory on a Place, and also to make
repeated tests of management by
<PAGE>
technological process and operational
tests for conformity to the standards of
quality, established in the Agreement
about a factory, with use of personnel
prepared By the Advisor of the Company;
B. To promote the Company in all
repairs, except current, and repairs
leaving for. Frameworks of a guarantee
of the manufacturer on components,
C. To promote the Company in
negotiations with the purpose of
purchase of raw materials, such as
(without restriction) of plastic, pitch,
chemicals of a medical degree of
cleanliness and etc. in the local
market, at an opportunity, and if it is
impossible in other markets under the
cheapest price with maintenance of
conformity of such materials for working
norms of USA Pharmacopea;
D. To provide the Company with the
general exploitationtechnological help,
including the help of the Company in
reception of replaceable parts, and also
recertification and training of the new
personnel; and
E. To provide the constant selective
control and tests of production made by
a factory, forces of the Adviser or
independent laboratory for maintenance
of maintenance of the standards of
quality. In connection with such
constant test of production. The company
should give the Adviser the appropriate
samples, to apply such raw material and
to carry out such firm procedures, which
the Adviser demands grounded.
The adviser is obliged directs two (2)
competent and qualified engineer /
scientist for residing on a Place and
work on a platform all or part of time
on an extent of validity of the present
<PAGE>
Contract as required under the
discretion of the Adviser and in
connection with fulfilment of his
obligations under the Contract. The
adviser pays a travel expenses of such
personnel and members of their families
to a Place and back in the beginning and
at the end of their stay on a Place.
2. Services, rendered by the Company.
The company provides the following
freeofcharge means and services to the
Adviser and its personnel:
A. The company provides services and
means to the employees of the Adviser
and members of their families during
their residing on a Place, and these
services and the means should be
grounded acceptable for the Adviser.
Such means and services should include
(but not to be limited by it) adequately
furnished, supported in good condition,
heated and conditioning habitation with
municipal convenience, and automobile
for each employee, registered addressed
to the Company for personal and service
use on an extent of stay of the employee
on a Place.
B. The company should give the employees
of the Adviser suitable working means,
telephone and facsimile services, office
services the necessary equipment and
tools for maintenance of an opportunity
of fulfilment by them of the duties on
an extent of their stay on a Place.
C. In case of the request on the part of
the employees or members of their
families the Company should ensure
medical service of the employees and or
of the members of their families.
D. The company should receive all
necessary visas, admissions and
administrative sanctions for the
<PAGE>
personnel of the Adviser and members of
their families, including the entrance
visas, sanction for work and residence
permits for the personnel, entrance
visas and residence permits for the
members of their families, and also exit
visas to the personnel and/or of the
members of their families as required,
that the personnel and or the members of
their families could leave a Place for
any reason, in particular if the
personnel and/or to the members of their
families needs the medical help outside
or in a place or in connection with
holiday.'
In case the Company for any reason keeps
at self the passports of the personnel
and/orof the members of their families,
it should immediately give out them on
an inquiry of the personnel and/or of
the members of their families, desiring
to leave a Place for any reason.
3.The Site. The personnel of the Adviser
should be placed in region of a Place
and should not move in other place
without the preliminary written sanction
of the Adviser.
4. Subordination of the personnel. The
personnel of the Adviser always remains
by the employees of the Adviser under
his supervision and control. The adviser
bears responsibility for payment of a
wages of the personnel, establishes
duration of working days, days off both
holidays, and holiday. The adviser
reserves the right to itself time from
time to replace the personnel and to
charge it with fulfilment of work for
the Adviser, not connected with
services, rendered or Section 1 above).
<PAGE>
5. Compensation. The company should pay
to the Adviser in total volume for
services rendered on the present
Agreement:
A. Large of the following sums: (i) 100
000 US dollars in a year on an extent of
validity of the present Agreement; or
(ii) 0, 116 US dollars for each unit of
LVPS made by a factory an each year on
an extent of validity of the present
Agreement; plus
B. Working at present rate of the
Adviser for training of the personnel of
the Company prepared after a sending of
a factory from the United States of
America.
All payments being subject to entering
on the present Section 5, should on an
extent of term of the present Contract
be paid monthly, at a rate of greater of
the following established interest from
monthly manufacture of LVPS in terms of,
or proportional share of annual minimum
payment, corrected quarterly (except
payments for trainings, which are
brought in by advance payment), and 100
000 US dollars or bank guarantee from
bank, authorized by the Adviser, with
payment under the order of the Adviser,
either other by the bank or financial
obligation in the form and under the
contents satisfactory for the Adviser
are guaranteed by the renewed letter of
credit on a sum a minimum. The adviser
and its representatives have the right
to check and to receive copies of the
registration books and records of the
Company, if it is necessary for check of
correctness of a su of compensation,
paid to the Adviser for the present
Agreement.
<PAGE>
6. Term and termination of the
Agreement. The validity of the present
Contract is established on period ten
(10) years from the date of arrival of a
factory on a Place, with automatic
prolongation each year after it, if it
will not be terminated by any party with
the notice not later than six (6) months
before cancellation during first ten
(10) years and not later than six (6)
months up to the end of each year term
after the expiration first tenyear (10)
period.
7. Confidentiality.
A. Parties owe, on an extent of term of
the present Agreement, and during five
(5) years after it, to keep as fiduciary
technical information, given any party
or its representatives to other party or
its personnel.
The parties should conclude with each of
their appropriate workers and
representatives, have access to the
technical information, contracts
preservations necessary for maintenance
by such workers and representatives of
confidentiality Of the technical
information. With the purposes of the
present Agreement " the technical
information" means (1) in case of the
technical information of the Adviser,
confidential and license information,
handed to the Company by the Adviser or
its personnel in the written or oral
form, in the attitude towards
tech.processes, tests, characteristics
<PAGE>
of production and its components, and
also other information and methods,
necessary applicable for installation,
service, maintenance, repair and
operation of a factory, and (ii) in case
of the technical information of the
Company, confidential and license
information concerning the Company and
its activity, to which the Adviser has
received access during execution of the
obligations under the present Agreement.
B. The restrictions on the present
section do not concern to the technical
information, which:
(i) Was available on date of its
disclosure in open sources;
(ii) was at disposal of the addressee up
to date of its disclosure by the
appropriate party;
(iii) has become wide of date known the
ambassador of disclosure but not owing
to disclosure by its addressee;
(iv) has become known to the addressee
by a lawful way from any third party,
without infringements of any
restrictions on disclosure and use. Such
restrictions nor are distributed to
cases, when the law demands from one and
parties disclosure of the technical
information provided that such party
undertakes all reasonable measures for
protection of confidentiality of
disclosed technical information.
<PAGE>
8. Quality control
The company has not the rights to offer
in the market any LVPS with quality,
appearance, safety, volume and
efficiency in any relation appearance,
safety, volume and efficiency LVPS, time
from time established by the Adviser in
the specifications on such production is
worse, than quality,.
B. The company provides the Adviser and
his personnel with samples LVPS on any
or all stages of manufacture, and also
samples of packing, which the Adviser
can time from time request with the
purposes of, specified in SECTION 1 E
above, and also to allow them on a
factory during usual working day for
selection such o6pa3i4OB.
C. In case tests by the Adviser selected
o6pa3qOB shows, that tested LVPS do not
correspond or leave for frameworks of
the specifications for such production.
The company is obliged to accept
immediate measures for reduction of
production in conformity with the
specifications and to withdraw whole
already sold or distributed defective
production.
9. Responsibility for production. The
company hereby is obliged and
guarantees, that it will maintain, to
serve and to repair a factory according
to the instructions, operational by
procedures and technical helps, given
the Adviser and the its personnel. The
company will not ha. of the claims to
the Adviser and its personnel and
accepts all completeness of the
responsibility for any sheer loss or
losses in connection with (i) misuse,
maintenance and repair of a factory and
(ii) by distribution or sale LVPS of
<PAGE>
local manufacture, not appropriate or
leaving for frameworks of the
specifications of quality, time from
time, installed by the Adviser. The
maintenance of sufficient insurance of
the responsibility for production is a
duty both parties
10. Independent contractors. The
contractors and Company are the
independent contractors, responsible for
the actions and action of their
appropriate workers and the agents. The
agents and workers of the Company are
not considered as the agents and workers
of the Adviser, and the agents and
workers of one of the parties cannot
accept the responsibility, to incur or
to create the direct or indirect
obligations from a name or concerning
other party.
11. Force Majuere. Force Majuere
circumstances (according to the
appropriate article of International
trade chamber [the edition ICC No.421])
hereby join in the present Contract by a
method of the reference. The parties
recognize and agree that inability of
the Company to convert currency in US
dollars is not force majuere
circumstance.
12.Miscellaneous
A. The adviser has the right to pass the
obligations under the present Agreement
to the third parties, provided that the
Adviser still bears responsibility
before the Company for fulfilment of the
passed obligations.
B. Persons, signing the Agreement on
behalf of the parties, guarantee and
declare, that have all powers and rights
to conclude the present Agreement on
behalf of the appropriate parties, that
<PAGE>
such party is the lawfully established
legal person according to the
legislation in frameworks of juridical,
according to which the given legal
person was established, that the
fulfillment of the present Agreement was
by due image authorized by all necessary
for this purpose corporate decisions,
and that present The Agreement has
lawful and certain force for the given
legal person and is subject to
compulsory fulfilment according to its
rules. The present Agreement is certain
for the parties, their assignees and
authorized close confidants.
C. In case of disputes, disagreements or
claims under the present Agreement or in
connection with it, or in connection
with infringement, cancellation or
expiry of the term of its action, the
parties are obliged honesty to discuss
such dispute, disagreement or claim with
the purposes of achievement of the
arrangement, acceptable to both parties.
If the parties do not manage to reach
the mutually acceptable decision during
thirty (30) days after a direction of
one of the parties of the notice from
other party with an exposition of
dispute, disagreement or claim, the
parties transfer dispute, disagreement
or claim to the final and certain
sanction according to a working
arbitration procedure UNCITRAL.
Arbitration instance will be Arbitration
Institute at Stockholm trade chamber.
The decision will be born three (3)
arbitrators. At assignment of the
umpire, the arbitrators nominated by the
parties have not the rights to choose
the person of the same nationality, as
any from the parties, or same
nationality, as any of the arbitrators
nominated as the parties. A place of
arbitration will be Stockholm (Sweden),
and the decision of arbitration will be
<PAGE>
considered as the decision of Swedish
court. In arbitration trial English
language will be used The sum of
compensation on court is determined in
US dollars and should be paid free from
the taxes and other deduction. This sum
should include interests from the date
of any infringement of the present
Agreement. The arbitrators should also
establish the appropriate interest rate
from the date of infringement up to date
of payment of compensation in complete
volume. The parties agree, that the
decision of arbitration court will be a
unique and exclusive means of judicial
protection their relations in case of
all and any claims and counterclaims,
with which they address in court.
<PAGE>
D. Interpretation and the fulfilment of
the present Contract is adjusted by the
legislation of Nevada state (United
States of America), without the
references to the conflict of rules of
the law.
E. Nonuse or the delay in application by
any party of any rights or means of
judicial protection does not mean a
refusal from such rights or means, and
the unitary or partial application of
any rights or means of judicial
protection does not exclude further or
other application of such rights or
means. All rights and the means under
the present contract are cumulative and
cannot be considered as the excluding
any other rights and means, stipulated
by the law.
F. The present Agreement comprises all
completeness of the arrangements between
the parties concerning the above
bargains and replaces by self all
previous contracts and agreements
between the parties concerning all
questions, stipulated in the present of
the Agreement. The present Agreement
cannot be changed or complemented
otherwise than in written form, with the
signatures both parties.
G. If any section or its part in the
present Agreement is announced void by
any competent court or governmental
body, have on the right, such decision
does not mention staying sections, and
each of them remains in complete force
and validity.
H. The English text of the Agreement
remains determining in all relations,
despite any translations of the present
Agreement for any purposes. All notices
and the other documentation are directed
by the parties each other in English.
<PAGE>
The present Agreement is made in two
identical originals each of which is
considered as the final text of the
Agreement between the parties.
J. The subtitles in the present
Agreement are used only for the
references and are not reflected in
interpretation of the present Agreement.
In witness thereof the parties on behalf
of lawfully authorized representatives
have concluded the present Contract in
abovestated a day and year.
218 Sotsialisticheskaya St,
RostovonDon, 344022 Russia
JCS "Giriey"
r.KpaMbdi CYJ1HH OCE X2 1800
settlement account 000467227
correspondent account 600164426
bank identification account 046036626
r. POCTOBHaAoHy
(~HnHaji KE "MocrEaHK"
p\c 1467060 Kop\cq. 700161683
B "K4 r. POCTOB-Ha-goHy
rY I]$ P(D no PocrOBCKOii o6ji.
B14K 046015783
code on OKNH 61124
code on OKPO 24169413
DenexCorp/LVPS MicroFacility
7755 Center Avenue,
Huntington Beach, California, USA
10.7 Assignment Agreement between DenexCorp(TM)/LVPS MicroFacility, Inc. and
LVPS MicroFacility, Inc. ASSIGNMENT
KNOW ALL THESE MEN BY THESE PRESENTS:
THIS ASSIGNMENT is made and entered into by and between
DenexCorp(TM)/LVPS MicroFacility, a Nevada corporation, ("Assignor"), and LVPS
MicroFacility, a Delaware corporation ("Assignee").
WITNESSETH: Assignor hereby assigns all of its rights in the
Micro-Manufacturing Facility Purchase Agreement dated December 18, 1996 between
Assignor and AO "GIRIYEY," a Russian corporation, to Assignee for the
consideration of one dollar ($1.00).
IN WITNESS WHEREOF, I have caused this instrument to be executed
effective the 30th day of August, 1999.
"Assignor"
DenexCorp(TM)/LVPS MicroFacility,
a Nevada corporation
/s/: Ron Patterson
--------------------------------------
Name: Ron Patterson
Title: Chief Executive Officer
"Assignee"
LVPS MicroFacility, Inc.,
a Delaware corporation
/s/: Ross Boling
--------------------------------------
Name: Ross Boling
Title: President
10.8 Subscription Agreement
Subscription Agreement
The undersigned irrevocably agrees to purchase ____________ shares of common
stock at $8.00 per share. Attached is a check payable to Richard O. Weed, Escrow
Agent. Please issue the shares in the name of
______________________________________________________.
Sincerely yours,
By:
---------------------------------
Name:
---------------------------------
Address:
----------------------------
----------------------------
----------------------------
----------------------------
Taxpayer Id. No.:
---------------------
