U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10SB12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
GENE-CELL, INC.
(Name of Small Business Issuer in its charter)
NEVADA 91-1766174
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1010 Hercules, Houston, Texas 77058
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(Address of principal executive Offices) (Zip Code)
Issuer's telephone number: (281) 461-7996
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None.
Securities to be registered under Section 12(g) of the Act:
COMMON
(Title of Class)
1
INFORMATION REQUIRED IN REGISTRATION STATEMENT
This Form 10-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-SB that are not statements
of historical fact may be deemed to be forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual
results or outcomes to differ materially from those expressed in the
forward-looking statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, expectations, future
events or performance and underlying assumptions and other statements which
are other than statements of historical facts. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitations,
managements's examination of historical operating trends, data contained in
the Company's records and other data available from third parties, but
there can be no assurance that management's expectations, beliefs or
projections will result or be achieved or accomplished.
Without limiting the foregoing, words such as "may", "will", "expect",
"believe", "anticipate", "estimate" or "continue" or comparable terminology
are intended to identify forward- looking statements. These statements by
their nature involve substantial risks and uncertainties, and actual
results may differ materially depending on a variety of factors, many of
which are not within the Company's control. These factors include but are
not limited to economic conditions generally and in the industries in which
the Company may participate; competition within the Company's chosen
industry, including competition from much larger competitors;
technological advances and failure by the Company to successfully develop
business relationships. In addition to other factors and matters discussed
elsewhere herein, the following are important factors that, in the view of
the Company, could cause actual results to differ materially from those
discussed in the forward-looking statements: the ability of the Company's
management to operate on a global basis; the ability of the Company to
effectuate and successfully operate acquisitions and new operations; the
ability of the Company to obtain acceptable forms and amounts of financing
to fund current operations and planned acquisitions; the political,
economic and military climate in nations where the Company may have
interests in foreign countries; and competition and the ever-changing
nature of the Internet and e-commerce. The Company has no obligation to
update or revise these forward-looking statements to reflect the occurrence
of future events or circumstances.
Item 1. Description of Business
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Overview
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Gene-Cell, (the "Company") was originally incorporated in the state of
Nevada on November 3, 1986 under the name Becniel Corporation. The Company
was organized and authorized to pursue any lawful purpose or purposes. The
Company amended its Articles of Incorporation on September 30, 1987,
changing its name to Tzaar Corporation and authorized common stock of
100,000,000 shares at par value of $0.001. Since 1989, the Company had not
engaged in any business activity. The Company had no significant revenues
and was considered to be a "development stage company."
2
On December 28, 1996, the Company entered an agreement to acquire all
of the outstanding shares of Genesystems, Inc., a Nevada corporation. In
connection with the agreement, the Company made a one for ten reverse split
of its outstanding shares, issued an additional 7,500,000 post-split
restricted shares to effect a share exchange with Genesystems, Inc. and
authorized and issued an additional 3,500,000 common shares for a limited
offering.
The Company changed its name to Gencell, Inc. and control of the
company changed as the result of the reorganization, issuance of shares and
appointment of new officers and directors of the Company. The Company
changed its name to Gene-Cell, Inc. on September 29, 1997. Since December
1996, the Company has focused its plan of operations to the business of
developing therapies that can treat major diseases and disorders of the
human blood system.
Business of the Company
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The Company operates in the biotechnology sector of the pharmaceutical
industry sometimes referred to as the Biopharmaceutical or Life Sciences
industry. The Company has developed a technology platform for
microinjecting DNA and proteins into living cells that provides the ability
to place genetic code material (DNA) into stem cells. Stem cells are
"original" blood cells, found in human bone marrow and umbilical cord
blood, which create millions of offspring in the form of red and white
blood cells. The Company's technology allows attaching a human cell that
can then be microinjected with a tiny needle, placing the DNA into the stem
cell. Genetically treated stem cells, when reintroduced into the patient's
body are expected to naturally travel through the blood stream to the bone
marrow. Re-established there, these DNA treated and/or corrected stem cells
are anticipated to produce millions of blood cell offspring with the
desired effect.
The Company's long-term strategy will be to target those chronic
illnesses which cause the majority of discomfort and expense to citizens of
industrialized nations. The target product of the Company's research is a
series of vaccines that would simply be injected into patients to treat
these diseases.
To date, about 4,000 diseases have been traced to gene disorders.
Among these are cancer, thalassemia and sickle cell anemia. The Company's
current focus is to continue development of its technology for gene therapy
intervention in chemotherapy resistance, thalassemia, and AIDS. The Company
aims to treat many of these illnesses by incorporating the corrective DNA
material into the patients' stem cells, along with certain proteins to get
the DNA to incorporate itself properly within the existing cell DNA.
3
Clinical Applications of Microinjection-mediated Gene Therapy
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Breast Cancer.
--------------
Breast cancer continues to be the most frequent form of cancer in U.S.
women. Treatment of breast cancer with chemotherapy reveals a dose
responsiveness between the amount of drug administered and the extent of
tumor cell killing. Since the maximum tolerable dose of chemotherapy is
primarily limited by its toxicity for blood cells, treatment of breast
cancer would be greatly enhanced if repetitive and/or high-dose combination
chemotherapy could be administered to patients whose blood systems were
protected from such toxicity. Transplantation of gene- modified blood stem
cells (modified with genes for drug resistance) would, in principle, lead
to a blood system protected from the toxic effects of chemotherapy. The
impact of such a development would be very significant. If protection of
the blood system from chemotherapy is demonstrated to be beneficial in
patients with advanced cases, it could eventually be applied to patients
with minimal residual disease but high risk of relapse.
Acquired Immune Deficiency Syndrome (AIDS).
-------------------------------------------
AIDS results from the progressive destruction of the immune system
caused by infection with the Human Immunodeficiency Virus (HIV). HIV
infection acquired at birth may be uniquely suited to treatment via genetic
engineering of blood stem/progenitor cells. At birth, and for a short
period thereafter, viral load is low and of limited heterogeneity, possibly
confined to the blood-forming system. Marrow-ablating therapy may destroy
latent virus and actively replicating HIV during a stage of host
development when the thymus and other blood-forming organs have full
regenerative capacity. Subsequent reinfusion of genetically engineered stem
and progenitor cells should reconstitute the blood system with progeny
cells resistant to any residual HIV that may have survived marrow-ablating
therapy. Umbilical cord blood is a readily obtained source of blood stem
and progenitor cells to target for antiviral genetic engineering prior to
reinfusion and marrow reconstitution. In previous studies, Dr. Davis and
associates found no evidence for HIV infection in highly purified stem and
progenitor cells from the marrow of HIV infected adults. This strongly
suggests that reinfused stem and progenitor cells from umbilical cord blood
will not be a source of reinfection.
Thalassemia.
------------
About 100,000 children worldwide are born each year with thalassemia,
a group of inherited diseases of the blood. It occurs most frequently in
people of Italian, Middle Eastern, African, Greek, and Asian ancestry.
Thalassemia results from lack of production of normal hemoglobin, an
oxygen-carrying protein found in normal red blood cells. Thalassemia can
occur in various forms, ranging from mild to very severe. Among children
with untreated beta-thalassemia major, the most severe form, leading causes
of death are heart failure and infection. When children with untreated
beta-thalassemia major are treated with frequent transfusions (generally
every 3-4 weeks) aimed at keeping their hemoglobin level near normal, many
of the complications of thalassemia can be prevented. Unfortunately,
repeated blood transfusions lead to a buildup of iron in the body, which
can damage the heart, liver and other organs. Therefore, iron chelation
therapy is normally required for thalassemic patients receiving
transfusions. Thalassemia has been cured using bone marrow transplants.
However, this form of treatment is possible only for a small minority of
patients who have a suitable bone marrow donor. Gene therapy may someday
offer a cure for thalassemia. Gene therapy would involve inserting a normal
beta globin gene (the gene that is abnormal in this disease) into the
patient's blood stem cells with expression of the globin gene targeted to
the red blood cell system.
4
Microinjection-mediated Gene Therapy
------------------------------------
Research by Drs. Brian R. Davis and David B. Brown has led to the
development of a technology platform for attaching human primitive blood
cells, including stem cells, allowing them to be microinjected with
specially develop glass needles. Prior to Drs. Davis' and Brown's discovery
this had never before been accomplished in the laboratory. The strength of
the Company lies in its novel procedure for microinjecting DNA and proteins
into living cells which enables placement of genetic code material into
stem cells.
Employing acceptable scientific methods of research, the Company's
technology has been verified through test results and review both at the
Company and at the University of Texas Medical Branch. This work has been
presented in university lectures, at gene therapy conferences, and has
recently been accepted for publication in Blood, the Journal of the
American Society of Hematology. In order to protect its technology, the
principals of the Company have applied for patents on its technology. The
Company will focus on further development of its microinjection and
integration technologies to achieve the efficiency of stem cell genetic
modification required for clinical application. The target of the Company's
research is a procedure for genetically modifying blood stem cells
applicable for treating a wide variety of genetically based diseases and
disorders. This research will also create marketable products in the
immediate and near future.
Microinjection has been extensively used since the late 1970's to
introduce DNA and other macromolecules into cells. This procedure has
generally been limited to cells which naturally attach to the bottom of
tissue culture plates - enabling the cells to remain fixed during the
process of injection. In addition, cells capable of sustaining
microinjection have typically been limited to those of larger size,
otherwise they would be fatally damaged by the penetration of
microinjection needles.
Blood stem cells, under normal laboratory culture conditions, do not
attach to tissue culture plates. In addition, their very small size (6-7
microns in diameter) has caused them to be easily damaged by microinjection
with commercially available needles (0.6 - 1.0 micron tip outer diameter
(O.D.)).
Due to the limitations of the prior technology, Drs. Davis and Brown,
focused on developing methods for 1) developing microinjection needles of
minimal tip size (<0.3 micron O.D.) to enable minimal injury during
injection, and 2) temporarily attaching enriched stem cell populations to
tissue culture plates for purposes of microinjection. These developments
comprise one of the Company's patent filings. The microinjection needles
developed by the Company feature excellent delivery of DNA and other
macromolecules to a variety of cells. In comparison with commercially
available needles, they enable injection with far less cell damage - even
to larger cells that normally grow attached. As such, there is already an
existing research market for these fine microinjection needles. In
addition, this novel temporary attachment methods works for various cell
types that normally grow unattached. The current market for needles is
approximately 100,000 needles sold per year. With the introduction of these
new needles for use in gene therapy and microinjection, in both research
and the clinic, the Company estimates the market could increase to around
300, 000 needles sold per year.
5
Another critical issue for gene therapy of the blood system is the
ability to maintain the introduced gene in the stem and progeny cells as
long as is needed to provide clinical benefit. In the case of protecting
blood cells from chemotherapeutic toxicity or infection from HIV, this
period may range from several months to a few years. For treatment of
genetic disease such as thalassemia, this would be for the lifetime of the
patient. Incorporation of the introduced DNA into the chromosomal DNA of
the stem cell would enable stable maintenance of the gene in both the stem
cell and its progeny. A variety of integration strategies involving
co-injection of DNA and proteins capable of facilitating incorporation of
the DNA into the chromosomal DNA are presently under active investigation
at the University of Texas Medical Branch at Galveston and at Gene-Cell.
These strategies comprise the second patent filing. Methods for
facilitating incorporation of microinjected DNA into chromosomal DNA of
cells would be potentially applicable to other methods of gene therapy. In
addition, they would find application in microinjection-mediated generation
of transgenic mice (that is, mice which contain the introduced DNA in every
cell of their body) or other transgenic animals.
Attachment Kits
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With the development of the Company's novel attachment protocol, the
microinjection of most suspension-grown cells is now possible. There are
hundreds of cells which grow in suspension; these types of cells will now
be able to be microinjected and used for experimentation and therapy by
biomedical investigators and physicians. The Company is developing kits
containing various attachment and release factors. This will allow the
injection of hundreds of existing suspension-grown cells, which were
previously non-injectable, giving the Company's technology very broad
applications. The Company is currently compiling a database which contains
information on the attachment and detachment of a variety of cell types.
Significant interest will likely be forthcoming from the scientific
community interested in employing such attachment and injection kits in
research. This would provide another possible market for the Company's
technology.
Microinjection Workstations
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To use microinjection of blood stem cells as a clinical therapy, the
Company estimates that 300-5000 cells will need to be injected per patient.
Using manual microinjection, maximal injection rates are 300-500 cells per
hour; and an automated system presently allows for up to 600-1000 cells per
hour. The Company is presently designing a microinjection workstation which
will facilitate rapid, consistent injection of various cell types, both
those that normally grow attached as well as suspension cells, such as
blood stem cells, that require temporary attachment. Using our novel
adhesion technology, a patient's blood stem cells could be arranged onto
specially designed plates in a grid pattern. Injection of cells would
proceed in a rapid step-wise pattern across the gridded plate.
6
Competition
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There are currently no direct competitors of the Company, as the
technology developed by the Company is unique. However, other participants
in both the pharmaceutical and biotechnology areas may be considered
competitors. The Company is aware of several development stage and
established enterprises, including prominent pharmaceutical and
biotechnology firms, (for example, Cell Genesys, Systemix/Novartis,
Chiron/Viagene) which are exploring the field of human gene therapy or are
actively conducting research in areas of gene insertion using retroviral
vectors and other methods.
Pharmaceutical companies compete by providing traditional drugs and
medicines to sufferers of disease and disorder. Biotechnology companies
compete through their own research and development of potential medical
breakthroughs. Systemix, a biotechnology company, acquired by Novartis, a
pharmaceutical company, is developing and refining technology that allows
purification of stem cells from the blood system. Systemix/Novartis focuses
on AIDS and specific cancers such as leukemia. While a competitor,
Systemix/Novartis is also a complement to the Company through its continued
research on stem cell purification.
Current competing technology attempts to introduce DNA into the stem
cells via retroviruses and adeno-associated viruses. To date, as exhibited
in human gene therapy trials, there has been only inefficient insertion of
DNA into human stem cells using virus technology. Further, even if the
virus-based technology should eventually succeed, retroviruses and
lentiviruses can carry only about 8,000 base pairs of DNA information into
a cell.
Generally, this may prove to be insufficient room to carry enough
genetic information to successfully correct the defective gene(s) in
diseases requiring tightly regulated expression (e.g. thalassemia). The
Company's proprietary technology will allow, in principle, greater than
20,000 bp DNA to be successfully microinjected into each stem cell. It also
allows for delivery of necessary protein(s) to cause successful integration
of the new DNA information within the existing code.
Biohazardous Waste
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The Company does not produce any biohazardous waste. However, the
Company does work with human blood products that must be handled and
disposed of as biohazardous waste. The Company currently contracts with BFI
Corporation to dispose of its biohazardous waste.
7
Governmental Approval
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As research and development progress, the Company will seek a
relationship with major pharmaceutical companies in order to take the
technology through the required government regulatory process and FDA
approval.
The Company believes that the short term potential of gene therapy for
the disease indications it is pursuing lies in the ex vivo genetic
modification of cells. In the United States, gene therapy will be regulated
by the FDA's Center for Biologic Evaluation and Research ("CBER"). For ex
vivo gene therapy, CBER regulation places a statutory emphasis on
manufacturing, that is, the genetic modification and processing of cells.
To ensure compliance with FDA/CBER regulation, the Company will carry out
the ex vivo modification and processing of cells at facilities under its
own control.
Before obtaining regulatory clearance for the commercial sale of any
of its potential products under development, the Company must demonstrate
through preclinical studies and clinical trials that the potential product
is safe and effective for use in humans for each target indication. The
results from preclinical studies and early clinical trials may not be
predictive of results that will be obtained in large-scale testing, and
there can be no assurance that the Company's clinical trials will
demonstrate sufficient safety and efficacy necessary to obtain the
requisite regulatory clearance or will result in marketable products. A
number of companies in the pharmaceutical industry, including biotechnology
companies, have suffered significant setbacks in advanced clinical trials,
even after promising results in earlier trials. The failure to adequately
demonstrate the safety and efficacy of a potential product under
development could delay or prevent regulatory approval of the potential
product and would have a material adverse effect on the Company's business,
financial condition and results of operations.
The activities required before a pharmaceutical agent may be marketed
in the United States begin with preclinical testing. Preclinical tests
include laboratory evaluation of potential products and animal studies to
assess the potential safety and efficacy of the product and its
formulations. The results of these studies and other information must be
submitted to the FDA as part of an investigational new drug application,
which must be reviewed and approved by the FDA before proposed clinical
testing can begin. Clinical trials involve the administration of the
investigational new drug to healthy volunteers or to patients under the
supervision of a qualified principal investigator. Clinical trials are
conducted in accordance with Good Clinical Practices under protocols that
detail the objectives of the study, the parameters to be used to monitor
safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the investigational new drug application. J
Further, each clinical study must be conducted under the auspices of an
independent institutional review board at the institution at which the
study will be conducted. The institutional review board will consider,
among other things, ethical factors and the safety of human subjects. In
addition, certain protocols involving the use of genetically modified human
cells must also be reviewed by the Recombinant Advisory Committee of the
National Institutes of Health.
8
Typically, clinical testing involves a three-phase process. In Phase
I, clinical trials are conducted with a small number of subjects to
determine the early safety profile and pharmacology of the new therapy. In
Phase II, clinical trials are conducted with groups of patients afflicted
with a specific disease in order to determine preliminary efficacy, optimal
dosages and expanded evidence of safety. In Phase III, large scale,
multicenter, comparative clinical trials are conducted with patients
afflicted with a target disease in order to provide enough data for the
statistical proof of efficacy and safety required by the FDA and other. In
the case of products for life-threatening diseases, the initial human
testing is generally done with diseased patients rather than with healthy
volunteers. Since these patients are already afflicted with the target
disease, it is possible that such studies may provide results traditionally
obtained in Phase II trials. These trials are frequently referred to as
Phase I/II trials.
The results of the preclinical and clinical testing, together with
chemistry and manufacturing information, are submitted to the FDA in the
form of a new drug application for a pharmaceutical product, and in the
form of a product license application for a biological product, for
approval to commence commercial sales. In responding to a new drug
application or a product license application, the FDA may grant marketing
approvals, request additional information or further research, or deny the
application if it determines that the application does not satisfy its
regulatory approval criteria. Approvals may not be granted on a timely
basis, if at all, or if granted may not cover all the clinical indications
for which the Company is seeking approval or may contraindications with
respect to conditions of use.
The Company anticipates first demonstrating that the Company's
technology works in an animal model before initiating clinical trails
involving human patients. To address this, the Company anticipates it will
isolate an enriched population of human blood stem cells and introduce, by
microinjection (or other technology), a new gene (DNA) into the cells. The
Company plans to then transfer the cells into mice lacking a fully
developed immune system to show that: 1) the cells survive; 2) the cells
adapt to the environment in the new host (engraft); 3) the engrafted cells
produce new blood cells for an extended period of time; and 4) the gene
introduced into the stem cells functions in the newly produced cells
derived from the stem cells.
Research & Development
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The Company's initial research and development efforts will focus on
further optimization of its technology in order to achieve the efficiencies
of stem cell genetic modification required for clinical application.
Efficiencies of stem cell modification will be assessed both in laboratory
experiments as well as in animal models. The target of the Company's
research is to develop a procedure for genetically modifying blood stem
cells applicable for treating a wide variety of genetically-based disease
and disorders.
The Company spent $353,939 in 1997 and $400,177 in 1998 on research
and development and anticipates expending an additional $400,000 during the
next twelve months. Research and development efforts will focus on
improving, refining and testing the Company's technology. The Company will
continue to develop the tools and technology appropriate for genetic
modification of various cell types and most particularly blood stem cells.
The Company has established working relationships with investigators at
several universities and biotechnology companies. These relationships add
critical know how and expertise to that already present within Gene-Cell.
9
Number of Employees
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The Company currently has three full-time employees, one of whom is a
Ph.D. trained scientist, and five part-time employees, three of whom are
Ph.D. trained scientists. The Company does not anticipate hiring
additional employees within the next twelve months.
Reports to Security Holders
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Prior to the filing of this registration statement on Form 10-SB, the
company was not subject to the reporting requirements of Section 13(a) or
15(d) of the Exchange Act. Upon effectiveness of this registration
statement, the Company will file annual and quarterly reports with the
Securities and Exchange Commission ('SEC"). The public may read and copy
any materials filed by the Company with the SEC at the SEC's Public
Reference Room at 150 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 1-800-SEC-0330. The Company is an electronic filer
and the SEC maintains an Internet site that contains reports and other
information regarding the Company which may be viewed at
http://www.sec.gov.
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The Year 2000 - Millennium Bug
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This concern, known as "The Year 2000" issue or "The Millennium Bug"
is expected to affect a large number of computer systems and programs after
the year 1999. The concern is that any computer function that requires a
date calculation may produce errors or system failures. As a result,
computer systems and/or software used by many companies will need to be
upgraded to comply with "Year 2000" requirements.
The Company has performed a complete assessment of the Year 2000 issue
and has determined that no significant modifications to its existing
computer software will be required and that its existing computer systems
will function properly with respect to dates in the year 2000 and
thereafter. The Company further believes that costs related to the Year
2000 issue will be insignificant because the Company's systems have been
designed to be Year 2000 complaint. Based on the Company's assessment of
its relationships with significant suppliers, management believes that the
Company does not have significant exposure with respect to third parties
and their ability or inability to comply with Year 2000 issues.
To date, the Company is unaware of any situation of noncompliance that
would materially adversely affect its operations or financial condition.
There can be no assurance, however, that instances of noncompliance which
could have a material adverse effect on the Company's operations or
financial condition have been identified. Additionally, there can be no
assurance that the systems of other companies with which the Company
transacts business will be corrected on a timely basis, or that failure by
such third party entities to correct a Year 2000 problem, or a correction
which is incompatible with the Company's information systems, would not
have a material adverse effect on the Company's operations or financial
condition.
10
Item 2. Plan of Operations
- ----------------------------
For a complete understanding, this Plan of Operations should be read
in conjunction with Part I. Item 1. Description of Business and Part F/S -
Financial Statements to this Form 10-SB.
Gene-Cell, Inc. is a Nevada corporation involved in biopharmaceutical
research. The Company was originally incorporated as Becniel and
subsequently adopted names changes to Tzaar Corporation and, finally, to
Gene-Cell, Inc. The Company is considered a development stage enterprise
because it has not yet generated revenue from sale of its products. Since
its inception, the Company has devoted substantially all of its efforts to
research and development and the search for sources of capital to fund its
efforts.
On December 28, 1996, Gene-Cell, Inc was acquired by Gene Systems,
Inc. in a recapitalization transaction accounted for similar to a reverse
acquisition, except that no goodwill was recorded. Gene-Cell, Inc. was the
"acquired" company in the transaction, but remains the surviving legal
entity. Prior to the acquisition, Gene-Cell, Inc. was a non-operating
public shell corporation with no significant assets. Accordingly, the
transaction was treated as an issuance of stock by Gene-Cell, Inc. for Gene
Systems, Inc.'s net monetary assets, accompanied by a recapitalization. In
connection with this transaction, Gene-Cell, Inc. issued 11,058,412 shares
of common stock in exchange for all outstanding shares of Gene Systems,
Inc. Since this transaction is in substance, a recapitalization of Gene
Systems, Inc. and not a business combination, proforma information is not
presented and a valuation of the company was not performed.
During the period from inception, December 12, 1996 to June 30, 1999,
the Company has not generated any revenue from sale of clinical products
and does not expect to generate any material revenue from sale of clinical
products for at least three to five years because during such time period,
management will use substantially all Company resources for further
development of its technology, including microinjection tools.
As of June 30, 1999, the Company had an accumulated deficit of
($2,034,213) funded by paid-in capital. During the years ended December
31, 1998 and 1997, the Company had losses from operations of ($499,260) and
($427,527), respectively. The Company expects that losses from operations
will continue at approximately $500,000 per year for each of the years
ending December 31, 1999, 2000 and 2001. However, the Company does not
expect to make any major capital expenditures in the foreseeable future.
The Company expects that operating losses will continue until such time as
product sales generate sufficient revenues to fund its continuing
operations, as to which there can be no assurance.
11
The Company has financed its operations mainly through the sale of its
common stock and had been entirely dependent on outside sources of
financing for continuation of operations. In January 1999, the Company
received $500,000 under a promissory note collateralized by shares of its
common stock. In January, 2000, the Company expects to receive an
additional $500,000 under the same secured promissory note. It is the
belief of the Company that these funds will be sufficient for the Company
to continue operations and its research and development efforts through
December, 2000. At that time, the Company anticipates its research to be at
a point that will allow the Company to seek a relationship with a major
pharmaceutical company in order to take the technology through the required
government regulatory process and FDA approval. The Company will consider
additional equity financing as well as traditional bank loans and lines of
credit if necessary. If the January 2000 funding under the secured
promissory note fails to occur, that event would have a significant
negative impact on the Company.
The Company's capital requirements will depend on numerous factors,
including the progress of its research and development programs; the time
and cost involved in obtaining regulatory approvals; the cost of filing,
prosecuting, defending and enforcing any patent claims and other
intellectual property rights; the economic impact of competing
technologies; developments and changes arising from the Company's
continuing research; and the terms of any new collaborative, licensing and
other arrangements that the Company may establish. The Company believes
that its current assets and potential committed contributions from certain
accredited investors will be sufficient to meet the Company's short-term
operating expenses and capital expenditures. At the present time, however,
there is no way to predict when and if any additional contributions may be
made beyond those currently committed. Consequently, at the expiration of
current commitments, the Company will need to seek one or more substantial
new investors.
The Company's ability to achieve profitability will depend, in part,
on its ability to successfully develop clinical applications and obtain
regulatory approvals for its products and to develop the capacity to
manufacture and market such products on a wide scale. There is no
assurance that the Company will be able to successfully make the transition
from research and development to manufacturing and selling commercial
microinjection therapy products on a broad basis. While attempting to make
this transition, the Company will be subject to all risks inherent in a
growing venture, including the need to produce reliable and effective
products and to develop marketing expertise and an effective sales force.
Further, the Company's success will depend, in part, on revenues
derived from the sale of the vaccines in the health care market. In the
event that the Company's market does not develop as anticipated, the
Company's business, financial condition and results of operations would be
adversely effected. Additionally, cost containment measures instituted by
health care providers as a result of regulatory reform or otherwise could
result in greater selectivity in the allocation of capital funds and such
selectivity could have a material adverse effect on the Company's ability
to sell the microinjection therapy and services.
12
The report from the Company's independent accountants includes an
explanatory paragraph which describes substantial doubt concerning the
ability of the Company to continue as a going concern, without continuing
additional contributions to capital. The Company may incur losses for the
foreseeable future due to the significant costs associated with research
and development activities which will be necessary for further development
of applications for the Company's microinjection therapy. See "Financial
Statements - Report of Independent Accountants" and Note 8 - Going Concern
Considerations.
Item 3. Description of Property
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Property & Facilities
- ---------------------
<TABLE>
<CAPTION>
The Company owns the following filed patent applications:
Title Number
----------------------------- ----------------
<S> <C>
Nucleic Acid Constructs and PCT/US97/24236
Uses thereof for Direct Nucleic
Acid Incorporation into Cells
Method and Device for PCT/US97/23781
Microinjection of Macromolecules
Into Non-Adherent Cells
</TABLE>
To accomplish its goals, the Company has established a research and
development laboratory, located in the Clear Lake area between Houston and
Galveston, Texas. It consists of approximately 2,000 square feet of
fully-equipped, state of the art laboratory space. The lease term expires
in March, 2000 and is renewable at market rate for an additional three year
term.
The Company's laboratory is fully operational with a fully functional
climatized (dehumidified, air conditioned) room for microinjection and
pulling microinjection needles. The laboratory is continuously monitored
with fire and burglar alarm systems.
The Company leases office equipment at a rate of $92.01 a month for 36
months. The lease agreement concludes in June 2000. The Company also leases
lab equipment through nine separate leasing agreements for a total of
$7,449.63 a month. All of the agreements are 36 month agreements and expire
at various times ranging from June 2000 until July 2001.
13
Item 4. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The following table sets forth as of June 3, 1999, the name and the
number of shares of the Company's Common Stock, par value $.001 per share,
held of record or beneficially by each person who held of record, or was
known by the Company to own beneficially, more than 5% of the 17,778,412
issued and outstanding shares of the Company's Common Stock, and the name
and shareholdings of each director and of all officers and directors as a
group.
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percentage of
Class Beneficial Owner Beneficial Ownership(2) Class
- -------- -------------------------- ----------------------- -------------
<S> <C> <C> <C>
Common Brian Davis (1) 2,024,000 11.38%
2107 Barrington Pointe Dr.,
League City, TX 77573
Common David B. Brown (1) 1,940,000 10.91%
2013 Charter Pointe Court,
League City, TX 77573
Common Michael R. Davis (1) 1,640,132 9.23%
22681 Sweet Meadow Lane,
Mission Viejo, CA 92692
Common Tom Kubota (1) 1,500,000 8.44%
6 Thomas Irvine,
California 92618
Common Gunther Soraperra (1) 400,000 2.24%
Arlbergstrasse 119
A-6751 Braz Austria
Common Amafin Trust 1,600,000 9.00%
c/o ATV
Aeulestr. 5
FL 9490 Vaduz
Liechtenstein
Common Auric Stiftung 1,500,000 8.44%
c/o ATV
Aeulestr. 5
FL 9490 Vaduz
Liechtenstein
Common Eurifa Anstalt 1,600,000 9.00%
Meierhofstrasse 121
Triesen, FL-9495
Liechtenstein
Common Rheinland Stiftung 1,600,000 9.00%
c/o ATV
Aeulestr. 5
FL 9490 Vaduz
Liechtenstein
- --------------------------------------------------------------------------------
Common Officers, Directors and 7,504,132 42.21%
Nominees as a Group:
5 persons
- --------------------------------------------------------------------------------
</TABLE>
14
(1) Officer and/or Director of the Company
(2) The term "beneficial owner" refers to both the power of investment (the
right to buy and sell) and rights of ownership (the right to received
distributions from the company and proceeds from sales of the shares).
Inasmuch as these rights or shares may be held by more than one person,
each person who has a beneficial ownership interest in shares is deemed the
beneficial owners of the same shares because there is shared power of
investment or shared rights of ownership.
There are no arrangements which would result in a change in control of
the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position Director or Officer Since
- -------------- ----- -------- --------------------------
<S> <C> <C> <C>
Brian R. Davis 45 President, Director January 1997
Chairman of the
Scientific Advisory
Board
David B. Brown 45 Secretary, Director, January 1997
Director of Research
& Development
Michael R. Davis 46 Treasurer, Director January 1997
Tom Kubota 59 Chairman of the Board, January 1997
Director
Gunther Soraperra 39 Director November 1997
</TABLE>
15
Brian R. Davis, Ph.D., President, Director, and Chairman of the
Scientific Advisory Board.
- ---------------------------------------------------------------------------
Dr. Davis is a co-founder of Gene-Cell. Dr. Davis currently holds the
position of Associate Professor, Department of Microbiology & Immunology
and Department of Internal Medicine, and Senior Scientist, Sealy Center for
Oncology & Hematology at the University of Texas Medical Branch (UTMB).
Prior to joining UTMB, Galveston in 1995, Dr. Davis was a Visiting Scholar
at the Department of Molecular Microbiology & Immunology at the Johns
Hopkins School of Public Health in Baltimore Maryland (1994-1995) and spent
nine years as Scientist at the Institute of Cancer Research/ Geraldine
Brush Cancer Research Institute in San Francisco, holding the positions of
Acting Director and Associate Director(1986-1995). Dr. Davis received his
A.B. summa cum laude from Harvard University in 1976, received his Ph.D.
from California Institute of Technology in 1980, and conducted his
postdoctoral training at the University of California, Irvine from
1982-1986. Dr. Davis has an extensive list of publications in the fields of
hematopoieses and retrovirology.
David B. Brown, Ph.D., Secretary, Director, and Director of Research
and Development.
- ---------------------------------------------------------------------------
Dr. Brown is a co-founder of Gene-Cell. Dr. Brown currently holds the
position of Assistant Professor, Department of Human Biological Chemistry
and Genetics, at University of Texas Medical Branch (1987-present), and
director of the Microinjection/Microdissection Core Facility, Sealy Center
for Oncology and Hematology, UTMB (1995-present). Dr. Brown received his
B.S. (1975) and M.S. (1978) from Colorado State University, received his
Ph.D. in 1982 from the University of Texas Health Science Center at
Houston, and conducted his postdoctoral training at the University of Texas
System Cancer Center and at Yale University. Dr. Brown has published
extensively in the fields of microinjection and reproductive biology.
Michael R. Davis, Treasurer, Director.
--------------------------------------
Mr. Davis is a co-founder of Gene-Cell. Mr. Davis graduated with
honors in economics and business from Harvard University in 1975, pursuing
graduate business studies thereafter at the Harvard Business School, UCI
and Clairemont's Peter Drucker Graduate School of Management. He assisted
in the founding of EPL Prolong, Inc. and leads the effort to sell Prolong
motor oil products in Japan. He has headed up the Maruzen Co. Ltd.
expansion and investment efforts in the United States from 1990 to 1997.
Mr. Davis is also the founder and chairman of Mustard Seed Foundation, a
nonprofit charity dedicated to alleviating world poverty and disease.
Tom Kubota, Director, Chairman of the Board.
--------------------------------------------
Mr. Kubota has thirty years of experience in the investment banking,
securities and corporate finance field. He held the position of Vice
President at Drexel Burnham Lambert; at Stem, Frank, Meyer and Fox; and at
Cantor Fitzgerald. Mr. Kubota is the president of Nanko Corporation which
specializes in capital formation services for high technology and natural
resources companies. He has expertise in counseling emerging public
companies and has previously served as a director of both private and
public companies.
16
Gunther Soraperra, Director.
----------------------------
Mr. Soraperra graduated as master in economics and business
administration from the University of Graz, Austria in 1990. He lectured as
Professor of Economics and Business Administration at the Academy of
Economics in Bludenz, Austria. He has seven years experience in
international investments, international commercial transactions, financial
advice, and capital management. Prior to his University studies he worked
for four years in industry. There he specialized in international sales,
marketing and administration. Mr. Soraperra is Founder and President of
Eurotrade, Austria, a counseling company in international commercial
business.
Significant Employees
- ---------------------
Judith I. Yannariello-Brown, Ph.D., Senior Scientist, Project Leader,
and Director of Cell Biology Group.
- ---------------------------------------------------------------------------
Dr. Yannariello-Brown currently holds the position of Assistant
Professor, Department of Human Biological Chemistry and Genetics,
University of Texas Medical Branch (1993-present), and director of the
Hematopoietic Stem Cell Facility, Sealy Center for Oncology and Hematology,
UTMB (1997-present). Prior to this, Dr. Yannariello-Brown was Assistant
Professor of Ophthalmology and Visual Sciences, UTMB. Dr.
Yannariello-Brown received her B.S. from Rutgers University, received her
M.S. at the University of Texas System Cancer Center, Graduate School of
Biomedical Sciences, received her Ph.D. at Yale University, and conducted
her postdoctoral training at UTMB. Dr. Yannariello-Brown has published
extensively in the field of cell- cell and cell-matrix interactions.
Nicole L. Prokopishyn, Ph.D., Research Scientist II.
----------------------------------------------------
Dr. Prokopishyn joined the Company in 1997 after receiving her Ph.D.
from the University of Saskatchewan. She previously received her B.Sc. with
Honors from the University of Saskatchewan (1991).
Dependence Upon Key Personnel
- -----------------------------
The Company has an acute dependence upon certain key members of
management and technical personnel. Particular reliance is made on Brian
R. Davis, Ph.D. and David B. Brown, Ph.D. Certain other key personnel have
been and will continue to be added on an "as needed" basis to complete the
tactical management group. Because of the specialized nature of the
Company's business, the Company's ability to achieve success will depend,
in part, upon its ability to attract and retain highly qualified people in
the areas of management and technology while maintaining relationships with
leading research institutions. The loss of Drs. Davis or Brown, or other
key individuals may adversely affect the Company's business and prospects.
At this time, the Company does not carry key man life insurance on any of
its employees.
17
Family Relationships
- --------------------
Michael R. Davis, Treasurer and Director of the Company, is the
brother of Brian R. Davis, President and Director of the Company. Judith
I. Yannariello-Brown, Senior Scientist, Project Leader and Director of Cell
Biology Group, is the wife of David B. Brown, Secretary, director and
Director of Research and Development of the Company.
Involvement in Legal Proceedings
- --------------------------------
To the knowledge of management, during the past five years, no present
or former director, executive officer or person nominated to become a
director or an executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of
which he was an executive officer at or within two years before the time of
such filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations or other minor
offenses);
(3) was the subject of any order, judgement or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or otherwise
limiting, the following activities;
(i) acting as a future commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, associated person of any of the foregoing, or as an
investment advisor, underwriter, broker or dealer in securities, or as an
affiliate person, director or employee of any investment company, of
engaging in or continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgement, or decree, not
subsequently reversed, suspended, or vacated, of any federal or state
authority barring, suspending, or otherwise limiting for more than 60 days
the right of such person to engage in any activity described above under
this Item, or to be associated with persons engaged in any such activity;
18
(5) was found by a court of competent jurisdiction in a civil action
or by the Securities and Exchange Commission to have violated any federal
or state securities law, and the judgment in such civil action or finding
by the Securities and Exchange Commission has not been subsequently
reversed, suspended, or vacated;
(6) was found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
Item 6. Executive Compensation
- --------------------------------
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Awards Long Term Compensation
------ --------------------------
Annual Compensation Other Restri LTIP
Name & --------------------- Annual -cted Payout
Principal Bonus Compen Stock Options Compen- All
Position Year Salary $ -sation Awards /SARs sation Other
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brian R. Davis 1998 $30,000 -0- -0- -0- -0- -0- -0-
President 1997 $30,000 -0- -0- -0- -0- -0- $40,000
1996 -0- -0- -0- $220,000 -0- -0- -0-
David B. Brown 1998 $26,712 -0- -0- -0- -0- -0- -0-
Secretary 1997 $25,440 -0- -0- -0- -0- -0- $40,000
1996 -0- -0- -0- $220,000 -0- -0- -0-
Michael R. Davis 1998 -0- -0- -0- -0- -0- -0- -0-
Treasurer 1997 -0- -0- -0- -0- -0- -0- -0-
1996 -0- -0- -0- $377,500 -0- -0- -0-
- -------------------------------------------------------------------------------------
</TABLE>
The Company provides an employee benefits program for its full time
employees which includes Medical/Dental/Life Insurance and a simple IRA
with matching funds of up to 3% of salary.
In 1996, Brian R. Davis and David B. Brown were granted 2,000,000
shares each as compensation for services. The shares were valued at $0.11
per share and resulted in compensation of $220,000 for each of these two
officers.
In 1996, Michael R. Davis was granted 3,500,000 shares as compensation
for services and in return for a $7,500 note to the Company. These shares
were valued at $0.11 per share and resulted in compensation of $277,500.
Consequently, Mr. Davis returned 1,000,000 of the shares to the Company.
19
In 1997, Brian R. Davis and David B. Brown were compensated $40,000
each as compensation for assignment of patents to the Company.
Compensation of Directors
- -------------------------
None
Employment Contracts and Termination of Employment and Change in Control
Arrangement
- ------------------------------------------------------------------------
None.
Item 7. Certain Relationships and Related Transactions
- --------------------------------------------------------
In December 1996, Mr. Michael R. Davis, Treasurer and Director of the
Company, made a loan to the Company in the amount of $7,500 for which he
was given 3,500,000 restricted common shares of the Company in
consideration for making the loan and for compensation of services.
Consequently, 1,000,000 of the shares were returned to the Company.
In December, 1997, Michael R. Davis, Treasurer and Director of the
Company, leased certain equipment to the Company under a direct finance
lease agreement. The lease provides for monthly lease payments of $200 per
month through November 2002. The Company is current in its lease
obligation.
Item 8. Description of Securities
- -----------------------------------
The Company's authorized capital stock consists of 100,000,000 shares
of common stock with $.001 par value. The Company has 17,778,412
outstanding shares of its common stock, all of which are validly issued,
fully paid and nonassessable. Holders of the common stock are entitled to
receive dividends when and as declared by the Board of Directors out of
funds legally available therefore. Any such dividends may be paid in cash,
property, or shares of the Company's common stock.
All shares of the Company's common stock have equal voting rights and,
when validly issued and outstanding, will have one vote per share on all
matters to be voted upon by the shareholders. Cumulative voting in the
election of directors is not allowed, and a quorum for shareholder meetings
shall result from a majority of the issued and outstanding shares present
or by proxy. Accordingly, the holders of a majority of the shares of common
stock present, in person or by proxy, at any legally convened shareholders'
meeting at which the Board of Directors is to be elected, may be able to
elect all directors and the minority shareholders may not be able to elect
a representative to the Board of Directors.
20
The Company appointed Pacific Stock Transfer as the transfer agent and
registrar for the Company's securities.
Stock Option Plan
- -----------------
The purpose of the Company's 1996 Stock Option Plan (the "Plan") is to
enable the Company to offer to its key employees, officers, directors,
consultants and sales representatives whose past, present and/or potential
contributions to the Company and its Subsidiaries have been, are or will be
important to the success of the Company, an opportunity to acquire a
proprietary interest in the Company. The various types of long-term
incentive awards which may be provided under the Plan will enable the
Company to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its business.
The total number of shares reserved and available for distribution
under the Plan shall be 2,500,000 shares. These shares will underlie the
Options issued by the Company pursuant to the Plan. The Option holders will
not be protected against dilution if the Company should issue additional
shares of Common Stock in the future. Neither the Options, nor the shares
underlying the Options have preemptive rights.
In the case of any reclassification, change, consolidation, merger,
sale or conveyance of Common Stock of the Company to another corporation,
the Company will make adequate provision whereby the registered holders of
any outstanding Option will have the right thereafter to receive and
exercise of the Options immediately prior to the reclassification, change,
consolidation, merger, sale or conveyance of common stock by the Company.
Other provisions of the Options are set forth below. This information
is subject to the provisions of the Plan and the Stock Option Certificates
representing the Options. The following information is a summary of the
Gene-Cell, Inc., 1996 Stock Options Plan and is qualified by reference to
the plan. (See the "Gene-Cell, Inc., 1996 Stock Option Plan" attached
hereto as Exhibit 12.1)
1. The Common Stock underlying the Options offered pursuant to the
Plan are subject to the same rights and restrictions as the Company's other
shares of authorized Common Stock. (See "Description of Common Stock").
2. Once an Option is granted, it may not be called by the Company.
3. The Common Stock underlying the Options offered pursuant to this
Registration Statement are offered in registered form. The Options may not
be sold prior to six months from the date of the grant of the related award
without prior approval of the Company.
4. Unless exercised within the time provided for exercise, the
Options will automatically expire.
21
5. The exercise price per share of Stock purchasable under a Stock
Option shall be determined by the Committee at the time of grant and may
not be less than 100% of Fair Market Value of the Stock, provided however,
that the exercise price of an Incentive Stock Option granted to a 10%
Stockholder shall not be less than 110% of the Fair Market Value of the
Stock.
6. There is no minimum number of shares of equity securities which
must be purchased upon exercise of the Option.
7. The Option holders, in certain instances, are protected against
dilution of their interest represented by the underlying shares of Common
Stock upon the occurrence of stock dividends, stock splits,
reclassifications and mergers.
8. The holders of the Options shall have the right to vote on any
matter submitted to the holders of the Company's equity securities and they
are entitled to receive and retain all regular cash dividends and other
cash equivalent distributions as the board may in its sole discretion
designate, pay or distribute.
Under this stock option plan, the Company has granted options for a
total of 7,815 shares at an exercise price of $1.00 per share. To date,
none of these options have been exercised.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and other Shareholder Matters.
- --------------------------------------------------------------------------
The Company's common stock is listed on the Over the Counter Bulletin
Board ("OTCBB"), under the symbol "GCLL". As of June 3, 1999 the Company
had 99 shareholders holding 17,778,412 shares of common stock. Of the
issued and outstanding common stock 4,553,743 are free trading, the balance
are restricted stock as that term is used in Rule 144. The Company has
never declared a dividend on its common Stock.
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
---------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ -------
<S> <C> <C> <C> <C>
1997
Second Quarter 2.50 1.125 3.00 1.625
First Available
(April 11)
Third Quarter 2.50 1.75 3.00 2.75
Fourth Quarter 2.50 2.00 3.00 2.375
22
1998
First Quarter 2.625 2.00 3.25 2.25
Second Quarter 2.25 1.125 3.00 1.50
Third Quarter 1.375 0.625 1.625 0.75
Fourth Quarter 0.625 0.50 0.875 0.625
1999
First Quarter 0.50 0.40625 0.625 0.4375
Second Quarter 0.625 0.40625 0.8125 0.4375
</TABLE>
Item 2. Legal Proceedings.
- ----------------------------
The Company not a party to any pending material legal proceedings. To
the knowledge of management, no federal, state, or local governmental
agency is presently contemplating or proceeding against the Company. To
the knowledge of the management, no director, officer or affiliate of the
Company or owner of record or beneficiary of more than 5% of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
Item 3. Changes in and Disagreements with Accountants
- -------------------------------------------------------
a. On May 15,1998 the Company engaged Ham, Langston & Brezina,
L.L.P. ("Ham, Langston & Brezina") as its independent accountant.
The decision to engage Ham, Langston & Brezina as the Company's
independent accountant was recommended and approved by the
Company's Chief Executive Officer.
b. In a report dated January 27, 1997, Schvaneveldt and Company,
Certified Public Accountants, reported on the Company's financial
statements as of December 31, 1996, 1995 and 1994, and the
related statements of operations, stockholders' equity and cash
flows for the years then ended, and for the period from
inception, December 1,1986 to December 31,1996. Such report did
not contain an adverse opinion or disclaimer of opinion, nor was
such report qualified or modified as to uncertainty, audit scope,
or accounting principles. Schvaneveldt and Company, Certified
Public Accounts, understands that they were terminated as the
Company's independent accountants effective January 30, 1997.
Thereafter, the Company engaged Ham, Langston & Brezina as its
independent accountants on May 15, 1998.
c. During the Company's two fiscal years ended December 31, 1997 and
1996, and the subsequent interim period preceding the decision
to engage independent accountants, there were no "reportable
events" (hereinafter defined) requiring disclosure pursuant to
Item 304 of Regulation S-B.
23
d. Effective May 15, 1998, the Company engaged Ham, Langston &
Brezina, L.L.P. as its independent accountants. During the two
years ended December 31, 1997 and 1996, and the subsequent
interim period preceding the decision to engage independent
accountants, neither the Company nor anyone on its behalf
consulted Ham, Langston & Brezina, L.L.P. regarding either the
application of accounting principles to a specified transactions,
either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, nor has
Ham, Langston & Brezina, L.L.P. provided to the Company a written
report or oral advise regarding such principles or audit opinion.
Schvaneveldt and Company, Certified Public Accountants, has provided
the Company with a letter pursuant to Rule 304 of Regulation S-B.
Item 4. Recent Sales of Unregistered Securities
- -------------------------------------------------
(a) Securities sold
1. Regulation S Offerings
----------------------------
<TABLE>
<CAPTION>
Date of Sale Title Amount of Securities Sold
----------------- ----------- -------------------------
<S> <C> <C>
December 1996 Common 3,500,000
December 1997 Common 600,000
March 1998 Common 120,000
August 1998 Common 6,000,000
</TABLE>
24
2. Section 4(2) Offerings
- ---------------------------
<TABLE>
<CAPTION>
Date of Sale Title Amount of Securities Sold
- ------------------- --------- -------------------------
<S> <C> <C>
December 1996 Common 6,500,000
</TABLE>
(b) Underwriters and other purchasers
- --------------------------------------
1. Regulation S Offerings
All securities were sold to non U.S. persons.
2. Section 4(2) Offerings
The securities were not publicly offered. The securities were
issued to officers and directors as compensation for services
rendered to the Company and in consideration of a loan made to
the Company by an Officer and Director.
(c) Consideration
- ------------------
1. Regulation S Offering
The aggregate offering price for sales made under the Regulation
S Offering was as follows:
<TABLE>
<S> <C>
December 1996 $383,500
December 1997 $135,000
March 1998 $30,000
August 1998 $1,500,000
</TABLE>
2. Section 4(2) Offerings
The Company received services in exchange for the issued shares.
25
(d) Exemption from registration claimed.
1. Regulation S Offerings
The securities were sold pursuant to Regulation S as promulgated
by the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The Company did not offer the securities
to any person in the United States, any identifiable groups of
U.S. citizens abroad, or to any U.S. Person as that term is
defined in Regulation S. At the time the buy order was
originated, the Company reasonably believed the Buyer was outside
of the United States and was not a U.S. Person. The Company
reasonably believed that the transaction had not been pre-
arranged with a buyer in the United States. The Company has not
nor will engaged in any "Directed Selling Efforts" and reasonably
believes the Buyer has not nor will engage in any "Directed
Selling Efforts." The Company reasonably believed the Buyer
purchased the securities for its own account and for investment
purposes and not with the view towards distribution or for the
account of a U.S. Person.
2. Section 4(2) Offerings
The Company relied upon section 4(2) of the Securities Act of
1933 to effect the sale of the shares. All shares were sold in
private transactions not involving any public solicitation or
offering.
(e) Terms of conversion or exercise
5. Regulation S Offering
Not applicable
2. Section 4(2) Offerings
Not applicable
(f) Use of Proceeds
1. Regulation S Offering
All proceeds from the Regulation S offerings were used for
working capital for the Company.
2. Section 4(2) Offerings
There were no cash proceeds from the sale of shares.
26
Item 5. Indemnification of Directors and Officers
- ---------------------------------------------------
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability
which they may incur in such capacity are as follows:
The registrant's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the Nevada Business
Corporation Act.
(a) Section 78.751 of the Nevada Business Corporation Act provides
that each corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contenders or its equivalent, does not, of itself create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit
was brought or other court of competent jurisdiction, determines upon
application that in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
27
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by
a court or advanced pursuant to subsection 5, must be made by the
corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper
in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by
independent legal counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
5. The certificate or articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the corporation.
The provisions of this subsection do not affect any rights to advancement
of expenses to which corporate personnel other than directors or officers
may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the certificate or articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
2 or for the advancement of expenses made pursuant to subsection
5, may not be made to or on behalf of any director or officer if
a final adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing violation of
the law and was material to the cause of action.
28
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
29
PART III
Item 1. Index and Description of Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Title of Document Location
- ------- ----------------------------------------- ------------------------
<S> <C> <C>
2.01 Articles of Incorporation See Attached
2.02 Certificate of Amendment See Attached
To the Articles of Incorporation Of
Becniel Corporation
2.03 Articles of Amendment to See Attached
Articles of Incorporation of
Tzaar Corporation
2.04 Amendment to the Articles See Attached
of Incorporation of
Tzaar Corporation
2.05 Certificate of Amendment of See Attached
Articles of Incorporation of
Gencell, Inc.
2.06 Articles of Exchange for the See Attached
Exchange of Genesystems, Inc.
For shares of Tzaar Corporation
2.07 Bylaws See Attached
6.1 Assignment of Patent, "Method and See Attached
Device in Microinjection of Macromolecules
with Non-Adherent Cells."
6.2 Assignment of Patent, "Nucleic Acid See Attached
Constructs and Uses thereof for
Direct Nucleic Acid Incorporation
Into Cells.
6.3 Secured Promissory Note See Attached
12.1 1996 Stock Option Plan See Attached
27 Financial Data Schedule See Attached
</TABLE>
30
Item 2. Description of Exhibits
- ------------------------------------
See Item 1.
31
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf, thereunto duly authorized.
Gene-Cell, Inc.
Date: Nov. 2, 1999 By: /s/ Brian R. Davis, Ph.D.
-----------------------------------
President
Date: Nov. 2, 1999 By: /s/ Michael R. Davis
----------------------------------
Treasurer
32
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
-----------------------------------------
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
F-1
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Independent Accountants F-2
Financial Statements:
Balance Sheet as of December 31, 1998 F-3
Statement of Operations for the years ended
December 31, 1998 and 1997, and for the period
from inception, December 12, 1996, to December 31,
1998 F-4
Statement of Stockholders' Equity for the years
ended December 31, 1998 and 1997, and for the
period from inception, December 12, 1996, to
December 31, 1998 F-5
Statement of Cash Flows for the years ended
December 31, 1998 and 1997, and for the period
from inception, December 12, 1996, to
December 31, 1998 F-7
Notes to Financial Statements F-8
</TABLE>
F-2
/Letterhead/
HAM
LANGSTON &
PREZINA, L.L.P.
Certified Public Accountants
- --------------------------------------------------------------------------
Report of Independent Accountants
----------------------------------
To the Stockholders and Directors
Gene-Cell, Inc.
We have audited the accompanying balance sheet of Gene-Cell, Inc. (a
corporation in the development stage) as of December 31, 1998, and the
related statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998 and 1997, and for the period from
inception, December 12, 1996, to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
upon our audits.
We conducted our audits 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 audits
provide 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 Gene-Cell, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for
the years ended December 31, 1998 and 1997, and for the period from
inception, December 12, 1996, to December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in
the consolidated financial statements and discussed in Note 8, the Company
has incurred significant recurring losses from operations since inception
and is dependent on outside sources of financing for continuation of its
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans with regard to
this matter are also discussed in Note 8. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Ham, Langston & Brezina, L.L.P.
June 15, 1999
Houston, Texas
F-3
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
December 31, 1998
------------------
<TABLE>
<S> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 109,408
-----------
Total current assets 109,408
Deposits 18,322
Laboratory equipment under capital leases,
net of accumulated amortization of $55,305 153,256
-----------
Total assets $ 280,986
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of capital lease obligations $ 71,572
Accounts payable and accrued liabilities 13,753
-----------
Total current liabilities 85,325
Capital lease obligations, net of current
portion 62,300
-----------
Total liabilities 147,625
-----------
Commitment and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 100,000,000
shares authorized, 18,778,412 shares
issued and outstanding 18,778
Additional paid-in capital 2,882,509
Subscription receivable (1,000,000)
Losses accumulated during the development
stage (1,767,926)
-----------
Total stockholders' equity 133,361
-----------
Total liabilities and stockholders'
equity $ 280,986
===========
</TABLE>
See accompanying notes.
F-4
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
for the years ended December 31, 1998 and 1997 and
for the period from inception, December 12, 1996, to December 31, 1998
------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Inception to
December 31, December 31, December 31,
1998 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Interest income $ 3,168 $ 1,768 $ 4,936
Costs and expenses:
Operating, general and adminis-
trative expenses 115,094 16,480 155,213
Research and development costs 353,939 400,177 1,571,616
Interest expense 33,395 12,638 46,033
------------ ------------ -------------
Total costs and expenses 502,428 429,295 1,772,862
------------ ------------ -------------
Net loss $ (499,260) $ (427,527) $(1,767,926)
============ ============ =============
Weighted average shares outstanding 12,801,527 12,058,412
============ ============
Net loss per common share $ (0.04) $ (0.04)
============ ============
</TABLE>
See accompanying notes.
F-5
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1998 and 1997, and for the
period from inception, December 12, 1996 to December 31, 1998
__________
<TABLE>
<CAPTION>
Losses
Accumulated
Addit Uniss Subscri During
Common Stock -ional -ued -ption the Dev-
------------------- Paid In Common Recei elopment
Shares Amount Capital Stock vable Stage Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
at inception,
December
12, 1996 - $ - - $ - $ - $ - $ -
Shares issued
as
compensation
at a price of
$0.11
(See Note 2) 7,500,000 7,500 817,500 - - - 825,000
Net proceeds
from a
private
placement
of common
stock at a
price of
$0.11 per
share, net
of offering
costs of
$49,100 3,500,000 3,500 329,900 - - - 333,400
Recapita-
lization
effective
December
28, 1996 1,058,412 1,058 (1,058) - - - -
Net loss,
as restated
(See Note 2) - - - - - (841,139) (841,139)
------------------------------------------------------------------------
Balance at
December
31, 1996,
as restated
(See Note 2)12,058,412 12,058 1,146,342 - (841,139) 317,261
</TABLE>
See accompanying notes.
F-6
<PAGE>
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1998 and 1997, and for the
period from inception, December 12, 1996 to December 31, 1998
<TABLE>
<CAPTION>
Losses
Accumulated
Addit Uniss Subscri During
Common Stock -ional -ued ption the Dev-
------------------- Paid In Common Recei elopment
Shares Amount Capital Stock vable Stage Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from
private
placement of
600,000
shares of
common stock
at a price of
$0.25 per
share, net of
offering
costs 100,000 100 22,400 112,500 - - 135,000
Net loss - - - - - (427,527) (427,527)
------------------------------------------------------------------------
Balance at
December
31, 1997 12,158,412 12,158 1,168,742 112,500 - (1,268,666) 24,734
Issuance
of shares
for which
proceeds
were
received
in 1997 500,000 500 112,000 (112,500) - - -
Notes
payable
to
stockholders
contributed
as additional
paid-in
capital - - 77,887 - - - 77,887
Proceeds from
private
placement of
common stock
at a price of
$0.25 per
share 6,120,000 6,120 1,523,880 - (1,000,000) - 530,000
Net loss - - - - - (499,260) (499,260)
------------------------------------------------------------------------
Balance at
December
31, 1998 18,778,412 $18,778 $2,882,509 $ - $(1,000,000)$(1,767,926) $133,361
========================================================================
</TABLE>
See accompanying notes.
F-7
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
for the years ended December 31, 1998 and 1997, and
for the period from inception, December 12, 1996, to December 31, 1998
---------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Inception to
December 31, December 31, December 31,
1998 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (499,260) $ (427,527) $(1,767,926)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock issued as compensation
or in payment of accounts payable - - 825,000
Depreciation and amortization 41,411 13,894 55,305
Notes payable to stockholders issued
for patent costs - 20,000 -
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable from lease company 5,668 (5,668) -
Increase in deposits (828) (17,494) (18,322)
Increase in accounts payable 12,303 2,000 13,753
------------- ------------- -------------
Net cash used in operating
activities (440,706) (414,795) (892,190)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from sale of common stock 530,000 135,000 1,062,500
Payment of stock offering costs - (49,100) (64,100)
Proceeds from notes payable to
officers and stockholders 10,000 87,887 117,887
Payments on notes payable to officers
and stockholders (40,000) - (40,000)
Payments on capital lease obligations (57,451) (17,238) (74,689)
------------- ------------- -------------
Net cash provided by financing
activities 442,549 156,549 1,001,598
Net increase (decrease) in cash and
cash equivalents 1,843 (258,246) 109,408
Cash and cash equivalents at beginning
of period 107,565 365,811 -
------------- ------------- -------------
Cash and cash equivalents at end of
period $ 109,408 $ 107,565 $ 109,408
============= ============= =============
</TABLE>
See accompanying notes.
F-8
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
-----------------
1: Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Gene-Cell, Inc. (the "Company") is a Nevada Corporation involved in
biopharmaceutical research. The Company's research is directed at
developing gene-based therapies for treatment of a wide variety of
genetic diseases and disorders using its proprietary technology for
microinjecting DNA and proteins into living cells. The Company was
originally incorporated as Becniel and subsequently adopted name
changes to Tzaar Corporation and, finally, to Gene-Cell, Inc. The
Company is considered a development stage enterprise because it has
not yet generated revenue from sale of its products. Since its inception,
the Company has devoted substantially all of its efforts to
research and development and the search for sources of capital to fund
its efforts. Following is a summary of the Company's significant
accounting policies:
Significant Estimates
---------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the periods. Actual results could differ from
estimates making it reasonably possible that a change in the estimates
could occur in the near term.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid short-term investments with an
original maturity of three months or less when purchased, to be cash
equivalents.
Laboratory Equipment
--------------------
Laboratory equipment acquired under capital leases is recorded at
cost. Depreciation is provided on the straight-line method over the
estimated useful life of the assets. Expenditures for normal repairs
and maintenance are charged to expense as incurred. The cost and
related accumulated depreciation of assets sold or otherwise disposed
of are removed from the accounts, and any gain or loss is included in
operations.
Continued
F-9
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996
to December 31, 1998
-------------------
1: Organization and Summary of Significant Accounting Policies, continued
----------------------------------------------------------------------
Income Taxes
------------
The Company uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded to reflect the
tax consequences on future years of temporary differences between the
tax basis of assets and liabilities and their financial amounts at
year-end. The Company provides a valuation allowance to reduce
deferred tax assets to their net realizable value.
Research and Development Expenses
---------------------------------
Research and development costs are expensed as incurred. These costs
consist of direct and indirect costs associated with specific
projects.
Stock-Based Compensation
------------------------
Stock-based compensation is accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees", rather than applying
the fair value method prescribed in Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation".
The Company applies the disclosure only provisions of SFAS No. 123.
Loss Per Share
--------------
Loss per share is computed on the basis of the weighted average number
of shares of common stock outstanding during each period.
Fair Value of Financial Instruments
-----------------------------------
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is
different from the book value. When the book value approximates fair
value, no additional disclosure is made.
Continued
F-10
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
__________________
1: Organization and Summary of Significant Accounting Policies, continued
----------------------------------------------------------------------
Comprehensive Income
--------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income,
which requires a company to display an amount representing
comprehensive income as part of the Company's basic financial
statements. Comprehensive income includes such items as unrealized
gains or losses on certain investment securities and certain foreign
currency translation adjustments. The Company's financial statements
include none of the additional elements that affect comprehensive
income. Accordingly, comprehensive income and net income are
identical.
2: Prior Period Adjustments
-------------------------
In December 1996, the Company merged with Genesystems, Inc. in a
transaction accounted for as a recapitalization of the Company. (See
Note 3) Prior to the merger, the stockholders of Genesystems were
issued 7,500,000 shares as compensation for services for which only a
nominal value was recorded. Generally accepted accounting principles
require that common stock issued as compensation be recorded at the
estimated fair value of the stock issued (or at the fair value of
consideration received or services provided if such value is more
readily determinable). Accordingly, the financial statements for the
year ended December 31, 1996 were restated to reflect an $825,000
increase in research and development expenses attributable to
compensation of the stockholders of Genesystems, Inc.
In December 1996, the Company, in addition to the issuance of shares
described above, also sold 3,500,000 shares of common stock in a
private placement. In connection with this private placement,
syndication costs totaling $49,100 were incurred but not accrued at
December 31, 1996. Accordingly, the December 31, 1996 financial
statements were adjusted to reflect an increase in accrued liabilities
and a related decrease to additional paid-in capital.
The effect of correcting these errors in application of generally
accepted accounting principles on the Company's financial statements
at December 31, 1996 was as follows:
Continued
F-11
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
------------------
<TABLE>
<CAPTION>
2: Prior Period Adjustments
------------------------
<S> <C>
Increase in total liabilities $ 49,100
===========
Increase in additional paid-in capital $ 775,900
===========
Increase in losses accumulated during the
development stage $ 825,000
===========
Increase in net loss for the year ended
December 31, 1996 $ 825,000
===========
Increase in net loss per common share
for the year ended December 31, 1996 $ (0.70)
===========
3. Recapitalization
----------------
Effective December 28, 1996, the Company was acquired by Gene Systems,
Inc. in a transaction accounted for similar to a reverse acquisition,
except that no goodwill was recorded. Prior to the acquisition the
Company was a non-operating public shell corporation with no
significant assets. Accordingly, the transaction was treated as an
issuance of stock by Gene Systems, Inc. for the Company's net monetary
assets, accompanied by a recapitalization.
4. Income Taxes
------------
The composition of deferred tax assets and the related tax effects at
December 31, 1998 were as follows:
</TABLE>
<TABLE>
<CAPTION>
Liability
---------
<S> <C>
Book vs. tax basis of capital lease assets $ (11,611)
Asset
-----
Benefit from carryforward of net
operating loss 339,083
Less valuation allowance (327,472)
-----------
Net deferred tax asset $ -
===========
</TABLE>
Continued
F-12
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
--------------------
4. Income Taxes, continued
-----------------------
The difference between the income tax benefit in the accompanying
statement of operations and the amount that would result if the U.S.
Federal statutory rate of 34% were applied to pre-tax loss is as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Percentage Percentage
of Pre-Tax of Pre-Tax
Amount Loss Amount Loss
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Benefit for income tax at
federal statutory rate $ 169,748 34.0% $ 145,359 34.0%
Increase in valuation
allowance (169,748) (34.0) (145,359) (34.0)
----------- ----------- ----------- -----------
Total $ - - $ - -
=========== =========== =========== ===========
</TABLE>
At December 31, 1998, for federal income tax and alternative minimum
tax reporting purposes, the Company has approximately $972,000 of
unused net operating losses available for carryforward to future
years. The benefit from carryforward of such net operating losses
will expire in various years between 2001 and 2019. The benefit from
utilization of net operating loss carryforwards incurred prior to
December 28, 1996 was significantly limited in connection with the
Company's merger with Genesystems (See Note 3). Such benefit could be
subject to further limitations if significant future ownership changes
occur in the Company.
5. Stockholders' Equity
--------------------
During 1998 the Company entered a funding agreement under which the
Company issued 6,000,000 shares of common stock to certain individuals
and companies in exchange for $500,000 and two promisory notes for
$500,000 each that mature in January 1999 and January 2000. These
notes are non-interest bearing. The Company also issued 120,000
shares of common stock to an individual for $30,000 in a transaction
unrelated to the funding agreement.
During 1997 the Company issued 100,000 shares of common stock to an
individual for $1.50 per share. Sales of the Company's stock during
1998 were all priced at $0.25 per share and Company management made
the decision to issue the 1997 investor an additional 500,000 shares
of the Company's common stock to equalize his share price with 1998
investors. Such additional shares are presented as unissued common
stock at December 31, 1997.
Continued
F-13
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
------------------
5. Stockholders' Equity, continued
-------------------------------
During 1996 the Company issued shares of common stock in transactions
described in Note 2.
6. Lease Commitments
-----------------
During 1998 and 1997 the Company acquired certain office and
laboratory equipment under leases accounted for as capital leases.
Amortization of leased assets is included in depreciation and
amortization expense.
The Company also leases office and laboratory facilities and certain
office equipment under operating leases. The Company's lease for
office and laboratory space is for an initial three-year term and
includes a renewal option for an additional three years at the market
rate. Rental expense for operating leases was $23,487 and $20,372
during the year ended December 31, 1998 and 1997, respectively.
Minimum lease payments due under leases with original lease terms of
greater than one year and expiration dates subsequent to December 31,
1999 are summarized as follows:
<TABLE>
<CAPTION>
Operating Leases
------------------------------------
Capital Laboratory Laboratory
Leases & Office Equipment Total
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1999 $ 92,445 $ 22,383 $ 1,104 $ 115,932
2000 62,568 1,865 368 64,801
2001 3,999 - - 3,999
2002 2,400 - - 2,400
---------- ----------- ----------- ----------
Total minimum leases $ 161,412 $ 24,248 $ 1,472 $ 187,132
========== =========== ==========
Less amount representing
interest (27,540)
----------
Present value of minimum
lease payments 133,872
Less current portion (71,572)
----------
Long-term portion $ 62,300
==========
</TABLE>
Continued
F-14
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 31, 1996,
to December 31, 1998
------------------
7. Employee Benefit Plans
----------------------
Simplified Employee Pension Plan
--------------------------------
Effective August 1997, the Company adopted a defined contribution
Simplified Employee Pension plan that covers substantially all Company
employees. Under the Plan, employees may contribute, on a tax
deferred basis, up to 15% of their compensation; however, annual
employee contributions may not exceed $6,000. During the year ended
December 31, 1997, the Company matched deferrals of up to 3% of
compensation. Company contributions to the Plan are discretionary and
totaled $3,538 and $1,148 for the years ended December 31, 1998 and
1997, respectively.
Stock Option Plan
-----------------
The Company periodically issues incentive stock options to key
employees, officers, and directors to provide additional incentives to
promote the success of the Company's business and to enhance the
ability to attract and retain the services of qualified persons. The
issuance of such options are approved by the Board of Directors. The
exercise price of an option granted is determined by the fair market
value of the stock on the date of grant.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting for Stock-Based
Compensation", requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options is
greater than or equals the market price of the underlying stock on the
date of grant, no compensation expense has been recognized.
Proforma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1998: risk-
free interest rate of 7%; no dividend yield; weighted average
volatility factor of the expected market price of the Company's common
stock of 0.700; and a weighted-average expected life of the options of
5 years.
Continued
F-15
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996
to December 31, 1998
------------------
7. Employee Benefit Plans, continued
---------------------------------
Stock Option Plan, continued
----------------------------
The Black-Scholes option valuation model was developed for use in
estimating fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
The Company has adopted the 1998 Stock Option Plan (the "Option Plan")
under which stock options for up to 2,500,000 shares of the Company's
common stock may be awarded to officers, directors and key employees.
The Option Plan is designed to attract and reward key executive
personnel. At December 31, 1998, the Company had granted options for
7,815 of a total of 2,500,000 shares of common stock reserved for
issuance under the Option Plan.
Stock options granted pursuant to the Option Plan expire not more than
ten years from the date of grant and typically vest over three years,
with 33% vesting after one year and 33% vesting after each of the two
succeeding years. During 1998 all of the options granted by the
Company were granted at option prices in excess of the fair market
value of the common stock at the date of grant.
For purposes of proforma disclosures, the estimated fair value of the
options is included in expense over the option's vesting period or
expected life. The Company's proforma net loss and basic and dilutive
net loss per share was the same as net loss and basic and dilutive net
loss per share reported in the financial statements.
A summary of the Company's stock option activity and related
information for the year ended December 31, 1998 follows:
Continued
F-16
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
-------------------
7. Employee Benefit Plans, continued
---------------------------------
Stock Option Plan, continued
----------------------------
<TABLE>
<CAPTION>
Number of
Shares
Under Weighted-Average
Options Exercise Price
----------- ----------------
<S> <C> <C>
Outstanding-December 31, 1997 - $ -
Granted 7,817 1.00
Exercised - -
Forfeited - -
----------- ----------------
Outstanding-December 31, 1998 7,817 $ 1.00
=========== ================
</TABLE>
The weighted-average fair value of options granted during the year
ended December 31, 1998 was $1.00.
A summary of outstanding stock options at December 31, 1998, follows:
<TABLE>
<CAPTION>
Remaining
Contractual
Number of Shares Expiration Date Life (Years) Exercise Price
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Exercisable at December 31, 1998:
2,605 June 2005 9.5 $1.00
Non-exercisable at December 31, 1998:
5,212 June 2008 9.5 $1.00
-----
7,817
=====
</TABLE>
Continued
F-17
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998 and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
------------------
8. Going Concern Considerations
----------------------------
Since its inception, as a development stage enterprise, the Company
has not generated any revenue and has been dependent on debt and
equity raised from individual investors to sustain its operations.
During the years ended December 31, 1998 and 1997, the Company
incurred net losses of $(499,260) and $(427,527), respectively, and
negative cash flows from operations of $(440,706) and $(414,795),
respectively. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
In order to address its financial situation, management issued
4,000,000 shares of its common stock to a private investor for a
commitment to provide $500,000 of additional equity in both January
1999 and January 2000. Over the period of this investment commitment,
management will also seek to negotiate an arrangement under which its
newly developed fine microinjection needles, and eventually its
attachment technology, will be marketed to the research and
biotechnology community. Management eventually plans, as its research
and development progresses, to seek a relationship with a major
pharmaceutical company in order to take its technology through the
required government regulatory process and FDA approval.
There can be no assurances that the Company's current cash reserves
will be adequate to sustain its operations, that the Company can raise
additional cash through private placement of its common stock, nor
that the Company can develop a relationship with a major
pharmaceutical company. There can also be no assurances that the
Company will ever obtain FDA approval of gene therapeutics based upon
its DNA microinjection technology nor that it can attain
profitability. The Company's long-term viability as a going concern
is dependent upon three key factors, as follows:
- The Company's ability to obtain adequate sources of funding to
continue the development of its proprietary DNA microinjection
technology.
- The ability of the Company to take its DNA microinjection
technology through the required government regulatory process and
ultimately obtain FDA approval.
- The ability of the Company to ultimately commercialize gene
therapeutics based upon its proprietary DNA microinjection
technology and achieve adequate profitability and positive cash
flows to sustain its operations.
Continued
F-18
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS, Continued
as of December 31, 1998, and for the years ended
December 31, 1998 and 1997,
and for the period from inception, December 12, 1996,
to December 31, 1998
------------------
9. Impact of the Year 2000 Issue
-----------------------------
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any
of the Company's computer programs that have time sensitive software
may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculation causing
a disruption of business activities.
The Company has performed a complete assessment of the Year 2000 issue
and has determined that no significant modifications to its existing
computer software will be required and that its existing computer
systems will function properly with respect to dates in the year 2000
and thereafter. The Company further believes that costs related to
the Year 2000 issue will be insignificant because the Company's
systems have been designed to be Year 2000 compliant.
Based on the Company's assessment of its relationships with
significant suppliers to understand the extent to which the Company is
vulnerable to any failure by third parties to remedy their own Year
2000 issues, management believes that the Company does not have
significant exposure with respect to third parties.
10. Non-Cash Investing and Financing Activities
-------------------------------------------
During the years ended December 31, 1998 and 1997, the Company engaged
in certain non-cash investing and financing transactions as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Property and equipment acquired by
entering into capital lease
obligations $ 24,936 $ 183,625
Notes payable to stockholders
contributed as additional paid-in
capital 77,887 -
</TABLE>
F-19
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
__________
FINANCIAL STATEMENTS
as of June 30, 1999 and December 31, 1998
and for the six months ended June 30, 1999 and 1998,
and for the period from inception, December 12, 1996,
to June 30, 1998
(Unaudited)
F-20
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
---------------
<TABLE>
<CAPTION>
Page
------
<S> <C>
Financial Statements:
Condensed Balance Sheet as of June 30, 1999
and December 31, 1998 F-22
Condensed Statement of Operations for the six
months ended June 30, 1999 and 1998, and for
the period from inception, December 12, 1996,
to June 30, 1999 F-23
Condensed Statement of Stockholders' Equity for
the six months ended June 30, 1999 F-24
Condensed Statement of Cash Flows for the six
months ended June 30, 1999 and 1998, and for
the period from inception, December 12, 1996,
to June 30, 1999 F-25
Notes to Financial Statements F-26
</TABLE>
F-21
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED BALANCE SHEET
June 30, 1999 and December 31, 1998
---------------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
ASSETS (Unaudited) (Note)
------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 331,270 $ 109,408
----------- -----------
Total current assets 331,270 109,408
Deposits 18,322 18,322
Equipment under capital leases, net 132,400 153,256
----------- -----------
Total assets $ 481,992 $ 280,986
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of capital lease obligations $ 79,302 $ 71,572
Accounts payable and accrued liabilities 15,000 13,753
----------- -----------
Total current liabilities 94,302 85,325
Capital lease obligations, net of current
portion 20,616 62,300
----------- -----------
Total liabilities 114,918 147,625
----------- -----------
Commitment and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 100,000,000
shares authorized, 17,778,412 and 18,778,412
shares issued and outstanding at June 30,
1999 and December 31, 1998, respectively 17,778 18,778
Additional paid-in capital 2,883,509 2,882,509
Subscription receivable (500,000) (1,000,000)
Losses accumulated during the development
stage (2,034,213) (1,767,926)
----------- -----------
Total stockholders' equity 367,074 133,361
----------- -----------
Total liabilities and stockholders'
equity $ 481,992 $ 280,986
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See accompanying notes.
F-22
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF OPERATIONS
for the six months ended June 30, 1999 and 1998 and
for the period from inception, December 12, 1996, to June 30, 1999
---------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months Inception
Ended Ended to
June 30, June 30, June 30,
1999 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 7,336 $ - $ 12,272
Costs and expenses:
Operating, general and adminis-
trative expenses 36,166 44,628 191,379
Research and development costs 222,743 174,231 1,794,359
Interest expense 14,714 14,488 60,747
----------- ----------- ------------
Total costs and expenses 273,623 233,347 2,046,485
Net loss $ (266,287) $ (233,347) $(2,034,213)
=========== =========== ============
Weighted average shares outstanding 18,778,412 13,218,404
=========== ===========
Net loss per common share $ (0.01) $ (0.02)
=========== ===========
</TABLE>
See accompanying notes.
F-23
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
for the six months ended June 30, 1999
__________
(Unaudited)
<TABLE>
<CAPTION>
Losses
Accumulated
Additional During the
Common Stock Paid In Subscription Development
Shares Amount Capital Receivable Stage Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December
31, 1998 18,778,412 $ 18,778 $2,882,509 $(1,000,000)$(1,767,926) $ 133,361
Receipt of
subscription
receivable - - - 500,000 - 500,000
Cancellation
of shares (1,000,000) (1,000) 1,000 - - -
Net loss - - - - (266,287) (266,287)
------------------------------------------------------------------------
Balance
at June
30, 1999 17,778,412 $ 17,778 $2,883,509 $ (500,000)$(2,034,213) $ 367,074
========================================================================
</TABLE>
See accompanying notes.
F-24
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended June 30, 1999 and 1998, and
for the period from inception, December 12, 1996, to June 30, 1999
---------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months Inception
Ended Ended to
June 30, June 30, June 30,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net cash used in operating activities $ (244,184) $ (212,491) $(1,136,374)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock - 130,000 1,062,500
Proceeds from collection of
subscription receivable 500,000 - 500,000
Payment of stock offering costs - - (64,100)
Proceeds from notes payable to
officers and stockholders - 10,000 117,887
Payments on notes payable to officers
and stockholders - - (40,000)
Payments on capital lease obligations (33,954) (30,929) (108,643)
------------ ------------ ------------
Net cash provided by financing
activities 466,046 109,071 1,467,644
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 221,862 (103,420) 331,270
Cash and cash equivalents at beginning
of period 109,408 107,565 -
------------ ------------ ------------
Cash and cash equivalents at end of
period $ 331,270 $ 4,145 $ 331,270
============ ============ ============
Non-cash investing and financing
activities:
Laboratory equipment under capital
leases $ - $ 24,936 $ 208,561
============ ============ ============
</TABLE>
See accompanying notes.
F-25
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO FINANCIAL STATEMENTS
as of June 30, 1999 and December 31, 1998,
and for the six months ended June 30, 1999 and 1998,
and for the period from inception, December 12, 1996,
to June 30, 1998
---------------
(Unaudited)
1: Organization
------------
Gene-Cell, Inc. (the "Company") is a Nevada Corporation involved in
biopharmaceutical research. The Company's research is directed at
developing gene-based therapies for treatment of a wide variety of
genetic diseases and disorders using its proprietary technology for
microinjecting DNA and proteins into living cells. The Company was
originally incorporated as Becniel and subsequently adopted name
changes to Tzaar Corporation and, finally, to Gene-Cell, Inc. The
Company is considered a development stage enterprise because it has
not yet generated revenue from sale of its products. Since its
inception, the Company has devoted substantially all of its efforts to
research and development and the search for sources of capital to fund
its efforts.
2. Interim Financial Statements
----------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June
30, 1999 and 1998 are not necessarily indicative of the results that
may be expected for the respective full years.
A summary of the Company's significant accounting princples and other
information necessary to understand these consolidated interim
financial statements is presented in the Company's audited financial
statements for the years ended December 31, 1998 and 1997.
Accordingly, the Company's audited financial statements should be
read in connection with these financial statements.
Continued
F-26
</Page>
GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO FINANCIAL STATEMENTS
as of June 30, 1999 and December 31, 1998
and for the six months ended June 30, 1999 and 1998,
and for the period from inception, December 12, 1996
to June 30, 1998
---------------
3. Comprehensive Income
--------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a
company to display an amount representing comprehensive income as part
of the Company's basic financial statements. Comprehensive income
includes such items as unrealized gains or losses on certain
investment securities and certain foreign currency translation
adjustments. The Company's financial statements include none of the
additional elements that affect comprehensive income. Accordingly,
comprehensive income and net income are identical.
4. 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 disclosures of contingent assets or liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
5. Income Tax
----------
The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to
increases in valuation allowances for deferred tax assets relating to
net operating losses.
F-27
PART III
Item 1. Index and Description of Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Title of Document Location
- ------- ----------------------------------------- ------------------------
<S> <C> <C>
2.01 Articles of Incorporation See Attached
2.02 Certificate of Amendment See Attached
To the Articles of Incorporation Of
Becniel Corporation
2.03 Articles of Amendment to See Attached
Articles of Incorporation of
Tzaar Corporation
2.04 Amendment to the Articles See Attached
of Incorporation of
Tzaar Corporation
2.05 Certificate of Amendment of See Attached
Articles of Incorporation of
Gencell, Inc.
2.06 Articles of Exchange for the See Attached
Exchange of Genesystems, Inc.
For shares of Tzaar Corporation
2.07 Bylaws See Attached
6.1 Assignment of Patent, "Method and See Attached
Device in Microinjection of Macromolecules
with Non-Adherent Cells."
6.2 Assignment of Patent, "Nucleic Acid See Attached
Constructs and Uses thereof for
Direct Nucleic Acid Incorporation
Into Cells.
6.3 Secured Promissory Note See Attached
12.1 1996 Stock Option Plan See Attached
27 Financial Data Schedule See Attached
</TABLE>
30
Item 2. Description of Exhibits
- ------------------------------------
See Item 1.
31
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf, thereunto duly authorized.
Gene-Cell, Inc.
Date: Sept. 30, 1999 By: /s/ Brian R. Davis, Ph.D.
-----------------------------------
President
Date: Sept. 30, 1999 By: /s/ Michael R. Davis
----------------------------------
Treasurer
32
EXHIBIT 2.01
ARTICLES OF INCORPORATION
ARTICLES OF INCORPORATION
OF
BECNIEL CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a Corporation under and
pursuant to the laws of the State of Nevada, and we do hereby certify that:
ARTICLE I -- NAME: The exact name of this Corporation is:
Becniel Corporation
ARTICLE II -- PRINCIPAL OFFICE AND REGISTERED AGENT:
The principal office and place of business in the State of Nevada of
this Corporation shall be located at 2950 East Flamingo Road, Suite G, Las
Vegas, Clark County, Nevada 89121. The resident agent of the Corporation
is the Law Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las
Vegas, Nevada 89121.
ARTICLE III --- DURATION: The Corporation shall have perpetual existence.
ARTICLE IV -- PURPOSES: The purpose, object and nature of the business for
which this Corporation is organized are:
(a) To engage in any lawful activity; (b) To carry on such business
as may be necessary, convenient, or desirable to accomplish the above
purposes, and to do all other things incidental thereto which are not
forbidden by law or by these Articles of Incorporation.
ARTICLE V: -- POWERS: The powers of the Corporation shall be those powers
granted by 78.060 and 78.070 of the Nevada Revised Statutes under which
this corporation is formed. In addition, the Corporation shall have the
following specific powers:
(a) To elect or appoint officers and agents of the Corporation and to
fix their compensation; (b) To act as an agent for any individual,
association, partnership, corporation or other legal entity; (c) To
receive, acquire, hold, exercise rights arising out of the ownership
or possession thereof, sell, or otherwise dispose of, shares or other
interests in, or obligations of, individuals, associations,
partnerships, corporations, or governments, (d) To receive, acquire,
hold, pledge, transfer, or otherwise dispose of shares of the
corporation, but such shares may only be purchased, directly or
indirectly, out of earned surplus; (e) To make gifts or contributions
for the public welfare or for charitable, scientific or educational
purposes, and in time of war, to make donations in aid of war
activities.
ARTICLE VI -- CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 50,000,000 shares of Common
Stock at $.001 par value per share.
Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing
in his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be
issued for such consideration, as shall be fixed from time to time by
the Board of Directors. In the absence of fraud, the judgment of the
Directors as to the value of any property for shares shall be
conclusive. When shares are issued upon payment of the consideration
fixed by the Board of Directors, such shares shall be taken to be
fully paid stock and shall be non-assessable. The Articles shall not
be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided
by the Board of Directors, no holder of any shares of the stock of the
Corporation, shall have any pre-emptive right to purchase, subscribe
for, or otherwise acquire any shares of stock of the Corporation of
any class now or hereafter authorized, or any securities exchangeable
for or convertible into such shares, or any warrants or other
instruments evidencing rights or options to subscribe for, purchase,
or otherwise acquire such shares.
Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and conditions
and at such times and prices as the Board of Directors may provide,
which terms and conditions shall be incorporated in an instrument or
instruments evidencing such rights. In the absence of fraud, the
judgment of the Directors as to the adequacy of consideration for the
issuance of such rights or options and the sufficiency thereof shall
be conclusive.
ARTICLE VII -- ASSESSMENT OF STOCK: The capital stock of this
Corporation, after the amount of the subscription price has been fully paid
in, shall not be assessable for any purpose, and no stock issued as fully
paid up shall ever be assessable or assessed. The holders of such stock
shall not be individually responsible for the debts, contracts or
liabilities of the Corporation and shall not be liable for assessments to
restore impairments in the capital of the Corporation.
ARTICLE VIII -- DIRECTORS: For the management of the business, and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its
directors and shareholders, it is further provided:
Section 1. Size of the Board. The members of the governing board
of the Corporation shall be styled directors. The number of directors
of the Corporation, their qualifications, terms of office, manner of
election, time and place of meeting, and powers and duties shall be
such as are prescribed by statute and in the by-laws of the
Corporation. The initial number of shareholders will be less than
three. The name and post office address of the sole director
constituting the first board of directors, which shall be one (1) in
number is:
NAME ADDRESS
Max C. Tanner 2950 East Flamingo Road
Suite G
Las Vegas, Nevada 89121
Section 2. Powers of the Board. In furtherance and not in limitation
of the powers conferred by the laws of the State of Nevada, the Board
of Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the
power of the shareholders to alter or repeal the By-Laws made by
the Board of Directors.
(b) Subject to the applicable provisions of the By-Laws then in
effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the Corporation, or
any of them, shall be open to shareholder inspection. No
shareholder shall have any right to inspect any of the accounts,
books or documents of the Corporation, except as permitted by
law, unless and until authorized to do so by resolution of the
Board of Directors or of the Shareholders of the Corporation;
(c) To issue stock of the Corporation for money, property,
services rendered, labor performed, cash advanced, acquisitions
for other corporations or for any other assets of value in
accordance with the action of the board of directors without vote
or consent of the shareholders and the judgment of the board of
directors as to value received and in return therefore shall be
conclusive and said stock, when issued, shall be fully paid and
non-assessable.
(d) To authorize and issue, without shareholder consent,
obligations of the Corporation, secured and unsecured, under such
terms and conditions as the Board, in its sole discretion, may
determine, and to pledge or mortgage, as security therefore, any
real or personal property of the Corporation, including after
acquired property;
(e) To determine whether any and, if so, what part, of the
earned surplus of the Corporation shall be paid in dividends to
the shareholders, and to direct and determine other use and
disposition of any such earned surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other
lawful purpose;
(g) To establish bonus, profit-sharing, stock option, or other
types of incentive compensation plans for the employees,
including officers and directors, of the Corporation, and to fix
the amount of profits to be shared or distributed, and to
determine the persons to participate in any such plans and the
amount of their respective participations.
(h) To designate, by resolution or resolutions passed by a
majority of the whole Board, one or more committees, each
consisting of two or more directors, which, to the extent
permitted by law and authorized by the resolution or the By-Laws,
shall have and may exercise the powers of the Board;
(i) To provide for the reasonable compensation of its own members
by By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority hereinbefore, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, subject, nevertheless,
to the provisions of the laws of the State of Nevada, of these
Articles of Incorporation, and of the By-Laws of the Corporation.
Section 3. Interested Directors. No contract or transaction between
this Corporation and any of its directors, or between this Corporation
and any other corporation, firm, association, or other legal entity
shall be invalidated by reason of the fact that the director of the
Corporation has a direct or indirect interest, pecuniary or otherwise,
in such corporation, firm, association , or legal entity, or because
the interested director was present at the meeting of the Board of
Directors which acted upon or in reference to such contract or
transaction, or because he participated in such action, provided that:
(1) the interest of each such director shall have been disclosed to or
known by the Board and a disinterested majority of the Board shall
have nonetheless ratified and approved such contract or transaction
(such interested director or directors may be counted in determining
whether a quorum is present for the meeting at which such ratification
or approval is given); or (2) the conditions of N.R.S. 78.140 are met.
ARTICLE IX -- INDEMNIFICATION: Each director and each officer of the
Corporation shall be indemnified by the Corporation as follows:
(a) The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, (other than an action by or in the
right of the Corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding, by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation and with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the Corporation, to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation, unless, and only to the extent that, the court in which
such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which such court deems
proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections (a) and (b)
of this Article, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections (a) or (b) of this Article
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the officer, director and employee or agent is
proper in the circumstances, because he has met the applicable
standard of conduct set forth in Sections (a) or (b) of this Article.
Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum, consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such quorum is
not obtainable or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (iii) by the affirmative vote of the holders of a majority
of the shares of stock entitled to vote and represented at a meeting
called for such purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit or
proceeding, as authorized in Section (d) of this Article, upon receipt
of an understanding by or on behalf of the director, officer, employee
or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to
purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of hisstatus
as such, whether or not the Corporation would have the power to
indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification
may be entitled under these Articles of Incorporation, the By-Laws,
agreements, vote of the shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs and personal
representatives of such a person.
ARTICLE X -- PLACE OF MEETING: CORPORATE BOOKS. Subject to the laws of the
State of Nevada, the shareholders and the Directors shall have power to
hold their meetings and the Directors shall have power to have an office or
offices and to maintain the books of the Corporation outside the State of
Nevada, at such place or places as may from time to time be designated in
the By-Laws or by appropriate resolution.
ARTICLE XI -- AMENDMENT OF ARTICLES. The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be
added. All rights herein conferred on the directors, officers and
shareholders are granted subject to this reservation.
ARTICLE XII -- INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
Marlene Llorens 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 28th day of October, 1986.
/s/ Marlene Llorens
---------------------
Marlene Llorens
STATE OF NEVADA )
:ss
COUNTY OF CLARK )
On October 28, 1986, personally appeared before me, a Notary Public,
Marlene Llorens, who acknowledged to me that she executed the foregoing
Articles of Incorporation for Becniel Corporation.
/s/ Pamela H. Blacklidge
-------------------------
Notary Public
EXHIBIT 2.02
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
BECNIEL CORPORATION
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
BECNIEL CORPORATION
Pursuant to the provisions of Nevada Corporation Law and pursuant to a
resolution of the Board of Directors dated September 28, 1987, the
undersigned corporation hereby adopts the following Certificate of Amendment
to its Articles of Incorporation:
1. The name of the corporation is BECNIEL CORPORATION.
2. The signers of this Amendment constitute the president and
secretary of the corporation.
3. The original date of incorporation was November 3, 1986.
4. The following amendments to the Articles of Incorporation were
adopted by the shareholders of the Corporation on September 28, 1987, in
the manner prescribed by the provisions of the Nevada Corporation Law.
a. The name of the corporation shall be changed to Tzaar
Corporation.
b. Article VI, Section 1 is hereby amended to read as follows:
"The number of shares which this Corporation is authorized to issue
is 100,000,000 shares of Common Stock at $.001 par value per
share."
5. The number of shares of the corporation outstanding at the time of
such adoption was 3,250,000 and the number of shares entitled to vote
thereon was 3,250,000. All of the shares were common shares of the same
class with like rights and preferences.
6. All of the shares were voted for the above amendments as follows:
<TABLE>
<CAPTION>
No. of Shares Shares Voted "For" Shares Voted "Against"
------------- ------------------ -----------------------
<S> <C> <C>
3,250,000 3,250,000 -0-
</TABLE>
7. The manner in which an exchange of issued shares shall be effected
is as follows: n/a
8. The manner in which such amendments effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
amendment is as follows: The amount of stated capital before the
amendment was $50,000 (50,000,000 shares times $.001 par value). The
amount of stated capital after this amendment is $100,000 (100,000,000
shares times $.001 par value). There is therefore an increase in the
stated capital of $50,000.
Dated this 30th day of September, 1987.
BECNIEL CORPORATION
By /s/ Paul J. Arnett
------------------
President
By /s/ David E. Pavel
------------------
Secretary
STATE OF OREGON )
)ss.
COUNTY OF WASHINGTON )
On this the 30th day of September, 1987, personally appeared before me
Paul J. Arnett, President, the signer of the within and foregoing instrument,
and duly acknowledged to me that he/she executed the same.
/s/ Daniel T. Burton
--------------------
Notary Public
Address:
My commission expires: 7-8-88
STATE OF NEBRASKA )
)ss
COUNTY OF DOUGLAS )
On this the 1st day of October, 1987, personally appeared before me
David E. Pavel, Secretary, the signer of the within and foregoing instrument,
and duly acknowledged to me that he executed the same.
/s/ Michele A. Long
--------------------
Notary Public
EXHIBIT 2.03
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
TZAAR CORPORATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TZAAR CORPORATION
Tzaar Corporation, a Nevada corporation organized under the laws of
the State of Nevada, November 3, 1986, hereby adopts the following Articles
of Amendment to its Articles of Incorporation pursuant to the provisions of
Nevada Revised Statute, Chapter 78.385.
I
Pursuant to resolution duly adopted by the shareholders of the
corporation on August 10, 1989, 6,300,000 shares of the issued common
voting stock are to be cancelled by the corporation and returned to
authorized shares, leaving 100,000,000, $.001 par value common shares
authorized, of which 6,584,039 shares are issued and outstanding with a
stated capital of $6,584.04.
II
The number of shares outstanding in the Corporation is 6,584,039, The
number of shares entitled to vote on the amendment is 6,584,039. All stock
in the Corporation is entitled to one vote per share for each matter coming
before the meeting of the shareholders.
III
The number of shares that voted in favor of the above amendments was
3,929,754. The number of shares that voted against the above amendments
was 0.
DATED this 10th day of August 1989.
TZAAR CORPORATION
By: /s/ William C. Grant, President
-------------------------------
William C. Grant, President
Attest: /s/ Glen F. Galbraith
----------------------
Glen F. Galbraith, Secretary
STATE OF WASHINGTON )
:ss
COUNTY OF SPOKANE )
I, Daena H. Skobalski, a Notary Public, do hereby certify that on this
the 10th day of August, 1989, personally appeared before me William C.
Grant and Glen F. Galbraith, who being by me first duly sworn, declared
that they are, respectively, the President and Secretary of the
Corporation, and that they signed the foregoing document as President and
Secretary, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
August, 1989.
/s/ Daena H. Skobalski
----------------------
NOTARY PUBLIC
Residing at: Spokane
My Commission Expires:
6-4-90
EXHIBIT 2.04
AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
TZAAR CORPORATION
AMENDMENT TO THE
ARTICLES OF INCORPORATION OF TZAAR CORPORATION
Tzaar Corporation, a corporation organized under the laws of the State
of Nevada, November 3, 1986, hereby adopts the following Articles of
Amendment to its Articles of Incorporation pursuant to the provisions of
Nevada Revised Statutes Sections 78.385 and 78.390.
I
The Articles of Incorporation shall be amended to read as follows:
Article I
NAME. The name of the corporation (hereinafter called the "Corporation")
- -----
Gencell, Inc.
II
The date of the adoption of the foregoing amendments by the shareholders
was December 28, 1996. The number of shares outstanding in the Corporation
and entitled to vote on the amendment was 10,584,039. All stock in the
Corporation is entitled to one vote per share for each matter coming before
the meeting of the shareholders.
III
The number of shares that voted in favor of the above amendments was
7,520,700. The number of shares that voted against the above amendments was
0.
IV
The shareholders also voted and approved a one for ten reverse split of
the outstanding shares of the Corporation. The authorized shares will remain
at 100,000,000, $.001 par value common voting shares. Following the reverse
split there were 1,058,404 shares outstanding. The shareholders also
approved the issuance of 7,500,000 in connection with the acquisition and an
additional 3,500,000 shares in connection with a limited offering. There are
currently 12,058,404 shares issued and outstanding in the corporation.
DATED this 28th day of December, 1996.
Tzaar Corporation
By: /s/ Michael R. Davis
------------------------
Michael R. Davis
President
By: /s Tom Kubota
------------------
Tom Kubota
Secretary
STATE OF )
:ss
COUNTY OF )
On the ____ day of December, 1996, personally appeared before me Michael
R. Davis and Tom Kubota and duly acknowledged to me that they are the persons
who signed the foregoing instrument as President and Secretary respectively
and that they have read the foregoing instrument and know the contents
thereof and that the same is true of their own knowledge except as to those
matters upon which they operate on information and belief and as to those
matters believe them to be true.
____________________________________
NOTARY PUBLIC
Residing in :__________________________
My Commission Expires:
____________________
STATE OF CALIFORNIA )
):ss
COUNTY OF ORANGE )
On December 23, 1996 before me, Karen T. Hills, Notary, personally
appeared Tom Kubota and Michael R. Davis, proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities, and that by their signatures on the instrument the
person(s) or the entity upon behalf of which the persons acted, executed the
instrument.
WITNESS my hand and official seal
/s/ Karen T. Hills
------------------
Description of Attached Document
Title or Type of Document: Amendment to the Articles of Incorporation of
Tzaar Corp.
Document Date: December 23, 1996 Number of Pages: 2
Signer Other Than Named Above: No other signers
3
EXHIBIT 2.05
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
GENCELL, INC.
CERTIFICATE OF AMENDMENT
of
ARTICLES OF INCORPORATION
of
GENCELL, INC.
GENCELL, INC., a corporation organized under the laws of the State of
Nevada (the "Corporation"), by its president and secretary does hereby
certify:
1. That the Board of Directors of the Corporation by unanimous
consent in writing, dated the 29th day of September 1997, passed a
resolution declaring the following amendment to the Articles of
Incorporation be made:
NOW THEREFORE, BE IT RESOLVED, that Article One of the Corporation's
Articles of Incorporation be amended to read as follows:
ARTICLE I: The name of the Corporation shall be: "Gene-Cell", Inc.
1. The number of share of the Corporation outstanding and entitled
to vote on an amendment to the Articles of Incorporation is 12,508,404;
that the said amendment has been consented to and authorized by the written
consent of 62% of the shares of the Corporation outstanding and entitled to
vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its president and its secretary this 30th day of September, 1997.
Date: October 1, 1997 GENCELL, INC.
/s/ Michael R. Davis
--------------------
MICHAEL R. DAVIS, President
/s/ Tom Kubota
---------------
THOMAS KUBOTA, Secretary
STATE OF CALIFORNIA
COUNTY OF ORANGE
On September 25, 1997 before me, Judith H. Gain, Notary Public
personally appeared Michael R. Davis, personally known to me to be the
person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person or the entity upon behalf of which
the person acted executed the instrument.
WITNESS my hand and official seal.
/s/ Judith J. Gain
------------------
Description of attached Document
Title of Type of Document: Certificate of Amendment of Articles of
Incorporation of Gencell, Inc.
Document Date: October 1, 1997 Number of pages 1
Signer(s) Other Than Named Above: Thomas Kubota
Capacity(ies) Claimed by Signer(s)
Signer's Name: Michael R. Davis
Corporate Officer
Title President
STATE OF CALIFORNIA
COUNTY OF ORANGE
On September 26, 1997 before me, Judith J. Gain, Notary Public,
personally appeared Thomas Kubota, personally known to me to be the person
whose name is subscribed to the within instrument and acknowledged to me
that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which
the person acted, executed this instrument.
WITNESS my hand and official seal.
/s/ Judith J. Gain
--------------------------
Description of attached Document
Title of Type of Document: Certificate of Amendment of Article s of
Incorporation of Gencell, Inc.
Document Date: October 1, 1997 Number of pages 1
Signer(s) Other Than Named Above: Michael R. Davis
Capacity(ies) Claimed by Signer(s)
Signer's Name: Thomas Kubota
Corporate Officer
Title Secretary
EXHIBIT 2.06
ARTICLES OF EXCHANGE
FOR THE EXCHANGE OF SHARES OF
GENESYSTEMS, INC. FOR SHARES
OF TZAAR CORPORATION
ARTICLES OF EXCHANGE
FOR THE EXCHANGE OF SHARES OF
GENESYSTEMS, INC., (a Nevada corporation) FOR SHARES
OF TZAAR CORPORATION, (a Nevada corporation)
Pursuant to Nevada Revised Statutes 92A.200, Tzaar Corporation, a Nevada
corporation ("Tzaar"), as the acquiring corporation and Genesystems, Inc., a
Nevada corporation ("Genesystems"), as the acquired corporation in the
exchange (the "Exchange") to be effected between Genesystems and Tzaar, upon
the filing of these Articles of Exchange, have caused their Presidents and
Secretaries to execute these Articles of Exchange for the purpose of filing
with the State of Nevada, Secretary of State.
ARTICLE I
The Plan of Exchange is as follows:
(a) Parties to the Exchange and Surviving Corporation. Genesystems
will exchange all of its issued and outstanding shares for an equal amount of
shares in Tzaar. Upon the filing of these Articles of Exchange with the
State of Nevada, Secretary of State, (the "Effective Time") Genesystems will
become a wholly owned subsidiary of Tzaar. The exchange shall be pursuant to
the provisions of, and with the effect provided in Chapter 92A of Nevada
Revised Statutes.
(b) Manner and Basis of Exchanging Shares. At the Effective Time,
there shall be a one (1) for (10) reverse split of the 10,584,039 issued and
outstanding shares of Tzaar. Following the Tzaar reverse split, Genesystems
shall be acquired by Tzaar and the shareholders of Genesystems shall be
issued 7,500,000 post reverse split restricted common shares of Tzaar in
exchange for 7,500,000 common shares of Genesystems.
(c) Exchange of Certificates. At the Effective Time, holders of
Genesystems certificates, representing the total issued and outstanding
shares of Genesystems, shall deliver such certificates to Tzaar in exchange
for certificates of Tzaar.
(d) No Further Ownership Rights in Genesystems. All shares of Tzaar
restricted common stock issued in the Exchange for Genesystems shares in
accordance with the terms hereof shall be deems to have been issued in full
satisfaction of all rights pertaining to such shares of Genesystems, and
there shall be no further registration of transfers on the stock transfer
books of Genesystems of the shares of Genesystems which were outstanding
immediately prior to the Effective Time.
ARTICLE II
The Plan of Exchange has been approved and adopted by the board of
directors of Genesystems and the board of directors of Tzaar in the manner
provided by the Nevada Revised Statutes.
ARTICLE III
The plan of exchange was approved by the unanimous consent of the owners
of Genesystems. The plan of exchange was approved by the shareholders of
Tzaar pursuant to Nevada Revised Statutes. Tzaar has one class of stock,
designated as Common Stock, and 10,584,039 shares of such class were issued
and outstanding as of the record date of the vote taken to approve the Plan
of Exchange. The holders of the outstanding common stock of Tzaar
constituted a single voting group for the purposes of voting on the Plan, and
each outstanding share of such common stock was entitled to one vote.
7,520,700 of the issued and outstanding shares of common stock of Tzaar were
voted for the Plan of Exchange. The number of votes cast by the holders of
Tzaar common stock for the Plan of Exchange was sufficient for approval by
such holders.
The complete executed plan of exchange in on file at the registered
office of Tzaar.
ARTICLE IV
The Exchange shall take effect upon the effective date of these Articles
of Exchange. These Articles of Exchange shall become effective upon the date
they are filed with the State of Nevada, Secretary of State.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Exchange on behalf of Tzaar this 28th day of December, 1996.
TZAAR CORPORATION,
a Nevada corporation
By: /s/ Elaine Kaspsimalis
----------------------
Elaine Kapsimalis, President and Secretary
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Exchange on behalf of Genesystems this 28th day of December, 1996.
GENESYSTEMS, INC.,
a Nevada corporation
By: /s/ Michael R. Davis
---------------------
Michael R. Davis, President
By: /s/ Tom Kubota
---------------
Tom Kubota, Secretary
State of Utah )
:ss.
County of Salt Lake )
On the 28th day of December, 1996, personally appeared before me, a
notary public (or judge or other authorized person, as the case may be), duly
commissioned and sworn, Elaine Kapsimalis, President of Tzaar Corporation,
Michael Davis and Tom Kubota, President and Secretary respectively of
Genesystems, Inc. personally known or proven to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the
foregoing instrument and who acknowledged that they executed the instrument.
IN WITNESS WHEREOF, I have executed this notary and affixed my official
seal.
/s/ Ronald L. Poulton NOTARY SEAL
-----------------
NOTARY PUBLIC
My Commission Expires: 3-30-99
EXHIBIT 2.07
BYLAWS
BYLAWS
OF
GENCELL, INC.
TABLE OF CONTENTS
-----------------
ARTICLE I OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 Office . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II SHAREHOLDERS' MEETING. . . . . . . . . . . . . . . . . . . . .1
Section 2.1 Annual Meetings . . . . . . . . . . . . . . . . . . . . .1
Section 2.2 Special Meetings.. . . . . . . . . . . . . . . . . . . .2
Section 2.3 Notice of Shareholders' Meetings.. . . . . . . . . . . .2
Section 2.4 Waiver of Notice.. . . . . . . . . . . . . . . . . . . .3
Section 2.5 Place of Meeting.. . . . . . . . . . . . . . . . . . . .3
Section 2.6 Closing of Transfer Books or Fixing Records Date.. . . .3
Section 2.7 Quorum of Shareholders.. . . . . . . . . . . . . . . . .4
Section 2.8 Voting Lists.. . . . . . . . . . . . . . . . . . . . . .5
Section 2.9 Voting.. . . . . . . . . . . . . . . . . . . . . . . . .5
Section 2.10 Proxies.. . . . . . . . . . . . . . . . . . . . . . . .5
Section 2.11 Informal Action by Shareholders.. . . . . . . . . . . .6
ARTICLE III BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . .6
Section 3.1 General Powers.. . . . . . . . . . . . . . . . . . . . .6
Section 3.2 Number, Tenure and Qualifications. . . . . . . . . . . .6
Section 3.3 Election of the Board of Directors.. . . . . . . . . . .6
Section 3.4 Regular Meetings.. . . . . . . . . . . . . . . . . . . .6
Section 3.5 Special Meeting. . . . . . . . . . . . . . . . . . . . .7
Section 3.6 Waiver of Notice.. . . . . . . . . . . . . . . . . . . .7
Section 3.7 Quorum.. . . . . . . . . . . . . . . . . . . . . . . . .7
Section 3.8 Manner of Acting.. . . . . . . . . . . . . . . . . . . .7
Section 3.9 Powers of Directors. . . . . . . . . . . . . . . . . . .8
Section 3.10 Specific Powers of Directors. . . . . . . . . . . . . .8
Section 3.11 Vacancies.. . . . . . . . . . . . . . . . . . . . . . 10
Section 3.12 Removals. . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.13 Resignations. . . . . . . . . . . . . . . . . . . . . 11
Section 3.14 Presumption of Assent.. . . . . . . . . . . . . . . . 11
Section 3.15 Compensation. . . . . . . . . . . . . . . . . . . . . 11
Section 3.16 Emergency Power.. . . . . . . . . . . . . . . . . . . 11
Section 3.17 Chairman. . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.1 Number.. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2 Election and Term of Office. . . . . . . . . . . . . . 12
Section 4.3 Resignation. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.4 Removal. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.5 Vacancies.. . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.6 President. . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.7 Vice President.. . . . . . . . . . . . . . . . . . . . 13
Section 4.8 Secretary. . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.9 Treasurer. . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.10 General Manager.. . . . . . . . . . . . . . . . . . . 15
Section 4.11 Other Officers. . . . . . . . . . . . . . . . . . . . 15
Section 4.12 Salaries. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.13 Surety Bonds. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.1 Executive Committee. . . . . . . . . . . . . . . . . . 16
Section 5.2 Other Committees.. . . . . . . . . . . . . . . . . . . 16
ARTICLE VI CONTRACTS, LOANS, DEPOSITS AND CHECKS. . . . . . . . . . . . 17
Section 6.1 Contracts. . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.2 Loans. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.3 Deposits.. . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.4 Checks and Drafts. . . . . . . . . . . . . . . . . . . 17
Section 6.5 Bonds and Debentures.. . . . . . . . . . . . . . . . . 18
ARTICLE VII CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.1 Certificate of Shares. . . . . . . . . . . . . . . . . 18
Section 7.2 Transfer of Shares.. . . . . . . . . . . . . . . . . . 19
Section 7.3 Transfer Agent and Registrar.. . . . . . . . . . . . . 19
Section 7.4 Lost or Destroyed Certificates.. . . . . . . . . . . . 19
Section 7.5 Consideration for Shares.. . . . . . . . . . . . . . . 20
Section 7.6 Registered Shareholders. . . . . . . . . . . . . . . . 20
ARTICLE VIII INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 20
Section 8.1 Indemnification. . . . . . . . . . . . . . . . . . . . 20
Section 8.2 Other Indemnification. . . . . . . . . . . . . . . . . 21
Section 8.3 Insurance. . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.4 Settlement by Corporation. . . . . . . . . . . . . . . 22
ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII CORPORATE SEAL. . . . . . . . . . . . . . . . . . . . . . . 23
BYLAWS
OF
GENCELL, INC.
ARTICLE I
OFFICE
------
Section 1.1 Office The principal office of the Corporation outside
-------------------
the State of Nevada shall be located at 24451 Alicia Parkway, Suite C-6,
California 93691. The Corporation may maintain such other offices, within
or without the State of Nevada, as the Board of Directors may from time to
time designate. The location of the principal office may be changed by the
Board of Directors.
ARTICLE II
SHAREHOLDERS' MEETING
---------------------
Section 2.1 Annual Meetings The annual meeting of the shareholders of
---------------------------
the Corporation shall be held at such place within or without the State of
Nevada as shall be set forth in compliance with these Bylaws. The meeting
shall be held on the fourth (4th) Monday of June each year beginning with
the year 1997 at 2:00 p.m. If such day is a legal holiday, the meeting
shall be on the next business day. This meeting shall be for the election
of directors and for the transaction of such other business as may properly
come before it.
No change of the time or place of a meeting for the election of
directors, as fixed by the Bylaws, shall be made within sixty (60) days
before the election is to be held. In case of any change in such time or
place for such election of directors, notice thereof shall be given to each
stockholder entitled to vote, in person, or by letter mailed to his last
known post office address as shown on the Corporate books, twenty (20) days
before the election is held.
1
In the event that such annual meeting is omitted by oversight or
otherwise on the date herein provided for, the directors shall cause a
meeting in lieu thereof to be held as soon thereafter as conveniently may
be, and any business transacted or elections held at such meeting shall be
as valid as if transacted or held at the annual meeting. If the election
of directors shall not be held on the date designated herein for an annual
meeting of shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of
shareholders as soon thereafter as may conveniently be called. Such
subsequent meetings shall be called in the same manner as is provided for
the annual meeting of shareholders.
Section 2.2 Special Meetings. Special meetings of shareholders,
------------------------------
other than those regulated by statute, may be called at any time by the
President, or by a majority of the directors, and must be called by the
President upon written request of the holders of not less than 10% of the
issued and outstanding shares entitled to vote at such special meeting.
Section 2.3 Notice of Shareholders' Meetings. The President, Vice
----------------------------------------------
President and Secretary shall give written notice stating the place, day
and hour of the meeting, and in the case of a special meeting the purpose
or purposes for which the meeting is called, which shall be delivered not
less then ten nor more than sixty days before the day of the meeting,
either personally or by mail to each shareholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at
his address as it appears on the books of the Corporation, with postage
thereon prepaid.
Any meeting of which all shareholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
2
business notwithstanding that notice has not been given as hereinbefore
provided.
Section 2.4 Waiver of Notice. Whenever any notice is required to be
-------------------------------
given by these Bylaws, or the Articles of Incorporation, or by any of the
Corporation Laws of the State of Nevada, a shareholder may waive the notice
of meeting by attendance, either in person or by proxy, at the meeting, or
by so stating in writing, either before or after such meeting. Attendance
at a meeting for the express purpose of objecting that the meeting was not
lawfully called or convened shall not, however, constitute a waiver of
notice.
Section 2.5 Place of Meeting. The Board of Directors may designate
------------------------------
any place, either within or without the State of Nevada, as the place of
meeting for any annual meeting or for any special meeting called by the
Board of Directors. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the office of the
Corporation, in the City of Omaha, in the State of Nebraska.
Section 2.6 Closing of Transfer Books or Fixing Records Date. For
--------------------------------------------------------------
the purpose of determining shareholders entitled to notice or to vote at
any meeting of shareholders or any adjournment thereof, or shareholder
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books
shall be closed for a period not to exceed in any case fifty (50) days. If
the stock transfer books be closed for the purpose of determining
shareholders, such books shall be closed for at least ten (10) days
immediately preceding the date determined to be the date of record. In
lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than sixty (60) days and
in case of a meeting of shareholders not less than ten (10) days prior to
3
the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed
and no record date is fixed for the determination of shareholders entitled
to notice or to vote at a meeting of shareholders or shareholders entitled
to receive payment of a dividend, the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be deemed the record for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
Section 2.7 Quorum of Shareholders. Except as herein provided and as
------------------------------------
otherwise provided by law, at any meeting of shareholders a majority in
interest of all the shares issued and outstanding represented by
shareholders of record in person or by proxy shall constitute a quorum, but
a less interest may adjourn any meeting and the meeting may be held as
adjourned without further notice; provided, however, that directors shall
not be elected at the meeting so adjourned.
If notice of such adjourned meeting is sent to the stockholders
entitled to receive the same, such notice also containing a statement for
the purpose of the meeting and that the previous meeting failed for lack of
a quorum, and that under the provisions of this Section it is proposed to
hold the adjourned meeting with a quorum of those present, then any number
of stockholders, in person or by proxy, shall constitute a quorum at such
meeting unless otherwise provided by statute. When a quorum is present at
any meeting, a majority in interest of the shares represented thereat shall
decide any question brought before such meeting, unless the question is one
upon which the express provision of law or of the Articles of Incorporation
or of these Bylaws a larger or different vote is required, in which case
such express provision shall govern and control the decision of such
question.
8
Section 2.8 Voting Lists. The officer or agent having charge of the
--------------------------
stock transfer books for shares of the Corporation shall make a complete
list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of
and the number of shares held by each, which list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder, for any purpose germane to the meeting,
during the whole time of the meeting. The original stock transfer books
shall be prima-facie evidence as to which shareholders are entitled to
examine such list or transfer books or to vote at any meeting of
shareholders.
Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting of the
shareholders.
Section 2.9 Voting. A holder of an outstanding share entitled to
--------------------
vote at a meeting may vote at such meeting in person or by proxy. Except
as may otherwise be provided in the Articles of Incorporation, every
shareholder shall be entitled to one vote for each share outstanding in his
name on the record of shareholders. Except as herein or in the Articles of
Incorporation otherwise provided, all corporate action shall be determined
by a majority of the votes cast at a meeting of shareholders by the holders
of shares entitled to vote thereon.
Section 2.10 Proxies. At all meetings of shareholders, a shareholder
----------------------
may vote in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
5
Section 2.11 Informal Action by Shareholders. Any action required to
----------------------------------------------
be taken at a meeting of the shareholders, or any action which may be taken
at a meeting of the shareholders, may be taken without a meeting of the
shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
-------------------
Section 3.1 General Powers. The business and affairs of the
----------------------------
Corporation shall be managed by its Board of Directors. The Board of
Directors may adopt such rules and regulations for the conduct of their
meetings and the management of the Corporation as they deem proper.
Section 3.2 Number, Tenure and Qualifications. The number of
-----------------------------------------------
directors for the Board of Directors of the Corporation shall be not less
than one (1) nor more than ten (10). Each director shall hold office until
the next annual meeting of the shareholders and until his successor shall
have been elected and qualified. Directors need not be residents of the
State of Nevada or shareholders of the Corporation.
Section 3.3 Election of the Board of Directors. The Board of
------------------------------------------------
Directors shall be chosen by ballot at the annual meeting of shareholders
or at any meeting held in place thereof as provided by law.
Section 3.4 Regular Meetings. A regular meeting of the Board of
------------------------------
Directors shall be held without other notice than by this Bylaw,
immediately following and at the same place as the annual meeting of the
shareholders. The Directors may hold their meetings and have one or more
offices, and keep the books of the corporation outside the State of Nevada,
at any office or offices of the Corporation or at any other place as they
may from time to time by resolution determine.
6
Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment
by which all persons participating in the meeting can hear each other and
participation in a meeting under this subsection shall constitute presence
in person at the meeting, pursuant to Nevada Revised Statute, Section
78.315.
Section 3.5 Special Meeting. Special meetings of the Board of
------------------------------
Directors may be called by order of the Chairman of the Board, the
President or by one-third of the directors. The Secretary shall give
notice of the time, place and purpose or purposes of each special meeting
by mailing the same at least two days before the meeting or by telephoning
or telegraphing the same at least one day before the meeting to each
director.
Section 3.6 Waiver of Notice. Whenever any notice whatsoever is
------------------------------
required to be given by these Bylaws, or the Articles of Incorporation of
the Corporation, or by any of the Corporation Laws of the State of Nevada,
a director may waive the notice of meeting by attendance in person at the
meeting, or by so stating in writing, either before or after such meeting.
Attendance at a meeting for the express purpose of objecting that the
meeting was not lawfully called or convened shall not, however, constitute
a waiver of notice.
Section 3.7 Quorum. A majority of the members of the Board of
--------------------
Directors shall constitute a quorum for the transaction of business, but
less than a quorum may adjourn any meeting from time to time until a quorum
shall be present, whereupon the meeting may be held, as adjourned, without
further notice. At any meeting at which every director shall be present,
even though without any notice, any business may be transacted.
Section 3.8 Manner of Acting. At all meetings of the Board of
-------------------------------
11
Directors, each director shall have one vote. The act of a majority
present at a meeting shall be the act of the Board of Directors, provided a
quorum is present. Any action required to be taken or which may be taken
at a meeting if a consent in writing setting forth the action so taken
shall be signed by all the directors. The directors may conduct a meeting
by means of a conference telephone or any similar communication equipment
by which all persons participating in the meeting can hear each other.
Section 3.9 Powers of Directors. The Board of Directors shall have
---------------------------------
the responsibility for the entire management of the business of the
Corporation. In the management and control of the property, business and
affairs of the Corporation the Board of Directors is hereby vested with all
of the powers possessed by the Corporation itself so far as this
delegation of authority is not inconsistent with the laws of the State of
Nevada and with the Articles of Incorporation or with these Bylaws. The
Board of Directors shall have the power to determine what constitutes net
earnings, profits and surplus, respectively, and what amounts shall be
reserved for working capital and for any other purpose and what amounts
shall be declared as dividends, and such determination by the Board of
Directors shall be final and conclusive.
Section 3.10 Specific Powers of Directors. Without prejudice to such
general powers, it is hereby expressly declared that the directors shall
have the following powers to-wit:
(1) To adopt and alter a common seal of the corporation.
(2) To make and change regulations, not inconsistent with these By-
Laws, for the management of the corporation's affairs and
business.
(3) To purchase or otherwise acquire for the corporation any
property, rights or privileges which the corporation is
authorized to acquire.
(4) To pay for any property purchased for the corporation either
8
wholly or partly in money, stock, bonds, debentures or other
securities of the corporation.
(5) To borrow money and to make and issue notes, bonds, and other
negotiable and transferable instruments, mortgages, deeds of
trust and trust agreements, and to do every act and thing
necessary to effectuate the same.
(6) To remove any officer for cause, or any officer other than the
President summarily without cause, and in their discretion, from
time to time, to develop the powers and duties of any officer
upon any other person for the time being.
(7) To appoint and remove or suspend such subordinate officers,
agents or factors as they may deem necessary and to determine
their duties and fix, and from time to time change their salaries
or remuneration, and to require security as and when they think
fit.
(8) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers, agents and
factors.
(9) To determine who shall be authorized on the corporation's behalf
to make and sign bills, notes, acceptances, endorsements, checks,
releases, receipts, contracts and other instruments.
(10) To determine who shall be entitled to vote in the name and behalf
of the corporation upon, or to assign and transfer, any shares of
stock, bonds, or other securities of other corporations held by
this corporation.
(11) To delegate any of the powers of the Board in relation to the
ordinary business of the corporation to any standing or special
committee, or to any officer or agent (with power to sub-
delegate), upon such terms as they think fit.
9
(12) To call special meetings of the stockholders for any purpose or
purposes.
(13) The directors shall have the right and the power to propose any
amendment to the By-Laws of this corporation at any meeting
whether called for that purpose or not and to submit to the next
regular meeting of directors said proposal or amendment to the
By-Laws of this corporation.
Section 3.11 Vacancies. A vacancy in the Board of Directors shall be
------------------------
deemed to exist in case of death, resignation or removal of any director,
or if the authorized number of directors be increased, or if the
shareholders fail at any meeting of shareholders at which any director is
to be elected, to elect the full authorized number to be elected at that
meeting.
Any vacancy occurring in the Board of Directors may be filled by an
affirmative vote of the majority of the remaining directors though less
than a quorum of the Board of Directors, unless otherwise provided by law
or the Articles of Incorporation. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number of
directors shall be filled by election at the annual meeting or at a special
meeting of shareholders called for that purpose.
Section 3.12 Removals. Directors may be removed at any time, at a
-----------------------
meeting called expressly for that purpose by a vote of the shareholders
holding a majority of the shares issued and outstanding and entitled to
vote. Such vacancy shall be filled by the directors then in office, though
less than a quorum, to hold office until the next annual meeting or until
his successor is duly elected and qualified, except that any directorship
to be filled by reason of removal by the shareholders may be filled by
election, by the shareholders, at the meeting at which the director is
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of
office.
10
Section 3.13 Resignations. A director may resign at any time by
---------------------------
delivering written notification thereof to the President or Secretary of
the Corporation. Such resignation shall become effective upon its
acceptance by the Board of Directors; provided, however, that if the Board
of Directors has not acted thereon within ten days from the date of its
delivery, the resignation shall upon the tenth day be deemed accepted.
Section 3.14 Presumption of Assent. A director of the Corporation
------------------------------------
who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the Secretary
of the Corporation immediately after the adjournment of the meeting. Such
right to dissent shall not apply to a director who voted in favor of such
action.
Section 3.15 Compensation. By resolution of the Board of Directors,
---------------------------
the directors shall be paid their expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.16 Emergency Power. When, due to a national disaster or
------------------------------
death, a majority of the directors are incapacitated or otherwise unable to
attend the meetings and function as directors, the remaining members of the
Board of Directors shall have all the powers necessary to function as a
complete Board and, for the purpose of doing business and filling
vacancies, shall constitute a quorum until such time as all directors can
attend or vacancies can be filled pursuant to these Bylaws.
11
Section 3.17 Chairman. The Board of Directors may elect from its own
------------------------
number a Chairman of the Board, who shall preside at all meetings of the
Board of Directors, and shall perform such other duties as may be
prescribed from time to time by the Board of Directors.
ARTICLE IV
OFFICERS
-----------
Section 4.1 Number. The officers of the Corporation shall be a
--------------------
President, one or more Vice Presidents, a Secretary and a Treasurer, each
of whom shall be elected by a majority of the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. In its discretion, the
Board of Directors may leave unfilled for any such period as it may
determine any office except those of President and Secretary. Pursuant to
Nevada Revised Statute, Section 78.130 any two or more offices may be held
by the same person, including the offices of the President and Secretary.
Officers may or may not be directors or shareholders of the Corporation.
Section 4.2 Election and Term of Office. The officers of the
-----------------------------------------
Corporation are to be elected by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 4.3 Resignation. Any officer may resign at any time by
-------------------------
delivering a written resignation either to the President or to the
Secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
12
Section 4.4 Removal. Any officer or agent may be removed by the
---------------------
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any such removal shall require a majority vote of the
Board of Directors, exclusive of the officer in question if he is also a
director.
Section 4.5 Vacancies. A vacancy in any office because of death,
----------------------
resignation, removal, disqualification or otherwise, or if a new office
shall be created, may be filled by the Board of Directors for the unexpired
portion of the term.
Section 4.6 President. The President shall be the chief executive
-----------------------
and administrative officer of the Corporation. He shall preside at all
meetings of the shareholders and, in the absence of the Chairman of the
Board, at meetings of the Board of Directors. He shall exercise such
duties as customarily pertain to the office of President and shall have
general and active supervision over the property, business and affairs of
the Corporation and over its several officers. He may appoint officers,
agents or employees other than those appointed by the Board of Directors.
He may sign, execute and deliver in the name of the Corporation, powers of
attorney, certificates of stock, contracts, bonds, deeds, mortgages and
other obligations and shall perform such other duties as may be prescribed
from time to time by the Board of Directors or by the Bylaws.
Section 4.7 Vice President. The Vice President shall have such
----------------------------
powers and perform such duties as may be assigned to him by the Board of
Directors or the President. In the absence or disability of the President,
the Vice President designated by the board or the President shall perform
13
the duties and exercise the powers of the President. In the event there is
more than one Vice President and the Board of Directors has not designated
which Vice President is to act as President, then the Vice President who
was elected first shall act as President. A Vice President may sign and
execute contracts and other obligations pertaining to the regular course of
his duties.
Section 4.8 Secretary. The Secretary shall keep the minutes of all
------------------------
meetings of the shareholders and of the Board of Directors and to the
extent ordered by the Board of Directors or the President, the minutes of
meetings of all committees. He shall cause notice to be given of the
meetings of shareholders, of the Board of Directors and any committee
appointed by the Board. He shall have custody of the corporate seal and
general charge of the records, documents and papers of the Corporation not
pertaining to the performance of the duties vested in other officers, which
shall at all reasonable times be open to the examination of any director.
He may sign or execute contracts with the President or Vice President
thereunto authorized in the name of the Corporation and affix the seal of
the Corporation thereto. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws.
He shall be sworn to the faithful discharge of his duties. Assistant
Secretaries shall assist the Secretary and shall keep and record such
minutes of meetings as shall be directed by the Board of Directors.
Section 4.9 Treasurer. The Treasurer shall have general custody of
-----------------------
the collection and disbursement of funds of the Corporation for collection
checks, notes, and other obligations, and shall deposit the same to the
credit of the Corporation in such bank or banks or depositories as the
Board of Directors may designate. He may sign, with the President, or such
other persons as may be designated for the purpose by the Board of
14
Directors, all bills of exchange or promissory notes of the Corporation.
He shall enter or cause to be entered regularly in the books of the
Corporation full and accurate accounts of all monies received and paid by
him on account of the Corporation; shall at all reasonable times exhibit
his books and accounts to any director of the Corporation upon application
at the office of the Corporation during business hours; and, whenever
required by the Board of Directors or the President, shall render a
statement of his accounts. Upon request by the Board of Directors, he
shall give the corporation a bond for the faithful discharge of his duties
in such amount and with such surety as the Board shall prescribe. He shall
perform such other duties as may be prescribed from time to time by the
Board of Directors or by the Bylaws.
Section 4.10 General Manager. The Board of Directors may employ and
-------------------------------
appoint a General Manager who may, or may not, be one of the officers or
directors of the Corporation. If employed by the Board of Directors he
shall be the chief operating officer of the Corporation and, subject to the
directions of the Board of Direction, shall have general charge of the
business operations of the Corporation and general supervision over its
employees and agents. He shall have the exclusive management of the
business of the Corporation and of all of its dealings, but at all times
subject to the control of the Board of Directors. Subject to the approval
of the Board of Directors or the executive committee, he shall employ all
employees of the Corporation, or delegate such employment to subordinate
officers, or such division officers, or such division chiefs, and shall
have authority to discharge any person so employed. He shall make a
quarterly report to the President and directors, or more often if required
to do so, setting forth the result of the operations under his charge,
together with suggestions looking to the improvement and betterment of the
condition of the Corporation, and to perform such other duties as the Board
of Directors shall require.
Section 4.11 Other Officers. Other officers shall perform such
-----------------------------
duties and have such powers as may be assigned to them by the Board of
15
Directors.
Section 4.12 Salaries. The salaries or other compensation of the
-----------------------
officers of the Corporation shall be fixed from time to time by the Board
of Directors except that the Board of Directors may delegate to any person
or group of persons the power to fix the salaries or other compensation of
any subordinate officers or agents. No officer shall be prevented from
receiving any such salary or compensation by reason of the fact that he is
also a director of the Corporation.
Section 4.13 Surety Bonds. In case the Board of Directors shall so
---------------------------
require, any officer or agent of the Corporation shall execute to the
Corporation a bond in such sums and with sureties as the Board of Directors
may direct, conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the accounting
for all property, monies or securities of the Corporation which may come
into his hands.
ARTICLE V
COMMITTEES
----------
Section 5.1 Executive Committee. The Board of Directors may appoint
---------------------------------
from among its members an Executive Committee of not less than two (2) nor
more than seven (7) members, one of whom shall be the President, and shall
designate one or more of its members as alternates to serve as a member or
members of the Executive Committee in the absence of a regular member or
members. The Board of Directors reserves to itself alone the power to
declare dividends, issue stock, recommend to shareholders any action
requiring their approval, change the membership of any committee at any
time, fill vacancies therein, and discharge any committee either with or
without cause at any time. Subject to the foregoing limitations, the
Executive Committee shall possess and exercise all other powers of the
Board of Directors during the intervals between meetings.
16
Section 5.2 Other Committees. The Board of Directors may also
-------------------------------
appoint from among its own members such other committees as the Board may
determine, which shall in each case consist of not less than two (2)
directors, and which shall have such powers and duties as shall from time
to time be prescribed by the Board. The President shall be a member ex
officio of each committee appointed by the Board of Directors. A majority
of the members of any committee may fix its rules of procedure.
ARTICLE VI
CONTRACTS, LOANS, DEPOSITS AND CHECKS
--------------------------------------
Section 6.1 Contracts. The Board of Directors may authorize any
-----------------------
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific instances.
Section 6.2 Loans. No loan or advances shall be contracted on behalf
-------------------
of the Corporation, no negotiable paper or other evidence of its
obligations under any loan or advance shall be issued in its name, and no
property of the Corporation shall be mortgaged, pledged, hypothecated or
transferred as security for the payment of any loan, advance, indebtedness
or liability of the Corporation unless and except as authorized by the
Board of Directors. Any such authorization may be general or confined to
specific instances.
Section 6.3 Deposits. All funds of the Corporation not otherwise
----------------------
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the
Board of Directors may select, or as may be selected by any officer or
agent authorized to do so by the Board of Directors.
17
Section 6.4 Checks and Drafts. All notes, drafts, acceptances,
-------------------------------
checks, endorsements and evidences of indebtedness of the Corporation shall
be signed by such officer or officers of such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time
may determine. Endorsements for deposit to the credit of the Corporation
in any of its duly authorized depositories shall be made in such manner as
the Board of Directors from time to time may determine.
Section 6.5 Bonds and Debentures. Every bond or debenture issued by
----------------------------------
the Corporation shall be evidenced by an appropriate instrument which shall
be signed by the President or a Vice President and by the Treasurer or by
the Secretary, and sealed with the seal of the Corporation. The seal may
be facsimile, engraved or printed. Where such bond or debenture is
authenticated with the manual signature of an authorized officer of the
Corporation or other trustee designated by the indenture of trust or other
agreement under which such security is issued, the signature of any of the
Corporation's officers named thereon may be facsimile. In case of any
officer who signed, or whose facsimile signature has been used on any such
bond or debenture, shall cease to be an officer of the Corporation for any
reason before the same has been delivered by the Corporation, such bond or
debenture may nevertheless be adopted by the Corporation and issued and
delivered as though the person who signed it or whose facsimile signature
has been used thereon had not ceased to be such officer.
ARTICLE VII
CAPITAL STOCK
--------------
Section 7.1 Certificate of Shares. The shares of the Corporation
-----------------------------------
shall be represented by certificates prepared by the Board of Directors and
signed by the President or the Vice President, and by the Secretary, or an
Assistant Secretary, or the Treasurer, and sealed with the seal of the
Corporation or a facsimile. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a
18
transfer agent or registered by a registrar other than the Corporation
itself or one of its employees. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the
number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation
for transfer shall be cancelled and no new certificate shall be issued
until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
Section 7.2 Transfer of Shares. Transfer of shares of the
--------------------------------
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by his legal representative,
who shall furnish proper evidence of authority to transfer, or by his
attorney thereunto authorized by power of attorney duly executed and filed
with the Secretary of the Corporation, and on surrender for cancellation of
the certificate for such shares. The person in whose name shares stand on
the books of the Corporation shall be deemed by the Corporation to be the
owner thereof for all purposes.
Section 7.3 Transfer Agent and Registrar. The Board of Directors
------------------------------------------
shall have power to appoint one or more transfer agents and registrars for
the transfer and registration of certificates of stock of any class, and
may require that stock certificates shall be countersigned and registered
by one or more of such transfer agents and registrars.
Section 7.4 Lost or Destroyed Certificates. The Corporation may
--------------------------------------------
issue a new certificate to replace any certificate theretofore issued by it
19
alleged to have been lost or destroyed. The Board of Directors may require
the owner of such a certificate or his legal representatives to give the
Corporation a bond in such sum and with such sureties as the Board of
Directors may direct to indemnify the Corporation and its transfer agents
and registrars, if any, against claims that may be made on account of the
issuance of such new certificates. A new certificate may be issued without
requiring any bond.
Section 7.5 Consideration for Shares. The capital stock of the
--------------------------------------
Corporation shall be issued for such consideration, but not less than the
par value thereof, as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the determination of the Board of
Directors as to the value of any property or services received in full or
partial payment of shares shall be conclusive.
Section 7.6 Registered Shareholders. The Corporation shall be
-------------------------------------
entitled to treat the holder of record of any share or shares of stock as
the holder thereof in fact, and shall not be bound to recognize any
equitable or other claim to or on behalf of the Corporation, any and all of
the rights and powers incident to the ownership of such stock at any such
meeting, and shall have power and authority to execute and deliver proxies
and consents on behalf of the Corporation in connection with the exercise
by the Corporation of the rights and powers incident to the ownership of
such stock. The Board of Directors, from time to time may confer like
powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 8.1 Indemnification. No officer or director shall be
-----------------------------
personally liable for any obligations arising out of any acts or conduct or
said officer or director performed for or on behalf of the Corporation.
The Corporation shall and does hereby indemnify and hold harmless each
person and his heirs and administrators who shall serve at any time
hereafter as a director or officer of the Corporation from and against any
20
and all claims, judgments and liabilities to which such persons shall
become subject by reason of any action alleged to have been heretofore or
hereafter taken or omitted to have been taken by him as such director or
officer, and shall reimburse each such person for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability; including power to defend such person from all suits as
provided, however, that no such person shall be indemnified against, or be
reimbursed for, any expense incurred in connection with any claim or
liability arising out of his own negligence or willful misconduct. The
rights accruing to any person under the foregoing provisions of this
section shall not exclude any other rights to which he may lawfully be
entitled, nor shall anything herein contained restrict the right of the
Corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, its
directors, officers, employees and agents shall be fully protected in
taking any action or making any payment or in refusing so to do in reliance
upon the advice of counsel.
Section 8.2 Other Indemnification. The indemnification herein
-----------------------------------
provided shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 8.3 Insurance. The Corporation may purchase and maintain
-----------------------
insurance on behalf of any person who is or was a director, officer or
employee of the Corporation, or is or was serving at the request of another
corporation, partnership, joint venture, trust or other enterprise against
21
any liability asserted against him and incurred by him in any capacity, or
arising out of his status as such, whether or not the Corporation would
have the power to indemnify him against liability under the provisions of
this Article 8 or the laws of the State of Nevada.
Section 8.4 Settlement by Corporation. The right of any person to be
---------------------------------------
indemnified shall be subject always to the right of the Corporation by its
Board of Directors, in lieu of such indemnity, to settle any such claim,
action, suit or proceeding at the expense of the Corporation by the payment
of the amount of such settlement and the costs and expenses incurred in
connection therewith.
ARTICLE IX
AMENDMENTS
----------
These Bylaws may be altered, amended, repealed, or added to by the
affirmative vote of the holders of a majority of the shares entitled to
vote in the election of any director at an annual meeting or at a special
meeting called for that purpose, provided that a written notice shall have
been sent to each shareholder of record entitled to vote at such meetings
at least ten (10) days before the date of such annual or special meetings,
which notice shall state the alterations, amendments, additions, or changes
which are proposed to be made in such Bylaws. Only such changes shall be
made as have been specified in the notice. The Bylaws may also be altered,
amended, repealed, or new Bylaws adopted by a majority of the entire Board
of Directors at any regular or special meeting. Any Bylaws adopted by the
Board may be altered, amended, or repealed by a majority of the
shareholders entitled to vote.
ARTICLE X
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be December 31st and may be
varied by resolution of the Board of Directors.
22
ARTICLE XI
DIVIDENDS
---------
The Board of Directors may at any regular or special meeting, as they
deem advisable, declare dividends payable out of the unreserved and
unrestricted earned surplus of the Corporation, such declaration shall be
made in accord with the Nevada Revised Statute, Section 78.288 thru 78.300.
ARTICLE XII
CORPORATE SEAL
---------------
The corporate seal may be used by causing it or a facsimile thereof to
be impressed affixed or reproduced or otherwise.
Adopted by resolution of the Board of Directors this 28th day of
December, 1996.
/s/ Tom Kubota
--------------
Secretary
23
EXHIBIT 6.1
ASSIGNMENT OF PATENT,
"METHOD AND DEVICE IN
MICROINJECTION OF MACROMOLECULES
WITH NON-ADHERENT CELLS."
ASSIGNMENT AGREEMENT
---------------------
This AGREEMENT is made this 15th day of 1997, by and between GENCELL,
INC. d/b/a THE REXFORD GROUP ("Rexford Group"), (the "Assignee"), and DR.
BRIAN R. DAVIS and DR. DAVID B. BROWN (Brian Davis and David Brown
hereinafter together referred to as the "Inventors Group"), (the
"Assignor").
RECITALS:
A. The Inventors Group owns certain rights to technology relating to
"Methods and Apparatus for Incorporating Macromolecules Into
Cells."
B. The Rexfbrd Group wishes to obtain assignment of said technology
and patent rights to said technology.
C. The parties hereto desire to enter into this Agreement in order
to effect assignment of said technology to the Rexford Group.
NOW, THEREFORE for GOOD AND VALUABLE CONSIDERATION, the receipt,
sufficiency and adequacy of which are acknowledged, the Inventors Group
does hereby SELL, ASSIGN AND TRANSFER to the Rexford Group (the Assignee),
the entire right, title and interest for the United States and all foreign
countries in United States Patent Application Serial No. _______, which
has been filed on December 20, 1996, and is entitled, "IMPROVED METHODS FOR
INCORPORATING MACROMOLECULES INTO CELLS" according to the following terms
herein:
1. DEFINITIONS
--------------
As used in this Agreement, the following terms shall have the meanings
indicated:
1.1 Assigned Subject Matter shall mean inventions and discoveries
covered by Patent Rights or Technology Rights which is within the
subject Field.
1.2 Technology Rights shall mean the Inventors Group's rights in any
technical information, know-how, process, procedure, composition, device,
method, formula, protocol, technique, software, design, drawing or data
relating to "Methods and Apparatus for Incorporating Macromolecules into
Cells" which is not covered by Patent Rights but which is necessary for
practicing the invention at any time covered by Patent Rights.
1.3 Subject Field shall mean technology related to "Methods and
Apparatus for Incorporating Macromolecules into Cells", and uses thereof in
gene therapy.
1
1.4 Sale or Sold shall mean the transfer or disposition of a Product
of the Subject Technology as used in conjunction thereon to a party other
than the Assignee or a subsidiary.
1.5 Subsidiary shall mean any business entity more than 50% owned by
Assignee, any business entity which owns more than 50% of the assigned
technology, any business entity that is more than 50% owned by a business
entity that owns more than 50% of the Assignee.
1.6 Net Sales shall mean the gross revenues received by the Assignee
from the sale of assigned products or those used therewith less sales
and/or use, tax actually paid, import and/or export duties actually paid,
outbound transportation - prepaid or allowed, and amounts allowed or
credited due to returns (not to exceed the original billing or invoice
amount).
II. TRANSFER OF TECHNOLOGY
---------------------------
The Inventors Group agrees to assign the technology as described in
the document provided hereto as Attachment "A" to the Rexford Group for the
purpose of marketing and developing of the Technology and products using
the Technology through a public entity to be known as GenCell, Inc. d/b/a
The Rexford Group ("Rexford" or "Company").
III. CONSIDERATION FOR TRANSFER
--------------------------------
In consideration of the assigned transfer of the Technology to the
Company, each of the inventors of the Inventors Group shall receive fifty
thousand dollars ($50,000). Twenty thousand dollars ($20,000) shall be
delivered to each inventor of the Inventors Group upon Close of Escrow in
such form and on such dates as each Inventor designates. The remaining
thirty thousand dollars ($30,000) shall be delivered to each of the
inventors of the Inventors Group by January 15, 1998.
IV. DISCLOSURE DOCUMENTS
-------------------------
4.1 The Inventors will be supplied with the following information
concerning the Company:
(a) Audited Financial Statements for the two full years and the
partial year ended June 16,1996 (included as Exhibit "B").
(b) Complete and current as well as periodically updated
Shareholder Listing for the Company, including full name,
address and number of present shares held (included as
Exhibit "C").
2
(c) Other pertinent material regarding the Company including but
not limited to date formed, state of domicile, initial line
of business and industry, names and descriptions of initial
and current key owners, promoters and officers, minutes,
articles of incorporation, by-laws, contracts, accounting
records, tax returns and stock offering documents (these key
items to be included as Exhibit "D").
4.2 The Inventors and their attorneys acknowledge that they have the
right to fully investigate the Company, and to inquire of its present
management concerning its operations, financial condition and prospects.
The Inventors also have the right to ask its own independent auditing firm
to determine whether the Company's financial statements are able to be
audited: past, present and future.
4.3 The Inventors further understand that the shares of Common
Stock to be issued by the Company will be restricted, and that only a
limited market presently exists for such shares.
V. THIRD PARTY BENEFICIARIES
----------------------------
This Agreement may be enforced only by the parties hereto, and their
permitted assigns, and not by any person or legal entity that is not a
signatory hereto.
VI. ARBITRATION
----------------
In the event of any dispute concerning the performance, interpretation
or enforcement of this Agreement, such dispute shall be submitted to
binding arbitration under the rules of JAMS/Endispute, which arbitration
shall be conducted in the State of Texas.
VII. RIGHTS OF THIRD PARTIES
----------------------------
7.1 The University of Texas System ("UTS") reserves for itself a
royalty-free, non- exclusive license to use this invention (whether the
patent is issued or not) in its own educational, research and patient care
activities.
7.2 Royalties and up front monies received from any license agreement
of the Subject Technology entered into by the Company shall be divided
equally between the Rexford Group and the Inventors Group.
3
VIII. PATENT MARKING
---------------------
The Rexford Group agrees to mark permanently and legibly all products
and documentation manufactured or sold by it under this Agreement with such
patent notice as may be permitted or required under Title 35, United States
Code.
IX. GENERAL
------------
9.1 No agreements altering or supplementing the terms hereof may be
made except by means of a written document signed by the duly authorized
representatives of the parties.
9.2 Any notice required by this Agreement shall be given by prepaid,
first class, certified mail, return receipt requested, addressed in the
case of the Inventors to:
Attention: Dr. Brian Davis
2107 Barrington Point Drive
League City, TX 77573
or in the case of The Rexford Group to:
Attention: Michael Davis
22681 Sweet Meadow
Mission Viejo, CA
or such other addresses as may be given from time to time under the terms
of this notice provision.
9.3 The Agreement shall comply with all applicable federal, state and
local laws and regulations in connection with its activities pursuant to
this Agreement.
9.4 Failure of the Rexford Group or the Inventors Group to enforce a
right under this Agreement shall not act as a waiver of that right or the
ability to later assert that right relative to the particular situation
involved.
9.5 Headings included herein are for convenience only and shall not
be used to construe this Agreement.
9.6 If any provision of this Agreement shall be found by a court to
be void, invalid or unenforceable, the same shall be reformed to comply
with applicable law or stricken if not so conformable, so as not to affect
the validity or enforceability of this Agreement.
4
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
By: /s/ Dr. Brian R. Davis By: /s/ Dr. David B. Brown
- --------------------------- ----------------------------
Dr. Brian R. Davis Dr. David B. Brown
By: /s/ Michael R. Davis
--------------------------
Chairman of the board
GenCell, Inc.
5
EXHIBIT 6.2
ASSIGNMENT OF PATENT,
"NUCLEIC ACID CONSTRUCTS
AND USES THEREOF FOR DIRECT NUCLEIC
ACID INCORPORATION INTO CELLS."
ASSIGNMENT
----------
FOR GOOD AND VALUABLE CONSIDERATION, the receipt, sufficiency and
adequacy of which are hereby acknowledged, the undersigned, do hereby:
SELL, ASSIGN AND TRANSFER, to Gene-Cell (the "Assignee"), having a
place of business at 1010 Hercules, Houston, TX 77058, the entire right,
title and interest for the United States and all foreign countries in and
to any and all improvements which are disclosed in the application for
International publication No. WO 98/28417 which has been filed on December
20, 1996 and is entitled NUCLEIC ACID CONSTRUCTS AND USES THEREOF FOR
DIRECT NUCLEIC ACID INCORPORATION INTO CELLS, such application and all
divisional, continuing, substitute, renewal, reissue and all other
applications for patent which have been or shall be filed in the United
States and all foreign countries on any of such improvements; all original
and reissued patents which have been or shall be issued in the United
States and all foreign countries on such improvements; and specifically
including the right to file foreign applications under the provisions of
any convention or treaty and claim priority based on such application in
the United States;
AUTHORIZE AND REQUEST the issuing authority to issue any and all
United States and foreign patents granted on such improvements to the
Assignee;
WARRANT AND COVENANT that no assignment grant, mortgage, license or
other agreement affecting the rights and property herein conveyed has been
or will be made to others by the undersigned, and that the full right to
convey the same as herein expressed is possessed by the undersigned;
COVENANT, when requested and at the expense of the Assignee, to carry
out in good faith the intent and purpose of this assignment, the
undersigned will execute all divisional, continuing, substitute, renewal,
reissue, and all other patent applications on any and all such
improvements; execute all rightful oaths, declarations, assignments, powers
of attorney and other papers; communicate to the Assignee all facts known
to the undersigned relating to such improvements and the history thereof;
and generally do everything possible which the Assignee shall consider
desirable for vesting title to such improvements in the Assignee, and for
securing, maintaining and enforcing proper patent protection for such
improvements;
TO BE BINDING on the heirs, assigns, representatives and successor of
the undersigned and extend to the successors, assigns, and nominees of the
Assignee.
(Signature) By: /s/ Brian R. Davis Date: 7/22/99
---------------------------------
Name: Brian R. Davis
STATE OF TEXAS )
) ss.
COUNTY OF GALVESTON )
BEFORE Me, the undersigned authority, on this 22ND day of July, 1999,
personally appeared BRIAN R. DAVIS known to me to be the person whose name
is subscribed to the foregoing instrument and acknowledged to me that he
executed the same of his own free will for the purposes and consideration
therein expressed.
By: /s/ Margaret Taylor
----------------------------
Notary or Consular Officer
(Signature) By: /s/ Aquig Yao Date: 7/22/99
-----------------
Name: Aquig Yao
STATE OF TEXAS )
) ss.
COUNTY OF GALVESTON )
BEFORE Me, the undersigned authority, on this 22ND day of July, 1999,
personally appeared BRIAN R. DAVIS known to me to be the person whose name
is subscribed to the foregoing instrument and acknowledged to me that he
executed the same of his own free will for the purposes and consideration
therein expressed.
By: /s/ Margaret Taylor
------------------------
Notary or Consular Officer
EXHIBIT 6.3
SECURED PROMISSORY NOTE
SECURED PROMISSORY NOTE
$500,000 - Due January 15, 1999
$500,000 - Due January 15, 2000
FOR VALUE RECEIVED, the undersigned AMAFIN TRUST, a Liechtenstein
Trust, hereby promises to pay to GENE-CELL, INC. ("Payee" or "Order") at
Houston, Texas:
1. The principal amount of Five Hundred Thousand Dollars
($500,000) is due on or before January 15, 1999, for the purchase of
2,000,000 shares of common stock of Gene-Cell, Inc. to be issued as
follows:
a. 1,000,000 shares to Rheinland Stiftung;
b. 500,000 shares to Spezialtransporte AG; and
c. 500,000 shares to AURIC Stiftung.
1.1 Payment of this Note is secured by the stock described
above.
1.2 The unpaid principal amount of this Note shall mature and
become immediately due and payable on January 15, 1999,
without presentment of demand for payment, dishonor or
notice of dishonor, protest or notice of protest or other
formality, all of which are expressly waived.
2. The principal amount of Five Hundred Thousand Dollars ($500,000)
is due on or before January, 15, 2000, for the purchase of
2,000,000 shares of common stock of Gene-Cell, Inc. to be issued
as follows:
a. 1,000,000 shares to Spezialtransporte AG; and
b. 1,000,000 shares to AURIC Stiftung.
2.1 Payment of this Note is secured by the stock described
above.
2.2 The unpaid principal amount of this Note shall mature and
become immediately due and payable on January 15, 2000,
without presentment of demand for payment, dishonor or
notice of dishonor, protest or notice of protest or other
formality, all of which are expressly waived.
Default: Default shall occur upon Borrower failing to make full
payment of the principal due within three (3) days of the date upon which
it is due and payable and, upon an event of default, Payee may forthwith,
in addition to other remedies, cancel any stock that has not been paid for
and return said stock treasury.
This Note shall be governed by the laws of the State of California.
Principal and interest on this Note shall be payable in lawful money of the
United States of America.
Attorney Fees. In the event any party hereto shall institute an
action to enforce any rights granted hereunder, the prevailing party in
such action shall be entitled, in addition to any other relief awarded by
the court, to such reasonable attorney's fee as the court may award.
AMAFIN TRUST
By: /s/ Manfred Heeb
- ----------------------------------
Its: President and Trustee
EXHIBIT 12.1
1996 STOCK OPTION PLAN
1
Tzaar Corporation
1996 Stock Option Plan
Section 1. Purpose; Definitions.
- ------------------------------------
1.1 Purpose. The purpose of the Tzaar Corporation (the "Company")
1996 Stock Option Plan (the "Plan") is to enable the Company to offer to
its key employees, officers, directors, consultants and sales
representatives whose past, present and/or potential contributions to the
Company and its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a proprietary interest in
the Company. The various types of long-term incentive awards which may be
provided under the Plan will enable the Company to respond to changes in
compensation practices, tax laws, accounting regulations and the size and
diversity of its business.
1.2 Definitions. For purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Agreement" means the agreement between the Company and the
Holder setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto and the regulations
promulgated thereunder.
(d) "Committee" means the Stock Option Committee of the Board or
any other committee of the Board, which the Board may designate to
administer the Plan or any portion thereof. If no Committee is so
designated, then all references in this Plan to "Committee" shall mean the
Board.
(e) "Common Stock" means the Common Stock of the Company, par
value $.001 per share.
(f) "Company" means Tzaar Corporation, a corporation organized
under the laws of the State of Nevada.
(g) "Deferred Stock" means Stock to be received, under an award
made pursuant to Section 9, below, at the end of a specified deferral
period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
2
(i) "Effective Date" means the date set forth in Section 13.1,
below.
(j) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder,
means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, the last sale price of the Common Stock in the
principal trading market for the Common Stock on the last trading day
preceding the date of grant of an award hereunder, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not
listed on a national securities exchange or quoted on the Nasdaq National
Market or Nasdaq SmallCap Market, but is traded in the over-the-counter
market, the closing bid price for the Common Stock on the last trading day
preceding the date of grant of an award hereunder for which such quotations
are reported by the OTC Bulletin Board or the National Quotation Bureau,
Incorporated or similar publisher of such quotations; and (iii) if the fair
market value of the Common Stock cannot be determined pursuant to clause
(i) or (ii) above, such price as the Committee shall determine, in good
faith.
(k) "Holder" means a person who has received an award under the
Plan.
(l) "Incentive Stock Option" means any Stock Option intended to
be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(m) "Nonqualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment
with the Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 10,
below, that is valued in whole or in part by reference to, or is otherwise
based upon Stock.
(p) "Parent" means any present or future parent corporation of
the Company, as such term is defined in Section 424(e) of the Code.
(q) "Plan" means Tzaar Corporation 1996 Stock Option Plan, as
hereinafter amended from time to time.
(r) "Restricted Stock" means Stock, received under an award made
pursuant to Section 8, below, that is subject to restrictions under said
Section 8.
(s) "SAR Value" means the excess of the Fair Market Value (on
the exercise date) of the number of shares for which the Stock Appreciation
Right is exercised over the exercise price that the participant would have
otherwise had to pay to exercise the related Stock Option and purchase the
relevant shares.
3
(t) "Stock" means the Common Stock of the Company, par value
$.001 per share.
(u) "Stock Appreciation Right" means the right to receive from
the Company, on surrender of all or part of the related Stock Option,
without a cash payment to the Company, a number of shares of Common Stock
equal to the SAR Value divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(w) "Stock Reload Option" means any option granted under Section
6.3, below, as a result of the payment of the exercise price of a Stock
Option and/or the withholding tax related thereto in the form of Stock
owned by the Holder or the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of
the Code.
Section 2. Administration.
- -------------------------------
2.1 Committee Membership. The Plan shall be administered by the
Board or a Committee. Committee members shall serve for such terms as the
Board may in each case determine, and shall be subject to removal at any
time by the Board.
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4.2, below, to award, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the Committee
shall have the authority (subject to the express provisions of this Plan):
(a) to select the officers, key employees, directors,
consultants and sales representatives of the Company or any Subsidiary to
whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Reload Stock Options and/or Other Stock-Based Awards may from time
to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, number of shares, share price, any restrictions or limitations,
and any vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions, as the Committee shall
determine);
(c) to determine any specified performance goals or such other
factors or criteria which need to be attained for the vesting of an award
granted hereunder;
(d) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash awards
made by the Company or any Subsidiary outside of this Plan;
4
(e) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish,
including the crediting of interest on deferred amounts denominated is cash
and of dividend equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which Stock
and other amounts payable with respect to an award hereunder shall be
deferred which may be either automatic or at the election of the Holder;
and
(g) to substitute (i) new Stock Options for previously granted
Stock Options, which previously granted Stock Options have higher option
exercise prices and/or contain other less favorable terms, and (ii) new
awards of any other type for previously granted awards of the same type,
which previously granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 4.2(iv) and 12,
below, the Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as
it shall, (deem advisable) from time to time, to interpret the terms and
provisions of the Plan and any award issued under the Plan (and to
determine the form and substance of all Agreements relating thereto), to
and otherwise supervise the administration of the Plan. Subject to Section
12, below, all decisions made by the Committee pursuant to the provisions
of the Plan shall be made in the Committee's sole discretion and shall be
final and binding upon all persons, including the Company, its Subsidiaries
and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options (including but limited to Stock Reload Options or
Stock Appreciation rights granted in conjunction with an Incentive Stock
Option) or any Agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the Holder(s) affected,
to disqualify any Incentive Stock Option under such Section 422.
Section 3. Stock Subject to Plan.
- -------------------------------------
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 2,500,000
shares. Shares of Stock under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares. If any shares of
Stock that have been granted pursuant to a Stock Option cease to be subject
to a Stock Option, or if any shares of Stock that are subject to any Stock
Appreciation Right, Restricted Stock, Deferred Stock award, Reload Stock
Option or Other Stock-Based Award granted hereunder are forfeited or any
such award otherwise terminates without a payment being made to the Holder
in the form of Stock, such shares shall again be available for distribution
in connection with future grants and awards under the Plan. Only net
shares issued upon a stock-for-stock exercise (including stock used for
withholding taxes) shall be counted against the number of shares available
under the Plan.
5
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of
any merger, reorganization, consolidation, recapitalization, dividend
(other than a cash dividend), stock split, reverse stock split, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for
issuance under the Plan, in the number and exercise price of shares subject
to outstanding Options, in the number of shares and Stock Appreciation
Right price relating to Stock Appreciation Rights, and in the number of
shares and Stock Appreciation Right price relating to Stock Appreciation
Rights, and in the number of shares subject to, and in the related terms
of, other outstanding awards (including but not limited to awards of
Restricted Stock, Deferred Stock, Reload Stock Options and Other Stock-
Based Awards) granted under the Plan as may be determined to be appropriate
by the Committee in order to prevent dilution or enlargement of rights,
provided that the number of shares subject to any award shall always be a
whole number.
Section 4. Eligibility.
- ----------------------------
Awards may be made or granted to key employees, officers, directors,
consultants and sales representatives who are deemed to have rendered or to
be able to render significant services to the Company or its Subsidiaries
and who are deemed to have contributed to or have the potential to
contribute to the success of the Company. No Incentive Stock Option shall
be granted to any person who is not an employee of the Company or a
Subsidiary at the time of grant.
Section 5. Required Six-Month Holding Period.
- -------------------------------------------------
Any equity security issued under this Plan may not be sold prior to
six months from the date of the grant of the related award without the
approval of the Company.
Section 6. Stock Options.
- ------------------------------
6.1 Grant and Exercise. Stock Options granted under the Plan may be
of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock
Options. Any Stock Option granted under the Plan shall contain such terms,
not inconsistent with this Plan, or with respect to Incentive Stock
Options, not inconsistent with the Code, as the Committee may from time to
time approve. The Committee shall have the authority to grant Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options
and which may be granted alone or in addition to other awards granted under
the Plan. To the extent that any Stock Option intended to qualify as an
Incentive Stock Option does not so qualify, it shall constitute a separate
Nonqualified Stock Option. An Incentive Stock Option may be granted only
within the ten-year period commencing from the Effective Date and may only
be exercised within ten years of the date of grant (or five years in the
case of an Incentive Stock Option granted to an optionee ("10%
Stockholder") who, at the time of grant, owns Stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company.
6
6.2 Terms and Conditions. Stock Options granted under the Plan shall
be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant and may not be less than 100% of the Fair Market Value of
the Stock as defined above; provided, however, that the exercise price of
an Incentive Stock Option granted to a 10% Stockholder shall not be less
than 110% of the Fair Market Value of the Stock.
(b) Option Term. Subject to the limitations in Section 6.1,
above, the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee and as set forth in Section 11, below. If the
Committee provides, in its discretion, that any Stock Option is exercisable
only in installments, i.e., that it vests over time, the Committee may
waive such installment exercise provisions at any time at or after the time
of grant in whole or in part, based upon such factors as the Committee
shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the
term of the Option, by giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchase. Such notice shall
be accompanied by payment in full of the purchase price, which shall be in
cash or, unless otherwise provided in the Agreement, in shares of Stock
(including Restricted Stock and other contingent awards under this Plan)
or, partly in cash and partly in such Stock, or such other means which the
Committee determines are consistent with the Plan's purpose and applicable
law. Cash payments shall be made by wire transfer, certified or bank check
or personal check, in each case payable to the order of the Company;
provided, however, that the Company shall not be required to deliver
certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of
Stock shall be valued at the Fair Market Value of a share of Stock on the
date prior to the date of exercise. Such payments shall be made by
delivery of stock certificates in negotiable form which are effective to
transfer good and valid title thereto to the Company, free of any liens or
encumbrances. Subject to the terms of the Agreement, the Committee may, in
its sole discretion, at the request of the Holder, deliver upon the
exercise of a Nonqualified Stock Option a combination of shares of Deferred
Stock and Common Stock; provided that, notwithstanding the provision of
Section 9 of the Plan, such Deferred Stock shall be fully vested and not
subject to forfeiture. A Holder shall have none of the rights of a
stockholder with respect to the shares subject to the Option until such
shares shall be transferred to the Holder upon the exercise of the Option.
7
(e) Transferability. No Stock Option shall be transferable by
the Holder other than by will or by the laws of descent and distribution,
and all Stock Options shall be exercisable, during the Holder's lifetime,
only by the Holder.
(f) Termination by Reason of Death. If a Holders' employment by
the Company or a Subsidiary terminates by reason of death, any Stock Option
held by such Holder, unless otherwise determined by the Committee at the
time of grant and set forth in the Agreement, shall be fully vested and may
thereafter be exercised by the legal representative of the estate or by the
legatee of the Holder under the will of the Holder, for a period of one
year (or such other greater or lesser period as the Committee may specify
at grant) from the date of such death or until the expiration of the stated
term of such Stock Option, which ever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in the
Agreement, shall be fully vested and may thereafter be exercised by the
Holder for a period of one year (or such other greater or lesser period as
the Committee may specify at the time of grant) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Other Termination. Subject to the provisions of Section
14.3, below, and unless otherwise determined by the Committee at the time
of grant and set forth in the Agreement, if a Holder is an employee of the
Company or a Subsidiary at the time of grant and if such Holder's
employment by the Company or any Subsidiary terminates for any reason other
than death or Disability, the Stock Option shall thereupon automatically
terminate, except that if the Holder's employment is terminated by the
Company or a Subsidiary without cause or due to Normal Retirement, then the
portion of such Stock Option which has vested on the date of termination of
employment may be exercised for the lesser of three months after
termination of employment or the balance of such Stock Option's term.
(i) Additional Incentive Stock Option Limitation. In the case
of an Incentive Stock Option, the aggregate Fair Market Value of Stock
(determined at the time of grant of the Option) with respect to which
Incentive Stock Options become exercisable by a Holder during any calendar
year (under all such plans of the Company and its Parent and Subsidiary)
shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at any
time, in its sole discretion, offer to buy out a Stock Option previously
granted, based upon such terms and conditions as the Committee shall
establish and communicate to the Holder at the time that such offer is
made.
(k) Stock Option Agreement. Each grant of a Stock Option shall
be confirmed by and shall be subject to the terms of, the Agreement
executed by the Company and the Holder.
8
6.3 Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after
the time of grant in the case of a Nonqualified Stock Option) a Stock
Reload Option up to the amount of shares of Stock held by the Holder for at
least six months and used to pay all or part of the exercise price of an
Option and, if any, withheld by the Company as payment for withholding
taxes. Such Stock Reload Option shall have an exercise price equal to the
Fair Market Value as of the date of the Stock Reload Option grant. Unless
the Committee determines otherwise, a Stock Reload Option may be exercised
commencing one year after it is granted and shall expire on the date of
expiration of the Option to which the Reload Option is related.
Section 7. Stock Appreciation Rights.
- -----------------------------------------
7.1 Grant and Exercise. The Committee may grant Stock Appreciation
Rights to participants who have been, or are being granted, Options under
the Plan as a means of allowing such participants to exercise their Options
without the need to pay the exercise price in cash. In the case of a
Nonqualified Stock Option, a Stock Appreciation Right may be granted either
at or after the time of the grant of such Nonqualified Stock Option. In
the case of an Incentive Stock Option, a Stock Appreciation Right may be
granted only at the time of the grant of such Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be subject
to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be
exercisable as determined by the Committee and set forth in the Agreement,
subject to the limitations, if any, imposed by the Code, with respect to
related Incentive Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate and
shall no longer be exercisable upon the termination or exercise of the
related Stock Option.
(c) Method of Exercise. Stock Appreciation Rights shall be
exercisable upon such terms and conditions as shall be determined by the
Committee and set forth in the Agreement and by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
Holder shall be entitled to receive a number of Option Shares equal to the
SAR Value divided by the exercise price of the Option.
(d) Shares Affected Upon Plan. The granting of Stock
Appreciation Rights shall not affect the number of shares of Stock
available for awards under the Plan. The number of shares available for
awards under the Plan will, however, be reduced by the number of shares of
Stock acquirable upon exercise of the Stock Option to which such Stock
Appreciation right relates.
9
Section 8. Restricted Stock.
- --------------------------------
8.1 Grant. Shares of Restricted Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which,
grants of Restricted Stock will be awarded, the number of shares to be
awarded, the price (if any) to be paid by the Holder, the time or times
within which such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name
of the Holder to whom such Restricted Stock shall have been awarded.
During the Restriction Period, certificates representing the Restricted
Stock and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the Restricted
Stock (and such Retained Distributions), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms and conditions
provided in the Plan and the Agreement. Such certificates shall be
deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and
any securities constituting Retained Distributions that shall be forfeited
or that shall not become vested in accordance with the Plan and the
Agreement.
(b) Rights of Holder. Restricted Stock shall constitute issued
and outstanding shares of Common Stock for all corporate purposes. The
Holder will have the right to vote such Restricted Stock, to receive and
retain all regular cash dividends and other cash equivalent distributions
as the Board may in its sole discretion designate, pay or distribute on
such Restricted Stock and to exercise all other rights, powers and
privileges of a holder of Common Stock with respect to such Restricted
Stock, with the exceptions that (i) the Holder will not be entitled to
delivery of the stock certificate or certificates representing such
Restricted Stock until the Restriction Period shall have expired and unless
all other vest requirements with respect thereto shall have been fulfilled;
(ii) the Company will retain custody of the stock certificate or
certificates representing the Restricted Stock during the Restriction
Period; (iii) other than regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and
such Retained Distributions will be subject to the same restrictions, terms
and conditions as are applicable to the restricted Stock) until such time,
if ever, as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall have become
vested and with respect to which the Restriction Period shall have expired;
(iv) a breach of any of the restrictions, terms or conditions contained in
this Plan or the Agreement or otherwise established by the Committee with
respect to any Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained Distributions with
respect thereto.
10
(c) Vesting; Forfeiture. Upon the expiration of the Restriction
Period with respect to each award of Restricted Stock and the satisfaction
of any other applicable restrictions, terms and conditions (i) all or part
of such Restricted Stock shall become vested in accordance with the terms
of the Agreement, subject to Section 11, below, and (ii) any Retained
Distributions with respect to such Restricted Stock shall become vested to
the extent that the Restricted Stock related thereto shall have become
vested, subject to Section 11, below. Any such Restricted Stock and
Retained Distributions that do not vest shall be forfeited to the Company
and the Holder shall not thereafter have any rights with respect to such
Restricted Stock and Retained Distributions that shall have been so
forfeited.
Section 9. Deferred Stock.
- ------------------------------
9.1 Grant. Shares of Deferred Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of Deferred Stock shall be awarded, the number of shares of Deferred
Stock to be awarded to any person, the duration of the period (the
"Deferral Period") during which, and the conditions under which, receipt of
the shares will be deferred, and all the other terms and conditions of the
awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be subject
to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period (or
the Additional Deferral Period referred to in Section 9.2 (d) below, where
applicable), shares certificates shall be issued and delivered to the
Holder, or his legal representative, representing the number equal to the
shares covered by the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred
stock shall not have any rights of a stockholder by virtue of such award
until the expiration of the applicable Deferral Period and the issuance and
delivery of the certificates representing such Stock. The shares of Stock
issuable upon expiration of the Deferral Period shall not be deemed
outstanding by the Company until the expiration of such Deferral period and
the issuance and delivery of such Stock to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of the Deferral
Period with respect to each award of Deferred Stock and the satisfaction of
any other applicable restrictions, terms and conditions all or part of such
Deferred Stock shall become vested in accordance with the terms of the
Agreement, subject to Section 11, below. Any such Deferred Stock that does
not vest shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Deferred Stock.
11
(d) Additional Deferral Period. A Holder may request to, and
the Committee may at any time, defer the receipt of an award (or an
installment of an award) for an additional specified period or until a
specified event (the "Additional Deferral Period"). Subject to any
exceptions adopted by the Committee, such request must generally be made at
least one year prior to expiration of the Deferral Period for such Deferred
Stock award (or such installment).
Section 10. Other Stock-Based Awards.
- -----------------------------------------
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or
payable, in value, in whole or in part by reference to, or otherwise based
on, or related to, shares of Common Stock, as deemed by the Committee to be
consistent with the purposes of the Plan, including, without limitation,
purchase rights, shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, or
other rights convertible into shares of Common Stock and awards valued by
reference to the value of securities or the performance of specified
subsidiaries. Other Stock-Based Awards may be awarded either alone or in
addition to or in tandem with any other awards under this Plan or any other
plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of such other stock-based awards shall be made, the number of shares
of Common Stock to be awarded pursuant to such awards, and all other terms
and conditions of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee
and to Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
- ------------------------------------------------------
If (i) any person or entity other than the Company and/or any
stockholders of the Company as of the Effective Date acquire securities of
the Company (in one or more transactions) having 25% or more of the total
voting power of all the Company's securities then outstanding and (ii) the
Board of Directors of the Company does not authorize or otherwise approve
such acquisition, then, the vesting periods of any and all Options and
other awards granted and outstanding under the Plan shall be accelerated
and all such Options and awards will immediately and entirely vest, and the
respective holders thereof will have the immediate right to purchase and/or
receive any and all Stock subject to such Options and awards on the terms
set forth in this Plan and the respective agreements respecting such
Options and awards.
Section 12. Amendment and Termination.
- -----------------------------------------
Subject to Section 4.2(iv) hereof, the Board may at any time, and from
time to time, amend, alter, suspend or discontinue any of the provisions of
the Plan, but no amendment, alteration, suspension or discontinuance shall
be made which would impair the rights of a Holder under any Agreement
theretofore entered into hereunder, without the Holder's consent.
12
Section 13. Term of Plan.
- ----------------------------
13.1 Effective Date. The Plan shall be effective as of the date on
which the Company's stockholders approved the Plan ("Effective Date").
13.2 Termination Date. Unless terminated by the Board, this Plan
shall continue to remain effective until such time no further awards may be
granted and all awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options may only
be made during the ten year period following the Effective Date.
Section 14. General Provisions.
- ----------------------------------
14.1 Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed
by the Company and the Holder. The Committee may terminate any award made
under the Plan if the Agreement relating thereto is not executed and
returned to the Company within 10 days after the Agreement has been
delivered to the Holder for his or her execution.
14.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Holder by the Company, nothing contained
herein shall give any such Holder any rights that are greater than those of
a general creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In the event any
Holder's employment with the Company or a Subsidiary is terminated for any
reason whatsoever, and within one year after the date thereof such Holder
accepts employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any
award which was realized or obtained by such Holder at any time during the
period beginning on that date which is six months prior to the date of such
Holder's termination of employment with the Company.
(b) Termination for Cause. The Committee may, in the event a
Holder's employment with the company or a Subsidiary is terminated for
cause, annul any award granted under this Plan to return to the Company
the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six
months prior to the date of such Holder's termination of employment with
the Company.
(c) No Right of Employment. Nothing contained in the Plan or in
any award hereunder shall be deemed to confer upon any Holder who is an
employee of the Company or any Subsidiary any right to continued employment
with the Company or any Subsidiary, nor shall it interfere in any way with
the right of the Company or any Subsidiary to terminate the employment of
any Holder who is an employee at any time.
13
14.4 Investment Representations. The Committee may require each
person acquiring shares of Stock pursuant to a Stock Option or other award
under the Plan to represent to and agree with the Company in writing that
the Holder is acquiring the shares for investment without a view to
distribution thereof.
14.5 Additional Incentive Arrangements. Nothing contained in the Plan
shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of Stock Options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
14.6 Withholding Taxes. Not later than the date as of which an amount
must first be included in the gross income of the Holder for Federal income
tax purposes with respect to any option or other award under the Plan, the
Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of
any kind required by law to be withheld or paid with respect to such
amount. If permitted by the Committee, tax withholding or payment
obligations may be settled with Common Stock, including Common Stock that
is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditioned upon such
payment or arrangements and the Company or the Holder's employer (if not
the Company) shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
Holder from the Company or any Subsidiary.
14.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Nevada (without regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the Plan shall not
be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such other plan
to awards under this Plan).
14.9 Non-Transferability. Except as otherwise expressly provided in
the Plan, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
14.10 Applicable Laws. The obligations of the Company with
respect to all Stock Options and awards under the Plan shall be subject to
(i) all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
the Securities Act of 1933, as amended, and (ii) the rules and regulations
of any securities exchange on which the Stock may be listed.
14
14.11 Conflicts. If any of the terms or provisions of the Plan or
an Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions
shall be deemed inoperative to the extent they so conflict with the
requirements of said Section 422 of the Code. Additionally, if this Plan
or any Agreement does not contain any provision required to be included
herein under Section 422 of the Code, such provision shall be deemed to be
incorporated herein and therein with the same force and effect as if such
provision had been set out at length herein and therein. If any of the
terms or provision of any Agreement conflict with any terms or provision of
the Plan, then such terms or provision shall be deemed inoperative to the
extent they so conflict with the requirements of the Plan. Additionally,
if any Agreement does not contain any provision required to be included
therein under the Plan, such provision shall be deemed to be incorporated
therein with the same force and effect as if such provision had been set
out at length therein.
14.12 Non-Registered Stock. The shares of Stock to be distributed
under this Plan have not been, as of the Effective Date, registered under
the Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to register
the Stock or to assist the Holder in obtaining an exemption from the
various registration requirements, or to list the Stock on a national
securities exchange.
15
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<EPS-DILUTED> (0.01)
</TABLE>
