<PAGE>
As filed with the Securities and Exchange Commission on ---------------.
REGISTRATION NO.
==========================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIOPULSE INTERNATIONAL, INC.
------------------------------
(Name of Small Business Issuer in its Charter)
Nevada -------------- 87-0634278
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(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification
Incorporation or Code Number) No.)
Organization)
10421 South Jordan Gateway, Suite 500, South Jordan, Utah 84095
(801) 523-0101
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(Address and Telephone Number of Registrant's Principal Place of Business)
Shirrell Hughes, 3230 E. Flamingo Road, Suite 156, Las Vegas, Nevada 89121
(800) 992-4333
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(Name, Address and Telephone Number of Agent for Service)
Copies to:
Ronald L. Poulton, Esq., Poulton & Yordan, 136 East South Temple,
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Suite 1700-A Salt Lake City, Utah 84111
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(801) 355-1341
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Approximate Date of Proposed Sale to the Public: As soon as practicable
from time to time after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
--------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. [ ]
--------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
----------------------
</Page>
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------
Title of Proposed Proposed
each class Maximum Maximum
or Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registrant
Registered Registered Per Share Price Fee (1)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 353,636 $8.875(1) $3,138,520 $828.57
Held By
Selling
Securityholders
Common Stock
Underlying 189,318 $8.875(1) $1,680,197 $443.57
Outstanding
Warrants(2)
Common Stock
Underlying 200,000 $8.875(1) $1,775,000 $468.60
Outstanding
Stock Options(2)
Common Stock 300,000 $8.875(1) $2,662,500 $702.90
------------------------------------------------------------------------------------
Total 1,042,954 $9,256,217 $2,443.64
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
based on Rule 457(c). The price represents the average of the high and low
price as reported on the OTCBB on December 15, 2000.
(2) Shares of common stock issuable by us from time to time upon exercise
of warrants and stock options previously issued to the Selling
Securityholders.
WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A) MAY DETERMINE.
</Page>
<PAGE>
BioPulse International, Inc.
CROSS-REFERENCE SHEET
Pursuant to Rule 404(a)
Item Number and Heading Heading in Prospectus
1. Front of the Registration
Statement and Outside
Front Cover Page of Prospectus Facing pages;
Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside
Back Cover Pages of Prospectus
3. Summary Information and
Risk Factors Prospectus Summary;
Risk Factors
4. Use of Proceeds Prospectus Summary; Use of
Proceeds; Description of Business;
5. Determination of Offering Price Cover Page; Prospectus
Summary; Risk Factors;
Determination of Offering
Price
6. Dilution Dilution; Comparative Data
7. Selling Security Holders Not applicable
8. Plan of Distribution Front Cover Page; Plan of
Distribution
9. Legal Proceedings Legal Matters
10. Directors, Executive Officers,
Promoters and Control Persons Directors, Executive Officers,
Promoters and Control Persons
11. Security Ownership of Certain
Beneficial Owners and Management Security Ownership of Certain
Beneficial Owners and
Management
12. Description of the Securities Description of Securities
13. Interest of Named Experts and Counsel Not Applicable
3
</Page>
<PAGE>
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities
15. Organization Within Last Five Years Organization Within Last Five
Years
16. Description of Business Description of Business
17. Management's Discussion and Analysis
or Plan Of Operation Plan of Operations
18. Description of Property Description of Property
19. Certain Relationships and
Related Transactions Not Applicable
20. Market for Common Equity and Related
Stockholder Matters Front Cover Page; Risk
Factors;
Shares Eligible for Future
Sale
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes In and Disagreements with
Accountants on Accounting and
Financial Disclosure Not Applicable
4
</Page>
<PAGE>
BIOPULSE INTERNATIONAL, INC.
1,042,954 Shares of Common Stock
We are registering the following shares:
- 353,636 shares of common stock held by an unaffiliated third
party;
- 189,318 shares of common stock issuable upon the exercise of
currently outstanding warrants held by an unaffiliated third
party;
- 200,000 shares of common stock issuable upon the exercise of
currently outstanding options held by an unaffiliated third
party; and
- 300,000 shares of common stock.
We will not receive any proceeds from the sale of the 353,636 shares
of common stock held by the selling securityholders. We may receive
proceeds from the exercise of the outstanding warrants and options, if they
are exercised. The strike price of the outstanding warrants is tied to the
market price of our common shares. The exercise price of the outstanding
options is $2.75 per share. We are also registering 300,000 common shares
which may be used to acquire additional technology or to raise additional
working capital. All of the funds we receive will be used to supplement
working capital. We will pay the expenses of registering all of the shares
for sale by the selling shareholders.
The shareholders named in this prospectus may offer and sell these
shares at any time using a variety of different methods. The actual number
of shares sold and the prices at which they are sold will depend upon the
market price at the time of those sales; therefore, we have not included in
this prospectus information about the price to the public of the shares or
the proceeds to the selling shareholders.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"BIOP." On December 15, 2000, the last reported price for our common stock
on the OTC Bulletin Board was $9.34 per share.
YOU SHOULD CAREFULLY CONSIDER THE SECTION TITLED "RISK FACTORS" BEGINNING
ON PAGE 9 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ____________, 2000
5
</Page>
<PAGE>
TABLE OF CONTENTS
Page
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Market for Common Equity and Related Stockholder Matters . . . . . . . . 17
Changes in and Disagreements with Accountants Disclosure . . . . . . . . 18
Management Discussion and Analysis . . . . . . . . . . . . . . . . . . . 19
Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . 20
Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . 21
Directors, Executive Officers, Promoters and Control Persons . . . . . . 33
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 35
Security Ownership of Certain Beneficial Owners and Management . . . . . 37
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . 39
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Interest of Named Experts and Counsel. . . . . . . . . . . . . . . . . . 42
Disclosure of Commission Position of Indemnification
for Securities Act Liabilities. . . . . . . . . . . . . . . . . . . 43
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6
</Page>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information and consolidated financial statements, including the
notes thereto, appearing elsewhere in this Prospectus. Each prospective
investor is urged to read this Prospectus in its entirety, and particularly
the information set forth in "RISK FACTORS."
The Company
We have developed and acquired proprietary technologies in various
aspects of alternative medicine and biotechnology that we believe will
advance the early detection and treatment of cancer and several other
diseases. Our goal is two-fold: early detection using our cancer screening
test and effective treatment through immunotherapy and other holistic
approaches.
The American Cancer Society estimates that approximately 1,200,000 new
cases of cancer will be diagnosed in the United States in 2000. In the
same year, cancer will cause over 550,000 deaths, making it the second
leading cause of death in the United States. In 1998, $7,400,000,000 was
spent on cancer therapeutic drugs in the United States. Total cancer-
related costs exceed $100,000,000,000 annually.
Our goal is to become a leader in applying biotechnology to the early
detection and treatment of cancer. The key components of our business
strategy are to:
- commercialize our TK1 cancer screening technologies;
- extend our TK1 technology to other uses in treatment;
- commercialize our cancer vaccine and other immunotherapies;
- integrate our treatments with promising alternative treatments;
and
- continue making scientific and technological advances in applied
biotechnology.
We believe the technologies which we have acquired and are developing
will allow us to offer a more accurate, less invasive method of cancer
screening. Moreover, we think the cancer treatments we are developing are
novel treatment alternatives for cancers that are not adequately addressed
at the current time.
The Offering
Securities Offered: 353,636 Shares of Common Stock, $.001 par value
("Common Stock") of the Company, see "Description of
Securities", to be sold by the Selling Securityholders.
189,318 Shares of Common Stock underlying currently
issued and outstanding warrants.
7
</Page>
<PAGE>
200,000 Shares of Common Stock underlying currently
issued and outstanding stock options.
300,000 Shares of Common Stock.
Offering Price: We anticipate that all of the securities offered
hereunder will be sold at the prevailing market price
at the time of such sales, at prices related to such
prevailing market price, at negotiated prices, or at
fixed prices.
Summary Selected: The following is a summary of our consolidated
financial statements, which
Financial Data: are included elsewhere in this prospectus, and should
be read in conjunction with those financial statements.
<TABLE>
<CAPTION>
For the Three Months
Ended October 31, For the Years July 31,
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $1,159,680 $ 228,208 $3,107,636 $ 289,623
Gross profit 761,321 43,142 1,944,038 109,753
Profit/(Loss) from operations 81,518 (234,904) 155,031 (243,435)
----------- ----------- ----------- -----------
Net Profit/(Loss) $ 81,518 $ (234,904) $ 155,031 $ (243,435)
=========== =========== =========== ===========
Share data:
Profit/Loss per common
shares - basic .01 (.04) .02 (.07)
diluted .01 (.04) .02 (.07)
=========== =========== =========== ===========
Weighted average number
of common
shares outstanding - basic 7,464,110 6,073,862 6,825,610 3,073,862
diluted 8,626,443 6,073,862 6,825,610 3,073,862
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
As of As of
October 31, 2000 July 31, 2000
----------------- -----------------
(unaudited)
<S> <C> <C>
BALANCE SHEET DATA:
Cash $ 104,189 $ 42,055
Total current assets 464,543 298,936
Total assets 2,162,812 1,150,145
Total current liabilities 1,054,886 298,717
Stockholders' equity (deficit) 1,107,926 851,428
</TABLE>
8
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES,
PRIOR TO MAKING AN INVESTMENT IN THE COMPANY.
WE ARE A DEVELOPMENT STAGE COMPANY AND WE MAY NOT BE ABLE TO COMMERCIALIZE
ANY OF OUR NEW PRODUCTS OR SERVICES OR CONTINUE TO EARN A PROFIT.
We are a development stage company that earned a profit for the first
time during our fiscal year ended July 31, 2000. Since our TK1 cancer
screening tests are still in development, we do not expect to have any
material revenue from the sale of our cancer test products and services
until late 2001. Revenue from our other products and services is earned
primarily outside the United States, and we do not expect any material U.S.
revenue from these product lines until we obtain appropriate regulatory
approval in 2002 or later. We cannot assure that we will ever
commercialize our cancer test products or services, or that we will be able
to earn substantial revenues from our other products or services.
IF OUR CANCER TEST CLINICAL STUDIES DO NOT PROVE THE SUPERIORITY OF OUR
TECHNOLOGIES, WE MAY NEVER SELL OUR CANCER TEST PRODUCTS AND SERVICES.
In the fourth quarter of 2001, we intend to initiate a blinded multi-
center clinical trial for our cancer test that will include several
thousand patients with average risk profiles. The results of this clinical
trial may show that tests using our technologies are not superior to
existing screening methods. In that event, we may have to devote
significant financial and other resources to further research and
development of this or new technology. In addition, we may experience
delays in the commercialization of tests using our technologies. It is
possible that commercialization of our technologies may never occur.
IF OUR CLINICAL STUDIES FOR OUR OTHER PRODUCTS DO NOT PROVE THE SUPERIORITY
OF OUR TECHNOLOGIES, OUR REVENUES MAY DECLINE AND WE MAY BE UNABLE TO SELL
OUR PRODUCTS AND SERVICES IN THE UNITED STATES AND OTHER MARKETS.
Our clinical studies with our other products and services have been
small and included high-risk patients. The results from these earlier
studies may not represent the results we may obtain from future studies,
including planned clinical trials in the United States, which will include
substantially more samples and average-risk patients. Consequently, we may
not be able to sell these products and services in the United States or in
other markets.
9
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<PAGE>
WE MAY BE UNABLE TO RECRUIT A SUFFICIENT NUMBER OR PATIENTS FOR OUR PLANNED
U.S.-BASED CLINICAL TRIALS.
We intend to conduct several U.S.-based clinical trials involving
thousands of average-risk patients. If we are unable to enroll the
required number of average-risk patients, we will be unable to validate the
superiority of our technologies, which would make it difficult to sell our
products and services. We cannot guarantee that we will be able to recruit
patients on a timely basis, if at all.
IF MEDICARE AND OTHER THIRD-PARTY PAYORS, INCLUDING MANAGED CARE
ORGANIZATIONS, DO NOT PROVIDE ADEQUATE REIMBURSEMENT FOR OUR PRODUCTS AND
SERVICES, MOST CLINICAL REFERENCE LABORATORIES WILL NOT USE OUR PRODUCTS OR
LICENSE OUR TECHNOLOGIES TO PERFORM CANCER SCREENING TESTS.
Most clinical reference laboratories will not perform cancer screening
tests using our products and licensing our technologies unless they are
adequately reimbursed by third-party payors such as Medicare and managed
care organizations. There is significant uncertainty concerning third-
party reimbursement for the use of any test incorporating new technology
such as ours. Reimbursement by a third-party payor may depend on a number
of factors, including a payor's determination that tests using our products
and technologies are sensitive for cancer, not experimental or
investigational, medically necessary, appropriate for the specific patient
and cost-effective. To date, we have not secured any reimbursement
approval for tests using our products and technologies from any third-party
payor, nor do we expect any such approvals in the near future.
Reimbursement by Medicare will require approval by the Secretary of
Health and Human Services, or HHS. The Federal Budget Act of 1997 provides
for reimbursement of new technologies such as ours, but only with action of
the Secretary of HHS. We cannot guarantee that the Secretary of HHS will
act to approve tests based on our technologies on a timely basis or at all.
In addition, the assignment of a current procedural terminology code
facilitates Medicare reimbursement. The process to obtain this code is
lengthy and we cannot guarantee that we will receive a current procedural
terminology code on a timely basis, or at all.
Since reimbursement approval is required from each payor individually,
seeking such approvals is a time-consuming and costly process. If we are
unable to obtain adequate reimbursement from Medicare and managed care
organizations, our ability to generate revenue and earnings from the sale
of our products or licenses to our technologies will be limited.
WE WILL NOT BE ABLE TO COMMERCIALIZE OUR TECHNOLOGIES IF WE ARE NOT ABLE TO
LOWER COSTS THROUGH AUTOMATING AND SIMPLIFYING KEY OPERATIONAL PROCESSES.
Currently, cancer screening tests using TK1 are expensive because they
are labor-intensive and use highly complex and expensive reagents. To
price our products and services competitively, we will need to
substantially reduce the costs of tests using our monoclonal antibody
technology through significant automation of key operational processes and
other cost saving procedures. If we fail to sufficiently reduce costs,
tests using our technologies either may not be commercially viable or may
generate little, if any, profitability.
10
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<PAGE>
OUR INABILITY TO ESTABLISH STRONG BUSINESS RELATIONSHIPS WITH LEADING
CLINICAL REFERENCE LABORATORIES TO PERFORM CANCER SCREENING TESTS USING OUT
TECHNOLOGIES WILL LIMIT OUR REVENUE GROWTH.
A key step in our strategy is to sell reagents and license our
proprietary technologies to leading clinical reference laboratories that
perform cancer screening tests. We currently have no business
relationships with these laboratories and have limited experience in
establishing such business relationships. If we are unable to establish
appropriate business relationships, we will have limited ability to obtain
revenues beyond revenue we can generate from our limited in-house capacity
to process tests.
OUR FAILURE TO CONVINCE MEDICAL PRACTITIONERS TO ORDER TESTS USING OUR
TECHNOLOGIES WILL LIMIT OUR REVENUE AND PROFITABILITY.
If we fail to convince medical practitioners to order tests using our
technologies, we will not be able to sell our products or license our
technologies in sufficient volume for us to generate profits. We will need
to make leading medical practitioners aware of the benefits of tests using
our technologies through published papers, presentations at scientific
conferences and favorable results from our clinical studies. Our failure
to be successful in these efforts would make it difficult for us to
convince medical practitioners to order cancer screening tests using our
technologies for their patients.
IF WE FAIL TO OBTAIN THE SUPPORT OF KEY SCIENTISTS AND RESEARCH INSTITUTES
IT MAY BE DIFFICULT TO ESTABLISH TESTS USING OUR TECHNOLOGIES AS A STANDARD
OF CARE FOR CANCER SCREENING, WHICH MAY LIMIT OUR REVENUE GROWTH AND
PROFITABILITY.
To make tests using our technologies the standard of care for cancer
screening we need to establish relationships with leading scientists and
research institutions. If these scientists and research institutions
determine that cancer screening tests using our technologies are not
superior to available cancer screening tests or that alternative
technologies would be more effective in the early detection of cancer, we
could encounter difficulty establishing tests using our technologies as a
standard of care for cancer screening, which would limit our revenue growth
and profitability.
WE MAY EXPERIENCE LIMITS ON OUR REVENUE AND PROFITABILITY IF ONLY AN
INSIGNIFICANT NUMBER OF PEOPLE DECIDE TO BE SCREENED FOR CANCER.
Even if our technologies are superior to alternative cancer screening
technologies, adequate third-party reimbursement is obtained and medical
practitioners order tests using our technologies, an insignificant number
of people may decide to be screened for cancer. Despite the availability
of current cancer screening methods and the recommendation of the American
Cancer Society that Americans age 40 and above be routinely screened for
colorectal, breast, prostate and other cancers, many of these individuals
decide not to complete cancer screening tests. If only an insignificant
portion of the population decides to complete cancer screening tests, this
would limit our revenue and profitability.
11
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<PAGE>
IF WE FAIL TO OBTAIN THE APPROVAL OF THE U.S. FOOD AND DRUG ADMINISTRATION,
("FDA"), OR TO COMPLY WITH OTHER FDA REQUIREMENTS, WE MAY NOT BE ABLE TO
MARKET OUR PRODUCTS AND SERVICES IN THE UNITED STATES AND WE MAY BE SUBJECT
TO STRINGENT APPROVAL GUIDELINES.
We are subject to extensive regulation by the FDA under the Federal
Food, Drug and Cosmetic Act and regulations thereunder, including
regulations governing the development, marketing, labeling, promotion,
manufacturing and export of our products. Failure to comply with these
requirements can lead to stringent sanctions, including withdrawal of
products from the market, recalls, refusal to authorize government
contracts, product seizures, civil money penalties, injunctions and
criminal prosecution.
WE MAY BE UNABLE TO MEET THE STRINGENT GUIDELINES ESTABLISHED BY THE FDA.
We may take longer to complete our clinical trials than we project, or
we may not be able to complete them at all. Clinical testing is very
expensive, can take many years, and the outcome is uncertain. The data
collected from our clinical trials may not be sufficient to support
approval by the FDA of any of our cancer vaccine or other products. The
FDA may not ultimately approve any of our product candidates for commercial
sale. If we fail to adequately demonstrate the safety and efficacy of a
cancer vaccine or any other product, this would delay or prevent regulatory
approval of that product, which could prevent us from achieving
profitability in that product line.
OTHER COMPANIES MAY DEVELOP AND MARKET METHODS FOR DETECTING AND TREATING
CANCER THAT MAY MAKE OUR TECHNOLOGIES LESS COMPETITIVE, OR EVEN OBSOLETE.
The market for cancer screening and treatment is large, estimated at
more than 100 million at risk Americans, with approximately one million new
cases of cancer being diagnosed per year. These markets have attracted
competitors, some of which have significantly greater resources than we
have.
Currently, we face competition from alternative procedure-based
detection technologies such as mammograms, PSA-based tests and colonoscopy;
screening tests such as the fecal occult blood test marketed by Beckman
Coulter, Inc.; and the stool-based DNA test being developed by Exact
Sciences, Inc. In addition, competitors, including Bayer Corporation,
diaDexus, Inc., Matritech, Inc. and Millennium Predictive Medicine, Inc.,
are developing serum-based tests, a screening test based on the detection
of proteins or nucleic acids produced by cancer. Several competitors,
including BioMira, Dendreon, Entremed, Antigenics, Medimmune, and Medarex,
are involved with researching and developing cancer vaccines, anti-
angiogenesis products, cytokine products, and immune-stimulants.
12
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<PAGE>
These and other companies may also be working on additional methods of
detecting and treating cancer that have not yet been announced. We may be
unable to compete effectively against these competitors either because
their tests are superior or because they may have more expertise,
experience, financial resources and business relationships.
THE LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT TEAM AND OTHERS COULD
ADVERSELY AFFECT OUR BUSINESS.
Our success depends largely on the skills, experience and performance
of key members of our senior management and advisory team, including
Jonathan Neville, our CEO, Loran Swensen, our President, and Neil Riordan
and Kim O'Neill, members of our Advisory Board. The efforts of each of
these persons will be critical to us as we continue to develop our
technologies and our testing process and as we attempt to transition from a
development stage company to a company with commercialized products and
services. If we lose one or more of these key individuals we may
experience difficulty in competing effectively, developing our technologies
and implementing our business strategies.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY EFFECTIVELY, WE MAY
BE UNABLE TO PREVENT THIRD PARTIES FROM USING OUR TECHNOLOGIES, WHICH WOULD
IMPAIR OUR COMPETITIVE ADVANTAGE.
We rely on patent protection as well as a combination of trademark,
copyright and trade secret protection, and other contractual restrictions
to protect the proprietary technologies we use, all of which provide
limited protection and may not adequately protect our rights or permit us
to gain or keep any competitive advantage. If the holders of the
intellectual property we rely on are unable to protect those intellectual
property rights, we may be unable to prevent third parties from using these
technologies. This could enable competitors to compete more effectively
against us.
As of December 15, 2000, we had licensed intellectual property rights
to two issued patents in the United States, three pending patent
applications in the United States, and several issued and pending foreign
applications. We cannot assure you that any of the currently pending or
future patent applications will result in issued patents. We also cannot
predict how long it will take for such patents to be issued. Further, we
cannot assure you that other parties will not challenge any patents issued
to us, or that courts or regulatory agencies will not hold these patents to
be invalid or unenforceable.
In addition to patents, we rely on contractual restrictions to protect
our technology. We require third parties to sign confidentiality
agreements. Nevertheless, we cannot guarantee that these measures will be
effective in protecting our intellectual property rights. We cannot
guarantee you that the patents will be broad enough to provide any
meaningful protection nor can we assure you that our competitors may not
develop more effective technologies, designs or methods to test for cancer
or to treat cancer using cancer vaccines or using other similar technology
without infringing upon intellectual property rights or that one of our
competitors might not design around our proprietary technologies.
13
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<PAGE>
WE MAY BE SUBJECT TO SUBSTANTIAL COSTS AND LIABILITY OR BE PREVENTED FROM
SELLING OUR SCREENING TESTS FOR CANCER OR SELLING OR PROVIDING OUR CANCER
TREATMENTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS RELATING TO
PATENT RIGHTS.
Third parties may assert infringement or other intellectual property
claims against our licensors or us. There may be third-party patents,
patent applications and other intellectual property relevant to our
potential products that may block or compete with our products or
processes. Even if third-party claims are without merit, defending a
lawsuit may result in substantial expense to us and may divert the
attention of management and key personnel. In addition, we cannot assure
you that we would prevail in any of these suits or that the damages or
other remedies if any, awarded against us would not be substantial. Claims
of intellectual property infringement may require us to enter into royalty
or license agreements with third parties that may not be available on
acceptable terms, if at all. These claims may also result in injunctions
against the further development and use of our technology, which would have
a material adverse effect on our business, financial condition and results
of operations.
Also, patents and applications licensed by us may become the subject
of interference proceedings in the United States Patent and Trademark
Office to determine priority of invention, which could result in
substantial cost to us, as well as a possible adverse decision as to the
priority of invention of the patent or patent application involved. An
adverse decision in an interference proceeding may result in the loss of
rights under a patent or patent application subject to such a proceeding.
OUR BUSINESS WOULD SUFFER IF CERTAIN LICENSES WERE TERMINATED.
We license certain technologies from Aidan, Incorporated and Brigham
Young University (BYU) that are key to our technologies. The Aidan
license, which relates to cancer vaccines, anti-angiogenesis, immune
stimulants, and cytokines, is an exclusive license. Aidan may terminate
the license if we fail to pay amounts due, submit certain reports or breach
any other material term of the license agreement. The BYU license is an
exclusive license to use the monoclonal antibody associated with TK1 and
methodologies relating to the antibody in connection with our products and
services. This license runs through 2004, with options to renew for annual
5 year extensions. BYU may terminate the license if we fail to pay
specified minimum royalties. If either Aidan or BYU were to terminate the
licenses, we would incur significant delay and expense to change a portion
of our testing and/or treatment methods and we cannot guarantee that we
would be able to successfully change these methods.
14
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<PAGE>
CHANGES IN HEALTHCARE POLICY COULD SUBJECT US TO ADDITIONAL REGULATORY
REQUIREMENTS THAT MAY DELAY THE COMMERCIALIZATION OF OUR TESTS AND INCREASE
OUR COSTS.
Healthcare policy has been a subject of discussion in the executive
and legislative branches of the federal and many state governments. We are
developing a staged commercialization strategy for our cancer screening
tests and cancer treatments based on existing healthcare policies. Changes
in healthcare policy, if implemented, could substantially delay the use of
our tests and treatments, increase costs, and divert management's
attention. We cannot predict what changes, if any, will be proposed or
adopted or the effect that such proposals or adoption may have on our
business, financial condition and results of operations.
OUR INABILITY TO RAISE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS IN THE FUTURE
MAY LIMIT OUR GROWTH.
We may need to raise additional funds to execute our business
strategy. We expect that the proceeds of this offering, together with our
current working capital, will fund our operations at current levels through
2000, although we hope to raise additional capital to expand our laboratory
facilities, and to accelerate and expand our research and development
efforts, our clinical trials, and our commercialization efforts. Our
inability to raise capital would seriously harm our business and
development efforts.
In addition, we may choose to raise additional capital due to market
conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operations. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in dilution to
our stockholders.
We currently have no credit facility or committed sources of capital.
If our earnings and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the
development and commercialization of our technologies. These funds may not
be available on favorable terms, or at all. If adequate funds are not
available on attractive terms, we may have to restrict our operations
significantly or obtain funds by entering into agreements on unattractive
terms.
OUR STOCK PRICE MAY BE VOLATILE
The market price of our stock is likely to be highly volatile and
could fluctuate widely in price in response to various factors, many of
which are beyond our control, including:
- technological innovations or new products and services by us or
our competitors;
- clinical trial results relating to our tests and treatments or
those of our competitors;
- reimbursement decisions by Medicare and other managed care
organizations;
- FDA regulation of our products and services;
- the establishment of partnerships with clinical reference
laboratories, research centers, and treatments centers;
15
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<PAGE>
- health care legislation;
- intellectual property disputes;
- additions or departures of key personnel; and
- sales of our common stock.
Because we are a development stage company, you may consider one of these
factors to be material. Our stock price may fluctuate widely as a result of
any of the above.
In addition, the over-the-counter market and the market for biotech
and companies in particular, have experienced significant price and volume
fluctuations that have often been unrelated or disproportionate to the
performance of those companies.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on
our current expectations, assumptions, estimates and projections about us
and our industry. When used in this prospectus, the words "expects,"
"anticipates," "estimates," "intends" and similar expressions are intended
to identify forward looking statements. These statements include, but are
not limited to, statements under the captions "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those projected. The cautionary statements made in this prospectus should
be read as being applicable to all related forward-looking statements
wherever they appear in this prospectus.
USE OF PROCEEDS
We will receive no proceeds from the shares being offered by the
selling securityholders under this prospectus. We will receive some funds
if the warrants or options are exercised. The strike price of 189,318
warrants is tied to the market price of our common shares. The options to
purchase up to 200,000 common shares have an exercise price of $2.75. We
will also receive proceeds if we sell the common shares registered
hereunder. We anticipate the common shares offered hereunder will be sold
at the prevailing market price at the time of such sales, at prices related
to such prevailing market price, at negotiated prices, or at fixed prices.
All of the proceeds we receive from the exercise of warrants and options
and the sale of common shares, if any, will be used for general working
capital purposes.
DIVIDEND POLICY
We have not paid, nor declared, any dividends since our inception and
we do not intend to declare any such dividends in the foreseeable future.
Our ability to pay dividends is subject to limitations imposed by Nevada
law. Under Nevada law, dividends may be paid to the extent that a
corporation's assets exceed its liabilities and it is able to pay its debts
as they become due in the usual course of business.
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<PAGE>
The present intention of management is to utilize all available funds
to develop our products and technologies.
CAPITALIZATION
This table should be read in conjunction with our financial statements
and the related notes, which are included elsewhere in this prospectus, as
well as Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
The following table sets forth our capitalization as of October 31,
2000:
<TABLE>
<CAPTION>
October 31, 2000
-----------------
(UNAUDITED)
<S> <C>
Stockholders' equity
Preferred stock, $ 0.001 par value;
10,000,000 shares authorized;
-- 0 issued and outstanding
Common stock, $ 0.001 par value;
100,000,000 shares authorized;
7,464,610 shares issued and outstanding 7,464
Paid-in capital 1,222,934
Less Subscriptions Receivable (119,586)
Accumulated deficit (6,886)
Total stockholders' deficit (1,102,926)
Total capitalization 1,114,812
</TABLE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the Over-the-Counter Bulletin Board
("OTCBB"), under the symbol "BIOP." As of December 18, 2000, the Company
had 223 shareholders holding 9,548,246 shares of common stock. Of the
issued and outstanding common stock 2,071,611 are free trading, the balance
are restricted sock as that term is used in rule 144. We have never
declared a dividend on our common stock.
The following quotations, as provided by the National Quotation
Bureau, LLC., represent prices between dealers and do not include retail
markup, markdown or commission. In addition, these quotations do not
represent actual transactions.
17
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<PAGE>
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
---------------------- ----------------------
HIGH LOW HIGH LOW
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998-1999
---------
First Quarter
(Aug 1-Oct 31) ---- ---- 100.00 100.00
Second Quarter
(Nov 1-Jan 31) ---- ---- 100.00 100.00
Third Quarter
(Feb 1-Mar 16) 0.01 0.01 1 .25
(Mar 17-Apr 30) UNPRICED
Fourth Quarter
(May 1-July 31) 4.75 2 5.50 2.3125
1999-2000
---------
First Quarter
(Aug 1-Oct 31) 7.875 4 9.50 5
Second Quarter
(Nov 1-Jan 31) 9 4.50 10.75 6.50
Third Quarter
(Feb 1-Apr 30) 6 3 9.75 5
Fourth Quarter
(May 1-July 31) 3.75 2 6.50 3
2000-2001
---------
First Quarter
(Aug 1-Oct 31) 4 2.75 5 3.375
Second Quarter
(Nov. 1-Dec. 11) 11.50 3.75 11.5626 4
</TABLE>
On November 19, 1998, a 400 to 1 reverse split took place on our
outstanding shares. The Closing Bid and Ask prices have been appropriately
adjusted.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Jones, Jensen & Company were previously the principal accountants for
BioPulse International, Inc., f/k/a International Sensor Technologies, Inc.
On November 10, 1999, the Company terminated the engagement of Jones,
Jensen & Company and appointed Crouch Bierwolf & Chisholm as the Company's
independent auditor and certifying accountant. The Board of Directors of
the Company approved the decision to change accountants.
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<PAGE>
Jones, Jensen & Company's report with respect to BioPulse
International, Inc. balance sheets for the fiscal years ended July 31, 1998
and 1997 and the related statements of operations, stockholder's equity
(deficit), and cash flows for the years ended July 31, 1998, 1997 and 1996
and from inception of July 13, 1984 through July 31, 1998 did not contain
an adverse opinion or a disclaimer of opinion and was not qualified as to
uncertainty, audit scope or accounting principles, but was modified as to
going concern.
In connection with the audit of the Company's financial statements for
the fiscal years ended July 31, 1998 and July 31, 1999 and the interim
period through November 10, 1999 preceding the date of the Jones, Jensen &
Company termination, there were no disagreements, as that term is defined
in Item 304 of Regulation S-B, with Jones, Jensen & Company on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures which, if not resolved to the satisfaction of
Jones, Jensen & Company would have caused Jones, Jensen & Company to make
reference to the matter in their report. Jones, Jensen & Company did not
advise the Company regarding any "reportable events" as defined in Item 304
(a)(1)(iv)(B) of Regulation S-B.
No change in accountants has occurred since November 10, 1999.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion contains comments about the financial
condition of BioPulse International, Inc., for the quarter ended October
31, 2000.
RESULTS OF OPERATIONS
We restarted operations after our merger with BioPulse Inc., during
the fiscal year ended July 31, 1999. Operations began in January 1999.
As is typical with most new businesses, there is a period of time
before the business is profitable. The market needs to be developed,
employees trained, policies and procedures fine-tuned and the company needs
to become known by and earn its reputation with its potential customers and
clients. During the first half of the last fiscal year, we were still
going through the startup process.
Since restarting operations, we have been refining our operations and
developing our market. We have advertised in periodicals targeting
potential patients, rented booths at trade shows, developed a good
reputation through our results and by satisfied patients. Our fees started
low and have increased as our market develops and as demand for our
treatments has increased. We have also been developing new treatments to
offer our patients and expand our market.
During the last half of the fiscal year ended July 31, 2000, we became
profitable. The quarter ended October 31, 2000 is the third profitable
quarter in a row. Revenues for the quarter ended October 31, 2000 are
$1,159,680 compared to $228,208 for the quarter ended October 31, 1999; an
increase of 500%. During the quarter ended October 31, 2000, we acquired a
license to the patent pending rights to Aidan, Incorporated's dendritic
cell vaccine technology and other technologies. The primary factors that
explain the increase in revenue are adding the dendritic cell therapy,
increasing fees and increasing the number of patients treated.
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<PAGE>
Gross profit improved. It increased from $43,142 for the quarter
ended October 31, 1999 to $761,321 for the quarter ended October 31, 2000;
an increase of more than 1700%. This is due to increases in fees and as
well as the increase in number of patients treated. Net profit went from a
loss of $234,804 for the quarter ended October 31, 1999 to a profit of
$81,518 for the quarter ended October 31,2000.
The increase in revenues and gross profit from the quarter ended
October 31, 1999 to the quarter ended October 31, 2000 are due primarily to
the maturing of the Company by moving from a start up company to a more
stable company. Now that we are more mature, revenues and gross profit
are expected to increase in the future but at a lower rate.
SIGNIFICANT ELEMENTS OF INCOME OR LOSS THAT DO NOT ARISE FROM
CONTINUING OPERATIONS
There are no significant elements of income or loss that do not arise
from continuing operation during the current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended October 31, 2000, we made a major acquisition
of a license to use patent pending technology from Aidan, Incorporated.
The contract to acquire this technology required payments of $750,000 over
a period of 180 days. We have short term notes payable of $911,600 as of
October 31, 2000, including the note due Aidan, Incorporated. This is more
than can be repaid from funds generated from the normal course of business.
We intend to raise additional capital and may seek additional sources of
debt financing.
We used $18,087 net cash in operations during the quarter ended
October 31, 2000. This was due to an increase in working capital. It is
not expected that working capital needs will increase as much in future
quarters and that cash flow from operations will be sufficient to meet
working capital needs.
KNOWN TRENDS
There are no known trends, events or uncertainties that have had or
that are reasonably expected to have a material impact on the net sales or
revenues or income from continuing operations.
20
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<PAGE>
MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURES AND CAPITAL RESOURCES
We have no material commitments for capital expenditures. We believe
we have made the necessary capital expenditures to carry on our business.
We are exploring raising additional equity to finance expansion at a
greater pace than can be financed from current operations.
BUSINESS
BioPulse International, Inc., was incorporated in the state of Nevada
on July 13, 1984 originally under the name Universal Financial Capital
Corp. The Company changed its name in September 1985 to International
Sensor Technologies, Inc. As International Sensor Technologies, Inc., the
Company incurred heavy losses and no revenue from operations. The Company
also experienced five years of inactivity. On January 12, 1999, the
Company again changed its name to BioPulse International, Inc. when it
acquired BioPulse, Inc. We are considered to be in the early stages of
market development. We are in the business of managing integrated
medicine clinics, clinical trials and medical research programs.
We offer a variety of alternative medical products and services,
including dietary supplements, clinical procedures, and medical equipment
from around the world. Our efforts focus on treatments for degenerative
diseases such as cancer.
During 1998, we identified the initial protocols to be included in the
BioPulse treatment programs. We evaluated a variety of techniques and
products before determining which ones were most appropriate. Some of the
selected treatments have not yet been approved or submitted for approval to
the United States Food and Drug Administration (the "FDA"), so they are
being studied at clinics outside the United States. We have made
arrangements to have clinical studies done at clinics owned by licensed
physicians in Mexico that utilize these protocols.
During 2000, we began expanding the scope of the treatments we were
studying to include developments in biotechnology. We believe that recent
advances in biochemistry and microbiology have the potential to explain the
observable benefits of alternative medicine so that these treatments can be
optimized. At the same time, developments in biotechnology and
immunotherapy hold the promise of new treatments that are consistent with
the alternative medicine philosophy of improving overall health by working
with the body's natural systems to fight disease.
We believe that these technological developments can converge with the
public shift toward alternative medicine that has been recognized by the
U.S. Government and major medical associations and institutions. We have
focused our efforts on cancer, which is the second leading cause of death
in the United States (over 500,000 deaths annually) and costs the U.S.
economy more than $100 billion per year.
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<PAGE>
We believe that our approaches can help to minimize the impact of
cancer on society by offering proprietary new, cost-effective, and life-
affirming methods for:
- early detection of cancer;
- treatments for cancer; and
- monitoring after treatment.
We have adopted the phrase "Alternative Biotech" to describe our
approach.
We accomplish our objectives by focusing on four distinct areas:
International clinical operations, U.S. clinical operations, biotech
products and services, and research and development.
INDUSTRY BACKGROUND - ALTERNATIVE MEDICINE
Health care is one of the largest industries in the world, accounting
for over 10% of U.S. GNP. Pharmaceutical companies alone spend over $8
billion per year in marketing.
The "alternative medicine" industry includes a broad spectrum of
products and services, ranging from chiropractic and herbal remedies to
acupuncture and aroma therapy. Some segments of the industry are regulated
through board certification and/or government agencies such as the FDA.
Other segments are largely unregulated.
While the term "alternative medicine" can include everything from
herbal remedies to acupuncture, its meaning actually changes over time.
For example, herbal supplements that years ago were produced only by
specialized manufacturers and sold primarily through health food stores are
now produced by major pharmaceutical companies and sold in ordinary grocery
stores. Once considered "alternative," these supplements are now more
likely to be considered "traditional." Practices that are considered
alternative in the United States, such as acupuncture, are considered
traditional in other countries, such as China.
The fluid nature of these classifications has led many industry
observers to adopt the term "integrative medicine" reflecting the
combination of alternative and traditional medical procedures.
Our focus is on testing and treatments for cancer using alternative
procedures. There are a variety of theories about the causes of cancer and
the appropriate types of treatment. We recognize the difficulty and
complexity of treating cancer and encourage cancer patients to seek the
best treatment they can get anywhere they can get it. Traditional
treatments for cancer include chemotherapy, radiation, and surgery.
Alternative treatments for cancer include dietary standards and
supplementation, homeopathics, detoxification, various forms of energy
medicine, and various methods to boost the immune system. Traditional and
alternative approaches have had success in many cases, but neither approach
has developed what could be considered a "cure" for cancer.
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<PAGE>
Traditional treatments have well-known adverse side effects such as
hair loss, decreased function of various organs, and substantially impaired
immune systems leading to susceptibility to other diseases. These side
effects and the uncertain likelihood of success with many types of cancer
has led some to question these methods of treatment.
Alternative treatments are becoming increasingly accepted in the
United States. Some studies suggest that the number of visits to
alternative practitioners exceeds the number of visits to primary care
physicians annually. Alternative treatments for cancer have not been
studied extensively. Some studies, however, show that as many as 50% of
all cancer patients use at least one form of alternative treatment at some
point during their illness.
Most medical authorities accept the proposition that successful
management of cancer involves three distinct activities: prevention, early
detection, and effective treatment. Prevention is a societal problem that
includes eliminating smoking and other cancer-causing activities, improved
diet, and better exercise. We focus primarily on the latter two
activities, although we promote prevention in our published information.
Early detection is important because for most cancers the earlier
treatment is rendered the greater the likelihood of success. For example,
some studies show that if breast cancer is detected while still localized
and before metastatic spread, the five-year survival rate is 97% or better.
If the cancer spreads regionally before treatment, the survival rate drops
to around 75%. If there is distant metastasis, the survival rate drops to
20%. Current methods of early detection can be effective, but most people
do not do the screening because of the cost, inconvenience, invasiveness of
the procedure, or the relatively unreliable results. We believe that the
our cancer screening test can overcome these limitations and allow for
widespread, inexpensive and accurate cancer screening.
Effective treatment of cancer historically has meant a reduction in
tumor size or, ideally, complete remission of the cancer, without regard to
the impact on the patient's overall medical condition. The side effects of
traditional treatments have led many companies to research new treatments
that can accomplish remission without otherwise harming the patient. Many
of the most promising treatments are in the field of immunotherapy. The
basic premise of these treatments is that the body's own immune system can
fight cancer. This premise is shared by many of the alternative
treatments, although the methodologies differ substantially. We view this
as a convergence of technologies and have developed and licensed technology
to take advantage of this convergence between alternative and biotechnical
treatments. Our primary focus is on cancer vaccines, but our approach
extends to cytokine mixtures, immune stimulants, and angiogenesis
inhibitors, as well as the role of nutrition, exercise, and other
alternative treatments.
BUSINESS MODEL
We manage clinics, clinical trials and conduct research and
development of alternative and biotech medicine. We plan to commercialize
certain products and services once appropriate regulatory approvals are
obtained in the respective markets.
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<PAGE>
We accomplish our corporate objectives by engaging in the following
activities:
1. International clinical operations.
We contract with clinics located outside the United States to conduct
clinical trials and provide patient care for cancer and other diseases. It
is not feasible to describe all of the various protocols being studied in
these clinical trial programs, and the program for each patient depends on
the physician's diagnosis of that particular patient. The primary emphasis
is on immunotherapies, including the cancer vaccine and related treatments.
We provide resources, including equipment, technical know-how, and
management services for these clinics as appropriate. We also contract
with laboratories to create products used for those activities. In the
future, we plan to offer a service to conduct clinical trials for other
biotech companies in these facilities.
Our relationships with foreign clinics offers us opportunities to
evaluate a variety of approaches to medicine. There is worldwide expansion
of research and development in medical technology and techniques. The
internet has made this knowledge more widely available than ever before,
but there are many practices that have not been documented. Many new
treatments could be highly promising if properly documented.
We pay particular attention to identifying medical treatments that:
- could show promise in fighting cancer and other degenerative
diseases if documented properly;
- are not unsafe as practiced by qualified medical personnel; and
- are cost effective for patients.
For these purposes, "medical treatments" may include nutritional
supplements, therapeutic devices or machines, and biofeedback devices, as
well as treatment practices and medications.
2. U.S. clinical operations.
We plan to open and/or contract with clinics inside the United States
to conduct clinical trials and offer our cancer tests and cancer treatments
as soon as we have the necessary regulatory approvals. Several states,
including Arizona, Georgia, and Maine, are adopting public policies and
related statutes and regulations to promote the evaluation of alternative
treatments and we plan to work with these states as soon as possible.
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<PAGE>
3. Biotech products and services.
We provide technical know-how, equipment and supplies to the clinics
we contract with to enable them to produce products including our cancer
vaccines, cytokines, and other products. We will provide our cancer test
for these clinics. We will also distribute certain dietary supplements,
including PGM, an angiogenesis inhibitor, and MPGC, an immune stimulant.
We plan to offer these products and services to other biotech companies for
their use in research.
As part of this effort, we participate in health-oriented trade shows
and forums, and we invite lecturers and specialists to visit the clinics we
collaborate with. We also engage in ongoing dialogue with health care
providers and leaders in the alternative medicine and biotech industries
who often introduce us to new medical treatments
4. Research and Development.
We are continuing the development and improvement of our cancer
vaccines, immune stimulants, angiogenesis inhibitor, cytokine products,
cancer tests and related products and services. We also research
alternative treatments to better understand how they work and what we can
do to enhance their effectiveness.
In addition to our own products, we evaluate medical treatments
offered to us from outside sources that have shown promising results for
compatibility and suitability for inclusion in our treatment programs.
Our research and development efforts are not designed to follow the
traditional biotech model of starting with basic science and developing a
product. Our approach is to license technology from other organizations
and individuals that has already shown a substantial likelihood of success,
and that are consistent with our objective of combining alternative and
biotech approaches. We do not intend to pursue tests or treatments that
rely on genomics, such as DNA testing or manipulation.
REGULATORY ENVIRONMENT
The nature of medical care makes the industry one of the more heavily
regulated sectors. In the United States, a variety of governmental
agencies have jurisdiction over health care products and services. For
example, each state has licensing boards that regulate the ability of
individuals to work as physicians, nurses, or other health care providers.
The Food and Drug Administration regulates the use of drugs and other
medicines within the United States. The Federal Trade Commission (FTC)
regulates certain aspects of the practice of medicine, including
advertising and marketing. Other countries have comparable regulatory
frameworks. We have a policy of obtaining all required permits, licenses,
and bonds to operate our facilities and sell our products and services. We
have retained counsel to assist us in understanding and complying with
these various regulations both in the United States and abroad.
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<PAGE>
We expect that the TK1 test will be our first product that will go
through the FDA process and we are taking steps to generate the necessary
data and other requirements to successfully obtain FDA approval. We intend
to develop our TK1 technology in three ways: (i) perform cancer screening
services in our own laboratories; (ii) license our intellectual property
and sell our reagents that target TK1 to leading clinical reference
laboratories to allow them to perform their own screening tests, using
their own methods and equipment; and (iii) package our technologies in the
form of diagnostic test kits that clinical laboratories can use to conduct
screening services. The FDA treats each of these alternatives differently.
1. Providing testing services directly. The FDA does not actively
regulate laboratory tests that have been developed and used by the
laboratory conducting the test. The FDA, however, does regulate reagents,
such as ours, that react with a biological substance to identify a specific
chemical substance. These regulations provide that most such reagents,
which the FDA refers to as analyte specific reagents, are exempt from the
FDA's premarket review requirements.
If the FDA were to decide to regulate in-house developed laboratory
tests, decide to require premarket approval or clearance of our analyte
specific reagents, conclude that our reagents do not meet the requirements
for analyte specific reagents, or conclude that licensing our intellectual
property constitutes non-compliant labeling, the commercialization of our
products and services could be delayed, halted or prevented. In addition,
the FDA could impose penalties on us or seek other enforcement actions.
Similarly, if the FDA were to determine that our blood collector requires
premarket approval or clearance, the sale of our products and services
could be delayed, halted or prevented and the FDA could impose penalties on
us or seek other enforcement action.
Finally, our reagents will be subject to a number of FDA requirements,
including a requirement to comply with the FDA's quality system regulation
which establishes extensive regulations for quality control and
manufacturing procedures. Failure to comply with these regulations could
subject us to enforcement action. Adverse FDA action in any of these areas
could significantly increase our expenses and limit our revenue and
profitability.
2. Licensing our technology. Reagents generally do not require FDA
approval or clearance if they are sold to clinical laboratories licensed by
the government to perform high complexity testing and are labeled in
accordance with FDA requirements, including a statement that their
analytical and performance characteristics have not been established. A
similar statement would also be required on all advertising and promotional
materials relating to analyte specific reagents such as ours. Laboratories
are also subject to restrictions on the labeling and marketing of tests
that have been developed using analyte specific reagents. The analyte
specific reagent regulatory category is relatively new and its boundaries
are not well defined, and there has been some discussion within the
government of changing the analyte specific reagent regulation. It is
unclear whether any such changes would affect our tests.
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<PAGE>
We believe that our in-house testing and the analyte specific reagents
we intend to sell to clinical reference laboratories do not require FDA
approval or clearance. We cannot be sure, however, that the FDA will not
assert that our tests or one or more of our reagents require premarket
approval or clearance. In addition, we cannot be sure that the FDA would
not treat the licensing of the intellectual property we rely on as labeling
that would subject the reagent to premarket approval or clearance and other
FDA regulation. Moreover, we cannot be sure that the FDA will not change
its position in ways that could negatively affect our operations.
3. Any diagnostic test kits that we may sell would require FDA
approval or clearance before they could be marketed. There are two review
procedures by which a product may receive such approval or clearance. Some
products may qualify for clearance under a premarket notification, or
510(k) procedure, in which the manufacturer provides to the FDA a premarket
notification that it intends to begin marketing the product, and
demonstrates to the FDA's satisfaction that the product is substantially
equivalent to a legally marketed product, which means that the product has
the same intended use as, is as safe and effective as, and does not raise
questions of safety and effectiveness different from a legally marketed
device. A 510(k) submission for an in vitro diagnostic device generally
must include manufacturing and performance data, and in some cases, it must
include data from human clinical studies. Marketing may commence when FDA
issues a clearance letter.
If a medical device does not qualify for the 510(k) procedure, the FDA
must approve a premarket approval application ("PMA") before marketing can
begin. PMA applications must demonstrate, among other matters, that the
medical device is safe and effective. A PMA application is typically a
complex submission, usually including the results of preclinical and
extensive clinical studies. Before the FDA will approve a PMA, the
manufacturer must pass an inspection of its compliance with the
requirements of the FDA's quality system regulations.
We believe that our TK1 diagnostic test kit may require PMA approval.
The PMA process is lengthy and costly, and we cannot be sure that the FDA
will approve PMAs for our products in a timely fashion, or at all. FDA
requests for additional studies during the review period are not uncommon,
and can significantly delay approvals. Even if we were able to gain
approval of a product for one indication, changes to the product, its
indication, or its labeling would be likely to require additional
approvals.
Physicians who order our TK1 cancer screening tests will need to
obtain blood serum from patients. This blood serum will have to be
transported to a laboratory. Tissue transport and storage containers are
also medical devices regulated by the FDA although they generally have been
exempt by regulation from the FDA's premarket clearance or approval
requirement. We believe that our blood serum container falls within the
exemption, but we cannot be sure that the FDA will not assert that our
container is not exempt and seek to impose a premarket clearance or
approval requirement.
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<PAGE>
Regardless of whether a medical device requires FDA approval or
clearance, a number of other FDA requirements apply to its manufacturer and
to those who distribute it. Device manufacturers must be registered and
their products listed with the FDA. Certain adverse events and product
malfunctions must be reported to the FDA. The FDA also regulates the
product labeling, promotion, and in some cases, advertising, of medical
devices. Manufacturers must comply with the FDA's quality system
regulation which establishes extensive requirements for quality control and
manufacturing procedures. Thus, manufacturers and distributors must
continue to spend time, money and effort to maintain compliance. Failure
to comply can lead to enforcement action. The FDA periodically inspects
facilities to ascertain compliance with these and other requirements.
To the extent that we perform cancer screening tests in our own
laboratories in the United States, we will be subject to U.S. and state
laws and regulations regarding the operation of clinical laboratories. The
federal Clinical Laboratory Improvement Act and laws of certain other
states, impose certification requirements for clinical laboratories, and
establish standards for quality assurance and quality control. Clinical
laboratories are subject to inspection by regulators and possible
sanctions for failing to comply with applicable requirements. Sanctions
available under the Clinical Laboratory Improvement Act include prohibiting
a laboratory from running tests, requiring a laboratory to implement a
corrective plan, and imposing civil money penalties. If we fail to meet
the requirements of the Clinical Laboratory Improvement Act or other
federal or state law, we could be stopped from providing services and incur
significant expense, thereby limiting our revenue and profitability.
All of our potential cancer vaccine, anti-angiogenesis, cytokine, and
immune-stimulant products, as well as our cell processing and manufacturing
activities, are subject to comprehensive regulation by the FDA in the
United States and by comparable authorities in other countries. The process
of obtaining FDA and other required regulatory approvals, including foreign
approvals, is expensive and often takes many years and can vary
substantially based upon the type, complexity and novelty of the products
involved. Because our cancer vaccines and our other products are novel,
regulatory agencies do not have experience with them. This may lengthen
the regulatory review process, increase our development costs and delay or
prevent commercialization of our cancer vaccines and our other products.
To our knowledge, no cancer vaccine using dendritic cell technologies has
been approved for marketing in the United States. Consequently, there is no
precedent for the successful commercialization of our cancer vaccine
products. Our other products differ in many respects from other anti-
angiogenesis cytokine and immune-stimulant products that have gone through
the FDA process, so we do not know whether the FDA will treat our products
in the same way. In addition, we have had only limited experience in
filing and pursuing applications necessary to gain regulatory approvals,
which may impede our ability to obtain timely approvals from the FDA. We
have not yet sought FDA approval for our cancer vaccine, anti-angiogenesis,
cytokine or immune-stimulant products. We will not be able to commercialize
any of our potential products in the United States until we obtain FDA
approval, and so any delay in obtaining, or inability to obtain, FDA
approval would harm our business.
28
</Page>
<PAGE>
If we violate regulatory requirements at any stage, whether before or
after marketing approval is obtained, we may be fined, forced to remove a
product from the market and experience other adverse consequences including
delay, which could materially harm our financial results. Additionally, we
may not be able to obtain the labeling claims necessary or desirable for
the promotion of our products. We may also be required to undertake post-
marketing trials. In addition, if we or others identify side effects after
any of our vaccines or other products are on the market, or if
manufacturing problems occur, regulatory approval may be withdrawn and
reformulation of our vaccines, additional clinical trials, changes in
labeling of our vaccines, and additional marketing applications may be
required.
An investigational new drug application must become effective before
human clinical trials may commence. The investigational new drug
application is automatically effective 30 days after receipt by the FDA,
unless before that time the FDA requests an extension to review the
application, or raises concerns or questions about the conduct of the
trials as outlined in the application. In the latter case, the sponsor of
the application and the FDA must resolve any outstanding concerns before
clinical trials can proceed. However, the submission of an investigational
new drug application may not result in the FDA authorizing us to commence
clinical trials in any given case.
Preclinical studies involve laboratory evaluation of product
characteristics and animal studies to assess the efficacy and safety of the
product. The FDA regulates preclinical studies under a series of
regulations called the current Good Laboratory Practices regulations. If
the sponsor violates these regulations the FDA, in some cases, may
invalidate the studies and require the sponsor replicate those studies.
If testing of a particular product does not yield successful results,
then we will be unable to commercialize that product. We must demonstrate
that our products are safe and effective in humans through extensive
preclinical and clinical testing. We may experience numerous unforeseen
events during, or as a result of, the testing process that could delay or
prevent commercialization of our products, including different or
unexpected results in later clinical trials, risks to participating
subjects or patients, undesirable side effects, or other problems that
would preclude regulatory approval or limit the commercial use of the
products if approved.
Moreover, we may take longer to complete our clinical trials than we
project, or we may not be able to complete them at all. Clinical testing
is very expensive, can take many years, and the outcome is uncertain. The
data collected from our clinical trials may not be sufficient to support
approval by the FDA of any of our cancer vaccine or other products. The FDA
may not ultimately approve any of our product candidates for commercial
sale. If we fail to adequately demonstrate the safety and efficacy of a
cancer vaccine or any other product, this would delay or prevent regulatory
approval of that product, which could prevent us from achieving
profitability in that product line.
29
</Page>
<PAGE>
COMPETITIVE ENVIRONMENT
We operate in a highly competitive environment. Our competitors
include other biotech companies who focus on cancer detection and
treatments, which includes most, if not all, of the major biotech companies
around the world. Generally, these companies follow a pharmaceutical model
that involves years of research and development before knowing whether a
product or procedure will be effective. We believe that to a large extent,
these companies have neglected research into alternative medicine. Because
we start with alternative medicine, and then select biotech products and
services that are complementary, we believe we can offer a different
approach that can be more cost-effective, more easily adopted by the public
and regulatory agencies, and more effective.
There are many companies that are developing cancer tests based on
tissue samples. To our knowledge, none of these are using our TK1
approach. Most of these are using a form of DNA testing to detect proteins
or nucleic acids that are produced by various cancers. We believe that
this type of test is unproven and, even if proven accurate, may be too
expensive to use for widespread screening. To the extent that such tests
do prove accurate, we believe they will complement our TK1 test. The TK1
test will serve as a general screening test. When patients have a positive
TK1 test, DNA tests can be used to more specifically identify the type of
cancer involved. We believe the development of DNA tests will therefore
enhance the usefulness of the TK1 test instead of competing with it.
There are also many companies that are developing cancer vaccines and
related immunotherapies. Many of these companies are seeking a specific
antigen that they can patent or otherwise protect. Others are developing
specialized equipment to improve the procedures. Most of these companies,
including us, have proprietary methods for preparing the dendritic cells
and the antigens for presentation to the patient's immune system. We
believe our approach, which uses the patient's own tumor antigen derived
from the patient's urine, offers a cost-effective and individualized
approach to cancer vaccines. Our approach can be supplemented with antigen
from the patient's tumor tissue where it is available. We recognize that
our approach does not follow the pharmaceutical model because our vaccines
cannot be manufactured and stored for use in thousands of patients like
pharmaceutical products. Our approach is more individualized. We believe,
however, that our approach will have lower risks to the patient than the
pharmaceutical model. We also believe our approach will ultimately be more
effective because it addresses all of a patient's tumors rather than
specific individual tumors. We are also researching a tumor-specific
vaccine that we believe could offer many of the advantages of the
pharmaceutical model without requiring extensive DNA manipulation.
Several biotech companies are researching angiogenesis inhibitors. We
believe our product, which is based on a plant extract, has the potential
to be more widely accepted because of its origin. We anticipate that it
will be more cost effective and stable than the products being developed by
other companies in biotech laboratories.
30
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<PAGE>
We believe it is important to collaborate with other companies as
appropriate and have begun discussions with other biotech companies to
explore these opportunities.
MARKETING
We engage in a variety of marketing efforts, including advertising in
magazines, participation in trade shows, and maintenance of a web page that
describes our research and development efforts and refers to clinical
trials that use our treatments. We have continuing dialog with industry
leaders and specialists, and we have participated in radio call-in shows
and discussions. We are currently implementing a program of informing
physicians, chiropractors and other alternative health care practitioners
about our activities.
PROPERTY AND FACILITIES
We currently lease 5,514 square feet of space in South Jordan, Utah.
We pay $8,730.50 per month for this space. The lease runs through 2003.
We manage a 6,000 square foot clinic in Tijuana, Mexico owned by Dr.
Jesus Omar Sanchez Tiznado. We own medical equipment valued at $150,000
which is located at this clinic. We have no obligation to pay the
property-related costs of this clinic.
We also have an association with a German clinic which began in
November 1999. Currently, the clinic is not utilizing our protocols. We
anticipate re-evaluating this association within the next six months to
determine whether to proceed forward or to seek association with another
clinic in Germany.
We are currently negotiating the lease of office space in San Ysidro,
California. If we are successful in negotiations, we expect to move our
executive offices to San Ysidro.
PRINCIPAL SUPPLIERS
Principal suppliers for our clinic are Merit Pharmaceuticals, Bayer
Diagnostics and Beckman Coulter, Inc.
PATENTS, TRADEMARKS, LICENSES, ETC.
We have licensed patented technology and other intellectual property
from Aidan, Incorporated and Brigham Young University.
ENVIRONMENTAL LAW COSTS AND EFFECTS
Compliance with federal, state and local regulations pertaining to the
discharge of materials into the environment or otherwise relating to the
protection of the environment is not anticipated to have an impact on the
Company's capital expenditures, earning and competitive position.
31
</Page>
<PAGE>
EMPLOYEES
The Company currently employs six administrative personnel. Each
clinic employs its own staff. We have no obligation to the employees of
the clinics. None of the Company's current employees are under collective
bargaining contracts.
CONSULTANTS
We recently retained the services of Liviakis Financial
Communications, Inc., to advise us on financial and public relations and
business and personnel related matters in exchange for 1,550,000 shares of
restricted common stock. The term of our agreement with Liviakis Financial
is one year and expires on October 13, 2001.
MANAGEMENT
The following table sets forth the name, age, and position of each
executive officer and director and the term of office of each director of
the Corporation.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR OR OFFICER SINCE
---- --- -------- -------------------------
<S> <C> <C> <C>
Jonathan Neville 46 CEO & January 1999
Director
Loran Swensen 43 President & January 1999
Director
Martha D. Rodririguez 46 Vice President August 2000
Jan Morse 39 Secretary September 1999
Michael L. Jones 48 Treasurer January 2000
Stephen R. Fey 51 Chairman of July 1998
the Board
and Director
F. Briton McConkie 54 Director July 1998
Robert Morrow 60 Director January 1999
</TABLE>
32
</Page>
<PAGE>
Our directors hold office until each annual meeting of stockholders or
until their successors are elected or appointed. Thereafter, at each
annual meeting of stockholders the successors to the directors will be
elected to serve from the time of election and qualification until the next
annual meeting following election. Officers serve at the will of the Board
of Directors.
The following sets forth certain biographical information relating to
the Company's Officers and Directors:
JONATHAN NEVILLE, CHIEF EXECUTIVE OFFICER, DIRECTOR. Mr. Neville is a
graduate of Brigham Young University where he earned a B.S. in Agricultural
Economics, an M.S. in Agribusiness, and a J.D. After graduating, he
clerked for H. Vern Payne, Chief Justice of the New Mexico Supreme Court.
He then spent five years in the U.S. Air Force as a Judge Advocate General.
He became General Counsel for Genesis Seed Corporation in 1986, a national
turf seed producer and distributor. In 1991, he co-founded Tempus
Entertainment, Inc. After selling his interest in Tempus in 1993, he co-
founded Multi-Dimensional Studios in 1994, a leading producer of 3D
computer animation and videos. He has advised a variety of other startups
and small companies, including Advanced Technologies Group, Inc. He co-
founded BioPulse, Inc., in 1998 with Mr. Swensen and Mr. Morrow. Since
1980 he has written in 30 volumes of the Legalines series for Harcourt
Brace Jovanovich.
LORAN SWENSEN, PRESIDENT, DIRECTOR. Mr. Swensen has been an
entrepreneur since 1980 when he started his own company, Alternate Energy
Corp., where he developed high insulating security windows. Mr. Swensen
sold the business in 1981 and developed Home Based Business News. In 1984,
Mr. Swensen co-founded three companies, Enhanced Simulation where he co-
developed and patented a rotating motion simulator for the amusement
industry, Multi-Dimensional Studios where he co-developed the MDS 3D EFX
Thunder Theater and 3D movies, and Advanced Technology Group where he co-
developed the Realeyes 3D box. In 1985, Mr. Swensen founded Swensen
Research Company where he developed Brain Neuro-Simulators which were sold
throughout the medical industry.
MARTHA D. RODRIQUEZ, VICE PRESIDENT. Ms. Rodriquez graduated from
Escuela de Enfermera del I.M.S.S. with her RN in 1997. She received her
LPN from La Universidad Autonoma de Baja California in 1978. She also
graduated from Universidad Ivero Americana in 1988. From 1994 through 1996
Ms. Rodriquez was the Head Nurse for Clinica Ban-Her in Tijuana, Mexico.
From 1996 to 1998 she was self-employed as a freelance surgical nurse. Ms.
Rodriguez joined BioPulse International, Inc., in January 1999. She has
served as Head Nurse and Medical Director for the BioPulse Tijuana Clinic.
In August 2000, she became a Vice President and our Adminstrative Director
of Mexican Clinics.
JAN MORSE, SECRETARY. Ms. Morse is the Secretary and current Director
of Operations at the BioPulse International, Inc. corporate offices. Her
duties include overseeing the running of the BioPulse business offices,
managing staff, payroll and book keeping. From 1997 to the present, Ms.
Morse worked at Multi-Dimensional Studios as Executive assistant and
Director of Operations. Before joining Multi-Dimensional Studios, Ms.
Morse worked as a customer service representative with U.S. West. Ms.
Morse attended Southern Utah State College (now Southern Utah University)
from 1979 to 1981.
33
</Page>
<PAGE>
MICHAEL L. JONES, TREASURER. Mr. Jones is a graduate of Brigham Young
University in Business Management and attended Graduate School at
California State University, Northridge in accounting. He worked in public
accounting for over 15 years and was vice president of the accounting firm
of Tanner + Co. He served three terms as chairman of the Utah Association
of CPAs Taxation Committee. He was listed by Money Magazine as one of
America's Best Tax Practitioners. He served for five years as Treasurer of
the Utah Republican Party. Mr. Jones has also worked as a management
consultant and computer consultant.
STEPHEN R. FEY, DIRECTOR. Mr. Fey graduated from Brigham Young
University with a B.S. degree in accounting. He received an MBA degree
from the University of Southern California. Along with Mr. McConkie, Mr.
Fey was a co-founder of Newport Equity Group, Inc., a financial planning
and venture capital firm, and MedGroup, Inc., a medical management
corporation specializing in physical and occupational rehabilitation. He
served as CFO and director for seven years and since 1992 has been a
consultant to MedGroup. Along with Mr. McConkie, Mr. Fey is co-founder of
Wasatch Capital, a venture capital and management consulting firm.
F. BRITON MCCONKIE, JR., DIRECTOR. Mr McConkie is a graduate of the
University of Utah. For seven years he was a marketing and product manager
for Searle/Will Ross in Salt Lake City, Utah and Milwaukee, Wisconsin. He
co-founded Newport Equity Group, Inc., of Provo, Utah, and served a Group
Vice President from 1980 through 1985. Mr. McConkie also co-founded
MedGroup, Inc., of Los Angeles, California, where he served as CEO from
1985 through 1993. Mr. McConkie is also a co-founder of Wasatch Capital.
ROBERT E. MORROW, M.D., DIRECTOR. Dr. Morrow is a graduate of the
University of Florida where he earned a B.S. in Chemistry, Biology and
Psychology. He earned his M.D. from Jefferson Medical College and did a
Rotating Internship at St. Vincent's Hospital in Indianapolis. Dr. Morrow
participated in the Orthopedic Surgeon Residency Program with Indiana
University Medical Center from 1960 until 1965, including a second year of
Children's Orthopedics. Dr. Morrow worked as a full-time Faculty
Instructor for the Department of Surgery Medical Center and Shiners
Children's Hospital. He also worked as a part time Clinical Instructor and
Assistant Clinical Professor at the Department of Orthopedic Surgery
University of Utah Medical Center for 1961 until 1986. Dr. Morrow is a
member of many groups and societies including a member of the American
Academy of Orthopedic Surgeons, the Orthopedic Research Society, the
American College of Surgeons, the American Academy of Anti-aging Medicine,
and a founding member and officer of the American Spine Society. He has
also served as a diplomat of the American Board of Orthopedic Surgery and
as past President of the American Academy of Neurological and Orthopedic
Surgeons. He has participated in various post-graduate and special courses
including courses in: Advanced Neurophysiology in association with Harvard
University, Electrodermal Testing and Homeopathy, Nutritional Medicine and
Alternative Therapies. Additionally, Dr. Morrow has participated in the
Post-graduate Neurological Surgery Laser Workshop at Northwestern
University Medical School. Dr. Morrow has presented an exhibit to the
Scoliosis Research Society and given a presentation on Nutritional Therapy
for Downs Syndrome. He has also done extensive studies of mentally and
physically handicapped children and adults Dr. Morrow has also served as
the Medical Director of the National Association of Child Development.
34
</Page>
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Awards Payout
Annual Compensation Other Restr- All
Name and Annual icted Other
Principal Bonus Compen Stock Options LTIP Compen-
Position Year Salary $ -sation Awards /SARs Payout sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jonathan Neville 2000 60,000 -0- -0- -0- -0- -0- -0-
CEO, Director 1999 60,000 -0- -0- -0- -0- -0- -0-
1998 - - - - - - -
Loran Swensen 2000 60,000 -0- -0- -0- -0- -0- -0-
President, 1999 60,000 -0- -0- -0- -0- -0- -0-
Director 1998 - - - - - - -
Martha D.
Rodriguez 2000 24,900 - - - - - -
Vice President 1999 6,700 - - - - - -
1998 - - - - - - -
Jan Morse 2000 24,000 -0- -0- -0- -0- -0- -0-
Secretary 1999 24,000 -0- -0- -0- -0- -0- -0-
1998 - - - - - - -
Michael L. Jones 2000 49,400 -0- -0- -0- -0- -0- -0-
Treasurer 1999 - - - - - - -
1998 - - - - - - -
Stephen R. Fey 2000 -0- -0- -0- -0- -0- -0- -0-
Chairman of Board 1999 -0- -0- -0- -0- -0- -0- -0-
Director 1998 -0- -0- -0- -0- -0- -0- -0-
F. Briton McConkie 2000 -0- -0- -0- -0- -0- -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
Robert Morrow 2000 36,000 -0- -0- -0- -0- -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
1998 - - - - - - -
</TABLE>
35
</Page>
<PAGE>
OPTION GRANTS IN CURRENT FISCAL YEAR
The following table sets forth each grant of stock options to each of
the Named Executive Officers and Directors. No stock appreciation rights
were granted during such fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------
NUMBER OF PERCENT OF
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE
OPTIONS DURING CURRENT PRICE EXPIRATION
GRANTED FISCAL YEAR ($/SHARE) DATE
------------ --------------- ------------ ----------
<S> <C> <C> <C> <C>
Jonathan Neville 68,026 1.9% $3.23 10/11/2005
831,974 22.8% $2.94 12/31/2009
Loran Swensen 68,026 1.9% $3.23 10/11/2005
831,974 22.8% $2.94 12/31/2009
Martha D. Rodriguez 15,000 0.4% $2.94 12/31/2009
Jan Morse 50,000 1.4% $2.94 12/31/2009
Michael L. Jones 150,000 4.1% $2.94 12/31/2009
Stephen R. Fey 550,000 15.1% $2.94 12/31/2009
F. Briton McConkie 550,000 15.1% $2.94 12/31/2009
Robert Morrow 250,000 6.9% $2.94 12/31/2009
</TABLE>
We did not issue any options to our officers, directors or employees
during the fiscal years ended July 31, 1998, 1999 or 2000.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENT
We employ Dr. Morrow pursuant to an oral employment agreement on a
month to month basis. Dr. Morrow currently receives a monthly salary of
$3,000.
Except as disclosed in this prospectus, no other compensation has been
paid directly or accrued to any other officer or director of the Company to
date. Compensation of officers and directors is determined by the
Company's Board of Directors and is not subject to shareholder approval.
36
</Page>
<PAGE>
<PAGE>
The Company has no retirement, pension, or benefit plan at the present
time, however, the Board of Directors may adopt plans as it deems to be
reasonable under the circumstances.
In the last three years, no executive officer has received any amounts
in connection with an executive officer's resignation, retirement, or other
termination. No executive officer received any amounts in the last three
years in connection with a change in control of the Company or a change in
the executive officer's responsibilities after a change in control.
PRINCIPAL STOCKHOLDERS
The following table sets forth the name and the number of Common Stock
of the Company, owned of record or beneficially, by each person who owned
of record, or was known by the Company to own beneficially, more than 5% of
the Company's Common Stock ("Principal Shareholders"), and the name and
share holding of each officer and director, and all officers and directors
as a group:
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of of Beneficial Beneficial Percentage
Class Owner (1) Ownership of Class
--------- ------------------------------ ------------------ ------------
<S> <C> <C> <C>
Common Stephen R. Fey (2) 336,500 3.52%
Ivy Lane Row
Provo, UT 84604
Common F. Briton McConkie (2) 336,500 3.52%
4014 Splendor Way
Salt Lake City, UT 84124
Common Lynda Swensen Family Trust (3) 1,004,200 10.52%
10070 Chattle Cir.
S. Jordan, UT 84095
Common Jonathan Neville (4) 1,089,200 11.41%
1089 Ridgetop Corp. Drive
S. Jordan, UT 84095
Common Jan Morse 10,000 .1%
1311 West Kodiak Way
South Jordan, Utah 84095
Common Robert Morrow (2) 317,600 3.33%
6814 E. 300 N
Huntsville, UT 84317
Common John Liviakis (5) 1,253,500 13.13%
Liviakis Financial
Communications, Inc.
495 Miller Avenue, Third Floor
Mill Valley, California 94941
---------------------------------------------------------------------------
Common Officers, Directors and 3,084,000 32.30%
Nominees as a Group:
(5 people)
---------------------------------------------------------------------------
Total: 4,337,500 45.43%
---------------------------------------------------------------------------
</TABLE>
37
</Page>
<PAGE>
(1) 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 share is deemed to
be the beneficial owner of all the shares. Therefore, the chart indicates
that several persons may be deemed the beneficial owners of the same shares
because there is shared power or investment or share rights of ownership.
(2) Directors of the Company
(3) Lynda Swensen is the mother of our President Loran Swensen. Mr.
Swensen is the beneficiary of the trust. Mr. Swensen may be deemed to be
the beneficial owner of the shares held by the Trust.
(4) Officers of the Company
(5) Mr. Liviakis is the president of Liviakis Financial
Communications, Inc., and may be deemed to be the beneficial owner of these
shares.
Except for Michael Jones, each of the Company's officers and directors
has or will have the right to acquire additional shares of the Company's
common stock within sixty days from options as disclosed hereinabove.
Within the next sixty days, Mr. Jones will only be vested up to two-thirds
of the 150,000 share option granted him on October 12, 2000.
CHANGE IN CONTROL
To the knowledge of the management, there are no present arrangements
or pledges of the Company's securities that may result in a change in
control of the Company.
38
</Page>
<PAGE>
RELATED PARTY TRANSACTIONS
The Company has not, nor does it expect to have significant dealings
with affiliates. If there are such dealings, however, the parties will
attempt to deal on terms competitive in the market and on the same terms
that either party would deal with a third person.
DESCRIPTION OF SECURITIES
The Company is presently authorized to issue one hundred and ten
million (110,000,000) shares, which shall be divided into one hundred
million (100,000,000) of Common Stock having a par value of $.001 each; two
million (2,000,000) shares of Class A Preferred Stock having a par value of
$.001; two million (2,000,000) shares of Class B Preferred Stock having a
par value of $.001; two million (2,000,000) shares of Class C Preferred
Stock having a par value of $.001: two million (2,000,000) shares of Class
D Preferred Stock having a par value of $.001; two million (2,000,000)
shares of Class E Preferred Stock.
COMMON STOCK
The holders of common stock are entitled to equal dividends and
distributions, per share, with respect to the common stock when, as and if
declared by the Board of Directors from funds legally available therefor.
No holder of any shares of common stock has a preemptive right to subscribe
for any securities of the Company. Upon liquidation, dissolution or
winding up of the Company, and after payment of creditors and preferred
stockholders, if any, the assets will be divided pro-rata on a share-for-
share basis among the holders of the shares of common stock. All shares of
common stock now outstanding are fully paid, validly issued and non-
assessable. Each share of common stock is entitled to one vote with
respect to the election of any director or any other matter upon which
shareholders are required or permitted to vote. Holders of the Company's
common stock do not have cumulative voting rights, so that the holders of
more than 50% of the combined shared voting for the election of directors
may elect all of the directors, if they choose to do so and, in that event,
the holder of the remaining shares will not be able to elect members to the
Board of Directors.
PREFERRED STOCK
The rights of the various classes of preferred stock shall be
determined by the Board of Directors as approved by a majority of the
shareholders. At the present time, no Preferred Shares are issued and
outstanding.
TRANSFER AGENT AND REGISTRAR
The Company has appointed Interwest Transfer Company, 1981 E. 4800 S.,
Salt Lake City, Utah 84117, as the transfer agent and registrar for our
securities.
39
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<PAGE>
SELLING SHAREHOLDERS
The following table shows certain information as of the date of this
prospectus regarding the number of common shares, and warrants and options
to purchase our common stock beneficially owned by each selling shareholder
and the number of shares each selling shareholder is including for sale in
this prospectus.
<TABLE>
<CAPTION>
NUMBER
BENEFICIAL OWNERSHIP OFFERED BY BENEFICIAL OWNERSHIP
SELLING OF COMMON STOCK SELLING OF COMMON STOCK
SHAREHOLDER BEFORE OFFERING SHAREHOLDER AFTER OFFERING
----------- --------------------- ----------- ---------------------
NUMBER PERCENT NUMBER PERCENT
---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Kauser Partners, L.P. 353,636 3.73% 353,636 0 *
Kauser Partners, L.P. 189,318(2) 2.00% 189,318 0 *
Aidan, Incorporated 200,000(3) 2.11% 200,000 0 *
* Less than 1%.
</TABLE>
(1) Assumes that all shares offered for sale in this prospectus are sold.
(2) Represents shares of common stock issuable upon exercise of
outstanding warrants.
(3) Represents shares of common stock issuable upon exercise of
outstanding options.
The selling shareholders listed above, who are not individuals, have
provided us with additional information regarding the individuals who
exercise control over the selling shareholder. The proceeds of any sale of
shares pursuant to this prospectus will be for the benefit of each of the
individuals that control the selling entity. The following is a list of the
selling shareholders and the individual who exercises control of the
entity:
- Kauser Partners, L.P. - controlled by Mr. Leonard Panzer.
- Aidan, Incorporated - controlled by Mr. Neil Riordan.
PLAN OF DISTRIBUTION
We are registering shares of common stock on behalf of the selling
stockholders. We will pay all costs, expenses and fees in connection with
this registration, except that the selling stockholders will pay
underwriting discounts and selling commissions, if any. We will not
receive any of the proceeds from the sale of the shares by the selling
stockholders. When we refer to the "selling stockholders" in this
prospectus, that term includes donees and pledgees selling shares of common
stock under this prospectus which were received from the selling
stockholders.
The selling stockholders may sell their shares at various times in one
or more of the following transactions:
- on the OTC Bulletin Board (or any other exchange on which the
shares may be listed);
40
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<PAGE>
- in the over-the-counter market;
- in negotiated transactions other than on such exchange;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions, in covering previously
established short positions and in settlement of other transactions in
standardized or over-the-counter options; or
- in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The selling stockholders
may sell shares directly or may use broker-dealers to sell their shares.
The broker-dealers will either receive discounts or commissions from the
selling stockholders, or they will receive commissions from purchasers of
shares. This compensation may be in excess of customary commission.
The selling stockholders may also sell all or a portion of their
shares under Rule 144 under the Securities Act of 1933, or may pledge
shares as collateral for margin accounts. These shares could then further
be resold pursuant to the terms of such accounts.
Under certain circumstances, the selling stockholders and any broker-
dealers that participate in the distribution might be deemed to be
"underwriters" within the meaning of the Securities Act and any commission
received by them and any profit on the resale of the shares of common stock
as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. The selling stockholders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against certain liabilities, including
liabilities arising under the Securities Act. Liabilities under the
federal securities laws cannot be waived.
If the selling stockholders are deemed to be "underwriters" under the
Securities Act, then they will be subject to prospectus delivery
requirements under the Securities Act. Furthermore, in the event of a
"distribution" of their shares, the selling stockholders, any selling
broker or dealer and any "affiliated purchasers" may be subject to Rule
10b-6 under the Exchange Act or Regulation M under the Exchange Act, which
prohibits, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until
such person's participation in that distribution is completed. In
addition, Rule 10b-7 under the Exchange Act or Regulation M prohibits any
"stabilizing bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of the common stock in connection with this
offering. We have informed the selling stockholders that the anti-
manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
If we are notified by the selling stockholders that any material
arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus, if required, under Rule 424(b) under the
Securities Act, disclosing the following:
41
</Page>
<PAGE>
the names of the selling stockholders and of the participating broker-
dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
- other facts material to the transaction.
In addition, if we are notified by the selling stockholders that a
donee or pledgee intends to sell more than 500 shares, we will file a
supplement to this prospectus.
The selling stockholders may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities
Act.
In order to comply with certain state securities laws, if applicable,
these shares of common stock will not be sold in a particular state unless
they have been registered or qualified for sale in that state or any
exemption from registration or qualification is available and complied
with.
We may sell the 300,000 common shares registered hereunder at market
prices prevailing at the time of such sale, at prices related to prevailing
market prices, at negotiated prices or at fixed prices. Any sales of
shares registered hereunder will be made by the officers and directors of
the Company on a best-efforts basis. The officers and directors will
recieve no commissions, discounts, compensation or other remuneration for
selling the shares.
LEGAL PROCEEDINGS
To the knowledge of the officers and directors of the Company, neither
the Company nor any of its officers or directors is a party to any material
legal proceeding or litigation and such persons know of no material legal
proceeding or litigation contemplated or threatened. There are no
judgments against the Company or its officers or directors. None of the
officers or directors has been convicted of a felony or misdemeanor
relating to securities or performance in corporate office.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named herein was or is a promoter, underwriter,
voting trustee, director, officer or employee of the Company. Further,
none of the experts was hired on a contingent basis and none of the experts
named herein will receive a direct or indirect interest in the Company.
42
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<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Poulton &
Yordan, of Salt Lake City, Utah. On October 12, 2000, Poulton & Yordan was
granted an option to purchase up to 20,000 shares of restricted common
stock, with an exercise price of $2.94 per share. This option expires on
December 31, 2009.
ACCOUNTING MATTERS
The financial statements included in this prospectus and elsewhere in
the registration statement have been audited by Crouch, Bierwolf &
Associates, Certified Public Accountants, located in Salt Lake City, Utah,
as indicated in their report with respect thereto, and are included herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
ADDITIONAL INFORMATION
We file annual, quarterly, and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You
may read and copy any materials filed by us with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. We file our reports
electronically with the SEC and the SEC maintains an internet site that
will contain reports and other information regarding us which may be viewed
at http://www.sec.gov.
We have filed a registration statement on Form SB-2 with the SEC
covering the shares of common stock being offered by means of this
prospectus.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons for the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that any claim for indemnification against such
liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of
the small business issuer in the defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
43
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<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are no provisions in the Nevada corporation law or the Articles
of Incorporation of the Registrant requiring the corporation to indemnify
any of the Registrant officers and directors. The articles of
incorporation of the registrant provide for indemnification as follows:
1) No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any action
taken or an failure to take any action as a director, except as
provided in this Article.
2) The limitation of liability contemplated in this Article shall not
extend to (a) the amount of a financial benefit received by a director
to which he is not entitled, (b) an intentional infliction of harm on
the corporation or the shareholders, (c) an intentional violation of
criminal law, or (d) unlawful distributions.
3) Any repeal or modification of this Article by the stockholders of
the corporation shall not adversely affect any right or protection of
a director of the corporation existing at the time of such repeal or
modification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers and directors of the
Company pursuant to the provisions of the Company's Certificate of
Incorporation, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth our estimates (other than the
SEC registration fee) of the expenses in connection with the issuance and
distribution of the shares of common stock being registered:
<TABLE>
<S> <C>
SEC registration fee. . . . . . . . . . . . $ 2,443.64
Legal fees and expenses . . . . . . . . . . $ 50,000.00
Accounting fees and expenses. . . . . . . . $ 20,000.00
Miscellaneous expenses. . . . . . . . . . . $ 2,556.36
-----------
Total: . . . . . . . . . . . . . . . . $ 75,000.00
</TABLE>
All of these expenses except for the SEC registration fee are
estimated. None of these expenses are being paid by the selling
stockholders.
44
</Page>
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
On April 6, 1999, 2,000,000 common shares were issued to sophisticated
investors in a private placement pursuant to an exemption from registration
provided by section 3(b) of the 1933 Securities and Exchange Act and
provisions of Regulation D, Rule 504 promulgated under the 1933
Act("Regulation D"). The Company received approximately $970,000 in cash.
In October of 1999, 600,000 restricted common shares were issued to
Celtic Ltd., pursuant to an exemption from registration under section 4(2)
of the Securities Act of 1933, for services rendered, no cash was received
by the Company.
In February of 2000, 600,000 restricted common shares were issued to
Paramo Investment pursuant to an exemption from registration under section
4(2) of the Securities Act of 1933, pursuant to a subscription agreement we
recieved $60,000.
In June of 2000, 5,000 restricted common shares were issued to David
J. Weaver, a sophisticated investor, pursuant to an exemption from
registration under section 4(2) of the Securities Act of 1933. We received
$15,000.
On August 3, 2000, the Company granted an option to purchase up to
1,500,000 restricted common shares to Aidan, Incorporated. This option was
issued pursuant to an exemption for registration under Section 4(2) of the
Securities Act of 1933. The exercise price of the options is $2.75. The
options shall expire on August 3, 2010. Pursuant to the terms of the
Sublicensing Agreement between the parties, the option vests pursuant to
the accomplishment by Aidan of certain activities. As of the date of this
prospectus, Aidan's option had vested up to 900,000 shares.
On August 18, 2000, 60,000 restricted common shares were issued in
exchange for medical equipment valued at approximately $60,000. The
restricted shares were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933.
On August 18, 2000, 6,000 restricted common shares were issued to a
sophisticated investor pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. We received $18,000.
On August 18, 2000, 7,500 restricted common shares were issued to a
sophisticated investor pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. We received $22,500.
On August 18, 2000, 2,500 restricted common shares were issued to a
sophisticated investor pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. We received $7,500.
45
</Page>
<PAGE>
On September 7, 2000, 9,000 restricted common shares were issued to a
sophisticated investor pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. We received $27,000.
On September 22, 2000, 25,000 shares of preferred stock held by Brad
Fey were converted to 50,000 shares of restricted common stock pursuant to
an exemption from registration under Section 4(2) of the Securities Act of
1933. We received no money.
On October 12, 2000, an option to purchase up to 900,000 restricted
common shares was granted to Jonathan Neville, one of our officers and
directors. This option was issued pursuant to an exemption for
registration under Section 4(2) of the Securities Act of 1933. The grant
provides an option to purchase up to 68,026 restricted shares at a price of
$3.23 per share and 831,974 restricted shares at a price of $2.94 per
share. The option on the 68,026 shares expires on October 11, 2005. The
option on the 831,974 shares expires on December 31, 2009. Fifty percent
of the shares vested on the date of grant. The other fifty percent vest on
January 1, 2001.
On October 12, 2000, an option to purchase up to 900,000 restricted
common shares was granted to Loran Swensen, one of our officers and
directors. This option was issued pursuant to an exemption for
registration under Section 4(2) of the Securities Act of 1933. The grant
provides an option to purchase up to 68,026 restricted shares at a price of
$3.23 per share and 831,974 restricted shares at a price of $2.94 per
share. The option on the 68,026 shares expires on October 11, 2005. The
option on the 831,974 shares expires on December 31, 2009. Fifty percent
of the shares vested on the date of grant. The other fifty percent vest on
January 1, 2001.
On October 12, 2000, an option to purchase up to 550,000 restricted
common shares was granted to Stephen R. Fey, one of our directors. This
option was issued pursuant to an exemption for registration under Section
4(2) of the Securities Act of 1933. The exercise price of the option is
$2.94 per share. The option expires on December 31, 2009.
On October 12, 2000, an option to purchase up to 550,000 restricted
common shares was granted to F. Briton McConkie, one of our directors.
This option was issued pursuant to an exemption for registration under
Section 4(2) of the Securities Act of 1933. The exercise price of the
option is $2.94 per share. The option expires on December 31, 2009.
On October 12, 2000, an option to purchase up to 250,000 restricted
common shares was granted to Robert Morrow, one of our directors. This
option was issued pursuant to an exemption for registration under Section
4(2) of the Securities Act of 1933. The exercise price of the option is
$2.94 per share. The option expires on December 31, 2009. Fifty percent
of the shares vested on the date of grant. The other fifty percent vest on
January 1, 2001.
On October 12, 2000, an option to purchase up to 150,000 restricted
common shares was granted to Michael Jones, one of our officers. This
option was issued pursuant to an exemption for registration under Section
4(2) of the Securities Act of 1933. The exercise price of the option is
$2.94 per share. The option expires on December 31, 2009. Thirty three
and one-third percent of the shares vested on the date of grant. Thirty
three and one-third percent vest on January 1, 2001. The final thirty
three and one-third best on January 1, 2002.
46
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<PAGE>
<PAGE>
On October 12, 2000, an option to purchase up to 50,000 restricted
common shares was granted to Jan Morse, one of our officers. This option
was issued pursuant to an exemption for registration under Section 4(2) of
the Securities Act of 1933. The exercise price of the option is $2.94 per
share. The option expires on December 31, 2009. Fifty percent of the
shares vested on the date of grant. The other fifty percent vest on
January 1, 2001.
On October 12, 2000, an option to purchase up to 100,000 restricted
common shares was granted to Randall Rayl. This option was issued pursuant
to an exemption for registration under Section 4(2) of the Securities Act
of 1933. The exercise price of the option is $2.94 per share. The option
expires on December 31, 2009. Fifty percent of the shares vested on the
date of grant. The other fifty percent vest on January 1, 2001.
On October 12, 2000, an option to purchase up to 100,000 restricted
common shares was granted to Debbie Oldson. This option was issued
pursuant to an exemption for registration under Section 4(2) of the
Securities Act of 1933. The exercise price of the option is $2.94 per
share. The option expires on December 31, 2009. Fifty percent of the
shares vested on the date of grant. The other fifty percent vest on
January 1, 2001.
On October 12, 2000, options to purchase an aggregrate of up to
160,500 restricted common shares was granted to approximately 20 persons
pursuant to an exemption for registration under Section 4(2) of the
Securities Act of 1933. The exercise price of the option is $2.94 per
share. The options expire on December 31, 2009.
On November 20, 2000, 1,550,000 restricted common shares were issued
to Liviakis Financial Communications, Inc., for consulting services on
financial and public relations and business and personnel related matters
pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933. We received no cash.
On November 20, 2000, 353,636 restricted common shares and warrants to
purchase up to an additional 189,318 restricted common shares were issued
to Kauser Partners, L.P., pursuant to an exemption from registration under
section 4(2) of the Securities Act of 1933. $1,000,000 was received by the
Company. The strike price on the warrants is currently $6.375. The
strike price can be adjusted downward depending upon the date when this
regitration statement becomes effective.
On November 29, 2000, 10,000 restricted common shares were issued to
Peter Kristensen for consulting services pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. We recieved
no cash.
47
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<PAGE>
On December 18, 2000, 40,000 restricted common shares were issued to
Edesio Biffoni for consulting services pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. We received
no cash.
On December 18, 2000, 30,000 restricted common shares were issued to
Tiger-Lewis, Inc., for consulting services pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. We received
no cash.
EXHIBITS
Exhibit Number Description of Document Location
-------------- ----------------------- ---------
3.01 Amended and Restated Articles
of Incorporation (1)
3.02 Bylaws (1)
5.01 Opinion Regarding Legality Attached
10.01 Contract with Dr. Jesus Omar
Sanchez Tiznado (1)
10.02 BioPulse International, Inc.
2000 Stock Option Plan (2)
10.03 Sublicensing Agreement with
Aidan, Incorporated Attached
10.04 Exclusive License and Bailment
Agreement with
Brigham Young University Attached
15.01 Letter on Unaudited Interim
Financial Information Attached
16.01 Letter on Change in Certifying
Accountant (1)
23.01 Consent of Independent Auditor Attached
23.02 Consent of Legal Counsel Attached
(Included in Exhibit 5.01)
27.01 Financial Data Schedule Attached
(1) Incorporated by reference to the Registrant's Form 10-SB dated January
18, 2000, SEC File Number 000-28973.
(2) Incorporated by reference the Registrant's Form 10-QSB dated December
18, 2000, SEC File Number 000-28973.
48
</Page>
<PAGE>
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
49
</Page>
<PAGE>
(b) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in "Indemnification
of Directors and Officers" above, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective by the
Securities and Exchange Commission.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
INDEX TO FINANCIAL STATEMENTS
The following documents are filed as part of this report:
Report of Independent Accountants.
Financial Statements and Schedules:
Consolidated Balance Sheet as of October 31, 2000 and July 31, 2000
Consolidated Statement of Operations for October 31, 2000 and July 31,
2000
Consolidated Statement of Stockholder's Equity
Statements of Cash Flows for the period ended October 31, 2000 and the
year ended July 31, 2000
Notes to the Financial Statements
All schedules omitted are not applicable, not required or the required
information is included in the financial statements thereto.
50
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and has duly
caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Salt Lake City,
State of Utah on the 20th day of December, 2000.
BIOPULSE INTERNATIONAL, INC.
By: /s/ Jonathan Neville
---------------------------------
Jonathan Neville, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registration statement has been signed by the following
persons in the capacities and on the dates indicated:
/s/ Jonathan Neville Chief Executive Officer
and Director December 20, 2000
Jonathan Neville (Principal Executive Officer)
/s/ Michael Jones Chief Financial Officer
and Treasurer December 20, 2000
Michael Jones (Principal Accounting Officer)
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<PAGE>
Biopulse International, Inc.
Consolidated Financial Statements
October 31, 2000 (Unaudited)
and
July 31, 2000
</Page>
<PAGE>
C O N T E N T S
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . .F-2
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . .F-5
Consolidated Statement of Stockholders' Equity . . . . . . . . . . . . .F-6
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . .F-7
Notes to the Consolidated Financial Statements . . . . . . . . . . . . .F-8
F-1
</Page>
<PAGE>
/Letterhead/
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
BioPulse International, Inc.
We have audited the accompanying balance sheets of BioPulse International,
Inc., as of July 31, 2000, and the related statements of operations,
stockholders' equity, and cash flows for the year ended July 31, 2000.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. 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 the significant estimates made by management, as well as
evaluating the overall financial statements presentation. We believe that
my audit provides a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of BioPulse International,
Inc., as of July 31, 2000, and the results of its operations and its cash
flows for the year ended July 31, 2000, in conformity with generally
accepted accounting principles.
The balance sheets, statements of operations, statement of cash flows and
statement of stockholders' equity for the period ended October 31, 2000
were not audited by us, and accordingly, we do not express an opinion or
any other form of assurance on them.
/S/ Crouch, Bierwolf & Associates
Salt Lake City, Utah
December 18, 2000
F-2
</Page>
<PAGE>
<PAGE>
Biopulse International, Inc.
Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
October 31, July 31,
2000 2000
----------- -----------
<S> <C> <C>
(Unaudited)
Current assets
Cash $ 104,189 $ 42,055
Accounts receivable (net of allowance for
doubtful accounts) 112,940 17,030
Inventory 83,502 77,094
Note receivable - employee 9,800 9,800
Note receivable - related party (Note 8) 19,032 19,032
Prepaid rent - current 135,080 133,925
----------- -----------
Total Current Assets 464,543 298,936
----------- -----------
Property & Equipment, Net (Note 2) 848,238 659,729
Intangible Assets (Note 3) 689,706 -
Other assets
Deposits 8,731 8,731
Prepaid rent - net of current portion 151,594 182,749
----------- -----------
Total Other Assets 160,325 191,480
----------- -----------
Total Assets $2,162,812 $1,150,145
=========== ===========
</TABLE>
(Continued)
See Accountant's report and notes to these financial statements.
F-3
</Page>
<PAGE>
Biopulse International, Inc.
Consolidated Balance Sheet
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, July 31,
2000 1999
----------- -----------
<S> <C> <C>
(Unaudited)
Current Liabilities
Accounts payable $ 92,739 $ 104,787
Accrued expenses 20,081 30,146
Unearned revenue 30,466 77,784
Notes payable (Note 7) 911,600 86,000
----------- -----------
Total Current Liabilities 1,054,886 298,717
----------- -----------
Total Liabilities 1,054,886 298,717
----------- -----------
Stockholders' Equity
Preferred Stock , Class A, authorized
2,000,000 shares of $.001 par value
25,000 shares issued and outstanding,
respectively - 25
Common Stock, authorized
100,000,000 shares of $.001 par value,
7,464,610 and 7,329,610, issued and
outstanding respectively 7,464 7,329
Additional Paid in Capital 1,226,934 1,092,044
Less: Subscriptions receivable (119,586) (159,566)
Accumulated Deficit (6,886) (88,404)
----------- -----------
Total Stockholders' Equity 1,107,926 851,428
----------- -----------
Total Liabilities and Stockholders' Equity $2,162,812 $1,150,145
=========== ===========
</TABLE>
See accountant's report and notes to the financial statements.
F-4
</Page>
<PAGE>
Biopulse International, Inc.
Consolidated Statement of Operations
<TABLE>
<CAPTION>
For the Three For the
Months Ended Year Ended
October 31, July 31,
2000 2000
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 1,159,680 $ 3,107,636
Cost of Goods Sold 398,359 1,163,598
-------------- --------------
Gross Profit 761,321 1,944,038
-------------- --------------
Operating Expenses:
General and administrative 679,803 1,789,007
-------------- --------------
Total Expenses 679,803 1,789,007
-------------- --------------
Net Income (Loss) from Operations 81,518 155,031
-------------- --------------
Net Income (Loss) Before Taxes 81,518 155,031
-------------- --------------
Provision for Income taxes - -
-------------- --------------
Net Income (Loss) $ 81,518 $ 155,031
============== ==============
Net Income (Loss) Per Share $ 0.01 $ 0.02
============== ==============
Weighted average shares outstanding 7,464,110 6,825,610
============== ==============
Fully diluted earnings per share 0.01 0.02
============== ==============
Fully diluted weighted average
shares outstanding 8,626,443 6,825,610
============== ==============
</TABLE>
See accountant's report and notes to these financial statements
F-5
</Page>
<PAGE>
<PAGE>
Biopulse International, Inc.
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accum-
ulated
During
Subscr- the
iptions Additional Devel-
Preferred Stock Common Stock Recei- paid-in opment
Shares Amount Shares Amount vable capital Stage
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
inception - $ - - $ - $ - $ - $ -
Net loss for the
year ended July
31, 1998 - - - - - - -
---------------------------------------------------------------
Balance,
July 31, 1998 - - - - - - -
Stock for cash to
organizers - - 4,000,000 4,000 - - -
Recapitalization
for accounting
purposes of
Biopulse, Inc. - - 73,862 74 - (74) -
Stock issued for
subscriptions
receivable at
$.49 per share - - 2,000,000 2,000 (970,000) 968,000 -
Stock issued for
cash at $1.00
per share 25,000 25 - - - 24,975 -
Stock issued
for services
at $1.00 per
share 25,374 25 - - - 25,348 -
Net loss for
the year ended
July 31, 1999 (243,435)
------------------------------------------------------------------
Balance,
July 31, 1999 50,374 50 6,073,862 6,074 (970,000) 1,018,249 (243,435)
Conversion of
preferred stock
to common stock (25,374) (25) 50,748 50 - - -
Stock issued for
services - - 600,000 600 - (600) -
Stock issued for
subscription
receivable at
$.10 per share - - 600,000 600 (60,000) 59,400 -
Stock issued for
$3 per share - - 5,000 5 - 14,995 -
</TABLE> F-6
</Page>
<PAGE>
<PAGE>
Biopulse International, Inc.
Consolidated Statement of Stockholders' Equity
-Continued-
<TABLE>
<CAPTION>
Deficit
Accum-
ulated
Subscrip- During
tions Additional the
Preferred Stock Common Stock Recei- paid-in opment
Shares Amount Shares Amount vable capital Stage
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Collection of
subscription
receivable - - - - 870,434 - -
Net Income for the
year ended
July 31, 2000 155,031
---------------------------------------------------------------
Balance,
July 31, 2000 25,000 25 7,329,610 7,329 (159,566) 1,092,044 (88,404)
Conversion of
preferred stock
to common stock (25,000) (25) 50,000 50 - (25) -
Stock issued for
$3 per share - - 25,000 25 - 74,975 -
Stock issued for
equipment - - 60,000 60 - 59,940 -
Collection of
subscription
receivable - - - - 39,980 - -
Net Income for
the three months
ended October
31, 2000 - - - - - - 81,518
---------------------------------------------------------------
Balance, October
31, 2000 - $ - 7,464,610 $7,464 $(119,586) $1,226,934 $(6,886)
===============================================================
</TABLE>
F-7
</Page>
<PAGE>
Biopulse International, Inc.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
For the Three For the
Months ended Year Ended
October 31, July 31,
2000 2000
------------- -------------
<S> <C> <C>
Cash Flows from Operating (Unaudited)
Activities
Net Income (Loss) $ 81,518 $ 155,031
Adjustments to reconcile
net income to cash
provided by operations:
Depreciation & Amortization 42,144 60,508
(Increase) decrease in receivables (95,910) (15,421)
(Increase) decrease in inventory (6,408) (77,094)
(Increase) decrease in prepaid expenses 30,000 (316,674)
Increase (decrease) in payables (12,048) 4,058
Increase (decrease) in accrued expenses (10,065) (7,014)
Increase (decrease) in unearned fees (47,318) -
Increase (decrease) in notes receivable - (9,800)
------------- -------------
Net Cash (Used) Provided by
Operating Activities (18,087) (206,406)
------------- -------------
Cash Flows from Investment
Activities:
Purchase of Equipment (160,379) (555,365)
Acquisition of intangible assets (700,000) -
Cash loan to related party - 19,032
------------- -------------
Net Cash (Used) Provided by
Investing Activities (860,379) (536,333)
------------- -------------
Cash Flows from Financing
Activities:
Issued common stock for cash
and subscriptions receivable 75,000 885,434
(Increase) decrease in
subscription receivable 40,000 -
Cash received from debt financing 825,600 86,000
------------- -------------
Net Cash (Used) Provided by
Financing Activities 940,600 780,806
------------- -------------
Net increase (decrease) in cash 62,134 38,067
Cash, beginning of period 42,055 3,988
------------- -------------
Cash, end of period $ 104,189 $ 42,055
============= =============
</TABLE>
See accountant's report and notes to these financial statements
F-8
</Page>
<PAGE>
Biopulse International, Inc.
Notes to the Financial Statements
October 31 and July 31, 2000
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Biopulse International, Inc. (the Company) was incorporated in
the State of Nevada on July 13,1984 originally under the name of
Universal Financial Capital Corp. The Company changed its name in
September 1985 to International Sensor Technologies, Inc. As
International Sensor Technologies, Inc. the Company incurred heavy
losses and no revenue from operations. The Company also experienced
five years of inactivity. On January 12, 1999, the Company again
changed its name to BioPulse International, Inc. when it acquired
BioPulse, Inc. The Company is in the business of managing drug and
rehabilitation centers, integrated medicine clinics, and medical
research programs.
The Company issued 4,000,000 common shares in exchange for 100
percent of the outstanding stock of Biopulse Inc., a Utah corporation
organized June 4, 1998. The share exchange with Biopulse, Inc. was
accounted for as a reverse acquisition (recapitalization), therefore
all historical financial information is that of the accounting
survivor Biopulse, Inc.
The Company also paid $100,000 to an officer/director of the
Company for accounting, legal and organization expenses to
recapitalize the Company. This was expensed during the period ended
July 31, 1999.
b. Recognition of Revenue
The Company recognizes income and expense on the accrual basis of
accounting. Revenue from services to patients is recognized as
services are performed.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date
of the financial statements.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carryforwards totaling approximately 2,370,000 that
will be offset against future taxable income pursuant to limitations
of the Internal Revenue Code. These NOL carryforwards begin to expire
in the year 2000. No tax benefit has been reported in the financial
statements because the Company believes there is a 50% or greater
chance the carryforward will expire unused, and are limited pursuant
to the Internal Revenue Code. The loss from the year ended July 31,
1999 can be used to offset income for the period ended July 31, 2000.
Accordingly, no tax provision has been recorded.
F-9
</Page>
<PAGE>
<PAGE>
Biopulse International, Inc.
Notes to the Financial Statements
October 31 and July 31, 2000
NOTE 1 - Summary of Significant Accounting Policies (continued)
Deferred tax assets and the valuation account is as follows at
October 31, 2000 and July 31, 2000:
<TABLE>
<CAPTION>
October 31, July 31,
2000 2000
----------- -----------
<S> <C> <C>
Deferred tax asset:
NOL carrryforward $ 700,000 $ 700,000
Valuation allowance (700,000) (700,000)
----------- -----------
Total $ - $ -
=========== ===========
f. Principles of Consolidation
These financial statements include the books of Biopulse
International, Inc and its wholly owned subsidiary Biopulse, Inc. All
intercompany transactions and balances have been eliminated in the
consolidation.
g. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and expenses during the reporting
period. In these financial statements, assets, liabilities and
expenses involve extensive reliance on management's estimates. Actual
results could differ from those estimates.
h. Accounts Receivable Allowance
The Company periodically reviews accounts receivable and the
allowance for doubtful accounts. At July 31, 2000, the allowance was
$8,435, at October 31, 2000 the allowance was $26,500.
i. Inventory
Inventory is recorded at the lower of cost or market on the
first-in, first-out basis, and consists primarily of nutrition
supplements and medical supplies.
j. International Exchange
All fees are charged in U.S. dollars and most expenses are paid
in U.S. dollars.
F-10
</Page>
<PAGE>
Biopulse International, Inc.
Notes to the Financial Statements
October 31 and July 31, 2000
NOTE 2 - Property and Equipment
The Company capitalizes purchases of long lived assets that are
expected to give benefit to the Company over the life of the asset.
The Company also capitalizes improvements and costs that increases the
value of or extend the life of the asset.
Capitalized assets are depreciated over the estimated useful
lives of the assets (five to seven years for furniture and fixtures
and leasehold improvements, three to five years for computer
equipment) on the straight line basis.
Property and Equipment consists of the following at October 31,
2000 and July 31, 2000:
</TABLE>
<TABLE>
<Caption
October 31, July 31,
2000 2000
------------ ------------
<S> <C> <C>
Furniture & Equipment $ 171,301 $ 144,228
Medical Equipment 683,104 543,087
Leasehold improvements 93,576 44,306
Auto 4,000 -
Accumulated Depreciation (103,743) (71,892)
------------ ------------
Total Property & Equipment $ 848,238 $ 659,729
============ ============
</TABLE>
Depreciation expense was $60,508 for the year ended July 31,
2000 and $31,850 for the three months ended October 31, 2000.
NOTE 3 - Intangible Assets
The companies intangible assets are patent pending and other
technologies acquired form Aidan Inc. in August 2000. The cost of
acquiring these assets are capitalized and amortized over their
estimated useful life. Patents have a useful life of 17 years.
Intangible assets consist of the following at October 31,2000:
Intangible Assets $ 700,000
Accumulated Amortization (10,294)
----------
Total Intangible Assets $ 689,706
==========
Amortization expense was $0 and $10,294 at July 31, 2000 and
October 31, 2000, respectively.
F-11
</Page>
<PAGE>
Biopulse International, Inc.
Notes to the Financial Statements
October 31 and July 31, 2000
NOTE 4 - Equity
During January, 1999, the Company issued 4,000,000 shares of
common stock for 100 percent of the outstanding stock of Biopulse,
Inc. The shares were valued at $4,000.
During April 1999, the Company issued 2,000,000 shares of common
stock for subscriptions receivable of $970,000.
During April 1999, the Company issued 25,000 shares of preferred
stock, class "A" for cash of $25,000.
During April 1999, the Company issued 25,374 shares of preferred
stock, class "A" for services valued at $25,374.
During the year ended July 31, 2000 the Company has the following
equity transactions:
- Issued 600,000 shares to the underwriter for services rendered in
the offering.
- Issued 600,000 shares at $.10 per share pursuant to a
subscription agreement.
- Issued 5,000 shares for $3 per share.
During the three months ended October 31, 2000 the Company has the
following equity transactions:
- Issued 25,000 shares for $3 per share.
- Issued 60,000 shares for equipment at $1 per share.
NOTE 5 - Commitments and Contingencies
The Company is committed to an operating lease for office space
in Sandy, Utah. The lease requires the Company to pay monthly rent of
$8,731 and expires December 2003.
The Company is committed to an operating lease for office space
in Tijuana, Mexico. The lease requires the payment of 11,000 per
month adjusted each March 1st by the consumer price index, and expires
February 28, 2005. For purposes of computing future obligations a CPI
increase of 3.5% is assumed. The lease states the rent obligation on
the clinic and office space in U.S. dollars.
Future minimum operating lease payments are as follows at October
31, 2000:
2000 $ 39,462
2001 240,622
2002 245,392
2003 250,342
2004 150,650
2005 25,250
----------
Total $ 951,718
F-12
</Page>
<PAGE>
Biopulse International, Inc.
Notes to the Financial Statements
October 31 and July 31, 2000
NOTE 6 - Royalties
The Company has an agreement to pay $450 in royalties per patient
who participates in a three week treatment program or $21 per day for
treatments of less than three weeks.
NOTE 7 - Note Payable
The Company borrowed $86,000 to be paid back on or before
September 5, 2000 along with $8,600 in interest. The balance of
$51,000 was repaid in November 2000.
The Company borrowed $225,000 on October 25, 2000 and is due
January 23, 2000. Medical care is to be provided to the lender's daughter
in leu of interest. Interest will be charged from the due date, at the
annual rate of 18%, if not paid by the due date.
NOTE 8 - Note Receivable - Related Party
Notes receivable - related party are detailed as follows:
<TABLE>
<CAPTION>
October 31, July 31,
2000 2000
------------ ------------
<S> <C> <C>
Note receivable from a corporation, under
common ownership, non-interest bearing,
due within one year 19,032 19,032
------------ ------------
Total Notes receivable - Related Party $ 19,032 $ 19,032
============ ============
</TABLE>
NOTE 9 - Preferred Stock
The Company has authorized five classes of Preferred Stock, each
class has 2,000,000 shares authorized at $.001 par value. At October
31, 2000, the Company had no preferred stock outstanding.
NOTE 10 - Reverse Stock Split
In November 1998, the board of directors authorized a 1 for 400
reverse stock split. Those statements have been retroactively
restated to reflect this reverse split.
NOTE 11 - Prepaid Rent
The lease on the clinic in Tijuana, BC, Mexico required that the
funds to build the clinic improvements be provided by the company and
applied against the rent obligation until the cost of the clinic
improvements was recovered.
F-13
</Page>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document Location
3.01 Amended and Restated Articles of Incorporation (1)
3.02 Bylaws (1)
5.01 Opinion Regarding Legality Attached
10.01 Contract with Dr. Jesus Omar Sanchez Tiznado (1)
10.02 BioPulse International, Inc. 2000 Stock Option Plan (2)
10.03 Sublicensing Agreement with Aidan, Incorporated Attached
10.04 Exclusive License and Bailment Agreement with Attached
Brigham Young University
15.01 Letter on Unaudited Interim Financial Information Attached
16.01 Letter on Change in Certifying Accountant (1)
23.01 Consent of Independent Auditor Attached
23.02 Consent of Legal Counsel Attached
(Included in Exhibit 5.01)
27.01 Financial Data Schedule Attached
(1) Incorporated by reference to the Registrant's Form 10-SB dated January
18, 2000, SEC File Number 000-28973.
(2) Incorporated by reference the Registrant's Form 10-QSB dated December
18, 2000, SEC File Number 000-28973.
67
</Page>
